- Historic Sites
Frederick T. Gates And John D. Rockefeller
April 1955 | Volume 6, Issue 3
Gates’s brochure is an effective defense of Rockefeller’s treatment of the Merritt brothers. Just how did they weather the first storm? In the aftermath of the panic Rockefeller strained his own financial position to assist hard-pressed friends, making advances of about six millions to 58 men and companies which could not get credit at the bank. He was ready to assist the Merritts. A new company was formed, the Consolidated, into which both the Merritts and Rockefeller put important mining properties. But the Merritts had concealed the true extent of their debts, and just as Rockefeller and Gates supposed that the brothers were safely past their troubles, and that the development of the joint property could now proceed, the Merritts were compelled, as Gates says, to sell their stock. Rockefeller took 90,000 shares at $10 a share, $2 above market price. He agreed to sell 55,000 shares back to the brothers after one year at the same valuation. Indeed, he kept carrying two of the Merritts on freely renewed options for seven years, when they sold their shares to United States Steel at prices which made them millionaires. But the other brothers fell into the hands of attorney Anak A. Harris, who persuaded them to turn against Rockefeller with a suit.
If Gates’s pamphlet vindicates Rockefeller and convicts Harris of indefensible conduct in behalf of certain of the Merritts (who finally signed a statement exonerating Rockefeller) it does not, unfortunately, contain the fascinating story of Gates’s part in developing the Mesabi.
That story is unquestionably the greatest in Gates’s business career. When Rockefeller, against his own will, came into control of the Consolidated properties on the Mesabi, Gates perceived that bold and imaginative measures must be taken to make it pay. With Rockefeller’s active support, he bought more lands in the Mesabi basin. As they were acquired, Rockefeller became chief holder of perhaps the richest iron deposits in the world, and thus potentially a leader of the steel industry. Gates helped put the Mesabi Railroad into good running order; he helped supervise the construction of ore docks at Duluth and Superior. He saw that ships would be needed to carry the ore down the Lakes to the iron mills. Indeed, he became a master of ore transportation, a complex subject entirely new to this former minister. “He did all the work,” states Rockefeller.
It was Gates who, when he and Rockefeller decided that a fleet of ore carriers must be built, brought Samuel Mather of Cleveland, experienced in the trade, to Rockefeller’s house. Rockefeller knew Mather. “I told him I thought we could finish up our affairs in ten minutes, and we did,” Rockefeller later recalled. When a dozen all-steel vessels, of the largest capacity then deemed practicable on the Lakes, had been finished, it was Gates who urged that they should run the craft themselves instead of contracting for operation by others. “You don’t know anything about ships, do you?” demanded Rockefeller. “No,” Gates confessed, “but I know a man who I believe could do it.” Doubtless with a twinkle, he added: “He lives upstate and never was on a ship in his life. But he has sense.” It was Gates who did more than anyone else to direct the multifarious investments by which Rockefeller’s Mesabi properties were made a handsome source of revenue, and an important part of the fortune. And it was Gates who, in the final negotiations with J. P. Morgan for the incorporation of these holdings in the United States Steel Corporation, bargained more tenaciously than anyone else.
When these negotiations came to their crisis, it appeared that Morgan and Frick believed $75,000,000 the “outside price.” But neither Rockefeller nor Gates, it would appear, thought that enough. The price finally paid for the Mesabi properties and the ore-carrying fleet has been usually put at $88,500,000, though as part of it was in stock, valuations might differ. That much more for the benefactions so near to Frederick T. Gates’s heart! Nor was he the man to see his achievement in helping build the Mesabi empire go unrecognized.
On the signing of the final papers, he called on Rockefeller to make his final report. What followed he several times reported to intimate friends. Listening attentively, Rockefeller at the end showed genuine gratitude.
“Thank you, Mr. Gates—thank you!” he said with his usual quiet emphasis, and more than his usual cordiality.
Gates stood facing his employer, an unusual glint in his eye.
” ‘Thank you’ is not enough, Mr. Rockefeller,” he replied.
Obviously it was not; and Rockefeller saw that he received a reward commensurate with the resourcefulness, energy and skill he had shown in developing the ore fields and marketing their product.