The Last Spike: The Great Railway, 1881-1885 (45 page)

The settlement watched the railroad approach with a mixture of apprehension and anticipation. Where would the station be located? Under the terms of its contract, the
CPR
had title to the odd-numbered sections along the right of way. The fort and surrounding log structures, together with all the squatters’ shacks, were situated on an even-numbered section – Number Fourteen. The adjacent section, Fifteen, on the opposite bank of the Elbow, had been reserved by Order in Council as pasturage for the police horses. Surely then, everyone reasoned, the town would have to be put on the east bank, where the fort was located.

The scrapers, clearing the right of way, lumbered through on June 21, followed by an army of graders. The tension began to mount. The bridge across the Bow was completed on August 10; two days later a construction train puffed in. On August 15, a train carrying a temporary station arrived, and the community held its breath. Where would it stop? To everyone’s surprise and dismay it shunted directly through the settlement, across the new bridge and was established, together with a siding, on Section Fifteen on the far side of the Elbow.

A state of uncertainty existed at this point on the banks of the Elbow.
Nobody quite knew what to do. No survey had been taken. The ownership of Section Fifteen was in dispute. The town was growing rapidly on the east bank, but because everyone wanted to wait for the decision about the townsite, no one wanted to go to the expense of erecting anything permanent; and so for all of 1883 Calgary was a tent city.

On August 20, two young men arrived from the East, erected a tent, and prepared to publish a newspaper, the
Herald
. The paper announced in its first edition, dated August 31, that it would always have the courage of its convictions and would not be afraid to speak its mind freely when wrongs were to be redressed or “manifest abuses to be remedied.” It started out with the usual trenchant editorial against the demon rum: “The
Herald
will always lend its influence against the introduction of intoxicating liquors as a beverage in the
N.W.T
., believing that the liquor traffic engenders vice, immorality and crime.”

The first edition also announced the arrival, on August 27, of the leading directors of the
CPR
, aboard Van Horne’s private car. Stephen, Angus, Donald A. Smith, and Van Horne had all come to Calgary together with their guests, Baron Pascoe du P. Grenfell, one of the European backers, and His Royal Highness, Prince Hohenlohe of Germany, who was looking over the country with a view to recommending it to prospective German emigrants. The trip had been made from Winnipeg over the new track at an average rate of more than thirty-five miles an hour, and at some points the locomotives, fed from recently discovered coal deposits near Medicine Hat, had pulled the cars at a clip of sixty miles an hour.

The directors invited Father Lacombe, who had saved them so much grief, to be their guest at luncheon. On a motion by Angus, Lacombe was made president of the
CPR
for one hour. Taking the chair, the priest immediately voted himself two passes on the railroad for life and, in addition, free transportation of all freight and baggage necessary to the Oblate missions together with free use for himself for life of the
CPR’S
telegraph system.

The directors were only too happy to grant Lacombe what he asked. He was the one man who had the full confidence of the Indians. All the promises made that day were honoured by the railway. Moreover, La-combe’s rather cavalier use of the passes, which he lent out indiscriminately (as he did most of his belongings), was regularly tolerated. On one occasion the two passes, which became familiar along the line, were presented by two nuns, newly arrived in the west. “May I ask,” the conductor politely inquired, “which one of you is Father Lacombe?” He let the blushing sisters go on their way.

Van Horne, who described Lacombe as “a great friend of the Company and of our people,” always made sure the donations to Lacombe’s mission were shipped free of charge from Montreal to Calgary. When Lacombe was in Montreal, he visited Van Horne who so amused him one Saturday night with conjuring tricks that the priest, who was staying at a nearby religious home, was forced to creep back in the early hours of the Lord’s Day. From then on he was accompanied on such visits by a stern-faced ecclesiastical watchdog who got him back before midnight.

Van Horne also sent personal gifts to Lacombe. An art connoisseur, he was prowling around a private gallery in New York one day when he came upon a religious picture he thought would appeal to the priest. He dispatched it to Montreal with his other purchases, with instructions to have it framed and sent on to the mission. When he received no acknowledgement from Lacombe he made some inquiries and found to his horror that there had been a mix-up. Instead of the religious painting, the shippers had substituted a Dégas study of a scantily clad and leggy ballet dancer, pirouetting on a stage before footlights. Van Horne wired an abject apology to the priest, who made a tactful reply. He had, he said, been surprised on receiving the picture but had treated it with the respect due to the generosity of the giver; some of his colleagues, however, had insisted that he put it out of sight, so he had been keeping it under his bed.

After honouring the priest, the distinguished visitors departed Calgary without leaving the questing settlers one whit the wiser about the future over which they themselves quite clearly had no control. The state of indecision continued all that fall, with half the community swearing that it would not budge an inch to accommodate the railway. “There are some people here who have a mind of their own and do not propose to follow the meanderings of the
CPR
,” the Fort Macleod
Gazette
declared. The
Herald
continued to demand, in vain, that the matter be settled one way or the other. “The people in Calgary have by this time the elements of suspense and patience reduced to a science,” it wrote in November. The following month it reported that “we have much pleasure in announcing that our friends east of the Elbow have definitely decided upon the permanent location of the city in that quarter. Already the surveyors are hard at work upon the sub-division of the Denny Estate, and our next issue will contain the date of the sale of this beautiful spot so well adapted for the future capital of Alberta.”

But the
CPR
itself and nobody else – editor, banker, merchant, or real estate man – would make the decision as to where Calgary was to be; and in January, when the Order in Council regarding the
NWMP
pasturage
was finally rescinded, the
CPR
spoke. The city would be on the west side of the Elbow River and not on its original location on the east side. To underline that point, the government, which stood to profit equally with the railway, moved the post office across the river to the west.

In vain the Denny subdivision on the east side advertised that it was “the centre of Calgary City.” As soon as the post office crossed the river, James Bannerman followed with his flour and feed store. All the solemn pledges about staying put and refusing to follow the meanderings of the railway were forgotten and a kind of wild scramble ensued as butcher shop, jeweller, churches, billiard parlour, and hotels packed up like gypsies and located on the favoured site. The
Herald
reported that buildings were suddenly springing up “as though some magical influence were being exerted” and that what had been barren prairie just three weeks before “is now rapidly growing into the shape of a respectable town.”

Once again the railway, in truth a “magical influence,” had dictated the lineaments of the new North West.

5
George Stephen’s disastrous gamble

When George Stephen returned from the North West on October 1, 1883, the company’s financial situation was even darker than before. Van Horne had spent the thirty million dollars raised the previous year. Hill had left the company and was selling out most of his stock. One of his reasons, and probably the major one,
^*
for this abrupt and unexpected departure was the
CPR’S
announced intention of taking the route north of Lake Superior, together with Van Horne’s decision to order three lake steamers to compete with American railways south of the border and to carry
railway materials across the lakes to the men building the line. Hill, who expected to get all the freight to the North West for his St. Paul road, had never contemplated such a turn of events. Both Donald A. Smith and George Stephen resigned simultaneously from the board of the St. Paul, Minneapolis and Manitoba Railway – Hill’s line – though they retained their stock and their friendship with the ex-Canadian. (Smith’s share in Hill’s railroad was always larger than his share in the Canadian Pacific.) Smith replaced Hill as a director of the
CPR
. J. S. Kennedy’s subsequent resignation from the
CPR
board – it was inevitable that the New York banker would follow Hill – made a bad impression in financial circles, since Kennedy’s firm had made its reputation in railroad securities. Moreover, the country was entering a depression,
CPR
stock began to drop. On June 25, 1883, when the international syndicate formed the previous year by Stephen to raise funds had picked up its last option for another ten millions, the stock had reached a peak of
65½
on the New York stock exchange. Following that, it began to slide to the point where brokers were advertising it as a bargain – “The foundations of many fortunes will be laid with the profit accruing to men who buy this stock whilst it is low.” There were few takers. By October 31, it had dived to 49¾.

That same fall, the North West, still reeling from the collapse of the real estate bubble, was struck a second blow. An early frost wiped out the wheat crop. In the United States, the Northern Pacific was teetering on the edge of insolvency. By December, its president, Henry Villard, who had risen in a few years from obscurity to commanding financial leadership, would be deposed – his health wrecked, his worldly goods abandoned to his creditors. On October 26, the
Globe
used the word “depression” to describe the economic crisis. A “demoralization in railway stocks occurred” (to quote Charles Tupper); if the
CPR
were to throw any more of its outstanding common stock on the market it would be sacrificed. Stephen was as concerned about the shareholders as he was about the company. He was afraid that many of them, egged on by speculators, would rush to dump their stock on the market at great personal loss – and to their later regret. He decided upon a bold gamble.

He arrived in Ottawa on October 24 and saw the Prime Minister the following day. Macdonald, as he told Tupper a month later, was seriously concerned over his friend’s appearance. It was the first time he had seen him so depressed. But the plan the
CPR
president unfolded was a tribute to “his enormous pluck,” as Macdonald called it.

Stephen had forty-five million dollars worth of authorized stock as yet unissued. At the moment no one would buy it, except at a price so low the company could not benefit. Stephen wanted to force the stock up and
make a market for it; only in that way could he secure adequate funds to finish the railway. He had decided upon a plan he thought would work: with the government’s help, the
CPR
was prepared to guarantee a five per cent dividend for the next ten years on all issued and unissued stock.

Stephen wanted the government to guarantee three per cent; the remainder he felt, could be paid out of the company’s resources. Because the government had had a disastrous experience with previous railway guarantees, Stephen was prepared to pay in advance for the privilege; he was in effect buying a government annuity. He had reckoned the cost as an insurance company reckons a policy: the price tag came to twenty-five millions. He was prepared to pay fifteen million dollars down, an additional five millions the following February, and the rest in securities and assets, including postal subsidies. All this would be deposited with the government, which would be acting merely as trustee for the fund.

This was exactly the kind of daring gambit that had won for Stephen a reputation for financial wizardry in international banking circles. But it
was
a gamble. If the gamble succeeded, then Stephen could sell the rest of the company’s stock at something close to par and get enough money – he calculated that he needed about thirty millions – to finish the railway. But if he lost, he would be tying up a huge block of cash at a time when the railway was desperately short of money. The situation out along the line was already serious. At Brandon, eighty men on the staff of the freight office had not been paid for three months; at the end of that period the company was able to give them only one month’s back wages. Brandon’s storekeepers had no other choice but to carry them. As one put it: “We’ve got to carry them. If the
CPR
goes bust, we will all have to pack up and go back to Bruce County, Ontario.”

In theory, Stephen’s plan was workable. He was proclaiming to the financial world that
CPR
shares were gilt-edged and that the Canadian government had confidence in them. All during the construction period the company had never passed a dividend. With three per cent guaranteed and only two per cent for the company to raise from current revenue, the investing public would look favourably on the proposition.

Macdonald liked the idea and the Cabinet passed it. The Prime Minister felt that the guarantee would boom the
CPR’S
stock to seventy or more. He turned to other matters, specifically, the Grand Trunk’s persistent campaign against the railway, which looked very much like a campaign against Canada. In Macdonald’s view the Grand Trunk had become an American line running between Chicago and Portland: its Canadian business had been made secondary to its foreign through traffic.
That being the case, he intended to “throw out a hint next session that would make Hickson tremble to his boots.” If Charles Tupper, now High Commissioner in England, could, perhaps with the help of John Rose, gather reliable evidence that the
GTR
was behind the attacks on the Canadian Pacific, then he, the Prime Minister, was prepared to threaten the older railway with a powerful weapon. Technically, the Grand Trunk still owed the government $15,500,000, with thirty years’ accumulated interest; the amount had been considered waived long ago, but it was still on the books. If necessary, Macdonald was prepared to use it as a lever to “bring those people to their bearings.”