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 in connection with them made a further ap- plication for a land grant from McMinnville to "Winnemucea. When this came up in Congress it was so changed through the Holladay influence as to the Winnemucea line tieing up with the Oregon and Cali- fornia (the Holladay line) at some point to be determined later, instead of with the Ore- gon Central, Gaston's company. This ren- dered it unsatisfactory to the projectors, who were working with the Central Pacific inter- ests, and resulted in the project being aban- doned. Gaston had been so sanguine over its going through as to use it as an argument with his Philadelphia people, who, upon its being eliminated, refused to carry out the arrangement for the 150-mile extension.

Alarmed over the narrow margin by which they had prevented Gaston from upsetting their plans, and also convinced that he could not be bottled up as a local Oregon line, the Holladay interests decided that self-protec- tion demanded their control of the Oregon Central. This was obtained by the purchase of outstanding obligations and subsequent pressure for their payment under threats of foreclosure proceedings. To avert this, Gas- ton and his associates were obliged to sell out to the enemy, upon assurance that all obligations would be met and the plans for the extension of the line carried out, Gaston, for himself, accepting service with the Hol- laday interests as freight and passenger agent of the line, which position he held until 1S75, when he retired to again come to the front as the projector of a system of narrow-gauge lines in the Willamette Valley.

The effacement of Gaston left Holladay supreme in railroad affairs in Oregon. Un- der his administration the Oregon and Cali- fornia Railroad was constructed on south. Rails were laid to Albany in 1871, Eugene in 1S72 and Roseburg in 1S73. During the same time construction was going along on the Oregon Central, Cornelius being reached in 1871 and St. Joe in 1872. The funds for the prosecution of this work as well as for his enormous private expenditures were raised by Holladay largely through the sale of the bonds of the two companies to Ger- man and English parties.

As yet the two lines had but a compara- tively small earning power. Their territory was but sparsely settled, and their business purely local. As a consequence the revenue

of the lines proved insufficient to meet the interest charges.

A slight divergence from the thread of our story is here necessary to introduce a new character, who was to become an important factor, namely, Henry Villard. Of German parentage, collegiate education, he reached Illinois as an emigrant in his teens, becom- ing a student of law, newspaper writer and war correspondent in the order named. His success in the latter capacity was marked, and he became a man of note. After the war he entered into the study of sociology. In 1871 he went to Germany on account of ill health, and while there made some in- vestigations into German methods of bank- ing with a view of their introduction in America. This brought him into contact with some of the holders of Oregon and Californa bonds, who asked his opinion re- garding the securities and the cause of the failure to receive their interest. Through his advice a "protective committee" was formed of the holders of these bonds, of which he was a member.

At this time there were outstanding some eleven million dollars of the bonds of the two companies, the Oregon and California and the Oregon Central. The majority of this was held by the Germans. Under the auspices of the protective committee, an agent was sent to Oregon to investigate and his report was very unfavorable as to the prospects of the earning power of the prop- erties. The roads were only 200 miles long instead of 350, as they had been given to understand; the gross earnings but about one-third of the interest charges and, in view of the restricted territory and limited popu- lation, there being but little probability of any material increase in earnings.

The question with the bondholders was, should they foreclose and take possession of the properties or would it be better to com- promise with the Holladay management and. by pooling their interests, reduce the fixed charges to a point within the earnings. The latter course was decided upon. Owing to his familiarity with America and American customs, Villard was selected to conduct the negotiations for the committee. This neces- sitated a trip to Oregon by him. Proceed- ing to America, Villard was met, upon his arrival in New York, by Holladay. To the Westerner, Villard was "a fool Dutchman,"