Page:Vincent F. Seyfried - The Long Island Rail Road A Comprehensive History - Vol. 1 (1961).pdf/71

 56 rivalry for the traffic of Hempstead. Then in 1873 the competition became still keener, for, in August, Alexander T. Stewart, the merchant prince who founded Garden City, opened his Central Railroad of Long Island from Flushing through Floral Park and Hempstead eastward to Farmingdale and Babylon, and with a short branch to Hempstead. That meant that the South Side's monopoly of travel through the south shore villages was broken, and that all three roads competed fiercely for the business of Hempstead. The anxious concern of the South Side RR, therefore, to make travel as attractive as possible was not altogether an act of altruism; to a degree it was dictated by the need to survive. The company even made plans to extend the double track at once from Valley Stream to Babylon and contracted for the iron; four more engines were ordered (and later delivered) and overtures were made to Oliver Charlick for the purchase of the Sag Harbor Branch of the Long Island RR to lay the groundwork for a through road all along the south shore.

The spring and summer of 1873 passed pleasantly enough; the railroad held its own fairly well in the face of competition with its two rivals. Then in September a disaster occurred that was to change completely the subsequent history of the road. On September 18 the great banking house of Jay Cooke & Co. closed its doors in New York, Philadelphia and Washington. Cooke's fame had begun during the Civil War with his successful flotation of the bond issues by which the North financed its operations. After the war he turned his attention to railway securities, and in attempting to back the Northern Pacific RR, he met disaster. The huge sums needed for this undertaking could not be obtained without European assistance, and after the Franco-Prussian War of 1870, foreign capital became harder and harder to get. Cooke tied up so much of his firm's resources in advances to the railroad that his partners finally took the drastic step of closing. Cooke's company was regarded as the last word in solvency, and when its closing was announced, the Exchange was immediately thrown into a wild panic. Two days later, the Exchange itself was closed and so remained for ten days. A run on the banks occurred, and industrial concerns, dependent on banks, failed by the score. Bankruptcies followed thick and fast and business came to a standstill.

Among the lesser banking houses involved in the general ruin