The Record · Chapter Five

The Combine

The biggest money in the country decided it was done competing. The Calumet is where it proved it.

By Jason C. Wandel and Claude for Chicago Register · Sunday, October 18, 2026

This is the stretch from 1900 to 1913, when the biggest money in the country decided it was done competing and the Calumet became the place it would prove it. The last part ended with the Calumet already in play. Douglas pointed at it, Pullman bought it, a steel mill went in at the river mouth and Standard Oil set up just over the state line in Whiting. Now the men who owned those mills sat down to dinner.

On December 12, 1900, about eighty bankers and industrialists filled the University Club in New York for a dinner honoring Charles Schwab. He was 38 and ran Carnegie Steel. J. Pierpont Morgan sat near the head of the table. Schwab got up and talked for ninety minutes without notes. He described one company that would own everything from the iron in the ground to the finished steel beam, with no competitors left to cut the price.

Morgan listened. Within weeks Schwab was carrying offers back and forth between Morgan and Andrew Carnegie, and he drew up the list of companies that would go in.

Ninety minutes, no notes, one room. Every big deal in this story has a salesman, and that night Schwab was the best one in the country.

In February 1901 the United States Steel Corporation was born. It was capitalized at about $1.4 billion. That same year the entire federal government took in about $587 million. One company on paper was worth more than twice what the whole country collected in taxes.

Carnegie walked away with about $226 million. The syndicate that backed the deal pledged up to $200 million, only had to put up about $25 million, and took home about $40 million in profit. J.P. Morgan & Co. took about $10 million as a fee for arranging it.

Ten years later the government counted what was actually there. On July 1, 1911, the federal Bureau of Corporations reported that U.S. Steel’s mills, mines, ships and land were worth about $676 million. The stocks and bonds sold against them came to about $1.403 billion. The Bureau called the common stock water.

Shrink it to a house. You sell shares in a $676,000 house for $1.4 million. Somebody buying those shares is paying for a second house that doesn’t exist. That money didn’t disappear. It went to the men who arranged the sale.

Schwab became the first president of U.S. Steel because Morgan insisted. The chairman was Elbert Gary, a lawyer and former judge from Illinois. The two men didn’t get along. In 1902 Schwab got caught gambling at Monte Carlo and the papers ran with it. Carnegie was furious. Morgan defended him, on the principle that a businessman’s private life is his own business. Schwab resigned the presidency in 1903, left the board in 1904, and went off to build Bethlehem Steel into U.S. Steel’s biggest rival.

Gary stayed, and Gary needed a mill.

He picked the Indiana shore of Lake Michigan, just past the Illinois line. A lawyer and former mayor of Hammond named Armanis Knotts went to work quietly buying land. He put together about 9,000 acres and seven miles of shoreline for about $7.2 million. Same move Pullman made in 1880. Buy it through somebody else so the sellers don’t know who’s buying.

Construction started in a snowstorm in March 1906. The first ore boat came in 1908. By then about $42 million had gone into the mill and the town.

The company built the town too, through the Gary Land Company. It sold lots with an eighteen month clause. Build on it in eighteen months or lose it. It built 506 houses itself and rented them by rank, from $12 or $13 a month for a four room frame house up to $42 for a big brick one. Skilled men, mostly American born and white, got the planned streets near the mill. The immigrant laborers who did the heaviest work got packed into the neighborhoods the company never bothered to plan.

Then they named the city after the chairman.

Pullman built a town and named a hotel for his daughter. Gary got a whole city.

Why Indiana? The same reason Standard Oil went to Whiting in 1889. Land was cheaper, taxes were lower and the local politics were friendlier. Two of the biggest industrial plants in America jumped the same state line for the same reasons, sixteen years apart. Chicago kept the market. Indiana got the smoke.

Ask yourself who still crosses that line today, and what they’re chasing.

Back in Chicago, the stockyards ran on the same idea. Armour and Swift and a few others controlled most of the meat that moved through the yards, and the government sued them as a trust. In 1905 the Supreme Court ruled against them in Swift and Company v. United States. The next year Upton Sinclair published The Jungle, about the families of Packingtown who worked the killing floors. He wanted readers to see the workers. They saw the sausage instead. Congress passed a meat inspection law within months. Sinclair said he aimed at the public’s heart and hit it in the stomach.

That’s a win, and we print it. But look at what it fixed. The meat got inspected. The pay and the hours in the yards stayed about where they were.

The same year Gary’s mill rose out of the sand, the city handed out a different kind of mill. In 1907 Samuel Insull got a forty year exclusive franchise to sell electric power anywhere inside Chicago’s limits, present or future. His Chicago Edison merged with Commonwealth Electric into Commonwealth Edison. You know it as ComEd. One company, one wire, forty years, and the city’s borders written in the future tense. Insull wasn’t done. We’ll see his paper again.

Standard Oil got broken up by the Supreme Court in 1911. A win for the government, on paper. The pieces turned out to be worth more than the whole, and the Rockefeller fortune grew after the breakup.

Then Congress tried to count the whole thing.

In 1912 and 1913 a House committee led by Arsene Pujo, with a lawyer named Samuel Untermyer asking the questions, put Morgan himself on the stand. The committee found that Morgan’s firm and a few allied banks held 341 seats on the boards of 112 corporations, with more than $22 billion in resources between them.

That’s not a conspiracy. It’s a seating chart. When the same men sit on the boards of the banks, the railroads, the steel mills and the insurance companies, they don’t need to meet in secret. They meet at lunch.

Morgan told the committee that what really mattered in lending money was character. He died a few months later.

So here’s what this stretch adds up to. A dinner in New York set the price of steel for the country. A lawyer quietly bought nine thousand acres of Indiana sand. A company town got named for a chairman. A forty year franchise wired the city. The government counted the water and the seats, and printed what it found. The men kept the money.

The Pujo hearings were a win for the public’s right to know. The reports are still there for anybody to read. What they didn’t do was move a single seat.

So here’s the question we keep asking. When the government finally counted it all and printed it, did the counting change the architecture, or just put it on the record?

Next comes the stretch where the seats got drawn on a map, block by block, and the line was the color of the people living on it.

The scoreboard

Read it yourself

Sources