Before 1920, the year in which railroad consolidation received Congressional sanction, three periods in the history of rail development the time of the Civil War the chief purpose of consolidation seems to have been to unite short connecting lines to form through routes between important terminals, usually with the approval and assistance of state legislatures. A good example was the chartering of the New York Central Railroad in 1853 by the New York legislature following the amalgamation of ten companies operating short lines in a chain of roads between Albany and Buffalo, New York. A second stage of consolidation developed from the unparalleled construction and intense intercompany competition that followed the Civil War when railroads felt the need of large systems both to offer effective service over widening geographic areas and to offset the disastrous effect of competition upon an industry of expensive, fixed, and specialized capital. It was during this period that the major eastern trunk and western transcontinental systems were formed. State laws designed to prevent the combination of competing lines were widely circumvented, or made inoperative, and the prohibition of pooling in the Interstate Commerce Act of 1887 and of trade (and traffic) associations in the Sherman Act of 1890 gave new impetus to the use of consolidation as a means of escaping the enervating effects of competition. In the years following the Panic of 1893, when one fourth of the country's rail mileage passed into the hands of receivers, the use by the railroads of several new legal devices, including the interlocking directorate, the holding company, and the community of interest, not only counteracted antimonopoly legislation but produced a third and still more impressive phase of consolidation.
Bank Examiners’ Information and Expertise and Their Role in Monitoring and Disciplining Banks Before and During the Panic of 1893
