Abstract

How does a country achieve a public capital market in which firms can raise capital from investors? In seeking clues and hypotheses, this article looks back to the dawn of the public corporation in the United States. The battles for control of the Erie Railroad, known as the "Scarlet Woman of Wall Street," a reference to its ill repute, stand at the symbolic center of these developments. The battles for control, which waxed and waned between 1868 and 1872, involved: the titan of the transportation age, Cornelius Vanderbilt; the brilliant and notorious stock market manipulator and takeover entrepreneur, Jay Gould; the largest and most powerful railroad of the era, the Pennsylvania; control over rail transportation to New York City; and the politics and courts of New York, Pennsylvania, and Ohio. It was played out in the securities markets, the courts, the legislatures, and the newspapers and attracted the attention, and condemnation, of some of the leading commentators of the day. Rereading this history from the vantage point of the end of the twentieth century, several features are striking. First, the battles are remarkably familiar: they are recognizably modern battles for control over a widely-held corporation. Second, many of the tactics utilized are now illegal. Finally, surprising connections emerge between antitrust, federalism, and the emergence of public capital markets.