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After the Erie Canal was completed in 1825, immigrants flooded into the Midwest from the East. Chicago's location, at the southwestern end of Lake Michigan with a short, easy portage to rivers flowing south and west, made it a strategic point for white settlers moving through—as it had been for Native peoples before them. The white population in the region expanded exponentially, creating both markets and products that would need transportation.
One particular market that had Chicago leaders' attention was centered in Galena, Illinois, a town named for the most common form of lead sulphide. Long mined by Native peoples and French explorers, substantial lead deposits in Illinois, Wisconsin, and Iowa became known to settlers from the East in the early 1800s. St. Louis had a monopoly on shipping lead from Galena down the Mississippi River by steamboat to link to markets on the East Coast. But merchants and miners in Galena wanted a quicker, more direct route to Lake Michigan.
The Illinois and Michigan Canal was chartered on February 13, 1835, to provide a water route from Lake Michigan to the Illinois River and then to the Mississippi. However, work on the canal didn't officially begin until 1836, and various issues delayed construction, so the canal wasn't completed and operable until April 1848. Once completed, the canal did in fact carry significant amounts of cargo, as its successor the Chicago Sanitary and Ship Canal still does.
But merchants in Galena thought a railroad would provide lower costs to transport goods more directly to and from Chicago, then on to the East Coast. Historian Patrick E. McLear notes that boosters on the North Side of Chicago—including the railroad's future president, William Butler Ogden—also favored a railroad line coming into the city from the north, which they believed would help balance trade patterns that had so far favored areas south of the Chicago River.
And so the Galena and Chicago Union Railroad was chartered on January 16, 1836, initially capitalized at one thousand shares of $100 each, for a total of $100,000. The first stockholders' meeting took place on May 23, 1836, at which a board of directors was elected; on July 3, 1836, the board elected Theophilus W. Smith as president.
Looming financial failure
The G&CU was one of seventeen railroads incorporated in that legislative session, seven of which failed within two years. New railroad companies were risky ventures, because they had to spend huge amounts on construction, rolling stock, and storage and maintenance facilities before they could even begin to make money. While communities in the Midwest wanted railroads, the population simply wasn't great enough to fund and support railroad services. Knowing this, the G&CU's commissioners initially sought financing from investors in the East, and on August 4, 1836, they increased the amount of stock for sale to $500,000, aware that building a railroad would cost much more than $100,000.
However, the Panic of 1837 played havoc with fundraising of any sort. Few people had money to invest in a railroad, and several Directors of the company had to resign as they themselves were engulfed in financial problems. Though the Board did commission a survey of the route from downtown Chicago to the Des Plaines River, they could do nothing further.
Things seemed about to change when Elijah K. Hubbard got involved, purchasing an overwhelming majority of G&CU stock—79 percent, in fact; he also provided $30,000 for construction costs, so the railroad had funds to work with until late 1838. However, Hubbard died in May 1839 of tuberculosis, at which point it was revealed that he had been silently representing Elihu Townsend, an Eastern financier who was a director of the New York and Erie Railroad. To show Townsend that things were moving, William B. Ogden worked with developer Walter L. Newberry to plot a general route for the railroad to Galena, and several towns along the route held public meetings to demonstrate support for continuing construction. But Townsend was not convinced, offered no further support, and did nothing with his shares.
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Everything came to a halt. Construction was not resumed. After their final meeting on November 22, 1837, the Directors of the Galena and Chicago Union Railroad did not meet for years. The G&CU was no longer a functioning company.
William B. Ogden and new life for the G&CU
William B. Ogden led the movement to reinvigorate the Galena and Chicago Union Railroad. When the G&CU was first chartered, Ogden had been in Chicago for less than a year, overseeing his wealthy brother-in-law's land investments north of the Chicago River. He had already worked to support railroad development as a young legislator in the state of New York, taking the lead in March 1835 to argue for state support of the New York and Erie Railroad. He asked fellow legislators to help build "continuous railways from New York to Lake Erie... through Ohio, Indiana, and Illinois, to the waters of the Mississippi," creating "the most splendid system of internal communication ever yet devised by man." The legislation passed, and his work was seen as a resounding success.
More interested in business than politics, however, two months later Ogden agreed to become the Chicago director of the American Land Company, arriving in May 1835. Although he himself was not wealthy, through his New York connections he had the trust of many rich investors. After two years in Chicago, Ogden was handling financial affairs for about a hundred Eastern investors, working with running totals, on average, of about $1 million of their funds. As his clients' profits grew, so did his own fortune. He was a savvy businessperson, well liked in Chicago, and he seems to have been a natural leader. In 1837 he was elected the first Mayor of Chicago, and in subsequent years he "was a leader in nearly every Chicago institution and investment enterprise in the 1840s and 1850s."
As he had been in New York, Ogden was particularly interested in building transportation networks. He invested in—and became president of—a steamboat company that operated for two years, linking Chicago with the western terminus of the Michigan Central Railroad at St. Joseph, Michigan. He and a partner got the contract to dig the Illinois and Michigan Canal, which they eventually completed a few years after the Panic of 1837 had calmed down. Although both ventures strained him financially, he successfully avoided bankruptcy, and when the economy settled down he focused on reviving the moribund Galena and Chicago Union Railroad.
As the years had gone on with no railroad service, frustrated mine operators in Wisconsin had begun to use wagon companies to transport lead to Madison and then on to Milwaukee. Newspapers in Milwaukee documented the exponentially increasing shipments of lead, taunting Chicagoans that this trade suggested "Milwaukee is destined to be the greatest town on Lake Michigan." As time went on, more towns in northwestern Illinois demanded action, to the point where supporters from Chicago realized that they might also lose the Galena market to the Madison-Milwaukee wagon companies.
Ogden and his associates began planning. In 1845, a group of businessmen from Galena, Rockford, and Chicago met in Rockford to organize a convention of interested parties from along the G&CU route. The convention began in Rockford on January 7, 1846 and was attended by Charles S. Hempstead who had just finished his term as Galena's first mayor. According to D. W. Yungmeyer, "the Chicago group was so well organized that it practically took over all the official chairs, committee heads, and about everything else, and because of its readiness with resolutions, statistics, and so on, secured the whole-hearted consent and approval of.–. everything [they] proposed." Delegates voted to create an organization that would take on the task of resurrecting the Galena and Chicago Union, appointing a committee which included eight Chicago representatives as well as former Galena mayor Hempstead.
William Ogden did not attend because he was in New York meeting with Elihu Townsend. With Ogden's eastern connections and his support of the New York and Erie Railroad—of which Townsend was a director—Ogden was in a good position to negotiate with Townsend. According to the original 1836 charter, if the G&CU company did not build a railroad within ten years, it would be disbanded as a corporation, and Townsend would lose everything he had invested. An amendment to the charter in 1837 had extended the construction deadline by five years, so they were still within the 15-year construction period, but it wasn't clear that Townsend planned to do anything on his own. If he were to let the new, still unofficial, group take over, Townsend could expect a profit if they were successful. Ogden set up the outlines of a deal in which Townsend would relinquish corporate control of the G&CU in exchange for the promise of substantial amounts of stock in what would essentially be a new company governed by the same charter.
When Ogden returned from New York with the promise of control over the Galena and Chicago Union Railroad Company, the new board of directors elected him as company president, on February 17, 1846. With the new organization, the deal with Townsend was completed in December 1846. A year after the first directors' meeting, on February 24, 1847, the Illinois legislature amended the railroad's charter to fit the new circumstances, setting the company's capital at $3 million. The Galena and Chicago Union was back in business.
From Wikipedia’s article on Galena and Chicago Union Railroad, shared under CC BY-SA 4.0.3