5.3.07

INVENTION, INNOVATION, DIFFUSION. Nikola Tesla might have solved the problem of transmitting electricity great distances, and Thomas Edison might have turned on the lights in cities. The credit for turning on the lights in the suburbs and farms, as well as providing the capacity to power appliances and machinery and electric railways goes to Samuel Insull, the subject of a recent biography, The Merchant of Power, making up this evening's Book Review No. 4. Mr Insull is one of the more obscure figures in business history today, although in the Crash of 1929, the rumor on Wall Street was that he had been wiped out (one broker quipped, "take off a zero" from his net worth), Orson Welles gained weight and grew a mustache to imitate him in Citizen Kane, and Franklin Roosevelt railed against "Insulls and Ishmaels" in his 1932 presidential campaign. Railroad enthusiasts might be familiar with the "Insull interurbans" without full knowledge of the power conglomerate that included mines, generating companies, railroads, and land developers that shaped and continues to serve the Midwest to this day.

The collapse of that conglomerate in the Crash, and Mr Insull's spending of his own money in a failing effort to save it, may be the best-known part of the story. The disclosure regulations of the Securities and Exchange Act and the ownership limitations of the Public Utilities Holding Company Act are direct, and not unjustified, regulatory responses to the collapse of the Insull holding companies, which were a highly leveraged capital structure vulnerable to a failure of any of the operating companies. Merchant raises the possibility that Mr Insull was creating holding companies on top of holding companies as a way of making it more difficult for Cleveland capitalist Cyrus Eaton, who figures in the railroad maneuvering of the 1920s and 1930s, to obtain board seats or outright control of the Chicago power and traction companies. The acquisition intrigues involving the railroads of that era might be a project for future research. The failure of the holding companies, with the concomitant losses of small investors, rendered Mr Insull less popular in Chicago than Al Capone. Mr Insull, however, was acquitted of any wrongdoing after he testified that he had lost his own fortune in attempting to protect shareholder value.

And what of the infrastructure he left behind? There are still a few Arthur Gerber buildings on the rapid transit, the South Shore interurban still takes over the streets of Michigan City, Exelon produces and Commonwealth Edison distributes the power, his estate (was Hawthorn-Mellody Dairy an Insull property??) is a museum, some people still know the CIVIC OPERA HOVSE as "Insull's Throne", and University of St. Mary of the Lake (not to be confused with the other Our Lady of the Lake at the end of the South Shore) recognizes the Insull role in developing northeastern Illinois.
In 1921, Archbishop George Mundelein opened a new seminary forty-five miles northwest of the original campus. Saint Mary of the Lake Seminary would operate under the same charter originally granted to the University of St. Mary of the Lake, making it the longest continuous academic charter in the State of Illinois. In 1926, the new seminary was host to the world, as one of the sites of the International Eucharistic Congress. The campus made transportation history with that event for it required the largest movement of people by rail in the history of the country.
Cardinal Mundelein offered St. Mary (I really must explore Insullvania in the area of Mundelein) as a wartime refuge for the Vatican, and the North Shore Line was a Catholic railroad. (As was Northern Pacific. Great Northern was Lutheran.)

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