F. Augustus Heinze

Fritz Augustus Heinze was born in Brooklyn, New York, to wealthy parents, Otto Heinze, a Jewish immigrant from Germany and Lida Lacey, an immigrant from Ireland.[1] He was very bright and had a good education in Germany (from 9 to 15 years of age)[2] and at Brooklyn Polytechnic Institute (now part of NYU) and was fluent in various languages. He then graduated from Columbia University's School of Mines, New York, in 1889. Instead of undertaking further studies in Germany, as his father wished, he headed west to Colorado and Salt Lake City to pursue his interest in mining.[3]

Heinze went to Butte, Montana, in 1889 as a mining engineer for the Boston and Montana Company. He became known for his hard drinking and fun-loving antics in Butte's saloons and gambling dens, whilst donning society dress and having a shy demeanor and polished manners that impressed the ladies.[3] Assisted by an inheritance of $50,000 from his recently deceased father, Heinze revelled in working hard to be a significant player.[4] In 1894, Heinze's Montana Ore Purchasing Company opened a sophisticated new smelter, allowing Heinze to offer low-priced smelting to small mining companies. Originally, Heinze had to lease mines and secure ore from independent companies in order to keep operating. Heinze was able to locate rich ore bodies and the Rarus Mine, purchased in 1895, turned out to be one of Butte's premier mining properties.[5]

Heinze had arrived in Butte well after the "Copper Kings", William A. Clark and Marcus Daly were well established, (Daly's company was the Anaconda and later, the massive Amalgamated Copper Mining Company [after the sale to William Rockefeller and Henry H. Rogers of Standard Oil], later renamed the Anaconda Copper Mining Company). In order to catch up, Heinze's strategies included reducing the working day for his miners from ten to eight hours and the miner's considered him a hero. One of the mining laws directed that an owner could mine the veins that outcropped on his claim, and follow them underground beneath claims owned by others. This was known as the law of the apex, and Heinze maintained that his miners had the right to take out copper ore from beneath his neighbors. Using this law to his advantage Heinze would employ up to 30 lawyers at a time and tie up his opponents in the legal system with case after case.[3][6]

With skillful political maneuverings, Heinze would also ensure that "friendly" people were appointed as judges in Montana. In one incident, a "pretty girl" was found to have offered a judge $100,000 and Heinze was implicated but never charged.[4] Heinze also became a brilliant orator, and in speeches to the miners and public he would paint the Amalgamated Company as a ruthless and oppressive organisation.[3]

In 1902, Heinze combined his various mining interests into a company called United Copper Company, valued at $80 million[7][8] with capacity to produce 40 million pounds of copper a year, compared to 143 million a year produced by Amalgamated.

In 1903, frustrated when the Rarus property was subject to a court order to cease mining, Heinze's miners moved down anyway from the Rarus into an adjoining Amalgamated property. Before being stopped, Heinze succeeded in taking out a hundred thousand tons of high grade copper ore. There was hand-to-hand combat with Amalgamated miners, opposition mine shafts were fouled through burning rubber and spreading caustic slaked lime, grenades were thrown, and high pressure hoses were fired. Dynamite was also set off, caving in the property and completely obliterating all the evidence. Heinze was charged with contempt of court yet he was fined only $20,000.[3]

The actions of Heinze had severely hampered the giant Amalgamated Company. In 1906, after a decade of the mining war, John D Ryan negotiated with Heinze for Heinze to sell his Butte interests to Amalgamated for a reported $12 million.[9] His mining days in Butte, Montana, had come to an end but Heinze had amassed a fortune.

In 1907, Heinze moved to New York to be a major player, this time in the financial arena. He based his company, United Copper, at 42 Broadway, just around the corner from Wall Street. Heinze entered the banking business, forming a close alliance with Charles W. Morse with whom he served on at least six national banks, ten state banks, five trust companies and four insurance companies.

Across the corridor from Heinze were his brothers Otto and Arthur P Heinze who had a brokerage firm. It was Otto that formulated the ill-fated financial ploy in October 1907 that dramatically failed and was a major catalyst that caused America's massive financial collapse, called "The Panic of 1907".[10] Otto's plan was to aggressively purchase the stock of United Copper. The price would soar high. Then, with prices high, and Otto controlling most of the stock, he would force the short-sellers to repay the borrowed stock. The short-sellers would have no option but to settle with Otto for high prices.

But Otto overestimated how much of the company the family controlled. When he forced the borrowers to buy back stock they were able to get it from other sources. When the market realized his 'corner' had failed, the stock price of United Copper collapsed. From there panic spread, as people pulled money out of banks associated with Heinze, and then from trust companies associated with those banks. Heinze had eventually supported his brother's ploy and due to his heavy involvement in the financial system suffered great financial and personal losses. He was barred from any further involvement in financial institutions.

The Panic of 1907 was one of the most significant financial crises in American history. There had been several contributing factors, such as the huge cost of the devastating 1906 San Francisco earthquake, but it was the actions of the Heinze brothers that had caused much of the panic. The 1907 crash eventually lead to the formation of the US Federal Reserve System in 1913.[11]

Just prior to the tumultuous events of 1907, Heinze's interests had turned to the mines of Bingham Canyon, south-west of Salt Lake City, Utah. Heinze purchased a controlling interest in the Bingham Consolidated Mining and Smelting Company and the Ohio Copper Company.[19] Unfortunately while Heinze fought his many charges in the courts, the operations struggled for funding[20] and Heinze's involvement in Utah eventually proved to be more as an impediment than as a saviour.

The mining operation and mills of all the companies at Bingham were located in the narrow Bingham Canyon, including Ohio's small 150 ton/day Winnamuck mill. The story went that the canyon was so narrow that for a dog to wag his tail in the canyon the dog had to wag it up and down, not side to side.[21]

In August 1910, Heinze married Mrs Bernice Henderson, an actress (who had played the role of a vampire on stage[37]), but they divorced in 1912. The two reconciled at Bernice's death bed in 1913.[38] They had a son Fritz Augustus Heinze, Jr.

In November 1914, Heinze suffered a hemorrhage of the stomach caused by cirrhosis of the liver, and died at 44 years of age.[4][39][1]

Heinze's estate was battled over by two women who both claimed to be legally married to him,[40] but it was left to his two-year-old son Fritz Augustus who was adopted by Heinze's sister, Mrs. Lida Fleitmann. Heinze did not leave a will.[41]

The Philadelphia Inquirer wrote that: "Heinze's fight may have been worthwhile. He may have accomplished substantive good for Montana, but his early death in comparative poverty illustrates how devious are the ways of the speculator and how dangerous is the game." [42] Some of the residents of Butte, Montana, thought about building a statue in his honour but it never happened.[14]

• Bruner, Robert F; Sean D Carr (2007). The Panic of 1907 – Lessons Learned from the Market's Perfect Storm. Hoboken, New Jersey: John Wiley and Sons. ISBN 978-0-470-45258-5.
• McNelis, Sarah (1968). Copper King at War. Missoula: University of Montana Press. Among McNelis' sources was a 72-page collection of correspondence she had with Otto Heinze between 1943 and 1947.
• Malone, Michael P. (2006). The Battle for Butte – Mining and Politics on the Northern Frontier, 1864–1906. Seattle, Washington: University of Washington Press. ISBN 0-295-98607-7.
• Redmond, George (1999). Stock Market Operators. London: Financial Times, Prentice Hall. ISBN 0-273-64311-8.
• Sales, Reno H (1964). Underground Warfare at Butte. Butte: World Museum of Mining.

• Federal Reserve Bank of Minneapolis – F. Augustus Heinze and the Panic of 1907
• The Copper King at War Manuscript (University of Montana Archives)