The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  This was the birth of a kind of abstract thinking never before required in everyday life. It sparked a fierce resistance. On a daily basis, most Americans rarely interacted with corporations; they still lived in a society of farms, small businesses, and independent proprietors. Jacksonians viewed corporations in much the same way that the evangelists of the Second Great Awakening saw the Masons or popery: as a corrupt conspiracy, a mysterious encrustation on the beautiful simplicity of the true religion. As artificial beings, Gouge intoned, “corporations have neither bodies to be kicked, nor souls to be damned.”9

  Jackson's veto of the Bank recharter marked only the beginning of the Bank War. The Bank still had six years left under its original authorization; its president, Biddle, still hoped to survive. He elected to systematically corrupt Congress by handing out loans and legal fees, and even bribed newspaper editors for friendly articles. Furious, Jackson launched a plan to withdraw the federal government's deposits and place them in friendly state banks, nicknamed the Pet Banks. Biddle retaliated, calling in loans, returning state banknotes for specie, and curtailing new credit. “All the other Banks and all the merchants may break,” he growled, “but the Bank of the United States shall not break.”

  “The subject of the removal of the bank deposits increases daily in interest,” wrote a New York merchant on January 11, 1834. “Nobody talks or thinks of anything else.” Nobody, of course, but Vanderbilt, lying broken in that Jersey cottage, spitting up blood within earshot of the trains of the Camden & Amboy. They were weeks of torment for the country and himself. As merchants and brokers along Wall Street pushed back their top hats and worried aloud, he had himself carried up to the railroad tracks, then placed in a special horse-drawn car he had ordered. Each rattle along the rails must have been agony, but it was better than one of the famously uncomfortable carriages that bounced down the turnpike. At South Amboy his crewmen lifted him out and placed him in one of his steamboats for the return to New York.

  There the city's businessmen fretted over their own casualties. One of those worriers was Philip Hone, a former mayor of New York, a wealthy merchant, and a member of the old Anglo-Dutch elite. His life would repeatedly intersect Vanderbilt's, despite their sharply contrasting social backgrounds. Most nights he sat at his desk and wrote in his diary in a tidy cursive script, recording the events of the day in eloquent, highly opinionated prose that makes him an ideal witness to Vanderbilt's world. “Wall Street was thrown into consternation this morning by the failure of John G. Warren & Son,” Hone wrote on January 31. Like most of the city's conservative merchants, he blamed the president, not Biddle. “If Gen. Jackson had visited Wall Street this morning, he might have been regaled with a sight similar to that of the field of battle at New Orleans. His killed and wounded were to be seen in every direction, and men enquiring with anxious solicitude, ‘Who is to fall next?’”10

  The Bank War spun American politics in a centrifuge, concentrating the two impulses of the day into distinct parties. On one side were Jackson's followers, the Democratic Party—or the Democracy, as they called it—the party of individual equality and limited government. Under the slogan “Jackson, Commerce, and Our Country,” they celebrated a market economy of real persons and republican simplicity. In opposition arose the Whigs, who were more trusting in the beneficial role of active government. At the time, the division between the two seemed as natural as a canyon. The Democrats had emerged out of the resistance to the eighteenth-century patricians and their culture of deference, out of battles against the limited franchise, aristocratic privileges, and mercantilist monopolies. Though their elected leaders often would make use of the government's economic power, the most radical among them—especially New York's “Locofoco” faction (nicknamed after the brand of matches they used when their rivals at a tumultuous party meeting doused the lights)—championed laissez-faire as their definition of equal rights. The Whigs (such as Hone) inherited some of the ordering, top-down outlook of the old elite, and a deeply moral vision of the role of the state. They believed that measures to assist the most enterprising, such as corporate charters or public works, would grace everyone; as historian Amy Bridges writes, they believed “the state should guide interdependent interests to a common good.” As development-minded modernizers in a young and growing country, they saw competition as a destructive force that punished entrepreneurship.11

  For months the nation endured the crisis, as Biddle squeezed, bankers and merchants gasped, and Jackson grimly held to his plan for removing federal deposits. Vanderbilt followed the war through the newspapers in his bed at 134 Madison Street, confined under Dr. Linsly's orders and the necessities of pain. Meanwhile Whig congressmen came to the painful conclusion that Biddle had gone too far. His retaliation against Jackson seemed to have proved the president's argument that the Bank threatened democracy.

  As spring wrestled loose from the grip of winter, scooping the ice from the harbor's waters and snow out of the streets, Americans realized that they had survived the Bank War. Biddle was beaten; in the end, he was forced to obtain a state charter from Pennsylvania for the Philadelphia-based Bank. And, by the end of 1834, Americans would discover that the prospering, dyspeptic, overbearing Vanderbilt had become a champion of the radical Jacksonian creed.12

  IN THE SUMMER OF 1834, not many weeks had passed since Vanderbilt had first emerged from his house on Madison Street, his skin pale from lack of sunlight, his legs shaky from lack of use. It had been a difficult winter. He was a man who charged ahead by instinct, by calculation, by the metaphor of the time; instead he had been confined to a single room until the onset of spring, struggling to simply hold steady as he managed his boats from his sickbed. He had ordered the new Union, for example, to be put on his lower Hudson River line, but Heyward, its captain (a “blockhead” or “blatherskite” or worse in Vanderbilt's extensive vocabulary of abuse), had allowed a shipment of thirty-eight crates of cotton prints to get so wet that the colors ran. Now Vanderbilt faced a lawsuit that would eventually cost him $5,000, plus $360 in court costs. At least his reliable brother Jacob had managed the Water Witch well on its route to Hartford.13

  Now there was this Westchester business. Three men confronted Vanderbilt in his office, angrily reminding him that, on March 15, 1834, the boat, which he had sold the year before, had started to run between New York and Albany at a fare of $2 per person. The men believed, as Hoyt and Peck had previously, that Vanderbilt was the real owner of the Westchester, and it infuriated them. They had taken pains to put the fare up to $3 on their own Albany-bound boats, and were grimly determined to do whatever was necessary to keep it there.

  When Vanderbilt later discussed this meeting in the press, he neglected to mention the names of his visitors. No matter—the public would not have recognized them. They were all-but-anonymous members of the Hudson River Steamboat Association, an organization of businessmen who maintained a monopoly on traffic between New York and Albany. The most famous among them, Robert L. Stevens, had sold out to the rest in 1832. They had paid Stevens the enormous sum of $80,000 for his boat, the North America, but the physical vessel was only one part of the purchase. They also had bought his agreement to not run any boat on the Hudson for ten years.14

  The stiff price—probably double the original construction cost—showed how difficult it was to maintain a monopoly on the Hudson, and how lucrative that monopoly proved to be. After the opening of the Erie Canal, traffic had boomed between Albany and New York, thanks to the passengers and freight coming from the West and the fast-growing towns along the Hudson and the canal. More and more entrepreneurs jumped in to meet this demand, forcing the monopoly to either buy them off or include them. By 1834, it had swollen to an overstretched alliance of three steamboat companies: the Hudson River, the North River, and the Troy.

  This confrontation, Vanderbilt recognized, was a dangerous moment. In this age of the cunning Yankee, of strangers and professional thieves, suspicion reigned; no one knew how far to tr
ust appearances. He insisted (quite truthfully) that he no longer had anything to do with the Westchester. “As further evidence of my unwillingness to appear as if joining in or promoting an opposition to the combined companies,” he explained shortly afterward, “I [had] refused a liberal offer for a charter of my steamboat Union, to run as an opposition boat between New York and Albany, and this I did for the purpose of keeping myself entirely aloof from all contest and competition.” The monopoly men didn't believe him. The question was settled: it would be war.15

  The problem was, it was war by proxy. A competitor soon appeared on Vanderbilt's lower Hudson route—his old Citizen, captained by Curtis Peck, steaming to Sing Sing at what Vanderbilt called “the paltry and pitiful price of 12½ cents.” Like his enemies, he saw a hidden hand at work—their hand. “It may be said that the Citizen does not belong to the combined companies,” he announced in the press. “To that I answer—she has been started in opposition to me at their suggestion, and is running under their sanction, protection, and patronage, and therefore the act is theirs.” The language was a bit too orderly to have come straight from his mouth, but the ferocity was pure Vanderbilt.

  His language was also pure radicalism. It appeared on the front page of the New York Evening Post, in an announcement of his retaliation against the monopoly.

  TO THE PUBLIC.—Having established a line of Steamboats on the North River, for the conveyance of passengers between New York and Albany, called the People's Line, in opposition to the great triangular monopoly composed of the North River Steamboat company, the Hudson River Steamboat company, and the Troy Steamboat company, I deem it proper to say a few words by way of appeal to a generous public, which, I feel persuaded, will sustain a single individual in an attempt to resist the overbearing encroachments of a gigantic combination. Competition in all things promotes the public convenience; and although the step I have taken may prove advantageous to the public, yet to me it may be far otherwise.16

  The brilliance of this appeal could be heard in its echo of the Evening Post's radical brand of Jacksonianism, as advocated by editor William Leggett. Two days before, Leggett had attacked corporations for “combining larger amounts of capital than unincorporated individuals can bring into competition.” He had called for laissez-faire to allow individuals to defeat “the grasping, monopolizing spirit of rapacious capitalists,” as expressed in corporate charters. “Even now, how completely we are monopoly-governed!” he had written. “How completely we are hemmed in on every side, how we are cabined, cribb'd, confined, by exclusive privileges!”

  Vanderbilt's declaration mimicked this rhetoric, which celebrated commerce and entrepreneurship but blasted corporations. He went on to explain how the monopoly had instigated the Citizen's run against him, and concluded:

  Thus, fellow citizens, has this aristocratic monopoly, secure as they think themselves in wealth and power, wantonly attacked an individual whose constant endeavor has been to avoid a contest with them. The gauntlet has been thrown by them, and not by me; and the question now is, will the public countenance the combined companies in an act of overbearing oppression, or will they patronize and encourage one who is determined to resist aggression and injustice, although the odds is vastly against him. The North River is the great highway of the people, and does not belong exclusively to the Monopolists.17

  Leggett himself could not have written a more vehemently Jacksonian statement.

  A more deliberately manipulative man probably would have been more careful in his argument. Vanderbilt praised the benefits of competition, for example, then wrote that he was challenging the Hudson River association only after trying to avoid “all contest and competition.” He attacked his enemies for being monopolists, but his outrage stemmed from their attack on his monopoly between New York and Peekskill. This inconsistency speaks of inflamed self-righteousness as much as cold cunning. He was undoubtedly opportunistic, and there is no evidence he was a Democrat (or a Whig, for that matter). But the political debate over monopolies and corporations went to the heart of his existence, leaving a deep impression that he believed his rhetoric: he was the people's rebel, a challenger of the mighty.

  And the people loved it—the drama, the slap in the face of the monopoly, and, especially, the low prices. Vanderbilt put the Nimrod and the Champion on the line to Albany for a $i fare. “Our river-boats are long, shallow, and graceful,” wrote one passenger, “and painted as brilliantly and fantastically as an Indian shell. With her bow just leaning up from the surface of the stream, her cut-water throwing off a curved and transparent sheet from either side, her white awnings, her magical speed, and the gay spectacle of a thousand well-dressed people on her open decks, I know of nothing prettier.” Serving fine food and abundant alcohol, these incessantly churning sidewheelers traveled a river renowned for beauty slipping between the wooded bluffs of upper Manhattan and the stunning cliffs of the New Jersey Palisades. On reaching West Point, the same writer found it almost impossible “to give an idea of the sudden darkening of the Hudson, and the underground effect of the sharp, overhanging mountains as you sweep first into the Highlands.”18

  Vanderbilt's mind was not on beauty, but the pain he inflicted on his opponents. Even a fare of $i—half that charged by the Westchester, the ostensible cause of this war—did not strike him as ruthless enough. Within days, he reduced it to fifty cents. Meanwhile he ordered his captains to beat the monopoly's boats at all costs.

  Philip Hone witnessed the resulting struggle on the Hudson. “We left Albany at ½ past 6 this morning in the Steam Boat Champlain,” he wrote in his diary on September 14. “There is a violent opposition between two lines of boats.” He meant violent literally. The rival crews hated each other, and public opinion was inflamed. “We were contending with the Nimrod all the way down, and for five or six miles before we reached Hyde Park Landing, the boats were in contact, both pushing furiously at the top of their speed. And we and our trunks were pitched ashore like bundles of hay. The people at the landing being all in favour of the opposition… nobody would take a line, and we might have drowned without an arm being reached to save us.”

  Hone was a commercially savvy merchant, yet he loathed such cutthroat competition, even when he had no personal interests at stake. Two days later, he took Vanderbilt's Champion to New York; the experience caused his social prejudices to rise up in his throat like bile. “Our boat had three or four hundred passengers, and such a set of rag-tag & bobtail I never saw on board a North River Steam Boat—the effect of the 50 cent system,” he sniffed into his diary. “If the people do not rise in their might and put a stop to the racing & opposition it will be better to return to the primitive mode of travelling in Albany sloops.”

  If the people do not rise? Against what—cheap travel? Hone saw firsthand the popularity of Vanderbilt's fierce competition, but he did not believe his own eyes. Indeed, his visceral distaste illuminates America's social and political divisions. The Democrats derided Hone and his fellow Whigs as “aristocrats,” and not entirely without cause. Though political and economic institutions no longer depended upon distinctions in social rank, New York's old patrician families had carried on into this more competitive, egalitarian era, carrying their wealth and prejudices with them. Their elitism blended with the Whig faith in an entreprenurial but orderly economy. Hone's disgust at being forced to mingle with his social inferiors was inseparable from his disaste for competitive anarchy. After complaining of the “rag-tag and bobtail,” he added, “I would rather consume three or four days in the voyage than be made to fly in fear and trembling, subject to every sort of discomfort, with my life at the mercy of a set of fellows whose only object is to drive their competitors off the river.”19

  Vanderbilt pressed the war into November. He added the Union to the line. He offered overnight service. He ran ads in Albany newspapers headlined “PEOPLE'S LINE.—FOR NEW-YORK.—NO MONOPOLY.” He battled on until fingertips of ice began to poke down the Hudson, until finally the
freeze clasped its hands shut over the river.20

  In the spring, steamboats began to churn again to Albany—and again charged $3 per person. The war was over; Vanderbilt had withdrawn. The public, which had cheered Vanderbilt's boats at every dock and landing, must have been mystified. Where had he gone? The answer would not come for another five years, when a careful investigation by the New York Herald revealed that Vanderbilt had fought not for a principle, but for revenge. On those terms, he had won a resounding victory. He had forced the “odious monopoly,” as the Herald called it, to call Peck off the Sing Sing route and to pay Vanderbilt the astronomical fee of $100,000 to leave the line to Albany, plus an annual payment of $5,000 to stay away21

  It was becoming a pattern with him. In the emerging code of conduct for steamboat men, the first proprietor to occupy a line assumed a sort of natural right to the route. A challenger who lasted long enough could expect an offer of a bribe to abandon the market and, should he accept it, would be expected to abstain from further competition. Vanderbilt had now repeatedly preyed on existing lines—to New Brunswick, to western Long Island Sound, and now to Albany—and each time had taken money to stay away. Like his late mentor Thomas Gibbons, he often acted out of a sense of self-righteous outrage, but always in ways that suited his material interests. To say that his Jacksonian rhetoric was deliberately deceitful is, perhaps, to suggest that he was more self-aware than he actually was. He made himself his first and last cause, but never the subject of study.

  The public, however, had no inkling of who Vanderbilt was as a man, or why he had left the Albany line. The people looked for his next fare-cutting offensive as he unerringly hunted out the next great channel of commerce. To them, he was not a self-serving capitalist, but a lone proprietor, an avenging entrepreneur, the monopolists' nemesis.