The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  Vanderbilt reached an agreement with the Boston & Providence Railroad—the erstwhile ally of the Navigation Company—that gave him a 25 percent rebate on freight charges. He put the Cleopatra on the line, which became very popular. (“She proves to be very fast,” Comstock admitted.) He even hired a lobbyist to petition Rhode Island's legislature to stop the Navigation Company from having exclusive rights to its dock. “V is determined to put us to as much trouble and expense as possible,” Comstock said. “There is a great disposition here [in Providence] to assist him.”

  On the strategic plane, Vanderbilt shifted the Sound's travel patterns as he drew thousands of passengers away from the Norwich and Stonington railroads. Palmer was utterly flummoxed. “To the astonishment of everybody he has not lost money & it is supposed that he has made,” he wrote to Lewis. “We have made every effort in our power during the winter to induce Vanderbilt to withdraw from the line but to this day have been entirely unsuccessful.… He is a very hard & troublesome customer.”

  As the spring of 1842 came and went, Palmer verged on a breakdown under the pressure. “His great wealth & tact in the management of steamboats renders him the most formidable opponent that could come in opposition,” he moaned on March 6. A few weeks later he whimpered, “Vanderbilt's boat (the New Haven) lessens our receipts nearly one half. We are barely paying expenses.” In June, he wailed, “Vanderbilt is pushing his opposition against us with great vigor, & as you must have perceived by our weekly returns is ruining our business.” McNeill put it more graphically. Vanderbilt, he warned, “is gnawing at our very vitals.”9

  WHATEVER HUGH MCLAUGHLIN SAID OR DID, Cornelius Vanderbilt didn't like it. On Staten Island on December 1, 1843, Vanderbilt flared in rage at McLaughlin, and bashed him with his knuckles until he reduced him to a bleeding wreck. What's remarkable about the story is not the beating, but McLaughlin's nerve in then suing him for $1,000. Vanderbilt's reputation usually terrified people.10

  On January 27, 1842, for instance, a committee from the Elizabethport & New York Ferry Company met him to discuss his proposal to sell them some waterfront land in Port Richmond, Staten Island. Coming from Vanderbilt, the most innocuous offer sounded like a threat. If they bought the land, they asked, would he sign an agreement to not compete with their ferry? “Capt. Vanderbilt would not agree to bind himself by any written agreement,” the committee reported, “but said his word was better than his bond & that he has no intention of running an opposition to us any more than he should think of running a boat to Quebec.” The delegation didn't believe him, but finalized the deal just the same, “believing that he will not interfere with us, if we make the purchase,” as the committee put it. It was an offer they couldn't refuse.11

  They did not have to look far for examples of Vanderbilt's ruthlessness. After taking over the Richmond Turnpike Company, he had pummeled his cousin Oliver—matching his fare cuts, filing lawsuits, even fencing in his dock and dumping gravel on it. And Vanderbilt insisted on a $20,000 bribe from the Navigation Company to leave the outside line. “Sooner than pay him one dollar tribute,” Comstock sputtered, “I would die in a ditch.… In fact I protest as an owner to paying him one dollar, directly or indirectly.” The company paid.

  But this was not the usual sort of extortion. It formed part of a larger deal in August 1842 that forced Sanford off the Sound and gave Vanderbilt the right to connect to the Norwich Railroad. Sanford retreated to lines between Boston and Maine, and Coit sold his Worcester to Vanderbilt. Daniel Allen began to sell through tickets via the Norwich on the “New York and Boston Railroad Line” for the Worcester under Jacob Vanderbilt and the Cleopatra under Captain Isaac Dustan.12

  The Norwich maneuver was the first of a series of strategic moves that would transform Vanderbilt from a spoiler to the ultimate insider. He began to systematically seize power in the companies that provided transportation around New York. On November 20, 1843, he bought 490 shares (out of 998 total) in the Elizabethport Ferry Company, which effectively gave him control of the second major ferry service to Staten Island (the company's boats stopped at Port Richmond on their way to New Jersey). On March 1, 1844, Vanderbilt became a director and treasurer; in July, he had Allen named secretary, and moved its offices in with his own, now at 34 Broadway13

  Also in March, another corporate delegation visited Vanderbilt—this one from the Long Island Railroad, now nearing completion to its eastern terminus, the village of Greenport. They had discovered, they told him, that the New England railroads across the Sound refused to supply a connection to Boston “without the concurrence of the steamboat proprietors connected with such railroads.” As negotiations wound on, the corporation invited him to join the grand festivities that marked the opening of the line on July 29 and 30. Vanderbilt and some five hundred dignitaries, including the mayors of New York and Brooklyn, rode in the first set of trains to make the ninety-five-mile journey from Brooklyn to Greenport. In August, he closed a deal to sell the railroad the Cleopatra, the Worcester, and the New Haven for $120,000 in railroad stock and $125,000 in bonds. He joined the board of directors, and was named to the three-man committee that managed its steamboat affairs.14

  In all these moves, Vanderbilt bracketed the Stonington with his attacks. First, as an individual proprietor he had drawn traffic to the outside route. Then his agreement not to compete with the Stonington and the Navigation Company in return for $20,000 had only bound him as an individual proprietor, not as a corporate director. So he operated through those corporations, undermining the Stonington through the railroads that ran parallel to it. He undercut it on both sides, by selling $2 tickets to Boston via the Norwich and, in 1845, arranging for the Long Island Railroad to switch its steamboat connection from Stonington to Providence.15

  The Stonington, however, transformed from a bankrupt enterprise into a potential fountain of profits and dividends. It began with the rise of Elisha Peck to the board of directors in January 1843. This was a powerless position; with the Stonington in the hands of its bondholders, led by William Lewis of the Girard Bank, the stockholders had no influence. But Peck had a plan to reduce the crippling debt by half and regain control: the railroad would take back the existing bonds in exchange for new ones worth 50 percent less. He argued that it was better for the creditors to accept half than to hold title to a whole that would never be paid. The deal would allow the company to resume its interest payments and therefore restore its financial health.

  Elisha Peck (apparently of no relation to Curtis Peck) was an ill-educated, hardheaded man, much like Vanderbilt. The polished and aristocratic Lewis mocked his unorthodox grammar and the sharp scrawl of his handwriting. But Peck proved that he understood his business very well indeed. He assembled a block of stockholders dedicated to “the work of regeneration & reform,” as broker Samuel Jaudon put it—a reform in administration as well as debt. Peck maneuvered to remove Courtlandt Palmer as president.16

  Peck pulled off his coup—assisted by Lewis, who literally sold out Palmer. Lewis arranged to have the Girard Bank sell the old bonds to a consortium of speculators at twenty-five cents on the dollar. Then the consortium swapped them with the railroad for its new bonds, as Peck had proposed, at a rate of fifty cents on the dollar, doubling the speculators' money. That consortium of lucky men included Peck, his faction of stockholders, and Lewis himself, who blithely profited at his own bank's expense. Peck ascended to the Stonington's presidency, and the railroad, with its debt reduced by half, finally emerged out of bankruptcy17

  But hardly had Peck assumed the presidency than he confronted the same problem that had wrecked Palmer. At the end of 1845, Peck wearily explained it in the railroad's annual report. “The receipts of the Company it will be seen, have fallen off materially, compared with those of the former years,” he wrote. “This has been caused by the very low rate of fare produced by an active opposition.”

  That opposition came from Cornelius Vanderbilt, of course, in conjunction with an old friend. “It app
ears that Vanderbilt, Newton, & Drew are all connected in their steam boat operations,” Comstock wrote Handy. (He was referring to Isaac Newton, Drew's partner in the People's Line on the Hudson.) “I have it from pretty good authority that Mr. Newton & Drew are both interested” in Vanderbilt's operations on the Sound.18

  And so they were. In recent years, Drew and Vanderbilt each had done his best to keep the other, a potentially deadly enemy, as close as possible. When Drew and Newton (an expert in the field of steamboats, unlike Drew) reorganized the People's Line as a joint-stock association in July 1843, Vanderbilt bought $11,500 worth of shares in the business, out of a total capitalization of $360,000, and took a seat on the board as one of five directors. (Drew owned $108,500, and Newton $52,000.) In December 1844, Daniel Allen became a partner in Drew's banking and brokerage firm, Drew, Robinson & Co.19

  When Allen entered Drew's office, he learned that the latter had concocted a scheme to buy control of the Mohawk & Hudson, New York State's pioneering steam railroad, which offered a shortcut between the Erie Canal at Schenectady and the Hudson River at Albany. Starting on September 16, 1844, Drew's partner Nelson Robinson, a man renowned for his cunning as a broker, set out to acquire the necessary shares. He regularly would pass under the colonnaded facade of the Merchants' Exchange, a large building between Wall and William streets, and between Exchange Place and Hanover Street, completed in 1842. The edifice housed the long room where mere handfuls of brokers gathered in front of a table where the few publicly traded stocks were called in a daily auction. By June 11, 1845, Robinson had purchased enough shares to elect Newton as the Mohawk & Hudson's president, and both Allen and Drew as directors.20

  With a man inside Drew's firm, Vanderbilt came to understand these operations intimately. They offered a promising model for his own offensive on the Sound. Barred by agreement from competing personally with the Stonington Railroad, he arranged in 1845 for the People's Line to take a steamboat off the Hudson and throw it on the outside route to Providence. Meanwhile, he used his position within the Norwich and Long Island railroads to further slash fares to Boston.

  “All of these lines are probably run for the pleasure of doing an active business,” the Boston Advertiser joked, for it seemed impossible that they made enough money to pay expenses.21 This fare-cutting assault marked the final offensive of Vanderbilt's long war on the Stonington and the Navigation Company. This time, however, he had his eye not only on the movements of passengers on the Sound, but on the movements on Wall Street. He did not want a bribe—he wanted possession.

  On July 4, 1845, the New York Herald published a lengthy analysis of Vanderbilt's attack, without mentioning his name. “The parties engaged in the running of the opposition boat, are perfectly indifferent about its earnings—they do not look for a single cent in return for the outlawry in that quarter,” the paper stated, using the revealing term “outlawry” for the ruthless reduction in prices.

  The support of the opposition is purely a Wall Street stock operation, and so long as it suits the interests of these brokers cornering Long Island, Norwich and Worcester, and Stonington Railroad stock, the boats will be regularly employed on the route.… The stock of the Stonington Railroad Company has thus far been more seriously affected than any other. That road having no local travel of consequence, depending almost entirely upon the receipts from through travel, its income has been badly reduced by the attraction of passengers to other routes.

  Perversely, the very reforms that Peck had carried out now made the Stonington a desirable property, and thus a target of attack. Vanderbilt waged his ferocious fare competition in order to drive down its stock price, in order to gain control. With Drew's firm (and most likely Nelson Robinson personally) handling the trading, Vanderbilt bought up large blocks of shares. He convinced Drew and his partners to buy shares as well, on the promise of a large rise in price once he assumed control of the corporation. As the annual meeting approached, Vanderbilt tried to rally support among the other investors. “A meeting of the stockholders of the Stonington Railroad is to be held at the Astor [House hotel] this evening,” the Herald reported on September 26, 1845. “The late movements which have taken place in this Stock are said to be for the purpose of producing a change in the Direction.”

  A few days later, the old board of directors won reelection.22 But the steady pressure Vanderbilt exerted on the railroad's business allowed him to acquire more and more shares. To that end, he next moved into the Hartford & New Haven Railroad. For its first few years, the line had staggered along with only local traffic; then, in December 1844, it completed a connection to Boston through an extension to the Western Railroad at Springfield, Massachusetts. “The result has produced a complete renovation of the affairs of the company,” the American Railroad Journal reported, as revenue more than doubled. On June 1, 1846, Vanderbilt sold to Hartford & New Haven three modest steamboats in return for $180,000 in stock at the par value of $100 per share (which paid a dividend of 7.5 percent, or $7.50 per share). This made him a major shareholder and a company director. It was another route on which he could cut fares to Boston—another finger in his grip on the Stonington's throat.23

  In September 1846, he seized Stonington directorships for himself, sons-in-law Allen and William Thorn, and Drew and his partner Eli Kelley. The Navigation Company succumbed as well, as Drew bought control of the old foe in early August 1846 (undoubtedly with Vanderbilt's assistance). Finally, in 1847, Vanderbilt and his partners forced Peck off the Stonington's board, replacing him with Nelson Robinson, and Vanderbilt assumed the presidency. “The road never was under better management or more prosperous condition,” the Herald reported. The monopolists' nemesis, the champion of the people, was now the prince of Long Island Sound.24

  “NO ONE WHO SAW IT WILL DENY that the Whig Procession yesterday surpassed anything of the kind ever seen in this country,” the New York Tribune exclaimed on October 31, 1844. “The Procession occupied two hours and a half in passing Canal street, while it was half an hour longer in wheeling into Broadway from Marketfield st.” Brass bands, columns of banner-wielding marchers, and formations of mounted men demonstrated in favor of Whig presidential candidate Henry Clay—and against Democrat James K. Polk, derided by the Tribune as “the creature and heir of the Annexation Conspiracy!”25

  The intended insult spoke of an ominous shift in American politics. The old political debates still smoldered, but had cooled somewhat. Many Whigs remained unhappy with cutthroat competition, and many Democrats with banks and corporations, but they were learning to endure them. Policy makers from both parties often proved more pragmatic than ideological. In 1838, for example, New York's Whigs had introduced free banking, which allowed anyone who met certain requirements to obtain a charter for a bank; the Whigs had intended to end the political abuse of bank chartering by Martin Van Buren's Albany Regency, but the result was to open the field to all who wished to compete. And the Democrats generally embraced the largest and most active part of the federal government, the Post Office, which subsidized newspaper delivery and (until 1845) many stagecoach lines. Meanwhile a wave of defaults by state governments on their bonds after the Panic of 1837 had tempered the enthusiasm for internal improvements, and President Van Buren's creation of the independent treasury system (removing federal money from private banks) had settled the Democrats' gravest complaints with the banking system.26

  But politics still generated searing heat, thanks to slavery. For the previous decade, abolitionists had been organizing and agitating, particularly in pious New England. On the other side, Democrats in particular wanted to annex Texas, where slave-owning settlers from the United States had won their independence from Mexico in 1836. Candidate Polk craved an expansion of the republic, hungrily eyeing Oregon, California, and New Mexico. But it was his enthusiasm for Texas that sparked the fury of many Northern Whigs. The idea of absorbing a territory where slavery actually existed upset even conservatives who frowned on the rabble-rousing abolition
ists. And Mexico refused to accept Texas's independence, raising the danger of war. “It would ill become this nation, so boastful of its love of freedom,” declared Horace Greeley the Tribune's editor, “to embark in a foreign war, assume a foreign debt, and involve itself in a web of responsibilities the end whereof no man can predict, for the clearly discerned purpose of extending and fortifying slavery”27

  And so the mammoth parade proceeded through New York's streets on October 30, 1844. It is too simple to say that passions ran high; the cliché conjures up none of the anger that vibrated between the watching crowds and the columned marchers, none of the hate in the eyes of the union members, the Irish immigrants who had flooded into the city since 1830, the expansionistic Democrats who saw the Whigs as aristocrats who conspired to hold them down. First came the shouts and insults, then pushing, and finally punching. All along the route, skirmishes erupted, in a daylong moving battle.28

  Of all the Irish Democrats who smashed Whig cheeks and broke Whig teeth, perhaps the most feared was Yankee Sullivan. Born in Ireland in 1813, he had been transported by British authorities to Botany Bay, Australia, for an unknown felony. In 1839 he had stowed away on a ship to the United States, where he rose to fame as a bare-knuckle prizefighter. He had opened a tavern, the Sawdust House, in the infamous Five Points slum and became an enforcer for the Democratic Party in the city. Sullivan was flamboyant, crafty, and merciless. In one fight, he was losing badly until he broke his foe's arm; Sullivan then punched the broken arm relentlessly until the opponent gave up. In another, he got caught in a headlock, gasped that he was done for, and went limp. When the enemy let him go and turned toward his corner, Sullivan leaped up and hammered his head behind the ear.29