by T. J. Stiles
Corneil returned from California in 1849 with something broken inside of him. It was the gear that connects labor with reward, diligence with satisfaction. Perhaps it had never worked properly in the first place, but the land of excitement and easy money had ruined it for good. Back on the Atlantic coast, he drew another draft on his father, which his father also refused to pay. He then agreed to seek treatment in an asylum. It did not help. He began to disappear into card and roulette-wheel saloons, only to emerge penniless. He developed a taste for fine clothes—a black silk tie, white watered silk vest, black frock coat, and kid gloves—but he neglected to pay for them, causing his creditors to pester the Commodore with the bills (unsuccessfully). Vanderbilt had given his own name to this boy, only to see him become everything he despised: sickly, weak, spendthrift, dishonest, dishonorable.53
William H. Vanderbilt—or Billy, as the Commodore still called him—had said nothing about his father's outburst at the wedding. He knew better than to try to fight such abuse, which he himself still received during his father's regular visits to Staten Island. Billy continued to complain to Daniel Allen about “the old man.” Vanderbilt had exiled Billy to a farm, yet harshly rebuffed his requests to borrow money to improve the place. “He would say of his father that he was mean,” Allen later recalled, “that he couldn't get anything out of him and couldn't get along without money.” As a prosperous businessman as well as a brother-in-law, Allen was always willing to help, loaning a few hundred dollars here and there, which Billy repaid promptly. Very likely it was Allen who brought Billy into his first joint business venture with his father, the ill-fated California Navigation Company (under which they had shipped the disassembled steamboat to San Francisco at the start of the gold rush).54
Gradually—and almost unnoticed by the Commodore—the supposedly meek, soft son turned his farm into a profitable operation. “He was a hard master to work for,” one field hand told W. A. Croffut, the nineteenth-century biographer. Knowing that new workers tried to make a good impression on their first day, Billy “would count the number of rows of corn they had hoed, and then require them to do the same amount of work every day”55
Billy's stature rose steadily, lifted by his own success. On December 5, 1851, virtually the entire population of Staten Island poured down to the water's edge to see “the greatest living man,” in the words of the New York Herald: Louis Kossuth, the Hungarian revolutionary who had nearly won his nation's independence from the Austrian Empire. Billy stood in front of the crowd as part of Richmond County's official welcoming committee; the other members included Daniel Allen and George A. Osgood, another of the Commodore's sons-in-law.
The next day, Kossuth took the Vanderbilt across the harbor to Manhattan. There the Commodore must have had trouble getting to his place of business at 9 Bowling Green, for an immense mob jammed into every crevice and climbed every ledge and pole to see the Hungarian hero.56 When Vanderbilt did reach his door and climbed the steps to the second floor, he strode past Allen's desk on his way to his own office in the rear. Allen would present the affairs of the steamship business, discuss decisions tentatively made, and show him handbills and documents. The Commodore would shift the cigar around in his mouth, put on his reading glasses, and give his approval or curtly say otherwise.
In late 1851 and early 1852, there was much for him to review. “That was a time of great emigration,” recalled James Cross. “There was a great demand for passages.” With the Nicaragua steamships sailing from Pier No. 2, just around the corner, ticket buyers packed into the office. Daniel Drew regularly stopped by to chat, discussing their joint ownership of the North America and Wall Street matters. And Vanderbilt often unrolled plans of various steamers, pondering which to buy to expand his fleet, especially on the Pacific, where he needed more tonnage. In the process, he built a partnership with Robert and George Schuyler, Alexander Hamilton's illustrious nephews, who helped settle a dispute between Vanderbilt and shipbuilder William H. Brown over the six-hundred-ton steamer Independence. “We came in and re-imbursed Mr. Vanderbilt his advances” for the ship, Robert testified, “and let the ship remain in the line, and took our chance for the earnings.” That brief statement shows how thoroughly the aristocratic Schuylers trusted Vanderbilt. As always, though, Vanderbilt trusted his own family most. On January 21, he sent his son-in-law Cross to California to act as his new agent in San Francisco and Jacob Vanderbilt to Nicaragua to supervise the Accessory Transit Company's affairs.57
As master of one of the two primary channels of commerce and travel between San Francisco and New York, the Commodore emerged as a national figure with a public stature worthy of his informal title. But Washington continued to fund his rivals, a circumstance that offended both his quasi-Jacksonian outlook and his personal interests. In January 1852 he offered to carry the mail via Nicaragua for $250,000 per year, compared to the current annual payments of $638,000 to the Pacific Mail and U.S. Mail Steamship companies and $100,000 to the still-incomplete Panama Railroad.
Though Congress declined his offer, he redoubled his competition. He purchased the Samuel S. Lewis in February and the Brother Jonathan in March, as well as the Pioneer and the Monumental City. He ordered eighteen omnibuses for the carriage road from San Juan del Sur to Virgin Bay. He launched an 1,800-ton steamship, the Northern Light, from the Simon-son yard, and began construction on another steamship. As if in tribute to the great turn in his career, it was named Star of the West. Bankers, merchants, and travelers all gained as he cut fares, added facilities, and put new hulls in the water.58
No one studied Vanderbilt's march more closely than George Law. In February, in seeming imitation of the Commodore's celebrated journeys to Nicaragua, Law sailed to Panama to inspect the progress of the railroad he had invested in so heavily. He inaugurated the Atlantic terminus of the line at Navy Bay, where he christened the new city of Aspinwall. He returned to New York in May and was welcomed with a public dinner at the Astor House hotel, hosted by Charles Morgan, Isaac Newton, Daniel E. Sickles, and an obscure Democratic Party functionary named William M. Tweed.59
Law took Vanderbilt's competition personally. One of Law's partners was Colonel Sloo, the original steamship “dummy;” alarmed at the “ruinous competition with the Nicaragua Company,” Sloo accused Law of refusing an offer to set fares jointly with Accessory Transit “in consequence of an old grudge between Law and C. Vanderbilt.” Law was full of grudgery but he also faced a deeper problem: Nicaragua's greater proximity to the United States gave Vanderbilt a permanent advantage over the Panama lines. A faster passage was one result, of course, attracting both passengers and specie shippers (who lost money with every day gold remained in transit, and who paid a lucrative commission on consignments). But the biggest benefit was the savings Vanderbilt reaped in operational costs. “The route by the Isthmus of Nicaragua is decidedly the most economical route,” declared John A. Buckman, a veteran of the California steamship business. Because of the shorter trip, a ship needed fewer provisions and, in particular, less coal, the biggest operating expense. On the Pacific alone, a Nicaragua voyage saved at least $5,000 over one to Panama. Even if the rival lines agreed to charge the same fare, Vanderbilt would earn a larger profit.60
Law had the advantage of a federal subsidy, of course; he also counted on the Panama Railroad, when complete, to make the Panama route just as fast. At the moment, he had to cope with a small distraction: in March, the New York Times reported that the New York attorney general, under highly suspicious circumstances, had lobbied the board that was awarding contracts to widen the Erie Canal to set aside $1 million for Law. Small wonder Law left the country for Panama.61
Vanderbilt soon had his own problems. On March 27, he learned that the North America had run aground on the coast of Mexico, and was a total loss. “The owners”—meaning Vanderbilt and Drew—“might as well have thrown $400,000 into the sea as to lose her,” remarked James Cross. The ship was also uninsured, as was Vanderbilt's custom. Still worse,
it was the biggest ship on the Pacific side, with six hundred berths—though it usually packed in nine hundred passengers. In San Francisco, Cross frantically worked to charter and dispatch steamships to carry customers stuck in Nicaragua, but many remained stranded for weeks. Some eventually gave up and returned to New York.
One of the latter was Sidney Briggs. He went to 9 Bowling Green and introduced himself to Vanderbilt. “I asked him if he proposed to do anything” to provide compensation, Briggs recalled. “He said he proposed to do what was right.… I told him there was no other way but for us to return. He said he supposed not.” Then Briggs asked why, after Vanderbilt had learned that he had lost his biggest Pacific steamship—when he knew Nicaragua was clogged with stranded travelers—he had let the Northern Light sail from New York, full of passengers. “His reply was that some of the tickets for the Northern Light were then in the hands of the passengers, that if he had kept back a part, it would have frightened the whole, and it was better for him to let us come back and settle with us and pay us our damages than to let the Northern Light go out empty.”
Vanderbilt had added up the numbers, and calculated that it would be more profitable to strand dozens, perhaps hundreds, of passengers in a tropical country, exposed to diseases for which they had no resistance, in a region chronically short of shelter and amenities, than to hold his ship. Of all the things the Commodore would be accused of in his long career, it would never be said that he had gone soft.62
Claims for damages soon flowed in. To defend himself, Vanderbilt turned to his son-in-law Horace Clark. Clark faced a grueling task, but he was wise enough to see that it was an apprenticeship, or even a test. Vanderbilt would give him bigger assignments in the future—greater, perhaps, than anything Clark now imagined.
TRAGEDY, TREACHERY, AND ACCIDENT most often strike at home. On July 5, 1852, that lesson came on a crowded dock at Vanderbilt's Landing, the terminal of the Staten Island Ferry, just a short distance from the Commodore's old mansion. At four o'clock on that Monday afternoon, the Hunchback chuffed in, and a crowd of passengers on the pier pushed forward onto a hinged bridge at the end, held in place by heavy chains. The bridge was designed to allow the boat to dock no matter what the state of the tide; it was not designed for the weight now pressing upon it. When the arriving passengers surged off the boat, the chains snapped, sending dozens of men, women, and children into the water below, smacking on top of each other, pushing the first to fall down under the surface. In the end, seventeen bodies would be recovered, most of them women, most of them German immigrants returning to the city from a jaunt to breezy Staten Island. A grand jury convened; in mid-August, it indicted Cornelius Vanderbilt for manslaughter. He would need Horace Clark's services more than ever.63
One week before the indictment was handed down, Joseph White and Orville Childs stepped off the Atlantic steamship Africa onto one of New York's piers, having returned from a second attempt to convince British bankers to provide capital for the canal. Back in March, Childs had presented his full report to the directors of the canal company, making an eminently reasonable (if unreasonably precise) construction estimate of $13,243,099.47. This had caused the price of the 192 canal shares (or “rights”) to shoot up on the stock exchange, from $1,800 to $3,250 to $3,600. Childs then had accompanied White and H. L. Routh to London to present the report to Rothschild, Baring Brothers, and the other British investment banks. The delegation returned with joyful news. At a meeting of the canal-company board, held on August 19, White announced that British capitalists had agreed to invest half of the amount needed to build the canal. Canal rights soared to $4,000 each.64
Then, mysteriously, the price suddenly collapsed. Someone was dumping the rights, in sufficient quantities to drop the price to $750. The press found it “striking,” and baffling.65 Who would be selling when construction of the canal now seemed assured? Close behind came a second surprise: a collapse in the stock of the Accessory Transit Company. “A transfer of 1,500 shares, it is stated, was made today by one of the strongest parties connected with the Company,” the New York Tribune reported. (This was a very large percentage of the 38,700 Transit shares in existence.) “The street appears to be entirely in the dark as to the reason for the late decline in this stock.”66
A war was playing out behind the scenes through the offers and bids of brokers at the Merchants' Exchange—a war between Vanderbilt and White. After White's return from London, the long-simmering tension between the two men had finally boiled over. It appears that White had betrayed Vanderbilt by withholding the real result of his mission to London. The great bankers of London had not agreed to put up half the money for the canal. On July 23, Joshua Bates, an American partner of Baring Brothers, had written a long letter to Thomas Baring that destroyed any chance of British investment in the project. “The proposed size of the canal strikes me as totally inadequate to the largest class of ships,” Bates argued. “To make this increased depth would more than double the cost.” At that price, the project would never pay for itself. The great Nicaragua canal project was dead. Back in New York, White had lied about his failure, loudly and long enough to dump his soon-to-be-worthless canal rights. It appears one of those who was burned by this brazen play was Vanderbilt.67
“An exceedingly bitter personal hostility existed between White and Vanderbilt, so much so that they were not on speaking terms at that time,” Daniel Allen testified three years later.68 Vanderbilt could do nothing to revive the now-lifeless canal rights, but he could go after White in his last stronghold: the Accessory Transit Company. For much of the previous year, White had been intriguing within the company, stealing influence from the Commodore. “Mr. Cornelius Vanderbilt,” the New York Times reported on August 27, “has not had, for some months, as much control of the affairs of the Company as he had desired, nor as much as his ownership of the line of California steamers, from which the Transit Company derive their main profits, would seem to entitle him.” As vain as he was treacherous, White was heard to boast, “I am the Nicaragua Transit company!”69
The corporate form had aided Vanderbilt in amassing capital and negotiating with sovereign governments to open the Nicaragua line; now it served him in a more personal way, as he used it as a weapon for revenge. As soon as he learned of White's deception, he launched a full-scale assault on the price of Accessory Transit shares—the bulwark of White's wealth—to impoverish his foe. “Vanderbilt advised [me] to divest… this stock,” recalled Franklin Osgood, “and declared the stock worthless, as long as White remained in the company, for he was using the company to his own benefit.” But in trying to drive the price down, Vanderbilt confronted a serious problem: the Accessory Transit Company was extremely profitable. The Commodore himself had talked up the stock in early 1852, when it had declared its first dividend. Since then, its competitive position had only grown stronger. Within Nicaragua, the friendly Conservative government had tightened its control, capturing León early in the year.
But Vanderbilt owned the all-important ships. He announced that his vessels would stop at Panama first before continuing on to Nicaragua. “The effect, of course, is to damage the Transit interest,” the New York Times wrote. Instantly Nicaragua became the slowest route. Accessory Transit plunged from 40 to 24.* Vanderbilt suffered losses, but revenge mattered more. “Vanderbilt declared that he would rather sink his ships at the dock than that White should make money,” Osgood reported.70
“Commodore Vanderbilt resigned the Presidency of the Transit Co., and with it the Directorship, which his colleagues promptly accepted,” the Times reported on September 14. “The fight on the Stock, therefore, is not likely to end at present. The immediate relatives of Commodore V. have been selling and talking it down for some weeks past. It is said that he has never been beaten in a Stock or Steamboat contest of this sort.” In all likelihood, his lead broker remained Nelson Robinson. Robinson recently had dissolved Drew, Robinson & Co. and moved into a luxurious home on fashionable Union Place, but
he remained Vanderbilt's friend and a master of the game.
Then a strange thing happened. Four days later, on September 18, the Times reported that the “Vanderbilt” party were now buying Transit stock, and that White and his friends were selling. “It is a frisky game of late,” the financial writer commented.71
On closer inspection, the turnaround appears less mysterious than brilliant. Vanderbilt used his “bear” campaign to pry shares out of the hands of White and his friends, and gain control of the company. How could selling lead to owning more? Most stocks, especially those in a “fancy” company like Accessory Transit (a volatile one that attracted speculators, who bought and sold rapidly), were bought “on margin.” A broker would lend the purchase money to his client, who merely put up a margin—an amount sufficient to protect the broker against loss if the price fell. Such stocks were, to use the technical term, “hypothecated.” When prices fell, the broker could either ask for a bigger margin from the client or sell the stock immediately to avoid a loss. The faster the price dropped, the more likely brokers were to dump hypothecated stocks, because they had less time to get more money from their clients. That drove the price down further, and eventually shook loose all the stock held on margin.
This was the secret behind Vanderbilt's bear attack on the Transit Company. Even before the end of August, the New York Tribune observed that the stock “has sunk so low that the margins on a large amount of hypothecated stock have been used up and this stock has also come upon the market.” By September 18, the price fell far enough that Robinson stopped selling and began to buy, on his own behalf as well as that of Vanderbilt, his family, and a new ally, Charles Morgan.
