by T. J. Stiles
In the middle of June, New York's policemen divided into two camps: the Metropolitan Police, organized by the Republican-controlled state legislature, and the Municipal Police, under the control of Mayor Wood. Skirmishes broke out over station houses; then an all-out battle erupted on the steps of the city hall as the largely Anglo-American Metropolitans tried to fight their way through a phalanx of largely Irish Municipals in order to arrest the mayor. On July 4 and again on the 8th, the conflict drew in the city's leading gangs, the Irish Dead Rabbits and the nativist Bowery Boys, the first fighting for the Municipals, the latter for the Metropolitans. Finally the state militia marched into the city to suppress what appeared to be an insurrection.38
Scarcely had this mayhem died away than the nation fell into the greatest financial crisis in twenty years—the Panic of 1857. In retrospect, the warnings of a collapse look all too clear. There was railroad overexpansion: of the twenty thousand miles of line built in the 1850s (tripling the total length of track), 2,500 were constructed in 1857 alone. There was the end of the Crimean War: Russian wheat now flooded the international market, hurting American exports. There was France's need for money: French banks borrowed from those in England, which raised English interest rates, which led British investors to sell off their American securities and invest at home, which undercut stock prices in the United States. And there was the heady effect of nearly nine years of California gold, which had fed speculation and inflated credit. Since the start of the gold rush, the number of banks in America had doubled, to more than 1,500. The monetary expansion reached a peak in early August. “And then there came on a sharp money market,” Vanderbilt recalled, “and everything broke down.”39
On August 24, the New York branch of the Ohio Life Insurance and Trust Company announced that it could no longer pay its bills. “The high credit enjoyed by that concern, and the fact that its solvency had hardly been questioned, made the failure a matter of… importance,” the New York Herald reported. It “opened the first great seal of the revulsion.” Constantly borrowing and lending in New York's intricate web of banks and investment houses, it ripped the financial lattice apart when it failed.40
On September 2, Vanderbilt welcomed his wife back from Europe. It would be the only happy event for many weeks to come, as banks and merchants collapsed. On the 18th, word spread through the city that the U.S. Mail steamship Central America (formerly the George Law) had sunk in a storm on its return from Panama. It was a terrible blow for Vanderbilt's troubled friend and ally Marshall Roberts, who was president of the corporation; already the North River Bank, of which Roberts owned half the stock, had failed and gone into liquidation. Even worse, the Central America carried down $1.6 million in gold from California, desperately needed in New York's constricted money market. In the afternoon, Vanderbilt went in person to the U.S. Mail office and asked for the details of the disaster. “He expressed his deep sympathy for the passengers on the ill-fated steamer,” the New York Times reported, “and commiserated with the Company [i.e., Roberts] for the heavy pecuniary loss entailed upon them by her loss.”41
“All confidence is lost, for the present, in the solvency of our merchant princes—and with good reason,” Strong wrote in his diary on September 27. “It is probable that every last one of them has been operating and gambling in stocks and railroad bonds.” Perhaps because he was a Wall Street lawyer, the financial catastrophe brought out the poet in his soul. “O Posterity, Posterity you can't think how bothered, bedeviled, careworn, and weary were your enlightened ancestors in their counting-rooms and offices and bank parlors during these bright days of September, A.D. 1857,” he wrote, two days later.
They are fighting hard for a grand, ugly house in the Fifth Avenue; for the gold and damask sofas and curtains that are ever shrouded in dingy coverings, save on the one night of every third year when they are unveiled to adorn the social martyrdom of five hundred perspiring friends. They are agonizing with unavailable securities, and pleading vainly for discount with stony-hearted directors and inflexible cashiers, lest they forfeit the privilege of inviting Joe Kernochan and Dan Fearing [two of the most prestigious leaders of elite society] to gorge and prose and stupefy over the barbaric splendors of an unwholesome dinner; that they may still yawn through the Trovatore in their own opera boxes; that they may be plagued with their own carriage horses and swindled by their own coachman instead of hiring a comfortable hack when they want a ride.
The Times echoed Strong's thoughts—in fact, it singled out Vanderbilt as a prime exemplar of what had brought the economy so low. “Commodore Vanderbilt, in his steam-yacht excursion, was just a type of the general Yankee who spends his money liberally and is as magnificent as his means will allow, and sometimes a good deal more so. That this extravagance can be carried much too far… a great many people have learned from their own experience.”42
Vanderbilt survived the great disaster with no sign of suffering. He must have felt some pain, for he could not levitate entirely above the great river of credit that carried the economy along. Yet it appears that he possessed deep cash reserves, and never failed to pay a bill or debt even in the worst of the storm. In early 1858, when the Mercantile Agency reported on the Allaire Works—a corporation that operated virtually as an extension of Vanderbilt's personal business—it observed, “They are [said] to be in [good] condition & to [have paid] all thro the panic. Have done & are [doing] a [good] bus. & are sold to freely.” No doubt all of his other agents, clerks, and companies also paid debts on time and in full.43
As the panic purged the city, Vanderbilt went to work each day as usual, down to his office on Bowling Green, behind the ticket desk to his private chamber in the rear, where he put on his reading glasses and reviewed letters and invoices and worried the cigar he kept clamped between his teeth. Sometime in September, Allan Campbell, the Harlem's president, came in to see him. The railroad could not pay its bills. Its own debtors refused to pay it, and its creditors would only take its acceptances (its corporate promissory notes) at the ruinous rate of 5 percent interest per month. “Commodore,” he pleaded, “how will we get along?”44
At the time, the railroad had large short-term notes coming due, endorsed by Daniel Drew. With the panic at full force, Drew refused to endorse a renewal of the notes. If he didn't sign, the creditors would refuse to extend the time for repayment. “He won't?” Vanderbilt asked Campbell. The railroad president said no. “He will!” the Commodore declared. “Go away, and mind your business, and I will send you the bonds.”
Twelve years later, Vanderbilt, with great relish, told a committee of the state legislature the story of what happened next. First, the board of directors put him in charge of managing the railroad's financial crisis.45 Then he called Drew in for a meeting, one that resulted in the Harlem's salvation—and that exposed the stark difference in temperament between these longtime partners and friends.
“I sent for Drew and he came to the office,” he recalled, “and I was signing these acceptances… and he says, ‘Commodore!’”
“Mr. Drew,” Vanderbilt replied, “how are you? Sit down there and sign these acceptances.” Drew was to be the primary endorser, Vanderbilt the secondary.
“Not one of 'em! Not one of 'em!”
“You will sign them all!” Vanderbilt insisted.
“Not one of them!” Drew proclaimed. “Are you crazy?”
“And [he] went on in that kind of strain, you know,” Vanderbilt recalled, “and I says, ‘No, I am not crazy, Mr. Drew!’”
“My God!” said the distraught Drew. “What are you going to do?”
“I am going to sign all these things, and you are too.”
“Where is the money to come from to pay it?”
“You and I will pay, if nobody else will,” Vanderbilt said. “Didn't you agree to? You have got one-half percent on the $400,000 that you have already signed. You have had that money, hain't you?”
“Yes,” Drew replied.
“I am going t
o do it, if it takes the coat off my back,” Vanderbilt said. “I am going to live up to it.” It was a moment that said everything about the Commodore at this stage of his life. His strict code of honor in business mattered more to him now than ever as he attained eminence among New York's merchants. He had promised to support the Harlem's credit, and so he would—and he would browbeat Drew into doing the same. As for Drew, he was a curious fellow: bold when he had every advantage, timid at all other times, he was the sort of financier who tried to run ahead of the changing wind rather than fight it. “I worked him up so that he signed them,” Vanderbilt recalled. “The old fellow was almost crying all the while.”
“Mr. Drew,” Vanderbilt said, when they were done, “you are one of the best receivers I ever knew, but about as bad a payer as I ever knew.” In return for Drew's half-percent commission, he offered to indemnify Drew completely and take on himself all responsibility for paying, should the railroad fail. Drew agreed. “He did not dare cheat me!” Vanderbilt recalled.46
The combined names of Drew and Vanderbilt on the company's notes reassured its nervous creditors. The Commodore began to work on a plan to restructure the large floating debt of about $750,000, to allow the Harlem to put its finances in order, and bought a majority of $1 million in third-mortgage bonds (at a 50 percent discount). On February 10, 1858, the directors would pass a resolution, declaring “that the thanks of the Board are due and are hereby tendered to Cornelius Vanderbilt Esq. for the liberal aid afforded by him in the disposition of the new loans of the company”47
Vanderbilt carried the Harlem through the Panic of 1857 with the liquid power of his wealth, his formidable reputation, and his ability to coerce Drew. But he was a man of foresight. Most likely he had no specific plans in mind, but he could sense that the time was coming when he would make a great deal more out of the railroad than one-half of 1 percent.
“THANKSGIVING,” a columnist for Harper's Weekly exclaimed on November 21, 1857. “The very word sounds like a blessing. The whole week seems to be covered with plums, and the smell of roast turkey and pumpkin pie. The boys have visions of snow and sliding, or coasting. The parents open their homes and hearts to the long absent. Business stops suddenly on a weekday.” It was a traditional holiday, not a legal one, having spread across the country from New England in the 1820s and ′30s. In hard-pressed New York, it offered a welcome respite from the Panic.48
This week, like most weeks, Vanderbilt went to his two-story brown-stone stables at 21 and 23 West Fourth Street, at the rear of the block occupied by his double-wide mansion. Approached from Fourth Street, there was a door to the harness room on the right, and on the left a large arched carriage entrance, which led into a cobblestone passage equipped with hydrants for washing the horses and carriages. Passing through, he would enter an enormous room—a “hippodrome,” as one newspaper called it—filling the building and rising to the roof, lit by sunshine from the great skylights above. Carriages, wagons, and sleighs were parked in a group in the center; young boys walked the horses around an oblong track on the outside of the room, on sawdust strewn across the cobblestones. Then the Commodore would descend a gradual winding stairway, designed with the horses in mind, to the well-ventilated stalls below, where his prize trotters were brushed and fed.49
This week, like most weeks, Vanderbilt ordered a pair of his fastest horses harnessed to a light, open-air racing rig, then climbed aboard, took the reins in hand, and smartly whipped his team down the cobblestone passage into West Fourth Street. A left turn, then another left onto Broadway, and uptown he went, past aristocratic Grace Church, past Union Square, out of the city to where Broadway became Bloomingdale Road. There “sporting men” liked to challenge each other amid the trees and pastures of upper Manhattan. On this day, as usual, they gathered at Jones's tavern, hoping to set up a race, when they saw Vanderbilt drive up behind his famously swift horses.
“Knowing, as all the sporting men do, that Commodore Vanderbilt likes a good brush, it is a very widespread ambition to pass him on the road,” Harper's Weekly remarked. “But this is not very easily done.” On this occasion, as so often, Vanderbilt came with his friend and broker Frank Work, who rattled alongside in his own rig. They pulled up in front of the tavern, but “everybody seemed to hold back. No one cared to lead off.” Disappointed, the Commodore and Work whipped their horses onto the road and headed back toward the city.
Immediately ten to fifteen men grabbed their horses' reins and set out after them, hoping to pass them. “If there wasn't some trotting done at that time I never did see any,” the correspondent wrote. “There was only one drawback—there were too many in the race, they kept too closely together, and the road was not wide enough.” With dozens of horses sprinting down the lane, the spinning wheels cracked against each other, and three wagons were smashed to pieces, “and all tumbled together. The Commodore came out all right.” Municipal policemen rushed to the scene from Mayor Wood's nearby home, but no one was hurt.50
In the year ahead, Vanderbilt would need all his coolness, dexterity, and speed in the race for the Nicaragua transit. Walker's landing at Greytown disrupted everything. Not that he remained for long: Commodore Hiram Paulding of the U.S. Navy rushed to the scene and forced Walker to surrender on December 8. Paulding's action caused outrage among Walker's Southern supporters; debate over whether to censure or congratulate Paulding tied up the Senate for weeks.51
Popular or not, Walker doomed all attempts to reopen the transit route with his latest foray. Nicaragua and Costa Rica abruptly settled their differences in order to present a united front against the filibusters. Fear of North Americans in general pervaded Nicaragua's national consciousness. “There is in all this country a deep-seated terror,” wrote the U.S. minister, Mirabeau B. Lamar, “that, when the Americans are admitted into it, the natives will be thrust aside—their nationality lost—their religion destroyed—and the common classes be converted into hewers of wood and drawers of water.” The most that Daniel Allen could do upon his arrival there was to file a protest over Yrisarri's contract with White's company. Not that he needed to: there was little danger that the Nicaraguans would open their borders ever again.52
As usual, it was White's bluster, not his deeds, that plagued Vanderbilt. White loudly proclamed that his new line would start up on February 20, 1858, which led Pacific Mail to stop paying its monthly subsidy to Vanderbilt (who now pocketed the money, since he had taken possession of the steamships at issue). The Commodore, knowing that White was penniless, viewed this as a breach of their noncompetition agreement. In retaliation, he announced an opposition line via Panama, in partnership with none other than Cornelius K. Garrison. He made just one voyage before Pacific Mail surrendered, raising its payment from $40,000 to $56,000 per month. It could afford the increase: it paid 30 percent dividends in 1857 (that is, $30 per share), even while paying off Vanderbilt. Monopolies were lucrative.53
Vanderbilt's short-lived line was an early sign of a comprehensive reconciliation that he reached with Morgan and Garrison. The deal, which they finalized in April, required Vanderbilt to buy Morgan's share in Garrison's steamers on the Pacific, the Orizaba and the Sierra Nevada, and to buy a very large new steamship that Morgan was building in New York, the Ocean Queen. Morgan purchased Vanderbilt's Gulf Coast line, and he and Garrison promised to never again compete in the California trade. On April 20, Garrison wrote to Joseph Scott at Punta Arenas, ordering him to transfer all transit property to Vanderbilt's control. It seems that once Morgan and Garrison admitted defeat, the Commodore forgave their treachery. He even saved Garrison from the ongoing lawsuit that Accessory Transit had filed against him. The two sides agreed to William K. Thorn, Vanderbilt's son-in-law, as referee in the case. In September, Thorn would rule that Garrison owed nothing.54
Truly April was the weirdest month. On the 15th, the Commodore welcomed to his office Joseph White. A fortune had passed through White's hands since he first had met Vanderbilt. “What he has made ha
s been within the past 6 yrs.,” the Mercantile Agency reported at the end of 1853. “Was not [worth] much when he came here [to New York].” At his height, he had accumulated as much as $200,000, purchased a fine house on Madison Square for $40,000, bought the farm of novelist James Fenimore Cooper, kept a private box at the opera house, and rode “in a handsome carriage.” But all that had come to an end. Ruined in the fall of Accessory Transit, he held on to the hope that he could convert the canal company's shaky transit contract with Yrisarri into a new pile. In the meantime, he had come to the end of all his resources. And so he asked his sworn enemy for a ninety-day loan of perhaps $10,000—offering as collateral twenty-five shares of the canal company, ostensibly worth $1,000 each. In all likelihood, White could find no one else with money to lend during the ongoing panic.55
Vanderbilt agreed. He certainly doubted that White would be able to repay him. And he couldn't have placed much value on the canal shares. But by lending the money he obtained inside information on White's finances and the state of the company. Perhaps he also took satisfaction in holding the debt over someone who had exuded arrogance for so long.
Another enemy succumbed in April as well. The Collins Line finally collapsed and sold off its last steamers—the Atlantic, the Baltic, and the Adriatic (larger than any ship except the newly launched English leviathan, Great Eastern). The New York Times blamed Vanderbilt for “driving too sharp a competition.” That brought an anonymous friend to his defense. “I know him well, and am well satisfied that he asks the sympathy of no nation and of no man, beyond that to which his merit may justly entitle him,” the advocate wrote. “I have always found him bold, energetic, upright, and honorable.”56
Perhaps he was—but he could never claim to be omnipotent. His grand Nicaragua venture, the single most original enterprise of his long career, slipped irretrievably beyond his grasp. First, he lost control of the Accessory Transit Company. A lawsuit by the Pennsylvania Coal Company, one of many unpaid creditors, resulted in the appointment of a receiver, David Colden Murray, on May 31. Murray prepared to sue the Commodore over the steamships he had taken from the company, for a total of $261,541.30.57 Next, “the inevitable W. R. C. Webster” (as the New York Times called the confidence man) arrived in New York, bearing yet another transit contract that he claimed to have negotiated in Nicaragua on Vanderbilt's behalf. Vanderbilt spurned him, but his claims led the Commodore to make one last grasp for the prize.58
