The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  Curiously, the writer of the letter shared a birthday with Cornelius Vanderbilt, though he was born in 1836, making him only twenty-seven. A former surveyor and local historian from the heart of the Catskill Mountains, he had set up as a leather merchant in Manhattan, where he was not very popular. Recently he had purchased a large quantity of the securities of the little Rutland & Washington at a steep discount and had gone into railroading, albeit on a very small scale. His name was Jay Gould.51

  Less than five years later, Gould would emerge as the most dangerous enemy of Vanderbilt's long life, but the plot that Gould now uncovered would bring them onto the same side. For Vanderbilt—only weeks into his presidency of the Harlem Railroad—Jerome's scheme posed a test: How would he conduct himself on the treacherous battlefield of New York's railways? The answer would prove surprising, given his reputation, but it would be characteristic of his career as a railroad executive. More than that, his handling of this plot spoke to the strategic geography of the nation's railways, a reality that would define the rest of his life.

  If one word could describe the railroad system, it would be fragmented. By 1860, a total of 30,626 miles of track draped the American landscape; hundreds of companies made up that network, which had as many as seven different gauges (widths between tracks), from 4 feet 8½ inches (standard in New England, New York, and Pennsylvania) to 6 feet (used on the Erie Railway and some thirteen smaller lines). This confusion dated back to the origins of the system in the 1830s and ′40s. Rather like the old turnpike companies, railroad corporations had been created by the merchants of various cities and towns to funnel trade toward themselves. Local communities fiercely resisted the integration of the network for fear that business would roll right past them; they wanted breaks between railroads, despite the inefficiencies imposed on long-distance commerce. The original charter of the Erie actually prohibited it from linking to railroads that led into neighboring states. By the start of the Civil War, such legal restrictions largely had been eliminated, but the profusion of incompatible gauges and the fragmentation into scores of companies persisted, with consequent costs from “breaking bulk” (loading freight from one car into another) and outbreaks of hostilities between connecting lines.52

  In the 1850s, four giant railroads rose to dominance over these mismatched pieces. As early as 1854 they were dubbed the “trunk lines”—defined as the primary routes between the eastern seaboard and the West, reaching from the main Atlantic ports to the heads of river and lake navigation across the Appalachians. They were the Baltimore & Ohio, the Pennsylvania (often called the Pennsylvania Central), the Erie, and the New York Central.*1 The latter two were New York lines, though the Erie now terminated in Jersey City The New York Central had emerged in 1853 from the consolidation of ten railways that paralleled the Erie Canal from Buffalo to Albany; it and the Erie were far larger, in capitalization and length, than any other line in the state.53

  It was the New York Central that overshadowed the smaller lines run by Gould and Vanderbilt. The Erie ran through barren mountains, but the Central connected a chain of agricultural and manufacturing centers from Buffalo to Rochester to Syracuse to Albany. From its terminus in the latter city it had a choice of three paths into Manhattan: Daniel Drew's People's Line steamboats, the Hudson River Railroad, or (through a short link) the Harlem. The Central's long-standing policy was to pit the three against each other to keep down costs. It routinely gave most of its New York-bound freight to the steamboats, except when ice closed the river during the winter; then it delivered to the Hudson River line. Very little ever went over the Harlem.54

  Vanderbilt sorely wanted the long-distance passengers and through freight that came from the West via the Central, no matter how little revenue he received. Unlike a steamboat and steamship line, a railroad suffered from high fixed costs. It was an immovable piece of infrastructure. Whether trains ran or not, the tracks, bridges, buildings, locomotives, and cars had to be maintained; conductors, engineers, firemen, and laborers had to be paid. At least two-thirds of a railroad's expenses remained constant no matter how much or how little traffic it carried. If the Commodore could get additional business, even at losing rates, it would improve the Harlem's outlook.55

  To gain access to that rich flow of freight from the West, Vanderbilt decided to pursue diplomacy with the Central. He made this choice as a matter of policy, but he liked and respected the Central's president, Erastus Corning, whom he hailed as “a man of business and a gentleman.” Corning, who was only a few months younger than the Commodore, also had risen to wealth through his wits. At thirteen, he had moved from Connecticut to upstate New York and set up as a merchant in Albany. Though he had served as the Central's president from its creation, he remained alert to his own interests, and ordered the railroad to buy its ironware from a foundry he owned. Corning was also a political power broker—a former congressman and leader of the state's Democratic Party (along with the Central's vice president, Dean Richmond of Buffalo). Corning had thin gray hair, a prominent lower lip, and large, dark, deep-set eyes. Clark and Schell knew him well; indeed, Vanderbilt took Clark with him when he opened talks with Corning in late summer. On September 16, Vanderbilt called on Corning again, and dispatched to him James Banker, who was emerging as a favorite subordinate.56

  Unfortunately for Vanderbilt, Corning believed the Harlem offered the Central few advantages. But then came Leonard Jerome's plot to oust Corning from the Central's presidency, offering the Commodore an unexpected opportunity for leverage.

  Jerome, the younger brother of Wall Street giant Addison G. Jerome, exemplified the flowering of wealth on wartime Wall Street and the resulting flourish of conspicuous consumption. Strong derided as “a sign of the times” Jerome's “grand eighty-thousand-dollar stable, with the private theatre for a second story.” Social observer Matthew Hale Smith observed that Jerome became “the leader of fashions.”*2 According to William Fowler, Jerome was “a tall man, fashionably but somewhat carelessly attired, having a slight stoop, a clear olive complexion, a tigerish moustache, and a cerulean eye.”57

  Jerome's belligerence, like Vanderbilt's diplomacy, was a response to the fragmentation of the railroad system. He had come onto the Hudson River board only recently, and he and his fellow directors resented the Central's custom of delivering its freight to Drew's steamboats. To solve this conflict, he organized “a large combination… to control NY Central RR affairs at the next election” in December, as banker Watts Sherman warned Corning, with the aim of “forcing the immense eastward traffic over the road of the [Hudson River],” according to Gould. The game began on October 20 when the Hudson River directors voted to loan Jerome $400,000 for his operation.58

  Vanderbilt had personal ties to both Corning and the Jerome brothers, but he calculated his strategic interests clearly and coldly. A takeover of the great trunk line by his rival, the Hudson River Railroad, would permanently deny the Harlem any through freight and passengers from the West. Furthermore, if Vanderbilt helped Corning he would put the Central's president in his debt. On November 11, Vanderbilt scratched a note to Corning in his own hand, a significant fact for a man who loathed writing. “Is their any feair of their success,” he asked, referring to Jerome and his allies. “I feal a little anxious, if I can be of any servis say so.” He wrote that he just had purchased a thousand shares, and had had a total of 5,250 transferred under his name. He offered to obtain “proxys” for many more. “If J. H. Banker ask you for information you can giv it to him he is true & will not deceive us this is certain,” he concluded—revealing how heavily he relied on the honey-smooth vice president of the Bank of New York. (As Watts Sherman told Corning, Banker was well known as Vanderbilt's personal agent. “He holds a position here of great influence in many quarters & is class in all respects.”)59

  On Vanderbilt's orders, Banker ferreted out information about Jerome's plot at brokers' offices and gentlemen's clubs. “They are making great exertions,” he wrote to Corning. “
I believe they have gone to the extent of sending to Geo. Peabody & Co. to influence foreign proxies,” referring to the American banking house in London where many shares of key railroads, including the New York Central, were held by British investors. The fight for proxies (the right to the votes of those shares) often was more important than stock purchases, especially in a big corporation in which it was prohibitively expensive to buy majority control.60 And the fight was fierce. The New York Herald wrote on November 19, “The excitement has now reached a pretty high point, and hard words are resorted to on both sides, instead of argument.”61

  “I sea by the New York Times of this morning that the opposition has used my name” on their ticket of proposed directors, Vanderbilt wrote to Corning on November 20. The letter that followed constitutes a piece of found poetry, a free verse of the Commodore's approach to Wall Street's shadow warfare.

  this is without athority

  They do not understand how

  I feal in this matter

  I keep them in the dark

  I in close you the two proxies

  I tell Mr Banker to keep

  you posted with what is

  doing here & get all proxy

  possible—let them say what

  they will I want you to

  understand I will have

  nothing to do with them

  in any form—over

  I want you to feal that

  you air at liberty to

  use me in this matter

  in any honorable way you

  may think adviseable62

  Shrewdly, Vanderbilt declined Banker's suggestion that he stand for election to the board on Corning's ticket, for he wished to avoid alienating Jerome. Indeed, one week before the election, he met with Jerome in private to propose a compromise. “I don't believe it is worthwhile to say anything more about what we talked about last night,” Jerome wrote to him the next morning. “I appreciate your views and feelings in the matter and in the main think you are perfectly correct. But you see I have been acting with other parties.… I guess we had better let the thing take its course.”63

  Was that a tone of resignation? Certainly the Commodore now acted as if he were certain of Corning's victory—and of the material benefits to flow from it. On December 2, for example, he convened a special meeting of the Harlem's stockholders. They approved the sale of the unissued $2,139,950 in stock authorized by the corporation's charter to double-track and extend the line to Albany. The stated reason was to accommodate “anticipated connections with other railroads.”64

  It was a dangerous game, especially now that Vanderbilt had revealed his position—dangerous because Jerome not only had taken power in the Hudson River, but also in Pacific Mail, the partner of the Commodore's steamship line. But Vanderbilt was as sure of his strength now, at sixty-nine, as he had ever been. On December 7, with the Central election two days away, he went down to his stables and ordered a fast team harnessed to his racing wagon. He drove up Broadway to where it became Bloomingdale Road, and looked for a “brush.” He found one. He and a challenger rattled their rigs alongside each other at top speed, Vanderbilt whipping his horses ahead as he tried to edge out his rival. Then the Commodore's powers failed him, and the wagons cracked into each other. “His carriage was broken,” the Chicago Tribune reported, “and the Commodore thrown over the dashboard to the ground”—more specifically, “head foremost and violently to the ground,” according to the New York Times. “He was picked up insensible, but soon recovered consciousness, and was conveyed to a house nearby, where he received every attention.”65

  The Commodore overcame his injuries, but he could not go to Albany as he had intended. Corning and his party triumphed regardless. “No election of this kind has ever produced such an extended & warm excitement,” longtime Central director John V. L. Pruyn noted in his journal. “The result has been most gratifying.” Banker dined at Corning's house on December 11 as his patron's representative.66

  In the first crisis of Vanderbilt's new career as a railroad president, he had displayed masterful statecraft, adroitly turning a battle between two far stronger companies to his advantage. As soon as he was able to go to his office, he addressed a letter to Corning. “In consequence of the severe fall I had I have been prevented from visiting you,” he wrote. He then specified how the Central could repay him. “It would suit the Harlem Road to have your agents… make their tickets in such a form that the holder should be entitled to pass either, at his option, over the Harlem or Hudson River Rail Road. I can see no good reason why this should not be.” Even more important, he insisted that his man Banker should have a seat on the Central's board. Corning obliged by forcing the resignation of one of his directors.67

  Hardly had Vanderbilt secured Corning's hold on power than he attempted to collect the debt. But time would show how difficult that would be. The structural conflicts stemming from the fragmentation of the railroad landscape—the same problem that gave rise to this particular battle—would continue to grow. As the Commodore would learn, they had only one solution.

  AT SEVEN O'CLOCK ON SATURDAY EVENING, December 19, 1863, a visitor who stepped out of a carriage in front of 10 Washington Place naturally might have paused in the cold winter air and looked up to the windows of the second floor. Scores of well-dressed people would be seen through the glass as band music drifted down from that nearly twenty-year-old mansion, twice the width of a regular brownstone. If a visitor proceeded up the stoop to the entrance, where one of the Irish servants would open the door, into the great hall where one's coat would be taken, then up the stairs and to the right, through the small library and into a large sitting room, twenty by twenty-five feet, the reason for all the revelry could be seen.68

  There, surrounded by the Commodore's milling siblings and children and grandchildren and nieces and nephews, was a table filled with gifts in celebration of Cornelius and Sophia Johnson Vanderbilt's fiftieth wedding anniversary. “There was a profusion of bracelets, porte-mounnales [sic], gold plate, exquisitely carved chess-men, superbly bound Bibles, brooches, and feminine ornaments of every kind,” wrote Mrs. Ann S. Stephens, a popular “authoress” and friend of the wealthy pair, who described the event for the New York Tribune. At the center perched the Commodore's gift to his wife, a miniature steamship crafted of gold, specially ordered from Europe. “It is twenty inches long and five wide, with exquisitely wrought revolving towers,” Stephens wrote, “which filled the room with fairy music whenever the delicate machinery was set in motion.” After a formal review of the ship, the bride presented the golden groom with “a collection of gold-headed canes [and] driving-whips, mounted in some costly manner.” Then the party descended to the main-floor parlors, where Stephens observed two striking sculptures: the marble bust of Vanderbilt, carved by Hiram Powers in Italy in 1853, and in the opposite corner of the room—in line with the stone Commodore's stare—a statue of the son of William Tell.69

  The family swarmed around Vanderbilt—dressed “in quiet black… unpretending and gentlemanly as he is everywhere”—and his wife, who wore “a head-dress of Brussels point, wreathed with gold-tinted roses and marabout feathers,” perched on her “thick and scarcely silvered curls,” as Stephens wrote. Sons-in-law all appeared: Nicholas La Bau, who had often served as Vanderbilt's attorney; George Osgood, a rising stockbroker who handled some of Vanderbilt's trades; Daniel Torrance and James Cross, who had helped to manage Vanderbilt's steamship lines; Horace Clark, growing ever more important as a lieutenant in all capacities; and Daniel Allen, the longest-serving of Vanderbilt's daughters' husbands. R. G. Dun & Co. would deem Allen “a high minded man of 1st rate [business] qualifications,” an accurate assessment of the man who had learned how to run a shipping line in Vanderbilt's office, only to stand up to him when Allen believed he had violated the Accessory Transit Company's charter. Now, after nearly thirty years in business together, they began to sever their ties. On November 27, Allen and Cornelius Garrison had incorpor
ated the Atlantic Mail Steamship Company, with an authorized capital of $4 million. Within a year, the new corporation would buy out the old Atlantic & Pacific Steamship Company, along with Vanderbilt's remaining stake in shipping. The Commodore was leaving the ocean behind.70

  Despite the profusion and importance of sons-in-law, Vanderbilt's sons by blood—the Vanderbilt princes, as it were—stepped forward to take command of the celebration. The teeming family assembled in one of the parlors, in front of a grand floral display, and the murmur of conversation died away. “Here and there,” Stephens wrote, “half-hidden by flowing robes of gossamer, tulle, brocade, or velvet, a little fairy child would peep into the front ranks to learn why all the stillness had come on so suddenly.” Then the ceremony formally began with a speech by Cornelius Jeremiah.71

  Corneil, the victim of disease and the degenerate gambler, had been the subject of concern and scorn poured out in unpredictable measure by his father. Once he collapsed in a severe seizure during a visit by his father. “While he was lying there,” recalled Corneil's servant, Margaret Massy who went to work in his Hartford house around 1862, “the Commodore came in, and, pointing his cane at the ship Vanderbilt, a picture in the room, said, ‘I would have given that ship to have cured Cornelius if it were possible.’” In the moneymaking frenzy that came with the war, Corneil had fallen back into his gambling habit. “Many times,” Jacob J. Van Pelt recalled, the Commodore “spoke very disrespectfully about him. He said he would lie and steal. He said, ‘I wouldn't let him go into my office if there was anything there he could lay his hands on.’” This mix of compassion and disdain—what Sophia called her husband's “stubborn inconsistency” toward his namesake—made Corneil self-conscious as he stood before the gathering. But his mother had always been his defender.72 And so, before his judge and his protector, Corneil began to speak.