The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  The next day, disaster struck, at the hands of Treasury Secretary Chase.

  Over the preceding months, congressmen and cabinet secretaries had grown increasingly angry at the gold market, seeing it as a den of treason. Speculators whistled “Dixie” as they sold greenbacks short before major battles, gambling that the Union would be defeated and legal-tender paper currency would lose value against gold. Chase pushed a bill in Congress that, with a spectacular lack of realism, would ban the trade in gold. Then he took direct action. On April 16, in an attempt to drive down the gold premium and undercut speculation, he went into the market and sold a large amount of federal specie; he took the greenbacks thus received and withdrew them from circulation. This moralistic act was a sharply deflationary blow, one that hit Wall Street hard. “The stock market was struck with a panic to-day,” the New York Herald reported. Even as Chase “locked up” millions in currency, another $15 million was absorbed by a new loan by the banks to the federal government. The sudden drain on cash reserves caused prices to collapse across the board in what the Evening Post called “one of the severest panics recorded since 1857 on the annals of the Stock Exchange.” Drew's hour, it seems, had come round at last; he had sold calls at 140, and now Harlem slouched to 133. The slide drove Vanderbilt to the brink, forcing him to put up more and more cash as margins for his millions of dollars' worth of purchases.92

  But Harlem rose again. Indeed, it rose relentlessly. On April 21, it reached 210. Five days later, it climbed to 235. Despite the immense strain on his resources—and the increasingly severe consequences should he fail—Vanderbilt kept up the pressure, buying still more. Short-sellers desperately waited out the terms of their contracts, hoping to buy in at a lower price before they ran out of time. They could not. Vanderbilt leaped every precipice (including a vicious attack on his management published in the Herald) in a splendid display of nerve, the most important virtue in a stock market battle. He carelessly attended the opening of the races at the Fashion Course while Tobin and his other brokers gambled his millions against the combined power of Daniel Drew, the New York State Legislature, and the desperate bears of Wall Street. On May 11, Harlem rose to 256. On May 14, it ascended to 275. Finally, it peaked at 285. One after another, the short-sellers crawled to the Commodore's myrmidons to buy their way out of their unfulfillable contracts. The legislators' attempted abuse of power cost them dearly93

  Drew, according to the press, refused to settle. He faced staggering losses on the tens of thousands of calls and whatever short sales he had made, so he announced that he would “squat”—litigate his contracts, rather than pay. The news shocked Wall Street. Should losers in transactions resort to the courts, the markets would break down in short order. If Drew carried out his threat, he likely would be shunned; few brokers, not even his longtime partner David Groesbeck, would do business with a man who did not fulfill his agreements. Once barred from the exchange, Drew never would recover his losses in the future. So Vanderbilt remained cool in the face of this intransigence, and icy cold to the mercurial Drew's pleas for mercy. In the course of further negotiations, Drew finally agreed to pay his old partner perhaps $1 million, roughly half of what the Commodore is believed to have gained in this second corner.94

  The tens of millions thrown about in this abstract battle on Wall Street captivated—and repulsed—the public. For one thing, the incident demonstrated that Civil War-era corruption was far more complicated than the historical cliché of the rich buying off lawmakers; in this case, as in the previous Harlem corner, the officeholders abused their power to profit from the deliberate destruction of the value of a major corporation. Time would show that extortion by legislators and their hangers-on was as serious a problem as bribery by the wealthy. Such graft only reinforced Vanderbilt's long-standing laissez-faire beliefs.

  Paradoxically, by punishing corrupt state legislators so thoroughly Vanderbilt made it appear that the balance of power in society was shifting away from democratic government and toward wealthy individuals and corporations. “Think of the one-man power that could accomplish this wonderful feat and prevail against a whole Legislature,” Henry Clews admiringly wrote in his memoirs. “Think of this, and then you will have some conception of the astute mind that the Commodore possessed, without education to assist it, in the contest against this remarkable combination of well-trained mental forces. There can hardly be a doubt that the Commodore was a genius, probably without equal in the financial world.”95

  The second Harlem corner marked the culmination of his move from steamships to railroads, for it forced him to concentrate his resources in this titanic battle. With victory in hand, he consolidated his power in the Harlem by driving Drew out of the board at the election on May 17 and giving his seat to Senator Dutcher. Out of 105,873 shares represented, the Commodore voted 29,607, though he likely hid the rest of his stock under the names of Horace Clark, Augustus Schell, James Banker, John Tobin (who voted 31,900 shares alone), and others. The next day, Vanderbilt hired his son William as the Harlem's vice president to manage the road's operations.96

  One month later, Vanderbilt made a second move to solidify his holdings, by displacing the Hudson River Railroad board in a disputed election. Out went Samuel Sloan, Moses H. Grinnell, Addison G. Jerome, and other giants. In came Vanderbilt's captains: Clark, Schell, Banker, and allies Oliver Charlick and Joseph Harker. John Tobin survived from the old board, of course, as did Leonard W. Jerome, who (according to rumor) had cooperated with Vanderbilt in the second Harlem corner. The new board elected Tobin president and created a standing executive committee—a common device, but typical of Vanderbilt's desire to centralize power—consisting of Clark, Schell, Banker, Jerome, and Charlick, in addition to Tobin. On July 6, the committee voted to end the competition between the Hudson River and Harlem trains.97

  Also in July, the Commodore sold his last sidewheelers to Atlantic Mail, which now supplanted the old Atlantic & Pacific Steamship Company. The step severed his business ties to his son-in-law Daniel Allen, who was a leading figure in Atlantic Mail alongside Cornelius Garrison. Curiously, Allen provided the only Vanderbilt to win glory in the war: his son Vanderbilt Allen, a West Point cadet appointed first lieutenant on June 13, 1864. The young officer soon found a place on General Philip H. Sheridan's staff.98

  The second Harlem corner typified Vanderbilt's battles on Wall Street in the 1860s. It was a defensive campaign rather than a merely speculative maneuver, designed to avenge himself upon men who had betrayed him. But it proved to be far more than a personal affair. By the summer of 1864, the Commodore had definitively left the floating world behind to concentrate on railroads. In short order he had gained control of the only two steam railways that entered Manhattan and linked it to the world, and had ended their costly rivalry. This first year set the pattern for his long railroad career: diplomacy, defensive battle, acquisition, reform, consolidation. In pursuit of “a small thing,” the bedraggled Harlem, he had begun to build an empire.

  “YOU MIGHT AS WELL HIT A BRICK WALL as hit that man on the head,” Yankee Sullivan declared in 1853. He spoke through the dripping blood of a badly battered face, and he spoke about John Morrissey his burly foe in a fight for a $1,000 stake, after the brick-wall fellow had beaten him into submission in fifty-seven minutes. The triumphant Morrissey—a fellow Irishman by birth—was somewhere between twenty and thirty years of age at the time, yet already he had acquired a fearsome reputation. As a teenager he had led an Irish gang on the streets of Troy against nativist thugs, before setting up in the slums of New York as a prizefighter, Democratic Party enforcer, and saloon owner. Notably lucky with his games of chance, he expanded beyond Five Points. His gambling house on Fifth Avenue was considered one of the city's finest.99

  Sullivan returned to San Francisco after his defeat, on a path toward ultimate suicide; the victor, on the other hand, went to Saratoga. Morrissey, the broken-nose prince of Paradise Square, aspired to fashion, and so he flowed with fashion's cu
rrent to the Springs every summer. There his presence was unmistakeable, “in his white flannel suit, huge diamond rings, and pin containing brilliants of the first water,” as Matthew Hale Smith described him. He was a man “of immense size; tall of stature, a powerful-looking fellow, walking quietly about the streets, or lounging at the hotels, but seldom speaking.” During the Civil War he opened the Club House, a brick saloon on Saratoga's Matilda Street; as on Fifth Avenue, his place attained a reputation as the most elegant casino in town. But he remained a creature of the street, no matter how high he rose above it. In 1864, for instance, a crowd of con men from Manhattan—three-card-monte artists—stepped off the train at Saratoga. Morrissey sauntered up to them in his white flannel suit and quietly told them to leave town. They did.100

  Morrissey himself had a taste for gambling, though he would never be seen at a roulette wheel; he understood that apparatus too well to risk his money there. Rather, he played the stock market. Rumor had it that he had joined with his Irish Democratic cohorts on the Common Council to short Harlem in 1863, forgetting the old rule that the house always wins. But he recovered his wits soon after. As the Chicago Tribune had observed, “no skull in the world” could absorb as much “pounding” as his and come back fighting. Poorer but wiser, he determined to join the house. For example, when the Commodore built a racetrack less than a mile outside of Saratoga, along with a group of Wall Street men (including his son-in-law George Osgood and William R. Travers) and a school of New York Central remoras (Erastus Corning Jr. and John M. Davidson, a partner of Erastus Corning Sr.), Morrissey agreed to serve as the track's manager.

  He steadily gained Vanderbilt's friendship in the course of the Commodore's summer residence in Saratoga, during his days at the track and evenings playing hands of whist in the rooms at the Congress Hall or the United States Hotel. And when Vanderbilt returned to the Springs in August 1864 on a train carrying his fastest horse, Post Boy (valued at $22,000), and four other expensive trotters, the knowing ones whispered that at least one of them was a gift from Morrissey. Vanderbilt's reward to the fighter, they said, had been a “point” or tip on the second Harlem corner.101

  For Vanderbilt's son Corneil, all the world comprised the house, yet he still bet against it. His gambling addiction continued to grow worse. He filched a gold cup from Horace Clark's house in Murray Hill before descending Broadway to bet and lose the money it brought him. Penniless again, he went into a pawnshop with a pair of gold sleeve buttons. They came from his dead brother George's dress uniform, and had been given to Corneil as a keepsake. When William learned they had been hocked, he redeemed them himself—and he never trusted Corneil with them again.102

  Corneil responded by gambling on a far larger scale, on the gaming table of the war itself. As early as February 1864, he charmed his way into the confidence of Horace Greeley editor of the New York Tribune, with that gift for manipulation that so confounded his closemouthed father. He borrowed money from Greeley, which he did not repay. He issued drafts that descended upon the famous editor unexpectedly103 Then Corneil brashly declared that he had a scheme to set things right. A frequent traveler to New Orleans before the war, he returned in 1864 to trade cotton across Confederate lines. There he befriended and beguiled General Nathaniel P. Banks, whom Corneil pronounced “a glorious fellow.”

  “Matters with me are progressing very favorably,” Corneil wrote to Greeley from New Orleans on September 7, “and through the friendship of Gen. Banks & [Edward R. S.] Canby & the especial favoritism shown myself & friend in connection with a certain cotton transaction I shall soon realize a very handsome profit. I do hope & feel that I shall shortly relieve myself of the heavy incubus hanging over me by reason of my former misdeeds.” It is a classic trait of the addict, of course, to admit his crimes and declare his intention to set them right just before a fresh round of lying and cheating. Corneil continued:

  I have been obliged to make use of some ready capital, & knowing of no earthly means to obtain it here I have drawn upon you for $1,700. I do beg that you will honor it, as a refusal to do so would of course involve me in dishonor & ruin. I shall leave here by the steamer of the 18th and shall bring home with me several thousands of greenbacks. I will call on you at once.… I beg Mr. Greeley that you will not desert me, just as my success is coming around.

  Greeley never saw how transparently dishonest this was; he had been manipulated completely. But Corneil knew that not everyone would prove so gullible. He warned Greeley, “On no account give any information to Father or family in relation to the past & present.”104

  Greeley did his best to help. Corneil needed a permit to buy and sell cotton in occupied territory, so Greeley asked for one directly from Lincoln. “His father, the Commodore, is the largest individual holder of our Public Securities (to the extent of $4,000,000), has given outright more than any other man to invigorate the prosecution of the War, and his good will is still an element of our National strength,” he wrote. “I know little of the business in question; but I feel confident that any favor shown to Mr. V. will redound to the advantage of the Union cause.” For this reason, “as well as that of my personal regard for him,” he begged that Corneil's application be approved.105 Lincoln, however, did not act on the request, so Greeley began to badger William P. Fessenden, the new secretary of the treasury.

  On October 8, the New York Herald reported a rumor that the Commodore stood behind the persistent lobbying on behalf of his son, which led him to write an angry letter that the paper published two days later. “I am at a loss to conceive how a report of this nature should have obtained currency,” Vanderbilt declared. “I have remained perfectly passive [in terms of recommending appointments], feeling that the present condition of the country requires of its citizens other and more patriotic endeavors than those of self-interest and personal aggrandizement.” Greeley sent the clipping to the Treasury Department as yet another reason to make Corneil a cotton-trading agent!106

  Stymied, Greeley wrote to Lincoln on November 23 to recommend that Fessenden be replaced as treasury secretary by the Commodore. He listed five reasons why Vanderbilt deserved the position, beginning with “i. He is the ablest and most successful financier now living, and has the largest private fortune in America.” He stressed Vanderbilt's knowledge, his reputation at home and abroad, and concluded, “He is utterly and notoriously unconnected with any clique, faction, or feud among the Unionists of our State or of any other.” It was all true, but Greeley admitted that he was not intimate with the Commodore, “whom I scarcely know by sight.”107

  The Commodore would have been appalled at Greeley's lobbying on his behalf. He never begged for public office; and when he wanted a corporate position, he simply took it. On September 6, he forced the resignation of two members of the Hudson River board (one of them William R. Travers, his partner in the Saratoga racetrack). He took one of the directorships for himself, and gave the other to Dean Richmond, the new president of the New York Central. At a board meeting in October, Vanderbilt ordered that the Hudson River's tracks be opened to the Harlem's trains between a junction at Castleton (now Castleton-on-Hudson) and Albany108

  So went the tale of dynastic struggles and railway statecraft. With his younger son conniving for petty favors, the Commodore brought the older into his new principality. He eliminated one rival, the Hudson River, by taking it over through quiet purchases and persuasion; with regard to the powerful New York Central, he clearly hoped that diplomacy would suffice. With a little decency on both sides, a few negotiations conducted with honor and propriety, he might manage that fraught relationship successfully for perhaps the first time in the history of those companies. All he sought, it appears, was to give Tobin and his son William a chance to reform their respective charges.109 But Vanderbilt would closely watch his old friend Drew; after his unprecedented betrayal in the second Harlem corner, there was no telling what he might do next.

  Unfortunately for Vanderbilt, betrayal, not friendship, woul
d govern the future. What he had begun with diplomacy, he would bring to an end in a stunning act of revenge.

  *1 A “trunk line” would later be defined as an integrated line, under one management, from the seaboard to Chicago or St. Louis. This book will use the contemporary meaning of the term, as explained here.

  *2 Leonard Jerome was to become the grandfather of Winston Churchill.

  Chapter Fifteen

  THE POWER TO PUNISH

  On September 5, 1864, abolitionist William Lloyd Garrison wrote a letter to his wife. He had just arrived in Albany by train, which caused him to reflect on how the locomotive had changed the country since their wedding thirty years earlier. “Then there was no railroad conveyance; now the whole country is covered in rails,” he wrote. “And through what enormous expenditure of money, and what incredible efforts of the human brain and hand!” Like many, he saw that railroads already were bringing a revolution—one that, as it spread beyond the Northeast, would foster national cohesion after the Civil War. As a devout Christian, he welcomed the prospect. “So may the modes of communication and the ties of life continue to multiply, until all nations shall feel a common sympathy and worship of a common shrine!”1

  In late 1864, Cornelius Vanderbilt entered the third and most critical phase of his conquest of a railroad empire. It would drag out over the course of three frustrating years, because he doggedly tried to avoid a climactic war with New York's most important railway: the New York Central. As master of the lines that penetrated Manhattan, he depended entirely on the Central; it was the trunk line that connected his tracks to western markets. Year after year he would practice patient diplomacy with the Central's presidents in an effort to settle their persistent conflicts. In the end he would fail. His response would be a shocking demonstration of the nation's vulnerabilty to the railroads'—to his—power.