by T. J. Stiles
For Vanderbilt, everything seemed to work exactly as Drew promised in the days that followed. “These manipulators of Erie talk of putting the stock much higher,” the New York Herald commented skeptically. The paper found Central's rising price to be still more remarkable—“ridiculous,” to use the exact quote. “It is said that a certain would-be railway monopolist aspires to control it, and that he and his friends hold a large amount of the stock; but it is against the public interests that any one person should constitute himself a railway king.” Drew led a pool to drive up the price of Erie, managing money contributed by Work, Richard Schell, Banker, and Steward. With the market rising, the Commodore duly conquered the New York Central in December. He little realized what treachery was in store for him.43
With Drew seemingly well in hand, Vanderbilt focused on reforming the management of the Central. “If I take possession of a railroad today,” he explained a year later, “I send my men over it to examine it in every particular and all over. They report to me its condition, and then it is my business to see that it is kept up, equal in every respect to what it is then.” This was a precise description of what he did upon taking command of the Central. On February 1, 1868, he dispatched Banker on an inspection tour with orders to examine the machine shops, ticket offices, and books kept by every office—“in fact look to every department of the company's property along its whole line.” He wanted to save every shilling. As he told the treasurer, “Mr. Worcester, do everything just as you would do it if it was your own business. Vary from this only so far as the peculiar demands incidental to a corporation demand.”44
Vanderbilt's reforms ranged from the petty to the profound. As on his other lines, he attacked the “monstrous” practice of handing out enormous quantities of free passes, restricting to himself and his vice president, Torrance, the privilege of granting them. He fired underperforming staff and eliminated patronage positions (including one held by Erastus Corning Jr.), in what one man called a “wholesale slaughter.” He had William better coordinate traffic and running arrangements of the Harlem and the Hudson River. He halted the practice of using the company's money to buy stock in connecting lines. He also revoked an agreement, made when Keep and Fargo had run the board, to pay American Express $50,000 a year—a rather remarkable contract, since ordinarily express companies paid rent to railroads, not the other way around. He also fought to recover a grain elevator in Buffalo that Keep had leased to Fargo.45
Vanderbilt's most famous reform was the most superficial: he forbade brass ornamentation on all locomotives, to save the time spent polishing them. This one step attracted lengthy comment in newspapers and railroad journals. Clearly it sent a powerful signal that economy would be Vanderbilt's defining principle.46
These changes aroused bitter complaints. Impervious to them all, Vanderbilt continued to squeeze savings out of the Central. But he was never vindictive. Instead, he sought peace with the railroad's strategic partners. After all of the struggles over the previous four years, he wanted peace. According to John M. Davidson, Vanderbilt declared that “he did not wish to persecute, but rather, to forget, and heal old sores.”47
AS 1868 BEGAN, VANDERBILT CONTINUED to participate in the bull campaign in the Erie, though it was the Central that really mattered to him. The brokers most closely identified with him were “the most steady buyers of NY Ctrl—they are buying for the Commodore's friends, who are all steadfast believers in the stock, even at these prices, for a long pull,” one Wall Street denizen wrote on January 7. “Vanderbilt advises his horse companions to buy Central,” Davidson wrote to Corning on January 14. “Told the noted driver [Dan] Mace yesterday to buy 500 shares, that he would make $25,000 in a short time.” Erie tagged along, ascending to 76, its highest price since the previous summer.48 Then, on January 22, it began to show “hesitation,” according to the New York Herald. Something was amiss. Erie began to fall. Drew unexpectedly declared the pool operation complete and divided the profits.
Schell believed that Drew had cheated them. “There has been quite a quarrel going on for several days between Mr. Drew & Richd Schell,” one financier wrote. Even as Drew had bought for the pool, for his own account he had “sold all his stock of Erie in the market, and gone largely short—in amount of nine millions of dollars.… Schell blows in a fearful manner—public & private—puffed up with his good fortune lately. He says that Erie will sell at par before next May, & threatens Mr. Drew with all kinds of prosecution & exposure.” Schell informed Gould that the legal complaint against Drew—shelved as part of the peace accord—would be filed at last, unless Drew took 5,500 shares of Erie off his hands at 75 or (perhaps intending to expose the famously pious Drew as a hypocrite) paid $20,000 to the poor of New York. Drew declined.49
Vanderbilt's involvement in this pool is far from certain. The Commodore later claimed to have been a reluctant participant in the Erie campaign, and one insider reported, “Vanderbilt refuses to have any interest in Erie.” After all, it was one thing to prevent Drew from ruining the money market; it was quite another to commit money into his hands. “There was a lot of people in the street that called themselves my friends, came up to me and pressed me very hard to go in with them,” Vanderbilt later explained. “Damn your pools!” he said he replied. “It is altogether out of my line.” Work and Richard Schell were in fact much more than Vanderbilt's puppets in this drama. They had pushed him to help them, not the other way around. Finally the Commodore had relented. “I had some loose money,” he said. “If you want me to help you along with your Erie I will help you along,” he recalled saying to them. “And they got me engaged in it, and I bought a pretty large amount of Erie.”50
But then Drew cheated, and whether he cheated Vanderbilt directly or his friends mattered little to the outraged Commodore. More than that, Vanderbilt's strategic concerns may have motivated him to move against his treacherous old friend. The new Erie board negotiated to lay a third rail on the Michigan Southern's track, to allow the Erie's broad-gauge rolling stock to pass over its standard-gauge line to Chicago; and Michigan Southern already discriminated against the Central in favor of the Erie. It seems that honor and economics both impelled Vanderbilt to proceed with the long-threatened lawsuit.51 On February 15, Work filed the complaint against Drew and his fellow Erie directors in New York's Supreme Court. (Despite the name, the Supreme Court was a trial, not appellate, court.) As mentioned earlier, it asked the court to halt Drew's trading in Erie stock and force the return of his secret 58,000 shares (which he had used to cheat the pool).52
Rapallo, as Work's attorney, filed the motion with the least respected, least honest, most notorious jurist in New York, Judge George G. Barnard. “Barnard,” historian Allan Nevins wrote, “was an insolent, overbearing man of handsome face and figure who had for a time hypocritically posed as a reformer.” He was not. Nor was he very, or even minimally, learned. “The court-room of Judge Barnard has been a place of amusement, where lawyers and others go to hear something ‘good,’” the New York Tribune later wrote. “Every day his indecent sarcasms and vulgar jests keep his court-room crowded with laughing spectators.” An ally of William Tweed, he had a reputation for being, as one newspaper wrote, “a most merchantable judge.”53
Barnard issued an injunction against Drew that barred him from the stock market. Two days later, Rapallo appeared before him again, acting in the name of New York's attorney general, to ask that Drew be removed from the Erie board. Barnard delivered a temporary order to that effect.54 With Drew thoroughly enjoined, Vanderbilt charged into the Erie china shop, determined to corner his old friend and punish him for his treachery. He gave orders to his brokers to buy all the Erie they could get.
Contemporaries and historians alike have concluded that the Commodore had “marked the Erie for his own,” as Charles F. Adams Jr. famously wrote, in pursuit of “absolute control over the railroad system.” Biographer Wheaton J. Lane claimed that Vanderbilt aimed at “ending competition between [the New York
Central] and the Erie,” by buying up the latter line.55 Wasn't his course toward monopoly obvious, as he moved from Harlem to Hudson River to New York Central? The Erie was the closest and most troublesome of the trunk lines; it seemed a natural target.
The Commodore himself thought otherwise. “I never had any intention of taking possession of or having anything to do with the Erie road—I mean in the management of it,” he later told a committee of the state assembly. “I never had the slightest desire; damn it! Never had time to. It is too big a thing!”56
Vanderbilt's words demand attention, for, flawed as he was, he was never a liar. And there is good reason to believe him. For one thing, he never launched a war of aggression in all his years as a railroad leader; always he practiced diplomacy first, fighting only as a last resort. For another, Vanderbilt was still mired in the process of taking over the Central, one of the largest and most important railroads in the United States; getting a grip on its levers of power proved to be a time-consuming task. Even a partial list of his work in February alone is imposing. On the 1st, he dispatched Banker on the inspection tour mentioned above; on the 6th, he wrote to President Andrew Johnson, complaining about the customs collector at the Niagara Suspension Bridge; on the 21st, he presided over a conference of the trunk lines to coordinate rates. All the while he fought resistance to his reforms by staff at all levels. “All the Assistant Supt. are doing their best to break the road down… because none of them like Mr. Torrance or the Commodore,” one official wrote. “The way the road is now managed is most ridiculous in the extreme.… It is perfect confusion from one end to the other.”57 Soon afterward, a strike broke out in the Albany machine shops because Torrance had reduced the men's hours and wages, then restored the hours but not the wages. Vanderbilt himself had to intervene to settle it.58 Seizing the Erie, in the midst of this enormous internal struggle, would have been too big a thing indeed. The surprising truth is that Vanderbilt fought one of the greatest business conflicts in American history purely out of a desire for revenge.
Drew's fellow Erie directors, unfortunately, could not see into the Commodore's heart. Their eyes were fixed instead on the stock certificates piling up in his safe, which made them fear that they would lose control of their railroad. Gould, Fisk, and Eldridge had come into the Erie in order to drive out Drew, but Vanderbilt's vengeance ironically forced them to rally around him and make his cause their own.
To defeat the attempted corner, they engaged in a stock-watering operation of unprecedented size and speed. In essence, they would drown Vanderbilt in new shares, created under cover of the law that permitted the conversion of bonds into stock. First, they approved an issue of $5 million in convertible bonds and sold them to Drew's broker. They also entrusted the “speculative director” with ten thousand new shares converted from the securities of a recently leased railroad, the Buffalo, Bradford & Erie. Then they established a fund of $500,000 in cash to pay for legal expenses—or what have you. On March 5, Erie attorney David Dudley Field approached a close friend of Barnard's and offered him $5,000 to convince the judge to modify his injunction; the friend declined, so Field placed the cash elsewhere. With these preparations made, Drew sold Erie short to Vanderbilt in massive quantities. He also took elaborate steps to have front men deliver the new shares in order to hide his hand from the courts.59 The trap was set.
THE COMMODORE HAD NO CORONATION as railroad king—but New York's aristocrats acknowledged early on that he had founded a dynasty. On February 18, William's eldest girl, Louisa, married Elliott F. Shephard at the Episcopalian Church of the Incarnation, on Madison Avenue and Thirty-fifth Street. The chapel was jammed “by the fashionable denizens of Murray Hill, Fifth Avenue, and Madison Avenue,” one newspaper reported. “The streets in the vicinity were lined with carriages for a quarter of a mile.” Afterward the reception was held at William's new house on Fifth Avenue. “For four hours the elite of the town flowed in and out, and it was altogether a splendid affair. The new home of Mr. Vanderbilt is the most elegant in its interior of any house in town.” New York's ballrooms would not be barred to William's princeling children.60
Sadly, no one would confuse Ellen Vanderbilt with a princess. The respectable daughter of a prosperous New England merchant, she had married the son of one of the wealthiest men in the world, only to be thrown into poverty and disgrace. Yet she stood loyally by Corneil. Only Greeley shared her faith in her husband—in part because of his affection for her. “I but interest myself in the Commodore's good will to his son and namesake, but I know he cannot in any case leave you destitute, for he knows how nobly you have deserved his highest appreciation,” he wrote her on March 8. “Even should he leave your husband nothing, he will leave a good income to you, and in that faith I rest content.… I know that he [the Commodore] has been sorely tried, and I can only hope that he will live to realize and put faith in his son's devotion.”61
Ellen needed more than sympathy. The couple had emerged out of Corneil's bankruptcy penniless. In order to “commence housekeeping once more,” she told Greeley, she needed money, though “I am really ashamed” to ask for more.62
Within the walls of 10 Washington Place, the fate of Corneil and Ellen remained a matter of dispute between Cornelius and Sophia. The Commodore simply didn't trust his son. He demanded that Corneil swear that he never again would borrow money; even then, he refused to help. “Father Vanderbilt is waiting to see us started, & in course of the summer he will be vastly more liberal than at present,” Ellen wrote. “But he says we must get started first, & it certainly is strange he does not consider our extra wants & make some appreciation requisite. But he does not.” The Commodore kept a close watch on his son's financial doings, as Ellen complained to Greeley. “I feel that you are in fact the only person on whom we can rely to keep our affairs from the world, & this is just the reason we ask you, as others would at present undoubtedly assist us, but father Vanderbilt would probably hear of it a day or two afterwards.”
“Mother Vanderbilt,” on the other hand, “aids us all in her power. She sent me last week a large quantity of linen, & other things, & says she shall continue to assist us as far as she is able. I think she has no patience with the Commodore for what she calls ‘his stubborn inconsistency’!”63 The divide between the two parents over their troubled son had continued—though, tellingly, it was no operatic feud. Sophia did not rage at her husband, just lost “patience.”
If tension was muted between Mother and Father Vanderbilt, it was still tension. Sophia aided the bankrupt couple secretly, lest she arouse her husband's wrath. One did not defy his will lightly; already his power and forcefulness had become proverbial in American culture. On February 17, for example, a religious periodical sought to express the glory of Jesus Christ by equating the Son of God with Vanderbilt—“and none can get a pass on his railroad without respect and loyalty for the Bible.” In the New York Times that same day, Albert DeGroot proposed a fund to build a life-size statue of the Commodore atop the mighty freight depot currently under construction in St. John's Park. “The public spirit, energy, and indomitable nerve of the great steamboat and railway king merits some such recognition,” he wrote. Vanderbilt's admirers began to contribute as his detractors muttered that yes, he certainly had nerve.64
A FEW MORE STEPS, and the steel jaws would snap shut. With the secret new stock certificates rolling off the presses, the Erie directors prepared for war with Vanderbilt by withdrawing from the trunk line compact, which freed them to slash rates in competition with the Central. Drew secured a delay of his hearing before Barnard, and hurriedly distributed the fresh shares to his front men. On March 5, in the final piece of preparation, the Erie lawyers appeared in remote Broome County, New York, before Judge Ransom Balcom, who agreed to suspend Work from the Erie board and to bar him—and the New York State attorney general—from pursuing their lawsuits. The attorneys took advantage of a quirk in New York's judicial structure that gave every one of the thirty-three Supreme Court
judges jurisdiction over the entire state, a flaw that fed rampant corruption in the legal system. “The New York community is not apparently unaccustomed to seeing one justice of its Supreme Court enjoining another,” the American Law Review commented, “on the ground that his respected associate has entered into a conspiracy to use his judicial power in a stock-jobbing operation.”65
A bewildering blizzard of lawsuits and injunctions began to snow paper across the desks of judges and lawyers across the state, giving Drew the legal cover to deliver giant blocks of new shares into Vanderbilt's hands. The courts and markets erupted in chaos: the price of Erie staggered, Richard Schell and the Erie lawyers obtained fresh injunctions, the New York Stock Exchange declared the new shares invalid, and the New York State Senate created a committee to investigate the imbroglio.
On March 10, with losses mounting, Vanderbilt suffered perhaps the most dangerous blow of all: Drew and the Erie board conducted a lockup. “The Erie Company is understood to have drawn nearly the whole of the balance from its bankers in this city… including some of the proceeds of the recent sale of ten millions of convertible bonds,” the New York Herald reported. The Times estimated that $5 million or $6 million in cash—formerly Vanderbilt's—had been withdrawn from the financial system (the Erie directors claimed $8 million), which forced bankers to call in loans, driving up interest rates and shaking down stock prices across the board.
But Vanderbilt continued to buy, grimly determined to corner Drew. According to rumor, his entire fortune teetered on the brink as he fought to put up margins on millions of dollars' worth of questionable Erie stock (questionable, because the Erie board had not secured the approval of the shareholders to issue convertible bonds, as required by law). Supposedly he pressured banks to lend to him on the threat of selling off his Central stock and causing a general panic. If only half of the gossip was half true, he was in a desperate spot.66
