The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  The Commodore, ever cool amid others' panic, projected pure strength. He strolled through the exchange to make his presence felt. “Central's coming up, Commodore,” a young broker shouted. “Top o' the heap still, my boy,” he replied. Soon the reason for his confidence leaked out: he had taken a large short-term loan from Baring Brothers in London, putting up as collateral an equal amount, at par, of New York Central stock. He bought back his Lake Shore shares (at radically reduced prices, of course), along with Lockwood's stake. And he very visibly purchased Central. He failed to keep the price above 200, where it had been before Black Friday, but he arrested its fall at 175, and brought it back to 184 in short order. On October 2, the New York World commented on his impact:

  The best men on the street all assert that had it not been for the Commodore coming to the rescue and sustaining his stocks, the panic on Tuesday and Wednesday of this week would have been a hundred fold greater than it was, and that nearly the whole street would have been ruined, and several of the banks have been obliged to succumb by the great decline that would have taken place in securities; that this decline would not have stopped with stocks, but have extended to government, State, and city stocks [i.e., bonds], and been universal and disastrous. To the prevention of this disaster, the brokers generally give the credit to Commodore Vanderbilt.57

  In the drama of Black Friday—a morality play of Gould's greed, government corruption, and new economic intricacies that easily fell prey to manipulation—Vanderbilt appeared in the role of a hero: the man who saved the stock market, who prevented a panic from igniting a depression. Closer inspection reveals that a blood-chilling ruthlessness infused all his actions. To avenge himself upon Lockwood, and to bring the Lake Shore Railway into the Central's orbit, he had gambled with the economic health of the national economy. Well aware of the frailty of the financial market in the autumn (and of Gould and Fisk's gold-cornering scheme), he had pumped in still more pressure, taking the risk that Wall Street's boiler would explode. Along the way, he also endangered the fortunes of his friends and his own grip on his flagship corporation. He gambled all this on his confidence in his ability to singlehandedly sustain the market. The only thing more remarkable than his recklessness was his success. After contributing to one of history's great panics, he took his revenge, captured the Lake Shore, and rescued Wall Street.

  To the American public, Black Friday suddenly illuminated, like a flash of lightning on a midnight floodplain, the way in which the new corporate and financial reality inundated the national landscape. The bankers and brokers of New York were no longer an oddity—an isolated batch of men who seemingly produced nothing but merely juggled bewilderingly abstract securities. Now, because of the railroads, corporations began to overshadow farmers, artisans, and merchants. Now, because of the increasing financial integration of the country, the fears and hopes of a few hundred men on Wall Street could shake the nation. More than any other man, the Commodore frightened or excited those few hundred, driving them as he willed. With the wave of one hand he created tens of millions in new wealth; with a wave of the other, he crushed his enemies; with cold-eyed calculation, he gambled with the lives of millions. The American people were fortunate that he gambled so well, but they had no say in how he placed his bets. Black Friday posed a great question: What was the place of a railroad king in a democracy of equals?

  AFTER SURVIVING THE PRESENT, there remained the future—specifically, the future of the Lake Shore. Vanderbilt swept his enemies out and his lieutenants in: Lockwood resigned as treasurer and was replaced by James Banker, and another Lockwood ally resigned from the board to make room for Augustus Schell.58 Clearly it was now Vanderbilt's property. But what would he do with it?

  Lockwood's defeat prompted widespread speculation about a grand consolidation of the Lake Shore with the still-merging New York Central & Hudson River. Such a move would have been in keeping with the changing times. For example, the Pennsylvania Railroad responded to Gould's threats by creating a self-contained system extending from Philadelphia to New York, Chicago, St. Louis, and throughout the South. Its lease of the Fort Wayne was only the first step in the development of a highly sophisticated, centrally controlled network of subsidiaries and holding companies. Within five years, the Pennsylvania's managers would gain control of $400 million in assets and nearly six thousand miles of track—8 percent of the national total.59

  But the Commodore balked at such an ambitious step as consolidating the Lake Shore into the Central. First, it is not clear that Vanderbilt had purchased an outright majority of Lake Shore stock. (It was hardly necessary to control the board.) Second, he and his lieutenants remained immersed in the immense task of merging the Central and the Hudson River. Third, the Lake Shore's finances were nowhere near as robust as those of Vanderbilt's other lines; to coalesce them before reforms could be enacted would scuff the gilt edges off Central stock.

  Most important, Vanderbilt handled the Lake Shore gingerly because of his keen ear for politics, both the electoral variety and the realpolitik of railroad diplomacy. He fully grasped the public's worries over the rise of giant railroad corporations. A fresh consolidation would have been a vast undertaking, financially, legally, and especially politically, requiring legislation from each of the six states through which the line would run. And since he had no desire (and perhaps insufficient means) to buy all the lines that fed the Central traffic, he had to appease the executives of connecting lines; he could not afford to discriminate against them. To understand him as a railroad leader, it must always be remembered that he was first and foremost a diplomat.

  Out of deference to both political and business sensitivities, he refused to treat the Lake Shore as a subsidiary of the Central. For example, he did not give it preference over the North Shore lines, which he did not control. Five years later, the Michigan Central's superintendent would applaud “the neutrality which he [the Commodore] has always professed and which up to this twine has been pretty well observed.” Vanderbilt's battle with Lockwood, like all his railroad wars, had been one of self-defense (in this case, to block Gould), not an exercise in imperial conquest.60

  The Commodore delegated command of the Lake Shore to Banker, Schell, and especially Horace Clark, who would take over as president at the next stockholders' meeting. They were more than puppets; they had agendas of their own, and Vanderbilt gave them latitude. “We have got some high-toned, honorable men in our board of directors, a set of men who are capable of thinking for themselves,” he had said about Clark, Banker, and Schell in 1867. “And they might think very differently from me, and I would not blame them for expressing their opinions.” As long as they managed the line wisely, cooperated in carrying through freight, and kept his enemies at bay, he would leave them to manage the railroad as they saw fit.

  He should have remembered his own words about keeping an eye on your friends.61

  “HOW I DO PITY YOU, Commodore Vanderbilt!” Mark Twain wrote. “You seem to be the idol of only a crawling swarm of small souls, who love to glorify your most flagrant unworthinesses in print; or praise your vast possessions worshippingly; or sing of your unimportant private habits and sayings and doings, as if your millions gave them dignity.”

  Twain's essay, “Open Letter to Com. Vanderbilt,” appeared in March 1869 in Packard's Monthly, a new periodical devoted to fighting “the evils of the day”62 Twain clearly saw Vanderbilt as evil. He ascribed to him a willingness to run down and kill pedestrians in his carriage. (“No matter, I'll pay for them.”) He pictured him as a creature of pure greed. (“You… rob yourself of restful sleep and peace of mind, because you need money so badly. I always feel for a man who is so poverty ridden as you.”) He accused him of lacking all charity. (“Do go, now, and do something that isn't shameful.”) Lest his point be missed, he added, “You observe that I don't say anything about your soul, Vanderbilt. It is because I have evidence that you haven't any.”

  And yet, what really irritated Twain was not the Com
modore himself so much as the adoration of his ultra wealth. He complained of the praise for Vanderbilt that appeared in editorials, the tales that ran in the columns of miscellaneous chitchat. “No, sir; other men think and talk as brilliantly as you do, but they don't do it in the glare of seventy millions,” he wrote, “so pray do not be deceived by the laudation you receive; more of it belongs to your millions than to you.”

  Twain saw a culture grown vulgar, selfish, materialistic, and corrupt, and he didn't like it. Like many of the Civil War generation, he viewed his times with a cynical eye and, underneath his ironic tone, a poignant sense that America had lost its virtue. (One of his most hilarious pieces of writing was an ironic attack on young Benjamin Franklin for having been so maliciously self-improving, “so that all other boys might have to do [the same] or else have Benjamin Franklin thrown up to them.”) He did not attack Vanderbilt's fortune in its own right; rather, he went after the way it warped the rest of society—for it was corruption, not riches, that offended him. It is worth remembering that the novel he wrote with Charles Dudley Warner—the book that gave its name to this era, The Gilded Age—is not a satire of the wealthy, nor even of the extravagant lifestyles now associated with the title. The book's hero actually rises to fortune through expertise and hard work. Rather, Twain and Warner's villains are scurrilous adventurers who try to bilk the federal government with a pork-barrel project championed by a flagrantly corrupt senator.

  At the opposite end of the social scale from Twain stood Henry and Charles Francis Adams Jr., yet they shared the same concerns. In their writings, they voiced an abiding belief in the scientific laws that governed economics, and argued that corruption in corporations and government prevented those laws from working properly63 Indeed, the key to understanding their critique is that it was infused with an almost Calvinist conviction that humanity is fallen. In “A Chapter of Erie,” Charles wrote with alarm about the increasing size of giant railroad corporations, but his real complaint was not with corporations themselves, but the moral failings of the businessmen who misused them. “No acute moral sensibility has… for some years troubled either Wall Street or the country at large,” he wrote. The natural laws of economics had been corrupted by “the legerdemain of paper financiering,” he argued, as if corporations were not products of the human imagination, but of natural processes, as much as mountain ranges or spoon-billed sandpipers. They wished to remove the original sin, to rest economic values on the natural, the solid, the inanimate. With regard to currency, this meant an end to legal tender. Instead of the volume of high-powered money being set by Congress, they argued, it should be based on the supply of gold. With regard to the values of stocks, they wished to base them on construction costs, not the whims of stock-watering rascals such as Vanderbilt or Gould.

  To the Adams brothers, the Commodore and his ilk were most dangerous when they spread their corruption into politics, as in Gould's alliance with Tweed. (Henry titled his own satirical novel Democracy, not Capitalism) In “A Chapter of Erie,” Charles wrote, “As the Erie ring represents the combination of the corporation and the hired proletariat of a great city, as Vanderbilt embodies the autocratic power of Caesarism introduced into corporate life… it, perhaps, only remains for the coming man to… put Caesarism at once in control of the corporation and of the proletariat.”64

  The phrase “the hired proletariat” speaks to the social prejudices that pervaded the Adams brothers' set, the liberal reformers—or the “best men,” as they called themselves. Liberals such as E. L. Godkin (editor of the Nation), Charles Eliot Norton (editor of the North American Review), economist David A. Wells, historian Francis Parkman, and others scorned the poor and uneducated “dangerous classes” as vulnerable to Tweed and other manipulators. As Warner wrote, “All men are created unequal.” The liberals recoiled from Reconstruction. Believing the worst tales about corruption in Southern state governments, they questioned black suffrage. They weren't sure all white men should vote. As Charles F. Adams Jr. proclaimed, “Universal suffrage can only mean in plain English the government of ignorance and vice.”

  In the same breath, they blasted the tycoons—Vanderbilt foremost among them—for one underlying, ultimate sin: they were uncultured. The Education of Henry Adams dismisses Vanderbilt and Gould by saying they “lacked social charm.” But charm mattered, the Adamses thought; the tycoons' ignorance and lack of culture served as the fountainhead of their selfish defiance of natural economic laws. Twain later befriended one of the richest and most ruthless of all industrialists, Andrew Carnegie, in large part because Carnegie aspired to intellectual cultivation and literary accomplishment, and thus distinguished himself from his peers. The “best men” saw the corrupt poor and the corrupt robber barons (a term used in June 1868 by Edward Howland, and by Charles F. Adams Jr. in a private 1869 letter) as the twin causes of society's troubles. “An ignorant proletariat and a half-taught plutocracy,” Parkman later wrote, had “risen like spirits of darkness on our social and political horizon.”65

  The worst fears of the liberal reformers seemed to come true on November 10, 1869, when half-taught Caesar and the ignorant plebeians met in a ceremony that rather resembled a coronation. New York's newspapers had given notice of the event, and the public came by the thousands—men and women, jostling and squeezing, stepping over curbs and clods of horse manure, pressing down the narrow streets of lower Manhattan toward the Hudson River. On Hudson Street they collided with a cordon of 250 policemen. Beyond the constables, a rope line divided the crowd from the invited ticket holders arrayed in front of an extended dais, beneath the long, low arches and massive brick walls of the new Hudson River Railroad freight depot. As a military band drummed and blared, the eyes of the crowd went to a detachment of twenty-five sailors who held a large canvas cover that flapped across the peak of the building's facade.

  On the dais sat the leading men of the city from Mayor A. Oakey Hall to Horace Greeley and August Belmont, along with two admirals, the U.S. district attorney, a bishop, Daniel Drew, and even Jim Fisk and Jay Gould. President Grant was expected, but sent his regrets. Vanderbilt occupied the center, smiling between the white shocks of his abundant sideburns, still a dominating presence at seventy-five.

  The onlookers fell silent for a bishop's invocation. Then the sailors let go the cover and unveiled a twelve-foot bronze statue of the Commodore, which stood within the brackets of an enormous bronze relief depicting the icons of Vanderbilt's long career: sailboats, steamships, and trains. “At the same moment,” the New York Tribune reported, a navy vessel “ran up the Commodore's pennant to the flagstaff; the band struck up a lively tune, and the crowd cheered with enthusiasm.” Mayor Hall delivered a lengthy tribute. Vanderbilt was the richest man on the continent, Hall observed, but he did not fritter his wealth; he employed it “in public projects of startling conception that have kept employed almost armies of men.” Vanderbilt, the mayor proclaimed, “is a remarkable prototype of that rough-hewn American character which asks no greater original capital than is afforded by that independence of thought… that irresistible resolution in executing great projects, which can carve the way of every humbly born American boy to national eminence.” He was the equivalent of Benjamin Franklin, Andrew Jackson, and Abraham Lincoln. William Rose Wallace—the poet who wrote “The Hand That Rocks the Cradle Is the Hand That Rules the World”—then read an original, if abysmal, verse, beginning, “Mighty Monument to Conquest—so the Great Republic cries / Power orbed on her vast forehead, earnestness burning in her eyes.”66

  High praise indeed. Unfortunately, Mayor Hall was on his way to two indictments for corruption, ensuing public disgrace, and self-imposed exile abroad. “But there is something essentially laughable,” E. L. Godkin noted in the Nation, “in the spectacle of a man's putting out his own cash to pay for civic honors to himself.” He found it reminiscent of the decaying days of the Roman republic, in particular the story of how a group of citizens approached a nobleman with the news that th
e Senate had voted to erect a statue of him. The nobleman gravely replied that honor alone was enough—in fact, it was too much, so he would put up his own monument.67

  Democracy must have its discontents, or it would not be democracy. Indeed, the liberal reformers formed only one channel of dissent against Vanderbilt and the corporate power he represented. The other would be a populist current that lifted up government regulation to counter the railroad monarchy. It would take longer to emerge, in large part because of the liberals' influence in intellectual circles and with the leadership of both political parties. The cynicism and social disdain of Godkin, Twain, and the Adams brothers created confusion, then and now, over the problems facing American society in 1869. Their attacks on corruption went beyond the Tweed ring, to the point of undermining black-elected governments in the South and giving credence to white supremacy. Their economic theories led them to lambast business practices that eventually would become standard. Most important, their distrust of popular government discredited regulatory measures that offered the only means of placing political limits on the power of large corporations.

  They were right about many things, of course: political corruption was a real problem; the spoils system needed to be replaced by a professional, nonpartisan civil service; insider trading and other abuses wracked corporations; and no one could accuse Vanderbilt of being well educated. But prejudice cannot replace investigation. Vanderbilt, for example, did not pay for his monument, as Godkin believed. It was the brainchild of Albert De Groot, who once had worked on Vanderbilt's steamboats, enjoyed his patronage, and felt he “owed a debt of gratitude.” He had planned the statue and relief, designed by Ernst Plassmann, and raised $500,000 from Vanderbilt's wealthy friends. De Groot claimed that the Commodore knew nothing about it until it was well under way68