The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  9 Recent historical and popular literature does a poor job of explaining why stock watering was considered such an abuse in the nineteenth century. (Of course, I simply may not have read widely enough.) For example, John Steele Gordon, The Scarlet Woman of Wall Street: Jay Gould, Jim Fisk, Cornelius Vanderbilt, the Erie Railway Wars, and the Birth of Wall Street (New York: Weidenfeld & Nicholson, 1988), 87, writes that it was seen as “cheating the stockholders by diluting their equity,” which misses the real complaint, and does not touch the underlying thinking that made it such a politically sensitive subject. See CFA, “The Railroad System,” 398–413. For an enlightening discussion between CVs executives and state legislators on the problem of “fictitious capital,” see NYSAD 142, 92nd sess., 1869. Stock watering was a focus of the famous Hepburn Committee, NYSAD 38, 103rd sess., 1880. For a contemporary attack on the “great evil” of “fictitious capital,” see BM, August 1869. See also Montgomery Rollins, “Convertible Bonds and Stocks,” Annals of the American Academy of Political and Social Science 35, no. 3 (May 1910): 97–110. Fowler, 24–5, is especially good at expressing the wonder his contemporaries felt for the abstraction of corporate finance.

  10 HC, March 18, 1867; NYT, April 4, 1867.

  11 Spuyten Duyvil & Port Morris Railroad Company Minutes Book, vol. 1, box 39, NYCRR; NYT, April 21, 1870. When Daniel Drew had operated the Upper Bull's Head Tavern on Third Avenue, it had been the primary north-south route to the city; see Walter Blair v. Daniel Drew, March 10, 1831, Court of Common Pleas, file 1831–87, and Fitz G. Halleck v. Daniel Drew, March 15, 1820, Court of Common Pleas, file 1820–479, NYCC.

  12 RT, July 13, 1867; NYT, May 20, August 29, September 11, 1867; Directors' Minutes, December 11, 1867, NYC, vol. 5, box 34, NYCRR. On the Great Western's third rail (it had been built to a gauge of 5′6”) and the creation of a through line on the North Shore, see Directors' Minutes, November 8, 1866, NYC, vol. 5, box 34, NYCRR; CT, January 9, 1867.

  13 Nathaniel Thayer to EC, November 26, 1867, fold. 8, box 39, JMD to EC, December 7, 1867, fold. 2, box 90, ECP; Directors' Minutes, December 11, 1867, NYC, vol. 5, box 34, NYCRR. On Joy, see Alfred D. Chandler Jr. and Stephen Salsbury, “The Railroads: Innovators in Modern Business Administration,” in Bruce Mazlish, The Railroad and the Space Program: An Exploration in Historical Analogy (Cambridge, Mass.: MIT Press, 1965), 152; Julius Grodinsky, Transcontinental Railway Strategy, 1869–1893: A Study of Businesmen (Philadelphia: University of Pennsylvania Press, 1962), 5–6.

  14 WHV to JFJ, January 29, 1868, JFJP See also WHV to JFJ, May 14, 1868; Memorandum of Agreement, December 17, 1868; and H. E. Sargent to JFJ, May 16, 1874; all in JFJP; Notice of NYC&HR, October 1, 1874, Document Summary, box 5, JFJP-2. WHV used back channels to reassure Joy as well, speaking to Samuel Sloan of the Vanderbilts' desire to treat the North Shore lines fairly; Samuel Sloan to JFJ, August 30, 1867, JFJP.

  15 RGD, NYC 374:1; Buffalo Express, in CT, December 16, 1867; NYT, October 15, 1866; testimony of CV, NYSAD 19, 90th sess., 1867. For high praise for his Harlem management, from a very skeptical source, see the Nation, March 26, 1868. See also praise from the RT, September 30, 1865, for CVs emphasis on safety.

  16 Testimony of Azariah Boody and CV, NYSAD 19, 90th sess., 1867; Putnam's Monthly Magazine, February 1868. For a splendid illustration of corruption in the Pennsylvania, see David Nasaw, Andrew Carnegie (New York: Penguin, 2006), 59–63.

  17 American Phrenological Journal, March 1866; NYT, February 7, 1867; Round Table, February 9, 1867.

  18 NYT, November 10, 1866.

  19 HW, December 15, 1866; Cleveland Leader, January 21, 1867.

  20 Round Table, February 9, 1867.

  21 NYH, November 14, 1867.

  22 Louis Auchincloss, The Vanderbilt Era: Profiles of a Gilded Age (New York: Charles Scribner's Sons, 1989), 37; The Way Bill, March 1887.

  23 Auchincloss, 38; CT, February 3, 1867; Directors' Minutes, May 23, 1867, HRR, reel 26, box 242, NYCRR.

  24 NYS, December 22, 1877, February 27, 1878; NYW, December 20, 1877; NYTr, February 27, 1868, February 6, 1879; Henry S. Thatcher and George Buckland v. CJV, April 2, 1867, file LJ.-1867-V-192, George R. Pecker v. CJV, April 2, 1867, file L. J-1867-V-100, Supreme Court Law Judgments, NYCC.

  25 New York Ledger in CT, November 19, 1867; CJV to HG, September 28 n.d., reel 3, HGP.

  26 CJV to Nathaniel P. Banks, October 27, 1867, cont. 40, Nathaniel P. Banks Papers, LOC.

  27 Letter quoted in NYS, December 27, 1877.

  28 SEP, April 4, 1873.

  29 NYT, April 27, 1867; New York Observer and Chronicle, May 16, 1867; NYH, May 22, 1867; H W, June 1, 1867; NYTr, January 24, 1876.

  30 NYT, October 1, 8, 1867.

  31 CT, October 18, 24, 1867; NYT, October 19, 22, 1867.

  32 New York Ledger, in CT, November 19, 1867.

  33 For the original complaint, see Frank Work v. Daniel Drew, John E. Eldridge, Alexander Drew, Homer Ramsdell, J. C Bancroft Davis, Henry Thompson, Dudley Gregory, Frederick A. Lane, George Gravel, James Fisk Jr., Jay Gould, and William Skidmore, July 24, 1868, file PL-1868-W-25, Supreme Court Pleadings, NYCC. The account given here of the complaint and CVs interaction with Jay Gould, to follow, comes from an overlooked deposition later filed by Gould; CT, March 30, 1868. For an influential source that calls Work CVs nephew, see CFA, “A Chapter of Erie,” NAR, July 1869. Work himself made no claim to any relation to CV; see his testimony in the will trial, NYS, March 7, 1878. On Samuel Barton's role in the HR, see Directors' Minutes, June 10, 1867, HR, oversize vol. 248, NYCRR. For his partnership with Work, see a notice in NYT, February 19, 1866. For evidence that CV specially favored Barton, see CV to Samuel L. M. Barlow, March 6, 1860, BW Box 36 (14), Samuel L. M. Barlow Collection, HL.

  34 CT, March 30, 1868. According to Gould's lieutenant and bodyguard, G. P. Morosini, Gould joined the Eldridge clique through contact with lawyer Frederick A. Lane and broker James Fisk Jr.; G. P. Morosini, “Jay Gould and the Erie Railway,” NYHS.

  35 Klein, 77; Edward Harold Mott, Between the Ocean and the Lakes: The Story of Erie (New York: Ticker Publishing, 1908), 141.

  36 NYT, December 14, 1865, June 10, 1867; PS, August 13, 1868; Edward Chase Kirk-land, Men, Cities, and Transportation: A Study in New England History, 1820–1900, vol. 2 (Cambridge, Mass.: Harvard University Press, 1948), 34–40. Kirkland notes that Adams stressed the need for the Boston, Hartford & Erie in his article on Boston for the NAR.

  37 CT, March 30, 1868.

  38 The discussion of the financial system that follows is largely based on the same sources cited in the discussion of the introduction of the greenback in Chapter Thirteen. See in particular Richard Franklin Bensel, Yankee Leviathan: The Origins of Central State Authority in America, 1865–1877 (New York: Cambridge University Press, 1990), 239–80, esp. 264–77; Richard Sylla, “Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863–1913,” JEH 29, no. 4 (December 1969): 657–86; Esther Rogoff Taus, Central Banking Functions of the United States Treasury, 1789–1941 (New York: Columbia University Press, 1943), 65–9; and also George A. Selgin and Lawrence H. White, “Monetary Reform and the Redemption of National Bank Notes, 1863–1913,” BHR 68, no. 2 (summer 1994): 205–43.

  39 EP in CT, March 28, 1868; Fowler, 508; Smith, 56–7; Bensel, 239–40, 254–74.

  40 In Gould's affidavit, quoted above, he said CV had told him that “Mr. Drew was bearing stocks, and was mainly instrumental in producing money stringency which took place just previous; that Drew had several millions on deposit, and knowing that Mr. Vanderbilt and his friends were carrying a large amount of stock, never offered assistance;” CT, March 30, 1868.

  41 Ibid.; Klein, 79.

  42 CT, March 30, 1868; NYH, October 9, 1867; Klein, 79.

  43 NYH, October 9, 1867. NYH, October 12, 1867, refers to the operations of “the Erie clique,” and the Albany Evening Journal, quoted in CT, December 10, 1867, observed the broad upward movement in railroad stocks, inclu
ding Erie. In Gould's affidavit quoted in CT, March 30, 1868, as elsewhere, he names the members of the pool.

  44 NYH, January 20, 1869; CV to JHB, February 1, 1868, CV-NYHS; SR 307, part 2, 43rd Cong., 1st sess., vol. 3, 137.

  45 NYTr, August 5, 1876; Directors' Minutes, December 11, 1867, Executive Committee Minutes, December 12, 20, 21, 26, 1867, January 20, February 11, 1868, NYC, vol. 3, box 34, NYCRR; Circular, February 10, 1868; NYH, January 20, 1869; JMD to EC, December 28, 1867, fold. 2, box 90, JMD to EC, July 2, 1868, fold. 8, box 39, ECP For a recollection of CVs elimination of sinecures, including EC Jr., see NYTr, August 5, 1876. For an account of the costs of free passes see RRG, July 6, 1872. The elimination of free passes created some problems; drovers, for example, usually traveled for free with their cattle, and when the Central stopped that practice the Erie captured much of the livestock business temporarily; see S. H. Dubois to EC, March 7, 1868, fold. 8, box 39, ECP. For a useful summary of CVs rationalization of the Central, see Alfred D. Chandler Jr., “The Railroads: Pioneers in Modern Corporate Management,” BHR 39, no. 1 (spring 1965): 16–40.

  46 RT, February 8, 1868; NYT, February 9, 1868; SA, February 15, 1868.

  47 BE, January 15, 1868; JMD to EC, December 28, 1867, fold. 2, box 90, JMD to EC, July 2, 1868, fold. 8, box 39, ECP.

  48 John D. Prince to JMD, January 7, 1868, JMD to EC, January 7, 14, 1868, fold. 8, box 39; JMD to EC, January 8, 1868, fold. 5, box 90, ECP; NYT, January 11, 1868.

  49 NYH, January 23, 1868; NYT, December 1, 1868; CT, March 30, 1868; S. W. Harned to EC, February 14, 1868, fold. 5, box 90, ECP.

  50 S. W. Harned to EC, February 14, 1868, fold. 5, box 90, ECP; NYSAD 142, 92nd sess., 1869. The stenographer, Hudson C. Tanner, later testified that the assembly committee before whom CV spoke these words suppressed some of his comments (reproduced here) to delete his profanity and generally clean up his comments; NYTr, March 6, 1871. Schell is quoted in HR 31, 41st Cong., 2nd sess., vol. 1.

  51 Klein, 81; NYH, February 20, 23, 1868; H. E. Sargent to JFJ, April 8, 1868, Telegram, Document Summary, box 5, JFJP-2. On March 7, a New York Central official reported, “4 out of 6 of the stock cars that comes down the Lake Shore Road [Michigan Southern's eastern connection] goes over the Erie Road in consequence of a nefarious arrangement;” S. H. Dubois to EC, March 7, 1868, fold. 8, box 39, ECP.

  52 Frank Work v. Daniel Drew, John E. Eldridge, Alexander Drew, Homer Ramsdell, J. C. Bancroft Davis, Henry Thompson, Dudley Gregory, Frederick A. Lane, George Gravel, James Fisk Jr., Jay Gould, and William Skidmore, July 24, 1868, file PL-1868-W-25, Supreme Court Pleadings, NYCC.

  53 Strong, 4:263n; NYTr, March 25, 1872, in HW, April 13, 1872; Zion's Herald, March 26, 1868. On Tweed, Barnard, and the role of the city's courts, see Seymour Mandelbaum, Boss Tweed's New York (New York: John Wiley & Sons, 1965), 57–8, 66–7, 83; Burrows & Wallace, 837.

  54 See the complaint against Barnard by James Fisk's partner, William Belden, NYH, March 12, 1868. On Barnard's closeness with Osgood, see NYH, March 19, 31, 1868. For some of the many letters from JMD to EC on Barnard and the stock market, see those for December 28, 1867, fold. 2, box 90; February 11, 27, 1868, fold. 8, box 39; August [n.d.], August 23, 1869, fold. 1, box 94; all in ECP. For a timeline of the Erie litigation, see American Law Review, October 1868. Barnard actually rebuked Rapallo at one point as he presented the motion to remove Drew; NYT, February 22, 1868.

  55 CFA, “A Chapter of Erie,” NAR, July 1869; Lane, 243.

  56 NYSAD 142, 92nd sess., 1869; NYTr, March 6, 1871.

  57 CV to JHB, February 1, 1868, CV-NYHS; CV to Andrew Johnson, February 6, 1868, in Paul H. Bergeron, ed., The Papers of Andrew Johnson, vol. 13, September 1867-March 1868 (Knoxville: University of Tennessee Press, 1996), 534–5; NYT, February 18, 22, 1868; S. H. Dubois to EC, March 7, 1868, fold. 8, box 39, ECP.

  58 CT, March 19, 1868; RT, March 21, 1868.

  59 NYT, March 4, April 24, 1868; NYSSD 52: Report of the Select Committee of the Senate, Appointed April 10, 1868, in Relation to Passage of Certain Railroad Bills (Albany: Argus Company, 1869), 1–6, 107; American Law Review, October 1868; NYH, April 9, 1868; Klein, 81–2.

  60 NYT, February 20, 1868. The wedding description is from the New York Mail in Flake's Bulletin, March 3, 1868.

  61 HG to Ellen Williams Vanderbilt, March 8, 1868, WFP.

  62 Ellen W. Vanderbilt to HG, March 19, 1868, reel 2, HGP.

  63 Ibid.

  64 Circular, February 17, 1868; NYT, February 17, March 17, 1868.

  65 NYH, March 7, 10, 25, 1868; American Law Review, October 1868.

  66 American Law Review, October 1868; NYH, March 12, 15, 25, April 3, 1868; NYT, March 12, 1868; NYSSD 52, 1–6. Those interested in the fine details of this tangle of legal actions, see John Steele Gordon, The Scarlet Woman of Wall Street: Jay Gould, Jim Fisk, Cornelius Vanderbilt, the Erie Railway Wars, and the Birth of Wall Street (New York: Weidenfeld & Nicolson, 1988), 164–73. Henry Clews reported the rumors about Vanderbilt forcing banks to lend, in Fifty Years in Wall Street (New York: Irving Publishing, 1908), 139, as did Croffut, 91.

  67 NYH, March 14, 15, 21, 1868; CT, March 24, 1868. Drew later testified that Field had advised the flight to New Jersey; NYT, November 30, 1869.

  68 CFA, “A Chapter of Erie.”

  69 HW, April 11, 1868.

  70 NYH, March 15, 1868.

  71 W. L. Garrison to Wife, May 24, 1871, William Lloyd Garrison Papers, Rare Books and Manuscripts Department, Boston Public Library.

  72 HW, October 16, 1869; NYH, March 15, 19, 1868; Klein, 80–3.

  73 NYH, March 16, 19, 20, 1868; CT, March 24, 25, 1868; Klein, 83.

  74 NYSSD 52, 11, 50, 111–2; NYH, March 21, 25, 1868; Klein, 84.

  75 Klein, 84.

  76 NYSSD 52, 1–11; NYH, April 2, 1868; NYT, April 2, 1868; William Cassidy to Samuel J. Tilden, April 6, 1868, fold. 6, box 6, Samuel J. Tilden Papers, NYPL.

  77 NYSSD 52, 9–11; Klein, 84–5.

  78 William Cassidy to Samuel J. Tilden, April 6, 1868, fold. 6, box 6, Samuel J. Tilden Papers, NYPL; Klein, 83; NYT, November 30, 1869, March 17, 1870.

  79 CT, April 29, 1868; HC, November 30, 1869; NYTr, April 27, 1868, in CT, April 30, 1868; NYT, March 17, 18, 1870. Drew testified, as reported in the NYT, November 30, 1869, that he intended to take CVs shares in order “to get control of the Erie Road—get these people out of it.”

  80 NYTr, April 27, 1868, in CT, April 30, 1868; NYT, April 28, 1868.

  81 The ensuing conversation is largely drawn from Gould and Fisk's testimony, NYT, March 16, 18, 19, 1870. Gordon, relying on Clews, claims that Fisk burst into CVs bedroom; the account I am citing, given by both Fisk and Gould under oath, shows CV called Fisk in.

  82 CT, January 1, 1873.

  83 NYT, March 16, 17, 18, 1870.

  84 Ibid.

  85 NYH, July 11, 1868, November 21, 30, 1869; BE, August 25, 1868; NYS, November 28, 1872; Klein, 85–6. A somewhat different version of this settlement would be laid out in an affidavit by Gould, NYH, December 1, 1868. However, since Gould was suing CV at the time, he oversimplified, and (not having been in on all the negotiations) he made errors. CVs court testimony on November 20, 1869, shows that his deal was technically with Drew, though the Erie paid most of the money; also, CV said he had sold the shares at 80, not 70 as Gould claimed. Drew's testimony, NYT, November 30, 1869, HC, November 30, 1869, tends to confirm CVs account. This is important, as will be seen, for CV later claimed that he had not sold his shares to the Erie, a claim that historians have scoffed at; see, for example, Klein, 91.

  86 RGD, NYC 374:10. As will be discussed later, estimates of CVs wealth can be no better than guesses, often wild ones.

  87 Foner, 333–6.

  88 RT, April 25, 1868; HsR 57, 40th Cong., 2nd sess., vol. 2.

  89 Nation, June 25, 1868.

  90 Round Table, April 4, 1868; MM, April 1868; NYT, April 4, 1868. A fine explanation of the divided public opinion appears in the Nation, March 26, 1868.

/>   91 On the writing and importance of this essay (for which Adams was only paid $150), see Edward Chase Kirkland, Charles Francis Adams, Jr., 1835–1915: The Patrician at Bay (Cambridge, Mass.: Harvard University Press, 1965), 40–1, 77.

  92 CFA, “A Chapter of Erie.” For two excellent accounts of the “liberals,” as the Adams brothers and their cohorts came to be called, see John G. Sproat, “The Best Men”: Liberal Reformers in the Gilded Age (New York: Oxford University Press, 1968), and Thomas K. McGraw, Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn (Cambridge, Mass.: Belknap Press, 1984). The liberal reformers will be discussed further later in the text.

  93 Letter to the JoC, in NYT, March 6, 1868.

  94 Mandelbaum, 58; Testimony Taken Before the Special Committee of the Assembly… in the Matter of the Erie Railway Investigation (1873), 764, Erie Railway Company Collection, Baker Library, Harvard Business School. For an important article on railroads and corruption, see Richard White, “Information, Markets, and Corruption: Transcontinental Railroads in the Gilded Age,” JEH 90, no. 1 (June 2003): 19–43. White's discussion, while perceptive, treats the corruption of financial information as a new phenomenon of the Gilded Age, whereas it arose as early as corporations themselves; this book has shown examples as early as the 1830s. Nor is it generally true that “profit came less from selling goods and services than from financial maneuvering involving the securities of the firms;” CV's railroads paid 8 percent annual dividends on a stock capitalization that eventually amounted to roughly $100 million. The use of shell companies in the transcontinentals, seen in Crédit Mobilier, was pioneered by the Pennsylvania Railroad; and, as Mark Wahlgren Summers points out in The Era of Good Stealings (New York: Oxford University Press, 1993), 46–54, Crédit Mobilier provided Union Pacific with a necessary means of financing itself, as Congress unrealistically prohibited it from selling its securities below par.

  95 NYSSD 52, 1–11.

  96 Francis Gerry Fairfield, The Clubs of New York (New York: Henry L. HINTON, 1873), 138–44. It was reported that Tweed and his ally Peter Sweeney were blackballed when they applied to become members of the Manhattan Club; NYT, October 16, 1869.