by H. W. Brands
One person, strikingly, who didn’t hold Gould’s actions against him was James Fisk. Whether because he understood the inescapable uncertainties of speculation or because Gould quietly compensated him for his losses, the impresario of Wall Street adopted a phlegmatic view of the affair and its denouement. “It was each man drag out his own corpse,” he said.43
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SURVIVORS AND OTHER witnesses searched for meaning in the scandal. Congressman James A. Garfield, writing for the majority of the House Committee on Banking and Currency, which investigated the affair at length, expressed shock at what Gould and Fisk had nearly accomplished. “The whole gold movement is not an unworthy copy of that great conspiracy to lay Rome in ashes and deluge its streets in blood, for the purpose of those who were to apply the torch and wield the dagger,” the Ohio Republican said. Calming himself somewhat, Garfield added:
But however strongly we may condemn the conspirators themselves, we cannot lose sight of those causes which lie behind the actors and spring from our financial condition. The conspiracy and its baneful consequences must be set down as one of the items in the great bill of costs which the nation is paying for the support of its present financial machinery. For all purposes of internal trade, gold is not money, but an article of merchandise; but for all purposes of foreign commerce it is our only currency.
So long as we have two standards of value recognized by law, which may be made to vary in respect to each other by artificial means, so long will speculation in the price of gold offer temptations too great to be resisted, and so long may capital continue to be diverted from enterprises which add to the national wealth, and be used in this reckless gambling which ruins the great majority of those who engage in it, and endangers the business of the whole country.44
Henry Adams drew a different lesson. Adams mined the Garfield committee’s report and produced an interpretive summary entitled “The New York Gold Conspiracy.” He liked his article immensely. “It was the best piece of work he had done,” he declared. Yet Adams decided against publishing it in the North American Review or any other American quarterly. The American press had reported the Erie War and the attempted gold corner in great detail, and Adams wanted his masterpiece to be appreciated by unjaded eyes. “London was a sensitive spot for the Erie management,” he explained, “and it was thought well to strike them there, where they were socially and financially exposed.” Adams on this point was being naive or disingenuous. Gould and Fisk, social pariahs in America, hardly feared the censure of Britain’s respectable classes, and though English money underwrote many American railroads, including the Erie, Gould and Fisk never had more trouble fleecing English investors than those of any other nationality. Adams’s subsidiary explanation for seeking a British outlet for his gold-conspiracy article was more to the point. “Any expression about America in an English review attracted ten times the attention in America that the same article would attract in the North American. Habitually the American dailies reprinted such articles in full. Adams wanted to escape the terrors of copyright; his highest ambition was to be pirated and advertised free of charge, since, in any case, his pay was nothing.”45
The piece, which appeared in the Westminster Review in 1870, recounted the conspiracy as revealed by the congressional committee and interpreted by Adams. He didn’t hesitate to impeach the witnesses, including the principals. Of a long and intricate explanation by Fisk of a critical meeting among the conspirators, Adams remarked, “There is every reason to believe that there is not a word of truth in the story from beginning to end. No such interview ever occurred, except in the unconfined apartments of Mr. Fisk’s imagination.” Nor did Adams hesitate to render his judgment of the whole affair.
The fate of the conspirators was not severe. Mr. Corbin went to Washington, where he was snubbed by the President, and at once disappeared from public view, only coming to light again before the Congressional Committee. General Butterfield, whose share in the transaction is least understood, was permitted to resign his office without an investigation. Speculation for the next six months was at an end. Every person involved in the affair seemed to have lost money, and dozens of brokers were swept from the street. But Mr. Jay Gould and Mr. James Fisk, Jr., continued to reign over Erie, and no one can say that their power or their credit was sensibly diminished by a shock which for the time prostrated all the interests of the country.
Yet the experience hadn’t been all for the bad. Quite the contrary, Adams said. “The result of this convulsion itself has been in the main good. It indicates the approaching end of a troubled time. Messrs. Gould and Fisk will at last be obliged to yield to the force of moral and economical laws.”
Adams wasn’t so sanguine about the corporations Gould, Fisk, and the other capitalists directed. The Erie War and the gold conspiracy were evil omens for democracy.
For the first time since the creation of these enormous corporate bodies, one of them has shown its power for mischief, and has proved itself able to override and trample on law, custom, decency, and every restraint known to society, without scruple, and as yet without check. The belief is common in America that the day is at hand when corporations far greater than the Erie—swaying power such as has never in the world’s history been trusted in the hands of mere private citizens, controlled by single men like Vanderbilt, or by combinations of men like Fisk, Gould, and Lane [Frederick Lane, counsel to Fisk and Gould on the Erie], after having created a system of quiet but irresistible corruption—will ultimately succeed in directing government itself. Under the American form of society, there is now no authority capable of effective resistance.46
Chapter 2
ONE NATION UNDER RAILS
The same year—1869—that produced the climax of the Erie War and the weaving and unraveling of the gold conspiracy also witnessed a landmark accomplishment of American capitalism: the completion of the country’s first transcontinental railroad. Participants and observers feted the Pacific railroad as a giant step in the march of technology. And so it was. Yet the techniques employed by the builders of the road were at least as important as the technology. Some of the techniques reflected improvements in the craft of construction: clever solutions devised by foremen and crews to deal with the unaccustomed challenges of distance, terrain, and weather in the West. But the really vital techniques involved the manner in which the Pacific railroad was financed—in particular, the way in which the capitalists commanding the road recruited the institutions of government to share the risk and costs of construction.
The dream of a Pacific railroad was almost as old as railroads in America. In 1832 a committee of citizens in Dunkirk, New York, agitated for the inclusion of their town on the route of a proposed railroad from the Hudson River to Lake Erie, on grounds that such a road “would be a strong and powerful link in a Railway to the valley of the Mississippi, and finally to the Pacific Ocean.” Only a few weeks later a territorial newspaper in Michigan avowed a desire on behalf of all forward-thinking Americans “to unite our Eastern and Western shores firmly together … to unite New-York and the Oregon by a railway by which the traveller leaving the city of New-York shall, at the moderate pace of ten miles an hour, place himself in a port right on the shores of the Pacific.”1
Serious consideration of a railroad to the Pacific awaited actual possession by the United States of Pacific frontage. Acquisition of title to Oregon in 1846 afforded the prospect of a seaport on the Columbia, linked to the East by rail. The annexation of California in 1848, at the end of the war with Mexico, shifted the attention of the transcontinentalists south to San Francisco and its incomparable bay. But it was the gold rush of 1849 and after that made a rail line to the Pacific appear both necessary and possible. The necessity was more than obvious to the hundreds of thousands of emigrants who walked from the Missouri to the gold fields and didn’t want to have to walk back. The possibility reflected the likelihood that California, suddenly teeming with people, would generate enough traffic to pay
for a Pacific railroad.
Yet even if it did, the payback would require decades, given the tremendous cost of construction across many hundreds of miles of desert and mountains uninhabited by potential customers. (Indigenous peoples didn’t count, except as a likely expense.) In the East, rail lines traversed districts blanketed by farms and villages; the whole length of a line produced business for a road. In the West, a transcontinental line would have to support itself by the terminus-to-terminus, end-to-end traffic.
It would, that is, unless the government could be persuaded to share the cost. Government participation in “internal improvements” had a long history in America, but it had often been controversial. Counties built roads and bridges, and states pitched in, but when the roads crossed state lines and advocates argued for federal funding, strict constructionists demurred. Andrew Jackson’s first veto was of a bill to fund the Maysville road to Kentucky. Old Hickory objected not to the road, merely to the federal funding. Jackson’s opponents coalesced in the Whig party, which advocated internal improvements till it split over slavery. At that point a Pacific railroad became a pet project for elements of both the Democrats and the newly forming Republicans. Democrat Stephen A. Douglas of Illinois guessed that a Pacific road was coming, and he determined that its eastern anchor be Chicago, where he had friends and property. But the region west of the Missouri and east of the Sierra Nevada had yet to be organized politically, and investors required at least that modicum of protection before they’d sink their money in something as risky as a long-haul rail line. Douglas solved the organizational problem by guiding the Kansas-Nebraska Act through Congress. He conceded that his bill would “raise a hell of a storm,” in that it required addressing the explosive topic of slavery in the territories, but he thought the benefit—to the country, to his party, to himself—worth the turbulence. In the event, the Douglas measure raised far more than a storm, triggering a guerrilla war in “bleeding Kansas.”2
Among the Republicans, support for a Pacific railroad fitted a general belief that government could benefit the American people by helping American business. The railroad won a place on the Republican platform in 1856, when the presidential nominee was John C. Frémont, who had personally reconnoitered potential railroad routes, and again in 1860, when the party put forward railroad attorney Abraham Lincoln. Southern secession after Lincoln’s victory gave the Republicans a new reason for sponsoring a railroad to California. Despite having entered the Union as a free state in 1850, California was predominantly Democratic and strongly sympathetic to the South; upon Southern secession, many Californians spoke of leaving the Union themselves—if not to join the Confederacy, at least to adopt a stance of pro-Confederate independence. Lincoln opposed secession of any sort, but the thought of losing California’s gold made him even less likely to tolerate a western split. He had no troops to spare to hold California in the Union, but he had something more effective: the promise of a railroad. Californians’ brave talk of self-sufficiency suddenly ceased when they heard the Republican offer; all they could think of was getting back home—to the civilized parts of the United States—in days rather than weeks or months.3
Converting the Republican promise of a Pacific railroad into legislation to fund construction required the concerted efforts of small armies of lobbyists, who spent more time fighting one another than persuading skeptics. The California crowd was led by Leland Stanford, an unlikely railroad mogul and a hardly more probable entrepreneur. A New Yorker by birth, Stanford was practicing law in Wisconsin when the discovery of gold in California lured his several brothers west. Leland resisted the temptation, preferring the steady income of the bar to the potentially larger but far less certain payoff of the mines. And when the brothers wrote home that mining wasn’t all they had hoped, he congratulated himself on his conservatism and looked forward to a career in the law. But then his law office burned down, claiming his books and his records. The same fire destroyed the businesses of his best clients, leaving Stanford to wonder whether he could reconstitute his practice and to revise his estimates of the risks and rewards of life. By now his brothers had given up on mining, in favor of the dry-goods trade. They were doing a brisk business, they explained, and could use another partner. Leland would be most welcome.4
He decided to take the chance, arriving in San Francisco via Nicaragua in the summer of 1852. He opened a branch of the brothers’ business at Cold Springs, not far from Coloma, the site of the original 1848 gold discovery. Stanford’s store did well till the gold ran out at Cold Springs and his customers decamped for newer, richer claims. He followed them to Michigan Bluff, where he made more money and some friends who elected him justice of the peace. His courtroom was the local saloon; verdicts were delivered over shots of whiskey. He might have remained at Michigan Bluff, but he missed his wife, who had refused to come west to live in a raucous, rowdy mining camp. She held out till he promised to move to less boisterous Sacramento, where he built a general merchandise emporium.
In Sacramento he also joined the Republican party. For national Republicans opposition to slavery was the primary issue and a Pacific railroad a secondary concern. For California Republicans the issues were reversed. Slavery was distant, while a railroad was immediate, or would be if the federal government cooperated. A railroad would benefit all Californians but especially California’s capitalists. Shipments from the East would be cheaper and more reliable; in a broader sense a railroad would spur the growth of California’s population and hence of California’s business activity.
The California Republicans were a lonely bunch at first. “In Sacramento, where I resided, the party at its inception was extremely limited in numbers,” Cornelius Cole remembered. “No record, I venture to say, can be found of a political organization starting out with fewer adherents. There were C. P. Huntington, Mark Hopkins, Leland Stanford, Edwin B. and Charles Crocker, all personal as well as political friends of mine. There were not for some time, besides these, as many as could be counted on one’s fingers.” The hardy band endured the taunts of their neighbors. “The convention of nigger worshippers assembled yesterday in this city,” the Sacramento State Journal declared during a meeting of the Republicans. And it survived a disastrous attempt by Stanford in 1859 to win the governorship of the state (he received but 10 percent of the vote). Yet after Lincoln won the presidency the following year, and after Southern secession made the Republicans the dominant party in Congress, the California Republicans prepared to claim the reward for their years in the wilderness.5
By this time three of Stanford’s fellow Republicans from Sacramento were also his partners in a railroad venture. Charles Crocker was a blacksmith turned merchant; Collis Huntington was a former peddler who had settled down in hardware; Mark Hopkins was Huntington’s associate. As the possibility that the federal government might actually build a Pacific railroad came into view, the four organized the Central Pacific Railway Company. In 1861 Stanford traveled to Washington to represent the company—and California Republicans—to the Lincoln administration. Theodore Judah, a railroad visionary long dismissed as a crank, followed Stanford to Washington to work on Congress.
Judah’s methods comported with the practice of the times. One of his suitcases bulged with shares of the Central Pacific; his instructions from Stanford and the others were to employ the shares in whatever manner they might be of use. How thoroughly Judah spread the wealth became a matter of dispute. Stanford recalled that he and his partners had given Judah $100,000 in stock to take east. “I think, however, that he brought most of it back,” Stanford added vaguely.6
While Judah was doing his part for Stanford and the Californians, other agents were busy on behalf of other hopefuls. The Pacific railroad would be built from both ends toward the middle; the eastern counterpart to Stanford’s Central Pacific turned out to be a group calling itself the Union Pacific and headed by Thomas Durant, a former ophthalmologist lately linked to the Mississippi & Missouri Railroad. Durant’s backer
s included Senator James Harlan of Iowa, a close friend of Lincoln (whose old employer, the Rock Island line, had spawned the Mississippi & Missouri).
Securing a majority for the Pacific railroad wasn’t easy. Judah described a “determined and bitter warfare” in Congress. “Pamphlets were written and laid on the desks of members and Senators, absurd statements with regard to bribery, fraud, etc., were freely circulated, and every effort made to poison the minds of members against the bill.” To counteract the poison, Judah and the other supporters of the railroad made a simple, straightforward argument: that without federal funding the road simply wouldn’t be built. Private capital markets couldn’t attract investors willing to hazard such large sums (tens of millions of dollars, at least) on such a distant payoff (at least a decade away). Complementing this bottom-line negativity was patriotic positivism: a Pacific railroad was necessary to the security of the Union and would redound to the benefit of the nation as a whole. It was a sound investment in the nation’s future and therefore deserved national support. If the defenders of states’ rights hadn’t silenced themselves by seceding, the new anti-Jacksonians might have added that federal funding of the Pacific railroad didn’t overly intrude on state prerogatives, as the great majority of the track mileage would be built on federal land.7
Eventually the arguments—and the bribes, which were even more lavish on the part of the Durant group than on that of Stanford—carried Congress. The Pacific Railway Act of 1862 authorized the construction of a single line from the Missouri River to California. Stanford’s Central Pacific would build east, Durant’s Union Pacific west. The federal government would subsidize the project with loans and grants of land. The loans were thirty-year first-mortgage bonds at 6 percent interest, in amounts that varied according to the difficulty of construction. For each easy mile at the eastern and western ends of the road, the companies would receive bonds worth $16,000. For construction on the High Plains, the Union Pacific would receive $32,000 per mile. For crossing the Sierra Nevada, the Central Pacific would get $48,000 per mile. The Union Pacific would receive the same for the steep pitches in the Rocky Mountains. In addition to the bonds, the companies would receive ten square miles (6,400 acres) of land for each mile of road constructed. The land would lie in alternating sections along the right of way.
