The First Tycoon

by T. J. Stiles

  No, he did not. Keep coldly told Banker “that he would have revenge against Mr. Vanderbilt if it cost him half he was worth.”76

  SARATOGA, WROTE A CORRESPONDENT for the New York Tribune, was a place of “huge dining halls with long walls of staring white… ball-rooms with the same shadowless surfaces, with blinding glare of gas, and stifling atmosphere of odors.” The writer thought the only remnant of the elegant Saratoga of old to be the aristocratic Cubans who flocked to the Springs each summer. The rest were vulgar climbers. “From 8 o'clock till 11 there streams into the dining room a constant procession of over-dressed women, of flippant and loud-tongued men,” the reporter continued.

  These fashionable young ladies audibly comment on the costumes of their neighbors, audibly snicker—I beg pardon of a polite world, but it is exactly what they do—at a toilet a little less fashionable, at a complexion a little less fair, at manners a little more rustic than their own. They paint and powder to a degree which arouses in one a desperate longing to get all of them under a pump.77

  How like the reporting of the 1830s and ′40s this was. Saratoga had been the scene of social climbing since the collapse of the hierarchical culture of deference. The ladies' snickers were a testament to the triumph of democracy—for without inherited distinctions, social rank had become a battefield. Yet it was also true that, after the Civil War, a new elite was surpassing the old patricians in riches and in extravagance, and that Saratoga no longer remained the sole summer center of fashion. As the New York Herald had observed in 1865, “Newport seems to have become by common consent the watering place par excellence; and there wealth, fashion, rank, and beauty… have formed a colony, and consider it their summer home.” In May 1866, in a symbolic bit of destruction, fire destroyed Saratoga's far-famed Congress Hall hotel, built in 1812.78

  But the Congress Hall would rise again, for Saratoga had not yet lost its supremacy as the nation's premier summer resort. Vanderbilt returned in 1866, as he had for at least three decades. This year, Saratoga chattered about his latest purchase, a six-year-old trotter named Mountain Boy. “I thought him the best horse of his age I ever saw,” Vanderbilt later wrote, worthy of his estimated price of $14,000.79

  And Saratoga remained Wall Street's favorite haunt. “At other watering places, they talked stocks; at Saratoga they bought and sold them,” William Fowler wrote in 1870. “Little knots of dealers stood in the piazzas of the United States Hotel, the Union, and the Congress, and traded in Erie and Harlem. The great pulsations of the heart-financial, 180 miles away, throbbed here through the telegraphic wires.”80 In the summer of 1866, these clusters of brokers murmured stories that the Commodore's and Richmond's enemies had formed a coalition to take control of the New York Central Railroad at the December election.

  The first element in this alliance was Corning, who wished to return to power in the railroad he had helped create. The second element was American Express, as embodied by William G. Fargo, the Buffalo businessman who had founded it (in addition to Wells, Fargo & Co.). Express companies had existed for decades, carrying expensive, high-priority items—especially money, for this was an economy that relied heavily on cash. They paid railroads rent to allow their messengers and safes to travel in the baggage cars of trains, though they often secured their routes by giving railway presidents shares in their companies—shares that were not publicly traded and paid double-digit dividends. Vanderbilt, impervious to this bribery, squeezed them to pay more to the Harlem and the Hudson River. “The directors of the [American], Adams Co. & United States [express companies] held a meeting to devise some means to break down the present prices charged by Vanderbilt & Co.,” John M. Davidson reported to Corning on June 19. “The whole thing may end in smoke, but at present it looks like a fight.” Already Fargo, on behalf of American Express, was buying Central shares in preparation for the December coup.81

  So was Henry Keep, the third and most important party in the plot against Richmond and Vanderbilt. Keep, who turned forty-eight on June 22, was a powerful, if silent, figure on Wall Street. Orphaned at the age of twelve, he had served as an apprentice to a Joseph Grimmonds in Adams, New York, near Lake Ontario and the Canadian border. After five years, Keep ran away; Grimmonds posted a notice in the local newspaper, announcing, “All persons are forbid trusting him.” He became a teamster on the Erie Canal, then began to buy and sell bank notes and bills of exchange, and finally became a banker. He forged a connection with LeGrand Lockwood of the banking and brokerage firm Lockwood & Co., and together they manipulated the stock of the Michigan Southern & Northern Indiana, one of the Central's links to Chicago. Thickset with a thick beard, Keep rather resembled General Grant, not only in appearance but in his taciturn manner as well. As Fowler wrote, Keep kept “an open countenance but thoughts concealed, a still tongue but a busy brain.”82

  Keep served as leader of the alliance. He was a past master of stock market battles; more than that, he had a personal vendetta against the Commodore, whom he saw as the real power behind Richmond. Keep, too, traveled to Saratoga that summer, and though he famously kept his mouth shut, word of his plot found its way to the ears of John Morrissey The prizefighter operated a kind of clearinghouse for “points” (as stock tips were called) in his Saratoga gambling saloon. “He (M) told us last night Keep and his party had control of all the Central stock here & they had arranged to carry it,” wrote G. C. Davidson, brother of John, “and [Keep had] gone to Europe to be gone till the Fall. He says they are in earnest and want to out the present directors.”83 Translated from Wall Street jargon, this meant that Keep and his allies had bought a majority of the shares and proxies held in New York, and had done so on credit. (To “carry” a stock was to hold it on margin.) Keep sailed for Europe to deceive Richmond and Vanderbilt as well as to buy up proxies for shares held in London.84

  Keep did not fool the Commodore, but Vanderbilt responded in two starkly different ways. As a private investor, he limited his personal exposure. “I said, ‘I will not own any of this property where it is owned by such a set of men,’” he later testified. “I sold out.” On July 30, after the payment of dividends, he sold all of his 6,500 Central shares. As a railroad president, on the other hand, he behaved as if it were irrelevant who ruled the Central. As he often said, “I think the Hudson River Road can take care of itself.” Perhaps he thought that Richmond might survive after all. But he did not.85

  “The announcement of the death of Dean Richmond creates a profound sensation in this city,” wrote an Albany correspondent for the New York Times on August 27. The railroad president, so long a titan in New York business and politics, had fallen ill at the Manhattan home of lawyer Samuel J. Tilden, and unexpectedly died. “He was sometimes abrupt in his manners,” the New York Central directors declared in their official tribute, but “he never betrayed a confidence reposed in him and never practised deception.”86 Those qualities explain why he and Vanderbilt liked each other so much.

  Richmond's plan to lease the Hudson River and Harlem railroads died with him. In London, Keep received letters from his partners, warning “that there was great danger that the roads would be consolidated,” as he recalled. With his encouragement, the pool secured an injunction that prohibited any lease. But Richmond's demise created a power vacuum on the Central's board that Vanderbilt exploited.87

  On October 18, William traveled to Albany to see the Central board “on matters of general business,” as he later said, and fell into a discussion over how the two sides could settle their problems. William wanted the Hudson River to have the Central's freight business all year round; the Central directors wanted to use the People's Line and set through rates as before. “It was urged that I should name a price—so much money” as compensation, William said. He had not been charged with the task of settling this great question; considering his father's temper—and need for control—he might well have begged off. But he did not. “I will take it upon myself to do it for $100,000 for a year,” William replied. A
s he recalled, “Two or three gentlemen jumped up from the table and said we will do that.”88

  William's offer was an act of confidence in his authority as his father's agent, and he was soon punished for it. “There has never been any one act in my life that has so much met the disapprobation of Cornelius Vanderbilt as that act,” William recounted. “He said the privileges I had granted was worth a half million of dollars a year to the Central R.R. Co.” Considering the Commodore's past “disapprobation,” this was saying a great deal. But Vanderbilt also accepted his son's power to act in this matter. Indeed, this negotiation reveals the maturation of their relationship.

  “The $100,000 was a mere bagatelle,” Vanderbilt remarked. “I did not care anything about it.” The specific amount paid “should not be a subject of any difference between the two companies if we can only have some understanding among ourselves hereafter.” But perhaps he went too far in making his point: he clearly wanted the maximum compensation possible for allowing the Central to treat the Hudson River Railroad as an extension of itself. Vanderbilt's company had numerous costs that he wished to shift, from the use of its engines and cars over the Central's tracks to the steep terminal expenses in Manhattan.

  Eager to appease the Commodore, the rudderless Central board named a committee to balance the companies' accounts. The committee consisted of James Banker. He took the Central's treasurer, Edwin D. Worcester, to the Hudson River office on Thirtieth Street to see Vanderbilt. At the meeting, Worcester expected the Hudson River to pay the $97,000 it owed the Central for westbound freight. But the Commodore believed that the Central owed the Hudson River money, so he insisted on arbitrary deductions until the $97,000 debt disappeared. “I objected,” Worcester recalled, “to which Mr. Vanderbilt said it did not make any difference at what rate they were put in.”

  “I said, ‘Damn the thing, I don't care anything about it,’” Vanderbilt recalled. “That is the way I did, and that is the way I generally do.” The whole thing was, he frankly admitted, “a kind of ‘jumped’ settlement.” He and the Central directors had fixed a payment, so they fiddled with the accounts until the books absorbed the agreed-upon amounts. However, none of this was what the Vanderbilts wanted. “We would a great deal rather do the business, than to get the money and not do the business,” William said. But at least the $100,000 and the other “jumped” amounts offered some compensation, and established the principle that they could not be taken for granted.89

  But soon the Central would have a new president, one who would throw this hard-won compromise into chaos and replace respect with disdain. In November, Keep returned from Europe “with his coat-pockets full of London proxies,” the New York Times reported.90 He promptly called on Vanderbilt. Keep informed him that he and his allies would take control of the board in December, and he planned to assume the presidency. He had no intention of paying $100,000 to the Hudson River for nothing, as he saw it, and would only prorate passenger fares and freight charges.

  “You may break if you please, but I will not do your work,” Vanderbilt warned.

  “We can live without the Hudson River Railroad,” Keep replied. “We do not want the Hudson River Railroad.”

  After the struggles of the previous two years, Vanderbilt scorned this arrogance. “Mr. Keep, I do not care one rush who is elected President of the N.Y. Central road. There is one thing I do know, there is no party of men in the world who can manage its affairs more prejudicially to our interests than the last board of directors.”91

  Vanderbilt was wrong. Things were going to get much worse.

  AS THIS BUSINESS INTRIGUE played out after the death of Dean Richmond, Vanderbilt spent an evening on politics. On August 29, he attended a dinner for President Andrew Johnson at Delmonico's on Fourteenth Street, thrown by the great capitalists of New York. Among those invited were Charles Morgan, Cornelius Garrison, August Belmont, and Peter Cooper, as well as Vanderbilt's circle of subordinates and sons-in-law—James Banker, Horace Clark, Augustus Schell, Daniel Allen, Frank Work, and Richard Schell—and William Vanderbilt.92

  The dinner was billed not as a political event, but as an appropriate gesture to honor the president. In truth, politics suffused the evening. Johnson visited New York as part of his “swing around the circle,” a speaking campaign designed to undermine congressional Republicans. He had broken with them in the spring in a fierce fight over the status of emancipated slaves and the nature of Reconstruction. Johnson, a longtime Democrat and a Southerner himself, had vetoed first an extension of the Freedmen's Bureau, and next a civil rights bill, which extended citizenship and some basic rights (but not the vote) to the freed people. Johnson argued that the latter bill would somehow discriminate against whites. In the face of rising violence across the South against blacks, however, his veto strengthened the radicals, who marshaled moderates to override it and pass the landmark Civil Rights Act of 1866. Johnson now launched an unprecedented effort to defeat the Republicans in the midterm elections.93

  Vanderbilt most likely did not care much about the politics involved. He should have, though, because the dinner was a sign of how the political world was rotating beneath his feet. He still believed in the Jacksonian principles that he had embraced in the 1830s, in his battles on the Hudson and Long Island Sound: free competition, laissez-faire, limited government. In his youth, these beliefs were found on the radical side of the political spectrum. But the Civil War and its aftermath had put in motion a process that broke down this matrix. The federal government had taken on power to a previously unthinkable degree to defeat the rebellion. Then, in the turmoil and confusion of the postwar South, Congress found itself forced to intervene at the local level—the individual level—in ways that fell far outside the American political tradition. Before the war, the federal government had not reached down very far (except in the territories); it had delivered the mail, inspected steam engines, and helped to capture runaway slaves, but not much else. Now it taxed individuals, extended aid to freed people, defined citizenship, specified rights, prescribed penalties for violating those rights, and soon would impose direct military administration of most of the South. In this crisis, Americans awoke to the power of the central government.

  The way was opening for a new political paradigm, in which those on the radical side would embrace government action to defend equality. At the moment, though, the older schools of politics remained alive. Most Republicans, in keeping with antebellum “free labor” ideology championed “the small-scale competitive capitalism” (to use historian Eric Foner's words) that still defined life in the North. They saw the individual as the primary actor in an economy of farms, workshops, and small mercantile houses. But their philosophy could not account for changes sweeping the nation. For example, the union movement—bolstered by rising numbers of wage workers in big companies such as railroads—staged a convention in Baltimore that left orthodox thinkers scratching their heads. “The tendency of the assembly… is to the recognition and indeed creation of a special class known as working men,” Harper's Weekly wrote. “Is such a tendency in this country wise, or is it even practicable?”94 It was inevitable. The unionists looked to government for help, calling for legal limits on the working day. It would not be long before farmers followed their example. Vanderbilt's laissez-faire principles were becoming conservative without changing at all.

  Personal and business matters kept him busy through the fall. On October 6, Sophia and grandson William K. Vanderbilt set sail for Europe. On October 8, the Commodore convinced Trinity Church to sell St. John's Park to the Hudson River Railroad. Once an elegant quadrangle of townhouses surrounding a gated park, dominated by St. John's Chapel at one end, it had been the model for Gramercy Park and the final home of Thomas Gibbons. It had fallen into decay, however, and offered a large, open space in lower Manhattan, close to the docks. As early as 1859, the railroad's management had eyed it as a location for a freight depot. Vanderbilt agreed to pay $1 million on behalf of the company—$400,000
going to the church, the rest to the lot owners.95

  Vanderbilt attended to his affairs in an office at 25 West Fourth Street, near Greene Street, adjacent to his stables in the rear of his Washington Place lot. After so many years on Bowling Green, he finally had relinquished his desk there. “He comes in about nine o'clock,” the Boston Journal wrote. “A digest of letters and papers is laid before him on a prepared sheet. Running his eye over the list, he dots down yes and no, and gives some brief direction to each.” Always puffing on a cigar, he moved around his office in a light linen coat and carpet slippers. Wardell kept a desk in the outer chamber, the walls covered with railroad maps and photographs of Vanderbilt's steamships and railway depots. The Commodore's room was in the back. “Through his rear window could be continually heard the chafing of his thoroughbreds, eager for the five o'clock drive which the indefatigable old gentleman gives them every afternoon,” a reporter for the New York Herald observed. After finishing whatever Wardell had prepared for his review, the Journal added, “he then goes out with some confidential friend to attend to what he calls business, which consists of going out to his stables and minutely examining his horses. After this he holds a levee [reception] in his office, and rides up to the Harlem and Hudson railroad.”96

  Famous for his expensive horses and his frugality in all other areas, Vanderbilt proved more generous than his reputation would suggest. In June, he had agreed to serve as a trustee of Horace Greeley's pet charity, the American Institute; in December, he served as a reference for the artist who had designed his congressional gold medal. But he cared little about whether he was seen as a public benefactor. “He does not go much to churches, and no one ever sees his name on a subscription paper, or ever will,” the Herald later noted. “In his charities, which are numerous and liberal, he exhibits the reticence which marks his conduct as a man of business. He despises cant and humbug and pretentious show.”97 It was hard to imagine Vanderbilt ostentatiously putting his name on an institution of higher learning, as Daniel Drew did with a seminary*