The First Tycoon

by T. J. Stiles

  Vanderbilt's final illness began in May 1876, and he remained bedridden until his death on January 4, 1877. Though he was in agony for much of this period, his mind remained clear until very near the end. Here crowds are shown outside his double-wide house between Mercer and Greene streets, at 10 Washington Place, after word of his death. Library of Congress

  Friends, family, and dignitaries crowded the Church of the Strangers on Mercer Street for Vanderbilt's funeral. Vanderbilt had purchased the church for Rev. Charles F. Deems, who ministered to fellow Southerners, or “strangers,” in New York, including Frank Vanderbilt and her mother. Vanderbilt gave it to Deems partly out of his desire to bring North and South together after the Civil War. Library of Congress

  Vanderbilt was buried in the family vault in the Moravian Cemetery on Staten Island. Years after his death, he would be reinterred in a lavish tomb constructed by William H. Vanderbilt, still in existence in the same cemetery. Library of Congress

  Vanderbilt's daughter Mary sued to break his will, which left an estimated $95 million to William. This illustration shows Vanderbilt's personal doctor, Jared Linsly, testifying on the first day of the trial, which lasted more than two years. As soon as William settled the suit, he sold a controlling stake in the New York Central to a syndicate organized by J. P. Morgan and constructed an enormous mansion on Fifth Avenue, initiating the Vanderbilt family's Gilded Age extravagance. Library of Congress

  This was the world that Vanderbilt made: New York City a few years after his death, when more than a million people crowded onto Manhattan. Described as an “overgrown seaport village” when he was a young man, it grew into the commercial and financial capital of North America, home to the greatest riches (and most desperate poverty) in the United States—a transformation that Vanderbilt helped lead. Library of Congress

  Given Boody's eruption, it is curious to note that just prior to the meeting he had taken William aside and told him that he and Baxter both desired a settlement. It gave William some hope. He urged the board to confer with him and Schell in New York by January 14, after which their power to negotiate would expire. They left.102

  In New York, William reported what had transpired, still optimistic that the negotiations would resume when the Central board came to New York. “They are humbugging you,” the Commodore replied. “I'll tell you my opinion; when they come [to New York], they will keep away, they will never come nigh you. They are going to fool you and draw you along in this controversy through the winter, until spring comes and the river opens, and then they will tell you to go to the devil; that is their policy.”

  Vanderbilt was being bullied, and he didn't like it. But he had one great advantage. It was deep winter, and the river was frozen. He proposed that they use their ultimate weapon: to break off all connections with the New York Central. “They do not think that we dare break with them, but they will find themselves mistaken for once,” he told his men. “We may as well break with those people tomorrow as at any time. I don't want to take two, three, or four days to do a thing that we can do in one.”

  “Don't do that,” William replied. “Let it be. They will be here and we will have a meeting on Monday,” January 14.

  “Very well,” Vanderbilt answered. “We will give them till that time, but they will not come.”103

  They never came. Late on January 14, the boards of both the Hudson River and the Harlem railroads voted to suspend relations with the New York Central as of January 18. No tickets or freight would be accepted from it; no trains would cross the Albany bridge. (Vanderbilt's lines would halt their own trains on the east side of the Hudson River.) “It would have this effect,” William testified. “It would put the NY. Central road in a position that she could not go before the public and say she was a grand trunk line between New York and Buffalo.” For the Central, it was apocalyptic.104

  Notice of the impending break reached the Central directors on January 15. They immediately asked for the meeting that they had previously scorned. Now it was the Commodore's turn to display indifference. “I did not have the time,” he blithely explained. “Life is not a bit too long for me, and I like to play whist; and I will not permit any business to come in and interfere with that.”

  As Vanderbilt enjoyed himself in the card rooms of the Manhattan Club, a howling blizzard swept down on the state. The heaviest snowfall in a decade piled up in enormous drifts; temperatures plunged below zero. “The present winter is to pass into the annals of the ‘extraordinary’” the Albany Evening Journal remarked on January 18. Passengers were forced to trudge across the ice at Albany, or hire sleighs to carry them and their baggage over, in order to buy tickets directly from the respective lines. Freight from the west piled up at the Central's terminus. Shippers turned to the Erie and the Pennsylvania, but those lines had to use ferries to cross the Hudson into Manhattan, and the severe weather made this connection intermittent. In a season and an age when everything depended on the railroad, Vanderbilt had not only cut the Central off from New York, he had cut off New York from the country105

  It was a shocking example of a private company's power over the city, if not the nation itself. Vanderbilt, the Brooklyn Eagle wrote, “was placing the metropolis in a state of strict blockade, and cutting off its supplies.… We can imagine no act more criminal than this or more deserving of exemplary punishment.” The New York Herald said, “Railroad corporations, whether ruled by boards or held within the grasp of a single individual, should not forget that they owe some consideration to the people who grant them special and valuable privileges, and to whose patronage and support they are indebted for their success.” In the state senate, Henry C. Murphy of Brooklyn offered a bill to require connecting lines to carry through passengers and freight without breaking bulk, and to refer all disputes to the state engineer for arbitration. The assembly's Railroad Committee began hearing testimony on January 18.106

  On February 5, the aged, erect figure of Cornelius Vanderbilt sat before this committee. His foes had testified first, excoriating him at length. His son and other Hudson River directors had followed, explaining the long history of their conflict with the Central and the details of the current crisis. But the assemblymen most wanted to hear from the Commodore himself. “Did you not take it for granted,” one of them asked, “that the Central Railroad were legally bound to pay you a $100,000 annually?”

  “When you talk about ‘legally’ I suppose your next question will be: ‘Why didn't you prosecute them?’” Vanderbilt replied. “It is not according to my mode of doing things, to bring a suit against a man that I have the power in my own hands to punish.… The law, as I view it, goes too slow for me when I have the remedy in my own hands.” As he elaborated a few minutes later, “Let the other parties go to law if they want, but by God I think I know what the law is; I have had enough of it.”

  One of the committee members pointed out that the Commodore had personal friends on the Central board. “My personal friends, when they take such grounds as they did, I am afraid of. I am not afraid of my enemies, but, my God, you must look out when you get among your friends,” he said. “No, sir, I never did any act in my life that I did with more reluctance than I did to assert my rights in that controversy with the N.Y. Central Railroad. But I would have asserted them if it had cost me half I was worth. It was not a matter of dollars and cents; it was a matter of principle.”107

  Vanderbilt's words later would be distorted into a sneer, one that mixed the essence of his speech with the caricature of him as a brute. “Law! What do I care about the law?” he would be quoted as saying. “Hain't I got the power?” This fabrication would have an enduring and misleading impact on his image. Over the course of his life, he had resorted to lawsuits many times; he found them inefficient, but he hardly spurned the courts. Far from a mere tyrant, he practiced patient and skillful diplomacy. Nor was his speech quite so crude—though he did say “damn” and “devil” far more often than was thought proper in the 1860s. But one point
of both quote and misquote was the same: he had the power to punish.

  The testimony of Vanderbilt and his men produced “a decided change in public sentiment, which had previously run altogether in favor of the Central management,” the Times reported. For one thing, Vanderbilt had a chance to present himself in his own terms. “I have always served the public to the best of my ability” he remarked. “Why? Because, like every other man, it is to my interest to do so, and to put them to as little inconvenience as possible.” More important, Vanderbilt and his men turned attention from the trivialities of business to the underlying problems: the fragmentation of the railway system that pitted connecting lines against each other, and the contradictory nature of railroads as both private businesses and public works. Clark and William pointed out that Senator Murphy's bill could strip a company of its power to defend itself against ill-treatment. How could society demand that private citizens provide the capital for the nation's railways, but leave them unable to protect their investments? Left unanswered was the question of how the public interest—and the public's interest in uninterrupted railway transportation was enormous—could be protected from disruptions caused by purely private disputes. The Central blockade contributed to a growing political conviction that railroads required regulation.

  Vanderbilt voiced no worries. “If you could pass a law compelling men to take better care of their interests than their interests will compel them without the law, then it is well enough,” he said. “I don't care what law the legislature makes in reference to railroads, provided it is general, and applies to all roads. For if I cannot exist upon the same terms with the rest of them, I will retire and go out of the business.”108

  By the time he said these words, the blockade had already ended. The demonstration of his ruthlessness had driven even Keep into a panic. “What is to be done?” Keep telegraphed Corning on January 17, as soon as he received word of the blockade. He transferred all power to settle the matter to Corning, Boody, and Baxter, the three directors most open to a compromise. The trio took a carriage to Vanderbilt's office on West Fourth Street and began peace talks. “I will do Commodore Vanderbilt the justice to say that he was, during the negotiation… the most anxious man in the party to settle,” Baxter said.109

  On January 19, they agreed to a new contract. The Central committed to delivering as much through freight “from competing points” to the Hudson River as the Hudson River delivered to it. There would be no more empty cars returning from Albany. The Central also agreed to pay its share of the Hudson River's terminal charges. There would be no $100,000 payment, but William considered the Central's concessions to be worth twice that. On January 21, the New York Herald announced, “END OF THE RAILROAD WAR.” Murphy's bill died, as did the assembly inquiry110

  In speaking to the assembly committee, Keep noted that Vanderbilt “claims to have had everything his own way, and I am afraid he has. I am very thankful that I have not been a party to it.” This was a remarkable statement. He was president of the company, and yet he was not “a party to” its agreement? It was a sign that Vanderbilt had defeated him mentally, morally, emotionally, from the moment the great and unexpected blow fell. Keep gave Corning's committee responsibility for making peace, and then began to dump his New York Central shares. “Keep & Lockwood are large sellers. They have flooded the market with stock,” John M. Davidson wrote to Corning on January 24. Vanderbilt, he recorded, had been out “on the road” driving his fast horses, “& said that he had instructed Wm never to notice any communications from Keep, that he was unworthy of notice, etc., etc.” Tellingly, Vanderbilt advised his horse-racing friends to buy and hold Central stock.111

  “Keep is cursed by all parties,” Davidson wrote to Corning the next day. “The swearing against him by the stockholders is terrible. They talk of getting up a meeting requesting him to resign. This man, Mr. Corning, is a bad one, for the interests of your road. He has a worse reputation than Vanderbilt. The difference between the two is this: Keep will throw over the stockholders' interests by twisting the stock, while Vanderbilt will sustain stocks by holding them—for instance Hudson & Harlem.” In all likelihood, Keep and Lockwood had been carrying their shares on narrow margins, and decided to cut their losses when the price fell during the blockade. As for Davidson, he joined the crowd in hurling his own Central shares into the flood.112

  He should have paid attention to what Vanderbilt told his companions on the road. The Commodore's victory turned out to be more complete than he ever could have predicted. He not only had forced the Central to acknowledge his railroad's demands for justice, he had broken the spirit of its largest stockholders. As Central shares grew cheap and abundant, Vanderbilt saw an opportunity. He took it.

  * The seminary Drew endowed is now Drew University, in Madison, New Jersey.

  Chapter Sixteen

  AMONG FRIENDS

  On December 11, 1867, Cornelius Vanderbilt ascended to the presidency of the New York Central. Less than five years after he had taken control of the New York & Harlem, he presided over the state's most important railroad—one of the nation's four trunk lines—as well as the lines that connected it to Manhattan. This conquest marked the culmination of the third and most important phase of his empire building. The Central would be the bastion of his realm, much as Prussia would be to the German empire that Otto von Bismarck constructed a few years later. Only now would he move toward the creation of the gigantic corporation—and system—that would seal his place in history.

  The press accordingly gave him a new title: the Railroad King.1 It was a rank (or insult) often handed to railway presidents, but increasingly it stuck to Vanderbilt, who was so different from his peers. Unlike Drew, he did not go into a railroad to manipulate its stock; unlike Keep, he did not go in on borrowed money and sell out when overmatched; unlike J. Edgar Thomson, he was not a professional executive, hired by the stockholders. He used his own cash to buy large blocks of shares, moved into the management to stay, and brought along his eldest son and sons-in-law. (Clark was now joined by Daniel Torrance, who took office as vice president of the Central.) Vanderbilt never liked the title of king, but it looked very much like he was building a kingdom.

  And yet, historians have often erred in accounting for this conquest. It has been written that he assumed all but formal control of the Central at the conclusion of the blockade in January 1867.2 In fact, he moved slowly and cautiously into the great trunk line over the eleven months that followed. True, the disgusted Henry Keep promptly withdrew from active management, but there is no sign that Vanderbilt simply assumed his place.3 To the contrary: on April 30, William wrote to James F. Joy, the president of the Michigan Central, to thank him for his help in clearing up a misunderstanding between the Hudson River and the New York Central—showing that Vanderbilt did not yet have even informal control of the larger line. But signs of growing influence, and stockholding, in the Central steadily accumulated.4

  On July 25, Keep resigned the Central presidency, and was replaced by H. Henry Baxter. Eager to appease Vanderbilt, the directors voted to reconsider the Central's relations with the Hudson River Railroad and Daniel Drew's People's Line. Two days later, Erastus Corning's son overheard Vanderbilt advise a friend to buy Central stock. In August, the New York Times reported that the Central's new management had forged “a close alliance with the Vanderbilt roads.” Ominously for Drew, the Central decided to “cut loose from all connection with the Hudson River steamboats.”5

  The latter statement would prove to be gravely portentous. The relationship between Vanderbilt and Drew had undergone a transformation of late, one that grew more dangerous with each passing month. Vanderbilt's acquisition of the Hudson River Railroad had broken their unwritten nonaggression pact—and their long-standing partnership—by pitting their interests against each other for the first time since their clash on the river three decades before. Drew's participation in the second Harlem corner had turned their rivalry into a matter of open comb
at. Vanderbilt's infiltration of the Central heightened tensions still further; as one newspaper reported, “Drew and Vanderbilt promise to fight it out on the Hudson River all summer.”6

  The summer of 1867 served as a mere skirmish before the battle to come. Vanderbilt's ascension to the presidency of the Central would spark a fight so fierce, so enormous, so outlandish, that history would record it as a formal noun: the Erie War.

  EVEN BEFORE THE COMMODORE assumed control of the New York Central, his historical legacy as a railroad king began to take shape. He would be no Leland Stanford, no James J. Hill, building transcontinental lines through thousands of miles of unsettled plains and mountains; rather, he would be a creator of the invisible world, a conjurer in the financial ether. What made him powerful—and controversial—was not his riches alone, but his mastery of the corporate golem.

  For his first magic trick, he took what was one and made it two. On March 30, 1867, the Hudson River shareholders (himself foremost among them) approved his plan to nearly double the stock by issuing new shares worth $6,963,900 at par value.7 Called a stock dividend, it was similar to a stock split, an operation that would become common in the twentieth century. In the nineteenth century, it sparked outrage. Charles F. Adams Jr. typified the reaction of orthodox thinkers when he called the transaction an “astounding” act of “financial legerdemain.”8 It seemed to unhinge the value of stock from the world of the concrete and real. Even now, the economic mind shrank before abstractions. Economists, moralists, and financiers alike expected stock to represent the original cost of physical construction and real property, at a rate of $100 per share, the standard par value. Even the most sophisticated thinkers refused to accept that stock could be increased at will, or that the market alone should determine the value of a share. The construction-based par value provided a reassuring sense that one could indeed find the honest, intrinsic, value apart from day-to-day market fluctuations, much like the gold that backed pre-greenback banknotes.