Gould and Fisk, who had landed the railroad by using the same methods Drew had pioneered, were not yet convinced their prize was of certain value, especially at the high price they had been forced to pay. The condition of the Erie showed the consequences of the speculators’ relentless manipulation of the line’s bonds and shares. The road owed more than $3.9 million in floating debt borrowed from Gould’s cronies, but had no money in its coffers to pay it back—or to perform the stupendous amount of maintenance that had been left undone. Physically and financially, the railroad was “an empty shell.” In March 1868 the line’s superintendent warned the Erie board of its decrepitude. “The iron rails have broken, laminated and worn out beyond all precedent, until there is scarce a mile of your road . . . where it is safe to run a train at the ordinary passenger train speed. . . . Broken wheels, axles, engines, and trains run off the track have been of daily, almost hourly, occurrence.” Of the company’s 371 locomotives, 30 were “entirely useless, and some forty more are of but little value, owing to their long service and general infirmity being considered unsafe to carry even moderate steam pressure and sure to break down if run long distances.”
This was the enterprise that Gould and Fisk now commanded, a tarnished prize, especially for Gould. For the Erie’s subsequent chapter would involve a confrontation with the one man who could outlast, outflank, and outmaneuver him: J. Pierpont Morgan.
* * *
VANDERBILT, WHO EMERGED from the Erie war with about $1.5 million in uncompensated losses, never shed his resentment at his adversaries. He resolved to “never have anything more to do with them blowers,” and kept his pledge. A few years later, irked at having been linked in the press with Gould’s efforts to corner the Chicago & Northwestern Railroad, the Commodore summoned a reporter from the New York Sun to 10 Washington Place. Showing “great irascibility at every reference to the name of Jay Gould,” the newsman wrote, Vanderbilt flatly denied having done any business with Gould since 1868. Then why so distrust him now? the reporter asked.
“His face, sir,” Vanderbilt replied; “no man could have such a countenance as his, and still be honest. . . . I read Mr. Gould like an open book the first time I saw him. . . . You have my authority for stating that I consider Mr. Jay Gould a damned villain. You can’t put it too strongly.” Not only would he have nothing to do with Gould, but he advised all his friends to follow his policy. “He’ll be sure to cheat you,” he told them. As the reporter headed off into a torrential rainstorm, the last words he heard from the doorway were: “He is undoubtedly a damned villain, and you can say I said so.”
It was a remarkable outburst, even for those indecorous times. The very next day Gould, who ordinarily did not care for “newspaper notoriety,” uncharacteristically responded in kind by summoning the Sun reporter to his own home.
“With his deep-set, coal-black eyes, and one leg thrown across the other,” the reporter wrote, Gould reviewed the entire history of the Erie war, and then gave his judgment. “The poor old Commodore is in his dotage,” he said, contrasting Vanderbilt with a younger generation with whom he identified personally and expected to lead.
He can no longer go around as he used to and attend to business, and he is feebly envious of those who can. There is a class of rising financiers whom the old man hates. They are young, full of energy, and possessed of modern knowledge and appliances to aid them in their business. . . . While he in his second childhood is up town amusing himself with his horses, and listening to the flatteries of sporting men, these young business men are rising into financial power which will far exceed the old Commodore’s even in his palmiest days. . . . He blows his little pellets of envy at them whenever he can.
The iconic “champagne toast” photo memorialized the driving of the golden spike binding the Union Pacific and Central Pacific into the nation’s first transcontinental railroad at Promontory, Utah, on May 10, 1869.
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As for Vanderbilt’s aspersions about Gould’s personal appearance, “he ought in his piety to attribute any defects in that respect to the same Wisdom that has bestowed on him his good looks.”
Gould was right that the new generation of financiers would outdo the Commodore’s exploits. But he was perhaps overly optimistic that he would be their leader. For his own history would militate against his assuming a position of trusted authority.
In the meantime, as these two tycoons sniped at each other, the industry that had once been their plaything had taken on a life of its own with the completion, three years earlier, of the first transcontinental railroad.
Promontory Summit, Utah Territory, was as graceless a site for national mythmaking as one could imagine. “It is sun that scorches, and alkali dust that blinds,” the traveler and memoirist Albert Richardson wrote. “It is vile whiskey, vile cigars, petty gambling. . . . It would drive a morbid mind to suicide. It is thirty tents upon the Great Sahara, sans trees, sans water, sans comfort, sans everything.” Chance had chosen it, however, as the place the Union Pacific and Central Pacific railroads would join together in the nation’s interior, a few hundred miles west of the Continental Divide.
About an hour before noon on May 10, 1869, a last ceremonial rail was laid and bolted down. A tie of laurel timber, polished to an almost glass-like sheen, was slid in under the last joint. Holes had already been drilled to accept the final ceremonial spikes, several of iron, two of gold etched with triumphal messages, one of silver, and another of amalgamated iron, silver, and gold. (These have been condensed by historical shorthand into a single “golden spike.”) There was a two-minute prayer by a Christian minister, followed by platitudinous speeches by the appointed spokesmen for the lines, Leland Stanford of the Central Pacific and Thomas Durant of the Union Pacific. They took up heavy mauls to drive the last spikes; legend has it that both men missed their targets on the first blow, sending titters through the crowd. But at 12:47 P.M. local time, a Union Pacific telegrapher signaled to the nation that the driving of the last spike was complete by tapping on his telegraph key the word “Done.”
Celebrations broke out from coast to coast. In San Francisco every fire bell in the city was struck, to mark “a victory over space, the elements, and the stupendous mountain barriers separating the East from the West,” the San Francisco Bulletin declared. One hundred cannons boomed in New York’s City Hall Park.
But the adventure was just beginning.
3
Pierpont Morgan’s Grand Tour
AT 5 P.M. ON July 5, 1869—two months almost to the day since the Union Pacific and Central Pacific railroads had met at Promontory—a luxurious westbound train carrying John Pierpont Morgan and his traveling party pulled out of the Pennsylvania Railroad station in Jersey City, just across the Hudson River from Manhattan. Joining Morgan on board were his wife, Frances Louisa (“Fanny”) Tracy Morgan; her sister, Mary Tracy; and Morgan’s neurasthenic cousin, Mary Goodwin, who came along for her health but whose recurrent headaches and fainting spells the long trip would fail to relieve. Over the next eight weeks the party would travel six thousand miles, riding the iron rails stretching across the continent to behold parts of the United States known to only a very few Americans of their class. It would not be all pleasure; they would also experience all the inconveniences and privation of rail travel of that era, from which not even the wealthy were exempt.
At thirty-two, Pierpont, as he was known, was the crown prince of the merchant bank cofounded by his father, Junius Spencer Morgan. The family had grown rich managing investment capital from clients in London and steering it toward profitable opportunities in America. Among the most sought-after investments were bonds of American railroads, whose demand for funds had exploded when the end of the Civil War revived the nation’s image as a land of unexampled economic potential. The firm then known as J. S. Morgan & Co. played an important role in allocating this river of capital to targets in the East and the agricultural South, but the firm had little familiarity with the railroads then reach
ing across the prairie toward the West Coast. Pierpont was to fill in the map during his two-month grand tour.
* * *
J. Pierpont Morgan, captured near the height of his wealth and influence by the photographer Edward Steichen in 1903.
* * *
Pierpont Morgan was tall and broad-shouldered, just beginning to show the stoutness of middle age, his hooded eyes not yet locked into the unforgiving glare that haunts Edward Steichen’s famous photo of him in his aristocratic maturity. He still labored under the oppressive thumb of his father, though as the head of the bank’s New York office he was cordoned off by the wide Atlantic from Junius, who presided over the House of Morgan from his London headquarters. (They came together twice each year, Junius sailing west in the fall for a three-month visit and Pierpont heading to Europe in the spring.) Junius would maintain the dominant role in this relationship up until his death in 1890.
Born in Hartford, Connecticut, Pierpont had traveled widely, but chiefly in Europe. He had been educated in Switzerland and at the University of Göttingen, Germany; the farthest west he had journeyed in his homeland was New Orleans, where in 1859 he had launched an audacious—but unauthorized—gamble on an unclaimed shipment of Brazilian coffee. He sold the coffee in small lots at a profit, but the escapade cost him a partnership in Duncan, Sherman & Co., the bank that had brought him on as an apprentice banker as a favor to his father.
Pierpont had married Fanny, the daughter of a prominent New York lawyer, four years earlier. Their wedding came three years after the death of his consumptive first wife, Memie, whose memory he would revere for the rest of his days. With his second wife he had a daughter, Louisa, and a son, John Pierpont Jr., who were left home in New York with a troupe of governesses during the western trip. Fanny Morgan had bright, soulful eyes and was already acquiring the bearing of an aristocratic grande dame. (The incompatibilities of husband and wife that would shadow the marriage were yet to surface.) At twenty-seven, Fanny was game for the adversities of cross-country train travel. She boarded with an ample supply of palm-sized journals whose blank pages she would fill with pencil in a florid hand, categorizing every breakfast, lunch, tea, and dinner along the way as “fine,” “poor,” or “wretched,” and recording the vistas of prairie, mountain range, and wildflower field with genuine appreciation, if not in the most evocative prose.
In touring the American West for the first time, Pierpont was expected to absorb every facet of the region’s potential for growth in agricultural production and manufacturing and to assess the demand for rail transport to bring products to market. But there was an even greater point to his journey: He was to take the measure of the railroad industry itself, for this vast, unruly enterprise was destined to become central to the House of Morgan’s fortunes.
* * *
THE RAILROADS HAD begun to exercise their influence over the banking industry and the capital markets as early as the 1840s, when the first construction boom had occurred in the eastern part of the country and spread rapidly west of the Allegheny Mountains. As the business historian Alfred Chandler would observe, the railroads’ appetite for capital could no longer be raised “from farmers, merchants, and manufacturers living along the line of the road.” Soon, not even the money markets in the East could fill the demand; “only the largest financial communities of Europe could provide the vast amount of capital required.” That demand was considerable indeed. By 1865 the dominant corporation in America was the Pennsylvania Railroad, with fifty thousand employees and invested capital of $61 million.
The opportunity for American banking concerns such as the House of Morgan and Kuhn, Loeb, which had carved out the franchise of placing European capital in American enterprises, was inescapable. But delivering sage advice to their clients required the acquisition of hands-on knowledge. Pierpont already had dabbled in the field, helping to manage a $500,000 third mortgage in May 1869 for the Albany & Susquehanna, a modest upstate New York road, shortly before leaving for his grand tour across the continent. For him it had been a forgettable, routine financial transaction, completed hastily so as not to interfere with his embarkation on that long journey. The deal would ultimately present him with an introduction to the more squalid aspects of railroad finance.
Morgan’s party traversed the first leg of the trip in civilized comfort, reaching Chicago in a day and a half. There they remained for almost two weeks under the solicitous eyes of Morgan’s midwestern business contacts, among them George Pullman and his investment partner John Chippewa Crerar, a pious Presbyterian elder with a gleaming bald pate and enormous sideburns. At the end of their visit the travelers were escorted to the depot by Crerar, who by his constant attentions had all but made himself a member of the family, and who deposited them in a sleeping car christened the Minnesota. This was one of Pullman’s early “Pioneer” cars, a vast improvement in ease and luxury over the customary passenger accommodations on rail. (“Such comfortable rooms surely never were on a rail road before!” Fanny exclaimed to her journal.) Pullman’s cars were revolutionizing train travel in the United States. For sleeping, the seatbacks folded down to form the lower berths, and a hinged platform opened from the ceiling for the uppers. The compartments were separated by thin curtains, and washrooms were situated at either end. There were as yet no facilities on board for preparing food, however, so passengers took their meals at scattered restaurant sidings or browsed for themselves from supplies brought on board, such as the enormous hampers that Crerar arranged to be packed for the Morgans.
They left Chicago at 9:45 A.M. on Monday, July 19, heading due west and reaching Dixon, Illinois, in time for lunch, then crossed the Mississippi at Fulton in a raging downpour and via what Fanny described as a “fearful looking bridge, resting on one or two islands. . . . There were rafts coming down the river, and wild looking swamps on each shore.” After a stop for tea in Cedar Rapids, Iowa, they were halted for hours at Marshalltown, near the dead center of the state, while crews mended a broken rail.
The Morgan party would soon experience more of the challenges facing travelers on the transcontinental railroad. As they would discover, the Union Pacific’s rails had been laid at breakneck speed to claim a federal subsidy comprising long-term loans and grants of land along the right of way, an arrangement that encouraged the building of miles of excess track and discouraged the careful planning that would produce dependable infrastructure. Indeed, many of the western railroads funded with government grants were patchwork affairs. Entrepreneurs laid down their tracks with little regard for sound construction principles and at varying gauges, making efficient inter-line transfers of rolling stock, freight, and passengers impossible, and gave little thought to coordination of their routes or schedules. Breakdowns were recurrent and river crossings frequently washed out. It was not uncommon for passengers and freight to be stranded at a depot for hours, even days, until a connecting line’s train showed up to carry them on their way. William Lawrence Humason, an adventurous cutlery manufacturer from Connecticut who traveled over the transcontinental route two months ahead of the Morgans, wrote of being decanted by the Union Pacific at a desert stop “into the hot sun, with no shade, no hotel, no house—surrounded by no comforts but sand, alkali, and sagebrush” because a quarrel between the superintendents of the Union Pacific and the Central Pacific prevented the latter’s train from arriving until dawn.
On Tuesday, July 20, the Morgans awoke at what Fanny described as “a funny dusty little place that did not seem to have any special name.” While the girls were “innocently dressing” before an open window, “the train drew slowly up before a platform covered like all Western platforms with men. The first the girls saw of it they heard a prolonged oh! And of course, there they dropped the curtains.” After a delay of several hours, they “went slowly off through an almost interminable swamp, till we came to the point where they backed us down to the river and on the ferry boat” to cross the muddy Missouri.* On the far side they found themselves in a beautif
ul aspen forest, “which we would enjoy much more if we had only had breakfast.” A railroad bridge would not span the Missouri until 1872.
Pierpont and his companions found sustenance at a roadhouse in Fremont, Nebraska, where they had to wait three hours to be picked up by the westbound Union Pacific train from Omaha. They spent the time gathering flowers and weighing themselves on the depot scale—Mary Goodwin 112.5 pounds, Fanny 140, her sister Mary 139, and Pierpont 200. Fanny complained of the dismal monotony of the fare, a feature of dining accommodations along the transcontinental railroad mentioned by other travelers almost without exception. “It was necessary to look at one’s watch to tell whether it was breakfast, dinner, or supper that we were eating, these meals presenting invariably the same salient features of beefsteak, fried eggs, fried potato,” reported the popular children’s author Sarah Chauncey Woolsey, who rode from New Haven to San Francisco over nearly the same route as the Morgans. “Sometimes the steak was a little tougher and was called antelope.”
After Fremont, the group’s next stop was Columbus, Nebraska, which had been conjured out of the prairie earth by the maverick financier George Francis Train. Famous for his world travels, Train would become the model for Phileas Fogg, the hero of Jules Verne’s 1873 novel Around the World in 80 Days; he had helped found the Union Pacific and would run for president as an independent against Ulysses S. Grant in 1872, and then, rather more eccentrically, for “Dictator of the United States” in 1876.
In Columbus the Morgans encountered “a party of wild Pawnees just in from a fight with other Indians, riding the horses they had captured,” Fanny reported. “Horrid looking wild creatures, with no clothes to speak of—blankets and skins and spears and a few such trifles. One came up and spoke to Pierpont, who, not understanding him, retired to the train immediately.” As fearsome as the Pawnees appeared, Pierpont might have felt more at ease had he known that the tribe had been pacified by the government through the expedient of placing its members on the public payroll. In fact they were gainfully employed defending the railroad against less malleable tribes such as the Sioux. If the Pawnees truly had come fresh from fighting with other tribes, as Fanny reported, then they had done so as agents of the US Army.
Iron Empires Page 6
