The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  But White was not going away. He could not be pried from the shares that he owned outright, those he had been given as one of the original incorporators of the company. So, as the battle raged, Vanderbilt dispatched Franklin Osgood (a large Transit shareholder) to offer terms to the man whom he could not bear to speak to himself. It was useless. “White declared,” Osgood said, “that… Vanderbilt was a great scoundrel, and would cheat and rob any person he had any dealings with.”72

  For the vain and self-destructive White, it was another sign of that imbalance of character that had driven him from Congress. Even as he insulted the Commodore, a man with far greater resources and even more guile, he provoked the one force that he could not afford to alienate: the government of Nicaragua. The lack of progress on the canal had left even the Conservatives of Granada disgruntled. They had grown more upset when they learned that Accessory Transit had declared a dividend even though it had not paid the 10 percent of its profits that were owed under its charter. To investigate, the Nicaraguan government appointed two commissioners, who arrived in New York in August to inspect the books; after a long delay, they received a thin and highly suspect ledger that showed no profits. For all their frustration, the commissioners modestly concluded that Accessory Transit owed $30,000. White's astounding response was to deny their diplomatic powers. He claimed that Nicaragua had lost the “attributes of a sovereign state” when it joined the Central American confederation decades earlier—asserting, in essence, that the company existed, but Nicaragua did not. The Nicaraguans seized the lake steamboat Central America to enforce payment of the $30,000, “but she was subsequently released in consequence of the threatening attitude taken by our minister,” the New York Tribune reported.73

  Vanderbilt, meanwhile, learned that the Pioneer had been wrecked on the Pacific.74 If anything, the loss made him more determined to bring his war with White to a satisfactory conclusion. He asked his son-in-law Allen to take over the negotiations. What Vanderbilt wanted was to sell his steamships to the Accessory Transit Company for $1.1 million. Allen refused. Considered “a high minded man” by his colleagues in business, he believed that the company's charter prohibited it from owning steamships. Vanderbilt dismissed the argument. He wanted his deal. With Osgood stymied, he thought only Allen (who had worked closely with White in the past) could achieve a settlement, so he pressured him until Allen finally agreed to open new talks.75

  For several weeks, the stock market battle had fallen silent, with the Transit Company stock lying exhausted below 30. Just before Christmas, Vanderbilt and his friends began to buy heavily. Aroused by the large purchases, the bears came out of their caves. The bears—brokers who believed the Transit stock would fall again—began to sell it “short;” that is, they made contracts to sell shares that they didn't own. They would either borrow the shares in order to deliver, then repay the lenders with shares they bought later at a lower price, or—more commonly in this era—make contracts for sale that gave them weeks or even months to deliver, hoping to buy the shares in the interim at a lower price. Instead of buy low, sell high, the short strategy was sell high, buy low. The Commodore's heavy purchases in “sick Transit” (as brokers called the stock) offered the bears a seemingly perfect opportunity. Unaware of the progress of the talks, they believed the price was doomed to sink.76

  On Christmas Eve, Allen concluded the negotiations. Vanderbilt now formally made the offer that had already been agreed to, in a letter to the board of the Accessory Transit Company. “I will sell to your company the steamships Northern Light, Star of the West, Prometheus, Daniel Webster, Brother Jonathan, Pacific, and S.S. Lewis, together with their furniture,” he wrote, “for the sum of $1,350,000; payable $1,200,000 in cash, and $150,000 in the bonds of your company, payable in one year from the date of the bills of sale. All the coal bulks, and all other fixtures, your Company to take at cost, paying for them from the first earnings of the vessels.” Three days later, the board accepted the terms. The directors decided to issue forty thousand new shares of stock to pay for the ships—to be sold to the directors themselves at 30. Vanderbilt would be the agent, managing the ships from his New York office, with a 20 percent commission on each transit ticket for the Nicaragua crossing. He would also take a 2.5 percent commission of the entire gross receipts.77

  The deal sent Accessory Transit stock skyrocketing. “The shorts have fairly been caught,” the New York Herald proclaimed, “and the probability is they will suffer some before they see the end of the present movement.” The bears had to buy stock for as much as 40 to deliver the shares they had sold for less than 30. Even worse, it appears that Vanderbilt and his friends may have “cornered” the market by buying up the available supply (the new stock had yet to be issued). When caught without shares to deliver, the bears had to pay the buyers heavily to get out of their contracts. Thus Vanderbilt made money by buying shares that didn't even exist.78

  In the end, the Commodore got all that he wanted. He had waged his wars on multiple fronts, under difficult conditions, against wily opponents, and won them all. He had battled the U.S. Mail and Pacific Mail Steamship companies, and made a great deal of money doing it. “The nett [sic] profits of his line of boats for the past season are figured up to $1,150,000,” the New York Times reported at the end of 1852. (Profits for the entire year, when added to those for 1851, must have been far more than that amount.) Then he had sold his ships on his terms, and at his price—indeed, for more than his initial price. His stock market campaigns had added enormously to his fortune. And he and his allies seized control of the Accessory Transit Company from the detested White (though that remained to be formalized).79

  For the public the picture was far more ambivalent. On one hand, Vanderbilt wrought much good for his fellow citizens. Even though his canal scheme failed, he had created a new path of commerce and travel to California, one of great practical and strategic value to the United States. Falling costs and increasing speeds helped lift San Francisco from a trading outpost to a thriving metropolis—firmly rooting the republic on the Pacific—and improved the flow of gold to New York, pumping money into the national economy. Vanderbilt seemed to vindicate Jacksonian philosophy as he successfully competed against a government-subsidized line. He also revealed the beneficial role of the stock market by mobilizing capital to develop this critical new route. On the other hand, his battle against White demonstrated all too clearly the sometimes unhappy consequences of mixing private and public interests in a large enterprise. Travelers, merchants, and specie shippers fell victim to his vindictiveness as he disrupted the Nicaragua line to destroy its stock price; small investors fell victim to his bear campaign against White.

  In pursuing his own interests, Vanderbilt acted as he always had, both creating wealth and punishing his enemies. But, as his businesses achieved a truly national scale, those who benefited and suffered from his decisions multiplied into the hundreds of thousands, and, eventually, millions. Like the marketplace itself, Vanderbilt was a paradox—both a creator and a destroyer.

  From his own perspective, he was simply the victor. All in all, it was a remarkable new year that Vanderbilt celebrated in 1853. Small wonder that he decided to celebrate as no American had ever celebrated before.

  * The stock prices will be given without dollar symbols throughout the text.

  Chapter Nine

  NORTH STAR

  “There is no friendship in trade.” Lambert Wardell often heard the Commodore make the remark as he pitched letters into the office fire, “bundled his bonds and stocks in packages,” or advised his sons-in-law. It was one of the few things he ever said. “He talked very little,” Wardell recalled. Indeed, his wariness with words marked him in the public eye. “Vanderbilt, as is well known, is remarkable for terseness of expression, a compacted force of argument, and Spartan simplicity, rarely to be equalled,” commented one newspaper. Standing six feet tall from the soles of his feet to his bristling grey hair, weighing a powerful two hundred poun
ds, he could be mistaken for a man of appetites; he was not (except, perhaps, for sex). Sparing with words, sparing with money, sparing even with food, “he was economical almost to extremes,” Wardell reflected, as if Vanderbilt suspected that his own mouth might betray him, just as he suspected everyone around him. “He thought every man could stand watching,” the clerk added, “and never placed confidence in anyone.”1

  As fancy carriages passed by 10 Washington Place on January 1, 1853, carrying the fashionable on their way to New Year's Day calls, Vanderbilt contemplated an end to his life of frugality and suspicion. A few months earlier, he had said to Franklin Osgood “that he was getting old, and had better close business.”2 And yet, even when brooding on his own mortality he cast a jaded eye over those closest to him.

  One day, in his office at 9 Bowling Green, he brought up the subject of his will with Daniel Allen. “Daniel,” he exclaimed, “when I die, there'll be hell to pay!”

  “Oh, no,” Allen replied. “Commodore, I guess not.”

  “Oh yes there will; yes there will!” Vanderbilt insisted, as Allen later recalled, “in that peculiar emphatic way that I have no doubt he meant it to be so.”3

  At the time, Vanderbilt was reordering the hierarchy of his heirs apparent, his sons and sons-in-law. Allen, who had served him so well for so long, slipped inexorably downward. He had self-righteously opposed the steamship sale, and now resigned his directorship in the Accessory Transit Company in protest. Horace Clark, on the other hand, continued his climb in his father-in-law's favor. Vanderbilt had asked him to review the terms of the sale, and now referred to him as his “professional adviser.”4 Daniel Torrance and James Cross hovered nearby, but Vanderbilt treated them as middle managers rather than possible successors.

  As for the sons by blood, Billy lurked in Staten Island obscurity, while George remained too young to be of much note—though he was strong and athletic, a favorite of his father. Cornelius Jeremiah continued to walk under the shadow of his addiction to gambling and his episodic epilepsy. His sister Mary later remembered how their mother confronted the Commodore in their home around this time. “Your hatred or dislike of Cornelius arises from the fret of his affliction,” she insisted. “You intend to give all your money to William.”

  The old man said nothing, as usual.5 Leaving a legacy grew increasingly important to him, but what he intended to do with his wealth remains a mystery. Frugality, suspicion, and silence guided his every step.

  In contemplating his mortality and his fractious family, Vanderbilt embarked on a most un-Vanderbiltian adventure. Reports soon spread that he was building a new steamship larger than any of those he had just sold. “Various opinions were entertained as to his ultimate designs,” reported Rev. John Overton Choules, a noted travel writer. “Many imagined that Mr. Vanderbilt… was to sell his ship to this monarch, or that government—or he was to take contracts for the supply of war steamers.” Choules learned the truth from Vanderbilt himself. In February, the minister sat down with the Commodore in the library at 10 Washington Place. There Vanderbilt confirmed the wildest rumor of all: that the great steamship, named North Star, was to be his private yacht. He planned to take his extended family on a grand tour of the Old World, and he invited Rev. Choules and his wife to join them. “Mr. V. expressly informed me that his sole object was to gratify his family and afford himself an opportunity to see the coast of Europe,” Choules wrote. “He observed that, after more than thirty years' devotion to business, in all which period he had known no rest from labor, he felt that he had a right to a complete holiday”6

  It seemed out of character that this “boorish, vy. austere” businessman (as the Mercantile Agency would call him that May) would splurge on his family in such grand fashion, and on a grand tour of Europe, no less. But even so monomaniacal a moneymaker as Vanderbilt was capable of ordinary human complexity. In his own blunt fashion, he loved his wife and children. Indeed, the North Star was a sign that, as he attained public eminence, he paused, as it were, and looked fondly at the family he had pressed so hard for so long. Then, too, there was his brooding over his advancing age. Recently the leading men of his day had started to die off: John Jacob Astor, Philip Hone, Daniel Webster, and Henry Clay. Believing that he had limited time, he sincerely wanted a holiday.

  This is not to say that Vanderbilt underwent a Scrooge-like conversion to Christian charity. He refused to bring along Corneil, for example. And two of his oldest obsessions, pride and patriotism, shaped his vision for the voyage. “I have a little pride, as an American, to sail over the waters of England and France,” he wrote to Hamilton Fish, now a U.S. senator, on February 15, “up the Baltic and through the Mediterranean and elsewhere, under this flag without a reflection of any kind that it is a voyage for gain—with such a vessel as will give credit to the enterprize of our country.” He wrote to Fish to learn if the North Star would retain the protection of the U.S. government, since Congress had not covered private yachts under the statute for American shipping abroad. “When the law was passed,” he observed (or perhaps boasted), “they did not think at that time our yachts would ever sail to a foreign port.”7

  Vanderbilt made careful preparations for the smooth operation of his corporate interests during his long absence. Amid rumors that he himself would take the presidency of the Accessory Transit Company, he forced Joseph L. White and his clique to resign from the board of directors. Vanderbilt resumed his seat on the board and brought in two close allies, Nelson Robinson and Charles Morgan. The Tribune reported talk that other friends, including Robert Schuyler, would become directors as well.8

  The Vanderbilt group also took steps to put the Pacific end of the business in capable hands. At the end of January, they called to New York Cornelius K. Garrison, a former Mississippi River steamboat captain who had established a successful bank in Panama. On February 1, Garrison agreed to an unusually lucrative two-year contract. As Accessory Transit's San Francisco agent, he could keep a 5 percent commission on receipts and 2.5 percent on disbursements, up to a maximum of $60,000 per year; or he could choose to limit himself to 2.5 percent all around, with no limit on his income. On February 19, Garrison departed New York to embark upon his new career in San Francisco.9 With White out and such trusted men as Morgan and Garrison in, Vanderbilt could sail for Europe with peace of mind.

  No other unfinished business was as important as Vanderbilt's indictment for manslaughter in Richmond County for the Staten Island Ferry's deadly bridge collapse. He showed no sign of concern, however, and for good reason: on February 26, the Brooklyn Eagle announced that the indictment had been quashed.10 In all likelihood, the result surprised no one. Vanderbilt dominated Staten Island more thoroughly than any medieval baron did his manor. For all his wealth, his mansion off Washington Square, his international prominence, he remained very much a man of Richmond County, a son of the soil between the Narrows and the Kills.

  Jacob J. Van Pelt brought up Vanderbilt's extensive Staten Island holdings in conversation one day early in 1853. For years, Van Pelt had sold timber to Vanderbilt for the construction of his ships; in recent weeks, they had begun to socialize, riding together on Vanderbilt's wagon as he whipped a pair of fast horses out of the narrow streets of New York and up through the rural stretches of upper Manhattan. “The Commodore asked me once what was the best thing to invest money in,” Van Pelt recalled. “I told him I thought he ought to improve his Staten Island property.”

  “Oh, the Staten Island property?” Vanderbilt replied. “The title ain't worth a damn.”

  “I didn't think you bought property unless it had a good title,” Van Pelt said.

  “Well, I didn't pay much for it.”11

  Indeed he had not, for he had purchased his crucial waterfront real estate from the dying Richmond Turnpike Company. His control of key landings had sustained his monopoly with the Staten Island Ferry for years; but now his title was under siege by the state attorney general, and he faced two rival ferries. (In addition to
George Law's, another had been started by Minthorne Tompkins, the son of the late vice president.)

  With his departure looming closer, Vanderbilt had little time to rescue his imperiled fortunes on Staten Island. His ferry, once stripped of its landings, could well be crushed during his long absence overseas, and one of his most valuable businesses would become worthless. As the days ticked by, he simultaneously lobbied the New York legislature to pass a law confirming his title and opened negotiations with Law and Tompkins for a consolidation of the three ferries. Using his lobbying for leverage—along with Tompkins's anxiety over the value of his own Staten Island real estate—he achieved a triumph. In his most vulnerable moment, he convinced his rivals to buy him out for $600,000—$150,000 in cash, plus $50,000 a year (the annual profits on the ferry) for the next nine years.12

  “I asked him if he had everything fixed,” Van Pelt later reported. “He said yes.” Vanderbilt had picked up his friend for another rattling fast ride shortly before his planned departure. The Commodore added, “Van, I have got eleven millions invested better than any eleven millions in the United States. It is worth twenty-five percent a year without any risk.” Given the size of Vanderbilt's business operations, the $11 million figure rang true. It would have made him one of a half-dozen or so of the richest men in America; only William B. Astor and very few others could boast notably larger estates. The risk-free rate of return he cited was clearly hyperbole, but his point was clear: he had taken great care to put his affairs in order.

  To Van Pelt, Vanderbilt seemed very much like a man preoccupied by his own death—and incapable of accepting it. “Commodore,” he once asked, “suppose anything should happen, what are you going to do with your property?” (As Van Pelt added, “He never liked to have me say ‘die,’ so I always said, ‘if anything happens.’”)