by T. J. Stiles
* John Overton Choules, The Cruise of the Steam Yacht North Star (New York: Evans and Dickerson, 1854), 26–7, records the following passengers, in addition to himself and his wife: Dr. Jared Linsly and his wife; the wife of the captain, Asa Eldridge; Cornelius and Sophia Vanderbilt; and the Vanderbilts' children and their spouses, Phebe Cross, Kate Vanderbilt, George W. Vanderbilt, Maria and William H. Vanderbilt, Ethelinda and Daniel B. Allen, Eliza and George Osgood, Emily and William K. Thorn and their daughter Louisa, Sophia and Daniel Torrance, Louise and Horace F. Clark, Mary and Nicholas B. La Bau. Cornelius J. Vanderbilt and Frances Lavinia did not accompany them.
* A popular story attributes the invention of the potato chip to Vanderbilt. In 1853 he supposedly complained that his fried potatoes were not salty or thin enough; the Lake House cook, George Crum, retaliated by frying absurdly thin and salty slices, which Vanderbilt loved. (The Washington Post, May 19, 1917, credited Crum's half sister, Catherine A. Wicks.) There is no truth to the tale. The New York Herald, August 2, 1849, strongly suggests that the potato chip originated with the now-forgotten Eliza, no later than the summer of 1849. See William S. Fox and Mae G. Banner, “Social and Economic Contexts of Folklore Variants: The Case of Potato Chip Legends,” Western Folklore 42, no. 2 (April 1983): 114–26.
Chapter Ten
ARIEL
“Billy, never underestimate your opponents.” Lambert Wardell overheard the comment in one of Vanderbilt's increasingly frequent, and increasingly fatherly, conversations with William. It is difficult to chart this father-son relationship, for it was entirely oral, yet it seems that a warming continued after their months together on the North Star. This particular piece of advice stuck in Wardell's memory because it was so characteristic of his employer's thinking. “This was one of the secrets of his success,” Wardell later reflected. “He never underrated himself nor anybody else.”1
These well-remembered words say much about how the Commodore envisioned his business career. Wardell would add that he “detested details.… He was very concise and gave general directions regarding matters rather than dictating in detail.” This statement seems not to apply to this stage of Vanderbilt's career, considering the minute attention he often lavished on his ships and various operations, until it is put into the context of that comment about “opponents.” He did not think of his businesses as machinery; rather, he saw them as military campaigns against his enemies. When he could not avoid the merely mechanical aspect of his enterprises he often expressed impatience; but when he was locked in combat he paid attention to the tiniest detail. This helps explain why he regularly sold out his steamboat and steamship lines after only a year or two of competition: once he achieved victory, he lost interest. He devoted little time to the businesses that he did operate year after year, such as the Staten Island Ferry, which had attracted widespread complaints about its condition.2
In the months and years that followed the North Star's voyage to Europe, Vanderbilt increasingly thought of himself in another way: as a pillar of New York's mercantile community. That could be seen clearly in August 1854 (the same time that he achieved victory over the Accessory Transit Company), when he set out to rescue a bastion of New York's business establishment, the New York & Erie Railroad—or Erie, as it was more commonly known. The Democrats who ran New York State had chartered the company in 1832 with the Whiggish notion that it would be a private corporation with a public purpose, to bring the benefits of the newfangled railway to the southern tier of upstate New York counties. Even the radical New York Evening Post supported it, and prominent merchants subscribed to the stock. But building a line over the mountains from the Hudson River to Lake Erie proved far too expensive and time-consuming for private capital alone. The state stepped in repeatedly to keep the enterprise afloat as it grew ever more costly. Finally, in 1851, New York celebrated the completion of what was then the longest railroad in the world.3
After all the trials the Erie endured in construction, it began to make a great deal of money. In 1853, it earned $4,318,762, a 25 percent increase over the year before and well above expenses (at a time when only three or four dozen textile factories represented a total investment of $250,000 or more). When Nelson Robinson carried its stock up to 92, it was not simply because of his skills as a broker, but also because the Erie had bright prospects. But it seems that Robinson did not attend to his duties as treasurer quite as carefully as he should have. A massive cluster of debts fell due on September 1, 1854; when the railroad's officers tried to arrange short-term loans to cover the payments, they encountered the same tight money market that had brought down Robert Schuyler. The company needed a great deal of credit, very fast.4
The Erie towered over the economic landscape. Its stockholders numbered in the hundreds, and it boasted a capitalization larger than all but a few other giant railroads. Yet it was situated in a culture that still did not distinguish between the invisible corporation and its corporeal managers and shareholders. In this crisis, all eyes turned to its directors, who were expected to take personal responsibility for the corporation's debts. Panicked by the enormity of the payments coming due, they all declined. “Where are all the great financiers who used to congregate in the directors' room of this huge concern, and put forth their edicts with all the pomposity of the Grand Mogul?” asked the New York Herald. “Where are they now? We do not see them striding about the streets, annihilating all the little bears by a look. Verily, their occupation is gone, and they have given place to a set of hungry creditors.”5
Robinson was nowhere to be found. As treasurer, he had seen the storm coming, sold all of his stock, and again went into retirement. Only his former partner, Daniel Drew, stood up to the challenge. Drew's connection to the road predated his election to the board of directors; as early as 1842, he and Isaac Newton had provided the steamboat connection between Manhattan and Piermont, the railroad's terminus on the west bank of the Hudson River. On August 30, 1855, the Mercantile Agency summarized his life and reputation in words that reflected the deep respect of Wall Street. “He is a self made man, of great energy, [prudence,] & integrity. Began his [business] life as a cattle dealer, in which he made considerable money. Was afterwards a broker in the firm of Drew, Robinson & Co.… until March ′52, when he retired,” it wrote. “Was then believed to be [worth] over a million & is probably [worth] that now.… He is [very] prompt in all his [business] transactions. Is in unquestioned [credit] & his [notes] are placed amongst the first-class paper.”6
A day would come when the brokers of Wall Street would howl with laughter at the thought of Drew being described by the words “prudence” and “integrity.” But in August 1854 he seemed like a savior when he undertook to rescue the Erie from bankruptcy. Not that he acted out of sheer nobility: he knew that the railroad would have to pay him enormous fees for credit it could get nowhere else. But it needed more credit than Drew alone could muster, and so the former drover turned to his old friend. “Mr. Vanderbilt has been called upon for aid after every member of the board of directors, except Mr. Drew, declined to come under for any further responsibility” the New York Herald reported, “and if he backs out we really do not know what will become of the once magnificent Erie Railroad Company”7
He did not back out. Vanderbilt endorsed the Erie's paper—that is, he accepted ultimate responsibility for its repayment of a six-month loan—to the sum of $400,000. For collateral, he took a mortgage on the entire rolling stock, all 180 locomotives and 2,975 cars. Drew endorsed notes for $200,000 (later even more) and took a mortgage on everything that was left. If the Erie didn't pay, it would become the personal property of Vanderbilt and Drew. The railroad's position was so precarious that a panicked sell-off of its stock broke out when it was rumored that Vanderbilt had been thrown from his wagon in Broadway and severely injured (it actually happened to his brother Jacob).
But the Erie paid back the loan. It also delivered a 10 percent fee to the two gentlemen, a neat $40,000 payoff for the Comm
odore on his bet that the Erie would survive.8
The incident reveals much about Vanderbilt's peculiar role in the emergence of the modern economy. The hallmark of a modern financial system is institutionalization—the emergence of banks and similar bodies to pool capital, assess risks, and provide credit. By 1854 such institutions had already sprouted on the American scene, but Vanderbilt the individual seemingly dwarfed them all. In rescuing the Erie, he (and Drew) accomplished what seemed beyond the combined might of New York's merchant class. He would have to battle that class again—as early as the beginning of October, when his spokesman faced down an angry meeting of New Haven Railroad stockholders, marking the start of Vanderbilt's long war to force the corporation to accept responsibility for the spurious stock Schuyler had issued.9 But his salvation of the Erie consolidated his position as a merchant prince in the Medici mold, both a relic of a bygone era and an aggressive leader of the new. And it contributed to a slow and subtle change in his social status.
At first glance, it seems impossible to decipher the contradictory signals sent by New York's great merchants in the 1850s. James King and the Mercantile Agency scorned him; Hamilton Fish and Robert Schuyler turned to him for help. But the signs of acceptance were growing more numerous. In 1855, for example, he received a dinner invitation from the socially prestigious merchant Cyrus W. Field, brother of the prominent lawyer David Dudley Field, denizen of fashionable Gramercy Park, and organizer of an attempt to build a transatlantic telegraph cable. Unusually, Vanderbilt personally wrote a reply. “I am extreamly mortified to be compelled to say it is out of my power to do so in consequinc of an ingagement previously made,” he wrote.10 This otherwise insignificant letter is less notable for Vanderbilt's continuing disregard for conventional spelling than for the formal tone that now suffused his language, as well as the fact of the invitation itself.
Did this creeping social acceptance give his wife Sophia equal satisfaction? “She was of simple tastes and habits, and never learned to feel quite at home amid the great and splendid city” wrote William A. Croffut a decade after Vanderbilt's death. Croffut was more a gossip than a biographer, but we have little other evidence. “She clung closely to the acquaintances of her youth, and used to tell… that the happiest days of her life were those spent in hard work in the halfway tavern at New Brunswick, and that she liked the house that her husband had built on Staten Island, with all the children romping on the lawn… far, far better than the prim mansion on Washington Place.”11
WITH ALL HIS ENEMIES CHASTISED, Vanderbilt had to decide what to do next. No matter how significant he was as a financier, temperamentally he wasn't suited to merely play the money man. He was a builder of enterprises—more specifically, he was a competitor. He was accustomed to taking a leading role in transportation, which was by far the largest sector in the American economy; that meant he was accustomed to being a public figure, for transportation was the great meeting ground of public and private interests in the nineteenth-century republic. It is not surprising, then, that as soon as he closed up his California lines he launched an attack on the sea lanes to Europe.
The end of 1854 happened to be the perfect time for his entry into the transatlantic steamship business. The Cunard Line, the British steamship company, temporarily disappeared because of the intensifying war with Russia. “In response to the British government's need for support in the Crimea,” writes maritime historian John A. Butler, “the line was… obliged to withdraw from the New York-Liverpool route and send its ships to the Black Sea with troops and mail.” In addition, the primary American competitor, the heavily subsidized Collins Line, had recently suffered the sinking of its flagship Arctic.12
“There is room for more Atlantic steamships, and, just in the nick of time, we have the man to step in and fill up the deficiency,” the Herald announced in December. “We understand that Mr. Cornelius Vanderbilt, who, as a shipbuilder and navigator has earned for himself the title of ‘Commodore Vanderbilt,’ is now building two fine steamers, upon the general plan of the North Star, to ply from New York to Havre or Liverpool, and that they will be ready for sea in the course of the coming spring.” Though the Herald avoided criticizing the Collins Line, the political controversy surrounding its federal subsidies suffused its commentary. “Competition is the life of business,” it wrote. “Commodore Vanderbilt has the necessary experience, both as a steamship builder and as a steamship navigator, to know what to do in the way of putting up a perfect steamer; and with a private fortune of some $7,000,000 or $8,000,000, he may undertake this great Atlantic enterprise with impunity”13
The Herald was right in one respect, but off the mark in two others. The Commodore did indeed have a steamship under construction at the Simonson shipyard, one specifically designed for the Atlantic. The New York Post lovingly described the three-deck sidewheeler: “twenty-three hundred tons burden, and named the Ariel, diagonally iron-braced throughout, and considered as strongly built as any steamship of her class afloat.” But, according to Vanderbilt himself, the Herald's estimate of his fortune was short by several million—a margin larger than the estate of nearly any other wealthy man in the country. An associate later recalled how the Commodore asked him who he thought was New York's next-wealthiest merchant, after William B. Astor. When he guessed Stephen Whitney, with some $7 million, Vanderbilt snorted, “Hmmm! He'll have to be worth a good deal more than that to be the second-richest man in New York.”14
A more significant oversight concerned Vanderbilt's attitude toward subsidies. He undoubtedly took a dim view of federal payments to private businesses—but he had no intention of operating at a disadvantage. He wanted for himself those federal dollars now flowing to Collins, though he was willing to take smaller helpings. To get them, he would embark on a dramatic new lobbying campaign in Washington.
Before he did so, he may have seen an opportunity to make a quick return on his investment in the Ariel. Sometime around January 1855, he reportedly called upon Collins in his office. The sixty-year-old Commodore bluntly stated his proposition: he planned to fight for the subsidy in Congress, but “he would refrain from doing so if he (Mr. Collins) would put back two of his ships to the Allaire Works for repair, and purchase the steamer Ariel, then on the stocks, for $250,000,” wrote the New York Times some weeks later. “Mr. Collins declined, considering the Ariel worth not over $150,000, and that $100,000 was asked simply as ‘hush money’” If the story was true, Collins badly underestimated the Ariel's value. In conversations with friends, Vanderbilt reportedly shook his head over his foe's stupidity in turning down a very fair price (especially in light of his long history of commercial extortion). Then again, the story may have been false, as it was reported by the openly hostile Times. The newspaper surmised, “The fact is, the ‘Commodore’ has become so accustomed to bringing down his game, that it is not to be wondered at if he does expect it to fall the instant he points a gun.”15
Collins himself brimmed with confidence. In the age that saw the great flowering of lobbying, he lobbied more effectively than anyone. In 1847, he had convinced Congress to pay him a subsidy for ten years in return for building five ships capable of conversion into military transports or men-of-war. He built four, all luxury passenger liners. The sums his company drew were staggering for the time. Its ships, each roughly 2,800 tons, cost an average of $736,035, an extravagance that Vanderbilt would never have tolerated—though he never had federal loans to cover his expenses. By 1855, federal payments to the line had risen to $858,000 annually, or $33,000 per trip; one congressman calculated that it had sucked $7,874,000 out of Washington since its formation. Collins lavished luxuries on his ships, built them to be very fast, and ran them hard. “They used twice the coal of other ships,” writes historian Mark Summers, “and cost more in repairs after six years than the original outlay for construction.”16
“A great deal is said about the excellence of these steamers,” one congressman quipped. “They are certainly the deepest-draught st
eamers I have ever yet heard of—drawing thirty-three feet in the National Treasury.” Collins secretly pooled earnings with the Cunard company, and earned an average annual profit of 40 percent per year, though inventive accounting made it seem that his line ran at a loss. “Any observer,” Summers concludes, “could see how well it did by a glance at the Brussels tapestries, chandeliers, silver tea-services, and rosewood furniture on board.”
To keep Congress from so observing, Collins marshaled the most effective lobbyists in Washington, including banker and gambling-house proprietor W. W. Corcoran and former House clerk Benjamin B. French. “While others got their thousands for aiding in the Collins steamer appropriation, I got $300,” French complained in 1852. “True I worked only one day, but if I had not worked that day, their appropriation would have been lost, for my intimacy with a single member caused him to remain at home, & his vote against it would have defeated it. They ought to have given me ten times what they did.” Another of Collins's “borers” (as they were called), a man notorious for his effectiveness in greasing money out of Congress, was described by a close friend as suffering from only one flaw: “He is such an infernal scoundrel.” Collins worked the Capitol in person, bringing the lavishly appointed Baltic up the Potomac in 1852 to entertain congressmen desperate for amusement in backwater Washington.17
The borers, the Collins subsidy, and the lucrative mail contracts for the California lines all represented a simmering crisis in American politics, as the ideology of an earlier generation broke down in the face of economic and territorial expansion. Radical Jacksonians condemned both active government and business corporations; yet the growing nation clearly needed transportation enterprises on a vast scale. This contradiction resulted, perversely enough, in large public payments to private corporations to do the work, with an attending frenzy of corruption.18 Ironically these circumstances set up Vanderbilt to play the Jacksonian champion even as he reached new heights of stockjobbing.