The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  “Kindred and friends,” he said, “the joyful yet solemn anniversary to which we have so long and anxiously looked forward, has at length brought us together. Let us be thankful that it finds so many links in our family circle still bright and unbroken.” After this auspicious beginning, Corneil's address took an awkward and painfully solipsistic turn. “For myself, having tested in a larger measure, perhaps, than others, the unwearying patience and unfailing love of those around whom we are gathered tonight,” he continued, “I feel sure that they will yet remain with us for many years, if only that I may be enabled to prove, by devotion and watchful care, through the long bright autumn of their days, that their long-suffering goodness was exercised in behalf of one who is neither insensible nor ungrateful.” A ripple of cringing around the room can be imagined at this wordy display of self-absorption and self-loathing.

  As if to break the crust of discomfort, La Bau brought in a six-foot “tree” of ivy wrapped around a trellis that spelled out the names of Vanderbilt's children in tiny flowers. “The Bible tells us that to everything there is a season,” he said. “I insist that it is not time in which to cast away stones, because, alas for poor humanity we all dwell in glass houses.” This was an appropriate occasion for such reflections. “Could you, sir, fifty years ago, have predicted that steam would have been encased in a steel jacket, placed on wheels, and sent off, puffing fire and smoke, through this land, upon iron roads?” La Bau asked. “And could you, madam, have predicted that men of this day, thousands of miles apart, would converse by lightning?”

  The Commodore declined to speak, as always. Rather, he and Sophia thanked their offspring through their oldest son, William. Billy, as Vanderbilt still called him, had earned his father's almost begrudging affection during the North Star excursion and its aftermath, in large part by winning his respect. “He was slow and clumsy in his movements,” the New York Sun later remarked. “His face was red and rough-skinnned and he had very small, dull eyes, so that he had the appearance, not justified by the facts, of a slow-witted man.” Unjustified indeed. The former treasurer of the Staten Island Railroad became the bankrupt line's receiver, revived its fortunes during the wartime boom, and now served as its president. This dull-looking farmer had emerged as a leading man of Richmond County and stood now as his parents' mouthpiece.73

  At ten o'clock, after Billy spoke, the band played a march to accompany the family into the dining room, in a procession led by the Commodore and Sophia. They ate; La Bau sang; the grandchildren sang; the 7th Regiment Band marched up outside and serenaded the famous couple; and near midnight the band indoors played “Home, Sweet Home,” as arms slid into coats and coachmen drove up carriages. It was a glorious evening for the Vanderbilts and their children—except for the two who did not attend. One was Frances Lavinia. She was described as an “invalid,” a term so general and all-encompassing that it could have included anything from mental retardation to multiple sclerosis, though clearly her ailment had left her unable to care for herself since her birth in 1828. She lurked somewhere out of view, a vivid yet completely obscured fact in Vanderbilt's life.74

  The other missing child was George. On September 19, the regular army had promoted him to captain of the 10th Infantry Regiment, but it appeared increasingly likely that it would be a purely honorary appointment. Soon after the horses pulling the last carriage had clopped away from the front of 10 Washington Place on the night of the golden anniversary, Billy resigned the presidency of the Staten Island Railroad to go to his brother in Nice. Whether he was prompted by news of his brother's decline is unclear. Whether he was prompted by news of his brother's death is unclear as well. George died on December 31, 1863. About the end of January, Billy returned to New York with his corpse.75

  At half past ten in the morning on Thursday, February 4, not quite two months after the golden gathering, the family again assembled at 10 Washington Place, along with army comrades and friends of the deceased. By one report, George was engaged to a Miss Hawley, on whom the Commodore bestowed a house in upper Manhattan; most likely she attended as well. The funeral procession trailed in black behind teams of horses down to the Staten Island Ferry, rolled onto a boat that steamed across the bay, and drove up the drive from Vanderbilt's Landing to the cemetery, where the statue of Grief presided over the family tomb. “How wavering are the scenes of earth,” wrote Rev. Samuel Kissam, Billy's father-in-law, “our kindred pleasures, too.”

  Now, now that circle we behold

  In sorrow deep and wide,

  Weeping o'er son and brother cold,

  Long, long their joy and pride—

  Embalmed, and ready for the tomb.

  Vanderbilt buried his youngest son. Now he looked to his oldest. William would speak for him not merely on ceremonial occasions, but with the full authority of the Commodore's tens of millions of dollars in his voice. At the next Harlem election in May, Vanderbilt made William vice president of the company. He brought him all the way into Manhattan, in fact, giving him a gift of a house on Thirty-eighth Street, on the west side of Fifth Avenue, two blocks south of the massive stone walls of the Egyptian-style reservoir between Forty-second and Fortieth streets. As dutifully as when William had left East Broadway for the farm twenty years before, he moved his family back to New York, into a house much like its new owner, substantial but unostentatious. “The interior was richly and not showily furnished,” the New York Sun wrote, “and the drawing room was surpassed in elegance of decoration and furnishing by hundreds in the city.”76

  As for Corneil, he seems to have left George's funeral with a determination to plummet as swiftly as he could.

  ON JANUARY 28, 1864, the Congress of the United States passed a resolution thanking Cornelius Vanderbilt for his “unique manifestation of a fervid and large-souled patriotism,” the gift of the steamship Vanderbilt to his country. It further resolved that President Lincoln be requested to “cause a gold medal to be struck, which shall fitly embody an attestation of the nation's gratitude.” Congress may have waited nearly two years before extending its thanks, but its timing was appropriate: it celebrated the finest act in the long career of perhaps the single most important figure in the history of American steam navigation, at the very moment he left the sea behind.77

  On the rivers, bays, and oceans, he had acted like a Viking prince, taking his fleet wherever trade or plunder seemed most promising, freely abandoning markets for a price. Railroads, on the other hand, were fixed properties, geographical entities by their very nature—often compared to nation-states by contemporaries and historians. The Commodore understood this intimately, having been involved in the industry for three decades. Though famous as a warrior, he demonstrated statecraft in the New York Central election, offering no hint of aggressive intent.

  Diplomacy, unfortunately, did not seem to work on the management of the Hudson River Railroad. “When I first went into the Harlem road, I did not want to have anything to do with the Hudson River,” Vanderbilt said later. “I took the Harlem when it was down to nothing, and I got it up along by degrees; but I found that there was a continual clashing with the Hudson River. I said this is wrong; these roads should not clash.” For one thing, competition between the parallel lines kept fares dangerously low78 For another, their friction could be felt in relations with their mutual partner, the New York Central. Even after the Hudson River's directors failed to oust Corning, they demanded preference in through traffic. It was a conflict made nearly inevitable by the fragmentation of the railroad net into multiple companies. “In a hundred miles,” the Railway Times observed, “we have two or three corporations with their conflicting interests, conflicting time tables, and different organizations, likely at any moment to be at war with each other as interest or personal feelings may dictate.”79

  Now began the second phase of the founding of Vanderbilt's empire: his campaign against the Hudson River Railroad. He began with an attempt to undermine it by changing the physical railway net itself—by o
utflanking the enemy in a double envelopment. First, on January 27, the Harlem board authorized him to sell (to himself, if he wished) the additional $2,139,950 in stock approved by the stockholders for the purpose of double-tracking the line to Chatham Four Corners. Second, he threatened to build down the western shore of the Hudson River, filing for incorporation of a line from Albany to the vicinity of New York City And he accepted Daniel Drew's proposal to build a short railroad from a point on the Central's line at Schenectady to Athens, a town on the Hudson River south of Albany where the People's Line steamboats would face fewer weeks of ice each winter. Officially known as the Saratoga & Hudson River Railroad (more commonly as the Athens road), it received a charter on April 15. Vanderbilt took a quarter of the $1.5 million in stock and went on the board with such well-known Wall Street figures as Henry Keep and Azariah Boody with Drew as the president. The two lines would be weapons against the Hudson River Railroad, threatening to strip it of what little freight it received from the Central.80

  The Commodore also had a spy among the enemy: John M. Tobin, whom Vanderbilt had hired years before as a fare collector on the Staten Island Ferry. Matthew Hale Smith reported a popular story that, when Tobin first went to work for the ferry, Vanderbilt strictly instructed him to allow no one to ride for free; the first time Tobin saw the Commodore come aboard, he demanded the fare, saying, “No dead-heads on this line” (using the common slang for those who rode boats and trains for free). “Tobin became the delight of the Commodore,” Smith wrote. Tobin later had gone into the liquor business in Manhattan in the 1850s, and was considered to be “of gd [character] & [habits], hard-working & [industrious], careful & reliable,” according to R. G. Dun & Co.

  The thin, wiry Tobin turned to stock speculation during the war, and became a flamboyant broker at the Open Board. “He was known to be somehow mysteriously connected with Vanderbilt,” William Fowler recalled. “His style of operating, too, was so bold and so dashing and even reckless… that it quite captivated ‘the boys,’ and they were all agog when Tobin got on his pins and commenced bidding.”81 Tobin's connection to Vanderbilt remains just as mysterious now as it was then, but a connection they clearly had; so when Tobin had taken a seat on the Hudson River board on June 8, 1863, Vanderbilt had gained either a puppet or an ally inside the rival corporation.82

  One of the canonical stories of Vanderbilt's life, enshrined in myth by the banker-memoirist Henry Clews, is that he had masterminded a famous corner in Hudson River stock almost simultaneously with the Harlem corner of 1863.83 There is no evidence for this tale, and it makes little sense. The leader of the Hudson River corner was Leonard Jerome, whom Vanderbilt simultaneously battled in the New York Central election. In December, the Commodore prepared to double-track the Harlem to Albany; why would he plan to pour money into a line with heavy grades if he was buying control of a parallel route, one better equipped and cheaper to operate?

  The best explanation of his real actions, and calculations, would come from the Commodore himself on February 5, 1867, in testimony before a legislative committee. As quoted before, he would state that he had been frustrated and irritated by the railroads' conflicts. “I said this is wrong; these roads should not clash,” he would say. “Then, step by step, I went into the Hudson River.” Having weakened it with his outflanking moves, he slowly purchased its stock, quietly maneuvering for control.84

  IN 1864, AS VANDERBILT stepped-by-step into the Hudson River, he continued to direct the Harlem's affairs—none of which were more pressing than the Broadway streetcar line. Despite the municipal grant (and the Harlem's plan to buy the Broadway stagecoach companies), no progress had been made. In October 1863, a judge had ruled that the city had no power to issue its grant. The Harlem would have to go to Albany85

  In early March, the railroad asked the state legislature for a bill to validate its rights to a railway in Broadway. Horace Clark led the lobbying effort, taking with him his fellow director, Daniel Drew. The committee seemed agreeable, and Senator John B. Dutcher, the Harlem's champion, prepared a report in favor of the bill. Harlem stock rose to 145. Then a vote was called. To Dutcher's (and Clark's and Vanderbilt's) surprise, the committee issued a negative report. Harlem plunged to 107.

  Legislators on either side of the issue muttered charges of corruption against their foes. On March 25, Dutcher raised the issue openly on the Senate floor. “He… denied that those who were here urging this bill had been speculating in the stock, but the speculating in stock was on the other foot,” the New York Herald reported. “Those who had been trying to kill this bill had been in Wall Street, to his knowledge, betting great odds that the report would be unfavorable, and had also been selling the stock short.”

  So they were. In fact, the inside trading on the committee report marked only the start of a massive attack by “a legislative clique” (as the Herald called the conspirators) on the stock value of the New York & Harlem Railroad Company. Following the example of the city councilmen the year before, they plotted to use their lawmaking power to make money by shorting Harlem. The corrupt legislators likely had an inside partner. Pervasive reports circulated in the press that Drew was selling Harlem short.86

  Drew's betrayal of Vanderbilt marked a chilling turn in their relationship. Despite Drew's later reputation for treachery, there is no evidence that he ever double-crossed the Commodore over their decades of partnership and friendship. Indeed, they were so close that Drew named his own son after William H. Vanderbilt.87 So why now? Perhaps most perplexing, why did the famously shrewd Drew believe that he could drive down the price of the very stock that Vanderbilt had recently cornered?

  One motive is obvious: if he succeeded, there would be a great deal of money in it. But more telling is the fact that, for the first time in more than thirty years, the two men's strategic interests were diverging. As long as Vanderbilt controlled the Harlem alone, he and Drew had a common enemy—a common rival for the New York Central's through freight—in the Hudson River Railroad. But Vanderbilt's creep toward control of the Hudson River presaged a conflict with Drew's steamboat line.

  As to why Drew thought he could succeed, there are four likely answers. First, he probably believed, like most of Wall Street, that the Harlem had no hope for prosperity without the Broadway line, and he knew that the legislature held the last hope for such a franchise. Second, the amount of Harlem stock had just increased, which would tend to depress the price. Third, the legislature was considering another bill to allow the Harlem to convert $3 million of its bonds into still more shares; this would cut its debt in half, but further add to the circulating stock.

  Finally, in a reflection of the growing complexity of the financial markets, Drew had cunningly refined his method of operations. In addition to selling shares that he did not own, he sold calls on shares that he did not own. A call was a contract that gave the buyer the right to call on the seller and buy a certain stock at a certain price within a limited period of time. If Drew sold seven-day calls for Harlem at 125, but the price fell below that figure for the duration of the call, then the holder of the call was certain to forgo his right to demand the stock. Who would insist on buying stock for more than the prevailing price? Drew, then, could make money without having to provide anything. More important, short-sellers used calls as margins to protect themselves from an upturn in the market. (Should the price rise unexpectedly, they could limit their losses by buying in at a preset call price.) Drew's huge distribution of calls, in addition to his own short sales, added momentum to the downward movement in Harlem.88

  Vanderbilt responded to Drew's campaign in characteristic fashion: he began to buy. With Tobin as his partner and agent, he took every offer of Harlem stock. Every day, Fowler recalled, Tobin could be seen at the Open Board or on the curb, “bidding for and buying thousands of shares, his face pale with excitement and his opalescent eyes blazing like a basilisk's. He grabbed at the stock with fury, for he had suffered by the decline.” The market felt the weight o
f the Commodore's liquid millions pressing down on short-sellers, who were burdened also by the thousands risked by Clark, the Schells, and Tobin himself. By March 29, Harlem had stabilized at 126½. In a few days it climbed over 141, and it kept rising.89

  The Commodore may have felt even richer than usual in the first week of April, when he was approached by members of the United States Sanitary Commission, a private charity devoted to the medical care of soldiers that had grown into an enormously important auxiliary to the Union army. The organization was about to hold a fund-raising fair in Union Square, and its leaders wanted a donation from the Commodore. Vanderbilt declined to make a pledge. Ever attuned to the marketplace, he said he would donate as much as any other man. The delegation later returned with a check for $100,000 from Alexander T. Stewart. “He found himself cornered,” the press reported. “However, he was as good as his word. He covered Stewart's check with a check of his own for a like amount.”

  On April 4, the fair commenced with a military parade before perhaps half a million onlookers. Leonard W. Jerome contributed in his own way hosting plays at his private theater. “Tickets are in great demand at five dollars, the whole transaction being highly distinguished, aristocratic, and exclusive,” Strong recorded. “House was full and everybody in the fullest tog, men in white chokers and women in ball costume.”90

  On Wall Street, all went well. A great upward tide lifted all shares. In the general financial frenzy of that year, brokers decided to open an evening exchange in a room at the Fifth Avenue Hotel, to keep on trading after dark. But Harlem led all others. Drew and his followers in the stock exchanges fought to drive down the price—the legislators prepared to obliterate the Broadway bill—all to no avail. “The Harlem corner goes up vigorously,” the financial correspondent for the New York Times wrote on April 15. Already Vanderbilt made money from frightened bears. “Heavy differences are said to have been paid to the leading Bull in the stock to close contracts,” the Times added.91