The First Tycoon: The Epic Life of Cornelius Vanderbilt

by T. J. Stiles

  “I WAS IN THE HABIT OF entertaining a good deal at my house the public leading men of the country,” Corneil would say, “and my expenses were very large, inasmuch as it was expected of me to sustain the honor of my family name as far as I could.” When asked precisely which “name” he meant, he loftily replied, “The name of my father, which was also my own. I maintained the honor of it in the State and city where I lived.”47

  This statement revealed more than he probably intended. He equated “honor” with a lavish lifestyle, and the only one who “expected” it was Corneil himself. The Commodore gave him $100 per month, increasing the allowance to $150 after his marriage—more than the monthly salaries of many men, but hardly an income on which to entertain “the public leading men of the country.” Corneil could not escape the hope that he might suddenly multiply that amount with a hand of cards or a spin of the roulette wheel. He returned again and again to an ever-lengthening list of saloons: Portland's, at 139 Broadway; Charley Ransom's, on Twenty-fifth Street; John Daly's, on Broadway between Thirteenth and Fourteenth streets; Zachariah E. Simmons's policy bank, on Broadway near Fourth Street; and George Beers's place, on University Place at Thirteenth Street. At Beers's saloon, it was said, Corneil conveniently collapsed in an epileptic fit if he held a losing hand.48

  And Corneil lost, and lost, and lost. He pawned his watch; he pawned his wife's rings; he pawned what self-respect remained to him. Like many addicts, he loathed himself, yet blamed his father for withholding his wealth. Corneil even forged the Commodore's name, to punish his father as much as to get money out of him. He wrote to Horace Greeley after he had finally struck bottom, “Discouragement, disgust, & an indicative desire to revenge myself upon my father by thus disguising his name forced me to everything vicious.”49

  He collided with said bottom in late November 1865. Shattered emotionally and physically—“a discouraged, abandoned, and well nigh Godforsaken wreck,” as he described himself—he went to the home of his brother, whom he resented deeply. He handed over pawn tickets for his wife's jewelry and his own watch. Then he disappeared. “Corneil has now gone to Litchfield [Connecticut] to a private institution which receives but eight or ten patients,” Ellen wrote to William on December 3. “He was admitted through the influence of my family physician. I have never known him during all the years of our married life so completely undermined in his general health as between the last two or three months.”50

  When Corneil went into the Litchfield asylum, he carried with him the love and support of two women who never turned away from him. He felt himself sustained, he wrote, by “many kind & encouraging letters that I have received from my dear wife & my noble, faithful mother (the only two in fact who had faith).” Greeley, too, maintained their friendship, despite Corneil's many unpaid loans; for good reason, Corneil called him “my truest & only self-sacrificing friend apart from mother & wife.”

  Yet even those family members who had rebuked Corneil now rose to help him as he sought to help himself. On December 25, as Ellen ate her Christmas dinner alone at her home in Hartford, a messenger from William knocked on the door. He handed her the rings that Corneil had pawned and William had redeemed. The Commodore himself took pity. On February 26, 1866, Corneil wrote to Greeley about “a few lines received… from my serious & well meaning father, congratulating me on my present course & urging me to persevere in well doing.” This rare encouragement gave him “fresh ambition & determination to regain from him that confidence & esteem which my past recklessness so materially impaired.” Corneil wrote to William of his resolve to abandon “my wild, reckless, and unprincipled conduct… and to avoid likewise all connection with the corrupt and demoralized associates who have hitherto so artfully sought to entrap me by their wily and infernal concoctions.”51

  But it is not easy to escape who we are. On December 27, Corneil had celebrated his thirty-fifth birthday in the Litchfield asylum. He was no longer at a formative or impressionable age. “I am sorry to state that our income is pledged by Ellen to joint creditors for five months to come,” he informed William, implying that his brother should cover the debts. He also wrote that it was “seriously inconvenient to be without a timepiece,” and glibly asked William to redeem his watch from the pawnshop, promising to pay him back later. Not long after he left the asylum, he returned to form, issuing promissory notes in August and September 1866 that he declined to pay52

  There is little doubt that the Commodore felt betrayed by his son's relapse. Corneil, desperate for love and money, often went to 10 Washington Place to see his father, but Vanderbilt sent him away. “The Commodore said he didn't want Cornelius J. around at all,” recalled nurse Cadwell. When Corneil wrote a wordy appeal to his father, Vanderbilt thought it impressive—as a piece of sophistry. “I remember the Commodore receiving a letter once from Cornelius J.,” Cadwell added, “and saying that fellow, or that scamp, could write a letter to the Queen.” Sophia, on the other hand, could never bring herself to condemn her son. She let him into the house secretly, saw him privately, and kept him out of his father's sight.53

  And yet, even Corneil, this creature of deceit, could not deny the truth about himself. He alternated his bombast with references to “my shame & mortification & sorrow.” He was literally fatalistic about his hope of reform. He wrote to Greeley of his “determination to humbly forfeit my life as the penalty of further vice.” It was the one prediction about himself that would come true.54

  ON FEBRUARY 15, 1866, the locomotive Augustus Schell chuffed onto the Albany bridge and rolled westward along its 2,020-foot span, over a total of nineteen piers, across an iron turntable above the center of the river below, and rattled down into Albany itself. Following this symbolic inauguration, the first passenger train crossed one week later. After four years of construction (and many more of litigation), the bridge gave the New York Central a continuous, direct connection to the Hudson River Railroad, and thus to Manhattan. But its completed track became a lighted fuse.55

  The Commodore's cold response to Corneil's backsliding revealed the icy judge who had always lurked behind the encouraging father. So, too, did the implacable warrior remain within the diplomat who had negotiated with Corning and Richmond. In December 1865, for example, the New York Court of Appeals handed down final judgment in the long-running court battle between Vanderbilt and the New York & New Haven Railroad over the shares that Schuyler had fraudulently issued in 1854. Over the years, weary shareholders had settled with the company—but the Commodore refused. He had waged his battle until the court ruled that the company owed $900,000 to Schuyler's victims. “The great principle is now settled by the highest court in this State,” wrote the Commercial and Financial Chronicle, “that railroad and other corporations are bound by the fraudulent acts of their own agents.”56

  It was, indeed, a great principle—but businessmen also saw a more personal lesson in the Schuyler fraud case. “The Commodore's word is as good as his bond when it is fairly given,” wrote Matthew Hale Smith. “He is equally exact in fulfilling his threats.” Vanderbilt “pursued his purpose for years with the instinct of an Indian. He attained his end at last.” In a more nuanced way, the reporters for R. G. Dun & Co. drew much the same conclusion: that Vanderbilt was a good ally but a dangerous man to cross. “Is a bold operator, but does not [do] that [which] will hurt him much,” they wrote in 1865. “Has so many resources at his command that it is hard to be caught.” In 1867, they added, “Among the richest men in this country. Good as gold but sharp.”57

  His edge would be felt again after the completion of the Albany bridge. Vanderbilt expected that the Central would finally end its custom of shifting freight to Drew's steamboats, as it was now more efficient to send through trains over the bridge. But once the ice on the river dissipated, the People's Line boats again churned up to the Albany docks and began to load freight. Even worse, March saw the completion of the Athens railway, giving the Central a shortcut to the river and a pier that allowed cars to run
right alongside the steamboats. “That was one of the foolish acts of my life,” Vanderbilt would say of his investment in the Athens road, “but I don't cry about it.”58

  Instead, he tried to do something about it. As the Railway Times later reported, “Commodore Vanderbilt, who is an owner in the Athens line to the extent of half a million of dollars, is reported to favor the taking up of the rails and the abandonment of the route.”59 The struggle over the thirty-eight-mile line was convoluted and largely hidden, pitting Vanderbilt against Richmond, Drew, and Henry Keep, each with his own interests and agenda. “I will tell you a very sore grievance to us,” Vanderbilt said to a state assembly committee several months later, speaking for the Hudson River.

  We could send up hundreds of car loads of freight, and they [the Central] would uniformly send our cars back empty. We cannot afford that. Not only that, but they would take our cars that we would send up and send them over their road.… We would sometimes trace our cars to Athens. What business had they to send our cars to Athens?

  Hauling empty cars back from Albany, of course, was a pure loss for the Hudson River Railroad, and the Central's appropriation of them was costly; but sending them to Athens was insulting. “I don't like your manner of getting our cars, running them to Buffalo, and then running them back to Athens,” he told Richmond.60

  If these disputes seem trivial, they were in fact the birth pains of a truly national economy. These railroad companies had been created for parochial reasons—to connect New York to Albany, to connect the Great Lakes with the Hudson River, to undercut the Hudson River Railroad—but now they were pressed into a continental transportation system. Freight and passengers moved by rail across distances scarcely imagined just ten or twenty years earlier. As far as the public interest was concerned, the fragmentation of the system was problematic, for the repeated transfers of freight from one company to another was inefficient and costly. But these conflicts between connecting lines raised even greater dangers: What if one company simply refused to cooperate, and closed its rails to its neighbors' shipments? The result could be catastrophic.

  Another of those pains came at the end of the second week of April, in the form of a strike by the Harlem streetcar drivers. “They held a mass-meeting this afternoon around the Washington statue on Union Square and afterwards marched in procession up Fourth Avenue,” Strong wrote in his diary. “I heard one of their orators, an unwashed loon. He spoke grammatically, fluently, and sensibly, and with good manner and action. Would that I enjoyed the same gift! I hear of no rioting yet and of but few cases of assault on newly enlisted drivers. The police seem wide-awake.”

  A fluent and sensible unwashed loon? Strong's apparent confusion over the union leader reflects how rapidly the times were changing. The wartime boom—and polarization of rich and poor—spawned a proliferation of labor organizations. In 1861, there were roughly fifteen unions in New York City; by 1864, there would be 157. “A larger proportion of the metropolitan working population enrolled in trade unions between 1865 and 1873 than during any other period of the nineteenth century,” write two historians of New York. Between 1863 and 1873, workers carried out 249 recorded strikes. Of course, walkouts had occurred in previous decades, but the Harlem drivers' strike pointed to the future. The Harlem men were employees of a large, impersonal corporation. Most could anticipate working their entire lives for wages, rather than starting their own farms or shops as their fathers might have done. Strikes now broke out not simply over short-term grievances, but to rebalance the long-term relationship between capital and labor—as seen in the campaign for an eight-hour day. A labor movement emerged, mirroring the rise of the large business enterprise.61

  The Commodore had never experienced such an existence as that faced by his employees. Even his relationship with Thomas Gibbons was more one of sponsorship than mere employment. From his perspective, labor represented a cost. His son William managed the workers under strict instructions to economize, even to the extent of hiring strike-breaking drivers. The fluent and sensible “spokesloon” for the strikers may not have appreciated it very much, but William carried out his task so well that the Harlem finally would pay a 4 percent dividend ($2 per share) in June.62

  Wall Street and the railroad industry greeted the dividend with disbelief. “It has never been considered a paying road,” judged the Central's superintendent, Harlow W. Chittenden. “Mr. Vanderbilt paid a dividend but most people doubt whether he had earned it. I think it was like taking money out of one pocket and putting it in the other.” He and others saw it as an accounting trick, pulled by the man who owned most of the stock, in order to make his pet project look successful. But they were wrong.63

  How do I make a profit? Vanderbilt would rhetorically ask in court in 1869. “I make it by a saving of the expenditures. If I cannot use the capital of that road for pretty nigh $2,000,000 per year better than anyone that has ever been in it, then I do not want to be in the road.” He would elaborate at length on this approach. “That has been my principle with steamships. I never had any advantage of anybody in running steamships; but if I could not run a steamship alongside another man and do it as well as he for twenty percent less than it cost him I would leave the ship.” His triumph in making the Harlem pay may well have been more satisfying to him than the award, on April 17, of the gold medal that Congress had authorized during the war.64

  THE ATHENS RAILROAD, the Albany bridge, and the People's Line: this was the iron triangle in which the Central and the Hudson River railroads collided. And Henry Keep, Dean Richmond, and Daniel Drew were the three men whose interests and personalities shaped the conflict. In 1866, Vanderbilt would make one last attempt to reach an accommodation with each of them. His hope lay in the fact that Drew and Richmond, at least, had vulnerabilities that inclined them toward compromise.

  Drew's were personal and pecuniary. In early 1866, he engaged in a massive short-selling campaign in Erie stock. Drew was treasurer of the railroad—but inside trading by corporate managers and directors had gone on for decades in America. Still, the Nation noted, the Erie had suffered more than most railroads. “It has been milked dry by parasites and hangers-on,” it wrote on June 5. “Everybody has fattened except the company, which has grown poorer and poorer every year.” Drew had grown fattest of all, and always off the Erie's financial weakness. “There has never been a time these ten years that the Company has not owed him money,” Harper's Weekly later wrote. “It has borrowed of Mr. Drew—because no one else would lend it.”65

  In early 1866, the railroad again needed money. Drew offered it, but he demanded Erie securities as collateral. The Erie (that is, Drew in his role as company treasurer) gave him (that is, Drew in his role as private speculator) 28,000 unissued shares created under a state law of May 4, 1864, along with $3 million in bonds that could be converted into stock at the holder's option. In return, Drew loaned the railroad a little less than $3.5 million. He then sold huge quantities of Erie stock at 90, on contracts that required him to deliver around the beginning of June. He steathily converted his bonds into stock, and on May 29 took all 58,000 shares out of his safe and threw them on the market. What he had sold at 90 instantly fell to 57½. Erie stockholders sold off in a panic, and Drew bought back his collateral for far less than he had sold it. It was “an operation,” Charles F. Adams Jr. later wrote, “which was at the time regarded as a masterpiece.”66

  Throughout this highly profitable maneuver, Drew had faced one potentially fatal danger: his friend and fellow director Cornelius Vanderbilt, who was a creditor of the railroad and very much wanted it to clean up its finances. (A year earlier the Erie board had voted a dividend “against the remonstrance of Commodore Vanderbilt,” according to the Chicago Tribune)67 If Vanderbilt had turned his mighty fortune against Drew's bear campaign, it would have been far more risky, perhaps even catastrophic.

  But Vanderbilt did not oppose his old friend. Did Drew make a bargain with him? It is impossible to know. What is known is
that Drew suddenly called a halt to the battle between his paddlewheelers and the Hudson River Railroad on June 1. When John M. Davidson, one of Drew's partners, sent runners to the railroad stations to call out the lower fares on the boats, a messenger “call'd to see me,” Davidson wrote to Corning, “and says, Drew says it must be stopped. Of course we understand Drew. He wants the fight to go on, but dares not show his hand, from fear of Vanderbilt.” At some point in 1866, Drew also agreed to cease running his boats to Athens. Taken together, these two facts sound very much like Vanderbilt's price for leaving Erie stock alone.68

  Richmond's vulnerabilities were strategic. He needed Vanderbilt's cooperation to settle a ruinous rate war with the other trunk lines. William Vanderbilt and James Banker joined Richmond in peace talks with the Pennsylvania, the Erie, and the Baltimore & Ohio on May 2 in Buffalo and May 22–23 at the St. Nicholas Hotel in New York. The negotiations produced a cartel—one of the “largest and most sophisticated cartels ever attempted in American business,” in the words of Alfred D. Chandler Jr. The trunk lines agreed to a schedule of rates; to end the special pricing represented by drawbacks and rebates; and to put themselves under the authority of Samuel Sloan as trunk line commissioner. He would receive a salary of $10,000 a year and have the power to fire any employee of any company who undercut the agreed rates.69

  Despite the happy cooperation between Richmond and the Vanderbilts in the creation of this cartel, tensions between them continued to rise. William, for example, discovered “hundreds of instances” in which freight specifically consigned to the Hudson River Railroad was reconsigned in the Central's offices to the People's Line.70 Rather than continue to fight over these petty but intractable issues, Richmond proposed a bold solution. One day in May, he suggested to Horace Clark that the Central consolidate with the Hudson River into one super corporation.71