The First Tycoon

by T. J. Stiles

  The tens of millions thrown about in this abstract battle on Wall Street captivated—and repulsed—the public. For one thing, the incident demonstrated that Civil War-era corruption was far more complicated than the historical cliché of the rich buying off lawmakers; in this case, as in the previous Harlem corner, the officeholders abused their power to profit from the deliberate destruction of the value of a major corporation. Time would show that extortion by legislators and their hangers-on was as serious a problem as bribery by the wealthy. Such graft only reinforced Vanderbilt's long-standing laissez-faire beliefs.

  Paradoxically, by punishing corrupt state legislators so thoroughly Vanderbilt made it appear that the balance of power in society was shifting away from democratic government and toward wealthy individuals and corporations. “Think of the one-man power that could accomplish this wonderful feat and prevail against a whole Legislature,” Henry Clews admiringly wrote in his memoirs. “Think of this, and then you will have some conception of the astute mind that the Commodore possessed, without education to assist it, in the contest against this remarkable combination of well-trained mental forces. There can hardly be a doubt that the Commodore was a genius, probably without equal in the financial world.”95

  The second Harlem corner marked the culmination of his move from steamships to railroads, for it forced him to concentrate his resources in this titanic battle. With victory in hand, he consolidated his power in the Harlem by driving Drew out of the board at the election on May 17 and giving his seat to Senator Dutcher. Out of 105,873 shares represented, the Commodore voted 29,607, though he likely hid the rest of his stock under the names of Horace Clark, Augustus Schell, James Banker, John Tobin (who voted 31,900 shares alone), and others. The next day, Vanderbilt hired his son William as the Harlem's vice president to manage the road's operations.96

  One month later, Vanderbilt made a second move to solidify his holdings, by displacing the Hudson River Railroad board in a disputed election. Out went Samuel Sloan, Moses H. Grinnell, Addison G. Jerome, and other giants. In came Vanderbilt's captains: Clark, Schell, Banker, and allies Oliver Charlick and Joseph Harker. John Tobin survived from the old board, of course, as did Leonard W. Jerome, who (according to rumor) had cooperated with Vanderbilt in the second Harlem corner. The new board elected Tobin president and created a standing executive committee—a common device, but typical of Vanderbilt's desire to centralize power—consisting of Clark, Schell, Banker, Jerome, and Charlick, in addition to Tobin. On July 6, the committee voted to end the competition between the Hudson River and Harlem trains.97

  Also in July, the Commodore sold his last sidewheelers to Atlantic Mail, which now supplanted the old Atlantic & Pacific Steamship Company. The step severed his business ties to his son-in-law Daniel Allen, who was a leading figure in Atlantic Mail alongside Cornelius Garrison. Curiously, Allen provided the only Vanderbilt to win glory in the war: his son Vanderbilt Allen, a West Point cadet appointed first lieutenant on June 13, 1864. The young officer soon found a place on General Philip H. Sheridan's staff.98

  The second Harlem corner typified Vanderbilt's battles on Wall Street in the 1860s. It was a defensive campaign rather than a merely speculative maneuver, designed to avenge himself upon men who had betrayed him. But it proved to be far more than a personal affair. By the summer of 1864, the Commodore had definitively left the floating world behind to concentrate on railroads. In short order he had gained control of the only two steam railways that entered Manhattan and linked it to the world, and had ended their costly rivalry. This first year set the pattern for his long railroad career: diplomacy, defensive battle, acquisition, reform, consolidation. In pursuit of “a small thing,” the bedraggled Harlem, he had begun to build an empire.

  “YOU MIGHT AS WELL HIT A BRICK WALL as hit that man on the head,” Yankee Sullivan declared in 1853. He spoke through the dripping blood of a badly battered face, and he spoke about John Morrissey his burly foe in a fight for a $1,000 stake, after the brick-wall fellow had beaten him into submission in fifty-seven minutes. The triumphant Morrissey—a fellow Irishman by birth—was somewhere between twenty and thirty years of age at the time, yet already he had acquired a fearsome reputation. As a teenager he had led an Irish gang on the streets of Troy against nativist thugs, before setting up in the slums of New York as a prizefighter, Democratic Party enforcer, and saloon owner. Notably lucky with his games of chance, he expanded beyond Five Points. His gambling house on Fifth Avenue was considered one of the city's finest.99

  Sullivan returned to San Francisco after his defeat, on a path toward ultimate suicide; the victor, on the other hand, went to Saratoga. Morrissey, the broken-nose prince of Paradise Square, aspired to fashion, and so he flowed with fashion's current to the Springs every summer. There his presence was unmistakeable, “in his white flannel suit, huge diamond rings, and pin containing brilliants of the first water,” as Matthew Hale Smith described him. He was a man “of immense size; tall of stature, a powerful-looking fellow, walking quietly about the streets, or lounging at the hotels, but seldom speaking.” During the Civil War he opened the Club House, a brick saloon on Saratoga's Matilda Street; as on Fifth Avenue, his place attained a reputation as the most elegant casino in town. But he remained a creature of the street, no matter how high he rose above it. In 1864, for instance, a crowd of con men from Manhattan—three-card-monte artists—stepped off the train at Saratoga. Morrissey sauntered up to them in his white flannel suit and quietly told them to leave town. They did.100

  Morrissey himself had a taste for gambling, though he would never be seen at a roulette wheel; he understood that apparatus too well to risk his money there. Rather, he played the stock market. Rumor had it that he had joined with his Irish Democratic cohorts on the Common Council to short Harlem in 1863, forgetting the old rule that the house always wins. But he recovered his wits soon after. As the Chicago Tribune had observed, “no skull in the world” could absorb as much “pounding” as his and come back fighting. Poorer but wiser, he determined to join the house. For example, when the Commodore built a racetrack less than a mile outside of Saratoga, along with a group of Wall Street men (including his son-in-law George Osgood and William R. Travers) and a school of New York Central remoras (Erastus Corning Jr. and John M. Davidson, a partner of Erastus Corning Sr.), Morrissey agreed to serve as the track's manager.

  He steadily gained Vanderbilt's friendship in the course of the Commodore's summer residence in Saratoga, during his days at the track and evenings playing hands of whist in the rooms at the Congress Hall or the United States Hotel. And when Vanderbilt returned to the Springs in August 1864 on a train carrying his fastest horse, Post Boy (valued at $22,000), and four other expensive trotters, the knowing ones whispered that at least one of them was a gift from Morrissey. Vanderbilt's reward to the fighter, they said, had been a “point” or tip on the second Harlem corner.101

  For Vanderbilt's son Corneil, all the world comprised the house, yet he still bet against it. His gambling addiction continued to grow worse. He filched a gold cup from Horace Clark's house in Murray Hill before descending Broadway to bet and lose the money it brought him. Penniless again, he went into a pawnshop with a pair of gold sleeve buttons. They came from his dead brother George's dress uniform, and had been given to Corneil as a keepsake. When William learned they had been hocked, he redeemed them himself—and he never trusted Corneil with them again.102

  Corneil responded by gambling on a far larger scale, on the gaming table of the war itself. As early as February 1864, he charmed his way into the confidence of Horace Greeley editor of the New York Tribune, with that gift for manipulation that so confounded his closemouthed father. He borrowed money from Greeley, which he did not repay. He issued drafts that descended upon the famous editor unexpectedly103 Then Corneil brashly declared that he had a scheme to set things right. A frequent traveler to New Orleans before the war, he returned in 1864 to trade cotton across Confederate lines. There he befriended and
beguiled General Nathaniel P. Banks, whom Corneil pronounced “a glorious fellow.”

  “Matters with me are progressing very favorably,” Corneil wrote to Greeley from New Orleans on September 7, “and through the friendship of Gen. Banks & [Edward R. S.] Canby & the especial favoritism shown myself & friend in connection with a certain cotton transaction I shall soon realize a very handsome profit. I do hope & feel that I shall shortly relieve myself of the heavy incubus hanging over me by reason of my former misdeeds.” It is a classic trait of the addict, of course, to admit his crimes and declare his intention to set them right just before a fresh round of lying and cheating. Corneil continued:

  I have been obliged to make use of some ready capital, & knowing of no earthly means to obtain it here I have drawn upon you for $1,700. I do beg that you will honor it, as a refusal to do so would of course involve me in dishonor & ruin. I shall leave here by the steamer of the 18th and shall bring home with me several thousands of greenbacks. I will call on you at once.… I beg Mr. Greeley that you will not desert me, just as my success is coming around.

  Greeley never saw how transparently dishonest this was; he had been manipulated completely. But Corneil knew that not everyone would prove so gullible. He warned Greeley, “On no account give any information to Father or family in relation to the past & present.”104

  Greeley did his best to help. Corneil needed a permit to buy and sell cotton in occupied territory, so Greeley asked for one directly from Lincoln. “His father, the Commodore, is the largest individual holder of our Public Securities (to the extent of $4,000,000), has given outright more than any other man to invigorate the prosecution of the War, and his good will is still an element of our National strength,” he wrote. “I know little of the business in question; but I feel confident that any favor shown to Mr. V. will redound to the advantage of the Union cause.” For this reason, “as well as that of my personal regard for him,” he begged that Corneil's application be approved.105 Lincoln, however, did not act on the request, so Greeley began to badger William P. Fessenden, the new secretary of the treasury.

  On October 8, the New York Herald reported a rumor that the Commodore stood behind the persistent lobbying on behalf of his son, which led him to write an angry letter that the paper published two days later. “I am at a loss to conceive how a report of this nature should have obtained currency,” Vanderbilt declared. “I have remained perfectly passive [in terms of recommending appointments], feeling that the present condition of the country requires of its citizens other and more patriotic endeavors than those of self-interest and personal aggrandizement.” Greeley sent the clipping to the Treasury Department as yet another reason to make Corneil a cotton-trading agent!106

  Stymied, Greeley wrote to Lincoln on November 23 to recommend that Fessenden be replaced as treasury secretary by the Commodore. He listed five reasons why Vanderbilt deserved the position, beginning with “i. He is the ablest and most successful financier now living, and has the largest private fortune in America.” He stressed Vanderbilt's knowledge, his reputation at home and abroad, and concluded, “He is utterly and notoriously unconnected with any clique, faction, or feud among the Unionists of our State or of any other.” It was all true, but Greeley admitted that he was not intimate with the Commodore, “whom I scarcely know by sight.”107

  The Commodore would have been appalled at Greeley's lobbying on his behalf. He never begged for public office; and when he wanted a corporate position, he simply took it. On September 6, he forced the resignation of two members of the Hudson River board (one of them William R. Travers, his partner in the Saratoga racetrack). He took one of the directorships for himself, and gave the other to Dean Richmond, the new president of the New York Central. At a board meeting in October, Vanderbilt ordered that the Hudson River's tracks be opened to the Harlem's trains between a junction at Castleton (now Castleton-on-Hudson) and Albany108

  So went the tale of dynastic struggles and railway statecraft. With his younger son conniving for petty favors, the Commodore brought the older into his new principality. He eliminated one rival, the Hudson River, by taking it over through quiet purchases and persuasion; with regard to the powerful New York Central, he clearly hoped that diplomacy would suffice. With a little decency on both sides, a few negotiations conducted with honor and propriety, he might manage that fraught relationship successfully for perhaps the first time in the history of those companies. All he sought, it appears, was to give Tobin and his son William a chance to reform their respective charges.109 But Vanderbilt would closely watch his old friend Drew; after his unprecedented betrayal in the second Harlem corner, there was no telling what he might do next.

  Unfortunately for Vanderbilt, betrayal, not friendship, would govern the future. What he had begun with diplomacy, he would bring to an end in a stunning act of revenge.

  *1 A “trunk line” would later be defined as an integrated line, under one management, from the seaboard to Chicago or St. Louis. This book will use the contemporary meaning of the term, as explained here.

  *2 Leonard Jerome was to become the grandfather of Winston Churchill.

  Chapter Fifteen

  THE POWER TO PUNISH

  On September 5, 1864, abolitionist William Lloyd Garrison wrote a letter to his wife. He had just arrived in Albany by train, which caused him to reflect on how the locomotive had changed the country since their wedding thirty years earlier. “Then there was no railroad conveyance; now the whole country is covered in rails,” he wrote. “And through what enormous expenditure of money, and what incredible efforts of the human brain and hand!” Like many, he saw that railroads already were bringing a revolution—one that, as it spread beyond the Northeast, would foster national cohesion after the Civil War. As a devout Christian, he welcomed the prospect. “So may the modes of communication and the ties of life continue to multiply, until all nations shall feel a common sympathy and worship of a common shrine!”1

  In late 1864, Cornelius Vanderbilt entered the third and most critical phase of his conquest of a railroad empire. It would drag out over the course of three frustrating years, because he doggedly tried to avoid a climactic war with New York's most important railway: the New York Central. As master of the lines that penetrated Manhattan, he depended entirely on the Central; it was the trunk line that connected his tracks to western markets. Year after year he would practice patient diplomacy with the Central's presidents in an effort to settle their persistent conflicts. In the end he would fail. His response would be a shocking demonstration of the nation's vulnerabilty to the railroads'—to his—power.

  But what was that power? The importance of the railroad in the nineteenth century is a historical cliché; a cliché can be true, of course, but will have lost its force, its original meaning. Garrison's letter, on the other hand, speaks to the railroad's dramatic impact at the time of the Civil War. It was, one contemporary writer argued, “the most tremendous and far-reaching engine of social revolution which has ever either blessed or cursed the earth.” It magnified the steamboat's impact, instilling a mobility in society that unraveled traditions, uprooted communities, and undercut old elites. It integrated markets, creating a truly national economy. It was so central to the development of the United States that this writer could reasonably claim (by including steamboats), “Our own country is the child of steam.”2

  In retrospect, this revolution had barely begun in 1864, yet already the railroad was central to American life. Everything went by rail, whether unmilled wheat or imported watches, an Irish immigrant or the president of the United States. Steamboats remained competitive for moving cheap, bulky goods (grain especially) or on particular passenger routes (notably the Hudson River), but even here trains gained rapidly on their aquatic competitors. The first all-rail shipments of grain from Chicago to Buffalo began in 1864; within a decade, they would surpass the volume carried by lake, river, and canal. The rise of cities that served as rail hubs was astounding. Kansas City was virtually n
onexistent before the Civil War; afterward it rapidly sprouted as a cattle shipment center on the edge of the Great Plains, growing into a major city. The railroads had raised up Chicago even earlier, building on its status as a major lake port. Cook County, home to this midwestern metropolis, grew from 43,385 people in 1850 to 394,966 in 1870. Railways to the eastern seaboard allowed Pittsburgh to flourish as an iron and steel center; railways to the oil fields of Pennsylvania permitted Cleveland to emerge as a refining center; railways to the East brought farmers from Ohio to Nebraska into the global market. It is telling that the word “rail” was often dropped from “railroad;” the companies were, indeed, America's roads.3

  The railroad sector surpassed all other industries combined, and individual railway corporations overshadowed any other kind of firm. Most manufacturing was still conducted in family-owned workshops and small mills; very few factories represented as much as $1 million of investment. (Historian Alfred D. Chandler Jr. counted only forty-one textile mills in the 1850s capitalized at $250,000 or more.) Even the largest commercial banks rarely boasted a capitalization of more than $1 million. By contrast, at least ten railroads had a capitalization of $10 million or more even before the war began. The stock of the New York Central alone stood on the books at about $25 million at par in 1865; even excluding its $14.6 million in outstanding bonds, this figure was equal to approximately one-quarter of all investment in manufacturing in the United States. Railroads connected American industries to sources of raw materials and to their markets—and were their most important customers, consuming vast quantities of products that ranged from coal, lumber, and iron to countless manufactured goods. Railroads were not simply the first big business, as Chandler famously called them; in Civil War America, they were the only big business.4