Sharon had been living in San Francisco for the last two years, nursing his gravely ill wife in a mansion he’d built near Union Square. Marie Sharon spent most of that time bedridden, fighting a painful stomach cancer. Sharon commuted to the mines—and his constituency—much less frequently than John Mackay, and he may have simply lost touch with the high-quality mining intelligence that sustained his previous success. The ore in the Ophir proved unconnected to the Big Bonanza and of lower grade, the realization of which had probably sparked the sell-off.
In the aftermath, Dan de Quille asked John Mackay to discuss the crash. “It is no affair of mine,” Mackay said. “I am not speculating in stocks. My business is mining—legitimate mining. I see that my men do their work properly in the mines and that all goes on as it should in the mills. I make my money here out of the ore. Had I desired to do so, I could have gone down to San Francisco with ten thousand shares of stock in my pocket, and, by throwing it on the market at the critical moment, I could have brought about a panic and a crash, just as has been done. Suppose I had done so and had made $250,000 by the job—what is that to me? By attending to my legitimate business here at home I take out $500,000 in one week.”
• • •
The stock market debacle didn’t affect the Firm’s mines or their splendid new mill. They’d begun testing it in early January. Like the old custom mills of the Ophir and Gould & Curry, the Consolidated Virginia mill was a colossal affair that cost the four Irishmen around $500,000. Unlike those earlier follies, Mackay and Fair ensured their mill was designed and constructed on proven, practical lines by experienced mill men and a veteran engineer. Built on sloping ground on the block below the Con. Virginia’s hoisting works, the mill was the largest steam-powered silver mill in the West, with four eye-catching 90-foot-tall smokestacks rising above the boiler room. Inside the massive building, high-pressure steam powered a 600-horsepower engine that drove a main shaft 14 inches in diameter that weighed 15,000 pounds. The shaft turned a 33,000-pound, 18-foot-diameter flywheel, every bit of its angular momentum necessary to drive the mill’s sixty 800-pound stamps. Below the stamp batteries and the mortars an intricate, carefully designed chain of distributing sluices, quicksilver injectors, steam-heated amalgamating pans, agitators, settlers, tail sluices, strainers, receiving tanks, a retort room, and a cooling reservoir recovered the bulk of the bullion from the crushed ore. On the hillside below the mill, settling ponds captured the mill’s blue-tinted discharge and oozed it down long, blanket-lined sluices into other settling reservoirs aimed at recovering as much metal as possible before allowing the tailings to run down Six Mile Cañon. With its stamps thundering like “the roar of Niagara Falls,” the mill went into service in mid-January, and it worked like a dream, able to crush and process 260 tons of ore per day. The enormous quantity of precious metal in the pulp presented the only significant operational difficulty—the metal overwhelmed the mill’s retorting capacity. The Firm enlarged the retorting room by two-thirds.
An all-weather car track on a raised three-hundred-foot-long trestle joined the Con. Virginia shaft landing to the new mill. To ease the work, Mackay, Fair, and the mill’s superintendent decided to use mules to haul loaded ore cars from the shaft landing to the mill’s ore bins. They bought three mules, one to work with each shift of miners, and one of them was Mary Jane Simpson, the famous mule who had worked eighteen months in the Belcher mine. Her ordeal had ended when the Belcher incline reached thirteen hundred feet in the spring of 1873. She’d been raised from the mine and put out to pasture on a rich ranch in Washoe Valley with one of her underground workmates, Victoria Woodhull, a mule named for the first woman to run for president of the United States. (She’d campaigned on “the free-love ticket” in 1872, standing for women’s equal rights and right to love whomever they chose.) The San Francisco Chronicle described Victoria Woodhull (the mule) as “a less intellectual beast” than Mary Jane Simpson, probably more of a mean-spirited dig at a woman whose presidential candidacy the newspaper had described as “a crime against womanhood” than a nod to the woman who’d been the newspaper’s longtime Comstock correspondent.
Mary Jane Simpson enjoyed a year and a half of indolent bliss in the pastures of Washoe Valley, but being a strong and healthy member of that valuable and much-suffering species that did such a large share of the West’s most unpleasant labor, Mary Jane Simpson was sold to the Con. Virginia and put back to work. However, perhaps in honor of her long stint of faithful underground service, she got the best shift at the mine, 3:00 to 11:00 p.m., and she didn’t get hard duty. With the car track from the shaft landing to the mill’s ore bins built with a slight downward slope, gravity aided Mary Jane Simpson as she hauled trains of six to ten linked ore cars to the mill. Uphill, she hauled only empty cars. She soon learned to understand the bells and whistles that regulated the mine, and she ran her own work with no man to direct her, hauling the loaded cars from mine to mill, waiting patiently for the mill workers to dump the ore, and returning to the shaft with the empties. Men supposed that she moved an average of $30,000 worth of ore per shift. When three bells struck the end of shift at 11:00 p.m., Mary Jane Simpson would return to the shaft house, step out of the track, and wait to be unharnessed, but instead of returning to her stable, she waited for the men to emerge from the mine. Nearly all of them had held back something from their dinners for her. Apples, eggs, pie, roast beef, she ate it all without discrimination and never turned her nose away from an offering. An utterly devoted man named Ben Smith served as her groom. Smith was unmarried, and so far as is known, “had no earthly attachment” except for Mary Jane Simpson. As a team, they were a great success, as was the new mill, which nearly doubled the mine’s bullion output.
In March 1875, the Con. Virginia increased its monthly dividend from the three dollars per share it had paid since the previous May to ten dollars per share. Paid on every one of the mine’s 108,000 shares, the new dividend aggregated to $1,080,000. No mine had ever paid out more. The Firm’s portion of that payout probably landed somewhere between $648,000 and $810,000, putting John Mackay’s personal slice between $248,000 and $303,000 per month, in cash. That was, without question, the largest monthly cash income in the world. Throughout the West, people began referring to the Firm as “the Bonanza Firm” and to John Mackay as “the Bonanza King.”
Mackay loathed the nickname. “It makes nothing of me but a millionaire with a swelled head,” he said.
• • •
The ten-dollar dividend signified a tectonic shift on the Comstock. A new power had risen. The old power resented the upheaval, and frictions erupted between John Mackay’s “Bonanza Crowd” flexing its muscles and William Sharon’s Bank Ring fighting to maintain its grip. Their interests collided through the full spectrum of Comstock operations.
The first battle—a change in the tax provisions of Nevada and Storey County, which contained Virginia City and the Comstock Lode—resulted in a clear victory for the Bank Ring. In that game, William Sharon played a stacked deck against the Bonanza Firm from the start, for he was a politician, and John Mackay most definitely was not.
Sharon had politicked to hold state and county mining taxes low and drive them lower since he’d first arrived on the Comstock in 1864. Mining interests carried a light load while owners of other types of property bore the bulk of the tax burden. In Storey County, owners of other property paid $1.50 per $100 based on the assessed value of their assets. Mines only paid a tax of $0.25 per $100 worth of bullion produced and were allowed a host of ancillary deductions. Popular resentment against the unfair nature of the tax code rose in the early 1870s. In early 1875, the new state legislature—the one that made William Sharon a United States senator—revised the tax structure to make mines pay $1.50 per $100 worth of bullion, in line with what people paid on other types of property. Senator Sharon made no objection to the change. His mines were playing out. John Mackay’s bonanza mines would carry the weight of the new taxes.
The tax hike wasn’t the nut of what stuck in Mackay’s craw, although he and his partners did complain about the midgame revision of the rules. What offended Mackay was the use to which Storey County intended to put the new tax revenue—the county planned to use the money to pay off the bonds that had financed construction of William Sharon’s Virginia & Truckee Railroad. Mackay loathed the idea of his successful mines facilitating his archrival’s primary business. With the Belcher and Crown Point bonanza fading and the Ophir’s projected bonanza snuffed out before it had a chance to rise, the core of William Sharon’s power on the Comstock had shifted to the railroad, which had paid steady dividends since retiring the last of its debt in the summer of 1874.
To leverage their monopoly control of transportation to and from Gold Hill and Virginia City, William Sharon and the Bank Ring had invested huge sums developing the Carson & Tahoe Lumber and Fluming Company to feed timber to the Comstock mines from fifty thousand acres of old-growth timber along the southern and western shores of Lake Tahoe. The company felled trees and used short-line railroads to haul logs to the lake. Steam tugboats moved them across the lake, where lakefront sawmills trimmed and shaped the logs. Another short-line railroad carried the logs to a twelve-mile-long flume that rushed them down the mountains to a spur of the Virginia & Truckee.
The Bonanza Firm gouged at the Bank Ring by incorporating its own lumber company. Sharon tried to delay or derail the project with an unsuccessful squabble over water rights, but even after the Firm got its lumber company into operation, they still had to contend with the V&T’s rapacious transportation rates.
Mackay grumbled about the rates and sought to have them reduced.
The V&T refused.
Mackay quietly reiterated his desire to have the rates reduced. If not, he said, “I’ll build my own damn railroad.”
When Sharon heard about Mackay’s statement, he reduced the Virginia & Truckee’s rates at once. Sharon knew his adversary. Away from the poker table, Mackay didn’t bluff. His threat to build a rival road pointed a spear at the heart of what remained of Sharon’s power on the Comstock. With Mackay’s mine disgorging a profit in excess of $1 million per month, Sharon’s railroad monopoly existed at the Irishman’s mercy.
Mackay and his partners pointed another spear at William Sharon and the Bank Ring when they decided to use their avalanche of money to open a rival bank, the Nevada Bank of San Francisco. Erected over an ore body worth uncounted millions, the power and stability of the Nevada Bank would stand unquestioned. In an industry with confidence as its lynchpin, people needed no special insight to see that the Nevada Bank of San Francisco would absorb a significant portion of the city’s financial business.
For the Bank of California, the competition couldn’t have come at a more inopportune moment—few people knew the details, but thanks to the freewheeling financial dealings of William C. Ralston, the Bank of California’s foundation was decaying into quicksand.
Ralston had always been the institution’s “soul,” but he’d never drawn a clear boundary between his own affairs and those of the bank. Nor had he gleaned any significant lessons from the near-disaster he’d escaped in 1870–71 when Sharon had saved him and the one in the winter of 1872–73, when Colonel Fry and the Belcher bonanza had bailed him out. Belcher dividends combined with Ralston’s share of the Union mills’ profits and what he could see coming from the Virginia & Truckee Railroad had embarked Ralston on a path of even more aggressive financial undertakings. (If Ralston had learned any lesson, it was the wrong one—that the Comstock would always come to his rescue.)
Emboldened, Ralston veered from one speculative scheme to another, spreading bank funds all over California. He “loaned” large sums to businesses he controlled without review by other bank officials and usually on no security but the success of the ventures themselves. Many of the projects had long-run merit. Few held the prospect of short-run returns. None of them immolated more money than the Palace Hotel, which William Ralston had started building at the corner of San Francisco’s Market and New Montgomery streets in late 1873.
Ralston intended the Palace not just as the biggest and best hotel in the West, but as the largest and most spectacular hotel in the world, a landmark achievement that would stake San Francisco’s claim to a place on the vanguard of progress and civilization. On the practical side of the ledger, Ralston envisioned a magnificent establishment luring upscale development and jolting life into the stagnant New Montgomery Street Real Estate Development Company, where he’d had money tied up for about five years. To that end, the project lacked originality. Ralston had already built the Grand Hotel for the same purpose—directly across the street from the Palace’s proposed address. Ralston responded to that objection with scale. The Palace would be an order of magnitude bigger and better than anything ever built in California.
William Sharon took a half share in the undertaking, but the Palace was always Ralston’s darling. Ralston toured the construction site daily. He knew many of the workmen by name. No detail escaped his attention. For a man like Ralston, who couldn’t experience “the need . . . of a nail without desiring to establish an iron foundry,” such a large-scale construction project was a singularly dangerous undertaking. The Palace had broken ground in late 1873 with a projected budget of $1.75 million. Ralston blew through that sum before construction reached the level of the sidewalk.
All sixteen brickyards around San Francisco Bay worked full time to produce the required total of 31 million bricks. The superintendent employed 225 bricklayers, and when all went well, they laid 190,000 bricks per day, incorporating iron bars into the masonry to defend the structure from earthquakes. Two hundred and forty carpenters, one hundred ironworkers, a squad of men exclusively devoted to slacking lime and another to mixing cement, dozens of hod carriers, plumbers, rope riggers, and a small army of assorted laborers pushed the total workforce over 1,200. Ralston ordered plaster and cement from kilns in New York and England, gas and water pipes from a factory in Philadelphia, marble and slate tiles from quarries in Vermont, and 340 bathtubs and 685,000 sheets of plate glass from England. He sourced yellow pine from Georgia, teak and camphor wood from India, white mahogany from Mexico, and fir, oak, and ash from Oregon. Ralston created a company to manufacture the Palace’s locks and door and cabinet fittings, and another to build its furniture. He bought a huge tract of oak woodlands—and subsequently discovered that the trees didn’t produce lumber adequate to the flooring.
“Where is this thing going to end?” Sharon asked. On several occasions, he advised his partner to “pull in his sails.”
Ralston did no such thing.
As the Palace Hotel mushroomed toward completion in 1874 and the first months of 1875, it filled an entire city block to the height of seven stories, towering over Market and New Montgomery streets. Four-in-hand teams pulling stately carriages could drive into the interior courtyard and turn around with ease. Every one of the Palace’s nearly eight hundred rooms had a flush toilet and a multifaceted exterior bay window. In aggregate, they glittered across the hotel’s enormous facades. Construction costs rose to somewhere between $5 million and $6.5 million.
California boosters eager to claim the biggest and best of everything reveled in the “gigantic enterprise,” as if grand ambition alone proved the world-class stature of California, but not all commentary was positive. A real estate publication in November 1874 described the Palace as “a dark menace to Montgomery Street.” The Marin Journal called it a “vast pile” and joked about Mephistophelian bargains struck on a mythical seventeen-hundred-foot level of the basement.
In the first months of 1875, as friction between the Bank Ring and John Mackay’s Bonanza Crowd intensified and the Palace Hotel built toward its autumn opening, Ralston’s financial commitments mounted. The impact of the economic depression in the eastern states beginning to take a toll in California worsened Ralston’s position—millions of dollars’ worth of gold coin flowed from California to New Yo
rk, constricting the California money supply exactly when Ralston needed “easy” money. The pace of Bank of California deposits from Mackay and the Bonanza Crowd slowed as they held back money to build a cash reserve for the opening of the Nevada Bank. Ralston’s large portfolio of stagnant businesses and under- or nonperforming loans returned only a trickle of coin to the Bank of California. A steady stream of gold flowed in the opposite direction, and the money Ralston received from the Union mills, the Virginia & Truckee Railroad, and the Belcher’s dwindling dividends failed to cover the outflows. Ralston’s obligations began to exceed the reach of his cash flow, and since Ralston never drew a clear line between his own business and that of the bank, a crisis with Ralston automatically extended to the Bank of California.
Sharon asked Ralston what he’d do if they didn’t unearth another Comstock bonanza.
“Go to the cemetery,” Ralston answered.
Although Sharon would later deny it in court, he must have known that his partner was dangerously undermining the Bank of California.
• • •
Attempting to keep both himself and the bank above water, Ralston sold his half of the Palace Hotel to William Sharon for $1.75 million in May. Considering the energy and vision—not to mention the gold—Ralston had invested in the project, the deal must have pained him greatly.
The transaction made William Sharon the largest real estate owner in San Francisco, with property “worth at least seven millions.” Sharon had no inclination to celebrate. His partner of a decade was in tight financial straits, and his wife of twenty-three years was at death’s door. Sharon was “unrelenting” in his attentions. He was at her San Francisco bedside when she “passed quietly into a better world” on Friday, May 14, two days after the Palace sale was registered.
The Bonanza King Page 43