The First Tycoon: The Epic Life of Cornelius Vanderbilt (78 page)

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 unexpectedly
¹⁰³
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 Albany
¹⁰⁸

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

O
n 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 nonexistent 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

Size—geographical as well as financial—brought challenges faced by no other type of enterprise. The Hudson River Railroad, for example, was far smaller than any of the four trunk lines, yet it stretched 144 miles in length, with sixty-seven locomotives, twenty-nine baggage cars, 130 passenger cars, and 671 freight cars, not to mention twelve engine shops and numerous depots and stations; in 1864, it carried more than 2 million passengers and 600,000 tons of freight. The technical demands of managing such businesses were unprecedented. The best-trained minds in the United States grappled with the problem, developing new systems of organization, control, and accounting.
⁵

The Commodore was surprisingly well prepared to serve as a chief executive in this emerging new world. He previously had served as president of the Stonington, of course, and had sat on the boards of a number of railroads since the 1840s. Perhaps more important was his experience in running far-flung steamship lines, involving multiple ports, transit operations in Central America, and a base on the far side of the continent. Not surprisingly, from his earliest days in railroads he demonstrated a comprehensive grasp of how to delegate authority “Are you a practical railroad manager?” a state assemblyman would ask him in early 1867. “No sir, I don't manage anything,” he would reply. “We have our superintendents, etc., who attend to those matters. All those matters of detail are done by our officers.”
⁶

What Vanderbilt did was set general policies, as well as the overall tone of management. Any corporation has an internal culture shaped by the demands, directives, and expections that rain down from above. The Commodore created an atmosphere of efficiency, frugality and diligence, as well as swift retribution for dishonesty or sloth. As Lambert Wardell observed, “He thought every man could stand watching.” Even though he disclaimed any interest in practical management, he tellingly remarked, “Now and then I get hold of a point that I have to look to. Smooth matters they never say anything to me about.” Every employee knew he was watching.
⁷

As the winter of 1864–65 set in, the end of the Civil War came into view—still a bloody distance away, but visible at last. Grant besieged Lee at Petersburg, and Sheridan had burned out the Shenandoah Valley. Railroads, which had grown little during the conflict, looked forward to peace with plans to lay new track, refurbish infrastructure, and generally reinvest their wartime profits. Lines short and long would soon burst out across the trans-Mississippi West, as seen in the famous example of the transcontinental Union Pacific. The Hudson River Railroad released its pent-up energies into the completion of a double track to the Albany bridge, an enormous span that it was building in conjunction with the New York Central and Western railroads.
⁸

The railroads' massive demand for capital for new construction, even for ordinary maintenance and operations, drove another, subtler revolution. The financial world had long been ruled by generalized merchant capitalists such as Vanderbilt himself, but the railroads' appetite for money far outstripped the capacity of individuals to meet it. Financial institutions—investment banks—now aggregated and channeled the capital of American and foreign investors. The wartime nationalization of the U.S. financial structure, with the introduction of greenbacks and the national bank system, contributed to this development. The frenzy on Wall Street, so notable in Vanderbilt's Harlem corners, centered almost entirely in railroads, which provided by far the largest number of securities actively traded on the exchanges. This, too, played a role in the institutionalization of the economy. The identification of corporations with individuals, already waning when the war began, virtually disappeared in the 1860s, heightening the abstraction of the economic world. On the Pennsylvania Railroad, this process had gone one step further. This trunk line was managed by a professional staff rather than leading stockholders, with an engineer as president (J. Edgar Thomson) and a powerful vice president (Thomas A. Scott) who had risen through the ranks.
⁹

Vanderbilt understood these financial changes; in part, that is why he relied so heavily on a vice president of the Bank of New York, James Banker. But he also represented a glaring exception to these trends. The Harlem was increasingly seen as his personal property, as the Hudson River would be before many months passed. He wielded financial might that surpassed that of the largest banks. The Hudson River estimated the cost of completing its second track to Albany at $900,000; Vanderbilt personally provided at least two-thirds of it, purchasing $600,000 in bonds at 105. This was Vanderbilt summarized in one transaction: maker and exemplar of his times, yet always standing apart, unique in his wealth and power.
¹⁰

“The influence of one earnest, energetic life upon the world is scarcely appreciated,”
Merchant's Magazine
declared in January 1865, in a frontpage profile of the Commodore. His name was “inseparably connected with our commercial history.… Perhaps there are two or three men wealthier than he in New York city—but no more; and all of his vast wealth is the product of his own labor.” The theme that ran through the article was the intersection of the broad current of history and the individuality of this man. The journal observed, just as Courtlandt Palmer had back in 1841, that the Commodore valued his reputation for honor, and rewarded “frankness and honesty of speech.” His courtesy toward men worthy of respect was matched by mercilessness toward those who were not. “Deceit and underhand dealing,” the magazine added, “he has ever quickly detected and thoroughly hated.”
¹¹

ON DECEMBER 8, 1864, VANDERBILT AND HIS WIFE
attended the wedding of their granddaughter, Sophia Cross, to Rev. J. B. Morse, at the home of the bride's parents, Phebe and James M. Cross.
¹²
As the saying goes, their granddaughter had her entire life in front of her, yet she would never witness changes as sweeping as those the Commodore had both experienced and helped to bring about. The biggest had been the advent of change itself—change as a nearly constant state in American society.

“When I was a boy,” George Templeton Strong reflected in early 1865, “the aristocracy lived around the Battery, on Bowling Green.” So it had been since New York was named New Amsterdam, two centuries earlier. Young Cornelius and Sophia Vanderbilt had lived on Broad and Stone streets, in buildings and circumstances that might have been recognizable to Pieter Stuyvesant himself. Then, in the 1820s, the transformation of New York began, as immigrants swarmed in from Germany, Ireland, and the American countryside. The elite relocated, and kept on relocating every decade or so. In 1864, Strong declined to serve as president of Columbia College, since it would require him to move from Murray Hill (the current center of fashion) “to a frontier settlement… on Forty-ninth Street.” He little realized how quickly the city's center of gravity would shift to that very area.
¹³