THE BEGINNINGS OF THE VANDERBILT FORTUNE
The first of the overshadowing fortunes to develop from the ownership
and manipulation of railroads was that of Cornelius Vanderbilt. The
Havemeyers and other factory owners, whose descendants are now
enrolled among the conspicuous multimillionaires, were still in the
embryonic stages when Vanderbilt towered aloft in a class by himself
with a fortune of $105,000,000. In these times of enormous individual
accumulations and centralization of wealth, the personal possession
of $105,000,000 does not excite a fraction of the astonished comment
that it did at Cornelius Vanderbilt's death in 1877. Accustomed as
the present generation is to the sight of billionaires or semi-
billionaires, it cannot be expected to show any wonderment at
fortunes of lesser proportions.
NINETY MILLIONS IN FIFTEEN YEARS.
Yet to the people of thirty years ago, a round hundred million was
something vast and unprecedented. In 1847 millionaires were so
infrequent that the very word, as we have seen, was significantly
italicised. But here was a man who, figuratively speaking, was a
hundred millionaires rolled in one. Compared with his wealth the
great fortunes of ten or fifteen years before dwindled into
bagatelles. During the Civil War a fortune of $15,000,000 had been
looked upon as monumental. Even the huge Astor fortune, so long far
outranking all competitors, lost its exceptional distinction and
ceased being the sole, unrivalled standard of immense wealth. Nearly
a century of fraud was behind the Astor fortune. The greater part of
Cornelius Vanderbilt's wealth was massed together in his last fifteen
years.
This was the amazing, unparalleled feature to his generation. Within
fifteen brief years he had possessed himself of more than
$90,000,000. His wealth came rushing in at the rate of $6,000,000 a
year. Such an accomplishment may not impress the people of these
years, familiar as they are with the ease with which John D.
Rockefeller and other multimillionaires have long swept in almost
fabulous annual revenues. With his yearly income of fully $80,000,000
or $85,000,000 [Footnote: The "New York Commercial," an ultra-
conservative financial and commercial publication, estimated in
January, 1905, his annual income to be $72,000,000. Obviously it has
greatly increased every year.] Rockefeller can look back and smile
with superior disdain at the commotion raised by the contemplation of
Cornelius Vanderbilt's $6,000,000.
Each period to itself, however. Cornelius Vanderbilt was the golden
luminary of his time, a magnate of such combined, far-reaching wealth
and power as the United States had never known. Indeed, one overruns
the line of tautology in distinguishing between wealth and power. The
two were then identical not less than now. Wealth was the real power.
None knew or boasted of this more than old Vanderbilt when, with
advancing age, he became more arrogant and choleric and less and less
inclined to smooth down the storms he provoked by his contemptuous
flings at the great pliable public. When threatened by competitors,
or occasionally by public officials, with the invocation of the law,
he habitually sneered at them and vaunted his defiance. In terse
sentences, interspersed with profanity, he proclaimed the fact that
money was law; that it could buy either laws or immunity from the
law.
* * * * * * *
Since wealth meant power, both economic and political, it is not
difficult to estimate Vanderbilt's supreme place in his day.
Far below him, in point of possessions, stretched the 50,000,000
individuals who made up the nation's population. Nearly 10,000,000
were wage laborers, and of the 10,000,000 fully 500,000 were child
laborers. The very best paid of skilled workers received in the
highest market not more than $1,040 a year. The usual weekly pay ran
from $12 to $20 a week; the average pay of unskilled laborers was
$350 a year. More than 7,500,000 persons ploughed and hoed and
harvested the farms of the country; comparatively few of them could
claim a decent living, and a large proportion were in debt. The
incomes of the middle class, including individual employers, business
and professional men, tradesmen and small middlemen, ranged from
$1,000 to $10,000 a year.
How immeasurably puny they all seemed beside Vanderbilt! He beheld a
multitude of many millions struggling fiercely for the dollar that
meant livelihood or fortune; those bits of metal or paper which
commanded the necessities, comforts and luxuries of life; the
antidote of grim poverty and the guarantees of good living; which
dictated the services, honorable or often dishonorable, of men, women
and children; which bought brains not less than souls, and which put
their sordid seal on even the most sacred qualities. Now by these
tokens, he had securely 105,000,000 of these bits of metal or wealth
in some form equivalent to them. Millions of people had none of these
dollars; the hundreds of thousands had a few; the thousands had
hundreds of thousands; the few had millions. He had more than any.
Even with all his wealth, great as it was in his day, he would
scarcely be worth remembrance were it not that he was the founder of
a dynasty of wealth. Therein lies the present importance of his
career.
A FORTUNE OF $700,000,000
From $105,000,000 bequeathed at his death, the Vanderbilt fortune has
grown until it now reaches fully $700,000,000. This is an approximate
estimate; the actual amount may be more or less. In 1889 Shearman
placed the wealth of Cornelius and William K. Vanderbilt, grandsons
of the first Cornelius, at $100,000,000 each, and that of Frederick
W. Vanderbilt, a brother of those two men, at $20,000,000. [Footnote:
"Who Owns the United States?"--The Forum Magazine, November, 1889.]
Adding the fortunes of the various other members of the Vanderbilt
family, the Vanderbilts then possessed about $300,000,000. Since that
time the population and resources of the United States have vastly
increased; wealth in the hold of a few has become more intensely
centralized; great fortunes have gone far beyond their already
extraordinary boundaries of twenty years ago; the possessions of the
Vanderbilts have expanded and swollen in value everywhere, although
recently the Standard Oil oligarchy has been encroaching upon their
possessions. Very probable it is that the combined Vanderbilt fortune
reaches fully $700,000,000, actually and potentially.
But the incidental mention of such a mass of money conveys no
adequate conception of the power of this family. Nominally it is
composed of private citizens with theoretically the same rights and
limitations of citizenship held by any other citizen and no more. But
this is a fanciful picture. In reality, the Vanderbilt family is one
of the dynasties of inordinately rich families ruling the United
States industrially and politically. Singly it has mastery over many
of the railroad and public utility systems and industrial
corporations of the United States. In combination with other powerful
men or families of wealth, it shares the dictatorship of many more
corporations. Under the Vanderbilts' direct domination are 21,000
miles of railroad lines, the ownership of which is embodied in
$600,000,000 in stocks and $700,000,000 in bonds. One member alone,
William K. Vanderbilt, is a director of seventy-three transportation
and industrial combinations or corporations.
BONDS THAT HOLD PRESENT AND POSTERITY.
Behold, in imagination at least, this mass of stocks and bonds. Heaps
of paper they seem; dead, inorganic things. A second's blaze will
consume any one of them, a few strokes of the fingers tear it into
shapeless ribbons Yet under the institution of law, as it exists,
these pieces of paper are endowed with a terrible power of life and
death that even enthroned kings do not possess. Those dainty prints
with their scrolls and numerals and inscriptions are binding titles
to the absolute ownership of a large part of the resources created by
the labors of entire peoples.
Kingly power at best is shadowy, indefinite, depending mostly upon
traditional custom and audacious assumption backed by armed force. If
it fall back upon a certain alleged divine right it cannot produce
documents to prove its authority. The industrial monarchs of the
United States are fortified with both power and proofs of possession.
Those bonds and stocks are the tangible titles to tangible property;
whoso holds them is vested with the ownership of the necessities of
tens of millions of subjected people. Great stretches of railroad
traverse the country; here are coal mines to whose products some
ninety million people look for warmth; yonder are factories; there in
the cities are street car lines and electric light and power supply
and gas plants; on every hand are lands and forests and waterways--
all owned, you find, by this or that dominant man or family.
The mind wanders back in amazement to the times when, if a king
conquered territory, he had to erect a fortress or castle and station
a garrison to hold it. They that then disputed the king's title could
challenge, if they chose, at peril of death, the provisions of that
title, which same provisions were swords and spears, arrows and
muskets.
But nowhere throughout the large extent of the Vanderbilt's
possessions or those of other ruling families are found warlike
garrisons as evidence of ownership. Those uncouth barbarian methods
are grossly antiquated; the part once played by armed battalions is
now performed by bits of paper. A wondrously convenient change has it
been; the owners of the resources of nations can disport themselves
thousands of miles away from the scene of their ownership; they need
never bestir themselves to provide measures for the retention of
their property. Government, with its array of officials, prisons,
armies and navies, undertakes all of this protection for them. So
long as they hold these bits of paper in their name, Government
recognizes them as the incontestable owners and safeguards their
property accordingly. The very Government established on the taxation
of the workers is used to enforce the means by which the workers are
held in subjection.
THEY DECREE TAXES AT WILL.
These batches of stocks and bonds betoken as much more again. A
pretty fiction subsists that Government, the creator of the modern
private corporation, is necessarily more powerful than its creature.
This theoretical doctrine, so widely taught by university professors
and at the same time so greatly at variance with the palpable facts,
will survive to bring dismay in the near future to the very classes
who would have the people believe it so. Instead of now being the
superior of the corporation the Government has long since definitely
surrendered to private corporations a tremendous taxing power
amounting virtually to a decree authorizing enslavement. Upon every
form of private corporation--railroad, industrial, mining, public
utility--is conferred a peculiarly sweeping and insidious power of
taxation the indirectness of which often obscures its frightful
nature and effects.
Where, however, the industrial corporation has but one form of
taxation the railroad has many forms. The trust in oil or any other
commodity can tax the whole nation at its pleasure, but inherently
only on the one product it controls. That single taxation is of
itself confiscatory enough, as is seen in the $912,000,000 of profits
gathered in by the Standard Oil Company since its inception. The
trust tax is in the form of its selling price to the public. But the
railroad puts its tax upon every product transported or every person
who travels. Not a useful plant grows or an article is made but that,
if shipped, a heavy tax must be paid on it. This tax comes in the
guise of freight or passenger rates.
The labor of hundreds of millions of people contributes incessantly
to the colossal revenues enriching the railroad owners. For their
producing capacity the workers are paid the meagerest wages, and the
products which they make they are compelled to buy back at exorbitant
prices after they pass through the hands of the various great
capitalist middlemen, such as the trusts and the railroads. How
enormous the revenues of the railroads are may be seen in the fact
that in the ten years from 1898 to 1908 the dividends declared by
thirty-five of the leading railroads in the United States reached the
sum of about $1,800,000,000. This railroad taxation is a grinding,
oppressive one, from which there is no appeal. If the Government
taxes too heavily the people nominally can have a say; but the people
have absolutely no voice in altering the taxation of corporations.
Pseudo attempts have been made to regulate railroad charges, but
their futility was soon evident, for the reason that owning the
instruments of business the railroads and the allied trusts are in
actual possession of the governmental power viewing it as a working
whole.
AND EXERCISE UNRESTRAINED POWER.
Visualizing this power one begins to get a vivid perception of the
comprehensive sway of the Vanderbilts and of other railroad magnates.
They levy tribute without restraint--a tribute so vast that the
exactions of classic conquerors become dwarfed beside it. If this
levying entailed only the seizing of money, that cold, unbreathing,
lifeless substance, then human emotion might not start in horror at
the consequences. But beneath it all are the tugging and tearing of
human muscles and minds, the toil and sweat of an unnumbered
multitude, the rending of homes, the infliction of sorrow, suffering
and death.
The magnates, as we have said, hold the power of decreeing life and
death; and time never was since the railroads were first built when
this power was not arbitrarily exercised.
Millions have gone hungry or lived on an attenuated diet while
elsewhere harvests rotted in the ground; between their needs and
nature's fertility lay the railroads. Organized and maintained for
profit and for profit alone, the railroads carry produce and products
at their fixed rates and not a whit less; if these rates are not paid
the transportation is refused. And as in these times transportation
is necessary in the world's intercourse, the men who control it have
the power to stand as an inflexible barrier between individuals,
groups of individuals, nations and international peoples. The very
agencies which should under a rational form of civilization be
devoted to promoting the interests of mankind, are used as their
capricious self-interest incline them by the few who have been
allowed to obtain control of them. What if helpless people are swept
off by starvation or by diseases superinduced by lack of proper food?
What if in the great cities an increasing sacrifice of innocents goes
on because their parents cannot afford the price of good milk--a
price determined to a large extent by railroad tariff? All of this
slaughter and more makes no impress upon the unimpressionable
surfaces of these stocks and bonds, and leaves no record save in the
hospitals and graveyards.
The railroad magnates have other powers. Government itself has no
power to blot a town out of existence. It cannot strew desolation at
will. But the railroad owners can do it and do not hesitate if
sufficient profits be involved. One man sitting in a palace in New
York can give an order declaring a secret discriminative tariff
against the products of a place, whereupon its industries no longer
able to compete with formidable competitors enjoying better rates,
close down and the life of the place flickers and sometimes goes out.
These are but a very few of the immensity of extravagant powers
conferred by the ownership of these railroad bonds and stocks. Bonds
they assuredly are, incomparably more so than the clumsy yokes of
olden days. Society has improved its outwards forms in these passing
centuries. Clanking chains are no longer necessary to keep slaves in
subjection. Far more effective than chains and balls and iron collars
are the ownership of the means whereby men must live. Whoever
controls them in large degree, is a potentate by whatever name he be
called, and those who depend upon the owner of them for their
sustenance are slaves by whatever flattering name they choose to go.
HIGH AND MIGHTY POTENTATES.
The Vanderbilts are potentates. Their power is bounded by no law;
they are among the handful of fellow potentates who say what law
shall be and how it shall be enforced. No stern, masterful men and
women are they as some future moonstruck novelist or historian bent
upon creating legendary lore may portray them. Voluptuaries are most
of them, sunk in a surfeit of gorgeous living and riotous pleasure.
Weak, without distinction of mind or heart, they have the money to
hire brains to plan, plot, scheme, advocate, supervise and work for
them. Suddenly deprived of their stocks and bonds they would find
themselves adrift in the sheerest helplessness. With these stocks and
bonds they are the direct absolute masters of an army of employees.
On the New York Central Railroad alone the Vanderbilt payroll
embraces fifty thousand workers. This is but one of their railroad
systems. As many more, or nearly as many, men work directly for them
on their other railroad lines.
One hundred thousand men signify, let us say, as many families.
Accepting the average of five to a family, here are five hundred
thousand souls whose livelihood is dependent upon largely the will of
the Vanderbilt family. To that will there is no check. To-day it may
be expansively benevolent; to-morrow, after a fit of indigestion or a
night of demoralizing revelry, it may flit to an extreme of
parsimonious retaliation. As the will fluctuates, so must be the fate
of the hundred thousand workers. If the will decides that the pay of
the men must go down, curtailed it is, irrespective of their protests
that the lopping off of their already slender wages means still
keener hardship. Apparently free and independent citizens, this army
of workers belong for all essential purposes to the Vanderbilt
family. Their jobs are the hostages held by the Vanderbilts. The
interests and decisions of one family are supreme.
The germination and establishment of this immense power began with
the activities of the first Cornelius Vanderbilt, the founder of this
pile of wealth. He was born in 1794. His parents lived on Staten
Island; his father conveyed passengers in a boat to and from New
York--an industrious, dull man who did his plodding part and allowed
his wife to manage household expenses. Regularly and obediently he
turned his earnings over to her. She carefully hoarded every
available cent, using an old clock as a depository.
THE FOUNDER'S START.
Vanderbilt was a rugged, headstrong, untamable, illiterate youth. At
twelve years of age he could scarcely write his own name. But he knew
the ways of the water; when still a youth he commenced ferrying
passengers and freight between Staten Island and New York City. For
books he cared nothing; the refinements of life he scorned. His one
passion was money. He was grasping and enterprising, coarse and
domineering. Of the real details of his early life little is known
except what has been written by laudatory writers. We are informed
that as he gradually made and saved money he built his own schooners,
and went in for the coasting trade. The invention and success of the
steamboat, it is further related, convinced him that the day of the
sailing vessel would soon be over. He, therefore, sold his interest
in his schooners, and was engaged as captain of a steamboat plying
between New York and points on the New Jersey coast. His wife at the
same time enlarged the family revenues by running a wayside tavern at
New Brunswick, N. J., whither Vanderbilt had moved.
In 1829, when his resources reached $30,000, he quit as an employee
and began building his own steamboats. Little by little he drove many
of his competitors out of business. This he was able to do by his
harsh, unscrupulous and strategic measures. [Footnote: Some glimpses
of Vanderbilt's activities and methods in his early career are
obtainable from the court records. In 1827 he was fined two penalties
of $50 for refusing to move a steamboat called "The Thistle,"
commanded by him, from a wharf on the North River in order to give
berth to "The Legislature," a competing steamboat. His defence was
that Adams, the harbor master, had no authority to compel him to
move. The lower courts decided against him, and the Supreme Court, on
appeal, affirmed their judgment. (Adams vs. Vanderbilt. Cowen's
Reports. Cases in Supreme Court of the State of New York, vii: 349-
353.)
In 1841 the Eagle Iron Works sued Vanderbilt for the sum of $2,957.15
which it claimed was due under a contract made by Vanderbilt on March
8, 1838. This contract called for the payment by Vanderbilt of
$10,500 in three installments for the building of an engine for the
steamboat "Wave." Vanderbilt paid $7,900, but refused to pay the
remainder, on the ground that braces to the connecting rods were not
supplied. These braces, it was brought out in court, cost only $75 or
$100. The Supreme Court handed down a judgment against Vanderbilt. An
appeal was taken by Vanderbilt, and Judge Nelson, in the Supreme
Court, in October, 1841, affirmed that judgment.--Vanderbilt vs.
Eagle Iron Works, Wendell's Reports, Cases in the Supreme Court of
the State of New York, xxv: 665-668.] He was severe with the men who
worked for him, compelling them to work long hours for little pay. He
showed a singular ability in undermining competitors. They could not
pay low wages but what he could pay lower; as rapidly as they set
about reducing passenger and freight rates he would anticipate them.
His policy at this time was to bankrupt competitors, and then having
obtained a monopoly, to charge exorbitant rates. The public, which
welcomed him as a benefactor in declaring cheaper rates and which
flocked to patronize his line, had to pay dearly for their premature
and short-sighted joy. For the first five years his profits,
according to Croffut, reached $30,000 a year, doubling in successive
years. By the time he was forty years old he ran steamboats to many
cities on the coast, and had amassed a fortune of half a million
dollars.
DRIVING OUT COMPETITORS.
Judging from the records of the times, one of his most effective
means for harassing and driving out competitors was in bribing the
New York Common Council to give him, and refuse them, dock
privileges. As the city owned the docks, the Common Council had the
exclusive right of determining to whom they should be leased. Not a
year passed but what the ship, ferry and steamboat owners, the great
landlords and other capitalists bribed the aldermen to lease or give
them valuable city property. Many scandals resulted, culminating in
the great scandal of 1853, when the Grand Jury, on February 26,
handed up a presentment showing in detail how certain aldermen had
received bribes for disposal of the city's water rights, pier
privileges and other property, and how enormous sums had been
expended in bribes to get railroad grants in the city. [Footnote:
Proceedings of the New York Board of Aldermen, xlviii: 423-431.]
Vanderbilt was not openly implicated in these frauds, no more than
were the Astors, the Rhinelanders, the Goelets and other very rich
men who prudently kept in the background, and who managed to loot the
city by operating through go-betweens.
Vanderbilt's eulogists take great pains to elaborate upon his
tremendous energy, sagacity and constructive enterprise, as though
these were the exclusive qualities by which he got his fortune. Such
a glittering picture, common in all of the usual biographies of rich
men, discredits itself and is overthrown by the actual facts. The
times in which Vanderbilt lived and thrived were not calculated to
inspire the masses of people with respect for the trader's methods,
although none could deny that the outcropping capitalists of the
period showed a fierce vigor in overcoming obstacles of man and of
nature, and in extending their conquests toward the outposts of the
habitable globe.
If indomitable enterprise assured permanency of wealth then many of
Vanderbilt's competitors would have become and remained
multimillionaires. Vanderbilt, by no means possessed a monopoly of
acquisitive enterprise; on every hand, and in every line, were men
fully as active and unprincipled as he. Nearly all of these men, and
scores of competitors in his own sphere--dominant capitalists in
their day--have become well-nigh lost in the records of time; their
descendants are in the slough of poverty, genteel or otherwise. Those
times were marked by the intensest commercial competition; business
was a labyrinth of sharp tricks and low cunning; the man who managed
to project his head far above the rest not only had to practice the
methods of his competitors but to overreach and outdo them. It was in
this regard that Vanderbilt showed superior ability.
In the exploitation of the workers--forcing them to work for low
wages and compelling them to pay high prices for all necessities--
Vanderbilt was no different from all contemporaneous capitalists.
Capitalism subsisted by this process. Almost all conventional
writers, it is true, set forth that it was the accepted process of
the day, implying that it was a condition acquiesced in by the
employer and worker. This is one of the lies disseminated for the
purpose of proving that the great fortunes were made by legitimate
methods. Far from being accepted by the workers it was denounced and
was openly fought by them at every auspicious opportunity.
Vanderbilt became one of the largest ship and steamboat builders in
the United States and one of the most formidable employers of labor.
At one time he had a hundred vessels afloat. Thousands of
shipwrights, mechanics and other workers toiled for him fourteen and
sixteen hours a day at $1.50 a day for many years. The actual
purchasing power of this wage kept declining as the cost of rent and
other necessaries of life advanced. This was notably so after the
great gold discoveries in California, when prices of all commodities
rose abnormally, and the workers in every trade were forced to strike
for higher wages in order to live. Most of these strikes were
successful, but their results as far as wages went were barren; the
advance wrung from employers was by no means equal to the increased
cost of living.
REGARDED AS A COMMERCIAL BUCCANEER.
The exploitation of labor, however, does not account for his success
as a money maker. Many other men did the same, and yet in the
vicissitudes of business went bankrupt; the realm of business was
full of wrecks. Vanderbilt's success arose from his destructive
tactics toward his competitors. He was regarded universally as the
buccaneer of the shipping world. He leisurely allowed other men to
build up profitable lines of steamboats, and he then proceeded to
carry out methods which inevitably had one of two terminations:
either his competitor had to buy him off at an exorbitant price, or
he was left in undisputed possession. His principal biographer,
Croffut, whose effusion is one long chant of praise, treats these
methods as evidences of great shrewdness, and goes on: "His foible
was 'opposition;' wherever his keen eye detected a line that was
making a very large profit on its investment, he swooped down on it
and drove it to the wall by offering a better service and lower
rates." [Footnote: "The Vanderbilts and the Story of Their Fortune,"
by W. A. Croffut, 1886: 45-46.] This statement is only partially
true; its omissions are more significant than its admissions.
Far from being the "constructive genius" that he is represented in
every extant biographical work and note, Vanderbilt was the foremost
mercantile pirate and commercial blackmailer of his day.
Harsh as these terms may seem, they are more than justified by the
facts. His eulogists, in line with those of other rich men, weave a
beautiful picture for the edification of posterity, of a broad,
noble-minded man whose honesty was his sterling virtue, and whose
splendid ability in opening up and extending the country's resources
was rewarded with a great fortune and the thanks of his generation.
This is utterly false. He who has the slightest knowledge of the low
practices and degraded morals of the trading class and of the
qualities which insured success, might at once suspect the
spuriousness of this extravagant presentation, even if the vital
facts were unavailable.
But there is no such difficulty. Obviously, for every one fraudulent
commercial or political transaction that comes to public notice,
hundreds and thousands of such transactions are kept in concealment.
Enough facts, however, remain in official records to show the
particular methods Vanderbilt used in getting together his millions.
Yet no one hitherto seems to have taken the trouble to disinter them;
even serious writers who cannot be accused of wealth worship or
deliberate misstatement have all, without exception, borrowed their
narratives of Vanderbilt's career from the fiction of his literary,
newspaper and oratorical incense burners. And so it is that
everywhere the conviction prevails that whatever fraudulent methods
Vanderbilt employed in his later career, he was essentially an
honest, straightforward man who was compelled by the promptings of
sheer self-preservation to fight back at unscrupulous competitors or
antagonists, and who innately was opposed to underhand work or fraud
in any form. Vanderbilt is in every case portrayed as an eminently
high-minded man who never stooped to dissimulation, deceit or
treachery, and whose first millions, at any rate, were made in the
legitimate ways of trade as they were then understood.
EXTORTION AND THEFT COMMON.
The truth is that the bulk of Vanderbilt's original millions were the
proceeds of extortion, blackmail and theft.
In the established code of business the words extortion and theft had
an unmistakable significance. Business men did not consider it at all
dishonorable to oppress their workers; to manufacture and sell goods
under false pretenses; to adulterate prepared foods and drugs; to
demand the very highest prices for products upon which the very life
of the people depended, and at a time when consumers needed them
most; to bribe public officials and to hold up the Government in
plundering schemes. These and many other practices were looked upon
as commonplaces of ordinary trade.
But even as burglars will have their fine points of honor among
themselves, so the business world set certain tacit limitations of
action beyond which none could go without being regarded as violating
the code. It was all very well as long as members of their own class
plundered some other class, or fought one another, no matter how
rapaciously, in accordance with understood procedure. But when any
business man ventured to overstep these limitations, as Vanderbilt
did, and levy a species of commercial blackmail to the extent of
millions of dollars, then he was sternly denounced as an arch thief.
If Vanderbilt had confined himself to the routine formulas of
business, he might have gone down in failure. Many of the bankrupts
were composed of business men who, while sharp themselves, were
outgeneraled by abler sharpers. Vanderbilt was a master hand in
despoiling the despoilers.
[Illustration: COMMODORE CORNELIUS VANDERBILT, The Founder of the
Vanderbilt Fortune.]
How did Vanderbilt manage to extort millions of dollars? The method
was one of great simplicity; many of its features were brought out in
the United States Senate in the debate of June 9, 1858, over the Mail
Steamship bill. The Government had begun, more than a decade back,
the policy of paying heavy subsidies to steamship companies for the
transportation of mail. This subsidy, however, was not the only
payment received by the steamship owners. In addition they were
allowed what were called "postages"--the full returns from the amount
of postage on the letters carried. Ocean postage at that time was
enormous and burdensome, and was especially onerous upon a class of
persons least able to bear it. About three-quarters of the letters
transported by ships were written by emigrants. They were taxed the
usual rate of twenty-four or twenty-nine cents for a single letter.
In 1851 the amount received for trans-Atlantic postages was not less
than a million dollars; three-fourths of this sum came directly from
the working class.
THE CORRUPTION OF OFFICIALS.
To get these subsidies, in conjunction with the "postages," the
steamship owners by one means or another corrupted postal officials
and members of Congress. "I have noticed," said Senator Toombs, in a
speech in the United States Senate on June 9, 1858, that there has
never been a head of a Department strong enough to resist steamship
contracts. I have noticed them here with your Whig party and your
Democratic party for the last thirteen years, and I have never seen
any head of a Department strong enough to resist these influences. ...
Thirteen years' experience has taught me that wherever you allow
the Postoffice or Navy Department to do anything which is for the
benefit of contractors you may consider the thing as done. I could
point to more than a dozen of these contracts. ... A million dollars
a year is a power that will be felt. For ten years it amounts to ten
million dollars, and I know it is felt. I know it perverts
legislation. I have seen its influence; I have seen the public
treasury plundered by it. ... [Footnote: The Congressional Globe,
First Session, Thirty-fifth Congress, 1857-58, iii: 2839.]
By means of this systematic corruption the steamship owners received
many millions of dollars of Government funds. This was all virtually
plunder; the returns from the "postages" far more than paid them for
the transportation of mails. And what became of these millions in
loot? Part went in profits to the owners, and another part was used
as private capital by them to build more and newer ships constantly.
Practically none of Vanderbilt's ships cost him a cent; the
Government funds paid for their building. In fact, a careful tracing
of the history of all of the subsidized steamship companies proves
that this plunder from the Government was very considerably more than
enough to build and equip their entire lines.
One of the subsidized steamship lines was that of E. K. Collins &
Co., a line running from New York to Liverpool. Collins debauched the
postal officials and Congress so effectively that in 1847 he obtained
an appropriation of $387,000 a year, and subsequently an additional
appropriation of $475,000 for five years. Together with the
"postages," these amounts made a total mail subsidy for that one line
alone during the latter years of the contract of about a million
dollars a year. The act of Congress did not, however, specify that
the contract was to run for ten years. The postal officials, by what
Senator Toombs termed "a fraudulent construction," declared that it
did run for ten years from 1850, and made payments accordingly. The
bill before Congress in the closing days of the session of 1858, was
the usual annual authorization of the payment of this appropriation,
as well as other mail-steamer appropriations.
VANDERBILT'S HUGE LOOT.
In the course of this debate some remarkable facts came out as to how
the Government was being steadily plundered, and why it was that the
postal system was already burdened with a deficit of $5,000,000.
While the appropriation bill was being solemnly discussed with
patriotic exclamations, lobbyists of the various steamship companies
busied themselves with influencing or purchasing votes within the
very halls of Congress.
Almost the entire Senate was occupied for days with advocating this
or that side as if they were paid attorneys pleading for the
interests of either Collins or Vanderbilt. Apparently a bitter
conflict was raging between these two millionaires. Vanderbilt's
subsidized European lines ran to Southampton, Havre and Bremen;
Collins' to Liverpool. There were indications that for years a secret
understanding had been in force between Collins and Vanderbilt by
which they divided the mail subsidy funds. Ostensibly, however, in
order to give no sign of collusion, they went through the public
appearance of warring upon each other. By this stratagem they were
able to ward off criticism of monopoly, and each get a larger
appropriation than if it were known that they were in league. But it
was characteristic of business methods that while in collusion,
Vanderbilt and Collins constantly sought to wreck the other.
One Senator after another arose with perfervid effusion of either
Collins or Vanderbilt. The Collins supporters gave out the most suave
arguments why the Collins line should be heavily subsidized, and why
Collins should be permitted to change his European port to
Southampton. Vanderbilt's retainers fought this move, which they
declared would wipe out of existence the enterprise of a great and
patriotic capitalist.
It was at this point that Senator Toombs, who represented neither
side, cut in with a series of charges which dismayed the whole lobby
for the time being. He denounced both Collins and Vanderbilt as
plunderers, and then, in so many words, specifically accused
Vanderbilt of having blackmailed millions of dollars. "I am trying,"
said Senator Toombs, to protect the Government against collusion,
not against conflict. I do not know but that these parties have colluded
now. I have not the least doubt that all these people understand one
another. I am struggling against collusion. If they have colluded,
why should Vanderbilt run to Southampton for the postage when
Collins can get three hundred and eighty-seven thousand dollars for
running to the same place? Why may not Collins, then, sell his ships,
sit down in New York, and say to Vanderbilt, 'I will give you two hundred
and thirty thousand dollars and pocket one hundred and fifty-seven
thousand dollars a year.' That is the plain, naked case. The Senator
from Vermont says the Postmaster General will protect us. It is my
duty, in the first place, to prevent collusion, and prevent the
country from being plundered; to protect it by law as well as I can.'
Regarding the California mails, Senator Toombs reminded the Senate of
the granting eleven years before of enormous mail subsidies to the
two steamship lines running to California--the Pacific Mail Steamship
Company and the United States Mail Steamship Company, otherwise
called the Harris and the Sloo lines. He declared that Vanderbilt,
threatening them with both competition and a public agitation such as
would uncover the fraud, had forced them to pay him gigantic sums in
return for his silence and inactivity. Responsible capitalists,
Senator Toombs said, had offered to carry the mails to California for
$550,000. "Everybody knows," he said, "that it can be done for half
the money we pay now. Why, then, should we continue to waste the
public money?" Senator Toombs went on:
You give nine hundred thousand dollars a year to carry the mails to
California; and Vanderbilt compels the contractors to give him
$56,000 a month to keep quiet. This is the effect of your
subventions. Under your Sloo and Harris contracts you pay about
$900,000 a year (since 1847); and Vanderbilt, by his superior skill
and energy, compelled them for a long time, to disgorge $40,000 a
month, and now $56,000 a month. ... They pay lobbymen, they pay
agencies, they go to law, because everybody is to have something; and
I know this Sloo contract has been in chancery in New York for years.
[Footnote: The case referred to by Senator Toombs was doubtless that
of Sloo et al. vs. Law et al. (Case No. 12,957, Federal Cases, xxii:
355-364.)
In this case, argued before Judge Ingersoll in the United States
Circuit Court, at New York City, on May 16, 1856, many interesting
and characteristic facts came out both in the argument and in the
Court decision.
From the decision (which went into the intricacies of the case at
great length) it appeared that although Albert G. Sloo had formed the
United States Mail Steamship Company, the incorporators were George
Law, Marshall O. Roberts, Prosper M. Wetmore and Edwin Crosswell.
Sloo assigned his contract to them. Law was the first president, and
was succeeded by Roberts. A trust fund was formed. Law fraudulently
(so the decision read) took out $700,000 of stock, and also
fraudulently appropriated large sums of money belonging to the trust
fund. This was the same Law who, in 1851 (probably with a part of
this plunder) bribed the New York Board of Aldermen, with money, to
give him franchises for the Second and Ninth Avenue surface railway
lines. Roberts appropriated $600,000 of the United States Mail
Steamship Company's stock. The huge swindles upon the Government
carried on by Roberts during the Civil War are described in later
chapters in this work. Wetmore was a notorious lobbyist. By fraud,
Law and Roberts thus managed to own the bulk of the capital stock of
the United States Mail Steamship Company. The mail contract that it
had with the Government was to yield $2,900,000 in ten years.
Vanderbilt stepped in to plunder these plunderers. During the time
that Vanderbilt competed with that company, the price of a single
steerage passage from California to New York was $35. After he had
sold the company the steamship "North Star" for $400,000, and had
blackmailed it into paying heavily for his silence and non-
competition, the price of steerage passage was put up to $125 (p.
364).
The cause of the suit was a quarrel among the trustees over the
division of the plunder. One of the trustees refused to permit
another access to the books. Judge Ingersoll issued an injunction
restraining the defendant trustees from withholding such books and
papers.] The result of this system is that here comes a man--as old
Vanderbilt seems to be--I never saw him, but his operations have
excited my admiration--and he runs right at them and says disgorge
this plunder. He is the kingfish that is robbing these small
plunderers that come about the Capitol. He does not come here for
that purpose; but he says, 'Fork over $56,000 a month of this money
to me, that I may lie in port with my ships,' and they do it.
[Footnote: The Congressional Globe, 1857-58, iii: 2843-2844.
The acts by which the establishment of the various subsidized ocean
lines were authorized by Congress, specified that the steamers were
to be fit for ships of war in case of necessity, and that these
steamers were to be accepted by the Navy Department before they could
draw subsidies. This part of the debate in the United States Senate
shows the methods used in forcing their acceptance on the Government:
Mr. Collamer.--The Collins line was set up by special contract?
Mr. Toombs.--Yes, by special contract, and that was the way with the
Sloo contract and the Harris contract. They were to build ships fit
for war purposes. I know when the Collins vessels were built; I was a
member of the Committee on Ways and Means of the other House, and I
remember that the men at the head of our bureau of yards and docks
said that they were not worth a sixpence for war purposes; that a
single broadside would blow them to pieces; that they could not stand
the fire of their own guns; but newspapers in the cities that were
subsidized commenced firing on the Secretary of the Navy, and he
succumbed and took the ships. That was the way they got here.
Senator Collamer, referring to the subsidy legislation, said: "As
long as the Congress of the United States makes contracts, declare
who they shall be with, and how much they shall pay for them, they
can never escape the generally prevailing public suspicion that there
is fraud and deceit and corruption in those contracts."]
Thus, it is seen, Vanderbilt derived millions of dollars by this
process of commercial blackmail. Without his having to risk a cent,
or run the chance of losing a single ship, there was turned over to
him a sum so large every year that many of the most opulent merchants
could not claim the equal of it after a lifetime of feverish trade.
It was purely as a means of blackmailing coercion that he started a
steamship line to California to compete with the Harris and the Sloo
interests. For his consent to quit running his ships and to give them
a complete and unassailed monopoly he first extorted $480,000 a year
of the postal subsidy, and then raised it to $612,000.
The matter came up in the House, June 12, 1858. Representative Davis,
of Mississippi, made the same charges. He read this statement and
inquired if it were true:
These companies, in order to prevent all competition to their line,
and to enable them, as they do, to charge passengers double fare,
have actually paid Vanderbilt $30,000 per month, and the United
States Mail Steamship Company, carrying the mail between New York and
Aspinwall, an additional sum of $10,000 per month, making $40,000 per
month to Vanderbilt since May, 1856, which they continued to do. This
$480,000 are paid to Vanderbilt per annum simply to give these two
companies the entire monopoly of their lines--which sum, and much
more, is charged over to passengers and freight.
Representative Davis repeatedly pressed for a definite reply as to
the truth of the statement. The advocates of the bill answered with
evasions and equivocations. [Footnote: The Congressional Globe, part
iii, 1857-58:3029. The Washington correspondent of the New York
"Times" telegraphed (issue of June 2, 1858) that the mail subsidy
bill was passed by the House "Without twenty members knowing its
details."]
BLACKMAIL CHARGES TRUE.
The mail steamer appropriation bill, as finally passed by Congress,
allowed large subsidies to all of the steamship interests. The
pretended warfare among them had served its purpose; all got what
they sought in subsidy funds. While the bill allowed the Postmaster-
General to change Collins' European terminus to Southampton, that
official, so it was proved subsequently, was Vanderbilt's plastic
tool.
But what became of the charges against Vanderbilt? Were they true or
calumniatory? For two years Congress made no effort to ascertain
this. In 1860, however, charges of corruption in the postal system
and other Government departments were so numerously made, that the
House of Representatives on March 5, 1860, decided, as a matter of
policy, to appoint an investigatng committee. This committee, called
the "Covode Committee," after the name of its chairman, probed into
the allegations of Vanderbilt's blackmailing transactions. The
charges made in 1858 by Senator Toombs and Representative Davies were
fully substatiated.
Ellwood Fisher, a trustee of the United States Mail Steamship
Company, testified on May 2 that during the greater part of the time
he was trustee, Vanderbilt was paid $10,000 a month by the United
States Mail Steamship company, and that the Pacific Mail Steamship
Company paid him $30,000 a month at the same time and for the same
purpose. The agreement was that if competition appeared payment was
to cease. In all, $480,000 a year was paid during this time. On June
5, 1860, Fisher again testified: "During the period of about four
years and a half that I was one of the trustees, the earnings of the
line were very large, but the greater part of the money was
wrongfully appropriated to Vanderbilt for blackmail, and to others on
various pretexts." [Footnote: House Reports, Thirty-sixth Congress,
First Session 1859-60 v:785-86 and 829. "Hence it was held,"
explained Fisher, in speaking of his fellow trustees, "that he
[Vanderbilt] was interested in preventing competition, and the terror
of his name and capital would be effectual upon others who might be
disposed to establish steamship lines" (p. 786).] William H. Davidge,
president of the Pacific Mail Steamship Company, admitted that the
company had long paid blackmail money to Vanderbilt. "The
arrangement," he said, "was based upon there being no competition,
and the sum was regulated by that fact." [Footnote: Ibid., 795-796.
The testimony of Fischer, Davidge and other officials of the
steamship lines covers many pages of the investigating committee's
report. Only a few of the most vital parts have been quoted here.]
Horace F. Clark, Vanderbilt's son-in-law, one of the trustees of the
United States Mail Steamship Company, likewise admitted the
transaction. [Footnote: Ibid., 824.
But Roberts and his associate trustees succeeded in making the
Government recoup them, to a considerable extent, for the amount out
of which Vanderbilt blackmailed them. They did it in this way:
A claim was trumped up by them that the Government owed a large sum,
approximating about two million dollars, to the United States Mail
Steamship Company for services in carrying mail in addition to those
called for under the Sloo contract. In 1859 they began lobbying in
Congress to have this claim recognized. The scheme was considered so
brazen that Congress refused. Year after year, for eleven years, they
tried to get Congress to pass an act for their benefit. Finally, on
July 14, 1870, at a time when bribery was rampant in Congress, they
succeeded. An act was passed directing the Court of Claims to
investigate and determine the merits of the claim.] It is quite
useless [Footnote: The Court of Claims threw the case out of court.
Judge Drake, in delivering the opinion of the court, said that the
act was to be so construed "as to prevent the entrapping of the
Government by fixing upon it liability where the intention of the
legislature [Congress] was only to authorize an investigation of the
question of liability" (Marshall O. Roberts et al., Trustees, vs. the
United States, Court of Claims Reports, vi: 84-90). On appeal,
however, the Supreme Court of the United States held that the act of
Congress in referring the case to the Court of Claims was in effect
_a ratification of the claim_. (Court of Claims Reports, xi:
198-126.) Thus this bold robbery was fully validated.] to ask whether
Vanderbilt was criminally prosecuted or civilly sued by the
Government. Not only was he unmolested, but two years later, as we
shall see, he carried on another huge swindle upon the Government
under peculiarly heinous conditions.
This continuous robbery of the public treasury explains how
Vanderbilt was able to get hold of millions of dollars at a time when
millionaires were scarce. Vanderbilt is said to have boasted in 1853
that he had eleven million dollars invested at twenty-five per cent.
A very large portion of this came directly from his bold system of
commercial blackmail. [Footnote: Undoubtedly so, but the precise
proportion it is impossible to ascertain.] The mail subsidies were
the real foundation of his fortune. Many newspaper editorials and
articles of the time mention this fact. Only a few of the important
underlying facts of the character of his methods when he was in the
steamboat and steamship business can be gleaned from the records. But
these few give a clear enough insight. With a part of the proceeds of
his plan of piracy, he carried on a subtle system of corruption by
which he and the other steamer owners were able time after time not
only to continue their control of Congress and the postal
authorities, but to defeat postal reform measures. For fifteen years
Vanderbilt and his associates succeeded in stifling every bill
introduced in Congress for the reduction of the postage on mail.
HE QUITS STEAMSHIPS.
The Civil War with its commerce-preying privateers was an
unpropitious time for American mercantile vessels. Vanderbilt now
began his career as a railroad owner.
He was at this time sixty-nine years old, a tall, robust, vigorous
man with a stern face of remarkable vulgar strength. The illiteracy
of his youth survived; he could not write the simplest words
correctly, and his speech was a brusque medley of slang, jargon,
dialect and profanity. It was said of him that he could swear more
forcibly, variously and frequently than any other man of his
generation. Like the Astors, he was cynical, distrustful, secretive
and parsimonious. He kept his plans entirely to himself. In his
business dealings he was never known to have shown the slightest
mercy; he demanded the last cent due. His close-fistedness was such a
passion that for many years he refused to substitute new carpets for
the scandalous ones covering the floors of his house No. 10
Washington place. He never read anything except the newspapers, which
he skimmed at breakfast. To his children he was unsympathetic and
inflexibly harsh; Croffut admits that they feared him. The only
relaxations he allowed himself were fast driving and playing whist.
This, in short is a picture of the man who in the next few years used
his stolen millions to sweep into his ownership great railroad
systems. Croffut asserts that in 1861 he was worth $20,000,000; other
writers say that his wealth did not exceed $10,000,000. He knew
nothing of railroads, not even the first technical or supervising
rudiments. Upon one thing he depended and that alone: the brute force
of money with its auxiliaries, cunning, bribery and fraud.