THE ONRUSH OF THE VANDERBILT FORTUNE
With the outbreak of the Civil War, and the scouring of the seas by
privateers, American ship owners found themselves with an assortment
of superfluous vessels on their hands. Forced to withdraw from marine
commerce, they looked about for two openings. One was how to dispose
of their vessels, the other the seeking of a new and safe method of
making millions.
Most of their vessels were of such scandalous construction that
foreign capitalists would not buy them at any price. Hastily built in
the brief period of ninety days, wholly with a view to immediate
profit and with but a perfunctory regard for efficiency, many of
these steamers were in a dangerous condition. That they survived
voyages was perhaps due more to luck than anything else; year after
year, vessel after vessel similarly built and owned had gone down to
the bottom of the ocean. Collins had lost many of his ships; so had
other steamship companies. The chronicles of sea travel were a long,
grewsome succession of tragedies; every little while accounts would
come in of ships sunk or mysteriously missing. Thousands of
immigrants, inhumanly crowded in the enclosures of the steerage, were
swept to death without even a fighting chance for life. Cabin
passengers fared better; they were given the opportunity of taking to
the life-boats in cases where there was sufficient warning, time and
room. At best, sea travel is a hazard; the finest of ships are liable
to meet with disaster. But over much of this sacrifice of life hung
grim, ugly charges of mismanagement and corruption, of insufficient
crews and incompetent officers; of defective machinery and rotting
timber; of lack of proper inspection and safeguards.
THE ANSWER FOUND.
The steamboat and steamship owners were not long lost in perplexity.
Since they could no longer use their ships or make profit on ocean
routes why not palm off their vessels upon the Government? A highly
favorable time it was; the Government, under the imperative necessity
of at once raising and transporting a huge army, needed vessels
badly. As for the other question momentarily agitating the
capitalists as to what new line of activity they could substitute for
their own extinguished business, Vanderbilt soon showed how railroads
could be made to yield a far greater fortune than commerce.
The titanic conflict opening between the North and the South found
the Federal Government wholly unprepared. True, in granting the mail
subsidies which established the ocean steamship companies, and which
actually furnished the capital for many of them, Congress had
inserted some fine provisions that these subsidized ships should be
so built as to be "war steamers of the first class," available in
time of war. But these provisions were mere vapor. Just as the Harris
and the Sloo lines had obtained annual mail subsidy payments of
$900,000 and had caused Government officials to accept their inferior
vessels, so the Collins line had done the same. The report of a board
of naval experts submitted to the Committee of Ways and Means of the
House of Representatives had showed that the Collins steamers had not
been built according to contract; that they would crumble to pieces
under the fire of their own batteries, and that a single hostile gun
would blow them to splinters. Yet they had been accepted by the Navy
Department.
In times of peace the commercial interests had practiced the grossest
frauds in corruptly imposing upon the Government every form of shoddy
supplies. These were the same interests so vociferously proclaiming
their intense patriotism. The Civil War put their pretensions of
patriotism to the test. If ever a war took place in which Government
and people had to strain every nerve and resource to carry on a great
conflict it was the Civil War. The result of that war was only to
exchange chattel slavery for the more extensive system of economic
slavery. But the people of that time did not see this clearly. The
Northern soldiers thought they were fighting for the noblest of all
causes, and the mass of the people behind them were ready to make
every sacrifice to win a momentous struggle, the direct issue of
which was the overthrow or retention of black slavery.
How did the capitalist class act toward the Government, or rather, let
us say, toward the army and the navy so heroically pouring out their
blood in battles, and hazarding life in camps, hospitals, stockades
and military prisons?
INDISCRIMINATE PLUNDERING DURING THE CIVIL WAR.
The capitalists abundantly proved their devout patriotism by making
tremendous fortunes from the necessities of that great crisis. They
unloaded upon the Government at ten times the cost of manufacture
quantities of munitions of war--munitions so frequently worthless
that they often had to be thrown away after their purchase.
[Footnote: In a speech on February 28, 1863, on the urgency of
establishing additional government armories and founderies,
Representative J. W. Wallace pointed out in the House of
Representatives: "The arms, ordnance and munitions of war bought by
the Government from private contractors and foreign armories since
the commencement of the rebellion have doubtless cost, over and above
the positive expense of their manufacture, ten times as much as would
establish and put into operation the armory and founderies
recommended in the resolution of the committee. I understand that the
Government, from the necessity of procuring a sufficient quantity of
arms, has been paying, on the average, about twenty-two dollars per
musket, when they could have been and could be manufactured in our
national workshops for one-half that money."--Appendix to The
Congressional Globe, Thirty-seventh Congress, Third Session, 1862-63.
Part ii: 136. Fuller details are given in subsequent chapters. ] They
supplied shoddy uniforms and blankets and wretched shoes; food of so
deleterious a quality that it was a fertile cause of epidemics of
fevers and of numberless deaths; they impressed, by force of
corruption, worn-out, disintegrating hulks into service as army and
naval transports. Not a single possibility of profit was there in
which the most glaring frauds were not committed. By a series of
disingenuous measures the banks plundered the Treasury and people and
caused their banknotes to be exempt from taxation. The merchants
defrauded the Government out of millions of dollars by bribing Custom
House officers to connive at undervaluations of imports. [Footnote:
In his report for 1862 Salmon P. Chase, Secretary of the Treasury,
wrote: "That invoices representing fraudulent valuation of
merchandise are daily presented at the Custom Houses is well
known...."] The Custom House frauds were so notorious that, goaded on
by public opinion, the House of Representatives was forced to appoint
an investigating committee. The chairman of this committee,
Representative C. H. Van Wyck, of New York, after summarizing the
testimony in a speech in the House on February 23, 1863, passionately
exclaimed: "The starving, penniless man who steals a loaf of bread to
save life you incarcerate in a dungeon; but the army of magnificent
highwaymen who steal by tens of thousands from the people, go
unwhipped of justice and are suffered to enjoy the fruits of their
crimes. It has been so with former administrations: unfortunately it
is so with this." [Footnote: Appendix to the Congressional Globe,
Thirty-seventh Congress, Third Session, 1862-63. Part ii: 118.]
The Federal armies not only had to fight an open foe in a desperately
contested war, but they were at the same time the helpless targets
for the profit-mongers of their own section who insidiously slew
great numbers of them--not, it is true, out of deliberate lust for
murder, but because the craze for profits crushed every instinct of
honor and humanity, and rendered them callous to the appalling
consequences. The battlefields were not more deadly than the supplies
furnished by capitalist contractors. [Footnote: This is one of many
examples: Philip S. Justice, a gun manufacturer of Philadelphia,
obtained a contract in 1861, to supply 4,000 rifles. He charged $20
apiece. The rifles were found to be so absolutely dangerous to the
soldiers using them, that the Government declined to pay his demanded
price for a part of them. Justice then brought suit. (See Court of
Claims Reports, viii: 37-54.) In the court records, these statements
are included:
William H. Harris, Second Lieutenant of Ordnance, under orders
visited Camp Hamilton, Va., and inspected the arms of the Fifty-
Eighth Regiment, Pennsylvania Volunteers, stationed there. He
reported: "This regiment is armed with rifle muskets, marked on the
barrel, 'P. S. Justice, Philadelphia,' and vary in calibre from .65
to .70. I find many of them unserviceable and irreparable, from the
fact that the principal parts are defective. Many of them are made up
of parts of muskets to which the stamp of condemnation has been
affixed by an inspecting officer. None of the stocks have ever been
approved by an officer, nor do they bear the initials of any
inspector. They are made up of soft, unseasoned wood, and are
defective in construction. ... The sights are merely soldered on to
the barrel, and come off with the gentlest handling. Imitative screw-
heads are cut on their bases. The bayonets are made up of soft iron,
and, of course, when once bent remain 'set,'" etc., etc. (p. 43).
Col. (later General) Thomas D. Doubleday reported of his inspection:
"The arms which were manufactured at Philadelphia, Penn., are of the
most worthless kind, and have every appearance of having been
manufactured from old condemned muskets. Many of them burst; hammers
break off; sights fall off when discharged; the barrels are very
light, not one-twentieth of an inch thick, and the stocks are made of
green wood which have shrunk so as to leave the bands and trimmings
loose. The bayonets are of such frail texture that they bend like
lead, and many of them break off when going through the bayonet
exercise. You could hardly conceive of such a worthless lot of arms,
totally unfit for service, and dangerous to those using them" (p.
44).
Assistant Inspector-General of Ordnance John Buford reported: "Many
had burst; many cones were blown out; many locks were defective; many
barrels were rough inside from imperfect boring; and many had
different diameters of bore in the same barrel. ... _At target
practice so many burst that the men became afraid to fire them_"
(p. 45).
The Court of Claims, on strict technical grounds, decided in favor of
Justice, but the Supreme Court of the United States reversed that
decision and dismissed the case. The Supreme Court found true the
Government's contention that "the arms were unserviceable and unsafe
for troops to handle."
Many other such specific examples are given in subsequent chapters of
this work.] These capitalists passed, and were hailed, as eminent
merchants, manufacturers and bankers; they were mighty in the marts
and in politics; and their praise as "enterprising" and "self-made"
and "patriotic" men was lavishly diffused.
It was the period of periods when there was a kind of adoration of
the capitalist taught in press, college and pulpit. Nothing is so
effective, as was remarked of old, to divert attention from
scoundrelism as to make a brilliant show of patriotism. In the very
act of looting Government and people and devastating the army and
navy, the capitalists did the most ghastly business under the mask of
the purest patriotism. Incredible as it may seem, this pretension was
invoked and has been successfully maintained to this very day. You
can scarcely pick up a volume on the Civil War, or a biography of the
statesmen or rich men of the era, without wading in fulsome accounts
of the untiring patriotism of the capitalists.
PATRIOTISM AT A SAFE DISTANCE.
But, while lustily indulging in patriotic palaver, the propertied
classes took excellent care that their own bodies should not be
imperilled. Inspired by enthusiasm or principle, a great array of the
working class, including the farming and the professional elements,
volunteered for military service. It was not long before they
experienced the disappointment and demoralization of camp life. The
letters written by many of these soldiers show that they did not
falter at active campaigning. The prospect, however, of remaining in
camp with insufficient rations, and (to use a modern expressive word)
graft on every hand, completely disheartened and disgusted many of
them. Many having influence with members of Congress, contrived to
get discharges; others lacking this influence deserted. To fill the
constantly diminishing ranks caused by deaths, resignations and
desertions, it became necessary to pass a conscription act.
With few exceptions, the propertied classes of the North loved
comfort and power too well to look tranquilly upon any move to force
them to enlist. Once more, the Government revealed that it was but a
register of the interests of the ruling classes. The Draft Act was so
amended that it allowed men of property to escape being conscripted
into the army by permitting them to buy substitutes. The poor man who
could not raise the necessary amount had to submit to the
consequences of the draft. With a few of the many dollars wrung,
filched or plundered in some way or other, the capitalists could
purchase immunity from military service.
As one of the foremost capitalists of the time, Cornelius Vanderbilt
has been constantly exhibited as a great and shining patriot.
Precisely in the same way as Croffut makes no mention of Vanderbilt's
share in the mail subsidy frauds, but, on the contrary, ascribes to
Vanderbilt the most splendid patriotism in his mail carrying
operations, so do Croffut and other writers unctuously dilate upon
the old magnate's patriotic services during the Civil War. Such is
the sort of romancing that has long gone unquestioned, although the
genuine facts have been within reach. These facts show that
Vanderbilt was continuing during the Civil War the prodigious frauds
he had long been carrying on.
When Lincoln's administration decided in 1862 to send a large
military and naval force to New Orleans under General Banks, one of
the first considerations was to get in haste the required number of
ships to be used as transports. To whom did the Government turn in
this exigency? To the very merchant class which, since the foundation
of the United States, had continuously defrauded the public treasury.
The owners of the ships had been eagerly awaiting a chance to sell or
lease them to the Government at exorbitant prices. And to whom was
the business of buying, equipping and supervising them intrusted? To
none other than Cornelius Vanderbilt.
Every public man had opportunities for knowing that Vanderbilt had
pocketed millions of dollars in his fraudulent hold-up arrangement
with various mail subsidy lines. He was known to be mercenary and
unscrupulous. Yet he was selected by Secretary of War Stanton to act
as the agent for the Government. At this time Vanderbilt was posing
as a glorious patriot. With much ostentation he had loaned to the
Government for naval purposes one of his ships--a ship that he could
not put to use himself and which, in fact, had been built with stolen
public funds. By this gift he had cheaply attained the reputation of
being a fervent patriot. Subsequently, it may be added, Congress
turned a trick on him by assuming that he gave this ship to the
Government, and, to his great astonishment, kept the ship and
solemnly thanked him for the present.
VANDERBILT'S METHODS IN WAR.
The outfitting of the Banks expedition was of such a rank character
that it provoked a grave public scandal. If the matter had been
simply one of swindling the United States Treasury out of millions of
dollars, it might have been passed over by Congress. On all sides
gigantic frauds were being committed by the capitalists. But in this
particular case the protests of the thousands of soldiers on board
the transports were too numerous and effective to be silenced or
ignored. These soldiers were not regulars without influence or
connections; they were volunteers who everywhere had relatives and
friends to demand an inquiry. Their complaints of overcrowding and of
insecure, broken-down ships poured in, and aroused the whole country.
A great stir resulted. Congress appointed an investigating committee.
The testimony was extremely illuminative. It showed that in buying
the vessels Vanderbilt had employed one T. J. Southard to act as his
handy man. Vanderbilt, it was testified by numerous ship owners,
refused to charter any vessels unless the business were transacted
through Southard, who demanded a share of the purchase money before
he would consent to do business. Any ship owner who wanted to get rid
of a superannuated steamer or sailing vessel found no difficulty if
he acceded to Southard's terms.
The vessels accepted by Vanderbilt, and contracted to be paid for at
high prices, were in shockingly bad condition. Vanderbilt was one of
the few men in the secret of the destination of Banks' expedition; he
knew that the ships had to make an ocean trip. Yet he bought for
$10,000 the Niagara, an old boat that had been built nearly a score
of years before for trade on Lake Ontario. "In perfectly smooth
weather," reported Senator Grimes, of Iowa, "with a calm sea, the
planks were ripped out of her, and exhibited to the gaze of the
indignant soldiers on board, showing that her timbers were rotten.
The committee have in their committee room a large sample of one of
the beams of this vessel to show that it has not the slightest
capacity to hold a nail." [Footnote: The Congressional Globe, Thirty-
seventh Congress, Third Session, 1862-63, Part 1: 610.] Senator
Grimes continued:
If Senators will refer to page 18 of this report, they will see that
for the steamer Eastern Queen he (Vanderbilt) paid $900 a day for the
first thirty days, and $800 for the residue of the days; while she
(the Eastern Queen) had been chartered by the Government, for the
Burnside expedition at $500 a day, making a difference of three or
four hundred dollars a day. He paid for the Quinebang $250 a day,
while she had been chartered to the Government at one time for $130 a
day. For the Shetucket he paid $250 a day, while she had formerly
been in our employ for $150 a day. He paid for the Charles Osgood
$250 a day, while we had chartered her for $150. He paid $250 a day
for the James S. Green, while we had once had a charter of her for
$200. He paid $450 a day for the Salvor, while she had been chartered
to the Government for $300. He paid $250 a day for the Albany, while
she had been chartered to the Government for $150. He paid $250 a day
for the Jersey Blue, while she had been chartered to the Government
for $150. [Footnote: The Congressional Globe, etc., 1862-63, Part
i:610.]
There were a few of the many vessels chartered by Vanderbilt through
Southard for the Government. For vessels bought outright, extravagant
sums were paid. Ambrose Snow, a well-known shipping merchant,
testified that "when we got to Commodore Vanderbilt we were referred
to Mr. Southard; when we went to Mr. Southard, we were told that we
should have to pay him a commission of five per cent." [Footnote:
Ibid. See also Senate Report No. 84, 1863, embracing the full
testimony.]
Other shipping merchants corroborated this testimony. The methods and
extent of these great frauds were clear. If the ship owners agreed to
pay Southard five--and very often he exacted ten per cent. [Footnote:
Senator Hale asserted that he had heard of the exacting of a
brokerage equal to ten per cent, in Boston and elsewhere.]--
Vanderbilt would agree to pay them enormous sums. In giving his
testimony Vanderbilt sought to show that he was actuated by the most
patriotic motives. But it was obvious that he was in collusion with
Southard, and received the greater part of the plunder.
HORRORS DONE FOR PROFIT.
On some of the vessels chartered by Vanderbilt, vessels that under
the immigration act would not have been allowed to carry more than
three hundred passengers, not less than nine hundred and fifty
soldiers were packed. Most of the vessels were antiquated and
inadequate; not a few were badly decayed. With a little superficial
patching up they were imposed upon the Government. Despite his
knowing that only vessels adapted for ocean service were needed,
Vanderbilt chartered craft that had hitherto been almost entirely
used in navigating inland waters. Not a single precaution was taken
by him or his associates to safeguard the lives of the soldiers.
It was a rule amoung commercial men that at least two men capable of
navigating should be aboard, especially at sea. Yet, with the lives
of thousands of soldiers at stake, and with old and bad vessels in
use at that, Vanderbilt, in more than one instance, as the testimony
showed, neglected to hire more than one navigator, and failed to
provide instruments and charts. In stating these facts Senator Grimes
said: "When the question was asked of Commodore Vanderbilt and of
other gentlemen in connection with the expedition, why this was, and
why they did not take navigators and instruments and charts on board,
the answer was that the insurance companies and owners of the vessel
took that risk, as though"--Senator Grimes bitingly continued--"the
Government had no risk in the lives of its valiant men whom it has
enlisted under its banner and set out in an expedition of this kind."
[Footnote: The Congressional Globe, Thirty-seventh Congress, Third
Session, 1862-63, Part i: 586.] If the expedition had encountered a
severe storm at Cape Hatteras, for instance, it is probable that most
of the vessels would have been wrecked. Luckily the voyage was fair.
FRAUDS REMAIN UNPUNISHED.
Did the Government make any move to arrest, indict and imprison
Vanderbilt and his tools? None. The farcical ending of these
revelations was the introduction in the United States Senate of a
mere resolution censuring them as "guilty of negligence."
Vanderbilt immediately got busy pulling wires; and when the
resolution came up for vote, a number of Senators, led by Senator
Hale, sprang up to withdraw Vanderbilt's name. Senator Grimes
thereupon caustically denounced Vanderbilt. "The whole transaction,"
said he, "shows a chapter of fraud from beginning to end." He went
on: "Men making the most open professions of loyalty and of
patriotism and of perfect disinterestedness, coming before the
committee and swearing that they acted from such motives solely, were
compelled to admit--at least one or two were--that in some instances
they received as high as six and a quarter per cent ... and I believe
that since then the committee are satisfied in their own mind that
the per cent. was greater than was in testimony before them." Senator
Grimes added that he did not believe that Vanderbilt's name should be
stricken from the resolution.
In vain, however, did Senator Grimes plead. Vanderbilt's name was
expunged, and Southard was made the chief scapegoat. Although
Vanderbilt had been tenderly dealt with in the investigation, his
criminality was conclusively established. The affair deeply shocked
the nation. After all, it was only another of many tragic events
demonstrating both the utter inefficiency of capitalist management,
and the consistent capitalist program of subordinating every
consideration of human life to the mania for profits. Vanderbilt was
only a type of his class; although he was found out he deserved
condemnation no more than thousands of other capitalists, great and
small, whose methods at bottom did not vary from his. [Footnote: One
of the grossest and most prevalent forms of fraud was that of selling
doctored-up horses to the Union army. Important cavalry movements
were often delayed and jeoparded by this kind of fraud. In passing
upon the suit of one of these horse contractors against the
Government (Daniel Wormser vs. United States) for payment for horses
supplied, in 1864, for cavalry use, the Supreme Court of the United
States confirmed the charge made by the Government horse inspectors
that the plaintiff had been guilty of fraud, and dismissed the case.
"The Government," said Justice Bradley in the court's decision,
"clearly had the right to proscribe regulations for the inspection of
horses, and there was great need for strictness in this regard, for
frauds were constantly perpetrated. . . . It is well known that
horses may be prepared and fixed up to appear bright and smart for a
few hours."--Court of Claims Reports, vii: 257-262.]
Yet such was the network of shams and falsities with which the
supreme class of the time enmeshed society, that press, pulpit,
university and the so-called statesmen insisted that the wealth of
the rich man had its foundation in ability, and that this ability was
indispensable in providing for the material wants of mankind.
Whatever obscurity may cloud many of Vanderbilt's methods in the
steamship business, his methods in possessing himself of railroads
are easily ascertained from official archives.
Late in 1862, at about the time when he had added to the millions
that he had virtually stolen in the mail subsidy frauds, the huge
profits from his manipulation of the Banks expedition, he set about
buying the stock of the New York and Harlem Railroad.
THE STORY OF A FRANCHISE.
This railroad, the first to enter New York City, had received from
the New York Common Council in 1832 a franchise for the exclusive use
of Fourth avenue, north of Twenty-third street--a franchise which, it
was openly charged, was obtained by distributing bribes in the form
of stock among the aldermen. [Footnote: "The History of Tammany
Hall": 117.]
The franchise was not construed by the city to be perpetual; certain
reservations were embodied giving the city powers of revocation. But
as we shall see, Vanderbilt not only corrupted the Legislature in
1872 to pass an act saddling one-half of the expense of depressing
the tracks upon the city, but caused the act to be so adroitly worded
as to make the franchise perpetual. Along with the franchise to use
Fourth avenue, the railroad company secured in 1832 a franchise, free
of taxation, to run street cars for the convenience of its passengers
from the railroad station (then in the outskirts of New York City)
south to Prince street. Subsequently this franchise was extended to
Walker street, and in 1851 to Park Row. These were the initial stages
of the Fourth Avenue surface line, which has been extended, and has
grown into a vested value of tens of millions of dollars. In 1858 the
New York and Harlem Railroad Company was forced by action of the
Common Council, arising from the protests of the rich residents of
Murray Hill, to discontinue steam service below Forty-second street.
It, therefore, now had a street car line running from that
thoroughfare to the Astor House.
This explanation of antecedent circumstances allows a clearer
comprehension of what took place after Vanderbilt had begun buying
the stock of the New York and Harlem Railroad. The stock was then
selling at $9 a share. This railroad, as was the case with all other
railroads, without exception, was run by the owners with only the
most languid regard for the public interests and safety. Just as the
corporation in the theory of the law was supposed to be a body to
whom Government delegated powers to do certain things in the
interests of the people, so was the railroad considered theoretically
a public highway operated for the convenience of the people. It was
upon this ostensible ground that railroad corporations secured
charters, franchises, property and such privileges as the right of
condemnation of necessary land. The State of New York alone had
contributed $8,000,000 in public funds, and various counties, towns
and municipalities in New York State nearly $31,000,000 by investment
in stocks and bonds. [Footnote: Report of the Special Committe on
Railroads of the New York Assembly, 1879, i:7.] The theory was indeed
attractive, but it remained nothing more than a fiction.
No sooner did the railroad owners get what they wanted, than they
proceeded to exploit the very community from which their possessions
were obtained, and which they were supposed to serve. The various
railroads were juggled with by succeeding groups of manipulators.
Management was neglected, and no attention paid to proper equipment.
Often the physical layout of the railroads--the road-beds, rails and
cars--were deliberately allowed to deteriorate in order that the
manipulators might be able to lower the value and efficiency of the
road, and thus depress the value of the stock. Thus, for instance,
Vanderbilt aiming to get control of a railroad at a low price, might
very well have confederates among some of the directors or officials
of that railroad who would resist or slyly thwart every attempt at
improvement, and so scheme that the profits would constantly go down.
As the profits decreased, so did the price of the stock in the stock
market. The changing combinations of railroad capitalists were too
absorbed in the process of gambling in the stock market to have any
direct concern for management. It was nothing to them that this
neglect caused frequent and heartrending disasters; they were not
held criminally responsible for the loss of life. In fact, railroad
wrecks often served their purpose in beating down the price of
stocks. Incredible as this statement may seem, it is abundantly
proved by the facts.
VANDERBILT GETS A RAILROAD.
After Vanderbilt, by divers machinations of too intricate character
to be described here, had succeeded in knocking down the price of New
York and Harlem Railroad shares and had bought a controlling part,
the price began bounding up. In the middle of April, 1863, it stood
at $50 a share. A very decided increase it was, from $9 to $50;
evidently enough, to occasion this rise, he had put through some
transaction which had added immensely to the profits of the road.
What was it?
Sinister rumors preceded what the evening of April 21, 1863,
disclosed. He had bribed the New York City Common Council to give to
the New York and Harlem Railroad a perpetual franchise for a street
railway on Broadway from the Battery to Union Square. He had done
what Solomon Kipp and others had done, in 1852, when they had spent
$50,000 in bribing the aldermen to give them a franchise for surface
lines on Sixth avenue and Eighth avenue; [Footnote: See presentment
of Grand Jury of February 26, 1853, and accompanying testimony,
Documents of the (New York) Board of Aldermen, Doc. No. XXI, Part II,
No. 55.] what Elijah F. Purdy and others had done in the same year in
bribing aldermen with a fund of $28,000 to give them the franchise
for a surface line on Third avenue; [Footnote: Ibid., 1333-1335.]
what George Law and other capitalists had done, in 1852, in bribing
the aldermen to give them the franchises for street car lines on
Second avenue and Ninth avenue. Only three years before--in 1860--
Vanderbilt had seen Jacob Sharp and others bribe the New York
Legislature (which in that same year had passed an act depriving the
New York Common Council of the power of franchise granting) to give
them franchises for street car lines on Seventh avenue, on Tenth
avenue, on Forty-second street, on Avenue D and a franchise for the
"Belt" line. It was generally believed that the passage of these five
bills cost the projectors $250,000 in money and stock distributed
among the purchasable members of the Legislature. [Footnote: See "The
History of Public Franchises in New York City": 120-125.]
Of all the New York City street railway franchises, either
appropriated or unappropriated, the Broadway line was considered the
most profitable. So valuable were its present and potential prospects
estimated that in 1852 Thomas E. Davies and his associates had
offered, in return for the franchise, to carry passengers for a
three-cent fare and to pay the city a million-dollar bonus. Other
eager capitalists had hastened to offer the city a continuous payment
of $100,000 a year. Similar futile attempts had been made year after
year to get the franchise. The rich residents of Broadway opposed a
street car line, believing it would subject them to noise and
discomfort; likewise the stage owners, intent upon keeping up their
monopoly, fought against it. In 1863 the bare rights of the Broadway
franchise were considered to be worth fully $10,000,000. Vanderbilt
and George Law were now frantically competing for this franchise.
While Vanderbilt was corrupting the Common Council, Law was
corrupting the legislature. [Footnote: The business rivalry between
Vanderbilt and Law was intensified by the deepest personal enmity on
Law's part. As one of the chief owners of the United States Mail
Steamship Company, Law was extremely bitter on the score of
Vanderbilt's having been able to blackmail him and Roberts so heavily
and successfully.] Such competition on the part of capitalists in
corrupting public bodies was very frequent.
THE ALDERMEN OUTWITTED BY VANDERBILT.
But the aldermen were by no means unschooled in the current sharp
practices of commercialism. A strong cabal of them hatched up a
scheme by which they would take Vanderbilt's bribe money, and then
ambush him for still greater spoils. They knew that even if they gave
him the franchise, its validity would not stand the test of the
courts. The Legislature claimed the exclusive power of granting
franchises; astute lawyers assured them that this claim would be
upheld. Their plan was to grant a franchise for the Broadway line to
the New York and Harlem Railroad. This would at once send up the
price of the stock. The Legislature, it was certain, would give a
franchise for the same surface line to Law. When the courts decided
against the Common Council that body, in a spirit of showy deference,
would promptly pass an ordinance repealing the franchise. In the
meantime, the aldermen and their political and Wall Street
confederates would contract to "sell short" large quantities of New
York and Harlem stock.
The method was simple. When that railroad stock was selling at $100 a
share upon the strength of getting the Broadway franchise, the
aldermen would find many persons willing to contract for its delivery
in a month at a price, say, of $90 a share. By either the repealing
of the franchise ordinance or affected by adverse court decisions,
the stock inevitably would sink to a much lower price. At this low
price the aldermen and their confederates would buy the stock and
then deliver it, compelling the contracting parties to pay the agreed
price of $90 a share. The difference between the stipulated price of
delivery and the value to which the stock had fallen--$30, $40 or $50
a share--would represent the winnings.
Part of this plan worked out admirably. The Legislature passed an act
giving Law the franchise. Vanderbilt countered by getting Tweed, the
all-powerful political ruler of New York City and New York State, to
order his tool, Governor Seymour, to veto the measure. As was
anticipated by the aldermen, the courts pronounced that the Common
Council had no power to grant franchises. Vanderbilt's franchise was,
therefore, annulled. So far, there was no hitch in the plot to pluck
Vanderbilt.
But an unlooked for obstacle was encountered. Vanderbilt had somehow
got wind of the affair, and with instant energy bought up secretly
all of the New York and Harlem Railroad stock he could. He had masses
of ready money to do it with; the millions from the mail subsidy
frauds and from his other lootings of the public treasury proved an
unfailing source of supply. Presently, he had enough of the stock to
corner his antagonists badly. He then put his own price upon it,
eventually pushing it up to $170 a share. To get the stock that they
contracted to deliver, the combination of politicians and Wall Street
bankers and brokers had to buy it from him at his own price; there
was no outstanding stock elsewhere. The old man was pitiless; he
mulcted them $179 a share. In his version, Croffut says of
Vanderbilt: "He and his partners in the bull movement took a million
dollars from the Common Council that week and other millions from
others." [Footnote: "The Vanderbilts," etc: 75.]
The New York and Harlem Railroad was now his, as absolutely almost as
the very clothes he wore. Little it mattered that he did not hold all
of the stock; he owned a preponderance enough to rule the railroad as
despotically as he pleased. Not a foot it had he surveyed or
constructed; this task had been done by the mental and manual labor
of thousands of wage workers not one of whom now owned the vestige of
an interest in it. For their toil these wage workers had nothing to
show but poverty. But Vanderbilt had swept in a railroad system by
merely using in cunning and unscrupulous ways a few of the millions
he had defrauded from the national treasury.
HE ANNEXES A SECOND RAILROAD.
Having found it so easy to get one railroad, he promptly went ahead
to annex other railroads. By 1864 he loomed up as the owner of a
controlling mass of stock in the New York and Hudson River Railroad.
This line paralleled the Hudson River, and had a terminal in the
downtown section of New York City. In a way it was a competitor of
the New York and Harlem Railroad.
The old magnate now conceived a brilliant idea. Why not consolidate
the two roads? True, to bring about this consolidation an authorizing
act of the New York Legislature was necessary. But there was little
doubt of the Legislature balking. Vanderbilt well knew the means to
insure its passage. In those years, when the people were taught to
look upon competition as indispensable, there was deep popular
opposition to the consolidating of competing interests. This, it was
feared, would inflict monopoly.
The cost of buying legislators to pass an act so provocative of
popular indignation would be considerable, but, at the same time, it
would not be more than a trifle compared with the immense profits he
would gain. The consolidation would allow him to increase, or, as the
phrase went, water, the stock of the combined roads. Although
substantially owner of the two railroads, he was legally two separate
entities--or, rather, the corporations were. As owner of one line he
could bargain with himself as owner of the other, and could determine
what the exchange purchase price should be. So, by a juggle, he could
issue enormous quantities of bonds and stocks to himself. These many
millions of bonds and stocks would not cost him personally a cent.
The sole expense--the bribe funds and the cost of engraving--he would
charge against his corporations. Immediately, these stocks and bonds
would be vested with a high value, inasmuch as they would represent
mortgages upon the productivity of tens of millions of people of that
generation, and of still greater numbers of future generations. By
putting up traffic rates and lowering wages, dividends would be paid
upon the entire outpouring of stock, thus beyond a doubt insuring its
permanent value. [Footnote: Even Croffut, Vanderbilt's foremost
eulogist, cynically grows merry over Vanderbilt's methods which he
thus summarizes: "(1) Buy your railroad; (2) stop the stealing that
went on under the other man; (3) improve the road in every
practicable way within a reasonable expenditure; (4) consolidate it
with any other road that can be run with it economically; (5) water
its stock; (6) make it pay a large dividend."]
CUNNING AGAINST CUNNING.
A majority of the New York Legislature was bought. It looked as if
the consolidation act would go through without difficulty.
Surreptitiously, however, certain leading men in the Legislature
plotted with the Wall Street opponents of Vanderbilt to repeat the
trick attempted by the New York aldermen in 1863. The bill would be
introduced and reported favorably; every open indication would be
manifested of keeping faith with Vanderbilt. Upon the certainty of
its passage the market value of the stock would rise. With their
prearranged plan of defeating the bill at the last moment upon some
plausible pretext, the clique in the meantime would be busy selling
short.
Information of this treachery came to Vanderbilt in time. He
retaliated as he had upon the New York aldermen; put the price of New
York and Harlem stock up to $285 a share and held it there until
after he was settled with. With his chief partner, John Tobin, he was
credited with pocketing many millions of dollars. To make their
corner certain, the Vanderbilt pool had bought 27,000 more shares
than the entire existing stock of the road. "We busted the whole
Legislature," was Vanderbilt's jubilant comment, "and scores of the
honorable members had to go home without paying their board bills."
The numerous millions taken in by Vanderbilt in these transactions
came from a host of other men who would have plundered him as quickly
as he plundered them. They came from members of the Legislature who
had grown rich on bribes for granting a continuous succession of
special privileges, or to put it in a more comprehensible form,
licenses to individuals and corporations to prey in a thousand and
one forms upon the people. They came from bankers, railroad, land and
factory owners, all of whom had assiduously bribed Congress,
legislatures, common councils and administrative officials to give
them special laws and rights by which they could all the more easily
and securely grasp the produce of the many, and hold it intact
without even a semblance of taxation.
The very nature of that system of gambling called stock-market or
cotton or produce exchange speculation showed at once the sharply-
defined disparities and discriminations in law.
Common gambling, so-called, was a crime. The gambling of the
exchanges was legitimate and legalized, and the men who thus gambled
with the resources of the nation were esteemed as highly respectable
and responsible leaders of the community. For a penniless man to sell
anything he did not own, or which was not in existence, was held a
heinous crime and was severely punished by a long prison term. But
the members of the all-powerful propertied class could contract to
deliver stocks which they did not own or which were non-existent, or
they could gamble in produce often not yet out of the ground, and the
law saw no criminal act in their performances.
Far from being under the inhibition of law, their methods were duly
legalized. The explanation was not hard to find. These same
propertied classes had made the code of laws as it stood; and if any
doubter denies that laws at all times have exactly corresponded with
the interest and aims of the ruling class, all that is necessary is
to compare the laws of the different periods with the profitable
methods of that class, and he will find that these methods, however
despicable, vile and cruel, were not only indulgently omitted from
the recognized category of crimes but were elevated by prevalent
teaching to be commercial virtues and ability of a high order.
With two railroads in his possession Vanderbilt cast about to drag in
a third. This was the New York Central Railroad, one of the richest
in the country.
Vanderbilt's eulogists, in depicting him as a masterful
constructionist, assert that it was he who first saw the waste and
futility of competition, and that he organized the New York Central
from the disjointed, disconnected lines of a number of previously
separate little railroads. This is a gross error.
The consolidation was formed in 1853 at the time when Vanderbilt was
plundering from the United States treasury the millions with which he
began to buy in railroads nine years later. The New York Central
arose from the union of ten little railroads, some running in the
territory between Albany and Buffalo, and others merely projected,
but which had nevertheless been capitalized as though they were
actually in operation.
The cost of construction of these eleven roads was about $10,000,000,
but they were capitalized at $23,000,000. Under the consolidating act
of 1853 the capitalization was run up to about $35,000,000. This
fictitious capital was partly based on roads which were never built,
and existing on paper only. Then followed a series of legislative
acts giving the company a further list of valuable franchises and
allowing it to charge extortionate rates, inflate its stock, and
virtually escape taxation. How these laws were procured may be judged
from the testimony of the treasurer of the New York Central railroad
before a committee of the New York State Constitutional Convention.
This official stated that from about 1853 to 1867 the New York
Central had spent hundreds of thousands of dollars for "legislative
purposes,"--in other words, buying laws at Albany.
ACQUISITION BY WRECKING.
Vanderbilt considered it unnecessary to buy New York Central stock to
get control. He had a much better and subtler plan. The Hudson River
Railroad was at that time the only through road running from New York
to Albany. To get its passengers and freight to New York City the New
York Central had to make a transfer at Albany. Vanderbilt now
deliberately began to wreck the New York Central. He sent out an
order in 1865 to all Hudson River Railroad employees to refuse to
connect with the New York Central and to take no more freight. This
move could not do otherwise than seriously cripple the facilities and
lower the profits of the New York Central. Consequently, the value of
its stock was bound to go precipitately down.
The people of the United States were treated to an ironic sight. Here
was a man who only eight years before had been shown up in Congress
as an arch plunderer; a man who had bought his railroads largely with
his looted millions; a man who, if the laws had been drafted and
executed justly, would have been condoning his frauds in prison;--
this man was contemptuously and openly defying the very people whose
interests the railroads were supposed to serve. In this conflict
between warring sets of capitalists, as in all similar conflicts,
public convenience was made sport of. Hudson River trains going north
no longer crossed the Hudson River to enter Albany; they stopped half
a mile east of the bridge leading into that city. This made it
impossible to transfer freight. There in the country the trains were
arbitrarily stopped for the night; locomotive fires were banked and
the passengers were left to shift into Albany the best they could,
whether they walked or contrived to hire vehicles. All were turned
out of the train--men, women and children--no exceptions were made
for sex or infirmity.
The Legislature went through a pretense of investigating what public
opinion regarded as a particularly atrocious outrage. Vanderbilt
covered this committee with undisguised scorn; it provoked his wrath
to be quizzed by a committee of a body many of whose members had
accepted his bribes. When he was asked why he had so high-handedly
refused to run his trains across the river, the old fox smiled
grimly, and to their utter surprise, showed them an old law (which
had hitherto remained a dead letter) prohibiting the New York Hudson
Railroad from running trains over the Hudson River. This law had been
enacted in response to the demand of the New York Central, which
wanted no competitor west of Albany. When the committee recovered its
breath, its chairman timidly inquired of Vanderbilt why he did not
run trains to the river.
"I was not there, gentlemen," said Vanderbilt.
"But what did you do when you heard of it?"
"I did not do anything."
"Why not? Where were you?"
"I was at home, gentlemen," replied Vanderbilt with serene impudence,
"playing a rubber of whist, and I never allow anything to interfere
with me when I am playing that game. It requires, as you know,
undivided attention."
As Vanderbilt had foreseen, the stock of the New York Central went
down abruptly; at its lowest point he bought in large quantities. His
opponents, Edward Cunard, John Jacob Astor, John Steward and other
owners of the New York Central thus saw the directorship pass from
their hands. The dispossession they had worked to the Pruyns, the
Martins, the Pages and others was now being visited upon them. They
found in this old man of seventy-three too cunning and crafty a man
to defeat. Rather than lose all, they preferred to choose him as
their captain; his was the sort of ability which they could not
overcome and to which they must attach themselves. On November 12,
1867, they surrendered wholly and unreservedly. Vanderbilt now
installed his own subservient board of directors, and proceeded to
put through a fresh program of plunder beside which all his previous
schemes were comparatively insignificant.