amendment declared that Section 24 of the Stock Corporation Law did
not apply to a railroad corporation.]
A very illuminating transaction, surely, and well deserving of
philosophic comment. This, however, will be eschewed, and attention
next turned to the manner in which the Vanderbilts, in 1899, obtained
control of the Boston and Albany Railroad.
THE BOSTON AND ALBANY RAILROAD BECOMES THEIRS.
To a great extent, this railroad had been built with public funds
raised by enforced taxation, the city of Albany contributing
$1,000,000, and the State of Massachusetts $4,300,000 of public
funds. Originally it looked as if the public interests were fully
conserved. But gradually, little by little, predatory corporate
interests got in their delicate work, and induced successive
legislatures and State officials to betray the public interests. The
public holdings of stock were entirely subordinated, so that in time
a private corporation secured the practical ownership.
Finally, in 1899, the Legislature of Massachusetts effaced the last
vestige of State ownership by giving the Vanderbilts a perpetual
lease of this richly profitable railroad for a scant two million
dollars' payment a year. During the debate over this act
Representative Dean charged in the Legislature that "it is common
rumor in the State House that members are receiving $300 apiece for
their votes." The acquisition of this railroad enabled the New York
Central to make direct connection with Boston, and with much of the
New England coast, and added about four hundred miles to the
Vanderbilt system. Most of the remainder of the New England territory
is subservient to the Boston and Maine Railroad system in which the
American Express Company, controlled by the Vanderbilts, owns 30,000
shares.
To pay interest and dividends on the hundreds of millions of dollars
of inflated bonds and stock which three generations of the
Vanderbilts had issued, and to maintain and enhance their value, it
was necessary to keep on increasingly extorting revenues. The sources
of the profits were palpable. Time after time freight rates were
raised, as was more than sufficiently proved in various official
investigations, despite denials. Conjunctively with this process,
another method of extortion was the ceaseless one of beating down the
wages of the workers to the very lowest point at which they could be
hired. While the Vanderbilts and other magnates were manufacturing
law at will, and boldly appropriating, under color of law, colossal
possessions in real and personal property, how was the law, as
embodied in legislatures, officials and courts acting toward the
working class?
THE GOVERNMENT AN ENGINE OF TYRANNY.
The grievances and protests of the workers aroused no response save
the ever-active one of contumely, coercion and violent reprisals. The
treasury of Nation, States and cities, raised by a compulsory
taxation falling heavily upon the workers, was at all times at the
complete disposal of the propertied interests, who emptied it as fast
as it was filled. The propertiless and jobless were left to starve;
to them no helping arm was outstretched, and if they complained, no
quarter given. The State as an institution, while supported by the
toil of the producers, was wholly a capitalist State with the
capitalists in complete supremacy to fashion and use it as they
chose. They used the State political machinery to plunder the masses,
and then, at the slightest tendency on the part of the workers to
resist these crushing injustices and burdens, called upon the State
to hurry out its armed forces to repress this dangerous discontent.
In Buffalo, in 1890-1891, thirty-one in every hundred destitutes were
impoverished because of unemployment, and in New York City twenty-
nine in every hundred. [Footnote: "Encyclopedia of Social Reform,"
Edition of 1897: 1073.] Hundreds of millions of dollars of public
funds were given outright to the capitalists, but not a cent
appropriated to provide work for the unemployed. In the panic of
1893, when millions of men, women and children were out of work, the
machinery of government, National, State and municipal, proffered not
the least aid, but, on the contrary, sought to suppress agitation and
prohibit meetings by flinging the leaders into jail. Basing his
conclusions upon the (Aldrich) United States Senate Report of 1893--a
report highly favorable to capitalist interests, and not unexpectedly
so, since Senator Aldrich was the recognized Senatorial mouthpiece of
the great vested interests--Spahr found that the highest daily wage
for all earners, taken in a mass, was $2.O4 [Footnote: "The Present
Distribution of Wealth in The United States."]
More than three-quarters of all the railroad employees in the United
States received less than two dollars a day. Large numbers of
railroad employees were forced to work from twelve to fourteen hours
a day, and their efficiency and stamina thus lowered. Periodically
many were laid off in enforced idleness; and appalling numbers were
maimed or killed in the course of duty. [Footnote: The report of the
Wisconsin Railway Commissioners for 1894, Vol. xiii., says: "In a
recent year more railway employees were killed in this country than
three times the number of Union men slain at the battle of Lookout
Mountain, Missionary Ridge and Orchard Knob combined. ... In the
bloody Crimean War, the British lost 21,000 in killed and wounded--
not as many as are slain, maimed and mangled among the railroad men
injured [Footnote: of the country in a single year." Various reports
of the Interstate Commerce Commission state the same facts.] or slain
largely because the railroad corporations refused to expend money in
the introduction of improved automatic coupling devices, these
workers or their heirs were next confronted by what? The unjust and
oppressive provisions of worthless employers' liability laws drafted
by corporation attorneys in such a form that the worker or his family
generally had almost no claim. The very judges deciding these suits
were, as a rule, put on the bench by the railroad corporations.
MACHINE GUNS FOR THE OVERWORKED.
These deadly conditions prevailed on the Vanderbilt railroads even
more than on any others; it was notorious that the Vanderbilt system
was not only managed in semi-antiquated ways so far as the operation
was concerned, but also that its trainmen were terribly underpaid and
overworked. [Footnote: "Semi-antiquated ways." Only recently the
"Railway Age Gazette," issue of January, 1909, styled the New York
Central's directors as mostly "concentrated absurdities, physically
incompetent, mentally unfit, or largely unresident and inattentive."]
In reply to a continued agitation for better hours on the part of the
Vanderbilt employees, the New York Legislature passed an act, in
1892, which apparently limited the working hours of railroad
employees to ten a day. There was a gleam of sunshine, but lo! when
the act was critically examined after it had become a law, it was
found that a "little joker" had been sneaked into its mass of
lawyers' terminology. The surreptitious clause ran to this effect:
That railroad companies were permitted to exact from their employees
overtime work for extra compensation. This practically made the whole
law a negation.
So it turned out; for in August, 1892, the switchmen employed by
various railroad lines converging at Buffalo struck for shorter hours
and more pay. The strike spread, and was meeting with tactical
success; the strikers easily persuaded men who had been hired to fill
their jobs to quit. What did the Vanderbilts and their allies now do?
They fell back upon the old ruse of invoking armed force to suppress
what they proclaimed to be violence. They who had bought law and had
violated the law incessantly now represented that their property
interests were endangered by "mob violence," and prated of the need
of soldiers to "restore law and order." It was a serviceable pretext,
and was immediately acted upon.
The Governor of New York State obediently ordered out the entire
State militia, a force of 8,000, and dispatched it to Buffalo. The
strikers were now confronted with bayonets and machine guns. The
soldiery summarily stopped the strikers from picketing, that is to
say, from attempting to persuade strikebreakers to refrain from
taking their places. Against such odds the strike was lost.
If, however, the Vanderbilts could not afford to pay their workers a
few cents more in wages a day, they could afford to pay millions of
dollars for matrimonial alliances with foreign titles. These
excursions into the realm of high-caste European nobility have thus
far cost the Vanderbilt family about $15,000,000 or $20,000,000. When
impecunious counts, lords, dukes and princes, having wasted the
inheritance originally obtained by robbery, and perpetuated by
robbery, are on the anxious lookout for marriages with great
fortunes, and the American money magnates, satiated with vulgar
wealth, aspire to titled connections, the arrangement becomes easy.
[Footnote: More than 500 American women have married titled
foreigners. The sum of about $220,000,000, it is estimated (1909),
has followed them to Europe.] Romance can be dispensed with, and the
lawyers depended upon to settle the preliminaries.
TEN MILLIONS FOR A DUKEDOM.
The announcement was made in 1895 that "a marriage had been arranged"
between Consuelo, a young daughter of William K. Vanderbilt, and the
Duke of Marlborough. The wedding ceremony was one of showy splendor;
millions of dollars in gifts were lavished upon the couple. Other
millions in cash, wrenched also from the labor of the American
working population, went to rehabilitate and maintain Blenheim House,
with its prodigal cost of reconstruction, its retinue of two hundred
servants, and its annual expense roll of $100,000. Millions more
flowed out from the Vanderbilt exchequer in defraying the cost of
yachts and of innumerable appurtenances and luxuries. Not less than
$2,500,000 was spent in building Sutherland House in London. Great as
was this expense, it was not so serious as to perturb the duchess'
father; his $50,000,000 feat of financial legerdemain, in 1898, alone
far more than made up for these extravagant outlays. The Marlborough
title was an expensive one; it turned out to be a better thing to
retain than the man who bore it; after a thirteen years' compact, the
couple decided to separate for "good and sufficient reasons," into
which it is not our business to inquire. All told, the Marlborough
dukedom had cost William K. Vanderbilt, it was said, fully
$10,000,000.
Undeterred by Cousin Consuelo's experience, Gladys Vanderbilt, a
daughter of Cornelius, likewise allied herself with a title by
marrying, in 1908, Count Laslo Szechenyi, a sprig of the Hungarian
feudal nobility. "The wedding," naively reported a scribe, "was
characterized by elegant simplicity, and was witnessed by only three
hundred relatives and intimate friends of the bride and bridegroom."
The "elegant simplicity" consisted of gifts, the value of which was
estimated at fully a million dollars, and a costly ceremony. If the
bride had beauty, and the bridegroom wit, no mention of them was
made; the one fact conspicuously emphasized was the all-important one
of the bride having a fortune "in her own right" of about
$12,000,000.
[Illustration: THE DUCHESS OF MARLBOROUGH, Daughter of William K.
Vanderbilt.]
The precise sum which made the Count eager to share his title, no one
knew except the parties to the transaction. Her father had died, in
1899, leaving a fortune nominally reaching about $100,000,000. Its
actual proportions were much greater. It had long been customary on
the part of the very rich, as the New York State Board of Tax
Commissioners pointed out, in 1903, to evade the inheritance tax in
advance by various fraudulent devices. One of these was to inclose
stocks or money in envelopes and apportion them among the heirs,
either at the death bed, or by subsequent secret delivery. [Footnote:
See Annual Report of the New York State Board of Tax Commissioners,
New York Senate Document, No. 5, 1903: 10.]
Like his father, Cornelius Vanderbilt had died of apoplexy. In his
will he had cut off his eldest son, Cornelius, with but a puny
million dollars. And the reason for this parental sternness? He had
disapproved of Cornelius' choice in marriage. To his son, Alfred, the
unrelenting multimillionaire left the most of his fortune, with a
showering of many millions upon his widow, upon Reginald, another
son, and upon his two daughters. Cornelius objected to the injustice
and hardship of being left a beggar with but a scanty million, and
threatened a legal contest, whereupon Alfred, pitying the dire
straits to which Brother Cornelius had been reduced, presented him
with six or seven millions with which to ease the biting pangs of
want.
Marriages with titled foreigners have proved a drain upon the
Vanderbilt fortune, although, thanks to their large share in the
control of laws and industrial institutions, the Vanderbilts possess
at all times the power of recouping themselves at volition. The
American marriages, on the other hand, contracted by this family,
have interlinked other great fortunes with theirs.
One of the Vanderbilt buds married Harry Payne Whitney, whose father,
William C. Whitney, left a large fortune, partly drawn from the
Standard Oil Company, and in part from an industrious career of
corruption and theft. The elder Whitney, according to facts revealed
in many official investigations and lawsuits, debauched legislatures
and common councils into giving him and his associates public
franchises for street railways and for other public utilities, and he
stole outright tens of millions of dollars in the manipulation of the
street railways in various cities. His crimes, and those of his
associates, were of such boldness and magnitude that even the cynical
business classes were moved to astonishment. [Footnote: For a
detailed account see that part of this work, "Great Fortunes from
Public Franchises."] Cornelius Vanderbilt, jr., married a daughter of
R. T. Wilson, a multimillionaire, whose fortune came to a great
extent from the public franchises of Detroit. The initial and
continued history of the securing and exploitation of the street
railway and other franchises of that city has constituted a solid
chapter of the most flagrant fraud. William K. Vanderbilt, jr.,
married a daughter of the multimillionaire Senator Fair, of
California, whose fortune, dug from mines, bought him a seat in the
United States Senate. Thus, various multi-millionaire fortunes have
been interconnected by these American marriages.
[Illustration: CORNELIUS VANDERBILT, Great-Grandson of Commodore
Vanderbilt.]
DIVERSITY OF THE VANDERBILT POSSESSIONS.
The fortune of the Vanderbilt family, at the present writing, is
represented by the most extensive and different forms of property.
Railroads, street railways, electric lighting systems, mines,
industrial plants, express companies, land, and Government, State and
municipal bonds--these are some of the forms. From one industrial
plant alone--the Pullman Company--the Vanderbilts draw millions in
revenue yearly. Formerly they owned their own palace car company, the
Wagner, but it was merged with the Pullman. The frauds and extortions
of the Pullman Company have been sufficiently dealt with in the
particular chapter on Marshall Field. In the far-away Philippine
Islands the Vanderbilts are engaged, with other magnates, in the
exploitation of both the United States Government and the native
population. The Visayan Railroad numbers one of the Vanderbilts among
its directors. This railroad has already received a Government
subsidy of $500,000, in addition to the free gift of a perpetual
franchise, on the ground that "the railroad was necessary to the
development of the archipelago."
But the Vanderbilts' principal property consists of the New York
Central Railroad system. The Union Pacific Railroad, controlled by
the Harriman-Standard Oil interests, now owns $14,000,000 of stock in
the New York Central system, and has directors on the governing
board. The probabilities are that the voting power of the New York
Central, the Lake Shore and other Vanderbilt lines is passing into
the hands of the Standard Oil interests, of which Harriman was both a
part and an ally. This signifies that it is only a question of a
short time when all or most of the railroads of the United States
will be directed by one all-powerful and all-embracing trust.
But this does not by any means denote that the Vanderbilts have been
stripped of their wealth. However much they may part with their
stock, which gives the voting power, it will be found that, like
William H. Vanderbilt, they hold a stupendous amount in railroad, and
other kinds of, bonds. As the Astors and other rich families were
perfectly willing, in 1867, to allow Commodore Vanderbilt to assume
the management of the New York Central on the ground that under his
bold direction their profits and loot would be greater, so the
lackadaisical Vanderbilts of the present generation perhaps likewise
looked upon Harriman, who proved his ability to accomplish vast
fraudulent stock-watering operations and consolidations, and to oust
lesser magnates. The New York Central, at this writing, still remains
a Vanderbilt property, not so distinctively so as it was twenty years
ago, yet strongly enough under the Vanderbilt domination. According
to Moody, this railroad's net annual income in 1907 was $34,000,000.
[Footnote: "Moody's Magazine," issue of August, 1908] In alluringly
describing its present and prospective advantages and value Moody
went on:
"To begin with, it has entry into the heart of New York City, with
extensive passenger and freight terminals, all of which are bound to
be of steadily increasing worth as the years go by, as New York
continues to grow in population and wealth. It has, in addition, a
practically 'water grade' line all the way from New York to Chicago,
and, therefore, for all time must necessarily have a great advantage
over lines like the Erie, the Lackawanna and others with heavy
grades, many curves, etc. It has a myriad of small feeders and
branches in growing and populous parts of the State of New York, as
well as in the sections further to the west. It touches the Great
Lakes at various points, operates water transportation for freight to
all parts of the lakes; enters Chicago over its own tracks and
competes aggressively with the Pennsylvania for all traffic to and
from all parts of the Mississippi Valley and the West and Southwest.
It is in no danger from disastrous competition in its own chosen
territory, therefore, and constantly receives income of vast
importance through a network of feeders which penetrate the territory
of some of the largest of its rivals."
THE SORT OF ABILITY DISPLAYED.
The particular kind of ability by which one man, followed by his
descendants, obtained the controlling ownership of this great
railroad system, and of other properties, has been herein adequately
set forth. Long has it been the custom to attribute to Commodore
Vanderbilt and successive generations of Vanderbilts an almost
supernatural "constructive genius," and to explain by that glib
phrase their success in getting hold of their colossal wealth. This
explanation is clumsy fiction that at once falls to pieces under
historical scrutiny. The moment a genuine investigation is begun into
the facts, the glamour of superior ability and respectability
evaporates, and the Vanderbilt fortune stands out, like all other
fortunes, as the product of a continuous chain of frauds.
Just as fifty years ago Commodore Vanderbilt was blackmailing his
original millions without molestation by law, so today the
Vanderbilts are pursuing methods outside the pale of law. Not all of
the facts have been given, by any means; only the most important have
been included in these chapters. For one thing, no mention has been
made of their repeated violations of a law prohibiting the granting
of rebates--a law which was stripped of its imprisonment clause by
the railroad magnates, and made punishable by fine only. Time and
time again in recent years has the New York Central been proved
guilty in the courts of violating even this emasculated law. From the
very inception of the Vanderbilt fortune the chronicle is the same,
and ever the same--legalized theft by purchase of law, and
lawlessness by evasion or defiance of law. With fraud it began, by
fraud it has been increased and extended and perpetuated, and by
fraud it is held.
CHAPTER IX
THE RISE OF THE GOULD FORTUNE
The greater part of this commanding fortune was originally heaped up,
as was that of Commodore Vanderbilt, in about fifteen years, and at
approximately the same time. One of the most powerful fortunes in the
United States, it now controls, or has exercised a dominant share of
the control, over more than 18,000 miles of railway, the total
ownership of which is represented by considerably more than a billion
dollars in stocks and bonds. The Gould fortune is also either openly
or covertly paramount in many telegraph, transatlantic cable, mining,
land and industrial corporations.
Its precise proportions no one knows except the Gould family itself.
That it reaches many hundreds of millions of dollars is fairly
obvious, although what is its exact figure is a matter not to be
easily ascertained. In the flux of present economic conditions,
which, so far as the control of the resources of the United States is
concerned, have simmered down to desperate combats between individual
magnates, or contesting sets of magnates, the proportions of great
fortunes, especially those based upon railroads and industries,
constantly tend to vary.
In the years 1908 and 1909 the Gould fortune, if report be true, was
somewhat diminished by the onslaughts of that catapultic railroad
baron, E. H. Harriman, who unceremoniously seized a share of the
voting control of some of the railroad systems long controlled by the
Goulds. Despite this reported loss, the Gould fortune is an active,
aggressive and immense one, vested with the most extensive power, and
embracing hundreds of millions of dollars in cash, land, palaces, or
profit-producing property in the form of bonds and stocks. Its
influence and ramifications, like those of the Vanderbilt and of
other huge fortunes, penetrate directly or indirectly into every
inhabited part of the United States, and into Mexico and other
foreign countries.
JAY GOULD'S BOYHOOD
The founder of this fortune was Jay Gould, father of the present
holding generation. He was the son of a farmer in Delaware County,
New York, and was born in 1836. As a child his lot was to do various
chores on his father's farm. In driving the cows he had to go
barefoot, perforce, by reason of poverty, and often thistles bruised
his feet--a trial which seems to have left such a poignant and
indelible impression upon his mind that when testifying before a
United States Senate investigating committee forty years later he
pathetically spoke of it with a reminiscent quivering. His father
was, indeed, so poor that he could not afford to let him go to the
public school. The lad, however, made an arrangement with a
blacksmith by which he received board in return for certain clerical
services. These did not interfere with his attending school. When
fifteen, he became a clerk in a country store, a task which, he
related, kept him at work from six o'clock in the morning until ten
o'clock at night. It is further related that by getting up at three
o'clock in the morning and studying mathematics for three years, he
learned the rudiments of surveying.
According to Gould's own story, an engineer who was making a map of
Ulster County hired him as an assistant at "twenty dollars a month
and found." This engagement somehow (we are not informed how) turned
out unsatisfactorily. Gould was forced to support himself by making
"noon marks" for the farmers. To two other young men who had worked
with him upon the map of Ulster County, Gould (as narrated by
himself) sold his interest for $500, and with this sum as capital he
proceeded to make maps of Albany and Delaware counties. These maps,
if we may believe his own statement, he sold for $5,000.
HE GOES INTO THE TANNING BUSINESS.
Subsequently Gould went into the tanning business in Pennsylvania
with Zadoc Pratt, a New York merchant, politician and Congressman of
a certain degree of note at the time. [Footnote: Pratt was regarded
as one of the leading agricultural experts of his day. His farm of
three hundred and sixty-five acres, at Prattsville, New York, was
reputed to be a model. A paper of his, descriptive of his farm, and
containing woodcut engravings, may be found in U. S. Senate
Documents, Second Session, Thirty-seventh Congress, 1861-62, v:411-
415.] Pratt, it seems, was impressed by young Gould's energy, skill
and smooth talk, and supplied the necessary capital of $120,000.
Gould, as the phrase goes, was an excellent bluff; and so dexterously
did he manipulate and hoodwink the old man that it was quite some
time before Pratt realized what was being done. Finally, becoming
suspicious of where the profits from the Gouldsboro tannery (named
after Gould) were going, Pratt determined upon some overhauling and
investigating.
Gould was alert in forestalling this move. During his visits to New
York City, he had become acquainted with Charles M. Leupp, a rich
leather merchant. Gould prevailed upon Leupp to buy out Pratt's
interest. When Gould returned to the tannery, he found that Pratt had
been analyzing the ledger. A scene followed, and Pratt demanded that
Gould buy or sell the plant. Gould was ready, and offered him
$60,000, which was accepted. Immediately Gould drew upon Leupp for
the money. Leupp likewise became suspicious after a time, and from
the ascertained facts, had the best of grounds for becoming so. The
sequel was a tragic one. One night, in the panic of 1857, Leupp shot
and killed himself in his fine mansion at Madison avenue and Twenty-
fifth street. His suicide caused a considerable stir in New York
City. [Footnote: Although later in Gould's career it was freely
charged that he had been the cause of Leupp's suicide, no facts were
officially brought out to prove the charge. The coroner's jury found
that Leupp had been suffering from melancholia, superinduced,
doubtless, by business reverses.
Even Houghton, however, in his flamboyantly laudatory work describes
Gould's cheating of Pratt and Leupp, and Leupp's suicide. According
to Houghton, Leupp's friends ascribed the cause of the act to Gould's
treachery. See "Kings of Fortune," 265-266.]
HE BUYS RAILROAD BONDS WITH HIS STEALINGS.
Three years later, in 1860, Gould set up as a leather merchant in New
York City; the New York directory for that year contains this entry:
"Jay Gould, leather merchant, 39 Spruce street; house Newark." For
several years after this his name did not appear in the directory.
He had been, however, edging his way into the railroad business with
the sums that he had stolen from Pratt and Leupp. At the very time
that Leupp committed suicide, Gould was buying the first mortgage
bonds of the Rutland and Washington Railroad--a small line, sixty-two
miles long, running from Troy, New York, to Rutland, Vermont. These
bonds, which he purchased for ten cents on the dollar, gave him
control of this bankrupt railroad. He hired men of managerial
ability, had them improve the railroad, and he then consolidated it
with other small railroads, the stock of which he had bought in.
With the passing of the panic of 1857, and with the incoming of the
stupendous corruption of the Civil War period, Gould was able to
manipulate his bonds and stock until they reached a high figure. With
a part of his profits from his speculation in the bonds of the
Rutland and Washington Railroad, he bought enough stock of the
Cleveland and Pittsburg Railroad to give him control of that line.
This he manipulated until its price greatly rose, when he sold the
line to the Pennsylvania Railroad Company. In these transactions
there were tortuous substrata of methods, of which little to-day can
be learned, except for the most part what Gould himself testified to
in 1883, which testimony he took pains to make as favorable to his
past as possible.
His career from 1867 onward stood out in the fullest prominence; a
multitude of official reports and investigations and court records
contribute a translucent record. He became invested with a sinister
distinction as the most cold-blooded corruptionist, spoliator, and
financial pirate of his time; and so thoroughly did he earn this
reputation that to the end of his days it confronted him at every
step, and survived to become the standing reproach and terror of his
descendants. For nearly a half century the very name of Jay Gould has
been a persisting jeer and by-word, an object of popular contumely
and hatred, the signification of every foul and base crime by which
greed triumphs.
WHY THIS BIASED VIEW OF GOULD'S CAREER?
Yet, it may well be asked now, even if for the first time, why has
Jay Gould been plucked out as a special object of opprobrium? What
curious, erratic, unstable judgment is this that selects this one man
as the scapegoat of commercial society, while deferentially allowing
his business contemporaries the fullest measure of integrity and
respectability?
Monotonous echoes of one another, devoid of understanding, writer has
followed writer in harping undiscriminatingly upon Jay Gould's
crimes. His career has been presented in the most forbidding colors;
and in order to show that he was an abnormal exception, and not a
familiar type, his methods have been darkly contrasted with those of
such illustrious capitalists as the Astors, the Vanderbilts, and
others.
Thus, has the misinformed thing called public opinion been shaped by
these scribbling purveyors of fables; and this public opinion has
been taught to look upon Jay Gould's career as an exotic, "horrible
example," having nothing in common with the careers of other founders
of large fortunes. The same generation habitually addicted to cursing
the memory of Jay Gould, and taunting his children and grandchildren
with the reminders of his thefts, speaks with traditional respect of
the wealth of such families as the Astors and the Vanderbilts. Yet
the cold truth is, as has been copiously proved, John Jacob Astor was
proportionately as notorious a swindler in his day as Gould was in
his; and as for Commodore Vanderbilt, he had already made
blackmailing on a large scale a safe art before Gould was out of his
teens.
Gould has been impeached as one of the most audacious and successful
buccaneers of modern times. Without doubt he was so; a freebooter
who, if he could not appropriate millions, would filch thousands; a
pitiless human carnivore, glutting on the blood of his numberless
victims; a gambler destitute of the usual gambler's code of fairness
in abiding by the rules; an incarnate fiend of a Machiavelli in his
calculations, his schemes and ambushes, his plots and counterplots.
But it was only in degree, and not at all in kind, that he differed
from the general run of successful wealth builders. The Vanderbilts
committed thefts of as great an enormity as he, but they gradually
managed to weave around themselves an exterior of protective
respectability. All sections of the capitalist class, in so fiercely
reviling Gould, reminded one of the thief, who, to divert attention
from himself, joins with the pursuing crowd in loudly shouting, "Stop
thief!" We shall presently see whether this comparison is an
exaggerated one or not.
THE TEACHINGS OF HIS ENVIRONMENT.
To understand the incentives and methods of Gould's career, it is
necessary to know the endemic environment in which he grew up and
flourished, and its standards and spirit. He, like others of his
stamp, were, in a great measure, but products of the times; and it is
not the man so much as the times that are of paramount interest, for
it is they which supply the explanatory key. In preceding chapters
repeated insights have been given into the methods not merely of one
phase, but of all phases, of capitalist formulas and processes. At
the outset, however, in order to approach impartially this narrative
of the Gould fortune, and to get a clear perception of the dominant
forces of his generation, a further presentation of the business-
class methods of that day will be given.
As a young man what did Jay Gould see? He saw, in the first place,
that society, as it was organized, had neither patience nor
compassion for the very poverty its grotesque system created. Prate
its higher classes might of the blessings of poverty; and they might
spread broadcast their prolix homilies on the virtues of a useful
life, "rounded by an honorable poverty." But all of these teachings
were, in one sense, chatter and nonsense; the very classes which so
unctuously preached them were those who most strained themselves to
acquire all of the wealth that they possibly could. In another sense,
these teachings proved an effective agency in the infusing into the
minds of the masses of established habits of thought calculated to
render them easy and unresisting victims to the rapacity of their
despoilers.
From these "upper classes" proceeded the dictation of laws; and the
laws showed (as they do now) what the real, unvarnished attitude of
these fine, exhorting moralists was towards the poor. Poverty was
virtually prescribed as a crime. The impoverished were regarded in
law as paupers, and so repugnant a term of odium was that of pauper,
so humiliating its significance and treatment, that great numbers of
the destitute preferred to suffer and die in want and silence rather
than avail themselves of the scanty and mortifying public aid
obtainable only by acknowledging themselves paupers.
Sickness, disability, old age, and even normal life, in poverty were
a terrifying prospect. The one sure way of escaping it was to get and
hold wealth. The only guarantee of security was wealth, provided its
possessor could keep it intact against the maraudings of his own
class. Every influence conspired to drive men into making desperate
attempts to break away from the stigma and thraldom of poverty, and
gain economic independence and social prestige by the ownership of
wealth.
But how was this wealth to be obtained? Here another set of
influences combined with the first set to suppress or shatter
whatever doubts, reluctance or scruples the aspirant might have. The
acquisitive young man soon saw that toiling for the profit of others
brought nothing but poverty himself; perhaps at the most, some small
savings that were constantly endangered. To get wealth he must not
only exploit his fellow men, he found, but he must not be squeamish
in his methods. This lesson was powerfully and energetically taught
on every hand by the whole capitalist class.
Conventional writers have descanted with a show of great indignation
upon Gould's bribing of legislative bodies and upon his cheatings and
swindlings. Without adverting again to the corruption, reaching far
back into the centuries, existing before his time, we shall simply
describe some of the conditions that as a young man he witnessed or
which were prevalent synchronously with his youth.
Whatever sphere of business was investigated, there it was at once
discovered that wealth was being amassed, not only by fraudulent
methods, but by methods often a positive peril to human life itself.
Whether large or small trader, these methods were the same, varying
only in degree.
* * * * * * *
ALL BUSINESS REEKED WITH FRAUD.
A Congressional committee, probing, in 1847-1848, into frauds in the
sale of drugs found that there was scarcely a wholesale or retail
druggist who was not consciously selling spurious drugs which were a
menace to human life. Dr. M. J. Bailey, United States Examiner of
Drugs at the New York Custom House, was one of the many expert
witnesses who testified. "More than one-half of many of the most
important chemical and medicinal preparations," Dr. Bailey stated,
"together with large quantities of crude drugs, come to us so much
adulterated as to render them not only worthless as a medicine, but
often dangerous." These drugs were sold throughout the United States
at high prices. [Footnote: Report of Select Committee on the
Importation of Drugs. House Reports, Thirtieth Congress, First
Session, 1847-48, Report No. 664:9. In a previous chapter, other
extracts from this report have been given showing in detail what many
of these fraudulent practices were.] There is not a single record of
any criminal action pressed against those who profited from selling
this poisonous stuff.
The manufacture and sale of patent medicines were attended with the
grossest frauds. At that time, to a much greater extent than now, the
newspapers profited more (comparatively) from the publication of
patent medicine advertisements; and even after a Congressional
committee had fully investigated and exposed the nature of these
nostrums, the newspapers continued publishing the alluring and
fraudulent advertisements.
After showing at great length the deceptive and dangerous ingredients
used in a large number of patent medicines, the Committee on the
Judiciary of the House of Representatives went on in its report of
February 6, 1849: "The public prints, without exception, published
these promises and commendations. The annual [advertising] fee for
publishing Brandeth's pills has amounted to $100,000. Morrison paid
more than twice as much for the advertisement of his never-dying
hygiene." The committee described how Morrison's nostrums often
contained powerful poisons, and then continued: "Morrison is
forgotten, and Brandeth is on the high road to the same distinction.
T. W. Conway, from the lowest obscurity, became worth millions from
the sale of his nostrums, and rode in triumph through the streets of
Boston in his coach and six. A stable boy in New York was enrolled
among the wealthiest in Philadelphia by the sale of a panacea which
contains both mercury and arsenic. Innumerable similar cases can be
adduced." [Footnote: Report No. 52. Reports of Committees, Thirtieth
Congress, Second Sess., i: 31.] Not a few multimillionaire families
of to-day derive their wealth from the enormous profits made by their
fathers and grandfathers from the manufacture and sale of these
poisonous medicines.
* * * * * * *
SUCCESS AS GOULD LEARNED IT.
The frauds among merchants and manufacturers reached far more
comprehensive and permeating proportions. In periods of peace these
fraudulent methods were nauseating enough, but in times of war they
were inexpressibly repellant and ghastly. During the Mexican War the
Northern shoe manufacturers dumped upon the army shoes which were of
so inferior a make that they could not be sold in the private market,
and these shoes were found to be so absolutely worthless that it is
on record that the American army in Mexico threw them away upon the
sands in disgust. But it was during the Civil War that Northern
capitalists of every kind coined fortunes from the national
disasters, and from the blood of the very armies fighting for their
interests shown how Commodore Vanderbilt and other shipping
merchants fraudulently sold or leased to the Government for
exorbitant sums, ships for the transportation of soldiers--ships so
decayed or otherwise unseaworthy, that they had to be condemned. In
those chapters such facts were given as applied mainly to Vanderbilt;
in truth, however, they constituted but a mere part of the gory
narrative. While Vanderbilt, as the Government agent, was leasing or
buying rotten ships, and making millions of dollars in loot by
collusion, the most conspicuous and respectable shipping merchants of
the time were unloading their old hulks upon the Government at
extortionate prices.
One of the most ultra-respectable merchants of the time, ranked of
high commercial standing and austere social prestige, was, for
instance, Marshall O. Roberts. This was the identical Roberts so
deeply involved in the great mail-subsidy frauds. This was also the
same sanctimonious Roberts, who, as has been brought out in the
chapters on the Astor fortune, joined with John Jacob Astor and
others in signing a testimonial certifying to the honesty of the
Tweed Regime. A select Congressional committee, inquiring into
Government contracts in 1862-63, brought forth volumes of facts that
amazed and sickened a committee accustomed to ordinary political
corruption. Here is a sample of the testimony: Samuel Churchman, a
Government vessel expert engaged by Welles, Secretary of the Navy,
told in detail how Roberts and other merchants and capitalists had
contrived to palm off rotten ships on the Government; and, in his
further examination on January 3, 1863, Churchman was asked:
Q. Did Roberts sell or chatter any other boats to the Government?
A. Yes, sir. He sold the Winfield Scott and the Union to the
Government.
Q. For how much?
A. One hundred thousand dollars each, and one was totally lost and
the other condemned a few days after they went to sea. [Footnote:
Report of Select Committee to Inquire into Government Contracts,
House Reports, Thirty-seventh Congress, Third Session, 1862-63,
Report No. 49:95.]
In the course of later inquiries in the same examination, Churchman
testified that the Government had been cheated out of at least
$25,000,000 in the chartering and purchase of vessels, and that he
based his judgment upon "the chartered and purchased vessels I am
acquainted with, and the enormous sums wasted there to my certain
knowledge." [Footnote: Ibid, 95-97.] This $25,000,000 swindled from
the Government in that one item of ships alone formed the basis of
many a present plutocratic fortune.
* * * * * * *
FRAUD UNDERLIES RESPECTABILITY.
But this was not by any means the only schooling Gould received from
the respectable business element. It can be said advisedly that there
was not a single avenue of business in which the most shameless
frauds were not committed upon both Government and people. The
importers and manufacturers of arms scoured Europe to buy up
worthless arms, and then cheated the Government out of millions of
dollars in supplying those guns and other ordnance, all notoriously
unfit for use. "A large proportion of our troops," reported a
Congressional Commission in 1862, "are armed with guns of very
inferior quality, and tens of thousands of the refuse arms of Europe
are at this moment in our arsenals, and thousands more are still to
arrive, all unfit." [Footnote: House Reports of Committees, Thirty-
seventh Congress, Second Session, 1861-62, vol. ii, Report No. 2:
lxxix.] A Congressional committee appointed, in 1862, to inquire into
the connection between Government employees on the one hand, and
banks and contractors on the other, established the fact
conclusively, that the contractors regularly bribed Government
inspectors in order to have their spurious wares accepted. [Footnote:
House Reports of Committees, Thirty-seventh Congress, 1862-63, Report
No. 64. The Chairman of this committee, Representative C. H. Van
Wyck, of New York, in reporting to the House of Representatives on
February 23, 1863, made these opening remarks:
"In the early history of the war, it was claimed that frauds and
peculations were unavoidable; that the cupidity of the avaricious
would take advantage of the necessities of the nation, and for a time
must revel and grow rich amidst the groans and griefs of the people;
that pressing wants must yield to the extortion of the base; that
when the capital was threatened, railroad communication cut off, the
most exorbitant prices could safely be demanded for steam and sailing
vessels; that when our arsenals had been robbed of arms, gold could
not be weighed against cannon and muskets; that the Government must
be excused if it suffered itself to be overreached. Yet, after the
lapse of two years, we find the same system of extortion prevailing,
and robbery has grown more unblushing in its exactions as it feels
secure in its immunity from punishment, and that species of fraud
which shocked the nation in the spring of 1861 has been increasing.
The fitting out of each expedition by water as well as land is but a
refinement upon the extortion and immense profits which preceded it.
The freedom from punishment by which the first greedy and rapacious
horde were suffered to run at large with ill-gotten gains seems to
have demoralized too many of those who deal with the Government."--
Appendix to The Congressional Globe, Third Session, Thirty-seventh
Congress, 1862-63, Part ii: 117.]
In fact, the ramifications of the prevalent frauds were so extensive
that a number of Congressional committees had to be appointed at the
same time to carry on an adequate investigation; and even after long
inquiries, it was admitted that but the surface had been scratched.
During the Civil War, prominent merchants, with eloquent outbursts of
patriotism, formed union defense committees in various Northern
cities, and solicited contributions of money and commodities to carry
on the war. It was disclosed before the Congressional investigating
committees that not only did the leading members of these union
defense committees turn their patriotism to thrifty account in
getting contracts, but that they engaged in great swindles upon the
Government in the process. Thus, Marcellus Hartley, a conspicuous
dealer in military goods, and the founder of a multimillionaire
fortune, [Footnote: When Marcellus Hartley died in 1902, his personal
property alone was appraised at $11,000,000. His entire fortune was
said to approximate $50,000,000. His chief heir, Marcellus Hartley
Dodge, a grandson, married, in 1907, Edith Geraldine Rockefeller, one
of the richest heiresses in the world. Hartley was the principal
owner of large cartridge, gun and other factories.] admitted that he
had sold a large consignment of Hall's carbines to a member of the
New York Union Defense Committee. In a sudden burst of contrition he
went on, "I think the worst thing this Government has been swindled
upon has been these confounded Hall's carbines; they have been
elevated in price to $22.50, I think." [Footnote: House Report No.2,
etc., 1861-62, vol. ii: 200-204] He could have accurately added that
these carbines were absolutely dangerous; it was found that their
mechanism was so faulty that they would shoot off the thumbs of the
very soldiers using them. Hartley was one of the importers who
brought over the refuse arms of Europe, and sold them to the
Government at extortionate prices. He owned up to having contracts
with various of the States (as distinguished from the National
Government) for $600,000 worth of these worthless arms. [Footnote:
Ibid.] That corruscating patriot and philanthropic multimillionaire
of these present times, J. Pierpont Morgan, was, as we shall see,
profiting during the Civil War from the sale of Hall's carbines to
the Government.
One of the Congressional committees, investigating contracts for
other army material and provisions, found the fullest evidences of
gigantic frauds. Exorbitant prices were extorted for tents "which
were valueless"; these tents, it appeared, were made from cheap or
old "farmers'" drill, regarded by the trade as "truck." Soldiers
testified that they "could better keep dry out of them than under."
[Footnote: House Report No. 64, etc., 1862-63: 6.] Great frauds were
perpetrated in passing goods into the arsenals. One manufacturer in
particular, Charles C. Roberts, was awarded a contract for 50,000
haversacks and 50,000 knapsacks. "Every one of these," an expert
testified, "was a fraud upon the Government, for they were not linen;
they were shoddy." [Footnote: Ibid.] A Congressional committee found
that the provisions supplied by contractors were either deleterious
or useless. Captain Beckwith, a commissary of subsistence, testified
that the coffee was "absolutely good for nothing and is worthless. It
is of no use to the Government."
Q. Is the coffee at all merchantable?
A. It is not.
Q. Describe that coffee as nearly as you can.
A. It seems to be a compound of roasted peas, of licorice, and a
variety of other substances, with just coffee enough to give it a
taste and aroma of coffee. [Footnote: House Report No. 2, etc. 1861-
62, ii: 1459.]
This committee extracted much further evidence showing how all other
varieties of provisions were of the very worst quality, and how
"rotten and condemned blankets" in enormous quantities were passed
into the army by bribing the inspectors. It disclosed, at great
length, how the railroads in their schedule of freight rates were
extorting from the Government fifty per cent. more than from private
parties. [Footnote: House Report No. 2, etc., 1861-62, xxix.] Don
Cameron, leader of the corrupt Pennsylvania political machine, and a
railroad manipulator, [Footnote: He had been involved in at least one
scandal investigated by a Pennsylvania Legislative Committee, and
also in several dubious railroad transactions in Maryland.] was at
that time Secretary of War. Whom did he appoint as the supreme
official in charge of railroad transportation? None other than Thomas
A. Scott, the vice-president of the Pennsylvania Railroad. Scott, it
may be said, was another capitalist whose work has so often been
fulsomely described as being that of "a remarkable constructive
ability." The ability he displayed during the Civil War was
unmistakable. With his collusion the railroads extorted right and
left. The committee described how the profits of the railroads after
his appointment rose fully fifty per cent in one year, and how
quartermasters and others were bribed to obtain the transportation of
regiments. "This," stated the committee, "illustrates the immense and
unnecessary profits which was spirited from the Government and
secured to the railroads by the schedule fixed by the vice-president
of the Pennsylvania Central under the auspices of Mr. Cameron."
[Footnote: House Report No. 2, etc., 1861-62, xix. The Pennsylvania
Railroad, for example, made in 1862 the sum of $1,350,237.79 more in
profits than it did in the preceding year.]
These many millions of dollars extorted in frauds "came," reported
the committee, "out of the impoverished and depleted Treasury of the
United States, at a time when her every energy and resources were
taxed to the utmost to maintain the war." [Footnote: Ibid., 4.]
These are but a few facts of the glaring fraud and corruption
prevailing in every line of mercantile and financial business. Great
and audacious as Gould's thefts were later, they could not be put on
the same indescribably low plane as those committed during the Civil
War by men most of whom succeeded in becoming noted for their fine
respectability and "solid fortunes." So many momentous events were
taking place during the Civil War, that amid all the preparations,
the battles and excitement, those frauds did not arouse that general
gravity of public attention which, at any other time, would have
inevitably resulted. Consequently, the men who perpetrated them
contrived to hide under cover of the more absorbing great events of
those years. Gould committed his thefts at a period when the public
had little else to preoccupy its attention; hence they loomed up in
the popular mind as correspondingly large and important.
A SPECIMEN OF GOULD'S TUITION.
At the very dawn of his career in 1857, as a railroad owner, Gould
had the opportunity of securing valuable and gratuitous instruction
in the ways by which railroad projects and land grants were being
bribed through Congress. He was then only twenty-one years old, ready
to learn, but, of course, without experience in dealing with
legislative bodies. But the older capitalists, veterans at bribing,
who for years had been corrupting Congress and the Legislatures,
supplied him with the necessary information. Not voluntarily did they
do it; their greatest ally was concealment; but one crowd of them had
too baldly bribed Congress to vote for an act giving an enormous land
grant in Iowa, Minnesota and other states, to the Des Moines
Navigation and Railroad Company. The facts unearthed must have been a
lasting lesson to Gould as to how things were done in the exalted
halls of Congress. The charges made an ugly stir throughout the
United States, and the House of Representatives, in self defense, had
to appoint a special committee to investigate itself.
This committee made a remarkable and unusual report. Ordinarily in
charges of corruption, investigating committees were accustomed to
reporting innocently that while it might have been true that
corruption was used, yet they could find no evidence that members had
received bribes; almost invariably such committees put the blame, and
the full measure of their futile excoriations, on "the iniquitous
lobbyists." But this particular committee, surprisingly enough,
handed in no such flaccid, whitewashing report. It found conclusively
that corrupt combinations of members of Congress did exist; and in
recommended the expulsion of four members whom it declared guilty to
receiving either money or land in exchange for their votes. One of
these four expelled member, Orasmus B. Matteson, it appeared, was a
leader of a corrupt combination; the committee branded him as having
arranged with the railroad capitalists to use "a large sum of money
[$100,000] and other valuable considerations corruptly." [Footnote:
Reports of Committees, House of Representatives, Thirty-fourth
Congress, Third Session, 1856/57. Report No. 243, Vol. iii. In
subsequent chapters many further details are given of the corruption
during this period.]
But it was essentially during the Civil War that Gould received his
completest tuition in the great art of seizing property and
privileges by bribing legislative bodies. While many sections of the
capitalist class were, as we have seen, swindling manifold hundreds
of millions of dollars from a hard-pressed country, and reaping
fortunes by exploiting the lives of the very defenders of their
interests, other sections, equally mouthy with patriotism, were
sneaking through Congress and the Legislatures act after act, further
legalizing stupendous thefts.
PATRIOTISM AT FIFTY PER CENT.
Some of these acts, demanded by the banking interests, made the
people of the United States pay an almost unbelievable usurious
interest for loans. These banking statutes were so worded that
nominally the interest did not appear high; in reality, however, by
various devices, the bankers, both national and international, were
often able to extort from twenty to fifty, and often one hundred per
cent., in interest, and this on money which had at some time or
somehow been squeezed out of exploited peoples in the United States
or elsewhere.
By these laws the bankers were allowed to get annual payment from the
Government of six per cent. interest in gold on the Government bonds
that they bought. They could then deposit those same bonds with the
Government, and issue their own bank notes against ninety per cent.
of the bonds deposited. They drew interest from the Government on the
deposited bonds, and at the time charged borrowers an exorbitant rate
of interest for the use of the bank notes, which passed as currency.
It was by this system of double interest that they were able to sweep
into their coffers hundreds upon hundreds of millions of dollars, not
a dollar of which did they earn, and all of which were sweated out of
the adversities of the people of the United States. From 1863 to 1878
alone the Government paid out to national banks as interest on bonds
the enormous sum of $252,837,556.77. [Footnote: House Documents,
Forty-fifth Congress, Second Session, Ex. Document No. 34, Vol. xiv.,
containing the reply of Secretary of the Treasury Sherman, in answer
to a resolution of the House of Representatives.] On the other hand,
the banks were entirely relieved from paying taxes; they secured the
passage of a law exempting Government bonds from taxation. Armies
were being slaughtered and legions of homes desolated, but it was a
rich and safe time for the bankers; a very common occurrence was it
for banks to declare dividends of twenty, forty, and sometimes one
hundred, per cent.
It was also during the stress of this Civil War period, when the
working and professional population of the nation was fighting on the
battlefield, or being taxed heavily to support their brothers in
arms, that the capitalists who later turned up as owners of various
Pacific railroad lines were bribing through Congress acts giving them
the most comprehensive perpetual privileges and great grants of money
and of land.
Gould saw how all of the others of the wealth seekers were getting
their fortunes; and the methods that he now plunged into use were but
in keeping with theirs, a little bolder and more brutally frank,
perhaps, but nevertheless nothing more than a repetition of what had
long been going on in the entire sphere of capitalism.
CHAPTER X
THE SECOND STAGE OF THE GOULD FORTUNE
The first medium by which Jay Gould transferred many millions of
dollars to his ownership was by his looting and wrecking of the Erie
Railroad. If physical appearance were to be accepted as a gauge of
capacity none would suspect that Gould contained the elements of one
of the boldest and ablest financial marauders that the system in
force had as yet produced. About five feet six inches in height and
of slender figure, he gave the random impression of being a mild,
meek man, characterized by excessive timidity. His complexion was
swarthy and partly hidden by closely-trimmed black whiskers; his eyes
were dark, vulpine and acutely piercing; his forehead was high. His
voice was very low, soft and insinuating.
PRIVATE CONFISCATION OF THE ERIE RAILROAD.
The Erie Railroad, running from New York City to Buffalo and thence
westward to Chicago, was started in 1832. In New York State alone,
irrespective of gifts in other States, it received what was virtually
a gift of $3,000,000 of State funds, and $3,217,000 interest, making
$6,217,000 in all. Counties, municipalities and towns through which
it passed were prevailed upon to contribute freely donations of
money, lands and rights. From private proprietors in New York State
it obtained presents of land then valued at from $400,000 to
$500,000, [Footnote: Report on the New York and Erie Railroad
Company, New York State Assembly Document, No. 50, 1842. See also,
Investigation of the Railroads of the State of New York, 1879, I:
100.] but now worth tens of millions of dollars. In addition, an
extraordinary series of special privileges and franchises was given
to it. This process was manifolded in every State through which the
railroad passed. The cost of construction and equipment came almost
wholly from the grants of public funds. [Footnote: "The Erie railway
was built by the citizens of this State with money furnished by its
people. The State in its sovereign capacity gave the corporation
$3,000,000. The line was subsequently captured, or we may say stolen,
by the fraudulent issue of more than $50,000,000 of stock." ... "An
analysis of the Erie Reorganization bill, etc., submitted to the
Legislature by John Livingston, Esq., counsel for the Erie Railway
Shareholders, 1876."]
Confiding in the fair promises of its projectors, the people
credulously supposed that their interests would be safeguarded. But
from time to time, Legislature after Legislature was corrupted or
induced to enact stealthy acts by which the railroad was permitted to
pass without restriction into the possession of a small clique of
exploiters and speculators. Not only were the people cheated out of
funds raised by public taxation and advanced to build the road--a
common occurrence in the case of most railroads--but this very money
was claimed by the capitalist owners as private capital, large
amounts of bonds and stocks were issued against it, and the producers
were assessed in the form of high freight and passenger rates to pay
the necessary interest and dividends on those spurious issues.
THE SPECULATOR, DREW, GETS CONTROL.
Not satisfied with the thefts of public funds, the successive cliques
in control of the Erie Railroad continually plundered its treasury,
and defrauded its stockholders. So little attention was given to
efficient management that shocking catastrophies resulted at frequent
intervals. A time came, however, when the old locomotives, cars and
rails were in such a state of decay, that the replacing of them could
no longer be postponed. To do this money was needed, and the treasury
of the company had been continuously emptied by looting.
The directors finally found a money loaner in Daniel Drew, an uncouth
usurer. He had graduated from being a drover and tavern keeper to
being owner of a line of steamboats plying between New York and
Albany. He then, finally, had become a Wall street banker and broker.
For his loans Drew exacted the usual required security. By 1855 he
had advanced nearly two million dollars--five hundred thousand in
money, the remainder in endorsements. The Erie directors could not
pay up, and the control of the railroad passed into his hands. As
ignorant of railroad management as he was of books, he took no pains
to learn; during the next decade he used the Erie railroad simply as
a gambling means to manipulate the price of its stocks on the Stock
Exchange. In this way he fleeced a large number of dupes decoyed into
speculation out of an aggregate of millions of dollars.
Old Cornelius Vanderbilt looked on with impatience. He foresaw the
immense profits which would accrue to him if he could get control of
the Erie Railroad; how he could give the road a much greater value by
bettering its equipment and service, and how he could put through the
same stock-watering operations that he did in his other transactions.
Tens of millions of dollars would be his, if he could only secure
control. Moreover, the Erie was likely at any time to become a
dangerous competitor of his railroads. Vanderbilt secretly began
buying stock; by 1866 he had obtained enough to get control. Drew and
his dummy directors were ejected, Vanderbilt superseding them with
his own.
* * * * * * *
VANDERBILT OUSTS DREW, THEN RESTORES HIM.
The change was worked with Vanderbilt's habitual brusque rapidity.
Drew apparently was crushed. He had, however, one final resource, and
this he now used with histrionic effect. In tears he went to
Vanderbilt and begged him not to turn out and ruin an old, self-made
man like himself. The appeal struck home. Had the implorer been
anyone else, Vanderbilt would have scoffed. But, at heart, he had a
fondness for the old illiterate drover whose career in so many
respects resembled his own. Tears and pleadings prevailed; in a
moment of sentimental weakness--a weakness which turned out to be
costly--Vanderbilt relented. A bargain was agreed upon by which Drew
was to resume directorship and represent Vanderbilt's interests and
purposes.
Reinstated in the Erie board, Drew successfully pretended for a time
that he was fully subservient. Ostensibly to carry out Vanderbilt's
plans he persuaded that magnate to allow him to bring in as directors
two men whose pliancy, he said, could be depended upon. These were
Jay Gould, demure and ingratiating, and James Fisk, Jr., a portly,
tawdry, pompous voluptuary. In early life Fisk had been a peddler in
Vermont, and afterwards had managed an itinerant circus. Then he had
become a Wall street broker. Keen and suspicious as old Vanderbilt
was, and innately distrustful of both of them, he nevertheless, for
some inexplicable reason, allowed Drew to install Gould and Fisk as
directors. He knew Gould's record, and probably supposed him, as well
as Fisk, handy tools (as was charged) to do his "dirty work" without
question. He put Drew, Gould and Fisk on Erie's executive committee.
In that capacity they could issue stock and bonds, vote improvements,
and generally exercise full authority.
* * * * * * *
DREW, GOULD AND FISK BETRAY VANDERBILT.
At first, they gave every appearance of responding obediently to
Vanderbilt's directions. Believing it to his interest to buy as much
Erie stock as he could, both as a surer guarantee of control, and to
put his own price upon it, Vanderbilt continued purchasing. The trio,
however, had quietly banded to mature a plot by which they would
wrest away Vanderbilt's control.
This was to be done by flooding the market with an extra issue of
bonds which could be converted into stock, and then by running down
the price, and buying in the control themselves. It was a trick that
Drew had successfully worked several years before. At a certain
juncture he was apparently "caught short" in the Stock Exchange, and
seemed ruined. But at the critical moment he had appeared in Wall
street with fifty-eight thousand shares of stock, the existence of
which no one had suspected. These shares had been converted from
bonds containing an obscure clause allowing the conversion. The
projection of this large number of shares into the stock market
caused an immediate and violent decline in the price. By selling
"short"--a Wall street process which we have described elsewhere--
Drew had taken in large sums as speculative winnings.
The same ruse Drew, Gould and Fisk now proceeded to execute on
Vanderbilt. Apparently to provide funds for improving the railroad,
they voted to issue a mass of bonds. Large quantities of these they
turned over to themselves as security for pretended advances of
moneys. These bonds were secretly converted into shares of stock, and
then distributed among brokerage houses of which the three were
members. Vanderbilt, intent upon getting in as much as he could,
bought the stock in unsuspectingly. Then came revelations of the
treachery of the three men, and reports of their intentions to issue
more stock.
Vanderbilt did not hesitate a moment. He hurried to invoke the
judicial assistance of Judge George C. Barnard, of the New York State
Supreme Court. He knew that he could count on Barnard, whom at this
time he corruptly controlled. This judge was an unconcealed tool of
corporate interests and of the plundering Tweed political "ring"; for
his many crimes on the bench he was subsequently impeached.
[Footnote: At his death $1,000,000 in bonds and cash were found among
his effects.] Barnard promptly issued a writ enjoining the Erie
directors from issuing further stock, and ordered them to return to
the Erie treasury one-fourth of that already issued. Furthermore, he
prohibited any more conversion of bonds into stock on the ground that
it was fraudulent.
So pronounced a victory was this considered for Vanderbilt, that the
market price of Erie stock went up thirty points. But the plotters
had a cunning trick in reserve. Pretending to obey Barnard's order,
they had Fisk wrench away the books of stock from a messenger boy
summoned ostensibly to carry them to a deposit place on Pine street.
They innocently disclaimed any knowledge of who the thief was; as for
the messenger boy, he "did not know." These one hundred thousand
shares of stock Drew, Gould and Fisk instantly threw upon the stock
market. No one else had the slightest suspicion that the court order
was being disobeyed. Consequently, Vanderbilt's brokers were busily
buying in this load of stock in million-dollar bunches; other persons
were likewise purchasing. As fast as the checks came in, Drew and his
partners converted them into cash.
GOULD AND HIS PARTNERS FLEE WITH MILLIONS.
It was not until the day's activity was over that Vanderbilt, amazed
and furious, realized that he had been gouged out of $7,000,000.
Other buyers were also cheated out of millions. The old man had been
caught napping; it was this fact which stung him most. However, after
the first paroxysm of frenzied swearing, he hit upon a plan of
action. The very next morning warrants were sworn out for the arrest
of Drew, Fisk and Gould. A hint quickly reached them; they thereupon
fled to Jersey City out of Barnard's jurisdiction, taking their cargo
of loot with them. According to Charles Francis Adams, in his
"Chapters of Erie," one of them bore away in a hackney coach bales
containing $6,000,000 in greenbacks. [Footnote: "Chapters of Erie":
30.] The other two fugitives were loaded down with valises crammed
with bonds and stocks.
Here in more than one sense was an instructive and significant
situation. Vanderbilt, the foremost blackmailer of his time, the
plunderer of the National Treasury during the Civil War, the arch
briber and corruptionist, virtuously invoking the aid of the law on
the ground that he had been swindled! Drew, Gould and Fisk
sardonically jested over it. But joke as they well might over their
having outwitted a man whose own specialty was fraud, they knew that
their position was perilous. Barnard's order had declared their sales
of stock to be fraudulent, and hence outlawed; and, moreover, if they
dared venture back to New York, they were certain, as matters stood,
of instant arrest with the threatened alternative of either
disgorging or of a criminal trial and possibly prison. To themselves
they extenuated their thefts with the comforting and self-sufficient
explanation that they had done to Vanderbilt precisely what he had
done to others, and would have done to them. But it was not with
themselves that the squaring had to be done, but with the machinery
of law; Vanderbilt was exerting every effort to have them imprisoned.
How was this alarming exigency to be met? They speedily found a way
out. While Vanderbilt was thundering in rage, shouting out streaks of
profanity, they calmly went ahead to put into practice a lesson that
he himself had thoroughly taught. He controlled a sufficient number
of judges; why should not they buy up the Legislature, as he had
often done? The strategic plan was suggested of getting the New York
Legislature to pass an act legalizing their fraudulent stock issues.
Had not Vanderbilt and other capitalists often bought up Congress and
Legislatures and common councils? Why not now do the same? They well
knew the approved method of procedure in such matters; an onslaught
of bribing legislators, they reckoned, would bring the desired
result.
GOULD BRIBES THE LEGISLATURE WITH $500,000.
Stuffing $500,000 in his satchel, Gould surreptitiously hurried to
Albany. Detected there and arrested, he was released under heavy bail
which a confederate supplied. He appeared in court in New York City a
few days later, but obtained a postponement of the action. No time
was lost by him. "He assiduously cultivated," says Adams, "a thorough
understanding between himself and the Legislature." In the face of
sinister charges of corruption, the bill legalizing the fraudulent
stock issues was passed. Ineffectually did Vanderbilt bribe the
legislators to defeat it; as fast as they took and kept his money,
Gould debauched them with greater sums. One Senator in particular, as
we have seen, accepted $75,000 from Vanderbilt, and $100,000 from
Gould, and pocketed both amounts.
A brisk scandal naturally ensued. The usual effervescent expedient of
appointing an investigating committee was adopted by the New York
State Senate on April 10, 1868. This committee did not have to
investigate to learn the basic facts; it already knew them. But it
was a customary part of the farce of these investigating bodies to
proceed with a childlike assumption of entire innocence.
Many witnesses were summoned, and much evidence was taken. The
committee reported that, according to Drew's testimony, $500,000 had
been drawn out of the Erie railroad's treasury, ostensibly for
purposes of litigation, and that it was clear "that large sums of
money did come from the treasury of the Erie Railroad Company, which
were expended for some purpose in Albany, for which no vouchers seem
to have been filed in the offices of the company." The committee
further found that "large sums of money were expended for corrupt
purposes by parties interested in legislation concerning railways
during the session of 1868."
But who specifically did the bribing? And who were the legistators
bribed? These facts the committee declared that it did not know. This
investigating sham resulted, as almost always happened in the case of
similar inquisitions, in the culpability being thrown upon certain
lobbyists "who were enriched." These lobbyists were men whose trade
it was to act as go-betweens in corrupting legistators. Gould and
Thompson--the latter an accomplice--testified that they had paid
"Lon" Payn, a lobbyist who subsequently became a powerful Republican
politician, $10,000 "for a few days' services in Albany in advocating
the Erie bill"; and it was further brought out that $100,000 had been
given to the lobbyists Luther Caldwell and Russell F. Hicks, to
influence legislation and also to shape public opinion through the
press. Caldwell, it appeared, received liberal sums from both
Vanderbilt and Gould. [Footnote: Report of the Select Committee of
the New York Senate, appointed April 10, 1868, in Relation to Members
Receiving Money from Railway Companies. Senate Document No. 52,
1869:3-12, and 137, 140-146. ] A subsequent investigation committee
appointed, in 1873, to inquire into other charges, reported that in
one year of 1868 the Erie railroad directors, comprising Drew, Gould,
Fisk and their associates, had spent more than a million dollars for
"extra and legal services," and that it was "their custom from year
to year to spend large sums to control elections and to influence
legislation." [Footnote: Report of the Select Committee of the
Assembly, Assembly Documents, 1873, Doc. No. 98: xix.] [Footnote:
"What the Erie has done," the Committee reported, "other great
corporations are doubtless doing from year to year. Combined as they
are, the power of the great moneyed corporations of this country is a
standing menace to the liberties of the people.
"The railroad lobby flaunts its ill-gotten gains in the faces of our
legislatures, and in all our politics the debasing effect of its
influence is felt" (p. 18).]
Vanderbilt later succeeded in compelling the Erie Railroad to
reimburse him for the sums that he thus corruptly spent in fighting
Drew, Gould and Fisk. [Footnote: Railroad Investigation of the State
of New York, 1879, ii: 1654.]
Their huge thefts having been legalized, Drew, Gould and Fisk
returned to Jersey City. But their path was not yet clear. Vanderbilt
had various civil suits in New York against them; moreover they were
adjudged in contempt of court. Parleying now began. With the severest
threats of what the courts would do if they refused, Vanderbilt
demanded that they buy back the shares of stock that they had
unloaded upon him.
Drew was the first to compromise; Gould and Fisk shortly afterward
followed. They collectively paid Vanderbilt $2,500,000 in cash,
$1,250,000 in securities for fifty thousand Erie shares, and another
million dollars for the privilege of calling upon him for the
remaining fifty thousand shares at any time within four months.
Although this settlement left Vanderbilt out of pocket to the extent
of almost two million dollars, he consented to abandon his suits. The
three now left their lair in Jersey City and transferred the Erie
offices to the Grand Opera House, at Eighth avenue and Twenty-third
street, New York City. In this collision with Vanderbilt, Gould
learned a sharp lesson he thereafter never overlooked; namely, that
it was not sufficient to bribe common councils and legislatures; he,
too, must own his judges. Events showed that he at once began
negotiations.
GOULD AND FISK THROW OVER DREW.
The next development was characteristic. Having no longer any need
for their old accomplice, Gould and Fisk, by tactics of duplicity,
gradually sheared Drew and turned him out of the management to
degenerate into a financial derelict. It was Drew's odd habit,
whenever his plans were crossed, or he was depressed, to rush off to
his bed, hide himself under the coverlets and seek solace in sighs
and self-compassion, or in prayer--for with all his unscrupulousness
he had an orthodox religious streak. When Drew realized that he had
been plundered and betrayed, as he had so often acted to others, he
sought his bed and there long remained in despair under the blankets.
The whimsical old extortionist never regained his wealth or standing.
Upon Drew's effacement Gould caused himself to be made president and
treasurer of the Erie Railroad, and Fisk vice-president and
controller.
When Gould and Fisk began to turn out more watered stock various
defrauded malcontent stockholders resolved to take an intervening
hand. This was a new obstacle, but it was coolly met. Gould and Fisk
brought in gangs of armed thugs to prevent these stockholders from
getting physical possession of the books of the company. Then the New
York Legislature was again corrupted.
A bill called the Classification Act, drafted to insure Gould and
Fisk's legal control, was enacted. This bill provided that only one-
fifth of the board of directors should be retired in any year. By
this means, although the majority of stockholders might be opposed to
the Gould-Fisk management, it would be impossible for them to get
possession of the road for at least three years, and full possession
for not less than five years.
But to prevent the defrauded large stockholders from getting
possession of the railroad through the courts, another act was
passed. This provided that no judgement to oust the board of
directors could be rendered by any court unless the suit was brought
by the Attorney-General of the State. It was thus only necessary for
Gould and Fisk to own the Attorney-General entirely (which they took
pains, of course, to do) in order to close the courts to the
defrauded stockholders. On a trumped-up suit, and by an order of one
of the Tweed judges, a receiver was appointed for the stock owned by
foreign stockholders; and when any of it was presented for record in
the transfer book of the Erie railroad, the receiver seized it. In
this way Gould and Fisk secured practical possesssion of $6,000,000
of the $50,000,000 of stock held abroad.
ALLIANCE WITH CORRUPT POLITICS AND JUDICIARY.
From 1868 to 1872 Gould, abetted by subservient directors, issued two
hundred and thirty-five thousand more shares of stock. [Footnote:
Fisk was murdered by a rival in 1872 in a feud over Fisk's mistress.
His death did not interrupt Gould's plans.] The frauds were made
uncommonly easy by having Tweed machine as an auxiliary; in turn,
Tweed, up to 1871, controlled the New York City and State dominant
political machine, including the Legislature and many of the judges.
To insure Tweed's connivance, they made him a director of the Erie
Railroad, besides heavily bribing him. [Footnote: "Did you ever
receive any money from either Fisk or Gould to be used in bribing the
Legislature?" Tweed was asked by an aldermanic committee in 1877,
after his downfall.
A. "I did sir! They were of frequent occurrence. Not only did I
receive money but I find by an examination of the papers that
everybody else who received money from the Erie railroad charged it
to me."--Documents of the Board of Aldermen, 1877, Part II, No.
8:49.] With Tweed as an associate they were able to command the
judges who owed their elevation to him. Barnard, one of Tweed's
servile tools, was sold over to Gould and Fisk, and so throughly did
this judge prostitute his office at their behest that once, late at
night, at Fisk's order, he sportively held court in the apartment of
Josie Mansfield, Fisk's mistress. [Footnote: The occasion grew out of
an attempt of Gould and Fisk in 1869 to get control of the Albany and
Sesquehanna Railroad. Two parties contested--The Gould and the
"Ramsey," headed by J. Pierpont Morgan. Each claimed the election of
its officers and board of directors. One night, at half-past ten
o'clock, Fisk summoned Barnard from Poughkeepsie to open chambers in
Josie Mansfield's rooms. Barnard hurried there, and issued an order
ousting Ramsey from the presidency. Judge Smith at Rochester
subsequently found that Ramsey was legally elected, and severely
denounced Gould and Fisk--"Letters of General Francis C. Barlow,
Albany": 1871.
The records of this suit (as set forth in Lansing's Reports, New York
Supreme Court. I:308, etc.) show that each of the contesting parties
accused the other of gross fraud, and that the final decision was
favorable to the "Ramsey" party. See the chapters on J. Pierpont
Morgan in Vol. III of this work.] When the English stockholders sent
over a large number of shares to be voted in for a new management, it
was Barnard who allowed this stock to be voted by Gould and Fisk. At
another time Gould and Fisk called at Barnard's house and obtained an
injunction while he was eating breakfast.
It was largely by means of his corrupt alliance with the Tweed "ring"
that Gould was able to put through his gigantic frauds from 1868 to
1872.
Gould was, indeed, the unquestioned master mind in these
transactions; Fisk and the others merely executed his directions. The
various fraudulent devices were of Gould's origination. A biographer
of Fisk casually wrote at the time: "Jay Gould and Fisk took William
M. Tweed into their board, and the State Legislature, Tammany Hall
and the Erie 'ring' were fused together and have contrived to serve
each other faithfully." [Footnote: "A Life of James Fisk, Jr.," New
York, 1871.] Gould admitted before a New York State Assembly
investigating committee in 1873 that, in the three years prior to
1873, he had paid large sums to Tweed and to others, and that he had
also disbursed large sums "which might have been used to influence
legislation or elections." These sums were facetiously charged on the
Erie books to "India Rubber Account"--whatever that meant.
Gould cynically gave more information. He could distinctly recall, he
said, "that he had been in the habit of sending money into various
districts throughout the State," either to control nominations or
elections for Senators or members of the Assembly. He considered
"that, as a rule, such investments paid better than to wait until the
men got to Albany." Significantly he added that it would be as
impossible to specify the numerous instances "as it would be to
recall the number of freight cars sent over the Erie Railroad from
day to day." His corrupt operations, he indifferently testified,
extended into four different States. "In a Republican district I was
a Republican; in a Democratic district, a Democrat; in a doubtful
district I was doubtful; but I was always for Erie." [Footnote:
Report of, and Testimony Before, the Select Assembly Committee, 1873,
Assembly Documents, Doc. No. 98: xx, etc.] The funds that he thus
used in widespread corruption came obviously from the proceeds of his
great thefts; and he might have added, with equal truth, that with
this stolen money he was able to employ some of the most eminent
lawyers of the day, and purchase judges.
GOULD'S TRADING CLASS SUPPORT
Those writers who are content with surface facts, or who lack
understanding of popular currents, either state, or leave the
inference, that it was solely by bribing and trickery that Gould was
able to consummate his frauds. Such assertions are altogether
incorrect. To do what he did required the support, or at least
tolerance, of a considerable section of public opinion. This he
obtained. And how? By posing as a zealous anti-monopolist.
The cry of anti-monopoly was the great fetich of the entire middle
class; this class viewed with fear the growing concentration of
wealth; and as its interests were reflected by a large number of
organs of public opinion, it succeeded in shaping the thoughts of no
small a section of the working class.
While secretly bribing, Gould constantly gave out for public
consumption a plausible string of arguments, in which act, by the
way, he was always fertile. He represented himself as the champion of
the middle and working classes in seeking to prevent Vanderbilt from
getting a monopoly of many railroads. He played adroitly upon the
fears, the envy and the powerful mainsprings of the self interest of
the middle class by pointing out how greatly it would be at the mercy
of Vanderbilt should Vanderbilt succeed in adding the Erie Railroad
and other railroads to his already formidable list.
It was a time of all times when such arguments were bound to have an
immense effect; and that they did was shown by the readiness with
which the trading class excused his corruption and frauds on the
ground that he seemed to be the only man who proved that he could
prevent Vanderbilt from gobbling up all of the railroads leading from
New York City. With a great fatuousness the middle class supposed
that he was fighting for its cause.
The bitterness of large numbers of the manufacturing, jobbing and
agricultural classes against Commodore Vanderbilt was deep-seated. By
an illegal system of preferential freight rates to certain
manufacturers, Vanderbilt put these favorites easily in a position
where they could undersell competitors. Thus, A. T. Stewart, one of
the noted millionaire manufacturers and merchants of the day, instead
of owing his success to his great ability, as has been set forth,
really derived it, to a great extent, from the secret preferential
freight rates that he had on the Vanderbilt railroads. A variety of
other coercive methods were used by Vanderbilt. Special freight
trains were purposely delayed and run at snail's pace in order to
force shippers to pay the extraordinary rates demanded for shipping
over the Merchant's Dispatch, a fast freight line owned by the
Vanderbilt family.
These were but a few of the many schemes for their private graft that
the Vanderbilts put in force. The agricultural class was taxed
heavily on every commodity shipped; for the transportation of milk,
for example, the farmer was taxed one-half of what he himself
received for milk. These taxes, of course, eventually fell upon the
consumer, but the manufacturer and the farmer realized that if the
extortions were less, their sales and profits would be greater. They
were in a rebellious mood and gladly welcomed a man such as Gould who
thwarted Vanderbilt at every turn. Gould well knew of this bitter
feeling against Vanderbilt; he used it, and thrust himself forward
constantly in the guise of the great deliverer.