BUILDING THE ATLANTIC AND GREAT WESTERN RAILWAY
1857-1858
The great project of a connecting railway between the Eastern and the
Middle Western States had been in my mind for some years. Queen Maria
Cristina's fortune, which was then the greatest possessed by any woman
in the world, seemed to me to offer a solution of the problem. I had no
idea, of course, of attempting to use her fortune in any schemes of my
own and for my own interest, but I saw at once that I could utilize her
idle wealth to the tremendous advantage of the United States and, at the
same time, render a service to her.
The Queen had had a large quantity of funds in the old United States
Bank that President Jackson smashed, and James McHenry, who was
connected with me in many enterprises, learned that she had taken as
securities some coal lands in Pennsylvania. I saw the Duke of Rianzares,
the guardsman Fernando Munoz, whom Maria Cristina had fallen in love
with and made a grandee of her kingdom, and finally married in '44. He
had his headquarters at Lillo's in the Square Clary, and he introduced
me to the Queen's secretary, Salerno. I suggested to the Spaniards the
advisability of hunting up these coal lands of the Queen. McHenry had
already made arrangements for me to go to America with her assistant
secretary, Don Rodrigo de Questa, who did not know a word of English.
The preliminaries were arranged, and we set out for Liverpool and
America.
One of the first of many difficulties into which poor de Questa fell
because of his ignorance of English occurred the first day out from
Liverpool. The Spaniard, with a fatuous assumption common to Europeans,
thought that whenever he failed to find the exact word he wanted in
another tongue than his own, all that was necessary was to use French.
The Spaniard asked the steward to get him some fish for breakfast. He
knew the Spanish word would not answer, and could not think of the
English word, though he had tried to master it for some time. He then
fell back upon the French, and asked for "poisson." Of course, the
steward thought he wanted poison, and reported the matter to
headquarters, thinking suicide was contemplated.
De Questa would have had serious trouble but for the thoughtfulness of
the steward, who remembered that I was traveling with him and came to
me for advice. "When did he ask for poison?" I inquired. "At
breakfast-time," said the steward. "Oh, then, he merely wants fish," and
I explained as well as I could to an English steward the meaning of the
French word.
The English of the ignorant classes look upon French very much as a
clergyman does upon profanity, or as a missionary regards the muttered
charms and incantations of a "voodoo" priestess. De Questa finally got
his fish, but he had long before lost his appetite. This adventure
discouraged him so much that he refused thenceforth to try to convey in
English, Castilian, or French, any of his desires concerning food, but
resorted to the primitive sign language. When he wanted eggs, he would
flap his arms together and cackle like a hen that has just laid an egg.
The steward who, perhaps, had never seen two square inches of
countryside in his life, thought he was imitating a rooster and laughed
until he almost had a fit. De Questa nearly starved. He had, at last, to
eat whatever he could find, without trying to seek what he wanted. I
explained to him that roosters did not lay eggs!
Our destination was Philadelphia. It was there that the Spaniards who
were living upon Queen Maria Cristina's property had their headquarters.
I found two of them, Christopher and John Fallon, living in fine houses,
with something of a court about them. They had control of about forty
thousand acres of coal lands belonging to the Queen. This large tract
was situated at a place to which the Fallons had given their name,
Fallonville. I at once consulted several of the best lawyers of
Philadelphia, among them William B. Reed, later Minister to China, and
was advised to go immediately to the lands and see what had been done
with them. I made an appointment with John Fallon, and we went out to
the mines. I can not now recall exactly where they were, but I remember
that we passed through a wilderness, after leaving the train that took
us from Philadelphia, and that we had a very long drive in carriages. A
railway track had been built through the forest to the mines, and it
seemed to me about fifteen miles long. I appeared to John Fallon as a
foreigner who was interested in mines and in coal lands in particular,
but not, of course, as representing the Queen.
As soon as I returned to Philadelphia and reported what I had learned,
my lawyers advised me to go back to Paris and report to the Queen. De
Questa and I, therefore, returned as soon as possible. McHenry met me in
London, and we went on to Paris together. We had a conference with Lillo
and with Don Jose de Salamanca, the Queen's banker, and it was decided
that the Queen should take active possession of her immense property at
once. I saw that there was a great deal of money in the land, and that
there was a fine opportunity for the Atlantic and Great Western Railway,
if I could in some way get the use of a portion of this vast coal
domain.
I saw also that my connection with the affair had already given me a
lever with which I could work to some purpose upon Don Jose de
Salamanca, and that this was the best card to play.
As soon as possible I went to his banking office and asked for a
conference. I had learned enough, in my dealings with bankers and
financiers, to know that you must approach them on the right side, from
the side of money, and not from that of a mere wish. Accordingly I wrote
on my card that I wished to propose a loan of $1,000,000. I really came
as a borrower, but circumstances permitted me to play the role of the
lender. I was admitted at once, but if I had asked outright for a loan I
should have been shown the door. As soon as I was in his presence I
said, without preface: "I have no cash in my pockets, nor would you wish
it if I had; but I want to show you something."
"I understood that you wanted to lend me a million," said the Spaniard.
"I do not see the million."
"You will, when I explain," I said. "I want to use your credit." (I knew
that he had none in London and that he could do nothing there.) "I
propose to deposit with you $2,000,000 of the bonds of the Atlantic and
Great Western Railway for $1,000,000 of your notes."
I knew that the bait of a credit in London would affect him, as the
Spanish bankers had long tried in vain to establish their credit in the
financial metropolis of the world.
"Where is this property?" he asked.
I drew a diagram of the property for him, explaining its location and
its relation to other properties and enterprises. I told him of the Erie
Railway, ending at Olean, and the Ohio and Mississippi Railway from
Cincinnati to St. Louis. "There is no connection between these two great
highways," I said, "and a highway that will connect them will prove a
fortune-maker to every one associated with the project." I explained
that there were only four hundred miles between the two, and how I
purposed filling in this gap. Between the two ends of the completed
railways lay three wealthy States. This road has since been reorganized
under the name of the New York, Pennsylvania and Ohio, or as it is
colloquially called, the "Nyp. and O." Near Olean now exists a town that
has the name of my Spanish friend, Salamanca.
My arguments touched Salamanca, but did not capture him. They paved the
way, however, for his complete capitulation a little later. My next step
was to go to London and confer with the Kennards, famous bankers of
that city. We arranged that a nephew of the Kennards, a son of Robert
William Kennard, then a member of Parliament, and an engineer of note,
should accompany me to America and go over the entire ground of the
proposed route.
We came to New York in October, '57, and shortly after we arrived had a
conference at the St. Nicholas Hotel, in Broadway, with the men who were
most interested in the proposed road. Maps were exhibited, and the plans
fully explained. We then left for Olean, where we were met by the
contractor in charge of the road, whose name was Doolittle, by Morton
the local engineer, and by General C. L. Ward, the president of the
road. The whole party took wagons for Jamestown, forty miles away. At
this point we were met by a committee appointed to take care of us and
to show us what had been done, and what could be done. This was the
program throughout, as we passed on from point to point. Among the men
who met us at Jamestown was Reuben E. Fenton, who had just been elected
Representative in Congress from that district, and was afterward
Governor and United States Senator. The line of the road was followed as
far as Dayton, Ohio, where it was proposed to connect with the Cleveland
and Cincinnati Railway.
At Mansfield there was a great gathering in honor of the occasion. The
committees of the three States--New York, Pennsylvania, and Ohio, were
present, and there was speech-making. I made a speech, which is printed
in full in "Spread-Eagleism," published in '58. Judge Bartley, afterward
famous on the Federal bench, was chairman of the meeting. I asked if
there were not some one present from Ohio who could give us a clear
statement as to what we could expect. Judge Bartley called on "Mr.
Sherman." A tall, spare man arose. It was John Sherman. He made a speech
that was clear, direct, and forcible. Among the other speakers were
Robert E. Schenck, of "Emma Mine" fame, who had been elected to Congress
recently, and Senator Benjamin F. Wade.
Just before the close of the meeting I introduced Thomas Kennard, the
civil engineer, and told the crowd that the road was to be built, and
that it would be aided by the money of Queen Maria Cristina of Spain and
the great Spanish banker, Salamanca.
I made a report in London of the work accomplished in America, and at
once began to purchase material for the road. I sought out Mr. Crawshay
Bailey, then a member of Parliament, and a great Welsh iron-master, and
he invited me to dine with him and his wife. He had just married a
charming young lady. At dinner, I found that Mrs. Bailey spoke French
very fluently and that Mr. Bailey did not understand a word of it. So I
asked permission of the iron-worker to carry on a conversation in French
with Mrs. Bailey. This delighted him very much, for he liked to see that
his wife was mistress of a language of which he did not know a single
word. This subtle flattery of his judgment and taste so pleased him that
I was able to close a bargain with him for 25,000 tons of iron at $40
the ton--$1,000,000--pledging for the debt bonds of the Atlantic and
Great Western Railway, at two to one. This was the first great purchase
made after the panic of '57.
My second purchase was made from the Ebwvale Company, of Wales. Through
Manager Robinson I negotiated for 30,000 tons of iron at $40 the
ton--$1,200,000--pledging bonds of the road at two to one, as with
Bailey.
I have already spoken of Salamanca, the Spanish Rothschild, and how I
had tried to obtain his notes for $1,000,000. I finally succeeded in
getting this loan, pledging $2,000,000 bonds of the road as security. At
this time, no Spanish securities had been negotiated in Lombard Street
for years. It was highly necessary for me that these notes of Salamanca
should be negotiated. I went to Mathew Marshall, Jr., of the Bank of
London. He was the son of the old Mathew Marshall who had signed the
notes of the Bank of England for fifty years. I asked him what $50,000
of the notes of Salamanca would be accepted at by the bank. He replied
that they would not be accepted at all. "No Spanish paper can be used in
London," he said.
I then had recourse to a scheme that I had previously worked out with
some degree of elaboration. I asked Marshall if he would not oblige me
by telling me, as a friend, what sixty-day bills of the kind I held
would be worth if they could be used. He said they should be handled at
six per centum. I telegraphed immediately to McHenry, in Liverpool, as
follows: "Marshall will not touch this paper under six per cent. Will
Moseley" (the big financier there) "do it for five?" McHenry answered
that Moseley would not handle it for less than Marshall's rate, but
would take $50,000 at six per centum.
Upon the strength of this, four hundred miles of railway were built,
through three great States, opening up a vast territory, and bringing in
fortunes to a large number of men. My arrangement with McHenry was that
I was to receive L100,000 as commission. No papers were signed, but I
asked McHenry to give me a paper settling $100,000 on my wife, Willie
Davis Train, which was done. After the road was built, Sir Morton Peto
came over from England with some London bankers, on McHenry's
invitation. McHenry believed in playing the part of a prince when it
came to giving an entertainment, and he invited the visitors to a
banquet at Delmonico's, then at Fourteenth Street and Fifth Avenue. It
cost him $15,000.
As I had not yet secured my commission, I thought this was a good time
to collect it, and instructed my lawyer, Clark Bell, now of No. 39
Broadway, to present and press my claim. McHenry was so afraid he would
be arrested while these moneyed men were with him that he settled at
once, giving me his notes at four months for the balance due. Gold was
very high at this time, being $1.90, and as the notes were on London, I
found they could be negotiated through McHenry's agents, McAudrey &
Wann. It happened that these agents had lost some $7,000 on information
that I had given to them about the result of the battle of Gettysburg;
so I agreed to reimburse them for the loss, if they would cash the notes
at once, which they did.
This was in '66, and a singular thing happened. When the notes fell due
in London on the 6th May, that comparatively small amount of gold
precipitated something of a panic in the unsteady market of the day.
Everything went with a crash. Moseley, the banker of Liverpool, failed
for a large sum; Lemuel Goddard, of London, followed with a loss of as
much more; Lunnon & Company failed for a greater amount; McHenry for
some millions; Sir Morton Peto for other millions; and Overend, Gurney &
Company for another large amount. This showed to me the real
shallowness and insubstantiality of the great world of finance. It is
built upon straw and paper. The secret of its great masters and
"Napoleons" is nothing but what is known among other gamblers as
"bluff."