HISTORY OF THE GREAT AMERICAN FORTUNES

CHAPTER IV

THE ONRUSH OF THE VANDERBILT FORTUNE



With the outbreak of the Civil War, and the scouring of the seas by privateers, American ship owners found themselves with an assortment of superfluous vessels on their hands.  Forced to withdraw from marine commerce, they looked about for two openings.  One was how to dispose of their vessels, the other the seeking of a new and safe method of making millions.

Most of their vessels were of such scandalous construction that foreign capitalists would not buy them at any price.  Hastily built in the brief period of ninety days, wholly with a view to immediate profit and with but a perfunctory regard for efficiency, many of these steamers were in a dangerous condition.  That they survived voyages was perhaps due more to luck than anything else ;  year after year, vessel after vessel similarly built and owned had gone down to the bottom of the ocean.  Collins had lost many of his ships ;  so had other steamship companies.  The chronicles of sea travel were a long, grewsome succession of tragedies ;  every little while accounts would come in of ships sunk or mysteriously missing.  Thousands of immigrants, inhumanly crowded in the enclosures of the steerage, were swept to death without even a fighting chance for life.  Cabin passengers fared better ;  they were given the opportunity of taking to the life-boats in cases where there was sufficient warning, time and room.  At best, sea travel is a hazard ;  the finest of ships are liable to meet with disaster.  But over much of this sacrifice of life hung grim, ugly charges of mismanagement and corruption, of insufficient crews and incompetent officers ;  of defective machinery and rotting timber ;  of lack of proper inspection and safeguards.


THE ANSWER FOUND.


The steamboat and steamship owners were not long lost in perplexity.  Since they could no longer use their ships or make profit on ocean routes why not palm off their vessels upon the Government ?  A highly favorable time it was ;  the Government, under the imperative necessity of at once raising and transporting a huge army, needed vessels badly.  As for the other question momentarily agitating the capitalists as to what new line of activity they could substitute for their own extinguished business, Vanderbilt soon showed how railroads could be made to yield a far greater fortune than com merce.

The titanic conflict opening between the North and the South found the Federal Government wholly unprepared.  True, in granting the mail subsidies which established the ocean steamship companies, and which actually furnished the capital for many of them, Congress had inserted some fine provisions that these subsidized ships should be so built as to be “ war steamers of the first class,” available in time of war.  But these provisions were mere vapor.  Just as the Harris and the Sloo lines had obtained annual mail subsidy payments of $900,000 and had caused Government officials to accept their inferior vessels, so the Collins line had done the same.  The report of a board of naval experts submitted to the Committee of Ways and Means of the House of Representatives had showed that the Collins steamers had not been built according to contract ;  that they would crumble to pieces under the fire of their own batteries, and that a single hostile gun would blow them to splinters.  Yet they had been accepted by the Navy Department.

In times of peace the commercial interests had practiced the grossest frauds in corruptly imposing upon the Government every form of shoddy supplies.  These were the same interests so vociferously proclaiming their intense patriotism.  The Civil War put their pretensions of patriotism to the test.  If ever a war took place in which Government and people had to strain every nerve and resource to carry on a great conflict it was the Civil War.  The result of that war was only to exchange chattel slavery for the more extensive system of economic slavery.  But the people of that time did not see this clearly.  The Northern soldiers thought they were fighting for the noblest of all causes, and the mass of the people behind them were ready to make every sacrifice to win a momentous struggle, the direct issue of which was the overthrow or retention of black slavery.

How did the capitalist class act toward the Government, or rather, let us say, toward the army and the navy so heroically pouring out their blood in battles, and hazarding life in camps, hospitals, stockades and military prisons ?


INDISCRIMINATE PLUNDERING DURING THE CIVIL WAR.


The capitalists abundantly proved their devout patriotism by making tremendous fortunes from the necessities of that great crisis.  They unloaded upon the Government at ten times the cost of manufacture quantities of munitions of war — munitions so frequently worthless that they often had to be thrown away after their purchase.1  They supplied shoddy uniforms and blankets and wretched shoes ;  food of so deleterious a quality that it was a fertile cause of epidemics of fevers and of numberless deaths ;  they impressed, by force of corruption, worn-out, disintegrating hulks into service as army and naval transports.  Not a single possibility of profit was there in which the most glaring frauds were not committed.  By a series of disingenuous measures the banks plundered the Treasury and people and caused their banknotes to be exempt from taxation.  The merchants defrauded the Government out of millions of dollars by bribing Custom House officers to connive at undervaluations of imports.2  The Custom House frauds were so notorious that, goaded on by public opinion, the House of Representatives was forced to appoint an investigating committee.  The chairman of this committee, Representative C.H. Van Wyck, of New York, after summarizing the testimony in a speech in the House on February 23, 1863, passionately exclaimed :  “The starving, penniless man who steals a loaf of bread to save life you incarcerate in a dungeon ;  but the army of magnificent highwaymen who steal by tens of thousands from the people, go unwhipped of justice and are suffered to enjoy the fruits of their crimes.  It has been so with former administrations :  unfortunately it is so with this.”3

The Federal armies not only had to fight an open foe in a desperately contested war, but they were at the same time the helpless targets for the profit-mongers of their own section who insidiously slew great numbers of them — not, it is true, out of deliberate lust for murder, but because the craze for profits crushed every instinct of honor and humanity, and rendered them callous to the appalling consequences.  The battlefields were not more deadly than the supplies furnished by capitalist contractors.4  These capitalists passed, and were hailed, as eminent merchants, manufacturers and bankers ;  they were mighty in the marts and in politics ;  and their praise as “ enterprising ” and “ self-made ” and “ patriotic ” men was lavishly diffused.

It was the period of periods when there was a kind of adoration of the capitalist taught in press, college and pulpit.  Nothing is so effective, as was remarked of old, to divert attention from scoundrelism as to make a brilliant show of patriotism.  In the very act of looting Government and people and devastating the army and navy, the capitalists did the most ghastly business under the mask of the purest patriotism.  Incredible as it may seem, this pretension was invoked and has been successfully maintained to this very day.  You can scarcely pick up a volume on the Civil War, or a biography of the statesmen or rich men of the era, without wading in fulsome accounts of the untiring patriotism of the capitalists.


PATRIOTISM AT A SAFE DISTANCE.


But, while lustily indulging in patriotic palaver, the propertied classes took excellent care that their own bodies should not be imperilled.  Inspired by enthusiasm or principle, a great array of the working class, including the farming and the professional elements, volunteered for military service.  It was not long before they experienced the disappointment and demoralization of camp life.  The letters written by many of these soldiers show that they did not falter at active campaigning.  The prospect, however, of remaining in camp with insufficient rations, and (to use a modern expressive word) graft on every hand, completely disheartened and disgusted many of them.  Many having influence with members of Congress, contrived to get discharges ;  others lacking this influence deserted.  To fill the constantly diminishing ranks caused by deaths, resignations and desertions, it became necessary to pass a conscription act.

With few exceptions, the propertied classes of the North loved comfort and power too well to look tranquilly upon any move to force them to enlist.  Once more, the Government revealed that it was but a register of the interests of the ruling classes.  The Draft Act was so amended that it allowed men of property to escape being conscripted into the army by permitting them to buy substitutes.  The poor man who could not raise the necessary amount had to submit to the consequences of the draft.  With a few of the many dollars wrung, filched or plundered in some way or other, the capitalists could purchase immunity from military service.

As one of the foremost capitalists of the time, Cornelius Vanderbilt has been constantly exhibited as a great and shining patriot.  Precisely in the same way as Croffut makes no mention of Vanderbilt’s share in the mail subsidy frauds, but, on the contrary, ascribes to Vanderbilt the most splendid patriotism in his mail carrying operations, so do Croffut and other writers unctuously dilate upon the old magnate’s patriotic services during the Civil War.  Such is the sort of romancing that has long gone unquestioned, although the genuine facts have been within reach.  These facts show that Vanderbilt was continuing during the Civil War the prodigious frauds he had long been carrying on.

When Lincoln’s administration decided in 1862 to send a large military and naval force to New Orleans under General Banks, one of the first considerations was to get in haste the required number of ships to be used as transports.  To whom did the Government turn in this exigency ?  To the very merchant class which, since the foundation of the United States, had continuously defrauded the public treasury.  The owners of the ships had been eagerly awaiting a chance to sell or lease them to the Government at exorbitant prices.  And to whom was the business of buying, equipping and supervising them intrusted ?  To none other than Cornelius Vanderbilt.

Every public man had opportunities for knowing that Vanderbilt had pocketed millions of dollars in his fraudulent hold-up arrangement with various mail subsidy lines.  He was known to be mercenary and unscrupulous.  Yet he was selected by Secretary of War Stanton to act as the agent for the Government.  At this time Vanderbilt was posing as a glorious patriot.  With much ostentation he had loaned to the Government for naval purposes one of his ships — a ship that he could not put to use himself and which, in fact, had been built with stolen public funds.  By this gift he had cheaply attained the reputation of being a fervent patriot.  Subsequently, it may be added, Congress turned a trick on him by assuming that he gave this ship to the Government, and, to his great astonishment, kept the ship and solemnly thanked him for the present.


VANDERBILT’S METHODS IN WAR.


The outfitting of the Banks expedition was of such a rank character that it provoked a grave public scandal.  If the matter had been simply one of swindling the United States Treasury out of millions of dollars, it might have been passed over by Congress.  On all sides gigantic frauds were being committed by the capitalists.  But in this particular case the protests of the thousands of soldiers on board the transports were too numerous and effective to be silenced or ignored.  These soldiers were not regulars without influence or connections ;  they were volunteers who everywhere had relatives and friends to demand an inquiry.  Their complaints of overcrowding and of insecure, broken-down ships poured in, and aroused the whole country.  A great stir resulted.  Congress appointed an investigating committee.

The testimony was extremely illuminative.  It showed that in buying the vessels Vanderbilt had employed one T.J. Southard to act as his handy man.  Vanderbilt, it was testified by numerous ship owners, refused to charter any vessels unless the business were transacted through Southard, who demanded a share of the purchase money before he would consent to do business.  Any ship owner who wanted to get rid of a superannuated steamer or sailing vessel found no difficulty if he acceded to Southard’s terms.

The vessels accepted by Vanderbilt, and contracted to be paid for at high prices, were in shockingly bad condition.  Vanderbilt was one of the few men in the secret of the destination of Banks’ expedition ;  he knew that the ships had to make an ocean trip.  Yet he bought for $10,000 the Niagara, an old boat that had been built nearly a score of years before for trade on Lake Ontario.  “ In perfectly smooth weather,” reported Senator Grimes, of Iowa, “ with a calm sea, the planks were ripped out of her, and exhibited to the gaze of the indignant soldiers on board, showing that her timbers were rotten.  The committee have in their committee room a large sample of one of the beams of this vessel to show that it has not the slightest capacity to hold a nail.”5  Senator Grimes continued :

If Senators will refer to page 18 of this report, they will see that for the steamer Eastern Queen he (Vanderbilt) paid $900 a day for the first thirty days, and $800 for the residue of the days ;  while she (the Eastern Queen) had been chartered by the Government, for the Burnside expedition at $500 a day, making a difference of three or four hundred dollars a day.  He paid for the Quinebang $250 a day, while she had been chartered to the Government at one time for $130 a day.  For the Shetucket he paid $25o a day, while she had formerly been in our employ for $150 a day.  He paid for the Charles Osgood $250 a day, while we had chartered her for $150.  He paid $250 a day for the James S. Green, while we had once had a charter of her for $200.  He paid $450 a day for the Salvor, while she had been chartered to the Government for $300.  He paid $250 a day for the Albany, while she had been chartered to the Government for $150.  He paid $250 a day for the Jersey Blue, while she had been chartered to the Government for $150.6

These were a few of the many vessels chartered by Vanderbilt through Southard for the Government.  For vessels bought outright, extravagant sums were paid.  Ambrose Snow, a well-known shipping merchant, testified that “ when we got to Commodore Vanderbilt we were referred to Mr. Southard ;  when we went to Mr. Southard, we were told that we should have to pay him a commission of five per cent.”7

Other shipping merchants corroborated this testimony.  The methods and extent of these great frauds were clear.  If the ship owners agreed to pay Southard five — and very often he exacted ten per cent.8 — Vanderbilt would agree to pay them enormous sums.  In giving his testimony Vanderbilt sought to show that he was actuated by the most patriotic motives.  But it was obvious that he was in collusion with Southard, and received the greater part of the plunder.


HORRORS DONE FOR PROFIT.


On some of the vessels chartered by Vanderbilt, vessels that under the immigration act would not have been allowed to carry more than three hundred passengers, not less than nine hundred and fifty soldiers were packed.  Most of the vessels were antiquated and inadequate ;  not a few were badly decayed.  With a little superficial patching up they were imposed upon the Government.  Despite his knowing that only vessels adapted for ocean service were needed, Vanderbilt chartered craft that had hitherto been almost entirely used in navigating inland waters.  Not a single precaution was taken by him or his associates to safeguard the lives of the soldiers.

It was a rule among commercial men that at least two men capable of navigating should be aboard, especially at sea.  Yet, with the lives of thousands of soldiers at stake, and with old and bad vessels in use at that, Vanderbilt, in more than one instance, as the testimony showed, neglected to hire more than one navigator, and failed to provide instruments and charts.  In stating these facts Senator Grimes said :  “ When the question was asked of Commodore Vanderbilt and of other gentlemen in connection with the expedition, why this was, and why they did not take navigators and instruments and charts on board, the answer was that the insurance companies and owners of the vessel took that risk, as though ”— Senator Grimes bitingly continued — “ the Government had no risk in the lives of its valiant men whom it has enlisted under its banner and set out in an expedition of this kind.”9  If the expedition had encountered a severe storm at Cape Hatteras, for instance, it is probable that most of the vessels would have been wrecked.  Luckily the voyage was fair.


FRAUDS REMAIN UNPUNISHED.


Did the Government make any move to arrest, indict and imprison Vanderbilt and his tools ?  None.  The farcical ending of these revelations was the introduction in the United States Senate of a mere resolution censuring them as “ guilty of negligence.”

Vanderbilt immediately got busy pulling wires ;  and when the resolution came up for vote, a number of Senators, led by Senator Hale, sprang up to withdraw Vanderbilt’s name.  Senator Grimes thereupon caustically denounced Vanderbilt.  “ The whole transaction,” said he, “ shows a chapter of fraud from beginning to end.”  He went on :  “ Men making the most open professions of loyalty and of patriotism and of perfect disinterestedness, coming before the committee and swearing that they acted from such motives solely, were compelled to admit — at least one or two were — that in some instances they received as high as six and a quarter per cent. and I believe that since then the committee are satisfied in their own mind that the per cent. was greater than was in testimony before them.”  Senator Grimes added that he did not believe that Vanderbilt’s name should be stricken from the resolution.

In vain, however, did Senator Grimes plead.  Vanderbilt’s name was expunged, and Southard was made the chief scapegoat.  Although Vanderbilt had been tenderly dealt with in the investigation, his criminality was conclusively established.  The affair deeply shocked the nation.  After all, it was only another of many tragic events demonstrating both the utter inefficiency of capitalist management, and the consistent capitalist program of subordinating every consideration of human life to the mania for profits.  Vanderbilt was only a type of his class ;  although he was found out he deserved condemnation no more than thousands of other capitalists, great and small, whose methods at bottom did not vary from his.10  Yet such was the network of shams and falsities with which the supreme class of the time enmeshed society, that press, pulpit, university and the so-called statesmen insisted that the wealth of the rich man had its foundation in ability, and that this ability was indispensable in providing for the material wants of mankind.


Whatever obscurity may cloud many of Vanderbilt’s methods in the steamship business, his methods in possessing himself of railroads are easily ascertained from official archives.

Late in 1862, at about the time when he had added to the millions that he had virtually stolen in the mail subsidy frauds, the huge profits from his manipulation of the Banks expedition, he set about buying the stock of the New York and Harlem Railroad.


THE STORY OF A FRANCHISE.


This railroad, the first to enter New York City, had received from the New York Common Council in 1832 a franchise for the exclusive use of Fourth avenue, north of Twenty-third street — a franchise which, it was openly charged, was obtained by distributing bribes in the form of stock among the aldermen.11

The franchise was not construed by the city to be perpetual ;  certain reservations were embodied giving the city powers of revocation.  But as we shall see, Vanderbilt not only corrupted the Legislature in 1872 to pass an act saddling one-half of the expense of depressing the tracks upon the city, but caused the act to be so adroitly worded as to make the franchise perpetual.  Along with the franchise to use Fourth avenue, the railroad company secured in 1832 a franchise, free of taxation, to run street cars for the convenience of its passengers from the railroad station (then in the outskirts of New York City) south to Prince street.  Subsequently this franchise was extended to Walker street, and in 1851 to Park Row.  These were the initial stages of the Fourth Avenue surface line, which has been extended, and has grown into a vested value of tens of millions of dollars.  In 1858 the New York and Harlem Railroad Company was forced by action of the Common Council, arising from the protests of the rich residents of Murray Hill, to discontinue steam service below Forty-second street.  It, therefore, now had a street car line running from that thoroughfare to the Astor House.

This explanation of antecedent circumstances allows a clearer comprehension of what took place after Vanderbilt had begun buying the stock of the New York and Harlem Railroad.  The stock was then selling at $9 a share.  This railroad, as was the case with all other railroads, without exception, was run by the owners with only the most languid regard for the public interests and safety.  Just as the corporation in the theory of the law was supposed to be a body to whom Government delegated powers to do certain things in the interests of the people, so was the railroad considered theoretically a public highway operated for the convenience of the people.  It was upon this ostensible ground that railroad corporations secured charters, franchises, property and such privileges as the right of condemnation of necessary land.  The State of New York alone had contributed $8,000,000 in public funds, and various counties, towns and municipalities in New York State nearly $31,000,000 by investment in stocks and bonds.12  The theory was indeed attractive, but it remained nothing more than a fiction.

No sooner did the railroad owners get what they wanted, than they proceeded to exploit the very community from which their possessions were obtained, and which they were supposed to serve.  The various railroads were juggled with by succeeding groups of manipulators.  Management was neglected, and no attention paid to proper equipment.  Often the physical layout of the railroads — the road-beds, rails and cars — were deliberately allowed to deteriorate in order that the manipulators might be able to lower the value and efficiency of the road, and thus depress the value of the stock.  Thus, for instance, Vanderbilt aiming to get control of a railroad at a low price, might very well have confederates among some of the directors or officials of that railroad who would resist or slyly thwart every attempt at improvement, and so scheme that the profits would constantly go down.  As the profits decreased, so did the price of the stock in the stock market.  The changing combinations of railroad capitalists were too absorbed in the process of gambling in the stock market to have any direct concern for management.  It was nothing to them that this neglect caused frequent and heartrending disasters ;  they were not held criminally responsible for the loss of life.  In fact, railroad wrecks often served their purpose in beating down the price of stocks.  In credible as this statement may seem, it is abundantly proved by the facts.


VANDERBILT GETS A RAILROAD.


After Vanderbilt, by divers machinations of too intricate character to be described here, had succeeded in knocking down the price of New York and Harlem Railroad shares and had bought a controlling part, the price began bounding up.  In the middle of April, 1863, it stood at $50 a share.  A very decided increase it was, from $9 to $50 ;  evidently enough, to occasion this rise, he had put through some transaction which had added immensely to the profits of the road.  What was it ?

Sinister rumors preceded what the evening of April 21, 1863, disclosed.  He had bribed the New York City Common Council to give to the New York and Harlem Railroad a perpetual franchise for a street railway on Broadway from the Battery to Union Square.  He had done what Solomon Kipp and others had done, in 1852, when they had spent $50,000 in bribing the aldermen to give them a franchise for surface lines on Sixth avenue and Eighth avenue ;  13 what Elijah F. Purdy and others had done in the same year in bribing aldermen with a fund of $28,000 to give them the franchise for a surface line on Third avenue ;  14 what George Law and other capitalists had done, in 1852, in bribing the aldermen to give them the franchises for street car lines on Second avenue and Ninth avenue.  Only three years before — in 1860 — Vanderbilt had seen Jacob Sharp and others bribe the New York Legislature (which in that same year had passed an act depriving the New York Common Council of the power of franchise granting) to give them franchises for street car lines on Seventh avenue, on Tenth avenue, on Forty-second street, on Avenue D and a franchise for the “ Belt ” line.  It was generally believed that the passage of these five bills cost the projectors $250,000 in money and stock distributed among the purchasable members of the Legislature.15

Of all the New York City street railway franchises, either appropriated or unappropriated, the Broadway line was considered the most profitable.  So valuable were its present and potential prospects estimated that in 1852 Thomas E. Davies and his associates had offered, in return for the franchise, to carry passengers for a three-cent fare and to pay the city a million-dollar bonus.  Other eager capitalists had hastened to offer the city a continuous payment of $100,000 a year.  Similar futile attempts had been made year after year to get the franchise.  The rich residents of Broadway opposed a street car line, believing it would subject them to noise and discomfort ;  likewise the stage owners, intent upon keeping up their monopoly, fought against it.  In 1863 the bare rights of the Broadway franchise were considered to be worth fully $10,000,000.  Vanderbilt and George Law were now frantically competing for this franchise.  While Vanderbilt was corrupting the Common Council, Law was corrupting the legislature.16  Such competition on the part of capitalists in corrupting public bodies was very frequent.


THE ALDERMEN OUTWITTED BY VANDERBILT.


But the aldermen were by no means unschooled in the current sharp practices of commercialism.  A strong cabal of them hatched up a scheme by which they would take Vanderbilt’s bribe money, and then ambush him for still greater spoils.  They knew that even if they gave him the franchise, its validity would not stand the test of the courts.  The Legislature claimed the exclusive power of granting franchises ;  astute lawyers assured them that this claim would be upheld.  Their plan was to grant a franchise for the Broadway line to the New York and Harlem Railroad.  This would at once send up the price of the stock.  The Legislature, it was certain, would give a franchise for the same surface line to Law.  When the courts decided against the Common Council that body, in a spirit of showy deference, would promptly pass an ordinance repealing the franchise.  In the meantime, the aldermen and their political and Wall Street confederates would contract to “sell short” large quantities of New York and Harlem stock.

The method was simple.  When that railroad stock was selling at $100 a share upon the strength of getting the Broadway franchise, the aldermen would find many persons willing to contract for its delivery in a month at a price, say, of $90 a share.  By either the repealing of the franchise ordinance or affected by adverse court decisions, the stock inevitably would sink to a much lower price.  At this low price the aldermen and their confederates would buy the stock and then deliver it, compelling the contracting parties to pay the agreed price of $90 a share.  The difference between the stipulated price of delivery and the value to which the stock had fallen — $30, $40 or $50 a share — would represent the winnings.

Part of this plan worked out admirably.  The Legislature passed an act giving Law the franchise.  Vanderbilt countered by getting Tweed, the all-powerful political ruler of New York City and New York State, to order his tool, Governor Seymour, to veto the measure.  As was anticipated by the aldermen, the courts pronounced that the Common Council had no power to grant franchises.  Vanderbilt’s franchise was, therefore, annulled.  So far, there was no hitch in the plot to pluck Vanderbilt.

But an unlooked for obstacle was encountered.  Vanderbilt had somehow got wind of the affair, and with instant energy bought up secretly all of the New York and Harlem Railroad stock he could.  He had masses of ready money to do it with ;  the millions from the mail subsidy frauds and from his other lootings of the public treasury proved an unfailing source of supply.  Presently, he had enough of the stock to corner his antagonists badly.  He then put his own price upon it, eventually pushing it up to $170 a share.  To get the stock that they contracted to deliver, the combination of politicians and Wall Street bankers and brokers had to buy it from him at his own price ;  there was no outstanding stock elsewhere.  The old man was pitiless ;  he mulcted them $179 a share.  In his version, Croffut says of Vanderbilt :  “ He and his partners in the bull movement took a million dollars from the Common Council that week and other millions from others.”17

The New York and Harlem Railroad was now his, as absolutely almost as the very clothes he wore.  Little it mattered that he did not hold all of the stock ;  he owned a preponderance enough to rule the railroad as despotically as he pleased.  Not a foot it had he surveyed or constructed ;  this task had been done by the mental and manual labor of thousands of wage workers not one of whom now owned the vestige of an interest in it.  For their toil these wage workers had nothing to show but poverty.  But Vanderbilt had swept in a railroad system by merely using in cunning and unscrupulous ways a few of the millions he had defrauded from the national treasury.


HE ANNEXES A SECOND RAILROAD.


Having found it so easy to get one railroad, he promptly went ahead to annex other railroads.  By 1864 he loomed up as the owner of a controlling mass of stock in the New York and Hudson River Railroad.  This line paralleled the Hudson River, and had a terminal in the downtown section of New York City.  In a way it was a competitor of the New York and Harlem Railroad.

The old magnate now conceived a brilliant idea.  Why not consolidate the two roads ?  True, to bring about this consolidation an authorizing act of the New York Legislature was necessary.  But there was little doubt of the Legislature balking.  Vanderbilt well knew the means to insure its passage.  In those years, when the people were taught to look upon competition as indispensable, there was deep popular opposition to the consolidating of competing interests.  This, it was feared, would inflict monopoly.

The cost of buying legislators to pass an act so provocative of popular indignation would be considerable, but, at the same time, it would not be more than a trifle compared with the immense profits he would gain.  The consolidation would allow him to increase, or, as the phrase went, water, the stock of the combined roads.  Although substantially owner of the two railroads, he was legally two separate entities—or, rather, the corporations were.  As owner of one line he could bargain with himself as owner of the other, and could determine what the exchange purchase price should be.  So, by a juggle, he could issue enormous quantities of bonds and stocks to himself.  These many millions of bonds and stocks would not cost him personally a cent.  The sole expense — the bribe funds and the cost of engraving — he would charge against his corporations.  Immediately, these stocks and bonds would be vested with a high value, inasmuch as they would represent mortgages upon the productivity of tens of millions of people of that generation, and of still greater numbers of future generations.  By putting up traffic rates and lowering wages, dividends could be paid upon the entire outpouring of stock, thus beyond a doubt insuring its permanent value.18


CUNNING AGAINST CUNNING.


A majority of the New York Legislature was bought.  It looked as if the consolidation act would go through without difficulty.  Surreptitiously, however, certain leading men in the Legislature plotted with the Wall Street opponents of Vanderbilt to repeat the trick attempted by the New York aldermen in 1863.  The bill would be introduced and reported favorably ;  every open indication would be manifested of keeping faith with Vanderbilt.  Upon the certainty of its passage the market value of the stock would rise.  With their prearranged plan of defeating the bill at the last moment upon some plausible pretext, the clique in the meantime would be busy selling short.

Information of this treachery came to Vanderbilt in time.  He retaliated as he had upon the New York aldermen ;  put the price of New York and Harlem stock up to $285 a share and held it there until after he was settled with.  With his chief partner, John Tobin, he was credited with pocketing many millions of dollars.  To make their corner certain, the Vanderbilt pool had bought 27,000 more shares than the entire existing stock of the road.  “ We busted the whole Legislature,” was Vanderbilt’s jubilant comment,” and scores of the honorable members had to go home without paying their board bills.”

The numerous millions taken in by Vanderbilt in these transactions came from a host of other men who would have plundered him as quickly as he plundered them.  They came from members of the Legislature who had grown rich on bribes for granting a continuous succession of special privileges, or to put it in a more comprehensible form, licenses to individuals and corporations to prey in a thousand and one forms upon the people.  They came from bankers, railroad, land and factory owners, all of whom had assiduously bribed Congress, legislatures, common councils and administrative officials to give them special laws and rights by which they could all the more easily and securely grasp the produce of the many, and hold it intact without even a semblance of taxation.

The very nature of that system of gambling called stock-market or cotton or produce exchange speculation showed at once the sharply-defined disparities and discriwrninations in law.

Far from being under the inhibition of law, their methods were duly legalized.  The explanation was not hard to find.  These same propertied classes had made the code of laws as it stood ;  and if any doubter denies that laws at all times have exactly corresponded with the interests and aims of the ruling class, all that is necessary is to compare the laws of the different periods with the profitable methods of that class, and he will find that these methods, however despicable, vile and cruel, were not only indulgently omitted from the recognized category of crimes but were elevated by prevalent teaching to be commercial virtues and ability of a high order.

With two railroads in his possession Vanderbilt cast about to drag in a third.  This was the New York Central Railroad, one of the richest in the country.

Vanderbilt’s eulogists, in depicting him as a masterful constructionist, assert that it was he who first saw the waste and futility of competition, and that he organized the New York Central from the disjointed, disconnected lines of a number of previously separate little railroads.  This is a gross error.

The consolidation was formed in 1853 at the time when Vanderbilt was plundering from the United States treasury the millions with which he began to buy in railroads nine years later.  The New York Central arose from the union of ten little railroads, some running in the territory between Albany and Buffalo, and others merely projected, but which had nevertheless been capitalized as though they were actually in operation.

The cost of construction of these eleven roads was about $10,000,000, but they were capitalized at $23,000,000.  Under the consolidating act of 1853 the capitalization was run up to about $35,000,000.  This fictitious capital was partly based on roads which were never built, and existing on paper only.  Then followed a series of legislative acts giving the company a further list of valuable franchises and allowing it to charge extortionate rates, inflate its stock, and virtually escape taxation.  How these laws were procured may be judged from the testimony of the treasurer of the New York Central railroad before a committee of the New York State Constitutional Convention.  This official stated that from about 1853 to 1867 the New York Central had spent hundreds of thousands of dollars for “ legislative purposes,”— in other words, buying laws at Albany.


ACQUISITION BY WRECKING.


Vanderbilt considered it unnecessary to buy New York Central stock to get control.  He had a much better and subtler plan.  The Hudson River Railroad was at that time the only through road running from New York to Albany.  To get its passengers and freight to New York City the New York Central had to make a transfer at Albany.  Vanderbilt now deliberately began to wreck the New York Central.  He sent out an order in 1865 to all Hudson River Railroad employees to refuse to connect with the New York Central and to take no more freight.  This move could not do otherwise than seriously cripple the facilities and lower the profits of the New York Central.  Consequently, the value of its stock was bound to go precipitately down.

The people of the United States were treated to an ironic sight.  Here was a man who only eight years before had been shown up in Congress as an arch plunderer ;  a man who had bought his railroads largely with his looted millions ;  a man who, if the laws had been drafted and executed justly, would have been condoning his frauds in prison ;  this man was contemptuously and openly defying the very people whose interests the railroads were supposed to serve.  In this conflict between warring sets of capitalists, as in all similar conflicts, public convenience was made sport of.  Hudson River trains going north no longer crossed the Hudson River to enter Albany ;  they stopped half a mile east of the bridge leading into that city.  This made it impossible to transfer freight.  There in the country the trains were arbitrarily stopped for the night ;  locomotive fires were banked and the passengers were left to shift into Albany the best they could, whether they walked or contrived to hire vehicles.  All were turned out of the train — men, women and children — no exceptions were made for sex or infirmity.

The Legislature went through a pretense of investigating what public opinion regarded as a particularly atrocious outrage.  Vanderbilt covered this committee with undisguised scorn ;  it provoked his wrath to be quizzed by a committee of a body many of whose members had accepted his bribes.  When he was asked why he had so high-handedly refused to run his trains across the river, the old fox smiled grimly, and to their utter surprise, showed them an old law (which had hitherto remained a dead letter) prohibiting the New York Hudson Railroad from running trains over the Hudson River.  This law had been enacted in response to the demand of the New York Central, which wanted no competitor west of Albany.  When the committee recovered its breath, its chairman timidly inquired of Vanderbilt why he did not run trains to the river.

“ I was not there, gentlemen,” said Vanderbilt.

“ But what did you do when you heard of it ? ”

“ I did not do anything.”

“ Why not ?  Where were you ?”

“ I was at home, gentlemen,” replied Vanderbilt with serene impudence, “ playing a rubber of whist, and I never allow anything to interfere with me when I am playing that game.  It requires, as you know, undivided attention.”

As Vanderbilt had foreseen, the stock of the New York Central went down abruptly ;  at its lowest point he bought in large quantities.  His opponents, Edward Cunard, John Jacob Astor, John Steward and other owners of the New York Central thus saw the directorship pass from their hands.  The dispossession they had worked to the Pruyns, the Martins, the Pages and others was now being visited upon them.  They found in this old man of seventy-three too cunning and crafty a man to defeat.  Rather than lose all, they preferred to choose him as their captain ;  his was the sort of ability which they could not overcome and to which they must attach themselves.  On November 12, 1867, they surrendered wholly and unreservedly.  Vanderbilt now installed his own subservient board of directors, and proceeded to put through a fresh program of plunder beside which all his previous schemes were comparatively insignificant.



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1 In a speech on February 28, 1863, on the urgency of establishing additional government armories and founderies, Representative J.W. Wallace pointed out in the House of Representatives :  “The arms, ordnance and munitions of war bought by the Government from private contractors and foreign armories since the commencement of the rebellion have doubtless cost, over and above the positive expense of their manufacture, ten times as much as would establish and put into operation the armory and founderies recommended in the resolution of the committee.  I understand that the Government, from the necessity of procuring a sufficient quantity of arms, has been paying, on the average, about twenty-two dollars per musket, when they could have been and could be manufactured in our national workshops for one-half that money.”—Appendix to The Congressional Globe, Thirty-seventh Congress, Third Session, 1862-63. Part ii: 136.  Fuller details are given in subsequent chapters.

2 In his report for 1862 Salmon P. Chase, Secretary of the Treasury, wrote: “That invoices representing fraudulent valuation of merchandise are daily presented at the Custom Houses is well known. . . .”

3 Appendix to The Congressional Globe, Thirty-seventh Congress, Third Session, 1862-63. Part ii: 118.

4 This is one of many examples :  Philip S. Justice, a gun manufacturer of Philadelphia, obtained a contract in 1861, to supply 4,000 rifles.  He charged $20 apiece.  The rifles were found to be so absolutely dangerous to the soldiers using them, that the Government declined to pay his demanded price for a part of them.  Justice then brought suit.  (See Court of Claims Reports, viii: 37-54.)  In the court records, these statements are included :
      William H. Harris, Second Lieutenant of Ordnance, under orders visited Camp Hamilton, Va., and inspected the arms of the Fifty-Eighth Regiment, Pennsylvania Volunteers, stationed there.  He reported :  “ This regiment is armed with rifle muskets, marked on the barrel, ` P.S. Justice, Philadelphia,’ and vary in calibre from .65 to .70.  I find many of them unserviceable and irreparable, from the fact that the principal parts are defective.  Many of them are made up of parts of muskets to which the stamp of condemnation has been affixed by an inspecting officer.  None of the stocks have ever been approved by an officer, nor do they bear the initials of any inspector.  They are made up of soft, unseasoned wood, and are defective in construction. . . . The sights are merely soldered on to the barrel, and come off with the gentlest handling.  Imitative screwheads are cut on their bases.  The bayonets are made up of soft iron, and, of course, when once bent remain ‘set,’" etc., etc. (p. 43).
      Col. (later General) Thomas D. Doubleday reported of his inspection :  “The arms which were manufactured at Philadelphia, Penn., are of the most worthless kind, and have every appearance of having been manufactured from old condemned muskets.  Many of them burst ;  hammers break off ;  sights fall off when discharged ;  the barrels are very light, not one-twentieth of an inch thick, and the stocks are made of green wood which have shrunk so as to leave the bands and trimmings loose.  The bayonets are of such frail texture that they bend like lead, and many of them break off when going through the bayonet exercise.  You could hardly conceive of such a worthless lot of arms, totally unfit for service, and dangerous to those using them” (p. 44).
      Assistant Inspector-General of Ordnance John Buford reported :  “ Many had burst ;  many cones were blown out ;  many locks were defective ;  many barrels were rough inside from imperfect boring ;  and many had different diameters of bore in the same barrel. ... At target practice so many burst that the men became afraid to fire them” (p. 45).
      The Court of Claims, on strict technical grounds, decided in favor of Justice, but the Supreme Court of the United States reversed that decision and dismissed the case.  The Supreme Court found true the Government’s contention that “the arms were unserviceable and unsafe for troops to handle.”
      Many other such specific examples are given in subsequent chapters of this work.

5 The Congressional Globe, Thirty-seventh Congress, Third Session, 1862-63, Part I:610.

6 The Congressional Globe, etc., 1862-63. Part i:610.

7 Ibid. See also Senate Report No. 84, 1863, embracing the full testimony.

8 Senator Hale asserted that he had heard of the exacting of a brokerage equal to ten per cent. in Boston and elsewhere.

9 The Congressional Globe, Thirty-seventh  Congress, Third Session, 1862-63, Part i:586.

10 One of the grossest and most prevalent forms of fraud was that of selling doctored-up horses to the Union army.  Important cavalry movements were often delayed and jeoparded by this kind of fraud.  In passing upon the suit of one of these horse contractors against the Government (Daniel Wormser vs. United States) for payment for horses supplied, in 1864, for cavalry use, the Supreme Court of the United States confirmed the charge made by the Government horse inspectors that the plaintiff had been guilty of fraud, and dismissed the case. “The Government,” said justice Bradley in the court’s decision, “clearly had the right to proscribe regulations for the inspection of horses, and there was great need for strictness in this regard, for frauds were constantly perpetrated. . . . It is well known that horses may be prepared and fixed up to appear bright and smart for a few hours.”—Court of Claims Reports, vii: 257-262.

11 “ The History of Tammany Hall ”:117.

12 Report of the Special Committee on Railroads of the New York State Assembly, 1879, i:7.

13 See presentment of Grand Jury of February 26, 1853, and accompanying testimony, Documents of the (New York) Board of Aldermen, Doc. No. XXI, Part II, No. 55.

14 Ibid., 1333-1335.

15 See “The History of Public Franchises in New York City”: 120-125.

16 The business rivalry between Vanderbilt and Law was intensified by the deepest personal enmity on Law’s part.  As one of the chief owners of the United States Mail Steamship Company, Law was extremely bitter on the score of Vanderbilt’s having been able to blackmail him and Roberts so heavily and successfully.

17 “The Vanderbilts,” etc : 75.

18 Even Croffut, Vanderbilt’s foremost eulogist, cynically grows merry over Vanderbilt’s methods which he thus summarizes “ (1) Buy your railroad ;  (2) stop the stealing that went on under the other man ;  (3) improve the road in every practicable way within a reasonable expenditure ;  (4) consolidate it with any other road that can be run with it economically ;  (5) water its stock ;  (6) make it pay a large dividend.”