Great Fortunes from Railroads

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Yet such was the network of shams and falsities with which the
supreme class of the time enmeshed society, that press, pulpit,
university and the so-called statesmen insisted that the wealth of
the rich man had its foundation in ability, and that this ability was
indispensable in providing for the material wants of mankind.

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

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

THE STORY OF A FRANCHISE.

This railroad, the first to enter New York City, had received from
the New York Common Council in 1832 a franchise for the exclusive use
of Fourth avenue, north of Twenty-third street--a franchise which, it
was openly charged, was obtained by distributing bribes in the form
of stock among the aldermen. [Footnote: "The History of Tammany
Hall": 117.]

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

This explanation of antecedent circumstances allows a clearer
comprehension of what took place after Vanderbilt had begun buying
the stock of the New York and Harlem Railroad. The stock was then
selling at $9 a share. This railroad, as was the case with all other
railroads, without exception, was run by the owners with only the
most languid regard for the public interests and safety. Just as the
corporation in the theory of the law was supposed to be a body to
whom Government delegated powers to do certain things in the
interests of the people, so was the railroad considered theoretically
a public highway operated for the convenience of the people. It was
upon this ostensible ground that railroad corporations secured
charters, franchises, property and such privileges as the right of
condemnation of necessary land. The State of New York alone had
contributed $8,000,000 in public funds, and various counties, towns
and municipalities in New York State nearly $31,000,000 by investment
in stocks and bonds. [Footnote: Report of the Special Committe on
Railroads of the New York Assembly, 1879, i:7.] The theory was indeed
attractive, but it remained nothing more than a fiction.

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

VANDERBILT GETS A RAILROAD.

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

Sinister rumors preceded what the evening of April 21, 1863,
disclosed. He had bribed the New York City Common Council to give to
the New York and Harlem Railroad a perpetual franchise for a street
railway on Broadway from the Battery to Union Square. He had done
what Solomon Kipp and others had done, in 1852, when they had spent
$50,000 in bribing the aldermen to give them a franchise for surface
lines on Sixth avenue and Eighth avenue; [Footnote: See presentment
of Grand Jury of February 26, 1853, and accompanying testimony,
Documents of the (New York) Board of Aldermen, Doc. No. XXI, Part II,
No. 55.] what Elijah F. Purdy and others had done in the same year in
bribing aldermen with a fund of $28,000 to give them the franchise
for a surface line on Third avenue; [Footnote: Ibid., 1333-1335.]
what George Law and other capitalists had done, in 1852, in bribing
the aldermen to give them the franchises for street car lines on
Second avenue and Ninth avenue. Only three years before--in 1860--
Vanderbilt had seen Jacob Sharp and others bribe the New York
Legislature (which in that same year had passed an act depriving the
New York Common Council of the power of franchise granting) to give
them franchises for street car lines on Seventh avenue, on Tenth
avenue, on Forty-second street, on Avenue D and a franchise for the
"Belt" line. It was generally believed that the passage of these five
bills cost the projectors $250,000 in money and stock distributed
among the purchasable members of the Legislature. [Footnote: See "The
History of Public Franchises in New York City": 120-125.]

Of all the New York City street railway franchises, either
appropriated or unappropriated, the Broadway line was considered the
most profitable. So valuable were its present and potential prospects
estimated that in 1852 Thomas E. Davies and his associates had
offered, in return for the franchise, to carry passengers for a
three-cent fare and to pay the city a million-dollar bonus. Other
eager capitalists had hastened to offer the city a continuous payment
of $100,000 a year. Similar futile attempts had been made year after
year to get the franchise. The rich residents of Broadway opposed a
street car line, believing it would subject them to noise and
discomfort; likewise the stage owners, intent upon keeping up their
monopoly, fought against it. In 1863 the bare rights of the Broadway
franchise were considered to be worth fully $10,000,000. Vanderbilt
and George Law were now frantically competing for this franchise.
While Vanderbilt was corrupting the Common Council, Law was
corrupting the legislature. [Footnote: The business rivalry between
Vanderbilt and Law was intensified by the deepest personal enmity on
Law's part. As one of the chief owners of the United States Mail
Steamship Company, Law was extremely bitter on the score of
Vanderbilt's having been able to blackmail him and Roberts so heavily
and successfully.] Such competition on the part of capitalists in
corrupting public bodies was very frequent.

THE ALDERMEN OUTWITTED BY VANDERBILT.

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

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

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

But an unlooked for obstacle was encountered. Vanderbilt had somehow
got wind of the affair, and with instant energy bought up secretly
all of the New York and Harlem Railroad stock he could. He had masses
of ready money to do it with; the millions from the mail subsidy
frauds and from his other lootings of the public treasury proved an
unfailing source of supply. Presently, he had enough of the stock to
corner his antagonists badly. He then put his own price upon it,
eventually pushing it up to $170 a share. To get the stock that they
contracted to deliver, the combination of politicians and Wall Street
bankers and brokers had to buy it from him at his own price; there
was no outstanding stock elsewhere. The old man was pitiless; he
mulcted them $179 a share. In his version, Croffut says of
Vanderbilt: "He and his partners in the bull movement took a million
dollars from the Common Council that week and other millions from
others." [Footnote: "The Vanderbilts," etc: 75.]

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

HE ANNEXES A SECOND RAILROAD.

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

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

The cost of buying legislators to pass an act so provocative of
popular indignation would be considerable, but, at the same time, it
would not be more than a trifle compared with the immense profits he
would gain. The consolidation would allow him to increase, or, as the
phrase went, water, the stock of the combined roads. Although
substantially owner of the two railroads, he was legally two separate
entities--or, rather, the corporations were. As owner of one line he
could bargain with himself as owner of the other, and could determine
what the exchange purchase price should be. So, by a juggle, he could
issue enormous quantities of bonds and stocks to himself. These many
millions of bonds and stocks would not cost him personally a cent.
The sole expense--the bribe funds and the cost of engraving--he would
charge against his corporations. Immediately, these stocks and bonds
would be vested with a high value, inasmuch as they would represent
mortgages upon the productivity of tens of millions of people of that
generation, and of still greater numbers of future generations. By
putting up traffic rates and lowering wages, dividends would be paid
upon the entire outpouring of stock, thus beyond a doubt insuring its
permanent value. [Footnote: Even Croffut, Vanderbilt's foremost
eulogist, cynically grows merry over Vanderbilt's methods which he
thus summarizes: "(1) Buy your railroad; (2) stop the stealing that
went on under the other man; (3) improve the road in every
practicable way within a reasonable expenditure; (4) consolidate it
with any other road that can be run with it economically; (5) water
its stock; (6) make it pay a large dividend."]

CUNNING AGAINST CUNNING.

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

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

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

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

Common gambling, so-called, was a crime. The gambling of the
exchanges was legitimate and legalized, and the men who thus gambled
with the resources of the nation were esteemed as highly respectable
and responsible leaders of the community. For a penniless man to sell
anything he did not own, or which was not in existence, was held a
heinous crime and was severely punished by a long prison term. But
the members of the all-powerful propertied class could contract to
deliver stocks which they did not own or which were non-existent, or
they could gamble in produce often not yet out of the ground, and the
law saw no criminal act in their performances.

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

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

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

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

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

ACQUISITION BY WRECKING.

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

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

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

"I was not there, gentlemen," said Vanderbilt.

"But what did you do when you heard of it?"

"I did not do anything."

"Why not? Where were you?"

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

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

CHAPTER V

THE VANDERBILT FORTUNE INCREASES MANIFOLD

Vanderbilt's ambition was to become the richest man in America. With
three railroads in his possession he now aggressively set out to
grasp a fourth--the Erie Railroad. This was another of the railroads
built largely with public money. The State of New York had
contributed $3,000,000, and other valuable donations had been given.

At the very inception of the railroad corruption began [Footnote:
Report of the New York State and Erie Railroad Company, New York
State Assembly Document No. 50, 1842.] The tradesmen, landowners and
bankers who composed the company bribed the Legislature to relinquish
the State's claim, and then looted the railroad with such consummate
thoroughness that in order to avert its bankruptcy they were obliged
to borrow funds from Daniel Drew. This man was an imposing financial
personage in his day. Illiterate, unscrupulous, picturesque in his
very iniquities, he had once been a drover, and had gone into the
steamboat business with Vanderbilt. He had scraped in wealth partly
from that line of traffic, and in part from a succession of
buccaneering operations. His loan remaining unpaid, Drew indemnified
himself by taking over, in 1857, by foreclosure, the control of the
Erie Railroad.

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