Great Fortunes from Railroads

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Far from being the "constructive genius" that he is represented in
every extant biographical work and note, Vanderbilt was the foremost
mercantile pirate and commercial blackmailer of his day.

Harsh as these terms may seem, they are more than justified by the
facts. His eulogists, in line with those of other rich men, weave a
beautiful picture for the edification of posterity, of a broad,
noble-minded man whose honesty was his sterling virtue, and whose
splendid ability in opening up and extending the country's resources
was rewarded with a great fortune and the thanks of his generation.
This is utterly false. He who has the slightest knowledge of the low
practices and degraded morals of the trading class and of the
qualities which insured success, might at once suspect the
spuriousness of this extravagant presentation, even if the vital
facts were unavailable.

But there is no such difficulty. Obviously, for every one fraudulent
commercial or political transaction that comes to public notice,
hundreds and thousands of such transactions are kept in concealment.
Enough facts, however, remain in official records to show the
particular methods Vanderbilt used in getting together his millions.
Yet no one hitherto seems to have taken the trouble to disinter them;
even serious writers who cannot be accused of wealth worship or
deliberate misstatement have all, without exception, borrowed their
narratives of Vanderbilt's career from the fiction of his literary,
newspaper and oratorical incense burners. And so it is that
everywhere the conviction prevails that whatever fraudulent methods
Vanderbilt employed in his later career, he was essentially an
honest, straightforward man who was compelled by the promptings of
sheer self-preservation to fight back at unscrupulous competitors or
antagonists, and who innately was opposed to underhand work or fraud
in any form. Vanderbilt is in every case portrayed as an eminently
high-minded man who never stooped to dissimulation, deceit or
treachery, and whose first millions, at any rate, were made in the
legitimate ways of trade as they were then understood.

EXTORTION AND THEFT COMMON.

The truth is that the bulk of Vanderbilt's original millions were the
proceeds of extortion, blackmail and theft.

In the established code of business the words extortion and theft had
an unmistakable significance. Business men did not consider it at all
dishonorable to oppress their workers; to manufacture and sell goods
under false pretenses; to adulterate prepared foods and drugs; to
demand the very highest prices for products upon which the very life
of the people depended, and at a time when consumers needed them
most; to bribe public officials and to hold up the Government in
plundering schemes. These and many other practices were looked upon
as commonplaces of ordinary trade.

But even as burglars will have their fine points of honor among
themselves, so the business world set certain tacit limitations of
action beyond which none could go without being regarded as violating
the code. It was all very well as long as members of their own class
plundered some other class, or fought one another, no matter how
rapaciously, in accordance with understood procedure. But when any
business man ventured to overstep these limitations, as Vanderbilt
did, and levy a species of commercial blackmail to the extent of
millions of dollars, then he was sternly denounced as an arch thief.
If Vanderbilt had confined himself to the routine formulas of
business, he might have gone down in failure. Many of the bankrupts
were composed of business men who, while sharp themselves, were
outgeneraled by abler sharpers. Vanderbilt was a master hand in
despoiling the despoilers.

[Illustration: COMMODORE CORNELIUS VANDERBILT, The Founder of the
Vanderbilt Fortune.]

How did Vanderbilt manage to extort millions of dollars? The method
was one of great simplicity; many of its features were brought out in
the United States Senate in the debate of June 9, 1858, over the Mail
Steamship bill. The Government had begun, more than a decade back,
the policy of paying heavy subsidies to steamship companies for the
transportation of mail. This subsidy, however, was not the only
payment received by the steamship owners. In addition they were
allowed what were called "postages"--the full returns from the amount
of postage on the letters carried. Ocean postage at that time was
enormous and burdensome, and was especially onerous upon a class of
persons least able to bear it. About three-quarters of the letters
transported by ships were written by emigrants. They were taxed the
usual rate of twenty-four or twenty-nine cents for a single letter.
In 1851 the amount received for trans-Atlantic postages was not less
than a million dollars; three-fourths of this sum came directly from
the working class.

THE CORRUPTION OF OFFICIALS.

To get these subsidies, in conjunction with the "postages," the
steamship owners by one means or another corrupted postal officials
and members of Congress. "I have noticed," said Senator Toombs, in a
speech in the United States Senate on June 9, 1858, that there has
never been a head of a Department strong enough to resist steamship
contracts. I have noticed them here with your Whig party and your
Democratic party for the last thirteen years, and I have never seen
any head of a Department strong enough to resist these influences. ...
Thirteen years' experience has taught me that wherever you allow
the Postoffice or Navy Department to do anything which is for the
benefit of contractors you may consider the thing as done. I could
point to more than a dozen of these contracts. ... A million dollars
a year is a power that will be felt. For ten years it amounts to ten
million dollars, and I know it is felt. I know it perverts
legislation. I have seen its influence; I have seen the public
treasury plundered by it. ... [Footnote: The Congressional Globe,
First Session, Thirty-fifth Congress, 1857-58, iii: 2839.]

By means of this systematic corruption the steamship owners received
many millions of dollars of Government funds. This was all virtually
plunder; the returns from the "postages" far more than paid them for
the transportation of mails. And what became of these millions in
loot? Part went in profits to the owners, and another part was used
as private capital by them to build more and newer ships constantly.
Practically none of Vanderbilt's ships cost him a cent; the
Government funds paid for their building. In fact, a careful tracing
of the history of all of the subsidized steamship companies proves
that this plunder from the Government was very considerably more than
enough to build and equip their entire lines.

One of the subsidized steamship lines was that of E. K. Collins &
Co., a line running from New York to Liverpool. Collins debauched the
postal officials and Congress so effectively that in 1847 he obtained
an appropriation of $387,000 a year, and subsequently an additional
appropriation of $475,000 for five years. Together with the
"postages," these amounts made a total mail subsidy for that one line
alone during the latter years of the contract of about a million
dollars a year. The act of Congress did not, however, specify that
the contract was to run for ten years. The postal officials, by what
Senator Toombs termed "a fraudulent construction," declared that it
did run for ten years from 1850, and made payments accordingly. The
bill before Congress in the closing days of the session of 1858, was
the usual annual authorization of the payment of this appropriation,
as well as other mail-steamer appropriations.

VANDERBILT'S HUGE LOOT.

In the course of this debate some remarkable facts came out as to how
the Government was being steadily plundered, and why it was that the
postal system was already burdened with a deficit of $5,000,000.
While the appropriation bill was being solemnly discussed with
patriotic exclamations, lobbyists of the various steamship companies
busied themselves with influencing or purchasing votes within the
very halls of Congress.

Almost the entire Senate was occupied for days with advocating this
or that side as if they were paid attorneys pleading for the
interests of either Collins or Vanderbilt. Apparently a bitter
conflict was raging between these two millionaires. Vanderbilt's
subsidized European lines ran to Southampton, Havre and Bremen;
Collins' to Liverpool. There were indications that for years a secret
understanding had been in force between Collins and Vanderbilt by
which they divided the mail subsidy funds. Ostensibly, however, in
order to give no sign of collusion, they went through the public
appearance of warring upon each other. By this stratagem they were
able to ward off criticism of monopoly, and each get a larger
appropriation than if it were known that they were in league. But it
was characteristic of business methods that while in collusion,
Vanderbilt and Collins constantly sought to wreck the other.

One Senator after another arose with perfervid effusion of either
Collins or Vanderbilt. The Collins supporters gave out the most suave
arguments why the Collins line should be heavily subsidized, and why
Collins should be permitted to change his European port to
Southampton. Vanderbilt's retainers fought this move, which they
declared would wipe out of existence the enterprise of a great and
patriotic capitalist.

It was at this point that Senator Toombs, who represented neither
side, cut in with a series of charges which dismayed the whole lobby
for the time being. He denounced both Collins and Vanderbilt as
plunderers, and then, in so many words, specifically accused
Vanderbilt of having blackmailed millions of dollars. "I am trying,"
said Senator Toombs, to protect the Government against collusion,
not against conflict. I do not know but that these parties have colluded
now. I have not the least doubt that all these people understand one
another. I am struggling against collusion. If they have colluded,
why should Vanderbilt run to Southampton for the postage when
Collins can get three hundred and eighty-seven thousand dollars for
running to the same place? Why may not Collins, then, sell his ships,
sit down in New York, and say to Vanderbilt, 'I will give you two hundred
and thirty thousand dollars and pocket one hundred and fifty-seven
thousand dollars a year.' That is the plain, naked case. The Senator
from Vermont says the Postmaster General will protect us. It is my
duty, in the first place, to prevent collusion, and prevent the
country from being plundered; to protect it by law as well as I can.'

Regarding the California mails, Senator Toombs reminded the Senate of
the granting eleven years before of enormous mail subsidies to the
two steamship lines running to California--the Pacific Mail Steamship
Company and the United States Mail Steamship Company, otherwise
called the Harris and the Sloo lines. He declared that Vanderbilt,
threatening them with both competition and a public agitation such as
would uncover the fraud, had forced them to pay him gigantic sums in
return for his silence and inactivity. Responsible capitalists,
Senator Toombs said, had offered to carry the mails to California for
$550,000. "Everybody knows," he said, "that it can be done for half
the money we pay now. Why, then, should we continue to waste the
public money?" Senator Toombs went on:

You give nine hundred thousand dollars a year to carry the mails to
California; and Vanderbilt compels the contractors to give him
$56,000 a month to keep quiet. This is the effect of your
subventions. Under your Sloo and Harris contracts you pay about
$900,000 a year (since 1847); and Vanderbilt, by his superior skill
and energy, compelled them for a long time, to disgorge $40,000 a
month, and now $56,000 a month. ... They pay lobbymen, they pay
agencies, they go to law, because everybody is to have something; and
I know this Sloo contract has been in chancery in New York for years.
[Footnote: The case referred to by Senator Toombs was doubtless that
of Sloo et al. vs. Law et al. (Case No. 12,957, Federal Cases, xxii:
355-364.)

In this case, argued before Judge Ingersoll in the United States
Circuit Court, at New York City, on May 16, 1856, many interesting
and characteristic facts came out both in the argument and in the
Court decision.

From the decision (which went into the intricacies of the case at
great length) it appeared that although Albert G. Sloo had formed the
United States Mail Steamship Company, the incorporators were George
Law, Marshall O. Roberts, Prosper M. Wetmore and Edwin Crosswell.
Sloo assigned his contract to them. Law was the first president, and
was succeeded by Roberts. A trust fund was formed. Law fraudulently
(so the decision read) took out $700,000 of stock, and also
fraudulently appropriated large sums of money belonging to the trust
fund. This was the same Law who, in 1851 (probably with a part of
this plunder) bribed the New York Board of Aldermen, with money, to
give him franchises for the Second and Ninth Avenue surface railway
lines. Roberts appropriated $600,000 of the United States Mail
Steamship Company's stock. The huge swindles upon the Government
carried on by Roberts during the Civil War are described in later
chapters in this work. Wetmore was a notorious lobbyist. By fraud,
Law and Roberts thus managed to own the bulk of the capital stock of
the United States Mail Steamship Company. The mail contract that it
had with the Government was to yield $2,900,000 in ten years.

Vanderbilt stepped in to plunder these plunderers. During the time
that Vanderbilt competed with that company, the price of a single
steerage passage from California to New York was $35. After he had
sold the company the steamship "North Star" for $400,000, and had
blackmailed it into paying heavily for his silence and non-
competition, the price of steerage passage was put up to $125 (p.
364).

The cause of the suit was a quarrel among the trustees over the
division of the plunder. One of the trustees refused to permit
another access to the books. Judge Ingersoll issued an injunction
restraining the defendant trustees from withholding such books and
papers.] The result of this system is that here comes a man--as old
Vanderbilt seems to be--I never saw him, but his operations have
excited my admiration--and he runs right at them and says disgorge
this plunder. He is the kingfish that is robbing these small
plunderers that come about the Capitol. He does not come here for
that purpose; but he says, 'Fork over $56,000 a month of this money
to me, that I may lie in port with my ships,' and they do it.
[Footnote: The Congressional Globe, 1857-58, iii: 2843-2844.

The acts by which the establishment of the various subsidized ocean
lines were authorized by Congress, specified that the steamers were
to be fit for ships of war in case of necessity, and that these
steamers were to be accepted by the Navy Department before they could
draw subsidies. This part of the debate in the United States Senate
shows the methods used in forcing their acceptance on the Government:

Mr. Collamer.--The Collins line was set up by special contract?

Mr. Toombs.--Yes, by special contract, and that was the way with the
Sloo contract and the Harris contract. They were to build ships fit
for war purposes. I know when the Collins vessels were built; I was a
member of the Committee on Ways and Means of the other House, and I
remember that the men at the head of our bureau of yards and docks
said that they were not worth a sixpence for war purposes; that a
single broadside would blow them to pieces; that they could not stand
the fire of their own guns; but newspapers in the cities that were
subsidized commenced firing on the Secretary of the Navy, and he
succumbed and took the ships. That was the way they got here.

Senator Collamer, referring to the subsidy legislation, said: "As
long as the Congress of the United States makes contracts, declare
who they shall be with, and how much they shall pay for them, they
can never escape the generally prevailing public suspicion that there
is fraud and deceit and corruption in those contracts."]

Thus, it is seen, Vanderbilt derived millions of dollars by this
process of commercial blackmail. Without his having to risk a cent,
or run the chance of losing a single ship, there was turned over to
him a sum so large every year that many of the most opulent merchants
could not claim the equal of it after a lifetime of feverish trade.
It was purely as a means of blackmailing coercion that he started a
steamship line to California to compete with the Harris and the Sloo
interests. For his consent to quit running his ships and to give them
a complete and unassailed monopoly he first extorted $480,000 a year
of the postal subsidy, and then raised it to $612,000.

The matter came up in the House, June 12, 1858. Representative Davis,
of Mississippi, made the same charges. He read this statement and
inquired if it were true:

These companies, in order to prevent all competition to their line,
and to enable them, as they do, to charge passengers double fare,
have actually paid Vanderbilt $30,000 per month, and the United
States Mail Steamship Company, carrying the mail between New York and
Aspinwall, an additional sum of $10,000 per month, making $40,000 per
month to Vanderbilt since May, 1856, which they continued to do. This
$480,000 are paid to Vanderbilt per annum simply to give these two
companies the entire monopoly of their lines--which sum, and much
more, is charged over to passengers and freight.

Representative Davis repeatedly pressed for a definite reply as to
the truth of the statement. The advocates of the bill answered with
evasions and equivocations. [Footnote: The Congressional Globe, part
iii, 1857-58:3029. The Washington correspondent of the New York
"Times" telegraphed (issue of June 2, 1858) that the mail subsidy
bill was passed by the House "Without twenty members knowing its
details."]

BLACKMAIL CHARGES TRUE.

The mail steamer appropriation bill, as finally passed by Congress,
allowed large subsidies to all of the steamship interests. The
pretended warfare among them had served its purpose; all got what
they sought in subsidy funds. While the bill allowed the Postmaster-
General to change Collins' European terminus to Southampton, that
official, so it was proved subsequently, was Vanderbilt's plastic
tool.

But what became of the charges against Vanderbilt? Were they true or
calumniatory? For two years Congress made no effort to ascertain
this. In 1860, however, charges of corruption in the postal system
and other Government departments were so numerously made, that the
House of Representatives on March 5, 1860, decided, as a matter of
policy, to appoint an investigatng committee. This committee, called
the "Covode Committee," after the name of its chairman, probed into
the allegations of Vanderbilt's blackmailing transactions. The
charges made in 1858 by Senator Toombs and Representative Davies were
fully substatiated.

Ellwood Fisher, a trustee of the United States Mail Steamship
Company, testified on May 2 that during the greater part of the time
he was trustee, Vanderbilt was paid $10,000 a month by the United
States Mail Steamship company, and that the Pacific Mail Steamship
Company paid him $30,000 a month at the same time and for the same
purpose. The agreement was that if competition appeared payment was
to cease. In all, $480,000 a year was paid during this time. On June
5, 1860, Fisher again testified: "During the period of about four
years and a half that I was one of the trustees, the earnings of the
line were very large, but the greater part of the money was
wrongfully appropriated to Vanderbilt for blackmail, and to others on
various pretexts." [Footnote: House Reports, Thirty-sixth Congress,
First Session 1859-60 v:785-86 and 829. "Hence it was held,"
explained Fisher, in speaking of his fellow trustees, "that he
[Vanderbilt] was interested in preventing competition, and the terror
of his name and capital would be effectual upon others who might be
disposed to establish steamship lines" (p. 786).] William H. Davidge,
president of the Pacific Mail Steamship Company, admitted that the
company had long paid blackmail money to Vanderbilt. "The
arrangement," he said, "was based upon there being no competition,
and the sum was regulated by that fact." [Footnote: Ibid., 795-796.
The testimony of Fischer, Davidge and other officials of the
steamship lines covers many pages of the investigating committee's
report. Only a few of the most vital parts have been quoted here.]
Horace F. Clark, Vanderbilt's son-in-law, one of the trustees of the
United States Mail Steamship Company, likewise admitted the
transaction. [Footnote: Ibid., 824.

But Roberts and his associate trustees succeeded in making the
Government recoup them, to a considerable extent, for the amount out
of which Vanderbilt blackmailed them. They did it in this way:

A claim was trumped up by them that the Government owed a large sum,
approximating about two million dollars, to the United States Mail
Steamship Company for services in carrying mail in addition to those
called for under the Sloo contract. In 1859 they began lobbying in
Congress to have this claim recognized. The scheme was considered so
brazen that Congress refused. Year after year, for eleven years, they
tried to get Congress to pass an act for their benefit. Finally, on
July 14, 1870, at a time when bribery was rampant in Congress, they
succeeded. An act was passed directing the Court of Claims to
investigate and determine the merits of the claim.] It is quite
useless [Footnote: The Court of Claims threw the case out of court.
Judge Drake, in delivering the opinion of the court, said that the
act was to be so construed "as to prevent the entrapping of the
Government by fixing upon it liability where the intention of the
legislature [Congress] was only to authorize an investigation of the
question of liability" (Marshall O. Roberts et al., Trustees, vs. the
United States, Court of Claims Reports, vi: 84-90). On appeal,
however, the Supreme Court of the United States held that the act of
Congress in referring the case to the Court of Claims was in effect
_a ratification of the claim_. (Court of Claims Reports, xi:
198-126.) Thus this bold robbery was fully validated.] to ask whether
Vanderbilt was criminally prosecuted or civilly sued by the
Government. Not only was he unmolested, but two years later, as we
shall see, he carried on another huge swindle upon the Government
under peculiarly heinous conditions.

This continuous robbery of the public treasury explains how
Vanderbilt was able to get hold of millions of dollars at a time when
millionaires were scarce. Vanderbilt is said to have boasted in 1853
that he had eleven million dollars invested at twenty-five per cent.
A very large portion of this came directly from his bold system of
commercial blackmail. [Footnote: Undoubtedly so, but the precise
proportion it is impossible to ascertain.] The mail subsidies were
the real foundation of his fortune. Many newspaper editorials and
articles of the time mention this fact. Only a few of the important
underlying facts of the character of his methods when he was in the
steamboat and steamship business can be gleaned from the records. But
these few give a clear enough insight. With a part of the proceeds of
his plan of piracy, he carried on a subtle system of corruption by
which he and the other steamer owners were able time after time not
only to continue their control of Congress and the postal
authorities, but to defeat postal reform measures. For fifteen years
Vanderbilt and his associates succeeded in stifling every bill
introduced in Congress for the reduction of the postage on mail.

HE QUITS STEAMSHIPS.

The Civil War with its commerce-preying privateers was an
unpropitious time for American mercantile vessels. Vanderbilt now
began his career as a railroad owner.

He was at this time sixty-nine years old, a tall, robust, vigorous
man with a stern face of remarkable vulgar strength. The illiteracy
of his youth survived; he could not write the simplest words
correctly, and his speech was a brusque medley of slang, jargon,
dialect and profanity. It was said of him that he could swear more
forcibly, variously and frequently than any other man of his
generation. Like the Astors, he was cynical, distrustful, secretive
and parsimonious. He kept his plans entirely to himself. In his
business dealings he was never known to have shown the slightest
mercy; he demanded the last cent due. His close-fistedness was such a
passion that for many years he refused to substitute new carpets for
the scandalous ones covering the floors of his house No. 10
Washington place. He never read anything except the newspapers, which
he skimmed at breakfast. To his children he was unsympathetic and
inflexibly harsh; Croffut admits that they feared him. The only
relaxations he allowed himself were fast driving and playing whist.

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