Great Fortunes from Railroads Part 10

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, Doc.u.ments 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 pa.s.sed 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 pa.s.sage 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 a.s.sociates had offered, in return for the franchise, to carry pa.s.sengers 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 Steams.h.i.+p Company, Law was extremely bitter on the score of Vanderbilt's having been able to blackmail him and Roberts so heavily and successfully.] Such compet.i.tion 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 a.s.sured 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 pa.s.s an ordinance repealing the franchise. In the meantime, the aldermen and their political and Wall Street confederates would contract to "sell short" large quant.i.ties 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 pa.s.sed 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 antic.i.p.ated by the aldermen, the courts p.r.o.nounced 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 ma.s.ses 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 pus.h.i.+ng 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 ma.s.s 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 compet.i.tor 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 pa.s.sage. In those years, when the people were taught to look upon compet.i.tion 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 pa.s.s 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 ent.i.ties--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 quant.i.ties 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.

Surrept.i.tiously, 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 pa.s.sage 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 a.s.siduously 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 cla.s.s 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 cla.s.ses 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 cla.s.s, all that is necessary is to compare the laws of the different periods with the profitable methods of that cla.s.s, 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, a.s.sert that it was he who first saw the waste and futility of compet.i.tion, 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 fict.i.tious 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 Const.i.tutional 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 pa.s.sengers 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 pa.s.sengers were left to s.h.i.+ft 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 s.e.x 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 compet.i.tor 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 quant.i.ties. His opponents, Edward Cunard, John Jacob Astor, John Steward and other owners of the New York Central thus saw the directors.h.i.+p pa.s.s 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 a.s.sembly Doc.u.ment 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 sc.r.a.ped 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.

For the next nine years Drew manipulated the stock at will, sending the price up or down as suited his gambling schemes. The railroad degenerated until travel upon it became a menace; one disaster followed another. Drew imperturbably continued his manipulation of the stock market, careless of the condition of the road. At no time was he put to the inconvenience of even being questioned by the public authorities. On the contrary, the more millions he made the greater grew his prestige and power, the higher his standing in the community. Ruling society, influenced solely by money standards, saluted him as a successful man who had his millions, and made no fastidious inquiries as to how he got them. He was a potent man; his villainies pa.s.sed as great astuteness, his devious cunning as marvelous sagacity.

GOULD OVERREACHES VANDERBILT