The First Tycoon: The Epic Life of Cornelius Vanderbilt (72 page)

This sentiment typified the Commodore's attitude toward both charitable bodies and his public image; and perhaps it reflected his desire to avoid any connection with the disreputable state legislature. But this attempt to distance himself from speculation would prove highly ironic. Even as he dictated this letter, the current of events carried him into an operation that would launch his career as a railroad tycoon through the greatest speculation to date.
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It would center on the New York & Harlem Railroad.

“It is not so big a road,” Vanderbilt remarked six years later. “It is a small thing, with a little capital of only about $6,000,000” ($5,772,800, actually). A small thing! Only in comparison to other railways could a business worth several million in the 1860s be considered “not so big.”
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And only in comparison to the Commodore's fortune, of course. But Wall Street agreed with his judgment, on the grounds of Harlem's potential as well as its size. New York State's two largest railroads dwarfed it, the Erie having a capital stock of just under $20 million at par, the New York Central just over $24 million. Its business suffered grave weaknesses, for it carried almost no through freight from the West, apart from some cattle, due to steep grades north of Manhattan. Even though Vanderbilt had helped reduce its floating debt, it still had trouble meeting expenses. “Of all the active railway shares dealt in at the board, the Harlems probably possess the least intrinsic value,” wrote the
New York Herald
on March 25, 1863. “The net earnings last year—which was an extraordinarily good one for all roads—were $473,401,” about equal to the interest on its $6.7 million in bonds. “No one believes that the road can, for ten years to come, pay anything” in dividends.
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The Harlem was a peculiar line in many ways, in part because it had been chartered in 1831, when railroads were still regarded as an unproven experiment. For example, the par value of each share was set at $50, half the standard $100 for an American corporation (though the press still reported changes in its price as 1 “percent” for each dollar, as with other stocks). It was a hybrid road, both a horse-drawn streetcar line and a steam-locomotive railway. Trains ran down the Harlem 130 miles from Chatham Four Corners or came in from New England over the New York & New Haven Railroad, crossed the Harlem River on a bridge, and rolled down Fourth Avenue to Forty-second Street. They entered a tunnel dug under Murray Hill (and covered over with parks, all at the expense of the railroad), rolled out ten blocks south, and continued into the Harlem depot at Twenty-sixth Street, a structure with crenellated walls that rather resembled a castle. There the trains interchanged passengers with the horse-drawn streetcars, which went as far down as the city hall via the Bowery. For years the company had fought city ordinances, passed at the urging of wealthy Murray Hill residents, to stop the locomotives north of the tunnel. Fearing an uptown creep of this sentiment, on April 16, 1859, the Harlem had secured from the state legislature the right to use steam engines as far south as Forty-second Street (though it was forced to haul its cars between the depot and Forty-second Street with horses).
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This undersize hermaphrodite road attracted the Commodore's renewed attention amid the Civil War boom in railway shares on Wall Street. “In 1862 he was known to be buying a large amount of the stock,” recalled William Fowler. According to rumor, Vanderbilt foresaw a great day in Harlem. “The idea that he was buying it for
investment
seemed intensely funny to the brokers,” Fowler wrote. Vanderbilt's purchases had no effect on the negative view of the railroad among financial men, even though he drove the share price from a few dollars a share to over 50. Most brokers said “the certificates were only good for wrapping paper.”
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Wall Street was at all times a waterfall of rumors, few of them accurate. In this case, the tales muttered over fillet of sole at Delmonico's proved to be true: Vanderbilt was, in fact, buying because he believed in the Harlem's prospects. “I recollect… hearing him say that this railroad property, if properly managed,” Horace Clark later remarked, “will be as good property as there was in the state.”
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What did he see in it that no one else did? From the very beginning of Vanderbilt's career, he had focused on transportation routes that had decisive strategic advantages over competitors. The Stonington railroad, for example, ran from a convenient port inside Point Judith over a direct line to Boston with easy grades that he made into the fastest and cheapest to operate at the time of his presidency. Likewise, the Nicaragua route to California had possessed a permanent superiority in coal consumption over Panama, thanks to shorter steamship voyages. The Harlem's fixed strength was its penetration of the center of New York, down Fourth Avenue and through its streetcar line. This was something that no other railroad possessed—not even the only other steam railway to enter Manhattan, the Hudson River, which was restricted to the far west side. The Harlem provided the only portal for direct rail traffic with industrial New England, a rich trade that Vanderbilt knew well from his directorship of the Hartford & New Haven. And, as with the Stonington, he moved in
after
the company's debts had been starkly reduced. Once in control, he could reduce the Harlem's operating costs (a science he practiced most effectively), and then he thought it would prove very profitable.
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But there was something more personal driving Vanderbilt's interest in the Harlem. Perhaps the most important element in his character—even more than his economic calculation—was pride. We know he prized his reputation (as shown by his letter to Governor Morgan, among many other examples) and cherished his status as a man of honor. Most of all, he took pride in his abilities. Competitive to the core, he had spent his life outdoing other men, whether sailing New York Bay or navigating the Nicaraguan rapids; fighting with his fists or waging rate wars; racing his steamboats or running his four-footed trotters; designing steamships or planning sprawling enterprises. Now he would show the world that he could revive the most necrotic of companies. “Here is a man,” the Commodore would remark in 1867, “who has taken a road when its stock was not worth ten dollars a share, and had not been for years. He has had a little pride; he said he would bring up that road, and make the stock valuable.”
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Of course, Vanderbilt's pride mattered little to anyone else. He had been an important Harlem stockholder for almost a decade, and his slowly increasing stake changed nothing for the public (except those few who also owned stock and saw the value rise). But his purchases led him into a confrontation with one of the great evils that worried civic-minded New Yorkers: the corruption of their government.
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During the Civil War, Americans began to fear that rampant corruption threatened democracy itself. The head of the New York Custom House alone could scoop in as much as four times the salary of the president (which, at $25,000, was many times larger than that of railroad presidents or other extremely well-paid men). As the federal budget grew, the scope of graft seemed to swell as well. Profiteering off military contracts seemed to run rampant, particularly under Lincoln's first secretary of war, Simon Cameron, who did without competitive bidding. Manufacturers delivered cheap, flimsy shoes and uniforms made of recycled wool, or “shoddy,” that soon fell apart. Conflicts of interest abounded as businessmen filled new government posts; for example, Thomas A. Scott, the superintendent of the Pennsylvania Railroad, served as assistant secretary of war with jurisdiction over military transportation.
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Crooked dealing within the federal government seemed almost tame compared to its rapacity in New York. George Templeton Strong, like many, complained of “our disgraceful, profligate legislature.”
Harper's Weekly
reported late in 1863, “Last winter, it became evident to all discerning observers that a combination of adventurers had bought up a majority of both branches of the Legislature.” And city government looked worse. At war's end, the Union League Committee on Municipal Reform would admit a “longing for a temporary dictator who would sweep these bad men from our municipal halls and cleanse this Augean stable of its accumulated corruption.”
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As Vanderbilt steadily purchased Harlem stock, the company fell afoul of a past master of bribery, one of the Commodore's oldest enemies, George Law. New York's merchant community smelled sulfur wherever he went. “It is impossible for outsiders to estimate his worth, & it is doubtful if he can do it himself,” R. G. Dun & Co. reported in 1859. The next year it added, “He is reported to be sharp & over-reaching in his transactions & dealt with accordingly.” He had spread his money freely in the fallow fields of Washington during his years in the U.S. Mail Steamship Company and the Panama Railroad. Now he devoted himself to transportation in Manhattan, with a stake in various ferries and the Eighth Avenue Railroad, a horse-drawn streetcar line, so his bribes flowed upstream to Albany
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Sometime around March 1863, Law reportedly began to twitch and tweak the state legislature into granting him a charter for a streetcar railroad down Broadway. “Reportedly” is as conclusive as any account can be; though the press blamed him for pushing this bill, direct evidence of his involvement is hard to find.
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But no doubt exists over the furious reaction that erupted in late April when Manhattanites learned that the most famous avenue in America might be bound with iron rails. As the bill advanced toward passage, a long list of New York's patriarchs—among them William B. Astor, Moses Taylor, Peter Lorillard, and Royal Phelps—signed a petition to the new governor, Horatio Seymour, to protest “bestowing a franchise of immense value upon individuals, many of whom are unknown.… Its effect will be to injure immensely if not almost destroy the most beautiful thoroughfare on this continent.” The
New York Herald
declared that New Yorkers were “wonderfully unanimous” in “disgust and anger at the shameless corruption of the Albany scheme.”
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One might well wonder why the state should intervene in a purely municipal matter. The answer is that the Broadway bill, and the corruption that surrounded it, reflected a long-standing struggle for power between city and state, and within the Democratic Party. In 1857, in an effort to weaken then-mayor Fernando Wood, the Republican legislature had passed a series of measures to strip New York of authority over its own affairs. This had strengthened Wood's Democratic opponents more than the city's Republicans, as one of his leading rivals, William Tweed, gained an independent power base in the enhanced New York County Board of Supervisors. By 1863, the city's Democratic Party had divided into three fiercely alienated factions: Tammany Hall, Wood's Mozart Hall, and a splinter group led by former U.S. attorney John McKeon. Even Tammany itself was split between Tweed's crowd and the wealthy circle around Horace Clark, Augustus Schell, and August Belmont.
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The “George Law” bill threatened to further erode the city's power over its own streets, and deny it any revenue from a potentially lucrative franchise. City hall, torn by its internal feuding, looked unlikely to come up with an effective response. But there was one force that could unite the bitterest enemies in New York: money.

Someone conceived a plan to have the city preempt the Law company, by granting the Harlem the right to run a streetcar line down Broadway. If the city fathers must have a Broadway railroad, they thought, they should at least keep control of it—and its proceeds. According to
Harper's Weekly
, the aldermen and councilmen demanded that, in return for this gift, the Harlem pay roughly $100,000 in bribes. (“We don't pretend to know exactly,”
Harper's
wrote.) What's more, rumors began to fly about unusual purchases—and purchasers—of Harlem stock. “Men with strongly Celtic faces were seen on Wall Street,” recounted Fowler, with the unblushing anti-Irish prejudice of the day, “sixth-warders by the cut of their jib, and said to belong to the Ancient and Honorable Board of Aldermen.”

On April 21, this farce turned into slapstick when a deputy sheriff appeared at a meeting of the aldermen, bearing an injunction on behalf of Broadway's stage and omnibus lines. “He was ordered to retire,” the
New York Herald
reported, “but not seeming inclined to go, the President directed the Sergeant-at-Arms to remove him.” Once the deputy had been wrestled out and the door locked, the honorable gentlemen voted to give the Harlem the Broadway streetcar franchise. Two days later the railroad's workmen began to lay tracks. Meanwhile the “George Law” company went to work on
another
section of Broadway, in anticipation of victory in the well-greased legislature.
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Even with General Grant attacking Vicksburg from the rear, with General Joseph Hooker in motion against Robert E. Lee, the people of New York could talk of little else but the battle of Broadway. “The
coup d'etat
of the Common Council” was “the great theme of conversation in the city yesterday,” the
Herald
reported on April 24. “The deepest interest was expressed by all classes, and a high state of excitement prevailed in Wall Street, about the City Hall, and around the newspaper bulletins.” Finally a fresh injunction halted both sides. Strong wrote that the “only visible sign” of the Harlem's Broadway line “is a strip of lacerated pavement between 13th and 14th Streets, and a few sleepers and rails lying out in the rain.” Then Governor Seymour vetoed the George Law bill. The city—and the Harlem Railroad—had won.
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