The First Tycoon: The Epic Life of Cornelius Vanderbilt (77 page)

Vanderbilt responded to Drew's campaign in characteristic fashion: he began to buy. With Tobin as his partner and agent, he took every offer of Harlem stock. Every day, Fowler recalled, Tobin could be seen at the Open Board or on the curb, “bidding for and buying thousands of shares, his face pale with excitement and his opalescent eyes blazing like a basilisk's. He grabbed at the stock with fury, for he had suffered by the decline.” The market felt the weight of the Commodore's liquid millions pressing down on short-sellers, who were burdened also by the thousands risked by Clark, the Schells, and Tobin himself. By March 29, Harlem had stabilized at 126½. In a few days it climbed over 141, and it kept rising.
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The Commodore may have felt even richer than usual in the first week of April, when he was approached by members of the United States Sanitary Commission, a private charity devoted to the medical care of soldiers that had grown into an enormously important auxiliary to the Union army. The organization was about to hold a fund-raising fair in Union Square, and its leaders wanted a donation from the Commodore. Vanderbilt declined to make a pledge. Ever attuned to the marketplace, he said he would donate as much as any other man. The delegation later returned with a check for $100,000 from Alexander T. Stewart. “He found himself cornered,” the press reported. “However, he was as good as his word. He covered Stewart's check with a check of his own for a like amount.”

On April 4, the fair commenced with a military parade before perhaps half a million onlookers. Leonard W. Jerome contributed in his own way hosting plays at his private theater. “Tickets are in great demand at five dollars, the whole transaction being highly distinguished, aristocratic, and exclusive,” Strong recorded. “House was full and everybody in the fullest tog, men in white chokers and women in ball costume.”
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On Wall Street, all went well. A great upward tide lifted all shares. In the general financial frenzy of that year, brokers decided to open an evening exchange in a room at the Fifth Avenue Hotel, to keep on trading after dark. But Harlem led all others. Drew and his followers in the stock exchanges fought to drive down the price—the legislators prepared to obliterate the Broadway bill—all to no avail. “The Harlem corner goes up vigorously,” the financial correspondent for the
New York Times
wrote on April 15. Already Vanderbilt made money from frightened bears. “Heavy differences are said to have been paid to the leading
Bull
in the stock to close contracts,” the
Times
added.
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The next day, disaster struck, at the hands of Treasury Secretary Chase.

Over the preceding months, congressmen and cabinet secretaries had grown increasingly angry at the gold market, seeing it as a den of treason. Speculators whistled “Dixie” as they sold greenbacks short before major battles, gambling that the Union would be defeated and legal-tender paper currency would lose value against gold. Chase pushed a bill in Congress that, with a spectacular lack of realism, would ban the trade in gold. Then he took direct action. On April 16, in an attempt to drive down the gold premium and undercut speculation, he went into the market and sold a large amount of federal specie; he took the greenbacks thus received and withdrew them from circulation. This moralistic act was a sharply deflationary blow, one that hit Wall Street hard. “The stock market was struck with a panic to-day,” the
New York Herald
reported. Even as Chase “locked up” millions in currency, another $15 million was absorbed by a new loan by the banks to the federal government. The sudden drain on cash reserves caused prices to collapse across the board in what the
Evening Post
called “one of the severest panics recorded since 1857 on the annals of the Stock Exchange.” Drew's hour, it seems, had come round at last; he had sold calls at 140, and now Harlem slouched to 133. The slide drove Vanderbilt to the brink, forcing him to put up more and more cash as margins for his millions of dollars' worth of purchases.
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But Harlem rose again. Indeed, it rose relentlessly. On April 21, it reached 210. Five days later, it climbed to 235. Despite the immense strain on his resources—and the increasingly severe consequences should he fail—Vanderbilt kept up the pressure, buying still more. Short-sellers desperately waited out the terms of their contracts, hoping to buy in at a lower price before they ran out of time. They could not. Vanderbilt leaped every precipice (including a vicious attack on his management published in the
Herald)
in a splendid display of nerve, the most important virtue in a stock market battle. He carelessly attended the opening of the races at the Fashion Course while Tobin and his other brokers gambled his millions against the combined power of Daniel Drew, the New York State Legislature, and the desperate bears of Wall Street. On May 11, Harlem rose to 256. On May 14, it ascended to 275. Finally, it peaked at 285. One after another, the short-sellers crawled to the Commodore's myrmidons to buy their way out of their unfulfillable contracts. The legislators' attempted abuse of power cost them dearly
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Drew, according to the press, refused to settle. He faced staggering losses on the tens of thousands of calls and whatever short sales he had made, so he announced that he would “squat”—litigate his contracts, rather than pay. The news shocked Wall Street. Should losers in transactions resort to the courts, the markets would break down in short order. If Drew carried out his threat, he likely would be shunned; few brokers, not even his longtime partner David Groesbeck, would do business with a man who did not fulfill his agreements. Once barred from the exchange, Drew never would recover his losses in the future. So Vanderbilt remained cool in the face of this intransigence, and icy cold to the mercurial Drew's pleas for mercy. In the course of further negotiations, Drew finally agreed to pay his old partner perhaps $1 million, roughly half of what the Commodore is believed to have gained in this second corner.
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The tens of millions thrown about in this abstract battle on Wall Street captivated—and repulsed—the public. For one thing, the incident demonstrated that Civil War-era corruption was far more complicated than the historical cliché of the rich buying off lawmakers; in this case, as in the previous Harlem corner, the officeholders abused their power to profit from the deliberate destruction of the value of a major corporation. Time would show that extortion by legislators and their hangers-on was as serious a problem as bribery by the wealthy. Such graft only reinforced Vanderbilt's long-standing laissez-faire beliefs.

Paradoxically, by punishing corrupt state legislators so thoroughly Vanderbilt made it appear that the balance of power in society was shifting away from democratic government and toward wealthy individuals and corporations. “Think of the one-man power that could accomplish this wonderful feat and prevail against a whole Legislature,” Henry Clews admiringly wrote in his memoirs. “Think of this, and then you will have some conception of the astute mind that the Commodore possessed, without education to assist it, in the contest against this remarkable combination of well-trained mental forces. There can hardly be a doubt that the Commodore was a genius, probably without equal in the financial world.”
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The second Harlem corner marked the culmination of his move from steamships to railroads, for it forced him to concentrate his resources in this titanic battle. With victory in hand, he consolidated his power in the Harlem by driving Drew out of the board at the election on May 17 and giving his seat to Senator Dutcher. Out of 105,873 shares represented, the Commodore voted 29,607, though he likely hid the rest of his stock under the names of Horace Clark, Augustus Schell, James Banker, John Tobin (who voted 31,900 shares alone), and others. The next day, Vanderbilt hired his son William as the Harlem's vice president to manage the road's operations.
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One month later, Vanderbilt made a second move to solidify his holdings, by displacing the Hudson River Railroad board in a disputed election. Out went Samuel Sloan, Moses H. Grinnell, Addison G. Jerome, and other giants. In came Vanderbilt's captains: Clark, Schell, Banker, and allies Oliver Charlick and Joseph Harker. John Tobin survived from the old board, of course, as did Leonard W. Jerome, who (according to rumor) had cooperated with Vanderbilt in the second Harlem corner. The new board elected Tobin president and created a standing executive committee—a common device, but typical of Vanderbilt's desire to centralize power—consisting of Clark, Schell, Banker, Jerome, and Charlick, in addition to Tobin. On July 6, the committee voted to end the competition between the Hudson River and Harlem trains.
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Also in July, the Commodore sold his last sidewheelers to Atlantic Mail, which now supplanted the old Atlantic & Pacific Steamship Company. The step severed his business ties to his son-in-law Daniel Allen, who was a leading figure in Atlantic Mail alongside Cornelius Garrison. Curiously, Allen provided the only Vanderbilt to win glory in the war: his son Vanderbilt Allen, a West Point cadet appointed first lieutenant on June 13, 1864. The young officer soon found a place on General Philip H. Sheridan's staff.
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The second Harlem corner typified Vanderbilt's battles on Wall Street in the 1860s. It was a defensive campaign rather than a merely speculative maneuver, designed to avenge himself upon men who had betrayed him. But it proved to be far more than a personal affair. By the summer of 1864, the Commodore had definitively left the floating world behind to concentrate on railroads. In short order he had gained control of the only two steam railways that entered Manhattan and linked it to the world, and had ended their costly rivalry. This first year set the pattern for his long railroad career: diplomacy, defensive battle, acquisition, reform, consolidation. In pursuit of “a small thing,” the bedraggled Harlem, he had begun to build an empire.

“YOU MIGHT AS WELL HIT A BRICK WALL
as hit that man on the head,” Yankee Sullivan declared in 1853. He spoke through the dripping blood of a badly battered face, and he spoke about John Morrissey his burly foe in a fight for a $1,000 stake, after the brick-wall fellow had beaten him into submission in fifty-seven minutes. The triumphant Morrissey—a fellow Irishman by birth—was somewhere between twenty and thirty years of age at the time, yet already he had acquired a fearsome reputation. As a teenager he had led an Irish gang on the streets of Troy against nativist thugs, before setting up in the slums of New York as a prizefighter, Democratic Party enforcer, and saloon owner. Notably lucky with his games of chance, he expanded beyond Five Points. His gambling house on Fifth Avenue was considered one of the city's finest.
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Sullivan returned to San Francisco after his defeat, on a path toward ultimate suicide; the victor, on the other hand, went to Saratoga. Morrissey, the broken-nose prince of Paradise Square, aspired to fashion, and so he flowed with fashion's current to the Springs every summer. There his presence was unmistakeable, “in his white flannel suit, huge diamond rings, and pin containing brilliants of the first water,” as Matthew Hale Smith described him. He was a man “of immense size; tall of stature, a powerful-looking fellow, walking quietly about the streets, or lounging at the hotels, but seldom speaking.” During the Civil War he opened the Club House, a brick saloon on Saratoga's Matilda Street; as on Fifth Avenue, his place attained a reputation as the most elegant casino in town. But he remained a creature of the street, no matter how high he rose above it. In 1864, for instance, a crowd of con men from Manhattan—three-card-monte artists—stepped off the train at Saratoga. Morrissey sauntered up to them in his white flannel suit and quietly told them to leave town. They did.
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Morrissey himself had a taste for gambling, though he would never be seen at a roulette wheel; he understood that apparatus too well to risk his money there. Rather, he played the stock market. Rumor had it that he had joined with his Irish Democratic cohorts on the Common Council to short Harlem in 1863, forgetting the old rule that the house always wins. But he recovered his wits soon after. As the
Chicago Tribune
had observed, “no skull in the world” could absorb as much “pounding” as his and come back fighting. Poorer but wiser, he determined to join the house. For example, when the Commodore built a racetrack less than a mile outside of Saratoga, along with a group of Wall Street men (including his son-in-law George Osgood and William R. Travers) and a school of New York Central remoras (Erastus Corning Jr. and John M. Davidson, a partner of Erastus Corning Sr.), Morrissey agreed to serve as the track's manager.

He steadily gained Vanderbilt's friendship in the course of the Commodore's summer residence in Saratoga, during his days at the track and evenings playing hands of whist in the rooms at the Congress Hall or the United States Hotel. And when Vanderbilt returned to the Springs in August 1864 on a train carrying his fastest horse, Post Boy (valued at $22,000), and four other expensive trotters, the knowing ones whispered that at least one of them was a gift from Morrissey. Vanderbilt's reward to the fighter, they said, had been a “point” or tip on the second Harlem corner.
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For Vanderbilt's son Corneil, all the world comprised the house, yet he still bet against it. His gambling addiction continued to grow worse. He filched a gold cup from Horace Clark's house in Murray Hill before descending Broadway to bet and lose the money it brought him. Penniless again, he went into a pawnshop with a pair of gold sleeve buttons. They came from his dead brother George's dress uniform, and had been given to Corneil as a keepsake. When William learned they had been hocked, he redeemed them himself—and he never trusted Corneil with them again.
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