The First Tycoon: The Epic Life of Cornelius Vanderbilt (94 page)

Or had he? Vanderbilt appears to have pulled his forces back from the front line in Albany because he had begun to outflank the enemy in Manhattan. On April 6, Cassidy reported, “Last Sunday Drew was at Vanderbilt's house; & yesterday the interview may have been renewed.” Drew was able to visit his old friend because of a provision of New York law that gave a Sunday reprieve from arrest in civil cases. Drew later admitted, “I called on the Commodore two or three times. He always told me that I acted very foolish in going to Jersey City; I ought to have never left my home in the City.” Drew sadly agreed with him. As Gould later observed, “He had got sick of New Jersey.” Drew and Vanderbilt began to talk about a compromise.
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Drew conducted these talks without the knowledge of Eldridge, Gould, or Fisk, though they suspected that he was up to something. On Sunday, April 19, Drew offered to return Vanderbilt's money in return for the shares, saying something about wanting to take over the Erie himself. Fisk found out about the plan and immediately attached Drew's personal funds, which put a stop to the subterfuge. So Drew turned to Eldridge and convinced him to settle with the Commodore to end their exile. Soon the equally Jersey-weary Eldridge joined Drew on his secret visits to Vanderbilt.
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For the public, the Erie War ended suddenly and mysteriously. Even before the end of April, the Erie directors fearlessly returned to New York. Barnard spared them arrest, and the New York attorney general agreed to vacate the motion to suspend Drew from the board. But these doves of peace proved just as mysterious to two key Erie directors, Gould and Fisk. In Jersey City the pair had forged a tight friendship, emerging as the most cunning and resilient opponents of Vanderbilt on the board. Recognizing this, Drew and Eldridge kept them in the dark as they negotiated terms.
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Frustrated, the two young men took a carriage early one June morning to 10 Washington Place and banged on the door. The servant showed them into the reception room, notified the Commodore, then sent them upstairs to the second-floor parlor. “Presently Mr. Vanderbilt sent for me to come into a little back room,” Fisk testified. Gould waited in the parlor as Fisk went in. It seems that the flamboyant former peddler had made an impression on the Commodore—or perhaps Vanderbilt wished to see him separately as a negotiating tactic. Fisk found him sitting on his bed, putting on his shoes. “I remember those shoes on account of the buckles,” Fisk later testified. “You see there were four buckles on that shoe, and I know it passed through my mind that if such men wore that kind of shoes I must get me a pair.”
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Vanderbilt looked Fisk over sharply. “I had a very bad opinion of Mr. Fisk since I first knew him,” he said later. “I thought he was a reckless man, and would do anything he undertook to accomplish a purpose.”
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But he was accustomed to dealing with enemies, even reckless ones. According to Fisk, Vanderbilt said that “several of the directors were trying to trade with him, and he would like to know who was the best man to trade with.” Fisk proudly replied that Vanderbilt should trade with him, “if the trade was a good one.” The Commodore ruefully said that he might be right. “Old man Drew was no better than a batter pudding, Eldridge was completely demoralized, and there was no head or tail to our concern,” Fisk reported him saying. Fisk agreed.

Vanderbilt wanted to unload his 100,000 Erie shares, and demanded compensation for his losses. Eldridge had made a peace proposal that he had accepted, he said; according to Fisk, Vanderbilt argued that Gould and Fisk should “take hold of it. If we would advocate the settlement and pay his losses we should be landed in the haven where we were all desirious of being, where there was peace and harmony.” Fisk said their talk grew momentarily heated.

He said I must take the position of things as I found it. He would keep his bloodhounds on us and pursue us until we took his stock off his hands; he would be d——d if he would keep it. I told him I would be d——d if we would take it off his hands, and that we would sell him stock as long as he would stand up and take it. Upon this he mellowed down and said that we must get together and arrange this matter. I told him that we would not submit to a robbery of the road.… Well, he said, these suits would not be withdrawn until he was settled with.
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Soon after this interview, Gould and Fisk confronted Eldridge, who told them it was all over. “He was tired and worn out and had been driven away from home and wanted to get out of his troubles,” Fisk recalled. “At last he had got the Commodore to settle on a price, and Schell and Work had fixed on their price, and if we would come in tomorrow we should be free and clear of all suits.”

The two young men went to see Vanderbilt at his home one more time. The Commodore looked them over with respect. According to Gould, he told them that “Drew had no backbone, and if we had not come in he would have had it all his own way.… When we rose to come away he said to us, ‘Boys, you are young, and if you carry out this settlement there will be peace and harmony between the two roads.’” Carry it out they did, but peace and harmony would prove elusive.
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The grand settlement was complex, and many of its details would elude contemporaries and historians alike. Of Vanderbilt's 100,000 Erie shares, he sold fifty thousand back at 80, for a total of $4 million. Except he did not actually sell it to the railroad. It was important to Vanderbilt that he technically sold the stock to Drew. As he said to Drew when they made the deal, “I must have an understanding about the matter. I will not sell the Erie Railroad anything; I will have nothing to do with it.” Drew replied that he was buying the stock for himself. “I said that,” Vanderbilt later explained, “because I had made up my mind the Erie Railroad had got under so many difficulties that I would have nothing to do with them.”

If Vanderbilt did not sell his stock to the Erie, the Erie certainly bought it. After Drew made the original agreement, Eldridge arranged for the Erie to take the fifty thousand shares at 70, paying $3.5 million that went into Vanderbilt's hands (Drew himself paid the Commodore the remaining $500,000). The Erie also paid Vanderbilt $1 million for a sixty-day call on his remaining fifty thousand shares at 70 (that is, the Erie purchased the right to buy from Vanderbilt that quantity of stock at that price within two months). In addition to compensating Vanderbilt for his losses, this was a payment to keep the stock off the market, to give the company time to stabilize its finances. The Erie also compensated Frank Work and Richard Schell for their losses with a payment of $429,000, and paid Rapallo for his legal work with 250 Erie shares at 70. And, among other acts, the Erie also bought $5 million of Boston, Hartford & Erie bonds at 80 (accomplishing Eldridge's mission), released Drew from any claims, and settled his long-standing loan to the company. In July, Drew resigned as director and treasurer. In August, Vanderbilt carried out the final part of the agreement, buying $1,250,000 in Boston, Hartford & Erie bonds at 80. Eldridge resigned the presidency, leaving the Erie to Gould and Fisk.
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The Erie War proved to be the most serious defeat of Vanderbilt's railroad career. His corner had been thwarted, his attempt at revenge had failed, and his losses had been heavy—perhaps as much as $1 million, though they remain impossible to calculate. But it was not the defeat that the public imagined. Observers in Wall Street and the press saw him as a voracious monopolist, so they assumed that he had wanted the Erie itself, something he explicitly denied. Indeed, what is most striking is not the failure of his corner, but how he rallied on the brink of disaster and forced his enemies to restore much of what he had lost. Unfortunately, he could never recover his lost prestige. More serious than the hundreds of thousands that slipped from his fingers was the humiliation he had suffered at the hands of the upstart Fisk and Gould.

But even his costliest battles served as a reminder of his vindictiveness and his power. On May 19, R. G. Dun & Co. estimated his wealth at $50 million. He was “peculiar & eccentric in [character],” the agency reported, “a strong friend, a mostly bitter enemy.” Drew, his oldest friend of all, would have agreed.
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ON MARCH 30, AS THE ERIE WAR
approached its height, the United States Senate convened as a court of impeachment for President Andrew Johnson. Most of the charges revolved around his violation of the Tenure of Office Act, a constitutionally questionable law that limited his ability to fire executive-branch officials without congressional approval. He had deliberately flouted the law by sacking Secretary of War Edwin Stanton, Commodore Vanderbilt's old friend.

The real issues driving the extraordinary trial were Johnson's personality and the nature of Reconstruction itself. Devotedly Jacksonian and virulently racist, Johnson wanted to quickly restore all-white governments in the South. Rising violence against freed slaves drove Republicans on Capitol Hill toward a far more expansive and direct federal role in reconstructing the South. Johnson had thwarted them at every step, giving rise to anger at his belligerence and sheer incompetence. Before the end of May, the Senate acquitted Johnson on all counts, after failing to meet the required two-thirds majority for a conviction by one vote. But congressional Reconstruction went forward. The South was divided into military districts and put under the administration of army officers until new, more racially just, state constitutions could be put into effect. In the old Confederacy, black voters, jurors, and officeholders appeared for the first time.
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In all this, Congress ventured into entirely unmapped terrain, not simply with respect to racial justice, but in terms of its own powers. The war and continuing crisis in the South created a ferment on Capitol Hill, opening up new possibilities. What else could the federal government do? What
should
it do? The Republicans had been united in fighting the Civil War, and one of the strongest arguments in favor of Radical measures to aid freed slaves was that they had been the only consistently loyal population in the South during the conflict. But in other areas the party remained deeply divided, and sometimes confused. On April 27, in the midst of the impeachment trial, the House of Representatives ordered the Committee on Roads and Canals to investigate whether Congress had the power to regulate railroads. On June 9, the committee reported that
Gibbons v. Ogden
had clearly established federal power over interstate commerce, but the committee was not sure exactly what to do with railroads. “The question of the constitutional power of Congress to regulate the rates of fare and charges for freight is one of very great importance and of difficult solution,” it hedged. The committee advised no action, though it voiced a serious fear. “The great railroad corporations do possess the power and the will to absorb the lesser competing lines.… These vast consolidated corporations have the power to crush out all competition and to fix upon such rates of fare and charges for the transportation of freight as they please to impose.” But congressional interference was still too radical even for the Radicals.
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“We hope the question will not be allowed to drop into forgetfulness,” the
Nation
responded. “The railroad corporations are already of immense power.” In light of the negotiations to end the Erie War, the
Nation
thought that Vanderbilt and Drew might make an alliance “which puts for many important purposes the whole State of New York into their hands. It is plain that we need a different order of things from what we had when the Constitution was adopted, when railroads were unthought of.”
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The Erie War proved to be a catalyst for rising anxieties over the place of the railroad corporation in a democratic society. In economic culture, railroads ran headlong against the deep Jacksonian belief that free competition was an essential component of democracy itself—that monopoly threatened free government. Their dual nature as both public works and private businesses presented a paradox: What was more important, to protect shareholders in their property rights, or to prevent a monopoly? Good management and returns on investment, or competition? When the Erie War brought this conundrum to a head, even business journals found themselves torn. The
Round Table
said, “It is very hard to understand why, if Mr. Vanderbilt does own a majority of the stock of the Erie Railway, he should not be allowed to manage it.” On the other side, the
Merchant's Magazine
wrote, “While allowing that Erie would be sure of a more efficient head under his supervision than under its present and late control, yet it would be a matter of regret” if Vanderbilt added it to his empire. The
New York Times
awkwardly dodged the monopoly question when defending him: “It may be right that the amalgamation… of the Erie with the Central and other Vanderbilt lines should be prohibited… [but] nothing can justify or even extenuate the conduct of the [Erie] directors in creating ten millions of stock for speculative purposes, or in otherwise abusing their power.”
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