HISTORY OF THE GREAT AMERICAN FORTUNES

CHAPTER III

THE BEGINNINGS OF THE VANDERBILT FORTUNE



The first of the overshadowing fortunes to develop from the ownership and manipulation of railroads was that of Cornelius Vanderbilt.  The Havemeyers and other factory owners, whose descendants are now enrolled among the conspicuous multimillionaires, were still in the embryonic stages when Vanderbilt towered aloft in a class by himself with a fortune of $105,000,000.  In these times of enormous individual accumulations and centralization of wealth, the personal possession of $105,000,000 does not excite a fraction of the astonished comment that it did at Cornelius Vanderbilt’s death in 1877.  Accustomed as the present generation is to the sight of billionaires or semi-billionaires, it cannot be expected to show any wonderment at fortunes of lesser proportions.


NINETY MILLIONS IN FIFTEEN YEARS.


Yet to the people of thirty years ago, a round hundred million was something vast and unprecedented.  In 1847 millionaires were so infrequent that the very word, as we have seen, was significantly italicised.  But here was a man who, figuratively speaking, was a hundred millionaires rolled in one.  Compared with his wealth the great fortunes of ten or fifteen years before dwindled into bagatelles.  During the Civil War a fortune of $15,000,000 had been looked upon as monumental.  Even the huge Astor fortune, so long far outranking all competitors, lost its exceptional distinction and ceased being the sole, unrivalled standard of immense wealth.  Nearly a century of fraud was behind the Astor fortune.  The greater part of Cornelius Vanderbilt’s wealth was massed together in his last fifteen years.

This was the amazing, unparalleled feature to his generation.  Within fifteen brief years he had possessed himself of more than $90,000,000.  His wealth came rushing in at the rate of $6,000,000 a year.  Such an accomplishment may not impress the people of these years, familiar as they are with the ease with which John D. Rockefeller and other multimillionaires have long swept in almost fabulous annual revenues.  With his yearly income of fully $80,000,000 or $85,000,0001 Rockefeller can look back and smile with superior disdain at the commotion raised by the contemplation of Cornelius Vanderbilt’s $6,000,000.

Each period to itself, however.  Cornelius Vanderbilt was the golden luminary of his time, a magnate of such combined, far-reaching wealth and power as the United States had never known.  Indeed, one overruns the line of tautology in distinguishing between wealth and power.  The two were then identical not less than now.  Wealth was the real power.  None knew or boasted of this more than old Vanderbilt when, with advancing age, he became more arrogant and choleric and less and less inclined to smooth down the storms he provoked by his contemptuous flings at the great pliable public.  When threatened by competitors, or occasionally by public officials, with the invocation of the law, he habitually sneered at them and vaunted his defiance.  In terse sentences, interspersed with profanity, he proclaimed the fact that money was law ;  that it could buy either laws or immunity from the law.


Since wealth meant power, both economic and political, it is not difficult to estimate Vanderbilt’s supreme place in his day.

Far below him, in point of possessions, stretched the 50,000,000 individuals who made up the nation’s population.  Nearly 10,000,000 were wage laborers, and of the 10,000,000 fully 500,000 were child laborers.  The very best paid of skilled workers received in the highest market not more than $1,040 a year.  The usual weekly pay ran from $12 to $20 a week ;  the average pay of unskilled laborers was $350 a year.  More than 7,500,000 persons ploughed and hoed and harvested the farms of the country ;  comparatively few of them could claim a decent living, and a large proportion were in debt.  The incomes of the middle class, including individual employers, business and professional men, tradesmen and small middlemen, ranged from $1,000 to $10,000 a year.

How immeasurably puny they all seemed beside Vanderbilt !  He beheld a multitude of many millions struggling fiercely for the dollar that meant livelihood or fortune ;  those bits of metal or paper which commanded the necessities, comforts and luxuries of life ;  the antidote of grim poverty and the guarantees of good living ;  which dictated the services, honorable or often dishonorable, of men, women and children ;  which bought brains not less than souls, and which put their sordid seal on even the most sacred qualities.  Now by these tokens, he had securely 105,000,000 of these bits of metal or wealth in some form equivalent to them.  Millions of people had none of these dollars ;  the hundreds of thounds had a few ;  the thousands had hundreds of thounds  ;  the few had millions.  He had more than any.  Even with all his wealth, great as it was in his day, he would scarcely be worth remembrance were it not that he was the founder of a dynasty of wealth.  Therein lies the present importance of his career.


A FORTUNE OF $700,000,000.


From $105,000,000 bequeathed at his death, the Vanderbilt fortune has grown until it now reaches fully $700,000,000.  This is an approximate estimate ;  the actual amount may be more or less.  In 1889 Shearman placed the wealth of Cornelius and William K. Vanderbilt, grandsons of the first Cornelius, at $100,000,000 each, and that of Frederick W. Vanderbilt, a brother of those two men, at $20,000,000.2  Adding the fortunes of the various other members of the Vanderbilt family, the Vanderbilts then possessed about $300,000,000.  Since that time the population and resources of the United States have vastly increased ;  wealth in the hold of a few has become more intensely centralized ;  great fortunes have gone far beyond their already extraordinary boundaries of twenty years ago ;  the possessions of the Vanderbilts have expanded and swollen in value everywhere, although recently the Standard Oil oligarchy has been encroaching upon their possessions.  Very probable it is that the combined Vanderbilt fortune caches fully $700,000,000, actually and potentially.

But the incidental mention of such a mass of money conveys no adequate conception of the power of this family.  Nominally it is composed of private citizens with theoretically the same rights and limitations of citizenship held by any other citizen and no more.  But this is a fanciful picture.  In reality, the Vanderbilt family is one of the dynasties of inordinately rich families ruling the United States industrially and politically.  Singly it has mastery over many of the railroad and public utility systems and industrial corporations of the United States.  In combination with other powerful men or families of wealth, it shares the dictatorship of many more corporations.  Under the Vanderbilts’ direct domination are 21,000 miles of railroad lines, the ownership of which is embodied in $600,000,000 in stocks and $700,000,000 in bonds.  One member alone, William K. Vanderbilt, is a director of seventy-three transportation and industrial combinations or corporations.


BONDS THAT HOLD PRESENT AND POSTERITY.


Behold, in imagination at least, this mass of stocks and bonds.  Heaps of paper they seem ;  dead, inorganic things.  A second’s blaze will consume any one of them, a few strokes of the fingers tear it into shapeless ribbons.  Yet under the institution of law, as it exists, these pieces of paper are endowed with a terrible power of life and death that even enthroned kings do not possess.  Those dainty prints with their scrolls and numerals and inscriptions are binding titles to the absolute ownership of a large part of the resources created by the labors of entire peoples.

Kingly power at best is shadowy, indefinite, depending mostly upon traditional custom and audacious assumption backed by armed force.  If it fall back upon a certain alleged divine right it cannot produce documents to prove its authority.  The industrial monarchs of the United States are fortified with both power and proofs of possession.  Those bonds and stocks are the tangible titles to tangible property ;  whoso holds them is vested with the ownership of the necessities of tens of millions of subjected people.  Great stretches of railroad traverse the country ;  here are coal mines to whose products some ninety million people look for warmth ;  yonder are factories ;  there in the cities are street car lines and electric light and power supply and gas plants ;  on every hand are lands and forests and waterways — all owned, you find, by this or that dominant man or family.

The mind wanders back in amazement to the times when, if a king conquered territory, he had to erect a fortress or castle and station a garrison to hold it.  They that then disputed the king’s title could challenge, if they chose, at peril of death, the provisions of that title, which same provisions were swords and spears, arrows and muskets.

But nowhere throughout the large extent of the Vanderbilt’s possessions or those of other ruling families are found warlike garrisons as evidence of ownership.  Those uncouth barbarian methods are grossly antiquated ;  the part once played by armed battalions is now performed by bits of paper.  A wondrously convenient change has it been ;  the owners of the resources of nations can disport themselves thousands of miles away from the scene of their ownership ;  they need never bestir themselves to provide measures for the retention of their property.  Government, with its array of officials, prisons, armies and navies, undertakes all of this protection for them.  So long as they hold these bits of paper in their name, Government recognizes them as the incontestable owners and safeguards their property accordingly.  The very Government established on the taxation of the workers is used to enforce the means by which the workers are held in subjection.


THEY DECREE TAXES AT WILL.


These batches of stocks and bonds betoken as much more again.  A pretty fiction subsists that Government, the creator of the modern private corporation, is necessarily more powerful than its creature.  This theoretical doctrine, so widely taught by university professors and at the same time so greatly at variance with the palpable facts, will survive to bring dismay in the near future to the very classes who would have the people believe it so.  Instead of now being the superior of the corporation the Government has long since definitely surrendered to private corporations a tremendous taxing power amounting virtually to a decree authorizing enslavement.  Upon every form of private corporation — railroad, industrial, mining, public utility — is conferred a peculiarly sweeping and insidious power of taxation the indirectness of which often obscures its frightful nature and effects.

Where, however, the industrial corporation has but one form of taxation the railroad has many forms.  The trust in oil or any other commodity can tax the whole nation at its pleasure, but inherently only on the one product it controls.  That single taxation is of itself confiscatory enough, as is seen in the $912,000,000 of profits gathered in by the Standard Oil Company since its inception.  The trust tax is in the form of its selling price to the public.  But the railroad puts its tax upon every product transported or every person who travels.  Not a useful plant grows or an article is made but that, if shipped, a heavy tax must be paid on it.  This tax comes in the guise of freight or passenger rates.

The labor of hundreds of millions of people contributes incessantly to the colossal revenues enriching the railroad owners.  For their producing capacity the workers are paid the meagerest wages, and the products which they make they are compelled to buy back at exorbitant prices after they pass through the hands of the various great capitalist middlemen, such as the trusts and the railroads.  How enormous the revenues of the railroads are may be seen in the fact that in the ten years from 1898 to 1908 the dividends declared by thirty-five of the leading railroads in the United States reached the sum of about $1,800,000,000.  This railroad taxation is a grinding, oppressive one, from which there is no appeal.  If the Government taxes too heavily the people nominally can have a say ;  but the people have absolutely no voice in altering the taxation of corporations.  Pseudo attempts have been made to regulate railroad charges, but their futility was soon evident, for the reason that owning the instruments of business the railroads and the allied trusts are in actual possession of the governmental power viewing it as a working whole.


AND EXERCISE UNRESTRAINED POWER.


Visualizing this power one begins to get a vivid perception of the comprehensive sway of the Vanderbilts and of other railroad magnates.  They levy tribute without restraint — a tribute so vast that the exactions of classic conquerors become dwarfed beside it.  If this levying entailed only the seizing of money, that cold, unbreathing, lifeless substance, then human emotion might not start in horror at the consequences.  But beneath it all are the tugging and tearing of human muscles and minds, the toil and sweat of an unnumbered multitude, the rending of homes, the infliction of sorrow, suffering and death.

The magnates, as we have said, hold the power of decreeing life and death ;  and time never was since the railroads were first built when this power was not arbitrarily exercised.

Millions have gone hungry or lived on an attenuated diet while elsewhere harvests rotted in the ground ;  between their needs and nature’s fertility lay the railroads.  Organized and maintained for profit and for profit alone, the railroads carry produce and products at their fixed rates and not a whit less ;  if these rates are not paid the transportation is refused.  And as in these times transportation is necessary in the world’s intercourse, the men who control it have the power to stand as an inflexible barrier between individuals, groups of individuals, nations and international peoples.  The very agencies which should under a rational form of civilization be devoted to promoting the interests of mankind, are used as their capricious self-interest incline them by the few who have been allowed to obtain control of them.  What if helpless people are swept off by starvation or by diseases superinduced by lack of proper food ?  What if in the great cities an increasing sacrifice of innocents goes on because their parents cannot afford the price of good milk — a price determined to a large extent by railroad tariff ?  All of this slaughter and more makes no impress upon the unimpressionable surfaces of these stocks and bonds, and leaves no record save in the hospitals and graveyards.

The railroad magnates have other powers.  Government itself has no power to blot a town out of existence.  It cannot strew desolation at will.  But the railroad owners can do it and do not hesitate if sufficient profits be involved.  One man sitting in a palace in New York can give an order declaring a secret discriminative tariff against the products of a place, whereupon its industries no longer able to compete with formidable competitors enjoying better rates, close down and the life of the place flickers and sometimes goes out.

These are but a very few of the immensity of extravagant powers conferred by the ownership of these railroad bonds and stocks.  Bonds they assuredly are, incomparably more so than the clumsy yokes of olden days.  Society has improved its outwards forms in these passing centuries.  Clanking chains are no longer necessary to keep slaves in subjection.  Far more effective than chains and balls and iron collars are the ownership of the means whereby men must live.  Whoever controls them in large degree, is a potentate by whatever name he be called, and those who depend upon the owner of them for their sustenance are slaves by whatever flattering name they choose to go.


HIGH AND MIGHTY POTENTATES.


The Vanderbilts are potentates.  Their power is bounded by no law ;  they are among the handful of fellow potentates who say what law shall be and how it shall be enforced.  No stern, masterful men and women are they as some future moonstruck novelist or historian bent upon creating legendary lore may portray them.  Voluptuaries are most of them, sunk in a surfeit of gorgeous living and riotous pleasure.  Weak, without distinction of mind or heart, they have the money to hire brains to plan, plot, scheme, advocate, supervise and work for them.  Suddenly deprived of their stocks and bonds they would find themselves adrift in the sheerest helplessness.  With these stocks and bonds they are the direct absolute masters of an army of employees.  On the New York Central Railroad alone the Vanderbilt payroll embraces fifty thousand workers.  This is but one of their railroad systems.  As many more, or nearly as many, men work directly for them on their other railroad lines.

One hundred thousand men signify, let us say, as many families.  Accepting the average of five to a family, here are five hundred thousand souls whose livelihood is dependent upon largely the will of the Vanderbilt family.  To that will there is no check.  To-day it may be expansively benevolent ;  to-morrow, after a fit of indigestion or a night of demoralizing revelry, it may flit to an extreme of parsimonious retaliation.  As the will fluctuates, so must be the fate of the hundred thousand workers.  If the will decides that the pay of the men must go down, curtailed it is, irrespective of their protests that the lopping off of their already slender wages means still keener hardship.  Apparently free and independent citizens, this army of workers belong for all essential purposes to the Vanderbilt family.  Their jobs are the hostages held by the Vanderbilts.  The interests and decisions of one family are supreme.

The germination and establishment of this immense power began with the activities of the first Cornelius Vanderbilt, the founder of this pile of wealth.  He was born in 1794.  His parents lived on Staten Island ;  his father conveyed passengers in a boat to and from New York — an industrious, dull man who did his plodding part and allowed his wife to manage household expenses.  Regularly and obediently he turned his earnings over to her.  She carefully hoarded every available cent, using an old clock as a depository.


THE FOUNDER’S START.


Vanderbilt was a rugged, headstrong, untamable, illiterate youth.  At twelve years of age he could scarcely write his own name.  But he knew the ways of the water ;  when still a youth he commenced ferrying passengers and freight between Staten Island and New York City.  For books he cared nothing ;  the refinements of life he scorned.  His one passion was money.  He was grasping and enterprising, coarse and domineering.  Of the real details of his early life little is known except what has been written by laudatory writers.  We are informed that as he gradually made and saved money he built his own schooners, and went in for the coasting trade.  The invention and success of the steamboat, it is further related, convinced him that the day of the sailing vessel would soon be over.  He, therefore, sold his interest in his schooners, and was engaged as captain of a steamboat plying between New York and points on the New Jersey coast.  His wife at the same time enlarged the family revenues by running a wayside tavern at New Brunswick, N.J., whither Vanderbilt had moved.

In 1829, when his resources reached $30,000, he quit as an employee and began building his own steamboats.  Little by little he drove many of his competitors out of business.  This he was able to do by his harsh, unscrupulous and strategic measures.3 He was severe with the men who worked for him, compelling them to work long hours for little pay.  He showed a singular ability in undermining competitors.  They could not pay low wages but what he could pay lower ;  as rapidly as they set about reducing passenger and freight rates he would anticipate them.  His policy at this time was to bankrupt competitors, and then having obtained a monopoly, to charge exorbitant rates.  The public, which welcomed him as a benefactor in declaring cheaper rates and which flocked to patronize his line, had to pay dearly for their premature and short-sighted joy.  For the first five years his profits, according to Croffut, reached $30,000 a year, doubling in successive years.  By the time he was forty years old he ran steamboats to many cities on the coast, and had amassed a fortune of half a million dollars.


DRIVING OUT COMPETITORS.


Judging from the records of the times, one of his most effective means for harassing and driving out competitors was in bribing the New York Common Council to give him, and refuse them, dock privileges.  As the city owned the docks, the Common Council had the exclusive right of determining to whom they should be leased.  Not a year passed but what the ship, ferry and steamboat owners, the great landlords and other capitalists bribed the aldermen to lease or give them valuable city property.  Many scandals resulted, culminating in the great scandal of 1853, when the Grand jury, on February 26, handed up a presentment showing in detail how certain aldermen had received bribes for disposal of the city’s water rights, pier privileges and other property, and how enormous sums had been expended in bribes to get railroad grants in the city.4  Vanderbilt was not openly implicated in these frauds, no more than were the Astors, the Rhinelanders, the Goelets and other very rich men who prudently kept in the background, and who managed to loot the city by operating through gobetweens.

Vanderbilt’s eulogists take great pains to elaborate upon his tremendous energy, sagacity and constructive enterprise, as though these were the exclusive qualities by which he got his fortune.  Such a glittering picture, common in all of the usual biographies of rich men, discredits itself and is overthrown by the actual facts.  The times in which Vanderbilt lived and thrived were not calculated to inspire the masses of people with respect for the trader’s methods, although none could deny that the outcropping capitalists of the period showed a fierce vigor in overcoming obstacles of man and of nature, and in extending their conquests toward the outposts of the habitable globe.

If indomitable enterprise assured permanency of wealth then many of Vanderbilt’s competitors would have become and remained multimillionaires.  Vanderbilt, by no means possessed a monopoly of acquisitive enterprise ;  on every hand, and in every line, were men fully as active and unprincipled as he.  Nearly all of these men, and scores of competitors in his own sphere — dominant capitalists in their day — have become well-nigh lost in the records of time ;  their descendants are in the slough of poverty, genteel or otherwise.  Those times were marked by the intensest commercial competition ;  business was a labyrinth of sharp tricks and low cunning ;  the man who managed to project his head far above the rest not only had to practice the methods of his competitors but to overreach and outdo them.  It was in this regard that Vanderbilt showed superior ability.

In the exploitation of the workers — forcing them to work for low wages and compelling them to pay high prices for all necessities — Vanderbilt was no different from all contemporaneous capitalists.  Capitalism subsisted by this process.  Almost all conventional writers, it is true, set forth that it was the accepted process of the day, implying that it was a condition acquiesced in by the employer and worker.  This is one of the lies disseminated for the purpose of proving that the great fortunes were made by legitimate methods.  Far from being accepted by the workers it was denounced and was openly fought by them at every auspicious opportunity.

Vanderbilt became one of the largest ship and steamboat builders in the United States and one of the most formidable employers of labor.  At one time he had a hundred vessels afloat.  Thousands of shipwrights, mechanics and other workers toiled for him fourteen and sixteen hours a day at $1.50 a day for many years.  The actual purchasing power of this wage kept declining as the cost of rent and other necessaries of life advanced.  This was notably so after the great gold discoveries in California, when prices of all commodities rose abnormally, and the workers in every trade were forced to strike for higher wages in order to live.  Most of these strikes were successful, but their results as far as wages went were barren ;  the advance wrung from employers was by no means equal to the increased cost of living.


REGARDED AS A COMMERCIAL BUCCANEER.


The exploitation of labor, however, does not account for his success as a money maker.  Many other men did the same, and yet in the vicissitudes of business went bankrupt ;  the realm of business was full of wrecks.  Vanderbilt’s success arose from his destructive tactics toward his competitors.  He was regarded universally as the buccaneer of the shipping world.  He leisurely allowed other men to build up profitable lines of steamboats, and he then proceeded to carry out methods which inevitably had one of two terminations :  either his competitor had to buy him off at an exorbitant price, or he was left in undisputed possession.  His principal biographer, Croffut, whose effusion is one long chant of praise, treats these methods as evidences of great shrewdness, and goes on :  “ His foible was ‘opposition ;’ wherever his keen eye detected a line that was making a very large profit on its investment, he swooped down on it and drove it to the wall by offering a better service and lower rates.”5  This statement is only partially true ;  its omissions are more significant than its admissions.  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.


Commodore Cornelius Vanderbilt (17941877), The Founder of the Vanderbilt Fortune. 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.

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 return 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. . . 6

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 thouand 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.7  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.8

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— hich 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.9


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 founds.  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 investigating 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 Davis were fully substantiated.

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.”10  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.”11  Horace F. Clark, Vanderbilt’s son-in-law, one of the trustees of the United States Mail Steamship Company, likewise admitted the transaction.12  It is quite useless 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.13  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.

This, in short, is a picture of the man who in the next few years used his stolen millions to sweep into his ownership great railroad systems.  Croffut asserts that in 1861 he was worth $20,000,000 ;  other writers say that his wealth did not exceed $10,000,000.  He knew nothing of railroads, not even the first technical or supervising rudiments.  Upon one thing he depended and that alone :  the brute force of money with its auxiliaries, cunning, bribery and fraud.



________________________________

1 The “ New York Commercial,” an ultra-conservative financial and commercial publication, estimated in January, 1905, his annual income to be $72,000,000.  Obviously it has greatly increased every year.

2 “ Who Owns the United States,”—The Forum  Magazine, November, 1889.

3 Some glimpses of Vanderbilt’s activities and methods in his early career are obtainable from the court records.  In 1827 he was fined two penalties of $50 for refusing to move a steamboat called “The Thistle,” commanded by him, from a wharf on the North River in order to give berth to “The Legislature,” a competing steamboat.  His defence was that Adams, the harbor master, had no authority to compel him to move.  The lower courts decided against him, and the Supreme Court, on appeal, affirmed their judgment.  (Adams vs. Vanderbilt. Cowen’s Reports. Cases in Supreme Court of the State of New York, vii: 349-353.)
      In 1841 the Eagle Iron Works sued Vanderbilt for the sum of $2,957.15 which it claimed was due under a contract made by Vanderbilt on March 8, 1838.  This contract called for the payment by Vanderbilt of $10,500 in three installments for the building of an engine for the steamboat “ Wave.”  Vanderbilt paid $7,900, but refused to pay the remainder, on the ground that braces to the connecting rods were not supplied.  These braces, it was brought out in court, cost only $75 or $100.  The Supreme Court handed down a judgment against Vanderbilt.  An appeal was taken by Vanderbilt, and Judge Nelson, in the Supreme Court, in October, 1841, affirmed that judgment.— Vanderbilt vs. Eagle Iron Works, Wendell’s Reports, Cases in the Supreme Court of the State of New York, xxv : 665-668.

4 Proceedings of the New York Board of Aldermen, xlviii 423-431.

5 “ The Vanderbilts and the Story of Their Fortune,” by W.A. Croffut, 1886:45-46.

6 The Congressional Globe, First Session, Thirty-fifth Congress, 1857-58, iii:2839.

7 The case in chancery 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 apropriated 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.  Wetinore was a notorious lobbyist.  By fraud, Law and Roberts thus managed 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.

8 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. Tombs.—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.”

9 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.”

10 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).

11 Ibid., 795-796. The testimony of Fisher, 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.

12 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.
      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:98-126.) Thus this bold robbery was fully validated. 

13 Undoubtedly so, but the precise proportion it is impossible to ascertain.