Gotham_ A History of New York City to 1898 - Edwin G. Burrows [726]
Cornelius Vanderbilt was no Alexander Hamilton—he had zero qualms about speculative wheeling and dealing—but since he’d shifted from river to rails, by gaining control of the Harlem during the Civil War, he had been a model entrepreneur. Devoting himself to improving the old line’s management and equipment, by 1866 he had turned the Harlem into a going concern, but one whose future profitability, he realized, was imperiled by competition from the Hudson line. Vanderbilt, accordingly, bought control of the Hudson by purchasing its shares on the open market, in partnership with Leonard Jerome and John M. Tobin. Then he coordinated the former rivals’ schedules and rates.
Now it became apparent that the success of his combined operation, which ran to Albany, was at the mercy of yet another road, the New York Central, which controlled the traffic with Buffalo, the junction point with midwestern commerce. Vanderbilt decided to take over the Central too. Buying a minority holding on the open market, he proceeded to convince key Central stockholders—notably John Jacob Astor Jr.—that only by linking up with his roads and letting him manage the conjoint operation would the Central be able to stand up to its competitors for the western trade. By 1867 he had become president and was operating the Hudson and Central as an effective New Yorkto-Buffalo unit.
The roads flourished and paid high dividends. Vanderbilt accordingly issued a vast amount of new stock, nearly doubling the capitalization, arguing that the additional certificates were justified by anticipated earnings. Others had “watered” stock this way, but only to make quick speculative profits; Vanderbilt plowed much of the proceeds back into improvements.
In his new position as commander of the consolidated Central lines, Vanderbilt confronted yet another competitor, the old Erie Rail Road. It too ran from New York City to the Great Lakes. The Erie, moreover, was controlled by his old steamboat rival Daniel Drew, beneath whose pious and austere Methodist exterior beat the heart of a shark. Drew had repeatedly jerked the road’s stock price up or down, as suited his market gambit of the moment, and had launched periodic rate wars to win freight traffic away from the Central.
In 1867 Vanderbilt set out to capture Erie and oust Drew. Drew, seconded by new board members Fisk and Gould, prepared to repel the hostile takeover. The Commodore began by secretly buying up Erie stock, through dummy agents. To block Drew and company from issuing more stock, which would make his buyout harder, Vanderbilt prevailed upon Justice George G. Barnard of the Supreme Court, a Tammany man renowned for his favors to wealthy petitioners, to enjoin Erie from increasing its capitalization. But Drew, Fisk, and Gould evaded the ban and secretly threw millions of dollars of new Erie stock on the market, in effect churning out certificates as fast as Vanderbilt’s unsuspecting brokers could buy them. “If this printing-press don’t break down,” chortled Fisk, “I’ll be damned if I don’t give the old hog all he wants of Erie.”
Vanderbilt soon discovered the ruse but grimly kept buying, driving the price ever higher. Meanwhile, he got Judge Barnard to authorize the arrest of the Erie’s directors for contempt of court. Drew, Fisk, and Gould, one jump ahead of the law, gathered together the company records, baled up over seven million dollars’ worth of greenbacks, and literally decamped with the corporation, fleeing by ferry through the fog to Jersey City. There they set up headquarters at Taylor’s Hotel (promptly dubbed “Fort Taylor”), hired policemen and roughs to protect them from Vanderbilt vengeance, and settled in for a lengthy stay.
The Erie directors now opened up a second front. Their agents in Albany introduced a bill into the state legislature that would, in effect, retroactively legalize all their questionable stock issuances. The proposed bill also shrewdly forbade