The First Tycoon: The Epic Life of Cornelius Vanderbilt (24 page)

Elsewhere in the house, James M. Cross waited anxiously with his wife, Phebe (Vanderbilt's eldest child), and their two-year-old son, Cornelius. They sat with the swarm of Vanderbilt's younger children and fretted. “We thought he would die,” Cross said. Vanderbilt's lawyer arrived and hurried into the sickroom. When he left, they were all called to Vanderbilt's bedside. The prostrate patriarch confirmed their fears; he said he would not live long. “Don't be too anxious to make money,” he told them. “There's enough for you all.” As Cross recalled, “That was the whole of his conversation.”
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It seemed as if the captain shared his flesh with his country—he quickened when it quickened, he struggled when it struggled. Just as three years before, he fell from a triumphant rise to a life-threatening illness as the country dropped from manic prosperity into crisis. From the East River to the Missouri River, from Boston to New Orleans, a financial panic now closed its grip on the nation. In Vanderbilt's house and out on the streets, no one believed in recovery. It appeared, as the evangelists of the Second Great Awakening had preached, that the end times had arrived.

It was so different a year earlier, when the island city was literally rising from the ashes. On December 16, 1835, a monstrous fire had burned out the commercial heart of New York. The ubiquitous Philip Hone saw everything. “When I arrived at the spot the scene exceeded all description,” he wrote; “the progress of the flames, like flashes of lightning, communicated in every direction, and a few minutes sufficed to level the lofty edifices on every side.” Afterward looters prowled the smoking ruins, getting drunk on recovered wine. “This will make the aristocracy haul in their horns!” they shouted. “Ah! They'll make no more five per cent dividends!”
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By the afternoon of December 17, though, gangs of workmen were “clearing the still warm rubble,” historians Edwin Burrows and Mike Wallace write. Rebuilding began at once. Banks, insurance companies, brokers, and merchants in the “burnt district” demolished brick shells and raised columned, classical structures along Wall Street. And so, Burrows and Wallace record, “the value of Manhattan real estate, registered at $143 million in 1835, mounted to $233 million within ten months.”

Stock and bond trading continued undisturbed in the aftermath of the great fire; in fact, it scudded ahead on a surge of speculation. Booming British textile mills boosted America's cotton-dependent economy; land prices soared, especially in the South. The number of banks exploded. Buoyed by specie and bountiful credits from Britain (itself enriched by exporting opium to China), giddy with optimism and the demands of capital-hungry borrowers, bankers radically expanded their loans. In the most extreme cases, western “wildcat” banks (named after the design on the notes of a particularly reckless Michigan institution) issued notes with little or no coin in reserve. The money supply inflated from $172 million to $276 million in just two years. The nation was on a winning streak, and it kept on spinning the wheel.
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Spinning the wheel was a connection that seemed more than a metaphor even at the time. “‘Sporting houses’ are in every part of town,” observed the
New York Herald
on October 5, 1836. “Several faro banks
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have just opened, which are much more replenished with real capital than half the banks in Michigan.” Gambling preoccupied society from high to low in this year of exuberance. “Literature, philosophy, and taste, are beginning to frequent the faro bank, and woman also has found an
entree
,” the
Herald
noted.

Prostitution flourished openly, and it, too, seemed stitched into the fabric of the times. When courtesan Helen Jewett was murdered that year, the
Herald
called her “the goddess of a large race of merchants, dealers, clerks, and their instruments,” who hired whores to entertain clients. Her brothel, intriguingly was in a building owned by John R. Livingston.
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Livingston's social equals might not have frequented brothels, but they certainly were sporting with their money. Many entered their horses in the Union Course races on Long Island. John C. Stevens and Samuel L. Gouverneur offered a thousand dollars to any man who could run ten miles in an hour. On Wall Street, Hone observed “the gambling in stocks” as a fever for canals and railroads that seized men with capital, or simply access to someone else's capital—Vanderbilt's, for instance. Throughout 1836 the buoyant captain extended credit to New York's eager businessmen. On April 5, he loaned two Staten Islanders $8,000; on May 3, he loaned a city merchant $15,000; on October 29, he and James Guyon loaned another Staten Islander $35,000. These were large sums (Hone gloated about selling his prime Broadway lot for $60,000), and he probably loaned more. It revealed the demand for credit on one hand and the captain's prosperity on the other—for this was merely a sideline, a way to keep his surplus cash busy earning 6 or 7 percent. Yet he was careful in his agreements, demanding valuable real estate on Staten Island, Coenties Slip, and Warren Street as collateral.
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All this told Andrew Jackson that he had caged the Monster only to spawn a nation of speculators. “The present bloat in the paper system cannot continue,” declared his ally, Senator Thomas “Old Bullion” Benton. “I did not join in putting down the paper currency of a national bank, to put up a national paper currency of a thousand local banks. I did not strike Caesar to make Anthony master of Rome.” On July 11, 1836, Jackson issued the Specie Circular, requiring coin, not banknotes, in payment for federal lands. Westward-moving settlers began to demand gold for their banknotes, making everyone worry about how long the shell game could go on.

On November 12, four days before the death of Vanderbilt's son George, Hone made a nervous entry in his diary. “There has been for some time past a severe pressure for money,” he wrote, “which continues, and I feel the effects of it. Stocks have fallen very much.” Jackson's redistribution of federal deposits was about to begin. “By this unnatural process,” Nicholas Biddle reported, “the specie of New York and other commercial cities is piled up in Western States… and while the West cannot use it—the East is suffering from the want of it.… Europe is alarmed and the Bank of England itself uneasy at the quantity of specie we possess.” The Bank of England began to restrict credit in order to reserve more silver in its vaults, and the tightening soon squeezed the United States. The bottom of the bag was beginning to tear.
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As the grim, gray new year dawned in 1837, Vanderbilt planned for death. For the previous three years he had begrudged various clerical tasks to his son-in-law, Daniel Allen; now he had to delegate a few basic responsibilities. He called Allen to his bedside and gave instructions. Allen went out into the winter air to Vanderbilt's office on South Street, then sat down to write letters, asking for an accounting from his father-in-law's agents. “Mr. Allen wrote a week or ten days since for the bills to be forwarded to him,” John W. Richmond informed Vanderbilt on January 24, 1837. “I have sent him a detailed statement of them.” He promised to deliver the originals at “the first interview with you or him.”
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For six weeks Vanderbilt was struggling, gasping, inert. Then there occurred something perhaps as straightforward as the response of his immune system, or the seeping of air out of the pocket outside his lung. Or perhaps the cliché applies—that he simply refused to die. There is no underestimating his force of will. Whatever the explanation, for the second time in three years he had avoided seemingly certain death. After a month and a half in bed, he found his feet again and wearily reentered the world of the living. There he discovered that the bottom had ripped out.

On February 25, a Wall Street broker named Joseph Hoxie visited Vanderbilt at his South Street office, where he sat, still weak, beside Daniel Allen. Hoxie explained that he came as an envoy from Nestor Houghton, one of the purchasers of the Elizabethtown ferry. Vanderbilt had just “lodged” (deposited for payment) Houghton's last promissory note for that transaction with his bank. There was a problem, however: Houghton couldn't pay it. Would the good captain be willing to renew the note?

Houghton's desperation marked a troubling shift in the wind. One by one, Vanderbilt's debtors began to default, forcing him to file lawsuits to seize the property they had mortgaged. Then, on March 13, the imposing new marble office building of I. & L. Joseph physically collapsed; at the end of the week, the firm stopped paying its bills, which “occasioned great consternation in Wall Street, for their business has been enormous,” Philip Hone recorded on March 17. “The great crisis is near at hand, if it has not already arrived.”
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That same day, Vanderbilt advertised the resumption of service on his People's Line to Providence, with his brother Jacob in command of the
Lexington
. On March 20, with its machinery repaired, galley stocked, and dishes replaced, the “far-famed” steamer eased out of Peck Slip, churned through Hell Gate, and sliced through the heavy seas of Long Island Sound. The
Providence Journal
announced its arrival, then went on to observe, “The
money market
in New York is still in a very precarious state.” This was an understatement. As the
Lexington
tied up at the India Dock in Providence, Hone wrote in his diary, “The prospects in Wall Street are getting worse and worse.… The accounts from England are very alarming; the panic prevails there as bad as here. Cotton has fallen. The loss on shipments will be very heavy, and American credits will be withdrawn. The paper of the southern and western merchants is coming back protested.”
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Hone's analysis was sound. Americans had climbed upward on a pyramid of debts that ultimately rested on high expectations for cotton prices. Instead, the restriction of credit by the Bank of England had been followed by a collapse of the cotton market. It was a classic speculative bubble. Hone had invested hope, and his supply of hope was gone.

“Philip Hone has gone to the d—1, figuratively speaking, having lost pretty much everything by his son… and by some speculation moreover, all of which have eased him out of not much below $200,000,” wrote another Wall Street diarist, the pious George Templeton Strong, in April. “Confidence annihilated, the whole community big and little, traveling to ruin in a body.” On May 3, he exclaimed, “So they go—smash, crash. Where in the name of wonder is there to be an end of it? Near two hundred and fifty failures thus far!”
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“We are in the midst of a great revolution,” the
New York Herald
proclaimed. “Wall street, and its business neighborhood, from river to river, has been for a week in a terrible convulsion. The banks—the merchants—the brokers—the speculators, have been rolling onward together in one undistinguishable mass, down the stream of bankruptcy and ruin.” A desperate mob attacked a warehouse where flour was stored, as radical Democrats rallied in the streets. “A deep and radical revolution for a year past has been ripening and ripening in politics as well as commerce,” the paper added. On May 9, the Dry Dock Bank locked its doors and refused to redeem its notes in gold and silver coin. “Crowds of exasperated creditors collected and great alarm prevailed,” Hone recorded. The other banks followed suit.
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Vanderbilt slithered unsinged through the financial fire. He had no speculative embarrassments, no debts pledged against consignments of cotton. True, the stocks he owned may have lost some of their market value; their dividends may have been suspended; the promissory notes he held may have gone unpaid. But he had demanded premium real estate as collateral; his property consisted largely of state-of-the-art steamboats; and his was a business that remained in demand. Indeed, he had an abundance of that most valuable item in a deflationary panic: cold, hard cash—piles of silver shillings and gold dollars paid for fares.
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Even weakened by illness, Vanderbilt remained an instinctive predator, and, like every predator, he was drawn to the scent of the sick and the vulnerable. To him, the great Panic of 1837 was a time for the hunt. He left his son-in-law Allen to manage the humdrum daily affairs of the steamers. Allen ordered supplies and paid bills, coordinated with captains, and met with merchants who had freight to ship. The nature of a maritime business fortuitously gave the enterprise a neatly compartmentalized structure. With each captain managing the personnel and daily affairs of his boat, the rest of the operational details could be handled by Allen in New York and a single agent in each port.
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Vanderbilt also hired a personal clerk in 1837: a native of Shrewsbury, New Jersey, named Lambert Wardell, who would stay by his side until his death. Looking back decades later, Wardell vividly remembered the day when, as an inconspicuous, unambitious twenty-two-year-old, he began to work for Vanderbilt. Like everyone else, he was overwhelmed by Vanderbilt's physical presence. His new employer “was a man of striking individuality,” he recalled, “as straight as an Indian, standing six feet in his stockings and weighing about two hundred pounds.” By the time Wardell started work, Vanderbilt had recovered from his near-fatal ailment; the new clerk found him to be “very strong” with “great powers of endurance,” a man who exuded raw energy. “His personal appearance was very neat.… He was very abstemious, being a light eater and never drank to any extent, not even at his meals, taking liquor only as medicine.” His only vice was smoking; he “always had a cigar in his mouth, either lit or unlit.” That iron self-control proved to be as important to his success as his ruthlessness; never did he let his emotions, or ambitions, get the best of him. “He never had a debt and never bought anything on credit,” Wardell declared (with some exaggeration). “He was economical almost to extremes.”
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