The First Tycoon: The Epic Life of Cornelius Vanderbilt (61 page)

Thus the Commodore forced the Harlem to admit that he was right, even as he saved it from destruction. Within ten weeks, the railroad paid back his $100,000 with interest.
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The line would face further crises in the months to come, but Vanderbilt would be there to meet them. Once in Harlem, he would never leave.

FIVE POINTS WOULD HAVE
its say about William Walker. Despite the deception of his recruiters in New York, despite the scores who died of disease and blundering tactics in his army in Nicaragua, he remained the greatest purveyor of freelance violence of all, and a hero in Five Points. So when Walker arrived at Pier No. 1 on the North River on June 16, a mass of laborers and rowdies cheered him. They followed his carriage to City Hall Park, where he addressed a crowd of thousands.
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Walker's arrival troubled Vanderbilt, who feared that he was preparing a fresh invasion of Nicaragua. Shortly afterward the Commodore went to Washington to ask Buchanan if he would prevent it. Publicly the president made no comment; he wished to avoid antagonizing the South, which strongly supported the filibuster, especially after Walker had reinstituted slavery in Nicaragua (an act that did not survive his rule). In private, Buchanan seethed. “That man has done more injury to the commercial & political interests of the United States,” he wrote, “than any man living.” He said as much to Vanderbilt. If Walker moved he would be “crushed out.”
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Less reassuring was Buchanan's refusal to commit to the cause of the Accessory Transit Company. Though the president was eager to reopen the Nicaragua route, he didn't particularly care who did it, which meant that Vanderbilt had to race to defeat White's maturing schemes. The Commodore corresponded with General José María Cañas, who commanded Costa Rica's troops on the San Juan River, in an attempt to regain Accessory Transit's steamboats. (Cañas hinted that he could carve out a new republic for the company along the transit route, but Vanderbilt thought that was going a bit too far.) He asked Goicouria to write to Nicaragua's new government to persuade them that White could not be trusted. He took Horace Clark on a visit to the White House in an attempt to convince Buchanan to refuse recognition of Yrisarri—White's coconspirator—as Nicaragua's minister. Finally he sent Daniel Allen to Nicaragua as his personal representative. Above all else, Vanderbilt had to secure the property and transit rights before Walker launched a second expedition.
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He failed. On November 25, Walker landed with 270 men on Punta Arenas.
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All calculations regarding the transit route immediately became obsolete.

IN THE MID-1850S
, George Templeton Strong contemplated the metropolis of New York—from Alexander T. Stewart's gleaming marble department store at Broadway and Chambers to the squalor of Five Points to the domed Crystal Palace up on Forty-second Street—and marveled about it all in his diary. “There is poetry enough latent in the South Street merchant and the Wall Street financier,” he wrote;

in Stewart's snobby clerk chattering over ribbons and laces; in the omnibus driver that conveys them all from the day's work to the night's relaxation and repose; in the brutified denizen of the Points and the Hook; in the sumptuous star courtesan of Mercer Street thinking sadly of her village home; in the Fifth Avenue ballroom; in the Grace Church contrast of eternal vanity and new bonnets.
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This was the New York that Vanderbilt had helped to create: commercial, mobile, and individualistic—yet increasingly polarized into rich and poor. The age of unspecialized merchants and skilled artisans began to fade as mills, factories, banks, and railroads rose in their place. Most Americans still worked on their own farms, in their own shops, or for small partnerships or personal businesses, but New York (and New England) presaged a future of industrialization and incorporation, of stockholders, managers, and wage workers. Unquestionably the new economy worked wonders, creating a highly productive, exceedingly wealthy society; but in 1857 the great self-directed orchestra of New York threatened to break apart into cacophony and chaos.

In the middle of June, New York's policemen divided into two camps: the Metropolitan Police, organized by the Republican-controlled state legislature, and the Municipal Police, under the control of Mayor Wood. Skirmishes broke out over station houses; then an all-out battle erupted on the steps of the city hall as the largely Anglo-American Metropolitans tried to fight their way through a phalanx of largely Irish Municipals in order to arrest the mayor. On July 4 and again on the 8th, the conflict drew in the city's leading gangs, the Irish Dead Rabbits and the nativist Bowery Boys, the first fighting for the Municipals, the latter for the Metropolitans. Finally the state militia marched into the city to suppress what appeared to be an insurrection.
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Scarcely had this mayhem died away than the nation fell into the greatest financial crisis in twenty years—the Panic of 1857. In retrospect, the warnings of a collapse look all too clear. There was railroad overexpansion: of the twenty thousand miles of line built in the 1850s (tripling the total length of track), 2,500 were constructed in 1857 alone. There was the end of the Crimean War: Russian wheat now flooded the international market, hurting American exports. There was France's need for money: French banks borrowed from those in England, which raised English interest rates, which led British investors to sell off their American securities and invest at home, which undercut stock prices in the United States. And there was the heady effect of nearly nine years of California gold, which had fed speculation and inflated credit. Since the start of the gold rush, the number of banks in America had doubled, to more than 1,500. The monetary expansion reached a peak in early August. “And then there came on a sharp money market,” Vanderbilt recalled, “and everything broke down.”
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On August 24, the New York branch of the Ohio Life Insurance and Trust Company announced that it could no longer pay its bills. “The high credit enjoyed by that concern, and the fact that its solvency had hardly been questioned, made the failure a matter of… importance,” the
New York Herald
reported. It “opened the first great seal of the revulsion.” Constantly borrowing and lending in New York's intricate web of banks and investment houses, it ripped the financial lattice apart when it failed.
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On September 2, Vanderbilt welcomed his wife back from Europe. It would be the only happy event for many weeks to come, as banks and merchants collapsed. On the 18th, word spread through the city that the U.S. Mail steamship
Central America
(formerly the
George Law)
had sunk in a storm on its return from Panama. It was a terrible blow for Vanderbilt's troubled friend and ally Marshall Roberts, who was president of the corporation; already the North River Bank, of which Roberts owned half the stock, had failed and gone into liquidation. Even worse, the
Central America
carried down $1.6 million in gold from California, desperately needed in New York's constricted money market. In the afternoon, Vanderbilt went in person to the U.S. Mail office and asked for the details of the disaster. “He expressed his deep sympathy for the passengers on the ill-fated steamer,” the
New York Times
reported, “and commiserated with the Company [i.e., Roberts] for the heavy pecuniary loss entailed upon them by her loss.”
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“All confidence is lost, for the present, in the solvency of our merchant princes—and with good reason,” Strong wrote in his diary on September 27. “It is probable that every last one of them has been operating and gambling in stocks and railroad bonds.” Perhaps because he was a Wall Street lawyer, the financial catastrophe brought out the poet in his soul. “O Posterity, Posterity you can't think how bothered, bedeviled, careworn, and weary were your enlightened ancestors in their counting-rooms and offices and bank parlors during these bright days of September, A.D. 1857,” he wrote, two days later.

They are fighting hard for a grand, ugly house in the Fifth Avenue; for the gold and damask sofas and curtains that are ever shrouded in dingy coverings, save on the one night of every third year when they are unveiled to adorn the social martyrdom of five hundred perspiring friends. They are agonizing with unavailable securities, and pleading vainly for discount with stony-hearted directors and inflexible cashiers, lest they forfeit the privilege of inviting Joe Kernochan and Dan Fearing [two of the most prestigious leaders of elite society] to gorge and prose and stupefy over the barbaric splendors of an unwholesome dinner; that they may still yawn through the
Trovatore
in their own opera boxes; that they may be plagued with their own carriage horses and swindled by their own coachman instead of hiring a comfortable hack when they want a ride.

The
Times
echoed Strong's thoughts—in fact, it singled out Vanderbilt as a prime exemplar of what had brought the economy so low. “Commodore Vanderbilt, in his steam-yacht excursion, was just a type of the general Yankee who spends his money liberally and is as magnificent as his means will allow, and sometimes a good deal more so. That this extravagance can be carried much too far… a great many people have learned from their own experience.”
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Vanderbilt survived the great disaster with no sign of suffering. He must have felt
some
pain, for he could not levitate entirely above the great river of credit that carried the economy along. Yet it appears that he possessed deep cash reserves, and never failed to pay a bill or debt even in the worst of the storm. In early 1858, when the Mercantile Agency reported on the Allaire Works—a corporation that operated virtually as an extension of Vanderbilt's personal business—it observed, “They are [said] to be in [good] condition & to [have paid] all thro the panic. Have done & are [doing] a [good] bus. & are sold to freely.” No doubt all of his other agents, clerks, and companies also paid debts on time and in full.
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As the panic purged the city, Vanderbilt went to work each day as usual, down to his office on Bowling Green, behind the ticket desk to his private chamber in the rear, where he put on his reading glasses and reviewed letters and invoices and worried the cigar he kept clamped between his teeth. Sometime in September, Allan Campbell, the Harlem's president, came in to see him. The railroad could not pay its bills. Its own debtors refused to pay it, and its creditors would only take its acceptances (its corporate promissory notes) at the ruinous rate of 5 percent interest
per month
. “Commodore,” he pleaded, “how will we get along?”
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At the time, the railroad had large short-term notes coming due, endorsed by Daniel Drew. With the panic at full force, Drew refused to endorse a renewal of the notes. If he didn't sign, the creditors would refuse to extend the time for repayment. “He won't?” Vanderbilt asked Campbell. The railroad president said no. “He will!” the Commodore declared. “Go away, and mind your business, and I will send you the bonds.”

Twelve years later, Vanderbilt, with great relish, told a committee of the state legislature the story of what happened next. First, the board of directors put him in charge of managing the railroad's financial crisis.
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Then he called Drew in for a meeting, one that resulted in the Harlem's salvation—and that exposed the stark difference in temperament between these longtime partners and friends.

“I sent for Drew and he came to the office,” he recalled, “and I was signing these acceptances… and he says, ‘Commodore!’”

“Mr. Drew,” Vanderbilt replied, “how are you? Sit down there and sign these acceptances.” Drew was to be the primary endorser, Vanderbilt the secondary.

“Not one of 'em! Not one of 'em!”

“You will sign them all!” Vanderbilt insisted.

“Not one of them!” Drew proclaimed. “Are you crazy?”

“And [he] went on in that kind of strain, you know,” Vanderbilt recalled, “and I says, ‘No, I am not crazy, Mr. Drew!’”

“My God!” said the distraught Drew. “What are you going to do?”

“I am going to sign all these things, and you are too.”

“Where is the money to come from to pay it?”

“You and I will pay, if nobody else will,” Vanderbilt said. “Didn't you agree to? You have got one-half percent on the $400,000 that you have already signed. You have had that money, hain't you?”

“Yes,” Drew replied.

“I am going to do it, if it takes the coat off my back,” Vanderbilt said. “I am going to live up to it.” It was a moment that said everything about the Commodore at this stage of his life. His strict code of honor in business mattered more to him now than ever as he attained eminence among New York's merchants. He had promised to support the Harlem's credit, and so he would—and he would browbeat Drew into doing the same. As for Drew, he was a curious fellow: bold when he had every advantage, timid at all other times, he was the sort of financier who tried to run ahead of the changing wind rather than fight it. “I worked him up so that he signed them,” Vanderbilt recalled. “The old fellow was almost crying all the while.”

“Mr. Drew,” Vanderbilt said, when they were done, “you are one of the best receivers I ever knew, but about as bad a payer as I ever knew.” In return for Drew's half-percent commission, he offered to indemnify Drew completely and take on himself all responsibility for paying, should the railroad fail. Drew agreed. “He did not dare cheat me!” Vanderbilt recalled.
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