Chapter Seven
Prophets, it is written, find no honor in their own countries. Certainly Lieutenant William Tecumseh Sherman paid little heed to the two emissaries who loomed over his desk, carrying with them a sign that the earth was about to open and swallow them all. What they held in their hands would even transform the life of a steamboat proprietor and railroad president now three thousand miles away.
It was March or April of 1848, in the Pacific coastal village of Monterey, in the recently conquered Mexican province of Alta California. The two men had ridden down from the settlement of Johann Augustus Sutter to speak to California's military governor, Colonel Richard B. Mason. They had found their way to this simple two-story adobe building, climbed the exterior staircase, and stepped into the upper level, where they now spoke to Lieutenant Sherman in the North American accents of U.S. citizens. Sutter had sent them, they announced, “on special business, and they wanted to see Governor Mason in person,” Sherman recalled. He waved them into Mason's office; before long the governor came to the door and asked Sherman to join them.
On Mason's desk, in the wrinkles of some sheets of paper that had been folded and unfolded, sat a few yellow, metallic lumps. Mason gestured to them and asked of Sherman, “What is that?” The young lieutenant picked up a couple of the larger pieces, unusually heavy for their size, and turned them over, peering closely at them. “Is it gold?” he asked in return. The governor responded with yet another question: Had Sherman ever seen “native gold”—that is, unrefined gold ore?
He had, in fact, though never in such large chunks. He polished a piece—“the metallic lustre was perfect,” he remembered—and bit down on it. It yielded, as gold would. Shouting through the door to his own assistant, he called for a hatchet from the backyard. When the soldier returned with one, Sherman raised it up and with the blunt end proceeded to hammer the biggest lump flat. Without question, it was gold.1
Sherman saw little significance in the nuggets he battered down on Governor Mason's desk. He was a tall twenty-eight-year-old, his head bristling with red hair, not to mention ambition, as might be expected of an intelligent West Point graduate. A little over a year earlier, he had landed at Monterey Bay after 198 days at sea, eager to win glory. He would not win it in California. The province had fallen to U.S. forces almost without resistance. When his academy classmates would tell one day of their bravery in the war, he wrote, “I will have to blush and say I have not heard a hostile shot.”
He did enjoy hunting “deer and bear in the mountains back of the Carmel Mission,” he wrote years later, “and ducks and geese in the plains of Salinas.” He also mingled with the residents of Monterey who, like Californians as a whole, were few—a mix of Mexicans, white emigrants from the states, and Indians. He joined in fandangos, poked his head into Mass at the Catholic church, and explored the countryside. On the whole, he found California to be “dry and barren,” poor and unpleasant, not equal to two counties of Ohio or Kentucky. He hardly expected it to produce more gold than he had just seen. As he wrote at the time, “California is a humbug.”2
Mason handed Sherman a letter from Sutter that explained matters. A man named James W. Marshall had found the gold in a tailrace, or water chute, for the wheel of a sawmill that he had been building for Sutter on the edges of the Sierra Nevada Mountains, forty miles above Sutter's settlement. Sutter had sent the messengers with a request for title to the mill land. At Mason's request, Sherman wrote that the governor could not help; California was still technically Mexican territory, and the laws of the United States did not yet apply. But, he added, “as there were no settlements within forty miles, he was not likely to be disturbed by trespassers.”3
Rarely has a prediction of the future been so utterly wrong.
NEW YORK'S NEW YEAR IN 1848 began as it always did, with one of the annual traditions that marked the march across the calendar in the island city. Moving Day, for example, arrived on May 1, the day when leases expired, as they had since Dutch times, the day when furniture-laden wagons rattled and cracked against each other in dense herds on almost every street. Evacuation Day, the celebration of the British army's departure from Manhattan on November 25, 1783, saw parades, thirteen-gun salutes, and mobs of revelers. And the first of the year brought the tradition of the New Year's Day call, a custom practiced in New York by the elite—the wealthy and respectable—who debarked from private carriages before the brownstone townhouses that shouldered together in the streets radiating from Washington Square, and that increasingly lined Fifth Avenue north, reaching nearly to Twentieth Street. To meet the torrent of visitors, women fortified themselves in their parlors amid rosewood and red satin, dispatching servants to usher in the gentlemen who raced up the steps to make their calls, stopping long enough to hand off their hats and remark on the weather. George Templeton Strong, a rising young lawyer in Wall Street, informed his diary that he made eighty calls by six o'clock one New Year's Day, “and got home at last, tolerably tired.”4
Neither Strong nor any other wealthy and respectable diarist is known to have recorded a visit to 10 Washington Place, to the parlor of Sophia Vanderbilt. That was her husband's fault. When the Mercantile Agency the nation's first credit bureau, first reported on Vanderbilt in 1853, it examined his character as much as his finances (since it reported on businessmen, not consumers, it attempted to assess the general trustworthiness of its subjects). The result says much about the attitude of New York's establishment toward the self-made Vanderbilt. “Started early in life as master of a [small] sailing craft between Staten Island & New York City. Manifested great ability & enterprize, & was taken hold of by the [late] Wm. [sic] Gibbons of New Jersey,” observed its reporter. “From this position Vanderbilt has risen to great prosperity in his way. He has a [large] fortune.” These words were honest, respectful, and only slightly snide. Unfortunately for Vanderbilt, it was a long report. After the commercial judgment came the social, and it was blunt: “He is illiterate & boorish, [very] austere & offensive & has made himself [very] unpopular with the inhabitants of Staten Island, so much so that his leaving there is subject of great rejoicing by the inhabitants & was manifested by a public jubilee.” Among the Astors and Aspinwalls, the Schuylers and Grinnells, Cornelius Vanderbilt did not belong. He had no place in their traditions.5
Outwardly, Vanderbilt seemed impervious to the snickers from those who drove their carriages past his new home on their way to the Astor Place Opera House.6 In many ways, he was destroying tradition as rapidly as possible. His career had disrupted ancient ways of life by facilitating a new mobility in society, breaking down barriers between markets, and introducing a fierce competitiveness that had become central to American culture. Now he had taken in hand the most important kind of business of the nineteenth century, the railroad.
In 1840, he had prophesied to the chief engineer of the Stonington, “If I owned the road, I'd know how to make it profitable.” As president of the line he brought his prediction to fruition. He expanded local traffic and dramatically improved its financial position. On May 1, 1848, he completed a new set of tracks that eliminated the ferry in Providence that had been such a bottleneck. In June, the railroad hosted a party for the leading businessmen of Boston to herald a new junction with the Boston & Providence. In December, the Stonington won lavish praise in the press. “This route is, without question, the shortest, directest, and easiest now in use” between Boston and New York, commented the Independent. “The cars are comfortable, and their motion equable and noiseless. The boats to Stonington are magnificent.… Throughout the whole route there is full proof of care, energy, and competency, which justify the rapidly growing popularity of this route.” Perhaps most important, under Vanderbilt's management the long-bankrupt line paid $65,000 in dividends that year.7
“Mr. Vanderbilt, the well-known Admiral of the Sound,” in the words of one newspaper, had held on to his interests in the “magnificent” boats that steamed between Stonington and New York's teeming slips.8 As he had assured the Stonington's chief engineer, when he finally owned the road, he owned the boats, too—though they were managed by Daniel Drew through the New Jersey Steam Navigation Company.
The year 1848 marked a high point of the partnership that Vanderbilt and Drew formed in the aftermath of their collision on the Hudson in 1831. For seventeen years each had taken a stake in the other's enterprises, neatly insuring against competition from the man he most respected. On Long Island Sound, they carried their cooperation beyond mere mutual nonaggression. With control of both trains and boats, they had eliminated the adversarial relationship between land and sea that had bedeviled the Stonington during the presidency of the hapless Courtlandt Palmer.
Vanderbilt and Drew took their partnership from business operations to the stock market. The model for what they now did with the Stonington took shape no later than 1844, when Drew had joined Isaac Newton and Nelson Robinson to buy control of the Mohawk & Hudson River Railroad. They had planned to divert its passengers and freight onto the People's Line boats, and to acquire (as they would explain in court in 1848) “the profits to be derived from the purchase and sale of stock.” Once they took control of a corporation, Drew and his partners gained first access to information that would drive the price of its stock, from potential problems to impending deals to the number and disposition of its shares in the market. They could also manipulate the share price, so they could buy or sell in advance of a manufactured rise or fall in the stock. Drew's passion for insider trading (as dealing in the stock of one's own corporation came to be known) made him a good credit risk in the eyes of the Mercantile Agency. Writing a decade later, in reference to another railroad that Drew controlled, an agency reporter observed, “He is inside & knows its fluctuations & bearings, & he is shrewd [enough] to take [good] care of himself. He may therefore be regarded as reliable [for his debts].” It was all perfectly legal. When Drew had to explain his behavior in court, it was not in a criminal case, but in a civil lawsuit filed by a junior partner of Drew, Robinson & Co., who felt that he had been cheated out of his share of the profits. That junior partner was Daniel B. Allen.9
Drew made few such revelations. He, Vanderbilt, Newton, and Robinson profited by keeping their operations and arrangements to themselves. “It would be difficult to find the real wealth of [Vanderbilt],” the Mercantile Agency observed. “It must, however, be great.” When their names came up for discussion, the same adjectives appeared again and again: “smart… shrewd… cunning.”
Of all this cunning crowd, no one, not even Vanderbilt, was sharper than Drew's senior partner in Drew, Robinson & Co. Though both Drew and Vanderbilt understood the dynamics of the stock market exceptionally well, it was Nelson Robinson who worked “the Street,” as Wall Street was called. (“Wall Street” was itself a nickname for the stock exchange, formally called the New York Stock and Exchange Board.) There he won a reputation as “one of the shrewdest and keenest operators,” as he made trades among the crowd of unlicensed brokers who gathered on the curb outside the Merchants' Exchange and inside on the floor of the great hall where formal transactions took place. He mastered the brokers' arts—not simply buying and selling at the right price, but also managing the terms, such as the number of days allowed to close a transaction, and whether the buyer or seller would be able to select the day within that window to make payment or delivery. Perhaps most important, Robinson understood the magic of perceptions—the whispered rumor to shape the mood of the market, the daily feat of acting to fool the brokers who studied his face, the trades conducted anonymously through other brokers to mask his real movements.10
Secrecy in such operations served a political purpose as well. Many Jacksonians had never fully reconciled themselves to corporations, let alone to “stockjobbing” and “speculation,” two of the worst insults an orator or editorialist could imagine. Even at the half century, the notion of dividing a company into shares, treating each share as property, and then allowing its value to fluctuate, just seemed wrong, even immoral to them.11
The rabble and their rousers were not the only Americans who had difficulty grasping the abstractions of the new economy. Most of those merchants and lawyers who paid New Year's calls on Fifth Avenue—not to mention the businessmen in smaller towns and villages around the country—still worked in personal enterprises, owned by single proprietors or small partnerships. Corporations remained so few that the stock exchange traded shares—and bonds—one at a time. The vice president of the Stock and Exchange Board called each one from the chair, brokers on the floor shouted bids and offers, and clerks recorded the trades on a large blackboard. Then they had lunch. Then they ran through the entire list once again.
As early as 1819, Chief Justice John Marshall had expounded on the corporation as “an artificial being, invisible, intangible,” but even corporate officials had difficulty with such abstract thinking. They used “company” as a plural noun, as in, “The company are in renewed trouble for their floating debts.” They saw the corporation as a gathering of individuals, as a kind of partnership—which it usually was, since few were very large or had widely traded stock.12 They placed great emphasis on the “par value” of stock, usually set at $100 per share. This represented the original investment in a company; it was expected that the total value of all its shares would equal the cost of the physical capital—land, buildings, machinery, livestock. A stock certificate might be a slip of paper, but it was thought to represent something real, much as paper currency represented cold, hard gold that could be retrieved on demand from a bank's vault.
With this physical, tangible basis for the price of stock, most investors did not buy in hopes that values would consistently rise, as they would in later centuries; that would have made no sense, since share prices ultimately rested on what it had cost to physically create the company, not how much it earned. They looked instead to a return on that cost in the form of dividends—often referred to as “interest on capital.” Share prices fluctuated, of course, but the most important factor driving them was the size and regularity of dividends. A price over par—above $100—was a premium paid for the certainty of a reliable return. A price below implied risk, uncertainty, even a dread conviction that dividends would never come. (Speculators did gamble on the prices of highly volatile, “fancy” stocks, but these were expected to go up and down, rather than rise steadily and permanently.)
It is easy to dismiss Vanderbilt and Drew's stock operations as mere corruption, as corporate profiteering of a type all too familiar to later generations. Indeed, they were corrupt, even by the broad social standards of their own time. When such dealings surfaced, contemporaries scorched these men with abuse, even though no laws prohibited their behavior. Social disdain for Vanderbilt, “illiterate & boorish,” and Drew, the former cattle drover, suffused such commentary.
But it is a mistake to simply adopt the condescension and derision of the contemporary social elite. This view ignores a critical fact: Vanderbilt and Drew's business careers, coming in the first half of the nineteenth century, were acts of imagination. In this age of the corporation's infancy, they and their conspirators created a world of the mind, a world that would last into the twenty-first century. At a time when even many businessmen could not see beyond the physical, the tangible, they embraced abstractions never known before in daily life. They saw that a group of men sitting around a table could conjure “an artificial being, invisible, intangible,” that could outlive them all. They saw how stocks could be driven up or dropped in value, how they could be played like a flute to command more capital than the incorporators could muster on their own. They saw that everything in the economy could be further abstracted into a substanceless something that might be bought or sold, that a banknote or promissory note or the right to buy a share of stock at a certain price could all be traded at prices that varied from day to day. The subtle eye of the boorish boatman saw this invisible architecture, and grasped its innumerable possibilities.13
It is important to remember that the corporation originated in mercantilism. Legal historian Morton J. Horwitz describes it as “an association between state and private interests for public purposes.” (The mercantilist character of early corporations led Adam Smith to denounce them as “a sort of enlarged monopolies.”) Over time it changed character until, Horwitz writes, “the corporate form had developed into a convenient legal device for limiting risks and promoting continuity in the pursuit of private advantage.” Eventually it became just another way of organizing a business.14
But not yet. In 1848, the corporation was still emerging out of a political conflict over the best way to create commercial facilities for the public good (namely banks and transportation infrastructure—turnpikes, canals, and railroads). Whigs had favored direct government action, from the Bank of the United States to state-owned railroads such as the Michigan Central, or else public-private partnerships, as in the Camden & Amboy Railroad. Jacksonians had wanted to limit government, fearing that “the money power” would capture it to enhance the advantages of the wealthy over their fellow citizens; like Adam Smith, they viewed corporations with a jealous eye. The Panic of 1837 had proved decisive in resolving this debate. In its wake, canals and railroads had failed, discrediting state-owned “internal improvements.” But the need for such public works remained. And so, for all the Jacksonian dread of “stockjobbers,” the task of building railroads and other large projects fell to privately funded business corporations. That created a paradox: the nation's public works, the carriers of commerce and means of travel, were owned by private parties, who operated them for personal gain.15 Because of this, Vanderbilt's position as a corporate executive gave him an increasingly public role, one that would grow over time until he became the foremost symbol of this public-private paradox. In the popular mind, that role began not with the Stonington Railroad, but with a far more ambitious enterprise yet to come.
At fifty-four, Vanderbilt could look back on a career of breathtaking leaps of imagination. Steamboats and railroads, fare wars, market-division agreements, and corporations: all were virtually unknown in America when he mastered them. He understood the emerging invisible world far better than those who condescended to him. And this knowledge was about to serve him better than he could have dreamed. He was about to imagine a work of global significance—to create a channel of commerce that would help make the United States a truly continental nation. In the process, a most perplexing collision of public and private interests would embroil him in great-power diplomacy, international finance, and a bitter war between a half-dozen sovereign nations. And it was all because of a frenzy that now began three thousand miles from 10 Washington Place.
IN APRIL 1848, in the northeastern corner of the great peninsula that extended like a thumb to enclose San Francisco Bay, some two hundred buildings could be counted in the village of Yerba Buena. They included some 145 houses, a dozen stores, and perhaps thirty-five shanties. Clustered in a sandy basin beneath steep hills and ridges, the town formed a convenient port close to the Golden Gate, with the promise of steady growth as Americans trickled into California. To assist that growth, the leading citizens had decided to change Yerba Buena's name to that of the bay—San Francisco. Already the population had risen from around two hundred in 1846 to as much as a thousand.
By the end of May, they were gone. Sand blew through deserted streets. Ships sailed through the Gate, rounded the northeastern corner of the peninsula, and dropped anchor in front of those two hundred empty buildings; then their crews scurried overboard, never to return. Over the previous few weeks, visitors from the upper country had brought rumors of gold near Sutter's settlement of New Helvetia; then men who had panned and dug for gold themselves had brought the yellow evidence to town. “The inhabitants began gradually, in bands and singly, to desert their previous occupations, and betake themselves to the American River,” wrote a resident. “Soon all business and work, except the most urgent, was forced to be stopped.… About the end of May we left San Francisco almost a desert place.”16
The craze soon struck Monterey. “As the spring and summer of 1848 advanced,” William T. Sherman recalled, “the reports came faster and faster from the gold-mines at Sutter's saw-mill. Stories reached us of fabulous discoveries, and spread throughout the land. Everybody was talking of ‘Gold! gold!!’ until it assumed the character of a fever. Some of our soldiers began to desert; citizens were fitting out trains of wagons and pack-mules to go to the mines.”17
Nothing could have been more predictable than the rush to the “diggings,” as they were called. Gold was not simply worth money—it was money. Anyone could take refined gold (and refining was a relatively simple process) to the United States Mint and have it poured into coin. The earth was spitting up cash. Who wouldn't have gone?
In late June, Lieutenant Sherman convinced Colonel Mason that they must visit the diggings in order to report on the find. With four soldiers, Mason's black servant, “and a good outfit of horses and pack-mules,” they journeyed up to the mines. “I recall the scene as perfectly today as though it were yesterday,” Sherman wrote decades later. “In the midst of a broken country, all parched and dried by the hot sun of July, sparsely wooded with live-oaks and straggling pines, lay the valley of the American River, with its bold mountain stream coming out of the snowy mountains to the east.” Along a gravel floodplain adjacent to the river, “men were digging, and filling buckets with the finer earth and gravel,” which they poured into roughly made sifters. Sherman estimated that about four men worked each sifter, and each man earned an average of an ounce of gold—$16—per day, though they often pulled in twice as much. “The sun blazed down on the heads of the miners with tropical heat, the water was bitter cold, and all hands were either standing in the water or had their clothes wet all the time; yet there were no complaints of rheumatism or cold.”
When Mason and Sherman returned to Monterey, they learned that the Mexican War had ended, and California would remain American territory. The troops began to desert by the company, riding to the mountains to take raw money out of the water and the dirt. “Nearly all business ceased,” Sherman wrote, “except that connected with gold.”18
It soon became clear just how much business could be connected with gold. Well before the end of the year, men began trickling back to San Francisco to start businesses to serve the thousands who poured off ships that sailed in growing numbers through the Golden Gate. California was one of the most remote parts of the new American empire—as much as six months' voyage from the Atlantic coast around Cape Horn—yet already its residents could see that something enormous had started there, something that would have repercussions far beyond the mountains and the bay.
IN MARCH 1847, Merchant's Magazine had published a survey of the commercial potential of the recently conquered territory of Upper California. “The Indians,” the writer added, “have always said there were mines, but refused to give their locality”19
Cornelius Vanderbilt, like most New York businessmen, paid little attention to reports of secret Indian gold. He had other concerns. In 1848, he took over the presidency of the Elizabethport Ferry Company, now paying a 20 percent dividend (that is, $20 per share).*1 That same year, Oroondates Mauran died. On March 1, Vanderbilt bought Mauran's shares of their joint enterprises from his estate, buying full control of the Staten Island Ferry for $80,000, along with various parcels of real estate.20
Before the end of the year, Vanderbilt developed his own health problems. He began to suffer heart palpitations. His heart started beating faster and faster, until “it was impossible to count its pulsations,” Dr. Linsly recalled. “At first these attacks lasted a few hours only. They increased at last to twenty-four hours' duration, and in 1848 Dr. Edward Johnson and I were with him sometimes all night and he was a great sufferer.” Given the state of medical knowledge, Linsly and Johnson likely made things worse. George Templeton Strong for one seriously considered homeopathy as an alternative to conventional medicine, “with emetics and cathartics and blistering and bleeding and all the horrors, the anticipation of which makes the doctor's entry give me such a sinking of spirit.”21
Vanderbilt survived his beating heart, blistered skin, and bleeding veins, only to learn that something strange was going on in the world. Rumors circulated of gold in California—real gold, not a figment of Indian legends. The rumors quickly found their way to the stock exchange, where brokers sucked in all commercial information, good or bad. With his ear to the Street, or at least to Nelson Robinson's lips, Vanderbilt would have heard the stories early on. On December 5, 1848, President Polk formally announced the discovery in his annual written message to Congress. “The accounts of the abundance of gold in that country are of such an extraordinary character as would scarcely command belief,” he reported, “were they not corroborated by the authentic reports of officers in the public service.” Horace Greeley proclaimed in the New York Tribune, “We are on the brink of the Age of Gold.”22
Many wealthy New Yorkers feared an age of inflation. “This California business worries me sadly,” Strong wrote on January 25, 1849. “Suppose… the circulating medium of the world should suddenly be increased by a third or a quarter? Where should I be then? Of course, without any loss whatever, one-third or one-fourth poorer.” On January 22, the venerable merchant James G. King voiced the same concerns to Baring Brothers, the esteemed London bankers. “The news from California… cannot fail to have much effect here upon prices, inducing speculation, &c.,” he wrote from New York. “Meanwhile, there is quite an emigration from this country to that region, although the journey is long and perilous.”
As King observed, greed, rather than fear, seized most Americans. One by one, Strong counted friends who organized partnerships of a dozen or more men to buy supplies, outfit a ship, and sail around Cape Horn for the Golden Gate. “The frenzy continues to increase every day,” he observed on January 29. “It seems as if the Atlantic Coast was to be depopulated, such swarms of people are leaving it for the new El Dorado. It is the most remarkable emigration on record in the history of man since the days of the Crusades.” In the twelve months following President Polk's announcement, no less than 762 vessels departed North American ports for California; by April 19, 1849, 226 would sail from New York alone, carrying nearly twenty thousand people.23
The calculation in Vanderbilt's set was much too cold for either fear or frenzy. Clearly this extraordinary development offered new opportunities. Daniel Allen seems to have concocted the group's first gold-rush scheme. On February 2, he convened a meeting of twenty-one men, including himself, to organize the California Navigation Company of New York. Vanderbilt attended, as did nearly his entire circle, including Drew, Jacob Vanderbilt, shipbuilder Jeremiah Simonson, steam-engine manufacturer Theodosius F. Secor, Staten Islander Daniel Van Duzer, Allen's brother William, and Vanderbilt's son Billy. They paid in a total capital of $21,630, divided into twenty-one shares. With this sum they purchased a schooner, the James L. Day, and built a seventy-foot steamboat named Sacramento. The completed steamer was cut into three pieces and placed on the schooner; they planned to have it reassembled in San Francisco, in order to steam between that port and the Sacramento River landings that served the diggings.
It was an ingenious plan, though it followed the model of many small emigration companies. For example, the agreement obliged each of the shareholders to serve as a crewman on the schooner and steamboat or provide a substitute. Vanderbilt had no intention of going, but he thought the expedition offered a suitable start in life for his disappointing son, Cornelius Jeremiah, now eighteen years old. On March 4, 1849, Corneil (as he was called) shipped out under the billowing canvas of the James L. Day as it sailed out of New York Harbor, on a voyage that would change him forever.24
Did Vanderbilt stand on the dock and wave good-bye to his son? He gave little sign to his associates of sentimentality and his daughter Mary would recall his “ill-treatment” of Corneil at this time.25 Yet the day would come when he would quietly confess his concern, even his compassion, for the boy.
In business, his mind was occupied by larger matters than his single share in the California Navigation Company. At each stage of his career, he had seized control of the most important channel of transportation in the young country's growing economy. Now tens of thousands proved desperate to travel to San Francisco, an enormous journey that commanded equally enormous fares. If he were to enter this market, he faced fierce competition from both familiar and unfamiliar rivals.
Two men—two utterly contradictory men—stood in his way, thanks to a confluence of forces so unusual as to verge on the bizarre. Long before anyone had heard of Sutter's mill, George Law, the canal contractor, and William H. Aspinwall, a merchant at the pinnacle of New York society had joined with the federal government and a pair of political fixers to establish steamship lines to the Pacific coast. Purely by coincidence, they put their first ships in place just as the gold rush began.
The project originated, in a sense, with a slogan: “Fifty-four forty or fight,” battle cry of expansionist James K. Polk in the presidential election of 1844. He came into office determined to annex Oregon, a task he completed in 1846. The next question was how to establish mail service to this distant territory, separated from the organized states by thousands of miles of wilderness. A glance at the map suggested the sea, with a land crossing at the narrowest point in Central America, across the Isthmus of Panama.
But who would pay for such a line? Who would operate it? This was the golden age of laissez-faire Democrats who believed in competitive private enterprise rather than government rewards for a favored few. In 1846, for example, President Polk vetoed a bill to improve harbors and river navigation, calling it an inappropriate and extravagant use of federal money. Unfortunately, businessmen saw no profit in sailing thousands of miles to carry a handful of letters for a few thousand settlers; maintaining a strong link to the Pacific was a matter of national, not private, interest. But there was no public institution capable of carrying out the massive operation. With the extremely important exception of the Post Office, the federal government boasted only a few hundred civilian employees, and played a less active role in the economy than many states. Jacksonian Democrats faced a conflict between their laissez-faire dogma and their territorial expansionism. Expansionism won. Polk's Democratic administration embraced Whig notions as Washington embarked on a scheme to subsidize private enterprise on an unprecedented scale.26
Congress and the State Department prepared the way. In 1846, the South American republic of New Granada (later called Colombia) agreed to a treaty that guaranteed Americans free and safe passage across its province of Panama. Congress passed legislation that offered public funds for private carriers to establish a line to the Pacific coast. In 1847, it directed that the contract for the Atlantic passage (between New York, New Orleans, Havana, and the Panamanian port of Chagres) be given to “Colonel” Albert G. Sloo; the contract for the Pacific (from Panama to points in California and Oregon) went to Arnold Harris.27
These were curious choices. Harris was a resident of Nashville and Sloo of Cincinnati—cities not generally thought of as ocean ports. Rather, the two men represented a new creature in American life, at least at the federal level: they were “dummies.” In some cases, dummies served as front men for other parties; more often, they were political connivers who used their contacts to obtain government privileges which they had no means—or intention—of using themselves, but promptly sold to real entrepreneurs. On August 17, Sloo essentially sold his contract to a group headed by George Law (including Marshall O. Roberts, Prosper M. Wet-more, Robert C. Wetmore, and Edwin Croswell). The federal government would pay these gentlemen $290,000 a year in return for two steamship voyages per month to Chagres. From there the mail would be carried by canoe and mule over the isthmus to the city of Panama, where it would be taken by steamships constructed by William H. Aspinwall, the merchant who bought the Pacific contract from Harris on November 19, 1847, three days after he had received it. Aspinwall would be paid $14,510 per voyage, or $348,250 per year, for his services. In some respects, these deals validated the Jacksonian critique of government largesse, offering a foreshadowing of the corruption that would creep into government in the aftermath of the Mexican War.28
Law's role in this contract-flipping subsidy speculation did not exactly shock political insiders. With his large, blunt head, his thick, wavy hair piled above overhanging brows, hard eyes, and a long, heavy nose, he resembled nothing so much as a prizefighter—and he spoke like one, too. “I ain't a-going to give you the money today,” he snapped on one occasion, with regard to a disputed bill. “I have nothing to do with that 'ere account. It belongs to the company to pay.” The Mercantile Agency, that mouthpiece of establishment opinion, later observed, “He is reported to be sharp & over-reaching in his transactions & dealt with accordingly.… Knows how to take care of his money but [has] little regard for the feelings or interests of others.”29
Law, of course, had defeated Vanderbilt in the famed steamboat race of 1847; but it was conniving rather than racing that defined his career. As a contractor on the Croton aqueduct and other projects, Law had learned the craft of lobbying—or simply bribing—public officeholders. He also knew how to arrange deals. With such talents, he easily gathered more highly esteemed businessmen—notably Marshall Roberts and the Wetmores—to form the United States Mail Steamship Company to build and run the five steamships demanded by his contract with the federal government.30
Aspinwall's role, on the other hand, surprised many. Born in 1807 into a family of prominent New York merchants, he rose to become senior partner of the esteemed firm of Howland & Aspinwall. Unlike Law or Vanderbilt, he received countless callers each New Year's Day at his richly appointed house. “Made a very satisfactory call there,” recorded the snooty Strong on January 1, 1846. “His arrangements, by the by, house and furniture both, are really magnificent.” Aspinwall was, Strong later wrote, “a merchant prince and one of our first citizens.”31
Aspinwall's overseas mercantile business revealed possibilities that his Manhattan-bound peers did not see. In 1847, with the federal subsidy in hand, he created the Pacific Mail Steamship Company to operate his half of the mail route. His corporation outpaced Law's U.S. Mail, building larger ships faster, and positioned its first vessels on the Pacific just as the torrent to California began to gush. When the scope of the rush became clear, Aspinwall helped organize the Panama Railroad to span the isthmus. Ticket buyers besieged the office of Pacific Mail as it continued to bank its huge federal subsidy. It is worth noting that, despite the romantic image of the gold-rush wagon train and dust-covered stagecoach, the steamship lines provided the primary means of travel and commerce between California and the East. They immediately became a very big business, one that would continue for two decades.32
To seize that business for himself, Cornelius Vanderbilt conceived perhaps the boldest plan of his entire career. It would require the help of his old associates, his family, the mercantile establishment, and still others. It would require his own political fixer—not as a dummy, but as an insider who could negotiate as an equal with officeholders at home and abroad. He planned to divert that golden torrent from Panama to a channel of his own making: a canal across the republic of Nicaragua.
Vanderbilt never revealed where his idea originated. Others had proposed much the same plan before. Louis Napoléon Bonaparte (Emperor Napoléon I's nephew) had championed a canal a few years earlier, though escape from imprisonment, the tumult of a revolution, and winning election to the French presidency had left him otherwise occupied. In the waning days of the Mexican War, even before gold had been discovered in California, American newspapers and magazines had frequently reported on a possible canal and transit route across Nicaragua.33 As was often pointed out, there seemed to be an obvious route, following natural waterways: up the San Juan River, which ran some 120 miles from the Atlantic up to Lake Nicaragua; across the lake's 110-mile width; then down a short twelve-mile land excavation to the Pacific, or a channel northwest through Lake Managua.34
But perhaps something deeper than maps and magazine articles drove his thinking. Vanderbilt had yet to hit upon a grand work he believed he was meant to build; no line of steamboats, not even the Stonington Railroad, loomed large enough. But an interoceanic canal—that would be a monument to enshrine his name in glory forever.
VANDERBILT'S SON CORNEIL first saw the Golden Gate from sea. The name (which predated the gold rush) appeared obvious to anyone sailing the rugged coast to where it suddenly broke open to reveal the great bay—“the glory of the western world,” as one man called it. Sailing through the Gate, the thin and sickly eighteen-year-old passed between mountains that rose straight up from the water, “the little stream tumbling from the rocks among the green wood,” in the words of a traveler, “and the wild game standing out from the cliffs or frolicking among the brush, and the seal barking in the water.”35 It was a fittingly grand entrance to the greatest treasure trove in history.
For five months, Corneil had blistered his hands as a crewman on the James L. Day, sailing down tropical coasts, crashing through the titanic storms of Cape Horn, sailing up the Chilean shore. Two of the twenty-one aboard had died. Finally, on August 5, 1849, Captain John Van Pelt gave the order to drop anchor at San Francisco. Where once had been a sleepy village, Corneil now saw bedlam. Workmen milled about the shore, leveling the countless sand hills, dumping the dust and dirt into the bay, pounding in pilings and planking down piers. Tents pimpled the flats all about the town, tents of all descriptions—canvas, blankets, and branches stripped from trees. Some served as homes and some as shops, with bags of coffee, barrels of foodstuffs, and stacks of bricks and lumber on display. Men, mules, horses, and carts lumbered up and down ungraded dirt streets, fighting through clouds of dust—or, after heavy rains, through quicksand that sucked horses down to their ears, along with the drays they pulled.
And everywhere Corneil saw men—almost only men—all eager to head for the mines or make money from those who were going. At the time the James L. Day sailed through the Gate, one resident counted some two hundred ships in the bay, from virtually every nation with a port on the Pacific. Russians and Australians, Peruvian Indians and Indian Brahmins, Japanese, Mexicans, and Maori, all passed up and down on urgent business. The town was “crowded with human beings from every corner of the universe and of every tongue—all excited and busy, plotting, speaking, working, buying and selling town lots, and beach and water lots, shiploads of every kind of assorted merchandise, the ships themselves, if they could.”36
No sooner had the Day pulled into port and the crew begun to unload the disassembled hull of the steamboat than Corneil deserted. Three others abandoned ship with him. He slipped into a town populated largely by young men awash in money with no authorities to inhibit their impulses. Making his way past the tents and shanties into the city's center, he discovered the finest buildings in San Francisco: “Gambling saloons, glittering like fairy palaces,” as a citizen wrote a few years later, “studding nearly all sides of the plaza, and every street in its neighborhood.… Monté, faro, roulette, rondo, rouge et noir and vingt-[et-]un, were the games chiefly played. In the larger saloons, beautiful and well-dressed women dealt out the cards or turned the roulette wheel, while lascivious pictures hung on the walls. A band of music and numberless blazing lamps gave animation and a feeling of joyous rapture to the scene.” All night the gambling went on, with runaway sailors and runaway slaves elbowing between wealthy merchants and ministers of the gospel, all drinking, eating, smoking, gaming.
Gold was everywhere, in solid lumps or bags of dust, thrown about carelessly, measured indifferently, won and lost at the tables with stunning rapidity (as much as $20,000 riding on a hand, it was said). And with the money and the revelry came violence—a flashing knife over a contemptuous word, the crack of a revolver over an attempted theft, a flurry of fistfights and formal duels. “And everybody made money,” wrote our San Franciscan, “and was suddenly growing rich.”
It is difficult to know how all this affected young Corneil, because we know so little of his childhood—just a fleeting image of a furtive second son, overshadowed by his overbearing father, occasionally seized by epileptic fits. But he landed in this most impressive place at an early and impressionable age. By every indication, the San Francisco of 1849 stamped him with its image—a city of gamblers and speculators, confidence men and killers. Cornelius J. Vanderbilt stood in the saloons that remained open all night, swam through cigar smoke and shouted over blaring music, smiled at female card dealers and calmed belligerent miners, learning to talk, learning to charm.
The fever of the place infected even Captain Van Pelt of the James L. Day. He and his crew reassembled the steamboat Sacramento and started to run it up the eponymous river on September 14; meanwhile his second-in-command, James S. Nash, took command of the schooner and entered the carrying trade on the bay. And they made money, and suddenly grew rich. Within two months, the Sacramento earned a profit of $40,000, and the James L. Day another $10,000. Unfortunately for Vanderbilt and the other owners, Captain Van Pelt allied himself with a San Franciscan, James H. Fisk of Turner, Fisk & Co., who saw no reason to remit such earnings all the way across the continent. Fisk and Van Pelt decided to auction off the two boats, even though they had no authority to do so. They named a time just before the departure of a Pacific Mail steamship from San Francisco, an hour when the city's merchants were frantically busy with correspondence and consignments of gold for the Atlantic coast. Then Fisk held the auction fifteen minutes ahead of schedule. With no other bidders, he bought the boats himself at ridiculously low prices. He soon sold them, winning a very large profit.
Corneil, on the other hand, did not do so well. Not long after abandoning ship, he ran out of money, most likely at the tables, and issued a draft on his father—a draft his father refused to honor.37 But it was the excitement rather than the bad debt that endured in his memory. It is impossible to contemplate the Corneil of later years without imagining that he carried with him those heady days of utter abandonment and strained to his utmost to recapture them. “Happy the man who can tell of those things which he saw and perhaps himself did, at San Francisco at that time,” wrote our witness. San Francisco would haunt Corneil to the end.
THEY CALLED HIM “INDIANA WHITE,” though the records of the House of Representatives name him Joseph L. White. Curiously, his contemporaries never described his physical appearance; he seems to have cut an eminently forgettable figure. It was his voice they remarked on, his gift for rhetorical explosions and diamond-cutting logic. In 1840 he emerged from an obscure youth in upstate New York, where he had studied law, to become a powerful speaker in Indiana for presidential candidate William Henry Harrison. White was “the most fascinating orator that ever mounted a stump in the state,” in the words of one newspaper. “Probably since stump speaking was invented no effort was ever received with such unqualified and extravagant delight, not merely by the ‘roughs,’ who could appreciate its ‘hits,’ but by cultivated men, who could penetrate its arguments.” He won election to the House that year as a Whig. In Washington he withered, much to everyone's surprise. He possessed “a genius,” the same writer observed, “that only lacked the balance of character to be one of the most powerful men in the nation.” Perhaps, in his only term in Congress, his unbalance began to reveal itself.
Still, White was smart, in every sense that word carried in 1843, when he moved to New York and started to practice law. “He was one of the most social and genial men I have ever met, and a most engaging and eloquent conversationalist,” remarked one New Yorker. “His apropos speeches, his witty and good-humored repartees, were inimitable.” He emerges from these accounts as a highly confident man of sharp wit, a sophisticated and well-connected charmer, a master of both courtroom histrionics and backroom negotiations. As a former politician, he also had ties to the new Whig administration of Zachary Taylor, elected president in 1848. He was, in short, a fixer.38
How and when Vanderbilt first approached White remains uncertain, though two dates suggest the moment when they joined in the Nicaragua canal project. On March 24, 1849, Vanderbilt resigned the presidency of the Elizabethport Ferry Company, as if to concentrate his efforts on something else. On March 29, White sent a letter from a hotel in Washington, D.C., to the new secretary of state, former Delaware senator John M. Clayton. “I have come from New York expressly to see you on business of importance, & which admits of no delay,” he wrote. “Will you oblige me by writing a note, informing me at what hour to day or tomorrow I can see you privately.… I have come on behalf of seven New York gentlemen & on their errand. I know something of your engagements, & would not press for an interview under ordinary circumstances.”39
Clearly White was an emphatic man, impressed with his own importance. In this case, though, he understood his audience. Back in 1835, Senator Clayton had sponsored a bill to encourage Americans to dig a canal across Nicaragua. Now he came into office as secretary of state with U.S. territory on the Pacific, massive quantities of gold coming out of California, and tens of thousands of Americans migrating there. The canal idea had grown dramatically more important for American foreign policy. Clayton listened with great interest as White told him that Vanderbilt had organized the American Atlantic & Pacific Ship Canal Company, and had dispatched David White (Joseph's brother) to Nicaragua to negotiate with the government there.
Not many days later, Clayton appointed Ephraim G. Squier the chargé d'affaires to Guatemala (the chief diplomatic post in Central America). “Considering the motive which influenced you to make this appointment so speedily,” Joseph White wrote to Clayton on April 3, “those with whom I am associated & myself… express their & my very sincere acknowledgments to you; and I beg you to examine this written assurance, that under no possible combination of circumstances will I fail to reciprocate this great favor in any mode which you may designate.”
This curious letter reveals White as not only emphatic, but insinuating as well—not to mention vain. He assumed Squier's appointment had been a favor, to be repaid on demand. It was an assumption that came naturally to the scheming brain of a political fixer. Clayton, by contrast, was a very high-minded man, focused not on rewarding friends but on public policy. Ignorant of this, White blustered on, listing orders that should be given to Squier to assist in the canal intrigues—“instruct him to avoid my brother (now in Nicaragua) in securing the grant”—and assuring Clayton that the company's tolls would discriminate against the British in favor of American ships.
If he thought this would prove appealing, he was mistaken. Clayton believed that any canal must be neutral, or it would lead to “more bloody and expensive wars than the struggle for Gibraltar had caused to England and Spain.” Yet he seems to have tolerated White's insinuations in order to accomplish the larger goal. As he wrote in his instructions to Squier, “A passage across the isthmus may be indispensable to maintain the relations between the United States and their new territories on the Pacific; and a canal from ocean to ocean might, and probably would, empty much of the treasures of the Pacific into the lap of this country.” Clayton thought that the canal was essential to the national interest, but he also knew that Congress would never fund its construction. He needed Vanderbilt and his backers as much as they needed him.40
Joseph White happened to reveal to Clayton the names of those backers, who have previously escaped historical notice. The original organizers of the canal company included Cornelius Vanderbilt, of course, along with White and his brother David, merchants Nathaniel H. Wolfe and Edmund H. Miller, and three Wall Street firms: Livingston, Wells & Co.; Hoyt & Hunt; and Bowden, Groesbeck & Bridgham. The last-named firm suggests the disguised involvement of Daniel Drew, for David Groesbeck was one of Drew's personal brokers and close allies.41
They were not the only American businessmen seeking the rights to a crossing in Nicaragua. No sooner had Squier arrived there than he learned that another firm claimed to have signed an agreement with the government that granted them monopoly rights for a canal or railroad across the isthmus.42 Vanderbilt's canal project had scarcely begun, and already it was mired in the political jungles of Central America.
ON AUGUST 26, DAVID WHITE signed a contract with the Nicaraguan government. It gave the exclusive right to build a canal to Vanderbilt's American Atlantic & Pacific Ship Canal Company in return for $10,000 a year, 20 percent of the annual profits, and a stake in the business. “It will also be observed that the grant is not only for a canal, but for a rail or carriage road,” Ephraim Squier wrote to Clayton, “a provision which will enable the company to open a route at once across this isthmus, more rapid, easier, cheaper, safer, and more pleasant, than that by Panama. In distance, this route will save 300 miles on the Atlantic and upwards of 800 on the Pacific.”43
For Vanderbilt, the transit route promised to make his Nicaragua adventure profitable during the prolonged canal construction by allowing him to carry passengers across the isthmus. But he may not have realized how lucky he was to get any contract at all. White negotiated it during a rare moment of peace and unity in a country whose divisions would plague Vanderbilt in ways he scarcely imagined in 1849.
The Spanish built cities in Nicaragua a century before Squanto taught the Pilgrims to plant corn, but they left an inheritance of perpetual civil war. When Spain's empire collapsed in 1821, Nicaragua briefly fell under Mexican rule; then it joined the United Provinces of Central America from 1823 to 1838, when it finally assumed full sovereignty. Independence, unfortunately, brought little sense of national cohesion. Unlike virtually every other former Spanish province, it lacked a single metropolitan center. Two cities—León and Granada—fought for dominance. As in other Latin American nations, two parties, generically known as the Liberals and the Conservatives,*2 dominated politics, but here they were identified with the two cities: the Liberals made a bastion of León, while the Conservatives were entrenched in Granada. The cities' patricians waged war without end, fighting less out of ideology than geographical rivalry, commanding armies of unmotivated Indians and mestizos who were dragooned out of the sparse population of only 275,000 or so. In 1849 alone, no less than three men declared themselves the supreme director, as the Nicaraguan chief executive was called. “Nothing exists but our misfortune,” declared a government report. “One man fights another, one family opposes another, one town attacks another, all with such a variety of different interests that we will never be able to form a state.”44
Fortunately for Vanderbilt, a popular uprising united Nicaragua's warring elite in 1849. They joined forces to suppress the rebellion, and executed its bandit leader a month before they signed the canal contract (superseding the agreement with the rival company, which had been negotiated before the settlement of the civil war). The unity government embraced Vanderbilt's proposal; for centuries, Nicaraguans had dreamed of a canal that would bring the riches of the world through their borders. “Where is… the patriot, the wise man,” asked one Nicaraguan newspaper, “who does not want to see this productive project carried out?” Enthusiasm for the North Americans swept the country, as Squier arranged a treaty that promised U.S. protection to Nicaragua.45
The enthusiasm was mutual. “Certain American citizens, whose judgment, energy, and pecuniary responsibility need no better voucher than the designation of ‘Cornelius Vanderbilt and others’… have chosen that [canal route] which follows the river St. Juan and crosses the Nicaragua lake,” rejoiced the United States Magazine and Democratic Review, an influential Democratic Party journal. “But,” it added, “suddenly there arises a lion in the path—that is to say, a sort of lion.”
Yes, a lion. Vanderbilt had slipped through the shoals of Nicaragua's civil wars through sheer good luck, only to confront the opposition of America's most persistent European rival: Great Britain. As soon as he secured his contract with Nicaragua, the British consul in New York published a warning, forbidding him to begin work on the canal.46 What had begun as a simple business venture was fast becoming the epicenter of dangerous tensions between Washington and London. If ever Vanderbilt needed the services of Joseph White, it would be now. The Anglo-American conflict over Nicaragua would require intensive diplomacy at the highest levels, and more than once it would threaten to descend into war.
Ever since the War of Independence, a significant proportion of Americans had nursed a resentment of Britain as the monarchical antithesis of republican ideals. More to the point, tensions between the two nations had flared over their influence in Latin America after the collapse of the Spanish empire. Despite the promulgation of the Monroe Doctrine in 1823, Britain had largely filled the vacuum left by Spain in Central America. Leapfrogging from the colonies of Jamaica and British Honduras (later Belize), English merchants had come to dominate the region's trade. In 1841, the British had extended their sway by proclaiming a protectorate over the “kingdom” of the Miskito (corrupted to “Mosquito” by the British) Indians on Nicaragua's sparsely populated Atlantic coast. The Nicaraguans regarded it as an insult to their sovereignty—an insult the British had compounded in 1848, when they had occupied San Juan del Norte and renamed it Greytown to block any canal or transit route. In the United States, where the burning of Washington in the War of 1812 remained a living memory, the sight of the Royal Navy guarding the mouth of the San Juan River looked like an act of war. “Better by far to lose California and Oregon,” the United States Magazine and Democratic Review wrote, than “Britain or any other great power should… stand in the way between us and our own.”47
Not all Americans breathed fire and steel. Secretary of State Clayton, for one, wanted an accommodation. The canal was a strategic imperative, he wrote to Abbott Lawrence, the United States minister to Great Britain. “Without some such ship navigation, it may be difficult, at some future period, to maintain our government over California and Oregon.” He instructed Lawrence to offer a neutral canal, open to all on equal terms.48
Clayton's initiative was complicated by a common problem in nineteenth-century global diplomacy: the independence of local agents, who operated for weeks or months without instructions from their capitals. The seizure of San Juan del Norte (to be called Greytown hereafter) was the work of the intrusive Frederick Chatfield, Britain's man in Central America since 1834, who worried that Nicaragua would be “overrun by American adventurers.” He recommended that the entire country be put under “a protectorate… favorable to British interests.”49 Lord Palmerston, the foreign secretary, took a dim view of the often-belligerent United States and generally supported Chatfield. But the rest of the British government feared the consequences of being too belligerent over too little of consequence. Prime Minister Lord John Russell declared that the Mosquito protectorate was “not worth a barrel of gunpowder on either side.”50
London responded to Clayton's overtures by sending a new minister, Sir Henry Lytton Bulwer, who presented his credentials in Washington at the end of November 1849. Palmerston had given him the mission of making a comprehensive settlement. He was to agree to an American-built canal in Nicaragua, but without ceding the Mosquito protectorate. The sly and polished Bulwer would prove more than equal to the task.
Joseph White checked into the Thomas Irving House in Washington just as Bulwer arrived in the capital. With the future of the canal company resting on these negotiations, he called on the new British minister. Bulwer, by definition, was a man of the world; he realized that he could take advantage of White's vanity and taste for intrigue. “In America nothing is done with the Govt.,” Bulwer wrote. “One must influence the people who influence the Govt.” He subtly cultivated White, in part by letting White cultivate him. Knowing the huge cost of building a canal, Bulwer dangled the bait of British capitalists, hinting that they wanted to buy a large stake once a treaty had been signed. White abruptly abandoned his anglophobic rhetoric of the year before. Why, he and his associates had been surprised that Nicaragua should give the United States special advantages over Britain. The canal contract would be amended at once!51
As 1850 began, Clayton and Bulwer threw themselves into crafting a politically viable agreement. The American public would not accept a permanent British presence on the Mosquito Coast, and with the South in an uproar over California's request to be admitted to the Union as a free state, President Taylor could not afford to look weak. But imperial pride would not allow the British to recede. “Sir H. L. Bulwer & I am again at variance,” Clayton wrote on February 10. “The Nicaragua question… may be settled—but will not be unless he agrees to abandon the Mosquito claim. I have many forebodings about this matter—yet I shall try hard to settle it.”52
THE FATE OF THE CANAL depended on this intricate international statecraft, but Vanderbilt had little choice but to go ahead as he awaited the outcome. He threw himelf into the task of turning the American Atlantic & Pacific Ship Canal Company into a functioning corporation. For the moment, that required him to start up the transit business, the carrying of passengers across Nicaragua by steamboats on the San Juan River and Lake Nicaragua and a short carriage road to the Pacific. It was an integral aspect of the canal project (engineers and supplies had to be moved into the interior), but it also promised immediate profits once it was linked with a steamship line on both oceans. The demand for steamer berths from New York to San Francisco remained so high that the Pacific Mail and U.S. Mail Steamship companies began to compete against each other on both sides of Panama. Other lines were entering the fray as well.53
On May 14, 1849, Vanderbilt had resigned the presidency of the Stonington Railroad, a step that reveals how central Nicaragua had become to his career.54 That year, as cholera swept New York, he attended to both the corporate and physical vessels of the canal company. He divided into 192 the shares held by the eight partners, for ease of trading. Then he went to the shipyard of his nephew Jeremiah Simonson, near Corlears Hook on the East River.
Simonson had inherited the firm Bishop & Simonson, which now faced bankruptcy. According to rumors in the shipbuilding trade, its chief problem was the spendthrift ways of Vanderbilt's “prodigal” nephew. “He lives in first rate style,” the Mercantile Agency observed, “keeps a fast horse and spends his money freely with his associates.” When he asked for credit, lenders turned to Vanderbilt to cosign the notes. With Simonson's failure looming, Vanderbilt decided to purchase the shipyard, though he would leave it in the care of his nephew, who, for all his faults, knew how to build boats. Vanderbilt also sketched plans for an oceangoing steam ship. At some 1,200 tons, it would be one of the largest and fastest of its kind in the world. He would call it Prometheus.55
His next step would be a firsthand inspection of the canal and transit route. At three o'clock in the afternoon on December 13, 1849, he boarded the steamship Crescent City at Pier No. 2 on Manhattan's North River waterfront, accompanied by his brother Jacob and David White. It was a brisk winter day, yet thousands of spectators crowded onto the docks, even clambered aboard schooners and brigs moored in the slips. They came to witness the “singular sight,” as the New York Herald called it, of four steamships departing at the same time. Three of these enormous vessels—the Crescent City, the Ohio, and the Cherokee—were headed for Chagres, Panama, carrying hundreds of California-bound passengers. The Vanderbilts and White had to fight a crowd on the gangway and the deck that loomed high above the pier, and push through “a large number of female friends of the passengers,” as the Herald observed, “promenading the decks, viewing the cabins, sitting around the stoves, or taking a last fond farewell, with a merry, ringing laugh, or with streaming eyes, according to the disposition of each.”56
Many women remained aboard as passengers when the crew let slip the hawsers that held the Crescent City to the pier. “Going to California has ceased to be regarded as the formidable undertaking it once was,” the reporter noted. On shore, fewer watchers waved hats and cheered as the multistory paddlewheels churned against the Hudson, smoke surging out of the great stacks that rose amidships between supplementary masts and rigging. To a businessman such as Vanderbilt, all this was telling. The very ordinariness of the event, the abundance of female passengers, and the fact that three steamships could be packed full of California passengers on the same day confirmed the size and endurance of the gold rush. It would not end soon.
Those steamships also revealed the fact that New York was the primary point of departure for voyages to San Francisco. Though far up the Atlantic coast from Panama, it was the most important city in the United States, easily reached by rail or steamboat from elsewhere in the Northeast. As one historian notes, New York had a “unique position as the national city-system's hub.” Travelers to California came from across the settled states to New York to make their departure.57
It was inevitable that Vanderbilt should go to survey the route for himself. In nineteenth-century terms, he was a “practical” businessman who attended to technical details to organize and direct the operation. As the Crescent City sailed south, he would observe weather, currents, and other aspects that could add or subtract days from each voyage. But he had a specific task at hand: to fetch the newly purchased Orus, a river steamer now in Panama, tow it to Greytown, and pilot it up the San Juan River. More intriguing than his task was his choice of company. Along with his brother and David White, he rode with the man who owned the Crescent City, one Charles Morgan.
At fifty-four, Morgan was a year younger than Vanderbilt, though with his thinning hair, wrinkled jowl, and bulbous nose that hung like a ripe pear between two large, cautious eyes, he made a decidedly poor contrast with his tall, athletic guest. In 1809, at the age of fourteen, Morgan had moved to New York from Long Island and had gone to work as a clerk. Ten years later, he had accumulated enough money to buy a share in a sailing ship; he eventually bought stakes in eighteen packet ships on ten lines, as well as some fifteen merchant vessels that plied European and Caribbean ports. He had moved into coastal steamers through James P. Allaire, Vanderbilt's own tutor in steamboats, and established a line on the Gulf of Mexico upon the annexation of Texas. He purchased Theodosius F. Secor's machine works in New York, built his own steamships, and now competed in the California traffic, making him a potential rival.58
But Morgan's position also made him a potential ally and investor. Indeed, his biographer believes he was one of the original partners in the canal company—unlikely, but possible, since he could have disguised his share. In the small world of New York's steamboat entrepreneurs, he and Vanderbilt surely knew each other well. Unfortunately for their planned visit to Nicaragua, four days out of New York the cross rail supporting the engine of the Crescent City snapped. Powerless, the ship drifted on the ocean swells until a brig, the Roscoe, happened by. The Roscoe took on board Morgan and the Vanderbilt party and carried them to Havana. On December 30, Morgan took a sailing ship to New Orleans, and the Vanderbilt brothers boarded the Ohio to return to New York, abandoning their journey to Nicaragua. White took passage to Chagres to fetch the Orus.59
If Vanderbilt failed at one task, he succeeded in another. In his search for investors in the canal, he appears to have aroused Morgan's interest. Certainly the two respected each other as businessmen. Morgan shared Vanderbilt's instinctive understanding of when to take a risk, as well as his discipline and caution. (Like Daniel Drew, Morgan was highly reticent about his business, and committed little to paper that would survive his lifetime.)60 The would-be rival was becoming a friend. If only Vanderbilt knew how costly that friend's ultimate betrayal would prove to be.
EVEN AS JOSEPH L. WHITE told lies to Sir Henry Lytton Bulwer, Vanderbilt searched out the truth for Governor Hamilton Fish. On his return to New York from Havana, he had traveled to Albany on mysterious business—though most of what he did was mysterious, for secrecy was one of the highest business virtues. But secrecy was quite a different thing from falsehood. Vanderbilt continued to cultivate his reputation as a man of his word, even if his words were few. This aspect of his character helps explain why New York's social elite continued to work with him, even seek him out, though they would never invite him to their houses for dinner. Austere and offensive Vanderbilt may have been—benevolent and polished he was not—but Fish knew that he was honest. And so, when the Commodore entered Fish's office on that mysterious errand, the governor brought up another, rather delicate, matter.
Fish boasted a head of thick, dark hair, along with an elaborate swell of cheek whiskers and a wide, heavy-lipped mouth that made him look rather like a grouper. He also laid claim to leadership of one of the first families of New York. His father had been a Federalist and a close friend of Alexander Hamilton, his namesake; he himself had served in the U.S. House of Representatives as a Whig, and had won the gubernatorial election in 1848. His problem now was that someone had told him that Addison G. Jerome, a prominent Wall Street figure, had spoken ill of him. The reported insult forced Fish to rethink some of his business or political plans. But was the story true?
Vanderbilt promised to look into it. “Upon investigation of the conduct of Mr. Jerome,” he wrote, “I have come to the conclusion that your mind has been abused. I am satisfied that every charge made against him relative to his conduct towards you is false.” The rumor's substance remains unknown, but Vanderbilt was unforgiving toward such intrigues. “It is extremely hard,” he added, “that an upright, honourable man should be put down by the base fabrications of foul and designing men.”61
He already may have grown uncomfortable with the highly designing Joseph White. On February 21, Vanderbilt stayed away from a formal dinner given by the canal company in honor of Eduardo Carcache, the Nicaraguan minister to the United States. White made the keynote toast; glib as ever, he boasted of his intimacy with Bulwer and insinuatingly alluded to matters of state that he could not discuss “without violating confidences.” It was the sort of self-important performance that Vanderbilt despised.62
As events swept forward in 1850, White's personality began to create problems for Vanderbilt's company. True, the year began well enough: on February 24, under headlines that announced Daniel Webster's intent to forge a compromise to settle the disputes between North and South, the New York Herald declared that Bulwer and Clayton had reached a settlement, to be ratified later as the Clayton-Bulwer Treaty It guaranteed the neutrality of the canal and barred Greytown's authorities from interfering with the company, though the British officials and fleet remained. The next good news came on March 9, when Nicaragua incorporated the American Atlantic & Pacific Ship Canal Company. But then some of White's letters fell into the hands of Nicaragua's leaders.63
“The letters from Mr. Joseph L. White,” Squier wrote to Clayton from Nicaragua, “were past all precedent egotistical, and calculated to leave the impression that the individual above named was charged with the entire business of arranging affairs with Sir Henry Bulwer.… ‘I stipulated this,’ and ‘I did that’ are the burthen of every sentence. Mr. White,” he added, “is unquestionably what the Yankees term a ‘smart’ man, but a most inveterate, indiscriminating, and indiscreet talker.… The General-in-Chief of the State, and other leading men, have openly expressed to me their disgust.”64 It was only a hint of the trouble White would cause.
Still, the treaty had been completed, allowing the canal to go forward. If White was, in Squier's judgment, “fitted for little beyond talking,” at least his talk had accomplished what Vanderbilt had required of him. As the company's counsel, his verbal dexterity soon would be needed for one more essential task: to open the bank accounts of those British investors who Bulwer had promised were eager to invest.
In the meantime, Vanderbilt moved the work of the company forward. He called a meeting of the board on April 24, and directed the incorporating partners to pay the first installment on the stock they had taken, to pay for the Orus and the riverboats now under construction. When the first new boat, the Director, was completed on July 1, he had it sent down to Nicaragua with a corps of engineers who would survey the canal route. He hired Orville Childs, the former chief engineer of New York State, to lead this team. Newspaper editors began to puff up the project, listing its advantages in distance, speed of crossing, and climate over the Panama route.65
Vanderbilt kept his hand in numerous other enterprises, of course, from the real estate he owned on Coenties Slip and Warren Street, to the Staten Island Ferry, to his post as a director of the Hartford & New Haven Railroad, now paying 10 percent annual dividends (with an extra 5 percent in the fall). But he let go of his last link to the Stonington, resigning the seat on the board he had held after stepping down as president.66
Another event occurred that year that had far more obvious repercussions. On Independence Day, President Taylor fell ill after a ceremony in extremely hot weather at the Washington Monument. Less than a week later, he was dead. A victorious general in Mexico, the popular Taylor had been an implacable nationalist who had refused to bend to pressure from his native South during the still-unresolved California admission crisis. “He was a good and upright man, such as is uncommon in high office,” George Templeton Strong wrote in his diary, “[and] everybody North and South had a vague sort of implicit confidence in him, which would have enabled him to guide us through our present complications.” He left the White House to Millard Fillmore, an unknown quantity in the midst of the ongoing crisis.67
At the end of September, the Prometheus slid down the rails at Simon-son's (that is, Vanderbilt's) shipyard, splashing into the East River. It was Vanderbilt's first oceangoing steamship, and perhaps his finest vessel to date. “V has superintended her construction himself,” the New York Tribune wrote on October 1, “and the builder has made her a first-class vessel.” Measured at more than 1,200 tons and 230 feet, with clean lines and enormous sidewheels, it promised to be the swiftest ship in the California trade.68
Everything seemed to be in place. Nicaragua had signed the contracts and issued the corporate charter; the United States and Great Britain had come to terms; riverboats were on the scene or on their way; and now Vanderbilt had launched the first ship for the Nicaragua transit line. Only one thing was lacking: money. And there was only one place where it would be found. No sooner had the hull of the Prometheus been towed to the Allaire machine works for the installation of its boilers and pistons than Vanderbilt and Joseph White boarded a different steamship, bound for London.
IF ANYONE DOUBTED that progress could serve to obscure the world, a carriage ride through London might have been proof enough. Here were all the wonders of civilization, from the cupolas of St. Paul's Cathedral to the crowded docks, where laborers swarmed over ships to unload goods from around the globe. Unfortunately, those wonders often were invisible, thanks to innumerable hearths of burning coal. When White and Vanderbilt rode in a coach through the crooked lanes of the great metropolis in October 1850, they, like characters in Charles Dickens's Bleak House, might well have asked “whether there was a great fire anywhere? For the streets were so full of dense brown smoke that scarcely anything was to be seen.”
For Vanderbilt, on a personal level, the impact and implications of this transatlantic journey remain as obscure as London itself. We can only guess. For one thing, the sheer size of the imperial capital must have been a revelation. Millions milled through “the dirtiest and darkest streets that ever were seen in the world” (in Dickens's words), down lanes lined with ancient monuments and architectural marvels unknown in the United States. This transatlantic voyage was Vanderbilt's first; for him, as for so many other Americans who crossed the ocean, to discover London was to discover the world.
His very presence on this mission speaks of a particular, perhaps growing, confidence. Three more years would pass before the Mercantile Agency pronounced him “boorish” and “offensive,” suggesting that he retained the crude manners of a Staten Island mariner. Yet no longer would he let White serve as sole interlocutor for the canal company. He conferred with Lord Palmerston himself during this visit—though it is unknown whether Vanderbilt kept his ever-present cigar clamped between his teeth, or spoke in curses and double negatives, as had been his wont.69
Vanderbilt and White journeyed from their hotel through the streets of the City the heart of the metropolis and the financial capital of the globe, to a building around the corner from the Bank of England, at 8 Bishopsgate Street: the grand offices of Baring Brothers & Co. The firm was perhaps the foremost merchant bank in the world, rivaling the combined wealth of the international Rothschild clan. After ninety years in business, Baring Brothers carried such weight in world affairs that a common saying counted the company as one of the great powers of Europe, alongside Britain, France, and Russia.
Vanderbilt and White were ushered in and conducted past “a hollow square,” as one historian described the central office, wherein worked a “corps of bookkeepers, clerks, copyists, and accountants, almost all perched on high stools facing the grillwork topping the high, continuous desk.” They passed from this chamber into a conference room, perhaps, or into the office of Thomas Baring or one of the other managing partners.70 In those private quarters, Vanderbilt and White explained the Nicaraguan grant, the treaty, and Bulwer's promise that English capitalists would invest. They offered Baring Brothers an equal stake in the canal company—a 50 percent share.
In this office, as at Rothschild & Sons, as with Sir J. H. Pelly, as elsewhere, Vanderbilt and White met with raised eyebrows. A Baring Brothers partner wrote that the hastiness of the proposal surprised them: “There appeared no information that could be used as to the profitability of making a canal or of the cost of constructing it.”
The Americans went back to their hotel as the various merchant bankers they had approached put together a joint position on the canal, which they communicated in a letter on October 14. “If, after organisation, surveys, & estimates, it shall appear that a canal can be made at a cost that would offer a fair return for the capital needed,” they declared, “we will endeavor to get English capital to join in completing it.” As one of the financiers summarized their response, “The matter is not ripe for the present.”71
The next day, the Baring partners read with surprise a gross distortion of their position in the financial columns of the London Times. “The junction of the Atlantic and Pacific may almost be regarded as a work commenced,” the story began. White's hyperbole and insinuations echoed throughout the piece. “It is the grandest physical work the world can witness.… A promise was given to Sir Henry Bulwer that an equal participation in the enterprise should be offered to this country on reasonable terms. To fulfil that pledge two commissioners from the company, Messrs. White and Vanderbilt, arrived in London… and after a short period of negotiation a satisfactory arrangement was completed this afternoon.” It was a planted story—White's own London fog.72
“C. Vanderbilt & Joseph L. White of New York have been here in regard to the Nicaragua Ship Canal,” Baring Brothers wrote to Thomas W. Ward, the firm's agent in Boston. “We see in the Times and [London] Globe that they would make more of [what was agreed] than [was] said here.… We don't think anyone knows at present whether the canal is practicable or not, therefore these newspaper puffs are all absurd.”73
Who were these Americans, with their grand plans, empty estimates, and deceitful boasts to the newspapers? The English financiers were hardly ignorant of the United States; the Rothschilds, for example, employed as their agent August Belmont, who since his arrival in New York in 1837 had inserted himself into the center of that city's politics and society. Days before Vanderbilt's visit, Baring Brothers and two other London houses each had agreed to purchase $25,000 in stock in the Panama Railroad, because the project was backed by William H. Aspinwall, whom they knew and respected as an aristocratic merchant. They perceived that Vanderbilt and his associates had connections to the U.S. government, but they knew little else about them. On October 15, one of the Baring partners penned a letter to James G. King of New York. “I should be glad if you can give us any information respecting the partners forming the Pacific Canal co.,” he wrote, “and about support it is likely to meet with on your side.”74
James King had been born in Manhattan only three years before Vanderbilt, yet he belonged to a completely different world. His father was Rufus King, one of the first two U.S. senators from New York and a friend of Alexander Hamilton's. James graduated from Harvard and served as a congressman, president of the Erie Railroad, and president of the New York Chamber of Commerce. He occupied the very peak of New York society and often might be found as a dinner guest in homes, as Philip Hone observed, known for “excellent taste” and “the utmost good breeding.”75
King did not know Cornelius Vanderbilt. “To your enquiry respecting the partners connected with the Pacific Canal Co., we can give you only general information,” he wrote to Baring Brothers on October 29, 1850. “Some of them, we hear of as large owners of steamboats employed in our neighboring routes, the success of which we have no means of estimating—large means, certainly, and so employed. And with the public, they have more credit for sagacity and enterprize, than for caution.”
Sagacity and enterprize, not caution: this distinction offers fascinating insight into the differences between the business milieus of the merchant banker and the steamboat entrepreneur in 1850. The competitive spirit that moved Vanderbilt to strain every resource in battle against an opponent remained suspect in King's eyes. Most of all, though, King's assessment spoke to the social gap that still yawned between Vanderbilt and the mercantile elite. “Altogether,” he concluded, “they do not possess, so far as we can judge, the confidence or cooperation of our prudent people. And they must join with them names better known and more widely confided in before they are able to command support here. And that, with other motives of more abundant capital abroad, is probably the reason of the plan being presented in London—before it was here.”76
Vanderbilt and White boarded the steamship Pacific for the return voyage home. They carried with them nothing to show for their efforts but White's puffery in the Times. They docked on October 31; two weeks later, the real story of their reception in London leaked out in the press. The canal company was a mere “speculation,” the New York Herald wrote. “No stock had been taken—no stock books opened—not one cent of capital subscribed or paid in.” For Vanderbilt, the scathing Herald story marked a low point in his long career. The scheming White had become the image of the canal company; Vanderbilt was lumped in with him, and cast as a political dummy hoping to flip the canal rights. “The whole affair was an experiment,” the Herald concluded, “in which a few lawyers in Wall Street were the principal movers, their original purpose being to obtain a charter, and afterwards dispose of it at any good price.”77
What remained now for Vanderbilt was to make real what his critics thought was a vaporous fraud.
*1 Since stock usually had a par value of $100, per-share dividends were described in percentages.
*2 In Nicaragua these parties were also called the Democrats and the Legitimists, respectively.