Chapter Eight
The air of crisis seemed to turn Americans' minds toward death. All through 1850, the South had made increasingly loud noises about seceding from the Union. The issue was whether slavery would be allowed in the vast swath of territory conquered from Mexico. Southerners saw attempts to block the spread of the “peculiar institution” as an assault on their labor and property system, as an unfair discrimination against their section. Most Northerners saw any extension of slavery as unfair competition with free labor, and the relatively few but vocal abolitionists denounced the institution itself. The crisis persisted throughout 1850, as Henry Clay and Daniel Webster, the Senate's aging statesmen, labored over a compromise. The price of failure, many believed, would be the nation's extinction.
The dead literally haunted New York that summer, as the famous teenage sisters Margaret and Kate Fox came down from Rochester to perform séances. The pair appeared to have the gift of speaking to spirits of the deceased, who would answer with a rapping noise that a less credulous public might have recognized as the cracking of toes. “I've attended twice,” George Templeton Strong informed his diary. “I'm mystified.” The girls proved a sensation. The spirits they conjured answered questions with remarkable accuracy—though Strong complained about “the trifling and undignified demeanor of these ghosts.”1
The People's Line on the Hudson died that year, in a way. For complicated legal and business reasons, Daniel Drew sent it to the cross. Just before the new year, Drew attended the auction of its steamboats at the Merchants' Exchange and purchased the best ones in his own name, in order to resurrect his monopoly. He attended to his own immortality as an avid member of the Mulberry Street Methodist church, one of only two churches in the city “built with no design of renting the seats [to rich congregants], though several have adopted the plan since their erection,” as a religious journal wrote.2
When Vanderbilt returned from London, he found that the crisis had lifted. The four bills comprising the Compromise of 1850 had passed through Congress. They admitted California as a free state, settled a boundary dispute between Texas and New Mexico, paid a large sum to Texas, and organized Utah and New Mexico as territories open to slavery. The deal also enacted a new fugitive slave law, requiring federal marshals to assist in recapturing escaped slaves. It restored calm to politics, but gave new energy to abolitionists. Still, they remained a small minority, loathed by many merchants in New York, a city made rich by Southern cotton.3
“Now, however, there is no quarter of the world to which attention is more actively directed than Central America,” declared a newspaper on November 2, 1850. For all the talk of disunion, Americans had continued to flock to and from San Francisco as gold emerged from the mountains in vast quantities. Most of the migrants—and all of the gold—traveled by steamship, crossing the isthmus at Panama. Miners, merchants, and bankers longed for a faster route. “The Nicaragua route must command the entire traffic to California, the moment it shall be rendered practicable, even by a mixture of water and land conveyance,” the press asserted.4
Vanderbilt threw himself into making that route practicable. He prepared the Prometheus for its first voyage, and ordered his lawyers to prepare a petition to Congress, offering to carry the California mail for $180,000 a year, a mere fraction of what the government currently paid. In a formal proposal, delivered in December, he offered to build six first-class steamships “at his own proper cost” to transport the mail via Nicaragua, “which transit route will be opened… probably within six months.” Joseph White played no part in this appeal, for an important reason: the steamship line Vanderbilt now organized was entirely separate from the canal company. Years later, his assistant Lambert Wardell vividly recalled how important it was to Vanderbilt that he personally owned the Prometheus. “She was the only [steamship] owned entirely by one man, up to that time at least. When she started out there was not a cent owing on her, he remarking that he wanted her to ‘go out on her own bottom.’”5
As with the ship, so with the man: Vanderbilt himself would finally go to Nicaragua. It would be the first of three remarkable voyages to that distant republic, a land virtually unknown to his fellow countrymen. There were practical reasons to go, of course; as a master of the transportation business, he could best judge for himself the technical considerations of a canal or transit line. That was why he had set out to go there once before. But there was something Homeric in this uneducated man's conception of himself. Like Achilles, he would lead the charge himself; like Odysseus, he would face ocean storms, river rapids, tropical fevers, and the crocodiles and sharks of Nicaragua's waters. These trips would further open his eyes to the world and enhance his heroic reputation.
At ten o'clock in the morning on December 26, Vanderbilt stood on the deck of the Prometheus as it churned through New York Harbor on its maiden voyage. Packed with passengers and freight, it would stop at Greytown and then Chagres, where most passengers would debark, since the canal company was not yet carrying travelers across Nicaragua. The Prometheus cut a fine figure of a ship as it steamed for the Narrows, with its distinctive vertical bow rising three decks in height, twin smokestacks, and enormous sidewheels—though it had to cut power in minutes to clear a rope caught in a paddlewheel. But this time Vanderbilt would not be stopped.6
The Prometheus proved itself. “Ship performing admirably,” wrote Joseph N. Allen in his diary, “riding the seas like a duck and though very rough not a drop or spray even on deck.” The forty-seven-year-old Allen was a merchant in New York and one of Vanderbilt's closest friends; he had agreed to help the Commodore establish the transit business in Nicaragua.7 He noted that some of the “rich” passengers grew “very much excited” when the ship hit heavy cross seas, causing its 230-foot hull to plunge and roll. Three days out of port, a crewman fell to the deck from the mainmast (like all steamships in this era, the Prometheus had supplementary sails), dying on impact, leading to what Allen called “the solemn scene of a burial at sea.” The ship made a New Year's Day call on Havana, and arrived at Greytown on January 4, 1851.
Greytown nestled on the inside of a harbor formed by the outlet of the San Juan River into the Atlantic. A sandy spit of land, Punta Arenas, enclosed the bay, in which porpoises frolicked among dugout canoes, called bungos, and canal-company steamboats. (Vanderbilt chose Punta Arenas as the location for machinery works, warehouses, and an office.) The town consisted of some sixty thatched huts, pushed nearly into the water by the great tropical forest that pressed up to the Atlantic shore. “There were no clearings, no lines of road stretching back into the country,” wrote Ephraim Squier; “nothing but dense, dark solitudes, where the tapir and the wild boar roamed unmolested; where the painted macaw and the noisy parrot, flying from one giant cebia to another, alone disturbed the silence; and where the many-hued and numerous serpents of the tropics coiled among the branches of strange trees, loaded with flowers and fragrant with precious gums.” Going ashore, Vanderbilt found a shanty port populated by three hundred Americans, Miskito Indians, mestizos, and “the English authorities,” as Squier wrote disapprovingly, “consisting chiefly of negroes from Jamaica.… All mingle together with the utmost freedom, and in total disregard of those conventionalities which are founded on caste.”8
At eleven in the morning on January 8, Vanderbilt and his party (including engineer Orville Childs) boarded the steamboat Orus and chuffed into the San Juan River. A heavy tropical rain fell as the paddles beat against the increasingly swift current, carrying them between high, vertical banks and dense, dark forest, past islands in the broad river. Now came the moment of greatest danger. On January 11, they spent an hour and forty minutes battling the torrent of water crashing through the Machuca rapids. Vanderbilt shoved the pilot aside and took the helm, an engineer recalled, “tied down the safety valve [and] put on all steam.” With the boiler pressure building dangerously, the paddles whirling at furious speed, the boat shot through, Allen wrote, after “a tremendously hard struggle and grating… on the rocks.”9
The next day they reached the ruins of Castillo Vejo, the ancient Spanish fortress that Horatio Nelson had stormed as a young man. On January 13, the Orus spent two hours fighting the raging Toro rapids, twice getting stuck on the boulders in the stream. Once again it appeared that the boat would be wrecked, deep in the Nicaraguan rain forest. This time Vanderbilt ordered ropes to be tied to trees on either bank, and had the boat painfully winched up over a hundred feet of water-swept rocks. Harper's Weekly later reported that one of the party, “a tough old sea-captain, declared he would not go through such work again for all Central America.” Finally, on January 14, they landed at the village of San Carlos, where the San Juan River poured out of Lake Nicaragua.
The Director—the riverboat that Vanderbilt had sent down in July 1850 and that had steamed up to the lake on January 1—was nowhere to be seen. The Commodore told Allen to wait for its return at San Carlos, in the care of the town's governor, Patricio Rivas; then he set out for Granada in the Orus with Childs and the other engineers. Allen remained behind with mixed feelings. On one hand, he studied Spanish with “a very pretty and very obliging daughter” of Rivas; on the other, he slept on an animal-hide cot, with rats skittering along the rafters, various lizards and “enormous spiders” scurrying across the walls, and hogs rooting outside.10
Vanderbilt and party, meanwhile, crossed Lake Nicaragua. Home of a rare species of freshwater shark, this enormous expanse could switch in an instant from calm to violent, throwing the shallow-draft steamboat into swells far more alarming than the ocean storms encountered by the Prometheus. The boat chuffed past the island of Ometepe, with its twin volcano cones covered in greenery, nosing thousands of feet into the clouds. On the approach to Granada's landing, the waterfront could be seen teeming with poor Nicaraguans, splashing and bathing, “without regard to sex or age, all mixed up indiscriminately,” as Allen wrote after he caught up with Vanderbilt, “a sight to make a northerner open his eyes.”11
To reach Granada, the group made their way past wandering, pecking chickens and outlying cane-and-mud huts with thatched roofs. Then they entered the streets of the city proper, lined with tile-roofed adobe houses decorated with window balconies, ornamental archways, and heavy wooden doors that guarded elegant courtyards. They finally reached the plaza, with its decaying cathedral. Even for the increasingly worldly Vanderbilt, it was all strange, far more alien than London. On Sunday, January 19, for example, a religious festival erupted. “Such a din,” Allen complained. “The streets were thronged with people.… In those occupied by the lower classes thousands of flags and streamers are fluttering in the wind.… As the morning advanced the people assembled in the neighborhood of the plaza and attired themselves in a variety of ways, among others by assuming masks and uncouth costumes.”12
Vanderbilt and Childs consulted with the Nicaraguan authorities, surveyed the canal route (through neighboring Lake Managua, up to the Gulf of Fonseca), then headed south to scout the transit route. The transit road would cut through roughly twelve miles of land from the western edge of Lake Nicaragua to the Pacific coast. The Commodore led his men sixty miles south toward Rivas, through a still more alien landscape. They passed scattered haciendas (mostly cattle ranches), seeing monkeys, armadillos, and fences made by lines of cactus and prickly-leafed aloe plants. In the immediate vicinity of Rivas, where some ten thousand people lived about three miles inland from the lake, innumerable fruit trees gave the area the feel of “an immense and beautiful garden,” as one observer thought.
Vanderbilt and Childs rode a rough nine miles from Rivas to the Pacific, through steep hills, trees, and brush, a route described by one reporter as “dangerous and even impassable during the rainy season.” Fortunately, the fifty-six-year-old Commodore was an excellent horseman. He and the engineers marked out the best path for the road, down to the virtually uninhabited little horseshoe harbor of San Juan del Sur, “one of the prettyest bays I ever saw,” as Allen described it. “I must say that with a moderate outlay of money it can be made as safe a harbor as is to be found anywhere.” Creating a harbor on the lake, on the other hand, would be more costly, as the western shore was exposed to swells that beat upon the beach from the southeast. The engineers selected Virgin Bay for the primary landing, but they would have to build a breaker and pier.13
Vanderbilt visited Granada once more. In that city, as elsewhere in Nicaragua, he saw that the people “hate Englishmen with an inveterate hatred, and hold Americanos Del Norte in high esteem,” in Allen's words. “Americans are welcomed in Nicaragua,” a reporter wrote. “At balls and public festivals the flag of the United States is seen wreathed together with that of the country.” At the end of the month, Vanderbilt descended the San Juan to Greytown amid pouring rain. Before leaving the harbor, he spoke to a reporter for the New York Herald. “He stated that the practicability of this route is no longer problematical,” the journalist wrote. “By the first of May next, Mr. V. is sanguine that a speedy and expeditious transit will be opened between this port and the Pacific; the motto is go-ahead.”14
As Vanderbilt and his entourage returned to New York (by way of New Orleans) in the Prometheus, they again encountered ferocious seas, and Allen came away impressed with how the vessel rode them. “The Prometheus is without doubt the finest sea steamer ever afloat,” he told his diary, “and in all respects and as for speed her equal is yet to be built. Anything that may start with the idea of catching her, in order to make the thing certain, must start at least two hours ahead.”15
The Prometheus convinced Vanderbilt of his own genius. It differed from other steamships in many respects, the most important being the engines. When oceangoing steam vessels were first built, engineers decided that the machinery should be as low in the hull as possible, to avoid exposure to the elements and give the ship a low center of gravity. They came up with the “side-lever engine,” which had elaborate gearing from the piston to the paddlewheels to keep the entire works belowdecks. The problem, Vanderbilt concluded, was that the multiple arms of the side lever made the engine inefficient, causing it to consume additional coal. Furthermore, side-lever engines had very narrow tolerances, and could not accommodate a ship's natural tendency to “hog,” or bend lengthwise, at sea. That mandated a strongly reinforced engine compartment that made a ship heavier and more expensive. Refuting conventional wisdom, Vanderbilt went back to the walking-beam engine used in steamboats. The exposed arm that rocked up and down above the deck allowed for simpler gearing, which meant greater fuel efficiency, a lighter and cheaper engine, and a lighter and cheaper hull. He calculated that exposure and a higher center of gravity would not prove much of a problem. The Prometheus proved him right.16
“A most extraordinary passage,” the New York Herald announced upon the Prometheus's return to New York on February 22, 1851. Vanderbilt published a long letter describing the ship's remarkable speed and fuel efficiency. It ran 5,590 miles in just over nineteen days, consuming 450 tons of coal—a third less than any steamer of its size. “I consider the Prometheus, in her combination of qualities, far superior to anything afloat,” he said. “I will venture a large wager that there is no ship afloat, and none that can be built within twelve months, having any other plan of engines of the same size in proportion to the capacity of the ship, that can make a winter passage in the same time, with the same quantity of fuel.” The bet he proposed was $100,000.17
This same intense pride pulsed through his drive to win the California mail contract. He dispatched Daniel Allen to Washington with letters for Postmaster General N. K. Hall and Secretary of the Navy William A. Graham, saying that he could carry the mail via Nicaragua in twenty-five days, faster than any other route. “I am willing to pledge my reputation,” he declared, “and it is well known to those who know me (and among those is the present Secretary of State), that I will make no such pledge unless certain of its fulfillment.” That new secretary of state was Daniel Webster, whom Vanderbilt had known since he first traveled to Washington in 1821. Henry Clay himself presented Vanderbilt's bid to the Senate. “I dare say it is well known to every Senator, as it is to almost every person in the United States, that Mr. Vanderbilt has been one of the most successful and enterprising persons engaged in that description of navigation,” Clay said. “All this is offered by this liberal, enterprising, and distinguished gentleman, without asking for one dollar of present appropriation.”18
Vanderbilt seems to have bounced back fully from the humiliation of the London trip. With a little prodding on his part, politicians and the press hailed his reputation. On March 6, the New York Herald, the same paper that had derided the canal as a mere “speculation,” effusively praised the Nicaragua route—and Vanderbilt himself.
Commodore Vanderbilt's character for energy and go-aheadativeness is well known in this community, and apart from other considerations, the fact that he is connected with this enterprise is a guarantee to the public that both of these great projects—the construction of an ocean ship canal, and that of a transit route—will be finished at the earliest moment practicable. He is a man whose resolution is indomitable, and before whose determination obstacles, no matter how great, disappear as the morning dew before a July sun.19
It was not the first time Vanderbilt was titled “Commodore,” but afterward his name rarely appeared in print without this honorary rank. He was becoming a cultural icon.
Despite the support of Webster and Clay, Vanderbilt failed to convince Congress to alter the existing mail contracts. Against George Law's skill at lobbying and William H. Aspinwall's aristocratic connections, he could make no headway—particularly after the U.S. Mail and Pacific Mail Steamship companies agreed in January to cease competing with each other, the first retreating to the Atlantic and the latter to the Pacific.20 But Vanderbilt had delivered a clear warning that he was going to fight for the California trade, with English capital or not. And when he fought, he usually won.
ONE DAY IN THE FUTURE there would be a name for it: vertical integration. Late in the nineteenth century, John D. Rockefeller and Andrew Carnegie would emerge as leading exponents of this form of organization, in which a single owner takes control of businesses at every step of the manufacturing process, from mining raw materials to production of finished goods. A vertically integrated company captured profits (or reduced costs) at every point. Perhaps more important, in an age when few industries existed it helped ensure supply that otherwise might be diverted to a competitor.21 Ship owner Charles Morgan understood the principle as early as the spring of 1851, when he bought control of a leading engine manufacturer in Manhattan, T. F. Secor & Co., and renamed it the Morgan Iron Works.
Ironically, Morgan's move quickened Vanderbilt's own steps toward a vertical integration of his budding steamship business. Already he had taken direct control of the Simonson shipyard, which constructed hulls; now he joined with the men whom Morgan had bought out, T. F. Secor and John Braisted, along with Daniel Drew, to purchase New York's other large steam-engine plant, the Allaire Works. “The works are immense,” remarked the Mercantile Agency, “one of the most extensive in this city.” Located at 466 Cherry Street on the East River near Corlears Hook, the Allaire Works would now be run by a corporation, commanded (not surprisingly) by Vanderbilt's sons-in-law: Daniel Allen as president, and James Cross as treasurer. The purchase hinted at the size of both Vanderbilt's means and his ambition.22
By the time the Mercantile Agency took note of all this, Vanderbilt's preparations for opening the Nicaragua route were advancing rapidly. Already the Prometheus carried California passengers—to Panama for now, until the transit route was ready. The steamboat Director plied Lake Nicaragua, carrying enterprising migrants who found their own way overland and down the San Juan River. The boat grossed $32,000 for the canal company in January alone. (The canal company owned the boats and infrastructure within Nicaragua, though not the oceangoing steamships.) The Orus had smashed onto the rocks of the Machuca rapids, but Vanderbilt sent down two specially constructed, shallow-draft, iron-hulled steam boats, the J. M. Clayton and the Sir H. L. Bulwer
Meanwhile, he pushed ahead with his efforts to put steamships on both sides of the isthmus. He had two under construction in New York, the 1,000-ton Daniel Webster and the 1,800-ton Northern Light; both would receive Vanderbilt's customary walking-beam engines from the Allaire Works, and would run on the Atlantic, along with the Prometheus. For the Pacific, he fittingly bought the 900-ton Pacific (while it was en route to San Francisco) and the 600-ton Independence. It was still not enough tonnage.
On June 17, passengers on the big new North America, which already had its steam up for a voyage from New York to Galway Ireland, were startled to learn that the ship would sail to California instead. Vanderbilt and Daniel Drew had bought it from P. T. Barnum. Barnum recalled the Commodore's amusement when they first met. “Why, I expected to see a monster—part lion, part elephant, and a mixture of rhinoceros and tiger,” Vanderbilt exclaimed. “Is it possible that you are the showman who has made so much noise in the world?” Like more than one businessman in the 1850s, Barnum had dangled his feet in the ocean and found the waters too cold.23
“We are happy to have it in our power to announce the opening of the new route to the Pacific,” the New York Evening Post declared at the end of June. “Cornelius Vanderbilt is the principal proprietor of this line, which is sufficient guaranty [sic] for the superior speed and equipment of the vessels.” Passengers thronged to the upstairs office at 9 Bowling Green, next to the offices of other lines on “steamship row,” to buy tickets. “The Vanderbilt line was then the rage,” recalled passenger William Rabe.
On July 14, Rabe boarded the Prometheus at Pier No. 2 on the Hudson River for the inaugural voyage of the Nicaragua transit route. “On board I found… Mr. Vanderbilt himself,” Rabe wrote a few weeks later. Rabe pressed the Commodore about whether the Nicaragua transit truly was in working order; otherwise Rabe and some of the other passengers might go on to Chagres and cross Panama. “Mr. Vanderbilt said that we would get through before any other passengers who had started about the same time for California, and insisted upon our going.”24
Unknown to Rabe and the other passengers, Vanderbilt accompanied them because he had a mission to perform. He embarked on this journey to Nicaragua to meet a political threat, one that endangered his entire canal-and-transit enterprise. Due to the nature of the problem, he brought Joseph White, the company counsel and fixer. Before they returned to New York, Vanderbilt would have reason to wonder if White himself was not a greater danger than any problem in Nicaragua.
Government and nature seemed to conspire against Vanderbilt and his inaugural passengers at every step. After ten days at sea, the Prometheus anchored at Greytown, where they boarded the Bulwer, one of the iron-hulled riverboats. The first sign of trouble was a demand from the town's officials that the boat obtain their permission to ascend the San Juan River, in clear violation of the Clayton-Bulwer Treaty. White haughtily replied that “the only way to prevent us was to blow us out of the water.” On they went—only to run aground. Most of the passengers leaped into the river “to drag her over, trying to lift her up, or pull her along,” in Rabe's words. Humiliatingly it took a boatload of sailors from the Bermuda, a British warship, to lift the steamer over the bar.
The next day, the tightly packed little paddlewheeler steamed to the Machuca rapids, where the passengers stared at the ominous wreck of the Orus, rusting on the rocks. As the pilot scraped the hull of the Bulwer helplessly into the rapids, it seemed likely that the boat would follow the Orus's example. Once again, Vanderbilt took the wheel. At fifty-seven, he already could be considered somewhat elderly by the standards of the day. Yet he radiated power, both physical strength and force of personality. And so, deep in the wilds of Nicaragua, on a treacherous jungle river, Vanderbilt poured on the steam and piloted his first passengers into the rapids. “Back we were swept,” wrote another traveler. “At it again; the boat's nose was brought out of the current, and all our steam applied. ‘Now she moves,’ cried one. Now she nears the rocks; puff, puff—up, up—not a word—all silent—how we gazed silently at the shrubbery fringing the water's edge, marking our headway. At length we passed the peril, and gave three hearty cheers, shot through one set of rapids, then ran aground on the next.”
After spending a night trying to run the mighty Castillo rapids, again using ropes, chain, and a winch to haul the boat over, Vanderbilt had to give up. The passengers piled into Nicaraguan bungos and were paddled up to San Carlos, where they boarded the Director. “To my astonishment I found the lake a boisterous expanse of water, running as high as the angry Atlantic,” Rabe wrote. Hungry, sopping wet, and seasick, the passengers finally arrived on the western shore, where they were ferried to land in canoes or carried on the shoulders of Nicaraguan porters. The passengers went on to California, some happy, some convinced that the transit was not really ready. Vanderbilt mounted a horse and galloped off to Granada, together with White, to complete his mission.25
Rumor had it that the Nicaraguan government, disturbed at the lack of progress on the canal, planned to revoke the company's charter. Vanderbilt knew that the canal would take far longer than originally envisioned, while the transit business offered immediate profits. To protect the latter from delays to the former, he wanted to separate the two enterprises by chartering a transit company26 But on his arrival in Granada, he learned that Nicaragua had once again descended into civil war. The unity government of 1849 had collapsed. The Liberals had risen in revolt; two hostile governments now faced each other, a Conservative one in Granada and a Liberal rival in León. It was a moment that called for great prudence.27
No one ever accused Joseph L. White of excessive prudence, or perhaps any prudence at all. Believing the Conservatives to be the friendliest government, he “promised to send men and arms to their support, assuring them at the same time that all resident foreigners were on their side,” a reporter wrote. He said he could help wrest control of Greytown from the British. He also paid out $20,000 in bribes.28 On August 14, the Conservative government agreed to charter the Accessory Transit Company, transferring to it the canal company's crucial monopoly on steamboats in exchange for 10 percent of its profits and $10,000 per year.
All this alarmed the Liberals. On August 25, John Bozman Kerr, the (notably bigoted) chief U.S. diplomat in Nicaragua, sent a warning to Secretary of State Daniel Webster from León. “Mr. White seems very naturally to have regarded these people as mere children, who could be led or driven any way he might be disposed,” he wrote; “but I fear he may have carried his contempt for their intellect somewhat too far.” One cynical journalist expressed ironic admiration: by dangling the false promise of a canal, the company had won a monopoly on the transit—“in my humble opinion, the most clever speculation which ever came into a Yankee's head.”29
Too clever, perhaps. On August 22, the rival Liberal government in León addressed an angry letter to White and Vanderbilt. By choosing sides, the Liberals declared, “you have lost the neutrality of a foreigner.” The Accessory Transit Company was created under a curse. White had been true to his nature, and so put the enterprise on the path to destruction from the start.30
For the time being, White's gamble seemed to pay off. The Conservatives remained safely entrenched in Granada, where they were well placed to protect the transit route. Rumor had it that the Prometheus carried a shipment of two thousand muskets to them in the fall of 1851. And Vanderbilt's new company flourished. Workers blasted rocks from the San Juan's rapids, and a steam sawmill arrived for construction of a plank road to San Juan del Sur. The creation of Accessory Transit as a separate corporation gave it access to the power of the stock market to gather capital through sales of bonds, issues of new stock, or calls for additional payments from the shareholders. The Commodore's sidewheelers now sailed the Atlantic and Pacific oceans, packed with passengers attracted from the Panama route by lower fares. Vanderbilt earned vast sums from his ships, and as agent of Accessory Transit he kept 20 percent of each $35 ticket for the Nicaragua crossing.31
The success of Vanderbilt's Nicaragua venture had national consequences. Simply put, he helped transform a rush for gold into the lasting establishment of American civilization on the Pacific. By steeply reducing fares and offering faster service, Vanderbilt sped up the flow of migrants to the West and gold to the East, where it had a significant impact on the economy. And he did it not only without a federal subsidy, but in competition with the subsidized line.
Thanks in large part to reduced transportation costs, San Francisco matured from a dust-blown, mud-lined tent camp with gambling saloons into a brick-walled, warehouse-filled commercial center with gambling saloons. Numerous devastating fires in the city's first few years destroyed the shanties and rough wooden buildings thrown up by the first settlers; by necessity sturdy masonry structures went up along the orderly streets that stretched from the bay up the steep hills. “The characteristics of a Spanish or Mexican town had nearly all disappeared,” wrote one resident. “Superb carriages now thronged the street, and handsome omnibuses regularly plied between the Plaza and the Mission.… The old stores, where so recently all things ‘from a needle to an anchor’ could be obtained, were nearly extinct; and separate classes of retail shops and wholesale warehouses were now the order of business. Gold dust as a currency had long given place to coin.” It was still a fast town, but it also became a place of aristocratic display. “A striking change was observable everywhere and in everything. The houses were growing magnificent, and their tenants fashionable.”32
The pulse of commerce between the Atlantic and Pacific coasts beat twice a month, a pace set by steamship departures. Every two weeks, “steamer day” sent San Francisco into a frenzy, as bankers prepared shipments of gold to New York houses, merchants called in debts to make payment to eastern suppliers, and everyone prepared letters and packages to mail to the “states.”33 When steamers were expected, all eyes watched the tower atop Telegraph Hill, where signalmen would announce the approach of a paddlewheeler by running out oversize wooden semaphore flags—two long black boards, hanging down on either side of a tall pole. The signal's centrality to life in the city was seen during a performance by a visiting theater company. At a climactic point in the play, an actor flung out his arms, the sleeves of his black robe hanging down, and asked, “What does this mean?” A wag in the audience shouted, “Sidewheel steamer!” The knowing audience erupted in howls of laughter.34
As the owner of one of the two primary steamship lines, Vanderbilt emerged as a powerful presence in San Francisco, where he never had and never would set foot. Railroad and newspaper promoters there besieged him with requests for investment. “If you knew of the hundreds of applications that we have daily for the same thing,” he replied to one, “you would at once see that it would be ruinous to grant them.”35
Rather than send money to California, Vanderbilt needed it close to home. His Nicaragua line posed a serious threat to the established interests on the Panama route, and those enemies had decided to strike back.
THE GHOST OF VICE PRESIDENT Daniel D. Tompkins bedeviled Cornelius Vanderbilt. When Tompkins had sought state assistance to develop Staten Island during the War of 1812, the New York legislature had chartered the Richmond Turnpike Company. Under the company's aegis, Tompkins started the first steam ferry to the island, which became known simply as the Staten Island Ferry. When Vanderbilt took over the ferry in 1838 it was still technically the Richmond Turnpike Company, the creature of eighteenth-century mercantilist philosophy. As such, it differed from later corporations in one important respect. This artificial person existed for a fixed term of years, after which its charter would expire. Just before it perished on April 1, 1844, its chief officers—Vanderbilt and Oroondates Mauran—assigned its leases and real-estate titles to two private citizens, Cornelius Vanderbilt and Oroondates Mauran. When Mauran died in 1848, Vanderbilt, as we've seen, purchased his stake, and was immediately forced to defend his title to the corporation's lands. New York's attorney general argued that the dead company's property reverted to the state. Vanderbilt battled back in court, where he repulsed the state's assault year after year. The ferry was worth defending, and it could pay for a few lawyers: the New York Times estimated its annual profits at $50,000.36
George Law never showed much interest in Staten Island. From his office in the Dry Dock Bank, he turned his eye toward Albany and Washington, where he bribed and bargained his way into government contracts, or to Panama, where his U.S. Mail Steamship Company connected to Pacific Mail, and where he had invested hundreds of thousands of dollars in the stocks and bonds of the Panama Railroad. By mid-1851, he had taken a number of steps to restore the original steamship monopoly. He had reached an agreement with Pacific Mail to divide the oceans (as noted earlier); he had purchased Charles Morgan's rival steamships, the Empire City and the Crescent City, along with Morgan's agreement to abandon future competition; and he had driven off or intimidated most of the lesser steamship owners who dared oppose him.37 And then Vanderbilt opened the Nicaragua route.
As coarse and conniving as Law was, he lived under the same informal code of the transportation business that Vanderbilt had defined in court twenty years earlier. It was a code honored in the breach as often as the observance, but it was recognized nonetheless. If a man had a steamboat line, he was entitled to enjoy it in peace. If a competitor moved against him, then the competitor's other lines were fair game for a counterattack. They called it “self-defense.” And so, with Vanderbilt cutting into profits on one of the most lucrative lines of transportation in American history Law struck back on the route Vanderbilt had plied since childhood.38
Shortly before the Commodore went aboard the Prometheus to inaugurate the Nicaragua line, he gave orders for the construction of a ferry house on Staten Island, on a lot he had acquired through the late Richmond Turnpike Company. A crew went to work on the structure, only to discover that Henry M. Western claimed the property as his own, and had leased it to the New-York & Staten Island Steam Ferry Company.
The moving force behind the new ferry company was Law, who had joined with Western and other Staten Islanders who were eager to break Vanderbilt's monopoly. With the Commodore away, his men worked warily alongside Law's employees, who built a dock for the new ferry on the same lot. Law's men started to openly harass Vanderbilt's, throwing obstacles in their way and nailing up boards. One of Vanderbilt's subordinates went to court for an injunction, which briefly stopped the intimidation. But Law's workers still snarled threats, and violence hung in the air.
On the afternoon of July 26, as Vanderbilt piloted a steamboat through the far-off jungle, a mob of three hundred workers, armed with axes and crowbars, marched down the road toward the new building, led by Henry Western. “Tear it down,” he bellowed. “It is on my land and I will be responsible.” The mob rushed forward, swinging axes and shouting, “Down with the building!” Vanderbilt's foreman tried to stop them, telling them not to “cut” the structure. “They replied,” the foreman later testified, “that if deponent did not get out of the way they would cut him too.” They razed the building to the ground, then ran a wooden footbridge over the foundation to the dock, where the boats of the new ferry began to land on July 27. Law's men posted a guard, but Vanderbilt's men reportedly retaliated by cutting down the pier's pilings.39
Elsewhere Law took a more subtle approach to countering his opponent. He worried that Vanderbilt's boast might prove true, that the Nicaragua route might consistently carry passengers between New York and San Francisco in twenty-five days, roughly a week less than the average on the Panama route. On July 21, Law told the postmaster general that most of his ships would sail directly between New York and Panama to save time; a separate postal steamer would tag along behind, making the multiple stops mandated by contract. Yet passengers traveling by way of Nicaragua still arrived from California eight days ahead of those on the Panama route. So Law and his partners resorted to a whispering campaign, spreading accounts of the poisonous climate and long delays encountered on Vanderbilt's line. Even the London Times took note of “the constant attempts to depreciate its success and underrate its convenience.”40
The Nicaragua transit did suffer problems. After all, it ran through hundreds of miles of rapids-filled river and storm-tossed lake. Only small, shallow-draft boats could run the river, a guarantee of overcrowding. Droughts and heavy rains both made for delays. The route ran through a wilderness without amenities; it would take time before hotels and restaurants could be built. Steamships arrived early or late. Cholera and tropical diseases plagued travelers in this era of dim medical knowledge. Passengers often complained, bitterly and publicly. But all this was true of the Panama route as well.41
Vanderbilt returned to New York to find that Daniel Allen already had filed a lawsuit against Law and his company for the attack on Staten Island. The Commodore prepared for a long war to keep his monopoly on the ferry. To fight the aspersions cast on the Nicaragua route, he served as his own publicist, writing letters to the press to tout his accomplishments. He constructed a new steamboat for Lake Nicaragua, named Central America. “When the expedition that has thus far marked the progress of this little vessel is taken into consideration I think it will somewhat astonish the world,” he wrote. “I had her built in 27 days.… Let some one try to beat it.”42
On October 22, 1851, Vanderbilt embarked on his final voyage to Nicaragua. His three trips neatly adumbrated the enormous effort he had put into his California line, for they were in turn geographical, political, and commercial—or, perhaps, maritime—in nature. First he had gone to scout the canal and transit route, next to create the corporate body of Accessory Transit, and last to crush his competitors. Unlike Law or William H. Aspinwall, the Commodore was a technical master of steam navigation, and it was to trumpet his prowess that he personally took the Central America to Nicaragua. The 375-ton steamboat trailed in the wake of the new Daniel Webster, sister ship to the Prometheus, sailing on its maiden voyage. It was another day of four simultaneous steamship departures; a huge crowd pushed onto the slips, and some of the onlookers even climbed wood piles and heaps of coal to get a look. “No sooner were the vessels observed to be moving from their berths,” the New York Tribune reported, “than parting cheers began to be exchanged between the people on board and those on shore, which were heartily renewed and continued till the increasing distance… rendered them inaudible.”43
Decades later, Vanderbilt's clerk, Lambert Wardell, would describe the Commodore as a man who couldn't be bothered with details. Clearly that was not true in 1851. The millionaire checked and double-checked the two stout hawsers that ran out over the stern to the Central America, as the Daniel Webster paddled through the Atlantic swell. Towing the boat onto the ocean was highly risky, as he had often been told before leaving New York. “All the ‘knowing ones,’” Vanderbilt wrote, “and particularly those of the greatest experience of the seafaring part of the community, pronounced it to be impossible.” The critics gave the Central America six hours before it swamped.
That evening, the water grew restless, then rough. After nightfall, the sea lashed out violently. Vanderbilt made his way across the tossing deck to the stern and learned that one of the hawsers had snapped. “This would have been the last of the tow had I not been here,” he declared. As always, the moment of crisis—of physical danger—showed the Commodore at his finest. He ordered the Daniel Webster to slacken its speed and personally directed the crew as they attached a new cable in the darkness, amid crashing waves and a soaking spray. The Webster went ahead again, and the new line held. The crisis had passed.44
On November 2, Vanderbilt arrived at Greytown and piloted the Central America into the San Juan River. Now came the second moment of danger. “She is a large vessel to get up through this river, drawing about four feet of water,” he wrote to a friend in New York, “when you know I never pretended, nor do I now, to navigate it with a greater draught of 20 to 22 inches, which is the draught of the small iron steamers now navigating it.” After a hard struggle, he made it through on November 19, and the Central America began to carry five hundred passengers at a time across the rough waters of Lake Nicaragua. “The steamer will now always be in readiness on the Lake,” he wrote to the New York Tribune, “which will hereafter remedy the former delays of the line.”45
His mission accomplished, Vanderbilt descended the now-familiar river to Greytown. With the increasing traffic across the isthmus, Americans hoping to profit from the migration had swelled the village. They met with frustration. Few passengers stopped in town; most transferred directly between the steamships and the riverboats. Accessory Transit set up its facilities across the harbor, at Punta Arenas. Exasperated municipal officials began to pester steamship and riverboat captains to pay port fees, only to be ignored—in part because the officials were black Jamaicans and the captains white Americans, and in part because the British had stipulated, as Sir Henry Lytton Bulwer had informed Daniel Webster, “All vessels or goods connected with the Nicaraguan Canal Company going up the River San Juan should be admitted free of duty.”46
On November 21, a well-satisfied Vanderbilt stepped aboard the Prometheus from one of the Accessory Transit Company's riverboats tied alongside. With him came some five hundred passengers traveling from California, who flocked through the ship, dropping bags in their cabins or claiming berths in steerage. At two in the afternoon, as Captain Henry Churchill was about to give orders for departure, a boat rowed over from Greytown and disgorged the port collector, Robert Coates. As on four previous occasions, Coates demanded port fees. This infuriated Vanderbilt; he had been assured by Lord Palmerston himself in London that his ships would be free from municipal interference. “I cannot nor will not recognize any authority here,” he snapped, “and I will not pay unless I am made by force.” The crew bundled Coates and his entourage off the Prometheus. Unnoticed by Vanderbilt, Coates notified the British consul, who dispatched a messenger to the British warship Express, anchored offshore.47
“I hove up my anchor and dropped down the harbor with the current, having alongside one of the river steamers, receiving from her the baggage of the passengers,” Captain Churchill reported later that day. “The English brig-of-war, lying a short distance from us, immediately got under weigh, made sail for us, and when within a quarter of a mile from us fired a round-shot over the forecastle, not clearing the wheelhouse over ten feet.”
Stunned, Vanderbilt and the passengers watched as smoke again billowed from the warship's gunports, and a moment later heard the cannon's boom and the dull whir of a second ball rocketing over the stern, “so near that the force of the ball was distinctly felt by several passengers,” Churchill wrote. When he sent a boat over to ask the reason for the shots, “the captain stated that it was to protect the authorities of Greytown in their demands, and if we did not immediately anchor he would fire a bombshell into us, and ordered his guns loaded with grape and canister shot.”
Some of the passengers, filled with fury at the bully Britain, demanded that they risk it. But Vanderbilt told the captain to steam back into the harbor and anchor, as the Royal Navy had ordered. (To pile on insult to American pride, the British sent over a detachment to see that the Prometheus's boiler fires were extinguished.) Then the Commodore went ashore to pay $123 to the triumphant Greytown authorities.48
No sooner had the Prometheus returned to the United States than news of the affair prompted a national wave of indignation. Americans had a clear sense of inferiority toward Britain that, together with a belligerent pride in the superiority of their republican institutions, primed them for outrage. And it was an outrage. A British warship had shot at an unarmed American passenger ship, had threatened to destroy it and kill hundreds of civilians. The order to fire came from the British consul, James Green, in violation of treaty and explicit assurances from London.
Joseph White carried an official protest from the American Atlantic & Pacific Ship Canal Company to Washington (oddly, as the canal company was not involved). The United States government demanded an explanation from London, and dispatched the USS Saranac to Greytown. Newspapers across the country voiced anger, even a willingness to go to war with the British Empire. “The outrage upon the Prometheus demands the most ample apology and reparation,” proclaimed the New York Herald, “or it demands the application of the Jacksonian doctrine of retaliation and reprisals.”49
As luck would have it, the British cabinet was in a state of turmoil. On December 21, Lord Russell dismissed Palmerston from the Foreign Office; his replacement, Lord Granville, eventually wrote to Washington, “Her Majesty's Government have no hesitation in offering an ample apology for that which they consider to have been an infraction of Treaty engagements.” The onus fell on the Greytown consul, James Green, but the ultimate victim may have been Frederick Chatfield, the British viceroy in Central America who had charted an aggressively anti-American course. London recalled him, even though he had not taken direct part in the affair. The real result of the near bombardment of Cornelius Vanderbilt, then, was a more stable diplomatic environment.50 In his war with George Law, he had gained another advantage.
IF THERE WAS ONE RELIGIOUS RITE that Vanderbilt believed in, it was marriage. Weddings brought him sons-in-law—and sons-in-law made trustworthy assistants, which were hard to find in the treacherous business world at mid-century. Vanderbilt's own sons sorely disappointed him, but his daughters gave him a steady succession of replacements in the form of their husbands. In the end, he would rely on no son-in-law, not even Daniel Allen, more than Horace F. Clark.
Clark exuded ambition from every pore—ambition in politics, ambition in business, ambition in society. Born in 1815 to a respected clergyman in Southbury Connecticut, he graduated from Williams College and began to practice law in New York in 1837. In 1848 he joined the firm of Charles A. Rapallo, the Commodore's attorney. Round-faced and wide-eyed, Clark pursued high-profile cases—demanding, for example, that famous writer Nathaniel P. Willis hand over letters written to Willis by a client's wife. Clark threw himself into Democratic Party politics alongside such luminaries as August Belmont. Above all, he tried to climb in social standing. George Templeton Strong derided him in 1851 as “that snob of snobs”—not in the sense of one who condescends, as the word would later mean, but one who sucks up insufferably. A dictionary of that era defined “snob” as “a person who looks up to his or her social betters and tries to copy or associate with them.” So when Clark married Maria Louise Vanderbilt on April 13, 1848, on a Thursday evening several months before the California gold rush changed the world, it was undoubtedly a wedding in keeping with the customs of New York's social elite, even if that elite shunned the event itself.51
Years after the wedding, a story would circulate about Clark's request for the Commodore's permission to marry Louise (as she was called). Vanderbilt assumed the lawyer was after his wealth, and curtly refused. “The impetuous Horace, with more emphasis than elegance, told him to take his money and be d——d, he would have the girl anyhow,” a newspaper later wrote. “Whereupon the Commodore, always an admirer of pluck and perseverance, quickly relented and consented to the union.” The story sounds suspiciously like something that a self-admiring man like Clark might tell of himself. He was too smart a Yankee not to see, and take advantage of, his new connection; and Vanderbilt was smart enough to see how useful Clark could be to him. The new son-in-law boasted strengths in precisely the areas where Vanderbilt felt most vulnerable—those requiring great learning, such as the law, public speaking, and politics, areas in which his business increasingly carried him.52
If the Commodore felt a growing appreciation for his new son-in-law, he seethed at the son who bore his own name. When Cornelius Jeremiah came to the wedding in his father's house at 10 Washington Place, the father boiled over. In the midst of the reception, this finely calibrated social event, he lashed out at his son with his fists. “The Commodore tried to do something to Cornelius,” son-in-law James Cross recalled, and Corneil “fled from the house.” The specific cause is unclear. The incident occurred before Vanderbilt sent Corneil to California, but perhaps the boy already showed some of the character flaws that later became so pronounced.
Corneil returned from California in 1849 with something broken inside of him. It was the gear that connects labor with reward, diligence with satisfaction. Perhaps it had never worked properly in the first place, but the land of excitement and easy money had ruined it for good. Back on the Atlantic coast, he drew another draft on his father, which his father also refused to pay. He then agreed to seek treatment in an asylum. It did not help. He began to disappear into card and roulette-wheel saloons, only to emerge penniless. He developed a taste for fine clothes—a black silk tie, white watered silk vest, black frock coat, and kid gloves—but he neglected to pay for them, causing his creditors to pester the Commodore with the bills (unsuccessfully). Vanderbilt had given his own name to this boy, only to see him become everything he despised: sickly, weak, spendthrift, dishonest, dishonorable.53
William H. Vanderbilt—or Billy, as the Commodore still called him—had said nothing about his father's outburst at the wedding. He knew better than to try to fight such abuse, which he himself still received during his father's regular visits to Staten Island. Billy continued to complain to Daniel Allen about “the old man.” Vanderbilt had exiled Billy to a farm, yet harshly rebuffed his requests to borrow money to improve the place. “He would say of his father that he was mean,” Allen later recalled, “that he couldn't get anything out of him and couldn't get along without money.” As a prosperous businessman as well as a brother-in-law, Allen was always willing to help, loaning a few hundred dollars here and there, which Billy repaid promptly. Very likely it was Allen who brought Billy into his first joint business venture with his father, the ill-fated California Navigation Company (under which they had shipped the disassembled steamboat to San Francisco at the start of the gold rush).54
Gradually—and almost unnoticed by the Commodore—the supposedly meek, soft son turned his farm into a profitable operation. “He was a hard master to work for,” one field hand told W. A. Croffut, the nineteenth-century biographer. Knowing that new workers tried to make a good impression on their first day, Billy “would count the number of rows of corn they had hoed, and then require them to do the same amount of work every day”55
Billy's stature rose steadily, lifted by his own success. On December 5, 1851, virtually the entire population of Staten Island poured down to the water's edge to see “the greatest living man,” in the words of the New York Herald: Louis Kossuth, the Hungarian revolutionary who had nearly won his nation's independence from the Austrian Empire. Billy stood in front of the crowd as part of Richmond County's official welcoming committee; the other members included Daniel Allen and George A. Osgood, another of the Commodore's sons-in-law.
The next day, Kossuth took the Vanderbilt across the harbor to Manhattan. There the Commodore must have had trouble getting to his place of business at 9 Bowling Green, for an immense mob jammed into every crevice and climbed every ledge and pole to see the Hungarian hero.56When Vanderbilt did reach his door and climbed the steps to the second floor, he strode past Allen's desk on his way to his own office in the rear. Allen would present the affairs of the steamship business, discuss decisions tentatively made, and show him handbills and documents. The Commodore would shift the cigar around in his mouth, put on his reading glasses, and give his approval or curtly say otherwise.
In late 1851 and early 1852, there was much for him to review. “That was a time of great emigration,” recalled James Cross. “There was a great demand for passages.” With the Nicaragua steamships sailing from Pier No. 2, just around the corner, ticket buyers packed into the office. Daniel Drew regularly stopped by to chat, discussing their joint ownership of the North America and Wall Street matters. And Vanderbilt often unrolled plans of various steamers, pondering which to buy to expand his fleet, especially on the Pacific, where he needed more tonnage. In the process, he built a partnership with Robert and George Schuyler, Alexander Hamilton's illustrious nephews, who helped settle a dispute between Vanderbilt and shipbuilder William H. Brown over the six-hundred-ton steamer Independence. “We came in and re-imbursed Mr. Vanderbilt his advances” for the ship, Robert testified, “and let the ship remain in the line, and took our chance for the earnings.” That brief statement shows how thoroughly the aristocratic Schuylers trusted Vanderbilt. As always, though, Vanderbilt trusted his own family most. On January 21, he sent his son-in-law Cross to California to act as his new agent in San Francisco and Jacob Vanderbilt to Nicaragua to supervise the Accessory Transit Company's affairs.57
As master of one of the two primary channels of commerce and travel between San Francisco and New York, the Commodore emerged as a national figure with a public stature worthy of his informal title. But Washington continued to fund his rivals, a circumstance that offended both his quasi-Jacksonian outlook and his personal interests. In January 1852 he offered to carry the mail via Nicaragua for $250,000 per year, compared to the current annual payments of $638,000 to the Pacific Mail and U.S. Mail Steamship companies and $100,000 to the still-incomplete Panama Railroad.
Though Congress declined his offer, he redoubled his competition. He purchased the Samuel S. Lewis in February and the Brother Jonathan in March, as well as the Pioneer and the Monumental City. He ordered eighteen omnibuses for the carriage road from San Juan del Sur to Virgin Bay. He launched an 1,800-ton steamship, the Northern Light, from the Simon-son yard, and began construction on another steamship. As if in tribute to the great turn in his career, it was named Star of the West. Bankers, merchants, and travelers all gained as he cut fares, added facilities, and put new hulls in the water.58
No one studied Vanderbilt's march more closely than George Law. In February, in seeming imitation of the Commodore's celebrated journeys to Nicaragua, Law sailed to Panama to inspect the progress of the railroad he had invested in so heavily. He inaugurated the Atlantic terminus of the line at Navy Bay, where he christened the new city of Aspinwall. He returned to New York in May and was welcomed with a public dinner at the Astor House hotel, hosted by Charles Morgan, Isaac Newton, Daniel E. Sickles, and an obscure Democratic Party functionary named William M. Tweed.59
Law took Vanderbilt's competition personally. One of Law's partners was Colonel Sloo, the original steamship “dummy;” alarmed at the “ruinous competition with the Nicaragua Company,” Sloo accused Law of refusing an offer to set fares jointly with Accessory Transit “in consequence of an old grudge between Law and C. Vanderbilt.” Law was full of grudgery but he also faced a deeper problem: Nicaragua's greater proximity to the United States gave Vanderbilt a permanent advantage over the Panama lines. A faster passage was one result, of course, attracting both passengers and specie shippers (who lost money with every day gold remained in transit, and who paid a lucrative commission on consignments). But the biggest benefit was the savings Vanderbilt reaped in operational costs. “The route by the Isthmus of Nicaragua is decidedly the most economical route,” declared John A. Buckman, a veteran of the California steamship business. Because of the shorter trip, a ship needed fewer provisions and, in particular, less coal, the biggest operating expense. On the Pacific alone, a Nicaragua voyage saved at least $5,000 over one to Panama. Even if the rival lines agreed to charge the same fare, Vanderbilt would earn a larger profit.60
Law had the advantage of a federal subsidy, of course; he also counted on the Panama Railroad, when complete, to make the Panama route just as fast. At the moment, he had to cope with a small distraction: in March, the New York Times reported that the New York attorney general, under highly suspicious circumstances, had lobbied the board that was awarding contracts to widen the Erie Canal to set aside $1 million for Law. Small wonder Law left the country for Panama.61
Vanderbilt soon had his own problems. On March 27, he learned that the North America had run aground on the coast of Mexico, and was a total loss. “The owners”—meaning Vanderbilt and Drew—“might as well have thrown $400,000 into the sea as to lose her,” remarked James Cross. The ship was also uninsured, as was Vanderbilt's custom. Still worse, it was the biggest ship on the Pacific side, with six hundred berths—though it usually packed in nine hundred passengers. In San Francisco, Cross frantically worked to charter and dispatch steamships to carry customers stuck in Nicaragua, but many remained stranded for weeks. Some eventually gave up and returned to New York.
One of the latter was Sidney Briggs. He went to 9 Bowling Green and introduced himself to Vanderbilt. “I asked him if he proposed to do anything” to provide compensation, Briggs recalled. “He said he proposed to do what was right.… I told him there was no other way but for us to return. He said he supposed not.” Then Briggs asked why, after Vanderbilt had learned that he had lost his biggest Pacific steamship—when he knew Nicaragua was clogged with stranded travelers—he had let the Northern Light sail from New York, full of passengers. “His reply was that some of the tickets for the Northern Light were then in the hands of the passengers, that if he had kept back a part, it would have frightened the whole, and it was better for him to let us come back and settle with us and pay us our damages than to let the Northern Light go out empty.”
Vanderbilt had added up the numbers, and calculated that it would be more profitable to strand dozens, perhaps hundreds, of passengers in a tropical country, exposed to diseases for which they had no resistance, in a region chronically short of shelter and amenities, than to hold his ship. Of all the things the Commodore would be accused of in his long career, it would never be said that he had gone soft.62
Claims for damages soon flowed in. To defend himself, Vanderbilt turned to his son-in-law Horace Clark. Clark faced a grueling task, but he was wise enough to see that it was an apprenticeship, or even a test. Vanderbilt would give him bigger assignments in the future—greater, perhaps, than anything Clark now imagined.
TRAGEDY, TREACHERY, AND ACCIDENT most often strike at home. On July 5, 1852, that lesson came on a crowded dock at Vanderbilt's Landing, the terminal of the Staten Island Ferry, just a short distance from the Commodore's old mansion. At four o'clock on that Monday afternoon, the Hunchbackchuffed in, and a crowd of passengers on the pier pushed forward onto a hinged bridge at the end, held in place by heavy chains. The bridge was designed to allow the boat to dock no matter what the state of the tide; it was not designed for the weight now pressing upon it. When the arriving passengers surged off the boat, the chains snapped, sending dozens of men, women, and children into the water below, smacking on top of each other, pushing the first to fall down under the surface. In the end, seventeen bodies would be recovered, most of them women, most of them German immigrants returning to the city from a jaunt to breezy Staten Island. A grand jury convened; in mid-August, it indicted Cornelius Vanderbilt for manslaughter. He would need Horace Clark's services more than ever.63
One week before the indictment was handed down, Joseph White and Orville Childs stepped off the Atlantic steamship Africa onto one of New York's piers, having returned from a second attempt to convince British bankers to provide capital for the canal. Back in March, Childs had presented his full report to the directors of the canal company, making an eminently reasonable (if unreasonably precise) construction estimate of $13,243,099.47. This had caused the price of the 192 canal shares (or “rights”) to shoot up on the stock exchange, from $1,800 to $3,250 to $3,600. Childs then had accompanied White and H. L. Routh to London to present the report to Rothschild, Baring Brothers, and the other British investment banks. The delegation returned with joyful news. At a meeting of the canal-company board, held on August 19, White announced that British capitalists had agreed to invest half of the amount needed to build the canal. Canal rights soared to $4,000 each.64
Then, mysteriously, the price suddenly collapsed. Someone was dumping the rights, in sufficient quantities to drop the price to $750. The press found it “striking,” and baffling.65 Who would be selling when construction of the canal now seemed assured? Close behind came a second surprise: a collapse in the stock of the Accessory Transit Company. “A transfer of 1,500 shares, it is stated, was made today by one of the strongest parties connected with the Company,” the New York Tribune reported. (This was a very large percentage of the 38,700 Transit shares in existence.) “The street appears to be entirely in the dark as to the reason for the late decline in this stock.”66
A war was playing out behind the scenes through the offers and bids of brokers at the Merchants' Exchange—a war between Vanderbilt and White. After White's return from London, the long-simmering tension between the two men had finally boiled over. It appears that White had betrayed Vanderbilt by withholding the real result of his mission to London. The great bankers of London had not agreed to put up half the money for the canal. On July 23, Joshua Bates, an American partner of Baring Brothers, had written a long letter to Thomas Baring that destroyed any chance of British investment in the project. “The proposed size of the canal strikes me as totally inadequate to the largest class of ships,” Bates argued. “To make this increased depth would more than double the cost.” At that price, the project would never pay for itself. The great Nicaragua canal project was dead. Back in New York, White had lied about his failure, loudly and long enough to dump his soon-to-be-worthless canal rights. It appears one of those who was burned by this brazen play was Vanderbilt.67
“An exceedingly bitter personal hostility existed between White and Vanderbilt, so much so that they were not on speaking terms at that time,” Daniel Allen testified three years later.68 Vanderbilt could do nothing to revive the now-lifeless canal rights, but he could go after White in his last stronghold: the Accessory Transit Company. For much of the previous year, White had been intriguing within the company, stealing influence from the Commodore. “Mr. Cornelius Vanderbilt,” the New York Times reported on August 27, “has not had, for some months, as much control of the affairs of the Company as he had desired, nor as much as his ownership of the line of California steamers, from which the Transit Company derive their main profits, would seem to entitle him.” As vain as he was treacherous, White was heard to boast, “I am the Nicaragua Transit company!”69
The corporate form had aided Vanderbilt in amassing capital and negotiating with sovereign governments to open the Nicaragua line; now it served him in a more personal way, as he used it as a weapon for revenge. As soon as he learned of White's deception, he launched a full-scale assault on the price of Accessory Transit shares—the bulwark of White's wealth—to impoverish his foe. “Vanderbilt advised [me] to divest… this stock,” recalled Franklin Osgood, “and declared the stock worthless, as long as White remained in the company, for he was using the company to his own benefit.” But in trying to drive the price down, Vanderbilt confronted a serious problem: the Accessory Transit Company was extremely profitable. The Commodore himself had talked up the stock in early 1852, when it had declared its first dividend. Since then, its competitive position had only grown stronger. Within Nicaragua, the friendly Conservative government had tightened its control, capturing León early in the year.
But Vanderbilt owned the all-important ships. He announced that his vessels would stop at Panama first before continuing on to Nicaragua. “The effect, of course, is to damage the Transit interest,” the New York Times wrote. Instantly Nicaragua became the slowest route. Accessory Transit plunged from 40 to 24.* Vanderbilt suffered losses, but revenge mattered more. “Vanderbilt declared that he would rather sink his ships at the dock than that White should make money,” Osgood reported.70
“Commodore Vanderbilt resigned the Presidency of the Transit Co., and with it the Directorship, which his colleagues promptly accepted,” the Times reported on September 14. “The fight on the Stock, therefore, is not likely to end at present. The immediate relatives of Commodore V. have been selling and talking it down for some weeks past. It is said that he has never been beaten in a Stock or Steamboat contest of this sort.” In all likelihood, his lead broker remained Nelson Robinson. Robinson recently had dissolved Drew, Robinson & Co. and moved into a luxurious home on fashionable Union Place, but he remained Vanderbilt's friend and a master of the game.
Then a strange thing happened. Four days later, on September 18, the Times reported that the “Vanderbilt” party were now buying Transit stock, and that White and his friends were selling. “It is a frisky game of late,” the financial writer commented.71
On closer inspection, the turnaround appears less mysterious than brilliant. Vanderbilt used his “bear” campaign to pry shares out of the hands of White and his friends, and gain control of the company. How could selling lead to owning more? Most stocks, especially those in a “fancy” company like Accessory Transit (a volatile one that attracted speculators, who bought and sold rapidly), were bought “on margin.” A broker would lend the purchase money to his client, who merely put up a margin—an amount sufficient to protect the broker against loss if the price fell. Such stocks were, to use the technical term, “hypothecated.” When prices fell, the broker could either ask for a bigger margin from the client or sell the stock immediately to avoid a loss. The faster the price dropped, the more likely brokers were to dump hypothecated stocks, because they had less time to get more money from their clients. That drove the price down further, and eventually shook loose all the stock held on margin.
This was the secret behind Vanderbilt's bear attack on the Transit Company. Even before the end of August, the New York Tribune observed that the stock “has sunk so low that the margins on a large amount of hypothecated stock have been used up and this stock has also come upon the market.” By September 18, the price fell far enough that Robinson stopped selling and began to buy, on his own behalf as well as that of Vanderbilt, his family, and a new ally, Charles Morgan.
But White was not going away. He could not be pried from the shares that he owned outright, those he had been given as one of the original incorporators of the company. So, as the battle raged, Vanderbilt dispatched Franklin Osgood (a large Transit shareholder) to offer terms to the man whom he could not bear to speak to himself. It was useless. “White declared,” Osgood said, “that… Vanderbilt was a great scoundrel, and would cheat and rob any person he had any dealings with.”72
For the vain and self-destructive White, it was another sign of that imbalance of character that had driven him from Congress. Even as he insulted the Commodore, a man with far greater resources and even more guile, he provoked the one force that he could not afford to alienate: the government of Nicaragua. The lack of progress on the canal had left even the Conservatives of Granada disgruntled. They had grown more upset when they learned that Accessory Transit had declared a dividend even though it had not paid the 10 percent of its profits that were owed under its charter. To investigate, the Nicaraguan government appointed two commissioners, who arrived in New York in August to inspect the books; after a long delay, they received a thin and highly suspect ledger that showed no profits. For all their frustration, the commissioners modestly concluded that Accessory Transit owed $30,000. White's astounding response was to deny their diplomatic powers. He claimed that Nicaragua had lost the “attributes of a sovereign state” when it joined the Central American confederation decades earlier—asserting, in essence, that the company existed, but Nicaragua did not. The Nicaraguans seized the lake steamboat Central America to enforce payment of the $30,000, “but she was subsequently released in consequence of the threatening attitude taken by our minister,” the New York Tribune reported.73
Vanderbilt, meanwhile, learned that the Pioneer had been wrecked on the Pacific.74 If anything, the loss made him more determined to bring his war with White to a satisfactory conclusion. He asked his son-in-law Allen to take over the negotiations. What Vanderbilt wanted was to sell his steamships to the Accessory Transit Company for $1.1 million. Allen refused. Considered “a high minded man” by his colleagues in business, he believed that the company's charter prohibited it from owning steamships. Vanderbilt dismissed the argument. He wanted his deal. With Osgood stymied, he thought only Allen (who had worked closely with White in the past) could achieve a settlement, so he pressured him until Allen finally agreed to open new talks.75
For several weeks, the stock market battle had fallen silent, with the Transit Company stock lying exhausted below 30. Just before Christmas, Vanderbilt and his friends began to buy heavily. Aroused by the large purchases, the bears came out of their caves. The bears—brokers who believed the Transit stock would fall again—began to sell it “short;” that is, they made contracts to sell shares that they didn't own. They would either borrow the shares in order to deliver, then repay the lenders with shares they bought later at a lower price, or—more commonly in this era—make contracts for sale that gave them weeks or even months to deliver, hoping to buy the shares in the interim at a lower price. Instead of buy low, sell high, the short strategy was sell high, buy low. The Commodore's heavy purchases in “sick Transit” (as brokers called the stock) offered the bears a seemingly perfect opportunity. Unaware of the progress of the talks, they believed the price was doomed to sink.76
On Christmas Eve, Allen concluded the negotiations. Vanderbilt now formally made the offer that had already been agreed to, in a letter to the board of the Accessory Transit Company. “I will sell to your company the steamships Northern Light, Star of the West, Prometheus, Daniel Webster, Brother Jonathan, Pacific, and S.S. Lewis, together with their furniture,” he wrote, “for the sum of $1,350,000; payable $1,200,000 in cash, and $150,000 in the bonds of your company, payable in one year from the date of the bills of sale. All the coal bulks, and all other fixtures, your Company to take at cost, paying for them from the first earnings of the vessels.” Three days later, the board accepted the terms. The directors decided to issue forty thousand new shares of stock to pay for the ships—to be sold to the directors themselves at 30. Vanderbilt would be the agent, managing the ships from his New York office, with a 20 percent commission on each transit ticket for the Nicaragua crossing. He would also take a 2.5 percent commission of the entire gross receipts.77
The deal sent Accessory Transit stock skyrocketing. “The shorts have fairly been caught,” the New York Herald proclaimed, “and the probability is they will suffer some before they see the end of the present movement.” The bears had to buy stock for as much as 40 to deliver the shares they had sold for less than 30. Even worse, it appears that Vanderbilt and his friends may have “cornered” the market by buying up the available supply (the new stock had yet to be issued). When caught without shares to deliver, the bears had to pay the buyers heavily to get out of their contracts. Thus Vanderbilt made money by buying shares that didn't even exist.78
In the end, the Commodore got all that he wanted. He had waged his wars on multiple fronts, under difficult conditions, against wily opponents, and won them all. He had battled the U.S. Mail and Pacific Mail Steamship companies, and made a great deal of money doing it. “The nett [sic] profits of his line of boats for the past season are figured up to $1,150,000,” the New York Times reported at the end of 1852. (Profits for the entire year, when added to those for 1851, must have been far more than that amount.) Then he had sold his ships on his terms, and at his price—indeed, for more than his initial price. His stock market campaigns had added enormously to his fortune. And he and his allies seized control of the Accessory Transit Company from the detested White (though that remained to be formalized).79
For the public the picture was far more ambivalent. On one hand, Vanderbilt wrought much good for his fellow citizens. Even though his canal scheme failed, he had created a new path of commerce and travel to California, one of great practical and strategic value to the United States. Falling costs and increasing speeds helped lift San Francisco from a trading outpost to a thriving metropolis—firmly rooting the republic on the Pacific—and improved the flow of gold to New York, pumping money into the national economy. Vanderbilt seemed to vindicate Jacksonian philosophy as he successfully competed against a government-subsidized line. He also revealed the beneficial role of the stock market by mobilizing capital to develop this critical new route. On the other hand, his battle against White demonstrated all too clearly the sometimes unhappy consequences of mixing private and public interests in a large enterprise. Travelers, merchants, and specie shippers fell victim to his vindictiveness as he disrupted the Nicaragua line to destroy its stock price; small investors fell victim to his bear campaign against White.
In pursuing his own interests, Vanderbilt acted as he always had, both creating wealth and punishing his enemies. But, as his businesses achieved a truly national scale, those who benefited and suffered from his decisions multiplied into the hundreds of thousands, and, eventually, millions. Like the marketplace itself, Vanderbilt was a paradox—both a creator and a destroyer.
From his own perspective, he was simply the victor. All in all, it was a remarkable new year that Vanderbilt celebrated in 1853. Small wonder that he decided to celebrate as no American had ever celebrated before.
* The stock prices will be given without dollar symbols throughout the text.