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Full text of "History of the great American fortunes"



x,m 



THE HISTORY OF THE GREAT 

AMERICAN FORTUNES 



JOHN F. HIGGINS 

PRINTER AND BINDER 



376-382 MONROE STREET 
CHICAGO, ILLINOIS 



HISTORY OF THE GREAT 
AMERICAN FORTUNES 



BY 



GUSTAVUS MYERS 

Author of "the history of tammany hall," "history ot 

PL'BLIC FRANCHISES IK NEW YORK CITY," ETC. 



VOL. II. 
GREAT FORTUNES FROM RAILROADS 



CHICAGO 

CHARLES H. KERR & COMPANY 

CO-OPEKATIVK 



Copyright 1908-1910 
BY GUSTAVUS MYERS 



Entered at Stationers' Hall, London, Kn?. 
By GUSTAVXTS MYERS 



hU Rights Reserved by Gustavus Myers including 

»hat of Translation into Foreign Languages, 

'ncluding the Scandinavian. 



CONTENTS 



CHAPTER PAGE 

I. The Seizure of the Public Domain .... ii 

II. A Necessary Contrast 51 

III. The Beginnings of the Vanderbilt Fortune . 95 

IV. The Onrush of the Vanderbilt Fortune . . 125 
V. The Vanderbilt Fortune Increases Manifold 153 

VI. The Entailing of the Vanderbilt Fortune . 191 

VII. The Vanderbilt Fortune in the Present Gen- 
eration 223 

VIII. Further Aspects of the Vanderbilt Fortune 260 

IX. The Rise of the Gould Fortune 2S1 

X. The Second Stage of the Gould Fortune . . 302 

XI. The Gould Fortune Bounds Forward . . . 326 

XII. The Gould Fortune and Some Antecedent 

Factors 351 



PART III 
THE GREAT FORTUNES FROM RAILROADS 



HISTORY OF THE GREAT 
AMERICAN FORTUNES 

CHAPTER I 
THE SEIZURE OF THE PUBLIC DOMAIN 

Before setting out to relate in detail the narrative of 
the amassing of the great individual fortunes from rail- 
roads, it is advisable to present a preliminary survey of 
the concatenating circumstances leading up to the time 
when these vast fortunes were rolled together. Without 
this explanation, this work would be deficient in clarity, 
and would leave unelucidated many important points, the 
absence of which might puzzle or vex the reader. 

Although industrial establishments, as exemplified by 
mills, factories and shops, much preceded the construc- 
tion of railroads, yet the next great group of fortunes to 
develop after, and along with, those from land were the 
fortunes plucked from the control and manipulation of 
railroad systems. 

THE LAGGING FACTORY FORTUNES. 

Under the first stages of the old chaotic competitive 
system, in which factory warred against factory, and an 
intense struggle for survival and ascendency enveloped 

II 



12 HISTORY OF THE GREAT AMERICAN FORTUNES 

the whole tense sphere of manufacturing, no striking in- 
dustrial fortunes were made. 

Fortunate was that factory owner regarded who could 
claim $250,000 clear. All of those modern and complex 
factors offering such unbounded opportunities for gath- 
ering in spoils mounting into the hundreds of millions 
of dollars, were either unknown or in an inchoate or rudi- 
mentary state. Invention, if we may put it so, was just 
blossoming forth. Hand labor was largely prevalent. 
Huge combinations were undreamed of ; paper capitali- 
zation as embodied in the fictitious issues of immense 
quantities of bonds and stocks was not yet a part of the 
devices of the factory owner, although it was a fixed 
plan of the bankers and insurance companies. 

The factory owner was the supreme type of that sheer 
individualism which had burst forth from the re- 
straints of feudalism. He stood alone fighting his com- 
mercial contests with persistent personal doggedness. Be- 
neath his occasional benevolence and his religious pro- 
fessions was a wild ardor in the checkmating or bank- 
ruptcy of his competitors. These were his enemies ; he 
fought them with every mercantile weapon, and they him ; 
and none gave quarter. 

Apart from the destructive character of this incessant 
Virarfare, dooming many of the combatants, other inter- 
vening factors had the tendency of holding back the fac- 
tory owners' quick progress — obstacles and drawbacks 
copiously described in later and more appropriate parts 
of this work. 



MIGHT OF THE RAILROAD OWNERS. 

In contrast to the slow, almost creeping pace of the 
factory owners in the race for wealth, the railroad own- 



THE SEIZURE OF THE PUBLIC DOMAIN I3 

ers sprang at once into the lists of mighty wealth-pos- 
sessers, armed with the most comprehensive and puis- 
sant powers and privileges, and vested with a sweep of 
properties beside which those of the petty industrial 
bosses were puny. Railroad owners, we say ; the distinc- 
tion is necessary between the builders of the railroads and 
the owners. The one might construct, but it often hap- 
pened that by means of cunning, fraud and corruption, 
the builders were superseded by another set of men who 
vaulted into possession. 

Lx)oking back and summing up the course of events 
for a series of years, it may be said that there was cre- 
ated over night a number of entities empowered with 
extraordinary and far-reaching rights and powers of own- 
ership. 

These entities were called corporations, and were called 
into being by law. Beginning as creatures of law, the 
very rights, privileges and properties obtained by means 
of law, soon enabled them to become the dictators and 
masters of law. The title was in the corporation, not 
in the individual ; hence the men who controlled the cor- 
poration swayed the substance of power and ownership. 
The factory was usually a personal affair, owned by one 
man or in co-partnership ; to get control of this property 
it was necessary to get the owner in a financial corner 
and force him to sell out, for, as a rule, he had no bond 
or stock issues. But the railroad corporation was a stock 
corporation; whoever secured control of a majority of the 
stock became the legal administrator of its policies and 
property. By adroit manipulation, intimidation, superior 
knavery, and the corrupt domination of law. it was al- 
ways easy for those who understood the science of rig- 
ging the stock market, and that of strategic undermining, 
to wrest the contpol away from weak, or (treating the 



14 HISTORY OF THE GREAT AMERICAN FORTUNES 

word in a commercial sense) incompetent, holders. 
This has been long shown by a succession of ex- 
amples. 

THE LEGALIZING OF CUNNING 

Thus this situation, so singularly conflicting with the 
theoretical majesty of the law, was frequently presented : 
A band of men styling themselves a corporation received 
a perpetual charter with the most sweeping rights and 
properties. In turn, the law interposed no effective 
hindrance to the seizing of their possessions by any other 
group proving its power to grasp them. All of this was 
done under nominal forms of law, but differed little in 
reality from the methods during medieval times when any 
baron could take another baron's castle and land by armed 
force, and it remained his until a stronger man came 
along and proved his title likewise. 

Long before the railroad had been accepted commer- 
cially as a feasible undertaking, the trading and land-own- 
ing classes, as has been repeatedly pointed out, had dem- 
onstrated very successfully how the forms of govern- 
ment could be perverted to enrich themselves at the ex- 
pense of the working population. 

Taxation laws, as we have seen, were so devised that 
the burden in a direct way fell lightly on the shipping, 
manufacturing, trading, banking and land-owning classes, 
while indirectly it was shoved almost wholly upon the 
workers, whether in shop, factory or on farm. Further- 
more, the constant response of Government, municipal, 
.State and National, to property interests, has been touched 
upon ; how Government loaned vast sums of public 
money, free of interest, to the traders, while at the same 
time refusing to assist the impoverished and destitute ; 
how it granted immunity from punishment to the rich 



THE SEIZURE OF THE PUBLIC DOMAIN I5 

and powerful, and inflicted the most drastic penalties 
upon poor debtors and penniless violators of the law ; 
how it allowed the possessing classes to evade taxation 
on a large scale, and effected summarily cruel laws per- 
mitting landlords to evict tenants for non-payment of 
rent. These and many other partial and grievously dis- 
criminative laws have been referred to, as also the refusal 
of Government to interfere in the slightest with the com- 
mercial frauds and impositions constantly practiced, with 
all their resulting great extortions, upon the defenceless 
masses. 

Of the long-prevailing frauds on the part of the capi- 
talists in acquiring large tracts of public land, some 
significant facts have been brought out in preceding chap- 
ters. Those facts, however, are only a few of a mass. 
When the United States Government was organized, 
most of the land in the North and East was already ex- 
propriated. But immense areas of public domain still re- 
mained in the South and in the Middle West. Over 
much of the former Colonial land the various legisla- 
tures claimed jurisdiction, until, one after another, they 
ceded it to the National Government. With the Louis- 
iana purchase, in 1805, the area of public domain was 
enormously extended, and consecutively so later after 
the Mexican war. 



THE LAND LAWS AGAINST THE POOR. 

From the very beginning of the Government, the Jand 
laws were arranged to discriminate against the poor set- 
tler. Instead of laws providing simple and inexpensive 
ways for the poor to get land, the laws were distorted 
into a highly effective mechanism by which companies of 
capitalists, and individual capitalists, secured vast tracts 



l6 HISTORY OF THE GREAT AMERICAN FORTUNES 

for trivial sums. These capitalists then either held the 
land, or forced settlers to pay exorbitant prices for com- 
paratively small plots. No laws were in existence com- 
pelling the purchaser to be a bona fide settler. Absentee 
landlordism was the rule. The capitalist companies were 
largely composed of Northern, Eastern and Southern 
traders and bankers. The evidence shows that they em- 
ployed bribery and corruption on a great scale, either in 
getting favorable laws passed, or in evading such laws as 
were on the statute books by means of the systematic 
purchase of the connivance of Land Office officials. 

By act of Congress, passed on April 21, 1792, the Ohio 
Land Company, for example, received 100,000 acres, and 
in the same year it bought 892,900 acres for $642,856.66. 
But this sum was not paid in money. The bankers and 
traders composing the company had purchased, at a heavy 
discount, certificates of public debt and army land war- 
rants, and were allowed to tender these as payment.^ 
The company then leisurely disposed of its land to set- 
tlers at an enormous profit. Nearly all of the land com- 
panies had banking adjuncts. The poor settler, in order 
to settle on land that a short time previously had been 
national property, was first compelled to pay the land 
company an extortionate price, and then was forced to 
borrow the money from the banking adjuncts, and give 
a heavy mortgage, bearing heavy interest, on the land.^ 
The land companies always took care to select the very 
best lands. The Government documents of the time are 
full of remonstrances from legislatures and individuals 
complaining of these seizures, under form of law, of 
the most valuable areas. The tracts thus appropriated 

1 U. S. Senate Executive Documents, Second Session, Nine- 
teenth Congress, Doc. No. 63. 

- U. S. Senate Documents, First Session, Twenty-fourth Cd- 
gress, 1835-36, Doc. No. 216: 16. 



THE SniZURE OF THE PLULlC UOMAIX I7 

comprised timber and mineral, as well as agricultural, 
land. 



VAST TRACTS SECURED BY BRIBERY. 

One of the most scandalous land-company transactions 
was that involving a group of Southern and Boston capi- 
talists. In January, 1795, the Georgia Legislature, by 
special act, sold millions of acres in different parts of 
the State of Georgia to four land companies. The peo- 
ple of the State were convinced that this purchase had 
been obtained by bribery. It was made an election issue, 
and a Legislature, comprising almost wholly new mem- 
bers, was elected. In February, 1796, this Legislature 
passed a rescinding act, declaring the act of the preceding 
year void, on the ground of its having been obtained by 
" improper influence." In 1803 the tracts in question were 
transferred by the Georgia Legislature to the United 
States Government. 

The Georgia Mississippi Land Company was one of 
the four companies. In the meantime, this company had 
sold its tract, for ten cents an acre, to the New England 
Mississippi Land Company. Although committee after 
committee of Congress reported that the New England 
Mississippi Land Company had paid little or no actual 
part of the purchase price, yet that company, headed by 
some of the foremost Boston capitalists, lobbied in Con- 
gress for eleven years for an act giving it a large indem- 
nity. Finally, in 1814, Congress passed an indemnifica- 
tion act, under which the eminent Bostonians, after ten 
years more lobbying, succeeded in getting an award from 
the United States Treasury of $1,077,561.73. The total 
amount appropriated by Congress on the pretense of set- 
tling the claims of the various capitalists in the " Yazoo 



l8 HISTORY OF THE GREAT AMERICAN FORTUNES 

Claims" was $1,500,000." The ground upon which this 
appropriation was made by Congress was that the Su- 
preme Court of the United States had decided that, ir- 
respective of the methods used to obtain the grant from 
the Georgia Legislature, the grant, once made, was in the 
nature of a contract which could not be revoked or im- 
paired by subsequent legislation. This was the first of 
a long line of court decisions validating grants and fran- 
chises of all kinds secured by bribery and fraud. 

It was probably the scandal arising from the bribery 
of the Georgia Legislature that caused popular ferment, 
and crystallized a demand for altered laws. In 1796 
Congress declared its intention to abandon the prevail- 
ing system of selling millions of acres to companies or 
individuals. The new system, it announced, was to be 
one adapted to the interests of both capitalist and poor 
man. Land was thereafter to be sold in small quantities 
on credit. Could the mechanic or farmer demand a bet- 
ter law? Did it not hold out the opportunity to the 
poorest to get land for which payment could be gradually 
made? 

But this law worked even better to the advantage of the 
capitalist class than the old. By bribing the land officials 
the capitalists were able to cause the choicest lands to be 
fraudulently withheld, and entered by dummies. In this 
way, vast tracts were acquired. Apparently the land en- 
tries were made by a large number of intending settlers, 
but these were merely the intermediaries by which capi- 

•' Senate Documents, Eighteenth Congress, Second Session, 
1824-25, Vol. ii. Doc. No. 14, and Senate Documents, Twenty- 
fourth Congress, 1836-37, Vol. ii, No. 212. After the grants 
were secured, the companies attempted to swindle the State of 
Georgia by making payments in depreciated currency. Georgia 
refused to accept it. When the grant was rescinded, both 
houses of the Georgia Legislature marched in solemn state to 
the Capitol front and burned the deed. 



THE SEIZURE OF THE PUBLIC DOMAIN IQ 

talists secured great tracts in the form of many small al- 
lotments. Having obtained the best lands, the capitalists 
then often held them until they were in demand, and 
forced actual settlers to pay heavily for them. During 
all of this time the capitalists themselves held the land 
" on credit." Some of them eventually paid for the lands 
out of the profits made from the settlers, but a great 
number of the purchasers cheated the Government almost 
entirely out of what they owed.* 

The capitalists of the period contrived to use the land 
laws wholly to their own advantage and profit. In 1824, 
the Illinois Legislature memorialized Congress to change 
the existing laws. Under them, it recited, the best selec- 
tions of land had been made by non-resident speculators, 
and it called upon Congress to pass a law providing for 
selling the remaining lands at fifty cents an acre.^ Other 
legislatures petitioned similarly. Yet, notwithstanding 
the fact that United States officials and committees of 
Congress were continually unearthing great frauds, no 
real change for the benefit of the poor settler was made. 

GREAT EXTENT OF THE LAND FRAUDS. 

The land frauds were great and incessant. In a long 
report, the United States Senate Committee on Public 
Lands, reporting on June 20, 1834, declared that the evi- 
dence it had taken established the fact that in Ohio and 
elsewhere, combinations of capitalist speculators, at the 

* On Sept. 30, 1822, " credit purchasers'^' owed the Govern- 
ment : In Ohio, $1,260,870.87; in Indiana, $1,212,815.28; in Illi- 
nois, $841,302.80; in Missouri, $734,108.87; in Alabama, $5,760.- 
728.01; in Mississippi, $684,093.50; and in Michigan, $50,584.82 — 
a total of nearly $10,550,000. (Executive Reports, First Session, 
Eighteenth Congress, 1824, Report No. 61.) Most of these cred- 
itors were capitalist land speculators. 

^ U. S. Senate Documents, Second Session, Eighteenth Con- 
gress, 1824-25, Vol. ii. Doc. No. 25. 



20 HISTORY OF THE GREAT AMERICAN FORTUNES 

public sales of lands, had united for the purpose of driv- 
ing other purchasers out of the market and in deterring 
poor men from bidding. The committee detailed how 
these companies and individuals had fraudulently bought 
large tracts of land at $1.25 an acre, and sold the land 
later at exorbitant prices. It showed how, in order to 
accomplish these frauds, they had bought up United 
States Land Office Registers and Receivers.^ 

Another exhaustive report was handed in by the 
United States Senate Committee on Lands, on March 3, 
1835. Many of the speculators, it said, filled high of- 
fices in States where public lands bought by them were 
located ; others were people of " wealth and intelligence." 
All of them " naturally united to render this investiga- 
tion odious among the people." The committee told how 
an attempt had been made to assassinate one of its mem- 
bers. " The first step," it set forth, " necessary to the 
success of every scheme of speculation in the public lands, 
is to corrupt the land officers, by a secret understanding 
between the parties that they are to receive a certain por- 
tion of the profits." '^ The committee continued : 

The States of Alabama, Mississippi and Louisiana have been 
the principal theatre of speculations and frauds in buying up the 
public lands, and dividing the most enormous profits between 
the members of the different companies and speculators. The 
committee refers to the depositions of numerous respectable wit- 
nesses to attest the various ramifications of these speculations 
and frauds, and the means by which they have been carried into 
effect. . . .8 

Describing the great frauds in Louisiana, Benjamin 

^ U. S. Senate Documents, First Session, Twenty-third Con- 
gress, 1833-34, Vol. vi, Doc. No. 461 : 1-91. 

■^ U. S. Senate Documents, Second Session, Twenty-third Con- 
gress, Vol. iv, Doc. No. 151:2. 

8 Ibid., 3. 



THE SEIZURE OF THE PUBLIC DOMAIN 21 

F. Linton, U. S. District Attorney for the Western Dis- 
trict of Louisiana, wrote, on August 25, 1835, to Presi- 
dent Jackson : " Governments, like corporations, are con- 
sidered without souls, and according to the code of some 
people's morality, should be swindled and cheated on 
every occasion." Linton gave this picture of " a noto- 
rious speculator who has an immense extent of claims " : 

He coul'd be seen followed to and from the land office by 
crowds of free negroes, Indians and Spaniards, and the very 
lowest dregs of society, in the counties of Opelousas and Rapides, 
with their affidavits already prepared by himself, and swnr.i to 
before some justice of the peace in some remote county. These 
claims, to an immense extent, are presented and allowed. And 
upon what evidence? Simply upon the evidence of the parties 
themselves who desire to make the entry ! ^ 

The " credit " system was gradually abandoned by the 
Government, but the auction system was retained for 
decades. In 1847, the Government was still selling large 
tracts at $1.25 an acre, nominally to settlers, actually to 
capitalist speculators or investors. More than two mil- 
lion acres had been sold every year for a long pe- 
riod. The House Committee on Public Lands, report- 
ing in 1847, disclosed how most of the lands were bought 
up by capitalists. It cited the case of the Milwaukee 
district where, although 6,441 land entries had been made, 
there were only forty actual settlers up to 1847. " This 
clearly shows," the committee stated, " that those who 
claimed the land as settlers, are either the tools of specu- 
lators, to sequester the best lands for them ... or 
the claim is made on speculation to sell out." ^° 

The policy of granting enormous tracts of land to 

'•* U. S. Senate Documents, Second Session, Twenty- fourth 
Congress, 1836-37, Vol. ii, Doc. No. 168:5. 

1*' Reports of Committees, First Session, Thirtieth Congress, 
1847-48, Vol. iii. Report No. 732:6. 



22 HISTORY OF THE GREAT AMERICAN FORTUNES 

corporations was revived for the benefit of canal and 
railroad companies. The first railroad company to get 
a land grant from Congress was the Illinois Central, in 
1850. It received as a gift 2,595,053 acres of land in 
Illinois. Actual settlers had to pay the company from 
$5 to $15 an acre. 

Large areas of land bought from the Indian tribes 
by the Government, almost at once became the property 
of canal or railroad corporations by the process of Gov- 
ernment grants. A Congressional document in 1840 
(Senate Document No. 616) made public the fact that 
from the establishment of the Federal Government to 
1839, the Indian tribes had ceded to the Government a 
total of 442,866,370 acres. The Indian tribes were paid 
either by grants of land elsewhere, or in money and 
merchandise. For those 442,866,370 acres they re- 
ceived exchange land valued at $53,757,400, and money 
and merchandise amounting to $31,331,403. 



THE SWAYING OF GOVERNMENT. 

The trading, banking and landed class had learned 
well the old, all-important policy of having a Govern- 
ment fully susceptible to their interests, whether the gov- 
erning officials were put in office by them, and were satu- 
rated with their interests, views and ideals, or whether 
corruption had to be resorted to in order to attain their 
objects. At all events, the propertied classes, in the main, 
secured what they wanted. And, as fast as their inter- 
ests changed, so did the acts and dicta of Government 
change. 

While the political economists were busy promulgat- 
ing the doctrine that it was not the province of Govern- 
ment to embark in any enterprise other than that of 



THE SEIZURE OF THE PUBLIC DOMAIN 23 

purely governing — a doctrine precisely suiting the trad- 
ers and borrowed from their demands — the commercial 
classes, early in the nineteenth century, suddenly discov- 
ered that there was an exception. They wanted canals 
built ; and as they had not sufficient funds for the pur- 
pose, and did not see any immediate profit for themselves, 
they clamored for the building of them by the States. In 
fine, they found that it was to their interest to have the 
States put through canal projects on the ground that these 
would " stimulate trade." The canals were built, but the 
commercial classes in some instances made the blunder 
of allowing the ownership to rest in the people. 

Never again was this mistake repeated. If it proved 
so easy to get legislatures and Congress to appropriate 
millions of the public funds for undertakings profitable 
to commerce, why would it not be equally simple to se- 
cure the appropriation plus the perpetual title? Why be 
satisfied with one portion, when the whole was within 
reach ? 

True, the popular vote was to be reckoned with ; it was 
a time when the people scanned the tax levy with far 
greater scrutiny than now ; and they were not disposed 
to put up the public funds only that private individuals 
might reap the exclusive benefit. ' But there was a way 
of tricking and circumventing the electorate. The trad- 
ing and land-owning classes knew its effectiveness. It 
was they who had utilized it; who from the year 1795 
on had bribed legislatures and Congress to give them 
bank and other charters. Bribery had proved a signal 
success. The performance was extended on a much 
wider scale, with far greater results, and with an adroit- 
ness revealing that the capitalist class had learned much 
by experience, not only in reaching out for powers tha^ 
the previous generation would not have dared to grant, 



24 HISTORY OF THE GREAT AMERICAN FORTUNES 

but in being able to make plastic to its own purposes the 
electorate that believed itself to be the mainspring of po- 
litical power. 



GRANTS TO CANAL CORPORATIONS. 

The first great canal, built in response to the demands 
of the commercial class, was the Erie Canal, completed 
in 1825. This waterway was constructed at public ex- 
pense, and was owned by New York State. The com- 
mercial men could succeed in having it managed for 
their purposes and profit, and the politicians could often 
extract plunder from the successive contracts, but there 
was no opportunity or possibility for the exercise of the 
usual capitalist methods of fraudulent diversion of land, 
or of over-capitalization and exorbitant rates with which 
to pay dividends on fictitious stock. 

Very significantly, from about the very time when 
the Erie Canal was finished, the era of the private canal 
company, financed by the Government, began. One 
after another, canal companies came forward to solicit 
public funds and land grants. These companies neither 
had any capital of their own, nor was capital necessary. 
The machinery of Government, both National and State, 
was used to supply them with capital. 

The Chesapeake and Ohio Canal Company received, 
up to 1839, the sum of $2,500,000 in funds appropriated 
by the United States Government, and $7,197,000 from 
the State of Maryland, 

In 1824 the United States Government began giving 
land grants for canal projects. The customary method 
was the granting by Congress of certain areas of land 
to various States, to be expressly given to designated 
canal companies. The States in donating them, some- 



THE SEIZURE OF THE PUBLIC DOMAIN 25 

times sold them to the canal companies at the nominal 
rate of $1.25 an acre. The commuting of these pay- 
ments was often obtained later by corrupt legislation. 

From 1824 to 1834, the Wabash and Erie Canal Com- 
pany obtained land grants from the Government amount- 
ing to 826,300 acres. The Miami and Dayton Canal 
Company secured from the Government, in 1828 and 
1833, a total grant of 333,826 acres. The St. Mary's 
Falls Ship Canal Company received 750,000 acres in 
1852; the Portage Lake and Lake Superior Ship Canal 
Company, 400,000 acres in 1865-66; and the Lac La 
Belle Ship Canal Company, 100,000 acres in 1866. In- 
cluding a grant by Congress in 1828 of 500,000 acres 
of public land for general canal purposes, the land 
grants given by the National Government to aid canal 
companies, totalled 4,224,073.06 acres, mostly in In- 
diana, Ohio, Illinois, Wisconsin and Michigan. 

Whatever political corruption accompanied the build- 
ing of such State-owned canals as the Erie Canal, the 
primary and fundamental object was to construct. In 
the case of the private canal companies, the primary and 
fundamental object was to plunder. The capitalists con- 
trolling these companies were bent upon getting rich 
quickly ; it was to their interest to delay the work as 
long as possible, for by this process they could periodic- 
ally go to Legislatures with this argument : That the 
projects were more expensive and involved more diffi- 
culties than had been anticipated ; that the original ap- 
propriations were exhausted, and that if the projects 
were to be completed, fresh appropriations were impera- 
tive. A large part of these successive appropriations, 
whether in money, or land which could be sold for money, 
were stolen in sundry indirect ways by the various sets 
of capitalist directors. The many documents of the 



26 HISTORY OF THE GREAT AMERICAN FORTUNES 

Maryland Legislature, and the messages of the succes- 
sive Governors of Maryland, do not tell the full story 
of how the Chesapeake and Ohio Canal project was 
looted, but they give abundantly enough information. 



THE GRANTS FRAUDULENTLY MANIPULATED. 

Many of the canal companies, so richly endowed by 
the Government with great land grants, made little at- 
tempt to build canals. What some of them did was to 
turn about and defraud the Government out of incal' 
culably valuable mineral deposits which were never in- 
cluded in the original grants. 

In his annual report for 1885, Commissioner Sparks, 
of the United States General Land Office told (House 
Executive Documents, 1885-86, Vol. ir) how. by 1885, 
the Portage Lake " canal " was only a worthless ditch 
and a complete fraud. What had the company done 
with its large land grant? Listead of accepting the grant 
as intended by Congress, it had, by means of fraudulent 
surveys, and doubtless by official corruption^ caused at 
least one hundred thousand acres of its grant to be sur- 
veyed in the very richest copper lands of Wisconsin. 

The grants originally made by Congress were meant 
to cover swamp lands — that is, lands not particularly 
valuable for agricultural uses, but which had a certain 
value for other purposes. Mineral lands were strictly 
excluded. Such was the law : the practice was very 
different. The facility with which capitalists caused the 
most valuable mineral, grazing, agricultural and timber 
lands to be fraudulently surveyed as " swamp " lands, 
is described at length a little later on in this work. 
Commissioner Sparks wrote that the one hundred thou- 
sand acres appropriated in violation of explicit law " were 



THE SEIZURE OF THE PUBLIC DOMAIN 27 

taken outside of legal limits, and that the lands selected 
both without and within such limits were interdicted 
lands on the copper range " (p. 189). Those stolen cop- 
per deposits were never recovered by the Government 
nor was any attempt made to forfeit them. They com- 
prise to-day part of the great copper mines of the Cop- 
per Trust, owned largely by the Standard Oil Company. 

The St. Mary's Falls Canal Company likewise stole 
large areas of rich copper deposits. This fact was clearly 
revealed in various official reports, and particularly in 
the suit, a few years ago, of Chandler vs. Calumet and 
Hecla Mining Company (U. S. Reports, Vol. 149, pp. 
79-95). This suit disclosed the fact that the mines of 
the Calumet and Hecla Mining Company were located 
on part of the identical alleged " swamp " lands, granted 
by Congress in 1852. The plaintiff. Chandler, claimed 
an interest in the mines. Concluding the court's deci- 
sion, favoring the Calumet and Hecla Mining Company, 
this significant note (so illustrative of the capitalist con- 
nections of the judiciary), appears: "Mr. Justice 
Brown, being interested in the result, did not sit in this 
case and took no part in its decision." 

Whatever superficial or partial writers may say of the 
benevolent origin of railroads, the fact is that railroad 
construction was ushered in by a widespread corruption 
of legislators that put to shame the previous debauchery 
in getting bank charters. In nearly every work on the 
subject the assertion is dwelt upon that railroad builders 
were regarded as public benefactors ; that people and leg- 
islatures were only too glad to present them with pub- 
lic resources. There is just a slight substance of truth 
in this alleged historical writing, but nothing more. The 
people, it is true, were eager, for their own convenience, 
to have the railroads built, but unwilling to part with 



28 HISTORY OF THE GREAT AMERICAN FORTUNES 

their hard-wrung- taxes, their splendid public domain, and 
their rights only that a fev/ men, part gamblers and part 
men of energy and foresight, should divert the entire do- 
nation to their own aggrandizement. For this attitude the 
railroad promoters had an alluring category of arguments 
ready. 



CASH THE GREAT PERSUADER. 

Through the public press, and in speeches and pam- 
phlets, the people were assured in the most seductive and 
extravagant language that railroads were imperative in 
developing the resources of the country ; that they would 
be a mighty boon and an immeasurable stimulant to prog- 
ress. These arguments had much weight, especially with 
a population stretched over such a vast territory as that 
of the United States. But alone they would not have 
accomplished the ends sought, had it not been for the 
quantities of cash poured into legislative pockets. The 
cash was the real eloquent persuader. In turn, the vir- 
tuous legislators, on being questioned by their constitu- 
ents as to why they had voted such great subsidies, such 
immense land grants and such sweeping and unprece- 
dented privileges to private corporations, could fall back 
upon the justification (and a legitimate one it seemed) 
that to get the railroads built, public encouragement and 
aid were necessary. 

Many of the projectors of railroads were small trades- 
men, landlords, millowners, merchants, bankers, associ- 
ated politicians and lawyers. Not infrequently, however, 
did it hap])en that some charters and grants were ob- 
tained by politicians and lawyers who, at best, were im- 
])ccunious sharpers. Their greatest asset was a devious 
knowledge of how to get something for nothing. With 



THE SEIZURE OF THE PUBLIC DOMAIN 29 

a grandiloquent front and a superb bluff they would or- 
ganize a company to build a railroad from this to that 
point; an undertaking costing millions, while perhaps 
they could not pay their board bill. An arrangement 
with a printer to turn out stock issues on credit was easy ; 
with the promise of batches of this stock, they would, 
then get a sufficient number of legislators to vote a char- 
ter, money and land. 

After that, the future was rosy. Bankers, either in 
the United States or abroad, could always be found to 
buy out the franchise or finance it. In fact, the bankers, 
who themselves were well schooled in the art of bribery 
and other forms of corruption," were often outwitted 
by this class of adventurers, and were only too glad to 
treat with them as associates, on the recognized commer- 
cial principle that success was the test of men's mettle, 
and that the qualities productive of such success must be 
immediately availed of. 

In other instances a number of tradesmen and land- 
owners would organize a company having, let us say, 
$250,000 among them. If they had proceeded to build a 
railroad with this sum, not many miles of rail would have 

11 " Schooled in the art of bribery." — In previous chapters 
many facts have been brought out showing the extent of cor- 
rupt methods used by the bankers. The great scandal caused 
in Pennsylvania in 1840 by the revelations of the persistent 
bribery carried on by the United States Bank for many years, 
was only one of many such scandals throughout the United 
States. One of the most characteristic phases of the reports 
of the various legislative investigating committees was the iron- 
ical astonishment that they almost invariably expressed at the 
" superior class " being responsible for the continuous bribery. 
Thus, in reporting in 1840, that $130,000 had been used in bribery 
in Pennsylvania by the United States Bank, an investigating 
committee of the Pennsylvania House of Representatives com- 
mented : " It is hard to come to the conclusion that men of 
refined education, and high and honorable character, would wink 
at such things, yet the conclusion is unavoidable." (Pa. House 
Journal, 1842, Vol. ii, Appendix, 172-531. 



30 HISTORY OF THE GREAT AMERICAN FORTUNES 

been laid before they would have found themselves hope- 
lessly bankrupt. 

Their wisdom was that of their class ; they knew a far 
better method. This was to use the powers of govern- 
ment, and make the public provide the necessary means. 
In the process of construction the $250,000 would have 
been only a mite. But it was quite enough to bribe a 
legislature. By expending this sum in purchasing a ma- 
jority of an important committee, and a sufficient number 
of the whole body, they could get millions in public loans, 
vast areas of land given outright, and a successio'.i of 
privileges worth, in the long run, hundreds upo) hun- 
dreds of millions of dollars. 



A WELTER OF CORRUPTION. 

So the onslaught of corruption began and continued. 
Corruption in Ohio was so notorious that it formed a 
bitter part of the discussion in the Ohio Constitutional 
Convention of 1850-51. The delegates were droning 
along over insertions devised to increase corporation 
power. Suddenly rose Delegate Charles Reemelin and 
exclaimed : " Corporations always have their lobby mem- 
bers in and around the halls of legislation to watch and 
secure their interests. Not so with the people — they 
cannot act with that directness and system that a corpora- 
tion can. No individual will take it upon himself to go 
to the Capitol at his own expense, to watch the repre- 
sentatives of the people, and to lobby against the potent 
influences of the corporation. But corporations have the 
money, and it is to their interest to expend it to s2<'.ure the 
passage of partial laws." '- 

Two years later, at one of the sessions of tht Massa- 

12 Ohio Convention Debates, 1850-51, ii:i74. 



THE SEIZURE OF THE PUBLIC DOMAIN 3I 

chusetts Constitutional Convention, Delegate Walker, of 
North Brookfield, made a similar statement as to condi- 
tions in that State. " I ask any man to say," he asked, 
" if he believes that any measure of legislation could be 
carried in this State, which was generally offensive to 
the corporations of the Commonwealth ? It is very rarely 
the case that we do not have a majority in the legislature 
who are either presidents, directors or stockholders in in- 
corporated companies. This is a fact of very grave im- 
portance." ^^ Two-thirds of the property in Massa- 
chusetts, Delegate Walker pointed out, was owned by 
corporations. 

In 1857 an acrimonious debate ensued in the Iowa Con- 
stitutional Convention over an attempt to give further 
extraordinary power to the railroads. Already the State 
of Iowa had incurred $12,000,000 in debts in aiding rail- 
road corporations. " I fear," said Delegate Traer, " that 
it is very often the case that these votes (on appropria- 
tions for railroads) are carried through by improper in- 
fluences, which the people, if left alone, would, upon ma- 
ture reflection, never have adopted." ^* 



IMPOTENCE OF THE PEOPLE. 

These are but a very few of the many instances of the 
debauching of every legislature in the United States. No 
matter how furiously the people protested at this giving 
away of their resources and rights, the capitalists were 
able to thwart their will on every occasion. In one case 
a State legislature had been so prodigal that the people 
of the State demanded a Constitutional provision forbid- 
ding the bonding of the State for railroad purposes. The 

13 Debates in the Massachusetts Convention, 1853, iii : 59, 
1* Constitutional Debates, Iowa, 1857, ii : ^^^. 



32 HISTORY OF THE GREAT AMERICAN FORTUNES 

Constitutional Convention adopted this provision. But 
the members had scarcely gone to their homes before the 
people discovered how they had been duped. The amend- 
ment barred the State from giving loans, but (and here 
was the trick) it did not forbid counties and municipali- 
ties from doing so. Thereupon the railroad capitalists 
proceeded to have laws passed, and bribe county and 
municipal officials all over the State to issue bonds and 
to give them terminal sites and other valuable privileges 
for nothing. In every such case the railroad owners in 
subsequent years sneaked legislation through in practic- 
ally every State, or resorted to subterfuges, by which they 
were relieved from having to pay back those loans. 

Hundreds of millions of dollars, exacted from the peo- 
ple in taxation, were turned over to the railroad corpora- 
tions, and little of it was ever returned. As for the land 
grants to railroads, they reached colossal proportions. 
From 1850 to 1872 Congress gave not less than 155,504,- 
994.59 acres of the public domain either direct to rail- 
road corporations, or to the various States, to be trans- 
ferred to those corporations. 

Much of this immense area was given on the condition 
that unless the railroads were built, the grants were to 
be forfeited. But the capitalists found no difficulty in 
getting a thoroughly corrupt Congress to extend the 
period of construction in cases where the construction 
had not been done. Of the 155,000,000 acres, a consid- 
erable portion of it valuable mineral, coal, timber and 
agricultural land, only 607,741 acres were forfeited by 
act of Congress, and even much of these were restored 
to the railroads by judicial decisions,^^ That Congress, 

1^ The principal of these decisions was that of the Supreme 
Court of the United States in the case of Schluenberg vs. Har- 
riman (Wallace's Supreme Court Reports, xxi:44). In many 
of the railroad grants it was provided that in case the railroad 



THE SEIZURE OF THE PUBLIC DOMAIN 33 

not less than the legislatures, was honeycombed with 
corruption is all too evident from the disclosures of many 
investigations — disclosures to which we shall have perti- 
nent occasion to refer later on. Not only did the rail- 
road corporations loot in a gigantic way under forms of 
law, but they so craftily drafted the laws of both Nation 
and the States that fraud at all times was easy. 



DEFRAUDING THE NATION OF TAXES. 

Not merely were these huge areas of land obtained by 
fraud, but after they were secured, fraud was further 
used to evade taxation. And by donations of land is not 
meant only that for intended railroad use or which could 
be sold by the railroads. In some cases, notably that of 
the Union Pacific Railroad, authority was given to the 
railroad by acts passed in 1862 and 1864 to take all of the 
material, such as stone, timber, etc., needed for construc- 
tion, from the public lands. So, in addition to the money 
and lands, much of the essential material for building the 
railroads was supplied from the public resources. No 
sooner had they obtained their grants, than the railroad 

lines were not completed within certain specified times, the lands 
unsold or unpatented should revert to the United States. The 
decision of the Supreme Court of the United States practically 
made these provisions nugatory, and indirectly legalized the 
crassest frauds. 

The original grants excluded mineral lands, but by a subse- 
quent fraudulent official construction, coal and iron were de- 
clared not to be covered by the term mineral. 

Commissioner Sparks of the U. S. General Land Office esti- 
mated in 1885 that, in addition to the tens of millions of acres 
the railroad corporations had secured by fraud under form of 
law, they had overdrawn ten million acres, " which vast amount 
has been treated by the corporations as their absolute property, 
but is really public land of the United States recoverable to 
the public domain." (House Executive Docs., First Session, 
Forty-ninth Congress, 1885-86, ii : 184.) It has never been re- 
covered. 



34 HISTORY OF THE GREAT AMERICAN^ FORTUNES 

corporations had law after law passed removing this re- 
striction or that reservation until they became absolute 
masters of hundreds of millions of acres of land which 
a brief time before had been national property. 

" These enormous tracts," wrote (in 1886) William 
A. Phillips, a member of the Committee on Public Lands 
of the Forty-third Congress, referring to the railroad 
grants, " are in their disposition subject to the will of the 
railroad companies. They can dispose of them in enor- 
mous tracts if they please, and there is not a single safe- 
guard to secure this portion of the national domain to 
cultivating yeomanry." The whole machinery of legis- 
lation was not only used to exclude the farmer from get- 
ting the land, and to centralize its ownership in corpora- 
tions, but was additionally employed in relieving these 
corporations from taxation on the land thus obtained by 
fraud. " To avoid taxation," Phillips goes on, " the rail- 
road land grant companies had an amendment enacted 
into law to the efifect that they should not obtain their 
patents until they had paid a small fee to defray the ex- 
pense of surveying. This they took care not to pay, or 
only to pay as fast as they could sell tracts to some pur- 
chasers, on which occasions they paid the surveying fee 
and obtained deeds for the portion they sold. In this 
way they have held millions of acres for speculative pur- 
poses, waiting for a rise in prices, without taxation, while 
the farmers in adjacent lands paid taxes." ^^ 

Phillips passes this fact by with a casual mention, as 
tliough it were one of no great significance. 

It is a fact well worthy of elaboration. Precisely as 
the aristocracies in the Old World had gotten their es- 
tates by force and fraud, and then had the laws so ar- 
ranged as to exempt those estates from taxation, so has 

16 " Labor, Land and Law " : 338-339. 



THE SEIZURE OF THE PUBLIC DOMAIN 35 

the money aristocracy of the United States proceeded on 
the same plan. As we shall see, however, the railroad 
and other interests have not only put through laws re- 
lieving from direct taxation the land acquired by fraud, 
but also other forms of property based upon fraud. 

This survey, however, would be prejudicial and one- 
sided were not the fact strongly pointed out that the rail- 
road capitalists were by no means the only land-graspers. 
Not a single part of the capitalist class was there which 
could in any way profit from the theft of public domain 
that did not wallow in corruption and fraud. 

The very laws seemingly passed to secure to the poor 
settler a homestead at a reasonable price were, as Henry 
M, Teller, Secretary of the Interior, put it, perverted into 
" agencies by which the capitalists secures large and valu- 
able areas of the public land at little expense." ^' The poor 
were always the decoys with which the capitalists of the 
day managed to bag their game. It was to aid and en- 
courage " the man of small resources " to populate the 
West that the Desert Land Law was apparently enacted ; 

1^ Report of the Secretary of the Interior for 1883. 

Reporting to Secretary of the Interior Lamar, in response to 
a U. S. Senate resolution for information, William A. J. Sparks, 
Commissioner of the General Land Office, gave statistics show- 
ing an enormous number of fraudulent land entries, and con- 
tinued : 

" It was the ease with which frauds could be perpetrated 
under existing laws, and the immunity offered by a hasty issue 
of patents, that encouraged the making of fictitious and fraudu- 
lent entries. The certainty of a thorough investigation would 
restrain such practices, but fraud and great fraud must in- 
evitably exist so long as the opportunity for fraud is preserved 
in the laws, and so long as it is hoped by the procurers ard 
promoters of fraud that examinations may be impeded or 
suppressed." If, Commissioner Sparks urged, the preemption, 
commuted-homestead, timber-land, and desert-land laws were re- 
pealed, then, "the illegal appropriation of the remaining pulilic 
lands would be reduced to a minimum." — U. S. Senate Docu- 
ments, First Session, Forty-ninth Congress, 1885-1886, Vol. viii. 
Doc. No. 134 : 4. 



36 HISTORY OF THE GREAT AMERICAN FORTUNES 

and many a pathetic and enthusiastic speech was made in 
Congress as this act was ostentatiously going through. 
Under this law, it was claimed, a man could establish 
himself upon six hundred and forty acres of land and, 
upon irrigating a portion of it, and paying $1.25 an acre, 
could secure a title. For once, it seemed, Congress was 
looking out for the interests of the man of few dollars. 



VAST THEFTS OF LAND. 

But plaudits were too hasty. To the utter surprise of 
the people the law began to work in a perverse direction. 
Its provisions had read well enough on a casual scrutiny. 
Where lay the trouble ? It lay in just a few words deftly 
thrown in, which the crowd did not notice. This law, 
acclaimed as one of great benefit to every man aspiring 
for a home and land, was arranged so that the capital- 
ist cattle syndicates could get immense areas. The lever 
was the omission of any provision requiring actual settle- 
ment. The livestock corporations thereupon sent in their 
swarms of dummies to the " desert " lands (many of 
which, in reality, were not desert but excellent grazing 
lands), had their dummies get patents from the Govern- 
ment and then transfer the lands. In this way the cattle- 
men became possessed of enormous areas ; and to-day 
these tracts thus gotten by fraud are securely held intact, 
forming what may be called great estates, for on many 
of them live the owners in expansive baronial style. 

In numerous instances, law was entirely dispensed with. 
Vast tracts of land were boldly appropriated by sheep and 
cattle rangers who had not even a pretense of title. En- 
closing these lands with fences, the rangers claimed them 
as their own, and hired armed guards to drive off in- 



THE SEIZURE OF THE PUBLIC DOMAIN 2)7 

truders, and kill if necessary.^* Murder after murder 
was committed. In this usurpation the august Supreme 
Court of the United States upheld them. And the 
grounds of the decision were what? 

The very extraordinary dictum that a settler could not 
claim any right of preemption on public lands in posses- 
sion of another who had enclosed, settled upon and im- 
proved them. This was the very reverse of every known 
declaration of common and of statute law. No court, 
supreme or inferior, had ever held that because the pro- 
ceeds of theft were improved or were refurbished a bit, 

18 " Within the cattle region," reported Commissioner Sparks, 
"it is notorious that actual settlements are generally prevented 
and made practically impossible outside the proximity of towns, 
through the unlawful control of the country, maintained by 
cattle companies." — U. S. Senate Docs., 1885-86, Vol. viii, No. 
134:4 and 5. 

Acting Commissioner Harrison of the General Land Office, 
reporting on March 14, 1884, to Secretary of the Interior Teller, 
showed in detail the vast extent of the unlawful fencing of 
public lands. In the Arkansas Valley in Colorado at least 
1,000,000 acres of public domain were illegally seized. The 
Prairie Cattle Company, composed of Scotch capitalists, had 
fenced in more than a million acres in Colorado, and a large 
number of other cattle companies in Colorado had seized areas 
ranging from 20,000 to 200,000 acres. " In Kansas," Harrison 
went on, " entire counties are reported as [illegally] fenced. 
In Wyoming, one hundred and twenty-five cattle companies are 
reported having fencing on the public lands. Among the com- 
panies and persons reported as having ' immense ' or ' very 
large ' areas inclosed . . . are the Dubuque, Cimarron and 
Renello Cattle [companies] in Colorado; the Marquis de Morales 
in Colorado; the Wyoming Cattle Company (Scotch) in Wyo- 
ming; and the Rankin Live Stock Company in Nebraska. 

" There is a large number of cases where inclosures range 
from 1,000 to 25,000 acres and upwards. 

" The reports_ of special agents show that the fraudulent 
entries of public land within the enclosures are extensively 
made by the procurement and in the interest of stockmen, 
largely for the purpose of controlling the sources of water sup- 
ply." — "Unauthorized Fencing of Public Lands," U. S. Senate 
Docs., First Session, Forty-eighth Congress, 1883-84, Vol. vi, Doc. 
No. 127 : 2. 



38 HISTORY OF THE GREAT AMERICAN FORTUNES 

the sufferer was thereby estopped from recovery. This 
decision showed anew how, while the courts were ever 
ready to enforce the law literally against the underlings 
and penniless, they were as active in fabricating tortuous 
constructions coinciding not always, but nearly always, 
with the demands and interests of the capitalist class. 

It has long been the fashion on the part of a certain 
prevalent school of writers and publicists to excoriate 
this or that man, this or that corporation, as the ringleader 
in the orgy of corruption and oppression. This practice, 
arising partly from passionate or ill-considered judgment, 
and in part from ignorance of the subject, has been the 
cause of much misunderstanding, popular and academic. 

No one section of the capitalist class can be held solely 
responsible ; nor were the morals and ethics of any one 
division different from those of the others. The whole 
capitalist class was coated with the same tar. Shipping 
merchants, traders in general, landholders, banking and 
railroad corporations, factory owners, cattle syndicates, 
public utility companies, mining magnates, lumber cor- 
porations — all were participants in various ways in the 
subverting of the functions of government to their own 
fraudulent ends at the expense of the whole producing 
class. 

While the railroad corporations were looting the public 
treasury and the public domain, and vesting in them- 
selves arbitrary powers of taxation and proscription, all 
of the other segments of the capitalist class were, at the 
same time, enriching themselves in the same way or simi- 
lar ways. The railroads were much denounced ; but 
wherein did their methods differ from those of the cattle 
syndicates, the industrial magnates or the lumber cor- 
porations? The lumber barons wanted their predacious 
share of the public domain ; throughout certain parts of 



THE SEIZURE OF THE PUBLIC DOMAIN 39 

the West and in the South were far-stretching, magnifi- 
cent forests covered with the growth of centuries. To 
want and to get them were the same thing, with a Gov- 
ernment in power representative of capitahsm. 



SPOLIATION ON A GREAT SCALE. 

The " poor settler " catspaw was again made use of. 
At the behest of the himber corporations, or of adven- 
turers or poHticians who saw a facile way of becoming 
multimillionaires by the simple passage of an act, the 
" Stone and Timber Act " was passed in 1878 by Con- 
gress. An amendment passed in 1892 made frauds still 
easier. This measure was another of those benevolent- 
looking laws which, on its face, extended opportunities 
for the homesteader. No longer, it was plausibly set 
forth, could any man say that the Government denied 
him the right to get public land for a reasonable sum. 
Was ever a finer, a more glorious chance presented? 
Here was the way open for any individual homesteader 
to get one hundred and sixty acres of timber land for 
the low price of $2.50 an acre. Congress was over- 
whelmed with outbursts of panegyrics for its wisdom and 
public spirit. 

Soon, however, a cry of rage went up from the duped 
public. And the cause? The law, like the Desert Land 
Law, it turned out, was filled with cunningly-drawn 
clauses sanctioning the worst forms of spoliation. En- 
tire trainloads of people, acting in collusion with the land 
grabbers, were transported by the lumber syndicates into 
the richest timber regions of the West, supplied with the 
funds to buy, and then each, after having paid $2.50 per 
acre for one hundred and sixty acres, immediately trans- 
ferred his or her allotment to the lumber corporations. 



40 HISTORY OF THE GREAT AMERICAN FORTUNES 

Thus, for $2.50 an acre, the lumber syndicates obtained 
vast tracts of the finest lands worth, at the least, according 
to Government agents, $100 an acre, at a time, thirty-five 
years ago, when lumber was not nearly so costly as now. 

The next development was characteristic of the prog- 
ress of onsweeping capitalism. Just as the traders, bank- 
ers, factory owners, mining and railroad magnates had 
come into their possessions largely (in varying degrees) 
by fraud, and then upon the strength of those posses- 
sions had caused themselves to be elected or appointed 
to powerful offices in the Government, State or National, 
so now some of the lumber barons used a part of the mil- 
lions obtained by fraud to purchase their way into the 
United States Senate and other high offices. They, as 
did their associates in the other branches of the capitalist 
class, helped to make and unmake judges, governors, leg- 
islatures and Presidents ; and at least one, Russell A. 
Alger, became a member of the President's Cabinet in 
1897. 

Under this one law, — the Stone and Timber Act — ir- 
respective of other complaisant laws, not less than $57,- 
000,000 has been stolen in the last seven years alone from 
the Government, according to a statement made in Con- 
gress by Representative Hitchcock, of Nebraska, on May 
5, 1908. He declared that 8,000.000 acres had been sold 
for $20,000,000, while the Department of the Interior had 
admitted in writing that the actual aggregate value of the 
land, at prevailing commercial prices, was $77,000,000. 
These lands, he asserted, had passed into the hands of the 
Lumber Trust, and their products were sold to the people 
of the United States at an advance of seventy per cent. 
This theft of $57,000,000 simply represented the years 
from 1901 to 1908 ; it is probable that the entire thefts for 
10,395,689.96 acres sold during the whole series of years 



THE SEIZURE OF THE PUBLIC DOMAIN 4I 

since the Stone and Timber Act was passed reaches a 
much vaster amount. 

Stupendous as was the extent of the nation's resources 
already appropriated by 1876, more remained to be seized. 
The Government still owned 40,000,000 acres of land in 
the South, mainly in Alabama, Louisiana, Florida, Ar- 
kansas and Mississippi, Much of this area was valuable 
timber land, and a part of it, especially in Alabama, was 
filled with great coal and iron deposits, — a fact of which 
certain capitalists were well aware, although the general 
public did not know it. 

During the Civil War nothing could be attempted in 
the war-ravaged South. That conflict over, a group of 
capitalists set about to get that land, or at least the valu- 
able part of it. At about the time that they had their 
plans primed to juggle a bill through Congress, an unfor- 
tunate situation arose. A rancid public scandal ensued 
from the bribery of members of Congress in getting 
through the charters and subsidies of the Union Pacific 
railroad and other railroads. Congress, for the sake of 
appearance, had to be circumspect. 



THE CASH SALES ACT, 

By 1876, however, the public agitation had died away. 
The time was propitious. Congress rushed through a bill 
carefully worded for the purpose. The lands were or- 
dered sold in unlimited areas for cash. No pretense was 
made of restricting the sale to a certain acreage so that all 
any individual could buy was enough for his own use. 
Anyone, if he chose, could buy a million or ten million 
acres, provided he had the cash to pay $1.25 an acre. 
The way was easy for capitalists to get millions of acres 
of the coveted iron, coal and timber lands for pj'actically 



42 HISTORY OF THE GREAT AMERICAN FORTUNES 

nothing. At that very time the Government was selling 
coal lands in Colorado at $io to $20 an acre, and it was 
recognized that even that price was absurdly low. 

Hardly was this " cash sales " law passed, than the be- 
sieging capitalists pounced upon these Southern lands 
and scooped in eight millions of acres of coal, iron and 
timber lands intrinsically worth (speaking commercially) 
hundreds of millions of dollars. The fortunes of not a 
few railroad and industrial magnates were instantly and 
hugely increased by this fraudulent transaction.^^ Hun- 
dreds of millions of dollars in capitalist bonds and stock, 
representing in effect mortgages on which the people per- 
petually have to pay heavy interest, are to-day based upon 
the value of the lands then fraudulently seized. 

Fraud was so continuous and widespread that we can 
here give only a few succinct and scattering instances. 
" The present system of laws," reported a special Con- 
gressional Committee appointed in 1883 to investigate 
what had become of the once vast public domain, " seem 
to invite fraud. You cannot turn to a single state paper 
or public document where the subject is mentioned be- 
fore the year 1883, from the message of the President to 
the report of the Commissioner of the Land Office, but 
what statements of ' fraud ' in connection with the dispo- 
sition of public lands are found." -^ A little later, Com- 
missioner Sparks of the General Land Office pointed out 
that " the near approach of the period when the United 
States will have no land to dispose of has stimulated the 
exertions of capitalists and corporations to acquire out- 
lying regions of public land in mass, by whatever means, 

19 " Fraudulent transaction," House Ex. Doc. 47, Part iv, 
Forty-sixth Congress, Third Session, speaks of the phrasing of 
the act as a mere subterfuge for despoihnent ; that the act was 
passed specifically "for the benefit of capitalists," and "that 
fraud was used in sneaking it through Congress." 

20 House Ex. Doc. 47 : 356. 



THE SEIZURE OF THE PUBLIC DOMAIN 43 

legal or illegal." In the same report he further stated, 
" At the outset of my administration I was confronted 
with overwhelming evidence that the public domain was 
made the prey of unscrupulous speculation and the worst 
forms of land monopoly." ^^ 



THE EXCHANGE OF LAND LAW. 

Not pausing to deal with a multitude of other laws the 
purport and effect of all of which were the same — to 
give the railroad and other corporations a succession of 
colossal gifts and other special privileges — laws, many 
of which will be referred to later — we shall pass on to 
one of the final masterly strokes of the railroad mag- 
nates in possessing themselves of many of such of the last 
remaining valuable public lands as were open to spolia- 
tion. 

This happened in 1900. What were styled the land- 
grant railroads, that is to say, the railroad corporations 
which received subsidies in both money and land from 
the Government, were allotted land in alternate sections. 
The Union Pacific manipulated Congress to '* loan " it 
about $27,000,000 and give it outright 13,000,000 acres 
of land. The Central Pacific got nearly $26,000,000 and 
received 9,000,000 acres. To the Northern Pacific 47,- 
000,000 acres were given; to the Kansas Pacific, 12,100,- 
000; to the Southern Pacific about 18,000,000 acres. 
From 1850 the National Government had granted sub- 
sidies to more than fifty railroads, and, in addition to the 
great territorial possessions given to the six railroads enu- 
merated, had made a cash appropriation to those six of 
not less than about $140,000,000. But the corruptly ob- 

21 Report of the Commissioner of the General Land Office 
for October, 1885 : 48 and 79. 



'44 HISTORY OF THE GREAT AMERICAN FORTUNES 

tained donations from the Government were far from 
being all of the bounty. Throughout the country, States, 
cities and counties contributed presents in the form of 
franchises, financial assistance, land and terminal sites. 

The land grants, especially in the West, were so enor- 
mous that Parsons compares them as follows : Those in 
Minnesota would make two States the size of Massachu- 
setts ; in Kansas they were equal to two States the size 
of Connecticut and New Jersey ; in Iowa the extent of 
the railroad grants was larger than Connecticut and 
Rhode Island, and the grants in Michigan and Wisconsin 
nearly as large ; in Montana the grant to one railroad 
alone would equal the whole of Maryland, New Jersey 
and Massachusetts. The land grants in the State of 
Washington were about equivalent to the area of the 
same three States. Three States the size of New Hamp- 
shire could be carved out of the railroad grants in Cali- 
fornia.-- 

The alternate sections embraced in these States might 
be good or useless land ; the value depended upon the 
locality. They might' be the richest and finest of agri- 
cultural grazing, mineral or timber land or barren wastes 
and rocky mountain tops. 

For a while the railroad corporations appeared sat- 
isfied with their appropriations and allotments. But as 
time passed, and the powers of government became more 
and more directed by them, this plan naturally occurred: 
Why not exchange the bad, for good, land? Having 
found it so easy to possess themselves of so vast and 
valuable an area of former public domain, they calculated 
that no difficulty would be encountered in putting through 
another process of plundering. All that was necessary 
was; to eo through the formality of ordering Congress 

22 " The Railways, the Trusts and the People " : 137. 



THE SEIZURE OF THE PUBLIC DOMAIN 45 

to pass an act allowing them to exchange bad, foi good, 
lands. 

This, however, could not be done too openly. The 
people must be blinded by an appearance of conserving 
public interests. The opportunity came when the Forest 
Reservation Bill was introduced in Congress — a bill to 
establish national forest reservations. No better vehicle 
could have been found for the project traveling in dis- 
guise. This bill was everywhere looked upon as a wise 
and statesmanlike measure for the preservation of forests ; 
capitalist interests, in the pursuit of immediate profit, 
had ruthlessly denuded and destroyed immense forest 
stretches, causing, in turn, floods and destruction of life, 
property and of agriculture. Part of the lands to be 
taken for the forest reservations included territory settled 
upon ; it was argued as proper, therefore, that the 
evicted homesteaders should be indemnified by having the 
choice of lands elsewhere. 

So far, the measure looked w^ell. But when it went to 
the conference committee of the two houses of Congress, 
the railroad representatives artfully slipped in the four 
unobtrusive words, " or any other claimant." This quar- 
tet of words allowed the railway magnates to exchange 
millions of acres of desert and of denuded timber lands, 
arid hills and mountain tops covered with perpetual snow, 
for millions of the richest lands still remaining in the 
Government's much diminished hold. 

So secretly was this transaction consummated that the 
public knew nothing about it ; the subsidized newspapers 
printed not a word ; it went through in absolute silence. 
The first protest raised was that of Senator Pettigrew, of 
South Dakota, in the United States Senate on May 31, 
1900. In a vigorous speech he disclosed the vast thefts 
going on under this act. Congress, under the complete 



46 .HISTORY OF THE GREAT AMERICAN FORTL'xNES 

domination of the railroads, took no action to stop it. 
Only when the fraud was fully accomplished did the rail- 
roads allow Congress to go through the forms of defer- 
ring to public interests by repealing the law.^^ 



COAL LANDS EXPROPRIATED. 

Not merely were the capitalist interests allowed to 
plunder the public domain from the people under these 
various acts, but another act was passed by Congress, the 
" Coal Land Act," purposely drawn to permit the rail- 
roads to appropriate great stretches of coal deposits. 
" Already," wrote President Roosevelt in a message to 
Congress urging the repeal of the Stone and Timber 
Act, the Desert Land Law, the Coal Land Act and similar 
enactments, " probably one-half of the total area of high- 
grade coals in the West has passed under private con- 
trol. Including both lignite and the coal areas, these pri- 
vate holdings aggregate not less than 30,000,000 acres of 
coal fields." These urgings fell flat on a Congress that 
included many members who had got their millions by 
reason of these identical laws, and which, as a body, was 
fully under the control of the dominant class of the day 
— the Capitalist class. The oligarchy of wealth was tri- 
umphantly, gluttonously in power ; it was ingenuous 
folly to expect it to yield where it could vanquish, and 
concede where it could despoil.-* 

23 In a letter to the author Senator Pettigrew instanges the 
case of the Northern Pacific Railroad. " The Northern Pacific," 
he writes, " having patented the top of Mount Tacoma, with 
its perpetual snow and the rocky crags of the mountains else- 
where, which had been embraced within the forest reservation, 
could now swap these worthless lands, every acre, for the best 
valley and grazing lands owned by the Government, and thus 
the Northern Pacific acquired about two million acres more of 
mineral, forest and farming lands." 

-■* Nor did it yield. Roosevelt's denunciations in no way 



THE SEIZURE OF THE PUBLIC DOMAIN 47 

The thefts of the public domain have continued, with- 
out intermission, up to this present day, and doubtless will 
not cease until every available acre is appropriated. 

A recent report of H. H. Schwartz, chief of the field 
service of the Department of the Interior, to Secretary 
Garfield, of that Department, showed that in the two 
years from 1906 to 1908 alone, approximately $110,000,- 
000 worth of public land in States, principally west of 
the Mississippi River, had been fraudulently acquired 
by capitalist corporations and individuals. This report 
disclosed more than thirty-two thousand cases of land 
fraud. The frauds on the part of various capitalist cor- 
porations in obtaining vast mineral deposits in Alaska, 
and incalculably rich water power sites in Montana and 
elsewhere, constitute one of the great current public 
scandals. It will be described fully elsewhere in this 
work. 

Overlooking the petty, confusing details of the last sev- 
enty years, and focusing attention upon the large devel- 
opments, this is the striking result beheld : A century ago 
no railroads existed ; to-day the railroads not only own 
stupendous natural resources, expropriated from the peo- 

afFected the steady expropriating process. In the current seizure 
(1909) of vast coal areas in Alaska, the long-continuing process 
can be seen at work under our very eyes. A controversy, in 
1909, between Secretary of the Interior Ballinger and U. S. 
Chief Forester Gifford Pinchot brought a great scandal to a 
head. It was revealed that several powerful syndicates of 
capitalists had filed fraudulent claims to Alaskan coal lands, 
the value of which is estimated to be from $75,000,000 to $1,- 
000,000,000. At the present writing their claims, it is announced, 
are being investigated by the Government. The charge has been 
made that Secretary of the Interior Ballinger, after leaving the 
Land Commissioner's office — a post formerly held by him — 
became the attorney for the most powerful of these syndicates. 

At a recent session of the Irrigation Congress at Spokane, 
Washington, Gov. Pardee of California charged that the timber, 
the minerals and the soil had long since become the booty of 
corporations whose political control of public servants was no- 
torious. 



48 HISTORY OF THR GREAT AMERICAN FORTUNES 

pie, but, in conjunction witli allied capitalist interests, 
they dictate what the lot, political, economic and social, 
of the American people shall be. All of this transfor- 
mation has come about within a relatively short period, 
much of it in our own time. But a little while ago the 
railroad projectors begged and implored, tricked and 
bribed ; and had the law been enforced, would have been 
adjudged criminals and consigned to prison. And now, 
in the blazing power of their wealth, these same men or 
their successors are uncrowned kings, swaying the full 
powers of government, giving imperial orders that Con- 
gress, legislatures, conventions and people must obey. 

AN ARRAY OF COMMANDING FACTS. 

But this is not the only commanding fact. A much 
more important one lies in the astonishing ease with 
which the masses of the people have been discriminated 
against, exploited and oppressed. Theoretically the 
power of government resides in the people, down to the 
humblest voter. This power, however, has been made 
the instrument for enslaving the very people supposed 
to be the wielders of political action. 

While Congress, the legislatures and the executive and 
administrative officials have been industriously giving 
away public domain, public funds and perpetual rights 
to railroad and other corporations, they have almost en- 
tirely ignored the interests of the general run of people. 

The more capitalists they created, the harder it became 
for the poor to get settler's land on the public domain. 
Congress continued passing acts by which, in most cases, 
the land was turned over to corporations. Intending set- 
tlers had to buy it at exorbitant prices. This took place 
in nearly all of the States and Territories. Large num- 



THE SEI7A"R1£ OF THE PUBLIC DOMAlK 49 

bers of people could not afford to pay the price demanded 
by the railroads, and consequently were compelled to 
herd in industrial centers. They were deliberately shut 
off from possession of the land. This situation was al- 
ready acute twenty-five years ago. " The area of arable 
land open to settlement." pointed out Secretary of the 
Interior Teller in a circular letter of May 22, 1883, " is 
not great when compared with the increasing demand 
and is rapidly decreasing." All other official reports con- 
sistently relate the same conditions.^^ 

At the same time, while being excluded from soil which 
had been national property, the working and farming 
class were subjected to either neglect or onerous laws. 
As a class, the capitalists had no difficulty at any time 
in securing whatever laws they needed; if persuasion by 
argument was not effective, bribery was. Moreover, over 
and above corrupt purchase of votes was the feeling in- 
grained in legislators by the concerted teachings of so- 
ciety that the man of property should be looked up to; 
that he was superior to the common herd ; that his inter- 
ests were paramount and demanded nursing and protec- 
tion. Whenever a commercial crisis occurred, the capi- 
talists secured a ready hearing and their measures were 
passed promptly. But millions of workers would be in 
enforced idleness and destitution, and no move was made 
to throw open public lands to them, or appropriate money, 
or start public works. Such a proposed policy was con- 
sidered " paternalism " — a catchword of the times im- 
plying that Governmental care should not be exercised 
for the unfortunate, the weak and the helpless. 

25 " The tract books of my office show," reported Commis- 
sioner Sparks, " that available public lands are already largely 
covered by entries, selections and claims of various kinds." The 
actual settler was compelled to buy up these claims, if, indeed, 
he was permitted to settle on the land. — U. S. Senate Ex. Docs., 
1885-86, Vol. viii. Doc. No. 134:4. 



50 HISTORY OF THE GREAT AMERICAN FORTUNES 

And here was the anomaly of the so-called American 
democratic Government. It was held legitimate and nec- 
essary that capital should be encouraged, but illegitimate 
to look out for the interests of the non-propertied. The 
capitalists were very few ; the non-propertied, holding 
nominally the overwhelming voting power, w^ere many. 
Government was nothing more or less than a device for 
the nascent capitalist class to work out its inevitable pur- 
poses, yet the majority of the people, on whom the powers 
of class government severely fell, were constantly de- 
luded into believing that the Government represented 
them. Whether Federalist or anti-Federalist, Whig, Re- 
publican or Democratic party was in power, the capitalist 
class went forward victoriously and invincibly, the proof 
of which is seen in its present almost limitless power and 
possessions. 



CHAPTER II 
A NECESSARY CO'NTRAST 

If the whole might of Government was used in the ag- 
grandizement and perpetuation of a propertied aristoc- 
racy, what was its specific attitude toward the working 
class ? Of the powerful few, whether political or indus- 
trial, the conventional histories hand down grossly biased 
and distorted chronicles. These few are isolated from 
the multitude, and their importance magnified, while the 
millions of obscure are nowhere adequately described. 
Such sterile historians proceed upon the perfunctory plan, 
derived from ancient usage in the days when kingcraft 
was supremely exalted, that it is only the mighty few 
whose acts are of any consequence, and that the doings 
of the masses are of no account. 

GOVERNMENT BY PROPERTY INTERESTS. 

Hence it is that most histories are mere registers of 
names and dates, dull or highly-colored hackneyed 
splurges of print giving no insight into actual conditions. 

In this respect most of the prevailing histories of the 
United States are the most egregious offenders. They 
fix the idea that this or that alleged statesman, this or 
that President or politician or set of politicians, have been 
the dominating factors in the decision and sway of public 
afifairs. No greater error could be formulated. Behind 
the ostentatious and imposing public personages of the 
different periods, the arbiters of laws and policies have 

51 



52 HISTORY OF THE GREAT AMERICAN FORTUNES 

been the men of property. They it was who really ruled 
both the arena and the arcana of politics. 

It was they, sometimes openly, but more usually cov- 
ertly, who influenced and manipulated the entire sphere 
of government. 

It was they who raised the issues which divided the 
people into contesting camps and which often beclouded 
and bemuddled the popular mind. It was their material 
ideals and interests that were engrafted upon the fabric 
of society and made the prevailing standards of the day. 

From the start the United States Government was what 
may be called a regime swayed by property. 

The Revolution, as we have seen, was a movement by 
the native property interests to work out their own des- 
tiny without interference by the trading classes of Great 
Britain. The Constitution of the United States, the va- 
rious State Constitutions, and the laws, were, we have 
set forth, all reflexes of the interests, aims, castes and 
prejudices of the property owners, as opposed to the 
non-propertied. At first, the landholders and the ship- 
ping merchants were the dictators of laws. Then from 
these two classes and from the tradesmen sprang a third 
class, the bankers, who, after a continuous orgy of bri- 
bery, rose to a high pitch of power. At the same time, 
other classes of property owners were sharers in varying 
degrees in directing Government. One of these was the 
slaveholders of the South, desperately increasing their 
clutch on government administration the more their in- 
stitutions were threatened. The factory owners were 
likewise participants. However bitterly some of these 
propertied interests might war upon one another for su- 
premacy, there was never a time when the majority of the 
men who sat in Congress, the legislatures or the judges 
did not represent, or respond to, either the interests or 



A NECESSARY CONTRAST 53 

the ideals of one or more of these divisions of the prop- 
ertied classes. 

Finally, out of the landowners, slaveowners, bankers, 
shippers, factory masters and tradesmen a new class of 
great power developed. This was the railroad-owning 
class. From about the year 1845 to 1890 it was the 
most puissant governing class in the United States, and 
only ceased being distinctly so when the industrial trusts 
became even mightier, and a time came when one trust 
alone, the Standard Oil Company, was able to possess it- 
self of vast railroad systems. 

These different components of the railroad-owning 
class had gathered in their money by either outright fraud 
or by the customary exploitative processes of the times. 
We have noted how many of the landholders secured 
their estates at one time or another by bribery or by in- 
vidiously fraudulent transactions ; and how the bankers, 
who originally were either tradesmen, factory owners or 
landowners, had obtained their charters and privileges 
by widespread bribery. A portion of the money thus 
acquired was often used in bribing Congress and legisla- 
tures for railroad charters, public funds, immense areas 
of land including forests and mines, and special laws of 
the most extraordinary character. 



CONDITIONS OF THE NON-PROPERTIED. 

Since Government was actually, although not avow- 
edly or apparently, a property regime, what was the con- 
dition of the millions of non-propertied? 

In order to get a correct understanding of both the 
philosophy and the significance of what manner of prop- 
erty rule was in force, it is necessary to give an accom- 
panying sketch of the life of the millions of producers, 



54 HISTORY OF THE GREAT AMERICAN FORTUNES 

and what kind of laws related to them. Merely to nar- 
rate the acts of the capitalists of the period is of no en- 
during value unless it be accompanied by a necessary 
contrast of how Government and capitalist acted toward 
the worker. It was the worker who tilled the ground 
and harvested the produce nourishing nations ; whose 
labor, mental or manual, brought forth the thousand and 
one commodities, utensils, implements, articles and lux- 
uries necessary to the material wants of civilization. 
Verily, what of the great hosts of toilers who have done 
their work and shuffled off to oblivion? What were their 
aspirations, difficulties, movements and struggles ? While 
Government, controlled by both the men and the stand- 
ards of property, was being used as a distributing instru- 
ment for centering resources and laws in the hands of a 
mere minority, what were its methods in dealing with the 
lowly and propertyless ? 

Furthermore, this contrast is indispensable for an- 
other reason. Posterity ever has a blunt way of asking 
the most inquisitive questions. The inquirer for truth 
will not be content with the simple statement that many 
of the factory owners and tradesmen bribed representa- 
tive bodies to give them railroad charters and bountiful 
largess. He will seek to know how, as specifically as 
the records allow, they got together that money. Their 
nominal methods are of no weight ; it is the portrayal of 
their real, basic methods which alone will satisfy the 
delver for actual facts. 

This is not the place for a voluminous account of the 
industrial development of the United States. We can- 
not halt here to give the full account of the origin and 
growth of that factory system which has culminated in 
the gigantic trusts of to-day. Nor can we pause to 
deal with the manifold circumstances and methods in- 



A NECESSARY CONTRAST 5S 

volved in that expansion. The full tale of the rise and 
climax of industrial establishments ; how they subverted 
the functions of government to their own ends ; stole in- 
ventions right and left and drove inventors to poverty 
and to the grave ; defrauded the community of incredible 
amounts by evading taxation ; oppressed their workers 
to a degree that in future times will read like the acts of 
a class outsavaging the savage ; bribed without intermis- 
sion ; slaughtered legions of men, women and children 
in the pursuit of profit ; exploited the peoples of the 
globe remorselessly — all of this and more, constituting 
a weird chapter of horrors in the progress of the race, 
will be fully described in a later part of this work.^ 

But in order to contribute a clear perspective of the 
methods and morals of a period when Government was 
but the mannikin of property — a period even more pro- 
nounced now — and to give a deeper insight into the 
conditions against which millions had to contend at a 
time when the railroad oligarchy was blown into life by 
Government edict, a few important facts will be pre- 
sented here. 

The sonorous doctrines of the Declaration of Inde- 
pendence read well, but they were not meant to be ap- 
plied to the worker. The independence so much vaunted 
was the independence of the capitalist to do as he pleased. 
Few, if any, restrictions were placed upon him ; such 
pseudo restrictions as were passed from time to time 
were not enforced. On the other hand, the severest laws 
were enacted against the worker. For a long time it 
was a crime for him to go on a strike. In the first strike 
in this country of which there is any record — that of 
a number of sailors in New York City in 1803, for better 
wages — the leader was arrested, indicted and sent to 

1 See " Great Fortunes from Industries." 



56 H-ISTORY OF THE GREAT AMERICAN FORTUNES 

prison. The formidable machinery of Government was 
employed by the ruHng commercial and landed classes 
for a double purpose. On the one hand, they insisted 
that it should encourage capital, which phrase translated 
into action meant that it should confer grants of land, 
immense loans of public funds without interest, virtual 
immunity from taxation, an extra-legal taxing power, 
sweeping privileges, protective laws and clearly defined 
statute rights. 

THE SUPREMACY OF EMPLOYERS. 

At the same time, while enriching themselves in every 
direction by transferring, through the powers of Gov- 
ernment, public resources to themselves, the capitalists 
declared it to be a settled principle that Government 
should not be paternalistic ; they asserted that it was not 
only not a proper governmental function to look out for 
the interests of the masses of workers, but they went 
even further. 

With the precedents of the English laws as an ex- 
ample, they held that it devolved upon Government to 
keep the workers sternly within the bounds established 
by employers. In plain words, this meant that the capi- 
talist was to be allowed to run his business as he de- 
sired. He could overwork his employees, pay them the 
lowest wages, and kill them off by forcing them to work 
under conditions in which the sacrifice of human life 
was held subordinate to the gathering of profits, or by 
forcing them to work or live in disease-breeding places.^ 

2 The slum population of the United States increased rapidly. 
" According to the best estimates," stated the " Seventh Special 
Report of the U. S. Commissioner of Labor — The Slums 
of Great Cities, 1894," " the total slum population of Baltimore 
is about 25,000; of Chicago, 162,000; of New York, 360,000; of 
Philadelphia, 35,000" (p. 12). The figures of the average weekly 



A NECESSARY CONTRAST 57 

The law, which was the distinct expression of the inter- 
ests of the capitaHst, upheld his right to do all this. Yet 
if the workers protested ; if they sought to improve their 
condition by joining in that community of action called 
a strike, the same code of laws adjudged them criminals. 
At once, the whole power of law, with its police, miltary 
and judges, descended upon them, and either drove them 
back to their tasks or consigned them to prison. 

The conditions under which the capitalists made their 
profits, and under which the workers had to toil, were 
very oppressive to the workers. The hours of work at 
that period were from sunrise to sunset. Usually this rule, 
especially in the seasons of long days, required twelve, 
and very often fourteen and sixteen, hours a day. Yet 
the so-called statesmen and the pietentious cultured and 
refined classes of the day, saw nothing wrong in this ex- 
ploitation. The reason was obvious. Their power, their 
elegant mansions, their silks and satins, their equipage 
and superior opportunities for enjoyment all were based 
upon the sweat and blood of these so-called free white 
men, women and children of the North, who toiled even 
harder than the chattel black slave of the South, and 
who did not receive a fraction of the care and thought 
bestowed, as a corrollary of property, upon the black 

wages per individual of the slum population revealed why there 
was so large a slum population. In Baltimore these wages were 
$8,651-^ per week; in Chicago, $9.8814; in New York, $8.36, and 
in Philadelphia. $8.68 per week (p. 64). 

In his " Modern Social Conditions," Bailey, basing his state- 
ments upon the U. S. Census of 1900, asserted that 109,750 per- 
sons had died from tuberculosis in the United States in 1900. 
" Plenty of fresh air and sunlight," he wrote, " will kill the 
germs, and yet it is estimated that there are eight millions of 
people who will eventually die from consumption unless strenuous 
efforts are made to combat the disease. Working in a confined 
atmosphere, and living in damp, poorly ventilated rooms, the 
dwellers in the tenements of the great cities fall easy victims to 
the great white plague (p. 265). 



58 HISTORY OF THE GREAT AMERICAN FORTUNES 

slave. Already the capitalists of the North had a slavery 
system in force far more effective than the chattel system 
of the South — a system the economic superiority of 
which was destined to overthrow that of black slavery. 

Most historians, taking their cue from the intellectual 
subserviency demanded of them by the ruling propertied 
classes, delight in picturing those times as " the good 
old times," when the capitalists were benevolent and 
amiable, and the workers lived in peace and plenty. 



AN INCESSANT WARFARE. 

History in the main, thus far, has been an institution 
for the propagation of lies. The truth is that for thou- 
sands of years back, since the private property system 
came into existence, an incessant, uncompromising war- 
fare has been going on between oppressors and op- 
pressed. Apart from the class distinctions and the bit- 
terness manifested in settlement and colonial times in 
this country — reference to which has been given m ear- 
lier chapters — the whole of the nineteenth century, and 
thus far of this century, has been a continuous indus- 
trial struggle. It has been the real warfare of modern 
times. 

In this struggle the propertied classes had the great 
advantage from the start. Centuries of .rulership had 
taught them that the control of Government was the 
crux of the mastery. By possession of Government they 
had the power of making laws ; of the enforcement or 
non-enforcement of those laws ; of the directorship of 
police, army, navy, courts, jails and prisons — all terrible 
instruments for suppressing any attempt at protest, peace- 
ful or otherwise. N'otwithstanding this massing of 
power and force, the working class has at no time been 



A NECESSARY CONTRAST 59 

passive or acquiescent. It has allowed itself to be duped ; 
it has permitted its ranks to be divided by false issues ; 
it has often been blind at critical times, and has made no 
concerted effort as yet to get intelligent possession of the 
great strategic point, — governmental power. Neverthe- 
less, despite these mistakes, it has been in a state of con- 
stant rebellion ; and the fact that it has been so, that its 
aspirations could not be squelched by jails, prisons and 
cannon nor by destitution or starvation, furnishes the 
sublimest record in all the annals of mankind. 

THE workers' struggle FOR BETTER CONDITIONS. 

Again and again the workers attempted to throw off 
some of their shackles, and every time the whole domi- 
nant force of society was arrayed against them. By 1825 
an agitation developed for a ten-hour workday. The pol- 
iticians denounced the movement ; the cultured classes 
frowned upon it ; the newspapers alternately ridiculed and 
abused it ; the officials prepared to take summary action 
to put it down. As for the capitalists — the shipping 
merchants, the boot and shoe manufacturers, the iron 
masters and others — they not only denied the right of 
the workers to organize, while insisting that they them- 
selves were entitled to combine, but they inveighed against 
the ten-hour demand as " unreasonable conditions which 
the folly and caprice of a few journeymen mechanics 
may dictate." " A very large sum of money," says 
McNeill, " was subscribed by the merchants to defeat the 
ten-hour movement." ^ And as an evidence of the in- 
tense opposition to the workers' demands for a change 
from a fourteen to a ten-hour day, McNeill quotes from 
a Boston newspaper of 1832: 

3 " The Labor Movement " : 339. 



60 HISTORY OF THE GREAT AMERICAN FORTUNES 

Had this unlawful combination had for its object the en- 
hancement of daily wages, it would have been left to its own 
care ; but it now strikes the very nerve of industry and good 
morals by dictating the hours of labor, abrogating the good old 
rule of our fathers and pointing out the most direct course to 
poverty; for to be idle several of the most useful hours of the 
morning and evening will surely lead to intemperance and ruin. 

These, generally speaking, were the stock capitalist ar- 
guments of the day, together with the further reiterated 
assertion that it was impossible to conduct business on 
a ten-hour day system. The effect of the fourteen-hour 
day upon the workers was pernicious. Having no time 
for reading, self-education, social intercourse or acquaint- 
ing themselves with refinement, they often developed bru- 
tal propensities. In proportion to the length of time 
and the rigor with which they were exploited, they de- 
generated morally and intellectually. This was a well- 
known fact, and was frequently commented upon by con- 
temporaneous observers. Their employers cotild not fail 
to know it, yet, with few exceptions, they insisted that 
any movement to shorten the day's labor was destructive 
of good morals. 

This pronouncement, however, need not arouse com- 
ment. Ever has the propertied class set itself up as the 
lofty guardian of morals although actuated by sordid 
self-interest and nothing more. Many workers were 
driven to drink, crime and suicide by the exasperating 
and deteriorating conditions under which they had to 
labor. The moment that they overstepped the slightest 
bounds of law, in rushed the authorities with summary 
punishment. The prisons of the period were full of me- 
chanics whom serfdom or poverty had stung on to commit 
sonic crime or other. However trifling the offence, or 
Vi'hatever the justifiable ])rovocalion, the law made no 



A NECESSARY CONTRAST 6l 

allowance ; the letter of the statutes was strictly construed, 
and always administered with a heavy hand. 



THE CAPITALIST S TACTICS. 

The whole of uppermost society was aligned against 
the hard-driven working class. The employers deplored 
the audacity of the workers in forming unions and at- 
tempting to get shorter hours of labor. The capitalist 
changed his tactics like an acrobat. If the workers struck 
for a less burdensome workday he would asure them 
that he could not recognize such an untenable position ; 
he might sympathize with their efforts for higher wages, 
but he must combat any effort for shorter hours. 

But when the workers struck specifically for more 
wages, then the capitalist summoned the judiciary to 
help him out, as happened in New York City, in 1836, 
when twenty-one journeymen tailors were fined by Judge 
Edwards sums ranging from $100 to $150. As many of 
them could not pay it, they were despatched to jail. The 
clergy virulently assailed the trade-union movement. 
" We regret to say," read a statement of a general meet- 
ing of the mechanics of Boston and vicinity, issued on 
January 8, 1834, " that no one of our respected clergy 
are present. Application having been made to twenty- 
two different societies for the use of a. meeting house on 
this day for trades unions, the doors of all were shut 
against us." . . . 

Year after year the struggle continued for a ten-hour 
day throughout the North and East. Time after time 
the workers were driven back to their jobs by utter im- 
poverishment. Repeatedly defeated, they renewed the 
attempt as often. Wherever they applied for aid or sym- 
pathy they met with hostility. In 1836 a Baltimore 



62 HISTORY OF THE GREAT AMERICAN FORTUNES 

trades-union memorialized Congress to limit the hours of 
labor of those employed on the public works to ten hours 
a day. The pathos of this petition ! So unceasingly had 
the workers been lied to by politicians, newspapers, clergy 
and employers, that they did not realize that in applying 
to Congress or to any legislature, that they were begging 
from men who represented the antagonistic interests of 
their own employers. After a short debate Congress 
laid the petition on the table. Congress at this very 
time was spinning out laws in behalf of capitalist inter- 
ests ; granting public lands, public funds, protective tar- 
iffs and manifold other measures demanded or lobbied 
for by existing or projected corporations. 

A memorial of a " Portion of the Laboring Classes of 
the City of New York in Relation to The Money Mar- 
ket " complained to Congress in 1833 that the powers 
of the Government were used against the working class. 

" You are not ignorant," they petitioned, 

That our State Legislatures have, by a usurpation of power 
which is expressly withheld by our Federal Constitution, char- 
tered many companies to engage in the manufacture of paper 
money; and that the necessities of the laboring classes have com- 
pelled them to give it currency. 

The strongest argument against this measure is, that by 
licensing any man or set of men to manufacture money, instead 
of earning it, we virtually license them to take so much of the 
property of the community as they may happen to fancy, without 
contributing to it at all — an injustice so enormous that it is 
incapable of any defense and therefore needs no comment. 

. That the profits of capital are abstracted from the 
earnings of labor, and that these deductions, like any other tax 
on industry, tend to diminish the value of money by increasing 
the price of all the fruits of labor, are facts beyond dispute; it 
is equally undeniable that there is a point which capitalists cannot 
exceed without injuring themselves, for when by their exertions 
they so far depreciate the value of money at home that it is sent 
abroad, many are thrown out of employ, and are not only dis- 



A NECESSARY CONTRAST 63 

abled from paying their tribute, but are forced to betake to dis- 
honest courses or starve. 

This memorial was full of iron and stern truths, .al- 
though much of its political economy was that of its own 
era ; a very different petition, it will be noticed, from the 
appealing, cringing petitions sent timidly to Congress 
by the conservative, truckling labor leaders of later times. 
The memorial continued ; 

The remaining laborers are then loaded with additional bur- 
dens to provide laws and prisons and standing armies to keep 
order ; expensive wars are created merely to lull for a time the 
clamors for employment ; each new burden aggravates the 
disease, and national death finally ends it. 

The power of capital, was, the memorial read on, " in 
the nature of things, regulated by the proportion that 
the numbers of, and competition among, capitalists bears 
to the number and destitution of laborers." The only 
sure way of benefiting labor, " and the way best calcu- 
lated to benefit all classes," was to diminish the destitu- 
tion among the working classes. And the remedy pro- 
posed in the memorial? A settled principle of national 
policy should be laid down by Congress that the whole of 
the remaining of the public lands should forever continue 
to be the public property of the nation " and accordingly, 
cause them to be laid out from time to time, as the wants 
of the population might require, in small farms with a 
suitable proportion of building lots for mechanics, for 
the free use of any native citizen and his descendants 
who might be at the expense of clearing them." This 
policy " would establish a perpetual counterpoise to the 
absorbing power of capital." The memorial concluded : 

These lands have been bought with public money every cent 
of which is in the end derived from the earnings of the laboring 
classes. 



64 HISTORY OF THE GREAT AMERICAN FORTUNES 

And while the public money has been liberally employed to 
protect and foster trade, Government has never, to our knowl- 
edge, adopted but one measure (the protective tariff system) 
with a distinct view to promote the interests of labor; and all 
of the advantages of this one have been absorbed by the pre- 
ponderating power of capital.* 



EMPLOYMENT OF MILITIA AGAINST THE WORKERS. 

But it was not only the National Governtnent which 
used the entire governing power against the workers. 
State and municipal authorities did likewise. In 1836 the 
'longshoremen in New York City struck for an increase 
of wages. Their employers hurriedly substituted non- 
union men in their places. When the union men went 
from dock to dock, trying to induce the newcomers to 
side with them, the shipping merchants pretended that 
a riot was under way and made frantic calls upon the 
authorities for a subduing force. The mayor ordered 
out the militia with loaded guns. In Philadelphia similar 
scenes took place. Naturally, as the strikers were pre- 
vented by the soldiers from persuading their fellow work- 
ers, they lost the strikes. 

Although labor-saving machinery was constantly being 
devised and improved to displace hand labor, and al- 
though the skilled worker was consequently producing far 
more goods than in former years, the masters — as the 
capitalists were then often termed — insisted that em- 
ployees must work for the same wages and hours as had 
long prevailed. 

By 1840, however, the labor unions had arrived at a 
point where they were very powerful in some of the 
crafts, and employers grudgingly had to recognize that 

* Executive Documents, First Session, Twenty-third Congress, 
1834, Doc. No. 104. 



A NECESSARY CONTRAST 65 

the time had passed by when the laborer was to be treated 
like a serf. A few enlightened employers voluntarily 
conceded the ten-hour day, not on any humane grounds, 
but because they reasoned that it would promote greater 
efficiency on the part of their workers. Many capitalists, 
perforce, had to yield to the demand. Other capitalists 
determined to break up the unions on the ground that 
they were a conspiracy. At the instigation of several 
boot and shoe manufacturers, the officials of Boston 
brought a suit against the Boston Journeymen Boot- 
makers' Society. The court ruled against the bootmakers 
and the jury brought in a verdict of guilty. On ap- 
peal to the Supreme Court, Robert Rantoul, the attorney 
for the society, so ably demolished the prosecution's 
points, that the court could not avoid setting aside the 
judgment of the inferior court. "' 

Perhaps the growing power of the labor unions had 
its effect upon those noble minds, the judiciary. The 
worker was no longer detached from his fellow work- 
men : he could no longer be scornfully shoved aside as a 
weak, helpless individual. He now had the strength of 
association and organization. The possibility of such 
strength transferred to politics affrighted the ruling 
classes. Where before this, the politicians had con- 
temptuously treated the worker's petitions, certain that 
he could always be led blindly to vote the usual partisan 
tickets, it now dawned upon them that it would be wiser 
to make an appearance of deference and to give some 
concessions which, although of a slight character, could 

s Commonwealth vs. Hunt and others; Metcalf's Supreme 
Court Reports, iv : III. The prosecution had fallen back on the 
old English law of the time of Queen Elizabeth, making it a 
criminal offence for workingmen to refuse to work under cer- 
tain wages. This law, Rantoul argued, had not been specifically 
adopted as common law in the United States after the Revolu- 
tioa 



66 HISTORY OF TIIR CKIvXT AMERICAN FORTUNES 

be made to appear important. The Workingmen's party 
of 1829 had shown a glimmer of what the worker could 
do when aroused to class-conscious action. 



CAJOLING THE LABOR VOTE. 

Now it was that the politicians began the familiar pol- 
icy of " catering to the labor vote." Some rainbow prom- 
ises of what they would do, together with a few scraps 
of legislation now and then — this constituted the bait 
held out by the politicians. That adroit master of po- 
litical chicanery, President Van Buren, hastened to issue 
an executive order on April 10, 1840, directing the estab- 
lishment of a ten-hour day, between April and Septem- 
ber, in the navy yards. From the last day of October, 
however, until March 31, the "working hours will be 
from the rising to the setting of the sun " — a length of 
time equivalent, meal time deducted, to about ten hours. 

The political trick of throwing out crumbs to the work- 
ers long proved successful. But it was supplemented 
by other methods. To draw the labor leaders away from 
a hostile stand to the established political parties, and to 
prevent the massing of workers in a party of their own, 
the politicians began an insidious system of bribing these 
leaders to turn traitors. This was done by either ap- 
pointing them to some minor political office or by giving 
them money. In many instances, the labor unions in 
the ensuing decades were grossly betrayed. 

Finally, the politicians always had large sums of elec- 
tion funds contributed by merchants, bankers, landown- 
ers, railroad owners — by all parts of the capitalist class. 
These funds were employed in corrupting the^ electorate 
and legislative bodies. Caucuses and primaries were 
packed, votes bought, ballot boxes stuffed and election 



A NECF.SSARY CONTRAST 6/ 

returns falsified. It did not matter to the corporations 
generally which of the old political parties was in power ; 
some manufacturers or merchants might be swayed to 
one side or the other for the self-interest involved in 
the reenactment of the protective tariff or the establish- 
ment of free trade; but, as a rule, the corporations, as 
a matter of business, contributed money to both parties, 

THE BASIS OF POLITICAL PARTIES. 

However these parties might differ on various issues, 
thy both stood for the perpetuation of the existing social 
and industrial system based upon capitalist ownership. 
The tendency of the Republican party, founded in 1856, 
toward the abolition of negro chattel slavery was in pre- 
cise harmony with the aims and fundamental interests 
of the manufacturing capitalists of the North. The only 
peril that the capitalist class feared was the creation of 
a distinct, disciplined and determined workingmen's 
party. This they knew would, if successful, seriously 
endanger and tend to sweep away the injustices and op- 
pressions upon which they, the capitalists, subsisted. To 
avert this, every ruse and expedient was resorted to : de- 
rision, undermining, corruption, violence, imprisonment 
— all of these and other methods were employed by that 
sordid ruling class claiming for itself so pretentious and 
all-embracing a degree of refinement, morality and patri- 
otism. 

Surveying historical events in a large way, however, it 
is by no means to be regretted that capitalism had its own 
unbridled way, and that its growth was not checked. Its 
development to the unbearable maximum had to come 
in order to prepare the ripe way for a newer stage in 
civilization. The capitalist was an outgrowth of condi- 



68 HISTORY OF TIIK CREAT AMERICAN FORTUNES 

tions as they existed both before, and during, his time. 
He fitted as appropriate a part in his time as the preda- 
tory baron in feudal days. 

But in this sketch we are not deahng with historical 
causes or sequences as much as with events and con- 
trasts. The aim is to give a sufficient historical per- 
spective of times when Government was manipulated by 
the capitalist class for its own aggrandizement, and to 
despoil and degrade the millions of producers. 

The imminence of working-class action was an ever 
present and disturbing menace to the capitalists. To 
give one of many instances of how the workers were be- 
ginning to realize the necessity of this action, and how 
the capitalists met it, let us instance the resolutions of 
the New England Workingmen's Association, adopted in 
1845. With the manifold illustrations in mind of how 
the powers of Government had been used and were being 
increasingly used to expropriate the land, the resources 
and the labor and produce of the many, and bond that 
generation and future generations under a multitude of 
law-created rights and privileges, this association de- 
clared in its preamble : 

Whereas, we, the mechanics and workingmen of New Eng- 
land are convinced by the sad experience of years that under 
the present arrangement of society labor is and must be the 
slave of wealth ; and, whereas, the producers of all wealth are 
deprived not merely of its enjoyment, but also of the social and 
civil rights which belong to humanity and the race ; and, whereas, 
we are convinced that reform of those abuses must depend upon 
ourselves only; and, whereas, we believe that in intelligence 
alone is strength, we hereby declare our object to be union for 
power, power to bless humanity, and to further this object re- 
solve ourselves into an association. 

One of the leading spirits in this movement was Charles 
A. Dana, a young professional man of great promise and 



A NECESSARY CONTRAST 69 

exceptional attainments. Subsequently he was bought 
off with a political office ; he became not only a renegade 
of the most virulent type, but he leagued himself with 
the greatest thieves of the day — Tweed and Jay Gould, 
for example — received large bribes for defending them 
and their interests in a newspaper of which he became 
the owner — the New York Sun — and spent his last 
years bitterly and cynically attacking, ridiculing and mis- 
representing the labor movement, and made himself the 
most conspicuous editorial advocate for every thieving 
plutocrat or capitalist measure. 

The year 1884 about marked the zenith of the era of 
the capitalist seizing of the public domain. By that time 
the railroad and other corporations had possessed them- 
selves of a large part of the area now vested in their 
ownership. At that very time an army of workers, esti- 
mated at 2,000,000, was out of employment. Yet it was 
not considered a panic year ; certainly the industrial es- 
tablishments of the country were not in the throes of a 
commercial cataclysm such as happened in 1873 and pre- 
vious periods. The cities were overcrowded with the 
destitute and homeless ; along every country road and 
railroad track could be seen men, singly or in pairs, 
tiamping from place to place looking for work. 

Many of those unemployed were native Americans. 
A large number were aliens who had been induced to 
migrate by the alluring statements of the steamship com- 
panies to whose profit it was to carry large batches ; by 
the solicitations of the agents of American corporations 
seeking among the oppressed peo])les of the Old World 
a generous supply of cheap, unorganized labor ; or by 
the spontaneous prospect of bettering their condition po- 
litically or economically. 



70 HISTORY OF THE GRKAT AMERICAN FORTUNES 

Millions of poor Europeans were thus persuaded to 
come over, only to find that the promises held out to 
them were hollow. They found that they were exploited 
in the United States even worse industrially than in their 
native country. As for political freedom their san- 
guine hopes were soon shattered. They had votes after 
a certain period of residence, it was true, but they saw — 
or at least the intelligent of them soon discerned — that 
the personnel and laws of the United States Government 
were determined by the great capitalists. The people 
were allowed to go through the form of voting ; the mon- 
eyed interests, by controlling the machinery of the dom- 
inant political parties, dictated who the candidates, and 
what the so-called principles, of those parties should be. 
The same program was witnessed at every election. The 
electorate was stimulated with excitement and enthusiasm 
over false issues and dominated candidates. The more 
the power and wealth of the capitalist class increased, 
the more openly the Government became ultra-capital- 
istic. 



WEALTH AND THE SWAY OF DIRECT POWER 

It was about this time that the Senate of the United 
States was undergoing a transformation clearly showing 
how impatient the great capitalists were of operating 
Government through middlemen legislators. Previously, 
the manufacturing, railroad and banking interests had, 
on the whole, deemed it wise not to exercise this power 
directly but indirectly. The representatives sent to Con- 
gress were largely lawyers elected by their influence and 
money. The people at large did not know the secret 
processes back of these legislators. The press, advocat- 
ing, as a whole, the interests of the capitalist class, con- 



A NECESSARY COI:tRAST Jl 

stantly portrayed the legislators as great and patriotic 
statesmen. 

But the magnates saw that the time had arrived when 
some empty democratic forms of Government could be 
waved aside, and the power exercised openly and directly 
by them. Presently we find such men as Leland Stan- 
ford, of the Pacific railroad quartet, and one of the arch- 
bribers and thieves of the time, entering the United States 
Senate after debauching the California legislature ; 
George Hearst, a mining magnate, and others of that 
class. 

More and more this assumption of direct power in- 
creased, until now it is reckoned that there are at least 
eighty millionaires in Congress. Many of them have 
been multimillionaires controlling, or representing cor- 
porations having a controlling share in vast industries, 
transportation and banking systems — men such as Sen- 
ator Elkins, of West Virginia ; Clark, of Montana ; Piatt 
and Depew, of New York ; Guggenheim, of Colorado ; 
Knox, of Pennsylvania ; Foraker, of Ohio, and a quota 
of others. The popular jest as to the United States 
Senate being a " millionaires' club " has become anti- 
quated ; much more appropriately it could be termed a 
" multimillionaires' club." While in both houses of Con- 
gress are legislators who represent the almost extin- 
guished middle class, their votes are as ineffective as 
their declamations are flat. The Government of the 
United States, viewing it as an entirety, and not consid- 
ering the impotent exceptions, is now more avowedly 
a capitalist Government than ever before. As for the 
various legislatures, the magnates, coveting no seats in 
those bodies, are content to follow the old plan of mas- 
tering them by either direct bribery or by controlling the 
political bosses in charge of the political machines. 



y2 HISTORY OF THE GREAT' AMERICAN FORTUNES 

Since the interests of the capitalists from the start were 
acutely antagonistic to those of the workers and of the 
people in general from whom their profits came, no 
cause for astonishment can be found in the refusal of 
Government to look out, even in trifling ways, for the 
workers' welfare. But it is of the greatest and most 
instructive interest to give a succession of contrasts. And 
here some complex factors intervene. Those cold, un- 
impassioned academicians who can perpetuate fallacies 
and lies in the most polished and dispassionate language, 
will object to the statement that the whole of governing 
institutions has been in the hands of thieves — great, not 
petty, thieves. And yet the facts, as we have seen (and 
will still further see), bear out this assertion. Govern- 
ment was run and ruled at basis by the great thieves, as 
it is conspicuously to-day. 

THE PASSING OF THE MIDDLE CLASS. 

Yet let us not go so fast. It is necessary to remember 
that the last few decades have constituted a period of 
startling transitions. 

The middle class, comprising the small business and 
factory men, stubbornly insisted on adhering to worn- 
out methods of doing business. Its only conception Qf 
industry was that of the methods of the year 1825. It 
refused to see that the centralization of industry was in- 
evitable, and that it meant progress. It lamented the 
decay of its own power, and tried by every means at its 
command to thwart the purposes of the trusts. This 
middle class had bribed and cheated and had exploited 
the worker. For decades it had shaped public opinion 
to support the dictum that " competition was the life of 
trade." It had, by this shaping of opinion, enrolled on 



A NECESSARY CONTRAST 73 

its side a large number of workers who saw only the 
temporary evils, and not the ultimate good, involved in 
the scientific organization and centralization of industry. 
The middle class put through anti-trust laws and other 
measure after measure aimed at the great combinations. 

These great combinations had, therefore, a double 
fight on their hands. On the one hand they had to resist 
the trades unions, and on the other, the middle class. 
It was necessary to their interests that centralization 
of industry should continue. In fact, it was historically 
and economically necessary. Consequently they had to 
bend every efifort to make nugatory any efifort of Govern- 
ment, both National and State, to enforce the anti-trust 
laws. The thing had to be done no matter how. It was 
intolerable that industrial development could be stopped 
by a middle class which, for self-interest, would have kept 
matters at a standstill. Self-interest likewise demanded 
that the nascent combinations and trusts get and exercise 
governmental power by any means they could use. 

For a while triumphant in passing certain laws which, 
it was fatuously expected, would wipe the trusts out of 
existence, the middle class was hopelessly beaten and 
routed. By their far greater command of resources and 
money, the great magnates were able to frustrate the ex- 
ecution of those laws, and gradually to install themselves 
or their tools in practically supreme power. The middle 
class is now becoming a mere memory. Even the frantic 
eflforts of President Roosevelt in its behalf were of abso- 
lutely no avail ; the trusts are mightier than ever before, 
and hold a sway the disputing of which is ineffective. 

THE TRUSTS AND THE UNEMPLOYED. 

With this newer organization and centralization of m- 
dustry the number of unemployed tremendously in- 



74 HISTORY OF THE GREAT AMERICAN FORTUNES 

creased. In the panic of 1893 ^^ reached about 3,000,000; 
in that of 1908 perhaps 6,000,000, certainly 5,000,000. 
To the appalhng suffering on every hand the Government 
remained indifferent. The reasons were two-fold : Gov- 
ernment was administered by the capitalist class whose 
interest it was not to allow any measure to be passed 
which might strengthen the workers, or decrease the vol- 
ume of surplus labor ; the second was that Government 
was basically the apotheosis of the current commercial 
idea that the claims of property were superior to those of 
human life. 

It can be said without exaggeration that high function- 
ary after high functionary in the legislative or executive 
branches of the Government, and magnate after magnate 
had committed not only one violation, but constant vio- 
lations, of the criminal law. They were unmolested ; hav- 
ing the power to prevent it they assuredly would not 
suffer themselve to undergo even the farce of prosecu- 
tion. Such few prosecutions as were started with sus- 
picious bluster by the Government against the Standard 
Oil Company, the Sugar Trust, the Tobacco Trust and 
other trusts proved to be absolutely harmless, and have 
had no result except to strengthen the position of the 
trusts. The great magnates reaped their wealth by an 
innumerable succession of frauds and thefts. But the 
moment that wealth or the basis of that wealth were 
threatened in the remotest by any law or movement, the 
whole body of Government, executive, legislative and 
judicial, promptly stepped in to protect it intact. 

The workers, however, from whom the wealth was 
robbed, were regarded in law as criminals the moment 
they became impoverished. If homeless and without vis- 
ible means of support, they were subject to arrest as 
vagabonds. Numbers of them were constantly sent to 



A NECESSARY CONTRAST 75 

prison or, in some States, to the chain-gang. If they 
ventured to hold mass meetings to urge the Government 
to start a series of pubHc works to reHeve the unem- 
ployed, their meetings were broken up and the assembled 
brutally clubbed, as happened in Tompkins square in 
New York City in the panic of 1873, in Washington in 
1892, and in Chicago and in Union square, New York 
City, in the panic of 1908. The newspapers represented 
these meetings as those of irresponsible agitators, incit- 
ing the " mob " to violence. The clubbing of the unem- 
ployed and the judicial murder of their spokesman, has 
long been a favorite repression method of the authori- 
ties. But as for allowing them freedom of speech, con- 
sidering the grievances, putting forth every effort to re- 
Heve their condition, — these do not seem to have come 
within the scope of that Government whose every move 
has been one of intense hostility — now open, again cov- 
ert — to the working class. 

This running sketch, which is to be supplemented by 
the most specific details, gives a sufficient insight into 
the debasement and despoiling of the working class while 
the capitalists were using the Government as an expro- 
priating machine. Meanwhile, how was the great farm- 
ing class faring? What were the consequences to this 
large body of the seizure by a few of the greater part of 
the public domain ? 



THE STATE OF THE FARMING POPULATION. 

The conditions of the farming population, along with 
that of the working class, steadily grew worse. In the 
hope of improving their condition large numbers mi- 
grated from the Eastern States, ana a constant influx 
of agriculturists poured in from Europe. 



76 HISTORY OF THE GREAT AMERICAN FORTUNES 

A comparatively few of the whole were able to get 
land direct from the Government. Naturally the course 
of this extensive migration followed the path of trans- 
portation, that is to say, of the railroads. This was ex- 
actly what the railroad corporations had anticipated. As 
a rule the migrating farmers found the railroads or cat- 
tlemen already in possession of many of the best lands. 
To give a specific idea of how vast and widespread were 
the railroad holdings in the various States, this tabula- 
tion covering the years up to 1883 will suffice : In the 
States of Florida, Louisiana, Alabama and Mississippi 
about 9,000,000 acres in all ; in Wisconsin, 3,553,865 
acres; Missouri, 2,605,251 acres; Arkansas, 2,613,631 
acres; Illinois, 2,595,053 acres; Iowa, 4,181,929 acres; 
Michigan, 3,355,943 acres ; Minnesota, 9,830,450 acres ; 
Nebraska, 6,409,376 acres ; Colorado, 3,000,000 acres ; 
the State of Washington, 11,700,000 acres; New Mexico, 
11,500,000 acres; in the Dakotas, 8,000,000 acres; Ore- 
gon, 5,800,000 acres ; Montana, 17,000,000 acres ; Cali- 
fornia, 16,387,000; Idaho, 1,500,000, and Utah, 1,850,- 
000.^ 

Prospective farmers had to pay the railroads exor- 
bitant prices for land. Very often they had not suffi- 
cient funds ; a mortgage or two would be signed ; and 
if the farmer had a bad season or two, and could no 
longer pay the interest, foreclosure would result. But 
whether crops were good or bad, the American farmer 
constantly had to compete in the grain markets of the 
world with the cheap labor of India and Russia. And 
inexorably, East or West, North or South, he was caught 
between a double fire. 

On the one hand, in order to compete with the im- 

« " The Public Domain," House Ex. Doc. No. 47, Third Ses- 
sion, Forty-sixth Congress : 273. 



A NECESSARY CONTRAST "7*] 

mense capitalist farms gradually developing, he had to 
give up primitive implements and buy the most improved 
agricultural machines. For these he was charged five 
and six times the sum it cost the manufacturers to make 
and market them. Usually if he could not pay for them 
outright, the manufacturers took out a mortgage on his 
farm. Large numbers of these mortgages were fore- 
closed. 

In addition, the time had passed when the farmer made 
his own clothes and many other articles. For everything 
that he bought he had to pay excessive prices. He, even 
more than the industrial working classes, had to pay an 
enormous manufacturer's profit, and additionally the 
high freight railroad rate. 

On the other hand, the great capitalist agencies di- 
rectly dealing with the crops — the packing houses, the 
gambling cotton and produce exchanges — actually 
owned, by a series of manipulations, a large proportion 
of his crops before they were out of the ground. These 
crops were sold to the working class at exorbitant prices. 
The small farmer labored incessantly, only to find him- 
self getting poorer. It served political purpose well to 
describe glowingly the farmer's prosperity ; but the 
greater crops he raised, the greater the profit to the 
railroad companies and to various other divisions of the 
capitalist class. His was the labor and worry; they 
gathered in the financial harvest. 

METHODS OF THE GREAT LANDOWNERS, 

While thus the produce of the farmer's labor was vir- 
tually confiscated by the different capitalist combinations, 
the farmers of many States, particularly of the rich ag- 
ricultural States of the West, were unable to stand up 



78 HISTORY OF THE GREAT AMERICAN FORTUNES 

against the encroachments, power, and the fraudulent 
methods of the great capitaUst landowners. 

The land frauds in the State of California will serve 
as an example. Acting under the authority of various 
measures passed by Congress — measures which have 
been described — land grabbers succeeded in obtaining 
possession of an immense area in that State. Perjury, 
fraudulent surveys and entries, collusion with Govern- 
ment officials — these were a few of the many methods. 

Jose Limantour, by an alleged grant from a Mexican 
Governor, and collusion with officials, almost succeeded in 
stealing more than half a million acres. Henry Miller, 
who came to the United States as an immigrant in 1850, is 
to-day owner of 14,539,000 acres of the richest land in 
California and Oregon. It embraces more than 22,500 
square miles, a territory three times as large as New 
Jersey. The stupendous land frauds in all of the Western 
and Pacific States by which capitalists obtained " an em- 
pire of land, timber and mines " are amply described in 
numerous documents of the period. These land thieves, 
as was developed in official investigations, had their tools 
and associates in the Land Commissioner's office, in the 
Government executive departments, and in both houses 
of Congress. The land grabbers did their part in driving 
the small farmer from the soil. Bailey Millard, who 
extensively investigated the land frauds in California, 
after giving full details, says : 

When you have learned these things it is not difficult to 
understand how one hundred men in the great Sacramento Val- 
ley have come to own over 17,000,000 acres, while in the San 
Joaquin Valley it is no uncommon thing for one man's name to 
stand for 100,000 acres. This grabbing of large tracts has dis- 
couraged immigration to California more than any other single 
factor. A family living on a small holding in a vast plain, with 
hardly a house in sight, will in time become a very lonely 



A NECESSARY CONTRAST 79 

family indeed, and will in a few years be glad to sell out 
to the land king whose domain is adjacent. Thousands of small 
farms have in this way been acquired by the large holders at 
nominal prices.'^ 

SEIZURE OF IMMENSE AREAS BY FRAUD. 

Official reports of the period, contemporaneous with 
the original seizure of these immense tracts of land, give 
far more specific details of the methods by which that 
land was obtained. Of the numerous reports of com- 
mittees of the California Legislature, we will here simply 
quote one — that of the Swamp Land Investigating Com- 
mittee of the California Assembly of 1873. Dealing with 
the fraudulent methods by which huge areas of the finest 
lands in California were obtained for practically nothing 
as " swamp " land, this committee reported, citing from 
what it termed a " mighty mass of evidence," " That 
through the connivance of parties, surveyors were ap- 
pointed who segregated lands as ' swamp,' which were 
not so in fact. The corruption existing in the land de- 
partment of the General Government has aided this sys- 
tem of fraud." 

Also, the committee commented with deep irony, " the 
loose laws of the State, governing all classes of State 
lands, has enabled wealthy parties to obtain much of it 
under circumstances which, in some countries, where 
laws are more rigid and terms less refined, would be 
termed fraudulent, but we can only designate it as keen 
foresight and wise (for the land grabbers) construction 
of loose, unwholesome laws." ^ 

■f " The West Coast Land Grabbers." Everybody's Magazine, 
May, 1905. 

^ Report of the Swamp Land Investigating Committee, Ap- 
pendix to California Journals of Senate and Assembly. Twentieth 
Session, 1874, Vol. iv, Doc. No. 5 :3. 



8o HISTORY OF THE GREAT AMERICAN FORTUNES 

After recording its findings that it was satisfied from 
the evidence that " the grossest frauds have been com- 
mitted in swamp matters in this State," the committee 
went on : 

Formerly it was the custom to permit filings upon real or 
alleged swamp lands, and to allow the applications to lie unacted 
upon for an indefinite number of years, at the option of the appli- 
cants. In these cases, parties on the " inside " of the Land Office 
" ring " had but to wait until some one should come along who 
wanted to take up these lands in good faith, and they would 
"sell out" to them their "rights" to land on which they had 
never paid a cent, nor intended to pay a cent. 

Or, if the nature of the land was doubtful, they would post- 
pone all investigation until the height of the floods during the 
rainy season, when surveyors, in interest with themselves, would 
be sent out to make favorable reports as to the " swampy " 
character of the land. In the mountain valleys and on the 
other side of the Sierras, the lands are overflowed from melting 
snow exactly when the water is most wanted ; but the simple 
presence of the water is all that is necessary to show to the 
speculators that the land is " swamp," and it therefore presents 
an inviting opportunity for this grasping cupidity.^ 

In his exhaustive report for 1885, Comm.issioner 
Sparks, of the General Land Office, described at great 
length the vast frauds that had continuously been going 
on in the granting of alleged " swamp " lands, and in 
fraudulent surveys, in many States and Territories.^" 
" I thus found this office," he wrote, " a mere instru- 
mentality in the hands of ' surveying rings.' " ^^ Sixteen 
townships examined in Colorado in 1885 were found to 
have been surveyed on paper only, no actual surveying 
having been done.^- In twenty-two other townships ex- 

^ Report of the Swamp Land Investigating Committee, etc., 5. 

10 House Documents, First Session, Forty-ninth Congress, 
1885-86, Vol. ii. 

11 Ibid., 166. 
"Ibid., 165. 



A NECESSARY CONTRAST 8l 

amined in Colorado, purporting to have been surveyed 
under a " special-deposit " contract awarded in 1881, the 
surveys were found wholly fraudulent in seven, while 
the other fifteen were full of fraud." ^" 

These are a very few of the numerous instances cited 
by Commissioner Sparks. Although the law restricted 
surveys to agricultural lands and for homestead entries, 
yet the Land Office had long corruptly allowed what it was 
pleased to term certain " liberal regulations." Surveys 
were so construed as to include any portion of townships 
the " larger portion " of which was not " known " to be of 
a mineral character. These " regulations," which were 
nothing more or less than an extra-legal license to land- 
grabbers, also granted surveys for desert lands and tim- 
ber lands under the timber-land act. By the terms of this 
act, it will be recalled, those who entered and took title 
to desert and timber lands were not required to be actual 
settlers. Thus, it was only necessary for the surveyors 
in the hire of the great land grabbers to report fine graz- 
ing, agricultural, timber or mineral land as " desert 
land," and vast areas could be seized by single individu- 
als or corporations with facility. 

Two specific laws directly contributed to the effective- 
ness of this spoliation. One act, passed by Congress on 
May 30, 1862, authorized surveys to be made at the ex- 
pense of settlers in the townships that those settlers de- 
sired surveyed. Another act, called the Deposit Act, 
passed in 1871, provided that the amounts deposited by 
settlers should be partly applied in payment for the lands 
,*;hus surveyed. Together, these two laws made the grasp- 
ing of land on an extensive scale a simple process. The 
"settler" (which so often meant, in reality, the capital- 
ist) could secure the collusion of the Land Office, and 

18 House Documents, etc., 1885-86, ii : 165. 



82 HISTORY OF THE GREAT AMERICAN FORTUNES 

have fraudulent surveys made. Under these surveys he 
could lay claim to immense tracts of the most valuable 
land and have them reported as " swamp " or " desert " 
lands ; he could have the boundaries of original claims 
vastly enlarged ; and the fact that part of his disburse- 
ments for surveying was considered as a payment for 
those lands, stood in law as virtually a confirmation of 
his claim. 

ACTUAL SETTLERS EXCLUDED FROM PUBLIC DOMAIN. 

" Wealthy speculators and powerful syndicates," re- 
ported Commissioner Sparks, 

covet the public domain, and a survey is the first step in the ac- 
complishment of this desire. The bulk of deposit surveys have 
been made in timber districts and grazing regions, and the sur- 
veyed lands have immediately been entered under the timber 
land, preemption, commuted homestead, timber-culture and 
desert-land acts. So thoroughly organized has been the entire 
system of procuring the survey and making illegal entry of 
lands, that agents and attorneys engaged in this business have 
been advised of every official proceeding, and enabled to present 
entry applications for the lands at the very moment of the filing 
of the plots of survey in the local land offices. 

Prospectors employed by lumber firms and corporations seek 
out and report the most valuable timber tracts in California, 
Oregon, Washington Territory or elsew^here; settler's applica- 
tions are manufactured as a basis for survey; contracts are 
entered into and pushed through the General Land Office in 
hot haste ; a skeleton survey is made . . . entry papers, made 
perfect in form by competent attorneys, are filed in bulk, and 
the manipulators enter into possession of the land. . . . This 
has been the course of proceeding heretofore.^* 

Commissioner Sparks described a case of where it was 
discovered by his special agents in California that an 
English firm had obtained 100,000 acres of the choicest 

1* House Documents, etc., 1885-86, ii : 167. 



A NECESSARY CONTRAST 83 

red-wood lands in that State. These lands were then 
estimated to be worth $ioo an acre. The cost of pro- 
curing surveys and fraudulent entries did not probably 
exceed $3 an acre.^^ 

" In the same manner," Commissioner Sparks con- 
tinued, " extensive coal deposits in our Western territory 
are acquired in mass through expedited surveys, followed 
by fraudulent pre-emption and commuted homestead en- 
tries." ^^ He went on to tell that nearly the whole of 
the Territory (now State) of Wyoming, and large por- 
tions of Montana, had been surveyed under the deposit 
system, and the lands on the streams fraudulently taken 
up under the desert land act, to the exclusion of actual 
settlers. Nearly all of Colorado, the very best cattle- 
raising portions of New Mexico, the rich timber lands of 
California, the splendid forest lands of Washington Ter- 
ritory and the principal part of the extensive pine lands 
of Minnesota had been fraudulently seized in the same 
way.^'' In all of the Western States and Territories these 
fraudulent surveys had accomplished the seizure of the 
best and most valuable lands. " To enable the pressing 
tide of Western immigration to secure homes upon the 
public domain," Commissioner Sparks urged, " it is neces- 
sary . , . that hundreds of millions of acres of pub- 
lic lands now appropriated should be wrested from illegal 
control." ^^ But nothing was done to recover these stolen 
lands. At the very time Commissioner Sparks — one of 
the very few incorruptible Commissioners of Public 
Lands, — was writing this, the land-grabbing interests 
were making the greatest exertions to get him removed. 
During his tenure of office they caused him to be 
malevolently harassed and assailed. After he left office 

^5 House Ex. Docs., etc., 1885-86, ii : 167. 

18 Ibid. I'Ibid., 168. 18 Ibid. 



84 HISTORY OF THE GREAT AMERICAN FORTUNES 

they resumed complete domination of the Land Com- 
missioner's Bureau.^'* 



THE GIGANTIC PRIVATE LAND CLAIM FRAUDS. 

The frauds in the settlement of private land claims 
on alleged grants by Spain and Mexico were colossal. 
Vast estates in California, New Mexico, Arizona, Colo- 
rado and other States were obtained by collusion with the 
Government administrative officials and Congress. These 
were secured upon the strength of either forged docu- 
ments purporting to be grants from the Spanish or Mex- 
ican authorities, or by means of fraudulent surveys. 

One of the most notorious of these was the Beaubin and 
Miranda grant, otherwise famous thirty years ago as the 
Maxwell land grant. A reference to it here is indispen- 
sable. It was by reason of this transaction, as well as 
by other similar transactions, that one of the American 
multimillionaires obtained his original millions. This in- 
dividual was Stephen B. Elkins, at present a powerful 

i» The methods of capitalists in causing the removal of offi- 
cials who obstructed or exposed their crimes and violent seiz- 
ure of property were continuous and long enduring. It was a 
very old practice. When Astor was debauching and swindling 
Indian tribes, he succeeded, it seems, by exerting his power at 
Washington, in causing Government agents standing in his way 
to be dismissed from office. The following is an extract from 
a communication, in 1821, of the U. S. Indian agent at Green 
Bay, Wisconsin, to the U. S. Superintendent of Indian Trade: 

" The Indians are frequently kept in a state of intoxication, 
giving their furs, etc., at a great sacrifice for whiskey. . . . 
The agents of ]\Ir. Astor hold out the idea that they will, ere 
long be able to break down the factories 1 Government agencies] ; 
and they menace the Indian agents and others who may inter- 
fere with them, with dismission from office through Mr. .A.stor. 
They say that a representation from Messrs. Crooks and Stewart 
(Mr. Astor's agents) led to the dismission of the Indian agent 
at Mackinac, and they also say that the Indian agent here is to 
be dismissed. . . ." — U. S. Senate Documents, First Session, 
Seventeenth Congress, 1821-22, Vol. i, Doc. No. 60:52-53. 



A NECESSARY CONTRAST 85 

member of the United States Senate, and one of the rul- 
ing oligarchy of wealth. He is said to possess a fortune 
of at least $50,000,000, and his daughter, it is reported. 
is to marry the Duke of the Abruzzi, a scion of the royal 
family of Italy. 

The New Mexico claim of Beaubin and Miranda 
transferred to L. B. Maxwell, was allowed by the Gov- 
ernment in 1869, but for ninety-six thousand acres only. 
The owner refused to comply with the law, and in 1874 
the Department of the Interior ordered the grant to be 
treated as public lands and thrown open to settle: v;cnt. 
Despite this order, the Government officials in New l\iex- 
ico, acting in collusion with other interested parties, il- 
legally continued to assess it as private property. In 
1877 a fraudulent tax sale was held, and the grant, fraud- 
ulently enlarged to 1,714,764.94 acres, was purchased 
by M, M. Mills, a member of the New Mexico Legisla- 
ture. He transferred the title to T. B. Catron, the United 
States Attorney for New Mexico. Presently Elkins 
turned up as the principal owner. The details of how 
this claim was repeatedly shown up to be fraudulent by 
Land Commissioners and Congressional Committees ; how 
the settlers in New Mexico fought it and sought to have 
it declared void, and the law enforced ; -^ and how Elkins, 
for some years himself a Delegate in Congress from New 
Mexico, succeeded in having the grant finally validated 
on technical grounds, and " judicially cleared " of all 
taint of fraud, by an astounding decision of the Supreme 
Court of the United States — a decision contrary to the 
facts as specifically shown by successive Government 

20 " Land Titles in New Mexico and Colorado," House Re- 
ports, First Session, Fifty-second Congress, 1891-92, Vol. iv, Re- 
port No. 1253. Also, House Reports, First Session, Fifty-second 
Congress, 1891-92, Vol. vii, Report No. 1824. Also, House Re- 
ports, First Session, Forty-ninth Congress, 1885-86, ii : 170. 



86 HISTORY OF THE GREAT AMERICAN FORTUNES 

officials — all of these details are set forth fully in another 
part of this work.-^ 

The forgeries and fraudulent surveys by which these 
huge estates were secured were astoundingly bold and 
frequent. Large numbers of private land claims, re- 
jected by various Land Commissioners as fraudulent, 
were corruptly confirmed by Congress. In 1870, the heirs 
of one Gervacio Nolan applied for confirmation of two 
grants alleged to have been made to an ancestor under 
the colonization laws of New Mexico. They claimed 
more than 1,500,000 acres, but Congress conditionally 
confirmed their claim to the extent of forty-eight thou- 
sand acres only, asserting that the Mexican laws had 
limited to this area the area of public lands that could be 
granted to one individual. In 1880 the Land Office re- 
opened the claim, and a new survey was made by sur- 
veyors in collusion with the claimants, and hired by them. 
When the report of this survey reached Washington, the 
Land Office officials were interested to note that the es- 
tate had grown from forty-eight thousand acres to five 
hundred and seventy-five thousand acres, or twelve times 
the legal quantity.-- The actual settlers were then 
evicted. The romancer might say that the officials were 
amazed ; they were not ; such fraudulent enlargements 
were common. 

The New Mexico estate of Francis Martinez, granted 
under the Mexican laws restricting a single gi-ant to 
forty-eight thousand acres, was by a fraudulent survey, 
extended to 594,515.55 acres, and patented in 1881."^ A 
New Mexico grant said to have been made to Salvador 
Gonzales, in 1742, comprising " a spot of land to enable 

21 See " The Elkins Fortune," in Vol. iii. 

" House Reports, First Session, Forty-ninth Congress, 1885- 
86, ii : 171. 
2' Ibid., 172. 



A NECESSARY CONTRAST 87 

him to plant a cornfield for the support of his family," 
was fraudulently surveyed and enlarged to 103,959,31 
acres — a survey amended later by reducing the area to 
23,661 acres.-* The B. M. Montaya grant in New Mex- 
ico, limited to forty-eight thousand acres, under the Mex- 
ican colonization laws, was fraudulently surveyed for 
151,056.97 acres. The Estancia grant in New Mexico, 
also restricted under the colonization act to forty-eight 
thousand acres, was enlarged by a fraudulent survey to 
415,036.56 acres.^^ In 1768, Ignacio Chaves and others 
in New Mexico petitioned for a tract of about two and 
one-fourth superficial leagues, or approximately a little 
less than ten thousand acres. A fraudulent survey mag- 
nified this claim to 243,036.43 acres.-® 

These are a very few of the large number of forged or 
otherwise fraudulent claims. 

Some were rejected by Congress; many, despite Land 
Ofifice protests, were confirmed. By these fraudulent and 
corrupt operations, enormous estates were obtained in 
New Mexico, Colorado and in other sections. The Pa- 
blo Montaya grant comprised in all, 655,468.07 acres ; the 
Mora grant 827,621.01 acres; the Tierra Amarilla grant 
594,515 acres, and the Sangre de Cristo grant 998.780,46 
acres. All of these were corruptly obtained.-'^ Scores 
of other claims were confirmed for lesser areas. During 
Commissioner Sparks' tenure of office, claims to 8,500,000 
acres in New Mexico alone were pending before Con- 
gress. A comprehensive account of the operations of 
the land-grabbers, giving the explicit facts, as told in 

-* House Reports, etc., 1885-86, ii : 172. 

25 Ibid., 173. 

26 Ibid. 

-'' See Resolution of House Committee on Private Land 
Claims, June, 1892, demanding a thorough investigation. The 
House took no action. — Report No. 1824, 1892. 



bo HISTORY OF THE GREAT AMERICAN FORTUNES 

Government and court records, of their system of fraud, 
is presented in the chapter on the Elkins fortune. 



FORGERY, PERJURY AND FRAUDULENT SURVEY. 

Reporting, in 1881, to the Commissioner of the General 
Land Office, Henry M. Atkinson, U. S. Surveyor-Gen- 
eral of New Mexico, wrote that " the investigation of this 
office for the past five years has demonstrated that some 
of the alleged grants are forgeries." He set forth that un- 
less the court before which these claims were adjudicated 
could have full access to the archives, ** it is much more 
liable to be imposed upon by fraudulent title papers." -^ 
In fact, the many official reports describe with what 
cleverness the claimants to these great areas forged their 
papers, and the facility with which they bought up wit- 
nesses to perjure for them. Finding it impossible to go 
back of the aggregate and corroborative " evidence " thus 
offered, the courts were frequently forced to decide in 
favor of the claimants. To use a modern colloquial 
phrase, the cases were " framed up." In the case of Luis 
Jamarillo's claim to eighteen fliousand acres in New Mex- 
ico, U. S. Surveyor-General Julian of New Mexico, in 
recommending the rejection of the claim and calling at- 
tention to the perjury committed, said : 

When these facts are <:onsiclered, in connection with the fur- 
ther and well-known fact that such witnesses can readily be 
found by grant claimants, and that in this way the most 
monstrous frauds have been practiced in extending the lines of 
such grants in New Mexico, it is not possible to accept the state- 
ment of this witness as to the west boundary of this grant, 
which he locates at such a distance from the east line as to 
include more than four times the amount of land actually 
granted.-" 

-s " The Public Domain," etc.. 1124. Also see note 29. 



A NECESSARY CONTRAST 89 

" The widespread belief of the people of this country," 
wrote Commissioner Sparks in 1885. " that the land de- 
partment has been largely conducted to the advantage of 
speculation and monopoly, private and corporate, rather 
than in the public interest, I have found supported by 
developments in every branch of the service. ... I 
am satisfied that thousands of claims without foundation 
in law or equity, involving millions of acres of public 
land, have been annually passed to patent upon the single 
proposition that nobody but the Government had any 
adverse interest. The vast machinery of the land depart- 
ment has been devoted to the chief result of conveying 
the title of the United States to public lands upon fraud- 
ulent entries under loose construction of law." ^^ When- 
ever a capitalist's interest was involved, the law was al- 
ways " loosely construed," but the strictest interpretation 
was invariably given to laws passed against the working 
population. 

It was estimated, in 1892, that 57,000,000 acres of land 
in New Mexico and Colorado had, for more than thirty 
years, been unlawfully treated by public officers as having 
been ceded to the United States by Mexico. The Max- 
well, Sangre de Cristo, Nolan and other grants were 
within this area. The House Committee on Private 
Land Claims reported on April 29, 1692 : " A long list 
of alleged Mexican and Spanish grants within the limits 
of the Texas cession have been confirmed, or quit claimed 
by Congress, under the false representation that said al- 
leged grants were located in the territory of New Mexico 
ceded by the treaty ; an enormous area of land has long 
been and is now held as confirmed Mexican and Spanish 

2» Senate Executive Documents, First Session, Fiftieth Con- 
gress, 1887-88, Vol. i. Private Land Claim No. 103, Ex. Doc. No. 
20:3. Documents Nos. 3 to 11, 13 to 23, 25 to 29 and 38 in the 
saine vohmic deal with similar claims. 

30 House Ex- Docs.. 1885-86, ii: 156. 



90 HISTORY OF THE GREAT AMERICAN FORTUNES 

grants, located in the territory of Mexico ceded by the 
treaty when such is not the fact." ^^ 

In Texas the fraudulent, and often, violent methods of 
the seizure of land by the capitalists were fully as marked 
as those used elsewhere. 

Upon its admittance to the Union, Texas retained the 
disposition of its public lands. Up to about the year 
1864, almost the entire area of Texas, comprising 274,356 
square miles, or 175,587,840 acres, was one vast unfenced 
feeding ground for cattle, horses and sheep. In about 
the year 1874, the agricultural movement began; large 
numbers of intending farmers migrated to Texas, partic- 
ularly with the expectation of raising cattle, then a highly 
profitable business. They found huge stretches of the 
land already preempted by individual capitalists or cor- 
porations. In a number of instances, some of these indi- 
viduals, according to the report of a Congressional Com- 
mittee, in 1884, dealing with Texas lands, had each ac- 
quired the ownership of more than two hundred and fifty 
thousand acres. 

" It is a notorious fact," this committee reported, " that 
the public land laws, although framed with the special 
object of encouraging the public domain, of developing 
its resources and protecting actual settlers, have been ex- 
tensively evaded and violated. Individuals and corpo- 
rations have, by purchasing the proved-up claims, or pur- 
chases of ostensible settlers, employed by them to make 
entry, extensively secured the ownership of large bodies 
of land." ^- The committee went on to describe how, to 
a very considerable extent, " foreigners of large means " 
had obtained these great areas, and had gone into the cat- 
tle business, and how the titles to these lands were se- 

31 House Report, 1892, No. 1253:8. 

^- House Reports, Second Session, Forty-eighth Congress, 
1884-85, Vol. xxix, Ex. Doc. No. 267 : 43. 



A NECESSARY CONTRAST 9I 

cured not only by individuals but by foreign corporations. 
" Certain of these foreigners are titled noblemen. Some 
of them have brought over from Europe, in considerable 
numbers, herdsmen and other employees who sustain to 
them a dependent relationship characteristic of the peas- 
antry on the large landed estates of Europe." Two Brit- 
ish syndicates, for instance, held 7,500,000 acres in 
Texas. ^^ 

This spoliation of the public domain was one of the 
chief grievances of the National Greenback-Labor party 
in 1880. This party, to a great extent, was composed of 
the Western farming element. In his letter accepting 
the nomination of that party for President of the United 
States, Gen. Weaver, himself a member of long standing 
in Congress from Iowa, wrote : 

An area of our public domain larger than the territory occu- 
pied by the great German Empire has been wantonly donated to 
wealthy corporations ; while a bill introduced by Hon. Hendrick 
B. Wright, of Pennsylvania, to enable our poor people to reach 
and occupy the few acres remaining, has been scouted, riditule 1, 
and defeated in Congress. In consequence of this stupendous 
system of land-grabbing, millions of the young men of America, 
and millions more of industriotts people from abroad, seeking 
homes in the New World, are left homeless and destitute. The 
public domain must be sacredly reserved to actual settlers, and 
where corporations have not complied strictly with the terms 
of their grants, the lands should be at once reclaimed. 



INCREASE OF FARM TENANTRY. 

Without dwelling upon all the causative factors — in- 
volving an extended work in themselves — some sig- 
nificant general results will be pointed out. 

The original area of public domain amounted to 1.815,- 

33 House Reports, etc., 1884-85, Doc. No. 267 : 46. 



92 HISTORY OF THE GREAT AAIERICAN FORTUNES 

504,147 acres, of which considerably more than half, em- 
bracing some of the very best agricultural, grazing, min- 
eral and timber lands, was already alienated by the year 
1880. By 1896 the alienation reached 806,532,362 acres. 
Of the original area, about 50,000,000 acres of forests 
have been withdrawn from the public domain by the 
Government, and converted into forest reservations. 
Large portions of such of the agricultural, grazing, min- 
eral and timber lands as were not seized by various cor- 
porations and favored individuals before 1880, have been 
expropriated west of the Mississippi since then, and the 
process is still going, notably in Alaska. The nominal 
records of the General Land Office as to the number of 
homesteaders are of little value, and are very misleading. 
Immense numbers of alleged homesteaders were, as we 
have copiously seen, nothing but paid dummies by whose 
entries vast tracts of land were seized under color of law. 
It is indisputably clear that hundreds of millions of acres 
of the public domain have been obtained by outright 
fraud. 

Notwithstanding the fact that only a few years before, 
the Government had held far more than enough land to 
have provided every agriculturist with a farm, yet by 
1880, a large farm tenant class had already developed. 
Not less than 1,024,061 of the 4,008,907 farms in the 
United States were held by renters. One-fourth of all 
the farms in the United States were cultivated by men 
who (lid not own them. Furthermore, and even more 
iin])ressivc, tlicre Vv-cre 3.323,876 farm laborers com- 
posed of men who did not even rent land. Equally sig- 
nificant was the increasing tendency to the operating of 
large farms by capitalists with the hired labor. Of 
farms under cultivation, extending from one hundred to 
five hundred acres, there were nearly a million and a 



A NECESSARY CONTRAST 93 

half — 1,416,618, to give the exact number — owned 
largely by capitalists and cultivated by laborers. •'■* 

Phillips, who had superior opportunities for getting 
at the real facts, and whose volume upon the subject 
issued at the time is well worthy of consideration, thus 
commented upon the census returns : 

It will thus be seen that of the 7,670,493 persons in our coun- 
try engaged in agriculture, there are 1,024,601 who pay rent to 
persons not cultivating the soil; 1,508,828 capitalist or specu- 
lating owners, who own the soil and employ laborers ; 804,522 
of well-to-do farmers who hire part of their work or employ 
laborers, and 670,944 who may be said to actually cultivate the 
soil they own : the rest are hired workers. 

Phillips goes on to remark : 

Another fact must be borne in mind, that a large number of 
the 2,984,306 farmers who own land are in debt for it to the 
money lenders. From the writer's observation it is probable 
that forty per cent, of them are so deeply in debt as to pay a 
rent in interest. This squeezing process is going on at the rate 
of eight and ten per cent., and in most cases can terminate in 
but one way.^^ 

A LARGELY DISPOSSESSED NATION. 

These are the statistics of a Government which, it is 

34 Tenth Census, Statistics of Agriculture : 28. 

35 " Labor, Land and Law " : 353. 

It is difficult to get reliable statistics on the number of mort- 
gages on farms, and on the number of farm tenants. The U. S. 
Industrial Commission estimated, in 1902, that fifty per cent, of 
the homesteads in Eastern Minnesota were mortgaged. Although 
admitting that such a condition had been general, it represented 
in its Final Report that a large number of mortgages in certain 
States had been paid off. According to the " Political Science 
Quarterly" (Vol. xi, No. 4, 1896) the LTnited States Census of 
i8go showed a marked increase, not only absolutely, but rela- 
tively in the number of farm tenants. It can hardly be doubted 
that farm tenantry is rapidly increasing and will under the in- 
fluence of various causes increase still more, 



94 HISTORY OF THE GREAT AMERICAN FORTUNES- 

known, seeks to make its showing as favorable as pos- 
sible to the existing- regime. They make it clear that a 
rapid process of the dispossession of the industrial work- 
ing, the middle and the small farming classes has been 
going on unceasingly. If the process was so marked in 
1900 what must it be now? All of the factors operating 
to impoverish the farming population of the United 
States and turn them into homeless tenants have been 
a thousandfold intensified and augmented in the last 
ten years, beginning with the remarkable formation of 
hundreds of trusts in 1898. Even though the farmer 
may get higher prices for his products, as he did in 1908 
and 1909, the benefits are deceptively transient, while 
the expropriating process is persistent. 

There was a time when farm land in Ohio, Illinois, 
Minnesota, Indiana, Wisconsin, and many other States 
was considered of high value. But in the last few years 
an extraordinary sight has been witnessed. Hundreds of 
thousands of American farmers migrated to the virgin 
fields of Northwest Canada and settled there — a por- 
tentous movement significant of the straits to which the 
American farmer has been driven. 

Abandoned farms in the East are numerous ; in New 
York State alone 22,000 are registered. Hitherto the 
farmer has considered himself a sort of capitalist: if 
not hostile to the industrial working classes, he has been 
generally apathetic. But now he is being forced to the 
point of being an absolute dependant himself, and will 
inevitably align his interests with those of his brothers 
in the factories and in the shops. 

With this contrast of the forces at work which gave 
empires of public domain to the few, while dispossessing 
the tens of millions, we will now proceed to a considera- 
tion of some of the fortunes based upon railroads. 



CHAPTER III 

THE BEGINNINGS OF THE VANDERBILT FORTUNE 

The first of the overshadowing fortunes to develop 
from the ownership and manipulation of railroads was 
that of Cornelius Vanderbilt. The Havemeyers and other 
factory owners, whose descendants are now enrolled 
among the conspicuous multimillionaires, were still in 
the embryonic stages when Vanderbilt towered aloft in 
a class by himself with a fortune of $105,000,000. In 
these times of enormous individual accumulations and 
centralization of wealth, the personal possession of $105,- 
000,000 does not excite a fraction of the astonished com- 
ment that it did at Cornelius Vanderbilt's death in 1877. 
Accustomed as the present generation is to the sight of 
billionaires or semi-billionaires, it cannot be expected to 
show any wonderment at fortunes of lesser proportions. 

NINETY MILLIONS IN FIFTEEN YEARS. 

Yet to the people of thirty years ago, a round hundred 
million was something vast and unprecedented. In 
1847 millionaires were so infrequent that the very word, 
as we have seen, was significantly italicised. But here 
was a man who, figuratively speaking, was a hundred 
millionaires rolled in one. Compared with his wealth 
the great fortunes of ten or fifteen years before dwin- 
dled into bagatelles. During the Civil War a fortune of 
$15,000,000 had been looked upon as monumental. 
Even the huge Astor fortune, so long far outranking all 

95 



g6 HISTORY OF THE GREAT AMERICAN FORTUNES 

competitors, lost its exceptional distinction and ceased 
being the sole, unrivalled standard of immense wealth. 
Nearly a century of fraud was behind the Astor fortune. 
The greater part of Cornelius Vanderbilt's wealth was 
massed together in his last fifteen years. 

This was the amazing, unparalleled feature to his gen- 
eration. Within fifteen brief years he had possessed 
himself of more than $90,000,000. His wealth came 
rushing in at the rate of $6,000,000 a year. Such an 
accomplishment may not impress the people of these 
years, familiar as they are with the ease with which John 
D. Rockefeller and other multimillionaires have long 
swept in almost fabulous annual revenues. With his 
yearly income of fully $80,000,000 or $85,000,000 ^ 
Rockefeller can look back and smile with superior dis- 
dain at the commotion raised by the contemplation of 
'Cornelius X'anderbilt's $6,000,000. 

Each period to itself, however. Cornelius Vanderbilt 
was the golden luminary of his time, a magnate of such 
combined, far-reaching wealth and power as the United 
States had never known. Indeed, one overruns the line 
of tautology in distinguishing between wealth and power. 
The two were then identical not less than now. Wealth 
was the real power. None knew or boasted of this more 
than old Vanderbilt when, with advancing age, he be- 
came more arrogant and choleric and less and less in- 
clined to smooth down the storms he provoked by his 
contemptuous flings at the great pliable public. When 
threatened by competitors, or occasionally by public offi- 
cials, with the invocation of the law, he habitually 

1 The " New York Commercial," an ultra-conservative financial 
and commercial publication, estimated in January, 1905, his an- 
nual income to be $72,000,000. Obviously it has greatly increased 
every year. 



BEGINNINGS OF THE VANDERBILT FORTUNE 97 

sneered at them and vaunted his defiance. In terse sen- 
tences, interspersed with profanity, he proclaimed the 
fact that money was law ; that it could buy either laws 
or immunity from the law. 

Since wealth meant power, both economic and polit- 
ical, it is not difficult to estimate Vanderbilt's supreme 
place in his day. 

Far below him, in point of possessions, stretched the 
50,000,000 individuals who made up the nation's popu- 
lation. Nearly lo.ooo.ooo were wage laborers, and of 
the 10,000,000 fully 500.000 were child laborers. The 
very best paid of skilled workers received in the highest 
market not more than $1,040 a year. The usual weekly 
pay ran from $12 to $20 a week ; the average pay of un- 
skilled laborers was $350 a year. More than 7.500,000 
persons ploughed and hoed and harvested the farms of 
the country ; comparatively few of them could claim a 
decent living, and a large proportion were in debt. The 
incomes of the middle class, including individual em- 
ployers, business and professional men, tradesmen and 
small middlemen, ranged from $i',ooo to $10,000 a year. 

How immeasurably puny they all seemed beside Van- 
derbilt ! He beheld a multitude of many millions strug- 
gling fiercely for the dollar that meant livelihood or for- 
tune ; those bits of metal or paper which commanded the 
necessities, comforts and luxuries of life ; the antidote 
of grim poverty and the guarantees of good living; 
which dictated the services, honorable or often dishon- 
orable, of men, women and children ; which bought 
brains not less than souls, and which put their sordid 
seal on even the most sacred qualities. Now by these 
tokens, he had securely 105,000,000 of these bits of metal 
or wealth in some form equivalent to them. Millions of 



gS HISTORY OF THE GREAT AMERICAN FORTUNES 

people had none of these dollars ; the hundreds of thou- 
sands had a few ; the thousands had hundreds of thou- 
sands ; the few had millions. He had more than any. 

Even wdth all his wealth, great as it was in his day, he 
would scarcely be worth remembrance were it not that 
he was the founder of a dynasty of wealth. Therein 
lies the present importance of his career. 

A FORTUNE OF $700,000,000. 

From $105,000,000 bequeathed at his death, the Van- 
derbilt fortune has grown until it now reaches fully 
$700,000,000. This is an approximate estimate ; the 
actual amount may be more or less. In 1889 Shearman 
placed the wealth of Cornelius and William K. Vander- 
bilt, grandsons of the first Cornelius, at $100,000,000. 
each, and that of Frederick W. Vanderbilt, a brother of 
those two men, at $20,000,000.^ Adding the fortunes 
of the various other members of the Vanderbilt family, 
the Vanderbilts then possessed about $300,000,000. 
Since that time the population and resources of the 
United States have vastly increased ; w^ealth in the hold 
of a few has become more intensely centralized ; great 
fortunes have gone far beyond their already extraor- 
dinary boundaries of twenty years ago ; the possessions 
of the Vanderbilts have expanded and swollen in value 
everywhere, although recently the Standard Oil oligar- 
chy has been encroaching upon their possessions. Very 
probable it is that the combined Vanderbilt fortune 
reaches fully $700,000,000, actually and potentially. 

But the incidental mention of such a mass of money 
conveys no adequate conception of the power of this 
family. Nominally it is composed of private citizens 

2 " Who Owns the United States ? " — The Forum Magazine, 
November. 1880. 



BEGINNINGS OF THE VANDERBILT FORTUNE 99 

with theoretically the same rights and limitations of citi- 
zenship held by any other citizen and no more. But this 
is a fanciful picture. In reality, the Vanderbilt family 
is one of the dynasties of inordinately rich families ruling 
the United States industrially and politically. Singly it 
has mastery over many of the railroad and public utility 
systems and industrial corporations of the United States. 
In combination with other powerful men or families of 
wealth, it shares the dictatorship of many more corpora- 
tions. Under the Vanderbilts' direct domination are 21,- 
000 miles of railroad lines, the ownership of which is 
embodied in $600,000,000 in stocks and $700,000,000 in 
bonds. One member alone, William K. Vanderbilt, is 
a director of seventy-three transportation and industrial 
combinations or corporations. 



BONDS THAT HOLD PRESENT AND POSTERITY. 

Behold, in imagination at least, this mass of stocks and 
bonds. Heaps of paper they seem ; dead, inorganic 
things. A second's blaze will consume any one of them. 
a few strokes of the fingers tear it into shapeless rib- 
bons. Yet under the institution of law, as it exists, these 
pieces of paper are endowed with a terrible power of life 
and death that even enthroned kings do not possess. 
Those dainty prints with their scrolls and numerals and 
inscriptions are binding titles to the absolute ownershi]-) 
of a large part of the resources created by the labors of 
entire peoples. 

Kingly power at best is shadowy, indefinite, depending 
mostly upon traditional custom and audacious assump- 
tion backed by armed force. If it fall back upon a cer- 
tain alleged divine right it cannot produce documents 
to prove its authority. The industrial monarchs of the 



lOO HISTORY OF THE GREAT AMERICAN FORTUNES 

United States are fortified with both power and proofs 
of possession. Those bonds and stocks are the tangible 
titles to tangible property ; whoso holds them is vested 
with the ownership of the necessities of tens of millions 
of subjected people. Great stretches of railroad traverse 
the country ; here are coal mines to whose products some 
ninety million people look for warmth ; yonder are facto- 
ries ; there in the cities are street car lines and electric 
light and power supply and gas plants ; on every hand 
are lands and forests and waterways — all owned, you 
find, by this or that dominant man or family. 

The mind wanders back in amazement to the times 
when, if a king conquered territory, he had to erect a 
fortress or castle and station a garrison to hold it. They 
that then disputed the king's title could challenge, if they 
chose, at peril of death, the provisions of that title, which 
same provisions were swords and spears, arrows and 
muskets. 

But nowhere throughout the large extent of the Van- 
derbilt's possessions or those of other ruling families are 
found warlike garrisons as evidence of ownership. 
Those uncouth barbarian methods are grossly antiquated ; 
the part once played by armed battalions is now per- 
formed by bits of paper. A wondrously convenient 
change has it been ; the owners of the resources of na- 
tions can disport themselves thousands of miles away 
from the scene of their ownership ; they need never be- 
stir themselves to provide measures for the retention of 
their property. Government, with its array of officials, 
prisons, armies and navies, undertakes all of this pro- 
tection for them. So long as they hold these bits of 
paper in their name. Government recognizes them as the 
incontestable owners and safeguards their property ac- 
cordingly. The very Government established on the 



BEGINNINGS OF THE VANDERBILT FORTUNE lOI 

taxation of the workers is used to enforce the means 
by which the workers are held in subjection. 

THEY DECREE TAXES AT WILL. 

These batches of stocks and bonds betoken as much 
more again. A pretty fiction subsists that Government, 
the creator of the modern private corporation, is neces- 
sarily more powerful than its creature. This theoretical 
doctrine, so W'idely taught by university professors and 
at the same time so greatly at variance with the palpable 
facts, will survive to bring dismay in the near future 
to the very classes who would have the people believe 
it so. Instead of now being the superior of the corpora- 
tion the Government has long since definitely surren- 
dered to private corporations a tremendous taxing power 
amounting virtually to a decree authorizing enslavement. 
Upon every form of private corporation — railroad, in- 
dustrial, mining, public utility — is conferred a pe- 
culiarly sweeping and insidious power of taxation the 
indirectness of which often obscures its frightful nature 
and effects. 

- Where, however, the industrial corporation has but 
one form of taxation the railroad has many forms. The 
trust in oil or any other commodity can tax the whole 
nation at its pleasure, but inherently only on the one 
product it controls. That single taxation is of itself 
confiscatory enough, as is seen in the $912,000,000 of 
profits gathered in by the Standard Oil Company since 
its inception. The trust tax is in the form of its sell- 
ing price to the public. But the railroad puts its tax 
upon every product transported or every person who 
travels. Not a useful plant grows or an article is made 
but that, if shipped, a heavy tax must be paid on it. 



102 HISTORY OF THE GREAT AMERICAN FORTUNES 

This tax comes in the guise of freight or passenger rates. 
The labor of hundreds of milHons of people contributes 
incessantly to the colossal revenues enriching the rail- 
road owners. For their producing capacity the workers 
are paid the meagerest wages, and the products which 
they make they are compelled to buy back at exorbitant 
prices after they pass through the hands of the various 
great capitalist middlemen, such as the trusts and the 
railroads. How enormous the revenues of the railroads 
are may be seen in the fact that in the ten years from 
1898 to 1908 the dividends declared by thirty-five of the 
leading railroads in the United States reached the sum 
of about $1,800,000,000. This railroad taxation is a 
grinding, oppressive one, from which there is no ap- 
peal. If the Government taxes too heavily the people 
nominally can have a say; but the people have abso- 
lutely no voice in altering the taxation of corporations. 
Pseudo attempts have been made to regulate railroad 
charges, but their futility was soon evident, for the rea- 
son that owning the instruments of business the railroads 
and the allied trusts are in actual possession of the gov- 
ernmental power viewing it as a working whole. 

AND EXERCISE UNRESTRAINED POWER. 

Visualizing this power one begins to get a vivid per- 
ception of the comprehensive sway of the Vanderbilts 
and of other railroad magnates. They levy tribute with- 
out restraint — a tribute so vast that the exactions of 
classic conquerors become dwarfed beside it. If this 
levying entailed only the seizing of money, that cold, 
unbreathing, lifeless substance, then human emotion 
niight not start in horror at the consequences. But be- 
neath it all are the tugging and tearing of human mus- 



BEGINNINGS OF THE VAXDERBILT FORTUNE I03 

cles and minds, the toil and sweat of an unnumbered 
multitude, the rending of homes, the infliction of sorrow, 
suffering and death. 

The magnates, as we have said, hold the power of de- 
creeing life and death ; and time never was since the 
railroads were first built when this power was not arbi- 
trarily exercised. 

Millions have gone hungry or lived on an attenuated 
diet while elsewhere harvests rotted in the ground ; be- 
tween their needs and nature's fertility lay the railroads. 
Organized and maintained for profit and for profit alone, 
the railroads carry produce and products at their fixed 
rates and not a whit less; if these rates are not paid 
the transportation is refused. And as in these times 
transportation is necessary in the world's intercourse, the 
men who control it have the power to stand as an in- 
flexible barrier between individuals, groups of individu- 
als, nations and international peoples. The very agencies 
which should under a rational form of civilization be 
devoted to promoting the interests of mankind, are used 
as their capricious self-interest incline them by the few 
who have been allowed to obtain control of them. What 
if helpless people are swept off by starvation or by dis- 
eases superinduced by lack of proper food? What if 
in the great cities an increasing sacrifice of innocents 
goes on because their parents cannot afford the price of 
good milk — a price determined to a large extent by rail- 
road tariff? All of this slaughter and more makes 
no impress upon the unimpressionable surfaces of these 
stocks and bonds, and leaves no record save in the hos- 
pitals and graveyards. 

The railroad magnates have other powers. Govern- 
ment itself has no power to blot a town out of existence. 
It cannot strew desolation at will. But the railroad 



104 HISTORY OF THE GREAT AMERICAN FORTUNES 

owners can do it and do not hesitate if sufficient profits 
be involved. One man sitting in a palace in New York 
can give an order declaring a secret discriminative tariff 
against the products of a place, whereupon its industries 
no longer able to compete with formidable competitors 
enjoying better rates, close down and the life of the place 
flickers and sometimes goes out. 

These are but a very few of the immensity of extrav- 
agant powers conferred by the ownership of these rail- 
road bonds and stocks. Bonds they assuredly are, in- 
comparably more so than the clumsy yokes of olden 
days. Society has improved its outwards forms in these 
passing centuries. Clanking chains are no longer nec- 
essary to keep slaves in subjection. Far more effective 
than chains and balls and iron collars are the owner- 
ship of the means whereby men must live. Whoever 
controls them in large degree, is a potentate by what- 
ever name he be called, and those who depend upon the 
owner of them for their sustenance are slaves by what- 
ever flattering name they choose to go. 



HIGH AND MIGHTY POTENTATES. 

The Vanderbilts are potentates. Their power is 
bounded by no law ; they are among the handful of fel- 
low potentates who say what law shall be and how it 
shall be enforced. No stern, masterful men and women 
are they as some future moonstruck novelist or histo- 
rian bent upon creating legendary lore may portray 
them. Voluptuaries are most of them, sunk in a sur- 
feit of gorgeous living and riotous pleasure. Weak, 
without distinction of mind or heart, they have the money 
to hire brains to plan, plot, scheme, advocate, supervise 



BEGINNINGS OF THE VANDERBILT FORTUNE I05 

and work for them. Suddenly deprived of their stocks 
and bonds they woukl find themselves adrift in the sheer- 
est helplessness. With these stocks and bonds they are 
the direct absolute masters of an army of employees. 
On the New York Central Railroad alone the Vander- 
bilt payroll embraces fifty thousand workers. This is 
but one of their railroad systems. As many more, or 
nearly as many, men work directly for them on their 
other railroad lines. 

One hundred thousand men signify, let us say, as many 
families. Accepting the average of five to a family, here 
are five hundred thousand souls whose livelihood is de- 
pendent upon largely the will of the Vanderbilt family. 
To that will there is no check. To-day it may be ex- 
pansively benevolent ; to-morrow, after a fit of indiges- 
tion or a night of demoralizing revelry, it may flit to an 
extreme of parsimonious retaliation. As the will fluctu- 
ates, so must be the fate of the hundred thousand work- 
ers. If the will decides that the pay of the men must 
go down, curtailed it is, irrespective of their protests 
that the lopping ofif of their already slender wages means 
still keener hardship. Apparently free and independent 
citizens, this army of workers belong for all essential 
purposes to the Vanderbilt family. Their jobs are the 
hostages held by the Vanderbilts. The interests and de- 
cisions of one family are supreme. 

The germination and establishment of this immense 
power began with the activities of the first Cornelius 
Vanderbilt, the founder of this pile of wealth. He was 
born in 1794. His parents lived on Staten Island ; his 
father conveyed passengers in a boat to and from New 
York — an industrious, dull man who did his plodding 
part and allowed his wife to manage household ex- 



I06 HISTORY OF THE GREAT AMERICAN FORTUNES 

penses. Regularly and obediently he turned his earn- 
ings over to her. She carefully hoarded every available 
cent, using an old clock as a depository. 

THE founder's START. 

Vanderbilt was a rugged, headstrong, untamable, illit- 
erate youth. At twelve years of age he could scarcely 
write his own name. But he knew the ways of the 
water ; when still a youth he commenced ferrying pas- 
sengers and freight between Staten Island and New York 
City. For books he cared nothing ; the refinements of 
life he scorned. His one passion was money. He was 
grasping and enterprising, coarse and domineering. Of 
the real details of his early life little is known except 
what has been written by laudatory writers. We are 
informed that as he gradually made and saved money 
he built his own schooners, and went in for the coasting 
trade. The invention and success of the steamboat, it 
is further related, convinced him that the day of the 
sailing vessel would soon be over. He, therefore, sold 
his interest in his schooners, and was engaged as captain 
of a steamboat plying between New York and points on 
the New Jersey coast. His wife at the same time en- 
larged the family revenues by running a wayside tavern 
at New Brunswick, N. J., whither Vanderbilt had moved. 

In 1829, when his resources reached $30,000, he quit 
as an employee and began building his own steamboats. 
Little by little he drove many of his competitors out of 
business. This he was able to do by his harsh, un- 
scrupulous and strategic measures.^ He was severe with 

•'' Some glimpses of Vanderbilt's activities and methods in his 
early career are obtainable from the court records. In 1827 he 
was fined two penalties of $50 for refusing to move a stcamlioat 
called " The Thistle," commanded by him, from a wharf on 



BEGINNINGS OF THE VANDERBILT FORTUNE 10/ 

the men who worked for him, compelling them to work 
long hours for little pay. He showed a singular ability 
in undermining competitors. They could not pay low 
wages but what he could pay lower ; as rapidly as they 
set about reducing passenger arid freight rates he would 
anticipate them. His policy at this time was to bank- 
rupt competitors, and then having obtained a monopoly, 
to charge exorbitant rates. The public, which wel- 
comed him as a benefactor in declaring cheaper rates 
and which flocked to patronize his line, had to pay dearly 
for their premature and short-sighted joy. For the first 
five years his profits, according to Croffut, reached $30,- 
000 a year, doubling in successive years. By the time 
he was forty years old he ran steamboats to many cities 
on the coast, and had amassed a fortune of half a million 
dollars. 

DRIVING OUT COMPETITORS. 

Judging from the records of the times, one of his most 
effective means for harassing and driving out compet- 

the North River in order to give berth to " The Legislature," 
a competing steamboat. His defence was that Adams, the harbor 
master, had no authority to compel him to move. The lower 
courts decided against him, and the Supreme Court, on appeal, 
affirmed their judgment. (Adams vs. Vanderbilt. Cowen's Re- 
ports. Cases in Supreme Court of the State of New York, 

vii: 349-353-) 

In 1841 the Eagle Iron Works sued Vanderbilt for the sum 
of $2,957.15 which it claimed was due under a contract made 
by Vanderbilt on March 8, 1838. This contract called for the 
payment by Vanderbilt of $10,500 in three installments for the 
building of an engine for the steamboat " Wave.'" Vanderbilt 
paid $7,900, but refused to pay the remainder, on the ground 
that braces to the connecting rods were not supplied. These 
braces, it was brought out in court, cost only $75 or $100. The 
Supreme Court handed down a judgment against Vanderbilt. An 
appeal was taken by Vanderbilt, and Judge Nelson, in the Su- 
preme Court, in October, 1841, affirmed that judgment. — Van- 
derbilt vs. Eagle Iron Works, Wendell's Reports, Cases in the 
Supreme Court of the State of New York, xxv : 665-668. 



Io8 HISTORY OF THE GREAT AMERICAN FORTUNES 

iters was in bribing the New York Common Council to 
give him, and refuse them, dock privileges. As the city 
owned the docks, the Common Council had the exclu- 
sive right of determining to whom they should be leased. 
Not a year passed but what the ship, ferry and steam- 
boat owners, the great landlords and other capitalists 
bribed the aldermen to lease or give them valuable city 
property. Many scandals resulted, culminating in the 
great scandal of 1853, when the Grand Jury, on Feb- 
ruary 26, handed up a presentment showing in detail 
how certain aldermen had received bribes for disposal 
of the city's water rights, pier privileges and other prop- 
erty, and how enormous sums had been expended in 
bribes to get railroad grants in the city.'* Vanderbilt was 
not openly implicated in these frauds, no more than were 
the Astors, the Rhinelanders, the Goelets and other very 
rich men who prudently kept in the background, and 
who managed to loot the city by operating through go- 
betweens. 

Vanderbilt's eulogists take great pains to elaborate 
upon his tremendous energy, sagacity and constructive 
enterprise, as though these were the exclusive qualities 
by which he got his fortune. Such a glittering picture, 
common in all of the usual biographies of rich men, dis- 
credits itself and is overthrown by the actual facts. The 
times in which Vanderbilt lived and thrived were not 
calculated to inspire the masses of people with respect 
for the trader's methods, although none could deny that 
the outcropping capitalists of the period showed a fierce 
vigor in overcoming obstacles of man and of nature, and 
in extending their conquests toward the outposts of the 
habitable globe. 

* Proceedings of the New York Board of Aldermen, xlviii : 
423-431- 



BEGINNINGS OF THE VANDERRILT FORTUNE lOQ 

If indomitable enterprise assured permanency of 
wealth then many of Vanderbilt's competitors would 
have become and remained multimillionaires. Vander- 
bilt, by no means possessed a monopoly of acquisitive 
enterprise ; on every hand, and in every line, were men 
fully as active and unprincipled as he. Nearly all of 
these men, and scores of competitors in his own sphere 
— dominant capitalists in their day — have become well- 
nigh lost in the records of time; their descendants are 
in the slough of poverty, genteel or otherwise. Those 
times were marked by the intensest commercial compe- 
tition ; business was a labyrinth of sharp tricks and low 
cunning; the man who managed to project his head far 
above the rest not only had to practice the methods of 
his competitors but to overreach and outdo them. It 
was in this regard that Vanderbilt showed superior 
ability. 

In the exploitation of the workers — forcing them 
to work for low wages and compelling them to pay high 
prices for all necessities — Vanderbilt was no different 
from all contemporaneous capitalists. Capitalism sub- 
sisted by this process. Almost all conventional writers, 
it is true, set forth that it was the accepted process of 
the day, implying that it was a condition acquiesced in 
by the employer and worker. This is one of the lies 
disseminated for the purpose of proving that the great 
fortunes were made by legitimate methods. Far from 
being accepted by the workers it was denounced and 
was openly fought by them at every auspicious oppor- 
tunity. 

Vanderbilt became one of the largest ship and steam- 
boat builders in the United States and one of the most 
formidable employers of labor. At one time he had a 
hundred vessels afloat. Thousands of shipwrights, me- 



I JO HISTORY OF THE GREAT AMERICAN* FORTUNES 

chanics and other workers toiled for him fourteen and 
sixteen hours a day at $1.50 a day for many years. The 
actual purchasing power of this wage kept declining as 
the cost of rent and other necessaries of life advanced. 
This was notably so after the great gold discoveries in 
California, when prices of all commodities rose abnor- 
mally, and the workers in every trade were forced to 
strike for higher wages in order to live. ]\Iost of these 
strikes were successful, but their results as far as wages 
went were barren ; the advance wrung from employers 
was by no means equal to the increased cost of living. 

REGARDED AS A COMMERCIAL BUCCANEER, 

The exploitation of labor, however, does not account 
for his success as a money maker. Many other men 
did the same, and yet in the vicissitudes of business went 
bankrupt ; the realm of business was full of wrecks, 
Vanderbilt's success arose from his destructive tactics 
toward his competitors. He was regarded universally 
as the buccaneer of the shipping world. He leisurely 
allowed other men to build up profitable lines of steam- 
boats, and he then proceeded to carry out methods which 
inevitably had one of two terminations : either his com- 
petitor had to buy him off at an exorbitant price, or he 
was left in undisputed possession. His principal biog- 
rapher, Croffut, whose effusion is one long chant of 
praise, treats these methods as evidences of great shrewd- 
ness, and goes on : " His foible was ' opposition ; ' wher- 
ever his keen eye detected a line that was making a very 
large profit on its investment, he swooped down on it 
and drove it to the wall by offering a better service and 
lower rates." ° This statement is only partially true ; 

•'■' "The Vanderbilts and the Story of Their Fortune." l-)y W. A. 
Crofifut, 1886:45-46. 



BEGINNINGS OF THE VANDERBILT FORTUXB 111 

its omissions are more significant than its admissions. 

Far from being the " constructive genius " that he is 
represented in every extant biographical work and note, 
Vanderbilt was the foremost mercantile pirate and com- 
mercial blackmailer of his day. 

Harsh as these terms may seem, they are more than 
justified by the facts. His eulogists, in line with those 
of other rich men, weave a beautiful picture for the edi- 
fication of posterity, of a broad, noble-minded man whose 
honesty was his sterling virtue, and whose splendid abil- 
ity in opening up and extending the country's resources 
was rewarded with a great fortune and the thanks of 
his generation. This is utterly false. He who has the 
slightest knowledge of the low practices and degraded 
morals of the trading class and of the qualities which in- 
sured success, might at once suspect the spuriousness of 
this extravagant presentation, even if the vital facts were 
unavailable. 

But there is no such difficulty. Obviously, for every 
one fraudulent commercial or political transaction that 
comes to public notice, hundreds and thousands of such 
transactions are kept in concealment. Enough facts, 
however, remain in official records to show the particular 
methods Vanderbilt used in getting together his millions. 
Yet no one hitherto seems to have taken the trouble to 
disinter them ; even serious writers who cannot be ac- 
cused of wealth worship or deliberate misstatement have 
all, without exception, borrowed their narratives of Van- 
derbilt's career from the fiction of his literary, newspaper 
and oratorical incense burners. And so it is that every- 
where the conviction prevails that whatever fraudulent 
methods Vanderbilt employed in his later career, he 
was essentially an honest, straightforward man who was 
compelled by the promptings of sheer self-preservation 



112 HISTORY OF THE GREAT AMERICAN FORTUNES 

to fight back at unscrupulous competitors or antagonists, 
and who innately was opposed to underhand work or 
fraud in any form. Vanderbilt is in every case por- 
trayed as an eminently high-minded man who never 
stooped to dissimulation, deceit or treachery, and whose 
first millions, at any rate, were made in the legitimate 
ways of trade as they were then understood. 



EXTORTION AND THEFT COMMON. 

The truth is that the bulk of Vanderbilt's original mil- 
lions were the proceeds of extortion, blackmail and theft. 

In the established code of business the words extor- 
tion and theft had an unmistakable significance. Busi- 
ness men did not consider it at all dishonorable to op- 
press their workers ; to manufacture and sell goods under 
false pretenses ; to adulterate prepared foods and drugs ; 
to demand the very highest prices for products upon 
which the very life of the people depended, and at a time 
when consumers needed them most ; to bribe public offi- 
cials and to hold up the Government in plundering 
schemes. These and many other practices were looked 
upon as commonplaces of ordinary trade. 

But even as burglars will have their fine points of 
honor among themselves, so the business world set cer- 
tain tacit limitations of action beyond which none could 
go without being regarded as violating the code. It was 
all very well as long as members of their own class plun- 
dered some other class, or fought one another, no matter 
how rapaciously, in accordance with understood proce- 
dure. But when any business man ventured to over- 
stc]) these limitations, as Vanderbilt did, and levy a spe- 
cies of commercial blackmail to the extent of millions 
of dollars, then he was sternly denounced as an arch 




COMMODORE CORNELIUS VANDERBILT, 

The Founder of the Vanderbilt Fortune. 



BECIXXIXCS OF TIIR VAXUKRlUl/r FOKTrXR II3 

thief. If Vanderbilt had confined himself to the routine 
formulas of business, he might have gone down in fail- 
ure. Many of the bankrupts were composed of business 
men who, while sharp themselves, were outgeneraled by 
abler sharpers. Vanderbilt was a master hand in de- 
spoiling the despoilers. 

How did Vanderbilt manage to extort millions of dol- 
lars ? The method was one of great simplicity ; many of 
its features were brought out in the United States Sen- 
ate in the debate of June 9, 1858, over the Mail Steam- 
ship bill. The Government had begun, more than a dec- 
ade back, the policy of paying heavy subsidies to 
steamship companies for the transportation of mail. 
This subsidy, however, was not the only payment re- 
ceived by the steamship owners. In addition they were 
allowed what were called " postages " — the full returns 
from the amount of postage on the letters carried. Ocean 
postage at that time was enormous and burdensome, 
and was especially onerous upon a class of persons least 
able to bear it. About three-quarters of the letters 
transported by ships were written by emigrants. They 
were taxed the usual rate of twenty-four or twen- 
ty-nine cents for a single letter. In 185 1 the amount 
received for trans-Atlantic postages was not less than 
a million dollars ; three-fourths of this sum came di- 
rectly from the working class. 



THE CORRUPTION OF OFFICIALS. 

To get these subsidies, in conjunction with the "post- 
ages," the steamship owners by one means or another 
corrupted postal officials and members of Congress. " I 
have noticed," said Senator Toombs, in a speech in the 
United States Senate on June 9, 1858, 



114 HISTORY OF THE GREAT AMERICAN FORTUNES 

that there has never been a head of a Department strong enough 
to resist steamship contracts. I have noticed them here with 
your Whig party and your Democratic party for the last thir- 
teen years, and I have never seen any head of a Department 
strong enough to resist these influences. . . . Thirteen years' 
experience has taught me that wherever you allow the Postoffice 
or Navy Department to do anything which is for the benefit of 
contractors you may consider the thing as done. I could point 
to more than a dozen of these contracts. ... A million 
dollars a year is a power that will be felt. For ten years it 
amounts to ten million dollars, and I know it is felt. I know it 
perverts legislation. I have seen its influence; I have seen the 
public treasury plundered by it. . . .® 

By means of this systematic corruption the steam- 
ship owners received many millions of dollars of Gov- 
ernment funds. This was all virtually plunder; the re- 
turns from the " postages " far more than paid them 
for the transportation of mails. And what became of 
these millions in loot? Part went in profits to the own- 
ers, and another part was used as private capital by them 
to build more and newer ships constantly. Practically 
none of Vanderbilt's ships cost him a cent ; the Govern- 
ment funds paid for their building. In fact, a careful 
tracing of the history of all of the subsidized steamship 
companies proves that this plunder from the Govern- 
ment was very considerably more than enough to build 
and equip their entire lines. 

One of the subsidized steamship lines was that of 
E. K. Collins & Co., a line running from New York to 
Liver])ool. Collins debauched the postal officials and 
Congress so effectively that in 1847 ^^^ obtained an ap- 
propriation of $387,000 a year, and subsequently an ad- 
ditional appropriation of $475,000 for five years. To- 
gether with the " postages," these amounts made a total 

« The Congressional Globe, First Session, Thirty-fifth Con- 
gress, 1857-58, iii 12839. 



BEGINNINGS OF THE VANDERBILT FORTUNE II5 

mail subsidy for that one line alone during the latter 
years of the contract of about a million dollars a year. 
The act of Congress did not, however, specify that the 
contract was to run for ten years. The postal officials, 
by what Senator Toombs termed " a fraudulent con- 
struction," declared that it did run for ten years from 
1850, and made payments accordingly. The bill before 
Congress in the closing days of the session of 1858, was 
the usual annual authorization of the payment of this 
appropriation, as well as other mail-steamer appropria- 
tions. 



VANDERBILT S HUGE LOOT. 

In the course of this debate some remarkable facts 
came out as to how the Government was being steadily 
plundered, and why it was that the postal system was 
already burdened with a deficit of $5,000,000. While 
the appropriation bill was being solemnly discussed with 
patriotic exclamations, lobbyists of the various steam- 
ship companies busied themselves with influencing or 
purchasing votes within the very halls of Congress. 

Almost the entire Senate was occupied for days with 
advocating this or that side as if they were paid at- 
torneys pleading for the interests of either Collins or 
Vanderbilt. Apparently a bitter conflict was raging be- 
tween these two millionaires. Vanderbilt's subsidized 
European lines ran to Southampton, Havre and Bremen ; 
Collins' to Liverpool. There were indications that for 
years a secret understanding had been in force between 
Collins and Vanderbilt by which they divided the mail 
subsidy funds. Ostensibly, however, in order to give 
-lo sign of collusion, they went through the public ap- 
pearance of warring upon each other. By this strat- 



Il6 HISTORY OF TPIE GREAT AMERICAN FORTUNES 

agem they were able to ward off criticism of monopoly, 
and each get a larger appropriation than if it were 
known that they were in league. But it was character- 
istic of business methods that while in collusion, Van- 
derbilt and Collins constantly sought to wreck the other. 

One Senator after another arose with perfervid effu- 
sion of either Collins or Vanderbilt. The Collins sup- 
porters gave out the most suave arguments why the Col- 
lins line should be heavily subsidized, and why Collins 
should be permitted to change his European port to 
Southampton. Vanderbilt's retainers fought this move, 
which they declared would wipe out of existence the en- 
terprise of a great and j^atriotic capitalist. 

It was at this point that Senator Toombs, who repre- 
sented neither side, cut in with a series of charges which 
dismayed the whole lobby for the time being. He de- 
nounced both Collins and Vanderbilt as plunderers, and 
then, in so many words, specifically accused Vanderbilt 
of having blackmailed millions of dollars. " I am trying," 
said Senator Toombs, 

to protect the Government against collusion, not against con- 
flict. I do not know but that these parties have colluded novir. 
I have not the least doubt that all these people understand one 
another. I am struggling against colkision. If they have col- 
luded, why should Vanderbilt run to Southampton for the post- 
age when Collins can get three hundred and eighty-seven thou- 
and dollars for running to the same place? Why may not Col- 
lins, then, sell his ships, sit down in New York, and say to 
Vanderbilt, ' I will give you two hundred and thirty thousand 
dollars and pocket one hundred and fifty-seven thousand dol- 
lars a year.' That is the plain, naked case. The Senator from 
Vermont says the Postmaster General will protect us. It is my 
duty, in the first place, to prevent collusion, and prevent the 
country from being plundered ; to protect it by law as well as 
I can. ' 



BEGINNINGS OF THE VANDERBILT FORTUNE II7 

Regarding the California mails, Senator Toombs re- 
minded the Senate of the granting eleven years before of 
enormous mail subsidies to the two steamship lines run- 
ning to California — the Pacific Mail Steamship Company 
and the United States Alail Steamship Company, other- 
wise called the Harris and the Sloo lines. He declared 
that Vanderbilt, threatening them with both competition 
and a public agitation such as would uncover the fraud, 
had forced them to pay him gigantic sums in return for 
his silence and inactivity. Responsible capitalists, Senator 
Toombs said, had offered to carry the mails to Califor- 
nia for $550,000. *' Everybody knows," he said, '* that 
it can be done for half the money we pay now. Why, 
then, should we continue to waste the public money ? " 
Senator Toombs went on: 

You give nine hundred thousand dollars a year to carry 
the mails to California; and Vanderbilt compels the contractors 
to give him $56,000 a month to keep quiet. This is the effect 
of your subventions. Under your Sloo and Harris contracts 
you pay about $900,000 a year (since 1847) ; and Vanderbilt, by 
his superior skill and energy, compelled them for a long time, 
to disgorge $40,000 a month, and now $56,000 a month. . . . 
They pay lobbymen, they pay agencies, they go to law, because 
everybody is to have something; and I know this Sloo con- 
tract has been in chancery in New York for yearsJ The result 

■^The case in chancery referred to by Senator Toombs was 
doubtless that of Sloo et al. vs. Law et al. (Case No. 12,957, 
Federal Cases, xxii : 355-364.) 

In this case argued before Judge Ingersoll in the United States 
Circuit Court, at New York City, on May 16, 1856, many inter- 
esting and characteristic facts came out both in the argument 
and in the Court decision. 

From the decision (which went into the intricacies of the case 
at great length) it appeared that although .\lbert G. Sloo had 
formed the United States Mail Steamship Company, the incor- 
porators were George Law, Marshall O. Roberts, Prosper M. 
Wetmore and Edwin Crosswcll. Sloo assigned his contract to 
them. Law was the first president, and was succeeded by Rob- 
erts. A trust fund was formed. Law fraudulently (so the 



Il8 HISTORY OF THE GREAT AMERICAN FORTUNES 

of this system is that here comes a man — as old Vanderbilt 
seems to be — I never saw him, but his operations have excited 
my admiration — and he runs right at them and says disgorge 
this pkmder. He is the kingfish that is robbing these small 
plunderers that come about the Capitol. He does not come 
here for that purpose ; but he says, ' Fork over $56,000 a month 
of this money to me, that I may lie in port with my ships,' and 
they do it.^ 

decision read) took out $700,000 of stock, and also fraudulently 
appropriated large sums of money belonging to the trust fund. 
This was the same Law who, in 185 1 (probably with a part of 
this plunder) bribed the New York Board of Aldermen, with 
money, to give him franchises for the Second and Ninth Avenue 
surface railway lines. Roberts appropriated $600,000 of the 
United States Mail Steamship Company's stock. The huge swin- 
dles upon the Government carried on by Roberts during the Civil 
War are described in later chapters in this work. Wetmore was 
a notorious lobbyist. By fraud, Law and Roberts thus managed 
to own the bulk of the capital stock of the United States Mail 
Steamship Company. The mail contract that it had with the 
Government was to yield $2,900,000 in ten years. 

Vanderbilt stepped in to plunder these plunderers. During the 
time that Vanderbilt competed with that company, the price of a 
single steerage passage from California to New York was $35. 
After he had sold the company the steamship " North Star" for 
$400,000, and had blackmailed it into paying heavily for his 
silence and non-competition, the price of steerage passage was 
put up to $125 (p. 364). 

The cause of the suit was a quarrel among the trustees over 
the division of the plunder. One of the trustees refused to 
permit another access to the books. Judge IngersoU issued an 
injunction restraining the defendant trustees from withholding 
such books and papers. 

* The Congressional Globe, 1857-58, iii : 2843-2844. 

The acts by which the establishment of the various subsidized 
ocean lines were authorized by Congress, specified that the 
steamers were to be fit for ships of war in case of necessity, 
and that these steamers were to be accepted by the Navy De- 
partment before they could draw subsidies. This part of the 
debate in the United States Senate shows the methods used in 
forcing their acceptance on the Government : 

Mr. Collamer. — The Collins line was set up by special con- 
tract? 

Mr. Toombs. — Yes, by special contract, and that was the way 
with the Sloo contract and the Harris contract. They were to 
build ships fit for war purposes. I know when the Collins 
vessels were built; I was a member of the Committee on Ways 
and Means of the other House, and I remember that the men 
at the head of our bureau of yards and docks said that they 



BEGINNINGS OF THE VANDERBILT FORTUNE I IQ 

Thus, it is seen, Vanderbilt derived millions of dollars 
by this process of commercial blackmail. Without his 
having to risk a cent, or run the chance of losing a single 
ship, there was turned over to him a sum so large ever}' 
year that many of the most opulent merchants could 
not claim the equal of it after a lifetime of feverish 
trade. It was purely as a means of blackmailing coer- 
cion that he started a steamship line to California to 
compete with the Harris and the Sloo interests. For 
his consent to quit running his ships and to give them a 
complete and unassailed monopoly he first extorted 
$480,000 a year of the postal subsidy, and then raised 
it to $612,000. 

The matter came up in the House, June 12, 1858. Rep- 
/esentative Davis, of Mississippi, made the same charges. 
He read this statement and inquired if it were true: 

These companies, in order to prevent all competition to their 
line, and to enable them, as they do, to charge passengers double 
fare, have actually paid Vanderbilt $30,000 per month, and the 
United States Mail Steamship Company, carrying the mail be- 
tween New York and Aspinwall, an additional sum of $10,000 
per month, making $40,000 per month to Vanderbilt since INIay, 
1856, which they continued to do. This $480,000 are paid to 
Vanderbilt per annum simply to give these two companies the 
entire monopoly of their lines — which sum, and much more, 
is charged over to passengers and freight. 

were not worth a sixpence for war purposes ; that a single 
broadside would blow them to pieces; that they could not stand 
the fire of their own guns ; but newspapers in the cities that 
were subsidized commenced firing on the Secretary of the Navy, 
and he succumbed and took the ships. That was the way they 
got here. 

Senator Collamer, referring to the subsidy legislation, said : 
" As long as the Congress of the United States makes contracts, 
declare who they shall be with, and how much they shall pay 
for them, they can never escape the generally prevailing public 
suspicion that there is fraud and deceit and corruption in those 
contracts." 



120 HISTORY OF THE GREAT AMERICAN FORTUNES 

Representative Davis repeatedly pressed for a definite 
reply as to the truth of the statement. The advocates 
of the bill answered with evasions and equivocations.* 

BLACKMAIL CHARGES TRUE. 

The mail steamer appropriation bill, as finally passed 
by Congress, allowed large subsidies to all of the steam- 
ship interests. The pretended warfare among them had 
served its purpose ; all got what they sought in subsidy 
funds. While the bill allowed the Postmaster-General 
to change Collins' European terminus to Southampton, 
that official, so it was proved subsequently, was Van- 
derbilt's plastic tool. 

But what became of the charges against Vanderbilt? 
Were they true or calumniatory? For two years Con- 
gress made no effort to ascertain this. In i'86o, how- 
ever, charges of corruption in the postal system and 
other Government departments were so numerously 
made, that the House of Representatives on March 5, 
i860, decided, as a matter of policy, to appoint an in- 
vestigating committee. This committee, called the " Co- 
vode Committee," after the name of its chairman, probed 
into the allegations of Vanderbilt's blackmailing trans- 
actions. The charges made in 1858 by Senator Toombs 
and Representative Davis were fully substantiated. 

Ellwood Fisher, a trustee of the United States Mail 
Steamship Company, testified on May 2 that during the 
greater part of the time he was trustee, Vanderbilt was 
paid $10,000 a month by the United States Mail Steam- 
ship Company, and that the Pacific Mail Steamship Com- 
pany paid him $30,000 a month at the same time and for 

» The Congressional Globe, Part iii, 1857-58 : 3029. The Wash- 
ington correspondent of the New York " Times " telegraphed 
(issue of June 2, 1858) that the mail subsidy bill was passed 
by the House " without twenty members knowing its details," 



BEGINNINGS OF THE VANDERBILT FORTUNE 121 

the same purpose. The agreement was that if competi- 
tion appeared payment was to cease. In all, $480,000 
a year was paid during this time. On Jvme 5, i860, 
Fisher again testified : " During the period of about four 
years and a half that I was one of the trustees, the earn- 
ings of the line were very large, but the greater part of 
the money was wrongfully appropriated to Vanderbilt 
for blackmail, and to others on various pretexts." ^^ 
William H. Davidge, president of the Pacific Mail 
Steamship Company, admitted that the company had 
long paid blackmail money to Vanderbilt. " The ar- 
rangement," he said, " was based upon there being no 
competition, and the sum was regulated by that fact." ^^ 
Horace F. Clark, Vanderbilt's son-in-law, one of the 
trustees of the United States Mail Steamship Company, 
likewise admitted the transaction." It is quite useless 

1"^ House Reports, Thirty-sixth Congress. First Session, 1859- 
60, v: 785-86 and 829. "Hence it was held," explained Fisher, 
in speaking of his fellow trustees, "that he [Vanderbilt] was 
interested in preventing competition, and the terror of his name 
and capital would he effectual upon others who might be dis- 
posed to establish steamship lines" (p. 786). 

11 Ibid., 795-796. The testimony of Fisher, Davidge and other 
officials of the steamship lines covers many pages of the investi- 
gating committee's report. Only a few of the most vital parts 
have been quoted here. 

12 Ibid., 824. 

But Roberts and his associate trustees succeeded in making 
the Government recoup them, to a considerable extent, for the 
amount out of which Vanderbilt blackmailed them. They did it 
in this way : 

A claim was trumped up by them that the Government owed 
a large sum, approximating about two million dollars, to the 
United States Mail Steamship Company for services in carry- 
ing mail in addition to those called for under the Sloo con- 
tract. In 1859 they began lobbying in Congress to have this 
claim recognized. The scheme was considered so brazen that 
Congress refused. Year after year, for eleven years, they tried 
to get Congress to pass an act for their benefit. Finally, on 
July 14, 1870, at a time when bribery was rampant in Congress, 
they succeeded. An act was passed directing the Court of Claims 
to investigate and determine the merits of the claim. 



122 HISTORY OF THE GREAT AMERICAN FORTUNES 

to ask whether Vanderbilt was criminally prosecuted or 
civilly sued by the Government. Not only was he un- 
molested, but two years later, as we shall see, he carried 
on another huge swindle upon the Government under 
peculiarly heinous conditions. 

This continuous robbery of the public treasury ex- 
plains how Vanderbilt was able to get hold of millions of 
dollars at a time when millionaires were scarce. Van- 
derbilt is said to have boasted in 1853 that he had eleven 
million dollars invested at twenty-five per cent. A very 
large portion of this came directly from his bold system 
of commercial blackmail. ^^ The mail subsidies were the 
real foundation of his fortune. Many newspaper edi- 
torials and articles of the tinie mention this fact. Only 
a few of the important underlying facts of the character 
of his methods when he was in the steamboat and steam- 
ship business can be gleaned from the records. But 
these few give a clear enough insight. With a part of 
the proceeds of his plan of piracy, he carried on a 
subtle system of corruption by which he and the other 
steamer owners were able time after time not only to 
continue their control of Congress and the postal au- 
thorities, but to defeat postal reform measures. For 
fifteen years Vanderbilt and his associates succeeded in 

The Court of Claims threw the case out of court. Judge 
Drake, in delivering the opinion of the court, said that the act 
was to be so construed " as to prevent the entrapping of the 
Government by fixing upon it liability where the intention of 
the legislature [Congress] was only to authorize an investigation 
of the question of liability" (Marshall O. Roberts et al., Trustees, 
vs. the United States, Court of Claims Reports, vi: 84-90). On 
appeal, however, the Supreme Court of the United States held 
that the act of Congress in referring the case to the Court of 
Claims was in effect a ratiftcation of the claim. (Court of Claims 
Reports, xi: 98-126.) llius this bold robbery was fully validated. 

I'S Undoul)tedly so, but the precise proportion it is impossible 
to ascertain. 



BEGINNINGS OF THE VANDERBILT FORTUNE I23 

stifling every bill introduced in Congress for the reduc- 
tion of the postage on mail. 



HE QUITS STEAMSHIPS. 

The Civil War with its commerce-preying privateers 
was an unpropitious time for American mercantile ves- 
sels. Vanderbilt now began his career as a railroad 
owner. 

He was at this time sixty-nine years old, a tall, robust, 
vigorous man with a stern face of remarkable vulgar 
strength. The illiteracy of his youth survived ; he could 
not write the simplest words correctly, and his speech 
was a brusque medley of slang, jargon, dialect and pro- 
fanity. It was said of him that he could swear more 
forcibly, variously and frequently than any other man 
of his generation. Like the Astors, he was cynical, dis- 
trustful, secretive and parsimonious. He kept his plans 
entirely to himself. In his business dealings he was 
never known to have shown the slightest mercy ; he de- 
manded the last cent due. His close-fistedness was such 
a passion that for many years he refused to substitute 
new carpets for the scandalous ones covering the floors 
of his house No. lo Washington place. He never read 
anything except the newspapers, which he skimmed at 
breakfast. To his children he was unsympathetic and 
inflexibly harsh ; Croffut admits that they feared him. 
The only relaxations he allowed himself were fast driv- 
ing and playing whist. 

This, in short, is a picture of the man who in the 
next few years used his stolen millions to sweep into 
his ownership great railroad systems. Croffut asserts 
that in 1861 he was worth $20,000,000; other writers 



124 HISTORY OF THE GREAT AMERICAN FORTUNES 

say that his wealth did not exceed $10,000,000. He 
knew nothing of railroads, not even the first technical 
or supervising rudiments. Upon one thing he depended 
and that alone : the brute force of money with its auxil- 
iaries, cunning, bribery and fraud. 



CHAPTER IV 
THE ONRUSH OF THE VANDERBILT FORTUNE 

With the outbreak of the Civil War, and the scouring 
o£ the seas by privateers, American ship owners found 
themselves with an assortment of superfluous vessels on 
their hands. Forced to withdraw from marine com- 
merce, they looked about for two openings. One was 
how to dispose of their vessels, the other the seeking of 
a new and safe method of making millions. 

Most of their vessels were of such scandalous con- 
struction that foreign capitalists would not buy them at 
any price. Hastily built in the brief period of ninety 
days, wholly with a view to immediate profit and with 
but a perfunctory regard for efficiency, many of these 
steamers were in a dangerous condition. That they sur- 
vived voyages was perhaps due more to luck than any- 
thing else ; year after year, vessel after vessel similarly 
built and owned had gone down to the bottom of the 
ocean. Collins had lost many of his ships ; so had other 
steamship companies. The chronicles of sea travel were 
a long, grewsome succession of tragedies ; every little 
while accounts would come in of ships sunk or myste- 
riously missing. Thousands of immigrants, inhumanly 
crowded in the enclosures of the steerage, were swept 
to death without even a fighting chance for life. Cabin 
passengers fared better ; they were given the opportu- 
nity of taking to the life-boats in cases where there was 
sufficient warning, time and room. At best, sea travel 
is a hazard ; the finest of ships are liable to meet with 

125 



126 HISTORY OF THE GREAT AMERICAN FORTUNES 

disaster. But over much of this sacrifice of hfe hung 
grim, ugly charges of mismanagement and corruption;^ 
of insufficient crews and incompetent officers ; of defect- 
ive machinery and rotting" timber; of lack of proper in- 
spection and safeguards. 

THE ANSWER FOUND. 

The steamboat and steamship owners were not long 
lost in perplexity. Since they could no longer use their 
ships or make profit on ocean routes why not palm ofif 
their vessels upon the Government? A highly favor- 
able time it was ; the Government, under the imperative 
necessity of at once raising and transporting a huge army, 
needed vessels badly. As for the other question mo- 
mentarily agitating the capitalists as to what new line 
of activity they could substitute for their own extin- 
guished business, Vanderbilt soon showed how railroads 
could be made to yield a far greater fortune than com- 
merce. 

The titanic conflict opening between the North and the 
South found the Federal Government wholly unpre- 
pared. True, in granting the mail subsidies which es- 
tablished the ocean steamship companies, and which 
actually furnished the capital for many of them. Con- 
gress had inserted some fine provisions that these sub- 
sidized ships should be so built as to be " war steamers 
of the first class," available in time of war. But these 
provisions were mere vapor. Just as the Harris and 
the Sloo lines had obtained annual mail subsidy pay- 
ments of $900,000 and had caused Government officials 
to accept their inferior vessels, so the Collins line had 
done the same. The report of a board of naval experts 
submitted to the Committee of Ways and Means of the 



THE ONRUSH OF THE VANDERBILT FORTUNE I27 

House of Representatives had showed that the CoUins 
steamers had not been built according to contract ; that 
they would crumble to pieces under the fire of their own 
batteries, and that a single hostile gun would blow them 
to splinters. Yet they had been accepted by the Navy 
Department. 

In times of peace the commercial interests had prac- 
ticed the grossest frauds in corruptly imposing upon the 
Government every form of shoddy supplies. These were 
the same interests so vociferously proclaiming their in- 
tense patriotism. The Civil War put their pretensions 
of patriotism to the test. If ever a war took place in 
which Government and people had to strain every nerve 
and resource to carry on a great conflict it was the 
Civil War. The result of that war was only to ex- 
change chattel slavery for the more extensive system of 
economic slavery. But the people of that time did not 
see this clearly. The Northern soldiers thought they 
were fighting for the noblest of all causes, and the mass 
of the people behind them were ready to make every 
sacrifice to win a momentous struggle, the direct issue 
of which was the overthrow or retention of black slavery. 

How did the capitalist class act toward the Govern- 
ment, or rather, let us say, toward the army and the 
navy so heroically pouring out their blood in battles, 
and hazarding life in camps, hospitals, stockades and 
military prisons? 

INDISCRIMINATE PLUNDERING DURING THE CIVIL WAR. 

The capitalists abundantly proved their devout patri- 
otism by making tremendous fortunes from the necessi- 
ties of that great crisis. They unloaded upon the Gov- 
ernment at ten times the cost of manufacture quantities 



128 HISTORY OF THE GREAT AMERICAN FORTUNES 

of munitions of war — munitions so frequently worthless 
that they often had to be thrown away after their pur- 
chase.^ They supplied shoddy uniforms and blankets 
and wretched shoes ; food of so deleterious a quality 
that it was a fertile cause of epidemics of fevers and of 
numberless deaths; they impressed, by force of corrup- 
tion, worn-out, disintegrating hulks into service as army 
and naval transports. Not a single possibility of profit 
was there in which the most glaring frauds were not 
committed. By a series of disingenuous measures the 
banks plundered the Treasury and people and caused 
their banknotes to be exempt from taxation. The mer- 
chants defrauded the Government out of millions of dol- 
lars by bribing Custom House officers to connive at un- 
dervaluations of imports.- The Custom House frauds 
were so notorious that, goaded on by public opinion, the 
House of Representatives was forced to appoint an in- 
vestigating committee. The chairman of this commit- 
tee, Representative C. H. Van Wyck, of New York, after 
summarizing the testimony in a speech in the House on 

1 In a speech on February 28, 1863, on the urgency of estab- 
lishing additional government armories and founderies, Repre- 
sentative J. W. Wallace pointed out in the House of Representa- 
tives : "The arms, ordnance and munitions of war bought by 
the Government from private contractors and foreign armories 
since the commencement of the rebellion have doubtless cost, 
over and above the positive expense of their manufacture, ten 
times as much as would establish and put into operation the 
armory and founderies recommended in the resolution of the 
committee. I understand that the Government, from the neces- 
sity of procuring a sufficient quantity of arms, has been paying, 
on the average, about twenty-two dollars per musket, when they 
could have been and could be manufactured in our national 
workshops for one-half that money." — Appendix to The Con- 
gressional Globe, Thirty-seventh Congress, Third Session, 1862- 
63. Part ii : 136. Fuller details are given in subsequent chapters. 

2 In his report for 1862 Salmon P. Chase, Secretary of the 
Treasury, wrote : " That invoices representing fraudulent valua- 
tion of merchandise are daily presented at the Custom Houses 
is well known. . . ." 



THE ONRUSH OF THE VANDERBILT FORTUNE I29 

February 23, 1863, passionately exclaimed: "The starv- 
ing, penniless man who steals a loaf of bread to save 
life you incarcerate in a dungeon ; but the army of mag- 
nificent highwaymen who steal by tens of thousands 
from the people, go unwhipped of justice and are suf- 
fered to enjoy the fruits of their crimes. It has been 
so with former administrations : unfortunately it is so 
with this." 3 

The Federal armies not only had to fight an open foe 
in a desperately contested war, but they were at the 
same time the helpless targets for the profit-mongers of 
their own section who insidiously slew great numbers 
of them — not, it is true, out of deliberate lust for mur- 
der, but because the craze for profits crushed every in- 
stinct of honor and humanity, and rendered them cal- 
lous to the appalling consequences. The battlefields 
were not more deadly than the supplies furnished by 
capitalist contractors.* These capitalists passed, and 

3 Appendix to The Congressional Globe, Thirty-seventh Con- 
gress, Third Session, 1862-63. Part ii:ii8. 

*This is one of many examples: Philip S. Justice, a gun 
manufacturer of Philadelphia, obtained a contract in 1861, to 
supply 4,000 rifles. He charged $20 apiece. The rifles were 
found to be so absolutely dangerous to the soldiers using them, 
that the Government declined to pay his demanded price for a 
part of them. Justice then brought suit. (See Court of Claims 
Reports, viii: 37-54.) In the court records, these statements are 
included : 

William H. Harris, Second Lieutenant of Ordnance, under 
orders visited Camp Hamilton, Va., and inspected the arms of 
the Fifty-Eighth Regiment, Pennsylvania Volunteers, stationed 
there. He reported : " This regiment is armed with rifle mus- 
kets, marked on the barrel, ' P. S. Justice, Philadelphia,' and 
vary in calibre from .65 to .70. I find many of them unservicea- 
ble and irreparable, from the fact that the principal parts are 
defective. Many of them are made up of parts of muskets to 
which the stamp of condemnation has been afiixed by an inspect- 
ing officer. None of the stocks have ever been approved by an 
officer, nor do they bear the initials of any inspector. They are 
made up of soft, unseasoned wood, and are defective in con- 
struction. . , . The sights are merely soldered on to the 



130 HISTORY OF THE GREAT AMERICAN FORTUXES 

were hailed, as eminent merchants, manufacturers and 
bankers ; they were mighty in the marts and in poHtics ; 
and their praise as " enterprising " and " self-made " and 
" patriotic " men was lavishly diffused. 

It was the period of periods when there was a kind 
of adoration of the capitalist taught in press, college 
and pulpit. Nothing is so effective, as was remarked of 
old. to divert attention from scoundrelism as to make 
a brilliant show of patriotism. In the very act of loot- 
ing Government and people and devastating the army 
and navy, the capitalists did the most ghastly business 
under the mask of the purest patriotism. Incredible 
as it may seem, this pretension was invoked and has 
been successfully maintained to this very day. You 

barrel, and come off with the gentlest handling. Imitative screw- 
heads are cut on their bases. The bayonets are made up of 
soft iron, and, of course, when once bent remain ' set,' " etc., 
etc. (p. 43). 

Col. (later General) Thomas D. Doubleday reported of his 
inspection : " The arms which were manufactured at Philadel- 
phia, Penn., are of the most worthless kind, and have every 
appearance of having been manufactured from old condemned 
muskets. Many of them burst ; hammers break off ; sights fall 
off when discharged ; the barrels are very light, not one-twentieth 
of an inch thick, and the stocks are made of green wood which 
have shrunk so as to leave the bands and trimmings loose. The 
bayonets are of such frail texture that they bend like lead, and 
many of them break off when going through the bayonet exer- 
cise. You could hardly conceive of such a worthless lot of arms, 
totally unfit for service, and dangerous to those using them " 
( P- 44.) • 

Assistant Inspector-General of Ordnance John Buford re- 
ported: "Many had burst ; many cones were blown out; many 
locks were defective ; many barrels were rough inside from 
imperfect boring; and many had different diameters of bore in 
the same barrel. . . . At target practice so many burst that 
the men became afraid to fire them" (p. 45). 

The Court of Claims, on strict technical grounds, decided in 
favor of Justice, but the Supreme Court of the United States 
reversed that decision and dismissed the case. The Supreme 
Court found true the Government's contention that " the arms 
were unserviceable and imsafe for troops to handle." 

Many other such specific examples are given in subsequent 
chapters of this work. 



THE ONRUSH OF THE VANDERRILT FORTUNE I3I 

can scarcely pick up a volume on the Civil War, or a bi- 
ography of the statesmen or rich men of the era, without 
wading in fulsome accounts of the untiring patriotism 
of the capitalists. 



PATRIOTISM AT A SAFE DISTANCE. 

But, while lustily indulging in patriotic palaver, the 
propertied classes took excellent care that their own 
bodies should not be imperilled. Inspired by enthusiasm 
or principle, a great array of the working class, in- 
cluding the farming and the professional elements, volun-. 
teered for military service. It was not long before they 
experienced the disappointment and demoralization of 
camp life. The letters written by many of these soldiers 
show that they did not falter at active campaigning. 
The prospect, however, of remaining in camp with in- 
sufficient rations, and (to use a modern expressive word) 
graft on every hand, completely disheartened and dis- 
gusted many of them. Many having influence with 
members of Congress, contrived to get discharges ; oth- 
ers lacking this influence deserted. To fill the constantly 
diminishing ranks caused by deaths, resignations and de- 
sertions, it became necessary to pass a conscription act. 

With few exceptions, the propertied classes of the 
North loved comfort and power too well to look tran- 
quilly upon any move to force them to enlist. Once 
more, the Government revealed that it was but a register 
of the interests of the ruling classes. The Draft Act 
was so amended that it allowed men of property to escape 
being conscripted into the army by permitting them to 
buy substitutes. The poor man who could not raise the 
necessary amount had to submit to the consequences of 
the draft. With a few of the many dollars wrung. 



132 HISTORY OF THE GREAT AMERICAN FORTUNES 

filched or plundered in some way or other, the capitalists 
could purchase immunity from military service. 

As one of the foremost capitalists of the time, Corne- 
lius Vanderbilt has been constantly exhibited as a great 
and shining patriot. Precisely in the same way as 
Crofifut makes no mention of Vanderbilt's share in the 
mail subsidy frauds, but, on the contrary, ascribes to 
Vanderbilt the most splendid patriotism in his mail car- 
rying operations, so do Croffut and other writers unctu- 
ously dilate upon the old magnate's patriotic services dur- 
ing the Civil War. Such is the sort of romancing that 
has long gone unquestioned, although the genuine facts 
have been within reach. These facts show that Vander- 
bilt was continuing during the Civil War the prodigious 
frauds he had long been carrying on. 

When Lincoln's administration decided in 1862 to send 
a large military and naval force to New Orleans under 
General Banks, one of the first considerations was to 
get in haste the required number of ships to be used as 
transports. To whom did the Government turn in this 
exigency? To the very merchant class which, since the 
foundation of the United States, had continuously de- 
frauded the public treasury. The owners of the ships 
had been eagerly awaiting a chance to sell or lease them 
to the Government at exorbitant prices. And to whom 
was the business of buying, equipping and supervising 
them intrusted? To none other than Cornelius Vander- 
bilt. 

Every public man had opportunities for knowing that 
Vanderbilt had pocketed millions of dollars in his fraudu- 
lent hold-up arrangement with various mail subsidy lines. 
He was known to be mercenary and unscrupulous. Yet 
he was selected by Secretary of War Stanton to act as 
the agent for the Government. At this time Vanderbilt 



THE ONRUSH OF THE VANDERBILT FORTUNE I33 

was posing as a glorious patriot. With much ostenta- 
tion he had loaned to the Government for naval purposes 
one of his ships — a ship that he could not put to use 
himself and which, in fact, had been built with stolen 
public funds. By this gift he had cheaply attained the 
reputation of being a fervent patriot. Subsequently, it 
may be added, Congress turned a trick on him by as- 
suming that he gave this ship to the Government, and, to 
his great astonishment, kept the ship and solemnly 
thanked him for the present. 



VANDERBILT S METHODS IN WAR. 

The outfitting of the Banks expedition was of such a 
rank character that it provoked a grave public scandal. 
If the matter had been simply one of swindling the 
United States Treasury out of millions of dollars, it 
might have been passed over by Congress. On all sides 
gigantic frauds were being committed by the capitalists. 
But in this particular case the protests of the thousands 
of soldiers on board the transports were too numerous 
and effective to be silenced or ignored. These soldiers 
were not regulars without influence or connections ; they 
were volunteers who everywhere had relatives and friends 
to demand an inc|uiry. Their complaints of overcrowd- 
ing and of insecure, broken-down ships poured in, and 
aroused the whole country. A great stir resulted. Con- 
gress appointed an investigating committee. 

The testimony was extremely illuminative. It showed 
that in buying the vessels Vanderbilt had employed one 
T. J. Southard to act as his handy man. Vanderbilt, it 
was testified by numerous ship owners, refused to charter 
any vessels unless the business were transacted through 
Southard, who demanded a share of the purchase money 



134 HISTORY OF THE GKEAT AMERICAN FORTUNES 

before he would consent to do business. Any ship owner 
who wanted to get rid of a superannuated steamer or 
sailing vessel found no difficulty if he acceded to South- 
ard's terms. 

The vessels accepted by Vanderbilt, and contracted to 
be paid for at high prices, were in shockingly bad con- 
dition. Vanderbilt was one of the few men in the secret 
of the destination of Banks' expedition ; he knew that the 
ships had to make an ocean trip. Yet he bought for 
$10,000 the Niagara, an old boat that had been built 
nearly a score of years before for trade on Lake Ontario. 
" In perfectly smooth weather," reported Senator Grimes, 
of Iowa, " with a calm sea, the planks were ripped out 
of her, and exhibited to the gaze of the indignant soldiers 
on board, showing that her timbers were rotten. The 
committee have in their committee room a large sample 
of one of the beams of this vessel to show that it has not 
the slightest capacity to hold a nail." ^ Senator Grimes 
continued : 

If Senators will refer to page 18 of this report, they will see 
that for the steamer Eastern Queen he (Vanderbilt) paid $goo 
a day for the first thirty days, and $800 for the residue of the 
days; while she (the Eastern Queen) had been chartered by 
the Government, for the Burnside expedition at $500 a day, mak- 
ing a difference of three or four hundred dollars a day. He 
paid for the Quinebang $250 a day, while she had been char- 
tered to the Government at one time for $130 a day. For 
the Shetucket he paid $250 a day, while she had formerly been 
in our employ for $150 a day. He paid for the Charles Osgood 
$250 a day, while we had chartered her for $150. He paid $250 
a day for the James S. Green, while we had once had a charter 
of her for $200. He paid $450 a day for the Salvor, while she 
had been chartered to the Government for $300. He paid $250 
a day for the Albany, while she had been chartered to the 

^ The Congressional Globe, Thirty-seventh Congress, Third 
Session, 1862-63, Pai't i '• 610. 



THE ONRUSH OF THE VANDERIULT FORTUNE 135 

Government for $150. He paid $250 a day for the Jersey Blue, 
while she had been chartered to the Government for $150.*^ 

These were a few of the many vessels chartered by 
Vanderbilt through Southard for the Government. For 
vessels bought outright, extravagant sums were paid. 
Ambrose Snow, a well-known shipping merchant, testi- 
fied that " when we got to Commodore Vanderbilt we 
were referred to Mr. Southard ; when we went to Mr. 
Southard, we were told that we should have to pay him 
a commission of five per cent." ^ 

Other shipping merchants corroborated this testimony. 
The methods and extent of these great frauds were clear. 
If the ship owners agreed to pay Southard five — and 
very often he exacted ten per cent.^ — Vanderbilt wotild 
agree to pay them enormous sums. In giving his testi- 
mony Vanderbilt sought to show that he was actuated 
by the most patriotic motives. But it was obvious that 
he was in collusion with Southard, and received the 
greater part of the plunder. 

HORRORS DONE FOR PROFIT. 

On some of the vessels chartered by Vanderbilt, ves- 
sels that under the immigration act would not have been 
allowed to carry inore than three hundred passengers, 
not less than nine hundred and fifty soldiers were packed. 
Most of the vessels were antiquated and inadequate ; not 
a few were badly decayed. With a little superficial 
patching up they were imposed upon the Government. 
Despite his knowing that only vessels adapted for ocean 

* The Congressional Globe, etc., 1862-63, Part i : 610. 

"^ Ibid. See also Senate Report No. 84, 1863, embracing the full 
testimony. 

s Senator Hale asserted that he had heard of the exacting of a 
brokerage equal to ten per cent, in Boston and elsewhere. 



136 HISTORY OF THE GREAT AMERICAN FORTUNES 

service were needed, Vanderbilt chartered craft that had 
hitherto been almost entirely used in navigating inland 
waters. Not a single precaution was taken by him or 
his associates to safeguard the lives of the soldiers. 

It was a rule among commercial men that at least two 
men capable of navigating should be aboard, especially 
at sea. Yet, with the lives of thousands of soldiers at 
stake, and with old and bad vessels in use at that, Van- 
derbilt, in more than one instance, as the testimony 
showed, neglected to hire more than one navigator, and 
failed to provide instruments and charts. In stating 
these facts Senator Grimes said : " When the question 
was asked of Commodore Vanderbilt and of other gen- 
tlemen in connection with the expedition, why this was, 
and why they did not take navigators and instruments 
and charts on board, the answer was that the insurance 
companies and owners of the vessel took that risk, as 
though " — Senator Grimes bitingly continued — " the 
Government had no risk in the lives of its valiant men 
whom it has enlisted under its banner and set out in an 
expedition of this kind." ^ If the expedition had en- 
countered a severe storm at Cape Hatteras, for instance, 
it is probable that most of the vessels would have been 
wrecked. Luckily the voyage was fair. 

FRAUDS REMAIN UNPUNISHED. 

Did the Government make any move to arrest, indict 
and imprison Vanderbilt and his tools? None. The far- 
cical ending of these revelations was the introduction in 
the United States Senate of a mere resolution censuring 
them as " guilty of negligence." 

^ The Congressional Globe, Thirty-seventh Congress, Third 
Session, 1862-63, Part i : 586. 



THE ONRUSH OF THE VANDERBILT FORTUNE 137 

Vanderbilt immediately got busy pulling wires ; and 
when the resolution came up for vote, a number of Sen- 
ators, led by Senator Hale, sprang up to withdraw Van- 
derbilt's name. Senator Grimes thereupon caustically de- 
nounced Vanderbilt. " The whole transaction," said he, 
" shows a chapter of fraud from beginning to end." He 
went on : " Alen making the most open professions of 
loyalty and of patriotism and of perfect disinterestedness, 
coming before the committee and swearing that they acted 
from such motives solely, were compelled to admit — at 
least one or two were — that in some instances they re- 
ceived as high as six and a quarter per cent. . . . 
and I believe that since then the committee are satisfied 
in their own mind that the per cent, was greater than 
was in testimony before them." Senator Grimes added 
that he did not believe that Vanderbilt's name should be 
stricken from the resolution. 

In vain, however, did Senator Grimes plead. Van- 
derbilt's name was expunged, and Southard was made 
the chief scapegoat. Although Vanderbilt had been ten- 
derly dealt with in the investigation, his criminality was 
conclusively established. The affair deeply shocked the 
nation. After all. it was only another of many tragic 
events demonstrating both the utter inefficiency of capital- 
ist management, and the consistent capitalist program of 
subordinating every consideration of human life to the 
mania for profits. Vanderbilt was only a type of his class : 
although he was found out he deserved condemnation 
no more than thousands of other capitalists, great and 
small, whose methods at bottom did not vary from his.^" 

*o One of the grossest and most prevalent forms of fraud was 
that of selling doctored-up horses to the Union army. Impor- 
tant cavalry movements were often delayed and jeoparded by 
this kind of fraud. In passing upon the suit of one of these 
horse contractors against the Government (Daniel Wormser vs. 
United States) for payment for horses supplied, in 1864, for 



138 HISTORY OF THE GREAT AMERICAN FORTUNES 

Yet such was the network of shams and falsities with 
which the supreme class of the time enmeshed society, 
that press, pulpit, university and the so-called statesmen 
insisted that the wealth of the rich man had its founda- 
tion in ability, and that this ability was indispensable in 
providing for the material wants of mankind. 

Whatever obscurity may cloud many of Vanderbilt's 
methods in the steamship business, his methods in pos- 
sessing himself of railroads are easily ascertained from 
official archives. 

Late in 1862, at about the time when he had added 
to the millions that he had virtually stolen in the mail 
subsidy frauds, the huge profits from his manipulation 
of the Banks expedition, he set about buying the stock 
of the New York and Harlem Railroad. 



THE STORY OF A FRANCHISE. 

This railroad, the first to enter New York City, had re- 
ceived from the New York Common Council in 1832 a 
franchise for the exclusive use of Fourth avenue, north 
of Twenty-third street — a franchise which, it was openly 
charged, was obtained by distributing bribes in the form 
of stock among the aldermen." 

The franchise was not construed by the city to be per- 
petual ; certain reservations were embodied giving the 

cavalry use, the Supreme Court of the United States confirmed 
the charge made by the Government horse inspectors that the 
plaintiff had been guilty of fraud, and dismissed the case. "The 
Government," said Justice Bradley in the court's decision, 
"clearly had the right to proscribe regulations for the inspection 
of horses, and there was great need for strictness in this regard, 
for frauds were constantly perpetrated. . . . It is well known 
that horses may be prepared and fixed up to appear bright and 
smart for a few hours." — Court of Claims Reports, vii : 257-262. 
11 " The History of Tammany Hall": 117. 



THE ONRUSH OF THE V'ANDERBILT FORTUNE Ijp 

city powers of revocation. But as we shall see, \'ander- 
bilt not only corrupted the Legislature in 1872 to pass 
an act saddling one-half of the expense of depressing the 
tracks upon the city, but caused the act to be so adroitly 
worded as to make the franchise perpetual. Along with 
the franchise to use Fourth avenue, the railroad company 
secured in 1832 a franchise, free of taxation, to run 
street cars for the convenience of its passengers from the 
railroad station (then in the outskirts of New York City ) 
south to Prince street. Subsequently this franchise was 
extended to Walker street, and in 185 1 to Park Row. 
These were the initial stages of the Fourth Avenue sur- 
face line, which has been extended, and has grown into 
a vested value of tens of millions of dollars. In 1858 
the New York and Harlem Railroad Company was forced 
by action of the Common Council, arising from the pro- 
tests of the rich residents of Murray Hill, to discontinue 
steam service below Forty-second street. It, therefore, 
now had a street car line running from that thoroughfare 
to the Astor House. 

This explanation of antecedent circumstances allows 
a clearer comprehension of what took place after Van- 
derbilt had begun buying the stock of the New York and 
Harlem Railroad. The stock was then selling at $9 a 
share. This railroad, as was the case with all other rail- 
roads, without exception, was run by the owners with 
only the most languid regard for the public interests and 
safety. Just as the corporation in the theory of the law 
was supposed to be a body to whom Government dele- 
gated powers to do certain things in the interests of the 
people, so was the railroad considered theoretically a pub- 
lic highway operated for the convenience of the people. 
It was upon this ostensible ground that railroad cor- 
porations secured charters, franchises, property and such 



140 HISTORY OF THE GREAT AMERICAN FORTUNES 

privileges as the right of condemnation of necessary land. 
The State of New York alone had contributed $8,000,000 
in public funds, and various counties, towns and munici- 
palities in New York State nearly $31,000,000 by invest- 
ment in stocks and bonds.^- The theory was indeed 
attractive, but it remained nothing more than a fiction. 

No sooner did the railroad owners get what they 
wanted, than they proceeded to exploit the very com- 
munity from which their possessions were obtained, and 
which they were supposed to serve. The various rail- 
roads were juggled with by succeeding groups of manipu- 
lators. Management was neglected, and no attention paid 
to proper equipment. Often the physical layout of the 
railroads — the road-beds, rails and cars — were delib- 
erately allowed to deteriorate in order that the manipu- 
lators might be able to lower the value and efficiency of 
the road, and thus depress the value of the stock. Thus, 
for instance, Vanderbilt aiming to get control of a rail- 
road at a low price, might very well have confederates 
among some of the directors or officials of that railroad 
who would resist or slyly thwart every attempt at im- 
provement, and so scheme that the profits would con- 
stantly go down. As the profits decreased, so did the 
price of the stock in the stock market. The changing 
combinations of railroad capitalists were too absorbed 
in the process of gambling in the stock market to have 
any direct concern for management. It was nothing to 
them that this neglect caused frequent and heartrending 
disasters ; they were not held criminally responsible for 
the loss of life. In fact, railroad wrecks often served 
their purpose in beating down the price of stocks. In- 

12 Report of the Special Committee on Railroads of the New 
York State Assembly, 1879, i : 7. 



THE ONRUSH OF THE VAXDERBILT FORTUNE I4I 

credible as this statement may seem, it is abundantly 
proved by the facts. 



Vanderbilt gets a railroad. 

After Vanderbilt, by divers machinations of too intri- 
cate character to be described here, had succeeded in 
knocking down the price of New York and Harlem Rail- 
road shares and had bought a controlling part, the price 
began bounding up. In the middle of April, 1863, it 
stood at $50 a share. A very decided increase it was, 
from $9 to $50; evidently enough, to occasion this rise, 
he had put through some transaction which had added 
immensely to the profits of the road. What was it? 

Sinister rumors preceded what the evening of April 21, 
1863, disclosed. He had bribed the New York City Com- 
mon Council to give to the New York and Harlem Rail-" 
road a perpetual franchise for a street railway on Broad- 
way from the Battery to Union Square. He had done 
what Solomon Kipp and others had done, in 1852, when 
they had spent $50,000 in bribing the aldermen to give 
them a franchise for surface lines on Sixth avenue and 
Eighth avenue ; ^^ what Elijah F. Purdy and others had 
done in the same year in bribing aldermen with a fund 
of $28,000 to give them the franchise for a surface line 
on Third avenue ; ^'* what George Law and other capital- 
ists had done, in 1852, in bribing the aldermen to give 
them the franchises for street car lines on Second avenue 
and Ninth avenue. Only three years before — in i860 — 
Vanderbilt had seen Jacob Sharp and others bribe the 

^3 See presentment of Grand Jury of February 26, 1853, and 
accompanying testimony, Documents of the (New York) Board 
of Aldermen, Doc. No. XXI, Part II, No. 55. 

i*Ibid., I333-I335- 



142 HISTORY OF THE GREAT AMERICAN FORTUNES 

New York Legislature (which in that same year had 
passed an act depriving the New York Common Council 
of the power of franchise granting) to give them fran- 
chises for street car lines on Seventh avenue, on Tenth 
avenue, on Forty-second street, on Avenue D and a fran- 
chise for the " Belt " line. It was generally believed that 
the passage of these five bills cost the projectors $250,000 
in money and stock distributed among the purchasable 
members of the Legislature.^^ 

Of all the New York City street railway franchises, 
either appropriated or unappropriated, the Broadway line 
was considered the most profitable. So valuable were 
its present and potential prospects estimated that in 1852 
Thomas E. Davies and his associates had ofifered, in re- 
turn for the franchise, to carry passengers for a three- 
cent fare and to pay the city a million-dollar bonus. 
Other eager capitalists had hastened to ofifer the city a 
continuous payment of $100,000 a year. Similar futile 
attempts had been made year after year to get the fran- 
chise. The rich residents of Broadway opposed a street 
car line, believing it would subject them to noise and dis- 
comfort; likewise the stage owners, intent upon keeping 
up their monopoly, fought against it. In 1863 the bare 
rights of the Broadway franchise were considered to be 
worth fully $10,000,000. Vanderbilt and George Law 
were now frantically competing for this franchise. 
While Vanderbilt was corrupting the Common Council, 
Law was corrupting the legislature.^*' Such competition 

^^ See "The History of Public Franchises in New York City": 
120-125. 

1^ The business rivalry between Vanderbilt and Law was in- 
tensified by the deepest personal enmity on Law's part. As one 
of the chief owners of the United States Mail Steamship Com- 
pany, Law was extremely bitter on the score of Van(!er])ilt's 
having been able to blackmail him and Roberts so heavily and 
successfully. 



THE ONRUSH OF THE VANDERBILT FORTUNE I43 

on the part of capitalists in corrupting public bodies was 
very frequent. 



THE ALDERMEN OUTWITTED BY VANDERBILT. 

But the aldermen were by no means unschooled in the 
current sharp practices of commercialism. A strong 
cabal of them hatched up a scheme by which they would 
take Vanderbilt's bribe money, and then ambush him for 
still greater spoils. They knew that even if they gave, 
him the franchise, its validity would not stand the test 
of the courts. The Legislature claimed the exclusive 
power of granting franchises ; astute lawyers assured 
them that this claim would be upheld. Their plan was 
to grant a franchise for the Broadway line to the New 
York and Harlem Railroad. This would at once send 
up the price of the stock. The Legislature, it was cer- 
tain, would give a franchise for the same surface line 
to Law. When the courts decided against the Common 
Council that body, in a spirit of showy deference, would 
promptly pass an ordinance repealing the franchise. In 
the meantime, the aldermen and their political and Wall 
Street confederates would contract to " sell short " large 
quantities of New York and Harlem stock. 

The method was simple. When that railroad stock 
was selling at $ioo a share upon the strength of getting 
the Broadway franchise, the aldermen would find many 
persons willing to contract for its delivery in a month 
at a price, say, of $90 a share. By either the repealing 
of the franchise ordinance or affected by adverse court 
decisions, the stock inevitably would sink to a much lower 
price. At this low price the aldermen and their confed- 
erates would buy the stock and then deliver it, compelling 
the contracting parties to pay the agreed price of $90 
a share. The difference between the stipulated price of 



144 HISTORY OF THE GREAT AMERICAN FORTUNES 

delivery and the value to which the stock had fallen — 
$30, $40 or $50 a share — would represent the winnings. 

Part of this plan worked out admirably. The Legis- 
lature passed an act giving Law the franchise. Vander- 
bilt countered by getting Tweed, the all-powerful polit- 
ical ruler of New York City and New York State, to 
order his tool, Governor Seymour, to veto the measure. 
As was anticipated by the aldermen, the courts pro- 
nounced that the Common Council had no power to grant 
franchises. \"anderbilt's franchise was, therefore, an- 
nulled. So far, there was no hitch in the plot to pluck 
Vanderbilt. 

But an unlooked for obstacle was encountered. Van- 
derbilt had somehow got wind of the affair, and with in- 
stant energy bought up secretly all of the New York and 
Harlem Railroad stock he could. He had masses of 
ready money to do it with ; the millions from the mail 
subsidy frauds and from his other lootings of the public 
treasury proved an unfailing source of supply. Pres- 
ently, he had enough of the stock to corner his antago- 
nists badly. He then put his own price upon it, eventu- 
ally pushing it up to $170 a share. To get the stock 
that they contracted to deliver, the combination of poli- 
ticians and Wall Street bankers and brokers had to buy 
it from him at his own price ; there was no outstanding 
stock elsewhere. The old man was pitiless ; he mulcted 
them $179 a share. In his version, Croffut says of Van- 
derbilt : " He and his partners in the bull movement took 
a million dollars from the Common Council that week 
and other millions from others." ^^ 

The New York and Harlem Railroad was now his, 
as absolutely almost as the very clothes he wore. Little 
it mattered that he did not hold all of the stock ; he owned 

" " The Vanderbilts," etc : 75. 



THE ONRUSH OF THE VAXDERliILT FORTUNE I45 

a preponderance enough to rule the railroad as despotic- 
ally as he pleased. Not a foot it had he surveyed or 
constructed; this task had been done by the mental and 
manual labor of thousands of wage workers not one of 
whom now owned the vestige of an interest in it. For 
their toil these wage workers had nothing to show but 
poverty. But Vanderbilt had swept in a railroad sys- 
tem by merely using in cunning and unscrupulous ways 
a few of the millions he had defrauded from the national 
treasury. 



HE ANNEXES A SECOND RAILROAD. 

Having found it so easy to get one railroad, he promptly 
went ahead to annex other railroads. By 1864 he loomed 
up as the owner of a controlling mass of stock in the New 
York and Hudson River Railroad. This line paralleled 
the Hudson River, and had a terminal in the downtown 
section of New York City. In a way it was a competitor 
of the New York and Harlem Railroad. 

The old magnate now conceived a brilliant idea. Why 
not consolidate the two roads? True, to bring about this 
consolidation an authorizing act of the New York Legis- 
lature was necessary. But there ^.'as little doubt of the 
Legislature balking. Vanderbilt well knew the means to 
insure its passage. In those years, when the people were 
taught to look upon competition as indispensable, there 
was deep popular opposition to the consolidating of com- 
peting interests. This, it was feared, would inflict mo- 
nopoly. 

The cost of buying legislators to pass an act so provoc- 
ative of popular indignation would be considerable, but, 
at the same time, it would not be more than a trifle com- 
pared with the immense profits he would gain. The 



146 HISTORY OF THE GREAT AMERICAN FORTUNES 

consolidation would allow him to increase, or, as the 
phrase went, water, the stock of the combined roads. 
Although substantially owner of the two railroads, he 
was legally two separate entities — or, rather, the cor- 
porations were. As owner of one line he could bargain 
with himself as owner of the other, and could determine 
what the exchange purchase price should be. So, by a 
juggle, he could issue enormous quantities of bonds and 
stocks to himself. These many millions of bonds and 
stocks would not cost him personally a cent. The sole 
expense — the bribe funds and the cost of engraving — 
he would charge against his corporations. Immediately, 
these stocks and bonds would be vested with a high value, 
inasmuch as they would represent mortgages upon the 
productivity of tens of millions of people of that gen- 
eration, and of still greater numbers of future genera- 
tions. By putting up traffic rates and lowering wages, 
dividends <could be paid upon the entire outpouring of 
stock, thus beyond a doubt insuring its permanent 
value.^'' 



CUNNING AGAINST CUNNING. 

A majority of the New York Legislature was bought. 
It looked as if the consolidation act would go through 
without difficulty. Surreptitiously, however, certain lead- 
ing men in the Legislature plotted with the Wall Street 
opponents of Vanderbilt to repeat the trick attempted by 
the New York aldermen in 1863. The bill would be 

^^ Even Croffut, \'andcrbilt's foremost eulogist, cynically grows 
merry over Vandcrhilt's methods which he thus summarizes: 
" (i) Buy your railroad; (2) stop the stealing that went on un- 
der the other man; (3) improve the road in every practicable 
way within a reasonable expenditure; (4) consolidate it with 
any other road that can be run with it economically; (5) water 
its stock; (6) make it pay a large dividend." 



THE ONRUSH OF THE VANDERBH.T FORTUNE I47 

introduced and reported favorably ; every open indication 
would be manifested of keeping faith with Vanderbilt. 
Upon the certainty of its passage the market value of the 
stock would rise. With their prearranged plan of de- 
feating the bill at the last moment upon some plausible 
pretext, the clique in the meantime would be busy selling 
short. 

Information of this treachery came to Vanderbilt in 
time. He retaliated as he had upon the New York alder- 
men; put the price of New York and Harlem stock up 
to $285 a share and held it there until after he was set- 
tled with. With his chief partner, John Tobin, he was 
credited with pocketing many millions of dollars. To 
make their corner certain, the Vanderbilt pool had 
bought 27,000 more shares than the entire existing stock 
of the road. " We busted the whole Legislature," was 
Vanderbilt's jubilant comment," and scores of the honor- 
able members had to go home without paying their board 
bills." 

The numerous millions taken in by Vanderbilt in these 
transactions came from a host of other men who would 
have plundered him as quickly as he plundered them. 
They came from members of the Legislature who had 
grown rich on bribes for granting a continuous succession 
of special privileges, or to put it in a more comprehen- 
sible form, licenses to individuals and corporations to 
prey in a thousand and one forms upon the people. They 
came from bankers, railroad, land and factory owners, 
all of whom had assiduously bribed Congress, legisla- 
tures, common councils and administrative officials to 
give them special laws and rights by which they could 
all the more easily and securely grasp the produce of the 
many, and hold it intact without even a semblance of 
taxation. 



148 HISTORY OF THE GREAT AMERICAN FORTUNES 

The very nature of that system of gambHng callecl 
stock-market or cotton or produce exchange speculation 
showed at once the sharply-defined disparities and dis- 
criminations in law. 

Common gambling, so-called, was a crime. The gam- 
bling of the exchanges was legitimate and legalized, and 
the men who thus gambled with the resources of the 
nation were esteemed as highly respectable and respon- 
sible leaders of the community. For a penniless man to 
sell anything he did not own, or which was not in exist- 
ence, was held a heinous crime and was severely punished 
by a long prison term. But the members of the all-pow- 
erful propertied class could contract to deliver stocks 
which they did not own or which were non-existent, or 
they could gamble in produce often not yet out of the 
ground, and the law saw no criminal act in their per- 
formances. 

Far from being under the inhibition of law, their meth- 
ods were duly legalized. The explanation was not hard 
to find. These same propertied classes had made the 
code of laws as it stood ; and if any doubter denies that 
laws at all times have exactly corresponded with the in- 
terests and aims of the ruling class, all that is necessary 
is to compare the laws of the different periods with the 
profitable methods of that . class, and he will find that 
these methods, however despicable, vile and cruel, were 
not only indulgently omitted from the recognized cate- 
gory of crimes but were elevated by prevalent teaching 
to be commercial virtues and ability of a high order. 

With two railroads in his possession Vanderbilt cast 
about to drag in a third. This was the New York Cen- 
tral Railroad, one of the richest in the country. 

Vanderbilt's eulogists, in depicting him ?s a masterful 



THE ONRUSH OF THE VANDERBILT FORTUNE 149 

constructionist, assert that it was he who first saw the 
waste and futility of competition, and that he organized 
the New York Central from the disjointed, disconnected 
lines of a number of previously separate little railroads. 
This is a gross error. 

The consolidation was formed in 1853 at the time when 
Vanderbilt was plundering from the United States treas- 
ury the millions with which he began to buy in railroads 
nine years later. The New York Central arose from the 
union of ten little railroads, some running in the territory 
between Albany and Buffalo, and others merely pro- 
jected, but which had nevertheless been capitalized as 
though they were actually in operation. 

The cost of construction of these eleven roads was 
about $10,000,000, but they were capitalized at $23,000,- 
000. Under the consolidating act of 1853 the capitaliza- 
tion was run up to about $35,000,000. This fictitious 
capital was partly based on roads which were never built, 
and existing on paper only. Then followed a series of 
legislative acts giving the company a further list of valu- 
able franchises and allowing it to charge extortionate 
rates, inflate its stock, and virtually escape taxation. 
How these laws were procured may be judged from the 
testimony of the treasurer of the New York Central rail- 
road befoi-e a committee of the New York State Constitu- 
tional Convention. This ofiicial stated that from about 
1853 to 1867 the New York Central had spent hundreds 
of thousands of dollars for '' legislative purposes," — in 
other words, buying laws at Albany. 



ACQUISITION r.Y WRECKING. 

Vanderbilt considered it unnecessary to buy New York 
Central stock to get control. He had a much better and 



150 HISTORY OF THE GREAT AMERICAN FORTUNES 

subtler plan. The Hudson River Railroad was at that 
time the only through road running from New York to 
Albany. To get its passengers and freight to New York 
City the New York Central had to make a transfer at 
Albany. Vanderbilt now deliberately began to wreck the 
New York Central. He sent out an order in 1865 to all 
Hudson River Railroad employees to refuse to connect 
with the New York Central and to take no more freight. 
This move could not do otherwise than seriously cripple 
the facilities and lower the profits of the New York 
Central. Consequently, the value of its stock was bound 
to go precipitately down. 

The people of the United States were treated to an 
ironic sight. Here was a man who only eight years be- 
fore had been shown up in Congress as an arch plunderer ; 
a man who had bought his railroads largely with his 
looted millions ; a man who, if the laws had been drafted 
and executed justly, would have been condoning his 
frauds in prison ; — this man was contemptuously and 
openly defying the very people whose interests the rail- 
roads were supposed to serve. In this conflict between 
warring sets of capitalists, as in all similar conflicts, 
public convenience was made sport of. Hudson River 
trains going north no longer crossed the Hudson River to 
enter Albany ; they stopped half a mile east of the bridge 
leading into that city. This made it impossible to trans- 
fer freight. There in the country the trains were 
arbitrarily stopped for the night ; locomotive fires were 
banked and the passengers were left to shift into Albany 
the best they could, whether they walked or contrived to 
hire vehicles. All were turned out of the train — men, 
women and children — no exceptions were made for sex 
or infirmity. 

The Legislature went through a pretense of investigat- 



THE ONRUSH OF THE VANDERBILT FORTUNE I5I 

ing what public opinion regarded as a particularly atro- 
cious outrage. Vanderbilt covered this committee with 
undisguised scorn ; it provoked his wrath to be quizzed by 
a committee of a body many of whose members had ac- 
cepted his bribes. When he was asked why he had so 
high-handedly refused to run his trains across the river, 
the old fox smiled grimly, and to their utter surprise, 
showed them an old law (which had hitherto remained a 
dead letter) prohibiting the New York Hudson Railroad 
from running trains over the Hudson River. This law 
had been enacted in response to the demand of the New 
York Central, which wanted no competitor west of Al- 
bany. When the committee recovered its breath, its 
chairman timidly inquired of Vanderbilt why he did not 
run trains to the river. 

" I was not there, gentlemen," said Vanderbilt. 

" But what did you do when you heard of it ? " 

" I did not do anything." 

•' Why not? Where were you? " 

" I was at home, gentlemen," replied Vanderbilt with 
!«,Gr6iie impudence, " playing a rubber of whist, and I 
never allow anything to interfere with me when I am 
playing that game. It requires, as you know, undivided 
attention." 

As "Vanderbilt had foreseen, the stock of the New 
York Central went down abruptly ; at its lowest point he 
bought in large quantities. His opponents, Edward 
Cunard, John Jacob Astor, John Steward and other 
owners of the New York Central thus saw the director- 
ship pass from their hands. The dispossession they had 
worked to the Pruyns, the Martins, the Pages and others 
was now being visited upon them. They found in this 
old man of seventy-three too cunning and crafty s mar 
to defeat. Rather than lose all, they preferred tc choose 



152 HISTORY OF THE GREAT AMERICAN FORTUNES 

him as their captain; his was the bort of abiHty which 
they could not overcome and to which they must attach 
themselves. On November 12, 1867, they surrendered 
wholly and unreservedly. Vanderbilt now installed his 
own subservient board of directors, and proceeded to 
put through a fresh program of plunder beside which all 
his previous schemes were comparatively insignificant. 



CHAPTER V 
THE VANDERBILT FORTUNE INCREASES MANIFOLD 

Vanderbilt's ambition was to become the richest man 
in America. With three railroads in his possession he 
now aggressively set out to grasp a fourth — the Erie 
Railroad. This was another of the railroads built largely 
with public money. The State of New York had con- 
tributed $3,000,000, and other valuable donations had 
been given. 

At the very inception of the railroad corruption began.^ 
The tradesmen, landowners and bankers who composed 
the company bribed the Legislature to relinquish the 
State's claim, and then looted the railroad with such con- 
summate thoroughness that in order to avert its bank- 
ruptcy they were obliged to borrow funds from Daniel 
Drew. This man was an imposing financial personage in 
his day. Illiterate, unscrupulous, picturesque in his very 
iniquities, he had once been a drover, and had gone into 
the steamboat business with Vanderbilt. He had scraped 
in wealth partly from that line of traffic, and in part 
from a succession of buccaneering operations. His loan 
remaining unpaid, Drew indemnified himself by taking 
over, in 1857, by foreclosure, the control of the Erie Rail- 
road. 

For the next nine years Drew manipulated the stock 
;!t will, sending the price uj) or down as suited his gamb- 
ling schemes. The railroad degenerated until travel upon 

^ Report of the New York and Erie Railroad Company, New 
York State Assembly Document No. 50, 1842. 



154 HISTORY OF THE GREAT AMERICAN FORTUNES 

it became a menace ; one disaster followed another. 
Drew imperturbably continvied his manipulation of the 
stock market, careless of the condition of the road. At 
no time was he put to the inconvenience of even being 
questioned by the public authorities. On the contrary, 
the more millions he made the greater grew his prestige 
and power, the higher his standing in the community. 
Ruling society, influenced solely by money standards, 
saluted him as a successful man who had his millions, 
and made no fastidious inquiries as to how he got them. 
He was a potent man ; his villainies passed as great 
astuteness, his devious cunning as marvelous sagacity. 

GOULD OVERREACHES VANDERBILT. 

Vanderbilt resolved to wrest the Erie Railroad out 
of Drew's hands. By secretly buying its stock he was 
in a position in 1866 to carry out his designs. He threw 
Drew and his directors out, but subsequently realizing 
Drew's usefulness, reinstated him upon condition that 
he be fully pliable to the Vanderbilt interests. There- 
upon Drew brought in as fellow directors two young men, 
then obscure but of whom the world was to hear much — 
James Fisk, Jr., and Jay Gould. The narrative of how 
these three men formed a coalition against Vanderbilt ; 
how they betrayed and then outgeneraled him at every 
turn ; proved themselves of a superior cunning ; sold him 
large quantities of spurious stock ; excelled him in corrup- 
tion; defrauded more than $50,000,000, and succeeded 
— Gould, at any rate — in keeping most of the plunder — 
this will be found in detail where it more properly be- 
longs — in the chapter of the Gould fortune describing 
that part of Gould's career connected with the Erie Rail- 
road. 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 155 

Baffled in his frantic contest to keep hold of. that rail- 
road — a hold that he would have turned into many 
millions of dollars of immediate loot by fraudulently 
watering the stock, and then bribing the Legislature to 
legaHze it as Gould did — Vanderbilt at once set in mo- 
tion a fraudulent plan of his own by wdiich he extorted 
about $44,000,000 in plunder, the greater portion of which 
went to swell his fortune. 

The year 1868 proved a particularly busy one for 
Vanderbilt. He was engaged in a desperately devious 
struggle with Gould. In vain did his agents and lobbyists 
pour out stacks of money to buy legislative votes enough 
to defeat the bill legalizing Gould's fraudulent issue of 
stock. Members of the Legislature impassively took 
money from both parties. Gould personally appeared at 
Albany with a satchel containing $500,000 in greenbacks 
which were rapidly distributed. One Senator, as was dis- 
closed by an investigating committee, accepted $75,000 
from Vanderbilt and then $100,000 from Gould, kept both 
sums, — and voted with the dominant Gould forces. It 
was only by means of the numerous civil and criminal 
writs issued by Vanderbilt judges that the old man con- 
trived to force Gould and his accomplices into paying for 
the stock fraudulently unloaded upon him. The best terms 
that he could get was an unsatisfactory settlement which 
still left him to bear a loss of about two millions. The 
veteran trickster had never before been overreached ; all 
his life, except on one occasion,^ he had been the success- 
ful sharper ; but he was no match for the more agile and 
equally sly, corrupt and resourceful Gould. It took 
some time for Vanderbilt to realize this ; and it was 
only after several costly experiences with Gould, that 

- In 1837 when he had advanced funds to a contractor car- 
rying the mails between Washington and Richmond, and had 
taken security which proved to be worthless. 



156 HISTORY OF THE GREAT AMERICAN FORTUNES 

he could bring himself to admit that he could not hope to 
outdo Gould. 



A NEW CONSOLIDATION PLANNED. 

However, Vanderbilt quickly and multitudinously re- 
couped himself for the losses encountered in his Erie as- 
sault. Why not. he argued, combine the New York 
Central and the Hudson River companies into one corpo- 
ration, and on the strength of it issue a vast amount of 
additional stock? 

The time was ripe for a new mortgage on the labor of 
that generation and of the generations to follow. Popu- 
lation was wondrously increasing, and with it trade. 
For years the New York Central had been paying a 
dividend of eight per cent. But this was only part of 
the profits. A law had been passed in 1850 authorizing 
the Legislature to step in whenever the dividends rose 
above ten per cent, on the railroad's actual cost, and to 
declare what should be done with the surplus. This law 
was nothing more or less than a blind to conciliate the 
people of the State, and let them believe that they would 
get some returns for the large outlay of public funds 
advanced to the New York Central. No returns ever 
came. Vanderbilt, and the different groups before him, 
in control of the road had easily evaded it, just as in every 
direction the whole capitalist class pushed aside law when- 
ever law conflicted with its aims and interests. It was 
the propertyless only for whom the execution of law was 
intended. Profits from the New York Central were far 
more than eight per cent. ; by perjury and frauds the di- 
rectors retained sums that should have gone to the State. 
Every year they ])rcpare(l a false account of their 
revenues and expenditures which they submitted to the 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 157 

State officials ; they pretended that they annually spent 
millions of dollars in construction work on the road — 
work, in reality, never done.^ The money was pocketed 
by them under this device — a device that has since be- 
come a favorite of many railroad and public utility corpo- 
rations. 

Unenforced as it was, this law was nevertheless an 
obstacle in the way of Vanderbilt's plans. Likewise was 
another, a statute prohibiting both the New York Central 
Railroad and the Hudson River Railroad from increasing 
their stock. To understand why this latter law was 
passed it is necessary to remember that the middle class 
— the factory owners, jobbers, retail tradesmen and em- 
ploying farmers — were everywhere seeking by the power 
of law to prevent the too great development of corpora- 
tions. These, they apprehended, and with reason, would 
ultimately engulf them and their fortunes and importance. 
They knew that each new output of watered stock meant 
either that the prevailing high freight rates would remain 
unchanged or would be increased ; and while all the 
charges had to be borne finally by the working class, the 
middle class sought to have an unrestricted market on its 
own terms. 

ALARM OF THE TRADING CLASSES, 

It was the opposition of the various groups of this class 
that Vanderbilt expected and provided against. He was 
fully aware that the moment he revealed his plan of con- 
solidation boards of trade everywhere would rise in their 
wrath, denounce him, call together mass meetings, insist 
upon railroad competition and send pretentious, fire- 
breathing delegates to the State Capitol. Let them thun- 

3 See Report of New York Special Assembly Committee on 
Railroads, 1879, iv : 3,894. 



158 HISTORY OF THE GREAT AMERICAN FORTUNES 

der, said Vanderbilt placidly. While they were explod- 
ing in eruptions of talk he would concentrate at Albany 
a mass of silent arguments in the form of money and 
get the necessary legislative votes, which was all he cared 
about. I 

Then ensued one of the many comedies familiar to 
observers of legislative proceedings. It was amusing to 
the sophositicated to see delegations indignantly betake 
themselves to Albany, submit voluminous briefs which 
legislators never read, and with immense gravity argue 
away for hours to committees which had already been 
bought. The era was that of the Tweed regime, when 
the public funds of New York City and State were being 
looted on a huge scale by the politicians in power, and 
far more so by the less vulgar but more crafty business 
classes who spurred Tweed and his confederates on to 
fresh schemes of spoliation. 

Laws were sold at Albany to the highest bidder. " It 
was impossible," Tweed testified after his downfall, " to 
do anything there without paying for it ; money had to be 
raised for the passing of bills." ^ Decades before this, 
legislators had been so thoroughly taught by the land- 
owners and bankers how to exchange their votes for cash 
that now, not only at Albany and Washington, but every- 
where in the United States, both legislative and adminis- 
trative officials haggled in real astute business style for the 
highest price that they could get. 

One noted lobbyist stated in 1868 that for a favorable 
report on a certain bill before the New York Senate, 
$5,000 apiece was paid to four members of the committee 
having it in charge. On the passage of the bill, a further 

* Statement of William M. Tweed before a Speri?l Investi- 
gating Committee of the New York Board of Aldermen. Docu- 
ments of the Board of Aldermen, 1877, Part II. Document No. 
8:15-16. 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 1 59 

$5,000 apiece with contingent expenses was added. In 
another instance, where but a sohtary vote was needed 
to put a bill through, three Republicans put their figures 
up to $25,000 each ; one of them was bought. About 
thirty Republicans and Democrats in the New York 
Legislature organized themselves into a clique (long 
styled the " Black* Horse Cavalry "), under the leadership 
of an energetic lobbyist, with a mutual pledge to vote as 
directed.^ " Any corporation, however extensive and 
comprehensive the privileges it asked" — to quote from 
" The History of Tammany Hall " — " and however much 
oppression it sought to impose upon the people in the line 
of unjust grants, extortionate rates or monopoly, could 
convince the Legislature of the righteousness of its re- 
quest upon ' producing ' the proper sum." 

A LEGALIZED THEFT OF $44,000,000. 

One act after another was slipped through the 
Legislature by Vanderbilt in 1868 and 1869. On May 
20, 1869, Vanderbilt secured, by one bill alone, the right 
to consolidate railroads, a free grant of franchises, and 
other rights worth hundreds of millions of dollars, and the 
right to water stock and bonds to an enormous extent. 

The printing presses were worked overtime in issuing 
more than $44,000,000 of watered stock. The capital 
stock of the two roads was thus doubled. Pretending 
that the railroads embraced in the consolidation had a 
great surplus on hand, Vanderbilt, instead of distributing 
this alleged surplus, apportioned the watered stock among 
the stockholders as a premium. The story of the surplus 
was, of course, only a pretense. Each holder of a $100 
share received a certificate for $180 — that is to say, $80 

^ Documents of the Board of Alcfermen, 1877, Part II, No. 
8:212-213. 



l6o HISTORY OF THE GREAT AMERICAN FORTUNES 

in plunder for every $ioo share that he held.^ " Thus," 
reported the " Hepburn Committee " (the popuhir name 
for the New York State Assembly investigating com- 
mittee of 1879), "as calculated by this expert, $53,507,- 
060 were wrongfully added to the capital stock of these 
roads." Of this sum $44,000,000 was issued in 1869 ; the 
remainder in previous years. " The only answer made 
by the roads was that the legislature authorized it," the 
committee went on. " It is proper to remark that the 
people are quite as much indebted to the venality of the 
men elected to represent them in the Legislature as to the 
rapacity of the railroad managers for this state of affairs."" 

Despite the fact that the report of the committee 
recorded that the transaction was piracy, the euphemistic 
wording of the committee's statement was characteristic 
of the reverence shown to the rich and influential, and 
the sparing of their feelings by the avoidance of harsh 
language. " Wrongfully added " would have been 
quickly changed into such inconsiderate terms as theft 
and robbery had the case been even a trivial one of some 
ordinary citizen lacking wealth and power. The facts 
would have immediately been presented to the proper 
officials for criminal prosecution. 

But not a suggestion was forthcoming of haling 
Vanderbilt to the criminal bar; had it been made, noth- 
ing except a farce would have resulted, for the reason 
that the criminal machinery, while extraordinarily active 
in hurrying petty lawbreakers to prison, was a part of 
the political mechanism financed by the big criminals and 
subservient to them. 

" The $44,000,000," says Simon Sterne, a noted lawyer 
who, as counsel for various commercial organizations, un~ 

« Report of Assembly Committee on Railroads, testimony of 
Alexander Robertson, an expert accountant, 1879, i : 994-999. 
'Ibid., i:2i. 



THE VANDERBILT FORTUNE INCREASES MANIFOLD l6l 

ravelled the whole matter before the "Hepburn Com- 
mittee," in 1879, " represented no more labor than it took 
to print the script." It was notorious, he adds, " that 
the cost of the consolidated railroads was less than 
$44,000,000," * In increasing the stock to $86,000,000 
Vanderbilt and his confederates therefore stole the differ- 
ence between the cost and the maximum of the stock issue. 
So great were the profits, both open and concealed, of 
the consolidated railroads that notwithstanding, as 
Charles Francis Adams computed, *' $50,000 of absolute 
water had been poured out for each mile of road between 
New York and Buffalo," the market price of the stock at 
once shot up in 1869 from $75 a share to $120 and then 
to $200. 

And what was Vanderbilt's share of the $44,000,000? 
His inveterate panegyrist, Croffut, in smoothly defending 
the transaction gives this illuminating depiction of the 
joyous event: "One night, at midnight, he (Cornelius 
Vanderbilt) carried away from the office of Horace F. 
Clark, his son-in-law, $6,000,000 in greenbacks as a part 
of his share of the profits, and he had $20,000,000 more 
in new stock." ^ 

By this coup Vanderbilt about doubled his previous 
wealth. Scarcely had the mercantile interests recovered 
from their utter bewilderment at being routed than 
Vanderbilt, flushed with triumph, swept more railroads 
into his inventory of possessions. 

8 "Life of Simon Sterne," by John Foord, 1903: 179-181. 

9 " The Vanderbilts '' : 103. Croffut in a footnote tells this 
anecdote : 

" When the Commodore's portrait first appeared on the bonds 
of the Central, a holder of some called one day and said : ' Com- 
modore, glad to see your face on them bonds. It's worth ten 
per cent. It gives everybody confidence.' The Commodore 
smiled grimly, the only recognition he ever made of a compli- 
ment. ''Cause,' explained the visitor, 'when we see that fine, 
uoble brow, it reminds us that you'll never let anybody else 
steal anything.' " 



l62 HISTORY OF THE GREAT AMERICAN FORTUNES 

His process of acquisition was now working with al- 
most automatic ease. 

First, as we have narrated, he extorted millions of 
dollars in blackmail. With these millions he bought, or 
rather manipulated into his control, one railroad after 
another, amid an onslaught of bribery and glaring viola- 
tions of the laws. Each new million that he seized was 
an additional resource by which he could bribe and 
manipulate ; progressively his power advanced ; and it be- 
came ridiculously easier to get possession of more and 
more property. His very name became a terror to those 
of lesser capital, and the mere threat of pitting his enor- 
mous v/ealth against competitors whom he sought to de- 
stroy was generally a sufficient warrant for their 
surrender. After his consummation of the $44,000,000 
theft in 1869 there was little withstanding of him. By 
the most favorable account — that of Croffut — his own 
allotment of the plunder amounted to $26,000,000. This 
sum. immense, and in fact of almost inconceivable power 
in that day, was enough of itself, independent of Vander- 
bilt's other wealth, to force through almost any plan in- 
volving a seizing of competing property. 

HE SO0O?S UP MORE RAILROADS. 

Vanderbilt did not wait long. The ink on the $44,000,- 
000 had barely dried, before he used part of the proceeds 
to buy a controlling interest in the Lake Shore Railroad, 
a competing line. Then rapidly, by the same methods, he 
took hold of the Canada Southern and Michigan Central, 

The commercial interests looked on dumfounded. 
Under their very eyes a pvocess of centralization was 
going on, of which they but dimly, vtupidly, grasped the 
purport. That competition Vrc*? they had so long 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 163 

shouted for as the only sensible, true and moral system, 
and which they had sought to buttress by enacting law 
after law, was being irreverently ground to pieces. 

Out of their own ranks were rising men, trained in 
their own methods, who were amplifying and intensifying 
those methods to shatter the class from which they had 
sprung. The dififerent grades of the propertied class, 
from the merchant with his fortune of $250,000 to the 
retail tradesman, felt very comfortable in being able to 
look down with a conscious superiority upon the working 
class from whom their money was wrung. Scofifing at 
equality, they delighted in setting themselves up as a class 
infinitely above the toilers of the shop and factory ; let 
him who disputes this consult the phrases that went the 
rounds — phrases, some of which are still current — as, 
for instance, the preaching that the moderately well-to-do 
class is the solid, substantial element of any country. 

Now when this mercantile class saw itself being far 
overtopped and outclassed in the only measurement to 
which it attached any value — that of property — by 
men with vast riches and power, it began to feel its rel- 
egation. Although its ideal was money, and although it 
set up the acquisition of wealth as the all-stimulating in- 
centive and goal of human effort, it viewed sullenly and 
enviously the development of an established magnate 
class which could look haughtily and dictatorially down 
upon it even as it constantly looked down upon the work- 
ing class. The factory owner and the shopkeeper had 
for decades commanded the passage of summary legisla- 
tion by which they were enabled to fleece the worker and 
render him incapable of resistance. To keep the worker 
in subjection and in their power they considered a justi- 
fiable proceeding. But when they saw the railroad 
magnates applying those same methods to themselves, by 



164 HISTORY OF THE GREAT AMERICAN FORTUNES 

first wiping out competition, and then by enforcing edicts 
regardless of their interests, they burst out in furious 
rage. 

VANDERBILT AND HIS CRITICS. 

They denounced \^anderbilt as a bandit whose methods 
were a menace to the community. To the onlooker this 
campaign of virulent assault was extremely suggestive. 
If there was any one line of business in which fraud was 
not rampant, the many official reports and court pro- 
ceedings of the time do not show it. 

This widespread fraud was not occasional ; it was per- 
sistent. In one of the earlier chapters, the prevalence, 
more than a century ago, of the practise of fraudulent 
substitution of drugs and foods was adverted to. In 
the middle of the nineteenth century it was far more 
extensive. In submitting, on June 2, 1848, a mass of 
expert evidence on the adulteration of drugs, to the 
House of Representatives, the House Select Committee 
on the Importation of Drugs pointed out : 

For a long series of years this base traffic has been constantly 
increasing, until it has become frightfully enormous. It would 
be presumed, from the immense quantities, and the great variety 
of inferior drugs that pass our custom houses, and particularly 
the custom-house at New York, in the course of a single year, 
that this country had become the great mart and receptacle of 
all of the refuse merchandise of that description, not only from 
the European warehouses, but from the whole Eastern market.^^ 

In presenting a formidable array of expert testimony, 

8a Reports of Committees, First Session, Thirtieth Congress, 
1847-48, Vol. iii, Report No. 664 : 3 — The committee reported 
that opium was adulterated with licorice paste and bitter vege- 
table extract; calomel, with chalk and sulphate of barytes ; qui- 
nine, with silicine, chalk and sulphate of barytes; castor, with 
dried blood, gum and ammonia; gum assafoetida with inferior 
gums, chalk and clay, etc., etc. (pp. 10 and 11). 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 165 

and in giving a list of cases of persons having died from 
eating foods and drugs adulterated with poisonous sub- 
stances, the House Committee on Epidemic Diseases, of 
the Forty-Sixth Congress, reported on February 4 1881 : 

That they have investigated, as far as they could ... the 
injurious and poisonous compounds used in the preparation of 
food substances, and in the manufacture of wearing apparel 
and other articles, and find from the evidence submitted to 
them that the adulteration of articles used in the every day 
diet of vast numbers of people has grown, and is now prac- 
tised, to such an extent as to seriously endanger the public 
health, and to call loudly for some sort of legislative correction. 
Drugs, liquors, articles of clothing, wall paper and many other 
things are subjected to the same dangerous process.^" 

The House Committee on Commerce, reporting the 
next year, on March 4, stated that " the evidence re- 
garding the adulterations of food indicates that they are 
largely of the nature of frauds upon the consumer 
. • . and injure both the health and morals of the 
people." The committee declared that the practise of 
fraudulent substitutions " had become universal." ^^ 

These few significant extracts, from a mass of official 
reports, show that the commercial frauds were contin- 
uous, and began long before Commodore Vanderbilt's 
time, and have prevailed up to the present. 

Everywhere was fraud ; even the little storekeepers, 
with their smug pretensions to homely honesty, were 
profiting by some of the vilest, basest forms of fraud, such 
as robbing the poor by the light-weight and short-weight 
trick. ^- or (far worse) by selling skim milk, or poisonous 

^0 House Reports, Third Session, Forty-sixth Congress, 1880- 

81, Vol. i, Report No. 199: i. The committee drafted a bill for 
the prevention of these frauds ; the capitalists concerned smoth- 
ered it. 

11 House Reports, First Session, Forty-seventh Congress, 1881- 

82, Vol. ii, Report No. 634: 1-5. 

i-These forms of cheating exist at present to a greater extent 



l66 HISTORY OF THE GREAT AMERICAN FORTUNES 

drugs or adulterated food or shoddy material. These 
practises were so prevalent, that the exceptions were 
rarities indeed. 

If any administration had dared seriously to stop these 
forms of theft the trading classes would have resisted and 
struck back in political action. Yet these were the men 
— these traders — who vociferously come forth with their 
homiletic trades against Vanderbilt's criminal trans- 
actions, demanding that the power of him and his kind be 
curbed. 

It was not at all singular that they put their protests 
on moral grounds. In a form of society where each man 
is compelled to fight every other man in a wild, demoraliz- 
ing struggle for self-preservation, self-interest naturally 
usurps the supreme functions, and this self-interest be- 
comes transposed, by a comprehensible process, into 
moralities. That which is profitable is perverted into a 
moral code ; the laws passed, the customs introduced and 
persisted in, and the weight of the dominant classes all 
conspire to put the stamp of morality on practices aris- 
ing from the lowest and most sordid aims. Thus did 
the trading class make a moral profession of its methods 

than ever before. It is estimated that manufacturers and shop- 
keepers cheat the people of the United States out of $200,000,000 
a year by the light-weight and short-weight frauds. In 1907 
the New York State Sealer of Weights and Measures asserted 
that, in that State alone, $20,000,000 was robbed from the con- 
sumers annually by these methods. Recent investigations by the 
Bureau of Standards of the United States Department of Com- 
merce and Labor have shown that immense numbers of 
" crooked " scales are in use. It has been conclusively estab- 
lished by the investigations of Federal, State and municipal 
inspectors of weights and measures that there is hardly an article 
put up in bottled or canned form that is not short of the weight 
for which it is sold, nor is there scarcely a retail dealer w-ho 
docs not swindle his customers by the light-weight fraud. There 
are manufacturers who make a specific business of turning out 
fraudulent scales, and who freely advertise the cheating merits 
of these scales. 



THE V'ANDERBILT FORTUNE INCREASES MANIFOLD l6/ 

of exploitation ; it congratulated and sanctified itself on 
its purity of life and its saving stability. 

From this class — a class interpenetrated in every di- 
rection with commercial frauds — was largely empanelled 
the men who sat on those grand juries and petit juries 
solemnly passing verdict on the poor wretches of criminals 
whom environment or poverty had driven into crime. 
They were the arbiters of justice, but it was a justice 
that was never allowed to act against themselves. Ex- 
amine all the penal codes of the period ; note the laws 
proscribing long sentences in prison for thefts of prop- 
erty; the larceny of even a suit of clothes was severely 
punishable, and begging for alms was a misdemeanor. 
Then contrast these asperities of law with the entire 
absence of adequate protection for the buyer of merchan- 
dise. Following the old dictum of Roman jurisprudence, 
" Let the buyer beware," the factory owner could at wall 
oppress his workers, and compel them, for the scantiest 
wages, to make for his profit goods unfit for consumption. 
These articles the retailer sold without scruple over his 
counter; when the buyer was cheated or overcharged, as 
happened with great frequency, he had practically no re- 
dress in law. If the merchant were robbed of even ever 
so little he could retaliate by sending the guilty one to 
prison. But the merchant himself could invidiously and 
continuously rob the customer without fear of any law. 
All of this was converted into a code of moralities ; and 
any bold spirit who exposed its cant and sham was de- 
nounced as an agitator and as an enemy of law and 
order. ^^ 

13 A few progressive jurists in the International Prison Con- 
gress are attempting to secure the recognition in law of the 
principle that society, as a supreme necessity, is obligated to 
protect its members from being made the victims of the cunning 
and unscrupulous. They have received no encouragement, and 



l68 HISTORY OF THE GREAT AMERICAN FORTUNES 

Vanderbilt did better than expose it ; he improved upon, 
and enlarged, it and made it a thing of magnitude ; he 
and others of his quahty discarded petty larceny and 
ascended into a sphere of superlative grand larceny. 
They knew with a cynical perception that society, with 
all its pompous pretensions to morality, had evolved a 
rule which worked with almost mathematical certainty. 
This rule was the paradoxical, but nevertheless true, one 
that the greater the theft the less corresponding danger 
there was of punishment. 



THE WISDOM OF GRAND LARCENY. 

Now it was that one could see with greater clearness 
than ever before, how the mercenary ideal of the ruling 
class was working out to its inevitable conclusion. So- 
ciety had made money its god and property its yardstick ; 
even in its administration of justice, theoretically sup- 
posed to be equal, it had made " justice " an expensive 
luxury available, in actual practice, to the rich only. The 
defrauder of large sums could, if prosecuted, use a part 
of that plunder, easily engage a corps of shrewd, expe- 
rienced lawyers, get evidence manufactured, fight out the 
case on technicalities, drag it along for years, call in po- 
litical and social influence, and almost invariably escape 
in the end. 

But beyond this power of money to make a mockery 
of justice was a still greater, though more subtle, factor, 
which was ever an invaluable aid to the great thief. Ev- 
ery section of the trading class was permeated with a 
profound admiration, often tangibly expressed, for the 
craft that got away with an impressive pile of loot. The 

v.ill receive none, from a trading class profiting from the very 
methods which it is sought to place under the inhibition of 
criminal law. 



THE VANDERCILT FORTUNE INCREASES MANIFOLD 169 

contempt felt for the pickpocket was the antithesis of 
the general mercantile admiring view of the man who 
stole in grand style, especially when he was one of their 
own class. In speaking of the piratical operations of 
this or that magnate, it was common to hear many busi- 
ness men interject, even while denouncing him, " Well, 
I wish I were as smart as he." These same men, when 
serving on juries, were harsh in their verdicts on poor 
criminals, and unctuously flattered themselves with being, 
and were represented as, the upholders and conservers 
of law and moral conduct. 

Departing from the main facts as this philosophical di- 
gression may seem, it is essential for a number of rea- 
sons. One of these is the continual necessity for keeping 
in mind a clear, balanced perspective. Another lies in 
the need of presenting aright the conditions in which 
Vanderbilt and magnates of his type were produced. 
Their methods at basis were not a growth independent 
of those of the business world and isolated from them. 
They were simply a development, and not merely one 
of standards as applied to morals, but of the mechanism 
of the social and industrial organization itself. Finally 
it is advisable to give flashlight glimpses into the modes 
and views of the time, inasmuch as it was in Vander- 
bilt's day that the great struggle between the old prin- 
ciple of competition, as upheld by the small capitalists, 
and the superseding one of consolidation, as incarnated 
in him and others, took on vigorous headway. 

HE CONTINUES THE BUYING OF LAWS. 

Protest as it did against Vanderbilt's merging of rail- 
roads, the midldle class found itself quite helpless. In 
rapid succession he put throuQl: one combination after 



170 HISTORY OF THE GREAT AMERICAN FORTUNES 

another, and caused theft after theft to be legaHzed, ut- 
terly disdainful of criticism or opposition. In State after 
State he bought the repeal of old laws, or the passage of 
new laws, until he was vested with authority to connect 
various railroads that he had secured between Buffalo 
and Chicago, into one line with nearly 1,300 miles of 
road. The commercial classes were scared at the sight 
of such a great stretch of railroad — then considered an 
immense line — in the hands of one man, audacious, all- 
conquering, with power to enforce tribute at will. Again, 
Vanderbilt patronized the printing presses, and many 
more millions of stock, all fictitious capital, were added 
to the already flooded capital of the Lake Shore and 
Michigan Southern Railroad Company. Of the total of 
$62,000,000 of capital stock in 1871, fully one-half was 
based upon nothing but the certainty of making it valu- 
able as a dividend payer by the exaction of high freight 
and passenger rates. A little later, the amount was run 
up to $73,000,000, and this was increased subsequently. 

Vanderbilt now had a complete railroad system from 
New York to Chicago, with extensive offshoots. It is 
at this point that we have to deal with a singular com- 
mendation of his methods thrust forward glibly from 
that day to this. True, his eulogists admitted then, as 
they admit now, Vanderbilt was not overscrupulous in 
getting property that he wanted. But consider, they 
urge, the improvements he brought about on the rail- 
roads that came into his possession ; the renovation of 
the roadbed, the institution of new locomotives and cars, 
the tearing down of the old, worn-out stations. This has 
been the praise showered upon him and his methods. 

Inquiry, however, reveals that this appealing picture, 
like all others of its sort, has been ingeniously distorted. 



THE VANDERBILT FORTUNE INCREASES MANIFOLD I7I 

The fact was, in the first place, that these improvements 
were not made out of regard to pubHc convenience, but 
for two radically different reasons. The first considera- 
tion was that if the dividends were to be paid on the huge 
amount of fabricated stock, the road, of necessity, had to 
be put into a condition of fair efficiency to meet or surpass 
the competing facilities of other railroads running to Chi- 
cago. Second, the number of damage claims for acci- 
dent or loss of life arising largely from improper appli- 
ances and insufficient safeguards, was so great that it 
was held cheaper in the long run to spend millions for 
improvements. 

PUBLIC FUNDS FOR PRIVATE USE. 

Instead of paying for these improvements with even 
a few millions of the proceeds of the watered stock, Van- 
derbilt (and all other railroad magnates in like cases did 
the same) forced the public treasury to defray a large 
part of the cost. A good illustration of his methods was 
his improvement of his passenger terminus in New York 
City. The entrance of the New York Central and the 
Harlem Railroads is by way of Park (formerly Fourth) 
avenue. This franchise, as we have seen, was obtained 
by bribery in 1832. But it was a qualified franchise. 
It reserved certain nominal restrictions in behalf of the 
people by inserting the right of the city to order the re- 
moval of the tracks at any time that they became an ob- 
struction. These terms were objectionable to Vander- 
bilt ; a perpetual franchise could be capitalized for far 
more than a limited or qualified one. A perpetual fran- 
chise was what he wanted. 

The opportunity came in 1872. From the building of 
the railroad, the tracks had been on the surface of Fourth 



172 HISTORY OF THE GREAT AMERICAN FORTUNES 

avenue. Dozens of dangerous crossings had resulted in 
much injury to Hfe and many deaths. The public de- 
mand that the tracks be depressed below the level of the 
street had been resisted. 

Instead of longer ignoring this demand, Vanderbilt 
now planned to make use of it ; he saw how he could 
utilize it not only to foist a great part of the expense 
upon the city, but to get a perpetual franchise. Thus, 
upon the strength of the popular cry for reform, he would 
extort advantages calculated to save him millions and 
at the same time extend his privileges. It was but an- 
other illustration of the principle in capitalist society 
to which we have referred before (and which there will 
be copious occasion to mention again and again) that 
after energetically contesting even those petty reforms 
for which the people have contended, the ruling classes 
have ever deftly turned about when they could no longer 
withstand the popular demands, and have made those 
very reforms the basis for more spoliation and for a 
further intrenchment of their power.^* 

The first step was to get the New York City Common 
Council to pass, with an assumption of indignation, an 
ordinance requiring Vanderbilt to make the desired im- 
provements, and committing the city to bear one-half 

1* Commodore Vanderbilt's descendants, the present Vander- 
bilts, have been using the public outcry for a reform of condi- 
tions on the West Side of New York City, precisely as the 
original Vanderbilt utilized that for the improvement of Fourth 
avenue. The Hudson River division of the New York Central 
and Hudson River Railroad has hitherto extended downtown on 
the surface of Tenth and Eleventh Avenues and other thorough- 
fares. Large numbers of people have been killed and injured. 
For decades there has been a public demand that tiicsc dangerous 
conditions be remedied or removed. The Vanderbilts have as 
long resisted the demand; the immense numbers of casualties 
had no effect upon them. When the public demand became too 
strong to be ignored longer, they set about to exploit it in order 
to get a comprehensive franchise with incalculable new privi- 
leges. 



THE VANDERBILT FORTLXE INCREASES MANIFOLD 173 

the expense and giving him a perpetual franchise. This 
was in Tweed's time when the Common Council was 
composed largely of the most corrupt ward heelers, and 
when Tweed's puppet, Hall, was Mayor. Public oppo- 
sition to this grab was so great as to frighten the politi- 
cians; at any rate, whatever his reasons, Mayor Hall 
vetoed the ordinance. 

Thereupon, in 1872, Vanderbilt went to the Legis- 
lature — that Legislature whose members he had so often 
bought like so many cattle. This particular Legislature, 
however, was elected in 1871, following the revelations 
of the Tweed " ring " frauds. It was regarded as a 
" model reform body." As has already been remarked 
in this work, the pseudo " reform " officials or bodies 
elected by the American people in the vain hope of over- 
throwing corruption, will often go to greater lengths in 
the disposition of the people's rights and interests than 
the most hardened politicians, because they are not sus- 
pected of being corrupt, and their measures have the ap- 
pearance of being enacted for the public good. The 
Tweed clique had been broken up, but the capitalists who 
had assiduously bribed its members and profited so hugely 
from its political acts, were untouched and in greater 
power than ever before. The source of all this corrup- 
tion had not been struck at in the slightest. Tweed, the 
politician, was sacrificed and went to prison and died 
there ; the capitalists who had corrupted representative 
bodies everywhere in the United States, before and dur- 
ing his time, were safe and respected, and in a position 
to continue their work of corruption. Tweed made the 
classic, unforgivable blunder of going into politics as a 
business, instead of into commercialism. The very cai)i- 
talists who had profited so greatly by his corruption, 
were the first to express horror at his acts. 



174 HISTORY OF THE GREAT AMERICAN FORTUNES 

From the " reform " Legislature of 1872 Vanclerbilt 
secured all that he sought. The act was so dexterously 
worded that while not nominally giving a perpetual fran- 
chise, it practically revoked the qualified parts of the char- 
ter of 1832. It also compassionately relieved him of 
the necessity of having to pay out about $4,000,000, in 
replacing the dangerous roadway, by imposing that cost 
upon New York City. Once these improvements were 
made, Vanderbilt bonded them as though they had been 
made with private money. 



REFORM AS IT WORKS OUT. 

But these were not his only gifts from the " reform " 
Legislature. The Harlem Railroad owned, as we have 
seen, the Fourth avenue surface line of horse cars. Al- 
though until this time it extended to Seventy-ninth street 
only, this line was then the second most profitable in New 
York City. In 1864, for instance, it carried nearly six 
million passengers, and its gross earnings were $735,000. 
It did not pay, nor was required to pay, a single cent 
in taxation. By 1872 the city's population had grown 
to 950,000. Vanderbilt concluded that the time was 
fruitful to gather in a few more miles of the public 
streets. 

The Legislature was acquiescent. Chapter 325 of the 
Laws of 1872 allowed him to extend the line from Sev- 
enty-ninth street to as far north as Madison avenue 
should thereafter be opened. " But see," said the Legis- 
lature in efifect, " how mindful of the public mterests we 
have been. We have imposed a tax of five per cent, on 
all gross receipts above Seventy-ninth street." When, 
however, the time came to collect. Vanderbilt innocently 
pretended that he had no means of knowing whether the 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 175 

fares were taken in on that section of the hne, free of 
taxation, below Seventy-ninth street, or on the taxed 
portion above it. Behind that fraudulent subterfuge the 
city officials have never been inclined to go, nor have 
they made any effort. As a consequence the only reve- 
nue that the city has since received from that line has 
been a meager few thousand dollars a year. 

At the very time that he was watering stock, sliding 
through legislatures corrupt grants of perpetual fran- 
chises, and swindling cities and States out of huge sums 
in taxes,^^ Vanderbilt was forcing the drivers and con- 
ductors on the Fourth avenue surface line to work an 
average of fifteen hours out of twenty-four, and reduc- 
ing their daily wages from $2.25 to $2. 

Vanderbilt made the pretense that it was necessary to 
economize ; and, as was the invariable rule of the capital- 
ists, the entire burden of the economizing process was 
thrown upon the already overloaded workers. This sub- 
traction of twenty-five cents a day entailed upon the 
drivers and conductors and their families many severe 
deprivations ; working for such low wages every cent 
obviously counted in the management of household af- 
fairs. But the methods of the capitalist class in delib- 
erately pyramiding its profits upon the sufferings of the 
working class were evidenced in this case (as they had 
been, and since have been, in countless other instances) 
by the announcement in the Wall Street reports that 
this reduction in wages was followed by an instant rise 
in the price of the stock of the Fourth avenue surface 

line. The lower the wages, the greater the dividends. 

I 

^5 Not alone he. In a tabulated report made public on Feb- 
ruary I, 1872, the New York Council of Political Reform charged 
that in the single item of surface railways, New York City for 
a long period had been swindled annually out of at least a mil- 
lion dollars. This was an underestimate. All other sections 
of the capitalist class swindled likewise in taxes. 



176 HISTORY OF TUK CURAT AMERICAN FORTUNES 

The further history of the Fourth avenue surface line 
cannot here be pursued in detail. Suffice to say that the 
Vanderbilts, in 1894, leased this line for 999 years to 
the Metropolitan Street Railway Company, controlled by 
those eminent financiers, William C. Whitney and others, 
whose monumental briberies, thefts and piracies have 
frequently been uncovered in official investigations. For 
almost a thousand years, unless a radical change of con- 
ditions comes, the Vanderbilts will draw a princely rev- 
enue from the ownership of this franchise alone. 

It is not necessary to enter into a narrative of all the 
laws that Vanderbilt bribed Legislature after Legislature, 
and Common Council after Common Council, into pass- 
ing — laws giving him for nothing immensely valuable 
grants of land, shore rights and rights to land under 
water, more authorizations to make further consolidations 
and to issue more watered stock. Nor is it necessary to 
deal with the numerous bills he considered adverse to 
his interests, that he caused to be smothered in legis- 
lative committees by bribery. 

vanderbilt's chief of staff. 

His chief instrument during all those years was a 
general utility lawyer, Chauncey M. Depew, whose spe- 
cialty was to hoodwink the public by grandiloquent 
exhibitions of mellifluent spread-eagle oratory, while 
bringing the " proper arguments " to bear upon legis- 
lators and other public officials.^" Every one who could 
in any way be used, or whose influence required subsi- 
dizing, was, in the phrase of the day, " taken care of." 

^° Roscoe Conkling, a noted Republican politician, said of him : 
"Chauncey Depew? Oh, you mean the man that Vanderbilt 
sends to Albany every winter to say ' haw ' and ' gee ' to his 
cattle up there." 



THE VANDERIJILT FORTUNE INCREASES :>rANIFOLD 177 

Great sums of money were distributed outright in bribes 
in the legislatures by lobbyists in Vanderbilt's pay. 
Supplementing this, an even more insidious system of 
bribery was carried on. Free passes for railroad travel 
were lavishly distributed ; no politician was ever refused ; 
newspaper and magazine editors, writers and reporters 
were always supplied with free transportation for the 
asking, thus insuring to a great measure their good will, 
and putting them under obligations not to criticise or 
expose plundering schemes or individuals. All railroad 
companies used this form, as well as other forms, of 
bribery. 

It was mainly by means of the free pass system that 
Depew, acting for the Vanderbilts, secured not only a 
general immunity from newspaper criticism, but contin- 
ued to have himself and them portrayed in luridly favor- 
able lights. Depending upon the newspapers for its 
sources of information, the public was constantly deceived 
and blinded, either by the suppression of certain news, 
or by its being tampered with and grossly colored. This 
Depew continued as the wriggling tool of the Vanderbilt 
family for nearly half a century. Astonishing as it may 
seem, he managed to pass among the uninformed as a 
notable man ; he was continuously eulogized ; at one time 
he was boomed for the nomination for President of the 
United States, and in 1905 when the Vanderbilt family 
decided to have a direct representative in the United 
States Senate, they ordered the New York State Legis- 
lature, which they practically owned, to elect him to that 
body. It was while he was a United States Senator that 
the investigations, in 1905, of a committee of the New 
York Legislature into the affairs of certain life insurance 
companies revealed that Depew had long since been an 
advisory party to the gigantic swindles and briberies car- 



178 HISTORY OF THE GREAT AMERICAN FORTUNES 

ried on by Hyde, the founder and head of the Equitable 
Life Assurance Society. 

The career of Depew is of no interest to posterity, 
excepting in so far as it shows anew how the magnates 
were able to use intermediaries to do their underground 
work for them, and to put those intermediaries into the 
Iiighest official positions in the country. This fact alone 
was responsible for their elevation to such bodies as the 
United States Senate, the President's Cabinet and the 
courts. Their long service as lobbyists or as retainers 
was the surest passport to high political or judicial posi- 
tion ; their express duty was to vote or decide as their 
masters' interest bid them. So it w'as (as it is now) that 
men who had bribed right and left, and who had put 
their cunning or brains at the complete disposal of the 
magnates, filled Congress and the courts. These were, to 
a large extent, the officials by whose votes or decisions 
all measures of value to the working class were defeated ; 
and reversely, by whose actions all or nearly all bills 
demanded by the money interests, were passed and sus- 
tained. 

Here we are again forced to notice the truism thrust- 
ing itself forward so often and conspicuously ; that law 
was essentially made by the great criminals of society, 
and that, thus far it has been a frightful instrument, 
based upon force, for legalizing theft on a large scale. 
By law the great criminals absolve themselves and at 
the same time declare drastic punishment for the petty 
criminals. The property obtained by theft is converted 
into a sacred vested institution ; the men who commit the 
theft or their hirelings sit in high places, and pass laws 
surrounding the proceeds of that theft with impregnable 
fortifications of statutes ; should any poor devil, goaded 
on by the exasperations of poverty, venture to help him- 



THE VANDERBILT FORTUNE INCREASES MANIFOLD I79 

self to even the tiniest part of that property, the severest 
penalty, enacted by those same plunderers, is mercilessly 
visited upon him. 

After having bribed legislatures to legalize his enor- 
mous issue of watered stock, what was Vanderbilt's next 
move? The usual fraudulent one of securing exemp- 
tion from taxation. He and other railroad owners 
sneaked through law after law by which many of their 
issues of stock were made non-taxable. 

So now old shaggy Vanderbilt loomed up the richest 
magnate in the United States. His ambition was con- 
summated ; what mattered it to him that his fortune was 
begot in blackmail and extortion, bribery and theft? 
Now that he had his hundred millions he had the means 
to demand adulation and the semblance of respect, if not 
respect itself. The commercial world admired, even 
while it opposed, him ; in his methods it saw at bottom 
the abler application and extension of its own, and while 
it felt aggrieved at its own declining importance and 
power, it rendered homage in the awed, reverential man- 
ner in which it viewed his huge fortune. 

Over and over again, even to the point of wearisome 
repetition, must it be shown, both for the sake of true 
historical understanding and in justice to the founders 
of the great fortunes, that all mercantile society was per- 
meated with fraud and subsisted by fraud. But the prev- 
alence of this fraud did not argue its practitioners to 
be inherently evil. They were victims of a system inex- 
orably certain to arouse despicable qualities. The memo- 
rable difference between the two classes was that the 
workers, as the sufferers, were keenly alive to the abom- 
inations of the system, while the capitalists not only 
insisted upon the right to benefit from its continuance^ 



l80 HISTORY OF THE GREAT AMERICAN FORTUNES 

but harshly sought to repress every attempt of the work- 
ers to agitate for its modification or overthrow. 



REPRESSION BY STARVATION. 

These repressive tactics took on a variety of forms, 
some of which are not ordinarily included in the defini- 
tions of repression. 

The usual method was that of subsidizing press and 
pulpit in certain subtle ways. By these means facts were 
concealed or distorted, a prejudicial state of public opin- 
ion created, and plausible grounds given for hostile inter- 
ference by the State. But a far more powerful engine 
of repression was the coercion exercised by employers 
in forcing their workers to remain submissive on instant 
peril of losing their jobs. While, at that time, manufac- 
turers, jobbers and shopkeepers throughout the country 
were rising in angry protest against the accumulation of 
plundering power in the hands of such men as Vander- 
bilt, Gould and Huntington, they were themselves exploit- 
ing and bribing on a widespread scale. Their great pose 
was that of a thorough commercial respectability ; it was 
in this garb that they piously went to legislatures and 
demanded investigations into the rascally methods of the 
railroad magnates. The facts, said they, should be made 
public, so as to base on them appropriate legislation 
which would curtail the power of such autocrats. Con- 
trasted with the baseness and hypocrisy of the trading 
class, Vanderbilt's qualities of brutal candor and selfish- 
ness shine out as brilliant virtues.^" 

1'' No observation could be truer. As a class, the manufactur- 
ers were flourishing on stolen inventions. There might be ex- 
ceptions, but they were very rare. Year after year, decade after 
decade, the reports of the various Commissioners of Patents 
pointed out the indiscriminate theft of inventions by the capi- 



THE VANDERBILT FORTUNE INCREASES MANIFOLD l8l 

These same manufacturers objected in the most indig- 
nant manner, as they similarly do now, to any legislative 
investigations of their own methods. Eager to have the 
practices of Vanderbilt and Gould probed into, they were 
acrimoniously opposed to even criticism of their factory 
system. For this extreme sensitiveness there was the 
amplest reason. The cruelties of the factory system 
transcended belief. In, for instance, the State of Massa- 
chusetts, vaunting itself for its progressiveness, enlight- 
enment and culture, the textile factories were a horror 
beyond description. The Convention of the Boston i -ight 
Hour League, in 1872, did not overstate when it declared 
of the factory system that *' it employs tens of thousands 

talists. In previous chapters we have referred to the plundering 
of Whitney and Goodyear. But they were only two of a vast 
number of inventors similarly defrauded. 

In speaking of the helplessness of inventors, J. Holt, Com- 
missioner of Patents, wrote in his Annual Report for 1857: 
" The insolence and unscrupulousness of capital, subsidizing and 
leading on its minions in the work of pirating some valuable 
invention held by powerless hands, can scarcely by conceived by 
those not familiar with the records of such cases as I have 
referred to. Inventors, however gifted in other respects, are 
known to be confiding and thriftless; and being generally with- 
out wealth, and always without knowledge of the chicaneries 
of law, they too often prove but children in those rude conflicts 
which they are called on to endure with the stalwart fraud and 
cunning of the world." (U. S. Senate Documents, First Session, 
Thirty-fifth Congress, 1857-58, viiiig-io). In his Annual Re- 
port for 1858, Commissioner Holt described how inventors were 
at the mercy of professional perjurers whom the capitalists hired 
to give evidence. 

The bribing of Patent office officials was a common occur- 
rence. "The attention of Congress," reported Commissioner of 
Patents Charles Mason in 1854, " is invited to the importance of 
providing some adequate means of preventing attempts to obtain 
patents by improper means." Several cases of " attempted 
bribery " had occurred within the year, stated Commissioner 
Mason. (Executive Documents, First Session, Thirty-third Con- 
gress, 1853-54, Vol. vii, Part 1:19-20.) Every successive Com- 
missioner of Patents called upon Congress to pass laws for the 
prevention of fraud, and for the better protection of the in- 
ventor, but Congress, influenced by the manufacturers, was 
deaf to these appeals. 



l82 HISTORY OF THE GREAT AMERICAN FORTUNES 

of women and children eleven and twelve hours a day ; 
owns or controls in its own selfish interest the pulpit and 
the press ; prevents the operative classes from making 
themselves felt in behalf of less hours, through remorse- 
less exercise of the power of discharge ; and is rearing 
a population of children and youth of sickly appearance 
and scanty or utterly neglected schooling." . . . 

As the factory system was in Massachusetts, so 
it was elsewhere. Any employee venturing to agi- 
tate for better conditions was instantly discharged ; 
spies were at all times busy among the workers; 
and if a labor union were formed, the factory owners 
would obtain sneak emissaries into it, with orders to 
report on every move and disrupt the union if possible. 
The factory capitalists in Massachusetts, New York, Illi- 
nois and every other manufacturing State were deter- 
mined to keep up their system unchanged, because it was 
profitable to work children eleven and a half hours a 
day in a temperature that in summer often reached io8 
degrees and in an atmosphere certain to breed immo- 
rality ; ^* it was profitable to compel adult men and 
women having families to work for an average of ninety 
cents a day ; it was profitable to avoid spending money 
in equipping their factories with life-saving apparatus. 
Hence these factory owners, forming the aristocracy of 
trade, savagely fought every move or law that might 
expose or alter those conditions ; the annals of legislative 
proceedings are full of evidences of bribery. 

Having no illusions, and being a severely practical man, 

IS " Certain to breed immorality." See report of Carrol D. 
Wright, Massachusetts Bureau of Statistics of Labor, 1881. A 
cotton mill operative testified : " Young girls from fourteen and 
upward learn more wickedness in one year than they would in 
five out of a mill." See also the numerous recent reports of 
the National Child Labor Committee. 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 183 

Vanderbilt well knew the pretensions of this trading 
class ; with many a cynical remark, aptly epitomizing the 
point, he often made sport of their assumptions. He 
knew (and none knew better) that they had dived deep 
in bribery and fraud ; they were the fine gentlemen, he 
well recalled, who had generally obtained patents by 
fraud; who had so often bribed members of Congress 
to vote for a high tariff ; the same, too, who had bribed 
legislatures for charters, water rights, exemptions from 
taxation, the right to work employees as long as, and 
under whatever conditions, they wanted to. This manu- 
facturing aristocracy professed to look down upon Van- 
derbilt socially as a coarse sharper ; and in New York 
a certain ruling social element, the native aristocracy, 
composed of old families whose wealth, originating in 
fraud, had become respectable by age, took no pains to 
conceal their opinion of him as a parvenu, and drew 
about their sacred persons an amusing circle of exclusive- 
ness into the rare precincts of which he might not enter. 
Vanderbilt now proceeded to buy social and religious 
grace as he had bought laws. The purchase of abso- 
lution has ever been a convenient and cheap method of 
obtaining society's condonation of theft. In medieval 
centuries it took a religious form ; it has become trans- 
posed to a social traffic in these superior days. Let a 
man steal in colossal ways and then surrender a small part 
of it in charitable, religious and educational donations ; 
he at once ceases being a thief and straightway becomes 
a noble benefactor. Vanderbilt now shed his life-long 
irreverence, and gave to Deems, a minister of the Pres- 
byterian Church, as a gift, the Church of the Strangers 
on Mercer street, and he donated $1,000,000 for the 
bounding of the Vanderbilt University at Nashville, Tenn. 



184 HISTORY OF THE GREAT AMERICAN FORTUNES 

The press, the church and the educational world there- 
upon hailed him as a marvel of saintly charity and 
liberality. 



THE SERMONIZING OF THE BEST CLASSES. 

One section of the social organization declined to accept 
the views of the class above it. This was the working 
class. Superimposed upon the working class, draining 
the life blood of the workers to provide them with wealth, 
luxuries and power, were those upper strata of society 
known as the " best classes." These " best classes," with 
a monstrous presumption, airily proclaimed their superi- 
ority and incessantly harped upon the need of elevating 
and regenerating the masses. 

And who, it may be curiously asked, were the classes 
self destined or self selected to do this regenerating? 
The commercial and financial element, with its peculiar 
morals so adjusted to its interests, that it saw nothing 
wrong in the conditions by which it reaped its wealth — 
conditions that made slaves of the workers, threw them 
into degradation and poverty, drove multitudes of girls 
and women into prostitution, and made the industrial 
field an immense concourse of tears, agony and carnage. 
Hanging on to this supreme class of wealth, fawning to 
it, licking its very feet, were the parasites and advocates 
of the press, law, politics, the pulpit, and, with a few 
exceptions, of the professional occupations. These were 
the instructors who were to teach the working class what 
morals were ; these were the eminences under whose 
guidance the working class was to be uplifted ! 

Let us turn from this sickening picture of sordid arro- 
gance and ignorance so historically true of all aristocra- 
cies based upon money, from the remotest time to this 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 185 

present day, and contemplate how the organized part of 
the working class regarded the morals of its " superiors." 

While the commercial class, on the one hand, was 
detemiined on beating down the working class at every 
point, it was, on the other, unceasingly warring among 
itself. In business dealings there was no such recognized 
thing as friendship. To get the better of the other was 
held the quintessence of mercantile shrewdness. A flint- 
hard, brute spirit enveloped all business transactions. 
The business man who lost his fortune was generally 
looked upon without emotion or pity, and condemned as 
an incapable. For self interest, business men began to 
combine in corporations, but these were based purely 
upon mercenary aims. Not a microscopic trace was visi- 
ble of that spirit of fellow kindness, sympathy, collective 
concern and brotherhood already far developed among 
the organized part of the working class. 

As the supereminent magnate of his day, Vanderbilt 
was invested with extraordinary publicity ; he was exten- 
sively interviewed and quoted ; his wars upon rival cap- 
italists were matters of engrossing public concern ; his 
slightest illness was breathlessly followed by commercial- 
dom and its outcome awaited. Hosts of men, women 
and children perished every year of disease contracted 
in factories, mines and slums ; but Vanderbilt's least ail- 
ment was given a transcending importance, while the 
scourging sweep of death among the lowly and helpless 
was utterly ignored. 

Precisely as mercantile society bestowed no attention 
upon the crushed and slain, except to advance roughshod 
over their stricken bodies while throwing out a pittance 
in charity here and there, so Vanderbilt embodied in him- 
self the qualities that capitalist society in mass practiced 
and glorified. " It was strong men," says CrofTutp 



l86 HISTORY OF THE GREAT AMERICAN FORTUNES 

" whom he liked and sympathized with, not weak ones ; 
the self-rehant, not the helpless. He felt that the solic- 
itor of charity was always a lazy or drunken person, 
trying to live by plundering the sober and industrious." 
This malign distrust of fellow beings, this acrid cynicism 
of motives, this extraordinary imputation of evil designs 
on the part of the penniless, was characteristic of the 
capitalist class as a whole. Itself practicing the lowest 
and most ignoble methods, governed by the basest mo- 
tives, plundering in every direction, it viewed every mem- 
ber of its own class with suspicion and rapacity. Then 
it turned about, and with immense airs of superiority, 
attributed all of its own vices and crimes to the impov- 
erished masses which its own system had created, 
whether in America or elsewhere. 

The apologist may hasten forward with the explana- 
tion that the commercial class was not to be judged by 
Vanderbilt's methods and qualities. In truth, however, 
vVanderbilt was not more inhuman than many of the 
contemporary shining lights of the business world. 

" HONESTY AND INDUSTRY " ANALYZED. 

If there is any one fortune commonly praised as hav- 
ing been acquired " by honesty and industry," it is the 
Borden millions, made from cotton factories. At the 
time Vanderbilt was blackmailing, the founder of this 
fortune, Colonel Borden, was running cotton mills in Fall 
River. His factory operatives worked from five o'clock 
in the morning to seven in the evening, with but two half 
hours of intermission, one for breakfast, the other for 
dinner. The workday of these men, women and children 
was thus thirteen hours ; their wages were wretchedly 
low, their life was one of actual slavery. Insufficient 



THE VANDERBILT FORTUNE INCREASES MANIFOLD 187 

nourishment, overwork, and the unsanitary and disgust- 
ing conditions in the mills, prematurely aged and debil- 
itated them, and were a constant source of disease, killing 
oflf considerable numbers, especially the children. 

In 1850, the operatives asked Borden for better wages 
and shorter hours. This was his reply : " I saw that 
mill built stone by stone ; I saw the pickers, the carding 
engines, the spinning mules and the looms put into it, 
one after the other, and I would see every machine and 
stone crumble and fall to the floor again before I would 
accede to your wishes." Borden would not have been 
amiss had he added that every stone in that mill was 
cemented with human blood. His operatives went on 
a strike, stayed out ten months, suffered frightful hard- 
ships, and then were forced back to their tasks by hunger. 
Borden was inflexible, and so were all the other cotton 
mill owners. ^'•' It was not until 1874, after many further 
bitterly-contested strikes, that the Masachusetts Legis- 
lature was prevailed upon to pass a ten-hour law, twenty- 
four years after the British Parliament had passed such 
an enactment. 

The commercial class, high and low, was impregnated 
with deceit and dissimulation, cynicism, selfishness and 
cruelty. What were the aspirations of the working class 
which it was to uplift? The contrast stood out with 
stark distinctness. While business men were frantically 
sapping the labor and life out of their workers, and then 
tricking and cheating one another to seize the proceeds 
of that exploitation, the labor unions were teaching the 

1^ The heroism of the cotton operatives was extraordinary. 
Slaves themselves, they battled to exterminate negro slavery. 
" The spinner's union," says McNeill, " was almost dead during 
the [Civil] war, as most of its members had gone to shoulder 
the musket and to fight ... to strike the shackles from 
the negro. A large number were slain in battle." — " The Labor 
Movement " : 216-217. 



l88 HISTORY OF THE GREAT AMERICAN FORTUNES 

nobility of brotherly cooperation " Cultivate friendship 
among the great brotherhood of toil," was the advice of 
Uriah Stevens, master w^orkman of the Knights of Labor, 
at the annual meeting of that organization on January 
12, 1871, And he went on : 

And while the toiler is thus engaged in creating the world's 
value, how fares his own interest and well-being? We answer, 
" Badly," for he has too little time, and his faculties become too 
much blunted by unremitting labor to analyze his condition or 
devise and perfect financial schemes or reformatory measures. 
The hours of labor are too long, and should be shortened. I 
recommend a universal movement to cease work at five o'clock 
Saturday afternoon, as a beginning. There should be a greater 
participation in the profits of labor by the industrious and in- 
telligent laborer. In the present arrangements of labor and 
capital, the condition of the employee is simply that of wage 
slavery — capital dictating, labor submitting; capital superior, la- 
bor inferior. 

This is an artificial and man-created condition, not God's 
arrangement and order ; for it degrades man and ennobles mere 
pelf. It demeans those who live by useful labor, and, in pro- 
portion, exalts all those who eschew labor and live (no matter 
by what pretence or respectable cheat — for cheat it is) without 
productive work. 



LABORS PRINCIPLES IGNORED. 

Such principles as these evoked so little attention that 
it is impossible to find them recorded in most of the 
newspapers of the time ; and if mentioned it was merely 
as the object of venomous attacks. In varying degrees, 
now in outright abuse and again in sneering and ridicule, 
the working class was held up as an ignorant, discon- 
tented, violent aggregation, led by dangerous agitators, 
and arrogantly seeking to upset all business by seeking 
to dictate to employers what wages and hours of labor 
should be. 



THE VANDERBILT FORTUNE INCREASES MANIFOLD I89 

And, after all, little it mattered to the capitalists what 
the workers thought or said, so long as the machinery of 
government was not in their hands. At about the very 
time Master Workman Stevens was voicing the unrest of 
the laboring masses, and at the identical time when the 
panic of 1873 saw several millions of men workless, 
thrown upon soup kitchens and other forms of charity, 
and battered wantonly by policemen's clubs when they 
attempted to hold mass meetings of protest, an Iowa 
writer, D. C. Cloud, was issuing a work which showed 
concretely how thoroughly Government was owned by 
the commercial and financial classes. This work, ob- 
scurely published and now scarcely known except to the 
patient delver, is nevertheless one of the few serious 
books on prevailing conditions written at that time, and 
is in marked contrast to the reams of printed nonsense 
then circulated. Although Cloud was tinged greatly with 
the middle class point of view, and did not see that all 
successful business was based upon deceit and fraud, yet 
so far as his lights carried him, he wrote trenchantly and 
fearlessly, embodying series after series of facts exposing 
the existing system. He observed : 

, . . A measure without any merit save to advance 
the interest of a patentee, or contractor, or railroad company, 
will become a law, while measures of interest to the whole peo- 
ple are suffered to slumber, and die at the close of the session 
from sheer neglect. It is known to Congressmen that these lob- 
byists are paid to influence legislation by the parties interested, 
and that dishonest and corrupt means are resorted to for the 
accomplishment of the object they have undertaken. . . . 
Not one interest in the country nor all other interests combined 
are as powerful as the railroad interest. . . . With a net- 
work of roads throughout the country; with a large capital at 
command ; with an organization perfect in all its parts, controlled 
by a few leading spirits like Scott, Vanderbilt, Jay Gould, 



190 HISTORY OF THE GREAT AMERICAN FORTUNES 

Tracy and a dozen others, the whole strength and weahh of 
this corporate power can be put into operation at any moment, 
and Congressmen are bought and sold by it like any article of 
merchandise.20. 

20 " Monopolies and the People : " 155-156. 



CHAPTER VI 

THE ENTAILING OF THE VANDERBILT FORTUNE 

The richer Commodore Vanderbilt grew, the more 
closely he cking to his old habits of intense parsimony. 
Occasionally he might ostentatiously give a large sum 
here or there for some religious or philanthropic purpose, 
but his general undeviating course was a consistent mean- 
ness. In him was united the petty bargaining traits of 
the trading element and the lavish capacities for plunder- 
ing of the magnate class. While defrauding on a great 
scale, pocketing tens of millions of dollars at a single 
raid, he would never for a moment overlook the leakage 
of a few cents or dollars. His comprehensive plans for 
self-aggrandizement were carried out in true piratical 
style ; his aims and demands w^re for no paltry prize, 
but for the largest and richest booty. Yet so ingrained 
by long development was his faculty of acquisition, that 
it far passed the line of a passion and became a mono- 
mania. 

vanderbilt's characteristics. 

To such an extent did it corrode him that even when 
he could boast his $100,000,000 he still persisted in hag- 
gling and huckstering over every dollar, and in tricking 
his friends in the smallest and most underhand ways. 
Friends in the true sense of the word he had none ; those 
who regarded themselves as such were of that thrifty, 
congealed disposition swayed largely by calculation. But 

191 



192 HISTORY OF THE GREAT AMERICAN FORTUNES 

if they expected to gain overmuch by their intimacy, 
they were generally vastly mistaken ; nearly always, on 
the contrary, they found themselves caught in some un- 
expected snare, and riper in experience, but poorer in 
pocket, they were glad to retire prudently to a safe dis- 
tance from the old man's contact. " Friends or foes," 
wrote an admirer immediately after his death, " were 
pretty much on the same level in his estimation, and if 
a friend undertook to get in his way he was obliged to 
look out for himself." 

On one occasion, it is related, when a candidate for a 
political office solicited a contribution, Vanderbilt gave 
$100 for himself, and an equal sum for a friend associated 
with him in the management of the New York Central 
Railroad. A few days later Vanderbilt informed this 
friend of the transaction, and made a demand for the 
hundred dollars. The money was paid over. Not long 
after this, the friend in question was likewise approached 
for a political contribution, whereupon he handed out 
$100 for himself and the same amount for Vanderbilt. 
On being told of his debt, Vanderbilt declined to pay it, 
closing the matter abruptly with this laconic pronuncia- 
mento, " When I give anything, I give it myself." 
At another time Vanderbilt assured a friend that he 
would " carry " one thousand shares of New York Central 
stock for him. The market price rose to $115 a share 
and then dropped to $90. A little later, before setting 
out to bribe an important bill through the Legislature — 
a bill that Vanderbilt knew would greatly increase the 
value of the stock — the old magnate went to the friend 
and represented that since the price of the stock had fallen 
it would not be right to subject the friend to a loss. 
Vanderbilt asked for the return of the stock and got it. 
Once the bill became a law. the market price of the 



THE ENTAILING OF THE VANDERBILT FORTUNE I93 

Stock went up tremendously, to the utter dismay of 
the confiding friend who saw a profit of $80,000 thus 
sHp out of his hands into Vanderbilt's.^ 

In his personal expenses Vanderbilt usually begrudged 
what he looked upon as superfluous expense. The plain- 
est of black clothes he wore, and he never countenanced 
jewelry. He scanned the table bill with a hypercritical 
eye. Even the sheer necessities of his physical condi- 
tion could not induce him to pay out money for costly 
prescriptions. A few days before his death his physi- 
cian recommended champagne for some internal trou- 
ble. " Champagne ! " exclaimed Vanderbilt with a re- 
proachful look, " I can't aflford champagne. A bottle 
every morning ! Oh, I guess sody water'll do ! " 

From all accounts it would seem that he diffused about 
him the same forbidding environment in his own house. 
He is described as stern, obstinate, masterful and miserly, 
domineering his household like a tyrant, roaring with 
fiery anger whenever he was opposed, and flying into 
fits of fury if his moods, designs and will were contested. 
His wife bore him thirteen children, twelve of whom 
she had brought up to maturity. A woman of almost 
rustic simplicity of mind and of habits, she became obe- 
diently meek under the iron discipline he administered. 
Croffut says of her that she was " acquiescent and pa- 
tient under the sway of his dominant will, and in the 
presence of his trying moods." He goes on : " The fact 
that she lived harmoniously with such an obstinate man 
bears strong testimony to her character." - 

If we are to place credibility in current reports, she 
was forced time and time again to undergo the most 

1 These and similar anecdotes are to be found incidentally 
mentioned in a two-page biography, very laudatory on the whole, 
in the New York " Times," issue of January 5, 1877. 

2 " The Vanderbilts " : 113. 



194 HISTORY OF THE GREAT AMERICAN FORTUNES 

violent scenes in interceding for one of their sons, Cor- 
nelius Jeremiah. For the nervous disposition and gen- 
eral bad health of this son the father had not much sym- 
pathy ; but the inexcusable crime to him was that Corne- 
lius showed neither inclination nor capacity to engage 
in a business career. If Cornelius had gambled on the 
stock exchange his father would have set him down as 
an exceedingly enterprising, respectable and promising 
man. But he preferred to gamble at cards. This rebel- 
lious lack of interest in business, joined with dissipation, 
so enraged the old man that he drove Cornelius from the 
house and only allowed him access during nearly a score 
of years at such rare times as the mother succeeded in 
her tears and pleadings. Worn out with her long life 
of drudgery, Vanderbilt's wife died in 1868; about a 
year later the old magnate eloped with a young cousin, 
Frank A. Crawford, and returning from Canada, an- 
nounced his marriage, to the unbounded surprise and 
utter disfavor of his children, 

THE OLD magnate's DEATH. 

An end, however, was soon coming to his prolonged 
life. A few more years of money heaping, and then, on 
May 10, 1876, he was taken mortally ill. For eight 
months he lay in bed, his powerful vitality making a vig- 
orous battle for life ; two physicians died while in the 
course of attendance on him ; it was not until the morn- 
ing of January 4, 1877, ^^^t the final symptoms of ap- 
proaching death came over him. When this was seen 
the group about his bed emotionally sang : " Come. Ye 
Sinners, Poor and Needy," " Nearer. My God. To Thee," 
and " Show Ye Pity, Lord." He died with a conven- 



THE ENTAILING OF THE VANDERBILT FORTUNE I95 

tional religious end of which the world made much ; all 
of the proper sanctities and ceremonials were duly ob- 
served ; nothing was lacking in the piety of that affect- 
ing deathbed scene. It furnished the text for many a 
sermon, but while ministerial and journalistic attention 
was thus eulogistically concentrated upon the loss of 
America's greatest capitalist, not a reference was made 
in church or newspaper to the deaths every year of 
a host of the lowly, slain in the industrial vortex by in- 
jury and disease, and too often by suicide and starvation. 
Except among the lowly themselves this slaughter passed 
unprotested and unnoticed. 

Even as Vanderbilt lay moribund, speculation was busy 
as to the disposition of his fortune. Who would inherit 
his aggregation of wealth ? The probating of his will 
soon disclosed that he had virtually entailed it. About 
$90,000,000 was left to his eldest son, William H., and 
one-half of the remaining $15,000,000 was bequeathed 
to the chief heir's four sons.^ A few millions were dis- 
tributed among the founder's other surviving children, 

3 To Cornelius J. Vanderbilt, the Commodore's " wayward " 
son, only the income derived from $200,000 was bequeathed, 
upon the condition that he should forfeit even this legacy if he 
contested the will. Nevertheless, he brought a contest suit. Wil- 
liam H. Vanderbilt compromised the suit by giving to his brother 
the income on $1,000,000. On April 2, 1882, Cornelius J. Vander- 
bilt shot and killed himself. Croffut gives this highly enlight- 
ening account of the compromising of the suit : 

" At least two of the sisters had sympathized with ' Cornele's ' 
suit, and had given him aid and comfort, neither of them liking 
the legatee, and one of them not having been for years on 
^speaking terms with him; but now, in addition to the bequests 
made to his sisters, William H. voluntarily [sic] added $500,000 
to each from his own portion. 

" He drove around one evening, and distributed this splendid 
largess from his carriage, he himself carrying the bonds into 
each house in his arms and delivering them to each sister in 



196 HISTORY OF THE GREAT AMERICAN FORTUNES 

and some comparatively small sums bequeathed to char- 
itable and educational institutions. The Vanderbilt dy- 
nasty had begun. 



PERSONALITY OF THE CHIEF HEIR. 

At this time William H. Vanderbilt was fifty-six years 
old. Until 1864 he had been occupied at farming on 
Staten Island ; he lived at first in " a small, square, plain 
two-story house facing the sea, with a lean-to on one 
end for a kitchen." The explanation of why the son of a 
millionaire betook himself to truck farming lay in these 
facts : The old man despised leisure and luxury, and had 
a correspondingly strong admiration for " self-made " 
men. Knowing this, William H. Vanderbilt made a 
studious policy of standing in with his father, truckling 
to his every caprice and demand, and proving that he 
could make an independent living. He is described as 
a phlegmatic man of dull and slow mental processes, do- 
mestic tastes and of kindly disposition to his children. 
His father (so the chronicles tell) did not think that 
he " would ever amount to anything," but by infinite 
plodding, exacting the severest labor from his farm la- 
borers, driving close bargains and turning devious tricks 

turn. The donation was accompanied by two interesting inci- 
dents. In one case the husband said, 'William, I've made a 
quick calculation here, and I find these bonds don't amount to 
quite $500,000. They're $150 short, at the price quoted today.' 
The donor smiled, and sat down and made out his check for the 
sum to balance. 

" In another case, a husband, after counting and receipting 
for the $500,000, followed the generous visitor out of the door, 
and said, 'By the way, if you conclude to give the other sisters 
any more, you'll see that we fare as well as any of them, won't 
you?' The donor jumped into his carriage and drove off with- 
out replying, only saying, with a laugh, to his companions, 
'Well, what do you think o' that?'" — "The Vanderbilts " : 151- 
152. 




WILLIAM H. VANDERBILT, 

He Inherited the Bulk of His Father's Fortune and 

Doubled It. 



THE ENTAILING OF THE VANDERBILT FORTUNE I97 

in his dealings, he gradually won the confidence and re- 
spect of the old man, who was always pleased with proofs 
of guile. Croffut gives a number of instances of Wil- 
liam's craft and continues : " From his boyhood he had 
given instant and willing submission to the despotic will 
of his father, and had made boundless sacrifices to please 
him. Most men would have burst defiantly away from 
the repressive control and imperious requirements ; but 
he doubtless thought that for the chance of becoming 
heir to $100,000,000 he could afiford to remain long in 
the passive attitude of a distrusted prince." (sic.) 

The old autocrat finally modified his contemptuous 
opinion, and put him in an executive position in the 
management of the New York and Harlem Railroad. 
Later, he elevated him to be a sort of coadjutor by in- 
stalling him as vice president of the New^ York Central 
Railroad, and as an associate in the directing of other 
railroads. It Vv^as said to be painful to note the ex- 
hausting persistence with which William H. Vanderbilt 
daily struggled to get some perceptions of the details of 
railroad management. He did succeed in absorbing con- 
siderable knowledge. But his training at the hands of 
his father was not so much in the direction of learning 
the system of management. Men of ability could al- 
ways be hired to manage the roads. What his father 
principally taught him was the more essential astute- 
ness required of a railroad magnate ; the manipulation 
of stocks and of common councils and legislatures ; how 
to fight and overthrow competitors and extend the 
sphere of ownership and control ; and how best to re- 
sist, and if possible to destroy, the labor unions. In 
brief, his education was a duplication of his father's 
scope of action : the methods of the sire were infused 
into the son. 



198 HISTORY OF THE GREAT AMERICAN FORTUNES 

From the situation in which he found himself, and 
viewing the particular traits required in the development 
of capitalistic institutions, it was the most appropriate 
training that he could have received. Book erudition 
and the cultivation of fine qualities would have been 
sadly out of place ; his father's teachings were precisely 
what were needed to sustain and augment his possessions. 
On every hand he was confronted either by competitors 
who, if they could get the chance, would have stripped 
him without scruple, or by other men of his own class 
who would have joyfully defrauded him. But over- 
shadowing these accustomed business practices, new and 
startling conditions that had to be met and fought were 
now appearing. 

Instead of a multitude of small, detached railroads, 
owned and operated by independent companies, the 
period was now being reached of colossal railroad sys- 
tems. In the East the small railroad owners had been 
well-nigh crushed out, and their properties joined in 
huge lines under the ownership of a few controlling 
men, while in the West, extensive systems„;;^housands 
of miles long, had recently been built. Having stamped 
out most of the small owners, the railroad barons now 
proceeded to wrangle and fight among themselves. It 
was a characteristic period when the railroad magnates 
w^ere constantly embroiled in the bitterest quarrels, the 
sole object of which was to outdo, bankrupt and wreck 
one another and seize, if possible, the others' property. 



THE RISE OF THE FIRST TRUST. 

It was these conflicts that developed the auspicious 
time and opportunity for a change of the most world- 
wide importance, and one which had a stupendous ulti- 



THE ENTAILING OF THE VANDERBILT FORTUNE I99 

mate purport not then realized. The wars between the 
railroad magnates assumed many forms, not the least of 
which was the cutting of freight rates. Each railroad 
desperately sought to wrench away traffic from the others 
by offering better inducements. In this cutthroat com- 
petition, a coterie of hawk-eyed young men in the oil 
business, led by John D. Rockefeller, saw their fertile 
chance. 

The drilling and the refining of oil, although in their 
comparative infancy, had already reached great propor- 
tions. Each railroad was eager to get the largest share 
of the traffic of transporting oil. Rockefeller, ruminat- 
ing in his small refinery at Cleveland, Ohio, had con- 
ceived the revolutionary idea of getting a monopoly of 
the production and distribution of oil, obliterating the 
middleman, and systematizing and centralizing the whole 
business. 

Then and there was the modern trust born ; and from 
the very inception of the Standard Oil Company Rocke- 
feller and his associates tenaciously pursued their design 
with a combined ability and unscrupulousness such as 
had never before been known since the rise of capitalism. 
One railroad after another was persuaded or forced into 
granting them secret rates and rebates against which 
it was impossible to compete. The railroad magnates — 
William H, Vanderbilt, for instance — were taken in the 
fold of the Standard Oil Company by being made stock- 
holders. With these secret rates the Standard Oil Com- 
pany was enabled to crush out absolutely a myriad of 
competitors and middlemen, and control the petroleum 
trade not only of the United States but of almost the en- 
tire world. Such fabulous profits accunuilated tlmt in the 
course of forty years, after one unending career of in- 
dustrial construction on the one hand, and crime on the 



200 HISTORY OF THE GREAT AMERICAN FORTUNES 

Other, the Standard Oil Company was easily able to be- 
come owners of prodigious railroad and other systems, 
and completely supplant the scions of the magnates whom 
three or four decades before they had wheedled or brow- 
beaten into favoring them with discriminations. 



CORPORATE WEALTH AND LABOR UNIONS. 

The effects of this great industrial transition were 
clearly visible by 1877, so much so that two years later, 
Vanderbilt, more prophetically than he realized, told the 
Hepburn Committee that " if this thing keeps up the oil 
people will own the roads." But other noted industrial 
changes were concurrently going on. With the up- 
springing and growth of gigantic combinations or con- 
centrations of capital, and the gradual disappearance of 
the small factors in railroad and other lines of business, 
workers were compelled by the newer conditions to or- 
ganize on large and compact national lines. 

At first each craft was purely local and disassociated 
from other trades unions. But comprehending the in- 
adequacy and futility of existing separately, and of act- 
ing independently of one another, the unions had some 
years back begun to weld themselves into one powerful 
body, covering much of the United States. Each craft 
union still retained its organization and autonomy, but it 
now became part of a national organization embracing 
every form of trades, and centrally officered and led. 
It was in this way that the workers, step by step, met 
the organization of capital ; the two forces, each repre- 
senting a conflicting principle, were thus preparing for 
a series of great industrial battles. 

Capital had the wealth, resources and tools of the 
country ; the workers their labor power only. As it 



THE ENTAILING OF THE VANDERBILT FORTUNE 201 

stood, it was an uneven contest, with every advantage 
in favor of capital. The workers could decline to work, 
but capital could starve them into subjection. These, 
however, were but the apparent differences. The real 
and immense difference between them was that capital 
was in absolute control of the political governing power 
of the nation, and this power, strange to say, it secured 
by the votes of the very working class constantly fighting 
it in the industrial arena. Many years were to elapse 
before the workers were to realize that they must organ- 
ize and vote with the same political solidarity that they 
long had been developing in industrial matters. With 
political power in their hands the capitalists could, and 
did, use its whole weight with terrific effect to beat down 
the working class, and nullify most of the few conces- 
sions and laws obtained by the w^orkers after the severest 
and most self-sacrificing struggles. 

One of the first memorable battles between the two 
hostile forces came about in 1877. In their rate wars 
the railroad magnates had cut incisively into one an- 
other's profits. The permanent gainers were such in- 
cipient, or fairly well developed, trusts or combinations 
as the Standard Oil Company. Now the magnates set 
about asserting the old capitalist principle of recouping 
themselves by forcing the workers to make up their 
losses. 

But these deficits were merely relative. Practically 
every railroad had issued vast amounts of bonds and 
watered stock, on which fixed charges and dividends 
had to be paid. Judged by the extent of this inflated 
stock, the profits of the railroads had certainly decreased. 
Despite, however, the prevailing cutthroat competition. 
and the slump in general business following the panic 
of 1873, the railroads were making large sums on their 



202 HISTORY OF THE GREAT AMERICAN FORTUNES 

actual investment, so-called. Most of this investment, 
it will be recalled, was not private money but was public 
funds, which were later stolen by corrupt legislation. 
It was shown before the Hepburn Committee in 1879, 
as we have noted, that from 1869 the New York Central 
Railroad had been making sixteen, and perhaps more 
than twenty per cent., on the actual cost of the road. 

Moreover, apart from the profits from ordinary traffic, 
the railroads were annually fattening on immense sums 
of public money gathered in by various fraudulent meth- 
ods. One of these — and is well worth adverting to, 
for it exists to a greater degree than ever before — was 
the robbery of the people in the transportation of mails. 
By a fraudulent official construction, in 1873, of the 
postal laws, the railroads without cessation have cheated 
huge sums in falsifying the weight of mail carried, and 
since that time have charged ten times as much for mail 
carrying as have the express companies (the profits of 
which are very great) for equal haulage. But these are 
simply two phases of the postal plunder. In addition 
to the regular mail payments, the Government has long 
paid to the railroad companies an extra allowance of 
$6,250 a year for the rent of each postal car used, al- 
though official investigation has proved that the whole 
cost of constructing such a car averages but from $2,500 
to $5,000. In rent alone, five millions a year have been 
paid for cars worth, all told, about four millions. From 
official estimates it would clearly seem that the railroads 
have long cheated the people out of at least $20,000,000 
a year in excess rates — a total of perhaps half a billion 
dollars since 1873. The Vanderbilt family have been 
among the chief beneficiaries of this continuous looting.* 

■» Postmaster General Vilas, Annual Report for 1887 : 56. In a 
debate in the United States Senate on February 11, 1905, Sen- 



THE ENTAILING OF THE VANDERBILT FORTUNE 203 

Occasionally the postal officials have made pretences at 
stopping the plunder, but with no real effect. 



THE GREAT STRIKE OF 1877, 

Making a loud and plaintive outcry about their de- 
clining revenues, some of the railroad systems prepared 
to assess their fictitious losses upon the workers by cut- 
ting down wages. They had already reduced wages to 
the point of the merest subsistence ; and now they decreed 
that wages must again be curtailed ten cents on every 
dollar. The Baltimore and Ohio Railroad, then in the 
hands of the Garrett family, with a career behind it of 
consecutive political corruption and fraud, in some ways 
surpassing that of the Vanderbilts, led in reducing the 
wages of its workers. The Pennsylvania Railroad fol- 
lowed, and then the Vanderbilts gave the order for an- 
other reduction. 

At once the Baltimore and Ohio Railroad employes 
retaliated by declaring a strike; the example was fol- 
lowed by the Pennsylvania men. In order to alienate 
the sympathy of the general public and to have a pre- 
text for suppressing the strike wath armed force, the 
railroads, it is quite certain, instigated riots at Martins- 
burg, W. Va., and at Pittsburg. Troops were called 
out and the so-called mobs were fired on, resulting in a 
number of strikers being killed and many wounded. 

That the railroads deliberately destroyed their own 
property and then charged the culpability to the strikers, 
was common report. So conservative an authority as 

ator Pettigrew quoted Postmaster General Wanamaker as say- 
ing that " the railroad companies see to it that the representatives 
in Congress in both branches take care of the interests of the 
railway people, and that it is practically impossible to procure 
legislation in the way of reducing expenses." 



204 HISTORY OF THE GREAT AMERICAN FORTUNES 

Carroll D. Wright, for a long time United States Com- 
missioner of Labor, tells of the railroad agents setting 
a large number of old, decayed, worthless freight cars 
at Pittsburg on fire, and accusing the strikers of the act. 
He further tells of the Pennsylvania Railroad subse- 
quently extorting millions of dollars from the public 
treasury on the ground that the destruction of these 
cars resulted from riot. Wright says that from all that 
he has been able to gather, he believes the reports of the 
railroads manufacturing riots to have been true.^ Van- 
derbilt acted w^ith greater wisdom than his fellow mag- 
nates. Adopting a conciliatory stand, he averted a strike 
on his lines by restoring the old rate of wages and by 
other mollifying measures. 

He was now assailed from a different direction. The 
long gathering anger and enmity of the various sections 
of the middle class against the corporate wealth which 
had possessed itself of so dictatorial a power, culminated 
in a manner as instructive as it was ineft'ective. 

In New York State, the Legislature was prevailed 
upon, in 1879, ^^ appoint an investigating committee. 
Vanderbilt and other railroad owners, and a multitude 
of complaining traders were haled up to give testimony ; 
the stock-jobbing transactions of Vanderbilt and Gould 
were fully and tediously gone into, as also were the 
methods of the railroads in favoring certain corporations 
and mercantile establishments with secret preferential 
freight rates. 

Not in the slightest did this long-drawn investigation 
have any result calculated to break the power of the rail- 

6 "The Battles of Labor ": 122. In all, the railroad com- 
panies secured approximately $22,000,000 from the public treasury 
in Pennsylvania as indemnity for property destroyed during these 
" riots." In a subsequent chapter, the corruption of the opera- 
tion is described. 



THE ENTAILING OF THE VANDERBILT FORTUNE 205 

road owners, or their predominant grip upon govern- 
mental functions. 

The magnate class preferred to have no official in- 
quiries; there was always the annoying possibility that 
in some State or other inconvenient laws might be passed, 
or harrassing legal actions begun ; and while revocation 
or amendment of these laws could be put through sub- 
sequently when the popular excitement had died away, 
and the suits could be in some way defeated, the ex- 
posures had an inflaming effect upon a population as 
yet ill-used to great one-man power of wealth. But if 
the middle class insisted upon action against the railroad 
magnates, there was no policy more suitable to these 
magnates than that of being investigated by legislative 
committees. They were not averse to their opponents 
amusing themselves, and finding a vent for their wrath, 
in volumes of talk which began nowhere and ended no- 
where. In reply to charges, the magnates could put in 
their skillful defense, and inject such a maze of argu- 
ment, pettifoggery and technicalities into the proceed- 
ings, that before long the public, tired of the puzzle, was 
bound to throw up its hands in sheer bewilderment, un- 
able to get any concrete idea of what it was all about. 

FRAUD BECOMES RESPECTABLE WEALTH. 

So the great investigation of 1879 passed by without 
the least deterrent effect upon the constantly-spreading 
power and wealth of such men as Vanderbilt and Gould. 
Every new development revealed that the hard-dying 
middle class was being gradually, yet surely, ground out. 
But the investigation of 1879 ^^d one significant unan- 
ticipated result. 

What William H. Vanderbilt now did is well worth 



206 HISTORY OF THE GREAT AMERICAN FORTUNES 

noting. As the owner of four hundred thousand shares 
of New York Central stock he had been rabidly de- 
nounced by the middle class as a plutocrat dangerous 
to the interests of the people. He decided that it would 
be wise to sell a large part of this stock ; by this stroke 
he could advantageously exchange the forms of some 
of his wealth, and be able to put forward the plausible 
claim that the New York Central Railroad, far from 
being a one-man institution, was owned by a large num- 
ber of investors. In November, 1879, he sold through 
J. Pierpont Morgan more than two hundred thousand 
shares to a syndicate, chiefly, however, to British aristo- 
crats. 

This sale in no way diminished his actual control of 
the New York Central Railroad ; not only did he retain 
a sufficient number of shares, but he owned an immense 
block of the railroad's bonds. The sale of the stock 
brought him $35,000,000. What did he do with this 
sum ? He at once reinvested it in United States Gov- 
ernment bonds. Thus, the proceeds of a part of the 
stock obtained by outright fraud, either by his father or 
himself, were put into Government bonds. This surely 
was a very sagacious move. Stocks do not have the 
solid, honest air that Government bonds do ; nothing is 
more finely and firmly respectable than a Government 
bondholder. 

From the blackmailer, corruptionist and defrauder of 
one generation to the stolid Government bondholder of 
the next, was not a long step, but it was a sufficient one. 
The process of investing in Government bonds Vander- 
bilt continued ; in a few years he owned not less than 
$54,000,000 worth of four per cents. In 1884 he had to 
sell $10,000,000 of them to make good the losses in- 
curred bv his sons on the Stock Exchange, but he later 



THE ENTAILING OF THE VANDERBILT FORTUNE 207 

bought $10,000,000 more. Also he owned $4,000,000 it] 
Government three and one-half per cent, bonds, many 
millions of State and city bonds, several millions of dol- 
lars in manufacturing stocks and mortgages, and $22,- 
000,000 of railroad bonds. The same Government of 
which his father had defrauded millions of dollars now 
stood as a direct guarantee behind at least $70,000,000 
of his bonded wealth, and the whole population of the 
United States was being taxed to pay interest on bonds, 
the purchase of which was an outgrowth of the theft 
of public money committed by Cornelius Vanderbilt, 

In the years following his father's death, William H. 
Vanderbilt found no difficulty in adding more extended 
railroad lines to his properties, and in increasing his 
wealth by tens of millions of dollars at a leap. 

MORE RAILROADS ACQUIRED. 

The impact of his vast fortune was well-nigh resist- 
less. Commanding both financial and political power, 
his money and resources were used with destructive ef- 
fect against almost every competitor standing in his way. 
If he could not coerce the owners of a railroad, the pos- 
session of which he sought, to sell to him at his own 
price, he at once brought into action the wrecking tactics 
his father had so successfully used. 

The West Shore Railroad, a competing line running 
along the west bank of the Hudson River, was bank- 
rupted by him, and finally, in 1883, bought in under fore- 
closure proceedings. By lowering his freight rates he 
took away most of its business ; through a series of years 
he methodically caused it to be harrassed and burdened 
by the exercise of his great political power ; he thwarted 
its plans and secretly hindered it in its application for 



208 HISTORY OF THE GREAT AMERICAN FORTUNES 

money loans or other relief. Other means, open and 
covert, were employed to insure its ruination. When 
at last he had driven its owners into a corner, he calmly 
stepped in and bought up its control cheaply, and then 
turned out many millions of dollars of watered stock. 

He attempted to break in upon the territory traversed 
liy the Pennsylvania Railroad by building a competing 
line, the South Pennsylvania Railroad. In the construc- 
tion of this road he had an agreement with the Phila- 
delphia and Reading Railroad, an intense competitor of 
the Pennsylvania ; and, as a precedent to building his 
line, he obtained a large interest in the Reading Rail- 
road. Out of this arrangement grew a highly im- 
portant sequence which few then foresaw — the grad- 
ual assumption by the Vanderbilt family of a large share 
of the ownership and control of the anthracite coal mines 
of Pennsylvania. 

Vanderbilt, aiming at sharing in the profits from the 
rich coal, oil and manufacturing traffic of Pennsylvania, 
went ahead with his building of the South Pennsylvania 
line. But there was an easy way of getting millions of 
dollars before the road was even opened. This was 
the fraudulent one, so widely practiced, of organizing 
a bogus construction company, and charging three and 
four times more than the building of the railroad actu- 
ally cost. Vanderbilt got together a dummy construc- 
tion company composed of some of his clerks and 
brokers, and advanced the sum, about $6,500,000, to 
build the road. In return, he ordered this company to 
issue $20,000,000 in bonds, and the same amount in 
stock. Of this $40,000,000 in securities, more than $30,- 
000,000 was loot.** 

® Van Oss' " American Railroads As Investments " : 126. Pro- 
fessor Frank Parsons, in his " Railways, the Trusts and the 



THE EXTAH-INV; oi' Tlir: VANDEREILT FORTUNE 209 

If, however, X'anderbilt anticipated that the Pennsyl- 
vania Raih'oad would remain docile or passive while 
his competitive line was being built, he soon learned how 
sorely mistaken he was. This time he was opposing 
no weak, timorous or unsophisticated competitors, but 
a group of the most powerful and astute organizers and 
corruptionists. Their methods in Pennsylvania and 
other States were exactly the same as Vanderbilt's in 
New. York State; their political power was as great 
in their chosen province as his in New York. His in- 
cursion into the territory they had apportioned to them- 
selves for exploitation was not only resented but was 
fiercely resisted. Presently, overwhelmed by the crush- 
ing financial and political weapons with which they 
fought him, Vanderbilt found himself compelled to com- 
promise by disposing of the line to them. 



THE SEQUEL TO A GENTLEMEN S AGREEMENT. 

Vanderbilt's methods and his duplicity in the disposi- 
tion of this project were strikingly revealed in the court 
proceedings instituted by the State of Pennsylvania. It 
appeared from the testimony that he had made a " gen- 
tlemen's agreement " with the Reading Railroad, the bit- 
terest competitor of the Pennsylvania Railroad, for a 
close alliance of interests. Vanderbilt owned eighty-two 
thousand shares of Reading stock, much of which he 
had obtained on this agreement. Strangely confiding 
in his word, the Reading management proceeded to ex- 
pend large sums of money in building terminals at Har- 
risburg and elsewhere to make connections with his pro- 
posed South Pennsylvania Railroad. 

People," incorrectly ascribes this juggling to Commodore Vander- 
bilt. 



2IO HISTORY Of THE GREAT AMERICAN FORTUNES 

Tlie Pennsylvania Railroad, however, set about re- 
taliating in various eiTective ways. At this point, J. 
rierpont Morgan — whose career we shall duly de- 
scribe — stepped boldly in. Morgan was Vanderbilt's 
financial agent ; and it was he, according to his own tes- 
timony on October 13, 1885, before the court examiner, 
who now suggested and made the arrangements between 
V^anderbilt and the Pennsylvania Railroad magnates, by 
which the South Pennsylvania Railroad was to become 
the property of the Pennsylvania system, and the Read- 
ing Railroad magnates were to be as thoroughly thrown 
over by as deft a stroke of treachery as had ever been 
put through in the business world. 

To their great astonishment, the Reading owners woke 
up one morning to find that Vanderbilt and his asso- 
ciates had completely betrayed them by disposing of a 
majority of the stock of the partly built South Pennsyl- 
vania line to the Pennsylvania Railroad system for 
$5,600,000 in three per cent, railroad debenture bonds. 
It is interesting to inquire who Vanderbilt's associates 
were in this transaction. They were John D. Rocke- 
feller, William Rockefeller, D. O. Mills, Stephen B. El- 
kins, William C. Whitney and other founders of large 
fortunes. For once in his career, Vanderbilt met in the 
Pennsylvania Railroad a competitor powerful enough to 
force him to compromise. 

Elsewhere, Vanderbilt was much more successful. 
Out through the fertile wheat, corn and cattle sections of 
Wisconsin, Minnesota, Iowa, Dakota and Nebraska ran 
the Chicago and Northwestern Railroad, a line 4,000 
miles long which had been built mostly by public funds 
and land grants. Its history was a succession of cor- 
rupt acts in legislatures and in Congress, and comprised 
the usual process of stock watering and exploitation. 




THE ORIGINAL VANDERBILT HOMESTEAD, 
Near New Dorp, Staten Island, N. Y. 




PALACES BUILT BY WILLIAM H. VANDERBILT, 
And Resided in by Him and His Descendants. 



THE ENTAILING OF THE VAXDERBILT FORTUNE 211 

By a series of manipulalions ending in 1880, \'anclerbilt 
secured a controlling interest in this railroad, so that he 
had a complete line from New York to Chicago, and 
thence far into the Northwest. During these years he 
also secured control of other railroad lines. 



HE EXPANDS IN SPLENDOR. 

It was at this time that he, in accord with the chrysalid 
tendency manifested by most other millionaires, discarded 
his long-followed sombre method of life, and invested 
himself with a gaudy magnificence. On Fifth avenue, 
at Fifty-first and Fifty-second streets, he built a spacious 
brown-stone mansion. In reality it was a union of two 
mansions ; the southern part he planned for himself, the 
northern part for his two daughters. For a year and a 
half more than six hundred artisans were employed on 
the interior ; sixty stoneworkers were imported from 
Europe. The capaciousness, the glitter and the clutter- 
ing of splendor in the interior were regarded as of un- 
precedented lavishness in the United States. 

All of the luxury overloading these mansions was, as 
was well known, the fruit of fraud piled upon fraud ; it 
represented the spoliation, misery and degradation of 
the many ; but none could deny that Vanderbilt was fully 
entitled to it by the laws of a society which decreed 
that its rulers should be those who could best use and 
abuse it. And rulers must ever live imperiously and 
impressively ; it is not fitting that those who command 
the resources, labor and Government of a nation should 
issue their mandates from pinched and meager surround- 
ings. Mere pseudo political rulers, such as governors 
and presidents, are expected to be satisfied with the plain, 
unornamental official residences provided by the people ; 



212 HISTORY OF THE GREAT AMERICAN FORTUNES 

thereby they keep up the appearance of that much-be- 
spoken repubUcan simpHcity which is part of the mask 
of poHtical formulas. Luckily for themselves, the finan- 
cial and industrial rulers are bound by no circumscrib- 
ing tradition ; hence they have no set of buckramed rules 
to stick close to for fear of an indignant electorate. 

The same populace that glowers and mutters when- 
ever its political officials show an inclination to pomp, 
regards it as perfectly natural that its financial and in- 
dustrial rulers should body forth all of the most obtru- 
sive evidences of grandeur. Those Vanderbilt twin 
palaces, still occupied by the Vanderbilt family, were 
appropriately built and fitted, and are more truly and 
specifically historic as the abode of Government than 
official mansions ; for it is the magnates who have in 
these modern times been the real rulers of nations ; it is 
they who have usually been able to decide who the po- 
litical rulers should be ; political parties have been simply 
their adjuncts; the halls of legislation and the courts 
their mouthpieces and registering bureaus. Theirs has 
been the power, under cover though it has lurked, of ele- 
vating or destroying public officials, and of approving 
or cancelling legislation. Why, indeed, should they not 
have their gilded palaces? 

A SUDDEN TRANSFORMATION. 

The President of the United States lived in the sub- 
dued simplicity of the White House. But William H. 
\^anderbilt ate in a great, lofty dining room, twenty- 
six by thirty-seven feet, wrought in Italian Renaissance, 
with a wainscot of golden-hued, delicately-carved Eng- 
lish oak around all four sides, and a ceiling with richly- 
painted hunting-scene panels. When he entertained it 



THE ENTAILING OF THE VANDERBILT FORTUNE 213 

was in a vast drawing-room, palatially equipped, its 
walls hung with flowing masses of pale red velvet, em- 
broidered with foliage flowers and butterflies, and set 
with crystals and precious stones. 

It was his art gallery, however, which flattered him 
most. He knew nothing of art, and underneath his pre- 
tentions cared less, for- he was a complete utilitarian; 
but it had become fashionable to have an elaborate art 
gallery, and he forthwith disbursed money right and left 
to assemble an aggregation of paintings. 

He gave orders to agents for their purchase witli the 
same equanimity that he would contracts for railroad 
supplies. And, as a rule, the more generous in size 
the canvasses, the more satisfied he was that he was get- 
ting his money's worth ; art to him meant buying by the 
square foot. Not a few of the paintings unloaded upon 
him were, despite their high-sounding reputations, essen- 
tially commonplace subjects, and flashy and hackneyed 
in execution; but he gloried in the celebrity that came 
from the high prices he was decoyed into paying for 
them. For one of Meissionier's paintings, " The Ar- 
rival at the Chateau," he paid $40,000, and on one of his 
visits to Paris he enriched ]\Ieissionier to the extent of 
$188,000 for seven paintings. Not until his corps of 
art advisers were satisfied that a painter became fash- 
ionably talked about, could Vanderbilt be prevailed upon 
to buy examples of his work. There was something 
intensely magical in the ease and cheapness with which 
he acquired the reputation of being a " connoisseur of 
art." Neither knowledge nor appreciation were required ; 
with the expenditure of a few hundred thousand dollars 
he instantaneously transformed himself from a heavy- 
witted. uncultured money hoarder into the character of 
a surpassing " judge and patron of art." And his pre- 



214 HISTORY OF THE GREAT AMERICAN FORTUNES 

tensions were seriously accepted by the uninformed, ab- 
sorbing their opinions from the newspapers. 

"the public be damned/' 

If he had discreetly comported himself in other 
respects he might have passed tolerably well as an ex- 
tremely public-spirited and philanthropic man. After 
every great fraud that he put through he would usually 
throw out to the public some ostentatious gift or dona- 
tion. This would furnish a new ground to the syco- 
phantic chorus for extolling his fine qualities. But he 
happened to inherit his father's irascibility and extreme 
contempt for the public whom he exploited. Unfortu- 
nately for him, he let out on one memorable occasion 
his real sentiments. Asked by a reporter why he did 
not consider public convenience in the running of his 
trains, he blurted out, '' The public be damned ! " 

It was assuredly a superfluous question and answer ; 
but expressed so sententiously, and published, as it was, 
throughout the length and breadth of the land, it excited 
deep popular resentment. He was made the target for 
general denunciation and execration, although unreason- 
ably so, for he had but given candid and succinct utter- 
ance to the actuating principle of the whole capitalist 
class. The moral of this incident impressed itself sharply 
upon the minds of the masterly rich, and to this day has 
greatly contributed to the politic manner of their ex- 
terior conduct. They learned that however in private 
they might safely sneer at the mass of the people as 
created for their manipulation and enrichment, they 
must not declare so publicly. Far wiser is it, they have 
come to understand, to confine spoliation to action, while 



THE EXTAILIXG OF THE VAXDERDILT FORTUNE 21$ 

in outward speech affirming the most melHfluous and 
touching professions of sohcitude for pubHc interests. 



ADDS $100,000,000 IN SEVEN YEARS. 

But WilHam H. Vanderbilt was Httle affected by this 
outburst of pubHc rage. He could well afford to smile 
cynically at it, so long as no definite move was taken 
to interfere with his privileges, power and possessions. 
Since his father's death he had added fully $100,000,000 
to his wealth, all within a short period. It had taken 
Commodore Vanderbilt more than thirty years to estab- 
lish the fortune of $105,000,000 he left. With a greater 
population and greater resources to prey upon, William 
H. Vanderbilt almost doubled the amount in seven years. 
In January, 1883, he confided to a friend that he was 
worth $194,000,000. " I am the richest man in the 
world," he went on. " In England the Duke of West- 
minster is said to be worth $200,000,000, but it is mostly 
in land and houses and does not pay two per cent." ^ 
In the same breath that he boasted of his wealth he 
would bewail the ill-health condemning" him to be a 
victim of insomnia and indigestion. 

Having a clear income of $10,350,000 a year, he kept 
his ordinary expenses down to $200,000 a year. What- 
ever an air of indifference he would assume in his 
grandee role of " art collector," yet in most other mat- 
ters he was inveterately closefisted. He had a delusion 
that " everybody in the world was ready to take advan- 
tage of him," and he regarded " men and women, as 
a rule, as a pretty bad lot." " This incident — one of 

' Related in the New York " Times," issue of December 9, 1885. 
8 "The Vanderbilts": 127. 



2l6 HISTORY OF THE GREAT AMERICAN FORTUNES 

many similar incidents narrated by Croffut — reveals 
his microscopic vigilance in detecting impositions : 

When in active control of aflfairs at the office he followed 
the unwholesome habit of eating the niiddaj' lunch at his desk, 
the waiter bringing it in from a neighboring restaurant. 

He paid his bill for this weekly, and he always scrutinized 
the items with proper care. "Was I here last Thursday?" he 
asked of a clerk at an adjoining desk. 

" No, Mr. Vanderbilt ; you stayed at home that day." 

" So I thought," he said, and struck that day from the bill. 
Another time he would exclaim, sotto voce, " I didn't order cof- 
fee last Tuesday," and that item would vanish. 

Up to the very last second of his life his mind was 
filled with a whirl of business schemes ; it was while 
discussing railroad plans with Robert Garrett in his 
mansion, on December 8, 1885, that he suddenly shot 
forward from his chair and fell apoplectically to the 
floor, and in a twinkling was dead. Servants ran to and 
fro excitedly ; messengers were dispatched to summon 
his sons ; telegrams flashed the intelligence far and wide. 

The passing away of the greatest of men could not 
have received a tithe of the excitement and attention 
caused by William H. Vanderbilt's death. The news- 
paper offices hotly issued page after page of description, 
not without sufficient reason. For he. although untitled 
and vested with no official power, was in actuality an 
autocrat ; dictator.'^hip by tnoney bags was an established 
fact ; and while the man died, his corporate wealth, the 
real director and center, to a large extent, of govern- 
ment functions, survived unimpaired. 

He had abundantly proved his autocracy. Law after 
law had he violated ; like his father he had corrupted and 
intiinidated, had bought laws, ignored such as were 
unsuited to his interests, and had decreed his own rules 



THE ENTAILING OF THE \^\NDERBILT FORTUNE 21'J 

and codes. Progressively bolder had the money kings 
become in coming out into the open in the directing of 
Government. Long had they prudently skulked behind 
forms, devices and shams ; they had operated secretly 
through tools in office, while virtuously disclaiming any 
insidious connection with politics. But no observer took 
this pretence seriously. James Bryce, fresh from Eng- 
land, delving into the complexities and incongruities of 
American politics at about this time, wrote that " these 
railway kings are among the greatest men, perhaps I 
may say, the greatest men in America," which term, 
" greatest," was a ludicrously reverent way of describing 
their qualities. " They have power," he goes on in the 
same work, " more power — that is, more opportunity 
to make their will prevail, than perhaps any one in polit- 
ical life except the President or the Speaker, who, after 
all, hold theirs only for four years and two years, while 
the railroad monarch holds his for life." ^ Bryce was 
not well enough acquainted with the windings and depths 
of American political workings to know that the money 
kings had more power than President or Speaker, not 
nominally, but essentially. He further relates how when 
a railroad magnate traveled, his journey was like a royal 
progress ; Governors of States and Territories bowed 
before him ; Legislatures received him in solemn session ; 
cities and towns sought to propitiate him, for had he 
not the means of making or marring a city's fortunes? 
" You cannot turn in any direction in American politics," 
wrote Richard T. Ely a little later, " without discovering 
the railway power. It is the power behind the throne. 
It is a correct popular instinct which designates the 
leading men in the railways, railroad magnates or kings. 
. . Its power ramifies in every direction, its roots 

'"The American Commonwealth," First Ed.: 515. 



2l8 UISTURV Ul" THE GREAT AMERICAN FORTUNES 

reaching counting rooms, editorial sanctums, schools and 
churches which it supports with a part of its revenues, 
as well as courts and Legislatures." . . .^'* 



HIS DEATH A NOTABLE EVENT. 

Vanderbilt's death, as that of one of the real monarchs 
of the day, was an event of transcendent importance, 
and was treated so. The vocabulary was ransacked to 
find adjectives glowing enough to describe his enterprise, 
foresight, sagacity and integrity. Much elaborated upon 
was the fiction that he had increased his fortune by 
honest, legitimate means — a fiction still disseminated 
by those shallow or mercenary writers whose trade is 
to spread orthodox belief in existing conditions. The 
underlying facts of his career and methods were pur- 
posely suppressed, and a nauseating sort of panegyric 
substituted. Who did not know that he had bribed 
Legislature after Legislature, and had constantly re- 
sorted to conspiracy and fraud? Not one of his eulogists 
was innocent of this knowledge ; the record of it was 
too public and i)al]:)able to justify doubts of its truth. 
The extent of his possessions and the size of his fortune 
aroused wonderment, but no cfifort was made to con- 
trast the immense wealth bequeathed by one man with the 
dire poverty on every hand, nor to connect those two 
conditions. 

At the very time his wealth was being inventoried at 
$200,000,000, not less than a million wage earners were 
out of employment," while the millions at work received 

^^ " The Independent," issue of August 28, i8qo. 

1^ " It is probably true," said Carroll D. Wright in the United 
States Labor Report for 1886, "that this totnl (in round uxim- 
bers 1,000,000) as representing the unemployed at any one time 
in the United States, is fairly representative.' 



THE ENTAILING OF THE VANDERBILT FORTUNE 219 

the scantiest wages. Nearly three milHons of people 
had been completely pauperized, and, in one way or 
another, had to be supported at public expense. Once 
in a rare while, some perceptive and unshackled public 
official might pierce the sophistries of the day and reveal 
the cause of this widespread poverty, as Ira Steward did 
in the fourth annual report of the Massachusetts Bureau 
of Statistics of Labor for 1873. 

" It is the enormous profits." he pointedly wrote, 
" made directly upon the labor of the wage classes, and 
indirectly through the results of their labor, that, first, 
keeps them poor, and, second, furnishes the capital that 
is finally loaned back to them again " at high rates of 
interest. Unquestionably sound and true was this ex- 
planation, yet of what avail was it if the causes of 
their poverty were withheld from the active knowledge 
of the mass of the wage workers? It was the special 
business of the newspapers, the magazines, the pulpit and 
the politicians to ignore, suppress or twist every particle 
of information that might enlighten or arouse the mass 
of people ; if these agencies were so obtuse or recalcitrant 
as not to know their expected place and duty at critical 
times, they were quickly reminded of them by the prop- 
ertied classes. To any newspaper owner, clergyman or 
politician showing a tendency to radicalism, the punish- 
ment came quickly. The newspaper owner was deprived 
of advertisements and accommodations, the clergyman 
was insidiously hounded out of his pulpit by his own 
church associations, the funds of which came from men 
of wealth, and the politician was ridiculed and was sum- 
marily retired to private life by corrupt means. As for 
genuinely honest administrative officials (as distinguished 
from the apparently honest) who exposed prevalent con- 
ditions and sought to remedy them in their particular 



220 HISTORY OF THE GREAT AMERICAN FORTUNES 

departments, they were eventually got rid of by a similar 
campaign of calumny and corrupt influences. 

HIS FRAUDS IN EVADING TAXES. 

As in the larger sense all criticism of conditions was 
systematically smothered, so were details of the methods 
of the rich carefully obscured or altogether passed by 
in silence. At Vanderbilt's death the newspapers laved 
in gorgeous descriptions of his mansion. Yet apart from 
the proceeds of his great frauds, the amounts out of which 
he had cheated the city and State in taxation were alone 
much more than enough to have paid for his splendor of 
living. Like the Astors, the Goelets, Marshall Field 
and every other millionaire without exception, he con- 
tinuously defrauded in taxes. 

We have seen how the Vanderbilts seized hold of tens 
of millions of dollars of bonds by fraud. Certain of 
their railroad stocks were exempted from individual tax- 
ation, but railroad bonds ranked as taxable personal 
property. Year after year William H. Vandetbilt had 
perjured himself in swearing that his personal property 
did not exceed $500,000. On more than this amount he 
would not pay. When at his death his will revealed to 
the public the proportions of his estate, the New York 
City Commissioners of Assessments and Taxes made an 
apparent effort to collect some of the millions of dollars 
out of which he had cheated the city. It was now that 
the obsequious and time-serving Depew, grown gray and 
wrinkled in the retainership of the Vanderbilt genera- 
tions, came forward with this threat: "He informed 
us," testified ^Michael Coleman, president of the commis- 
sion, " that if we attempted to press too hard he would 
take proceedings by which most of the securities would 



THE ENTAILING OF THE VANDERBILT FORTUNE 221 

be placed beyond our reach so that we could not tax 
them. The Vanderbilt family could convert everything 
they had into non-taxable securities, such as New York 
Central, Government and city bonds, Delaware and Lack- 
awanna, and Delaware and Western Railroad stocks, 
and pay not a dollar provided they wished to do so." ^- 
The \"anderbilt estate compromised by paying the city 
a mere part of the sum owed. It succeeded in keeping 
the greatest part of its possessions immune from taxa- 
tion, in doing which it but did what the whole of the 
large propertied class was doing, as was disclosed in 
further detailed testimony before the New York Senate 
Committee on Cities in 1890. 

HIS WILL TRANSMITS $200,000,000. 

Unlike his father, William H. Vanderbilt did not 
bequeath the major portion of his fortune to one son. 
He left $50,000,000 equally to each of his two sons, 
Cornelius and William K. Vanderbilt. Supplementing 
the fortunes they already had, these legacies swelled 
their individual fortunes to approximately $100,000,000 
each — about the same amount as their father had him- 
self inherited. The remaining $100,000,000 was thus 
disposed of in William H. Vanderbilt's will : $40,000,- 
000, in railroad and other securities, was set apart as a 
trust fund, the income of which was to be apportioned 
equally among each of his eight children. This provided 
them each with an annual income of $500,000. In turn, 
the principal was to descend to their children, as they 
should direct by will. Another $40,000,000 was shared 
outright among his eight children. The remaining $20,- 

^- The New York Senate Committee on Cities, 1890, iii : 2355- 



222 HISTORY OF THE GREAT AMERICAN FORTUNES 

000,000 was variously divided : the greater part to his 
widow ; $2,000,000 as an additional gift to Cornelius ; 
$1,000,000 to a favorite grandson; sundry items to other 
relatives and friends, and about $1,000,000 to charitable 
and public institutions. 

He was buried in a mausoleum costing $300,000, which 
he himself had ordered to be built at New Dorp, Staten 
Island ; and there to-day his ashes lie, splendidly interred, 
while millions of the living plundered and disinherited 
are suffered to live in the deadly congestion of miserable 
habitations. 



CHAPTER VII 

THE VANDERBILT FORTUNE IN THE PRESENT 
GENERATION 

With the demise of William H. Vanderbilt the Vander- 
bilt fortune ceased being a one-man factor. Although ap- 
portioned among the eight children, the two who 
inherited by far the greater part of it — Cornelius and 
William K. Vanderbilt — were its rulers paramount. To 
them descended the sway of the extensive railroad sys- 
tems appropriated by their grandfather and father, with 
all of the allied and collateral properties. Both of these 
heirs had been put through a punctilious course of train- 
ing in the management of railroad afifairs ; all of the 
subtle arts and intricacies of finance, and the grand tacti- 
cal and strategic strokes of railroad manipulation, had 
been drilled into them with extraordinary care. 

Their first move upon coming into their inheritance 
was to surround themselves with the magnificence of 
imposing residences, as befitted their state and estate. 
A signatory stroke of the pen was the only exertion 
required of them ; thereupon architects and a host of 
artisans yielded service and built palaces for them, for 
the one at Fifth avenue and Fifty-second street, for the 
other at Fifth avenue and Fifty-seventh street. 

Millions were spent with prodigal lavishness. On 
his Fifth avenue mansion alone, Cornelius expended 
$5,000,000. To get the space for three beds of blossoms 
and a few square yards of turf, a brownstone house 
adjoining his mansion was torn down, and the garden 

223 



224 HISTORY OF THE GREAT AMERICAN FORTUNES 

created at an expense of $400,000. George, a brother of 
Cornelius and of William K. Vanderbilt, and a man of 
retiring disposition, spent $6,000,000 in building a palatial 
home in the heart of the North Carolina mountains. For 
three years three hundred stonemasons were kept busy ; 
and he gradually added land to his surrounding estate until 
it embraced one hundred and eighty square miles. His 
game preserves were enlarged until they covered 20,000 
acres. So, within thirty years from the time their grand- 
father, Commodore Vanderbilt, was extorting his original 
millions by blackmailing, did they live like princes, and 
in greater luxury and power than perhaps any of the 
titular princes of ancient or modern days. But the 
splendor of these abodes was intended merely for partial 
use. At their command spacious, majestic palaces arose 
at ISTewport, whither in the torrid season some of the 
Vanderbilts transferred their august seat of power and 
pleasure. 

Hardly had they settled themselves down in the vested 
security of their great fortunes when an ominous situ- 
ation presented itself to shake the entire propertied class 
into a violent state of uneasiness. Hitherto the main an- 
tagonistic movement perturbing the magnates was that 
of the obstreperous and still powerful middle class. 
Dazed and enraged at the certain prospect of their com- 
plete subjugation and eventual annihilation, these small 
capitalists had clamored for laws restricting the power 
of the great capitalists. Some of their demands were 
constantly being enacted into law, without, however, the 
expected results. 

THE GREAT LABOR MOVEMENT OF 1886. 

Now, to the intense alarm of all sections of the cap- 
italist class, a very different quality of movement reared 



THE VANDERBILT FORTUNE 225 

itself upward from the deeps of the social formation.^ 
This time it was the laboring masses preparing for 
the most vigorous and comprehensive attack that they 
had ever made upon capitalism's intrenchments. Long 
exploited, oppressed and betrayed, starved or clubbed 
into intervals of apathy or submission, they were again 
in motion, moving forward with a set deliberation and 
determination which disconcerted the capitalist class. 
No mere local conflict of class interests was it on this 
occasion, but a general cohesive revolt of the workers 
against some of the conditions and laws under which 
they had to labor. 

In 1884 the Federation of Trades and Labor Unions 
of the United States and Canada had issued a manifesto 
calling upon all trades to unite in the demand for an 
eight-hour workday. The date for a general strike 
was finally fixed for May i, 1886. The year 1886, 
therefore, was one of general agitation throughout the 
United States. With rapidity and enthusiasm the move- 
ment spread. Presently it took on a radical character. 
Realizing it to be at basis the first national awakening 
of the proletariat, progressive men and women of every 
shade of opinion hastened forward to support it and 
direct it into one of opposition, not merely to a few of 
the evils of wage slavery, but to what they considered 
the fundamental cause itself — the capitalist system. 
The propertied classes were not deceived. They knew 

^ It may be asked why an extended description of this move- 
ment is interposed here. Because, inasmuch as it is a part of 
the plan of this work to present a constant succession of con- 
trasts, this is, perhaps, as appropriate a place as any to give an 
account of the highly important labor movement of 1886. Of 
course, it will be understood that this movement was not the 
result of any one capitalist fortune or process, but was a general 
revolt to compel all forms of capitalist control to concede better 
conditions to the workers. 



^26 



HISTORY OF THE GREAT AMERICAN FORTUNES 



that while this labor movement nominally confined itself 
to one for a shorter workday, yet its impetus was such 
that it contained the fullest potentialities for developing 
into a mighty uprising against the very system by which 
they were enabled to enrich themselves and enslave the 
masses. 

The moment this fact was discerned, both great and 
small capitalists instinctively suspended hostilities. They 
tacitly agreed to hold their bitter warfare for supremacy 
in abeyance, and unite in the face of their common 
danger. The triangular conflict between the large and 
small capitalists and the trades unions now resolved into 
a duel between the propertied classes of all descriptions 
on the one hand, and, on the other, the workingmen's 
organizations. The Farmers' Alliance, essentially a mid- 
dle-class movement of the employing farmers in the 
South and West, was counted upon as aligned with the 
propertied classes. On the part of the capitalists there 
was no unity of organization in the sense of selected 
leaders or committees. It was not necessary. A 
stronger bond than that of formal organization drove 
them into acting in conscious unison — namely, the im- 
mediate peril involved to their property interests. Ap- 
prehension soon gave way to grim decision. This for- 
midable labor movement had to be broken and dispersed 
at any cost. 

rUit how was the work of destruction to be done? 
This was the predicament. Vested wealth could suc- 
ceed in bribing a labor leader here and there ; but the 
movement had bounded far beyond the elemental stage, 
and had become a glowing agitation which no traitor 
or set of traitors could have stopped. 

One effective way of discrediting and suppressing it 



THE VAXDERRILT FORTUNE 227 

there was ; the ancient one of virtually outlawing it, and 
throwing against it the whole brute force of Government. 
The task of putting it down was preeminently one for 
the police, army and judiciary. They had been used 
to stifle many another protest of the workers ; why not 
this? As the great labor movement rolled on, enlistint;; 
the ardent attachment of the masses, denouncing the 
injustices, corruption and robberies of the existing indus- 
trial system, the propertied classes more acutely under- 
stood that they must hasten to stamp it out by whatever 
means. The municipal and State governments and the 
National Government, completely representing their inter- 
ests and ideas, and dominated by them, stood ready to use 
force. But there had to be some kind of pretext. The 
hosts of labor were acting peacefully and with remark- 
able self control and discipline. 



THE PROPERTIED CLASSES STRIKE BACK. 

The propitious occasion soon came. It was in Chi- 
cago that the blow was struck which succeeded in 
discrediting the cause of the workers, stayed the progress 
of their movement, and covered it with a prejudice and 
an odium lasting for years. There, in that maddening 
bedlam, called a city, the acknowledged inferno of indus- 
trialism, the agitation was tensest. With its brutalities, 
cruelties, corruptions and industrial carnage, its hideous 
contrasts of dissolute riches and woe-bcgone poverty, 
its arrogant wealth lashing the working population lower 
and lower into squalor, pauperism and misery, Chicago 
was overripe for any movement seeking to elevate con- 
ditions. 

In the first months of t886, strike followed strike 



228 HISTORY OF THE GREAT AMERICAN FORTUNES 

throughout the United States for an eight-hour day. 
At McCormick's reaper works in Chicago - a prolonged 
strike of many months began in February. Determined 
not only to refuse shorter hours, but to force his twelve 
hundred wage workers to desert labor unions, McCor- 
mick drove them from his factory, hired armed merce- 
naries, called Pinkerton detectives, and substituted in 
the place of the union workers those despised irrespon- 
sibles called " scabs " — signifying laborers willing to help 
defeat the battles of organized labor, and, if the unions 
won, share in the benefits without incurring any of the 
responsibilities, risks or struggles. On May I, 1886. 
forty thousand men and women in Chicago went on 
strike for an eight-hour day. Thus far, the aim of incit- 
ing violence on the part of the strikers had completely 
failed everywhere. 

The Knights of Labor were conducting their strikes 
with a coolness, method and sober sense of order, giving 
no opportunity for the exercise of force. On May 2, 
a great demonstration of the McCormick workers was 
held near that company's factories to protest against the 
employment of armed Pinkertons. The Pinkerton de- 
tective bureau was a private establishment, founded dur- 
ing the Civil War; in the ensuing contests between 
labor and capital it was alleged to have made a profitable 
business of supplying spies and armed men to capitalists 
under the pretense of safeguarding property. These 
armed bands really constituted private armies ; recruited 
often from the most debased and worthless part of the 

- The McCormick fortune was the outgrowth, to a large ex- 
tent, of a variety of frauds and corruptions. Later on in this 
work, the facts are given as to how Cyrus H. McCormick, the 
founder of the fortune, bribed Congress, in 1854, to give him a 
time extension of his patent rights. 



THE VANDERBILT FORTUNE 229 

population, as well as from the needy and shifty, they 
were, it was charged, composed largely of men who 
would perjure themselves, fabricate evidence, provoke 
trouble, and slaughter without scruple for pay. Some, 
as was well established, were ex-convicts, others thugs, 
and still others were driven to the ignoble employment 
by necessity.^ During the course of the meeting in the 
afternoon the factory bell rung, and the " scabs " were 
seen leaving. Some boys in the audience began throw- 
ing stones and there was hooting. Fully aware of the 
combustible accounts wanted by their offices, the report- 
ers immediately telephoned exaggerated, inflammatory 
stories of a riot being under way ; the police on the spot 
likewise notified headquarters.* Police in large numbers 
soon arrived ; the boys kept throwing stones ; and sud- 
denly, without warning, the police drew their revolvers 
and indiscriminately opened a general fire upon the men, 

" The prevailing- view of the workmg class toward the Pinker- 
ton detectives was thus expressed at the time in a chapter on 
the mine workers by John AIcBride, one of the trade union lead- 
ers: "They have awakened," he wrote, "the hatred and detesta- 
tion of the workingmen of the United States ; and this hatred is 
due, not only to the fact that they protect the men who are 
stealing the bread from the mouths of the families of strikers, 
but to the fact that as a class they seem rather to invite trouble 
than to allay it. . . . They are employed to terrorize the 
workingmen. and to create in the minds of the public the idea 
that the miners are a dangerous class of citizens that have to be 
kept down by armed force. These men had an interest in keep- 
ing up and creating troubles which gave employers opportunity to 
demand protection from the State militia at the expense of 
the State, and which the State has too readily granted." — " The 
Labor Movement " : 264-265. 

4 In a statement published in the Chicago " Daily News," issue 
of May 10, i88g. Captain Ebersold, chief of police in 1886, 
charged that Captain Schaack, who had been the police official 
most active in proceeding against the labor leaders and causing 
them to be executed and imprisoned, had deliberately set about 
concocting "anarchist" conspiracies in order to get the credit 
for discovering and breaking them up. 



230 HISTORY OF THE GREAT AMERICAN FORTUNES 

women and children in th-e crowd, killing four and 
wounding many. Terror stricken and in horror the 
crowd fled. 

There was a group of radical spirits in Chicago, pop- 
ularly branded as anarchists, but in reality men of ad- 
vanced ideas who, while differing from one another in 
economic views, agreed in denouncing the existing sys- 
tem as the prolific cause of bitter wrongs and rooted 
injustices. Sincere, self-sacrificing, intellectual, out- 
spoken, absolutely devoted to their convictions, burn- 
ing with compassion and noble ideals for suffering 
humanity, they had stepped forward and had greatly 
assisted in arousing the militant spirit in the working 
class in Chicago. At all of the meetings they had spoken 
with an ardor and ability that put them in the front 
ranks of the proletarian leaders ; and in two newspapers 
published by them, the " Alarm," in English, and the 
" Arbeiter Zeitung," in German, they unceasingly advo- 
cated the interests of the working class. These men 
were Albert R. Parsons, a printer, editor of the 
" Alarm ; " August Spies, an upholsterer by trade, and 
editor of the " Arbeiter Zeitung ; " Adolph Fischer, a 
printer ; Louis Lingg, a carpenter ; Samuel Fielden, the 
son of a British factory owner ; George Engel, a painter ; 
Oscar Neebe, a well-to-do business man, and Michael 
Schwab, a bookbinder. All of them were more or less 
deep students of economics and sociology ; they had be- 
come convinced that the fundamental cause of the prev- 
alent inequalities of opportunity and of the widespread 
misery was the capitalist system itself. Hence they op- 
posed it luicompromisingly." 

•"' The utterances of these leaders revealed the reasons why 
they were so greatlj' feared by the capitalist class. Fischer, for 
instance, said: "I perceive that the diligent, never-resting hu- 



THE VANUEKBILT FORTUNE 23I 

The newspapers, voicing the interests and demands 
of the intrenched classes, denounced these radicals with 
a sinister emphasis as destructionists. But it was not 
ignorance which led them to do this ; it was intended as 
a deliberate poisoning and inflaming of public opinion. 
Themselves bribing, corrupting, intimidating, violating 
laws and slaying for profit everywhere, the propertied 
classes ever assumed, as has so often been pointed out, 
the pose of being the staunch conservers of law and 
order. To fasten upon the advanced leaders of the labor 
movement the stigma of being sowers of disorder, and 
then judicially get rid of them, and crush the spirit and 
movement of the aroused proletariat — this was the plan 
determined upon. Labor leaders who confined their pro- 
gramme to the industrial arena were not feared so much ; 
but Parsons, Spies and their" comrades were not only 
pointing out to the masses truths extremely unpalatable 
to the capitalists, but were urging, although in a crude 
way, a definite political movement to overthrow capital- 
ism. With the finest perception, fully alert to their 
danger, the propertied classes were intent upon exter- 
minating this portentous movement by striking down its 
leaders and terrifying their followers. 

THE HAYMARKET TRAGEDY. 

Fired with indignation at the slaughter at the McCor- 
mick meeting. Spies and others of his group issued a 

man working bees, who create all wealth and fill the magazines 
with provisions, fuel and clothing, enjoy only a minor part of 
this product, while the drones, the idlers, keep the warehouses 
locked up, and revel in luxury and voluptuousness." Engcl said : 
" The history of all times teaches us that the oppressing always 
maintain their tyrannies by force and violcrce. Some day the 
war will break out ; therefore all workingmen should iniite and 
prepare for the last war. the outcome of which will bo the end 
forever of all war, and bring peace and happiness to mankind." 



232 HISTORY OF THE GREAT AMERICAN FORTUNES 

call for a meeting on the night of May 4, at the Hay- 
market, to protest against the police assaults. Spies 
opened the meeting, and was followed by Fielden. Ob- 
servers agreed that the meeting was proceeding in 
perfect quiet, so quietly that the Mayor of Chicago, who 
was present to suppress it if necessary, went home — 
when suddenly one hundred and eighty poHcemen, with 
arms in readiness, appeared and peremptorily ordered 
the meeting to disperse. It seems that without pausing 
for a reply they immediately charged, and began club- 
bing and mauling the few hundred persons present. At 
this juncture a small bomb, thrown by someone, ex- 
ploded in the ranks of the police, felling sixty and 
killing one. The police instantly began firing into the 
crowd. 

No one has ever been able to find out definitely who 
threw the bomb. Suspicions were not lacking that it was 
done by a mercenary of corporate wealth. At Pittsburg, 
in 1877, as we have seen, the Pennsylvania railroad 
hirelings deliberately destroyed property and incited riot 
in order to charge the strikers with crime. In the coal 
mining regions of Pennsylvania, subsidized detectives 
had provoked trouble during the strikes, and by means 
of bogus evidence and packed juries had hung some labor 
leaders and imprisoned others. 

The hurling of the bomb, whether done by a secret 
emissary, or by a sympathizer with labor, proved the 
lever which the propertied classes had been feverishly 
awaiting. Spies, Fielding and their comrades were at 
once cast into jail ; the ncvvsjiapers invented wild yarns 
of conspiracies and midnight plots, and raucously de- 
manded the hanging of the leaders. The trifling formal- 
ity of waiting until their guilt had been proved was not 
considered. The most significant event, however, was 



THE VANDERBILT FORTUNE 233 

the secret meeting of about three hundred leading Amer- 
ican capitalists to plan the suppression of " anarchy." 
Very horrified they professed themselves to be at violent 
outrages and destruction of property and life. Their 
views were given wide circulation and commendation ; 
they were the finest types of commercial success and 
prestige. They were the owners of railroads that 
slaughtered thousands of human beings every year, be- 
cause of the demands of profit ; of factories which sucked 
the very life out of their toilers, and which filled the 
hospitals, slums, brothels and graveyards with an ever- 
increasing assemblage ; every man in that conclave, as a 
beneficiary of the existing system, had drained his for- 
tune from the sweat, sorrow, miseries and death agonies 
of a multitude of workers.*^ These were the men who 
came forth to form the " Citizens' Association," and 
within a few hours subscribed $100,000 as a fighting 
fund. 



JUDICIAL MURDER OF LABOR S LEADERS. 

The details of the trial will not be gone into here. 
The trial itself is now everywhere recognized as having 
been a tragic farce. The jury, it is clear, was purposely 
drawn from the employing class, or their dependents ; of 
a thousand talesmen summoned, only five or six belonged 

6 This seems a ver}^ sweeping and extraordinarily prejudicial 
statement. It should be remembered, however, that these capi- 
talists, both individually and collectively, had contested the pas- 
sage of every proposed law. the aim of which was to improve 
conditions for the workers on the railroads and in mines and 
factories. Time after time they succeeded in defeating or ignor- 
ing this legislation. Although the number of workers killed or 
injured in accidents every year was enormous, and although the 
number slain by diseases contracted in workshops or dwellings 
was even greater, the capitalists insisted that the law had no 
right to interfere with the conduct of their " private business."' 



234 HISTORY OF THE GREAT AMERICAN FORTUNES 

to the working class. The mahgnant class nature o£ 
the trial was revealed by the questions asked of the 
talesmen; nearly all declared that they had a prejudice 
against Socialists, Anarchists and Communists. Soon 
the blindest could see that the conviction of the group 
was determined upon in advance, and that it was but 
the visible evidence of a huge conspiracy to terrorize the 
whole working class. 

The theory upon which the group was prosecuted was 
that they were actively engaged in a conspiracy against 
the existing authorities, and that they advocated vio- 
lence and bloodshed. No jurist would now presume to 
contend that the slightest evidence was adduced to prove 
this. But all were rushed to conviction : Spies, Parsons, 
Fischer, and Engel were hanged on November ii, 1887, 
after fruitless appeals to the higher courts ; Lingg com- 
mitted suicide in prison, and Fielden, Neebe and Schwab 
were sentenced to long terms in prison. The four ex- 
ecuted leaders met their death with the heroic calmness 
of martyrdom. " Let the voice of the people be heard ! " 
were Parsons' last words. Fielden, Neebe and Schwab 
might have rotted away in prison, were it not that one 
of the noblest-minded and most maligned men of his 
time, in the person of John P. Altgeld, was Governor 
of Illinois in 1893. Governor Altgeld pardoned them 
on these grounds, which he undoubtedly proved in an 
exhaustive review : ( 1 ) The jury was a packed one se- 
lected to convict; (2) the jurors were prejudiced; (3) 
no guilt was proved; (4) the State's attorney had ad- 
mitted no case against Neebe, yet he had been impris- 
oned; (5)the trial judge (Gary) was either so preju- 
diced or subservient to class influence that he did not 
or could not give a fair trial. Even many of those who 



THE VANDERBILT FORTUNE 235 

denounced Altgeld for his action, now admit that his 
grounds were justified. 



THE LABOR UPRISING IN NEW YORK. 

In the meanwhile, between the time of the Haymarket 
episode and the hanging and imprisonment of the Chi- 
cago group, the labor movement in New York City had 
assumed so strong a political form that the ruling class 
was seized with consternation. The Knights of Labor, 
then at the summit of organization and solidarity, were 
ripe for independent political action ; the effects of the 
years of active propaganda carried on in their ranks by 
the Socialists and Single-Tax advocates now began to 
show fruit. At the critical time, when the labor unions 
were wavering in the decision as to whether they ought 
to strike out politically or not, the ruling class supplied 
the necessary vital impulsion. While in Chicago the 
courts were being used to condemn the labor leaders 
to death or prison, in the East they were used to paralyze 
the weapons of offense and defence by which the unions 
were able to carry on their industrial warfare. 

The conviction, in New York City, of certain mem- 
bers of a union for declaring a boycott, proved the one 
compelling force needed to mass all of the unions and 
radical societies and individuals into a mighty movement 
resulting in an independent labor party. To meet this 
exigency an effort was made by the politicians to buy off 
Henry George, the distinguished Single-Tax advocate, 
who was recognized as the leader of the labor party. 
But this flanking attempt at bribing an incorruptible 
man failed ; the labor unions proceeded to nominate 
George for Mayor, and a campaign was begun of an 



236 HISTORY OF THlr rji'fe'^r AMFRICAN FORTUNES 

ardor, vigor and enchusiasrp such as had not been known 
since the Workiagmen's party movement in 1829. 

The election was for local officers of the foremost city 
in the United States — a point of vantage worth con- 
tending for, since the moral efifect of such a victory of 
the working class would be incalculable, even if short- 
lived. To the ruling classes the triumph of the labor 
unions, while restricted to one city, would unmistakably 
denote the glimmerings of the beginning of the end of 
their regime. Such rebellious movements are highly 
contagious ; from the confines of one municipality they 
sweep on to other sections, stimulating action and in- 
spiring emulation. The New York labor campaign of 
1886 was an intrinsic part and result of the general 
labor movement throughout the I'nited States. And it 
was the most significant manifestation of the onward 
march of vhe workers ; elsewhere the labor unions had 
not gone beyond the stage of agitation and industrial 
warfare; but in New York, with the most acute percep- 
tion of the real road it must traverse, the labor move- 
ment hud plunged boldly into political action. It real- 
ized that it must get hold of the governmental powers. 
Its antagonists, the capitalists, had long had a rigid grip 
on them, and had used them almost wholly as they willed. 

But the capitalist class was even more doggedly de- 
terttiined upon retaining and intensifying those powers. 
Government was an essential requisite to its plans and 
development. The small capitalists bitterly fought the 
great ; but both agreed that Government with its legis- 
lators, laws, precedents, and the habits of thought it cre- 
ated, must be capitalistic. Both saw in the uprising of 
labor a prospective overturning of conditions. 

From this identity of interest a singular concrete alli- 
ance resulted. The great capitalists, whom the middle- 



T'KE VANDERBILT FORTUNE 237 

class had denounced as pirates, now became the decor- 
ous and orthodox " saviors of society," with the small 
capitalists trailing behind their leadership, and shouting 
their praises as the upholders of law and the conserva- 
tors of order. In Chicago the same men who had bribed 
legislators and common councils to give them public fran- 
chises, and who had hugely swindled and stolen under 
guise of law, had been the principals in calling for the 
execution and imprisonment of the group of labor lead- 
ers, and this they had decreed in the name of law. In 
New York City a pretext for dealing similarly with the 
labor leaders was entirely lacking, but another method 
was found effective in the subjugation and dispersion 
of the movement. 



CAPITALIST TRIUMPH BY FRAUD. 

This was the familiar one of corruption and fraud. 
It was a method in the exercise of which the capitalists 
as a class had proved themselves adepts ; they now sum- 
moned to their aid all of the ignoble and subterranean 
devices of criminal politics. 

In the New York City election of 1886 three parties 
contested, the Labor party, Tammany Hall and the Re- 
publican party. Steeped in decades of the most loath- 
some corruption, Tammany Hall was chosen as the me- 
dium by which the Labor party was to be defrauded and 
effaced. Pretending to be the " champion of the peo- 
ple's rights," and boasting that it stood for democracy 
against aristocracy, Tammany Hall had long deceived 
the mass of the people to plunder them. It was a pow- 
erful, splendidly-organized body of mercenaries and self- 
seekers which, by trading on the principles of democracy, 
had been able to count on the partisan votes of a pre- 



238 HISTORY OF THE GREAT AMERICAN FORTUNES 

dominating element of the wage-working class. In re- 
ality, however, it was absolutely directed by a leader 
or " boss," who, with his confederates, made a regular 
traffic of selling legislation to the capitalists, on the one 
hand, and who, on the other, enriched themselves by a 
colossal system of blackmail. They sold immunity to 
pickpockets, confidence men and burglars, compelled the 
saloonkeepers to pay for protection, and even extorted 
from the wretched women of the street and brothels. 
This was the organization that the ruling class, with its 
fine assumptions of respectability, now depended upon to 
do its work of breaking up the political labor revolt. 

The candidate of Tammany Hall was the ultra-re- 
spectable Abram S. Hewitt, a millionaire capitalist. The 
Republican party nominated a verbose, pushful, self-glo- 
rifying young man, who, by a combination of fortuitous 
circumstances, later attained the position of President 
of the United States. This was Theodore Roosevelt, 
the scion of a moderately rich New York family, and a 
remarkable character whose pugnacious disposition, in- 
difference to political conventionalities, capacity for ex- 
hortation, and bold political shrewdness were mistaken 
for greatness of personality. The phenomenal success to 
which he subsequently rose was characteristic of the pre- 
vailing turgidity and confusion of the popular mind. 
Both Hewitt and Roosevelt were, of course, acceptable 
to the capitalist class. As, however. New York was nor- 
mally a city of Democratic politics, and as Hewitt stood 
the greater chance of winning, the su])port of those op- 
posed to the labor movement was concentrated upon 
him. 

Intrenched respectability, for the most part, came forth 
to join sanctimony with Tammany scoundrelism. It was 
an edifying union, yet did not comprise all of the forces 



THE VANDERinLT FORTUNE 239 

linked in (hat historic coalition. The Church, as an in- 
stitution, :ast into it the whole weight of its influence and 
power. Soaked with the materialist spirit while dogmat- 
ically prc-aching the spiritual, dominated and pervaded by 
capitalist influences, the Church, of all creeds and de- 
nominations, lost no time in subtly aligning itself in its 
expected place. And woe to the minister or priest who 
defied the attitude of his chfirch ! Father McGlynn, for 
example, was excommunicated by the Pope, ostensibly for 
heretical utterances, but in actuality for espousing the 
cause of the labor movement. 

Despite every legitimate argument coupled with veno- 
mous ridicule and coercive and corrupt influence that 
wealth, press and church could bring to bear, the labor 
unions stood solidly together. On election day groups 
of Tammany repeaters, composed of dissolutes, profli- 
gates, thugs and criminals, systematically, under direc- 
tions from above, filled the ballot boxes with fraudulent 
votes. The same rich class that declaimed with such 
superior indignation against rule by the " mob " had 
poured in funds which were distributed by the politicians 
for these frauds. But the vote of the labor forces was 
so overwhelming, that even piles of fraudulent votes 
could not suffice to overcome it. One final resource was 
left. This was to count out Henry George by grossly 
tampering with the election returns and misrepresenting 
them. And this is precisely what was done, if the tes- 
timony of numerous eye-witnesses is to be believed. The 
Labor party, it is quite clear, was deliberately cheated 
out of an election won in the teeth of the severest and 
most corrupt opposition. This result it had to accept ; 
the entire elaborate machinery of elections was in the full 
control of the Labor ])arty's opponents ; and had it insti- 
tuted a contest in the courts, the Labor party would 



240 HISTORY OF THE GREAT AMERICAN FORTUNES 

have found its efforts completely fruitless in the face of 
an adverse judiciary. 



THE LABOR PARTY EVAPORATES. 

By the end of the year 1887 the political phase of the 
labor movement had shrunk to insignificant proportions, 
and soon thereafter collapsed. The capitalist interests 
had followed up their onslaught in hanging and impris- 
oning some of the foremost leaders, and in corruption and 
fraud at the polls, by the repetition of other tactics that 
they had long so successfully used. 

Acting through the old political parties they further 
insured the disintegration of the Labor party by bribing 
a sufficient number of its influential men. This bribery 
took the form of giving them sinecurist offices under 
either Democratic or Republican local, State or National 
administrations. Many of the most conspicuous organ- 
izers of the labor movement were thus won over, by the 
proffer of well-paying political posts, to betray the cause 
in the furtherance of which they had shown such en- 
ergy. Deprived of some of its leaders, deserted by oth- 
ers, the labor political movement sank into a state of dis- 
organization, and finally reverted to its old servile po- 
sition of dividing its vote between the two capitalist par- 
ties. 

From now on, for many years, the labor movement 
existed purely as an industrial one, disclaiming all con- 
nection with politics. Voting into power either of the old 
political parties, it then humbly begged a few crumbs of 
legislation from them, only to have a few sops thrown 
to it, or to receive contemptuous kicks and humiliations, 
and, if it grew too importunate or aggressive, insults 



THE VANDERBILT FORTUNE 24I 

backed with the strong might of jiuHcial, pohce and 
miHtary power. 

When it was jubilantly seen by the coalesced proper- 
tied classes that the much-dreaded labor movement had 
been thrust aside and shorn, they resumed their inter- 
rupted conflict. 

The small capitalist evinced a fierce energy in seeking 
to hinder in every possible way the development of the 
great. It was in these years that a multitude of middle- 
class laws were enacted both by Congress and by the State 
legislatures ; the representatives of that class from the 
North and East joined with those of the Farmers' Alli- 
ance from the West and South. Laws were passed de- 
claring combinations conspiracies in restraint of trade 
and prohibiting the granting of secret discriminative rates 
by the railroads. In 1889 no fewer than eighteen States 
passed anti-trust laws ; five more followed the next year. 
Every one of these laws was apparently of the most ex- 
plicit character, and carried with it drastic penal provi- 
sions. " Now," exulted the small capitalists in high spir- 
its of elation, " we have the upper hand. We have laws 
enough to throttle the monopolists and preserve our 
righteous system of competition. They don't dare vio- 
late them, with the prospects of long terms in prison 
staring them in the face." 

THE SMALL CAPITALISTS' LOSING FIGHT. 

The great capitalists both dared and did. If specific 
statutes were against them, the impelling forces of eco- 
nomic development and the power of might were wholly 
on their side. The competitive system was already 
doomed ; the middle class was too blind to realize that 



242 HISTORY OF THE GREAT AMERICAN FORTUNES 

what seemed to be victory was the rattle of the slow 
death struggle. At first, the great capitalists made no 
attempt to have these laws altered or repealed. They 
adopted a slyer and more circuitous mode of warfare. 
They simply evaded them. As fast as one trust was 
dissolved by court decision, it nominally complied, as 
did, for instance, the Standard Oil Trust and the Sugar 
Trust, and then furtively caused itself to be reborn into 
a new combination so cunningly sheltered within the 
technicalities of the law that it was fairly safe from ju- 
dicial overthrow. 

But the great capitalists were too wise to stake their 
existence upon the thin refuge of technicalities. With 
their huge funds they now systematically struck out to 
control the machinery of the two main political parties ; 
they used the ponderous weight of their influence to se- 
cure the appointment of men favorable to them as At- 
torneys General of the United States, and of the States, 
and they carried on a definite plan of bringing about the 
appointment or election of judges upon whose decisions 
they could depend. The laws passed by the middle class 
remained ornamental encumbrances on the statute books ; 
the great capitalists, although harassed continually by 
futile attacks, triumphantly swept forward, gradually in 
their consecutive progress strangling the middle class be- 
yond resurrection. 

Such was the integral impotence of the warfare of 
the small against the great capitalists that, during this 
convulsive period, the existing magnates increased their 
wealth and power on every hand, and their ranks were 
increased by the accession of new members. From the 
chaos of middle-class industrial institutions, one trust 
after another sprang full-armed, until presently there 
was a whole array of them. The trust system had proved 



THE VANDEREILT FORTUNE 243 

itself immensely superior in every respect to the com- 
petitive, and by its own superiority it was bound to sup- 
plant the other. 

Where William H. Vanderbilt had thought himself 
compelled to temporize w'ith the middle class agitation 
by making a show of dividing the stock ownership of 
the New York Central Railroad, his sons Cornelius and 
William ignored or defied it. Utterly disdainful of the 
bitter feeling, especially in the W^est, against the consoli- 
dation of railroads in the hands of the powerful few, 
they tranquilly went ahead to gather more railroads in 
their ownership. The Cleveland, Cincinnati, Chicago 
and St. Louis Railroad (popularly dubbed the " Big 
Four ") acquired by them in 1890 was one of these. It 
would be tiresome, however, to enter into a narrative 
of the complex, tortuous methods by wdiich they pos- 
sessed themselves of these railroads. By the beginning 
of the year 1893 the Vanderbilt system embraced at least 
12,000 miles of railways, with a capitalized value of sev- 
eral hundred million dollars, and a total gross earning 
power of more than $60,000,000 a year. " All of the best 
railroad territory," says John Moody in his sketch enti- 
tled " The Romance of the Railways," " outside of New 
England, Pennsylvania and New Jersey was penetrated 
by the Vanderbilt lines, and no other railroad system in 
the country, wnth the single notable exception of the 
Pennsylvania Railroad, covered anything like the same 
amount of rich and settled territory, or reached so many 
towns and cities of importance. New York, Buffalo, 
Chicago, Cleveland, St. Louis, Cincinnati, Detroit, In- 
dianapolis, Omaha — these were a few of the great marts 
which were embraced in the Vanderbilt preserves." So 
impregnably rich and powerful were the Vanderbilts, so 
profitable their railroads, and their command of re- 



244 HISTORY OF THE GREAT AMERICAN FORTUNES 

sources, financial institutions and legislation so great, that 
the panic of 1893 instead of impairing their fortunes gave 
them extraordinary opportunities for getting hold of the 
properties of weaker railroads. 

It was now, acting jointly with other puissant interests, 
that they saw their chance to get control of a large part 
of the fabulously rich coal mines of Pennsylvania. These 
coal mines had originally been owned by separate com- 
panies or operators, each independent of the other. But 
by about the year 1867 the railroads penetrating the coal 
regions had conceived the plan of owning the mines them- 
selves. Why continue to act as middlemen in transport- 
ing the coal ? Why not vest in themselves the ownership 
of these vast areas of coal lands, and secure all the profits 
instead of those from merely handling the coal ? 

The plan ingratiated itself as a capital one ; it could 
be easily carried out with little expenditure. All that 
was necessary for the railroad to do was to burden down 
the operators with exorbitant charges, and hamper and 
beleaguer them in a variety of compressing ways.'' As 
was proved in subsequent lawsuits, the railroads fre- 
quently declined to carry coal for this or that mine, on 
the pretext that they had no cars available. Every means 
was used to crush the independent operators and depre- 
ciate the selling value of their property. It was a cam- 
paign of ruination ; in law it stood as criminal conspiracy ; 
but the rrilroads persisted in it without any further 
molestation than prolix civil suits, and they finally forced 
a number of the well-nigh bankrupted independent op- 

''■ See testimony licfore the committee to investigate the Phila- 
delphia and Reading Railroad Company, and the Philadelphia 
and Reading Coal and Iron Company, Pennsylvania Legislative 
Docs. 1876, Vol. V, Doc. No. 2. This investigation fully revealed 
how^ the railroads detained the cars of the " independent " oper- 
ators, and otherwise used oppressive methods. 



THE VAXDERBILT FORTUNE 245 

erators to sell out to them for comparatively trifling 
sums.* 

By these methods such railroads as the Philadelphia 
and Reading, the Delaware, Lackawana and Western, 
the Central Railroad of New Jersey, the Lehigh Valley 
and others gradually succeeded, in the course of years, in 
extending an ownership over the coal mines. The more 
powerful independent operators struck back early at 
them by getting a constitutional provision passed in Penn- 
sylvania, in 1873, prohibiting railroads from owning and 
operating coal mines. The railroads evaded this law 
with facility by an illegal system of leasing, and by or- 
ganizing nominally separate and independent companies 
the stock of which, in reality, was owned by them. 

To the men who did the actual labor of working in the 
mines — the coal miners — this change of ownership was 
not regarded with alarm. Indeed, they at first cherished 
the pathetic hope that it might benefit their condition, 
which had been desperate and intolerable enough under 
the old company system. The small coal-owning capi- 
talists, who had emitted such wailings at their own op- 
pression by the railroads, had long relentlessly exploited 
their tens of thousands of workers. One abuse had been 
piled upon another. The miners were paid by the ton ; 
the companies had fraudulently increased the size of the 
ton, so that the miners had to perform much more labor 
while wages remained stationary or were reduced. 

But one of the most serious grievances was that against 
what were called " company or truck stores." Ingenious 
contrivances for getting back the miserable wages paid 
out, these were company-owned merchandise stores in 

8 Spahr quotes an independent operator in 1900 as saying that 
the railroads charged the independents three times as much for 
handling hard coal as they charged for handling soft coal from 
the West — "America's Working People": 122-223. 



246 HISTORY OF THE GREAT AMERICAN FORTUNES 

which the miners were compelled to buy their supplies. 
In many collieries the mine worker was not paid in 
money but was given an order on the company store, 
where he was forced to purchase inferior goods at exor- 
bitant prices. 

To blast in the mines powder was necessary ; the miner 
had to buy it at his own expense, and was charged $2.75 
a keg, although its selling value was not more than $1.10 
or 90 cents. In every direction the mine worker was 
defrauded and plundered. " Often," says John Mitchell, 
long the leader of the miners, and a compromiser whose 
career proves that he cannot be charged with any deep- 
seated antagonism to capitalist interests, " a man together 
with his children would work for months without receiv- 
ing a dollar of money, and not infrequently he would 
find at the end of the month nothing in his envelope but 
a statement that his indebtedness to the company had in- 
creased so many dollars." " Mitchell adds that the Legis- 
lature of Pennsylvania passed anti-truck store laws, " but 
the operators who have always cried out loudest against 
illegal action by miners openly and unhesitatingly vio- 
lated the act and subsequently evaded it by various de- 
vices." ^"^ The wretched houses the miners occupied 
" also," says Mitchell, " served as a means of extortion, 
and, in other instances, as a weapon to be used against the 
miners." In case they complained or struck, the miners 
were evicted under the most cruel circumstances. Many 
other media of extortion were common. In the entire 
year the miners averaged only one hundred and ninety 

" " Organized Labor " : 359. Mitchell's comments were fully 
supported by the vast mass of testimony taken by the United 
States Anthracite Coal Commission in 1902. Mitchell is, at this 
writing (iooq), in the employ of the Civic Federation, an organ- 
ization financed l)y capitalists. Its alleged purpose is to bring 
about " harmony " between capital and labor. 

10 Ibid. 



THE VANDERBILT FORTUNE 247 

working days of ten hours each, and, of course, were paid 
for working time only. According to Spahr 350,000 
miners drudged for an average wage of $350 a year.^^ 

SEIZING RAILROADS AND COAL MINES. 

This system of abject slavery was in full force when 
the railroads ousted many of the small operators, and 
largely by pressure of power took possession of the mines. 
In vain did the miners' unions implore the railroad mag- 
nates for redress of some kind. The magnates abruptly 
refused, and went on extending and intrenching their 
authority. The Vanderbilts manipulated themselves 
into being important factors in the Delaware and Hud- 
son Railroad, and in the Delaware, Lackawana and West- 
ern Railroad, which had deviously obtained title to some 
of the richest coal deposits in Wyoming County, and 
they also became prominent in the directing of the Le- 
high Valley Railroad. 

The most important coal-owning railroad, however, 
which they and other magnates coveted was the Phila- 
delphia and Reading Railroad. At least one-half of the 
anthracite coal supply of Pennsylvania was owned or 
controlled by this railroad. The ownership of the Read- 
ing Railroad, with its subordinate lines, was the pivotal 
requisite towards getting a complete monopoly of the an- 
thracite coal deposits. William H. Vanderbilt had ac- 
quired an interest in it years before, but the actual con- 
trolling ownership at this time was held by a group of 
Philadelphia capitalists of the second rank with their 
three hundred thousand shares. 

Unfortunately for this group, the Philadelphia and 
Reading Railroad was afflicted with a president, one 

11 " The Present Distribution of Wealth in the United States '"': 

IIO-III. 



248 HISTORY OF THE GREAT AMERICAN FORTUNES 

Arthur A. McLeod, who was not only too recklessly 
ambitious, but who was temerarious enough to cross the 
path of the re;;'ly powerful magnates. With immense 
confidence in his plans and in his ability to carry them 
out, he set out to monopolize the anthracite coal supply 
and to make the Reading Railroad a great trunk line. To 
perfect this monopoly he leased some coal-carrying rail- 
roads and made " a gentlemen's agreement " with others; 
and in line with his policy of raising the importance of 
the road, he borrowed large sums of money for the con- 
struction of new terminals and approaches and for equip- 
ment. 

Now, all of these plans interfered seriously with the 
aims and ambition of magnates far greater than he. 
These magnates quickly saw the stupendous possibilities 
of a monopoly of the coal supply — the hundreds of mil- 
lions of dollars of profits it held out — and decided that 
it was precisely what they themselves should control and 
nobody else. Second, in his aim to have his own rail- 
road connections with the rich manufacturing and heav- 
ily-populated New England districts, McLeod had ar- 
ranged with various small railroads a complete line from 
the coal fields of Pennsylvania into the heart of New 
England. In doing this he overreached his mark. He 
was soon taught the folly of presuming to run counter 
to the interests of the big magnates. 



AND THE WAY IN WHICH IT WAS DONE. 

The two powers controlling the large railroads tra- 
versing most of the New England States were the Van- 
derbilts and J. Pierpont Morgan. The one owned the 
New York Central, the other dominated the New York, 
New Haven and Hartford Railroad. The Pennsylvania 



THE VANDER15ILT FORTUNE 249 

Railroad likewise had no intention of allowing such a 
powerful competitor in its own province. These mag- 
nates viewed with intense amazement the effrontery of 
what they regarded as an upstart interloper. Although 
they had been constantly fighting one another for su- 
premacy, these three interests now made common cause. 

They adroitly prepared to crush McLeod and bank- 
rupt the railroad of which he was the head. By this 
process they would accomplish three highly important 
objects; one the wresting of the Philadelphia and Read- 
ing Railroad into their own divisible ownership ; second, 
the securing of their personal hold on the connecting 
railroads that McLeod had leased ; and, finally, the ob- 
taining of undisputed sovereignty over a great part of 
the anthracite coal mines. The warfare now began 
without those fanciful ceremonials, heralds or proclama- 
tions considered so necessary by Governments as a pre- 
lude to slaughter. These formalities are dispensed with 
by business combatants. 

First, the Morgan-Vanderbilt interests caused the pub- 
lication of terrifying reports that grave legislation hos- 
tile to the coal combination was imminent. The price 
of Reading stock on the Stock Exchange immediately 
declined. Then, following up their advantage, this dual 
alliance inspired even more ruinous reports. The credit 
of the Philadelphia and Reading Railroad was repre- 
sented as being in a very bad state. As the railroad had 
borrowed immense sums of money both to finance its 
coal combination and to build extensive terminals and 
other equipment, large payments to creditors were due 
from time to time. To pay these creditors the railroad 
had to borrow more ; hut when the credit of the rail- 
road was assailed, it found that its sources of borrowing 
were suddenly shut off. The group of Philadelphia cap- 



23c HISTORY OF THE GREAT AMERICAN FORTUNES 

italists had already borrowed large sums of money, giv 
ing Reading shares as collateral. When the market price 
of the stock kept going down they were called upon to 
pay back their loans. Declining or unable to do ' so, 
their fifty thousand shares of pledged stock were sold. 
This sale still more depressed the price of Reading stock. 

In this group of Philadelphia capitalists were men 
who were reckoned as very astute business lights — 
George M. Pullman, Thomas Dolan, one of the street 
railway syndicate whose briberies of legislatures and com- 
mon councils, and whose manipulation of street railways 
in Philadelphia and other cities were so notorious a scan- 
dal ; John W'anamaker, combining piety and sharp busi- 
ness ; — these were three of them. But they were no 
match for the much more powerful and wily Vanderbilt- 
Morgan forces. They were compelled under resistless 
pressure to throw over their Reading stock at a great 
loss to themselves. Most of it was promptly bought up 
by J. P. Morgan and Company and the Vanderbilts, who 
then leisurel}^ arranged a division of the spoils between 
themselves. 

This transaction (strict interpreters of the law would 
have styled it a conspiracy) opened a facile way for a 
number of extremely important changes. The Vander- 
bilts and the IMorgan interests apportioned between them 
much of the ownership of the Philadelphia and Reading 
Railroad with its vast ownership of coal deposits and 
its coal carrying traffic.^- The New York, New Haven 
and Hartford Railroad grasped the New York and New 

12 An investigation, in 1905, showed that the " Baltimore and 
Ohio Railroad and the New York Central and Hudson River 
Railroad owned ahout 43.3 per cent, of the entire capital stock 
of the Philadelphia and licading Railroad Company." " Report 
on Discriminations and 'Monopolies in Coal and Oil, Interstate 
Commerce Commission, January 25, 1907 " : 46. 



THE V'ANDERBILT FORTUNE 25I 

England Railroad from the Reading's broken hold, and 
there were further far-reaching changes militating to 
increase the railroad, and other, possessions of both par- 
ties. ^^ It was but another of the many instances of the 
supreme capitalists driving out the smaller fry and seiz- 
ing the property which they had previously seized by 
fraud.i^ 

13 A good account of this expropriating transaction is that 
of Wolcott Drew, " The Reading Crash in 1903 " in " Moody's 
Magazine" (a leading financial periodical), issue of January, 
1907. 

^■'One of the particularly indisputable examples of the glaring 
fraud by which immense areas of coal fields were originally 
obtained was that of the disposition of the estate of John Nichol- 
son. 

Dying in December, 1800, Nicholson left an estate embracing 
land, the extent of which was variously estimated at from three 
to five million acres. Some of the Pennsylvania legislative docu- 
ments place the area at from three to four million acres, while 
others, notably a report in 1842, by the judiciary committee of 
the Pennsylvania House of Representatives, state that it was 
5,000,000 acres. Nicholson was a leading figure in the Penn- 
sylvania Land Company which had obtained most of its vast 
land possessions by fraud. Some of Nicholson's landed estate 
lay in Virginia, Kentucky, North Carolina, South Carolina, 
Georgia and other States, but the bulk of it was in Pennsylvania, 
and included extensive regions containing the very richest coal 
deposits. 

The State of Pennsylvania held a lien upon Nicholson's estate 
for unpaid taxes amounting to $300,000. Notwithstanding this 
lien, different individuals and corporations contrived to get hold 
of practically the whole of the estate in dispute. How they 
did it is told in many legislative documents ; the fraud and 
theft connected with it were a great scandal in Pennsylvania for 
forty-five years. We will quote only one of these documents. 
Writing on January 24, 1842, to William Elwell, chairman of the 
Judiciary Committee of the Pennsylvania House of Representa- 
tives, Judge J. B. Anthony, of the Nicholson Court (a court 
especially established to pass upon questions arising from the 
disposition of the estate), said: 

"On the nth of April, 1825, an act passed the Governor to 
appoint agents to discover and sell the Nicholson lands at auc- 
tion, for which they were allowed in'cnty-iivc per cent. A Spe- 
cial Board of Property was also formed to compromise and 
settle with claimants. From what has come to my knowledge in 
relation to this Act, I am satisfied that the commonwealth was 
seriously injured by the manner in which it was carried out by 



252 HISTORY OF THE GREAT AMERICAX FORTUNES 

The A'anderbilts' ownership of a large part of the shares 
of railroads, which, in turn, own and control the coal 
mines, may be summed up as follows : Through the Lake 
Shore Railroad, which they have owned almost abso- 
lutely, they own, or until recently did own, $30,000,000 
of shares in the Philadelphia and Reading Railroad with 
its stupendous anthracite coal deposits, and they owned, 
for a long time, large amounts of stock in the Lehigh 
A'alley Railroad with its unmined coal deposits of 400,- 
000,000 tons. In 1908 they disposed of their Lehigh 
Valley Railroad ownings, receiving an equivalent in 
either money or some other form of property. The 
ownership of the Delaware, Lackawana and Western 
Railroad with its equally large unmined coal deposits is 
divided between the Vanderbilt family and the Standard 
Oil interests. The Vanderbilts, according to the latest 
official reports, also own heavy interests in the Delaware 
and Hudson Railroad, the New York, Ontario and West- 
ern Railroad, $12,500,000 of stock in the Chesapeake and 
Ohio Railroad, and large amounts of stock in other coal 
mining and coal carrying railroads. ^^ 

Here, then, is another important step in the acquisition 
of a large part of the country's resources by the Van- 
derbilts. A recapitulation will not be out of place. His 

some of the agents. It was made use of principally for the 
benefit of land speculators ; and the very small sums received 
by the State treasurer for lartje and valuable tracts sold and 
compromised, show that the cunning and astute land jobbers 
could easily overreach the Board of Property at Harrisburg. 
. . . Many instances of gross fraud might be enumerated. Init 
it would serve no useful purpose." Judge Anthony further said 
that " very many of the most influential, astute and intelligent 
inhabitants" and "gentlemen of high standing" were par- 
ticipants in the frauds. — Pennsylvania House Journal, 1842, Vol. 
ii, Doc. No. 127:700-704. 

15 See Special Report No. t of the Interstate Commerce Com- 
mission on Intercorporate Relationship of Railroads : 39. Also 
Carl Snyder's "American Railways as Investments ": 473. 



THE VANDERBILT FORTUNE 253 

first millions obtained by blackmailing, Commodore Van- 
derbilt then uses those millions to buy a railroad. By 
further fraudulent methods, based upon bribery of law- 
making bodies, he obtains more railroads and more 
wealth. His son, following his methods, adds other rail- 
roads to the inventory, and converts tens of millions of 
fraudulently-acquired millions into interest-bearing Gov- 
ernment, State, city and other bonds. The third gen- 
eration (in point of order from the founder) continues 
the methods of the father and grandfather, gets hold 
of still more railroads, and emerges as one of the powers 
owning the great coal deposits of Pennsylvania. 

THE DICTATION OF THE COAL FIELDS. 

The Vanderbilt and the Morgan interests at once in- 
creased the price of anthracite coal, adding to it $1.25 
to $1.35 a ton. In 1900 they appeared in the open 
with a new and gigantic plan of consolidation by which 
they were able to control almost absolutely the production 
and prices. That the Vanderbilt family and the Morgan 
interests were the main parties to this combination was 
well established. ^''' Already high, a still heavier increase 
of price at once was put on the 40.000,000 tons of an- 
thracite then produced, and the price was successively 
raised until consumers were taxed seven times the cost 
of production and transportation. 

The population was completely at the mercy of a few 
magnates ; each year, as the winter drew on, the Coal 
Trust increased its price. In the needs and suffering 
of millions of people it found a ready means of laying 
on fresher and heavier tribute. By the mandate of the 

^6 Final Report of the U. S. Industrial Commission, 1902, xix : 
462-463. 



254 HISTORY OF THE GREAT AMERICAN FORTUNES 

Coal Trust, housekeepers were taxed $70,000,000 in extra 
impositions a year, in addition to the $40,000,000 
annually extorted by the exorbitant prices of previous 
years. At a stroke the magnates were able to confiscate 
by successive grabs the labor of the people of the United 
States at will. Neither was there any redress ; for those 
same magnates controlled all of the ramifications of Gov- 
ernment. 

What, however, of the workers in the mines? While 
the combination was high-handedly forcing the con- 
sumer to pay enormous prices, how was it acting toward 
them? The question is almost superfluous. The rail- 
roads made little concealment of their hostility to the 
trades unions, and refused to grant reforms or conces- 
sions. Consequently a strike was declared in 1900 by 
which the mine workers obtained a ten per cent increase 
in wages and the promise of semi-monthly wages in cash. 
But they had not resumed work before they discovered 
the hollowness of these concessions. Two years of fu- 
tile application for better conditions passed, and then, in 
1902, 150,000 men and boys went on strike. This strike 
lasted one hundred and sixty-three days. The magnates 
were generally regarded as arrogant and defiant ; they 
contended that they had nothing to arbitrate ; ^'^ and only 
yielded to an arbitration lx)ard when President Roosevelt 
threatened them with the full punitive force of Govern- 
ment action. 

By the decision of this board the miners secured an 
increase of wages (which was assessed on the consumer 

1^ It was on this occasion that George F. Baer, president of 
the Philadelphia and Reading Railroad, in scoring the public 
sympathy for the strikers, justified the attitude of the railroads 
in his celebrated utterance in which he spoke "of the Christian 
men and women to whom God in His infinite wisdom has in- 
trusted the property interests of the country," which alleged 
divine sanction he was never able to prove. 



THE VANDF.RBILT FORTTXE 255 

in tlie form of higher prices) and several minor conces- 
sions. Yet at best, their lot is excessively hard. Writ- 
ing a few years later, Dr. Peter Roberts, who, if any- 
thing, is not partial to the working class, stated that the 
wages of the contract miners were (in 1907) about $600 
a year, while adults in other classes of mine workers, 
who formed more than sixty per cent, of the labor forces, 
did not receive an annual wage of $450. Yet Roberts 
quotes the Massachusetts Bureau of Statistics as saying 
that " a family of five persons requires $754 a year to 
live on." The average number in the family of a mine 
worker is five or six. " This small income," Roberts ob- 
serves, " drives many of our people to live in cheap and 
rickety houses, where the sense of shame and decency 
is blunted in early youth, and where men cannot find such 
home comforts as will counteract the attractions of the 
saloon." Hundreds of company houses, according to 
Roberts, are unfit for habitation, and " in the houses of 
mine employees, of all nationalities, is an appalling in- 
fant mortality." ^^ 

THE BITUMINOUS COAL MINES ALSO. 

The sway of the Vanderbilts, however, extends not 
only over the anthracite, but over a great extent of the 
bituminous coal fields in Pennsylvania, Maryland, West 
Virginia, Ohio and other States. By their control of 
the New York Central Railroad, they own various os- 
tensibly independent bituminous coal mining companies. 
The Clearfield Corporation, the Pennsylvania Coal and 
Coke Co., and the West Branch Coal Company are some 
of these. By their great holdings in other railroads 
traversing the soft coal regions, the Wanderbilts control 

18 " The Anthracite Coal Communities " : 346-347. 



256 HISTORY OF THE GREAT AMERICAN FORTUNES 

about one-half of the bituminous coal supply in the East- 
ern, and most of the Middle-Western, States. 

According to the Interstate Commerce Commission's 
report, in 1907, the New York Central Railroad and the 
Pennsylvania Railroad owned in that year about forty- 
five per cent, of the stock of the Chesapeake and Ohio 
Railroad, and the New York Central owned large 
amounts of stock in other railroads. " The Commission, 
therefore, reaches the conclusion," the report reads on 
after going into the question of ownership in detail, 
" that, as a matter of fact, the Baltimore and Ohio Rail- 
road Company, the Norfolk and Western Railroad Com- 
pany, and the Philadelphia and Reading Railway Com- 
pany were practically controlled by the Pennsylvania 
Railroad Company and the New York Central and 
Hudson River Railroad Company, and that the result 
was to practically abolish substantial competition between 
the carriers of coal in the territories under consider- 
ation." Although the Standard Oil oligarchy now owns 
considerable stock in the Vanderbilt railroads, it is an 
undoubted fact that the Vanderbilts share to a great 
extent the mastery of both hard and soft coal fields. 

It is not possible here to present even in condensed 
form the outline, much less the full narrative, of the 
labyrinth of tricks, conspiracies and frauds which the 
railroad magnates have resorted to, and still practice, in 
the throttling of the small capitalists, and in guarantee- 
ing themselves a monopoly. A great array of facts are 
to be found in the reports of the exhaustive investiga- 
tions made by the L'uited States Industrial Commission 
in 1901-1902, and by the Interstate Commerce Commis- 
sion in 1907. 

Thousands of times was the law glaringly violated, 
yet the magnates were at all times safe from prosecution. 



THE VANDERBILT FORTUNE 257 

Periodically the Government would make a pretense of 
subjecting them to an inquiry, but in no serious sense 
were they interfered with. These investigations all have 
shown that the railroads first crushed out the small 
operators by a conspiracy of rates, blockades and 
reprisals, and then by a juggling process of stocks and 
bonds, bought in the mines with the expenditure of 
scarcely any actual money. Having done this they 
formed a monopoly and raised prices which, in law, was 
a criminal conspiracy. The same weapons destructively 
used against the small coal operators years ago are still 
being employed against the few independent companies 
remaining in the coal fields, as was disclosed, in 1908, 
in the suit of the Government to dissolve the workings 
of the various railroad companies in the anthracite coal 
combination.^" 



THE HUGE PROFITS FROM THE COAL MINES. 

No one knows or can ascertain the exact profits of 
the Vanderbilts and of other railroad owners from their 
control of both the anthracite, and largely the bituminous, 
coal mines. As has been noted, the railroad magnates 
cloud their trail by operating through subsidiary com- 
panies. That their extortions reach hundreds of mil- 
lions of dollars every year is a patent enough fact. Some 
of the accompaniments of this process of extortion have 
been referred to ; — the confiscation, on the one hand, of 
the labor of the whole consuming population by taxing 
from them more and more of the products of their labor 

^^ See testimony brought out before Charles H. Guilbert, Ex- 
aminer appointed by the United States District Court in Phila- 
delphia. The Government's petition charged the defendants with 
entering into a conspiracy contrary to the letter and the spiri'. 
of the Sherman act. 



258 HISTORY OF THE GREAT AMERICAN FORTUNES 

by repeated increases in the price of coal, and, on the 
other, the confiscation of the labor of the several hundred 
thousand miners who are compelled to work for the 
most precarious wages, and in conditions worse, in some 
respects, than chattel slavery. 

But not alone is labor confiscated. Life is also immo- 
lated. The yearly sacrifice of life in the coal mines of 
the United States is steadily growing. The report for 
1908 of the United States Geological Survey showed 
that 3,125 coal miners were killed by accidents in the 
current year, and that 5,316 were injured. The number 
of fatalities was 1,033 niore than in 1906. " These fig- 
ures," the report explains, " do not represent the full 
extent of the disasters, as reports were not received from 
certain States having no mine inspectors." Side by side 
with these appalling figures must be again brought out 
the fact adverted to already : that the owners of the coal 
mines have at all times violently opposed the passage 
of laws drafted to afford greater safeguard for life in 
the working of the mines. Being the owners, at the 
same time, of the railroads, their opposition in that field 
to life-saving improvements has been as consistent. 

Improvements are expensive ; human life is contempt- 
ibly cheap ; so long as there is a surplus of labor it is 
held to be commercial folly to go to the unnecessary 
expense of protecting an article of merchandise which 
can be had so cheaply. Human tragedies do not enter 
into the making of profit and loss accounts ; outlays for 
luechanical appliances do. Assuredly this is a business 
age wherein profits must take precedence over every 
other consideration, which principle has been most elab- 
orately enunciated and established by a long list of ex- 
alted court decisions. Yea, and the very magnates whose 
power rests on force and fraud are precisely those who 



THE VANDEREILT FORTUNE 



259 



insidiously dictate what men shall be appointed to these 
omniscient courts, before whose edicts all men are ex- 
pected to bow in speechless reverence.-" 



CHAPTER VIII 
FURTHER ASPECTS OF THE VANDERBILT FORTUNfe 

The juggling of railroads and the virtual seizure of 
coal mines were by no means the only accomplishments 
of the Vanderbilt family in the years under consideration. 
Colorless as was the third generation, undistinguished 
by any marked characteristic, extremely commonplace in 
its conventions, it yet proved itself a worthy successor 
of Commodore Vanderbilt. The lessons he had taught 
of how to appropriate wealth were duly followed by 
his descendants, and all of the ancestral methods were 
closely adhered to by the third generation. Whatever 
might be its pretensions to a certain integrity and to a 
profound respectability, there was really no difference 
between its methods and those of the Commodore. Times 
had changed ; that was all. What had once been regarded 
as outright theft and piracy were now cloaked under 
high-sounding phrases as " corporate extension " and 
" high finance " and other catchwords calculated to lull 
public suspicion and resentment. A refinement of 
phraseology had set in ; and it served its purpose. 

Concomitantly, while executing the transactions already 
described, the Vanderbilts of the third generation put 
through many others, both large and small, which were 
converted into further heaps of wealth. An enumera- 
tion of all of these diverse frauds would necessitate a 
tiresome presentation. A few examples will suffice. 

The small frauds were but lesser in relation to the 

260 



FURTHER ASPECTS OF THE VANDERBILT FORTUNE 261 

larger. At this period of the economic development of 
the country, when immense thefts were being consum- 
mated, a fraud had to rise to the dignity of at least fifty 
million dollars to be regarded a large one. The law, it 
is true, proscribed any theft involving more than $25 
as grand larceny, but it was law applying to the poor 
only, and operative on them exclusively. The inordi- 
nately rich were beyond all law, seeing that they could 
either manufacture it, or its interpretation, at will. 
Among the conspicuous, audacious capitalists the fraud 
of a few paltry millions shrank to the modesty of a small, 
cursory, off-hand operation. Yet, in the aggregate, these 
petty frauds constituted great results, and for that reason 
were valued accordingly. 

AN $8,000,000 AREA CONFISCATED. 

Such a slight fraud was, for instance, the Vanderbilts' 
confiscation of an entire section of New York City. In 
1887 they decided that they had urgent and particular 
need for railroad yard purposes of a sweep of streets 
from Sixtieth street to Seventy-second street along the 
Hudson River Railroad division. What if this property 
had been bought, laid out and graded by the city at con- 
siderable expense? The Vanderbilts resolved to have it 
and get it for nothing. Under special forms of law 
dictated by them they thereupon took it. The method 
was absurdly easy. 

Ever compliant to their interests, and composed as 
usual of men retained by them or responsive to their 
influences, the Legislature of 1887 passed an act com- 
pelling the city authorities to close up the required area 
of streets. Then the city officials, fully as accommodat- 
ing, turned the property over to the exclusive, and 



262 HISTORY OF THE GREAT AMERICAN FORTUNES 

practically perpetual, use of the New York Central and 
Hudson River Railroad. With the profusest expres- 
sions of regard for the public interests, the railroad offi- 
cials did not in the slightest demur at signing an agree- 
ment with the municipal authorities. In this paper they 
pledged themselves to cooperate with the city in confer- 
ring upon the Board of Street Openings the right to 
reopen any of the streets at any time. This agreement 
was but a decoy for immediate popular eflfect. No such 
reopening ordinance was ever passed ; the streets re- 
mained closed to the public which, theoretically at least, 
was left with the title. In fact, the memorandum of 
the agreement strangely disappeared from the Corpora- 
tion Counsel's office, and did not turn up until twenty 
years later, when it was accidentally and most myster- 
iously discovered in the Lenox Library. Whence came 
it to this curious repository? The query remains un- 
answered. 

For seventeen and a half acres of this confiscated land, 
comprising about three hundred and fifty city lots, now 
valued at a round $8,000,000, the New York Central 
and Hudson River Railroad has not paid a cent in rental 
or taxes since the act of 1887 was passed. On the island 
of Manhattan alone 70.000 poor families are every year 
evicted for inability to pay rent — a continuous and 
horribly tragic event well worth comparing with the 
preposterous facility with which the great possessing 
classes everywhere either buy or defy law, and confiscate 
when it suits them. So cunningly drafted was the act 
of 1887 that while New York City was obliged to give 
the exclusive use of this large stretch of property to the 
company, yet the title to the property — the empty name 
— remained vested in the city. This being so. a corpor- 
ation counsel complaisantly decided that the railroad com- 



FL'RTUEX /vSriiCTS OI'" THE \AXDERDILT FORTUNE 263 

pany could not be taxed so long as the city owned the 
title. 1 

Another of what may be called — for purposes of 
distinction — the numerous small frauds at this time, 
was that foisting upon New York City the cost of 
replacing the New York Central's masonry viaduct ap- 
proaches with a fine steel elevated system. This fraud 
cost the public treasury about $r,200,ooo, quite a sizable 
sum, it will be admitted, but one nevertheless of pitiful 
proportions in comparison with previous and later trans- 
actions of the Vanderbilt family. 

We have seen how, in 1872, Commodore Vanderbilt 
put through the Legislature an act forcing New York 
City to pay $4,000,000 for improving the railroad's road- 
way on Park avenue. His grandsons now repeated his 
method. In 1892 the United States Government was 
engaged in dredging a ship canal through the Harlem 
River. The Secretary of War, having jurisdiction of all 
navigable waters, issued a mandate to the New York 
Central to raise its bridge to a given height, so as to 
permit the passing under of large vessels. 

To comply with this order it was necessary to raise 
the track structure both north and south of the Harlem 
River. Had an ordinary citizen, upon 'receiving an 
order from the authorities to make improvements or 
alterations in his property, attempted to compel the city 
to pay all or any part of the cost, he would have been 
laughed at or summarily dealt with. The Vanderbilts 
were not ordinary property holders. Having the power 

1 Minutes of the New York City Board of Estimate and Ap- 
portionment — Financial and Franchise Matters, 1907:1071-1085. 
■' It will thus be seen," reported Harry P. Nichols, Eugineer-in- 
Charge of the Franchise Bureau, "' that the railroad is at pres- 
ent, and has been for twenty years, occupying more than three 
hundred city lots, or something less than twenty acres, without 
compensation to the city." 



264 HISTORY OF THE GREAT AMERICAN FORTUNES 

to order legislatures to do their bidding, they now pro- 
ceeded to imitate their grandfather, and compel the city 
to pay the greater portion of the cost of supplying them 
with a splendid steel elevated structure. 



PUBLIC TAXATION TO SUPPLY PRIVATE CAPITAL. 

The Legislature of 1892 was thoroughly responsive. 
This was a Legislature which was not merely corrupt, 
but brazenly and frankly so, as was proved by the scan- 
dalous openness with which various spoliative measures 
were rushed through. 

An act was passed compelling New York City to pay 
one-half of the cost of the projected elevated approaches 
up to the sum of $1,600,000. New York City was thus 
forced to pay $800,000 for constructing that portion 
south of the Harlem River. If, so the law read on, 
the cost exceeded the estimate of $800,000. then the New 
York Central was to pay the difference. Additional 
provision was made for the compelling of New York 
City to pay for the building of the section north of the 
Harlem River. But who did the work of contracting 
and building, and who determined what the cost was? 
The railroad company itself. It charged what it pleased 
for material and work, and had complete control of the 
disbursing of the appropriations. The city's supervising 
commissions had, perforce, to accept its arbitrary de- 
mands, and lacked all power to question, or even scruti- 
nize, its reports of expenditures. Apart from the New 
York Central's officials, no one to-day knows what the 
actual cost has been, except as stated by the company. 

South of the Harlem River this reported cost has been 
S8oo,ooo, north of the Harlem River $400,000. At prac- 
tically no expense to themselves, the Vanderbilts ob- 




CORNELIUS VANDERBILT, 
Grandson of Commodore Vanderbilt. 



FURTHER ASPECTS OF THE VANDERBILT FORTUNE 265 

tained a massive four-track elevated structure, running 
for miles over the city streets. The people of the city 
of New York were forced to bear a compulsory taxation 
of $1,200,000 without getting the slightest equivalent for 
it. The Vanderbilts own these elevated approaches ab- 
solutely; not a cent's worth of claim or title have the 
people in them. Together with the $4,000,000 of public 
money extorted by Commodore Vanderbilt in 1872, this 
sum of $1,200,000 makes a total amount of $5,200,000 
plucked from the public treasury under form of law to 
make improvements in which the people who have footed 
the bill have not a moiety of ownership.- The Vander- 
bilts have capitalized these terminal approaches as though 
they had been built with private money. ^ 

At this point a significant note may be made in passing. 
While these and other huge frauds were going on, Cor- 
nelius Vanderbilt was conspicuously presenting himself 
as a most ardent " reformer " in politics. He was, for 
instance, a distinguished member of the Committee of 
Seventy, organized in 1894. to combat and overthrow 
Tammany corruption ! Such, as we have repeatedly 
observed, is the quality of the men who compose the 
bourgeois reform movements. For the most part great 
rogues, they win applause and respectability by virtu- 

2 The facts as to the expenses incurred under the act of 1892 
were stated to the author by Ernest Harvier, a member of the 
Change of Grade Commission representing New York City 
in supervising the work. 

3 The New York Central has long compelled the New York. 
New Haven and Hartford Railroad to pay seven cents toll for 
every passenger transported south of Woodlawn, and also one- 
third of the maintenance cost, including interest, of the terminal. 
In reporting an effort of the New York. New Haven and Hart- 
ford Railroad to have these terms modified, the New York 
" Times " stated in its financial columns, issue of December 25, 
1908: "As matters now stand the New Haven, without its 
consent, is forced to bear one-third of the charge arising from 
the increased capital invested in the Central's terminal." 



2^ HISTORY OF THE GREAT AMERICAN FORTUNES 

ously denouncing petty, vulgar political corruption which 
they themselves often instigate, and thus they divert 
attention from their own extensive rascality. 



A MULTITUDE OF ACQUISITIONS. 

Why tempt exhaustion by lingering upon a multitude 
of other frauds which went to increase the wealth and 
possessions of the Vanderbilt family? One after 
another — often several simultaneously — they were put 
through, sometimes surreptitiously, again with overt 
effrontery. Legislative measures in New York and 
many other States were drafted with such skill that sly 
provisions allowing the greatest frauds were concealed 
in the enactments ; and the first knowledge that the 
plundered public frequently had of them was after they 
had already been accomplished. These frauds comprised 
corrupt laws that gave, in circumstances of notorious 
scandal, tracts of land in the Adirondack Mountains to 
railroad companies now included in the Vanderbilt sys- 
tem. They embraced laws, and still more laws, exempt- 
ing this or that stock or property from taxation, and 
laws making presents of valuable franchises and allowing 
further consolidations. Laws were enacted in New 
York State the effects of which were to destroy the Erie 
Canal (which has cost the people of New York State 
$100,000,000) as a competitor of the New York Central 
Railroad. All of these and many other measures will be 
skimmed over by a simple reference, aiid attention 
focussed on a particularly large and notabiC transaction 
by which William K. Vanderbilt in 1898 added about 
$e;o.ooO;OD0 to his fortune at one superb swoop. 

The Vanderbilt ownership of various railroad systems 
has been of an intricate, roundabout nature. A group 



FURTHER ASPECTS OI" THE VANDERBILT FORTUNE 26/ 

of railroads, the majority of the stock of which was 
actually owned by the Vanderbilt family, were nominally 
put under the ownership of different, and apparently 
distinct, railroad companies. This devious arrangement 
was intended to conceal the real ownership, and to have 
a plausible claim in counteracting the charge that many 
railroads were concentrated in one ownership, and were 
combined in monopoly in restraint of trade. The plan 
ran thus : The Vanderbilts owned the New York Cen- 
tral and Hudson River Railroad. In turn this railroad, 
as a corporation, owmed the greater part of the $50,000,- 
000 stock of the Lake Shore Railroad, The Lake Shore, 
in turn, owned the control, or a chief share of the con- 
trol, of other railroads, and thus on. 

In 1897, William K. Vanderbilt began clandestinely 
campaigning to combine the New York Central and the 
Lake Shore under one definite, centralized management. 
This plan was one in strict harmony with the trend of 
the times, and it had the undoubted advantage of promis- 
ing to save large sums in managing expenses. But this 
anticipated retrenchment was not the main incentive. A 
dazzling opportunity was presented of checking in an 
immense amount in loot. The grandson again followed 
his eminent grandfather's teachings ; his plan was nothing 
more than a repetition of what the old Commodore had 
done in his consolidations. 

During the summer and fall of 1897 the market gym- 
nastics of Lake Shore stock were cleverly manipulated. 
By the declaration of a seven per cent, dividend the 
market price of the stock was run up from 115 to about 
200. The object of this manipulation was to have a 
justification for issuing $100,000,000 in three and one- 
half per cent. New York Central bonds to buy $50,000.- 
000 of Lake Shore seven per cent, capital stock. By 



268 HISTORY OF THE GREAT AMERICAN FORTUNES 

his personal manipulation, William K. Vanderbilt at the 
same time ballctoned the price of New York Central 
stock. 

The purpose was kept a secret until shortly before the 
plan was consummated on February 4, 1898. On that day 
William K. Vanderbilt and his subservient directors of 
the New York Central gathered their corpulent and cor- 
porate persons about one table and voted to buy the Lake 
Shore stock. With due formalities they then adjourned, 
and moving over to another table, declared themselves 
in meeting as directors of the Lake Shore Railroad, and 
solemnly voted to accept the offer. 

Presently, however, an awkward and slightly annoying 
defect was discovered. It turned out that the Stock 
Corporation law of New York State specifically prohib- 
ited the bonded indebtedness of any corporation being 
more than the value of the capital stock. This discovery 
was not disconcerting ; the obstacle could be easily over- 
come with some well-distributed generosity. A bill was 
quickly drawn up to remedy the situation, and hurried 
to the Legislature then in session at Albany. The As- 
sembly balked and ostentatiously refused to pass it. But 
after the lapse of a short time the Assembly saw a great 
new light, and rushed it through on March 3, on which 
same day it passed the Senate. It was at this precise 
time that a certain noted lobbyist at Albany somehow 
showed up, it was alleged, with a fund of $500,000, and 
members of the Assembly and Senate suddenly revealed 
evidences of being unusually flush with money.* 

* The author is so informed by an official who represented 
New York City's legal interests at this session and successive 
Legislative sessions, and who was thoroughly conversant with 
every move. See Chapter 80, Laws of 1898, Laws of New York, 
1898, ii : 142. The amendment declared that Section 24 of the 
Stock Corporation Law did not apply to a railroad corporation. 



FURTHER ASPECTS OF THE VANDERBILT FORTUNE 269 

A very illuminating transaction, surely, and well de- 
serving of philosophic comment. This, however, will be 
eschewed, and attention next turned to the manner in 
which the Vanderbilts, in 1899, obtained control of the 
Boston and Albany Railroad. 



THE BOSTON AND ALBANY RAILROAD BECOMES THEIRS. 

To a great extent this railroad had been built with 
public funds raised by enforced taxation, the city of 
Albany contributing $1,000,000, and the State of Massa- 
chusetts $4,300,000 of public funds. Originally it looked 
as if the public interests were fully conserved. But 
gradually, little by little, predatory corporate interests got 
in their delicate work, and induced successive legislatures 
and State officials to betray the public interests. The 
public holdings of stock were entirely subordinated, so 
that in time a private corporation secured the practical 
ownership. 

Finally, in 1899, the Legislature of- Massachusetts 
effaced the last vestige of State ownership by giving 
the Vanderbilts a perpetual lease of this richly profitable 
railroad for a scant two million dollars' payment a year. 
During the debate over this act Representative Dean 
charged in the Legislature that " it is common rumor 
in the State House that members are receiving $300 
apiece for their votes." The acquisition of this railroad 
enabled the New York Central to make direct connection 
with Boston, and with much of the New England coast, 
and added about four hundred miles to the Vanderbilt 
system. Most of the remainder of the New England 
territory is subservient to the Boston and Maine Railroad 
system in which the American Express Company, con- 
trolled by the Vanderbilts, owns 30,000 shares. 



270 HISTORY OF THE GREAT AMERICAN FORTUNES 

To pay interest and dividends on the hundreds of mil- 
lions of dollars of inflated bonds and stock which three 
generations of the Vanderbilts had issued, and to main- 
tain and enhance their value, it vv^as necessary to keep 
on increasingly extorting revenues. The sources of the 
profits were palpable. Time after time freight rates 
were raised, as was more than sufificiently proved in 
various official investigations, despite denials. Conjunc- 
tively with this process, another method of extortion was 
the ceaseless one of beating down the wages of the 
workers to the very lowest point at which they could be 
hired. While the Vanderbilts and other magnates were 
manufacturing law at will, and boldly appropriating, 
under color of law, colossal possessions in real and per- 
sonal property, how was the law, as embodied in legis- 
latures, officials and courts acting toward the working 
class? 



THE GOVERNMENT AN ENGINE OF TYRANNY. 

The grievances and protests of the workers aroused 
no response save the ever-active one of contumely, 
coercion and violent reprisals. The treasury of Nation, 
States and cities, raised by a compulsory taxation falling 
heavily upon the workers, was at all times at the com- 
plete disposal of the propertied interests, who emptied 
it as fast as it was filled. The propertiless and jobless 
were left to starve ; to them no helping arm was out- 
stretched, and if they complained, no quarter given. The 
State as an institution, while supported by the toil of 
the producers, was wholly a capitalist State with the 
capitalists in complete supremacy to fashion and use it 
as they chose. They used the State political machinery 
to plunder the masses, and then, at the slightest tendency 



FURTHER ASPECTS OF THE VANDERBILT FORTUNE 27 1 

on the part of the workers to resist these crushing injus- 
tices and burdens, called upon the State to hurry out its 
armed forces to repress this dangerous discontent. 

In Buffalo, in 1 890-1 891, thirty-one in every hundred 
destitutes were impoverished because of unemployment, 
and in New York City twenty-nine in every hundred.'' 
Hundreds of millions of dollars of public funds were 
given outright to the capitalists, but not a cent appropri- 
ated to provide work for the unemployed. In the panic 
of 1893, when millions of men, women and children were 
out of work, the machinery of government, National, 
State and municipal, proffered not the least aid, but, on 
the contrary, sought to suppress agitation and prohibit 
meetings by flinging the leaders into jail. Basing his 
conclusions upon the (Aldrich) United States Senate 
Report of 1893 — a report highly favorable to capitalist 
interests, and not unexpectedly so, since Senator Aldrich 
was the recognized Senatorial mouthpiece of the great 
vested interests — Spahr found that the highest daily 
wage for all earners, taken in a mass, was $2.04.*^ 

More than three-quarters of all the railroad employees 
in the United States received less than two dollars a day. 
Large numbers of railroad employees were forced to 
work from twelve to fourteen hours a day, and their 
efficiency and stamina thus lowered. Periodically many 
were laid off in enforced idleness ; and appalling numbers 
were maimed or killed in the course of duty.'^ Injured 

5 " Encyclopedia of Social Reform," Edition of 1897 : 1073. 
^ " The Present Distribution of Wealth in The United States." 
^ The report of the Wisconsin Railway Commissioners for 
1894, Vol. xiii., says : " In a recent year more railway employees 
were killed in this country than three times the number of Union 
men slain at the battle of Lookout Mountain, Missionary Ridge 
and Orchard Knob combined. ... In the bloody Crimean 
War, the British lost 21.000 in killed and wounded — not as 
many as are slain, maimed and mangled among the railroad men 



272 HISTORY OF THE GREAT AMERICAN FORTUNES 

or slain largely because the railroad corporations refused 
to expend money in the introduction of improved auto- 
matic coupling devices, these workers or their heirs 
were next confronted by what? The unjust and oppres- 
sive provisions of worthless employers' liability laws 
drafted by corporation attorneys in such a form that the 
worker or his family generally had almost no claim. 
The very judges deciding these suits were, as a rule, 
put on the bench by the railroad corporations. 

MACHINE GUNS FOR THE OVERWORKED. 

These deadly conditions prevailed on the Vanderbilt 
railroads even more than on any others ; it was notorious 
that the Vanderbilt system was not only managed in semi- 
antiquated ways so far as the operation was concerned, 
but also that its trainmen were terribly underpaid and 
overworked.* In reply to a continued agitation for better 
hours on the part of the Vanderbilt employees, the New 
York Legislature passed an act, in 1892, which appar- 
ently limited the working hours of railroad employees 
to ten a day. There was a gleam of sunshine, but lo ! 
when the act was critically examined after it had become 
a law, it was found that a " little joker " had been 
sneaked into its mass of lawyers' terminology. The 
surreptitious clause ran to this effect : That railroad 
companies were permitted to exact from their employees 
overtime work for extra compensation. This practically 
made the whole law a negation. 

of the country in a single year." Various reports of the Inter- 
state Commerce Commission state the same facts. 

* " Semi-antiquated ways." Only recently the " Railway Age 
Gazette," issue of January, 1909, styled the New York Central's 
directors as mostly " concentrated ahsurdities, physically incom- 
petent, mentally unfit, or largely unresidcnt and inattentive." 



PURTIIRR ASPECTS OF THE VAXDERBILT FORTUNE 2/3 

So it turned out ; for in August, 1892, the switchmen 
employed by various railroad lines converging at Buffalo 
struck for shorter hours and more pay. The strike 
spread, and was meeting with tactical success ; the strik- 
ers easily persuaded men who had been hired to fill 
their jobs to quit. What did the Vanderbilts and their 
allies now do? They fell back upon the old ruse of 
invoking armed force to suppress what they proclaimed 
to be violence. They who had bought law and had 
violated the law incessantly now represented that their 
property interests were endangered by " mob violence," 
and prated of the need of soldiers to " restore law and 
order." It was a serviceable pretext, and was immedi- 
ately acted upon. 

The Governor of New York State obediently ordered 
out the entire State militia, a force of 8,000, and dis- 
patched it to Buffalo. The strikers were now confronted 
with bayonets and machine guns. The soldiery sum- 
marily stopped the strikers from picketing, that is to 
say, from attempting to persuade strikebreakers to 
refrain from taking their places. Against such odds the 
strike was lost. 

If, however, the Vanderbilts could not afiford to pay 
their workers a few cents more in wages a day, they 
could afford to pay millions of dollars for matrimonial 
alliances with foreign titles. These excursions into the 
realm of high-caste European nobility have thus far cost 
the Vanderbilt family about $15,000,000 or $20,000,000. 
When impecunious counts, lords, dukes and princes, hav- 
ing wasted the inheritance originally obtained by robbery, 
and perpetuated by robbery, are on the anxious lookout 
for marriages with great fortunes, and the American 
money magnates, satiated with vulgar wealth, aspire to 



274 HISTORY OF THE GREAT AMERICAN FORTUNES 

titled connections, the arrangement becomes easy.'' Ro- 
mance can be dispensed with, and the lawyers depended 
upon to settle the preliminaries. 



TEN MILLIONS FOR A DUKEDOM. 

The announcement was made in 1895 that " a marriage 
had been arranged " between Consuelo, a young daugh- 
ter of William K. Vanderbilt, and the Duke of Marl- 
borough. 71ie wedding ceremony was one of showy 
splendor ; millions of dollars in gifts were lavished upon 
the couple. Other millions in cash, wrenched also from 
the labor of the American working population, went to 
rehabilitate and maintain Blenheim House, with its prod- 
igal cost of reconstruction, its retinue of two hundred 
servants, and its annual expense roll of $100,000. Mil- 
lions more flowed out from the \^anderbilt exchequer 
m defraying the cost of yachts and of innumerable ap- 
purtenances and luxuries. Not less than $2,500,000 was 
spent in building Sutherland House in London. Great 
as was this expense, it was not so serious as to perturb 
the duchess' father ; his $50,000,000 feat of financial 
legerdemain, in i8q8, alone far more than made up for 
these extravagant outlays. The Marlborough title was 
an expensive one ; it turned out to be a better thing to 
retain than the man who bore it ; after a thirteen years' 
compact, the couple decided to separate for " good and 
sufficient reasons," into which it is not our business to 
inquire. All told, the Marlborough dukedom had cost 
William K. Vanderbilt, it was said, fully $10,000,000. 

Undeterred by Cousin Consuclo's experience, Gladys 

* More than 500 .American women have married titled foreign- 
ers. The sum of about $220,000,000, it is estimated (1909), has 
followed them to Europe. 




THE DUCHESS OF MARLBOROUGH, 
Daughter of William K. Vanderbilt. 



FL'RTHEFi ASPECTS OF THE VANDERBILT FORTUNE 275 

Vanderbilt, a daughter of Cornelius, likewise allied her- 
self with a title by marrying, in 1908, Count Laslo 
Szechenyi, a sprig of the Hungarian feudal nobility. 
" The wedding," naively reported a scribe, " was char- 
acterized by elegant simplicity, and was witnessed by 
only three hundred relatives and intimate friends of the 
bride and bridegroom." The " elegant simplicity " con- 
sisted of gifts, the value of which was estimated at fully 
a million dollars, and a costly ceremony. If the bride 
had beauty, and the bridegroom wit, no mention of them 
was made ; the one fact conspicuously emphasized was 
the all-important one of the bride having a fortune " in 
her own right " of about $12,000,000. 

The precise sum which made the Count eager to share 
his title, no one knew except the parties to the transaction. 
Her father had died, in 1899, leaving a fortune nominally 
reaching about $100,000,000. Its actual proportions 
were much greater. It had long been customary on the 
part of the very rich, as the New York State Board of 
Tax Commissioners pointed out, in 1903, to evade the 
inheritance tax in advance by various fraudulent devices. 
One of these was to inclose stocks or money in envelopes 
and apportion them among the heirs, either at the death 
bed, or by subsequent secret delivery.^" 

Like his father, Cornelius Vanderbilt had died of apo- 
plexy. In his will he had cut oflF his eldest son, Cor- 
nelius, with but a puny million dollars. And the reason 
for this parental sternness? He had disapproved of 
Cornelius' choice in marriage. To his son, Alfred, the 
unrelenting multimillionaire left the most of his fortune, 
with a showering of many millions upon his widow, upon 
Reginald, another son, and u]K3n his two daughters. 

10 See Annual Report of the New York State Board of Tax 
Commissioners, New York Senate Document, No. 5, 1903: 10. 



276 HISTORY OF THE GREAT AMERICAN FORTUNES 

Cornelius objected to the injustice and hardship of being 
left a beggar with but a scanty million, and threatened 
a legal contest, whereupon Alfred, pitying the dire straits 
to which Brother Cornelius had been reduced, presented 
him with six or seven millions with which to ease the 
biting pangs of want. 

Marriages with titled foreigners have proved a drain 
upon the Vanderbilt fortune, although, thanks to their 
large share in the control of laws and industrial institu- 
tions, the Vanderbilts possess at all times the power of 
recouping themeselves at volition. The American mar- 
riages, on the other hand, contracted by this family, have 
interlinked other great fortunes with theirs. 

One of the Vanderbilt buds married Harry Payne 
Whitney, whose father, William C. Whitney, left a large 
fortune, partly drawn from the Standard Oil Company, 
and in part from an industrious career of corruption and 
theft. The elder Whitney, according to facts revealed 
in many official investigations and lawsuits, debauched 
legislatures and common councils into giving him and 
his associates public franchises for street railways and 
for other public utilities, and he stole outright tens of 
millions of dollars in the manipulation of the street rail- 
ways in various cities. His crimes, and those of his 
associates, were of such boldness and magnitude that 
even the cynical business classes were moved to astonish- 
ment.^^ Cornelius Vanderbilt, jr., married a daughter 
of R. T. Wilson, a multimillionaire, whose fortune came 
to a great extent from the public franchises of Detroit. 
The initial and continued history of the securing and 
exploitation of the street railway and other franchises 
of ^hat city has constituted a solid chapter of the most 

11 For a detailed account see that part of this work, " Great 
Fortunes from Public Franchises." 




CORNELIUS VANDERBILT, 

Great-Grandson of Commodore Vanderbilt. 



FURTHER ASPECTS OF THE VANDERBILT FORTUNE 277 

flagrant fraud. William K. Vanderbilt, jr., married a 
daughter of the multimillionaire Senator Fair, of Cal- 
ifornia, whose fortune, dug from mines, bought him a 
seat in the United States Senate. Thus, various multi- 
millionaire fortunes have been interconnected by thcie 
American marriages. 



DIVERSITY OF THE VANDERBILT POSSESSIONS. 

The fortune of the Vanderbilt family, at the present 
writing, is represented by the most extensive and d'ffer- 
ent forms of property. Railroads, street railways, elec- 
tric lighting systems, mines, industrial plants, express 
companies, land, and Government, State and municipal 
bonds — these are some of the forms. From one indus- 
trial plant alone — the Pullman Company — the Vander- 
bilts draw millions in revenue yearly. Formerly they 
owned their own palace car company, the Wagner, but 
it was merged with the Pullman. The frauds and ex- 
tortions of the Pullman Company have been sufficiently 
dealt with in the particular chapter on JMarshall Field. 
In the far-away Philippine Islands the Vanderbilts are 
engaged, with other magnates, in the exploitation of both 
the United States Government and the native population. 
The Visayan Railroad numbers one of the Vanderbilts 
among its directors. This railroad has already received 
a Government subsidy of $500,000, in addition to the 
free gift of a perpetual franchise, on the ground that 
" the railroad was necessary to the development of the 
archipelago." 

But the Vanderbilts' principal property consists of the 
New York Central Railroad system. The Union Pacific 
Railroad, controlled by the Harriman-Standard Oil in- 
terests, now owns $14,000,000 of stock in the New York 



278 HISTORY OF THE GREAT AMERICAN FORTUNES 

Central system, and has directors on the governing board. 
The probabihties are that the voting power of the New 
York Central, the Lake Shore and other Vanderbilt lines 
is passing into the hands of the Standard Oil interests, 
of which Harriman was both a part and an ally. This 
signifies that it is only a question of a short time when 
all or most of the railroads of the United States will be 
directed by one all-powerful and all-embracing trust. 

But this does not by any means denote that the Van- 
derbilts have been stripped of their wealth. However 
much they may part with their stock, which gives the 
voting power, it will be found that, like William H. Van- 
derbilt, they hold a stupendous amount in railroad, and 
other kinds of, bonds. As the Astors and other rich fami- 
lies were perfectly willing, in 1867, to allow Commodore 
Vanderbilt to assume the management of the New York 
Central on the ground that under his bold direction 
their profits and loot would be greater, so the lackadaisical 
Vanderbilts of the present generation perhaps likewise 
looked upon Harriman, who proved his ability to accom- 
plish vast fraudulent stock-watering operations and con- 
solidations, and to oust lesser magnates. The New York 
Central, at this writing, still remains a Vanderbilt prop- 
erty, not so distinctively so as it was twenty years ago, 
yet strongly enough under the Vanderbilt domination. 
According to Moody, this railroad's net annual income 
in 1907 was $34,cxx),ooo.^- In alluringly describing its 
present and prospective advantages and value Moody 
went on : 

" To begin with, it has entry into the heart of New 
York City, with extensive passenger and freight termi- 
nals, all of which are bound to be of steadily increasing 

12 " Moody's Magazine," issue of August, 1908. 



FLRTllEK A.--i'FCTS G'" THE VANDEKBILT FORTUNE 2/9 

worth as the years go by, as New York continues to 
grow in population an'i weahh. It has, in addition, a 
practically ' wate' grade ' line all the way from New 
York to Chicago, and, therefore, for all time must nec- 
essarily have a great advantage over lines like the Erie, 
the Lackawanna and others with heavy grades, many 
curves, etc. It has a myriad of small feeders and 
branches in growing and populous parts of the State of 
New York, as well as in the sections further to the west. 
It touches the Great Lakes at various points, operates 
water transportation for freight to all parts of the lakes ; 
enters Chicago over its own tracks and competes ag- 
gressively with the Pennsylvania for all traffic to and 
from all parts of the Mississippi Valley and the West 
and Southwest. It is in no danger from disastrous com- 
petition in its own chosen territory, therefore, and con- 
stantly receives income of vast importance through a net- 
work of feeders which penetrate the territory of some of 
the jargest of its rivals." 



THE SORT OF ABILITY DISPLAYED. 

The particular kind of ability by which one man, fol- 
lowed by his descendants, obtained the controlling own- 
ership of this great railroad system, and of other prop- 
erties, has been herein adequately set forth. Long has it 
been the custom to attribute to Commodore Vanderbilt 
and successive generations of Vanderbilts an almost su- 
pernatural " constructive genius," and to explain by that 
glib phrase their success in getting hold of their colossal 
wealth. This explanation is clumsy fiction that at once 
falls to pieces under historical scrutiny. The moment a 
genuine investigation is begun into the facts, the glamour 



'280 HISTORY OF THE GREAT AMERICAN FORTUNES 

of superior ability and respectability evaporates, and the 
Vanderbilt fortune stands out, like all other fortunes, as 
the product of a continuous chain of frauds. 

Just as fifty years ago Commodore Vanderbilt was 
blackmailing his original millions without molestation by 
law, so to-day the Vanderbilts are pursuing methods out- 
side the pale of law. Not all of the facts have been 
given, by any means ; only the most important have been 
included in these chapters. For one thing, no mention 
has been made of their repeated violations of a law pro- 
hibiting the granting of rebates — a law which was 
stripped of its imprisonment clause by the railroad mag- 
nates, and made punishable by fine only. Time and time 
again in recent years has the New York Central been 
proved guilty in the courts of violating even this emas- 
culated law. From the very inception of the Vanderbilt 
fortune the chronicle is the same, and ever the same — 
legalized theft by purchase of law, and lawlessness by 
evasion or defiance of law. With fraud it began, by 
fraud it has been increased and extended and perpetuated, 
and by fraud it is held. 



CHAPTER IX 
THE RISE OF THE GOULD FORTUNE 

The greater part of this commanding fortune was orig- 
inally heaped up, as was that of Commodore Vanderbilt, 
in about fifteen years, and at approximately the same time. 
One of the most powerful fortunes in the United States, 
it now controls, or has exercised a dominant share of the 
control, over more than 18,000 miles of railway, the 
total ownership of which is represented by considerably 
more than a billion dollars in stocks and bonds. The 
Gould fortune is also either openly or covertly paramount 
in many telegraph, transatlantic cable, mining, land and 
industrial corporations. 

Its precise proportions no one knows except the Gould 
family itself. That it reaches many hundreds of mil- 
lions of dollars is fairly obvious, although what is its 
exact figure is a matter not to be easily ascertained. In 
the flux of present economic conditions, which, so far as 
the control of the resources of the United States is con- 
cerned, have simmered down to desperate combats be- 
tween individual magnates, or contesting sets of mag- 
nates, the proportions of great fortunes, especially those 
based upon railroads and industries, constantly tend to 
vary. 

In the years 1908 and 1909 the Gould fortune, if re- 
port be true, was somewhat diminished by the onslaughts 
of that catapultic railroad baron. E. H. Harriman, who 
unceremoniously seized a share of the voting control of 

281 



282 HISTORY OF THE GREAT AMERICAN FORTUNES 

some of the railroad systems long controlled by the 
Goulds. Despite this reported loss, the Gould fortune 
is an active, aggressive and immense one, vested with the 
most extensive power, and embracing hundreds of mil- 
lions of dollars in cash, land, palaces, or profit-producing 
property in the form of bonds and stocks. Its influence 
and ramifications, like those of the Vanderbilt and of 
other huge fortunes, penetrate directly or indirectly into 
every inhabited part of the United States, and into Mex- 
ico and other foreign countries. 



JAY GOULD S BOYHOOD. 

The founder of this fortune was Jay Gould, father 
of the present holding generation. He was the son of a 
farmer in Delaware County, New York, and was born 
in 1836. As a child his lot was to do various chores on 
his father's farm. In driving the cows he had to go 
barefoot, perforce, by reason of poverty, and often this- 
tles bruised his feet — a trial which seems to have left 
such a poignant and indelible impression upon his mind 
that when testifying before a United States Senate inves- 
tigating committee forty years later he pathetically spoke 
of it with a reminiscent quivering. His father was, in- 
deed, so poor that he could not afi'ord to let him go to 
the public school. The lad, however, made an arrange- 
ment with a blacksmith by which he received board in 
return for certain clerical services. These did not inter- 
fere with his attending school. When fifteen, he be- 
came a clerk in a country store, a task which, he related, 
kept him at work from six o'clock in the morning until 
ten o'clock at night. It is further related that by getting 
up at three o'clock in the morning and studying mathc- 



THE RISE OF TIIC GOLLD FORTUNE 28 



J 



matics for three years, he learned the rudiments of sur- 
veying. 

According to Gould's own story, an engineer who was 
making a map of Ulster County hired him as an as- 
sistant at " twenty dollars a month and found." This 
engagement somehow (we are not informed how) turned 
out unsatisfactorily. Gould was forced to support him- 
self by making " noon marks " for the farmers. To two 
other young men who had worked with him upon the 
map of Ulster County, Gould (as narrated by himself) 
sold his interest for $500, and with this sum as capital 
he proceeded to make maps of Albany and Delaware 
counties. These maps, if we may believe his own state- 
ment, he sold for $5,000. 

HE GOES INTO THE TANNING BUSINESS. 

Subsequently Gould went into the tanning business 
in Pennsylvania with Zadoc Pratt, a New York mer- 
chant, politician and Congressman of a certain degree 
of note at the time.^ Pratt, it seems, was impressed by 
young Gould's energy, skill and smooth talk, and sup- 
plied the necessary capital of $120,000. Gould, as the 
phrase goes, was an excellent bluff; and so dexterously 
did he manipulate and hoodwink the old man that it was 
quite some time before Pratt realized what was being 
done. Finally, becoming suspicious of where the profits 
from the Gouldsboro tannery (named after Gould) were 

1 Pratt was regarded as one of the leading agricultural ex- 
perts of his day. His farm of three hundred and sixty-five 
acres, at Prattsville, New York, was reputed to be a model. A 
paper of his, descriptive of his farm, and containing wood- 
cut engravings, may be found in U. S. Senate Documents, Sec- 
ond Session, Thirty-seventh Congress, 1861-62, v:4ii-4i5. 



284 HISTORY OF THE GREAT AMERICAN FORTUNES 

going, Pratt determined upon some overhauling and in- 
vestigating. 

Gould was alert in forestalling this move. During his 
visits to New York City, he had become acquainted with 
Charles M. Leupp, a rich leather merchant. Gould pre- 
vailed upon Leupp to buy out Pratt's interest. When 
Gould returned to the tannery, he found that Pratt had 
been analyzing the ledger. A scene followed, and Pratt 
demanded that Gould buy or sell the plant. Gould was 
ready, and offered him $60,000, which was accepted. Im- 
mediately Gould drew upon Leupp for the money. 
Leupp likewise became suspicious after a time, and from 
the ascertained facts, had the best of grounds for becom- 
ing so. The sequel was a tragic one. One night, in the 
panic of 1857, Leupp shot and killed himself in his fine 
mansion at Madison avenue and Twenty-fifth street. His 
suicide caused a considerable stir in New York City.^ 

HE BUYS RAILROAD BONDS WITH HIS STEALINGS. 

Three years later, in i860, Gould set up as a leather 
merchant in New York City; the New York directory 
for that year contains this entry : " Jay Gould, leather 
merchant, 39 Spruce street ; house Newark." For sev- 
eral years after this his name did not appear in the direc- 
tory. 

He had been, however, edging his way into the railroad 

'-■ Although later in Gould's career it was freely charged that 
he had been the cause of Leupp's suicide, no facts were officially 
brought out to prove the charge. The coroner's jury found that 
Loupp had been suffering from melancholia, superinduced, doubt- 
less, by business reverses. 

Even Houghton, however, in his flamboyantly laudatory work 
describes Gould's cheating of Pratt and Leupp, and Leupp's 
suicide. According to Houghton, Leupp's friends ascribed the 
cause of the act to Gould's treachery. See "Kings of Fortune," 
265-266. 



THE RISE OF THE GOULD FORTUNE 285 

business with the sums that he had stolen from Pratt and 
Leupp. At the very time that Leupp committed suicide, 
Gould was buying the first mortgage bonds of the Rut- 
land and Washington Railroad — a small line, sixty-two 
miles long, running from Troy, New York, to Rutland, 
Vermont. These bonds, which he purchased for ten cents 
on the dollar, gave him control of this bankrupt railroad. 
He hired men of managerial ability, had them improve the 
railroad, and he then consolidated it with other small rail- 
roads, the stock of which he had bought in. 

With the passing of the panic of 1857, and with the in- 
coming of the stupendous corruption of the Civil War 
period, Gould was able to manipulate his bonds and stock 
imtil they reached a high figure. With a part of his 
profits from his speculation in the bonds of the Rutland 
and Washington Railroad, he bought enough stock of the 
Cleveland and Pittsburg Railroad to give him control of 
that line. This he manipulated until its price greatly rose, 
when he sold the line to the Pennsylvania Railroad Com- 
pany. In these transactions there w^ere tortuous sub- 
strata of methods, of which little to-day can be learned, 
except for the most part what Gould himself testified 
to in 1883, which testimony he took pains to make as 
favorable to his past as possible. 

His career from 1867 onward stood out in the fullest 
prominence ; a multitude of official reports and investiga- 
tions and court records contribute a translucent record. 
He became invested with a sinister distinction as the most 
cold-blooded corruptionist, spoliator, and financial pirate 
of his time ; and so thoroughly did he earn this reputa- 
tion that to the end of his days it confronted him at 
every step, and survived to become the standing reproach 
and terror of his descendants. For nearly a half century 
the very name of Jay Gould has been a persisting jeer 



286 HISTORY OF THE GREAT AMKRICAX FORTUNES 

and by-word, an object of {iopular contumely and hatred, 
the signification of every foul and base crime by which 
greed triumphs. , 

WHY THIS BIASED VIEW OF GOULD'S CAREER? 

Yet, it may well be asked now, even if for the first 
time, why has Jay Gould been plucked out as a special 
object of opprobrium? What curious, erratic, unstable 
judgment is this that selects this one man as the scape- 
goat of commercial society, while deferentially allow- 
ing his business contemporaries the fullest measure of 
integrity and respectability? 

Monotonous echoes of one another, devoid of under- 
standing, writer has followed writer in harping undis- 
criminatingly upon Jay Gould's crimes. His career has 
been presented in the most forbidding colors ; and in order 
to show that he was an abnormal exception, and not a 
familiar type, his methods have been darkly contrasted 
with those of such illustrious capitalists as the Astors, 
the Vanderbilts, and others. 

Thus, has the misinformed thing called public opinion 
been shaped by these scribbling purveyors of fables ; and 
this public opinion has been taught to look upon Jay 
Gould's career as an exotic, " horrible example," having 
nothing in common with the careers of other founders of 
large fortunes. The same generation habitually addicted 
to cursing the memory of Jay Gould, and taunting his 
children and grandchildren with the reminders of his 
thefts, speaks w^ith traditional respect of the wealth of 
such families as the Astors and the Vanderbilts. Yet the 
cold truth is, as has been copiously proved, John Jacob 
Astor was proportionately as notorious a swindler in his 
day as Gould was in his ; and as for Commodore Vander 



THE RISE OF THE COULD FORTrXE 287 

bilt, he had already made blackmailing on a large scale 
a safe art before Gould was out of his teens. 

Gould has been impeached as one of the most audacious 
and successful buccaneers of modern times. Without 
doubt he was so ; a freebooter who, if he could not ap- 
propriate millions, would filch thousands ; a pitiless 
human carnivore, glutting on the blood of his numberless 
victims ; a gambler destitute of the usual gambler's code 
of fairness in abiding by the rules ; an incarnate fiend of 
a Machiavelli in his calculations, his schemes and am- 
bushes, his plots and counterplots. 

But it was only in degree, and not at all in kind, that 
he differed from the general run of successful wealth 
builders. The Vanderbilts committed thefts of as great 
an enormity as he, but they gradually managed to weave 
around themselves an exterior of protective respectability. 
All sections of the capitalist class, in so fiercely reviling 
Gould, reminded one of the thief, who, to divert attention 
from himself, joins with the pursuing crowd in loudly 
shouting, " Stop thief ! " We shall presently see whether 
this comparison is an exaggerated one or not. 

THE TEACHINGS OF HIS ENVIRONMENT. 

To understand the incentives and methods of Gould's 
career, it is necessary to know the endemic environment 
in which he grew up and flourished, and its standards 
and spirit. He, like others of his stamp, were, in a great 
measure, but products of the times ; and it is not the man 
so much as the times that are of paramount interest, for 
it is they which supply the explanatory key. In preceding 
chapters repeated insights have been given into the 
methods not merely of one phase, but of all phases, of 
capitalist formulas and processes. At the outset, how- 



288 HISTORY OF THE GREAT AMERICAN FORTUNES 

ever, in order to approach impartially this narrative of 
the Gould fortune, and to get a clear perception of the 
dominant forces of his generation, a further presentation 
of the business-class methods of that day will be given. 

As a young man what did Jay Gould see? He saw, 
in the first place, that society, as it was organized, had 
neither patience nor compassion for the very poverty its 
grotesque system created. Prate its higher classes might 
of the blessings of poverty ; and they might spread broad- 
cast their prolix homilies on the virtues of a useful life, 
" rounded by an honorable poverty." But all of these 
teachings were, in one sense, chatter and nonsense ; the 
very classes which so unctuously preached them were 
those who most strained themselves to acquire all of the 
wealth that they possibly could. In another sense, these 
teachings proved an effective agency in the infusing into 
the minds of the masses of established habits of thought 
calculated to render them easy and unresisting victims 
to the rapacity of their despoilers. 

From these " upper classes " proceeded the dictation of 
laws; and the laws showed (as they do now) what the 
real, unvarnished attitude of these fine, exhorting mora- 
lists was towards the poor. Poverty was virtually pre- 
scribed as a crime. The impoverished were regarded in 
law as paupers, and so repugnant a term of odium was 
that of pauper, so humilating its significance and treat- 
ment, that great numbers of the destitute preferred to 
suffer and die in want and silence rather than avail them- 
selves of the scanty and mortifying public aid obtainable 
only by acknowledging themselves paupers. 

Sickness, disability, old age, and even normal life, in 
poverty were a terrifying prospect. The one sure way 
of escaping it was to get and hold wealth. The only 
guarantee of security was wealth, provided its possessor 



THE RISE OF THE GOULD FORTUNE 289 

could keep it intact against the maraudings of his own 
class. Every influence conspired to drive men into mak- 
ing desperate attempts to break away from the stigma 
and thraldom of poverty, and gain economic independence 
and social prestige by the ownership of wealth. 

But how was this wealth to be obtained ? Here another 
set of influences combined with the first set to suppress 
or shatter whatever doubts, reluctance or scruples the 
aspirant might have. The acquisitive young man soon 
saw that toiling for the profit of others brought nothing 
but poverty to himself; perhaps at the most, some small 
savings that were constantly endangered. To get wealth 
he must not only exploit his fellow men, he found, but 
he must not be squeamish in his methods. This lesson 
was powerfully and energetically taught on every hand by 
the whole capitalist class. 

Conventional wTiters have descanted with a show of 
great indignation upon Gould's bribing of legislative 
bodies and upon his cheatings and swindlings. Without 
adverting again to the corruption, reaching far back into 
the centuries, existing before his time, we shall simply 
describe some of the conditions that as a young man he 
witnessed or which were prevalent synchronously with 
his youth. 

Whatever sphere of business was investigated, there it 
was at once discovered that wealth was being amassed, 
not only by fraudulent methods, but by methods often 
a positive peril to human life itself. Whether large or 
small trader, these methods were the same, varying only 
in degree. 

ALL BUSINESS REEKED WITH FRAUD. 

A Congressional committee, probing, in 1847-48, into 
frauds in the sale of drugs found that there was scarcely 



290 HISTORY OF THE GRKAT AMERICAN FORTUNES 

a wholesale or retail druggist wlio was not consciously 
selling spurious drugs which were a menace to human 
life. Dr. M. J. Bailey, United States Examiner of Drugs 
at the New York Custom House, was one of the many 
expert witnesses who testified. " More than one-half of 
many of the most important chemical and medicinal prep- 
arations," Dr. Bailey stated, " together with large quanti- 
ties of crude drugs, come to us so much adulterated as 
to render them not only worthless as a medicine, but 
often dangerous." These drugs were sold throughout 
the United States at high prices.^ There is not a single 
record of any criminal action pressed against those who 
profited from selling this poisonous stuff. 

The manufacture and sale of patent medicines were at- 
tended with the grossest frauds. At that time, to a much 
greater extent than now, the newspapers profited more 
(comparatively) from the publication of patent medicine 
advertisements ; and even after a Congressional commit- 
tee had fully investigated and exposed the nature of these 
nostrums, the newspapers continued publishing the allur- 
ing and fraudulent advertisements. 

After showing at great length the deceptive and danger- 
ous ingredients used in a large number of patent medici- 
cines, the Committee on the Judiciary of the House of 
Representatives went on in its report of February 6, 1849 • 
" The public prints, without exception, published these 
promises and commendations. The annual [advertising] 
fee for publishing Brandeth's pills has amounted to 
Si 00.000. Morrison paid more than twice as much for 
the advertisement of his never-dying hygiene." The com- 

3 Report of Select Committee on the Importation of Drugs. 
House Reports, Thirtieth Congress, First Session, 1847-^8, Re- 
port No. 664:9. In a previous chapter, other extracts from this 
report have been given showing in detail what many of these 
fraudulent practices were. 



THE RISE OF THE GOULD FORTUNE 29I 

mittee described how ]Morrison's nostrums often con- 
tained powerful poisons, and then continued : " Morrison 
is forgotten, and Brandeth is on the high road to the same 
distinction. T. W. Conway, from the lowest obscurity, 
became worth millions from the sale of his nostrums, and 
rode in triumph through the streets of Boston in his 
coach and six. A stable boy in New York was enrolled 
among the wealthiest in Philadelphia by the sale of a 
panacea which contains both mercury and arsenic. In- 
numerable similar cases can be adduced." * Not a few 
multimillionaire families of to-day derive their wealth 
from the enormous profits made by their fathers and 
grandfathers from the manufacture and sale of these 
poisonous medicines. 



SUCCESS AS GOULD LEARNED IT. 

The frauds among merchants and manufacturers 
reached far more comprehensive and permeating propor- 
tions. In periods of peace these fraudulent methods 
were nauseating enough, but in times of war they were 
inexpressibly repellant and ghastly. During the Mexican 
War the Northern shoe manufacturers dumped upon the 
army shoes which were of so inferior a make that they 
could not be sold in the private market, and these shoes 
were found to be so absolutely worthless that it is on 
record that the American army in ^Mexico threw them 
away upon the sands in disgust. But it was during the 
Civil War that Northern capitalists of every kind coined 
fortunes from the national disasters, and from the blood 
of the very armies fighting for their interests. 

In the chapters on the Vanderbilt fortune, it has been 

* Report No. 52. Reports of Committees, Thirtieth Congress, 
Second Sess., i : 31. 



292 HISTORY OF THE GREAT AMERICAN FORTUNES 

shown how Commodore Vanderbih and other shipping 
merchants fraudulently sold or leased to the Government 
for exorbitant sums, ships for the transportation of 
soldiers — ships so decayed or otherwise unseaworthy, 
that they had to be condemned. In those chapters such 
facts were given as applied mainly to Vanderbilt ; in 
truth, however, they constituted but a mere part of the 
gory narrative. While Vanderbilt, as the Government 
agent, was leasing or buying rotten ships, and making 
millions of dollars in loot by collusion, the most conspicu- 
ous and respectable shipping merchants of the time were 
unloading their old hulks upon the Government at ex- 
tortionate prices. 

One of the most ultra-respectable merchants of the 
time, ranked of high commercial standing and austere 
social prestige, was, for instance, Marshall O. Roberts. 
This was the identical Roberts so deeply involved in the 
great mail-subsidy frauds. This was also the same sanc- 
timonious Roberts, who, as has been brought out in the 
chapters on the Astor fortune, joined with John Jacob 
Astor and others in signing a testimonial certifying to 
the honesty of the Tweed Regime. A select Congres- 
sional committee, inquiring into Government contracts in 
1862-63, brought forth volumes of facts that amazed and 
sickened a committee accustomed to ordinary political 
corruption. Here is a sample of the testimony : Samuel 
Churchman, a Government vessel expert engaged by 
Welles, Secretary of the Navy, told in detail how Roberts 
and other merchants and capitalists had contrived to 
palm ofT rotten ships on the Government; and, in his 
further examination on January 3, 1863, Churchman was 
asked : 

Q. Did Roberts sell or charter any other boats to the Govern- 
ment .'' 



!> THE RISE OF THE GOULD FORTUNE 293 

A. Yes, sir. He sold the Winfield Scott and the Union to 
the Government. 

Q. For how much ? 

A. One hundred thousand dollars each, and one was totally 
lost and the other condemned a few days after they went to 
sea.^ 

In the course of later inquiries in the same examina- 
tion, Churchman testified that the Government had been 
cheated out of at least $25,000,000 in the chartering and 
purchase of vessels, and that he based his judgment up- 
on " the chartered and purchased vessels I am acquainted 
with, and the enormous sums wasted there to my certain 
knowledge." ^ This $25,000,000 swindled from the Gov- 
ernment in that one item of ships alone formed the basis 
of many a present plutocratic fortune. 



FRAUD UNDERLIES RESPECTABILITY. 

But this was not by any means the only schooling 
Gould received from the respectable business element. 
It can be said advisedly that there was not a single 
avenue of business in which the inost shameless frauds 
were not committed upon both Government and people. 
The importers and manufacturers of arms scoured Europe 
to buy up worthless arms, and then cheated the Govern- 
ment out of millions of dollars in supplying those guns 
and other ordnance, all notoriously unfit for use. " A 
large proportion of our troops," reported a Congressional 
Commission in 1862, " are armed with guns of very in- 
ferior quality, and tens of thousands of the refuse arms 
of Europe are at this moment in our arsenals, and thou- 

s Report of Select Committee to Inquire into Government 
Contracts, House Reports, Thirty-seventh Congress, Third Ses- 
sion, 1862-63, Report No. 49 : 95. 

« Ibid., 95-97. 



294 HISTORY OF THE GREAT AMERICAN FORTUNES 

sands more are still to arrive, all unfit." ^ A Congres- 
sional committee appointed, in 1862, to inquire into the 
connection between Government employees on the one 
hand, and banks and contractors on the other, established 
the fact conclusively, that the contractors regularly bribed 
Government inspectors in order to have their spurious 
wares accepted.^ 

In fact, the ramifications of the prevalent frauds were 
so extensive that a number of Congressional committees 
had to be appointed at the same time to carry on an 
adequate investigation ; and even after long inquiries, it 
was admitted that but the surface had been scratched. 

During the Civil War, prominent merchants, with 

■'' House Reports of Committees, Thirty-seventh Congress, 
Second Session, 1861-62, vol. ii, Report No. 2:lxxix. 

^ House Reports, Thirty-seventh Congress, Second Session, 
1862-63, Report No. 64. The Chairman of this committee, Rep- 
resentative C. H. Van Wyck, of New York, in reporting to the 
House of Representatives on February 23, 1863, made these 
opening remarks : 

" In the early history of the war it was claimed that frauds 
and peculations were unavoidable; that the cupidity of the ava- 
ricious would take advantage of the necessities of the nation, 
and for a time must revel and grow rich amidst the groans and 
griefs of the people; that pressing wants must yield to the ex- 
tortion of the base ; that when the capital was threatened, rail- 
road communication cut off, the most exorbitant prices could 
safely be demanded for steam and sailing vessels ; that when our 
arsenals had been robbed of arms, gold could not be weighed 
against cannon and muskets; that the Government must be ex- 
cused if it suffered itself to be overreached. Yet, after the 
lapse of two years, we find the same system of extortion pre- 
vailing, and robbery has grown more unblushing in its exactions 
as it feels secure in its immunity from punishment, and that 
species of fraud which shocked the nation in the spring of i86r 
has been increasing. The fitting out of each expedition by water 
as well as land is but a refinement upon the extortion and im- 
mense profits which preceded it. The freedom from punish- 
ment by which the first greedy and rapacious horde were suf- 
fered to run at large with ill-gotten gains seems to have demor- 
alized too many of those who deal with the Governmoiil." — Ap- 
pendix to The Congressional Globe, Third Session, Thirty-sev- 
enth Congress, 1862-63, Part ii:ii7. 



THE RISE OF THE GOULD FORTUNE 295 

eloquent outbursts of patriotism, formed union defense 
committees in various Northern cities, and solicited con- 
tributions of money and commodities to carry on the 
war. It was disclosed before the Congressional investi- 
gating committees that not only did the leading members 
of these union defense committees turn their patriotism 
to thrifty account in getting contracts, but that they en- 
gaged in great swindles upon the Government in the pro- 
cess. 

Thus, Marcellus Hartley, a conspicuous dealer in mili- 
tary goods, and the founder of a multimillionaire fortune.*' 
admitted that he had sold a large consignment of Hall's 
carbines to a member of the New York Union Defense 
Committee. In a sudden burst of contrition he went on, 
" I think the worst thing this Government has been 
swindled upon has been these confounded Hall's carbines ; 
they have been elevated in price to $22.50, I think." ^" 
He could have accurately added that these carbines were 
absolutely dangerous ; it was found that their mechanism 
was so faulty that they would shoot off the thumbs of the 
very soldiers using them. Hartley was one of the im- 
porters who brought over the refuse arms of Europe, 
and sold them to the Government at extortionate prices. 
He owned up to having contracts with various of the 
States (as distinguished from the National Government) 
for $600,000 worth of these worthless arms.^^ That cor- 
ruscating patriot and philanthropic multimillionaire of 
these present times, J. Pierpont Morgan, was, as we shall 

^ When Marcellus Hartley died in 1902, his personal property 
alone was appraised at $11,000,000. His entire fortune was said 
to approximate $50,000,000. His chief heir, Marcellus Hartley 
Dodge, a grandson, married, in 1907, Edith Geraldine Rocke- 
feller, one of the richest heiresses in the world. Hartley was 
the principal owner of large cartridge, gun and other factories. 

^° House Report No. 2, etc., 1861-62, vol. ii : 200-204. 

'Ubid. 



296 HISTORY OF THE GREAT AMERICAN FORTUNES 

see. profiting during the Civil War from the sale of Hall's 
carbines to the Government. 

One of the Congressional committees, investigating 
contracts for other army material and provisions, found 
the fullest evidences of gigantic frauds. Exorbitant 
prices were extorted for tents " which were valueless " ; 
these tents, it appeared, were made from cheap or old 
" farmers' " drill, regarded by the trade as " truck." Sol- 
diers testified that they " could better keep dry out of 
them than under." ^^ Great frauds were perpetrated in 
passing goods into the arsenals. One manufacturer in 
particular, Charles C. Roberts, was awarded a contract for 
50,000 haversacks and 50,000 knapsacks. " Every one 
of these," an expert testified, " was a fraud upon the 
Government, for they were not linen ; they were 
shoddy." ^^ A Congressional committee found that the 
provisions supplied by contractors were either deleterious 
or useless. Captain Beckwith, a commissary of sub- 
sistence, testified that the cofifee was " absolutely good for 
nothing and is worthless. It is of no use to the Govern- 
ment." 

Q. Is the coffee at all merchantable? 

A. It is not. 

Q. Describe that coffee as nearly as you can. 

A. It seems to be a compound of roasted peas, of licorice, and 
a variety of other substances, with just coffee enough to give it 
a taste and aroma of coffee.^* 

This committee extracted much further evidence show- 
ing how all other varieties of provisions were of the very 
worst quality, and how " rotten and condemned blankets " 
in enormous quantities were passed into the army by 

12 House Report No. 64, etc., 1862-63 : 6. 

^■^ Ibid. 

^* House Report No. 2, etc., 1861-62, ii : 1459. 



THE RISE OF THE GOULD FORTUNE 297 

bribing the inspectors. It disclosed, at great length, 
how the railroads in their schedule of freight rates 
were extorting from the Government fifty per cent, 
more than from private parties. ^^ Don Cameron, leader 
of the corrupt Pennsylvania political machine, and a rail- 
road manipulator,^® was at that time Secretary of War. 
Whom did he appoint as the supreme official in charge of 
railroad transportation? None other than Thomas A. 
Scott, the vice-president of the Pennsylvania Railroad. 
Scott, it may be said, was another capitalist whose work 
has so often been fulsomely described as being that of 
" a remarkable constructive ability." The ability he dis- 
played during the Civil War was unmistakable. With his 
collusion the railroads extorted right and left. The com- 
mittee described how the profits of the railroads after his 
appointment rose fully fifty per cent, in one year, and how 
quartermasters and others were bribed to obtain the trans- 
portation of regiments. " This," stated the committee, 
" illustrates the immense and unnecessary profits which 
was spirited from the Government and secured to the 
railroads by the schedule fixed by the vice-president of 
the Pennsylvania Central under the auspices of Mr. Cam- 
eron." '' 

These many millions of dollars extorted in frauds 
" came," reported the committee, " out of the impover- 
ished and depleted Treasury of the United States, at a 
time when her every energy and resources were taxed to 
the utmost to maintain the war." ^^ 

1^ House Report No. 2, etc., 1861-62, xxix. 

1^ He had been involved in at least one scandal investigated 
by a Pennsylvania Legislative Committee, and also in several 
dubious railroad transactions in Maryland. 

'^ House Report No. 2, etc.. 1861-62, xix. The Pennsylvania 
Railroad, for example, made in 1S62 the sum of $1,350,237.79 
more in profits than it did in the preceding year. 

18 Ibid., 4. 



298 HISTORY OF THE GREAT AMERICAN FORTUNES 

These are but a few facts of the glaring fraud and cor- 
ruption prevaihng in every Hue of mercantile and financial 
business. Great and audacious as Gould's thefts were 
later, they could not be put on the same indescribably low 
plane as those committed during the Civil War by men 
most of whom succeeded in becoming noted for their fine 
respectability and " solid fortunes." So many moment- 
ous events were taking place during the Civil War, that 
amid all the preparations, the battles and excitement, 
those frauds did not arouse that general gravity of public 
attention which, at any other time, would have inevitably 
resulted. Consequently, the men who perpetrated them 
contrived to hide under cover of the more absorbing great 
events of those years. Gould committed his thefts at a 
period when the public had little else to preoccupy its at- 
tention ; hence they loomed up in the popular mind as 
correspondingly large and important. 



A SPECIMEN OF GOULDS TUITION. 

At the very dawn of his career in 1857, as a railroad 
owner, Gould had the opportunity of securing valuable 
and gratuitous instruction in the ways by which railroad 
l)rojects and land grants were being bribed through Con- 
gress. He was then only twenty-one years old, ready 
to learn, but, of course, without experience in dealing with 
legislative bodies. Rut the older capitalists, veterans at 
Ijribing, who for years had been corrupting Congress and 
the Legislatures, supplied him with the necessary informa- 
tion. 

Not voluntarily did they do it ; their greatest ally was 
concealment ; but one crowd of them had too baldly bribed 
Congress to vote for an act giving an enormous land 
grant in Iowa, Minnesota and other states, to the Des 



THE RISE OF THE GOULD FORTUNE 299 

Moines Navigation and Railroad Company. The facts 
unearthed must have been a lasting lesson to Gould as 
to how things were done in the exalted halls of Congress. 
The charges made an ugly stir throughout the United 
States, and the House of Representatives, in self defense, 
had to appoint a special committee to investigate itself. 

This committee made a remarkable and unusual report. 
Ordinarily in charges of corruption, investigating com- 
mittees were accustomed to reporting innocently that 
while it might have been true that corruption was used, 
yet they could find no evidence that members 
had received bribes ; almost invariably such com- 
mittees put the blame, and the full measure of 
their futile excoriations, on " the iniquitous lobbyists." 
But this particular committee, surprisingly enough, 
handed in no such flaccid, whitewashing report. It found 
conclusively that corrupt combinations of members of 
Congress did exist ; and it recommended the expulsion of 
four members whom it decreed guilty of receiving either 
money or land in exchange for their votes. One of these 
four expelled members, Orasmus B. Matteson, it ap- 
peared, was a leader of a corrupt combination ; the com- 
mittee branded him as having arranged with the railroad 
capitalists to use " a large sum of money [$100,000] and 
other valuable considerations corruptly." ^^ 

But it was essentially during the Civil War that Gould 
received his completest tuition in the great art of seizing 
property and privileges by bribing legislative bodies. 
While many sections of the capitalist class were, as we 
have seen, swindling manifold hundreds of millions of 
dollars from a hard-pressed country, and reaping fortunes 

19 Reports of Committees, House of Representatives, Thirty- 
fourth Congress, Third Session, 1856-57. Report No. 243. Vol. 
iii. In subsequent chapters many further details are given of 
the corruption during this period. 



300 HISTORY OF THE GREAT AMERICAN FORTUNES 

by exploiting the lives of the very defenders of their in- 
terests, other sections, equally mouthy with patriotism, 
were sneaking through Congress and the Legislatures act 
after act, further legalizing stupendous thefts. 



PATRIOTISM AT FIFTY PER CENT. 

Some of these acts, demanded by the banking interests, 
made the people of the United States pay an almost un- 
believable usurious interest for loans. These banking 
statutes were so worded that nominally the interest did 
not appear high ; in reality, however, by various devices, 
the bankers, both national and international, were often 
able to extort from twenty to fifty, and often one hundred 
per cent., in interest, and this on money which had at 
some time or somehow been squeezed out of exploited 
peoples in the United States or elsewhere. 

By these laws the bankers were allowed to get an an- 
nual payment from the Government of six per cent, in- 
terest in gold on the Government bonds that they bought. 
They could then deposit those same bonds with the Gov- 
ernment, and issue their own bank notes against ninety 
per cent, of the bonds deposited. They drew interest 
from the Government on the deposited bonds, and at the 
time charged borrowers an exorbitant rate of interest for 
the use of the bank notes, which passed as currency. 

It was by this system of double interest that they were 
able to sweep into their coffers hundreds upon hundreds 
of millions of dollars, not a dollar of which did they 
earn, and all of which were sweated out of the adver- 
sities of the people of the United States. From 1863 to 
1878 alone the Government paid out to national banks 
as interest on bonds the enormous sum of $252,837,- 



THE RISE OF THE COULD FORTUNE 3OI 

556.77.^° On the other hand, the banks were entirely 
reheved from paying- taxes ; they secured the passage 
of a law exempting Government bonds from taxation. 
Armies were being slaughtered and legions of homes 
desolated, but it was a rich and safe time for the bank- 
ers ; a very common occurrence was it for banks to de- 
clare dividends of twenty, forty, and sometimes one 
hundred, per cent. 

It was also during the stress of this Civil War period, 
when the working and professional population of the 
nation was fighting on the battlefield, or being taxed 
heavily to support their brothers in arms, that the cap- 
italists who later turned up as owners of various Pa- 
cific railroad lines were bribing through Congress acts 
giving them the most comprehensive perpetual privileges 
and great grants of money and of land. 

Gould saw how all of the others of the wealth seek- 
ers were getting their fortunes ; and the methods that 
he now plunged into use were but in keeping with theirs, 
a little bolder and more brutally frank, perhaps, but 
nevertheless nothing more than a repetition of what had 
long been going on in the entire sphere of capitalism. 

-0 House Documents, Forty-fifth Congress, Second Session, Ex. 
Document No. 34, Vol. xiv., containing the reply of Secretary 
of the Treasury Sherman, in answer to a resolution of the House 
of Representatives. 



CHAPTER X 

THE SECOND STAGE OF THE GOULD FORTUNv 

The first medium by which Jay Gould transfer ci.< 
many millions of dollars to his ownership was by h'u 
looting and wrecking of the Erie Railroad. If physica' 
appearance were to be accepted as a gauge of capacity 
none would suspect that Gould contained the elements, 
of one of the boldest and ablest financi./l marauders 
that the system in force had as yet produced. About 
five feet six inches in height and of slender figure, he 
gave the random impression of being a mild, meek 
man, characterized by excessive timidity. His complex- 
ion was swarthy and partly hidden by (.losely-trimmed 
black whiskers ; his eyes were dark, vulp'ne and acutely 
piercing ; his forehead was high. His voice was very 
low, soft and insinuating. 

PRIVATE CONFISCATION OF THE ERIE RAILROAD. 

The Erie Railroad, running from New York City to 
Buffalo and thence westward to Chicago, was started in 
1832. In New York State alone, irrespective of gifts 
in other States, it received what was virtually a gift of 
$3,000,000 of State funds, and $3,217,000 interest, mak- 
ing $6,217,000 in all. Counties, municipalities and 
towns through which it passed were prevailed upon 
to contribute freely donations of money, lands and 
rights. From private proprietors in New York State 

302 



THE SECOX'J STACK OF THE GOULD FORTUNE 3O3 

it obtained presents of land then valned at from $400.- 
000 to $500,000/ but now worth tens of millions of 
dollars. In addition, an extraordinary series of specie;! 
privileges and franchises was given to it. This process 
was manifolded in every State through which the rail- 
road passed. The cost of construction and equipment 
came almost wholly from the grants of public funds.- 
Confiding in the fair promises of its projectors, the 
people credulously supposed that their interests would 
be safeguarded. But from time to time, Legislature 
after Legislature was corrupted or induced to enact 
stealthy acts by which the railroad was permitted to 
pass without restriction into the possession of a small 
clique of exploiters and speculators. Not only were 
the people cheated out of funds raised by public tax- 
ation and advanced to build the road — a common oc- 
currence in the case of most railroads — but this very 
money was claimed by the capitalist owners as private 
capital, large amounts of bonds and stocks were issued 
against it, and the producers were assessed in the form 
of high freight and passenger rates to pay the necessary 
interest and dividends on those spurious issues. 

THE SPECULATOR, DREW, GETS CONTROL. 

Not satisfied with the thefts of public funds, the 
successive cliques in control of the Erie Railroad con- 

1 Report on the New York and Erie Railroad Company, New 
York State Assembly Document, No. 50, 1842. See also, Inves- 
tigation of the Railroads of the State of New York, 1879, i : 100. 

2 " The Erie Railway was built by the citizens of this State 
with money furnished by its people. The State in its sovereign 
capacity gave the corporation $3,000,000. The line was subse- 
quently captured, or we may say stolen, by the fraudulent issue 
of more than $50,000,000 of stock." ..." An Analysis of 
»he Erie Reorganization bill, etc., submitted to the Legislature 
^y John Livingston, Esq., counsel for the Erie Railway Share- 
iiolders, 1876." 



304 HISTORY OF THR GREAT AMERICAN FORTUNES 

tiniially plundered its treasury, and defrauded its stock- 
holders. So little attention was given to efficient man- 
agement that shocking catastrophies resulted at fre- 
quent intervals. A time came, however, when the olo 
locomotives, cars and rails were in such a state of decay, 
that the replacing of them could no longer be postponed. 
To do this money was needed, and the treasury of the 
company had been continuously emptied by looting. 

The directors finally found a money leaner in 
Daniel Drew, an uncouth usurer. He had grad- 
uated from being a drover and tavern keeper to 
being owner of a line of steamboats plying between 
New York and Albany. He then, finally, had become 
a Wall street banker and broker. For his loans Drew 
exacted the usual required security. By 1855 ^^ ^^^ 
advanced nearly two million dollars — five hundred 
thousand in money, the remainder in endorsements. 
The Erie directors could not pay up, and the control 
of the railroad passed into his hands. As ignorant of 
railroad management as he was of books, he took no 
pains to learn ; during the next decade he used the 
Erie railroad simply as a gambling means to manipulate 
the price of its stocks on the Stock Exchange. In 
this way he fleeced a large number of dupes decoyed 
into speculation out of an aggregate of millions of dol- 
lars. 

Old Cornelius Vanderbilt looked on with impatience. 
He foresaw the immense profits which would accrue 
to him if he could get control of the Erie Railroad ; 
how he could give the road a much greater value by 
bettering its equipment and service, and how he could 
put through the same stock-watering operations that he 
did in his other transactions. Tens of millions of dol- 
lars would be his, if he could only secure control. More- 



THE SECOND STAGE OF THE GOULD FORTl'XE 305 

over, the Erie was likely at any time to become a dan- 
gerous competitor of his railroads. Vanderbilt secretly 
began buying stock ; by 1866 he had obtained enough 
to get control. Drew and his dummy directors were 
ejected, Vanderbilt superseding them with his own. 



VANDERBILT OUSTS DREW, THEN RESTORES HIM. 

The change was worked with Vanderbilt's habitual 
brusque rapidity. Drew apparently was crushed. He 
had, however, one final resource, and this he now used 
with histrionic effect. In tears he went to Vanderbilt 
and begged him not to turn out and ruin an old, self- 
made man like himself. The appeal struck home. Had 
the implorer been anyone else, Vanderbilt would have 
scoffed. But, at heart, he had a fondness for the old 
illiterate drover whose career in so many respects re- 
sembled his own. Tears and pleadings prevailed ; in 
a moment of sentimental weakness — a weakness which 
turned out to be costly — Vanderbilt relented. A bar- 
gain was agreed upon by which Drew was to resume 
directorship and represent Vanderbilt's interests and pur- 
poses. 

Reinstated in the Erie board, Drew successfully pre- 
tended for a time that he was fully subservient. Os- 
tensibly to carry out Vanderbilt's plans he persuaded that 
magnate to allow him to bring in as directors two men 
whose pliancy, he said, could be depended upon. These 
were Jay Gould, demure and ingratiating, and James 
Fisk, Jr., a portly, tawdry, pompous voluptuary. In 
early life Fisk had been a peddler in Vermont, and af- 
terwards had managed an itinerant circus. Then he 
had become a Wall street broker. Keen and suspicious 
as old Vanderbilt was, and innately distrustful of both 



306 HISTORY OF THE GREAT AMERICAN FORTUNES 

of them, he nevertheless, for some inexpHcable reason, 
allowed Drew to install Gould and Fisk as directors. 
He knew Gould's record, and probably supposed him, 
as well as Fisk, handy tools (as was charged) to do his 
" dirty work " without question. He put Drew, Gould 
and Fisk on Erie's executive committee. In that ca- 
pacity they could issue stock and bonds, vote improve- 
ments, and crenerally exercise full authority. 



DREW, GOULD AND FISK BETRAY VANDERBILT. 

At first, they gave every appearance of responding 
obediently to Vanderbilt's directions. Believing it to 
his interest to buy as much Erie stock as he could, both 
as a surer guarantee of control, and to put his own price 
upon it, Vanderbilt continued purchasing. The trio, 
however, had quietly banded to mature a plot by w'hich 
they would wrest away Vanderbilt's control. 

This w^as to be done by flooding the market with an 
extra issue of bonds which could be converted into stock, 
and then by running down the price, and buying in the 
control themselves. It was a trick that Drew had suc- 
cessfully worked several years before. At a certain 
juncture he was apparently " caught short " in the 
Stock Exchange, and seemed ruined. But at the crit- 
ical moment he had appeared in Wall street with fifty- 
eight thousand shares of stock, the existence of which 
no one had suspected. These shares had been converted 
from bonds containing an obscure clause allowing the 
conversion. The projection of this large number of 
shares into the stock market caused an immediate and 
violent decline in the price. By selling "short" — a 
Wall street process which we have described elsewhere 



THE SECOND STAGE OF THE GOULD FORTUNE 307 

— Drew had taken in large snms as speculative win- 
nings. 

The same ruse Drew, Gould and Fisk now proceeded 
to execute on Vanderbilt. Apparently to provide funds 
for improving the railroad, they voted to issue a mass 
of bonds. Large quantities of these they turned over 
to themselves as security for pretended advances of mon- 
eys. These bonds were secretly converted into shares 
of stock, and then distributed among brokerage houses 
of which the three were members. Vanderbilt, intent 
upon getting in as much as he could, bought the stock 
in unsuspectingly. Then came revelations of the treach- 
ery of the three men, and reports of their intentions 
to issue more stock. 

Vanderbilt did not hesitate a moment. He hurried 
to invoke the judicial assistance of Judge George C. 
Barnard, of the New York State Supreme Court. He 
knew that he could count on Barnard, whom at this 
time he corruptly controlled. This judge was an un- 
concealed tool of corporate interests and of the plunder- 
ing Tweed political " ring " ; for his many crimes on 
the bench he was subsequently impeached."^ Barnard 
promptly issued a writ enjoining the Erie directors 
from issuing further stock, and ordered them to return 
to the Erie treasury one-fourth of that already issued. 
Furthermore, he prohibited any more conversion of 
bonds into stock on the ground that it was fraudulent. 

So pronounced a victory was this considered for Van- 
derbilt, that the market price of Erie stock went up 
thirty points. But the plotters had a cunning trick in 
reserve. Pretending to obey Barnard's order, they had 

3 At his death $1,000,000 in bonds and cash were found among 
his effects. 



308 HISTORY OF THE GREAT AMERICAN FORTUNES 

Fisk wrench away the books of stock from a messenger 
boy summoned ostensibly to carry them to a deposit 
place on Pine street. They innocently disclaimed any 
knowledge of who the thief was ; as for the messenger 
boy, he " did not know." These one hundred thou- 
sand shares of stock Drew, Gould and Fisk instantly 
threw upon the stock market. No one else had the 
slightest suspicion that the court order was being diso- 
beyed. Consequently, Vanderbilt's brokers were busily 
buying in this load of stock in million-dollar bunches ; 
other persons were likewise purchasing. As fast as 
the checks came in, Drew and his partners converted 
them into cash. 



GOULD AND HIS PARTNERS FLEE WITH MILLIONS. 

It was not until the day's activity was over that Van- 
derbilt, amazed and furious, realized that he had been 
gouged out of $7,000,000. Other buyers were also 
cheated out of millions. The old man had been caught 
napping; it was this fact which stung him most. How- 
ever, after the first paroxysm of frenzied swearing, he 
hit upon a plan of action. The very next morning war- 
rants were sworn out for the arrest of Drew, Fisk and 
Gould. A hint quickly reached them ; they thereupon 
fled to Jersey City out of Barnard's jurisdiction, taking 
their cargo of loot with them. According to Charles 
Francis Adams, in his " Chapters of Erie," one of them 
bore away in a hackney coach bales containing $6,000,- 
000 in greenbacks.* The other two fugitives were 
loaded down with valises crammed with bonds and 
stocks. 

Here in more than one sense was an instructive and 

* " Chapters of Erie " : 30. 



THE SECOND STAGE OF THE GOULD FORTUNE 309 

significant situation. Vanderbilt, the foremost black- 
mailer of his time, the plunderer of the National Treas- 
ury during the Civil War, the arch briber and corrup- 
tionist, virtuously invoking the aid of the law on the 
ground that he had been swindled ! Drew, Gould and 
Fisk sardonically jested over it. But joke as they well 
might over their having outwitted a man whose own 
specialty was fraud, they knew that their position was 
perilous. Barnard's order had declared their sales of 
stock to be fraudulent, and hence outlawed ; and, more- 
over, if they dared venture back to New York, they v.ere 
certain, as matters stood, of instant arrest with the 
threatened alternative of either disgorging or of a crim- 
inal trial and possibly prison. To themselves they ex- 
tenuated their thefts with the comforting and self-suffi- 
cient explanation that they had done to Vanderbilt pre- 
cisely what he had done to others, and would have done 
to them. But it was not with themselves that the squar- 
ing had to be done, but with the machinery of law ; 
Vanderbilt was exerting every effort to have them im- 
prisoned. 

How was this alarming exigency to be met ? They 
speedily found a way out. While Vanderbilt was thun- 
dering in rage, shouting out streaks of profanity, they 
calmly went ahead to put into practice a lesson that he 
himself had thoroughly taught. He controlled a suffi- 
cient number of judges; why should not they buy up 
the Legislature, as he had often done? The strategic 
plan was suggested of getting the New York Legislature 
to pass an act legalizing their fraudulent stock issues. 
Had not Vanderbilt and other capitalists often bought 
up Congress and Legislatures and common councils ? 
Why not now do the same? They well knew the ap- 
proved method of procedure in such matters ; an on- 



3IO HISTORY OF THE GREAT AMERICAN FORTUNES 

slatight of bribing legislators, they reckoned, would bring 
the desired result. 



GOULD BRIBES THE LEGISLATURE WITH $500,000. 

Stuffing $500,000 in his satchel, Gould surreptitiously 
hurried to Albany. Detected there and arrested, he 
was released under heavy bail which a confederate sup- 
plied. He appeared in court in New York City a few 
days later, but obtained a postponement of the action. 
No time was lost by him. " He assiduously cultiva- 
ted," says Adams, " a thorough understanding between 
himself and the Legislature." In the face of sinister 
charges of corruption, the bill legalizing the fraudulent 
stock issues was passed. Ineffectually did Vanderbilt 
bribe the legislators to defeat it ; as fast as they took and 
kept his money, Gould debauched them with greater 
sums. One Senator in particular, as we have seen, ac- 
cepted $75,000 from Vanderbilt, and $100,000 from 
Gould, and pocketed both amounts. 

A brisk scandal naturally ensued. The usual effer- 
vescent expedient of appointing an investigating commit- 
tee was adopted by the New York State Senate on 
April 10, 1868. This committee did not have to investi- 
gate to learn the basic facts ; it already knew them. 
But it was a customary part of the farce of these in- 
vestigating bodies to proceed with a childlike assump- 
tion of^entire innocence. 

Many witnesses were summoned, and much evidence 
was taken. The committee reported that, according to 
Drew's testimony, $500,000 had been drawn out of the 
Erie railroad's treasury, ostensibly for purposes of litiga- 
tion, and that it was clear " that large sums of money did 
come from the treasury of the Eric Railroad Company, 



THE SECOND STAGE OF THE GOL'LD FORTUNE 3II 

which were expended for some purpose in Albany, 
for which no vouchers seem to have been filed in the 
offices of the company." The committee further found 
that " large sums of money were expended for corrupt 
purposes by parties interested in legislation concerning 
railways during the session of 1868." 

But who specifically did the bribing? And who were 
the legislators bribed? These facts the committee de- 
clared that it did not know. This investigating sham 
resulted, as almost always happened in the case of sim- 
ilar inquisitions, in the culpability being thrown upon 
certain lobbyists " who were enriched." These lobby- 
ists were men whose trade it was to act as go-betweens 
in corrupting legislators. Gould and Thompson — the 
latter an accomplice — testified that they had paid 
" Lou " Payn, a lobbyist who subsequently became a 
powerful Republican politician, $10,000 " for a few days' 
services in Albany in advocating the Erie bill " ; and it 
was further brought out that $100,000 had been given 
to the lobbyists Luther Caldwell and Russell F. Hicks, 
to influence legislation and also to shape public opinion 
through the press. Caldwell, it appeared, received lib- 
eral sums from both Vanderbilt and Gould.^ A subse- 
quent investigating committee appointed, in 1873, to 
inquire into other charges, reported that in the one year 
of 1868 the Erie railroad directors, comprising Drew. 
Gould, Fisk and their associates, had spent more than 
a million dollars for " extra and legal services," and that 
it was " their custom from year to year to spend large 
sums to control elections and to influence legislation."^ 

s Report of the Select Committee of the New York Senate, 
appointed April ic, 1868, in Relation to Members Receiving 
Money from Railway Companies. Senate Document No. 52, 
i86q: 3-12, and 137, 140-146. . ^ u a u, a ui 

6 Report of the Select Committee of the Assembly, Assembly 
Documents, 1873, Doc. No. 98 : xix. 



312 HISTORY OF THE GREAT AMERICAN FORTUNES 

Vanderbilt later succeeded in compelling the Erie Rail- 
road to reimburse him for the sums that he thus cor- 
ruptly spent in lighting Drew, Gould and Fisk.'' 

Their huge thefts having been legalized. Drew, Gould 
and Fisk returned to Jersey City. But their path was 
not yet clear. Vanderbilt had various civil suits in 
New York against them; moreover they were adjudged 
in contempt of court. Parleying now began. With 
the severest threats of what the courts would do if they 
refused, Vanderbilt demanded that they buy back the 
shares of stock that they had unloaded upon him. 

Drew was the first to compromise ; Gould and Fisk 
shortly afterward followed. They collectively paid Van- 
derbilt $2,500,000 in cash, $1,250,000 in securities for fifty 
thousand Erie shares, and another million dollars for the 
privilege of calling upon him for the remaining fifty 
thousand shares at any time within four months. Al- 
though this settlement left Vanderbilt out of pocket 
to the extent of almost two million dollars, he consented 
to abandon his suits. The three now left their lair in 
Jersey City and transferred the Erie offices to the Grand 
Opera House, at Eighth avenue and Twenty-third street. 
New York City. In this collision with Vanderbilt. 
Gould learned a sharp lesson he thereafter never over- 
looked ; namely, that it was not sufficient to bribe com- 
mon councils and legislatures; he, too, must own his 

" What the Erie has done," the Committee reported, " other 
great corporations are doubtless doing from year to year. Com- 
lined as they are, the power of the great moneyed corporations 
of this country is a standing menace to the lilierties of the 
people. 

■' The railroad lobby flaunts its ill-gotten gains in the faces 
nf our legislatures, and in all our politics the debasing effect of 
its influence is felt" (p. 18). 

'^ Railroad Investigation of the State of New York, 1879, ii: 
1654- 



THE SECOND STAGE OF THE GOULD FORTUNE 313 

judges. Events showed that he at once began negotia- 
tions. 



GOULD AND FISK THROW OVER DREW. 

The next development was characteristic. Having 
no longer any need for their old accomplice, Gould and 
Fisk, by tactics of duplicity, gradually sheared Drew 
and turned him out of the management to degenerate 
into a financial derelict. It was Drew's odd habit, 
whenever his plans were crossed, or he was depressed, 
to rush oi¥ to his bed, hide himself under the coverlets 
and seek solace in sighs and self-compassion, or in 
prayer — for with all his unscrupulousness he had an 
orthodox religious streak. When Drew realized that he 
had been plundered and betrayed, as he had so often 
acted to others, he sought his bed and there long re- 
mained in despair under the blankets. The whimsical 
old extortionist never regained his wealth or standing. 
Upon Drew's efifacement Gould caused himself to be 
made president and treasurer of the Erie Railroad, and 
Fisk vice-president and controller. 

When Gould and Fisk began to turn out more watered 
stock various defrauded malcontent stockholders re- 
solved to take an intervening hand. This was a new 
obstacle, but it was coolly met. Gould and Fisk brought 
in gangs of armed thugs to prevent these stockholders 
from getting physical possession of the books of the 
company. Then the New York Legislature was again 
corrupted. 

A bill called the Classification Act, drafted to insure 
Gould and Fisk's legal control, was enacted. This bill 
provided that only one-fifth of the board of directors 
should be retired in any year. By this means, although 



314 HISTORY OF THE GREAT AMERICAN FORTUNES 

the majority of stockholders might be opposed to the 
Gould-Fisk management, it would be impossible for 
them to get possession of the road for at least three 
years, and full possession for not less than five years. 

But to prevent the defrauded large stockholders from 
getting possession of the railroad through the courts, 
another act was passed. This provided that no judg- 
ment to oust the board of directors could be rendered 
by any court unless the suit was brought by the At- 
torney-General of the State. It was thus only necessary 
for Gould and Fisk to own the Attorney-General en- 
tirely (which they took pains, of course, to do) in order 
to close the courts to the defrauded stockholders. On 
a trumped-up suit, and by an order of one of the Tweed 
judges, a receiver was appointed for the stock owned 
by foreign stockholders ; and when any of it was pre- 
sented for record in the transfer book of the Erie rail- 
road, the receiver seized it. In this way Gould and Fisk 
secured practical possession of $6,000,000 of the $50,- 
000.000 of stock held abroad. 

ALLIANCE WITH CORRUPT POLITICS AND JUDICIARY. 

From 1868 to 1872 Gould, abetted by subservient di- 
rectors, issued two hundred and thirty-five thousand more 
shares of stock.^ The frauds were made uncommonly 
easy by having the Tweed machine as an auxiliary ; in 
turn, Tweed, up to 187 1, controlled the New York City 
and State dominant political machine, including the Leg- 
islature and many of the judges. To insure Tweed's 
connivance, they made him a director of the Erie Rail- 
road, besides heavily bribing him." With Tweed as an 

** Fisk was inurdcM-cd by a rival in 1872 in a feud over Fisk's 
mistress. His deatli did not inlerrupt Gould's plans. 

8 " Did you ever receive any money from either Fisk or Gould 



THE SECOND STAGE OF THE GOULD FORTUNE 315 

associate they were able to command the judges who 
owed their elevation to him, Barnard, one of Tweed's 
servile tools, was sold over to Gould and Fisk, and so 
thoroughly did this judge prostitute his office at their 
behest that once, late at night, at Fisk's order, he sport- 
ively held court in the apartment of Josie Mansfield, 
Fisk's mistress.^" When the English stockholders sent 
over a large number of shares to be voted in for a 
new management, it was Barnard who allowed this 
stock to be voted by Gould and Fisk. At another time 
Gould and Fisk called at Barnard's house and obtained 
an injunction while he was eating breakfast. 

It was largely by means of his corrupt alliance with 
the Tweed " ring " that Gould was able to put through 
his gigantic frauds from 1868 to 1872. 

Gould was, indeed, the unquestioned master mind in 
these transactions ; Fisk and the others merely executed 
his directions. The various fraudulent devices were of 

to be used in bribing the Legislature? " Tweed was asked by 
an aldermanic committee in 1877, after his downfall. 

A. "I did sir! They were of frequent occurrence. Not only 
did I receive money but I find by an examination of the papers 
that everybody else who received money from the Erie railroad 
charged it to me." — Documents of the Board of Aldermen, 1877, 
Part II, No. 8:49. 

10 The occasion grew out of an attempt of Gould and Fisk in 
1869 to get control of the Albany and Susquehanna Railroad. Two 
parties contested — the Gould and the "Ramsey," headed by J. 
Pierpont Morgan. Each claimed the election of its officers and 
board of directors. One night, at half-past ten o'clock, Fisk 
summoned Barnard from Poughkeepsie to open chambers in 
Josie Mansfield's rooms. Barnard hurried there, and issued an 
order ousting Ramsey from the presidency. Judge Smith at 
Rochester subsequently found that Ramsey was legally elected, 
and severely denounced Gould and Fisk. — "Letters of General 
Francis C. Barlow, Albany" : 1871. 

The records of this suit (as set forth in Lansing's Reports, 
New York Supreme Court, i : 308, etc.) show that each of the 
contesting parties accused the other of gross fraud, and that the 
final decision was favorable to the " Ramsey " party. See the 
chapters on J. Pierpont Morgan in Vol. Ill of this work. 



3l6 HISTORY OF THE GREAT AMERICAN FORTUNES 

Gould's origination. A biographer of Fisk casually 
wrote at the time : " Jay Gould and Fisk took Wil- 
liam M. Tweed into their board, and the State Legisla- 
ture, Tammany Hall and the Erie ' ring ' were fused 
together and have contrived to serve each other faith- 
fully." ^^ Gould admitted before a New York State As- 
sembly investigating committee in 1873 that, in the 
three years prior to 1873, he had paid large sums to 
Tweed and to others, and that he had also disbursed 
large sums " which might have been used to influence 
legislation or elections." These sums were facetiously 
charged on the Erie books to " India Rubber Account " 
— whatever that meant. 

Gould cynically gave more information. He could 
distinctly recall, he said, " that he had been in the habit 
of sending money into various districts throughout the 
State," either to control nominations or elections for 
Senators or members of the Assembly. He considered 
" that, as a rule, such investments paid better than to 
wait until the men got to Albany." Significantly he 
added that it would be as impossible to specify the nu- 
merous instances " as it would be to recall the number 
of freight cars sent over the Erie Railroad from day to 
day." His corrupt operations, he indifferently testified, 
extended into four different States. " In a Republican 
district I was a Republican ; in a Democratic district, 
a Democrat ; in a doubtful district I was doubtful ; but 
I was always for Erie." "^ The funds that he thus used 
in widespread corruption came obviously from the pro- 
ceeds of his great thefts; and he might have added, with 
equal truth, that with this stolen money he was able to 

11 "A Life of James Fisk, Jr.,'' New York, 1871. 
1- Report of, and Testimony Before, the Select Assembly 
Committee, 1873, Assembly Documents, Doc. No. 98 : x.x, etc. 



THE SECOND STAGE OF THE GOULD FORTUNE 317 

employ some of the most eminent lawyers of the day, 
and purchase judges. 



GOULD S TRADING CLASS SUPPORT. 

Those writers who are content with surface facts, or 
who lack understanding of popular currents, either state, 
or leave the inference, that it was solely by bribing 
and trickery that Gould was able to consummate his 
frauds. Such assertions are altogether incorrect. To 
do what he did required the support, or at least toler- 
ance, of a considerable section of public opinion. This 
he obtained. And how? By posing as a zealous anti- 
monopolist. 

The cry of anti-monopoly was the great fetich of the 
entire middle class ; this class viewed with fear the grow- 
ing concentration of wealth ; and as its interests were 
reflected by a large number of organs of public opinion, 
it succeeded in shaping the thoughts of no small a sec- 
tion of the working class. 

While secretly bribing, Gould constantly gave out 
for public consumption a plausible string of arguments, 
in which act, by the way, he was always fertile. He 
represented himself as the champion of the middle and 
working classes in seeking to prevent \'anderbilt from 
getting a monopoly of many railroads. He played 
adroitly upon the fears, the envy and the powerful main- 
springs of the self interest of the middle class by point- 
ing out how greatly it would be at the mercy of Vander- 
bilt should Vanderbilt succeed in adding the Erie Rail- 
road and other railroads to his already formidable list. 

It was a time of all times when such arguments were 
bound to have an immense effect ; and that they did 
was shown by the readiness with which the trading class 



3l8 HISTORY OF THE GREAT AMERICAN FORTUNES 

excused his corruption and frauds on the ground that 
he seemed to be the only man who proved that he could 
prevent Vanderbilt from gobbling up all of the rail- 
roads leading from New York City. With a g'reat 
fatuousness the middle class supposed that he was fight- 
ing for its cause. 

The bitterness of large numbers of the manufacturing, 
jobbing and agricultural classes against Commodore 
Vanderbilt was deep-seated. By an illegal system of 
preferential freight rates to certain manufacturers, Van- 
derbilt put these favorites easily in a position where 
they could undersell competitors. Thus, A. T. Stewart, 
one of the noted millionaire manufacturers and mer- 
chants of the day, instead of owing his success to his 
great ability, as has been set forth, really derived it, 
to a great extent, from the secret preferential freight 
rates that he had on the Vanderbilt railroads. A variety 
of other coercive methods were used by Vanderbilt. 
Special freight trains were purposely delayed and run 
at snail's pace in order to force shippers to pay the ex- 
traordinary rates demanded for shipping over the Mer- 
chant's Dispatch, a fast freight line owned by the Van- 
derbilt family. 

These were but a few of the many schemes for their 
private graft that the Vanderbilts put in force. The agri- 
cultural class was taxed heavily on every commodity 
shipped ; for the transportation of milk, for example, 
the farmer was taxed one-half of what he himself re- 
ceived for milk. These taxes, of course, eventually fell 
upon the consumer, but the manufacturer and the farmer 
realized that if the extortions were less, their sales and 
profits would be greater. They were in a rebellious 
mood and gladly welcomed a man such as Gould who 
thwarted Vanderbilt at every turn. Gould well knew 



THE SECOND STAGE OF THE COULD FORTL-NE 3I9 

of this bitter feeling against Vanderbilt ; he used it, and 
thrust himself forward constantly in the guise of the 
great deliverer. 

As for the small stockholders of the Erie railroad, 
Gould easily pacified them by holding out the bait of a 
larger dividend than they had been getting under the 
former regime. This he managed by the common and 
fraudulent expedient of issuing bonds, and paying divi- 
dends out of proceeds. So long as the profits of these 
small stockholders v^^ere slightly better than they had 
been getting before, they were complacently satisfied 
to let Gould continue his frauds. This acquiscence in 
theft has been one of the most pronounced character- 
istics of the capitalistic investors, both large and small. 
Numberless instances have shown that they raise no ob- 
jections to plundering management provided that under 
it their money returns are increased. 

The end of Gould's looting of the Erie railroad was 
now in sight. However the small stockholders might 
assent, the large English stockholders, some of whom 
had invidious schemes of their own in the way of which 
Gould stood, were determined to gain control them- 
selves. 



GOULD S DIRECTORS BRIBED TO RESIGN. 

They made no further attempt to resort to the law. 
A fund of $300,000 was sent over by them to their Amer- 
ican agents with which to bribe a number of Gould's 
directors to resign. As Gould had used these directors 
as catspaws, they were aggrieved because he had kept 
all of the loot himself. If he had even partly divided, 
their sentiments would have been quite different. The 



320 HISTORY OF THE GREAT AMERICAN FORTUNES 

$300,000 bribery fund was distributed among them, and 
they carried out their part of the bargain by resigning.^' 
The Assembly Investigating Committee of 1873 referred 
carelessly to the English stockholders as being " impa- 
tient at the law's delay " and therefore taking matters 
into their own hands. If a poor man or a trade union 
had become " impatient at the law's delay " and sought 
an illegal remedy, the judiciary would have quickly pro- 
nounced condign punishment and voided the whole pro- 
ceeding. The boasted " majesty of law " was a majesty 
to which the underdogs only were expected to look 
up to in fear and trepidation. 

When the English stockholders elected their own 
board Gould obtained an injunction from the courts. 
This writ was absolutely disregarded, and the anti- 
Gould faction on March 11, 1872, seized possession of 
the offices and books of the company by physical force. 
Did the courts punish these men for criminal contempt? 
No effort was made to. IMany a worker or labor union 
leader had been sent to jail (and has been since), for 
" contempt of court," but the courts evidently have been 
willing enough to stomach all of the contempt pro- 
fusely shown for them by the puissant rich. The prop- 
ertyless owned nothing, not to speak of a judge, but the 
capitalists owned whole strings of judges, and those 
whom they did not own or corrupt were generally in- 
fluenced to their side by association or environment. 
" All of this," reported the Assembly Investigating 
Committee of 1873, speaking of the means employed 
to overthrow Gould, " has been done without authority 

13 AssciTil)ly Document No. 98, 1873 :xii and xiii. The Eng- 
lish stockholders took no chances on this occasion. The com- 
mittee reported that not until the directors had resigned did 
they " receive their price." 



THE SECOND STAGE OF THE GOULD FORTUNE 321 

of law." Cut no law was invoked by the officials to 
make the participants account for their illegal acts. 



THE LEGISLATURE BRIBED AGAIN. 

It seems that the entire amount, including the large 
fees paid to agents and lawyers, corruptly expended by 
the English capitalists in ousting Gould, was $750,000. 
Did they foot this bill out of their own pockets? By 
no means. They arranged the reimbursements by vot- 
ing this sum to themselves out of the Erie Railroad 
treasury ; ^* that is to say, they compelled the public to 
shoulder it by adding to the bonded burdens on which 
the people were taxed to pay interest. 

To complete their control they bribed the New York 
Legislature to repeal the Classification Act. As has 
been shown, the Legislature of 1872 was considered a 
" reform " body, and it also has been brought out how 
Vanderbilt bribed it to give him invaluable public fran- 
chises and large grants of public money. In fact, other 
railroad magnates as well as he systematically bribed ; 
and it is clear that they contributed jointly a pool of 
money both to buy laws and to prevent the passage of 
objectionable acts. " It appears conclusive," reported 
the Assembly Investigating Committee of 1873, "that 
a large amount — reported by one witness at $100,000 — 
was appropriated for legislative purposes by the railroad 
interest in 1872, and that this [$30,000] was Erie's pro- 
portion." ^^ One of the lobbyists, James D. Barber, " a 
ruling spirit in the Republican party," admitted receiv- 
ing $50,000 from the Vanderbilts.^" While uniting to 

1* Assembly Document No. 98, 1873 : xii and xvi. 
15 Ibid., xvii. 
18 Ibid., 633. 



322 HISTORY OF THE GREAT AMERICAN FORTUNES 

suppress bills feared by them all, each of the magnates 
bribed to foil the others' purposes. 



Gould's direct erie thefts were $12,000,000. 

What did Gould's plunder amount to? His direct 
thefts, by reason of his Erie frauds, seem to have 
reached more than twelve million dollars, all, or nearly 
all, of which he personally kept. 

That sum, considering the falling prices of commodi- 
ties after the panic of 1873, and comparable with cur- 
rent standards of cost and living, was equivalent to per- 
haps double the amount at present. Various approxi- 
mations of his thefts were made. After a minute ex- 
amination of the Erie railroad's books, Augustus Stein, 
an expert accountant, testified before the " Hepburn 
Committee " (the New York Assembly Investigating 
Committee of 1879) that Gould had himself pocketed 
twelve or thirteen million dollars.^" 

This, however, was only one aspect. Between 1868 
and 1873 Gould and his accomplices had issued $64,000,- 
000 of watered stock. Gould, so the Erie books re- 
vealed, had charged $12,000,000 as representing the out- 
lay for construction and equipment, yet not a new rail 
had been laid, nor a new engine put in use, nor a new 
station built. These twelve millions or more were what 
he and his immediate accomplices had stolen outright 
from the Erie Railroad treasury. Considerable sums 

17 Q. — Do you think that you could remember the aggregate 
amount of wrong-doing on the part of Mr. Gould that you have 
discovered? 

A. — I could give an estimate throwing off a couple of mil- 
lions here and there; I could say that it amounted to — that 
is, what v.-e discovered — amounted to about twelve or thirteen 
million dollars. — Railroad Investigation of the State of New 
York, 1879, ii : 1/65. 



THE SECOND STAGE OF THE OOl'ED FORTl'NE 323 

were, of course, paid corruptly to politicians, but Gould 
got them all back, as well as the plunder of his asso- 
ciates, by personally manipulating Erie stock so as to 
compel them to sell at a great loss to themselves, and a 
great profit to himself. Furthermore, in these manip- 
ulations of stock, he scooped in more millions from other 
sources. 

Had it not been for his intense greed and his consti- 
tutional inability to remain true to his confederates, 
Gould might have been allowed to retain the proceeds 
of his thefts. His treachery to one of them, Henry N. 
Smith, who had been his partner in the brokerage firm 
of Smith, Gould and Martin, resulted in trouble. Gould 
cornered the stock of the Chicago and Northwestern 
Railroad; to put it more plainly, he bought up the out- 
standing available supply of shares, and then ran the 
price up from 75 to 250. Smith was one of a number 
of Wall Street men badly mulcted in this operation, 
as Gould intended. Seeking revenge, Smith gave over 
the firm's books, which were in his possession, to Gen- 
eral Barlow, counsel for the Erie Railroad's protesting 
stockholders.^^ Evidence of great thefts was quickly 
discovered, and an action was started to compel Gould 
to disgorge about $12,000,000. A criminal proceeding 
was also brought, and Gould was arrested and placed un- 
der heavy bonds. 

AN EXTRAORDINARY " RESTITUTION." 

Apparently Gould was trapped. But a wonderful and 
unexpected development happened which filled the Wall 
Street legion with admiration for his craft and audacity. 
He planned to make his very restitution the basis for 

18 Railroad Investigation, etc., v:S3i. 



324 HISTORY OF THF. GREAT AMERICAN FORTUNES 

taking in many more millions by speculation ; he knew 
that when it was announced that he had concluded to 
disgorge, the market value of the stock would instantly 
go up and numerous buyers would appear. 

Secretly he bought up as much Erie stock as he could. 
Then he ostentatiously and with the widest publicity 
declared his intention to make restitution. Such a cack- 
ling sensation it made ! The price of Erie stock at once 
bounded up, and his brokers sold quantities of it to his 
great accruing profit. The pursuing stockholders as- 
sented to his ofifer to surrender his control of the Erie 
Railroad, and to accept real estate and stocks seemingly 
worth $6,000,000. But after the stockholders had with- 
drawn their suits, they found that they had been tricked 
again. The property that Gould had turned over to them 
did not have a market value of more than $200,000.^® 

19 Railroad Investigation, etc., 1879, iii.: 2503. 

One of the very rare instances in which any of Gould's vic- 
tims was able to compel him to disgorge, was that described in 
the following anecdote, which went the rounds of the press: 

" An old friend had gone to Gould, telling him that he had 
managed to save up some $20,000, and asking his advice as to 
how he should invest it in such a manner as to be absolutely 
safe, for the benefit of his family. Gould told him to invest 
it in a certain stock, and assured him that the investment would 
be absolutely safe as to income, and, besides, its market value 
would shortly be greatly enhanced. 

" The man did as advised by Gould, and the stock promptly 
started to go down. Lower and lower it went, and seeing the 
steady depreciation in the price of the stock, and hearing stories 
to the effect that the dividends were to be passed, the man 
wrote to Gould asking if the investment was still good. Gould 
replied to his friend's letter, assuring him that the stories had 
no foundation in fact and were being circulated purely for 
market effect. 

" But still the stock declined. Each day the price went to 
new lower figures on the Stock Exchange, and finally the ru- 
mors became fact, and the Directors passed the dividend. The 
man had seen the savings of years vanish in a few months 
and realized that he was a ruined man. 

" Goaded to an almost insane frenzy, he rushed into Gould's 
office the afternoon the Directors announced the passing of thfr 



THE SECOXD STAGE OF THE GOULD FORTUNE 325 

Gould's thefts from the Erie railroad were, however, 
only one of his looting transactions during those busy 
years. At the same time, he was using these stolen 
millions to corner the gold supply. In this " Black Fri- 
day " conspiracy (for so it was styled) he fraudulently 
reaped another eleven million dollars to the accompani- 
ment of a financial panic, with a long train of failures, 
suicides and much disturbance and distress. 

dividend, and told Gould that he had been deliberately and 
grossly deceived and that he was ruined. He wound up by an- 
nouncing his intention of shooting Gould then and there. 

" Gould heard his quondam friend through. There could be 
no mistaking the man's intent. He was evidently half crazed 
and possessed of an insane desire to carry out his threat. Gould 
turned to him and said: 'My dear Mr. — ' calling him by 
name, ' you are laboring under a most serious misapprehension. 
Your money is not lost, li you will go down to my bank to- 
morrow morning, you will find there a balance of $25,000 to 
your credit. I sold out your stock some time ago, but had 
neglected to notify you.' The man looked at him in amazement 
and, half doubting, left the office. 

" As soon as he had left the office Gould sent word to his 
bank to place $25,000 to this man's credit. The man spent a 
sleepless night, torn by doubts and fears. When the bank 
opened for business he was the first man in line, and was nearly 
overcome when the cashier handed him the sum that Gould 
had named the previous afternoon. 

" Gould had evidently decided in his own mind that the man 
was determined to kill him, and that the only way to save his 
life and his name was to pay the man the sum he had lost 
plus a profit, in the manner he did. But as a sidelight on the 
absolutely cold-blooded self-posse»sion of the man, it is inter- 
esting." 



CHAPTER XI 

THE GOULD FORTUNE BOUNDS FORWARD 

The " gold conspiracy " as plotted and consummated 
by Gould was in its day denounced as one of the most 
disgraceful events in American history. To adjudge it 
so was a typical exaggeration and perversion of a so- 
ciety caring only about what was passing in its upper 
spheres. The spectacular nature of this episode, and 
the ruin it wrought in the ranks of the money dealers 
and of the traders, caused its importance to be grossly 
misrepresented and overdrawn. 

THE ABUSE OF GOULD OVERDONE. 

It was not nearly as discreditable as the gigantic and 
repulsive swindles that traders and bankers had carried 
on during the dark years of the Civil War. The very 
traders and financiers who beslimed Gould for his " gold 
conspiracy " were those who had built their fortunes on 
blood-soaked army contracts. Nor could the worst as- 
pects of Gould's conspiracy, bad as they were, begin to 
vie in disastrous results with the open and insidious 
abominations of the factory and landlord system. To 
repeat, it was a system in which incredible numbers of 
working men, women and children were killed off by 
the perils of their trades, by disease superinduced and 
aggravated by the wretchedness of their work, and by 
the misery of their lot and habitations. Millions more 

326 



THE GOULD FORTUNE BOUNDS FORWARD 327 

died prematurely because of causes directly traceable to 
the withering influences of poverty. 

But this unending havoc, taking place silently in 
the routine departments of industry, and in obscure al- 
leyways, called forth little or no notice. What if they 
did suffer and perish? Society covered their wrongs 
and injustices and mortal throes with an inhibitive si- 
lence, for it was expected that they, being lowly, should 
not complain, obtrude grievances, or in any way make 
unpleasant demonstrations. Yet, if the prominent of 
society were disgruntled, or if a few capitalists were 
caught in the snare of ruin which they had laid for 
others, they at once bestirred themselves and made the 
whole nation ring with their outcries and lamentations. 
Their merest whispers became thunderous reverbera- 
tions. The press, the pulpit, legislative chambers and 
the courts became their strident voices, and in all the in- 
fluential avenues for directing public opinion ready ad- 
vocates sprang forth to champion their plaints, and con- 
centrate attention upon them. So it was in the " gold 
conspiracy." 

GOULD EMBARKS ON HIS CONSPIRACY. 

After the opening of the Civil War, gold was ex- 
ceedingly scarce, and commanded a high premium. The 
supply of this metal, this yellow dross, which to a con- 
siderable degree regulated the world's relative values of 
wages and commodities, was monopolized by the pow- 
erful banking interests. In 1869 but fifteen million dol- 
lars of gold was in actual circulation in the United 
States. 

Notwithstanding the increase of industrial productive 
power, the continuous displacement of obsolete methods 



328 HISTORY OF THE GREAT AMERICAN FORTUNES 

by the introduction of labor-saving machinery, and the 
consecutive discovery of new means for the production 
of wealth, the task of the worker was not lightened. 
He had, for the most part, after great struggles, secured 
a shorter workday, but if the hours were shorter the 
work was more tense and racking than in the days be- 
fore steam-driven machinery supplanted the hand tool. 
The mass of the workers were in a state of dependence 
and poverty. The land, industrial and financial system, 
operating in the three-fold form of rent, interest and 
profit, tore away from the producer nearly the whole of 
what he produced. Even those factory-owning capital- 
ists exercising a personal and direct supervision over 
their plants, were often at the mercy of the clique of 
bankers who controlled the money marts. 

Had the supply of money been proportionate to the 
growth of population and of business, this process of 
expropriation would have been less rapid. As it was, 
the associated monopolies, the international and national 
banking interests, and the income classes in general, 
constricted the volume of money mto as narrow a com- 
press as possible. As they were the very class which 
controlled the law-making power of Government, this 
was not difficult. 

The resulting scarcity of money produced high rates 
of interest. These, on the one hand, facilitated usury, 
and, on the other, exacted more labor and produce for 
the privilege of using that money. Staggering under 
burdensome rates of interest, factory owners, business 
men in general, farmers operating on a large scale, 
and landowners with tenants, shunted the load on to the 
worker. The producing population had to foot the ad- 
ditional bill by accepting wages which had a falling 
buying power, and by having to pay more rent and 



THE GOLLD FORTUNE BOUNDS FORWARD 329 

greater prices for necessities. Such conditions were cer- 
tain to accelerate the growth of poverty and the centrali- 
zation of wealth. 

Gould's plan was to get control of the outstanding 
fifteen millions of dollars of gold, and fix his own price 
upon them. Not only from what was regarded as legiti- 
mate commerce would he exact tribute, but he would 
squeeze to the bone the whole tribe of gold speculators — 
for at that time gold was extensively speculated in to 
an intensive degree. 

With the funds stolen from the Erie Railroad treas- 
ury, he began to buy in gold. To accommodate the 
crowd of speculators in this metal, the Stock Exchange 
had set apart a " Gold Room," devoted entirely to the 
speculative purchase and sale of gold. Gould was con- 
fident that his plan would not miscarry if the Govern- 
ment would not put in circulation any part of the ninety- 
five million dollars in gold hoarded as a reserve in the 
National Treasury. The urgent and all-important point 
was to ascertain whether the Government intended to 
keep this sum entirely shut out from circulation, 

HE BRIBES GOVERNMENT OFFICIALS. 

To get this inside information he succeeded in cor- 
ruptly winning over to his interests A. R. Corbin. a 
brother-in-law of President Grant. The consideration 
was Gould's buying two million dollars' worth of gold 
bonds, without requiring margin or security, for Cor- 
bin's account.^ Thus Gould thought he had surely se- 
cured an intimate spy within the authoritative precincts 

1 Gold Panic Investigation, House Report No. 31, Forty-first 
Congress. Second Session, 1870: 157. Corbin's venality in lob- 
bying for corrupt bills was notorious ; he admitted his com- 
plicity before a Congressional Investigating Committee in l8S7- 



330 HISTORY OF THE GREAT AMERICAN FORTUNES 

of the White House. As the premium on gold con- 
stantly rose, these bonds yielded Corbin as much some- 
times as $25,000 a week in profits. To insure the 
further success of his plan, Gould subsidized General 
Butterfield, whose appointment as sub-treasurer at New 
York Corbin claimed to have brought about. Gould 
testified in 1870 that he had made a private loan to 
Butterfield, and that he had carried speculatively $1,500,- 
000 for Butterfield's benefit. These statements Butter- 
field denied. - 

Through Corbin, Gould attempted to pry out Grant's 
policies, and with Fisk as an interlocutor, Gould per- 
sonally attempted to draw out the President. To their 
consternation they found that Grant was not disposed 
to favor their arguments. The prospect looked very 
black for them. Gould met the situation with match- 
less audacity. By spreading subtle rumors, and by in- 
spiring press reports through venal writers, he deceived 
not only the whole of Wall Street, but even his own as- 
sociates, into believing that high Government officials 
were in collusion with him. The report was assidu- 
ously disseminated that the Government did not intend 
to release any of its hoard of gold for circulation. The 
premium, accordingly, shot up to 146. Soon after this, 
certain financial quarters suspected that Gould was bluf- 
fing. The impression spreading that he could not de- 
pend upon the Government's support, the rate of the pre- 
mium declined, and Gould's own array of brokers turned 
against him and sold gold. 

GOULD BETRAYS HIS PARTNERS. 

Entrapped, Gould realized that something had to be 
done, and done quickly, if he were to escape complete 

'■^ Gold Panic Investigation, etc., 160. 



THE GOULD FORTUXE BOUNDS FORWARD 33 1 

ruin, holding as he did the large amount of gold that 
he had bought at steep prices. By plausible fabrications 
he convinced Fisk that Grant was really an ally. Gould 
had bought a controlling interest in the Tenth National 
Bank. This institution Gould and Fisk now used as a 
fraudulent manufactory of certified checks. These they 
turned out to the amount of tens of millions of dollars. 
With the spurious checks they bought from thirty to 
forty millions in gold.^ Such an amount of gold did 
not, of course, exist in circulation. But the law per- 
mitted gambling in it as though it really existed. Or- 
dinary card gamblers, playing for actual money, were 
under the ban of the law ; but the speculative gamblers 
of the Stock Exchange who bought and sold goods 
which frequently did not exist, carried on their huge 
fraudulent operations with the full sanction of the law. 
Gould's plan was not intricate. Extensive purchases of 
gold naturally — as the laws of trade went — were bound 
to increase constantly its price. 

By September, 1869, Gould and his partners not only 
held all of the available gold in circulation, but they 
held contracts by which they could call upon bankers, 
manufacturers, merchants, brokers and speculators for 
about seventy millions of dollars more of the metal. 
To the banking, manufacturing and importing interests 
gold, as the standard, was urgently required for various 
kinds of interfluent business transactions : to pay inter- 
national debts, interest on bonds, customs dues or to 
move the crops. They were forced to borrow it at 
Gould's own price. This price was added to the cost 
of operation, manufacture and sale, to be eventually 
assessed upon the consumer. Gould publicly announced 
that he would show no mercy to anyone. He had a 

3 Gold Panic Investigation: 13. 



332 HISTORY OF THE GREAT AMERICAN FORTUNES 

list, for example, of two hundred New York merchants 
who owed him gold ; he proposed to print their names 
in the newspapers, demanding settlement at once, and 
would have done so, had not his lawyers advised him 
that the move might be adjudged criminal conspiracy.* 

The tension, general excitement and pressure in busi- 
ness circles were such that President Grant decided to 
release some of the Government's gold, even though the 
reserve be diminished. In some mysterious way a 
hint of this reached Gould. The day before " Black 
Friday " he resolved to betray his partners, and secretly 
sell gold before the price abruptly dropped. To do this 
with success it was necessary to keep on buying, so 
that the price would be run up still higher. 

Such methods were prohibited by the code of the 
Stock Exchange which prescribed certain rules of the 
game, for while the members of the Exchange allowed 
themselves the fullest latitude and the most unchecked 
deception in the fleecing of outside elements, yet among 
themselves they decreed a set of rules forbidding any 
sort of double-dealing in trading with one another. To 
draw an analogy, it was like a group of professional 
card sharps deterring themselves by no scruples in the 
cheating of the unwary, but who insisted that among 
their own kind fairness should be scrupulously observed. 
Yet, rules or no rules, no one could gainsay the fact 
that many of the foremost financiers had often and suc- 
cessfully used the very enfillading methods that Gould 
now used. 

While Gould was secretly disposing of his gold hold- 
ings, he was goading on his confederates and his crowd 
of fifty or more brokers to buy still more.^ By this 

* Gold Panic Investigation, etc., 13. 

^ " Gould, the guilty plotter of all these criminal proceedings," 



THE GOULD FORTUNE ROUNDS FORWARD 333 

time, it seems, Fisk and his partner in the brokerage 
business, Beklen, had some stray inkhngs of Gould's 
real plan ; yet all that they knew were the fragments 
Gould chose to tell them, with perhaps some surmises 
of their own. Gould threvy out just enough of an out- 
line to spur on their appetite for an orgy of spoils. 
Undoubtedly, Gould made a secret agreement with them 
by which he could repudiate the purchases of gold made 
in their names. Away from the Stock Exchange Fisk 
made a ludicrous and dissolute enough figure, with his 
love of tinsel, his show and braggadacio, his mock mili- 
tary prowess, his pompous, windy airs and his covey of 
harlots. But in Wall Street he was a man of affairs 
and power; the very assurance that in social life made 
him ridiculous to a degree, was transmuted into a pillar 
of strength among the throng of speculators who them- 
selves were mainly arrant bluffs. A dare-devil audacity 
there was about Fisk that impressed, misled and intimi- 
dated ; a fine screen he served for Gould plotting and 
sapping in the background. 

THE MEMORABLE " BLACK FRIDAY" 

The next day, " Black Friday," September 24, 1869, 
was one of tremendous excitement and gloomy apprehen- 
sion among the money changers. Even the exchanges 
of foreign countries reflected the perturbation. Gould 
gave orders to buy all gold in Fisk's name ; Fisk's bro- 
kers ran the premium up to 151 and then to 161. The 
market prices of railroad stocks shrank rapidly ; failure 
after failure of Wall Street firms was announced, and 

reported the Congressional Investigating Committee of 1870, 
" determined to betray his own associates, and silent, and im- 
perturbable, by nods and whispers directed all." — Gold Panic 
Investigation : 14. 



334 HISTORY OF TPIF. CHEAT AMERICAN FORTUNES 

fortinies were swept away. Fearing that tlie price of 
gold might mount to 200, manufacturers and other busi- 
ness concerns throughout the country frantically di- 
rected their agents to buy gold at any price. All this 
time Gould, through certain brokers, was secretly sell- 
ing ; and while he was doing so, Fisk and Belden by his 
orders continued to buy. 

The Stock Exchange, according to the descrip- 
tions of many eye-witnesses, was an extraordinary sight 
that day. On the most perfunctory occasions the scenes 
enacted there might have well filled the exotic observer 
with unmeasured amazement. But never had it pre- 
sented so thoroughly a riotous, even bedlamic aspect as 
on this day, Black Friday ; never had greed and the 
fear born of greed, displayed themselves in such fright- 
ful forms. 

Here could be seen many of the money masters shriek- 
ing and roaring, anon rushing about with whitened faces, 
indescribably contorted, and again bellowing forth this 
order or that curse with savage energy and wildest ges- 
ture. The puny speculators had long since uttered their 
doleful squeak and plunged down into the limbo of ruin, 
completely engulfed ; only the big speculators, or their 
commission men, remained in the arena, and many of 
these like trapped rats scurried about from pillar to post. 
The little fountain in the "' Gold Room " serenely 
spouted and bubbled as usual, its cadence lost in the 
awful uproar; over to it rushed man after man splashing 
its cooling \vater on his throbbing head. Over all rose 
a sickening exhalation, the dripping, malodorous sweat 
of an assemblage worked up to the very limit of mental 
endurance. 

What, may we ask, were these men snarling, cursing 
and fighting over? Why, quite palpably over the di- 



THE GOULD FORTUNE BOUNDS FORWARD 335 

vision of wealth that masses of working men, women 
and children were laboriously producing, too often amid 
sorrow and death. \\'hile elsewhere pinioned labor was 
humbly doing" the world's real work, here in this " Gold 
Room," greed contested furiously with greed, cunning 
with cunning over their share of the spoils. Without 
their structure of law, and Government to enforce it, 
these men would have been nothing; as it was, they 
were among the very crests of society ; the makers of 
law, the wielders of power, the pretenders to refinement 
and culture. 

Baffled greed and cunning outmatched and duplicity 
doubled against itself could be seen in the men who 
rushed from the " Gold Room " hatless and frenzied — 
some literally crazed — when the price of gold advanced 
to 162. In the surrounding streets were howling and 
impassable crowds, some drawn thither by curiosity and 
excitement, others by a fancied interest ; surely, fancied, 
for it was but a war of eminent knaves and knavish 
gamblers. Now this was not a " disorderly mob " of 
workers such as capitalists and politicians created out of 
orderly workers' gatherings so as to have a pretext for 
clubbing and imprisoning ; nay it all took place in the 
" conservative " precincts of sacrosant Wall Street, the 
abiding place of " law and order." The participants 
were composed of the " best classes ; " therefore, by all 
logic it was a scene supereminently sane, respectable 
and legitimate ; the police, worthy defenders of the peace, 
treated it all with an awed respect. 

Suddenly, early in the afternoon, came reports that 
the United States Treasury was selling gold : they 
proved to be true. W^ithin fifteen minutes the whole 
fabric of the gold manipulation had gone to ^pieces. It 
is narrated that a mob, bent on lynching, searched for 



33^ HISTORY OF THE GREAT AMERICAN FORTLXES 

Gould, but that he and Fisk had sneaked away through 
a back door and had gone uptown. 

The general belief was that Gould was irretrievably 
ruined. That he was secretly selling gold at an exorbi- 
tant price was not known ; even his own intimates, ex- 
cept perhaps Fisk and Belden, were ignorant of it. All 
that was known was that he had made contracts for the 
purchase of enormous quantities of fictitious gold at 
excessive premiums. As a matter of fact, his under- 
hand sales had brought him eleven or twelve million dol- 
lars profit. But if his contracts for purchase were en- 
forced, not only would these profits be wiped out, but 
also his entire fortune. 



ELEVEN MILLIONS POCKETED BY JUDICIAL COLLUSION. 

Ever agile and resourceful, Gould quickly extricated 
himself from this difficulty. He fell back upon the 
corrupt judiciary. Upon various flimsy pretexts, he and 
Fisk, in a single day, procured twelve sweeping injunc- 
tions and court orders.® These prohibited the Stock 
Exchange and the Gold Board from enforcing any rules 
of settlement against them, and enjoined Gould and 
Fisk's brokers from settling any contracts. The result, 
in brief, was that judicial collusion allowed Gould to 
pocket his entire " profits," amounting, as the Congres- 
sional Committee of 1870 reported, to about eleven mil- 
lion dollars, while relieving him from any necessity of 
paying up his far greater losses. Fisk's share of the 
eleven millions was almost nothing ; Gould retained prac- 
tically the entire sum. Gould's confederates and agents 
were ruined, financially and morally ; scores of failures, 

Gold Panic Investigation, etc., 18. 




JAY GOULD, 
Who, in a Brief Period, Possessed Himself of a Vast Fortune. 



THE COLLD FORTUXE KOUNLS FOR WARD 337 

dozens of suicides, tlie tlespoilmcnt of a whole people, 
were the results of Gould's handiwork. 

From his Erie railroad thefts, the gold conspiracy 
and other maraudings, Gould now had about twenty- 
five or thirty million dollars. Perhaps the sum was 
much more. Having sacked the Erie previous to his 
being ousted in 1873, he looked out for further instru- 
ments of plunder. 

Money was power; the greater the thief the greater 
the power ; and Gould, in spite of abortive lawsuits and 
denunciations, had the cardinal faculty of holding on to 
the full proceeds of his piracies. In 1873 there was no 
man more rancorously denounced by the mercantile 
classes than Gould. If one were to be swayed by their 
utterances, he would be led to believe that these classes, 
comprising the wholesale and retail merchants, the im- 
porters and the small factory men. had an extraor- 
dinarily high and sensitive standard of honesty. But 
this assumption was sheer pretense, at complete vari- 
ance with the facts. It was a grim sham constantly 
shattered by investigation. Ever, while vaunting its 
own probity and scoring those who defrauded it, the 
whole mercantile element was itself defrauding at every 
opportunity. 



SOME COMPARISONS WITH GOULD. 

One of the numberless noteworthy and conclusive ex- 
amples of the absolute truth of this generalization was 
that of the great frauds perpetrated by the firm of Phelps. 
Dodge and Company, millionaire importers of tin, cop- 
per, lead and other metals. 



338 HISTORY OF THE GREAT AMERICAN FORTUNES 

So far as public reputation went, the members of the 
house were the extreme opposites of Gould. In the 
wide realm of commercialism a more stable and illus- 
trious firm could not be found. Its wealth was conven- 
tionally " solid and substantial ; " its members were 
lauded as " high-toned " business men " of the old-fash- 
ioned school," and as consistent church communicants 
and expansive philanthropists. Indeed, one of them was 
regarded as so glorious and uplifting a model for adoles- 
cent youth, that he was chosen president of the Young 
Men's Christian Association ; and his statue, erected 
by his family, to-day irradiates the tawdry surroundings 
of Herald Square, New York City. In the Blue Book of 
the elect, socially and commercially, no names could be 
found .more indicative of select, strong-ribbed, triple- 
dyed respectability and elegant social poise and posi- 
tion. 

In the dying months of 1872, a prying iconoclast, un- 
awed by the glamor of their public repute and the con- 
templation of their wealth, began an exhaustive investi- 
gation of their custom house invoices. This inquiring 
individual was B. G. Jayne, a special United States 
Treasury agent. He seems to have been either a duty- 
loving servant of the people, stubbornly bent upon fer- 
reting out fraud wherever he found it, irrespective of 
whether the criminals were powerful or not, or he was 
prompted by the prospect of a large reward. The more 
he searched into tb.is case, the more of a mountainous 
mass of perjury and fraud revealed itself. On January, 
3' i^73» Jayne set the full facts before his superior, 
George S. Bout well, Secretary of the Treasury. 

". . . According to ordinary modes of reckon- 
ing," he wrote, " a house of the wealth and standing of 



THE GOLLD FORTL'XE BOUNDS FORWARD 339 

Phelps, Dodge and Company would be above tlie inflii- 
^ences that induce the ordinary brood of importers to 
commit fraud. That same wealth and standing became 
an almost impenetrable armor against suspicion of 
wrong-doing and diverted the attention of the officers 
of the Government, preventing that scrutiny which they 
give to acts of other and less favored importers." Jayne 
went on to tell how he had proceeded with great caution 
in " establishing beyond question gross under-valua- 
tions," and how United States District Attorney Noah 
Davis (later a Supreme Court Justice) concurred with 
him that fraud had been committed. 



THE GREAT FRAUDS OF PHELPS, DODGE AND COMPANY. 

The Government red tape showed signs at first of 
declining to unwind, but further investigation proved 
the frauds so great, that even the red tape was thrilled 
into action, and the Government began a suit in the 
United States District Court at New York for $i,ooo,- 
ooo for penalties for fraudulent custom-house under- 
valuations. It sued William E. Dodge, William E. 
Dodge, Jr., D. Willis James, Anson Phelps Stokes, 
James Stokes and Thomas Stokes as the participating 
members of the firm. 

The suit was a purely civil one ; influential defrauders 
were not inconvenienced by Government with criminal 
actions and the prospect of prison lodging and fare ; this 
punishment was reserved exclusively for petty offenders 
outside of the charmed circle. The sum of $1,000,000 
sued for by the Government referred to penalties due 
since 1871 only; the firm's duplicates of invoices cover- 
ing the period before that could not be found ; " they 



340 HISTORY OF THE GREAT AMERICAN FORTUNES 

had probably been destroyed ; " hence, it was impossible 
to ascertain how much Phelps, Dodge and Company had 
defrauded in the previous years. 

The firm's total importations were about $6,000,000 
a year ; it was evident, according to the Government of- 
ficials, that the frauds were not only enormous, but that 
they had been going on for a long time. These frauds 
were not so construed " by any technical construction, or 
far-fetched interpretation," but were committed " by the 
firm's deliberately and systematically stating the cost of 
their goods below the purchase price for no conceivable 
reason but to lessen the duties to be paid to the United 
States." 

These long-continuing frauds could not have been 
possible without the custom-house officials having been 
bribed to connive. The practice of bribing customs offi- 
cers was an old and common one. In his report to the 
House of Representatives on February 23, 1863, Repre- 
sentative Van Wyck, chairman of an investigating com- 
mittee, fully described this system of bribery. In sum- 
marizing the evidence brought out in the examination 
of fifty witnesses he dealt at length with the custom 
house officials who for large bribes were in collusion 
with brokers and merchants. " No wonder," he ex- 
claimed, " the concern [the custom house] is full of 
fraud, reeking with corruption." ^ 

^ The Congressional Globe, Appendix, Thirty-seventh Con- 
gress, Third Session, 1862-3, Pai"t ii:ii8. 

" During the last session the Secretary had the honor of trans- 
mitting the draft of a bill for the detection and prevention of 
fraudulent entries at the custom-houses, and he adheres to the 
opinion that the provisions therein embodied are necessary for 
the protection of the revenue. . . . For the past year the 
collector, naval officer, and surveyor of New York have enter- 
tained suspicions that fraudulent collusions with some of the 
customs officers existed. MeaFurcs were taken by them to as- 
certain whether these suspicions were well founded. By per- 



THE GOULD FORTUNE BOUNDS FORWARD 34I 

Great was the indignation shown at the charges by 
the flustered members of the firm ; most stoutly these 
" eminently proper " men asserted their innocence.^ In 
point of fact (as has been shown in the chapters on the 
Astor fortune) several of them had long been slyly de- 
frauding in other fields, particularly by the corrupt pro- 
curing of valuable city land before and during the 
Tweed regime. They had also been enriching them- 
selves by the corrupt obtaining of railroad grants. There 
was a scurrying about by Phelps, Dodge and Company 
to explain that some mistake had been made ; but the 
Government steadfastly pressed its action ; and Secre- 
tary Boutwell curtly informed them that if they were 
innocent of guilt, they had the opportunity of proving 
so in court. After this ultimatum their tone changed ; 
they exerted every influence to prevent the case from 
coming to trial, and they announced their willingness to 
compromise. The Government was induced to accept 
their ofifer; and on February 24, 1873, Phelps, Dodge 
and Company paid to the United States Treasury the 

sistent vigilance facts were developed which have led to the 
arrest of several parties and the discovery that a system of 
fraud has been successfully carried on for a series of years. 
These investigations are now being prosecuted under tlie im- 
mediate direction of the Solicitor of the Treasury, for the 
purpose of ascertaining the extent of those frauds and bring- 
ing the guilty parties to punishment. It is believed that the 
enactment at the last session of the bill referred to would 
have arrested, and that its enactment now will prevent here- 
after, the frauds hitherto successfully practiced."' — Annual Re- 
port for 1862 of Salmon P. Chase, Secretary of the Treasury. 
No matter what laws were passed, however, the frauds con- 
tinued, and the importers kept on bribing. 

^If the degree of the scandal that the unearthing of these 
frauds created is to be judged by the extent of space given to it by 
the newspapers, it must have been large and sensational. See 
issues of the New York " Times " and other newspapers of 
January 11, 1873, January 29, 187,3, March 20, 1873, and April 
20, 1873. A full history of the case, v.ith the official correspond- 
ence from the files of the Treasury Department, is to be found 
in the New York " Times," issue of April 28, 1873. 



342 HISTORY OF THE GREAT AMERICAN FORTUNES 

sum of $271,017.23 for the discontinuance of the miUion- 
dollar suit for custom-house frauds.^ 

THEIR PRESENT WEALTH TRACED TO FRAUD. 

From these persistent frauds came, to a large extent, 
the great collective and individual wealth of the mem- 
bers of this firm, and of their successors. It was also 
by reason of these frauds that Phelps, Dodge and Com- 
pany were easily able to outdo competitors. Only re- 
cently, let it be added, they formed themselves into a 
corporation with a capital of $50,000,000. With the 
palpably great revenues from their continuous frauds, 
they were in an advantageous position to buy up many 
forms of property. Beginning in 1880 the mining of 
copper, they obtained hold of many very rich mining 
properties; their copper mines yield at present (1909) 
about 100,000,000 pounds a year. Phelps, Dodge and 
Company also own extensive coal mines and lines of 
railroads in the southwest Territories of the United 
States. Ten thousand employees are directly engaged in 
their copper and coal mines and smaller works, and on 
the 1,000 miles of railroad directly owned and operated 
by them. 

^ See House Executive Documents, Forty-third Congress, First 
Session, 1874, Doc. No. 124:78. Of the entire sum of $271,- 
017.23 paid by Phelps, Dodge and Company to compromise the 
suit, Chester A. Arthur, then Collector of the Port, later Pres- 
ident of the United States, received $21,906.01 as official fees; 
the Naval Officer and the Surveyor of the Port each were paid 
the same sum by the Government, and Jayne received $65,718.03 
as his percentage as informer. 

One of the methods of defrauding the Govermnent was 
peculiar. Under the tariff act there was a heavy duty on im- 
ported zinc and lead, while works of art were admitted free 
of duty. Phelps, Dodge and Company had zinc and lead made 
into Europe into crude Dianas. Venuses and Mercurys and 
imported them in that form, claiming exemption from the cus- 
toms duty on the ground of their being "works of art." 



THE GOULD FORTUXE BOUNDS FORWARD 



343 



So greatly were the members of the firm enriched 
by their frauds that when D. WilHs James, one of the 
partners sued by the Government for fraudulent under- 
valuations, died on September 13, 1907, he left an estate 
of not less than $26,967,448. John F. Farrel, the ap- 
praiser, so reported in his report filed on March .8 
1908, in the transfer tax department of the Surrogate's 
department, New York City. But as the transfer tax 
has been, and is, continuously evaded by ingenious an- 
ticipatory devices, the estate, it is probable, reached much 

mnrp 



more. 



James owned (accepting the appraiser's specific re- 
port at a time when panic prices prevailed) tens of mil- 
lions of dollars worth of stock in railroad, mining, man- 
ufacturing and other industries. He owned for in- 
stance, $2,750,000 worth of shares in the Phelps-Dodge 
Copper Queen Mining Company; $1,419,510 in the C^d 
iJommion Company, and millions more in other mining 
companies. His holdings in the Great Northern Rail 
way. the history of which is one endless chain of fraud 
amounted to millions of dollars - $3,840,000 of pre- 
ferred stock; $3,924,000 of common stock; $1,71=000 of 
stock m the Great Northern Railway iron ore properties- 
$1405.000 of Great Northern Railway shares in the 
form of subscription receipts, and so on. He was a 
large holder of stock in the Northern Pacific Railway 
the development of which, as we shall see, has been one 
of incessant frauds. His interest in the "good will " 
of Phelps, Dodge and Company was appraised at $180- 
000: his interest in the same firm at $945786: his cash 
on deposit with that firm at $475,000.^° 

said. Mr. James was senior member of the firm of Phel??; 



344 HISTORY OF THE GREAT AMERICAN FORTUNES 

In the defrauding of the United States Government, 
however, Phelps, Dodge and Company were doing no 
uncommon thirg. The whole importing trade was in- 
cessantly and cohesively thriving upon this form of 
fraud. In his annual report for 1874. Henry C. John- 
son, United States Commissioner of Customs, estimated 
that tourists returning from Europe yearly smuggled 
in as personal effects 257,810 trunks filled with dutiable 
goods valued at the enormous sum of $i'28,905,ooo. " It 
is well known," he added, " that much of this baggage 
is in reality intended to be put upon the market as mer- 
chandise, and that still other portions are brought over 
for third parties who have remained at home. Most 
of those engaged in this form of importation are people 
of wealth " . . .^^ Similar and additional facts 
were brought out in great abundance by a United States 
Senate committee appointed, in 1886, to investigate cus- 
toms frauds in New York. After holding many ses- 
sions this committee declared that it had found " con- 
clusive evidence that the undervaluation of certain kinds 
of imported merchandise is persistently practiced to an 
alarming extent at the port of New York." ^- At all 
other ports the customs frauds were notorious. 

The frauds of the whiskey distillers in cheating the 
Government out of the internal revenue tax were so 

Dodge & Co., of 99 John Street. His interest in educational 
and philanthropic work was very deep, and by his will he left 
bequests amounting to $1,195,000 to various charitable and re- 
ligious institutions. The residue of the estate, amounting to 
S'24,48.2,653, is left in equal shares to his widow and their son." 
On the same day that the appraiser's report was filed a large 
gathering of unemployed attempted to hold a meeting in Union 
Scpiare to jjlcad for the starting of public work, but were 
brutally clubbed, ridden down and dispersed by the police. 

11 Executive Documents, Forty-third Congress, Second Ses- 
sion, 1874, No. 2: 225. 

^^U. S. Senate Report, No. 1990, Forty-ninth Congress, Sec- 
ond Session, Senate Reports, iii, 1886-87. 



THE GOULD FORTUNE BOUNDS FORWARD 345 

enormous as to call forth several Congressional investi- 
gations ; ^^ the millions of dollars thus defrauded were 
used as private capital in extending the distilleries ; vir- 
tually all of the fortunes in the present Whiskey Trust 
are derived in great part from these frauds. The banks 
likewise cheated the Government out of large sums in 
their evasion of the stamp tax. " This stamp tax," re- 
ported the Comptroller of Currency in 1874, " is to a 
considerable extent evaded by banks and more fre- 
quently by depositors, by drawing post notes, or bills of 
exchange at one day's sight, instead of on demand, and 
by substituting receipts for checks." ^* 

It was from these various divisions of the capitalist 
class that the most caustic and virtuous tirades against 
Gould came. The boards of trade and chambers of 
commerce were largely made up of men who, while as- 
suming the most vaniloquent pretensions, were them- 
selves malodorous with fraud. To read the resolutions 
passed by them, and to observe retrospectively the su- 
preme airs of respectability and integrity they individ- 
ually took on, one would conclude that they were all 
men of whitest, most irreproachable character. But the 
official reports contradict their pretensions at every turn; 
and they are all seen in their nakedness as perjurers, 
cheats and frauds, far more sinister in their mask than 
Gould in his carelessly open career of theft and corrup- 
tion. Many of the descendants of that sordid aggrega- 
tion live to-day in the luxury of inherited cumulative 
wealth, and boast of a certain " pride of ancestry " and 
" refinement of social position ; " it is they from whom 
the sneers at the " lower classes " come ; and they it is 

^3 Reports of Committees, Fortieth Congress, Third Session, 
1869-70. Report No. 3, etc. 
1* Executive Document, No. 2, 1874:140. 



346 HISTORY OF THE GREAT AMERICAN FORTUNES 

who take unto themselves the ordaining of laws and of 
customs and definitions of morality. ^^' 

From the very foundation of the United States Gov- 
ernment, not to mention what happened before that time, 
the custom-house frauds have been continuous up to the 
very present, without any intermission. The recent 
suits brought by the Government against the Sugar Trust 
for gigantic frauds in cheating in the importation of 
sugar, were only an indication of the increasing frauds. 
The Sugar Trust was compelled to disgorge about 
$2,000,000, but this sum, it was admitted, was only a 
part of the enormous total out of which it had defrauded 
the Government. The further great custom-house scan- 
dals and court proceedings in 1908 and 1909 showed that 
the bribery of custom-house weighers and inspectors had 
long been in operation, and that the whole importing 
class, as a class, was profiting heavily by this bribery and 
fraud. While the trials of importers were going on in 
the United States Circuit Court at New York, despatches 
from Washington announced, on October 22, 1909, that 
the Treasury Department estimated that the same kind of 
frauds as had been uncovered at New York, had flour- 
ished for decades, although in a somewhat lesser degree, 
at Boston, Philadelphia, Norfolk, New Orleans, San 
Francisco and at other ports. 

" It is probable," stated these subdued despatches, 

15 It is worthy of note that several of the descendants of the 
Phelps-Dodge-Stokes families are men and women of the high- 
est character and most radical principles. J. G. Phelps Stokes, 
for instance, joined the Socialist party to work for the over- 
throw of the very system on which the wealth of his family is 
founded. A man more devoted to his principles, more keenly 
alive to the injustices and oppressions of the prevailing system, 
more conscientious in adhering to his views, and more upright 
in both public and private dealings, it would be harder to find 
llian J. G. Phelps Stokes. He is one of the very few distin- 
guished exceptions among his class. 



THE GOULD FORTUXE E0UND3 FORWARD 347 

" that these systematic filchings from the Government's 
receipts cover a period of more than fifty years, and 
that in this, the minor officials of the New York Custom 
House have been the greatest offenders, although their 
nefarious profits have been small in comparison with the 
illegitimate gains of their employers, the great importers. 
These are the views of responsible officials of the Treas- 
ury Department." These despatches stated the truth 
very mildly. The frauds have been going on for more 
than a century, and the Government has been cheated out 
of a total of hundreds upon hundreds of millions of dol- 
lars, perhaps billions. 

And the thieving importers of these times comprise 
the respectable and highly virtuous chambers of com- 
merce and boards of trade, as was the case in Gould's 
day. They are ever foremost in pompously denouncing 
the very political corruption which they themselves cause 
and want and profit from ; they are the fine fellows who 
come together in their solemn conclaves and resolve this 
and resolve that against '' law-defying labor unions," or 
in favor of " a reform in our body politic," etc., etc. A 
glorious crew they are of excellent, most devout church 
members and charity dispensers ; sleek, self-sufficient 
men who sit on Grand Juries and Trial Juries, and con- 
demn the petty thieves to conviction carrying long terms 
of imprisonment. Viewing commercial society, one is 
tempted to conclude that the worthiest members of so- 
ciety, as a whole, are to be found within the prisons ; yes, 
indeed, the time may not be far away, when the stigma 
of the convict may be considered a real badge of an- 
cestral honor. 

But the comparison of Gould and the trading classes 
is by no means complete without adding anew a con- 
trast between how the propertied plunderers as a class 



348 HISTORY OF THE GREAT AMERICAN FORTUNES 

were immune from criminal prosecution, and the perse- 
cution to which the working class was subjected. 

Although all sections of the commercial and financial 
class were cheating, swindling and defrauding with al- 
most negligible molestation from Government, the work- 
ers could not even plead for the right to work 
without drawing down upon themselves the full punitive 
animosity of governing powers whose every move was 
one of deference to the interests of property. Apart 
from the salient fact that the prisons throughout the 
United States were crowded with poor criminals, while 
the machinery of the criminal courts was never seriously 
invoked against the commercial and financial classes, the 
police and other public functionaries would not even 
allow the workers to meet peacefully for the petitioning 
of redress. Organized expressions of discontent are 
ever objectionable to the ruling class, not so much for 
what is said, as for the movements and reconstructions 
they may lead to — a fact which the police authorities, 
inspired from above, have always well understood. 



THE CLUBBING OF THE UNEMPLOYED. 

" The winter of 1873-74," says McNeill, 

was one of extreme suflfering. Midwinter found tens of thou- 
sands of people on the verge of starvation, suffering for food, 
for the need of proper clothing, and for medical attendance. 
Meetings of the unemployed were held in many places, and 
public attention called to the needs of the poor. The men asked 
for work and found it not, and children cried for bread. . . . 
The unemployed and suffering poor of New York City determined 
to hold a meeting and appeal to the public by bringing to their 
attention the spectacle of their poverty. They gained permission 
from the Board of Police to parade the streets and hold a meet- 
ing in Tompkins Square on January 13, 1874, but on January 12 



THE GOULD FORTUNE BOUNDS FORWARD 349 

the Board of Police and Board of Parks revoked the order and 
prohibited the meeting. It was impossible to notify the scattered 
army of this order, and at the time of the meeting the people 
marched through the gates of Tompkins Square. . . . When 
the square was completely filled with men, women and children, 
without a moment's warning, the police closed in upon them on 
all sides. 

One of the daily papers of the city confessed that the scene 
could not be described. People rushed from the gates and 
through the streets, followed by the mounted officers at full 
speed, charging upon them without provocation. Screams of 
women and children rent the air, and the blood of many stained 
the streets, and to the further shame of this outrage it is to be 
added that when the General Assembly of New York State was 
called to this matter they took testimony, but made no sign.i^ 

Thus was the supremacy of " law and order " main- 
tained. The day was saved for well-fed respectability, 
and starving humanity was forced back into its despair- 
ing haunts, there to reflect upon the club-taught lesson 
that empty stomachs should remain inarticulate. For 
the flash of a second, a nameless fright seized hold of the 
gilded quarters, but when they saw how well the police 
did their dispersing work, and choked up with their clubs 
the protests of aggregated suffering, self-confidence came 
back, revelry was resumed, and the saturnalia of theft 
went on unbrokenly. 

And a lucky day was that for the police. The meth- 
ods of the ruling class were reflected in the police force ; 
while perfumed society was bribing, defrauding and ex- 

16 " The Labor Movement ": 147-148. In describing to the 
committee on grievances the horrors of this outrage, John 
Swinton, a writer of great ability, and a man whose whole 
heart was with the helpless, suffering and exploited, closed his 
address by quoting this verse: 

" There is a poor blind Samson in our land. 

Shorn of his strength and bound with bonds of steel, 
Who may in snmc grim revel raise his hand. 
And shake the pillars of the Commonweal." 



350 HISTORY OF THE GREAT AMERICAN FORTUNES 

propriating, the police were enriching themselves by a 
perfected system of blackmail and extortion of their own. 
Police Commissioners, chiefs, inspectors, captains and 
sergeants became millionaires, or at least, very rich from 
the proceeds of this traffic. Not only did they extort 
regular payments from saloons, brothels and other estab- 
lishments on whom the penalties of law could be visited, 
but they had a standing arrangement with thieves of all 
kinds, rich thieves as well as what were classed as or- 
dinary criminals, by which immunity was sold at speci- 
fied rates. ^" The police force did not want this system 
interfered with ; hence at all times toadied to the rich 
and influential classes as the makers of law and the cre- 
ators of public opinion. To be on the good side of the 
rich, and to be praised as the defenders of law and order, 
furnished a screen of incalculable utility behind which 
they could carry on undisturbedly their own peculiar 
system of plunder. 

1' The very police captain, one Williams, who commanded 
the police at the Tompkins Square gathering was quizzed by 
the " Lexow Committee " in 1893 ^s to where he got his great 
wealth. He it was who invented the term " Tenderloin," sig- 
nifying a district from which large collections in blackmail and 
extortion could be made. By 1892, the annual income derived 
by the police from blackmailing and other sources of extortion 
was estimated at $7,000,000. (See "Investigation of the Police 
Department of New York City," 1894, v:5734.) With the 
estal)lishment of Greater New York the amount about doubled, 
or, perhaps, trebled. 



CHAPTER XII 

THE GOULD FORTUNE AND SOME ANTECEDENT 
FACTORS 

With his score or more of millions of booty, Jay Gould 
now had much more than sufficient capital to compete 
with many of the richest magnates ; and what he might 
lack in extent of capital when combated by a combina- 
tion of magnates, he fully made up for by his pulverizing 
methods. His acute eye had previously lit upon the 
Union Pacific Railroad as offering a surpassingly prolific 
field for a new series of thefts. Nor was he mistaken. 
The looting of this railroad and allied railroads which 
he, Russell Sage and other members of the clique pro- 
ceeded to accomplish, added to their wealth, it was 
estimated perhaps $60,000,000 or more, the major share 
of which Gould appropriated. 

It was commonly supposed in 1873 that the Union 
Pacific Railroad had been so completely despoiled that 
scarcely a vestige was left to prey upon. But Gould had 
an extraordinary faculty for devising new and fresh 
schemes of spoliation. He would discern great oppor- 
tunities for pillage in places that others dismissed as 
barren ; projects that other adventurers had bled until 
convinced nothing more was to be extracted, would be 
taken up by Gould and become plethora of plunder under 
his dexterous touch. Again and again Gould was charged 
with being a wrecker of property ; a financial beach- 
comber who destroyed that he might profit. These 
accusations, in the particular exclusive sense in which 

351 



352 HISTORY OF THE GREAT AMERICAN FORTUNES 

they were meant, were distortions. In almost every 
instance the railroads gathered in by Gould were wrecked 
before he secured control ; all that he did was to revive, 
continue and elaborate the process of wrecking. It had 
been proved so in the case of the Erie Railroad ; he now 
demonstrated it with the Union Pacific Railroad. 



THE MISLEADING ACCOUNTS HANDED DOWN. 

This railroad had been chartered by Congress in 1862 
to run from a line on the one hundredth meridian in 
Nebraska to the western boundary of Nevada. The 
actual story of its inception and construction is very 
different from the stereotyped accounts shed by most 
writers. These romancers, distinguished for their syco- 
phancy and lack of knowledge, would have us believe 
that these enterprises originated as splendid and memo- 
rable exhibitions of patriotism, daring and ability. Ac- 
cording to their version Congress was so solicitous that 
these railroads should be built that it almost implored 
the projectors to accept the great gifts of franchises, land 
and money that it proffered as assistance. A radiantly 
glowing description is forged of the men who succeeded 
in laying these railroads ; how there stretched immense 
reaches of wilderness which would long have remained 
desolate had it not been for these indomitable pioneers ; 
and how by their audacious skill and persistence they at 
last prevailed, despite sneers and ridicule, and gave to 
the United States a chain of railroads such as a few 
years before it had been considered folly to attempt. 

Very limpidly these narratives flow : two generations 
have drunk so deeply of them that they have become 
inebriated with the contemplation of these wonderful 
men. When romance, however, is hauled to the arch- 



'1\ 




N 



itdfte 




RESIDENCE OF JAY GOULD, 

759 Fifth Avenue, New York. 



SOME ANTFXEDEXT FACTORS 353 

ives, and confronted with the frigid facts, the old dame 
collapses into shapeless stufifing". 

In the opening chapter of the present part of this work 
it was pointed out by a generalization (to be frequently 
itemized by specifications later on) that the accounts 
customarily written of the origin of these railroads have 
been ridiculously incorrect. To prove them so it is only 
necessary to study the debates and the reports of Con- 
gress before, and after, the granting of the charters. 

SECTIONAL INTERESTS IN CONFLICT. 

Far greater forces than individual capitalists, or iso- 
lated groups of capitalists, were at work to promote or 
prevent the construction of this or that Pacific road. In 
the struggle before the Civil War between the capitalist 
system of the North and the slave oligarchy of the 
South, the chattel slavery forces exerted every effort to 
use the powers of Government to build railroads in sec- 
tions w^here their power would be extended and further 
intrenched. Their representatives in Congress feverishly 
strained themselves to the utmost to bring about the con- 
struction of a trans-continental railroad passing through 
the Southwest. The Northern constituents stubbornly 
fought the project. In reprisal, the Southern legislators 
in Congress frustrated every move for trans-continental 
railroads which, traversing hostile or too doubtful terri- 
tory, would add to the wealth, power, population and 
interests of the North. The Government was allowed 
to survey routes, but no comprehensive trans-continental 
Pacific railroad bills were passed. 

The debates in Congress during the session of 1859 
over Pacific railroads were intensely aciduous. Speak- 
ing of the Southern slave holders. Senator Wilson, of 



354 HISTORY OF THE GREAT AMERICAN FORTUNES 

iNIassachusetts, denounced them as " restless, ambitious 
gentlemen who are organizing Southern leagues to open 
the African slave trade, and to conquer Mexico and Cen- 
tral America." He added with great acerbity : " They 
want a railroad to the Pacific Ocean ; they want to carry 
slavery to the Pacific and have a base line from which 
they can operate for the conquest of the continent 
south." ^ In fiery verbiage the Southern Senators slashed 
back, taunting the Northerners with seeking to wipe out 
the system of chattel slavery, only to extend and enforce 
all the more effectually their own system of white slavery. 
The honorable Senators unleashed themselves ; Sena- 
torial dignity fell askew, and there was snarling and 
growling, retort and backtalk and bad blood enough. 

The disclosures that day were extremely delectable. 
In the exchange of recriminations, many truths inad- 
vertently came out. The capitalists of neither section, 
it appeared, were faithful to the interests of their con- 
stituencies. This was, indeed, no discovery ; long had 
Northern representatives been bribed to vote for land 
and money grants to railroads in the South, and vice 
versa. But the charges further brought out by Senator 
Wilson angered and exasperated his Southern colleagues. 
" We all remember," said he, " that Texas made a grant 
of six thousand dollars and ten thousand acres of land a 
mile to a Pacific railway company." Yes, in truth, they 
all remembered ; the South had supported that railroad 
project as one that would aid in the extension of her 
power and institutions. " I remember," Wilson went on, 
" that when that company was organized the men who 
got it up could not, by any possibility, have raised one 
hundred thousand dollars if they paid their honest debts. 

^ The Congressional Globe. Tlnrty-fifth Congress, Second Ses- 
sion, 1858-59, Part II, Appcndi.x : 291. 



SOME ANTECEDENT FACTORS 355 

Many of them were political bankrupts as well as pecun- 
iary bankrupts — men who had not a dollar ; and some of 
them were men who not only never paid a debt, but never 
recognized an obligation." 

At this thrust a commotion was visible in the exalted 
chamber; the blow had struck, and not far from where 
Wilson stood., 

" Years have passed away," continued the Senator, 
" and what has Texas got ? Twenty-two or twenty-three 
miles of railway, with two cars upon it, with no depot, 
the company owning everything within hailing distance 
of the road; and they have imported an old worn-out 
engine from Vermont. And this is part of your grand 
Southern Pacific Railroad. These gentlemen are out in 
pamphlets, proving each other great rascals, or attempt- 
ing to do so ; and I think they have generally succeeded. 
. . . The whole thing from the beginning has been a 
gigantic swindle." ^ 

What Senator Wilson neglected to say was that the 
capitalists of his own State and other Northern States 
had effected even greater railroad swindles; the owners 
of the great mills in Massachusetts were, as we shall see, 
likewise bribing Congress to pass tariff acts. 

A MYTH OF MODERN FABRICATION. 

The myth had not then been built up of putative great 
constructive pioneers, risking their every cent, and rack- 
ing their health and brains, in the construction of rail- 
ways. It was in the very heyday of the bribing and 
swindling, as numerous investigating committees showed ; 
there could be no glamour or illusion then. 

The money lavishly poured out for the building of 

2 The Congressional Globe, etc., 1858-59, Part II, Appendix 
291. ' 



35^ HISTORY OF Till'. GREAT AMRKICaN FORTUNES 

railroads was almost wholly public money drawn from 
compulsory taxation of the whole people. At this identi- 
cal time practically every railroad corporation in the 
country stood indebted for immense sums of public 
money, little of which was ever paid back. In New York 
State more than $40,000,000 of public funds had gone 
into the railroads ; in Vermont $8,000,000 and large sums 
in every other State and Territory. The whole Legis- 
lature and State Government of Wisconsin had been 
bribed with a total of $800,000, in 1856, to give a large 
land grant to one company alone, details of which trans- 
action will be found elsewhere.^ The State of Missouri 
had already disbursed $25,000,000 of public funds ; not 
content with these loans and donations two of its rail- 
roads demanded, in 1859, that the State pay interest on 
their bonds. 

In both North and South the plundering was equally 
conspicuous. Some of the Northern Senators were fond 
of pointing out the incompetency and rascality of the 
Southern oligarchy, while ignoring the acts of the cap- 
italists in their own section. Senator Wilson, for in- 
stance, enlarged upon the condition of the railroads in 
North and South Carolina, describing how, after having 
been fed with enormous subsidies, they were almost 
worthless. And if anything was calculated to infuriate 
the Southerners it was the boast that the capitalists of 
Massachusetts had $100,000,000 invested in railroads, 
for they knew, and often charged, that most of this sum 
had been cheated by legislation out of the National, State 
or other public treasury, and that what had not been 
so obtained had been extracted largely from the under- 
paid and overworked laborers of the mills. Often they 
had compared the two systems of labor, that of the North 

3 See the chapters on the Russell Sage fortune. 



SOME ANTKCEDEXT FACTORS 357 

and that of the South, and had pointedly asked which 
was really the worse. 

Not until after the Civil War was under way, and the 
North was in complete control of Congress, was it that 
most of the Pacific railroad legislation was secured. The 
time was exceedingly propitious. The promoters and 
advocates of these railroads could now advance the all- 
important argument that military necessity as well as 
popular need called for their immediate construction. 

No longer was there any conflict at Washington over 
legislation proposed by warring sectional representatives. 
But another kind of fight in Congress was fiercely set in 
motion. Competitive groups of Northern capitalists en- 
ergetically sought to outdo one another in getting the 
charters and appropriations for Pacific railroads. After 
a bitter warfare, in which bribery was a common weapon, 
a compromise was reached by which the Union Pacific 
Railroad Company was to have the territory west of a 
point in Nebraska, while to other groups of capitalists, 
headed by John I. Blair and others, charters and grants 
were given for a number of railroads to start at different 
places on the Missouri River, and converge at the point 
from which the Union Pacific ran westward. 

In the course of the debate on the Pacific Railroads 
bill, Senator Pomeroy introduced an amendment provid- 
ing for the importation of large numbers of cheap Euro- 
pean laborers, and compelling them to stick to their work 
in the building of the railroads under the severest penal- 
ties for non-compliance. It was, in fact, a proposal to 
have the United States Government legalize the peonage 
system of white slavery. Pomeroy's amendment specific- 
ally provided that the troops should be called upon to 
enforce these civil contracts. " It strikes one as the 
most monstrous proposition I ever heard of," interjected 



358 HISTORY OF THE GREAT AMERICAN FORTUNES 

Senator Rice. " It is a measure to enslave white men, 
and to enforce that slavery at the point of the bayonet. 
1 begin to believe what I have heard heretofore in the 
South, that the object of some of these gentlemen was 
merely to transfer slavery from the South to the North ; 
and I think this is the first step toward it." * 

The amendment was defeated. The act which Con- 
gress passed authorized the chartering of the Union Pa- 
cific Railroad with a capital of $100,000,000. In addition 
to granting the company the right of way, two hundred 
feet wide, through thousands of miles of the public do- 
main, of arbitrary rights of condemnation, and the right 
to take from the public lands whatever building material 
was needed, Congress gave as a gift to the company 
alternate sections of land twenty miles wide along the 
entire line. Still further, the company was empowered 
to call upon the Government for large loans of money. 

CONGRESS BRIBED FOR THE UNION PACIFIC CHARTER. 

It was highly probable that this act was obtained by 
bribery. There is not the slightest doubt that the sup- 
plementary act of 1864 was. The directors and stock- 
holders of the company were not satisfied with the com- 
prehensive privileges that they had already obtained. It 
was very easy, they saw, to get still more. Among these 
stockholders were many of the most effulgent merchants 
and bankers in the country ; we find William E. Dodge, 
for instance, on the list of stockholders in 1863. The 
pretext that they offered as a public bait was that " cap- 
ital needed more inducements to encourage it to invest 
its money." But this assuredly was not the argument 
prevailing in Congress. According to the report of a 
Senate committee of 1873 — the "Wilson Committee" 

* The Congressional Globe, Thirty-seventh Congress, Third 
Session, 1862-63. Pa.rt 11:1241-1243. 



SOME ANTECEDENT FACTORS 359 

— nearly $436,000 was spent in getting the act of July, 
1864, passed.^ 

For this $436,000 distributed in fees and bribes, the 
Union Pacific Railroad Company secured the passage of 
a law giving it even more favorable government subsi- 
dies, amounting to from $16,000 to $48,000 a mile, 
according to the topography of the country. The land 
grant was enlarged from tv/enty to forty miles wide until 
it included about 12,000,000 acres, and the provisions of 
the original act were so altered and twisted that the Gov- 
ernment stood little or no chance of getting back its 
outlays. 

The capitalists behind the project now had franchises, 
gifts and loans actually or potentially worth many hun- 
dreds of millions of dollars. But to get the money ap- 
propriated from the National Treasury, it was necessary 
by the act that they should first have constructed certain 
miles of their railroads. The Eastern capitalists had at 
home so many rich avenues of plunder in which to invest 
their funds — money wrung out of army contracts, usury 
and other sources — that many of them were indisposed 
to put any of it in the unpopulated stretches of the far 
West. The banks, as we have seen, were glutting on 
twenty, and often fifty, and sometimes a hundred per 
cent. ; they saw no opportunity to make nearly as much 
from the Pacific railroads. 

THE CREDIT MOBILIER JOBBERY. 

All the funds that the Union Pacific Railroad Com- 
pany could privately raise by 1865 was the insufficient 

^ Reports of Committees, Credit Mobilier Reports, Forty-sec- 
ond Congress, Third session, lorj-v,^; Doc. No. /Srxviii. The 
committee reported that the evidei:ce proved that this sum had 
been disbursed in connection with the passage of the amenda- 
tory act of July 2, 1864. 



360 HISTORY OF THE GREAT AMERICAN FORTUNES 

sum of $500,000. Some greater incentive was plainly 
needed to induce capitalists to rush in. Oakes Ames, 
head of the company, and a member of Congress, finally 
hit upon the auspicious scheme. It was the same scheme 
that the Vanderbilts, Gould, Sage, Blair, Huntington, 
Stanford, Crocker and other railroad magnates employed 
to defraud stupendous sums of money. 

Ames produced the alluring plan of a construction 
company. This corporation was to be a compact affair 
composed of himself and his charter associates ; and, so 
far as legal technicalities went, was to be a corporation 
apparently distinct and separate from the Union Pacific 
Railroad Company. Its designed function was to build 
the railroad, and the plan was to charge the Union 
Pacific exorbitant and fraudulent sums for the work of 
construction. What was needed was a company chart- 
ered with comprehensive powers to do the constructing 
work. This desideratum was found in the Credit Mobi- 
lier Company of America, a Pennsylvania corporation, 
conveniently endowed with the most extensive powers. 
The stock of this company was bought in for a few 
thousand dollars, and the way was clear for the colossal 
frauds planned. 

The prospects for profit and loot were so unprccedent- 
edly great that capitalists now blithely and eagerly darted 
forward. One has only to examine the list of stock- 
holders of the Credit Mobilier Company in 1867 to verify 
this fact. Conspicuous bankers such as Morton, Bliss 
and Company and William H. Macy ; owners of large 
industrial plants and founders of multimillionaire for- 
tunes such as Cyrus H. McCormick and George M. Pull- 
man ; merchants and factory owners and landlords and 
politicians — a very edifying and inspiring array of re- 



SOME ANTECEDENT FACTORS 361 

spectable capitalists was it that now hastened to buy or 
get gifts of Credit Mobilier stock.** 

The contract for construction was turned over to the 
Credit Mobiher Company. This, in turn, engaged sub- 
contractors. The work was really done by these sub- 
contractors with their force of low-paid labor. Oakes 
Ames and his associates did nothing except to look on 
executively from a comfortable distance, and pocket the 
plunder. As fast as certain portions of the railroad were 
built the Union Pacific Railroad Company received bonds 
from the United States Treasury. In all, these bonds 
amounted to $27,213,000, out of much of which sura 
the Government was later practically swindled. 

GREAT CORRUPTION AND VAST THEFTS. 

Charges of enormous thefts committed by the Credit 
Mobilier Company, and of corruption of Congress, were 
specifically made by various individuals and in the public 
press. A sensational hullabaloo resulted ; Congress was 
stormed with denunciations ; it discreetly concluded that 
some action had to be taken. The time-honored, mil- 
dewed dodge of appointing an investigating committee 
was decided upon. 

Virtuously indignant was Congress ; zealously inquis- 
itive the committee appointed by the United States Sen- 
ate professed to be. Very soon its honorable members 
were in a state of utter dismay. For the testimony began 
to show that some of the most powerful men in Congress 

8 The full lists of these stockholders can be found in Docs. 
No. "jj and No. 78, Reports of U. S. Senate Committees, 1872- 
T2)- Morton, BHss & Co. held 18,500 shares ; Pullman, 8,400 
shares, etc. The Morton referred to — Levi P. Morton — was 
later ( 1888- 1892) made Vice President of the United States by 
the money interests. 



362 HISTORY OF THE GREAT AMERICAN FORTUNES 

were implicated in Credit Mobilier corruption ; men such 
as James G. Blaine, one of the foremost Republican poli- 
ticians of the period, and James A. Garfield, who later 
was elevated into the White House. Every effort was 
bent upon whitewashing these men ; the committee found 
that as far as their participation was concerned " nothing 
was proved," but, protest their innocence as they vehem^ 
ently did, the tar stuck, nevertheless. 

As to the thefts of the Credit Mobilier Company, the 
committee freely stated its conclusions. Ames and his 
band, the evidence showed, had stolen nearly $44,000,000 
outright, more than half of which was in cash. The 
committee, to be sure, was not so brutal as to style it 
theft; with a true parliamentarian regard for sweetness 
and sacredness of expression, the committee's report 
described it as " profit." 

After holding many sessions, and collating volumes 
of testimony, the committee found, as it stated in its 
report, that the total cost of building the Union Pacific 
Railroad was about $50,000,000. And what had the 
Credit Mobilier Company charged? Nearly $94,000,000 
or. to be exact, $93,546,287.28.'^ The committee admit- 
ted that " the road had been built chiefly with the 
resources of the Government." * A decided mistake ; it 
had been entirely built so. The committee itself showed 
how the entire cost of building the road had been " wholly 
reimbursed from the proceeds of the Government bonds 
and first mortgage bonds," and that " from the stock, 
income bonds, and land grant bonds, the builders received 
in cash value $23,366,000 as profit — about forty-eight 
per cent, on the entire cost." ^ 

The total " profits " represented the difference between 

'' Doc. No. 78, Credit Mobilier Investigation : xiv. 
* Ibid., XX. 
^ Ibid., xvii. 



SOME ANTECEDENT FACTORS 363 

the cost of building the railroad and the amount charged 
— about $44,000,000 in all, of which $23,000,000 or more 
was in immediate cash. It was more than proved that 
the amount was even greater ; the accounts had been falsi- 
fied to show that the cost of construction was $50,000,000. 
Large sums of money, borrowed ostensibly to build the 
road, had at once been seized as plunder, and divided in 
the form of dividends upon stock for which the clique 
had not paid a cent in money, contrary to law. 



THRIFTY, SAGACIOUS PATRIOTISM. 

Who could deny that the phalanx of capitalists scram- 
bling forward to share in this carnival of plunder were 
not gifted with unerring judgment? From afar they 
sighted their quarry. Nearly all of them were the fifty 
per cent. " patriot " capitalists of the Civil War ; and, 
just as in all extant biographies, they are represented as 
heroic, self-sacrificing figures during that crisis, when 
in historical fact, they were defrauding and plundering 
indomitably, so are they also glorified as courageous, 
enterprising men of prescience, who hazarded their money 
in building the Pacific railroads at a time when most of 
the far West was an untenanted desert. And this string 
of arrant falsities has passed as " history ! " 

If they had that foresight for which they are so invet- 
erately lauded, it was a foresight based upon the cer- 
tainty that it would yield them forty-eight per cent, profit 
and more from a project on which not one of them did 
the turn of a hand's work, for even the bribing of Con- 
gress was done by paid agents. Nor did they have to 
risk the millions that they had obtained largely by fraud 
in trade and other channels ; all that they had to do 
was to advance that money for a short time until they 



364 HISTORY OF THE GREAT AMERICAN FORTUNES 

got it back from the Government resources, with forty- 
eight per cent, profit besides. 

The Senate Committee's report came out at a time of 
panic when many milHons of men, women and children 
were out of work, and other milHons in destitution. It 
was in that very year when the workers in New York 
City were clubbed by the police for venturing to hold a 
meeting to plead for the right to work. But the bribing 
of Congress in 1864, and the thefts in the construction 
of the railroad, were only parts of the gigantic frauds 
brought out — frauds which a people who believed them- 
selves under a democracy had to bear and put up with, 
or else be silenced by force. 



THE BRIBERY PERSISTENTLY CONTINUES. 

When the act of 1864 was passed, Congress plausibly 
pointed out the wise, precautionary measures it was tak- 
ing to insure the honest disbursements of the Govern- 
ment's appropriations. " Behold," said in effect this 
Congress, " the safeguards with which we are surround- 
ing the bill. We are providing for the appointment of 
Government directors to supervise the work, and see to 
it that the Government's interests do not suffer." Very 
appropriate legislation, indeed, from a Congress in which 
$436,000 of bribe money had been apportioned to insure 
its betrayal of the popular interests. 

But Ames and his brother capitalists bribed at least 
one of the Government directors with $25,000 to connive 
at the frauds : ^° he was a cheaply bought tool, that 
director. And immediately after the railroad was built 
and in operation, its owners scented more millions of 
plunder if they could get a law enacted by Congress 

10 Document No. 78, Credit Mobilier Investigation : xvii. 



SOME ANTECFJMllNT FACTORS 365 

allowing them exorbitant rates for the transportation of 
troops and Government supplies and mails. They cor- 
ruptly paid out, it seems, $126,000 to get this measure of 
March 3, 1871, passed.^^ 

What was the result of all this investigation? Mere 
noise. The oratorical tom-toms in Congress resounded 
vociferously for the gulling of home constituencies, and 
of palaver and denunciations there was a plenitude. The 
committee confined itself to recommending the expulsion 
of Oakes Ames and James Brooks from Congress. The 
Government bravely brought a civil action, upon many 
specified charges, against the Union Pacific Railroad 
Company for misappropriation of funds. This action 
the company successfully fought ; the United States Su- 
preme Court, in 1878, dismissed the suit on the ground 
that the Government could not sue until the company's 
debt had matured in 1895.'- 

Thus these great thieves escaped both criminal and 
civil process, as they were confident that they would, and 
as could have been accurately foretold. The immense 
plunder and the stolen railroad property the perpetrators 
of these huge frauds were allowed to keep. Congress 
could have forfeited upon good legal grounds the charter 
of the Union Pacific Railroad Company then and there. 
So long as this was not done, and so long as they were 
unmolested in the possession of their loot, the participat- 
ing capitalists could well afford to be curiously tolerant 
of verbal chastisement which soon passed away, and 
which had no other result than to add several more 
ponderous volumes to the already appallingly encumbered 
archives of Government investigations. 

By this time — the end of 1873 — the market value 

1^ Doc. No. 78, etc., xvii. 
12 98 U. S. 569. 



366 IIISTORV OF THE GREAT AMERICAN FORTUNES 

of the Stock of the Union Pacific Raih-oad was at a vcr> 
low point. The excessive amount of plunder appropri- 
ated by Ames and his confederates had loaded it down 
with debt. With fixed charges on enormous quantities 
of bonds to pay, few capitalists saw how the stock could 
be made to yield any returns — for some time, at any 
rate. Now was seen the full hollowness of the preten- 
sions of the capitalists that they were inspired by a public- 
s])irited interest in the development of the Far West. 
This pretext had been jockeyed out for every possible 
kind of service. As soon as they were convinced that 
the Credit Mobilier clique had sacked the railroad of all 
immediate plunder, the participating capitalists showed 
a sturdy alacrity in shunning the project and disclaiming 
any further connection with it. Their stock, for the most 
part, was oflfered for sale. 



JAY GOULD COMES FORWARD. 

It was now that Jay Gould eagerly stepped in. Where 
others saw cessation of plunder, he spied the richest pos- 
sibilities for a new onslaught. For years he had been a 
covetous spectator of the operations of the Credit Mobi- 
lier ; and, of course, had not been able to contain himself 
from attempting to get a hand in its stealings. He and 
Fisk had repeatedly tried to storm their way in, and had 
carried trumped-up cases into the courts, only to be 
eventually thwarted. Now his chance came. 

What if $50,000,000 had been stolen? Gould knew 
that it had other resources of very great value ; for, in 
addition to the $27,000,000 Government bonds that the 
Union Pacific Railroad had received, it also had as asset 
about T 2,000,000 acres of land presented by Congress. 
Some of this land had been sold by the railroad company 



SOME ANTECEDENT FACTORS 367 

at an average of about $4.50 an acre, but the greater part 
still remained in its ownership. And millions of acres 
more could be fraudulently seized, as the sequel proved. 

Gould also was aware — for he kept himself well 
informed — that, twenty years previously, Government 
geologists had reported that extensive coal deposits lay 
in Wyoming and other parts of the West. These de- 
posits would become of incalculable value ; and while they 
were not included in the railroad grants, some had 
already been stolen, and it would be easy to get hold of 
many more by fraud. And that he was not in error in 
this calculation was shown by the fact that the Union 
Pacific Railroad and other allied railroads under his con- 
trol, and under that of his successors, later seized hold 
of many of these coal deposits by violence and fraud. ^^ 
Gould also knew that every year immigration was pour- 
ing into the West ; that in time its population, agriculture 
and industries would form a rich field for exploitation. 
By the well-understood canons of capitalism, this futurity 
could be capitalized in advance. Moreover, he had in 
mind other plans by which tens of millions could be stolen 
under form of law. 

Fisk had been murdered, but Gould now leagued him- 
self with much abler confederates, the principal of whom 
was Russell Sage. It is well worth while pausing here 
to give some glimpses of Sage's career, for he left an 
immense fortune, estimated at considerably more than 
$100,000,000, and his widow, who inherited it, has at- 
tained the reputation of being a " philanthropist " by 

13 The Interstate Commerce Commission reported to the 
United States Senate in 1908 that the acquisition of these coal 
lands had "been attended with fraud, perjury, violence and 
disregard of the rights of individuals," and showed specifically 
how. Various other Government investigations fully supported 
the charges. 



368 HISTORY OF THE GREAT AMERICAN FORTUNES 

disbursing a few of those niillions in what she considers 
charitable enterprises. One of her endowed " philan- 
thropies " is a bureau to investigate the causes of 
poverty and to improve living conditions ; another for 
the propagation of justice. Deeply interested as the 
benign Mrs. Sage professes to be in the causes producing 
poverty and injustice, a work such as this may perad- 
venture tend to enlighten her. This highly desirable 
knowledge she can thus herein procure direct and 
gratuitously. Furthermore, it is necessary, before de- 
scribing the joint activities of Gould and Sage, to give a 
prefatory account of Sage's career ; what manner of man 
he was, and how he obtained the millions enabling him to 
help carry forward those operations. 



END OF VOL. II. 



Part III, comprising " The Great Fortunes from 
Railroads," is continued in Vol. III. 

(The index for Volumes I, II and III will be found in 
Volume III.) 



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