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 in plunder for every $100 share that he held. [Footnote: Report of Assembly Committee on Railroads, testimony of Alexander Robertson, an expert accountant, 1879, i:994-999.] "Thus," reported the "Hepburn Committee" (the popular name for the New York State Assembly investigating committee 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." [Footnote: Ibid., i:21.]
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, nothing 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, unravelled the whole matter before the "Hepburn Committee," 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," [Footnote: "Life of Simon Sterne," by John Foord, 1903:179-181.] In increasing the stock to $86,000,000 Vanderbilt and his confederates therefore stole the difference 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." [Footnote: "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: 'Commodore, 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 compliment. ''Cause,' explained the visitor, 'when we see that fine, noble brow, it reminds us that you'll never let anybody else steal anything.'">[
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.
His process of acquisition was now working with almost 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 violations 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 became 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 enormous wealth against competitors whom he sought to destroy 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 Vanderbilt's other wealth, to force through almost any plan involving a seizing of competing property.
* * * * * * *
HE SCOOPS 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 process of centralization was going on, of which they but dimly, stupidly, grasped the purport. That competition which they had so long 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 different 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. Scoffing 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 relegation. Although its ideal was money, and although it set up the acquisition of wealth as the all-stimulating incentive 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 working class. The factory owner and the shopkeeper had for decades commanded the passage of summary legislation 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 justifiable proceeding. But when they saw the railroad magnates applying those same methods to themselves, by first wiping out competition, and then by enforcing edicts regardless of their interests, they burst out in furious rage.