The franchise was not construed by the city to be perpetual; certain reservations were embodied giving the city powers of revocation. But as we shall see, Vanderbilt 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 1851 to Park Row. These were the initial stages of the Fourth Avenue surface 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 protests 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 Vanderbilt 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 railroads, 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 delegated powers to do certain things in the interests of the people, so was the railroad considered theoretically a public highway operated for the convenience of the people. It was upon this ostensible ground that railroad corporations secured charters, franchises, property and such 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 municipalities in New York State nearly $31,000,000 by investment in stocks and bonds. [Footnote: Report of the Special Committe on Railroads of the New York Assembly, 1879, i:7.] 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 community from which their possessions were obtained, and which they were supposed to serve. The various railroads were juggled with by succeeding groups of manipulators. Management was neglected, and no attention paid to proper equipment. Often the physical layout of the railroads—the road-beds, rails and cars—were deliberately allowed to deteriorate in order that the manipulators 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 railroad 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 improvement, and so scheme that the profits would constantly 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. Incredible as this statement may seem, it is abundantly proved by the facts.
VANDERBILT GETS A RAILROAD.
After Vanderbilt, by divers machinations of too intricate character to be described here, had succeeded in knocking down the price of New York and Harlem Railroad 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 Common Council to give to the New York and Harlem Railroad a perpetual franchise for a street railway on Broadway 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; [Footnote: 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.] 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; [Footnote: Ibid., 1333-1335.] what George Law and other capitalists 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 1860— Vanderbilt had seen Jacob Sharp and others bribe the 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 franchises for street car lines on Seventh avenue, on Tenth avenue, on Forty-second street, on Avenue D and a franchise 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. [Footnote: See "The History of Public Franchises in New York City": 120-125.]
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 offered, in return 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 offer the city a continuous payment of $100,000 a year. Similar futile attempts had been made year after year to get the franchise. The rich residents of Broadway opposed a street car line, believing it would subject them to noise and discomfort; 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. [Footnote: The business rivalry between Vanderbilt and Law was intensified by the deepest personal enmity on Law's part. As one of the chief owners of the United States Mail Steamship Company, Law was extremely bitter on the score of Vanderbilt's having been able to blackmail him and Roberts so heavily and successfully.] Such competition 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 certain, 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 $100 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 confederates 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 delivery and the value to which the stock had fallen—$30, $40 or $50 a share—would represent the winnings.