In New York State, the Legislature was prevailed upon, in 1879, to 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 railroad owners, or their predominant grip upon governmental functions.
The magnate class preferred to have no official inquiries; 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 subsequently when the popular excitement had died away, and the suits could be in some way defeated, the exposures 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 nowhere. In reply to charges, the magnates could put in their skillful defense, and inject such a maze of argument, pettifoggery and technicalities into the proceedings, that before long the public, tired of the puzzle, was bound to throw up its hands in sheer bewilderment, unable 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 had one significant unanticipated result.
What William H. Vanderbilt now did is well worth noting. As the owner of four hundred thousand shares of New York Central stock he had been rabidly denounced 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 number of investors. In November, 1879, he sold through J. Pierpont Morgan more than two hundred thousand shares to a syndicate, chiefly, however, to British aristocrats.
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 Government 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 Vanderbilt 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 incurred by his sons on the Stock Exchange, but he later bought $10,000,000 more. Also he owned $4,000,000 in Government three and one-half per cent. bonds, many millions of State and city bonds, several millions of dollars 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.