The impact of his vast fortune was well-nigh resistless. Commanding both financial and political power, his money and resources were used with destructive effect against almost every competitor standing in his way. If he could not coerce the owners of a railroad, the possession 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 bankrupted by him, and finally, in 1883, bought in under foreclosure 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 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 by the Pennsylvania Railroad by building a competing line, the South Pennsylvania Railroad. In the construction of this road he had an agreement with the Philadelphia 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 Railroad. Out of this arrangement grew a highly important sequence which few then foresaw—the gradual 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 actually cost. Vanderbilt got together a dummy construction 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. [Footnote: Van Oss' "American Railroads As Investments": 126. Professor Frank Parsons, in his "Railways, the Trusts and the People," incorrectly ascribes this juggling to Commodore Vanderbilt.]
If, however, Vanderbilt anticipated that the Pennsylvania Railroad 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 incursion into the territory they had apportioned to themselves for exploitation was not only resented but was fiercely resisted. Presently, overwhelmed by the crushing financial and political weapons with which they fought him, Vanderbilt found himself compelled to compromise by disposing of the line to them.
THE SEQUEL TO A "GENTLEMEN'S AGREEMENT."
Vanderbilt's methods and his duplicity in the disposition 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 "gentlemen's agreement" with the Reading Railroad, the bitterest 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 expend large sums of money in building terminals at Harrisburg and elsewhere to make connections with his proposed South Pennsylvania Railroad.
The Pennsylvania Railroad, however, set about retaliating in various effective ways. At this point, J. Pierpont Morgan—whose career we shall duly describe—stepped boldly in. Morgan was Vanderbilt's financial agent; and it was he, according to his own testimony on October 13, 1885, before the court examiner, who now suggested and made the arrangements between Vanderbilt and the Pennsylvania Railroad magnates, by which the South Pennsylvania Railroad was to become the property of the Pennsylvania system, and the Reading 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 associates had completely betrayed them by disposing of a majority of the stock of the partly built South Pennsylvania 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. Rockefeller, William Rockefeller, D. O. Mills, Stephen B. Elkins, 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 corrupt acts in legislatures and in Congress, and comprised the usual process of stock watering and exploitation.