CHAPTER XV.DREW AND VANDERBILT.
Vanderbilt Essays to Swallow Erie, and Has a Narrow Escape from Choking.—He Tries to make Drew Commit Financial Suicide.—Manipulating the Stock Market and the Law Courts at the Same Time.—Attempts to “Tie Up” the Hands of Drew.—Manufacturing Bonds with the Erie Paper Mill and Printing Press.—Fisk Steals the Books and Evades the Injunction.—Drew Throws Fifty Thousand Shares on the Market and Defeats the Commodore.—The “Corner” is Broken and Becomes a Boomerang.—Vanderbilt’s Fury Knows no Bounds.—In his Rage he Applies to the Courts.—The Clique’s Inglorious Flight to Jersey City.—Drew Crosses the Ferry with Seven Millions of Vanderbilt’s Money.—The Commodore’s Attempt to Reach the Refugees.—A Detective Bribes a Waiter at Taylor’s Hotel, who Delivers the Commodore’s Letter, which Brings Drew to Terms.—Senator Mattoon gets “Boodle” from Both Parties.
One of the most interesting episodes connected with the speculative life of Drew, in the somewhat sensational history of Erie affairs, was the interposition of Commodore Vanderbilt in one of the famous deals of the Erie clique. His object was to swallow up the corporation, and it came pretty near swallowing him. He was only saved by the skin of the teeth, after one of the most prolonged and desperate financial struggles of his life.
In order to explain clearly the manner in which the Commodore became involved in the Erie matter with Drew and his partners, it will be necessary to take a brief resume of the history of a few of his other prominent deals, more fully dwelt upon elsewhere.
In 1860 Harlem stock had sold as low as eight or ninedollars a share. In January, 1863, when Vanderbilt got full control of the property, the stock had advanced to 30, and in July of the same year it had bounded to 92. In August, when the “corner” was effected, it went to the remarkable figure of 179.
It was put through a similar operation the succeeding year, and the stock, which sold in January below 90, was settled for in the following June at 285. Drew had been drawn into one of these transactions, and his losses reached nearly a million.
Vanderbilt’s prospects with the Harlem property were seriously menaced by the competition of the Hudson River railroad. He bought up the competing line, and thus destroyed the competition. He made this purchase when the stock was at par. He soon manifested his superior power in management, and displayed his skill in the art of “watering,” which he had invented. He had the stock advanced to 180 in a very short time.
Seeing his great success with these two properties, through his novel and unique methods of financiering, the managers of the New York Central, thinking that discretion was the better part of valor, and perceiving that they could not hold out against the edicts of manifest destiny very long, offered their property to him almost at his own price, which he very cordially accepted, approving their good judgment and keen perception.
He obtained full control of New York Central early in 1867. As soon as this triple amalgamation was complete he set his insatiable and avaricious heart upon Erie, and essayed to compass his designs and effect his purpose of reducing it to possession through the speculative machinery of Wall Street.
It was through this channel that he had obtained Hudson, and in defiance of the scientific maxim that lightning never strikes twice in the same place, he was inspired with full confidence in his ability to “scoop” Erie in the same manner.He tried first to arbitrate and consolidate, but his efforts in that direction failed.
With all his marvellous foresight and almost unerring judgment in speculative affairs, the Commodore was greatly at fault in his calculation regarding the magnitude of the task he had now undertaken in Erie. He had no idea of the immense volume of the stock which, after the speculative battle began to rage, seemed to spring out of the ground, spontaneously, as the reserve troops of Wellington were said to appear to do in the eyes of Napoleon when the struggle waxed warm at Waterloo. He had to contend with the ablest generals in speculation and finance that ever Wall Street had produced. His first bold, flank movement was an attempt to “corner” Drew. He knew how to manipulate the courts almost as well as the Erie Ring did. Accordingly, he made use of the services of Frank Work to obtain an injunction from Judge Barnard, of Tweed Ring notoriety, restraining Drew from the payment of interest on 3½ million bonds, pending an investigation of his accounts as treasurer of Erie. This was followed up in a few days by another application to the court for the treasurer’s removal from office.
These measures were resorted to by Vanderbilt to prevent the issue of this stock, into which these 3½ million bonds were convertible, and thus enable him to get a “corner” in the stock with greater facility. He thus attempted to make the court instrumental in forcing Drew into a position where he would be obliged to commit financial suicide.
The Erie Ring had managed to get legally around what in reality was an over-issue of Erie stock and bonds in the following subtle manner:
There was a statute of New York which authorized any railroad to create and issue its own stock in exchange for the stock of any other road under lease to it. The Ring had obtained the Buffalo, Bradford & Pittsburg road, which was comparatively worthless, for carrying out thisscheme. The Erie management then set about supplying themselves with the amount of Erie stock required, by leasing their own road to the road of which they were directors. They then created stock and issued it to themselves in exchange under the authority vested in them by law.
The nominal price of the road with which they worked this game of legerdemain was $250,000. They issued bonds in its name for two millions of dollars, payable to one of themselves as trustee.
Vanderbilt, before he could get a “corner” in Erie, had to place a limit to the issue of the stock. Otherwise he would have been throwing away millions, like pouring water into a sieve, in his attempt to make a “corner.”
Drew was enjoined by the Commodore to return to the Treasury 68,000 shares of the capital stock of Erie. This was the amount that was said to remain in the unsettled transactions of the Erie corner of 1866. This was the sword of Damocles which Vanderbilt had suspended over Drew’s devoted head.
Vanderbilt thus undertook to play the double game of manipulating the courts and the stock market at the same time, and against wily opponents, who were experts in both operations.
There were at this time three competitors for the possession of Erie in the field. The Drew party, the Vanderbilt party, and the Boston, Hartford and Erie party. Drew had tried to appease Vanderbilt to some extent, and had an interview with him at Vanderbilt’s own house prior to the election of the Erie directors. He agreed to “let up” on Vanderbilt, and offered him greater swing in purchasing Erie, while, on the other hand, Vanderbilt consented not to press the proceedings in court against Drew.
Before this, the Boston party and Vanderbilt had been fixing matters to oust Drew from the Erie directory. Now, Vanderbilt changed his tactics, and resolved to let Drew remain. The Boston party was with him, but to keepup the appearance of what had been formerly determined, the new board was to be elected ostensibly without Drew, and a vacancy created afterwards by which he could be chosen in the board. This method of whipping the Devil around the stump was adopted to put public opinion off its guard, and help to forward Vanderbilt’s purposes of consolidation. The election scheme was successfully effected, but the ruse, though well conceived, fell far short of accomplishing its designs.
There were wheels within wheels during this speculative deal. Drew and Vanderbilt entered into a secret alliance to exclude the Boston party, who was Vanderbilt’s ally. The new board was elected, leaving Drew out. This was a surprise to Wall Street, but a greater surprise was in store for it when a vacancy was created the next day, and Drew was re-elected to the Erie Board of Directors. The Street was confused and confounded, and at a loss to know how to act, and the Boston party was groping around to find out where it stood. Frank Work was elected to the Erie Board in the Vanderbilt interest. A pool was then formed to put up Erie, as it was in a very depressed condition. Drew was to manage the pool and manipulate the market.
The proposed plan for consolidating with the Vanderbilt interests failed because the Erie people said that the great railroad king would only consent to give them one-third of the earnings, while they contributed more than half to the pool. So, when this scheme collapsed, Vanderbilt went on the speculative war path, and determined to snatch Erie from the hands of the Ring in the way he had obtained Hudson. He began his operations about the middle of February, 1868, and pursued his policy in the courts for the purpose of limiting the apparently unlimited supply of Erie stock.
In the leasing process above referred to with the Buffalo, Bradford & Pittsburgh, the Erie clique added $140,000 a year to its income.
Mr. Work got an additional injunction to prevent Erie from issuing stock in addition to the 251,058 shares which had appeared in the previous report of the road, and forbidding a guarantee by Erie of the bonds of any other road, and Drew was further restrained from any transactions in Erie until he should return the 68,000 shares of capital stock to the treasury.
It will thus be seen that Vanderbilt had taken very rigid measures to “tie up” the hands of the veteran speculator.
The case was set down for hearing in the court of the immaculate Judge Barnard, on the 10th of March. When Vanderbilt thought he had everything fixed to force Drew to ruin himself by the return of these shares, which would enable Vanderbilt to effect his “corner,” he was checkmated by a counter injunction issued in the interest of the Erie people by Judge Balcom, of Binghamton, which stayed all proceedings in Barnard’s court.
Richard Schell then applied to Judge Ingraham and got out another injunction in the interest of the Vanderbilt party, staying all proceedings before Judge Balcom.
In the meantime the Erie directors were busy preparing their new issue of stock, despite the injunctions, in order that the bulls of the Vanderbilt party might be generously fed with Erie when the opportunity should arrive.
The Executive Committee of Erie resolved to issue bonds for improvements, extensions and steel rails. The bonds were convertible into stock at not less than 72½. Five millions of these were manufactured by the Erie paper mill and printing press, to be exchanged for Vanderbilt’s good, solid cash.
A great difficulty presented itself at this juncture, which, even to the majority of clever speculators, would have been insurmountable. The genius of “Jim” Fisk was called in to cut the Gordian knot. The certificates of the new Erie shares were in the hands of the secretary of the company, but he was enjoined from issuing them. They had beenmade out on Saturday night. On Monday the secretary directed a messenger, in the Erie office in West street, to take the books containing the certificates to the transfer office in Pine street. The messenger took the books and walked out. He was hardly a minute absent when he returned, apparently frightened, without the books. He stated that Mr. Fisk, who had been standing at the door, took the books from him, and ran away with them!
The certificates were then where no injunction could molest them. The next day the convertible bonds were found upon the secretary’s desk. In a day or two afterwards the certificates appeared in Wall Street. An order was obtained from Judge Gilbert enjoining all the previous orders of that legal luminary, Judge Barnard. Mr. Drew then threw 50,000 shares of Erie stock on the market. The boldness of the operation threw the Vanderbilt brokers off their guard, for it never struck them for a moment that Drew would risk contempt of court, and use the new issue of Erie in the face of an injunction, so they eagerly devoured the fresh bait before they got time to examine the quality of it or suspect its origin.
Erie had opened at 80, and advanced to 83. When the facts became known the stock broke, and declined to 71; but under heavy purchases by the Vanderbilt party, soon recovered to 78. The “corner,” however, was broken by the large blocks which Drew had thrown on the market, and Vanderbilt was signally defeated, and had a narrow escape from being completely swamped. The corner proved a boomerang to Vanderbilt. In his wrath he again applied to the courts. As the result, the Erie clique were obliged to fly and take refuge in Jersey City. Drew crossed the ferry heavily loaded with a big carpet bag, which contained seven millions, which had recently changed hands from Vanderbilt to himself in the cornering operation.
Gould and Fisk decamped by different routes. When the party had taken refuge in “Fort” Taylor (Taylor’s Hotel),safe from the laws of New York, they determined that no papers should be served upon them, and gave strict orders to the host that they would not receive anything in the shape of letters or notes. Communications of all kinds were prohibited except through persons well known to the clique, and the waiters at the hotel were strictly enjoined to observe this rule, on pain of being discharged.
While Vanderbilt was working hard to reach the refugees through the courts, the Legislature and his detectives, he discovered a method of communicating with Drew in spite of the precautions with which the latter was surrounded. The Commodore’s scheme would have done honor to a first-class Nihilist of the present day. He instructed a person in his service to play temporary detective, to go to the Taylor Hotel in the garb of a commercial traveler from the Far West, and to watch the movements of Drew, so as to get a note slipped into his hand in a way that he would be certain to read it.
The amateur detective watched for a day or two, and saw that his only chance of success was when Drew was at lunch, and that the person who waited on him must hand him the note. He saw the waiter, and told him what he wanted, and that when he should be discharged the Commodore would find him a better place.
The waiter agreed to hand Mr. Drew the note. Drew was enraged, sent for the host, and the waiter was instantly discharged, only to enter Vanderbilt’s service, according to agreement, at much higher remuneration. The note of the Commodore, however, had the desired effect. What that note contained, probably, nobody but Vanderbilt and Drew ever knew. Though the friends of Drew attempted to frighten him from going by arousing his suspicions of being kidnapped, he came over to New York on the following Sunday and had an interview with the Commodore. The matter was fixed up between them, and while Gould and Fisk were fighting Vanderbilt tooth and nail at Albany, and Gouldwas arrested and arraigned for contempt of court and other high crimes and misdemeanors in the eyes of the Vanderbilt lawyers, Drew was left unmolested to pursue the even tenor of his way.
As treasurer of Erie, however, Drew took an active part in the progress of legislative matters. He was the first to see that Senator Mattoon, who was chiefly instrumental in organizing the Investigating Committee, wanted tangible recognition of his services before the Committee made its report. He thought he was using Mattoon, but the Senator used him, and gave his casting vote in favor of Vanderbilt, whom he used also, after the most approved method of Albany legislators. Mattoon was also found on the winning side at the end of the legislative farce, when the bill in favor of the Erie clique and its over-issue of stock was passed, and no doubt got his fair share of the half million with which Drew fortified Gould from the Erie treasury when this gentleman went to Albany to conduct the war in the Legislature against Vanderbilt concerning the extra issue of Erie stock.