THE BATTLE OF THE GIANTS OVER ERIE
“THECOMMODORE,†as Vanderbilt was familiarly called, was seeking to develop the Hudson River property, when he found it assailed by a large “bear†element. Immediately taking the situationin hand, he tricked his opponents into the belief that his position was weak, and lured them into increasing their output of short stock. Getting virtually all the real stock in existence into his possession, and accepting contracts for additional amounts from the short interest, he soon had the market at his mercy. From 112 the stock rose in a few days to 180. The shorts, unable to make the deliveries they had contracted for, begged for mercy, and the stock was sold back to them at a handsome profit.
Much more complicated and daring were the operations of Daniel Drew, Jay Gould, and Fisk in Erie. The story of their use of the Erie road is worth outlining, if only to illustrate methods which in the financial world of to-day would no longer be tolerated, even if they were possible. In July, 1868, the Erie Railroad became the personal property of Fisk and Gould. The board of directors held no meetings; the executive committee never was called together. The Erie offices were moved to a white marble “palace†on the corner of Eighth Avenue and Twenty-third Street, which was furnished with vulgar ostentation, contained an opera-house (still a popular theater), and was connected with the private apartments of Fisk. Just before this (in 1866), Drew had operated his famous plan of loaning money to the Erie Railroad on the security of stock and convertible bonds, and converting the bonds into stock to meet his short contracts.
It was the acquisition by Commodore Vanderbilt in 1867 of the New York Central Railroad which brought him into conflict with Drew and Gould. “The Commodore†desired to acquire Erie. To guard against the transformation of more “convertible bonds†into stock, he employed the services of Frank Work to obtain from Judge Barnard an injunction restraining Drew from the payment of interest on $3,500,000 in bonds, pending an investigation of his accounts as treasurer of the railway. But Drew was equal to the emergency. Under a statute authorizing any railroad to create and issue its own stock in exchange for that of a leased line, he and his associates issued against an insignificant property, worth perhaps $250,000, the amount of $2,000,000 in Erie stock. Deals and counter-deals, and injunctions to restrain injunctions, did not prevent Fisk from seizing the enjoined stock certificates by force, nor Drew from aiding him by throwing 50,000 shares on the market and breaking Vanderbilt’s attempted “corner.†It is said that while new stock was thus being put out, Fisk summed up the purposes of his clique toward Vanderbilt in the remark, “If this printing-press don’t break down, I’ll give the old hog all he wants of Erie.†Vanderbilt was credited with spending $7,000,000 in this operation, and it was the wonder of his friends that he was not ruined.
To tell fully the story of these battles of the financial giants would be beyond the scope of a sketch like this. How Gould and Fisk succeeded Drew in control of the Erie; how they nearly ruined him when he came back into the speculative field; how Judge Barnard authorized Gould and Fisk to sell their Erie stock, issued at 40, back to the corporation at any price less than par, is a story of surpassing interest, but it represents methods long since discarded in American finance.