Sunday, February 3, 2013

45. The Great Erie War, part 1


Erie Logo

            Wall Street buzzed:  Dan Drew had been smitten by one, two, three injunctions, was suspended as treasurer of Erie, must issue no new stock.  So ordered the fiercely mustached Justice George G. Barnard, a ruffle-shirted magistrate drowsy on the bench in the morning from revels long past midnight -- a friend of wealth and brandy whom the Vanderbilt attorneys appealed to with learned arguments and canny compliments.  From all accounts Dan Drew, the wiggliest figure on the Street, had been nailed down and trussed up by the full force and majesty of Law.

            But when Dan Drew stepped from his one-horse chaise to enter his broker’s office on William Street, he did so with a buoyant tread and looked chipper and blithe.  As did other Erie directors assembling there, all smiley smiles while grim-faced Vanderbilt brokers bought every share of Erie on the market.  Wall Street buzzed again: what was Erie up to?

Jay Gould, Jim Fisk's buddy, whose fertile brain
may have hatched the epic rascality of flooding
the market with quantities of new Erie stock.
            It may have been Jim Fisk’s new crony Jay Gould, a small, quiet man with scalpel eyes and an abundance of dark whiskers, and an appetite for grandiose schemes, who proposed a way to handle Vanderbilt.  Certainly Jim Fisk agreed: give the old hog all he wants.  But Dan Drew may well have hesitated: it meant cheating the mightiest, wrathiest man on the Street – one who for decades had mocked his whiny twang, made him feel puny because he hadn’t wrastled in his youth, and once, having nipped him for a million in the market, squelched his pleas: “Dan’l, don’t plead the baby act anyhow – settle up like a man!”  Cheat Cornele Vanderbilt?   And on a grand scale like this?  Unthinkable!  Or was it?  Dangerous, to be sure.  But maybe ... just maybe ... thinkable.  In fact, delicious.  And the whole board agreed.

            Lawyers harangued.  In two, three, five courtrooms Erie counsel answered Vanderbilt counsel injunction for injunction, got the courts all bollixed up.  Then, one weekend, while Judge Barnard in a white top hat made the rounds of his favorite saloons, eyeing the tasseled garters of the waiter girls, and Cornelius Vanderbilt, hot from Harlem Lane, at a fancy club played euchre with millionaire cronies for the highest stakes, the Erie conspirators convened.  At Dan Drew’s brownstone residence at 41 Union Square, behind drawn blinds and locked doors, the flowery carpets of the front and back parlors (witnesses of late to teas for ministers and the founding of a seminary) took the furtive imprint of the soles of brokers, lawyers, directors.  They were conferring with their host, who sat slouched down in an easy chair, tickled by mazes of whispers like the rustle of beach grass before a storm.

            And storm there was.  In those days stocks were not all traded simultaneously at the Stock Exchange; to ensure an orderly market, they were called up and traded one at a time.  But when the Exchange opened on Monday, and it came the turn of Erie to be traded, pandemonium ensued.  The Vanderbilt men were suddenly engulfed by an avalanche of Erie stock and, as ordered, bought every share offered.  But thousands – tens of thousands – were offered, far more than anyone anticipated.  When the Exchange, following its usual procedure, ended trading in the stock, the traders spilled out onto the street, gesticulating wildly and uttering grunts and shouts and squeals like a rout of hogs to the trough, buying, buying, buying.

Trading at the New York Stock Exchange, where stocks were called out one at a time.

 It took courage and nerve to cross swords
with this man in the market.
            In his office on West Fourth Street, watched by ranks of flunkies, Cornelius Vanderbilt examined Erie certificates of stock just delivered to his brokers on Wall Street: immaculate sheets of paper dated only two days before.  He was forking out millions for virgin squares of paper, the biggest fraud the Street had ever seen.  Erie, he would learn in time, had converted ten millions in convertible bonds – intended for other purposes, but no matter – into one hundred thousand shares of stock.  Clerks, brokers, lawyers, sons-in-law, and son all braced for claps of oaths, but heard only a wisp of a whisper: “Thievin’ bastards …”  Gouged by his enemies, even now he was being deserted in the market by his friends, who dumped their Erie shares in a panic, forcing him to buy them, too.  He could almost hear the rumors spreading that his nerve, his fortune had cracked; he stood alone.

            “Shall we sell, sir?” stammered a broker.

            “No, you fool, buy!  If we don’t, the whole damn market’ll bust to smithereens.  Whatever they’ve printed, buy!

            Out millions, he needed cash, and quickly; to get it from the banks, he would twist arms, make  threats.  Having issued orders, he called for his trotting wagon.  Departing not a jot from his daily routine, tight-lipped, chin set, and with every eye on him, he raced on Harlem Lane.  Meanwhile,   when his emissary demanded that the banks give the Commodore a loan using Erie stock as collateral, they refused, but offered to do it with his own New York Central stock instead.  Adamant, Old Sixty Millions threatened to dump tons of Central stock on the market and cause a panic; the banks, holding Central stock themselves, crumbled, and the Commodore got his loan.

A New York Central stock certificate, with a picture of
you-know-who at the top.  In the banks' eyes, as solid and
safe as Erie stock was flimsy and risky.

            Judge Barnard fumed.  Sitting in court with his top hat cocked at an angle and his feet propped up on the bench, he had just learned that Treasurer Drew and the Erie board of directors had flouted his every injunction.  He sipped a brandy, scowled.  The majesty of Law had been insulted, his pride skinned, his dignity gored.  He throbbed with rage.

            The Erie crowd were in high cackle.  And why not?  Before them on a table in the Erie offices on West Street, stacked in bales and bundles, sat eight millions of Vanderbilt cash.  About to send it for safety to New Jersey, they gazed, gloated.  Never had the Commodore been so clipped; they were the envy and awe of the Street.  Suddenly a messenger puffed in: Barnard had ordered their arrest for contempt, vowing by nightfall to clap every one of them in jail!  Well lawyered, they had looked for suits and countersuits to be fought with Vanderbilt’s money, plus bribes to the solons of Albany, but never this.  How could Barnard take it so personally?  Jail!   They must get themselves, the money, and the company’s books out of the state of New York!

A greenback of 1862, front and back: our first national currency,
printed by the Treasury Department to finance the Civil War.
This is the stuff the Erie boys were in high cackle over  --
some eight million dollars' worth -- courtesy of Commodore
Vanderbilt.  He got some, but not all, of it back.

            The patrolman on West Street gaped, as from the Erie offices came a flurry of top-hatted gentlemen and a whirl of clerks clutching documents tied with red tape, as well as account books, desks, and drawers, their pockets stuffed with what looked like securities and cash.  Moments later, reassured and richer by a greenback, he watched as they made for the docks, one old gent leaping into a hackney cab with bank notes packed in bales.

            By luck, the fugitives reached the docks unmolested and boarded a ferry bound for the blessed Jersey shore, and as they passed the midpoint of the crossing, breathed a collective sigh of relief: out of New York at last!  Soon they were lodged in Taylor’s Hotel, Jersey City, hard by the Erie depot, where Erie trains bound for New York deposited their passengers, so they could proceed by ferry to the city.  Not for anything would Uncle Daniel set foot again in New York, but Fisk and Gould had affairs to wind up in the city and hankered for one last dinner at Delmonico’s, whose sumptuous fare no restaurant in provincial Jersey could match; so they went back, risking arrest.  In mid-feast at Delmonico’s, getting word of their imminent arrest, they exited in hot haste, hurried by cab to the docks, obtained a small rowboat and two hands to row them to New Jersey, got lost in fog on the river, finally managed to clamber aboard a passing ferry, and so, soaked and bedraggled, finally made it back to New Jersey.

            Bedraggled or not, the younger fugitives, safe with Vanderbilt’s money in the blessed sanctuary known as New Jersey, saw it all as an inconvenience and a lark.  But Daniel Drew, a distinguished churchman of seventy and the founder of a theological seminary, was stricken with dismay.  He was a fugitive from the state of New York!  What would Wall Street say?  And the Methodists?  And his wife?  Nothing like this had ever happened to him in his life.

            Source note:  Again, this post and the next one are somewhat fictionalized in details, but close to historical fact.  Much of the dialogue is taken from contemporary sources.  The story is told in more detail in my out-of-print biography, The Money Game in Old New York: Daniel Drew and His Times (University Press of Kentucky, 1986), of which used copies are available online, and in other sources as well; I have often simplified and streamlined.  (I wish someone would digitize the Drew book's illustrations; I could use them in posts.)  The story will be concluded in the following post, with treachery, secret meetings, a train disaster, and the dove of peace.

            Note:   Another colorful New Yorker died last week, former mayor Ed Koch, who ruled the city from 1978 to 1989.  A native of the Bronx, he was a real New Yorker, feisty and abrasive, but fun-loving as well.  Credited with pulling the city out of a financial crisis, he finally wore out his welcome as mayor, but continued to play a public role until his death, and wrote a best-selling autobiography that inspired an Off Broadway musical.  His trademark query was "How'm I doin'?" -- a risky gesture since New Yorkers, like Koch himself, are notoriously unsubtle of tongue; they squawk.  Loved or hated, Hizzoner will be long remembered.

(c)  2013  Clifford Browder

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