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to create the modern American economy. Our next story is one that portrays Vanderbilt at his most skillful and yet is most chilling. The Commodore's personal wealth had grown so much by 1869 that his private interests had intersected with the public interests. Let's take a listen to TJ Styles. There's no way I could really cover Vanderbilt's life.
This is someone who was born during George Washington's presidency. Who went to work before the War of 1812 and lived long enough to make deals personally with John D. Rockefeller? I just want to speak briefly though about one incident in his life. that suggests how important he was.
and why in many ways his life is relevant today. Historians hate to draw lessons from the past. But certainly his life is and his career is very resonant with what's happening right now.
Now, the incident that I'll just take a couple of minutes to describe took place in September 1869. In 1863, as a little background to this, Vanderbilt turned from steamships. He'd spent his long career in steamboats and steamships. Becoming the foremost maritime entrepreneur in American history to that date.
sold off all his ships at the age of seventy, and turned to railroads. And during the 1860s, he progressively took over the railroads that connected New York City with the West. And by 1869, He controlled the railroads. that he at that moment was in the process of consolidating into the New York Central and Hudson River Railroad, what I think is probably the ancestor, the pioneering giant corporation in American history. And it ran from Lower Manhattan all the way to Buffalo in the west.
So this was a great development in corporate history, a great development in transportation history, building a very low-cost, efficient transportation network that also brought himself great wealth. But at that time, the most important channel of commerce was between Chicago and the great seaports in the east.
So connection from Buffalo to Chicago was extremely important.
So in September 1869, Vanderbilt faced a conundrum. As he tried to To get at least influence and healthy relations with the railroads to the West, he faced an opponent. The opponent's name was Jay Gould. Jay Gould was one of the last and most troublesome of the many enemies in Cornelius Vanderbilt's life, and the two men were exact opposites. Vanderbilt was six feet tall, Athletic.
A fierce competitor, someone who got involved in fist fights as a young man, and even into his 80s would engage in high-speed harness races on the roads of Upper Manhattan. Gould was small, slender, had a huge black beard, liked to putter around in his garden and collect books. They were complete opposites, but they were very well matched when it came to wits and wiliness in business battle. and Gould controlled the Erie Railroad. the other major railroad that ran west from New York City.
and he needed a connection to Chicago.
So the two men began to struggle behind the scenes for control of a newly merged railroad that stretched from Chicago to Buffalo. We'll just call it the Lakeshore, the Lakeshore and Michigan Southern Railway. Vanderbilt buy a lot of stock in the company, put his son-in-law on the board. but his son-in-law soon found he had an opponent on the board of the lake shore. The man's name was Legrand Lockwood.
He's kind of short, kind of fat. Unlike Vanderbilt, had spent his long career on Wall Street, very much accepted by New York's high society. Went to Europe every year and collected fine art, was a treasurer of the New York Stock Exchange. And Lockwood had suffered in business combat with Vanderbilt in the past. And Lockwood made an alliance with Gould.
They sealed the deal with a fine. Dinner at Delmonico's in Lower Manhattan, where Jim Fisk, Jay Gould's flamboyant partner, played the entertainer. And they made an agreement to divert the traffic from the lakeshore from Chicago over the Erie rather than over Vanderbilt's Railroad. And they made other plans that would have injured Vanderbilt's interests.
Well, Vanderbilt was a man who had seen a lot of business combat over the years.
So he was patient, he bided his time. He understood What I call the unseen architecture of American commerce that was emerging in the 19th century. The rise of abstract financial world that was new for Americans at that time. A world of credit markets. financial markets, securities, corporations, things that had no tangible corporeal existence.
It was something that was at the heart of a cultural as well as economic debate in America in the 19th century. A lot of businessmen. Really had trouble grasping this sort of abstract world that was a step removed from the tangible world of what we now call the real economy. Vanderbilt understood it very well.
So he waited until September of eighteen sixty nine. when the credit markets started to grow tight. America was an agricultural country. In the fall, the crops in the west were harvested and shipped to seaport for export. Reserve accounts, deposits in New York banks were drawn down as merchants and farmers in the West needed to.
Get cash to be able to handle all the transactions for the harvest, what they called the moving of the crops. and on Wall Street, Stock trading began to suffer at that time of year when the credit market started to dry up.
So Vanderbilt waited until the moving of the crops began. Then, secretly, because there were no reporting requirements at that time, through anonymously through multiple brokers. He issued contracts for the sale of stock. in Lakeshore Stock, of which he owned vast amounts.
Well, Lockwood, as he knew, had borrowed millions of dollars To buy on margin, that is on credit. millions of dollars worth of Lakeshore stock. Lockwood counting on his alliance with Gould to drive up the shares of Blake Shore. Vanderbilt secretly selling vast amounts. reserving to himself the right to decide when to deliver the stock.
Once the moving of the crops begins, the credit market starts to tighten up. Stock trading is beginning to slow down, prices are beginning to hesitate. Then, all in one day, actually, three successive days, in one big blow, delivers all of his stock. Stock price collapsed. The heavily leveraged Lockwood was driven into bankruptcy.
He apparently went to Vanderbilt's brownstone mansion in the Washington Square neighborhood and begged for mercy, and Vanderbilt sent him away. and Lockwood, one of the great powers on Wall Street. was driven into bankruptcy. Vanderbilt then Took a large loan from Bering Brothers, the British bank, bought back all of the stock that he had sold at reduced prices. Bought back all of Lockwood's stock, which his brokers had sold when he couldn't make his margin calls.
All the stock had gone into the market, the prices had collapsed. He not only crushed his enemy, drove him into bankruptcy, from which he never recovered. He not only got control of the railroad, absolute control, He also made a fortune by engaging in this operation in which he dropped the price of the company and then bought it back at a lower price.
So it was a brilliant operation.
However, The problem is that it contributed to one of the great panics on Wall Street, Black Friday of 1869. Vanderbilt also knew that Jay Gould was engaged in a complex operation the corner of the gold market. I won't go into the details. but he knew that the Wall Street was in peril at that moment. And yet he gambled, essentially, the health of the entire financial system on his ability to step in and rescue Wall Street from this panic.
When Black Friday occurred, the gold market collapsed. And Vanderbilt contributed to it by crushing stock prices and driving down stock prices. Vanderbilt then stepped in. did something he rarely did, he went to Wall Street himself. At 75 years old, he strolls down onto the stock exchange.
Brokers gather around him. One broker said to a reporter, I knew it, I knew it. The old rat never forgets his friends. and he began to very publicly make a big show of buying stock. Of course he bought stock, outstanding stock in his own railroads.
driving the price up. He arrested the fall of the market. managed to stop the panic and brought prices back up again. This moment shows Vanderbilt both at his most daring. at his most skilful in the financial markets that even some of his contemporaries did not yet understand, and at the same time, it's chilling.
This is a man who in pursuing his own private interests knowingly pushed the entire economy to the brink. gambling on his ability to arrest the fall and bring it back. The American public was very lucky that he gambled so skilfully. And he was able to carry out the rescue operation as successfully as he carried out the punishment side of the operation. And that is the the conundrum of Vanderbilt.
This man who pursued his own private interests, but had grown to such power, had grown to such a prominent place in the American economy that his private interests intersected with the public interest, And when he engaged in vast public enterprises, he contributed, there's no doubt that he contributed enormously. Two, the wealth of the American economy. of the American economy. to the geographical expansion of the United States.
So he may have died in 1877, but I Find his life to be, if anything, more relevant than at any point when I was working on the book, having no idea at the end it would be as relevant as it is right now. And great work, as always, by Greg Hangler on this piece. And a special thanks to TJ Stiles, Pulitzer Prize winning author of The First Tycoon, and a little glimpse this one story into the remarkable mind, life of Cornelius, Commodore Vanderbilt. His story here. on our American stories.
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