CHAPTER XIII

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THE COMMODORE’S “CORNERS.”

THE GREAT HUDSON “CORNER.”—COMMODORE VANDERBILT THE “BOSS” OF THE SITUATION.—THE “CORNER” FORCED UPON HIM.—HOW HE MANAGED THE TRICK OF GETTING THE BEARS TO “TURN” THE STOCK, AND THEN CAUGHT THEM.—HIS ABLE DEVICE OF UNLOADING WHILE FORCING THE BEARS TO COVER AT HIGH FIGURES.—THE HARLEM “CORNER.”—THE COMMON COUNCIL BETRAYED THE COMMODORE, BUT WERE CAUGHT IN THEIR OWN TRAP, AND LOST MILLIONS.—THE LEGISLATURE ATTEMPT THE SAME GAME, AND MEET WITH A SIMILAR FATE.

In the Hudson “corner,” the stock jumped from 112 to 180. Commodore Vanderbilt was the “Boss” of the situation in this “corner.” He got the “bulge” completely on all the other parties connected with it, and what is more, he had the balance of the sympathy of the Street with him, for he was not the aggressor in getting up the “corner.” The fighting at first was forced upon him, but he acted on the defensive in a way that made his opponents sorry for their rashness. Though he did not know much about Shakespeare, he acted in accordance with old Polonius’ advice to his son by pushing the opposition to the wall.

As soon as he gained the mastery, he became severely aggressive, as he was in everything.

The beginning of this story of the Hudson “corner” is somewhat romantic. The Commodore was sunning himself on a pile of logs on the Jersey side of the Hudson while his yacht lay in the stream, and he was in the mood for enjoying a long and well-earned vacation, attempting to lay aside for a time the toil and trouble of eking out a precarious existence in speculation. While basking in the noon-day sun and gazing with delight on the luxurious foliage that arose from the New Jersey bank of the river, he was aroused from his charming reverie by a messenger from Wall Street, who conveyed to him the important intelligence that a wicked and unregenerate clique of “bears” had conspired to sell Hudson stock “short,” and that it was declining with great rapidity under the repeated and unmerciful blows of their hammers.

The Commodore arose and shook off his lethargy, as a lion may be supposed to shake the dew from his mane prior to his preparation for a spring upon an unfortunate foe.

The Commodore hastened down to Wall Street and instructed his brokers to take all the sellers’ options offered in Hudson. Cash stock was then taken as quickly as possible until the market was bare. A brief calculation showed that the buyers had secured either as cash or contract stock all the Hudson stock in existence with the exception of a small number of shares which were not expected to come upon the market.

The prolific brain of the Commodore then invented a new move in the game. A number of leading “bear” houses were requested to “turn” Hudson, which means to buy it for cash from the cornering party and sell it back to them on buyers’ options for periods varying from ten to thirty days. This able ruse was intended to impress the bears with the idea that the cornering party was weak. It seemed as if they were short of cash. So the leading bears grasped at the good chance, as they imagined, of turning several thousand shares, and instantly threw the cash stock on the market. It was privately picked up by the brokers of the great “cornerer.”

Everything having thus far progressed in favor of the ruse the trap was sprung upon the unsuspecting party. The sellers’ options began to mature, and there was no Hudson to be obtained.

The “corner” was complete, and the stock rose to 180. It had been 112 a few mornings before, when the Commodore was basking in the sun, and found that the bears were taking advantage of his absence. The loss on a hundred shares was $6,800.

There were about 50,000 shares contracted for to be delivered at this rate of profit by the “cornerers.” It will thus be seen that they were well fixed.

The bears were in terrible anguish.

But the worst part of the deal for these poor animals had yet to come. The bears who had turned the stock were notified that they must stand and deliver. They complained bitterly of the ingratitude of the bulls, whom they had only sought to oblige, by turning the stock. The bulls were implacable, however, and demanded their property. They proposed a compromise which was most exacting. They were willing to lend stock at five per cent. per day. Some of the bears paid this, thinking the “corner” would be of short duration, but it continued for over two weeks, and, after paying five per cent. a day for several days, these poor victims bought the stock at the high rate and settled.

This double move in turning the stock was the ablest trick that had ever been accomplished in cornering. It made Vanderbilt king of strategists in that line.

But the best part of the stratagem was that wherein the bulls saved themselves from being saddled with the whole stock, and made immense profits out of the deal.

While some of the bears were purchasing to cover at 170, Vanderbilt’s private brokers were selling at 140, the clique thus craftily unloading at good paying figures. This was one of the best inside moves in the whole history of “corners.”

The bulls thus saved themselves from the risk of being loaded with probably the whole, or at any rate the greater part of the capital stock, and through the Commodore’s able management the load was comparatively light at the end of the deal, the property remaining as good a speculative as before, which is a rare exception in “corners.”

The “corner” in Harlem was not less skilfully managed than the one in Hudson, but it had fewer complications. It was all plain sailing, so to speak, compared with the former, yet it clearly illustrated that the Commodore had a genius for “corners.” When he managed the Harlem “corner” he had had no experience in railroad matters, and he had reached the ripe age of sixty-nine.

I place the Hudson “corner” first in order because it was, in several respects, the greatest, though it happened at a later date than the Harlem.

It is a curious fact that in nearly all “corners” with which the Commodore was connected, he was on the defensive, and seldom the aggressor at the beginning of the fight. He was always placed in such a position that he had to fight hard to defend his property, or let it go to the dogs.

Buying stock in Harlem was his first venture in railroad transactions. He bought it as an investment. This was in 1863. Thirty years prior to this he had been requested to go into Harlem, but he declined, ironically remarking: “I’m a steamboat man, a competitor of these steam contrivances that you tell us will run on dry land. Go ahead. I wish you well, but I never shall have anything to do with ’em.”

When the Commodore went into Harlem it was selling at eight or nine dollars a share. It had been down as low as three dollars about the time I arrived in Wall Street. He put some money in the road, began improvements and the stock soon rose to 30. Many people predicted that the Commodore would lose all the money in railroads that he had made in steamboats.

The stock, however, gradually rose to 50, and speculators began to perceive that there was some inside movement going on. This was made apparent when, one day in April, 1863, the Common Council of this city passed an ordinance authorizing the Commodore to build a street railroad down Broadway to the Battery. So Jake Sharp’s enterprise was not original, as the Commodore was over twenty years ahead of him.

The Common Council were not immaculate in those days either, though the Jaehnes and Waites escaped punishment. They basely deceived the Commodore after taking his money; but he punished them severely. As soon as the franchise was granted, Harlem advanced to 75, and the Aldermen began to sell it “short.” They thought they had the Commodore fast in their clutches, and took their friends into the secret. They expected to sell enough of stock to make several millions. Their plan was to sell “short” all that the market would take, and then repeal the ordinance, which would cause the stock to drop probably below 50. Drew was one of the great bears in this deal with the Aldermen.

The Commodore got wind of the scheme, went on buying, and got others to help him, taking all the “shorts” that were offered. The operators had soon sold a great deal more Harlem stock than there was actually in existence. There were 110,000 shares of Harlem. When the Aldermen and their friends thought they had made millions, they repealed the ordinance, and Judge Brady, in the Court of Common Pleas, at the same time issued an injunction prohibiting the laying of rails on the Broadway road.

Everybody thought that the Commodore was hopelessly ruined. Harlem stock, however, dropped three points only, to 72. This created surprise among the Aldermen and the bears. They thought it should have dropped to 50. The “shorts” went into the market for the purpose of covering. Harlem ascended with amazing rapidity to 100, to 150, to 170 and finally to 179. The Common Council were obliged to make their final settlements at the last figure. The Commodore had all the stock. The Common Council lost a million, and their friends, whom they had advised to sell “short,” lost several millions. The Commodore “raked in” five or six millions, and went on his way rejoicing and improving Harlem, having now taken “Bill” in with him as vice president.

One would naturally imagine that the severe lesson which the Common Council had received in “corners” would have taught others to beware of the Commodore in this line of speculation, although it was new to him, but it did not. People as a rule will not learn either by precept or example. They must go through the rough experience themselves.

The Legislature soon fell into the same trap in which the Common Council had been caught and which they had actually set for themselves. The following year the Commodore secured control of the Hudson River Railroad through the purchase of its stock, and afterwards secured a sufficient number of the members of the Legislature to pass a bill consolidating the road with Harlem. He also won the promise of the Governor to sign the bill.

Harlem again began to rise, and went from 75 to 150. This was early in 1864.

The members of the Legislature employed to pass the bill pocketed the money of the Commodore and then hatched a conspiracy, after the manner of the Common Council, to ruin him and make millions by his fall. He had a shrewd lobbyist in the Legislature, however, who attentively watched his interests while he came down to New York to purchase stock for the rise that must have necessarily followed the passage of the bill. He had not been long in Wall Street when he was informed that the Legislature were imitating the game in which the Common Council had been so signally defeated the previous year. The Commodore sent him word to keep close watch at Albany, and he went on buying stock in Wall Street.

The bill was defeated. Harlem stock had a slump from 150 to 90. The Commodore was in a dilemma, and would have been dreadfully embarrassed only for the intense avarice of the Legislature. If they had bought and delivered at 90, they would have made millions, which the Commodore would have lost; but, like the horse leech’s daughter, they cried out for more. Nothing would satisfy them until the stock should be depressed to 50. Then they could “scoop” in several millions and the Commodore would be wound up. This was probably the darkest hour in the Commodore’s life. He hardly knew which way to turn. He was on the ragged edge. He has often pathetically described his feelings at this crisis to his intimate friends. He was almost on the brink of despair. He sent for old John Tobin, who had been a gate keeper at the ferry-house at Staten Island. Tobin had made quite a haul in the former deal in Harlem, and was worth over a million. He told Tobin what the perfidious members of the Legislature had done. John had been buying Harlem also in prospect of a rise.

“They stuck you too, John,” said the Commodore. “How do you feel about it?” John sighed, and replied that his feelings were not the most enviable. “Shall we let ’em bleed us?” queried the Commodore.

John sighed again, but did not know what reply to make.

“John, don’t them fellows need dressing down?” emphatically queried the Commodore. John answered in the affirmative, but did not see how it was to be accomplished, as “them fellows” at that moment seemed to hold the fort.

After a pause of deep reflection, the Commodore, again addressing John with intensified emphasis in his tone, said: “John, let us teach ’em never to go back on their word again as long as they draw breath. Let us try the Harlem ‘corner’ once more.”

It was agreed to try and repeat the Harlem “corner.”

John put up a million. Leonard Jerome also went into the deal. It took five millions to face the Legislature in this game, in which they had every opportunity of packing all the cards. It was virtually, at first, a silent game of whist, at which the Commodore was a noted player. He never played with greater skill than this time, except in the Hudson “corner,” and in both instances he almost manifested the skill of inspiration.

The members of the Legislature completely lost their heads. The old classic maxim, “whom the gods devote to destruction, they first make mad,” appeared to apply peculiarly to them, in the manipulation of the Harlem “corner.” Some of them mortgaged their houses and lands to get money to sell Harlem “short.” They advised all their friends that it was such a sure thing that failure was impossible, and brought all of their acquaintances whom they could influence into the speculative maelstrom of Harlem.

In the coarse of a few weeks, the members of the Legislature and their friends had sold millions of Harlem to be delivered at various periods during the summer, when they expected it would go ‘way down, probably to 8 or 9, where the Commodore had originally bought it.

They expected, moreover, that the Commodore would have appeared at Albany either in person or by his lobby representatives to sue for terms of settlement. They were greatly disappointed. He never left the company of his brokers in Wall Street, and persisted in purchasing. The members thought he must be mad, or at least in his dotage. He was then threescore and ten, the Scriptural limit of human days.

The Commodore continued to purchase Harlem until he had bought—paradoxical as it may seem to the general reader—27,000 shares more than were in existence of Harlem stock.

When the members of the Legislature who set the trap to catch Vanderbilt, but in which they themselves were now hopelessly ensnared, went into the market to buy for the purpose of covering, there was no Harlem to be had. Vanderbilt and his brokers had every share of it safely secured in their strong boxes.

The members of the Legislature were paralyzed. They could expect no mercy from the Commodore. He owed them none, and though a good Christian prior to his death, he was then practically a stranger to the doctrine of the great Nazarene. “Return good for evil,” or, “whosoever shall smite thee on thy right cheek, turn to him the other also.” He was rather inclined to follow the maxim of that practical Quaker, who, when smitten on the cheek and asked to turn the other, replied, “Friend, thou didst not read far enough. It is written, ‘pay what thou owest,’” and he knocked the fellow down.

This was the rule of action to which the Commodore rigidly adhered in dealing with the Legislature in the Harlem “corner.”

When a compromise was mooted to him, the Commodore replied, “Put it up to a thousand. This panel game is bring tried too often.”

No doubt he would have put it up to a thousand and totally ruined the members of the Legislature, with the Governor and their friends included, only for the overpowering appeals of his two trustworthy friends, Leonard Jerome and John Tobin.

Mr. Jerome had no sympathy for the Legislature, any more than Vanderbilt had, but he had a patriotic desire to take care of the “Street,” thus showing the large and comprehensive view of which this able financier is capable where a broad speculative question and a variety of diverse interests are involved.

“If you should carry out your threat,” said Mr. Jerome to the Commodore, “it would break every house on the Street.”

The Commodore yielded to that touch of nature that makes all the world akin, and under the magnetism of Jerome’s prudent entreaty, like Pharaoh with the Israelites, agreed to let the Legislature go—at 285 for Harlem.

In one day 15,000 shares matured at this figure. Speculators who read these lines, just pause and think of it for a moment! The stock that sold at $3 when I made my debut in Wall Street in 1857, reached 285 in 1864, and could have been put to 1,000. Don’t you feel astounded at the possibilities of speculation?

Then, again, think of the one-man power that could accomplish this wonderful feat and prevail against a whole Legislature and its Governor, with the choicest assortment of “crooked” lawyers in the State, versed in all the arts of duplicity and cunning to aid and abet said Legislature and its Governor.

Think of this, and then you will have some conception of the astute mind that the Commodore possessed, without education to assist it, in the contest against this remarkable combination of well-trained mental forces. There can hardly be a doubt that the Commodore was a genius, probably without equal in the financial world. There was hardly any achievement of his life which he gloated over with such ineffable delight as the cornering of the Legislature. He would say, when referring to the matter afterwards: “We busted the whole Legislature, and scores of the honorable members had to go home without paying their board bills.” Thus ended the second “corner” in Harlem.

Many large houses were ruined by the “corner,” and a host of private speculators lost all they had. Daniel Drew came very near being swamped in it, but finally escaped with paying a million, chiefly through his influence at court.

It is unnecessary to speak of the celebrated Erie “corners” here, as I have treated them pretty fully in the life and speculations of Drew.

[Illustration:

DANIEL DREW. ]

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