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V
CHAPTERS OF ERIE
AND OTHER ESSAYS
BY
CHARLES F. ADAMS, JR., AND HENRY ADAMS
NEW YORK
HENEY HOLT AND COMPANY
1886
Entered according to Act of Congress, in the year 1871,
BY JAMES R. OSGOOD & CO.,
in the Office of the Librarian of Congress, at Washington.
TROW'I
NIW TOKK.
CONTENTS.
PAGE
A CHAPTER OF ERIE C. F. Adams, Jr. . . . 1
THE NEW YORK GOLD CONSPIRACY . Henry Adams .... 100
AN ERIE RAID C. F. Adams, Jr. . . . 135
CAPTAINE JOHN SMITH Henry Adams .... 192
THE BANK OF ENGLAND RESTRICTION . Henry Adams .... 224
BRITISH FINANCE IN 1816 .... Henry Adams .... 268
THE LEGAL-TENDER ACT. Franc-is A. Walker and Henry Adams 302
THE RAILROAD SYSTEM C. F. Adams, Jr.
Chap. I. The Era of Change 332
II. The Transportation Tax 355
III. Railroad Consolidation 380
IV Stock Watering 398
V. The Government and the Railroad Corporations . .414
A CHAPTER OF ERIE.'
~"VTOT a generation has passed away during the last six hun-
JL^i dred years without cherishing a more or less earnest con-
viction that, through its efforts, something of the animal had
been eliminated from the higher type of man. Probably, also,
no generation has been wholly mistaken in nourishing this
faith ; even the worst has in some way left the race of men
on earth better in something than it found them. And yet it
would not be difficult for another Rousseau to frame a very in-
genious and plausible argument in support of the opposite view.
Scratch a Russian, said the first Napoleon, and you will find a
Cossack ; call things by their right names, and it would be no
difficult task to make the cunning civilization of the nineteenth
century appear but as a hypocritical mask spread over the
more honest brutality of the twelfth. Take, for instance, some
of the cardinal vices and abuses of the imperfect past. Pirates
are commonly supposed to have been battered and hung out
of existence when the Barbary Powers and the Buccaneers of
the Spanish Main had been finally dealt with. Yet freebooters
are not extinct ; they have only transferred their operations to
the land, and conducted them in more or less accordance with
the forms of law ; until, at last, so great a proficiency have they
attained, that the commerce of the world is more equally but
far more heavily taxed in their behalf, than would ever have
entered into their wildest hopes while, outside the law, they
simply made all comers stand and deliver. Now, too, they no
* From the North American Review for July, 1809.
1 A
2 A CHAPTER OF ERIE.
longer live in terror of the rope, skulking in the hiding-place
of thieves, but flaunt themselves in the resorts of trade and
fashion, and, disdaining such titles as once satisfied Ancient
Pistol or Captain Macheath, they are even recognized as Presi-
dent This or Colonel That. A certain description of gambling,
also, has ceased to be fashionable ; it is years since Crockford's
doors were closed, so that in this respect a victory is claimed
for advancing civilization. Yet this claim would seem to be
unfounded. Gambling is a business now where formerly it
was a disreputable excitement. Cheating at cards was always
disgraceful ; transactions of a similar character under the
euphemistic names of "operating," "cornering," and the like
are not so regarded. Again, legislative bribery and corrup-
tion were, within recent memory, looked upon as antiquated
misdemeanors, almost peculiar to the unenlightened period of
Walpole and Fox, and their revival in the face of modern pub-
lic opinion was thought to be impossible. In this regard at
least a sad delusion was certainly entertained. Governments
and ministries no longer buy the raw material of legislation ;
at least not openly or with cash in hand. The same cannot
be said of individuals and corporations ; for they have of late
not infrequently found the supply of legislators in the market
even in excess of the demand. Judicial venality and ruffian-
ism on the bench were not long since traditions of a remote
past. Bacon was impeached, and Jeffries achieved an immor-
tal infamy for offences against good morals and common de-
cency which a self-satisfied civilization believed incompatible
with modern development. Recent revelations have cast
more than doubt upon the correctness even of this assump-
tion.*
No better illustration of the fantastic disguises which the
worst and most familiar evils of history assume as they meet
See a very striking article entitled " The Now York City .lu<lioi:iry" in
the North American Review for July, 1867. This paper, which, from its feur-
less denunciation of a class of judicial delinquencies which have since great-
ly increased both In frequency and in magnitude, attracted great attention
when it was published, has been attributed to the pen of Mr. Thomas G.
Shearman, of the New York bnr.
A CHAPTER OF ERIE. 3
us in the actual movements of our own day could be afforded
than was seen in the events attending what are known as the
Erie wars of the year 18G8. Beginning in February and last-
ing until December, raging fiercely in the . late winter and
spring, and dying away into a hollow truce at midsummer,
only to revive into new and more vigorous life in the autumn,
this strange conflict convulsed the money market, occupied
the courts, agitated legislatures, and perplexed the country,
throughout the entire year. These, too, were but its more di-
rect and immediate manifestations. The remote political com-
plications and financial disturbances occasioned by it would
afford a curious illustration of the close intertwining of inter-
ests which now extends throughout the civilized world. The
complete history of these proceedings cannot be written, for
the end is not yet ; indeed, such a history probably never will
be written, and yet it is still more probable that the events it
would record can never be quite forgotten. It was something
new to see a knot of adventurers, men of broken fortune,
without character and without credit, possess themselves of
an artery of commerce more important than was ever the
Appian Way, and make levies, not only upon it for their own
emolument, but, through it, upon the whole business of a
nation. Nor could it fail to be seen that this was by no
means in itself an end, but rather only a beginning. No peo-
ple can afford to glance at these things in the columns of the
daily press, and then dismiss them from memory. For Amer-
icans they involve many questions ; they touch very nearly
the foundations of common truth and honesty without which
that healthy public opinion cannot exist which is the life's
breath of our whole political system.
A CHAPTER OF ERIE.
I.
The history of the Erie Railway has been a checkered one.
Chartered in 1832, and organized in 1833, the cost of its con-
struction was then estimated at three millions of dollars, of
which but one million were subscribed. By the time the first
report was made the estimated cost had increased to six
millions, and the work of construction was actually begun
on the strength of stock subscriptions of a million and a
half, and a loan of three millions from the State. In 1842
the estimated cost had increased to twelve millions and a half,
and both means in hand and credit were wholly exhausted.
Subscription-books were opened, but no names were entered
in them ; the city of New York was applied to, and refused a
loan of its credit ; again the legislature was besieged, but the
aid from this quarter was now hampered with inadmissible
conditions ; accordingly work was suspended, and the property
of the insolvent corporation passed into the hands of assign-
ees. In 1845 the State came again to the rescue ; it surren-
dered all claim to the three millions it had already lent to the
company ; and one half of their old subscriptions having been
given up by the stockholders, and a new subscription of three
millions raised, the whole property of the road was mortgaged
for three millions more. At last, in 1851, eighteen years after
its commencement, the road was opened from Lake Erie to
tide-water. Its financial troubles had, however, as yet only
begun, for in 1859 it could not meet the interest on its mort-
gages, and passed into the hands of a receiver. In 1861 an
arrangement of interests was effected, and a new company
was orgaiii/cd. The next year the old New York & Erie Rail-
road Company disappeared under a foreclosure of the fifth
mortgage, and the present Erie Railway Company rose from
its ashes. Meanwhile the original estimate of three millions
had developed into an actual outlay of fifty millions ; the 470
miles of track opened in 1842 had expanded into 773 miles in
1868 ; and the revenue, which the projectors had "confident-
A. CHAPTER OF ERIE. 5
ly " estimated at something less than two millions in 1833,
amounted to over five millions when the road passed into the
hands of a receiver in 1859, and in 1865 reached the enor-
mous sum of sixteen millions and a half. The road was, in
truth, a magnificent enterprise, worthy to connect the great
lakes with the great seaport of America. Scaling lofty moun-
tain ranges, running through fertile valleys and by the banks
of broad rivers, connecting the Hudson, the Susquehanna, the
St. Lawrence, and the Ohio, it stood forth a monument at
once of engineering skill and of commercial enterprise.
The series of events in the Erie history which culminated
in the struggle about to be narrated may be said to have had
its origin some seventeen or eighteen years before, when Mr.
Daniel Drew first made his appearance in the Board of Direc-
tors, where he remained down to the year 1868, generally
holding also the office of treasurer of the corporation. Mr.
Drew is what is known as a self-made man. Born in the year
1797, as a boy he drove cattle down from his native town of
Carmel, in Putnam County, to the market of New York City,
and, subsequently, was for years proprietor of the Bull's Head
Tavern. Like his contemporary, and ally or opponent, as
the case might be, Cornelius Vanderbilt, he built up his
fortunes in the steamboat interest, and subsequently extended
his operations over the rapidly developing railroad system.
Shrewd, unscrupulous, and very illiterate, a strange com-
bination of superstition and faithlessness, of daring and tim-
idity, often good-natured and sometimes generous, he
ever regarded his fiduciary position of director in a railroad as
a means of manipulating its stock for his own advantage.
For years he had been the leading bear of Wall Street, and
his favorite haunts were the secret recesses of Erie. As treas-
urer of that corporation, he had, in its frequently recurring
hours of need, advanced it sums which it could not have ob-
tained elsewhere, and the obtaining of which was a necessity.
He had been at once a good friend of the road and the worst
enemy it had as yet known. His management of his favorite
stock had been cunning and recondite, and his ways inscru
6 A CHAPTER OF ERIE.
table. Those who sought to follow him, and those who sought
to oppose him, alike found food for sad reflection ; until at last
he won for himself the expressive sobriquet of the Speculative
Director. Sometimes, though rarely, he suffered greatly in
the complications of Wall Street ; more frequently he inflicted
severe damage upon others. On the whole, however, his for-
tunes had greatly prospered, and the outbreak of the Erie
war found him the actual possessor of some millions, and the
reputed possessor of many more.
In the spring of 1866 Mr. Drew's manipulations of Erie
culminated in an operation which was at the time regarded as
a masterpiece ; subsequent experience has, however, so im-
proved upon it that it is now looked upon as an ordinary and
inartistic piece of what is called "railroad financiering," a
class of operations formerly known by a more opprobrious
name. The stock of the road was then selling at about 95,
and the corporation was, as usual, in debt, and in pressing
need of money. As usual, also, it resorted to its treasurer.
Mr. Drew stood ready to make the desired advances upon se-
curity. Some twenty -eight thousand shares of its own author-
ized stock, which had never been issued, were at the time in
the hands of the company, which also claimed, under the stat-
utes of New York, the right of raising money by the issue
of bonds, convertible, at the option of the holder, into stock.
The twenty-eight thousand unissued shares, and bonds for
three millions of dollars, convertible into stock, were placed
by the company in the hands of its treasurer, as security for
a cash loan of $ 3,500,000. The negotiation had been quietly
effected, and Mr. Drew's campaign now opened. Once more
he was short of Kri<-. While Erie was buoyant, while if
Htendily approximated to par, while speculation was ram-
pant, and that outside public, the delight and the prey of
Wall Street, was gradually drawn in by the fascination of
amassing wealth without labor, quietly and stealthily,
through his agents and brokers, the grave, desponding opera-
te was daily concluding his contracts for the future delivery
of stock at current prices. At last the hour had come. Erie
A CHAPTER OF ERIE. 7
was rising, Erie was scarce, the great bear had many contracts
to fulfil, and where was he to find the stock 1 ? His victims
were not kept long in suspense. Mr. Treasurer Drew laid his
hands upon his collateral. In an instant the bonds for three
millions were converted into an equivalent amount of capital
stock, and fifty-eight thousand shares, dumped, as it were, by
the cart-load in Broad Street, made Erie as plenty as even
Drew could desire. Before the astonished bulls could rally
their faculties, the quotations had fallen from 95 to 50, and
they realized that they were hopelessly entrapped.*
The whole transaction, of course, was in no respect more
creditable than any result, supposed to be one of chance or
skill, which, in fact, is made to depend upon the sorting
of a pack of cards, the dosing of a race-horse, or the selling
out of his powers by a " walkist." But the gambler, the pa-
tron of the turf, or the pedestrian represents, as a rule, him-
self alone, and his character is generally so well understood as
* A bull, in the slang of the stock exchange, is one who endeavors to in-
crease the market price of stocks, as a bear endeavors to depress it. The
bull is supposed to toss the thing up with his horns, and the bear to drag it
down with his claws. The vast majority of stock operations are pure gam-
bling transactions. One man agrees to deliver, at some future time, property
which he has not got, to another man who does not care to own it. It is only
one way of betting on the price at the time when the delivery should be made;
if the price rises in the mean while, the bear pays to the bull the difference
between the price agreed upon and the price to which the property has risen;
if it falls, he receives the difference from the bull. All operations, as they are
termed, of the stock exchange are directed to this depression or elevation of
stocks, with a view to the settlement of differences. A " pool " is a mere
combination of men contributing money to be used to this end, and a " cor-
ner " is a result arrived at when one combination of gamblers, secretly hold-
ing the whole or greater part of any stock or species of property, induces
another combination to agree to deliver a large further quantity at some future
time. When the time arrives, the second combination, if the corner succeeds,
suddenly finds itself unable to buy the amount of the stock or property ne-
cessary to enable it to fulfil its contracts, and the first combination fixes at its
own will the price at which differences must be settled. The corner fails or
is broken, when those who agree to deliver succeed in procuring the stock or
property, and fulfilling their contracts. The argot of the exchange is, how-
ever, a language- by itself, and very difficult of explanation to the wholly
uninitiated. It can only be said that all combinations of interests and manipu-
lations of values are mere weapons in the hands of bulls and bears for elevat-
ing or depressing values, with a view to the payment of differences.
8 A CHAPTER OF ERIE.
to be a warning to all the world. The case of the treasurer
of a great corporation is different. He occupies a fiduciary
position. He is a trustee, a guardian. Vast interests are
confided to his care ; every shareholder of the corporation is
his ward ; if it is a railroad, the community itself is his cestui
que trust. But passing events, accumulating more thickly
with every year, have thoroughly corrupted the public morals
on this subject. A directorship in certain great corporations
has come to be regarded as a situation in which to make a for-
tune, the possession of which is no longer dishonorable. The
method of accumulation is both simple and safe. It consists in
giving contracts as a trustee to one's self as an individual, or
in speculating in the property of one's cestui que trust, or in
using the funds confided to one's charge, as treasurer or other-
wise, to gamble with the real owners of those funds for their
own property, and that with cards packed in advance. The
wards themselves expect their guardians to throw the dice
against them for their own property, and are surprised, as well
as gratified, if the dice are not loaded. These proceedings,
too, are looked upon as hardly reprehensible, yet they strike
at the very foundation of existing society. The theory of rep-
resentation, whether in politics or in business, is of the essence
of modern development. Our whole system rests upon the
sanctity of the fiduciary relations. Whoever betrays them, a
director of a railroad no less than a member of Congress or
the trustee of an orphans' asylum, is the common enemy of
every man, woman, and child who lives under representative
government. The unscrupulous director is far less entitled to
mercy than the ordinary gambler, combining as he does the
character of the traitor with the acts of the thief.
No acute moral sensibility on this point, however, has for some
years troubled \V;ill Street, nor, indord, the country at large.
As a result of the transaction of 1866, Mr. Drew was looked
upon as having effected a surprisingly clever operation, and he
retired from the field hated, feared, wealthy, and admired.
This episode of Wall Street history took its place as a bril-
liant success beside the famous Prairie du Chien and Harlein
A CHAPTER OF ERIE. 9
" corners," and, but for subsequent events, would soon have
been forgotten. Its close connection, however, with more im-
portant though later incidents of Erie history seems likely to
preserve its memory fresh. Great events were impending ; a
new man was looming up in the railroad world, introducing
novel ideas and principles, and it could hardly be that the
new and old would not come in conflict. Cornelius Vander-
bilt, commonly known as Commodore Vanderbilt, was now de-
veloping his theory of the management of railroads.
Born in the year 1794, Vanderbilt was a somewhat older
man than Drew. There are several points of resemblance in
the early lives of the two men, and many points of curious
contrast in their characters. Vanderbilt, like Drew, was born
in very humble circumstances in the State of New York, and
like him also received little education. He began life by fer-
rying passengers and produce from Staten Island to New York
City. Subsequently, he too laid the foundation of his great
fortune in the growing steamboat navigation, and likewise, in
due course of time, transferred himself to the railroad inter-
est. When at last, in 1868, the two came into collision as
representatives of the old system of railroad management and
of the new, they were each threescore and ten years of age,
and had both been successful in the accumulation of millions,
Vanderbilt even more so than Drew. They were probably
equally Tinscrupulous and equally selfish ; but, while the cast
of Drew's mind was sombre and bearish, Vanderbilt was gay
and buoyant of temperament, little given to thoughts other
than of this world, a lover of horses and of the good things
of life. The first affects prayer-meetings, and the last is a
devotee of whist. Drew, in Wall Street, is by temperament
a bear, while Vanderbilt could hardly be other than a bull.
Vanderbilt must be allowed to be by far the superior man of
the two. Drew is astute and full of resources, and at all times
a dangerous opponent ; but Vanderbilt takes larger, more
comprehensive views, and his mind has a vigorous grasp which
that of Drew seems to want. While, in short, in a wider
field, the one might have made himself a great and successful
1*
10 A CHAPTER OF ERIE.
despot, the other would hardly have aspired beyond the con-
trol of the jobbing department of some corrupt government.
Accordingly, while in Drew's connection with the railroad sys-
tem his operations and manipulations evince no qualities cal-
culated to excite even a vulgar admiration or respect, it is
impossible to regard Vanderbilfs methods or aims without rec-
ognizing the magnitude of the man's ideas and conceding his
abilities. He involuntarily excites feelings of admiration for
himself and alarm for the public. His ambition is a great
one. It seems to be nothing less than to make himself mas-
ter in his own right of the great channels of communication
which connect the city of New York with the interior of the
continent, and to control them as his private property. Drew
sought to carry to a mean perfection the old system of operat-
ing successfully from the confidential position of director, nei-
ther knowing anything nor caring anything for the railroad sys-
tem, except in its connection with the movements of the stock
exchange, and he succeeded in his object. Vanderbilt, on the
other hand, as selfish, harder, and more dangerous, though less
subtle, has by instinct, rather than by intellectual effort, seen
the full magnitude of the system, and through it has sought
to make himself a dictator in modern civilization, moving for-
ward to this end step by step with a sort of pitiless energy
which 1ms seemed to have in it an element of fate. As trade
now dominates the world, and railways dominate trade, his ob-
ject has been to make himself the virtual master of all by
making himself absolute lord of the railways. Had he begun
his railroad operations with this end in view, complete failure
would have been almost certainly his reward. Commencing
as he did, however, with a comparatively insignificant objec-
tive point, the cheap purchase of a bankrupt stock, and
developing his ideas as he advanced, his power and his reputa-
tion grow, until an end which at first it would have seemed
madness to entertain became at last both natural and feasible.
Two great lines of railway traverse the State of New York
and connect it with the West, the Erie and the New York
Central. The latter communicates with the city by a great
A CHAPTER OF ERIE. 11
river and by two railroads. To get these two roads the
Harlem and the Hudson River under his own absolute con-
trol, and then, so far as the connection with the Central was
concerned, to abolish the river, was Vanderbilt's immediate
object. First making himself master of the Harlem road, he
there learned his early lessons in railroad management, and
picked up a fortune by the way. A few years ago Harlem
had no value. As late as 1860 it sold for eight or nine
dollars per share; and in January, 1863, when Vanderbilt
had got the control, it had risen only to 30. By July of
that year it stood at 92, and in August was suddenly raised
by a "corner "to 179. The next year witnessed a similar
operation. The stock which sold in January at less than
90 was settled for in June in the neighborhood of 285. On
one of these occasions Mr. Drew is reported to have con-
tributed a sum approaching half a million to his rival's wealth.
More recently the stock had been floated at about 130. It
was in the successful conduct of this first experiment that
Vanderbilt showed his very manifest superiority over previous
railroad managers. The Harlem was, after all, only a compet-
ing line, and competition was proverbially the rock ahead in
all railroad enterprise. The success of Vanderbilt with the
Harlem depended upon his getting rid of the competition of
the Hudson River railroad. An ordinary manager would
have resorted to contracts, which are never carried out, or to
opposition, which is apt to be ruinous. Vanderbilt, on the
contrary, put an end to competition by buying up the com-
peting line. This he did at about par, and, in due course of
time, the stock was sent up to 180. Thus his plans had de-
veloped by another step, while through a judicious course of
financiering and watering and dividing, a new fortune had
been secured by him. By this time Vanderbilt's reputation as
a railroad manager as one who earned dividends, created
stock, and invented wealth had become very great, and the
managers of the Central brought that road to him, and asked
him to do with it as he had done with the Harlem and Hud-
son River. He accepted the proffered charge, and now, prob-
12 A CHAPTER OF ERIE.
ably, the possibilities of his position and the magnitude of
the prize within his grasp at last dawned on his mind. Un-
consciously to himself, working more wisely than he knew, he
had developed to its logical conclusion one potent element of
modern civilization.
Gravitation is the rule, and centralization the natural con-
sequence, in society no less than in physics. Physically, mor-
ally, intellectually, in population, wealth, and intelligence, all
things tend to concentration. One singular illustration of this
law is almost entirely the growth of this century. Formerly,
either governments, or individuals, or, at most, small combina-
tions of individuals, were the originators of all great works
of public utility. Within the present century only has de-
mocracy found its way through the representative system into
the combinations of capital, small shareholders combining to
carry out the most extensive enterprises. And yet already
our great corporations are fast emancipating themselves from
the State, or rather subjecting the State to their own control,
while individual capitalists, who long ago abandoned the at-
tempt to compete with them, will next seek to control them.
In this dangerous path of centralization Vanderbilt has taken
the latest step in advance. He has combined the natural
power of the individual with the factitious power of the cor-
poration. The famous " L'etat, c'est moi " of Louis XIV. rep-
resents Vanderbilt's position in regard to his railroads. Un-
consciously he has introduced C;rsarism into corporate life.
He has, however, but pointed out the way which others will
tread. The individual will hereafter be engrafted on the cor-
poration, democracy running its course, and resulting in im-
perialism ; and Vanderbilt is but the precursor of a class of
men who will wield within the State a power created by the State,
but too great for its control. He is the founder of a dynasty.
From the moment. Van.lerbilt stepped into the management
of the Central, but a single effort seemed necessary to give
the ue\v railroad kiiiLT absolute control over the railroad sys-
tem, and consequently over the- eommeire, of \e\v York. I'.y
only one step IK- could securely levy his tolls on
A CHAPTER OF ERIE. 13
the traffic of a continent. Nor could this step have seemed
difficult to take. It was but to repeat with the Erie his suc-
cessful operation with the Hudson River road. Not only was
it a step easy to take, but here again, as so many times before,
a new fortune seemed ready to- drop into his hand. The Erie
might well yield a not less golden harvest than the Central,
Hudson River, or Harlem. There was indeed biit one obsta-
cle in the way, the plan might not meet the views of the
one man who at that time possessed the wealth, cunning,
and combination of qualities which could defeat it, that man
being the Speculative Director of the Erie, Mr. Daniel
Drew.
The New York Central passed into Vanderbilt's hands in
the winter of 1866 - 67, and he marked the Erie for his own
in the succeeding autumn. As the annual meeting of the cor-
poration approached, three parties were found in the field con-
tending for control of the road. One party was represented
by Drew, and might be called the party in possession, that
which had long ruled the Erie, and made it what it was,
the Scnrlet Woman of Wall Street. Next came Vanderbilt,
flushed with success, and bent upon fully gratifying his great
instinct for developing imperialism in corporate life. Lastly,
a faction made its appearance composed of some shrewd and
ambitious Wall Street operators and of certain persons from
Boston, who sustained for the occasion the novel character of
railroad reformers. This party, it is needless to say, was as
unscrupulous, and, as the result proved, as able as either of
the others ; it represented nothing but a raid made upon the
Erie treasury in the interest of a thoroughly bankrupt New
England corporation, of which its members had the control.
The history of this corporation, known as the Boston, Hart-
ford, & Erie Railroad, --a projected feeder and connection of
the Erie, would be one curious to read, though very difficult
to write. Its name was synonymous with bankruptcy, litiga-
tion, fraiid, and failure. If the Erie was of doubtful repute
in Wall Street, the Boston, Hartford, & Erie had long been
of worse than doubtful repute in State Street. Of late years,
14 A CHAPTER OF EKIE.
under able and persevering, if not scrupulous management,
the bankrupt, moribund company had been slowly struggling
into new life, and in the spring of 1867 it had obtained, un-
der certain conditions, from the Commonwealth of Massachu-
setts; a subsidy in aid of the construction of its road. One
of the conditions imposed obliged the corporation to raise a
sum from other sources still larger than that granted by the
State. Accordingly, those having the line in charge looked
abroad for a victim, and fixed their eyes upon the Erie.
As the election day drew near, Erie was of course for sale.
A controlling interest of stockholders stood ready to sell their
proxies, with entire impartiality, to any of the three contend-
ing parties, or to any man who would pay the market price for
them. Nay, more, the attorney of one of the contending par-
ties, as it afterwards appeared, after an ineffectual effort to
extort black mail, actually sold the proxies of his principal to
another of the contestants, and his doing so seemed to excite
mirth rather than siirprise. Meanwhile -the representatives
of the Eastern interest played their part to admiration. Tak-
ing advantage of some Wall Street complications just then ex-
isting between Vanderbilt and Drew, they induced the former
to ally himself with them, and the latter saw that his defeat
was inevitable. Even at this time the Vanderbilt party con-
templated haying recourse, if necessary, to the courts, and a
petition for an injunction had been prepared, setting forth the
details of the "corner" of I860. On the Sunday preceding
the election Drew, in view of his impending defeat, called
upon Vanderbilt. That gentleman, thereupon, very amicably
read to him the legal documents prepared for his benefit ;
whereupon the ready treasurer at once turned about, and,
having hitherto been hampering the Commodore by his bear
operations, he now agreed to join hands with him in giving to
the market a strong upward tendency. Meanwhile the other
parties to the contest were not idle. At the same house, at a
later hour in the >\.\\, Vanderbilt rxphinnl t<> tlic Kastcrn ad-
venturers his new plan of operations, which included the c<>ii-
t.inuawp of Drow in his directorship. These gentlemen were
A CHAPTER OF ERIE. 15
puzzled, not to say confounded, by this sudden change of front.
An explanation was demanded, some plain language followed,
and the parties separated, leaving everything unsettled ; but
only to meet again at a later hour at the house of Drew.
There Vanderbilt brought the new men to terms by proposing
to Drew a bold coup de main, calculated to throw them entire-
ly out of the direction. Before the parties separated that
night a written agreement had been entered into, providing
that, to save appearances, the new board should be elected
without Drew, but that immediately thereafter a vacancy
should be created, and Drew chosen to fill it. He was there-
fore to go in as one of two directors in the Vanderbilt interest,
that gentleman's nephew, Mr. Work, being the other.
This programme was faithfully carried out, and on the 2d
of October Wall Street was at once astonished by the news of
the defeat of the notorious leader of the bears, and bewildered
by the immediate resignation of a member of the new board
and the election of Drew in his place : Apparently he had
given in his submission, the one obstacle to success was re-
moved, and the ever-victorious Commodore had now but to
close his fingers on his new prize. Virtual consolidation in
the Vanderbilt interest seemed a foregone conclusion.
The reinstalment of Drew was followed by a period of hol-
low truce. A combination of capitalists, in pursuance of an
arrangement already referred to, took advantage of this to
transfer as much as possible of the spare cash of the " outside
public " from its pockets to their own. A " pool " was formed,
in view of the depressed condition of Erie, and Drew was left
to manipulate the market for the advantage of those whom
it might concern. The result of the Speculative Director's
operations supplied a curious commentary on the ethics of the
stock exchange, and made it questionable whether the ancient
adage as to honor among a certain class in society is of uni-
versal application, or confined to its more persecuted mcmbei's.
One contributor to the " pool," in this instance, was Mr. ,
a friend of Vanderbilt. The ways of Mr. Drew were, as usual,
past finding out ; Mr. . however, grew impatient of wait-
16 A CHAPTER OF ERIE.
ing for the anticipated rise in Erie, and it occurred to him
that, besides participating in the profits of the " pool," he
might as well turn an honest penny by collateral operations
on his own account, looking to the expected rise. Before em-
barking on his independent venture, however, he consulted
Mr. Drew, it is said, who entirely declined to express any
judgment as to the enterprise, but at the same time agreed to
loan Mr. out of the " pool " any moneys he might re-
quire upon the security usual in such cases. Mr. availed*
himself of the means thus put at his disposal, and laid in
a private stock of Erie. Still, however, the expected rise
did not take place. Again he applied to Mr. Drew for infor-
mation, but with no better success than before ; and again,
tempted by the cheapness of Erie, he borrowed further funds
of the " pool," and made new purchases of stock. At last
the long-continued depression of Erie aroused a dreadful sus-
picion in the bull operator, and inquiries were set on foot.
He then discovered, to his astonishment and horror, that his
stock had come to him through certain of the brokers of Mr.
Drew. The members of the " pool " were at once called to-
gether, and Mr. Drew was appealed to on behalf of Mr. .
It was suggested to him that it would be well to run Erie up
to aid a confederate. Thereupon, with all the coolness imag-
inable, Mr. Drew announced that the " pool " had no Erie and
wanted no Erie ; that it had sold out its Erie and had real-
ized large profits, which he now proposed to divide. There-
after who could pretend to understand Daniel Drew 1 who could
fail to appreciate the humors of Wall .Street ] The controller
of the "pool " had actually lent the money of the " pool " to
one of the members of the " pool," to enable him to buy up
the stock of the " pool " ; and having thus quietly saddled
him with it, the controller proceeded to divide the profits,
and calmly rrtumed to the victim a portion of his own money
as his share of the proceeds. Yet, strange to say, Mr.
wholly failed to set- the humorous side of the transaction, and
actually feigned great indignation.
This, however, was a mere sportive interlude between the
A CHAPTER OF ERIE. 17
graver scenes of the drama. The real conflict was now im-
pending. Commodore Vanderbilt stretched out his hand to
grasp Erie. Erie was to be isolated and shut up within the
limits of New York ; it was to be given over, bound hand and
foot, to the'lord of the Central. To perfect this programme,
the representatives of all the competing lines met, and a prop-
osition was submitted to the Erie party looking to a practi-
cal consolidation on certain terms of the Pennsylvania Central,
the Erie, and the New York Central, and a division among the
contracting parties of all the earnings from the New York
City travel. A new illustration was thus to be afforded, at
the expense of the trade and travel to and from the heart of
a continent, of George Stephenson's famous aphorism, that
where combination is possible competition is impossible. The
Erie party, however, represented that their road earned more
than half of the fund of which they were to receive only one
third. They remonstrated and proposed modifications, but
their opponents were inexorable. The terms were too hard ;
the conference led to no result ; a ruinous competition seemed
impending as the alternative to a fierce war of doubtful issue.
Both parties now retired to their camps, and mustered their
forces in preparation for the first overt act of hostility. They
had not long to wait.
Vanderbilt was not accustomed to failure, and in this case
the sense of treachery, the bitter consciousness of having
been outwitted in the presence of all Wall Street, gave a pe-
culiar sting to the rebuff. A long succession of victories had
intensified his natural arrogance, and he was by no means dis-
posed, even apart from the failure of his cherished plans, to
sit down and nurse an impotent wrath in presence of an in-
jured prestige. Foiled in intrigue, he must now have recourse
to his favorite weapon, the brute force of his millions. He
therefore prepared to go out into Wall Street in his might,
and to make himself master of the Erie, as before he had
made himself master of .the Hudson River road. The task
in itself was one of magnitude. The volume of stock was
immense ; all of it was upon the street, and the necessary ex-
B
18 A CHAPTER OF ERIE.
peuditure involved many millions of dollars. The peculiar
difficulty of the task, however, lay in the fact that it had to
be undertaken in the face of antagonists so bold, so subtle, so
unscrupulous, so thoroughly acquainted with Erie, as well as
so familiar with all the devices and tricks of fence of Wall
Street, as were those who now stood ready to take up the
gage which the Commodore so arrogantly threw down.
The first open hostilities took place on the 17th of Feb-
ruary. For some time Wall Street had been agitated with
forebodings of the coming hostilities, but not until that day
was recourse had to the courts. Vanderbilt had two ends in
view when he sought to avail himself of the processes of law.
In the first place, Drew's long connection with Erie, and espe-
cially the unsettled transactions arising out of the famous
corner of 1866, afforded admirable ground for annoying offen-
sive operations ; and, in the second place, these very proceed-
ings, by throwing his opponent on the defensive, afforded an
excellent cover for Vanderbilt's own transactions in Wall
Street. It was essential to his success to corner Drew, but to
corner Drew at all was not easy, and to corner him in Erie
was difficult indeed. Very recent experiences, of which Van-
derbilt was fully informed, no less than the memories of 1866,
had fully warned the public how manifold and ingenious were
the expedients through which the cunning treasurer furnished
himself with Erie, when the exigencies of his position de-
manded fresh supplies. It was, therefore, very necessary for
Vanderbilt that he should, while buying Erie with one hand
in Wall Street, with the other close, so far as he could, that
apparently inexhaustible spring from which such generous
supplies of new stock were wont to flow. Accordingly, on
the 17th of February, Mr. Frank Work, the only remaining
representative of the Vanderbilt faction in the Erie direction,
arc(iiii|i;iiiic<l by Mr. Vandcrbilt's attorneys, Messrs. Rapallo
and Spenser, made his appearance before Judge Barnard, of
the Supreme Court of New York, then sitting in chambers,
and applied for an injunction against Treasurer Drew and his
brother directors, of the Erie Railway, restraining them from
A CHAPTER OF ERIE. 19
the payment of interest or principal of the tnree and a half
millions borrowed of the treasurer in 1866, as well as from
releasing Drew from any liability or cause of action the com-
pany might have against him, pending an investigation of his
accounts as treasurer ; on the other hand, Drew was to be en-
joined from taking any legal steps towards compelling a settle-
ment. A temporary injunction was granted in accordance
with the petition, and a further hearing was assigned for the
21st. Two days later, however, on the 19th of the month,
without waiting for the result of the first attack, the same
attorneys appeared again before Judge Barnard, and now in
the name of the people, acting through the Attorney-General,
petitioned for the removal from office of Treasurer Drew. The
papers in the case set forth some of the difficulties which be-
set the Commodore, and exposed the existence of a new foun-
tain of Erie stock. It appeared that there was a recently en-
acted statute of New York which authorized any railroad com-
pany to create and issue its own stock in exchange for the
stock of any other road under lease to it. The petition then
alleged that Mr. Drew and certain of his brother directors,
had quietly possessed themselves of a worthless road connect-
ing with the Erie, and called the Buffalo, Bradford, & Pittsburg
Kailroad, and had then, as occasion and their own exigencies
required, proceeded to supply themselves with whatever Erie
stock they wanted, by leasing their own road to the road of
which they were directors, and then creating stock and issuing
it to themselves, in exchange, under the authority vested in
them by law. The uncxmtradicted history of this transaction,
as subsequently set forth on the very doubtful authority of
a leading Erie director, affords, indeed, a most happy illustra-
tion of brilliant railroad financiering, whether true in this
case or not. The road, it was stated, cost the purchasers, as
financiers, some $ 250,000 ; as proprietors, they then issued
in its name bonds for two million dollars, payable to one of
themselves, who now figured as trustee. This person, then,
shifting his character, drew up, as counsel for both parties, a
contract leasing this road to the Erie Railway for four hun-
20 A CHAPTER OF ERIK.
dred and ninety-nine years, the Erie agreeing to assume the
bonds ; reappearing in their original character of Erie direc-
tors, these gentlemen then ratified the lease, and thereafter
it only remained for them to relapse into the role of financiers,
and to divide the proceeds. All this was happily accomplished,
and the Erie Railway lost and some one gained $ 14:0,000 a
year by the bargain. The skilful actors in this much-shift-
ing drama probably proceeded on the familiar theory that
exchange is no robbery ; and the expedient was certainly
ingenious.
Such is the story of this proceeding as told under oath by
one who must have known the whole truth. That the facts
are correctly set forth by no means follows. Indeed, many
parts of this narrative are open to this criticism. The evi-
dence on which it is founded may be sufficiently clear, but un-
fortunately the witnesses are not seldom wholly unworthy of
credence. The formality of an oath may accompany plausible
statements without giving to them the slightest additional
weight. In this case the sworn allegations were made, and
they implicated certain respectable men ; it can only be said
of them that their falsehood is not patent, and that they are
thoroughly in character with other transactions known to be
true. If the facts of the case were correctly stated, or had in
them an element of truth, it is difficult to see what fiduciary
relation these directors, as trustees, did not violate. How-
ever this may be, it is indisputable that the supply of Erie on
the market had been largely increased from the source indi-
cated, and Commodore Vanderbilt naturally desired to put
some limit to the amount of the stock in existence, a majority
of which he sought to control. Accordingly it was now fur-
ther ordered by Mr. Justice Barnard that Mr. Drew should
show cause mi the 21st why the prayer of the petitioner
should not be granted, and meanwhile he was temporarily
su.s]icnili-(l from his position as treasurer and director.
It WHS not until the 3d of March, however, that any deci-
sive action was taken by Judge Barnard on either of the peti-
tions before him. Even then, that in the name of the Attor-
A CHAPTER OF KRIK. 21
ney-General was postponed for final hearing until the 10th of
the month ; but, on the application of Work, an injunction was
issued restraining the Erie board from any new issue of capital
stock, by conversion of bonds or otherwise, in addition to the
251,058 shares appearing in the previous reports of the road,
and forbidding the guaranty by the Erie of the bonds of any
connecting line of road. While this last provision of the
order was calculated to furnish food for thought to the Boston
party, matter for meditation was supplied to Mr. Drew by
other clauses, which specially forbade him, his agents, attor-
neys, or brokers, to have any transactions in Erie, or fulfil any
of his contracts already entered into, until he had returned to
the company sixty-eight thousand shares of capital stock, al-
leged to be the number involved in the unsettled transaction
of 1866, and the more recent Buffalo, Bradford, & Pittsburg
exchange. A final hearing was fixed for the 10th of March on
both injunctions.
Things certainly did not now promise well for Treasurer
Drew and the bear party. Vanderbilt and the bulls seemed
to arrange everything to meet their own views ; apparently
they had but to ask and it was granted. If any virtue ex-
isted in the processes of law, if any authority was wielded by
a New York court, it now seemed as if the very head of the
bear faction must needs be converted into a bull in his own
despite, and to his manifest ruin. He, in this hour of his
trial, was to be forced by his triumphant opponent to make
Erie scarce by returning into its treasury sixty-eight thousand
shares, one fourth of its whole capital stock of every de-
scription. So far from manufacturing fresh Erie and pouring
it into the street, he was to be cornered by a writ, and forced
to work his own ruin in obedience to an injunction. Appear-
ances are, however, proverbially deceptive, and all depended on
the assumption that some virtue did exist in the processes of
law, and that some authority was wielded by a New York
court. In spite of the threatening aspect of his affairs, it
was very evident that the nerves of Mr. Drew and his asso-
ciates were not seriously affected. Wall Street watched him
22 A CHAPTER OF ERIE.
with curiosity not uniniugled with alarm ; for this was a con-
flict of Titans. Hedged all around with orders of the court,
suspended, enjoined, and threatened with all manner of un-
heard-of processes, with Vanderbilt's wealth standing like a
lion in his path, and all Wall Street ready to turn upon him
and rend him, in presence of all these accumulated terrors
of the court-room and of the exchange, the Speculative
Director was not less speculative than was his wont. He
seemed rushing on destruction. Day after day he pursued the
same " short " * tactics ; contract after contract was put out for
the future delivery of stock at current prices, and this, too, in
the face of a continually rising market. Evidently he did not
yet consider himself at the end of his resources.
It was equally evident, however, that he had not much time
to lose. It was now the 3d of March, and the anticipated
" corner " might be looked for about the 10th. As usual,
some light skirmishing took place as a prelude to the heavy
shock of decisive battle. The Erie party very freely and
openly expressed a decided lack of respect, and something
approaching contempt, for the purity of that particular frag-
ment of the judicial ermine which was supposed to adorn the
person of Mr. Justice Barnard. They did not pretend to con-
ceal their conviction that this magistrate was a piece of the
Vandcrbilt property, and they very plainly announced their
intention of seeking for justice elsewhere. With this end in
view they betook themselves to their own town of Bingham-
ton, in the county of Broome, where they duly presented
themselves before Mr. Justice Balcom, of the Supreme Court.
The existing judicial system of New York divides the State
into eight distinct districts, each of which has an independent
Supreme Court of four judges, elected by the citizens of that
district. The first district alone enjoys five judges, the fifth
being the Judge Barnard already referred to. These local
jii'lgea, however, are clothed with certain equity powers in
actions commenced before them, which run throughout the
An operator is snid to bo "short" when he IKIS agreed to deliver that
which he has not got. He wngers, in fact, on n full.
A CHAPTER OF ERIE. 23
State. As one subject of litigation, therefore, might affect
many individuals, each of whom might initiate legal proceed-
ings before any of the thirty-three judges ; which judge,
again, might forbid proceedings before any or all of the other
judges, or issue a stay of proceedings in suits already com-
menced, and then proceed to make orders, to consolidate
actions, and to issue process for contempt, it was not im-
probable that, sooner or later, strange and disgraceful conflicts
of authority would arise, and that the law would fall into con-
tempt. Such a system can, in fact, be sustained only so long-
as co-ordinate judges use the delicate powers of equity with a
careful regard to private rights and the dignity of the law,
and therefore, more than any which has ever been devised,
it calls for a high average of learning, dignity, and personal
character in the occupants of the bench. When, therefore,
the ermine of the judge is flung into the kennel of party
politics and becomes a part of the spoils of political victory ;
when by any chance partisanship, brutality, and corruption
become the qualities which especially recommend the success-
ful aspirant to judicial honors, then the system described will
be found to furnish peculiar facilities for the display of these
characteristics.
Taking advantage of the occasion this system, so simple in
theory, so complicated in practice, afforded for creating com-
plications by obtaining conflicting orders from co-ordinate
judges, the Erie party broke ground in a new suit. The in-
junction was no sooner asked of Judge Balcom than it was
granted, and Mr. Frank Work, the Attorney-General, and all
other parties litigant, were directed to show cause at Cortland-
ville on the 7th of March ; and, meanwhile, Mr. Director
Work, accused of being a spy in the councils of Erie, was
temporarily suspended from his position, and all proceedings
in the suits commenced before Judge Barnard were stayed.
The moment, however, this order became known in New York,
a new suit was commenced by the Vanderbilt interest in the
name of Richard Schell ; an urban judge cried check to the
move of the rural judge, by forbidding any meeting of the
24 A CHAPTER OF ERIE.
Erie board, or the transaction of any business by it, unless
Director Work was at full liberty to participate therein. The
first move of the Drew faction did not seem likely to result in
any signal advantage to its car.se.
All this, however, was mere skirmishing, and now the deci-
sive engagement was near at hand. The plans of the Erie
ring were matured, and, if Commodore Vanderbilt wanted the
stock of their road, they were prepared to let him have all he
desired. As usual the Erie treasury was at this time deficient
in funds. As usual, also, Daniel Drew stood ready to advance
all the funds required on proper security. One kind of se-
curity, and only one, the company was disposed at this time to
offer, its convertible bonds under a pledge of conversion.
The company could not issue stock outright, in any case, at
less than par ; its bonds bore interest, and were useless on the
street ; an issue of convertible bonds was another name for
an issue of stock to be sold at market rates. The treasurer
readily agreed to find a purchaser, and, in fact, he himself
stood just then in pressing need of some scores of thousands
of shares. Already at the meeting of the Board of Directors,
on the 19th of February, a very deceptive account of the con-
dition of the road, jockied out of the general superintendent,
had been read nnd made public ; the increased depot facilities,
the projected double track, and the everlasting steel rails, had
been made to do vigorous duty ; and the board had, in the
vuguest and most general language conceivable, clothed the
Executive Committee with full power in the premises.* Im-
This vote of the Board of Directors of the Erie I!:iihv:iy Company was
the -ole Miithority under which, without further consultation with the board,
the stock of the road wns increased four hundred and fifty thousand shares.
It wa worded a* follows:
" It l>ein<; necessary for the finishing, completing, nnd operating the road of
tin- company, t<> borrow money,
" Retoli-ed, That under the provisions of the statute authorizing the loan of
money tor such purposes, the Executive Committee be :iuthori/ed to borrow
nuch sum ns may be necessary, anil to issue therefor Mich security MS is pro-
vided for in such cases by the laws of tliis State; and that the president and
secretary be authori/cd. under the seal of the company, to execute all needful
nnd proper agreements and undertaking for -uch purpose."
The law referred to was Subdivision 10 of Section 28 of the General Rail-
A CHAPTER OF ERIE. 25
mediately after the Board of Directors adjourned a meeting
of the Executive Committee was held, and a vote to issue at
once convertible bonds for ten millions gave a meaning to the
very ambiguous language of' the directors' resolve ; and ttms,
when apparently on the very threshold of his final triumph,
this mighty mass of one hundred thousand shares of new
stock was hanging like an avalanche over the head of Vander-
bilt.
The Executive Committee had voted to sell the entire
amount of these bonds at not less than 72. Five millions
were placed upon the market at once, and Mr. Drew's broker
became the purchaser, Mr. Drew giving him a written guar-
anty against loss, and being entitled to any profit. It
was all done in ten minutes after the committee adjourned, -
the bonds issued, their conversion into stock demanded and
complied with, and certificates for fifty thousand shares depos-
ited in the broker's safe, subject to the orders of Daniel Drew.
There they remained until the 29th, when they were issued,
on his requisition, to certain others of that gentleman's army
of brokers, much as ammunition might be issued before a gen-
eral engagement. Three days later came the Barnard injunc-
tion, and Erie suddenly rose in the market. Then, it was
determined to bring up the reserves and let the eager bulls
have the other five millions. The history of this second issue
road Act of 1850, which authorized the railroad companies to which it applied
" to borrow such sums of money as may be necessary for completing, finishing,
and operating the road " ; to mortgage their roads as security for such loans;
and to " confer on any holder of any bond issued for money borrowed as afore-
said, the right to convert the principal due or owing thereon into stock of said
company, at any time, not exceeding ten years from the date of the bond,
under such regulations as the directors may see fit to adopt."
It was an open question whether this law applied at all to the Erie Railway
Company, the amount of the capital stock of which was otherwise regulated
bylaw; the bonds were issued and sold, not as bonds, but with a distinct
pledge of immediate conversion into stock, and as an indirect way of doing
that, the direct doing of which was clearly illegal; finally, as a matter of fact,
the proceeds of these bonds were not used for "completing, finishing, or oper-
ating the road." As a matter of law the question is of no interest outside of
New York, and is as yet undecided there. Of the good faith and morality of
the transaction but one opinion exists anywhere.
2
26 A CHAPTER OF ERIE.
was, in all respects, an episode worthy of Erie, and deserves
minute relation. It was decided upon on the 3d, but before the
bonds were converted Barnard's injunction had been served on
every one connected with the Erie Road or with Daniel Drew.
The 10th was the return day of the writ, but the Erie opera-
tors needed even less time for their deliberations. Monday,
the 9th, was settled upon as the day upon which to defeat the
impending "corner." The night of Saturday, the 7th, was a
busy one in the Erie camp. While one set of counsel and
clerks were preparing affidavits and prayers for strange writs
and injunctions, the enjoined vice-president of the road was busy
at home signing certificates of stock, to be ready for instant
use in case a modification of the injunction could be obtained,
and another set of counsel was in immediate attendance on
the leaders themselves*. Mr. Groesbeck, the chief of the Drew
brokers, being himself enjoined, secured elsewhere, after one
or two failures, a purchaser of the bonds, and took him to the
house of the Erie counsel, where Drew and other directors and
brokers then were. There the terms of the nominal sale were
agreed upon, and a contract was drawn up transferring the
bonds to this man of straw, who in return gave Mr. Drew a
full power of attorney to convert or otherwise dispose of the
bonds, in the form of a promissory note for their purchase-
money ; Mr. Groesbeck, meanwhile, with the fear of injunctions
before his eyes, prudently withdrew into the next room, and
amused himself by looking at the curiosities and conversing
with the lawyers' young gentlemen. After the contract was
closed, the purchaser was asked to sign an affidavit setting
forth his ownership of the bonds and the refusal of the cor-
poration to convert them into stock in compliance with their
contract, upon which affidavit it was in contemplation to seek
from some justice a writ of w //'/</,//>/* to compel the Erie
Railway to convert them, the necessary papers for such a pro-
ceeding being then in course of preparation elsewhere. This
flu 1 |imvliascr di'i-liiii'd to do. One of the lawyers present
tlu'ii said: "Well, you can make the demand now; here is
Mr. Drew, the treasurer of the company, and Mr. Gould, one
A CHAPTER OF ERIE. 27
of the Executive Committee." In accordance with this sug-
gestion a demand for the stock was then made, and, of course,
at once refused ; thereupon the scruples of the man of straw
being all removed, the desired affidavit was signed. All busi-
ness now being finished, the parties separated ; the legal
papers were ready, the convertible bonds had been disposed
of, and the certificates of stock, for which they were to be
exchanged, were signed in blank and ready for delivery.
Early Monday morning the Erie people were at work. Mr.
Drew, the director and treasurer, had agreed to sell on that
day fifty thousand shares of the stock, at 80, to the firms of
which Mr. Fisk and Mr. Gould were members, these gentle-
men also being Erie directors and members of the Executive
Committee. The new certificates, made out in the names of
these firms on Saturday night, were in the hands of the sec-
retary of the company, who was strictly enjoined from allow-
ing their issue. On Monday morning this official directed an
employee of the road to carry these books of certificates from
the West Street office of the company to the transfer clerk in
Pine Street, and there to deliver them carefully. The mes-
senger left the room, but immediately returned empty-handed,
and informed the astonished secretary that Mr. Fisk had met
him outside the door, taken from him the books of unissued
certificates, and " run away with them." It was true ; one.
essential step towards conversion had been taken ; the certifi-
cates of stock were beyond the control of an injunction. Dur-
ing the afternoon of the same day the convertible bonds were
found upon the secretary's desk, where they had been placed
liy Mr. Belden, the partner in business of Director James Fisk,
Jr. : the certificates were next seen in Broad Street.
Before launching the bolt thus provided, the conspirators
had considered it not unadvisable to cover their proceedings,
if they could, with some form of law. This probably was
looked upon as an idle ceremony, but it could do no harm ;
and perhaps their next step was dictated by what has been
called "a decent respect for the opinions of mankind," com-
bined with a profound contempt for judges f.nd courts of
law.
28 A CHAPTER OF ERIE.
Early on the morning of the 9th Judge Gilbert, a highly
respected magistrate of the Second Judicial District, residing
in Brooklyn, was waited upon by one of the Erie counsel, who
desired to initiate before him a new suit in the Erie litigation,
this time, in the name of the Saturday evening purchaser of
bonds and maker of affidavits. A writ of mandamus was asked
for. This writ clearly did not lie in such a case ; the magistrate
very properly declin?d to grant it, and the only wonder is that
counsel should have applied for it. New counsel were then
hurriedly summoned, and a new petition, in a fresh name, was
presented. This petition was for an injunction, in the name
of Belden, the partner of Mr. Fisk, and the documents then
and there presented were probably as eloquent an exposure as
could possibly have been penned of the lamentable condition
into which the once honored judiciary of New York had fallen.
The petition alleged that some time in February certain per-
sons, among whom was especially named George G. Barnard,
the justice of the Supreme Court of the First District,
had entered into a combination to speculate in the stock of
the Erie Railway, and to use the process of the courts for the
purpose of aiding their speculation ; " and that, in further-
ance of the plans of this combination," the actions in Work's
name had been commenced before" Barnard, who, the counsel
asserted, was then issuing injunctions at tb.9 rate of half a
dozen a day. It is impossible by any criticism to do justice
to such audacity as this : the dumb silence of amazement is
the only fitting commentary. Apparently, however, nothing
that could be stated of his colleague across the river exeeedeil
the belief of Judge Gilbert, for, after some trifling delays and
a few objections on the part of the judge to the form of the
desired order, the Erie counsel hurried away, and returned to
New York with a new injunction, restraining all the parties to
all the other suits from further proceedings, and from doing
any acts in " furthernneo of said conspiracy " ; in one para-
graph onli-rinir the Krie directors, except Work, to continue
in tin- ilisrlijii-L:-' 1 <>f their duties, in direct deti.-mer of the in-
junction of one judiri'. :mI in the next, with an equal disre-
A CHAPTER OF ERIE. 29
gard of another judge, forbidding the directors to desist from
converting bonds into stock. Judge Gilbert having, a few
hours before signing this wonderful order, refused to issue a
writ of mandamus, it may be proper to add that the process
of equity here resorted to, compelling the performance of
various acts, is of recent invention, and is known as a "man-
datory injunction."
All was now ready. The Drew party were enjoined in
every direction. One magistrate had forbidden them to move,
and another magistrate had ordered them not to stand still.
If the Erie board held meetings and transacted business, it
violated one injunction ; if it abstained from doing so, it vio-
lated another. By the further conversion of bonds into stock
pains and penalties would be incurred at the hands of Judge
Barnard ; the refusal to convert would be an act of disobedi-
ence to Judge Gilbert. Strategically considered, the position
could not be improved, and Mr. Drew and his friends were
not the men to let the golden moment escape them. At once,
before a new injunction could be obtained, even in New York,
fifty thousand shares of new Erie stock were flung upon the
market. That day Erie was buoyant, Vanderbilt was pur-
chasing. His agents caught at the new stock as eagerly as at
the old, and the whole of it was absorbed before its origin
was suspected, and almost without a falter in the price. Then
the fresh certificates appeared, and the truth became known.
Erie had that day opened at 80 and risen rapidly to 83, while
its rise even to par was predicted ; suddenly it faltered, fell
oft", and then dropped suddenly to 71. Wall Street had never
been subjected to a greater shock, and the market reeled to and
fro like a drunken man between these giants, as they hurled
about shares by the tens of thousands, and money by the mil-
lion. When night put an end to the conflict, Erie stood at
78, the shock of battle was over, and the astonished brokers
drew breath as they waited for the events of the morrow.
The attempted " corner " was a failure, and Drew was victo-
rious, no doubt existed on that point. The question now
was, could Vanderbilt sustain himself? In spite of all his
30 A CHAPTER OF ERIE.
wealth, must he not go down before his cunning oppo-
nent ] -"
The morning of the llth found the Erie leaders still trans-
acting business at the office of the corporation in West Street.
It would seem that these gentlemen, in spite of the glaring
contempt for the process of the courts of which they had been
guilty, had made no arrangements for an orderly retreat be-
yond the jurisdiction of the tribunals they had set at defiance.
They were speedily roused from their real or affected tranquil-
lity by trustworthy intelligence that processes for contempt
were already issued against them, and that their only chance
of escape from incarceration lay in precipitate flight. At ten
o'clock the astonished police saw a throng of panic-stricken
railway directors looking more like a frightened gang of
thieves, disturbed in the division of their plunder, than like
the wealthy representatives of a great corporation rush
headlong from the doors of the Erie office, and dash off in the
direction of the Jersey ferry. In their hands were packages
and files of papers, and their pockets were crammed with
assets and securities. One individual bore away with him in
a hackney-coach bales containing six millions of dollars in
greenbacks. Other members of the board followed under
cover of the night ; some of them, not daring to expose them-
selves to the publicity of a ferry, attempted to cross in open
boats concealed by the darkness and a March fog. Two di-
rectors, who lingered, were arrested ; but a majority of the Ex-
ecutive Committee collected at the Erie Station in Jersey City,
and there, free from any apprehension of Judge Barnard's
pursuing wrath, proceeded to the transaction of business.
Meanwhile, on the other side of the river, Vanderbilt was
:-tniirL'liiig in the toils. As usual in these Wall Street opera-
tions, there was a grim humor in the situation. Had Vandcr-
bilt failed to sustain the market, u financial collapse and panic
must have ensued which would have sent him to the wall. He
h;id -n-tained it, and had absorlied a hundred thousand .shares
of I'.i ie. Thus when I >n>w retired to Jersey City he carried
witli him seven millions of his opponent's money, and the
A CHAPTER OF ERIE. 31
Commodore had freely supplied the enemy with the sinews of
war. He had grasped at Erie for his own sake, and now his
opponents derisively promised to rehabilitate and vivify the
old road with the money he had furnished them, so as more ef-
fectually to compete with the lines which he already possessed.
Nor was this all. Had they done as they loudly claimed
they meant to do, Vanderbilt might have hugged himself in
the faith that, after all, it was but a question of time, and the
prize would come to him in the end. He, however, knew well
enough that the most pressing need of the Erie people was
money with which to fight him. With this he had now fur-
nished them abundantly, and he must have felt that no scru-
ples would prevent their use of it.
Vanderbilt had, however, little leisure to devote to the en-
joyment of the humorous side of his position. The situation
was alarming. His opponents had carried with them in their
flight seven millions in currency, which were withdrawn from
circulation. An artificial stringency was thus created in Wall
Street, and, while money rose, stocks fell, and unusual mar-
gins were called in. Vanderbilt was carrying a fearful load,
and the least want of confidence, the faintest sign of faltering,
might well bring on a crash. He already had a hundred
thousand shares of Erie, not one of which he could sell. He
was liable at any time to be called upon to carry as much
more as his opponents, skilled by long practice in the manu-
facture of the article, might see fit to produce. Opposed to
him were men who scrupled at nothing, and who knew every
in and out of the money market, With every look and every
gesture anxiously scrutinized, a position more trying than his
can hardly be conceived. It is not known from what source
ho drew the vast sums which enabled him to surmount his
difficulties with such apparent ease. His nerve, however,
stood him in at least as good stead as his financial resources.
Like a great general, in the hour of trial he inspired confi-
dence. While fighting for life he could " talk horse " and play
whist. The manner in which he then emerged from his trou-
bles, serene and confident, was as extraordinary as the finan-
cial resources he commanded.
32 A CHAPTER OF ERIE.
Meanwhile, before turning to the tide of battle, which now
swept away from the courts of law into the halls of legisla-
tion, there are two matters to be disposed of; the division of
the spoils is to be recounted, and the old and useless lumber
of conflict must be cleared away. The division of profits
accruing to Mr. Treasurer Drew and his associate directors,
acting as individuals, was a fit conclusion to the stock issue
just described. The bonds for five millions, after their con-
version, realized nearly four millions of dollars, of which
$ 3,625,000 passed into the treasury of the company. The
trustees of the stockholders had therefore in this case secured
a profit for some one of $375,000. Confidence in the good
faith of one's kind is very commendable, but possession is
nine points of the law. Mr. James Fisk, Jr., through whom
the sales were mainly effected, declined to make any payments
in excess of the $ 3,625,000, until a division of profits was
agreed upon. It seems that, by virtue of a paper signed by
Mr. Drew as early as the 19th of February, Gould, Fisk, and
others were entitled to one half the profits he should make
" in certain transactions." What these transactions were, or
whether the official action of Directors Gould and Fisk was in
any way influenced by the signing of this document, does not
appear. Mr. Fisk now gave Mr. Drew, in lieu of cash, his
uncertified check for the surplus $ 375,000 remaining from
this transaction, with stock as collateral amounting to about
the half of that sum. With this settlement, and the redemp-
tion of the collateral, Mr. Drew was fain to be content.
Seven months afterwards he still retained possession of the
uncertified check, in the payment of which, if presented, he
seemed to entertain no great confidence. Everything, how-
ever, showed conclusively the advantage of operating from
interior lines. While the Krie treasury was <>n<v more replete,
three of the persons who had been mainly Instrumental in
filling it ha<l in it suH'rivd in the transaction. The tivasurer
was richer by $ 180,000 directly, and he himself only knew
by how much moro incidentally. Tn like manner his faithful
adjutants had profited to an amount us much exceeding
A CHAPTER OF ERIE. 33
$60,000 each as their sagacity had led them to provide
for.
The iiseless lumber of conflict, consisting chiefly of the nu-
merous judges of the Supreme Court of New York and their
conflicting processes of law, must next be disposed of. Judge
Gilbert was soon out of the field. His process had done its
work, and the Erie counsellors hardly deigned upon the 18th,
which was the day fixed for showing cause, to go over to
Brooklyn and listen to indignant denunciations on the part of
their Vanderbilt brethren, as, with a very halting explanation
of his hasty action, Judge Gilbert peremptorily denied the
request for further delay, and refused to continue his injunc-
tion. It is due to this magistrate to say, that he is one of the
most respected in the State of New York ; and when that is
said, much is implied in the facts already stated as to his
opinion of some of his brother judges. Judicial demoraliza-
tion can go no further. If Judge Gilbert was out of the fray,
however, Judge. Barnard was not. The wrath and indignation
of this curious product of a system of elective judiciary can-
not be described, nor were they capable of utterance. They
took strange forms of expression. At one time he sent all the
papers relating to the alleged conspiracy down to the grand
jury, and apparently sought thereby to indicate that he courted
an investigation. The prosecuting attorneys, however, better
instructed in the law, seem to have doubted whether a matter
which was the proper subject for a legislative impeachment
could satisfactorily be brought before a petty jury on an in-
dictment, and did not pursue the investigation. Then, at a
later day, the judge mysteriously intimated that the belief
of both the counsel and the affiants in the truth of the
charges contained in the complaint before Judge Gilbert was
then a matter of investigation before a criminal body, to see
whether or not it constituted perjury. Finally, a heavy col-
lection of counter-affidavits piirified the judicial skirts from
their taint, but not until fresh and more aggravated grounds
for indignation had presented themselves. It is unnecessary
to go into the details of the strange and revolting scenes which
2* c
34 A CHAPTER OF ERIE.
the next few months witnessed in the rooms of the Supreme
Court. They read like some monstrous pai'ody of the forms
of law ; some Saturnalia of bench and bar. The magistrate
became more partisan than were the paid advocates before
him, and all seemed to vie with one another in their efforts to
bring their common profession into public contempt. Day
and night detectives in the pay of suitors dogged the steps of
the magistrate, and their sworn affidavits, filed in his own
court, sought to implicate him in an attempt to kidnap Drew
by means of armed ruffians, and to bring the fugitive by vio-
lence within reach of his process. Then, in retaliation, the
judge openly avowed from the bench that his spies had pene-
trated into the consultations of the litigants, and he aston-
ished a witness by angrily interrogating him as to an affidavit
reflecting upon himself, to which that witness had declined to
make oath.* At one moment he wept, as counsel detailed
* Question by the Court to Mr. Belden. Did not Mr. Field send you, two or
three days ago, an affidavit rilled with gross abuse of me, and you declined to
sign it?
Wittiest (producing a paper). This is the affidavit. I said I would rather
not sign it
Question by Mr. Field. Did you show that affidavit to Judge Barnard?
A. I did not.
Q. How, then, did he learn of its being sent to you?
Judge Barnard. He does not know, and never will in this world. I am
now doing as other people have been doing; I have been followed by de-
tectives for four or five weeks all over the city, and now I am following
others
Q. Was it not stated openly to you, in a law office below Chambers
Street, that you must prevent, at all hazards, Judge Barnard from hearing
this case?
A. In hearing winch case, Judge? I do not know which case you refer to.
Q. The case before me
Q. When you were present at the Metropolitan Hotel, did not one of flic
counsel, who was there, when he heard the complaint read, say tlu.t it was a
shame to put Judge Harnanl in as a defendant, and did not Dudley Field say,
that by doing so he could frighten him off the bench and overawe the bal-
ance ?
A. I do not remember anything of it.
Q. See if one of the counsel did not tell you that it was a shame to put
him in as one of the defendants, and whether another of the counsel did not
tell you that that was the only way to scare him off the bench, and that you
could overawe the balance of the judges?
A I don't remember nnyMiing lir-ini; snid nbont overawing nny ona
A CHAPTER OF ERIE. 35
before him the story of his own grievances and the insults to
which he had been subjected, and then again he vindicated
his purity by select specimens of pothouse rhetoric.* When
the Vanderbilt counsel moved to fix a day on which their
opponents should show cause why a receiver of the proceeds
of the last over-issue of stock should not be appointed, the
judge astonished the petitioners by outstripping their eager-
ness, and appointing Vanderbilt's own son-in-law receiver
on the spot. Then followed a fierce altercation in court, in
which bench and bar took equal part, and which closed with
the not unusual threat of impeaching the presiding judge.t
* " In this wide cify of a million or a million and a half of inhabitants,
where a man can be hired for five dollars to swear any man's life away, there
is not one so base as to come upon this stand and swear that I had anything to
do with any Conspiracy.''
t The matter before the court, regarding the bail of the contumacious di-
rectors, being disposed of, Mr. Clark, of the Vanderbilt counsel, rose and
referred to another matter, which proved to be no less than an application for
an order appointing a receiver of all the property, amounting to millions of
dollars, which had been issued in violation of the injunction.
Mr. Fidd. This is an ex parte application and we do not care anything
about it. The worse you make the case the better it will be in the end.
Mr. RdjHillo. I ask your honor to make this order returnable on Monday
morning.
The Court. I do not think it necessary to wait till Monday morning. You
had better have it returnable forthwith.
Mr. Clurk. We ask that that paper (the order to show cause instantly) be
served upon Mr. Diven, who is now in court.
The order was then served on an individual director then in court, and Mr.
Clark moved the appointment of the receiver.
Judge Barnard. Is there any objection to this application?
Mr. Field sat smilingly in his chair, which was tipped back on its rear legs,
and looked composed in ths extreme, but made no response to the inquiry of
the judge.
77(e Couit. Draw up an order appointing George A. Osgood receiver of
this fund, with security in the sum of S 1,000,000, and requiring these defend-
ants to appear before a referee in regard to the matter.
Mr. Field ( rising). The court will understand that this was ex parte.
Mr. Clttrk. We have given notice, and therefore this is not ex parte.
Mr. Fitld. There has been no notice given; there has been no service.
This is ex parte, and now if any one will enter that order, I want to see him
doit.
Mr. FvUerton (excitedly and earnestly). I dare enter that order, and will
do it with your honor's permission.
Mr. Field. May it please the court, there have been no papers submitted
36 A CHAPTER OF ERIE.
When Mr. John B. Haskin was placed upon the stand, there
ensued a scene which Barnard himself not inaptly character-
ized the next day as " outrageous and scandalous, and insult-
ing to the court." Upon this occasion the late Mr. James T.
Brady seemed to be on the verge of a personal collision with
the witness in open court ; the purity of the presiding magis-
trate was impugned, his venality openly implied through a
long cross-examination, and the witness acknowledged that he
had himself in the course of his career undertaken for money
to influence the mind of the judge privately " on the side
of right." All the scandals of the practice of the law, and
the private immoralities of lawyers, were .dragged into the
broad light of day ; the whole system of favored counsel,
of private argument, of referees, and of unblushing extortion,
was freely discussed.* On a subsequent day the judge him-
in this case, and no affidavits presented on which this order is made. You
have made it upon blank paper, and in complete absence of any regular pro-
ceeding whatever. I wish to say, however, that just so sure as this proceed-
ing is being taken in this form, a day of reckoning will as surely come, when
these parties will have to answer before some one for this action.
Mi: Fullerton (in a decidedly animated tone). Let that day come, and
there will be a reckoning that you will have to hear, and so will every one of
those men who have been engaged in this transaction.
* John B. Haskin was called as the next witness for the people, and exam-
ined by Mr. Clark, and testified that he was an attorney at law, and had prac-
tised about twenty-six veal's.
Quvttion by ,1/r. Chirk. Were you ever employed by Mr. Dudley Field,
professionally, prior to the 1st of March, or since?
A. I was applied to by Mr. Dudley Field, the attorney for Mr. Gould, on
the 6th or 6th of March last, to accept a retainer in this Erie Railroad contro-
versy, which I declined. I had never previous to that time been employed or
rc<|iicsted to act as counsel by Mr. Field.
Mr. Brady, "on his own responsibility," objected to this line of examina-
tion: lint after some discussion it was admitted, and the witness continued:
Mr. Dudley Field, on the morning of the 6th or 6th of March, called at my
oliicc, and desired to retain mo as counsel in this Erie controversy. 1 asked
him on which side, and he said," The Drew side." I asked him before whom,
and he said, before Judge Barnard. I replied that my intimacy had been very
great with Judge Barnard, and that I supposed he thought my influence as
associate in this case would assist his side of the litigation.
Q. What further was said?
A. He said that he desired me to accept a retainer in the case, and said
that if I would do so, it might be the means of a voiding serious trouble which
would take place in the legislature, as I was Judge Barnard's friend, and if I
A CHAPTER OF ERIE. 37
self made inquiries as to a visit of two of the directors to one
gentleman supposed to have peculiar influence over the jndi-
would get that injunction modified I might, as his friend, prevent the terrible
consequences which would result in this fight which was to take place, as
Judge Barnard would be impeached; I Jhen left him, and went into another
office. In a short time Dudley Field came back, and handed me this book
[producing a book], with his written modification of the injunction, as I be-
lieve, in his own handwriting, saying, "If you will get that signed by Judge
Barnard, I will give you five thousand dollars; if that sum is not sufficient, I
will make it more." I declined the offer; and having occasion to go to the
City Hall to see Judge Barnard, I went, and met him at the Astor House,
where he had gone with some friends, John R. Hackett, Mr. Thomson, one
of the directors of the Erie Railroad Company, and some others whom I do
not recollect. I told him incidentally of this application to me, and he said:
" Dudley Field must be a dirty fellow to apply to you for this modification in
this way, for lie applied to me in court this morning for this same modifica-
tion, and I refused to grant it."
Q. Did you see Dudley Field again?
A. I did not see him again.
Q. Did you accept the retainer?
A. I did not accept the retainer or undertake the service.
Cross-examination by Mr. James T. Brady.
Q. Well, Mr. Haskin, have you ever in your life been applied to by any-
body, to use your influence, personally or professionally, with Judge Barnard,
to accomplish any result whatever?
A. Yes, sir; I think I have.
Q. Personally?
A. Yes.
Q. Professionally?
A. Yes.
Q. To influence his action as a judge?
A. Well, no; not that.
Q. What, then?
A. Well, in cases where there were great interests at stake, to point out
to him certain objects that were entitled to consideration.
Ci. Did you ever agree or undertake to influence his action as a judge.
A. I might have done so on the side of right. What do you mean,
sir ?
Mr. Brady. well, you will understand what I mean, sir. Have you
never in all your life used your influence with Judgo Barnard to induce him
to make a decision in favor of some person in litigation whose cause you
espoused ?
A. I don't recollect any case of that kind.
Q. Will you swear that you have never done so?
A. I won't swear I did n't, because I might have done it in some case in
the number of years I have been acquainted with him.
Q. Did you ever receive any kind of reward, directly or indirectly, for
38 A CHAPTER OF ERIE.
cial mind, and evinced great familiarity with the negotiations
then carried on, and even showed some disposition to extend
using any species of influence, or promising to use any species of influence,
with Judge Barnard, or control or direct his action in any respect what-
ever?
A. \ have never received anything; no, sir, except my legitimate fees,
which I have received in references and so forth.
He then asked him ahout his connection with the Christy will case.
Witness said he was general counsel in that.
Q. How did you earn your fee?
Witness. I will not answer; it is none of your business; it is impertinent.
Mr. Clark interposed, and said it was irrelevant.
Mr. Brady. I want to show that Mr. Haskin received a fee for his in-
fluence with the judge to gain a decision at the General Term.
Mr. Haskin said there was a suit pending about the matter.
Mr. Brady repeated that when he went into the case he knew the hostility
with which he would be met. He was prepared for it. He had known some
of the men a great many years, and he had hitherto kept still. He would
repeat the question about the Christy will case.
Witness. I refuse to answer; it is none of your business.
Witness further on gave some testimony as to what he said to Judge Bar-
nard about the Merchants' Express Company case before that judge last sum-
mer; he (witness) was not a counsel in it, but when on a fishing excursion
last summer he was talking with the court about the law of the case. Ho
told the judge there were some cases in which a judge could not afford to do
a favor fora friend; I knew you were in the case, Mr. Brady; I told Judge
Barnard that the newspapers ware all down on the express monopoly.
Mr. Brady. Did you tell Judge Barnard in what cases a judge could
n fiord to do a favor for a friend! You say you told him there were some in
which a judge could not do a favor.
A. I did not say there were any.
The next day it was supposed that Mr. Field would be examined and the
court-room was crowded. Judge Barnard, however, declined to proceed anv
further, and ordered the evidence of the previous day to be stricken from the
record. He further stated that he had already been busily engaged during the
day in the other court-room, and did not intend to sit here to gratify imner-
tinent curiosity In regard to the examination of Mr. Field, ho (Mr.
Field) could make his affidavit ex partt, and would have the same publicity
given to his testimony MS had been given to that tnken yesterday.
Mr. Brady said he appeared this afternoon exclusively to attend to the
examination of Mr. Kiel '.. Of course be had had no notice on his side of the
<M-I- that flu-re hail been any conference between his honor and other eminent
gentlemen ns to what course should be taken. He bad come to take charge.
of Mr. Field's case, and MR regards whatever had happened, he took the whole
responsibility of it. It belnnjred to him exclusively, every question, every
suggestion, ns it would also belong to him h.-reafter. He simply asked now
A CHAPTER OF ERIE. 39
the inquiry indefinitely into periodical literature.* Nor were
the lawyers in any way behind the judge. At one moment
they would indulge in personal wrangling, and accuse each
other of the grossest malpractice, and the next, favor each
other with remarks upon manners, more pointed than delicate.
All this time injunctions were flying about like hail-stones ;
but the crowning injunction of all was issued, in reference to
the appointment of a receiver, by Judge Clerke, a colleague
of Judge Barnard, at the time sitting as a member of the
Court of Appeals at Albany. The Gilbert injunction had
gone, it might have seemed, sufficiently far, in enjoining
Barnard the individual, while distinctly disavowing all refer-
ence to him in his judicial functions. Judge Clerke made no
such exception. He enjoined the individual and he enjoined
that Mr. Field have the opportunity to be heard in the matter publicly, as the
other witnesses had been.
Mr. Clark, in reply, said that he would give Mr. Brady a promise that, if he
lived, he (Mr. Brady) should have the opportunity of examining Mr. Field be-
fore a referee, if they could agree upon a gentleman who should be acceptable.
Judge Barnard, in reply to Mr. Field, who asked for the appointment of a
referee, said that he had made the only order in the case he would make to-
day, and that the matter would now stand adjourned until Thursday next, at
three o'clock, P. M.
No affidavit of Mr. Field was ever taken, and the subject was allowed to
drop.
* Question by the Judge to Mr. Bddtn Do you know whether James Fisk,
Jr., and William H. Marston, went in a carriage to John J. Crane's house and
offered him $50,000 to vacate this injunction; and did you hear from a direc-
tor of the Erie Railroad that the Executive Committee had allowed that sum
to be paid?
Answer. No one of the directors told me this; but I think I heard some-
thing of the kind. I can't tell from whom I heard it; there were numerous
reports flying about at the time.
Judge Barnard. I have n't [addressing counsel] ruled the question out
simply because I want to know whether I am fit to sit on the bench or not; if
I have been engaged in a conspiracy, I am unfit to sit here.
Mr. Field said the question would open new evidence that had already been
ruled out
Judge Barnard. It was ruled out because I intend to have this " North
American Review " [holding up the book] put in evidence, which contains an
article about me, written by a clerk in your office. I intend to have this
whole matter ferreted out.
40 A CHAPTER OF ERIE.
the judge ; he forbade his making any order appointing a
receiver, and he forbade the clerks of his court from entering
it if it were made, and the receiver from accepting it if it
were entered. The. signing of this extraordinary order by any
judge in his senses admits of no explanation. The Erie coun-
sel served it upon Judge Barnard as he sat upon the bench,
and, having done so, withdrew from the court-room ; where-
upon the judge immediately proceeded to vacate the order,
and to appoint a receiver. This appointment was then en-
tered by a clerk, who had also been enjoined, and the receiver
was himself enjoined as soon as he could be caught. Finally
the maze had become so intricate, and the whole litigation so
evidently endless and aimless, that by a sort of agreement
of parties, Judge Ingraham, another colleague of Judge
Barnard, issued a final injunction of universal application,
as it were, and to be held inviolable by common consent,
under which proceedings were stayed, pending an appeal. It
was high time. Judges were becoming very shy of anything
connected with the name of Erie, and Judge McCunn had, in
a lofty tone, informed counsel that he preferred to subject
himself to the liability of a fine of a thousand dollars rather
than, by issuing a writ of habeas corjtus, allow his court "to
have anything to do with the scandal."
The result of this extraordinary litigation may be summed
up in a few words. It had two branches : one, the appoint-
ment of a receiver of the proceeds of the hundred thousand
shares of stock issued in violation of an injunction ; the
other, the processes against the persons of the directors for a
coitciDpt of court. AH for the receiver, every dollar of the
money this officer was intended to receive was well known
t'i In- iii New Jersey, beyond his reach. Why one party
i to insist on the appointment, or why the other party
l>j'vU:d to it, is not very apparent. Mr. Osgood, the son-in-
law of Vanderbilt, was appointed, and immediately enjoined
fnun acting; sulis(M|iicntly he resigned, when Mr. Peter B.
SWCCIK-V, tin- head of the Tammany ring, was appointed in
his place, without notice to the other side. Of course he had
A CHAPTER OF ERIE. 41
nothing to do, as there was nothing to be done, and so he was
subsequently allowed by Judge Barnard $ 150,000 for his ser-
vices. The contempt cases had even less result than that
of the receivership. The settlement subsequently effected
between the litigants seemed also to include the courts. The
outraged majesty of the law, as represented in the person
of Mr. Justice Barnard, was pacified, and everything was ex-
plained as having been said and done in a " Pickwickian
sense " ; so that, when the terms of peace had been arranged
between the high contending parties, Barnard's roaring by
degrees subsided, until he roared as gently as any sucking
dove, and finally he ceased to roar at all. The penalty for
violating an injunction in the manner described was fixed at
the not unreasonable sum of ten dollars, except in the cases
of Mr. Drew and certain of his more prominent associates;
their contumacy his Honor held too gross to be estimated in
money, and so .they escaped without any punishment at all.
Probably being as well read a lawyer as he was a dignified
magistrate, Judge Barnard bore in mind, in imposing these
penalties, that clause of the fundamental law which provides
that " no excessive fines shall be imposed, or cruel or unusual
punishments inflicted." The legal profession alone had cause
to regret the cessation of this litigation ; and, as the Erie
counsel had $ 150,000 divided among them in fees, it may
be presumed that even they were finally comforted. And
all this took place in the court of that State over which the
immortal Chancellor Kent had once presided. His great
authority was still cited there, the halo which surrounds his
name still shed a glory over the bench on which he had sat,
and yet these, his immediate successors, could
" On tliat high mountain cease to feed,
And batten on this moor."
42 A CHAPTER OF ERIE.
II.
IT is now necessary to return to the real field of operations,
which had ceased on the morning of the llth of March to be
in the courts of law. As the arena widened the proceedings
became more complicated and more difficult to trace, em-
bracing as they did the legislatures of two States, neither
of them famed for purity. In the first shock of the catastro-
phe it was actually believed that Commodore Vanderbilt con-
templated a resort to open violence and acts of private war.
There were intimations that a scheme had been matured for
kidnapping certain of the Erie directors, including Mr. Drew,
and bringing them by force within reach of Judge Barnard's
process. It appeared that on the 16th of March some fifty
individuals, subsequently described, in an affidavit filed for the
special benefit of Mr. Justice Barnard, as "disorderly charac-
ters, commonly known as roughs," crossed by the Pavonia
Ferry and took possession of the Erie depot. From their
conversation and inquiries it was divined that they came
intending to "copp" Mr. Drew, or, in plainer phraseology, to
take him by force to New York ; and that they expected to
receive the sum of $ 50,000 as a reward for so doing. The
exiles at once loudly charged Vanderbilt himself with originat-
ing this blundering scheme. They simulated intense alarm.
From day to day new panics were started, until, on the 19th,
Drew was secreted, a standing army was organized from the
employees of the road, and a small navy equipped. The
alarm spread through Jersey City; the militia was held in
readiness ; in the evening the stores were closed and the citi-
/ciis beiran to arm ; while a garrison of about one hundred and
twenty-five men intrenched themselves around the directors,
in their hotel. On the 1'lst there was another alarm, and
the fears of an attack continued, with lengthening intervals
if quiet, until the 31st, when the guard was at last with-
drawn. It is impossible to suppose that Vanderliilt ever had
any knowledge of this ridiculous episode or of its cause, ex-
A CHAPTER OF ERIE. 43
cept through the press. A band of ruffians may have crossed
the ferry, intending to kidnap Drew on speculation ; but to
suppose that the shrewd and energetic Commodore ever sent
them to go gaping about a station, ignorant both of the per-
son and the whereabouts of him they sought would be to im-
pute to Vanderbilt at once a crime and a blunder. Such
botching bears no trace of his clean handiwork.
The first serious effort of the Erie party was to intrench
itself iu New Jersey ; and here it met with no opposition. A
bill making the Erie Railway Company a corporation of New
Jersey, with the same powers they enjoyed in New York, was
hurried through the legislature iu the space of two hours,
and, after a little delay, signed by the Governor. The aston-
ished citizens of the latter State saw their famous broad-
gauge road thus metamorphosed before their eyes into a den-
izen of the kingdom of Camdeu and Amboy. Here was
another dreadful hint to Wall Street. What further issues
of stock might become legal under this charter, how the ten-
ure of the present Board of Directors might be altered, what
curious legal complications might arise, were questions more
easily put than satisfactorily answered. The region of possi-
bilities was considerably extended. The new act of incor-
poration, however, was but a precaution to secure for the
directors of the Erie a retreat in case of need ; the real field
of conflict lay in the legislature of New York, and here Van-
derbilt was first on the ground.
The corruption ingrained in the political system of New
York City is supposed to have been steadily creeping into the
legislature at Albany during several years past. The press
has rung with charges of venality against members of this
body ; individuals have been pointed out as the recipients
of large sums ; men have certainly become rich during short
terms in office ; and, of all the rings which influence New
York legislation, the railroad ring is currently supposed to be
the most corrupt and corrupting. The mind of the unpreju-
diced inquirer, who honestly desires to ascertain the truth on
this subject, will probably pass through several phases of be-
44 A CHAPTER O* 1 ERIE.
lief before settling into conviction. In the first place, he will
be overwhelmed by the broad, sweeping charges advanced in
the columns of the press by responsible editors and well-
informed correspondents. He will read with astonishment
that legislation is controlled by cliques and is openly bought
and sold ; that the lobby is but the legislative broker's board,
where votes are daily quoted ; that sheep and bullocks are not
more regularly in the market at Smithfield than Assembly-
men and Senators at Albany. Amazed by such statements,
the inquirer becomes incredulous, and demands evidence in
support of them. This is never forthcoming. Committees
of investigation one or two in a session are regularly
appointed, and their reports are invariably calculated to con-
found the existing confusion. These committees generally
express a belief in the existence of corruption and an utter
inability to find it out ; against some notoriously venal brother
legislator they enter a Scotch verdict of " not proven " ; and,
having thus far been very guarded in their language, they
then launch forth into tremendous denunciations of an \in-
bridlcd and irresponsible press. Here they have it all their
own way, and, indeed, too often make out an excellent case.
Meanwhile the seeker after truth leaves both correspondents
and committees, and tries to reach a conclusion by other
means. Public rumor he finds to be merely a reflection of the
press, or itself the impalpable form which the press reflects.
No conviction can be had on such evidence. He finds loose
statements, unproved assertions, and unsustained charges,
tending to pioduce general incredulity. Where so much more
is alleged than is proved, nothing is finally believed ; until
individual corruption may be almost measured by an ostenta-
tious disregard of public opinion. Passing through the phase
of incredulity, the inquirer may at last resort to the private
judgment of the best informed. Appealing to individuals in
whose purity, judicial temper, and means of information he
has entire confidence, ho will probably find his conclusions as
duootmging as they arc inevitable. The weight of opinion
and of evidence gradually becomes irresistible, until his mind
A CHAPTER OF ERIE. 45
settles down into a sad belief that probably no representative
bodies were ever more thoroughly venal, more shamelessly
corrupt, or more hopelessly beyond the reach of public opin-
ion, than are certain of those bodies which legislate for repub-
lican America in this latter half of the nineteenth century.
Certainly, none of the developments which marked the Erie
conflict in the New York legislature of 1868 would tend to
throw doubts on this conclusion when once arrived at.
One favorite method of procedure at Albany is through the
appointment of committees to investigate the affairs of wealthy
corporations. The stock of some great company is manipu-
lated till it fluctuates violently, as was the case with Pacific
Mail in 1867. Forthwith some member of the Assembly rises
and calls for a committee of investigation. The instant the
game is afoot, a rush is made for positions on the commit-
tee. The proposer, of course, is a member, probably chair-
man. The advantages of the position are obvious. The com-
mittee constitutes a little temporary outside ring. If a mem-
ber is corrupt, he has substantial advantages offered him to
influence his action in regard to the report. If he is not open
to bribery, he is nevertheless in possession of very valuable
information, and an innocent little remark, casually let fall,
may lead a son, a brother, or a loving cousin to make very
judicious purchases of stock. Altogether, the position is one
not to be avoided.
The investigation phase was the first which the Erie struggle
assumed at Albany. During the early stages of the conflict
the legislature had scented the carnage from afar. There was
" money in it," and the struggle was watched with breathless
interest. As*arly as the 5th of March the subject had been
introduced into the State Senate, and an investigation into
the circumstances of the company was called for. A commit-
tee of three was ordered, but the next day a senator, by name
Mattoon, moved to increase the number to five, which was
done, he himself being naturally one of the additional mem-
bers. This committee had its first sitting on the 10th, at the
very crisis of the great explosion. But before the iuvestiga-
46 A CHAPTER OF ERIE.
tion was entered upon, Mi*. Mattoon thought it expedient to
convince the contending parties of his own perfect impartial-
ity and firm determination to hold in check the corrupt im-
pulses of his associates. With this end in view, upon the 9th
or the 10th he hurried down to New York, and visited West
Street, Avhere he had an interview with the leading Erie direc-
tors. He explained to them the corrupt motives which had
led to the appointment of the committee, and how his sole
object in obtaining an increase of the number had been
to put himself in a position in which he might be able
to prevent these evil practices and see fair play. Curiously
enough, at the same interview he mentioned that his son was
to be appointed an assistant sergeant-at-arms to aid in the in-
vestigation, and proved his disinterestedness by mentioning
the fact that this son was to serve without pay. The labors
of the committee continued until the 31st of March, and dur-
ing that time Mr. Mattoon, and at least one other senator,
pursued a course of private inquiry which involved further
visits to Jersey City. Naturally enough, Mr. Drew and his
associates took it into their heads that the man wanted to be
bought, and even affirmed subsequently that, at one inter-
view, he had in pretty broad terms offered himself for sale.
It has not been distinctly stated in evidence by any one that
an attempt was made on his purity or on that of his public-
spirited sou ; and it is difficult to believe that one who came
to New York so full of high purpose could have been suffi-
ciently corrupted by metropolitan influences to receive bribes
from both sides. Whether he did so or not his proceedings
were terribly suggestive as regards legislative morality at
Albany. Here was a senator, a member of a committee of in-
vestigation, rousing gamblers from their beds at early hours
of the morning to hold interviews in the faro-bank parlor of
the establishment, and to give "points" on which to operate
upon the joint account. Even then the wretched creature
could not even keep faith with his very "pals" ; he wrote to
them to " go it heavy " for Drew, and (hen himself went, over to
Vandi-rbilt, he made agreements to share profits and then
A CHAPTER OF EIUE. 47
submitted to exposure sooner than meet his part of the loss.
A man more thoroughly, shamefacedly contemptible and
coiTupt, a more perfect specimen of a legislator on sale
haggling for his own price, could not well exist. In this case
he cheated every one, including himself. Accident threw
great opportunities in his way. On the 31st the draft of a
proposed report, exonerating in great measure the Drew fac-
tion, was read to him by an associate, to which he not only
made no objection, but was even understood to assent. On
the same day another report was read in his presence, strongly
denouncing the Drew faction, sustaining to the fullest extent
the charges made against it, and characterizing its conduct as
corrupt and disgraceful. Each report was signed by two of his
associates, and Mr. Mattoon found himself in the position of
holding the balance of power ; whichever report he signed
would be the report of the committee. He expressed a desire
to think the matter over. It is natural to suppose that, in his
eagerness to gain information privately, Mr. Mattoon had not
confined his unofficial visits to the Drew camp. In any case
his mind was in a state of painful suspense. Finally, after
arranging in consultation on Tuesday for a report favoring the
Drew party, on Wednesday he signed a report strongly de-
nouncing it, and by doing so settled the action of the commit-
tee. Mr. Jay Gould must have been acquainted with the cir-
cumstances of the case, and evidently supposed that Mr.
Mattoon was " fixed," since he subsequently declared he was
" astounded " when he heard that Mr. Mattoon had signed this
report. The committee, however, with their patriotic ser-
geant-at-arms, whose services, by the way, cost the State but
a hundred dollars, desisted at length from their labors, the
result of which was one more point gained by Commodore
Vanderbilt.
Indeed, Vanderbilt had thus far as much outgeneralled
Drew in the manufacture of public opinion as Drew had out-
generalled Vanderbilt in the manufacture of Erie stock. His
whole scheme was one of monopoly, which was opposed to
every interest of the city and State of New York, yet into the
48 A CHAPTER OF ERIE.
support of this scheme he had brought all the leading papers
of New York City, with a single exception. Now again ho
seemed to have it all his own way in the legislature, and the
tide ran strongly against the exiles of Erie. The report of the
investigation committee was signed on April 1st, and may he
considered as marking the high-water point of Vanderbilt's
success. Hitherto the Albany interests of the exiles had been
confided to mere agents, and had not prospered ; but, when
fairly roused by a sense of danger, the Drew party showed at
least as close a familiarity with the tactics of Albany as with
those of Wall Street. The moment they felt themselves set-
tled at Jersey City they had gone to work to excite a popular
sympathy in their own behalf. The cry of monopoly was a
sure card in their hands. They cared no more for the actual
welfare of commerce, involved in railroad competition, than
they did for the real interests of the Erie Railway ; but they
judged truly that there was no limit to the extent to which
the public might be imposed upon. An active competition
with the Vanderbilt roads, by land and water, was inaugurated ;
fares and freights on the Erie were reduced on an average by
one third ; sounding proclamations were issued ; " interview-
ers " from the press returned rejoicing from Taylor's Hotel to
New York City, and the Jersey shore quaked under the clat-
ter of this Chinese battle. The influence of these tactics
made itself felt at once. By the middle of March memorials
against monopoly began to flow in at Albany.
While popular sympathy was thus roused by the bribe of ac-
tive competition, a bill was introduced into the Assembly, in
the Erie interest, legalizing the recent issue of new stock,
declaring and regulating the power of issuing convertible
In 'iids, providing for a broad-gauge connection with Chicago
and the guaranty of the bonds of the Boston, Hartford, <k
Krii-, and finally forbidding, in so far as any legislation could
forbid, the consolidation of the Central and the Erie in the
han. Is of Vandi-rbilt. This bill was referred to the Committee
'.ii l.'.-iilroads on the loth of M:nvh. On the 20th a public
hniring was begun, and the committee proceeded to take
A CHAPTER OF ERIE. 49
evidence, aided by a long array of opposing counsel, most
of whom had figured in the proceedings in the courts of law.
In a few days the bill was adversely reported upon, and the
report adopted in the Assembly by the decisive vote of eighty-
three to thirty-two. This was upon the 2 7th. of March. The
hint was a broad one ; the exiles must give closer attention to
their interests. So soon as the news of this adverse action
reached Jersey City, it was decided that Mr. Jay Gould should
brave the terrors of the law, and personally superintend mat-
ters at Albany. Neither Mr. Drew nor his associates desired
to become permanent residents of Jersey City ; nor did they
wish to return to New York as criminals on their way to jail.
Mr. Gould was to pave the way to a different return by caus-
ing the recent issue of convertible bonds to be legalized. That
once done, Commodore Vanderbilt was not the man to wage
an unavailing war, and a compromise, in which Barnard and
his processes of contempt would be thrown in as a make-
weight, could easily be effected. A rumor was therefore
started that Mr. Gould was to leave for Ohio, supplied with
the necessary authority and funds to press vigorously to com-
pletion the eighty miles of broad-gauge track between Akron
and Toledo, which would open to the Erie the much-coveted
connection with Chicago. Having hung out this false light,
Mr. Jay Gould went on his mission, the president of the com-
pany having some time previously drawn half a million of dol-
lars out of the overflowing Erie treasury.
This mission was by no means unattended by difficulties.
In the first place, Judge Barnard's processes for contempt
seemed to threaten the liberty of Mr. Gould's person. He left
Jersey City and arrived at Albany on the 30th day of March,
three days after the defeat of the Erie bill, and two days
before Mr. Mattoon had made up his mind as to which report
he would sign. Naturally his opponents were well satisfied
with the present aspect of affairs, and saw no benefit likely to
arise from Mr. Gould's presence in Albany. The day after his
arrival, therefore, he was arrested, on the writ issued against
him for contempt of court, and held to bail in half a million
3 D
50 A CHAPTER OF ERIE.
of dollars for his appearance in New York on the following
Saturday. He was immediately bailed of course, and for the
next few days devoted himself assiduously to the business he
had in hand. On Saturday he appeared before Judge Barnard,
and was duly put in charge of the sheriff' to answer certain
interrogatories. It would seem to have been perfectly easy
for him togiva the necessary bail, and to return from Barnard's
presence at once to Albany ; but the simple method seems
never to have been resorted to throughout these complications :
nothing was ever done without the interposition of a writ and
the assistance of a crowd of counsel. In this case Judge
Barrett of the Common Pleas was appealed to, who issued a
writ of liabeas corpus, by virtue of which Mr. Gould was taken
out of the hands of the sheriff and again brought into court.
Of course the hearing of the case was deferred, and it was
equally a matter of course that Mr. Gould was bent on return-
ing at once to his field of labor. The officer to whose care
Mr. Gould was intrusted was especially warned by the court,
in Mr. Gould's presence, that he was not to allow his charge
to go out of his sight. This difficulty was easily surmounted.
Mr. Gould went by an early train to Albany, taking the officer
with him in the capacity of a travelling companion. Once in
Albany he was naturally taken ill, not too ill to go to the
Capitol in the midst of a snow-storm, but much too ill to
think of returning to New York. On the 10th the trusty
official and travelling companion signified to Mr. Gould that
his presence was much desired before Judge Barrett, and inti-
mated an intention of carrying him back to New York. Mr.
Gould then pleaded the delicate condition of his health, and
\v IK illy declined to undergo the hardships of the proposed jour-
ney. Whereupon the officer, stimulated, as was alleged, by
Gould's opponents, returned alone to New York, and reported
his charge to the court as a runaway. A new spectacle of ju-
dicial indignation ensued, and a new process for contempt
seemed imminent. Of course nothing came of it. A few
nllid.-ivits from All>:my pacified the indignant Barrett. Tin;
application for a habeas corpus was discharged, and Mr.
A CHAPTER OF ERIE. 51
was theoretically returned into the custody of the sheriff.
Thereupon the required security for his appearance when
needed was given ; and meanwhile, pending the recovery of his
health, he assiduously devoted the tedious hours of convales-
cence to the task of cultivating a thorough understanding
between himself and the members of the legislature.
A strange legislative episode occurred at this time, which
for a day or two threatened to thwart Mr. Gould's operations,
but in the end materially facilitated them. All through
March the usual sensational charges had been flying through
the press in relation to the buying of votes on the pending
Erie measures. These were as vague and as difficult to sus-
tain as usual, and it was very important that no indiscreet
friend of legislative purity should blunder out charges which
could be triumphantly refuted. On the 1st of April, however,
the second day after Mr. Gould appeared on the ground, a
quiet country member named Glenn, remarkable for nothing
but his advanced years and white hair, suddenly created an
intense sensation by rising in his place in the Assembly and
excitedly declaring that he had just been offered money for
his vote on the Erie Bill. He then sent up to the Speaker
charges in writing, to the effect that the recent report on the
bill in question was bought, that members of the House were
engaged in purchasing votes, that reports of committees were
habitually sold, and ended by charging " corruption, deep,
dark, and damning on a portion of the House," of which he
felt " degraded in being a member." A committee of investi-
gation was, of course, appointed, and the press congratulated
the public that at last specific charges had been advanced
from a responsible quarter. On the 9th Mr. Glenn followed
up the attack by charging, again in writing, that one member
of the committee of investigation, whose name he gave, was
the very member who had offered him money for his vote.
Mr. Frear, the member in question, at once resigned his place
upon the committee, and demanded an investigation. Then it
turned out that the simple old gentleman, between his desire
for notoriety and his eagerness to expose corruption, had been
52 A CHAPTER OF ERIE.
made the victim of a cruel joke. Some waggish colleagues
had pointed out to him an itinerant Jew, who haunted the
lobby and sold spectacles, as an agent of the fifth estate.
From him the old gentleman had, after some clumsy angling
and many leading questions, procured what he supposed to be
an offer of money for his vote, which, by a ludicrous misun-
derstanding, managed by his humorous colleagues, was made
to appear in his eyes as having received Mr. Frear's indorse-
ment. Mr. Glenn's charges ended, therefore, in a ridiculous
fiasco, and in a tremendous outburst of offended legislative
virtue. The committee reported on the 10th ; every one was
exonerated ; Mr. Glenn was brought to the bar and censured,
and the next day he resigned. As for the astonished pedler,
he was banished from the lobby, imprisoned, prosecuted, and
forgotten. The display of indignation on the part of Mr.
Glenn's brother legislators was, in view of the manifest absur-
dity of the whole affair, somewhat superfluous and somewhat
suspicious; but one such false accusation protects a multitude
of real sins. The trade of censor of morals fell into disre-
pute at Albany ; and, under the shadow of this parody upon
exposures of corruption, Mr. Gould was at liberty to devote
himself to serious business without fear of interruption.
The full and true history of this legislative campaign will
never be known. If the official reports of investigating com-
mittees are to be believed, Mr. Gould at about this time
underwent a curious psychological metamorphosis, and sud-
denly became the veriest simpleton in money matters that
ever fell into the hands of happy sharpers. Cunning lobby
members had but to pretend to an influence over legislative
minds, which every one knew they did not possess, to draw
unlimited amounts from this verdant habitue of Wall Street.
It seemed strange that he could have lived so long and learned
so little. He dealt in large sums, lie gave to one man, in
whom In- said "he did not take much stock," the sum of
$5,000, "just to smooth him over." This man had just be-
fore received $ 5,000 of Erie money from another agent of
the company. It would, therefore, be interesting to know
A CHAPTER OF KRIE. 53
what sums Mr. Gould paid to those individuals in whom he
did "take much stock." Another individual is reported to
have received $ 100,000 from one side, "to influence legisla-
tion," and to have subsequently received $ 70,000 from the
other side to disappear with the money ; which he accordingly
did, and thereafter became a gentleman of elegant leisure.
One senator was openly charged in the columns of the press
with receiving a bribe of $ 20,000 from one side, and a sec-
ond bribe of $ 15,000 from the other; but Mr. Gould's foggy
mental condition only enabled him to be "perfectly astounded "
at the action of this senator, though he knew nothing of any
such transactions. Other senators were blessed with a sudden
accession of wealth, but in no case was there any jot or tittle
of proof of bribery. Mr. Gould's rooms at, the Develin House
overflowed with a joyous company, and his checks were nu-
merous and heavy ; but why he signed them, or what became
of them, he seemed to know less than any man in Albany.
This strange and expensive hallucination lasted until about
the middle of April, when Mr. Gould was happily restored to
his normal condition of a shrewd, acute, energetic man of
business ; nor is it known that he has since experienced any
relapse into financial idiotcy.
About the period of Mr. Gould's arrival in Albany the tide
turned, and soon began to flow strongly in favor of Erie and
against Vanderbilt. How much of this was due to the
skilful manipulations of Gould, and how mnch to the rising
popular feeling against the practical consolidation of compet-
ing lines, cannot be decided. The popular protests did indeed
pour in by scores, but then again the Erie secret-service money
poured out like water. Yet Mr. Gould's task was sufficiently
difficult. After the adverse report of the Senate committee,
and the decisive defeat of the bill introduced into the Assem-
bly, any favorable legislation seemed almost hopeless. Both
Houses were committed. Vanderbilt had but to prevent ac-
tion, to keep things where they were, and the return of his
opponents to New York was impracticable, unless with his
consent ; he appeared, in fact, to be absolute master of the
54 A CHAPTER OF ERIE. .
situation. It seemed almost impossible to introduce a bill in
the face of his great influence, and to navigate it through the
many stages of legislative action and executive approval,
without somewhere giving him an opportunity to defeat it.
This was the task Gould had before him, and he accomplished
it. On the 13th of April a bill, which met the approval of
the Erie party, and which Judge Barnard subsequently com-
pared not inaptly to a bill legalizing counterfeit money, was
taken up in the Senate ; for some days it was warmly debated,
and on the 18th was passed by the decisive vote of seventeen
to twelve. Senator Mattoon had not listened to the debate
in vain. Perhaps his reason was convinced, or perhaps he
had sold out new " points " and was again cheating himself or
somebody else ; at any rate, that thrifty senator was found
voting with the majority. The bill practically legalized the
recent issues of bonds, but made it a felony to use the pro-
ceeds of the sale of these bonds except for completing, fur-
thering, and operating the road. The guaranty of the bonds
of connecting roads was authorized, all contracts for consoli-
dation or division of receipts between the Erie and the Van-
derbilt roads were forbidden, and a clumsy provision was
enacted that no stockholder, director, or officer in one of the
Vanderbilt roads should be an officer or director in the Eric,
and vice versa. The bill was, in fact, an amended copy of the
one voted down so decisively in the Assembly a few days
before, and it was in this body that the tug of war was expected
to come.
The lobby was now full of animation ; fabulous stories
were told of the amounts which the contending parties \ven>
willing to ex{)cnd ; never before had the market quotations of
votes and influence stood so high. The wealth of Vanderbilt
seemed pitted against the Erie treasury, and the vultures
(lucked to Albany from every part of the State. Suddenly,
at the very last moment, and even while special trains were
briii'_:'m'_r up fresh contestants to take part in the fray, a rumor
rail through Albany as of some groat public disaster, spread-
ing panic and terror through hotel and corridor. The ob-
A CHAPTER OF ERIE. 55
server was reminded of the dark days of the war, when tid-
ings came of some great defeat, as that on the Chickahominy
or at Fredericksburg. In a moment the lobby was smitten
with despair, and the cheeks of the legislators were blanched,
for it was 1'eported that Vanderbilt had: withdrawn his opposi-
tion to the bill. The report was true. Either the Commo-
dore had counted the cost and judged it excessive, or he de-
spaired of the result. At any rate, he had yielded in advance.
In a few moments the long struggle was over, and that bill
which, in an uuamended form, had but a few days before been
thrown out of the Assembly by a vote of eighty-three to
thirty-two, now passed it by a vote of one hundred and one to
six and was sent to the Governor for his signature. Then the
wrath of the disappointed members turned on Vanderbilt.
Decency was forgotten in a frenzied sense of disappointed
avarice. That same night the pro rata freight bill, and a bill
compelling the sale of through tickets by competing lines,
were hurriedly passed, simply because they were thought
hurtful to Vanderbilt ; and the docket was ransacked in
search of other measures, calculated to injure or annoy him.
An adjournment, however, brought reflection, and subse-
quently, on this subject, the legislature stultified itself no
more.
The bill had passed the legislature ; would it receive the
Executive signature 1 ? Here was the last stage of danger.
For some time doubts were entertained on this point, and the
last real conflict between the opposing interests took place in
the Executive Chamber at Albany. There, on the afternoon
of the 21st of April, Commodore Vanderbilt' s counsel ap-
peared before Governor Feuton, and urged upon him their
reasons why the bill should be returned by him to the Senate
without his signature. The arguments were patiently listened
to, but, when they had closed, the Executive signature placed
the seal of success upon Mr. Gould's labors at Albany. Even
here the voice of calumny was not silent. As if this remark-
able controversy was destined to leave a dark blot of suspi-
cion upon every department of the civil service of New York,
56 A CHAPTER OF ERIE.
there were not wanting those who charged the Executive
itself with the crowning act in this history of conniption. The
very sum pretended to have been paid was named ; the broker
of Executive action was pointed out, and the number of min-
utes was specified which should intervene between the pay-
ment of the bribe and the signing of the law.*
Practically, the conflict was now over, and the period of
negotiation had already begun. The combat in the courts
was indeed kept up until far into May, for the angry passions
of the lawyers and of the judges required time in which to
wear themselves out. Day after day the columns of the press
revealed fresh scandals to the astonished public, which at last
grew indifferent to such revelations. Beneath all the wrangling
of the courts, however, while the popular attention was dis-
tracted by the clatter of lawyers' tongues, the leaders in the
controversy were quietly approaching a settlement. In the
early days of his exile Mr. Drew had been more depressed in
spirit, more vacillating in counsel, than his younger and more
robust associates. The publicity and excitement which had
sustained and even amused them had wearied and annoyed
the old man. His mind had been oppressed \Vith saucy doubts
and tormented by officious advisers. Stronger wills than his
were bearing him along with them ; and though, perhaps, not
more scrupulous than those about him, he was certainly less
bold ; their reckless daring shocked his more subtle and timid
nature. He missed also his home comforts ; he felt himself a
prisoner in everything but in name ; he knew that he was
distrusted, and his every action watched l>y associates of \vh<>m
he even stood in physical fear, who hardly allowed him to see
his brokers alone, and did not respect the sanctity of his tele-
grams. After the first week or two, and as affairs began to
assume a less untoward aspect, his spirits revived, and he soon
ii to make secret advances towards his angry opponent.
* It is but justice to (iovrnior r'cnton to SMV, tliat, though tins clmrgo wns
liolilly advanced by respectable, journals of his own party, it cannot be con-
sidered MS Mi-taiiied by the evidence. The testimony on the point will bo
found in the report of Senator Male's invent j^utin^ committee. Documents
(Senate), 1V09, No. 62, pp. 140- 148, 151-155.
A CHAPTER OF ERIE. 57
The hostilities of the Stock Exchange are proverbially short-
lived. A broker skilled in the ways of his kind gave it as his
opinion, in one of these proceedings, that five minutes was
the utmost period during which it was safe to count on the
enmities or alliances of leading operators. Early in April
Mr. Drew took advantage of that blessed immunity from
arrest which the Sabbath confers on the hunted of the law, to
revisit the familiar scenes across the river. His visit soon
resulted in conferences between himself and Vanderbilt, and
these conferences naturally led, to overtures of peace. Though
the tide was turning against the great railroad king, though
an uncontrollable popular feeling was fast bearing down his
schemes of monopoly, yet he was by no means beaten or sub-
dued. His plans, however, had evidently failed for the pres-
ent ; as he expressed himself, he could easily enough buy up
the Erie Railway, but he could not buy up the printing-press.
It was now clearly his interest to abandon his late line of at-
tack, and to bide his time patiently, or to possess himself of his
prey by some other method. The wishes of all parties, there-
fore, were fixed on a settlement, and no one was disposed to
stand out except in order to obtain better terms. The inter-
ests, however, were multifarious. There were four parties to
be taken care of, and the depleted treasury of the Erie Kail-
way was doomed to suffer.
The details of this masterpiece of Wall Street diplomacy
have never come to light, but Mr. Drew's visits to New York
became more frequent and less guarded ; by the middle
of April he had appeared in Broad Street on a week-day, un-
disturbed by fears of arrest, and soon rumors began to spread
of misunderstandings between himself and his brother exiles.
It was said that his continual absences alarmed them, that
they distrusted him, that his terms of settlement were not
theirs. It was even asserted that his orders on the treasury
were no longer honored, and that he had, in fact, ceased to be
a power in Erie. Whatever truth there may have been in
tlicsi 1 rumors, it was very evident his associates had no inclina-
tion to trust themselves within the reach of the New York
3*
58 A CHAPTER OF ERIE.
courts until a definitive treaty, satisfactory to themselves, was
signed and sealed. This probably took place about the 25th
of April ; for on that day the Erie camp at " Fort Taylor," as
their uninviting hotel had been dubbed, was broken up, the
President and one of the Executive Committee took steamer
for Boston, and the other directors appeared before Judge
Barnard, prepared to purge themselves of their contempt.
Though the details of negotiation have never been divulged,
yet it was clear enough what three of the four parties desired.
Commodore Vanderbilt wished to be relieved of the vast
amount of stock with which he was loaded, and his friends
Work and Schell, in whose names the battle had been fought,
must be protected. Mr. Drew desired to settle his entangled
accounts as treasurer, and to obtain a release in full, which
might be pleaded in future complications. Mr. Eldridge and
his Boston friends were sufficiently anxious to be relieved
of the elephant they found on their hands, in the Erie Rail-
way of New York, and to be at leisure to devote the spoils
of their victim to the development of their New England en-
terprise. Messrs. Gould and Fisk alone were unprovided for,
and they alone presented themselves as obstacles to be over-
come by railroad diplomacy.
At last, upon the 2d of July, Mr. Eldridge formally an-
nounced to the Board of Directors that the terms of peace
had l>een agreed upon. Commodore Vanderbilt was, in the
first place, provided for. He was to be relieved of fifty thou-
sand shares of Erie stock at 70, receiving therefor $2,500,000
in cash, and $ 1,250,000 in bonds of the Boston, Hartford, &
Kric at 80. He was also to receive a further sum of $ 1,000,000
outright, as a consideration for the privilege the Erie road
thus purchased of calling upon him for his remaining fifty
thousand shares at 70 at any time within four months. He
was also to have two scats in Hit- Moa.nl of I )i rectors, and all
suits were to be dismissed and offences condoned. The sum
of $429,2. r >l) was tixed upon as a proper amount to assuage
Hie. sense of wrong from which his two friends Work and
Schell had suffered, and to efface from their memories all
A CHAPTER OF ERIE. 59
recollection of the unfortuato " pool " of the previous Decem-
ber. Why the owners of the Erie Railway should have paid
this indemnity of $ 4,000,000 is not very clear. The opera-
tions were apparently outside of the business of a railway
company, and no more connected with the stockholders of the
Erie than were the butchers' bills of the individual directors.
While Vanderbilt and his friends were thus provided for,
Mr. Drew was to be left in undisturbed enjoyment of the fruits
of his recent operations, but was to pay into the treasury
$ 540,000 and interest, in full discharge of all claims and
causes of action which the Erie Company might have against
him. The Boston party, as represented by Mr. Eldridge, was
to be relieved of $5,000,000 of their Boston, Hartford, &
Eric bonds, for which they were to receive $ 4,000,000 of Erie
acceptances. None of these parties, therefore, had anything
to complain of, whatever might be the sensations of the real
owners of the railway. A total amount of some $ 9,000,000 in
cash was drawn from the treasury in fulfilment of this settle-
ment, as the persons concerned were pleased to term this
remarkable disposition of property intrusted to their care.
Messrs. Gould and Fisk still remained to be taken care
of, and to them their associates left the Erie Railway. These
gentlemen subsequently maintained that they had vehemently
opposed this settlement, and had denounced it in the secret
councils as a fraud and a robbery. Mr. Fisk was peculiarly
outspoken in relation to it, and declared himself " thunder-
struck and dumbfounded " that his brother directors whom he
had supposed respectable men should have had anything to
do with any such proceeding. A small portion of this state-
ment is not wholly improbable. The astonishment at the
turpitude of his fellow-officials was a little unnecessary in one
who had already seen " more robbery " during the year of his
connection with the Erie Railway than he had " ever seen before
in the same space of time," so much of it indeed that he
dated his " gray hairs " from that 7th of October which saw
his election to the board. That Mr. Fisk and Mr. Gould were
extremely indignant at a partition of plunder from which they
60 A CHAPTER OF ERIE.
were excluded is, however, very certain. The riud of the
orange is not genei'ally considered the richest part of the fruit ;
a corporation on the verge of bankruptcy is less coveted, even
by operators in Wall Street, than one rich in valuable assets.
Probably at this time these gentlemen seriously debated the
expediency of resorting again to a war of injunctions, and
carefully kept open a way for doing so ; however this may
have been, they seem finally to have concluded that there was
yet plunder left in the poor old hulk, and so, after four stormy
interviews, all opposition was at last withdrawn and the de-
finitive treaty was finally signed.* Mr. Eldridge thereupon
counted out his bonds and received his acceptances, which
latter were cashed at once to close up the transaction, and at
once he resigned his positions as director and president. The
Boston raiders then retired, heavy with spoil, into their own
North country, and there proceeded to build up an Erie influ-
ence for New England, in which task they labored with assidu-
ity and success. Gradually they here introduced the more
highly developed civilization of the land of their temporary
adoption and boldly attempted to make good their private
losses from the public treasury. A more barefaced scheme
of plunder never was devised, and yet the executive veto
alone stood between it and success. These, however, were the
* The account given of this affair by Mr. Fisk from the witness stand on n
subsequent occasion was characteristic : " Finally about twelve o'clock ti
paper was passed round and we signc.d it; I don't know what it contained; I
did n't read it; I don't think I noticed a word of it; I remember the space for
the names was greater than that covered by the writing; my impression is
that I took my hat and left at once in disgust; I told Gould we had sold our-
selves to the Devil; I presume that was not the only document signed; I re-
member seeing Mr. White, the cashier, come in with the check-book, and I
said to him, 'Yon are bearing in the remains of this corporation to be put in
Vnndcrbilt's tomb.' No; I did n't know the contents of the paper which I
signed, and I have always been glad that I didn't; I have thought of it a thou-
sand times; I don't know what other documents 1 signed ; I signed everything
that was put In-fore me ; after once the Devil had hold of me 1 kept on signing;
did n't read any of them and have no idea what they were; I don't know how
manv I signed; I kept no count after the first one; I went with the robbers
then and I have been with them ever since; my impression is that after the
signing I left at once; I don't know whether we sat down or not; we didn't
have anything to ent. I know."
A CHAPTER OF ERIE. 61
events of another year and unconnected with this narrative,
from which these characters in the Erie management hence-
forth disappear. For the rest it is only necessary to say that
Mr. Vanderbilt, relieved of his heavy load of its stock, ap-
parently ceased to concern himself with Erie ; while Daniel
Drew, released from the anxieties of office, assumed for a
space the novel character of a looker-on in Wall Street.
III.
THUS, in the early days of July, Messrs. Fisk and Gould
found themselves beginning life, as it were, in absolute control
of the Erie Railway, but with an empty treasury and a doubt-
ful reputation. Outwardly things did not look unpromising.
The legal complications were settled, and the fearful load
imposed by the settlement upon the already overburdened
resources of the road was not, of course, imparted to the pub-
lic. It is unnecessary to add that the "outside" holders
of the stock were, in the counsels of the managers, included
in that public the inquiries of which in regard to the affairs
of the company were looked upon by the ring in control as
downright impertinence. A calm deceitful indeed, but yet
a calm succeeded the severe agitations of the money mar-
ket. All through the month of July money was easy and
ruled at three or four per cent ; Erie was consequently high,
and was quoted at about seventy, Avhich enabled the company
to dispose without loss of the Vanderbilt stock. It may well
be believed that Messrs. Fi.sk and Gould could not have re-
garded their empty treasury, just depleted to the extent of
nine millions, trust funds misapplied by directors in the pro-
cesses of stock-gambling, without serious question as to their
ability to save the road from bankruptcy. The October elec-
tion was approaching, Vanderbilt was still a threatening ele-
ment in the future, and new combinations might arise.
62 A CHAPTER OF ERIE.
Millions were necessary, and must at once be forthcoming.
The new officials were, however, men of resource, and were
not men of many scruples. The money must be raised, and
recent experience indicated a method of raising it. Their
policy, freed from the influence of Drew's vacillating, treach-
erous, and withal timid nature, could now be bold and direct.
The pretence of resistance to monopoly would always serve
them, as it had served them before, as a plausible and popular
cry. Above all, their councils were now free from interlopers
and spies ; for the first act of Messrs. Gould and Fisk had been
to do away with the old board of auditors, and to concentrate
all power in their own hands as president, treasurer, and con-
troller. Fortunately for them it was midsummer, and the
receipts of the road were very heavy, supplying them with
large sums of ready money ; * most fortunately for them, also,
a strange infatuation at this time took possession of the Eng-
lish mind.
* It will be remembered that the net of 21st April, legalizing the issue of
bonds, made it a felony to devote the proceeds to any purpose except equip-
ping, constructirg, and operating the road. Mr. Gould's explsv atioi of the
effect he gave to this clause is not only amusing as a piece of impudence, but
extremely suggestive as regards the efficacy of legislation. Mr. Gould, be it
remembered, procure! the passage of the law, and Mr. Gould thus explains to
the railroad committee of the legislature the force he gave to its provisions.
Mr. Gould. .... The law is, that you can only use the money realized on
these bonds for the purpose of equipping, constructing, and operating the road,
and therefore I had to use the earnings of the road to meet these large liabili-
ties, wliich had been authorize! by the board (the Eldridge-Vanderbilt settle-
ment ), and use the mor.ey realized from the bonds to equip, construct, and
operate the road
Qutstion by Mr. Waterman. In fact these twenty million of bonds were
issued to meet these obligations, and not for the purpose of maintaining, oper-
ating, and constructing the road?
Antwo: No, sir; I used the earnings of the road to meet these obligations.
.... \Vi> had to live up to the letter of the law, and use the money reali/i-ti
from the bonds for the purpose of operating, constructing, and equipping tho
road.
Q. But your pressing need of money was not for the purpose of operating
the road, but for the purpose of meeting these obligations?
A. V
Q The amoiu.t of mo;.ey you sought to raise was the amount of these
obligations?
A. Yes, sir.
A CHAPTER OF ERIE: 63
Shrewd as the British capitalist proverbially is, his judg-
ment in regard to American investments has been singularly
fallible. When our national bonds went begging at a discount
of sixty per cent, he transmitted them to Germany and refused
to touch them himself. At the very same time a class of rail-
road securities - such as those of this very Erie Railway, or,
to cite a yet stronger case, those of the Atlantic & Great West-
ern road was gradually absorbed in London as an honest in-
vestment long after these securities had " gone into the street "
in America. It was this strange fatuity which did much to
bring on the crash of May, 1866. Even that did not seem to
teach wisdom to the British bankers, who had apparently
passed from the extreme of caution to the extreme of confi-
dence. They now, after all the exposures of the preceding
months, rushed into Erie, apparently because it seemed cheap,
and the prices in New York were sustained by the steady de-
mand for stock on foreign account. Not only did this curious
infatuation, involving purchases to the extent of a hundred
thousand shares, cover up the operations of the new ring, but,
at a later period, the date of the possible return of this stock
to Wall Street was the hinge on which the success of its cul-
minating plot was made to turn.
The appearance of calm lasted but about thirty days.
Early in August it was evident that something was going on.
Erie suddenly fell ten per cent; in a few days more it experi-
enced a further fall of seven per cent, touching 44 by the 1 9th
of the month, upon which day, to the astonishment of Wall
Street, the transfer-books of the company were closed pre-
paratory to the annual election. As this election was not to
take place Tintil the -13th of October, and as the books had
thus been closed thirty days in advance of the usual time, it
looked very much as though the managers were satisfied with
the present disposition of the stock, and meant, by keeping it
where it was, to preclude any such unpleasantness as an
opposition ticket. The courts and a renewed war of injunc-
tions were of course open to any contestants, including Com-
modore Vanderbilt, who might desire to avail themselves of
64 A CHAPTER OF ERIE.
them ; probably, however, the memory of recent struggles
was too fresh to permit any one to embark on those treacher-
ous waters. At any rate, nothing of the sort was attempted.
The election took place at the usual time, and the ring in
control voted itself, without opposition, into a new lease of
power. Two new names had meanwhile appeared in the list
of Erie directors, those of Peter B. Sweeney and William M.
Tweed, the two most prominent leaders of that notorious
ring which controls the proletariat of New York City and
governs the politics of the State. The alliance was an omi-
nous one, for the construction of the new board can be stated
in few words, and calls for no comment. It consisted of the
Erie ring and the Tammany ring, brought together in close
political and financial union ; and, for the rest, a working
majority of supple tools and a hopeless minority of respect-
able figure-heads. This formidable combination shot out its
feelers far and wide : it wielded the influence of a great cor-
poration with a capital of a hundred millions ; it controlled
the politics of the first city of the New World ; it sent its
representatives to the Senate of the State, and numbered
among its agents the judges of the courts. Compact, disci-
plined, and reckless, it knew its own power and would not
scruple to use it.
It was now the month of October, and the harvest had been
gathered. The ring and its allies determined to reap their
harvest also, and that harvest was to be nothing less than a
contribution levied, not only upon Wall Street and New York,
but upon all the immense interests, commercial and financial,
which radiate from New York all over the country. Like the
Cscsar of old, they issued their edict that all the world should
be- taxed. Tlu- process was not novel, but it. was ell'ective. A
monetary stringency may be looked for in New York at cer-
tain seasons of every year. It is gem-rally most severe in the
autumn months, when the crops have to be moved, and the
currency is drained steadily away from the financial centre
towards the extremities of the system. The method by which
an artificial stringency is produced is thus explained in a
A CHAPTER OF ERIE. 65
recent report of the Comptroller of the Currency : " It is
scarcely possible to avoid the inference that nearly one half
of the available resources of the national banks in the city of
New York are used in the operations of the stock and gold ex-
change ; that they are loaned upon the security of stocks
which are bought and sold largely on speculation, and which
are manipulated by cliques and combinations, according as
the bulls or bears are for the moment in the ascendency
Taking advantage of an active demand for money to move the
crops West and South, shrewd operators form their combina-
tion to depress the market by ' locking up ' money, with-
drawing all they can control or borrow from the common
fund ; money becomes scarce, the rate of interest advances,
and stocks decline. The legitimate demand for money con-
tinues ; and, fearful of trenching on their reserve, the banks
are strained for means. They dare not call in their demand
loans, for that would compel their customers to sell securities
on a falling market, which would make matters worse. Habi-
tually lending their means to the utmost limit of prudence,
and their credit much beyond that limit, to brokers and specu-
lators, they are powerless to afford relief ; their customers
by the force of circumstances become their masters. The
banks cannot hold back or withdraw from the dilemma in
which their mode of doing business has placed them. They
must carry the load to save their margins. A panic which
should greatly reduce the price of securities would occasion
serious, if not fatal, results to the banks most extensively
engaged in such operations, and would produce a feeling of
insecurity which would be very dangerous to the entire bank-
ing interest of the country." *
All this machinery was now put in motion ; the banks and
their customers were forced into the false position described,
and towards the end of October it had become perfectly no-
torious in Wall Street that large new issues of Erie had been
made, and that these new issues were intimately connected
with the sharp stringency then existing in the money market.
* Finance Report, 1668, pp. 20, 21.
66 A CHAPTER OF ERIE.
It was at last detei'mined to investigate the matter, and upon
the 27th of the mouth a committee of three was appointed
by the Stock Exchange to wait upon the officers of the cor-
poration with the view of procuring such information as they
might be willing to impart. The committee called on Mr.
Could and stated the object of their visit. In reply to their
inquiries Mr. Gould informed them that Erie convertible bonds
for ten millions of dollars had been issued, half of which had
already been, and the rest of which would be, converted into
stock ; that the money had been devoted to the purchase of
Boston, Hartford, & Erie bonds for five millions, and also
of course to payments for steel rails. The committee de-
sired to know if any further issue of stock was in contempla-
tion, but were obliged to rest satisfied with a calm assurance
that no new issue was just then contemplated except " in cer-
tain contingencies " ; from which enigmatical utterances Wall
Street was left to infer that the exigencies of Messrs. Gould
and Fisk were elements not to be omitted from any calcula-
tions as to the future of Erie and the money market. The
amount of these issues of new stock was, of course, soon
whispered in a general way ; but it was not till months after-
wards that a sworn statement of the secretary of the Erie
Kailway revealed the fact that the stock of the corporation
had been increased from $34,265,300 on the 1st of July,
18G8, the date when Drew and his associates had left it, to
$57,766,300 on the 24th of October of the same year, or by
two hundred and thirty-five thousand shares in four months.*
This, too, had been done without consultation with the board
of directors, and with no other authority than that conferred
by the ambiguous resolution of February 19. Under that
iTsolution the stock of the company had now been increased
* In April, 1871, although the stock wns then nominally registered, :i fur-
ther secret issue was made by which some S 600,000 in cash was realized on
$3,000,000 of stock. Periodical issues had then carried the gross amount up to
the neighborhood of $86,500,000; or from n total of 250,000 shares, when the
management changed at the election of October 17, 1867, to '865,000 shares
within four years. Apparently Mr Fisk wns more correct thnn usual in his
statement, when he remarked, that, having oace joined the robbers, " lie had
been with them ever since."
A CHAPTKK OF EKIK. 67
one hundred and thirty-eight per cent in eight months. Such
a process of inflation may, perhaps, be justly considered the
most extraordinary feat of financial legerdemain which history
has yet recorded.
Now, however, when the committee of the Stock Exchange
had returned to those who sent them, the mask was thrown
off, and operations were conducted with vigor and determina-
tion. New issues of Erie were continually forced upon the
market until thestock fell to 35 ; greenbacks were locked up
iu the vaults of the banks, until the unexampled sum of
twelve millions was withdrawn from circulation ; the prices
of securities and merchandise declined ; trade and the au-
tumnal movement of the crops were brought almost to a
stand-still ; and loans became more and more difficult to nego-
tiate, until at length eveii one and a half per cent a day was
paid for carrying stocks. Behind all this it was notorious that
some one was pulling the wires, the slightest touch upon
which sent a quiver through every nerve of the great financial
organism, and wrung private gain from public agony. The
strange proceeding reminds one of those scenes in the cham-
bers of the Inquisition where the judges calmly put their
victim to the question, until his spasms warned them not to
exceed the limits of human endurance. At last the public
distress reached the ears of the government at Washington.
While it was simply the gamblers of Wall Street who were
tearing each other, their clamor for relief excited little sym-
pathy. When, however, the suffering had extended through
all the legitimate business circles of the country, when the
scarcity of money threatened to cut off the winter food of the
poor, to rob the farmer of the fruits of his toil, and to bring
ruin upon half the debtor class of the community, then
even Mr. McCulloch, pledged as he was to contraction, was
moved to interfere. The very revenues of the government
were affected by the operations of gamblers. They were
therefore informed that, if necessary, fifty millions of addi-
tional currency would be forthcoming to the relief of the
community, and then, and not till then, the screws were
loosened.
08 A CHAPTER OF ERIE.
The harvest of the speculators, however, was still but half
gathered. Hitherto the combination had operated for a fall.
Now was the moment to change the tactics and take advan-
tage of the rise. The time was calculated to a nicety. The
London infatuation had wonderfully continued, and as fast as
certificates of stock were issued they seemed to take wings
across the Atlantic. Yet there was a limit even to English
credulity, and in November it became evident that the agents
of foreign houses were selling their stock to arrive. The
price was about 40 ; the certificates might be expected by the
steamer of the 23d. Instantly the combination changed
front. As before they had depressed the market, they now
ran it up, and, almost as if by magic, the stock, which had
been heavy at 40, astonished every one by shooting up to 50.
New developments were evidently at hand.
At this point Mr. Daniel Drew once more made his appear-
ance on the stage. As was very natural, he had soon wearied
of the sameness of his part as a mere looker-on in Wall Street,
and had relapsed into his old habits. He was no longer
treasurer of the Erie, and could not therefore invite the pub-
lic to the game, while he himself with sombre piety shook tin
loaded dice. But it had become with him a second nature to
operate in Erie, and once more he was deep in its movements.
At first he had combined with his old friends, the present
directors, in their " locking-up " conspiracy. He had agreed
to assist them to the extent of four millions. Tho vacillating,
timid nature of the man, however, coulJ not keep pace with
his more daring and determined associates, and, after embark-
ing a million, becoming alarmed at the success of the joint
oj)erations and the remonstrances of those who were threat-
ened with ruin, he withdrew his funds from the operators'
control and himself from their councils. But though he did
nut care to run the risk or to incur the odium, he had no sort
of objection to sharing the 'spoils. Knowing, therefore, or
supposing that he knew, the plan of campaign, and that plan
jumping with his own be.-irish inclinations, he contiuucd, on
his own juvount, operations looking to a fall. One may easily
A CHAPTER OF ERIE. CD
conceive the wrath of the Erie operators at such a treacherous
policy ; and it is not difficult to imagine their vows of ven-
geance. Meanwhile all went well with Daniel Drew. Erie
looked worse and worse, and the golden harvest seemed draw-
ing near. By the middle of November he had contracted for
the delivery of some seventy thousand shares at current prices,
averaging, perhaps, 38, and probably was counting his gains.
He did not appreciate the full power and resources of his old
associates. On the 14th of November their tactics changed,
and he found himself involved in terrible entanglements,
hopelessly cornered. His position disclosed itself on Satur-
day. Naturally the first impulse was to have recourse to
the courts. An injunction a dozen injunctions could
be had for the asking, but, unfortunately, could be had by
both parties. Drew's own recent experience, and his intimate
acquaintance with the characters of Fisk and Gould, were not
calculated to inspire him with much confidence in the efficacy
of the law. But nothing else remained, and, after hurried
consultations among the victims, the lawyers were applied to,
the affidavits were prepared, and it was decided to repair on
the following Monday to the so-called courts of justice.
Nature, however, had not bestowed on Daniel Drew the
steady nerve and sturdy gambler's pride of either Vanderbilt
or of his old companions at Jersey City. His mind wavered
and hesitated between different courses of action. His only
care was for himself, his only thought was of his own position.
He was willing to betray one party or the other, as the case
might be. He had given his affidavit to those who were to
bring the suit on the Monday, but he stood perfectly ready to
employ Sunday in betraying their counsels to the defendants in
the suit. A position more contemptible, a state of mind more
pitiable, can hardly be conceived. After passing the night in
this abject condition, on the morning of Sunday he sought out
Mr. Fisk for purposes of self-humiliation and treachery.* He
* It ought perhaps to be stated that this portion of the narrative has ro
stronger foundation than an affidavit of Mr. Fisk, which has cot, however,
been publicly contradicted.
70 A CHAPTER OF ERIE.
then partially revealed the difficulties of his situation, only to
have his confidant prove to him how entirely he was caught,
by completing to him the revelation. He betrayed the secrets
of his new allies, and bemoaned his own hard fate ; he was
thereupon comforted by Mr. Fisk with the cheery remark
that "he (Drew) was the last mau who ought to whine over
any position in which he placed himself in regard to Erie."
The poor mau begged to see Mr. Gould, and would take no
denial. Finally Mr. Gould was brought in, and the scene was
repeated for his edification. The two must have been satiated
with revenge. At last they sent him away, promising to see
him again that evening. At the hour named he again ap-
peared, and, after waiting their convenience, for they
spared him no humiliation, he again appealed to them,
offering them great sums if they would issue new stock or
lend him of their stock. He implored, he argued, he threat-
ened. At the end of two hours of humiliation, persuaded
that it was all in vain, that he was wholly in the power of an-
tagonists without mercy, he took his hat, said, " I will bid you
good night," and went his way.
There is a touch of nature about this scene which reads like
fiction. Indeed, it irresistibly recalls the feebler effort of
Dickens to portray Fagin's last night alive, and there is more
pathos in the parting address than in the Jew's, " An old
111:111, my lord ! a very, very old man." But the truth is
stranger than fiction. Dickens did not dare picture the old
"fence" in Oliver Twist turned out of his own house and
stripped of his plunder by the very hands through which he
had procured it. In the case of Daniel Drew, however, the
ideal poetic justice was brought about in fact ; the evil instruc-
tions returned to plague the inventor, and it is hard to believe
that, as he left the Erie offices that night, his apt pupils, even
as those of Fagin might have done, did not watch his retiring
steps with suppressed inerriine f ; and, when the door had
rinsed upon him, that the nne did not explode in loud bursts
of laughter, while the other, with a quiet chuckle, plunged
his hands into those capacious pockets which yawned for all
A CHAPTER OF ERIE. 71
the Avealth of Erie. Bad as all these things are, terrible as is
the condition of affairs only partially revealed, there is a grim
humor running through them which ever makes itself felt.
But to return to the course of events. With the lords of
Erie forewarned was forearmed. They knew something of the
method of procedure in New York courts of law. At this-
particular juncture Mr. Justice Sutherland, a magistrate
of such pure character and unsullied reputation that it is
inexplicable how he ever came to be* elevated to the bench on
which he sits, was holding chambers, according to assignment,
for the four weeks between the first Monday in November and
the first Monday in December. By a rule of the court, all
applications for orders during that time were to be made
before him, and he only, according to the courtesy of the
Bench, took cognizance of such proceedings. Some general
arrangement of this nature is manifestly necessary to avoid
continual conflicts of jurisdiction. The details of the assault
on the Erie directors having been settled, counsel appeared
before Judge Sutherland on Monday morning, and petitioned
for an injunction restraining the Erie directors from any new
issue of stock or the removal of the funds of the company
beyond the jurisdiction of the court, and also asking that the
road be placed jn the hands of a receiver. The suit was
brought in the name of Mr. August Belmont, who was sup-
posed to represent large foreign holders. The petition set
forth at length the alleged facts in the case, and was sup-
ported by the affidavits of Mr. Drew and others. Mr. Drew
apparently did not inform the counsel of the manner in which
he had passed his leisure hours on the previous day ; had ho
done so, Mr. Belmont's counsel probably would have expedited
their movements. The injunction was, however, duly signed,
and, doubtless, immediately served.
Meanwhile Messrs. Gould and Fisk had not been idle. Ap-
plications for injunctions and receiverships were a game which
two could play at, and long experience had taught these close
observers the very great value of the initiative in law. Accord-
ingly, some two hours before the Belmont application was
72 A CHAPTER OF ERIE.
made, they had sought no less a person than Mr. Justice Bar-
nard, caught him, as it were, either in his bed or at his break-
fast, whereupon he had held a lit de justice, and made divers
astonishing orders. A petition was presented in the name
of one Mclntosh, a salaried officer of the Erie Road, who
claimed also to be a shareholder. It set forth the danger
of injunctions and of the appointment of a receiver, the great
injury likely to result therefrom, etc. After due consideration
on the part of Judge Barnard, an injunction was issued, stay-
ing and restraining all suits, and actually appointing Jay
Goiild receiver, to hold and disburse the funds of the company
in accordance with the resolutions of the Board of Directors
and the Executive Committee. This certainly was a very
brilliant flank movement, and testified not less emphatically
to Gould's genius than to Barnard's law ; but most of all did
it testify to the efficacy of the new combination between
Tammany Hall and the Erie Railway. Since the passage
of the bill "to legalize counterfeit money," in April, and
the present November, new light had burst upon the judicial
mind, and as the news of one injunction and a vague rumor
of the other crept through Wall Street that day, it was no
wonder that operators stood aghast and that Erie fluctuated
wildly from 50 to 61 and back to 48.
The Erie directors, however, did not rest satisfied with the
position which they had won through Judge Barnard's order.
That simply placed them, as it were, in a strong defensive
attitude. They were not the men to stop there : they aspired
to nothing less than a vigorous offensive. With a superb au-
dacity, which excites admiration, the new trustee immediately
filed a supplementary petition. Therein it was duly set forth
that doubts had been raised as to the legality of the recent, issue
of some two hundred thousand shares of stock, and that only
about this amount was to be had in America ; the trustee there-
fore petitioned for authority to use the funds of the corporat ion
to purchase and cancel the whole of this amount at any price
less than the par value, without regard to the rate at which it
had been issued. The desired authority was conferred by Mr.
A CHAPTER OF ERIE. 73
Justice Barnard as soon as asked. Human assurance could go
no further. The petitioners had issued these shares in the
bear interest at 40, and had run down the value of Erie to
35 ; they had then turned round, and were now empowered
to buy back that very stock in the bull interest, and in the
name and with the funds of the corporation, at par. A law
of the State distinctly forbade corporations from operating in
their own stock ; but this law was disregarded as if it had
been only an injunction. An injunction forbade the treasurer
from making any disposition of the funds of the company, and
this injunction was respected no more than the law. These
trustees had sold the property of their wards at 40 ; they
were now prepared to use the money of their wards to buy
the same property back at 80, and a jiidge had been found
ready to confer on them the power to do so. Drew could not
withstand such tactics, and indeed the annals of Wall Street
furnished no precedent or parallel. They might have fur-
nished one, but the opportunity had been lost. Had Robert
Schuyler not lived fifteen years too soon, had he, instead
of flying his country and dying broken-hearted in exile, boldly
attempted a change of front when his fraudulent issues had
filled Wall Street with panic, and had he sought to use the
funds of his company for a masterly upward movement in his
own manufactured stock, then, though in those uncultivated
and illiberal days his scheme might have come to naught, and
lie himself might even have passed from the presence of an
indignant jury into the keeping of a surly jailer, at least he
would have evinced a mind in advance of his day, and could
have comforted himself with the assurance that he was the
first of a line of great men, and that the time was not far
distant when his name and his fame would be cherished
among the most brilliant recollections of Wall Street. But
Schuyler lived before his time !
When this last, undreamed-of act was made public on
Wednesday at noon, it was apparent that the crisis was not far
off. Daniel Drew was cornered. Erie was scarce and selling
at 47, and would not become plenty until the arrival of the Eng-
74 A CHAPTER OF ERIE.
lish steamer on Monday; and so, at 47, Mr. Drew flung him-
self into the breach to save his endangered credit, and, under
his purchases, the- stock rapidly rose, until at five o'clock
Wednesday afternoon it reached 57. Contrary to expectation,
the " corner " had not yet culminated. It became evident the
next morning that before two o'clock that day the issue would
be decided. Drew fought desperately. The Brokers' Board
was wild with excitement. High words passed ; collisions
took place ; the bears were savage, and the bulls pitiless.
Erie touched 62, and there was a difference of sixteen per
cent between cash stock and stock sold to be delivered in
three days, when the steamer would be in, and a dif-
ference of ten per cent between stock to be delivered on
the spot and that to be delivered at the usual time, which
was a quarter after two o'clock. Millions were handled like
thousands ; fabulous rates of interest were paid ; rumors of
legal proceedings were flying about, and forays of the Erie
chiefs on the Vanderbilt roads were confidently pi'edicted.
New York Central suddenly shot up seven per cent under
these influences, and Vanderbilt seemed about to enter the
field. The interest of the stock market centred in the com-
batants and on these two great corporations. All other stocks
were quiet and neglected while the giants were fighting it
ont. The battle was too fierce to last long. At a quarter
before three o'clock the struggle would be over. Yet now, at
the very last moment, the prize which trembled before them
eluded the grasp of the Eric ring. Their opponent was not
saved, but they shared his disaster. Their combination had
turned on the fact, disclosed to them by the Erie books, that
some three hundred thousand shares of its stock had been
issued in the ten-share certificates which alone are transmitted
to London. This amount they supposed to be out of the
country ; the. balance they could account for as beyond the
iv.u-h of I)re\v. Suddenly, as two o'clock approached, and
Krie \vas trembling in the sixties, all Broadway every tailor
and boot-maker and elixir-vender of Now York seemed pour-
ing into Mro.-id Street, and each new-comer held eagerly before
A CHAPTER OF ERIE. /O
him one or more of those ten-share certificates which should
have been in London. Not only this, but the pockets of the
agents of foreign bankers seemed bursting with them. Bed-
lam had suddenly broken loose in Wall Street. It was abso-
lutely necessary for the conspirators to absorb this stock, to
keep it from the hands of Drew. This they attempted to do,
and manfully stood their ground, fighting against time. Sud-
denly, when the hour had almost come, when five minutes
more would have landed them in safety, through one of
those strange incidents which occur in Wall StreeN and which
cannot be explained, they seemed smitten with panic. It is
said their bank refused to certify their checks for the suddenly
increased amount ; the sellers insisted on having certified
checks, and, in the delay caused by this unforeseen difficulty,
the precious five minutes elapsed, and the crisis had passed.
The fruits of their plot had escaped them. Drew made good
his contracts at 57, the stock at once fell heavily to 42, and a
dull quiet succeeded to the excitement of the morning. The
hand of the government had made itself felt in Wall Street.
The Broad Street conflict was over, and some one had
reaped a harvest. Who was it 1 It was not Drew, for his
losses, apart from a ruined prestige, were estimated at nearly
a million and a half of dollars. The Erie directors were not the
fortunate men, for their only trophies were great piles of certifi-
cates of Erie stock, which had cost them "corner" prices, and for
which no demand existed. If Drew's loss was a million and
a half, their loss was likely to be nearer three millions. Who,
then, were the recipients of these missing millions 1 There is
an ancient saying, which seems to have been tolerably verified
in this case, that when certain persons fall out certain other
persons come by their dues. The " corner " was very beauti-
ful in all its details, and most admirably planned ; but, unfor-
tunately, those who engineered it had just previously made
the volume of stock too large for accurate calculation. For
once the outside public had been at hand and Wall Street had
been found wanting. A large portion of the vast sum taken
from the combatants found its way into the pockets of tho
76 A CHAPTER OF ERIE.
agents of English bankers, and a part of it was accounted for
by them to their principals ; another portion went to relieve
anxious holders among the American outside public ; the re-
mainder fell to professional operators, probably far more lucky
than sagacious. Still, there had been a fall befoi'e there was
a rise. The subsequent disaster, perhaps, no more than coun-
terbalanced the earlier victory ; at any rate, Messrs. Gould
and Fisk did not succumb, but preserved a steady front, and
Erie was more upon the street than ever. In fact, it was
wholly there now. The recent operations had proved too
outrageous even for the Brokers' Board. A new rule was
passed, that no stock should be called, the issues of which
were not registered at some respectable banking-house. The
Erie directors declined to conform to this rule, and their road
was stricken from the list of calls. Nothing daunted at this,
these Protean creatures at once organized a new board of
their own, and so far succeeded in their efforts as to have
Erie quoted and bought and sold as regularly as ever.
Though the catastrophe had taken place on the 19th, the
struggle was not yet over. The interests involved were so
enormous, the developments so astounding, such passions had
been aroused, that some safety-valve through which suppressed
wrath could work itself oft' was absolutely necessary, and this
the courts of law afforded. The attack was stimulated by
various motives. The bona Jide holders of the stock, espe-
cially the foreign holders, were alarmed for the existence of
their property. The Erie ring had now boldly taken the position
that their duty was, not to manage the road in the interests
of its owners, not to make it a dividend-paying corporation,
but to preserve it from consolidation with the Vanderbilt
monopoly. This policy was openly proclaimed by Mr. (Jould,
at a later day, before an investigating committee 1 at Albany.
With unspeakable effrontery, an effrontery o great as ae
tnally to impose on his audience and a portion of the press,
and make them believe that the public ought, to wish him
Hiiccess, he described how stock issues at the proper time,
to any required amount, could alone keep him in control of
A CHAPTER OF ERIE. 77
the road, and keep Mr. Vanderbilt out of it ; it would be his
duty, therefore, he argued, to issue as much new stock, at
about the time of the annual election, as would suffice to keep
a majority of all the stock in existence under his control ; and
he declared that he meant to do this.* The strangest thing
of all was, that it never seemed to occur to his audience that
the propourider of this comical sophistry was a trustee and
guardian for the stockholders, and not a public benefactor ;
and that the owners of the Erie Road might possibly prefer
not to be deprived of their property, in order to secure the
blessing of competition. So unique a method of securing a
re-election was probably never before suggested with a grave
face, and yet, if we may believe the reporters, Mr. Gould, in
developing it, pixxluced a very favorable impression on the
committee. It was hardly to be expected that such advanced
views as to the duties and powers of railway directors would
favorably impress commonplace individuals who might not
care to have their property scaled down to meet Mr. Gould's
views of public welfare. These persons accordingly, popu-
larly supposed to be represented by Mr. Belinont, wished to
get their property out of the hands of such fanatics in the
* Question to Mr. Gould For the information of the committee, would
you give us your opinion as to the utility of that section of the general
railroad law, under which so many issues of convertible bonds have been
made?
Ansicer. I could only speak as to the Eric Road; that law saved the Erie
Road from bankruptcy; and as long as that law is unrepealed, I should do
what I did again. I should save the road. I think it is a good law.
Q. Is it not liable to abuse?
A. I have never known it to be abused; if that was repealed. I think tli.it
Mr. Vanderbilt would have the road ; but as long as it is not repealed it is held
in terrorem over him.
Q. Suppose the section was amended so as to require the consent of the
stockholders?
A. Suppose he owned all the stock, what would be the difference? ....
Q. What other effect would it (the repeal of Section 10) have?
A. I think it would lay the State open to a great monopoly, the greatest
the world has ever seen.
Much more followed in the same style. One remark of Mr. Gould's, how-
ever, in this examination, bore the stamp of truth and perspicuity. It is re-
corded as follows: " The Erie road won't be a dividend-paying road for a long
time on its common stock."
78 A CHAPTER OF ERIE.
cause of cheap transportation and plentiful stock, with the
least possible delay. Combined with these were the operators
who had suffered in the late " corner," and who desired to fight
for better terms and a more equal division of plunder. Be-
hind them alJ, Vanderbilt was supposed to be keeping an eager
eye on the long-coveted Erie. Thus the materials for litiga-
tion existed in abundance.
On Monday, the 23d, Judge Sutherland vacated Judge
Barnard's* order appointing Jay Gould receive!', and, after
seven hours' argument and some exhibitions of vulgarity and
indecency on the part of counsel, which vied with those of
the previous April, he appointed Mr. Da vies, an ex-chief jus-
tice of the Court of Appeals, receiver of the road an.l its
franchise, leaving the special terms of the order to be settled
at a future day. The seven hours' struggle had not been
without an object ; that day Judge Barnard had been pecu-
liarly active. The morning hours he had beguiled by the
delivery to the grand jury of one of the most astounding
charges ever recorded ; and now, as the shades of evening
were falling, he closed the labors of the day by issuing a stay
of the proceedings then pending before his associate.* Tucs-
* The charge referred to is altogether too curious to be forgotten ; it was
couched in the following terms:
" OENTLKMEN OF THE GRAND JURY, I deem it not inappropriate at the
present time to call your attention to three or four subjects that, in my judg-
ment, the grand jury should look into: First, in regard to alleged frauds at
elections; second, in regard to the alleged corruptions of the judiciary here;
third, as to the action of certain newspapers in New York in perpetrating
daily and hourly libels. I had intended, gentlemen, at the commencement of
this term, to have gone over many of these subjects more fully than I can
now ; but I am led to-day not to delay it any longer hi consequence of the
annoyance I am subjected to by newspapers and letter-writers, not borne out,
of all sorts of vilifications and abuses for offences of which I certainly know
nothing, and see if the writers of some of these articles cannot be made to
come before you and substantiate some among the many of the different alle-
gations that they huve made against the judge that now addresses you. In
to-day'^ Tribune and to-day's Times, along with articles in the Jersey papers
and cKowhen', are charges of the most atrocious character made against cor-
ruptions, in interfering with the duties of electors, and charging the judge
with being in a combination in Wall Street. Now, it is unnecessary for me to
any to yon that he never bought or sold or owned a share of stock in his life,
and :i for the hrge fortune of $ 5.000.0AO which one of the papers charges
A CHAPTER OF ERIE. 79
flay had been named by Judge Sutherland, at the time he
appointed his receiver, as the day upon which he would settle
the details of the order. His first proceeding upon that day,
on finding his action stayed by Judge Barnard, was to grant a
motion to show cause, on the next day, why Barnard's order
should not be vacated. This style of warfare, however, sa-
vored altogether too much of the tame defensive to meet suc-
cessfully the bold strategy of Messrs. Gould and Fisk. They
carried the war into Africa. In the twenty-four hours during
which Judge Sutherland's order to show cause was pending-
three new actions were commenced by them. In the first
him with being possessed of, he has not now, nor did he ever have, belonging
to him, separate from his wife, a single dollar's worth of property, and is to-
day dependent upon his salary as a judge and the charity of his wife; and
why these particular and atrocious charges at this particular time should be
made with such boldness and audacity is a matter I hope you as grand jurors,
whose duty it is, will look into, so that if you find them to be substantial, or
even a suspicion that they are true, that you will give the judge a chance to
resign. For infamy means one thing, and it ought to be ferreted out; and if a
man or a newspaper editor will sit down deliberately and make a charge
without any proof, let us see whether the rigor and terror of the law will not
stop this thing in future. For eleven years this judge has submitted to it
without any notice, and now, having arrived at a period of life when his use-
fulness is impaired by such charges, he deems it his duty, and yours, gentle-
men, to look into the matter whenever you have leisure, and say whether a
combination of thieves, scoundrels, and rascals, who have infested Wall Street
and Broad Street for years, and are now quarrelling among themselves, shall be
permitted to turn around and endeavor to hide their own tracks by abuse and
vilification of the judge."
It may be interesting to record how this falmination affected the papers
referred to. The Times the next morning commented on it as follows: " What
we have said and done in the matter we have said and done deliberately; ....
we believe we have said nothing that is not true, and nothing that cannot be
proved to be true. At all events, we shall very willingly accept the responsi-
bility of establishing its truth and of vindicating ourselves from the judge's
imputations for having said it. A few days later it was reported that a true
bill had been found against the Times, and that paper on the 26th congratu-
lated the public on the fact. Finally, when Judge Barnard determined to drop
the matter, the Times, in its issue of December 1, discoursed as follows on
the subject: "We beg the judge to understand that we are quite ready to
meet the issue that he tendered us, and to respond to such an indictment as
he first urged the grand jury to find against us, or to a suit for damages,
which would, perhaps, better suit the deplorable condition of pecuniary
dependence to which he says he is reduced."
Nothing further came of the matter.
80 A CHAPTER OF ERIE.
place, they sued the suers. Alleging the immense injury
likely to result to the Erie Road from actions commenced, as
they alleged, solely with a view of extorting money in settle-
ment, Mr. Belmont was sued for a million of dollars in dam-
ages. Their second suit was against Messrs. Work, Schell,
and others, concerned in the litigations of the previous spring,
to recover the $429,250 then paid them, as was alleged, in a
fraudulent settlement. These actions were, however, com-
monplace, and might have been brought by ordinary men.
Messrs. Gould and Fisk were always displaying the invention
of genius. The same day they carried their quarrels into the
United States courts. The whole press, both of New York
and of the country, disgusted with the parody of justice
enacted in the State courts, had cried aloud to have the whole
matter transferred to the United States tribunals, the decis-
ions of which might have some weight, and where, at least,
no partisans upon the bench would shower each other with
stays, injunctions, vacatings of orders, and other such pellets
of the law. The Erie ring, as usual, took time by the fore-
lock. While their slower antagonists were deliberating, they
acted. On this Monday, the 23d, one Henry B. Whelpley,
who had been a clerk of Gould's, and who claimed to be a
stockholder in the Erie and a citizen of New Jersey, instituted
a suit against the Erie Railway before Judge Blatchford, of
the United States District Court. Alleging the doubts which
hung over the validity of the recently issued stock, he peti-
tioned that a receiver might be appointed, and the company
directed to transfer into his hands enough property to secure
from loss the plaintiff as well as all other holders of the new
issues. The Krie counsel were on the ground, and, as soon as
the petition was read, waived nil further notice as to the nut
ters contained in it ; whereupon the court at once appointed
Jay GouM ivreivcr, and directed the Krie Com puny to phice
ci-ht millions of dollars in his hands to protect the rights
represented by the plaintiff. Of course the receiver \VMS
required to give bonds witli siiHicienl sureties. Among the
sureties w.-is James Fisk, Jr. The brilliancy of this move
A CHAPTER OF ERIE. 81
was only surpassed by its success. It fell like a bombshell in
the enemy's camp, and scattered dismay among those who
still preserved a lingering faith in the virtue of law as admin-
istered by any known courts. The interference of the court
was in this case asked for on the ground of fraud. If any
fraud had been committed, the officers of the company alone
could be the delinquents. To guard against the consequences
of that fraud, a receivership was prayed for, and the court
appointed as receiver the very officer in whom the alleged
frauds, on which its action was based, must have originated.
It is true, as was afterwards observed by Judge Nelson in set-
ting it aside, that a prima facie case, for the appointment of a
receiver " was supposed to have been made out," that no ob-
jection to the person suggested was made, and that the right
was expressly reserved to other parties to come into court,
with any allegations they saw fit against Receiver Gould.
The collusion in the case was, nevertheless, so evident, the
facts were so notorious and so apparent from the very papers
before the court, and the character of Judge Blatchford is so
far above suspicion, that it is hard to believe that this order
was not procured from him by surprise, or through the agency
of some counsel in whom he reposed a misplaced confidence.
The Erie ring, at least, had no occasion to be dissatisfied with
this day's proceedings.
The next day Judge Sutherland made short work of his
brother Barnard's stay of proceedings in regard to the Davies
receivership. He vacated it at once, and incontinently pro-
ceeded, wholly ignoring the action of Judge Blatchford on the
day before, to settle the terms of the order, which, covering
as it did the whole of the Erie property and franchise, ex-
cepting only the operating of the road, bade fair to lead to a
conflict of jurisdiction between the State and Federal courts.
And now a new judicial combatant appears in the arena.
It is difficult to say why Judge Barnard, at this time, disap-
pears from the narrative. Perhaps the notorious judicial
violence of the man, which must have made his eagerness as
dangerous to the cause he espoused as the eagerness of a too
4* F
82 A CHAPTER OF ERIE.
swift witness, had alarmed the Erie counsel. Perhaps the
fact that Judge Sutherland's term in chambers would expire
in a few days had made them wish to intrust their cause to
the magistrate who was to succeed him. At any rate, the
new order staying proceedings under Judge Sutherland's order
was obtained from Judge Cardozo, it is said, somewhat
before the terms of the receivership had been finally settled.
The change spoke well for the discrimination of those who
made it, for Judge Cardozo is a very different man from Judge
Barnard. Courteous but inflexible, subtle, clear-headed, and
unscrupulous, this magistrate conceals the iron hand beneath
the silken glove. Equally versed in the laws of New York and
in the mysteries of Tammany, he had earned his place by a
partisan decision on the excise law, and was nominated for the
bench by Mr. Fernando Wood, in a few remarks concluding as
follows : " Judges were often called on to decide on political
questions, and he was sorry to say the majority of them de-
cided according to their political bias. It was therefore
absolutely necessary to look to their candidate's political prin-
ciples. He would nominate, as a fit man for the office of Judge
of the Supreme Court, Albert Cardozo." Nominated as a
partisan, a partisan Cardozo has always been, when the occa-
sion demanded. Such was the new and far more formidable
champion who now confronted Sutherland, in place of the
vulgar Barnard. His first order in the matter to show
cause why the order of his brother judge should not be set
aside was not returnable until the 30th, and in the inter-
vening five days many events were to happen.
Immediately after the settlement by Judge Sutherland of
the order appointing Judge Davie.s receiver, that gentleman
had proceeded to take possession of his trust. Upon arriving
at the Erie building, he found it converted into a fortress, with
a sentry patrolling behind the bolts and bars, to whom was
confided the duty of scrutini/ing all coiners, and of admitting
none but the faithful allies of the garrison. It so happened
that Mr. Davics, himself unknown to the custodian, was ac-
companied by Mr. Eaton, the former attorney of the Erie
A CHAPTER OF ERIE. 83
corporation. This gentleman was recognized by the sentry,
and forthwith the gates flew open for himself and his com-
panion. In a few moments more the new receiver astonished
Messrs. Gould and Fisk, and certain legal gentlemen with
whom they happened to be in conference, by suddenly appear-
ing in the midst of them. The apparition was not agreeable.
Mr. Fisk, however, with a fair appearance of cordiality, wel-
comed the strangers, and shortly after left the room. Speedily
returning, his manner underwent a change, and he requested
the new-comers to go the way they came. As they did not
comply at once, he opened the door, and directed their atten-
tion to some dozen men of forbidding aspect who stood out-
side, and who, he intimated, were pi'epared to eject them
forcibly if they sought to prolong their unwelcome stay. As
an indication of the lengths to which Mr. Fisk was prepared
to go, this was sufficiently significant. The movement, how-
ever, was a little too rapid for his companions ; the lawyers
protested, Mr. Gould apologized, Mr. Fisk cooled down, and
his familiars retired. The receiver then proceeded to give
written notice of his appointment, and the fact that he had
taken possession ; disregarding, in so doing, an order of Judge
Cardozo, staying proceedings under Judge Sutherland's order,
which one of the opposing counsel drew from his pocket, but
which Mr. Davies not inaptly characterized as a "very singu-
lar order," seeing that it was signed before the terms of the
order it sought to affect were finally settled. At length, how-
ever, at the earnest request of some of the subordinate offi-
cials, and satisfied with the formal possession he had taken,
the new receiver delayed further action until Friday. He
little knew the resources of his opponents, if he vainly sup-
posed that a formal possession signified anything. The suc-
ceeding Friday found the directors again fortified within, and
himself a much enjoined wanderer without. The vigilant
guards were now no longer to be beguiled. Within the build-
ing, constant discussions and consultations were taking place ;
without, relays of detectives incessantly watched the premises.
No rumor was too wild for public credence. It was confi-
84 A CHAPTER OF ERIE.
dently stated that the directors were about to fly the State
and the country, that the treasury had already heen con-
veyed to Canada. At last, late on Sunday night, Mr. Fisk
with certain of his associates left the building, and made for
the Jersey Ferry ; but on the way he was stopped by a vigilant
lawyer, and many papers were served upon him. His plans
were then changed. He returned to the office of the company,
and presently the detectives saw a carriage leave the Erie
portals, and heard a loud voice order it to be driven to the
Fifth Avenue Hotel. Instead of going there, however, it
drove to the ferry, and presently an engine, with an empty
directors' car attached, dashed out of the Erie station in Jei'-
sey City, and disappeared in the darkness. The detectives
met and consulted ; the carriage and the empty car were put
together, and the inference, announced in every New York
paper the succeeding day, was that Messrs. Fisk and Gould
had absconded with millions of money to Canada.
That such a ridiculous story should have been published,
much less believed, simply shows how utterly demoralized the
public mind had become, and how prepared for any act of high-
handed fraud or outrage. The libel did not long remain uncon-
tradicted. The next day a card from Mr. Fisk was telegraphed
to the newspapers, denying the calumny in indignant terms.
The eternal steel rails were again made to do duty, and the
midnight flitting became a harmless visit to Binghamton on
business connected with a rolling-mill. Judge Balcom, how-
ever, of injunction memory in the earlier records of the Erie
suits, resides at Binghamton, and a leading New York paper
not inaptly made the timid inquiry of Mr. Fisk, " If he really
thought that Judge Balcom was running a rolling-mill of the
Erie Company, what did he think of Judge Barnard?" Mr.
Fisk, however, as became him in his character of the Mavcnas
of the bar, instituted suits claiming damages in fabulous sums,
for defamation of character, against some half-dozen of the
leading papers, and nothing further was heard of the matter,
nor, indeed, of the suits either. Not so of the trip to Itinij,
hamtoii. On Tuesday, the 1st of December, while one set
A CHAPTER OF ERIE. 85
of lawyers were arguing mi appeal in the Whelpley case before
Judge Nelson in the Federal courts, and another set were pro-
curing orders from Judge Cardozo staying proceedings author-
ized by Judge Sutherland, a third set were aiding Judge
Balcom in certain new proceedings instituted in the name of
the Attorney-General against the Erie Road. The result
arrived at was, of course, that Judge Balcom declared his to
be the only shop where a regular, reliable article in the way
of law was retailed, and then proceeded forthwith to restrain
aud shut up the opposition establishments. The action was
brought to terminate the existence of the defendant as a
corporation, and, by way of preliminary, application was made
for an injunction and the appointment of a receiver. His
Honor held that, as only three receivers had as yet been ap-
pointed, he was certainly entitled to appoint another. It was
perfectly clear to him that it was his duty to enjoin the de-
fendant corporation from delivering the possession of its road,
or of any of its assets, to either of the receivers already ap-
pointed ; it was equally clear that the corporation would be
obliged to deliver them to any receiver he might appoint.
He was not prepared to name a receiver just then, however,
though he intimated that he should not hesitate to do so if
necessary. So he contented himself with the appointment
of a referee to look into matters, and, generally, enjoined the
directors from omitting to operate the road themselves, or
from delivering the possession of it to " any person claiming
to be a receiver."
This raiding upon the agricultural judges was not peculiar
to the Erie party. On the contrary, in this proceeding it
rather followed than set an example ; for a day or two pre-
vious to Mr. Fisk's hurried journey, Judge Peckham of Albany
had, upon papers identical with those in the Belmont suit,
issued divers orders, similar to those of Judge Balcom, but on
the other side, tying up the Erie directors in a most astonish-
ing manner, and clearly hinting at the expediency of an addi-
tional receiver to be appointed at Albany. The amazing part
of these Peckham and Balcom proceedings is, that they seem
86 A CHAPTER OF ERIE.
to have been initiated with perfect gravity, and neither to have
been looked upon as jests, nor intended by their originators to
bring the courts and the laws of New York into ridicule and
contempt. Of course the several orders in these cases were
of no more importance than so much waste paper, unless,
indeed, some very cautious counsel may have considered au
extra injunction or two very convenient things to have in his
house ; and yet, curiously enough, from a legal point of view,
those in Judge Balcom's court seeni to have been almost the
only properly and regularly initiated proceedings in the whole
ease.
These little rural episodes in no way interfered with a re-
newal of vigorous hostilities in New York. While Judge
Balcom was appointing his referee, Judge Cardozo granted an
order for a reargument in the Belrnont suit, which brought
up again the appointment of Judge Davies as receiver, and
assigned the hearing for the 1 Gth of December. This step on
his part bore a curious resemblance to certain of his perform-
ances in the notorious case of the Wood leases, and made the
plan of operations perfectly clear. The period during which
Judge Sutherland was to sit in chambers was to expire on the
4th of December, and Cardozo himself was to succeed him ;
he now, therefore, proposed to signalize his associate's depart-
ure from chambers by reviewing his orders. No sooner had
he granted the motion, than the opposing counsel applied to
Judge Sutherland, who forthwith issued an order to sHow
cause why the reargument ordered by Judge Cardozo should
not take place at once. Upon which the counsel of the Erie
Road instantly ran over to Judge Cardozo, who vacated Judge
Sutherland's order out of hand. The lawyers then left him
and ran back to Judge Sutherland with a motion to vacate
tliis last order. The contest was now becoming altogether too
ludicrous. Somebody must yield, and when it was reduced to
that, the honest Sutherland was pretty sure to give way to the
subtle Cardozo. Accordingly the hearing on this last motion
was postponed until the next morning, when Judge Suther-
land made a not undignified statement as to his position, and
A CHAPTER OF ERIE. 87
closed by remitting the whole subject to the succeeding Mon-
day, at which time Judge Cardozo was to succeed him in
chambers. Cardozo, therefore, was now iu undisputed pos-
session of the field. In his closing explanation Judge Suth-
erland did not qiiote, as he might have done, the following
excellent passage from the opinion of the court, of which both
lie and Cardozo were justices, delivered in the Schell case as
recently as the last day of the previous June : " The idea that-
a cause, by such manoeuvres as have been resorted to here, can
be withdrawn from one judge of this court and taken pos-
session of by another ; that thus one judge of the same and
no other powers can practically prevent his associate from
exercising his judicial functions ; that thus a case may be
taken from judge to judge whenever one of the parties fears
that an unfavorable decision is about to be rendered by the
judge who, up to that time, had sat in the caiise, and that
thus a decision of a suit may be constantly indefinitely post-
poned at the will of one of the litigants, only deserves to be
noticed as being a curiosity in legal tactics, a remarkable
exhibition of inventive genius and fertility of expedient to
embarrass a suit which this extraordinarily conducted litiga-
tion has developed Such a practice as that disclosed
by this litigation, sanctioning the attempt to counteract the
orders of each other in the progress of the suit, I confess is
new and shocking to me, .... and I trust that we have seen
the last in this high tribunal of such practices as this case has
exhibited. No apprehension, real or fancied, that any judge
is about, either wilfully or innocently, to do a wrong, can pal-
liate, much less justify it." * Neither did Judge Sutherland
state, as he might have stated, that this admirable expression
of the sentiments of the full bench w r as written and delivered
by Judge Albert Cardozo. Probably also Judge Cardozo and
all his brother judges, rural and urban, as they used these
bow-strings of the law, right and left, as their reckless
orders and injunctions struck deep into business circles far
beyond the limits of their State, as they degraded them-
* Schell v. Erie Railway Co., 51 Harbour's S. C. 373, 374.
88 A CHAPTER OF ERIE.
selves in degrading their order, and made the ermine of
supreme justice scarcely more imposing than the motley of the
clown, these magistrates may have thought that they had
developed at least a novel, if not a respectable, mode of con-
ducting litigation. They had not done even this. They had
simply, so far as in them lay, turned back the wheels of
progress and reduced the America of the nineteenth century
to the level of the France of the sixteenth. " The advocates
and judges of our times find bias enough in all causes to ac-
commodate them to what they themselves think fit
What one court has determined one way another determines
quite contrary, and itself contrary to that at another time ;
of which we see very frequent examples, owing to that practice
admitted among us, and which is a marvellous blemish to the
ceremonious authority and lustre of our justice, of not abiding
by one sentence, but running from judge to judge, and court
to court, to decide one and the same* cause." *
It was now very clear that Receiver Davies might abandon
all hope of operating the Erie Railway, and that Messrs.
Gould and Fisk were borne upon the swelling tide of victory.
The prosperous aspect of their affairs encouraged these last-
named gentlemen to yet more vigorous offensive operations.
The next attack was npou Vanderbilt in person. On Saturday,
the 5th of December, only two days after Judge Sutherland
and Receiver Davies were disposed of, the indefatigable Fisk
waited on Commodore Vanderbilt, and, in the name of the
Erie Company, tendered him fifty thousand shares of Erie
common stock at 70.f As the stock was then selling in Wall
* Montaigne's Works, Vol. II. p. 310.
t Throughout these proceedings glimpses nrc from time to time obtained of
the more prominent ehVMton in their undress, as it were, which huve in them
n. good many elements lioth of nature and humor. The following description
of the visit in which this tender was inside was subsequently given by Fisk
on tho witness-stand: ''I went n his ( Vanderbilt's) house; it was n bnd,
stormy day, and I had the Quires in a carpet-bag; I told the Commodore I
Jiftd come to tender 60,000 shares of Krie and wanted back the money which
we had paid for them and the bonds, and I made a separate demand for the
$ 1,000,000 which had been p-iid to cover \\l< lo>*es : be said he had nothing to
do with the Krie now, and must consult his counsel; .... Mr. Shearman
A CHAPTER OF ERIE. 89
Street at 40, the Commodore naturally declined to avail him-
self of this liberal offer. He even went further, and, disre-
garding his usual wise policy of silence, wrote to the New
York Times a short communication, in which he referred to the
alleged terms of settlement of the previous July, so far as
they concerned himself, and denied them in the following
explicit language : " I have had no dealings with the Erie
Railway Company, nor have I ever sold that company any
stock or received from them any bonus. As to the siiits insti-
tuted by Mr. Schell and others, I had nothing to do with
them, nor was I in any way concerned in their settlement."
This was certainly an announcement calculated to confuse the
public ; but the confusion became confounded, when, upon the
10th, Mr. Fisk followed him in a card in which he reiterated
the alleged terms of settlement, and reproduced two checks
of the Erie Company, of July 11, 1868, made payable to the
treasurer and by him indorsed to C. Vanderbilt, upon whose
order they had been paid. These two checks were for the
sum of a million of dollars. He further said that the com-
pany had a paper in Mr. Vanderbilt's own handwriting, stating
that he had placed fifty thousand shares of Erie stock in the
hands of certain persons, to be delivered on payment of
$ 3,500,000, which sum he declared had been paid. Undoubt-
edly these apparent discrepancies of statement admitted of an
explanation ; and some thin veil of equivocation, such as the
transaction of the business through third parties, justified
Vanderbilt's statements to his own conscience. Comment,
wu< with me: the date I don't know: it was about eleven o'clock in the morn-
ing: don't know the day, don't know the month, don't know the year; I rode
up with Shearman, holding the carpet-bag tight between my legs ; I told him
he was a small man and not much protection; this was dangerous property,
you see, and might blow up; .... besides Mr. Shearman the driver went in
with the witnesses, and besides the Commodore I spoke with the servant-girl;
the Commodore was sitting on the bed with one shoe off and one shoe on ;
.... don't remember what more was said; I remember the Commodore put
on his other shoe; I remember those shoes on account of the buckles; you
see there were four buckles on that shoe, and I know it passed through my
mind that if such men wore that kind of shoe I must get me a pair, this
passed through my mind, but I did not speak of it to the Commodore; I was
very civil to him."
90 A CHAPTER OF ERIE.
however, is wholly superfluous, except to call attention to the
amount of weight which is to be given to the statements and
denials, apparently the most general and explicit, which from
time to time were made by the parties to these proceedings.
This short controA'ersy merely added a little more discredit to
what was already not deficient in that respect. On the 10th
of December the Erie Company sued Commodore Vanderbilt
for $ 3,500,000, specially alleging in their complaint the par-
ticulars of that settlement, all knowledge of or connection
Avith which the defendant had so emphatically denied.
None of the multifarious suits which had been brought as
yet were aimed at Mr. Drew. The quondam treasurer had
apparently wholly disappeared from the scene on the 19th
of November. Mr. Fisk took advantage, however, of a leisure
day, to remedy this oversight, and a suit was commenced
against Drew, on the ground of certain transactions between
him, as treasurer, and the railway company, in relation to
some steamboats concenied in the trade of Lake Erie. The
usual allegations of fraud, breach of trust, and other trifling
and, technically, not State prison offences, were made, and
damages were set at a million of dollars.
Upon the 8th the argument in Belmont's case had been
reopened before Judge Cardozo in New York, and upon the
same day, in Oneida County, Judge Boardman, another justice
of the Supreme Court, had proceeded to contribute his share
to the existing complications. Counsel in behalf of Receiver
Davies had appeared before him, and, upon their application,
the Cardozo injunction, which restrained the receiver from
taking possession of the Erie Railway, had been dissolved.
Why this application was made, or why it was granted, sur-
passes comprehension. However, the next day, Judge Board-
man's order having been read in court before Judge Cardozo,
that magistrate suddenly revived to a full appreciation of the
views expressed by him in June in regard to judicial inter-
\\ifli judicial action, and at once stigmatized Jnd^e
action as "extremely indecorous." Neglecting,
however, the happy opportunity to express an opinion as to
A CHAPTER OF ERIE, 91
his own conduct during the previous week, he simply stayed
all proceedings under this new order, and applied himself to
the task of hearing the case before him reargued.
This hearing lasted many days, was insufferably long and
inexpressibly dull. While it was going on, upon the 15th,
Judge Nelson, in the United States'Court, delivered his opin-
ion in the Whelpley suit, reversing, on certain technical
grounds, the action of Judge Blatchford, and declaring that
no case for the appointment of a receiver had been made out ;
accordingly he set aside that of Gould, and, in conclusion,
sent the matter back to the State court, or, in other words, to
Judge Cardozo, for decision. Thus the gentlemen of the ring,
having been most fortunate in getting their case into the Fed-
eral court before Judge Blatchford, were now even more fortu-
nate in getting it out of that court when it had come before
Judge Nelson. After this, room for doubt no longer existed.
Brilliant success at every point had crowned the strategy
of the Erie directors. For once Vanderbilt was effectually
routed and driven from the field. That he shrunk from con-
tinuing the contest against such opponents is much to his
credit. It showed that he, at least, was not prepared to see
how near he could come to the doors of a State prison and yet
not enter them ; that he did not care to take in advance the
opinion of leading counsel as to whether what he meant to do
might place him in the felons' dock. Thus Erie was wholly
given over to the control of the ring. No one seemed any
longer to dispute their right and power to issue as much new
stock as might seem to them expedient. Injunctions had
failed to check them , receivers had no terrors for them. Se-
cure in their power, they now extended their operations over
sea and land, leasing railroads, buying steamboats, ferries,
theatres, and rolling-mills, building connecting links of road,
laying down additional rails, and, generally, proving them-
selves a power wherever corporations were to be influenced or
legislatures were to be bought.
Christmas, the period of peace and good-will, was now
approaching. The dreary arguments before Judge Cardozo
92 A CHAPTER OF ERIE.
had terminated .on December 18, long after the press and
the piiblic had ceased to pay any attention to them, and al-
ready rumors of a settlement were rife. Yet it was not meet
that the settlement should be effected without some final
striking catastrophe, some characteristic concluding tableau.
Among the many actions which had incidentally sprung from
these proceedings was one against Mr. Samuel Bowles, the
editor of the Springfield Republican, brought by Mr. Fisk in
consequence of an article which had appeared in that paper,
reflecting most severely on Fisk's proceedings and private
character, his past, his present, and his probable future.
On the 22d of December, Mr. Bowles happened to be in New
York, and, as he was standing in the office of his hotel, talk-
ing with a friend, was suddenly arrested on the warrant of
Judge McCunn, hurried into a carriage, and driven to Ludlow
Street Jail, where he was locked up for the night. This ex-
cellent jest afforded intense amusement, and was the cause
of much wit that evening at an entertainment given by the
Tammany ring to the newly elected mayor of New York, at
which entertainment Mr. James Fisk, Jr., was an honored
guest. The next morning the whole press was in a state of
high indignation, and Mr. Bowles had suddenly become the
best-advertised editor in the country. At an early hour ho
was, of course, released on bail, and with this outrage the
second Erie contest was brought to a close. It seemed right
and proper that proceedings which, throughout, had set pub-
lic opinion at defiance, and in which the Stock Exchange, tho
courts, and the legislature had come in for eipial measures
of opprobrium for thoir disregard of private rights, should be
terminated by an exhibition of petty spite, in which bench and
bar, judge, sheriff, and jailer, lent themselves with base sub-
serviency to a violation of the liberty of the citizen.
It was not until the 10th of February that Judge Cardo/o
published his decision setting aside the Sutherland reeeiver-
sliip, and establishing on a basis of authority the right to
OV( I 1 issue stock at pleasure. The subject was then as obsolete
and forgotten as though it had never absorbed the public
A CHAPTER OF ERIE. 93
attention. And .another "settlement" had already been
effected. The details of this arrangement have not been
dragged to light through the exposures of subsequent litiga-
tion. But it is not difficult to see where and how a combina-
tion of overpowering influence may have been effected, and a
guess might even be hazarded as to its objects and its victims.
The fact that a settlement had been arrived at was intimated
in the papers of the 2Gth of December. On the 19th of the
same month a stock dividend of eighty per cent in the New
York Central had been suddenly declared by Vanderbilt.
Presently the legislature met. While the Erie ring seemed to
have good reasons for apprehending hostile legislation, Van-
derbilt, on his part, might have feared for the success of a bill
which was to legalize his new stock. But hardly a voice was
raised against the Erie men, and the bill of the Central was
safely carried through. This curious absence of opposition did
not stop here, and soon the two parties were seen united in an
active alliance. Vanderbilt wanted to consolidate his roads ;
the Erie directors wanted to avoid the formality of annual
elections. Thereupon two other bills went hastily through
this honest and patriotic legislature, the one authorizing the
Erie Board, which had been elected for one year, to classify
itself so that one fifth only of its members should vacate
office during each succeeding year, the other consolidating the
Vanderbilt roads into one colossal monopoly. Public interests
and private rights seem equally to have been the victims.
It is impossible to say that the beautiful unity of interests
which led to such results was the fulfilment of the December
settlement ; but it is a curious fact that the same paper which
announced in one column that Vanderbilt's two measures,
known as the consolidation and Central scrip bills had gone to
the Governor for signature, should, in another, have reported
the discontinuance of the Belmont and Whelpley suits by the
consent of all interested.* It may be that public and private
interests were not thus balanced and traded away in a servile
legislature, but the strong probabilities arc that the settlement
* See the New York Tribune of May 10, 1869.
94 A CHAPTER OF ERIE.
of December made white even that of Jtily. Meanwhile the
conquerors the men whose names had been made notorious
through the whole land in all these infamous proceedings
were at last undisputed masters of the situation, and no man
questioned the firmness of their grasp on the Erie Railway.
They walked erect and proud of their infamy through the
streets of our great cities ; they voluntarily subjected them-
selves to that to which other depredators are compelled to
submit, and, by exposing their portraits in public conveyances,
converted noble steamers into branch galleries of a police-
office ; nay, more, they bedizened their persons with gold lace,
and assumed honored titles, until those who w r itnssed in
silent contempt their strange antics were disposed to exclaim
in the language of poor Doll Tearsheet : "An Admiral ! God's
light, these villains will make the word as odious as the word
'occupy,' which was an excellent good word before it was ill
sorted ; therefore, Admirals had need look to 't."
The subsequent history of the Erie Railway, under the
management of the men who had thus succeeded in gaining
absolute control over it, forms no part of this narrative. The
attempt has been made simply to trace the course of events
which resulted in placing a national thoroughfare in the hands
of unscrupulous gamblers, and to describe the complications
which marked their progress to power. The end was finally
attained, when, after every opponent had, by fair means or by
foul, been driven from the conflict, that strange law was en-
acted which assured these men, elected for one year, a five
yeara' term of power, beyond the control of their stockholders.
I'Yi'in that moment all the great resources of the Erie Railway
became mere engines with which to work their lawless will.
Comment would only weaken the force of this narrative.
It sufficiently suggests its own moral. The facts which have
In en set forth cannot but have revealed to every observant
c\c the deep decay which has eaten into our social edifice.
No portion of our system was left untested, and no portion
A CHAPTER OF ERIE. 95
showed itself to be sound. The stock exchange revealed
itself as a haunt of gamblers and a den of thieves ; the offices
of our great corporations appeared as the secret chambers in
which trustees plotted the spoliation of their wards ; the law
became a ready engine for the furtherance of wrong, and the
ermine of the judge did not conceal the eagerness of the par-
tisan ; the halls of legislation were transformed into a mart in
which the price of votes was higgled over, and laws, made to
order, were bought and sold ; while under all, and through all,
the voice of public opinion was silent or was disregarded.
It is not, however, in connection with the present that all
this has its chief significance. It speaks ominously for the
future. It may be that our society is only passing through a
period of ugly transition, but the present evil has its root deep
down in the social organization, and springs from a diseased
public opinion. Failure seems to be regarded as the one unpar-
donable crime, success as the all-redeeming virtue, the acqui-
sition of wealth as the single worthy aim of life. Ten years
ago such revelations as these of the Erie Railway would have
sent a shudder through the community, and would have
placed a stigma on every man who had had to do with them.
Now they merely incite others to surpass them by yet bolder
outrages and more corrupt combinations. Were this not so,
these things would be as impossible among us now as they are
elsewhere, or as they were here not many years ago. While
this continues it is mere weakness to attribute the conse-
quences of a lax morality to a defective currency, or seek to
prevent its outward indications by statute remedies. The root
of the disease is deep ; external applications will only hide its
dangerous symptoms. It is well to reform the currency, it is
well to enact laws against malefactors ; but neither the one
nor the other will restore health to a business community
which tolerates successful fraud, or which honors wealth more
than honesty.
One leading feature of these developments, however, is,
from its political aspect, especially worthy of the attention of
the American people. Modern society has created a class
96 A CHAPTER OF ERIE.
of artificial beings who bid fair soon to be the masters of their
creator. It is but a very few years since the existence of a
corporation controlling a few millions of dollars was regarded
as a subject of grave apprehension, and now this country
already contains single organizations which wield a power rep-
resented by hundreds of millions. These bodies are the crea-
tures of single States ; but in New York, in Pennsylvania, in
Maryland, in New Jersey, and not in those States alone, they
are already establishing despotisms which no spasmodic popu-
lar effort will be able to shake off. Everywhere, and at all
times, however, they illustrate the truth of the old maxim of
the common law, that corporations have no souls. Only in
New York has any intimation yet been given of what the
future may have in store for us should these great powers
become mere tools in the hands of ambitious, reckless men.
The system of corporate life and corporate power, as applied
to industrial development, is yet in its infancy. It tends
always to development, alwa}'s to consolidation, it is ever
grasping new powers, or insidiously exercising covert influ-
ence. Even now the system threatens the central government.
The Erie Railway represents a weak combination compared to
those which day by day are consolidating under the unsus-
pecting eyes of the community. A very few years more, and
we shall see corporations as much exceeding the Eric and the
New York Central in both ability and will for corruption as
they will exceed those roads in wealth and in length of iron
track. We shall see these great corporations spanning the
continent from ocean to ocean, single, consolidated lines,
not connecting Albany with Buffalo, or Lake Erie with the
Hudson, but uniting the Atlantic and the Pacific, and bringing
New York nearer to San Francisco than Albany once was to
Buffalo. Already the disconnected members of these future
leviathans have built up States in the wilderness, and chosen
their attorneys senators of the United States. Now tiieir
p-.wer is in its infancy; in a very le\\ years they will re-enact,
on ;i larger theatre and on a grander .scale, with every feature
magnified, the scenes which were lately witnessed on the nar-
A CHAPTER OF ERIE. 97
row stage of a single State. The public corruption is the
foundation on which corporations always depend for their
political power. There is a natural tendency to coalition be-
tween them and the lowest strata of political intelligence and
morality ; for their agents must obey, not question. They
exact success, and do not cultivate political morality. The
lobby is their home, and the lobby thrives as political virtue
decays. The ring is their symbol of power, and the ring is
the natural enemy of political purity and independence. All
this was abundantly illustrated in the events which have just
been narrated. The existing coalition between the Erie Rail-
way and the Tammany ring is a natural one, for the former
needs votes, the latter money. This combination now controls
the legislature and courts of New York ; that it controls also
the Executive of the State, as well as that of the city, was
proved when Governor Hoffman recorded his reasons for sign-
ing the infamous Erie Directors' Bill. It is a new power, for
which our language contains no name. We know what aris-
tocracy, autocracy, democracy are ; but we have no word to
express government by moneyed corporations. Yet the people
already instinctively seek protection against it, and look for
such protection, significantly enough, not to their own legisla-
tures, but to the single autocratic feature retained in our
system of government, the veto by the Executive. In this
there is something more imperial than republican. The peo-
ple have lost faith in themselves when they cease to have any
faith in those whom they uniformly elect to represent them.
The change that has taken place in this respect of late years
in America has been startling in its rapidity. Legislation is
more and more falling into contempt, and this not so much on
account of the extreme ignorance manifested in it as because
of the corrupt motives which are believed habitually to actu-
ate it. Thus the influence of corporations and of class inter-
ests is steadily destroying that belief in singleness of purpose
which alone enables a representative government to exist, and
the community is slowly accustoming itself to look for pro-
tection, not to public opinion, but to some man in high place
5 o
98 A CHAPTER OF ERIE.
and armed with great executive powers. Him they now think
they can hold to some accountability. It remains to be
seen what the next phase -in this process of gradual develop-
ment will be. History never quite repeats itself, and, as was
suggested in the first pages of this narrative, the old familial-
enemies may even now confront us, though arrayed in such a
modern garb that no suspicion is excited. Americans are apt
pupils, and among them there are probably some who have
not observed Fisk and Vanderbilt and Hoffman without a
thought of bettering their instructions. No successful mili-
tary leader will repeat in America the threadbare experiences
of Europe ; the executive power is not likely to be seized
while the legislative is suppressed. The indications would
now seem rather to point towards the corruption of the legis-
lative and a quiet assumption of the executive through some
combination in one vigorous hand of those influences which
throughout this narrative have been seen only in conflict.
As the Erie ring represents the combination of the corporation
and the hired proletariat of a great city ; as Vauderbilt em-
bodies the autocratic power of Caesarism introduced into cor-
porate life, and as neither alone can obtain complete control
of the government of the State, it, perhaps, only remains for
the coming man to carry the combination of elements one
step in advance, and put Caesarism at once in control of the
corporation and of the proletariat, to bring our vaunted insti-
tutions within the rule of all historic precedent.
It is not pleasant to take such views of the future ; yet
they are irresistibly suggested by the events which have been
narrated. They seem to be in the nature of direct inferences.
The only remedy lies in a renovated public opinion ; but no
indication of this has as yet been elicited. People did indeed,
at one time, watch these Erie developments with interest, but
the feeling excited was rather one of amazement than of in-
dignation. Even where a real indignation was excited, it led
to no sign of any persistent effort at reform ; it betrayal it-
self only in aimless denunciation or in sad forebodings. The
danger, however, is day by day increasing,- and the period dur-
A CHAPTER OF ERIE. 99
ing which the work of regeneration should begin grows always
shorter. It is true that evils ever work their own cure, but
the cure for the evils of Roman civilization was worked out
through ten centimes of barbarism. It remains to be seen
whether this people retains that moral vigor which can alone
awaken a sleeping public opinion to healthy and persistent
activity, or whether to us also will apply these words of the
latest and best historian of the Roman republic : " What De-
mosthenes said of his Athenians was justly applied to the
Romans of this period ; that people were very zealous for
action so long as they stood round the platform and listened
to proposals of reform ; but, when they went home, no one
thought further of what he had heard in the market-place.
However those reformers might stir the fire, it was to no pur-
pose, for the inflammable material was wanting." *
* Mommsen, Vol. IV. p. 91, referring to the early Ciceronian period, B. c. 75.
THE NEW YORK GOLD CONSPIRACY/
Howe of Representatives. Report, No. 31. Forty-first Con-
gress, Second Session. Report of the Committee, on Banking
and Currency, in response to a Resolution of the House of
Representatives, passed December 13, 1869, directing the Com-
mittee " to investigate the causes that led to the unusual and
extraordinary fluctuations of Gold in the City of New York,
from the 21st to the 27th of September, 1869 " ; accompanied
by the Testimony collected by the Committee.
civil war in America, with its enormous issues of depre-
JL ciating currency, and its reckless waste of money and credit
by the government, created a speculative mania such as the
United States, with all its experience in this respect, had never
before known. Not only in Broad Street, the centre of New
York speculation, but far and wide throughout the Northern
States, almost every man who had money at all employed ;i
part of .his capital in the purchase of stocks or of gold, of cop-
per, of petroleum, or of domestic produce, in the hope of a
rise in prices, or staked money on the expectation of a fall.
To use the jargon of the street, every farmer and every shop-
keeper in the country eecmed to be engaged in " carrying "
some favorite security " on a margin." Whoever could obtain
five pounds sent it to a broker with orders to buy fifty pounds'
worth of stocks, or whatever amount the broker would consent
to purchase. If the stock rose, the speculator prospered ; if
* From the Westminster Review, for October, 1870.
THE NEW YORK GOLD CONSPIRACY. 101
it fell until the five pounds of deposit or margin were lost, the
broker demanded a new deposit, or sold the stock to protect
himself. By means of this simple and smooth machinery,
winch differs in no essential respect from the processes of
roulette or rouge-et-noir, the whole nation flung itself into the
Stock Exchange, until the " outsiders," as they were called, in
opposition to the regular brokers of Broad Street, represented
nothing less than the entire population of the American Re-
public. Every one speculated, and for a time every one
speculated successfully.
The inevitable reaction began when the government, about
a year after the close of the war, stopped its issues and ceased
borrowing. The greenback currency had for a moment sunk
to a value of only 37 cents to the dollar. It is even asserted
that on the worst day of all, the llth of July, 1804, one sale
of 20,000 in gold was actually made at 310, which is equiva-
lent to about 33 cents in the dollar.* At this point, however,
the depreciation stopped ; and the paper which had come so
near falling into entire discredit steadily rose in value, first
to 50 cents, then to 60, to 70, and within the present year to
more than 90 cents. So soon as the industrious part of the
public felt the touch of this return to solid values, the whole
fabric of fictitious wealth began to melt away under their
eyes.
Thus it was not long before the so-called " outsiders," the
men who speciilated on their own account, and could not act
in agreement or combination, began to suffei'. One by one, or
in great masses, they were made the prey of the larger opera-
tors ; their last margins were consumed, and they dropped
down to the solid level of slow, productive industry. Some
lost everything ; many lost still more than they had, and there
are few families of ordinary connection and standing in the
United States which cannot tell, if they choose, some dark
story of embezzlement, or breach of trust, committed in these
days. Some men, who had courage and a sense of honor,
* See Men and Mysteries of Wall Street, by James K. Medbery, pp. 250,
261.
102 THE NEW YORK GOLD CONSPIRACY.
found life too heavy for them ; others went mad. But the
greater part turned in silence to their regular pursuits, and
accepted their losses as they could. Almost every rich Amer-
ican could produce from some pigeon-hole a bundle of worth-
less securities, and could show check-books representing the
only remaining trace of margin after margin consumed in vain
attempts to satisfy the insatiable broker. A year or two of
incessant losses swept the weaker gamblers from the street.
But even those who continued to speculate found it neces-
sary to change their mode of operations. Chance no longer
ruled over the Stock Exchange and the gold market. The
fate of a battle, the capture of a city, or the murder of a
President, had hitherto been the influences which broke
through the plans of the strongest combinations, and put all
speculators, whether great or small, on fairly even ground ;
but as the period of sudden and uncontrollable disturbing
elements passed away, the market fell more and more com-
pletely into the hands of cliques which found a point of adhe-
sion in some great mass of incorporated capital. Three
distinct railways, with all their enormous resources, became
the property of Cornelius Vanderbilt, who, by means of their
credit and capital, again and again swept millions of dollars
into his pocket by a process curiously similar to gambling
with loaded dice. But Vanderbilt was one of the most re-
spectable of these great operators. The Erie Railway was
controlled by Daniel Drew, and while Vanderbilt at least acted
in the interests of his corporations, Drew cheated equally his
corporation and the public. Between these two men and the
immense incorporated power they swayed, smaller operators,
one after another, were crushed to pieces, until the survivors
1 ,-u-iied to seek shelter within some clique sufficiently strong
to afford protection. Speculation in this manner began to
consume itself, and the largest combination of capital was des-
tined to swallow every weaker combination which ventured to
show it itself in the market.
Thus, between the inevitable effect of a currency which
steadily shrank the apparent wealth of the country, and the
THE NEW YORK GOLD CONSPIRACY. 103
omnipotence of capital iu the stock market, a sounder and
healthier state of society began to make itself felt. Nor
could the unfortunate public, which had been robbed with
such cynical indifference by Drew and Vanderbilt, feel any
sincere regret when they saw these two cormorants reduced to
tearing each other. In the year 1867 Mr. Vanderbilt under-
took to gain possession of the Erie Road, as he had already
obtained possession of the New York Central, the second
trunk line between New York and the West. Mr. Vanderbilt
was supposed to own property to the value of some 10,000,000,
all of which might be made directly available for stock opera-
tions. He bought the greater part of the Erie stock ; Drew
sold him all he could take, and then issued as much more as
was required in order to defeat Vauderbilt's purpose. After a
violent struggle, which overthrew all the guaranties of social
order, Drew triumphed, and Mr. Vanderbilt abandoned the
contest. The Erie corporation paid him a large sum to reim-
burse his alleged losses. At the same time it was agreed that
Mr. Drew's accounts should be passed, and he obtained a
release in full, and retired from the direction. And the Erie
Road, almost exhausted by such systematic plundering, was
left in the undisturbed, if not peaceful, control of Mr. Jay
Gould and Mr. James Fisk, Jr., whose reign began in the
month of July, 1868.
Mr. Jay Gould was a partner in the firm of Smith, Gould;
& Martin, brokers, in Wall Street. He had been engaged
before now in railway enterprises, and his operations had not
been of a nature likely to encourage public confidence- in his
ideas of fiduciary relations. He was a broker, and a broker
is almost by nature a gambler, perhaps the very last profession
suitable for a railway manager. In character he was strongly
marked by his disposition for silent intrigue. He preferred as
a rule to operate on his own account, without admitting other
persons into his confidence, and he seemed never to be satis-
fied except when deceiving every one as to his intentions.
There was a reminiscence of the spider in his nature. He
spun huge webs, in corners and in the dark, which were sel-
104 THE NEW YORK GOLD CONSPIRACY.
dom strong enough to resist a serious strain at the critical
moment. His disposition to this subtlety and elaboration
of intrigue was irresistible. It is scarcely necessary to say
that he had not a conception of a moral principle. In speak-
ing of this class of men it must be fairly assumed at the out-
set that they do not and cannot understand how there can be
a distinction between right and wrong in matters of specula-
tion, so long as the daily settlements are punctually effected.
In this respect Mr. Gould was probably as honest as the mass
of his fellows, according to the moral standard of the street ;
but without entering upon technical questions of roguery, it is
enough to say that he was an uncommonly fine and unscru-
pulous intriguer, skilled in all the processes of stock-gambling,
and passably indifferent to the praise or censure of society.
James Fisk, Jr., was still more original in character. He
was not yet forty years of age. and had the instincts of four-
teen. He came originally from Vermont, probably the most
respectable and correct State in the Union, and his father had
been a pedler who sold goods from town to town in his na-
tive valley of the Connecticut. The son followed his father's
calling with boldness and success. He drove his huge wagon,
made resplendent with paint and varnish, with four or six
horses, through the towns of Vermont and Western Massachu-
setts ; and when his father remonstrated in alarm at his reck-
less management, the young man, with his usual bravado, took
his father into his service at a fixed salary, with the warning
that he was not to put on airs on the strength of his new
dignity. A large Boston firm which had supplied his goods on
credit, attracted by his energy, took him into the house ; the
war broke out ; his influence drew the firm into some bold
^peculation! which were successful; in a few years he retired
with some 20,000, which he subsequently lost. He formed
a connection with Daniel Drew in New York, and a new sign,
ominous of future trouble, was raised in Wall Street, bearing
the names of Fisk <fc Belden, brokers.
Personally Mr. Fisk was coarse, noisy, boastful, ignorant;
the typeof a young butcher in appearance and mind. Noth-
THE NEW YORK GOLD CONSPIRACY. 105
ing could be more striking than the contrast between him and
his future associate Gould. One was small and slight in per-
son, dark, sallow, reticent, and stealthy, with a trace of Jewish
origin. The other was large, florid, gross, talkative, and ob-
streperous. Mr. Fisk's redeeming point was his humor, which
had a strong flavor of American nationality. His mind was
extraordinarily fertile in ideas and expedients, \vhile his conver-
sation was filled with unusual images and strange forms of
speech, which were caught up and made popular by the N w
York press. In respect to honesty as between Gould and Fisk,
the latter was, perhaps, if possible, less deserving of trust
than the former. A story not without a keen stroke of satiri-
cal wit is told by him, which illustrates his estimate of abstract
truth. An old woman who had bought of the elder Fisk a
handkerchief which cost ninepence in the New England cur-
rency, where six shillings are reckoned to the dollar, com-
plained to Mr. Fisk, Jr., that his father had cheated her. Mr.
Fisk considered the case maturely, and gave a decision based
on a priori principles. " No ! " said he, " the old man would n't
have told a lie for ninepence " ; and then, as if this assertion
needed some reasonable qualification, he added, "though he
would have told eight of them for a dollar ! " The distinction
as regards the father may have been just, since the father
seems to have held old-fashioned ideas as to wholesale and
retail trade ; but in regard to the son even this relative de-
gree of truth cannot be predicated with any confidence, since,
if the Investigating Committee of Congress and its evidence are
to be believed, Mr. Fisk seldom or never speaks truth at all.
An intrigue equally successful and disreputable brought
these two men into the Erie Board of Directors, whence they
speedily drove their more timid predecessor Drew. In July,
1868, Gould made himself President and Treasurer of the
corporation. Fisk became Comptroller. A young lawyer,
named Lane, became counsel. These three directors made a
majority of the Executive Committee, and were masters of
Erie. The Board of Directors held no meetings. The Execu-
tive Committee was never called together, and the three men
5*
106 THE NEW YORK GOLD CONSPIRACY.
Fisk, Gcnild, and Lane became from this time the abso-
lute, irresponsible owners of the Erie Railway, not less than if
it had been their personal property and plaything.
This property was in effect, like all the great railway
corporations, an empire within a republic. It consisted of
a trunk line of road 459 miles in length, with branches
314 miles in extent, or 773 miles of road in all. Its
capital stock amounted to about 7,000,000. Its gross re-
ceipts exceeded 3,000,000 per annum. It employed not
less than 15,000 men, and supported their families. Over all
this wealth and influence, greater than that directly swayed
by any private citizen, greater than is absolutely and person-
ally controlled by most kings, and far too great for the public
safety either in a democracy or in any other form of society,
the vicissitudes of a troubled time placed two men in irre-
sponsible authority ; and both these men belonged to a low
and degraded moral and social type. Such an elevation has
been rarely seen in modern history. Even the most dramatic
of modern authors, even Balzac himself, who so loved to deal
with similar violent alternations of fortune, or Alexandre
Dumas, with all his extravagance of imagination, never have
reached a conception bolder or more melodramatic than this,
nor have they ever ventured to conceive a plot so enormous,
or a catastrophe so original, as was now to be developed.
One of the earliest acts of the new rulers was precisely such
as Balzac or Dumas might have predicted and delighted in.
They established themselves in a palace. The old offices of
the Erie Railway were in the lower part of the city, among the
wharves and warehouses ; a situation, no doubt, convenient
for business, but by no means agreeable as a residence ; and
the new proprietors naturally wished to reside on their prop-
erty. Mr. Fisk and Mr. Gould accordingly bought a huge
building of white marble, not unlike a European palace, situ-
ated about two miles from the Imsinrss quarter, and contain-
ing a large theatre or opera-house. They also purchased sev-
eral smaller houses adjoining it. The opera-house cost about
140,000, and a large part of the building was at once leased,
THE NEW YORK GOLD CONSPIRACY. 107
by the two purchasers, to themselves as the Erie corporation,
to serve as offices. This suite of apartments was then fur-
nished by themselves, as representing the corporation, at an
expense of some 60,000, and in a style which, though called
vulgar, is certainly not more vulgar than that of the Presi-
dent's official residence, and which would be magnificent in
almost any palace in Europe. The adjoining houses were
connected with the main building ; and in one of these Mr.
Fisk had his private apartments, with a private passage to his
opera-box. He also assumed direction of the theatre, of
which he became manager-in-chief. To these royal arrange-
ments he brought tastes which have been commonly charged
as the worst results of royal license. The atmosphere of the
Erie offices was not supposed to be disturbed with moral pre-
judices; and as the opera itself supplied Mr. Fisk's mind with
amusement, so the opera troupe supplied him with a perma-
nent harem. Whatever Mr. Fisk did was done on an extraor-
dinary scale.
These arrangements, however, regarded only the pleasures
of the American Aladdin. In the conduct of their interests
the new directors showed a capacity for large conceptions, and
a vigor in the execution of their schemes, such as alarmed the
entire community. At the annual election in 1868, when
Gould, Fisk, and Lane, having borrowed or bought proxies for
the greater part of the stock, caused themselves to be elected
for the ensuing year, the respectable portion of the public
throughout the country was astonished and shocked to learn
that the new Board of Directors contained two names pecu-
liarly notorious and obnoxious to honest men, the names of
William M. Tweed and Peter B. Sweeney. To English ears
these commonplace, not to say vulgar, titles do not seem sin-
gularly alarming ; but to every honest American they con-
veyed a peculiar sense of terror and disgust. The State of
New York in its politics is much influenced, if not controlled,
by the city of New York. The city politics are so entirely in
the hands of the Democratic party as to preclude even the ex-
istence of a strong minority. The party organization centres
108 THE NEW YORK GOLD CONSPIRACY.
in a political club, held together by its patronage and the
money it controls through a system of jobbery unequalled
elsewhere in the world. And the Tammany Club, thus sway-
ing the power of a small nation of several million souls, is it-
self ruled by William M. Tweed and Peter B. Sweeney, abso-
lute masters of this terrible system of theft and fraud, and to
American eyes the incarnation of political immorality.
The effect of this alliance was felt in the ensuing winter in
the passage of a bill through the State legislature, and its sig-
nature by the Governor, abolishing the former system of an-
nual elections of the entire board of Erie directors, and
authorizing the board to classify itself in such a manner that
only a portion should be changed each year. The principle
of the bill was correct. Its practical effect, however, was to
enable Gould and Fisk to make themselves directors for five
years, in spite of any attempt on the part of the stockholders
to remove them. The formality of annual re-election was
spared them ; and so far as the stockholders were concerned,
there was no great injustice in the act. The Erie Road was
in the peculiar position of being without an owner. There
was no cestui que trust, unless the English stockholders could
be called such. In America the stock was almost exclusively
held for speculation, not for investment ; and in the morals of
Wall Street speculation means, or had almost come to mean,
disregard of intrinsic value. In this case society at large was
the injured party, and society knew its risk.
This step, however, was only a beginning. The Tammany
ring, as it is called, exercised a power far beyond politics.
Under the existing constitution of the State, the judges of the
State courts are elected by the people. There are thirty-
three such judges in New York, and each of the thirty-three
is clothed with equity powers running through the whol;;
State. Of these judges Tammany Hall elected several, and
the Krie Railway controlled others in country districts. Each
of these judges mi.dit. forbid proceedings before any and all
the other judges, or stay proceedings in suits already com-
menced. Thus the lives and the property of the public were
THE NEW YORK GOLD CONSPIRACY. 109
in the power of the new combination ; and two of the .city
judges, Barnard and Cardozo, had already acquired a peculiarly
infamous reputation as so-called " slaves to the ring," which
left no question as to the depths to which their prostitution
of justice would descend.
The alliance between Tammany and Erie was thus equiva-
lent to investing Mr. Gould and Mr. Fisk with the highest
attributes of sovereignty ; but in order to avail themselves to
the utmost of their judicial powers, they also required the
ablest legal assistance. The degradation of the bench had
been rapidly followed by the degradation of the bar. Prom-
inent and learned lawyers were already accustomed to avail
themselves of social or business relations with judges to for-
ward private purposes. One whose partner might be elevated
to the bench was certain to be generally retained in cases
brought before this special judge ; and litigants were taught
by experieiice that a retainer in such cases was profitably be-
stowed. Others found a similar advantage resulting from
known social relations with the court. The debasement of
tone was not confined to the lower ranks of advocates ; and
it was probably this steady demoralization of the bar which
made it possible for the Erie ring to obtain the services of
Mr. David Dudley Field as its legal adviser. Mr. Field, a
gentleman of European reputation, in regard to which he is
understood to be peculiarly solicitous, was an eminent law
reformer, author of the New York Code, delegate of the
American Social Science Association to the European Interna-
tional Congress, and asserted by his partner, Mr. Shearman,
in evidence before a committee of the New York legislature,
to be a man of quixotic sense of honor. Mr. Shearman him-
self, a gentleman of English parentage, had earned public grat-
itude by arraigning and deploring, with unsurpassed courage
and point, the condition of the New York judiciary, in an
admirable essay which will be found in the North American
Review for July, 18G7. The value of Mr. Field's services to
Messrs. Fisk and Gould was not to be measured even by the
enormous fet's their generosity paid him. His power over
110 THE NKW YORK GOLD CONSPIRACY.
certain judges became so absolute as to impress the popular
imagination ; and the gossip of Wall Street insists that he
has a silken halter round the neck of Judge Barnard, and a
hempen one round that of Cardozo. It is certain that he
who had a year before threatened Barnard on his own bench
with impeachment now appeared in the character of Bar-
nard's master, and issued as a matter of course the edicts
of his court.
One other combination was made by the Erie managers to
extend their power, and this time it was credit that was
threatened. They bought a joint-stock bank in New York
City, with a capital of ,200,000. The assistance thus gained
was purchased at a very moderate price, since it was by no
means represented by the capital. The great cliques and so-
called ' ' operators " of Wall Street and Broad Street carry on
their transactions by a system of credits and clearing-houses
with a very limited use of money. The banks certify their
checks, and the certified checks settle all balances. Nomi-
nally and by law the banks only certify to the extent of bonct
//'/' deposits, but in reality the custom of disregarding the
strict letter of the law is not unknown, and in regard to the
bank in question, the Comptroller of the Currency, an officer
of the National Treasury, testifies that on an examination of
its affairs in April, 18G9, out of fifteen checks deposited in its
hands as security for certifications made by it, selected at haz-
ard for inquiry, and representing a nominal value of 300,000,
three only were good. The rest represented accommodation
extended t<> brokers and speculators without security. As ;m
actual fact it is in evidence that this same bank on Thursday,
September 24, 1869, certified checks to the amount of nearly
1,500,000 for Mr. Gould alone. What sound security Mr.
Gould deposited against this mass of credit may be left to the
imagination. His operations, however, were not confined to
this bank alone, although this was the only one owned by the
ring.
Thus Mr. Ciould and Mr. Fisk created a combination more
powerful than any that has been controlled by more private
THE NEW YORK GOLD CONSPIRACY. Ill
citizens in America or in Europe since society for self-protec-
tion established the supreme authority of the judicial name.
They exercised the legislative and the judicial powers of the
State ; they possessed almost unlimited credit, and society was
at their mercy. One authority alone stood above them, be-
yond their control ; and this was the distant but threatening
figure of the National Government.
Nevertheless, powerful as they were, the Erie managers
were seldom in funds. The huge marble palace in which they
lived, the theatre which they supported, the reckless bribery
and profusion of management by which they could alone main-
tain their defiance of public opinion, the enormous schemes
for extending their operations into which they rushed with
utter recklessness, all required greater resources than could be
furnished even by the wholesale plunder of the Erie Road.
They were obliged from time to time to issue from their castle
and harry the industrious public or their brother freebooters.
The process was different from that known to the dark ages,
but the objects and the results were equally robbery. At one
time Mr. Fisk is said to have ordered heavy speculative sales
of stock in an express company which held a contract with
the Erie .Railway. The sales being effected, the contract was
declared annulled. The stock naturally fell, and Mr. Fisk
realized the difference. He then ordered heavy purchases,
and having renewed the contract the stock rose again, and Mr.
Fisk a second time swept the street.* In the summer and
autumn of 1869 the two managers issued and sold 235,000
new shares of Erie stock, or nearly as much as its entire capital
when they assumed power in July, 1868. With the aid of the
money thus obtained, they succeeded in withdrawing about
2,500,000 in currency from circulation at the very moment
of the year when currency was most in demand in order to
harvest the crops. For weeks the whole nation writhed and
quivered under the torture of this modern rack, until the
national government itself was obliged to interfere and threaten
a sudden opening of the treasury. But whether the Erie
* Men and Mysteries of Wall Street, p. 168.
112 THE NEW YORK GOLD CONSPIRACY.
speculators operated for a rise or operated for a fall, whether
they bought or sold, and whether they were engaged in manip-
ulating stocks, or locking up currency, or cornering gold, they
were always a public nuisance and scandal.
In order to explain the operation of a so-called corner in
gold to ordinary readers with the least possible use of slang or
technical phrases, two preliminary statements are necessary.
In the first place it must be understood that the supply of
gold immediately available for transfers is limited within dis-
tinct bounds in America. New York and the country behind
it contain an amount usually estimated at about 4,000,000.
The national government commonly holds from 15,000,000
to .20,000,000, which may be thrown bodily on the market
if the President orders it. To obtain gold from Europe or
other sources requires time.
In the second place, gold in America is a commodity bought
and sold like stocks in a special market or gold-room which is
situated next the Stock Exchange in Broad Street and is prac-
tically a part of it. In gold as in stocks, the transactions are
both real and speculative. The real transactions are mostly pur-
chases or loans made by importers who require coin to pay
customs on their imports. This legitimate business is sup-
posed to require from 1,000,000 to 1,500,000 per day.
The speculative transactions are mere wagers on the rise or
fall of price, and neither require any actual transfer of gold,
nor even imply its existence, although in times of excitement
hundreds of millions nominally arc bought, sold, and loaned.
Under the late administration Mr. McCulloch, then Secre-
tary of the Treasury, had thought it his duty at least to
guarantee a stable currency, although Congress forbade him
to restore the gold standard. During four years gold had
fluctuated little, and principally from natural causes, and the
danger of attempting to create an artificial scarcity in it had
prevented the <>]MT;it<>rs from trying an experiment which
would have \tccu sure to irritate the government. The finan-
rial policy of the new administration was not so definitely
fixed, and the success of a speculation would depend on the
THE NEW YORK GOLD CONSPIRACY. 113
action of Mr. Boutwell, the new secretary, whose direction was
understood to have begun by a marked censure on the course
pursued by his predecessor.
Of all financial operations, cornering gold is the most bril-
liant and the most dangerous, and possibly the very hazard
and splendor of the attempt were the reasons of its fascina-
tion to Mr. Jay Gould's fancy. He dwelt upon it for months,
and played with it like a pet toy. His fertile 'mind even went
so far as to discover that it would prove a blessing to the
community, and on this ingenious theory, half honest and
half fraudulent, he stretched the widely extended fabric of the
web in which all mankind was to be caught. This theory
WHS in itself partially sound. Starting from the principle that
the price of grain in New York is regulated by the price in
London and is not affected by currency fluctuations, Mr.
Gould argued that if it were possible to raise the premium on
gold from thirty to forty cents at harvest-time, the farmers'
grain would be worth $1.40 instead of $1.30, and as a conse-
quence the farmer would hasten to send all his crop to New
York for export, over the Erie Railway, which was sorely in
need of freights. With the assistance of another gentleman,
Mr. Goitld calculated the exact premium at which the Western
farmer would consent to dispose of his grain, and thus dis-
tance the three hundred sail which were hastening from the
Danube to supply the English market. Gold, which was then
heavy at 34, must be raised to 45.
This clever idea, like all the other ideas of these gentlemen
of Erie, seems to have had the single fault of requiring that
some one, somewhere, should be swindled. The scheme was
probably feasible ; but sooner or later the reaction from such
an artificial stimulant must have come, and whenever it came
some one must suffer. Nevertheless, Mr. Gould probably
argued that so long as the farmer got his money, the Erie Rail-
way its freights, and he himself his small profits on the gold
he bought, it was of little consequence who else might be
injured ; and, indeed, by the time the reaction came, and gold
was ready to fall as he expected, Mr. Gould would probably
114 THE NEW YORK GOLD CONSPIRACY.
have been ready to assist the process by speculative sales in
order to enable the Western farmer to buy his spring goods
cheap as he had sold his autumn crops dear. He himself was
equally ready to buy gold cheap and sell it dear on his private
account ; and as he proposed to bleed New York merchants
for the benefit of the Western fanner, so he was willing to
bleed Broad Street for his own. The patriotic object was,
however, the one which for obvious reasons Mr. Gould pre-
ferred to put forward most prominently, and on the strength
of which he hoped to rest his ambitious structure of intrigue.
In the operation of raising the price of gold from 133 to
145, there was 110 great difficulty to men who controlled the
resources of the Erie Railway. Credit alone was needed, and
of credit Mr. Gould had an unlimited supply. The only
serious danger lay in the possible action of the national gov-
ernment, which had not taken the same philanthropic view
of the public good as was peculiar to the managers of Erie.
Secretary Boutwell, who should have assisted Mr. Gould in
" bulling " gold, was gravely suspected of being a bear, and
of wishing to depress the premiums to nothing. If he were
determined to stand in Mr. Gould's path, it was useless even
for the combined forces of Erie and Tammany fo jostle
against him ; and it was therefore essential that Mr. Gould
should control the government itself, whether by fair means
or foul, by persuasion or by purchase. He undertook the
task ; and now that his proceedings in both directions have
been thoroughly drawn into light, it is well worth while for
the public to sec how dramatic and how artistically admirable
a conspiracy in real life may be, when slowly elaborated from
the subtle mind of n clever intriguer, and carried into execu-
tion by a band of unshrinking scoundrels.
The first requisite for Mr. Gould's purpose was some channel
of direct communication with the President; and here he was
peculiarly favored by chance. Mr. Abel Rathbone Corbin, for-
merly lawj'er, editor, speculator, lobby-Agent, familiar, as he
claims, with everything, had succeeded, during his varied
career, in accumulating from one or another of his ha/ardmis
THE NEW YORK GOLD CONSPIRACY. 115
pursuits a comfortable fortune, and he had crowned his suc-
cess, at the age of sixty-seven or thereabouts, by contracting
a marriage with General Grant's sister, precisely at the mo-
ment when General Grant was on the point of reaching the
highest eminence possible to an American citizen. To say
that Mr. Corbih's moral dignity had passed absolutely pure
through the somewhat tainted atmosphere in which his life
had been spent, would be flattering him too highly ; but at
least he was now no longer engaged in any active occupation,
and he lived quietly in New York, watching the course of pub-
lic affairs, and remarkable for an eminent respectability which
became the President's brother-in-law. Mr. Gould enjoyed a
slight acquaintance with Mr. Corbin, and he proceeded to
improve it. He assumed, and he asserts that he really felt, a
respect for Mr. Corbin's shrewdness and sagacity. It is amus-
ing to observe that Mr. Corbin claims to have first impi'essed
the famous crop theory on Mr. Gould's mind ; while Mr.
Gould testifies that he himself indoctrinated Mr. Corbin with
this idea, which became a sort of monomania with the Presi-
dent's brother-in-law, who soon began to preach it to the
President himself. On the 15th of June, 1869, the Presi-
dent came to New York, and was there the guest of Mr.
Corbin, who urged Mr. Gould to call and pay his respects to
the Chief Magistrate. Mi*. Gould had probably aimed at
precisely this result. He called ; and the President of the
United States not only listened to the president of Erie, but
accepted an invitation to Mr. Fisk's theatre, sat in Mr. Fisk's
private box, and the next evening became the guest of these
two gentlemen on their magnificent Newport steamer, while
Mr. Fisk, arrayed, as the newspapers reported, " in a blue
uniform, with a broad gilt cap-band, three silver stars on his
coat-sleeve, lavender gloves, and a diamond breast-pin as large
as a cherry, stood at the gangway, surrounded by his aids,
bestarred and bestriped like himself," and welcomed his dis-
tinguished friend.
It had been already arranged that the President should on
this occasion be sounded in regard to his financial policy ; and
116 THE NEW YORK GOLD CONSPIRACY.
when the selected guests among whom were Mr. Gould, Mr.
Fisk, and others -sat down at nine o'clock to supper, the
conversation was directed to the subject of finance. " Some
one," says Mr. Gould, " asked the President what his view
was." The "some one" in question \vas, of course, Mr. Fisk,
who alone had the impudence to put such an inquiry. The
President bluntly replied, that there was a certain amount of
fictitiousuess about the prosperity of the country, and that the
bubble might as well be tapped in one way as another. The
remark was fatal to Mr. Gould's plans, and he felt it, in his
own words, as a wet blanket.
Meanwhile the post of assistant-treasurer at New York had
become vacant, and it was a matter of interest to Mr. Gould
that some person friendly to himself should occupy this posi-
tion, which, in its relations to the public, is second in impor-
tance only to the secretaryship of the treasury itself. Mr.
Gould consulted Mr. Corbin, and Mr. Corbin suggested the
name of General Butterfield, a former officer in the volun-
teer army. The appointment was not a wise one ; nor does it
appear in evidence by what means Mr. Corbin succeeded in
bringing it about. There is a suggestion that he used Mr.
A. T. Stewart, the wealthy importer, as his instrument for
the purpose ; but whatever the influence may have been, Mr.
Corbin appears to have set it in action, and General Butter-
field entered upon his duties towards the 1st of July.
The elaborate preparations thus made show that some
large scheme was never absent from Mr. Gould's mind, al-
though between the months of May and August lie made no
attempt to act upon the markets. But between the 20th of
August and the 1st of September, in company with Messrs.
Woodward and Kimber, two large speculators, he made what
is known as a pool, or combination, to raise the premium on
gold, and some ten or fifteen millions were bought, but with
very little effect on the price. The tendency of the market
was downwards, and it was not easily counteracted. Perhaps
under onliiuirv eirennistaiiees In- might have now abandoned
his |. reject ; but an incident suddenly occurred whirh seems
to have drawn him headlong into the boldest operations.
THE NEW YORK GOLD CONSPIRACY. 117
Whether the appointment of General Butterfield had any
share in strengthening Mr. Gould's faith in Mr. Corbin's se-
cret powers does not appear in evidence, though it may readily
be assumed as probable. At all events, an event now took
place which would have seemed to authorize an unlimited faith
in Mr. Corbin, as well as to justify the implicit belief of an
Erie treasurer in the corruptibility of all mankind. The un-
suspicious President again passed through New York, and
came to breakfast at Mr. Corbin's house on the 2d of Sep-
tember. He saw no one but Mr. Corbin while there, and the
same evening at ten o'clock departed for Saratoga. Mr. Gould
declares, however, that he was told by Mr. Corbin that the
President, in discussing the financial situation, had shown
himself a convert to the Erie theory about marketing the
crops, and had "stopped in the middle of a conversation in
which he had expressed his views, and written a letter" to
Secretary Boutwell. This letter is not produced ; but Secre-
tary Boutwell testifies as follows in regard to it :
" I think on the evening of the 4th of September I received a let-
ter from the President dated at New York, as I recollect it ; I am
not sure where it is dated. I have not seen the letter since the
night I received it. I think it is now in my residence in Groton.
In that letter he expressed an opinion that it was undesirable to
force down the price of gold. He spoke of the importance to the
West of being able to move their crops. His idea was that if gold
should fall, the West would suffer, and the movement of the crops
would be retarded. The impression made on my mind by the letter
was that lie had rather a strong opinion to that effect Upon
the receipt of the President's letter on the evening of the 4th of Sep-
tember, I telegraphed to Judge Richardson [Assistant Secretary at
Washington] this despatch : ' Send no order to Butterfield as to
sales of gold until you hear from me.' "
Mr. Goiild had therefore succeeded in reversing the policy
of the national government ; but this was not all. He knew
what the government would do before any officer of the gov-
ernment knew it. Mr. Gould was at Corbin's house on the 2d
of September ; and although the evidence of both these gen-
tlemen is very confused on this point, the inference is inevita-
118 THE NEW YORK GOLD CONSPIRACY.
ble that Gould saw Corbin privately, unknown to the Presi-
dent, within an hour or two after this letter to Mr. Bout well
Avas written, and that it was at this interview, while the Pres-
ident was still in the house, that Mr. Corbin gave him the
information about the letter ; perhaps showed him the letter
itself. Then followed a transaction worthy of the French
stage. Mr. Corbin's evidence gives his own account of it :
" On the 2d of September (referring to memoranda) Mr. Gould
offered to let mo have some of the gold he then possessed
He spoke to me as he had repeatedly done before, about taking a
certain amount of gold owned by him. I finally told Mr. Gould
that for the sake of a lady, my wife, I would accept of $ 500,000 of
gold for her benefit, as I shared his confidence that gold would rise.
.... He afterwards insisted that I should take a million more, and
I did so on the same conditions for my wife. He then sent me this
paper."
The paper in question is as follows :
" Smith, Gould, Martin, & Co., Bankers,
11 Broad Street, New York, September 2, 186a
Mr.
" Dear Sir : we have bought for your account and risk
500,000, gold, 132, R.
1,000,000, gold, 183|, R.
which we will carry on demand with the right to use.
" SMITH, GOULD, MARTIN, & Co."
This memorandum meant that for every rise of one per cent
in the price of gold Mr. Corbin was to receive ,3,000, and
his name nowhere to appear. If the inference is correct that
Gould had seen Corbin in the morning and had learned from
him what the President had written, it is clear that he must
have made his bargain on the spot, and then going directly to
the city, he must in one breath have ordered this memoran-
dum to be made out and large quantities of gold to be pur-
chased, before the President had allowed the letter to leave
Mr. ( 'orbiu's house.
No time was lost. On this same afternoon, Mr. Gould's
brokers bought large amounts in gold. One testifies to buy-
ing $ 1,315,000 at 134f On the 3d the premium was forced
THE NEW YORK GOLD CONSPIRACY. 119
up to 3G ; on the 4th, when Mr. Boutwell received his letter,
it had risen to 37. Here, however, Mr. Gould seems to have
met a check, and he describes his own position in nervous
Americanisms as follows :
" I did not want to buy so much gold. In the spring I put gold
up from 32 to 38 and 40, with only about seven millions. But all
these fellows went in and sold short, so that in order to keep it up
I had to buy, or else to back down and show the white feather.
They would sell it to you all the time. I never intended to buy
more than four or five millions of gold, but these fellows kept pur-
chasing it on, and I made up my mind that I would put it up to 40
at one time We went into it as a commercial transaction,
and did not intend to buy such an amount of gold. I was forced
into it by the bears selling out. They were bound to put it down.
1 got into the contest. All these other fellows deserted me like rats
from a ship. Kimber sold out and got short He sold out
at 37. He got short of it, and went up "( or, in English, he failed).
It was unfortunate that the bears would not consent to lie
still and be flayed, but this was unquestionably the fact. They
had the great operators for once at a disadvantage, and they
were bent on revenge. Mr. Gould's position was very hazard-
ous. When Mr. Kimber sold out at 37, which was probably
on the 7th of September, the market broke ; and on the 8th
the price fell back to 35. Nor was this all. At the same
moment, when the " pool " was ended by Mr. Kimber's deser-
tion, Mr. Corbin, with his eminent shrewdness and respecta-
bility, told Mr. Gould " that gold had gone up to 37," and
that he " should like to have this matter realized," which was
equivalent to saying that he wished to be paid something on
account. This was on the 6th ; and Gould was obliged this
same day to bring him a check for 5,000, drawn to the order
of Jay Gould, and indorsed in blank by him with a touching
regard for Mr. Corbin's modest desire not to have his name
appear. There are few financiers in the world who will not
agree that this transaction does great credit to Mr. Corbin's
sagacity. It indicates at least that he was acquainted with
the men he dealt with. Undoubtedly it placed Mr. Gould in
a difficult position ; but as Mr. Gould already held some fifteen
120 THE NEW YORK GOLD CONSPIRACY.
millions of gold and needed Mr. Corbin's support, he preferred
to pay .5,000 outright rather than allow Corbin to throw his
gold on the market. Yet the fabric of Gould's web had now
been so seriously injured that, for a whole week, from the 8th
to the 15th of September, he was at a loss what to do, unable
to advance and equally unable to retreat without very severe
losses. He sat at his desk in the opera-house, silent as usual,
and tearing little slips of paper which he threw on the floor
in his abstraction, while he revolved new combinations in his
mind.
Down to this moment Mr. James Fisk, Jr., has not ap-
peared in the affair. Gould ha4 not taken him into his con-
fidence ; and it was not until after the 10th of September
that Gould appears to have decided that there was nothing
else to be done. Fisk was not a safe ally in so delicate an
affair, but apparently there was no choice. Gould approached
him ; and, as usual, his touch was like magic. Mr. Fisk's
evidence begins here, and may be believed when very strongly
corroborated :
" Gold having settled down to 35, and I not having cared to touch
it, he was a little sensitive on the subject, feeling as if he would
rather take his losses without saying anything about it One
day ho said to me, ' Don't you think gold has got. to the bottom ? '
I replied that I did not see the profit in buying gold unless you have
got into a position where you can command the market. Ho then
suid he had bought quite a large amount of gold, and I judged from
his conversation that lie wanted me to go into the movement and
help strengthen the market. Upon that I went into the market
and bought. I should say that was about the 15th or IGth of Sep-
tember. I l>ought at that time about seven or eight millions, I think.''
The market responded slowly to these enormous purchases ;
and on the IGth the clique was still struggling to recover its
lost ground.
.Meanwhile Mr. Gould had placed another million ;ind a half
of gold to the account of Geiiend Butterfield, and notified him
of the purchase. So Mr. Gould swears in spite of General
Butterfiald'a denial. The date of this purchase is not fixed.
Through Mr. Corbin a notice was also sent by Gould about the
THK NEW YORK GOLD CONSPIRACY. 121
middle of September to the President's private secretary, Gen-
eral Porter, informing him that half a million was placed to his
credit. General Porter instantly wrote to repudiate the pur-
chase, but it does not appear that Butterfield took any notice
of Gould's transaction on his account. On the 10th of Sep-
tember the President had again come to New York, where he
remained his brother-in-law's guest till the 13th ; and during
this visit Mr. Gould appears again to have seen him, although
Mr. Corbin avers that on this occasion the President intimated
his wish to the servant that this should be the last time Mr.
Gould obtained admission. " Gould was always trying to get
something out of him," he said ; and if he had known how
much Mr. Gould had succeeded in getting out of him, he
would have admired the man's genius, even while shutting the
door in his face. On the morning of the 13th the President
set out on a journey to the little town of Washington, situ-
ated among the mountains of Western Pennsylvania, where
he was to remain a few days. Mr. Gould, who now consulted
Mr. Corbin regularly every morning and evening, was still
extremely nervous in regard to the President's policy ; and as
the crisis approached, this nervousness led him into the fatal
blunder of doing too much. The bribe offered to Porter was
a grave mistake, but a greater mistake yet was made by
pressing Mr. Corbin's influence too far. He induced Mr.
Corbin to write an official article for the New York press on
the financial policy of the government, an article afterwards
inserted in the New York Times through the kind offices of
Mr. James McHenry, and he also persuaded or encouraged Mr.
Corbin to write a letter directly to the President himself. This
letter, written on the 1 7th under the influence of Gould's anx-
iety, was instantly sent away by a special messenger of Fisk's to
reach the President before he returned to the capital. The
messenger carried also a letter of introduction to General
Porter, the private secretary, in order to secure the personal
delivery of this important despatch.
We have now come to the week which was to witness the
explosion of all this elaborately constructed mine. On Mon-
6
122 THE NEW YORK GOLD CONSPIRACY.
day, the 20th, gold again rose. Throughout Tuesday and
Wednesday Fisk continued to purchase without limit, and
forced the price up to 40. At this time Gould's firm of Smith,
Gould, & Martin, through which the operation was conducted,
had purchased some $50,000,000; and yet the bears went on
selling, although they could only continue the contest by bor-
rowing Gould's own gold. Gould, on the other hand, could
no longer sell and clear himself, for the very reason that the
sale of $50,000,000 woiild have broken the market to noth
ing. The struggle had become intense. The whole country
was looking on with astonishment at the battle between the
bulls and the bears. All business was deranged, and all val-
ues unsettled. There were indications of a panic in the stock
market ; and the bears in their emergency were vehemently
pressing the government to intervene. Gould now wrote to
Mr. Boutwell a letter so inconceivably impudent that it indi-
cates desperation and entire loss of his ordinary coolness. He
began :
" SIR, There is a panic in Wall Street, engineered by a bear
combination. They have withdrawn currency to such an extent
that it is impossible to do ordinary business. The Erie Company
requires eight hundred thousand dollars to disburse Much
of it in Ohio, where an exciting political contest is going on, and
where we have about ten thousand employed, and the trouble is
charged on the administration Cannot you, consistently,
increase your line of currency ? "
From a friend such a letter would have been an outrage ;
but from a member of the Tammany ring, the principal object
of detestation to the government, such a threat or bribe
whichever it may be called was incredible. Mr. Gould was,
in fact, at his wits' cud. He dreaded a panic, and he felt that
it could no longer be avoided.
The scene now shifts for a moment to the distant town of
Washington, among the hills of Western Pennsylvania. On
the morning of the 19th of September, President .Grant and
liis private 1 secretary, General I'urter, were playing croquet on
the grass, when Fisk's messenger, after twenty-four hours of
THE NEW YCI.'A. GOLD CONSPIRACY. 123
travel by rail and carriage, arrived at the house, and sent in
to ask for General Porter. AVhen the President's game was
ended, General Porter came, received his own letter from
Corbin, and called the President, who entered the room and
took his brother-in-law's despatch. He then left the room,
and after some ten or fifteen minutes' absence returned. The
messenger, tired of waiting, then asked, " Is it all right ] "
" All right," replied the President ; and the messenger hast-
ened to the nearest telegraph station, and sent word to Fisk,
" Delivered ; all right/'
The messenger was, however, altogether mistaken. Not
only was all not right, but all was going hopelessly wrong.
The President, it appears, had at the outset supposed the man
to be an ordinary post-office agent, and the letter an ordinary
letter which had arrived through the post-office. Nor was it
until Porter asked some curious question as to the man, that
the President learned of his having been sent by Corbin merely
to carry this apparently unimportant letter of advice. The
President's suspicions were at once excited ; and the same even-
ing, at his request, Mrs. Grant wrote a hurried note to Mrs. Cor-
bin, telling her how greatly the President was distressed at the
rumor that Mr. Corbin was speculating in Wall Street, and
how much he hoped that Mr. Corbin would "instantly discon-
nect himself with anything of that sort."
This letter, subsequently destroyed or said to have been
destroyed by Mrs. Corbin, arrived in New York on the morn-
ing of Wednesday the 22d, the same day on which Gould and
his enemies the bears were making their simultaneous appeals
to Secretary Bout well. Mrs. Corbin was greatly excited and
distressed by her sister-in-law's language. She at once carried
the letter to her husband, and insisted that he should instantly
abandon his interest in the gold speculation. Mr. Corbin,
although he considered the scruples of, his wife and her family
to be highly absurd, assented to her wish ; and when Mr.
Gould came that evening as usual, with $50,000,000 of gold
on his hands, and extreme anxiety on his mind, Corbin read
to him two letters : the first, written by Mrs. Grant to Mrs.
124 THE NEW YORK GOLD CONSPIRACY.
Corbin ; the second, written by Mr. Corbin to President Grant,
assuring him that he had not a dollar of interest in gold.
The assurance of this second letter was, at any sacrifice, to be
made good.
Mr. Corbin proposed that Mr. Gould should give him a
check for 20,000, and take his $1,500,000 off his hands. A
pi'oposition more calmly impudent than this can scarcely be
imagined. Gould had already paid Corbin .5,000, and Corbin
asked for 20,000 more, at the very moment when it was
clear that the 5,000 he had received had been given him
under a misunderstanding of his services. He even had the
impudence to represent himself as doing Gould a favor by
letting him have a million and a half more gold at the highest
market price, at a time when Gould had fifty millions which
it was clear he must sell or be ruined. What Gould might,
under ordinary circumstances, have replied, may be imagined ;
but at this moment he could say nothing. Corbin had but to
show this note to a single broker in Wall Street, and the
whole fabric of Gould's speculation would have fallen to
pieces. Gould asked for time and went away. He consulted
no one. He gave Fisk no hint of what had happened. The
next morning he returned to Corbin, and made him the fol-
lowing offer :
" ' Mr. Corbin, I cannot give you anything if you will go out
If you will remain in, and take the chances of the market, I will
give you my check [for 20,000].' 'And then.' says Mr. Corbin,
'I did what I think it would have troubled almost any other busi-
ness man to consent to do, refuse one hundred thousand dollars on
a rising market. If I had not been an old man married to a middle-
aged woman, I should have done it (of course with her consent) just
as sure as the offer was made. I said, 'Mr. Gould, my will- says
" No ! " Ulysses thinks it wrong, and that it ought to end.' So I
gave it up He looked at me with an air of severe distrust, as
if lie was afraid of treachery in tin- camp. He remarked, 'Mr. Cor-
bin, I am undone il' that letter gets out.' .... He stood there for a
little while looking very thoughtful, exceedingly thoughtful, lie
then lel't and went into Wall Street. .... and my impression is
that he it was, and not the government, that broke that market.' "
THE NKW YORK GOLD CONSPIRACY. 125
Mr. Corbin was right ; throughout all these transactions
his insight into Mr. Gould's character was marvellous.
It was the morning of Thursday, the 3d ; Gould and Fisk
went to Broad Street together, but as usual Gould was silent
and secret, while Fisk was noisy and communicative. There
was now a complete separation in their movements. Gould
acted entirely through his own firm of Smith, Gould, & Mar-
tin, while Fisk operated principally through his old partner,
Belden. One of Smith's principal brokers testifies :
" ' Fisk never could do business with Smith, Gould, & Martin very
comfortably. They would not do business for him. It was a very
uncertain thing of course where Fisk might be. He is an erratic
sort of genius. I don't think anybody would want to follow him
very long. I am satisfied that Smith, Gould, & Martin controlled
their own gold, and were ready to do as they pleased with it with-
out consulting Fisk. I do not think there was any general agree-
ment None of us who knew him cared to do business with
him. I would not have taken an order from him nor had anything
to do with him.' Belden was considered a very low fellow. ' I
never had anything to do with him or his party,' said one broker
employed by Gould. ' They were men I had a perfect detestation
of; they were no company for me. I should not have spoken to
them at all under any ordinary circumstances.' Another says,
' Belden is a man in whom I never had any confidence in any way.
For mouths before that, I would not have taken him for a gold
transaction.' "
And yet Belden bought millions upon millions of gold. He
himself says he had bought twenty millions by this Thursday
evening, and this without capital or credit except that of his
brokers. Meanwhile Gould, on reaching the city, had at once
given secret orders to sell. From the moment he left Corbin,
he had but one idea, which was to get rid of his gold as quietly
as possible. " I purchased merely enough to make believe I
was a bull," says Gould. This double process continued all
that afternoon. Fisk's wild purchases carried the price up to
144, and the panic in the street became more and more serious
as the bears realized the extremity of their danger. No one
can tell how much gold which did not exist they had con-
126 THE NEW YORK GOLD CONSPIRACY.
tracted to deliver or pay the difference in price. One of the
clique brokers swears that on this Thursday evening the street
had sold the clique one hundred and eighteen millions of gold,
and every rise of one per cent on this sum implied a loss of
more than 200,000 to the bears. Naturally the terror was
extreme, for half Broad Street and thousands of speculators
would have been ruined if compelled to settle gold at 150
which they had sold at 140. It need scarcely be said that by
this time nothing more was heai'd in regard to philanthropic
theories of benefit to the Western farmer.
Mr. Gould's feelings can easily be imagined. He knew that
Fisk's reckless management would bring the government upon
his shoulders, and he knew that imless he could sell his gold
before the order came from Washington he would be a ruined
man. He knew, too, that Fisk's contracts must inevitably be
repudiated. This Thursday evening he sat at his desk in the
Erie offices at the opera-house, while Fisk and Fisk's brokers
chattered about him.
' : I was transacting my railway business. I had my own views
about the market, and my own fish to fry. I was all alone, so to
speak, in what I did, and I did not let any of those people know
exactly how I stood. I got no ideas from anything that was said
there. I had been selling gold from 35 up all the time, and I did
not know till the next morning that there would probably come an
order about twelve o'clock to sell gold."
He had not told Fisk a word in regard to Corbin's retreat,
nor his own orders to sell.
When the next day came, Gould and Fisk went together to
Broad Street, and took possession of the private back office
of ii principal broker, "without asking the privilege of doing
so," as the broker observes in his evidence. The first news
brought to Gould was a disaster. The government had sent
three men from Washington to examine the bank which Gould
owned, and the K-mk sent word to Mr. Gould that it feared to
certify for him as usual, and was itself in danger of a panic,
caused by the presence of officer, which created distrust ol tin-
bank. It barely managed to save itself. Gould took tho
THE NEW YORK GOLD CONSPIRACY. 127
information silently, and his firm redoubled sales of gold.
His partner, Smith, gave the orders to one broker after an-
other, " Sell ten millions ! " " The order was given as quick
as a flash, and away he went," says one of these men. " I
sold only eight millions." " Sell, sell, sell ! do nothing but
sell ! - only don't sell to Fisk's brokers," were the orders
which Smith himself acknowledges. In the gold-room Fisk's
brokers were shouting their rising bids, and the packed crowd
grow frantic with terror and rage as each successive rise showed
their increasing losses. The wide streets outside were thronged
with excited people ; the telegraph offices were overwhelmed
with messages ordering sales or purchases of gold or stocks ;
and the whole nation was watching eagerly to see what the
result of this convulsion was to be. All trade was stopped,
and even the President felt that it was time to raise his hand.
No one who has not seen the New York gold-room can under-
stand the spectacle it presented ; now a perfect pandemonium,
now silent as the grave. Fisk, in his dark back office across
the street, with his coat off, swaggered up and down, " a big
cane in his hand," and called himself the Napoleon of Wall
Street. He really believed that he directed the movement,
and while the street outside imagined that he and Gould were
one family, and that his purchases were made for the clique,
Gould was silently flinging away his gold at any price he could
get for it.
Whether Fisk really expected to carry out his contract, and
force the bears to settle, or not, is doubtful ; but the evidence
seems to show that he was in earnest, and felt sure of success.
His orders were unlimited. "Put it up to 150," was one
which he sent to the gold-room. Gold rose to 150. At length
the bid was made "160 for any part of five millions," and
no one any longer dared take it. " 161 for five millions,"
" 102 for five millions." No answer was made, and the offer
was repeated, " 162 for any part of five millions." A voice
replied, "Sold one million at 62." The bubble suddenly
burst, and within fifteen minutes, amid an excitement without
parallel even in the wildest excitements of the war, the clique
128 THE NEW YORK GOLD CONSPIRACY.
brokers were literally swept away, and left struggling by them-
selves, bidding still 160 for gold in millions which no one
would any longer take their word for ; while the premium sank
rapidly to 135. A moment later the telegraph brought from
Washington the government order to sell, and the result was
no longer possible to dispute. Mr. Fisk had gone too far, while
Mr. Gould had secretly weakened the ground under his feet.
Gould, however, was saved. His fifty millions were sold ;
and although no one yet knows what his gains or losses may
have been, his firm was now able to meet its contracts and
protect its brokers. Fisk was in a very different situation.
So soon as it became evident that his brokers would be unable
to carry out their contracts, every one who had sold gold to
them turned in wrath to Fisk's office. Fortunately for him
it was protected by armed men whom he had brought with
him from his castle of Erie ; but nevertheless the excitement
was so great that both Mr. Fisk and Mr. Gould thought it best
to retire as rapidly as possible by a back entrance leading into
another street, and to seek the protection of the opera-house.
There nothing but an army could disturb them ; no civil man-
date was likely to be served without their permission within
these walls, and few men would care to face Fisk's ruffians in
order to force an entrance.
The subsequent winding up of this famous conspiracy may
be stated in few words. But no account could possibly be
complete which failed to reproduce in full the story of Mr.
Fisk's last interview with Mr. Corbin, as told by Fisk himself.
' I wont down to the neighborhood of Wall Street. Friday morn-
ing, and the history of that morning you know. When I pot hack
to our office, you can imagine I was in no enviable state of mind,
and the moment I got up street that afternoon I started right round
to old ('orl)in's to rake him out. I went into the room, and sent
word that Mr. Fisk wanted to sec him in the dining-room. 1 was
too mad to say anything civil, ami when he came into the room,
said I, You damned old scoundrel, do you know what j r ou have
done here, "on and your people?' He hegan to wring his hands,
and, ' Oh ! ' he says, this is a horriMe position. Arc you ruined?'
I .-aid I did n't know whether I was or not; and I asked him again
THE NEW YORK GOLD CONSPIRACY. 129
if he knew what had happened ? He had been crying, and said he
had just heard ; that he had been sure everything was all right ;
but that something had occurred entirely different from what he
had anticipated. Said I, ' That don't amount to anything ; we know
that gold ought not to be at 31, and that it would not be but for such
performances as you have had this last week ; you know damned
well it would not if you had not failed.' I knew that somebody
had run a saw right into us, and said I, ' This whole damned thing
has turned out just as I told you it would.' I considered the whole
party a pack of cowards, and I expected that when we came to
clear our hands they would sock it right into us. I said to him, ' I
don't know whether you have lied or not, and I don't know what
ought to be done with you.' He was on the other side of the table,
weeping and wailing, and I was gnashing my teeth. ' Now,' he
says, ' you must quiet yourself.' I told him I did n't want to be
quiet. I had no desire to ever be quiet again, and probably never
should be quiet again. He says, ' But, my dear sir, you will lose
your reason.' Says I, ' Speyers [a broker employed by him that
day] has already lost his reason ; reason has gone out of everybody
but me.' I continued, 'Now what are you going to do? You have
got us into this thing, and what are you going to do to get out of it ? '
He says, ' I don't know. I will go and get my wife.' I said, ' Get
her down here ! ' The soft talk was all over. He went up stairs
and they returned, tottling into the room, looking older than Stephen
Hopkins. His wife and he both looked like death. He was tottling
just like that. [Illustrated by a trembling movement of his body.]
I have never seen him from that day to this."
This is sworn evidence before a committee of Congress ; and
its humor is perhaps the more conspicuous, because there is
every reason to believe that there is not a word of truth in
the story from beginning to end. No such interview ever
occurred, except in the unconfined apartments of Mr. Fisk's
imagination. His own previous statements make it certain
that he was not at Oorbin's house at all that day, and
that Corbiu did come to the Erie offices that evening, and
again the next morning. Corbin himself denies the truth
of the account without limitation ; and adds, that when he
entered the Erie offices the next morning Fisk was there.
" I asked him how Mr. Gould felt after the great calamity of
the day before." He remarked, " 0, he has no courage at all.
6* i
130 THE NEW YORK GOLD CONSPIRACY.
He has sunk right down. There is nothing left of him but a
heap of clothes and a pair of eyes." The internal evidence of
truth in this anecdote would support Mr. Corbiu against the
world.*
In regard to Mr. Gould, Fisk's graphic description was prob-
ably again inaccurate. Undoubtedly the noise and scandal
of the moment were extremely unpleasant to this silent and
impenetrable intriguer. The city was in a ferment, and the
whole country pointing at him with wrath. The machinery
of the gold exchange had broken down, and he alone could
extricate the business community from the pressing danger
of a general panic. He had saved himself, it is true ; but in
a manner which could not have been to his taste. Yet his
* Mr. Fisk to the Editor of the Sun :
Erie Railway Company, Comptroller's Office,
NEW YORK, October 4, 1869.
To THE EDITOR OF THE SUN.
Dear Sir, . . . . Mr. Corbin has constantly associated with me; . . . . he
tpent more than an hour with me in the Erie Railway Office on the afternoon of
Saturday, September 25lh, the day after the gold panic I enclose you a
few affidavits which will give you further information concerning this matter.
I remain your obedient servant,
JAMES FISK, JR.
Affidavit of Charles W. Pollard.
" State of New York, City and County of New York, ss.
" C. W. Pollard, being duly sworn, says: ' I have frequently been the bearer
of messages between Mr. James Fisk, Jr , and Mr. Abel R. Corbin, brother-
in-law of President Grant Mr. Corbin called on me at the Erie build-
ing on Thursday, 23d September, 1869, telling me he came to see how Messrs.
Fisk and Gould were getting along He called again on Friday, the
following day, at about noon; appeared to be greatly excited and said he
feared ice should lose a great deal of money. The following morning, Saturday,
September 25, Mr. Fisk told me to take his carriage and call upon Mr. Corbin
and say to him that he and Mr. Gould would like to see him (Corbin) at their
office. I called and saw Mr. Corbin. He remarked upon greeting me: " How
does Mr. Fisk bear his losses? " and added. " It is terrible fur ." He then
asked me to bring Mr. Fisk up to liis nouse immediately, as ho was indisjxt-iMl,
Rnd did not feel able to go down to his (Fisk's) office I went after Mr. Fisk,
who returned immediately with me to Mr. Corbin's residence, but shortly
after came out with Mr. Corbin, who accompanied him to Mr. Fisk's office,
where he was closeted with him and Mr. Gould for about two hours ' "
There are obvious inconsistencies among these different accounts, which it
i useless to attempt to explain. The fact of Saturday's interview -
li"WfVi-r, to he licyniid <|j[>lit<>.
THE NEW YORK GOLD CONSPIRACY. 131
course from this point must have been almost self-evident to
his mind, and there is no reason to suppose that he hesitated.
His own contracts were all fulfilled. Fisk's contracts, all
except one, in respect to which the broker was able to compel
a settlement, were repudiated. Gould probably suggested to
Fisk that it was better to let Belden fail, and to settle a hand-
some fortune on him, than to sacrifice something more than
1,000,000 in sustaining him. Fisk therefore threw Belden
over, and swore that he had acted only under Belden's order ;
in support of which statement he produced a paper to the
following effect :
" September 24.
" DKAR SIR, I hereby authorize you to order the purchase and
sale of gold on my account during this day to the extent you may
deem advisable, and to report the same to me as early as possible.
It is to be understood that the profits of such order are to belong
entirely to me, and I will, of course, bear any losses resulting.
" Yours,
" WILLIAM BELDEN.
u JAMES FISK, JR."
This document was not produced in the original, and cer-
tainly never existed. Belden himself could not be induced to
acknowledge the order ; and no one would have believed him
if he had done so. Meanwhile the matter is before the na-
tional courts, and Fisk may probably be held to his contracts :
but it will be far more difficult to execute judgment upon him,
or to discover his assets.
One of the first acts of the Erie gentlemen after the crisis!
was to summon their lawyei-s, and set in action their judicial
powers. The object was to prevent the panic-stricken brokers
from using legal process to force settlements, and so render
the entanglement inextricable. Messrs. Field and Shearman
came, and instantly prepared a considerable number of injunc-
tions, which were sent to their judges, signed at once, and im-
mediately served. Gould then was able to dictate the terms
of settlement ; and after a week of complete paralysis, Broad
Street began at last to show signs of returning life. As a
legal curiosity, one of these documents, issued three months
132 THE NEW YORK GOLD CONSPIRACY.
after the crisis, may be reproduced, in order to show the
powers wielded by the Erie managers : -^
" SUPREME COURT.
H. N. SMITH, JAY GOULD, H. H. MARTIN, ^
and J. B. BACH, Plaintiffs,
gainst Injunctton
by order.
JOHN BONNER and ARTHUR L. DEWELL,
Defendants,
" It appearing satisfactorily to me by the complaint duly verified
by the plaintiffs that sufficient grounds for an order of injunction
exist, I do hereby order and enjoin .... That the defendants,
John Bonner and Arthur L. Sewell, their agents, attorneys, ami
servants, refrain from pressing their pretended claims against the
plaintiffs, or either of them, before the Arbitration Committee of the
New York Stock Exchange, or from taking any proceedings thereon,
or in relation thereto, except in this action.
"GEORGE G. BARNARD, J. S. C.
"NEW YORK, December 29, 1869."
Mr. Bonner had practically been robbed with violence by
Mr. Could, and instead of his being able to bring the robber
into court as the criminal, the robber brought him into court
as criminal, and the judge forbade him to appear in any other
character. Of all Mr. Field's distinguished legal reforms and
philanthropic projects, this injunction is beyond a doubt the
most brilliant and the most successful.*
* These remarks on Mr. Field's professional conduct ns counsel of the Erie
Railway have excited n somewhat intempern'e controversy, and Mr. Field's
]>:irtis:ms in the press have made against the authors of Hie " Chapter* of
Erie" a charge which cerfninly has the merit of even exaggera'ed moles' y
on the part of the New York bench and bar, namely, that these wri cvs
"have indelica'ely interfered in a matter alien to them in everyway"; the
administration of justice in New York being, in this point of view, a matter
in which Mr. Field nnd the Erie Railway nre alone concerned. Mr. Field him-
self has published a letter in the Westminster Review for April, 1871, in
which, after the general assertion that the passages in the " New York (Jold
('Hi-piracy" which relate to him " cover about as much untruth as could he
crowded into so many lines," lie proceeds to make the following corrections:
First, he denies, what was never suggested, that lie was in any way a party to
the origin or progress of the Gold Conspiracy ; until (secondly) he was consulted
on the 28th of September: when (thirdly) he gave an opinion as to the powers
of the members of the Gold and Stock Exchanges. Fourthly, he denies thnt
he has relations of any sort with any judge in New York, or tiny power over
THE NEW YORK GOLD CONSPIRACY. 133
The fate of the conspirators was not severe. Mr. Corbiu
went to Washington, where he was snubbed by the President,
and at once disappeared from public view, only coming to
light again before the Congressional Committee. General
Butterfield, whose share in the transaction is least under-
stood, was permitted to resign his office without an investiga-
tion. Speculation for the next six months was at an end.
Every person involved in the affair seemed to have lost money,
and do/ens of brokers were swept from the street. But Mr.
Jay (lould and Mr. Jarnes Fisk, Jr., continued to reign over
Erie, and no one can say that their power or their credit was
sensibly diminished by a shock which for the time prostrated
all the interests of the country.
Nevertheless it is safe to predict that sooner or later the
last traces of the disturbing influence of war and paper money
will disappear in America, as they have sooner or later disap-
peared in every other country which has passed through the
same evils. The result of this convulsion itself has been in
the main good. It indicates the approaching end of a troubled
these judges, other than such as English counsel have in respect to English
judges. Fifthly, he asserts that out of twenty-eight injunctions growing out
of the gold transactions, his partners obtained only ten. and only one of these
ten, the one quoted above, from Justice Barnard. Sixthly, that this injunc-
tion was proper to be sought and granted. Seventhly, that Mr. Bonner was
not himself the person who had been "robbed with violence,'' but the assignee
of the parties.
On the other hand it does not appear that Mr. Field denies that the injunc-
tion as quoted is genuine, or that he is responsible for it, or that it did, as as-
serted, shut the defendants out of the courts as well as out of the Gold Ex-
change Arbitration Committee, or that it compelled them to appear only as
defendants in a case where they were the injured parties.
In regard to the power which Mr. Field, whether as a private individual or
as Erie counsel, has exercised over the New York bench, his modest, denial is
hardly calculated to serve as a final answer. And in regard to Mr. Bonner,
the fact of his being principal or representative scarcely affects the character
of Mr. Field's injunction. Finally, so far as the text is concerned, after allow-
ing full weight to all Mr. Field's corrections, the public can decide for itself
how many untruths it contains. The subject has, however, ceased to be one
of consequence even to Mr. Field since the subsequent violent controversy
which arose in March, 1871, in regard to other points of Mr. Field's profes-
sional conduct, and in another month after his letter was written he would
perhaps have thought the comments of the Westminster Review so compara-
tively trifling in importance as not to deserve his attention.
134 THE NEW YORK GOLD CONSPIRACY.
time. Messrs. Gould and Fisk will at last be obliged to yield
to the force of moral and economical laws. The Erie Rail-
way will be rescued, and its history will perhaps rival that of
the great speculative manias of the last century. The United
States will restore a sound basis to its currency, and will learn
to deal with the political reforms it requires. Yet though the
regular process of development may be depended upon, in its
ordinary and established course, to purge American society of
the worst agents of an exceptionally corrupt time, there is in
the history of this Erie corporation one matter in regard to
which modern society everywhere is directly interested. For
the first time since the creation of these enormous corporate
bodies, one of them has shown its power for mischief, and has
proved itself able to override and trample on law, custom, de-
cency, and every restraint known to society, without scruple,
and as yet without check. The belief is common in America
that the day is at hand when corporations far greater than the
Erie swaying power such as has never in the world's history
been trusted in the hands of mere private citizens, controlled
by single men like Vanderbilt, or by combinations of men
like Fisk, Gould, and Lane, after having created a system of
quiet but irresistible corruption will ultimately succeed in
directing government itself. Under the American form of
society, there is now no authority capable of effective resist-
ance. The national government, in order to deal with the cor-
porations, must assume powers refused to it by its fundamental
law, and even then is always exposed to the chance of forming
an absolute central government which sooner or later is likely
to fall into the very hands it is struggling to escape, and thus
destroy the limits of its power only in order to make corrup-
tion omnipotent. Xor is this dimger confined to America
alone 1 . Tin- corporation is in its nature a threat against, the
popular institutions which are spreading so rapidly over the
whole world \Yheiwer there is a popular and limited gov-
ernment this difficulty will be found in its path, and unless
some satisfactory solution of the problem can he reached,
popular institutions may yet find their very existence endan*
AN ERIE RAID.*
HISTORY scarcely affords a parallel to the rapid develop-
ment of character which took place in America during
the five years of the late civil war. At its close the ordinary
results of long internal strife wei'e conspicuous only by their
absence. No chronic guerilla warfare was sustained in tlie
South, and in the North no unusual license or increase of
crime revealed the presence of a million of men unaccustomed
to habits of industry and inured to a life of arms. Yet while
these superficial indications of change would be so\ight in
vain, other and far more suggestive phases of development
cannot but force themselves on the attention of any thought-
ful observer. The most noticeable of these is perhaps to be
found in a greatly enlarged grasp of enterprise and increased
facility of combination. The great operations of war, the
handling of large masses of men, the influence of discipline,
the lavish expenditure of unprecedented sums of money, the
immense financial operations, the possibilities of effective co-
operation, were lessons not likely to be lost on men quick to
receive and to apply all new ideas. Those keen observers who
looked for strange and unexpected phenomena when the strug-
gle in the field was over have indeed witnessed that which
must have surpassed all anticipation.
If the five years that succeeded the war have been marked
by no exceptional criminal activity, they have witnessed some
of the most remarkable examples of organized lawlessness,
* From the North American Review for April, 1871.
1):>6 AN ERIE RAID.
under the forms of law, which mankind has yet had an oppor-
tunity to study. If individuals have, as a rule, quietly pur-
sued their peaceful vocations, the same cannot be said of
certain single men at the head of vast combinations of pri-
vate wealth. This has been peculiarly the case as regards
those controlling the rapidly developed railroad interests.
These modern potentates have declared war, negotiated peace,
reduced courts, legislatures, and sovereign States to an un-
qualified obedience to their will, disturbed trade, agitated the
currency, imposed taxes, and, boldly setting both law and
public opinion at defiance, have freely exercised many other
attributes of sovereignty. Neither have the means at disposal
proved at all inadequate to the ends in view. Single men
have controlled hundreds of miles of railway, thousands of
men, tens of millions of revenue, and hundreds of millions
of capital. The strength implied in all this they wielded in
practical independence of the control both of governments and
of individuals ; much as petty German despots might have
governed their little principalities a century or two ago. Thus
by degrees almost the whole of the system of internal com-
munication through the northern half of the United States
has practically been partitioned out among a few individu-
als, and, as proximity, or competition on certain debatable
grounds, the Belgiums of the system, brought the inter-
ests represented by these men into conflict, a series of strug-
gles have ensued replete with dramatic episodes. No history
of the present time will be complete in which these do not
occupy much space, and any condensed record of them has,
therefore, much more than a passing value. Not history in
itself, it contains the material of history ; yet the thread
of thc'se episodes is so difficult to trace, lying concealed in
such dull volumes of evidence and records of the law, or lire-
served only in the knowledge of individuals, that unless it be
found at once it is in danger of being lost forever. The speedy
oblivion which covers up events that, for a time, fasten public
attention and seem big with great results, is indeed one of the
noticeable indications of the times. The practical experience
AN ERIE RAID. 137
of this fact has tended greatly to encourage all sorts of viola-
tions both of law and of morals. There seems no longer to
be any Nemesis to dog the evil-doer. Men are to-day in all
mouths infamous from active participation in some great
scandal or fraud, some stock operation or gambler's con-
spiracy, some gold combination or Ei'ie Railway war, some
Credit Mobilier's contractor's job or Hartford & Erie scandal,
and to-morrow a new outrage, in another quarter, works a
sudden condonation of each oftence.
Nothing could more fully illustrate the rapidity with which
such episodes as those referred to are forgotten than the com-
plete oblivion into which the struggle in 1869 for the pos-
session of the Albany & Susquehanna Railroad has fallen.
This contest, marked by legal scandals almost unparalleled,
and actually resulting in an attempt at armed warfare between
corporations, though not yet finally passed upon by the courts,
is fairly forgotten by the world. It was, however, not without
elements of a permanent intei'est, though no consecutive
account of it has yet been attempted. The following narra-
tive, drawn almost exclusively from the sworn evidence and
official records in the case, probably presents the story with
as near an approach to accuracy as is now likely ever to be
arrived at.
The business of transportation by rail naturally divides
itself into the two great elements of through and local traffic.
The Erie Railway was especially constructed with a view to
< h rough traffic, and the New York Central, though originally
consist iiiy in a chain of disconnected local roads, through the
force of circumstances and by a natural process of develop-
ment, early became one of the great trunk lines of the conti-
nent. The Albany & Susquehanna, on the contrary, was
designed by its projectors as a purely local road. As such its
history could never have been, a very interesting one, except
to its projectors and owners. It happened, however, to occupy
a bit of debatable territory between the two great trunk
lines just mentioned, and hence derived its importance. New
138 AN ERIE RAID.
England has always been in railroad history a sort of an ap-
panage of the Central Railroad of New York. Both freight
and passengers passing to and fro between Boston and the
West naturally took Albany on their way, and the Central
Road, monopolizing as it did the one natural gap in the moun-
tain ranges which divided the interior basin from the sea,
looked upon this traffic as its inalienable property. The
Albany & Susquehanna Railroad started from this eastern
terminus of the Central, and was intended to open it to the
Erie at the city of Binghamton, some one hundred and forty
miles from the point of departure. In the early days of the
enterprise through traffic was less regarded by railroad man-
agers than it now is, and the future significance of this link in
their system was hardly realized by either of the great trunk
lines. The carriage of freight was then but little understood,
and grades were of far greater importance than they now are.
Valley roads, it was supposed, might safely ignore the moun-
tain track. This the Albany & Susquehanna certainly was.
The region through which it passes is very broken, though it
ranks among the finest of the agricultural districts of New
York. Starting from that point where the great Alleghany
range gradually sinks away into the valley of the Mohawk,
the road skirts the base of the heights of Helderberg, an out-
lying spur of the Catskills, famous once as the seat of the
anti-rent troubles, and then, passing among the large rolling
hills of Southeastern New York, it gradually climbs the water-
shed. The route was a difficult one, and the road was costly
of construction ; laid out on the broad-gauge principle, as a
contemplated feeder of the Erie, it was forced to scale ridge
after ridge in working its way from one picturesque valley to
another, through which to find a natural roadway to its desti-
nation. The country along the line is of a hilly rather than
a mountainous character, partaking more of the appearance
of Vermont than of New Hampshire; timbered lands and
cultivated fields alternate over the loftiest summits, and there
is something peculiarly attractive in the primitive nestling
appearance of the towns and villages. The road thus was
AN ERIE RAID. 139
projected through a difficult and sequestered region, neither
wealthy nor of varied industries, opening to a new trade
neither great markets nor a peculiarly active people. It en-
countered, therefore, even more than the average amount of
those financial tribulations which mark the early history of all
railroads.
The company was organized in 1852, and the work of con-
struction was begun in 1853, with one million dollars raised
by individual subscription along the line of the road ; further
sums in aid of construction were subsequently received from
the towns likely to be benefited by the line, which, by an act
of special legislation, were authorized to subscribe to its stock ;
a loan of one million dollars was likewise obtained from the
city of Albany, upon a pledge of the first-mortgage bonds of
the company. The process of construction was, however,
very slow. The work begun in 1853 was suspended in 1854
on account of the failure of the contractors ; it was recom-
menced in 1857, and then slowly dragged along to comple-
tion, a very contractors' Golgotha. Eight times did acts ex-
tending to it the financial aid of the State pass the legisla-
ture ; but they were encountered by six Executive vetoes, and
from this source the company realized but seven hundred and
fifty thousand dollars. That the scheme was successfully car-
ried out at all was mainly due to the good pluck and \intiring
industry of one man, Joseph H. Ramsey, at once the origi-
nator, president, financial agent, legal adviser, and guiding
spirit of the enterprise.
The close of the seventeenth year of corporate life found
all the available means of the company exhausted, and every
one connected with it, except Mr. Ramsey, thoroughly discour-
;iLV<l and despondent, with the twenty-two last and most dif-
ficult miles of the work yet unfinished. In this emergency
the con p my once more looked to the State for assistance.
Through the management of Mr. Ramsey, who had himself
in former times more than once assumed the duties of a State
legislator in behalf of the enterprise, the necessary act was
passed. Most unexpectedly it encountered a veto, the sixth
140 AN ERIE RAID.
of the series. With an empty treasury, with heavy payments
to contractors and on account of interest already due, and
with other similar payments rapidly maturing, with bank-
ruptcy staring him in the face, and with all sources of supply
apparently exhausted, under all these disheartening aspects
of the case Mr. Ramsey did not despair. The company had
in its safe two classes of securities and two only on which the
further necessary loans could possibly be effected. It had a
portion of its own second-mortgage bonds and some nine
thousand shares of its capital stock, on which various instal-
ments ranging from ten to forty per cent had been paid by the
original subscribers. This stock and the subscriptions upon
it had subsequently been declared forfeited by a vote of the
Board of Directors, with the consent of the holders, for the
non-payment of the balance of subscriptions. A law of New
York prescribed that no railroad should issue its stock for less
than its par value. This law, however, the courts had held
did not apply to forfeited stock in the treasury of the com-
pany. The difficulty in the case was not in putting the stock
on the market, but in finding a purchaser for it when it got
there ; it had no market price ; as an investment it ranked
far from high, and, unlike the Erie, it had at this time no
value for " speculative purposes." Under these circumstances
it seemed possible to the directors to make this one of their
two securities available only as a make-weight, nJniiinn; it
might be said, to the other. Two loans were effected accord-
ingly, under a resolution which received the unanimous ap-
proval of the Board of Directors on the 3d of June, 1868.
The first was with Azro Chase, who became the purchaser of
fifty thousand dollars of the second-mortgage bonds at seventy
percent oft licit- p;ir value, with the additional right or option
of taking at. ai>v time three hundred shares of the forfeited
stock at twenty dolhrs per share. This loan was negotiated
through one of the directors of the company named Leonard,
acting as it;) financial agent, and amounted to the sale of
eighty thousand dollars, in the nominal securities of the com-
pany, for the sum of forty-one thousand dollars in cash. Two
AN ERIE RAID. 141
hundred shares of the stock, as it afterwards appeared, passed
into the pockets of the director and financial agent as a species
of brokerage commission. The second loan was negotiated by
Mr. Ramsey himself with Mr. David Groesbeck, the head of a
well-known brokers' firm in the city of New York, and for-
merly the business associate of Mr. Daniel Drew. This loan
was upon terms somewhat more favorable to the company
than the other, and there were no indications of In-okerage in
the case. The company received five hundred and sixty thou-
sand dollars, and pledged as collateral its second-mortgige
bonds at seventy per cent, with the privilege of purchasing
them at any time within eighteen months at eighty, and a
similar privilege as regarded twenty-four hundred shares of the
forfeited stock at twenty-five dollars per share. In other
words, if the lenders availed themselves of the option, as they
subsequently did, securities to the nominal value of one mil-
lion and forty thousand dollars were sold to them for seven
hundred thousand dollars in cash. This must certainly be
considered as a very advantageous bargain for the company ;
thirty per cent is a large profit, but it here represented a very
unusual risk. Both of these loans received the unanimous
sanction of the Board of Directors, and that to Groesbeck
played a most important part in the subsequent struggle for
the possession of the road.
With the money thus raised the enterprise was at last car-
ried through, and, on the 15th of January, 1809, seventeen
years after the organization of the company, the cities of Bing-
hamton and Albany were brought into direct communication.
Meanwhile those seventeen years of construction had greatly
altered all the conditions of that railroad system of which the
Albany fe Susquehanna Railroad was now for the first time
to become an integral part. In 1853 both the Erie and the
Central were but feebly entering on their great careers. The
Erie was just completed to Dunkirk : the Central was not yet
consolidated ; the whole receipts of the first were but one
third part of what the completion of Mr. Ramsey's road found
them, while, during the same interval, the receipts of the last
142 AN ERIE RAID.
had swollen from less than six millions per annum to consid-
erably over fifteen. As for the men who managed the great
trunk lines when Mr. Ramsey had completed his work, {heir
names had never been mentioned in connection with railroads
when he began it. In fact, the whole aspect of the problem
had changed. In 1853 all the roads in the country were
local roads ; in 1869 no local road was suffered to exist, un-
less the great through roads were satisfied that it could serve
no purpose in their hands ; nay, more, unless they were also
satisfied that it could serve no purpose in the hands of their
competitors. When, therefore, the projectors of the Albany
& Susquehanna line had completed it to Binghamton, they
suddenly found themselves involved in all the complications
and controversies of an intricate system. The intended local
road was an element of strength or a source of danger not to
be ignored by the managers of the great trunk lines.
Messrs. Jay Gould and James Fisk, Jr., had at this time
already succeeded in firmly establishing themselves in the
practical ownership of the Erie Railway. Mr. Daniel Drew,
some six months before, had been driven out of its treasurer-
ship, and even Commodore Vanderbilt had been compelled by
fair means and by foul to abandon all idea of controlling its
management. When the Susquehanna Road was completed it
became at once a most important element in the successful
prosecution of the plans of Messrs. Gould and Fisk. It was
so from two points of view, either as regarded their compe-
tition with the Central Road for the carriage of the produce
of the West to New England ; or, still more important, as re-
j/anlrd their competition with other agencies for the carriage
of coal to the same region. The anthracite coal deposits of
America lie but a short distance to the south of the Erie Rail-
way. Disappointed in the hope of successfully competing
with the Central Row! for the carriage of the produce of tho
West, convinced at la.st, by hard experience that the more of
tliis business the road undertook to do the more hopelessly
bankrupt it became, the Krie mnnngers had more and more
turned their attention to the business of transportim; coal.
AN ERIE RAID. 143
In this also they were subject to a very sharp competition,
particularly from the wealthy companies which themselves
owned the coal-beds, and which now proposed to supplement
their business as colliers with that of carriers also. This by
no means met the views of the Erie people. They were now
entering into vast contracts with various coal companies to
haul many hundreds of thousands of tons per annum ; they
naturally wished to extend their connection, as by doing so
they accomplished two ends, they shut the coal companies
up in their mines, making them dependent on the Erie Rail-
way for access to their markets, and at the same time they
secured to themselves a monopoly in so far as the consumers
were concerned ; they, in fact, placed themselves as an indis-
pensable medium between producer and consumer. The Al-
bany & Susquehanna Road might well develop into an inde-
pendent and competing line ; hence they greatly coveted the
possession of it. By it they would not only secure an access
to Albany, but would forge the link which was to unite the
Erie with a whole network of roads running north and east
from Albany throughout coal-consuming New England.
It is wholly unnecessary to dwell upon the public considera-
tions which rendered it unadvisable that the adventurers then
representing the Erie Railway should be intrusted with a prac-
tical control over the winter supply of such an article as
anthracite coal. However amiable or otherwise they might
be in their domestic characters, their course had not been
such as to make unprejudiced observers anxious to repose in
them so delicate a duty as that of sole purveyors at any sea-
son of an article of prime necessity. The coal companies
naturally did not look with any favor at a policy which threat-
ened their lines of communication. Finally Mr. Ramsey, as
the controlling influence in the Albany & Susquehanna man-
agement, neither desired to surrender the independence of his
road, nor, in view of the recent experience of others, did he
impose implicit faith in either the verbal or written assur-
ances or obligations of the Erie representatives. Possession
was with them considerably more than nine points of the law,
144 AN ERIE RAID.
and Mr. Ramsey evinced a marked repugnance to surrender the
property intrusted to his charge into their possession, regard-
less of any liberal promises held out as to subsequent beneficial
results, public and private, likely to ensue from his doing so.
The position of Mr. Ramsey in his own board of direction
was not, however, perfectly secure. Certain enmities and
jealousies had, little by little, not unnaturally grown up along
the line of the road, and, at the election of directors in 1868,
a ticket had been chosen partly in the opposition interest.
What these parties represented when they came into the board
it is difficult to say ; it may have been a restless feeling of dis-
content at the slow progress of the enterprise, or a vague
desire for change ; or, perhaps, a personal dislike and mistrust
of Mr. Ramsey. Whatever the cause, the direction at the
time of the completion of the road was divided not unevenly.
This condition of affairs was very unsatisfactoiy to Mr. Ram-
sey. He maintained that at the previous election he and his
friends had been taken by surprise ; that no wish for a change
in management really existed in the minds of the bulk of the
stockholders ; but, finally, whether it existed or not, he let it
be distinctly understood that he did not intend to belong to a
divided direction, and that at the coming election either he or
his opponents were to go out. The materials for a lively con-
test for the control of the company in September, 1869, thus
existed in great abundance and on all sides.
The road was completed in January, and early in June the
Erie manipulators began their preparations to obtain pos-
session of it, or, as they more graphically would have said, to
" Cobble " it. The stock of the road was nominally quoted at
about twenty-five per cent of its par value ; it was rarely
bought or sold, and was supposed to possess little real value,
except as representing the control of the enterprise. It was
almost exclusively in the hands of three classes of owners,
the directors and those dwelling along the line of the mad,
Mili.-rribing municipalities, and certain capitalists who held it
RH security for money advanced and expended in construction.
The subscription books of the company had never been closed,
AX KIMK I!AID. 14."
as but two million eight hundred thousand dollai's of the four
million dollars of authorized capital had ever been subscribed,
and of the amount of stock which had been subscribed for,
eight hundred thousand dollars had been forfeited in the man-
ner already mentioned. Whoever desired to get possession
of the property had, therefore, to obtain the control for a
longer or shorter period, to include the election day, of a
majority of this stock. The Erie party wishing to come in,
and the opposition minority determined not to go out, thus
had natural affinities to each other. But though when united
they controlled a formidable minority of the whole stock, yet
it was by no means the majority, and the Ramsey party was
now thoroughly alive to the danger of the situation. The
plan for the approaching campaign was soon matured. Under
a sudden demand for election purposes the stock, which for
years had been nominally quoted at twenty, rose rapidly in
July to forty and fifty, and even to sixty and sixty-five per
cent. All parties were buying. The issue was, however, to
be decided by stock held by municipalities, and it was to the
control of this that the greatest efforts were devoted. Here
lay the stronghold of the Ramsey party ; and here they felt
secure, for the law authorized the town commissioners, who
held this stock as trustees, to sell it only for cash and at its
par value, and forbade them to sell it for less unless specially
authorized to do so by a town vote. This was a point which
it seemed hardly likely to touch. Suddenly, and to their
great dismay, Mr. Ramsey and his friends beard of agents out
among the towns offering the commissioners par for the stock,
provided the offer was accepted at once. Naturally this was
a great temptation to commissioners who represented towns
winch grievously felt the weight of railroad loans. These
men were suddenly called upon to accept or reject, on their
own responsibility, an offer which, a few days before, would
have seemed incredible, but the acceptance of which, while it
would relieve the town of debt, would also deprive it of all
voice in the management of the road waited for so long. In
a number of cases the commissioners considered it their duty
7 J
14G AX ERIE RAID.
to accept the offer, and the control of several hundred shares
was in this way secured. The Ramsey party was thus forced
into the field, and the stock of towns rose to a premium.
This process, however, involved a very considerable outlay
of money and no inconsiderable risk of loss. Buying up a
majority of the stock was altogether too much like paying for
a road. Why should that be obtained at great cost which
could equally well be got for nothing? Stimulated by the
passion which Mr. Fisk has happily described as an inherited
disposition " to rescue things out of somebody else," one Sun-
day afternoon, early in August, a party of gentlemen met at
the Fifth Avenue Hotel in New Yoi'k and arranged a new
plan, involving the certain transfer of the road into their
hands, but avoiding the necessity of further pecuniary outlay.
A negotiation was successfully concluded for the purchase of
four hundred and fifty thousand dollars of the stock of various
towns on the following terms : no money was to pass, but the
bonds of Messrs. Gould and Fisk were given, binding them to
purchase and pay for the stock after the election, provided the
commissioners should at the election vote as the givers of the
bond should direct. The legal effect of such an arrangement
may well have escaped the town commissioners, but Messrs.
Fisk and Gould had not as a rule up to this time been found
deficient in matters of technical nicety. These bonds had no
binding force whatever. It was not a sale for cash, it was
contrary to law and to public policy ; it was an arrangement
wholly beyond the powers of the commissioners to make, and
one which the courts would not sustain. The commissioners
who accepted these bonds and who subsequently did vote as
tin isc who L, r :ivc them dictated, were public officials, as such
their duties were prescribed and were sufficiently simple; they
cm i Id sell, and they could vote, but if they sold it. was to be
for cash down, and if they voted it was to l>o on their own
judgments, and not on those of other people. In this c.n ;e,
indeed, what security had they that, after they had voted the
road into the hands of the Krie managers, the conditions of
the bond in regard to the purchase of the stock would be ful-
AN ERIK RAID. 147
filled ] As a matter of fact they did vote as they agreed, but
nothing further was ever done to complete the transfer of the
stock.
Events now moved rapidly on both sides. On the 3d of
August the certificates of town stock were presented for trans-
fer. It was a new question ; Mr. Ramsey was away, and the
treasurer hesitated. Finally, all stock sold for cash and paid
for by either side was transferred ; but the transfer was denied
where, in the opinion of the treasurer, the transaction was
not completed. It was evident they were pressing the Ramsey
party heavily. It now occurred to Ramsey that the subscrip-
tion-books had never been closed, and that twelve thousand
shares of the capital stock of the company were as yet unis-
sued. On the 5th he took the subscription-book home with
him, held a meeting of a few of his friends, and, among them,
they wrote down their names for nine thousand five hundred
shares of stock. It was fully understood that this subscription
bound those who made it to no immediate payments ; ten per
cent was to be paid in at once, and for this Ramsey was to
provide ; the remainder would only be called in as should be
ordered by the board of directors whom this very stock would
elect. Meanwhile, if any of the subscribers desired to get rid
of their stock, Ramsey undertook to relieve them of it. That
this subscription, made by directors in secret on the eve of an
election, and with a view of affecting that election, should have
subsequently been held legal is open to criticism ; its good
faith even might well have been suspected : but that, on grave
consideration, it should be justifiable is perhaps as severe a
censure as could be passed on the condition of affairs existing
in the community in which it was made. Yet, \inder the cir-
cumstances, unnecessary and unfortunate as the step after-
wards proved to have been, Mr. Ramsey and his friends were
justified in taking it. It is simply necessary to refer to those
who now sought to obtain control of the Albany & Susque-
hanna Railroad. Their position in the community, their stand-
ing in the courts, their financial and fiduciary relations, were
notorious. They had reduced society to a condition in which
148 AN ERIE RAID.
any man brought into conflict with them could not but realize
that he had only himself to rely on, that a species of Lynch
law prevailed, and that might and possession alone counted for
anything. The first duty of Mr. Ramsey then, unquestion-
ably, was to keep the property intrusted to his charge out of
the hands of those men ; this every consideration of honor and
of responsibility bound him to do at any cost and by all legal
means, certain that, whatever he might scruple at, his oppo-
nents, once in control, would scruple at nothing. This step
was legal, and, however questionable in many aspects, Mr.
Ramsey and his friends were justified in taking it, provided
they made their subscriptions in good faith to their company,
and held themselves responsible for them. At best, however,
it was an error in judgment. By it Mr. Ramsey sacrificed
much of the strength of his position, which lay in the fact
that he was fighting men who had set the most infamous pre-
cedents ever known for transactions of a not dissimilar char-
acter. As usual in dealing in measures of questionable right
and expediency, one doubtful step soon led to another which
admitted of no doubt.
Ten per cent on the amount of the subscriptions had at
once to be provided, and that, too, by Ramsey, whose resources
were already strained to the utmost. Again he had recourse
to Groesbeck, and drew on him for $ 1 00,000 ; he had also
subscribed for more stock in Groesbeck's name. The subscrip-
tion, involving as it did further possible calls to the full value
of the stock, Groesbeck politely declined ; the draft he hon-
ored, receiving as collateral for it a deposit of $150,000 of the
equipment bonds of the Albany & Susquehanna Uailmad <'<>.,
which belonged to the road, and which Mr. Ramsey procured
from the treasurer for the purpose of so pledging them. The
ten per cent of the subscription was thus paid in, and the nine
thousand five hundred .shares were placed on the books of the
company to the credit of the nominal subscribers, each of
whom gave Ramsey a voting proxy for the coming election.
Mouths afterwards Mr. Grocslieek defended this transaction,
and declared that, undor the same circumstances and fighting
AX KR1K RAID. 14'J
the same men, he himself would have gone as far, and further
too, if necessary. The proceeding was, however, none the less
indefensible. The securities which had thus been misapplied
were shortly after, at Groesbeck's own suggestion, returned to
the officials of the company, and their place supplied by col-
lateral of inferior value ; and as for the stock, it was never
voted on, and the issue of it only served to endanger the case
of the Ramsey party.*
This took place on the 5th of August, but already the usual
storm of judicial orders and injunctions had begun. The stock
of the towns being, so far as possible, secured, the next blow
was directed at the stock reissued and held as collateral. Two
blocks of this were outstanding, one in the hands of Chase,
the other in those of Groesbeck. On the application of Messrs.
Gould and Fisk's counsel, an injunction was issued by Mr.
Justice Barnard, of the Supreme Court, forbidding any votes
being cast upon this stock, and ordering its transfer to a re-
ceiver pending judicial investigation ; all this upon the ground
that the stock was unlawfully issued. The books were to close
upon the 7th, the order was procured on the 4th. While this
was going on in the city, the Ramsey party was not idle in the
* This and the pravious paragraph are repuhlishecl in the form in which
they originally appeared. Yet it may well be questioned whether even the
modified censure implied upon Mr. Ramsey's proceedings would bear exami-
nation. Ordinary rules cannot always govern exceptional cases. If a mm
finds himself involved in an every-day controversy, however angry, lie is
very properly expected to confine himself to recognized remedies; if, however,
lie is suddenly roused from his sleep by the assault of midnight robbers, he
cannot, if he is a man of courage, be called upon to exercise any nice judg-
ment as to the use he may make of the weapons nearest at hand : it is si
ease of self-preservation. Especially would this be true if his assailants were
notoriously in collusion with the watch. If Ramsey had hesitated, even for
an instant, his friends would have lost courage, and lie could never have re-
covered himself; under the circumstances it is very difficult to see why he
was not as fully justified in the use of any and every weapon as a. man would
be in a struggle for bis life. Of course in the one case or the other he would
be amenable to the law for any illegal act. The question is o e purely of moral
accountability; legally, a man so circumstanced must act at his own peril. He
may infringe laws, and. if he does, he must 1)6 prepared to undergo the peraltv
of so doing, but it may yet be his duty to incur that penalty in defence of his
trust.
150 AN KRIE RAID.
country. On the same day they appeared before Judge Parker
of Owego and commenced a suit, resulting, of course, in the
inevitable injunction, by which all parties were restrained and
enjoined from transferring on the books of the company seven
hundred shares of stock belonging to the town of Oneonta, and
which the Ei'ie party claimed to have purchased. No sooner
did the news of this move arrive in New York, than Mr.
Thomas G. Shearman, a member of the firm of Field, Shear-
man, & Co., and one of the most trusted legal advisers of those
now controlling the Erie Railway, was despatched to Owego,
where he succeeded in getting the injunction dissolved. Hith-
erto the engagement had been at long range, as it were, but
it now lacked a few days only of the date when transfers
previous to the election were to cease ; it was time for close
quarters. Not content with the success of his defensive op-
erations, the Erie counsellor at once assumed a vigorous offen-
sive. Two new suits were initiated, one to compel the
immediate transfer of that very Oneonta stock which the com-
pany had just previously sought to prevent ; and the other, a
more vital thrust still, sought to restrain Ramsey himself from
the further performance of his duties as president of the com-
pany. It is almost unnecessary to say that both the desired
orders were almost immediately obtained. The board of di-
rection was divided into two hostile camps exactly equal in
strength, they stood seven to seven. The suspension of Mr.
Itamsey thus turned the scale and placed the Erie opposition
in the majority. It remained only to call a meeting of the
directors, over which the vice-president, whose sympathy with
the Erie movement was pronounced, would preside, and this
meeting would vote out of office the present treasurer, who
hesitated about the desired transfers, and would replace him
by a suitable successor. Absolute control of the books thus
s.-cnred, the election might be regarded us a mere matter of
detail. All the day of that meeting the offices of the company
swarmed with indignant directors and opposing counsel ; angry
words passed, loud threats were uttered ; the suspended presi
dent was informed that his presence was undesired, and the
AN ERIK RAID. 151
unsuspended vice-president showed a strong disposition to
assume also the duties of treasurer in so far as these involved
the entering of transfers and the issuing of certificates of stock.
At last a sort of tussle took place over the books, and then the
police were called in, who established an angry truce. All
this took place on the 5th ; on the 7th the books were to be
closed.
The control of those books, it was well understood, implied
the control of the road. The presence of James Fisk, Jr.,
and of Jay Gould in the struggle was no mystery, and the
officei's of the road could not fail to recall how, only a few
months before, the vault of the Union Pacific Railroad had
been forced, in a vain search for the books of the company,
under cover of a judicial process and at the dictation of these
very men. That the records were not in safety while in the
offices of the corporation was notorious. That night, in the
presence of counsel, and with the knowledge of the treasurer,
they were removed from the building. The law guaranteed to
stockholders access to the books of the corporation ; the judi-
cial abuse of the processes of law had converted this right
into a facility for fraud. Whether those who would now insist
upon the right were likely to avail themselves of that oppor-
tunity was a question in regard to which recent experience in
other quarters might warrant the formation of an opinion. In
any case the books were now surreptitiously removed under
the advice of counsel, and the action of the officials who
assented to this removal was indorsed by public opinion, and,
throughout the subsequent proceedings, was not censured by
the courts.
The next, day the opposition wing of the direction met and
organized with the vice-president in the chair. Just as they
were proceeding to business, however, an attorney of the
other wing quietly entered the room and served upon four
of those present a new judicial order, restraining them from
acting as directors of the company, or from interfering with its
affairs. This unexpected move, leaving them without a quo-
nun, fell like a thunderbolt on the Albany members of the
152 AN ERIK RAID.
Erie party, and they precipitately retired from the field and
took the first train to New York in search of counsel and
assistance.
Reaching the Grand Opera Honse and the offices of the Erie
counsel, the fugitives laid their case before Mr. Shearman.
The quick eye of that gentleman at once took in the whole
situation, and he was not unequal to the emergency. The
president, vice-president, and a majority of the board of di-
rection were now suspended, and the Albany &, Susquelnuma
Railroad was suspended with them ; every one was enjoined ;
there was no one authorized to give an order or to pay out a
dollar ; chaos was come again. Recognizing the fact that a
court of equity had done this mischief through the exercise
of one of its powers, Mr. Shearman was inspired with a con-
viction that the same court must repair it by the exercise of
another power, injunctions had occasioned the dead-lock, a
receivership must dissolve it. A new suit was at once com-
menced, the complaint in which set forth the existing condi-
tion of affairs, and prayed for the appointment of receivers
who should operate the road, and so avert the disastrous con-
sequences otherwise sure to ensue. This paper was drawn up
by Mr. Shearman at his office in the Twenty-third Street Opera
Umise, on the afternoon of Friday the 6th of August. It was
not ready for signature until the hour of ten o'clock, P. M. The
<!rand Opera House is not in the immediate vicinity of any
court of law, nor do judges generally frequent their court-
rooms at late hours on August evenings. The private resi-
dence of Mr. Justice Barnard was on Twenty-first. Street, at,
least, half a mile away, and on the morning of this day the
Justice himself was at the bedside of his dying mother at
Poughkeeptrie, seventy-five miles from New York. Telegraphs
from Mr. Fisk had, however, found him there and summoned
him to the city. The order was ready for si.uimture at 10.20
1'. M., when it was delivered to a junior partner of the .firm
of Field. Shearman. ,v < '<>., who thereupon left the (irand Opera
House Mini, in fifteen minutes, returned with what, purported
to be Judge l.arnard's signature appended to it. A strange
AN ERIE RAID. 153
obscurity hangs over this part of the transaction. It was
never stated throughout the subsequent proceedings where
this order was .signed ; it was never proved that it had then
been signed by Judge Barnard at all. Diligent inquiry at a
date long subsequent failed to discover any trace of it in the
records of the court ; no evidence was ever elicited that Judge
Barnard was in New York at any time during that day. It
was subsequently said to have been signed at the house of
Fisk's mistress ; but this strange statement only called forth
a bare denial unaccompanied by any explanation.* That this
order, whether there signed by him or not, was subsequently
adopted as his own by Judge Barnard admits of no doubt.
Under the most favorable supposition it would appear that
the surprisingly brief period of fifteen minutes had sufficed
to go through all the forms and make all the inquiries neces-
sary to satisfy the judicial mind in regard to so trifling a
matter as the receivership of some one hundred and fifty miles
of railroad, involving millions of capital. This order appointed
Charles Courier, of whom the judge probably knew absolutely
nothing, and James Fisk, Jr., of whom he undoubtedly knew a
great deal, receivers of the Albany & Susquehanna Railroad
Co. Criticism is wholly unnecessary. The whole proceeding
reflects the highest credit on the energy of all concerned : it
speaks volumes. The law's delay is an ill of which the citi-
zens of New York, certainly, have no cause to complain, at all
times and under all circumstances.
By half after ten o'clock all was settled, and at eleven the
two receivers, accompanied by a select body-guard of directors,
friends, and lawyers, were on their way by the night train to
take possession of their charge. Their opponents had, how-
* It has since been stated, on the authority of Judge Barnard, that he acci-
dentally met the counsel on his way from the cars to his house, and wns asked
by him to sign the order; that he did so, stepping into a. neighboring real-
estate office for the purpose. The meeting was certainly a singular coinci-
dence, and the method indicated of transacting judicial business of the first
importance is calculated to excite surprise, if not consternation The " ex-
planation " seems, however, to have been considered perfectly satisfactory by
those to whom it was made.
7*
154 AN ERIE RAID.
ever, already got an inkling of the summary process impend'
ing over them from New York, and, while Mr. Shearman was
busy with the preparation of his order in the Grand Opera
House, other counsel were no less busy in the opposing camp
at Albany prepai'ing a counter-order, appointing another re-
ceiver in their own interest. This, when completed, was duly
submitted to Mr. Justice Peckham, of the Supreme Court
of the Albany district, between nine and ten o'clock of the
same (Friday) evening. The signature of this magistrate was
affixed to it, and a Mr. Pruyn, of Albany, was by him appointed
receiver of the Albany & Susquehanna Railroad Co. It was
close work. Each order took effect when signed, and there
certainly was no delay in their preparation, and even less in
procuring signatures to them. The evidence seemed subse-
quently to indicate that the Albany receivership had about
one hour's priority in time ; it had, however, one hundred and
fifty miles of distance in its favor, and the great weight which
attaches to possession as an element of success in litigation
has long since passed into a proverb.
Thus, on Saturday, the 7th of August, everything indicated
a collision of forces, No sooner had Receiver Fisk reached
Albany, and received the reports of his scouts, than he hast-
ened with his friends to the offices of the company. He
arrived there towards eight o'clock. In spite of this praise-
worthy activity on their part, Messrs. Fisk and Courter, on
proceeding to take possession of the premises, encountered a
somewhat unexpected obstacle in the person of a Mr. Van
Valkenburg, the superintendent of the road, who, upon being
informed of their errand, announced that he was already in
possession under the orders of Receiver Pruyn, and further
intimated that he did not propose to abandon it. A very
amusing and somewhat exciting scene then ensued. The
junior appointee of Mr. Justice Barnard presented his papers
to the superintendent, seated himself on the table, announced
himself as Mr. .lames Fisk, Jr., <>f New York, eome to take
sioii and prepared to do so if it required "millions of
money and an unlimited number of men." He further added
AN ERIE RAID. 155
that this was his twenty-sixth raid of the same character, and
that he proposed " to take you fellows " ; to all of which Mr.
Van Valkenburg pleasantly replied that he " hoped he would
have a good time doing it." His companions Mr. Fisk intro-
duced as his " boys," and invited them in to possess them-
selves. Quite a lively colloquy ensued, which was not satis-
factory to Mr. Fisk, who from words gradually proceeded to
overt acts, and finally ordered his "boys "to put the other
" boys " out. Unfortunately the preponderance of force was
not on his side. Instead of ejecting ins opponents, he was
summarily ejected himself, and, after being ignominiously and
very roughly hustled down stairs, he found himself in the
street in a very dishevelled condition. Nor did his dis-
comfiture stop here ; no sooner did he reach the pavement
than he was arrested by a fiery little individual, claiming to
be a policeman, and ignominiously marched off to the station-
house. As no complaint was preferred he was speedily re-
leased, but probably not until he had discovered that his
arrest, like his ejectment, was the work, not of a policeman,
but of an employee of the company. No sooner was he again
a free man than he returned' to the charge. Mr. Pruyn was
now at the offices in person, claiming to be in possession as
receiver, and a crowd of lawyers, officers, and parties in interest
had also assembled there. The heads of the opposing factions
met face to face. No further riotous demonstrations were at-
tempted, but, pending advices from New York, Mr. Fisk kept
up the semblance of a possession. He evidently bore no ill-
will to Mr. Van Valkenburg, on account of the rough treat-
ment of the morning, as he even went so far as to compliment
that gentleman on his display of energy, and to signify a de-
sire to extend to him his personal favor. As to Mr. Ramsey,
Mr. Fisk, as a happy solution of existing complications, sug-
gested that the possession of the road should be decided, not
as of old by a personal contest between the two heads of the
opposing factions, but by the goddess of chance, or whatever
other divinity may preside over the issue of a game of " seven
up " ; and, with such interchange of amenities and pleasant
156 AN ERIE RAID.
sallies of wit, with now and again the service of some notice
or order of court, and perhaps an injunction or two, the pro-
tege of Barnard beguiled the weary monotony of the day.
The cessation of active hostilities did not last long. The
discomfiture of the morning had been at once telegraphed to
Mr. Shearman, in the recesses of the Grand Opera House, and
that gentleman had forthwith proceeded to discover and apply
the suitable remedies of the law. Recourse was at once had,
or is alleged to have been had, to Judge Barnard, sitting at
special term in the conrt-honse. Again, however, a curious
obscurity hangs over the actual whereabouts of that magistrate.
On this day his mother was still lingering at Poughkeepsie, and
another judge was sitting at special term in the court-house.
In any case a most unusual and indeed welmigh antiquated writ,
never before granted to meet such an exigency as that which
had now arisen, was at once exhumed and prepared. In the
first place a new and sweeping injunction, purporting to have
been granted by Judge Barnard, was obtained, by virtue of
which Mr. Receiver Pniyn, the sheriff of the county, the
Albany police, and all the railroad employees, were restrained
from any interference with receivers Courter and Fisk. Not
satisfied with this, a writ of assistance * was likewise ordered
to issue, by which the sheriff, and, if need be, the posse comi-
f /if its, wrn> placed at the disposal of Messrs. Fisk and Courter.
This was a sufficiently unusual proceeding, but the service
of the process was so extraordinary that the ordering it was
:i( oucr reduced to Ijic commonplace. Now, probably for the
first time on record, both injunction and writ were forwarded
to their destination for service by electric telegraph. That;
afternoon officers in Albany actually undertook to serve upon
parties to a suit processes which had been issued in New York
* " Writs to the sheriff 1 , to:\s<i>t :i receiver, seijinvstnitor, or other party to a
suit in rhiuicery, to L'et pn-^cssioii, under a decree of the court, of lands with-
hold from him l>y another party to the suit. These writs, which issue from
th<> equity side of the Court of Exchequer, or from any other court of dian-
CITV. !ire :it leiist :i< old a* the reijrn of .Tame* I., and arc still ill common uso
In England, Ireland, and some of the Tinted States." (luincy's (Afats.) Re-
l*>rtt, p. 896.
AN ERIK RAID. 157
not an hour before, on the strength of affidavits as to facts
which had that day occurred in Albany. In place of making
service with the original, bearing the seal of the court and the
signature of the judge, the very ink of the copies which the
officers had in their hands was not yet dry. Of com-se such
a service was contemptuously disregarded, nor did the sheriff
presume to insist upon it.
It was now afternoon, and it was very evident that nothing
further could be effected this day; both parties, however,
claimed to be in possession, and neither would yield the
ground. Finally a species of truce was arranged to hold good
over the corning Sunday. A representative of each party
was to be left in the offices, and, before nine o'clock of the
coming Monday, no act of hostility, open or covert, in so
far as possession was concerned, was to be attempted by
either side.
The interval of Sunday was passed in active preparation.
While the representatives of the receivers tarried in the de-
serted offices, the principals themselves were busy with their
plans of campaign. Mr. Fisk and his friends among the direc-
tors retired to New York to get advice and the originals of the
telegraphed writs ; Mr. Pruyn and the Ramsey party stoutly
prepared themselves in Albany for such trials as the morrow
might bring forth. The issue now presented was, in plain
language, one simply of judicial nerve. It was a conflict be-
tween the judiciary of New York City and that of the country.
The system of electing judges by the popular vote had at last
brought forth bitter fruit, and men had been elevated to the
bench who should have ornamented the dock. These selec-
tions did not perhaps extend beyond one or two districts oiit
of the eight into which the State was divided, but each of the
thirty-three judges who composed those eight courts exercised
throughout the State the extensive and delicate powers of a
chancellor. All were magistrates of co-oi'dinate powers, and
technically of one court ; an order made by one could be dis-
solved by another, an officer appointed by this magistrate
could be suspended in the exercise of his duties by that, what
158 AN ERIK RAID.
one justice could do the next could undo. Everything under
such a system depended on judicial respect for judicial action ;
courtesy and confidence were the essence of it. All these
had, in certain quarters, now long passed away. The judges
of the country had felt bitterly the discredit brought upon
the common bench by the action of more than one judge in the
city ; there were among them those who had been deeply mor-
tified by a contemptuous disregard of their process. Hence a
conflict had become inevitable, and nowhere was it so likely
to arise as out of the litigations originating with the managers
of the Erie Railway. A peculiar discredit had now long at-
tached to these, and certain names, both on the bench and at
the bar, were always associated with them. There are facts
which are of public notoriety ; the community recognizes
them and no justice can ignore them. When, therefore,
James Fisk, Jr., was appointed, as a matter of course, by
Judge Barnard, receiver of a railway, no part of which lay
within a hundred miles of that magistrate's judicial district,
and when this appointment was made on the eve of a con-
tested election for directors of that railway, and must have
been decisive of the contest, then, at last, a case was presented
which could not be ignored. The conflict was not likely to be
a pleasant one. Recent proceedings in other causes had indi-
cated with sufficient clearness the lengths to which certain jus-
tices of the first district were not indisposed to go. Neither
the scandal certainly involved, nor the defeat not unlikely to
ensue, were pleasant to contemplate ; but the stand must be
made. Circumstances had a 1 ready designated Judge I'eckham,
of Albany, as the magistrate to whom the Ramsey people, must
almost, necessarily have recourse. The public estimation in
which thisgentlernan is held was shown by his election, shortly
after the events here narrated took place, as one of the new
Court of Appeals organ i/.ed under the judiciary clause of the
rejected Constitution of iSiiU. The scandal which arose out
of the Albany ifc Sus(|iieh!inna (-use most materially contributed
to the adoption of this single clause. It is probable, there-
fore, that the action of Judge Peckham on this occasion had a
AN ERIE RAID. 159
direct influence on his own future elevation ; it certainly
received the public indorsement.
Receiver Fisk might confidently be expected back, well
armed with injunctions and with the original of his writ of as-
sistance on Monday morning. It was necessary that Receiver
Pruyn should be prepared to meet him. The last New Yo-k
suit had enjoined the Albany receiver from any interference
with the New York receivers, and had been accompanied by a
writ of assistance. This was now met in the usual way. A
new Albany suit enjoined the New York receiver from any
interference with Mr. Pruyn, and at the same time an order
was issued by Judge Peckham restraining the sheriffs from
taking any action under the writs f assistance. It was fur-
ther sought to punish Mr. Fisk for a contempt of court in
interfering with its receiver on the previous Saturday, but this
the judge held it necessary to send to a referee to take evi-
dence and report. A temporary injunction was granted, and
Mr. Fisk was ordered to appear and -show cause on the 13th
why this should not be made permanent. Such were the legal
complications encountered by Mr. Fisk on his return to the
scene of his labors early on Monday morning. He had left
New York on the boat the evening before, in company with fif-
teen friends and advisers, and was fully prepared for vigorous
operations. The condition of affairs did not look propitious.
He was distinctly checkmated at Albany, and the order check-
mating him, and forbidding the sheriffs to interfere to put him
in possession, was already on the express-train which had left
Albany at 8 A. M., and would be due in Binghamton, at
the other end of the coveted road, at three o'clock that after-
noon. A party to a conflict, however, who operates by steam,
i;; at a manifest disadvantage when acting against one who
despatches writs by telegraph. In the present case Mr. Fisk,
baffled at one end of the line, went vigorously to work a hun-
dred and forty miles away at the other end of it. While the
express-train was toiling along to Binghamton, enjoining as
it went all sheriffs and others from paying any attention to his
writs of assistance, the telegraph was flashing those writs
160 AN ERIE RAID.
direct to Binghamton, and commanding that immediate pos-
session should be given to his representatives. Accordingly
just before two o'clock, and as the afternoon train for Albany
was on the point of leaving Binghamton, the sheriff of Broome
County made his appearance, and, by virtue of a writ of Judge
Barnard's, fresh from the telegraph wires, proceeded to take
possession of all the property of the Albany & Susqnehanna
Railroad Co., including the train then standing at the station.
Three locomotives belonging to the same company were also
at Binghamton. These he undertook to seize next ; of two
of them he obtained possession, but the agent of the road was
before him with the third ; for, just as he- was approaching his
prey, writ in hand and borne upon one locomotive, the in-
genious employee switched him off, and, while his own path
suddenly led into space, he saw his prize gently slide down
the grade out of his reach, and there get up the steam neces-
sary to make good its escape.
The Barnard receivers were thus fairly installed in posses-
sion of the Binghamton end of the road, of the point where
it connected with the Erie. An assistant superintendent of
the Erie Railway was at once appointed superintendent of the
Albany & Susquehanna, and a conductor of the same road
was ordered to take out the regular train to Albany, which
was still standing at the platform where it was seized. Mat-
ters were evidently approaching a crisis. Different sets of
receivers were operating the two ends of the road, and two
sheriffs, bearing conflicting processes, were rapidly approach-
ing each other on trains drawn by the locomotives and directed
by the officers of the hostile factions. This condition of af-
fairs was tch-graphed to the Ramsey train at Harpersvillc,
twenty-five miles from Miughamton, and, after some consid-
eration, it was determined to proceed no farther. Meanwhile
the news of the Binghamton proceedings caused Superin-
tendent Van Valkenburg to decide on vigorous measures. In
the first place he proceeded to clear the offices of all hostile
influences. Mr. Fisk had not that day been allowed within
the premises. Repeatedly, in company with the sheriff and
AN ERIE RAID. 161
others, had he presented himself and energetically demanded
admission. It was of no avail. It was different with Mr.
Conrter, his fellow-receiver ; he had been treated with a de-
gree of courtesy, and indeed had been permitted to sustain
the character of a nominal receiver within the offices. This
gentleman was, however, now notified by Mr. Van Valkenburg
that the farce of a double possession was to terminate then
and there. On Saturday, in the little unpleasantness with
Mr. Fisk, Van Valkenburg had given some indications that he
was a man of few words and decided action. The hint had
not been thrown away. Mr. Conrter, after a formal resistance
just sufficient to establish the fact of foi'cible ejectment, with-
drew from the premises, and the Barnard receivers abandoned
every pretence of actual possession of the Albany end of the
line. Van Valkeuburg's next move was to telegraph an order
over the road, stopping every train where it then was ; all
movement was thus brought to a stand. An extra train, car-
rying a hundred and fifty men from the workshops, under
command of the master mechanic, was then sent up the road
to be ready for any emergency. Having thus cleared every-
thing away for action, the next move of the other side was in
order.
The representatives of this other side were meanwhile ad-
vancing from the opposite direction ; upon the train were the
sheriff of Broome County, the Erie superintendent of the road,
and some twenty men. As they moved along, the orders
of Judge Barnard were served at each way station, the old
officials of the road were displaced, and Erie men were sub-
stituted for them. So eager, indeed, was the sheriff in the dis-
charge of his duties, under the electro-writ of assistance, that
he not only served an order, the illegal character of which he
must have more than suspected, throughout his own county,
but he continued to do so throughout the adjacent county,
and, indeed, seemed not indisposed to extend his bailiwick to
Albany. At Afton, about thirty miles from Binghamton, a
despatch was received from Mr. Van Valkenburg, notifying
the party that any farther advance would be at its own peril.
162 AN ERIE RAID.
The Albany people were then lying at Bainbridge, six miles
farther down the track. After some hesitation, which involved
a great deal of rapid telegraphing and no inconsiderable delay,
positive orders for an advance came to the Erie party, followed
shortly after by reinforcements. It was now deep in the
night, but the train at last was started, and moved slowly and
cautiously towards Bainbridge. The Albany party was pre-
pared to receive it. They lay on a siding, with a patent
frog a little machine made to slide trains on to the rails,
but equally calculated to slide them off attached at a con-
venient point to the main track. In total ignorance of this
bit of strategy, the Erie people felt their way along, when, just
as Bainbridge, to their very great relief, seemed safely reached,
their locomotive gently and suddenly glided off the track, and
their train was brought to a stand-still. The instant this took
place the Albany train moved up the siding, passed triumph-
antly by its disabled opponents and on to the main track
above them, where it took its position in their rear, effectually
cutting off all retreat. As the Erie party tumbled out of their
train, they were met by Mr. Smith, one of the counsel of their
opponents, who glanced at the process under which they were
acting, and at once pronounced it worthless. There was no
alternative ; they had fallen into a trap, unconditional sur-
render was all that remained. This was accordingly submit ted
to, aad Sheriff Browne of Broome County, and all his jif>.w
comilatus, were helped off their train and duly served with the
order of Judge Peckham, restraining them from doing or at-
tempting anything in aid of the receivers appointed by Judgo
Barnard.
Having disposed of this little party by capture, and it being
now broad day, <he Ramsey commander decided vigorously to
follow up his advantage, steaming up the road towards Biug-
hamton. On the way he displaced the recently appointed
Fisk men, and replaced the ejected Ramsey men in charge
of the various stations. Everything proceeded well until the
train approached the long tunnel, near Binghamton. This
was the battle-ground chosen by the Erie party. Here, close
AX ERIE RAID. 163
to their base of operations, and near their supplies, they had
massed their reserves, after the total and ignominious capture
of their advance guard.
The tunnel is some twenty-two hundred feet in length, and
is about fifteen miles from Binghamtou. It marks the last
summit the road crosses in going west, and, on either side, is
approached by a heavy ascending grade and round a sharp
curve. The Albany party arrived at this point at about ten
o'clock, and here halted. On the other side of the hill, trains
were bringing up workmen from the Erie shops, under the
officers of the Erie road, until Mr. Fisk's threat in regard to
" any number of men " seemed tolerably certain to be verified.
It was a motley collection, the control of which must have
considerably puzzled the general superintendent of the Erie
Railway, who found himself in command. A more unwieldy
body could not well have been got together. The men were
wholly unarmed, except, perhaps, with sticks, which one party
was detailed to cut in the neighboring woods ; they had been
hastily summoned from the shops, and were ignorant as chil-
dren of the crazy errand they were about, nor had they the
slightest enmity towards those opposite to whom they stood in
ludicrous array. This, however, was not the case with the
Susquehanna people. They were now thoroughly stirred up
and ready for anything. Most of them had for years been in
the employ of the road, and many were personally attached to
Mr. Ramsey ; they regarded the effort to dispossess him as
aimed also at themselves. They were, too, flushed with the
success at Bainbridge, and possessed with a strong esprit de
corps. Such being the opposing elements, they lay waiting
for peremptory orders, which in any case had to come from
Albany, fur there both Fisk and Van Valkenburg kept their
head-quarters. From time to time reinforcements came up,
until by seven o'clock the Erie party was raised to an un-
wieldy mob of some eight hundred men, while their opponents
numbered hardly less than four hundred and fifty. The Erie
people now decided to try an advance, and accordingly a train
well loaded with combatants was set in motion. It moved
164 AN ERIE RAID.
slowly througn the tunnel and emerged safely from the east-
ern end, merely having to replace a single rail. This done,
the advance was continued. Meanwhile the Albany people
were fully notified of the impending danger. Accordingly,
when the Erie people had replaced the rail and started, they
started too, and thus the first intimation the raiders had of
danger was the discovery, on rounding the sharp curve, of an
approaching locomotive, angrily puffing up the grade, and
apparently bent on mischief. This was more than they were
prepared for. Their whistle at once signalled danger, which
the Albany locomotive replied to by signalling to them to get
out of the way. In vain the Erie conductor jumped off his
train and gesticulated like a madman ; in vain the Erie engi-
neer tried to back out of the way ; the curve was hero so
sharp and the incline up which it was necessary to back in
order to return into the tunnel was so great, that it was in-
stantly evident, not only that the Albany people wanted a
collision, but that their wish was to be gratified. Though the
Erie engine could not reverse, it had stopped, and the heavy
grade kept down the speed of the Albany train, so that the
collision rather indicated an animus than inflicted an injmy ;
nevertheless, in a moment the two locomotives came together
with a sharp shock. The damage done was not. great ; guards
and cow-catchers were swept away, head-lights were broken,
and the attacking locomotive was roughly thrown from the
track ; but the collision of engines was the signal for a collision
of men. Before the trains held met they were emptied of their
loads. Such a system of opposition was something on which
the Erie people had not counted, and when, simultaneously
with the collision, the Albany men rushed upon them with
loud shouts, they were at once completely demoralized, and
broke into a precipitate flight. Their locomotive, with broken
lights and a pistol-bullet through its cab, vigorously reversed,
until it had reversed itself out of the melee and back into the
tunnel, while they themselves took to their heels and scam-
pered back towards Binghamton. A few remained on board
the train, a few stumbled back through the darkness of the
AN ERIE RAID. 1G5
tunnel, but the greater part, to whom their terror perhaps
lent wings, scaled the mountain like a sand-hill in their flight.
Victory had again rested on the Albany banners; the Ram-
sey star was in the decided ascendant. While one party of the
Albany men followed up the disorganized enemy, others busied
themselves in getting the locomotive on the track. This
was soon done, and then they, in their turn, locomotive and
all, advanced through the tunnel to complete the rout of Erie.
The last-named party had, however, rallied a little in the
breathing-time afforded them, and were now at least eqiial to
the task of making a very considerable noise. This, it is true,
was not much, but in the growing darkness it was enough.
In fact it might be said that one party was afraid to go for-
ward, and the other did not dare to attack. The element of
the ludicrous was becoming very pronounced, notwithstanding
the earnestness of the combatants. Thus ; as the shades
of night deepened, they stood apart and defied each other
with loud shouts and excessive profanity. A few conflicts
of the more daring, a few scattering pistol-shots, a few wounds,
none of them serious, told the whole story. Yet it was a riot,
and a shockingly lawless one ; nay, more, it was an alarming
one. It was not a sudden fight between ignorant and angry
mobs ; it was the attempt of two great corporations to levy
war on each other with organized force. How far it might
have gone cannot be said, for, in the midst of the tumult, the
drums of the Forty-fourth Regiment of State Militia were
heard approaching, and at this not unwelcome sound the com-
batants desisted. The Erie people held possession of the field.
The Albany party sullenly withdrew, locomotive and all,
through the tunnel, which they blocked up with a freight-
car, and then, after breaking down a trestle-work or two, with
a view of preventing another attack, they retired to Harpers-
ville, where they established themselves for the night.
Meanwhile the whole State was in an uproar over the scan-
dal of these lawless acts. All along the line of the road, and
indeed almost everywhere, the feeling was strongly in sympa-
thy with Mr. Ramsey. It could not well be otherwise ; with-
166 AX ERIE RAID.
out knowing anything of the circumstances of the particular
case, a strong presumption was now inevitable wherever the
Erie management made its appearance in any complication.
At Albany the public sentiment was peciiliarly strong ; meet-
ings were held, a perfect ovation greeted the arrival of the
runaway locomotive from Biughamton and the captured Erie
train ; crowds collected round the station, and were addressed
from the cars by city demagogues on their way " to the front."
At last, also, the point was reached at which, if the authorities
did not interfere, the people would organize and take matters
into their own hands. The militia had already been called
upon by the civil authorities of Broome County and had re-
sponded to the call, and now Governor Hoffman was recalled
from his summer sojourning-place by telegraph, and reached
Albany at almost the very time that the Forty-fourth Regi-
ment arrived at the scene of riot. He at once took decisive
measures. Orders were telegraphed to the sheriffs along the
line of the road, directing them, in all cases of doubt, to trout
any party in actual possession under a judicial order as being
in rightful possession. The military were to be called upon
only in case of extreme emergency, but, if the disorders con-
tinued, the whole district was to be placed under martial
law.
In spite of these new developments, the Erie party was
neither discouraged nor idle. The papers of Tuesday con-
tained a long letter from Mr. James Fisk, Jr., setting forth at
great length the magnitude of the public interests for which he
claimed to be contending. The literary shortcomings of this
production were excused on the ground of "quick, sharp work
on a stamping ground new to me." Not content with this bid
for moral support, on the evening of Tuesday, when the offices
of the company would naturally have been deserted, Fisk ;md
Courter made another effort to obtain possession of them.
Armed with an order of Judge Barnard's, staving all proceed-
ings under .lud^i- I'eckham's writ of Monday, and further forti-
fied with an additional writ of assistance, the brother receivers
made their appearance in a carriage accompanied by the sher-
AN ERIE RAID. 1G7
if Van Valkenburg was, however, on the ground, and, for a
moment or two, thing's had an unpleasant look ; so unpleasant,
indeed, that Mr. Fisk now changed his tactics. Instead of
bullying he attempted bribing ; all the braggart confidence
of Saturday was gone, and his demeanor was chiefly marked
by an excessive care for his personal safety. As for the sheriff,
the indications of violence were sufficiently pronounced to
induce him to think it inexpedient to proceed further. Prob-
ably they would have gone away empty-handed, had not a
new judicial power just then stepped into the arena. This
was Mr. Justice Clute, of the Albany County Court, who
issued his order directing the arrest of the Barnard receivers
for conspiring to take possession of the Albany <fe Susquehanna
Railroad by force of arms. In obedience to this order the two
indignant receivers were at once taken to Judge Clute's office,
whence they were not released until they gave bail for their
appearance next morning. The cwip de main was a failure ;
but Mr. Fisk relieved his feelings by graphically describing
the attempts which had been made to assassinate him.
The next morning Judge Peckham began the day, not
exactly by setting aside his brother Barnard's recent orders,
b\it, more courteously, by fixing a day on which cause should
be shown why they should not be vacated, and, meanwhile,
granting a temporary stay of all proceedings under them.
The judicial equilibrium was thus restored. At last Governor
Hoffman put a final stop to the judicial farce by notifying the
sheriff of Albany that he was included in the directions of the
previous day. The Ramsey party, being in actual possession
at Albany under a judicial order, forthwith applied to the
police for protection, which was immediately granted them.
Meanwhile, Governor Hoffman received information of the
tunnel conflict. He at once notified the counsel that such
proceedings must stop, and that some agreement must be
arrived at. In due time the counsel notified the Governor,
in reply, that they were utterly unable to agree on anything.
His Excellency thereupon very emphatically and very properly
replied that he neither knew nor carfed anything for their com-
108 AN ERIE RAID.
plications, but he did propose to preserve the public peac,e.
If those interested could not agree on some other course, it
only remained for him to declare the whole district in a state
of insurrection, and to operate the road as a military one.
This declaration produced a document, signed by all the re-
ceivers, requesting his Excellency, as a species of nondescript
superintendent, mutually agreed upon, to take possession of
and operate the road. This very anomalous trust was ac-
cepted by Governor Hoffman, who issued a quasi military
order, detailing Inspector-General McQuade as his deputy
superintendent, and directing him to take possession. This
was certainly a fitting climax to all that had gone before. A
receiver is an officer of the court. His possession is the pos-
session of the court. The courts in this case Avere fighting
over the control of a railroad, and were forced to ask the
Executive to hold the bone of contention while the judiciary
" had it out " amongst themselves. Thus the Executive, in
the utter break-down of the law, had to accept a trust which
did not belong to it, and proceed to perform duties which it
had no right to perform, \inder an authority conferred by cer-
tain persons who had no such authority to confer. And all
this because a man was selected in caucus and elected at the
polls a judge in the first judicial district of New York, who
fairly represented the moral and intellectual level of the major-
ity of the voters who had elevated him into infamy. It was
no accident ; there was no element of chance in the case ; it
was the working of a system which produced a logical and
natural result.
Though the possession of the road was thus disposed of, cer-
tain little outstauding accounts remained to be adjusted. The
vacating of Judge iVrkliMin's orders by Judge Barnard, and
tin' staying of proceedings under Judge Barnard's orders by
.ludgc IVrkliam, were mutters of too common occurrence to
call for notice. The interference of Judge Clute, however, a
mere county judge, was something "most tolerable and not to
be endured." And now for the first time in these proceedings
Judge Barnard appeared upon the stage as something more
AN ERIE RAID. 169
than a name. The funeral of his mother had taken place at
Poughkeepsie on the previous day ; on that day, also, orders
had been forthcoming from him in these Susqnehanna suits,
purporting to be granted on the behest of Mr. Shearman, be-
tween 1 1 A. M. and 1 P. M., at special term at the court-
house in New York City. The minutes of the court-house show
that the special term at the court-house in New York City was
held on this day by another magistrate. Upon the morning of
the llth, however, he at length appeared in proper person, and,
after obtaining from him the usual order, setting aside Judge
Peckham's action of the day before, Mr. David Dudley Field,
of counsel for the Erie Railway, read to the court the return
of the sheriff, setting forth" the resistance he had encountered
on the previous afternoon in his attempt on the Susquetmnna
offices. Upon his motion the court ordered a peremptory writ,
not bailable, to issue, commanding the sheriff to arrest Messrs.
Pruyn, Ramsey, and Van Valkenburg, and to produce their
bodies in court without delay. Under this process these gen-
tlemen were arrested that afternoon, while in the Executive
Chamber, and were held in duress awaiting conveyance to
New York. Of course they none of them, at this time, seri-
ously contemplated any such journey. Recourse was again
had to Judge Clute, and the non-bailable prisoners were car-
ried before that magistrate on a habeas corpus. The subject
was taken under consideration by him until next morning.
The opponents of Mr. Fisk had shown themselves not inapt
scholars, and it naturally occurred to them that processes for
contempt might be made to apply to him as well as to them-
selves. The same thought suggested itself to Mr. Fisk, as
soon as he found time to relax from the efforts incident to
"quick, sharp work on a stamping ground new to him." He
had once before fled to Jersey City, pursued by Barnard ; he
now incontinently retired to New York, terrified by Peckham.
In fact, he abandoned his new " stamping ground " with great
precipitation. Flying on board his own steamer, which was
lying in the stream ready to serve either as an ark of refuge
or a stronghold for prisoners, he was conveyed at once to New
8
170 AN ERIE RAID.
York, where he secured himself in the recesses of Castle
Erie.
The next morning Judge Clute incontinently discharged the
prisoners held under Judge Barnard's writ. It is almost
unnecessary to say that his action was apparently in disregard
of law ; these proceedings throughout were open to this criti-
cism. It was perfectly proper for Judge Clute to issue his writ
of Jiabeas corpus ; when it came, however, to releasing prison-
ers held by a sheriff on a writ issued for contempt from a
court superior to his own, the action of his Honor was, per-
haps, more spirited than correct in practice. The prisoners,
however, were released, and it only remained for the sheriff to
make a return of the facts by mail to Judge Barnard. The
matter was then brought once more before that magistrate,
this time by Mr. Shearman. The colloquy that then took
place was characteristic and well calculated to fill with terror
the hearts of Peckham and Clute, no less than of Pruyn and
Ramsey. The counsel began with a comparison. Judge Peck-
ham, it appeared, had signed certain of his orders at his office ;
Judge Barnard, it will be remembered, was supposed to have
signed his somewhere in the immediate neighborhood of a
theatre. Bearing these facts in mind, one cannot but appre-
ciate the delicate sense of honor implied in the following open-
ing remark of the counsel : " Unlike our opponents, who in-
vite the judge to their private office, and from which he issues
his orders as if from the court, we have never sought to con-
sult your Honor in private, and whatever we have asked lias
been asked openly in court, and in accordance with our firm
conviction of our legal rights." The peculiarly elevated tone
of Judge Barnard's court being thus established, the colloquy
proceeded us follows :
J/n/'/i- lltrimril. I have been looking into this matter with
some degree of care, and am of opinion that J. H. Clute, .sign-
in'.: himself as county judge of Albany County, entertained
jurisdiction of this matter as a criminal contempt, well know-
ing 'hat it was a civil contempt. I am not quite sure but he
should be brought before me to lie punished for contempt.
AN KI211-: RAID. 171
Mr. Shearman. I intend to follow these men as I have
followed others. Four months ago we were in pursuit of cer-
tain parties, and they were finally overtaken as their coat-tails
were disappearing behind a safe. I shall follow these men,
if it is necessary and possible, to the end of time.
Jtulye Barnard. I have some years to sit ou this bench,
and would as soon devote them to this as to anything else.
Mr. Shearman. I am a young man also, having perhaps
forty years at my disposal, and I am willing to devote them all
to the pursuit of these men.
The first step in this forty years of persistent strife was
thereupon at once taken by directing the sheriff to make a
more detailed return. The individuals in question had, how-
ever, already fled the State, and Judge Barnard does not seem
finally to have made up his mind to try conclusions with
Judge Clute. Meanwhile the friends of the fugitives began to
think that these proceedings had exceeded the limits of a jest.
To fly the State was an ignominious thing ; it seemed to imply
a confession of wrong-doing ; it could only be justified by the
uncertainty which existed in regard to the limits of judicial
power in cases of contempt, and especially of the exercise of
that power by Barnard himself. He had indicated his animus
by his remarks in court. Resort was had to negotiation. One
of the Ramsey counsel went to New York and threw himself in
Barnard's way. The Judge assured him that there was no vin-
dictiveness in his mind, and this interview led finally to some
distinct understanding, reassured by which the fugitives one
by one came back and presented themselves in court. After
this the matter took the usual course. A reference was ordered,
a mass of evidence was taken, the case dragged its slow length
along, bail was reduced, a multiplicity of orders were issued,
the wrath of Barnard gradually subsided, and, at last, the bat-
tle of the judges died away in a faint rumble of evidence, affida-
vits, explanations, and orders, and then was heard of no more.
One further order, and one only, was made at about this
time, to which subsequent events lent a deep consequence.
The Erie party had been completely foiled in its efforts to get
172 AN ERIE RAID.
possession of the much-coveted books. Now and again they
would obtain some clew which led them to suspect their pres-
ence somewhere, but when they were sought they were gone.
Agents went out of the State hunting for them, parties were
examined in the State concerning them ; a strange ignorance
apparently existed as to their whereabouts. They seemed
ubiquitous ; at one time in Albany, at another in Pittsficld,
and then suddenly in Troy ; but always in the undisturbed
possession of some friend of Mr. Ramsey. The Erie party
was, in their absence, wholly unable to estimate its own rela-
tive strength as compared with that of its opponents. It was
known, however, that a portion of the forfeited stock had been
reissued, and now stood in the names of Leonard, Groesbeck,
and others. Leonard was a director, and in negotiating the
sale for the company of certain of its second mortgage bonds
and stock had reserved to himself a portion of the stock as a
species of brokerage commission. Mr. Leonard, however, was
one of the directors in close sympathy and alliance with the
Erie management, and, in regard to the stock reissued and
standing in his name, for which in reality no consideration
had been paid to the company, it seemed unnecessary to in-
stitute any proceedings. Not so as regarded that issued to
(Iroesbeck and paid for by him. The reissue of this last stock
was pronounced flagrantly illegal and void, and Judge Barnard
was accordingly petitioned to appoint a receiver for it. The
order was immediately granted, and Mr. William J. A. Fuller,
an individual who had once been a clerk in Mr. Field's office,
was named receiver, and directed to take immediate possession
of the property. Armed with this order, and accompanied by
a slu-riff 's officer, the new receiver proceeded at once to Mr.
Groesbeok'a office and demanded his scrip. Upon Mr. (Jroes-
bcck's demurring somewhat at being deprived of his property
in this summary way, Receiver Fuller proceeded to explain to
him the mysterious terrors of a writ of assistance, which
almost unknown process he darkly intimated he had some-
where at hand. Mr. (iroesberk was tolerably familiar from
long experience with all the usual judicial processes which arc
AN ERIE RAID. 173
auxiliary to New York financial combinations, but writs of as-
sistance were implements strange to him. The element of the
unknown seems to have produced the desired effect, and Mr.
Groesbeck delivered to Mr. Fuller certificates for nine hundred
shares of stock. Under the same authority this gentleman
further collected other certificates representing sixteen hun-
dred additional shares. His duty was simply, at the most,
to hold these shares pending the result of litigation as to the
legality of their issue ; he subsequently, as will be seen, took
what may be called very enlarged views of these duties. Both
parties had now gathered up their strength for the election
which was to take place on the 7th of September.
It was provided in the by-laws of the company that the polls
should be opened at twelve o'clock on the day of election, and
should continue open for one hour ; no transfers of shares were
to take place during the thirty days next preceding the elec-
tion ; three inspectors were provided for, to be chosen each
year by the stockholders ; it was their duty to conduct the
election ; they were to be provided by the secretary with a
list of stockholders entitled to vote, and to them also upon
that day the transfer book was to be submitted. To this state
of the law and the facts the two parties prepared to conform
their plans. It was in the first place incumbent on the Ram-
sey party to restore the books to the offices of the company.
This was done very secretly on the night preceding the elec-
tion. A certain fictitious consequence was sought to be
attached to the way in which this was done, owing to the fact
that, when the messengers arrived with the books, instead
of finding everything quiet and deserted as they had hoped,
they discovered a large crowd gathered in front of the offices
watching a conflagration across the river. The nature of their
business was thus sure to be discovered. This was just what
they wished to avoid. After a moment's reflection it was de-
cided to drive with the books to the rear of the building and
put them in through a window. A basket and cord were
found, the books were hauled up to the second-story window
by the secretary, and by him secured in the safe of the com-
174 AN ERIE RAID.
pany. Had the books, under the circumstances, been carried
in through the front door, an officer armed with a warrant,
and accompanied, if need be, by pick-locks and blacksmiths,
would, in all probability, have been after them before morn-
ing. As it was, their return was a secret until it ceased to be
of importance. Many unjustifiable features were assigned to
the proceeding by the Fisk counsel ; the one thoroughly un-
justifiable one in their eyes was probably its success. It was
never denied that the secretary of the company had, after the
removal of the books and while they were secreted, made
many entries in them. These, however, were all of transac-
tions concluded prior to the day when the books were to be
closed, and included all of those transactions, whether favor-
ing Ramsey or Fisk. Though much was hinted in regard to
these entries, during the searching investigation they were
subjected to in the subsequent trial, no instance of abuse of
trust was even specifically alleged, much less proved. Nor
indeed is it probable in itself that any such improper entries
were made, as those who made them must at the time have
known that they were unnecessary so far as securing a major-
ity of the stock was concerned.
The aspect of affairs was not, on the whole, propitious to
the Erie party as the day of election drew near. Their op-
ponents held the books, which forced them to act very much
in the dark, and the inspectors of election were understood to
incline to the Ramsey interest. That a majority of the stock
also inclined to it was a matter of less moment. The situa-
tion WUH full of difficulty ; but the men called upon to meet
it were full of resource. Their preliminary step was naturally
to lay in a sufficient supply of judicial orders. The regular
inspectors must, in the first place, be got out of the way. It
was ascertained that they were not stockholders ; the by-laws
required that the inspectors should be chosen from among the
stockholders. The Fisk-Gould counsel at once applied to
Judge Clerke, a colleague of Jud-c Barnard's, in the First
District, and that magistrate granted, as a matter of course,
an ru part? order, restraining the inspectors from acting as
AN ERIE RAID. 175
such. Having obtained this- process from Judge Clerke, and
filed it away for use at the proper moment, the counsel next
applied to Judge Barnard. They quietly commenced a suit in
the name of the Albany & Susquehanna Railroad Co. against
Messrs. Ramsey, Pruyn, Phelps, and Smith, the president,
receiver, secretary, and leading counsel of the company, to
recover damages for the abstraction of its books. On this
complaint they obtained from Judge Barnard, on the evening
of the day preceding the election, an order of arrest against
the defendants, with bail fixed at $ 25,000. This, be it re-
membered, was a judicial proceeding in New York, and not in
Constantinople. Thus panoplied in orders, all parties repaired
on the 6th to Albany. Mr. David Dudley Field came from
the pleasant shades of his summer retreat among the hills
of Berkshire, and Mr. Shearman, his associate in the .practice
of the law, had, for the nonce, quitted his offices in the Grand
Opera House, in order himself to be at the right hand of his
chief in conducting those delicate proceedings so skilfully and
secretly planned in New York. The former gentleman was
doubtless actuated only by a high sense of his professional
duty to his clients, but Mr. Shearman may have been braced
for the approaching crisis by the fell purpose he had recently
avowed of pursuing even for forty years the miscreants who
had failed properly to respect the orders of the distinguished
magistrate with whom his own relations were such models
of propriety. Having arrived in Albany, the last-named gen-
tleman repaired at once to the capitol, where he carefully
informed himself as to the details of the election. This done, a
general conference was held at the Delavan House, and the
plan of operations was matured. The first object was to
secure the organization of the meeting ; that once done,
arrangements of a satisfactory nature had been made to hold
it. The trap was to be sprung just before the hour appointed
for the election, when the regular inspectors were to be en-
joined by the service upon them of Judge Clerke's ex part?
order. The whole regular machinery being thus dislocated, a
preliminary organization was to be effected, three new and
176 AN ERIE RAID.
thoroughly sound inspectors were to be chosen, which would
insure the control of the election and the subsequent posses-
sion of the Susquehanna Railway. Every detail was arranged,
every person who was to play a part was designated and care-
fully taught his role. Such was the extreme caution used
that Mr. Shearman himself wrote out the appropriate resolu-
tions, and indorsed upon them the order in which, and the
very second at which, they were to be offered ; while Mr.
David Dudley Field personally handed certain of them to the
leading performers, with further verbal instruction. Early the
next morning there took place one of the most remarkable
comparisons of watches on record. A special messenger vis-
ited the Dudley Observatory, and obtained the exact time,
which was by him communicated to every active performer in
the approaching farce; or, rather, to all except the vulgar
majority, to whom time was of no consequence, they being
hired by the day, and constituting the fierce democracy of the
occasion. These gentlemen arrived by the morning train from
New York ; they were a very singular party, such as is more
frequently seen in the neighborhood of the riotous election
precincts of New York City than in the offices of respectable
corporations. A breakfast was negotiated for them by an
employee of the Fall River line of steamers, which constituted
"Admiral" Fisk's naval command, at the saloon in the sta-
tion ; and there they stood and fed at the counter, as rough a
set of patriots as ever stuffed a ballot or hit from the shoulder.
Sumo of them had coats, and some had not ; their clothes were
in various stages of dilapidation, as also were their counte-
nances ; open shirts disclosed muscular breasts, and rollnl up
trousers stuck iugless feet; one man saved himself the trouble
of rolling up both legs of his trousers by having only one ;
they emphatically belonged to tint class technically known as
"roughs,'' a class subsequently defined by a witness as "men
\\ith scarred faces and noses, and black eyes." Under the
circumstances it was little to be wondered at, that, while they
indulged in a " square meal," the keeper of the saloon gave
directions to have his silver counted. Pending the feeding
AN ERIE RAID. 177
of the democracy, their proxies were in course of preparation ;
at last all was ready, and between eleven aud twelve o'clock
they were marched up fifty strong to the offices of the com-
pany.
Everywhere things proceeded exactly according to plan. On
his way in a carriage to the corporation offices, Mr. Shearman
happened to see the injunction of Judge Clerke served on two
of the three inspectors as they were on their wa} 7 to the meet-
ing. This settled two points; the injunction was a surprise;
and the regular inspectors were disposed of. Judge Barnard's
more important order was meanwhile sent to the sheriff, and
the messenger was specially instructed by Mr. Shearman him-
self to hand it to him with this Roman injunction, " Sheriff,
do your duty ! " This instruction was given at nine o'clock,
but, curiously enough, the official had to consult his lawyer
about the service of the process, and this lawyer happened to be
one of Mr. Fisk's numerous legal advisers ; with that gentleman
he remained in counsel until half past eleven o'clock, when at
last he was advised to make his arrests at once. By this time
all the parties were collected at the offices of the company.
It might fairly be called a mixed society. Mr. Van Valken-
burg had tendered to the Governor's receivers a guard of men
from the shops of the road, but these had been refused, and a
large force of Albany police were on duty in the building.
Some thirty of the employees of the company were on hand
against an emergency, but under positive orders not to enter
the offices until sent for. Up stairs was a large array of stock-
holders, directors, real and contingent, a few receivers, and a
score or two of counsel. Then came the New York importa-
tion of ruffians, who were divided into squads under the
command of divers officials of the Fall River boats, the Erie
Hallway and the Grand Opera House ; thus marshalled, and
each man proxy in hand, they were marched into the room and
formed in line at one end of it. Besides these there was pres-
ent a choice collection of Albanians of somewhat similar char-
acter, either neutrals or inclined to Mr.. Ramsey. How they
got there did not appear, but if the instructions to the police
8* L
1/0 AN ERIE RAID.
to allow no one but holders of certificates of stock to pass up
stairs were enforced that day, these certificates were certainly
held by a great many strange characters. The Erie party,
prominent among whom were Messrs. David Dudley Field,
Thomas G. Shearman, and James Fisk, Jr., took possession
of the directors' room, which their assortment of " New York
stockholders " wellnigh filled ; in the adjoining room were
Messrs. Ramsey, Prnyn, and their friends and advisers.
Exactly at fifteen minutes before twelve o'clock, by observa-
tory time, one Colonel North, to whom that role in the Erie
parts had been assigned, moved the organization of the meet-
ing. No opposition was encountered, and the gentleman cast
for the part of chairman was duly installed. The resolve in-
dorsed "No. 1, Immediate," was then recited by Colonel North,
Mr. Shearman standing at his side watch in hand, and the old
inspectors were voted out of office and the new ones in. The
officers thus elected at once retired to the treasurer's room,
where the poll was to be held, whither they were immediately
followed by Mr. Shearman, still watch in hand ; having satisfied
himself that all was in readiness there, this master of cere-
monies immediately returned to the side of Colonel North and
resumed his comparison of timepieces. At last he said : " It
is now one minute of twelve ; keep your watch open and be
sure that you offer these resolutions at a little after twelve,
and not before ; and, in order to make sure, wait a few seconds
after twelve, but not more than fifteen seconds." With this
parting injunction he left the Colonel to his own devices, mid
" at thirty seconds of twelve " returned to the inspectors'
room, just in time to find an injunction served on those offi-
cials. It was issued on the complaint of David Groesl >(<!<, and
enjoined an election unless the stock held by him was first
voted on. Now, at last, was developed the entire significance
of the ex parte order under which Mr. William J. A. Fuller was
made receiver of this stock. There were twenty-five hundml
shares of it; Mr. (Jioc^ln ck had paid for several hundred of
them ; he was at that very moment in the next room : he was
on every ground bitterly opposed to the Erie direction, and
i AN ERIK RAID. 179
to the parody of an election then in process ; Mr. William J. A.
Fuller was the receiver of the stock, and it was to this receiver,
now conveniently standing at his elbow, that Mr. Shearman
turned and remarked: "An injunction has been served re-
straining this election from going on, unless the votes on the
twenty-four hundred shares which you hold are first received,
and yon had better vote." Thus appealed to, Mr. Fuller
modestly replied that he had not intended to vote at this
election, but, having been appointed receiver, he deemed it his
duty to do all in his power to preserve the property, and con-
cluded his statement by giving as a reason for his vote that
the ticket which he offered was composed of men of the high-
est character and ability, whose election would best secure the
rights of all parties to the litigation. At the close of these
remarks he actually voted, and the curious spectacle was ex-
hibited of a court of equity taking a man's stock away from
him on the ground that it was illegally issued and conld not
be voted on at all, and then proceeding to vote on it itself,
before the man's face and against his wishes. Viewed calmly,
and after the event, such a proceeding strikes one chiefly as an
extremely droll joke. The climax of the humorous, however,
was not attained until some months later, when Mr. Fuller
gravely stated in court that, as a receiver, he considered it his
duty to vote on stock without consulting the wishes of its
ostensible owner, and that for his services as receiver in this
case lie had as yet received no remuneration, but expected
the regular fees, amounting to $15,000. After Mr. Fuller
had thus relieved Mr. Groesbeck of the trouble of voting, and
after the meeting in the next room had gone through a nomi-
nal reorganization to meet the letter of the law, the polls
were declared open. The inspectors were withal curiously
careless, or too intent on the passage of time to think of aught
else ; they certainly neglected to be qualified by taking oath
as to the performance of their duties, which was specially pre-
scribed in the by-laws ; neither did they use any ballot-box,
other than the straw hat of one of their number. In this,
however, the ballots were deposited, and the election went
AN' ERIE U AID.
briskly on for some fifteen minutes, when, under the names
of John Doe, Richard Roe, and James Jackson, the inspectors
were again enjoined, this time from any further proceedings.
Most of their tickets had, however, already been voted, and
this injunction was violated by the reception of others, subse-
quently offered, only in a moderate degree.
Meanwhile events did not stand still in the little library
adjoining the directors' room, where Mr. Ramsey and his
friends were collected. The sheriff of Albany, after leaving
the office of his legal adviser, proceeded to "do his duty."
As Mr. Ramsey was intently listening in the president's office
to Colonel North, who was moving the organization in the
next room, some one suddenly touched his arm, and he became
conscious of the sheriff at his side. Here was a thunderbolt.
At the very instant when his presence was most necessary,
when all depended on the full possession of his liberty and
his faculties, he found himself, the secretary of the company
and its legal adviser, under arrest. The thing could not have
been better timed. To understand the full possible effect of
this move, it is necessary to bear in mind a remark made
by Mr. Shearman in his subsequent testimony, though in an-
other connection : "I did n't want to lose a second's time, bo-
cause I knew the value of time in this case, and I knew
that the whole question would have to depend upon the
question of which meeting was organi/ed first." The officials
of the road were therefore arrested, by mere accident, as it
was claimed, just when they should have been organizing
their meeting. Nor did the possible benefit to be derived
from this muasuru stop here. The election was limited to
one hour, and the sheriff was instructed " to do his duty."
He might have effected his arrest at ten o'clock ; but had he
done so, the parties would have been bailed at once, and the
arrest might as well not have been made. Having been made
at exactly the right moment, the sheriff might now further
construe it to be his duty to remove the prisoners to his office,
1hTc to iiiTai) 1 ^! tlu.'ir bail. The votes on which Mr. Ramsey
relied were, of course, held by him in the usual form of prox-
AN ERIE RAID. 18 1
ies ; they were, in fact, on this day so cast by him. Could
he, therefore, be held in durance, away from the offices, by
any fictitious delays and objections, for one short hour, the
election would be over and irrevocably decided against him.
The construction the sheriff should give to "his duty" in the
premises was very vital, and fully warranted his lengthy inter-
view with that gentleman who was the common adviser of
himself and the Erie Railway Company. The whole proceed-
ing certainly spoke volumes for the ingenuity and resource
of those who engineered it. In its style it could not have
been improved.
Mr. Ramsey was thus a prisoner. He proposed at first to
leave the room to consult his friends, but was requested by
the sheriff to remain in it, and here he was soon visited by
Mr. David Dudley Field, of counsel for the Erie Railway
Company, who satisfied himself that the sheriff was doing
" his duty " by taking a comprehensive glance at the situa-
tion. Finding this greatly to his mind, he then proceeded,
with a smile indicative of profound satisfaction and with his
thumbs in the armholes of his waistcoat, to inquire of Mr.
Ramsey as to the present condition of his health. Mr. Ram-
sey has the reputation of being a remarkably cool and im-
perturbable man, so that now, when his counsel, Mr. Smith,
entered the room in a state of intense excitement and indig-
nation, and also under arrest, he received simply a direction
to go back and attend to the election, while Mr. Ramsey him-
self effected the bail arrangements. It is not clear whether
the sheriff lacked nerve to construe his duty as he might have
done, or whether the delay already occasioned was considered
sufficient ; at any rate, though he certainly arrested his prison-
ers at exactly the proper moment, he did not remove them
from the building. He was, indeed, even provided with blank
bail bonds, which were produced and filled, though not until
objection had been made to the security of one or two gentle-
men notoriously worth millions ; and this done the prisoners
were released. All this had occupied half an hour ; on the
theory of Mr. Shearman it was now too late, the moment had
182 AN ERIE RAID.
passed ; the coup had been completely successful. Mr. Smith
had, indeed, gone back and organized a stockholders' meeting
in the hall of the building ; but not iintil ten minutes after
twelve, and when the polls of the other organization had been
long open. The Erie party were, in their own belief, in pos-
session of the Albany & Susquehanna Railroad beyond a
peradventure.
Before going on with the narrative, a few words may here
'be not out of place concerning the much-discussed question
of the limits, if there be any, of the duty which counsel owe
to their clients. The celebrated dictum of Lord Brougham
in this regard is sufficiently general in its terms : " An advo-
cate, by the sacred duty which he owes his client, knows, in
the discharge of that office, but one person in the world, THAT
CLIENT AND NONE OTHER. To save that client by all expedient
means, to protect that client at all hazards and costs to all
others, and among others to himself, is the highest and most
unquestioned of his duties ; and he must not regard the
alarm, the suffering, the torment, the destruction which he
may bring on any other. Nay, separating even the duties
of a patriot from those of an advocate, and casting them,
if need be, to the wind, he must go on reckless of the conse-
quences, if his fate it should unhappily be to involve his
country in confusion for his client's sake ! "
Certainly no counsel could have acted more fully up to
both the letter and spirit of this famous rule than did Messrs.
David Dudley Field and Thomas G. Shearman, of counsel for
the Erie Railway Company, on this notable occasion. They
even " cast to the wind " the single faint limitation conveyed
by Lord Brougham in the words " to save " and " to protect "
by all " expedient means " ; and, in the intense fervor of their
devotion to their clients, had recourse in aggressive proceed-
ings to processes of law which were subsequently judicially
characterized as procured " in aid of fraudulent purposes."
Attending one's clients to corporation meetings, at the head
of a band of " nide, rough, and dangerous persons " and there
acting as the master of ceremonies, through the parody of an
AX ERIE RAID. 183
election, was a case which undoubtedly Brougham would have
included in his definition, had it occurred to him ; but it
probably escaped his notice, from the fact that, since the fall
cf the Roman Republic, such proceedings have not been usual
The ingenious device, also, of arresting one's opposing counsel
and holding him to $25,000 bail, at the moment when his
professional services are likely to become peculiarly necessary,
is a feature in legal amenities with which the English barrister
could not have been expected to be familiar. A high author-
ity has now, however, established these as part of the duties
of the American advocate. Instances of similar devotion
will, therefore, unless the now obsolete practice of disbarring
should chance to be revived, probably hereafter become more
common than they hitherto have been. The use of unusual
processes of court, unpleasantly suggestive of lettres de cachet,
quietly procured and suddenly brought in play, would seem also
to have met of late with an undeserved odium. Whether
these will again arrive at the great efficiency as an element in
litigation which they once attained in France will, perhaps,
depend upon the degree of fidelity with which sheriffs do their
duty. For the shortcomings of such officials, advocates natu-
rally cannot be held accountable, even by the most exacting
of clients. The client, moreover, in whose defence Brougham
was prepared, if need be, " to involve his country in confu-
sion " was the Queen of England ; which, indeed, cannot but
cause the deeper sense of a professional devotion, no less reck-
less, exerted in furtherance of the schemes of Mr. James
Fisk, Jr.*
* It ought, perhaps, to be stated in this connection, that the opinion com-
monly entertained of the transactions with which the names cf Fisk and
Gould are associated was not apparently shared by their counsel. These
gentlemen, whose close acquaintance with the facts in the case must certain!}'
have qualified them to form an intelligent judgment, have made no con-
cealment of what that extra professional judgment was. Upon this point
Mr. Shearman expressed himself very explicitly before a legislative committee
at Albany on the 31st of March, 1870, six months subsequent to the Susque-
lianna proceedings. He then paid the following high tribute to himself and to
Mf-M-<. Field, Fisk, and Gould:
" If I were to speak from my own personal judgment of the management
184 AX KRIE RAID.
To return from this abstract digression to the narrative,
little remains to be said of the election after the release of Mr.
Ramsey was effected. While bail was being procured, and the
necessary bonds executed, a second meeting had been organ-
ized by Mr. Smith in the hall before the offices, and this meet-
ing had proceeded to choose inspectors, who wei'e duly sworn
and received from the secretary the prescribed list of stock-
holders. They then opened their polls in the same room and
at the same desk at which the opposition inspectors were still sit-
ting. Mr. Shearman immediately stepped in front of them and
began, on various grounds, to challenge every vote. Of course
his challenge was disregarded, but the process was kept up by
himself or others, until, towards one o'clock, both polls were
declared closed. Neither party attempted to vote at the polls
of the other, nor was there any disorder or disturbance. The
two boards then canvassed their votes ; the Erie board de-
clared that the ticket voted for at their polls had received
13,400 votes, and was elected. Shortly afterwards the Ram-
sey board declared that the ticket voted for at their poll had
of the (Erie road. I should say that I hnve never been able to find where these
fraudulent nets charged were committed. I hnve never been able to find
where the villiiny comes in. I have been looking for it very anxiously. I
hnve thought that the newspapers were edited by men so much wiser than
myself that they must know all nbout it, and I confess that when I entered
upon the service of the company, amid a perfect clnmor on the pnrt of the
newspapers, I thought they were edited by such wise men that there must be
something wrong, and I entered upon my duties with fear and trembling, but
I found no occasion for fear and trembling."
Mr. Liltlejolin. You are speaking as a lawyer now?
Mr. Skearmnn. No, sir, as a man; and now as a lawyer I say that I
think it N no slight tribute to the character of the gentlemen who are in the
management of the Krie Company, that, knowing as they did how particular
I was in regard to the management of its ollieer-, how careful I was that no
iiijustiee should lie done, to the company, and how strongly determined I was
that its interests .should not sutler, they confided their affairs in my hands.
And they have confided also in a gentleman of superior age and of very high
character, a gentleman with a QuKolic .sense of honor, a gentleman who has
never done a dishonorable, action, a gentleman whom the other side would have
been glad to engage for themselves if they could have done so, Mr David
Dudley Field. Mr. Field has been chosen by the Krie Railway Company as
their adviser, and, trained with Mr. Field, I have learned something of his
high sense of professional honor, etc.
AN ERIE RAID. 185
received 10,742 votes, and was elected. The two boards of
directors thus chosen then met and organized, the one by the
choice of Colonel Church as president, and the other by the
re-election of Mr. Ramsey ; and having then sufficiently re-
garded each other from the opposite sides of the directors'
room, in due time they adjourned.
The election was over, and apparently nothing was decided
by it. Each of the boards elected claimed to be the regular
and only lawful one, and neither of them in any way recog-
nized the other. Fortunately the agents of Governor Hoffman
were still in actual possession. The Erie party had, indeed,
endeavored to take advantage of this fact, by including in their
list of directors both Messrs. McQuade and Banks, who were
then operating the road under the authority of the Governor.
This move wholly failed. Both of these gentlemen instantly
and peremptorily withdrew from the board when notified of
their election. Governor Hoffman was the one person now re-
sponsible, and he very wisely called upon the courts to decide
who was legally entitled to the possession of the road. At his
direction the Attorney-General, immediately after the election,
began a new suit, in which all parties litigant were included,
and a general decision on the merits was prayed for. This
was the only way to cut the knot. The previous litigation
was ill a state of hopeless chaos. Twenty -two suits had been
begun, a score of injunctions had been issued, numberless
orders had been made, and both parties now stood ready to
continue the same style of warfare, just as long as any
judge could be found who disregarded the duties of his
position on the one side, or who did not lack nerve on the
other.
The action brought by the Attorney-General came on for
trial before Justice E. Darwin Smith, at Rochester, on the 29th
of November succeeding the election. The intervening time
had been wasted by neither party. Messrs. Fisk and "Gould
had utilized it in those manipulations of the gold market,
which had resulted in the celebrated explosion of Septem-
ber 24, long to be famous as the "black Friday" in Wall Street
186 AN ERIK RAID.
annals. Mr. Ramsey, meanwhile, had confined his attention
to the quarrel already existing, and had carried the war vigor-
ously into Africa, assailing the Erie management in its own
stronghold through the suit of Ramsey vs. Erie et ah. Writs,
orders, injunctions, receiverships, and conflicts of jurisdiction
had become matters of such daily occurrence as hardly to
excite a passing notice, and the complications which had grown
up around the Erie ring were only exceeded by the scandal
they caused. Hitherto, strong in the protection of the more
reckless of the city judges, Messrs. Gould and Fisk had suf-
fered no material defeat ; they had, indeed, in so far as the
law was concerned, carried all before them ; for to them the
law was simply a process for annoying others, and obstructing
all that was calculated to annoy them. Foiled in their attempt
to get control of the Susquehanna road by force, they did, in-
deed, now try to get it by negotiation ; they proposed a com-
promise of all existing disputes on the basis of a lease of this
road by the Erie for a term of ninety-nine years, at a rent
equal to seven per cent on its bonds and stock outstanding,
with a thirty per cent stock dividend flung in as a bonus. The
.Susquehanna people listened to the proposal, but it finally
appeared that no further guaranty than the word of the Erie
managers was contemplated. The Atlantic & (Jreat Western
Railroad had already illustrated the value of that. Like Fal-
stafTs tailor, the Susquehanna people " liked not the security " ;
and the other party, like the fat old knight himself, " had as
lief they would put ratsbane in my mouth as offer to stop it
with security." The negotiation fell wholly through, and
nothing remained but the arbitrament of a country justice of
the Supreme Court.
At the end of November flu 1 ease was in order for trial. The
Executive, the Attorney-General, the court, and the Ramsey
(diinsel were re;idy and in earnest. The usual motions for de-
lay from the other side were received with little favor. It was
shown that another suit, in which Messrs. Fisk and Gould and
their leading counsel were engaged, was then on trial before
Judge Barnard. It was of no avail ; the parties were ordered
AN ERIK RAID. 187
to proceed, and the case before Judge Barnard had to be post-
poned. The trial lasted ten days, and a vast amount of evi-
dence was put in. Mr. Fisk and Mr. Gould were conspicuous
by their absence from the witness-stand, but their counsel were
put upon it, and Messrs. Harris and Shearman each told his
own story. Some features of the evidence and incidents of the
trial were far from creditable. Among these may especially
be mentioned an attempt to create an impression that Mr.
Ramsey had once been under an indictment for forgery. So
grave a charge seemed most unlikely to be made without some
shadow of reason. In this case, however, it was wantonly
advanced, and even the machinery through which it was manu-
factured was subsequently exposed. Naturally this proceeding
and others reacted violently on those who had sought to derive
advantage from them. Public feeling in the court-room and
in the city of Rochester grew very strong as the case pro-
ceeded, showing itself in ways not to be mistaken. As the
case was on the equity side of the court, there was no inter-
vention of a jury, no chance of an inability to agree on a ver-
dict. After the evidence was all in, and the case had been
elaborately argued by Mr. David Dudley Field for the Erie
party, and by Mr. Henry Smith for the Susqiiehanna party,
Judge Smith took the papers, but reserved his decision. It
was January before this was made public.
There are cases where a judge upon the bench is called
upon to vindicate in no doubtful way the purity as well as the
majesty of the law ; cases in which the parties before the court
should be made to feel that they are not equal, that fraud is
fraud even in a court of law, that cavilling and technicali-
ties and special pleading cannot blind the clear eye of equit} r .
It is possible that even a judicial tone maybe overdone or
be out of place. There are occasions when the scales of justice
become almost an encumbrance, and both hands clutch at the
sword alone. Whether the magistrate upon whom the de-
cision of this cause devolved was right in holding this to be
such an occasion is not now to be discussed ; it is enough to
say that his -decision sustained at every point the Ramsey
188 AN ERIE RAID.
board, and crushed in succession all the schemes of the Erie
ring. The opinion was most noticeable in that it approached
the inquiry in a large spirit. Its conclusion was not made to
turn on the question of a second of time, or a rigid adherence
to the letter of the law, or any other technicality of the petti-
fogger ; it swept all these aside and spoke firmly and clearly
to the question of fraud and fraudulent conspiracy. All the
elaborate comparison of watches, and noting of fractional parts
of a minute, which marked the organization of the Erie meet-
ing were treated with contempt, but the meeting itself was
pronounced to be organized in pursuance of a previous con-
spiracy, and the election held by it was " irregular, fraudulent,
and void." The scandals of the law the strange processes,
injunctions, orders, and conflicts of jurisdiction were dis-
posed of with the same grasp, whenever they came in the path
of the decision. The appointment of Fuller as receiver was
declared to have been made in a " suit instituted for a fraudu-
lent purpose," and it was pronounced in such " clear conflict
with the law and settled practice of the court " as to be ex-
plicable only on a supposition that the order was "granted
incautiously, and \ipon some mistaken oral representation or
.statement of the facts of the case." The order removing the
regular inspectors of election was " improvidenHy granted "
and was " entirely void" ; and the keeping it back by counsel,
and serving it only at the moment of election, was " an ob-
vious and designed surprise on the great body of stockhold-
ers." The suit under which the Barnard order of arrest was
issued against Ramsey ami 1'helps was instituted without right,
tin' order of arrest Avas unauthorized, the order to hold to
bail " most extraordinary and exorbitant," and was procured
" in aid of fraudulent purposes." The injunction forbidding
Ramsey to act as president of the company was "entirely
void." The three thousand shares of forfeited stock reissued
t" Mr. (Jroesbeek were pronounced " valid stock," and numerous
precedents were cited in which the principle had been sus-
tained. E\en the subscription for the nine thousand live
hundred new shares of stock bv Uarnsev and his friends, on
AN ERIE I? AID. 189
which they had not even attempted to vote at the election,
was declared, in point of law, regular, valid, and binding.
Upon the facts of the case the decision was equally outspoken ;
it was fraud and conspiracy everywhere. " The importation
and crowding into a small room " of a large number of "rude,
rough, and dangerous persons," and furnishing them with
proxies that they might participate in the proceedings of the
meeting, " was a gross perversion and abuse of the right to
vote by proxy and a clear infringement of the rights of stock-
holders, tending, if such proceedings are countenanced by the
courts, to convert corporation meetings into places of disorder,
lawlessness, and riot." Finally, costs were decreed to the
Ramsey board of directors, and a reference was made to Sam-
uel L. Selden, late a judge of the Court of Appeals, to ascer-
tain and report a proper extra allowance in the case, and to
which of the defendants it was to be paid.
The legal scandals of the case were not yet quite exhaiisted.
No sooner was this decision announced and telegraphed to
New York, than the Erie counsel at once had recourse to the
judges of that city. As a matter of course, an ex parte order
was instantly granted, staying the entry of judgment. It
reached Rochester a few hours too late ; the judgment was
entered. The next day a new order was obtained, staying all
proceedings under the judgment; and this was served on
Messrs. Banks and McQuade, who were still in possession of
the road. Recourse was had to Judge Peckham, who quietly
declared the stay of no effect, and granted an order putting
the Ramsey board in possession. Then at last the keys were
delivered to them. The Erie counsel were not yet satisfied.
A motion was made to vacate the judgment. This was sup-
ported by affidavits of counsel of the most \musual nature.
Imputations of unfairness, irregularity, bias, and conduct oth-
erwise wholly unbecoming a magistrate, were advanced against
Judge Smith. The four leading lawyers of the defeated party
then united in a certificate, which concluded with these singu-
lar words: "We have examined the opinion of Mr. Justice
Smith in this cause, and, in our judgment, it is in every ma-
190 AN ERIE RAID.
terial part erroneous, either in fact or in law." It may be
necessary to mention here that this was a certificate of counsel
on the losing side of a decided case, applying to one judge of
the Supreme Court of New York, to vacate a judgment just
entered by another judge of the same court. It ought to be
unnecessary to add that the assumptions on which the motion
was based were pronounced " simply monstrous " ;. and the
affidavits were ordered to be stricken from the record as " ir-
relevant and impertinent." Nothing now remained to the Erie
faction but the slow process of appeal, with their opponents in
actual possession.
The struggle was over. Long before any action could be
taken on the decision of Judge Smith, at the general term of
the court, the Albany & Susquehanna Railroad was beyond the
reach of Fisk or Gould or the Erie Railway. Early in Febru-
ary, 1870, the Ramsey direction leased the whole property in
perpetuity, and on very favorable terms, to the Hudson &
Delaware Canal Company. This arrangement transferred the
struggle from the comparatively weak shoulders of the rail-
road itself to those of one of the most powerful and wealthy
corporations in the country. With it the Erie managers
could not afford to quarrel, so they were fain to profess them-
selves satisfied with the result, and to desist from the con-
test.
Meanwhile the Hon. Samuel L. Selden was busy over his
reference ; and the case was wellnigh forgotten before he made
iiis report. When it was made, it was calculated to revive a
very fresh recollection of the litigation in the minds of Mr.
Kisk's hoard of directors. This was composed of thirteen
individuals, of whom Messrs. Fisk and Gould were two. The
report of Mr. Selden was long and very minutely drawn ; it
\\as a document likely to be accepted by the court, and not
easily overt brown on appeal. " In view of the whole history
of this extraordinary ease," and in consideration of the assump-
tion by the Albany & Susquehanna Railroad Co. of the entire
expenses of the litigation, the sum of ninety-two thousand dol-
lars was fixed upon as a just and proper extra allowance to be
AN ERIE RAID. 191
paid by the persons constituting the Fisk board of directors to
those persons constituting the Ramsey board.*
* An appeal was taken by the Fisk board of directors from the decision of
Judge Smith, referred to in the text, and reported in 7 Abbot's Pr. Rep. N. S ,
p 265. The decision of the General Term was not announced until May, 1871.
It turned wholly upon technical points, a* d in no respect entered into the
merits of the controversy; upon these the findings of the court below were ap-
parently accepted as conclusive. The decision of Judge Smith was affirmed
in so far as it declared the election of the Fisk board fraudulent and void, and
that of the Ramsey board valid, on the ground that this question was properly
before the court, and it was competent to pass upon it. Judge Smith had also
decreed that the proceedings in all the suits on either side between the parties
defendant should be stayed and discontinued. This relief, it was held, upon
technical grounds, the court below was not competent to grant, and upon this
point the decision was reversed. It was also reversed upon the question of
costs, upon the ground that in an action brought by the People against two
sets of defendants the court had no power to grant costs to one set against the
other.
The Ramsey party was, therefore, sustained in the possession of the prop-
erty; but the Fisk party escaped the payment of costs under the Selden refer-
ence. So far as the scandals in litigation were concerned, which gave so gret
a notoriety to this case between the preparation and publication of this paper,
the court at General Term confined itself to a simple closing reference to them.
Profound regret was expressed at the occurrences which had preceded the
action then before the court, which in itself, however, it was declared had been
mavked by co unbecoming conduct on the part of counsel.
CAPTAINE JOHN SMITH,*
SOMETIME GOVERNOUR IN VIRGINIA AND ADMIRALL OF
NEW ENGLAND.
A Discourse of Virginia. By EDWARD MARIA WINGFIELD, the
First President of the Colony. Edited by CHARLES DEANE,
Member of the American Antiquarian Society, and of the
Massachusetts Historical Society. Boston : Privately printed.
1860.
A True Relation of Virginia. By CAPTAIN JOHN SMITH.
With an Introduction and Notes, by CHARLES DKAXE.
Boston. 1866.
THE ordinary reader will see in the small book lately pub-
lished by Mr. Deane a simple reprint of a black-letter
pamphlet which is one of 'the most precious jewels of Ameri-
can bibliopoles. There is not a word in the title-page to sug-
gest that the Introduction and notes, which are the work of the
editor, serve any other purpose than to explain and illustrate
the text. The volume is in appearance as innocent and five
from heretical taint as the reprint of the New England Primer.
Yet any one familiar with the course of Mr. Deanc's previous
inquiries knows quite well, in taking up the book, that he is
about to find very original views in regard to some extremely
interesting questions of colonial history; and if Mi 4 . Oeane
has chosen to adopt this modest form of publication, it is by
no means because what he has to say would not wan-ant an
original .-md inile'iendent work bearing his own name alone
on the titlr |.a-c. II i he opinions advanced by Mr. Deane,
which it will be our aim to explain, are correct, a very serious
* From tin' North American l-vicw for January, 1867.
CAPTAIN JOHN SMITH. 193
change in received ideas concerning the early history of Vir-
ginia will be necessaiy, and one to which the American people
will find it difficult to reconcile themselves.
Stated in its widest bearings, the question raised in this
publication is upon the veracity of Captain John Smith ; and
since the account of the colonization of Virginia has hitherto
been almost exclusively drawn from Smith's Generall Historic,
it is evident that, if' the authority of that work is overthrown,
it will become necessary to reconsider, not merely the state-
ments of fact which rest only on its assertions, but the whole
series of opinions which through it have been grafted upon
history. These statements and opinions have been received
with unhesitating confidence for more than two hundred years.
There are powerful social interests, to say nothing of popular
prejudices, greatly concerned in maintaining the credit of
Smith's narrative oven at the present day. No object what-
ever can be gained by discrediting it, except the establishment
of bald historical truth. A very strong case indeed must
therefore be made out on the part of Mr. Deane and of those
who follow him, before the American public can be induced to
listen with attention to an argument which aims at nothing
less than the entire erasure of one of the most attractive por-
tions of American history.
Captain John Smith belonged to the extraordinary school
of adventurers who gave so much lustre to the reign of Eliza-
beth, and whose most brilliant leader it was one of King
James's exploits to bring to the Tower and the block. Like
Kaleigh, though on a much lower level, Smith sustained many
different characters ; he was a soldier or a sailor indifferently,
a statesman when circumstances gave him power, and an au-
thor when occasion required. He was born in Lincolnshire
in 1579, of what is supposed to have been a good Lancashire
family. At a very early age he became a soldier of fortune in
the Low Countries, and seems to have drifted into the Austrian
service, where he took part in the campaign of 1600 against
the Turks. Afterwards he reappears as a soldier of the Prince
of Transylvania, who gave him a coat of arms, which was
9 M
194 CAPTAIN JOHN SMITH.
registered at the Herald's College in London. The extraordi-
nary adventures which he met with during the three or four
years of his life in Eastern Europe are related in his Autobi-
ography, or " True Travels," a work published in London in
1630, near the close of his life. There is an interesting note
in Dr. Palfrey's History of New England (Vol. I. pp. 89-92)
which contains the earliest critical examination of this portion
of Smith's story from an historical and geographical point of
view, with a result not on the whole unfavorable to Smith,
although under reservations which admit a considerable degree
of doubt as to particulars. In the absence of other authori-
ties, however, the credit of the Autobiography must be left to
stand or fall with that of the Generall Historic.
In 1604 Smith was again in England, where he soon began
to interest himself in the enterprise of colonizing America.
On the 10th of April, 1606, King James conferred a charter
upon certain persons in England, who took the title of the
Virginia Company, and who proceeded to fit out an expedition
of three small vessels, containing, in addition to their crews,
one hundred and five colonists, headed by a Council, of which
Edward Maria Wingfield was chosen President, and Captains
Bartholomew Gosnold, John Smith, John Ratclifte, John Mar-
tin, and George Kendall were the other members. After vari-
ous delays this expedition dropped down the Thames on the
L'Otli of December of the same year, but was still kept six
weeks in sight of England by unfavorable winds. After a long
and difficult voyage, and a further delay of three weeks among
the West India Islands, the headlands of Chesapeake Bay
\\riv passed on the 26th of April, 1607. On the 14th of May
lollowing, the colonists formally founded Jamestown.
But in the mean while a difficulty, the true causes of which
:in not well understood, lt;id uvated trouble between Smith
and his colleagues. Smith's own story is told in the Gencrall
Historic as follows: "Now Captain Smith, who all this time
from their departure from the Canaries was restrained as a
prisoner upon the scandalous suggestions of some of the chiefe
(envying his repute) who fained he intended to usurpe the
CAPTAIN JOHN SMITH. 195
Government, murther the Councell, and make himselfe King,
that his confederats were dispersed in all the three ships, and
that divers of his confederats that revealed it would affirm it,
for this he was committed as a prisoner : thirteen weeks he
remained thus suspected, and by that time the ships should
returue, they pretended out of their commisse rations to refer
him to the Councell in England to receive a check, rather then
by particulating his desigues make him so odious to the world,
as to touch his life, or utterly overthrow his reputation."
The truth was, that Captain Newport, who was about to
return to England, exerted his influence so strongly in favor
of harmony, that Smith was allowed to resume his seat among
the Council. But we are left entirely in ignorance of the real
motives of Smith's colleagues, and the evidence, if any, on
which they acted. One fact, however, is quite clear ; Smith
was not liked by the persons in control of the expedition, and
it is possible that some little light on the causes of this dislike
or suspicion may be found in a passage of Wingfield's " Dis-
course," a work which we shall hereafter have occasion to
mention at greater length. Wingfield, who was one of Smith's
opponents, says that " it was proved to his face that he begged
in Ireland, like a rogue without a lycence." And he adds,
" To such I would not my name should be a companyon."
One may imagine that, if Smith were really accused of con-
spiring to obtain power, the dark events and questionable
expedients of his varied and troubled career might well be
flung in his face, and produce a considerable influence on the
minds of his judges.
Harmony, however, was a blessing which was little known
among the unhappy colonists, and it is worth noticing that,
before the close of the year, Captain George Kendall, another
of the members of the Council, was accused of the same crime
with vhich Smith had been charged, and was tried, convicted,
and actually executed. Newport, who seems to have had great
influence over the colonists, returned to England on the 22d
of June, leaving three months' supplies behind him, and prom-
ising to return in seven months with a new company of set-
190 CAPTAIN .JOHN SMITH.
tiers. His departure was followed by a series of disasters and
troubles of every description. The mortality was frightful.
More than forty deaths took place before September, some of
which were caused by fevers and sickness, some by the Indians,
but the larger number by mere famine. The kindness of the
Indians alone, if we may believe the express statement of
Percy, who was among the" survivors, preserved the remaining
colonists from the fate of Ihe lost Roanoke settlement of
1585.
Even this terrible condition of the colony, though dur ing-
five months together there were not five able-bodied men to
mount the defences, had no effect in quieting the jealousies
and dissensions of the leaders. Captain Gosnold died, leaving
only Wingfield, Ratcliffe, Smith, and Martin in the Council.
The last three combined to depose Wingfield ; and this revolu-
tion took place on the 10th of September, without resistance.
Ratcliffe, as the next in order, was chosen President, although
there is strong reason to believe that Wingfield \vas the better
man.
It became absolutely necessary to obtain supplies in order
to preserve the lives of the few remaining colonists. " As at
this time," says Smith, " were most of our chiefest men either
Kicke or discontented, the rest being in such despaire as they
would rather starve and rot with idlenes, then be persuaded
to do anything for their owne relicfe without constraint : our
victualles bring now within eighteenc dayes spent, and the
Indians trade decreasing, I was sent to the mouth of y e river to
trade for Corne, and try the River for Fish, but our fishing we
could not effect by reason of the stormy weather." Fortu-
nately the Indians were found willing to trade for corn, and by
means of their supplies the lives of the settlers were saved.
On the 9th of November, Smith made a longer excursion,
partially exploring the Cliickahoininy, and WHS received with
much kindness by the Indians, who supplied him with corn
enough to have "laded ;i ship." Klated by his success and
encouraged by the friendly attitude of the savages, or, accord
ing to his own account, eager "to discharge the imputation
CAPTAIN -10HN SMITH. 197
of malicious tungs, that halfe suspected I durst not, for so long
delaying," he determined to carry on his exploration of the
Chickahominy to its source. On the 10th of December he
set out in the pinnace, which he left at a place he calls Apocant,
forty miles from the mouth of the Chickahominy, and continued
his journey in a barge. Finally, rather than endanger the
barge, he hired a canoe and two Indians to row it, and with
two of his own company, named Robinson and Emry, he went
twenty miles higher. "Though some wise men may condemn
this too bould attempt of too much indiscretion, yet if they
well consider the friendship of the Indians, in conducting me,
the desolatenes of the country, the probability of [discover-
ing] some lake, and the malicious judges of my actions at
home, as also to have some matters of worth to incourage our
adventurers in England, might well have caused any honest
minde to have done the like, as wel for his own discharge, as
for the publike good."
At length they landed to prepare their dinner, and Smith
with one Indian walked on along the course of the river, while
Robinson and Emry with the other Indian remained to guard
the canoe. Within a quarter of an hour he heard a hallooing
of Indians and a loud cry, and, fearing treachery, he seized
his guide, whose arm he bound fast to his own hand, while he
prepared his pistol for immediate use. As they "went dis-
coursing," an arrow struck him on the right thigh, but without
harm. He soon found himself attacked by some two hundred
savages, against whose arrows he used his guide as a shield,
discharging his pistol three or four times. The Indian chief,
Opechankanough, then called upon him to surrender, and the
savages laid their bows on the ground, ceasing to shoot. " My
hinde treated betwixt them and me of conditions of peace, lie
discovered me to be the Captaine, my request was to retire to
y e boate, they demanded my armes, the rest they saide were
slaine, only me they woxdd reserve : the Indian importuned me
not to shoot. In retiring being in the midst of a low quag-
mire, and minding them more than my steps, I stept fast
into the quagmire, and also the Indian in drawing me forth :
198
CAPTAIN .JOHN SMITH.
thus surprised, I resolved to trie their mercies, my armes I
caste from me, till which none durst approch me : being
ceazed on me they drew me out and led me to the King."
Thus far, to avoid confusion, we have followed the account
given in the' True Relation, written by Smith, and published
in London in 1G08, the year following the events described.
But in 1624 Smith published in London his Generall Historic,
which contains a version of the story varying essentially from
that of the True Relation. In continuing, therefore, the ac-
count of his captivity, the two narratives will be placed side
by side, for convenience of comparison, and the principal
variations will be printed in Italics. After describing the
circumstances of his capture, which took place far up on the
Chickahominy River, Smith proceeds in his double narrative
as follows :
A TRUE RELATION.
1608.
"They drew me out and led me
to tlie King, I presented him with a
compasse cliall .... with kindc
speeches and bread he requited me,
conducting me where the Caiiow lay
and John BobiMOU slaine, with 20
or 3d tin-owes in him. Emry I saw
not, 1 ]>erceiv T ed by the ationndanee
of tires all over the woods, ut e<tfh
fifni'i- f ii/ni/id irlu a tin-;/ iitmld e.rc-
i-ulf mi-, i/i I t/.ii/ nscil we with ichat.
kindnet tln-y >nl<l . aj>t>roacliiug
their Towne, which was within (!
miles when- I was taken .... the
Captaine conducting me to Ins lodg-
ing, n quarter of \vnisoii and some
ten pound of bread I had for sup-
]>er, wliat I left was reserved forme,
ami sent with me 1o my lodging :
each morning 'A women pieM-ntcd
in-- three great ]>latters of fine
bread, wore venison than tru mrn
THE GENERALL JirsTOUIE.
1624.
" Then according to their compo-
sition they drew him forth and led
him to the fire where his men were
slaine. Diligently they chafed his
benummed limbs. He demanding
for their Captaine they showed him
O| hankanough king of 1'amaun-
kee, to whom he gave a round ivory
double compass Pyall. Much they
in, availed at the playing of t he Fly
and Needle \oiwitlixtundiwf,
iri/lini mi l<<>iif<- ii/lrr llify Iml linn !>
a In'*' iiiul a* ilium/ us i:i/<! b.'iiiKt
(I/Hint In in /in /mi dl lt> xliiKit linn, lilt
the King holding np the ( 'on i pass in
his hand, they all laid down their
howcs and allows and in a tri-
umphant manner led him to Orapaks
\\here lie was alter their manner
kindly feaMed and well used
Smith they conducted to a long
house wlieie thirtte 01 fortie tall fel-
CAPTAIN JOHN SMITH.
199
could devour I had, my gowne, points
and garters, my compas and a tab-
let they gave me again, though 8
ordinarily guarded me, I wanted not
what they could devise to content
me and still our longer acquaint-
ance increased our better affection.
.... I desired he [the King] would
send a messenger to Paspahegh
[Jamestown] with a letter I would
write, by which they shold under-
stand, how kindly they used me,
and that I was well, least they
should revenge my death : this he
granted and sent three men, in such
weather as in reason were impossi-
ble, by any naked to be endured.
.... The next day after my letter
came a salvage to my lodging with
his sword to have slaine me
this was the father of him I had
slayne, whose fury to prevent, the
King presently conducted me to an-
other Kingdome, upon the top of
the next northerly river, called
Youghtanan, having feasted me, he
further led me to another branch
of the river called Mattapament, to
two other hunting townes they led
me, and to each of these countries
a house of the great Emperor of
Pewhakan, whom as yet I supposed
to bee at the Fals, to him I told him
1 must goe, and so returne to Paspa-
heijh, after this foure or five dayes
march, we returned to Kasawrack,
the first towne they brought me too,
where binding the Mats in bundles,
they marched two dayes journey
and crossed the river of Youghtanan
where it was as broad as Thames ;
so conducting me to a place called
Menapacute in Pamaunke, where y e
King inhabited
" From hence this kind King
lowes did guard him, and ere long
more bread and venison was brought
him than would have served twentie
men. I think his stomach af that
time was not very good ; what he
left they put in baskets and tyed
over his head. About midnight
the}' set the meat again before him,
all this time not one of them would
eat a bit with him, till the next
morning they brought him as much
more, and then did they eate all the
olde, and reserved the newe as they
had done the other, which made
him think they would fat him to
eate him. Yet in this desperate
estate to defend him from the cold,
one Maocassater brought him his
gowne in requitall of some beads
and toyes Smith had given him at
his first arrival in Virginia.
"Two dayes after a man would
have slaine him (but that the guard
prevented it) for the death of his
sonne to whom they conducted him
to recover the poore man then breath-
ing his last In part of a Ta-
ble booke he writ his minde to them
at the Fort, and .... the messen-
gers .... according to his request
went to Jamestowne in as bitter
weather as could be of frost and
snow, and within three dayes re-
turned with an answer.
"Then they led him to the
Youthtanunds, the Mattaponients,
the Payankatanks, the Nantaughta-
cunds, and Omawmanients upon
the rivers of Rapahannock and Pat-
aivomeck, over all those rivers and
back agaiue by divers other severall
nations to the King's habitation at
Pamaunkee where they entertained
him with 'most strange and fearfull
Conjurations
200
CAPTAIN JOHN SMITH.
conducted mee to a place called
Topahanocke, a kingdomc upon an-
other River northward : the cause
of this was, that the yeare before,
a shippe had beene in the River of
Pamaunke, who having been kindly
entertained by Powhatan their Em-
perour, they returned thence, and
discovered the River of Topalian-
ocke, where being received with like
kindnesse, yet he slue the King and
tooke of his people, and they sup-
posed I were hee, but the people
reported him a great man that was
Captaine, and using mee kindly, the
next day we departed
' ' The next night I lodged at a
hunting town of Powhatams, and
the next day arrived at Warana-
comoco upon the river of Pa-
mauncke, where the great king is
resident
"Arriving at Weramocomoco
their Emperour .... kindly wel-
comed me with good worcles, and
great Platters of sundrie Victuals,
irinfi mee fiis friendship, and my
ie within foure dayea hee
desired mee to forsake Paspahegh,
and to live with him upon his River,
a Countiic called Capa Howasicke :
hee promised to give me Corne,
VfiiiMin, or what I wanted to (cede
us, Hatchets and Copper wee should
make him, and none should <lis-
turlic us. This request I promised
In peil'iinm- ; and thus having with
all the kindnes hee could devise,
sought to content me : hee sent
me home iriilt 4 HUH, one that usu-
ally carried my (iowne and Knap-
sacke after me, two other hided
with bread, and one to accompanie
roe
"From Weramocomoco is but I "2
"At last they brought him to
Meronocomoeo where was Powha-
tan their Emperor. Here more than
two hundred of those grim Courtiers
stood wondering at him, as he had
been a monster ; till Powhatan and
his trayne had put themselves in
their greatest braveries At
his entrance before the King, all the
people gave a great shout. The
Queene of Appamatuck was ap-
pointed to bring him water to wash
his hands, and another brought him
a bunch of feathers, in stead of a
Towell to dry them : having feasted
him after their best barbarous manner
they could, a long consultation was held,
but the conclusion was, two great stones
were brought before Powhatan : then
as many as could la yd hands on him,
dragged him to them, and thereon hud
his head, and being ready u-ith f/n-ir
clubs, to beate out his bralnes, /'</m-
hontas the Kings dearest daughter,
when no intreati/ could prevaile, got his
head in her urines, and laid her oivne
upon his to save him from death :
whereat the. EIII/X -runr in is nmti'ntfd In-
should lire to make him hatchets, and
her bells, beads and copper
" T\vo dayes after, Powhatan hav-
ing disguised himselfe in the most
fearfullest manner he could ....
more like n devil than a man witli
some two hundred more as blacke
as himselfe, came unto him and told
him now they were friends, and
presently lie should goe to .lanies-
towne, to send him two great
guimes and a gryndstone, for which
he would give him the Country of
Capahowosick, and for ever estceme
him as his sonne Nantaquoud. So
to Jamestowne with 12 guides Pow-
hatan sent him, he still expecting (us
CAPTAIN JOHN SMITH.
201
miles, yet the Indians trifled away
that day, and would not goe to our
Forte by any perswasions : but in
certaine olde bunting bouses of Pas-
pahegb we lodged all night. The
next morning ere Sunne rise, we
set forward for our Fort, where we
arrived within an houre, where each
man with truest signes of joy they
could expresse welcomed mee, ex-
cept M. Archer, and some 2 or 3
of bis, who was then in my absence,
sworne Counsellour, though not
with the consent of Captaine Mar-
tin : great blame and imputation
was laide upon mee by them, for the
losse of our two men which the In-
dians slew : insomuch that they
purposed to depose me, but in the
midst of my miseries, it pleased God
to send Captaine Nuport, whoairiving
there the same niyht, so tripled our joy,
as for a while these plots against me
were deferred though with much
malice against me, which captain
Newport in short time did plainly
see."
he had done all this lony time of his
imprisonment) every houre to Ite put to
one death or other : for all their feast-
iny. But almightie God (by his di-
vine providence) had mollified the
hearts of those sterne Barbarians
with compassion. The next morn-
ing betimes they came to the
Fort
" Now in Jamestowne they were all
in combustion the strongest preparing
ones more to rim away with the Pin-
nace ; which with the hazzard of his
life, with Sabre falcon and musket shot,
Smith forced now the third time to stay
or sinke. Some no better than they
should be, had plotted with the
President, the next day to have put
him to death by the Leviticall law,
for the lives of Robinson and Emry,
pretending the fault was his that
had led them to their ends : but he
quickly tooke such order with such, law-
yers, that he fai/d them by the heeles till
he sent some of them prisoners for
England
" Newport got in and arrived at
James Towne not long after the re-
demption of Captaine Smith
"Written by Thomas Studley,
the first Cape Merchant in Virginia,
Robert Fenton, Edward Harrington,
and J. S."
The instant result of comparing the two narratives thus for
the first time placed side by side, is to bring into sharp promi-
nence a certain curious tone of exaggeration which character-
izes the later story. Eight guards, which had been sufficient
in Ki08, are multiplied into thirty or forty tall fellows in 1024.
What was enough for ten men at the earlier time would feed
twenty according to the later version. Four guides were
surely an ample escort to conduct Smith to Jamestown, but
9*
202 CAPTAIN JOHN SMITH.
they are reinforced to the number of twelve sixteen years
afterwards. With the best disposition towards Smith, one
cannot but remember that this was just the period when
Falstaff and his misbegotten knaves in Kendal Green ap-
peared upon the stage. The execution wrought upon the
wretched lawyers who wished to try Smith for his life on his
return to Jamestown is most prompt and decisive, according
to the story of 1624, but in 1608 Smith is happy to accept the
aid of Captain Newport to disembarrass him of his too-power-
ful enemies. With sabre, falcon, and musket-shot he forced
the mutinous crew of the pinnace to stay or sink, if we are to
believe the Generall Historic, while the True Relation is quite
silent as to any such feat of arms, but simply observes that
Captain Newport arrived the same evening.
The same character of exaggeration marks the whole ac-
count of the treatment he received among the savages.
According to the story written a few months after the event,
a people is described, savage it is true, but neither cruel nor
bloodthirsty ; reckless, perhaps, of life in battle, but kind
and even magnanimous towards their captive. Here is an ex-
press statement that no such demonstration was made against
Smith as is affirmed in 1624, to have taken place within an
hour after his capture. Only a few days after he was taken
prisoner, he represents himself as giving orders to Opechanka-
nongh to take him to Powhatan, and even at this time he
knew that he was to be allowed to return to Jamestown. "To
him I told him I must go, and so return to Paspahegh." Pow-
hatan received him with the greatest cordiality, and, having
sought to content him with all the kindness he could devise,
did actually send him with a guard of honor back to his
friends. If the True Relation is really true, the behavior of
theae naked barbarians towards Smith was far more humane
than that which lie would have received at the hands of
any civili/.ed nation on '.lie lace of the earth. There is not
a trace of his having felt any immediate fear for his life, ex-
cept, from a savage whose son he had killed, and from whom
OpechankanOttgh protected him. One line indeed occurs to
CAPTAIN JOHN SMITH. 203
the effect that they fed him so fat as to make him much doubt
they meant to sacrifice him ; and this paragraph furnishes the
most striking evidence of the kindness of the Indians, and of
the fact that he believed himself to have been mistaken in
having entertained the suspicion. Yet in 1624 we learn that
throughout his long imprisonment he was still expecting every
hour to be put to one death or another.
These variations would be of little consequence to the ordi-
nary reader of the colonial history, if they stopped at trifling
inconsistencies. They would merely prove, what is almost
self-evident, that the earlier narrative is the safer authority for
historians to follow, and that the confidence which has hitherto
been felt in the exactness of the Generall Historic cannot be
altogether maintained. But there is one particular point in
the text where every American who has heretofore enjoyed
the most favorite story in the early annals of his country will
stop with a feeling of wonder and a desire to doubt the evi-
dence of his eyes. When he comes to the paragraph in which
the Generall Historic relates the touching story of Pocahontas,
and her intercession at the moment of Smith's extremest peril,
and when he turns to the opposite column of the True Rela-
tion to find its version of the incident, he will sm-ely be
amazed to see not only that it fails to furnish the remotest
allusion to this act, or even by a single word to indicate that
Pocahontas so much as existed, but that it expressly asserts
the remarkable kindness with which Powhatan treated his
captive and assured him at once of his early liberation.
No American needs to learn that this tale of Pocahontas is
probably the most romantic episode in the whole history of his
country. Her name and story are familiar to every school-
boy, and there are even families whose greatest pride is to
trace their descent from the Emperor's daughter that saved
the life of Captain John Smith. Perhaps this feeling is based
on admiration of the heroism and rare qualities of the Indian
child, though her character as a princess of blood royal may
<>il'<-T a certain attraction to some of her descendants even in
our own day. In the general enthusiasm, language, and pet'
204 CAPTAIN JOHN SMITH.
haps common sense, have been a little strained to describe hr
attributes. Her beauty and wild grace, her compassion and
disinterestedness, her Christian life and pure character, have
been dwelt upon with warm affection, which is the more natu-
ral as the childhood of the nation has furnished little latitude
to the imagination. One after another, all American histori-
ans have contented themselves with repeating the words of the
Generall Historic, vying with each other in heaping praises
which no critics were cynical enough to gainsay, now on the
virtues of Pocahontas, and now on the courage and constancy
of Smith.
The unquestioning faith with which this narrative has been
hitherto received is well shown by a quotation from the work
which ranks as the standard authority for American history.
In the early editions of Mr. Bancroft's " History of the
United States," we read the following version of Smith's
adventure :
"The gentle feelings of humanity are the same in every race, and
in every period of life ; they bloom, though unconsciously, even in
the bosom of a child. Smith had easily won the confiding fondness
of the Indian maiden ; and now, the iinpul.se of mercy awakened
within her breast, she clung firmly to his neck, as his head was
bowed to receive the strokes of the tomahawk. Did the childlike
superstition of her kindred reverence her interference as a token
from a superior power? Her fearlessness and her entreaties per-
suaded the council to spare the agreeable stranger, who might make
hatchets for her father, and rattles and strings of beads for herself,
the favorite child. The barbarians, whose decision had long been
held in suspense by the mysterious awe which Smith had inspired,
now resolved to receive him as a friend, and to make him a partner
ot their councils. They tempted him to join their bands, and lend
a i-taiiee in an attack upon the white men at Jamestown ; and when
lii< decision of character succeeded in changing the current of their
thoughts, they dismissed him with mutual promises of friendship and
benevolence."
In a note appended to these paragraphs the author
otes :
"Smith, I. 1.1X- Hi!', and II. 2!) :;;',. The account is fully con-
CAPTAIN JOHN SMITH. 205
tained in the oldest book printed on Virginia, in our Cambridge
library. It is a thin quarto, in black-letter, by John Smith, printed
in 1608, A True Eelation, &c."
One sees at a glance that the story, in passing through the
medium of Mr. Bancroft's mind, has gained something which
did not belong to the original, or belonged to it only in a
modified degree. The spirit of Smith has infused itself into
the modern historian, as it had already infused itself into
the works of his predecessors. The lights arc intensified; the
shadows deepened ; the gradations softened ; the copy sur-
passes its model. This tendency is carried so far that the
author quotes the True Relation as the full authority for what
is only to be found in the Generall Historic, if indeed it is all
to be found even there. When Mr. Bancroft made the careful
collation of his own version of the story with the black-letter
pamphlet in the Cambridge library, the brilliant popular repu-
tation of Smith had already created an illusion in his mind
resembling the optical effect of refracted light. He saw some-
thing which did not exist, the exaggerated image of a figure
beyond.
No one, however, has now a right to triumph over the
error. The time has gone by when the mistake contained in
this note could be made use of to point any attack upon the
merits of Mr. Bancroft's work, or upon the soundness of his
study ; he has himself corrected his own blunder, and in his
last editions, since 1860, another note has been substituted in
the place of the one already quoted. It stands at present as
follows :
" The rescue of Smith by Pocahontas was told with authority in
1617, in Smith's 'Relation to Queen Anne'; Historic, 127. It is
confirmed in his New England's Trials, printed in 1622; and the full
narrative is to be found in the Historic, printed in 1624. In 1625,
Purchas, who had many manuscripts on Virginia, gives the narrative
a place in his Pilgrims, as unquestionably authentic. Compare
Deane's note on Wingfield, 31, 32."
From a critical point of view, this statement of the case
may be open to objection as well as the other. Tf it is to
206 CAPTAIN JOHN SMITH.
be understood as a defence of Smith, strict critical justice
would require that the existence of some accusation should be
mentioned, its nature noticed, and its authority given. If it
is not intended as a defence, but merely indicates a doubt in
the author's own mind, which he wishes to place with its cor-
rective before his readers, without laying too much stress upon
it, exact accuracy demands a softening in the assertion of
facts. It is unfortunate, too, that, as the note now stands,
the ordinary reader, who is not directed to the Archseologia
Americana, may be led to suppose that Mr. Deane, whose
edition of Wingfield seems to have caused the alteration, is
referred to in support of Smith and of Mr. Bancroft. But it
is no part of our purpose to dwell xipon these small and of
coiirse accidental mistakes, which would not have been worth
mentioning except to illustrate the tyrannical sway still exer-
cised by Smith over the intelligence of the country.
The quiet investigations of Mr. Deane have, however, now
made it necessary for historians to meet this difficulty. They
must either rely upon the testimony of Smith concerning mat-
ters of his own personal experience, and upon the prescription
of two centuries in favor of his story, or, rejecting the author-
ity hitherto considered unquestionable, they must undertake
the reconstruction of this whole history out of original mate-
rial hitherto considered as merely auxiliary to Smith's narra-
tive. Unfortunately, there is no possibility of compromise in
the dispute. Cautious as the expressions of Mr. Deane are,
and unwilling as he evidently is to treat the reputation of
Smith with harshness, it is still perfectly dear that the state-
ments of the Gcnerall Historic, if proved to be untrue, are
Eklsehooda of a rare effrontery.
The argument against the Generall Historic does not rest,
however, upon the text of the True Relation alone. Properly
speaking, this is only the cause of a discussion which has
rapidly spread itself over the whole field of contemporaneous
history. Kven Mr. Deanc's publications do not yet quite
cover all the disputed ground, and pmliably future students
will be able to throw fresh light upon the question from
.sources now unknown.
CAPTAIN JOHN SMITH. 207
The original Virginia Colony was so incongruous in compo-
sition, its sufferings were so severe, and its disasters so fre-
quent, that in the course of a very few years several entirely
different classes of men came upon the scene, and each to some
extent effaced the memory of its predecessor. Of these, many
leaders besides Smith have left records of more or less in-
terest, though the most important of all, the papers of the
Company itself, are mostly lost. It is even a considerable un-
dertaking to go through the mass of these documents, and to
cull out the isolated passages which bear upon the point now
in dispute ; but here we have fortunately the assistance of Mr.
Deane's notes, which leave little to be desired.
It has already been mentioned that the first President of the
Colony was Edward Maria Wing-field, who, in September, 1607,
was deprived of his office and placed in confinement by Smith,
and the other members of the Council. When Newport
who, with a new company of settlers, arrived at Jamestown on
the 8th of January, 1608, immediately after Smith's release
set out on his second return voyage to London, he took the
deposed President Wingfield with him, and they arrived safely
at Blackwall on the 21st of May. Wingfield appears to have
kept a sort of a diary during his stay in Virginia, and after his
return he wrote with its assistance a defence of himself and
his administration, which seems to have been privately circu-
lated in manuscript, and at a later period used by Purchas, but
afterwards was forgotten and hidden in the dust of the Lambeth
Library. From this obscurity it was at length drawn by Mr.
Dcane, who piiblished a copy of it with notes in the fourth
volume of the Archseologia Americana in 1860. Excepting a
few papers of little consequence, this is the earliest known
writing which comes directly from the Colony. The manu-
script of Smith's True Relation, which is its only possible
rival, could not have reached England before the month of July,
while the Discourse appears to have been intended for imme-
diate circulation in May or June. Wiugfield's work, which is
called " A Discourse of Virginia," is therefore a new authority
on the early history of the Colony, and has peculiar value as
208 CAPTAIN JOHN SMITH.
a means of testing the correctness of the True Relation, and
as furnishing some idea of what was thought and said by the
party jealous of Smith's infhience. Its account of Smith's
captivity could only have been gained from his own mouth, or
from those to whom he told the story, and the more accurate
it is, the closer it should coincide with the True Relation.
There are a number of passages in this short pamphlet
which would be well worth extracting ; but the question as to
Smith's veracity had for the present best be narrowed to the
evidence in regard to Pocahontas, and we will only quote the
passage from Wingfield which tells of Smith's adventures
among the Indians.
" Dec. The 10th of December, Mr. Smith went up the ryver of
the Chechohomynies to trade for corne. He was desirous to see the
heade of that river; and Avhen it was not passible with the shallop,
he hired a cannow and an Indian to carry him up further. The
river the higher grew worse and worse. Then he went ou shoare
with his guide and left Robinson and Emmery, twoo of our men in
the .cannow ; which were presently slaine by the Indians, Pama-
onke's men, and he himself taken prysoner; and by the means of his
guide his lief was saved ; and Pamaonche haveing him prisoner,
carry ed him to his neybors wyroances to see if any of them Icnewe
him for one of those which had bene, some two or three ycres be-
fore us, in a river amongst them Northward, and taken awaie some
Indians from them by force. At last he brought him to the great
I'owatou (of whomo before wee had no knowledg) who sent him
home to our towne (.lie viii" 1 of January
"Mr. Archer sought how to call Mr. Smith's lief in question and
had indited him upon a chapter in Leviticus for (lie death of his i\voe
men. lie had hud histryall the same daie of his retornc, and I be-
lieve his hanging the same or the next daie. so speedie is our law
there. But it pleased God to send ('aptii. NYwport unto us the
same evening to our unspeakable comfort, whose arrival! saved Mr.
Smyth's life and mine."
Mr. Deane, in editing this work of Wingfield's, in 1860, fur-
ni>ln'd a note upon this passive, in which for the first time, so
far as we are aware, a doubt was tin-own upon the story of
r-.c:ihout;is's intervention. Yet the discovery of Wingfield's
nniTNtive adds little to the evidence contained in the True
CAPTAIN JOHN SMITH. 20;)
Relation, which has always been a well-known work. From
the Discourse we learn few new facts. It supplies precise
dates, fixing Smith's departure on the 10th of December, and
his return on the 8th of January, so that we now know that
his absence was exactly four weeks in length. It says that
Smith's guide saved his life, which may or may not be a vari-
ation from the story of the True Relation. It states rather
more strongly the danger Smith ran from the enmity of
Archer, which may perhaps have been only the result of Wing-
field's own dislike of that person. But, in general, this new
piece of evidence, though clearly independent of the True
Relation, confirms it in all essential points, and especially in
the entire omission of any reference to Pocahontas. It is
highly improbable that so remarkable an incident as her pro-
tection of Smith, if known to Wingfield, should not have been
mentioned in this nairative, which, it may fairly be assumed,
contained the current version of Smith's adventures, as told
among the colonists after his return to Jamestown.
These two works are the only actually contemporaneous au-
thority for the events of the first year of the colonial history.
There is a wide gap between them and the next work from
which we can quote ; and indeed the strength of Mr. Deane's
casj rests so largely on the negative evidence offered by the
True Relation and the Discourse, that for his purpose it was
scarcely necessary to go further. Every one, whether believ-
ing or disbelieving the General] Historic, must agree that Poca-
hontas was not mentioned, either by name or by implication,
in the account given of Smith's captivity, either in the True
Relation or in Wingfield's Discourse. If the matter in dispute
were of little consequence, the inquiry might stop here, and
each reader might be left to form his own opinion as to the
truth, or the relative value as authority, of the conflicting
narratives. But the interest of the question requires an ex-
haustive statement. We shall therefore return to the history
of Smith and of the Colony, which has been interrupted for
the purpose of explaining the difficulty which the publications
of Mr. Deanc have raised.
210 CAPTAIN JOHN SMITH.
Newport returned to England on the 10th of April, 1G08,
carrying Wingfield with him, and leaving llatcliffe President
of the Colony, with Martin, Smith, and Archer in the Council,
together with a new member, Matthew Scrivener, who Imd
arrived with Newport. Smith in June explored successfully a
part of Chesapeake Bay, and, returning on the 21st of July,
found, according to the Generall Historic, the colonists in a
miserable condition, unable to do anything but complain of
Ratclitfe, whose principal offence appears to have been his
obliging the colonists to build him " an unnecessary building
for his pleasure in the woods." Ratcliffe, whose real name was
Sicklemore, appears to have been really a poor creature, if the
evidence in regard to him can be believed. He was now de-
posed, and Scrivener, Smith's " deare friend," though then
exceedingly ill, succeeded him as President. This revolution
was rapidly effected ; for three days later, on the 24th of July,
Smith again set out, with twelve men, to finish his explorations,
and made a complete tour round the bay, which supplied his
materials for the map published at Oxford in 1612. He did
not return to Jamestown till the 7th of September, and on the
10th assumed the Presidency, "by the Election of the Conn-
cell, and request of the Company." Scrivener appears merely
to have held the office during Smith's pleasure, and voluntarily
resigned it into his hands.
The history of Smith's administration of the Colony from
the 10th of September, 1008, till the end of September, 1009, is
given in the Generall Historic, and may be studied with great
advantage as an example of Smith's style. It abounds in
praise of the President, combined with vigorous attacks upon
every one else, from the authorities in England down to (he
laborers at Jamestown. We will not even try to draw a line
between truth ami lid ion in this part of his story. Whatever
may have been the merits of his government, it is certain that
he had n<> better success than his predecessors, and that he not
only failed to command obedience, but that he was left almost
or quite without a friend. He was ultimately deposed and sent
1" Kngland under articles of complaint. The precise tenor
CAPTAIN JOHN SMITH. 211
of these articles is unknown ; but the indefatigable Mr. Deane
has unearthed in the Colonial Office a letter of Ratcliffe, alias
Sicklemore, dated 4th October, 1G09, in which he announces
to the Lord Treasurer that " this man [Smith] is sent home to
answere some misdemeanors whereof I perswade me he can
scarcely clear himselfe from great imputation of blame." Be-
yond a doubt, the difficulties of the situation were very great,
and the men Smith had to control were originally poor mate-
rial, and were made desperate by their trials ; but it is equally
certain that his career in Virginia terminated disastrously, both
for himself and for the settlement. The Virginia Company,
notwithstanding his applications, never consented to employ
him again.
The Colony went on from bad to worse. George Percy, a
brother of the Earl of Northumberland, succeeded Smith in
the Presidency. The condition of the colonists between
Smith's departure in October, 1609, and the arrival of Sir
Thomas Gates, in May, 1610, was terrible. Percy "was so
sicke hee could neither goe nor stand." Ratcliffe, with a num-
ber of others, was killed by Indians. The remainder fed on
roots, acorns, fish, and actually on the savages whom they
killed, and on each other, one man murdering his wife and
eating her. Out of the whole number, said to have been five
hundred, not more than sixty were living when Gates arrived ;
and that the situation was beyond hope is proved by the fact
that Gates immediately took them on board ship, and, aban-
doning Jamestown, set sail for England. It was only an
accident that they fell in with a new expedition under Lord
Delaware at the mouth of the river, who brought with him a
year's provisions, and restored the fortunes of the settlement.
In spite of the discouragement produced in England by the
news of these disasters, the Company renewed its efforts, and
again sent out Sir Thomas Gates with six vessels and three
hundred men, who arrived in August, 1611. The government
was now in the hands of Sir Thomas Dale, who had assumed
it in May, 1611, and retained it till 1616. If the ultimate
success of the Colony was due to any single man, the merit
212 CAPTAIN JOHN SMITH.
appears to belong to Dale ; for his severe and despotic mle
crushed the insubordination that had been the curse of the
state, compelled the idle to work, and maintained order be-
tween the Colonists and the Indians. But whatever were the
merits or the faults of the government subsequent to the
abandonment of Jamestown and the practical destruction of
the first colony in May, 1610, it is indisputable that previous
to that time nothing could have been worse than the manage-
ment of the settlement ; and it is evident that the horrors of
the winter of 1 GOO -10 must have had their causes in the
misfortunes, or the mistakes, or the incompetency of Wmgfield,
Ratcliffe, and Smith. That the colonists, after so long a trial,
Avere still dependent for their bread on the Indians and on
supplies from England, could scarcely have been the fault of
any but themselves, and could not be excused by throwing the
blame of their improvidence upon the distant board of direc-
tors in London.
In the mean while Smith, who had taken his final leave of
the Colony, appears to have led a quiet life in London during
several years. But he was not a man to be crushed by any
disaster. The point in Smith's character which really com-
mands admiration, although it habitually caused him to neglect
his nearer duties, is the spirit of adventure which nothing could
quench, and the energy in action which often overtasked his
resources and caused his disasters. Although wo lose sight
of him during the years 1G10 and 1G11, we again find him in
1G12 busied in the same direction as before. In this year he
published at Oxford a short work called "A Map of Virginia.
With a Description of the countrey, the Commodities, People,
Government, and Religion. Written by Captaine Smith, some-
times Governour of the Countrey. Whercunto is annexed the
proceedings of those Colonies <fec. by W. S." This latter part
of the publication, which purports to be drawn from the
writings of certain colonists, was afterwards reprinted, with
alterations, as the Third Book of the Generull Historic, In mi
the title of which it appears that W. S. stood for the initials
of one William Simons, Doctor of Divinity.
CAPTAIN JOHN SMITH. 2l:'>
There is in the text of this tract only one passage bearing
upon the point now principally in dispute. Among the cus-
toms which he describes as peculiar to the Indians was the
form of execution practised against criminals. Their heads,
he says, were placed upon an altar, or sacrificing-stone, while
" one with clubbes beates out their braines." During his cap-
tivity, he adds, not indeed that he had actually seen this mode
of execution, but that an Indian had been beaten in his pres-
ence till he fell senseless, without a cry or complaint. Here
is, therefore, the whole idea of the story which he afterwards
made public. Practised lawyers may decide whether, under
the ordinary rules of evidence, this passage amounts to a posi-
tive implication that he had himself not been placed in the
position described, or it may perhaps be possible for future
students to explain why Smith should have suppressed his own
story, supposing it to have been true. The inference is very
strong that, if anything of the sort had ever occurred, it
would certainly have been mentioned here, and this argument
is considerably strengthened by a short narration of the facts
of his imprisonment, given in the second part of the pam-
phlet, for which Dr. Simons is the nominal authority. This
version is as follows :
" A month those barbarians kept him prisoner, many strange tri-
umphs and conjurations they made of him, yet he s^ demeened him-
self amongst them as he not only diverted them from surprising
the fort, but procured his own liberty, and got himself and his com-
pany such estimation among them that those savages admired him
as a Demi God. So returning safe to the Fort, once more stayed the
pinnace her flight for England."
This work was, as above stated, afterwards reprinted,
under the author's name, as the Third Book of the Generall
Historic. The passage just quoted is there reproduced with
the evidently intentional substitution of " six or seven weekes "
for " a month," as in the original. In the Generall Historie
the concluding paragraph is omitted, and in its place stands,
" The manner how they used and delivered him, is as fol-
loweth." And than, breaking abruptly into the middle of the
214 CAPTAIN JOHN SMITH.
old narrative, the story which has been quoted at such length
was interpolated.
The narrative in the second part of the Map of Virginia,
of which the above extract forms a part, is signed by the name
of Thomas Studley alone, while in the Generall Historic the
enlarged account bears also the signatures of Edward Har-
rington, Robert Fenton, and Smith himself. A question may
arise as to the extent to which these persons should be con-
sidered as dividing with Smith the responsibility for the story.
Thomas Studley, however, died on the 28th of August, 1G07.
Both he and Edward Harrington had lain four months in their
graves before Smith ever had heard of Powhatan or Pocahontas.
The date of Robert Fenton's death is not so clear, but there
is no reason to suppose that he had any share in the narration
of events which Smith alone witnessed.
The argument so far as the Oxford tract is concerned would
therefore seem to be strong enough, even if it went no further.
But it becomes irresistible when we find that this tract not
only mentions Pocahontas, but actually introduces her in the
role of guardian angel and saviour of Smith's life, although it
says no word of her most famous act in this character. The
allusion occurs towards the end of the pamphlet, where the
assumed writer takes occasion to defend Smith against certain
charges, one of them being an alleged scheme on his part of
marrying Powhatan's daughter Pocahontas in order to acquire
a claim to the throne. The writer denies the charge, and
adds :
" It is true she was the very nonpareil of his kingdome and at
most not past 13 or 14 yeares of age. Very often slice came to our
fort with what slice could get for Captaine Smith, that ever loved
and used all the eoun'rie well, but her especially he ever much re-
specied : and she so well requited it that when her father intended
to have surprised him, slice by stealth in the darke night came
through the wild woods and told him of it."
This Oxford tract of 1012 may be considered as decisive of
the fact that, down to that date, the story of Pocahontas had
not been Hindi- public. We are obliged to confess that no
CAPTAIN JOHN SMITH. 215
explanation whatever, consistent with an assumption of the
truth of the later narrative, occurs to the mind to account
for Smith's continued silence so long after his connection with
the Colony had ceased.
Here we take leave of Smith, as an authority, for a period
of some ten years, during which he published but one work,
not relating to the present subject. But an entirely new class
of colonists had, ill 10 10 and 1011, taken the place of the
first settlers, almost exterminated by the disasters of 1009 - 10.
Among the new-comers there arrived in the train of Lord
Delaware, in 1010, a certain William Strachey, who held the
office of Secretary of the Colony. Little is known of Strachey,
except that, after his return to England, he compiled a work
called the " Historic of Travaile into Virginia," never com-
pleted in its original plan, but still extant in two neatly written
manuscripts, and printed by the Hakluyt Society in 1849.
The date of its composition was probably about the year 1015.
It consists largely of extracts from Smith's previous works,
though without acknowledgment of their origin ; but it also
contains original matter, and especially some curious references
to Pocahontas. (See Deane's edition of the True Relation,
p. 7'2.) There is, however, no reference, direct or indirect, to
her agency in saving Smith's life, and no trace of the high
esteem which such aft act would have won for her.
Next in order after Strachey's manuscript, we have a work
which is quite original, and which gives, perhaps, the best ac-
count of the Colony ever made public by an eye-witness. This
is a small volume in quarto, printed in London in 1015, and
called " A True Discourse of the Present Estate of Virginia
.... till the 18th of June, 1014, together with .... the
Christening of Powhatan's daughter and her Marriage with an
Englishman. Written by Raphe Hamor, late Secretaire in
the Colonie." In it we find a minute and graphic story how
" Pocahuntas, King Powhatan's daughter, whose fame has
spread even to England xmder the name of Nou Parella,"
while staying with some tribe, subject to her father, on the
Potomac, was seized and carried away by Captain Argol, who
210 CAl'TAIX JOHN SMITH
had sailed up that river on a trading expedition. Her impris-
onment as a hostage at Jamestown, her visit to her father's
residence with Sir Thomas Dale and a strong force of English,
Powhatan's failure to redeem her, and her subsequent marriage
to John Rolf'e, on the 5th of April, 1G13, are all circumstan-
tially narrated ; and finally an extremely interesting account
is given of a visit which Harnor made to Powhatan, and of the
conversation he had with that extraordinary savage. Besides
this work of Hamor, the volume also contains several letters
from persons in Virginia, one of which is by John Rolfe him-
self, written with the single object of justifying his marriage.
Afterwards, when the arrival of Pocahoutas in England had
excited an interest throughout Europe in her story, Hamor' s
book was translated and published in German} 7 .
Although there are repeated allusions to Pocahontas in the
works already mentioned, it is in Hamor that she makes, for
the first time, her appearance as a person of political 'impor-
tance. In the True Relation, Smith represented her as a
pretty and clever child of ten years old, who was once sent,
with a trusted messenger by Powhatan to the fort to entreat
the liberation of some Indians whom Smith had seized. The
Oxford tract mentions her as a friend of Smith's, but a mere
child. Strachey gives a curious description of her intimate
relations with the Colony during his residence there. " IV-a-
huntas, a well featured but wanton yong girle, 1'owhatan's
daughter, soinetymes resorting to our fort, of the age then of
eleven or twelve yeares, would get the boycs forth with her
into the markett place, and make them \\heele, falling on their
hands, turning up their heeles upwards, whome she would fol-
lowr and wheele so her self, naked as she was, all the fort
over." All this seems to indicate that she was considered
merely as a child, whose age made her a general favorite.
But from the time when Argol treacherously sei/ed her. she
occupied an important position, in the first place as the guar-
anty of a peaee which Powhataii promised, and seems to have
faithfully preserved during the remainder of her life and of his
own ; in the second place as a person well calculated to excite
CAPTAIN JOHN SMITH. 217
interest in England in behalf of the Colony ; and, finally, as
an eminent convert to the English Church, through whom a
powerful religious influence might, it was believed, be exer-
cised among her father's subjects. Hamor's book is filled with
her history, and Rolfe's letter shows much anxiety to prove
the propriety of his course in marrying her. Both writers
were interested in exciting as much sympathy for her as could
be roused. Yet neither the one nor the other alludes in any
manner to the act which has since become her first claim to
praise, and iu the light of which the rest of her story has been
almost thrown out of sight. There is no reason to suppose
that in Virginia at this time the persons best informed were
yet aware that Pocahontas had ever saved Smith's life.
In the month of June, 1G16, Sir Thomas Dale arrived at
Plymouth, on his return home, bringing with him, among his
Suite, the baptized Pocahontas, now called Rebecca Rolfe, who,
with her husband and child, came at the charge of the Com-
pany to visit England, and to prove to the world the success
of the Colony. She became at once the object of extraordi-
nary attention, and in the following winter she was the most
distinguished person in society. Her portrait, taken at this
time, still exists, and shows a somewhat hard-featured figure,
with a tall hat and ruff, appearing ill at ease in the stiff and
Ungraceful fashions of the day. Gentlemen of the court sent
the engraving, as the curiosity of the season, in their letters
to correspondents abroad. The Church received her with great
honor, and the Bishop of London gave her an entertainment,
celebrated in enthusiastic terms by Purchas. At the court
masque, in January, 1617, she was among the most conspicu-
ous guests. The king and queen actually received her in
special audiences ; and to crown all, tradition reports, with
reasonable foundation, that King James, in his zeal for the
high principles of divine right and the sacred character of
royalty, expressed his serious displeasure that Rolfe, who was
at best a simple gentleman, should have ventured so far be-
yond his position as to ally himself with one who was of
imperial blood.
10
213 CAPTAIN JOHN SMITH.
Just &t this time, when the influence of London society had
set its only too decisive stamp of fashion on the name of the
Indian girl, and when King James had adopted her as right-
fully belonging within the pale of the divinity that hedges a
king, just at this moment Samuel Purchas, " Parson of St.
Martin's by Lndgate," published the third edition of his " Pil-
grimage." The excellent Purchas, although not himself an
explorer, was an enthusiast on the subject of travels and
adventures, and in compiling the collection which is now so
eagerly sought and so highly valued by collectors of books he
had, so far as related to Virginia, the direct assistance of per-
sonal Avitnesses, and also of manuscripts now unhappily lost
except for his extracts. He was well acquainted with Smith,
who "gently communicated" his notes to him, and who was
now in London, and visited Pocahontas at Brentford. Purchas
himself saw Pocahoutas. He was present when "my Hon ble ->
and Rev d- Patron the Lord Bishop of London, D r King, en-
tertained her with festivall state and pompe beyond what I
have seen in his great hospitalitie afforded to other ladies," in
his " hopefull zeale by her to advance Christianitie." He knew
Tomocomo, an Indian of Powhatan's tribe, who came with her
to England. " With this savage I have often conversed at my
good friend's Master Doctor Goldstone, where he was a fre-
quent guest ; and where I have both seen him sing and dance
his diabolicall measures and heard him discourse of his coun-
trey and religion, Sir Thomas Dale's man being the interpre-
tour." He knew Rolfe also, who lent him his manuscript
discourse on Virginia. Yet in Purchas's book no allusion can
be found to the heroic intervention on behalf of Smith, the
story of whose captivity is simply copied from Simons's quarto
of 1012 ; the diffuse comments on men and manners in Vir-
ginia contain no trace of what would have been correctly
regarded as the most extraordinary incident in colonial his-
tory.
Silence in a single instance, us in Wiimlicld or in Struchey,
nil-lit be accounted for, or, at all events, mi<>ht be overlooked.
But in the course of this examination we have found silence
CAPTAIN JOHN SMITH. 219
absolute during a long period of years and under the most
improbable circumstances. Wing-field, Smith himself, Simons,
Strachey, Hamor, Rolfe, and Purchas, all the authorities, with-
out exception, known to exist, are equally dumb when ques-
tioned as to a circumstance which, since 1624, has become the
most famous part of colonial history. The field is litci-ally
exhausted. There exist no other sources from which to draw au-
thentic information. Nothing remains but to return to Smith,
and to inquire when it was that this extraordinary story first
made its appearance, and how it obtained authority.
The blaze of fashionable success that surrounded Pocahon-
tas in London lights up the closing scene of her life. It is
said that she was obliged, against her will, to set out on her
return to Virginia, bxit she never actually left the shores of
England. Detained in the Thames by several weeks of con-
trary winds, her failing strength altogether gave way ; and in
March, 1617, in the poor word-play of Purchas, "she came at
Gravesend to her end and grave." Her father, Powhatan, sur-
vived her less than a year.
Smith, in the mean while, was busied with projects in regard
to New England and the fisheries. His efforts to form a col-
ony there and to create a regular system of trade had very
little success ; but to spread a knowledge of the new country
among the people of England, he printed, in 1616, a small
quarto, called "A Description of New England," and in 1620
he published another pamphlet, entitled "New England's
Trials," a second and enlarged edition of which appeared in
1622. Here, at last, in 1622, we find the long-sought allusion
to his captivity, in the following words :
' For wronging a soldier but the value of a penny I have caused
Powhatan send his own men to Jamestowne to receive their punish-
ment at my discretion. It is true in our greatest extremitie they
shot me, slue three of my men, and by the folly of them that fled,
took me prisoner ; yet God made Pocahontas the King's daughter
the means to deliver me ; and thereby taught me to know their
treacheries to preserve the rest."
220 CAPTAIN JOHN SMITH.
This in order of time is the third version given by Smith
of his own adventure, the account in the General! Historic
being the fourth. Each of these four stories is more or less
inconsistent with all the others; but this of 1622 is, we are
sony to say it, more certainly mendacious than any of the
rest. Read it in whatever light we please, it is creditable nei-
ther to Smith's veracity nor to his sense of honor. " By the
folly of them that fled," he now states that the Indians suc-
ceeded in capturing him. All the other versions agree in this,
that at the time Smith was attacked and his two men slain he
was quite alone, except for his Indian guide, whom he used as
a shield. To throw upon the invented cowardice of compan-
ions who were far away, out of sight and out of hearing of the
contest, the blame for a disaster which was solely due to his
own over-boldness, was not an honorable way of dealing with
his command. Perhaps it would be better to leave this point
unnoticed, in deference to Smith's real merits, but unfortu-
nately this is not the only passage in his works in which the
same tendency is apparent.
Nevertheless, the fact remains, that here for the first time
the story of Pocahontas appears in print. "God made Poea-
hontas the means to deliver me." The devout form is charac-
teristic of the age, though the piety of a man like Smith, if
his autobiography gives a true idea of his course of life, must
have been a curious subject for study. But for those who
assume, with Mr. Ik-am-, that the agency of Pocahontas is a
pure invention, this paragraph becomes doubly interesting, as
showing to what a degree of quaint, dignity the Elizabethan
age could rise, even in falsehood.
The first appearance of this famous story can therefore be
fixed with sufficient certainty within five years between 1017
and 1022, although the published account in all its complete-
ness is only to be found in the General! Historic, printed in
1624, from which such copious extracts have already been
quoted as to make any further allusion unnn-cs^iry. There
n-maiiis only one pint of difficulty requiring attention in this
work.
CAPTAIN JOHN SMITH. 221
Smith has there stated (pp. 121-123) that, when Pocahon-
tas came to England, he wrote for her a sort of letter of intro-
duction to the Queen, or, in his own words, " a little booke to
this effect to the Queen, an abstract whereof folio weth."
" Some ten yeeres agoe, being in Virginia and taken prisoner by
the power of Powhatan their chiefe King .... I cannot say I felt
the least occasion of want that was in the power of those my mor-
tall foes to prevent, notwithstanding al their threats. After some
six weeks fatting amongst those Salvage Courtiers, at the minute of
my execution, she hazarded the beating out of her owne braines to
save mine, and not onely that, but so prevailed with her father, that
I was safely conducted to Jamestowne."
If Smith really wrote this statement to the Queen, and the
Queen received the letter, the case \inquestionably becomes
even more complicated than before. But the fact is, that the
letter itself rests on the authority of the Generall Historic,
and has neither more nor less weight than the other state-
ments in that work. It is by no means necessary to believe
that this " abstract of the effect " of the little book is freer
from interpolations than the text of the Generall Historic
elsewhere. At the time it was published, in 1624, not only
hud Pocahontas long been dead, but Queen Anne herself had,
in 1(519, followed her to the grave, and Smith remained alone
to tell his own story. The Virginia Company certainly had
no interest in denying the truth of a story so admirably cal-
culated to draw popular sympathy towards the Colony. But
even if it be granted that Smith's letter as it stands was really
sent to the Queen, the argument against its truth, so far as it
is based on the silence of all previous authorities, is left quite
untouched ; and if there is no conclusive evidence to prove
that the story was unknown in 1G17, it is at least equally diffi-
cult to prove that, if known, it was believed. Smith's charac-
ter was certainly a matter of warm dispute in his own day,
and his enemies seem to have been too numerous and strong
for even his energy and perseverance to overcome. No more
decisive witness on this point is needed than Thomas Fuller,
himself one of Smith's contemporaries, whose " Worthies of
222 CAPTAIN JOHN SMITH.
England " first appeared some thirty years after Smith's death,
when the civil wars had intervened to obliterate the recol-
lection of all personal jealousies, and when Smith himself
must have been almost as little remembered as he is to-day.
Fuller devotes a page to his history in the following vein :
" From the Turks in Europe he passed to the Pagans in America
where, towards the latter end of the reign of Queen Elizabeth, such
his perils, preservations, dangers, deliverances, they seem to most
men above belief, to some beyond truth. Yet have we two witnesses
to attest them, the prose and the pictures, both in his own book ;
and it soundeth much to the diminution of his deeds that he alone
is the herald to publish and proclaim them."
The essential evidence on each side of this curious question
has now been exhausted, although it would be easy to argue
indefinitely in regard to Smith's general character. This must
indeed be done by the first historian who attempts again to
deal with the history of the Virginia Colony. But although
the argument has been stated fairly, and may now be left for
future and final judgment, some reasonably clear theory is
still required to explain the existence of the story now as-
sumed to be false. If Mr. Dcanc had departed a little farther
than he has done from his sphere of work as an editor, and
given the result of his studies in a more general form, his
deep acquaintance with the sitbject would have made his con-
clusions particularly valuable. As it is, he, like Dr. Palfrey,
only hints that Smith, in the latter part of his life, had fallen
into the hands of hack-writers, who adapted his story for pop-
ul.ir effect. Perhaps, if we may venture to guess at his real
opinion, the view lie would be inclined to take might be some-
what as follows.
Tin; examination of Smith's works has shown that his final
imrnitive was the result of gradual additions. The influence
exercised by Pocahontas on the affairs of the Colony, according
to the account given in 1608, was very slight. In 1G12 she
first appears in her heroic character. Her capture and her mar-
riage to llolfe gave her importance. Her visit to England,
however, made her beyond question the most conspicuous fig-
CAPTAIN JOHN SMITH. 223
xire in Virginia, and it became inevitable that romantic inci-
dents in her life would be created, if they did not already
exist, by the mere exercise of the popular imagination, attracted
by a wild and vigorous picture of savage life.
The history of the emperor's daughter became, as we are
led by Smith to suppose, a subject for the stage. Nothing
was more natural or more probable. It is not even necessary
to assume that Smith himself invented the additions to his
original story. He may have merely accepted them after they
had obtained a strong and general hold on the minds of his
contemporaries.
In the mean while Smith's own career had failed, and his
ventures ended disastrously, while in most cases he did not
obtain the employment which he continued to seek with unre-
laxed energy. In 1622, however, a great disaster occurred in
Virginia, which roused the greatest interest and sympathy in
England, and gave occasion for renewed efforts in behalf of the
Colony. The Indians rose against the English, and in the
month of May a terrible massacre took place around James-
town. The opportunity was not one to be lost by a man who,
like Smith, while burning to act, was still smarting under
what he considered undeserved neglect, and he at once has-
tened to offer his services to the Company, with a plan for
restoring peace ; but his plan and his offer of services were
again declined. Still, the resource of which he had already
made such frequent use remained, and by publishing the Gen-
erall Historie he made a more ambitious appeal to the public
than any he had yet attempted. In this work he embodied
everything that could tend to the increase of his own reputa-
tion, and drew material from every source which could illus-
trate the history of English colonization. Pocahontas was
made to appear in it as a kind of stage deity on every possible
occasion, and his own share in the affairs of the Colony is mag-
nified at the expense of all his companions. None of those
whose reputations he treated with so much harshness appeared
to vindicate their own characters, far less to assert the facts in
regard to Pocahontas. The effort indeed failed of its object,
224 CAPTAIN JOHN SMITH.
for he remained unemployed and without mark of distinction.
" He led his old age iu London, where his having a Prince's
mind imprisoned in a poor man's purse rendered him to the
contempt of such who were not ingenuous. Yet he eftbrted
his spirits with the remembrance and relation of what formerly
he had been and what he had done." So Fuller writes, who
might have known him in his later years. He died quietly in
his bed, in London, in June, 1631 ; his will is extant, and has
been published by Mr. Deane, but furnishes little new informa-
tion ; in the absence of criticism, due perhaps to the political
excitement of the times, his book survived to become the
standard authority on Virginian history. The readiness with
which it was received is scarcely so remarkable as the credu-
lity which has left it unquestioned almost to the present day.
THE BANK OF ENGLAND RESTRICTION.
1797-1821*
DURING the eighteenth century the mechanism of trade
had been elaborated in Great Britain to a high point of
perfection. London had become in a great degree the centre
of commerce for the whole world, while the Bank of England
was the business centre of London. But the Bank had a
double sphere of usefulness. As a private corporation, it ex-
ercised, not less by the high character of its directoi-s than by
the amount of its capital and the privileges of its charter, a
great influence over all foreign and domestic trade. By com-
mon agreement, its notes circulated within London to the
exclusion of all other bank -paper. Its discounts represented
at that time a far greater proportion of the active capital of
England than they now do. But its operations were not
restricted within the limits of ordinary banking ; it was also
a recognized official agent. As a national establishment, it
issued the coin, managed the debt, took charge of government
deposits,' and made advances to the Exchequer and the Treas-
ury, on security of Exchequer Bills. In the same capacity, it
was expected to perform the difficult duty of maintaining a
supply of gold, not merely for circulation, but in anticipation
of any sudden drain or panic, which might cause a run upon
the other banking institutions of the country. It was obliged,
therefore, to purchase at a fixed rate all the gold which was
brought to its counters. Thus, as a bank of discount, it held
the exclusive privilege of discounting government paper ; as a
* From the North American Review for October, 1867.
10* o
226 THE BANK OF ENGLAND RESTRICTION.
bank of deposit, it alone held the public balances ; as a bank
of issue, its circulation alone passed through the hands of the
government as well as of the public. Its notes, when not
issued in loans on Exchequer Bills to the government, or in
payment for the precious metals aa already mentioned, could
only pass into circulation through the medium of discounts
furnished to merchants. Neither then, nor at any time, has
the Bank had other than these three means of issuing its
paper; and as it is clear that, so far as the second is con-
cerned, no notes could be sent out which did not represent
their equivalent in coin or bullion brought in, the only possi-
ble mode of issuing an excess of paper must have been either
by loans to the government on security of Exchequer Bills, or
in regular and legitimate commercial discounts.
All foreign and most provincial payments were ultimately
settled by drafts on London. But the country merchants and
others, who had occasion in this manner to extend their con-
nections beyond the limits of a district, usually found it con-
venient to deal through the local bankers of their neighbor-
hood, rather than to draw upon correspondents of their own.
In 1797, there were about three hundred and fifty such
country banks in England and Wales, most, if not all, of
which were banks of issue ; and as they were always liable to
be called upon to redeem their notes either in gold, in Bank
of England notes, or in bills of exchange drawn on London, it
is evident that their circulation was subject to all the varia-
tions of the London money-market.
Besides this practical check, yet another control was ex-
ercised by the Bank of England over the credit operations of
the country. Every private banker naturally felt that his
own credit depended upon the solvency of his customers ; and
lie was obliged, by the very nature of his business, to acquire
the most accurate knowledge in Ins power of the people who
dealt with him. In precisely the same way the London
banker, his correspondent, looked carefully to the country
client's credit, *wd to the character of the bills which he dealt
in ; while in his own city the Louder banker was subjected
THE BANK OF ENGLAND IJES FRICTION. 227
to the scrutiny of the business community of London, whose
opinions, centring upon one point, guided the policy and the
particular discounts and accommodations of the Bank of Eng-
land. Thus again the Bank was at once the head and heart
of English credit ; it exercised a controlling influence even
upon the remote provincial trader.
So 'far as the currency was concerned, the Bank could, by
contracting its issues, affect in a short time tli3 whole circula-
tion of England ; and naturally, when such a contraction had
taken place, a renewed expansion on its part would be likely
to result in a similar movement on the part of private bank-
ers. But the antiquated and mischievous legislation of Par-
liament still maintained, and, in spite of the severest practical
lessons, long continued to maintain, a legal maximum of inter-
est at five per cent, even when the government itself was
borrowing at six. At present the Bank regulates its discounts
by raising or lowering its rate according to the value of money
in the open market. But while the usury laws were in force,
the Bank continued to lend its credit at five per cent, whether
the market value was at two or at twenty ; and it possessed
no means of restricting its discounts and contracting its circu-
lation other than that of refusing a certain proportion of each
applicant's paper, without regard to his solvency or credit.
Such a measure was seldom resorted to, since it was calculated
to aggravate the evils of a financial piessure, by sacrificing the
public in order to save the Bank. In practice, therefore, it
will be seen that the Bank avoided the exercise of any other
control over its discounts and circulation than is implied by a
proper regard for the soundness of the bills it discounted.
The directors might exercise more or less of caution in their
loans, according as individual ci'edit varied ; but they never
during the Restriction attempted to act upon exchange or gen-
eral credit, either by contracting or by expanding their issues.
The average amount of Bank of England notes in circula-
tion, during ten years before the Restriction, was 10,800,000,
The best authorities estimate that the coin may have then
amounted to about 20,000,000, or somewhat more. There
228 THE BANK OF ENGLAND RESTRICTION.
was also a large quantity of country bank paper ; while certain
wealthy districts, as Lancashire, for example, used no other
ciirrency than bills of exchange, which were passed from hand
to hand, and in every case indorsed by the holder. There can
be no reasonable confidence placed, therefore, in any estimate
which assumes to establish any fixed sum as representing the
value of English currency, previous to the Restriction. Per-
haps 40,000,000 woiild be a moderate value to assign for
it; and from this calculation Scotland and Ireland arc ex-
cluded, since their currency systems were independent of
England, and exercised no more influence upon hers than those
of Holland or Hamburg.
The great war, which lasted, with only a few months' inter-
mission, for upwards of twenty years, began in February,
1793. It was preceded and accompanied by a violent com-
mercial crisis throughout Europe, which caused in England a
great number of bankruptcies, and a heavy fall in prices, the
country banks suffering especially ; but the Bank of England
succeeded in maintaining its credit unimpaired under the
shock ; and, in spite of every difficulty, continued its specie
payments and its ordinary discounts, to the immense relief of
the mercantile community. Two years of the war passed
away without altering this position of affairs. It was not till
1795 that a drain of bullion to the Continent began, which
obliged the Bank directors to resort to the extraordinary
measure of contracting their issues by rejecting a certain pro-
portion of the applications made upon them for discounts,
without regard to the credit of the applicants. During the
next two years the Bank circulation was steadily diminished,
as the supply of gold became smaller and smaller. But this
policy of contraction was seriously hampered by the necessities
of Mr. Pitt, then Prime Minister, who insisted upon advances,
which the directors could not honestly furnish. The Bank
records are filled with repeated remonstrances addressed to
Mr. Pitt on this accoxmt, and these, in February, 179G, were
carried to the extent of an absolute refusal to discharge the
bills drawn ; while again, in July of the same year, a similar
THE BANK OF ENGLAND RESTRICTION. 229
refusal was only overcome by the positive assurance of Mr.
Pitt that it would be impossible to avoid the most serious and
distressing embarrassments to the public service, unless an
advance to the extent of ,800,000 were made. The Bank
yielded, but only under the strongest protest, declaring that
nothing but the extreme pressure and exigency of the case
could in any shape justify the directors in acceding. Whether
this source of difficulty was due to bad management on the
part of Mr. Pitt, or whether he had no choice but to lean upon
the Bank, is of little consequence. The directors, at all events,
carried out their policy of contraction. While the drain of
gold continued, and their treasure fell from 6,000,000 in
1795 to 2,000,000 in August, 1796, the circulation was
simultaneously reduced from 14,000,000 to 9,000,000.
But violent as this contraction was, it failed to counteract the
causes of the drain. Foreign subsidies, the payment for large
quantities of imported grain, and of articles the price of which
had been enormously increased by the war demand, prevented
the exchange from rising. It is estimated that for three years,
from 1794 to 1796, these extraordinary payments amounted
to 40,000,000, a calculation which is certainly not extrav-
agant, if compared with the length of time and the amount
of pressure required to restore the exchanges.
It is difficult to say what more could have been done by the
Bank in order to preserve the country from the evils of an
inconvertible currency. The directors might have refused
to advance another shilling in loans, and, in order to save
themselves, might have forced a national bankruptcy, as well
as general private ruin ; but they could scarcely have reduced
their issues more resolutely than they did, or resisted more
obstinately the entreaties of the merchants. These last were
mercilessly sacrificed ; and their fate was especially hard,
since the crisis appears to have been caused by no act of
theirs, but solely by a combination of political and natural
agencies, by bad harvests and foreign ware, over which they
could have exercised no control, and on the occurrence or the
cessation of which they could not have calculated.
230 THE BANK OF ENGLAND RESTRICTION.
The measures thus taken by the Bank were in fact success-
ful. Early in 1797, the tide had already turned ; the foreign
exchanges began to improve ; and there can be no doubt that,
had the Bank been able to stand another month or two of
pressure, gold would have flowed plentifully into its coffers.
But precisely at the time of extreme exhaustion, after the for-
eign drain had been checked, but when the Bank was too weak
for further resistance, a sudden panic seized the people of
England. An ungrounded alarm of French invasion caused a
run upon the banks of Newcastle, and obliged them to sus-
pend payment. From Newcastle, the panic spread in all
directions. Every country banker rushed to the Bank of
England for assistance or for gold. The Bank responded by
forcing its issues down to 8,640,000, while its treasures fell
to 1,200,000, and the panic naturally grew more and more
violent. Hopeless of averting their fate, the directors at last
sent word to Mr. Pitt that suspension was inevitable ; and on
the morning of Monday, the 27th of February, an Order in
Council, issued the preceding day, was posted on the doors of
the Bank, forbidding further payments in cash.
The policy of the Bank throughout this crisis has been
since that day very generally criticised ; and the directors
themselves afterwards expressed it as their opinion that the
contraction had been pressed too far, until it contributed to
bring about the very difficulty it was intended to preclude. It
is contended that a bolder policy should have been adopted,
and that the discounts should have been liberally increased,
while Ihe gold should have been paid out down to the last
guinea. In support of this theory is instanced the celebrated
crisis of 1825, when the Bank, in face of a drain which re-
duced its stock of gold to 1,027,000, increased its issues
from 17,000,000 to 25,000,000, and succeeded in restoring
confidence and maintaining its payments. However this may
be, it is at least a matter of regret that Mr. Pitt should have
sanctioned suspension before exhausting every possible alter-
native. At the worst, the Bank could only have refused t<>
redeem its notes. While there was a single chance left of
THE BANK OF ENGLAND RESTRICTION. 231
escaping this final disaster, neither Mr. Pitt nor the Bank
directors were justified in neglecting it. The mere political
consequences of suspension, in that disastrous year, were a
triumph to the enemy as important as the mutiny at the Nore
or the Treaty of Leoben.
Mr. Pitt, however, felt the necessity of maintaining the
credit of the Bank ; and he appears to have thought that this
might be done by giving to the suspension an official appear-
ance, and throwing upon it the character of a compulsory act
of government. He represented the Bank as a passive, or
even unwilling, instrument, in the hands of the Privy Council.
The expedient was shallow, and unworthy of so great a man ;
nor was it likely to deceive any person, however dull of com-
prehension he might be. But its result was fortunate; for
while Mr. Pitt declared that the affairs of the Bank were in
the most affluent and flourishing condition, and that the
restriction was only a precautionary government measure,
which in a few weeks would be removed, he established, un-
consciously as we must believe, a legal fiction of some value.
Parliament never recognized any incapacity on the part of the
Bank to meet its obligations, but only a temporary restriction,
created by itself, and limited by law to a certain period.
There was at least a delicate distinction favorable to national
pride and private credit involved in this idea that there was
no actual bankruptcy in the case, but that the government
had seen fit, for the public convenience, to relieve the Bank
for a time from a duty which it was still ready and able to
perform.
It was not unnatural, indeed, that Mr. Pitt should make use
of this or any other deception in order to quiet the general
alarm. The idea of inconvertible currency was, in 1797,
exclusively associated with the Continental paper of the
American Congress, and with the assignats of the French
Directory. It was supposed by men like Fox and Lord Lans-
downe that the mere fact of inconvertibility must soon de-
stroy that confidence in paper which enabled it to represent
values. A few months, it was believed, would bring about
232 THE BANK OF ENGLAND RKSTRICTION.
this decay of credit. To provide against such a disaster,
extraordinary efforts were required. On the very day of sus-
pension, a great meeting was held at the Mansion House, the
Lord Mayor presiding ; and more than three thousand business
men pledged themselves, by resolution, to receive and to make
their payments in bank-notes, as equivalent to coin. A nearly
similar paper was signed and published by the Lords of the
Council. At the present time, such a pledge would, in similar
circumstances, be considered as quite superfluous ; but in that
day it had a value, and tended to restore public confidence.
Had the foreign drain still continued, bank-paper would, no
doubt, have rapidly fallen to a discount, in spite of all the
resolutions that could have been passed ; but we have already
seen that this cause of difficulty had ceased to act. The only
effect of suspension was to lower the exchanges for a very few
days, after which they again rallied, and before the close of
the year they had risen to the highest point ever known. The
Bank at once inci'eased its issues, and commerce returned to
its regular routine.
The suspension having once taken place, it became neces-
sary for Parliament to intervene, not merely to legalize the
act, but to establish a status for the new condition of the Bank.
A secret committee was appointed, which made elaborate in-
vestigations, and concluded by reporting a bill, indemnifying
the governor and directors for all acts done in pursuance of the
Order in Council ; superseding all actions which might have
been brought against them for refusing payments ; prohibiting
them from issuing cash, except in sums under twenty shillings ;
sheltering them from prosecutions for withholding payment
of notes, for which they were willing to offer other notes in
exchange ; restricting them from advancing to the Treasury
any sum exceeding 600,000 ; obliging the collectors of reve-
nue to receive bank-notes in payment ; protecting the subject
from arrest for debt, unless the affidavit to hold him to bail
contained a statement that the amount of debt claimed had
not been tendered in money or bank-notes ; and limiting the
duration of the restriction to the 24th of June following.
THK BANK OF ENGLAND RESTRICTION. 233
It is interesting to observe how cautiously the govern-
ment acted. The policy of Mr. Pitt may not have been bold,
nor necessarily correct ; but it was at least free from the grie-
vous mistakes which have ruined or dishonored almost every
country where an inconvertible currency has existed. He
began by treating the suspension as a temporary difficulty,
and carefully limiting its duration. In this respect, his suc-
cessors invariably followed his example ; and never, during the
next twenty-three years, was there a time when Parliament
allowed the country to consider the restriction as other than a
temporary measure, for the termination of which a provision
was made by law. He further pledged the government not to
make an improper use of the Bank resources, nor to tamper
with the currency by obtaining excessive advances, and this
pledge he honestly observed. Finally, he refused to make the
bank-note a legal tender, except as between the government
and the public, still allowing the creditor to insist upon pay-
ment in coin, if he chose to do so ; and leaving open to him
his ordinary process in law, except only the power of arrest in
the first instance. England probably owes more than she is
aware of to Mr. Pitt for his forbearance in regard to the cur-
rency. His necessities were great, and his power was un-
limited. He might have used paper money as was done by
contemporary financiers ; but the example which he set be-
came a law for his successors, so that whatever mistakes he
or his imitators may have made, they arc not chargeable with
that of tampering with the currency.
The Restriction Act passed without opposition, and in June
was continued till one month after the commencement of the
next session. In the mean time, gold began again to flow into
the Bank, which held in August treasure to the amount of
4,000,000, against a circulation of 11,000,000. When
Parliament again met in the autumn, the Bank directors
announced themselves ready to resume payments, "if the
political circumstances of the country do not render it in-
expedient."
Had Mr. Pitt been able to foresee the course which events
234 THE BANK OF ENGLAND RESTRICTION.
would take during the next ten years, he would surely have
acted at once upon this opportunity. The dangers and temp-
tations of irredeemable paper were too obvious for any states-
man to incur them, unless under an absolute necessity. But
Mr. Pitt probably foresaw something very different from what
actually occurred. He had every reason to expect a series of
monetary convulsions and commercial misfortunes, such as had
harassed him since 1792. On the other hand, he saw that
none of the prophesied evils had really followed restriction.
It had been proved that bank-paper did not depend for its
credit merely on its convertibility. Month after month had
passed away, not only without bringing depreciation, but even
rapidly increasing the stream of precious metals which flowed
towards England, so that people were little inclined to dwell
upon the dangers or temptations of restriction, and probably
overestimated its value as a safeguard against panic. They
were already demoralized. Mr. Pitt was not ashamed to fall
back upon the hint given by the Bank directors, and to de-
clare " that the avowal by the enemy of his intention to ruin
our public credit was the motive for an additional term of re-
striction " ; thus, as Mr. Tierney rejoined, in order to leave
the enemy no credit to attack, destroying it himself; for it is
difficult to see how France was prevented by the Restriction
from any action upon public credit, except precisely that of
causing another restriction.
The bill, however, by which the measure was continued till
one month after the conclusion of peace, passed with little
opposition, Mr. Fox and his friends having ceased to take
part in the debates. Had the Bank been now obliged to re-
sume its cash payments, it would have had no great difficulty
in maintaining them till 1808 or l.SO!), when it must inevita-
bly, from mere political causes, have again broken down. But
the occasion was lost, and from this time the Restriction took
itH place among the permanent war-measures of the govern-
ment.
Previous to the suspension, no bank-note of less than five
in value was allowed to circulate. Under the now state
THE BANK OF ENGLAND RESTRICTION. 235
of affairs this prohibition was removed, and notes of one and
two pounds began rapidly to drive gold from ordinary use.
With this exception, the public appears to have been quite un-
affected by the change in the currency. Throughout the year
1798 the Bank continued to receive treasure, and the foreign
exchanges continued favorable, until at the end of February,
1799, there was an accumulation of more than 7,500,000 in
the Bank vaults, against a circulation in notes of less than
13,000,000. Apparently nothing could be more solid than
such a position. No expansion of consequence occurred in the
Bank circulation ; and yet, by the close of 1799, the exchanges
had turned against England, and the gold began to disappear
as rapidly, or almost as rapidly, as it had accumulated. The
explanation of this sudden revolution was simple. A deficient
harvest had caused large importations of corn ; a severe com-
mercial crisis at Hamburg had produced a considerable press-
ure for the immediate transmission of funds from England ;
and the "war on the Continent created a perpetual demand for
gold to supply the armies. Had the Bank now been obliged
to redeem its notes, it might probably have contracted its
issues. Instead of doing so, it extended them in proportion
to the increased demand for discounts thrown upon it by the
rise in the market rate of interest, and the circulation rose till
in the first quarter of 1801 it averaged nearly 16,500,000.
The price of gold also rose, until it stood at a premium of ten
per cent.
These events naturally caused uneasiness ; they gave rise,
in fact, to the first currency controversy. Mr. Boyd, a mem-
ber of Parliament, published a pamphlet with the object of
proving that the depreciation was due to the excess of bank-
notes. He was answered by Sir Francis Baring and Mr.
Henry Thornton, whose work remains to this day a standard
authority. As the question then raised was practically identi-
cal with that which ten years afterwards excited the most
elaborate and earnest discussion, we shall not now stop to ex-
amine into it. Events soon decided in favor of Mr. Boyd's
opponents. The Bank continued its policy undisturbed ; the
236 THE BANK OF ENGLAND RESTRICTION.
pressure ceased ; during 1801 and 1802 the foreign exchanges
again rose, and gold fell almost to par. It seems to be beyond
dispute that the temporary depreciation of 1801 was preceded
by the fall of exchange, and was caused by it ; and that, when
the accidental foreign demand for gold had been satisfied, the
currency returned to its natural value, without any effort on
the part of the Bank, or any artificial pressure on credit or on
the circulation.
Without admitting this to be the case, it appears scarcely
possible to explain the course which events afterwards took,
and the perfect stability of the currency during a number of
years when the circulation was still further enlarged. The
Treat}- of Amiens was signed in March, 1802 ; and the inter-
val of peace, short as it was, allowed Great Britain a momentary
relief of inestimable value. But the Restriction Act was again
continued for another term, and the Bank circulation rose to
nearly 17,400,000, without producing any sensible effect on
exchange or on the price of gold. War was resumed in May,
1803, but without affecting the value of the currency, which
during the next five years remained stationary in its amount,
or only varied slightly between 16,000,000 and 1 7,000,000.
The Bank, meanwhile, anxious to maintain its reserve of bul-
lion, offered a standing premium of about three per cent for
gold, and hence it has been usually supposed that the bank-
notes were actually depreciated to this extent. This, however, .
was not the case. Under such circumstances the exchanges
become the only true standard, and in those days the quota
lions of exchange included any existing depreciation of paper ;
the nominal, not the real, exchange was always given, so that,
in the want of any fair quotations of gold, we can only esti-
mate its fluctuations in value by means of the recorded fluctu-
ations in exchange. It appeal's that these were very slight,
and rather in favor of England than against her, so that the
Bank had actually accumulated in 1805 the very unusual sum
of 7,600,000, a result which indicates that the bank-notes
with which this treasure was bought could not have been de-
preciated to the full extent of the three-pcr-cent bonus offered
THE BANK OF ENGLAND RESTRICTION. 237
as fin inducement to the seller. During the whole of this
period from 1803 to 1808, Bank paper was in fact at par, or
not enough below it to have made the exportation of gold
profitable in a time of specie payments. There were no doubt
intervals when the Bank lost gold, but, if the average of each
year be taken, it will be found that the exchanges were uni-
formly favorable.
No comparison can be just which is drawn between such a
state of things as this and the ordinary forced issues of gov-
ernment paper, such as have been known in most countries
suffering under prolonged difficulties. There is a distinct dif-
ference between the two cases, and we art obliged to dwell
with emphasis upon this difference, becatise we believe that it
entirely removes the English currency from the same class with
ordinary instances of depreciation. Usually the issue of paper
has been assumed by governments themselves, and such issues
have been made directly in payment of expenses, without pro-
viding on the same scale for a return of the paper put out, or
consulting in any way the wants of the people. Bank of Eng-
land paper was in no sense a government issue. It was not
even government paper, but merely that of a private banking
corporation, which was conducted on very strict banking prin-
ciples, and whose notes, so. far as they were in excess of public
wants, were inevitably returned at once to the bank counters.
The government, therefore, was not to blame if paper was is-
sued in excess ; but in such a case it must have been the Bank
directors who failed to observe proper rules in their extensions
of credit either to the government or to individuals.
It is necessary, therefore, to turn aside for a moment in or-
der to examine the Bank rules of that day in regard to their
ordinary action upon the circulation, since it is here that the
secret will be found, not only of the steadiness of value which
marked the ciirrency during the first ten years of war, but
of its extraordinary fluctuations afterwards, fluctuations
which are quite inexplicable on the ordinary supposition of a
forced issue. It must be remembered that the usury laws
fixed the highest legal rate of interest at five per cent. The
238 THE BANK OF ENGLAND RESTRICTION.
Bank rule, during the whole period of Restriction, was to dis-
count at this rate all good mercantile bills offered, not having
more than sixty-one days to run ; and in making these ad-
vances the only duty which the directors considered themselves
obliged to observe was that of throwing out, so far as possible,
all bills which there was reason to believe represented specu-
lative transactions. In other respects the Bank was perfectly
passive. It neither contracted nor expanded its own issues,
but allowed the public demand to contract or expand the cur-
rency, in the firm conviction that the public would not retain
more notes than it actually required. Naturally the demand
for discount at the Bank varied according to the market rate
of interest outside ; and when private bankers lent money at
three per cent, comparatively few persons cared to pay five to
the Bank of England. During the early part of the war the
Bank rate was in fact almost always higher than that in the
open market, and consequently the Bank issues were moderate.
By a regularly self-balancing principle, the advances made to
government in an oi'dinary state of affairs diminished the pri-
vate demand, since the government at once paid away to the
public the notes it received from the Bank, and this money,
coming back to the private bankers, enabled them to extend
their discounts and to accommodate those merchants who
would otherwise have been obliged to apply to the Bank. It
is merely a theoretical question, what would have been the
result had government obliged the Bank to make excessive ad-
vances on its account. In point of fact, the case did not
occur, and government contented itself with moderate accom-
niodiition ; while, as a rule, the private demands were greatest
when the advances to government were at the lowest point.
Thus the Bank was throughout a mere channel of credit.
It did not, and under these rules it could not, exercise any
direct control over its issues, and it conducted its business upon
much the sumo principles as would him- regulated any sound
private banker, whether lie issued notes or not. Its theory
excluded the idea that it WMS bound to regard the excluiiigcs
or the price of gold, or to interfere in any way with the course
THE BANK OF ENGLAND RESTRICTION. 239
of business. Its sole duty was to lend capital, and it was for
the public and for each individual merchant to see that his
affairs were in a proper condition, that speculation was avoided,
that the exchanges were watched, or to take the consequences
of neglecting such obvious pi-ecautions.
And so long as each individual did observe a proper degree
of precaution, or until political difficulties or some other acci-
dental cause deranged the ordinary state of credit, these rules
of the Bank answered the purpose for which they were made.
But while the usury laws remained in force, any rise in the
market rate of interest was certain to precipitate the whole
body of merchants upon the Bank of England, and any crisis
which obliged private bankers to seek, instead of furnishing
credit, was sure to bring the whole nation to the counters of
the Bank. In either of these cases, therefore, the Bank was
liable to be driven into an excessive issue of its paper, and
extension of its credit. But it did not necessarily follow that
such an expansion would lead to a permanent increase of the
circulation. On the contrary, whenever the crisis was over,
and the rate of interest again had fallen below the Bank stand-
ard, the demand for discount would naturally decline, and the
circulation would return to its normal state.
For two or three years after the war had been resumed,
everything went on in a sound and regular course. Great
Britain might have carried on hostilities indefinitely, had she
been subjected to no greater pressure. The currency retained
its value, and trade its regularity, but taxation was greatly
augmented and the cost of production increased. Prices
Ktcudily rose, until they attained in 1805 almost as high a
range as ever afterwards. With the exception of grain, an
article peculiarly liable to be affected by accidental causes, it
appears that almost the whole rise in prices, which was after-
wards attributed to depreciation of currency, took place dur-
ing the first twelve or fifteen years of the war, when no
depreciation existed. Much of it occurred at a time when
paper was highest in credit, and there is no reason for suppos-
ing that the same thing would not have equally happened,
even if the Bank had continued its specie payments.
240 THE BANK OF ENGLAND RESTRICTION.
This comparatively happy and prosperous state of affairs
was not destined to continue. While the English were waging
a cheap and effective war on the ocean and in the colonies,
while Nelson crushed the combined navies of France and Spain
at Trafalgar, and Wellington subdued the Mahrattas in India,
Napoleon reached Vienna, and, turning from Austerlitz to Ber-
lin, swept the whole of Gennany into the hands of France.
From Berlin he turned to Russia, and at Friedland stopped
for the mere want of other countries to conquer.
Such successes promised little good to England. Napoleon
hastened to turn his new power against her. It was from Ber-
lin, in November, 180G, that he issued the famous decree de-
claring the British Islands in a state of blockade, confiscating
English property wherever found, and prohibiting all inter-
course with the British nation. Russia joined the coalition in
the following year, and Sweden in 1809. Thus the Continent
was closed to English commerce.
Napoleon's decree was an outrage to international law, but
the Continental System thus enforced was a prodigious shock
to Great Britain. There seemed no end to the losses and
complications which it caused. Yet there was still one coun-
try apparently beyond its reach, whose commerce was of ines-
timable importance. The United States of America was still
an open market, and the Berlin Decree almost inevitably forced
the United States into the arms of England. The British gov-
ernment, however, with characteristic fatuity, actually assisted
Napoleon to extend the Continental System even to America.
The Berlin Decree, and that of Milan which followed it, had
declared the British Islands to be in a state of blockade, and
ordered that no ship should enter any port under the con-
trol of France, if she came from England, or even had touched
at England, or if any part of her cargo was English. The
I'.ritish government retaliated in January, 1807, by issuing an
Order in Council interdicting the passage of vessels between
any two ports which were not open to British commerce ; and
in November followed this up by declaring all ports closed t<>
the British flag to be in a state of blockade, and all vessels
THt: BANK OF ENGLAND KKSTRICTION. 241
trading to or from such ports, or carrying- tiny produce of such
countries, to be, with their cargoes, lawful prize. The Ameri-
can government responded to these outrages by interdicting
commerce with both England and France.
No ordinary review can undertake so difficult and compli-
cated a labor as that of fairly examining the various effects of
these measures on English credit and currency. That British
trade with the Continent was annihilated, that it was for a
time impossible to determine the course of exchange, and to
recover debts, was but the most obvious and immediate result.
No sooner did it become evident that the decrees were to be
rigorously enforced, than all articles for a supply of which
England depended on the Continent rose to speculative prices.
Flax, linseed, tallow, timber, Spanish wool, silk, hemp, even
American cotton, advanced in 1807 and 1808 to prices two or
three times those hitherto prevailing. And while one class
of imports was thus thrown wholly into the hands of specu-
lative holders, another class, consisting of all colonial produce,
underwent an exactly opposite process. The European market
was closed to it. Sugar and coffee were selling at Calais for
three, four, and five times their price at Dover. And mean-
while the almost omnipotent naval force of Great Britain was
contributing, under the Orders in Council, to aggravate this
evil, and to pile up still vaster quantities of unsalable goods in
British warehouses, by compelling every neutral ship to make
for an English port.
A wild spirit of speculation now took possession of the Brit-
ish people. Brazil and the South American colonies of Spain
happened at this moment to offer a new market, and merchants
flung themselves upon it as though it had no limit. The beach
at Rio Janeiro was for a time covered with English merchan-
dise, which there were no warehouses to hold, and which there
was no chance of selling. In London, a rage for visionary
joint-stock enterprises characterized the years 1807 and 1808.
None of the symptoms were wanting which long experience
has shown to be invariable precursors of commercial disaster.
The Bank of England, however, still preserved its steady
11 p
242 THK BANK 0F ENGLAND RESTRICTION.
and conservative routine. The issues were not increased, the
price of gold did not vary, the exchanges had not, fallen below
par, as late as September, 1808. So far as the Bank is con-
cerned, there is no indication that any unusual speculation
existed, or that it lent itself or was asked to lend itself to
speculative objects. It was not through the Bank that specu-
lators acted. But if we turn to the private and country bank-
ers, and, out of the almost impenetrable obscurity in which
this part of the subject is hidden, attempt to gather some evi-
dence of their condition, it will be found, not indeed that their
paper was depreciated, for that it could not be without im-
mediately bankrupting the issuer, but that their credit had
been extended far beyond any moderate limit. It was not
merely that the number of country banks had been more than
doubled in ten years. What was of greater consequence than
this was the change which had gradually crept into their mode
of conducting business. Originally their rules of discount had
been the same as those of the Bank of England ; they accepted
only short bills, representing, so far as they could judge, real
transactions of business. They gradually began to make ad-
vances upon bills of longer date, and then to lend money
without security of any kind. Paper which could not be dis-
counted in London was sent down to them by their London
agents. Their West Indian bills had from twelve to thirty-
six months to run. They made little inquiry as to what might
be accommodation paper, and still less as to the speculative
transactions of their customers. The reaction which ulti-
mately followed, at the very time when the Bank circulation
was greatly increased and increasing, proves the extent to
which private credit had been abused.
We have been led into this somewhat tedious account of
Kiigliind's financial situation in 1807 and 1808, by the hope
of showing how critical her position was, and how inevitable a
collapse of credit had become. Down to this point, however,
the subject offers comparatively few difficulties. Beyond it,
the whole region has been made a favorite battle-ground for
armies of currency theorists. It is only within the last thirty
THE BANK OF ENGLAND RESTRICTION.
243
years that even a fair comprehension of the matters in dispute
has been made possible to the public, through the great work
of Mr. Thomas Tooke. The opinions first advocated, and the
facts first proved by the author of the " History of Prices,"
have since been accepted by some of the highest authorities in
political economy, of whom Mr. John Stuart Mill stands at the
head. That they are still hotly contested in England is a fact
which only adds to the interest of the inquiry.
It has already been stated, that down to September, 1808,
the exchanges remained favorable to England, and the price
of gold continued firm. During the first half-year, the average
Bank circulation had been 16,950,000. At the end of Au-
gust, 17,200,000 were in issue. These sums were not ex-
cessive. If the small notes, which merely supplied the place
of coin withdrawn, are deducted, it appears that the real cir-
culation was but 12,993,000 ; less than had frequently been
in issue before, and considerably less than has always been in
issue since. The prices of all commodities, except grain, had
already reached their highest point, or reached it within six
months afterwards. It was at this time, when no change ex-
cept ordinary fluctuations had occurred in the currency for
seven years, that the exchanges suddenly turned, and the price
of gold rose.*
* BANK CIRCULATION.
Notes of
Bank
Price of
Date.
Total.
5 and upwards.
Treasure.
Gold.
1797, 28 February
9,674,780
9,674,780
1,086,170
100
31 August
11,114,120
10,246,535
4,089,620
100
1798, 28 February
13,095,830
11,647,610
5,828,940
100
31 August
12,180,610
10,649,550
6,546,100
100
1799, 28 February
12,959.800
11,494,150
7,563,900
100
31 August
13,389,490
12,047,790
7,000,780
100
1800, 28 February
16,844,470
15,372,930
6,144,250
109
31 August
15,047,180
13,448,540
5,150,450
109
1801, 28 February
16,213,280
13,578,520
4,640,120
107.85
31 August
14,556,110
12,143,460
4,335,260
106.5
1802, 28 February
15,186,880
12,574,860
4,152,950
106.2
31 August
17,097,630
13,848,470
3,891,780
103
1803, 28 February
15,319,930
12,350 ; 970
3,776,750
103
31 August
15,983,330
12,217,390
3,592,500
103
1804, 28 February
17,077,830
12,546,560
3,372,140
103
31 August
17,153,890
12,466,790
6,879,190
103
244 THE BANK OF ENGLAND RESTRICTION.
The Continental System had begun to act. The mercantile
ventures of the last year proved ruinous ; the enormous im-
portations at fabulous prices required to be paid for ; the
unfortunate military expeditions which Great Britain was now
renewing against the Continent demanded the transmission of
gold. England was paying money in every direction, and she
was selling her goods nowhere. No one watched this process
of exhaustion more carefully, or understood its consequences
better, than Napoleon himself.
The Bank, following its invariable routine of business, took
no notice of the sharp fall in exchanges, or of the heavy drain
which rapidly reduced its treasure, and, instead of contracting
its issues, allowed them slowly to expand, according to the
demand for discount. From 13,000,000 in 1808, the circu-
lation in notes of 5 and upwards rose to 14,325,000 in No-
vember, 1809. The exchanges indicated already a difference
of about fifteen per cent between paper and gold. Meanwhile
the government expenses requiring transmission of gold abroad
had increased to above 10,000,000 for the year. The exces-
sive prices of that class of goods which could only be obtained
from the Continent stimulated merchants into every possible
effort to procure them. Ships' papers were regularly forged as
a matter of business : licenses for trading were obtained at
great expense from both governments. Importations were by
these means greatly increased, and large quantities of grain
were brought in to supply an unusual deficiency in the harvest.
The receipts of cotton were more than doubled, and the mar-
ket was again overwhelmed with colonial produce. Thus no
opportunity was allowed for a recovery of the exchanges, nnd
the country continued to be drained steadily of its gold.
TW*A
Note* of
Bank
Price of
UMfc
Total.
.6 and upwards.
Treasure.
Qold.
1805, 28 February
17,871,170
13,011,010
6,883,800
103
::i August
16,388,400
11,862,740
7,624,500
103
1806, 28 I-Vlirunry
17.::tO,120
13,271,520
6,987,190
103
31 August
21,027.470
16,757,930
6,215,020
103
1807, 2h r,.l,ru:iry
16,960,680
12,840,790
6,142,640
108
:il Auprust
19,678,360
15,432,990
6,484,350
108
1808, IX Ftibrunry
18,188,860
14,093,690
7,855,470
108
31 August
17,111,290
12,993,020
6,016,940
103
THE BANK OF ENGLAND RESTRICTION. 245
Throughout the year 1810 the same process was continued.
Again the importations were greatly increased, and the quan-
tity of grain brought from abroad was far in excess of what
had been imported in any year since 1801. Wellington was
now in the lines of Torres Vedras, requiring continual supplies
of gold. The military efforts made by England on the Conti-
nent were greater than ever before, and the foreign expenditure
rose beyond 12,000,000 for the year. The exchanges con-
tinued to fall, although at one time there was a tendency to
recovery. Gold remained at about the same premium as in
1809, while the government and the public equally increased
their demands on the Bank, until in August the circulation
of large notes rose to 17,570,000.
If irredeemable government paper had been forced upon the
public without regard to its wants, until within a space of two
years the currency had swelled from a total of 17,000,000
to one of 24,500,000, it scarcely admits of a doubt that the
result would have been a rise in prices and an increase of spec-
ulation. According to all the old currency theories, such ought
now to have been the case with England. In fact, directly
the contrary result took place. During the last months of
1809 and the whole of 1810, a fall of prices and a destruction
of private credit occurred, which for severity remains perhaps
to this day without a parallel, as it was then without a prece-
dent. Half the traders in the kingdom became bankrupt, or
were obliged to compound. Country banks by dozens were
swept out of existence. Rich and poor alike were plunged in
distress, while the crash extended to the Continent and to
America. It was this universal collapse of credit which, by
driving the whole trading class for assistance to the Bank
obliged the Bank to increase its issues. Nothing but an abso-
lute refusal of discounts could have prevented suspension, had
the Bank at this moment been paying its notes in specie. Ac-
cording to one theory, the withdrawal of so much country-
bank paper should have restored gold to par, since it is very
improbable that the Bank issues supplied the vacancy. This
would no doubt have been the case, if the depreciation had
246 THE BANK OF ENGLAND RESTRICTION.
been, as is usually supposed, the result of over-issue ; but in
fact the foreign debt of England was enormous ; its immediate
payment was necessary ; gold was the only exportable com-
modity, and gold was not to be had. Mr. Baring declared in
the House of Commons, that, if his firm wished to obtain fifty
thousand pounds sterling for transmission abroad, he did not
know how such a sum was to be procured even at a premium
of fifty per cent. To export more bulky goods was simply
impossible. At this time the British merchant was sending
sugar by sea to Salonica, and thence on horseback through
Servia and Hungary, in order to reach Vienna ; one parcel of
silk sent from Bergamo to England, by way of Smyrna, was
twelve months on its passage ; another, sent by way of Arch-
angel, was two years. The British government attempted to
establish a smuggling depot at Heligoland, in order to over-
come the obstructions caused by the Continental System. A
single licensed cargo to a French port cost for freight alone
twenty times the cost of the vessel which carried it. Gold
alone was comparatively easy to export, and naturally bullion
rose in value.
In all this there is clear evidence of a terrible convulsion in
commerce, and no doubt of a previous excessive expansion in
credit, followed by as excessive contraction ; but there is noth-
ing which indicates an excess of currency in the sense which
that phrase bears in regard to the effect of forced issues on
prices. Undoubtedly there was a depreciation of ten or fifteen
per cent, or even more, in paper as compared with gold, and
there may justly be a question whether the Bank was not
bound to restrict its issues till that difference was removed.
But so long as the usury laws remained in force, the Bank
could not act upon the exchanges by raising its rate of inter-
est ; and to refuse accommodation would have been the ruin
of such merchants MS had hitherto succeeded in surviving the
shock. Even had the Bank resorted to this desperate measure,
such was the preponderance of foreign payments over receipts
from abroad, that no possible pressure could have immediately
restored the balance of exchange. In ordinary times a mone-
THE BANK OF ENGLAND RESTRICTION. 217
tary crisis effects this result by reducing prices and thus mak-
ing it possible to export goods at a profit ; but it is difficult to
see how any reduction of prices could have had such an effect
in 1810, since for years before that time it had been impossi-
ble to obtain in Holland and Hamburg, even at three and four
times their English price, the goods which overwhelmed the
British market. The only result of Bank contraction, there-
fore, must have been to stop importations. But in the first
place the general fall in prices was alone sufficient to produce
this result, as was proved in 1811. And, moreover, grain was
at famine rates ; the people must be fed ; the foreign expendi-
ture of the government also defied laws of political economy,
and Wellington's army in Portugal required millions in gold.
If, therefore, the Bank had attempted to put a still more se-
vere pressure on the exchanges than already existed, it would
have found itself paralyzed by the government at its first step,
and in the struggle which must have followed the people would
have been ground into the dust. Even under the liberal sys-
tem adopted, there was a time, in 1811 and 1812, when the
general distress shook society to its foundations. Had the
Bank wilfully intensified and prolonged this distress, it is not
improbable that Napoleon's Continental System might, after
all, have proved the greatest success of his life.
The fall in foreign exchange during 1808 and 1809 did not
attract very much public attention until Mr. Ricardo published
a pamphlet on the subject, " The High Price of Bullion a
Proof of the Depreciation of Bank-Notes." Shortly after the
meeting of Parliament in 1810, a committee was appointed, at
the instance of Mr. Francis Horner, to investigate the causes
of the high price of gold bullion. This was the famous " Bul-
lion Committee," whose Report made so marked an era in
currency problems that it might almost be called their jions
asinorum. Its doctrines, rejected by Parliament in 1811 only
to be triumphantly adopted in 1819, acquired through the
conversion of Sir Robert Peel an overruling ascendency, and,
embodied in the Bank Charter Act of 1844, still hold sway in
England, although the more liberal economists have long since
protested against the application given to them.
248 THK BANK OF ENGLAND UKSTRICTIOX.
We would willingly linger over the Bullion Report, if it were
possible to compress the subject within our limits ; but this
great controversy does not allow of narrow treatment, and we
prefer to lay it aside. It was based upon three propositions :
first, that Bank paper was depreciated as compared with gold ;
secondly, that this depreciation was caused by over-issues ;
thirdly, that the price of gold and the state of foreign ex
change should regulate the issues of paper. And the Report
closed by recommending that the Bank should be obliged to
resume payments within two years.
Had the government been in the hands of able or dexterous
men, Mr. Homer's resolutions, in which the substance of his
Report was embodied, need not have been so difficult to deal
with as they proved. The first proposition was indeed incon-
trovertible, and no sensible being could have fallen into the
blunder of disputing it. The third was, if not indisputable, at
least not necessary to dispute under certain limitations. But
the second was very far from evident in the sense which Mr.
Homer gave to it, and Mr. Thornton, perhaps the highest
authority in the House, appears not to have understood it as
absolutely excluding the idea that the depreciation might have
been due to a deeper cause ; while the concluding practical
measure was supported by scarcely any one besides Mr. Homer,
its author.
But the government was held by a class of men equally in-
capable of seeing their own mistakes, and of profiting by those
of their opponents. The Ministers began by plunging head-
long into the grossest absurdity they could have found. They
denied that Bank notes were depreciated at all. Assuming
that the sale of coin for more than its nominal value in paper
was forbidden by law, they undertook to affirm that the Bank
note and the guinea still maintained thoir relative worth in
ivirard to each other. They denied that bullion was the true
laii'lard of value, and they affirmed that it was the stamp
and the stamp alone which made the guinea a standard. They
denied that the amount of circulation affected the price of
gold, or that the Bank issues had anything to do with the
THE BANK OF ENGLAND RESTRICTION. 249
course of exchange. Yet at intervals they were obliged prac-
tically to admit the very conclusions which they were so eager
to contest, until all their really accurate statements and forci-
ble reasoning became inextricably entangled and hidden from
sight in a confused mass of inconsistent arguments.
On the other hand, they had as opponents some of the ablest
men whom England has ever produced. It was pitiable to
watch the torture of Mr. Vansittart, Mr. Rose, and Lord Cas-
tlercagh, in the grasp of Mr. Horner, Mr. Huskisson and Mr.
Canning. The mistakes of the bullionists are hidden by the
brilliancy of their oratory, the sparkle of their wit, the vigor
and solidity of their genius. Sympathy is irresistibly attracted
to their side, when it is seen what magnificent powers they
were obliged .to use, in order to convince an unreasoning
majority of the simplest principles in practical business. And
yet, after all these efforts, they thought themselves fortunate
in being defeated by a vote of only two to one.
It would have been happy for Mr. Vansittart and his asso-
ciates, had they been willing to rest satisfied with this negative
upon the resolutions offered by Mr. Horner. Victorious in
defence, they thought it necessary to establish their advantage
permanently by a vigorous assertion of what they deemed the
true principles of credit and currency. Mr. Vansittart accord-
ingly moved, in his turn, a long series of resolutions.
The third of these has been the chief means of preserving
Mr. Vansittart's memory. It was worded as follows : " Re-
solved, That it is the opinion of this committee that the prom-
issory notes of the Bank of England have hitherto been, and
are at this time, held in public estimation to be equivalent to
the legal coin of the realm, and generally accepted as such in
all pecuniary transactions to which such coin is lawfully ap-
plicable."
This position was beyond the reach of argument, but not of
ridicule. In the whole range of Parliamentary oratory, there
are few examples of sarcasm so happy as that which Mr. Can-
ning poured out upon this unfortunate resolution in his speech
of the 13th of May, 1811. But it was all in vain. The HOUSJ
250 THE BANK OF ENGLAND RESTRICTION.
sustained Mr. Vansittart by a vote of 76 to 24 ; and from that
day to this the resolution has stood, an object of laughter and
wonder to each succeeding generation.
Thus the Bullion Committee was disposed of, but the subject
was farther than ever from a satisfactory settlement. Within
two months of the passage of this resolution, in which Parlia-
ment had gravely pledged the people to believe that Bank
notes were equivalent to coin, two events almost simultane-
ously occurred, which obliged the government to take active
measures in order to compel the people to accept these same
Bank notes. The first of thest difficulties was due to an un-
expected interpretation of the law. Two obscure individuals,
one a Jew pedler named De Yonge, the other a guard on the
Liverpool mail-coach, had been taken in the act of buying
guineas at a premium, an act supposed to be illegal, and,
like the exportation of coin, subjecting the delinqtient to the
penalties of a misdemeanor. Government determined to make
an example of these persons, and they were accordingly in-
dicted under an obsolete statute of Edward VI., and, the facts
being cleai'ly proved, they were duly found guilty of the acts
charged in the indictment. But their counsel raised the point
of law, that the act as laid in the indictment and proved in
evidence was not an offence in law, inasmuch as the statute
of I'M ward VI. was intended to apply only to the exchange of
one sort of coin for another. Judgment was respited until the
opinion of the twelve judges in the Court of the Exchequer
Chamber could be obtained on this point; but at length, on
the 4th of July, 1811, Lord Ellenborough pronounced the
unanimous decision of the Court, that the exchange of guineas
for l>;mk-notes, such guineas being taken at a higher value than
they were current for under the King's proclamation, was not
an offence against the statute upon which the indictment was
founded. Thus the whole government theory in regard to
paper money was at once overthrown.
Almost :it the same time with this blow, the famous third
n -"lution \vjis attacked from another side with a vigor far
more alarming. It was well understood that the law of 1797
THE BANK OF ENGLAND RESTRICTION. 251
had by no means made Bank paper a legal tender. The case
of Grigby v. Oakes, in 1801, had established the principle that
Bank of England notes might be refused by the creditor, and
the debtor must in that case discharge his debt in coin. Prac-
tically, however, the Bank note had been received as equiva-
lent to coin, except in some remote districts of Ireland, where
the unfortunate peasants were obliged to buy guineas at a
premium from the landlord, in order to discharge their rents.
The government policy, however, seemed purposely calcu-
lated to challenge attack, and it was perfectly natural that the
bullionists, who saw no limit to the possible depreciation, should
resort to the last means now left for compelling government
to check it. Lord King, a nobleman of high character and
strong liberal principles, accordingly issued a circular to such
of his tenants as held leases dated before the depreciation
began, requiring them in future to pay their rents either in
gold or in Bank paper representing the market value of gold.
Even the dignity of the House of Lords was almost overthrown
by this unexpected attack. A storm of indignation burst on
the head of Lord King, whose practical sarcasm was more ex-
asperating to the Ministry than even the satire of Mr. Canning.
But Lord King was in his right ; he was acting from conscien-
tious motives, and he would not yield. Yet, after the passage
of Mr. Vansittart's resolution, this act dii'ectly tended to bring
Parliament into public contempt. " My Lords," said Lord
Grenville, in opening his speech on the subject, " it is painful
to me to observe, that I cannot remember in the course of my
life to have ever seen the Ministers of this country placed in
so disgraceful a situation as that in which they appear this
night." Obviously some action had become necessary, and
yet Ministers hesitated, in the vague hope that Lord King's
example would not be followed. The judges' decision in De
Yonge's case, however, turned the scale ; but even then, such
was the general dislike to a law of legal tender, and such was
the difficulty of forcing a contraction in the Bank discounts,
that they were placed in a most embarrassing situation. There
was apparently a third alternative, that of allowing Lord
252 THE BANK OF ENGLAND RESTRICTION.
King to proceed ; but in fact this would have established two
scales of prices throughout the country, and the result would
ultimately have been that the Bank, rather than endure the
discredit thus attached to its paper, would have preferred to
withdraw 7 it wholly.
The Ministers were saved from this dilemma by Lord Stan-
hope, one of their ordinary opponents. He invented a meas-
ure which is certainly one of the curiosities of legislation,
a measure which disposed of Lord King, and established the
law for such cases as that of De Yonge, but neither made
paper a legal tender, nor contained the trace of a legal princi-
ple. The act, which has since been commonly known as Lord
Stanhope's, made the purchase or sale of coin for more than
its legal value in Bank notes or other lawful money a misde-
meanor, as also the reception or payment of notes for less than
their nominal value ; and it further deprived the creditor of
the power of distraining, in case a tender in Bank notes to the
amount of the debt had been made.
Strange to say, this preposterous statute completely an-
swered its purpose. The courts seem never to have been
called upon to interpret it, nor did any creditor attempt to en-
force his rights. The law officers of the crown did not venture
to express any opinion upon the bill while on its passage
through Parliament. During the ten years that the Restric-
tion Act still remained in force, with this measure of Lord
Stanhope's as its supplement, no man in England really knew
what the law was as affecting the currency, or the extent to
which Bank notes were recognized as the lawful equivalent of
coin. In the failure of any judicial declaration on the subject,
we can only refer to an opinion expressed in debate by Sir
Samuel Romilly. That eminent lawyer pointed out to Parlia-
ment, that, if the object of government were to prevent Lord
Kinir "i any other landlord or creditor from insisting upon
payment in eoiii, the bill was far from answering its purpose.
Creditors would still have the right to demand gold, and no
court could refuse in such a case to give judgment against
the debtor, who was yet apparently debarred by the act from
THE BANK OF ENGLAND RESTRICTION. 253
obtaining gold without incurring the penalties of a misde-
meanor. The creditor, having obtained his judgment, need
not, and probably would not, proceed by way of distraint upon
the goods of his debtor. If a landlord, he would resort to an
ejectment. In any case, however, he might proceed against
the person, and shut up the debtor in jail indefinitely, or until
he made himself liable to further imprisonment by purchasing
coin. There appears, however, to have been one means of es-
cape left open to him still. The law only prohibited the trade
in coin, not that in bullion. If the debtor, therefore, chose to
purchase bullion, and have it coined at the mint, there seems
to be no reason why he might not so have evaded the law.
Ministers, however, gave it to be understood that, if cred-
itors pressed their rights to this point, it would become neces-
sary for Parliament to intervene by making Bank notes a legal
tender. It is difficult to see precisely what was gained to the
country by a resort to these absurd subterfuges, or why a legal-
tender act should not have been passed outright, since Lord
Stanhope's bill was intended to have, and did in fact produce,
the same effect, except that it went much beyond the limits
of reasonable legislation, and accomplished its purposes only
by creating a new offence hitherto unknown to the law. The
plea that it successfully met the emergency is merely an excuse
for slovenly legislation.
This act, hurried through Parliament in July, 1811, just at
tlie close of the session, was the sole i-esult of the currency
controversy, unless Mr. Vansittart's resolutions are worthy of
sharing its credit. From this time it became evident that no
interference by government in monetary matters was to be
looked for, but that the Bank was to retain that exclusive
control which it had hitherto possessed. This result was
probably fortunate for the country. The Bank directors, if
not great masters of statesmanship, were at least convinced
that any arbitrary action of their own would only aggravate the
evils of the situation, while, if the foreign and domestic policy
of the government in other respects furnishes any idea of the
probable result of its interference in Bank affairs, there is no
254 THE BANK OF ENGLAND RESTRICTION.
disaster which it might not have brought upon the credit and
resources of the community.
The great financial crash of 1809 and 1810 threw the
country into a state of profound distress and depression, but
it had the effect of preparing the way for a rapid change at
the first sign of military success. The year 1811 marked
perhaps the lowest point of England's fortunes ; but in the
autumn of that year the prospect became brighter. Napo-
leon had now broken with Russia, and was preparing his great
campaign to Moscow, while Wellington had achieved unusual
success in Portugal. There was hope that both the Russian
and the Spanish ports would soon be reopened, while the
colonies and South America were actually consuming again
large quantities of British goods. Importations into England
had meanwhile fallen to a very low point, and the exchanges
were slowly creeping upwards. The pressure upon the Bank
for assistance and for discounts fell off as credit recovered
itself, until the circulation, which had reached 17,570,000 in
August, 1810, contracted itself to 15,365,000 in August,
1812, the small notes excluded.
What was only hope in 1811 became certainty in 1812.
Napoleon was driven both from Russia and from Spain. In
another year all Europe was again open to British commerce,
and in April, 1814, peace was restored. During this period,
many of the dangerous symptoms of 1807 and 1808 again
made their appearance ; the circulation had become much
smaller, but nevertheless prices rose ; speculation was as gen-
cral, if not so desperate, as in 1808 ; the Continent was flooded
with Knglisli goods, while in England itself the price of wheat
had risen, in 1812, to nearly 100 shillings the quarter.
But although the circulation was diminished by 2,000,000.
Although public confidence was so far restored tli.it prices gen
erally rose, although the exchanges became considerably more
favorable, still gold showed no sign of (idling in value. The
premium had risi-n to forty-two per cent in September, 1812,
and after various lliictuatioiis it was again forty-two per cent
in the autumn of 1813. Then at last the fall began, and for
THE BANK OF ENGLAND RESTRICTION. 255
a twelvemonth gold continued to decline steadily, until, at the
close of 1814, the premium was less than twelve per cent.
And it should be remarked that the rise in value of Bank
paper was coincident with another very large extension of
issues, which now reached 18,700,000.
This extension was due partly to government, but partly,
as in 1810, to the private demand. The whole fabric which
speculators had raised for themselves on the apparently solid
basis of supposed European necessities had crumbled to pieces
at tfie first shock. Europe was too poor to buy or too thor-
oughly plundered to pay for English merchandise. The spec-
ulations abroad failed at the very time when a prodigious
fall in the price of grain ruined the English farmers and the
country bankers, who depended upon agricultural prosperity.
The collapse was general and disastrous ; England was again
plunged into distress at the very time when her success was
most brilliant; for two years after 1814, trade stagnated and
merchants became bankrupt, without the slightest reference
to the price of gold or the amount of circulation ; nor is there
any reason to suppose that the Bank could have prevented, or
even shortened, the distress by any action upon the currency.
However devoted might be the adherence of theorists to
their own favorite currency dogma, the most ardent follower
of Mr. Horner could scarcely have regretted that the princi-
ples of the bullion report had not been made obligatory as a
rule of action for the Bank during the year 1815. The evils
of inconvertible paper are no doubt many, but there are also
advantages in the system during times of political trouble ;
and it is impossible to deny that the violent convulsions of
1815 would have proved too severe a trial for any but the
most elastic form of credit. During January and February,
gold had stood at about 115, as compared with paper. The
Emperor returned from Elba and arrived in Paris on the 20th
of March. The next quotation of gold is on the 4th of April,
when at one leap it rose to 137, almost as high a point as it
had reached during the war. The exchanges went down with
almost equal violence ; but the Bank circulation remained
256
THE BANK 01 KNGLAND RESTRICTION
absolutely stationary. After the first panic was over, gold
began again to fall slowly, and on the news of Waterloo it de-
clined to 128; on the 1st of September it resumed the posi-
tion it had held in January ; but instead of resting there, it
continued to fall, until at the close of the year the premium
was only five per cent ; and in July, 18 1C, it was nothing at
all, or at most only about one per cent. The Bank circula-
tion meanwhile expanded or contracted itself according to the
demand, averaging rather more than 17,500,000, exclusive
of the small notes.*
The equilibrium was therefore restored, and it was restored
without interference by government. The system vindicated
itself, and is justly entitled to the high credit that properly
belongs to so brilliant a success. But, unfortunately, this
very success has given occasion for another hot dispute among
currency writers, involving the whole question in its historical
as well as in its theoretical bearings ; and tedious as the sub-
ject may be, we are obliged again to turn aside, and to exam-
ine the opposing theories so obstinately and positively ad-
vanced.
It is almost needless to repeat that there were in 1816, and
that there still are, two classes of political economists, so far
as the currency is concerned. The one has found in bank
paper and its over-issues an explanation for every rise or fall
* BANK
CIRCULATION.
Ttllto
Trttal
Notes of
Bank
Priro of
IMMVi
UbHl.
5 and upwards.
Treasure.
Gold.
1809, 28 Februnry
18,542,860
14,241,360
4,488,700
115.5
31 August
111,574,180
14,393,110
3,652,480
111
1810, 28 February
21,019,600
16,159,180
8,601,410
115
31 August
24,793,990
17,570,780
3,191,860
115
111, 28 February
23,360,220
16,246,130
3,350,940
118.75
31 August
23,286,860
15,692,490
3,243,300
125
1812, 29 February
23,408,320
16,951,290
2,!)83,190
122
31 August
23,026,880
15,385,470
3,099,270
128.6
1813, 27 F.-bniary
23.210,930
n. l'.'7,320
2,884,500
130
81 August
14,498,180
1". 7110,980
2,712,270
142
l-ll. -J* I-Vl.ruary
24,801,080
li;.4r>f,.540
2,204,430
140
31 August
2\:i(i8,290
18,703,210
2,097,680
115.6
1815, 2 February
27,261,650
18,22t>, ion
2,036,910
116
81 August
27,248,670
17,766,140
3,409,040
116
THE BANK OF ENGLAND RESTRICTION. 257
in prices, and for every financial disaster. The other has
denied to such a medium of exchange any influence whatever
upon prices, and insists that, if every bank-note were de-
stroyed, speculation and abuses of credit would flourish not
less than now. The bullionists of 1810 and their successors
were strong in the belief that the Bank issues did control
prices, and the price of gold especially. They were, therefore,
obliged to explain how it happened that gold fell to par, or
about forty per cent, while the Bank issues were actually in-
creased. Obviously the dilemma was serious.
The bullionists, however, had a reply, and a very reasonable
one ; we quote it as given by Mr. McCulloch, whose opinion is
always entitled to weight. Mr. McCulloch's theory is, that,
although no contraction of Bank issues occurred which could
explain the fall in gold, yet there was such a contraction in
the entire circulation, taking the country banks into the cal-
culation ; and that the rise in value of Bank of England
paper was in fact due to the destruction of country bank-
notes during the disastrous years of 1814, 1815, and 1816.
And if the inquiry be carried a step further by seeking the
cause of these disasters themselves, Mr. McCulloch explains
that the fall of grain from 155 shillings the quarter, in 1812,
to 67 shillings, in 1814, had spread universal ruin among the
agricultural class.
We are far from affirming positively that so natural and so
obvious an explanation as this is not the correct one ; yet we
are obliged to confess that the view taken by Mr. Tooke and
Mr. Fullarton appears to our eyes more philosophical and
more exact than that of Mr. McCulloch. They maintained
that the fall in gold was due simply to the fact that, with the
final turn of exchange in favor of England, gold ceased to be
an object of demand, and, like other commodities in the same
position, rapidly fell to its ordinary value.
Mr. McCulloch's facts are unquestioned, but they appear to
be only a part of the truth. The prodigious decline in the
price of grain was coincident with a very general decline in
prices, which naturally checked importations and stimulated
258 THE BANK OF ENGLAND RESTRICTION.
export. The grain alone which was imported in 1814 is esti-
mated at 2,800,000 iu value : in 1815 it was but 800.000,
and in 1816 only 940,000. Silk and wool, coffee, flax, lin-
seed, and most of the great staples of import, fell off in the
same way between 1814 and 1816. Under any circumstances
the exchanges must have risen without regard to the currency,
and gold must have fallen, since considerable sums were actu-
ally brought from abroad during 1815 and 1816.
The force of this argument becomes evident by comparison
with previous cases. If the rise in exchange and the appre-
ciation of paper in 1815 and 1816 were caused by the with-
drawal of private bank-notes, the same reason should hold
good for the similar events in 1814. If at the later time the
currency were so depreciated from excess as to regain its value
only by contraction, it was certainly more in need of that re-
lief at the earlier. Yet a fall of thirty per cent in gold was
then coincident with an increase of paper throughout the
country.
Allowing, however, that Mr. McCulloch is right, and that
the restoration of paper was caused by involuntary contraction,
that contraction was at all events only temporary, and the re-
establishment of the credit of the country banks of issue should
have renewed the depreciation. The Bank issues rose in 1817
and 1818 to a higher point than ever before, and the country
banks had again extended their credit in every direction.
Under these circumstances, the depreciation should have been
very great, even after every reasonable allowance had been
made ; yet in fact gold was at a premium of only about five
per cent, and this slight advance appears to have been caused
UK rely by a temporary pressure on the foreign exchanges
which will iiresently be explained.
If these arguments seem still insufficient to show that the
theory of excessive issues does not fully meet the difficulties
of the niKc, we can only compare the circulation of 1814 and
1815, which is said to have lost twenty per cent or more of
its value through its excess, with that which existed after spe-
cie payments were resumed. Such comparisons are not a fair
THE BANK OF ENGLAND RESTRICTION. 259
proof of either excess or deficiency, since the piiblic demand
varies, and the same amount of circulation is at one time less
and at another more than is required. Allowing for such
variations, we may still venture to compare the three different
periods of general expansion between 1813 and 1825. The
small notes having been withdrawn at the resumption, and
their place supplied by coin, it is necessary to exclude these
in each case.
The highest point reached by the Bank circulation in any
quarterly average between 1812 and 1815 was 19,007,000
in the third quai'ter of 1814; the price of gold being about
112. Between 1816 and 1822, the highest average was in
the second quarter of 1817, or 21,517,000, and it remained
above 20,000,000 until July, 1818, the country banks ex-
panding generally. Gold was then at about 105. Between
1823 and the close of 1825, the highest average was iu the
first quarter of 1825, a time of universal expansion, when it
reached 20,665,000, the Bank redeeming its notes in coin.
If, then, two thirds or three fourths of the whole deprecia-
tion was removed in 1814 without any withdrawal of paper;
if the circulation was restored to its widest range in 1818
without any effect of consequence upon the price of gold; and
if, after the resumption, the circulation remained undiminished
in amount, and its issue subject to the same general laws as
before, there seems to be no necessity for resorting to the
theory of involuntary contraction in order to explain the fall
of gold in 1816. There is no reason to dispute that theory,
if it is understood to mean merely that this contraction was
itself a part of a general movement of trade and credit, and
as such that it contributed to hasten the result. But if more
than this is intended, it appears to us that the effect produced
was entirely out of proportion to the cause assigned.
The whole subject of private banking, for many years as-
signed as the source of all financial troubles, has in fact veiy
little to do with the question of depreciation during the
French wars. The country banks held then precisely the
same position they had held before suspension, nor did the
260 THE BANK OF ENGLAND RESTRICTION.
resumption change it. They never suspended payments. At
any time gold might have been demanded for their notes. At
all times they did in fact redeem their notes on demand, by
exchanging them for those of the Bank of England. Their
circulation, therefore, was limited by that of the Bank, and
the same general laws controlled the whole.
Country bank paper could not have been in excess of the
public wants then, any more than it could now be, although
the credit of such banks might be, and no doubt was, abused
then, as it may be now. On the other hand, the Bank of
England was not obliged to redeem its notes. There is no
doubt that, through the channel of permanent loans to gov-
ernment, it might have forced any given amount of paper into
circulation, had it chosen to do so. But it did not force a
single note upon the public. It lent notes, but never paid
them away. At the end of two months every such loan had
to be paid back into the coffers of the Bank by the borrower ;
and although the advances to government were to some degree
permanent, in the first place they were not excessive, and in
the second place, as has been already shown, they tended di-
rectly to lower the private demand. Whatever action may
have been caused by the Restriction was upon credit in the
first place, and not upon currency. The encouragement it
may have afforded to speculation could not, however, have
been very great, or ten years would not have passed without
showing it. But when taxes, bad seasons, or the operations
of war, or other causes, combined to raise prices and to stimu-
late speculation, the credit system was not then, nor is it now,
adapted to check the rise. And when a stagnation in business
and a fall in prices followed, as was sure ultimately to be the
case, the circulation contracted as a necessary consequence.
But in every instance, before the resumption and since, the
rise in prices has preceded the expansion, and the fall has pre-
ceded the contraction.
In the early part of 1817 the supply of bullion in the Bank
had risen to 10,000,000, the average total circulation for
the quarter being somewhat in excess of 27,000,000, while
THE BANK OF ENGLAND RESTRICTION 261
the exchanges were considerably above par. The directors,
therefore, considered it safe to try the experiment of partial
resumption, and by a series of steps taken during this year
they undertook to redeem all notes dated previous to the 1st
of January. This was, in fact, resumption. During the next
two years any holder of Bank notes could obtain gold for
them at the Bank, either directly, or by exchanging them for
such as were dated previous to the 1st of January, 1817.
There is no reason to doubt that, had the exchanges remained
firm, there would have been no further question as to an easy
and regular return to the normal condition of the currency.
But, unfortunately, the year 1817 was one of renewed specu-
lation, and the imports again rose to an extravagant point.
Grain alone to the value of 17,300,000 was brought into
England in the two years 1817 and 1818. Another cause
which could not well have been foreseen tended powerfully to
depress the exchanges and to carry gold abroad. Nearly all
the governments of Europe were at this time borrowing large
sums of money, and the English capitalists negotiated several
of their largest loans. How much money was sent abi-oad for
this purpose it is not easy to say, but certainly not less than
.10,000,000. The effect upon exchange was immediate, yet
the extreme variation in gold was not more than five per cent,
although no effort of any kind was made to counteract the
pressure. So far from resorting to the theory of excessive issues
for an explanation of this temporaiy rise in gold, one may well
feel surprise that, under the circumstances, there was not a
much greater disturbance of the market. The return of
peace must have largely increased English resources, to enable
them to bear so easily the pressure of enormous foreign pay-
ments.
But even the slight variation of five per cent which did
exist was not of long duration. Again in 1819, as before in
1816 and in 1814, the system vindicated itself without artifi-
cial pressure, by the mechanical operation of its own laws.
The excessive importations of 181 7 and 1818 resulted in stag-
nation of business and decline in prices. The foreign loans
262
THE BANK OF ENGLAND RESTRICTION.
were discharged. The exchanges, relieved from pressure, rose.
The demand for gold ceased, and in July, 1819, the Bank
note was again at par. There it remained thenceforward, and
from that day to this there has been no depreciation in the
value of Bank of England paper.*
In the mean while, however, Parliament had taken alarm.
The Bank directors, after paying out 4,000,000 in redemp-
tion of their notes under the conditions specified in 1817, see-
ing no immediate prospect of a rise in exchange, and fearful
of the entire exhaustion of their treasure, applied to Parlia-
ment early in 1819 to be relieved from the further perform-
ance of their own promises of redemption. Committees were
appointed by both Houses, whose first act was to renew the
Restriction in its whole extent. Then, with a view to the final
establishment of a fixed government policy in regard to re-
sumption, the two committees entered into a separate and
most extended investigation of the whole subject, resulting in
two reports made in the course of April and May, which, with
the accompanying evidence, fill an enormous volume, and still
furnish a mass of readable matter not less interesting than
bulky. We are obliged to omit any detailed examination of
* BANK CIUCTLATION.
Tntnl
Notes rif
Bank
Price of
UUil-
5 and up.v.iril*.
Treasure.
Gold.
1816, 29 February
27,013,620
18,012,220
4,640,880
IOC
31 August
26,758,720
17,661,510
7,662,780
101.5
1817, 28 February
27,397,900
19,261,630
9,680,970
100.8
30 August
29,543,780
21,55(i.C,:!0
11,6(58.260
103
1818, 28 February
27,770,970
20,370,290
10,065,460
L04J
81 Aujru^t
26,202,150
18,676,220
0,363. ir.o
104.5
1819, 27 February
25,126,700
17.772,470
4,184,620
104
31 Au-rust
2V2V2,690
18,017,460
8,695.::i;o
100
1820, 2!) February
23.484,110
1<;.7:4,980
4,911,060
100
31 August
2'.2!i!-,340
17,ii00.730
8,211,080
100
1821, 28 February
23,SM.'.n>o
17,447,360
H.J-09,900
100
31 Au.^u-t
2ii.295,300
17.717,070
ll,233.r,!m
100
1822, 2K February
18,61
17, 2 110,600
11.057,150
100
31 Aujju^t
17,464,790
16,609,460
10,097.'.Mio
100
Average Circulation of Bank Note* of 5 and upwards for the years
I-j:{. 1824. 1826.
18,033,636 19,927,120 19,679,120
THE BANK OF ENGLAND RESTRICTION. 263
these papers, and of the Parliamentary debates that followed
them ; but it is impossible to close this history without some
slight analysis of the measures finally adopted.
Mr. Peel, afterwards the celebrated Prime Minister, was
chairman of the House committee. Hitherto an opponent of
the bullionists, his opinions were changed by the testimony
offered before his committee, and he became a convert to the
doctrines which Mr. Horner and his friends had so ably advo-
cated in 1810. He carried almost his whole party with him.
It was now generally acknowledged in Parliament that Bank
paper was depreciated in regard to gold, and that a forcible
contraction would restore the equilibrium. This principle,
therefore, lay at the basis of his report.
The most serious resistance to resumption now came, how-
ever, from a new party, which made an alarming \ise of this
doctrine of depreciation. It was affirmed, and probably with
truth, that the trifling difference between paper and gold was
no measure of the actual depreciation in paper as compared
with commodities generally. The rise in prices during the war
had been, it was argued, as much as fifty or one hundred per-
cent upon the old scale. A return to the original standard
would be a flagrant injustice to the community. The fund-
holders alone would be benefited by it, and the people would
be ground down by additional taxes solely in order to pamper
the wealthy capitalist. If Parliament were determined to re-
store specie payments, it should at least create a new standard,
and reduce the value of sterling money by twenty-five per
cent ; or it should accompany the resumption by allowing an
equivalent deduction to every debtor on the amount of his
debt. In other words, a general repudiation to the extent of
twenty-five per cent was demanded by a party which contained
some leading and influential members of Parliament not in any
way inclined to act the part of demagogues.
The House of Commons was, however, faithful to one main
principle, in which it justly considered the national honor to be
involved. The Restriction had been a war measure merely.
Since peace had been restored, Parliament, while consenting
264 THE BANK OF ENGLAND RESTRICTION.
to renew the law from year to year, had repeatedly pledged it-
self to ultimate resumption. Every government loan had been
raised on the faith of these pledges ; the interest of the na*
tional debt had been paid in paper, on the ground of its equiv-
alence to gold ; every public or private debt since 1797 had
been contracted under the influence of acts of Parliament
prescribing the time of resumption ; every Bank note bore a
promise to pay upon its face. Four years had already been
allowed to pass, and nothing had yet been done. It was felt
that any further concession either to public timidity or to class
interests would endanger the national credit, if indeed it did
not proclaim a criminal dishonesty in those to whom the
duties of legislation were intrusted.
All resistance, therefore, to the principle of resumption in
its purest and simplest form was summarily swept aside. Yet
it is curious to observe with what excessive caution Mr. Peel
proceeded, and how clumsy and ponderous an engine he thought
it necessary to invent in order to bring about a very simple
result. At the time when his committee was sitting, there
was a premium of about five per cent upon gold, and his object
was to restore fully the equilibrium between paper and coin in
the first place, and in the second to create a system under
which it should be impossible for paper to foil again below par.
The latter purpose could, as he believed, be effected by estab-
lishing the principle that the circulation should be forcibly
contracted as the exchanges became unfavorable, or, in other
words, that the Bank should diminish its issues whenever its
treasure was diminished. But as the Bank directors were ob-
stinate in denying the efficacy of this contrivance, Mr. IVel
undertook to frame his bill in such a manner as to leave them
no option but to follow out his theory.
Tlit: project, therefore, began by an order for the repayment
by the government of ten millions out of the twenty-three
millions advanced to it by the I'.;ink. This repayment was not
m:ide, however, for the purpose of necessarily contracting the
Bank loans or issues, but because the Bank could more easily
control its circulation when made in short private loans, than
THE BANK OF ENGLAND RESTRICTION. 265
when made in more permanent advances to government, and
would, therefore, be more able to act energetically should a
fall in the exchanges threaten the success of the plan.
Having thus removed one possible impediment, Mr. Peel's
next step was to move the following resolution : " That from
the 1st of February, 1820, the Bank shall be liable to deliver
on demand gold of standard fineness, having been assayed and
stamped at his Majesty's mint, a quantity of not less than
sixty ounces being required in exchange for such an amount
of notes by the Bank as shall be equal to the value of the
gold so required, at the rate of 4 Is. per ounce " ; that is to
say, any person presenting Bank notes to the amount of 243
at the Bank counter should receive in return a bar of gold
worth 233. After the 1st of October he was to pay only
238 for the same quantity of gold, and after the 1st of May,
1821, the ingot of sixty ounces was to be purchasable at its
par value in notes. After this experiment had been fully tried
during a space of two years, the Bank was, on the 1st of May,
1823, to commence the redemption of its notes in coin.
Such was the famous bill of Mr. Peel, which excited the
warmest controversies during a whole generation. So far as
its ultimate purpose of effecting an unconditional return to
specie payments is concerned, it deserves all praise ; but we
cannot think that the merits of Mr. Peel's bill, as a practical
measure, were very great, or that, apart from its general ten-
dency, it either did or could exercise any great influence on
the result. A simple resolution requiring the Bank to resume
on a certain day would have answered the purpose better.
In the first place, the elaborate mechanism by which the
price of gold was to be forced down was based upon an official
acknowledgment of depreciation, the Bank note being made
the legal equivalent of a smaller sum in gold than that named
upon its face. It is true that no actual coin was to pass, but
the gold ingots were as much coin as if they had been guineas.
To reverse the whole policy of the war, and at this late mo-
ment to proclaim that the government had for years steadily
cheated its creditors by paying them in depreciated paper, was
unnecessary, and, as we believe, wrong in principle.
266 THE BANK OF ENGLAND RESTRICTION.
In the second place, the radical difficulty with Peel's bill
was, that if its provisions had been tested, had the event
occurred which they r/ere designed to provide for, they
would probably have proved useless. We have no space to
enter on the wide controversy still raging in England on this
point as connected with Sir Robert Peel's Bank Charter Act
of 1844 ; but there are few admirers of that act who can deny
that the theory of regulating the currency by the movements
of exchange does not and cannot exclude very violent fluctua-
tions in credit, in fact, that it for the time aggravates them.
Had the exchanges, therefore, become unfavorable in 1820, as
they did in 1825, no amount of contraction could have saved
the specie of the Bank. If, therefore, in the face of such a
drain, the Bank had undertaken to increase it by selling gold
two per cent cheaper than before, as Peel's act required, there
is every reason to believe that it would have again broken
down.
As Mr. Ricardo pointed out to Parliament, its duty was to
establish the principle, but it was for the Bank to carry that
principle out in action. Mr. Peel's act was not merely for the
resumption of specie payments ; it was also one for the regula-
tion of commerce and credit; it undertook to control both the
currency and the exchanges. Such efforts have hitherto al-
ways failed, and we can see no reason for supposing that this
one would have been more successful than the rest. The
really valuable part of the bill was that which fixed a day for
the resumption, and that which repealed the penal statutes
against melting or exporting coin. Had all the rest been
omitted, the measure would have been greatly improved.
Whatever may have been the theoretical merits or demerits
of the scheme, in actual practice it was wholly inoperative.
Within a few months of its adoption, and without any opera-
tion upon the curreney, gold again fell to par, and tin-re it has
since remained. The liank prepared its bars of bullion, but no
one \voiild have them. On the contrary, large amounts of gold
were brought into its vaults. \Veary of prolonging an ob-
viously ii.M-lr.-vs dd.-iy, the directors applied to Parliament early
THE BANK OF ENGLAND RESTRICTION. 267
in 1821, and procured the passage of a new act, under which
cash payments were at length entirely resumed on the 1st of
May of that year. The public was unconscious of the event.
The Bank system was not altered, nor was the circulation
diminished, except so far as sovereigns were substituted for
notes of one and two pounds ; and after twenty -four years of
an irredeemable paper currency, Great Britain returned smooth-
ly and easily to its ancient standard, and redeemed its pledged
honor.
There was, however, between the years 1818 and 1822, a
general and severe fall in prices, which was then, and is still,
commonly referred to the action of Mr. Peel's bill. There
may be a certain degree of truth in this theory, since the cer-
tainty of resumption would very possibly inspire for the time
a salutary cautiousness in the extension of general credit.
But in truth there were other causes which tended much more
strongly to produce the same result. The agricultural class,
which uttered the loudest complaints, had, under the influence
of an excessive stimulus, brought more land under cultivation
than was required by the public wants, and a long time passed
before a proper equilibrium was again established. The ship-
ping interest was in much the same condition. But the popu-
lation at large did not suffer. On the contrary, it does not
admit of doubt that the condition of the mass of Englishmen
steadily improved after 1817. At the very time when prices
were falling, the manufacturing interests were rapidly extend-
ing and enriching themselves ; we hear less and less of politi-
cal discontent and internal disorder, as reviving prosperity
brought with it social repose, while even among the bankers
and traders there were far fewer bankruptcies during the three
years ending in 1821 than in any similar period since 1809.
It' the resumption was to be held responsible for the misfor-
tunes of certain branches of industry, common justice requires
that the general prosperity of others should outweigh the
complaint ; but if the views which we have taken are correct,
both complaint and praise were equally thrown away, and the
system after resumption was identical with that which had
268 TH1 ' : BANK OF ENGLAND RESTRICTION.
existed before. The only effect of the long suspension was to
breed a race of economists who attributed an entirely undue
degree of power to mere currency, and who for years to come
delayed a larger and more philosophical study of the subject,
by their futile experiments upon paper money.
We will not undertake to apply England's experience to oth-
er cases of depreciation, though no richer field could be wished.
But we reiterate, in concluding this review, that a wide distinc-
tion must be drawn between inconvertible bank-notes, issued
on good security merely as loans, payable within a short defi-
nite period, and inconvertible government paper, issued like so
much gold or silver, yet not capable of being melted like the
precious metals into an article of commerce, nor of being re-
turned to the issuer and not again borrowed, like bank-notes.
In one case the public regulates the supply by its own wants ;
in the other, it is compelled to regulate prices by the supply.
No country laboring under the latter difficulty can draw con-
solation from England's example. But if, in addition to the
00,000,000 which we will suppose to have circulated in
British paper during the last ten years of Restriction, there
had been another 60,000,000 of government currency forced
upon the public, and if the private banks of issue had been
under a less rigorous central control, in this case there might
indeed be some parallel l>ct\veen the difficulties of resumption
in 1821 and those under which other nations have been
weighed down. But in this case, too, we may freely venture
to disbelieve that the return to cash payments on the old sys-
tem would have been so easily brought about ; and if England
had, after all, succeeded in ultimately restoring her credit, if
she had redeemed her pledges and vindicated her honor, she
would have accomplished more than any nation has yet done,
although many have bucn placed in a similar situation.
BRITISH FINANCE IN 1816.*
T ORD LIVERPOOL'S administration, at the close of the
I J great French war, contained perhaps not a single mem-
ber endowed with less originating power than Mr. Vansittart,
the Chancellor of the Exchequer. The twenty- three years
during which that struggle had raged almost without inter-
mission had seen many men in succession attempting, after
their own fashion, to sustain the enormous and rapidly in-
creasing burden imder which the resources of England were
strained to exhaustion. Mr. Pitt, who, in spite of all that may
be said, was great as a finance minister, even in his errors, Mr.
Addington, Lord Henry Petty, and Mr. Spencer Perceval had,
one after another, tried their ingenuity, not in restoring order
to the nuances, for they all found any snch purpose far beyond
their powers, but in holding England back from the brink of
national bankruptcy. When, in 1812, Mr. Perceval was assas-
sinated, and Lord Liverpool became the First Lord of the Treas-
ury, it was not supposed that so weak an administration could
long sustain the weight of the public interests ; and Mr. Van-
sittart seems to have been placed at the head of the Excheq-
uer rather in the expectation that the position would not be
permanent, than with any idea that he might become the most
important member of the government. Nominally, indeed,
the financial policy of the country was under the control of
the Prime Minister, and the whole administration was respon-
sible for its direction. But Lord Liverpool was himself not a
* From the Nortli American Review for April, 1867.
270 BRITISH FINANCE IN 1816.
great man, and Lord Castlereagh, whose ability was really con-
siderable, gave, as could scarcely have been otherwise, his
whole attention to his own department of foreign affairs. Nev-
ertheless, weak as it was in 1812, this administration brought
the war to its conclusion, placing Great Britain in a position
more powerful and commanding than she ever had held before,
or probably will ever hold again. Bnt the close of this long
struggle, and the settlement at last effected by the treaty of
Vienna, .changed with great rapidity the task of the English
government. Questions of internal policy sprang into sur-
passing interest and prominence ; and while Lord Liverpool
and Lord Castlereagh were still occupied in maintaining British
influence on the Continent at the same point to which they
had raised it in 1815, the movement had already begun among
the people, which, fifty years later, ended in the official avowal
of the uselessness and mischief of the traditional foreign
policy of Great Britain.
Mr. Vansittart was not a person of so much consequence
that it has been thought worth while to publish his papers ;
and we cannot now learn whether he was in any way conscious
of -tho enormous duties which the close of the war threw upon
him, duties which would have overtasked Pitt himself, and
which Huskisson and Peel made the foundation of their great
reputations, while a host of inferior men were buried under
the weight. Even now it is impossible to draw up a clear
statement of the condition of English finances in 1816. It is
impossible to determine with certainty even the simplest of all
the facts, the amount of the debt. If, therefore, the follow-
ing account of English financial affairs appears unintelligible
to the reader, there is only one consideration to be offered in
its excuse. Tim account is difficult to understand, and may
contain errors ; but there can be no possible doubt that a clear
and positive statement would be quite unworthy of belief.
Tin: Parliamentary Paper No. 443 of the session of 1858
gives an official return <!' the ;un unit of the public debt of
the United Kingdom for 6Y0ry year incc that debt has h:id
an existence. There is excellent reason to doubt whether the
BRITISH FINANCE IN 181G.
271
sums given are in the majority of cases more than approxima-
tions to the truth ; but there seems to be no reason to expect
greater exactness from any other source. The following may,
therefore, be assumed as a fair statement of the national debt
of Great Britain in 1810, the first year after the return of
peace.
Great
Britain.
Ireland.
Total.
Funded Debt.
Bank of England, at 3% . .
.
11,686,800
14,814,085
136,181,688
74,1)35,719
164,701,456
382,447,774
5,731,192
534,712
1,000,000
2,169,231
10,579,485
789,785
10,740,014
.
11,686,800
2,169,231
14,814,085
146,761,173
75,725,504
10,740,014
164,701,456
382,447,774
5,731,192
534,712
1.000,000
South Sea Company, at 3% ....
Three per cent Reduced Annuities . .
Three per cent Consolidated Annuities
Three per cent Consolidated Annuities
(Germany)
Three per cent Consolidated Annuities
Bank Annuities (1726), at 3% . . . .
Total . . .
Unfunded Debt.
Exchequer Bills
792,033,426
24,278,515
816,311,941
41,441,900
787,400
2,497,808
41,441,900
2,497,808
787,400
Treasury Bills (Ireland)
Total . . .
Grand Total . . .
42,229,300
2,497,808
44,727,108
834,262,726
26,776,323
861,039,049
The nominal capital was, therefore, about eight hundred and
sixty million pounds ; and in January, 1816, six months after
\Yaterloo, the three per cents stood at sixty in the market. It
must, however, be stated at the outset, and always borne in
mind, that the funded debt of Great Britain cannot be rightly
represented by a statement of the nominal amount of capital
supposed to be involved. One nation borrows money, and, by
the terms of the contract, engages to repay the whole sum
lent, and fixes a time for the repayment. Another nation bor-
rows without the profession of any intention ever to return the
capital at all ; and Great Britain's whole funded debt was con-
tracted in this manner. In technical language, the govern-
272 BRITISH FINANCE IN I81G.
ment sells annuities, and no purchaser is either in law or in
equity entitled to demand more than his stipulated annual
interest upon the sum which he has lent. No man can ever
claim of right any part of the principal of the public funds.
It is true, however, that there are two sorts of annuities,
which must be clearly distinguished. The perpetual annuities,
to which class the mass of the funds belong, are also called
redeemable, because, whenever they rise above par in the
market, and it becomes profitable to pay them off by borrow-
ing the money at a lower rate of interest, there is nothing in
the contract which forbids the operation ; and accordingly this
has been regularly done, until the whole debt is now consoli-
dated in three per cents, and may at any time be reduced still
lower, should these rise above par. But the terminable annu-
ities are not redeemable, and depend oil an entirely different
principle.
These terminable annuities are of two kinds, those for
lives and those for a term of years. They bear a higher rate
of interest, calculated according to special tables, so that the
life annuities terminate absolutely with the life of the holder,
and the others at some fixed time, according to the specified
ten us of the contract. The so-called long annuities, for in-
stance, were fixed to terminate in 18GO. This system of
terminable annuities has, therefore, the advantage of securing
the extinction of the loan at a very moderate annual charge,
so that the tax-payers are unconscious that they are in fact
paying off every year a portion of the capital, as well as the
interest of the debt. This was at one time a favorite scheme
in Knglish finance, and there were several forms of terminable
annuities, the principle of the self-extinguishing character of
Ihe debt remaining the same throughout. Although this plan
nf bid-rowing is accompanied by a higher rate of annual charge
than is necessary when borrow ing on a perpetual annuity, it
was usually made very light by grant ing the annuity for a long
term of years. Thus, an annuity for a hundred years is the
same thing to most persons as an annuity forever ; and it is
also nearly the same by calculation, its value at four per cent
being twenty-four and a half years' purchase, and therefore
BRITISH FINANCE IN 18Hi.
273
only a half-year's purchase less than an annuity forever. It
lias been contended that the whole debt ought to have been
contracted in this form, and possibly, if the government had
begun with this purpose in its mind, it might have succeeded ;
but in practice the public naturally prefer, where the choice is
given them, the perpetual investment. These terminable an-
nuities were also objected to, reasonably or not, on the ground
that they encouraged the popular tendency to improvidence.
The unfunded debt, too, is not fairly represented as capital.
Exchequer bills were habitually used to some extent, in antici-
pation of revenue that could not be immediately collected.
Far the larger portion, however, was really so much debt,
which had to be ultimately paid off or funded. Large sums
were usually voted upon these bills towards the conclusion of
each session of Parliament, particularly in time of war, to
answer exigencies of the public service.
It is, therefore, the charge of the debt alone which is the
true measure of the liabilities of Great Britain. The same
authority which has been already quoted states this charge to
have been, in 1816, as follows :
Great
Britain.
Ireland.
Total.
Funded Debt.
Interest on Capital
27,233,994
1,044,928
28,278,922
1 359 436
1 359 430
230 000
230,000
199 845
199,845
16,731
16,731
Exchequer Annuities
43,677
44,924
88,601
Total . . .
1,832,958
61,655
1,894,613
Interest of Stock for Redemption of Land
Tax
3 815
3,815
Management
284,674
284,674
Total . . .
29,355,441
1,106,583
30,462,024
Unfunded Debt.
Exchequer Bills (Interest) . . .
Debentures (Interest)
1,971,699
39 370
124,890
2.096,589
39,370
Exchequer Bills issued in anticipation of
Taxes (Interest)
47,635
47,635
Total . . .
2.058,704
124,890
2,183,594
Grand Total . . .
31,414,145
1,231,473
32,645,618
274 BRITISH FINANCE IN 181(i.
We may begin, therefore, with the . assumption, that the
capital of the national debt amounted, in 1816, to the sum
of 861,040,000, bearing an annual burden of 32,645,618.
The regular annual expenses of the government amounted
to nearly the same sum as the charge of the debt. The whole
amount required to be raised by taxation, in the year siibse-
quent to the war, was about 61,000,000. Many years after-
wards, when the popular cry for economy had exercised its full
power, and circumstances had allowed a considerable reduction
to be effected in the charge for.interest of the debt, the annual
expenditure of the country sank so low as 47,000,000; but
the first peace budget was one of more than sixty millions
sterling.
This immense burden was levied on a population which
probably did not exceed twenty million souls ; and of this
number fully six millions were Irish. But Ireland was bank-
rupt. So bad was her financial condition, that, after every
effort, she found herself unable to meet by taxation even the
charge of her debt. That charge amounted, in 1815, to
6,370,000 ; while the net revenue paid into the Irish ex-
chequer was little more than 5,000,000. It was not to
Ireland that the people of Great Britain could look for the
faintest assistance in the support of their common credit .
There remained a population of fourteen millions in England,
Scotland, and Wales, and of this number it is hardly rash to
say that one half contributed little to the payment of taxes.
The warehouses were choked with goods, for which no market
\vas to be found. The price of grain had fallen from five and
six pounds sterling the quarter down to two pounds and a half,
bringing distress to every farmer in the kingdom. More than
6,000,000 were annually raised, by local taxation, for the
support or relief of the poor in Kn.:Iand and \Vales alone. Un-
der these circumstances, it seems a liberal allowance toBnppose
that the whole weight of an annual taxation of 60,000,0(11)
fell practically upon not more than ten millions of people ; and
from these, in 1S15, the government had actually succeeded
in grinding 72,000,000. But even allowing that the whole
BRITISH FINANCE IN 1816. 275
fourteen millions contributed in just proportion, the burden
of taxation is terrible to consider, when the vast mass of pov-
erty and pauperism is taken into the account.
The income returns of Great Britain for the year 1815 give
the following result :
Customs -. , . . . . 10,487,522
Excise ....... 26,562,432
Property Tax 14,318,572
Assessed Taxes 6,214,987
Land Tax 1,079,993
Stamps . . . . . . . 5,865,413
Post-Office 1,548,000
Miscellaneous 366,867
Total . . . 66,443,786
To this total, about 5,000,000 is to be added on account
of Ireland, which still had an exchequer, and even a currency,
distinct from that of Great Britain. It must also be men-
tioned, that the distinction between customs and excuse was
merely nominal, and did not indicate the nature of the taxes.
The transfers from one to the other head seem to have been
arbitrary ; and, as the same article frequently paid both an
excise and a customs duty, it was more convenient that one
board should collect the whole.
More than half the revenue was produced by the excise and
customs. It was, therefore, of paramount importance that
these two branches should be carefully fostered, simplified, and
systematized. When Mr. Pitt assumed the control of the
finances, after the American war of independence, he found
the customs in a state of such inextricable confusion, that the
most experienced merchants were unable to foresee what would
be the amount of duty affecting the articles they were import-
ing, or to know the course to be followed in entering or clear-
ing their vessels. In the midst of a chaos of contradictory
statutes, irreconcilable systems, and arbitrary regulations, the
inheritance of a century of bad government, the clerks of the
custom-house ruled with supreme authority over the whole
276 BRITISH FINANCE IN 181C.
commerce of Great Britain. Among the measui'es by which
Mr. Pitt gained his right to be considered the greatest of Eng-
lish administrators, the one which did away with this state of
things was by no means the least in value. In 1787 he suc-
ceeded in carrying through Parliament an act abolishing all
the existing duties, and substitiiting in their place single duties
on each article, according to a regular tariff, which was still
further assisted by a reform in the method of transacting
business in the custom-house.
But the new system had scarcely prodiiced all its beneficent
results, when the French war broke out ; and for twenty -three
years Parliament piled one customs law upon another, until
the old confusion reigned in the custom-house as absolutely as
ever before. The same article paid duty repeatedly, - now to
the customs, now to the excise. The laws were without a sys-
tem, .and impossible to class under any imaginable plan. There
were bounties or drawbacks upon half the articles of commerce
or production. Fees were multiplied to excess. Five hundred
different statutes regulated the customs alone. A complete
and vigorous measure was urgently required for the consolida-
tion of the customs laws ; and the example of Mr. Pitt made
the neglect of the step by any subsequent government all the
more obvious and inexcusable.
This, however, was a part of the situation which lay nearest
the light, and was most easily reached. It concerned only the
form of collecting the taxes ; and the real difficulties of the
case extended throughout the whole length and breadth of the
system of taxation itself. There seems to have been scarcely
a fragment of the Knglish revenue laws which was not marked
I iy peculiar faults of its own, besides sharing in the radical
vices that, lay at the foundation of almost all of them. The
principal exceptions which modern writers appear to have made
in this sweeping condemnation <>(' the <>ld system an- those of
the house and land taxes, and the property or income tax. as
the most economical and the most just, that existed. I'.uf these
required a decree of reform and alteration wliic.h would almost
have converted them into new taxes.
BRITISH FINANCE IN 1816. 277
It is unquestionable that the nation, apart from the form
of its burdens, was very much over-taxed. The most ordinary
and necessary articles of consumption were overloaded with
burdens. The case of the salt duties was a notorious example
of this evil. The natural cost of salt was less than eightpence
the bushel, while the law required fifteen shillings on each
bushel, raising its price to about twenty-two times its value.
The same objection ran through most of the excise duties.
This was, however, comparatively a simple difficulty ; and
although it needed prompt and effective correction, no very
high intellectual power was required to arrive at the remedy,
so long as the question of protection was not involved.
But it was rare indeed that the question of protection could
at that time be kept out of any projected improvement in
English taxation. Protection coiled like a tangled cord around
and over and through every portion of British finance. The
reformers, who, with no enmity to the long-established princi-
ple of protecting home industry, still wished to relax a little
here and there the strain of taxation, which was tearing the
very muscles out of the bodies of their poorer fellow-country-
men, tugged now at one projecting evil of the vast system,
and now at another ; but wherever they came, they found the
whole mass, confused and chaotic as it was, bound hard and
fast in the inextricable meshes of protection. Some alarmed
interest sprang out of the darkness to cry shame, and to excite
popular hatred against them at the very moment when they
were hoping at last to have found a chance of stirring the
phlegmatic government and the wretchedly indifferent Parlia-
ment into taking a step which could by no possibility harm
any living creature.
Everything was protected. Every petty interest of the
country had its rag of protection, not merely against the
genius or activity or superior circumstances of a foreign rival,
but against allied branches of industry at home. Tiles com-
plained if slates were untaxed. Wool was jealous of cotton.
The brain of the Chancellor of the Exchequer was racked by
hopeless efforts to maintain a proper equilibrium between home
278 BRITISH FINANCE IX 1810.
industries, while protecting them all against the foreigner.
The irresistible logic of the principle was really carried out to
that extent from which tamer modem protectionists shrink.
One part of the United Kingdom was protected from the other.
The products of English industry were protected from the
rivalry of Ireland, and the manufactures and produce of Ire-
land were only admitted under suitable precautions into Eng-
land. It is true, that the policy was, in this particular case,
pursued with somewhat superfluous energy, since not only were
heavy duties exacted for the protection of manufactures which
actually existed in Ireland, but also for that of some which did
not exist at all, and never had existed, and which a moderate
degree of knowledge of the subject would have shown never
could exist ; so that the Irish people enjoyed, through a long
series of years, the most favorable of possible opportunities for
observing the operation of a thoroughly efficient protective
system of their own choice.
Nor was this all. Besides the protection granted to each
industry against its neighbor, besides that which built a wall
between the different states of the same empire, and besides
thai which guarded them all against the foreigner, the British
system undertook to protect one foreign nation from another;
and this was even regarded as a masterpiece of statesmanship.'
A brilliant example of this form of protection was furnished
in the case of Portugal. For an entire century, down to 1 S."> I ,
the. British people were condemned to drink the vintage of
Portugal, in order to protest both countries against the supe-
rior attractions of French wine.
But even as regarded the ordinary and almost universally
accepted practice; of protecting home industry against the for-
eiu,i !>T, tlio system of 1810 was far in advance of the mild con-
ceptions of 1800. The statesmen of that day shrank from no
cnns(>(|iu>ncc of their theory. It was not enough to lay pro-
tective duties of sixty or a hundred per cent on rival eiiter-
]n i-r. It was uot even enough to tax at the rate of fifty per
ci-nt as a manufactured article the very mummies that were
imported from Egypt, lest they should interfere with the Brit-
BRITISH FINANCE IN 1816. 279
ish product. If the principle was good at all, it was held to
be good to the extent of absolute prohibition ; and as, on the
one hand, the law required that the Englishman who had been
so unlucky as to die could only go to his grave in a winding-
sheet of British woollen, so it was enacted, that any man,
duke or beggar, who might be suspected of wearing or -pos-
sessing even a silk handkerchief of foreign manufacture was
liable to have it taken from his neck or his pocket, or to have
his house entered and ransacked from garret to cellar. There
was an element of the most intolerable tyranny inherent in
the very nature of the prohibitive laws.
It might be supposed that difficulties and confusion enough
would have resulted from such a revenue system. But in
point of fact, there was nothing peculiarly strange or remarka-
ble in it. Similar principles lay at the base of almost every
financial theory at that time, and the countries of Europe, and
even of America, accepted them as their rule of action. It
was here that the British system began to show itself in its
own strength ; but it was only when the colonial and naviga-
tion laws were added to the over-taxation and to the eccen-
tricities of ordinary protection, that confusion became , con-
founded, and absurdity ran riot in the English statute-book.
The principle which then lay at the bottom of the colonial
system was, that the colonies existed for the benefit of the
mother country ; and the successful protest of the North
American Colonies, in their war of independence, had not yet
succeeded in convincing Great Britain of the radical error of
this theory. No ships but British ships could enter the ports
of a British colony, and no market but the English market
was open to the colonists. The West Indian sugar-planter
was obliged to send his produce to England for sale. He might
perhaps have gained something had he refined it before ship-
ment ; but the British refiner would have suffered, and the
British mercantile marine must have the benefit of the bulkier
freight. In return, he was obliged to receive only British
goods, or goods which had passed through Great Britain. But
the West Indian colonies were dependent upon the nearer
280 BRITISH FINANCE IN 1816.
ports of the United States for many of the very necessaries
of life ; and the negroes died of hunger when those ports were
closed. This necessity of obtaining food was alone the cause
of a slight relaxation in the law, by which a limited trade was
permitted in certain articles, from certain ports, by a certain
class of vessels, with the United States. On the other hand,
if the price of colonial sugar was twice or more than twice
that of the foreign, as was sometimes the case, the British
public was required to pay the additional tax of several mil-
lions sterling annually for the benefit of the colonial system.
The timber trade with the Canadian colonies was a still more
curious example of British protection and its complications.
It was undisputed that the timber of Norway was not only the
easiest to procure and the cheapest, but also much the best in
the market. But the interests of the colonies required protec-
tion, and the British marine was accordingly built of inferior
material. The reformers demanded the abolition of this mis-
chievous system, and called upon the shipping interest to join
in obtaining its repeal. The ship-owners refused. They re-
sisted desperately every attempt to reopen the Norway timber
trade ; and their argument was, that, as the naval power of
(ireat Britain demanded a numerous merchant marine as its
basis, and as the timber trade with Canada supplied an enor-
mously bulky freight, and required long and frequent voyages,
it would be a violation of the very first principles of British
policy to allow their ships to be built of the best timber. The
liberal members of Parliament, irritated at this extravagant
taxation of the nation for what they considered a gross piece
of jobbing, tried to reduce the argument to the absurd, and
indignantly declared that Parliament had better at once enact
by law that the Newcastle colliers, instead of bringing their
c"al direct to London, should sail "north about" to their mar-
ket, and make a preliminary tour around the United Kingdom.
The answer t<> the atleni|)ted sarcasm was quick and decisive.
The ship-owners retorted, without hesitation, that, although it
must indocd be admitted that the Newcastle colliers wen;
allowed by law to choose the shortest and easiest route to
BRITISH FINANCE IN 1816. 281
London, still it was not to be supposed that even here the
shipping interests had been overlooked. The laws practically
forbade the use of the inland and cheapest transit from the
nearer mines, with the single object of encouraging and de-
veloping the coastwise shipping hi the interest of the national
marine.
A protective system so logically perfect, so rigid in its obe-
dience to a single purpose, so universal in its scope, so minute
in its application, contains elements almost of grandeur. The
ruling class of England appeared in it as the masters of the
world. Around them and in harmony with them stood the
English nation. The colonies existed for their benefit. Allied
nations were made use of for their purposes, and the rest of
mankind were their enemies. It is literally true, that, if the
British Parliament had at this time possessed the power to
protect the interests of the people of the United Kingdom
and its colonial dependencies by causing every other existing
nation to be annihilated from the surface of the earth, an en-
actment to that effect would have been only the logical se-
quence of its whole system of legislation.
It is of course impossible even to conjecture what was the
actual cost to the citizen of this indirect taxation. But there
is one means of showing how grievously it pressed upon the
public, and how intolerable it would have been if the power
of the government could have enforced it.
There is a strange law of finance, which has fixed a limit to
indirect taxation, and decreed that, where the line is passed, a
new agent shall intervene for the protection of a misgoverned
people and the vindication of the laws of statesmanship. At
a certain point, the smuggler appears and rescues the nation
from its burdens. The extent to which smuggling is carried
is, therefore, the measure of bad revenue systems.
In England in 1816 there was no limit to the activity of the
smugglers. From Kent to Dorset and Devonshire, the whole
line of the coast swarmed with them, and wherever they came
Ilic sympathies of the people were with them. Coast guards
were multiplied in every direction. The army itself was em-
282
BRITISH FINANCE IN 181(5.
ployed in the service of the custom-house. The severity of
the penalties was terrible ; yet any gentleman in London could,
at ten days' or a fortnight's notice, obtain any prohibited arti-
cle from the Continent, at thirty per cent advance upon its
cost there. Foreign silks were prohibited ; but, in spite of the
prohibition, they were to be seen in every haberdasher's shop
in England, and in the very Houses of Parliament. Mr. Hume,
the well-known member for Aberdeen, when arguing once
against the absurdity of those protective laws, " produced his
bandana handkei-chief before the very eyes of the House, and,
having triumphantly xmfurled the standard of smuggling, blew
his nose in it, and deliberately returned it to his pocket."
The only vindication of the offended majesty of the law at-
tempted by the Chancellor of the Exchequer consisted in
reminding Mr. Hume that any member of the House had an
absolute right to seize that bandana handkerchief and export
it to a foreign country. " Upon every information laid under
this prohibitive law," said Mr. Huskisson in 1826, "the chances
are, that the informer and the constable have bandanas round
their necks, and that the magistrate who hears the charge has
one in his pocket." Another prohibited article was Scotch
whiskey, and Mr. Hume took again the occasion to inform the
House that he had at that moment smuggled Scotch whiskey
in his cellar, and he defied the whole power of the government
to prevent his having it.
These were, however, only luxuries. The case was much
worse when it concerned the great articles of consumption
among the people. Salt paid its duty of two-and-twenty times
its value on fifty thousand tons annually ; but it was sup-
posed that twice as much more was consumed which paid no
duty at all, or only the moderate one which made the profit
<>f the smuggler or the thief. Soap was smuggled to nearly
Bf irreat an extent as salt. By this universal evasion, fraud,
and violence, the whole national character was perverted and
degraded
But even the spectacle in England was a harmless comedy
in comparison with the results of this same system in Ireland.
BRITISH FINANCE IN 1816. 283
If armies of four or five hundred smugglers, supported by the
population, fought pitched battles with the coast guard and
revenue officers on the chalk downs of Sussex and Hampshire,
and were not always defeated, there reigned all over Ireland,
from Dublin to Kinsale, a state of actual civil war, which was
waged by the peasantry, with horrible cruelty, by assassina-
tions and savage deeds of violence that are still remembered
with vivid force in that unhappy country, and which were met
and repressed, so far as force could repress them, by equally
exasperating acts of legalized cruelty and military violence.
Here it was the excessive duty on spirit that was intolerable to
the population ; and yet this duty was but five shillings and
sixpence on the gallon, while more than twice the charge was
borne in England without serious difnciilty. Financially, the
result was, that about three million gallons paid the tax, and
about seven millions were distilled and consumed in defiance
of the law. Politically, the attempt to enforce the tax re-
sulted in making Ireland more than ever a danger and disgrace
to Great Britain.
Such were some of the results of over-taxation and of an
overstrained protective system. It is obvious that the very
highest and most statesmanlike qualities were required in the
government that was to attempt the task of reform. But it is
not to be supposed that this was the only field for the activity
of reformers in the financial affairs of the country. The ope-
ration of the taxes on the welfare of the people is only one
side of financial science. The administrative system under
which the revenue is collected and expended, if not first in
actual importance, is certainly first in order of time among
financial problems ; for it is useless- to expect economy and
foresight from a wasteful and blundering treasury, whose errors
are not the mere mistakes of an incompetent chief, but are the
inevitable result of false principles.
It is absolutely impossible to furnish anything like a fair
picture of the system under which the finances of Great Britain
suffered at tht beginning of this century. The student, who
has labored month after month to comprehend it, turns away
284 BRITISH FINANCE IN 1810.
at last with despair, and abandons the attempt as not worth,
even if successful, a tenth part of the mental effort that is
required to fathom it. There was no beginning, no middle,
and no end. There was a bottomless ocean of accounts, with-
out a system, without connection, and without result. There
were innumerable departments and bureaus, independent of
each other, and accountable to no one. The mysteries of the
exchequer were portentous. Few Englishmen, even then, had
any conception what functions were exercised by such me-
diaeval creations as the Department of the Pells, the Pipe
Office, and the Tally Court, the calm abodes of happy sinc-
cnrists, whose duties of inconceivable clumsiness had long
been assumed by the Bank of England and other offices, but
who were still permitted to perform by deputy an imaginary
routine. If any one should still be unwisely curious to pene-
trate these forgotten absurdities, he must consult the reports
of Parliamentary commissions from 1824 to 1834, which re-
sulted in their abolition. England, Scotland, and Ireland hud
each its own exchequer, repeating these costly eccentricities
inherited from the Middle Ages.
Leaving this part of the investigation as of merely secondary
importance, the main inquiry must be directed to the method
of administering the treasury. This was an inheritance from
Mr. Pitt. When he had remodelled, in 1787, the whole sys-
tem of English finance, his great object was, not only to restore
order and method where only confusion had existed, but to
secure the ultimate redemption of the public debt. His idea
seems to have been, that, if a sufficient portion of the perma-
nent revenue were to be set aside and appropriated by l:i\\ to
the payment of the annual interest and a certain part of the
principal of the debt, the result, would be, not only to simplify
the accounts, but to furnish an additional guaranty for the
national credit, lie therefore divided the whole of the reve-
nues of the country into two branches, applicable to two
distinct classes of payments. The first comprised all the
permanent taxes, united into one consolidated fund, dud this
was by law appropriated to the payment of the permanent
BRITISH FINANCE IN 1816 285
charges of the national debt and the civil list. The second
comprised the taxes voted by Parliament only for the year,
and was left for the charges of the army and navy, and the
civil expenditure of the government.
Mr. Pitt's famous sinking fund was the supplement to this
plan. His original scheme was, that one million sterling should
be applied annually from surplus revenue, and should accumu-
late at compound interest until the whole debt should be ex-
tinguished.
These large and ingenious arrangements answered all Mr.
Pitt's wishes for the first five years. His success was such as
to place him unquestionably at the head of all living states-
men. But then the French war broke out, and no possible
financial scheme, except the simplest, could have resisted the
pressure of the next twenty-three years. In a surprisingly
short time all Mr. Pitt's elaborate structure crumbled to
pieces. Yet not only he, but all his successors, clung to the
hollow shells of the two funds with an obstinacy as remark-
able as their conduct of the war itself. For every new loan
that was raised, Parliament carefully set aside some new tax
to meet the annual charge, and appropriated it to the consoli-
dated fund, as though that fund still had some inherent virtue
which would insure the payment of the national obligations
in case all the rest of the system should become bankrupt, or
as though every tax, of whatever description, was not just as
much pledged to the payment of the interest of the debt as
though fifty acts of Parliament had reasserted the fact. This,
however, was only a cumbrous form of management. The
sinking fund had became a most pernicious burden on the
nation. Every loan that was contracted, however ruinous the
terms, was increased by the amount of a certain proportion
of the whole, which was set aside as a part of the sinking
fund. In other words, it was expected to pay off the debt by
borrowing money at a time when the nation's credit was at its
lowest ebb. Under this treatme.it, the sinking fund rapidly
grow to gigantic proportions. It was perfectly evident that
the debt also increased in a similar or a greater ratio ; but
286 BRITISH FINANCE IN 1816.
nevertheless the government actually introduced a measure,
which became law, restricting the operation of the fund,
on the ground that it would pay off the debt too rapidly.
Nothing could shake the infatuated faith of the British people
in the magical efficacy of these two funds. The argument
against them was simply met by the assurance that, whether
right or wrong, the confidence of the public and the respect
of foreign nations were so largely founded on a belief in the
efficacy of the system, that the national creait would not stand
the shock of abandoning it.
However effective this answer may have been during the
dark years of the war, when the salvation of England depended
on her credit, it seems as though the return of peace should
have deprived it of further force. Yet the two funds contin-
ued to nourish with unabated energy. The original scheme
of Mr. Pitt had long been lost, and little of his project re-
mained except the names and the mistakes. The system had
ceased to be comprehensible. The public accounts were a
chaos, and the budget speeches seem really to have been made
with the intention of adding to the confusion.
Parliament never knew, nor could know, what was the exact
relation between the income and expenditure of the year ; and
when unreasonable radicals supplicated for a balance-sheet,
they were answered as though such an innovation were big
with revolutionary dangers. The fact of the tptal want of
a balance-.- licet seems to modern minds so incredible, that it
may be well to quote a passage from the report of a select
committee on the public accounts, made to Parliament in 1822,
six years after the time now spoken of.
" The principal and most prominent defect in the present form of
the accounts is, that they neither do, nor can, exhibit any balance
bet ween the income and expenditure of the year. The income side
of the account shows the amount collected from the subject ami (lie
amount paid into the exchequer within the year The expendi-
ture-sheet has not been framed on this principle; and, with respect
to some of (lie eliicf heads of the service, such as the army and the
onli:-i:ii'r. instead of Containing a statement of the issues made from
BRITISH FINANCE IN 1816. 287
the exchequer, it gives the amount of payments by the distributing
public officers, to whom the moneys required for their respective ser-
vices are issued from the exchequer. The account of incomes and
the account of expenditure, therefore, are accounts of different kinds,
and no true balance can be struck by comparing them together."
No man, whatever industry he might possess, could come to
an undisputed conclusion upon the financial situation of the
country. Mr. Hume asserted, in 1821, and no less an author-
ity than Mr. Ricardo indorsed the statement, that not only was
there a difference of some millions between the budget and the
annual accounts, in regard to the reduction of debt, but even
on so simple a matter as the deficiency of the consolidated
fund there were three public accounts, all signed by the same
person, all relating to the same period, and all presenting a
different result.
If Mr. Hume, whose Scotch sagacity and indefatigable pa-
tience have never been equalled, and Mr. Ricardo, who was the
first" political economist of his time, abandoned in despair the
attempt to unravel the complications of the consolidated fund,
which was then the principal part of the financial system,
the chance is small Indeed that any man in the present day
can arrive at a better result. The budget speeches were
almost silent in regard to it, and the information given by the
official accounts was apparently only such as the humorous
disposition of the public accountant incited him to furnish by
way of a riddle for the amusement of over-zealous members
of the House of Commons. If the difficulty even were ex-
plained, it is doubtful whether most people could understand
the explanation. The nature of the fund has already been
described. Certain taxes were appropriated to certain pur-
poses. So long as the taxes were sufficiently productive for
those payments, the system worked tolerably well. But there
were sometimes years when the taxes fell off, and their amount
was not sufficient to meet the charges put by law upon the
fund. When this happened, the government borrowed the
amount of the deficiency from the Bank, pledging exchequer
bills in return, and pledging the next quarter's receipts of the
238 BRITISH FINANCE IN 1816.
fund to meet and pay these exchequer bills. The deficiency
meanwhile might or might not be reckoned as a part of the
annual deficiency, or a deduction fi-om the annual surplus.
The Chancellor of the Exchequer enjoyed a wide latitude of
conscience on that point, and it was sometimes very con-
venient to be able to shut his eyes to a deficit of seven or
eight million pounds, with which of course neither he nor the
House nor the country had anything to do, since it concerned
only the consolidated fund. The consolidated fund existed for
the very purpose of providing for the national debt, without
allowing the matter to enter into the range of common ques-
tions of supply. There was, therefore, much to be said in
favor of the official view of the question.
But the transaction did not always end even here. The
fund borrowed, as a sort of independent corporation, the
amount of its arrears from the Bank. Let us suppose ten
millions to have been borrowed in this way. The Bank re-
ceived the taxes composing the resources of the fund as fast as
they were collected. Let ns suppose a quarter's income, or
say eight million pounds, to have been nearly received, consti-
tuting the guaranty for the debt owed by the fund. The gov-
ernment now stepped in and borrowed this eight million for
its immediate wants, thus exhibiting the strange anomaly of
first creating a fund for no other purpose than to secure the
payment of debt, then allowing that fund to create a debt of
its own, and, finally, itself borrowing, as an advantage to the
public, its own money, which was already doubly pledged, and
substituting its own bonds as the security for the security of
the security for the national securities.
Is it to be wondered at that the cleverest men in England
were mystified when these transactions were put before them
piecemeal in separate accounts, and they were asked to guess
the riddle 1 ? It wa.s notorious, that the Chancellor of the Ex-
iiei|iier himself, whoso experience at least was ample, did not
understand the very explanations which he himself made to
the House, far less tho accounts that came to him from his own
department. The officers of the Kxchequer openly confessed
BRITISH FINANCE IN I81f. 289
that they could not comprehend the accounts which they made
out, and to which their names were signed. The public knew
nothing but its taxes.
There was another evil incident to this confused condition
of the nuances. The functions of the Exchequer were as-
sumed by the Bank of England ; and in the absence of a
powerful mind at the head of the government, the Bank had
become almost the exclusive director of the financial policy
of the countr}'. The management of the Bank was not so
remarkable for ability at this time as to make such an ar-
rangement a great advantage. Mr. Ricardo went so far as to
say that it was totally ignorant of the principles of political
economy. When the House of Commons decided, in 1819,
to return to specie payments, the Bank presented a remon-
strance which contained a remarkable paragraph, appealing to
its duties to the community at large, "whose interests in a
pecuniary and commercial relation had, in a great degree, been
intrusted to its discretion." This assumption of authority, on
the part of a mere subordinate office, was treated by Mr. Peel
as a melancholy truth, the fault of Parliament itself, and of
the government which had thus allowed its functions to fall
into the hands of a private corporation.
If an energetic reform was required in the system of taxa-
tion and in the administration of the public property, it was
certainly not less necessary to subject the expenditure to the
most rigid scrutiny. A thoroughly economical government is
among the rarest blessings ever vouchsafed to a nation, and a
long period of war does not tend to teach or to encourage the
habit of frugality. Besides, the English system of goveraient
and of society was essentially an extravagant one, and only the
most resolute popular opposition could make the ruling party
conscious of this fact.
There were two great branches in the national expenditure,
which were about equal in amount. There was, in the first
place, the regular annual interest on the.uational debt, funded
and floating, which amounted to more than 30,000,000 ster-
ling; and tlij,s was, for the time, beyond the reach of economy.
290 BRITISH FINANCE IN 1816.
But even here there was much to be done. It was necessary
to fund a large amount of the exchequer bills. It was neces-
sary to look sharply to the management of the debt by the
Bank. Above all, it was the part of a good finance minister
so to adapt his measures as to encourage popular confidence in
the national credit, in order to hasten the moment when a
reduction of interest should be possible on the most burden-
some of the public securities. This in itself involved a whole
system of finance, and demanded ability of the highest order.
The second branch of the expenditure was divided into sev-
eral heads. There were the civil expenses of government, the
army, the navy, the ordnance, and a miscellaneous division
which embraced a variety of appropriations as well for internal
improvements as for other purposes.
The most immediate want was, of course, a large measure
of reduction in the armaments, to be followed by an elaborate
reform in the various departments. During some years of the
war, the expenditure on this account had risen to more than
seventy millions, exclusive of foreign subsidies. The question
of what should be the proper peace establishment was one of
especial difficulty to a generation which had scarcely known
any condition but that of war ; and it was made still more
embarrassing by the disturbed state of Ireland, requiring it to
be treated like a conquered country, as well as by the immense
colonial possessions of Great Britain, which seemed to demand
protection on account of their exposed positions and the mix-
ture of races.
The civil expenditure of the government had also been
allowed to flourish in unchecked extravagance during the war.
There was a rich field for reformers and radicals in the extirpa-
tion of those numerous sinecure offices whose (piaiut names
and obsolete functions were little known to the public, except
o far as the regular annual parliamentary accounts established
the fact that there were still men who drew the salaries at-
tached to them. The who?c amount of the civil expenditure
did not, indeed, form a very large proportion of the public
burdens. Two or three million pounds covered the whole
BRITISH FINANCE IX 18 Hi. 291
charge. But, large or small, it was too heavy for the tax-
payers, who were justly indignant if a single shilling were un-
necessarily added to the enormous sum which they were obliged
to pay. There was the more excuse for the most rigid econ-
omy, since the privilege of possessing a constitutional monarch
and an aristocratic court was by no means obtained for noth-
ing. His Majesty's household cost the nation more than a
million sterling annually, with no visible return, since the
King was blind and insane, and lived in close confinement at
Windsor. How much the Prince Regent cost, Heaven only
knows. He drew 65,000 a year by way of pension on the
consolidated fund ; but as he was perpetually in debt, and as
the country was perpetually called upon to pay his debts, it is
not easy to discover where the expense ended. Besides the
King and the Prince Regent, there were fifteen royal princes
and princesses who drew pensions, varying from 35,000
downwards, from the consolidated fund alone, making an ag-
gregate of rather more than 250,000 annually, on account
of the royal family ; in return for which the nation not only
failed to obtain a magnificent court, but was obliged to satisfy
itself with one which was particularly offensive to its tastes.
It was, however, the British theory to pay public servants
well, except where they were not paid at all. Perhaps noth-
ing would have stung the average British mind more sharply,
than the idea that the representatives of his country abroad
were unable to maintain as high a scale of expense as those of
France, Russia, and Austria. The example of Prussia and
the United States of America was of no effect, except to place
those countries low in the British estimation. It was certain,
however, that the gratification of this fancy added largely to
the national expenditure ; not so much, perhaps, from the ac-
tual salaries paid, as by the scale of expense which was en-
couraged, and the habit of lavishing large sums for small ob-
jects. The most burdensome form in which this practice
showed itself was in the shape of pensions, superannuation
allowances, and similar charges, either for life or in perpetuity ;
which, considering the fact that the salaries themselves were
292 RRITISH l-'INANCK IX I^IC.
in most cases so liberal, seem to have been somewhat super-
fluous, and by no means calculated to impress any lesson of
economy upon the servants of the crown. The precise amount
of all the different classes of pensions after the war cannot
easily be ascertained, if, indeed, it is at all possible to collect
them from the published accounts of so many various depart-
ments thi-oughout the three kingdoms ; but they formed one
of the most serious items of expense with which the govern-
ment had to deal, and those connected with the army and
navy gave occasion, in 1822, for an effort on the part of Mr.
Vansittart to diminish their burden, which was the last of
many financial operations effected by him, and which made his
name long notorious.
We have now passed in review, rapidly, and no doub*, super-
ficially, but at as much length as is possible, the financial
difficulties with which England at the close of the war had to
struggle, so far as they related to the revenue. It would have
been fortunate for her if these had been the only evils be-
queathed to her by the war. Serious as they were, although
they demanded the most laborious attention, the exercise of
the highest order of intellect, and the most resolute perse-
verance, there remained still another evil, which lay behind
them all, and demanded an immediate remedy.
Considering the length and the violence of the strain to
which the resources of England had been subjected, it is rather
a matter of surprise that her currency had not become utterly
worthless, than that it should have suffered a certain degree of
depreciation. The Bank had suspended specie payments in
1797 ; but for more than ten years after that time the Bank
paper remained on a par with gold, or at a very slight dis-
count. It was only in 1809 that the price of bullion began to
maintain itself at a permanently higher rate, which continued
till the close of the war. In 1810, the average depreciation
of the currency was 13J per cent. In 1814, it was 25 per
cent, and this was its lowest point. In 1815 and 1816, the
Bank paper gained credit, and averaged 16^ per cent dis-
count. Towards the close of the year 181 G the currency rose
BRITISH FINANCE IN 1816. 293
without the necessity of legislation, until it stood on a par with
gold. Unfortunately, however, the mere fact that the Bank
notes were of the same value as gold was by no means equiva-
lent to a return to specie payments. The country had gone
through a period of depreciation, and, if this were allowed to
continue, was certain to be demoralized by it. Already the
agricultural interest complained because the farms, leased at a
time when corn sold at six pounds the quarter, could no longer
be made to pay the extravagant rental thus fastened upon
them. The business classes, the merchants, the bankers, the
retailers, naturally timid in the face of measures likely to
affect their interests, trembled with fear at the thought of
commencing business upon a system entirely new to all but the
oldest among them. Every month that the return to a specie
basis was delayed strengthened the ultimate opposition to the
measm-e, and encouraged the party which maintained that
promptness was dangerous, and that it was necessary by act
of Parliament to prevent the nation's too easy progress up an
ascent so difficult that few nations have ever succeeded in
climbing it.
The history of the process by which Great Britain succeeded
at length in restoring its original standard of value is one so
important, so instructive, but also so complicated and disputed,
that it cannot be dealt with in a few sentences. It requires
an entire chapter to itself. It called into full play the best
ability in England, and for many yeai-s after the result was
accomplished a perpetual dispute was maintained in regard to
its justice and its effects. Among the many financial difficul-
ties which surrounded the government of that day, this was the
one which a high statesmanship would have considered the
most pressing, for it lay at the basis of all transactions involv-
ing an exchange of values, as well between the government
and its subjects as between every individual and his neighbor.
With this last difficult problem of the currency our survey
of the financial situation of Great Britain may be considered
completed. Yet something remains to be said in regard to the
men upon whom the vast labor fell of restoring order in the
294 BRITISH FINANCE IN 1816.
national affairs, and of creating the new formulas by which
the economy of the nation was destined in the future to be
represented. For it is obvious that between such a condition
as has been described and that which England enjoys at pres-
ent there is not a difference of degree, but of kind. It is a
complete revolution that has taken place, and not merely a
modification. Only fifty years have passed, and there has been
no break of continuity ; a steady and natural process of devel-
opment has been always going on, always irresistibly tending
towai'ds one result, until at length we find that the principles
npon which the government of England acts are the direct
reverse of those which it considered essential in 1816. Mr.
Huskisson, Mr. Peel, and Mr. Frederick Robinson were all in
the government at the close of the war, and supported Mr.
Vansittart's measures so far as they were called npon to do so ;
yet these were the very men by whom the subsequent policy
was created and developed. There appears to be something
that needs explanation in this curious copartnership.
Lord Liverpool's followers comprised a considerable majority
of the House of Commons, and usually followed their leader
without useless remonstrance, wherever their orders directed.
But nevertheless the government itself contained two classes
of members so strangely differing in character that their suc-
cessful co-operation may well be a matter of surprise.
Lord Liverpool's own opinions were naturally sound and
liberal upon economical questions, though he wanted the force
of personal character to stamp them upon his administration.
Nor indeed was there even in men like Lord Caetlereagh, Mr.
Vansittart, and Mr. Hose any such devotion to antiquated
prejudices as might be supposed from the condition of the de-
partments they dim-ted. Mr. Vansittart was not a man gifted
with the blind Toryism of Lord Sidmouth, or the narrow-
minded perverse-ness of Lord Eldon. He was simply a thor-
oughly incompetent man. It would scarcely l>e worth the
while to dwell npon his qualities at any length, if it were not
that he was almost a perfect representative of the old school
of financiers, the school of Perceval and Addington, a
BRITISH FINANCE IN 181G. 295
school which had sprung from Mr. Pitt's side when his better
days had passed, and which lent the influence of narrow minds
to encourage and aggravate the mistakes of a great one. Eng-
lish finance hag not even yet entirely cleared itself from the
traditions of this period.
Mr. Vansittart had served long in the treasury, and had
stored his mind with all the intricate knowledge of financial
machinery that a laborious subordinate can always so readily
learn. Mr. Pitt, no doubt, was an object of his unbounded
admiration. But the qualities which he would admii'e in Mr.
Pitt would probably be precisely those which caused him,
with all his genius, to create nothing which has endured.
Men like Mr. Vansittart and his contemporaries in office
thought it little that Mr. Pitt had aimed at magnificent re-
sults, that his ambition led him into a superb attempt to pay
off the national debt, and that to effect his purpose he had
created, with scarcely any assistance from precedent, a great
and admirable system where none existed before. What daz-
zled the eyes of Mr. Pitt's successors was, that the machinery
invented by him was rich in detail and ingenious in expe-
dients. That every loan should have its special tax, that
every tax should go to a special fund, that each fund should
be so constructed as to balance and support the other, that
there should be wheels within wheels, and springs beneath
springs, until the whole structure was elaborated to a point
of theoretical perfection, this it was that seemed wonderful
to the men that had seen its creation and had received it from
the hands of its dying inventor. The results of such an educa-
tion were most disastrous to England, for there arose a race of
so-called financiers ; men who drew their political economy
from the traditions of the Exchequer, and their financial knowl-
edge from the Stock Exchange ; men whose highest idea
of a policy was the skill to place a loan at a half per cent
better terms than its predecessor had obtained ; men who to
effect this tried to mystify the public, and to avail themselves
of all the complications in which the official accounts were so
rich ; men who in the struggle to obtain means for carrying
296 BRITISH FINANCE IN 18IG.
on the war forgot that there were laws which regulated the
limits of taxation, to go beyond which was a folly and a crime;
and finally, men who, in their zeal to raise money, entirely
disregarded the fact, that the first duty of a finance minister
is to exercise some degree of economy in spending it.
As a Chancellor of the Exchequer, Mr. Vansittart's inca-
pacity was scarcely a matter of dispute. But he possessed,
from long experience, the kind of tact and business knowledge
which gives men influence in the House of Commons, and fre-
quently enabled him to meet with success the attacks of the
Whig opposition. There was in his character a fund of good
nature and a cordial indifference to abuse which attracted
sympathy, and protected him when opposition members howled
in his face, that "the present distresses were occasioned by
having a miserable, miscalculating, puny Chancellor of the .
Exchequer, who did not know the resources of the country,
owing to the ignorance and want of power of his little mind."
Although a heavy burden to the Ministry of which he was a
member, he long retained his office, and only retired to the
honorable ease of the House of Lords in 1822, after having
been ten years at the head of the finances.
Of the liberal wing of the administration Mr. Huskisson
was by far the ablest member, and indeed it is not too much
to say that, within his own sphere of economical subjects, he
was not surpassed by any man then in public life. The ex-
tent of his knowledge, the soundness of his judgment, the
breadth of his views, and his natural instinct, leading him
always to stand just so far in advance of his contemporaries
as to inspire them with confidence in the safety and moder-
ation of his guidance without obliging them to accept para-
doxical or unpopular truths, these qualities combined to
give Mr. Huskisson a personal weight which only needed the
support, of high office to prove itself in great administrative
reforms. But, unfortunately, he was no politician, and in
consequence had so managed his party course as to throw
nway the power he had a right to claim, until at forty-six
years oid he still found himself buried out of sight as Chief
BRITISH FINANCE IX 1816. 207
Commissioner of Woods and Forests, when he might and
should have been in a commanding position in the Cabinet.
The political blunders of Mr. Huskisson had thrown a
younger and much weaker man into the foreground. Mr.
Frederick Robinson, the Vice-President of the Board of Trade,
rapidly rose to be President of that Board, Chancellor of the
Exchequer, Secretary for the Colonies, and Prime Minister.
Mr. Frederick Robinson, Lord Goderich, or Earl of Ripon, by
whichever name we may choose to call him, was a man of
considerable abilities and a decidedly liberal turn of mind ;
but as a statesman he was particularly happy in having two
great men at his side, Mr. Canning and Mr. Huskisson. With
their assistance he accomplished great results, without it he
found the burden of a high position intolerable. At the re-
txirn of peace he was still in a subordinate office, but even
there his influence was thrown, not without effect, on the side
of progress and reform.
It cannot be said that this was the case with Mr. Peel, who
was the Chief Secretary for Ireland at this time. Mr. Peel's
power consisted, not so much in the opinions which he held
and advocated, as in his capacity for changing them at the
right moment. Few statesmen of his raiik have changed their
political creed so much and on so many points ; perhaps not
one has ever, like him, succeeded through all changes in re-
taining popular confidence and esteem. At the close of the
war be was an extreme Tory ; and although he was ultimately
influenced greatly by his association with Mr. Huskisson, it
was a very long time before he became a convert to those
opinions on questions of trade which have made his reputa-
tion eclipse that of his teacher. It is one of the most curious
facts of modern English history, that he who in 1817 was the
ally of Lord Sidmouth and Lord Eldon should have become
the disciple of Cobdeu and the model ot Gladstone.
The ablest of all the statesmen ol this period was certainly
Mr. Canning. But, unfortunately both for himself and for the
country, Mr. Canning had allowed the wave of political success
to sweep over him, and to carry Lord Castlereagh on its crest.
298 BRITISH FINANCE IN 1816.
It was not until Lord Castlereagh's death, in 1822, that Mr.
Canning's influence obtained the control of the administration,
and began to set in action the progressive energies of the
nation.
All these men belonged to the Tory party. The old Whig
opposition had little to offer that was better, if so good, and
what little it had was soon lost. The ablest of the Whigs in
the field of financial science was Mr. Francis Horner, who, as
chairman of the famous Bullion Committee, had treated very
roughly the strange absurdities of Mr. Vausittart. The report
of that committee, of which he was for the most part the au-
thor, was made in 1810, and in spite of the triumphant vote
by which, in 1811, Mr. Vansittart carried his resolution, that
"the promissory notes of the Bank of England have hitherto
been, and are at this time held to be equivalent to the legal
coin of the realm," Mr. Horner's argument practically settled
the question, and made his opponent's name an object of stand-
ing ridicule down to this day, a result the more annoying,
since Mr. Vansittart was not himself the real author of the res-
olution. It is safe to say that, if Mr. Horner had lived, his
influence on the financial and commercial policy of England
would have been very considerable ; but his death, which took
place in 1817, broke short a most promising career, and, com-
bined with that of Sir Samuel Rom illy, deprived the Whig
opposition of all its best vital force.
For it cannot, bo said that Mr. Henry Brougham's brilliant
qualities at all supplied the place of Mr. Horner's sound intel-
lect. Mr. Brougham busied himself with economical questions,
as he did with every other topic ; but before and above all, he
was a politician, and a selfish one. A man of far greater
worth, from every point of view, was Mr. Ricardo, whose posi-
tion as a member of Parliament often enabled him to infuse
into the delates a spirit of philosophy which is rare enough
in the best of legislative assemblies. He, however, did not
enter Parliament till 1819; and his death, in 1823, took place
Ix-lon- tin; new theories of internal policy were fairly developed.
Another pi-rs'ii', who came into public life at the same time,
BRITISH FINANCE IN 1816. 299
but whose career lasted through all the vicissitudes of free
trade down to a very late day, was au eminently useful and
energetic reformer, whom the English public laughed at and
abused during his whole life, but discovered after his death
to have been one of those rare, bold, indefatigable, and scrupu-
lously honest characters, whose existence makes amends for a
world of Parliamentary nobodies. This was Joseph Hume,
a thorn in the side of each successive ministry, a sort of self-
constituted tribune of the people, with an eye for abuses and a
tongue for dilating upon them that made him at once the ter-
ror of ministers and of the House, which fled from his speeches
with some reasonable excuse. Mr. Hume was, however, a man
of broad and statesmanlike views, which is more than can
fairly be said of Mr. Cobbett, though the latter was even more
active in his denunciation of the evils that were so strongly
stamped upon the system of internal government. In fact,
the popular feeling was too strongly directed upon political
grievances to allow of its giving any deep attention to difficult
financial and commercial questions, the connection of which
with its own objects was not always obvious; and popular
orators, like Cobbett and Hunt, exercised only an indirect and
very modified influence upon the development of those liberal
and progressive economical theories which neither Whig nor
Tory could claim as exclusively their own property, but which
each party made use of in its turn.
. Thus it will be seen how small was the number of promi-
nent men who, in 1816, could exercise an influence in favor of
reform. And in this respect it is only right to do justice to
Lord Liverpool and Mr. Vansittart. Neither they nor their
opponents considered finance as a field for party divisions.
Mr. Vansittart's want was one of capacity, not of will. It is
a curious fact that he, though administering a system in which
protection was carried to absurdity, was yet in his opinions a
free-trader, as was also Lord Liveipool. Both of them were
far in advance on this point of the public opinion of their
time ; for the popular wishes so far as concerned finance were
solely directed to the reduction of taxation, and the knowl-
300 BRITISH FINANCE IN 1816.
edge of financial theories was extremely slight even among the
wealthiest of the middle class. This was shown in regard to
the income tax. Fifty years later the income tax was a pop-
ular measure, since it threw upon the holders of property an
immediate burden which otherwise must have been borne by
the poor. In 1816 the property tax was thoroughly unpop-
ular, not only among the rich, but among the poor whom it
relieved, and who actually allowed themselves to be persuaded
that the heavy duties on com, tea, beer, and tobacco were
preferable to one which they did not feel ! It was necessary,
therefore, that the small body of political economists who saw
in advance that free trade, whether suitable or not for other
nations, was the only possible policy for England, should be-
gin at the very foundation, and educate even those for whose
special benefit their measures would immediately operate.
There was no basis of existing public opinion upon which they
could stand.
If, then, we attempt to sum up the results of this long
inquiry into a condition of affairs now forgotten, we shall
find that Great Britain, then a nation of twenty million in-
habitants, was burdened with an annual charge of more
than 30,000,000 of debt, to which was added more than
20,000,000 of ordinary expenditure ; that her administra-
tivr system was in the highest degree cumbrous, expensive,
and inefficient; that her revenue was drawn indiscriminately
from every available source, without regard to the disastrous
results upon national industries and the national character,
and in violation of all the acknowledged principles of political
economy ; that her expenditure was extravagant, and without
any sufficient check in public opinion ; that her currency was
deranged, and the .standard of value fluctuating in such a
manner as to stimulate powerful interests towards resistance
to any return to the former specie basis; that her principal
officers were unequal to the effort which a return to sound
financial and economical principles would have required ; that,
Parliament, with the exception of a very few of its mcmliers,
wa-s incompetent to deal properly with such a state of affidrs,
BRITISH FINANCE IN 1810. 301
and too apt to be influenced by personal and political motives ;
and, finally, that the people were themselves ignorant of the
true nature of the difficulties under which they were labor-
ing, and the few really progressive minds in England were
obliged to trust to those natural popular instincts which in
the end usually decide rightly in regard to the interests of
the people.
It was not surprising that some oY the most patriotic and
excellent Englishmen were in alarm lest their country should
succumb under this accumulation of difficulties. And yet a
few years of peaceful development enabled it to support the
burden of the debt with an ease which is a just subject for
pride ; it purged the administrative system of its abuses, and
made it comparatively simple, economical, and efficient ; it
created a wholly new system of revenue, founded on sound
laws, and interfering to the least possible extent with the
industry and character of the people. If it has not restricted
the expenditure, and reduced the debt so far as was possible
and right, this is merely because the people themselves, in
their wealth, became indifferent and extravagant ; it restored,
without any concession to interested clamor, the ancient and
only sound basis to the currency ; it educated a race of states-
men who, in regard to economical subjects, were certainly not
inferior to any in the world ; it placed in Parliament numbers
of men who, whatever their faults may have been or may now
be, were, and are now, better acquainted with those laws of
financial science ignorance of which has become inexcusa-
ble in legislators than the members of any other legislative
assembly in Europe ; and, finally, it has diffused among the
people a degree of acquaintance with the true bearing of their
own interests, which has strangely modified their national ten-
dencies, and will ultimately wholly break down the ancient
barriers of insular prejudice and exclusiveness.
The process by which these results have been effected, and
the consideration of what has still been left incomplete, must
be a worthy subject of careful study ; but it involves so great
a variety of topics, and so wide a range of doubtful or dis-
302 BRITISH FINANCE IN 1616.
puted conclusions, that, unless rigidly restricted within the
proper limits of the regions that belong purely to finance, the
discussion would soon extend itself beyond any ordinary ca-
pacity of endurance, and lose the interest which belongs to it
of furnishing instruction to other nations placed in circum-
stances more or less similar.
THE LEGAL-TENDER ACT.*
History of the Legal-Tender Paper Money issued during the
great Rebellion, being a Loan without Interest, and a National
Currency. Prepared by HON. E. G. SPAULDING, Chairman
of the Sub-Committee of Ways and Means at the Time the
Act was passed. Buffalo. 1869.
Opinion delivered in tlie Supreme Court of the United States l>y
CHIEF JUSTICE CHASE, on tJie 7th of February, 1870, in Re-
gard to the Construction of the Legal-Tender Act.
DURING the Rebellion the United States armies suffered
many disasters in the field, which for the moment were
felt as direct and personal misfortunes by every loyal citizen.
So strong was the public feeling of anger and astonishment,
that Congress appointed committees of investigation, to exam-
ine into the causes of these military failures, and subjected the
whole conduct of the war to a searching and sometimes a se-
vere criticism. In finance, on the other hand, the nation suf-
fered only one great disaster, but its effects have extended far
beyond the period of the war, and are likely to be felt with
unmitigated force for an indefinite time yet to come. The
causes of this catastrophe have not been investigated by Con-
gress ; but as the day may probably arrive when the national
government will have been forced to accept the fact that the
act of national bankruptcy was a calamity so terrible as to in-
volve the personal and political credit of every man in whose
* From the North American Review for April, 1870.
304 TH E LEGAL- TENDER ACT.
charge the people had then placed the common interests, it
may be useful to point out the path which the future congres-
sional committee on the Conduct of the Finances will be com-
pelled to follow in investigating the causes which led to that
miscarriage, the results of which have far exceeded in impor-
tance the defeat of any of the national armies or the failure of
any campaign. The timid and hesitating criticism with which
the subject has been commonly treated speaks ill for the sound
sense of the community. The public has so thoroughly adopted
the idea that it is itself the responsible governing power, and
its representatives only delegates to enroll its orders, that the
healthy, process of criticising a policy once adopted seems to
it almost an attack on its own authority. The confusion of
ideas involved in this assumption of responsibility is peculiarly
unfortunate. The task of citizens who are selected to govern
is one thing. They bear the burden of leaders, and they en-
joy the honor. They are, too, at liberty to excuse or palliate
their mistakes, their ignorance, or their crimes by whatever
argument they can make to answer their purpose. But the
task of the public is wholly different. It is that of insisting,
without favor or prejudice, on the observance of truth in legis-
lation and in the execution of the laws. To apply the princi-
ples of truth in criticism is the first duty of every writer for
the press and every speaker on the hustings. Whatever seems
harsh in criticism or vehement in temper may be excused in
the citizen who clings to the rigid logic of fundamental princi-
ples, and who leaves to those whose public conduct fails to
reach his standard, the labor of justifying themselves in the
best way they can.
It is customary, however, for critics of American finance to
begin at this point with the assumption that the Legal-Tender
Act was necessary and inevitable. As a matter of criticism,
nothing can be more absurd than such a beginning; and as a
matter of intelligence, nothing can be feebler. Congress and
the country permitted no such assumption to be made in ex-
cuse for the beaten generals at Fredericksburg and Chancel-
lorsville. There can be no satisfactory conclusion from such a
THE LEGAL-TENDER ACT. 305
premise. No sound result can be reached except by assuming
at the outset that the Legal-Tender Act was not necessary ;
that the public was not responsible for it ; that the men who
made it law were answerable to the people for their act, and
are bound to show that so extraordinary and so grave a mis-
fortune could, by no means, have been avoided. If they fail
to prove their case, they are condemned. It is, too, a matter
of the greatest consecpjence to decide what the ultimate judg-
ment will be, since on it must turn not only questions of the
most considerable material interests, but points of fundamental
law in the United States, and of the theory of government for
future time. The urgent necessity of establishing some fixed
principles in regard to this disease of debased currency may
be measured by the extent of the disease itself. Russia, Aus-
tria, Turkey, Italy, Spain, Brazil, Japan, and an indefinite
number of smaller communities, besides the United States,
have, to day, no fixed standard of value in domestic exchanges.
With rare exceptions, no government that has once debased its
standard has ever restored it, except through the desperate
resource of partial or entire repudiation. Unless the world is
prepared to agree that society has no protection, and that the
assumed progress of political science is a mere dream, there
can be no excuse for continuing to accept as inevitable an evil
which, in all times, has been merely the result of ignorance
and misgovernment.
The law of legal tender, passed by Congress in February,
1862, cannot, therefore, be assumed to have been necessary,
find its supporters are bound to prove that they had no alter-
native. To this task Mr. Spaulding, the principal author of
the measure, has applied himself; while, on the other hand,
Mr. Chase, without 'whose assent the law could not have
passed, has assumed the contrary ground. There is, unfortu-
nately, at the outset a strong presumption against the law,
rising from the unquestionable fact that the men who, in 1862,
V.-ITO charged with the conduct of the finances, and were re-
sponsible for this law in particular, had no claim to confidence
on the ground of their financial knowledge or experience.
T
306 THE LEGAL-TENDER ACT.
Something better might indeed have been expected among a
people so devoted to commerce and so habituated to self-gov-
ernment. Military disasters were to be looked for, seeing that
the nation had no training nor taste for war ; but though war,
or art, or philosophy, or abstract knowledge, were beyond the
range of public or popular interest, an experience of two hun-
dred years ought at least to have insured the country against
mistakes in practical politics. Such, however, was very far
from the truth. Among the leading statesmen then charged
with responsibility, not one was, by training, well fitted to
perform the duties of finance minister, or to guide the finan-
cial opinions of Congress. The Secretary of the Treasury,
certainly the most capable of the men then connected with
finance, suffered severely under the disadvantage of inexperi-
ence. In the Senate, finance, like every other subject, was
treated rather as though it were a branch of the common or
constitutional law, than as though it were a system with
established principles and processes of its own. But it was
in the House of Representatives that the want of education
was most apparent and most mischievous, while, by a signifi-
cant coincidence, it happens that the law of legal tender, more
than almost any other great financial measure of the Rebel-
lion, \vns peculiarly and essentially the work of this House.
As for the members who originated and whose activity carried
Ihroiigh all opposition the act of February, 1862, it is difficult
to characterize them in language which would not seuin un-
duly and unreasonably severe. Yet it may honestly bo
dpubted whether there has ever been a time since Kk'on, the
leather seller, was sent by the people of Athens to command
its armies at Sphacteria and Amphipolis, and since Aristophanes
on the public stage covered the powerful popular leader with
an immortal ridicule which surely reflected most severely on
the Athenian people itself, it may honestly be doubted
whether history records an occasion when the interests of a
r.reiit country in an extreme emergency li.-ivo been committed
to hands more eminently :li>'|iialitied for the trust. In Feb-
ruary, 1S62, Mr. Th;iddeus Stevens was chairman of the Com-
THE LEGAL-TKNDER ACT. 307
mittee of Ways and Means, from which emanates the ordinary
financial legislation of Congress. To say that Mr. Stevens was
as little suited to direct the economical policy of the country
at a critical moment, as a naked Indian from the plains to
plan the architecture of St. Peter's or to direct the construc-
tion of the Capitol, would express in no extreme language the
degree of his unfitness. That Mr. Stevens was grossly igno-
rant upon all economical subjects and principles was the least
of his deficiencies. A dogmatic mind, a high temper, and an
overbearing will are three serious disqualifications for financial
success, especially when combined with contempt for financial
knowledge. It is no exaggeration to say, that every quality
of his nature and every incident of his life which gave Mr.
Stevens power in' the House, where he was almost omnipotent
in the legislation which belonged to the war and to recon-
struction, conspired to unfit him for the deliberate and diffi-
cult discussions of finance. But it is not to Mr. Stevens
that the principal burden of blame or praise for the financial
legislation of that momentous year is to be awarded. In the
press of business upon the committee, when in the brief
space of a few months the whole system of loans, of taxation,
and of currency, demanded by a war of such tremendous
proportions, had to be created, so to speak, out of nothing,
two sub-committees were formed to divide the duties which
fell upon the committee. One of these, imder the lead of Mr.
Morrill of Vermont, undertook to enlarge and adjust the
scheme of taxation to the new necessities of the government.
The other, under the chairmanship of the Hon. Elbridge G.
Spaulding of New York, assumed the care of the national cur-
rency, the raising of loans, and the issue of treasury notes or
bonds. Mr. Stevens remained chairman of the whole commit-
tee, charging himself particularly with the matter of appro-
priations, and lending his powerful voice to both sections be-
low him, as either by turn encountered opposition in forcing
its measures through the House.
The intellect of a Congressman, gifted with no more than
the ordinary abilities of his class, is scarcely an interesting or
308 THE LEGAL-TENDER ACT.
instructive subject of study ; nor are the discussions that arise
among such men likely to be rich in stores of knowledge or
experience. But when an accidental representative is able to
carry "over the administration and through Congress,"* as
Mr. Spaulding claims to have done, and as it is clear that Mr.
Spaulding did, a measure of such far-reaching consequences as
the Legal-Tender Act of 1862, the character of that person's
mind and the facts of his life cease to be matters of insignifi-
cance. One may well inquire what sort of a man it was that
could lead a nation so far astray, and what the condition of
things that made it possible to effect results of such magni-
tude. Financiers who make an addition of hundreds of
millions of dollars to the debts of their countries, represent-
ing not a penny of value enjoyed, are entitled to a place in
history, whether they boast the intellectual capacity of Mr.
Pitt or of Mr. Spaulding.
Unlike Mr. Stevens, Mr. Spaulding had the advantage or
disadvantage of a cei-tain sort of financial experience. He had
been for a time treasurer of the State of New York. By pro-
fession he was, in 1862, president of a joint-stock bank at
Buffalo, and it was on this circumstance that he based his
chief claim to speak as an expert in finance. At the confer-
ence on the llth of January, 1862, at the treasury, between
the Secretary, the committees of Congress, and the representa-
tives of the principal Northern banks, a conference whose
momentous importance will require close attention, Mr.
Spaukting expressed his convictions both "as a banker and
legislator." The association of functions was not unimportant,
in i<l Mr. Spaulding was right in laying stress upon it. Had ho
not been a banker as well as a legislator, the Legal-Tender Act
might, it is not improbable, never have been enacted. Being
a provincial banker, and at the same time chairman of a sub-
coiiiinitlcc dealing with the nominally financial but really
universal interests of thirty millions or more of citi/eus, and
dealing, too, with the whole future of a nation whose devclop-
* Mr. SpauWing's share in the passage of the Bill is <lo.-cril>e<l in tlii^o words
l>y liis rolli-!tBu\ Hon. T. M. I'omeroy, in a speech delivered in the House of
Kepresentativp* on th<- 10th February, IMJ-J.
THE LEGAL-TENDER ACT. 3(J9
ment no bounds seem to limit, Mr. Spaulding naturally pro-
ceeded to apply to the necessities of the situation the princi-
ples of finance which he had learned in shaving notes at a
country bank.
These necessities were unquestionably serious, but few per-
sons now retain any distinct recollection of their actual shape.
To the minds of men living in 1870 the events of 18G2 appeal-
bound up in close connection with the long series of events
that have intervened. The necessity of the Legal-Tender Act
is now assumed, not on account of what had happened before
the law was passed, nor on account of anything that was fore-
seen by its authors, but because of what afterwards occurred,
the exigencies of a situation far more difficult and alarming
than existed at that earlier time. Against such a confusion
of ideas it is necessary that every candid man should be on
his guard. The vague, general notion that, sooner or later,
legal-tender paper was inevitable, is a part of the same loose
and slovenly popular criticism with which the whole subject
has been so habitually treated, and is scarcely worth comment ;
but the actual circumstances under which Congress declared
the measure to be necessary are a matter of fact, and it is with
these that law, history, and political science have first of all
to deal.
Congress met on the 2d of December, 1861, and the Secre-
tary immediately set before it an account of the financial
situation, and his own scheme for supplying the wants of the
treasury. He required about $200,000,000, in addition to re-
sources already provided, in order to meet the demands of the
next half-year. His immediate necessity was for $ 100,000,000
within three months. He estimated that the debt would
reach $517,000,000 on the 1st of July, 1862, and that a year
later it would probably become $900,000,000. In fact it rose
to $1,100,000,000. A part of the heavy government ex-
penses were to be met by taxation ; a part by the sale of
bonds ; and for the rest Mr. Chase proposed the assumption
by the government of the bank circulation, amounting to some
$200,000,000, with a view not only of obtaining the money,
310 THE LEGAL-TENDER ACT.
but of providing a sound currency on which to condiict the
war. The Secretary did not, in this connection, overlook the
possibility of resorting to a forced paper circulation, but " the
immeasurable evils of dishonored public faith and national
bankruptcy " deterred him from recommending the measure,
or rather obliged him to reject it as dangerous and unneces-
sary.
Thus, on the 1st of December, 1861, according to the Sec-
retary of the Treasury, no occasion existed for resorting even
to the moderate measure of issuing government paper at all,
except so far as concerned a possible guaranty to a new bank
circulation. The idea of legal tender was expressly rejected.
The government believed itself able to meet its demands on
the basis of the bank circulation, provided Congress would
place the bank circulation on an available footing. Nothing,
however, was done by Congress towards supplying the wants
of the treasury, until, towards the end of December, Mr.
Spaulding began to draft a bill for establishing a national
banking currency. While preparing this draft, Mr. Spaulding,
" upon mature reflection, came to the conclusion that the bill
could not be passed and made available quick enough to meet
the crisis then pressing upon the government for money to
sustain the army and navy. He therefore drafted a legal-
tender treasury note section." This was done about the 30th
December ; and this was the origin of the measure destined
to have so vast and permanent an influence on the American
people. The "mature reflection" of Mr. Spaulding could dis-
cover no other or better method of supplying a temporary
want of $100,000,000, than a resort to the last expedient
known to finance ; what he himself calls a forced loan, made
in the first year of the war by means which were equivalent
to a debasement of the standard of value and a bankruptcy
of the government. It is scarcely necessary to add a com-
ment upon this simple statement. Any reader in the least
familiar with financial history must appreciate the extrava-
gance of Mr. Spaulding's assumption. That he acted with
perfect honesty and good intention no one will think it worth
THE LEGAL-TENDER ACT. 311
while to dispute ; but that he had the least conception of the
consequences of what he was doing, or that he grasped even in
a limited degree the principles of statesmanship, no unpreju-
diced or cool observer could imagine. Like all ignorant men,
impatient of resistance or restraint, the moment he saw an
obstacle, he knew but one resource, that of a blind and reck-
less appeal to force.
Mr. Spaulding then, "upon more mature consideration,"
converted this section into a separate bill, and laid it before
his committee. The committee, however, was by no means
unanimous in accepting Mr. Spaulding's views of necessity.
It is true, and it is an interesting fact, that the only doubt
entertained by Mr. Thaddeus Stevens was in regard to the con-
stitutionality of the law ; and one is somewhat at a loss
whether most to wonder at the profound ignorance thus be-
trayed or at the constitutional scruples which suggested
themselves to this veteran expunger of constitutions. But
though Mr. Stevens and one half the committee approved the
bill, the other half stood out firmly against it, and only as a
matter of courtesy allowed it to be reported to the House.
On the 7th of January, 1862, the bill was reported. It au-
thorized the issue of $100,000,000 in treasury notes, to be a
legal tender, and exchangeable on demand for six per cent
bonds. Public opinion at once became sharply divided on the
merits of the measure. Delegates from the Boards of Trade
and banks of the principal Northern cities appeared in Wash-
ington to oppose the bill, and on the llth of January these
gentlemen met the Secretary of the Treasury and the finance
committees of the Senate and House, at Mr. Chase's office in
the department. Here the whole financial policy of the gov-
ernment was made a subject of discussion, and the two paths
between which the country was still at liberty to choose were
marked out with unmistakable precision. Mr. Spaulding, on
the one hand, insisted not only that his measure was the best,
but that it was the only means of raising the money required,
and he demanded to know what alternative could be suggested.
On the part of the baak committees Mr. James Gallatin of
312 E LEGAL-TENDER ACT.
New York, submitted a complete financial scheme, and, with
the plain common sense of a practical man, replied to Mr.
Spauldiug's inquiry with the simple proposal that the govern-
ment should sell its bonds in the open market for what they
would bring, without limitation of price. To this suggestion
Mr. Spaulding made the following reponse :
" The Sub-Committee of Ways and Means, through Mr. Spaulding,
objected to any and every form of ' shinning' by government through
Wall or State Streets, to begin with ; objected to the knocking down
of government stocks to seventy-five or sixty cents on the dollar,
the inevitable result of throwing a new and large loan on the mar-
ket without limitation as to price ; claimed for treasury notes as
much virtue of par value as the notes of banks which have suspended
specie payments, but which yet circulate in the trade of the North ;
and finished with firmly refusing to assent to any scheme which should
permit a speculation by brokers, bankers, and others in the government
securities, and particularly any scheme which should double the public
debt of the country, and double the expenses of the war, by damaging
the credit of the government to the extent of sending it to ' shin '
through the shaving-shops of New York, Boston, and Philadelphia.
He affirmed his conviction as a banker and legislator, that it was
the lawful policy as well as the manifest duty of the government, in
the present exigency, to legalize as tender its fifty millions issue of
demand treasury notes, authorized at the extra session in July last,
and to add to this stock of legal tender, immediately, one hundred
millions more. He thought that this financial measure u-mild carry
tin- runntnj through the ?ror, and save its credit <in<l i/ii/ititi/. At the
same time we should insist upon taxation abundantly ample to pay
the. expenses of the government on a peaec footing, and interesi of
every dollar of the public obligation, and to give this generation a
clear show of a speedy liquidation of the public debt."
Before commenting further upon this speech, it is necessary
to mark with care the fact that, throughout the whole legal-
tender contest in 1862, there was no question involved but
that of remiiii-n-. The sum of one hundred million dollars was
wanted to e;irry on the government, and Mr. Spaulding closed
every mouth by asking lm\v else the money could be raiso!,
wince the banks could provide no more coin and their paper
would not properly answer the purpose. At this time there
THE LEGAL-TENDER ACT. 313
was no thought of any ulterior process of " floating the bonds,"
which became the ultimate function of the legal-tender paper,
and indeed this argument, which implied an intentional depre-
ciation of the paper, would in 18G2 have scaz-cely worked in
favor of the bill. How little weight was put on the idea of
" making money easy " is evident from the whole debate, but
so far as Mr. Spaulding is concerned, the following letter,
written on the 8th of January, 1862, is a sufficiently clear
statement :
" DEAR SIR, In reply to yours of the 4th instant, I would say
that the Treasury Note Bill for $ 100,000,000 agreed upon in com-
mittee yesterday is a measure of necessity and not one of choice. You
criticise matters very freely, and very likely you may be right in
what you say. We will be out of means to pay the daily expenses
in about thirty days, and the committee do not see any other way to
get along till we can get the tax-bills ready, except to issue tempo-
rarily treasury notes. Perhaps you can suggest some other mode
of carrying on the government for the next one hundred days
It is much easier -io find fault than it is to suggest practicable means
or measures. We must have at least $ 100,000,000 of paying means
during the next three months, or the government must stop pay-
ment I will thank you to suggest a better practicable mode of
getting $ 100,000,000 of paying means during the next three months.
I would be glad to adopt it, and the committee would be glad to
adopt it. Let us have your specific plan for this purpose, one that
will produce the money, and we will be very much obliged to you."
This curious letter, which, strange to say, Mr. Spaulding
has actually published, italics and all, as a meritorious docu-
ment, tells the whole story of the legal te'nder in its origin.
As a specimen of American finance and congressional ability
it will live in history. It presents the view on which, then as
now, the adherents of this measure have always wished to
place it before the public, as the only alternative to the im-
mediate stoppage of government. Not as a means of supply-
ing currency, nor of easing the money market, nor of " float-
ing " bonds, was the legal-tender paper first created, but solely
to supply a temporary want of $ 100,000,000, without which
the treasury must stop payments. And Mr. Spaulding flung
14
o-j_4 THE LEGAL-TENDER ACT.
into the face of every doubter his contemptuous request to
suggest some better mode of raising the money, or in future
to keep silence.
Three days after this letter was written, Mr. Gallatin, on
the part of the New York banks, replied to Mr. Spaulding's
entreaties by the simple and business-like remark of a man
who knew what he was talking about, that it was only neces-
sary for Mr. Chase to sell his bonds at their market value, and
obtain what money he wanted. To this suggestion Mr.
Spaulding was called upon for a rejoinder. Obviously he was
bound to show that Mr. Gallatin was mistaken ; that no such
alternative really existed ; and that it was, for some reason or
othei', impossible to sell the government bonds in the way
proposed. In the speech which has just been quoted Mr.
Spaulding did undertake to answer Mr. Gallatin, but he took
tio such ground as this. He did not deny the efficacy of the
proposed measure. He did not even question the fact that
the resource suggested was both simple and easy. He only
appealed to the dignity of the government.
It appears, therefore, that there was an alternative to legal
tender, in spite of Mr. Spaulding's assertions that there was
none. What this alternative consisted in will be discussed in
a moment ; but as the point is most material in the argument,
it will be well to establish here beyond dispute the fact that
the existence of this alternative was acknowledged by the sup-
porters of the bill almost in the same breath with which they
declared legal tender to be a necessity. In his speech of the
28th January, on introducing the bill in the House of Repre-
sentatives, Mr. Spaulding said :
"The bill before us is a war m<-asnre. a measure of necessity, and not
of choice We ]mrr tin- alternative, either to go into the market
and sell our bonds I'm- what, they will command, or to pass this
bill If you offer to the people and put upon the market,
$300,000,000 to the highest bidder in the present state of affairs,
they would not be taken except at, ruinous rates of discount
I fear the twenty years six per cent bonds would under the pressure
fall to 75, 70, 60 and even 50 cents Why, then, go into the
THE LEGAL-TENDER ACT. 315
streets at all to borrow money ! I prefer to assert the power and
dignity of the government by the issue of its own notes."
Mr. Hooper, who was second on Mr. Spauldiug's committee,
said :
"The propositions of committees from boards of trade and banks,
which recently visited Washington, differed from the theory of this
bill so far as to require that .... the government bonds must first
be disposed of, and the money received for them paid to the con-
tractors The obvious effect of such an arrangement would
be to put the reins of our national finances in the hands of the
banks To render the government financially more independent,
it is necessary to make the United States notes a legal tender. It
is possible that they would become a practical tender ivithout provid-
ing/or them to be a legal tender."
The alternative, therefore, as seen by Mr. Hooper, was not
between legal tender and a stoppage of payments, but between
legal tender and dependence on the banks. Mr. Biugham's
idea of necessity was only a little more ridiculous :
" Great names," said Mr. Bingham, " have been invoked [against
legal tender] in this debate. For what purpose ? For the purpose
of laying at, the feet and at the mercy of brokers and hawkers on
'Change, the power of the people over their monetary interests in
this hour of their national exigency."
Mr. Thaddeus Stevens, again, had views of his own in re-
gard to the meaning of the word " necessity " :
" This bill," said he, " is a measure of necessity, not of choice
Here, then, in a few words lies your CHOICE. Throw bonds at six or
seven per cent on the market between this and December enough
to raise at least $ 600,000.000, or issue United States notes. . . ., .
I maintain that the highest sum you could sell your bonds at would
be seventy-five per cent, payable in currency itself at a discount.
That would produce a loss which no nation or individual doing a
large business could stand a year."
Senator Sherman also used the word " necessity " in a sense
which would have been ludicrous if the subject had concerned
the metaphysical doctrine of fate and free will : " We must no
longer hesitate as to the necessity of this measure. That ne-
cessity does exist, and now presses upon us. I rest my vote
316 THE LEGAL-TENDER ACT.
upon the proposition that this is a necessary and proper meas-
ure to furnish a cwrency." A more amusing example of anti-
climax than this is seldom seen in rhetoric.
It would be pleasant to linger over this subject, and enjoy
among these apparently tedious speeches the delicate touches
of involuntary humor which a critic finds so difficult to resist,
but it is useless to accumulate evidence of a point that is self-
evident ; and it is unquestionable that even the strongest sup-
porters of the bill did not in any true and absolute sense
maintain that legal tender was necessary, but only that it
was preferable to the process of selling bonds at a discount
and retaining the old bank currency. The next step, there-
fore, must lead to some closer discussion of this opinion, and
of the financial principles by which its justice can alone be
tested.
Finance is a subject which the liveliest writer may well
despair of making popular, since the mere sight or suspicion
of it is alone enough to cause every reader, except the dullest,
to close the most promising volume. A writer, therefore, can
have no hope of gaining a general hearing on such a topic.
Rarely can he expect sympathy among even business men,
unless he adopts the views they hold. Yet notwithstanding
this, it is and will remain true, and not only true but inter-
esting, that in the large experience of modern nations, some
few solid principles in finance have been established too firmly
to be shaken ; and whether or no busy politicians or local
bankers choose to believe them, and whether or no the ordi-
nary reader choose to listen to them, the principles are sound
and will hold.
Hitherto in human history, the mind of man has succeeded
in conceiving of but two means by which govcniments can
obtain money. One of these is, to take. The other is, to'
borrow. The hybrid and self-contradictory notion of a forced
loan resolves itself ultimately into one or the other of these
conceptions, and as a permanent policy is impossible. In
practice, where a government does not take, it must borrow.
Almost all modern nations :nv, to a greater or less extent,
THE LEGAL-TENDER ACT. 317
habitual borrowers so far as their governments are concerned,
and therefore it is natural that, during two hundred years of
experience, the principles which regulate loans should have
been studied with some care, and simplified in some degree
into a science. After innumerable costly experiments and
elaborate study of the interests and motives of lenders and
borrowers, the effect of complicated financial schemes and
special pledges and conditions, it seems to be now acknowl-
edged by the shrewdest governments that the simplest bargain
is the best for the public, and that all financial tricks and de-
vices, all attempts to coax or deceive capitalists into better
conditions than they are ready to offer, in the end injure only
the government and the public. Simplicity has, therefore,
of late years been carried by the great borrowing nations to a
degree of scientific perfection beyond which there seems to be
no possibility of passing. According to this principle, govern-
ments now sell their own credit without stipulation, reserve,
or condition. They sell, for example, their simple promise to
pay a thousand dollars a year so long as it is demanded. To
this promise no condition, expressed or implied, is attached,
except that the payment of a nominal principal may at any
time discharge the debt. For this promise they obtain what-
ever they can, and experience has proved that, in the compe-
tition of the world, the bargain thus struck is for both parties
the fairest.
Another simple law has also been established, and this is
that lenders will always prefer and pay most for a security on
which there is a certainty of permanence or a chance of profit,
other things being equal ; that is to say, that a security is rel-
atively less valuable as it approaches its par and its redemp-
tion than it should be, judging from the price paid for an
exactly similar security which has a better chance of perma-
nence or a wider limit of possible profit. The English 3 per
cents at eighty would commonly have a marked advantage in
the markets over 3^ per cents ; in the first place, because the
margin of possible- profit would be greater, and in the second
place, because there would be no prospect of disturbance in
318 THE LEGAL-TENDER ACT.
the one case, while in the other redemption would be near at
hand. Experience, therefore, shows that governments as a
rule obtain relatively a low price for a security which they
insist upon selling at par.
This obvious fact induces most governments to adapt their
offer to the market in such a way as to combine these induce-
ments. If the market rate of interest is at 4 per cent, they
commonly offer 3J or 3 per cent, and thus dispose of their
credit at a discount on better terms than if they attempted
to outbid the market rate. The American government, on the
other hand, has commonly pursued a different course. While
insisting that it will borrow only at the market rate, that is,
at par, it has found itself compelled to concede something in
order to be allowed to borrow at all. In the first place it has
to concede a high rate of interest, but even this is not enough.
Lenders require permanence. It accepts, therefore, the con-
dition that it shall not attempt to redeem its bonds until after
the lapse of a term of years, five or ten, or whatever may
be agreed upon. The expedient is clumsy, but the ignorant
prejudice against usury compels its adoption, although, like
all such devices, it works in practice only against the public
interest and in favor of the capitalist. Another condition,
however, to which the United States government is in the
habit of pledging itself is entirely gratuitous. This is the ob-
ligation to redeem after a certain number of years, an obli-
gation which works wholly against the public interest, and
which is without excuse on financial grounds, although the
incessant enforcement of a temporary character in the national
debt is considered its excuse from a political stand-point.
Every established principle of finance, therefore, indicated
that government credit could he sold to more advantage ;i l
a certain nominal discount than if a higher interest or any
equivalent condition wore insisted upon in order to "float" it
at par. If, therefore, the government had chosen to authori/o
the sale of six per cent bonds at their market price, omitting
iVom the contract all restriction on its own free control over
them, it would have done precisely what all established iinan-
THE LEGAL-TENDER ACT. 319
cial rules enjoin, and for such bonds it would unquestionably
have obtained the best terms which were then to be had, while
at the present day the nation would have owed a homogeneous
debt, with which it would have been free to deal as it chose.
Mr. Spaulding, however, apparently imagined that he had dis-
covered some new principle in finance, by which the govern-
ment might raise money through a process which should be
neither taxation nor loan. Before three years had passed the
government was selling its six per cent bonds at a rate equiv-
alent to very nearly thirty-five cents on the dollar ; but at
this time the idea of its credit selling at a discount of twenty
or thirty or forty per cent was so revolting to Congress that
it was not even to be entertained. Mr. Gallatin talked in vain.
Nor was it Mr. Spaulding and members of Congress alone who
were extravagant on this theme. At least one gentleman who
should have known better, Mr. Moses H. Grinnell of New
York, encouraged the same delusion. " As for G[allatin]
and a few egotistical gentlemen that act with him, they should
be driven out of Washington, as they only embarrass the gov-
ernment. There are not eight bank presidents that side with
G[allatin]. He is an odd fish, has very little influence here."
These were the terms used by Mr. Grinnell in a letter dated
the 30th January, 1862, and it was a curious sign of the times
that the only man who seems to have had a clear and practi-
cal knowledge of what the occasion required should have really
been " an odd fish."
But it is not enough to show that this idea about " shin-
ning " through Wall Street was almost inconceivably absurd,
seeing that eveiy government always does and always must
borrow on the best terms it can get, or not borrow at all, in
which case it can have no resource but to tax. The event
soon showed that the men who treated so contemptuously the
idea of the nation's credit being sold at a discount were the
first to convert this same legal-tender paper into the instru-
ment by which the government was to "shin," not only
through Wall Street during the short emergency of the war,
but through every lane, and alley of the land during a period
320 THE LEGAL-TENDER ACT.
that now seems interminable. Congress and the government
followed Mr. Spaulding's doctrine, that the nation's credit must
not be sold at a discount, and the result was that, as the laws
of society are inflexible, while the laws of Congress are not
omnipotent, there ensued a period of " shinning " which has
seldom had a parallel. The dollar which Congress had set np
was " shaved " through Wall Street at twenty, thirty, forty,
fifty, and sixty cents discount. Europe bought the United
States six per cents at about thirty-five cents on the dollar,
notwithstanding Mr. Stevens's asseverations that no nation
could afford to borrow at seventy without being ruined in a
year. But if Mr. Spaulding and his friends could have fore-
seen, not only that the government woxild be compelled to
perform this process of " shinning " during four long years,
but that, thanks to them and to them alone, the government
credit and its broken promises-to-pay would for years longer
be hawked about Wall Street at whatever price they could
command, and would become the support by which Mr. Jay
Gould and Mr. James Fisk, Jr., and their like, would succeed
in bolstering up their scandalous schemes against the pressure
of sound economical laws, the statesmen of 1862 might per-
haps have gained more sensible ideas in regard to the treat-
ment of government credit.
In justice to the Secretary of the Treasury, it must be said
that, on the day of the conference, he showed no symptom of
yielding to Mr. Spanlding's influence. He remained then as
before hostile to the principle of legal tender, and before the
bank delegates left Washington he succeeded in agreeing with
them upon a new financial arrangement which included the
adoption of his policy in regard to the bank currency, and re-
jected the resort to legal tender. Nor would it perhaps have
affect CM 1 the success of his scheme, that Mr. Spaulding and his
committee deemed it inadequate and withheld their assent.
There was a different reason than this, which caused the com-
promise between Mr. Chase and tin; banks to fail. The gentle-
man who represented the Boston banks on that occasion found
on his return to Massachusetts that the arrangement he had
THE LEGAL-TENDER ACT. 321
made was not satisfactory to them, and he at once telegraphed
this information to the Secretary. Then for the first time Mr.
Chase yielded his better judgment, and, relying on his own
power and will to control the issues, accepted the policy of
legal tender, for which Boston influence thus became im-
mediately answerable. Having once made his determination
to adopt the policy, the Secretary was not a man to hesitate
in carrying it out. He had been drawn into it against his
most deeply rooted convictions and his better judgment, but
no sooner was the decision made than he threw his whole
weight in favor of the bill.
Thus, in spite of the treasury and the banks and the active
remonstrances of a great part of the community, the bill came
before the House of Representatives as a government measure.
Two months of delay and confusion had seriously complicated
the difficulties of the case, but even yet no necessity existed
which could in anyjiist sense be considered to exact the adop-
tion of legal tender. The cry of necessity was indeed raised,
and prolonged without a pause, but it was raised merely be-
cause no solid argument could be found. The ablest mem-
bers of Congress denied the necessity without qualification,
and, as has already been shown, the ideas of necessity held by
the different supporters of the bill were almost as various as
the speeches.
The debate began on the 28th of January, by a speech from
Mr. Spaulding, in which he explained at considerable length
his reasons for forcing on the country a measure which was so
generally obnoxious. There seems to be something almost
extravagant in so often recalling attention to Mr. Spaulding's
speeches, which have little intrinsic claim to notice. But Mr.
Spaulding was at this moment in a position of vast responsi-
bility. His activity and persistence had earned the bill " over
the administration," and were now to carry it through the
House. It is not easy, therefore, to set him aside as a person
of no consequence, or to pass his opinions by as undeserving
of attention ; and indeed, however open to criticism these
opinions may have been, Mr. Spaulding has a perfect right to
H* u
322 THE LEGAL-TENDER ACT.
claim that they were little if at all inferior in merit to those
expressed by the other friends of the bill. It is true that if
any object were to be gained by reviewing this ground, if it
were intended to conciliate support, for new opinions, or to lay
down principles for a new party, it would be well to speak in
milder terms of men whose power and authority have not yet
passed wholly away. But the only inquiry that can haA r e value
here is to ask how the future historian will be compelled to treat
this chapter of American history ; and, unless the world is to
move backward, it seems as though he must inevitably declare
that not all the campaigns of all the unfortunate or incompe-
tent generals employed during the Rebellion can furnish an
instance of grosser mistreatment than was offered by Congress
in these debates. The good sense and high moral standard
of a few men served only to relieve and make more conspicu-
ous the dark and impenetrable cloud of ignorance against
which their efforts were utterly thrown away. This language
is no doubt strong, but it is strictly true. It would, for ex-
ample, have been difficult for any human being to compress
within the same limitecj space a greater number of mistaken
ideas than are contained in the following extract from Mr.
Spaulding's speech of January 28th :
"The bill before us is a war measure, a measure of necessity, not
of choice Congress may judge of the necessity in the present
exigency. It may decide whether it will authorize the Secretary
of the Treasury to issue demand treasury notes, and make them a
legal tender in payment of debts, or whether it will put its (i or 7
per cent bonds on the market, at ruinous rates of discount, and raise
the money at any sacrifice the money-lenders may require, to meet
the pressing demands upon the treasury. In the one case the imv-
enmient will lie able to pay its debts at fair rates of interest ; in the
other, it must go into the streets shinning for the means, like an in-
dividual in failing cireumstauces, and sure of being used up in the
end by the avarice of those who may exact unreasonable terms.
But, sir, knowing the power of money, and the disposition there is
among men to use it for the acquisition of greater gain, I am unwil-
ling that this government, with all its immense power and resources,
hould be left in the hands, of .any class of men, bankers, or money-
THE LEGAL-TENDER ACT. 323
lenders, however respectable or patriotic they may be. The govern-
ment is much stronger than any of them. Its capital is much greater.
It has control of all the bankers' money and all the brokers' money,
and all the property of the thirty millions of people under its jurisdic-
tion. Why then should it go into Wall Street, State Street, Chestnut
Street, or any other street, begging for money ? Their money is
not as secure as government money. All the gold they possess
would not carry on the goverment for ninety days. They issue only
promises to pay, which, if Congress does its duty, are not half as
secure as United States treasury notes based on adequate taxation
of all the property of the country. Why, then, go into the streets at
all to borrow money ? I am opposed in our present extremities to
all shifts of this kind. I prefer to assert the power and dignity of
the government by the issue of its own notes.' 1
He would be a bold man who should undertake to say that
these remarks can, by any process of explanation, be made in-
telligible. The conclusion, however, is clear enough, and is
well worth attention. Had Mr. Spaulding's studies ever led
him to read Goethe's Faust, he might at this point have re-
called the scene where Mephistopheles, in the character of
court-jester, invents for the empire a legal-tender currency
based on the firm foundation of old treasures which in past
ages might have been hidden underground, and applauds his
own creation as better than coin, because, if the bankers re-
fused to give coin for it, the holder would at worst have only
the trouble of digging. The great satirist, however, with all
his genius, was not so great a satirist as Mr. Spaulding. He
never thought of carrying the bitterness of his sarcasm so far
as to invoke the dignity of the empire as the chief glory of his
paper money, and yet Mephistopheles closes his scene with the
exulting exclamation :
" Wer zweifelt noch an unsers Nivrren Witx! "
Yet one thing remains to be said before quitting Mr. Spauld-
ing. If he really had an idea in his own mind, and sincerely
believed that the government need not go into the streets at
all to borrow money, and that a simple assertion of its own
dignity would place it in command of indefinite resources ; hi
other words, if he thought that the dignity of the government
324 THE LEGAL-TENDER ACT.
forbade its borrowing, except on its own terms, and that there
was no necessity for it to borrow at all, it is a matter of grave
question how he can justify himself in having consented that
the government should pay 6 per cent or even 1 per cent for
money, or should promise to repay any money whatever.
The argument of Mr. Hooper was less extravagant. He
avoided committing himself to anything except to a cautious
opinion that the paper issue would make the government finan-
cially more independent, and that if Mr. Chase were discreet,
the quality of legal tender would help him to keep the notes
at par. The latter opinion may, perhaps, be questioned, and
indeed Mr. Chase has himself questioned it in his late judg-
ment, but at least it was not absurd.
Mr. Bingham, however, rivalled Mr. Spaulding, though in
different way. His speech was necessarily made without refer-
ence to financial principles, since Mr. Bingham made no pre-
tence to the slightest acquaintance with that subject. He
therefore assumed at the outset that the bill was necessary,
because it was said to be necessary, and he then burst into a
brilliant denunciation of all persons who refused to believe
in the necessity. Mr. Roscoe Conkling was the victim first
immolated.
" Sir, said Mr. Bingham, " as a representative of the people I can-
not keep silent when I see efforts made upon this side of the house
and upon that, to lay the power of the American people to mi it ml
the currency at the feet of brokers and of city bankers, who have
not a tittle of authority, save by the assent or I'orlirnraiKv of tin-
people, to deal in their paper issued as money. I am hcrr to-dny
to assert the rightful authority of the American people as :i nation-
ality, sovereignty, under and by virtue of their Constitution."
Such legal finance would not call for notice, except that it
came from a leader in Congress, who, in order to protect the
sovereignty of the American people from bankers and brokers,
insisted upon creating a legal-tender paper currency, which lias
always been and always will be the most efficient instrument.
ever yet discovered for the worst purposes of this very class
of men. Yet Mr. Bingham denounced his opponents for act-
THE LEGAL-TENDER ACT. ;,-_>-,
ing with the purpose of sacrificing the public interest to the
interest of bankers and brokers. At the same time it is mor-
tifying to observe the ignorance and vulgar prejudice with
which the bankers and brokers of the country were always
mentioned in these debates. Perhaps no other single charac-
teristic offers so much instruction as this simple fact, in re-
gard to the temper and the range of thought exhibited in this
momentous discussion. Mr. Bingham's remarks have already
been quoted. Mr. Stevens, with his usual nice discrimination,
characterized the dealers in money as " sharks and brokers,"
to which he afterwards added " harpies." Mr. Shellabarger,
after appropriating bodily and almost literally several pages
of Macaulay's most luminous and most familiar writing, in
the effort to maintain himself on Macaulay's level without
Macaulay's aid, could discover no more original idea for his
peroration than to denounce the outside opposition to this bill
as coming from interested persons in the expectation " that out
of the blood of their sinking country they may be enabled to
coin the gains of their infamy." Senator Wilson announced
that the practical question lay between " brokers and jobbers
and money-changers on the one side, and the people of the
United States on the other." Invective like this properly be-
longs only to a debating-club of boys. But if invective were
to be used at all, and if these bankers had been represented
in Congress by any person capable of using it, he might easily
have retaliated in a manner which would have left little op-
portunity for an effective rejoinder. He might have replied
that men who claim to be trusted for all they say in regard to
a financial exigency ; who assert in one- breath that a neces-
sity exists, which in the next breath they acknowledge does
not exist ; who presume on this utterly unwarrantable plea of
necessity to exculpate themselves from what, without exculpa-
tion, is the wickedest vote the representative of the people can
ever give ; a vote which delivei's labor to the marcy of capital ;
a vote which forces upon the people that as money which in
no just sense is money ; a vote which establishes as law one
of the most abominable frauds which law can ever be prosti-
326 THE LEGAL-TENDER ACT.
tuted to enforce ; that such men are not the pel-sons to
judge of others' patriotism, honesty, or good sense.
And here it may be proper to add a remark as to the dis-
position of Congress to stumble over constitutional difficul-
ties. A very large part of the debate turned on the point of
technical construction of the Constitution ; and many mem-
bers of the legislature who hesitated about nothing else found
an insurmountable obstacle here. The constitutional argu-
ment, whatever its weight may be, is one on which only
lawyers will be likely to insist. Whether, under a strict inter-
pretation of constitutional powers, the law of legal tender is
to be justified or not, can make but little difference to persons
who look for their principles of action beneath the letter of
the Constitution, to the principles upon which all government
and all society must ultimately rest. The law of legal tender
was an attempt by artificial legislation to make something
true which was false. This is the sum-total of the argument
against legal tender, and this argument is based on the eternal
maxim that the foundation of law is truth. If it is possible
for the rhetoric of congressional orators or the ingenuity of
professional lawyers to reduce the principle involved to simpler
elements than this, at all events neither the debates at the
Capitol nor the arguments at the bar, however brilliant or
elaborate they may have been, have as yet shown any prob-
ability of success.
It would be pleasant to extract from the speeches delivered
in favor of this bill any such portions as show depths of knowl-
edge, elevation of morals, or breadth of mind. Unfortunately
nothing of the sort exists. Almost all the soundest minds in
the llmise deolared themselves against leual tender and denied
its necessity. Jud-v Thomas of Massachusetts and Mr. lioseoe
Conkling of New York, Mr. M on-ill of Vermont, from the Com-
mittee of Ways and Means. Mi-. Horton of Ohio, also of the
Ways and Means, all the Democratic members, and others who
contented themselves with a silent vote, opposed the leu r al
tender clause. And by some freak of nature, which seems
occasionally to amuse itself with putting into the mouths of
THE LEGAL-TENDER ACT. 327
extreme and violent men language and argument which ex-
press the most elevated sense of fitness, the speech of Mr.
Owen Lovejoy of Illinois was in its short space as clear, as
vigorous, and, from a rhetorical point of view, as perfect, as
the oldest statesman or the most exacting critic or the deepest
student of finance could have hoped or wished to make. But
although the opponents of the measure were far superior in
intellect to its supporters, and although their arguments were
essentially sound, and under ordinary circumstances would
probably have proved successful, they could not deal with the
authority of the executive, which Mr. 1 Chase now used with all
his energy in favor of the bill. On the 6th of February Mr.
Spaulding pressed his measure to a vote, and it passed the
House by a majority of 93 to 59.
One can scarcely resist the conclusion that, had the bill
originated in the Senate, and been discussed without the pre-
judice arising from the responsibility of rejecting what was
approved by the House and urged by the Executive, and had
it been acted upon before so much valuable time had been
lost, the country woxild probably for the time have been spared
the great misfortune of its adoption. This opinion is ren-
dered probable by the higher and more statesmanlike spirit in
which the Senate discussed the proposed measure. If it were
possible that a mere word of unqualified admiration could
please the ear or help to soothe the rest of a statesman whose
loss the nation has regretted but has never fairly appreciated,
there would be a keen and personal pleasure in repeating
the language of Mr Fessenden, who reported this bill to the
Senate :
" The question after all returns : is this measure absolutely indis-
pensable to procure means ? If so, as I said before, necessity knows
no law. What are the objections to it ? I will state them as briefly
as I can. The first is a negative objection. A measure of this kind
certainly cannot increase confidence in the ability or integrity of the
country
" Next, in my judgment, it is a confession of bankruptcy
" Again, say what you will, nobody can deny that it is ba.d faith
.... and encourages bad morality both in public and private
328 THE LEGAL-TENDER ACT.
" Again, it encourages bad rnorals, because if the currency falls
(as it -is supposed it must, else why defend it by a legal enactment),
what is the result ? It is that every man who desires to pay off his
debts at a discount, no matter what the circumstances are, is able to
avail himself of it against the will of his neighbor who honestly con-
tracted to receive something better.
" Again, sir, necessarily as a result, in my judgment, it must inflict
a stain upon the national honor
" Again, sir, it necessarily changes the value of all property
" Again, sir, a stronger objection than all that I have to this prop-
osition is that the loss must fall most heavily upon the poor by rea-
son of the inflation."
He concluded by declaring that in his opinion the legal-ten-
der clause was not necessary, and he reported several amend-
ments. One of these, the second, he described in these terms :
" The committee .... give to the Secretary the power to sell
the bonds of the government at any time that it may be
necessary, at the market price, in order to raise <?oin. That
can always be done." This amendment was ultimately adopted
and became part of the bill, but the Secretary preferred reach-
ing the same result by a different policy, and the old system
was therefore retained.
But it was reserved for Mr. Collamer of Vermont to take
yet stronger and more uncompromising ground. " Even if it
was a ," r.wV//," said he, " I would not vote for this measure."
Fidelity to a trust is not so universal that one might not be
permitted to sympathize with a man who, when placed between
the alternatives of utter destruction on the one hand and what
he thinks a broach of trust on the other, in spite of necessity
utill maintains the standard of his personal honor. But there
was in reality no such bravado in this declaration of Judge
(' Hauler's. It \\ as not mere impracticability that prompted
his resistance, but a superior discernment that the evidence
of necessity which imposes on a bvnslative body in times of
panic is not to be trusted. K\eu on a calculation of chances,
it is far more likely that other resources are available than
that so desperate an expedient should offer the only hope of
sulvation. Ni'v, a measure which in itself is inherently and
THE LEGAL-TENDER ACT. 399
irredeemably wrong cannot in any just sense be a necessity.
Mr. Collamer's speech, therefore, was only an energetic ex-
pression of his resolution, not that he would refuse to obey
necessity, but that he would refuse to believe it.
The position taken by Mr. Sumner wanted only the same
defiant confidence in the eternal laws of truth to have made it
still more impressive than any of the others. Unhappily, by
the side of Mr. Fessenden and Mr. Collamer, his conclusions
seemed tinged with irresolution :
'' And now, as I close, I will not cease to be frank. Is it neces-
sary to incur all the unquestionable evils of inconvertible paper,
forced into circulation by act of Congress, to suffer the stain upon
our national faith, to bear the stigma of a seeming repudiation,
to lose for the present that credit which in itself is a treasury, and
to teach debtors everywhere that contracts may be varied at the
will of the stronger? Surely there is much in these inquiries which
may make us pause It is hard, very hard, to think that such a
country, so powerful, so rich, and so beloved, should be compelled
to adopt a policy of even questionable propriety Surely we
must all be against paper money, we must all insist on maintain-
ing the integrity of the government, and we must all set our faces
against any proposition like the present, except as a temporary ex-
pedient rendered imperative by the exigency of the hour Oth-
ers may doubt if the exigency is sufficiently imperative, but the Sec-
retary of the Treasury does not doubt Reluctantly, painfully, I
consent that the process should issue."
The authority of the Secretary of the Treasury overruled
the scruples of the Senate, and the bill passed by a majority
of five votes on the legal-tender clause. It is scarcely worth
while to carry the scene back to the House, in order to ascer-
tain the fate of the Senate amendments, or to cull from the
second debate new subjects for quotation. It is easy, only too
easy, to ridicule and satirize the doctrines of public men, and
something like an apology to the public is due for the extent
to which this appetite has been indulged in these pages. It is
but just to add that Mr. Spaulding at least did strongly and
invariably insist upon the difference between legal-tender notes
that were fundablc and the later issue of greenbacks which
330 THE LEGAL-TENDER ACT.
were not so. In point of fact the difference was very slight.
There was nothing in the condition of fundability which made
legal tender anything but legal tender, nor would the princi-
ple of legal tender have been any sounder, even though it had
been attached to the bonds themselves. It is amusing to no-
tice that, as the later issues of legal tender were made, and the
depreciation became excessive, Mr. Spaulding by similar steps
became virtuous, until at last his virtue grew intense. He at-
tributed the failure of his favorite financial scheme to the
mistakes of others, and he proposed as an infallible cure a
restoration of his funding proviso. There is little probability
that Mr. Spaulding's mind will ever succeed in gaining a higher
stand-point than this, or will ever look over a wider horizon
where it can more broadly measure the uncontrollable power
of the elements which he, like the unlucky companions of
Ulysses, ignorantly set free.
Such was the history of the legal-tender bill. So far as any
evidence of its necessity can be drawn from the action of the
Executive at the time, the late decision of Chief Justice Chase
has left no doubt as to the facts. That Mr. Chase should, as
Secretary of the Treasury, have adopted the course he did
was doubly unfortunate : in the first place, because he created
legal tender ; and in the second place, because when the delu-
sion was over, and his mind reverted to its first sound princi-
ples, the action he had taken as Secretary of the Treasury
remained in the public memory to reduce the authority of the
opinions he was bound to express as Chief Justice. Into the
legal correctness or political propriety of these opinions it is
no purpose of this essay to euler. No one who holds strong
convictions against legal tender as a measure of finance is
likely greatly to trouble his mind with the question whether
sncli a power has or lias not been conferred by the Constitu-
tion upon ('diigrcss. Though it were conferred in the- nmst,
explicit terms language is capable of supplying, there could
be no excuse on that account for changing an opinion as to its
linancial merits, and its financial merits an; not a subject for
lawyers, nor even for judges, as such, to decide. These hap-
THE LEGAL-TENDER ACT. 33 1
pily rest on pi-inciples deeper than statute or than constitu-
tional law. They appeal to no written code, and whenever the
public attempts to overrule them, the public does so only at
its own peril.
There remains but one more point to touch. The common
impression undoubtedly is, that even though there were no
actual necessity for a law of legal tender so early as February,
1862, yet at some subsequent time the enactment of such a
law would have proved inevitable. This opinion should prop-
erly form the subject of a separate paper. If it be once ac-
knowledged that the law of February, 1862, was unnecessary
and passed by a practical fraud, the whole condition of the
argument is changed. Whenever the public has reached this
point, it will be time to enter upon the wider field of discussion
into which so vague and general a proposition must lead. Yet,
without venturing at present on any absolute denial of the
theory, since this would require much explanation and reason-
ing, it is only fair to say that, although the subject is scarcely
capable at present of positive demonstration, there is abso-
lutely no evidence to prove that the government might not
have carried the war to a successful conclusion without the
issue of a single dollar of its legal-tender paper. Such
appears to be the opinion of the Chief Justice, as it is un-
doubtedly the natural inference from economical principles.
It is, however, true that after the first issues of the paper,
its original purpose and importance as a resource against a
temporary exigency that purpose which had been so dis-
creditably used in forcing the bill through Congress was
almost wholly lost from sight, and the paper assumed entirely
new functions as a financial instrument.
The government, adhering to the policy of selling its bonds
only at par, was obliged to consider its paper as the par stand-
ard, and the next step was to issue of its own accord enough
paper to "float "the successive loans. This was equivalent
to selling its credit at the market price, with the addition of
voluntarily degrading its own standard of value. In order to
protect the nation's credit from degradation in the hands of
332 THE LEGAL-TENDER ACT.
bankers and brokers, the government undertook to dishonor it
of its own free will. As a financial policy, this tortuous and
disreputable expedient will not bear a moment's examination ;
but there was one incidental function of the paper, closely
connected with this, on which more stress may be laid. The
issue of paper money in large quantities does produce a tem-
porary and feverish excitement, which, during a certain
length of time, may facilitate borrowing, though at a frightful
ultimate cost. If the sole object of the legal tender were to
cause this temporary stimulus, and if this stimulus can be
proved to have been essential to financial success, the manage-
ment of the nation's financial affairs during the war may
admit of excuse if not of praise. Unfortunately, neither of
these conditions can be established.
This essay aims at no advocacy of any financial nostrum,
nor at any cure of present difficulties. In the popular humor
of the moment, it is more than ever doubtful whether any
advice that is wise would be listened to, or whether any advice
that has a chance of being listened to could possibly be wise.
Mere knowledge has no hold upon political power in its treat-
ment of this subject. Other considerations are supremo both
in Congress and in the public mind. But although knowledge,
and the application of simple truth in politics, arc for the
present divorced from power and no longer control the course
of current events, yet at least the past belongs to them as
their exclusive property, and no one can prevent the past from
receiving, sooner or later, the judgment which historical criti-
cism must inevitably exact for the betrayal of principles to
which it pretended allegiance.
THE RAILROAD SYSTEM.*
CHAPTER I.
THE BRA OF CHANGE.
~T~~rPON the 7th of August, in the year 1807, Robert Fulton,
V_J with his little party of anxious and doubting guests on
board the " Claremont," cast oft' from the piers of New York,
and the waters of the Hudson were first troubled by the strokes
of the steam-paddle. There are few Americans at least who
have not lingered over the story and shared in the excitement
of that famous voyage ; dwelling upon its every detail from
the moment the clumsy little steamer big with the fate of
commercial marines and of navies left her wharf at New
York, until the steeples of Albany shone in the distance.
Twenty-two years later the corollary to this great event was
worked out in England. Popular biographers have made the
world even more familiar with the incidents of this second
memorable day than are Americans with the story of Fulton's
voyage. On the 6th of October, 1829, George Stephenson, an
ex-stoker and a graduate of the coal-mines of Northumber-
land, but withal one of the most vigorous intellects which
England, rich as she has been in that class of products, has
ever given to the world, upon that day Stephenson drove
his little experimental locomotive " The Rocket " from Man-
* By CHARLES F. ADAMS, Jr. Much of the material used in the prepara-
tion of this paper originally appeared in the following articles in the North
American Review: The Railroad System, April, 1868 ; Railroad Inflation,
January, 1869; Railroad Problems in 1869, January, 1870; The Government
and the Railroad Corporations, January, 1871.
334 THE RAILROAD
Chester to Liverpool and back. " The Rocket " weighed only
four tons and a quarter, but Stephenson showed that it could
move at a rate of thirty miles an hour, and upon that day the
modern railroad system was born.
At exactly the same time, in this country, the Cumberland
Turnpike and its construction was a fiercely agitated political
question. It was part of a great system of internal improve-
ments then contemplated ; and, in identifying himself with it,
Henry Clay doubtless thoxight that he had imperishably con-
nected his memory with a monument more enduring than
bronze, with the Appian Way of America. The ambition
was an honorable one ; all human experience justified his
faith in the permanence of the foundations upon which he
rested it. From a period long before the Christian Era down
to the year 1829 there had been no essential change in the
system of internal communication. At present, before another
half century has yet elapsed, the Cumberland Turnpike is as
antiquated as the Appian Way, as useful, perhaps, but far
less interesting.
As to the railroad system, it long ago became impossible
exactly to compute the number of miles contained in it or the
millions of capital which its construction had cost; it is very
difficult upon cither of these points to arrive at conclusions
even approximately correct. Neither where the attempt is
made is the result at all encouraging. The mind fails to grasp
proposition^ <>f such magnitude; the mere piling up of num-
bers conveys no new idea. For present purposes it may, in
round numbers, be said that in 1870 there were about 12f),000
mill s of railroad in the two hemispheres, constructed at an
average cost of little less than 100,000 per mile, and thus
representing hardly less than twelve thousand million dollars
of invested capital. All this has grown out of the thirty-two
miles of road alone in existence just forty years ago.
Thi-se tiirim-s are certainly sufficiently startling ; but, larL'e
as they arc, they are men-using at a emistantly accelerating
rate. Thirty years ago in this country wo constructed aiimi
nllv some oOO miles of road : twenty years ago this amount
THE EKA OF CHANGE. OOO
had increased to 1,500, and as recently as ten years ago, it
had scarcely reached 2,000 ; now we build 6,000, and in the
year 1871 it is stated that enterprises involving 20,000 miles
of road and eight hundred million of dollars are simultane-
ously going forward to completion.
Though this material or financial aspect of the system is
that which is almost invariably dwelt upon, it is by no means
the most interesting one. Here is an enormous, an incalcula-
ble force practically let loose suddenly upon mankind ; exer-
cising all sorts of influences, social, moral, and political ; pre-
cipitating upon us novel problems which demand immediate
solution ; banishing the old before the new is half matured to
replace it ; bringing the nations into close contact before yet
the antipathies of race have begun to be eradicated ; giving
us a history full of changing fortunes and rich in dramatic
episodes. Yet, with the curious hardness of a material age,
we rarely regard this new power otherwise than as a money-
getting and time-saving machine. We know sufficiently well
the number of passengers and of tons of freight which the rail-
road system annually moves ; we know how much it cost, we
guess at what it will return ; but not many of those who deal
in its securities, or live by means of it, or legislate for it, or
who fondly believe they control it, ever stop to think of it as,
with perhaps two exceptions, the most tremendous and far-
reaching engine of social change which has ever either blessed
or cursed mankind.
It cannot, therefore, be time wasted to look for a while at
the new agent or master from the other point of view, to
consider how it has already affected human interests. Some
such discipline is absolutely necessary before any one can be
at all fitted to approach the very difficult problems arising out
of it which are certainly in store for us, both socially and po-
litically, in our immediate future. Perhaps if the existing
community would take now and then the trouble to pass in
review the changes it has already witnessed it would be less
astounded at the revolutions which continually do and contin-
ually must flash before it ; perhaps also it might with more
336 THE RAILROAD SYSTEM.
grace accept the inevitable, and cease from useless attempts at
making a wholly new world conform itself to the rules and
theories of a bygone civilization.
Among the transformations effected by steam-locomotion,
perhaps the most obvious of all is the rapid enlargement of
the area of civilization. Emigration has recently passed into
a new phase of development, under which it might almost
be said that entire nations have been mobilized. Until as
recently as the year 1847, the old Phoenician method of colo-
nization, somewhat improved in details, yet prevailed. As
the Greeks sent out colonies to the ^Egean isles, to Asia
Minor, and to Sicily, as the Romans conquered the barba-
rians, and then held them as colonists, so the Spanish, the
Dutch, the French, and the English planted their offshoots
in every quarter of the globe called uncivilized. In some
regions, as in the East, they held races in subjection, and fos-
tered colonies of the Roman type, while in others the}' estab-
lished feeble settlements on the model of the Greeks. As a
rule, the growth of these colonies was as slow in the modern as
it had been in the ancient times. By no means was it always
even rapid enough to be healthy. A few, in the long cour.se
of years, struggled through the vicissitudes of infancy and
became flourishing communities; many languished, and many
died. The law of their progression through twenty centuries
had continued essentially the same.
At length, in 1846, vague rumors of regions rich beyond all
precedent in golden ores, and only then discovered on the
shores of the Pacific, pervaded the whole civili/ed globe, and,
under the influence of steam, a new phase of colonization at
once developed itself. To the new gold-fields rushed whole
populations, and forthwith steam became their servant, and
bound them closely with the older world. Where yesterday
had lieen a wilderness, California and Australia took their
places amoiiLr the communities of the globe. The new era was
making itself Celt, and, under its fostering impulse, communi-
ties sprang into life full grown. Without the assistance..!'
steam, settlements would probably have been established, and
THK ERA OF CHANGE. 337
lingered in slow growth, along the shores of the sea and on the
banks of navigable rivers ; but the steamboat and the locomo-
tive lent their aid, and the very Arabs of civilization became
substantial communities. So far as the inducement of gold
was concerned, the same process now going on upon both slopes
of the Rocky Mountains was witnessed in the colonization of
Mexico and Cuba. With Cuba it succeeded, as the ocean con-
nected the colonist with the world ; with Mexico it failed, be-
cause colonization was too rapid to be healthy, and the scat-
tered emigrants, cut off from and unsupported by the inter-
course of their kind, merged into, and both degraded and were
degraded by, the semi- civilization of the aborigines. Such was
not the case with Nevada. The discovery of some black-look-
ing, heavy fragments of stone in the uninhabited, hideous
region of the Great Basin suddenly revealed to the world in
1859 the existence of that famous Comstock lode, which almost
at once called a State into existence. Mining-camps, towns,
and even cities started up like mushrooms and at once experi-
enced the influence of the new law of civilization. No long,
wearisome, and dangerous wagon-road, scarcely marked out
across the plains, connected a nomadic population of semi-bar-
barous, uudomesticated men with a distant civilization which
was to them as a dream of their childhood ; but, almost at
once, the ringing grooves of the railroad merged them with the
denser populations of the East and West. So the new era of
material development, by a process of its own, is peopling and
subduing the wilds of America and Australia. This is the
present exemplification of a law which dates back only twenty
years.
What other possible exemplifications of it await us 1 Cali-
fornia and Australia have revealed their secrets ; how long
will those of Mexico and South America and Africa remain
concealed ] The application of the new process of develop,
nient to Mexico and South America can only be a question of
time ; already begun, it must go on. But as yet Africa can but
be accounted among the possibilities of the future. Let it
once share the fate, as it one day may well do, of California or
15 v
338 THE RAILROAD SYSTEM.
of Australia, let it once reveal a hidden wealth, which some-
where surely exists, and those now living 'may see the solu-
tion of its enigma. Now, such a result is but a dream ; but
it is a dream far less strange than the Australian and Cali-
foruian facts of the last twenty years.
We are always inclined to look upon the world as finished,
upon known forces as having produced their final results ; but
results are never complete. Perhaps in 1481 the thinkers
of that day may have considered that the printing-press had
expended its force as a new power; and in 1522 philoso-
phers may have supposed that the ultimate material effects
of geographical discovery could be approximately estimated.
But, while it is given to ordinary men to see the full fruits
of their own action, the seed sown by men of genius, though
it may germinate early, arrives at its maturity only with a
distant posterity. The discoveries of Gutteuberg and Colum-
bus have produced more startling and more clearly defined
results upon the destinies of the human race within the last
twenty -five years than in any other equal period of time
during the four previous centuries. So will it be with the
discovery made by Watt, and its applications by Fulton and
Stephenson. A remote civilization in central Africa or South
America may perhaps hereafter gauge its whole influence in
subduing the wilderness and forcing its secrets from the in-
nermost recesses of nature, but the casting up of that balance
sheet will not fall to the lot of this century.
Yet the extent of the change wrought by the new force upon
the limits of civilization has hardly been greater than that
which has been effected in manners and habits of thought.
Whatever constantly enters into the daily life soon becomes
:m unnoticed part of it, and the infinitely varied influences of
the railroad system are so much a part of our everyday act
and thoughts that they have lircomr familiar, and have c
to be marvellous. The changes have been so gradual that we
have failed to notice their completeness. Yet most people whi
observe at all have vaguely felt that, there was some element
which made the present century different from all others.
THE ERA OF CHANGE. 339
a century of surprises. The young have found things differ-
ent upon attaining manhood from what they remembered in
their youth ; the middle-aged have wondered if change flashed
in the eyes of their fathers as it has in their own ; and the
old can easily remember a period less removed from the
Middle Ages than from the passing year. Our times are not
as those of our fathers.
No power has been so great as to be able to defy the
influence of the new force at work, and no locality so ob-
scure as to escape it. From the most powerful of Euro-
pean monarchies to the most insignificant of New England vil-
lages, the revolution has been all-pervading. Abroad and at
home it has equally nationalized people and cosmopolized
nations. The chief bonds of nationality are unities of race,
of language, of interest, and of thought. The tendency of
steam has universally been towards the gravitation of the
parts to the centre, towards the combination and concentra-
tion of forces, whether intellectual or physical. Increased
communication, increased activity, and increased facilities of
trade destroy local interests, local dialects, and local jealousies.
The days of small barrier kingdoms and intricate balances of
power are wellnigh numbered. Whatever is homogeneous is
combining all the world over in obedience to an irresistible
law. It is the law of gravitation applied to human affairs.
One national centre regulates the whole daily thought, trade,
and language of great, nations, and regulates it instantly. In
this way, France and England are already bound as closely
into two compact wholes, as were formerly the parishes of
London or the arrondissements of Paris. The same law is rev-
olutionizing Italy. In that country the long-scattered elements
of homogeneity, long kept by foreign influence apart, and
in a condition of artificial hostility and jealousy, yielding
with hard struggle to the new influence, are at last drawn
together, and are combining with each other as by chemical
affinity. Cavour had destiny on his side, and Austria strug-
gled against fate. But for steam the fate of Italy would yet
be more than doubtful. Local jealousies, foreign influence,
340 THE KAILKOAD SYSTEM.
and domestic ti'eason might well destroy all that has been
effected. Sicily might be set up against Sardinia, and Tus-
cany against Rome. But every mile of completed railroad
takes for Italian unity P new bond of fate, banishes a little
more of local jealousy, local interest, and local dialect, and,
without the aid of a leader, completes the unfinished task of a
statesman.
The same phenomena and the same results are witnessed in
northern Europe. The nationalities gravitate. The old, arti-
ficial, evil barriers set up by dynasties upon certain inhuman
theories as to the balance of powers are visibly breaking down.
All Germany, to its own great amazement, finds itself irresist-
ibly drawn towards Prussia, and Prussia will very shortly, not
less to its own amazement, find itself Germanized. A power
stronger than diplomacy or statecraft is steadily and silently
at work ; but while, in one locality, it compels to union, in
another it tears asunder. Germany unites, but Austria, made
up of discordant elements which for centuries have been re-
tained under one head by a skilfully contrived and artificially
stimulated antagonism and jealousy of forces, rapidly finds her
position becoming untenable. The Hun, the Croat, and the
Transylvanian will not combine. They have no affinities of
race, of language, or of interest, the ingredients will not
mix. To yield the popular reforms insures disintegration : to
resist them provokes revolution. The revolutions of the
steam-engine have at last rendered forever impracticable the
traditional policy of the house of Hapsburg.
The same new elements are rapidly working out its prob-
lems for Russia. Not twenty years ago all Europe was per-
plexed and alarmed by the growth and imagined power of the
empire of the Czars. The seeds of destruction seemed, how-
ever, to lie hidden in the very successes of power. It might
well be deemed impossible that the vast, incongruous, over-
grown empire could remain united from the Baltic to the
Bosporus. All this is now changed. Within the last few
years only, brought to it in great degree by the disasters
of the Crimea, the ingredients have been cast into the, cru-
THE ERA OF CHANGE. 341
cible. Railroads are in course of construction all over the
country, and, under their influence, the affinities day by day
unite. In a few years Constantinople will be nearer to St.
Petersburg than Moscow once was, and the whole great na-
tion will be bound together hard and fast by the iron bands.
On this continent, our own country is the child of the loco-
motive. With us it has neither combined homogeneous ele-
ments, nor forced into conflict those that were incongruous,
but it has rapidly disseminated one element over a vast wil-
derness. The steamboat and railroad alone have rendered
existing America possible.
Such are some of the results of peace. The same force
has left a deep mark on the results of modern warfare, a
mark no less noticeable from its absence than from its pres-
ence. The history of two recent wars, not ten years apart,
perfectly illustrates the possible differences of result arising
from the regard or disregard of this new element of power.
These two are the war in the Crimea and our own Rebellion.
Russia failed of success in the Crimea, because she could not
avail herself of the steam-engine ; the Allies succeeded, be-
cause they could avail themselves of the steam-ship. Mar-
seilles and Plymouth were infinitely nearer to Sebastopol than
were Moscow and St. Petersburg. The new element of force
and combination, neglected by Russia in 1854, we availed our-
selves of with decisive effect in 1864. That one new element
of power wholly left out of their calculations by European
military authorities in exercising the gifts of prophecy on the
result of our struggle was the one element which made
possible the results we accomplished. They told us of the
vastness of the territory to be subdued, of the impossibility of
sustaining our armies, of the power of a people acting on the
defensive. They pointed to Napoleon's dismal experience in
Russia, and wondered and sneered at those who would not
learn from the experience of others, or profit from the disas-
ters of the past. They could not realize, and would take no
count of, the improved appliances of the age. The result the
world knows. It saw a powerful enemy's very existence de-
342 THK HAILROAD SYSTEM.
pending upon a frail thread of railroad iron, with the effectual
destruction of which perished all hope of resistance : it saw
Sherman's three hundred miles of rear, and the base and sup-
plies of eighty thousand fighting men in security three days'
journey by rail away from the sound of strife; it saw two
whole army corps, numbering eighteen thousand men, moved,
with all their munitions and a portion of their artillery, thir-
teen hundred miles round the circumference of a vast theatre
of war, from Virginia to Tennessee, in the moment of dan-
ger, and this too in the apparently incredibly brief space of
only seven days. From Alexander to Napoleon, the possibil-
ities of combination in warfare were in essentials the same.
Within thirty years of the death of Napoleon, that was ac-
complished which to him would have read as the tale of some
Arabian Night. The changes of thirty years threw deep into
the shade those of thirty centuries.
All those yet referred to are but the interior circles of the
influences already perceptible from the disturbing action of
this one new force. It does not confine itself to nationalizing
each severed race, but it cosmopolizes nations. It is in this
respect, perhaps, that the world is brought face to face with
the most subtle and disturbing influence of its new em, an
influence of which the early quickenings are but now making
themselves felt, and the complete development of which must
be the work of another century. As a result of the frequent
and easy intercourse among the nations which has existed of
late, the rapid exchange both of thought and of presence,
there has arisen a steady and increasing tendency towards a
union of sympathetic forces, overcoming the barriers of lau-
LMniue. habit, and race. New questions arc looming up, involv-
ing the social relations and the division of the fruits of indust i \ ,
which are common to all countries, and which bid fair in great
degree to supersede questions of local interest. The two great
permanent parties into \\liidi mankind must always be divided
are thus brought vividly into the foreground carrying on their
struggle over these problems in a wav hitherto unknown. The
innovators strive to emliine the world over. They regard the
THE ERA OF CHANGE. 343
peculiar class of questions with which they concern themselves
as overriding all considerations of religion or nationality,
the ancient sheet-anchors of society. They hold international
congresses and organize international associations, thus seek-
ing gradually to create a government within existing govern-
ments. The end they keep ever in view is such a close con-
centration of forces as shall enable them to act with decisive
effect upon any point of immediate conflict. Meanwhile the
party of conservatism, divided by traditional lines, seeks con-
tinually to effect the impossible by struggling to preserve forms
from which the life has gone out. Hence results a period of
transition, marked by a state of human affairs almost wholly
wanting in the one element which mankind most eagerly
covets, that of stability. The party of attack does not as yet
know what it really desires, and the party of resistance mainly
sustains itself by virtue of the blunders of its opponents. It
would be wholly futile to philosophize over the possible re-
sults of this wide array of forces. So tar as the facilities of
intercourse affect them, the issue would seem to be, whether,
in the process of time, a unity of end among men may be
brought to override the prejudice of race. The most advanced
portions of the world are unquestionably still far from any
such result ; this description of mobilization is hardly yet
begun. At the same time passing events in Europe would
seem to indicate that the seed may now be sown broadcast,
which is destined to grow until it shall shatter the whole fabric
of modern society.
Hitherto this tendency to assimilation has expended itself
in the reduction of differences. Much in the way of destruc-
tion yet remains to be done before the plan of construction
can reveal itself. Meanwhile an incessant wearing away of
individual characteristics is very perceptible. More notably is
this the case as regards the outward aspect of civilized countries.
Since 1830 all the world travels. Already the whole Cau-
casian race looks alike and talks alike, and is rapidly growing
to live alike and to think alike. We mix and mingle, until
there is no strangeness left. Those of middle life yet remem-
344 THE RAILROAD SYSTEM.
ber Paris and London in the days of the diligence and the
stage-coach ; and Rome has come directly within the influence
of railroads only within the last ten years ; but, after all, the
mushroom cities of America, in their very brick and mortar,
in the architecture of their buildings and the age of their
walls, are the same in appearance, and just as ancient, as
modern London or Paris. We dream of England as old ; we
dwell upon the descriptions of English humorists, and picture
to ourselves the quaint rambling inns and familiar streets of
Dickens, the haunts of Dr. Johnson and of Boswell, the
spots made familiar by Irving and his great progenitor who
showed old Sir Roger the sights of the town ; we insensibly
associate with modern London, in childlike fancy, the familiar
scenes of English literature, from Prince Hal and Jack Falstaff
at the Boar's Head Inn to Mr. Pickwick snuffing the morn-
ing air in Goswell Street. We still go to that city vaguely
expecting to find the quaiutness we imagine ; at any rate,
we do not look for what we left behind us in America.
Probably some of this quaintness did until recently linger
about London. But though 1829 did not work all its changes
at once, the old and quaint went out with stage-coaches. To-
day we might as well look for traces of the Indians on Bos-
ton Common, or of the renowned Wouter Van T wilier on
Manhattan Island. Paris and London have yielded to the
new influence, and are giving up their distinctive characteris-
tics, to become the stereotyped railroad centres of the future.
Rome, under the influence of the Papacy, resisted the revolu-
tion a little longer; and there, until recently, the traveller
could yet, dwell a moment with the past, and enjoy an instant's
forgetfulneM <>f the wearying march of progress. But even
there the shrill scream of the steam-whistle broke the silence
of the Campagna, and a steam-engine had possession of the
palace of the Ccnci.
At home, too, we notice similar change. The Revolution
has swept away the last vestiges of colonial thoughts and
persons. Who that lias ever formerly lived in a New Eng-
land country town does not remember its old quiet and dul-
THE ERA OF CHANGE. 345
ness, its industry, the slow, steady growth of its prosperity,
and the staidness of its inhabitants ? There, also, you met a
class of men now wholly gone, dull, solid, elderly men, men
of some property and few ideas, the legitimate descendants
of the English broad-acred squires. They were the gentry,
the men who went up to the General Court, and had been
members of the Governor's Council ; they were men of formal
bearing and of formal dress, men who remembered GoA r ernor
Hancock, and had a certain trace of his manners. To-day this
class is extinct. Railroads have abolished them and their
dress and their habits, they have abolished the very houses
they dwelt in. The race of hereditary gentry has gone for-
ever, and the race of hereditary business-men has usurped its
place. They represent the railroad, as the earlier type did
the stage-coach.
The same phenomena are witnessed in the regions of thought.
It is bolder than of yore. It exerts its influence with a speed
and force equally accelerated. The newspaper press is the
great engine of modern education ; and that press, obeying
the laws of gravitation, is everywhere centralized, the rays
of light once scattered are concentrated into one all-powerful
focus. To-day's metropolitan newspaper, printed by a steam-
press, is whirled three hundred miles away by a steam-engine
before the day's last evening edition is in the hands of the
carrier. The local press is day by day fighting a losing cause
with diminished strength, while the metropolitan press drives
it out of circulation and filches from it its brain. Ideas are
quickly exchanged, and act upon each other. Nations can no
longer, except wilfully, persist in national blunders. Litera-
tures can no longer lie hid as did the German until so few
years ago. Since 1830 the nations are woven together by the
network of iron, and all thoTight and results of thought are
in common. The same problems perplex at once the whole
world, and from every quarter light floods in upon their solu-
tion. But increased communication has not alone quickened
and intensified thought, it has revolutionized its process.
One great feature of the future must be the rapid uprising
15*
346 THE RAILROAD SYSTEM.
of new 'communities. Of all such communities questioning
is a leading characteristic. They have neither faith in, nor
reverence for, that which is old. On the contrary, with them
age is a strong prima facie evidence of badness, and they love
novelty for novelty's sake. This mental inclination will ulti-
mately apply the last test to truth, for error has its full chance
and is sure of a trial. The burden of proof seems likely to be
shifted from the innovator to the conservator.
It is in the domains of trade, however, that the revolution
is the most apparent and bewildering, that the sequences
of cause and effect are most innumerable and interminable.
Herbert Spencer says that it would require a volume to trace
through all its ramifications the contingent effects of the every-
day act of lighting a fire. These effects are imperceptible, but
the influence of steam locomotion as applied to trade is as
apparent as it is infinite. In this respect steam has proved
itself to be not only the most obedient of slaves, but likewise
the most tyrannical of masters. It pulls down as well as
builds up. The very forces of nature do not stand in its way.
It overcomes the wind and tide, and abolishes the Mississippi
River. It is as whimsical as it is powerful. The individual it
carries whithersoever he will, but whole communities it carries
whither they would not. It makes the grass grow in the once
busy streets of small commercial centres, like Nantucket, Sa-
lem, and Charleston. It robs New Orleans of that monopoly
of wealth which the Mississippi River once promised to pour
into her lap. It threatens to make a solitude of the once busy
\\ li.-irves of Boston, and it fills New Hampshire with deserted
farms. For some mysterious reasons which it will never dis-
close, it carries wealth and importance past one threshold that
it may lay them down at another. The old channels of com-
merce are broken up, and the points which depended upon them
are left to philosophize upon the mutability of human ati'airs in
forgotten obscurity. Meanwhile San Francisco and Chicago
s|)rin^ up like a very palace of Aladdin, and the centre of
|>"pulation is transferred, as if by magic, to some point which
existed in the school-books of the present generation of men
THE ERA OF CHANGE. 347
only as a howling wilderness. Meanwhile prices seek a level ;
produce is exchanged ; labor goes, where it is needed. Eng-
land and Russia exchange bread for cotton, and Iowa and Ire-
land, labor for corn. These countries are nearer to one another
now than in 1829 were the very counties of England. In-
creased activity demands new centres and channels, and those
phenomena result which men call railroad centres, the appari-
tion of which on the face of the earth is confounding and puz-
zling all thinking men. At the time of the great plague, just
before the fire of 1666, De Foe estimated the population of
London at one million souls ; but Macaulay places it, more
accurately, for about the same time, at 500,000. In the
succeeding century and a half it increased about threefold,
until, in 1831, it numbered 1,600,000. The new era then
commenced, and from that time the growth of London was
almost to be dated. During the next twenty years its popu-
lation had risen to 2,500,000 ; and to-day it contains within
its limits hardly less than 4,000,000 of human beings. Be-
tween 16G6 and 1821 it had a growth of three hundred per
cent, and it has experienced nearly similar increase between
1821 and 1871. When Fulton steamed up the Hudson, Paris
was a city of rather more than half a million of inhabitants,
and it now numbers about 2,000,000. In the days of Louis
XIV. it had 490,000, and in 1841, 912,000, an increase
of one hundred per cent in two centuries. In 1866 it had
1,825,000, an increase of one hundred per cent in twenty-
five years.
The results in America have been no less extraordinary.
In 1807 New York numbered a population of about 75,000.
Chicago existed in 1829 only as an uninviting swamp in-
habited by a dozen families, and San Francisco was hardly a
name. In 1830 New York contained over 200,000 inhabi-
tants ; and to-day they exceed 900,000, without considering
those suburbs which enter so largely into the bulk of London
and Paris. Between 1829 and 1870 Chicago had increased to
300,000, and San Francisco since 1847 has become a city of
150,000 inhabitants.
348 THE RAILROAD SYSTEM.
Nearly twenty years ago Macaulay called attention to the
fearful human material of which this growth was composed.
He then referred to the arguments used by Gibbon and Adam
Smith to prove that the world would not again be flooded with
barbarism ; and he remarked that it had not occurred to those
philosophers " that civilization itself might engender the bar-
barians who should destroy it. It had not occurred to them
that in the very heart of great capitals, in the neighborhood
of splendid palaces and churches and theatres and libraries
and museums, vice and ignorance might produce a race of
Huns fiercer than those who marched under Attila, and of
Vandals more bent on destruction than those who followed
Genseric." When Macaulay used these words in Edinburgh
in 1852, he could hardly have realized that the growth of
those great cities was but just begun ; but since that time
London has increased fifty per cent, and the " Vandals " of Paris
have recently given a point to his well-balanced period which
it never had before. For America, and the permanence of
republican institutions, this tendency of population to concen-
trate at great railroad centres, cannot fail to be a subject for
anxious consideration. The success of popular government
must depend solely upon the virtue, the intelligence, and the
public spirit of the people governed. As long as the members
of any community can be approached by reason, or by argu-
ment, or by considerations of the public good, there is no sound
cause to despair of the safety of any republic. It is useless,
however, to hope or to struggle for that std'civ for any length
of time after one party has firmly established its power upon
'lie basis of an ignorant, unapproachable proletariat. The
tendency of all self-governed great cities is inevitably towards
this political control through the agency of irresponsible masses.
The history of Athens and of Rome is continually repeating it-
self, and never has its reproduction displayed features more
closely rcscinbiinu: the Lriv.-it originals than now in the lead-
ing iiiuiiici|i;ilities of America. In what respect, except in
ii;iiuc, docs I ho city of New York enjoy a republican form of
government ] Yet the difference between New York and the
THE ERA OF CHANGE. 349
other great cities of the continent is simply one of degree.
The same tendencies, which must inevitably lead to the same
results, are manifest everywhere. The dense aggregation of
mankind may be said to necessarily result in an upper class
which wants to be governed, and in a lower class which has
to be governed. The extreme of luxury and the extreme of
misery are equally fatal to public virtues ; and no one can
doubt that the great cities of the future are destined infinitely
to surpass, both as regards luxury and misery, anything of the
kind which the world has yet seen. This must result from
the mere progress of railroad development. It is no less cer-
tain that republican America is destined very shortly to be
dotted all over with these centres of population. Created by
railroads, the railroads lend to them a gravitating influence
both moral and political which cannot be ignored. To hope
for a pure government by the people at large while ignorance
and corruption are the ruling forces in these centres, is as
futile as it would be to look for healthy members where the
vitals are diseased. This it is which really constitutes that
problem of great cities which so confounds the friends of popu-
lar government.
Meanwhile the influence of this railroad power upon the
politics of America and the political theories at the base of
party organizations has been very strongly denned and little
considered. Paradoxical as it sounds, it has actually made
that which was mistaken, right, and that which was danger-
ous, safe. The year 1830 was a year of political revolution
in America, the friends of a strong central government went
out of power, and a party hostile in theory to all concentration
of governmental functions came in. It can now hardly admit
of a doubt that both parties to that bitter and memorable
struggle were right, and it is equally true that both were
wrong. Both, however, were made right or wrong by one
clement which entered into the practical solution of the ques-
tions agitated with decisive consequences, an element wholly
unanticipated by either side, the element of improved loco-
motion. Jt may now with safety be premised that a strong
350 THE RAILROAD SYSTEM.
central government was a political necessity for the United
States of a time anterior to 1830 ; that in this respect Hamil-
ton was right and Jefferson was wrong. It may also, with
equal safety, be asserted that a strong central government con-
stitutes a continually increasing political danger for the United
States of the period subsequent to 1830 ; that the school of
Hamilton is wrong, and the school of Jefferson is right. An
equally thoughtful and observant man would thus have been
a Hamiltonian up to 1830, and a Jeffersonian subsequently
to that date. During the first period he would have seen
a country of vast dimensions and sparsely settled, without
means of communication or diversified industries, full of local
jealousies and destitute of any recognized centre of thought or
business, a country, in short, in constant danger of going to
pieces from lack of cohesion, a country in which the cen-
trifugal force continually tended to overpower the centripetal.
Then the railroad system sprang into being, and all this rap-
idly changed, science suddenly supplied that cohesion which
it had been the great study of the statesman to provide. The
point from which danger was to be anticipated thus gradually
passed to the other side of the circle, everything centralized
of itself, all things gravitated : the unaided centripetal
force was clearly overcoming the centrifugal. Thus the error
of yesterday had become the truth of to-day, and the only
men who were hopelessly wrong were the thoroughly consist-
ent. The world at large rarely allows for these changes of
conditions; a statesman or a political party must stand or fall
with the permanence of that policy with which they have
identified themselves, and posterity rarely stops to consider
how circumstances have altered cases. Yet it is none the
i rue that the inventions of Robert Fulton and George
Stephenson settled, in the minds of all thinking men, those
great questions of internal policy for the United States gov-
ernment which were so fiercely contested in the first cabi-
net of Washington ; and the way in which they settled
them was by altering every condition of the problem. The
destinies of nations are, perhaps, very much more frequently
THE ERA OF CHANGE. 351
decided in the workshops of mechanics than in the councils of
princes.
The influence of this same power has, however, made itself
felt by the people of the United States in their political ca-
pacity more recently and in another way, though the sequel
of this last experience is yet to be developed. The war of the
rebellion left the United States heavily burdened with debt, '
upon which a high rate of interest had to be paid, while its
people were at once infected with a mania for speculation and
debauched by an irredeemable paper currency. A system of
taxation was in \ise calculated to excite in equal degrees the
wonder and contempt of all future students of fiscal problems.
Under these circumstances the shrewdest men of business were
always predicting an immediate and wide-spread commercial
catastrophe, and the more cunning politicians hastened to con-
ciliate the spirit of repudiation, which they asserted was sure
to rise up. History furnished no precedent which would lead
any political economist to suppose that a currency once greatly
debased would ever appreciate through a regular and healthy
process ; and the statesman could not but see with alarm evi-
dences of indebtedness passing out of the country into foreign
hands by the hundreds of millions. It is not too much to say
that the financial history of the six years between 1865 and
1871 falsified every prediction ever made as regards it. No
wide-spread commercial crisis, no general collapse of private
credit took place in America, nor did that one which swept
over England cross the Atlantic ; the public debt was steadily
decreased, and the interest upon it was cheerfully paid ; the
spirit of repudiation ruined in its early death the hopes of
numerous political charlatans ; the currency rapidly appreci-
ated to its gold value, while the mass of indebtedness against
the country held in foreign hands constantly increased, and
showed no signs of a retuni for redemption.
The simple truth was that, through its energetic railroad
development, the country then was producing real wealth as
no country ever produced it before. Behind all the artificial
inflation, which, if the experience of the past was worth any-
352 THE RAILROAD SYSTEM.
thing, so clearly foreshadowed a catastrophe, there was also
going ou a production which exceeded all experience. This
new element vitiated the hest reasoned conclusions. The rail-
road system, acting upon undeveloped and inexhaustible natu-
ral resources, dragged the country through its difficulties in
spite of itself, it actually seemed as though fraud, ignorance,
and speculation combined were unable to precipitate disaster.
While all of these agents were noisily at woi-k, every mile
of railroad constructed was quietly adding many times its cost
to the aggregate wealth of the country, the tonnage carried
over the new roads built each year was many hundreds of mil-
lions in value, while that of the old roads always increased, so"
that the estimated average of annual transportation, which
was but $85 for each inhabitant of the country in 1860, had,
in 1870, risen to $300.
Such an increase in actual production could alone account
for the general setting aside of all the lessons of the past.
Not the least instructive part of this experience was, perhaps,
the complacency with which a certain class of philosophers
mistook the operation of a great, quiet, natural force for the
results of their own meddling. One school attributed the
freedom from commercial disaster to the juggle of paper
money. Another saw in the great prosperity of the day
nothing but a vindication of the absurdities of protection.
While sciolists talked, however, the locomotive was at work,
and all the obstructions which they placed in its way could at
most only check but never overcome the impetus it had given
to material progr* -s.
Tin* same direct influences could unquestionably be traced
into morals, which have been observed in other departments
of life. The laws of combination and gravitation apply to
ethics no less than trade. Here, however, it is far more
difficult than elsewhere to strike the balance of profit and
loss. Whether the world, as a whole, is better or worse
than it was forty years ago is a point upon which the statisti-
cian can as yet throw little light, and concerning which the
divergence of opinion between the old uud the young is apt to
THE ERA OF CHANGE. 353
be excessive. One thing is very clear, the golden age of purity
and simplicity has always lain behind us ever since those early
times when it was first created in the imagination of the earli-
est poets. We never realize how bad the old times were, until
we come to grope amid the happily forgotten records of their
filthy vices.
Such is a passing sketch of some of the disturbing influ-
ences of the new power on the general aspect of the century,
influences so all -pervading in their results as to be rather
revolutionizing than disturbing. Whatever affects the whole
affects every part. It would therefore be mere waste of time
to follow out with curious assiduity the myriad remoter rami-
fications, until, among larger incidents of change, we should
find the possibilities of emigration modifying for a time the
terrible truth of the Malthusian theory of population, and the
exodus of the nations going quietly on before our eyes upon a
scale which reduces to insignificance the largest of those
human tides the flow of which is traced through -the pages of
Gibbon ; or we might see the Highlander expelled from the
mountain fastnesses of his clan, because the railroad has made
them so accessible as a pleasure-ground to the English noble-
man, and a writer like John Stuart Mill forced to declare that
so wonderful are the changes, both moral and economical,
taking place in our age, that, without perpetually rewriting a
work like his "Elements of Political Economy," it is impossi-
ble to keep up with them. Such would be the instances
among nations and authors, and, descending, we should see
the increased demand for a cheap press influencing the price
of rags in a country village, and the increased use of lubri-
cating oil compensating to the fisheries for the innovation
of gas. All of these, too, are the revolutions worked in a
single half-century by a force which is as yet bound up in its
swaddling-clothes. Its iron arms have been stretched out in
every direction ; nothing has escaped their reach, and the most
firmly established institutions of man have proved under their
touch as plastic as clay. Everything is changing, and will
change with increasing rapidity. No human power can stop
354 THE RAILROAD SYSTEM.
it. It is useless to cast back regretful glances at the old quiet
days of other years and another order of things, at the
middle ages antecedent to 1807. The progressive may exult,
and the conservative may repine, but the result will be all the
same. We must follow out the era on which we have entered
to its logical and ultimate conclusions, for it is useless for men
to stand in the way of steam-engines. Change is usually ugh-,
and the whole world, both physical and moral, is now in a
period of transition. But the serpent does not cast his skin
till the new one is formed beneath the old ; and because the
old world is now sloughing its skin, we cannot conclude that
the world of the future is to exist without one.
" To-day I saw the dragon-fly
Come from the wells where he did lie.
" An inner impulse rent the veil
Of his old husk; from head to tail
Came out clear plates of sapphire-mail.
" He dried his wings; like gauze they grew;
Through crofts and pastures wet with dew,
A living flash of light he flew."
It would be simply presumptuous to try to cast the horo-
scope of this revolution after thus surveying the changes
already wrought. If we wished to draw a few feeble infer-
ences to reassure ourselves in regard to the future, we could
best do so b falling back on the analogies of the past.
The changes of the future will undoubtedly be more rapid,
more complete and more bewildering than those of the past,
in the same ratio that the combined forces now at work are
engines more powerful for change than the comparatively sim-
ple ones of the earlier days. Still, the past cannot but throw
some light on the future. To the dwellers in it, the world
doubtless seemed sufficiently lovely before the middle of the
fifteenth century ; but then the sloughing-time came on, and
the old skin was slowly shed, and, in the ripeness of time, the
new was found better. The old passed away amid the fierce
contortions of tortured communities, through wars and revo-
lutions and inquisitions and anarchy. The period of change
THE ERA OF CHANGE. 355
was ugly, and mankind often had cause for discouragement ;
but the worst times were found bearable, and the result has
justified the price. Our era has just begun to work its own
revolution. That its results will all be pleasant, we may not
hope ; that its course will be marked by fierce agonies, we have
been fully taught by the events of the last few years ; but that
it will in the end serve to elevate and make more happy the
whole race of man upon earth, we have some cause to trust.
Yet in surveying the history of the last great era just finished,
the distinctive era of the printing-press, with all its changes
from 1444 to 1807, the imagination is bewildered and lost
in the vain effort to realize those more striking changes which
are to make remarkable the new era upon whiuh we have just
entered, the distinctive era of steam locomotion.
CHAPTER II.
THE TRANSPORTATION TAX.
IF by Free Trade is meant the unrestricted exchange of
the products of their industry among the peoples of the
earth, George Stephenson more than any other man deserves
to be called the great practical Free Trader. His invention
went very far towards abolishing the one sure basis of the
whole protective system, the one tax for which not Adam
Smith nor Cobden, neither abstract reason nor corn-law leagues,
could suggest any measure of repeal. Stephenson took off
from the world at large four fifths of the transportation tax.
During the last quarter of a century it may be said that the
whole efforts of the protectionist school have been concentrated
upon the attempt to replace, in the form of an arbitrary impost,
a portion of that burden which the improved facilities of trans-
portation had removed from human industry. Meanwhile apt
illustrations are not far to seek of the part which the railroad
system has borne in the great work of bringing the price of
350 THE HAILKOAD SYSTEM.
things in their place of consumption as near as possible to their
price in that of production. Perhaps as striking an example
of this as could be found is presented in the case of the lead-
ing material interest of the American people, the produc-
tions of agriculture, and more especially corn and wheat.
Formerly, upon the old highways, it cost as much to carry a
bushel of corn 125 miles, or a bushel of wheat 250 miles, as
either of these articles was worth. The railroad has increased
this distance of possible carnage twentyfold. In other words,
it now costs less to carry a given quantity of corn or wheat
from Boston to San Francisco by rail, than forty years ago it
would have cost to carry the same quantity by the highway
from Boston to Albany. Where, therefore, formerly a given
centre could, as regards these cereals, hold tributary to it,
through land carriage and before all value was exhausted,
only some 50,000 square miles, or a region of about the
area of New York, it can now hold, at the same cost, over
8,000,000 square miles, or more than twice the area of the
whole United States.
Taking this given point as a centre, therefore, it follows that
a slight fractional increase or decrease in the transportation
tax must add to it or strike from it thousands of square miles
of tributary area. For instance, Chicago is the great produce
market of the country, and New York is its commercial centre.
The distance from one point to the other is a thousand mill's.
In these days of fierce competition, five cents a bushel is no
small fluctuation - loss or gain for the dealers in corn and
wheat. As a part of the transportation tax between Chicago
and New York this important variation of five cents a bushel
represents the merest trifle more than one mill and one half
per ton per mile. To the producers of a very large portion
of the interior of the continent, therefore, a matter of two
mills a ton per mile in freights must necessarily involve the
whole difference between a profit and a loss on their annual
industry.
Exception may perhaps bo taken to the xise of the odious
word " tax," in connection with the charge imposed for carriage
THE TRANSPORTATION TAX. 3~>7
by rail. It may be said that this is a tax in no . other sense
than a charge for any other necessary service rendered is a
tax. Usage and long-established authority have, indeed, fixed
upon this word a meaning which is too exclusively political,
as though some form of government could alone, and solely
for its own purposes, impose a pecuniary burden under the
name upon the wealth of a community. Such a definition is
open to serious objections. It not only creates a mischievous
confusion of ideas, but it actually deceives the community as
to the extent and unnecessary nature of many of the burdens
under which it labors. The burden of taxation, as it is called,
is crudely measured by the proportion which the public reve-
nue bears to the numbers or supposed wealth of any commu-
nity as expressed in the census. Such a measure is fallacious
in the extreme. A tax is not only a contribution taken directly
from the resources of any community for governmental or
public uses, but, in its general significance, it is also any bur-
den, natural or artificial, which, without altering the intrinsic
value, the quality, or the quantity of raw material, adds to its
cost before it reaches the consumer.
It is an elementary principle of political economy, that all
wealth comes from the soil ; neither human industry nor hu-
man ingenuity can produce any addition to the material pos-
sessions of mankind, except from the earth. Everything pro-
duced from the earth, moreover, is valuable only in so far as
some one wants it and is willing to exchange labor or its prod-
ucts for it. Speaking somewhat loosely, all mankind may,
then, be divided into the two great classes of consumers and
pi-oducers, to the first of which every human being, and to
the last of which the vast majority of mankind, belongs. Be-
tween the producer of the raw material and the consumer there
comes an intermediate class, the possessorsof skilled labor, those
who by their industry lend an additional intrinsic value to tfie
raw material. Such are all manufacturers. The sum total,
therefore, of the wealth of any community and of the whole
world consists of all that which it has extorted from the earth,
enriched by any factitious value which may have been added to
358 THE RAILROAD SYSTEM.
it. These two elements of cost production and manufac-
ture are necessary preliminaries to a fitness for consumption :
everything beyond these which adds to the price of a commod-
ity before it reaches the consumer is a tax levied upon con-
sumption or production ; just as much a tax, if the increase is
charged for transportation and collected by an importer over
his counter, as if it is charged for revenue and received by a
collector at the custom-house. If tea, for instance, is raised
and cured in China, and thence transported thousands of miles
to London, and the consumer in London pays three times the
price at which it was sold by him who cured it in China, that
additional sum, however fairly earned by the services rendered,
is nothing more nor less than a tax of two hundred per cent
on the consumption of tea in London, which again reacts and
affects the profit on its production in China. It is a necessary
tax, perhaps, in view of existing means of transportation, but
none the less is it a tax. The process of removal from one
point to another from the point of production to that of
consumption has added nothing to the wealth of the world.
It has, indeed, distributed, but it has in no way increased or
intrinsically qualified human possessions ; for after it, as before,
whether in Canton or in London, the world possessed the same
number of pounds of tea of a given quality. So of flour, of
cotton, and of every other product of the soil. Transports t ion
is simply a distribution of wealth in existence ; and the cost
of distribution constitutes a tax on consumption, levied in-
differently on the producer, the manufacturer, and the con-
sumer. This tax must necessarily fall upon all parties, though
in imt'qual proportions very difficult to ascertain. Could it be
wholly abolished, ami breadstuff's be transported without cost
to London, the exchangeable value ot flour would rise in ( '!iir:r">
and fall in Liverpool. Society would then at once be relieved
of a tax fn comparison with which all the imposts of govern-
ments arc trivial. In like manner, anything winch adds to the
necessary cost of transportation aggravates the tax, and any-
thing which diminishes it removes one more burden from
human toil.
THE TRANSPORTATION TAX. 359
These facts and principles must be clearly borne in mind,
else the great interest which communities have in all questions
of transportation cannot be appreciated. The preliminary
discussion may be fairly summed up as follows. All elements
of price which add to the amount paid by the consumer of any
commodity above the cost of the production and manufacture
are in the nature of direct taxes on consumption and of indirect
taxes on production, whether imposed by government, by
distance, or the friction of trade, everywhere and always a
tax.
The transportation tax, however, has one peculiarity in com-
mon with the tariff tax upon imports ; the lower it is fixed,
within certain limits, the larger in the aggregate it becomes.
Large aggregate receipts of railroad corporations, or large per
capita payments to their railroads by communities by no means
necessarily indicate an oppressive scale of railroad charges, but,
not improbably, the contrary. Industry pays a large tax be-
cause the tax is levied in such a way that industry is stimu-
lated, and carries its burdens easily. With municipal taxes,
except those i-aised from tariff imposts, the case is wholly dif-
ferent. Every increase there indicates a direct addition to a
burden, the larger its aggregate the heavier is the load im-
posed by it upon the production of the State ; in the case of
the transportation tax, on the contrary, the larger the total
becomes the greater is the volume of business indicated, and,
very probably, the lower the tariff rates.
It is computed that the yearly revenue of the 53,000 miles
of railroad now in operation in the United States is in the
neighborhood of $450,000,000, and represents an annual
average payment of nearly $ 12 per head from the whole pop-
ulation of the country. The rapid growth of this payment
has been extraordinary, and well illustrates the importance of
the limitation last referred to- In 1840, when there were less
than 3,000 miles of railroad in the country, the annual pay-
ment hardly exceeded $8,000,000 or fifty cents each to the
inhabitants of the country. Even in 1860 it scarcely equalled
$150,000,000 or less than five dollars per head. These sums
360 THE RAILROAD SYSTEM.
measure the growth of the internal commerce of the country.
Should a new invention come into use which should prove as
great an improvement upon steam locomotion as that is on
the system which preceded it, the aggregate transportation tax
would not improbably be increased several fold, and amount,
perhaps, to fifty dollars a year for each inhabitant, and yet,
upon the tonnage now moved, the yearly expenditure would
be decreased from $450,000,000 to $45,000,000. The large
amount of the levy affords in itself no just ground for com
plaint.
The next question is, For what purpose is this tax levied,
and to whom does it accrue 1 What portion of this large sum
is a necessary tax upon the community ; and what portion, if
any, is \mnecessary 1 Railroads must not only be built, but
they must be operated. The gross income of the system must
therefore be devoted to two ends : first, to the operating of
the roads ; and, secondly, to the remuneration of the capital
invested in them. The tables of statistics show, that, under
the present system of operating American railroads, which
must be presumed to be reasonably economical, seventy per
cent of the gross earnings are consumed in operating expenses.
This is approximately the absolute cost of working and re-
placing the machinery which keeps up the movement of com-
merce. It is the necessary tax, the first cost, as it were, of
friction. The remaining thirty per cent of the $ 450,000,000
of gross revenue perhaps $ 150,000,000 per annum is the
amount reserved as a remuneration for the capital and the risk
involved in the construction and management <>f the system.
This sum is, therefore, an annual tax by itself, which the peo-
ple i if tliis country pay to those who own and control our rail-
roads. In view of the inestimable value, both immediate and
|ii-cs])cctive, of the service rendered, and of the essential part
it plays in material and moral progress, it would indeed lie
strange if this tax were very closely scrutini/ed, or were not
cheerfully, and even eagerly, paid. Yet every tax upon their
resources should be calmly and carefully scanned by a people
which pretends to guide its own destinies. In spite, however,
THE TRANSPORTATION TAX. 361
of its enormous proportions and onerous nature, in spite of
the fact that it adds to the cost of every article of consump-
tion and enters into the expense of every movement of nation-
al and individual life, this transportation tax is so indirect in
its nature, so plausible and fair in its reason, and is so com-
pletely a part of the customary life of the community, that,
until within a very few years past, it has excited absolutely
far less real attention and less earnest discussion than a tax
of a dollar a "gallon on whiskey, or two cents a pound on cot-
ton. Indeed, it has not as yet even excited enough attention
to cause the several State governments to procure returns and
statistics about it. Its very amount must be guessed at from
such partial data as the corporations themselves see fit to fur-
nish.
Two thirds of this annual tax of $450,000,000 may then be
regarded as made in payment of actual work of transportation,
and the remaining one third represents what is, in the opinion
of the owners of the roads, a fair compensation, or at any rate
the best that can be got, for the use of the capital and the risk
involved in the business. In other words, certain private indi-
viduals, responsible to no authority and subject to no super-
vision, but looking solely to their own interests or to those of
their immediate constituency, yearly levy upon the internal
movement of the American people a tax, as a suitable remu-
neration for the use of their private capital, equal to about one
half of the expenses of the United States government, army,
navy, civil-list, and interest upon the national debt included.
Whether this sum is in the aggregate an excessive remunera-
tion or not is immaterial. Probably, as will hereafter be seen,
it is not. This consideration only partially meets the real
vital point at issue. The question of the manner in which the
amount is raised is even more important than the amount it-
self. For it may well be that a tax, not in itself excessive,
may be raised in an annoying and vexatious manner ; or so as
to oppress one locality, at the expense of another ; or it may
be exacted in payments which fluctuate wildly at different
times, destroying all basis of sound business calculation ; or it
16
362 THE RAILROAD SYSTEM.
may be regulated so as to exact the greatest compensation pos-
sible for the least possible service ; or, finally, it may be cal-
culated to produce a fixed and reasonable profit, and to dis-
courage all business development in excess of that easily able
to pay such profit. All of these are matters not of mere
study, they are not suggestions of that which is improb-
able, but they are points of serious public concern. They
are all involved in the question of the manner in which the
transportation tax is raised, as contradistinguished from its
amount.
The obvious danger of committing so extraordinary a power
as that described to private individuals, could not well have
escaped the attention of legislators even in the earliest days
of the system. But when the process of railroad construction
began, forty years ago, those who were called upon to inaugu-
rate it little foresaw the proportions which it was soon to
assume. They, however, took every precaution against abuse
which suggested itself, and the world has since done little more
than follow in the path marked out, and elaborate and work
over the various measures then devised.
This, however, took place the lifetime of a generation back.
The practical working of the various theories on which the
system was inaugurated has of late years been anxiously dis-
cussed, and the question of how the community can best regu-
late and keep within bounds the cost of its transportation is
assuming a new significance. The time also has now come
when the operation of the various laws, whether natural or
human, whether laws of trade or acts of legislature, which
were relied upon to secure a healthy and economical railroad
development can be passed in review and a judgment be calmly
formed upon them.
Sir I!ol>ert Peel and King Leopold of Belgium were probably
tin- t\v> men of those days whose minds exercised the most
immediate and l:is*'iig influence upon this question. They
both approached it, however, in the manner characteristic of
their education, habits of thought, and the political and social
surroundings in which they were placed. Peel was essentially
THE TRANSPORTATION TAX. 363
a parliamentarian ; King Leopold was the model head of a
bureaucratic government. The former instinctively turned
for protection, to the operation of natural laws, such as com-
petition or the laws of supply and demand, supplemented, if
need be, by any desired amount of acts of Parliament ; the
Litter took counsel with the economists and administrators,
and shaped a policy under which the community was intended
to cut itself loose from the capitalist, and to undertake the
management cf its own channels of communication in its own
interests. The systems inaugurated respectively in England
and Belgium under the impulse of these two minds have since
spread over the whole civilized world. The several nations
have modified them in greater or less degree to meet local
conditions or habits of thought or action ; but, in great es-
sentials, the two groups all the world over clearly exhibit
their distinctive characteristics.
The English system, which is that also in use in America,
rests wholly upon the fundamental principle of the private
ownership of railroads by corporations. By these corporations
the roads are to be constructed, and they recoup themselves
for the risk and expenditure involved by levying a toll for
the transportation of merchandise or passengers. Two agen-
cies were relied upon to prevent the owners of the railroads from
abusing the power confided in them ; the one was competition,
the other was statute regulation. It was argued, and still is
argued, that if railroads were left wholly alone, if all parties
were free to construct them wherever a demand for them was
thought to exist, if these parties were free to make what they
could on them, that, in this case, wherever the profits of the
capital employed were excessive new capital would flow in and
ii'j\v roads would be constructed until here, as in all other de-
partments of trade, profits and charges would equalize them-
selves. This was Peel's early argument ; it did not last long
with him.
It was many years, however, after the railroad system was
inaugurated, before any, except the most clear-sighted, could
be made to realize that railroads were monopolies, and must be
364 THE RAILROAD SYSTEM.
treated as such, not only in their own interest, but in that of
the community. King Leopold, saw it as early as 1834.
George Stephenson saw it from the beginning, and condensed
the whole question into the pithy apophthegm, that " where
combination was possible, competition was impossible." Again
in 1846, before a committee of the House of Commons, he gave
it as his decided opinion that the power of government su-
pervision should extend to vetoing the construction of com-
peting lines, to protect the public against the heavy rates of
traffic which would be required to remunerate the capital in-
volved in their construction. Stephenson fully appreciated
what the ultimate burden of free trade in railway construc-
tion would amount to. He saw that a line once built must
impose a tax on the community, if only to keep itself in
existence. He also saw, that, if a competing road was built
to divide any given business which could by any possibility
be done over a road already constructed, in the end that
business must support two roads instead of one. A very
slender knowledge of human nature would have enabled him
to take the next step, and conclude that any number of
competing roads would ultimately unite to exact money
from the community, rather than continue a ruinous com-
petition. As combination must always remain possible, no
matter how many roads are constructed, it necessarily fol-
lows that the more roads the heavier tax, provided always
;i less number properly managed could have been made to
do the work. Relief did not lie in that direction ; it could be
found there only under circumstances which rendered exelusiv
combination impossible. Nor is human legislation to be in-
cluded in the number of such circumstances. Had Stephen ion
lived a few years longer, he would have seen in England an
excellent example of the virtues of railroad competition guar-
anteed by law, as a safeguard to the community. an example
not without a savor of comfort for America, with the memory
of recent legislative experiences fresh in mind. The Great
Northern Railway went U'loiv Parliament for its charter. The
lines threatened with competition combined their influence,
THE TRANSPORTATION TAX. 365
and the bill was thrown out. The next year the application
was renewed, and those having the bill in charge engineered
it successfully through Parliament by offering to accede to a
charter limitation of first-class fares to a point thirty per cent
below those charged by the existing companies. The bill was
passed and the line constructed, so that a combination, except
at low fares, seemed prohibited by act of Parliament. Before
the new road was opened, however, before a passenger had
passed over it, its directors, pointing out to the other compa-
nies how much they would suffer from such ruinous competi-
tion, induced them to combine the Parliamentary strength of
all concerned, and they actually got through Parliament an
amendatory bill, raising the fares of the new road to the level
of the old. The law of self-preservation had simply been re-
pealed by act of Parliament.
How much this fallacy of cheap transportation through rail-
road competition has cost Great Britain cannot well be esti-
mated. During the mania of 1845-46, it was estimated by
Mr. Laing, of the Board of Trade, and the estimate was con-
firmed by Robert Stephenson, that out of three hundred mil-
lions sterling, at that time expended, seventy millions had been
completely thrown away in constructing unnecessary duplicate
lines with a view to competition.
The result of this dependence upon a correct general prin-
ciple, misapplied, has, in America, been both singular and
interesting ; and, indeed, it is a question whether competition
has done more harm or good to the business community which
has relied upon it as a protection in this case against monop-
oly. No system can woi'k its way out to logical results which
is perpetually subject to fluctuations ; and competition has
ever acted on the railway system as a violent disturbing ele-
ment. At one time it has forced down the charges on trans-
portation to an unnaturally low rate, only to elevate them at
another time by artificial combinations to a rate as unnecessa-
rily excessive. During the year 1869 freights between New
York and Chicago fluctuated tinder this influence, between
8~> and 837.60 per ton ; and between the same point and St.
366 THE RAILROAD SYSTEM.
Louis, between $7 and $46 ; while, the Erie Railway carried
goods to Chicago at as low a rate as $2 per ton, and from
this bounded back to $37. In the last case, part of the trans-
portation was by water ; but rates on the same class of freights
carried through by rail have ranged all the way from four mills
to four cents per ton per mile, and fluctuated violently from
the one point to the other. Such has been the result of com-
petition as regards through business, while upon local business
its effect has been even more pernicious. " Usually, competing
lines, while they seek the same large centres of commerce, reach
them through different districts. This confines their competi-
tion to the trade of such centres, while the traffic of the coun-
try peculiar to each line is not only uncompeted for, but sub-
jected to an extra and often oppressive tax, whereby to restore
the revenue depletions each road suffers in its violent struggles
with the others for jointly accessible business. The ability to
unjustly burden uncom petit ive or local trade supplies trans-
porters with strength to wage prolonged contests for other
tonnage at less than cost of transport ; and this wretched
warfare, indirectly ruinous to the local business it overtaxes,
is of little real benefit to the property battled for ; as, sooner
or later, truce is declared, and, if the truce becomes a perma-
nent peace, competition ceases; while if but a temporary
measure, it is presently broken, but only to be renewed ; then
renewed, but only to be broken ; while the tax on trade fluc-
tuates with the shattering or maintenance of covenants, until
commerce is harassed and dazed and partially prostrated by
its wild, illogical, and ruinous changes." *
For these reasons competition has long been regarded among
ill- 1 best authorities on railroads as a dangerous evil. The
most sagacious look upon it as a terrible weapon in the hands
of the visionary, the reckless, or the ignorant ; an almost in-
superable obstacle in the way of the judicious, the conserva-
tivc, and tho progressive. It disturbs every calculation,
* " Transportation ns a Scicnc'-." A paper n>:i<l by Jos. I). Potts, l'iv-i-
dent of the Empire Transportation Co., before the American Social Science
A'foointion nt n m^ftinp in XPW York, October 28, 1W9.
THE TRANSPORTATION TAX. 367
vititates every result, puts a stop to all experiment, destroys
all system. All persons concerned in the management of rail-
ways are therefore anxious to get rid of it, the more respect-
able, that the railway system may have a chance to work out
its results under a settled policy ; the unscrupulous and less
reputable, that a better occasion for levying plunder may be
afforded. Under these circumstances it is not impossible that
all may unite in the adoption of the principle now lying at the
basis of what are known as the " colored lines," that of a
combination and a clearing-house for the adjustment of diffi-
culties, as a solution of the question.
Such a combination would, of course, at once put a stop to
competition in so far as the land carriage of freight is con-
cerned. And for this reason in many of the States legislation
has been directed against the consolidation of competing lines.
In 1869 an act forbidding it waj passed in New York, and
more recently a provision to the same end has been incorpora-
ted into the Constitutions of Illinois and of Michigan. It is
wholly unnecessary to say that all such measures of State
legislation are utterly futile, almost childish. These giants
have sometime since outgrown State swaddling-clothes. Even
had they not, the character of such legislation is most open to
criticism. Certainty and responsibility in management are
two of the most important requisites of a good railroad
system. This is peculiarly the case in America, where almost
our only machinery for the correction of abuses lies in the
degree of concentration with which public opinion can be
brought to bear in a given direction. If our people distinctly
feel an evil and can be made to see that some one is responsible
for it, there is no interest nor combination of interests which
can long resist the pressure. So far as railroads are concerned,
competition puts both certainty and responsibility out of the
question ; it renders the first impossible, and, by dividing,
destroys the last. Most conclusive illustrations of all these
propositions, as well as of the utter insufficiency of State leg-
islation to deal with the subject, may be found in the experi-
ence of the year 1870.
368 THE RAILROAD SYSTEM.
During that year competition was bitter in the extreme ;
the rates made East and West were simply ruinous. On
certain descriptions of freight they literally were reduced to
nothing, and cattle were carried over the Erie road at a cent
a head, as against one dollar a car, the rate charged on the
Central. On other articles the reduction was not so great,
but, both on passengers and goods, rates were purely nominal,
and hardly averaged a third of the usual amounts. Of course
this could not last. Early in September, 1870, representatives
of the competing lines met in New York, and proceeded to
put a stop to competition in the one way possible among mo-
nopolists, by combination. The parties in interest were the
Central, the Erie, and the Pennsylvania Railroads. The com-
petition was mainly from Illinois to New York. In both
Illinois and New York laws forbidding the consolidation of
competing lines were in force, and all the roads were carrying
on operations in one or both of those States. At the meeting
in question it was decided to " pool " the cam ings of the
colored lines to all competing points ; in other words, all re-
ceipts from that business which was supposed to receive a
peculiar benefit from competition, were to be paid into a common
fund, competition was immediately to cease, fixed rates were
to be charged, and thus, at last, all the great trunk lines were
to be practically consolidated, in so far as the business com-
munity was concerned. This arrangement was agreed to. but
broke down for the moment because of quarrels among cer-
tain of the individual contracting potentates. The irreconcil-
ables were Messrs. Gould and Vanderbilt, two New York im-n.
who represented two New York roads ; and yet the New York
statute-book contained a recently enacted law intended to
prevent and render impracticable any combination like the one
agreed upon. Not l>ring able to effect the desired arrange-
ment there, certain of the same parties went to Chicago, in a
State whrtv M similar provision to that in force in New York
had In'. MI mad.- a part of the Constitution, and there they ac-
tually did enter into an agreement, under which all the
roads between Chicago and Omaha " pooled " their receipts
TIIK TRANSPORTATION TAX. 30$
between those points, and this contract went into effect. Yet
no law, no constitutional restriction, was violated. No law, in
fact, could be framed which would meet the case, and the
solemn efforts to accomplish it were simply illustrative of the
extreme ignorance prevailing among fairly intelligent men as
to the practical limits of legislation.
The failure of the New York negotiators was, however, only
temporary ; and, moreover, it is by no means clear that its
failure was not a disaster to the community. In this combi-
nation would at least have been found some degree of certainty
and of responsibility. Rates would no longer have varied with
every season and to every city ; points destitute of competi-
tion would not have been plundered, as they now habitually
are, that competing points might be supplied for nothing.
During the summer of 1870, accordingly, many towns in New
England were charged upon Western freights heavily in ad-
vance of the sums charged for carrying the same freights on
the same roads a hundred or two miles farther on. All be-
cause, through competition, the farther point was served at a
loss to the carrier, and, therefore, the nearer had to pay the
road profits for both, besides replacing the loss. The agents
of the roads do not seek to deny this ; they acknowledge and
defend it. They say, and say truly : " We must live. If our
through business is done at a loss (and they show that it was
done for nothing), then our local business must pay for all."
This was the case in New England. The cities of central New
York fared no better. During a war of rates, almost any
manufactured article will be carried from the seaboard to the
West for perhaps one half of the amount charged for carry-
ing the article there from a semi-interior point. So also as
regards Eastern freights. Syracuse, Rochester, and the like
class of cities can neither compete on equal terms with Boston
m the markets of the West, nor with Chicago in those of the
East The discrimination against them is said to amount in
certain cases to ten per cent of the whole value of the article
transported. Neither, under the competing system, is there
any remedy for this evil, and a consciousness of this fact, of
16* x
370 THE RAILROAD SYSTEM.
the risk to which they are continually exposed, has caused the
breaking up of many manufacturing establishments at interior
points.
Again, the element of gambling is not considered as an ad-
vantageous one in the transaction of business. To eliminate
it, to equalize, to insure stability and an even operation of
natural laws in trade, is one attribute of an advancing civiliza-
tion and a chief result of science. Does not a sudden change
in a tariff, a change sprung on the community in an hour,
ranging all the way from one hundred to fifteen thousand par
cent on all classes of freights, infuse an element of chance
into current transactions] Just this fluctuation took place in
September, 1870. How, also, could the business community
deal with certainty, or make orders or contracts during that
year, when it at one time cost far more to send goods from
Boston to Chicago than from New York, and shortly after
New York firms had to ship their goods to Boston as the
cheapest way of getting them to the West. Thus competition
by rail, unlike that by sea, knew no law of supply and de-
mand ; there was always a given supply of machinery, wholly
irrespective of the demands of trade. Here, then, was no
certainty, no stability ; a great evil existed ; yet who was to
be held responsible for it 1 Upon what point was public opin-
ion to be concentrated 1 It could not be on the system, for
nothing of the sort in an organized form exists ; neither could
it be on individuals, for they clearly were unable to control
events, otherwise there would have been no recourse to " pool
ing." The responsibility, in fact, was and is absolutely divided
away ; it does not exist.
States and legislatures will doubtless for some little whib
longer cling to the idea of competition as regulating tariffs l>y
rail, but it must break down in the end. The value of com-
petition as affecting the railroad system is very great, but it
lies in the superior quality of the service it exacts, the
promptness, comfort, civility, and general regard to the wislies
of the public. These things no statute ran regulate, but
competition does; as regards rates on the other hand the
THE TRANSPORTATION TAX. :' , 1
result of thirty years' reliance upon competition may oe briefly
summed up by saying that nineteen places out of every twenty
on our railroads are wholly at the mercy of close monopolies,
while each twentieth point enjoys such advantages of the law
of supply and demand as may be evolved out of fierce com-
petition, alternating with close combination.
The school of Sir Robert Peel had, however, by no means
exclusively relied upon the operation of natural laws to regu-
late the new system. They would not have been English
statesmen had they not had recourse to acts of Parliament to
make good any deficiencies in the law of supply and demand ;
and following, as is the custom in such cases, the precedents
already upon the statute-book, they undertook, in the com-
plete breakdown of competition, to apply the remedy against
extortion which most naturally suggested itself, that of affixing
a limit to profits.
This was accordingly done, and, following the example thus
set, in the earliest charters granted in this country are found
clauses reserving a power of abating charges for transportation
whenever tho dividends of the companies shall exceed a certain
percentage on the capital. In England, Parliament further
attempted to limit the profits of these enterprises by including
in the charters long and carefully prepared lists of charges
which the companies could not exceed. Such an attempt,
made at that time, could of course only be very crude and
unsatisfactory. The system, however, expanded through long
years into a mass of legislation, half public, half private, based
on no principle and no knowledge, and finally culminating,
after the manner of the English, in a multiplicity of conflicting
acts, and a confusion worse confounded. For instance, by the
charter of the Lancaster & Carlisle Railway, passed in 1844,
and resembling, at great length, the old toll-boards of the
turnpikes, it was minutely set forth that a "horse, mule, or
ass" should not be charged at more than three pence per
mile, nor a calf or pig, " or other small animal," at more than
a penny ; and so on through an interminable list, beginning
with " dung, compost, and all sorts of manure," and ending
372 THE RAILROAD SYSTEM.
with "passengers and animals." The charter of this road, by
the way, consisted of three hundred and eighty-one distinct
clauses ; and the commission of 1867 reports, that, in ad-
dition to the acts of universal application, " the powers of
the railway companies and the consequent rights of the public
are now scattered through three thousand one hundred acts of
Parliament," and are exceedingly difficult of ascertainment.
It further resulted that the tariffs of charges, being based
upon the old turnpike and canal experiences, were extremely
exorbitant, and the profits of the early lines were unduly large.
In other words, the tax levied on the community by the pro-
prietors of the lines in their own favor was evidently oppres-
sive. The attention of Parliament was called to the subject,
and in 1844, at the instance of Mr. Gladstone, a law was en-
acted which contained a clause of general operation, practi-
cally, in the view of railway directors, limiting their dividends
to ten per cent per annum upon the stock of their roads.
This particular feature of an otherwise well-considered act led
to results in no way anticipated. Not only did it go far to-
wards bringing on the railroad mania of 1845, which was
comparatively a small matter, but it introduced into England
the practice of what has since been known as stock-water-
ing, one of the most ingenious and oppressive forms of
burdening the growth and industry of a people and of mort-
gaging future development which has ever been devised.
Immediately upon the enactment of this law the railway man-
agers resorted to the usual weapons of those who wish to tax
an unwilling community. The more direct and lighter tax
having raised a popular outcry, they acquiesced in what they
regarded as its repeal, and at once proceeded to levy several
times the sum previously levied, through a vastly more op-
pressive form of indirect taxation. As they considered that
after the enactment of 1844 they could no longer, on their
existing stock, safely divide all the money they could earn, the
railroad financiers, on every possible pretext, create additional
slmivs, until the gross amount of the stock should be sufficient
to absorb, in the dividends allowed by the act, the utmost pos-
THE TRANSPORTATION TAX. 373
sible net earnings of their roads. The Gladstone act, in so far
as it failed to place checks upon the creation of new stock,
was defective. Excessive charges and large profits had been
found to be like excessive direct taxation, a present burden,
which wrought its own cure, and that speedily ; but an increase
of stock was nothing more nor less than a creation of new
national debt. It represented so much paper capital to pay
dividends and interest upon which a tax in the shape of trans-
portation charges was to be levied forever. In other words,
the increasing business of the community was mortgaged in
perpetuity to pay dividends on capital stock of railways upon
which not a penny had ever been paid in.
It is not worth while, however, to go into the details of the
history of stock- watering in England. There it has never been
reduced to a science, although Sir Morton Peto carried it to a
very creditable degree of perfection. In America only is the
process found in its highest stage of development. Here it
may be studied as an art now in its mature perfection, and as
such merits consideration by itself.
Neither would it be difficult in American railway history to
select examples of another no less unsatisfactory result of this
usury law. Roads could be named which have found them-
selves inconveniently prosperous ; so far from having any
incentive to increased energy they already, on the business
they conveniently did, earned more than it was quite safe for
them to confess to. Their profits seemed to invite legislative
interference. As a result, development stopped. Every pro-
posal of new enterprise was quietly but honestly met with
the argument that it was better to "leave well enough alone."
And for this result the corporations should not be held respon-
sible. They had fulfilled their contract, only, by the terms
of that contract, the community, at a certain point in their
development, not only deprived them of every incentive to
growth, but made growth absolutely dangerous to them.
Neither men nor corporations will labor, of their own free will,
that others may enjoy all the fruits of their labor ; and, while .
the sic vos non vobis principle is rigorously applied to railroad
P. 74 THE RAILROAD SYSTEM.
enterprises, who can blame them if they practically reply to
all remonstrances and appeals with an indolent cui bono ? Cor-
porations, like men, will labor unceasingly, and incessantly
develop under the impetus either of necessity or gain ; but to
suppose, when absence of all competition deprives them of the
first impulse, and force of law destroys the second, that an ab-
stract love of the general prosperity will induce corporations,
any more than men, to do double or fourfold the labor necessarily
required to earn a given profit, requires an absence of common
sense not infrequently characteristic of the statute-book.
In spite of the ill success which attended all the earlier ef-
forts in that direction, the idea of regulating railroad charges
by act of legislature has continued to be a very favorite one in
the Anglo-Saxon mind. A deep-seated faith in u the omnipo-
tence of Parliament " is inherent in the English speaking race.
No act has, however, yet been framed which meets the case
proposed, and it is not easy to see how one could be framed.
The difficulty is very apparent. The railroad system of every
large community is made up of many different members.
These members exist and perform their duties to the com-
munity under all sorts of varying conditions. One road is
built for passenger travel o,nd another for freight, or even for
the transportation of a particular kind of freight, such as
iron or coal. There are roads to accommodate local travel
and others to accommodate through travel. Construction,
and consequently the cost of operation, vary just as much as
the configuration of the soil. We thus have a complicated
system, between the numerous members of which no con-
nection necessarily exists. The legislature is called upon to
frame a law, or a series of laws, which shall regulate the tariff
of charges throughout this system.
There are but two kinds of statute which any legislative
body can pass ; there are statutes of general operation and
those of special operation. A law establishing a scale of fares
and freights of universal operation, which would affect one
r<i;td very slightly, would inevitably ruin another ; and a law
which would meet the requirements of one half of the com-
THK TRANSPORTATION TAX 37")
mimity would almost inevitably ignore those of the other.
A simple general law being thus out of the question, the only
other resource has hitherto been to acts of special legislation.
These of course can be put in operation to any extent, as has
already been done in England, and probably with pi'ecisely
similar results. No large and constantly shifting legislative
body can, in the nature of things, be qualified to specifically
regulate the tariffs of numerous railroads.
Instinctively appreciating the great difficulties inherent in
this matter, and yet feeling a strong desire to do something
in the premises, many legislatures in America have taken re-
fuge in a sort of rude rule of thumb. They have sought to
fix upon all, or certain of the roads subject to their jurisdic-
tion, a hard indiscriminate tariff on travel or freight of so much
per mile. Such a solution of the difficulty may be popular,
but it is not intelligent. It ignores all special requirements ;
all considerations of speed, comfort, distance, quantity or fre-
quency of movement. The operation of a simple clause
inserted in its charter, limiting the rates for travel upon the
New York Central Railroad, is always pointed out as conclu-
sive evidence of the wisdom of this class of legislation. The
Central is one railroad out of many in the State, however, and
two obvious criticisms may be made upon the operation of the
law even in this case. It wholly fails to provide for the univer-
sally recognized principle that the burden of taxation should
be adjusted so as least to be felt. He who travels daily is no
more considered than he who travels once a year. No provis-
ion whatever is made for that discount in price which should
always be allowed to the heavy purchaser. The most serious ar-
gument that can however be adduced against this precedent is
that it discourages and defeats more searching but more compli-
cated efforts at reform. Confining itself to fares, it does not
even pretend to touch the intricate subject of freights. In
1851 the freight business and the passenger business were of
nearly equal value to the railroad system, returning for that
year about $ 20,000,000 each ; but during the year 1868
the ratio of freight earnings to passenger earnings was as
376 THE RAILROAD SYSTEM.
$280,000,000 to $120,000,000, or as nearly two and a half
to one. The law in question, therefore, ignores that which
bears the great burden of the transportation tax. And yet
this is the best result of thirty years of consecutive effort
towards controlling the method of levying this tax by means
of legislative action ; a short, simple rule, ignoring every
principle of railroad economy and two thirds of its business,
but limiting the charge for travel over a specified road to two
cents per mile.
Enough has perhaps been said of the practical working of
competition, supplemented by statute regulation, as a means
of controlling the mode of raising the transportation tax. It
is unnecessary to recapitulate. It is sufficient, in leaving this
branch of the subject, to say that, waiving all question of rea-
sonableness of amount, the levying of the $ 450,000,000 a year
which constitutes this tax would seem to be marked by many
of those characteristics which are considered most objection-
able in a government tax. The amount fluctuates wildly and
is very unequally imposed ; the laws which seek to limit its
amount lead to fraud, evasion, and abuse, besides occasionally
even to the wilful sacrifice of those interests which they were
intended to protect.
It only remains in this connection to briefly describe the
results arrived at by the other method of controlling, in behalf
of the community, this subject of the transportation tax, the
method of ownership by the state as inaugurated by King
Leopold and Stephenson. This also has practically developed
into results which its originators could hardly have foreseen.
The magnitude of the task involved in supplying with rail-
roads a country even so densely populated and of so limited
extent as Belgium was evidently more than the government
had anticipated. Accordingly at a very early period it \\ns
forced to devolve a large portion of the work upon private
enterprise. The result was a mixed system of ownership.
The government lines, managed by a bureau at the head of
which was a cabinet minister, ran side by side with private
lines owned and operated by companies as in Knglund and
THE TRANSPORTATION TAX. 377
America. These were gradually consolidated until, in 1864, of
the 1247 miles of railroad in the country some 460 were either
absolutely owned or controlled under lease by the government,
and the remaining 780 miles, or little short of two thirds of
the whole, were in the hands of two private companies. The
result of this division of ownership was something wholly un-
anticipated. It led to a new form of railroad competition,
which gave the government without recourse to legislation
a complete practical control over the railroad system as a
whole. The essential principle of this control was found, not
as in England and America in a multiplication of roads built
to compete but more frequently combining in private hands,
but in a regular and healthy competition through the mixed
ownership of roads already existing. Or, stated in another
way, the power' of combination was destroyed by the introduc-
tion into the system of an element which would not combine.
In 1866 the practical effect of this novel form of competition
was stated by the Belgian Minister at the head of the bureau
in these words, " the state railways thus find themselves
placed in constant comparison with the railways worked by
private companies ; on the one hand stimulating them to gen-
eral improvements, and on the other hand acting as a sort of
check against any attempt to realize extravagant profits at the
cost of the public."
A sufficient illustration both of the method of practical
procedure and of the results arrived at under this system is
furnished by the record of the doings of the ten years between
1856-65.
In 1856, in spite of a considerable increase in the miles of
railroads worked, the freight movement of the Belgian roads
was found to have seriously decreased. Instead of making
good the deficiency in receipts by increased rates on existing
business, after the manner of private companies, the admin-
istration met the emergency by accepting all traffic that
offered at greatly reduced special rates. This policy succeeded
so well that in 1861 the principle was adopted as regards miner-
als and raw materials of a regular low scale of charges, with a
378 THE RAILROAD SYSTEM.
reduction according to distance. This resulted in the follow-
ing year in an increase of 72 per cent in the tonnage of this
class of goods. In 1862 the principle was extended to goods
of the next class with similar results. In 1864, freights were
reclassified and the new principle applied to all except the first
class, or small parcels, which in this country are known as ex-
press matter. The result was summed up by the Minister of
Public Works as follows: " la eight years, between 1856-
64, the charges on goods have been lowered, on an average,
by 28 per cent; the public have sent 2,706,000 tons more
goods, while they have actually saved more than $4,000,000
on the cost of carriage, and the public treasury has earned an
increased net profit of $1,150,000." A further reduction,
made subsequently to this statement, in 1864, exceeded even
these results, and under it the tonnage rose from 4,479,000
tons in 1863, to 6,533,000 in 1864.
In 1865, the government, encouraged by these results,
turned its attention to fares, now applying to them principles
before applied to freights. A general scale was adopted, in
which the charge per mile was diminished in proportion to the
length of the journey over 22 miles. For distances less than
22 miles the old rates were retained, varying between 1.2 and
2.5 cents per mile, according to the class of carriage. Above
the 22 miles the rates rapidly decreased until the fares for dis-
tances over 155 miles were as low as one cent per mile for first
class, and seven mills per mile for second class tickets. Under
this system the fare from Boston to Albany, for instance,
would be respectively $2, $1.40, and $1, according as it was
paid for a first, second, or third class ticket, instead of $<!, as
at (in-sent. The effect of this change was a singular and very
striking illustration of the immediate influence of any reduc-
tion of rates on the volume of travel. The traffic within dis-
tances of 22 miles, on which no reduction was made, scarcely
mrp'ased at nil. Between 22 ami I'i miles, on which dis-
tances the reduction \vas small, it increased only 20 per cent,
while on distances over 46 miles, on which a heavy reduction
was made, it nearly doubled.
THK TKANSPOKTAT1ON TAX o79
Here at last we see experiments carried on steadily to a le-
gitimate result by which principles are evolved. A fi'ee, un-
trammelled competition between agents not limited in number
would be equally effective, but no such results have yet been
arrived at through the spasms of railroad competition. -The
grand result, therefore, so far as Belgium is concerned, has
been all that could be desired. While the state roads have
boldly led the way, as in the case cited, in all the reforms
which have made the Belgium system famous, they have yet
accomplished these great results without injury to the private
roads. These have followed the lead of the state roads only
as that lead was seen by its results to be safe, and they have
proved in consequence far more profitable investments to their
owners than the roads in England. As a result of this happy
deviation from the strict plan of state ownership originally
formed by King Leopold, the Belgian people are better satis-
tied than any other with the present condition of their rail-
road system. There is no popular disposition to dispose of
the State roads to private parties, and, while the service of
the roads in private hands is not manifestly inferior to that of
the public roads, there is no danger that the mixed system of
ownership which is the essence of the system will be broken
up by a popular clamor for a universal assumption of its rail-
roads by the State.
The curious result is thus finally arrived at that the two
typical railroad systems have worked round and almost com-
pletely changed front. The English system, organized in a
complete reliance on competition, is tending both in England
and America more and more strongly towards regulation by
act of Parliament ; while the Belgian, founded on the com-
plete negation of the power of competition under the circum-
stances, has practically found competition, through a system
of mixed ownership, its effective weapon of control. Though
to a degree in this way approaching each other, the two sys-
tems are still widely divergent, but it can hardly admit of any
question that, up to the present time, the railway system in
use in Belgium has furnished the community with a far more
380 THE RAILROAD SYSTEM.
efficient and reliable method of controlling and regulating the
levying of the transportation tax than has been furnished by
the system in use in England or America.
CHAPTER III.
RAILROAD CONSOLIDATION.
/CONSOLIDATION and stock-watering are two such promi-
V_y nent features in the development of the railroad system,
and have attracted so much discussion, that they merit a sepa-
rate consideration. Consolidation is one form of that tendency
to combination which Stephenson referred to in his aphorism.
Combination in some shape, a union of forces under the in-
fluence of an outside pressure, is one of the certain results of
any active competition ; it is, in fact, a measure dictated by the
instinct of self-preservation. The simple question always is
whether the field in which the combination takes place is of a
kind which will admit of the union of all the agencies at work
in it. If it is, a close monopoly is almost sure to ensue. The
laws of competition thus have play just in proportion as these
agencies are too numerous for a perfectly united action. The
possession of, or at least some small share in a monopoly is
always very eagerly craved by the average man, while, on the
other hand, the progress of civilization, by multiplying agencies,
is continually increasing the difficulty of effecting a perfect
combination <>f any kind. Yet the difficulty which surrounds
the creation of a monopoly, and the resource and ingenuity
with which the creation of monopolies is pursued, seem to
move along with almost equal steps. The modern develop-
ment of the area of competing industries, for instance, would
seem to have rendered any combination of labor in general, to
all'fct its share in the profits of production, a practical impos-
sibility ; but, on the contrary, the facility of intercourse be-
tween all civilized countries seems to have developed the
RAILROAD CONSOLIDATION. 381
possibility of combination to an even greater extent. The
consequence is that single associations claim' that, from some
central office, they will at no remote day be able to control
the productions of skilled industry in conflict with capital
from the Baltic to the Gulf of Mexico. So it is with trans-
portation. The construction of as many channels of inter-
course as mankind saw fit to build would seem to have made
any monopoly of intercourse the dream of a visionary. Man-
kind has, however, at least proved equal to the effort. The
operation of the natural law has not in this respect been
allowed to pass unchallenged.
The control of the intercourse between the interior basin of
the continent, drained by the St. Lawrence and the Mississippi
with their affluents, and the sea-board has naturally been the
great prize contended for among the railroads of America.
Formerly it seemed as though the Erie Canal and the Mis-
sissippi River had insured a divided monopoly of this to the
cities of New York and New Orleans. Then the railroads
broke in upon the dispositions of nature, and, for a time, the
monopoly was effectually destroyed. Mankind, however, very
shortly rallied its energies, and the old struggle was renewed.
Science had now, in a great degree, superseded nature, and
the several artificial channels of intercourse and the men con-
trolling them were brought into sharp conflict. Each interest
became anxious to strengthen itself, and to secure every ad-
vantage over all others ; and thus, by degrees, there resulted
a race of consolidation, until a very few little groups of
men practically controlled the whole railroad system of the
country.
There are four great thoroughfares connecting the several
Atlantic seaports with the interior of the continent, the
New York Central, the Erie, the Pennsylvania, and the Balti-
more and Ohio railroads. A sketch of the development and
present position of two of these will afford a sufficiently vivid
illustration of one phase, and unquestionably the most striking
one in the progress of consolidation.
Eighteen years ago the New York Central Road, which forms
382 THE RAILROAD SYSTEM.
the nucleus of the Vanderbilt combination, was not in existence
as a corporation. In 1853 it was chartered, and eleven dis-
tinct corporations were merged into it. Five of these corpo-
rations, the longest of which could boast but of 76 miles
of track, divided among them the 300 rniles which separate
Albany from Buffalo. The corporation created out of these
elements was again, in its turn, merged in 1869 into the
larger New York Central & Hudson River Railroad Company,
which controls within the State of New York but little less
than a thousand miles of track, and is represented by rather
more than $100,000,000 of capital. The consolidation, so
far, was perfect and had taken place under a State law and
within State limits. Growth, however, did not stop here ; the
combinations of capital simply adapted themselves to the forms
of a political system. Beyond the limits of New York, the
corporation held, in the eye of the law, no property ; it did
not control a mile of track. At Buffalo, however, the Central
connected with another company, itself made up of four sepa-
rate primal links which had once connected Buffalo with Chi-
cago, and which had united in obedience to the same law of
development which had built up the Central. West of Chi-
cago came yet other links in the trans-continental chain. Three
lines competed to fill the gap which lay between Chicago and
the eastern terminus of the Pacific Road, the Northwest-
ern, the Rock Island, and the Burlington & Missouri. In the
autumn of 1869 the consolidation of the Central and the Hud-
son River took place. Immediately afterwards, at the annual
election of the Lake Shore <fe Michigan Southern, the Vander-
bilt interest took open possession of that corporation, control-
ler.' a majority of its stock. In May, 1870, it in like manner as-
sumed control of the Rock Island and Chicago <fe Northwestern.
The same parties in interest \vere now practically the owners
of a connected line of mid from New York to Omaha ; there
was no consolidation as vet. Imt, so far as the public and com-
pethiL: roads were concerned, the close of 1870 found the six
parties, which but a short, time before had been in possession
of the trans-continental thoroughfare, reduced to three. With-
RAILROAD CONSOLIDATION. 383
out taking into consideration the immense influence which
their position necessarily gave to them over other and less
powerful members of the railroad system, here was a single
combination of capital representing the control of at least 4,500
miles of road and not less than $250,000,000 of capital.
This, however, is but the result of a loose alliance between
men notorious for their feuds and their selfishness; the combina-
tion is temporary, depending perhaps upon the continued life of
one who lacks little of being an octogenarian. The men who
control it not infrequently evince talents of a very high order,
and their course is made continually interesting by episodes of
dramatic surprise. ' They lack, however, the greatest and most
indispensable element of permanent success, some underly-
ing, indissoluble bond of union. In this respect they differ
entirely from the great combination which has gradually taken
shape in the neighboring State of Pennsylvania. What is
commonly known as the Pennsylvania Central Railroad Com-
pany is probably to-day the most powerful corporation in the
world, as, indeed, it owns and operates one of the oldest of
railroads. Its organization, as compared with that of its
great rival, the New York Central, bears the relation of a
republic to an empire. Ceesarism is the principle of the
Vanderbilt group ; the corporation is the essence of the Penn-
sylvania system. The marked degree in which the character
of the people have given an insensible direction to the man-
agement of their corporations in these two States is well de-
serving of notice. In New York politics the individual leader
has ever been the centre ; in Pennsylvania, always the party.
The people of this last State are not marked by intelligence ;
they are, in fact, dull, uninteresting, very slow and very per-
severing. These are qualities, however, which they hold in
common with the ancient Romans, and they possess, also,
in a marked degree, one other characteristic of that classic
race, the power of organization, and through it of command.
They have always decided our Presidential elections; they
have always, in their dull, heavy fashion, regulated our eco-
nomical policy. Not open to argument, not receptive of
384 THE RAILROAD SYSTEM.
ideas, not given to flashes of brilliant execution, this State
none the less knows well what it wants, and knows equally
well how to organize to secure it. Its great railroad affords a
striking illustration in point. It is probably the most thor-
oughly organized corporation, that in which each individual is
most entirely absorbed in the corporate whole, now in ex-
istence. With its president and its four vice-presidents, each
of whom devotes his whole soul to his peculiar province,
whether it be to fight a rival line, to develop an inchoate
traffic, to manipulate the legislature, or to operate the road,
with this perfect machinery and subordination there is no
reason why the corporation should not assume absolute con-
trol of all the railroads of Pennsylvania.
Such is this great corporation, high in credit in the money-
markets of the world, careful withal of its outward repute,
apparently unbounded in its. resources. Organized so long
ago as 1831, it had thirty miles of road ready for operation
in the succeeding year. Not until 1854, however, was the
Pennsylvania Railroad proper completed. It then controlled
the line from Harrisburg to Pittsburg, 210 miles, which
had cost a little less than $17,000,000, and was repre-
sented by about $12,000.000 of stock and $7,000,000 of
indebtedness. This might be considered the starting-point ;
$ 3,500,000 of annual gross earnings on a capital a little less
than $ 20,000,000. For many years its growth was CM tufined
to Pennsylvania, In 1869, however, its policy in this respect
underwent a change, and it burst through State limits, extend-
ing its field of operations over the vast region lying between
the great lakes and the Ohio upon the north and south, and
the Missouri on the west. This sudden development was, as
usual, the immediate result of competition, and was almost
forced upon the corporation in spite of itself, as a measure of
defence. The secret history of the railway intrigues and legis-
lative manipulations of 18G9 would make' a very singular nar-
rative could the whole of it be disclosed. That year was, in
fact, a turning-point in our railway progress. The Erie manage-
ment had then fallen into confessed discredit, and was beginning
RAILROAD CONSOLIDATION. 385
its remarkable attempt under Messrs. Gould and Fisk to cany
on a great commercial enterprise in absolute disregard of every
principle of good faith, commonly supposed to be at the basis
of civilized transactions. Those managing this thoroughfare
were desperately thrusting out in every direction, contracting,
buying, and leasing all adjoining roads with a rashness only
surpassed by their easy disregard of the obligations thus con-
tracted. Early in 1869 they sought to cut off the connections of
the Pennsylvania road and to shut it up within the limits of that
State. For a brief time the battle seemed to go in their favor,
but suddenly the tide turned. The result showed that they
were no match for the powerful antagonist they had provoked ;
their overthrow was so effectual as to have in it some ele-
ments of the ludicrous. Bills in the interest of the Pennsylvania
company, which it was doubtful if it were in the power of any
legislature to pass, were pushed through their various stages.
and received executive approval, with a speed Tinprecedented ;
contracts, arranged with the Erie managers by boards of direc-
tors, were unexpectedly rejected in meetings of stockholders ;
and for a time this irresistible power even threatened to wrest
from the Erie road its own peculiar and long-established con-
nections. The result of these operations was that the Penn-
sylvania Central soon controlled by perpetual lease a whole
system of roads radiating to all points in the West and South-
west. By one it reached Chicago, by another St. Louis, and
by a third Cincinnati. At Indianapolis it had absorbed a net-
work of routes ; at Chicago and St. Louis it had formed close
connections looking directly towards the Pacific. Here for a
time it rested, declaring that its policy did not look to any
expansion beyond the Mississippi. The corporation rested,
perhaps, but not the ambitious men who controlled it ; their
individual operations now commenced. They obtained the
control of roads endowed with vast land grants in Michigan
and in Minnesota ; they were the directors of the Northern
Pacific ; and when the men who had constructed the Union
Pacific broke down under the multiplicity of their engage-
ments, the first vice-president of the Pennsylvania road ap-
386 THE RAILROAD SYSTEM.
peared as the new president of that road also. The very land
grants belonging to the companies these men now controlled
amounted to 80,000 square miles, or an area equivalent to
the aggregate possessions of four of the existing kingdoms of
Europe.
Meanwhile the Pennsylvania Railroad Company, distinct
from its individual directors, now owned or held by lease
400 miles of road in Pennsylvania, and directly controlled
450 miles more, almost entirely within the same State;
beyond its limits it leased and operated nearly two thousand
miles in addition, holding the stock and bonds of railroads,
canals, towns, and cities, like some vast Credit Mobilier ; it
had, indeed, no less than $20,000,000 standing on its books
as represented by these investments. In the sixteen years its
own capital and indebtedness had swollen from $ 20,000,000
to $65,000,000, with a liberty secured to increase them to
nearly $100,000,000 ; at the same time the system of roads
which it held in its hands returned a yearly income of hardly
less than $40,000,000, of which about $10,000,000 was
claimed as net profit.
If, however, as its direction had officially declared, the cor-
poration had no distinct interests to push west of the Missis-
sippi, the same could not be said of the region east of the
Susquehanna. In the closing days of 1870 New York was
suddenly startled by the announcement that the Pennsylvania
Railroad had effected a perpetual lease of the whole famous
railroad monopoly known as the United Companies of New
Jersey. The rumor proved true, and some 450 miles of addi-
tional track, besides 05 miles of canals and some 30 steamers,
in all some $35,000,000 of property was by this transaction
added to the vast consolidation, and brought it to the shores
of New York Harbor.
It is unnecessary to consider how much further this com-
bination will carry its operations, or in what they will re-
sult. The Pennsylvania road now controls directly and as
itself owner or proprietor, and wholly distinct from its direc-
tors, more than 3,000 miles of track, claiming to represent
RAILROAD CONSOLIDATION. 287
$175,000,000 of securities, and returning a gros.j income of at
least $40,000,000 per annum. It is far from impossible that
this combination may from its very magnitude lead to its own
downfall. The leasing of roads has not generally proved a
source of profit, and there are indications that the Pennsyl-
vania Railroad Company will not find its own case an excep-
tion to this rule. Upon the leases of four roads, which netted
a gross income of over $ 15,000,000 in 1870, the returns
seemed to indicate a profit to the leasing corporation of only
$128,000; while, estimated upon the returns of the year
previous to that in which the lease was made, the New Jersey
contract would seem to involve a heavy annual payment in
excess of net receipts. For years a general crash in the
American railroad system has been very commonly predicted.
Those are not wanting who now confidently insist that the
shadow of the United States Bank rests heavily upon the Penn-
sylvania Railway, and that the closing pages in the histories
of the two institutions will not be dissimilar. Should this ap-
prehension prove true, the crash, when it comes, will probably
be coincident with the fall of the Pennsylvania consolidation.
Meanwhile, whatever the future may bring forth, it is im-
possible to repress a feeling of admiration, mixed with vague
alarm, at the steady massive growth of this corporation. Its
method of procedure is so silent, so organized, and so sure, that
it has already cast a spell over the mind and conscience of the
State which created it. Compared with the magnitude and
order of its proceedings, the results achieved by the other com-
binations seem but the freaks of stock-jobbers. The Pennsyl-
vanians are reducing consolidation to a science and mastering
the whole subject of transportation, while their varioxis rivals
are dabbling in railroads and amassing individual fortunes.
As between the two combinations the growth of which has
here been sketched, it would seem not unsafe to predict that
the solidity of the latter company is almost certain ultimately
to overcome the elan of the former.
Only one phase of consolidation is as yet presented in the
great east and west thoroughfares, the consolidation brought
388 THE L'AILROAD SYSTEM.
about through the stress of competition. No consolidation of
the competing thoroughfares has hitherto been effected, though
several times it has been attempted. Instances of this on a
smaller scale are, however, by no means wanting, and perhaps
no combination in the whole history of the railroad system,
has ever been more suggestive than that effected in the winter
of 1870-71 among the anthracite coal-roads of Pennsyl-
vania ; it illustrated in almost every possible way both the
fallacies of railroad competition and the inefficiency of the
attempts hitherto made to secure the railroad monopoly from
abuse through legislation.
The production of anthracite coal had increased, under the
influence of an artificial stimulus, from one million tons in
1842, up to nearly seventeen millions in 1870. The country
did not really require such a production, and the usual severe
struggle ensued as supply and demand sought the same level.
There were four parties in the field, the consumers, the
miners, the coal companies, and the railroads. The consumers
alone could not combine ; all others could and did. The
miners combined for an increase of wages, and refused to pro-
duce ; the coal companies combined against excessive freights,
and refused to forward ; the railroad corporations combined to
raise freights, and refused to carry. The inevitable results
ensued ; coal in the same market fluctuated many hundred per
cent ; the miners starved, the coal companies failed, and the
railroads became unprofitable. There was but one way out
of the difficulty, a closer combination between two of the
contending parties to secure a mastery over the third. The
coal companies and the railroads accordingly combined, and
the railroads became the largest owners of mines.
The contest was now a simple one between labor and capi-
tal. Between 1867 and 1870 the struggles and consequent
fluctuations were incessant ; there was a constant recurrence
of strikes, n'simi|iti<>ns under agreement, violations of ngn'c-
uient, and suspensions of production. The parties then
resorted to amicable arrangements, by which strikes were pre-
^ended, and surplus coal was sold off to consumers at panic
RAILROAD CONSOLIDATION. 380
prices under the fear of an impending scarcity. This, how-
ever, was a trick which would not bear frequent repetition,
and when, at last, in 1870 it became evident that production
was again in excess of consumption, and that a glut was im-
pending, the two pai'ties drew together their forces for a
decisive conflict. The miners struck for what they considered
a remunerative basis for their labor, and the companies com-
bined to starve them out. They not only ceased to produce
from their own mines, but they trebled their freights, and thus
put a stop to production by all others. The result was not
only great inconvenience and suffering throughout the country,
but a violent disturbance of industry, and, in Pennsylvania,
there resulted almost a condition of civil war.
So far the efficacy of railroad competition alone was illus-
trated, but in Pennsylvania, as elsewhere, legislation had
sought to make good all possible deficiencies in the work-
ing of natural laws. Recourse was had to the statute-
book, and the charters of the corporations were eagerly
examined. The corporations, it will be remembered, not
only insisted upon stopping all production from their own
mines, but they also, through prohibitory tariffs, put a
practical stop to production from all other mines. As trans-
porters of a commodity they once for all undertook to regulate
both demand and supply as regarded that commodity. A long
conflict before the legislature ensued, and the effect of the law
was discussed. It was found that, in the charters of the
roads, the amounts which could be charged as "tolls" were
alone limited. The courts had held long before, and when the
question had come up in a different connection, that " tolb "
were a mere charge on the passage of a person or article over
a road or through a canal, where no service in aid of such
passage beyond furnishing the thoroughfare were included;
where the party owning the thoroughfare likewise furnished
the means of transportation a further sum as freight could bo
charged, no limit to which had been assigned by law. In
other words the law provided only for the use of the road, and
not for services as a common carrier.
390 THE RAILROAD SYSTEM.
The railroad combination was thus left master of the field,
and it only remained for the courts, after slow process, to re-
affirm or reverse their former decision. For the time being
the combined companies had carried the day. It would be
futile, however, to suppose that this is the end of the difficulty
in Pennsylvania. At the present time the question as to the
intent of the law is again before the courts. The carrying it
there was a very dangerous move on the part of the railroad
companies, for whatever the result may be it may safely be
predicted that they have pushed their reserved rights too far.
The difficulty lies beyond the reach of any court of law ; it will
be found to be nothing less than the breaking down of the
guarantees hitherto relied upon to protect the community
against the abuse of great powers by private monopolies. It
required just such a combination of circumstances as exists in
Pennsylvania to raise this question. Elsewhere it has only
threatened; here it must now be confronted.
The examples of combination hitherto discussed have been
those of a more elementary nature, those which would natu-
rally be looked for in the earlier and less complex days of a
system. It is extremely unlikely, however, that this process
will stop with the permanent consolidation of certain connect-
ing lines, as in the case of the Pennsylvania Central, or in the
temporary combination of certain competing lines, as in tin-
case of the anthracite coal railroads. Indications are not
wanting that the forms of concentration hitherto described
are but one, and not the most significant, phase of the work-
ing of general law. It is the one which most effectively and
dramatically presents itself to the public, but it is not im-
probable that a more important revolution is now in rapid
progress. 1'ropcrly to understand the origin and possible
scope of this movement, a retrospect is necessary.
What is known as the express system of America is a very
peculiar and convenient, though expensive, OfganizatioD, wholly
the creation of this country and of the present generation. The
men who have since given their names to immense companies,
wielding millions of capital, began their brilliant careers in a
RAILROAD CONSOLIDATION. 391
very modest way. To the Harndens belongs the credit of
originating the business. They began operations in 1839,
passing to and fro between Boston and New York, carpet-bag
in hand ; but that carpet-bag was big with the express system
of America. At first they undertook little more than to carry
money, letters, and valuables, to make collections, and to see
to the delivery of very small parcels between the two cities ;
but the carpet-bag soon expanded into a trunk; the trunk
developed into a crate, and each new crate contained more
and more cubic feet until at last they became freight-cars,
and the managers grasped at the internal carrying trade. For
several years the receipts of the route between Boston and
New York hardly exceeded fifty dollars a day, out of which
fares, salaries, office-rent, wages, and costs of delivery had to
be paid. The machinery, however, was needed ; new lines
were organized, opposition started up, and, when Harnden
died in 1845, only thirty -three years old, the business was
practically as fully developed as it is to-day. In 1868 there
were over 3,000 licensed express carriers and agents in the
country, paying an Internal Revenue tax on more than
$22,000,000 of gross receipts. Even as early as 1845 the
organization had brought about a division of the carriage of
freight. The most valuable and remunerative part of it, the
carrying of all small and valuable packages, which demand
little room and pay heavy rates, had passed out of the hands
of the railroads into those of the express companies. At
one time the system seemed likely to monopolize, by means
of its despatch lines, the whole business of " time freights,"
and to draw to itself the carriage of all articles, no matter how
bulky, on which persons were willing to pay the price neces-
sary to insure speedy delivery. The wealth of the companies
was so great, and their influence ramified so far, that the man-
agement of railroads in a great degree passed under their con-
trol. Officers of the latter corporations suddenly found them-
selves considerable holders of express stocks, or openly received
bribes. The result was that some of these officials observed
with indifference, or even connived at, the great inroads which
392 THE RAILROAD SYSTEM.
the express system was making on the legitimate freighting
business of their lines, and nothing was practically done to
check the rapid growth of the express companies, until the
system of " time freights " was inaugurated by the railroads
themselves, in 1858. This was the first step taken by them
towards the resumption of their legitimate business, and this
was forced upon the roads by the strenuous exertions of busi-
ness men. The system of time freights once inaugurated, the
attention of railroad managers was soon aroused to the possible
profits to be derived from its development. Naturally, this
development took the form of a job. Certain men, controlling
great through lines, conceived the idea of forming a company
which should be nothing more than an immense freight ex-
press line, owning its own cars and charging its own prices,
while the railroads were to supply only road-beds and motive-
power, and charge tolls for drawing cars over their lines. The
system of moving freights by canal, in accordance with which
all the original railroad charters were drawn, was in fact re-
vived and applied to railroads. This scheme promised to carry
to the last possible point of development the express system.
The business of carrying freights in their own interest was to
be surrendered by the railroad companies, who were hence-
forth to devote themselves to the transportation of passengers
and the dragging of freight-cars. If properly instituted, and
regulated with thorough impartiality, with a view to a per-
fectly free competition between firms engaged in the shipping
business, such a system would not be without its advantages.
It would create a division of labor, and, if favoritism were
excluded, would tend to stimulate competition. It was, how-
ever, brought forward with no such views. The men who
devised it controlled the roads over which it was to be put in
op, -r.-itiiiii. Competition was the l:ist. thing they h;id in view ;
on the contrary, they proposed to monopolize in their private
hands the whole lucrative business of time freights. It was
an immense job. The credit of defeating this ingenious pl;in
belongs, "it is said, to the president of a leading New England
road. His concurrence in the enterprise was essential to its
RAILROAD CONSOLIDATION. 303
success ; but, when the plan was submitted to him, he refused
to have anything to do with it, except in his official capacity
and in the interest of his road. He saw at once the great im-
portance of the scheme, and how profitable it might be made,
bxit he insisted that the roads, and not individuals, should be
the parties to it, and that to them all the profits should accrue.
This action on his part ultimately led to the formation of the
earliest of what are known as the " colored lines." It was
organized in 1865, and was substantially a corporation within
a corporation. Certain contracting roads between the west
and tide-water combined in contributing a number of cars, all
of which were to be distinguished by a uniform color. These
were to transport freights, under special conditions, from any
point of reception to any point of delivery on the connecting
roads. The machinery for the collection and disbursement
of money was the simplest possible A clearing-house was
established, the duties of which were confined to keeping a
record of the miles run by the cars of the various roads in the
combination, and to striking, accordingly, a balance of credit
or debit each month. A small percentage upon the amount
invested was then charged for wear and tear, and a balance-
sheet forwarded to each company. All transactions in regard
to freights were settled in cash when they took place, and no
receipts were returned to the clearing-house. A business in-
volving millions each month could thus be done on the pay-
ment of trifling monthly balances. The growth of this system
has been one of the marvels of railroad development. So far
as the business of transporting freight is concerned, it will be
seen at once that these organizations effected a practical con-
solidation of all the roads interested in them. The result
hitherto has been one of almost unmixed good. Responsi-
bility was secured ; consignees were no longer bandied about
between numerous disconnected forwarders, each one of whom
shoved liability off upon his neighbor. Promptitude, also,
was secured by the introduction of time contracts, and, with
simplicity, of course came economy.
There are three peculiarly significant features in the history
17*
394 THE RAILROAD SYSTEM.
of these organizations, the creation of corporations within
corporations, the establishment of a clearing-house, and the
rapid growth of the system. It is not impossible that these
innovations may result in a revolution of the freighting busi-
ness, perhaps of the railroad system. The essential feature of
the organization is the combining of roads, whether competing
or connecting, through the machinery of a clearing-house.
This once established, the extent of its possible development
cannot be forecast. If a corporation within a corporation, in-
cluding, as it easily might, a central tribunal practically em-
powered to enforce its own judgments should gradually be de-
veloped out of this beginning, it is more than probable that
the days of railroad competition would be numbered. It is
absurd to suppose that, after the creation of such a central
power, the force necessary to make its decision effective would
be wanting. No single member, however powerful, of a com-
bination of the sort suggested, could afford to rebel, when the
immediate result of so doing would be that it would be thrown
out of the clearing-house and its connections cut.
Neither will it be possible to meet by legislation such a con-
tingency as that suggested. Congress or State legislatures
may, indeed, enact by statute that connecting roads shall re-
ceive freights from or deliver them to any recusant line ; but
here their power stops. They cannot by any law, no matter
how stringent or cunningly devised, control the direction which
may be given to the immense mass of freight which merely
seeks a transit from one part of the continent to another;
neither can they dictate as to the use of rolling-stock, which
includes the vital-point of breaking bulk. Both of these mat-
ters obey a law of their own, and merchandise once passing
under the control and into the cars of a combination, will, of
necessity, follow the channel into which it is directed. No re-
lief could bo found from this quarter, even supposing that a
combination wielding the immense political influence which
would be possessed by that suggested could not regulate legis-
lation to suit itself. The present time-freight lines may, there-
fore, contain the germ of that consolidation which shall \\cld
RAILROAD CONSOLIDATION. 395
the railroad interests together as one body, and give to them
the unity and concentration which hitherto they have notori-
ously lacked. This result of the experiment of 1865 would
seem by no means so unlikely as that from one carpet-bag in
1838 should spring the present express system of America.
It is nnich the custom among those who discuss this consoli-
dating phase in the development of a great system to denounce
it as an unmitigated commei'cial and political evil. It remains
to consider whether these judgments are fully warranted. So
far as the interests of commerce and of intercourse in general
are concerned such conclusions do not seem to be sustained by a
calmer examination of the results in so far as they are yet devel-
oped. On the contrary, it may safely be asserted that, taken
as a whole, the advance hitherto made in the direction of a
closer and more perfect combination has been highly beneficial
to the best interests both of trade and of travel. All decla-
mation to the contrary notwithstanding, this conclusion hardly
admits of a doubt. Even in the case of the Pennsylvania coal
combination, unjustifiable as in many respects it was, so far as
the material interests of the whole country were concerned a
responsible combination even of monopolies, insuring a steady
supply at regular prices, was preferable to the chronic chaos
previously existing. This case, however, was purely excep-
tional. As a general rule it will scarcely be maintained that
it is to small, local or disconnected lines that the public now
looks for the last conveniences and comforts of travel, or for
the most prompt and cheapest transportation of freight. On
the contrary, it is only the consolidated corporations whose
means admit of that freedom of expenditure and minute divi-
sion of labor which is essential to perfect ease of modern move-
ment, whether of merchandise or of persons. It may in fact
be broadly stated as a general rule, to which no exceptions
exist, that, wherever there is a break in management in the
railroad system, the intercourse of the community experiences
a jar or shock, the sense of which is lessened in the exact
degree in which such break of management is overcome by a
closer connection.
396 THE RAILROAD SYSTEM.
It may be argued that this applies only to the combination
of connecting, and not to that of competing lines. It is by
no means clear, however, whether, when fairly considered in
all its aspects, even this distinction is well taken. The sub-
ject has already been somewhat discussed in its connection
with railroad competition and the practice of " pooling prof-
its." On the one side are to be estimated the decided
advantages of the superior promptness and convenience, the
desire to secure every improved appliance, whether of comfort
or safety, which results from a competition, which, in those
respects, is always felt, and also the more modified advan-
tage of charges which are occasionally unduly low ; upon the
other hand, it is to be remembered that competition is con-
fined to points of convergence, that excessive local rates
always make good depressed through rates, that violent fluc-
tuations characterize sharp competition, and, finally, that the
absence of responsibility must perpetuate every abuse. Even
upon this point we are by no means without a practical expe-
rience. No people ever enjoyed more fully the advantages of
competing lines than did the inhabitants of certain portions
of the State of Vermont during the long struggle between the
Vermont Central road and the Rutland & Burlington ; each of
these corporations strove for ye<u~s to steal business from the
other, and illustrated every feature of railroad competition.
After more than fifteen years of disturbance, during which the
people, whom the roads were built to accommodate, were sacri-
ficed to their quarrels, the companies at last consolidated amid
public rejoicing. The war of through competition and local suf-
fering was over, and one uniform, responsible managemenl gave
some assurance that the railroad service of a whole commu-
nity should cease to be the shuttlecock of angry combatant -.
Neither are the political considerations connected with
these vast corporations often fairly considered. The evils
nmlcr our form of government connected with railroad legis-
lation, in any shape, cannot easily be overstated. It is very
questionable, lio\vi-ver, whether (.hey arc a^-jra vateil by the
existence <>f great consolidations. One fact is to be borne in
RAILROAD CONSOLIDATION. 397
mind. If the political power of the large consolidation is
great, so also is the jealousy and apprehension excited by it.
In this respect also, there conies in the important element of
responsibility ; the great corporation presents a point upon
which the force of public opinion can be concentrated ; it
thus bears with it its own element of weakness. This is not
the case with smaller companies. They can and do combine
for political action with most pernicious results to the public ;
but in this cass, though the power is in reality greater, the
responsibility is wholly divided away. What is known as
"log-rolling" is probably the most familiar form of legislative
corruption in general use in America. No bribes are paid, no
money changes hands, but a regular truck-and-dicker of votes
takes place, through which wholly incongruous schemes are
lumped together and passed, regardless of opposition. In this
contemptible science the lesser railroad corporations are apt to
be the most thorough proficients. Each has its little band of
friends, and each is apt to want its rag of special legislation.
Individually, they are powerless, but in combination with the
friends of every other doubtful measure they are irresistible.
Their obscurity is their great protection. From behind it
they raise the cry against the larger companies, concerning
which a jealousy is known to exist, and, while the public at-
tention is absorbed in another direction, they quietly secure
their plunder. To a large corporation, on the other hand,
there attaches in some degree that responsibility which be-
longs to a high public official. Its agents are known, its
operations are jealously watched, it can be held to a public
account. Where, in short, it would be perfectly. feasible for the
community to meet and control a single agent, all experience
goes to show that a dozen may run riot.
As regards the consolidation of railroads, therefore, the case
may be summed up somewhat as follows. Both railroad com-
bination and railroad consolidation, are the legitimate and in-
evitable consequence of railroad competition, and, as such, like
all other phases of natural development, are not easily to be
restrained by legislative enactments. That they may not result
398 THE RAILROAD SYS I EM.
in serious political and material complications is by no means
clear, but these are not likely to be of the character hitherto
anticipated. If, as now seems to be the case, the exigencies
of our civilization force upon us this concentrating process,
there must ultimately result a condition of things which can
be resolved only in one of two ways ; either the community,
as it has already done in certain of the States, must face, and
endeavor to control, a recognized railroad monopoly in respon-
sible private hands ; or it must directly, in a greater or less
degree, take part in its management, thus recognizing the
control of the railroad system as one of the necessary, and for
that reason, legitimate functions of every government. At
present, as respects consolidation, both the railroad system
and pxiblic opinion are in a state of simple confusion. Vague
denunciation and crude statute enactments have hitherto
usurped the place of reason and mature action, and it now
remains to be seen what effect they will have upon a develop-
ment which they may distort but cannot prevent.
CHAPTER IV.
STOCK-WATERING.
~T^)ROPERLY speaking stock-watering is the reappraisal by
I its owners of a corporate property which has, or is al-
leged to have, increased in value on their hands, without any
new outlay upon their part, and the issue to themselves of new
evidences of value equal to such supposed increase. It is
indisputable that, as regards railroads, this practice has been
not infrequently very grossly abused, especially of late years,
and that these abuses of it now impose a very heavy addi-
tional burden upon the cost of transportation. Fraudulent
and secret issues of stock by corrupt inaiiMgnuents or dishon-
est officials have also contributed to this result, but the trans-
;icti.in in this case differs from strict stock-watering in much
STOCK-WATERING. 399
the same way as the money of counterfeiters differs from
excessive issues by government of irredeemable legal tenders.
Both processes directly inflate the volume of the securities
which represent the value of the railroad system, and, in so
fir, constitute stock-watering, but while the first is, strange to
say, legitimate in character, the last is a mere fraud.
In America, as in England, the private corporation owning
the thoroughfare is the basis of the whole railroad system.
In thus surrendering the control of this system out of its own
hands, the community as a rule made one and but one reser-
vation in its own favor ; it was almost universally stipulated
that the rate of profit upon the capital invested in the work
of construction should not exceed a certain annual percentage,
varying, according to locality, from 10 to 20 per cent. Within
this limit the corporations were free to earn and to divide all
that they could.
This constituted the railroad usury law, and like all usury
laws was an exceedingly clumsy contrivance. It had two ob-
vious defects ; no provision was made for ascertaining the real,
as contradistinguished from the nominal cost of any road, and
nothing was said in regard to arrears of unpaid dividends. It
was absurd to suppose that even the most honest capitalist
would accept the strict construction of a law which insured
him a certain loss in each bad year or unprofitable enterprise,
and limited him in case of success to a reasonable profit. Of
course, therefore, the law was no sooner enacted than it was
circumvented. How this was done in Elnglaud has already
been stated, but it is in America that the process has been
conducted on the most magnificent scale. The principle oper-
ated upon in both countries was the same. The doubt raised
was whether the stipulated percentage was to be paid upon
what the propei'ty cost its holders, or upon what it was actu-
ally worth. Interpreting it in the way last specified, the cap-
italist proceeded to act accordingly. The result as a whole
bids fair to be most disastrous, and yet, in not a few cases, it
is very difficult to take any just exception to it. Many roads
were constructed, and proved, if not commercial failures, very
400 THE RAILROAD SYSTEM.
gradual successes; for years no dividends were paid, the
money which should have gone to dividends, which rightfully
belonged to the capitalists, was absorbed in construction.
Fairly speaking, this was so much new capital belonging to the
owners, and by them invested in the enterprise ; just as much
so as if the allotted dividends had been paid to the stock-
holder and by him instantly handed back to the treasurer of
the company. In the vast majority of other cases very small
dividends were paid, far below the limit fixed in the law, and
the balance found its way into construction. In all of these
instances heavy arrears accumulated against the property, and
these arrears might fairly and justly be claimed as capital,
actually paid in, and which should be represented by evidences
of value. Wherever stock was issued under such circum-
stances the operation would not seem justly open to criticism.
The difficulty was that no provision whatever had been made
in the law to meet the case. It therefore devolved upon the
owners of the property to cast up the balance-sheet themselves,
and to decide all nice points, undoubtedly in their own favor.
Where a people so provides for its own interests it needs no
prophet to foretell the consequences. No landlord deals in
this way with a tenant.
The history of the companies which have been consoli-
dated into what is known as the Pittsburg Fort Wayne &
Chicago Railroad, furnishes a very fair illustration of what,
rnay be expected to ensue from this disregard of ordinary
precautions. Here the process of watering was early com-
menced, as a simple and desperate expedient for raising
money at an enormous discount for the purpose of complet-
ing an enterprise of doubtful success. In the earlier history
of one of these companies we read : " The stock subscriptions
which were paid in cash into the treasury of the company were
very small, amounting perhaps, in all, to less than three
per cent on the final cost of building and equipping the m.-nl.
The stock subscriptions wen- paid for mostly in uncultivated
l-iinls, farms, town lots, and labor upon tlie road." Of the
whole road as it stands we are told, that, " of the % 1H, <><>.'{, S7<'>,
STOCK-WAT KlilXii. 401
now representing the cost of the road and equipment, &c., the
shareholders contributed in cash only about ten per cent, or
less than $2,000,000; and their contributions in cash, bonds,
notes, lands, and personal property, labor, &c., amounted to
something less than $4,000,000. or rather more than twenty
per cent of the present cost of the work. The difference be-
tween this sum and the capital stock as now shown by the
books of the company, is made up of dividends which were
paid in stock, interest on stock paid in stock, premium 011
stock allowed to stockholders at the time of consolidation,
which was paid in stock, and a balance of stock still held by
the trustees.
This, however, was in the early days of the enterprise, the
days of doubtful success, when the stock was thought worth-
less, and was almost given away. But in 1866 a new era
dawned upon the Fort Wayne road ; it began to pay divi-
dends. In 1870 the stock of the company, the history of
a portion of which has just been given, stood at $ 11,500,000,
while its indebtedness amounted to about $ 13,600,000 more,
being in all some $1,150,000 above the cost of road and
equipment as they stood upon the books of the company.
In June of this year, a lease was effected of the entire prop-
erty by the Pennsylvania Railroad Company. The Fort
Wayne stockholders had their option between annual divi-
dends of 12 per cent on the stock then in existence, or the
more moderate rate of 7 per cent on a proportionately in-
creased amount. They wisely chose the latter, and forthwith
the $11,500,000 of stock became $19,714,000, while the
road which was claimed to have cost only $ 24,000,000, was
suddenly represented by $ 33,400,000 of securities, none of
which bore a less interest than 7 per cent.
The great masterpieces of Commodore Vanderbilt have, how-
ever, so eclipsed all other performances in this line that they
may be said to constitute an epoch in the history of paper infla-
tion, it might also be said of bubble-blowing. It is only
necessary, therefore, in this connection, to recount the history
of the chain of roads, now reduced in number to two, which
z
402 THE RAILROAD SYSTEM.
connect New York and Chicago by way of Albany. The dis-
tance between these points is 982 miles. It is useless to
begin the story further back than 1852, when the through
line was completed, consisting of sixteen independent links,
sevsral of which were themselves made up of numerous
smaller and once independent roads. That was a year of
active and much needed consolidation. The New York Cen-
tral led off under a special act of legislature. Eleven roads
went into the consolidation with an aggregate capital of $ 23,-
235,600. The stock lowest in value of the eleven was set-
tled upon as the par of the new concern, and the stocks of
the other ten companies were received at a premium varying
from 17 to 55 per cent. By this simple financial arrange-
ment, $ 8,894,500 of securities, of which not one cent was
ever represented by property, but which in reality consti-
tuted so much guaranteed stock, was made a charge, princi-
pal and interest, against future income. This was the price
paid to get rid of the vested rights which had been allowed
to settle down upon this thoroughfare. Between 1852 and
1868 the stock and indebtedness of the consolidated com-
pany had been increased, for one reason or another, until,
when Mr. Vanderbilt became president in the latter year,
they amounted in round numbers to $ 40,000,000, represent-
ing a road which its construction account showed had cost
$ 36,600,000. Vanderbilt had for some years been president
of the Hudson River road, and, as such, in 1867 had doubled
its capital stock, ($ 7,000,000), calling in 50 per cent of the
increased amount and thus watering to the extent of $ 3,500,-
000. Extending his control over the Central, he now proceed-
ed to better his previous instructions. A stock dividend of
80 per cent, not a dollar of which was called in, was suddenly
declared. Over $ 23,000,000 of securities were thus created
at once. Operations stood still at this point, but only for a
moment. The next measure was a consolidation of the Cen-
tral and the Hudson River railroads. This was effected in the
succeeding year upon a stock basis of $90,000,000; a fur-
ther watering of 27 per cent being allotted to the Central,
STOCK-WATERING. 403
while the turn of the Hudson River road now having come again,
there was provided for it the munificent amount of 85 per
cent. The result of these astounding feats of financial leger-
demain was that a property which in 1866 appeared from its
own books to have cost less then $50,000,000, and which was
than represented by over $ 54,000,000 of stock and indebted-
ness, was suddenly shot up to over $ 103,000,000 in 1870,
upon the whole of which interest and dividends were paid. At
the same time the cost of the road stood upon the books of
the company at less than $ 60,000,000, or about $70,000 per
mile, while in evidences of property each mile was charged
with no less than $ 122,000. The average cost of railroads
throughout the world has been somewhat less than $ 100,000
per mile, while in America it has stood at about half of that
amount. According to the books of the company over
$ 50,000 of absolute water has been poured out for each mile
of road between New York and Buffalo.
The next step towards Chicago was one of 88 miles to Erie.
This was made up of a consolidation of two roads effected in
1867, which went in with $2,800,000 of capital and came out
with $ 5,000,000. The total capital account of the company
was then a trifle over $ 3,200,000. In 1869 the consolidation
of the lines between Buffalo and Chicago was effected, and
this road became a party to it with $ 6,000,000 of stock and
$ 4,000,000 of indebtedness, at least 30 per cent of water
in excess of all cost of construction.
The next step in the line is one of 96 miles to Cleveland ;
this was filled by the celebrated Cleveland Painesville & Ash-
tabula road, which in the six years between 1862 -67 divided
120 per cent in stock, 33 per cent in bonds, and 79 per cent
in cash. Having really cost less than $5,000,000 in money
it was consolidated at nearly $12,000,000.
The next step was from Cleveland to Toledo, 148 miles.
Here it was that Vanderbilt began his operations, for in 1866
hs secured possession of this road and signalized his adminis-
tration of its affairs by the issuing of a scrip dividend of 25
per cent upon its $5,000,000 of capital.
404 THE RAILROAD SYSTEM.
The last two roads were consolidated into the Lake Shore
road, 258 miles in length, in 1867 ; the stock and indebted-
ness of the new company was $22,000,000. In 1869 the
work of consolidation was perfected from Buffalo to Chicago
by the merging of all the connecting links into the Lake Shore
& Michigan Southern Railroad Co., operating nearly 1,300
miles of road, represented by $57,000,000 of stock and in-
debtedness, which was increased to $62,000,000 in 1871, and
which it had the further privilege of increasing to about
$73,000,000. These figures throw a very curious light upon
the real cost of railroad construction in America. They rep-
resent a nominal outlay of but $48,000 per mile, and yet
it is not denied tha.t in the amount was included $ 20,000,000
of fictitious capital. These roads, not improbably, may have
cost those who constructed them in cash, actually paid in either
directly in money or in dividends which had never been drawn
out, the full amount of the consolidation capital. The profits
had, it is true, been very unequally divided, but substantial
justice was done in the end ; what had been lost in one road
was made good in another, but as a whole the community was,
perhaps, paying for nothing which it had not received. No
credit on this account is due to those managing the affairs of
the company. They undoubtedly regarded the Vanderbilt
operations as masterpieces of railroad management, and only
regretted that the earnings of the company under their con-
trol could by no possibility justify any similar performances;
and yet the contrast between the results hitherto arrived
at upon this line, under a system of moderate, average water-
ing, and those achieved further east by Vanderbilt is sin-
gularly suggestive. It is probably safe to say that the
Vauderbilt stock-waterings between Buffalo and New York an-
nually cost the American people not less than $ 3,000,000 in
excess of all remuneration which ever under any construc-
tion of right belonged to the owners of the lines. 1'ii'Ier
these circumstances it would seem, judging by the example
of the Lake Shore road, that comparatively legitimate and
reasonable waterings should satisfy any one not inordinately
rapacious.
STOCK-\VATKI;IX<;. 40~>
The science of stock-watering as thus far described had not
yet, however, attained perfection ; in fact had not gone beyond
the English precedents. What might be called the American
system remains to be described. The stock of corporations is
in this country given away as a sort of gratuity, the right
to direct railways and to tax trade is habitually thrown in
as a makeweight. In the earlier days of railroad financier-
ing it would naturally have seemed almost impossible to
accomplish such a result, but time and experience brought
even this about. It originated in the system of railroad
mortgages. Very early, and very naturally in the immature
days of the system, attempts were made to construct railways
upon an insufficient capital. Funds gave out before the en-
terprises were half developed, and projectors had their election
between abandonment or progress at any price. The obvious
resource was to mortgage the property already in existence.
Soon the market was weighed down with every conceivable
description of railroad security. First there was a floating
debt ; then preference stock, to be followed in rapid suc-
cession by first, second, and third mortgages ; construction
and equipment bonds closing up the dreary procession, which
not seldom ended at the tomb of a receivership. All these
evidences of indebtedness were, however, secxired on property
really in existence. The art was not at once discovered of
mortgaging something thereafter to be created. Presently
new roads were projected, the business of railroad construction
and financiering being now reduced to a system. The country
through which these roads were to pass was young and poor,
and capital had to be brought in from outside. There was
abundance of it, but the risk involved was great, and the
temptation to incur it must not be small. In the first place,
the new road as ap enterprise promises well. The next thing
is to raise the money necessary to construct it. This is done,
not by laying an assessment upon the stock, that is not
heard of as yet, and has no value in the market, it exists
only in name. In place of this, the bonds are put upon the
market at a stated price, which, or a portion of which, is
406 THE RAILROAD SYSTEM.
advanced by the capitalist, and construction is carried on
with the proceeds. The stock itself then passes as a gratu-
ity into the hands of those advancing money upon the bonds.
The result is, that by this ingenious expedient the capitalist
holds a mortgage, paying a secured and liberal interest, .on
his own property, which has been conveyed to him forever
for nothing. The stock is at once nothing and everything.
Given away, the donees own and manage the road, and,
receiving a fixed and assured interest upon their bonds, en-
joy a further right to exact an additional sum, and one as
large as they are able to make it, from the developing business
of the country, as dividends on the stock. Instances of this
form of railroad financiering need not be specified, for it
is now the common course of Western railroad construction.
The new country needs its railroads, and is willing to pay any-
thing for them, while the capitalists of the old country specify
their own terms of construction, which are only too eagerly
accepted.
So far as those immediately involved in these transactions
are concerned no exception can be taken to them. Both are
fair and equal contracting parties, and both understand the
bargain they make. The occupant of the new country wants
his railroad, and the capitalist is asked to embark his means
in an enterprise full of risk. They both make the best terms
they can, but the terms are made in advance ; there is no
fraud and no chicane. While, therefore, the contract is not
unfair as a private transaction, as a matter of public policy
such a method of railroad construction cannot but excite very
lively apprehensions for the future. The community, in its
over eagerness to stimulate construction beyond all healthy
limit, is. continually binding itself to conditions which here-
after it will find very hard to fulfil.
The absolute disposal of the control of a road and all its
securities, on condition that it is built, would seem to be a
contract of a sufficiently sweeping nature, and it certainly
marks the limit of legitimate rnilro:id construction. Not
seldom, however, the embryotic enterprise is bolstered up
STOCK-WATERING. 4()7
extraneously. Simple mortgages are not sufficient, and the
credit of the road is guaranteed by land-grants, or by na-
tional or state or town or county loans, or by the credit of
connecting or established lines, or by any or all of these
combined. Every expedient which the mind of man can de-
vise has been brought into play to secure to the capitalist
the largest possible profit, with the least possible risk. The
Pacific Railroad furnishes a fine example of all these ingen-
ious devices. In speaking of this enterprise it is not pleasant
to adopt a tone of criticism towards the able and daring men
who with such splendid energy forced it through to com-
pletion. It was a work of great national import and of untold
material value. Those who took its construction in hand in-
curred great risk, and at one time trembled on the verge of
ruin. This enterprise was to them a lottery, in which they
might well draw a blank, but, should they draw a prize, the
greatness of the prize must justify the risk incurred. The
community asked them to assume the risk, and was willing to
reward their success. Success was thought to be well worth all
it might cost. At the same time the process of construction
afforded a curious example of the methods through which
fictitious evidences of value can be piled upon each other.
The length of the united road was 1919 miles, and the cost
of construction was estimated at $60,000,000. To meet this
outlay a stock capital was authorized of $100,000,000 for each
of the two great divisions of the line ; upon this, however, no
dependence was placed as a means of raising money ; it was
only a debt to be imposed, if possible, on the future business
of the country. A curious mystery hangs over this part of
the financial arrangements of the concern. Probably not
$20,000,000 ever has been, or ever will be, derived from this
source. The rest is very clear. There was the government
subsidy of $30,000 a mile, and $30,000 a mile of mortgage
indebtedness ; there was a land grant of $ 12,800 acres a mile,
and, where there were States, there were bonds, with interest
guaranteed by the State and gifts of real estate from cities,
where cities existed ; and there were even millions of net earn-
408 THE RAILROAD SYSTEM.
ing applied to construction. The means to build the road were
not grudgingly bestowed. Meanwhile, of the real cost of con-
struction but little is correctly known ; absolutely nothing in-
deed of the western division, or Central Pacific. Managed by
a small clique in California, the internal arrangements of this
company were involved in absolute secrecy. The eastern
division was built, however, by an organization known as the
Credit Mobilier, which received for so doing all the unissued
stock, the proceeds of the bonds sold, the government bonds,
and the earnings of the road, in fact, all its available
assets. Its profits were reported to have been enormous, and
they made the fortunes of many, and perhaps of most of those
connected with it. Who, then, constituted the Credit Mobi-
lier 1 It was but another name for the Pacific Railroad ring.
The members of it were in Congress ; they were trustees for
the bondholders, they were directors, they were stockholders,
they were contractors ; in Washington they voted the sub-
sidies, in New York they received them, upon the Plains they
expended them, and in the Credit Mobilier they divided them.
Ever-shifting characters, they were ubiquitous, now engi-
neering a bill, and now a bridge, they received money into
one hand as a corporation, and paid it into the other as a
contractor. As stockholders they owned the road, as mort-
gagees they had a lien upon it, as directors they contracted
tor its construction, and as members of the Credit Mobilier
they built it. What is the community to pay for it?
At the close of 1870, with $103,000,000 of their capital yet
unsubscribed, and thus reserved for issue, should the earnings
ot the roads at any future period make watering practicable :
with this amount ot stock in reserve, the two companies oper-
ated 2,083 miles of road, represented by stock and debt to the
amount of $240,000,000. Thus the last results of Vainl.T-
bilt's genius have boon surpassed at the very outset of this
enterprise. The line from Chicago to New York represents
now but $60,000 to the mile, as the result of many years
of inflation, while the line between Omaha and Sacramento
begins life with the cost oi $115,000 per mile It would
STOCK-WATERING. 409
be safe to say that the road cost in money considerably less
than one half of this sum. .The difference is the price paid
for every vicious element of railroad construction and man-
agement ; costly construction, entailing future taxation on
trade ; tens of millions of fictitious capital ; a road built on
the sale of its bonds, and with the aid of subsidies ; every
element of real outlay recklessly exaggerated, and the whole at
some future day is to make itself felt as a burden on the trade
which it is to create.
Enough has been said to illustrate the bearing which stock-
watering and extravagant construction have upon taxation.
It would be useless to attempt to estimate the weight of the
burden imposed through these means upon material develop-
ment. The statistics which should enter into any reliable
estimate are not accessible, and any approximation would be
simply a matter of guess-work. A table was published, dur-
ing the year 1869, in a leading financial organ,* comparing
the capital stocks of twenty-eight roads as they stood on July
1, 1867, and May 1, 1869. During those twenty-two months
it was found that the total had increased from $ 287,036,000
to $400,684,000, or 40 per cent. Carrying the comparison
on nine of these roads back two years further, it was found
that, in less than four years, their capitals had increased from
less than $ 84,000,000 to over $ 208,000,000, or 150 per cent.
A portion of this, perhaps 25 per cent of the whole, represents
private capital actually paid in and expended ; another por-
tion, pei-haps equally large, represents dividends the payment
of which was foregone and the money applied to construction ;
the whole of the remainder may be set down as pure, un-
adulterated " water," which calls for an annual tax-levy of
some three or four millions a year.
There is, however, another and very important side to this
question. What may be called the wrongs of the community
and the exactions of the capitalist have alone been discussed
hitherto. It now remains to consider the subject from the
capitalist point of view. Almost every balance-sheet presents
* The Commercial and Financial Chronicle of May 15, 1869.
18
410 THE RAILROAD SYSTEM.
items of loss as well as of profit ; that relating to railroads
is no exception to this rule. It has been noticed that the
laws which limited the profit on capital paid into railroad con-
struction made no provision to guarantee any profit up to
that limit. In regard to this the capitalist took his risk. He
built railroads in every direction, and the community under-
took to say to him that, where he made a success he must
content himself with reasonable profits ; where he made a
failure he must submit to a total loss. Here, then, in this
absence of a guarantee of reasonable profit, lay the real
security which the community saw fit to take for itself against
excessive profit. It Avas a case of resort had to the doctrine of
averages. That it was no meaningless security is a thing very
susceptible of proof ; indeed, it is not too much to say that
the loss incurred by private capital in ill-considered railroad
enterprises, the mere amounts of money actually paid into
construction, and since wiped out of existence by insolvency
or loss of interest, it is safe to say that this often forgotten
element in the account would constitute more than a set off
for the largest amount of watered stock ever alleged to have
been issued. People continually refer to the brilliant successes
in railroad enterprises; they do not so often count the
failures, or remember the fact that not a few of our thorough-
fares were actually given by capitalists to the communities
which now enjoy them. This statement is very susceptible of
proof. The profits upon railroad enterprises, as a whole, are not
excessive, the business is one which affords in this country
even less than the average return upon the capital invested in
it. The actual cost in money, up to the present time, of the
55,000 miles of railroad now in operation in the United States
cannot have been less than $ 40,000 per mile, or, in all, twenty-
two hundred millions of dollars, and was probably much more.
Perhaps one quarter in amount of the cost to both sides of
the war of the rebellion. The net earnings of the system,
that part which alone represents profit on capital, cannot cer-
tainly be estimated at more than ">.''> per cent of the gross
earnings, or in this case $ 150,000,000 per annum. Here,
STOCK-WATERING. 411
then, under the most favorable circumstances, is a system re-
turning 6.82 per cent upon the capital actually invested in it.
In America this cannot surely be considered excessive ; had
the State governments guaranteed the investments the money
could not have been obtained at a lower rate.
An examination of the system in detail would indicate a
similar result. In Massachusetts, the net earnings average
7.26 per cent on the construction accounts of the roads ; in
New York, they average 7.5 per cent ; but in Ohio they fall
to 4.8 per cent; while in Pennsylvania they rise to 8.3 per
cent. Such facts as these would seem to indicate many and
very heavy counterbalancing losses. Nor are such difficult to
find. Beginning with the Grand Trunk in Maine, and passing
down by the Vermont Central to the Boston, Hartford & Erie
in Massachusetts, and thence to the Erie in New York, and the
Philadelphia & Erie in Pennsylvania, and the Atlantic & Great
Western in Ohio, and so on by the Ohio & Mississippi to the
North Missouri, it is not difficult to enumerate name after
name, representing thousands of miles of roads and hundreds
of millions of investment, which are synonymous only with
loss and insolvency, or at best with hopes long deferred.
It is in this way that a certain just, though rude average is
evolved out of a conflict of shrewdness and simplicity, ex-
cessive cunning and unreasoned action. The difficulty with
averages is, however, an obvious one. The burden is necessa-
rily to be placed just where the public interest demands that
it should not be placed. A thoroughfare like the New York
Central makes good the deficiencies of a number of local enter-
prises which have no connection with it. It is thus on the
chief arteries that the greatest obstruction is placed, and the
transportation tax is to be levied indefinitely wherever it can
most readily be found. The mere fact that a sort of aver-
age is educed is no alleviation of particular ills complained of.
Each road is constructed on its own merits, and without regard
to the profit or loss involved in the operation of another road
perhaps hundreds of miles off. That the through routes of
the country, the main arteries of travel and commerce
412 THE RAILROAD SYSTEM.
should "ultimately be as nearly as possible free, is of the great-
est moment to the whole American people ; that they should
ever become so under a system which causes them to make
good the deficiencies of an entire system, is to the last degree
improbable. The true rule would seem to be, that, while the
owners have a right to the stipulated return on the cost of
their whole property, whether the same was paid in by them
in money or in undivided profits within the limit of dividends,
yet that beyond this the community ought resolutely to insist
that every increase of value should contribute only to the
freedom of intercourse.
In conclusion, the practical remedy of the abuse of stock-
watering in its most objectionable shape would after all seem
to be both obvious and easily to be secured. There has never
been in America any recognized and uniform mode of keeping
railroad accounts. The want of this has opened the door to
all the evils, not fraudulent, which have been described. A
very brief statement of the case will make this apparent.
All railroad expenditures are incurred either on account of
the construction or of the operation of roads. Construction
should properly represent cash paid in by stockholders, upon
the full amount of which they have a right to receive divi-
dends, if the earnings justify their payment ; the operation of
the road, on the other hand, is to be fully provided for out
of the earnings, and it is only the balance left over after thus
providing for it which can be devoted to the payment of
dividends. No method of keeping those accounts having been
prescribed by government, as a consequence no two corpora-
tions have kept them alike. Certain corporations early closed
their construction accounts, and consequently the whole cost
of developing their roads was afterwards charged to operating
expenses. In such cases the community simply doubled and
trebled its railroad facilities out of an excessive transportation
tax. In other words, instead of paying an annual interest on
capital invested in railroads, it pays in the capital itself, thus
gradually accumulating a property out of all proportion to the
evidences of value which represent it in private hands. This
STOCK-WATERING. 413
is what is known as a conservative system of management.
On the other hand, another system of management charges all
doubtful amounts to consti'uction, thus perhaps running the
company in debt, but at the same time reducing operating
expenses to a minimum and nominally leaving heavy net-
profits to furnish dividends to the stockholders. The result
of this system is that the securities of a road rapidly reach an
amount which more than represents the full value of the
property. This is what is not infrequently known as a pro-
gressive or enterprising management. In each extreme the
public is practically defrauded.
So long as this license in railroad accounts is permitted it is
impossible for any community to do more than guess at the
real amount of paid-in capital represented by its railroad sys-
tem. On the one hand the proceeds of the transportation tax
are habitually perverted to the work of construction ; and,
upon the other hand, the private capital which should do the
work of construction is applied to the payment of dividends.
The responsibility of fixing the- cost of their thoroughfares is
thus devolved upon the private corporations which own them.
That such a power should be abused is almost inevitable ; that
it now does exist and always has existed is a striking evidence
of legislative improvidence. A piiblic and uniform system of
railroad accounts, kept in a manner specified by government,,
and audited by government officials, would have obviated
much of the difficulty and prevented innumerable frauds.
Finally, a responsible department of the executive should
have charge of the subject and should be empowered to decide
as to the amounts of private capital, directly or indirectly-
paid into construction, and authorize the issue of securities
accordingly.
414 THE RAILROAD SYSTEM.
CHAPTER V.
THE GOVERNMENT AND THE RAILROAD CORPORATIONS.
IF neither competition nor legislation have proved them-
selves effective agents for the regulation of the railroad
system what other and more effective one is there within the
reach of the American people 1 This is the final issue to
which the railroad problem must apparently reduce itself.
The material and moral difficulties which surround the ques-
tion are further complicated by grave political considerations!,
which need now to be stated with all possible emphasis, for
they will continually present themselves throughout what
remains of this discussion, and must ever be borne in mind.
The difficulty in great degree arises from the development of
a material and moral power, or rather, perhaps, combination
of powers, in our social organism which our political system
was not calculated to deal with. At the time the framework
of our government was put together, a system of necessary
monopolies was the very last thing which was expected to pre-
sent itself on this continent. Our governments, state and
national, grew up among, and were calculated for, a commu-
nity in the less complex stages of civilization. Our whole
machinery looked to dealing with individuals, and that only in
the least degree which deserved the name of government at
all. The idea of one man or set of men combining to own
in absolute monopoly the great channels of internal commu-
nication as they then existed, the Hudson, or the Ohio, or
the great lakes, would have been regarded as a wholly inad-
missible supposition, a contingency impossible to occur. Con-
sequently no machinery was devised calculated to meet such
an improbable emergency. Yet that very emergency would
now sci'tn to be imminent. Here then arc two systems grow-
ing and expanding .side by side, the representative, repub-
lican system of government, adapted to a simple and some-
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 415
what undeveloped phase of society ; and the corporate in-
dustrial system, the result and concomitant of a complex and
artificial civilization. How long can they develop together ?
The peculiarities and combinations now noticed in our legis-
latures and market-places, the growing torpidity of public
opinion, the constant strain under which our machinery of
government visibly works, the crude, undigested propositions
for reform which emanate from every quarter, the startling
rapidity with which change develops itself, and the rapidly
shifting phases which all interests assume, clearly indicate
some deep-seated social and political revolution in progress.
What this will result in, time only can disclose. It would
be a mere waste of space and ingenuity to endeavor to fore-
cast it at present.
Meanwhile so far as the railroad system is concerned it
seems almost inevitable that the national government must,
soon or late, and in a greater or less degree, assume a jtirisdic-
tion. This is an obvious conclusion to be deduced from the
irresistible development of the system in a course it has hith-
erto pursued. The next question is when, and in what way,
and to what extent, is this to be done 1 What is to be the
basis of legislation ? This now admits of almost infinite modi-
fication, ranging from piiblic ownership on the one hand, to
the most limited regulation on the other. The same may be
said as to extent of jurisdiction. It may be assumed over all
roads lying in more than one State, or it may be confined to
certain trunk lines specially designated as military and post
roads. These questions it is now premature to discuss. They
constitute the final problem. All other proposed solutions of
it, resting upon State regulation or State control, are but
temporizing expedients, important simply as illustrating the
practical vahie of certain theories. Such may prove instruc-
tive resting-places , they can hardly be the final objective. To
these, however, attention should now be confined, for through
them the ultimate results are to be evolved.
Two of these proposed solutions have of late excited an un-
usual degree of discussion. The one seeks to supply our gov-
416 THE RAILROAD SYSTEM.
eminent with a supplementary power, which will better adapt
it to the new exigency which it is called upon to meet ; the
other directly meets the emergency with a proposal of some
form of ownership of railroads by the State ; it pronounces the
English and American railroad system in many respects a
failure, and seeks to make good its defects by the introduction
into it of certain features of the Belgian system.
It is impossible, in view of past experience, not to entertain
grave doubts as to the result of any experiment of the sort last
referred to, made through the political machinery which exists
in America. As regards the construction of a railroad system
it has repeatedly been tried and uniformly ended in failure.
Pennsylvania, Ohio, Michigan, Illinois, and many other States
went through the same sad experience. Every section with us
had its claims, and those claims could not be disregarded.
In Belgium, in France, or in Russia a government engineer
can locate a railway, and there an end ; it was found to be
otherwise in America, and an impartial disregard of the figures
of the census by no means resulted in a commercial success.
It is, however, argued that it would be otherwise in the case
of a completed system ; that if our State governments could
not construct, they could at least manage railroads by deputy.
This remains to be seen. That the government should engage
in any business, whether as producers, as carriers, as bankers,
or as manufacturers, is opposed to the whole theory of strictly
limited governmental functions.
This aspect of the question is most important, and in Amer-
ica it cannot well be dwelt upon too frequently or stated too
broadly. Our whole political organization, our history as a
nation, the prodigious material development of which we are
so vain, all of these rest upon the great principle of limited
govemmental functioiiR, and the leaving of persons and interests
to rely solely on themselves, and to work out tlu-ir own destiny
in their own way, subject to the least possible external inter-
ference. To turn over to a government constructed on such
a principle the management of so complex an organization as
the railroad system is certainly a measure of the last resort.
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 417
But, unfortunately, this is a case in which choice must be
made between two evils. So far from disentangling themselves
from connection with the railroad system, there is not to-day
a government in the United States, including the national
government itself, which is not steadily drifting into the most
dangerous form of connection with it of which it is possible
to conceive. It is scarcely an exaggeration to say that our
legislatures are now universally becoming a species of irreg-
ular boards of railroad direction. Questions of the purest
detail affecting the operation of railroads are regularly brought
before them, and the increasing disposition to manage this
elaborate system by statute enactment is notorious. Not only
is it more than questionable whether this can be successfully
done, but the attempt itself irresistibly forces the owners of
the system in self-defpnce into the lobby. The inevitable con-
sequence does not need to be dwelt upon ; it has already be-
come a fruitful source of scandal and alarm. The question at
issue, therefore, is not between interference and non-interfer-
ence by the State, but between two forms of interference.
For, indeed, it is practically conceded on all sides that the
task of supervising in some way the railroads of a modern
State does constitute one of the necessary functions of gov-
ernment. A writer as jealous of limiting those functions as
J. S. Mill expressly makes this exception : " There are many
cases in which the agency, of whatever nature, by which a
service is performed, is certain from the nature of the case, to
be virtually single, in which a practical monopoly, with all the
power it confers of taxing the community, cannot be prevented
from existing . . . it is the part of government either to sub-
ject this service to reasonable conditions for the general ad-
vantage, or to retain such power over it, that the profits of
the monopoly may at least be obtained for the public. This
applies to the case of a road, a canal, or a railway. These are
always in a great degree practical monopolies ; and a govern-
ment which concedes such monopolies unreservedly to a private
company, does much the same thing as if it allowed an indi-
vidual or an association to levy any tax they chose, for their
418 THE RAILROAD SYSTEM.
own benefit, on all the malt produced in the country, or on all
the coffee imported into it." Accepting this statement of the
case as sound, and it is difficult to see how it can be contro-
verted, it simply remains to consider what form of interference
will be most effective, and at the same time in the least degree
politically injurious. At. this point opinions diverge.
The results of legislative regulation of private railroad cor-
porations have been sufficiently dwelt upon. It can hardly be
claimed that in any aspect they have been encouraging. Not
only have the material interests of the community suffered,
but the effects upon political morality have been injurious,
and are felt at the most vital point of our system, in the
legislative department. A vicious civil service or an inefficient
executive can be reformed, but there is no power which can
purify a corrupted legislature. Many States in this country,
and especially New York, New Jersey, Pennsylvania, and
Maryland have now for years notoriously been controlled by
their railroad corporations. Not one of these States owns a
mile of railroad, and yet it is very difficult to conceive of any
form of State ownership which would entail greater scandals
or political evils than those which now spring from the system
in use in them. The empty name of non-interference is thus
jealously guarded, while, constant interference notoriously con-
stitutes one half of the legislative business of the country.
The expediency of making an experiment at the State
ownership of a railway and its management through the
agency of public trustees, instead of a board of private di-
rectors, has been more or less discussed during each of the
last three sessions of the Massachusetts legislature. A fair
though carefully limited trial of the Belgian system was pro-
posed by the Board of Railroad Commissioners of the State
in their report for 1871. They advocated the purchase by the
Commonwealth of the fifty miles of road between Boston
and Fitchburg, which will ultimately connect \vilh the West
by means of the Hoosac Tunnel. The argument of the Com
missioners practically was, that competition, if it couM be
secured, was, under the present circumstances, the most efl'ec-
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 419
tive agent which could be brought to bear to introduce many
greatly needed reforms into the Massachusetts railway system.
To eft'ect these reforms by means of legislation in the case of
roads owned and managed by private companies, even if it
were practicable, would in fact occasion a far more dangerous
and corrupting political association between the private com-
panies and the government, than the absolute ownership of
any experimental line. 'Such a line once in the hands of
trustees, and energetically managed, would obviate all necessity
of further attempts at the most difficult class of railroad legis-
lation by effecting that through the force of competition,
which it was now in vain sought to compel by law. The com-
petition and comparison continually existing between the pub-
lic and private lines could be relied upon to keep the adminis-
tration of each pure ; neither, it was argued, would the State
in this way be gradually led on to assume the other railroads
within its limits. If public management failed to operate the
one road assumed so as to compete with private roads, and in
addition thereto to pay the interest on its purchase money, -
equal to the dividends on private roads, then other por-
tions of the State would insist upon the sale of the property
rather than pay taxes to support a local public road ; did pub-
lic management succeed in its reforms and still meet all de-
mands on account of interest, then private managements
would, under the pressure of public opinion, naturally adopt
reforms thus proved to be safe ; they would follow in the
beaten track.
The only cases furnished by American experience at all
parallel to the one here proposed, certainly do not militate
against this line of argument. Most prominent is that of the
Erie Canal in New York. The influence of this canal as an
independent and steady competing force upon railroads is
well known ; it, and it only, can be relied upon never to
enter either into freight combinations or ruinous competition.
It has been public property, and its management certainly has
not been above criticism, but it is equally indisputable that it
has never exercised upon the politics of New York an influence
420 THE RAILROAD SYSTEM.
either so great or so pernicious as at least two of the pri-
vate railroad corporations with which it competes. So far as
administration is concerned, the precedent of the Erie Canal
wholly fails. The service in the case of a canal and a railroad
being dissimilar, the element of comparison between the pub-
lic and the private roads which has produced such great re-
sults in Belgium is wanting. One thing, however, is very cer-
tain, and not less suggestive as bearing on one present phase
of the railroad problem, were the canal a public railway, in-
stead of what it is, Mr. Vanderbilt might safely be permitted
to water the stock of the Central to any degree which he
might desire ; the community could always control the
tariff of his road without, being compelled to resort to hostile
legislation. Neither would the influence of this competition
probably be confined to the Central road. Railroad manage-
ment in the same community always seeks a certain level ;
reforms once introduced are never confined to their original
limits. Let a positive advance in any direction be thoroughly
established, and the pressure of self interest and popular feel-
ing may safely be relied upon to make it general.
The Post-Office Department of the United States govern-
ment also throws some light through its workings upon the
proposed innovation. The postal service is a close monopoly,
employing thousands of agents and entailing heavy expendi-
tures ; it has for a long time been subjected to all the evils
which flow from a system of rotation in office, it is a recog-
nized part of the political spoils of the country. While, in
spite of these adverse circumstances, its administration will
probably compare favorably with that of any railroad in the
country, and while it furnishes facilities and accommodates the
public as no private corporation possibly could do, yet no
one will mantain that the 1W OHice in its connection with
the government is politically either as disturbing or as cor-
rupting an agent as any one of numerous railroad corporations
which arc perpetually soliciting Congress.
Should tin's experiment In- tried and sin-reed it might well
give a new phase to the whole question of internal conununi-
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 421
cation, and bring the railroad problem one step nearer to a
solution. Meanwhile, it would be wholly futile to suppose in
the face of the growing tendency to nationality, the constant-
ly increasing disposition to ignore State lines and to transfer
control to the general government, that this revolution would
confine itself to State limits, or that a dozen different State
organizations could control a Pacific railway. Such a system,
with local jealousies, interests, and pride to contend with,
each great line running the gauntlet of a dozen rival competing
points, and artificially turned into twenty interested channels,
would so hamper the commerce of the continent that it would
crumble into chaos in 'less than a twelvemonth. Government
ownership of railroads can therefore with us only mean their
ultimate, though not necessarily exclusive, ownership by the
national government. At present, however, that government
is peculiarly unfitted to assume any functions of this sort,
and must continue to be so until after a thorough and sweep-
ing reform of the civil service is effected. A purified political
atmosphere may be imagined, in which at some future time it
would be safe for Congress to assume the management, through
supervising boards, of certain designated continental routes ;
but any movement in that direction would certainly, and very
properly, encounter a strong and determined opposition so
long as the present condition of affairs exists.
It is not wholly impossible, however, that a safer, even if less
effective, solution of the difficulty may be found in the furnish-
ing our governments with the supplementary power which
shall adapt them to the new condition of affairs which has
arisen. A practical attempt in this direction is now in process
of development in Illinois. That State was the first to recognize
the essential fact that the railroad system is an exceptional
interest, and therefore requires to be exceptionally dealt with.
This great stride in advance was secured by the Constitution
of 1870. It was the concession of a starting-point, the recog-
nition of the new social and political force for which no pro-
vision had been made. When a deficiency is fairly acknowl-
edged, we can in America fee! a tolerable confidence that it
422 THE KAILROAD SYSTEM.
will shortly be supplied. The provisions introduced into the
Illinois Constitution are, indeed, crude and unsatisfactory, but
they are a beginning. A discussion of these provisions will
again bring into view at once the very point upon which our
State systems have hitherto broken down in their attempts to
deal with the railroad development.
The most striking' feature of the Illinois Constitution is the
strong resolve of its frame rs to do away with what are known
in England as " private bills," and in this country as special
legislation. It is unnecessary to dilate upon the nature of
this abuse, which may safely be set down as the greatest dan-
ger to which any system of government is liable ; it may
almost be said to be the root of all political ills. Legislation
should know nothing of individuals. All modern thought
tends to the conclusion that the universe is controlled by gen-
eral laws ; and a belief in special providences is entertained
only by the most superstitious. A sound system of govern-
ment should recognize individuals no more than the laws of
nature recognize them. The law should apply to all, without
discrimination for or against. The system of special legisla-
tion, on the contrary, from top to bottom, is based on a sup-
posed necessity, which is taken for granted as existing, that
privileges may be conceded to one or a few which it is not safe
or politic to concede to all. Nature never acts in this way,
nor will thoroughly enlightened governments do so, when any
such exist. The Illinois Constitution deserves to be hailed as
;i great :i(!v:iiift! towards the realization of this idea. The
framers of this instrument, when they came to dealing with
railways, provided for their regulation these articles, among
others :
AlHiri.K XI.
CORPORATIONS.
1. "No corporation shall l>e created by special laws, or its char-
ter extended, changed, or amended ; . . . but the (leneral Assembly
shall provide, hy general laws, for the organization of all corpora-
tions here.-il'ler to In' created."
i 11. "No railroad corporation shall consolidate it* stock-, prop-
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 423
erty, or franchises with any other railroad' corporation owning a
parallel or competing line "
12. " Railways heretofore constructed, or that may hereafter be
constructed, in this State, are hereby declared public highways, and
shall be free to all persons for the transportation of their property
thereon, under such regulations as may be prescribed by law. And
the General Assembly shall, from time to time, pass laws establishing
reasonable maximum rates of charges for the transportation of pas-
sengers and freight on the different railroads in this State."
13. " No railroad corporation shall issue any stock or bonds,
except for money, labor, or property, actually received and applied
to the purposes for which such corporation was created ; and all
stock dividends and other fictitious increase of the capital stock or
indebtedness of any such corporation shall be void "
15. " The General Assembly shall pass laws to correct abuses,
and prevent unjust discrimination and extortion in the rates of
freight and passenger tariffs on the different railroads in this State,
and enforce such laws by adequate penalties, to the extent, if neces-
sary for that purpose, of forfeiture of their property and franchises."
Now while it is conceded that special legislation is the
bane of all government, it must also be conceded that special
legislation has hitherto been found indispensable to any regu-
lation of the railroad system. The exception once conceded,
every railroad came up and demanded it own special immuni-
ties and privileges, its peculiar charter, which was a law
unto itself. The extent to which this was carried may be in-
ferred from the three thousand two hundred acts on the
statute-book of Great Britain, and the one thousand on that
of Massachusetts, nine-tenths of them, in each case, special
legislation to meet the supposed requirements of an organized
monopoly. The exception and its dangerous nature the
frauds which were perpetrated under it, and the lax and con-
fused system of legislation it was engendering long ago
attracted the public attention and excited its alarm. The
press raised its voice, and the people responded by inserting
into more than one constitution provisions absolutely inhibit-
ing the passage of any act of a private nature. In other States
the Executive accepted the issue ; and in New York a long
424 THE RAILROAD SYSTEM.
succession of vetoes has only recently vindicated the principle
of general legislation. There was in each of these efforts at
reform an element of fatal weakness. The fact that the rail-
road system occupied an exceptional position was ignored.
Instead of conceding that this system was made up of a num-
ber of monopolies, in regard to the necessities of which a dis-
cretion must be exercised, journalists and legislators insisted
on placing them in a position exactly similar to that of in-
dividuals, amenable to every law of trade. The result was,
of course, failure. The monopolies evaded or broke down the
law, and were omnipresent in legislatures. There was no
machinery in the government adapted to meeting the excep-
tional case. Reformers failed to realize that, though special
legislation was corrupting the whole political system, yet
general legislation of the ordinary description would not meet
the requirements of the case. It is here that the whole ques-
tion lies in a nutshell, how can the requirements of the
railroad system be met, and yet its individual members driven
from the legislature?
This final result was not attained in the Illinois Constitu-
tion ; had it been, the value of that instrument would have
been more than doubled. Indeed, the provision made in it
brings the innovator just to the fatal point ; as yet he has
done nothing, but the next step involves everything. In spite
of its Constitution, Illinois must now slip back into the deep
mire of special railroad legislation, or it must go on and solve
the problem. The case stands thus : the Constitution implies
tlic passage of (1) laws prescribing reasonable rates of charges
on the different railroads, and ('2) laws to correct abuses and
prevent unjust discrimination and extortion in the rates of
freight and passenger tariff.
Tin; legislature it seems is to do this work ; if so, the work
("iinidl. be done ; the provision is HO much waste paper. It
may boldly be laid down as a principle, that no general law
can be framed which will meet the exigencies of a whole rail-
mail system in all its manifold details. This is ti'iie in almost
every respect. A law, for instance, authorizes the taking of
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 425
land for railroad purposes, but one road requires an excep-
tional amount of land in a particular locality. A general law
regulates station facilities ; but while it may apply well to one
district, it will be simply ridiculous in its application to
another. The difficulties in the way of framing a general law
regulating fairs and freights, the very one provided for in
the Illinois Constitution, have already been sufficiently dis-
cussed. If, turning from this manifest difficulty, the legisla-
ture seeks to establish tariffs adapted to particular roads, then
the whole evil of special legislation in its worst possible form
is upon it. Where, then, is the escape 1
We have thus got back to the old puzzle, how to meet
special requirements under general laws. The solution, if
found at all, if failure is not predestined, will be found
by the Illinois legislature in fairly recognizing an evident ex-
ception to general conditions, and supplying an executory power
specially calculated to meet it. It is the want of this whicli
has brought to nought all efforts at general legislation on this
subject up to this time. They have uniformly failed from one
defect ; they were hard, unyielding, intended to apply to dif-
ferently conditioned members of one exceptional and most com-
plex system, and yet wholly unprovided with any discretionary,
adaptive, or executory power. The law was there, but it did
not move. It was as if a criminal law were put upon the
statute-book which was to apply to all degrees of crime indis-
criminately, without the aid of judge or of officer. And, in-
deed, this very example illustrates the whole subject. The
criminal law was once a subject of special legislation. Indi-
vidual criminals had acts passed to meet their particular
cases. The legislature was at one and the same time judge
and jury. The legislative and judicial functions of govern-
ment were, however, separated so long ago, that the com-
munity has forgotten that they were ever united ; yet it
was this division, first introduced under Alfred the Great,
which alone made possible the success of parliamentary gov-
ernment. Had it been the discovery of one man, he who
made it would have deserved to rank among the greatest
426 THE RAILROAD SYSTEM.
benefactors of his kind. In early New England history the
distinction was again- obliterated. The Great and General
o'ourt was in Massachusetts Bay both the source of law and
the seat of supreme justice. This simplicity very shortly dis
appeared as society became more complex, but it left behind it
the fatal legacy of special legislation. The same confusion of
functions is exactly what has hitherto existed in regard to rail-
roads ; the result, both in New and Old England, is seen in a
statute-book swollen with special enactments, a legislature
overwhelmed with business it cannot do and tainted with
jobbery of which it cannot rid itself, all resulting in a rail-
road system which is a confessed failure in everything but its
material aspect, with which the legislature could have nothing
to do. Can the desired separation be effected 1
The solution of the problem stated in this form seems so
obvious, that it is fairly matter of surprise that it has never
yet been practically attempted. The legislature should enact
its general laws for the requirements of railroads, as it does
to meet the innumerable civil and criminal complications which
arise ; but, in the one case as in the other, the judicial and
discretionary action under the general law should be devolved
upon tribunals specially created to take cognizance of them.
The legislature declares the rule which is the same to all;
but the degrees of discretion which varying circumstances ex-
act in the application of the rule must constitute a trust neces-
sarily delegated to others. At present all these distinct powers
are jealously retained by the legislatures. Their committees
sit as courts and take evidence and listen to arguments. So
far it is well. At this point, however, instead of framing a
general law or dismissing the individual case, they undertake
to give a charter to this npplirunt and to refuse it to that; to
pass a special act in favor of this corporation, and to reject it
as regards that ; to authorize an increase of stock here, and to
direct the construction of a new depot there. These arc 'func-
tions which no legisl.ilivr body c;m successfully perform ; as
well undertake to decide every suit at law or to af)i\ the pen-
alty to every crime. Just so long as legislatures insist on
THE GOVERNMENT AND THE RAILROAD CORPORATIONS 427
themselves doing work of this nature, just so long will corrup-
tion increase and the statute-book fall into confusion.
But it will be said, Who will guard the virtue of the tri-
bunal 1 ? Why should the corporations not deal with them as
with the legislatures 1 They may do so, but somewhere and
at some point, put on all the checks and balances that human
ingenuity can devise, we must come back and rely on human
honesty at last. One rule always holds good, where the
most direct responsibility exists, there will the best conduct
be found. Corruption loves a throng and shrinks from iso-
lated places. To divide responsibility is to destroy it. The
judges of our courts are rarely otherwise than pure; the
heads of our official departments are conspicuous for honesty ;
they are always directly and individually responsible. If we
thus can, and indeed, from the necessity of the case, must
confide the charge of the public funds and our personal liber-
ties to mortals like ourselves, acting under the law, it is diffi-
cult tc see why, except that we never have done so, we cannot
trust these other interests to similar mortals. All in such
cases depends upon the men. We have had in England and in
this country a sufficiency of feeble attempts in this direction
boards of trade, railroad commissions, and various other
pieces of machinery. They have all failed, for one reason, --
the principle of special legislation was ever kept open in the
background behind them. They have uniformly possessed a
mere simulacrum of power ; their decisions were appealed
from, their recommendations were ignored, and their principal
duty was to sit patiently by and watch the corporations as
they dealt directly with the legislature over their heads.
Instead of the legislature saying to the sturdy corporation
beggars who infested the lobby, as it would say to civil liti-
gants or to criminals, " Leave us ! there is the general law
and there is a tribunal specially charged with the interests of
you monopolists ; go to it ! " instead of this, the boards,
commissions, and what not, have ever been placed in the ig-
nominious position of a court, whether civil or criminal, from
which in every case an appeal would lie to the legislature it-
428 THE RAILROAD SYSTEM.
self. A tribunal so constituted can hardly fail, soon or late,
to sink into contempt ; least of all is it calculated to deal with
powerful corporations. As a direct consequence of this con-
spicuous distrust, these tribunals have almost invariably been
made up of very inferior and, not seldom, corrupt men, for no
such responsibility and prominence was thrown upon them as
forced out capacity and integrity as the only alternative to
failure. Had the same class of appointees, as a rule, been
placed upon the bench, the judiciary would long since have
sunk into contempt. The duties, the responsibilities, and the
characters of those composing these boards should, on the
contrary, be brought up to the highest standard, to an
equality, in short, with those of the judges of our courts.
Their tribunals should be clothed with all necessary powers
and be put forward as if the members were fully competent to
represent the interests of the State with an experience and
ability, a knowledge of details, and a zeal in their occupation
equal to that ever so conspicuously displayed by the agents
of the corporations. Such men could certainly be found ;
the corporations always have them. Meanwhile the whole
subject may be summed up in few words : under a system
which permits speeial legislation, boards for the regulation of
railroads are useless ; they are, however, indispensable under
one which confines itself to general laws.
It is not impossible that the defective machinery in our
government, to use once more the simile originally employed
at the beginning of this chapter, may be strengthened in the
way indicated. A new strain has been brought to bear. At
present our government occupies the impossible position of
a wooden liner exposed to the fire of modern artillery. It
was built for no such trial. The railroad corporations, neces-
sarily monopolists, constitute a privileged class living under a
form of government intended to inhibit all class legislation.
We must, then, sec our government fail in this unexpected
crisis, or we must strengthen it in such a manner as to enable
it to vindicate its authority. This can only be done through
human agency; ingenious statute machinery, without a man
THE GOVERNMENT AND THE RAILROAD CORPORATIONS. 429
inside of it, will only result in certain failure. The other
course, also, may fail, as the iron plates of our monitors may
be crushed by the weight of novel projectiles ; but here, at
least, the power of resistance can in some degree be propor-
tioned to the intensity of the strain.
The only advance which has for years been made in
railroad legislation was effected in the direction indicated by
the legislature of Illinois in the first session after the adoption
of the new constitution. Amid some legislation of very ques-
tionable character and propriety, and which can hardly fail in-
juriously to react upon the reform desired, two laws were
enacted of great importance ; by one a board of commis-
sioners was constituted, and by the other a general attempt
was made to classify roads and to affix limits to the charges for
travel. It is extremely improbable that the last act will be
found perfect in its provisions, but it contains in itself the
two great germs from which an efficient regulation of roads by
law must grow if the thing is in any way possible ; these
two germs are the recognition of the natural differences be-
tween different railroad enterprises, and the consequent dele-
gation of a discretion in details and administration to a per-
manent and competent tribunal.
THE END.
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