Cornelius Vanderbilt on Regulatory Environment

Gibbons v. Ogden, decided in 1824, held that Congress's power to regulate interstate commerce encompasses navigation, and the ruling is credited with underwriting the growth of the antebellum economy and the creation of national markets. Daniel Webster argued for Gibbons that federal power over interstate commerce was exclusive; Ogden's counsel answered that the states held concurrent authority. Chief Justice Marshall's opinion defined commerce as more than mere traffic, embracing the trade of commodities and navigation, and read the phrase among the several states to mean commerce intermingled with the states rather than stopping at boundary lines. A license granted under the federal Coasting Act of 1793 therefore took precedence over New York's monopoly grant. The Court produced one of the longest sets of opinions in its history to that point. The precedent became the basis for congressional regulation of railroads, freeways, and broadcasting, the legal architecture of the continental market that Vanderbilt's boats and rails would go on to fill.

Vanderbilt stipulated that McTyeire serve as chairman of the Board of Trust for life. For its first forty years the institution remained under the auspices of the Methodist Episcopal Church, South, a lineage modern historians have documented unsparingly: McTyeire was born into a slave-owning family and wrote an essay defending slavery, chancellor Landon Garland owned as many as sixty enslaved people before the war, and Vanderbilt's own second wife was a Confederate sympathizer during the conflict. Tension between the board and the church over trustee selection and the place of non-Methodist faculty culminated in 1910, when the board refused to seat three Methodist bishops. After litigation, the Tennessee Supreme Court held in 1914 that the true founder of the university was the Commodore himself, not the Methodist Church, and the General Conference voted 151 to 140 to sever its ties with the institution that carried his name.

Family tradition preserves the young Vanderbilt's boldest gesture of defiance, from a line that began with Jan Aertszoon, a Dutch farmer who reached New Netherland as an indentured servant in 1650. Competing with Robert Fulton's company for dominance of New York's waterways, and blocked by the monopoly Fulton's heirs held over trade in and out of New York Harbor, Vanderbilt based himself across the river in New Jersey and flouted the law outright, sailing his boats in and out of the harbor beneath a banner reading New Jersey Must Be Free. He engaged Daniel Webster to argue his position before the United States Supreme Court, and won, helping establish an early precedent for the country's first laws of interstate commerce. The episode fixed the pattern of his entire career: where monopoly closed a market, he treated the closure itself as the opening, converting a legal barrier into a marketing banner and a courtroom fight into a competitive asset.

Between 1866 and 1868, Drew conspired with James Fisk and Jay Gould, whom he brought onto the Erie board, to issue spurious shares, watering down the stock, of which an unsuspecting Vanderbilt bought a large quantity, losing more than seven million dollars in his attempt to gain control. Gould later returned most of the money under threat of litigation, but Vanderbilt conceded the railroad to the trio. They were entangled with the corrupt Tammany Hall machine and made Boss Tweed a director of the railroad, and he arranged favorable state legislation in Albany legalizing the newly issued shares. The historian Gustavus Myers recorded that Vanderbilt's agents poured out money to buy legislative votes against the legalization bill while members impassively took cash from both sides: Gould appeared in Albany with a satchel holding half a million dollars in greenbacks, and one senator kept seventy-five thousand from Vanderbilt and a hundred thousand from Gould, and voted with Gould.

On November 24, 1817, the ferry proprietor Thomas Gibbons recruited Vanderbilt to take command of a steamboat running between New York and New Jersey. Vanderbilt kept his own ventures alive but in practice became Gibbons's business manager. Gibbons was then waging war on the steamboat monopoly that the New York State Legislature had handed to the patrician Robert Livingston and the steamboat inventor Robert Fulton, a privilege Livingston's heirs inherited and licensed to Aaron Ogden for a ferry linking New York and New Jersey. Gibbons had started his rival operation out of a personal quarrel with Ogden, whom he meant to drive into bankruptcy, cutting fares while carrying a landmark legal challenge to the United States Supreme Court. Piloting Gibbons's boats put the young captain in daily defiance of a state-protected monopoly, an apprenticeship in aggressive competition under legal fire that shaped everything he later did as an operator and placed him at the center of the struggle that opened American interstate commerce.

The years with Gibbons taught Vanderbilt to run a large and complicated business. He moved his family to New Brunswick, New Jersey, a stop on Gibbons's New York to Philadelphia line, where his wife Sophia ran a profitable inn whose proceeds fed, clothed, and educated the couple's thirteen children. A quick legal study, he represented Gibbons in meetings with lawyers and traveled to Washington to engage Daniel Webster for the Supreme Court argument. Vanderbilt's own appeal against the monopoly sat next on the Court's docket, but it never came up: on March 2, 1824, the Court ruled for Gibbons, holding that states had no power to interfere with interstate commerce. Gibbons v. Ogden remains a landmark, and the protection of competitive interstate commerce it established is considered the basis for much of the prosperity the United States subsequently generated. Vanderbilt had bet a decade of his career on the right side of the argument.

Vanderbilt's career began in an economy still ruled by patricians. In 1798 the New York legislature handed Chancellor Robert R. Livingston and Robert Fulton a monopoly on steam navigation, and Livingston passed it down as a hereditary right, the logic of what historians call the culture of deference, in which the state turned to its leading families to direct orderly economic development. New York's 1777 constitution had entrenched the hierarchy with three tiers of citizenship and escalating property requirements for voting. Thomas Gibbons attacked the monopoly out of a personal vendetta against Aaron Ogden, punishing him commercially, one aristocratic observer marveling at such malice in an enlightened age, while carrying the case to the Supreme Court. Chief Justice Marshall's 1824 ruling that states could not erect barriers to interstate commerce ended the monopoly; Ogden went to debtor's prison, Gibbons died in 1826, and Vanderbilt emerged as a proprietor in his own right. Competition itself was a new thing on the American scene, and the old elite read it as pure destruction.

His one failed campaign was the 1868 attempt to corner the stock of the Erie Railway, launched to punish Daniel Drew for betraying him on the stock market. As Vanderbilt bought, Drew, the Erie's treasurer allied with Jay Gould and James Fisk, sold short, and the board flooded Wall Street with fresh certificates of dubious legality. The notoriously corrupt judge George Barnard issued arrest warrants; the Erie directors packed up the corporate files and funds and fled to New Jersey; Gould visited Albany with a suitcase of greenbacks, and the suddenly enriched legislators legalized the new shares. Barnard kept the warrants alive, forcing a compromise in which the company restored Vanderbilt's losses and he asked the judge to let the directors return. Stiles draws out the nuance: for all the graft surrounding Vanderbilt's career, no evidence convincingly shows that he corrupted government officials, since corruption also flowed as extortion by officeholders. The Erie War personalized the rising institutional economy, making dehumanization human.

Vanderbilt's transatlantic campaign against the Collins Line was a war over subsidies. Edward K. Collins ran the celebrated American steamers that carried more passengers than Cunard and as much express freight, but the ships lost money: pushed at top speed to meet the requirements of the mail subsidy contract, they burned enormous quantities of coal and needed constant repair. In January 1852 Collins petitioned Congress to raise his subsidy from $385,000 to $858,000 a year, and dramatized the request by bringing the Baltic to Washington on the Potomac, mooring her off Alexandria for President Fillmore and the Cabinet to admire. The spectacle worked, but opponents wrote a cancellation clause into the new contract, and after the loss of the Arctic in September 1854, with the line's fortunes sinking, Collins's enemies invoked it, cutting the payments back to the original $385,000. The episode exposed the fragility of a business model built on political patronage rather than operating economics.

Harlem stock, with a par value of fifty dollars, traded as low as nine during the Civil War before the Commodore's arrival on the board lent it standing. In December 1862 the directors applied under their 1832 charter to lay rails down Broadway from Union Square to the Battery, and the stock jumped. Smart brokers snickered at the news that Vanderbilt was buying for investment and unloaded their shares on him at rising prices, until the franchise was granted in April 1863 and the stock leapt again. The speculator George Law pushed a rival bill through the legislature awarding himself the Broadway franchise in defiance of the city's ordinances; Governor Seymour, advised by Samuel Tilden and lobbied by William Astor and Pierre Lorillard, vetoed it. At the annual election Vanderbilt, revealed as holder of 8,801 shares, was elected president, stipulating that he take no salary while the vice president ran operations. The cornered interests had yet to learn what that election meant.