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ART. II. — A CHAPTER OF ERIE.
EVERY generation during the last six hundred years, it is currently supposed, has seen something of the animal educated out of the Caucasian type of man. But progress in this direction has been neither so rapid nor so steady as many sanguine believers in the approaching millennium are disposed to hold. Often the old enemy confronts us in a new and more specious form, and experience then steadily teaches us that, in practice, vice by no means loses half its evil in losing all its grossness. Take, for instance, some of the cardinal vices and abuses of the imperfect past. The practice of piracy, it was thought, was battered and hung out of existence when the Barbary Powers and the pirates of the Spanish Main had been finally dealt with. But the freebooters have only transferred their operations to the land, and the commerce of the world is now more severely, though far more equally, taxed through the machinery of rings and tariffs, selfish money combinations at business centres, and the unprincipled corporate control of great lines of railway, than ever it was by depredations outside of the law. Gambling has ceased to be fashionable, and Crockford's doors were closed years ago, so that in this respect too a victory is claimed for an advancing civilization. But this seems to be another error. Gambling is a business now, where formerly it was a disreputable excitement, and is called by some such euphemism as “operating,” “ financiering,” or the like. Again, legislative bribery and corruption were, within memory, looked upon as antiquated misdemeanors, almost peculiar to the unenlightened period that expired with Walpole and Holland, and the revival of them regarded as impossible in the face of modern public opinion. This is a third error.
It is no longer the practice of Governments and Ministries to buy legislators; but individuals and corporations have of late not unfrequently found them commodities for sale in the market. So with judicial venality and ruffianism on the bench. Bacon was impeached and Jeffries made infamous for offences against good morals and common decency which a self-satisfied civilization believes incompatible
with its present development. Recent revelations, however, have cast grave doubts on the correctness even of this assumption. Altogether, there is more to be said than is commonly believed in favor of the morality of the past as compared with that of the present day.
No better illustration of the fantastic guises which the worst commonplace evils of history assume, as they meet us in the movements of the day, could be afforded than was seen in the events attending what are known as the Erie wars of the year 1868. Beginning in February and lasting 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. Its history has not been fully written and probably never will be; yet it should not be wholly forgotten. It was something new to see a band of conspirators possess themselves of a road, more important than was ever the Appian Way, and make levies, not only upon it for their own emolument, but, through it, on the whole business of a nation. Nor could it fail to be seen that this was by no means the end, but only the beginning. The American people cannot afford to glance at this thing in the columns of the daily press, and then dismiss it from memory. It involves too many questions; it touches too nearly the national life. The history of the Erie Railway has been a checkered
Chartered in 1832, and organized in 1833, the cost of its construction 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 be
sieged, 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 assignees. In 1845 the State came again to the rescue ; it surrendered 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 mortgages, and passed into the hands of a receiver. In 1861 an arrangement of interests was effected, and a new company was organized. The next year the old New York and Erie Railroad 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 “confidently” 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 enormous amount 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 mountain 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.
Some seventeen or eighteen years ago, Mr. Daniel Drew first made his appearance in the Board of Directors of the Erie, 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 combination of superstition and faithlessness, of daring and timidity, - often good-natured and sometimes generous, - he has ever regarded his fiduciary position of director of a railroad as a means of manipulating its stock for his own advantage. For years he has been the leading bear of Wall Street, and his favorite haunts have been the secret recesses of Erie. As treasurer of that corporation, he has, in its frequently recurring hours of need, advanced it sums which it could not have obtained elsewhere, and the obtaining of which was a necessity. His management of his favorite stock has been cunning and recondite, and his ways inscrutable. 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 fortunes 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, but which subsequent experience has so improved upon that it is now looked on as an ordinary and inartistic piece of financiering. The stock of the road was at that time 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 adYances upon security. Some twenty-eight thousand shares of fits own authorized stock, which had never been issued, were at the time in the hands of the company, which also claimed the right, under the statutes of New York, of raising money by the issue of bonds convertible, at the option of the holder, into stock. The twenty-eight thousand unissued shares and VOL. CIX. No. 224.
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 Erie. While Erie was buoyant, — while it steadily approximated to par, - while speculation was rampant, 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 operator was daily concluding his contracts for the future delivery of stock at current prices. At last the hour had come. Erie was rising, Erie was scarce, the great bear had many contracts to fulfil, and where was he to find the stock? 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 equiralent 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 game, supposed to be one of chance or skill, the result of which is made to depend upon the sorting of a pack of cards, the dosing of a racehorse, or the selling out of his powers by a “walkist.” But the gambler, the patron of the turf, or the pedestrian represents, as a rule, no one but himself, and his character is generally so well understood as to be 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 di rectorship in certain great corporations has come to be regarded as a situation in which to make a fortune, the possession which is no longer dishonorable. The method of accumulation