The worst injustice has been done by popular misconception to Commodore Vanderbilt of the New York Central. He is always referred to as “an old pirate” or “a monster of Wall Street”, etc., and was always denounced for the alleged ruthlessness of his Wall Street activites. But here is the actual story.
When Vanderbilt began to organize several small, obscure railroads into what was to become the New York Central system, he had to obtain a franchise from the City Council to permit his railroad, The New York and Harlem, to enter New York City. The Council was known to be corrupt, and if one wanted a franchise, one had to pay for it, which Vanderbilt did (should he be blamed for this, or does the blame rest on the fact that the government held an arbitrary, unanswerable power in the matter and Vanderbilt had no choice?).
The stock of his company went up once it was known that his railroad had permission to enter the city. A little while later, the council suddenly revoked the fanchise, and the stock began to fall. The aldermen (who had taken Vanderbilt’s money), together with a clique of speculators, were selling Vanderbilt stock short. Vanderbilt fought them and saved his railroad. His ruthlessness consisted of of buying his stock as fast as it was being dumped on the market, and thus preventing its price from crashing down to the level the short-sellers needed. He risked everything he owned in this battle, but he won. The clique and the aldermen went broke.
And, as if this were not enough, the same trick was repeated again a little while later, this time involving the New York State Legislature. Vanderbilt needed an act of the legislature to permit him to consolidate the two railroads which he owned. Again, he had to pay the legislators for a promise to pass the necessaary bill. The stock of his company went up, the legislators started selling it short and denied Vanderbilt the promised legislation. He had to go through the same Wall Street battle again, he took on a frightening responsibility, he risked everything he owned plus millions he borrowed from friends, but won and ruined the Albany statesmen. “We busted the whole legislture” he said, “and some of the honorable members had to go home without paying their board bills.”
Nothing is said or known nowadays about the details of this story, and it is viciously ironic that Vanderbilt is used as one of the examples of the evils of free enterprise by those who advocate government controls. The Albany statesmen are forgotten and Vanderbilt is made to be a villian. If you ask people just what was evil about Vanderbilt, they will answer “Why, he did something cruel in Wall Street and ruined a lot of people.”*
*(For details of this story, see David Marshall’s “Grand Central”, pages 60-64)
Notes on the History of American Free Enterprise – Ayn Rand (1959)