Cornelius Vanderbilt's Role In The Panic Of 1873

Cornelius Vanderbilt saw the trouble coming. By 1873, the 79-year-old "Commodore," as he was called, was no stranger to risk: calculated bets with steamboat and railroad companies had made him by far the richest man in America. But he was wary of overexpansion by the railroads in the West, skeptical of economic weakness abroad and loose credit at home, and disdainful of the new "gang of stock speculators in Wall Street"—which included some of his own clan. When big banks began to fall on Sept. 18, 1873, he immediately understood what was wrong. "There are a great many worthless railroads started in this country without any means to carry them through," he told a reporter that evening. "Respectable banking houses in New York, so called, make themselves agents for sale of the bonds of the railroads in question and give a kind of moral guarantee to their genuineness." Vanderbilt did not play a direct role in the unfolding of the Panic of 1873—though the president and the people alike looked to him for guidance as the leading businessman of the age. But better and quicker than most, he grasped how the economy worked, for it was, in some sense, his own invention.

J. Stiles writes in his long but fascinating new biography of the Commodore, "The First Tycoon: The Epic Life of Cornelius Vanderbilt." "The modern economic mind began to emerge in Vanderbilt's lifetime," Stiles writes, "amid fierce debate, confusion, and intense resistance." The Panic of 1873 takes up little space in the book, coming at the end of the Commodore's career, but its resonance with today's crisis makes it stand out, a reminder that Vanderbilt's life and times still have much to teach