Commodore by Edward J. Renehan Jr

Author:Edward J. Renehan, Jr.
Language: eng
Format: epub
Publisher: Basic Books
Published: 2010-11-30T16:00:00+00:00

In mid-1853, one passenger who felt particularly ill-used sued in the New York courts, the result being a $10,000 fine levied against Vanderbilt and Drew as co-owners of the decrepit North America.4

Early in 1852, the engineer Childs issued a detailed survey. In his lengthy report, Childs argued for a lock canal fifty feet wide and seventeen feet deep between Lake Nicaragua and a port immediately to the north of San Juan del Sur called Brito. Additionally, Childs prescribed several small canals as work-arounds for problematical sections of the San Juan River. Childs estimated the total cost of the project at $32 million. Interest soon picked up when influential groups of topographical engineers in the United States and London declared the project, as laid out by Childs, to be feasible.

That spring, the New York Stock Exchange briefly embraced the idea of the canal. Each original investor in the American Atlantic & Pacific Ship Canal Company (primarily Vanderbilt and a few close associates and family members who had made initial investments of $2,000 per share to cover initial expenses) possessed 192 “grand” shares in the project as a whole. Each grand share represented the equivalent of 200 shares in the Accessory Transit Company: a firm with a total of 40,000 shares outstanding. (A second commodity related to the venture, Canal “Rights,” rose from a base price of $800 to $3,600 during this period of exhilaration.) Shares of Accessory Transit, meanwhile, spiked from $20 to $50, causing each $2,000 “grand” share to have a value, at the market peak, of $13,600.

The excitement of the topographers and the stock traders was not, however, shared by the world’s bankers. That summer, when a delegation of American Atlantic & Pacific Ship Canal Company executives visited London’s Lombard Street in search of financing, they found themselves rebuffed. Leading investment banks from Baring Brothers on down flatly refused to fund the project. Joshua Bates, a native of Boston and a Baring Brothers partner who loomed large in virtually all the firm’s American investments, roundly condemned the economics of the Nicaraguan canal scheme. Doing the most elementary of sums, Bates pointed out that in order to yield a 6 percent return on a $32 million investment, the canal would need to transport 900,000 tons annually—an astronomical figure. Also, further clouding the financial viability of the venture, Bates questioned the American Atlantic & Pacific Ship Canal Company’s proposed toll of $3 per ton, which he thought exorbitant to the point of being prohibitive. Bates’s criticisms effectively killed the Nicaraguan canal not just with Barings Brothers, but all other London banks. On Wall Street, canal “Rights” dropped back down to $800 and eventually to nothing. However, Accessory Transit, as a going-concern with positive cash-flow, remained strong. Overall, Vanderbilt continued well into the black, personally netting $1 million per year from the Nicaraguan venture.5

Down in South America, relations with the government and with the locals in San Juan del Norte were sometimes complicated. During the fall of 1851, the Mosquito King, backed

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