The New York Central Railroad 🚂 Vanderbilt's Water Level Route and the Bonds It Left Behind
🚂 Ask most folks about the great American railroads and they'll name the Pennsylvania first. But for a hundred years the Pennsy had a rival that matched it mile for mile: the New York Central. It ran from Grand Central Terminal up the Hudson, across New York State and along the Great Lakes to Chicago, and it was the Vanderbilt family's railroad.
I have a shelf of New York Central paper, and every piece of it is a chapter of that story. There's an 1885 bond from a line the Central was pushed into buying, gold bonds from the Lake Shore and the Big Four, a 1913 bond engraved with Grand Central itself, and a 1955 bond issued the year after a Texan took the whole railroad over. Let me walk you through it.
🛤️ Where did the New York Central Railroad come from?
The New York Central was born on May 17, 1853, when a string of short railroads across upstate New York merged. The oldest of them, the Mohawk and Hudson, was chartered in 1826 and opened in 1831 between Albany and Schenectady with a little engine called the DeWitt Clinton.
The man who stitched the pieces together was Erastus Corning of Albany. He was an iron and hardware merchant who served four terms as Albany's mayor and spent twenty years as president of the Utica and Schenectady. The state legislature approved the merger on April 2, 1853, and six weeks later the New York Central was a company.
That first New York Central ran from Albany to Buffalo. It did not reach New York City. To get to Manhattan you changed to the Hudson River Railroad, and that gap is where the Vanderbilts come in.
⚓ How did Cornelius Vanderbilt get control of the New York Central?
Cornelius Vanderbilt, "the Commodore," made his fortune in steamships before he ever bought a railroad. By the 1860s he owned the Hudson River Railroad, the line that carried New York Central traffic the last stretch down to the city.
In the winter of 1866, Vanderbilt suddenly refused to accept transfers from the New York Central at Albany. The Central's board gave in, and in 1867 Vanderbilt took control of the company.
On November 1, 1869, he merged the two lines into the New York Central and Hudson River Railroad. Take a look at the corporate seal on my 1898 New York Central & Hudson River gold bond and you'll find that exact date around it: "Consolidated Nov. 1, 1869."
💧 Why was it called the Water Level Route?
The New York Central's main line from New York to Chicago followed rivers and lakeshores almost the whole way. Up the Hudson, west through the Mohawk Valley, then along the shore of Lake Erie. It had no big grades to climb, apart from West Albany Hill and the Berkshires on the Boston and Albany.
The railroad made that its calling card: the Water Level Route. While the Pennsylvania hauled its trains over the Alleghenies at Horseshoe Curve, the Central's trains ran nearly flat.
🌊 What was the Lake Shore and Michigan Southern?
The Lake Shore and Michigan Southern was the Central's road from Buffalo to Chicago. It was formed in 1869 and ran along the south shore of Lake Erie through New York, Pennsylvania and Ohio, then across northern Indiana into Chicago.
The Vanderbilts and the New York Central and Hudson River gained a majority of its stock around 1877. From then on it was the western half of the Water Level Route.
The Lake Shore also carries one of the worst days in American railroad history. On December 29, 1876, the Pacific Express was crossing the bridge at Ashtabula, Ohio, when it gave way. Ninety-two people were killed and sixty-four injured.
My 1897 Lake Shore and Michigan Southern gold bond is a $1,000 three-and-a-half percent gold bond dated June 1, 1897, with the principal due June 1, 1997. That's a hundred-year bond! Its trustee was the United States Trust Company of New York, founded in 1853 with money from men including Peter Cooper and that same Erastus Corning.
📜 The next year, 1898, the New York Central and Hudson River bought up the Lake Shore's stock and paid for it with bonds secured by that stock. Those are the "Lake Shore Collateral" bonds, three and a half percent, printed by the American Bank Note Company and due in 1998. The face shows a locomotive and boxcar rolling past a harbor full of ships and a waterfront factory.
⛵ Why did the New York Central buy the West Shore Railroad?
This is my favorite story on the shelf. In the early 1880s a group of investors, George M. Pullman of the sleeping cars among them, built a brand-new railroad right alongside the New York Central. The New York, West Shore and Buffalo ran up the west bank of the Hudson from Weehawken, New Jersey, to Albany and on to Buffalo.
It set off a rate war that bled everybody, and the West Shore went into receivership in 1884. Meanwhile a new line was being pushed into Pennsylvania Railroad country, the South Pennsylvania, and the two biggest railroads in the East were heading for open war.
J. P. Morgan stopped it. Alvin Harlow's history of the railroad, The Road of the Century (1947), tells how in July 1885 Morgan summoned Chauncey Depew of the Central and George B. Roberts and Frank Thomson of the Pennsylvania to a conference on his yacht, the Corsair. The yacht cruised slowly in the East River and the Sound for most of the day, and Morgan wouldn't let Roberts go until he agreed to a compromise.
The deal: the Pennsylvania took the South Pennsylvania, and the Central took the West Shore. On December 5, 1885, the West Shore was sold under foreclosure to Morgan, Depew and Ashbel Green. They formed a new West Shore Railroad Company, owned by the Central, and leased it to the New York Central for 475 years.
That lease is written right into my 1885 West Shore Railroad $1,000 bond. It's a four percent first mortgage bond, guaranteed by the New York Central and Hudson River, from an issue limited to $50,000,000. The principal falls due on January 1, 2361. Not a typo. 2361! When your lease runs 475 years, your bonds can run a while too.
The face carries a Hudson River scene with steamboats and a sailboat along the shore, just right for a railroad that ran up the river's west bank.
🏃 Did a New York Central train really hit 112 miles an hour in 1893?
That's the record claimed, and it made Engine No. 999 famous. On May 10, 1893, pulling the Empire State Express, No. 999 was reported at 112.5 miles per hour on the straight run between Batavia and Buffalo, with engineer Charles Hogan at the throttle.
The speed came from a stopwatch on a single mile, so railroad historians have argued over it ever since. But it was the number the world read in 1893, and the engine was built to show off the railroad at that year's Chicago World's Fair.
🌽 What was the Big Four Railroad?
The Big Four was the Cleveland, Cincinnati, Chicago and St. Louis Railway, and the four cities in its name gave it the nickname. It was formed on June 30, 1889, from three older lines, and its routes ran through Ohio, Indiana, Illinois and Michigan. It was headquartered in Indianapolis.
The New York Central acquired the Big Four in 1906 and ran it as a separate company until 1930, when it took a 99-year lease. The Big Four built big shops at Beech Grove, Indiana, between 1904 and 1908 (Amtrak bought them in 1975), and its terminal at Bellefontaine, Ohio, had the largest roundhouse of its time between New York City and St. Louis.
🌉 You can still walk on a piece of it. The Big Four acquired a bridge across the Ohio River at Louisville in 1895. Rail traffic ended in the late 1960s, and today the Big Four Bridge carries walkers and bicycles between Louisville and Jeffersonville, Indiana.
I have two Big Four bonds. The 1893 Big Four $1,000 general mortgage gold bond is dated May 15, 1893, payable June 1, 1993, from a $50,000,000 authorized issue. Its center vignette shows two allegorical women, one with a sickle and one with a sheaf of wheat, between two steam trains. Collectors know the design as "The Reapers," engraved by G. F. C. Smillie, who learned the trade at the American Bank Note Company from his uncle.
The 1927 Big Four Series E bond is a four-and-a-half percent refunding and improvement mortgage bond printed in blue, dated July 1, 1927 and due 1977, with twin locomotives under a "United States of America" arch.
🏛️ What does Grand Central Terminal have to do with these bonds?
Grand Central Terminal opened at midnight on February 2, 1913. The New York Times reported more than 150,000 people came through on the first day.
The terminal we know exists partly because of a disaster. In January 1902, two trains collided in the smoke-filled Park Avenue Tunnel, and at least fifteen people were killed. The engineer couldn't see the signal through the steam and smoke. Within a week the New York Central announced it would electrify its suburban lines into Grand Central, and the state soon banned steam locomotives in Manhattan after July 1, 1908. Smoke-free electric trains made a terminal with underground platforms possible.
That's why my two 1913 New York Central bonds look the way they do. The 1913 Refunding and Improvement 4½% gold bond, Series A, dated October 1, 1913, carries a bird's-eye engraving of Grand Central Terminal and midtown Manhattan, made the same year the terminal opened. It runs to 2013.
The 1913 Consolidation Mortgage 4% gold bond, dated August 1, 1913 and due 1998, shows an electric locomotive lettered NEW YORK CENTRAL hauling passenger cars beside a stone arched viaduct. It also prints its authorization from the State Public Utilities Commission of Illinois, 1914.
🔗 Both of those bonds belong to the big reorganization of 1914. That December, the New York Central and Hudson River, the Lake Shore and other subsidiaries were merged into one company, the New York Central Railroad Company. Holders of the 1898 Lake Shore Collateral bonds were asked to swap into the new four percent consolidation bonds, with the extra half percent as the sweetener.
🪙 Were these gold bonds actually paid in gold?
Not after 1933. Most of these bonds promise payment "in gold coin of the United States." On June 5, 1933, Congress passed a joint resolution voiding gold clauses in public and private contracts.
The fight went all the way to the Supreme Court, and the private-bond case was a railroad bond: Norman v. Baltimore & Ohio Railroad Co., decided 5 to 4 on February 18, 1935. The Court upheld the law. From then on, a coupon that promised gold was paid in ordinary dollars, even though the paper still said gold.
🌟 What was the 20th Century Limited?
The 20th Century Limited was the New York Central's flagship train, running from Grand Central Terminal to LaSalle Street Station in Chicago from 1902 until its last run in December 1967. After the 1938 streamlining it made the 960-mile trip in 16 hours.
Passengers boarded at Grand Central along a crimson carpet, and the train is widely credited with giving us the phrase "red carpet treatment."
🤠 Who took the New York Central away from the old management?
Robert R. Young, a financier from Canadian, Texas. People called him "Railroad" Young, from his initials, and the "Populist of Wall Street." His most famous ad line was a jab at how passenger travel worked: "A hog can cross the country without changing trains – but you can't."
In June 1954, after a long proxy fight, Young beat the sitting management and took control of the New York Central as board chairman. He brought in Alfred E. Perlman to run the railroad.
My 1955 New York Central $1,000 Collateral Trust 6% bond comes from that moment. It's dated April 1, 1955 and due April 1, 1980, from an issue printed right on its face as not to exceed $37,500,000. The trustee was the Second Bank-State Street Trust Company of Boston, a name that only existed from 1955 to 1960, and the bank behind it traces back to one chartered in 1792 by Governor John Hancock.
The vignette is a beauty: a seated woman with her arm over a globe, the NYC monogram at her knee, a riverboat and steam train on one side and a streamlined train and city skyline on the other.
Young didn't get to see how it turned out. He suspended the railroad's dividends in January 1958 and took his own life later that month.
📉 What happened to the New York Central?
On February 1, 1968, the New York Central merged with its old rival, the Pennsylvania Railroad, to form Penn Central, with Alfred Perlman as its first president. In June 1970, Penn Central went bankrupt, the largest private bankruptcy in American history up to that time.
Its railroads went into Conrail in 1976, and Conrail was later split between CSX and Norfolk Southern. The Water Level Route still carries trains. Grand Central still stands. And the Big Four Bridge carries people who may never have heard of the Big Four.
❤️ What's left of the company itself is mostly paper like this: the bonds that paid for the tracks, the terminals and the takeovers. Each one was engraved by a bank note company to be hard to fake and handsome to hold, and that's a whole lot of history for one frame on the wall. Nobody is printing New York Central bonds anymore, so once the supply out there is gone, it's gone.
❓ Quick answers
When was the New York Central Railroad founded? May 17, 1853, by the merger of short lines across upstate New York that Erastus Corning brought together.
When did the Vanderbilts take over? Cornelius Vanderbilt took control in 1867 and merged it with his Hudson River Railroad on November 1, 1869.
What was the Big Four? The Cleveland, Cincinnati, Chicago and St. Louis Railway, formed in 1889, acquired by the New York Central in 1906 and leased for 99 years in 1930.
When did the New York Central end? It merged with the Pennsylvania Railroad into Penn Central on February 1, 1968.
