The Battle of the Belden Hill Tunnel
“ Considering the number of men involved and, in all likelihood, the amount of alcohol consumed, the casualty list was astonishingly small; only eight or ten men had been shot, some others suffered‘ bruises, more or less severe’ and one man had fractured his skull. No one had been killed.”
— John Steele Gordon, author of The Scarlet Woman of Wall Street
For more than a year, Cornelius Vanderbilt battled Jay Gould, Jim Fisk and Daniel Drew for control of the Erie Railway. Ultimately, the duplicitous Drew was removed as treasurer, and Vanderbilt retreated after receiving a large cash settlement for the illegally issued stock he was duped into buying. But the payout left the Erie short on funds and vulnerable to competitive pressure. In 1869, Gould and Fisk concluded that absorbing the newly completed Albany and Susquehanna Railroad, which linked Albany to Binghamton, was essential to the Erie’ s survival.
The obstacle was Joseph H. Ramsey, president of the Albany and Susquehanna, who had no interest in surrendering control. What followed was a bitter struggle for legal authority over the railroad. Tactics included bribery, forged documents and even the burial of stock subscription books in a cemetery to prevent the completion of share sales. During the week ending August 9, 1869, the dispute culminated in dueling court orders appointing rival receivers— one aligned with Ramsey, the other with Erie interests.
Each side claimed the law was on its side and set out to secure the railroad.
In the earliest stages of development, securing charters and land grants was existential to railroad ventures. As a result, political bribery was rampant. In one infamous episode, financier Henry Cooke attempted to bribe Speaker of the House James G. Blaine with securities in the Northern Pacific Railroad— only to be met with Blaine’ s counteroffer to sell Cooke his own inventory of railroad securities, which he had accumulated from previous bribes.
A Ramsey-controlled train departed from Binghamton, while an Erie-backed train left Albany. Both were packed with company employees hastily assembled for a mission few fully understood. Some men carried revolvers; others fashioned clubs from nearby forests. But most were armed only with their fists. As the trains advanced, their occupants seized stations along the route, each attempting to assert physical control of the line.
On August 10, 1869, the two trains collided at the Belden Hill Tunnel. A few shots were fired, skirmishes broke out and one prisoner was taken. Disaster was only avoided because of a fortuitous combination of widespread inebriation among the combatants, timely intervention by the Fourth Regiment of the New York State Militia and the fact that many of the combatants had little idea what, precisely, they were fighting over.
The legal battle for control of the Erie continued for another eight months. Ultimately, the Albany and Susquehanna was absorbed by a competing railroad, denying victory to Fisk and Gould. But if there was ever a moment of peak absurdity in the Gilded Age, it may well have occurred at Belden Hill.
A second, far more lucrative phase of corruption emerged during the construction phase. Before breaking ground, a small group of insiders would create separately managed“ construction and finance” companies. These entities then subcontracted with the railroad itself, charging inflated fees for labor and materials. It was not uncommon for such companies to bill more than double prevailing market rates. The profits then flowed to a select group of insiders, while the losses were borne by investors in the railroad.
The final phase of corruption was often the most visible— and may be more familiar to modern readers— but was ironically less significant in financial terms. Tactics included the misuse of investor funds, price fixing and stock watering through excessive share issuance. While such practices drew public outrage, they were not the primary source of value extraction. By the time these abuses surfaced, much of the damage had already been done.
The Overwhelming Force of Progress
“ In the midst of all this speculation, whilst some enrich and some ruin themselves, banks spring up and diffuse credit; railroads and canals extend themselves over the country; steamboats are launched into the rivers, lakes, and the sea; the career of speculators is ever enlarging, the field for railroads, canals, steamers, and banks goes on expanding. Some individuals lose, but the country is a gainer.”
— Michel Chevalier, 1835
Corruption in boardrooms and securities markets created a dark cloud over the Gilded Age. But contrary to many recollections, it was also a time of tremendous economic advancement. Evidence clearly shows that the force of progress outweighed the damage of corruption. By the turn of the 20th century, the cumulative effects of advancement enabled the nation to rise as a rival to the British Empire. Some of the key drivers included manufacturing innovation, natural resource extraction and development of an expansive transportation and communication network.
Manufacturing Innovation
On May 1, 1851, Queen Victoria opened a five-month event called the Great Exhibition of Works of Industry of All Nations in London. For nearly 100 years, the British were at the forefront of the Industrial Revolution, and British entrepreneurs were excited to display their latest innovations.
The British welcomed their American cousins even though resentment remained due to recent debt defaults of many US states in the early 1840s and the persistent lawlessness of US securities markets. The
12 FINANCIAL HISTORY | Winter 2026 | www. MoAF. org