The original mail contracts awarded to George Law and William Aspinwall had only contracted service for ten years and were set to expire on September 30, 1858.1 However, in June of 1858, the Postmaster General and the Secretary of the Navy signed an agreement to extend the mail service for another year, ending in September of 1859. The U.S. Mail Steamship Company withdrew from the isthmian trade altogether, though few mourned its absence. Pacific Mail was then in direct competition with Vanderbilt, who was after a lucrative government deal.
Postmaster General Joseph Holt, who succeeded Aaron Brown after his death, was convinced that the U.S. Mail and Pacific Mail companies had been receiving extortionate compensation for the merely satisfactory service they provided, so he advertised for new bids in hope of establishing the service on more reasonable terms. The most formidable steam entrepreneurs of the time, Vanderbilt and the Pacific Mail Company bid on the contract. Vanderbilt had since formed a new company, loftily named the Atlantic and Pacific Steamship Company, which was chartered by the New York Legislature in April 1858.2
However, the contract was awarded not to Vanderbilt or Pacific Mail, but to dark horse bidder Daniel H. Johnson. It became clear, however, that Johnson did not have the knowledge or wherewithal to carry out the service. Johnson waited until the afternoon of October 5, the first day he was to sail, to notify the Postmaster General that he would be unable to carry out the service.3 Vanderbilt then received the contract, which called for a service carrying the mail semimonthly for nine months from New York and New Orleans to San Francisco by way of Panama.
The Original Mail Lines
When the U.S. Mail Steamship Company dissolved, there was very little public regret and its final years were marked by the disaster of the Central America, wrecked by a hurricane in 1857.4 The Alta California newspaper wrote,
“The vast income of the company, instead of being applied to the building of new and seaworthy steamers, is appropriated to bolstering up spavined and shaky banks, and inflated stock jobbing schemes, or furnishing Fifth Avenue palaces; and when at last some one of the old and overtaxed vessels becomes tabooed in public opinion, she is taken upon the ways ‘examined,’ painted, re-christened, and palmed off upon deluded travelers as a new boat. But for the catastrophe of the Central America, doubtless, we should have had the present line of rattle traps introduced to us under fictitious names, after a course of tar and oakum, to give a semblance of repairs.”5
The loss of the service of the Pacific Mail Steamship Company drew much more public sentiment than the dissolution of the U.S. Mail. The Alta California reported while the John L. Stephens departed California with the last mail to be carried under the original contract.
“The Pacific Mail Steamship Company is deserving of all praise for the prompt and safe manner in which the mails have been transported during the past ten years. Since the going into effect of the original contract, they have not lost a single mail… The prompt and efficient manner in which the service has been performed by the Mail Company is certainly deserving of high commendation.”6
The Pacific Mail was still able to support a through line from New York to San Francisco, but it was forced to reduce its fleet and no longer held the privilege of carrying the mail.
The mail steamers carried an assurance of reliability and quality of service. Pacific Mail continued to advertise itself as “the old mail line,” much to the chagrin of Vanderbilt. His Atlantic and Pacific Steamship Company placed an advertisement in the New York Herald on December 12, 1859.
“Caution to the public. Beware of the ticket swindlers, bogus passage offices, and concerns falsely styling themselves ‘mail’ companies. Unless you be on your guard you will be deceived and defrauded. This is the only line carrying the United States mails on this route, under contract with the government.”7
Increasingly bitter competition damaged the profits of both Vanderbilt and Pacific Mail and the companies entered into negotiations. The first round of negotiations failed in November 1859 when Aspinwall refused to give Vanderbilt assurance that he would not renew competition.8 Negotiations were opened up again in February 1860, with terms providing a division of the mail service. Vanderbilt would give Pacific Mail $173,000 from the $250,000 he received through the annual contract. The revenues of the mail service would be divided with 70 percent going to Pacific Mail and 30 percent to Vanderbilt.9 The arrangement resulted in Vanderbilt becoming a large stockholder in Pacific Mail, which guaranteed that there would be very little competition remaining between the two companies. The arrangement between Vanderbilt and Aspinwall would last until 1865, when Vanderbilt arranged to take over the entire route from New York to San Francisco.
Under the leadership of the banking firm Brown Brothers, a number of important shareholders in the Pacific Mail Steamship Company hoped to adopt a long-term financial policy for the company.10 To do this, they would buy and hold a significant portion of Pacific Mail stock in order to establish a shareholding body with permanent interests, uninfluenced by fluctuations in the market. In 1864, the Brown Brothers purchased ten thousand shares of Pacific Mail stock and with shares already held by these shareholders and the banking firm they gained a controlling interest in the company.11
The main objective of the stockholder group was to end the agreement with Vanderbilt which split profits unequally. The group agreed to a new arrangement in September 1865, in which Vanderbilt sold ships operating between New York and Aspinwall in return for twenty thousand new shares of stock in Pacific Mail.12 Vanderbilt remained in the business of operating steamers from New York to Aspinwall through New Orleans.
In 1867, corporate infighting continued and the Brown Brothers firm was accused of operating the business for their own gain.13 Long after side-wheel engines for steamships had been outmoded in favor of screw propellers, Pacific Mail was still building inefficient and expensive side-wheel-propelled ships produced by the Novelty Iron Works. It should come as no surprise that, in addition to Pacific Mail, the Brown Brothers also had a controlling interest in the Novelty Iron Works. Similar conflicts of interests were then uncovered. Louis McLane, a director and president pro tempore of Pacific Mail was also the president of the Wells Fargo Express Company. It was Wells Fargo, of course, which served as agent for all freight business of Pacific Mail.
A turf war ensued, with opposing interests publishing libelous pamphlets, purchasing proxies and gaining injunctions against fellow stockholders. In the end, Brown Brothers won a corporate election on December 16 and retained control of the company.14
Innovations in Transportation
Approaching the 1860s, steamship travel was being overshadowed by advancements in overland travel and steamship lines lost the attention of the Post Office Department. In the Post Office Appropriation Act for 1861, a provision enforced that compensation for the mail service would be restricted to actual postages received.15 Compensation was therefore severely reduced and Vanderbilt refused to renew the contract.
In an effort to repair ties with the mail lines, the Senate passed a bill which authorized the Postmaster General to contract for new service to California for a very modest sum.16 Vanderbilt and Pacific Mail then made their own offers to Congress which were acceptable to the Postmaster General, but congressional stagnation resulted in no contract. The steamers continued on their routes without the mail. The frustrated Postmaster General sent a telegram to Vanderbilt on June 30, 1860 promising presidential pressure on Congress to ensure a contract would be made.17
By then, mail was increasingly traveling across country by land. On July 1, 1861, it was announced that mail would be sent overland daily from Placerville, CA and no provision would be made for steamship service.18 Yet, the overland routes were unable to carry bulky matter, which required the service of steamships. Additionally, the overland service was forced to close temporarily in the summer of 1862, when severe storms broke out and in September 1864, when hostilities with Native Americans erupted. A temporary agreement made in February 1861 allowed the steamers to carry the mail for a short time. 19