The Erie War was a 19th-century conflict between American financiers for control of the Erie Railway Company, which owned and operated the Erie Railroad. Built with public funds raised by taxation and on land donated by public officials and private developers, by the middle of the 1850s the railroad was mismanaged and heavily in debt. A cattle drover turned Wall Street banker and broker Daniel Drew at first loaned $2 million to the railroad, and then acquired control over it. He amassed fortune by skilfully manipulating the Erie railroad shares on the New York Stock Exchange. Cornelius Vanderbilt, who set his mind on building a railroad empire, saw multiple business and financial opportunities in railways and decided in 1866 to corner the market on Erie by silently scooping the Erie railroad stock. After succeeding, Vanderbilt permitted Drew to stay on the board of directors in his former capacity as a treasurer.
Watered-down stocks
Between 1866-1868, Daniel Drew conspired with James Fisk and Jay Gould, whom he brought on the board, to issue spurious Erie Railroad shares, thus "watering down" the stock, of which unsuspecting Cornelius Vanderbilt bought a large quantity. Vanderbilt lost more than $7 million in his attempt to gain control over Erie Railway Company, although Gould later returned most of the money under threat of litigation. As a result, Vanderbilt conceded control of the railroad to the trio. They were involved with the corrupt Tammany Hallpolitical party machine, and made Boss Tweed a director of the Erie Railroad. Tweed, in return arranged favorable state legislation in Albany for them, legalizing the newly issued shares.
Gustavus Myers, an American historian and muckraker, wrote in his survey of railroad fortunes in the U.S., But in 1870, Fisk and Gould betrayed Drew, again manipulating the Erie Railroad stock price and causing him to lose $1.5 million. The Panic of 1873 cost him still more, and by 1876, Drew filed for bankruptcy, with debts exceeding a million dollars and no viable assets. He died in 1879, dependent on his son for support. Gould eventually gained the advantage in the conflict, but he had to relinquish control in 1872-73, following his loss of $1 million worth of Erie Railroad stock to the British confidence manLord Gordon-Gordon. Public opinion was also hostile to Gould because of his involvement in the 1869 Black Friday stock market crash. In 1878, after all financial swindles and due to continuing mismanagement the Erie Railway Company declared bankruptcy and was reconstituted as the .
