For some days a panic prevailed in the Democratic headquarters. Matters were in a critical condition. The Legitimists in the State, always secretly disaffected, hastened to spread the news of the defeat among their friends in the North. Honduras and the neighbouring republics grew firmer in their refusal to recognize the Rivas Government, and Guardiola began to mass his savage troops on the border of Leon. The demoralization spread among the Americans themselves. Faint-hearted officers, erstwhile thirsting for glory, suddenly began to long for a return home, and to send in applications for furlough. Walker lay tossing on a bed of fever, the while his enemies conspired against him and fair-weather friends deserted him. But he had many a stout heart among his trusty veterans, men who welcomed danger as a gambler courts his risks, and who bade good-bye to their shrinking comrades with a fine scorn worthy of Pizarro's old lieutenant, Carvajal, who sang: "The wind blows the hairs off my head, mother-- Two by two it blows them away." Another misfortune at this moment overtook the adventurers. The steamers of the Transit Company were suddenly withdrawn, and all communication with California was suspended. Though it stopped desertion, this isolation also cut off the coming of recruits. This action of the company was the result of a misunderstanding of long date. By the terms of its charter it was bound to pay to the Government of Nicaragua ten thousand dollars annually, and ten per cent. of its net profits. The company claimed, and the Government denied, that the ten thousand dollars had been paid with some regularity; but by a process of book-keeping, well known to financiers, the accounts never showed a balance of net profit upon which to levy the additional tithe. Against this deception the weak and ephemeral administrations of Nicaragua had at times feebly protested. The agents of the company bullied, deceived, or bribed them into silence, and went on reaping a golden harvest, until the installation of the Rivas administration. Cornelius Vanderbilt was then managing the company's affairs in New York, while its Western business was conducted by Morgan and Garrison at San Francisco. Vanderbilt, a man of boundless ambition and no weak scruples, soon made himself master of the company's resources. Nicaragua had never challenged the Wall Street autocrat until Walker took the country's affairs in hand. One of his first steps was the appointment of a commission to examine the Transit Company's books. The commission reported that the Government had been defrauded flagrantly and systematically for years, and that a balance, amounting to over $250,000 was lawfully due to it. Vanderbilt peremptorily declined either to acknowledge or liquidate the debt, repeating the vague threats with which he had been used to awe the little officials of former days.