“Plans of mice and men gang aft aglee.”
Morning’s business offices were on the west side of Broadway, below
Trinity Church, but he gave attention to his large and increasing
correspondence in his rooms at the Hoffman House, where he had a suite
of apartments fronting on Broadway.
The largest room of the suite had always been reserved by the
proprietors for a private dining room, but Morning insisted upon its
constituting a part of his suite, and as he permitted the hotel keepers
to name their own price, it was reluctantly surrendered to him. In this
room Morning had a large-sized phonograph receiver fitted into the wall
opposite his desk, the instrument itself being placed upon a long table
against the partition in the adjacent room. A cord which swung over the
desk was fastened to a lever connected with an electric motor, also in
the next room.
It was Morning’s habit each day after breakfast to seat himself at his
desk, open his letters, pull the cord which started the electric motor,
and “talk” his replies to the phonograph receiver. The instrument in the
next room was arranged to hold a cylinder of sufficient length to
receive a communication an hour in length. After Morning had completed
this portion of his daily labors, it was the duty of his secretary to
remove the cylinders, and place them in other phonographs, where two and
sometimes three clerks received their contents, and reduced the same to
typewriter manuscript.
This simple contrivance had still another use. Morning knew that there
was no such fruitful source of business difficulties and consequent
litigation as that which emanated from misunderstanding or
misrepresentation of verbal communications. He endeavored, therefore, to
conduct all important business conversations in this room, and all the
utterances of either party were recorded by the faithful and unerring
phonograph, and the cylinders upon which they were reported were
properly labeled, dated, and stored away. He did not fail in any
instance to inform the person with whom he was conversing that all their
words were thus finding accurate record.
One day in October, 1895, while Morning was in Chicago—where he had gone
to perfect the organization of a Labor Aid Corporation—the great
financier, Mr. Arnold Claybank, stopped at the Hoffman House on his way
down town, and ordered a choice dinner for three to be served at seven
o’clock that day.
“And have it served in the room fronting upon Broadway, where we always
dine,” said the millionaire.
“Very sorry, Mr. Claybank,” answered the clerk, “but that room is at
present rented to Mr. David Morning, as a part of his suite, and when he
is in town he uses it as a room in which to receive and answer his
correspondence; at present he is in Chicago.”
“If he is in Chicago,” replied the Wall Street magnate, “you can have
our dinner served in the room as usual. It will not disturb him,
certainly, even if he should know of it, and he is not likely to know of
it unless you tell him. I have dined in that room with my friends at
least once a week during the last twenty years, and, not supposing you
would ever rent it for other purposes, I have already invited them to
meet me there this evening. I don’t like to change, in fact, I won’t
change, and if you will not accommodate me I will take my patronage
elsewhere.”
After some hesitation, the clerk agreed to have dinner served in the
room desired, and at seven o’clock that evening Mr. Arnold Claybank,
with his guests, Mr. Isaiah Wolf and Mr. John Gray, assembled to discuss
both the menu and the subject of their gathering.
Not until the last course was removed, the Burgundy on the table, the
cigars lighted, and the waiter excused from further attendance, did the
great capitalists approach the real object of their meeting. Mr.
Claybank observed that they might need writing materials, and, stepping
to Morning’s desk, he seated himself thereat, and pulled what he
supposed to be a bell cord that would summon a waiter. No waiter
appeared in answer to the supposed summons, and Claybank, taking a
notebook and pencil from his pocket, remarked that they would serve his
purpose.
These three gentlemen had dined well, and should have been in a pleasant
frame of mind toward the world, for good dinners are, or ought to be,
humanizing in their tendencies. Yet there are natures which will remain
unaffected even by terrapins, Maryland style, and roasted canvas-back
duck, assimilated with the aid of Lafitte and Pommery Sec., and no
tigers crouching in the jungle were ever more merciless and
conscienceless in their rapacity than these three black-coated
capitalists.
Mr. Arnold Claybank was the leading spirit of the conclave. His wealth
was popularly estimated at $100,000,000. He had inherited none of it. At
thirty-five years of age he was a dry goods merchant in an interior city
in Ohio, possessed of less than $100,000. During his frequent visits to
New York to purchase goods he was in the habit of “taking a flyer” in
the stock market. These flyers proved so continuously successful, and
added so largely to his capital, that in a few years he closed out his
dry goods business, removed permanently to the metropolis, bought a seat
in the stock board, and soon became known as one of the boldest and
shrewdest operators in the street.
He was rapid and usually accurate in judgment, and always possessed of
the courage of his convictions. He was as cunning as the gray fox, to
which he was often likened. He was suave in manner but merciless in the
execution of his plans. He was identified in the public mind with
several of the boldest and most unscrupulous operations in the history
of Wall Street, and his millions had steadily and rapidly increased,
until now, at sixty years of age, he was one of the acknowledged kings
of New York finance.
Isaiah Wolf was, as his name indicated, of Hebrew origin. He was about
the same age as Claybank, and had many of the qualities of that
gentleman, lacking, however, his courage and his quickness of
comprehension and movement. He was a gambler by birth, education, and
instinct, and a gambler who never failed to use all advantages possible.
Thirty years before he had been a clothing merchant and dealer in city,
county, and legislative warrants at Portland, Oregon. He furnished the
impecunious legislators, when they came down from the mountain counties,
with an outfit of clothing; he discounted their salaries at three per
cent per month; he was usually the custodian of the lobby funds, and he
could always introduce senator or assemblyman to a quiet game of “draw,”
where, whenever a huge “pot” was in dispute, Isaiah could usually be
found safely entrenched behind the winning hand.
When the Comstock mines began to yield their great output of silver in
1875–77, the Wolf Brothers located in San Francisco, made their homes on
Pine and California Streets, and gambled in mining stocks from the
vantage-ground of secret knowledge, for in every mine were one or more
miners under pay, not only from the mining company, but from Isaiah
Wolf. In 1879, when the transactions in the stock board of San Francisco
had dwindled to a tithe of their former magnitude, and when the sand-lot
agitators succeeded in grafting their ideas of finance and taxation upon
the organic law of California, Isaiah Wolf and his brother Emanuel
gathered their assets together and joined the exodus of millionaires. In
New York City they opened a bankers’ and brokers’ office, and were now
accounted as jointly the possessors of $80,000,000, the management of
which was left almost exclusively to Isaiah.
John Gray was an insignificant-looking old man of seventy. From his
unkempt beard, watery eyes, shrinking manner, and small stature, he
might have been taken for a congressional doorkeeper who had seen better
days. In truth, there was, under his ignoble exterior, one of the
broadest, wiliest, and best-informed minds in America. He was the
acknowledged leader of Wall Street in ability and resources. His wealth
was estimated at quite $150,000,000, and it had been created by himself
in about forty-five years.
He began life as a Vermont peddler, but at the age of twenty-five
carried his New England education, his capacity for calculation, his
retentive memory, his frugal habits, and his tireless energy into New
York City, where he began as porter and messenger in the office of a
broker. He soon learned the history and methods of the principal
operators of the Wall Street of that day, and his savings were shrewdly,
quietly, and boldly invested on “points” which he picked up while
delivering messages or awaiting replies. He soon accumulated a large sum
of money, yet he kept his humble place, and his employer never suspected
when he paid the faithful porter his $40 at the end of each month, that
the quiet and deferential young man could have purchased not only his
employer’s business, but the building in which it was conducted.
Gray remained as porter and messenger for five years, declining all
offers which were made to him of promotion to a desk and a higher
salary. The place he held gave him opportunities which could be obtained
in no other way. None suspected the quiet and stolid-looking man, who
seemed so dull of comprehension when any verbal message was intrusted to
him; and words were dropped and conversations held in his presence
which, when fitted by his quick and comprehensive brain into other words
and conversations held in other offices, often enabled him to forecast
events. The man who by any means is accurately advised of the real
intentions of the leaders of Wall Street a day or even an hour before
their execution, has a key to wealth, and Gray used this key, conducting
all his operations through one broker, who was pledged to secrecy.
At the time of the great deal in Harlem, so successfully engineered
before the war by Commodore Vanderbilt, Gray was still occupying his
place as messenger. He overheard a conversation held in the commodore’s
private office between that gentleman and his confidential clerk, and,
comprehending the magnitude of the opportunity, he directed that all his
resources, which then amounted to nearly $200,000, be placed in Harlem
stock. He was enabled, under the system of margins which prevailed in
Wall Street, to purchase $2,000,000 worth of the stock, which he sold at
an average advance of fifty per cent, clearing $1,000,000 by the
operation.
The old commodore, who had himself made $6,000,000 by the deal, found
that somebody had been sharing profits with him to the extent of
$1,000,000, and, not supposing that this was the result of guesswork, he
used means to discover who was the cunning operator and what were the
sources of his information. Without much difficulty he traced the
transactions to John Gray, and, remembering the presence of that young
man in the anteroom at the time of giving directions to his confidential
clerk, he was not at a loss to determine how it came about.
The commodore considered that Gray had gained $1,000,000 which should
have come to his own coffers, and he determined to “give the young
fellow a lesson, sir,” as he said to his confidential clerk. That
morning Gray’s employer received—to his great surprise—a call from
Vanderbilt, who, to his greater surprise, informed him of the true
status of his messenger, who had become a millionaire. Gray’s employer
readily promised to assist in the scheme which Vanderbilt formed for
punishing Gray and “stripping him of his ill-gotten gains, sir.”
Vanderbilt required only that Gray’s employer should next day send Gray
to Vanderbilt’s office, with a verbal message, inquiring, “What is to be
done about Erie?”
The next day Gray called and delivered his message to the commodore in
his private office.
“Take a seat, young man, until I can write a reply,” was the direction,
and Gray deferentially seated himself upon the edge of a chair, and
gazed at the carpet stolidly, while the commodore penned the following:
“Buy all the Erie offered at market rates up to fifty-three. C. V.” This
note the commodore placed in an envelope, which he directed, but
apparently forgot to seal, and handed it to Gray, who thereupon
departed. As the door closed behind the messenger, the veteran bull
smote himself upon the sides, and threw his head back and laughed.
Gray noticed that the envelope was not sealed, and before he reached the
bottom of the stairs, he possessed himself of its contents.
Then he fell into a train of thought. Erie was selling at $37, and Gray
was thoroughly posted as to the resources, liabilities, and business of
the road, and knew very nearly who were the principal stockholders. He
knew that the commodore held fully one-third of the capital stock of
Erie, which had cost him not more than $30 a share, and he also knew
that the old gentleman had been for some time selling his stock at $37
as fast as he could do so without breaking the market. Thirty-seven was
really a nursed price for the stock; it was more than the condition and
prospects of the road warranted, and Gray did not believe that
Vanderbilt intended to purchase any great quantity, even at $37, or that
it would be possible for him to run the stock to $53 without purchasing
the entire amount.
Gray delivered the note to his employer, and asked that gentleman if he
might be excused for half an hour to attend to some matters of business
of his own. Leave of absence was graciously granted, and Gray was
watched to the door of the office of the broker who had bought and sold
his Harlem stock. Then Gray’s employer walked to the office of the
expectant commodore and informed him that the young man had swallowed
the bait, for he had gone to the office of his broker, probably to order
large purchases of Erie.
Vanderbilt thanked the broker, assured him that in the division of the
spoils he should not be forgotten, and authorized him in furtherance of
their project to purchase all the Erie offered up to $42, to which
figure Vanderbilt proposed to run the stock before letting it drop.
Gray directed his broker to purchase Erie in one-hundred-share lots,
beginning at $37, and to follow the market up to $53 if it reached that
figure, but not to purchase more than five thousand shares in all.
Having given this direction, he walked into the back office of a firm of
brokers, who, although leaders in the market, had never succeeded in
obtaining any business from Vanderbilt, and between them and that
gentleman there was a business feud of long standing. The quiet
messenger was well known to the head of the firm, who greeted him
pleasantly.
“What can I do for you, Gray,” said he.
“I would like to take your time for not more than five minutes,” said
Gray.
“I am pretty busy,” said the gentleman, “but I will try and oblige you,”
and he led the way to an inner office.
The broker’s eyes distended with astonishment as Gray rapidly told how
he had made such use of his opportunities as porter and messenger as to
accumulate, by speculation, a large sum of money, and that he desired
now to employ their firm in an operation which, for reasons of his own,
he did not care to intrust to his regular broker.
The gentleman smilingly agreed to accept Mr. Gray’s business, and opened
his eyes still wider when Gray took from his pockets large packages
containing bonds and securities to the amount of half a million dollars,
and, depositing them as collateral, directed the broker to sell all the
Erie for which he could find buyers at forty and over, and to buy it
whenever it went below thirty-three.
That day Erie mounted, under the pressure of Vanderbilt’s purchases, and
the flurry created thereby, to $43, at which figure an immense quantity
changed hands. Then it fell rapidly, point by point, back to $37, and,
under the influence of a temporary panic, went down to $32, at which
figure it rallied and mounted to $35, where it stood at the close of the
day.
Mr. Gray’s regular broker reported to him purchases of five thousand
shares Erie at prices ranging from $37 to $42, and averaging about $39.
He regretted that Mr. Gray had not authorized a sale at $43.25, which
was the highest point reached, and at closing figures Mr. Gray must lose
about $20,000.
And Mr. Gray’s new brokers reported to him sales of eighty thousand
shares of Erie, at an average of $41.50, which had been repurchased at
an average of $34.50, with a profit to Mr. Gray of $540,000, which they
held, subject to his check.
And when the returns were all in at the office of the old commodore, and
that white-whiskered, choleric, kind-hearted, and courageous old bull
found that he owned more Erie than ever, at higher prices than those for
which he had sold a small part of his holdings, and that the rattan
which he had prepared for Gray had fallen upon his own shoulders, he
stormed for a while and clothed himself with cursing as with a garment,
and then he cooled off and laughed. Then he sent a note, this time not
to John Gray’s employer, but to John Gray himself, which read as
follows: “Young fellow, you are a genius. Come and dine with me at six
o’clock to-day, at Delmonico’s. C. V.”
The friendship cemented at that dinner, between the great capitalist and
the ex-messenger—for Gray returned no more to his duties as a
porter—continued until the day of the commodore’s death.
Gray continued to operate in Wall Street, both in small and large ways,
and seldom made a loss. When the first loud mutterings of the civil
conflict began to shake the land, he became a heavy purchaser of tar,
resin, and cotton, and, later, of gold. When the Union armies were
defeated and the day looked darkest, and gold mounted to two hundred and
eighty premium, he never faltered in his belief in the ultimate triumph
of the nation, and he sold gold and bought government bonds, and
margined one against the other, and risked little and gained much.
A year after the sun went down upon Appomattox, the Yankee peddler was
worth $20,000,000, and ten years later he was worth $50,000,000. He
abandoned such stock operations as were dependent for their success upon
other men’s movements and plans, and only engaged in such as he could
absolutely control. He gambled only with marked cards and loaded dice.
He bought a control of the stocks and bonds of badly-managed and
bankrupt railroads. He consolidated them, re-equipped them, built
feeders, opened new sources of traffic, and so doubled, trebled, and
quadrupled his investments. He sold short the stock of a prosperous
railroad, and obtained, by purchase of proxies, the control of its
management. He cut rates, diminished traffic, enlarged expenses, and
passed dividends until he depreciated the value of the stock to a point
where he could gain millions by covering his shorts, and other millions
by again restoring the road to prosperity. In one instance, by his paid
emissaries, he promoted a general strike, until, through riot and fires
and suspension of traffic, the stock of the afflicted corporation was
depreciated to the price at which he desired to purchase a controlling
interest.
John Gray was an exemplary father and husband, a good neighbor, and, in
a small way, generous and charitable; but in his larger dealings with
mankind he was a moral idiot, without conscience or perception. The
world is no better for his life; the youth of the land are the worse for
his example of successful scoundrelism, and those who wish well to their
country and their kind, will have a right to stand beside his coffin and
thank God that he is dead.
“I suppose,” said Mr. Arnold Claybank, “that we all understand the
general outlines of our project, and that this meeting is for the
purpose of talking over details.”
“Our purpose,” said Mr. Wolf, “of I gomprehent it, is to use the bower
dot we haf in our hants, to make for ourselves about fifty millions of
tollars apiece. Is not dot apout vot it vas, eh?”
“We need not, I think, discuss that question,” said Gray suavely.
“Exactly,” said Claybank. “Now I propose that we list the securities
which we shall place in our pool, at the closing quotations of the Stock
Exchange to-day, each one of us being credited with his contributions.
The stocks contributed will aggregate in value about $150,000,000, at
present market prices, and, as nearly as possible, will be contributed
by us equally. It is also understood that the stocks and bonds placed in
the pool will constitute the entire holdings of each and all of us, in
that class of property. Am I correct?”
“Quite so,” said Mr. Gray.
“Dot is also my unterstanting,” said Wolf.
“Very well,” resumed Claybank, “these securities are to be placed in the
offices of different brokers, and turned into cash as rapidly as
possible without breaking the market. The public will, I think, take
them easily in a week, for the market is rising, and permanent as well
as speculative investment is in order.”
“Ont then we lock up the gash for which we sells the stock, ain’t it?”
said Wolf.
“Not immediately,” rejoined Claybank, “it must be left in the banks in
the usual channels for a time, or there will be no money for them to
loan to the buyers of stocks. Having sold our own securities, we will
next proceed to sell short at ruling prices to as large an extent as
possible.”
“Your plan is admirable,” said Mr. Gray. “We will next arrange at the
banks for borrowing all the money that they can spare without suspending
payment, and we will compel them to withdraw all loans now out. Through
our joint and separate control of, and influence with, the officers and
directors, we ought to be able to borrow in this city, and in Boston and
Philadelphia, as much as $150,000,000, which, added to $150,000,000
received from sale of our stocks, will give us control of $350,000,000
in cash.”
“Will dey loan so much as $150,000,000 even upon the personal security
of such men as we?” said Wolf.
“They will not be asked to do so,” said Gray. “The money borrowed can be
sealed up and left as special deposits in their vaults as security for
itself, with a small margin of one or two per cent to cover interest.”
“Dot inderest, of we borrow for thirty days at six per cent, on
$150,000,000 will amount to three kevawters of a million of tollars; ont
that amount we lose out of our bockets; ont the interest on our own
$150,000,000 which will be itle for a month will be another three
kevawters of a million. It makes US$500,000 each to lose. It is a great
teal of money to lose,” said Wolf.
“That,” said Claybank, “is all we lose, and is practically all we risk.
It is essential to the success of our plans that for a brief period we
shall withdraw from the channels of commerce a large portion of the
money of the country. We cannot withdraw it unless we control it; we
cannot control it unless we borrow it; and we cannot borrow it without
paying bank rates of interest upon it.”
“How,” said Gray, “do you propose to supply the necessary margins for
the stock which we sell short? When you borrow stock on a
rapidly-falling market, the loaner expects at some time a reaction, and
an equally rapid advance, and you will have to give him a pretty big
margin beyond the money which you receive from a sale of the borrowed
stock.”
“We shall have for that purpose,” replied Claybank, “the $150,000,000
received from the sale of our own stock. This, at fifty per cent fall in
prices, will margin borrowings of three hundred millions of stock, and
this money we can arrange to have locked up in special deposits as well
as the money we borrow.”
“Ont to how low a point shall we put brices before we commence to
cover?” said Wolf.
“That,” replied Claybank, “will be a matter for future consideration. My
present impression is that we can by thus locking up the currency bear
the market one-half. We must not proceed so far as we might go, or we
will ruin everybody, so that there will be no investors to purchase
stocks when we wish to sell them again after we have loaded up for a
rise.”
“Ont how much we makes by bearing fifty per cent?” asked Wolf.
“It is easily calculated,” replied Claybank. “If our plans succeed, we
sell one hundred and fifty millions of our own holdings at present
prices. In order to bear the market fifty per cent below present prices,
we must continue to sell down, diminishing the quantity we sell as
prices recede, and when we begin to cover, we must buy all we can at the
lowest point, diminishing our purchases as prices advance. Those not
familiar with such things would be surprised to know that the ebb and
flow of values in the stock market is almost as regular, and can be
almost as certainly predicted, as the movement of the tides. Such a
movement as we propose is artificial, yet, to an extent, it will be
similarly controlled by the influences of human nature. If we sell one
hundred and fifty millions of stock at an average of say one hundred,
and three hundred millions at an average say of eighty, and buy it all
back at an average of sixty, we will gain one hundred and twenty
millions, and that, I think, is about all we can calculate upon.”
“But have you considered, gentlemen, the other side of the question?”
said Gray. “Have you fully considered whether there may not exist
influences that will defeat us? Depend upon it, once we inaugurate this
raid, our rivals in business will plot to overthrow us. Such great
newspapers as are not in our control will denounce us. The Treasury
Department at Washington, which is under the control of the Farmers’
Alliance party, will use every effort to break down our combination, and
we shall be howled at generally as ghouls and villains. I do not care
much about the public or the newspapers, but we must take every possible
precaution against failure.”
“That is right,” said Claybank. “I have considered all these things and
I do not see how our plan can be defeated. The newspapers may denounce
us but cannot overthrow our plan, which, at last, is very simple. We
produce a panic and depression of prices by locking up the circulating
medium, and prices can only be advanced by unlocking the money and
restoring it, or other money in its place, to the channels of commerce.
The money which we lock up in special deposits must remain in the bank
vaults until we release it. No bank officer would for any reason or
under any pressure dare to touch a special deposit. It would be a
penitentiary offense to tamper with it.”
“Are you sure,” said Gray, “that other capitalists may not combine, and
provide other money to take the place of that which we lock up?”
“The only other very large sum of money in the country within the
control of anybody,” replied Claybank, “is $300,000,000 in the treasury
vaults at Washington. The laws authorizing government deposits in banks,
as well as the law authorizing bond purchases in the discretion of the
secretary of the treasury, have, as you know, been repealed. There are
absolutely but two ways to get that $300,000,000 out of the treasury
vaults. One is by the ordinary disbursements of government, which would
take a year or more, and the other is by somebody depositing, under the
law of 1894, gold or silver bars to that amount, and nobody in the world
is able to command three hundred, or one hundred, or even fifty millions
of dollars in gold or silver bullion.”
“The new mining capitalist, David Morning, might supply the bars from
his mine in Arizona if we gave him a few years’ time,” said Gray.
“Yes, and if we gave him time he would be crank enough to do it,”
replied Claybank. “But we won’t give him time. How much does his mine
yield, anyhow?”
“Four millions a month in solit golt,” said Wolf. “It has yieltet that
sum now for teventy months. I hear that it is nearly worked out, but
nopoty can get into it, and you can’t tell anything apout it. If it
continues to yielt at that rate for a few years, dot fellow is going to
make us all some trupple. He is crazy as a loon, though he has taken out
of his mine over eighty millons of tollars.”
“Even his $80,000,000, if he has them in money, might disarrange our
plans,” said Gray.
“He has plown them all in, puilding plocks for glerks ont poor people,
ont he disgriminates against Hebrews, or his trustees do. A Jew knows a
goot thing when he fints it, ont there were eighteen thousant
applications from Jew glerks for the prifilege of renting apartments in
the Morning Blocks, ont the committee made up a mean drick to get rit of
them. They requiret every man who applied for rooms to answer whether it
was easier to fill to a bob-tail flush or a sequence, ont those who
answered the question they refused to pass, on the grount that they knew
too much apout draw poker to haf goot moral characters.”
“I do not see,” said Claybank, after the laughter at Wolf’s indignation
had subsided, “that we need take Mr. Morning into consideration as a
disturbing element in our present plans. If the present output of his
mine shall continue, it must, by and by, greatly advance prices of
stocks and all other property, but that is in the future.”
“Have we anything further to consider?” said Gray.
“I think,” replied Claybank, rising, “that we understand each other
perfectly. I will have triplicate memorandums made of our agreement,
which we can execute in my office to-morrow morning at nine o’clock,
where we will have our stocks brought at the same time. This Burgundy is
the genuine article, Clos Voguet, vintage of 1875. I propose as a
parting toast, ‘Success to our enterprise.’”
And the phonograph needle in the adjoining room wrote in mystic
scratches upon the wax, “Success to our enterprise.” Then came the
shuffling of feet, the sound of a closing door, and the faint buzz of
the electric motor until it ceased, and silence reigned.