CHAPTER XIII.
THE COMMODORE’S “CORNERS.”
THE GREAT HUDSON “CORNER.”—COMMODORE VANDERBILT THE “BOSS” OF THE
SITUATION.—THE “CORNER” FORCED UPON HIM.—HOW HE MANAGED THE TRICK OF
GETTING THE BEARS TO “TURN” THE STOCK, AND THEN CAUGHT THEM.—HIS
ABLE DEVICE OF UNLOADING WHILE FORCING THE BEARS TO COVER AT HIGH
FIGURES.—THE HARLEM “CORNER.”—THE COMMON COUNCIL BETRAYED THE
COMMODORE, BUT WERE CAUGHT IN THEIR OWN TRAP, AND LOST MILLIONS.—THE
LEGISLATURE ATTEMPT THE SAME GAME, AND MEET WITH A SIMILAR FATE.
In the Hudson “corner,” the stock jumped from 112 to 180. Commodore
Vanderbilt was the “Boss” of the situation in this “corner.” He got the
“bulge” completely on all the other parties connected with it, and what
is more, he had the balance of the sympathy of the Street with him, for
he was not the aggressor in getting up the “corner.” The fighting at
first was forced upon him, but he acted on the defensive in a way that
made his opponents sorry for their rashness. Though he did not know much
about Shakespeare, he acted in accordance with old Polonius’ advice to
his son by pushing the opposition to the wall.
As soon as he gained the mastery, he became severely aggressive, as he
was in everything.
The beginning of this story of the Hudson “corner” is somewhat romantic.
The Commodore was sunning himself on a pile of logs on the Jersey side
of the Hudson while his yacht lay in the stream, and he was in the mood
for enjoying a long and well-earned vacation, attempting to lay aside
for a time the toil and trouble of eking out a precarious existence in
speculation. While basking in the noon-day sun and gazing with delight
on the luxurious foliage that arose from the New Jersey bank of the
river, he was aroused from his charming reverie by a messenger from Wall
Street, who conveyed to him the important intelligence that a wicked and
unregenerate clique of “bears” had conspired to sell Hudson stock
“short,” and that it was declining with great rapidity under the
repeated and unmerciful blows of their hammers.
The Commodore arose and shook off his lethargy, as a lion may be
supposed to shake the dew from his mane prior to his preparation for a
spring upon an unfortunate foe.
The Commodore hastened down to Wall Street and instructed his brokers to
take all the sellers’ options offered in Hudson. Cash stock was then
taken as quickly as possible until the market was bare. A brief
calculation showed that the buyers had secured either as cash or
contract stock all the Hudson stock in existence with the exception of a
small number of shares which were not expected to come upon the market.
The prolific brain of the Commodore then invented a new move in the
game. A number of leading “bear” houses were requested to “turn” Hudson,
which means to buy it for cash from the cornering party and sell it back
to them on buyers’ options for periods varying from ten to thirty days.
This able ruse was intended to impress the bears with the idea that the
cornering party was weak. It seemed as if they were short of cash. So
the leading bears grasped at the good chance, as they imagined, of
turning several thousand shares, and instantly threw the cash stock on
the market. It was privately picked up by the brokers of the great
“cornerer.”
Everything having thus far progressed in favor of the ruse the trap was
sprung upon the unsuspecting party. The sellers’ options began to
mature, and there was no Hudson to be obtained.
The “corner” was complete, and the stock rose to 180. It had been 112 a
few mornings before, when the Commodore was basking in the sun, and
found that the bears were taking advantage of his absence. The loss on a
hundred shares was $6,800.
There were about 50,000 shares contracted for to be delivered at this
rate of profit by the “cornerers.” It will thus be seen that they were
well fixed.
The bears were in terrible anguish.
But the worst part of the deal for these poor animals had yet to come.
The bears who had turned the stock were notified that they must stand
and deliver. They complained bitterly of the ingratitude of the bulls,
whom they had only sought to oblige, by turning the stock. The bulls
were implacable, however, and demanded their property. They proposed a
compromise which was most exacting. They were willing to lend stock at
five per cent. per day. Some of the bears paid this, thinking the
“corner” would be of short duration, but it continued for over two
weeks, and, after paying five per cent. a day for several days, these
poor victims bought the stock at the high rate and settled.
This double move in turning the stock was the ablest trick that had ever
been accomplished in cornering. It made Vanderbilt king of strategists
in that line.
But the best part of the stratagem was that wherein the bulls saved
themselves from being saddled with the whole stock, and made immense
profits out of the deal.
While some of the bears were purchasing to cover at 170, Vanderbilt’s
private brokers were selling at 140, the clique thus craftily unloading
at good paying figures. This was one of the best inside moves in the
whole history of “corners.”
The bulls thus saved themselves from the risk of being loaded with
probably the whole, or at any rate the greater part of the capital
stock, and through the Commodore’s able management the load was
comparatively light at the end of the deal, the property remaining as
good a speculative as before, which is a rare exception in “corners.”
The “corner” in Harlem was not less skilfully managed than the one in
Hudson, but it had fewer complications. It was all plain sailing, so to
speak, compared with the former, yet it clearly illustrated that the
Commodore had a genius for “corners.” When he managed the Harlem
“corner” he had had no experience in railroad matters, and he had
reached the ripe age of sixty-nine.
I place the Hudson “corner” first in order because it was, in several
respects, the greatest, though it happened at a later date than the
Harlem.
It is a curious fact that in nearly all “corners” with which the
Commodore was connected, he was on the defensive, and seldom the
aggressor at the beginning of the fight. He was always placed in such a
position that he had to fight hard to defend his property, or let it go
to the dogs.
Buying stock in Harlem was his first venture in railroad transactions.
He bought it as an investment. This was in 1863. Thirty years prior to
this he had been requested to go into Harlem, but he declined,
ironically remarking: “I’m a steamboat man, a competitor of these steam
contrivances that you tell us will run on dry land. Go ahead. I wish you
well, but I never shall have anything to do with ’em.”
When the Commodore went into Harlem it was selling at eight or nine
dollars a share. It had been down as low as three dollars about the time
I arrived in Wall Street. He put some money in the road, began
improvements and the stock soon rose to 30. Many people predicted that
the Commodore would lose all the money in railroads that he had made in
steamboats.
The stock, however, gradually rose to 50, and speculators began to
perceive that there was some inside movement going on. This was made
apparent when, one day in April, 1863, the Common Council of this city
passed an ordinance authorizing the Commodore to build a street railroad
down Broadway to the Battery. So Jake Sharp’s enterprise was not
original, as the Commodore was over twenty years ahead of him.
The Common Council were not immaculate in those days either, though the
Jaehnes and Waites escaped punishment. They basely deceived the
Commodore after taking his money; but he punished them severely. As soon
as the franchise was granted, Harlem advanced to 75, and the Aldermen
began to sell it “short.” They thought they had the Commodore fast in
their clutches, and took their friends into the secret. They expected to
sell enough of stock to make several millions. Their plan was to sell
“short” all that the market would take, and then repeal the ordinance,
which would cause the stock to drop probably below 50. Drew was one of
the great bears in this deal with the Aldermen.
The Commodore got wind of the scheme, went on buying, and got others to
help him, taking all the “shorts” that were offered. The operators had
soon sold a great deal more Harlem stock than there was actually in
existence. There were 110,000 shares of Harlem. When the Aldermen and
their friends thought they had made millions, they repealed the
ordinance, and Judge Brady, in the Court of Common Pleas, at the same
time issued an injunction prohibiting the laying of rails on the
Broadway road.
Everybody thought that the Commodore was hopelessly ruined. Harlem
stock, however, dropped three points only, to 72. This created surprise
among the Aldermen and the bears. They thought it should have dropped to
50. The “shorts” went into the market for the purpose of covering.
Harlem ascended with amazing rapidity to 100, to 150, to 170 and finally
to 179. The Common Council were obliged to make their final settlements
at the last figure. The Commodore had all the stock. The Common Council
lost a million, and their friends, whom they had advised to sell
“short,” lost several millions. The Commodore “raked in” five or six
millions, and went on his way rejoicing and improving Harlem, having now
taken “Bill” in with him as vice president.
One would naturally imagine that the severe lesson which the Common
Council had received in “corners” would have taught others to beware of
the Commodore in this line of speculation, although it was new to him,
but it did not. People as a rule will not learn either by precept or
example. They must go through the rough experience themselves.
The Legislature soon fell into the same trap in which the Common Council
had been caught and which they had actually set for themselves. The
following year the Commodore secured control of the Hudson River
Railroad through the purchase of its stock, and afterwards secured a
sufficient number of the members of the Legislature to pass a bill
consolidating the road with Harlem. He also won the promise of the
Governor to sign the bill.
Harlem again began to rise, and went from 75 to 150. This was early in
1864.
The members of the Legislature employed to pass the bill pocketed the
money of the Commodore and then hatched a conspiracy, after the manner
of the Common Council, to ruin him and make millions by his fall. He had
a shrewd lobbyist in the Legislature, however, who attentively watched
his interests while he came down to New York to purchase stock for the
rise that must have necessarily followed the passage of the bill. He had
not been long in Wall Street when he was informed that the Legislature
were imitating the game in which the Common Council had been so signally
defeated the previous year. The Commodore sent him word to keep close
watch at Albany, and he went on buying stock in Wall Street.
The bill was defeated. Harlem stock had a slump from 150 to 90. The
Commodore was in a dilemma, and would have been dreadfully embarrassed
only for the intense avarice of the Legislature. If they had bought and
delivered at 90, they would have made millions, which the Commodore
would have lost; but, like the horse leech’s daughter, they cried out
for more. Nothing would satisfy them until the stock should be depressed
to 50. Then they could “scoop” in several millions and the Commodore
would be wound up. This was probably the darkest hour in the Commodore’s
life. He hardly knew which way to turn. He was on the ragged edge. He
has often pathetically described his feelings at this crisis to his
intimate friends. He was almost on the brink of despair. He sent for old
John Tobin, who had been a gate keeper at the ferry-house at Staten
Island. Tobin had made quite a haul in the former deal in Harlem, and
was worth over a million. He told Tobin what the perfidious members of
the Legislature had done. John had been buying Harlem also in prospect
of a rise.
“They stuck you too, John,” said the Commodore. “How do you feel about
it?” John sighed, and replied that his feelings were not the most
enviable. “Shall we let ’em bleed us?” queried the Commodore.
John sighed again, but did not know what reply to make.
“John, don’t them fellows need dressing down?” emphatically queried the
Commodore. John answered in the affirmative, but did not see how it was
to be accomplished, as “them fellows” at that moment seemed to hold the
fort.
After a pause of deep reflection, the Commodore, again addressing John
with intensified emphasis in his tone, said: “John, let us teach ’em
never to go back on their word again as long as they draw breath. Let us
try the Harlem ‘corner’ once more.”
It was agreed to try and repeat the Harlem “corner.”
John put up a million. Leonard Jerome also went into the deal. It took
five millions to face the Legislature in this game, in which they had
every opportunity of packing all the cards. It was virtually, at first,
a silent game of whist, at which the Commodore was a noted player. He
never played with greater skill than this time, except in the Hudson
“corner,” and in both instances he almost manifested the skill of
inspiration.
The members of the Legislature completely lost their heads. The old
classic maxim, “whom the gods devote to destruction, they first make
mad,” appeared to apply peculiarly to them, in the manipulation of the
Harlem “corner.” Some of them mortgaged their houses and lands to get
money to sell Harlem “short.” They advised all their friends that it was
such a sure thing that failure was impossible, and brought all of their
acquaintances whom they could influence into the speculative maelstrom
of Harlem.
In the coarse of a few weeks, the members of the Legislature and their
friends had sold millions of Harlem to be delivered at various periods
during the summer, when they expected it would go ‘way down, probably to
8 or 9, where the Commodore had originally bought it.
They expected, moreover, that the Commodore would have appeared at
Albany either in person or by his lobby representatives to sue for terms
of settlement. They were greatly disappointed. He never left the company
of his brokers in Wall Street, and persisted in purchasing. The members
thought he must be mad, or at least in his dotage. He was then
threescore and ten, the Scriptural limit of human days.
The Commodore continued to purchase Harlem until he had
bought—paradoxical as it may seem to the general reader—27,000 shares
more than were in existence of Harlem stock.
When the members of the Legislature who set the trap to catch
Vanderbilt, but in which they themselves were now hopelessly ensnared,
went into the market to buy for the purpose of covering, there was no
Harlem to be had. Vanderbilt and his brokers had every share of it
safely secured in their strong boxes.
The members of the Legislature were paralyzed. They could expect no
mercy from the Commodore. He owed them none, and though a good Christian
prior to his death, he was then practically a stranger to the doctrine
of the great Nazarene. “Return good for evil,” or, “whosoever shall
smite thee on thy right cheek, turn to him the other also.” He was
rather inclined to follow the maxim of that practical Quaker, who, when
smitten on the cheek and asked to turn the other, replied, “Friend, thou
didst not read far enough. It is written, ‘pay what thou owest,’” and he
knocked the fellow down.
This was the rule of action to which the Commodore rigidly adhered in
dealing with the Legislature in the Harlem “corner.”
When a compromise was mooted to him, the Commodore replied, “Put it up
to a thousand. This panel game is bring tried too often.”
No doubt he would have put it up to a thousand and totally ruined the
members of the Legislature, with the Governor and their friends
included, only for the overpowering appeals of his two trustworthy
friends, Leonard Jerome and John Tobin.
Mr. Jerome had no sympathy for the Legislature, any more than Vanderbilt
had, but he had a patriotic desire to take care of the “Street,” thus
showing the large and comprehensive view of which this able financier is
capable where a broad speculative question and a variety of diverse
interests are involved.
“If you should carry out your threat,” said Mr. Jerome to the Commodore,
“it would break every house on the Street.”
The Commodore yielded to that touch of nature that makes all the world
akin, and under the magnetism of Jerome’s prudent entreaty, like Pharaoh
with the Israelites, agreed to let the Legislature go—at 285 for Harlem.
In one day 15,000 shares matured at this figure. Speculators who read
these lines, just pause and think of it for a moment! The stock that
sold at $3 when I made my debut in Wall Street in 1857, reached 285 in
1864, and could have been put to 1,000. Don’t you feel astounded at the
possibilities of speculation?
Then, again, think of the one-man power that could accomplish this
wonderful feat and prevail against a whole Legislature and its Governor,
with the choicest assortment of “crooked” lawyers in the State, versed
in all the arts of duplicity and cunning to aid and abet said
Legislature and its Governor.
Think of this, and then you will have some conception of the astute mind
that the Commodore possessed, without education to assist it, in the
contest against this remarkable combination of well-trained mental
forces. There can hardly be a doubt that the Commodore was a genius,
probably without equal in the financial world. There was hardly any
achievement of his life which he gloated over with such ineffable
delight as the cornering of the Legislature. He would say, when
referring to the matter afterwards: “We busted the whole Legislature,
and scores of the honorable members had to go home without paying their
board bills.” Thus ended the second “corner” in Harlem.
Many large houses were ruined by the “corner,” and a host of private
speculators lost all they had. Daniel Drew came very near being swamped
in it, but finally escaped with paying a million, chiefly through his
influence at court.
It is unnecessary to speak of the celebrated Erie “corners” here, as I
have treated them pretty fully in the life and speculations of Drew.
[Illustration:
DANIEL DREW.
]
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CHAPTER XIV.
DANIEL DREW.
DREW, LIKE VANDERBILT, AN EXAMPLE OF GREAT SUCCESS WITHOUT
EDUCATION.—CONTROLLED MORE READY CASH THAN ANY MAN IN AMERICA.—DREW
GOES DOWN AS GOULD RISES.-“HIS TOUCH IS DEATH.”—PREDICTION OF DREW’S
FALL.—HIS THIRTEEN MILLIONS VANISH.—HOW HE CAUGHT THE OPERATORS IN
“OSHKOSH” BY THE HANDKERCHIEF TRICK.—THE BEGINNING OF “UNCLE
DANIEL’S” TROUBLES.—THE CONVERTIBLE BOND TRICK.—THE “CORNER” OF
1866.—MILLIONS LOST AND WON IN A DAY.—INTERESTING ANECDOTE OF THE
YOUTH WHO SPECULATED OUTSIDE THE POOL, AND WAS FED BY DREW’S
BROKERS.
One of the most singular and eventful careers in Wall Street was that of
Daniel Drew, familiarly called “Uncle Daniel.” This man affords another
remarkable instance of the possibility of attaining great success by
stubbornly following up one idea, and one line of thought and purpose.
His life also shows that education is not necessary to success in the
acquisition of money, but, as I have attempted to show in another
chapter, may be a great hindrance.
This fact is abundantly illustrated in the lives of both Drew and
Vanderbilt. In fact, everybody who knew these two men were of the
opinion that with a fair or liberal education they would never have cut
a prominent figure as financiers. It is also questionable whether either
of them, with all their ability in other respects, would have been
capable, with their peculiar predilections for other pursuits, of
receiving a common school or college education. They, probably, had not
the capacity for that kind of acquisition. Perhaps it might have been
impossible for any teacher to make Drew pronounce the word shares
otherwise than “sheers,” or convince Vanderbilt that the part of a
locomotive in which, the steam is generated should not be spelt
phonetically, “boylar.”
It is more than probable that professors in grammar would have found it
a hopeless task to convince the Commodore that there was anything wrong
in the expression, “Never tell nobody what yer goin’ to do, till you do
it,” or Drew that it was improper to say to his broker, “Gimme them
sheers,” when he desired his stocks reduced to possession. Both men
seemed to think with the character in Shakespeare, that reading and
writing, like their other attributes, came by nature. They evidently
thought that their abilities for financiering emanated solely from that
source, and results largely bore them out in that interpretation. Both
had supreme contempt for persons of less ability than themselves in the
speculative arena, yet they were terribly jealous of rivals who essayed
to compete with them in their own peculiar methods of making money.
Cunning and shrewdness were the leading characteristics of Drew. Though
illiterate himself, he, however, showed that he appreciated education in
others, by erecting and endowing a seminary in his native place.
Some people who were not inclined to give Drew any credit for the finer
and more generous and genial feelings of man’s nature, said that his
motive for this endowment was merely popularity, and a morbid desire,
like that of Vanderbilt, to perpetuate his name.
Another motive, however, less ennobling to man’s nature, seemed to be
the true one. He saw that the religious element in society was then
influential, and that many religious people of his acquaintance were in
good circumstances, and he sought to ingratiate himself with them in
order to make use of them in his speculations.
This appears clearly to have been at the bottom of his precious gift of
a seminary to his native county. It was a curious illustration of
retributive justice, if I am right about his motive, that he was obliged
to default in the payment of that gift, with the exception of the
interest.
Daniel Drew, at one time, could command more ready cash at short notice
than any man in Wall Street, or probably than any man in America. His
wealth was estimated at thirteen million dollars. He made a very large
part of this out of his speculations in Erie stock, of which corporation
he was then managing director and treasurer. Being thus on the inside,
he was enabled to leave everybody else on the outside in the ups and
downs of the market, which he himself generally engineered.
The Street was frequently amazed by fluctuations of 20 or 30 per cent.
in Erie stock, sometimes in the course of a day or two, through the able
manipulation of Mr. Drew.
It was a sorry day for Drew when Jay Gould took his place in the control
of Erie, and it was equally disastrous for the Erie property.
From this period Gould began to grow rapidly to the full stature of
speculative manhood, while Drew moved as quickly in a downward
direction, until he found himself again at the lowest rung of the
financial ladder. It was no wonder that he said of Gould, “his touch is
death.”
Drew’s losses followed one another in quick succession, until his
thirteen millions had melted away like snow off a ditch, and eventually
he died in debt and broken hearted. His last days stand out as a sad,
but eloquent warning to the avaricious. And this reminds me of a festive
event, the chief incidents of which, I think, are worthy of
reproduction.
I remember being at a dinner party ostensibly given to the old gentleman
when in the very zenith of his financial fame and prosperity. It was a
kind of mutual admiration society, Drew being the king-pin of the social
coterie. On account of his thirteen millions he was the centre of
cringing admiration, and was by a number of the assemblage almost
deified.
As is usual on such occasions, speechmaking was in order, the oratorical
talent being called out by the toasts as they went the round of the
board.
When it came my turn to speak, I followed suit, to some extent, in
picking up the thread of the general glorification extended to the
honored guest, to whom I paid marked deference.
“We are honored,” I said, “on this festive occasion, by a gentleman of
vast wealth, one who can control more ready money than any man in
America, and be it said to his honor, it has all been of his own
creation. He is a true representative of American thrift and enterprise.
His money and his genial disposition together combined make all men his
friends, and I know of only one antagonistic spirit to the continued
growth of this already marvellous fortune; but that one, in all
probability, may yet work his ruin. I refer to our honored guest, Mr.
Drew, and his one enemy which I have in mind is ‘Avarice.’”
In five years from that memorable dinner Daniel Drew was a ruined man,
and his thirteen millions had vanished like the baseless fabric of a
vision, leaving nothing but the miserable wreck of an avaricious spirit
behind.
The manner in which Drew was supposed to make religion the handmaid to
speculation was satirically touched in the following verses published in
the New York _Tribune_ about fifteen years ago:
He was a long, lank countryman,
And he stoppeth one of two.
“I’m not acquaint in these yeere parts,
An’ I’m a lookin’ fur Dan’l Drew.”
“I’m a stranger in the vineyard,
An’ my callin’ I pursoo
At the institoot at Madison,
That was built by Dan’l Drew.”
“I’m a stranger in the vineyard,
An’ my ’arthly wants are few;
But I want sum p’ints on them yer sheares,
An’ I’m a lookin’ fur Dan’l Drew.”
Again I saw that laborer,
Corner of Wall and New;
He was looking for a ferry boat,
And not for Daniel Drew.
Upon his back he bore a sack,
Inscribed “Preferred Q. U.”
Some Canton scrip was in his grip,
A little Wabash, too.
At the ferry gate I saw him late,
With his white hat askew,
Paying his fare with a registered share
Of that “Preferred Q. U.”
And these words came back from the “Hackensack:”
“Ef yew want ter gamble a few,
Jest git in yer paw at a game o’ draw,
But don’t take a ’and with Drew.”
Mr. Drew was negligent in his attire, even to the verge of slovenliness.
He dressed like a drover, having originally been employed in that
capacity. By the way, the significant term of “watering stock”
originated in the practice of Uncle Daniel giving his cattle salt in
order to create a thirst in them that would cause them to imbibe large
quantities of water, and thus appear bigger and fatter when brought to
market. Until he met with Gould and Fisk, it was difficult for anybody
to get the best of him in a deal.
He was wonderfully prolific in resources for the purpose of getting
advantage of those who attempted to overreach him.
A good story, illustrative of this trait in his speculative character,
is told of the time that he was so severely squeezed in Northwestern
stock. He was greatly grieved at his ill luck, while the brokers and
operators who had been prosperous at his expense were highly elated.
They considered it a great thing to have caught the wily old Daniel
napping. He was accordingly made the victim of much ribaldry and jesting
for several days in Wall Street. Some of the young men carried the joke
so far as to meet him and laugh significantly and irritatingly in his
face. He seemed to take it all in good part, for he had a happy flow of
animal spirits, but he had a terrible rod in pickle for these young men
who were making him an object of ridicule. He watched for his
opportunity, and one evening as several of them were enjoying themselves
in an uptown club, Uncle Daniel walked in, _sans ceremonie_. He appeared
to be looking after some man, and though invited to remain, seemed to be
in a great hurry to get away, and was apparently excited and warm. He
seemed to have something important on hand. He drew a big white
handkerchief out of his pocket a few times and wiped the perspiration
from his heated brow. When he was about to depart there came out of his
pocket with the handkerchief a small slip of white paper which floated
around apparently unseen by him, and alighted at the feet of one of the
bystanders, who quickly set his foot upon it. When Mr. Drew made his
exit the white scrap of paper was instantly scanned. It contained these
ominous words in his own handwriting: “Buy me all the Oshkosh stock you
can at any price you can get it below par.”
Here was a speculative revelation for the boys, for everybody believed
at the time that Oshkosh had already gone too high, and the point had
been circulated to sell it “short.” The mysterious words written on this
erratic slip of paper, however, convinced these operators that there
must be a new deal to give Oshkosh another “kiting.” There was no time
to be lost in taking advantage of the unexpected and highly valuable
information. They formed a pool to purchase 30,000 shares the next day.
They bought the stock according to pre-arrangement, and a new broker of
Daniel Drew’s was the man who sold it to them. They only discovered how
badly they themselves had been sold by Mr. Drew’s handkerchief trick
when Oshkosh began to decline at the rate of a dozen points a day, and
Uncle Daniel soon raked in from the jokers and their friends more than
he had lost in Northwest.
Mr. Drew first entered the Board of Directors in Erie about the year
1852, and remained there until he was squeezed out, and almost ruined,
in 1868. He held the office of treasurer to the corporation.
Drew was born in the town of Carmel, Putnam county, in the year 1797,
and was three years younger than Vanderbilt. As I have intimated above,
in early life he drove cattle from his native town to New York. He
afterward became proprietor of the Bull’s Head tavern in this city.
He never changed his style of dress from that to which he was accustomed
to wear when he was a drover, and when he was worth thirteen millions,
instead of sporting a gold headed cane, he went around Wall Street with
the handle of an old broken umbrella in his hand. While treasurer of
Erie he used every opportunity to manipulate the stock to his own
advantage, irrespective of the rights or interests of any other person.
He was the leading bear of the market for many years. Like Vanderbilt,
he was interested to some extent in steamboats, but he made Erie stock
the great medium of acquiring his vast wealth. He got the name of the
speculative director, and at the outbreak of what was known as the Erie
war he was supposed to be almost financially impregnable.
The “corner” of 1866 was the beginning of Uncle Daniel’s troubles. Up to
that period all had gone merry as a marriage bell with him, and he was
piling up the millions at a rate which no other financier or speculator
had ever dared to imitate. Erie stock was selling at 95 in the spring of
that year. The company was badly off for money. It made application to
its treasurer for the needed relief. He was ready to serve it in that
way at all times, but he wanted security for the loan. There were then
28,000 shares of unissued Erie stock. The company also claimed the right
to raise money by the issue of bonds convertible into stock at the
option of the holder.
This was an old trick in the management of Erie matters. It had saved
Jacob Little on one occasion, as I have mentioned in a former chapter,
during the earlier history of speculation in Wall Street. It was,
therefore, not original with the Drew management of Erie, as some people
have supposed.
The 28,000 shares of unissued stock then, and three millions of dollars
of convertible bonds, were placed in the hands of Mr. Drew as security,
and he advanced the loan of 3½ million dollars to relieve the pressing
necessities of the corporation.
When Drew found himself thus fortified with the convertible bonds, he
laid another trap for the boys in the Street. Erie had been rapidly
absorbed for some time, and was very strong at 95 with anxious
purchasers. The stock was, therefore, becoming very scarce. Mr. Drew had
a large number of contracts to fill, and operators were wondering where
he would get the stock to settle. Many of them were laughing in their
sleeves at his impending embarrassment, as they had done on a former
occasion, and were in ecstasies of delight at the idea of the terrific
“squeeze” which the old man was about to experience. When he seemed on
the very horns of this dilemma, upon which the rampant bulls thought
they would successfully impale him, he converted his three million bonds
into an equivalent amount of stock, threw 58,000 shares on the market,
met all his contracts, and fed the voracious bulls with all they wanted.
Hungry as the Street had been for Erie, this was an overdose that it was
utterly incapable of digesting. The bulls were paralyzed, and before
they could rally their broken ranks from the demoralizing effects of
this unexpected sortie from the stronghold of Erie, the stock had
declined from 95 to 50, wiping out the broadest margins and putting the
whole army of bulls, reserve forces and all, to utter rout.
Millions were lost and won in a day in this deal.
This was regarded as a grand _coup d’etat_, and one of Drew’s most
brilliant exploits in operating. In fact, at the time, it seemed to
throw every prior operation of this nature totally in the shade, and the
other leading operators of the street were blue with envy, green with
jealousy, and raging mad over their losses and the way they had been
entrapped and almost ruined by the deeply-laid scheme of the Erie
treasurer. Drew was despised, feared and revered on account of this
unparalleled achievement. He then essayed to rest on his oars for a
short time, but his period of repose was but short-lived.
There was a little side-show in connection with the maturing of the
operations in the pool just referred to, which is so characteristic of
Daniel’s methods that it is worth relating. There was a young man in the
Erie pool, but not in the wheel-within-the-wheel in that sacred circle,
who imagined that the purpose of the pool was to put Erie stock up, and
accordingly he borrowed money from Uncle Daniel, his credit being good
and having money in the pool funds, to purchase Erie. The accommodating
treasurer not only lent him the money, but his private brokers sold the
young man the Erie stock desired. He was duly fed from day to day with
the quantity which his speculative appetite craved. After the dump just
referred to, this unsophisticated youth and some other members of the
pool among his friends, went to Uncle Daniel and requested him, as
manager of the pool, according to the programme supposed to have been
agreed upon, to put Erie again on the line of advance, in order that the
young man and his friends might get in and out again, so as to cover
their recent losses.
Mr. Drew, however, coolly informed them that the pool had no Erie stock
and did not want any, and was not prepared to trade in that security any
more at that time.
“I sold all our Arie at a profit,” said Uncle Daniel, “and am now ready
to divide the money.”
So this youthful member had the felicity of discovering that while he
was speculating on his own account for a rise, Uncle Daniel was looking
after his interests in another direction, and had realized at the most
opportune moment.
Thus this amateur operator, whom Uncle Daniel had amused, without
letting him into the secret, in the way described, got nearly enough of
money back to pay the loss he had sustained experimenting outside the
pool on his own account, and upon his own independent but fallacious
judgment.
If he had not speculated outside, he would have had very handsome
profits from the pool, but he would not have obtained the useful
experience which was connected with his losses, and the independent
attitude he was ambitious to assume in speculations.
------------------------------------------------------------------------
CHAPTER XV.
DREW AND VANDERBILT.
VANDERBILT ESSAYS TO SWALLOW ERIE, AND HAS A NARROW ESCAPE
FROM CHOKING.—HE TRIES TO MAKE DREW COMMIT FINANCIAL
SUICIDE.—MANIPULATING THE STOCK MARKET AND THE LAW COURTS AT THE
SAME TIME.—ATTEMPTS TO “TIE UP” THE HANDS OF DREW.—MANUFACTURING
BONDS WITH THE ERIE PAPER MILL AND PRINTING PRESS.—FISK STEALS THE
BOOKS AND EVADES THE INJUNCTION.—DREW THROWS FIFTY THOUSAND SHARES
ON THE MARKET AND DEFEATS THE COMMODORE.—THE “CORNER” IS BROKEN AND
BECOMES A BOOMERANG.—VANDERBILT’S FURY KNOWS NO BOUNDS.—IN HIS RAGE
HE APPLIES TO THE COURTS.—THE CLIQUE’S INGLORIOUS FLIGHT TO JERSEY
CITY.—DREW CROSSES THE FERRY WITH SEVEN MILLIONS OF VANDERBILT’S
MONEY.—THE COMMODORE’S ATTEMPT TO REACH THE REFUGEES.—A DETECTIVE
BRIBES A WAITER AT TAYLOR’S HOTEL, WHO DELIVERS THE COMMODORE’S
LETTER, WHICH BRINGS DREW TO TERMS.—SENATOR MATTOON GETS “BOODLE”
FROM BOTH PARTIES.
One of the most interesting episodes connected with the speculative life
of Drew, in the somewhat sensational history of Erie affairs, was the
interposition of Commodore Vanderbilt in one of the famous deals of the
Erie clique. His object was to swallow up the corporation, and it came
pretty near swallowing him. He was only saved by the skin of the teeth,
after one of the most prolonged and desperate financial struggles of his
life.
In order to explain clearly the manner in which the Commodore became
involved in the Erie matter with Drew and his partners, it will be
necessary to take a brief resume of the history of a few of his other
prominent deals, more fully dwelt upon elsewhere.
In 1860 Harlem stock had sold as low as eight or nine dollars a share.
In January, 1863, when Vanderbilt got full control of the property, the
stock had advanced to 30, and in July of the same year it had bounded to
92. In August, when the “corner” was effected, it went to the remarkable
figure of 179.
It was put through a similar operation the succeeding year, and the
stock, which sold in January below 90, was settled for in the following
June at 285. Drew had been drawn into one of these transactions, and his
losses reached nearly a million.
Vanderbilt’s prospects with the Harlem property were seriously menaced
by the competition of the Hudson River railroad. He bought up the
competing line, and thus destroyed the competition. He made this
purchase when the stock was at par. He soon manifested his superior
power in management, and displayed his skill in the art of “watering,”
which he had invented. He had the stock advanced to 180 in a very short
time.
Seeing his great success with these two properties, through his novel
and unique methods of financiering, the managers of the New York
Central, thinking that discretion was the better part of valor, and
perceiving that they could not hold out against the edicts of manifest
destiny very long, offered their property to him almost at his own
price, which he very cordially accepted, approving their good judgment
and keen perception.
He obtained full control of New York Central early in 1867. As soon as
this triple amalgamation was complete he set his insatiable and
avaricious heart upon Erie, and essayed to compass his designs and
effect his purpose of reducing it to possession through the speculative
machinery of Wall Street.
It was through this channel that he had obtained Hudson, and in defiance
of the scientific maxim that lightning never strikes twice in the same
place, he was inspired with full confidence in his ability to “scoop”
Erie in the same manner. He tried first to arbitrate and consolidate,
but his efforts in that direction failed.
With all his marvellous foresight and almost unerring judgment in
speculative affairs, the Commodore was greatly at fault in his
calculation regarding the magnitude of the task he had now undertaken in
Erie. He had no idea of the immense volume of the stock which, after the
speculative battle began to rage, seemed to spring out of the ground,
spontaneously, as the reserve troops of Wellington were said to appear
to do in the eyes of Napoleon when the struggle waxed warm at Waterloo.
He had to contend with the ablest generals in speculation and finance
that ever Wall Street had produced. His first bold, flank movement was
an attempt to “corner” Drew. He knew how to manipulate the courts almost
as well as the Erie Ring did. Accordingly, he made use of the services
of Frank Work to obtain an injunction from Judge Barnard, of Tweed Ring
notoriety, restraining Drew from the payment of interest on 3½ million
bonds, pending an investigation of his accounts as treasurer of Erie.
This was followed up in a few days by another application to the court
for the treasurer’s removal from office.
These measures were resorted to by Vanderbilt to prevent the issue of
this stock, into which these 3½ million bonds were convertible, and thus
enable him to get a “corner” in the stock with greater facility. He thus
attempted to make the court instrumental in forcing Drew into a position
where he would be obliged to commit financial suicide.
The Erie Ring had managed to get legally around what in reality was an
over-issue of Erie stock and bonds in the following subtle manner:
There was a statute of New York which authorized any railroad to create
and issue its own stock in exchange for the stock of any other road
under lease to it. The Ring had obtained the Buffalo, Bradford &
Pittsburg road, which was comparatively worthless, for carrying out this
scheme. The Erie management then set about supplying themselves with the
amount of Erie stock required, by leasing their own road to the road of
which they were directors. They then created stock and issued it to
themselves in exchange under the authority vested in them by law.
The nominal price of the road with which they worked this game of
legerdemain was $250,000. They issued bonds in its name for two millions
of dollars, payable to one of themselves as trustee.
Vanderbilt, before he could get a “corner” in Erie, had to place a limit
to the issue of the stock. Otherwise he would have been throwing away
millions, like pouring water into a sieve, in his attempt to make a
“corner.”
Drew was enjoined by the Commodore to return to the Treasury 68,000
shares of the capital stock of Erie. This was the amount that was said
to remain in the unsettled transactions of the Erie corner of 1866. This
was the sword of Damocles which Vanderbilt had suspended over Drew’s
devoted head.
Vanderbilt thus undertook to play the double game of manipulating the
courts and the stock market at the same time, and against wily
opponents, who were experts in both operations.
There were at this time three competitors for the possession of Erie in
the field. The Drew party, the Vanderbilt party, and the Boston,
Hartford and Erie party. Drew had tried to appease Vanderbilt to some
extent, and had an interview with him at Vanderbilt’s own house prior to
the election of the Erie directors. He agreed to “let up” on Vanderbilt,
and offered him greater swing in purchasing Erie, while, on the other
hand, Vanderbilt consented not to press the proceedings in court against
Drew.
Before this, the Boston party and Vanderbilt had been fixing matters to
oust Drew from the Erie directory. Now, Vanderbilt changed his tactics,
and resolved to let Drew remain. The Boston party was with him, but to
keep up the appearance of what had been formerly determined, the new
board was to be elected ostensibly without Drew, and a vacancy created
afterwards by which he could be chosen in the board. This method of
whipping the Devil around the stump was adopted to put public opinion
off its guard, and help to forward Vanderbilt’s purposes of
consolidation. The election scheme was successfully effected, but the
ruse, though well conceived, fell far short of accomplishing its
designs.
There were wheels within wheels during this speculative deal. Drew and
Vanderbilt entered into a secret alliance to exclude the Boston party,
who was Vanderbilt’s ally. The new board was elected, leaving Drew out.
This was a surprise to Wall Street, but a greater surprise was in store
for it when a vacancy was created the next day, and Drew was re-elected
to the Erie Board of Directors. The Street was confused and confounded,
and at a loss to know how to act, and the Boston party was groping
around to find out where it stood. Frank Work was elected to the Erie
Board in the Vanderbilt interest. A pool was then formed to put up Erie,
as it was in a very depressed condition. Drew was to manage the pool and
manipulate the market.
The proposed plan for consolidating with the Vanderbilt interests failed
because the Erie people said that the great railroad king would only
consent to give them one-third of the earnings, while they contributed
more than half to the pool. So, when this scheme collapsed, Vanderbilt
went on the speculative war path, and determined to snatch Erie from the
hands of the Ring in the way he had obtained Hudson. He began his
operations about the middle of February, 1868, and pursued his policy in
the courts for the purpose of limiting the apparently unlimited supply
of Erie stock.
In the leasing process above referred to with the Buffalo, Bradford &
Pittsburgh, the Erie clique added $140,000 a year to its income.
Mr. Work got an additional injunction to prevent Erie from issuing stock
in addition to the 251,058 shares which had appeared in the previous
report of the road, and forbidding a guarantee by Erie of the bonds of
any other road, and Drew was further restrained from any transactions in
Erie until he should return the 68,000 shares of capital stock to the
treasury.
It will thus be seen that Vanderbilt had taken very rigid measures to
“tie up” the hands of the veteran speculator.
The case was set down for hearing in the court of the immaculate Judge
Barnard, on the 10th of March. When Vanderbilt thought he had everything
fixed to force Drew to ruin himself by the return of these shares, which
would enable Vanderbilt to effect his “corner,” he was checkmated by a
counter injunction issued in the interest of the Erie people by Judge
Balcom, of Binghamton, which stayed all proceedings in Barnard’s court.
Richard Schell then applied to Judge Ingraham and got out another
injunction in the interest of the Vanderbilt party, staying all
proceedings before Judge Balcom.
In the meantime the Erie directors were busy preparing their new issue
of stock, despite the injunctions, in order that the bulls of the
Vanderbilt party might be generously fed with Erie when the opportunity
should arrive.
The Executive Committee of Erie resolved to issue bonds for
improvements, extensions and steel rails. The bonds were convertible
into stock at not less than 72½. Five millions of these were
manufactured by the Erie paper mill and printing press, to be exchanged
for Vanderbilt’s good, solid cash.
A great difficulty presented itself at this juncture, which, even to the
majority of clever speculators, would have been insurmountable. The
genius of “Jim” Fisk was called in to cut the Gordian knot. The
certificates of the new Erie shares were in the hands of the secretary
of the company, but he was enjoined from issuing them. They had been
made out on Saturday night. On Monday the secretary directed a
messenger, in the Erie office in West street, to take the books
containing the certificates to the transfer office in Pine street. The
messenger took the books and walked out. He was hardly a minute absent
when he returned, apparently frightened, without the books. He stated
that Mr. Fisk, who had been standing at the door, took the books from
him, and ran away with them!
The certificates were then where no injunction could molest them. The
next day the convertible bonds were found upon the secretary’s desk. In
a day or two afterwards the certificates appeared in Wall Street. An
order was obtained from Judge Gilbert enjoining all the previous orders
of that legal luminary, Judge Barnard. Mr. Drew then threw 50,000 shares
of Erie stock on the market. The boldness of the operation threw the
Vanderbilt brokers off their guard, for it never struck them for a
moment that Drew would risk contempt of court, and use the new issue of
Erie in the face of an injunction, so they eagerly devoured the fresh
bait before they got time to examine the quality of it or suspect its
origin.
Erie had opened at 80, and advanced to 83. When the facts became known
the stock broke, and declined to 71; but under heavy purchases by the
Vanderbilt party, soon recovered to 78. The “corner,” however, was
broken by the large blocks which Drew had thrown on the market, and
Vanderbilt was signally defeated, and had a narrow escape from being
completely swamped. The corner proved a boomerang to Vanderbilt. In his
wrath he again applied to the courts. As the result, the Erie clique
were obliged to fly and take refuge in Jersey City. Drew crossed the
ferry heavily loaded with a big carpet bag, which contained seven
millions, which had recently changed hands from Vanderbilt to himself in
the cornering operation.
Gould and Fisk decamped by different routes. When the party had taken
refuge in “Fort” Taylor (Taylor’s Hotel), safe from the laws of New
York, they determined that no papers should be served upon them, and
gave strict orders to the host that they would not receive anything in
the shape of letters or notes. Communications of all kinds were
prohibited except through persons well known to the clique, and the
waiters at the hotel were strictly enjoined to observe this rule, on
pain of being discharged.
While Vanderbilt was working hard to reach the refugees through the
courts, the Legislature and his detectives, he discovered a method of
communicating with Drew in spite of the precautions with which the
latter was surrounded. The Commodore’s scheme would have done honor to a
first-class Nihilist of the present day. He instructed a person in his
service to play temporary detective, to go to the Taylor Hotel in the
garb of a commercial traveler from the Far West, and to watch the
movements of Drew, so as to get a note slipped into his hand in a way
that he would be certain to read it.
The amateur detective watched for a day or two, and saw that his only
chance of success was when Drew was at lunch, and that the person who
waited on him must hand him the note. He saw the waiter, and told him
what he wanted, and that when he should be discharged the Commodore
would find him a better place.
The waiter agreed to hand Mr. Drew the note. Drew was enraged, sent for
the host, and the waiter was instantly discharged, only to enter
Vanderbilt’s service, according to agreement, at much higher
remuneration. The note of the Commodore, however, had the desired
effect. What that note contained, probably, nobody but Vanderbilt and
Drew ever knew. Though the friends of Drew attempted to frighten him
from going by arousing his suspicions of being kidnapped, he came over
to New York on the following Sunday and had an interview with the
Commodore. The matter was fixed up between them, and while Gould and
Fisk were fighting Vanderbilt tooth and nail at Albany, and Gould was
arrested and arraigned for contempt of court and other high crimes and
misdemeanors in the eyes of the Vanderbilt lawyers, Drew was left
unmolested to pursue the even tenor of his way.
As treasurer of Erie, however, Drew took an active part in the progress
of legislative matters. He was the first to see that Senator Mattoon,
who was chiefly instrumental in organizing the Investigating Committee,
wanted tangible recognition of his services before the Committee made
its report. He thought he was using Mattoon, but the Senator used him,
and gave his casting vote in favor of Vanderbilt, whom he used also,
after the most approved method of Albany legislators. Mattoon was also
found on the winning side at the end of the legislative farce, when the
bill in favor of the Erie clique and its over-issue of stock was passed,
and no doubt got his fair share of the half million with which Drew
fortified Gould from the Erie treasury when this gentleman went to
Albany to conduct the war in the Legislature against Vanderbilt
concerning the extra issue of Erie stock.
------------------------------------------------------------------------
CHAPTER XVI.
DREW AND THE ERIE “CORNERS.”
A HARMONIOUS UNDERSTANDING WITH THE COMMODORE.—HOW THE COMPROMISE WAS
EFFECTED.—AN INTERESTING INTERVIEW WITH FISK AND GOULD IN THE
COMMODORE’S BED-ROOM.—HOW RICHARD SCHELL RAISED THE WIND FOR THE
COMMODORE.—DREW’S SHARE OF THE SPOILS.—HE TRIES TO RETIRE FROM WALL
STREET, BUT CAN’T.—THE SETTLEMENT COST ERIE NINE MILLIONS.—GOULD AND
FISK “WATER” ERIE AGAIN, TO THE EXTENT OF TWENTY-THREE MILLIONS, BUT
LEAVE DREW OUT.-“UNCLE DANIEL” RETURNS TO THE STREET.—HE IS
INVEIGLED INTO A BLIND POOL BY GOULD AND FISK, LOSES A MILLION AND
RETREATS FROM THE POOL.—HE THEN OPERATES ALONE ON THE “SHORT” SIDE
AND THROWS AWAY MILLIONS.—HE TRIES PRAYER, BUT IT “AVAILETH
NOT.”-“IT’S NO USE, BROTHER, THE MARKET STILL GOES UP.”—PRAYING AND
WATCHING THE TICKER.—HOPELESSLY “CORNERED” AND RUINED BY HIS FORMER
PUPILS AND PARTNERS.
About the middle of April Drew emerged from his retreat in Jersey City,
and appeared openly in Wall Street, apparently without any fear of
arrest. Other members of the Erie clique had gone through the formality
of purging their contempt of court, but had not made their peace with
the Commodore, and things went forward without any special interruption
or excitement until July, when a settlement was made with Vanderbilt.
It was agreed that the Commodore should be relieved of 50,000 shares of
Erie stock at 70, for which he was to receive $2,500,000 in cash, and
$1,250,000 in bonds of the Boston, Hartford & Erie at 80. It was further
stipulated that he was to receive $1,000,000 for the privilege of
calling on him at any time within four months for the remaining 50,000
shares of Erie at 70. He was allotted two seats in the Erie Board of
Directors. All suits between the two high contending parties were to be
dismissed and all offenses whatsoever relating to the case, in the
language of the law, were to be condoned.
The manner in which the compromise was effected is not the least
interesting part of the famous deal in Erie. Some time after Drew had
got through his famous Sunday evening interview with the Commodore,
paving the way for his partners, by weeping and showing other
manifestations of deep contrition on account of his inglorious flight to
Jersey City, Gould and Fisk came over early one morning to see the
Commodore at his residence in Washington Place. Fisk told the story of
meeting the Commodore with great unction, in his bold, brazen and lively
manner. “Gould wanted to wait,” said Fisk, “until the Commodore should
have time to get out of bed, but I rang the bell, and when the door was
opened I rushed up to his room. The Commodore was sitting on the side of
the bed with one shoe off and one shoe on. He got up, and I saw him
putting on the other shoe. I remember that shoe from its peculiarity. It
had four buckles on it. I had never seen shoes with buckles in that
manner before, and I thought, if these sort of men always wear that sort
of shoe, I might want a pair. He said I must take my position as I found
it; that there I was, and he would keep his bloodhounds (the lawyers) on
our track; that he would be damned if he didn’t keep them after us if we
didn’t take the stock off his hands. I told him that if I had my way,
I’d be damned if I would take a share of it; that he brought the
punishment on himself and he deserved it. This mellowed him down. I told
him that he was a robber. He said the suits would never be withdrawn
till he was settled with. I said (after settling with him) that it was
an almighty robbery; that we had sold ourselves to the Devil, and that
Gould felt just the same as I did.”
Among the friends who adhered to the Commodore in the trying hour of the
“corner,” besides those mentioned, were William Heath, Richard Schell
and his brother Augustus, and Rufus Hatch. Richard Schell was highly
practical and remarkably shrewd in the aid which he offered the
Commodore to obtain money for the speculative fight. He managed, through
his tact and shrewdness, to get loans on Erie after the banks had
absolutely refused to lend, on account of the over-issue of the stock.
After this refusal, he made inquiry at the banks, and found that most of
them had New York Central stock. He then went to a bank and said: “If
you don’t lend the Commodore half a million on Erie at 60, he will put
Central down to 50 to-morrow, and break half the houses on the Street.
You know whether or not you will be among them.”
The threat was repeated at other banks, and, in almost every instance,
had the desired effect, and the Commodore was supplied with the sinews
of war, but he was only throwing away his ammunition.
The Erie stock from the inexhaustible fountain of over-issue was
supplied to him without stint, and his attempts to “corner” the clique
were absolutely futile.
While these gamesters were feeding the Commodore with this extemporized
stuff to order, Fisk said: “If this printing press don’t break down,
I’ll be d—d if I don’t give the old hog all he wants of Erie.”
The printing press did not break down, but did its work well until the
Commodore was nearly “burst,” and had it not been for his indomitable
courage and the hold he had acquired on the courts, he would have been
bankrupt. His escape seemed almost a miracle to the people of Wall
Street, and Gould and Fisk were not less surprised that they had met a
foeman worthy of their steel. In spite of the fact that he spilled over
seven millions like water, the Commodore managed to sustain the market
through it all, and prevented a crash that, in its local effects, at
least, would have been as disastrous as that of Black Friday.
Certain innocent holders who had been badly crushed in the collision
between the great leaders received a financial emollient for their
lacerated feelings, amounting in the aggregate to $429,250. The Boston
party, represented by Mr. Eldridge, was to be relieved of five millions
of its precious Boston, Hartford & Erie bonds, receiving therefor four
millions of Erie acceptances.
Thus, the settlement in full cost Erie about nine million dollars. The
Erie stock and bondholders were saddled with this liability in defiance
of law and justice.
Gould and Fisk pretended to be opposed to the settlement, leaving the
public to infer that it was all the work of Drew with Vanderbilt.
However this may have been, it was probably the best thing the others
could have done to relieve themselves of their various complications at
the time. No doubt the Vanderbilt note to Drew, for which the waiter was
discharged from Taylor’s Hotel, was at the bottom of the whole
settlement.
Drew was left to enjoy his share of the fruits of the “corner,” which
netted seven millions, except that he had to pay into the Erie treasury
the trifling item of $540,000 in discharge of interest and all claims or
causes of action which might be presented against him by the Erie
Company. The Erie Railway fell to the lot of Gould and Fisk as their
share of the spoils growing out of the _entente cordiale_.
Drew then retired from Wall Street in the same way that Gould has so
often retired since that time, except that Drew had probably an honest
intention so far as it was possible for him to have such a conception of
leaving the Street forever, but it would seem that he had not the power
to do so. Once in Wall Street, always in Wall Street. It is like the
doctrine of the final perseverance of the saints, as laid down in the
Westminster Confession of Faith. It is impossible to get out of it when
the speculator gets fairly into its fascinating grasp.
Drew might have enjoyed life and the consolations of religion on the few
millions he had left if he had retired in company with his Bible and
Hymn Book, to some lovely, secluded spot in the peaceful vales of Putnam
county; but he was under the infatuation of some latent and mysterious
force or attraction, the victim of some potent spell, like the one in
whose weird grasp Nancy Sykes was firmly held when she essayed to get
away from the murderous “Bill,” as described by Dickens in Oliver Twist.
Drew came back to Wall Street, and saw and was vanquished, quite unlike
Cæsar.
When he returned to the “Street” after a few months absence, the scene
was greatly changed. His two pupils had shown themselves to be such apt
scholars, that in the interim they had exceeded the wildest dreams of
avarice that ever their able preceptor had conjured up or inculcated. In
four months Gould and Fisk had inflated the capital stock of Erie from
34 millions to 57 millions. No doubt, Uncle Daniel was astounded at
their progress, and his feelings can be better imagined than described
when, in the presence of this marvellous increase of wealth, he
reflected that he was no longer treasurer of Erie, and had neither lot
nor part in its unprecedented prosperity.
His natural propensity to operate, however, was still strong, but when
he again tried his hand at speculation, it seemed to have lost its
cunning, and he felt almost as much disappointed as Rip Van Winkle did
when he awoke in Sleepy Hollow, after his twenty years’ nap, and began
to examine the changed aspect of the country in the vicinity of
Irvington, now Gould’s country seat.
The speculative tactics in operation had been changed, and he soon found
that it was a losing game to go on the bear side of the market. He was
invited into the pool by his old partners, to have a little practice at
the popular game of spider and fly. Drew had been the spider for a long
time who had inveigled the unwary flies from every direction into his
insidious net. He was now asked to assume the role of a fly, while his
former pupils played spiders. In plain terms, he was coolly requested to
go into a “blind pool” in Erie, deposit four millions, shut his eyes and
open his mouth, leaving the Erie sharpers to put taffy or candy into it,
just as they pleased.
He was no longer to have the privilege of pulling the wires, nor the
wool over other people’s eyes. On the contrary, he was to be one of the
puppets that should dance to the music of Gould and Fisk, and let them
pull the wool over his eyes. He was not to ask any questions, but pay
his money and take his choice, that is to say, whatever Gould and Fisk
chose to give him. The terms were rather humiliating, and on reflection,
Uncle Daniel revolted. He did not see the point of paying the piper
without having the privilege of choosing the tune. He, therefore,
withdrew his funds after losing a million, and undertook the task of
bearding these two young lions in their den—the den which he had
constructed for them, and the two young lions which he had so carefully
nurtured to destroy him. They were very wroth with him on account of
what they regarded as his treachery, which virtually consisted in his
refusal to be totally devoured by them. The fact is, however, Daniel
could not have been true to any one, any more than they. “Can the
Ethiopian change his skin, or the leopard his spots?”
After considering the matter prayerfully, as he always did in such
emergencies, he resolved to operate alone, and the oracle told him to go
on the short side. It was evident that the Gods had doomed him to
destruction, so he rushed in madly to sell the market, which moved
persistently upward.
In this emergency he took counsel of a Christian brother, who advised
him to pray. He tried hard to pray, but his irresistible desire to keep
constant watch on the tape of the ticker, to see the quotations,
evidently distracted his devotions. This was probably the first time
that he lost faith in the power that moves the arm that moves the world.
He went to his Christian brother with tears in his eyes, saying: “It is
no use, brother; the market still goes up.” And Uncle Daniel ceased to
pray, and despairingly fixed his attention on the ticker.
Daring November, Drew contracted for the delivery of 70,000 shares of
Erie at current prices. It was then in the vicinity of 38. He proceeded
on this line of operation until he was hopelessly “cornered.” He then
applied to the court. Application was made for an injunction in the name
of August Belmont, but Gould and Fisk offset it by applying for another
injunction to their faithful Barnard. That upright Judge not only
granted an injunction restraining all suits brought against his two
eminent protegés, but appointed Gould Receiver of Erie. He also gave
authority to the directors of Erie to use the funds of the corporation
to purchase and cancel 200,000 shares of stock, the legality of whose
issue had been questioned, at any price less than the par value, without
regard to the rate at which it had been issued.
Gould and Fisk had issued these shares in the bear interest at 40, ran
the stock down to 35, and now obtained the power to purchase it back at
par in the bull interest. This they did by the authority and permission
of a Judge of the Supreme Court, in spite of the law prohibiting members
of corporations to deal in their own stock. So these two great
manipulators “cornered” their old friend and teacher, Drew, by legally
over-riding the law.
Erie became scarce after this skilful movement was performed, and was
selling at 47. Drew made desperate attempts to cover at this price, but
the stock ran up to 57 between Monday and Wednesday. Wall Street was in
a terrible ferment, and, as the newspapers say, the greatest excitement
prevailed. Erie made still another leap and reached 62. It was evident
that it was bound to keep on the upward grade, and there was no apparent
relief for Drew, at least for two or three days, when an incoming
steamer was expected to have a considerable amount of Erie on board. It
was manifest, however, that by that time Drew would have reached the end
of his millions, and probably most of his credit would have vanished
with his own filthy lucre. His oppressors were bearing down upon him
with all their might, and were evidently determined to make short work
of him.
The struggle waxed hotter as the hour of three in the afternoon
approached, and these two young lions of speculation were determined to
crush the old bear unmercifully and effectually.
When Drew was apparently on the very brink of utter financial
destruction, and almost at the close of the market, two events happened
that preserved him from total annihilation. There had been 300,000
shares of Erie issued in ten share lots, which the operators thought
were safely secreted in London and Amsterdam. When the stock reached 60
these ten-share lots began to come out. It turned out that most of them
had never left home, but were securely had by tradesmen, mechanics,
grocers and small bankers and brokers. They were thrown on the market
with great rapidity to realize handsome profits, and the efforts of the
clique to absorb them before they got into the hands of Drew, made
serious inroads on the reserve funds of the champion operators. As
troubles never come singly, at this new juncture the banks refused to
certify their checks. Drew was, therefore, enabled to make good his
contracts at 47, but speculatively speaking, he was ruined. He came
pretty near bringing down his desperate assailants, however, in his sad
and frightful fall. The stock then fell to 42, and Erie became a drug in
the market. The victors had got the spoils, but they paid dearly for
them, and had come pretty near being destroyed in the moment of their
triumph. They had purchased their Erie at “corner” prices, and they were
obliged to carry it, for nobody wanted it. Added to this Erie was struck
from the Board for a time, and had it not been for the gullibility of
our English cousins, this stock would have ceased to be a disturbing
element in the market for a great while longer.
Although old Drew was badly treated, yet there was little sympathy for
him, since he had merely become the victim of his own avarice,
vacillation, treachery and scheming to catch others in the same net.
He could not justly complain of his former partners, and Fisk told him
so, for their methods of operation, and the immense inflation of the
Erie stock by which he was ruined had been accomplished by the machinery
which he, himself, had set in motion, only his _ci-devant_ colleagues
had improved upon it, and had received various new patents on inventions
and improvements, which they had joined to the old one invented by
“Uncle Daniel,” mating one of the best combinations for the purpose of
creating and working “corners” that had ever been devised in Wall
Street.
But the unkindest cut of all was the way in which Fisk taunted him, on
the eve of his crushing defeat, with the absurdity of his complaints
about the management of Erie matters.
“You should be the last man,” said this worthy pupil, sneeringly, to his
dear old preceptor, “that should whine over any position in which you
may be placed in Erie.”
It was a sad truth, heartlessly uttered by the generous “Jim.” Drew had
no mercy on others, and could not expect to be shown any of that “twice
blessed quality” towards himself.
The private scene in the Erie office between old Drew and Fisk and
Gould, just prior to their final and victorious charge upon him, was
deeply pathetic, yet none of the three showed more conspicuously that
they were destitute of that proverbial honor among “boodlers” than Drew
himself. He had secured Vanderbilt to assist him in the courts, and also
in the market, against the machinations of the Erie clique, and then,
turning around, he went straight to Gould. and to him betrayed his ally
and the plans he had arranged with him, expecting mercy from his old
colleague by this dastardly act of humiliation and deception.
He must have lost his head at this crisis, for he ought to have known
Gould better. He begged and pleaded with Gould and Fisk, and was ready
to throw himself at their feet. He implored them to join him, with the
remnant of his fortune, in giving the old paper mill another turn to
grind out more Erie stock, that he might be permitted to emerge from
that cruel “corner” in which he was placed like a scorpion girt by fire,
brooding over his guilty woes.
But his pupils proved that they had profited only too well by his
instructions. Just as he would have acted under similar circumstances,
they were perfectly relentless. They seemed to be a double incarnation
of Shylock personified, or two Dromios bereft of conscience and human
sympathy. Drew had no Daniel but himself, to come to judgment. There was
no fair Portia to plead his cause, and if there had been such an angelic
creature in the case, though she might have “broke up” Fisk, it is
almost certain that Gould would have successfully resisted her charms.
When Drew saw they were implacable he bade them good night, and with the
courage of despair returned to the charge in Wall Street the next
morning, with the results which have been briefly related. He lost
nearly two millions in that fatal struggle.
------------------------------------------------------------------------
CHAPTER XVII.
INTERESTING EPISODES IN DREW’S LIFE.
INCIDENTS IN THE EARLY LIFE OF DREW, AND HOW HE BEGAN TO MAKE MONEY.—HE
BORROWS MONEY FROM HENRY ASTOR, BUYS CATTLE IN OHIO AND DRIVES THEM
OVER THE ALLEGHANY MOUNTAINS UNDER GREAT HARDSHIP AND SUFFERING.—HIS
GREAT CAREER AS A STEAMBOAT MAN, AND HIS OPPOSITION TO
VANDERBILT.—HIS MARRIAGE AND FAMILY.—HE BUILDS AND ENDOWS RELIGIOUS
AND EDUCATIONAL INSTITUTIONS.—RETURNS TO HIS OLD HOME AFTER HIS
SPECULATIVE FALL, BUT CAN FIND NO REST SO FAR AWAY FROM WALL
STREET.—HIS HOPES, THROUGH WM. H. VANDERBILT, OF ANOTHER START IN
LIFE.—HIS BANKRUPTCY, LIABILITIES AND WARDROBE.—HIS SUDDEN BUT
PEACEFUL END.—CHARACTERISTIC STORIES OF HIS ECCENTRICITIES.
I had intended at first to give only a sketch of the salient points in
the speculative career of Drew, but, on reflection, I find that the
lives of great men all remind us that people want to know a great deal
of minutiæ concerning men who have made their mark in this world. Our
enterprising newspapers are encouraging this laudable curiosity more and
more every day. So in the case of Drew, I must try to furnish answers to
questions that may be asked about him in order that popular expectation
may not be disappointed. I shall endeavor to anticipate what the reader
may naturally want to know when he comes to the end of Drew’s great
speculative ventures. One of these questions will probably be, what kind
of a boy was Daniel Drew, and how did he begin to make money?
It goes without saying that Drew was the most unique figure that Wall
Street has ever seen, and a characteristic specimen of one kind of
American thrift, enterprise and speculation. Every side of his
many-sided and peculiar character, therefore, is of interest as the
representative of a class to the reader who sets his heart on making
money, and the majority of readers have this weakness. He is of special
interest to all speculators not only in this country, but throughout the
civilized world. These facts constitute my apology for dwelling so long
and minutely on his characteristics. I have an idea that his life and
adventures will be read with deep interest many years hence, and help to
prolong the existence and reputation of this book. They will also assist
to immortalize the man who was one of the most wonderful products of
American civilization, and who could hardly have been evolved from any
other soil or clime. Such prodigies of success cause the members of the
older social fabrics to stare with astonishment at the stupendous
capabilities of our great country.
There is nothing interests people so much as the start in life, probably
because there are so few who consider themselves able to get a good
start. So far as I can learn, in the case of Daniel Drew, the boy was
father to the man. He worked on a farm, going to school at intervals,
where he was unable to learn anything, except that he obtained a notion
of the current theological ideas of that day, until he was fifteen years
of age, when his father died, leaving him, a younger brother and their
mother to shift for themselves on a poor, small farm. His father was of
English and his mother of Scotch descent.
In his seventeenth year young Drew enlisted as a substitute in the State
Militia, which had then been called into service on account of the
second war with England.
The regiment was placed at Fort Gansevoort, on the Hudson, opposite New
York. Hostilities ceased between this country and England a few months
after his enlistment, and the regiment was mustered out. Daniel returned
home. His mother had taken charge of his substitute money, which
probably did not exceed a hundred dollars, the amount with which his
great rival, Commodore Vanderbilt commenced life, and which he earned
from his mother by ploughing and planting a field.
“I want my substitute money,” said Drew to his mother, one day shortly
after his return. “What are you going to do with it?” queried the old
woman, for being of Scotch descent, she was quite as thrifty in looking
after the pennies as her American contemporary, old Mrs. Vanderbilt.
They both had the gripping sense by nature, and to this transmissible
quality may probably be attributed, in a large degree, the financial
success of both of their sons.
“I am going to buy cattle, and sell them in New York,” replied Daniel.
“Are you sure you will not lose money by it?” rejoined his mother.
“I am sure I will make money,” he said.
He started to purchase cattle in the country and to sell them in New
York. His profits were at first very small, especially as his capital
was so limited. He soon discovered that if he could purchase his cattle
in Ohio he would be able to increase his profits largely, and he applied
to Henry Astor, a butcher in Fulton Market, and a brother of the great
millionaire, John Jacob Astor, for a loan to speculate in Ohio cattle.
Astor accommodated him, though he at first thought he was running a
considerable risk. He was mistaken, for Drew made money and soon
established his credit on a solid basis. He bought cattle throughout
Ohio, and drove them over the Alleghany mountains. He is said to have
been the first drover who attempted this daring experiment. It required
sixty days then to make the journey. He suffered great hardship and
privation, and would sometimes lose a third part of a drove of 600 or
1,000 in crossing the mountains. Yet, as cattle were very cheap in Ohio,
his profits were still very large.
One terrible night, in a terrific thunderstorm, the tree under which he
took shelter was shattered to splinters, his horse was killed under him,
and he himself was struck senseless for a time. But no hardship or
privation could deter him in the pursuit of making money. He afterwards
extended his operations to Kentucky and Illinois.
In 1829 Drew opened a cattle yard at Twenty-fourth street and Third
avenue and ran the Bull’s Head Tavern. He went into the steamboat
business in 1834. Vanderbilt had then been seventeen years in the
business. _Westchester_ and _Emerald_ were the names of his first two
boats, and they ran between New York and Albany, in opposition to the
Vanderbilt Line. Drew reduced the fare from three dollars to one, and
attempted to freeze out Vanderbilt. The war of rates became so fierce
that people were carried 100 miles between these two cities for a
shilling. Drew added the _Knickerbocker_, the _Oregon_, _George Law_,
_Isaac Newton_ and the _New World_ to his river fleet, and became quite
a formidable competitor of the Commodore.
In 1840 Isaac Newton organized the People’s Line on the Hudson, of which
Drew became the largest stockholder. The boats _St. John_, _Dean
Richmond_ and _Drew_ were built. The _Isaac Newton_ was burned and the
_New World_ was sunk.
When the Hudson River Railroad was opened, in 1852, Drew refused to sell
out his stock. “You can regulate your fares as you choose,” he said to
the President of the Railroad Company, “but the only way you can
regulate my steamboat fares is to buy the People’s Line, and this I
don’t believe you have money enough to do.” The railroad line merely
stimulated traffic, as the elevated railroads have done in our day, and
Drew was only a gainer instead of a loser by the apparent competition.
He also controlled the Stonington Line for twenty years.
Drew made his debut in Wall Street in 1844, just thirteen years prior to
my first appearance on the boards of this financial theatre, and he was
quite a war horse in speculation when I entered the arena. He formed a
partnership with his son-in-law, a Mr. Kelly, and Nelson Taylor, as
stock brokers and bankers. Their business was large and their credit
good. The firm continued for ten years, until it was dissolved by the
death of his partners. Drew then became one of the most daring and
successful operators in Wall Street.
Drew was married at the age of 25 to Roxana Mead, a farmer’s daughter,
by whom he was the father of three children, William H., Josephine, who
died in infancy, and Catharine, who was married to the Rev. W. I. Clapp,
a Baptist clergyman, who died and left his widow in good circumstances.
So there were very little grounds for “Uncle Daniel’s” dread that he
should probably die in miserable destitution, as it seems that his two
surviving children were very kind to him. His wife died in 1876.
Drew was a member of St. Paul’s Methodist Episcopal Church of New York
for several years. He contributed large sums to various religious and
educational institutions, but like Wilkins Micawber, he usually paid the
money in notes, which appeared in the schedule of his liabilities when
he had lost his large fortune, and had become bankrupt. He founded the
Drew Seminary at Carmel, for young ladies, at a cost of $250,000. He
built the Drew Theological Seminary, at Madison, New Jersey, also at a
cost of $250,000, and endowed it with a similar amount. He only paid the
interest on the latter. He increased the endowment fund of the Wesleyan
University, at Middletown, Conn., and the Concord Biblical Institute. He
added $100,000 to the endowment fund of Wesley University, but only paid
the interest on that also. These appear in the schedule, in the list of
his unsecured claims. He owned several large grazing farms in Putnam
county, but they were heavily mortgaged.
Drew had some intention of returning to his old home after the
bankruptcy proceedings in 1876, to spend the remainder of his days there
among his grandchildren. This desire shows that there was something
inherently soft and good, after all, in his avaricious nature, and
reminds me of the touching lines of Cowper on the same subject:
“Be it a weakness, it deserves some praise,
We love the play place of our early days,
The scene is touching, and the heart is stone,
That feels not at the sight, and feels at none.”
He went out to Putnam county in 1876, when he was sick, but he was soon
glad to get back to the city. He said: “I was troubled with visitors,
some of ’em well on to 100 years old. Some of them said I bought cattle
from them when I was young, on credit, and they wanted their bills. I
kept no books, and how was I to know I owed ’em for them critters? It
was dull outen thar,” he continued, “and yer never can tell till the
next day how ‘sheers’ is gone.”
So Uncle Daniel came back and stopped at the Hoffman House, where he
could have ready access to the ticker, and kept constantly posted on the
price of stocks. His principal broker was Mr. David Groesbeck.
The city still seemed to have certain fascinations for him that the
country was unable to afford. He often spoke regretfully, in his latter
days, of being too old to retrieve his fortune. He said he longed for
rest. Nothing seemed to weigh more heavily upon his mind than his
inability to carry out the plans connected with his religious
endowments, and he grieved deeply that he had not the means to return to
Wall Street that he might have another lucky turn that would enable him
to fulfil these religious obligations according to the original
intention.
In the bankruptcy schedule his personal property is itemized as follows:
watch and chain, $150; sealskin coat, $150; wearing apparel, $100;
Bible, hymn books, &c., $130.
Although he was economic in his domestic expenses, he entertained
friends liberally, and his house at the southwest corner of Seventeenth
street and Union Square was always open to Methodist ministers, free of
charge, from all quarters of the world.
Some years prior to his death Mr. Drew gave the following candid,
succinct and pathetic account of his embarrassment to a journalist who
interviewed him:
“I had been wonderfully blest,” said Uncle Daniel, “in money making. I
got to be a millionaire before I knowed it hardly. I was always pretty
lucky till lately. I didn’t think I could ever lose money extensively. I
was ambitious of making a great fortune, like Vanderbilt, and I tried
every way I knew, but got caught at last. Besides that, I liked the
excitement of making money, and giving it away, and am glad of it. So
much has been saved anyhow. Wall Street was a great place for making
money, and I could not give up the business when I ought to have done
so. Now, I see very clearly what I ought to have done. I ought to have
left the Street eight or ten years ago, and paid up what I owed. When I
gave $100,000 to this institution and that, I ought to have paid the
money, and I ought to have provided better for my children, by giving
them enough to make them rich for life. Instead of that I gave my notes,
and only paid the interest on ’em, thinking I could do better with the
principal myself. One of the hardest things I have had to bear has been
the fact that I could not continue to pay the interest on the notes I
gave to the schools and churches.”
“I gave my son the old homestead,” continued Mr. Drew, “and some other
small property up in Putnam, where we came from, which I hope will make
him independent at least. My daughter married a rich man, and when he
died, leaving considerable property to five children, I was made
executor of the will. For so great a trust as their property I was
obliged to give security, which I did by making over to them this house
where we are, and the North River steamboats, the Drew, Dean Richmond,
St. John and Chauncey Vibbard. This security makes them whole, and I
thank God that breach of trust is not on my conscience. Their mother, my
daughter, is, of course, well provided for, through her children and
deceased husband. My son’s principal business is now in connection with
the management of the boats, by which he is getting on very well.”
After Drew’s great disaster in the Erie “corner,” he became a special
partner in the firm of Kenyon, Cox & Co., and when this house failed,
after the panic of 1873, Uncle Daniel was compelled to make an
assignment. He had been for years on the losing side, having dropped
between two and three millions in the Erie “corner” through the
machinations of Gould and Fisk. Horace F. Clark and Gould had also
cornered him in Northwestern to the tune of $750,000. After the panic he
had made an assignment to Wm. L. Scott, of Erie, Pa., but was not
legally declared a bankrupt until 1876. His liabilities were
$1,074,131.83, and his assets were estimated at $746,499.46.
Like Vanderbilt, Drew kept his accounts in his head, and considered the
whole paraphernalia of book-keeping a confounded fraud.
His failure, which at one time would have induced a panic, did not cause
a ripple on the surface of speculation. After his discharge in the
bankruptcy proceedings, he appeared to pluck up fresh courage, and said,
“The boys think I’m played out, but I’ll give ’em many a turn and twist
yet.” He was interested in Toledo & Wabash, Canada Southern, Quicksilver
Mining Company and Canton (Land) Company stock.
Wm. H. Vanderbilt, who had received his early financial training as a
clerk in Drew’s office, still retained a kindly feeling for his old
employer, and sometimes gave him “pints” as Drew called them, on which
he made a little turn. It was said that Mr. Vanderbilt had intended to
give him another start in life about the time Drew passed suddenly over
to the majority. He died at 10.45 P. M., September 18, 1879, at the
residence of his son, Wm. H. Drew, No. 3 East Forty-second street.
His death came without any prior warning. He had been apparently in his
usual health during the day, and had dined with Mr. Darius Lawrence, of
Lawrence Brothers, brokers in Broad street, at the Grand Union Hotel, at
six o’clock in the evening. After dinner he returned to the house of his
son. About nine o’clock he complained of feeling ill, but refused to
permit anybody to sit up with him, saying he would call Mr. Lawrence,
who slept in an adjacent room, if he should feel worse. About ten
o’clock he went into Mr. Lawrence’s apartments and said he felt much
worse. Dr. Woodman, his family physician, was immediately summoned, but
before his arrival Mr. Drew had expired. The cause of his death was
apoplexy.
Among the numerous stories related of Uncle Daniel’s eccentricities, one
is noteworthy in relation to his habit of getting in a mellow mood when
prayer failed to soothe him, and covering himself up in bed after any
speculative disappointment. He was found in this condition one day at
the Sturtevant House, the year in which he died, by two Wall Street
acquaintances who called upon him, and were conversant with his peculiar
habits. He had all the windows closed, so that the atmosphere in the
room was stifling, and was enveloped in several pairs of double
blankets. His friends called for a bottle of champagne, of which he
refused to partake. When this was drunk they called for another, and
left it with him, believing that when he was left alone he might be
inclined to imbibe without any feeling of embarrassment.
Another story is related characteristic of Uncle Daniel’s methods of
making the best use of a secret, and any confidence that a person might
foolishly repose in him, in a speculative deal. During the war a young
man known as California Parker, who had more money than brains, began to
buy Erie in the vicinity of par, and put it up to 120. He went to Drew
and told him that he would let him in at fifteen per cent. below the
market, if he would only aid him with a little money to carry the price
higher. Mr. Drew blandly appeared to entertain the young millionaire’s
proposition favorably and Parker, on the strength of that, continued the
struggle until he had almost reached the end of his California gold. The
next morning when he met Drew the latter told him that he was unable to
raise the money, and appeared to be grieved at his disappointment. In
the meantime Drew had instructed his brokers to sell Erie “short,”
knowing that Parker was unable to absorb any more of that precious
paper, Erie stock. The market went down, Drew made a “scoop,” and Mr.
Parker retired from Wall Street a ruined, but a wiser man.
In personal appearance Drew was tall, strong and sinewy, and in his
latter days his face was seamed with deep lines, indicating intense
thought and worry. He had restless twinkling eyes, with a steady
cat-like tread in his gait. His general demeanor was bland, good-natured
and insinuating, with affected but well dissembled humility, which was
highly calculated to disarm any resentment, and enable him to move
smoothly in society among all shades and conditions of men. He has often
been mistaken for a country deacon.
So, now, having revived and collated the chief incidents in the
chequered career of this great speculative celebrity, I close this
sketch with the ardent hope that he may have found that peace beyond the
tomb which the ordinary speculator in Wall Street can seldom or never
hope to achieve on this side of “that beautiful shore.”
------------------------------------------------------------------------
CHAPTER XVIII.
PANICS.—THEIR CAUSES.—HOW FAR PREVENTABLE.
NOT ACCIDENTAL FREAKS OF THE MARKET.—WE ARE STILL A NATION OF
PIONEERS.—THE QUESTION OF PANICS PECULIARLY AMERICAN.—VIOLENT
OSCILLATIONS IN TRADE OWING TO THE GREAT MASS OF NEW AND IMMATURE
UNDERTAKINGS.—UNCERTAINTY ABOUT THE INTRINSIC VALUE OF
PROPERTIES.—SUDDEN SHRINKAGE OF RAILROAD PROPERTIES A FRUITFUL CAUSE
OF PANICS.—RISKS AND PANICS INSEPARABLE FROM PIONEERING
ENTERPRISE.—WE ARE BECOMING LESS DEPENDENT ON THE MONEY MARKETS OF
EUROPE.—IN PANICS MUCH DEPENDS UPON THE PRUDENCE AND SELF-CONTROL OF
THE MONEY LENDERS.—THE LAW WHICH COMPELS A RESERVE FUND IN THE
NATIONAL BANKS IS AT CERTAIN CRISES A PROVOCATIVE OF PANICS.—GEORGE
I. SENEY.—JOHN C. ENO.—FERDINAND WARD.—THE CLEARING HOUSE AS A
PREVENTIVE OF PANICS.
There are few subjects on which there is more loose theorizing than that
of the origin and remedy of panics. These crises are commonly spoken of
as accidental freaks of the markets, due to antecedent reckless
speculations, controlled in their progress by the acts of men and banks
who have lost their senses, but quite easily prevented, and as easily
cured when they happen.
These are the notions of mere surface observers. They may be in a
measure true, when applied to the markets of some of the older
countries, whose business moves in long-established grooves and embraces
but little of the risk attendant on new enterprises. In France and
Germany, for instance, the hazards of business are almost entirely
confined to the accidents of political events; and such nations are
comparatively exempt from panics due to purely commercial causes. In the
United States, panics arise, principally, from causes from which
European countries are exempt.
Notwithstanding our immense population and the large measure of
well-ordered consolidation that has been effected in our various
interests, we are still a nation of pioneers. In every ten years, we now
add nearly fifteen millions to our population, which means that each
successive decade we are piling up the equivalent of a first-class
European state upon our past marvellous accumulation of empire.
Inseparable from this unparalleled national growth are great ventures
and great commercial and financial risks. Our new population has to
subdue new territory. New lands have to be cleared; new mines have to be
opened; new industries have to be established; new railroads have to be
built; new banks created and new corporations founded. These new
ventures are necessarily in a measure experimental. Some of them fail
utterly; others succeed magnificently. They require large outlays of
capital in advance of obtainable results. These outlays are, in many
cases, met by borrowing; the loans being secured by liens upon the
uncertain undertakings, and therefore lacking the stability of value
that attaches to well developed investments.
We have thus a ceaseless stream of new issues of stocks, mortgages and
commercial paper, and have, therefore, at all times outstanding a large
amount of obligations which, from the uncertainty of their basis, are
liable to wide fluctuations in value. Besides these absolutely new
investments, we have also at all times an equal or larger amount of
obligations issued against enterprises which, although not properly new,
are still in an unconsolidated and experimental stage, and the value of
which is, therefore, subject to wide fluctuations. Issues of this
character naturally appeal to the adventurous instincts of our people
and elicit a vast extent of speculative activity.
It is this peculiarity in the development and trade of the United States
that renders our markets more exposed to panic than those of any other
nation, and which makes the question of panics a peculiarly American
one. In any and every commercial nation, trade is subject to regular
successions of prosperity and depression. This oscillation results from,
or constitutes a natural law.
The action of commerce, like the motion of the sea or the atmosphere,
follows an undulatory line. First comes an ascending wave of activity
and rising prices; next, when prices have risen to a point that checks
demand, comes a period of hesitation and caution; then, care among
lenders and discounters; then comes the descending movement, in which
holders simultaneously endeavor to realize, thereby accelerating a
general fall in prices. Credit then becomes more sensitive and is
contracted; transactions are diminished; losses are incurred through the
depreciation of property, and finally the ordeal becomes so severe to
the debtor class that forcible liquidation has to be adopted, and
insolvent firms and institutions must be wound up. This process is a
periodical experience in every country; and the extent of the
destructiveness of the crisis that attends it depends chiefly on the
steadiness and conservatism of the business methods in each particular
community affected. In addition to this ordinary and, I would even say,
_natural_ liability to commercial crises with a greater or lesser degree
of panic, we, in the United States, have to stand the far more violent
oscillations so inseparable from our great mass of new and immature
undertakings.
In times of crisis, the obligations issued against such enterprises
suffer instantly from the uncertainty about their intrinsic value.
Holders are anxious to get rid of them; banks which have advanced money
on them, call in their advances; and they become virtually unavailable
assets. Every panic that has happened since the beginning of the era of
railroads in this country, has been intensified many-fold by the sudden
shrinkage in the value of this class of assets; and it is precisely here
that the aggravation and the chief danger of an American panic centres.
In view of these facts, what is the use of discussing the possibility of
averting our periodic panics? Risks and panics are inseparable from our
vast pioneering enterprise; and all we can hope is, that they may
diminish in severity in proportion as our older and more consolidated
interests afford an increasing power of resistance to their operation. I
am disposed to think that, in the future, the counteraction from this
source will be much more effective than it has been in the past. The
accumulations of financial resource available for market purposes at our
monetary centres are increasing at a very rapid rate. Evidence of this
is seen in the fact that, while the magnitude of our corporate
undertakings is augmenting every year, we are also every year becoming
less dependent on the money markets of Europe, and our large corporate
loans are now made principally at home. These accumulations afford
elasticity to our financial system and serve as a buffer against the
violence of great financial disturbances.
I do not see how we can in any other way satisfactorily explain how it
is that, while we have had two distinct waves of commercial depression
since the great crisis of 1873, such as have ordinarily been attended
with more or less panic, we have had no disturbance that can be regarded
as a fully developed panic. The only approach to it was the disturbance
brought about by the Grant & Ward failure in May, 1884, which was merely
a restricted and comparatively temporary affair.
But, whilst maintaining that panics cannot be avoided in a country
situated as ours is in its present incomplete development, I cannot
avoid expressing the opinion that conditions are permitted to exist
which needlessly aggravate the perils of these upheavals when they do
occur. In every panic very much depends upon the prudence and
self-control of the money lenders. If they lose their heads and
indiscriminately refuse to lend, or lend only to the few unquestionably
strong borrowers, the worst forms of panic ensue; if they accommodate to
their fullest ability the larger and reasonably safe class of borrowers,
then the latter may be relied upon to protect those whom the banks
reject, and thus the mischief may be kept within legitimate bounds.
Everything depends upon rashness being held in check by an assurance
that deserving debtors will be protected. This is tantamount to saying
that all depends on the calmness and wisdom of the banks. They may
easily mitigate or aggravate the severity of the crisis, according as
they are prudently liberal or blindly selfish. It is, perhaps, safe to
say, that the banks never do all they may; but the banks of this city
must be credited with having shown great sagacity under repeated
derangements of this kind within the last twenty-five years. They have
largely succeeded in combining self-protection with the protection of
their customers; and the antecedents they have established will go far
toward breaking the force of any future panic.
But, unfortunately, the law imposes restraints upon the national banks
which seriously interfere with the wise discretion of those
institutions. As the law now stands, the banks are liable to be wound up
at the order of the Government if they permit their lawful money
reserves to fall below 26 per cent. of their legal deposits. This
establishes a “dead line” which is so dreaded when approached that it
becomes almost a panic line. When that limit is reached, the banks are
compelled to contract their loans; and, in certain conditions, the
contraction of loans means forcible liquidation, without regard to
consequences. Thus the very contrivance designed to protect the banks
becomes a source of most serious danger to their customers and therefore
to the banks themselves; and, in times of monetary pressure, it is the
most direct provocative of panic. Were the banks allowed to use their
reserves under such circumstances, a fund would be provided for
mitigating the force of the crisis, and the danger might be gradually
tided over; but, as it is, the banks can legally do little or nothing to
avert panic; on the contrary, the law compels them to take a course
which precipitates it; and when the crash has come, they have to unite
in common cause to disregard the law and do what they can to repair the
catastrophe that a preposterous enactment has helped to bring about.
This is one of not a few unwise restrictions upon our national banks
which needs to be stricken from the statute book. These periods of the
breaking-down of unsound enterprises and of the weeding out of insolvent
debtors and of liquidation of bad debts can never be wholly averted; nor
is it desirable that they should, for they are essential to the
maintenance of a sound and wholesome condition of business; but it is a
grave reproach to our legislators if, when the day of purgation comes,
the law treats the deserving and the undeserving with equal severity.
GEORGE I. SENEY.
The most prominent characters in the short lived panic of 1884, as every
observing person knows, were Ferdinand Ward, James D. Fish and a few
others who acted minor parts in connection with the methods of
financiering which precipitated the crisis in Wall Street.
There are many people who think that Ward—the Young Napoleon of finance,
as he was popularly called—was able to dupe everybody, his accomplices
included, and that he was chiefly responsible for all the trouble. But
this is an exaggerated and unscientific view of the case.
Among the financiers who came to grief in the general embarrassment
caused by the peculiar methods of the two financiers referred to, was
George I. Seney. Seney gave his money away, and it was placed in the
wrong quarters for any tangible return. He was a great patron of the
churches and religious institutions. If he had studied the life of
Daniel Drew, he might have discovered that investments in such
enterprises as these were not particularly profitable. In his financial
difficulties, Seney was left high and dry without friends who would come
to his rescue. The result was, that the two financial institutions, the
Metropolitan Bank and the Brooklyn bank with which he was thoroughly
identified, had to go under as the result of Mr. Seney’s misfortunes.
And an insurance company in Brooklyn, which had loaned about all of its
surplus to Mr. Seney, taking Metropolitan Bank stock as collateral, was
swamped as well.
There are few of the speculative magnates who succumbed to the crash of
1884, whose financial histories are more interesting than that of Mr.
Seney. He is the son of a Methodist minister, and was born at Astoria,
Long Island, about sixty years ago. He has always manifested the deepest
devotion to his paternal church, and in the very height of his
prosperity the church was the first object of his financial care. He was
educated at the University of the City of New York, and shortly after he
graduated, and when about 22 years of age, entered the Metropolitan Bank
as a clerk. He was afterwards teller and then cashier. This was when Mr.
Williams was President and when Mr. Jacques was Vice-President. Mr.
Jacques resigned that position several years ago and made a prolonged
journey to Europe. Mr. Williams died a few years ago, and Mr. Seney
became his successor as President of the bank.
Mr. Seney’s wonderful financial abilities were a comparatively recent
outgrowth of his mental evolution, at an age when very few men exhibit
signs of new developments.
Up to a date shortly prior to the panic, he was generally regarded as
slow and phlegmatic, without manifesting any special parts that
indicated superior brilliancy as a financier. He first distinguished
himself in Wall Street during the speculative furore of 1879, and came
to the front then with sudden and surprising activity. He carved out an
original course for himself in speculation—so original, in fact, as to
stamp the enterprises with which he became identified with his name. The
Seney properties became almost as familiar to the financial world as the
Goulds, the Vanderbilts and the Villards.
Mr. Seney’s chief securities (so-called through the courtesy of
speculative parlance) were Ohio Central, Rochester and Pittsburgh, East
Tennessee, Virginia & Georgia, and the celebrated “Nickel Plate” Road.
These were known as the Seney Syndicate properties, and the system of
handling them was entirely novel in the history of Wall Street, causing
the financial veterans of Wall Street to stand and stare at the boldness
and rapidity of the Seney movements.
Instead of starting with moderate issues in amount, as has usually been
the custom of most men handling railroad and telegraph properties, and
doing the watering process by degrees, Mr. Seney boldly began the
watering at the very inception of the enterprise, pouring it in lavishly
and without stint. There was nothing mean or niggardly about his method
of free dilution, the sight of which threw some of the old operators
into a fit of consternation. The stocks were strongly puffed, and as
they were so thoroughly diluted their owners could afford to let them
get a start at a very low figure. The future prospects of the properties
were set forth in the most glowing colors, the public took the bait, and
the stocks became at once conspicuous among the leading active fancies
of the market.
The cause of the vigorous life and amazing activity so suddenly imparted
to the stocks of the Seney Syndicate can only be revealed by a careful
perusal of Mr. Seney’s checkbook, which, if still in existence, will
show commissions paid for the execution of the orders to buy and the
orders executed to sell, both by the same pen and in the same
handwriting.
These transactions, in the language of the “Street,” are called washed
sales. In this way Mr. Seney was understood to have made a very large
amount of money, and from being almost one of the poorest men in
Brooklyn, he soon became marked as the richest. While he continued to
thrive it was a singular fact that the majority of his financial friends
seemed to fall into a decline.
When the affairs of the Seney enterprise were wound up, it was
discovered that these people had little left except the certificates
which bore the high-sounding term of the Seney Syndicate Property.
One peculiarity about Mr. Seney in his social relations was, that while
he appeared almost bereft of sympathy for used-up friends whom his
schemes had ruined, he drew largely on his immense gains for
philanthropic purposes, and in the aggregate must have distributed over
$2,000,000 in a very magnanimous manner.
It would seem that Mr. Seney at one time aspired to be a great
philanthropist, and had it not been for the unfortunate exposé which was
the result of the panic, he might one day have stood in as high and
lordly a position as the renowned Peabody, with even a greater
reputation as a financier. It is sad to picture the contrast presented
by the _denouement_ with what might have been, in a career which began
with so much promise, dating from the time that Mr. Seney was installed
as President of the Metropolitan Bank, whose standing and credit were
the highest in the State.
Mr. Seney’s speculative career affords an example of the way in which
this kind of speculation reflects on the stability of our best banking
institutions. The lesson is one that should be carefully taken to heart
by the financiers of this country.
It is due, however, to Mr. Seney to state that he alone was not
responsible for the misfortunes of the Metropolitan Bank, although he
was the ruling spirit; for it could hardly be possible that the
directors of that institution could have been ignorant of its affairs in
connection with the Seney speculations. The Metropolitan Bank cannot be
compared with the Marine Bank, which met a similar misfortune, for it
was no family affair, and Mr. Seney had none of his relatives connected
with it, as Mr. Fish had with the Marine Bank.
It appears that it was chiefly owing to the fact that Mr. Seney had so
little personal interest in the Metropolitan Bank that he was so anxious
to gut the concern, knowing that the loss would fall upon others.
The most important point for speculators and investors, however,
connected with the enterprises of these men is, that the terrible
shrinkage of Stock Exchange values at the time, amounting to over
$1,000,000,000, was in a large measure brought about by a foregone
conclusion on the part of the sagacious bear cliques that disaster would
sooner or later overtake the institutions over which Mr. Seney and Mr.
Fish presided.
This should afford a wholesome lesson, through the medium of practical
experience, to speculators and investors for all future time. For this
very reason the facts are worthy of being put on permanent record as a
reminder and a guide, particularly to Wall Street men, who are too often
prone to forget the past and thus leave themselves liable to be caught
in a similar net again.
The transactions of the four prominent speculators who played the most
conspicuous part in the events which resulted in the panic of May, 1884,
should be preserved for reference, as a guide when similar cases arise,
for in spite of the deep disgrace, shame and misery that have followed
in the wake of their enterprises, these men will have hosts of imitators
for many years to come. Ward, Fish, Seney and Eno, with probably the one
exception, Fish, are, by many, considered smart men, who simply had the
misfortune to become involved, but who had a fair chance of coming out
of all their troubles, great millionaires and publicly honored for their
ability and success.
It must be admitted that there are some examples in the financial world
whose careers will fully support this theory and belief but they are the
exceptions which only prove the rule in speculation, as in other lines
of business, that “honesty is the best policy.” These men, who have been
apparently so successful through dishonest methods, are never free from
dread of being tripped up at any period of their inflated prosperity.
They are always subject to be called upon by the application of the
stern methods of honest financiering to give an account of their
stewardship, and to have the transactions of a lifetime eventually
gauged by the standard of public honesty. It is the winding up that
tells the tale, and exposes the duplicity of the ablest financiers, who
vainly imagine that dishonest methods will always prevail.
JOHN C. ENO.
Of the four famous “financiers” mentioned who were most prominent in the
Summer panic of 1884, the speculative history of John C. Eno was in some
respects the most remarkable and most interesting.
Eno was a young man, not more than twenty-six years of age, and a
representative of that class of ardent and youthful speculators who
plunge into the market with all the recklessness incident to young and
sanguine imaginations, with many roseate schemes of wealth and
greatness, for which inexperienced youth is proverbial. Eno was a victim
of that rashness, impulsiveness and desire for extravagance, by which
the possessors of these attributes frequently get themselves and many of
their associates embroiled in numerous difficulties and embarrassments.
Another point of interest in the curious career of Eno was his position
as President of the Second National Bank of New York, up to the time of
the panic. Seldom does it fall to the lot of a youth of his tender years
to have conferred upon him a position of such responsibility and
dignity. The manner in which he made use of this position of trust, for
appropriating money which did not belong to him, was notable for its
peculiar ingenuity.
Most of the money lent by the bank was upon collateral securities,
which, for convenience, as well as for safety, were kept, not at the
bank, which was situated under the Fifth Avenue Hotel, but in a vault
down town.
The capital stock of the bank was $100,000, and it had $4,000,000 of
deposits, all of which was appropriated to speculative use by this smart
young man, who decamped to Canada in company with a Roman Catholic
priest.
Eno happened to have a rich father, who had made his money by thrift and
economy during a long and prosperous life. To his credit, it must be
said, that he came promptly to the rescue of this wayward and erring
son, and paid the bank, of which he was director, three and one-half
millions of dollars, on condition that the other half million should be
contributed by the other directors, all of whom were very rich men. The
directors willingly accepted the proposition, and thus the entire
deficiency was made good by this generous arrangement, so that none of
the depositors suffered the loss of a dollar.
The methods which Mr. John C. Eno, the President, resorted to for the
purpose of capturing the institution root and branch, were ingenious and
unique in their character, inasmuch as they had a tendency to inspire
the fullest confidence in his vigilance and honesty regarding the
affairs of the bank, instead of exciting any suspicion.
He discouraged the custom of keeping the securities of the bank in its
own vaults, on the pretense that they were not sufficiently secure, and
suggested that a safe should be rented in one of the down town safe
deposit companies. This was done at his request. He argued, further,
that the funds on hand being mostly family deposits, the depositors were
not of a class that often required to be accommodated with discounts,
and that the money was not taken by the bank to be locked up and kept on
hand so as to have the name of having it, but to be used to the best
possible advantage consistent with safety, to make profitable returns
through interest. Consequently, he was allowed to use the money of the
bank freely to make loans to Wall Street brokers on interest, with
approved collaterals, and he represented to the directors that he was
carrying out this course.
As the bank was located so far up town, (at Twenty-third street,) the
distance from Wall Street made it extra hazardous to send securities
back and forth, as adventurous thieves might seize the messenger on the
way. This has frequently happened in this city. It was, therefore,
desirable to have the safe deposit vault in close proximity to Wall
Street. Of the combination to the safe in this vault Mr. John C. Eno was
the sole possessor. Having things fixed in this manner it was
indispensable that the President himself should go down town every day,
so as to accommodate the brokers in the loaning of money. The directors
were by this plan convinced that the risks, through the careful methods
adopted by the President, were no greater than if the bank was located
in Wall Street. These conservative methods, so skilfully planned and
plausibly explained, increased the confidence of the directors in the
able and careful management of Mr. Eno, and nobody was so much surprised
as they, when the wool was raised from their eyes and they discovered
that these various and ostensible “safeguards” were ingeniously devised
for the sole purpose of screening their skilful inventor in the
accomplishment of his huge defalcations.
Instead of loaning the money to Wall Street brokers, as he represented
to the directors, he placed it as margin with his own brokers in various
speculative ventures, and in that manner he made away with the entire
$4,000,000 of the bank’s deposits without exciting the least suspicion
in the confiding breasts of the directors.
Such another instance of a clean sweep of the deposits of a bank by any
of its officials, is probably not on record in the whole history of this
kind of manipulation.
When the President represented to the Cashier, every evening, that he
had lent specified sums on certain securities, his word was taken, and
his checks for the amounts duly honored, without exciting a feeling of
suspicion. Thus, by degrees the books of the bank showed $4,000,000 of
call loans upon unexceptionable collaterals, when in fact the money had
all gone to the President’s private account.
Eno speculated with the greater portion of the money in stocks that were
continually declining in price, and at length the time arrived when he
was obliged to make a clean breast of the terrible condition of his
affairs to his father. As I have stated, the old gentleman, Mr. Amos R.
Eno, nobly came to the relief of his prodigal son, and saved the bank
from suspension.
As Eno senior is still worth about $25,000,000, he will never suffer the
pangs of poverty through this great loss; but it will take a long time
to enable him to survive the disgrace which the flagrant acts of his son
have brought upon an honest and highly respected name.
THE CLEARING-HOUSE AS A PREVENTER OF PANICS.
In this panic the boldest and most remarkable instance of self-sacrifice
on record was manifested by the Clearing-House banks. The panic of 1884,
in its incipient stage, was different to any that had preceded it—at
least any of the financial convulsions within my recollection—owing to
the influence exercised upon it by the prompt and liberal policy of the
banks. In every respect their action was notable, showing that those at
the head of their management had largely profited by the lessons of
former panics.
It was chiefly due to the masterly management of the banks, together
with the magnanimous conduct of Mr. Amos R. Eno and his associate
directors of the Second National Bank, that the panic was short-lived
and so narrowly circumscribed. Had it not been for the determinate and
instantaneous joint action of these parties there would have been a very
serious crash, which would have been far-reaching in its results.
The results of the timely action taken on the part of the managers of
these institutions in this crisis, proves that panics can be arrested by
proper methods, and that quick and determined action is indispensable in
the incipient stage of the emergency. If bank presidents could only be
relied upon by the business community to act promptly and in unison with
the business men, as they did in this instance, threatened panics need
have but little terror for the people, who now live constantly in dread
that these outbursts of business disaster may be sprung upon them at any
time in any decade.
In the past history of panics bank managers, as a rule, have acted
without system, without judgment and almost entirely without any well
defined plan of action. There has been an astonishing lack of vigor in
their methods and purposes, which were weak and vacillating in their
character—frequently more like the acts of children than those of
business men.
If the panic of 1873 had received the same vigorous treatment in its
origin as that of 1884, it could just as easily have been checked as the
latter, and the entire country would have been saved a large portion of
the depressing effects of that serious collapse and its attendant
disasters, which caused a state of general prostration for five or six
years succeeding the event. These years, from a business standpoint,
appear as a blank in the history of the country’s progress. Indeed, they
constitute a black mark.