In 1884 the bears indulged in much adverse criticism in regard to the

action of the Clearing-House in taking Mr. Seney’s pictures as

collateral. At the time, this method of financiering was without

precedent; but the result has fully justified the policy of the

Clearing-House Association and its management. Such an exceptionally

fine collection of paintings in a country like this, now filled with

connoisseurs who have sufficient wealth to gratify their tastes,

stimulates the demand for these luxurious articles of value and

transforms them into the best collateral to be found in the market. When

the Seney pictures were offered for sale at auction they attracted

greater competition in the purchase, at good prices, than could have

been obtained for almost any class of railroad securities connected with

Wall Street for months afterwards. While Mr. Seney seems to have been as

much of a virtuoso as the late Mrs. Morgan, he did not permit his love

of the beautiful to rise to such a pitch of exaltation as would cause

him to pay the extravagant prices which almost ruined that eccentric

woman. He never forgot that the picture had a “market” value, and never

permitted his enthusiasm for the fine arts to make him a victim of sharp

and unconscionable dealers. In fact he appeared to have been more

wide-awake in picture buying than banking, and demonstrated that the

former, rather than the latter, was his forte. If the bank presidents

had not acted in the praiseworthy manner referred to, the financial

revulsion of that panic would have been very serious. Several millions

of deposits in the Metropolitan and Second National were promptly drawn

out, and forthwith entered into circulation. This saved the community

from the evil influence of a large number of panic makers in the persons

of the depositors of these banks. Instead, therefore, of helping to stir

up the excitement—as they would have done by pursuing the selfish policy

formerly resorted to in similar circumstances—every person with funds in

these two institutions, assisted very effectively to allay suspicion and

create confidence, instead of distrust.

It was the disturbing element of panic makers, who generally constitute

one of the most potent factors of disruption to be dealt with in seasons

of business trouble, that caused the greater part of the trouble at the

time of Jay Cooke’s failure. The holders of the Northern Pacific bonds

then, finding that the security was no longer equal to that of

Government bonds (as they had been taught to believe), but was

apparently worthless, became panic-stricken at their losses, and were

all transformed into panic-makers, infusing the spirit of distrust into

every person with whom they came into contact, until, like a fatal

virus, it inoculated the whole country, spreading business disaster far

and wide.

[Illustration:

_G. I. Seney_

]

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CHAPTER XIX.

OLD TIME PANICS.

THE PANIC OF 1837.—HOW IT WAS BROUGHT ABOUT.—THE STATE BANKS.—HOW THEY

EXPANDED THEIR LOANS UNDER GOVERNMENT PATRONAGE.—SPECULATION WAS

STIMULATED AND VALUES BECAME INFLATED.—PRESIDENT JACKSON’S “SPECIE

CIRCULAR” PRECIPITATES THE PANIC.—BANK CONTRACTIONS AND CONSEQUENT

FAILURES.—MIXING UP BUSINESS AND POLITICS.—A GENERAL COLLAPSE, WITH

INTENSE SUFFERING.

The first panic of any great importance was that of 1837. This panic had

its origin in a misunderstanding between the United States Bank, with

headquarters located at Philadelphia, and President Jackson, whose

election the officials of the bank had opposed.

The bank had been chartered in 1816, and went into operation in 1817.

Its charter had twenty years to run. The bank had been kept in operation

with varying success until 1830, when it was considered to be on a very

stable footing, so that the Finance Committee of the United States

Senate were enabled to testify to its efficiency as follows: “We are

satisfied that the country is in the enjoyment of a uniform national

currency, not only sound and uniform in itself, but perfectly adapted to

the purposes of the Government and the community, and more sound and

uniform than that possessed by any other nation.”

This was the second United States Bank; the first had been chartered in

1791.

The bank applied to Congress, in 1832, for a renewal of its charter,

which would expire in 1836. A bill was passed by Congress to re-charter

the bank. The bill was vetoed by the President for the reason above

stated. In the following year the Treasurer announced, by order of the

President, that the public funds, amounting to $10,000,000, would be

drawn from the custody of the bank because it was an unsafe depository.

The transfer of the Government funds to the State banks created great

agitation in political and financial circles. The State banks, under

this favorable turn of Government patronage, quickly assumed a thriving

condition and began to expand their loans and circulation. This

stimulated speculation in all parts of the country, but especially land

speculation. Large purchases of land were made from the Government, and

payment was made in notes of State banks.

With the rapid sales of its lands the Government was soon able to pay

off the public debt, and had still a surplus of $50,000,000 in the

Treasury. This apparent prosperity continued for the next year or two,

money was plenty and speculation was greatly stimulated and values

became inflated.

The crisis came in 1837, and was hastened by the “Specie Circular,”

which was the last official act of President Jackson, and which pricked

the bubble of inflation. This circular, which was issued from the

Treasury in July, 1836, required all collectors of the public revenue to

receive nothing but gold and silver in payment. The purpose of the

circular was to check the speculation in public lands, but it caused too

sudden a contraction in values, and created widespread disturbance in

business circles generally.

The public protest against the “Specie Circular” was so strong and

universal, that a bill went through both houses of Congress partially

repealing it. “Old Hickory” did not yield to Congress, however, and

though he did not veto the bill, he delayed signing it until after

Congress adjourned, thus preventing it from becoming a law.

The State banks sought to tide over the troubles arising from the

Jacksonian method of financiering by loans of public money to certain

financial concerns and individuals, but this plan only made matters

worse. There was a sudden expansion of paper money, which encouraged a

wild spirit of speculation and excessive importations, and imparted an

unnatural stimulus to business and commercial affairs. This state of

over-trading and reckless speculation was suddenly checked by bank

contractions, and in the spring of 1837 there were failures amounting to

$100,000,000 in New York city alone.

The shock was communicated to the entire country, and a state of general

paralysis in business circles ensued.

In the meantime the Bank of the United States continued in operation,

and did not even suspend in 1836, when its charter expired, but obtained

another charter from the State of Pennsylvania, which was entitled “An

Act to repeal the State taxes on real and personal property, and to

continue and extend the improvement of the State by railroads and

canals, and to charter a State bank to be called a United States bank.”

This United States bank did not expire until 1839, though it suspended

specie payment with the State banks in 1837, when by this method they

escaped a general collapse, and dragged through an agonising existence

for two years longer. The circulating notes and deposits of the Bank of

the United States were paid in full, but the $28,000,000 of capital were

a total loss to the stockholders, who never obtained a dividend. Such

were the good old times of financiering when General Jackson and his

successor, Martin Van Buren, sat in the Executive chair.

The entire capital stock of the bank was $35,000,000, of which

$7,000,000 were to be subscribed by the Government.

The real cause at the bottom of the failure of this bank was its error

of mixing up its legitimate business of banking with politics and

speculation, showing that keeping those matters as distinct as possible

is one of the great secrets of success in each of them.

The panic of 1837 was further aggravated by the action of the Bank of

England which, in one day, threw out all the paper connected with the

United States. The banks on this side refused to discount paper, and as

a retaliatory measure in self-defense the business men and speculators

withdrew their deposits from the banks. This had a tendency to cripple

business still more, and cause utter prostration. In their selfish

frenzy bankers and merchants completed the ruin of each other, hastening

the catastrophe from their inability to take a broad, cool and generous

view of the situation.

There was a general suspension of the New York banks on May 10, 1837,

and the banks throughout the country followed in their wake within a

week afterwards, producing a financial convulsion unparalleled in the

history of the Republic. The country was brought to the verge of

bankruptcy from the effects of which a long time was required for

recovery.

After two years’ struggle to regain the credit and stability lost

through false methods of financiering, the banks suffered a relapse, and

underwent a severe process of weeding out the weakest, nearly one-third

of which happened to be of this description. Out of 850 banks, 343

closed their doors permanently.

The Sub-Treasury at New York was established the following year, 1840,

by an act of Congress which provided that the officers of the Government

should keep the public funds in their own custody, that coin alone

should be received in payment to the United States, and bank notes were

to be no longer received and paid out at the Treasury.

While this short chapter deals with matters which go back beyond my

personal recollections of twenty-eight years in Wall Street, still as

the panic of 1837 was the first of the great upheavals of its kind, that

had a marked effect on Wall Street affairs, it properly falls within the

scope of this book to chronicle the chief incidents of that great

business convulsion.

For this reason, therefore, I find room for it, in some measure

commensurate with its importance, and the space which can be afforded to

it, as a matter of financial history, the facts of which were still

fresh in the recollection of several speculators, bankers and business

men, with whom I had the honor of being acquainted shortly after my

advent in Wall Street immediately succeeding the panic of 1857.

Of those who gave me lively descriptions of their vivid recollections of

that panic, but few now survive.

I think, therefore, it is well for me to do my part in helping to

preserve the leading features of this important episode in the early

history of Wall Street, as there will soon be none of those, who took an

active part in the exciting events of that period, left to tell the

tale.

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CHAPTER XX.

THE TRUE STORY OF BLACK FRIDAY TOLD FOR THE FIRST TIME.

THE GREAT BLACK FRIDAY SCHEME ORIGINATES IN PATRIOTIC MOTIVES.—ADVISING

BOUTWELL AND GRANT TO SELL GOLD.—THE PART JIM FISK PLAYED IN THE

SPECULATIVE DRAMA.-“GONE WHERE THE WOODBINE TWINETH.”—A GENERAL

STATE OF CHAOS IN WALL STREET.—HOW THE ISRAELITE FAINTED.-“WHAT ISH

THE PRISH NOW?”—GOULD THE HEAD CENTRE OF THE PLOT TO “CORNER”

GOLD.—HOW HE MANAGED TO DRAW AMPLE MEANS FROM ERIE.—GOULD AND FISK

ATTEMPT TO MANIPULATE PRESIDENT GRANT AND COMPROMISE HIM AND HIS

FAMILY IN THE PLOT.—SCENES AND INCIDENTS OF THE GREAT SPECULATIVE

DRAMA.

In the year 1869 this country was blessed with abundant crops, far in

excess of our needs, and it was apparent that great good would result

from any method that could be devised to stimulate exports of a part, at

least, of the surplus.

Letters poured into Washington by the thousand from leading bankers,

merchants and business men, urging that the Treasury Department abstain

from selling gold, as had been the practice for some time, so that the

premium might, as it otherwise would not, advance to a figure that would

send our products out of the country, as the cheapest exportable

material in place of coin, which, at its then artificially depressed

price, was the cheapest of our products, and at the same time the only

one undesirable to part with. So the Government decided to suspend gold

sales indefinitely.

Jay Gould and others, being satisfied that this was to be the policy of

the Administration, commenced at once buying large amounts of gold,

actuated, doubtless, by the purest of patriotic motives, namely, to

stimulate cotton and cereal exports. They succeeded in accumulating a

considerable amount of gold at prices ranging from 135 to 140, covering

a period of three months’ steady buying.

This was the honest foundation on which the great Black Friday

speculative deal was erected.

The eruption on Black Friday was really caused by the erratic conduct of

James Fisk, Jr., who actively joined the movement on Thursday, the day

before, and became wild with enthusiasm on the subject of high gold. He

began on Friday, early in the morning, to buy large blocks through his

own brokers, William Belden and Albert Speyer, running the price up very

rapidly.

The original syndicate consisted of Jay Gould, Arthur Kimber,

representing Stern Brothers, of London, and W. S. Woodward, of Rock

Island corner notoriety. The two latter, however, sold out their

interest to Gould, who directed the deal to the end, with the assistance

of several able and wicked partners. Their office was located in Broad

street, on the present site of the Drexel Building.

When the excitement arising from the above causes was at its height, I

sent a telegram to Secretary Boutwell, and one to President Grant,

representing the exact condition of affairs in Wall Street, and urging

the sale of gold without delay. I also prevailed upon General

Butterfield, the New York Sub Treasurer, and Moses H. Grinnell, the

Collector of the Port, to send similar telegrams, which they did, and

timely action was taken at once by an order coming to sell $5,000,000.

The moral effect of this Government action was to strike terror to the

holders of gold, and a general rush was made to sell out, thereby

driving down the premium from 160, in less than two hours, to 132. The

down grade produced an excitement quite equal to the early furore in the

up movement. Albert Speyer had from Fisk a verbal _carte blanche_ order

to buy, in million lots, all the gold he could get at 160; while he was

thus buying millions upon millions at this figure, on the opposite side,

and in other sections of the room, sales were freely made in moderate

amounts at 140, 145, 147 and 150, almost simultaneously; and even when

135 was reached, which was soon thereafter, Speyer still kept on bidding

160 for a million at a time, making one of the wildest and most

ludicrous spectacles ever witnessed among men not idiots. Fisk

afterwards repudiated the contracts made on his account by Speyer &

Belden, simply denying having given the orders, and as they were not in

writing, they could not well be proven, hence both brokers failed,

throwing immense losses upon an innumerable number of others. Quite a

noted firm sold Speyer some of his million lots, which they bought back

at 140, being satisfied with the profit of 20 per cent.; when they had

finished buying, the price instantly broke to 132, and the announcement

of Speyer’s failure, which was made before the close of the day, caused

them also to fail, as well as half the members of the Gold Room. Owing

to the serious complications prevailing and the disaster being so

widespread, it was found impossible to continue the clearances through

the Gold Bank, and the Governing Committee of the Gold Room were at once

convened, and passed a resolution to suspend all dealings in gold for

one week, in order to enable the members to adjust their difficulties

and differences between themselves privately. The Gold Bank also

suspended business in the meantime. While Albert Speyer was vigorously

buying and continuing to bid 160 for one million after another, the

clique were as actively engaged in selling all the market would take at

ten points less, and also busy making private settlements with the

shorts.

As the transactions were purely phantom in their nature, the great

parties in the speculative contest did not really lose much. Contrary to

popular opinion about such transactions, they did, virtually, incur

heavy losses, but in one way or another they managed to evade them.

Gould’s losses were estimated at over four millions. Fisk’s were equally

large, but he repudiated all of them. Others were heavily saddled,

however, with the burden which he should have borne.

Importing merchants were among the greatest sufferers, and a large

number of them were forced to cover at high figures.

The suspension of the Gold Board caused many important failures. Private

settlements were made during a period of sixty days following, in many

instances on the basis of a compromise.

When Fisk heard that Secretary Boutwell had ordered gold sold, he

exclaimed that it would knock spots out of phantom gold, and send him

and others with their long stuff “where the woodbine twineth.” The full

effect of the disaster became more fully realized when the Gold Board

and Gold Bank suspended and the numerous large failures were announced;

then it almost seemed that a general state of chaos reigned, and how to

unravel the complications was the problem to be solved. No one that had

any connection with gold dealings during the eventful day could

positively tell how they actually stood, or how to estimate their losses

or gains; such was the uncertainty as to future results, and the doubt

as to who was, and who was not, going to pay the differences due. The

Board Room was crowded almost to suffocation, and the scene just prior

to its close partook of the appearance of Bedlam let loose; in fact, it

had not been much different during the entire day. Late in the

afternoon, a formidable body of enraged sufferers assembled at the doors

of Smith, Gould & Martin’s office, and many and boisterous were the

threats that were indulged in against the members of the firm, in

consequence of which a police guard was detailed for their protection.

The gold furore brought many Israelites to Wall Street, who since, by

their numbers and natural shrewdness, have become quite formidable in

our midst.

One of them, being very long of the precious metal, on its break from

160 to 140, fainted; water was soon obtained to bathe his feverish brow,

and rubbing was also adopted. When, finally, he had sufficiently

recovered to raise his head and open his eyes, looking all around he

said: “What ish the prish now?” Upon finding it still lower, he closed

his eyes again, and fell into another swoon. He was finally carried from

the Gold Room a sick and ruined, but a wiser Hebrew, and is now in the

“ole cloe” business on the East side.

This is the history in brief, but the scenes and incidents of that day

would furnish material for an interesting volume.

Although I am not much given to the sensational, I have collected a few

of the leading events in detail, which I think are worth putting in

permanent form, if I may presume that this book itself may happily

partake of that character.

The inside history of the conspiracy to put up the price of gold is also

full of interesting material, and shows how deeply laid the scheme was

to take advantage of the circumstances and of the feeling which existed

in favor of stimulating our exports at the time. I shall, therefore,

give an epitome of the salient points behind the scenes of the great

speculative plot, and the bold attempt made to involve President Grant

and his family in the conspiracy.

As I have intimated, Jim Fisk, Jr., or Jim Jubilee Junior, as he was

then popularly called, was eventually put forth as the active member of

the manipulating coterie. The clique made very good use of him, also, at

intervals during the period they were concerting their plans.

Fisk had originally been a peddler in New England, as his father had

been. He appeared in Wall Street a few years previous to the great gold

conspiracy as one of the confidential men of Daniel Drew. Having shown

that he was too sharp for some of the people in the broker’s office

where Mr. Drew made his headquarters, he received a polite hint that his

presence there was undesirable. Mr. Fisk then opened an office of his

own, and united his speculative fortunes with those of Mr. William

Belden. The name of the firm was Fisk & Belden. It was of but short

duration. It seems that they had difficulty in finding bankers to

accommodate them to the extent required, and they closed up the

business. But though Fisk failed of success in this instance as a

broker, his resources were not by any means exhausted. He made himself

generally useful to Mr. Drew, who still adhered to him.

As the result of this friendship and his own smartness, in a short time

afterwards Mr. Fisk was elected to the directory of the Erie Railroad

Company, and Mr. Drew, who had forwarded his interest in that direction,

was left out. This is an instance of the way Fisk made the best use of

his friends.

As the result of Fisk’s election to the Erie Board, forty thousand

shares of new stock were issued. Bold attempts were made to gobble up

other railroads through the same instrumentality. Fuller information on

these matters is given in my chapters on Drew, Gould, and the struggle

with Vanderbilt.

Fisk began to be considered a universal genius at that time, and had

acquired the sobriquet of Prince of Erie. Though he had no money to

operate with when he made his debut in Wall Street, soon after this

large issue of Erie stock, he began to show signs of wealth very

rapidly. He had the reputation of being the fortunate owner of several

railroads and steamboats, an opera house, at least one bench of judges,

an unlimited number of lawyers and a bevy of ballet girls.

The Head Centre of this gold conspiracy needs no introduction here, as I

have attempted to do him ample justice in another chapter. He was also

the power behind the throne in Erie as well as in the Gold clique. He

pulled the wires while Fisk was the imposing factotum who was exhibited

to an admiring public. He managed the courts, the judges and the

lawyers, while Fisk got the reputation of doing this fine work, but was

simply the mechanical executive. He had made himself solid with the

Legislature also, and had acquired a hold on Erie that enabled him to

use that property just as he pleased for his own personal benefit,

ambition and purposes.

Erie was a mighty power at that time, with a wonderful leverage for

raising money. When cash was needed to purchase another railroad, a

legislature or a court, all that was necessary was to sell a few hundred

thousand of Convertible Bonds and turn them into Erie shares. Mr. Gould

was thus fortified with ample means of raising money on call at the time

he played the heavy role in the events which culminated in the disaster

of Black Friday.

Though the circumstances at that time were all in favor of success in

such a plot, it required a mind with great grasp and wonderful powers of

generalization to take advantage of all the bearings of the situation,

and to utilize everything toward the great end in view. Gould did his

work as chief of the conspiracy with rare tact and marvellous sagacity.

A resume of the conspicuous points in the situation and the plot will

make this clear.

The supply of gold in the New York market then did not exceed 25

millions. The Government held less than 100 millions, and about

one-fourth of this was in the form of special deposits represented by

gold certificates, part of which were deposited in the banks and the

remainder circulating throughout the country. Gold was then being sold

by the Treasury at the rate of a million a month, in accordance with a

plan that had been adopted as the best financial policy, both for the

administration and the prosperity of the country. This had always a

tendency to keep the price down, but on account of the circumstances

briefly related in the beginning of this chapter, this policy of selling

gold, owing to our commercial relations, was no longer considered for

the best interests of the country, and Mr. Boutwell, with his coadjutors

in the Treasury, were bound to give ear to the opinions of the bankers

and business men in the interest of our export trade.

Although the policy of stopping the sale of gold had been agreed upon in

deference to the views of the best financiers of the country, yet Mr.

Gould and his fellow strategists thought it was best to make assurance

doubly sure on this point, in order that nothing might stand in the way

of the great speculative intrigue, to get a “corner” in gold. President

Grant was conservative on the subject. The conspirators, therefore,

conceived the design of arranging things so that Secretary Boutwell

could not depart from this policy, no matter what emergency might arise.

This bold and wicked strategy could only be successful by first getting

President Grant convinced that the theory of stopping the gold sales was

the only commercial salvation for the country in the then condition of

business stagnation and the possible panic threatened. The theory was

then to impress him with the necessity of giving Secretary Boutwell an

absolute order not to sell gold, and afterwards to fix things so that it

would be impossible for the President to revoke that order until the

brilliant speculative purposes of the clique in cornering gold should be

accomplished.

The scheme was but little short of treason, regarded from a patriotic

point of view, and it is very questionable if the perpetrators would

have stopped short of this dastardly act, had they not been convinced

that their purpose was fully compassed by a method less villainous and

shocking. It was considered indispensable by the conspirators, for the

consummation of their plans, that Grant should be got out of the way by

some means or other. Fortunately for him, and for the honor of the

nation, the plan succeeded without the necessity of offering him any

violence.

Before explaining how this was done it is necessary to describe briefly

a few of the preliminary events which formed a portion of the plot.

It was arranged that General Grant should accompany a party, one

beautiful evening in the middle of June, who were going to attend the

great Peace Jubilee of Patrick Sarsfield Gilmore in Boston. Jim Fisk did

the executive work in the arrangement. There was a fine champagne supper

on board the Boston boat, and several gentlemen were present who were

thoroughly conversant with financial questions, and could talk glibly on

the state of the country. The subject of exports and the policy of

stopping the sale of gold were thoroughly discussed. It was a feast of

reason, and those who have imagined that it was all flow of soul, on

that festive occasion, do very scant justice to the intelligence that

was at the bottom of the deep design of the nocturnal excursion, planned

by Gould, Fisk & Co. General Grant was an eager listener to all that was

said on the most interesting subject of that day, but his mind, it would

seem, was not then thoroughly made up that the best policy for the

prosperity of the country was to stop the sale of gold. He was undecided

on that point, and it required well directed reasons to convince him.

Mr. Gould observed this and foresaw what was necessary to be done. The

drift of the conversation, when this point was brought clearly out, was

very succinctly described by Mr. Gould in his testimony before the

Garfield Investigating Committee. He said: “The President was a

listener. The other gentlemen were discussing. Some were in favor of

Boutwell’s selling gold, and some were opposed to it. After they all

interchanged their views, some one asked the President what his views

were. He remarked that he thought there was a certain amount of

fictitiousness about the prosperity of the country and the bubble might

as well be tapped in one way as the other. That was the substance of his

remark. He asked me what I thought about it. I remarked that I thought

if that policy was carried out it would produce great distress and

almost lead to civil war; it would produce strikes among the workmen,

and the workshops, to a great extent, would have to be closed; the

manufactories would have to stop. I took the ground that the Government

ought to let gold alone, and let it find its commercial level; that, in

fact, it ought to facilitate an upward movement of gold in the fall. The

fall and winter is the only time that we have any interest in. That was

all that occurred at that time.”

It may be necessary to observe that I am merely quoting Gould from the

report, and am not by any means responsible for his confusion of ideas

and grammar.

This is sufficient to show how ably Mr. Gould played his part in

attempting to get the President into the proper frame of mind to enable

him to endorse a policy so vital to the interests of the country and to

the success of the gold clique.

“I took the ground,” says Gould, “that the Government ought to let gold

alone and let it find its commercial level.”

This reference to “its commercial level” is rich, coming from the

head-centre of the plotters who wanted to put the article up to 200.

Then, in another afterthought, he says: “It (the Government) ought to

facilitate an upward movement of gold in the fall.”

How artfully insinuating was this suggestion in the interest of our

foreign commerce! It showed clearly the power the man possesses of

rising to the patriotic height of the occasion. This is a characteristic

of Mr. Gould that few people know how to appreciate at its true worth.

It has stood out conspicuously in his character in many other

exigencies. It reminds one of the unkind but vigorous remark of the

famous old English critic, Dr. Samuel Johnson: “Patriotism, Sir,” said

the old cynic, “is the last refuge of a scoundrel.”

About the time the above events were transpiring, the Assistant

Secretary of the Treasury, Mr. H. H. Van Dyck, resigned his office in

this city. Mr. Gould’s chief ambition at that time was to name his

successor, in order that he might be able to control the Treasury when

the time to get a “corner” in gold should be ripe. Mr. Abel R. Corbin

came in quite handy at this juncture to help to further the designs of

Mr. Gould. He was a man of fair education and considerable experience

both in business and politics. He had been a lobbyist in Washington for

some years. He was well informed on financial matters, a pretty good

writer, and could “talk like a book.” His wife was a sister of Mrs.

Grant, and he had good opportunities for reaching the Presidential ear,

which he employed to the best advantage.

A gentleman named Robert B. Catherwood, who was married to a

step-daughter of Mr. Corbin, was approached by Gould and Corbin on the

subject of the assistant-treasuryship. They were anxious that Mr.

Catherwood should take the office, and told him he could make a great

deal of money in a perfectly legitimate manner if he were once

installed.

So Mr. Catherwood stated in his testimony before the Investigating

Committee, but he adds, “My ideas differed from theirs in what

constituted a legitimate manner, and I declined the office.”

The office then sought another man in the person of General Daniel

Butterfield. He received the intimation of his appointment in a very

different spirit from Mr. Catherwood, showing that he was fully equal to

the occasion. He wrote a letter to Mr. Corbin thanking him kindly for

the offer, saying that he was under numerous obligations to him, and

expressing a hope that he would be eminently successful in his

undertaking. General Butterfield received his commission in due course.

This made perfect another link in the chain of Mr. Gould’s speculative

design, as he supposed. It made Corbin “solid” with Gould also, a

position which they both highly appreciated. Mr. Gould paid the

following tribute of admiration to the true value of Corbin in the

enterprise: “He was a very shrewd old gentleman. He saw at a glance the

whole case, and said he thought it was the true platform to stand on;

that whatever the Government could do legitimately and fairly to

facilitate the exportation of breadstuffs and produce good prices for

the West, they ought to do so. He was anxious that I should see the

President, and communicate to him my views on the subject.” Corbin

talked with Grant until he received a positive assurance that Boutwell

was not to sell any more gold. At a meeting in Grant’s house, where

Gould and Corbin were present, the President said: “Boutwell gave an

order to sell gold, and I heard of it, and countermanded the order.”

It was not until Gould had received positive assurance from the

President’s own lips, that he considered his scheme perfect. But the

links of this strategic chain were now nearly all forged. The bankers

and merchants were largely in his favor through commercial necessity,

the Sub-Treasury was “fixed,” as he thought, and the Executive fiat had

placed the Treasury of the United States itself where it could not spoil

the deal if Grant did not change his mind. There were reasons, of

course, to apprehend that he would do so in case of an emergency; for he

never was privy to the scheme, no matter what his traducers and

political enemies may have said.

To ensure perfect safety, then, Grant must be put out of the way

temporarily. This was the crowning effort of the conspirators. After the

Boston Peace Jubilee, this Cabal spent the remaining part of the summer

in maturing its designs. Large enterprises of this nature always require

time and patience. I am told that “Billy” Porter, “Sheeny” Mike and

other eminent burglars will work assiduously from six to twelve months

studying all the ins and outs of a bank or other financial concern

before coming to the point of using the “jimmy,” blowing the safe or

chloroforming the janitor.

It seemed necessary that all the members of the Cabal should be fully

acquainted with the combination to Grant’s purposes as regarded his

orders to Boutwell, and that his ideas should remain fixed on the theory

of increasing exportation for the country’s safety. Accordingly it was

arranged that Jim Fisk should visit the President at Newport, where he

was on a visit, some time about the middle of August, a month or so

prior to Black Friday. It would seem that Grant at this date was still

wavering, and adhering to his policy of selling gold in spite of the

order which he had given Boutwell. He may have been suspecting that the

anxiety of Gould, Corbin & Co. for the prosperity of the country was not

altogether genuine. The necessity of bringing further pressure to bear

upon him was therefore clearly manifest.

Referring to the interview at Newport, Fisk said: “I think it was some

time in August that General Grant started to go to Newport. I then went

down to see him. I had seen him before, but not feeling as thoroughly

acquainted as I desired for this purpose, I took a letter of

introduction from Mr. Gould, in which it was stated that there were

three hundred sail of vessels then on the Mediterranean, from the Black

Sea, with grain to supply the Liverpool market. Gold was then about

thirty-four. If it continued at that price, we had very little chance of

carrying forward the crop during the fall. I know that we felt nervous

about it. I talked with General Grant on the subject and endeavored, as

far as I could, to convince him that his policy was one that would only

bring destruction on us all. He then asked me when we should have an

interview, and we agreed upon the time. He said: ‘During that time I

will see Mr. Boutwell, or have him there.’”

The President was carefully shadowed after this by the detectives of the

clique, and great care was taken to throw men across his path who were

fluent talkers on the great financial problem of the day, the absolute

necessity of stimulating the export trade and raising the premium upon

gold for that patriotic purpose. In this way, President Grant began to

think that the opinion of almost everybody he talked with on this

subject was on the same side, and must, therefore, be correct.

About the 1st of September it was considered that the opinions of the

President had been worked up fairly to the sticking point, and Gould

bought $1,500,000 in gold at 132½ for Corbin. Gould, however, was timid

in his purchasing at first, as he had heard that a number of operators

who were short of gold were making arrangements to give Secretary

Boutwell a dinner. On further assurances from Corbin that the President

had written Boutwell to sell no gold without consulting him, Gould

prepared to go ahead with the execution of his great scheme. Nothing

remained to be done in the completion of the plot except to stow away

the President in a place of safety until the financial storm should blow

over.

Things were so managed that the President was placed in a position that

his honor was seriously in danger of being compromised, yet so ably was

the matter engineered that he was perfectly unconscious of the designs

of the plotters.

He was prevailed upon to go to a then obscure town in Pennsylvania,

named Little Washington. The thing was so arranged that his feelings

were worked upon to visit that place for the purpose of seeing an old

friend who resided there. The town was cut off from telegraphic

communication, and the other means of access were not very convenient.

There the President was ensconced, to remain for a week or so about the

time the Cabal was fully prepared for action.

Sometime about the period of the President’s departure for Little

Washington, Fisk bought seven or eight millions of gold. Gould then said

to Fisk: “This matter is all fixed up. Butterfield is all right. Corbin

has got Butterfield all right, and Corbin has got Grant fixed all right,

and in my opinion they are all interested together.”

This was patriotism with a vengeance. Just think of the audacity of it!

Gould enters into a scheme to place the President in a position where he

could not interfere with the plan of getting a “corner” in gold, and

then he turns around and accuses the first Magistrate of the Republic

with being privy to a plot that was calculated to create a panic, and

cause widespread disaster in business circles, and render him an object

of universal contempt.

Gould and Fisk, through Corbin, also attempted to compromise Grant’s

family, as well as his private Secretary, General Horace Porter. This

intention was fully disclosed through the interview of Fisk with Corbin.

Fisk testified: “When I met Corbin he talked very shy about the matter

at first, but finally came right out and told me that Mrs. Grant had an

interest; that $500,000 in gold had been taken at 31 and 32, which had

been sold at 37; that Mr. Corbin held for himself about two millions of

gold, $500,000 of which was for Mrs. Grant and $500,000 for Porter. I

did not ask whether he was General or not. I remember the name Porter.

This was given out very slowly. He let out just as fast as I did when he

found that Gould had told me about the same thing. I said: ‘Now, I have

had nothing to do with your transactions in one way or the other. We

have embarked in a scheme that looks like one of large magnitude. Mr.

Gould has lost as the thing stands now. It looks as if it might be a

pretty serious business before getting out straight again. The whole

success depends on whether the Government will unload on to us or not.’

He said: ‘You need not have the least fear.’ I said: ‘I want to know

whether what Mr. Gould told me is true. I want to know whether you have

sent this $25,000 to Washington, as he states?’ He then told me that he

had sent it, that Mr. Gould had sold $500,000 in gold belonging to Mrs.

Grant, which cost 32, for 37 or something in that neighborhood, leaving

a balance in her favor of about $27,000, and that a check for $25,000

had been sent. Said I: ‘Mr. Corbin, what can you show me that goes still

further than your talk?’ ‘Oh, well,’ the old man said, ‘I can’t show you

anything, but,’ said he, ‘this is all right.’ He talked freely and

repeated: ‘I tell you it is all right.’ When I went away from there, I

had made up my mind that Corbin had told me the truth.”

An attempt was made to prove, before the Garfield Committee, that a

package containing $25,000 was sent to Mrs. Grant through the Adams

Express Company, but expert testimony failed to decide whether the

amount was that or $250, as the two noughts at the extreme right were

crowded into the cents column, and it was difficult to determine whether

or not a very light “period” was placed between them and the “$250.”

The design of the clique was manifest, however, to implicate the family

of the President in some way or other, in order that they might make use

of the Executive influence to help accomplish their great speculative

purpose. But as the Garfield Committee truly said in its report: “The

wicked and cunningly devised attempt of the conspirators to compromise

the President of the United States or his family utterly failed.”

The scheme might have succeeded if Fisk had been possessed of the

coolness and penetration of his partner, but his impetuosity, anxiety

and enthusiasm aroused suspicion and partially spoiled the plot.

Fisk was so eager to be satisfied that Grant was all right that he

overdid the thing by urging Corbin to write Grant a letter to stand firm

and not to permit the Treasury to sell gold under any consideration. The

outcome of this afforded clear proof, if any were wanting, that Grant

had no guilty knowledge of the base purposes for which he was being

used. Fisk had this letter from Corbin sent by a special messenger from

Pittsburgh, who rode twenty-eight miles on horseback, and delivered it

in person to the President. He read the letter, and had his suspicions

at once aroused. He said laconically to the messenger, “It is

satisfactory; there is no answer.” He began to see through the game, and

at once desired Mrs. Grant to write to Mrs. Corbin requesting her

husband to have nothing more to do with the Gould-Fisk gang.

Mrs. Grant wrote to Mrs. Corbin to say that the President was greatly

troubled to learn that her husband had been speculating in Wall Street,

and that she should desire him to disconnect himself immediately with

the party who were attempting to entrap the President.

Corbin hastened to obey the mandate from Little Washington. He was

greatly agitated, but the ruling passion of avarice was strong; in

bidding Gould farewell, and before taking his final adieu of the clique,

he requested the arch plotter to hand him over his share of the profits.

Referring to this incident, Gould said: “I told him I would give

$100,000 on account, and that when I sold, if he liked, I would give him

the average of my sales. I did not feel like buying any gold of him

then.”

This was the denouement of the plot against the President, who

immediately hastened to big Washington.

Now, let me again ask the reader to turn his attention for a moment to

the concluding scenes in the speculative drama in Wall Street on Black

Friday. How the clique tried to manipulate Assistant-Secretary

Butterfield was kept as profoundly secret as possible, and as it turned

out, he did not have as much power over the events of that great day as

was expected. When somebody charged Fisk with tapping the telegraph

wires, however, to obtain information from the Government, he replied:

“It was only necessary to tap Butterfield to find out all we wanted.”

This was very likely a vain boast of Fisk.

On Wednesday, the 22d September, two days preceding Black Friday, the

clique, it is believed, owned several millions more gold than there was

in the city outside the vaults of the Sub-Treasury. Belden bought about

eight millions of gold on that day, while Smith, Gould, Martin & Co.

were also heavy purchasers. The clique held a caucus in the office of

William Heath & Co., in Broad street, and concluded that it had gold

enough to put the price to 200, if it could carry the gold without

lending and compel the “shorts” to purchase. But the idea of finding a

market for over thirty millions of gold was also a gigantic problem, and

they felt the risk of being ground between the upper and the nether

millstones of their scheme.

On the morning of Thursday another council of war was held in the office

of Belden & Co., on Broadway. At this meeting, Gould, Fisk, Henry N.

Smith and William Belden were present. The proceedings of this meeting

were kept a profound secret, but one result of it was that Belden gave

his clerk the famous order to put gold to 144 and keep it there. On that

day Belden purchased about twenty millions of gold, the price opening at

141½ and closing at 143½.

The chiefs of the Cabal had another private meeting up town that

evening. The great question of closing up the transactions on the

following day was the chief topic of discussion. These operators held

contracts for over $100,000,000 in gold. Gould said that the “short”

interest was $250,000,000. The total amount of gold in the city did not

exceed $25,000,000, and the difference between this and the aggregate

amount of the contracts of the clique was the enormous amount that would

have to be settled in the event of a “corner.”

Fisk proposed that the clique show its hand, publish the state of

affairs, and offer to settle with the shorts at 150. His plan was

rejected by his brother conspirators.

On the morning of the fatal day, Belden and William Heath had an early

breakfast together at the Fifth Avenue Hotel, and repaired immediately

to their offices. Belden announced that gold was going to 200. “This

will be the last day of the Gold Room,” he added. Moved by Belden’s

threat, a large number rushed to cover. In the language of Henry N.

Smith, “They came on with a rush to settle.” He was settling in the

office of Smith, Gould & Martin, at 150 to 145, while Albert Speyer,

acting as broker for Fisk and Gould, was bidding up to 160 for a million

at a time. It was only when the price came down to 133 that Speyer

realized the humorous absurdity of his position. He had then bought 26

millions since morning at 160.

A voracious demand for margins about midday brought the work to a

crisis. The scene at the office of Heath was indescribable when Belden

went there to see Gould and his confederates, to find out what was to be

done next with the frenzied purchasers. An eye-witness thus describes

the scene at Heath’s office: “I went outside while Belden went in. I

walked up and down the alley-way waiting for him to come out. Deputy

sheriffs, or men appearing to be such, began to arrive and to mount

guard at Heath’s office to keep out visitors. After waiting a prodigious

long time, as it seemed to me, Jay Gould came creeping out of the back

door, and looking round sharply to see if he was watched, slunk off

through a private rear passage behind the buildings. Presently came

Fisk, steaming hot and shouting. He took the wrong direction at first,

nearly ran into Broad street, but soon discovered his error, and

followed Gould through the rear passage. Then came Belden, with hair

disordered and red eyes, as if he had been crying. He called: ‘Which way

have they gone?’ and, upon my pointing the direction, he ran after them.

The rear passage led into Wall Street. At its exit the conspirators

jumped into a carriage and fled the Street.”

They did not fly the Street, however, but went to the Broad street

office of Smith, Gould & Martin, where the crowd assembled, evidently

with riotous intent, apparently bent upon an application to Judge Lynch

for justice; and had any of the gentlemen appeared outside the confines

of the front wall, the chances were that the lamp-post near by would

have very soon been decorated with a breathless body. To ensure their

safety inside, however, a small police force kept guard outside, which

made the barricade complete. These gentlemen remained under this shelter

until the small hours of the morning, busily endeavoring to find out

where they stood in the result of the gold deal, and the more they

pondered over it, the greater grew the doubt in their minds whether they

were standing on their heads or their heels.

Although the Black Friday “corner” was a temporary calamity, perhaps it

was worth all it cost, in teaching us a useful lesson in financial and

speculative affairs. In my chapter on “Panics, and How to Prevent Them,”

I think I have made several points clear that can be utilized by

financiers, speculators and investors to advantage, in ease of an

impending panic or “corner.”

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CHAPTER XXI.

CAUSES OF LOSS IN SPECULATION.

INADEQUATE INFORMATION.—FALSE INFORMATION.—DEFECTS OF NEWS

AGENCIES.—INSUFFICIENCY OF MARGINS.—DANGERS OF PERSONAL

IDIOSYNCRASIES.—OPERATING IN SEASON AND OUT OF SEASON.—NECESSITY OF

INTELLIGENCE, JUDGMENT AND NERVE.—AN IDEAL STANDARD.—WHAT MAKES A

KING AMONG SPECULATORS?

As there is always a class of speculators whose operations, in the long

run, leave a net result of loss rather than profit, it may not be amiss

if I state what experience has taught me as to the causes of this want

of success.

Undoubtedly, many who enter the arena of speculation are in every way

unfitted to take the risks against such wily opponents as they must

encounter. They are either too ignorant or too wise, too timid or too

bold, too pessimistic or too sanguine, too slow or too hasty, too

diffident or too conceited, too confiding or too incredulous. These are

constitutional defects, any one of which may easily cost an operator a

fortune. And yet self-knowledge, with self-control, may prevent these

natural disqualifications from seriously interfering with success. There

is no mental discipline more severe and exacting than that of

speculation. There is no pursuit in which a man can less afford to

indulge in whims, or prejudices, or pet theories, than that of staking

his money against the prospective changes in financial values. He must

be as calm and as impartial as a judge, not less in respect to the risks

he incurs than in regard to the integrity of his own judgment. I should

lay it down as the first rule necessary to success, that the judgment be

not warped by any natural idiosyncrasies; this being secured, a man may

succeed in spite of his constitutional defects.

Singular as it may seem, there are no advantages beset with greater

dangers than information—the one thing most largely sought after and

most highly prized. Very naturally, most men object to taking a risk

without possessing some knowledge of the conditions that determine the

risk; and yet how few take care that their knowledge is adequate enough

or certain enough for the formation of a safe judgment. In some cases,

knowledge is unattainable and the operation must be a leap in the dark;

and in such instances a man is unwise to step in unless his experience

satisfies him that he is uncommonly sagacious in guessing.

Many speculators lose because the information on which they base their

operations is _insufficient_; more because it is _false_; and others

because, while their information is correct, they do _not know how to

turn it to account_.

Between one or other of these difficulties in the use of information

must be distributed a very large proportion of the losses incurred in

speculation. Incomplete or insufficient information is especially

dangerous. One-sided knowledge is nowhere so deceiving as here. A

railroad, for instance, may report an increase of gross earnings which

is construed as making its stock worth two or three per cent. more than

its current price; but the improvement may be due to transient special

causes, and the road’s current expenses may be growing at a rate which

makes the net increase show a decrease. A financially embarrassed

company may announce an assessment of its stockholders, upon which there

is a rush to sell the stock; a little further explanation shows that the

proceeds of the assessment will so improve the facilities of the

company, or so enable it to reduce its fixed charges, as to make the

stock intrinsically far more valuable than it was before; this discovery

causes a sharp advance in the shares, and the “short” sellers have to

cover their sales at a loss. A stock is bought up freely at New York

because London is taking large amounts of it; a day or two later, the

deliveries show that large holders connected with the management are

unloading on the foreign market upon knowledge of facts damaging to the

prospects of the property; the late buyers then rush to realize, and

pocket a loss instead of a profit. Every day furnishes new instances of

speculations undertaken on this incomplete kind of information, and

which end disastrously because the operators did not wait to be informed

on all sides of the case, but were satisfied to take a pound of

assumption with but an ounce of fact.

One of the strongest anomalies of speculation is in the facility with

which men are induced to take large risks on false information and

manufactured “points.” Considering the readiness with which a numerous

class of “outside” operators buy or sell on sensational rumors, it is

not surprising that the professional operators should keep the market

well supplied with such decoys; and it is not easy to say which most

deserves condemnation—the heedless credulity of the dupes, or the

deliberate lies of the canard-makers. There is, however, a third party

not less blameable than either of the foregoing. I refer to those who

make it a part of their business to circulate false information.

Principal among these caterers are the financial news agencies and the

morning Wall Street news sheet, both specially devoted to the

speculative interests that centre at the Stock Exchange. The object of

these agencies is a useful one; but the public have a right to expect

that when they subscribe for information upon which immense transactions

may be undertaken, the utmost caution, scrutiny and fidelity should be

exercised in the procurement and publication of the news. Anything that

falls short of this is something worse than bad service and bad faith

with subscribers; it is dishonest and mischievous. And yet it cannot be

denied that much of the so-called news that reaches the public through

these instrumentalities must come under this condemnation. The “points,”

the “puffs,” the alarms and the canards, put out expressly to deceive

and mislead, find a wide circulation through these mediums, with an ease

which admits of no possible justification. How far these lapses are due

to the haste inseparable from the compilation of news of such a

character, how far to a lack of proper sifting and caution, and how far

to less culpable reasons, I do not pretend to decide; but this will be

admitted by every observer, that the circulation of pseudo news is the

frequent cause of incalculable losses. Nor is it alone in the matter of

circulating false information that these news vendors are at fault. The

habit of retailing “points” in the interest of cliques, the volunteering

of advice as to what people should buy and what they should sell, the

strong speculative bias that runs through their editorial opinions,

these things appear to most people a revolting abuse of the true

functions of journalism. But patent as these things are to those

educated in the ways of Wall Street, there is a large class who accept

such effusions as gospel, and are easily led by them into the clutches

of the sharks. It is but just, however, to acknowledge that with these

very serious drawbacks, both these classes of news agencies render

valuable service to Wall Street interests, and it is to be hoped that

experience will convince them that their enterprises would attain a

higher success through emulating a higher standard.

Another source of losses in speculation lies in the speculator not

holding back a cash reserve sufficient to protect him against an adverse

course of prices. Ordinarily, the man who speculates is of a sanguine

temperament, and apt to take risks without sufficient provision against

contingencies. Hence, it is common with inexperienced operators to use

all their available resources in their original margin. The result is

that, if prices go against them, they are liable to be closed out and

saddled with a loss they can ill afford. Such persons should never

pledge more than one-half of their available means at the beginning of a

transaction; the remaining half should be kept as a guarantee against

their being “sold out,” or to enable them to duplicate the transaction

at the changed price, so as to make an average likely to yield a profit.

The violation of this rule creates a class of weak holders, who offer a

constant inducement to “room-traders” to raid the market; knowing, as

they do, that when they have impaired these unsupported margins, there

is sure to be a rush of selling orders calculated to break down prices.

It is safe to say that if better provisions were made for keeping

margins good, the power of the “bears” and the wreckers would be broken;

one-half of the losses of “outside” operators would be obviated, and

one-half the risks of speculation would be obliterated.

Another class especially exposed to losses are those who always operate

in the same direction. Wall Street has its optimists and pessimists;

they are such from a constitutional bent; and they are “bull” or “bear”

in season and out of season. As a rule, those that follow a natural

disposition, rather than the course of the market and the conditions

that mould it, are sure to bankrupt themselves sooner or later. I do not

mean to maintain that there is no chance for an operator who clings

continuously to one side of the market; for in times when conditions

favor higher prices there is always some profitable work to be done by

the “bear” in checking excesses of a rise; and, when events favor

decline, the “bull” may find his chances in intervals of excessive

decline. But the man who can thus successfully steer his craft against

the winds and the tides must be a thoroughly trained navigator, cool in

temperament, capable of reining his natural proclivities, and above all,

the possessor of means large enough to control, if necessary, the course

of the market by sheer money power. It is needless to say that

nine-tenths of this stereotyped class are devoid of these requisites to

success. One cannot but pity the man with sallow face and sluggish gait

so suggestive of the blue pill, who, when everybody else is feeling the

happy impulse of a common prosperity, persists in believing that the

country is going to the dogs, and steadily sells stocks while everybody

else is buying them. He is simply ruining himself through

unconsciousness that he views everything through bilious spectacles.

Equally is the man to be commiserated who, from a constitutional

intoxication of hope, keeps on buying and holding when it is manifest

that the country has passed the summit of an era of prosperity and is

destined to a general reaction in trade and values. Of course, such men

never remain long in Wall Street; their pockets are soon emptied, and

they retire to reflect on the folly of refusing to appreciate and to

follow the natural drift of the conditions that regulate values.

A minor source of losses lies in operating at times when the market is

so evenly balanced between opposing forces that there is no chance for

making profits. At such times, operators get disgusted at the

sluggishness of the market; they change their holdings from day to day,

with no advantage except to their broker; and their monthly statement

shows a heavy list of charges for interest and commissions, with no

offset of profits. These intervals of stagnancy sometimes run for weeks,

sometimes for months; and at such times a wise speculator would take

care to keep out of the market and hold himself in readiness for

anything that may turn up.

It is necessary to the avoidance of loss that the operator should

maintain an intelligent watch upon the influences that control the

market. Those influences are two-fold—such as are intrinsic to the

market, and such as are external to it. Of the former class are those

that relate to the spirit and tone of the market; the position and

disposition of the cliques; the action of the large operators; the

overloaded or over-sold state of the market, as indicated by the loaning

rates for stocks; the influence exerted by the upward or downward

movements in stocks which at the moment are specially active; the

possibility of closing out holders on “stop orders” or on the impairment

of margins; the unloading of influential cliques and the covering of

important lines of short sales, &c., &c. Influences of this kind are

very frequently sufficient of themselves to control the market for a

considerable period in direct opposition to the tendency indicated by

external conditions. It is, however, no easy matter to form a correct

conclusion as to the drift resulting from this set of factors. They are

so concealed and so changeful, and the symptoms are so vague, that it

requires long experience, added to unusual sagacity, to determine what

may be the tendency resulting from the complex action and counteraction

of this set of conditions. Some exceptional operators enjoy an

instinctive faculty for weighing these shadowy indications with almost

unerring certainty. Such men usually care little about outside

influences, except so far as they may affect the market for the moment.

From the nature of the case, their transactions are apt to be brief

ones, and follow quickly the momentary course of the market They are

reckoned among the most sagacious speculators, and are usually very

successful. But their success is the result of a special natural gift,

and therefore cannot be won by others.

The second class of influences above alluded to as external to the

market are of a very broad and varied character. They embrace almost

everything that affects the welfare of the country. Those, however,

which are most potent are, the state of the crops; the condition of

manufacturing industries; the state and prospects of trade; the earnings

of the transportation companies; the course of the imports and exports;

the attitude of the foreign markets towards American securities; the

movements of the precious metals; the condition of the London and

Continental money markets; the position of the New York banks and the

course of currency movements; the action of Congress, of the

Legislatures and of the Courts on matters affecting the value of

investments; the acts of labor unions and the drift of labor agitations,

and the course of political and social issues. This may be considered a

rather startling list of topics for a man to keep himself well informed

upon, but there is not one of them which may not any day become a

controlling factor in the condition of the stock market. For a man,

therefore, who aims to keep his knowledge abreast with his business, it

is necessary that he should be a close observer of events. Undoubtedly

few possess this breadth of information, and most men think it

sufficient to get their knowledge as best they may when the events

happen. The misfortune in such cases is, that those better informed

utilize the event while the others are “getting posted.” Considering how

many half-informed or wholly ignorant persons engage in speculation with

more or less success, it cannot be pretended that to keep informed on

the foregoing set of conditions is essential to a fair degree of

success. But it must be maintained that such knowledge is of

incalculable value and that a man who has it is in a position to act

with more intelligence, assurance and success than one without it. To

those who desire to turn to account all coming changes, and to stand

always prepared for the good or evil events of the future, this

intelligent comprehension of the status of all the forces that make or

unmake values is absolutely indispensable. And yet it is one thing to

possess this information; another to know how to draw correct

conclusions from it, and yet another to know how best to use it in the

area of speculation. Failure at any one of these points may be fatal to

success and result in disaster.

I conclude, then, that for a man to be a thoroughly equipped speculator,

it is necessary that he be possessed of extraordinary parts and

attainments. He must be an unceasing and intelligent observer of events

at large, and a sagacious interpreter of symptoms on the Exchange; his

judgment must be sound, not only as to existing conditions, but as to

coming tendencies, and he must possess the calmness and nerve to face

unflinchingly whatever emergencies may arise. Whoever enjoys these

qualities in the highest degree must be the King of Speculators. As to

others, their rank must correspond to the degree of their conformity to

this ideal standard.

[Illustration:

_H. Villard_

]

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CHAPTER XXII.

VILLARD AND HIS SPECULATIONS.

RETURN OF THE RENOWNED SPECULATOR TO WALL STREET.—RECALLING THE FAMOUS

“BLIND” POOL IN NORTHERN PACIFIC.—HOW VILLARD CAPTURED NORTHERN

PACIFIC.—PURSUING THE TACTICS OF OLD VANDERBILT.—RAISING TWELVE

MILLION DOLLARS ON PAPER CREDIT.—VILLARD EMERGES FROM THE “BLIND”

POOL A GREAT RAILROAD MAGNATE.—HE INFLATES HIS GREAT SCHEME FROM

NOTHING TO ONE HUNDRED MILLION DOLLARS.—HIS UNIQUE METHODS OF

WATERING STOCK AS COMPARED WITH THOSE OF GEORGE I. SENEY.

The return of Mr. Henry Villard to Wall Street, after two years’ absence

in Germany, his native land, renews the public interest in the career of

that bold speculator. My reminiscences of Wall Street affairs would be

incomplete without a sketch of the daring railroad operations of this

gentleman, which so fully illustrate some of the evils to which I have

referred in my chapter on “Railroad Methods.”

The culminating point in the speculative history of Mr. Villard, which

covered a period of five years, from 1879 to 1884, was the famous blind

pool in Northern Pacific.

Instead of taking up the events of his life in detail, and carrying my

readers to this point, I shall depart from the usual course of

biography, and present the more interesting facts of the career of my

hero at the beginning.

In his capture, of Northern Pacific he seems to have followed the

methods of the elder Vanderbilt very closely, with the important

exception that he failed in the consummation of his purpose. Vanderbilt

always, eventually, triumphed.

Villard was the chief agent in forming the Oregon Railway and Navigation

Company, which was organized for the purpose of consolidating the

business of the Oregon Steam Navigation Company with that of the Oregon

Steamship Company, and for the purpose of buying, building and operating

railroads, as stated in the circular setting forth the objects of the

company. The lines of the Oregon Railway and Navigation Company extended

from Portland west to Wallula Junction.

The value of this property was seriously menaced by the project of the

Northern Pacific to extend its lines west, with a terminus at Tacoma.

President Billings, of the Northern Pacific, rejected a proposition from

Mr. Villard to accommodate the Northern Pacific by permitting it to

reach the Pacific coast over the lines of the Oregon Railway Navigation

Company.

It was at this juncture that Villard resorted to the old Vanderbilt

tactics, by attempting to purchase stock enough of the Northern Pacific

to enable him to control the property. For this purpose he formed a

blind pool, in which Messrs. Woerishoffer, Pullman and Endicott, and a

host of other solid men, were the original members. A fund of $8,000,000

was subscribed to purchase Northern Pacific stock. During the spring of

1881 the pool kept on buying steadily, and continued their operations

until the middle of summer, when it was discovered that the treasury of

the pool was almost exhausted without having effected its purpose of

acquiring control of the Northern Pacific property.

Mr. Villard then called a meeting, explained matters, proposed to extend

the scope of the pool’s operations, and to increase its membership. By

showing the enormous profits to be gleaned in the future, he succeeded

in getting $12,000,000 more subscribed. This secured the control of the

road, and in September, 1881, Mr. Villard was elected President of

Northern Pacific.

Villard at once emerged from this blind pool into a great railroad

magnate, in a manner, to the eye of the general public, as miraculous as

the springing forth of Minerva fully armed from the brain of Jupiter.

The stock of Northern Pacific advanced rapidly in price, and Villard and

his friends were supposed to be accumulating millions with unprecedented

celerity. Villard appeared to have realized all the financial dreams of

Monte Cristo, and he was fast looming up into a proud and dangerous

rival of Gould, Vanderbilt and Huntington.

He went forward with the building of the Northern Pacific road, which

was finished two years after his success in capturing it through the

medium of his blind pool. His phenomenal success induced him to enter

largely into the extension of other investments. He became lavish in his

personal expenses also, although he had formerly been accustomed to the

closest economy in his mode of living, and he built a palace at Madison

Avenue and Fiftieth street.

When seemingly on the highest tide of prosperity, Villard suddenly

became embarrassed, and when an accounting of the cost of finishing the

road was made, he was found to be away behind. There was a

miscalculation of $20,000,000 somewhere. Villard explained it by

declaring that the estimate of the engineers for finishing the road was

$20,000,000, whereas the real cost reached $40,000,000.

For the $20,000,000 subscribed by the blind pool the subscribers

received the stock of the Oregon & Transcontinental. This company had

been organized to build branch lines to the Northern Pacific, as the

charter of the latter did not permit it to build such lines.

This is the speculative history, in brief, of Mr. Villard from the time

he took hold of the Oregon & California Railroad up to the juncture of

his grand collapse. There were several incidents, however, of more than

ordinary interest in his railroad history prior to the time he set his

heart upon Northern Pacific. As a stock-waterer he had, probably, no

superior, and was only equalled by Mr. George I. Seney, in that

important department of railroad management. His methods in obtaining

control of the Oregon Steam Navigation Company and the Oregon Steamship

Company amply illustrate his remarkable ability in this respect. When

Villard proposed to purchase these two companies he had no money, but he

had unlimited confidence in his own ability. He asked each company to

give him an option to run a year for $100,000. They agreed to do this,

and Villard forthwith consulted a number of capitalists, who came

together and filed articles of incorporation of the Oregon Railway &

Navigation Company, a consolidation of the two companies above-named.

When this company, with such a high sounding name, was organized, it had

no assets, and the prospects of acquiring any seemed exceedingly blue.

The names of the incorporators were as follows: Henry Villard, James H.

Fry, Artemus H. Holmes, Christian Bors, W. H. Starbuck and Charles E.

Brotherton, all of the city and State of New York, and W. H. Corbett, C.

N. Lewis, J. N. Dolph, Paul Schulze and N. Thielson, all of Portland,

Oregon. The capital was nominally six million dollars, divided into

60,000 shares. This arrangement was made in June, 1879.

The next problem to be solved after the reorganization was how to raise

money to run the concern.

The Board of Directors, under the management of Mr. Villard, were equal

to the occasion. They met at Portland a few days after the organization

and executed a mortgage to the Farmers’ Loan and Trust Company of New

York, and under this mortgage issued 6,000 bonds of $1,000 each, payable

in thirty years after July 1, 1879, with interest at 6 per cent.

Mr. Villard then paid the $100,000 bonus money to the companies which

had been incorporated, took his option, stock and bonds and came East to

negotiate his securities. It is said he presented them to Jay Gould, who

refused to touch them, as he believed there was not much stamina in the

scheme, and he wished to avoid trouble with the Northern Pacific, which

he plainly saw the project involved. Villard was more fortunate with Mr.

Endicott, Jr., of Boston, Mr. George Pullman and others whom they

interested in the enterprise.

The property of the two companies, out of which the new company had been

formed, whose securities were so boldly placed upon the market, was not

in reality purchased until March of the following year.

After the organization was complete, the visible assets of the Oregon

Railway and Navigation Company did not exceed $3,500,000, while the

total liabilities amounted to $21,000,000. This was made up as follows:

Original $6,000,000

stock

Water 3,000,000

Water 6,000,000

Mortgage 6,000,000

bonds

It will thus be seen that there were seven dollars of liabilities for

every dollar of assets, and the intrinsic value of the stock was

represented by a minus quantity of 20 per cent., having no positive

value at all. In other words, it was 20 per cent. worse than nothing.

In spite of these facts, however, Mr. Villard had the stock listed at

the Stock Exchange, and through a carefully prepared report, showing

immense and unprecedented earnings, he had the stock bulled up to 200.

It was when it reached this high figure that the $9,000,000 of water

(noted before) were thrown in to prevent it from becoming top-heavy.

This was the preparatory and successful process of watering which

preceded the transactions of Mr. Villard on a more magnificent scale in

his manipulation of Northern Pacific, as described at the opening of

this chapter. Mr. Villard excelled Mr. Seney in one respect which is

noteworthy. As I have shown in a former chapter, Mr. Seney poured the

water in lavishly at the reorganization, and prior to having his

properties listed on the Stock Exchange.

Villard improved upon this process by employing Seney’s method liberally

in the first instance, and also by a free and copious dilution after the

stocks had been inflated to the very point of bursting.

There is probably no instance in the whole history of railway

manipulation in which a man has presented to the public, and with such

amazing success, such a specious appearance of possessing solid capital

where so little existed in reality.

He began with nothing in 1879 and succeeded in the course of a year in

possessing himself, by various adroit methods, as described, of

$3,500,000 of assets in railroad securities. With this as a basis of

operation, in five years he managed to obtain temporary control of

property aggregating in value over $1,000,000,000.

------------------------------------------------------------------------

CHAPTER XXIII.

FERDINAND WARD.

PECULIAR POWER AND METHODS OF THE PRINCE OF SWINDLERS.—HOW HE DUPED

ASTUTE FINANCIERS AND BUSINESS MEN OF ALL SORTS, AND SECURED THE

SUPPORT OF EMINENT STATESMEN AND LEADING BANK OFFICERS, WHOM HE

ROBBED OF MILLIONS OF MONEY.—THE MOST ARTFUL DODGER OF MODERN

TIMES.—THE TRUTH OF THE SWINDLE PRACTICED UPON GENERAL GRANT AND HIS

FAMILY.

In making a fair estimate of the part that Ferdinand Ward, of the firm

of Grant & Ward, played in the panic of 1884, I can only say that Ward’s

methods, taken altogether in their conception and execution, constituted

a huge confidence game. He built up confidence by deceiving a few

eminent men in financial and social circles, who, from his insinuating

and plausible demeanor, were induced to place reliance upon his

representations.

His presence was magnetic, and his manner deceitfully unassuming. He had

the art of dissembling in great perfection and was possessed of

extraordinarily persuasive powers, without appearing to have any selfish

object in view. So highly developed in him were these social gifts,

through the power of cultivation, that he could convince his unhappy

victims that he was actuated with a single purpose for their welfare.

By practicing in this way on the credulity of certain people, Ward

managed to get into his hands, for his own personal use, sums of money

aggregating millions. Some of the richest financiers became his victims,

chiefly induced by promises of high rates of interest and large profits

on various ventures.

Ward would ascertain the names and circumstances of certain people who

had large balances in their banks and were unable to make satisfactory

and paying investments with them. He would bring certain influences to

bear upon them to take their money out of the bank and invest it through

him in “Government contracts,” which he said afforded immense returns,

but were of a delicate character, and required some secrecy in the

manipulation. This circumstance naturally prevented him from going into

an explanation of the details of the enterprise, which it was not

necessary for the investors to know when their profits were secured

through such a stable investment. It was sufficient for them to be

assured that the returns would be very large.

As an instance of the successful manner in which Ward’s specious

pretences worked, I will relate the experience of one gentleman

who deposited $50,000 with him, on the strength of these

representations—just as an experiment.

This gentleman was going on a trip to Europe and he left the amount

stated in the possession of Mr. Ward to be used to the best possible

advantage during his absence, and invested in his own way.

About six months after the date of this deposit, the gentleman returned

from Europe and called at the office of Grant & Ward to learn what

progress had been made with his investment. He saw Ward, and called his

attention to the fact.

The young Napoleon of finance recollected the appearance of his customer

at a glance, for he is admirably developed in what phrenologists term

individuality, and never forgets a face, but in the immense rush of his

speculative business he had forgotten the circumstance until he referred

to his books. He was but a few minutes absent in the interior office

when he returned and informed the gentleman that his $50,000 had been

invested with the ordinary turn of luck that usually accrued under his

management, and he was very happy to be able to hand him a check for

$250,000, after deducting the ordinary commission, as the result of the

investment.

The man was overpowered with this unexpected turn of luck, and the

enormous profits taxed his credulity to its utmost capacity. This was a

speculative mine that he had never dreamed of, and instead of sleeping

any that night he set his entire mind to calculate the profits on

$250,000 in the same ratio that his $50,000 investment had been

transformed into this amount.

It required very little mathematical knowledge to arrive at the

conclusion that with such another turn of speculative prosperity, he

would, within the next six months, be a millionaire and have the

original investment left intact. Then if he should make this on three

turns, which seemed not unlikely, when he should be present to look

after his own business, he might pile up millions by the dozen.

The mind of this fortunate speculator being filled with such thoughts as

these, he lost no time after breakfast in taking the train on the

elevated road and arrived at Ward’s office before business had begun.

When Ward arrived he met his customer with a gracious smile, took the

check in the most handsome manner and made a note of it in his book.

The investor had not very long to wait this time before he knew the

result of his venture. It was only a few days prior to the 12th of May,

1884, at which date the failures of Grant & Ward and the Marine Bank

were announced in Wall Street, as the _avant courier_ of a sudden panic.

So, the only thing that interfered with the second check producing

similar results to those of the first, was the unfortunate panic, but of

course Mr. Ward could tell his customer that he was not responsible for

that.

In this connection an important financial question arises. Would there

have been any panic had it not been for Ward, Fish, Eno & Co.? However

this may be, there is one thing very evident, namely, that Mr. Ward must

be accorded the power of ability to control men with whom he came in

contact in a remarkable manner, and of being able to get the best of

them in all financial matters. Old and astute financiers, who were

considered experts in every method of speculation, and who knew all the

artifices of making a sharp bargain, became helpless in the mystical

presence of Ward, and were completely non-plussed by his superior acumen

in taking advantage of every situation that offered the least

opportunity of practicing his peculiar methods of chicanery and fraud.

Ward seems to have been very much of a mind reader. He knew when he

passed that check over to the gentleman referred to, for $250,000, that

it would come back again, that it would keep burning that man’s pocket

while he kept it there, and that sooner or later he was bound to return

it to the mysterious place of its issue. Doubtless this was not the

first case that Ward had experimented upon in this way. He had evidently

made a regular practice of it, and could calculate the proportion of his

victims with as much accuracy as tables of mortality are made out for

insurance companies. There was no blind chance about Ferdinand’s

methods. He worked according to a rule, having calculated to a nicety

the exceptions that proved it, and his success showed that he had not

wasted much time over stubborn cases.

Ward displayed marvellous tact in discovering, at a glance, those who

were sufficiently credulous to be entrapped into acquiescence with his

schemes, and manifested great executive ability in pouncing upon his

prey at the proper moment. His methods of operation were admirably

suited to his purposes. He saw, for instance, that this man would not

put the money in any other kind of investment, and would not be likely

to operate, except through Ward himself, as no other man could be found

anywhere who could make himself the instrument of realizing such

stupendous returns for the money invested.

It is marvellous how the idea of large profits, when presented to the

mind in a plausible light, has the effect of stifling suspicion.

The specious pretexts of Ward appeared equal to the task of overcoming

the most obdurate cases of incredulity. So, it is not so singular, after

all, that men utterly unacquainted with business methods and sharp

practice in speculation, were so easily victimized by the sinister

methods, conciliatory manners and seductive schemes of this consummate

imposter.

Ward was so successful in his arts of persuasion that he could not only

succeed in getting possession of all the available capital, for his own

practical use, of many eminent financiers, but he had the power of

transforming them into walking advertisements for the promotion of his

nefarious designs, and turned them to the best account in drumming up

business and customers for him while they were blissfully ignorant that

they were all the time the subservient mediums of swindling projects. In

fact, they made themselves the willing instruments of “roping” in others

for Ward’s purposes, inspired by the purest motives of gratitude toward

him as their confidential broker and benefactor.

In this way General Grant and his sons became the helpless victims of

Ward’s deeply designing duplicity.

People who have blamed General Grant fail to reflect on the fact that

the famous soldier and able tactician was no better than a raw recruit

in the hands of a disciplined warrior when he was placed in contact with

Ferdinand Ward’s superior financial tactics.

One great point in the confidence game worked on joint account between

Fish and Ward was to obtain men of well known reputation to vouch for

the genuineness of the enterprises in which they were engaged. This

enabled them to solidify and extend their credit. It was for this

purpose that General Grant was inveigled into signing the well-known

letter No. 2, addressed to Fish, which has been the subject of so much

criticism and comment. Following is a copy of this letter:

No. 2 Wall Street, }

Room 6, }

NEW YORK, July 6, 1882.

MY DEAR MR. FISH:—In relation to the matter of discounts, kindly

made by you for account of Grant & Ward, I would say that I

think the investments are safe, and I am willing that Mr. Ward

should derive what profit he can for the firm that the use of my

name and influence may bring.

Yours very truly,

U. S. GRANT.

This letter was written in answer to one from Jas. D. Fish, President of

the Marine Bank, saying he had negotiated notes for the benefit of Grant

& Ward, to the amount of $200,000. He said in explanation: “Those notes,

as I understand it, are given for no other purpose than to raise money

for the payment of grain, &c., to fill the Government contracts.”

This letter, signed by General Grant was designated by his counsel as

“only an ordinary letter in the course of business,” and that is all it

is where a man placed confidence in another as General Grant did in Ward

and Fish.

It was Ward who wrote the letter, through the instruction of Fish, and

got General Grant to sign it.

In an interview with a reporter of the New York _World_, in July last,

Ward explained the circumstances under which the letter was signed, as

follows:

“Do you know anything about that letter addressed to Mr. Fish

and signed by Gen. Grant, regarding the Government contracts?”

asked the reporter.

“Of course I do,” quickly replied Ward. “I made the original

draft. It was by Mr. Fish’s direction, and he asked me to do it,

suggesting what I should write. He had had some trouble in

getting Grant & Ward’s paper discounted, for he attended to that

and raised millions of dollars. He wanted something to show to

Mr. Cox, President of the Mechanic’s Bank, and others from whom

he tried to get money for the firm. The contract business was

the great thing, and he said if he only had something from the

General to show that he knew about the contracts, it would be

easier for him to go to these men. I distinctly remember the

circumstances under which this letter was prepared. Fish gave me

an idea what it ought to be like and I wrote it. Then Mr. Fish

went over it and made some corrections in his own handwriting.

It was scrawled on a piece of paper that happened to be handy in

the office, and after he had it to suit him he handed it to me

and I gave it to Spencer, our cashier, to copy. I am not sure

but that I have got that draft somewhere among my papers. I

think I have seen it since the failure, and if it is still in

existence it can plainly be seen that Mr. Fish knew all about it

before it received Gen. Grant’s signature. The General was in

the habit of signing papers I asked him to without paying much

attention to what they were. So when I asked him to sign this

one he did so without much if any questioning. I understood well

enough what Fish wanted it for, because he told me, and I have

no doubt that Mr. Cox and other gentlemen from whom he borrowed

money saw the letter.”

------------------------------------------------------------------------

CHAPTER XXIV.

HENRY N. SMITH.

HOW MR. SMITH STARTED IN LIFE AND BECAME A SUCCESSFUL OPERATOR.—HIS

CONNECTION WITH THE TWEED “RING,” AND HOW HE AND THE FAMOUS “BOSS”

MADE LUCKY SPECULATIONS, THROUGH THE USE OF THE CITY FUNDS, IN

MAKING A TIGHT MONEY MARKET.—ON THE VERGE OF RUIN IN A POOL WITH W.

K. VANDERBILT.—HE IS CONVERTED TO THE BEAR SIDE BY WOERISHOFFER, AND

AGAIN MAKES MONEY, BUT BY PERSISTENCE IN HIS BEARISH POLICY RUINS

HIMSELF AND DRAGS WM. HEATH & CO. DOWN ALSO.

I have already had occasion to speak of Henry N. Smith, who was a member

of the firm of Smith, Gould & Martin, but I consider him of sufficient

importance, speculatively speaking, for a separate biographical sketch.

pi This gentleman is a native of Buffalo, and had been in the mercantile

business there before coming to Wall Street. He was familiarly known as

the young man from Buffalo. He had then a decidedly Hebrew aspect; was a

strawberry blonde, with full beard of auburn hue, sharp, piercing eyes,

and an air of self-confidence. He had made some money in Buffalo, and

was lucky in his first ventures in Wall Street, being one of the few who

emerged from the panic of 1864 on the winning side. Smith became a bold

operator, and accumulated considerable money. He was invariably

successful in his transactions whenever he was governed by his own

judgment. The first disaster overtook him in the panic of 1873.

Immediately prior to that he had been under the influence of Commodore

Vanderbilt, who put him into Western Union, and the loss which he

sustained by its terrible fall in that year almost ruined him. He lost

all his ready money, being left without anything but his New York

residence and a stock farm.

He did not lose courage, however, by this speculative blow, but picked

himself up again and soon became quite a power in the Street, and in

spite of the ups and downs of speculation and the various panics, Smith

kept clearly ahead of the market for many years, and became a successful

and comparatively wealthy operator.

He always managed to ingratiate himself with wealthy connections in his

various operations, and was able to command an enormous amount of credit

in comparison with his actual means.

A few years ago, on his return from Europe, he met W. K. Vanderbilt, and

they began to discuss the probable future of the market. Vanderbilt had

been a bull for some time previously. They entered into an agreement to

operate on the bull side together. The result was that Vanderbilt lost

several millions, and came pretty near running the risk of exhausting a

large part of his then anticipated share of his father’s estate. The

deal was disastrous to Smith also.

Soon after this discomfiture, one day, on his way to Long Branch, Mr.

Smith met the late Mr. Woerishoffer, who was the great bear on the

market, while Smith and Vanderbilt were still then the leading bulls.

Woerishoffer succeeded in convincing Smith that his position on the

market was wrong—that he had better make a clean sweep of it in selling

out the stocks which he held, and join hands with him on the bear side.

Smith was impressed with Woerishoffer’s advice, earnestness and

personality.

The great bear was also in a position to back up his theory by examples

of his success, the best and most convincing argument that could

possibly be employed, especially by a Wall Street speculator. As the

result of this bearish counsel, Smith soon recuperated from the effect

of his former losses, and, in consequence, got bearish notions so badly

on the brain that he was prepared to swear by Woerishoffer’s judgment,

and considered his own equally infallible. He could see nothing but

disaster ahead any more than his general, and was recklessly prepared to

follow wherever the champion bear should lead in the destruction of

values.

Smith seemed to have the same abiding faith in Woerishoffer that

Ignatius Loyola reposed in the Pope of his day. “If the Holy Father,”

said that eminent Jesuit, “should command me to row several leagues into

the ocean in an open boat, in the midst of a terrific gale, I should

straightway obey his mandate without asking why or wherefore.”

Such is hardly an exaggerated illustration of the thorough appreciation

which Smith entertained of the perfection of Woerishoffer’s bearish

discipline, and the exact certitude of his judgment in all matters of a

speculative character. It is almost impossible for a man who has had no

experience in Wall Street matters to estimate the extremes of fanaticism

in speculation to which a man is prepared to go when he is seized with a

monomania either on the bull or the bear side, but especially on the

latter.

The evidence of his senses counts for nothing, and the evidence of other

people’s senses, if possible, goes for less. He is a consistent bull or

bear, as the case may be, and that settles it. He is Sir Oracle on the

stock market and when he speaks let no dog bark.

This inveterate combination of egotism and fanaticism has ruined many

hundreds, to my own knowledge. The disease is contagious, and Smith had

a very obstinate form of it. His symptoms were even worse than those of

Woerishoffer, by whom he was smitten, a peculiarity that very often

occurs in the recipient of this financial malady.

Like Woerishoffer, Smith fought the market with desperation on every

advance. He adhered steadily to the policy of attacking prices on every

rally during the summer of 1885, while values were constantly advancing,

with occasional healthy reactions. When his own money was exhausted he

began to incur cumulative liabilities with the house of Wm. Heath & Co.,

until that famous firm had become almost depleted of its available

resources in replacing margins as fast as they were wiped out by the

persistent tide of advancing prices in speculation.

Thus Mr. Smith proceeded, in obedience to the spirit of bearish

fanaticism, until his loss became so great that he not only had to pay

out all his own money, but was in debt to the firm of Wm. Heath & Co. in

a million dollars, which was the cause of their failure, and which

crippled or caused to collapse several smaller houses.

When Mr. Smith appeared before the Governing Committee of the Stock

Exchange to make application for the extension of time on his seat, he

made the following extraordinary statement: “On January 1, 1885, I was

worth $1,400,000. I had $1,100,000 in money, and the balance, $300,000,

in good real estate. On the following January I had lost the whole

amount, and was $1,200,000 in debt, a million of which I owed to Wm.

Heath & Co.”

Many people were surprised that Mr. Smith was enabled to obtain such an

enormous and unlimited amount of credit in one house. I took the ground

at the time, and I am still of the same opinion, that the animal

magnetism or psychologic power of Henry N. Smith over the elder Heath

was the real cause of all the trouble.

Mr. Heath had been in bad health for some time, consequently he left the

general management of the business to Mr. McCanless, the head clerk and

general manager of the firm, through whom the orders of Mr. Heath were

strictly executed.

Mr. Heath being weak in both body and mind, yielded his opinions to

those of Mr. Smith, by virtue of the superior mental force of the

latter.

In conducting a large Wall Street business it is necessary that a man

should have the mental stamina to say “no” firmly, and stand to it. In

order to be able to do this he must be backed up by a vigorous, healthy

physique.

The power to utter a negative in a determined manner requires,

generally, a fair degree of physical force, and it is absolutely

necessary to the success of a Wall Street broker that he should be able

to do it when occasion requires. A deficiency either in will power or

physical force to pronounce this small negative distinctly and firmly

may result in financial ruin, as it did in the case of Wm. Heath & Co.

Henry Nelson Smith made many successful turns in speculation during the

Tweed regime, owing to the facilities which the municipal bankers

belonging to that famous coterie afforded him for manipulating the money

market.

There were great fluctuations in stocks while William Marcy Tweed was

the power behind the throne in the government of the city of New York.

Mr. Tweed contributed largely towards these fluctuations. He and his

trusty companions pulled the wires at the City Hall while the puppets in

several of the brokers’ offices in the vicinity of Wall Street danced to

the sweet will of the managers in the municipal building.

One of Tweed’s three famous maxims was, “The way to have power is to

take it.” The other two were, “He is human,” and “What are you going to

do about it?” In conformity with the first maxim, Mr. Tweed took control

of the city funds, besides a number of the city savings banks, and other

financial institutions, which he had organized through special charters

from the Legislature, which he also owned during the period of his

Boss-ship.

These funds were so managed that a very tight squeeze could, at almost

any time, be effected in the money market. The city funds on hand were,

at that time, usually about from six to eight millions of dollars, and

were deposited in the banking institutions of the “Boss.” They were

ostensibly under the control of the City Chamberlain, who was under the

control of Tweed.

Henry N. Smith and a few other favorite members of the syndicate would

draw their balances from these banks, making money scarce to the general

public, and the money market would suffer a sudden squeeze, and

consequently the stock market would break, sometimes with such rapidity

as to produce disastrous results to a number of brokers, business houses

and other financial concerns outside the Tweed Ring.

On one of these occasions Mr. Smith drove up to the Tenth National Bank,

the Black Friday ring institution, in a cab, and drew his balance

therefrom, amounting to $4,100,000. He took it home and kept it there

several days under lock and key. In the meantime Mr. Tweed and his

companions withdrew from circulation the greater portion of the amount

under their immediate control, making a tie-up, on the whole, of nearly

twenty millions of dollars. At that time this was an amount sufficient

to make a very stringent money market, and cause Wall Street operators

to feel very uncomfortable. It was then a mighty power to be wielded by

a few unscrupulous men. At that time Mr. Smith considered himself worth

at least five million dollars. He lost most of this in the panic of

1873, largely in Western Union stock, as above stated, into which

Commodore Vanderbilt had kindly put him.

I have referred to the prominent part which Mr. Smith played in the

great speculative drama of Black Friday, in the scenes and incidents of

my chapter on that ever-to-be-remembered day in Wall Street

I shall, in another chapter, briefly review some of the methods to which

the Tweed Ring resorted to make speculation and politics play into each

other’s hands, and show how a bold attempt was made to add the control

of the National Treasury to that of New York.

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CHAPTER XXV.

KEENE’S CAREER.

HE STARTS IN SPECULATION AS A CALIFORNIA BROKER.—A LUCKY HIT IN A MINING

STOCK PUTS HIM ON THE ROAD TO BE A MILLIONAIRE.—HIS SPECULATIVE

ENCOUNTER WITH THE BONANZA KINGS.—HE MAKES FOUR MILLIONS, STARTS FOR

EUROPE AND STOPS AT WALL STREET, WHERE HE FORMS AN ALLIANCE WITH

GOULD, WHO “EUCHRES” HIM AND OTHERS.—SELOVER DROPS GOULD IN AN AREA

WAY.—KEENE GOES ALONE AND ADDS NINE MILLIONS MORE TO HIS FORTUNE.—HE

THEN SPECULATES RECKLESSLY IN EVERYTHING.—SUFFERS A SUDDEN REVERSAL

AND GETS SWAMPED.—OVERWHELMING DISASTER IN A BEAR CAMPAIGN, LED BY

GOULD AND CAMMACK, IN WHICH KEENE LOSES SEVEN MILLIONS.—HIS

DESPERATE ATTEMPTS TO RECOVER A PART ENTAIL FURTHER LOSSES, AND HE

APPROACHES THE END OF HIS THIRTEEN MILLIONS.—HIS PRINCELY LIBERALITY

AND SOCIAL RELATIONS WITH SAM WARD.

One of the most remarkable up-and-down lives known to Wall Street is

that of James R. Keene. His rise and fall are both of recent date.

Mr. Keene is of English parentage, and was born in London, about 48

years ago. He came to this country at the age of 17, lived in the South

and studied law there. He removed to San Francisco in 1853, and became

well informed in mining matters through several mining cases that were

put into his hands while practising at the bar in that city. I am told

he was also connected with a Western newspaper for some time. He caught

the speculative fever shortly after his arrival in California, and, as

it seems, abandoned both law and journalism to become a broker.

Keene had hard work for some time to make both ends meet, and his

struggle for existence in the wild West made serious inroads on his

health. His physician told him he must give up work, and advised him to

take a long sea voyage if he intended to prolong his life. Acting on

this advice, he secured his passage to the East. This was the turning

point in both his health and fortune.

Prior to his departure, Mr. Keene was urged to invest a few hundred

dollars in a mining stock then selling very low. The length of his

journey and the change of scene caused him almost to forget about his

investment, and the methods of communication between the far West and

the far East in those days were so very slow that he had hardly any

chance of being informed of his lucky venture until his return. As an

illustration of this slow transit of news at that time, it may be stated

that gold was discovered January 19, 1848, but the news did not reach

the Eastern States until the following December. It was authoritatively

announced in the President’s annual message, and created great

excitement. Mr. Alfred Robinson, with about twenty companions, were the

first to leave New York for the scene of the new El Dorado, on the bark

“John Benton.”

After nearly a year’s absence Keene was surprised to find, on his

return, that mining stocks had taken a prodigious bound upward and

carried the one in which he had invested with them. The mine had turned

out to be a veritable bonanza, and the stock which had cost him only a

few hundred dollars was then worth over $200,000.

Had Mr. Keene’s health not required his absence from the scene of

speculation the chances are that he would have disposed of his stock as

soon as it should have realized a few thousand dollars.

This was a wonderful realization for one who had been comparatively

poor, and was sufficient to turn the head of any ordinary man; but it

only made Keene more anxious for greater success, which he set himself

diligently to achieve.

The speculative craze was then intense and epidemic. Waiters and

chambermaids bloomed into millionaires with the rapidity of mushroom

growth. Mr. Keene secured a seat in the Board, and began to do an

immense business.

Flood, Mackay, Fair and O’Brien were then the prominent operators. The

speculative contagion spread rapidly over the coast, and soon imparted

its influence to the entire continent. Keene’s further investments were

crowned with similar success to that of his first venture, and even in a

greater ratio of profit.

Seeing the great and rapid advance in the stocks of the Comstock mines,

he naturally reasoned, like old Daniel Drew, that what had gone up so

high and so fast was bound to come down. There were but few people on

the coast at that time, however, in a mood to reason so soberly, and it

required more than ordinary nerve to make the experiment of selling

“short.” Mr. Keene, however, had the courage of his convictions, and

made an onslaught upon the market.

There Was a strong contingent to oppose him, for the wealthy syndicate

just named, with the Bank of California behind them, were his bitter

foes, and they did their best to crush him. In spite of their efforts,

however, the market began to yield under the pressure of Keene’s “short”

sales. In a little while the list gave way and stocks began to topple

from their dizzy eminence, even quicker than they had climbed to that

unprecedented height. Keene netted millions in their fall. He cleared

two and a-half millions in the Belcher and Crown Point mines, and over

half a million in Ophir.

So, in a few years, this poor lawyer, journalist, curbstone broker and

invalid, found himself the happy possessor of millions, his name covered

with speculative glory, and the fame of his fabulous fortune heralded in

every city, town, hamlet and mining camp between the two oceans.

Keene was still found on the right side of the market when the great

bubble burst, when the Bank of California went under, and its president,

Mr. Ralston, committed suicide while pretending to take a bath in the

Pacific Ocean.

In 1877 Mr. Keene started on a voyage for Europe for the good of his

health, and made a friendly call in Wall Street to see how business was

transacted there. He found the speculative attraction irresistible.

Mahomet had come to the mountain and was held by its magnetic power.

Although Mr. Keene had been a grand success in California, he had a good

deal to learn when he came to Wall Street. He soon discovered that

California tactics would not do here. He began to sell “short,” but

found the market failed to yield to the touch of his bearish wand as it

had done in San Francisco. When he sold ten thousand shares of a certain

stock the decline, instead of being a slump, as he expected, was only an

insignificant fraction, and the market soon reacted. Mr. Keene quickly

discovered that he was throwing water into a sieve, and stopped

sacrificing his California gold so lavishly.

A pool was then formed by Mr. Keene and Jay Gould to put down Western

Union. Keene and Selover sold the stock in large blocks, but it was

absorbed by some party or parties unknown as fast as it was thrown out.

It was gravely suspected that Mr. Gould was the wicked partner who was

playing this absorbing game behind the scenes. Major Selover brooded

over the matter so seriously that his suspicions began to take tangible

form and “body themselves forth” in violence.

The Major and Keene met one morning at the rear entrance of the Stock

Exchange, in New street, and interchanged intelligent glances on the

subject, after the fashion of those passed between Bill Nye and his

companion at the card table with the Heathen Chinee. Selover walked down

the street with blood in his eye, and meeting Mr. Gould on the corner of

New street and Exchange Place, caught him up by the collar of the coat

and a part of his pants and dropped him in the area way of a barber’s

shop.

The little man promptly picked himself up, went quietly to his office,

and made a transaction by which Selover lost $15,000 more. This was his

method of retaliation.

Mr. Keene next went into the Atlantic and Pacific Telegraph pool, and

was again fortunate. It has been frequently asserted that he lost

heavily in this deal, but I have it on good authority that he came out

ahead. In the deal with Gould in Western Union, he and Gould netted on

joint account $1,300,000. It is popularly believed that Gould “euchred”

Keene in this pool, but these are the bare facts.

Keene looked over the speculative field, and found that there had been

great depreciation in values prevailing here since the panic of 1873. He

had arrived in the nick of time to take advantage of the situation. He

was backed by four millions of money, and the few losses which he at

first sustained were not felt by him, and only seemed to initiate him

properly.

This new blood was just what Wall Street then wanted to put the wheels

of speculation in motion. Mr. Keene informed himself about the principal

stocks dealt in at the Exchange. He did so with remarkable rapidity.

They were all down to panic prices, and seeing that most of them were

intrinsically cheap, he bought heavily. Soon the turn came which

resulted in the high tide of speculation which continued with but slight

reactions all through 1879-80.

The advance was immense, as can be seen in the tabular statement at the

end of this book, and the profits were enormous.

Keene’s millions were doubled and trebled. He must have felt himself a

modern Crœsus.

Fully nine millions were added to the four which he brought from

California. He stood in the centre of that great pile, figuratively

speaking, the cynosure of all eyes from Maine to California, and his

fame was noised abroad in Europe.

Gould and other old speculators began to grow green with envy at Keene’s

unprecedented success. He seemed likely to exceed the wildest dreams

that ever the avarice of Monte Cristo or Daniel Drew had conjured up,

and with him the imaginary profits of Col. Sellers had become material

realities. His investments were nearly all in good, reliable securities.

No dubious paper acceptances nor rotten railroad items were mixed up

with his tangible fortune, which was without parallel in Wall Street for

its size and rapidity of accumulation.

The history of speculation was ransacked in vain for an illustration of

such amazing success in so short a period. But here, I regret to say,

this marvellous prosperity ends.

In an evil hour Mr. Keene was induced to spread himself out all over

creation, while he still retained his immense interest in stocks. He was

so flushed with successive victories that he began to regard failure

impossible, and thought he was a man of destiny in speculation, such as

Napoleon considered himself in war. He speculated in everything that

came along—in wheat, lard, opium and fast horses.

Keene’s attempt to get a corner in all the grain in the country,

however, was a signal failure. The very week that Foxhall won the Grand

Prix in Paris he himself was sadly beaten in the speculative race by the

steady going farmers of the West, who sent their wheat to market quicker

than he could purchase it with his thirteen million dollars, and all the

credit which that implied.

All of a sudden, reversal in the tide of speculation set in. Mr. Cammack

was quick to perceive that Mr. Keene was extending his lines and his

ventures. He had a conversation with Mr. Gould. They became convinced

that the Californian must soon be obliged to leave some of his

enterprises in a weak and unguarded position. It was impossible that he

could take care of them all. These two champion bears united their

efforts to upset the market, and each day brought additional force to

their aid. By dint of perseverance their efforts commenced to bear

fruit, and it was apparent that they would soon be rewarded with

success. The bears began to multiply while the bulls diminished, and the

remnant of the latter that were left were anything but rampant at that

time.

The bankers became timid. The brokers were inspired with the same spirit

and were still calling out for more margin. Loans were called in as a

part of the programme of a bear campaign, and all the machinery of

depression was put in active motion. Prices were torn to pieces.

Properties that had been considered good as solid investments for a long

turn, were mercilessly raided, and some of them shattered to fragments.

In fact, there was a regular panic. In the general slaughter, many of

the brokers sold Mr. Keene’s stocks out. His wheat was also sold in

immense quantities at great sacrifice, and his load was lightened all

around, even more quickly than it had been heaped up.

His losses are said to have amounted to seven millions of dollars at

this time.

The manly efforts of Mr. Keene to recover these losses, as is usually

the case in such instances, only resulted in further misfortune.

Disaster followed disaster, and as he became desperate in his efforts to

get back something, his losses became constantly greater, until nearly

the whole of his immense pile was buried in fruitless efforts to recover

a portion of it.

Great sympathy has been felt in Wall Street for Keene since his failure,

for the Street had never before found such a liberal man. By general

consent he decidedly took the palm in this respect, not only from all

his speculative contemporaries, but the archives of Wall Street since

the days of the first meetings of the brokers in the Tontine Coffee

House, opposite the sycamore tree, early in the century, can furnish no

such parallel of princely liberality as that of James R. Keene during

the period of his matchless prosperity.

The parasites that waxed fat on his bounty and business are numerous. At

least a score of Wall Street brokers were raised from penury to wealth

by the commissions which they made out of him. Many of them are to-day

living in luxury who started with a desk and a few plain office chairs

to do business for the California millionaire, and now he is

comparatively poor, and thrown on the slender resources of his wife.

Keene arose from nil to be worth thirteen millions. He is now back where

he started.

A full and correct history of Keene’s beneficences would fill this

volume, and however much I admire him, I cannot afford to give him so

much space.

I shall relate one remarkable instance of his unbounded generosity,

however, as the object has been so universally known, and was himself

such a popular society man.

Long prior to Mr. Keene’s advent in Wall Street, Sam Ward had been a

conspicuous figure in Washington and Wall Street, and had acquired a

society reputation in Europe.

This gentleman was originally forced into prominence by his marriage

with Miss Astor.

Mr. Ward had changed from one thing to another until finally he took up

his abode in Washington, and became a lobbyist.

When Mr. Keene came to New York with his four millions of dollars, which

he had made when the majority of New York investors had been on the

losing side, dropping their money almost as fast as water runs down

hill, through the unprecedented shrinkage in values, there was a wide

field for profitable investment. This shrinkage had been going on from

the panic of 1873, step by step downward until 1878, when society had

reached a stratum by dint of levelling down that placed almost everybody

upon an equality. Property, in many instances, became a serious

encumbrance instead of a benefit, and many were glad to be rid of the

responsibility of their holdings for what was sufficient to settle the

mortgage. Everybody felt poor, and was really so, with a few fortunate

exceptions.

Mr. Keene arrived here at the most fortunate moment for investment.

Everything was down to bed-rock prices. He, therefore, became an object

of actual curiosity, and was as much of a lion in our midst as he had

been in San Francisco.

He was not only the favorite of fortune, but a favorite of society,

which generally go together with curious inconsistency in our social

democracy.

One of the first acquaintances Mr. Keene made on his arrival was this

great society man, the celebrated Sam Ward, who at once recognized his

social worth, not only in dollars and cents, but in considerable

liabilities, genuine representatives of dollars and cents. The more

tangibly he realized this fact the more tenacious was his attachment,

until Mr. Keene found Mr. Ward the very _beau ideal_ of Scriptural

fraternity, namely, “a friend that sticketh closer than a brother.”

Wherever Keene appeared, though apparently alone, it was safe to bet

that Ward’s shadow could soon be seen.

It is said of Seneca, when he observed a house falling, and nobody near

it, that he asked: “Where is the woman?” So Keene’s presence naturally

suggested Ward to the mental vision of every Wall Street man and every

sporting man.

Whether it was up-town or down-town, at Newport, or in London, at the

Derby, or the Grand Prix, it was all the same, where Keene was, there

Ward soon appeared with the promptitude of the genius that stood before

Aladdin when he touched his wonderful lamp or rubbed his magic ring.

This self-sacrificing friendship and ardent devotion on the part of Mr.

Ward was recognized by Mr. Keene in the most tangible manner. He made an

investment for his protege, of $50,000 in solid securities, placing them

in the hands of trustees, so that his ward received the income therefrom

of three thousand dollars, as an annuity, for life.

Mr. Keene bestowed numerous benefits on other newly made acquaintances,

of which this is a fair sample.

A Pacific coast biographer draws the following graphic sketch of Keene,

some time after his departure from California, which is curious reading

in the light of the events which I have related:

“No series of sketches of men, prominently identified with the

stock interests of the Pacific coast, would be complete without

a pen portrait of James R. Keene, the free lance operator of the

San Francisco stock market, who dared to beard the Bonanza Kings

in their den, and came off victorious with many shekels of gold

and silver. Mr. Keene is no longer with us. Some time since,

after having realized largely on his stock ventures, he

concluded to take a trip East, to be extended to Europe, unless

on the Atlantic seashore he regained the health which too active

exertions on the Pacific had impaired. And so he went with his

family. Those who bade him God-speed expected to see him return

within a few months, certainly within a year, with recovered

health, new ambitions, new conquests to make. But he comes not.

New York has presented more attractions than his old love, San

Francisco. Railroad stocks, Jay Gould, Sam Ward, Rufus Hatch,

Long Branch, Trenor W. Park, Newport, have been too many

attractions for Jim Keene. He fell into the New York market as

easily as any man generally falls among thieves—but he seems to

have got the best of the thieves in every issue. When it was

rumored that Keene contemplated making Wall Street his

headquarters, his old San Francisco friends generally wrote out

their calendars, and figured up when ‘Jim’ would be back,

bursted out and out, looking for a job. A few who had abiding

faith in Keene, who knew his pluck, who had gauged his

capacities, who had measured his horse sense, consulted their

calendars and said: ‘Jim is gone! He never will come back to

couch his lance in such a narrow field as ours. New York is big,

Wall Street is big—just about the size of institutions that

Keene wants to tackle.’ The few were right. Keene hasn’t come

back to look for a job. He has tried conclusions with the

smartest of the Wall Street operators, and, novice that he was,

came out triumphant. The California goose that was to be plucked

wasn’t plucked. Even Jay Gould, with all his shrewdness, gave it

up as a bad job; and Vanderbilt condescends to confer with Keene

on momentous occasions.

“Keene started in his career as a stock operator years ago in

San Francisco. He first was conspicuous as an impulsive,

dare-devil sort of a street broker, acting for big firms, with

an occasional dash for liberty and himself. Gradually he worked

his way from steerage to cabin, from the private’s ranks to the

position of the lieutenant of the watch, then to officer of the

day, and finally, boss of the stock concern. No man in the stock

market exercised so much influence as Mr. Keene. He had hosts of

friends, friends whom he grappled with hooks of steel, ready to

swear by him on any and every occasion. Generous to a fault,

brusque in manner at times, but with the heart of a woman, ready

to melt at a moment’s notice, open-handed and open-hearted to

the appeal of even an acquaintance, no wonder that Jim Keene was

the ideal of the market.”

It is not generally known that Keene was chiefly instrumental in

rehabilitating the Bank of California after the death of Ralston. He

raised a large subscription in the Stock Board, and got the Hon. William

Sharon, D. O. Mills and “Lucky” Baldwin to subscribe a million each, and

he put in a million himself. The bank was thus enabled to meet all

immediate demands, and a threatened panic was averted.

At the time of Keene’s failure he was chief of a syndicate which had

purchased 25,000,000 bushels of wheat, which would soon have netted many

million dollars of profit, if it had been firmly held, but one or two of

his partners in the pool became timid and sold out. The syndicate went

to pieces, and both profits and capital vanished. He laid his misfortune

mainly to the newspapers which raised such a universal cry about the

immense “corner” that was being manipulated in wheat, threatening a

famine in the great staple of human life.

Keene was next shaken out of his stocks. This was done chiefly by an

ably concocted scheme of the bears, and he had the mortification of

seeing the stocks which he had held advance within a few months’ time to

a point that would have enabled him to realize ten million dollars, if

he had been able to hold them.

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CHAPTER XXVI.