GOULD AND THE MANHATTAN ELEVATED.
Jay Gould was not an originator of systems. Others with ideas secured
charters, began railroads and other schemes, and then, when money was
needed, Gould would step in and profit by their energies by purchase
at low figures. This was never more forcibly illustrated than by his
connection with the elevated railroad system of New York City.
He had nothing to do with their construction. In fact, Gould’s name is
unidentified with any great public undertaking original with himself.
Other men planned and built. He grabbed. He did, it is true, start
a telegraph company, and put up poles and wires, but it was only as
a part of his plan to capture a system already constructed. So the
elevated roads--the measurable solution of the problem of rapid transit
in the metropolis and an inestimable boon to the city--are not due to
the foresight, pluck and energy of Gould. Other men were the pioneers,
but they were driven to the wall and forgotten, while he plucked the
fruits of their labors.
Gould, naturally enough, came into control of this great system, which
carries 600,000 passengers every day, through a consolidation and the
“watering” of stock. There were three elevated roads--the Metropolitan
(formerly the “Gilbert,” named after its originator, Dr. Gilbert), of
which S. H. Kneeland was president; the second, the New York, of which
Cyrus W. Field was president and of which Samuel J. Tilden was once a
heavy stockholder, and the third, the Manhattan, of which Jay Gould
and Russell Sage were the owners. The Metropolitan and the New York
were bona-fide companies, actually owning railroads and rolling stock,
but the Manhattan was a “paper” company, having a nominal charter and
an organization, but not one inch of road. Yet these three companies
were consolidated on equal terms, and Gould, Sage and Field became the
owners. Later the control narrowed down to Gould and Sage.
Sage, Field and Kneeland are remarkable characters in Wall street
history, and their names are intimately identified with Gould’s--Sage
and Field as associates, and Kneeland as an unpurchasable opponent.
Russell Sage is one of the richest men of his generation. He came
originally from Troy, where he ran a bank, and whose district he
represented in Congress, before the war, for one or two terms. Then
he entered Wall street. His great distinguishing trait was avarice.
He worshipped the mighty dollar. Money-getting was his passion--not
for the power and luxury which money can purchase, but for the mere
pleasure of acquisition. He lived, it is true, on Fifth avenue, and
gave somewhat to charity, but his habits were economical almost to the
point of penuriousness, and once a dollar got into his hands it did
not easily slip through them. It should be said of him, however, that
he was as careful of other people’s money as of his own. This was the
man who for many years was Gould’s most intimate business associate, a
director in all his companies and a partner in all his schemes. Gould
estimated Sage’s wealth at $50,000,000 and their combined capital was
thus enormous. Sage was chiefly a money-lender in Wall street. He
carried an immense amount of ready cash and was of incalculable aid
to Gould in all his undertakings. It is indeed one of the traditions
of the street that Sage saved Gould from ruin at a time when he was
hotly pressed by James R. Keene and other bear operators. Field was
a different kind of a man. He liked money but only as a means to an
end, and he had not the heart or mind to roll up a colossal fortune
in the way that Gould and Sage did, though he shared for a time in
their enterprises. But at one time he was worth millions. Field’s
passion was love of fame. His brothers all gained distinction in the
professions; he sought and obtained distinction in commercial life.
One of his brothers sat on the Supreme Bench of his country. Another
was a leader of the New York Bar. A third was a noted clergyman,
editor and traveler. Cyrus W. Field began his business life as a rag
merchant, but with indomitable pluck, energy and foresight he finally
succeeded in constructing the first Atlantic cable, and was honored
both in London and New York. Mr. Field sought almost equal distinction
in connection with the elevated railroads, whose great importance
he comprehended, and he made a bid for popularity by insisting on a
reduction of the fares from 10 to 5 cents against the wishes of Gould
and Sage. Sage first became acquainted with Gould in Troy. Field first
became identified with him in 1879, when he (Field) was president of
the Wabash railroad, though we have seen him as a guest at the famous
banquet given to President Grant on “Jim” Fisk’s steamboat in 1869.
Mr. Gould turned his attention to the elevated railroads in this city
early in 1881. The Manhattan company was then in control of all the
lines as lessee, and to Mr. Gould’s keen vision that company presented
the appearance of being on the verge of financial disaster. The
Manhattan company had issued $13,000,000 of stock--pure water--and had
divided the same equally between the Metropolitan and the New York
companies. There was much criticism of the action of the Manhattan
corporation in issuing so large a quantity of stock which was wholly
unrepresented by property. The attorney-general of this state, Hamilton
Ward, obtained permission from Judge Donohue, May 18, 1881, to begin
a suit for the dissolution of the Manhattan company’s charter and the
appointment of a receiver. Other suits were begun about the same time
to restrain the Manhattan company from paying any dividends on its
stock. Of course these suits tended to depress Manhattan stock in the
stock market.
Gould, Sage and Field agreed together to consolidate the three
elevated railroad companies. They were, however, met by the determined
opposition of President Kneeland, of the Metropolitan road. Nothing
could induce him to waver in his opposition. His associates in the
Metropolitan deserted him, and one by one they went over to Gould, but
he stood firm to the very last, and his persistency caused a celebrated
litigation, which proved so protracted and costly that Kneeland was
finally defeated, though his spirit was unsubdued.
At that period Mr. Gould was the owner of the New York _World_, and for
several months in 1881 that newspaper was greatly exercised over the
bad management and “financial rottenness” of the Manhattan company.
Scarcely a day would pass that the _World_ did not contain an editorial
or a news paragraph attacking Manhattan. The stock kept dropping two,
three and five points at a time. With the beginning of July, 1887,
suits were pending against the three elevated railroad companies in all
of the state courts in which they could be brought. Mr. Gould became a
stockholder in the Metropolitan company on the 1st of that month, 100
shares of stock having been transferred to him by Russell Sage. On July
8th, Mr. Gould, Mr. Connor, Mr. Navarro, and other friends of Mr. Gould
were elected directors of the Metropolitan company. On the same day
Attorney-General Ward entered an order discontinuing his suit against
the Manhattan company in this judicial district. He immediately,
however, applied to Judge Westbrook at Kingston, and obtained an order
appointing ex-Judge John F. Dillon and Albert L. Hopkins receivers of
the Manhattan company. A few days afterward Cyrus W. Field began a suit
to take the New York company’s roads out of the hands of the Manhattan
company, and later an application was made to the receivers to sue the
New York and Manhattan companies for the $13,000,000 of stock issued
without consideration. In the meantime the _World_ kept up an incessant
fire of criticism and denunciation of the Manhattan company. The price
of the stock naturally kept dropping until it got as low as 16.
Early in October Mr. Gould went into the Manhattan company, and it was
proclaimed that he and his friends had obtained control. They held more
than 70,000 shares, nearly all of which they had been able to pick
up in the stock market at prices ranging from 20 to 16 cents on the
dollar. All of the timid original stockholders had been scared into
sacrificing their holdings by the confusing cloud of litigation and the
attacks of Mr. Gould’s newspaper.
For a while after Mr. Gould got control of the Manhattan company there
was some show of fight between him and Cyrus W. Field, who represented
the stockholders of the New York company. Soon Gould, Field and Sage
came together and had an amicable understanding. An opinion was
obtained from Judge Westbrook, who held court in Jay Gould’s private
office, denying the application of the New York company to get its
road out of the hands of the Manhattan company, and in the latter
part of October the Gould-Field-Sage party entered into an agreement
in behalf of the three companies by which the Manhattan stockholders
were to receive only 6 per cent. dividend on their stock instead of 10
per cent. Next came an order from Judge Westbrook taking the Manhattan
company out of the hands of the receivers, and that corporation, which
was absolutely under Gould’s control, proceeded to rivet its hold upon
the entire elevated railway system of this city. Immediately following
Judge Westbrook’s action the Manhattan stock went above 52, and on
November 9th, the day that Jay Gould was elected president of the
company, the stock was quoted at 55.
The steps which Gould and his associates took to “freeze out” the
original stockholders of the Metropolitan company were exposed by the
New York _Times_ in a series of articles beginning in December, 1881,
and continuing until the Legislature ordered a special investigation
into the matter in April, 1882. Specific charges were made against
Hamilton Ward, as attorney general, and Justice Theodoric R. Westbrook
of the Supreme Court for their part in the elevated railroad
proceedings, and the Judiciary Committee of the Assembly spent several
weeks in taking testimony. Jay Gould and others were examined, and
letters and telegrams from Judge Westbrook to Gould’s lawyers were
produced in evidence, showing that Westbrook had a very friendly
understanding with Mr. Gould. It was also proved that on two occasions
Judge Westbrook exercised his judicial functions in Gould’s private
office. The committee was divided in its conclusions and Westbrook just
escaped impeachment. The effective lessons of the exposure and the
official investigation, however, put a stop to further “freeze-out”
tactics in dealing with the honest stockholders of the Metropolitan
Elevated Railroad Company. Those who had refused to be shaken off by
the bearish assaults on the property finally received satisfactory
compensation for their property from Mr. Gould and his associates.
After obtaining full control of the elevated railroad system, Gould
and his associates voted to double the capital stock, making it
$26,000,000. In opposing the reduction of the fare from 10 cents to
5 cents, they argued that a 5 cent fare would not enable them to pay
dividends on their $26,000,000. A member of the Senate committee
suggested that they might reduce their capitalization. Mr. Field
became identified with all of Mr. Gould’s properties, but gave most
of his attention to the development of the elevated roads. In 1886
he inaugurated the big bull movement in Manhattan stock. He “boomed”
the stock in every possible way, and bought immense quantities, and
publicly predicted that it would sell at 200. He succeeded in pushing
the price to 175. Like almost all artificial corners this movement
collapsed suddenly and Mr. Field was nearly buried in the ruins.
Many believed at the time that this collapse was precipitated by
Gould and Sage. It might have come about by other causes, but Gould
gave the tottering structure the push that leveled it to the ground.
There were many reasons, it was argued, for his action. First, Field
was no longer necessary, but on the contrary a hindrance to Gould
and Sage, and they therefore wanted to get rid of him; and second,
Field was conducting his bull movement independently of them. They
would profit by his fall, while if he succeeded the system might pass
into his hands. So in June, 1887, came the collapse. Mr. Field never
charged Gould with having precipitated it, and Gould himself claimed
that he came to the rescue of Field and saved him from bankruptcy. It
was, however, a remarkable deal and one by which Gould made himself
absolutely master of the elevated system, of which in 1891 he made
his eldest son vice-president, and another son a director. Field was
carrying an immense amount of stock on margins and was consequently a
heavy borrower of money. Gould and Sage were lenders. The bank reserves
were low. Gould and Sage called in their loans and Gould found it
impossible to negotiate loans and was thus obliged to throw over his
stock at a sacrifice. The price of Manhattan fell from 160 to 120 and
Gould purchased from Field 78,000 shares at prices understood to have
ranged from par to 120. Field saved his real estate and other property,
but his power in the street was gone. His later history was a tragedy.
In 1891, within a few weeks, he lost his wife and his son became a
disgraced bankrupt. A few months ago Field died, broken hearted.