In its early years, the stock market was dominated by brokers who abided by an informal code of gentlemanly conduct. By the Civil War, however, market dominance had passed into the hands of a small group of free-wheeling speculators — Jay Gould, “Commodore” Cornelius Vanderbilt, Daniel Drew, James Fisk, Jr. and others.
These men were not members of the New York Stock Exchange. Instead, they were financiers who controlled companies and honed stock manipulation (then generally legal) to a fine art, often with the aid of corrupt politicians. The period was marked by elegance as well as vulgarity and is aptly known as the “Gilded Age,” from the title of the 1873 novel by Mark Twain which satirized the rampant financial and political chicanery.
One of the most bizarre incidents of the Gilded Age, epitomizing its worst excesses both on Wall Street and politics, saw Gould and Fisk attempt to corner the gold market in 1869. To “corner” gold, they needed to buy up the entire available supply on the New York market. They would then be in a position to dictate the price and pocket tens of millions of dollars. All that stood in their way was the U.S. government, which had the power to foil their plans by threatening to flood the market with gold from its stockpile.
To secure the government’s cooperation, Gould began at the top: he enlisted the help of Abel Corbin, President Ulysses S. Grant’s brother-in-law. Gould assured Corbin that a gold corner would aid the nation by enabling American farmers to export their crops at higher prices (international trade was based on gold as a medium of exchange). But just in case Corbin didn’t fathom that argument, Gould bought contracts for $2.5 million worth of gold in Mrs. Corbin’s name.
Thereafter, Corbin did the dirty work for the ring. He introduced Gould and Fisk to the president, with Gould taking the opportunity to offer Grant some advice: never sell gold from the federal stockpile, since doing so would harm the American farmer and even precipitate a depression. In the ensuing weeks, with Corbin’s aid, Gould contrived to have a number of men meet the president in a casual way, and just as casually mention the danger of selling gold. As an added precaution, Gould began bribing journalists to write articles warning the government against selling gold. The hero of Vicksburg and Appomattox seemed partial to these views, but never did make a firm commitment to keep the government’s gold vaults tightly locked.
Then came a breakthrough: the resignation of the assistant treasurer of the United States in New York, the very man who controlled the federal stockpile.
Through some deft maneuvering, Corbin convinced the president to appoint Gen. Daniel Butterfield, a malleable Civil War veteran, to the post. Drawing Butterfield into the ring, Gould bought $1.5 million worth of gold to be credited to the general’s account if and when the operation succeeded.
When the trap was sprung, the president was secluded, in case he still harbored any thoughts about releasing gold. Corbin, as usual, handled the details, convincing his brother-in-law to visit a cousin in a remote Pennsylvania town which lacked telegraph service. Grant left Washington on Sept. 13, riding in a private railroad car conveniently provided by Gould’s Erie line. Check in next week for the conclusion.
Quote of the week: “If a man has done his best, what else is there” — George S. Patton.
Bart Ward is the chief executive officer of Ward & Co. Ltd., an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.