FIFTY YEARS IN
 
WALL STREET

To My Readers:

The theme is worthy of an abler pen, but in the absence of other contributors to this branch of our National history, I venture the plain narrative of an active participator in the financial events of the time in which I have lived.

I have also made a brief retrospect of the history of Wall Street, and financial affairs connected therewith since the origin of the Stock Exchange in New York City.

In sketching the men and events of Wall Street, I have freely employed the vernacular of the speculative fraternity as being best adapted to a true picture of their characteristics, although probably not most consonant with literary propriety.

I have simply attempted to unfold a plain, unvarnished tale, drawing my material from experience and the records of reliable narrators.

New York, March 31, 1908.

My Dear Friends:

I have attempted, in the following pages, to relate in a simple and comprehensive manner, without any aim at elaboration, the leading features of the most prominent events that have come within the sphere of my personal knowledge and experience during the twenty-eight years of my busy life in Wall street. I have never kept a diary regularly, but have been occasionally in the habit of preserving certain memoranda in the form of letters, and a few scraps from the newspapers at various times. With these imperfect mementoes, I have revived my recollection to dictate to my stenographer the matter which these pages contain, in a somewhat crude form and unfinished style. In fact, I have not aimed at either finish or effect, not having time for it, but have simply made a collection of important facts in my own experience that may help the future historian of Wall Street to preserve for the use, knowledge and edification of posterity some of the most conspicuous features and events in the history of the place that is yet destined to be the great financial centre of the world.

If I can only succeed, out of all the poorly-arranged material I have gathered, in furnishing the historian of the future with a few facts for a portion of one of his chapters, I shall have some claim upon the gratitude of posterity.

In my description of Drew, Vanderbilt, Gould, Travers, xxviiiKeene, Conkling and others, I have followed the advice which Oliver Cromwell gave his portrait painter: “Paint me as I am,” he said. “If you leave out a scar or a wrinkle, I shall not pay you a farthing.” I have given my opinion of men and things also without any superstitious regard for the proverb de mortuis nil nisi bonum.

I have also endeavored to refrain from setting down aught in malice. Many of those referred to are now dead.

When any of those gentlemen of whom I have had occasion to speak, who still survive, shall write a book, they can indulge in the same privilege with my name that I have done with theirs, whether I am living or dead at the time.

I shall ask no indulgence for myself that I don’t accord to others.

I have expressed my opinions freely from a Wall Street point of view, from the standpoint of the much-abused operator and broker, and “bloated bondholder.”

I have endeavored to enlighten the public on the true status of Wall Street, as the very backbone of the country’s progress and prosperity, instead of misrepresenting it as a den of gamblers, according to the ignorant and somewhat popular prejudice of the majority who have attempted to write or speak on the subject. This feeling has been largely fostered by clergymen, on hearsay evidence, as well as by the practices of professional swindlers, who have been smuggled into Wall Street from time to time, but who have no legitimate connection therewith any more than they have with the church, which repudiates them as soon as it discovers them.

In fact, the great aim of the book is to place Wall Street in its true light before the eyes of the world, and help to efface the many wrong impressions the community have received regarding the method of doing business in the great financial mart to which the settlement of accounts in all our industry, trade and commerce naturally converges.

xxixI have endeavored to correct the utterly erroneous impression that prevails outside Wall Street, in regard to the nature of speculation, showing that it is virtually a great productive force in our political and social economy, and that without it railroad enterprise and other branches of industrial development which have so largely increased the wealth of the nation, would have made but slow progress.

To preserve and inculcate these ideas by putting them in what I hope may be a permanent form, is another object of publishing this volume. I know you can sympathize with me in this effort to set public opinion right, as many of you have long been making strenuous endeavors after success in the same direction.

To put the whole matter, then, into one short and comprehensive clause, my cardinal object in this book is to give the general public a clearer insight of the reputed mystery and true inwardness of Wall Street affairs.

In my relation of certain reminiscences of Wall Street, and in discussing the checkered career of certain brokers, operators and politicians, I have endeavored to be guided by a historic aphorism of Lord Macaulay:

“No past event has any intrinsic importance,” says the great essayist, litterateur, historian and statesman. “The knowledge of it is valuable,” he adds, “only as it leads us to form just calculations with respect to the future.”

In the samples of my experience which I have given in this book I have aimed, to some extent, at this rendition of the noble purposes of history and biography in their philosophic and scientific application of teaching by example. If I have fallen far short of this high ideal of the British Essayist, as I humbly feel that I have, I must throw myself on the kind indulgence of the readers, and ask them to take the will for the deed. For the presentation of the facts themselves I crave no indulgence. They are gems worthy of preservation in the light xxxof the above definition. I only submit that the setting might be much better.

My chapters on politics may be considered foreign to the main issue, but as many of the events therein described were intimately connected with my business career, I think they are not much of a digression.

To a very large majority of Americans now living the great Civil War—waged from 1861 to 1865—between the North and the South is only known as a matter of history. But it was the greatest war the world ever witnessed, involving the loss of nearly a million of men, and I have a vivid recollection of it, for I was an actor in it, from its beginning to its end, to the extent of providing some of the sinews of war for the United States Government, without which it could not have defeated the armies of secession, and preserved the Union.

From the time that Abraham Lincoln was elected to the Presidency of the United States, in November, 1860, the South began to prepare for secession from the North, peaceably if the North consented, but by war if it resisted. It was bent on this course because it foresaw in a Republican administration at Washington its practical loss of control of Congress and the spoils of office—in fact, of the Government itself—that it had so long enjoyed under Democratic administrations. James Buchanan’s term as President having expired on March 4, 1861, Abraham Lincoln was then inaugurated as his successor. It angered the South to see a Republican succeed a Democrat in the White House, and it precipitated the tremendous conflict that followed, by seizing Fort Moultrie, in Charleston Harbor, and firing on Fort Sumter. Fort Moultrie’s guns awoke the North to action, and made it a determined unit in defense of the flag that had xxxiibeen fired upon, and its cry was, “The Union must and shall be preserved!”

As this was the most eventful and critical period in our national history since 1776, and so many know it only by what they have read of it, I will give a general idea of its salient features bearing upon the Government finances and the war loans.

When, after the bombardment of Fort Sumter by Fort Moultrie, on April 14, 1861, Major Robert Anderson, the Union commander, accepted, under the stern necessities of the situation, General Beauregard’s terms of evacuation, the die was cast.

The North picked up the gauntlet of war with patriotic enthusiasm, and the great conflict had begun. But when our troops marched out of that dismantled stronghold of the Union, with drums beating and colors flying, it is safe to say that few or none, either in the North or the South, foresaw the long and mighty struggle that would, for four eventful years, follow the bombardment of Fort Sumter, during which gold would become demonetized before the end of the year. It did so on December 30, 1861, and in the darkest days of the conflict commanded a premium as high as one hundred and eighty-five per cent. over United States legal tender notes, making these worth only 54 1/20 cents in gold, while United States bonds were selling for about 60 cents on the dollar in gold.

When the New York Clearing House agreed, on the date named, to suspend specie payments, the example was at once followed by all the banks in the country, and gold immediately began to command a small premium. None supposed then that the suspension would continue for eighteen years.

In England, during the long suspension from 1797 to 1821—through the Napoleonic wars—the premium on gold never rose above forty-one per cent., and that was in 1814, the year before the end of hostilities. This was owing to the policy of William Pitt and his successors in the management of the British finances. They raised all the money needed for war xxxiiipurposes by taxation and loans, thus restricting the paper money issues, so as to prevent currency inflation, whereas we pursued the opposite course.

When Fort Sumter was fired upon, my firm—Livermore, Clews & Co.—was already prominent in Wall Street, and I immediately began to devise ways and means to help the Government to raise the money that I saw would be necessary to prosecute the war for the Union which this bombardment made inevitable. Fort Moultrie’s guns had united the North in a call to arms, and men by tens of thousands left the farm, the loom, the office, and the store, from Maine to Indiana, to join the Union army.

Money, therefore, was needed by the United States Government, and very large amounts of it, to equip troops and purchase munitions of war.

As James Buchanan was then President, and, like a long line of his predecessors, a Democrat, he had several Southerners in his Cabinet. These promptly resigned their places and went South, including the Secretary of the Treasury, Howell Cobb, who left with surprising suddenness, and the office was filled for a brief period by General John A. Dix, as acting Secretary.

But before leaving, Howell Cobb had offered and sold to Wall Street bankers $20,000,000 of United States five per cent. bonds at 105, authorized, of course, by an old law. Owing, however, to the heavy decline in securities, and general depression following the outbreak of the war, only about one-quarter of these bonds were taken and paid for by those who had subscribed for them; and nothing was done by the Government to enforce the completion of the purchase by those who had defaulted under the severe stress of the times.

Their default was a serious matter for the Government at that time, as it left the funds in the Treasury in a very depleted condition, and interest payments on the public debt were about to fall due, which it had no money in its vaults to provide for. At this crisis John J. Cisco, the United States Sub-treasurer in New York, was instructed, from Washington, xxxivto call a meeting of the principal Wall Street bankers at the Sub-treasury, and after stating the situation to them, to ask for an emergency loan on one-year United States notes, and let them fix the rate of interest themselves to correspond with the state of the money market.

Money was then loaning at about twelve per cent. per annum in Wall Street. So when the bankers who responded to Mr. Cisco’s call, myself among the number, assembled at the Sub-treasury, they, after full discussion, agreed to take the amount of notes offered, and at this rate of interest. It was a very high rate for the Government to pay, too high under ordinary circumstances, but the emergency justified it; and Mr. Cisco approved of it, in view of the market rate and the notes running for one year only. My firm took a considerable amount of them and induced others to do so also, and we did so, presumably like the rest of the buyers, not merely because the rate agreed upon was so high, but because we felt it a duty to help the Government; and at all times thereafter during that critical period we worked no less diligently to uphold the public credit.

The Government recognized that a default in its interest payments would have been disastrous to the public credit, and a stumbling block in the way of raising money to prosecute the war, besides causing general depression of business. It therefore had to be prevented at all hazards.

Had these notes not been taken, the Treasury would undoubtedly have been left without the means of paying this interest when due. Consequently, it gratified me to feel that I had been instrumental in inducing others to subscribe for a part of this urgently needed loan.

Soon afterwards Mr. Salmon P. Chase was appointed Secretary of the Treasury by President Lincoln.

Not long afterwards Secretary Chase came to the Sub-treasury and invited bids for $20,000,000 of six per cent. United States bonds maturing in 1884. These were authorized by an old law. He accepted all bids at 94 and over, but rejected all under 94, the result of which was that considerably xxxvmore than a third of the 1884’s remained unsold. This was to be regretted, because the Treasury was in great need of money. I therefore quickly bestirred myself to form a combination to purchase the unsold bonds of 1884 at 94, my firm being willing to take a liberal share of them, and I succeeded in getting subscriptions from banks and capitalists who had not bought any of those sold, for the unsold amount, subject to my own discretion as to the advisability of taking the bonds, after going to Washington and conferring with Secretary Chase.

So I immediately went there by night train and saw the Secretary early in the morning at the Treasury, and told him I had come on behalf of the combination I had formed, to make him a direct offer at his own price—94—for the unsold 1884 bonds. He was evidently pleased and surprised by the apparent improvement in the demand for them. He said, however, with a fine sense of probity, and consideration for the rights of others, that while he was glad I had come to Washington, and made the proposition to take the balance, he did not think it would be fair to those who had bid and whose bids were thrown out, to sell the rest of the issue without first notifying them of the new offer, and giving them the option of taking what they wanted at the price I offered—94.

He asked me to call again the next morning, after he had given the matter further consideration, and I did so. But meanwhile I had talked with many Southern politicians and office-holders, Peter G. Washington, one of the Virginia Washingtons, among them, and seen so much of the extensive war preparations which were being made in and about Washington, that I came to the conclusion that a long and very bitter war lay before us, notwithstanding that Mr. Chase had the day previously assured me that it would all blow over, with peace restored, within sixty days, a prediction that was echoed by Secretary of State Seward a little later. I was particularly impressed by what Mr. Washington, himself a prominent Government official, had told me of Southern sentiment and Southern determination to fight till all was xxxvilost or gained, and by his and other Southerners’ absolute but mistaken confidence that the South would establish its own Confederacy, however long a war it might take to do it. The South in seceding from the Union expected to be able to establish a slave oligarchy, for in Lincoln’s election it foresaw the doom of slavery, as both he and the Republican party were pledged to work for its abolition. Yancey and the other leading Southern “fire eaters” were responsible for this false view.

When I made my second call upon Mr. Chase, I said: “Since I saw you yesterday, Mr. Secretary, I have heard so much in conversation with Southern politicians and office-holders at the hotels, and seen and heard so much of the extensive war preparations on both sides, that I am convinced the war will be a long one, and I fear we shall see much lower prices for Government bonds and securities of all kinds. Feeling as I do, therefore, in justice to those I represent and who have given me full power to use my own discretion in the matter, I must withdraw the offer I made you yesterday. Had you accepted my offer at the time, of course I would have considered the transaction closed, and taken the bonds without question, but as it is, you will admit I am under no obligation, and free to retire.”

“Oh, certainly,” said Mr. Chase, “but I think you are making a mistake, for the war will be over in sixty days and these bonds will go to par!”

But my sober second thought and foresight, based upon what I had seen and heard, and the information I had gleaned in Washington, served me well, and my associates in the combination had reason to thank me for my sagacious action, as the bonds soon afterwards declined to 84; and the Union disaster at the battle of Bull Run, fought at Manassas on July 21, 1861, aroused the North to a realization of the gravity and vastness of the conflict far more than any of the warfare that had preceded it had done; at the same time it made it more determined than before to prosecute the war till the South was conquered into submission to the Union forces.

xxxviiMr. Chase’s second act, in replenishing the Treasury’s funds, was to offer for subscription six per cent. United States notes, receivable for all payments, including customs duties, authority to issue which already existed. He found difficulties in the way, however, and, after conferring with the Sub-treasurer, Mr. John J. Cisco, who recommended the appointment of three Wall Street banking houses to act as Government agents for their sale, on commission, namely, Morris Ketchum & Co., Read, Drexel & Van Vleck, and Livermore, Clews & Co., he appointed them. These were the first and sole Government agents for the sale of its securities that had been thus far selected, and they all appreciated the compliment, and did their work well, for they promptly sold all the notes, of this issue, the Secretary had offered.

Mr. Chase throughout made strenuous efforts to supply the Government with the means for carrying on the war, and he was loyally aided by the banking interests of New York, a fact which he recognized and acknowledged to me and others in appreciative terms.

On a subsequent memorable occasion, in the summer of 1861, Secretary Chase appeared at the Sub-treasury after Sub-treasurer John J. Cisco had called, at his request, a number of leading bankers and capitalists to meet and confer with him. When we assembled there he said to us, in his stately and impressive manner, “Gentlemen, the Government needs and must have fifty millions of dollars, and it wants it at once to meet war expenses. For this I am prepared to issue that amount of Treasury notes of the two hundred and fifty million issue just authorized by Congress—by the act of July 17, 1861—bearing interest at 7 3/10 per cent. I am no financier, so I cannot tell you how to raise the money, but you distinguished leaders in the world of finance well know what means to adopt to get it. So I leave it in your hands entirely. All I need say further is to repeat that the Government must have fifty millions of dollars, and I leave it to you to find the way to procure it.”

Then Mr. Chase sat down, and all of us who were present xxxviiicompared notes with each other in conversation about the room; that is, we talked the matter over for nearly twenty minutes. The result of the conference was then announced by our spokesman, Moses Taylor, who said, addressing Mr. Chase:

“Mr. Secretary, we have decided to subscribe for the fifty millions of United States Government securities that you offer, and to place that amount at your disposal immediately! So you can begin to draw against it to-morrow!”

A general clapping of hands followed this prompt announcement, and Mr. Chase responded by saying:

“Gentlemen, I thank you on behalf of the Government for your public spirit in helping it so generously and so promptly in this emergency.”

The whole scene was of rare and stirring interest, and momentous consequences hinged upon its result. As a drama drawn from real life it would have been effective if represented on the stage, with the large and portly form and massive head of Secretary Chase as its leading feature.

This was the first lot, or installment, of the $250,000,000 issue of 7-30 Treasury notes put on the market.

Of these, the Secretary had the privilege of issuing $50,000,000, payable in coin at the Sub-treasuries in New York, Boston, and Philadelphia, without interest, to be used as currency.

After disposing of the first 50,000,000 of 7-30 notes, as I have described, Secretary Chase communicated with the banks concerning the sale of the remainder, with the view chiefly of saving the payment of commission to the agents. But he was unable in that way to make sales on satisfactory terms to them. So he added to the three Government agents originally appointed for the sale of its securities, Fisk & Hatch, and Vermilye & Co., of New York, and Jay Cooke & Co., of Philadelphia, and told them the “7-30” notes would be delivered to them as fast as called for at the New York Sub-treasury.

Thereupon the New York agents held a meeting, at which xxxixit was agreed that Jay Cooke, of Philadelphia, should be at the head of the agency system and take charge of the advertising of the 7-30 loan, or, in other words, that Jay Cooke should act as Chairman of the agency system. The agreement also specified the commission rates and other details for the purpose of avoiding cutting, or clashing, between the agents. To this organization and agreement Mr. Chase assented; and all the agents made strenuous efforts to make sales from the word go.

Jay Cooke & Co. had no office in New York at that time, nor did they establish one till after the end of the war. This really led to their designation as the head of the agency system, as the selection of a New York firm would have created jealousy among the New York firms.

After all the 7-30s authorized to be issued were sold, came the 5-20 loans, which were sold through the same Government agency system, and the 5-20s were as successful as the 7-30s had been.

Mr. Munson B. Field, Assistant Secretary of the Treasury under Salmon P. Chase, had an examination made of the books at Washington, at my request, to see which individual firm of the Government agents sold the most United States 7-30s and 5-20s, and he reported that Livermore, Clews & Co. had the highest record. But I am willing that the credit should be shared equally by the four United States war loan banking firms, viz.: Jay Cooke & Co.; Livermore, Clews & Co.; Vermilye & Co., and Fisk & Hatch, as all did equally good and earnest work in financing the Government during the Civil War. Certainly the four firms are entitled to equal credit, and no one to a greater extent than the others. There was sufficient glory achieved by the magnificently patriotic work done by these four firms to admit of dividing the honors, so that I do not hesitate to say that they did immensely valuable service to the Nation, and made for themselves a proud National record, which should be always greatly appreciated by the American people, as it was at the time by the Government authorities in Washington. The Government xlwas thus enabled to clothe and feed a million of soldiers in arms on the battlefield, fighting for the salvation of the Nation, and these finally brought the war to a victorious end, thus perpetuating the best form of government known to man.

I may here mention that Secretary Chase said:

“If it had not been for Jay Cooke and Henry Clews, I should never have been able to sell enough of the 7-30 notes and 5-20 bonds to carry on the war.”

This remark of his was generally published at the time in the newspapers.

The Government had sold through its agents $150,000,000 of the 7-30 notes before the suspension of specie payments, an event that was hastened by the Secretary’s withdrawal from the banks into the Sub-treasuries of most of the proceeds of the sales, his call for payment from the agents to the Treasury being in three installments: on August 19th, October 1st, and November 2d. Moreover, the hoarding and exportation of gold were largely stimulated by the anticipation of specie suspension, and, after it occurred, gold suddenly disappeared from circulation.

This obviously involved a corresponding contraction of the circulating medium, and Mr. Chase, to neutralize it, and supply the place of the demonetized coin, issued the $50,000,000 of non-interest-bearing notes, which were called United States Demand Notes. He did this also to obviate the necessity of the State Banks issuing more of their own notes, as well as to raise money to meet the rapidly increasing demands of the Treasury.

Congress, seeing that this contraction tended to produce stringency in the money market, and handicapped the Government’s agents in the sale of its securities, had, on August 5, 1861, suspended the act of August 6, 1846, “providing for the better organization of the Treasury, and for the collection, safe-keeping, and disbursement of the public revenue.” It did this so as to permit the Secretary of the Treasury to deposit any of the money obtained on authorized loans in such xlisolvent specie-paying banks as he might select, and, in addition, it expressed this in a resolution. The resolution was promptly acted upon by Secretary Chase, and this, and a later law, governed the policy of the Treasury ever afterwards. Monetary stringency was thus avoided by the Treasury keeping as much of its money in the banks as it could, and so locking up as little as possible in the Treasury and Sub-treasuries. The evil effects of the Sub-treasuries system in locking money out of circulation was thus practically acknowledged and guarded against.

When the sale of the 7-30s had been completed by the Government agents, there was great pressure brought to bear by the banks throughout the country, who were backed by many influential newspapers, in favor of giving the sale of the 5-20s to the banks instead of to the Government agents. The pressure upon Secretary Chase became so great that he concluded to try the experiment, and authorized all the banks throughout the country to sell the 5-20s. After giving them every opportunity to supersede the agency system, as previously adopted with the six per cent. and the 7-30 Treasury notes, the Secretary was finally compelled to abandon the banks and go back again to the agents, who took hold with vigor and made the sale of the 5-20s as brilliant a success as they had previously made that of the 7-30s. We were friendless in Europe, but we overcame this by patriotism and energy at home.

After a time, some of the banks, and there were only State Banks then, threw out the Demand Notes, and so it became necessary to enforce their circulation. To accomplish this, Secretary Chase asked Congress to make them a legal tender for the payment of all debts, public and private, excepting customs duties, and interest on the public debt, payable in coin.

Congress, therefore, on February 25, 1862, remedied the difficulty by passing the Legal Tender Act, making these and all the United States notes lawful money. In the same act it authorized the issue of $150,000,000 of new non-interestbearing xliilegal tender notes. The provision for the payment in coin of customs duties and interest on the bonded debt was obviously as necessary as it was wise, as customs duties furnished the means for paying the interest in specie; and the fact of its being payable in gold created a demand for our bonds in other countries, as well as at home, which would not have existed on paper money interest.

Before long, the whole of the authorized $250,000,000 of 7-30 notes had been sold to the public through the Government agents; and later, from time to time, Congress authorized large additional amounts of these till finally they reached their maximum, in August, 1865, when $830,000,000 of them were outstanding.

At the same date, also, the Government bond issues, which had kept pace with the 7-30 note issues, and simultaneously reached their maximum, showed immense totals. There were then outstanding $514,880,500, of 5-20 bonds, and $172,770,100 of 10-40 bonds. Among our own people patriotism and profit combined to make these great United States loans doubly attractive, and the Government agents used their best efforts to stimulate the demand for them both at home and abroad. Livermore, Clews & Co., in particular, sold large amounts of these in England and other foreign countries, where they ultimately proved extremely profitable investments. To meet the demands of the war, we—the Government agents—were as anxious as the Secretary of the Treasury himself, and never were men more successful in accomplishing their object and doing good work than we were. There was patriotism worthy of Patrick Henry, as well as profit, in this, and Wall Street can lay the flattering unction to its soul that it rendered, through the Government agents, the best of good service to the Government in this time of peril to the Union.

As General Grant said long afterwards to me, we were not fighting for the Union as soldiers in the field, but we served it equally well by helping it in its struggle for money to prosecute the war; and I felt proud of the active part I took xliiiin thus helping to preserve the Union as one of its army in civil life.

The campaign in Virginia having proved prolific of disaster to the Union army, Congress, on July 11, 1862, authorized the issue of a hundred and fifty millions more of non-interest-bearing United States legal tender notes, and on January 17, 1863, another hundred millions to which it added $50,000,000 on March 3d, in the same year, making $450,000,000 of legal tender notes, or greenbacks, fifty of which were to be held as a Treasury reserve, for the redemption of temporary loan certificates.

This was the maximum issue of non-interest-bearing legal tender notes at any time, and by the act of January 28, 1865 Congress restricted the total to $400,000,000, and there it remained till Hugh McCulloch became Secretary of the Treasury, early in 1865.

Secretary Chase had meanwhile become Chief Justice of the United States Supreme Court, and Thomas Fessenden, who succeeded him as Secretary, had resigned. Mr. McCulloch began to contract the legal tender notes, and had withdrawn $44,000,000 before Congress interfered to prohibit any further contraction. It did this in response to a general protest against any further curtailment of the greenbacks in circulation.

From that time until the panic of 1873 their amount remained at $356,000,000. In the interval Mr. Boutwell had succeeded Mr. McCulloch, and Mr. Richardson had succeeded Mr. Boutwell as Secretary. Mr. Richardson, under diminished customs and revenue receipts, and the stress of the panic, restored to circulation $26,000,000 of the $44,000,000 of legal tender notes that had been withdrawn by Mr. McCulloch, whereupon Congress, on June 22, 1874, provided that the greenbacks in circulation should remain fixed at the then existing total of $382,000,000.

The same law which thus legalized the reissue of the $26,000,000 of legal tender notes by Secretary Boutwell abolished the National Bank reserve, previously required to xlivbe kept on bank-note circulation, and for this substituted the provision that the banks were to deposit five per cent. in legal tender notes of the amount of their own note issues with the United States Treasurer at Washington for the redemption of their notes.

This law is still in force, and the establishment of the Redemption Bureau at Washington has resulted, ever since, in daily receipts by it of mutilated bank notes to be replaced by new notes, in addition to the ebb and flow caused by banks increasing or reducing their circulation. The five per cent. in legal tender deposited is counted by them as part of their legal reserve. But the necessity of sending the notes to Washington, and of receiving them therefrom, involves trouble and loss of time to the banks, and also prevents the banks from contracting their circulation when the demand for it is light and increasing it when heavy, as freely and promptly as they would if every Sub-treasury was made a redemption point for National Banks. Congress ought therefore to authorize the equipment of the Sub-treasuries with redemption bureaus for the banks in their respective districts, in order to facilitate this ebb and flow of bank-note issues, and so increase the much needed elasticity of the currency.

In addition to United States legal tender notes, large amounts of interest-bearing legal tender notes were issued during the war. On September 1, 1865, when the currency, like the whole National debt, reached its greatest amount of inflation, the noninterest-bearing legal tender notes and fractional currency stood at $459,505,311, the three years six per cent. compound interest legal tender notes at more than $217,000,000, and the one and two years five per cent. legal tender notes at nearly $34,000,000, the whole aggregating $685,236,269 issued by the Treasury.

There were also outstanding $107,000,000 of temporary loan certificates. These, being payable after ten days’ notice, were treated as greenbacks by the banks, and counted as part of their lawful money reserve, while the remainder circulated as currency, and so practically increased the xlvvolume of paper money. At the same time the new National Bank law had put in circulation $170,000,000 of National Bank notes; and more than $70,000,000 of State Bank notes were still circulating. The last named were, however, soon taxed out of existence by Congress. The grand total of the issues enumerated was ten hundred and sixty-seven millions of paper money in circulation. Nor was this all, for there were then outstanding $85,000,000 of one-year certificates of indebtedness; and the $830,000,000 of 7-30 notes, called 7-30s, outstanding were extensively used as money, and so tended to increase the inflation of the currency and prices.

It will be seen therefore that the inflation of the currency was really much larger than it appeared to be by the Public Debt statements at that time. But so rapid was the contraction during the eight years following, through the maturity and cancellation of interest-bearing notes and certificates, that it is safe to say we had from sixty to seventy-five per cent. less paper, used as money, in circulation when the panic of 1873 commenced than we had in September, 1865, and to this enormous contraction of our medium of exchange that disastrous panic, the worst this country ever had, was largely due. It was, I repeat, the worst in its effects that this country ever experienced, not excepting the panics of 1837 and 1857, and was aggravated by the Franco-German War, that practically shut American securities out of the European markets, which had previously taken them freely. This was a severe blow to the American bankers who had undertaken to finance the railways then in process of construction in different parts of the country, and who had relied upon finding both home and foreign markets for the sale of the bonds issued against the completed mileage of these railways, and it led to much embarrassment and a number of failures. The depression following this panic of 1873—in which Jay Cooke & Co. failed owing to their having undertaken to finance the Northern Pacific—was prolonged, and prosperity did not really return to us as a Nation till after the resumption of specie payments in 1879. Meanwhile, xlvinearly all the uncompleted railways in the country had been reorganized through foreclosures that wiped out hundreds of millions.

Our National debt, which had increased from $64,000,000 on June 30, 1860, and $88,409,387 on June 30, 1861, to $2,845,907,626 on September 1, 1865, had then been very largely reduced, for it was only $2,140,695,365 on September 1, 1873. The debt and the currency had gone up and down together under the influence of a common cause. Not till specie payments were resumed by the Government and the banks did gold cease to command a premium. With this the Gold Room became a thing of the past.

The great activity and the enormous sales of the Government agents may be inferred from the maximum amounts I have quoted, of the 7-30 notes, and the 5-20 and 10-40 bonds outstanding five months after Lee surrendered to Grant at Appomattox on April 9, 1865.

The total debt on which interest was payable in coin then amounted to $1,116,658,100, while that bearing interest in lawful money was $1,874,478,100, the first calling for $65,001,570 in gold annually, and the other for $72,527,646 of greenback currency.

That great event—Lee’s surrender to Grant—that ended the war, was the fitting prelude to General Grant’s election to the Presidency. It made it certain that no other Republican candidate for the office of President of the United States would have any chance of success at the next general election, and, of course, no Democratic candidate could be elected. Grant became our great National hero, and the country glorified him for his splendid war record.

But soon after the memorable historical scene at Appomattox, while the country was rejoicing over the advent of peace, with the Union restored, there came that terrible tragedy at Ford’s Theater in Washington, when President Lincoln, on April 14, 1865, was assassinated by John Wilkes Booth, and on the following day Vice President Andrew Johnson was sworn in as President.

xlviiThen, indeed, the Nation was plunged into mourning, and mourning emblems from ocean to ocean testified to the National grief.

I will not dwell on the stormy career of Andrew Johnson as President, and the impeachment proceedings against him, that for a long time made both branches of Congress seething cauldrons of excitement. But it was a happy relief to the country when his term expired and General Grant succeeded to the Presidency on March 4, 1869, with Schuyler Colfax as Vice President. The Democratic candidates who had run against General Grant in the campaign in which he was elected in November, 1868, were Horatio Seymour and General Francis P. Blair, Jr. But the popularity of Grant was so overwhelming that his election was a foregone conclusion.

Till within a short time of its final termination the duration of the war was a matter of much uncertainty, and its ultimate result had long been the subject of doubt and gloomy forebodings by many who failed to see that the superior money power and resources of the North were sure to conquer and crown the Union with victory in the end. Our currency, greatly inflated though it was, remained good throughout the trying ordeal, whereas that of the Confederate States became utterly discredited and worthless, thus repeating the history of the French assignats.

A new era opened in our history with the ending of the war, and our currency, which, of course, had previously no circulation in the South, began to circulate there. This, of itself, was equivalent to extensive contraction. The currency of one section had now to supply the currency needs of both sections, and for a long time the drain of money from the North to the South was felt in the money market.

The country was somewhat like a sick man accustomed to and dependent on stimulants, to withdraw which suddenly would have been perilous. Many in Congress recognized this danger, for it was a noticeable feature of the debates on the subject that not a few of those who had been strongly opposed to our excessive issues of paper money during the war, and xlviiiwarned the country against them, were among those who opposed violent contraction as being a remedy worse than the disease. The radical contractionists, however, failed to see, or refused to acknowledge, that the arguments which would have applied to the rising tide of the currency while the war continued, and there was danger of indefinite further inflation, did not apply with equal force to the altered condition of affairs.

Although schemes of radical contraction were rejected, even the moderate measure of contraction that was adopted proved too severe to be endured without much complaining from business interests, so hard and painful is the process of contraction, whereas that of inflation is always pleasant and easy.

In later years I became very well acquainted with General Grant, and toward the end of his first term of the Presidency, when a good deal of opposition was manifested to his renomination by the press, including the New York Evening Post, I made strenuous efforts to secure his renomination. To that end I organized a public meeting at the Cooper Institute, and induced William E. Dodge to act as Chairman. It was a great popular success, and Grant’s renomination was unanimously advocated with immense enthusiasm. The Evening Post then said that after such an overwhelming demonstration it was evident that public sentiment was on the side of Grant, and that it was useless to oppose his renomination. He was accordingly renominated by the Republican Party and triumphantly reëlected. His second term as President began on March 4, 1873, and he retired from the Presidency four years later.

General Grant was well aware of the part I took at this meeting, which, many said, turned the scale in favor of his renomination when it was doubtful and trembling in the balance, and he also knew of my services in connection with the Government war loans, and in organizing various public meetings to celebrate Union victories and stimulate recruiting for the army. He said that I deserved some public recognition xlixof my public services in supplying the sinews of war, and asked me how I would like to be Secretary of the Treasury, but I said I preferred Wall Street. Therefore, later on, he appointed me Fiscal Agent for the United States Government in all foreign countries, in place of Baring Brothers, of London, who had been its fiscal agents up to that time, since the Bank of England had acted in that capacity.

When it became certain that General Grant’s death was very near, I was anxious to see him once more, and also a strong advocate of his burial in the city of New York, where his tomb would be a conspicuous monument, to be seen by all, instead of burying him almost out of sight in Arlington Cemetery or at West Point, which places were strongly urged. The States of Ohio and Illinois also claimed him, as did the city of St. Louis. They all made strenuous efforts to obtain the family’s consent, as well as his, through committees sent to Mount McGregor for that purpose.

So I went to Mount McGregor, where he was, and as delicately as possible urged this upon him and his family. All of the members of the family assented, and the General, being unable to speak, nodded his assent also to what I said. Then when he was wheeled out in his chair, on the veranda, on his way to take his regular afternoon sun bath on the mountain side, accompanied by Dr. Douglas, he wrote on a pad that all he demanded was that his wife should be buried by his side when her own time came. Knowing them all well, I remained there two hours, talking with the General and the family, and my visit, when I made its result known, led to the selection of New York as the great soldier’s burial place, on the conditions mentioned by him. Within three days after I had seen him, the great General died. I had visited him on a Monday afternoon, and he died on the following Wednesday. His death threw the Nation into mourning.

Incidentally, I may mention that I started the organization of the famous Committee of Seventy, that brought about the overthrow of the corrupt Tweed Ring, that had robbed the lcity of New York of about a hundred millions of dollars. I nominated sixty-five of its members, and for my instrumentality in forming that Committee of eminent and public-spirited citizens I received many congratulations. That Committee not only drove the thieves out of office, but caused the prosecution of all of them who had not fled the country, and ultimately brought back and convicted Tweed, who died in prison. Meanwhile, it had reorganized the City Departments, and put new men in office, with Andrew H. Green as Comptroller. It purified, and, for a time, virtually ruled the city, through controlling its government.

But above everything else in my business life, I regard with most satisfaction the work I did in marketing the Civil War loans of the Government of this great and glorious country of ours—the United States of America—and in other ways strengthening the hands of the Government to the best of my ability and with all my heart and soul, not only as a banker but a patriotic American citizen; and I felt that I had my reward when, after the memorable four years’ war, peace came bringing with it Victory for the Union and a reunited country, a victory which gave permanence to the best government ever known to man—a government “of the people, for the people, and by the people,” which bids fair to be everlasting.

My advent in Wall Street was on the heels of the panic of 1857. That panic was known as the “Western blizzard.” It was entitled to the name, as its destructive power and chilling effects had surpassed all other financial gales that had swept over Wall Street. The first serious result of its fatal force was the failure of the Ohio Life and Trust Company, a concern of gigantic dimensions in those days.

The Company had an office in Wall Street, and on the announcement of the collapse, business became completely paralyzed. This failure was immediately followed by the suspension of many large firms that had withstood the shock of all ordinary collisions and had successfully weathered many financial storms.

The panic was due in part to excessive importations of foreign goods, and also to the rapid construction of railroads, to a large extent on borrowed capital. There were other contributing causes. The crops were bad that year, and the country was unable to pay for its imports in produce, and coin was brought to the exporting point. In October, the New York City banks suspended payments, and their example was followed throughout the country. 6Bank credits had been unduly expanded everywhere, and the time had naturally arrived for contraction. It came with a bound, and financial disaster spread like a whirlwind, becoming general.

The Stock Exchange had been a moderately growing concern for the ten years previous to this calamity, and the securities there dealt in had been rapidly accumulating in number and appreciating in value. Its members were wealthy and conservative, with a strong infusion of Knickerbocker blood, an admixture of the Southern element and a sprinkling of Englishmen and other foreigners.

The effect of the crisis on the majority of Stock Exchange properties was ruinous. Prices fell fifty per cent. in a few days, and a large proportion of the Board of Brokers were obliged to go into involuntary liquidation. There was a great shaking up all around.

Then came the work of rehabilitation and reorganization. Confidence gradually returned. The Young Republic had great recuperative powers, and they were thoroughly exerted in the work of resuming business. Much of the old conservative element had fallen in the general upheaval, to rise no more. This element was eliminated, and its place supplied by better material, and with young blood, and in December the banks resumed business.

This panic and its immediate results created an entire revolution in the methods of doing business in Wall Street. Prior to this time, the antique element had ruled in things financial, speculative and commercial. This crisis sounded the death knell of old fogyism in the “street.” A younger race of financiers arose and filled the places of the old conservative leaders.

The change was a fine exemplification of the survival of the fittest, and proved that there was a law of natural selection in financial affairs that superseded old conservatism and sealed its doom.

Until that time, the general idea prevailed that those engaged in financial matters must be people well advanced in 7years, even to the verge of infirmity. It is the same idea that has been handed down, as if by divine right, from old world prejudices, especially in the learned professions. No doctor was considered a safe prescriber unless his hoary locks, bald head and wrinkled brow proclaimed that he had almost passed the period of exercising human sympathy. The same rule of judgment was applied to the lawyer and the clergyman.

These unworthy prejudices were fostered by the character of the Government of the old country, and nurtured by the surroundings of the venerable monarchies of Europe, where they exist largely even to the present day. So tenacious of life are these old-fashioned ideas, that many of them were found in full vigor, dominating Wall Street affairs up to the crash of 1857, fostering the antique element and choking off salutary enterprise.

Hence the process of decay of these archaic notions and our gradual development.

This struggle for new life in Wall Street was not successfully developed without a serious effort to attain it. The old potentates of the street fought hard to prolong their obstructive power, and their tenacious vitality was hard to smother, reminding one of the nine lives attributed to the feline species. The efforts of the young and enterprising men to gain an entrance to the Stock Exchange were regarded by the older members as an impertinent intrusion on the natural rights of the senior members. It was next to impossible for a young man, without powerful and wealthy patrons, to obtain membership in the New York Stock Exchange at the time of which I speak.

The old fellows were united together in a mutual admiration league, and fought the young men tooth and nail, contesting every inch of ground when a young man sought entrance to their sacred circle.

The idea then struck me that there was a chance for young men to come to the front in Wall Street. I was then engaged in the dry goods importing trade, in which I received 8my early training. I had been kept out of the Exchange for several years by the methods to which I have alluded. My fate was similar to that of many others. It was only by an enterprising effort, and by changing the base of my operations, that I finally succeeded.

The commissions charged at that time were an eighth of one per cent. for buying and selling, respectively.

After numerous efforts to gain admission to the Exchange, without success, I finally made up my mind to force it. I at once inserted an advertisement in the newspapers, and proposed to buy and sell stocks at a sixteenth of one per cent. each way. This was such a bombshell in the camp of these old fogies that they were almost paralyzed. What rendered it more distasteful to them still was the fact that, while they lost customers, I steadily gained them. The result was that they felt compelled to admit me to their ranks, so that I could be kept amenable to their rules and do business only in their own conventional fashion. My membership cost me, in all, initiation fee and other trifling expenses in connection therewith, $500. This presents a striking contrast to the recent price of a seat, $35,000, but though this difference seems very large, yet the changes in every other respect connected with Wall Street affairs have been in similar proportion. Among some of the old members of that day were Jacob Little, John Ward, David Clarkson and others whose names may be found in the archives of the Stock Exchange.

As an instance of the way in which membership was then appreciated, it may be mentioned that speculators frequently offered $100 a week, or ten times the cost of membership, for the privilege of listening at the keyhole during the calls.

Although the prostration growing out of this panic was very great and of long continuance throughout the country, general confidence being shaken to its very foundation, yet, on the whole, it was a great gain, and marked an era of financial and speculative progress. It was the chief cause 9in drawing out the young element in the business of Wall Street, which might have lain dormant for a much longer period without this sudden and somewhat rude awakening. It not only brought Young America to the front in speculation, commerce and general business, but it imparted an impetus of genuine enterprise to every department of trade and industry, from the good effects of which the country has never since receded.

This new element, emanating from the throes of one of the greatest business revolutions that any country has ever experienced, has continued to grow and thrive with marvellous rapidity. It is now getting so large that the Exchange will soon require a whole block instead of a basement as at its origin for its headquarters. The Governing Committee of the Stock Exchange are now looking forward to arrangements for this consummation. How the ancient fathers of my early days in Wall Street would have been shocked at the bare idea of such amazing progress!

It is not the least singular phase of this evolution in Wall Street, that the youthful element to which I have referred stands alone as compared with the progress achieved by the same class of men in any other nation. In America only does the youthful element predominate in financial affairs; and results have justified the selection, which perhaps in no other nation is possible. Thanks to the freedom of our Republican institutions, which, in spite of some individual deductions and the occasional obstructions of “crankdom,” make way for that progress, in the wake of which the other nations of the world are emulous to follow.

The Exchange was at this time situated on William street between Beaver street and Exchange Place. That place is rich in speculative reminiscences. It was there that Jacob Little made and lost his nine fortunes. It was there that Anthony Morse, the lightning calculator, operated. He could foot up four columns of figures as easily as the ordinary accountant could run up one. He had been a clerk, and having saved seven hundred dollars by close economy, 10began to deal in stocks. His career at that time was more marvellous even than that of Keene of a recent date. Morse made a fortune of several millions in a year, and became bankrupt during the same period, without any available assets to speak of. It was all honorably lost, however. There was no Ferdinand Ward game connected with it.

Youthful speculators had not then learned the “crooked” methods of the young idea of modern times. It was there also that Daniel Drew began to accumulate those millions that afterward were subject to such a rude scattering. It was there that the celebrated “corners” in Rock Island, Prairie du Chien and Harlem were concocted. It was there that the wealth was accumulated which built twenty thousand miles of Western railroads, causing many millions of acres, that would otherwise have been a wilderness, to blossom like the rose, in spite of Mr. Powderly’s opinion that no material good can come out of speculation, and thus adding immense wealth in real estate to the country, besides conferring incalculable benefits on trade and commerce, and preparing comfortable homes not only for the pioneers and surplus population of the Eastern States, but a teeming soil that has attracted the down-trodden of every nation to come and partake of the blessings of freedom and prosperity.

One of Jacob Little’s speculative ventures has been rendered historically famous through the rule of limitation of sixty days for option contracts. The necessity for this limit was brought about by one of his celebrated attempts to manipulate the market. He was one of the most prominent speculators in Erie in the early days of Drew’s transactions with that property and its stocks. Mr. Little had been selling large blocks of Erie on seller’s option, to run from six to twelve months. This was in the early history of “corners,” before the method of managing them scientifically had been fully developed and while “blind pools” were yet in embryo.

The leading members of the Erie Board formed a pool to “corner” Mr. Little, and ran Erie shares up to a considerable 11height. They imagined that he was in blissful ignorance of their purpose, and had everything arranged for a coup d’etat which was to reach its crisis at two o’clock on a certain day, when Little was to be completely overwhelmed and hopelessly ruined. An hour prior to the time appointed by the clique for his disaster he walked into the Erie office, opened a bag filled with convertible bonds, and requested an exchange of stock for the same. He had purchased the bonds in London and had them safely locked up for the emergency, which he promptly met on its arrival. He got the stock, settled his contracts, broke the “corner,” and came out triumphantly.

The option limit of sixty days was afterwards adopted in order to prevent similar triumphs in manipulation on the “short” side.

As will be illustrated more fully in subsequent chapters, Mr. Little’s convertible bond trick was used with signal advantage by his speculative successors in Erie, who practically demonstrated on several occasions that there were millions in it.

Mr. Little was generous and liberal to a fault with his brother speculators who had experienced misfortune. He used to say that he could paper his private office with notes he had forgiven to the members of the Board. He was also remarkable for his great memory. He could easily remember all the operations he made in the course of a day without making a note or a mistake.

Like Drew, he was careless in his attire, wearing a hat like that of a farmer, and not a very prosperous one, but he had no compeer in his day at calculating ahead in a speculative venture.

Clerical Obliquity of Judgment About Wall Street Affairs.—The Slanderous Eloquence of Talmage.—Wall Street a Great Distributor, as Exhibited in the Clearing House Transactions.—Popular Delusions in Regard to Speculation.—What Our Revolutionary Sires Advised About Improving the Industrial Arts, Showing the Striking Contrast Between Their Views and the Way Lord Salisbury Wanted to Fix Things for This Country.

The dense ignorance displayed by men outside of Wall Street, in regard to the business of that great mart, is almost incredible. Even the most intelligent men I meet in other professions and walks of life have the most utterly crude and undefined notions about the methods of doing business at the Stock Exchange. Many good and pious clergymen are under the impression that Wall Street is a name for the sum total of all kinds of infamy, and solemnly exhort their devoted flocks not to touch the unclean thing.

Clerical obliquity of judgment is not quite so bad, nor popular ignorance so dense in this respect, as it has been, but there is a large field for improvement yet. The business activity of the country, and the spirit of intercourse being so rapidly infused throughout all ranks of the community, have demonstrated that this antipathy to Wall Street has been simply an unworthy prejudice, in spite of the high moral authority from which it has emanated.

I don’t wish to throw any aspersion on the noble purposes of the clergy. The end they have been seeking has been good, but it has not always justified the means employed. These good men have unwittingly misrepresented Wall Street, to the great detriment of the business interests of the country.

14There is no excuse, however, for a man in this enlightened age, who professes to be a Shepherd in Israel and a spiritual leader of the people, to remain ignorant of an important fact, or to continue to see that fact through a false medium, when he has the opportunity of coming into Wall Street and seeing for himself. He has no right to set himself up as a censor, a public detractor, and a public libeller upon a set of men and merchants who are the bone and sinew of the commercial and industrial interests and prosperity of the country. It is not only a personal wrong but a public injury.

The Rev. T. De Witt Talmage has perhaps done more than any other clergyman to make our speculators, investors and business men ridiculous in the eyes of the rest of the community and in the estimation of John Bull, in whose dominion his so-called sermons are extensively read. Talmage has employed his flashing wit and mountebank eloquence to bring financial disgrace on the business methods of the whole country by the manner in which he has ignorantly vilified Wall Street.

He can go to the Cremorne Garden, Billy McGlory’s, Harry Hill’s and other places of dubious reputation, and make himself acquainted with the real condition of things there.

How far he has penetrated into the green rooms and behind the scenes in these places it is not my business to know, but why should he not treat Wall Street as fairly, where everything is open to inspection, as he does these dens of vice, where midnight scenes of villainous revelry and reckless dissipation reign supreme? Why does he misrepresent Wall Street without knowing anything about it? He can come here and go wherever he wishes without a bodyguard of detectives or fear of molestation. Why is he so particular about doing justice to the brothel and the gaming den, while he airs his ludicrous eloquence to the highest pitch to falsify the respectable business methods of Wall Street?

15I recollect the time that men in the higher walks of life, and among the higher classes (if I may use the expression, in opposition to the opinion of the New York Sun, whose editor maintains that we have no classes in this country) would have been ashamed to be seen in Wall Street. Now, men in the same sphere are proud of the distinction, both socially and financially. In fact Wall Street has become a necessity as a healthy stimulant to the rest of the business of the country. Everything looks to this centre as an index of its prosperity. It moves the money that controls the affairs of the world.

Take the Clearing House, for example, with its 50 billions of transactions annually. All but a fraction of this wonderful wealth, compared with which the stupendous pile of Crœsus was a mere pittance, passes through Wall Street, continually adding to its mighty power. This great power, in comparison with which the influence of monarchies is weak, is not, like the riches of these, concentrated chiefly on itself. It is imparted to all the industries and productive forces of the country. Wall Street is a great distributor. It is also universal in its benevolent effects, practically unlimited by either creed or geography.

It has taken greater advantage, for the general good, of scientific discovery than all the scientific societies combined. Wherever the electric wires have penetrated the Wall Street broker has followed. The members of the Stock Exchange are, through the power of electricity, in closer sympathy with the great heart of civilized humanity than all the missionaries and philanthropic societies in the world. They are the great cosmopolitans of the age. In practical sympathy they outshine the most devoted efforts of the benevolent associations of half the continent. They have the means to do it, and this comes chiefly from being practical, and from their strong antipathy as a body to cant and hypocrisy.

There are many popular delusions outside the ranks of the clergy connected with the effort to form a correct estimate 16of Wall Street affairs by the general public. It is a popular delusion that it is a place where people who are in the “ring” take something for nothing. No idea could be further wide of the mark in regard to Wall Street men as a class, however true it may be of some individual instances, as in other departments of business. Wall Street gives full value for everything it receives, and the country at large is deeply its debtor. Some people may think this a paradox, but there is nothing more easily demonstrated to those who have observed the commercial and industrial progress of the country and the age.

Wall Street has furnished the money that has set the wheels of industry in motion over the vast continent, and in one century has brought us abreast, in the industrial arts, of countries that had from one to two thousand years the start of us. In this respect it has assisted nobly to carry out the ideas of the fathers of the Constitution. Washington, Jefferson, Madison, Franklin and Hamilton laid down the doctrine that it would be a betrayal of the interests of posterity to limit the productive energies of this country to raw material. With our present experience we may think it strange that this question should ever have been debated, but it was, even after the old tyranny had been obliged to loosen its grasp on the struggling enterprise of the young Republic. Our old revolutionary sires deserve credit for their foresight, but what would have been the fate of their commercial philosophy if Wall Street had not supplied the sinews of war to cope with the forces of nature, to work our mines and build our railroads, and through these and other means, to attract the teeming population from every clime to cultivate our virgin soil and develop our wonderful industries and resources?

Apropos of the above observations, I may add that during the debate in the British Parliament, on the recognition of the Confederacy, the great manufacturing power in our industrial, financial and commercial progress was clearly 17exhibited and thoroughly appreciated by British statesmen. It was made one of the strongest arguments, too, by some of the representatives of our jealous and envious cousins on the other side of the “pond,” why Great Britain should recognize and aid the South in the war. Lord Salisbury, then Lord Robert Cecil, at present the leader of the Tory party in England, and the advocate of twenty years’ coercion for Ireland, was one of the bitterest foes of the Union, chiefly on this account. He was one of the Vice-Presidents of the “Southern Independent Association,” for the promotion of the cause of the Rebellion, and for supplying the Confederates with money and arms, and for the ultimate object of founding an empire of slavery on this continent.

In his speech then, on the Southern blockade, the future Lord Salisbury made the following touching allusion to our dangerous prosperity on this side: “The plain matter of fact is, as every one who watches the current of history must know, that the Northern States of America never can be our sure friends, for this simple reason—not merely because the newspapers write at each other, or that there are prejudices on both sides, but because we are rivals—rivals politically, rivals commercially. We aspire to the same position. We both aspire to the government of the seas. We are both manufacturing people, and in every port as well as at every court we are rivals to each other. With respect to the Southern States the case is entirely reversed. The population are an agricultural people. They furnish the raw material of our industry, and they consume the products which we manufacture from it. With them, therefore, every interest must lead us to cultivate friendly relations, and we have seen that when the war began they at once recurred to England as their natural ally.”

Thus we see how anxious Great Britain was to take the place which the North has reserved for itself, and so proudly maintained in commerce and industry.

The great coming man, Salisbury, wanted to reduce us all 18to the position of hewers of wood, drawers of water and planters and pickers of cotton, for the special accommodation of Great Britain, as the mighty centre of the world’s manufacturing industries. This would have given a set-back to our civilization, causing us to make a retrogressive move to the dark ages. Since then we have afforded this noble lord and his nation ample proof that we are very far advanced in the manufacturing arts ourselves, and that in many things we are far ahead of England, and they are no doubt greatly surprised that the arrangement by which England was to have all the profit and America all the hard work, has not been carried out.

In this wonderful development of the industrial arts, Wall Street money, enterprise and speculation have played by far the most conspicuous and progressive part, thus enabling us, in little more than two decades, to outstrip the old nations that were so anxious to enslave us, in spite of the fact that they had centuries upon centuries the start of us. It must be galling to some of these people that we are now the most available candidates for the commercial and industrial supremacy of the world, and we have attained this position, in a great measure, through the instrumentality of Wall Street as a civilizer.

How to take Advantage of Periodical Panics in Order to Make Money.—Wholesome Advice to Young Speculators.—Alleged “Points” from Big Speculators End in Loss or Disaster.—Professional Advice the Surest and Cheapest, and How and Where to Obtain it.

But few gain sufficient experience in Wall Street to command success until they reach that period of life in which they have one foot in the grave. When this time comes these old veterans of the Street usually spend long intervals of repose at their comfortable homes, and in times of panic, which recur sometimes oftener than once a year, these old fellows will be seen in Wall Street, hobbling down on their canes to their brokers’ offices.

Then they always buy good stocks to the extent of their bank balances, which have been permitted to accumulate for just such an emergency. The panic usually rages until enough of these cash purchases of stock is made to afford a big “rake in.” When the panic has spent its force, these old fellows, who have been resting judiciously on their oars in expectation of the inevitable event, which usually returns with the regularity of the seasons, quickly realize, deposit their profits with their bankers, or the overplus thereof, after purchasing more real estate that is on the up grade, for permanent investment, and retire for another season to the quietude of their splendid homes and the bosoms of their happy families.

If young men had only the patience to watch the speculative signs of the times, as manifested in the periodical egress of these old prophetic speculators from their shells of security, they would make more money at these intervals 20than by following up the slippery “tips” of the professional “pointers” of the Stock Exchange all the year round, and they would feel no necessity for hanging at the coat tails, around the hotels, of those specious frauds, who pretend to be deep in the councils of the big operators and of all the new “pools” in process of formation. I say to the young speculators, therefore, watch the ominous visits to the Street of these old men. They are as certain to be seen on the eve of a panic as spiders creeping stealthily and noiselessly from their cobwebs just before rain. If you only wait to see them purchase, then put up a fair margin for yourselves, keep out of the “bucket shops” as well as the “sample rooms,” and only visit Delmonico’s for light lunch in business hours, you can hardly fail to realize handsome profits on your ventures.

The habit of following points which are supposed to emanate from the big operators, nearly always ends in loss and sometimes in disaster to young speculators. The latter become slavish in their methods of thought, having their minds entirely subjected to others, who are presumed to do the thinking for them, and they consequently fail to cultivate the self-reliance that is indispensable to the success of any kind of business.

To the question often put, especially by men outside of Wall Street, “How can I make money in Wall Street?” there is probably no better answer than the one given by old Meyer Rothschild to a person who asked him a similar question. He said, “I buys ‘sheep’ and sells ‘dear.’”

Those who follow this method always succeed. There has hardly been a year within my recollection, going back nearly thirty years, when there have not been two or three squalls in “the Street,” during the year, when it was possible to purchase stocks below their intrinsic value. The squall usually passes over in a few days, and then the lucky buyers of stocks at panic prices come in for their profits ranging from five to ten per cent. on the entire venture.

21The question of making money, then, becomes a mere matter of calculation, depending on the number of the squalls that may occur during any particular year.

If the venture is made at the right time—at the lucky moment, so to speak—and each successive venture is fortunate, as happens often to those who use their judgment in the best way, it is possible to realize a net gain of fifty per cent. per annum on the aggregate of the year’s investments.

In this way it is easy to see how the rich will get richer, and the poor poorer.

Sometimes men make money in Wall Street by strange turns in their fortunes that appear like having been governed by a special Providence, and this sometimes occurs when men appear to be utter wrecks.

One of the strangest examples of this kind, in my personal experience, occurred in the summer of 1885.

A man called at my office utterly broken down in spirit, but with a few hundred dollars left out of many thousands that he had possessed a few months previously.

“I read your letter of the third of July,” he said, “and had some mind to act on the advice which it contained, but was unfortunately dissuaded therefrom by reading an article in a city paper by a very able writer, who had got the bearish mania, then prevalent, on the brain, and who, I am informed, is now, like myself, almost ruined.”

“I hardly know what to do,” he continued. “I have a few hundred dollars left, which I will leave with you, and you can use your pleasure with it. I am going out to the country for the remainder of the summer. I will leave my address with you, and, if there is any good result, you can let me know of it. I really don’t hope for much, and of course, I need hardly tell you that, in the event of being ‘wiped out,’ you need not apply to me for more margin. Let this go with the rest,” he added, in a despairing tone.

The man walked sadly out, and I did not see him again for months. I invested his pittance on the carte blanche 22order which he had given me, to the best of my judgment. The result was favorable, and his account began to accumulate. He was duly advised, according to our business methods, of his good luck, but I did not hear anything from him personally for several months.

One day, a portly gentleman, with rosy health beaming in his face, stepped into my private office, and was quite profuse in his thanks to me.

“Well,” I said; “I have but a hazy recollection of your acquaintance, if I know you at all.”

“Don’t you recollect,” he said, “the time I went to the country in summer, when I told you my case, and how I had been unfortunate in speculation?”

“And are you the man who went to the country in despair to die?” I asked, in surprise at his changed appearance.

“I am,” he replied, “and I owe the wonderful change which you now see to your timely advice. I staked almost my last dollar on that counsel, and now I am comfortably fixed through your management of the small fund placed at your disposal.”

How, this was an example of a man who did make money simply by taking the advice that was freely tendered him.

There are others who lose, in spite of all that the most honest judgment can do to prevent them.

Some men, when they have money, are so fearfully perverse that all attempts to get them to do the right thing only have the opposite effect, and they prefer to follow every wild rumor.

One day, for instance, a man gave me an order to buy a thousand shares of Erie without limit. The order was executed at 94. I had no sooner bought it than the stock went down.

My customer returned in a short time and ordered the stock to be sold. It was then 92½.

In half an hour afterwards he returned again and ordered it bought back again, without any limit as before. It was bought back at 95.

23After consulting with other friends for some time he ordered it sold again. The market by that time was 90.

He then came back the fifth time, and said: “I first saw one man who told me to buy, and then another who told me to sell. I understand one is called a ‘bull’ and the other a ‘bear.’ About these names I don’t know much, but I do know now that I am a — jackass.”

This affords a good illustration of the way the average speculator is managed and perplexed in Wall Street. There is a means of avoiding such a peck of trouble, however, if he would only take a little wholesome advice, wait patiently for a proper opportunity, and not rush headlong to purchase on the “tips” of the delusive rumor mongers. He would then begin to learn how to make money in Wall Street.

As I have pointed out in another chapter, speculation is a business that must be studied as a specialty, and though it is popularly believed that any man who has money can speculate, yet the ordinary man, without special training in the business, is liable to make as great a mistake in this attempt, as the man who thinks he can act as his own lawyer, and who is said “to have a fool for a client.”

The common delusion, that expert knowledge is not required in speculation, has wrecked many fortunes and reputations in Wall Street, and is still very influential in its pernicious and illusory achievements.

When a man wants correct advice in law he goes to a professional lawyer in good standing, one who has made a reputation in the courts, and who has afforded other evidence to the public that he is thoroughly reliable. No man of average common sense would trust a case in law to a bar room “bummer” who would assert that he was well acquainted with Aaron J. Vanderpoel, Roscoe Conkling, and Wm. M. Evarts, and had got all the inside “tips” from these legal lights on the law relating to the case in question. The fellow would be laughed at, and, in all probability, if he persisted in this kind of talk, would be handed over to 24the city physician to be examined in relation to his sanity, but in Wall Street affairs men can every day make similar pretensions and pass for embodiments of speculative wisdom.

If speculators are caught and fleeced by following such counsel, the professional brokers who are members of the Stock Exchange, are no more to blame than the eminent lawyers to whom I have referred would be for the upshot of a case that had been taken into court on the advice which some irresponsible person had pretended to receive from these celebrities of the New York Bar.

Professional advice in Wall Street, as in legal affairs, is worth paying for, and costs far less in the end than the cheap “points” that are distributed profusely around the Street, thick as autumn leaves in Vallombrosa, and which only allure the innocent speculator to put his money where he is almost certain to lose it.

My advice to speculators who wish to make money in Wall Street, therefore, is to ignore the counsel of the barroom “tippers” and “tipplers,” turn their backs on “bucket shops,” and when they want “points” to purchase, let them go to those who have established a reputation for giving sound advice in such matters, and who have ample resources for furnishing correct information on financial topics, as well as a personal interest in making all the money they can for their clients.

There is no difficulty in finding out such reliable men and firms in the vicinity of Wall Street, if speculators will only read the newspapers, or make inquiry of the first messenger boy they may happen to meet.

Sons of Independent Gentlemen make very bad Clerks.—They become Unpopular with the Other Boys, and must Eventually Go.—Night Dancing and Late Suppers don’t contribute to Business Success.—Give Merit its True Reward.—Keeping Worthless Pretense in its True Position.—Running Public Offices on Business Principles.—A Piece of Gratuitous Advice for the Administration.—A College Course not in general calculated to make a Good Business Man.—The Question of Adaptability Important.—Children should be Encouraged in the Occupation for which they show a Preference.—Thoughts on the Army and Navy.

I have usually found that the sons of independent gentlemen, who have great expectations, make very poor clerks and don’t develope into Good Wall Street men.

Their expectations seem to dwarf the ability that might develope under the more favorable auspices of being obliged to paddle their own canoe. Like the light under a bushel, referred to in the Good Book, their brilliant qualities are obscured and circumscribed by the paternal protection in prospect. They have not a sufficient incentive to work, because they know that all they require for their natural wants will fall easily into their laps. The motives, therefore, which usually develope the greatest mental qualities are absent and the qualities themselves lie dormant, and frequently decay like poppy seeds in their seed vessels, without being productive of the fruits which are the result of industrial habits and the desire for acquisition. Such young men, instead of being a help to an office into which they happen to be thrust, often through friendship and favoritism, are a great hindrance and a stumbling block in the path to promotion of other young men.

26After many ineffectual attempts to reform and remodel them, they have generally to be discarded, as the drone bees are ejected from the rest of the industrious hive. And they usually become as unpopular with the other boys as the drone does with his comrades who make the honey and will not suffer the idle fellow to feast on the fruits of their labor.

Young men who have nothing but their own resources to depend upon will be found far more meritorious than this higher class. There are some eminent exceptions, but it takes a large amount of good sense to counteract the conceit instilled by the idea of financial independence by birth.

The latter are more liable to youthful and enervating excesses, as they have the means to indulge in nocturnal amusements that are not conducive either to clear brains or active habits during the day.

Night dancing and late suppers, with some of their social concomitants, when habitually indulged, don’t contribute to business success. I know how this is myself, and therefore speak feelingly; but I don’t lay myself open to the charge of egotism when I say that I have never permitted the habit to get the better of me.

I am not setting myself up as a censor of other men’s habits, nor attempting to utter mere moral or religious cant. I am simply discussing the question from a scientific and physical standpoint, and I say that these habits don’t contribute to business success, but, on the contrary, form one of the greatest hindrances to it. They make any man, no matter how strong he may be, physically unfit for ordinary business. These “recreations” up town, however attractive and delightful they may be, don’t fit a young man for business down town. The line must be drawn somewhere. Let us draw it, say, at Fourteenth street.

There has been much said and written about Civil Service Reform by various authorities from President Cleveland down to Dorman B. Eaton and the Custom House officials. The great rule to follow is to give merit its true reward 27This draws out the best efforts of the recipient, where real merit is found, and keeps the drones beyond the pale of competition. It develops the qualities that are worthy of being encouraged, and keeps worthless pretense in its true position. This is the role I have adhered to in my office, and it works like a charm. My office, though not quite so large as the Custom House or Post Office of New York city, I think affords a fair test of what could be done on the largest possible scale.

If public office is a public trust, and we have the high authority of President Cleveland and of the New York Tribune for saying so, I think it can be administered on the same business principles that have contributed to the success of some of the largest and most successful firms in the world; and among these, I think I can say without egotism, as the matter is capable of demonstration, that the house of which I have the honor to be the head, stands second to none in the attributes to which I have referred.

The reader may say, “This is a puff for his own house.” Well, even so. If it is, it is true, and will bear the strictest investigation. So I don’t see why I should feign any false modesty about the assertion. It would be sheer affectation to do so.

Collegiate education is a great question for debate among literary men, journalists and business men, as to its utility in forming the character of youth for business life. As the college curriculum and training stand at present, the ordinary course is not in general calculated to make a good business man. It is erroneously regarded by some people as a kind of substitute for business training in the earlier years of a young man’s life. There could be no greater mistake in the beginning of a business career. It is in many instances not only a hindrance, but absolutely fatal to success. To put a young man in an office fresh from college, on a level with one of the same age who has been training in business methods since he left the common school, is demoralizing to both.

28I wish to have it distinctly understood that in the foregoing remarks I have not made any attempt to cast the slightest reflection on the personal attributes and abilities of any young man in any line of life or status of society, and I make this statement perfectly independent of the mere social incident as to whether the young man in question may part his hair in the middle or assume other dudish airs. That is his business, and I have no right to trench on the sacred precincts of his individuality, nor do I mean to do so. As a rule I stick to my own business. I simply intend to imply that when a dude happens to come into my office, where I think he will find the most æsthetic appointments in the way of furniture and the business arrangements, if he should, upon thus entering into my employment, come to the sudden conclusion that this æstheticism of office furnishing implied any plea for idleness or assumption of airs on his part, he would very soon experience a rude awakening from his charmed lethargy of conceit, and if he were not prepared to undertake in a calm and appreciative tone of mind the first lessons of business industry, I would politely bid him an affectionate adieu, and on parting tell him very kindly that though his great natural gifts might be thoroughly adapted to shine in another sphere of life, he was both by nature and education totally unfitted to play the most humble part in a business career, such as that of which my firm affords a fair and most successful example.

The same remarks will apply to any other young man who does not appreciate his vocation, and try to know himself as old Seneca taught.

I don’t insidiously single out the dude for an odious comparison. The remark will apply just as appropriately to the young man who is better fitted for a blacksmith or a farmer, or perhaps a preacher, than a business man or a financier.

“All blacksmiths,” says the Rev. Robert Collyer, “can’t become preachers, and it would be bad for the world if they 29did.” There is a good deal of philosophy in the remark of this popular preacher, and quite to the point on the subject which I am now attempting to handle.

In fact, there is nothing in this world would grieve me more than the prospect of being obliged to reflect in future years on the fact that I had been instrumental in keeping a young man’s “nose to the grind-stone,” so to speak, in my office, where he would make a very poor employee without the chance of attaining average success, while in a career for which nature and education had fitted him, he might not only be happy and successful, but make his mark as a star of the first magnitude.

When viewed in this light, the question of adaptability becomes a serious affair, for young men starting in life, and for their parents, who often sacrifice a great deal of their worldly comforts and peace of mind to launch their fond offspring.

The best thing for parents to do, then, as a general rule, is to encourage their children in that occupation or avocation for which they show a decided preference. Whatever young men do voluntarily, as a rule, they do well. This is especially illustrated in the lives of youths who exhibit an inclination for a military pursuit, which offers the least inducement to human avarice, and attracts the mind through the more sentimental motives of patriotism and the love of glory. But in our present civilization there are national feelings that must be inculcated and encouraged.

I entertained at my Newport residence, during the past Summer, the officers of the 23d Brooklyn regiment of the National Guard of the State of New York, because I felt it a matter of duty to do so, as well as a privilege to do my part in contributing to the encouragement of the young men who have taken it upon themselves voluntarily to be members of that militia company.

These young men visit Newport at very great cost to each one, as they themselves have to contribute to the expenses 30attending the trip, and their presence in Newport in going through, regularly each day, their drills and parades with as much precision and correctness as though they all had been graduates of West Point, all well equipped and well attired in plain but most becoming military apparel, made a most interesting scene to witness, contributing not a little to the amusement and gratification of the residents of that famous watering place. They are becoming disciplined to be soldiers. They are mostly young men of good families, of profitable occupation, many in business for themselves and others trustworthy clerks in the employ of others, with good salaries; consequently they make a great sacrifice to themselves in the time that they thus bestow upon such excursions as well as ordinarily in the drills which they have to go through, when at home, once or twice each week, frequently oftener. What is the incentive in this personal sacrifice on their part?

The answer is, the spirit of patriotism, and that really is what it means, for in the event of a foreign invasion or internal disturbances, their services are pledged to the State and to the Government. They are therefore liable to receive at a moment’s notice a call from any quarter to go to the front with their lives in their hands, leaving their families, their wives, their children, their old parents, their business, leaving all and requiring a farewell at their departure, as the dangers they may have to encounter are threatening in character and, not unlikely, may prevent their ever returning alive.

Taking this view of the subject, therefore, these young men should be encouraged by all who have the means and power at their hand, and to the full extent of their ability. Whenever they go on missions of State defense, it is only just and fair that they should be received as soldiers, and accorded the honors which soldiers merit. They are entitled to it to a greater extent than the regular soldiers of the United States standing army. These men do not make 31one-half the sacrifice that the young militia do, nor do they make any better soldiers on the battle-field.

These militia soldiers, when they go to the front, leave behind them enough, in the way of properly, good homes and families, to make them more enthusiastic to fight for victory, than the regular army, so that they may return to their own domestic circles with the laurels that victory gives.

In thin country we do not desire standing armies, for we do not wish the expense entailed upon the Government to sustain them, but we do want the young men encouraged to do military duty and be prepared for action when it comes. The only money, therefore, that the Government need expend to protect our continent is a good militia force in each of the various States, to be well disciplined. In that case our country will be prepared to meet foreign foes.

I am also opposed to a large standing naval force, not only on account of the expense, but also because our country is less likely to get into trouble with other nations, providing we have no ships to send into their waters. Naval officers are often very impetuous and chivalrous and sometimes fancy they have grievances to repel, which are largely imaginary, and with them it is a word and a blow.

With a thoroughly equipped and largely efficient naval force, we might thus not unlikely be driven into a conflict without cause or reason with some friendly power. Our country is happily located far in the distance from the quarrelling nations of Europe, and our being so removed is our protection. It is not desirable to be brought in closer contact by sending our naval vessels into their waters, to be under their fire. The policy of this nation is peace and good will to all mankind. What gain would it be to America to have a conflict with England, even though we should conquer in the end, or France, or Germany, or Russia? We couldn’t tow any of these countries to ours, 32nor could we hold on to our conquest as a permanent possession; neither should we desire to do so, as we have territory enough in the 38 States which comprise the United States of America, already, without desiring to annex that of any of our far-off neighbors.

And if an emergency should arise in what has been called the last resort of kings, namely, the necessity of going to war, it would be found that the importance of this training in the special business of war could then be appreciated at its true value.

The importance of business training, that is, training for the special occupation in which a man’s energies are to be developed, is always made apparent when those energies are put to the test of competition, or are called upon to put forth an extraordinary effort. If a man has not got the special training, whether in the army or in civil life, he is never reliable in an emergency, but is like that weak and vacillating friend which old Solomon compared to a broken ankle.

I say, therefore, to the young man of the rising generation, while you don’t relax any effort to procure all the education that your time and means will afford, above all things, don’t neglect the paramount importance of business training.

Breach of Trust Rare Among Wall Street Men.—The English Clergyman’s Notion of Talmage’s Tirades Against Wall Street.—Adventurous Thieves Have No Sympathizers Among Wall Street Operators.—Early Training Necessary for Success in Speculation.—Ferdinand Ward’s Evil Genius.—A Great Business can only be Built up on Honest Principles.—Great Generals Make Poor Financiers, Through Want of Early Training.—Practical Business is the Best College.

There is no place in the world where people are trusted so much on faith as they are in Wall Street; not even in the Church.

The business is one of mutual confidence, and each day there are numerous opportunities for men to secure many millions of dollars of other people’s money and take themselves safely off to that Paradise of defaulters and absconders over the Border. Yet instances of this nature are comparatively rare when we consider the large number of transactions and the immense amount of money handled in Wall Street.

The men of Wall Street have, therefore, become world-renowned for straightforward dealing, and have thus obtained the first position as leading spirits in the speculative affairs not only of their own country, but of the entire world. Wherever the speculative spirit of the age has obtained a foothold, there Wall Street is a household word, and Wall Street men are held in the highest esteem. It has become a term familiar to the ears of those even who know nothing about the business which has made its name almost universal.

“What is that Wall Street?” said an English curate to a friend of mine who recently visited Liverpool. “What a queer place,” he continued, “for Mr. Talmage to have his Tabernacle.”

34The English divine, evidently only having “caught on” to isolated sketches of the Brooklyn preacher’s calumnious invectives, thought they were actually delivered among the bulls and bears, and that Talmage had the boldness to beard these ferocious animals in their den.

It is true the honor of Wall Street is sometimes slightly tarnished, especially in the eyes of those who reside at a great distance, owing to the occasional delinquencies of dishonorable men, who consider Wall Street men and Wall Street money fair game for swindling operations. These are for the most part outsiders, who pounce upon the Street as their illegitimate prey, after probably making a show of doing business there.

There is no place, of course, where confidence men have the opportunity of reaping such a rich harvest when they can succeed in establishing the confidential relations that help them to secure their swag. But Wall Street proper is not any more responsible for such men than the Church, whose sacred precincts are used and abused by the same social pariahs in a similar manner. The Street is the victim of these adventurers, and has no more to do with nurturing and aiding them than the Church has.

What should be said of a financier who would have the temerity to assert that the Church was an asylum for swindlers, and that thence they issued forth to commit their lawless depredations on society? He would be tabooed by all intelligent people. Yet there would be about as much truth in such a statement as in most of the eloquent anathemas and objurations launched from the pulpit every Sunday against Wall Street.

There is no place on this earth where adventurous thieves have fewer sympathizers than in Wall Street, except perhaps in Pinkerton’s and Byrnes’ detective bureaux.

There is another popular delusion with regard to those who don’t succeed in Wall Street. Their failure is frequently attributed to sharp practice on the part of the old 35habitues of the Street. People forget that the business of speculation requires special training, and every fool who has got a few hundred dollars cannot begin to deal in stocks and make a fortune. The men who don’t succeed are usually those who have spent their early life elsewhere, and whose habits have been formed in other grooves of thought.

The business of Wall Street requires long and close training in financial affairs, so that the mind may attain a flexible facility with the various ins and outs of speculative methods. If this training is from youth upward, all the better. It is among this class that many of our most successful men are to be found, though there are some eminent examples of success among those who began late in life. It will be found, however, that the latter must have a special genius for the business, and genius, of course, discounts all the usual conditions and auxiliaries; but among ordinary intellects early training is generally indispensable to financial success.

It seldom happens, moreover, that the early trained man from youth up does any great wrong.

Ferdinand Ward may seem an exception to this rule, but he had a born genius for evil, and though he had all the early advantages of Timothy and Samuel the Prophet, with a higher civilization thrown in, so utterly incorrigible was his nature that nothing but prison walls and iron bars could prescribe bounds to his rascality. He is an extraordinary exception, a genius of the other extreme, against whose subtle operations society must always be on its guard; but he is only one of the dangerous exceptions that prove the rule for which I am contending, the rule that early training in finance more, perhaps, than in any other field of human energy, is the great desideratum.

If such a man is unsuccessful, dishonor seldom accompanies his misfortunes. He may pass through the whole catalogue of financial disasters and their natural results. He may fall to the gutter through over-indulgence in liquor 36and the despair attendant on a run of bad lack or unfortunate connection with wicked partners, but he is still capable of rising from the very ashes of his former self. He will never stoop to swindle, no matter how low the rest of his moral condition may be brought.

No great business can be built up except upon honest and moral principles. It may flourish for a time, but it will topple down eventually. The very magnitude to which the business of Wall Street has grown is a living proof of its moral stamina. It is impossible, in the social and moral nature of things, to unite a large number of men, representing important material interests, except on principles of equity and fair dealing. A conspiracy to cheat must always be confined to a small number.

The most successful men of Wall Street, to my own personal knowledge, are those who came to the Street young and have “gone through the mill,” so to speak; those who have received severe training, who have had some sledgehammer blows applied to their heads to temper them, like the conversion of iron into steel.

These are some of the prerequisites of a successful financial career.

One of the most common delusions incident to human nature in every walk of life is that of a man who has been successful in one thing imagining he can succeed in anything and everything he attempts. In general, overweening conceit of this kind can be cured by simple experiments that bring men to a humiliating sense of their mortal condition and limited capacity. When the experiment is tried in Wall Street, however, to these healthy admonitions are frequently added irreparable disaster and overwhelming disgrace.

I shall note a few examples within the memory of newspaper readers still living. The brief panic of 1884 brought several instances of this character to the surface. Some of them had fought our battles for national existence and preserved the Union when this achievement seemed almost 37hopeless. Their fame as generals was as extensive as history itself. They had planned and executed projects with success on which the destiny of a great nation, and perhaps the destiny of other nations, had impended, yet when they attempted to manage banks, railroads and financial operations they became hopelessly entangled.

The great captain of the Union’s salvation was as helpless as a babe when Ferdinand Ward and James D. Fish moved upon his works. The eye that took in the whole situation at a glance at Vicksburg, Richmond and Appomatox was totally unable to penetrate the insidious and speculative designs of the “Young Napoleon of finance.”

General Grant was a victim, not so much to the sincere, veracious and unsuspecting attributes which were so largely predominant in that great man, as to his want of early training in financial business affairs, and to the fact that he was unable to appreciate its necessity in dealing with sharp business men of loose morals. Generals Winslow and Porter fell into a similar error of judgment in the West Shore Railroad matter. Their mistake came near being a serious blow to the railroad interests of this country. General Wilson, of the New York and New England, and General Gordon were similarly unfortunate. The common mistake committed by these worthy men, to whom the country owes an inestimable debt of gratitude, was the chief cause of the “general demoralization,” to which Treasurer Jordan facetiously but indignantly alluded when denouncing railroad methods, and which from time to time has played sad havoc with some of the best securities in the country.

Therefore, I say to all who have sons destined for a business career, let your cherished offspring have the advantage of early practical training in the particular line of business for which you may consider them best adapted, and do so, even to the partial neglect of their school and college education. Practical business is the best school and college in which they can possibly graduate. I shall attempt to make this point clearer in another chapter.

The Financiers of Wall Street Assist the Government in the Hour of the Country’s Peril.—The Issue of the Treasury Notes.—Jay Cooke’s Northern Pacific Scheme Precipitates the Panic of 1873.—Wall Street Has Played a Prominent Part in the Great Evolution and Progress of the Present Age.

Wall Street came to the rescue of the country when the war broke out. The Government then did not have money enough to pay the interest on the debt, and was sorely embarrassed for a time. The Hon. S. P. Chase, Secretary of the Treasury, sent word to Mr. Cisco, the Sub-Treasurer in New York, to do everything in his power to raise the money required to sustain the nation’s credit.

Mr. Cisco apprised the “Street” of the instructions he had received from Washington concerning the empty condition of the Treasury. He showed a number of the leading operators and financiers that within a few days the interest on the accruing obligations would have to be paid, or the Government paper should go to protest. It was clearly demonstrated that if funds could not be raised the Government should be placed in a perplexing position, that would, in all probability, greatly complicate and prolong the struggle for national existence. It was one of the most critical moments in the whole history of the Republic, and the emergency required clear, decisive judgment, and promptitude of action.

Wall Street men perceived the gravity of the situation at a glance. If the Government’s credit should collapse, it was feared that the whole framework of our political system would be endangered.

The foundation of all securities was threatened with a destructive upheaval, and most serious consequences were 40likely to ensue, menacing a contraction of all values. The prospect was very dark. Not a ray of hope shone through the sombre clouds that hung dismally over the Union. The internal dissensions of our people, and the apparent destruction of our national life, were watched with the deepest interest by European friends and foes—the latter being then largely in the majority, and only waiting a favorable opportunity to pounce upon what they considered their destined prey.

Manifest destiny seemed to have leagued all her forces in opposition to us. The stoutest hearts quailed at the prospect of our dissolution as a nation.

At this momentous juncture, when there was no eye to pity, and when no other arm seemed mighty enough to save, the Wall Street men were equal to the occasion. They put their heads together, came to the front, and resolved to extricate the Government from its perilous position. It is true that they were well paid for it. They charged twelve per cent. for the loan, but that was nothing when the risk is taken into account. It was then almost impossible to get a loan at any rate of interest. By some of the great nations of Europe the risk then involved in such a loan was regarded in about the same light as the people of this country now estimate the present chances for realizing on Confederate paper money, or Georgia bonds of the old issue.

In this state of public feeling, Lombard Street was not in a favorable mood to negotiate loans with this country, and, the whole fraternity of the Rothschilds shut their fists on their shining shekels and shook their heads negatively and ominously at the bare mention of advancing money to the once great but now doomed Republic.

Money was dear at the time, and the Government was only obliged to pay what could have been obtained in other quarters. Curiously enough, private property then was considered better security than the Government endorsement, on the principle—which was not a very patriotic one, though 41in reality true—that the country could survive its form of government. That form, however, the best the world has yet seen, survived the shock and maintained its autonomy. That it did so was in a large measure due to the prompt action of Wall Street men in raising the sinews of war at the incipient stage of the rebellion. Had they failed to do so, it is not improbable that the repulse at Bull Run might have proved a decisive blow to the Union, and plunged the country into a state of anarchy from which nothing but a despotism almost as bad could have retrieved it.

The negotiation of this loan brought out the twelve per cent. Treasury notes. After this issue the rates fell. Then came the 11 and the 10¾ per cent. issues, and subsequently the well-known and long to be remembered 7 3-10 Treasury notes.

After this issue had been popularized, successfully disposed of, and finally taken up at maturity by the 5-20 loan, Jay Cooke was quick to issue, after their pattern, his famous 7 3-10 Northern Pacific Railroad bonds. Evidently he had a patent for negotiating that famous 7 3-10 per cent. railroad loan, as almost every clergyman, Sunday-school teacher and public benefactor were found to have invested in them, when the crash came, and although the road was the means of his financial downfall, with the ruin of an innumerable number of others besides, who were dragged into the same speculative whirlpool, this unfortunate event was not entirely an unmixed evil.

It is true that this was the main and visible cause of precipitating the panic of 1873, of which I shall speak more fully in another chapter, but the Pacific road was the great pioneer in opening up the Far West, and developing its material resources, the great artery of the Western railroad system, conveying vigorous and durable vitality to the industrial life of the expansive regions beyond the Rockies.

Thus, in taking a retrospect of my twenty-eight years in Wall Street, I find that what sometimes appeared to be 42great evils have been succeeded by compensating good, fate counter-balancing fate, as the Latin poet has it. It was so, as I have previously observed, after the panic of 1857. It was so after the convulsion of 1873, and though I have only historic evidence to guide me in regard to the earlier history of the Street, I find it was so after 1837. So, the maxim that history repeats itself has been fully verified in Wall Street.

So, now that I have relapsed into a reflective mood on this subject, a host of important associations connected with the main issue rush upon me. The prominent idea that stands out in bold relief is the rapid and wonderful progress made in Wall Street during the period that I have undertaken to chronicle. And not only so, but the rapid strides that have been made in everything, almost universally, during that time, present a vast theme for consideration. The part that Wall Street men have taken in this mighty evolution is the topic that concerns me most at present. As I attempt to progress with my subject, I observe this division of it becoming more expansive, so that I find myself in the position of the Irishman when he ascended to the top of a mountain. After recovering from the first effects of his surprise, he exclaimed: “I never thought the world was so large!”

So it is with me. I never thought that Wall Street was so big, nor that Wall Street affairs were so extensive, until I began to write about them. They expand, as well as improve, surprisingly on closer acquaintance. I only hope I shall be able to impress this idea more vividly on the minds of my clerical friends, and others who have been misguided in this respect, chiefly on hearsay and irresponsible evidence, and who, I am sorry to say, have been the well-meaning, but over-zealous instruments of misleading others.

To come to an approximate deduction of facts, then, it is, I think, a fair estimate of the general progress of humanity, to say that there has been greater material advance in everything that relates to a higher civilization, and the greatest 43good to the greatest number, during the last thirty years, than in all the previous time that has elapsed since the period that the father of history, old Herodotus, began to chronicle, in his racy style, the real and imaginary events of the human family.

The part that Wall Street has played in this amazing progress has been comparatively large, and would, if thoroughly investigated and fully discussed, make a larger book than I have time to write at present.

I can only glance at the prominent topics and leading events in the extensive and somewhat sensational history of Wall Street, and sketch briefly the conspicuous features in the lives of certain celebrities who have been conspicuous in the history of speculation, and of those who have been prominent in the financial affairs of the country.

How Napoleon Defied the Monroe Doctrine.—The Banquet to Romero.—Speeches by Eminent Financiers, Jurists and Business Men.—The Eloquent Address of Romero against French Intervention.—Napoleon shows his Animus by Destroying the Newspapers Containing the Report of the Banquet.—The Emperor Plotting with Representatives of the English Parliament to Aid the Confederates and Make War on the United States.

There were other critical periods during the war when Wall Street came to the front, besides the one in which it rendered such timely aid to the Government in its financial embarrassment. One of these was when the Emperor of the French, Napoleon III., showed his cloven foot and exhibited anew the rancorous disposition which ten years previously had crushed the Republican hopes of La Belle France by the murderous Coup d’Etat. He made a bold attempt to plant that blood-stained foot on this fair soil, in open defiance of the Monroe doctrine, and to crush the liberties that his immortal uncle, even in the full flush of his great conquests, dared not attack and was forced to respect.

I shall here relate an incident of this period, which, I think, has not obtained the prominence in our national history to which, I believe, it is justly entitled.

Senor Romero, then Mexican Minister at Washington, was invited to a public dinner in New York, in order that proper occasion might be found to discuss the situation with regard to the intentions of Napoleon the Little concerning Mexico, and with a view of preventing foreign intrusion, which was only the entering wedge for future invasion, at a time when our nation was engaged in a family struggle to 46maintain its own existence, and demonstrate the durability of Republicanism.

The dinner, at which there was a grand manifestation of sympathy in favor of the Mexican cause against French invasion, took place on the evening of March 29, 1864, at Delmonico’s, Fifth Avenue and Fourteenth street. The banquet was held in four of the largest rooms. The large dining hall was illuminated as a promenade for the families of the hosts and guests, and a large concourse of ladies and gentlemen who were invited to see the table and be presented to the distinguished envoy. The rooms were elegantly decorated with flowers, grouped and festooned with artistic skill, and the doorways arrayed with fragrant wreaths and garlands. One room was set apart for the orchestra, and Helmsmuller furnished the music.

Senor Don Juan N. Navarro, Consul-General of the Mexican Republic, Ignacio Mariscal, an eminent jurist of Mexico, and Don Fernando De La Cuesta, Assistant-Secretary of the Legation, were invited guests. Following are the names of the Committee of Invitation:

Hon. James W. Beekman presided. The stewards were John Jacob Astor, John W. Hamersley and Henry Clews.

When full justice had been done to the large variety of sumptuous dishes, the chairman called the company to order, and explained that the object of the meeting was to 47do honor to the great cause of religions and political freedom contended for by the Republic of Mexico. The chair gave the first regular toast, “The President of the United States,” and called upon David Dudley Field to respond, who did so in his usual eloquent style, stating that the sentiment of the whole country was united in sympathy with the cause of the Mexicans, and that the Executive Department of the Government was simply the agent and exponent of the popular will. He dwelt at some length on the French invasion of Mexico as one of the greatest crimes of the age, and predicted the brief reign of Maximilian. Mr. Field wound up his discourse with the following grand peroration:

Maximilian may come with the Austrian eagle and the French tricolor; he may come with a hundred ships; he may march on the high road from Vera Cruz to the capital, under the escort of French squadrons; he may be proclaimed by French trumpets in all the squares of the chief cities; but he will return, at some earlier or later day, a fugitive from the New World back to the Old, from which he came; his followers will be scattered and chased from the land; the titles and dignities which he is about to lavish on parasites and apostates will be marks of derision; the flag of the republic will wave from all the peaks of the Cordilleras, and be answered from every mountain-top, east and west, to either ocean; and the renewed country, purified by blood and fire, will resume its institutions, and be free.

The second toast was, “Don Benito Juarez, Constitutional President of the Mexican Republic,” to which Mr. Charles King, President of Columbia College, responded. He spoke of Mexico as the friend and ally of the Union as opposed to European hostility.

His Excellency, Senor Matias Romero, the honored guest of the evening, then made a brilliant speech on the situation, from which I take the following extracts:

“I am very happy to say that the kind of feeling you express for Mexico is fully reciprocated. In Mexico there 48are now but the sentiments of regard and admiration for the United States, and the desire to pursue such a course as will draw more closely all those powerful ties by which both nations should be united.

“The Emperor of the French pretends that the object of his interference in Mexican affairs is to prevent the annexation of Mexico to the United States; and yet that very thing would, most likely, be ultimately accomplished if a monarchy were established in Mexico. Fortunately for us, that scheme is by no means a feasible one.

“We were willing to grant to the United States every commercial facility that will not be derogatory of our independence and sovereignty. This will give to the United States all possible advantages that could be derived from annexation, without any of its inconveniences. That once done, our common interests, political as well as commercial, will give us a common whole American continental policy which no European nation would dare disregard.

“The bright future which I plainly see for both nations had made me forget for a moment the present troubles in which they are now involved. I consider these troubles of so transitory a nature as not to interfere materially with the common destiny I have foreshadowed; but, as they have the interest of actuality, I beg to be allowed to make a few remarks in regard to them.

“Every careful observer of events could not help noticing, when the expedition against Mexico was organized in Europe, that it would, sooner or later, draw the United States into the most serious complications, and involve them in the difficulty. The object of that expedition being no less than a direct and armed interference in the political affairs of an American nation, with a view to overthrow its republican institutions and establish on their ruins a monarchy, with a European prince on the throne—the only question to be determined by the United States and the other nations concerned, was as to the time when they would be willing or ready to meet the issue thus boldly and openly held out by the antagonistic nations of Europe.

“This, in my opinion, is the situation in which the United States are placed with regard to Mexico. Taking into consideration the well-known sagacity of American statesmen the often-proved devotion of the American people to republican institutions, and the patriotism and zeal of the 49Administration that presides over the destinies of the country, I cannot entertain the slightest doubt that the United States will act in this emergency as will conduce to the best interests they and mankind at large have at stake in the Mexican question.

“The United States may find that they are brought squarely to the issue in the Mexican question sooner than they expected, should the report, lately reached here, of any understanding between Maximilian, as so-called Emperor of Mexico, and the insurgents in this country, prove correct. The archduke, it is stated, will inaugurate his administration by acknowledging the independence of the South, and, perhaps, he will go further; and this, of course, by the advice, consent and support of the French Government, whose satellite, and nothing else, will the archduke be in Mexico.

“Among the many events calculated to terminate immediately French intervention in Mexico, the European complications which threaten to cause a general war on that continent should be particularly mentioned. It is certainly wonderful that while Europe is in so insecure and agitated a condition, menaced by revolutions everywhere, and wrestling to recover its own existence and independence, the French Emperor should be thinking about arranging other people’s affairs, as if his own did not require his immediate and most particular attention.”

Mr. George Bancroft, the eminent historian, was next called upon to reply to the toast, “The Eminent Statesmen of Mexico,” among whom the chair named Guatimotzin, Hidalgo, Morelos, Ocampo, Lerdo and Degollado. Mr. Bancroft said:

Gentlemen—Although I am not prepared to deliver an address worthy of this auditory, I can not refrain from replying and expressing my sentiments, as I have been called to reply to the toast which our president has just proposed to the statesmen of our neighboring sister republic. The struggle which for many long years the Mexican people have sustained against their interior tyrants has been an heroic struggle, worthy of a civilized and cultivated people, and in which the sympathies of the whole civilized 50world—of all the friends of political and religious liberty—ought to have been manifested in a frank and decided manner in behalf of the Mexican people, directed by the liberal party. I believe, gentlemen, that the cause of civil wars, not only in Mexico, but throughout all Spanish America, has been the clergy alone, who, when they come to acquire power in the State, always strive to overturn the government and to subordinate the temporal interests of society to their own. This attribute seems to belong principally to the Catholic clergy.

“The struggle, then, in which up to this time the patriotic Mexicans have been engaged, was a holy struggle, and the sympathy of the whole people of the United States was with them—a people who, whatever may be their religious creeds, adopts as a fundamental principle the most complete religious liberty, and the absolute independence of the Church from the State.

“But now the sympathy of the United States is increased for the Mexican people, when, in addition to the facts already mentioned, we find this people struggling for their independence and nationality against a European nation, which, taking advantage of the civil strife in which we were engaged, has sought to establish before our eyes a form of Government in open antagonism to our own. We can not do less than receive this project in the same way as Europe would receive it, were we to foment revolutions and establish republics on that continent.

“Then it is that those statesmen in the United States who aid us to emerge from our present difficulties, and to restore our power and legitimate influence, and those who in Mexico not only consummate the great work of establishing religious liberty on a solid basis, but who succeed in driving from their country the foreign invader, or at least keep the sacred fire of patriotism and of resistance to the invader burning, while we disembarrass ourselves of our complications, deserve, in the highest degree, our success and ardent homage.

“Gentlemen, the Egyptians used to place a burning lamp at the feet of their royal corpses. On descending the steep vaults in which the corpses were deposited, the lamp was naturally extinguished.

“Let Europe place at Maximilian’s feet the weak lamp of monarchial power. It will not burn in the atmosphere of our continent.”

51Mr. William Cullen Bryant was then called upon, and said, in part:

“We of the United States have constituted ourselves a sort of police of the New World. Again and again have we warned off the highwaymen and burglars of the Old World who stand at the head of its governments, styling themselves conquerors. We have said to them, that if they attempted to pursue their infamous profession here they did it at their peril. But now, when the police is engaged in a deadly conflict with a band of ruffians, comes this Frenchman, knocks down an unoffending bystander, takes his watch and purse, strips him of his clothing, and makes off with the booty. This act of the French monarch is as base, cowardly and unmanly as it is criminal and cruel. There is no person, acquainted, even in the slightest degree, with the political history of the times, who does not know that it would never have been perpetrated had not the United States been engaged in an expensive and bloody war within their own borders.

“We thought that we saw the dawn of an era of enlightened government in the administration of Juarez. That dawn has been overcast by the clouds of a tempest wafted hither from Europe. May the darkness which has gathered over it be of short continuance; may these clouds soon be dispelled by the sunshine of liberty and peace, and Mexico, assured of her independence, take the high place which belongs to her in the family of nations.” (Continued applause.)

Senor Don Ignacio Mariscal responded to “Our Guest and the Bar of Mexico.”

Mr. George Folsom, formerly envoy from the United States to the Netherlands, responded on behalf of the diplomacy, making special reference to Don Jose Lopez Uraga, Mexican Minister to Berlin.

Dr. Willard Parker responded to the health of Dr. Navarro, formerly Chief of the Medical Staff of the Mexican Army.

Mr. George Opdyke responded on behalf of the merchants.

52Senor De La Cuesta replied to the Commerce of Mexico.

Mr. Jonathan Sturges spoke for the fine arts of Mexico.

Mr. Washington Hunt spoke, protesting strongly against the French invasion of Mexico.

Mr. Frederick De Peyster, President of the New York Historical Society, responded on behalf of the historians of Mexico. He also made some eloquent remarks on the tyranny of French intervention.

Mr. Henry E. Pierrepont spoke, as the representative of Brooklyn, against the French policy in Mexico.

Mr. Smith Clift responded on behalf of the Bar.

Mr. Charles Astor Bristed replied on behalf of the Literary Men.

Mr. William E. Dodge, Jr., spoke on behalf of the Young Men of America. “The tread of a French invasion,” he said, “is to them a direct insult, and were our own sad war over, I believe there is not a town, or village, or hamlet, where a full company would not spring to arms to aid our sister republic in her glorious struggle. I give, as a sentiment in which I know all will heartily join, the “Monroe Doctrine”-“Americans can never allow the heel of European despotism to place its imprint upon the soil of our Western continent.”

The Chair then said, “Let us now recognize the services of our commissariat, who have so nobly discharged their stewardship. I propose the health of the stewards. I beg Mr. John W. Hamersley to speak in their behalf.” Three cheers were then given for the stewards.

Mr. Hamersley delivered an eloquent address, from which I take the following excerpts:

“It is hardly fair, sir, to call on us while our hearts are beating with fervid thoughts, and your ears ringing with burning words. Had this toast been on the programme, one of my coadjutors would have prepared an address worthy of the compliment and the occasion. This Committee was not chosen for their gifts of utterance, but for 53those humbler tastes, which only lend a grace to eloquence. Our duties are æsthetic, industrial and artistic. We have compassed the ends of the earth, the depths of the sea; we have levied contributions on the four winds of heaven, to cluster here all that can tempt the appetite, or fascinate the ear and eye, and we fancied our mission accomplished.

“However, there is the post-prandial law; the despotism of the wine cup, to which we all owe allegiance—the only despotism which the descendants of the Huguenots, or Pilgrim Fathers, will ever tolerate on this continent. We are here, sir, in menace to none, but firmly and respectfully, in the majesty of manhood, and in consciousness of power, to reassert a principle, imbibed with our mother’s milk, a household word, a dogma of American faith; but while we cordially grasp our neighbor’s hand, in the darkest hour of her trial, the grasp has due emphasis and significance.

“With her, we have kindred traditions; each of us has hewn an empire from the wilderness; each of us has expelled the oppressor; and both of us, with tattered banners drenched in the gore of hero martyrs, are now appealing from treachery to the God of Battles.

“We have a common future; for who can doubt that our successes and the death-knell of treason is already rung?—who can doubt that the triumph of our arms will be the signal for the eagles of Austerlitz “to change their base,” from the pyramids of Puebla for their perch on the towers of Notre Dame? And permit me here, sir, to express a hope, suggested by the season (God grant it may be a prophecy), that the Easter chimes of Mexico, of the coming year, with the glad tidings of a Saviour risen, shall peal from sierra to sierra, from ocean to ocean, with the glad tidings of a nation risen, a nation born again. (Cheers.)

“Sir [to the Chair], it is fitting, while the accents of sweet music recall tender and happy memories (man, imaged by that armed cactus; woman, by that graceful palm), it is holy to consecrate the hour to her who was “last at the cross and first at the sepulchre.” I propose, sir, a toast, to which your heart’s pulse will echo:

‘The daughters of Mexico—Fair as her sons are brave.’”

(Enthusiastic and prolonged applause. Music—Viva Republica.)

“We must not permit the modesty of our banker and steward, Mr. Clews, to outweigh our desire to hear from the Bourse.”

Mr. President and Gentlemen—Enough has already been said, in the speeches made this evening, to indicate most conclusively the depth of sympathy which pervades this community in behalf of the cause of Mexico, and I rise to express my cordial concurrence with the sentiments which have been avowed.

The unanimous and determined voices of this company clearly show that public opinion in this country will not submit to the encroachments of foreign powers upon any portion of the territory of the continent.

The principles of free republican government are so strongly implanted in the hearts of the people both of Mexico and the United States, that they will never consent to surrender them.

“Human freedom and the rights of man make common cause between Mexico and all other American States.

“I do not utter these words in prejudice against any government. In my judgment, European nations will best promote the welfare of their own people by carefully abstaining from all interference with the declared will of those who dwell on this continent.

“The doctrine has been solemnly asserted, and will be maintained inviolate against all alliances which seek to impede the progress of liberal institutions, or to impair the strength of governments founded on the rights and intelligence of the people.

“This is the doctrine of the United States, and, under the shield of its power and influence, the safety, prosperity and independence of Mexico will be maintained and made perpetual.” (Cheers.)

The meeting then separated, marching out to the inspiring strains of the Marseillaise.

A few days after this meeting the House of Representatives unanimously resolved that the United States would never consent to the establishment of a monarchy which would arise under the auspices of Europe, upon the ruins of a republic on the American continent.

55The speeches at the Romero banquet, followed by this resolution, were the premonitory sounds of the death knell of Maximilian’s empire, even before he took formal possession of his evanescent throne.

To show the animus of the Emperor regarding this meeting, and how closely he was watching the struggle, I may state that when the New York Herald, which had a full account of the meeting, arrived in Paris it was promptly seized by Napoleon’s censors and shared the fate of La Lantern and some of Victor Hugo’s most vigorous productions. It was committed to the flames on account of the speeches made by some of our representative men. It will be seen by reference to this incident that our representatives in Wall Street were among the first to perceive this threatened danger to the nation, and that they manifested their business tact and capacity in promptly meeting it. They acted literally on the maxim of Sir Boyle Roche, that “the best way to shun danger is to meet it half way.”

Wall Street men were the first to make the move that checkmated the tyrant who was ambitious to prove before the eyes of the world that Republicanism was a failure.

A volume might be written by the student of universal history, and probably will be by some future Herodotus, Macaulay, or Prescott, on the far-reaching influences of this original move on the part of the Wall Street men. There is a large field for speculative theorizing, containing much important truth in the way the Republican spirit was reflected in the political thought of Mexico, as the result of the feeling manifested at this public dinner in New York. It was undoubtedly the active precursor of the events that sealed the fate of that unfortunate cat’s paw, Maximilian. It gave birth to the idea that reverberated across the Atlantic, created distrust in Napoleon’s schemes of conquest as visionary with his own people, and alarmed their Teutonic foes, who urged forward those mighty preparations that culminated in the terrible overthrow at Sedan.

56To the mere reader of our local newspapers the connection between cause and effect of these great events may seem far-fetched, but it is all plain sailing to the student of general history.

In this connection it would be unjust to the genius of history to omit the part which England played on the same chessboard with her former political refugee, constable and Imperial protégé. Although Mr. Disraeli has done considerable justice to the case in Endymion, he has not dealt with it from this side of the Atlantic. And I am now going to touch on some points of hitherto unwritten history.

There was a secret alliance formed between Napoleon and the British Cabinet—an international conspiracy on a large scale—to demolish the liberties of this country, pounce upon the wreck and then share the spoils between these two powerful pirates. How this was planned and subsequently averted would form, if fully written up, one of the most interesting chapters in the voluminous library of statecraft, and would take most of the political sensation out of the best efforts of Macchiavelli, Talleyrand and Prince Metternich. I can only glance at the leading features of the diabolical scheme, and show how Wall Street men were again promptly in the breach at the proper moment.

The New York riots of 1863 were fomented by British, French and Southern influence combined, as a part of the villainous plot. The design was to give our troops enough to do in quelling local riots, so that they should have no opportunity of going to the front. Southern passion was predominant, and could not discern at the time that their would-be allies were their bitterest enemies. It was hoped that the “draft riots” would be so widespread as to afford Southern chivalry a chance to march unimpeded to Washington and capture the Capitol, when the allied foes of liberty, by virtue of their entente cordiale, should seize upon their prey.

Everything was in readiness for raising the blockade 57and pouring in armaments from Europe to complete the conquest. England had acted with more caution than Napoleon, and was slow to move, though he was constantly urging her forward. It is due to the villainy of his great conception to state, that, had he been able to move his more sluggish ally in crime with greater celerity, the result might have been overwhelmingly disastrous to this country.

How the Imperial Pirates of France and England Were Frightened Off Through the Diplomacy of Seward.—Ominous Appearance of the Russian Fleet in American Waters.—Napoleon Aims at the Creation of an Empire West of the Mississippi, and the Restoration of the Old French Colonies.—Plotting With Slidell, Benjamin, Lindsay, Roebuck and Others.—Urging England to Recognize the Confederacy.—Disraeli Explains England’s Designs and Diplomacy.—After the Naval Victory of Farragut, and the Capture of New Orleans England Hesitates Through Fear, and Napoleon Changes His Tactics.—Renewal of Intrigues Between England and France.—Their Dastardly Purposes Defeated by the Victories of Gettysburg, Vicksburg, and the General Triumph of the Union Arms.

While the events related in the previous chapter were progressing apparently towards a result that might have proved disastrous to the dearly purchased liberties of this country, the nation was saved by taking advantage of a circumstance that was peculiarly providential to the Union. The Russian fleet happened to be in South American waters at the time. Secretary Seward was apprised of the fact by a Wall Street man. He was quick to act on the suggestion. Alexis, the brother of the Emperor, was in command of the fleet. Seward sent him a friendly invitation, which he instantly accepted. The spies of Napoleon and of Scotland Yard, who were always on the alert, and who always discerned the evil side of everything, promptly informed their employers of the fact. The conclusion was manifest to European statesmen, who, unlike Wall Street men, never “copper” the points given by spies. It seemed to them clearly an alliance between the Great Empire and the Great Republic. Extremes had met for mutual defence and safety 60probably for aggressive purposes. The conspirators were frightened with their own shadows and foiled by their own cowardice, and an apparently imminent calamity was thus simply averted.

As the designs of the two great European powers were craftily concealed through their evasive system of diplomacy, it has frequently been a subject of debate as to whether they meant to take the part of the Confederacy for the purpose of dissolving the Union. It is necessary, therefore, to produce some tangible evidence of the intentions of these foreign potentates in the hour of our country’s greatest peril.

The Confederate records purchased by the Government some years ago throw a ghastly light on this subject, and gravely warn us of the Scriptural injunction, to put no trust in kings and rulers.

The correspondence between the officials of the Confederacy and the Confederate Commissioners, Slidell and Mason, at Paris and London, prove to a demonstration that the ruler of France and the rulers of Great Britain were making preparations on a large scale to take charge of this country as soon as the Union, through their diplomatic aid, should be dissolved. Letters from other representatives of the Confederates of Europe go to corroborate this view of the matter. The correspondence between Dudley, Post, Mann and Lamar, who were commissioners in various parts of Europe, and Judah P. Benjamin, the Confederate Secretary of State, is conclusive on the subject of European armed intervention, which has hitherto formed a topic of dispute in the historic circles of the Civil War.

The correspondence of Slidell, who was on familiar relations with the Emperor of the French, gives the inside history of the intrigues of that potentate in such clear terms, that there can be no doubt of his intentions towards this country.

Had it not been for the superior vigilance of Mr. Dayton, 61the United States Minister at Paris, several privateers would have been launched from French ports to prey upon the commerce of the United States, and to do similar work to that for which the Alabama was fitted out.

It would seem from the correspondence that the managers of the affairs of Great Britain were not so anxious to encourage the South as Napoleon was; at least they succeeded in concealing their purpose better. The practical diplomacy of England in this affair was superior to that of France, though the latter has still held the palm for possessing better diplomatic plotters, who are supposed to have no superiors outside the royal associations of the reigning power of Russia.

There is no doubt, however, that Napoleon was anxious to take positive steps to recognize the South, while professing the most friendly feelings in favor of the North, but he was afraid to act except in unison with Great Britain, and he failed to bring her to time until the favorable moment for the execution of his plans had passed.

Slidell and Mason went to Europe in January, 1862. This was perhaps the darkest and most critical period for the cause of the Union during the great struggle. The Commissioners carried letters with them showing the inefficiency of the blockade of the Southern ports, the great disadvantages and losses suffered by England and France through cutting off the cotton supplies, and setting forth the enormous advantages that would result if free trade with the Confederacy were established. These were strong arguments to arouse the spirit of commercial selfishness in favor of the South.

The ambitious designs of Napoleon were of a very towering and extensive character. He not only expected to recover Louisiana, which his uncle in an hour of necessity had sold to the United States, but he aimed at the restoration of the entire old colonial empire of France on this continent.

62The Emperor was thoroughly posted in the affairs of this country. It seems that while he had resided in a small room in Hoboken, and took his meals at a twenty-five cent restaurant, paying for them with money borrowed from French patriots, on the very slim prospect of reaching the throne of France, he made the best use of his time, and he had studied the history and geography of the United States and Canada with great care and accuracy.

In justice to his character for gratitude, however, it must be said, in passing, that, like young “Corneel” Vanderbilt, he paid all the money he borrowed, and placed some of his New York and Hoboken creditors in good positions at the Tuileries, under the Second Empire. He never forgot a favor nor forgave an injury.

The Emperor’s knowledge of American affairs, as well as his ambitious designs, were briefly, but at the same time very fully disclosed, in conversation with Mr. Benjamin, at the Villa Eugenie, at Biarritz. “He turned with peculiar and undisguised eagerness,” said Mr. Benjamin, “to the Mexican question. He knew the very number of guns on the Morro, the sums the United States had spent on the fortifications in Florida, the exports and imports of Galveston and Matamoras, in fact everything which well informed local agents could have reported to an experienced statesman eager for information. He examined me again on Texas and its population, the disposition of the French residents, the tendencies of the German colonists, the feeling on the Mexican frontier. He observed that Louisiana was nothing but French at the bottom. I was fully persuaded that he proposed to seek in Mexico a compensation for the lost colonies in the West Indies, which, he said, could not be recovered, ‘sans nous brouiller avec nòs allies,’ (without embroiling us with our allies). He insisted upon it that France must, sooner or later, have a foothold (pied à terre) on the Florida coast, for the purpose of protecting her commerce in the Gulf, for, he added, ‘Nous ne voulons pas d’un autre 63Gibraltar de ce côté là,’ (we don’t want another Gibraltar on that side.”)

Mr. Slidell’s predecessor at Paris, Mr. Rost, had received assurance from the Duc de Morny, who was then next to the Emperor in his knowledge of State affairs, that the South would be recognized. It was only a question of time. After consulting with M. Thouvenel, Minister of Foreign Affairs; Persigny, Minister of the Interior; Fould, Minister of Finance; Rouher, Minister of Commerce; Baroche, President of the Council of State; Mocquard, Private Secretary of the Emperor; Count Walewski, De Morny and others, Slidell was satisfied that the Emperor was all right, and he wrote to Jeff. Davis & Co. as follows:

“The Emperor has invited the English Government to join with him in recognizing the South, but the English Government, owing to Earl Russell, has refused to act simultaneously with him.”

This statement of Slidell was true in one sense, but it was not strictly and diplomatically correct. There is no doubt that the English Government would have been anxious enough to join the Emperor in any scheme of conquest and spoliation that had a fair promise of success, and an average chance of avenging the Boston Tea Party and the Battle of Bunker Hill, but both powers were playing at the game of diplomacy, each for the purpose of making the other responsible for taking the initiative in the recognition of the South. They were both very circumspect about committing themselves, and the Palmerston-Russell Cabinet, with that caution which always characterized old “Pam” in foreign affairs, would not recognize any suggestion from the Emperor that did not bear his signature. The Emperor thought to make use of a Mr. Lindsay, a wealthy shipowner and member of Parliament, to draw out the English Government, but the latter was not to be committed to any course of policy that might involve important responsibilities in the future through any second-hand authority.

64The Emperor seemed to have opened his mind very freely to Mr. Lindsay. He told him that he would have taken steps to put an end to the blockade of the Southern ports if the English Ministry had intimated a willingness to act with him. He said he had forwarded intimation to this effect through Mr. Thouvenel, but had not received a satisfactory answer. He intimated that if England was ready, he was, and was prepared at once to despatch a formidable fleet to the Mississippi, on condition that England should send an equal force to demand free ingress and egress for their merchantmen, and for the cargoes of goods and supplies of cotton which were necessary to carry on the commerce of the world.

Napoleon was resolved to act, as he had always done, on the high ground of conferring universal favors on humanity.

This was an old trick in his family, but it did not work effectually this time. He said he had regarded the restoration of the Union impossible from the first, and for that reason had deprecated the continuance of the bloody contest, which could not lead to any other result than separation. He authorized Mr. Lindsay to make this statement to Lord Cowley, and to ascertain whether he would recommend the course indicated to his Government.

It is very refreshing to reflect on the sensitive exhibition of feeling displayed, in his ostensible attempt to stop the carnage and fratricidal strife, by the man who planned and directed the wholesale assassinations in connection with the sanguinary Coup d’Etat.

Mr. Lindsay reported back to the Emperor the substance of his interview with Lord Cowley, who said that the English Government was not prepared to act until further developments. It was about this time that Mr. Seward was getting in his fine diplomatic work with Earl Russell and Palmerston, which helped materially to upset the calculations of the Emperor.

Napoleon then requested Mr. Lindsay to see Palmerston, 65Russell, Derby and Mr. Disraeli, and to gather their intentions. He desired Mr. Lindsay to do all this of his own motion, and not as coming from him, and said he did not wish to be embarrassed by the forms and delays of ordinary diplomacy, because he felt the necessity of immediate action.

Lindsay again saw Earl Russell, as the accredited and special ambassador of the Emperor, viva voce. The Earl informed him that he could not receive any communications from a foreign power, except through the regular diplomatic channel. He then sought an interview with Mr. Disraeli, who was much more affable and communicative than the little Lord who stood so punctiliously on ministerial ceremony.

Disraeli threw considerable light on the subject. After expressing a deep interest in the affairs of the Confederacy, and saying that he fully concurred in the views of the Emperor, he told Mr. Lindsay that he had good reasons for believing that a secret understanding existed between Earl Russell and Mr. Seward; that England, in the meantime, would respect the Federal blockade and withhold recognition of the South. “But if France should take the initiative,” said Mr. Disraeli in conclusion, “any course she may adopt to put an end to the present state of affairs will undoubtedly be supported by a large majority in Parliament, and knowing this, Lord Russell will give a reluctant assent to this, to avoid a change of ministry, which would otherwise certainly follow.”

This shows that Disraeli saw very clearly through the duplicity of English diplomacy, and that while England was profuse in her promises to Mr. Seward, she was only waiting for the Emperor to act as pioneer in order that she might have a safe opportunity as well as a plausible pretext for armed intervention.

The Emperor complained that Earl Russell had divulged his views on American affairs, as expressed through his ambassador, to Mr. Seward. Lord Russell placed himself 66squarely on the “fence,” to be prepared for any emergency. Finally, about the middle of April, the Emperor thought it would be best that he himself should make a friendly appeal to the Federal Government alone to open the ports, if England did not join him, without further hesitation. He thought it would be necessary, however, to accompany the appeal with a demonstration of force on the Southern coasts; and if the appeal should be effective, to back it up by a declaration of his purpose not to respect the blockade. He determined, however, to wait a few days longer to see how England would act.

This resolution of the Emperor to make a friendly appeal to raise the blockade was only a thin excuse to find a cause for quarrel with the North, and it is very probable he would have acted on this determination alone, but for an unexpected event which changed his projects, and the apparent course of history.

About a week after this diplomatic conference, Commodores D. G. Farragut, and D. D. Porter, with their able commanders Bailey and Bell, had made the famous passage of forts Jackson and St. Philip, at the mouth of the Mississippi, with the United States squadron, silenced the Chalmette batteries and anchored in the harbor of New Orleans. After two days’ parleying the city surrendered at discretion, or rather, the city authorities passively and sullenly permitted Farragut, and afterwards General Butler, to take possession of the city without shedding any blood.

This great naval victory of Farragut’s squadron and its consequences dampened the ardor of the Emperor. He saw the chances of backing up his “friendly appeal” by a demonstration of force, were cut off, so far as New Orleans and the forts of the Mississippi were concerned.

Yet, Napoleon did not totally relinquish the enterprise, on account of this crushing defeat of the Confederacy. M. Billault, a prominent member of Napoleon’s cabinet, after this event said to Slidell, “The cabinet, with the probable 67exception of M. Thouvenel, are in favor of the South. If New Orleans had not fallen, our recognition could not have been long delayed, but if the Confederates should obtain successes in Virginia and Tennessee, and hold the enemy at bay a month or two longer, we may see an opportunity for intervention.”

The Emperor’s intentions, however, were fully revealed in an autograph letter to General Forey, which was written in July and in which his grasping ambition stood out in the boldest relief. He wrote: “In the present state of civilization of the world, the prosperity of America is not a subject of indifference to Europe, for she nourishes our manufactures and gives life to our commerce. We are interested in having the Republic of the United States a powerful and prosperous power, but we are not willing to have that Republic take possession of the entire Gulf of Mexico, command from there the Antilles as well as South America, and monopolize the distribution of the products of the New World. To prevent this, a stable Government must be established in Mexico, and we will in that event have restored to the Latin race on the other side of the Atlantic its power and prestige.”

Napoleon completely overdid the thing in this letter to General Forey. The vaulting ambition which overleaps itself and falls on the other side stuck out too plainly. He showed that he wanted the whole earth, and this aroused the resentment of the South. In the following August, M. Theron, a French consul in Texas, inspired by Napoleonic ideas of annexation, coolly contemplated the transformation of Texas to a French republic, and confided his project to Governor Lubbock of that State, who apprised Jefferson Davis of the consul’s aspirations. This was too much even for the Confederate Government, and M. Theron and the French consul at Richmond were both politely requested to leave the Confederate States.

Napoleon persisted in his intrigues for the purpose of 68getting a foothold in this country, in spite of the rebuff which his officious consuls had received from the Confederacy. He expressed himself desirous of interesting some of the rest of the European powers in the cause of the South, and again entered into confidence with Slidell on the possibility of joint mediation on the part of England, France and Russia. “My own preference,” said the Emperor, “is for a proposition for an armistice for six months, with the Southern ports open to the commerce of the world. This would put a stop to the effusion of blood” (How tender-hearted he was!) “and hostilities would probably never be resumed. We can urge it,” he added, “on the high grounds of humanity, and the interests of the whole civilized world. If it be refused by the North, it will afford good reason for recognition, and perhaps for more active intervention.”

Mr. Slidell then suggested that if the Emperor would give some kind of assurance that the police would not interfere, ships and munitions of war might be sent from France to the Confederacy.

“Why could you not have the ships built as if for the Italian Government?” suggested the Emperor. “I do not think it would be difficult, but I will consult my ministers about it.”

Napoleon then suggested the joint appeal for the six months’ armistice to England and Russia, which was declined by both. He then made a direct offer of mediation to the United States Government, in the most friendly terms, and on the “high grounds of humanity.”

The United States Government did not see it in this light, and rejected Napoleon’s humane offer.

The Confederate agents then obtained power to build ships of war in French ports, and to arm and equip them, and proceed to sea without molestation from the French authorities, the Treaty of Paris forbidding such a hostile act against a friendly power like the North to the contrary notwithstanding. The despot of France imagined himself above all treaties at that time.

69The English Alabama was then cruising in a most successful manner. The Emperor had a conference with Mr. Arman, a large shipbuilder, and assured him that there would be no difficulty about building the ships for the Confederates under the disguise of their Italian destination. Accordingly, a contract was made for building five ships of war at Bordeaux and Nantes, and afterwards another contract for three iron-clad rams.

In 1863 the Emperor had a great deal of business on hand, but was still convinced, amid all his diplomatic duties that the South should be recognized by the European powers. He was afraid, however, of putting his Mexican expedition in jeopardy by risking a rupture with the North. Finally, he said: “I will make a direct proposition to England for joint recognition. This will effectually prevent Lord Palmerston from misrepresenting my position and wishes on the American question.” Accordingly, he had an interview with those two worthy members of Parliament, Messrs. Roebuck and Lindsay, at Fontainebleau, which was said to be highly satisfactory. He authorized them to state in the House of Commons that he was both willing and anxious to recognize the Confederate States, with the co-operation of England.

There was a great debate in Parliament on the subject, in the midst of which Earl Russell arose and said that Baron Gros, the French Minister, had received no communication from his Government on American affairs. Mr. Roebuck, who made the motion on the authority of the Emperor, was astonished that he had been so badly fooled. It still remains a mystery, however, why Baron Gros did not receive the advice in question from the Emperor, because M. Mocquard, the Emperor’s Secretary, wrote to Slidell as follows: “On the next day after the interview of Messrs. Roebuck and Lindsay with the Emperor, the Minister of Foreign Affairs telegraphed Baron Gros to ‘officiously’ inform Lord Palmerston that, should Great 70Britain be willing to recognize the South, the Emperor would be willing to follow her in that way.”

The only explanation that seems plausible under these circumstances is, that the Palmerston-Russell Cabinet interrupted this telegram to Baron Gros for diplomatic purposes, or that the Baron, seeing that the debate in Parliament had taken an unfavorable turn, had prudently resolved to suppress the advice from Napoleon, in order that his master might not commit himself while England was not heart and soul with him in the enterprise. In fact, England had begun to see that she had taken a false position, and Mr. Gladstone’s eloquent spurt, to the effect that “Jefferson Davis had created a nation,” was no longer the diplomatic faith of England. She was more influenced by fear than love, as she always is, and had begun to think, after the capture of New Orleans and the destruction of the Confederate fleet, that the Federal Government was capable of organizing a formidable navy. The London Times, which voiced diplomatic sentiment then, said so. During this very debate on Roebuck’s motion, Lee’s army had been beaten at Gettysburg, Vicksburg had surrendered and victory was beginning to perch on the Northern banners everywhere. Napoleon also drew in his horns, complaining bitterly that “perfidious Albion” had gone back on him, and he was afraid to permit the war ships, when finished, to leave the French ports for any destination, and when he permitted the English privateer, the Rappahannock, to depart, it was under the injunction that the American minister should know nothing about it.

What Lord Palmerston called a “concatenation of circumstances” contributed largely to force the Emperor to change his policy towards the United States. Maximilian’s Mexican expedition was exceedingly unpopular, trouble was brewing in several parts of the continent, and Bismarck and Von Moltke were cunningly and deliberately weaving that net in which the Man of Destiny, seven years later, was 71hopelessly entangled at Sedan. His dream of a French American Empire beyond the Mississippi had vanished long before his last abject act of humiliation in surrendering the sword of France to Bismarck. And ere he died, a miserable wreck of disappointed ambition, again a political exile, he had the opportunity of seeing our own Republic, which he sought to destroy, rehabilitated, and on its way to become the greatest nation in history.

The Depleted Condition of the Treasury when Mr. Chase took Office.—Preparations for War and Great Excitement in Washington.—Chivalrous Southerners in a Ferment.—Officials Up in Arms in Defence of their Menaced Positions.—Miscalculation with Regard to the Probable Duration of the War.—A Visit to Washington and an Interview with Secretary Chase.—Disappointment about the Sale of Government Bonds.—A Panic Precipitated in Wall Street.—Millionaires Reduced to Indigence in a Few Hours.—Miraculously Saved from the Wreck.—How it Happened.

Soon after Mr. Chase came into the Treasury he found that money was seriously needed. In fact the Treasury was empty. The expenditure for the fiscal year ending June, 1861, was 62 millions, and there were only 41 millions of revenue to meet them, and even this amount was threatened with a serious reduction on account of the traitorous and rebellious attitude of the South.

After President Lincoln had called upon Congress to provide for the enlistment of 400,000 men, the expenses of the Government were soon advanced to the enormous amount of a million dollars a day. The Secretary of the Treasury made a calculation, which he submitted to the President, showing that the probable expenditures would amount to 318 millions for the ensuing year. He advised that 80 millions be provided for by taxation, 240 millions by loan, and that 50 millions of Treasury notes, redeemable in coin on demand, should be issued.

The Secretary was authorized by Congress to borrow a sum not exceeding 250 millions, on the credit of the United States, and as a part of this loan he was, in the words of the 74Act, “to issue in exchange for coin, or pay for salaries or other dues from the United States, not over 50 millions of Treasury notes, bearing no interest, but payable on demand at New York, Philadelphia or Boston.”

When Mr. Chase advertised for bids on the bonds known as the 81 issue all bids at 94 and above were accepted, and those under 94 were rejected.

I got up a syndicate immediately to take the entire balance of the loan at 94, and went on to Washington to see the Secretary. This syndicate comprised a number of New York banks and many large capitalists. I called upon Secretary Chase when I arrived, informed him of the object of my visit and made him an offer of 94 for the entire balance of the loan.

He was in favor of the proposition, but requested me to leave the matter open until the following morning for him to consider. It was a question with him whether he ought not to give those whose bids had been rejected an equal opportunity with the parties I represented.

I never can forget the impression I received on my approach to Washington that morning. As I looked through the window of the sleeping-car my eye was met by an entire train load of brass cannon. There were at least a dozen platform cars, each having one of those huge guns, all apparently in order to wheel at once against the enemy. I shall always remember the feelings that came over me at that moment. The question of war or no war was vividly presented to my mind, and this was the uppermost thought during my visit at Washington.

I descended from my traveling quarters as soon as the train was announced as having arrived at the capital, and repaired to Willard’s, then the principal, if not, in fact, the only hotel for a traveler to go to, and it was an old-fashioned, historic hostelry. I hastened to my room, rapidly performed my ablutions, and then found my way into the dingy breakfast room. On inquiry, I found that ten o’clock 75was the usual hour for heads of departments, including Mr. Chase, to be at the Treasury. At that hour I went to see him. I sent in my card and was ushered into his presence without delay. He was a man of portly frame and distinguished bearing, and impressed me with the feeling of being in the presence of an individual far above the average standard of humanity in every respect.

I informed the Secretary of my mission, with the result above stated.

About seven-eighths of the people of Washington, at that time, were Southerners. The office-holders were largely composed of the latter, and they were expecting to be suddenly turned out of office. This rendered the place a boiling caldron of conspiracy and treason.

As I went around collecting information, the sight of those cannon that at first had made such an indescribable impression upon me, continued to haunt my vision wherever I went. The air was filled with rumors of war, and everybody was wound up to the highest pitch of hostile excitement.

As I mingled among the people, the impression was forced upon me that war was inevitable, and that up to the very hilt of the sword. I felt that the contest would be long and bloody.

I sent a dispatch to my firm in New York, conveying my impressions to that effect, and advised them to clear the decks in preparation therefor. I urged them to lose no time in selling off all the mercantile paper on hand, and requested them to communicate to the members of the syndicate, which I had formed for the purchase of bonds, recommending them to withdraw therefrom, as I was convinced that war to the knife was imminent, and that Government bonds must have a serious fall in price in consequence.

I saw Mr. Chase the next morning, and told him that, as I believed, there was going to be a long and bloody war, I could not conscientiously, in the interest of my clients, renew my bid of the previous day.

76With regard to my opinion about the probable length of the war, the Secretary took issue with me very firmly.

Mr. Chase, however, afterwards proved to be a warm and most valued friend of mine, and it was largely due to his aid and recognition that I achieved brilliant success in my early Wall Street career during the war period.

The Secretary was of opinion that the bonds should command par, at least, and they would be worth that and above it very soon, he thought. He made this assertion on the expectation that the impending difficulties would soon be adjusted, and that in less than sixty days all the trouble would be at an end.

It was not so extraordinary as it may seem to some people now, with the light of later events fully before them, that the Secretary was so sanguine of short work being made of the South, because he only shared the opinion of a large number of people, who greatly underestimated Southern durability.

After leaving the Secretary, who treated me with great consideration, as he did every one in his inimitable and dignified manner, which made such a durable and favorable impression on all who came in contact with him, I felt greatly pleased and highly gratified at meeting him. In fact, his fine, magnetic presence was of a character to command the admiration of almost every person who had the honor of an interview. He was a great man for producing good first impressions, and, unlike many impressions of this character they were generally lasting.

Had I not visited Washington at the time I did, and had I not obtained the correct impression concerning the future of the then impending difficulties, my firm, like many others that invested in Government bonds, mercantile paper, stocks and other fluctuating properties, would have been irretrievably ruined. I have reason to congratulate myself, therefore, on my good fortune in narrowly escaping such a disaster, almost at the beginning of my Wall Street career, as I was thus enabled, at a later stage of the national trouble, 77to be of considerable service to the Government, through the Treasury, in its efforts to sustain such an army in the field as was calculated to ensure success to the Federal arms.

My first experience in dealing in Government bonds was just prior to the Lincoln administration, when Mr. Cobb was Secretary of the Treasury. He advertised for sale to the highest bidders an issue of U. S. bonds bearing five per cent. interest, having twenty years to run, and my firm bid for $200,000 of them, hoping to make a quick turn, and a small profit thereon. A five per cent. deposit was made, as required by custom.

The loan was all awarded to most of the bids, mine included, and a very large part of it was awarded to Lockwood & Co., who were then regarded the largest and most prosperous Stock Exchange firm in the street.

George S. Robbins & Co., John Thompson, Marie & Kans, and a few others, whose names I now forget, made also large bids.

Of those mentioned, however, my firm stood alone in taking up the bonds, as the threatening aspect of political affairs came on so soon afterwards as to depreciate Government securities. The original deposit of five per cent. was lost by these subscribers, and the bonds were permitted to remain in statu quo, as the Government never forced the claim against the delinquents.

This, in a large measure, accounted for the impoverished condition of the Treasury when Mr. Chase took charge of it, and for which Mr. Cobb has been made an object, not wholly undeserving, of public reproach.

The $200,000 bonds my firm subscribed for at par were sold mostly at 95 and below, but the fact of taking them, and meeting the subscription, without fail, gave my firm an excellent standing with the Government at the beginning of the war, and enured greatly to my firm’s advantage thereafter.

78At the time I visited Washington my firm was more largely engaged in dealing in mercantile paper than any other branch of Wall Street business.

I had inaugurated the system at the time of my advent to the “Street” of buying merchants’ acceptances and receivables out and out, the rate being governed by the prevailing ruling rate for money, with the usual commission added.

It was by this method that my firm soon became the largest dealers in mercantile paper, which business had formerly been controlled by two other firms for at least a quarter of a century, and whose old fogy methods were by my innovations easily eclipsed.

The merchants at that time would go to these discount firms and leave their receivables, bearing their endorsements, on sale there, and only when sold by piecemeal could they obtain the avails thereof.

The more expeditious plan that I adopted, which was to give these negotiators a check at sight, seemed generally to merit their approbation, and enabled me to command the situation in that line of business, very much to the chagrin of my competitors.

In this way my firm had accumulated about five hundred thousand dollars in notes, which were hypothecated with various city and country banks.

After coming to the conclusion above referred to on my visit to Washington, in regard to the certainty of a prolonged and desperate war, I made quick steps back to New York to dispose of my paper. I went vigorously to work, and succeeded in unloading all but ten thousand dollars of short time notes made by Lane, Boyce & Co., and a note of $500 of Edward Lambert & Co.

I had no sooner accomplished this very desirable work of shifting my burden, and distributing it in a more equable manner on the shoulders of others, but at higher rates than I paid, than in less than a week after my return from Washington the exciting news arrived of the firing of the first hostile gun at Fort Sumter.

79The announcement of this overt act of war spread like wildfire, and the wildest scenes of excitement and consternation were witnessed in Wall Street and throughout the entire business community. The whole country was panic stricken in an instant.

Stocks went down with a bound to panic prices. Fortunes were lost, and millionaires were reduced to indigence in a few hours. Money was unobtainable, and distrust everywhere was prevalent.

The two firms whose paper I was unable to dispose of were about the first to fail, and before the maturity of any of the balance of the paper which I had successfully negotiated both the drawers and endorsers thereon, without a single exception, all collapsed.

The height which Gilroy’s kite attained would have been nowhere in point of altitude to that which I should have reached had I not had the good luck to have cleared my decks as I did, and in the nick of time.

My safety in this instance was due to my inspiration, to which I believe myself more indebted than anything else for the privilege of remaining in Wall Street up to the present date.

I am no spiritualist nor theosophist, but this gift or occasional visitation of Providence, or whatever people may choose to call it, to which I am subject at intervals, has enabled me to take “points” on the market in at one ear and dispose of them through the other without suffering any evil consequences therefrom, and to look upon these kind friends who usually strew these valuable “tips” so lavishly around with the deepest commiseration. My ability to do this, whatever may be its source, whether human or divine, has saved me from being financially shattered at least two or three times annually.

I do not indulge in any table tapping or dark seances like the elder Vanderbilt, but this strange, peculiar and admonitory influence clings to me in times of approaching squalls more tenaciously than at any ordinary junctures.

80I have known others who have had these mysterious forebodings, but who recklessly disregarded them, and this has been the rock on which they have split in speculative emergencies.

Therefore I say again, beware of “points.” They constitute the ignis fatuus which lure more unfortunate speculators to their financial doom than all other influences put together.

Secretary Chase Considers the Problem of Providing a National Currency.—How E. G. Spaulding takes a Prominent Part in the Discussion on the Bank Act.—The Act Founded on the Bank Act of the State of New York.—Effect of the Act upon the Credit of the Country.—A New System of Banking Required.

The history of the Bank Act of 1863, improved by the Act of 1864, would require much larger space than I can devote to it in this book. I can only glance at its salient points, and show its great influence, not only on the finances of the country, but upon the destiny of the nation itself.

The Hon. E. G. Spaulding, who was one of the most prominent men in dealing with the financial questions of that period, has written and preserved a very full history of the legislation on the subject, and of the interesting debates which preceded it.

After the temporary loans had been negotiated to release the pressure upon the Government, Secretary Chase set his mind to consider the problem of providing a currency without disturbing the business organization of the country.

At this period he was met by a fresh difficulty, in the suspension of specie payments, which had been hastened by the arrest of Mason and Slidell, which, but for the wise policy of Mr. Seward, would have precipitated a conflict with Great Britain.

Early in 1862 Congress authorized ten million more of demand notes. This was followed by further issues, making in all 300 million United States notes. Secretary Chase was at first opposed to making these notes a legal tender for private 82debts, but in order to get the bill through, he agreed to the legal tender clause, as the Government was greatly in need of money.

The Secretary was also empowered by Congress to borrow 500 million dollars on 5-20 year 6 per cent. bonds, and also to obtain a temporary loan of 100 millions on condition that the interest on the bonds should be paid in coin, and that the customs should be collected in coin for that purpose.

The first bill to provide a national currency secured by a pledge of United States bonds was introduced by Mr. Hooper, in July, 1862, but it was not reported from the Committee to which it had been sent. At the meeting of Congress in December the same year the financial problem had become still more complicated, and owing to the magnitude which the war had then assumed, the expenses amounted to two millions a day.

The total receipts for the fiscal year ending June 30, 1863, were 511 millions, and the expenditures were 788 millions, thus leaving a deficit of 277 millions.

All the financial wisdom of the Secretary was necessary in this dilemma. The question was whether to provide for these 277 millions by a fresh issue of United States notes, or by interest-bearing loans.

The Secretary was opposed to increase the volume of the currency, saying that the result would be the inflation of prices, increase of expenditures, augmentation of debt, and ultimately disastrous defeat of the very purposes sought to be attained by it.

He was in favor of an increase in the amount authorized to be borrowed on the 5-20 bonds. He advised the creation of banking associations which should secure their circulation by a deposit of Government bonds. One object of this was to create a market for the bonds.

Congress was not in favor of this proposition, and the bill of Mr. Hooper was again offered in the following January, 83but was adversely reported from the Committee on Ways and Means.

Another new issue of 100 millions United States notes was ordered on motion of Mr. Stevens, of Pennsylvania, to meet the constantly increasing needs of the army and navy.

Mr. Lincoln signed the joint resolution ordering the new issue with some reluctance, and sent a special message to the House, in which he expressed his regret that it was necessary to add this last amount to the currency while the suspended banks were free to increase their circulation.

Soon after this Senator Sherman offered a bill to provide a national currency, somewhat after the model of Mr. Hooper’s bill. The Sherman bill was passed before the end of February. This virtually secured the present national banking system.

In order to show more clearly the nature of the national bank legislation, and the prominent part taken by Mr. Spaulding and a few others therein, Mr. Chase having been the directing mind, it is necessary to make a brief resume of the action of Congress with the State banks in this connection.

In January, 1862, the banks applied to Secretary Chase to receive their notes in payment for the bonds which he had for sale, but the Secretary, thinking that this would inflate the bank currency, refused the offer. Yet the process of inflation went on until it increased from 130 to 167 millions.

When Mr. Spaulding advocated the National Bank Act on the ground that it would provide a permanently improved bank currency, the Hon. Roscoe Conkling, at that time in the lower House, opposed the policy of making war upon the twelve hundred banks in the free States, and made a very affecting appeal for the orphans and widows who had stock therein. He proposed to issue 260 millions of seven per cent. bonds, payable in thirty-one years, to be exchanged for the bills of the suspended banks of New York, Philadelphia 84and Boston, and also to issue 200 millions of United States notes, payable in coin in a year. Mr. Conkling’s scheme was assailed by Mr. Bingham, of Ohio, on the ground that it would subject the national currency to the mercy of city bankers and brokers. Other eminent representatives stood up for the maintenance and integrity of the State banks, and notably Mr. Conkling opposed the measure vigorously, which was intended to tax the State banks out of existence.

Mr. Spaulding, who advocated the bill, was followed by Mr. Fenton in an able argument, showing the superiority of a currency secured by United States bonds, and Senator Sherman explained the great evil occasioned by the success attending the counterfeiting of the State bank notes.

These arguments seemed to be conclusive and overwhelming in the passage of the bill.

It must not be forgotten, to the honor of the State of New York, that the National Bank Act was founded on the Banking act of this State, whose chief features were a currency secured on public funds, and that directors and stockholders should be personally liable.

The authorship of this idea is attributed to Mr. Stillman, who is also the well-known author of the “Stillman Act” to abolish imprisonment for debt.

This bank act, which was especially engineered by the far-seeing Secretary of the Treasury, Salmon P. Chase, had almost a miraculous effect upon the credit of the country. It created a new and extensive market for United States bonds, which immediately advanced from 93 to par.

All the running expenses of the Government, accumulated with such rapidity, were paid from the sale of the 5-20’s within the short period of two months or thereabouts.

It was stated in the Treasury report at the end of the year that “The Bank Act at once inspired faith in the securities of the Government, and, more than any other cause, enabled the Secretary to provide for the prompt payment of the soldiers and the public creditors.”

85Mr. Hugh McCulloch, the Comptroller of the Currency, saw room for certain changes in the law, some of which were effected by Congress in the first session of 1864. These changes were embodied in the Act of June, 1864.

There was a long debate and strenuous opposition, in which Secretary Chase deeply sympathized, against State taxation of the national banks, but despite the opposition the taxation clause was carried.

At length the modified act was passed, limiting the total amount of United States notes to be issued to 400 millions, with such additional amount, not exceeding 50 millions, as might be transiently required for the redemption of the temporary loan, and thus the main features of the Bank Act, which has served its purpose very well, became a law.

I hope, however, ere long, as I have more fully intimated in another chapter, to see a superior system of banking, which I believe must succeed the present system, which is now doomed to “innocuous desuetude” through the imminent payment of the public debt.

History of the Organization for Ninety-four Years.—From a Button-Wood Tree to a Palace Costing Millions of Dollars.—Enormous Growth and Development of the Business.—How the Present Stock Exchange was Formed by the Consolidation of Other Financial Bodies.—Patriotic Action During the War Period.—Reminiscences of Men and Events.

The New York Stock Exchange is not a building, as people generally suppose. It is an Association of brokers united, but not incorporated by law, for the purpose of buying and selling representatives of value called “stocks” and “bonds.” Stocks, in the American sense of the term, are properties consisting of shares in joint stock companies or corporations, or in the obligations of a government for its funded debt. In England, government obligations only, are called “stocks,” and the obligations of companies or corporations are called “shares.”

The edifice in which the Stock Exchange meets, and which, in common parlance, is designated by the name of the association of members, occupies a large portion of the block bounded by Broad, Wall, and New streets, and Exchange Place. Its main entrance is on Broad street, and it has entrances also on Wall and New streets. It has a frontage of 65 feet on Broad and 158 on New, on which the back entrance is situated. The members of the Stock Exchange have no need of a charter from the Legislature. In fact, they have steadily resisted all attempts of the Solons of this State to legislate in their interest. Their notion in this respect is more fully commented upon in my chapter on 88“Corners.” The Tweed Ring, in the height of its power, made a bold attempt to force a charter upon the Stock Exchange, but it was indignantly rejected. The irrepressible “Boss” and his henchmen, by the presentation of false names, had a charter for the incorporation of the Stock Exchange passed in 1871, the year prior to Tweed’s downfall, and it was signed by the Governor. For these gratuitous services the sum of $100,000 was impudently demanded; but the charter was refused, and the demand repudiated by the association. Since 1879 until recently the membership, which has been full, was limited to 1,100, but by a resolution lately passed the limit is now placed at 1,200. The seats for the past year have sold at from $25,000 to $30,000.

The Stock Exchange building is a fine, solid structure, devoid of anything showy, pretentious or decorative. It was designed by James Renwick, the architect of Grace Church and of St. Patrick’s Roman Catholic Cathedral, on Fifth avenue at Fiftieth street. The cost of the building was nearly $2,000,000. It costs nearly $200,000 a year to pay the salaries of the various officials and keep the building in proper repair. The apparatus for ventilating the building is one of the best. It cost $30,000, and supplies an abundance of pure air and perfumes at the same time. The heating and cooling arrangements are the best of their kind, and the lighting is admirable. There are three chandeliers containing 200 electric lamps, which throw a flood of beautiful soft light around the whole interior. The building is well supplied with rooms for members, lavatories, and closets. One great feature of the interior consists of the large vaults, which contain more than a thousand safes for the safe keeping of securities. About 400 of those safes are let to persons who are not members. The vaults and safes are considered the strongest in the country.

The growth of this institution appears marvelous when we go back to its humble beginning in 1792, when the originators formed the association under a button-wood tree in front of 89what is now No. 60 Wall Street. Following is the text of the simple agreement into which the original members entered: “We, the subscribers, brokers for the purchase and sale of public stocks, do hereby solemnly promise and pledge ourselves to each other that we will not buy or sell from this date, for any person whatsoever any kind of public stocks at a less rate than one-quarter of one per cent. commission on the specie value, and that we will give a preference to each other in our negotiations. In testimony whereof, we have set our hands this 17th day of May, at New York, 1792. Lem Bleekez, Hugh Smith, Armstrong & Barnewell, Samuel Marsh, Bernard Hart, Sutton & Hardy, Benjamin Seixas, John Heary, John A. Hardenbrook, Amurt Beebee, Alexander Gunty, Andrew D. Barclay, Empn. Hart, Julian McIvers, G. N. Bleecker, Peter Inspach, Benjamin Winthrop, James Ferrers, Isaac M. Gomez, Augustine H. Lawrence, John Besley, Charles McIvers, Jr., Robinson & Hartshorn, David Reedy.”

This arrangement existed, and was the only one by which the members were bound, until 1820, when daily meetings and the regular call of stocks began. The Board met in various places, including the old Merchants’ Exchange on the corner of Wall and William streets, but did not take root in permanent shape until the year 1842, when it became established in the new Merchants’ Exchange, now the Custom House. An illustration of the old Merchants’ Exchange is given on another page. The sight of it will doubtless awake a host of endearing reminiscences in the minds of some of the oldest merchants and speculators. It will be remembered by the few survivors of that period that about the year 1820 the meetings of the Board were held in the office of Samuel J. Beebee, at 47 Wall Street. The Board also met in a room in the rear of Leonard Bleecker’s; also in the office of the old Courier and Journal. Subsequently the meetings of the Board were held in an upper room of the old Merchants’ Exchange. This building was destroyed 90by the great fire of 1835, and afterwards the new Merchants’ Exchange was built. The Board moved into this building in 1842, and remained there until 1853. Up to this time the Board was the very closest of corporations, its membership being governed by the most iron-clad rules. There was no field for financial news agencies in those days, for the Board kept its proceedings a profound mystery, and its members were bound to the strictest secresy on pain of expulsion. That wonderful development of our later civilization, the ubiquitous interviewer, was then unknown. The business of the Board excited the most intense curiosity, and so impatient did outsiders become to learn the mysteries of the interior, that the members of an open Board which was organized about the year 1837, after failing to force themselves into the regular association, engaged a building next to the Board-room, and dug the bricks out of the wall in order that they might see and hear what was going on.

The Board removed from the Merchants’ Exchange building in 1863 to a room in the Commercial Exchange Bank building, at the corner of Beaver and William. About the year 1857, memorable as the period of the great panic, and my advent in Wall Street, the Board removed to “Dan Lord’s building,” which had entrances on William and Beaver streets. It was here, about the time of my advent, in Wall street, more fully described in another chapter, that some of the great speculators of that era figured. Among these were Daniel Drew, Jacob Little, and the lightning calculator, Morse, who made and lost a fortune of millions in little more than a year. In this building the rule of secresy was not relaxed, and the fact is on record that a hundred dollars a day were freely offered for the privilege of listening at the key-hole during the time of the calls. The Board continued to hold its meetings in this building during the war, and up to 1865, when it removed to the present edifice.

91It is worthy of note here that the Stock Exchange, during the war, for the purpose of assisting the Government, passed a resolution prohibiting members from selling Government bonds “short;” and also a resolution forbidding all dealings in gold. The latter resolution was the principal cause of the formation of the Gold Exchange. This action on the part of the Stock Exchange was taken at a pecuniary loss of many millions of dollars, the sacrifice having been made for the highest and noblest of patriotic purposes; yet, in the face of such an historic record as this some people still imagine that the members of the Stock Exchange never have been anything but a selfish set of money grabbers. Is there any other institution in the country whose members would have made such a personal sacrifice in the interest of the Government? I doubt if there is. Certainly, none did.

There was a second Open Board of Brokers formed in the year 1863. It took up its quarters first in a basement in William street, called the “Coal Hole.” The membership began to increase rapidly, and the business accumulated so fast that the Board was soon enabled to take more capacious accommodations on Broad street, contiguous to the Stock Exchange. In this menacing attitude the new Board began to make serious inroads on the business of the old one, almost one-half of which it had acquired by the year 1869, when the old Board called a truce. It was seen by the judicious members of the Board that the competition was likely to work the ruin of both, and amicable negotiations were begun which culminated in consolidation. So the Open Board, the Stock Exchange and the United States Government Board were consolidated in May, 1869, making the strongest public financial association in the country, and one of the most important in the world, and placing it upon an almost impregnable footing. Mr. William Neilson was the first President in the new building.

92The following are the names of the Presidents of the New York Stock Exchange from 1824 until the present time:

Ten Oldest Living Members to 1907, all of whom joined the Exchange prior to July 1, 1864.

The Senate Committee on “Corners” and “Futures.”—Speculation Beneficial to the Country at Large.—A Regulation of Values, and an Important Agent in the Prevention of Panics.-“Corners” in all kinds of Business.—How A. T. Stewart made “Corners.”—All Importing Firms deal in “Futures.”—Legislation Against “Corners” would stop Enterprise and cause stagnation in Business.—Only the Conspirators themselves get hurt in “Corners.”—The Black Friday “Corner.”—Speculation in Grain Beneficial to Consumers.

The New York Stock Exchange is organized after the same manner as a social club, such as the Union League, the Union or the Manhattan, and not under a special charter from the Legislature. Hence it is protected from the interference of that honorable body.

Although various attempts have been made, from time to time, at Albany, to levy taxes upon the transactions of the Exchange, and to interfere with the business of speculation and investment in many other ways, these legislative designs have hitherto been happily frustrated.

Shortly after the memorable “corner” in Hannibal & St. Jo., in 1881, another attempt was made by the Legislature to force Wall Street matters under the jurisdiction of Albany lobbyists and “scalpers.”

The newspaper articles on the subject of the “corner” had attracted the attention of the Legislature then in session, and naturally suggested to some of the wiseacres of that dignified and incorruptible body that the “corner” afforded an excellent opportunity, when the public mind was excited on the subject, to raise an outcry against the shocking immorality of such huge speculations.

96A Senate Committee on “corners” and “futures” was therefore appointed, and various Wall Street men were summoned to appear before it, and give their testimony on this interesting subject. I had the honor of being one of the witnesses cited. I promptly obeyed the subpœna in preference to taking the risk of being hauled up for contempt and sent to durance vile. I appeared before the Committee at the Metropolitan Hotel, and not only answered all questions put to me, without any fashionable lapses of memory, after the manner of certain other financiers, but I regaled the Committee with a little dissertation on the subject of investigation. I had letters from members of the Legislature afterwards complimenting me for having made the points very clear. So I can say, “Praise from Sir Hubert is praise indeed,” and therefore I am encouraged to reproduce that effort in this volume, not so much from an intense desire to go down to posterity as a successful orator, as from a disposition to record my approval, in more permanent form, of the soundness of the legislative judgment on my explanation of “corners.”

When the applause had subsided, I spoke as follows:

“Gentlemen of the Committee on Corners and Futures: Speculation is a method now adopted for adjusting differences of opinion as to future values, whether of products or securities. This is more common now than in former years because the facilities for procuring information have increased with the greater intelligence and celerity with which all business is now conducted, and also from the greater rapidity with which such information can be transmitted by telegraph and cable.

“In former years the results of a crop were known only when it came to the market. Now almost everything affecting its future value is known with a fair degree of accuracy before the crop is harvested. This advanced information naturally becomes the subject of speculative transactions which could not have existed in former times.

97“Speculation brings into play the best intelligence as to the future of values. It has always two sides. The one that is based principally on the facts and conditions of the situation wins in the end, and the result of the conflict is the nearest possible approach to correct values. The consequences of speculation are thus financially beneficial to the country at large.

“Speculation for a fall in prices is based upon the presumption of an over-supply. If it succeeds, the production of the particular product is checked until prices recover, and in the meantime production is diverted to articles less abundant. Thus speculation proves a regulator both of values and production. Speculation for a rise in prices is based upon a presumption of scarcity or short supply, and its direct effect is to quicken production and restore the equilibrium of prices.

“‘Corners’ usually come from running speculation to an excessive length, by which the seller becomes responsible for deliveries beyond what he can possibly make. He thereby places himself at the mercy of those with whom he has made the contracts. These exigencies chiefly affect the speculators themselves, and the community at large but little.

“Extreme prices usually grow out of them, but they are only momentary, and have small effect upon regular or cash transactions, which sympathize very remotely with these temporary and artificial quotations.

“Speculation is not to be judged by its occasional excesses, but by the general effects which the foregoing considerations show to be beneficial. It regulates production by instantaneously advancing prices when there is a scarcity, thereby stimulating production, and by depressing prices when there is over-production. It thus becomes one of the most beneficial agents in the business world for the prevention of panics.

“Speculation, moreover, makes a market for securities that otherwise would not exist. It enables railroads to be built 98through the ready sale of their bonds, thus adding materially to the wealth of the whole country, and opening a more profitable market to labor. In this it becomes the forerunner of enterprise and material prosperity in business.

“There are ‘corners’ in all kinds of business as well as in Wall Street speculation. Mr. A. T. Stewart, the great dry goods merchant, made more ‘corners’ during the latter part of his life than half the rest of the business community put together. He did this mainly by contracting for the entire and exclusive production of certain classes of goods, and as such goods could only be bought at his establishment he had a close ‘corner’ in them, and accordingly put on his own prices.

“The greater portion of all the large mercantile firms do business in the same way. And all the importing firms deal in futures. They sell goods by sample, agreeing to deliver them at a future stated period, varying from thirty days to twelve months. In the meantime the goods have to be manufactured, and in many instances purchasers have to wait until they are grown, and imported thousands of miles.

“If it were not for the support which comes from the ‘short’ interest in grain and the general activity created thereby in times of depression, which come periodically in this country, it would be in the power of the large speculative grain dealers in Europe to manipulate prices downward, and purchase our products every year, on raids, at prices much under the cost of production.

“When we sell to Europe we must do so at a profit, or our transactions don’t help to enrich the country.

“Another curious thing about ‘corners’ is that the people who organize and manipulate them generally get most hurt in the enterprise. This was the case with the ‘corner’ referred to in Hannibal and St. Joseph. Mr. John Duff, of Boston, was the man in whose prolific brain that ‘corner’ originated, and the result to him was financial ruin. The stock ran up to 350, though the short account amounted to 99only about 1,200 shares, and the ‘shorts’ had to settle at 280.

“The result was similar in the ‘corner’ in Northwest in 1872, manipulated by Jay Gould. The stock was started at 80 and it ran up to 280. It then reacted to the former figure. I believe Jay Gould was alone in that deal, and it came pretty near crushing him, in spite of his incomparable capacity for wriggling out of a tight place.

“Patents are ‘corners’ protected by law. The inventor has a monopoly for seventeen years in his invention against all the world, and this gives him a right to make and sell the article covered by his patent, often at a profit of several hundred per cent. on the original cost, and on the price it would bring if placed in competition in the open market, like railroad stocks and grain.

“If it is the intention of the Legislature of this State to stop enterprise in business, then your Committee is undertaking to accomplish that work in the right way, but I think your success would be a public calamity.”

I doubt the expediency of either undertaking to regulate enterprise by law or to choke off competition by the law-making power. The result would be woeful stagnation in business. It would crush the motives for commercial activity and depress the creative energies of prosperity.

The law of supply and demand is the best regulator.

Congress attempted to suppress speculation in gold during the war, and as soon as the act was passed prohibiting such dealings, the premium on gold advanced 100 per cent. This so much terrified the wise statesmen who concocted this sweeping measure of financial reform, that they immediately displayed much more wisdom in hastening to have the bill repealed.

The simple reason that such laws will not work in practice is that where there is a will there is generally a way to evade them. This is the case with the very best of such laws that can possibly be framed. Take the usury laws for 100example. The methods of getting around these are numerous, and there is practically no limit to the rate of interest that can be exacted except the conscience of the lender, which is frequently very elastic. Daniel O’Connell said he could drive a coach and six through any act of Parliament. Jake Sharp was also of opinion that he could run a double-track horse-car railroad through the best act that could be framed by any Albany Legislature. Jake was checked in his career at considerable trouble and expense, but his case illustrated that the rule referred to holds good generally in legislation.

The fact, however, that it seldom happens that anybody gets badly hurt in “corners,” except the conspirators themselves, is sufficient protection for the general public, and should set the minds of legislators at rest, if they mean to do legitimate business in their law-making capacity.

The conspirators in “corners” are usually left high and dry without any market for their fictitious values, and the “corner” very frequently has the effect of putting the property out of the speculative market for a long time. The fate of Han. & St. Jo. is a warning to those who manipulate “corners.” The stock was seldom quoted for months afterwards.

Take the case of Black Friday for example. It was most disastrous to the parties intimately connected with it. It came near proving Gould’s ruin, and he has not got over the moral effect of it yet. The probability is it will be an heirloom in his family, a skeleton in the Gould closet for generations to come. Gould and Black Friday have become synonymous in the minds of many people, and the further from Wall Street the more the distinction becomes confounded.

In making these remarks I have no intention of throwing any reflection upon Mr. George Gould, who seems to be a very promising young man for a rich man’s son. His careful education has, no doubt, done much to counteract the drawbacks incident to the sons of wealthy men to which I have 101referred more fully in another part of this book. His maternal training, I understand, has been of the most exemplary kind. This will go far to offset the disadvantages to a business career, which the accident of his birth in luxurious surroundings, according to my theory, otherwise entails. If his brain is composed of the genuine plastic material out of which the craniums of successful financiers are made, he may learn to forget that he has been nursed in the lap of luxury, and look back with due respect to the hole whence his father was digged and the rock whence he was hewn. He may have brains enough, possibly, to reflect with more pride on that ingenious mousetrap that first brought his father into prominence, than the gew-gaws of the gilded palace in Fifth avenue, the luxuries of the handsome parlors and rich conservatories at Irvington, and the gorgeous trappings of his father’s yacht and palace cars. I have, therefore, great hopes that George will be a conspicuous exception to the rule I have propounded elsewhere regarding rich men’s sons.

When a large mercantile firm buys up goods in any line so that nobody else has the same goods, it then has a “corner” in these goods.

“Corners” in goods differ from “corners” in Wall Street in regard to their influence on the organizers. They don’t act like a boomerang as the Wall Street “corners” mostly do. The “corner” is sometimes sustained during the life of the manipulator, as in the case of Mr. Stewart.

The successors of the great operators sometimes maintain it, but in this instance Judge Hilton made a signal failure, though in some respects he is a far abler man than Stewart was. Yet, he had not the genius, for working “corners,” of his eminent predecessor. He is, probably, so well learned in the law that he has too much inclination to go around the “corners.”

One thing is certain, very few of these merchants can become wealthy except through the medium of “corners.” It 102is by these peculiar methods that nearly all large fortunes are amassed in their line, and in a perfectly legitimate manner, too, whatever casuists and hair-splitting moralists may say or think about the matter. The tendency to make “corners” seems to be interwoven in our business methods, and to play an important part in the struggle for existence. So I don’t see what we are going to do about it without a radical change in that compendium of the best political wisdom that the world has ever seen. I refer to the Constitution of the United States. All the acumen and sophistry which the most astute Philadelphia lawyer could bring to bear upon it has hitherto failed to show that there is anything in this wonderful document opposed to the liberty of making “corners.”

As Mr. Gladstone has truly said: “This document is the most wonderful work ever struck off at a given time by the brain and purpose of man.”

I hold there is nothing in the Constitution opposed to the freedom of making “corners,” and that all the evils resulting from these speculative inventions can be met and counteracted by business methods, and the laws regulating the ordinary concerns of life without resorting to any rigid or special methods.

To dispose of “corners” or abolish them on the large scale to which I have alluded would presume an entire revolution in our social system, and to attack them piecemeal, as the Legislature frequently does, involves a very suspicious kind of discrimination, and is at variance with the spirit of the Constitution. In fact it often amounts to a kind of thinly-disguised blackmail.

The truth is, that it is almost impossible to legislate against “corners” without aiming a fatal blow at speculation itself, which, as I have shown, is a vital principle in the regulation of values, the stability of business, and the prevention of panics.

I believe the men of most experience, not only in Wall 103Street, but in other departments of finance and commerce, will bear me out in the statement that a market where even values are considerably inflated by speculation, is more desirable than a period of depression. The result, in the long run, is the greatest good to the greatest number. I don’t believe that the ghost of Jeremy Bentham himself could rise up and consistently condemn this statement.

I believe that speculation in grain and provisions is materially beneficial to consumers, and that the latter are better off, one year with another, and less liable to be menaced with periodical famines, than if there were no speculation in these necessities of life.

Before leaving this prolific theme of “corners” I wish to say a few words about my own experience in that line. The only “corner” in which I have ever been materially hurt during my long business experience was one manipulated by the State of Georgia.

This Sovereign State issued and granted altogether about eight millions of bonds, all bearing the great seal, properly signed and legally issued for full value. I advanced over two million dollars in good money on a part of these bonds. Shortly after this transaction, the State of Georgia ascertained through a garbled report of a committee sent to this city by the Georgia Legislature, that all these bonds were held outside of her own borders. The Legislature then passed an act of repudiation, thereby reducing the value of the bonds from par to that of waste paper. When I discovered that my little pile of two million dollars in what I considered good securities would no longer exchange for greenbacks, I had a very disagreeable sensation of having been “cornered” by the high toned and chivalrous representatives of the State of Georgia, which, through its lawmakers, claimed the sovereign right to do wrong to the citizens of a sister State.

In the Harlem “corner,” which is referred to in another place, contracts to deliver at 110 were settled at 179.

104About three million dollars were taken out of the pockets of the bears. Several prominent houses went down in the struggle. The result of the “corner” was that the bulls were saddled with the entire capital stock of the property.

One broker, who had sold calls at 150 and was requested to fulfil his contracts when the stock had advanced to 250, was very much in the same position as Glendower’s spirits, which were called from the vasty deep but would not come. “I don’t see anything here,” he said, “about delivering. You can call, but I don’t mind it.”

There were two “corners” in Harlem. The Common Council was cornered in one and the Legislature in the other.

In the Rock Island “corner” the bulls bought 20,000 shares more than existed, and the price rose from 110 to 150.

London financiers have a fearful horror of “corners.” Hence the London Stock Exchange is very chary about listing our railroads, especially those with a moderate number of shares.

“Corners” are seldom profitable, and the parties connected with them can hardly escape getting badly hurt unless they are prepared to own and carry the entire property. Even in that event, it is usually put out of the speculative market for a considerable time.

The Hudson “corner” was one of the most successful. It paid a profit of 12 per cent. There was a profit of 4½ on the Rock Island “corner.”

The first “corner” of which there is any record in Wall Street was in Morris Canal, an old “fancy” now almost forgotten except for its “corner.” It had been forced upward as fancies frequently are, until it was far above its intrinsic value, and several operators began to sell “short.”

After this operation had gone on for some time a pool was formed to protect it, and the pool bought it all up and locked it up in a trunk. The operation was new to the 105Street and the bears were astounded, but when called upon to settle they became furious, and accused the manipulators of the “corner” of entering into a conspiracy. The “bulls” asked the “bears” why they had sold what they did not possess and could not procure.

The dispute was referred to the arbitration of the Board of Brokers, and that eminent body, then unsophisticated in the arts of speculation, took what seemed to them an equitable view of the case, and decided it in favor of the “shorts,” who, on the ground of conspiracy on the part of the clique, were relieved from fulfilling their obligations.

The Great Hudson “Corner.”—Commodore Vanderbilt the “Boss” of the Situation.—The “Corner” Forced upon Him.—How he Managed the Trick of getting the Bears to “Turn” the stock, and then caught them.—His able Device of Unloading while Forcing the Bears to Cover at High Figures.—The Harlem “Corner.”—The Common Council Betrayed the Commodore, but were Caught in their own Trap, and Lost Millions.—The Legislature Attempt the same Game, and meet with a Similar Fate.

In the Hudson “corner,” the stock jumped from 112 to 180. Commodore Vanderbilt was the “Boss” of the situation in this “corner.” He got the “bulge” completely on all the other parties connected with it, and what is more, he had the balance of the sympathy of the Street with him, for he was not the aggressor in getting up the “corner.” The fighting at first was forced upon him, but he acted on the defensive in a way that made his opponents sorry for their rashness. Though he did not know much about Shakespeare, he acted in accordance with old Polonius’ advice to his son by pushing the opposition to the wall.

As soon as he gained the mastery, he became severely aggressive, as he was in everything.

The beginning of this story of the Hudson “corner” is somewhat romantic. The Commodore was sunning himself on a pile of logs on the Jersey side of the Hudson while his yacht lay in the stream, and he was in the mood for enjoying a long and well-earned vacation, attempting to lay aside for a time the toil and trouble of eking out a precarious existence in speculation. While basking in the noon-day sun and gazing with delight on the luxurious foliage that arose from the New Jersey bank of the river, he was aroused 108from his charming reverie by a messenger from Wall Street, who conveyed to him the important intelligence that a wicked and unregenerate clique of “bears” had conspired to sell Hudson stock “short,” and that it was declining with great rapidity under the repeated and unmerciful blows of their hammers.

The Commodore arose and shook off his lethargy, as a lion may be supposed to shake the dew from his mane prior to his preparation for a spring upon an unfortunate foe.

The Commodore hastened down to Wall Street and instructed his brokers to take all the sellers’ options offered in Hudson. Cash stock was then taken as quickly as possible until the market was bare. A brief calculation showed that the buyers had secured either as cash or contract stock all the Hudson stock in existence with the exception of a small number of shares which were not expected to come upon the market.

The prolific brain of the Commodore then invented a new move in the game. A number of leading “bear” houses were requested to “turn” Hudson, which means to buy it for cash from the cornering party and sell it back to them on buyers’ options for periods varying from ten to thirty days. This able ruse was intended to impress the bears with the idea that the cornering party was weak. It seemed as if they were short of cash. So the leading bears grasped at the good chance, as they imagined, of turning several thousand shares, and instantly threw the cash stock on the market. It was privately picked up by the brokers of the great “cornerer.”

Everything having thus far progressed in favor of the ruse the trap was sprung upon the unsuspecting party. The sellers’ options began to mature, and there was no Hudson to be obtained.

The “corner” was complete, and the stock rose to 180. It had been 112 a few mornings before, when the Commodore was basking in the sun, and found that the bears were taking 109advantage of his absence. The loss on a hundred shares was $6,800.

There were about 50,000 shares contracted for to be delivered at this rate of profit by the “cornerers.” It will thus be seen that they were well fixed.

The bears were in terrible anguish.

But the worst part of the deal for these poor animals had yet to come. The bears who had turned the stock were notified that they must stand and deliver. They complained bitterly of the ingratitude of the bulls, whom they had only sought to oblige, by turning the stock. The bulls were implacable, however, and demanded their property. They proposed a compromise which was most exacting. They were willing to lend stock at five per cent. per day. Some of the bears paid this, thinking the “corner” would be of short duration, but it continued for over two weeks, and, after paying five per cent. a day for several days, these poor victims bought the stock at the high rate and settled.

This double move in turning the stock was the ablest trick that had ever been accomplished in cornering. It made Vanderbilt king of strategists in that line.

But the best part of the stratagem was that wherein the bulls saved themselves from being saddled with the whole stock, and made immense profits out of the deal.

While some of the bears were purchasing to cover at 170, Vanderbilt’s private brokers were selling at 140, the clique thus craftily unloading at good paying figures. This was one of the best inside moves in the whole history of “corners.”

The bulls thus saved themselves from the risk of being loaded with probably the whole, or at any rate the greater part of the capital stock, and through the Commodore’s able management the load was comparatively light at the end of the deal, the property remaining as good a speculative as before, which is a rare exception in “corners.”

The “corner” in Harlem was not less skilfully managed 110than the one in Hudson, but it had fewer complications. It was all plain sailing, so to speak, compared with the former, yet it clearly illustrated that the Commodore had a genius for “corners.” When he managed the Harlem “corner” he had had no experience in railroad matters, and he had reached the ripe age of sixty-nine.

I place the Hudson “corner” first in order because it was, in several respects, the greatest, though it happened at a later date than the Harlem.

It is a curious fact that in nearly all “corners” with which the Commodore was connected, he was on the defensive, and seldom the aggressor at the beginning of the fight. He was always placed in such a position that he had to fight hard to defend his property, or let it go to the dogs.

Buying stock in Harlem was his first venture in railroad transactions. He bought it as an investment. This was in 1863. Thirty years prior to this he had been requested to go into Harlem, but he declined, ironically remarking: “I’m a steamboat man, a competitor of these steam contrivances that you tell us will run on dry land. Go ahead. I wish you well, but I never shall have anything to do with ’em.”

When the Commodore went into Harlem it was selling at eight or nine dollars a share. It had been down as low as three dollars about the time I arrived in Wall Street. He put some money in the road, began improvements and the stock soon rose to 30. Many people predicted that the Commodore would lose all the money in railroads that he had made in steamboats.

The stock, however, gradually rose to 50, and speculators began to perceive that there was some inside movement going on. This was made apparent when, one day in April, 1863, the Common Council of this city passed an ordinance authorizing the Commodore to build a street railroad down Broadway to the Battery. So Jake Sharp’s enterprise was not original, as the Commodore was over twenty years ahead of him.

111The Common Council were not immaculate in those days either, though the Jaehnes and Waites escaped punishment. They basely deceived the Commodore after taking his money; but he punished them severely. As soon as the franchise was granted, Harlem advanced to 75, and the Aldermen began to sell it “short.” They thought they had the Commodore fast in their clutches, and took their friends into the secret. They expected to sell enough of stock to make several millions. Their plan was to sell “short” all that the market would take, and then repeal the ordinance, which would cause the stock to drop probably below 50. Drew was one of the great bears in this deal with the Aldermen.

The Commodore got wind of the scheme, went on buying, and got others to help him, taking all the “shorts” that were offered. The operators had soon sold a great deal more Harlem stock than there was actually in existence. There were 110,000 shares of Harlem. When the Aldermen and their friends thought they had made millions, they repealed the ordinance, and Judge Brady, in the Court of Common Pleas, at the same time issued an injunction prohibiting the laying of rails on the Broadway road.

Everybody thought that the Commodore was hopelessly ruined. Harlem stock, however, dropped three points only, to 72. This created surprise among the Aldermen and the bears. They thought it should have dropped to 50. The “shorts” went into the market for the purpose of covering. Harlem ascended with amazing rapidity to 100, to 150, to 170 and finally to 179. The Common Council were obliged to make their final settlements at the last figure. The Commodore had all the stock. The Common Council lost a million, and their friends, whom they had advised to sell “short,” lost several millions. The Commodore “raked in” five or six millions, and went on his way rejoicing and improving Harlem, having now taken “Bill” in with him as vice president.

112One would naturally imagine that the severe lesson which the Common Council had received in “corners” would have taught others to beware of the Commodore in this line of speculation, although it was new to him, but it did not. People as a rule will not learn either by precept or example. They must go through the rough experience themselves.

The Legislature soon fell into the same trap in which the Common Council had been caught and which they had actually set for themselves. The following year the Commodore secured control of the Hudson River Railroad through the purchase of its stock, and afterwards secured a sufficient number of the members of the Legislature to pass a bill consolidating the road with Harlem. He also won the promise of the Governor to sign the bill.

Harlem again began to rise, and went from 75 to 150. This was early in 1864.

The members of the Legislature employed to pass the bill pocketed the money of the Commodore and then hatched a conspiracy, after the manner of the Common Council, to ruin him and make millions by his fall. He had a shrewd lobbyist in the Legislature, however, who attentively watched his interests while he came down to New York to purchase stock for the rise that must have necessarily followed the passage of the bill. He had not been long in Wall Street when he was informed that the Legislature were imitating the game in which the Common Council had been so signally defeated the previous year. The Commodore sent him word to keep close watch at Albany, and he went on buying stock in Wall Street.

The bill was defeated. Harlem stock had a slump from 150 to 90. The Commodore was in a dilemma, and would have been dreadfully embarrassed only for the intense avarice of the Legislature. If they had bought and delivered at 90, they would have made millions, which the Commodore would have lost; but, like the horse leech’s daughter, they cried out for more. Nothing would satisfy 113them until the stock should be depressed to 50. Then they could “scoop” in several millions and the Commodore would be wound up. This was probably the darkest hour in the Commodore’s life. He hardly knew which way to turn. He was on the ragged edge. He has often pathetically described his feelings at this crisis to his intimate friends. He was almost on the brink of despair. He sent for old John Tobin, who had been a gate keeper at the ferry-house at Staten Island. Tobin had made quite a haul in the former deal in Harlem, and was worth over a million. He told Tobin what the perfidious members of the Legislature had done. John had been buying Harlem also in prospect of a rise.

“They stuck you too, John,” said the Commodore. “How do you feel about it?” John sighed, and replied that his feelings were not the most enviable. “Shall we let ’em bleed us?” queried the Commodore.

John sighed again, but did not know what reply to make.

“John, don’t them fellows need dressing down?” emphatically queried the Commodore. John answered in the affirmative, but did not see how it was to be accomplished, as “them fellows” at that moment seemed to hold the fort.

After a pause of deep reflection, the Commodore, again addressing John with intensified emphasis in his tone, said: “John, let us teach ’em never to go back on their word again as long as they draw breath. Let us try the Harlem ‘corner’ once more.”

It was agreed to try and repeat the Harlem “corner.”

John put up a million. Leonard Jerome also went into the deal. It took five millions to face the Legislature in this game, in which they had every opportunity of packing all the cards. It was virtually, at first, a silent game of whist, at which the Commodore was a noted player. He never played with greater skill than this time, except in the Hudson “corner,” and in both instances he almost manifested the skill of inspiration.

114The members of the Legislature completely lost their heads. The old classic maxim, “whom the gods devote to destruction, they first make mad,” appeared to apply peculiarly to them, in the manipulation of the Harlem “corner.” Some of them mortgaged their houses and lands to get money to sell Harlem “short.” They advised all their friends that it was such a sure thing that failure was impossible, and brought all of their acquaintances whom they could influence into the speculative maelstrom of Harlem.

In the coarse of a few weeks, the members of the Legislature and their friends had sold millions of Harlem to be delivered at various periods during the summer, when they expected it would go ‘way down, probably to 8 or 9, where the Commodore had originally bought it.

They expected, moreover, that the Commodore would have appeared at Albany either in person or by his lobby representatives to sue for terms of settlement. They were greatly disappointed. He never left the company of his brokers in Wall Street, and persisted in purchasing. The members thought he must be mad, or at least in his dotage. He was then threescore and ten, the Scriptural limit of human days.

The Commodore continued to purchase Harlem until he had bought—paradoxical as it may seem to the general reader—27,000 shares more than were in existence of Harlem stock.

When the members of the Legislature who set the trap to catch Vanderbilt, but in which they themselves were now hopelessly ensnared, went into the market to buy for the purpose of covering, there was no Harlem to be had. Vanderbilt and his brokers had every share of it safely secured in their strong boxes.

The members of the Legislature were paralyzed. They could expect no mercy from the Commodore. He owed them none, and though a good Christian prior to his death, he was then practically a stranger to the doctrine of the great Nazarene. “Return good for evil,” or, “whosoever shall 115smite thee on thy right cheek, turn to him the other also.” He was rather inclined to follow the maxim of that practical Quaker, who, when smitten on the cheek and asked to turn the other, replied, “Friend, thou didst not read far enough. It is written, ‘pay what thou owest,’” and he knocked the fellow down.

This was the rule of action to which the Commodore rigidly adhered in dealing with the Legislature in the Harlem “corner.”

When a compromise was mooted to him, the Commodore replied, “Put it up to a thousand. This panel game is bring tried too often.”

No doubt he would have put it up to a thousand and totally ruined the members of the Legislature, with the Governor and their friends included, only for the overpowering appeals of his two trustworthy friends, Leonard Jerome and John Tobin.

Mr. Jerome had no sympathy for the Legislature, any more than Vanderbilt had, but he had a patriotic desire to take care of the “Street,” thus showing the large and comprehensive view of which this able financier is capable where a broad speculative question and a variety of diverse interests are involved.

“If you should carry out your threat,” said Mr. Jerome to the Commodore, “it would break every house on the Street.”

The Commodore yielded to that touch of nature that makes all the world akin, and under the magnetism of Jerome’s prudent entreaty, like Pharaoh with the Israelites, agreed to let the Legislature go—at 285 for Harlem.

In one day 15,000 shares matured at this figure. Speculators who read these lines, just pause and think of it for a moment! The stock that sold at $3 when I made my debut in Wall Street in 1857, reached 285 in 1864, and could have been put to 1,000. Don’t you feel astounded at the possibilities of speculation?

116Then, again, think of the one-man power that could accomplish this wonderful feat and prevail against a whole Legislature and its Governor, with the choicest assortment of “crooked” lawyers in the State, versed in all the arts of duplicity and cunning to aid and abet said Legislature and its Governor.

Think of this, and then you will have some conception of the astute mind that the Commodore possessed, without education to assist it, in the contest against this remarkable combination of well-trained mental forces. There can hardly be a doubt that the Commodore was a genius, probably without equal in the financial world. There was hardly any achievement of his life which he gloated over with such ineffable delight as the cornering of the Legislature. He would say, when referring to the matter afterwards: “We busted the whole Legislature, and scores of the honorable members had to go home without paying their board bills.” Thus ended the second “corner” in Harlem.

Many large houses were ruined by the “corner,” and a host of private speculators lost all they had. Daniel Drew came very near being swamped in it, but finally escaped with paying a million, chiefly through his influence at court.

It is unnecessary to speak of the celebrated Erie “corners” here, as I have treated them pretty fully in the life and speculations of Drew.

Drew, like Vanderbilt, an Example of Great Success without Education.—Controlled more Ready Cash than any man in America.—Drew goes Down as Gould Rises.-“His Touch is Death.”—Prediction of Drew’s Fall.—His Thirteen Millions Vanish.—How he caught the Operators in “Oshkosh” by the Handkerchief Trick.—The Beginning of “Uncle Daniel’s” Troubles.—The Convertible Bond Trick.—The “Corner” of 1866.—Millions Lost and Won in a Day.—Interesting Anecdote of the Youth who Speculated outside the Pool, and was Fed by Drew’s Brokers.

One of the most singular and eventful careers in Wall Street was that of Daniel Drew, familiarly called “Uncle Daniel.” This man affords another remarkable instance of the possibility of attaining great success by stubbornly following up one idea, and one line of thought and purpose. His life also shows that education is not necessary to success in the acquisition of money, but, as I have attempted to show in another chapter, may be a great hindrance.

This fact is abundantly illustrated in the lives of both Drew and Vanderbilt. In fact, everybody who knew these two men were of the opinion that with a fair or liberal education they would never have cut a prominent figure as financiers. It is also questionable whether either of them, with all their ability in other respects, would have been capable, with their peculiar predilections for other pursuits, of receiving a common school or college education. They, probably, had not the capacity for that kind of acquisition. Perhaps it might have been impossible for any teacher to make Drew pronounce the word shares otherwise than “sheers,” or convince Vanderbilt that the part of a locomotive 118in which, the steam is generated should not be spelt phonetically, “boylar.”

It is more than probable that professors in grammar would have found it a hopeless task to convince the Commodore that there was anything wrong in the expression, “Never tell nobody what yer goin’ to do, till you do it,” or Drew that it was improper to say to his broker, “Gimme them sheers,” when he desired his stocks reduced to possession. Both men seemed to think with the character in Shakespeare, that reading and writing, like their other attributes, came by nature. They evidently thought that their abilities for financiering emanated solely from that source, and results largely bore them out in that interpretation. Both had supreme contempt for persons of less ability than themselves in the speculative arena, yet they were terribly jealous of rivals who essayed to compete with them in their own peculiar methods of making money. Cunning and shrewdness were the leading characteristics of Drew. Though illiterate himself, he, however, showed that he appreciated education in others, by erecting and endowing a seminary in his native place.

Some people who were not inclined to give Drew any credit for the finer and more generous and genial feelings of man’s nature, said that his motive for this endowment was merely popularity, and a morbid desire, like that of Vanderbilt, to perpetuate his name.

Another motive, however, less ennobling to man’s nature, seemed to be the true one. He saw that the religious element in society was then influential, and that many religious people of his acquaintance were in good circumstances, and he sought to ingratiate himself with them in order to make use of them in his speculations.

This appears clearly to have been at the bottom of his precious gift of a seminary to his native county. It was a curious illustration of retributive justice, if I am right about his motive, that he was obliged to default in the payment of that gift, with the exception of the interest.

119Daniel Drew, at one time, could command more ready cash at short notice than any man in Wall Street, or probably than any man in America. His wealth was estimated at thirteen million dollars. He made a very large part of this out of his speculations in Erie stock, of which corporation he was then managing director and treasurer. Being thus on the inside, he was enabled to leave everybody else on the outside in the ups and downs of the market, which he himself generally engineered.

The Street was frequently amazed by fluctuations of 20 or 30 per cent. in Erie stock, sometimes in the course of a day or two, through the able manipulation of Mr. Drew.

It was a sorry day for Drew when Jay Gould took his place in the control of Erie, and it was equally disastrous for the Erie property.

From this period Gould began to grow rapidly to the full stature of speculative manhood, while Drew moved as quickly in a downward direction, until he found himself again at the lowest rung of the financial ladder. It was no wonder that he said of Gould, “his touch is death.”

Drew’s losses followed one another in quick succession, until his thirteen millions had melted away like snow off a ditch, and eventually he died in debt and broken hearted. His last days stand out as a sad, but eloquent warning to the avaricious. And this reminds me of a festive event, the chief incidents of which, I think, are worthy of reproduction.

I remember being at a dinner party ostensibly given to the old gentleman when in the very zenith of his financial fame and prosperity. It was a kind of mutual admiration society, Drew being the king-pin of the social coterie. On account of his thirteen millions he was the centre of cringing admiration, and was by a number of the assemblage almost deified.

As is usual on such occasions, speechmaking was in order, the oratorical talent being called out by the toasts as they went the round of the board.

120When it came my turn to speak, I followed suit, to some extent, in picking up the thread of the general glorification extended to the honored guest, to whom I paid marked deference.

“We are honored,” I said, “on this festive occasion, by a gentleman of vast wealth, one who can control more ready money than any man in America, and be it said to his honor, it has all been of his own creation. He is a true representative of American thrift and enterprise. His money and his genial disposition together combined make all men his friends, and I know of only one antagonistic spirit to the continued growth of this already marvellous fortune; but that one, in all probability, may yet work his ruin. I refer to our honored guest, Mr. Drew, and his one enemy which I have in mind is ‘Avarice.’”

In five years from that memorable dinner Daniel Drew was a ruined man, and his thirteen millions had vanished like the baseless fabric of a vision, leaving nothing but the miserable wreck of an avaricious spirit behind.

The manner in which Drew was supposed to make religion the handmaid to speculation was satirically touched in the following verses published in the New York Tribune about fifteen years ago:

Mr. Drew was negligent in his attire, even to the verge of slovenliness. He dressed like a drover, having originally been employed in that capacity. By the way, the significant term of “watering stock” originated in the practice of Uncle Daniel giving his cattle salt in order to create a thirst in them that would cause them to imbibe large quantities of water, and thus appear bigger and fatter when brought to market. Until he met with Gould and Fisk, it was difficult for anybody to get the best of him in a deal.

He was wonderfully prolific in resources for the purpose of getting advantage of those who attempted to overreach him.

A good story, illustrative of this trait in his speculative character, is told of the time that he was so severely squeezed in Northwestern stock. He was greatly grieved at his ill luck, while the brokers and operators who had been prosperous at his expense were highly elated. They considered it a great thing to have caught the wily old Daniel napping. He was accordingly made the victim of much ribaldry and jesting for several days in Wall Street. Some of the young men carried the joke so far as to meet him and laugh significantly and irritatingly in his face. He seemed to take it all in good part, for he had a happy flow of animal spirits, but he had a terrible rod in pickle for these young men who were making him an object of ridicule. 122He watched for his opportunity, and one evening as several of them were enjoying themselves in an uptown club, Uncle Daniel walked in, sans ceremonie. He appeared to be looking after some man, and though invited to remain, seemed to be in a great hurry to get away, and was apparently excited and warm. He seemed to have something important on hand. He drew a big white handkerchief out of his pocket a few times and wiped the perspiration from his heated brow. When he was about to depart there came out of his pocket with the handkerchief a small slip of white paper which floated around apparently unseen by him, and alighted at the feet of one of the bystanders, who quickly set his foot upon it. When Mr. Drew made his exit the white scrap of paper was instantly scanned. It contained these ominous words in his own handwriting: “Buy me all the Oshkosh stock you can at any price you can get it below par.”

Here was a speculative revelation for the boys, for everybody believed at the time that Oshkosh had already gone too high, and the point had been circulated to sell it “short.” The mysterious words written on this erratic slip of paper, however, convinced these operators that there must be a new deal to give Oshkosh another “kiting.” There was no time to be lost in taking advantage of the unexpected and highly valuable information. They formed a pool to purchase 30,000 shares the next day. They bought the stock according to pre-arrangement, and a new broker of Daniel Drew’s was the man who sold it to them. They only discovered how badly they themselves had been sold by Mr. Drew’s handkerchief trick when Oshkosh began to decline at the rate of a dozen points a day, and Uncle Daniel soon raked in from the jokers and their friends more than he had lost in Northwest.

Mr. Drew first entered the Board of Directors in Erie about the year 1852, and remained there until he was squeezed out, and almost ruined, in 1868. He held the office of treasurer to the corporation.

123Drew was born in the town of Carmel, Putnam county, in the year 1797, and was three years younger than Vanderbilt. As I have intimated above, in early life he drove cattle from his native town to New York. He afterward became proprietor of the Bull’s Head tavern in this city.

He never changed his style of dress from that to which he was accustomed to wear when he was a drover, and when he was worth thirteen millions, instead of sporting a gold headed cane, he went around Wall Street with the handle of an old broken umbrella in his hand. While treasurer of Erie he used every opportunity to manipulate the stock to his own advantage, irrespective of the rights or interests of any other person. He was the leading bear of the market for many years. Like Vanderbilt, he was interested to some extent in steamboats, but he made Erie stock the great medium of acquiring his vast wealth. He got the name of the speculative director, and at the outbreak of what was known as the Erie war he was supposed to be almost financially impregnable.

The “corner” of 1866 was the beginning of Uncle Daniel’s troubles. Up to that period all had gone merry as a marriage bell with him, and he was piling up the millions at a rate which no other financier or speculator had ever dared to imitate. Erie stock was selling at 95 in the spring of that year. The company was badly off for money. It made application to its treasurer for the needed relief. He was ready to serve it in that way at all times, but he wanted security for the loan. There were then 28,000 shares of unissued Erie stock. The company also claimed the right to raise money by the issue of bonds convertible into stock at the option of the holder.

This was an old trick in the management of Erie matters. It had saved Jacob Little on one occasion, as I have mentioned in a former chapter, during the earlier history of speculation in Wall Street. It was, therefore, not original with the Drew management of Erie, as some people have supposed.

124The 28,000 shares of unissued stock then, and three millions of dollars of convertible bonds, were placed in the hands of Mr. Drew as security, and he advanced the loan of 3½ million dollars to relieve the pressing necessities of the corporation.

When Drew found himself thus fortified with the convertible bonds, he laid another trap for the boys in the Street. Erie had been rapidly absorbed for some time, and was very strong at 95 with anxious purchasers. The stock was, therefore, becoming very scarce. Mr. Drew had a large number of contracts to fill, and operators were wondering where he would get the stock to settle. Many of them were laughing in their sleeves at his impending embarrassment, as they had done on a former occasion, and were in ecstasies of delight at the idea of the terrific “squeeze” which the old man was about to experience. When he seemed on the very horns of this dilemma, upon which the rampant bulls thought they would successfully impale him, he converted his three million bonds into an equivalent amount of stock, threw 58,000 shares on the market, met all his contracts, and fed the voracious bulls with all they wanted.

Hungry as the Street had been for Erie, this was an overdose that it was utterly incapable of digesting. The bulls were paralyzed, and before they could rally their broken ranks from the demoralizing effects of this unexpected sortie from the stronghold of Erie, the stock had declined from 95 to 50, wiping out the broadest margins and putting the whole army of bulls, reserve forces and all, to utter rout.

Millions were lost and won in a day in this deal.

This was regarded as a grand coup d’etat, and one of Drew’s most brilliant exploits in operating. In fact, at the time, it seemed to throw every prior operation of this nature totally in the shade, and the other leading operators of the street were blue with envy, green with jealousy, and raging mad over their losses and the way they had been entrapped and almost ruined by the deeply-laid scheme of 125the Erie treasurer. Drew was despised, feared and revered on account of this unparalleled achievement. He then essayed to rest on his oars for a short time, but his period of repose was but short-lived.

There was a little side-show in connection with the maturing of the operations in the pool just referred to, which is so characteristic of Daniel’s methods that it is worth relating. There was a young man in the Erie pool, but not in the wheel-within-the-wheel in that sacred circle, who imagined that the purpose of the pool was to put Erie stock up, and accordingly he borrowed money from Uncle Daniel, his credit being good and having money in the pool funds, to purchase Erie. The accommodating treasurer not only lent him the money, but his private brokers sold the young man the Erie stock desired. He was duly fed from day to day with the quantity which his speculative appetite craved. After the dump just referred to, this unsophisticated youth and some other members of the pool among his friends, went to Uncle Daniel and requested him, as manager of the pool, according to the programme supposed to have been agreed upon, to put Erie again on the line of advance, in order that the young man and his friends might get in and out again, so as to cover their recent losses.

Mr. Drew, however, coolly informed them that the pool had no Erie stock and did not want any, and was not prepared to trade in that security any more at that time.

“I sold all our Arie at a profit,” said Uncle Daniel, “and am now ready to divide the money.”

So this youthful member had the felicity of discovering that while he was speculating on his own account for a rise, Uncle Daniel was looking after his interests in another direction, and had realized at the most opportune moment.

Thus this amateur operator, whom Uncle Daniel had amused, without letting him into the secret, in the way described, got nearly enough of money back to pay the loss he had sustained experimenting outside the pool on his own 126account, and upon his own independent but fallacious judgment.

If he had not speculated outside, he would have had very handsome profits from the pool, but he would not have obtained the useful experience which was connected with his losses, and the independent attitude he was ambitious to assume in speculations.

Vanderbilt Essays to Swallow Erie, and Has a Narrow Escape from Choking.—He Tries to make Drew Commit Financial Suicide.—Manipulating the Stock Market and the Law Courts at the Same Time.—Attempts to “Tie Up” the Hands of Drew.—Manufacturing Bonds with the Erie Paper Mill and Printing Press.—Fisk Steals the Books and Evades the Injunction.—Drew Throws Fifty Thousand Shares on the Market and Defeats the Commodore.—The “Corner” is Broken and Becomes a Boomerang.—Vanderbilt’s Fury Knows no Bounds.—In his Rage he Applies to the Courts.—The Clique’s Inglorious Flight to Jersey City.—Drew Crosses the Ferry with Seven Millions of Vanderbilt’s Money.—The Commodore’s Attempt to Reach the Refugees.—A Detective Bribes a Waiter at Taylor’s Hotel, who Delivers the Commodore’s Letter, which Brings Drew to Terms.—Senator Mattoon gets “Boodle” from Both Parties.

One of the most interesting episodes connected with the speculative life of Drew, in the somewhat sensational history of Erie affairs, was the interposition of Commodore Vanderbilt in one of the famous deals of the Erie clique. His object was to swallow up the corporation, and it came pretty near swallowing him. He was only saved by the skin of the teeth, after one of the most prolonged and desperate financial struggles of his life.

In order to explain clearly the manner in which the Commodore became involved in the Erie matter with Drew and his partners, it will be necessary to take a brief resume of the history of a few of his other prominent deals, more fully dwelt upon elsewhere.

In 1860 Harlem stock had sold as low as eight or nine 128dollars a share. In January, 1863, when Vanderbilt got full control of the property, the stock had advanced to 30, and in July of the same year it had bounded to 92. In August, when the “corner” was effected, it went to the remarkable figure of 179.

It was put through a similar operation the succeeding year, and the stock, which sold in January below 90, was settled for in the following June at 285. Drew had been drawn into one of these transactions, and his losses reached nearly a million.

Vanderbilt’s prospects with the Harlem property were seriously menaced by the competition of the Hudson River railroad. He bought up the competing line, and thus destroyed the competition. He made this purchase when the stock was at par. He soon manifested his superior power in management, and displayed his skill in the art of “watering,” which he had invented. He had the stock advanced to 180 in a very short time.

Seeing his great success with these two properties, through his novel and unique methods of financiering, the managers of the New York Central, thinking that discretion was the better part of valor, and perceiving that they could not hold out against the edicts of manifest destiny very long, offered their property to him almost at his own price, which he very cordially accepted, approving their good judgment and keen perception.

He obtained full control of New York Central early in 1867. As soon as this triple amalgamation was complete he set his insatiable and avaricious heart upon Erie, and essayed to compass his designs and effect his purpose of reducing it to possession through the speculative machinery of Wall Street.

It was through this channel that he had obtained Hudson, and in defiance of the scientific maxim that lightning never strikes twice in the same place, he was inspired with full confidence in his ability to “scoop” Erie in the same manner. 129He tried first to arbitrate and consolidate, but his efforts in that direction failed.

With all his marvellous foresight and almost unerring judgment in speculative affairs, the Commodore was greatly at fault in his calculation regarding the magnitude of the task he had now undertaken in Erie. He had no idea of the immense volume of the stock which, after the speculative battle began to rage, seemed to spring out of the ground, spontaneously, as the reserve troops of Wellington were said to appear to do in the eyes of Napoleon when the struggle waxed warm at Waterloo. He had to contend with the ablest generals in speculation and finance that ever Wall Street had produced. His first bold, flank movement was an attempt to “corner” Drew. He knew how to manipulate the courts almost as well as the Erie Ring did. Accordingly, he made use of the services of Frank Work to obtain an injunction from Judge Barnard, of Tweed Ring notoriety, restraining Drew from the payment of interest on 3½ million bonds, pending an investigation of his accounts as treasurer of Erie. This was followed up in a few days by another application to the court for the treasurer’s removal from office.

These measures were resorted to by Vanderbilt to prevent the issue of this stock, into which these 3½ million bonds were convertible, and thus enable him to get a “corner” in the stock with greater facility. He thus attempted to make the court instrumental in forcing Drew into a position where he would be obliged to commit financial suicide.

The Erie Ring had managed to get legally around what in reality was an over-issue of Erie stock and bonds in the following subtle manner:

There was a statute of New York which authorized any railroad to create and issue its own stock in exchange for the stock of any other road under lease to it. The Ring had obtained the Buffalo, Bradford & Pittsburg road, which was comparatively worthless, for carrying out this 130scheme. The Erie management then set about supplying themselves with the amount of Erie stock required, by leasing their own road to the road of which they were directors. They then created stock and issued it to themselves in exchange under the authority vested in them by law.

The nominal price of the road with which they worked this game of legerdemain was $250,000. They issued bonds in its name for two millions of dollars, payable to one of themselves as trustee.

Vanderbilt, before he could get a “corner” in Erie, had to place a limit to the issue of the stock. Otherwise he would have been throwing away millions, like pouring water into a sieve, in his attempt to make a “corner.”

Drew was enjoined by the Commodore to return to the Treasury 68,000 shares of the capital stock of Erie. This was the amount that was said to remain in the unsettled transactions of the Erie corner of 1866. This was the sword of Damocles which Vanderbilt had suspended over Drew’s devoted head.

Vanderbilt thus undertook to play the double game of manipulating the courts and the stock market at the same time, and against wily opponents, who were experts in both operations.

There were at this time three competitors for the possession of Erie in the field. The Drew party, the Vanderbilt party, and the Boston, Hartford and Erie party. Drew had tried to appease Vanderbilt to some extent, and had an interview with him at Vanderbilt’s own house prior to the election of the Erie directors. He agreed to “let up” on Vanderbilt, and offered him greater swing in purchasing Erie, while, on the other hand, Vanderbilt consented not to press the proceedings in court against Drew.

Before this, the Boston party and Vanderbilt had been fixing matters to oust Drew from the Erie directory. Now, Vanderbilt changed his tactics, and resolved to let Drew remain. The Boston party was with him, but to keep 131up the appearance of what had been formerly determined, the new board was to be elected ostensibly without Drew, and a vacancy created afterwards by which he could be chosen in the board. This method of whipping the Devil around the stump was adopted to put public opinion off its guard, and help to forward Vanderbilt’s purposes of consolidation. The election scheme was successfully effected, but the ruse, though well conceived, fell far short of accomplishing its designs.

There were wheels within wheels during this speculative deal. Drew and Vanderbilt entered into a secret alliance to exclude the Boston party, who was Vanderbilt’s ally. The new board was elected, leaving Drew out. This was a surprise to Wall Street, but a greater surprise was in store for it when a vacancy was created the next day, and Drew was re-elected to the Erie Board of Directors. The Street was confused and confounded, and at a loss to know how to act, and the Boston party was groping around to find out where it stood. Frank Work was elected to the Erie Board in the Vanderbilt interest. A pool was then formed to put up Erie, as it was in a very depressed condition. Drew was to manage the pool and manipulate the market.

The proposed plan for consolidating with the Vanderbilt interests failed because the Erie people said that the great railroad king would only consent to give them one-third of the earnings, while they contributed more than half to the pool. So, when this scheme collapsed, Vanderbilt went on the speculative war path, and determined to snatch Erie from the hands of the Ring in the way he had obtained Hudson. He began his operations about the middle of February, 1868, and pursued his policy in the courts for the purpose of limiting the apparently unlimited supply of Erie stock.

In the leasing process above referred to with the Buffalo, Bradford & Pittsburgh, the Erie clique added $140,000 a year to its income.

132Mr. Work got an additional injunction to prevent Erie from issuing stock in addition to the 251,058 shares which had appeared in the previous report of the road, and forbidding a guarantee by Erie of the bonds of any other road, and Drew was further restrained from any transactions in Erie until he should return the 68,000 shares of capital stock to the treasury.

It will thus be seen that Vanderbilt had taken very rigid measures to “tie up” the hands of the veteran speculator.

The case was set down for hearing in the court of the immaculate Judge Barnard, on the 10th of March. When Vanderbilt thought he had everything fixed to force Drew to ruin himself by the return of these shares, which would enable Vanderbilt to effect his “corner,” he was checkmated by a counter injunction issued in the interest of the Erie people by Judge Balcom, of Binghamton, which stayed all proceedings in Barnard’s court.

Richard Schell then applied to Judge Ingraham and got out another injunction in the interest of the Vanderbilt party, staying all proceedings before Judge Balcom.

In the meantime the Erie directors were busy preparing their new issue of stock, despite the injunctions, in order that the bulls of the Vanderbilt party might be generously fed with Erie when the opportunity should arrive.

The Executive Committee of Erie resolved to issue bonds for improvements, extensions and steel rails. The bonds were convertible into stock at not less than 72½. Five millions of these were manufactured by the Erie paper mill and printing press, to be exchanged for Vanderbilt’s good, solid cash.

A great difficulty presented itself at this juncture, which, even to the majority of clever speculators, would have been insurmountable. The genius of “Jim” Fisk was called in to cut the Gordian knot. The certificates of the new Erie shares were in the hands of the secretary of the company, but he was enjoined from issuing them. They had been 133made out on Saturday night. On Monday the secretary directed a messenger, in the Erie office in West street, to take the books containing the certificates to the transfer office in Pine street. The messenger took the books and walked out. He was hardly a minute absent when he returned, apparently frightened, without the books. He stated that Mr. Fisk, who had been standing at the door, took the books from him, and ran away with them!

The certificates were then where no injunction could molest them. The next day the convertible bonds were found upon the secretary’s desk. In a day or two afterwards the certificates appeared in Wall Street. An order was obtained from Judge Gilbert enjoining all the previous orders of that legal luminary, Judge Barnard. Mr. Drew then threw 50,000 shares of Erie stock on the market. The boldness of the operation threw the Vanderbilt brokers off their guard, for it never struck them for a moment that Drew would risk contempt of court, and use the new issue of Erie in the face of an injunction, so they eagerly devoured the fresh bait before they got time to examine the quality of it or suspect its origin.

Erie had opened at 80, and advanced to 83. When the facts became known the stock broke, and declined to 71; but under heavy purchases by the Vanderbilt party, soon recovered to 78. The “corner,” however, was broken by the large blocks which Drew had thrown on the market, and Vanderbilt was signally defeated, and had a narrow escape from being completely swamped. The corner proved a boomerang to Vanderbilt. In his wrath he again applied to the courts. As the result, the Erie clique were obliged to fly and take refuge in Jersey City. Drew crossed the ferry heavily loaded with a big carpet bag, which contained seven millions, which had recently changed hands from Vanderbilt to himself in the cornering operation.

Gould and Fisk decamped by different routes. When the party had taken refuge in “Fort” Taylor (Taylor’s Hotel), 134safe from the laws of New York, they determined that no papers should be served upon them, and gave strict orders to the host that they would not receive anything in the shape of letters or notes. Communications of all kinds were prohibited except through persons well known to the clique, and the waiters at the hotel were strictly enjoined to observe this rule, on pain of being discharged.

While Vanderbilt was working hard to reach the refugees through the courts, the Legislature and his detectives, he discovered a method of communicating with Drew in spite of the precautions with which the latter was surrounded. The Commodore’s scheme would have done honor to a first-class Nihilist of the present day. He instructed a person in his service to play temporary detective, to go to the Taylor Hotel in the garb of a commercial traveler from the Far West, and to watch the movements of Drew, so as to get a note slipped into his hand in a way that he would be certain to read it.

The amateur detective watched for a day or two, and saw that his only chance of success was when Drew was at lunch, and that the person who waited on him must hand him the note. He saw the waiter, and told him what he wanted, and that when he should be discharged the Commodore would find him a better place.

The waiter agreed to hand Mr. Drew the note. Drew was enraged, sent for the host, and the waiter was instantly discharged, only to enter Vanderbilt’s service, according to agreement, at much higher remuneration. The note of the Commodore, however, had the desired effect. What that note contained, probably, nobody but Vanderbilt and Drew ever knew. Though the friends of Drew attempted to frighten him from going by arousing his suspicions of being kidnapped, he came over to New York on the following Sunday and had an interview with the Commodore. The matter was fixed up between them, and while Gould and Fisk were fighting Vanderbilt tooth and nail at Albany, and Gould 135was arrested and arraigned for contempt of court and other high crimes and misdemeanors in the eyes of the Vanderbilt lawyers, Drew was left unmolested to pursue the even tenor of his way.

As treasurer of Erie, however, Drew took an active part in the progress of legislative matters. He was the first to see that Senator Mattoon, who was chiefly instrumental in organizing the Investigating Committee, wanted tangible recognition of his services before the Committee made its report. He thought he was using Mattoon, but the Senator used him, and gave his casting vote in favor of Vanderbilt, whom he used also, after the most approved method of Albany legislators. Mattoon was also found on the winning side at the end of the legislative farce, when the bill in favor of the Erie clique and its over-issue of stock was passed, and no doubt got his fair share of the half million with which Drew fortified Gould from the Erie treasury when this gentleman went to Albany to conduct the war in the Legislature against Vanderbilt concerning the extra issue of Erie stock.

A Harmonious Understanding with the Commodore.—How the Compromise was Effected.—An Interesting Interview with Fisk and Gould in the Commodore’s Bed-Room.—How Richard Schell Raised the Wind for the Commodore.—Drew’s Share of the Spoils.—He Tries to Retire from Wall Street, but Can’t.—The Settlement Cost Erie Nine Millions.—Gould and Fisk “Water” Erie again, to the Extent of Twenty-three Millions, but leave Drew out.-“Uncle Daniel” Returns to the Street.—He is Inveigled into a Blind Pool by Gould and Fisk, Loses a Million and Retreats from the Pool.—He then Operates Alone on the “Short” Side and Throws Away Millions.—He Tries Prayer, but it “Availeth Not.”-“It’s no Use, Brother, the Market Still Goes Up.”—Praying and Watching the Ticker.—Hopelessly “Cornered” and Ruined by his Former Pupils and Partners.

About the middle of April Drew emerged from his retreat in Jersey City, and appeared openly in Wall Street, apparently without any fear of arrest. Other members of the Erie clique had gone through the formality of purging their contempt of court, but had not made their peace with the Commodore, and things went forward without any special interruption or excitement until July, when a settlement was made with Vanderbilt.

It was agreed that the Commodore should be relieved of 50,000 shares of Erie stock at 70, for which he was to receive $2,500,000 in cash, and $1,250,000 in bonds of the Boston, Hartford & Erie at 80. It was further stipulated that he was to receive $1,000,000 for the privilege of calling on him at any time within four months for the remaining 50,000 shares of Erie at 70. He was allotted two seats in 138the Erie Board of Directors. All suits between the two high contending parties were to be dismissed and all offenses whatsoever relating to the case, in the language of the law, were to be condoned.

The manner in which the compromise was effected is not the least interesting part of the famous deal in Erie. Some time after Drew had got through his famous Sunday evening interview with the Commodore, paving the way for his partners, by weeping and showing other manifestations of deep contrition on account of his inglorious flight to Jersey City, Gould and Fisk came over early one morning to see the Commodore at his residence in Washington Place. Fisk told the story of meeting the Commodore with great unction, in his bold, brazen and lively manner. “Gould wanted to wait,” said Fisk, “until the Commodore should have time to get out of bed, but I rang the bell, and when the door was opened I rushed up to his room. The Commodore was sitting on the side of the bed with one shoe off and one shoe on. He got up, and I saw him putting on the other shoe. I remember that shoe from its peculiarity. It had four buckles on it. I had never seen shoes with buckles in that manner before, and I thought, if these sort of men always wear that sort of shoe, I might want a pair. He said I must take my position as I found it; that there I was, and he would keep his bloodhounds (the lawyers) on our track; that he would be damned if he didn’t keep them after us if we didn’t take the stock off his hands. I told him that if I had my way, I’d be damned if I would take a share of it; that he brought the punishment on himself and he deserved it. This mellowed him down. I told him that he was a robber. He said the suits would never be withdrawn till he was settled with. I said (after settling with him) that it was an almighty robbery; that we had sold ourselves to the Devil, and that Gould felt just the same as I did.”

Among the friends who adhered to the Commodore in the trying hour of the “corner,” besides those mentioned, were 139William Heath, Richard Schell and his brother Augustus, and Rufus Hatch. Richard Schell was highly practical and remarkably shrewd in the aid which he offered the Commodore to obtain money for the speculative fight. He managed, through his tact and shrewdness, to get loans on Erie after the banks had absolutely refused to lend, on account of the over-issue of the stock. After this refusal, he made inquiry at the banks, and found that most of them had New York Central stock. He then went to a bank and said: “If you don’t lend the Commodore half a million on Erie at 60, he will put Central down to 50 to-morrow, and break half the houses on the Street. You know whether or not you will be among them.”

The threat was repeated at other banks, and, in almost every instance, had the desired effect, and the Commodore was supplied with the sinews of war, but he was only throwing away his ammunition.

The Erie stock from the inexhaustible fountain of over-issue was supplied to him without stint, and his attempts to “corner” the clique were absolutely futile.

While these gamesters were feeding the Commodore with this extemporized stuff to order, Fisk said: “If this printing press don’t break down, I’ll be d—d if I don’t give the old hog all he wants of Erie.”

The printing press did not break down, but did its work well until the Commodore was nearly “burst,” and had it not been for his indomitable courage and the hold he had acquired on the courts, he would have been bankrupt. His escape seemed almost a miracle to the people of Wall Street, and Gould and Fisk were not less surprised that they had met a foeman worthy of their steel. In spite of the fact that he spilled over seven millions like water, the Commodore managed to sustain the market through it all, and prevented a crash that, in its local effects, at least, would have been as disastrous as that of Black Friday.

Certain innocent holders who had been badly crushed in 140the collision between the great leaders received a financial emollient for their lacerated feelings, amounting in the aggregate to $429,250. The Boston party, represented by Mr. Eldridge, was to be relieved of five millions of its precious Boston, Hartford & Erie bonds, receiving therefor four millions of Erie acceptances.

Thus, the settlement in full cost Erie about nine million dollars. The Erie stock and bondholders were saddled with this liability in defiance of law and justice.

Gould and Fisk pretended to be opposed to the settlement, leaving the public to infer that it was all the work of Drew with Vanderbilt. However this may have been, it was probably the best thing the others could have done to relieve themselves of their various complications at the time. No doubt the Vanderbilt note to Drew, for which the waiter was discharged from Taylor’s Hotel, was at the bottom of the whole settlement.

Drew was left to enjoy his share of the fruits of the “corner,” which netted seven millions, except that he had to pay into the Erie treasury the trifling item of $540,000 in discharge of interest and all claims or causes of action which might be presented against him by the Erie Company. The Erie Railway fell to the lot of Gould and Fisk as their share of the spoils growing out of the entente cordiale.

Drew then retired from Wall Street in the same way that Gould has so often retired since that time, except that Drew had probably an honest intention so far as it was possible for him to have such a conception of leaving the Street forever, but it would seem that he had not the power to do so. Once in Wall Street, always in Wall Street. It is like the doctrine of the final perseverance of the saints, as laid down in the Westminster Confession of Faith. It is impossible to get out of it when the speculator gets fairly into its fascinating grasp.

Drew might have enjoyed life and the consolations of religion on the few millions he had left if he had retired in 141company with his Bible and Hymn Book, to some lovely, secluded spot in the peaceful vales of Putnam county; but he was under the infatuation of some latent and mysterious force or attraction, the victim of some potent spell, like the one in whose weird grasp Nancy Sykes was firmly held when she essayed to get away from the murderous “Bill,” as described by Dickens in Oliver Twist.

Drew came back to Wall Street, and saw and was vanquished, quite unlike Cæsar.

When he returned to the “Street” after a few months absence, the scene was greatly changed. His two pupils had shown themselves to be such apt scholars, that in the interim they had exceeded the wildest dreams of avarice that ever their able preceptor had conjured up or inculcated. In four months Gould and Fisk had inflated the capital stock of Erie from 34 millions to 57 millions. No doubt, Uncle Daniel was astounded at their progress, and his feelings can be better imagined than described when, in the presence of this marvellous increase of wealth, he reflected that he was no longer treasurer of Erie, and had neither lot nor part in its unprecedented prosperity.

His natural propensity to operate, however, was still strong, but when he again tried his hand at speculation, it seemed to have lost its cunning, and he felt almost as much disappointed as Rip Van Winkle did when he awoke in Sleepy Hollow, after his twenty years’ nap, and began to examine the changed aspect of the country in the vicinity of Irvington, now Gould’s country seat.

The speculative tactics in operation had been changed, and he soon found that it was a losing game to go on the bear side of the market. He was invited into the pool by his old partners, to have a little practice at the popular game of spider and fly. Drew had been the spider for a long time who had inveigled the unwary flies from every direction into his insidious net. He was now asked to assume the role of a fly, while his former pupils played spiders. In 142plain terms, he was coolly requested to go into a “blind pool” in Erie, deposit four millions, shut his eyes and open his mouth, leaving the Erie sharpers to put taffy or candy into it, just as they pleased.

He was no longer to have the privilege of pulling the wires, nor the wool over other people’s eyes. On the contrary, he was to be one of the puppets that should dance to the music of Gould and Fisk, and let them pull the wool over his eyes. He was not to ask any questions, but pay his money and take his choice, that is to say, whatever Gould and Fisk chose to give him. The terms were rather humiliating, and on reflection, Uncle Daniel revolted. He did not see the point of paying the piper without having the privilege of choosing the tune. He, therefore, withdrew his funds after losing a million, and undertook the task of bearding these two young lions in their den—the den which he had constructed for them, and the two young lions which he had so carefully nurtured to destroy him. They were very wroth with him on account of what they regarded as his treachery, which virtually consisted in his refusal to be totally devoured by them. The fact is, however, Daniel could not have been true to any one, any more than they. “Can the Ethiopian change his skin, or the leopard his spots?”

After considering the matter prayerfully, as he always did in such emergencies, he resolved to operate alone, and the oracle told him to go on the short side. It was evident that the Gods had doomed him to destruction, so he rushed in madly to sell the market, which moved persistently upward.

In this emergency he took counsel of a Christian brother, who advised him to pray. He tried hard to pray, but his irresistible desire to keep constant watch on the tape of the ticker, to see the quotations, evidently distracted his devotions. This was probably the first time that he lost faith in the power that moves the arm that moves the world. He 143went to his Christian brother with tears in his eyes, saying: “It is no use, brother; the market still goes up.” And Uncle Daniel ceased to pray, and despairingly fixed his attention on the ticker.

Daring November, Drew contracted for the delivery of 70,000 shares of Erie at current prices. It was then in the vicinity of 38. He proceeded on this line of operation until he was hopelessly “cornered.” He then applied to the court. Application was made for an injunction in the name of August Belmont, but Gould and Fisk offset it by applying for another injunction to their faithful Barnard. That upright Judge not only granted an injunction restraining all suits brought against his two eminent protegés, but appointed Gould Receiver of Erie. He also gave authority to the directors of Erie to use the funds of the corporation to purchase and cancel 200,000 shares of stock, the legality of whose issue had been questioned, at any price less than the par value, without regard to the rate at which it had been issued.

Gould and Fisk had issued these shares in the bear interest at 40, ran the stock down to 35, and now obtained the power to purchase it back at par in the bull interest. This they did by the authority and permission of a Judge of the Supreme Court, in spite of the law prohibiting members of corporations to deal in their own stock. So these two great manipulators “cornered” their old friend and teacher, Drew, by legally over-riding the law.

Erie became scarce after this skilful movement was performed, and was selling at 47. Drew made desperate attempts to cover at this price, but the stock ran up to 57 between Monday and Wednesday. Wall Street was in a terrible ferment, and, as the newspapers say, the greatest excitement prevailed. Erie made still another leap and reached 62. It was evident that it was bound to keep on the upward grade, and there was no apparent relief for Drew, at least for two or three days, when an incoming 144steamer was expected to have a considerable amount of Erie on board. It was manifest, however, that by that time Drew would have reached the end of his millions, and probably most of his credit would have vanished with his own filthy lucre. His oppressors were bearing down upon him with all their might, and were evidently determined to make short work of him.

The struggle waxed hotter as the hour of three in the afternoon approached, and these two young lions of speculation were determined to crush the old bear unmercifully and effectually.

When Drew was apparently on the very brink of utter financial destruction, and almost at the close of the market, two events happened that preserved him from total annihilation. There had been 300,000 shares of Erie issued in ten share lots, which the operators thought were safely secreted in London and Amsterdam. When the stock reached 60 these ten-share lots began to come out. It turned out that most of them had never left home, but were securely had by tradesmen, mechanics, grocers and small bankers and brokers. They were thrown on the market with great rapidity to realize handsome profits, and the efforts of the clique to absorb them before they got into the hands of Drew, made serious inroads on the reserve funds of the champion operators. As troubles never come singly, at this new juncture the banks refused to certify their checks. Drew was, therefore, enabled to make good his contracts at 47, but speculatively speaking, he was ruined. He came pretty near bringing down his desperate assailants, however, in his sad and frightful fall. The stock then fell to 42, and Erie became a drug in the market. The victors had got the spoils, but they paid dearly for them, and had come pretty near being destroyed in the moment of their triumph. They had purchased their Erie at “corner” prices, and they were obliged to carry it, for nobody wanted it. Added to this Erie was struck from the Board for a time, 145and had it not been for the gullibility of our English cousins, this stock would have ceased to be a disturbing element in the market for a great while longer.

Although old Drew was badly treated, yet there was little sympathy for him, since he had merely become the victim of his own avarice, vacillation, treachery and scheming to catch others in the same net.

He could not justly complain of his former partners, and Fisk told him so, for their methods of operation, and the immense inflation of the Erie stock by which he was ruined had been accomplished by the machinery which he, himself, had set in motion, only his ci-devant colleagues had improved upon it, and had received various new patents on inventions and improvements, which they had joined to the old one invented by “Uncle Daniel,” mating one of the best combinations for the purpose of creating and working “corners” that had ever been devised in Wall Street.

But the unkindest cut of all was the way in which Fisk taunted him, on the eve of his crushing defeat, with the absurdity of his complaints about the management of Erie matters.

“You should be the last man,” said this worthy pupil, sneeringly, to his dear old preceptor, “that should whine over any position in which you may be placed in Erie.”

It was a sad truth, heartlessly uttered by the generous “Jim.” Drew had no mercy on others, and could not expect to be shown any of that “twice blessed quality” towards himself.

The private scene in the Erie office between old Drew and Fisk and Gould, just prior to their final and victorious charge upon him, was deeply pathetic, yet none of the three showed more conspicuously that they were destitute of that proverbial honor among “boodlers” than Drew himself. He had secured Vanderbilt to assist him in the courts, and also in the market, against the machinations of the Erie clique, and then, turning around, he went straight to Gould. 146and to him betrayed his ally and the plans he had arranged with him, expecting mercy from his old colleague by this dastardly act of humiliation and deception.

He must have lost his head at this crisis, for he ought to have known Gould better. He begged and pleaded with Gould and Fisk, and was ready to throw himself at their feet. He implored them to join him, with the remnant of his fortune, in giving the old paper mill another turn to grind out more Erie stock, that he might be permitted to emerge from that cruel “corner” in which he was placed like a scorpion girt by fire, brooding over his guilty woes.

But his pupils proved that they had profited only too well by his instructions. Just as he would have acted under similar circumstances, they were perfectly relentless. They seemed to be a double incarnation of Shylock personified, or two Dromios bereft of conscience and human sympathy. Drew had no Daniel but himself, to come to judgment. There was no fair Portia to plead his cause, and if there had been such an angelic creature in the case, though she might have “broke up” Fisk, it is almost certain that Gould would have successfully resisted her charms.

When Drew saw they were implacable he bade them good night, and with the courage of despair returned to the charge in Wall Street the next morning, with the results which have been briefly related. He lost nearly two millions in that fatal struggle.

Incidents in the Early Life of Drew, and How he Began to Make Money.—He Borrows Money from Henry Astor, Buys Cattle in Ohio and Drives them over the Alleghany Mountains under Great Hardship and Suffering.—His Great Career as a Steamboat Man, and his Opposition to Vanderbilt.—His Marriage and Family.—He Builds and Endows Religious and Educational Institutions.—Returns to his Old Home after his Speculative Fall, but can Find No Rest so Far away from Wall Street.—His Hopes, through Wm. H. Vanderbilt, of another Start in Life.—His Bankruptcy, Liabilities and Wardrobe.—His Sudden but Peaceful End.—Characteristic Stories of his Eccentricities.

I had intended at first to give only a sketch of the salient points in the speculative career of Drew, but, on reflection, I find that the lives of great men all remind us that people want to know a great deal of minutiæ concerning men who have made their mark in this world. Our enterprising newspapers are encouraging this laudable curiosity more and more every day. So in the case of Drew, I must try to furnish answers to questions that may be asked about him in order that popular expectation may not be disappointed. I shall endeavor to anticipate what the reader may naturally want to know when he comes to the end of Drew’s great speculative ventures. One of these questions will probably be, what kind of a boy was Daniel Drew, and how did he begin to make money?

It goes without saying that Drew was the most unique figure that Wall Street has ever seen, and a characteristic specimen of one kind of American thrift, enterprise and speculation. Every side of his many-sided and peculiar character, therefore, is of interest as the representative of a 148class to the reader who sets his heart on making money, and the majority of readers have this weakness. He is of special interest to all speculators not only in this country, but throughout the civilized world. These facts constitute my apology for dwelling so long and minutely on his characteristics. I have an idea that his life and adventures will be read with deep interest many years hence, and help to prolong the existence and reputation of this book. They will also assist to immortalize the man who was one of the most wonderful products of American civilization, and who could hardly have been evolved from any other soil or clime. Such prodigies of success cause the members of the older social fabrics to stare with astonishment at the stupendous capabilities of our great country.

There is nothing interests people so much as the start in life, probably because there are so few who consider themselves able to get a good start. So far as I can learn, in the case of Daniel Drew, the boy was father to the man. He worked on a farm, going to school at intervals, where he was unable to learn anything, except that he obtained a notion of the current theological ideas of that day, until he was fifteen years of age, when his father died, leaving him, a younger brother and their mother to shift for themselves on a poor, small farm. His father was of English and his mother of Scotch descent.

In his seventeenth year young Drew enlisted as a substitute in the State Militia, which had then been called into service on account of the second war with England.

The regiment was placed at Fort Gansevoort, on the Hudson, opposite New York. Hostilities ceased between this country and England a few months after his enlistment, and the regiment was mustered out. Daniel returned home. His mother had taken charge of his substitute money, which probably did not exceed a hundred dollars, the amount with which his great rival, Commodore Vanderbilt commenced life, and which he earned from his mother by ploughing and planting a field.

149“I want my substitute money,” said Drew to his mother, one day shortly after his return. “What are you going to do with it?” queried the old woman, for being of Scotch descent, she was quite as thrifty in looking after the pennies as her American contemporary, old Mrs. Vanderbilt. They both had the gripping sense by nature, and to this transmissible quality may probably be attributed, in a large degree, the financial success of both of their sons.

“I am going to buy cattle, and sell them in New York,” replied Daniel.

“Are you sure you will not lose money by it?” rejoined his mother.

“I am sure I will make money,” he said.

He started to purchase cattle in the country and to sell them in New York. His profits were at first very small, especially as his capital was so limited. He soon discovered that if he could purchase his cattle in Ohio he would be able to increase his profits largely, and he applied to Henry Astor, a butcher in Fulton Market, and a brother of the great millionaire, John Jacob Astor, for a loan to speculate in Ohio cattle. Astor accommodated him, though he at first thought he was running a considerable risk. He was mistaken, for Drew made money and soon established his credit on a solid basis. He bought cattle throughout Ohio, and drove them over the Alleghany mountains. He is said to have been the first drover who attempted this daring experiment. It required sixty days then to make the journey. He suffered great hardship and privation, and would sometimes lose a third part of a drove of 600 or 1,000 in crossing the mountains. Yet, as cattle were very cheap in Ohio, his profits were still very large.

One terrible night, in a terrific thunderstorm, the tree under which he took shelter was shattered to splinters, his horse was killed under him, and he himself was struck senseless for a time. But no hardship or privation could deter him in the pursuit of making money. He afterwards extended his operations to Kentucky and Illinois.

150In 1829 Drew opened a cattle yard at Twenty-fourth street and Third avenue and ran the Bull’s Head Tavern. He went into the steamboat business in 1834. Vanderbilt had then been seventeen years in the business. Westchester and Emerald were the names of his first two boats, and they ran between New York and Albany, in opposition to the Vanderbilt Line. Drew reduced the fare from three dollars to one, and attempted to freeze out Vanderbilt. The war of rates became so fierce that people were carried 100 miles between these two cities for a shilling. Drew added the Knickerbocker, the Oregon, George Law, Isaac Newton and the New World to his river fleet, and became quite a formidable competitor of the Commodore.

In 1840 Isaac Newton organized the People’s Line on the Hudson, of which Drew became the largest stockholder. The boats St. John, Dean Richmond and Drew were built. The Isaac Newton was burned and the New World was sunk.

When the Hudson River Railroad was opened, in 1852, Drew refused to sell out his stock. “You can regulate your fares as you choose,” he said to the President of the Railroad Company, “but the only way you can regulate my steamboat fares is to buy the People’s Line, and this I don’t believe you have money enough to do.” The railroad line merely stimulated traffic, as the elevated railroads have done in our day, and Drew was only a gainer instead of a loser by the apparent competition. He also controlled the Stonington Line for twenty years.

Drew made his debut in Wall Street in 1844, just thirteen years prior to my first appearance on the boards of this financial theatre, and he was quite a war horse in speculation when I entered the arena. He formed a partnership with his son-in-law, a Mr. Kelly, and Nelson Taylor, as stock brokers and bankers. Their business was large and their credit good. The firm continued for ten years, until it was dissolved by the death of his partners. Drew then became one of the most daring and successful operators in Wall Street.

151Drew was married at the age of 25 to Roxana Mead, a farmer’s daughter, by whom he was the father of three children, William H., Josephine, who died in infancy, and Catharine, who was married to the Rev. W. I. Clapp, a Baptist clergyman, who died and left his widow in good circumstances. So there were very little grounds for “Uncle Daniel’s” dread that he should probably die in miserable destitution, as it seems that his two surviving children were very kind to him. His wife died in 1876.

Drew was a member of St. Paul’s Methodist Episcopal Church of New York for several years. He contributed large sums to various religious and educational institutions, but like Wilkins Micawber, he usually paid the money in notes, which appeared in the schedule of his liabilities when he had lost his large fortune, and had become bankrupt. He founded the Drew Seminary at Carmel, for young ladies, at a cost of $250,000. He built the Drew Theological Seminary, at Madison, New Jersey, also at a cost of $250,000, and endowed it with a similar amount. He only paid the interest on the latter. He increased the endowment fund of the Wesleyan University, at Middletown, Conn., and the Concord Biblical Institute. He added $100,000 to the endowment fund of Wesley University, but only paid the interest on that also. These appear in the schedule, in the list of his unsecured claims. He owned several large grazing farms in Putnam county, but they were heavily mortgaged.

Drew had some intention of returning to his old home after the bankruptcy proceedings in 1876, to spend the remainder of his days there among his grandchildren. This desire shows that there was something inherently soft and good, after all, in his avaricious nature, and reminds me of the touching lines of Cowper on the same subject:

152He went out to Putnam county in 1876, when he was sick, but he was soon glad to get back to the city. He said: “I was troubled with visitors, some of ’em well on to 100 years old. Some of them said I bought cattle from them when I was young, on credit, and they wanted their bills. I kept no books, and how was I to know I owed ’em for them critters? It was dull outen thar,” he continued, “and yer never can tell till the next day how ‘sheers’ is gone.”

So Uncle Daniel came back and stopped at the Hoffman House, where he could have ready access to the ticker, and kept constantly posted on the price of stocks. His principal broker was Mr. David Groesbeck.

The city still seemed to have certain fascinations for him that the country was unable to afford. He often spoke regretfully, in his latter days, of being too old to retrieve his fortune. He said he longed for rest. Nothing seemed to weigh more heavily upon his mind than his inability to carry out the plans connected with his religious endowments, and he grieved deeply that he had not the means to return to Wall Street that he might have another lucky turn that would enable him to fulfil these religious obligations according to the original intention.

In the bankruptcy schedule his personal property is itemized as follows: watch and chain, $150; sealskin coat, $150; wearing apparel, $100; Bible, hymn books, &c., $130.

Although he was economic in his domestic expenses, he entertained friends liberally, and his house at the southwest corner of Seventeenth street and Union Square was always open to Methodist ministers, free of charge, from all quarters of the world.

Some years prior to his death Mr. Drew gave the following candid, succinct and pathetic account of his embarrassment to a journalist who interviewed him:

“I had been wonderfully blest,” said Uncle Daniel, “in money making. I got to be a millionaire before I knowed it hardly. I was always pretty lucky till lately. I didn’t 153think I could ever lose money extensively. I was ambitious of making a great fortune, like Vanderbilt, and I tried every way I knew, but got caught at last. Besides that, I liked the excitement of making money, and giving it away, and am glad of it. So much has been saved anyhow. Wall Street was a great place for making money, and I could not give up the business when I ought to have done so. Now, I see very clearly what I ought to have done. I ought to have left the Street eight or ten years ago, and paid up what I owed. When I gave $100,000 to this institution and that, I ought to have paid the money, and I ought to have provided better for my children, by giving them enough to make them rich for life. Instead of that I gave my notes, and only paid the interest on ’em, thinking I could do better with the principal myself. One of the hardest things I have had to bear has been the fact that I could not continue to pay the interest on the notes I gave to the schools and churches.”

“I gave my son the old homestead,” continued Mr. Drew, “and some other small property up in Putnam, where we came from, which I hope will make him independent at least. My daughter married a rich man, and when he died, leaving considerable property to five children, I was made executor of the will. For so great a trust as their property I was obliged to give security, which I did by making over to them this house where we are, and the North River steamboats, the Drew, Dean Richmond, St. John and Chauncey Vibbard. This security makes them whole, and I thank God that breach of trust is not on my conscience. Their mother, my daughter, is, of course, well provided for, through her children and deceased husband. My son’s principal business is now in connection with the management of the boats, by which he is getting on very well.”

After Drew’s great disaster in the Erie “corner,” he became a special partner in the firm of Kenyon, Cox & Co., and when this house failed, after the panic of 1873, Uncle Daniel was 154compelled to make an assignment. He had been for years on the losing side, having dropped between two and three millions in the Erie “corner” through the machinations of Gould and Fisk. Horace F. Clark and Gould had also cornered him in Northwestern to the tune of $750,000. After the panic he had made an assignment to Wm. L. Scott, of Erie, Pa., but was not legally declared a bankrupt until 1876. His liabilities were $1,074,131.83, and his assets were estimated at $746,499.46.

Like Vanderbilt, Drew kept his accounts in his head, and considered the whole paraphernalia of book-keeping a confounded fraud.

His failure, which at one time would have induced a panic, did not cause a ripple on the surface of speculation. After his discharge in the bankruptcy proceedings, he appeared to pluck up fresh courage, and said, “The boys think I’m played out, but I’ll give ’em many a turn and twist yet.” He was interested in Toledo & Wabash, Canada Southern, Quicksilver Mining Company and Canton (Land) Company stock.

Wm. H. Vanderbilt, who had received his early financial training as a clerk in Drew’s office, still retained a kindly feeling for his old employer, and sometimes gave him “pints” as Drew called them, on which he made a little turn. It was said that Mr. Vanderbilt had intended to give him another start in life about the time Drew passed suddenly over to the majority. He died at 10.45 P. M., September 18, 1879, at the residence of his son, Wm. H. Drew, No. 3 East Forty-second street.

His death came without any prior warning. He had been apparently in his usual health during the day, and had dined with Mr. Darius Lawrence, of Lawrence Brothers, brokers in Broad street, at the Grand Union Hotel, at six o’clock in the evening. After dinner he returned to the house of his son. About nine o’clock he complained of feeling ill, but refused to permit anybody to sit up with him, saying 155he would call Mr. Lawrence, who slept in an adjacent room, if he should feel worse. About ten o’clock he went into Mr. Lawrence’s apartments and said he felt much worse. Dr. Woodman, his family physician, was immediately summoned, but before his arrival Mr. Drew had expired. The cause of his death was apoplexy.

Among the numerous stories related of Uncle Daniel’s eccentricities, one is noteworthy in relation to his habit of getting in a mellow mood when prayer failed to soothe him, and covering himself up in bed after any speculative disappointment. He was found in this condition one day at the Sturtevant House, the year in which he died, by two Wall Street acquaintances who called upon him, and were conversant with his peculiar habits. He had all the windows closed, so that the atmosphere in the room was stifling, and was enveloped in several pairs of double blankets. His friends called for a bottle of champagne, of which he refused to partake. When this was drunk they called for another, and left it with him, believing that when he was left alone he might be inclined to imbibe without any feeling of embarrassment.

Another story is related characteristic of Uncle Daniel’s methods of making the best use of a secret, and any confidence that a person might foolishly repose in him, in a speculative deal. During the war a young man known as California Parker, who had more money than brains, began to buy Erie in the vicinity of par, and put it up to 120. He went to Drew and told him that he would let him in at fifteen per cent. below the market, if he would only aid him with a little money to carry the price higher. Mr. Drew blandly appeared to entertain the young millionaire’s proposition favorably and Parker, on the strength of that, continued the struggle until he had almost reached the end of his California gold. The next morning when he met Drew the latter told him that he was unable to raise the money, and appeared to be grieved at his disappointment. In the 156meantime Drew had instructed his brokers to sell Erie “short,” knowing that Parker was unable to absorb any more of that precious paper, Erie stock. The market went down, Drew made a “scoop,” and Mr. Parker retired from Wall Street a ruined, but a wiser man.

In personal appearance Drew was tall, strong and sinewy, and in his latter days his face was seamed with deep lines, indicating intense thought and worry. He had restless twinkling eyes, with a steady cat-like tread in his gait. His general demeanor was bland, good-natured and insinuating, with affected but well dissembled humility, which was highly calculated to disarm any resentment, and enable him to move smoothly in society among all shades and conditions of men. He has often been mistaken for a country deacon.

So, now, having revived and collated the chief incidents in the chequered career of this great speculative celebrity, I close this sketch with the ardent hope that he may have found that peace beyond the tomb which the ordinary speculator in Wall Street can seldom or never hope to achieve on this side of “that beautiful shore.”

Not Accidental Freaks of the Market.—We are still a Nation of Pioneers.—The Question of Panics Peculiarly American.—Violent Oscillations in Trade Owing to the Great Mass of New and Immature Undertakings.—Uncertainty About the Intrinsic Value of Properties.—Sudden Shrinkage of Railroad Properties a Fruitful Cause of Panics.—Risks and Panics Inseparable from Pioneering Enterprise.—We are Becoming Less Dependent on the Money Markets of Europe.—In Panics Much Depends upon the Prudence and Self-control of the Money Lenders.—The Law which Compels a Reserve Fund in the National Banks is at Certain Crises a Provocative of Panics.—George I. Seney.—John C. Eno.—Ferdinand Ward.—The Clearing House as a Preventive of Panics.

There are few subjects on which there is more loose theorizing than that of the origin and remedy of panics. These crises are commonly spoken of as accidental freaks of the markets, due to antecedent reckless speculations, controlled in their progress by the acts of men and banks who have lost their senses, but quite easily prevented, and as easily cured when they happen.

These are the notions of mere surface observers. They may be in a measure true, when applied to the markets of some of the older countries, whose business moves in long-established grooves and embraces but little of the risk attendant on new enterprises. In France and Germany, for instance, the hazards of business are almost entirely confined to the accidents of political events; and such nations are comparatively exempt from panics due to purely commercial causes. In the United States, panics arise, principally, from causes from which European countries are exempt.

158Notwithstanding our immense population and the large measure of well-ordered consolidation that has been effected in our various interests, we are still a nation of pioneers. In every ten years, we now add nearly fifteen millions to our population, which means that each successive decade we are piling up the equivalent of a first-class European state upon our past marvellous accumulation of empire. Inseparable from this unparalleled national growth are great ventures and great commercial and financial risks. Our new population has to subdue new territory. New lands have to be cleared; new mines have to be opened; new industries have to be established; new railroads have to be built; new banks created and new corporations founded. These new ventures are necessarily in a measure experimental. Some of them fail utterly; others succeed magnificently. They require large outlays of capital in advance of obtainable results. These outlays are, in many cases, met by borrowing; the loans being secured by liens upon the uncertain undertakings, and therefore lacking the stability of value that attaches to well developed investments.

We have thus a ceaseless stream of new issues of stocks, mortgages and commercial paper, and have, therefore, at all times outstanding a large amount of obligations which, from the uncertainty of their basis, are liable to wide fluctuations in value. Besides these absolutely new investments, we have also at all times an equal or larger amount of obligations issued against enterprises which, although not properly new, are still in an unconsolidated and experimental stage, and the value of which is, therefore, subject to wide fluctuations. Issues of this character naturally appeal to the adventurous instincts of our people and elicit a vast extent of speculative activity.

It is this peculiarity in the development and trade of the United States that renders our markets more exposed to panic than those of any other nation, and which makes the question of panics a peculiarly American one. In any and 159every commercial nation, trade is subject to regular successions of prosperity and depression. This oscillation results from, or constitutes a natural law.

The action of commerce, like the motion of the sea or the atmosphere, follows an undulatory line. First comes an ascending wave of activity and rising prices; next, when prices have risen to a point that checks demand, comes a period of hesitation and caution; then, care among lenders and discounters; then comes the descending movement, in which holders simultaneously endeavor to realize, thereby accelerating a general fall in prices. Credit then becomes more sensitive and is contracted; transactions are diminished; losses are incurred through the depreciation of property, and finally the ordeal becomes so severe to the debtor class that forcible liquidation has to be adopted, and insolvent firms and institutions must be wound up. This process is a periodical experience in every country; and the extent of the destructiveness of the crisis that attends it depends chiefly on the steadiness and conservatism of the business methods in each particular community affected. In addition to this ordinary and, I would even say, natural liability to commercial crises with a greater or lesser degree of panic, we, in the United States, have to stand the far more violent oscillations so inseparable from our great mass of new and immature undertakings.

In times of crisis, the obligations issued against such enterprises suffer instantly from the uncertainty about their intrinsic value. Holders are anxious to get rid of them; banks which have advanced money on them, call in their advances; and they become virtually unavailable assets. Every panic that has happened since the beginning of the era of railroads in this country, has been intensified many-fold by the sudden shrinkage in the value of this class of assets; and it is precisely here that the aggravation and the chief danger of an American panic centres.

In view of these facts, what is the use of discussing the 160possibility of averting our periodic panics? Risks and panics are inseparable from our vast pioneering enterprise; and all we can hope is, that they may diminish in severity in proportion as our older and more consolidated interests afford an increasing power of resistance to their operation. I am disposed to think that, in the future, the counteraction from this source will be much more effective than it has been in the past. The accumulations of financial resource available for market purposes at our monetary centres are increasing at a very rapid rate. Evidence of this is seen in the fact that, while the magnitude of our corporate undertakings is augmenting every year, we are also every year becoming less dependent on the money markets of Europe, and our large corporate loans are now made principally at home. These accumulations afford elasticity to our financial system and serve as a buffer against the violence of great financial disturbances.

I do not see how we can in any other way satisfactorily explain how it is that, while we have had two distinct waves of commercial depression since the great crisis of 1873, such as have ordinarily been attended with more or less panic, we have had no disturbance that can be regarded as a fully developed panic. The only approach to it was the disturbance brought about by the Grant & Ward failure in May, 1884, which was merely a restricted and comparatively temporary affair.

But, whilst maintaining that panics cannot be avoided in a country situated as ours is in its present incomplete development, I cannot avoid expressing the opinion that conditions are permitted to exist which needlessly aggravate the perils of these upheavals when they do occur. In every panic very much depends upon the prudence and self-control of the money lenders. If they lose their heads and indiscriminately refuse to lend, or lend only to the few unquestionably strong borrowers, the worst forms of panic ensue; if they accommodate to their fullest ability the larger and reasonably safe 161class of borrowers, then the latter may be relied upon to protect those whom the banks reject, and thus the mischief may be kept within legitimate bounds. Everything depends upon rashness being held in check by an assurance that deserving debtors will be protected. This is tantamount to saying that all depends on the calmness and wisdom of the banks. They may easily mitigate or aggravate the severity of the crisis, according as they are prudently liberal or blindly selfish. It is, perhaps, safe to say, that the banks never do all they may; but the banks of this city must be credited with having shown great sagacity under repeated derangements of this kind within the last twenty-five years. They have largely succeeded in combining self-protection with the protection of their customers; and the antecedents they have established will go far toward breaking the force of any future panic.

But, unfortunately, the law imposes restraints upon the national banks which seriously interfere with the wise discretion of those institutions. As the law now stands, the banks are liable to be wound up at the order of the Government if they permit their lawful money reserves to fall below 26 per cent. of their legal deposits. This establishes a “dead line” which is so dreaded when approached that it becomes almost a panic line. When that limit is reached, the banks are compelled to contract their loans; and, in certain conditions, the contraction of loans means forcible liquidation, without regard to consequences. Thus the very contrivance designed to protect the banks becomes a source of most serious danger to their customers and therefore to the banks themselves; and, in times of monetary pressure, it is the most direct provocative of panic. Were the banks allowed to use their reserves under such circumstances, a fund would be provided for mitigating the force of the crisis, and the danger might be gradually tided over; but, as it is, the banks can legally do little or nothing to avert panic; on the contrary, the law compels them to 162take a course which precipitates it; and when the crash has come, they have to unite in common cause to disregard the law and do what they can to repair the catastrophe that a preposterous enactment has helped to bring about. This is one of not a few unwise restrictions upon our national banks which needs to be stricken from the statute book. These periods of the breaking-down of unsound enterprises and of the weeding out of insolvent debtors and of liquidation of bad debts can never be wholly averted; nor is it desirable that they should, for they are essential to the maintenance of a sound and wholesome condition of business; but it is a grave reproach to our legislators if, when the day of purgation comes, the law treats the deserving and the undeserving with equal severity.

The most prominent characters in the short lived panic of 1884, as every observing person knows, were Ferdinand Ward, James D. Fish and a few others who acted minor parts in connection with the methods of financiering which precipitated the crisis in Wall Street.

There are many people who think that Ward—the Young Napoleon of finance, as he was popularly called—was able to dupe everybody, his accomplices included, and that he was chiefly responsible for all the trouble. But this is an exaggerated and unscientific view of the case.

Among the financiers who came to grief in the general embarrassment caused by the peculiar methods of the two financiers referred to, was George I. Seney. Seney gave his money away, and it was placed in the wrong quarters for any tangible return. He was a great patron of the churches and religious institutions. If he had studied the life of Daniel Drew, he might have discovered that investments in such enterprises as these were not particularly profitable. In his financial difficulties, Seney was 163left high and dry without friends who would come to his rescue. The result was, that the two financial institutions, the Metropolitan Bank and the Brooklyn bank with which he was thoroughly identified, had to go under as the result of Mr. Seney’s misfortunes. And an insurance company in Brooklyn, which had loaned about all of its surplus to Mr. Seney, taking Metropolitan Bank stock as collateral, was swamped as well.

There are few of the speculative magnates who succumbed to the crash of 1884, whose financial histories are more interesting than that of Mr. Seney. He is the son of a Methodist minister, and was born at Astoria, Long Island, about sixty years ago. He has always manifested the deepest devotion to his paternal church, and in the very height of his prosperity the church was the first object of his financial care. He was educated at the University of the City of New York, and shortly after he graduated, and when about 22 years of age, entered the Metropolitan Bank as a clerk. He was afterwards teller and then cashier. This was when Mr. Williams was President and when Mr. Jacques was Vice-President. Mr. Jacques resigned that position several years ago and made a prolonged journey to Europe. Mr. Williams died a few years ago, and Mr. Seney became his successor as President of the bank.

Mr. Seney’s wonderful financial abilities were a comparatively recent outgrowth of his mental evolution, at an age when very few men exhibit signs of new developments.

Up to a date shortly prior to the panic, he was generally regarded as slow and phlegmatic, without manifesting any special parts that indicated superior brilliancy as a financier. He first distinguished himself in Wall Street during the speculative furore of 1879, and came to the front then with sudden and surprising activity. He carved out an original course for himself in speculation—so original, in fact, as to stamp the enterprises with which he became identified with his name. The Seney properties became almost as familiar 164to the financial world as the Goulds, the Vanderbilts and the Villards.

Mr. Seney’s chief securities (so-called through the courtesy of speculative parlance) were Ohio Central, Rochester and Pittsburgh, East Tennessee, Virginia & Georgia, and the celebrated “Nickel Plate” Road. These were known as the Seney Syndicate properties, and the system of handling them was entirely novel in the history of Wall Street, causing the financial veterans of Wall Street to stand and stare at the boldness and rapidity of the Seney movements.

Instead of starting with moderate issues in amount, as has usually been the custom of most men handling railroad and telegraph properties, and doing the watering process by degrees, Mr. Seney boldly began the watering at the very inception of the enterprise, pouring it in lavishly and without stint. There was nothing mean or niggardly about his method of free dilution, the sight of which threw some of the old operators into a fit of consternation. The stocks were strongly puffed, and as they were so thoroughly diluted their owners could afford to let them get a start at a very low figure. The future prospects of the properties were set forth in the most glowing colors, the public took the bait, and the stocks became at once conspicuous among the leading active fancies of the market.

The cause of the vigorous life and amazing activity so suddenly imparted to the stocks of the Seney Syndicate can only be revealed by a careful perusal of Mr. Seney’s checkbook, which, if still in existence, will show commissions paid for the execution of the orders to buy and the orders executed to sell, both by the same pen and in the same handwriting.

These transactions, in the language of the “Street,” are called washed sales. In this way Mr. Seney was understood to have made a very large amount of money, and from being almost one of the poorest men in Brooklyn, he soon became 165marked as the richest. While he continued to thrive it was a singular fact that the majority of his financial friends seemed to fall into a decline.

When the affairs of the Seney enterprise were wound up, it was discovered that these people had little left except the certificates which bore the high-sounding term of the Seney Syndicate Property.

One peculiarity about Mr. Seney in his social relations was, that while he appeared almost bereft of sympathy for used-up friends whom his schemes had ruined, he drew largely on his immense gains for philanthropic purposes, and in the aggregate must have distributed over $2,000,000 in a very magnanimous manner.

It would seem that Mr. Seney at one time aspired to be a great philanthropist, and had it not been for the unfortunate exposé which was the result of the panic, he might one day have stood in as high and lordly a position as the renowned Peabody, with even a greater reputation as a financier. It is sad to picture the contrast presented by the denouement with what might have been, in a career which began with so much promise, dating from the time that Mr. Seney was installed as President of the Metropolitan Bank, whose standing and credit were the highest in the State.

Mr. Seney’s speculative career affords an example of the way in which this kind of speculation reflects on the stability of our best banking institutions. The lesson is one that should be carefully taken to heart by the financiers of this country.

It is due, however, to Mr. Seney to state that he alone was not responsible for the misfortunes of the Metropolitan Bank, although he was the ruling spirit; for it could hardly be possible that the directors of that institution could have been ignorant of its affairs in connection with the Seney speculations. The Metropolitan Bank cannot be compared with the Marine Bank, which met a similar misfortune, for 166it was no family affair, and Mr. Seney had none of his relatives connected with it, as Mr. Fish had with the Marine Bank.

It appears that it was chiefly owing to the fact that Mr. Seney had so little personal interest in the Metropolitan Bank that he was so anxious to gut the concern, knowing that the loss would fall upon others.

The most important point for speculators and investors, however, connected with the enterprises of these men is, that the terrible shrinkage of Stock Exchange values at the time, amounting to over $1,000,000,000, was in a large measure brought about by a foregone conclusion on the part of the sagacious bear cliques that disaster would sooner or later overtake the institutions over which Mr. Seney and Mr. Fish presided.

This should afford a wholesome lesson, through the medium of practical experience, to speculators and investors for all future time. For this very reason the facts are worthy of being put on permanent record as a reminder and a guide, particularly to Wall Street men, who are too often prone to forget the past and thus leave themselves liable to be caught in a similar net again.

The transactions of the four prominent speculators who played the most conspicuous part in the events which resulted in the panic of May, 1884, should be preserved for reference, as a guide when similar cases arise, for in spite of the deep disgrace, shame and misery that have followed in the wake of their enterprises, these men will have hosts of imitators for many years to come. Ward, Fish, Seney and Eno, with probably the one exception, Fish, are, by many, considered smart men, who simply had the misfortune to become involved, but who had a fair chance of coming out of all their troubles, great millionaires and publicly honored for their ability and success.

It must be admitted that there are some examples in the financial world whose careers will fully support this theory 167and belief but they are the exceptions which only prove the rule in speculation, as in other lines of business, that “honesty is the best policy.” These men, who have been apparently so successful through dishonest methods, are never free from dread of being tripped up at any period of their inflated prosperity. They are always subject to be called upon by the application of the stern methods of honest financiering to give an account of their stewardship, and to have the transactions of a lifetime eventually gauged by the standard of public honesty. It is the winding up that tells the tale, and exposes the duplicity of the ablest financiers, who vainly imagine that dishonest methods will always prevail.

Of the four famous “financiers” mentioned who were most prominent in the Summer panic of 1884, the speculative history of John C. Eno was in some respects the most remarkable and most interesting.

Eno was a young man, not more than twenty-six years of age, and a representative of that class of ardent and youthful speculators who plunge into the market with all the recklessness incident to young and sanguine imaginations, with many roseate schemes of wealth and greatness, for which inexperienced youth is proverbial. Eno was a victim of that rashness, impulsiveness and desire for extravagance, by which the possessors of these attributes frequently get themselves and many of their associates embroiled in numerous difficulties and embarrassments.

Another point of interest in the curious career of Eno was his position as President of the Second National Bank of New York, up to the time of the panic. Seldom does it fall to the lot of a youth of his tender years to have conferred upon him a position of such responsibility and dignity. The manner in which he made use of this position of trust, for appropriating money which did not belong to him, was notable for its peculiar ingenuity.

168Most of the money lent by the bank was upon collateral securities, which, for convenience, as well as for safety, were kept, not at the bank, which was situated under the Fifth Avenue Hotel, but in a vault down town.

The capital stock of the bank was $100,000, and it had $4,000,000 of deposits, all of which was appropriated to speculative use by this smart young man, who decamped to Canada in company with a Roman Catholic priest.

Eno happened to have a rich father, who had made his money by thrift and economy during a long and prosperous life. To his credit, it must be said, that he came promptly to the rescue of this wayward and erring son, and paid the bank, of which he was director, three and one-half millions of dollars, on condition that the other half million should be contributed by the other directors, all of whom were very rich men. The directors willingly accepted the proposition, and thus the entire deficiency was made good by this generous arrangement, so that none of the depositors suffered the loss of a dollar.

The methods which Mr. John C. Eno, the President, resorted to for the purpose of capturing the institution root and branch, were ingenious and unique in their character, inasmuch as they had a tendency to inspire the fullest confidence in his vigilance and honesty regarding the affairs of the bank, instead of exciting any suspicion.

He discouraged the custom of keeping the securities of the bank in its own vaults, on the pretense that they were not sufficiently secure, and suggested that a safe should be rented in one of the down town safe deposit companies. This was done at his request. He argued, further, that the funds on hand being mostly family deposits, the depositors were not of a class that often required to be accommodated with discounts, and that the money was not taken by the bank to be locked up and kept on hand so as to have the name of having it, but to be used to the best possible advantage consistent with safety, to make profitable returns 169through interest. Consequently, he was allowed to use the money of the bank freely to make loans to Wall Street brokers on interest, with approved collaterals, and he represented to the directors that he was carrying out this course.

As the bank was located so far up town, (at Twenty-third street,) the distance from Wall Street made it extra hazardous to send securities back and forth, as adventurous thieves might seize the messenger on the way. This has frequently happened in this city. It was, therefore, desirable to have the safe deposit vault in close proximity to Wall Street. Of the combination to the safe in this vault Mr. John C. Eno was the sole possessor. Having things fixed in this manner it was indispensable that the President himself should go down town every day, so as to accommodate the brokers in the loaning of money. The directors were by this plan convinced that the risks, through the careful methods adopted by the President, were no greater than if the bank was located in Wall Street. These conservative methods, so skilfully planned and plausibly explained, increased the confidence of the directors in the able and careful management of Mr. Eno, and nobody was so much surprised as they, when the wool was raised from their eyes and they discovered that these various and ostensible “safeguards” were ingeniously devised for the sole purpose of screening their skilful inventor in the accomplishment of his huge defalcations.

Instead of loaning the money to Wall Street brokers, as he represented to the directors, he placed it as margin with his own brokers in various speculative ventures, and in that manner he made away with the entire $4,000,000 of the bank’s deposits without exciting the least suspicion in the confiding breasts of the directors.

Such another instance of a clean sweep of the deposits of a bank by any of its officials, is probably not on record in the whole history of this kind of manipulation.

When the President represented to the Cashier, every evening, that he had lent specified sums on certain securities, 170his word was taken, and his checks for the amounts duly honored, without exciting a feeling of suspicion. Thus, by degrees the books of the bank showed $4,000,000 of call loans upon unexceptionable collaterals, when in fact the money had all gone to the President’s private account.

Eno speculated with the greater portion of the money in stocks that were continually declining in price, and at length the time arrived when he was obliged to make a clean breast of the terrible condition of his affairs to his father. As I have stated, the old gentleman, Mr. Amos R. Eno, nobly came to the relief of his prodigal son, and saved the bank from suspension.

As Eno senior is still worth about $25,000,000, he will never suffer the pangs of poverty through this great loss; but it will take a long time to enable him to survive the disgrace which the flagrant acts of his son have brought upon an honest and highly respected name.

In this panic the boldest and most remarkable instance of self-sacrifice on record was manifested by the Clearing-House banks. The panic of 1884, in its incipient stage, was different to any that had preceded it—at least any of the financial convulsions within my recollection—owing to the influence exercised upon it by the prompt and liberal policy of the banks. In every respect their action was notable, showing that those at the head of their management had largely profited by the lessons of former panics.

It was chiefly due to the masterly management of the banks, together with the magnanimous conduct of Mr. Amos R. Eno and his associate directors of the Second National Bank, that the panic was short-lived and so narrowly circumscribed. Had it not been for the determinate and instantaneous joint action of these parties there would have been a very serious crash, which would have been far-reaching in its results.

171The results of the timely action taken on the part of the managers of these institutions in this crisis, proves that panics can be arrested by proper methods, and that quick and determined action is indispensable in the incipient stage of the emergency. If bank presidents could only be relied upon by the business community to act promptly and in unison with the business men, as they did in this instance, threatened panics need have but little terror for the people, who now live constantly in dread that these outbursts of business disaster may be sprung upon them at any time in any decade.

In the past history of panics bank managers, as a rule, have acted without system, without judgment and almost entirely without any well defined plan of action. There has been an astonishing lack of vigor in their methods and purposes, which were weak and vacillating in their character—frequently more like the acts of children than those of business men.

If the panic of 1873 had received the same vigorous treatment in its origin as that of 1884, it could just as easily have been checked as the latter, and the entire country would have been saved a large portion of the depressing effects of that serious collapse and its attendant disasters, which caused a state of general prostration for five or six years succeeding the event. These years, from a business standpoint, appear as a blank in the history of the country’s progress. Indeed, they constitute a black mark.

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 172and 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 173losses, 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.

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, 175that 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 176expansion 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 177paper 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 178measure 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.

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 182amount 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 183at 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.

184Importing 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 185and 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. 186It 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 187had 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.

188Although 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 189Sarsfield 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 190level; 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 191of 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 192good 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 193that 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.

194About 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 195cause 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.”

196An 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 197was 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 198millions 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 199realized 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 200more 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.”

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.

202Singular 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 203with 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 204through 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 205the 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 206while 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 207of 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 208one 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.

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 210purpose 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 211public, 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 212that 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 213the 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:

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 214method 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.

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 216people 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, 217after 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 218accorded 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.

219It 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 220of so much criticism and comment. Following is a copy of this letter:

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 221thing, 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.”

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.

224He 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 225infallible. 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 226began 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.

227The 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, 228making 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.

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 230made 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. 231Waiters 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 232suicide 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.

233The 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 234envy 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 235their 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.

236The 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 237rid 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.

238Mr. 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; 239and 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.

Deceptive Financiering.—Over-Capitalization.—Stock “Watering.”—Financial Reconstructions.—Losses to the Public.—Profits of Constructors.—Bad Reputation of our Railroad Securities.—Unjust and Dangerous Distribution of the Public Wealth.

The following chapter, on the subject of “Our Railroad Methods,” was delivered by me as a Fourth of July address at Mr. H. C. Bowen’s Annual Symposium at Woodstock, Conn., to an assemblage of over 3,000 people. It was so favorably received by the press and the public in general, that I have been encouraged to publish it in this book without any material changes:

In the whole range of our law-making there is no one branch in which there has been such an utter lack of judgment, foresight and just regard for the rights of the citizen, as in the legislation provided for our railroads and railroad companies. For the most part, the statutes relating to this class of corporations are a set of general enactments, loosely defining the large powers granted to the incorporators, comparatively silent on the duties and obligations of the companies to the public, and conferring upon them a virtual carte blanche as to their methods of finance and of conducting their business.

In a country whose products are mainly bulky, and have to be carried to markets hundreds or thousands of miles distant, it is of the first moment that its railroads should be built with the strictest economy and on the lowest possible capitalization. The low cost of land and the cheapness of material for road-bed are especially favorable to our securing this advantage; but the laws have permitted a system of inflated financiering which neutralizes these natural adaptations and immensely increases the cost of transportation.

As railroads have to be largely built with borrowed 242money, their construction in this country afforded an opportunity for establishing credit relations with the great lending centres of Europe, which might have been of incalculable value in promoting the development of our vast resources in various directions. England, Holland and Germany have indeed loaned us very large amounts for railroad enterprises; but the law has permitted these undertakings to be conducted with so much concealment, misrepresentation and actual fraud, and has so disregarded the rights of the bondholders, that American credit has become a scandal and a by-word on the European bourses. The result is, that foreign capitalists are seeking other fields of investment; and their respective Governments are encouraging them by opening up new colonies, and thus getting fresh sources for the supply of products which otherwise would have continued to be readily taken from the United States. Such are the rewards of immoral financiering; and these bad methods are directly traceable to the encouragements afforded by our negligently constructed railroad laws.

Perhaps I may best succeed in making myself understood on this subject by illustrating the way in which our railroads are usually built. Under the laws of the State of New York—which are a fair sample of the laws of most other States—a number of persons form a company under the general railroad laws, registering at Albany the proposed route of the road, the amount of capital stock and bonds to be issued, and a few other particulars required in the papers of incorporation. The incorporators then proceed to form themselves into a syndicate or company, for the purpose of contracting to build and equip the road. Here comes the first step in the system of “crooked” financiering. In their capacity of incorporators, the same men make a contract with themselves, in the capacity of constructors. Of course, they do not fail to make a bargain to suit their own interests. They would be more than human if they did. Usually, the bargain is that the construction company undertakes 243to build the road for 80 to 100 per cent. of the face value of the first mortgage bonds, with an equal amount of stock, and sometimes also a certain amount of second mortgages thrown in, virtually without consideration. The first mortgages are supposed to represent the real cash outlay on the construction and equipment; but, as a matter of fact, the true cash cost of the work done and materials furnished ranges from 60 to 80 per cent. of the amount of first lien transferred to the constructors. The Construction Company disposes of the bonds, partly by negotiating their sale to the public through bankers, at an advance upon the valuation at which they had received them, and partly by using them in payment for rails and equipment. Beyond the profits made from building the road for the first mortgage bonds, there remains in the hands of the constructors the entire capital stock and any second mortgage bonds they may have received, as a clear bonus, to be held for future appreciation, and to keep control of the Company and be ultimately sold on a market deftly manipulated for that purpose.

This is the way in which a large majority of our railroads have been and others are still constructed. It will thus be seen that the actual cash cost of a railroad is ordinarily less than 60 per cent. of the stock and bonds issued against the property, and that its first mortgage exceeds the amount of the legitimate actual cost of the road.

The basis of all the discredit, the embarrassments, the bankruptcies and the robberies of our railroad system is thus laid at the inception of the enterprises. They rest upon an intrinsically rotten and dishonest foundation; and the evil is far from having reached the end of its mischief to the financial, political and social interests of the country. In some few cases, railroads thus exorbitantly capitalized have proved able to earn the interest on their debt, provide for additional outlays on construction and betterments, and even to pay dividends on their stock; but, in 244a large majority of cases, they have had to undergo a process of financial reconstruction, in order to bring the debts of the Company within its ability to meet its fixed charges. It is not a risky estimate to suppose that of our present 125,000 miles of railroad, with its $7,500,000,000 of stock and debts, 60 per cent. has undergone this process of debt-scaling and rehabilitation. Were it not that the new roads have opened up new country for settlement, which has become an immediate source of traffic, these bad financial results would have been more general and worse than they have proved to be. The risks attending the building of lines into unsettled regions ought to have been a reason why they should be constructed upon conservative principles; but, in reality, the prospects of settling new populations and of tapping new sources of wealth, have been so magnified to the eyes of distant and credulous lenders as to enable the speculative constructors to easily consummate their illegitimate schemes.

The general result of this system of financiering has been to deprive the legitimate original investors of their chances of making a fair return out of their investment. As a rule, the bondholders have provided all the capital expended, and the stockholders have invested nothing. The bondholders incur all the risks; the stockholders have no responsibilities. If the enterprise proves a success, the bondholders get their interest, while the stockholders, without a dollar of original outlay, get vastly more than ever falls to the mortgage creditors through the stock becoming an instrument of profitable speculation. If the enterprise is a failure, the bondholder has to forego interest and finally to accept a new mortgage for a less amount and at a lower rate of interest; whilst the original stockholder has, in the meantime, made money out of artificially “booming” the shares in Wall Street.

The profits realized on these speculative constructions are enormous, and have constituted the chief source of the 245phenomenal fortunes piled up by our railroad millionaires within the last twenty years. It is no exaggeration to characterize these transactions as direct frauds upon the public. They may not be such in a sense recognized by the law, for legislation has strangely neglected to provide against their perpetration; but, morally, they are nothing less, for they are essentially deceptive and unjust, and involve an oppressive taxation of the public at large for the benefit of a few individuals, who have given no equivalent for what they get. The result of this system is that, on an average, the railroads of the country are capitalized at probably fully 50 per cent. in excess of their actual cost. The managers of the roads claim the right to earn dividends upon this fictitious capital, and it is their constant effort to accomplish that object. So far as they succeed, they exercise an utterly unjust taxation upon the public, by exacting a compensation in excess of a fair return upon the capital actually invested. This unjust exaction amounts to a direct charge and burthen on the trade of the country, which limits the ability of the American producer and merchant to compete with those of foreign nations, and checks the development of our vast natural resources. In a country of “magnificent distances,” like ours, the cost of transportation is one of the foremost factors affecting its capacity for progress; and the artificial enhancement of freight and passenger rates due to this false capitalization has been a far more serious bar to our material development than public opinion has yet realized. The hundreds of millions of wealth so suddenly accumulated by our railroad monarchs is the measure of this iniquitous taxation, this perverted distribution of wealth.

This creation of a powerful aristocracy of wealth, which originated in a diseased system of finance, must ultimately become a source of very serious social and political disorder. The descendants of the mushroom millionaires of the present generation will consolidate into a broad and almost omnipotent money power, whose sympathies and influence 246will conflict with our political institutions at every point of contact. They will exercise a vast control over the larger organizations and movements of capital; monopolies will seek protection under their wing; and, by the ascendancy which wealth always confers, they will steadily broaden their grasp upon the legislation, the banking and the commerce of the nation.

The illegitimate methods by which the wealth of this class has been accumulated cannot always remain a mystery to the masses. The time will come when every citizen will clearly perceive how his interests have been sacrificed for the creation of this abnormal class; and, when that time comes, a series of public questions will arise that will strain our political institutions to their very foundations. Already the working masses begin to see the dim outline of the gigantic wrong that has been inflicted upon them in common with all other classes. If they do not understand the exact method by which a portion of the rewards of labor has thus been diverted from them, they clearly comprehend which is the class responsible. The labor troubles that have so seriously shaken confidence during the spring of this year have been largely stimulated by an idea that a serious wrong has been done to the workman in the creation of these abnormal fortunes. It is not surprising—although it may lead to disappointing results—if workingmen should reason that, if railroads can afford to make a few men so wonderfully rich, they can afford to pay their employees higher wages and for shorter hours. Nor can we wonder if, when capitalists are on every hand piling up their wealth by the tens of millions, the laborer should conclude that he ought to be able to get a few dollars a week more, or deduct an hour or two off his day’s work, without very seriously hurting the employing class. This may be and is very fallacious reasoning; but it is what might very naturally be expected under these circumstances, from a class who are not trained to think beyond surface depth. It will be of no avail to 247tell the workmen that this unjust distribution of wealth is final and irrevocable; that there is no power of redress by which a wrong of this nature can be righted; or that, as voting citizens, they are as much responsible as anybody else for permitting the neglects and defects of legislation that have made these inequalities possible. This class never reason either calmly or logically, and it will take a great deal of fruitless agitation to satisfy them of the hopelessness of their methods of seeking reparation.

The Socialistic seductions which have captivated such large masses of the working population of Europe will all the more readily find acceptance among our millions of laborers because they have before their eyes such conspicuous instances of the unequal division of wealth and of the overwhelming power of organized capital. Certainly, if any facts could be supposed to justify the doctrines of Socialism and Communism, it would be the sudden creation of such fortunes as those which, within a very few years, have come into the hands of our railroad magnates. A few years later, the public will understand much better than it now does how facts like these have contributed to the raising of questions of government which will dangerously test the cohesion and endurance of our political institutions.

Artificial methods of establishing our railroad corporations have naturally led to artificial methods of regulating their operations. Over-capitalization incapacitates the roads for competition; for it necessarily holds out a temptation to parallel existing roads by others at a lower capitalization. As roads running between the same points were multiplied, competition for “through” business became more active, until not only were dividends threatened on some of the best lines, but some roads were driven into default on their mortgages. At this point the “pool” was introduced—a device by which all lines running between the same points agree to put their business from through traffic into a common aggregate, to be distributed among the several members according 248to certain accepted percentages. It was hoped that, in this way, uniformity of charges could be maintained, at such rates as were necessary to make the business satisfactory to each member. This, however, was soon found to be a step “from the mud into the mire.” The pool was discovered to operate as a premium on the construction of new parallels.

Speculators were quick to perceive that they could build new lines on the same routes for much less cost than the old ones, and that, with a lower capitalization, they could easily compel the pool to admit them to membership, with all the privileges of a ready-made traffic and with all the guarantees the pool could afford of exemption from competition, and of ample charges. Thus, the pools that, in the first instance, were made necessary through the evils of speculative methods of construction, became, in turn, the source of a new and even worse form of the same evil. New roads were built, or sets of old detached ones were connected, so as to afford additional parallels to the existing trunk lines, with no other object than to compel the latter to support them by dividing with them a portion of their traffic, or to accept the alternative of a reckless cutting down of rates. The end to this viciously excessive system of construction can only come when the pools have been reduced to such a low condition that they will no longer care to take newcomers into their co-partnership; in which case speculative builders will see no chance for profit in such ventures. The fate of the “Nickel Plate” and of the West Shore speculations, by which nearly 1,000 miles of needless road was built to divide traffic with the Vanderbilt system, serves as a warning against the danger of building roads to live upon pool support; but, nevertheless, the Eastern trunk pool still stands exposed to a great deal of harassing outside competition from possible and contemplated new combinations of existing detached links. Routes of the latter kind are even more formidable competitors than new lines, because they 249can be provided at a lower capitalization, and have already the support of an established way traffic. It would not be surprising if, within the next three or four years, several new routes should in this way be established between New York and Chicago.

It will thus be seen that the very contrivance intended to stave off the vicious effects of artificial capitalization is contributing, by a sort of punitive process, towards the end of reducing earnings to a just ratio to the true value of the properties. The weakness of the pool, arising from its temptations to new competitors to enter the field, is not the only cause of its failure. Up to this time it has been found impossible to find a form of pool stringent enough to restrain the members from cutting rates against each other. The modes of possible evasion are so numerous, the sacrifices of special advantages that each member has to make are so galling, the small share that remains to each road in a numerously divided business is so small, and the temptations of agents to get freight “by hook or by crook,” in dull times are so irresistible, that the strictest watching and the severest penalties fail to secure a faithful observance of the pool agreements. Much forbearance is shown towards transgressions, and deliberate violations have to be condoned or connived at; but, all the time, the pools are in imminent danger of jealousies and breaches of faith causing their disruption. No sooner have they won public confidence by maintaining harmony through a period of prosperous business, than the public wake up to find that some member has been secretly “cutting,” and the agreements are torn to pieces.

The result is, that the public have lost all confidence in the ability of the pool to regulate competition; and, still worse for the railroads, their managers are losing faith in them also. The great crucial test of this expedient so far as respects the Eastern lines, is likely to come when the number of smaller outside competitors, of the character 250just alluded to, comes to be increased. The pool will not be likely to admit them into its fold, which already includes too many diverse interests to permit of harmony; and if it did, the danger of disagreements and disruption would be only thereby increased. And yet, if those routes are shut out, they will act as so many free lances, attacking the older lines in every direction, and doing business at rates which will leave the pool companies no alternative but to follow suit. In this dilemma, the outlook for some time ahead is not an encouraging one for the older companies. To my view, it seems very probable that their original sins of construction and their subsequent transgressions of stock “watering” are about to find them out. The natural law of competition is a terrible foe to the violators of commercial justice. It is the inevitable police power of trade. Its working may be evaded for a time; its final conquest over wrongs and monopolies may sometimes be delayed beyond the limits of human patience, and men may at such times lose confidence in its power to right the wrongs of society; but its ultimate success in the restoration of equity and fair-play is as certain as the rising of the sun.

My absolute confidence in the ultimate triumph of this principle prompts me to venture the assertion that, at no very distant period, the wrongs practised in the original construction of our railroads and in the subsequent “waterings” of their stocks, will be compensated through competition adjusting the profits of the companies to the equivalent of a fair return upon a true valuation of the properties; that is, a value measured by what they are able to earn under the conditions of free competition and the now current cash cost of providing like facilities. That, it appears to me, is the solution towards which our railroad problem is now steadily working; and neither Congressional legislation, nor State regulation, nor the resistance of organized capital, can be expected much longer to stave off that result.

It may, however, be very properly asked, whether legislation 251has no duty in the premises? To me, it appears that it has a very weighty one. The consequences of the original neglect to prescribe proper regulations for the construction, capitalization and financial management of railroads has been so fully exposed by their past history, that the Legislatures will greatly err if they neglect to impose restrictions upon future corporations that will prevent farther repetition or perpetuation of the evils. When the Government bestows upon railroads important privileges and franchises, under which fundamental private rights are held in abeyance for the common good, it is due to the public protection that the recipients of these favors should be held under restrictions which will prevent them from abusing the privilege to the public disadvantage.

When a railroad company capitalizes its property at double its actual cost, and seeks to collect charges calculated to yield dividends upon such false capital, it grossly perverts and abuses the privileges conferred by its charter, and virtually perpetrates a public robbery. This appears to be a perfectly plain proposition, and yet this glaring wrong has been so long tolerated that not only the railroads, but a portion of the public even, have come to regard it as a sort of right inherent in these corporations. One of the first duties of the State Legislatures, therefore, is to enact laws requiring that the stocks and bonds issued against any railroad hereafter built shall, in no case, exceed in the aggregate the true cash cost of the property; the penalty for the violation of this restriction to be forfeiture of charter. The responsibility of managers should be definitely fixed. All extensions, betterments or improvements should be provided for by issues of stock or bonds on like conditions. The issue of mortgages should be restricted within 60 per cent. of the true cost of the property.

In order to prevent wrongful speculative profits being realized by the incorporators, they should be prevented from becoming the constructors of their road, directly or indirectly; and all contracts for construction, equipment, extensions 252or improvements should be made upon open competitive bids, the lowest bid to be accepted, with substantial guarantees for the faithful performance of the contract. Also, it should be made the duty of a board of State railroad commissioners to see to it that all these conditions are strictly complied with. Regulations should be provided prohibiting issues of stock for any other than construction or equipment purposes, forbidding the payment of dividends not actually earned, and enforcing the amplest publicity of details relating to current traffic and the financial affairs of the companies.

Had our original railroad laws incorporated provisions of this character, our railroads would have all along ranked as the safest and most stable investments of the country; the discredit that hangs over our corporate enterprises would have been averted; transportation would have been done at lower rates with steadier charges, and we should have been saved the social and political excrescence of an aristocracy based upon ill-gotten wealth. After our bitter experience of the dangerous results of neglecting to guard the railroad interest by some such restraints as the foregoing it surely is not too early now to apply these safer methods to all future enterprises of this character. Not only is such legislation due as a measure necessary for the protection of our commerce and investors, but it would go very far towards remedying the evils that have grown up under the old and badly regulated system. To a man of business it is hardly necessary to point out what would be the competitive advantages of roads constructed under the proposed regulations. As a rule, their capitalization would not exceed 50 to 60 per cent. of that of the older companies, and they could, therefore, be run upon a much lower rate of charges.

The thoroughly conservative nature of their organization would bespeak fer them a degree of public confidence which would enable them to get all the capital needed for really legitimate undertakings, whilst purely speculative ventures would be put under conservative check. Under these circumstances 253new roads could do a profitable business, and yet compete disastrously with the old excessively capitalized companies. The ultimate result of this competition from the new order of roads would inevitably be to reduce the earnings of the older class to a point which would admit of interest and dividends being earned only on the same rate of capitalization as existed among the new-system companies. In other words, the effect of the honest method of capitalization here suggested would be to squeeze all the “water” out of the old companies, and to bring them in effect, though possibly not in form, to the same financial level as the new.

If my reasoning here is correct, there is cause for our great railroad capitalists to look out for the security of their investments. The basis for their wealth may prove far less certain than they have imagined it to be. With the prevailing and steadily increasing public feeling against the methods of railroad capitalists and the working of our railroad system, what assurance can there be that, when a remedy for these corporate wrongs comes to be clearly propounded, it will not be eagerly urged upon the attention of the Legislatures and adopted without much ceremony? The dash of a Governor’s pen is, therefore, all that stands between the railroad millionaire and the sudden extinction of a large portion of his inflated paper wealth. Is this a chimerical conclusion? The question, it seems to me, deserves a far more serious consideration than those most vitally concerned have yet bestowed upon it. No man can confidently deny the possibility of such a result as is here indicated. No one familiar with the present public temper on the subject of railroad monopoly can reasonably question the probability even of a settlement of this kind being ere long resorted to. Under these circumstances, it is a question very pertinent to the times, whether the foundation of our railroad aristocracy is as broad or as firm as it has been supposed to be, and whether a healthy solution of the great railroad problem is as difficult and as remote as some despondent people have represented it to be.

How a Sovereign Southern State Cheated the Northern Men who Helped Her in Distress.—A New Way to Pay Old Debts.—Cancellation by Repudiation of Just Claims for Cash Loaned to Sustain the State Government, Build Public Schools and Make Needed Improvements.—Bottom Facts of the Outrage.—The Recent Attempt to Place a New Issue of Georgia Bonds on the Market, while the Old Ones Remain Unpaid.—The Case Before the Attorney-General of the State of New York.—He Examines the Legal Status of the Bonds in Connection with the Savings Banks.—His Decision Prohibits these Institutions from Investing the Hard Earnings of the Working People in these Doubtful and Dangerous Securities.—A Bold Effort to have the Fresh Issue of Georgia Paper Put Upon the List of Legitimate Securities of the New York Stock Exchange Firmly Opposed and Eventually Frustrated.—Reflections on the Bad Policy which Advocated Repudiation and Has Injured Georgia Credit in the Eyes of the World.—General Observations upon the Nature of Repudiation of States’ Debts, and the Moral Influence on the General Credit of the United States.—Successful Appeal of Bondholders of the Repudiated Bonds to the Stock Exchange.

One of the saddest events of my business experience arose from the purest motives on my part, to aid the South in the work of reconstruction, in the way of which, as I have stated in the previous chapter, President Johnson threw the greatest obstacles.

I ventured my money and offered my friendship at a time when that section of the country stood in need of both 256money and friendship, and used my best efforts to bring about the return of such feelings of fraternal harmony as should exist among all the citizens of this great country. For these kindly offices I was treated with the basest ingratitude by some of the Southern States.

I held a large amount of Southern securities, all issued for full value received, which went into the internal improvements of that section, enhancing the taxable value of its property. These securities bore the great seals of the Sovereign States of Georgia and Alabama.

The dishonor attaching to repudiation in these instances has been brought out in more glaring colors, from the fact that these States have long since become abundantly able to liquidate their obligations, and to erase the black spot from the escutcheons of their chivalrous people.

The people themselves are not so much to blame as the disreputable politicians into whose hands the management of their affairs had fallen.

It is of the sovereign and high-toned State of Georgia that I have most occasion to complain. On account of the bad faith of that State, through her political managers, I suffered a terrible reverse in my fortune, which came near crushing out my financial existence.

It is not, therefore, surprising, I think, that having placed my faith in the integrity of that State and the promises of its officials and governing power, and having been so basely deceived, that I should now be aroused to act in self defence, fight for my rights and do all in my power to cause the bonds or securities for which I paid good money to be redeemed, and to have my just claims satisfied. It has therefore, been incumbent upon me to leave no stone unturned in fighting this battle, with the hope of recovering the money, or a part of it, that was filched from me through the ostensible defalcations of these sovereign and chivalrous States.

About thirteen years ago the repudiation which has reflected 257such disgrace upon the South became prevalent in that section, and took the character, for a time, of a severe financial epidemic.

It was for this reason that the Legislature of the State of New York, as well as the legislatures of several other States, considered it necessary for the protection of the savings banks, which are the custodians of many hundreds of millions, chiefly of the hard earnings of the working people, to prohibit these institutions from investing in, or loaning upon, the securities of any State in the Union that had within ten years previously repudiated any of its lawful obligations.

The laws of the State of New York, in chapter 409, section 260, of the laws of 1882, provides that savings banks shall be prohibited from investing money in stocks or bonds of any State which, in the language of the statute, “has within ten years previous to making such investment by such corporation defaulted in the payment of any part of either principal or interest of any debt authorized by any legislature of such State to be contracted.”

It was for this reason that the newly issued securities of some of the Southern States have been unable to find a resting place in the monied institutions of the North.

The State of Georgia, recently finding that she had some obligations becoming due, and seeing that money was cheap in the North, and that more than ten years had expired since she repudiated her former obligations, thought there was a good opportunity of issuing a fresh batch of these so-called securities, similar to those that had been dishonored in 1873.