Praise for Dark Genius of Wall Street
“Renehan. . . turns in a masterful glance at the social history of the Gilded Age as well as a brilliant biography of Gould. . . . Renehan’s sumptuous prose and his dazzling research and style provide a window into Gould’s ambitions and offer a first-rate social history of the financial workings of his time.”
–Publishers Weekly (starred review)
“Renehan. . . [demonstrates] from contemporary sources that Gould’s misdeeds have been much exaggerated over a century of telling. . . . [Gould] was no better and no worse than the sharks of today’s corporate world, but unlike most of them he was without vanity and did not pretend to be anything other than what he was. Renehan’s meticulous portrait does him proud.”
–Martin Vander Weyer, Spectator (London)
“. . . a primer for our own dark age of business leaders. . . . Renehan’s dead-on biography is proof it happened before, and, if anything, Gould was better at it than the current collection of fraudsters.”
–Ed Leefeldt, Bloomberg
“Renehan’s engaging descriptions of Gould’s exploits make the reader realize how much the markets have cleaned up in our age–and, alas, how much less fun they are to write (or read) about now.”
–Joseph Nocera, Sunday New York Times Book Review
“Dark Genius of Wall Street is a masterwork–entertaining, readable, and informative–by one of America’s leading biographers. In our new Gilded Age of technological and financial transformation, this comprehensive reexamination of the most brilliant and enigmatic of all the Robber Barons could not be more timely.”
–James Strock, author of Theodore Roosevelt
on Leadership and Reagan on Leadership
“Renehan masterfully recalls Gould the business builder (his railroad empire, including the Union Pacific, was one of the most extensive and best run of the age) and family man, who reveled in collecting books and orchids (the latter grown in his enormous greenhouse at Lyndhurst, his Westchester estate). Gould was clearly no saint, but with Renehan’s even-handed biography we get a clear picture of the man for the first time.”
–Reed Sparling, Hudson Valley Magazine
“Renehan’s zestful recounting of the intricate maneuvers involved in the titanic struggles over the Erie and Union Pacific railroads, Western Union and the Manhattan Elevated amply make the point that Gould was no more unscrupulous than his opponents and frequently a lot smarter.”
–Wendy Smith, Washington Post Book World
“The battle for the Erie is a set piece of the Gilded Age, and no Gould biographer can shirk from it. Mr. Renehan does a good job of conveying the utter lack of scruples of each of the major players. . . [and] commendably cleanses the historical record.”
–Roger Lowenstein, The New York Times Business Section
DARK GENIUS OF WALL STREET
ALSO BY EDWARD J. RENEHAN, JR.
The Kennedys at War
The Lion’s Pride:
Theodore Roosevelt and
His Family in Peace and War
The Secret Six
John Burroughs: An American Naturalist
DARK GENIUS
OF WALL STREET
The Misunderstood
Life of Jay Gould,
King of the Robber Barons
EDWARD J. RENEHAN, JR.
A Member of the Perseus Books Group
New York
Dedicated to the memory of
Alf Evers
Catskills historian extraordinaire
1905–2004
Copyright © 2005 by Edward J. Renehan, Jr.
Hardcover edition first published in 2005 by Basic Books,
A Member of the Perseus Books Group
Paperback edition first published in 2006 by Basic Books.
All rights reserved. Printed in the United States of America. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information, address Basic Books, 387 Park Avenue South, New York, NY 10016–8810.
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Designed by Jeff Williams
Cataloging-in-Publication data for this book is available from the Library of Congress.
Hardcover: ISBN-13: 978-0-465-06885-2; ISBN-10: 0-465-06885-5
Paperback: ISBN-13: 978-0-465-06886-9; ISBN-10: 0-465-06886-3
eBook ISBN: 9780786722310
06 07 08 / 10 9 8 7 6 5 4 3 2 1
PREFACE
In mid-December 1892, the banker Jesse Seligman gave an interview to a reporter from the New York Tribune. Seligman’s friend Jay Gould had been buried a week earlier. He described the dead mogul–whose empire had included the Western Union Telegraph Company, the Missouri Pacific, the Union Pacific, and the Manhattan Elevated Railroad–as “the most misunderstood, most important, and most complex entrepreneur of this century.” Seligman said he found it “ironic” that Gould was always cast as the arch demon in any telling of the nation’s recent financial history. If Gould was a sinner, asked Seligman, exactly who were the saints?
Seligman ran down the list of contenders, starting with Cornelius Vanderbilt. The foulmouthed and brutal old Commodore never claimed to have any agenda other than his own aggrandizement. Was he really to be revered? (On one famous occasion, when asked to contribute to the poor, Vanderbilt cited his modest beginnings, pointed to a line of people waiting for bread, and said, without a hint of irony, “Let them do what I have done.”) Next Seligman called up the memory of Daniel Drew, the pious founder of the Drew Theological Seminary, with whom Gould and Jim Fisk had joined forces to defeat Vanderbilt and gain control of the Erie Railroad. The Bible-thumping Drew had started his career herding cattle across the Alleghenies in the late 1820s and then brought his habits as a drover to Wall Street, watering stocks just as he’d always watered his beef. “Was Mr. Drew really any better than Mr. Gould?” Seligman asked. And what of John D. Rockefeller, the avid, competition-crushing monopolist whose exclusive freight contracts (spurred by Gould’s clever involvement of Rockefeller in a secret partnership controlling a lucrative Erie Railroad subsidiary) had played such a key role in the Gould-controlled Erie?1 “Why,” asked Seligman, “is Rockefeller held in so much higher esteem than Gould in the public mind?”
Certainly Gould was shady at times, said Seligman, mentioning in particular that lengthy experiment in stock manipulation dubbed the Erie Wars. Seligman also acknowledged Gould’s infamous 1869 campaign to corner the gold market in collaboration with Fisk: an escapade that triggered the Black Friday panic and ruined many investors. The same event cemented Jay’s reputation as a financial vampire. This was an image that an energetic press continued to burnish thereafter, once it was realized that the crimes of Jay Gould, whether true or not, sold well on street corners. But Seligman did not see Gould as any more or less a criminal than most operators of his era: “I can’t say that Mr. Gould was, in his moral nature, much better, much worse, or much different than any other shrewd and sharp player of his generation,” said Seligman. “I’ve known them all. I’ve known Jay Gould better than most. And I can tell you he deserves no more notoriety than those against which, and with which, he played. If he was exceptional, it was as a strategist. He had a certain genius. Time and time again, Wall Street never saw him coming.”2
Ignoring Seligman’s plea, three generations of b
iographers, taking their cues from the nearly uniform bad press Gould received in life, built him into an evil genius of almost Wagnerian proportions: dark, soulless, and unstoppable. In his History of the Great American Fortunes (1909), Gustavus Myers copied the tone of the first potboiler bios from the 1890s when he described Gould as “a human carnivore, glutting on the blood of his numberless victims; a gambler destitute of the usual gambler’s code of fairness in abiding by the rules; an incarnate fiend of a Machiavelli in his calculations, his schemes and ambushes, his plots and counterplots.”3 Matthew Josephson, a socialist at the time he put together his Depression-era book, The Robber Barons (1934), created an entirely damning portrait of Gould as a heartless thief and confidence man. “No human instinct of justice or patriotism or pity caused [Gould] to deceive himself,” said Josephson, “or to waver in any perceptible degree from the steadfast pursuit of strategic power and liquid assets.”4 Then, twenty-eight years later, Richard O’Connor did little more than parrot Josephson in his New York Times best-seller, Gould’s Millions (1962). In fact, in all the years since Jay’s death in 1892, only two obscure academic biographies for business historians, Julius Grodinsky’s Jay Gould: His Business Career (1957) and Maury Klein’s The Life and Legend of Jay Gould (1986), have provided balanced, substantial, and reasonable accounts of Gould’s brilliant professional history.5 Thus, through the years, Gould has been cobbled down in the popular mind to the ultimate one-dimensional villain of American financial life: a talented and highly opportunistic Wall Street leech benefiting from commerce created by others. (“The whole interest of Gould,” wrote Robert Riegel in The Story of the Western Railroads [1926], “lay in manipulation of the securities of his various companies. The development of the roads was an entirely minor concern. In all cases the property was used to aid his financial transactions.”6)
But the case for Gould as an exemplary, successful, long-term CEO is there to be made. The highly imaginative, ruthless, and easy-to-vilify Gilded Age manipulator of securities markets was also a detail-oriented owner of companies: a workaholic who painstakingly consolidated dying railroads, transformed them into highly profitable megalines, and then did the same in maximizing the profitability of the Western Union, skillfully steering all his concerns through choppy economic seas in the 1880s.
Other aspects of Gould’s dark legend collapse just as easily under scrutiny. For example, much has always been made of Gould’s will, in which he left not one dime to any charity. But few have noted Gould’s significant philanthropies in life: efforts at good works that he transacted anonymously once he realized the press would allow no noble deed of his to go unpunished. Gould’s few publicized attempts at good works were all greeted with derision by the New York Times, the New York Herald, and other papers bent on castigating him. Every one of Gould’s philanthropic endeavors of which reporters got wind were portrayed as inadequate, feeble gestures at facesaving that paled beside the weight of the man’s presumed grave sins. Thus, after several such experiences, Gould no longer publicized his giving. Nevertheless, he continued to give, usually with the explicit requirement that his name not be brought up in connection with whatever charity was at hand. In turn, the press criticized him for his lack of generosity. “The good deeds of this man must have been more than usually unobtrusive to have so completely escaped notice,” commented the New York World in October 1891. “It is incredible that his life should have been devoid of them, but neither in number nor in kind have they been sufficient to extort admiration or create imitators.”7
Then we also have Gould the human being whom one encountered face to face across a table or on a street corner. Here he is as painted by Josephson and company: brusque, intolerant, curt and cruel, dismissive of underlings, blisteringly critical, always self-satisfied, and never loyal to anyone not of his blood. As Robert I. Warshow put it in Jay Gould: The Story of a Fortune (1928), Gould’s “allies were many, but none his friends; at one time or another in his life he broke almost every man who worked with him.”8 But in fact, Gould’s long-term colleagues over the course of decades included Russell Sage, the Ames family of Boston, Sydney Dillon, and numerous others who linked their fortunes with his and were never betrayed. On a personal level, his household domestic servants, including several to whom he awarded college scholarships, remembered him fondly decades after he was dead. As well, the reportedly unapproachable Jay Gould maintained close relationships to the very last year of his life with the majority of the friends he’d made during his impoverished Catskills boyhood, most of them humble farmers and merchants.
Falsely and cruelly caricatured by the press in life, Gould has been sentenced to the same fate in death. Although he was guilty of every crime transacted by his generation of American capitalists, Gould’s operations were nevertheless no more sinister than those of the financiers and industrialists against whom he competed: men whose personal reputations have soared above his over the past century. In the end, Gould’s chief public relations error seems to have been his over-arching success. His antagonists in business, after having been burned by him, provided grist for the mills of a hungry press when they dubbed him the “Mephistopheles of Wall Street.” It was easier, and more nurturing to the pride of the wounded, to suggest a pact with Satan than to admit that Jay was in fact the Michelangelo of Wall Street: a genius who crafted financial devices and strategies, and who leveraged existing laws, in stunningly original ways.
Gould’s story is too important to get wrong, for his impact on his country and his era was monumentally large. A recent inflation-adjusted listing of the all-time richest Americans, which compared fortunes as percentages of GNP, placed Gould in eighth place. Although he ranked behind such luminaries as John D. Rockefeller (1), Cornelius Vanderbilt (2), and John Jacob Astor (3), Gould came out ahead of Henry Ford (11), Andrew Mellon (12), Sam Walton (14), J. P. Morgan (23), and Bill Gates (31). His success was profound, his productivity was astonishing, and his motivations and tactics were fascinating.9
In essaying a new, full biography of Jay Gould, my aim is to create a true, unbiased picture of Gould as both financier and man. With regard to Gould’s business life, I intend to serve as neither his prosecutor nor his defense attorney, but to lay out the facts as we have them. With regard to Gould’s personal life, my purpose is to fill the vast gap left by previous biographers. In sum, I seek to present, for what will be the first time, an informed, objective, and integrated depiction of Gould in all his complex (and sometimes conflicting) guises: unpredictable Wall Street pirate, levelheaded manager of corporations, and dynastic paterfamilias.
EDWARD J. RENEHAN, JR.
DARK GENIUS OF WALL STREET
Chapter 1
THE MYSTERIOUS BEARDED GOULD
5–6 DECEMBER 1892
OUTSIDE THE TOWNHOUSE at the northeast corner of Forty-seventh Street and Fifth Avenue a stray adventurer did a good business selling freshly printed calling cards with the chiseled name of one of the sons: Edwin Gould. “This will get you in, dead certain,” he assured those who forked over their two-dollar notes. Then he vanished with his profits just as his first customers were brusquely shown the door and the balance refused admittance.1 Old Jay Gould–who lay stiff and cold in the living room of 579 Fifth Avenue–would have applauded both the huckster’s boldness and his wile. Jay had always believed that shrewd aptitude should be rewarded and its absence punished. He despised fools.
This fact was well known to the men who jostled through the crowd to present their more genuine credentials: Russell Sage, J. P. Morgan, and William Rockefeller among them. Inside, standing by the casket, Ogden Mills was heard to compliment the “naturalness” of the corpse. A butler told Mills that Jay’s body had spent the previous three days propped in a chest full of ice. This accounted for the healthy red flush of his cheeks. Railway tycoon Henry Villard studied the many flowers, including an orchid spray for the coffin arranged to spell out “Grandpa,” and commented how Jay would have enjoyed them. Jay’s love of fl
owers, said Villard to no one in particular, was one of the few things that signaled his humanity. As he spoke, Villard pulled a keepsake blossom from an ornate pastiche of blooms sitting near the head of the casket. It was arranged in the form of a ship, fully rigged, inscribed with the words VOYAGE ENDED, SAFE IN PORT.2
Voyage ended indeed. The nation’s newspapers breathlessly competed to summarize Jay’s strenuous circumnavigation of life and business. Editors from Boston to San Francisco vied to see who could come up with the most pejorative turns of phrase, and those in his hometown were scarcely moved to defend him. “He exercised a large influence over the careers of many who had commercial aspirations,” wrote Gould’s longtime nemesis James Gordon Bennett, Jr., publisher of the New York Herald. “That influence tended to lower the moral tone of business transactions. The example he set is a dangerous one to follow. The methods he adopted are to be avoided. His financial success, judged by the means by which it was attained, is not to be envied. His great wealth was purchased at too high a price. He played the game of life for keeps, and he regarded the possible ruin of thousands as a matter in which he had no concern.”3
Bennett’s competitors at the New York Times used the occasion of Gould’s death to extol Astor and A. T. Stewart, who “in serving their own ends were serving the public ends, while Gould was a negative quantity in the development of the country.”4 Over at the New York World–a paper Gould owned briefly before selling it to Joseph Pulitzer–editorialists opined that “ten thousand ruined men will curse the dead man’s memory. Convicts . . . will wonder what mental defect robbed them of such a career as Gould’s. The public has no great interest in the death of Jay Gould because Jay Gould in his life never showed any interest in the public, . . . This is not a death that will cause any public sorrow.”5
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