Dark Genius of Wall Street

by Edward J Renehan Jr

  In the wake of Gould’s takeover, the New York Times published an exposé headlined:

  PUBLIC TRUSTS BETRAYED

  The Stock Jobbing Scandal of

  the Elevated Road

  How the Gould Clique Gained

  Their Present Control

  Ignoring its own factually accurate critiques of the Manhattan and its position, the Times ranted that the “daily sheet” owned by Gould, “making pretensions to influence as a newspaper,” had been “used to hammer down Manhattan stock and deprecate the value of the elevated railways generally.” The Times went on to say: “There is no more disgraceful chapter in the history of stock jobbing than that which records the operations of Jay Gould, Russell Sage, Cyrus W. Field and their associates in securing control of the system of elevated railroads in New York City. . . . There is nothing specially surprising in the fact that Mr. Gould and his accomplices should resort to any means in their reach to gain control of other people’s property by stock jobbing devices which should frighten or force its possessors to yield it up at a sacrifice. We have never been led to expect that they would have a fastidious regard either for the rights of other men or the interests of the public where an opportunity was presented for putting millions of dollars into their own pockets. . . . But what is both surprising and disgraceful is the facility with which they succeeded in using the Attorney General’s office and the Supreme Court of this state to further their object.”17

  Amid this by-now standard harping on and criticism of his operations, Gould could sit back and see the three key pillars of his great, long-term fortune locked into place: the western railroads, the Western Union, and the Manhattan Elevated. This golden triangle of holdings would form the nexus of his wealth and power for the brief eleven years remaining to him. Also standing strong, however, was a hoary, dark, and impossible-to-miss relic of hungrier days. Less needed now than ever before, but impossible to dislodge, Gould’s vile reputation persevered, shadowing him and stalking him with a single-minded diligence to be matched only by the Grim Reaper.

  Chapter 27

  AMBITION SATISFIED

  THROUGHOUT THE 1880S, Gould was a tired soul: first just weary, then weary and sick. “I sometimes think,” he told a reporter for the Commercial and Financial Chronicle in early 1882, “I should like to give up business entirely. The care and worriment attending large business interests are very great, but besides that fact the manner in which motives are impugned and characters assailed is very unpleasant.”1 Another journalist commented that Gould looked “somewhat careworn and weary.”2 That same spring, confronted with unfounded rumors of his impending financial collapse, he summoned Sage, Field, Frank Work, and other interested parties to his office. There he had Morosini dump on his desk an enormous pile of securities–representing the Missouri Pacific, Western Union, Manhattan Elevated, and lesser properties. The items totaled a par value of $53 million, which amounted to a Street value well in excess of that. All of the securities were unsigned, an indication that they’d never been transferred or borrowed against. The witnesses declined when Gould offered, laconically, to produce $30 million more of the same.

  One year later, talk of retirement emerged again when Gould sold the New York World to Joseph Pulitzer (who promptly made the paper an organ for Gould’s ridicule). Simultaneously, Gould commissioned the building of an enormous steam yacht to be launched in June 1883. (A fatalistic man who’d always felt the need to make haste, he named his new vessel Atalanta, after the swift hunter-goddess of Greek myth.) “I am going to try a little play,” Gould told an interviewer as the yacht began to take shape at a Philadelphia dry dock. “I did not have an opportunity when I was young, and I must do my playing later in life. If I like it I may keep it up.”3

  The Atalanta, 233 feet long, was launched from Cramp’s Shipyard on 7 April 1883. Young Nellie, not quite fifteen, broke a bottle of champagne against the bow as the massive craft began its roll down into the water. On the 25th, Jay appointed veteran mariner John W. Shackford to outfit the vessel and make her seaworthy. Shackford would eventually command a crew of fifty-two. In its report of the launching, the New York Times took the opportunity to editorialize: “Mr. Jay Gould protests that he . . . will quit the world (which is Wall Street), and will wreck no more railroads, rig no more markets, and buy no more newspapers. . . . The wily little man has many devices. This penitential game is one of them.”4 No one at the Times, or elsewhere, believed Jay’s frank talk of retreat. “I have been in the harness a long time and want rest,” he told George Miller of the Omaha Herald. “My ambition was long since satisfied and I am ready to go into quiet retirement and hope ere long I shall have the opportunity.”5

  He spoke of making an around-the-world cruise, in part to escape the constant innuendo and speculation of the press. When business made it impossible for him to get away, his repeated, well-meaning promises of imminent departure became something of a joke in the Times and other papers. In the near term, the Atalanta–capable of crossing any ocean of the world–went only as far as Newport, Rhode Island, and coastal Virginia. Day-to-day, Jay used the yacht to commute between Lyndhurst and Midtown Manhattan in season. He also made a halfhearted attempt at joining the yachting community. When his low birth and lower reputation kept him out of the prestigious New York Yacht Club, he founded his own organization. The American Yacht Club operated out of a Midtown clubhouse until 1887, at which point Jay and several associates purchased twelve waterfront acres at the tip of Milton Point on Long Island Sound in Rye, New York, where the club remains to this day.

  Did Gould contemplate retirement because he believed it offered the promise of longed-for obscurity? Comments to friends and family seem to hint at this motive. But retirement remained elusive. Early in 1884–the same year Gould’s public support for the Republican presidential candidate James Blaine backfired following a garish gathering of Blaine-boosting plutocrats in New York–few accepted at face value his emphatic declaration that he would soon leave Wall Street for good. Pundits pointed to Gould’s special partnership in Washington Connor & Company, a brokerage house headed by Jay’s longtime friend “Wash” Connor, who’d once played a role in the old William Belden & Company. Connor’s concern handled a large amount of Gould family business. Morosini was another special partner. Here Jay’s eldest son, George, had been employed since January 1883. Gould’s agreement with Connor was set to expire at the end of 1884, but as reporters noted, Jay wound up extending it. As a practical matter, no matter how many partnerships he ended or thought of ending, an exit from Wall Street was not to be had. The empire he’d built was too enormous, his affairs too complex, to allow withdrawal. There would always be positions that needed defending, capital that needed to be raised, and bets that needed to be covered. This was the prison Gould had built for himself. He controlled a slice of the U.S. economy that was far too large to ignore or, in the end, delegate–though delegate he would try. On George’s birthday in 1885, Jay gave the freshly minted twenty-one-year-old his power of attorney, combinations for all his private safes, and keys to his deposit vaults. Two years later he did the same with Edwin, who dropped out of Columbia University to come into the family business. Edwin’s privileges came with just one caveat: George was the boss. In time, the boys ascended to posts on numerous Gould boards.

  By 1881, Gould–who’d always stayed on the offensive, attacking, seizing, and manipulating corporations–had reached a plateau from which the only war left to wage was a good defense. Although he still occasionally sought to expand his operations, especially his railroads in the Southwest, he would henceforth spend most of his days, Vanderbilt-like, on guard against upstart challengers to his franchises. The largest retrenchment occurred in 1884, amid a bear market that led to depression. This was the point at which Charles Francis Adams, chairman of the government directors of the Union Pacific, successfully undermined Gould’s dominance in the UP and emerged as president, replacing Sidney Dillon. Abram Gould now departed the UP,
along with Dillon and Silas Clark, and took on the task of heading the purchasing department for the Missouri Pacific: a job he would keep for the rest of his life. He also served on the boards of several of Jay’s western roads. Clark eventually joined the Missouri Pacific as well, while Dillon involved himself with various affairs, some Gould-related and some not.

  Amid the market doldrums of 1884 Gould temporarily lost control of two other roads: the Wabash and the Texas & Pacific. But unlike the cash-strapped and regulation-ridden UP, these were roads Gould urgently worked to reorganize and restore to his fold, where they continued as feeders for his Missouri Pacific. At the same time, on the telegraph front, Gould confronted a host of would-be competitors, such as the Mutual Union, Bankers & Merchants, American Rapid, and Postal. Some of these he swatted like flies. Others he moved to lease or otherwise control. But increasingly, his dominance was put to the test. Even in New York, where the now profitable elevated railroads hummed along in his daily sight, he had to keep his guard up.

  In mid-1886, Cyrus Field attracted Gould’s attention when he and his son Edward began, without explanation, to acquire enormous slices of Manhattan Elevated stock, evidently with an eye toward seizing control. By October, the Fields’ purchases had helped bull the price of Manhattan up to 175. Despite this rise, and not suspecting that the bemused Gould was laying a trap, Field and his boy borrowed aggressively to acquire still more Manhattan at sharply escalating prices. The Fields’ buying continued until June 1887, when Gould released several thousand of his own shares in a flood, making the price collapse down to 125. The Fields’ creditors then invoked margin calls that forced them to sell from their large reserves. This in turn made the market for Manhattan go down even further, invoking still more cascading margin calls. In the end, Gould wound up purchasing the Fields’ roughly 75,000 shares, bought by the Fields at an average price of 175, for 120.

  Some subsequently accused Gould of willfully and maliciously attempting to ruin Cyrus Field. Others saw Field’s actions as self-destructive. Alice Northrop recalled being at Lyndhurst on the day Field came to beg Jay’s assistance. Field looked “physically sick . . . a drowning man beseeching a rope from shore . . . a picture of abject despair.” Alice’s mother told her later that “the failure of Mr. Field would have brought down several stock exchange houses and one National Bank, involving large losses to Wall Street, possibly producing a panic, and it was largely that knowledge which caused [your uncle] to render the assistance which he did. It was a matter of great mortification to him, and of disappointment also, that he should be allowed to rest under the imputation that Mr. Field had been unjustly treated by his hands.”6

  Of course, Jay’s role was not so benign as his adoring sister made out. But the game played on Wall Street was as deadly serious then as it is today. Jay could not allow the fumbling Field to seize the Manhattan. Nor could he allow himself to be seen in the marketplace as not punishing a challenger who came against him so blatantly, boldly, and ineptly. Still, Jay’s loyalty to the old innovator and entrepreneur remained steadfast. After the affair was over, Field himself told the press that Gould had behaved “throughout the transaction in a perfectly straightforward manner” and “the most friendly feelings” lingered between them.7 Even the New York Times chose to defend Gould in the way he had handled the matter. “The truth,” editorialized the Times, “is that Mr. Field’s speculation in Manhattan was so wild that a smash was inevitable. It was carried on against the protests of his associates; and when the final and expected end came, Mr. Gould, though he pricked the bubble, took care to do it in such a way that . . . Mr. Field was left with something. Had he gone on to the inevitable catastrophe, he would have been stripped of everything.”8

  Defending against would-be corporate raiders, Gould also found himself playing defense against organized labor. He emerged victorious in 1883 after a month-long strike launched at the Western Union by the Brotherhood of Telegraphers. In later congressional testimony before the U.S. Senate Committee on Labor and Education–this focused not on Gould himself but on labor relations nationwide, with Gould appearing in the role of expert witness–he asserted that the “poorest part” of one’s labor force could usually be found at the bottom of any strike. “Your best men do not care how many hours they work. They are looking to get higher up; either to own a business of their own, or to get higher in the ranks.”9 Commenting on Gould’s demeanor as he gave his testimony, Frank Carpenter of the Cleveland Leader described the diminutive multimillionaire sitting “with a tired look on his face, answering the questions being put to him. He speaks easily in tones as soft as a woman’s, and there is nothing ostentatious or aggressive about him. A couple of his detectives sit nearby, and his lawyer is at his back to give advice when it is needed. But Gould himself answers the questions, and he exhibits no fear as he reads his denunciation of the railroad strikers with a display of feeling.”10

  This was the third and last time in his life that Jay gave testimony on Capitol Hill. His first deposition had been before Garfield’s committee looking into Black Friday back in 1869. A few years after that he’d been summoned to testify concerning his management of the Union Pacific, in which the federal government maintained a significant financial interest. But it was during his 1883 appearance before the Senate Labor and Education Committee, under friendly questioning from senators sympathetic with his opposition to labor unions, that he gave the account of his early history–his rough start in the Catskills–that has been quoted earlier in this volume. The message inherent in Gould’s tales of his early strife was that one did not need a union, just drive and ambition, to get ahead. Ironically, numerous pundits and legislators who frequently criticized and demonized Gould as a nefarious criminal when it came to his dealings with Wall Street bankers and brokers stood with him when he chose to go up against organized labor. In this battle, at least, Gould was seen by his fellow elites as an upright soldier waging the good fight for the defense of something they all held dear: capital.

  Two years after the Western Union trouble, in 1885, Gould did not fare quite so well when the railroad brotherhoods and the Knights of Labor struck to protest depression-driven pay cuts on the Missouri Pacific. The 1885 strike brought a halt to the Missouri’s business and eventually forced the railroad to retract the pay cuts after the governors of Missouri and Kansas insisted on arbitration. One year later, Gould–still smarting from his loss on the Missouri–refused to back down on layoffs in the face of a strike by 9,000 employees of the Texas & Pacific. “I beg to say that I am yet a free American citizen,” he wrote Terence Powderly, leader of the Knights of Labor. “I am past forty-nine years of age. I began life in a lowly way, and by industry, temperance, and attention to my own business have been successful, perhaps beyond the measure of my deserts. If, as you say, I am now to be destroyed by the Knights of Labor unless I sink my manhood, so be it.”11 Confronting vandalism on his line, Gould suspended service. At the same time, his publicists astutely turned the resentment of a greatly inconvenienced public onto the Knights. By year’s end, the strikers–starved out–capitulated. Gould endured no more labor unrest on his roads in his lifetime, though he walked away from the affair widely despised by America’s working class.

  Like Rockefeller, Carnegie, and other moguls who’d beaten back militant unionism with strenuous, sometimes violent opposition, Gould nevertheless remained a frequent, pragmatic benefactor of numerous worthy causes, all of which he supported with brusque, precise efficiency. Many of his charities were quite personal. In addition to the generosity he extended to relatives, Jay also retired his boyhood pastor to a cottage not far from Lyndhurst. He likewise made frequent contributions to the Five Points Mission, run by his old Roxbury friend Rice Bouton as of 1884. One other intriguing aspect of Jay’s benevolence has heretofore escaped notice by biographers. On several occasions he funded scholarships for men and women of the household and grounds staffs at 579 and Lyndhurst. In this regard, Jay reserved his largesse for
younger employees: candidates whom he triaged in an interesting manner. After an invitation was made, those who availed themselves of Gould’s personal libraries with some frequency on their off hours were in turn spoken to by the master and offered help in continuing their education. Thus more than one job scrubbing Gould floors, tending Gould gardens, or driving Gould carriages eventually morphed into a career in schoolteaching, the law, or accounting. A pattern emerges: Jay never came across a candidate for bootstrapping whom he did not wish to applaud and help.