Chapter 23

Not only do men squander their own money in this way, but they risk and often lose the funds of others committed to their charge. Bank officers, having the use of the deposits in their institutions, take them for speculation, intending of course to return them. Sometimes they are successful, and are able to replace the money in the bank, so that no one hears of their dishonesty. Again, and most commonly, they fail, and they are ruined. Guardians thus misappropriate the funds of their wards. Even the funds of churches are thus used by their trustees. The amount of speculation engaged in by clergymen with their own money would astonish a novice. Some prominent divines in the city are well known in Wall street. Their brokers keep their secrets, but the habitues of the street are adepts at putting this and that together, and these reverend gentlemen, some of whom preach eloquently against the sins of speculation and gambling, become known as regular customers. The street is full of gossip concerning them, and if the stories told of them be true, some of them have made large fortunes in this way, while others have literally "gone to the bad."

It is not necessary that a person speculating in stocks should be master of the entire value of the stocks. If he be known to the broker operating for him as a responsible person, he may employ only ten per cent., or some other proportion, of the stock to be dealt in. By depositing $1000 with his broker, he can speculate to the extent of $10,000. This per centage is called a _margin_, and the deposit is designed to protect the broker from loss in case the stock should fall in value. As the stock depreciates, the customer must either sell out and bear the loss which is inevitable, or he must increase his margin to an extent sufficient to protect his broker. If he fails to increase his margin, the broker sells the stock and uses the money to save himself.

VIII. THE WAYS OF THE STREET.

Like Brette Harte's Heathen Chinee,

"For ways that are dark And tricks that are vain, Wall Street is peculiar."

It takes a clear, cool head, a large amount of brains, and unaltering nerve, to thread one's way through the intricacies of the business of finance as carried on there. It would be interesting to know how many come out of the ordeal untouched by the taint of corruption. Members of the Exchanges are held by a rigid code of laws, but in questions of morality Wall street has a code of its own. Expediency is a prominent consideration in the dealings of the street, and men have come to regard as honest and correct almost anything short of a regular breach of contract. They do not spare their own flesh and blood. Friendships are sacrificed, the ties of kinship are disregarded, if they stand in the way of some bold operation. Every thing must give way to the desire for gain. The great operators plunder and destroy their lesser rivals without a feeling of remorse, and by combinations which they know cannot be resisted blast the prospects and ruin the lives of scores whose greatest fault is an inability to oppose them successfully. Tricks so mean and contemptible that their perpetrator would not be tolerated in social life, are resorted to, and if successful are applauded as evidences of smartness. Every man's hand is against his neighbor. Clerks are bribed to betray the secrets of their employers. The baser their treachery, the larger their reward. We do not propose, however, to discuss the morality of Wall street transactions, and so we drop the subject.

It is said by the gossips of the street that the great Railroad King, Commodore Vanderbilt, is not above using any means at hand to secure the success of his schemes. It is said that he once tried to use his son William in this way. He came to him one day, and advised him that he had better sell his Hudson River stock, as 110 was too high for it. William thanked him, and made inquiries in the market, and found that his father was buying quietly all he could lay his hands upon.

William determined to follow suit. Up jumped the stock to 137. It was a clear twenty-six per cent. in pocket.

When the operation was concluded, the Commodore rode round to the son's office.

"Well, William, how much did you lose?"

"I went in at 110 on 10,000 shares. That ought to make me two hundred and sixty thousand dollars--"

"Very bad luck, William," quoth the father, trying to look extremely troubled,--"very bad luck, this time."

"But then I bought, and so made."

"Hey? What sent you doing that, sir?"

"O, I heard that was your line, and so concluded that you meant long instead of short."

"Ahem!" croaked Vanderbilt _pere_, as he buttoned up his fur overcoat, and stalked out of the open door. He has always had a high opinion of William since that event!

Some years ago Vanderbilt wanted to consolidate the Hudson River and Harlem Railroads, and when the scheme was presented before the Legislature of New York, secured a sufficient number of votes in that body to insure the passage of the bill authorizing the consolidation. Before the bill was called upon its final passage, however, he learned from a trustworthy source that the members of the Legislature who had promised to vote for the bill, were determined to vote against it, with the hope of ruining him. The stock of the Harlem road was then selling very high, in consequence of the expected consolidation. The defeat of the bill would, of course, cause it to fall immediately. The unprincipled legislators at once began a shrewd game. They sold Harlem right and left, to be delivered at a future day, and found plenty of purchasers, every one but those in the plot expecting the consolidation of the roads and a consequent advance in the value of the stock. They let their friends into the secret, and there was soon a great deal of "selling short" in this stock. Commodore Vanderbilt managed to acquaint himself with the whole plot; but he held his peace, and resolved upon revenge. He went into the market quietly, with all the funds he could raise, and bought every certificate of Harlem stock that he could find. These certificates he locked up in his safe. When the bill came before the Legislature on its final passage, it was defeated.

The conspirators were jubilant. They were sure that the defeat of the bill would bring "Harlem" down with a rush. To their astonishment, however, "Harlem" did not fall. It remained stationary the first day, and then to their dismay rose steadily. Those to whom they had sold demanded the delivery of the stock, but the speculators found it impossible to buy it. There was none in the market at any price. In many of these instances Vanderbilt was the real claimant, the brokers acting in the transactions being merely his agents. Being unable to deliver the stock, the conspirators were forced to settle the demands against them in money, and the result was that they were ruined. One of the shrewdest operators in New York lost over $200,000. He refused to pay, and his name was stricken from the list of stockholders. This brought him to his senses, and he made good his contracts. Vanderbilt made money enough out of this transaction to pay for all the stock he owned in the Harlem Road.

Daniel Drew is a great operator. His gains are immense, as are also his losses. He is not popular in the street, and the brokers are fond of abusing him. He has handled too many of them mercilessly to have many friends. They say that he does not hesitate to sacrifice a friend to gain his ends, and that he is utterly without sympathy for those who go down before his heavy blows.

Bogus stock companies appear from time to time in Wall street. An office is rented and fitted up in magnificent style, a flaring programme is issued, and seemingly substantial evidences of the stability and prosperity of the company are exhibited to inquirers. The stock offered is readily taken up by the eager to be rich crowd. A dividend, most hopefully large, is declared and paid, to stimulate investments, and then, when the market has been drained dry, the bubble bursts, the directors disappear, the office is closed, and the shareholders lose their money.

On fine afternoons visitors to the Park do not fail to notice a handsome equipage driven by a stylish young man, with rosy cheeks and light curly hair. His face is the perfect picture of happy innocence. He is very wealthy, and owns a great deal of real estate in the city. The manner in which he made his money will show how other persons enrich themselves.

A few years ago, he, in company with several others, organized a scheme for working certain gold mines said to be located in a distant territory. A company was made up, the country was flooded with flaming descriptions of the valuable mine, and stock was issued which sold readily. The bonds were soon taken up, and in a month or two the so-called company commenced paying handsome dividends. A number of gold bars, bearing the stamp of the mint, were on exhibition in the company's office, and were triumphantly exhibited as amongst the first yields of the valuable mine. For several months the dividends were paid regularly, and the company's stock rose to a splendid premium. It could hardly be bought at any price. No one doubted for an instant the genuineness of the affair, and the lucky company was the envy of all Wall street.

In a few months, all the stock being disposed of, the company ceased paying dividends. This excited the suspicion of some of the shrewdest holders of the stock, and the affair was investigated. It was found that the wonderful mine had no real existence. The gold bars were simply gold coins melted into that form at the Mint, and stamped by the Government as so much bullion. The dividends had been paid out of money advanced by the company, who were simply half a dozen unprincipled sharpers. The stockholders were ruined, but the company made a profit of a clear half million of dollars out of the infamous transaction. Legal proceedings are expensive and tedious when instituted against such parties, and the stockholders, rather than increase their losses by the outlay necessary for a lawsuit, suffered the swindlers to go unmolested.

A certain stock broker, anxious to increase his wealth, purchased twenty acres of land a few years ago in one of the Western States, and commenced boring for oil. After a few weeks spent in this work, he discovered to his dismay that there was not the slightest trace of oil on his land. He kept his own counsel, however, and paid the workmen to hold their tongues. About the same time it became rumored throughout New York that he had struck oil. He at once organized a company, and had a committee appointed to go West and examine the well. In a few weeks the committee returned in high glee, and reported that the well contained oil of the very best quality, and only needed capital and improved machinery to develop its capacity. In support of this assertion, they brought home numerous bottles containing specimens of the oil. This report settled the matter in Wall street, and the stock issued by the company was all sold at a handsome premium. When the sales ceased, it was rumored that the well had ceased to flow. This was true, for there was no oil anywhere on the land. That in the well had been bought in Pennsylvania, and poured into the well by the agents of the owner, and the examining committee had been paid large sums for their favorable report. The owner of the well was enriched, as were his confederates of the bogus company, and the holders of the stock were swindled, many of them being ruined.

Said the New York _Herald_, at a period when speculation was rampant:

"Within the past few days we have seen the most gigantic swindling operations carried on in Wall street that have as yet disgraced our financial centre. A great railway, one of the two that connect the West with the Atlantic seaboard, has been tossed about like a football, its real stockholders have seen their property abused by men to whom they have entrusted its interests, and who, in the betrayal of that trust, have committed crimes which in parallel cases on a smaller scale would have deservedly sent them to Sing Sing. If these parties go unwhipped of justice, then are we doing injustice in confining criminals in our State prisons for smaller crimes.

"To such a disgusting degree of depravity do we see these stock operations carried, that members of the church of high standing offer, when 'concerned,' to betray their brother 'pals,' and, in their forgetfulness of the morality to which they sanctimoniously listen every Sunday, state that 'all they care about is to look out for number one.' A manager of a great corporation is requested to issue bonds of his company without authority, offering 'to buy the bonds if you are caught, or buy the bonds with the understanding not to pay for them unless you are caught.' This attempted fiscal operation, however, did not work, and resulted in a good proof of the old adage that it requires 'a rogue to catch a rogue.'

"A railroad treasurer boldly states that he has without authority over-issued stock of the company to a large amount. He offers it to a broker for sale, with the understanding that all received over a fixed value is to go into his (the treasurer's) pocket. From the fact that this man is not arrested for maladministration of the company's property, we judge this to be a legitimate operation, and that this may hereafter serve as a model or standard of morals to all presidents, directors, treasurers and managers of railway and other great corporations."

IX. BLACK FRIDAY.

In the month of September, 1869, one of the most gigantic attempts to run up the value of gold ever made was attempted by a powerful combination of Bulls, consisting of a set of unprincipled men whose only object was to make money. Their scheme came near attaining a success which would have broken the market utterly, have unsettled values of all kinds, and have precipitated upon the whole country a financial crisis of the most terrible proportions. Nothing but the interference of the Secretary of the Treasury at a critical moment averted this disaster. As it was, the losses were fearful. Men in Wall street were ruined by the score, and for several days the best houses in the street were uncertain as to their exact condition.

An account of this formidable transaction is interesting as revealing the method of conducting the great operations of the street.

[Picture: SCENE IN THE GOLD ROOM--BLACK FRIDAY.]

"On the 22d of September, 1869, gold stood at 137.5 when Trinity bells rang out the hour of twelve. By two it was at 139. Before night its lowest quotation was 141. . . . An advance of three and a half per cent. in five hours. At the same time the Stock Market exhibited tokens of excessive febrility, New York Central dropping twenty-three per cent. and Harlem thirteen. Loans had become extremely difficult to negotiate. The most usurious prices for a twenty-four hours' turn were freely paid. The storm was palpably reaching the proportions of a tempest.

"Nevertheless, the brokers on the Bear side strove manfully under their burden. The character and purposes of the clique were fully known. Whatever of mystery had heretofore enfolded them was now boldly thrown aside, and the men of Erie, with the sublime Fisk in the forefront of the assailing column, assured the shorts that they could not settle too quickly, since it remained with the ring, now holding calls for one hundred millions, either to kindly compromise at 150 or to carry the metal to 200 and nail it there. This threat was accompanied by consequences in which the mailed hand revealed itself under the silken glove. The movement had intertwisted itself deep into the affairs of every dealer in the street, and entangled in its meshes vast numbers of outside speculators. In borrowing or in margins the entire capital of the former had been nearly absorbed, while some five millions had been deposited by the latter with their brokers in answer to repeated calls. When Thursday morning rose, gold started at 141-5/8, and soon shot up to 144. Then the clique began to tighten the screws. The shorts received peremptory orders to increase their borrowing margins. At the same moment the terms of loans overnight were raised beyond the pitch of ordinary human endurance. Stories were insidiously circulated exciting suspicion of the integrity of the Administration, and strengthening the belief that the National Treasury would bring no help to the wounded Bears. Whispers of an impending lock-up of money were prevalent; and the fact, then shrewdly suspected, and now known, of certifications of checks to the amount of twenty-five millions by one bank alone on that day, lent color to the rumor. Many brokers lost courage, and settled instantly. The Gold Room shook with the conflict, and the battle prolonged itself into a midnight session at the Fifth Avenue Hotel. The din of the tumult had penetrated to the upper chambers of journalism. Reporters were on the alert. The great dailies magnified the struggle, and the Associated Press spread intelligence of the excitement to remote sections. When Friday opened clear and calm, the pavement of Broad and New streets soon filled up with unwonted visitors. All the idle population of the city and its neighborhood crowded into the financial quarter to witness the throes of the tortured shorts. Blended with the merely curious were hundreds of outside speculators who had ventured their all in the great stake, and trembled in doubt of the honor of their dealers. Long before 9 A.M. these men, intensely interested in the day's encounter, poured through the alley-way from Broad street, and between the narrow walls of New street, surging up around the doorways, and piling themselves densely and painfully within the cramped galleries of the Room itself. They had made good the fresh calls for margins up to 143, the closing figure of the night before. The paramount question now was, How would gold open? They had not many minutes to wait. Pressing up to the fountain, around which some fifty brokers had already congregated, a Bull operator with resonant voice bid 145 for twenty thousand. The shout startled the galleries. Their margins were once more in jeopardy. Would their brokers remain firm? It was a terrible moment. The Bears closed round the aggressors. Yells and shrieks filled the air. A confused and baffling whirl of sounds ensued, in which all sorts of fractional bids and offers mingled, till '46 emerged from the chaos. The crowd within the arena increased rapidly in numbers. The clique agents became vociferous. Gold steadily pushed forward in its perilous upward movement from '46 to '47, thence to '49, and, pausing for a brief twenty minutes, dashed on to 150.5. It was now considerably past the hour of regular session. The President was in the chair. The Secretary's pen was bounding over his registry book. The floor of the Gold Room was covered with 300 agitated dealers and operators, shouting, heaving in masses against and around the iron railing of the fountain, falling back upon the approaches of the committee-rooms and the outer entrance, guarded with rigorous care by sturdy door-keepers. Many of the principal brokers of the street were there,--Kimber, who had turned traitor to the ring; Colgate, the Baptist; Clews, a veteran government broker; one of the Marvins; James Brown; Albert Speyer, and dozens of others hardly less famous. Every individual of all that seething throng had a personal stake beyond, and, in natural human estimate, a thousand-fold more dear than that of any outside patron, no matter how deeply or ruinously that patron might be involved. At 11 of the dial gold was 150.5; in six minutes it jumped to 155. Then the pent-up tiger spirit burst from control. The arena rocked as the Coliseum may have rocked when the gates of the wild beasts were thrown open, and with wails and shrieks the captives of the empire sprang to merciless encounter with the ravenous demons of the desert. The storm of voices lost human semblance. Clenched hands, livid faces, pallid foreheads on which beads of cold sweat told of the interior anguish, lurid, passion-fired eyes,--all the symptoms of a fever which at any moment might become frenzy were there. The shouts of golden millions upon millions hurtled in all ears. The labor of years was disappearing and reappearing in the wave line of advancing and receding prices. With fortunes melting away in a second, with five hundred millions of gold in process of sale or purchase, with the terror of yet higher prices, and the exultation which came and went with the whispers of fresh men entering from Broad street bearing confused rumors of the probable interposition of the Government, it is not hard to understand how reason faltered on its throne, and operators became reckless, buying or selling without thought of the morrow or consciousness of the present. Then came the terrific bid of Albert Speyer for any number of millions at 160. William Parks sold instantly two millions and a half in one lot. Yet the bids so far from yielding rose to 161, 162, 162.5. For five minutes the Board reeled under the ferocity of the attack. Seconds became hours. The agony of Wellington awaiting Blucher was in the souls of the Bears. Then a broker, reported to be acting for Baring & Brothers, at London, sold five millions to the clique at the top price of the day. Hallgarten followed; and as the shorts were gathering courage, the certain news that the Secretary of the Treasury had come to the rescue swept through the chamber, gold fell from 160 to 140, and thence, with hardly the interval of one quotation, to 133. The end had come, and the exhausted operators streamed out of the stifling hall into the fresh air of the street. To them, however, came no peace. In some offices customers by dozens, whose margins were irrevocably burnt away in the smelting-furnace of the Gold Board, confronted their dealers with taunts and threats of violence for their treachery. In others the nucleus of mobs began to form, and, as the day wore off, Broad street had the aspect of a riot. Huge masses of men gathered before the doorway of Smith, Gould, Martin & Co., and Heath & Co. Fisk was assaulted, and his life threatened. Deputy-sheriffs and police officers appeared on the scene. In Brooklyn a company of troops were held in readiness to march upon Wall street.

"When night came, Broad street and its vicinity saw an unwonted sight. The silence and the darkness which ever rests over the lower city after seven of the evening, was broken by the blaze of gas-light from a hundred windows, and the footfall of clerks hurrying from a hasty repast back to their desks. Until long after Trinity bells pealed out the dawn of a new day, men bent over their books, scrutinized the Clearing-House statement for the morrow, took what thought was possible for the future. At the Gold Exchange Bank the weary accountants were making ineffective efforts to complete Thursday's business. That toilful midnight, at the close of the last great passion-day of the bullion-worshippers, will be ever memorable for its anxieties and unsatisfying anguish.

[Picture: BROAD STREET ON BLACK FRIDAY.]