CHAPTER XII.

GOULD AND THE MANHATTAN ELEVATED.

Jay Gould was not an originator of systems. Others with ideas secured charters, began railroads and other schemes, and then, when money was needed, Gould would step in and profit by their energies by purchase at low figures. This was never more forcibly illustrated than by his connection with the elevated railroad system of New York City.

He had nothing to do with their construction. In fact, Gould’s name is unidentified with any great public undertaking original with himself. Other men planned and built. He grabbed. He did, it is true, start a telegraph company, and put up poles and wires, but it was only as a part of his plan to capture a system already constructed. So the elevated roads--the measurable solution of the problem of rapid transit in the metropolis and an inestimable boon to the city--are not due to the foresight, pluck and energy of Gould. Other men were the pioneers, but they were driven to the wall and forgotten, while he plucked the fruits of their labors.

Gould, naturally enough, came into control of this great system, which carries 600,000 passengers every day, through a consolidation and the “watering” of stock. There were three elevated roads--the Metropolitan (formerly the “Gilbert,” named after its originator, Dr. Gilbert), of which S. H. Kneeland was president; the second, the New York, of which Cyrus W. Field was president and of which Samuel J. Tilden was once a heavy stockholder, and the third, the Manhattan, of which Jay Gould and Russell Sage were the owners. The Metropolitan and the New York were bona-fide companies, actually owning railroads and rolling stock, but the Manhattan was a “paper” company, having a nominal charter and an organization, but not one inch of road. Yet these three companies were consolidated on equal terms, and Gould, Sage and Field became the owners. Later the control narrowed down to Gould and Sage.

Sage, Field and Kneeland are remarkable characters in Wall street history, and their names are intimately identified with Gould’s--Sage and Field as associates, and Kneeland as an unpurchasable opponent. Russell Sage is one of the richest men of his generation. He came originally from Troy, where he ran a bank, and whose district he represented in Congress, before the war, for one or two terms. Then he entered Wall street. His great distinguishing trait was avarice. He worshipped the mighty dollar. Money-getting was his passion--not for the power and luxury which money can purchase, but for the mere pleasure of acquisition. He lived, it is true, on Fifth avenue, and gave somewhat to charity, but his habits were economical almost to the point of penuriousness, and once a dollar got into his hands it did not easily slip through them. It should be said of him, however, that he was as careful of other people’s money as of his own. This was the man who for many years was Gould’s most intimate business associate, a director in all his companies and a partner in all his schemes. Gould estimated Sage’s wealth at $50,000,000 and their combined capital was thus enormous. Sage was chiefly a money-lender in Wall street. He carried an immense amount of ready cash and was of incalculable aid to Gould in all his undertakings. It is indeed one of the traditions of the street that Sage saved Gould from ruin at a time when he was hotly pressed by James R. Keene and other bear operators. Field was a different kind of a man. He liked money but only as a means to an end, and he had not the heart or mind to roll up a colossal fortune in the way that Gould and Sage did, though he shared for a time in their enterprises. But at one time he was worth millions. Field’s passion was love of fame. His brothers all gained distinction in the professions; he sought and obtained distinction in commercial life. One of his brothers sat on the Supreme Bench of his country. Another was a leader of the New York Bar. A third was a noted clergyman, editor and traveler. Cyrus W. Field began his business life as a rag merchant, but with indomitable pluck, energy and foresight he finally succeeded in constructing the first Atlantic cable, and was honored both in London and New York. Mr. Field sought almost equal distinction in connection with the elevated railroads, whose great importance he comprehended, and he made a bid for popularity by insisting on a reduction of the fares from 10 to 5 cents against the wishes of Gould and Sage. Sage first became acquainted with Gould in Troy. Field first became identified with him in 1879, when he (Field) was president of the Wabash railroad, though we have seen him as a guest at the famous banquet given to President Grant on “Jim” Fisk’s steamboat in 1869.

Mr. Gould turned his attention to the elevated railroads in this city early in 1881. The Manhattan company was then in control of all the lines as lessee, and to Mr. Gould’s keen vision that company presented the appearance of being on the verge of financial disaster. The Manhattan company had issued $13,000,000 of stock--pure water--and had divided the same equally between the Metropolitan and the New York companies. There was much criticism of the action of the Manhattan corporation in issuing so large a quantity of stock which was wholly unrepresented by property. The attorney-general of this state, Hamilton Ward, obtained permission from Judge Donohue, May 18, 1881, to begin a suit for the dissolution of the Manhattan company’s charter and the appointment of a receiver. Other suits were begun about the same time to restrain the Manhattan company from paying any dividends on its stock. Of course these suits tended to depress Manhattan stock in the stock market.

Gould, Sage and Field agreed together to consolidate the three elevated railroad companies. They were, however, met by the determined opposition of President Kneeland, of the Metropolitan road. Nothing could induce him to waver in his opposition. His associates in the Metropolitan deserted him, and one by one they went over to Gould, but he stood firm to the very last, and his persistency caused a celebrated litigation, which proved so protracted and costly that Kneeland was finally defeated, though his spirit was unsubdued.

At that period Mr. Gould was the owner of the New York _World_, and for several months in 1881 that newspaper was greatly exercised over the bad management and “financial rottenness” of the Manhattan company. Scarcely a day would pass that the _World_ did not contain an editorial or a news paragraph attacking Manhattan. The stock kept dropping two, three and five points at a time. With the beginning of July, 1887, suits were pending against the three elevated railroad companies in all of the state courts in which they could be brought. Mr. Gould became a stockholder in the Metropolitan company on the 1st of that month, 100 shares of stock having been transferred to him by Russell Sage. On July 8th, Mr. Gould, Mr. Connor, Mr. Navarro, and other friends of Mr. Gould were elected directors of the Metropolitan company. On the same day Attorney-General Ward entered an order discontinuing his suit against the Manhattan company in this judicial district. He immediately, however, applied to Judge Westbrook at Kingston, and obtained an order appointing ex-Judge John F. Dillon and Albert L. Hopkins receivers of the Manhattan company. A few days afterward Cyrus W. Field began a suit to take the New York company’s roads out of the hands of the Manhattan company, and later an application was made to the receivers to sue the New York and Manhattan companies for the $13,000,000 of stock issued without consideration. In the meantime the _World_ kept up an incessant fire of criticism and denunciation of the Manhattan company. The price of the stock naturally kept dropping until it got as low as 16.

Early in October Mr. Gould went into the Manhattan company, and it was proclaimed that he and his friends had obtained control. They held more than 70,000 shares, nearly all of which they had been able to pick up in the stock market at prices ranging from 20 to 16 cents on the dollar. All of the timid original stockholders had been scared into sacrificing their holdings by the confusing cloud of litigation and the attacks of Mr. Gould’s newspaper.

For a while after Mr. Gould got control of the Manhattan company there was some show of fight between him and Cyrus W. Field, who represented the stockholders of the New York company. Soon Gould, Field and Sage came together and had an amicable understanding. An opinion was obtained from Judge Westbrook, who held court in Jay Gould’s private office, denying the application of the New York company to get its road out of the hands of the Manhattan company, and in the latter part of October the Gould-Field-Sage party entered into an agreement in behalf of the three companies by which the Manhattan stockholders were to receive only 6 per cent. dividend on their stock instead of 10 per cent. Next came an order from Judge Westbrook taking the Manhattan company out of the hands of the receivers, and that corporation, which was absolutely under Gould’s control, proceeded to rivet its hold upon the entire elevated railway system of this city. Immediately following Judge Westbrook’s action the Manhattan stock went above 52, and on November 9th, the day that Jay Gould was elected president of the company, the stock was quoted at 55.

The steps which Gould and his associates took to “freeze out” the original stockholders of the Metropolitan company were exposed by the New York _Times_ in a series of articles beginning in December, 1881, and continuing until the Legislature ordered a special investigation into the matter in April, 1882. Specific charges were made against Hamilton Ward, as attorney general, and Justice Theodoric R. Westbrook of the Supreme Court for their part in the elevated railroad proceedings, and the Judiciary Committee of the Assembly spent several weeks in taking testimony. Jay Gould and others were examined, and letters and telegrams from Judge Westbrook to Gould’s lawyers were produced in evidence, showing that Westbrook had a very friendly understanding with Mr. Gould. It was also proved that on two occasions Judge Westbrook exercised his judicial functions in Gould’s private office. The committee was divided in its conclusions and Westbrook just escaped impeachment. The effective lessons of the exposure and the official investigation, however, put a stop to further “freeze-out” tactics in dealing with the honest stockholders of the Metropolitan Elevated Railroad Company. Those who had refused to be shaken off by the bearish assaults on the property finally received satisfactory compensation for their property from Mr. Gould and his associates.

After obtaining full control of the elevated railroad system, Gould and his associates voted to double the capital stock, making it $26,000,000. In opposing the reduction of the fare from 10 cents to 5 cents, they argued that a 5 cent fare would not enable them to pay dividends on their $26,000,000. A member of the Senate committee suggested that they might reduce their capitalization. Mr. Field became identified with all of Mr. Gould’s properties, but gave most of his attention to the development of the elevated roads. In 1886 he inaugurated the big bull movement in Manhattan stock. He “boomed” the stock in every possible way, and bought immense quantities, and publicly predicted that it would sell at 200. He succeeded in pushing the price to 175. Like almost all artificial corners this movement collapsed suddenly and Mr. Field was nearly buried in the ruins. Many believed at the time that this collapse was precipitated by Gould and Sage. It might have come about by other causes, but Gould gave the tottering structure the push that leveled it to the ground. There were many reasons, it was argued, for his action. First, Field was no longer necessary, but on the contrary a hindrance to Gould and Sage, and they therefore wanted to get rid of him; and second, Field was conducting his bull movement independently of them. They would profit by his fall, while if he succeeded the system might pass into his hands. So in June, 1887, came the collapse. Mr. Field never charged Gould with having precipitated it, and Gould himself claimed that he came to the rescue of Field and saved him from bankruptcy. It was, however, a remarkable deal and one by which Gould made himself absolutely master of the elevated system, of which in 1891 he made his eldest son vice-president, and another son a director. Field was carrying an immense amount of stock on margins and was consequently a heavy borrower of money. Gould and Sage were lenders. The bank reserves were low. Gould and Sage called in their loans and Gould found it impossible to negotiate loans and was thus obliged to throw over his stock at a sacrifice. The price of Manhattan fell from 160 to 120 and Gould purchased from Field 78,000 shares at prices understood to have ranged from par to 120. Field saved his real estate and other property, but his power in the street was gone. His later history was a tragedy. In 1891, within a few weeks, he lost his wife and his son became a disgraced bankrupt. A few months ago Field died, broken hearted.