After the opening of the Civil War, gold was exceedingly scarce, and commanded a high premium. The supply of this metal, this yellow dross, which to a considerable degree regulated the world's relative values of wages and commodities, was monopolized by the powerful banking interests. In 1869 but fifteen million dollars of gold was in actual circulation in the United States.

Notwithstanding the increase of industrial productive power, the continuous displacement of obsolete methods by the introduction of labor-saving machinery, and the consecutive discovery of new means for the production of wealth, the task of the worker was not lightened. He had, for the most part, after great struggles, secured a shorter workday, but if the hours were shorter the work was more tense and racking than in the days before steam-driven machinery supplanted the hand tool. The ma.s.s of the workers were in a state of dependence and poverty. The land, industrial and financial system, operating in the three-fold form of rent, interest and profit, tore away from the producer nearly the whole of what he produced. Even those factory-owning capitalists exercising a personal and direct supervision over their plants, were often at the mercy of the clique of bankers who controlled the money marts.

Had the supply of money been proportionate to the growth of population and of business, this process of expropriation would have been less rapid. As it was, the a.s.sociated monopolies, the international and national banking interests, and the income cla.s.ses in general, constricted the volume of money into as narrow a compress as possible. As they were the very cla.s.s which controlled the law- making power of Government, this was not difficult.

The resulting scarcity of money produced high rates of interest.

These, on the one hand, facilitated usury, and, on the other, exacted more labor and produce for the privilege of using that money.

Staggering under burdensome rates of interest, factory owners, business men in general, farmers operating on a large scale, and landowners with tenants, shunted the load on to the worker. The producing population had to foot the additional bill by accepting wages which had a falling buying power, and by having to pay more rent and greater prices for necessities. Such conditions were certain to accelerate the growth of poverty and the centralization of wealth.

Gould's plan was to get control of the outstanding fifteen millions of dollars of gold and fix his own price upon them. Not only from what was regarded as legitimate commerce would he exact tribute, but he would squeeze to the bone the whole tribe of gold speculators--for at that time gold was extensively speculated in to an intensive degree.

With the funds stolen from the Erie Railroad treasury, he began to buy in gold. To accommodate the crowd of speculators in this metal, the Stock Exchange had set apart a "Gold Room," devoted entirely to the speculative purchase and sale of gold. Gould was confident that his plan would not miscarry if the Government would not put in circulation any part of the ninety-five million dollars in gold h.o.a.rded as a reserve in the National Treasury. The urgent and all- important point was to ascertain whether the Government intended to keep this sum entirely shut out from circulation.

HE BRIBES GOVERNMENT OFFICIALS.

To get this inside information he succeeded in corruptly winning over to his interests A. R. Corbin, a brother-in-law of President Grant.

The consideration was Gould's buying of two million dollars' worth of gold bonds, without requiring margin or security for Corbin's account [Footnote: Gold Panic Investigation, House Report: No 32, Forty-first Congress, Second Session, 1870:157. Corbin's venality in lobbying for corrupt bills was notorious; he admitted his complicity before a Congressional Investigating Committee in 1857.] Thus Gould thought he had surely secured an intimate spy within the authoritative precincts of the White House. As the premium on gold constantly rose, these bonds yielded Corbin as much sometimes as $25,000 a week in profits. To insure the further success of his plan, Gould subsidized General b.u.t.terfield, whose appointment as sub-treasurer at New York Corbin claimed to have brought about. Gould testified in 1870 that he had made a private loan to b.u.t.terfield, and that he had carried speculatively $1,500,000 for b.u.t.terfield's benefit. These statements b.u.t.terfield denied. [Footnote: Gold Panic Investigation, etc., 160.]

Through Corbin, Gould attempted to pry out Grant's policies, and with Fisk as an interlocutor, Gould personally attempted to draw out the President. To their consternation they found that Grant was not disposed to favor their arguments. The prospect looked very black for them. Gould met the situation with matchless audacity. By spreading subtle rumors, and by inspiring press reports through venal writers, he deceived not only the whole of Wall Street, but even his own a.s.sociates, into believing that high Government officials were in collusion with him. The report was a.s.siduously disseminated that the Government did not intend to release any of its h.o.a.rd of gold for circulation. The premium, accordingly, shot up to 146. Soon after this, certain financial quarters suspected that Gould was bluffing.

The impression spreading that he could not depend upon the Government's support, the rate of the premium declined, and Gould's own array of brokers turned against him and sold gold.

GOULD BETRAYS HIS PARTNERS.

Entrapped, Gould realized that something had to be done, and done quickly, if he were to escape complete ruin, holding as he did the large amount of gold that he had bought at steep prices. By plausible fabrications he convinced Fisk that Grant was really an ally. Gould had bought a controlling interested in the Tenth National Bank. This inst.i.tution Gould and Fisk now used as a fraudulent manufactory of certified checks. These they turned out to the amount of tens of millions of dollars. With the spurious checks they bought from thirty to forty millions in gold. [Footnote: Gold Panic Investigation: 13.]

Such an amount of gold did not, of course, exist in circulation. But the law permitted gambling in it as though it really existed.

Ordinary card gamblers, playing for actual money, were under the ban of law; but the speculative gamblers of the Stock Exchange who bought and sold goods which frequently did not exist, carried on their huge fraudulent operations with the full sanction of the law. Gould's plan was not intricate. Extensive purchases of gold naturally--as the laws of trade went--were bound to increase constantly its price.

By September, 1869, Gould and his partners not only held all of the available gold in circulation, but they held contracts by which they could call upon bankers, manufacturers, merchants, brokers and speculators for about seventy millions of dollars more of the metal.

To the banking, manufacturing and importing interests gold, as the standard, was urgently required for various kinds of interfluent business transactions: to pay international debts, interest on bonds, customs dues or to move the crops. They were forced to borrow it at Gould's own price. This price was added to the cost of operation, manufacture and sale, to be eventually a.s.sessed upon the consumer.

Gould publicly announced that he would show no mercy to anyone. He had a list, for example, of two hundred New York merchants who owed him gold; he proposed to print their names in the newspapers, demanding settlement at once, and would have done so, had not his lawyers advised him that the move might be adjudged criminal conspiracy. [Footnote: Gold Panic Investigation, etc., 13.]

The tension, general excitement and pressure in business circles were such that President Grant decided to release some of the Government's gold, even though the reserve be diminished. In some mysterious way a hint of this reached Gould. The day before "Black Friday" he resolved to betray his partners, and secretly sell gold before the price abruptly dropped. To do this with success it was necessary to keep on buying, so that the price would be run up still higher.

Such methods were prohibited by the code of the Stock Exchange which prescribed certain rules of the game, for while the members of the Exchange allowed themselves the fullest lat.i.tude and the most unchecked deception in the fleecing of outside elements, yet among themselves they decreed a set of rules forbidding any sort of double- dealing in trading with one another. To draw an a.n.a.logy, it was like a group of professional card sharps deterring themselves by no scruples in the cheating of the unwary, but who insisted that among their own kind fairness should be scrupulously observed. Yet, rules or no rules, no one could gainsay the fact that many of the foremost financiers had often and successfully used the very enfillading methods that Gould now used.

While Gould was secretly disposing of his gold holdings, he was goading on his confederates and his crowd of fifty or more brokers to buy still more. [Footnote: "Gould, the guiltier plotter of all these criminal proceedings," reported the Congressional Investigating Committee of 1870, "determined to betray his own a.s.sociates, and silent, and imperturbable, by nods and whispers directed all."-Gold Panic Investigation: 14.] By this time, it seems, Fisk and his partner in the brokerage business, Belden, had some stray inklings of Gould's real plan; yet all that they knew were the fragments Gould chose to tell them, with perhaps some surmises of their own. Gould threw out just enough of an outline to spur on their appet.i.te for an orgy of spoils. Undoubtedly, Gould made a secret agreement with them by which he could repudiate the purchases of gold made in their names. Away from the Stock Exchange Fisk made a ludicrous and dissolute enough figure, with his love of tinsel, his show and braggadacio, his mock military prowess, his pompous, windy airs and his covey of harlots. But in Wall Street he was a man of affairs and power; the very a.s.surance that in social life made him ridiculous to a degree, was trans.m.u.ted into a pillar of strength among the throng of speculators who themselves were mainly arrant bluffs. A dare-devil audacity there was about Fisk that impressed, misled and intimidated; a fine screen he served for Gould plotting and sapping in the background.

THE MEMORABLE "BLACK FRIDAY"

The next day, "Black Friday," September 24, 1869, was one of tremendous excitement and gloomy apprehension among the money changers. Even the exchanges of foreign countries reflected the perturbation. Gould gave orders to buy all gold in Fisk's name; Fisk's brokers ran the premium up to 151 and then to 161. The market prices of railroad stocks shrank rapidly; failure after failure of Wall Street firms was announced, and fortunes were swept away.

Fearing that the price of gold might mount to 200, manufacturers and other business concerns throughout the country frantically directed their agents to buy gold at any price. All this time Gould, through certain brokers, was secretly selling; and while he was doing so, Fisk and Belden by his orders continued to buy.

The Stock Exchange, according to the descriptions of many eye- witnesses, was an extraordinary sight that day. On the most perfunctory occasions the scenes enacted there might have well filled the exotic observer with unmeasured amazement. But never had it presented so thoroughly a riotous, even bedlamic aspect as on this day, Black Friday; never had greed and the fear born of greed, displayed themselves in such frightful forms.

Here could be seen many of the money masters shrieking and roaring, anon rushing about with whitened faces, indescribably contorted, and again bellowing forth this order or that curse with savage energy and wildest gesture. The puny speculators had long since uttered their doleful squeak and plunged down into the limbo of ruin, completely engulfed; only the big speculators, or their commission men, remained in the arena, and many of these like trapped rats scurried about from pillar to post. The little fountain in the "Gold Room" serenely spouted and bubbled as usual, its cadence lost in the awful uproar; over to it rushed man after man splashing its cooling water on his throbbing head. Over all rose a sickening exhalation, the dripping, malodorous sweat of an a.s.semblage worked up to the very limit of mental endurance.

What, may we ask, were these men snarling, cursing and fighting over?

Why, quite palpably over the division of wealth that ma.s.ses of working men, women and children were laboriously producing, too often amid sorrow and death. While elsewhere pinioned labor was humbly doing the world's real work, here in this "Gold Room," greed contested furiously with greed, cunning with cunning over their share of the spoils. Without their structure of law, and Government to enforce it, these men would have been nothing; as it was, they were among the very crests of society; the makers of law, the wielders of power, the pretenders to refinement and culture.

Baffled greed and cunning outmatched and duplicity doubled against itself could be seen in the men who rushed from the "Gold Room"

hatless and frenzied--some literally crazed--when the price of gold advanced to 162. In the surrounding streets were howling and impa.s.sable crowds, some drawn thither by curiosity and excitement, others by a fancied interest; surely, fancied, for it was but a war of eminent knaves and knavish gamblers. Now this was not a "disorderly mob" of workers such as capitalists and politicians created out of orderly workers' gatherings so as to have a pretext for clubbing and imprisoning; nay it all took place in the "conservative" precincts of sacrosanct Wall Street, the abiding place of "law and order." The partic.i.p.ants were composed of the "best cla.s.ses;" therefore, by all logic it was a scene supereminently sane, respectable and legitimate; the police, worthy defenders of the peace, treated it all with an awed respect.

Suddenly, early in the afternoon, came reports that the United States Treasury was selling gold; they proved to be true. Within fifteen minutes the whole fabric of the gold manipulation had gone to pieces.

It is narrated that a mob, bent on lynching, searched for Gould, but that he and Fisk had sneaked away through a back door and had gone uptown.

The general belief was that Gould was irretrievably ruined. That he was secretly selling gold at an exorbitant price was not known; even his own intimates, except perhaps Fisk and Belden, were ignorant of it. All that was known was that he had made contracts for the purchase of enormous quant.i.ties of fict.i.tious gold at excessive premiums. As a matter of fact, his underhand sales had brought him eleven or twelve million dollars profit. But if his contracts for purchase were enforced, not only would these profits be wiped out, but also his entire fortune.

ELEVEN MILLIONS POCKETED BY JUDICIAL COLLUSION.

Ever agile and resourceful, Gould quickly extricated himself from this difficulty. He fell back upon the corrupt judiciary. Upon various flimsy pretexts, he and Fisk, in a single day, procured twelve sweeping injunctions and court orders. [Footnote: Gold Panic Investigation, etc. 18.] These prohibited the Stock Exchange and the Gold Board from enforcing any rules of settlement against them, and enjoined Gould and Fisk's brokers from settling any contracts. The result, in brief, was that judicial collusion allowed Gould to pocket his entire "profits," amounting, as the Congressional Committee of 1870 reported, to about eleven million dollars, while relieving him from any necessity of paying up his far greater losses. Fisk's share of the eleven millions was almost nothing; Gould retained practically the entire sum. Gould's confederates and agents were ruined, financially and morally; scores of failures, dozens of suicides, the despoilment of a whole people, were the results of Gould's handiwork.

[Ill.u.s.tration: JAY GOULD, Who, in a Brief Period, Possessed Himself of a Vast Fortune.]

From his Erie railroad thefts, the gold conspiracy and other maraudings, Gould now had about twenty-five or thirty million dollars. Perhaps the sum was much more. Having sacked the Erie previous to his being ousted in 1873, he looked out for further instruments of plunder.

Money was power; the greater the thief the greater the power; and Gould, in spite of abortive lawsuits and denunciations, had the cardinal faculty of holding on to the full proceeds of his piracies.

In 1873 there was no man more rancorously denounced by the mercantile cla.s.ses than Gould. If one were to be swayed by their utterances, he would be led to believe that these cla.s.ses, comprising the wholesale and retail merchants, the importers and the small factory men, had an extraordinarily high and sensitive standard of honesty. But this a.s.sumption was sheer pretense, at complete variance with the facts.

It was a grim sham constantly shattered by investigation. Ever, while vaunting its own probity and scoring those who defrauded it, the whole mercantile element was itself defrauding at every opportunity.

SOME COMPARISONS WITH GOULD.

One of the numberless noteworthy and conclusive examples of the absolute truth of this generalization was that of the great frauds perpetrated by the firm of Phelps, Dodge and Company, millionaire importers of tin, copper, lead and other metals.

So far as public reputation went, the members of the house were the extreme opposites of Gould. In the wide realm of commercialism a more stable and ill.u.s.trious firm could not be found. Its wealth was conventionally "solid and substantial;" its members were lauded as "high-toned" business men "of the old-fashioned school," and as consistent church communicants and expansive philanthropists. Indeed, one of them was regarded as so glorious and uplifting a model for adolescent youth, that he was chosen president of the Young Men's Christian a.s.sociation; and his statue, erected by his family, to-day irradiates the tawdry surroundings of Herald Square, New York City.

In the Blue Book of the elect, socially and commercially, no names could be found more indicative of select, strong-ribbed, triple-dyed respectability and elegant social poise and position.

In the dying months of 1872, a prying iconoclast, unawed by the glamor of their public repute and the contemplation of their wealth, began an exhaustive investigation of their custom house invoices.

This inquiring individual was B. G. Jayne, a special United States Treasury agent. He seems to have been either a duty-loving servant of the people, stubbornly bent upon ferreting out fraud wherever he found it, irrespective of whether the criminals were powerful or not, or he was prompted by the prospect of a large reward. The more he searched into this case, the more of a mountainous ma.s.s of perjury and fraud revealed itself. On January, 3, 1873, Jayne set the full facts before his superior, George S. Boutwell, Secretary of the Treasury.

". . . Acording to ordinary modes of reckoning," he wrote, "a house of the wealth and standing of Phelps, Dodge and Company would be above the influences that induce the ordinary brood of importers to commit fraud. That same wealth and standing became an almost impenetrable armor against suspicion of wrong-doing and diverted the attention of the officers of the Government, preventing that scrutiny which they give to acts of other and less favored importers." Jayne went on to tell how he had proceeded with great caution in "establishing beyond question gross under-valuations," and how United States District Attorney Noah Davis (later a Supreme Court Justice) concurred with him that fraud had been committed.

THE GREAT FRAUDS OF PHELPS, DODGE AND COMPANY.

The Government red tape showed signs at first of declining to unwind, but further investigation proved the frauds so great, that even the red tape was thrilled into action, and the Government began a suit in the United States District Court at New York for $1,000,000 for penalties for fraudulent custom-house under-valuations. It sued William E. Dodge, William E. Dodge, Jr., D. Willis James, Anson Phelps Stokes, James Stokes and Thomas Stokes as the partic.i.p.ating members of the firm.

The suit was a purely civil one; influential defrauders were not inconvenienced by Government with criminal actions and the prospect of prison lodging and fare; this punishment was reserved exclusively for petty offenders outside of the charmed circle. The sum of $1,000,000 sued for by the Government referred to penalties due since 1871 only; the firm's duplicates of invoices covering the period before that could not be found; "they had probably been destroyed;"

hence, it was impossible to ascertain how much Phelps, Dodge and Company had defrauded in the previous years.

The firm's total importations were about $6,000,000 a year; it was evident, according to the Government officials, that the frauds were not only enormous, but that they had been going on for a long time.