Jay Gould and the Black Friday Gold Corner of 1869

At ten o'clock on the morning of Friday 24 September 1869, a broker named Albert Speyers took his place beside the sculpted fountain in the middle of the New York Gold Room on Broad Street and began buying gold he had no means of paying for. An indicator mounted outside the window, a clock-faced dial that displayed the price to the crowd on the pavement, read 143. Within two hours Speyers had driven it past 160 and was shouting an offer that the men on the floor remembered for the rest of their lives: "$160 for any part of five millions!"

He was bidding for James Fisk. Fisk's partner, Jay Gould, sat that morning in an office in the same block, selling everything he owned.

A Second Currency

To understand what Speyers was buying, it helps to remember that the United States in 1869 ran two currencies at once. Congress had authorised legal-tender notes in 1862 to finance the Civil War, and those greenbacks circulated at a discount to coin that never closed. Customs duties still had to be paid in gold. Importers, exporters and anyone with a foreign obligation therefore needed metal, and the price of metal in paper was quoted continuously in a single room at the corner of Broad and New Streets.

Quotations ran as greenback dollars per hundred dollars of gold coin. A print of 135 meant that $135 in paper bought $100 in gold, a premium of thirty-five per cent. Through 1868 and the first months of 1869 the premium moved in a band of roughly 35 to 42, and the whole visible supply of gold in New York at any moment was small — something in the region of $15 to $20 million, against a Treasury hoard of about $100 million sitting in the Sub-Treasury vaults a few hundred yards away.

Those two numbers are the entire mechanism of the story. A pool with enough capital could buy more gold than existed in the city and force every short seller to settle at whatever price the pool named. Only one counterparty could break such a corner, and it was the government, which could sell from its vaults at will. George Boutwell, Ulysses Grant's Treasury Secretary, had been doing exactly that most months, selling coin and buying bonds to retire war debt.

The Men From the Erie

Jay Gould was thirty-three, tubercular, soft-spoken and detested. With Fisk and Daniel Drew he had spent 1868 defending the Erie Railway against Cornelius Vanderbilt by printing fresh shares faster than Vanderbilt could buy them, then fleeing across the Hudson to Jersey City with the proceeds in a carpetbag when the New York courts issued warrants. Erie emerged from that war with Gould as president, Fisk as comptroller, and William M. Tweed on its board. Judges Albert Cardozo and George Barnard could be relied on for an injunction at short notice.

Fisk was the opposite of his partner in every respect that showed. He wore a diamond in his shirt front, kept an opera house, and talked to reporters. Maury Klein's biography argues that the public caricature of Gould as a spider and Fisk as a buffoon has obscured how precisely the two divided the work: Fisk supplied noise and nerve, Gould supplied the arithmetic and, when it mattered, the exit (Klein, 1986).

Erie had a problem that gold could solve. Its freight business depended on hauling western grain east, and western grain moved only when European buyers found American prices attractive. A higher gold price meant a cheaper greenback, which meant cheaper American wheat abroad. Gould built an entire public policy argument on that proposition, and the House committee that later investigated him summarised it in his own terms: the country's business required an advance in the price of gold, and "in order to move the fall crops and secure the foreign market for our grain, it was necessary that gold should be put up to $145" (Garfield, 1870).

He tested the theory in April 1869 with about $7 million of purchases. Gold climbed from 132 to 144 by 20 May. Boutwell then sold, and the premium sank back toward its old level by August. Gould drew the correct conclusion: the trade worked, and it would keep working only if the Treasury could be persuaded to stand aside.

The President's Brother-in-Law

Abel Rathbone Corbin was a retired Washington lobbyist in his late sixties who had married Grant's sister Virginia, known as Jennie, at the start of 1869. He was therefore a man who could invite the President of the United States to dinner in New York and be certain of an answer.

Gould opened an account carrying $1.5 million of gold in Corbin's name, with no money down and no risk to Corbin beyond his reputation. In June 1869 Corbin arranged for Gould and Fisk to sit with Grant aboard the steamer Providence, on the way to a peace jubilee in Boston, and the two men laid out the crop argument over dinner. Grant listened, and then said that the country had too much speculation in it and would be better for a return to specie. Fisk reported the remark as a setback. Gould treated it as information.

Corbin's second service was personnel. In July 1869, on his recommendation, Grant appointed Daniel Butterfield assistant treasurer of the United States at New York — the officer who would physically execute any Treasury gold sale, and who would know of it before the market did. Butterfield was a Civil War general credited with the bugle call "Taps"; his salary was $8,000. Gould handed him a cheque for $10,000 and carried $1.5 million of gold for his account as well.

Henry Adams, writing for the Westminster Review the following year, thought the arrangement's boldness lay in its cheapness. Gould had bought the appearance of access to the executive branch for a cheque smaller than a Wall Street clerk's annual bonus, and the appearance was all the market needed to see (Adams, 1870).

The Letter

By mid-September the pool held gold contracts with a face value several times the floating supply in New York. Gould's remaining exposure was political, and on 17 September it came due. Grant had left Saratoga and was staying with a friend in Washington, Pennsylvania, a town with no telegraph line into the house.

Corbin wrote to him there, at Gould's urging, arguing against any Treasury sale. A courier hired by Gould carried the letter across Pennsylvania and delivered it on 19 September. Grant read it, said nothing of consequence, and the courier wired back three words that Gould read as a policy commitment: "Letter delivered. All right."

Grant had in fact understood the letter precisely. He asked Julia Grant to write to Jennie Corbin, and the letter that reached the Corbin house in New York on 22 September told the President's sister that he was "very much annoyed by your speculations" and that "you must close them as quick as you can."

Corbin went to Gould and asked to be taken out. Gould, who now knew that the government's neutrality had evaporated and that Fisk did not, offered him $100,000 to sit still and say nothing. Edward Renehan's account treats this as the hinge of the whole affair: from the evening of 22 September, Gould was running two books, publicly encouraging Fisk to buy and privately instructing his own brokers to sell into Fisk's bids (Renehan, 2005).

Black Friday

Thursday 23 September was the heaviest session the Gold Room had ever seen. More than $325 million of contracts changed hands, and the price closed at 144½. That evening in Washington, Grant and Boutwell agreed that the Treasury would sell $4 million of gold the following day.

Friday's opening was 143. Speyers, acting for Fisk, bid the market up in steps — 145, 150, 155 — and the crowd outside on Broad Street grew large enough to stop traffic. Shorts who had sold gold at 137 or 141 were being asked to settle at fifty cents on the dollar of their own capital. Some had already failed by eleven o'clock. Speyers reached 160 and then 161, offering to take any part of five millions at either price, and the dial touched 162.

Boutwell's telegram to Butterfield went out at about a quarter past eleven. Word of it reached the floor shortly after noon, and the market gave up the entire advance in roughly fifteen minutes, printing 133 before the shouting stopped.

The point marked 24 September is the day's high print rather than a close; the session ended near 133 and gold settled around 135 the following week. Every other value on the chart is a closing quotation, which is why the spike looks like a single vertical stroke. On the floor it was not a stroke but two hours of ascent and a quarter of an hour of ruin.

The Wreckage

Fisk simply repudiated the trades Speyers had made in his name, on the reasoning that Speyers had exceeded his authority — a defence that left the broker personally liable for tens of millions and, by several accounts, briefly out of his mind. When a messenger brought Fisk the news that the corner was broken, he produced the line that followed him to his grave: "Nothing is lost save honor!"

Settlement was worse than the price move. The Gold Exchange Bank, which cleared the room's trades, could not reconcile Thursday's and Friday's volume against members who were insolvent or refusing to pay, and it suspended. Trading in gold stopped for several days while clerks worked through the tickets. Brokers who needed cash sold whatever they could still sell, which meant railroad shares, and the stock market fell about twenty per cent. A dozen Wall Street houses went under. Farmers who had shipped grain east against the high gold price found the market for it gone by the time it arrived, and produce prices in the interior stayed depressed for weeks.

Gould's own position had been unwound so thoroughly during the rise that he finished the week ahead. Lawsuits followed for years, and Tweed's judges saw to it that none of them arrived at a verdict while the money was still traceable. Neither Gould nor Fisk spent a night in custody.

Garfield's Committee

James A. Garfield, then chairman of the House Committee on Banking and Currency, took testimony through the winter and reported on 1 March 1870. Kenneth Ackerman's reconstruction of the hearings shows how much of the documentary record survived only because Corbin kept his correspondence and Butterfield did not think to destroy his (Ackerman, 1988).

The committee found no evidence that Grant had any financial interest in the pool or any knowledge of it, and it said so plainly. It also declined to call Julia Grant or Jennie Corbin, a limitation the minority complained of at the time and which left the question of what the President's household knew, and when, permanently open. Fisk, asked by the committee what had become of the money, answered that "it has gone where the woodbine twineth" — a phrase that entered the language as a euphemism for funds beyond recovery.

What the affair changed was narrower than the scandal deserved. No new statute governed cornering, and no federal agency acquired jurisdiction over commodity manipulation for another half-century. Two things did shift. The Treasury stopped announcing its gold operations on any predictable schedule, having learned what advance knowledge was worth to a man who could buy it for $10,000, and the Gold Exchange Bank rebuilt its clearing arrangements with margin deposits posted in advance — the same answer that markets would reach for again after the clearing failures of the Wall Street paperwork crisis a century later.

The pattern Gould worked out in 1869 has proved more durable than any of the institutions involved. Buy more of a physically scarce commodity than exists in deliverable form, hold the shorts hostage at settlement, and pray that no one with a larger inventory decides to sell. Nelson Bunker Hunt would reach the same square on the board with silver in 1980, and his brothers' corner broke for precisely the reason Gould's did: a party outside the trade changed the supply. Yasuo Hamanaka's decade of hidden copper losses at Sumitomo ended the same way, and the unwinding cost his employer $2.6 billion.

Gould's method of buying government also outlasted him by less than four years. Congress was still reading the gold-panic testimony when the Union Pacific's construction accounts surfaced, and the Crédit Mobilier revelations of 1872 showed that railroad promoters had been distributing shares to congressmen on terms that made Butterfield's cheque look modest.

Fisk was shot dead in the lobby of the Grand Central Hotel in January 1872 by Edward Stokes, a rival for the affections of Josie Mansfield, and was buried in Brattleboro under a monument paid for by public subscription. Gould left Erie the same year, took the Union Pacific, bought Western Union, and died in 1892 at fifty-six with an estate of roughly $72 million.

The indicator on Broad Street outlasted both of them by a few years and no more. On 1 January 1879 the Treasury resumed specie payments, greenbacks became convertible into coin at par, and the premium the dial had published every business day since the war simply went to zero. There was nothing left to quote.