Black Friday, a financial crisis which came close to crashing the American economy, struck Wall Street on September 24, 1869. It was caused when the notorious speculators Jay Gould and Jim Fisk tried to corner the market on gold.
The audacious plan devised by Gould hinged on the fact that trading in gold had a great effect on the national economy in the years following the Civil War. And in the unregulated markets of the time, an unscrupulous character like Gould could conspire with other traders as well as government officials to subvert the market.
For Gould’s plan to work, he and his partner Fisk needed to drive up the price of gold. Doing so would wipe out many traders and allow those in on the scheme to make outrageous profits.
A potential obstacle stood in way: the federal government. If the United States Treasury were to sell gold, flooding the market at the time Gould and Fisk were manipulating the market to cause the price to rise, the conspirators would be thwarted.
To ensure no intervention from the government, Gould had bribed government officials, including even the new brother in law of President Ulysses S. Grant. But despite his crafty planning, Gould’s plan came apart when the government entered the gold market and drove the prices down.
In the mayhem that reached a pinnacle on the day that became notorious as “Black Friday,” September 24, 1869, the “gold ring,” as the newspapers called it, was broken. Yet Gould and Fisk still profited, making millions of dollars for their efforts.
Jay Gould, who would become known as a classic robber baron, had been working on Wall Street for ten years by the time he devised his plan to control the gold market.
And like many unscrupulous traders of his era, he was familiar with the technique of “cornering.”
Cornering is a technique which has since been outlawed, but in the freewheeling stock markets of the 1860s it was not uncommon. The mechanics of a stock market corner could become quite complicated, but in simple terms it meant that traders acting together could quietly buy up as much of the supply of a stock as they could. Once they controlled the stock, they could dictate the price.
When Gould first attempted a corner on the gold supply in the summer of 1869 he quickly learned that government intervention could quickly derail his plans. He needed to find a way to keep the federal government on the sidelines.
Gould had close connections to New York’s Tammany Hall political machine, and he experienced in bribing politicians. And he found a way into the Grant administration through Abel Corbin, an acquaintance who who just married President Grant’s sister.
Gould bribed Corbin to set up a meeting with Grant. Speaking with Grant in a social setting, Gould tried to influence the president’s views on gold sales. Grant was not convinced of Gould’s arguments, so Gould made sure to bribe officials.
After the scheme collapsed, it was widely assumed that Gould had bribed a war hero who had been appointed to an important treasury post in New York City, General Daniel Butterfield, who is best remembered for having composed the bugle call “Taps.”
Gould, Fisk, and others in on the scheme began buying gold in earnest in September 1869, and as the month went on the price steadily rose. Finally the gold market opened in a frenzy on the morning of Friday, September 24, 1869.
It appears that Jay Gould had hints that his plan to keep the federal government from intervening was doomed. And while the traders at the gold exchange in lower Manhattan furiously drove the price upward, he began selling the gold shares.
By midday the word came out that the federal government would sell gold supplies to lower the price. The scheme had been thwarted, and many traders were ruined. Gould, as he had sold off his positions before the price collapse happened, escaped with a huge profit that some estimates placed as high as $10 million.
Remarkably, much of the manipulation of the market happened in plain view of the public. The New York Sun devoted most of its front page to stories about “the gold ring” on September 25, 1869. Details of the day’s trading were meticulously reported, and an unethical scheme to rig one of the most important markets in the country was reported with the liveliness of a sporting event.
The audacious plan devised by Gould hinged on the fact that trading in gold had a great effect on the national economy in the years following the Civil War. And in the unregulated markets of the time, an unscrupulous character like Gould could conspire with other traders as well as government officials to subvert the market.
For Gould’s plan to work, he and his partner Fisk needed to drive up the price of gold. Doing so would wipe out many traders and allow those in on the scheme to make outrageous profits.
A potential obstacle stood in way: the federal government. If the United States Treasury were to sell gold, flooding the market at the time Gould and Fisk were manipulating the market to cause the price to rise, the conspirators would be thwarted.
To ensure no intervention from the government, Gould had bribed government officials, including even the new brother in law of President Ulysses S. Grant. But despite his crafty planning, Gould’s plan came apart when the government entered the gold market and drove the prices down.
In the mayhem that reached a pinnacle on the day that became notorious as “Black Friday,” September 24, 1869, the “gold ring,” as the newspapers called it, was broken. Yet Gould and Fisk still profited, making millions of dollars for their efforts.
Bribes Paved the Way for Gould’s Scheme
Jay Gould, who would become known as a classic robber baron, had been working on Wall Street for ten years by the time he devised his plan to control the gold market.
And like many unscrupulous traders of his era, he was familiar with the technique of “cornering.”
Cornering is a technique which has since been outlawed, but in the freewheeling stock markets of the 1860s it was not uncommon. The mechanics of a stock market corner could become quite complicated, but in simple terms it meant that traders acting together could quietly buy up as much of the supply of a stock as they could. Once they controlled the stock, they could dictate the price.
When Gould first attempted a corner on the gold supply in the summer of 1869 he quickly learned that government intervention could quickly derail his plans. He needed to find a way to keep the federal government on the sidelines.
Gould had close connections to New York’s Tammany Hall political machine, and he experienced in bribing politicians. And he found a way into the Grant administration through Abel Corbin, an acquaintance who who just married President Grant’s sister.
Gould bribed Corbin to set up a meeting with Grant. Speaking with Grant in a social setting, Gould tried to influence the president’s views on gold sales. Grant was not convinced of Gould’s arguments, so Gould made sure to bribe officials.
After the scheme collapsed, it was widely assumed that Gould had bribed a war hero who had been appointed to an important treasury post in New York City, General Daniel Butterfield, who is best remembered for having composed the bugle call “Taps.”
The Black Friday Panic
Gould, Fisk, and others in on the scheme began buying gold in earnest in September 1869, and as the month went on the price steadily rose. Finally the gold market opened in a frenzy on the morning of Friday, September 24, 1869.
It appears that Jay Gould had hints that his plan to keep the federal government from intervening was doomed. And while the traders at the gold exchange in lower Manhattan furiously drove the price upward, he began selling the gold shares.
By midday the word came out that the federal government would sell gold supplies to lower the price. The scheme had been thwarted, and many traders were ruined. Gould, as he had sold off his positions before the price collapse happened, escaped with a huge profit that some estimates placed as high as $10 million.
Remarkably, much of the manipulation of the market happened in plain view of the public. The New York Sun devoted most of its front page to stories about “the gold ring” on September 25, 1869. Details of the day’s trading were meticulously reported, and an unethical scheme to rig one of the most important markets in the country was reported with the liveliness of a sporting event.
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