Financial History Issue 125 (Spring 2018) - Page 20

efforts after the Civil War . Popular stocks for the firm were the Pacific and Atlantic Mail companies , Western Union Telegraph , various railroad ventures stemming from the Great Lakes regions and , of course , gold .
It was gold — and Heath ’ s stock market acumen — that attracted Robber Barons Gould and Fisk to his firm , and it was Heath ’ s intense focus on market strategy that distracted him from societal rumblings about Gould and Fisk ’ s tremendous greed . Thus , Heath found himself as the unwitting lynchpin to one of the biggest financial scandals of all time : September 24 , 1869 — otherwise known as “ Black Friday .”
The Black Friday Scandal , also known as the Gold Panic , had its roots in the federal government ’ s aim to shore up the post-war economy by limiting the amount of greenbacks ( paper dollars ) in circulation and putting more gold into the economy . But Gould and Fisk had other plans . The two men , president and vice president of the Erie Railroad , respectively , were known for having issued fraudulent stocks , bribing politicians and judges , and maintaining a relationship with Tammany Hall ’ s William “ Boss ” Tweed .
Gould wagered that because there was only around $ 20 million of gold in circulation at a given time , a speculator could potentially buy large portions of gold , corner the market , drive the price up as high as possible and then sell for a hefty profit . But if President Ulysses S . Grant ordered the Treasury to sell off large amounts of gold to drive prices down , the scheme would not work . So Gould set about manipulating the President of the United States .
In an effort to thwart Grant ’ s plan to dump gold back into the market , Gould and Fisk convinced Abel Rathbone Corbin , the President ’ s brother-in-law , to help them get close to the President and persuade him to halt the government ’ s plan . ( Corbin did not do this out of any ideological belief system — Fisk and Gould deposited $ 1.5 million dollars into his personal account .) Corbin convinced Grant that keeping gold prices high would benefit US farmers who sold their harvests overseas . Unfortunately for the manipulating pair , Grant became uncomfortable with Corbin ’ s excessive interest and , in the end , ordered the sale of millions of dollars in gold . But Gould and Fisk had already
William Heath spent six weeks in the Ludlow Street Jail , at the corner of Ludlow and Grand Streets in New York City , beginning on November 19 , 1885 .
purchased large quantities of gold , and while they lost money when the government ’ s gold hit the market on September 24 , 1869 , they were not completely ruined like thousands of duped speculators .
Fisk and Gould did not work in perfect tandem during this operation — both had reason to distrust the other and keep certain pieces of knowledge to themselves . But one thing they agreed upon was that the quiet , surreptitious purchasing of gold required the services of a brokerage house that could keep calm , keep quiet and employ an army of sub-brokers to move large amounts of gold to and from accounts . Starting the first week of September 1869 , for 10 days the men used only one brokerage firm to handle gold transactions for them as a pair . This firm was William Heath & Co .
By September 23 , Heath ’ s firm had — simplistically speaking — purchased more than $ 3 million worth of gold for Gould and Fisk ( more specifically , for their firm , Smith , Gould , Martin & Co .). By Friday , September 24 , through their army of brokers — employed by Heath — Fisk and Gould ’ s buy-and-sell machinations drove the price of gold up to nearly $ 150 per share . But by this time , The New York Times was onto them , and printed its assessment :
[ Fisk ’ s ] presence in the Gold Room was signalized by the rapid rise in gold [ and ] the other engineers of the movement were not idle ... The highest official in the land was quoted as being with them , and he , of course , controls the actions of the Secretary of the Treasury and the New York Assistant Treasurer ... Although this must have been known to be false , there were abundant rumors and suspicions insidiously spread around the street to create the belief or fear with good men that the administration would not interpose by further sales of gold from the Treasury .
This signaled to Gould that President Grant would soon realize what was going on and would likely release Treasury gold into circulation . He summoned Fisk to meet him at Heath ’ s office , outside of which he installed three burly Erie Railroad guards . Each gentleman placed himself in a different office at Heath & Co ., which traders now dubbed the “ Gold Room .” In his side of the office , Fisk ordered Heath ’ s agents to buy all the gold they could at $ 145 , keeping up a public front and telling would-be buyers that they expected the price to rise to $ 200 by the end of the trading day .
18 FINANCIAL HISTORY | Spring 2018 | www . MoAF . org