Chapter 10
THE GOULDSBORO WAR
WILLIAM M. EVARTS–the distinguished, Harvard-trained attorney who was destined to act as defense counsel during the 1868 impeachment trial of Andrew Johnson and later serve variously as U.S. attorney general, U.S. secretary of state, and Republican senator from New York–oversaw the long process of settling Leupp’s estate in collaboration with David Lee.1 While these gentleman did their work, Jay did his best to keep the Gouldsboro tannery afloat, a suddenly precarious undertaking given the fact that paper underwritten in whole or in part by Leupp–as were the credit lines maintained by Jay’s operation–now became impossible to extend. Indeed, for the short term, Gould’s collateral was strictly limited to the market value of the hides and leather he had on hand in the tannery warehouse.
After struggling with this situation for close to two months–at which point the Leupp estate was still not completely settled and the business of Leupp & Company still not reorganized–Gould offered to take the Gouldsboro tannery out of the picture by purchasing Leupp’s one-third of the tanning enterprise from his estate and Lee’s one-third from Lee. In a detailed letter of proposal to Lee, Gould calculated that a separation at that precise time would benefit all parties, removing a complicating factor from the tangled affairs of Messrs. Leupp and Lee, and also removing credit complications arising for Jay out of his affiliation with Leupp. Just under a year after Leupp and Lee had entered into the Gouldsboro operation with an investment of $60,000, Jay offered to let them out for the same sum. This price, Jay said, was to be paid at a rate of $10,000 per year, the funds for the buyout coming from a joint stock initiative (the Gouldsboro Manufacturing Company) that Jay planned to organize. Through the Gouldsboro Manufacturing Company, Jay proposed to take ownership not only of the tannery but also some $10,000 in hides and leather currently on hand. Lee accepted these terms in a formal document signed 19 December 1859, noting only that his commitment was subject to the approval of Evarts. Nine days later, Evarts objected to the clause giving Gould control of the tannery’s inventory. Subsequently the parties signed a revised agreement under which Gould would compensate Lee and the Leupp estate for two-thirds the value of the hides and leather at Gouldsboro.2
With everyone finally agreed, Jay was chagrined to receive word from Evarts that the sale could not be completed until the final settlement of the Leupp estate, this still several months away. “The wheels of the Gods,” he complained in a letter to his sister Sarah, “turn slow, as do the wheels of the probate court.”3 Forced to continue to do business in the purgatory of quasi ownership and quasi credit, Jay now also found himself having to bicker with Lee as to who would exert management control over the operation until the sale finalized. When Lee insisted that he held authority over the Gouldsboro plant because of his association with the two-thirds ownership block, Jay–grasping tightly his initial management agreement with Leupp and Lee–pointed out that the Gouldsboro property represented the sole holding of a special partnership owned by himself and Leupp & Company, this partnership having been formed under the name Jay Gould, and that the agreement identifying Jay as “sole known partner” and manager remained in force until such time as Leupp’s estate was settled. Simultaneous with these discussions, probably in a move to protect himself from too much credit exposure vis-à-vis Leupp & Company, which had suddenly become slow in paying for leather received from Gouldsboro, Jay set himself up as a leather merchant on Manhattan’s Spruce Street and started marketing tanned sides from Gouldsboro on his own. (Gould was also, by this time, a silent partner in the Swamp firm of Wilson, Price & Company, Leather Merchants.) While he did this, he simultaneously pressed Lee to settle Leupp & Company’s account, paying all money due the Gouldsboro concern for leather delivered to date, and thus setting the stage for a clean break.
Lee, for his part, had other concerns. Evarts’s ongoing investigations of Charles Leupp’s assets and debts revealed a bitter truth. While slowly losing his mind, Leupp had allowed his personal financial affairs to slip into disorder. Although he remained quite rich by the standard of his era at the time of his death, the one-time millionaire’s total wealth in the autumn of 1859 was just a fraction of what it had once been. “It is positively asserted,” reads a credit report that Evarts commissioned from the independent financial reporting bureau R. G. Dun & Company, “that Leupp’s means will not exceed $100,000, which is a great deal less than he was thought to be worth.”4 In the wake of this revelation, wishing to do their best for Leupp’s three daughters, Evarts and Lee seem–in the early months of 1860, after signing their revised letter of agreement with Gould–to have made a decision to play hardball in settling Leupp & Company’s affairs, and to leave no tree unshaken in their quest for dollars for the estate.
After Gould pestered him for weeks to settle Leupp & Company’s account, Lee finally acquiesced, making an appointment for Saturday, 25 February. Arriving in Manhattan for the meeting, Gould and his plant supervisor, J. A. DuBois, found themselves put off until Tuesday the 28th, when, after at last gaining access to Lee’s office, they were informed that the man had changed his mind about settling accounts, needed to think things over, and would see them again the following morning. When Gould and DuBois returned on Wednesday, a secretary told them Lee was ill and regretted having to cancel their conference.
In fact, having contrived to lure Gould away from the Pennsylvania tannery, Lee had now gone there himself, intent on seizing the property outright. In testimony given several weeks later, Lee would state that his move had been based on Gould’s unreliability and inexperience in tanning, and on rumors of mutinous feelings among the demoralized tannery staff. But the notion of Gould’s unreliability does not jibe with his record of steady output, nor with a letter addressed to him by Lee, representing Leupp & Company, on 29 December–one day after the signing of the revised sales agreement–in which Lee praised Gould’s operation, saying, “Since you have been tanning for our house yours has been the quickest tannage which our books record, showing in one instance the unusual fact of a sale of all the leather before the maturity of the hide notes.”5
As to the tales of disquiet among Gould’s men, subsequent events would show these to be false. Arriving at Gouldsboro, Lee made an impassioned speech about Gould’s shortcomings and leveled a charge (unsubstantiated, and never repeated by Lee in the court proceedings that were to follow) of Gould’s misappropriating some $25,000 forwarded from Leupp & Company to settle tannery debts. After his remarks, however, he found only about fifteen men willing to take his side in seizing the tannery. Given this unpromising start, Lee sent an agent to Scranton to hire as many armed guards as could be found. The agent returned with ten, after which Lee and his total army of twenty-five barricaded themselves inside the Gouldsboro tannery, prepared for a fight.
As for Jay, his first action was to consult with his attorney, Andrew H. Reeder. The former proslavery governor of the Kansas territory when it was nicknamed “Bleeding Kansas,” Reeder promptly urged that Gould take back his property by force. Arriving at the tannery on 5 March, Gould was met at the gates by Lee and his crew, who threatened his life if he did not leave the premises. Early the next day, Gould addressed a crowd of more than two hundred employees and townspeople, persuading some hundred of them to join him in ousting Lee. Gould then invited Lee to surrender in order to avoid bloodshed. Upon Lee’s refusal, Jay moved into action.
“I quietly selected fifty men,” he told a reporter several days later, “commanding the reserve to keep aloof. I divided them into two companies, one of which I dispatched to the upper end of the building, directing them to take off the boards [of the wall], while I headed the other one to open a large front door.” When Jay burst open the door and ran in, he was “immediately saluted with a shower of balls,” which forced him to retire temporarily before charging a second and then a third time, at last gaining complete entrée. “By this time the company at the upper end of the tannery had succeeded in effecting
an entrance, and the firing now became general on all sides and the bullets were whistling in every direction. After a hard-contested struggle on both sides, we became the victors, and our opponents went flying from the tannery, some of them making fearful leaps from the second story.”6 Three men received wounds. David Lee, whom Jay immediately cast out of Gouldsboro, absorbed a piece of buckshot in one finger.
Gould and Lee wound up in the courts. Suits and countersuits went on for seven years while the Gouldsboro tannery languished and lost all value, incapable of transacting business while the lawsuits progressed. Lee would eventually win a settlement of some thirty-five hundred dollars against Gould, partial payment for Lee and Leupp’s share of the hides and leather at Gouldsboro in late 1859. In 1868 Gould would sell his interest in the Gouldsboro property to Lee for a grand total of one dollar, and do so happily, pleased to close that chapter of his career, a chapter that, though tangled, had led him inevitably to the next rung of his life.
After the “Gouldsboro war,” Gould was forced to start over both financially and professionally. At the start of 1859, when Leupp and Lee first came in with him at Gouldsboro, he’d estimated his personal net worth at about $80,000–his chief assets being his share in the tannery, 9,000 acres of Pennsylvania forest that he owned outright, and another 30,000 acres for which he controlled the rights to bark. As late as February 1860, just weeks before the battle at Gouldsboro, R. G. Dun & Company described Gould as “a smart, enterprising young man of good character and habits, reliable in his statements.”7 But the publicity of the Gouldsboro fight and Lee’s charges of malfeasance, however unwarranted or unprovable, soon worked to undermine both Jay’s reputation and his credit. In a memorandum of April 1860, the same credit-reporting firm expressed concern over “unfavorable reports in circulation respecting Gould which have greatly impaired if not destroyed his credit in the Swamp.”8
Gould eventually closed his Spruce Street establishment. Then his investment in Wilson, Price & Company evaporated when that firm collapsed, at a loss of $60,000, early in the summer of 1860. Soon he was forced to sell his Pennsylvania bark rights and acreage, albeit at a small profit. Thereafter he spent an autumn of discontent in Manhattan, pondering his future, looking for a toehold and a new career.
The fact that Gould lived during this period in the exclusive Everett House Hotel, opposite the northeast corner of Union Square at Seventeenth Street and Fourth Avenue, suggests that despite his losses he did not feel overly impoverished. He was also wealthy enough to pay for his brother Abram, now seventeen, to take business courses in Poughkeepsie, where the youngster now lived with the newlyweds Anna and Asahel Hough, who had recently relocated to that town from a church in Tuckahoe, New York.
Jay enjoyed a brief reunion with Abram, Anna, and all the rest of the family that September when he traveled to Pennsylvania–Canadensis, not Gouldsboro–for the marriage of Bettie Gould to George Northrop’s partner, Gilbert Palen. John Burr Gould, grim as an undertaker, also made an appearance. The old man did not have far to travel, as he had recently started living with Sarah and George Northrop in their large but crowded home not far from the Canadensis tannery. (In addition to the five children that Northrop brought to the marriage, George and Sarah now had five-year-old Howard, four-year-old Ida, two-year-old Frank, and a new baby, Reid. Four more girls and two more boys were to follow.9)
Between her youngsters and her father, Sarah had her hands full. The doddering senior Gould–who’d sold his tin shop in 1858 and then gotten rid of the house on Roxbury’s Elm Street in 1860–was by this point unpredictable and mischievous. At one moment a benign and beneficent grandfather, an hour later he’d transform into a dark and contrary inebriate, quickly revealing the result of snorts taken from the bottles he hid about Sarah’s house in direct defiance of Sarah’s and George’s outspoken temperance beliefs. (Sarah would not even allow her children to drink cider or root beer lest they develop the habit of going to a keg for a drink.10) “Jay looks at father sadly,” Sarah wrote a cousin not long after the Palen wedding. “What he sees in that broken man, I cannot tell.”11 What Jay saw, most likely, was a specter of futile pride and broken dreams from which he would spend the rest of his life in flight. “I am trying,” Jay wrote James Oliver a few weeks later, “to start myself in the smoky world of stocks and bonds. There are magicians’ skills to be learned on Wall Street, and I mean to learn them.”12
Chapter 11
A PARTICULAR FUTURE
WRITING IN HIS 1908 MEMOIR Fifty Years on Wall Street, banker Henry Clews, a Gould contemporary, wryly commented on the geography of New York City’s financial district. Manhattan’s shabby avenue of cynical dealing and ultimate greed, he noted, started at a church (Trinity, near lower Broadway) and then rushed downhill to the East River waterfront, a hellish neighborhood that trafficked not just in maritime commerce but in lust, drunkenness, and violence. Describing the same landscape in 1860, just when the twenty-four-year-old Jay Gould began to explore Wall Street, an anonymous commentator for the New York Tribune wrote that “the road to Hell is not–contrary to popular rumor–paved with good intentions. It is paved instead with cobblestones, beer and broken promises. That is Wall Street, plain and simple, the place where the faithless mingle, where dreams are shattered and fortunes lost and made.”1
More than two centuries earlier, Dutch settlers had built an east-west wall across this part of lower Manhattan as a barricade against Indians, pirates, and other dangers. In time, the path along the wall became a bustling commercial thoroughfare. Early merchants built warehouses, shops, a city hall, and a church (the aforementioned Trinity). When New York City served as the U.S. national capital, the focal point of the road was Federal Hall, on the front steps of which George Washington stood for his inauguration as the country’s first president in 1789.
The earliest stock exchange in America was founded one year later, not in New York but in Philadelphia, just as Alexander Hamilton, Washington’s secretary of the treasury, issued the first federal bonds to pay down the debt of the Revolution. Informal New York trading, routed by couriers to the Philadelphia exchange, commenced soon after. Local brokers transacted business under a buttonwood tree outside 68 Wall Street. Shortly, in 1792, twenty-four of these traders established a formal New York market. The Buttonwood Agreement mandated that signers trade securities only among themselves, that they set trading fees by mutual agreement, and that they not participate in other auctions of securities. The organization launched by the Buttonwood Agreement would evolve into the New York Stock Exchange Board (in 1817) and in 1863 the New York Stock Exchange.
From the start, the Exchange was a clubby affair. Bylaws required that new members be voted in, and a candidate could be blackballed by three negative votes. The average price of a seat in 1817 stood at $25. It had increased to $100 by 1827 and $400 by 1848. Members wore top hats and boasted–with reason, after the state of Pennsylvania defaulted on notes and scores of Philadelphia brokers closed shop during the Panic of 1837–that their Exchange represented the dominant financial market in the United States. Dominant or not, and despite the rules of membership governing the Exchange, Wall Street as a financial marketplace was hardly the habitué of elites when Gould arrived in 1860. Outside the walls of the stuffy Exchange, on the street itself, virtually any “curb broker” could buy and sell securities. These dealers conducted business literally on the curb, also in the lobby of the Fifth Avenue Hotel, at Delmonico’s restaurant, on Gallagher’s Evening Exchange, and–after 1864–via representatives in the “Long Room” of Broad Street’s “Open Board,” which in fact frequently did ten times the volume of the Exchange’s so-called Regular Board. (Typically, in the early 1860s, the Regular Board might see $7 million in business on any given day, and the Open Board $70 million.)
It was among the hundreds of Wall Street curb traders that Jay Gould trolled during late 1860 and early 1861, searching for opportunities as the United States disintegrated. Whereas the advent of Civil Wa
r meant bloodshed and heartache for hundreds of thousands of Americans on both sides of the conflict, for much of Wall Street it meant only an opportunity for profit. “Along with ordinary happenings,” recalled Daniel Drew, almost thirty years Gould’s senior and well-established by 1860 as the most sinister and self-serving of operators, “we fellows in Wall Street had the fortunes of war to speculate about and that always makes great doings on a stock exchange. It’s good fishing in troubled waters.”2
Drew was, by all accounts, startling to look at: cadaverously thin and stooped, walking about in the same ancient suit day in and day out, using the stripped shaft of an old umbrella as a cane. His hair was as wrinkled as his clothes, and his manners were as rustic as his roots even though he lived in a fine mansion on Seventeenth Street, near Union Square and the Everett House. Born on a farm in rural Carmel, New York, in 1797, Drew began his career working as a roustabout for a circus and then joined the U.S. Army in 1812, at age fourteen, pocketing a one-hundred-dollar bonus but never seeing any action against the British. Following the war he became a drover who purchased cattle from the local farmers in Westchester and Putnam Counties and then brought them down to Manhattan for resale. During these pilgrimages, Drew usually salted his herd to make them ravenously thirsty and then stopped in the village of Harlem to water up his inventory and increase his cows’ weight before selling them by the pound to downtown wholesalers.
Settling in Manhattan in the 1820s, Drew bought the Bull’s Head Inn at the corner of Third Avenue and Twenty-sixth Street and thereafter acted as an innkeeper and informal banker for drovers. During the 1830s–at about the same time he began his speculations on Wall Street–he entered the steamboat business on the Hudson River, starting the Peoples Line of steamers and making his first acquaintance with Cornelius Vanderbilt. (Drew later branched out with steam lines extending south along the Jersey coast and north through Long Island Sound.) At the same time Drew earned himself a reputation as an outright liar and cheat. On those occasions when he was caught on the bad end of a deal, Drew would routinely “squat”–Street slang for dishonoring a contract–and take cover behind a bombardment of spurious lawsuits.
Dark Genius of Wall Street Page 9