Dark Genius of Wall Street

by Edward J Renehan Jr

  Sometime that afternoon, Vanderbilt ran across shares that, having been signed by Jim Fisk, were demonstrably new. And only then, with his purchases continuing at fever pitch, did the Commodore realize the trouble he might be in. By this point, with rumors rampant that an unknown quantity of new Erie shares had been put into the market, the stock had once again gone into free fall, standing at 71 by 3 P.M.. Vanderbilt had by this time plunged $7 million completely leveraged dollars into the stock. Understanding instantly that the shares would drop even further if he stopped buying–precipitating a financial collapse that would threaten not only himself but many others–Vanderbilt chose to stay the course. “He never flinched,” Fowler recalled admiringly.12

  The Commodore commanded his representatives to go even longer into Erie. By that evening, he had created enough “demand” so that the stock stood at 76 1/8. As the day’s business closed, Vanderbilt owned or controlled almost 200,000 units of the firm, at least half of these of dubious value, their ink still wet. Did this represent a majority of the Erie’s equity? Who knew? Certainly not Vanderbilt. (In fact, more than 50 percent of Vanderbilt’s shares would be challenged just two days later, when the administrators of both the New York Stock Exchange and the Open Board ruled that Erie certificates dated after 7 March were not valid.)

  Adding to Vanderbilt’s problem was the inflated rate of interest he had paid on the vast sums he was forced to borrow during the afternoon of the 10th. Early that morning, acting on a suggestion from Gould, Drew had shrewdly moved to drive up the price of credit. Visiting several downtown banks, the speculative director withdrew as cash close to $7 million in proceeds derived from the recent Erie stock sales, which he then placed in the safe at the Erie offices downtown near the foot of Duane Street. This maneuver, as Maury Klein has described in a wonderfully crafted phrase, “precipitated a spasm in the money market” and caused short-term interest rates to suddenly leap.13 Thus Gould, Drew, and Fisk–with Gould as chief strategist–had Vanderbilt coming and going.

  William Fowler was with the three of them at the Erie offices early on the morning of the 11th. “The executive committee of the Erie board,” he wrote, “were holding high festival over their triumphs at the offices of the company. . . . Uncle Daniel’s corrugated visage was set into a chronic chuckle, Jay Gould’s financial eye beamed and glittered and the blond bulk of James Fisk, Jr., was unctuous with jokes.” But the mood in the room changed abruptly when messengers arrived bearing word that Vanderbilt’s lawyers had been busy. None other than Judge Barnard himself, Fowler recounted, had issued a “process of the court” to “punish them for contempt of its mandates.” Barnard’s order for the arrest of Drew, Fisk, and Gould “would soon be placed for service in the hands of the high sheriff ’s spongy officers.”14

  Soon thereafter, according to a reporter for the Herald, a police officer walking his beat on Duane Street noticed “a squad of respectably dressed, but terrified looking men, loaded down with packages of greenbacks, account books, bundles of papers tied up with red tape [emerging] in haste and disorder from the Erie building. Thinking perhaps that something illicit had been taking place, and these individuals might be plunderers playing a bold game in open daylight, he approached them, but he soon found out his mistake. They were only the executive committee of the Erie company, flying the wrath of the Commodore, and laden with the spoils of their recent campaign.”15

  None of these men found the prospect of incarceration appealing. Likewise, they realized that to be thrown behind bars would be to cede the ability to manipulate events, cash, and stocks. Thus they determined immediately that they must get out of the reach of New York marshals. The panicked Drew took the very next ferry across the Hudson to Jersey City, carrying with him numerous key files and records of the corporation. Gould and Fisk, meanwhile, stayed behind in Manhattan to clean up a few details with brokers and bankers before fleeing. Although they had dispatched Drew with the files, they themselves hung onto the $7 million from the Erie vault. (“Such a sum,” Fisk later told his friend Robert Fuller, “was far safer with myself and Jay than it would have been if left in the hands of Uncle Daniel.”16)

  Gould and Fisk were relaxed enough to dine that evening at Fisk’s favorite restaurant, Delmonico’s, with guards outside watching for the marshals. They were halfway through their meal when their men alerted them to approaching officers of the court. Running out the back of the restaurant and down the alley, Gould lugging the $7 million in greenbacks in a large satchel, the partners hailed a cab to take them down to the waterfront. There they engaged two seamen from the steamer St. John to row them across to Jersey City in one of the steamer’s lifeboats.

  The trip, as Fisk later described it for a reporter, was nothing if not hair-raising. The waters of New York Harbor still ran profoundly cold in mid-March; to submerge in them longer than a few minutes would have meant death. Ocean tides pushing north into the estuary of the Hudson made the work all the harder as the men from the St. John endeavored to row in a straight east-west line across the channel. Added to that was the moonless night, the thick pea-soup fog, and the many large, fast steamers and freighters that pushed quickly in and out of sight without warning, their running lights obscured, and their helmsmen frighteningly unaware of the little band of rowers. At one point a large ferry suddenly bore down on the rowboat, “and only the vigorous use of their lungs” allowed them to row out of the ferry’s path before being struck. After a second episode much like the first, the party “determined to get some assistance” and hailed a Jersey-bound ferryboat, from which they “could get no response.” In desperation, instead, Fisk reached out and made “a clutch” for the housing that covered the ferry’s giant, churning paddlewheels, with the result that they “were drawn so near to the wheel as to nearly wash the whole party out of the boat. They however saved her from swamping, and climbed aboard, arriving shortly afterwards at Jersey City, safe and sound, but thoroughly drenched.”17

  Chapter 16

  AN ALMIGHTY ROBBERY

  GOULD, FISK, AND DREW–together with Eldridge and a few other more minor players–established their headquarters in Taylor’s Hotel, right on the Jersey City waterfront. The hotel lay just a stone’s throw from the Erie’s terminal, adjacent to the town’s Long Wharf. Taking an entire floor of rooms for themselves, the Erie clique also set up a reception hall in the hotel’s Ladies’ Parlor for the comfort of the many reporters who promptly followed them into exile. Fisk’s old Vermont friend Fuller–now one of the journalistic throng attached to the traveling Erie circus–remembered Fisk’s supplying ample cigars, liquor, and food. Fisk also did most of the glad-handing and chatting-up of the press, a task that Gould–who most people, including Vanderbilt, were slow to realize had begun to displace Drew as the clique’s chief tactician–was glad to delegate.

  “[Fisk] could manage them [the press] better than Gould could,” Fuller wrote. “Gould was always intense and therefore serious. His whole mind was centered upon whatever project he happened to have in hand. He was a stronger character than Jim because he was more tenacious; but somehow he didn’t seem to know as much about people.” Fisk, on the other hand, served as the consummate salesman and promoter. “The Commodore owns New York,” he told the reporters. “The stock exchange, the streets, the railroads, and most of the steamboats there belong to him. As ambitious young men, we saw there was no chance for us there to expand, and so we came over here to grow up with the country.” When a correspondent countered that Drew was none too young–was, in fact, of the same generation as Vanderbilt–Fisk answered that “Uncle Dan’l says he feels like a two-year-old now that he’s taken the plunge.”

  What, the press asked, were the Erie’s immediate plans? To become a New Jersey corporation, answered Fisk, and after that to capture the Erie for the common man, whose interests would not be served should Vanderbilt be allowed to establish a monopoly of all the railroads linking New York with the West. “The Commodore,” said Fisk, “will never b
e quite happy unless he owns all the railroads and can charge whatever he darn pleases for the freight that comes into New York. He don’t care a cuss how much the people of that city pay for their bacon and eggs, not a bit, provided they pay it to him. Well, he isn’t going to get hold of the Erie–at least, not as long as the Erie Exiles are patrolling the quarter-deck. We know what to do with pirates when we see one!”1 Fisk was center stage, and public interest was at a fever pitch. The Herald noted that the impeachment proceedings against Andrew Johnson, then going on at the nation’s capital, were eclipsed nearly completely in the press by the war over the Erie.2

  While Fisk did all the talking, it was Gould who had composed the talking points. To him goes credit for the masterstroke of framing the fight against Vanderbilt in populist terms: a high-minded battle against single-minded greed, a war against monopoly. It was also Gould’s idea to order up a quick report from the Erie’s chief superintendent, which, in order to demonstrate the urgent need for the bonds recently issued, earnestly decried the road’s horrendous physical condition. (One year earlier, in an effort to placate federal overseers, this same superintendent had authored a report describing the Erie as “in better condition and better equipped than at any period during the past ten years.”3 But luckily for Gould, the boozy hacks who chronicled the Erie for Greeley’s Tribune, James Gordon Bennett, Jr.’s Herald, and other New York dailies were not inclined to delve too deeply into inconsistent company statements.)

  To make their antimonopoly campaign seem more real, Gould and Fisk soon launched a rate war against the New York Central, slashing freight and passenger prices to the extent that the Erie instantly began to operate at a loss. At the same time, they moved to secure the necessary legislation at Trenton to make the Erie a New Jersey corporation–a legal status that would permit the Erie clique to issue even more bonds and stock, regardless of what injunctions might be flung against them from the eastern shore of the Hudson. The recognition by New Jersey also provided the Erie’s substantial New York properties with some measure of protection against seizure by Vanderbilt via the New York courts.

  But more than mere property stood threatened with seizure. Given their proximity to New York, the personal security of Gould and his allies became an issue, especially after Gould received word of a $50,000 reward supposedly offered by Vanderbilt for the capture and return of the Erie clique to the jurisdiction of the New York courts. The rumor, which was false, metastasized into action on 16 March, when armed bands of thugs began debarking various Pavonia ferries from New York and gathered ominously at the Erie terminal. But this was an eventuality for which Gould had prepared himself. A Herald reporter described how “fifteen picked men of the Jersey City police force, armed with revolvers and [nightsticks] under the command of Chief of Police Fowler” commanded the approaches to what was now being called Fort Taylor. Beside Fowler and his men stood a slightly smaller force under Inspector Hugh Masterson, special superintendent of police for the Erie Railroad.4 Despite all this firepower, it took several hours for the Erie’s Masterson to convince the New York horde their errand was useless. Gould, Fisk, and Drew could not be pried from the heavily defended hotel.

  On the same day that brought the thugs from New York, Judge Barnard announced that he would indict for contempt any Erie fugitives whom he or his deputies found in New York. Drew, meanwhile, became quickly unhappy in New Jersey. The speculative director, a family man like Gould, missed his wife and hearth just as much as Gould missed his. Additionally, the secretive Drew did not like sharing close quarters with business associates. “Hardly had the Erie confederates been installed in Taylor’s Hotel,” Fowler wrote, “when [Drew’s] younger and more robust associates noticed the workings of his timid, vacillating nature. He had been borne along by their stronger wills and now felt painfully his trying position. He missed his pleasant fireside, where he had so often toasted his aged limbs and dreamed of panics.”5

  Early on, Gould guessed that Drew might seek to profit via a separate peace with Vanderbilt. The Commodore had always forgiven Drew and taken him back in the past. Why not now as well? What was to stop the old allies from striking a bargain that left Fisk and Gould out in the cold? Drew had a long track record of betrayal. As Gould, Fisk, and everyone else on Wall Street knew, in any given situation Drew could always be counted on to do whatever most benefited Drew.

  Thus Gould and Fisk were annoyed but not surprised when, a few days into the New Jersey adventure, treasurer Drew–under the constant scrutiny of a tailing detective underwritten by Gould–made his move. The treasurer withdrew the Erie directorate’s $7 million from the firm’s New Jersey bank and sent it via messengers for deposit in several New York banks, where the funds would instantly become liable to attachment by Vanderbilt. Once apprised of the situation, Fisk and Gould immediately attached Drew’s own considerable Erie securities (these still located in Jersey) and demanded that Drew return the $7 million forthwith. Drew did so but remained under suspicion. After this episode, the increasingly tired and forlorn old man was relieved of all treasurer’s authority. As the Adams brothers put it, Drew “ceased to be a power in Erie.”6

  Rather than a shaper of events, Drew would from now on be–for the most part, with just two notable exceptions–a prisoner of events. And large events they were. As the Herald pointed out, “The great Erie railway stock litigation, at present going on in this city, promises to assume proportions of the most extensive and complicated character ever brought before the civil courts of any country.”7 The weapons deployed by both sides in the quarrel added up to about $120 million in capital. The players contesting for control of the Erie were the sharpest to ever walk on Wall Street.

  Only a few days into the commotion, Judge Barnard appointed attorney Charles S. Osgood–one of Vanderbilt’s sons-in-law–to serve as receiver for the stock sale that Barnard had previously forbidden to take place. When Gould got a friendly Ulster County judge, T. W. Clerke, to stay Osgood’s appointment, Barnard in turn voided Clerke’s stay. This exercise in judicial badminton would have continued ad infinitum save for Osgood’s recusing himself. (The point was actually moot, since the funds Osgood would have been receiving were in New Jersey. The next appointed receiver–Peter B. Sweeny, chamberlain of Boss Tweed’s Tammany Hall ring–therefore had nothing whatsoever to do, save collect $150,000 from the Erie at the end of the day, for services not rendered.) To complicate matters further, Judge Gilbert of Brooklyn–who had previously ordered the continued conversions of Erie bonds into stock–now vacated his own order, announcing that he had been tricked by false facts into issuing his initial judgment.

  Both Gould and the speculative director made visits to New York on successive Sundays, that Sabbath day which, according to New York law, remained free of marshals, writs, summonses, and subpoenas. Through careful planning–chartering a small vessel to land them on the Battery just after midnight and then returning just before midnight twenty-four hours later–Drew and Gould were able to safely spend a night and one long day and evening with their wives and families every week. From the Battery they rode together with two armed guards–just in case–to their respective homes within a block of each other on Seventeenth Street. One guard stayed with Drew, both to protect the man and to keep an eye on his activities. The other shadowed Gould.

  Fisk, on the other hand, had his comforts delivered to him in Jersey. Food from Delmonico’s came rolling across the harbor in regular convoys. So did cigars, liquor, and–most important–love, the latter in the form of a music hall actress and onetime whore by the name of Helen Josephine Mansfield. Twelve years Fisk’s junior, “Josie” Mansfield had been born in Boston but moved to San Francisco with her parents when she was sixteen. One year later she married an actor, Frank Lawlor, but divorced him in short order after he’d paid both their fares to New York. Once in Manhattan, Josie made her home in a Thirty-fourth Street bordello run by a Miss Annie Wood, whose official profession, according to the New York Directory of 1866,
was that of actress. It was at Annie Wood’s notorious establishment in 1867 that Fisk fell under Josie’s spell. He soon set her up in her own suite of rooms at the American Club Hotel and began financing her career on the stage.

  At Fort Taylor, as Fuller told it, Fisk installed Josie in a “comfortable room which opened into the same bathroom from which his room connected.” Fuller also remembered how Gould, when first presented with the fact of Miss Mansfield in residence, “looked at her and through her with his piercing black eyes and stroked his beard, but made no comment. . . . The newspaper reporters gradually learned about Josie, but they never said a word.”8 Meanwhile Drew, devoutly puritanical when it came to everything but business, was outraged. Already surrounded by liquor, something of which he stoutly disapproved, Uncle Daniel was now confronted with the thinly veiled fact of Fisk’s extramarital exploits. “The only Scarlet woman Drew ever had a mind to countenance was the Erie,” wrote Fowler. “He did not care to see, be seen with, or breathe the same air as the likes of Miss Mansfield. The founder of the Drew Theological Seminary had no patience or charity for harlots. Not only did he not desire Miss Mansfield’s company, he detested it.”9

  Of course, all members of the Erie clique realized that a prolonged stay in New Jersey was impossible. A real solution, either peace with Vanderbilt or a New York law formally legitimizing Erie’s recent issues, was clearly necessary. Vanderbilt, still busy financing injunctions from Judge Barnard, seemed in no mood to negotiate. Thus Gould decided to focus his attention on gaining favorable legislation in Albany. Soon, cynical pundits were hailing Gould’s Erie Bill, introduced by a friendly Ulster County representative, as a boon to one of New York’s most corrupt institutions. The Herald described the Erie Bill “as a Godsend to the hungry legislators and lobbymen, who have had up to this time such a beggarly session that their women and bootblacks are becoming insubordinate. As the Erie Bill promises to carry the fight up to the Capitol, the whole army of [politicos], inside and out, are in ecstasies; and numbers of experienced lobbyists, who had left Albany in despair, are packing up their paper collars and making the best of their way back, in the hope of sharing in the anticipated spoils. It is whispered that Vanderbilt is determined to defeat the bill, and fabulous sums are mentioned as having been ‘put up’ for that purpose.”10