Dark Genius of Wall Street

by Edward J Renehan Jr

  Did Adams realize that Jay, exhausted, was totally preoccupied with his dying wife? We don’t know. Probably not. Ellie’s sickness had not been publicized, and Jay was not one to divulge such personal information. In any event, Adams was underwhelmed the following morning when Gould, arriving uncharacteristically late, lacked his normal force and focus. Adams recalled that Gould “suggested the idea [of involving the ICC], but in so weak and vague a way that it made no impression.” Subsequently Adams drove the point home more persuasively, and in the end most agreed to the notion. They came away from the table having decided to maintain rates for two months, and to reassemble at Morgan’s place after Christmas to hammer out a final plan. But the second round of meetings, held on 8–10 January, yielded little progress, and Gould—embarked upon the final week of his deathwatch–seemed to Adams “worn, reduced and nervous, with a tired film on his eyes.”29

  Gould had little to say when Charles E. Perkins of the Burlington grumbled he would not attend a meeting at which the ICC commissioners were present. At the end of the grueling sessions, the parties finally agreed to form something called the Interstate Commerce Railway Association (ICRA)—a collection of presidents who would meet regularly, arbitrate disputes, and maintain rates. But the organization was doomed from the start. Within months, Adams himself would begin boycotting the meetings, saying that in the ICRA his worst fear (that agreement without enforcement was no agreement at all) had become realized. Adams eventually defied the spirit of the agreement when, late in 1889, he instituted an alliance with the Northwestern on behalf of the Union Pacific, effectively making the two roads one for the purpose of conducting through traffic. Meanwhile, Gould’s Missouri Pacific suffered a pricing assault from the Rock Island. In January 1890, just one year after the launch of the ICRA, Gould would ask Clark, “Is it worth while for us to be represented at the meeting of the President’s Association in Chicago, or shall we simply send flowers for the corpse?”30

  Two days following the last of the Morgan meetings of January 1889, Ellie lapsed into a coma. One day after that, on the 13th, she died. “When the end came,” stated an uncharacteristically sympathetic report in the World, “it found Mr. Gould sitting at his wife’s bedside holding her hand. She did not recover consciousness and passed peacefully away. During her entire illness Mr. Gould was at her side or within call, except when matters of vital importance called him away.”31 In the weeks and months after the funeral, it was Nellie, naturally spinsterish, who plunged in to become her father’s hostess, the family’s household manager, and the dominant force in the lives of the younger children. As for Jay, it took him several weeks to recoup, after which he returned glumly to work.

  A small crisis erupted in February when one of Jay’s key associates, A. L. Hopkins, abruptly quit. Hopkins had come into Jay’s organization a dozen years earlier when Gould took control of the Wabash, and since then he had become one of Gould’s closest confidants in business after Sage. “The smooth and plausible story,” commented the World, “which George Gould put in circulation . . . to the effect that Mr. Hopkins had retired because he wanted to rest, was laughed at. Well-informed men have learned during the past two years something of what manner of man young Gould is. . . . They point out that the young man is animated, just as his father used to be, with a belief that he can run all the diverse and gigantic enterprises . . . and conduct all his speculations without any assistance from able and trusted lieutenants. . . . Mr. Gould, it is pretty well known, discarded G. P. Morosini to please his son. Mr. Morosini felt the treatment very keenly, but he never uttered a word against Mr. Gould.”32 The World overstated Morosini’s separation. Gould had withdrawn from his special partnership with Morosini and Connor at the end of 1886, and George had departed the firm before that. Nevertheless, Washington Connor & Company continued to transact much of the Gould family’s trading business and even had offices in the Western Union building. As well, Morosini, like Hopkins, continued to serve on several Gould boards. But clearly, some housekeeping was going on in the Gould camp as Jay, racing a ticking clock, rushed to groom George and, to a lesser extent, Edwin, for leadership.

  At the same time, amid dismal market conditions and price wars that continued to depress rates for freight and passenger traffic nationwide, Gould fixated single-mindedly on cutting the overhead on his Missouri Pacific and related lines. In this connection, he sent Clark a barrage of missives (“blue jays” as they were called, handwritten on Jay’s personal blue-tinted letterhead) packed with detailed instructions for layoffs, pay cuts, and other economies on the Cotton Belt, the Wabash, and every other property that looked fat. No level of micromanagement escaped Gould’s studious insomniac eye as he labored through the long nights, poring over payroll sheets and similar key data. Other executives besides Clark received compliments and slaps on the wrist as warranted. When Jay’s nephew Reid Northrop–recently made president of a Missouri subsidiary called American Refrigerator Transit–began a small reorganization without consulting Clark in St. Louis, a blue jay quickly flew with a reprimand. The young man was to run the firm subject to Clark’s directions, “and it is my wish that you confer with him freely and accept his directions as law.”33

  As time went on, Jay’s physical exertions became less and less while his mind rushed ahead of his competition at an ever more rapid pace. Casual onlookers could not guess the strenuous activity of the marketplace in which the frail, wheezing man was daily and nightly engaged. Likewise, few imagined that the emaciated magnate had in him one more great play, one more sudden and majestic move on the chess board.

  During the summer of 1890, markets fell and the Union Pacific, mired down in massive floating debt, began to founder under the captaincy of Adams. By autumn, banks were calling in notes, triggering the most severe panic to hit Wall Street since May 1884. In this climate, during November, Gould briefly reentered the market with a view toward saving–or, some said, confiscating–the railroad he’d lost to Adams six years earlier. At first, few suspected Gould was behind the bears who hammered UP. As well, early on, no one guessed Gould might be the source of an idle comment–nothing more than a slim bit of rhetorical wallpaper–picked up and repeated by numerous financial pundits: “A general feeling prevails in railroad circles that Union Pacific is managed by Harvard graduates who have big heads and small experience.”34 Shortly another unsourced bit of gossip appeared and was reprinted: Gould’s mysterious ailment had been miraculously healed. He was his old self again, at the top of his game once more, and could “make or break railroad rates in the West [and] the prices of stocks at will.”35 Monday, 10 November, saw an unprecedented sell-off in which all the railroad issues received a pummeling, especially the UP. “One thing is apparent,” Adams told banker R. S. Grant, “that is, that the whole pack, headed by Gould, are now at work to pull me down.”36

  At this point, the gods, perhaps urged on by Atalanta herself, intervened on the side of Gould. On the 15th, word came from London that Baring Brothers had shut its doors. Although this news gave life to the general panic for a few more days, damaging all values for the short term, it posed an even greater problem for Adams, who’d recently been relying on sterling loans from Baring Brothers to oil the precarious UP cash flow. On the heels of this intelligence, early on the morning of the 17th, Jay suddenly announced he was going into UP. Acting like the Gould of old, he bounded from the wings to grab his prize, buying aggressively and seizing control, at the same time buoying the price.

  Ames and Morgan met with Gould briefly that afternoon. After getting a view of Gould’s plan, Ames wrote Adams that Gould’s ambition was to work the UP “into some enormous, vague scheme he is meditating of a railroad combination which is to solve the problem, do away with competition, make everyone rich and, at one stroke, reduce chaos to order.”37 In short, Gould sought to make himself the Bismarck that Adams had once hoped for. On the 20th, Adams visited Gould’s office to surrender. The men set the following Wednesday as the date to form
alize the transition. On that day, Gould, Sage, Henry B. Hyde of Equitable Life, and banker Alexander E. Orr were elected directors, while Dillon returned to the post of president. In a prepared statement read by an assistant, Gould pledged to do everything necessary to prop up the cash-strapped road. When asked by a World reporter why he’d returned to the UP, he replied in a breathy whisper, “There is nothing strange or mysterious about it. I knew it very intimately when it was a child, and I have merely returned to my first love.”38

  It was his last hurrah. Through late 1890 and into 1891, Jay’s physical decline accelerated. He spent most of the winter of 1891 out west, and then holed up at Lyndhurst through the summer. At the annual meeting of the UP board in October 1891, Gould suffered a physical breakdown. Standing to respond to criticisms of the annual report voiced by his friend Sage, he spoke only two or three sentences before losing his stream of thought, sitting down, and covering his face with his hands, “his whole frame quivering with . . . great excitement.”39 Periods of confusion and excitability are common in the latter stages of tuberculosis, but the World and other papers reported that Gould’s problem was not organic: “The whole trouble arises from shattered nerves and this condition of his nervous system affects his stomach.”40 An officer of the UP told Adams how Gould “would physically collapse while trying to do business.”41 His meetings and interviews were now carefully orchestrated, with subordinates doing much of his talking for him, and every session kept short. Some days were better than others.

  Three weeks before Christmas, Gould received a shock when word came of Sage’s near murder. A madman named Henry Norcross had walked into the financier’s office in the Western Union building and demanded $1.5 million. After Sage told him to go to hell, Norcross activated a bomb he carried in a valise. The explosion killed the bomber and one of Sage’s clerks but barely touched Sage, who arose from the wreckage intact. George Gould, sitting in the office of the Manhattan Elevated next door, heard the bomb go off and experienced a rain of plaster, as did Connor and Morosini in their digs one floor below. In short order, George got word to his father, who immediately walked down Fifth Avenue to the Sage home, there to comfort Mrs. Sage and wait with her until her husband was brought home. Sage would recall that Gould could not be dissuaded from staying with him in his room as the doctor attended to his minor cuts and scrapes. “It seemed very strange to me at that time that this little man, who was anything but robust himself, could do so much and insist upon doing it.”42

  In February 1892, Gould suffered another tubercular crisis. On Sunday, the 21st, he felt well enough to spend half an hour in the lobby of the Windsor Hotel across the street from his home. There he gossiped with the brokers and journalists who frequented the place. In the midst of his chatter, he mentioned casually that he would go south in a matter of days. On the Tuesday following, he bowed to a request from Nellie that he host a meeting of the Church Extension Society and present the organization with a $10,000 donation. Subsequently, as the week dragged on and Gould did not depart, rumors began to circulate. The word was that he’d fallen ill shortly after the church meeting. An anonymous source, probably a member of the household staff, told a World reporter that from Tuesday night onward Gould had seemed to improve, but on Friday he began to hemorrhage. “Mr. Gould was coughing violently, and his handkerchief was flecked with blood.”43

  Dr. Munn insisted that Jay’s problem was a bad cold, nothing more. At the same time, Gould’s Atalanta was attached to a flyer, Gould helped aboard, and the train pointed toward the dry air of El Paso. Nellie and Anna went along. Howard, currently enrolled at Columbia, would soon follow. Once he was out west, Gould’s appetite improved and his cough dried up. In May, when the heat became uncomfortable, he relocated to the mountains near Pueblo. Reading the papers as his train rushed through the countryside, he could not have missed the obituaries of old friends. Rice Bouton had died the previous September. Now Gould noted the deaths of Bishop John Sharp, a Mormon leader who’d been active with the Union Pacific for years, and New York merchant Edward Jaffray. On 9 June, the sickly Dillon–only recently elevated to the post of UP chairman to make way for incoming president Clark–went to his last rest at Woodlawn, within view of the Gould mausoleum and the future site of the Morosini crypt. Not long after, in July, Cyrus Field closed his eyes.

  Gould got back to New York in midsummer and spent several weeks at Lyndhurst, seeing only family and close advisers. Returning to 579 in September, he was observed on several occasions, late at night, strolling back and forth by lamplight in front of his townhouse, guarded by a sleepy retainer. Every now and then he would pause, embark upon a fit of coughing, and hack up bloody sputum into a handkerchief. Whenever one of the boys from the Windsor lobby strolled across to greet him, he’d smile and shake hands but remain silent. Then he’d wander back inside, where his diversions were few. Sometimes he played bezique with Nellie. He also enjoyed it when she read to him from his favorite authors: Dickens, Thackeray, and his old friend John Burroughs.

  Jay attended his last meeting of the Missouri Pacific board on 11 October. Two weeks after that, on the 26th, he appeared, beaming, at Edwin’s wedding to Sarah Cantine Shrady, the stepdaughter of a prominent physician. That Thanksgiving, when Alice Northrop came to 579 for several days, she found her uncle a ravaged shell of his former self. Early in her visit, as she sat with him, he stunned her when he leaned over and confessed, out of the blue, “Alice, I am not afraid to die. I am not afraid to die. But the younger children–well–I don’t like the thought of leaving them.” Two nights later, Alice was chatting with Nellie when Jay walked slowly and unsteadily into the room, “sat down heavily” in his favorite armchair, and leaned his head against its back. His face was completely drained. He’d been out with Munn in the carriage. “Uncle Jay,” Alice said. “You look so tired!” “Yes,” he whispered, breathless. “I am tired. I stopped in for a little at Madison Square Garden to see the horse show. They had some wonderful animals. It was worth going to–but I think I have taken cold.”44

  Later that evening, Jay hemorrhaged severely for several hours, after which Munn announced that it was just a matter of brief time before the end. Still, the secret was kept. Jay lay abed a full week before word of his condition hit the street, appearing in newspapers on the morning of Thursday, 1 December. All through that day, reporters gathered on the cold sidewalk outside 579, watching as Gould’s children and intimates came and went. Across the street at the Windsor, Gould’s acquaintances–speculators, brokers, and hack reporters–calculated the market ramifications of his last breath and laid their bets. The family, meanwhile, said good-bye. Gould regained consciousness for the last time at about 2 A.M. on Friday, the 2nd. He whispered to Munn that he wished to bid farewell to the household, after which he spoke briefly to each of his children in turn and talked as well with every member of the staff before closing his eyes and lapsing into a coma. He died at 9:15 A.M. The reporters hovering on Fifth Avenue scattered the moment they saw Margaret Terry hang a black knot of crepe on the door. A few hours later, when Munn published the death certificate, the press finally learned the details of the ailment that had stalked Jay Gould for years.

  Around the world, editorials condemned the dead man. The London Standard eulogized Gould as a “wrecker of industries and an impoverisher of men.”45 The News, of that same city, described him as “less a man than a machine for churning wealth.”46 In his own town, the Times reminded readers that Gould’s fortune was based on his talent for “intercepting the earnings of other people and diverting them from their original destination.”47 And the Herald confided that there had been “much quiet rejoicing” down on Wall Street once news of Gould’s death circulated.48 Nearly all these papers printed a report, spurious, that a stock ticker had been installed close by Gould’s deathbed. Uninformed gossip had it that the machine clicked away as he breathed his last, providing an oddly appropriate counterpoint to the dying millionaire’s death rattle. Even in death, Jay foun
d no escape from the popular romance of his evil.

  EPILOGUE

  The Goulds after Jay

  JAY GOULD’S WILL, a complex and in some ways ingenious document, proved the downfall of his family. Or at least it proved the downfall of the cohesive, dynastic, and eminently solvent version of family Jay had so long dreamed of leaving in his wake.

  At the time of Jay’s death, the appraised value of the estate stood at $72 million, some $2 million of this being in real estate. (In fact, $72 million represented an extremely conservative estimate made for tax purposes. The actual value was more like $125 million.) By the terms of the will, each of the children received a sixth interest in the amount, but not free and clear. The millions were to be put in trust, and residual income would be paid to every son and daughter for life. As for the core capital of the trust, Jay called for this to be invested and administered by the six cooperatively as trustees, with the two youngest, Anna and Frank, coming into their own as full voting partners once they reached the age of twenty-one. In an attempt to protect Nellie and Anna from gold diggers, Jay stipulated that, should they marry, control of their votes could not transfer to their husbands. In the event of a disagreement among trustees, George was to hold final authority. Last, any unmarried heir who wed without the approval of a majority of his or her fellow trustees would forfeit half his or her share.

  Jay made a few special bequests. Until Anna and Frank reached their majority, George and Nellie were to serve as their guardians, and the young people were to make their home with Nellie. To accommodate this situation, Jay gave both 579 and Lyndhurst to Nellie for her life use, along with an income of $6,000 per month until Frank, the youngest, turned twenty-one. Additionally, as compensation for his senior position and increased responsibility, Jay gave George an extra $5 million of the capital as part of his share. Other unique gifts included $500,000 for the second grandson, Jay Gould II, evidently a bonus for being the only namesake.