Cold Open

It’s around 4 P.M. on January 6th, 1872, outside the Grand Central Hotel in New York City.

36-year-old railroad executive Jim Fisk squeezes his hefty frame through a carriage door, steps down to the sidewalk, and swaggers into the hotel through a private doorway.

Inside the lobby, Jim collars a bellboy and asks whether a woman named Mrs. Morse is in. The boy tells him that Mrs. Morse has gone out with her younger daughter, but that the older daughter may still be upstairs. Jim asks the bellboy to let her know that he's arrived.

The boy hurries away, and Jim turns toward the stairs.

As he crosses the lobby, he’s followed by curious eyes and whispered comments. Jim is a well-known figure in New York, renowned for his generosity toward his employees and his flamboyant public persona. But that’s not really why he’s famous—two and a half years ago, Jim was at the center of a financial conspiracy that cost the U.S. economy millions of dollars.

So he’s a man with many enemies, and as he begins to haul himself up the stairs, he’s surprised to see one of them coming down the steps toward him.

Edward Stokes was once a friend and business associate. But the two men have become bitter rivals, feuding over money and women. They’ve been pursuing each other through the courts for a year now, and the bad blood between them seems to deepen with each passing day.

But before Jim can say a word, he notices that Edward has something in his hand. There’s a flash.

A gunshot rings out, and Jim staggers back. He’s been shot in the stomach.

A second shot catches Jim in the arm. Jim turns and stumbles down the stairs and across the lobby. But a gathering crowd blocks his escape.

Jim wheels around, his eyes searching for his assailant. But he can’t see Edward Stokes anywhere. Meanwhile beneath him, on the fine carpet, a pool of blood steadily grows.

The following morning, Jim Fisk dies from the wound to his abdomen.

His body will be displayed at the Grand Opera House, the magnificent theater he owns in Manhattan, and an estimated 20,000 people will file past to pay their respects.

But while Jim will be mourned by many, he will also be remembered as one of the most notorious financial operators of his age. He used bribery, political influence, and market manipulation to build a fortune. And just over two years before his death, he helped cause one of the wildest days in the history of Wall Street—the gold panic of September 24th, 1869.

Introduction

From Noiser and Airship, I’m Lindsay Graham, and this is History Daily.

History is made every day. On this podcast—every day—we tell the true stories of the people and events that shaped our world.

Today is September 24th, 1869: The Black Friday Gold Market Scandal.

Act One: Stock, Locked and Ready to Rock

It’s March 10th, 1868, in New York City, almost four years before the murder of Jim Fisk.

In his opulent Manhattan office, Cornelius Vanderbilt lights a giant cigar and takes a triumphant puff as he looks out the window at the streets below. At 73, Vanderbilt is one of the richest men in America. He made his first fortune by building a shipping empire. But more recently, he's turned his attention to railroads.

Vanderbilt already controls the New York and Harlem Railroad and the Hudson River Railroad. He's also secured control of the New York Central, which carries passengers and freight between Albany and Buffalo. Now he wants to add another major line to his growing network—the Erie Railway.

The Erie stretches west from the Hudson River across New York State. And if Vanderbilt can take it over, he will strengthen his grip on all rail traffic entering New York City.

To gain control, Vanderbilt instructed his brokers to buy Erie stock. And now, he believes he's almost acquired enough shares to dominate the company and replace its existing leadership.

But then the door to Vanderbilt’s office flies open. It’s one of his aides, and Vanderbilt can instantly see its bad news. He listens aghast as the man explains that the Erie Railroad’s board has swindled them. Using convertible bonds, the company’s treasurer, Daniel Drew, and directors Jim Fisk and Jay Gould have been secretly creating tens of thousands of new shares and releasing them onto the market.

Vanderbilt is furious. He’s just spent $7 million on Erie shares, but this new stock has diluted his position. And he knows that the more he buys, the more stock they’ll print. Control of the company will always be just out of reach.

It’s a low trick—and an illegal one. So Vanderbilt turns to the courts.

With the help of friendly judges, Vanderbilt obtains orders designed to stop the new share issue and force the Erie directors to account for their actions. Facing the threat of arrest for contempt of court, Daniel Drew, Jim Fisk, and Jay Gould gather their financial records and millions of dollars in cash and flee across the Hudson River.

They hole up in a hotel in Jersey City, and there, beyond the immediate reach of the New York authorities, they plan their counterattack.

Soon, Erie Railroad money starts flowing into the bank accounts of legislators who can protect the company. Vanderbilt and his allies respond by handing out bribes of their own. In some instances, corrupt officials reportedly take money from both sides, promising to favor whichever man can pay them the most.

But it’s the Erie Railroad that has the most important ally. New York senator William “Boss” Tweed is one of the most powerful men in the state. With his support, the legislature in Albany passes a measure that retroactively legalizes the disputed Erie shares. Tweed is rewarded with a seat on the railroad’s board, and Daniel Drew, Jim Fisk, and Jay Gould are free to return to New York.

But Vanderbilt is not about to give up so easily. He retains his Erie stock and continues pressing civil suits against the company. Daniel, Jim, and Jay may have saved the railroad from takeover, but their legal bills are growing, and eventually, they are forced to settle.

Erie agrees to take a large quantity of Vanderbilt’s stock off his hands and pay him additional compensation.

The rest of Erie’s shareholders are less fortunate. Much of the cost of the settlement comes out of the company itself, and in the aftermath, the alliance between Daniel Drew, Jim Fisk, and Jay Gould begins to fracture. By the fall of 1868, Jay has become president of the Erie Railway, with Jim Fisk as his flamboyant ally. Before long, the two men will push Daniel aside and take control of the company for themselves.

For Jim Fisk and Jay Gould, this Erie War has been an education. They have learned that a determined financier can manipulate the supply of an asset, use political influence to protect themselves, and emerge from the chaos with power and money.

Soon, they will try to apply these lessons to a far larger target.

And this time, they will not be manipulating shares in one railroad. They will be manipulating the price of gold—and with it, the value of the nation’s currency.

Act Two: Making Money Hand Over Fisk

It’s April 1869, in Manhattan, New York, nine months after the Erie Railroad directors settled with Cornelius Vanderbilt.

In an office in the Broad Street Financial Rooms, Jay Gould hunches over his desk and speaks in hushed tones with his chief broker, Henry Smith. The two men have worked together for years, looking for angles in various financial schemes. But today, Jay has a new and bold proposal.

Jay believes he’s found a way to make a fortune by manipulating the gold market. He’ll secretly buy up huge amounts of gold, creating an artificial shortage to drive up its price. He’ll then sell his holdings at a huge profit.

The idea sounds simple. But the scheme depends on exploiting the price difference between two forms of currency circulating in the United States.

Before the Civil War, the United States used gold and silver coins as its official currency. Paper money was also issued by private banks, but as long as those institutions remained viable, those bills could always be exchanged for gold or silver.

That all changed in the early 1860s. The financial pressure of the Civil War led the federal government to a radical new policy. It began issuing a new paper currency that quickly became known as “greenbacks,” on account of the green ink printed on their reverse. Unlike previous banknotes, greenbacks could not be redeemed for gold. And soon, there were effectively two forms of money circulating in America, each with a different value.

And in New York’s Gold Exchange, traders quoted the number of greenback dollars needed to buy $100 in gold coin. If that “gold quotation” stood at 135, for example, it meant $100 in gold cost $135 in paper money.

Jay Gould hopes to take advantage of this discrepancy by buying low and selling high. And that’s not the only way he thinks he can make money from the scheme. Every time the price of gold rises, the value of the greenback falls. And if the greenback falls, American grain will become cheaper for foreign buyers. Exports should rise. More crops will move east from the interior to the Atlantic ports—and some of those will travel over the Erie Railway.

Jay could therefore profit twice—first from owning gold as its price rises, and again from increased freight traffic on the railroad.

But there is a major obstacle standing in the way of his plans.

The federal government holds an enormous gold reserve. If someone at the Treasury figures out Jay’s scam, they could simply release some of that gold onto the market, undo the scarcity and bring the price back down.

So Jay needs to learn what the government plans to do—and, if possible, influence that decision. He figures the best way to do that is to go right to the top.

Jay Gould's route into President Ulysses S. Grant’s inner circle is Abel Corbin, a financier married to Grant’s sister. For a cut of the profits, Abel promises to get Jay access to the president and to important men inside the U.S. Treasury who can warn Jay if and when the government plans to release gold onto the market.

Believing he has the inside track, Jay begins buying as much gold as he can. And in early September 1869, his old friend Jim Fisk joins the plot. He had held off before, unsure whether Jay’s idea could really work. But as the price of gold climbs higher, he can’t resist the opportunity to make a quick buck.

Together, Jay, Jim, and their brokers continue to buy up enormous quantities of gold, much of it on credit. Then they watch with glee as the price of gold climbs up and up. By September 22nd, the gold quotation has reached 141. A hundred and forty-one dollars of "greenbacks" to buy one hundred dollars in gold. But Jay and Jim think it can go even higher.

Still, President Grant is no fool. His brother-in-law’s constant desire to talk about gold and what the U.S. should do with its reserves has set off alarm bells. And when Grant figures out that he has been deceived by those closest to him, he will do everything in his power to stop Jay Gould and Jim Fisk’s manipulation of the market.

But the president’s intervention will have unexpected consequences. And the turbulence it unleashes will trigger one of the greatest financial panics Wall Street has ever seen.

Act Three: Gold, Gould, Ghouls

It’s late morning on September 24th, 1869, at the office of the Gold and Stock Telegraph Company near Wall Street, five months after Jay Gould began his scheme to corner the gold market.

22-year-old telegraph engineer Thomas Edison carefully balances a paperweight on top of the transmitter in front of him. The extra pressure is supposed to make the machine run faster—and today, every second counts.

Thomas’ job is to supervise the machinery that transmits the latest gold quotation from the Exchange to hundreds of brokerage offices across the financial district. The system’s numbered wheels normally advance each time an operator at the exchange enters a new quotation.

But today, the price of gold is changing faster than the machinery can follow. Even with the paperweight pressing down on the transmitter, Thomas and his colleagues can’t keep the indicators synchronized with the market.

Nearby, at the Gold Exchange, hundreds of brokers shout and scream their trades. The quotation for $100 in gold climbs higher and higher—150 dollars in greenbacks, then 155, then 160.

Jay Gould, Jim Fisk, and their other conspirators appear to be tightening their grip on the market. But a fall is coming.

President Ulysses S. Grant has learned of their scheme. And at around noon, word reaches Wall Street that the Treasury intends to sell $4 million in government gold.

The reaction on the markets is almost instantaneous. The gold quotation plunges from roughly $160 to around $133 in a matter of minutes. Jay and Jim’s scheme is in tatters.

And the day quickly becomes known as “Black Friday.” Men who believed the price of gold would continue rising discover that their fortunes have vanished. Brokerage houses fail. And the panic soon spreads beyond the gold market. Investors dump stocks to cover their losses, sending share prices down roughly 20 percent over the following week. Agricultural prices also fall, hurting farmers, merchants, and ordinary workers far beyond New York.

But while much of the country suffers, the two men behind the gold ring manage to avoid financial ruin.

Jay Gould’s contacts in the government tipped him off, and he was able to protect himself by selling his gold before the crash. Jim Fisk will also emerge with his wealth largely intact. He’ll repudiate many of the contracts made by his brokers and use friendly courts to obstruct any efforts to enforce them.

A congressional investigation will later expose much of their scheme and reveal the scandalous involvement of the government officials in the deception. But Jay and Jim themselves won’t face any criminal consequences for their actions. Instead, others will be left to pay the price for their manipulation of the gold market that culminated in “Black Friday” on September 24th, 1869.

Outro

Next on History Daily. September 25th, 1066. The English defeat the invading Norwegians at the Battle of Stamford Bridge, bringing an end to the age of the Vikings.

From Noiser and Airship, this is History Daily, hosted, edited, and executive produced by me, Lindsay Graham.

Audio editing by Muhammad Shahzaib.

Sound design by Mollie Baack.

Music by Thrumm.

This episode is written and researched by Owen Paul Nicholls.

Edited by William Simpson.

Managing producer Emily Burke.

Executive Producers are William Simpson for Airship, and Pascal Hughes for Noiser.