Cornell University Library arV13078 Men and mysteries of W^all^^^^^^^ 3 1924 031 218 336 olin.anx Cornell University Library The original of tliis bool< is in tlie Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924031218336 MEN AND MYSTERIES WALL STKEET. JAMES K. MEDBBRY. WITH ORIGINAL ILLUSTRATIONS. BOSTON: FIELDS, OSGOOD, & CO. 1870. Entered according to Act of Congress, in the year 1870, hj FIELDS, OSGOOD, & CO., In tho Clerk's Office of the District Court for the District of filassachusetts. University Press : Welch, Bigblow, & Co., Cambridge. TABLE OF CONTENTS. CHAPTER I. Faou Pbeliminary . . 1 CHAPTER II. The New Tokk Stock Exchange . . . . . 13 CHAPTER III. A Day at the Boards 25 CHAPTER IV. The Maohinert of Speculation 45 CHAPTER V. Margins and the Loan Market 64 CHAPTER VI. The Methods of Specitlation 81 CHAPTER VII. Concerning Stock-Brokers 109 CHAPTER VIII. Habits and Humors of " the Street " . . . . 139 IV CONTENTS. CHAPTER IX. The G-beat Operators . 152 CHAPTER X. The Outsidehs 194 CHAPTER XI, The Mobility op Stock 207 CHAPTER XII. In the Gold Room 231 CHAPTER XIII. The Gold-Brokers 244 CHAPTER XIV. The Mining Board 274 CHAPTER XV. Before 1837 286 CHAPTER XVI. From '37 to '60 299 CHAPTER XVII. Prospectite 333 LIST OF ILLUSTRATIONS. Bulls and Bears Erontispieoe. The Long Room Pas« 38 The Regular Board 119 Broad Street from Wall Street 142 The Gold Room • • 231 The G-old Indioatob 263 MEN AND MYSTERIES OF WALL STREET. CHAPTEE I. PEELIMINAEY. THE farthest reach of audacious speculation in our day is not without a definite background of con- servatism. An age of steam has stringent need of im- mense balance-wheels. The sharp and fevered struggle for wealth has created a necessity for. secure investment ; and no man, however gigantic may be the balances of his ledgers, feels himself safely over the bridge of for- tune until his assets assume the shape of quickly real- izable values. Hence the ease with which national debts are now funded and joint-stock enterprises are set on foot. With an instantaneous exchangeable value for all kinds of property in the world's market, and an average certainty of return to invested capital, mankind would deem itself not far from the threshold of the millen- nium. And it is because civilization has as yet failed to make adequ.ate progress in this direction with refer- ence to the products of agriculture and machinery, that great money-marts have arisen and "expanded into para- mount impoKtance. Cotton is good, corn is good, real estate is very good ; but none of these have the beautiful qualities of 3 per 2 MEN AND MYSTERIES OF WALL STREET. cent British consols or United States 5-2 Os. Commo- dore Vanderbilt can convert the bulk of his vast prop- erty into money in a day. There is no similar market ready to perform a like service for William B. Aster. The Spragues of Ehode Island are slaves to their fac- tories. The heavy cattle-raisers of Texas, the great far- mers of California and Illinois, the mill-owners of New England, are not merely subject to fluctuations in the prices of their products, they are the veriest victims of circumstance whenever they attempt to turn their prop- erty into coin, or the equivalents of coin. Daniel Drew, the drover, had come to comprehend this serfdom very thoroughly before he took up his quarters at the Bull Head Tavern and mastered the subtleties of Erie specu- lation. Up and down the human gamut it is everywhere the same, even to the affairs of the most modest of capital- ists. The clergyman whose ten years' faithful ministry has resulted in the painful saving of a thousand dollars is very much at the mercy of his parish if his money is in land, and quite his own master if it be locked up in bonds or shares, merchantable at once in the great city which lies an hour's distance from his village. The tradesman in extremity is keenly aware of the advantage of collaterals over mortgage. Gloucester fishermen know the difference between sloops in the Bay of Fundy and . a package of Boston and Maiae K. E. stock stowed away in a bank- vault. Nor is the proverbial sensitiveness of j»per values any considerable bar to their popvdarity. Over all the rumor of fraud, of " street " artifices, of the perils of open PEELIMINAET. 3 market, and of whirlwind crises, is the mighty fact that the main bulk of securities in the great stock boards bear annual fruitage in interest, and are assured of in- stant sale at current prices. If we glance across the water to the great centres of finance, — London, Paris, Frankfort, — we perceive what immense consequences follow in the train of this modern tendency for converti- ble investment. In those controlling money-marts, the major portion of the assets of all the large houses are in paper evidences of sunken value. This paper, it is true, has a gold edge. The marginal annual worth, its inter- est-bearing dividend property, is coin. By virtue of one of the grandest outgrowths of our present civiliza- tion, — that profound yet strangely misunderstood in- strumentality of finance, the share market, — it is indeed practically all coin up to the accepted limit of its selling capacity. The forms which it assumes are manifold. It lies in British consols, French Rentes, in all those weighty mortgages which nations in sore strait have executed over the whole property of their subject populations ; in shares, bonds, — those representatives of absorbed wealth which have created English railroads, mines, banking-houses, and insurance companies. Credit Foncier and Credit Mobilier, transtlantic steam lines and sub- atlantic telegraphic cables, placing the locomotive in Eussia and the far East, and joining the Mediterranean and the Eed Sea by ship-canal. Curiously, — or what, at least, would be curious if the fact were not a part of education, — the most desirable of these assets lack one of the main essentials of conversion. Were all the capi- 4 MEN AND MYSTERIES OF WALL STREET. talists of Europe to combine to-day, they could not com- pel England to redeem its national debt. And in de- gree, a like rule holds regarding all these securities. Interest in due season is certain. The principal in sea- son or out of season is hard to reach. Nevertheless, for every purpose of life, this property is available. It has bought crowns. It has sustained governments. It is a perennial flower of auriferous bloom, whereby all that is splendid or solid or beautiful in Europe is made possible. The magnificence of courts, the glories of art, the permanence of industries, the serenity of humble firesides, the open hand of organized and consecrated charities, depend upon the stability of these values. In sum total they can only be estimated by billions. A shadowy frost-blight on the confidence of Capital, a tre- mor of doubt affecting these investments in slight per cent, is like the sudden engulfment of a vast fleet, home- laden with specie to the quarter-deck. It is a lightning annihilation of definite wealth, not less terrible because temporary, comparable only to a conflagration -wTapping some imperial city, or the fitful prostration of whole in- dustries. A most facile instrument of foreign exchanse, the best possible groundwork for business loans, the safest vehicle of testamentary bequests, they have be- come the stanchest and pre-eminent bulwark of com- merce. Yet without the interposition of the stock mar- ket, they would be the most volatile of values. Those startling variations in prices between almost contiguous centres of trade which characterized all the prime com- modities of life in pre-railroad and pre-telegraph days PKELIMINAEY. 6 would equally appear in the transactions of the kings of finance, if they were without the restraiuing influence of mutual consultation and the test of mutual desire afforded by the great Exchanges. The large economies consequent upon the symmetric working of the various Bourses and Stock- Marts of Europe compensate a hun- dred-fold for all excesses of speculation. On that inti- mate monetary sympathy which the wide connections of the principal bankers and the agency of the telegraph has brought about in England and on the Contiaent, the steadiness of the whole social fabric of the Old World may be justly said to hinge. In America, up to the point when the exigencies of civil war compelled to a vast expansion of the national debt, there was nothing that could fairly admit of Eu- ropean comparison. We had our pivotal money-mart. We had minor Exchanges in certain .important seaboard cities. In some particulars there had been an actual de- cline ia the international influence of these financial centres. When Nicholas Biddle entered upon his gigan- tic scheme of making the Southern cotton yield the basis of a broad national credit, and our State legisla- tures had ventured into the London market with bonds as yet untarnished by the whisper of repudiation, foreign exchange was largely influenced, and the New York Stock Board assumed a dignity which the crisis of 1837 could not wholly efface. Thereafter, however, Wall Street con- cerned itself almost wholly with securities whose quota- tions were limited to this side the Atlantic. The ten- dency to become borrowers stiU inhered in the country. 6 MEN AKD MYSTERIES '01' WALL STREET. but the ereditor^lass was made up from among our own citizens. Municipalities provided for the wants of the future, in costly aqueducts, in spacious city-haUs, in grand parks and generous avenues. States constructed imperial water-ways, and rendered themselves debtors for the assured education of the young, for the care of the insane and imibecile, for the protection of the law-abid- ing from the criminal, and through a proud solicitude for the quick development of their multitudinous domes- tic resources. The people themselves, conscious of the splendid promise of the great agencies of' steam and electricity, supplemented the not wholly selfish purposes of capital by magnificent subscriptions to railroads, to telegraph companies, and to every form of industry which avails itseK of the joint-stock principle. The shares and bonds resulting from these growing necessities of a young and daring nation had everywhere a local market, and in large proportion were the subject of daily dealing at the New York Stock Exchange. That consciousness of the manifold uses of this form of invest- ment which already filled Europe had seized upon the mind of every iuteUigent class in this country. It was a popular medium for the employment of the meagre savings of men on salaries, or the week's earnings of mechanics. It was not less the favorite with that more fortunate portion who sought security for surplus wealth. That current finance was already deeply affected thereby was notably made evident in the depressed days of 1854 and the subsequent revulsion of 1857, when the fact that the banks were more and more in the custom of lending PEELIMINAEY. ' 7 money to brokers and merchants on security of stock was one of the most alarming revelations of the time. Ever and anon, also, in the columns of the daily press it became apparent that these paper values were the in- strument of speculative tactics, some of them as old as the Mississippi Land Scheme and 'Change Alley, while others, if not of purely American origin, yet had re- ceived their first definite nomenclature in our domestic share-mart. A degree of public interest attached to the proceedings. The morality of the United States, more effective, if not more earnest, than in recent years, launched forth invectives which carried force and in par- tial ways affected public opinion. A stock operator was regarded somewhat as lottery dealers are at present. In rural cities and villages the summer visit of brokers was an occasion of suspicion. At watering-places solid merchants warfied their dames and daughters against these ignes fatui of wealth in the same terms of denun- ciation which opulence assumes toward social adventur- ers. And although the great capitalists of the nation, through whose agency railroad shares. State bonds, and other securities had become marketable, were well aware that in this epoch there cannot be a great people with- out a great stock exchange, and that, in comparison with the essential advantage of an open mart for the equalization of values, the chance profits of speculation were as naught, they nevertheless so far acquiesced in the prevailing opinion as to seek to cloak their inter- course with what was already known as "the Street." The great majority of brokers made it their pride that 8 MEN AND MYSTERIES OF WALL STEEET. they performed a purely commission business. However much in the secret ledgers of their ofiices the outward assumption lacked confirmation, they claimed to be high- priests of the ideal in stock-market transactions. In the fmal years of the last decade a palpable change began to disclose itself, both in opinion and action. Nice distinctions perceptibly crumbled. Eailway directors were less chary of their reputations. Brokers had fa- miliarized themselves with the idea that speculation was a necessity of their calling. The general public had ap- parently ceased to regard the stock market as som^hing that could be overthrown by sentimental outbursts, and from accepting it as a fixed fact there was an evi- dently growing disposition to overlook its shortcomings in its larger usefulness. Then came the terrible apparition of war, with swift- succeeding consequences. An enormous national debt was created, absorbing more than a billion and a half of dollars. Large emissions of greenback cui-rency took the place of gold, and by its immense volume stimulated pro- duction and gave the loyal sections of the nation an aspect of sudden opulence. The earnings of all the great share companies were rapidly augmented. Eailroad stocks be- gan a succession of gigantic upward strides in the mar- ket, and through the deceptive appearance of increased values, a pretext was afforded for a notable expaneion of paper capital. The mining corporations, operating in the distant West, declared unusual dividends. The gen- uine wealth, foreshadowed by the rich yield of Petroleum in Pennsylvania and "Western Virginia, opened a new ave- PEELIMINAEY. 9 nue for investment. And the excitement naturally grow- ing out of the excessive demands upon reserved capital by the vast varieties of new securities was lifted to flood- tide by the exaggerations of speculation and the rumors of millionnaire fortunes disappearing and reappearing in the vortex of Wall Street. In one form or another every citizen throughout the country was affected by the changed condition of affairs. Money always has a tendency to concentrate itself, and stocks, bonds, gold, rapidly accumulate at those points where the most considerable financial activity prevails. The greater the volume of floating wealth, the more conspicuous is this peculiarity. It resulted from this law that New York City became to the United States what London is to the world. Eminent before, this chief metropolis of the seaboard now assumed an abso- lute financial supremacy. Its alternations of buoyancy and depression produced corresponding perturbations in every State, city, and village in the land. A strange sympathy exists between aU descriptions of paper securities under a common monetary system. The reason may not always be apparent, but the fact never ceases to be apparent. A fall in one class may lead to a fall or rise in another class ; there may even be a want of congruity between the date of the cause and the date of the effect ; but the sympathetic relation remains constant, however perplexing its developments. Potent, therefore, through ' these subtle influences, over even the municipal and county bonds, — the shares and manifold securities of remote and insignificant commu- 10 MEN AND MYSTERIES OF WAIL STREET. nities, — the paramount money-mart exercised peculiar control over those larger values with which the share market especially concerns itself. The holder of Gov- ernments in Wisconsin or in Vermont sought the money value of his property, not on the face of his bond, but in the telegraph report of Wall Street transactions. Ad- ministrators of estates gauged their worth by multiply- ing each budget of State bonds, or railway shares, by the last " quotation " fi'om New York. The Baltimore mer- chant who had made a shipment to Brazil when gold was 150 saw his venture return not only with the fair margin of commercial profit, but ^vith the additional gain incident to a rise of specie to 260. Country trad- ers found their local banks perpetually influenced by the ease or stringency of money in a city perhaps many hundreds of miles distant. Eetail city dealers averaged the probabilities of the incoming month by the stock barometer, and expanded their orders with the rise of the market. Moreover, these conservative considerations were not the only ones that formed the interest of Wall Street. Flushed with greenbacks, and influenced by the vary- ing fortunes of our armies, the whole population of the North gave itself up to a speculative frenzy. Brokers were overwhelmed with orders. The slang of the stock- board found its way to the drawing-room. Everybody made ventures. Gold was the favorite with ladies. Clergymen rather affected mining-stock and Petroleum. Lawyers had a penchant for Erie. Solid merchants, pre- ferring their customary staples, sold cotton or corn for PEELIMINAEY. 11 future delivery, or bought copper and salt on margins. Some of the strange episodes of that period may be glanced at hereafter, but our present object is rather to indicate their existence, and to remark that the conse- quences of that excitement are likely to be permanent. The war, which made us a great people, made us also a nation in whom speculative ideas are predominant. The events of ten years have educated us into a certain scientific appreciation of hazards, into a greater degree of foresight, into a habit of action which combines conservatism with an aptitude for risks. To-day the wires of our telegraph companies are constantly bur- . dened with orders to brokers from gold or stock oper- ators, thickly scattered throughout every State in the Union. Many of these persons are large capitalists ; the majority are salaried men, small merchants, indi- viduals who deem it an averagely safe business to divert their surplus to the chances of the market. In sum total, the number is unquestionably one of high figures. N"or if we take into our reckoning the enlarged propor- tions of the values naturally the vehicle of speculation, and the inevitable fluctuations to Avhich they are sub- ject, is there any just reason for anticipating a decline in this tendency? As a matter of fact, that power which, for lack of a better name, common usage denominates Wall Street, has become of overshadowing importance. The varia- tions of its share market affect the whole volume of capi- talized indebtedness the country through. Its loan mar- ket holds the keys of trade, and invigorates or depresses 12 MEN AND MYSTERIES OF WALL STREET. all our domestic industries. Its daily sales of gold influ- ence our entire international commerce. Indeed, if the United States holds steadfastly to the prosperities of peace, ia three decades it will be the controlling financial force of the world. At present, London, Frankfort, Paris, retain a certain supremacy, but the element of longitude is against them. The New York broker by high noon knows the aspect of the London stock market and the European Bourses. He scans their closing prices, while bids and offers are still resounding through the halls of our home Exchanges. Thus far the Cables serve only in . respect to purely American securities, but the set of for- eign speculative Capital is westward, and there is needed nothing but the growth of confidence to secure us the enormous advantage of the active employment of the accumulated wealth of England and the Continent. To exhibit in all its profound aspects the working of our money centre, whether in its international relations or its influence upon oui- multiplex national life, would be an achievement of incalculable value. That no such work has yet appeared is doubtless due to the great em- barrassments of the subject. It is needless to add that the present volume has far humbler pretensions. Its purpose is limited to a very incomplete survey of some of the more obvious phenomena of Wall Street, and with especial reference to its speculative transactions. AMiat these phenomena are we shall now proceed to consider. THE NEW YORK STOCK EXCHANGE. 13 CHAPTEE II. THE NEW YORK STOCK EXCHANGE. THE year 1835 was one of high speculation in New York. In. January the famous Morris Canal and Banking Company "corner" culminated. The stock jumped from almost nothing to 185. In July and August Wall Street had so far forgotten the lesson that 64,000 shares of Harlem were sold for future delivery, although the whole capital stock was only $ 7,000. In- cidental to this immense activity were corresponding "irregularities." Bartow, Cashier of the Commercial Bank of Alkiny, was a defaulter to the extent of $ 130,000. ■ "Wilding, an operator from London, disap- peared with f 45,000 worth of shares. Some of the mem- hers of the State Legislature were involved in the trans- actions, and one was expelled from the Senate. At Buffalo, Benjamin Eathbiin had reached the climax of his land and house ventures, and was just on the eve of a $ 3,000,000 failure, with half his liabilities in bills bearing forged indorsements ! Does any one know how much Wall Street was worth in those days ? It is a hard question, — to be solved only by inferences. There was a Jew operator, for ex- ample, who made occasional bank deposits of f 500,000 in a day, and men spoke of it under their breath. Three 14 MEN AND MYSTERIES OF WALL STEEET. years before a block of a million dollars in United States funds had been purchased, and the transaction was still town talk. The Stock Exchange itself was so far un- equal to its young ambitions that it twice refused to enforce contracts in the case of brokers caught in the " corners," and on a test vote, in a week of unparalleled excitement, could only muster fifty-two members. The lapse of thirty-five years has certainly wrought changes, and the contrast is as wholesome as it is remark- able. To-day the New York Stock Exchange includes in its roU-caU over one thousand names. It eclipses all other stock organizations in the world for wealth. The daily credits and deposits of brokers ia city banks and trust companies are estimated in hundreds of millions, and the par value of annual sales, made at the boards and "over the counter," are computed as considerably exceeding $ 22,000,000,000. This notabk increase in financial importance has been attended by correspond- ing results. Speculations, which, in former times, swept over the street like a monsoon, now produce mere rip- ples. Defalcations, forgeries, bank robberies, disappear from sight and thought, as the sea closes over wrecks. A healthy conservatism and a profound sense of responsi- bility lie at the base of the vast proportion of opera- tions, and whatever may be the vicissitudes of individ- ual members, there is an unvarying enhancement of permanent collective wealth. The present has another triumph over the past. In that very year 1835, just ten days before Christmas, oc- curred the great conflagration which must ever remain THE NEW YORK STOCK EXCHANGE. 15 one of the dark memories of New York. The Stock Board, then meeting at the old Merchants' Exchange, became suddenly houseless, and from that day, for thirty years, it flitted hither and thither about the neighbor- hood, now in an attic over the Corn Exchange Bank, and again in rooms reached by obscure passage-ways off from William Street, — always without permanent abid- ing-place, and with none of the surroundings essential to give dignity and character to such a body. The en- ergy of a few public-spirited and far-sighted members has changed all that. Through a building committee, incorporated under State law, a fund was subscribed, the result of which now appears in the fine and admirably ordered edifice, standing on the west side of Broad Street, a few steps off from Wall. Perfectly fire-proof, with a stately marble faqade, free from any of the shams and flauntings of the " American '' style of architecture, a magnificent vaulted basement, where property of vast value is held secure from theft or flame, and with spa- cious halls furnished forth with all the fitting appoint- ments of an imperial business, the New York Stock Exchange is one of the most substantial and note- worthy structures in the metropolis. Before entering the spacious Broad Street portal and surveying the interior, it is highly essential that the organization of the Board and the salient features of its daily routine should be thoroughly comprehended. On the 29th of July, 1869, the consolidation of the Govern- ment and the Open Boards with the old historic Stock Exchange, which had been provisionally completed for 16 MEN AND MYSTEKIES OF WALL STREET. the space of two months, received its final confirmation by the passage of a revised Constitution and By-Laws. This new organic law is marked by a conservatism that cannot fail to impart a character and strength to the Association, such as its high representative position demands. As before, there is a President, whose office is mainly perfunctory, and there is a Treasurer of semi- annual importance ; there are two Vice-Presidents, a Secretary with his Assistant, and the EoU-Keeper, — all intrusted with the duties naturally incumbent upon similar officers in every organization of men, and with the .special and extremely arduous work incident to the daily sessions ; but the real Executive control now rests with a Governing Committee, consisting of forty mem- bers, selected from the whole body, together with the President, Secretary, and Treasurer, in their unofficial capacity. AU duties of administration, of legislation, of police, devolve upon this imjxrium in imperio. Divided into classes of ten, one of wliich goes out each year, the Committee, like its associate officers, is subject, in a certain degree, to the will of its constitu- ency. But beyond its right of election at the annual meeting, the Board is nearly powerless. Tlie Governing Committee may make or unmake, suspend, expel, re- admit. It may even alter the entire letter of the Con- stitution or By-Laws, and unless two thirds of aU the members of the Association disapprove thereof within one week, the changes become final law. So fuU an attendance of the Board as is required by this rule is almost unexampled, and the Committee is, therefore. THE NEW YORK STOCK EXCHANGE. 17 practically as autocratic as the Venetian Council of ten. It is scarcely possible to overrate the excellence of this revolution, which has transferred the essential power from that impulsive, volatile, centrifugal aggregate of forces which meets daily " round the table," to a select and authoritative body, who combine with a great ex- perience the sense of a great responsibility. This Governing Committee, ia reference to its varied functions, consists of seven subdivisions, whose duties correspond to -the distinct objects for which the Associa- tion was created. The most vital of these objects are : — First, the rigid scrutiny of all securities liable to be dealt in by the Exchange. Second, a proper surveillance over members in respect to their fidelity to contracts, and a stringent examination of the good character and responsibility of candidates for membership. Third, a systematization of the whole business of brokerage, so far as it relates to the intercourse of mem- ber with member. ]^o stock, bond, or other security can be dealt in by the Board, unless all the financial conditions, capital, number of shares, resources, etc.> have been searchingly examined. As an additional safeguard, the Exchange biuds itself to exclude any active speculative stock of any company which fails to keep a registry of shares in some responsible Trust Company, Bank, or kindred agency, and to give due public notice of every intention to increase its capital, either through the conversion of bonds or by direct issue, with the grounds for such in- 18 MEN AND MYSTERIES OF WALL STEEET. crease. This exceedingly conservative pro\dsion owes its origin to the stock-jobbing improprieties of the directors of the Erie and other railway companies, whose manceuvres during the past decade have brought more discredit upon Wall Street operations than all other causes combined. The rules for the admission of members, and for the government of those already enrolled in the organization, are necessarily very strict. In an arena where a mere nod may seal a contract involving hundreds of thou- sands, and a whisper is as binding as the longest and most cunningly phrased agreement of all the lawyers, men must have keen heads, vast experience, spotless business reputation. Every debt, every offer made and accepted, must be rigidly fulfilled. A member who fails must notify the President at once ; he, in turn, announces it to the Board ; the Secretary records the name on the fatal list ; the stock which has occasioned the default is sold or bought in open market under the rule ; and the broker loses every privilege of the Exchange until his creditors are satisfied, and the Governing Committee consents to his reinstatement. The reader has only to consult the Constitution to discover how carefully the Exchange has guarded itself against the hazards of fail- ure, compeULag " vireak " members to supplement their contracts by heavy money deposit, punishing fraud by expulsion, rendering suspension a severe penalty by its network of rules framed out of extreme solicitude for the rights of the creditor. Not less exacting are the pro- visions for new membership. Brokers' clerks, — repre- THE NEW TOEK STOCK EXCHANGE. 19 senting that alert, quick-witted, sure-footed class, which has grown up under the rough tuition of the street, knows its laws, comprehends the abiding sacredness of its verbal contracts, — find the doors of admission open much more readily than do men whose experience is limited to two or three years as capitalist brokers or bankers. The latter, indeed, must show a very clean record, and submit to a scrutiny in its very nature ex- tremely irksome. In former years the black-ball played an efficient part in winnowing out candidates, and the new regimen, although probably more free from the influences of personal dislike, is likely in other ways to be not less exacting. That portion of the government which concerns itself with the terms of each several class of contracts, and the regular order of business, can, in many respects, be more properly explained hereafter. It is a curious blending of law and usage, the latter being enforced as strictly as the former, although finding no place in the By-Laws. There is one point, however, demanding particular con- sideration. In all the great European share-marts there is a general executive organization differing only in local details from that by which the New York Exchange is regulated. But the functions of the of&cers cease at the moment when the real business of a stock-market begins. The syndic of the Paris Bourse, it is true, presides over the daily sessions ; but his duties are wholly subordinate, and the agens de change in the CorbeUle — that basket- like chamber where the parquet assembles — direct the market quite at their pleasure. In the London Stock 20 MEN AlfD MYSTEEIES OF WAIL STEEET. Exchange even this semblance of authority is wanting. The daily meetings are simply the confluence of a mob, in which everybody bargains with everybody, iu which there is no order, nor system, nor record of transac- tions. The New York Stock Exchange, in this regard, has a completeness to be found in no similar transatlantic organization. The securities dealt in by the Board are divided into two classes, known respectively as the Eegular and the Free List. No bond or stock can be or has been enrolled in either of these classes with- out due scrutiny in committee, and the ground of sep- aration is simple: The Eegular List must be called iu sequence by the Vice-President in the chair : the Pree List may or may not be called at the option of mem- bers. Of course, the former is the important class, and includes some two hundred and seventy-eight dis- tinct securities, comprising all the great railway shares and bonds, State and city securities, bank-stock, and a curious melange of express, telegraph, mining shares, etc., which is enumerated as "miscellaneous." Every day, at half past ten in the morning, the First Vice-President ascends the rostrum, in the ofi&cial chamber of the Stock Exchange, and goes through with the selected list in the subjoined sequence : — FiEST. — Miscellaneous Stocks. Second. — EaQroad Stocks. Thied. — State Bonds. FouETH. — City Stocks. Fifth. — Eaikoad Bonds. THE NEW YOEK STOCK EXCHANGE. 21 The assembled brokers, with their budget of orders, wait expectant ; and the instant a stock is reached that is in their day's book, they spring into the arena with a bid or an offer. When a " speculative " or favorite stock is called, the excitement deepens, and the air is rent with rival cries. The presiding of&cer repeats the trans- actions to the Assistant Secretary at his side, who at once records them, while the "marker" or black-board clerk writes off the prices upon the tablet at the head of the room. Where there is a doubt regarding buyer or seller, the Vice-President decides, subject to immediate appeal in case of dissatisfaction; such brokers as wit- nessed the transaction voting and generally upholding the Chair. As soon as the Eegular Call is completed, the Free List is in order, and the Vice-President repeats the name of such stocks as the members may select for dealings, the Assistant Secretary recording every bid and the accompanying details. After this the session closes, unless the members in attendance wish to call up anew particular stocks on the Eegular List; this pro- vision allowing of dealings in those securities which were slurred over in the routiue morning call. At one o'clock the afternoon session is held, over which the Second Vice-President usually presides. The usages of the Morning Board apply here as well. The Vice-President holds the market in his hands, directs aU movements, announces each transaction, and arbitrates in all disputes. The Assistant Secretary also renews his record of aU biddings, and in his book, at the close, the whole history of the day's work appears. 22 MEN AND MYSTEEIES OF WAiL STREET. Fifteen minutes before the first meeting at the Eegu- lar Board, the Government Board begins its sessions in an adjoining chamber. The same routine is observed: a Vice-President directs the market; an Assistant Secre- tary notes down against each class of national securities, as it passes the gantlet of the brokers, the prices offered and demanded, and every important feature of a transac- tion in case of positive sale. Were the stock-dealings of Wall Street limited to these two rooms, an efiicient safeguard would exist against some of the most perilous phases of speculation. But it has happened, partly on account of the great volume of daily business, partly from a desire to avoid, for speculative reasons, this very registry, that a chamber is provided at the Exchange, where members may bargain with members at any hour throughout the day. This is known as the Long Eoom. Practically, then, the daily routine of brokers at the Boards might be classified, as follows : — Government Securities. All other Securities, Shares, Bonds, etc. Government Board. Regular Board. Sessions lOJ, 12^, 2^. Sessions lOJ A. M. ; 1 P. M. Every class of Speculative Stock on any list of the Stock Exchange. Long Room. Sessions Continuous, from the moment brokers come down in the morning, till night arrives to relieve them. It is apparent, from what precedes, that the really im- portaiit officers of the Stock Exchange are those in active THE NEW YORK STOCK EXCHANGE. 23 duties at the daily sessions. The Vice-Presidents per- form all the work which is not ornamental, with the Secretary and his Assistant as active coadjutors. Next in usefulness is the EoU-Keeper. He records the fines, and no body of men are to all appearance more fond of breaking over minor rules, and promptly meeting the penalty, than New York stockbrokers. The annual dues of the Exchange are only fifty dollars, but the fines of iadividual members not seldom mount up to nearly ten times that sum. Any interruption of the presiding offi- cer while calling stocks renders a broker liable to a penalty, "not less than twenty-five cents" for each offence. To smoke a cigar within the Exchange costs five dollars. Non-attendance at special meetings sub- jects one to a fine of anything under five dollars. A broker cannot stand on a table or chair without paying a dollar ; or innocently fling a " paper dart " at a neigh- bor without being amerced ten dollars. It costs twelve and a half cents to call up a stock not on the Eegular List, and all the way from one to five dollars to do any- thing not enumerated in these offences which may be deemed indecorous by the Presiding Officer. Besides the register of fines, there is another officer whose name has no place in the publications of the Board, but whose services are perpetually called into req^uisition by almost every member, and whose pres- ence is an inevitable and formidable apparition to a chance visitor at the Exchange. Concerning his t6U we shall presently have occasion to speak somewhat fully, for the now sufficiently instructed reader will 24 MEN AND MTSTEEIES OF WALL STREET. meet him almost face to face as lie passes witli us over the threshold at which we have wearily detained him, and enters at once into the main hall of the Exchange. A DAY AT THE BOARDS. 25 CHAPTEE III. A DAY AT THE BOARDS. THE first impression on entering the Stock Exchange is upon the tympanum. A genuine tourist almost inevitably has a dreamy reminiscence of Niagara. The visitor finds himself in the vestibule of a vast chamber, which stretches a furlong deep from Broad to New Street. At the farther end, shut off by successive iron barriers with narrow gateways under watch and ward, is a huge basin-like enclosure, filled with wild human tumult. Peering down through the high-vaulted, dim- lighted space, the eye sees nothing bat excited faces, arms flung wildly in air, heads appearing and disappear- ing, — a billowy mob, from which surges up an incessant and confused clamor. The straining ear distinguishes ever and anon an individual voice rising in shriller pitch or heavier volume, only to be drowned by fifty other cries booming and echoing out from the abyss. This chaos of plunging sound and deafening roar is the Long Eoom. To comprehend it, one mus* approach nearer. Pre- vious to such visit, however, a stranger should instruct himself by mounting the staircase at the left and study- ing the more orderly proceedings of the regular sessions. Just at the head of the stairway are the private and public approaches to the Eegular Board. At ten in the 26 MEN AND MYSTERIES OF WALL STREET. morning we can take a leisurely survey of the architec- tural peculiarities of the room. Opening the nearer door, we suddenly confront the mild-mannered Cerberus of the Stock Exchange. The reader has already been fore- warned of this unescapable phenomenon. His duty is to challenge every stray-comer. Properly introduced by officers or members, you can pass. Without these credentials, there is no ingress. His guards are stationed at every doorway. They rise up before you at all the avenues to the Long Eoom. They stand athwart the threshold of the Government Board. One might as weU attempt to visit the Kabla at Mecca without swearing by the Prophet, as to enter the sacred arena of the brok- ers, when lacking satisfactory introduction. Besides his sterner function, " Peter," the door-keeper, acts as a sort of general factotum. When telegraphic messages ar- rive for brokers inside, he shouts the name with a reso- nant voice rolling high above the clangor of the stock market. In fact, with his leash of page-boys who assist him in distributing the incoming telegrams, he is one of the most remarkable institutions of the room. Sixteen years at his post, he has grown into his place, and the broker guild could no more do without him than they could speak of him other than by his Christian-name. Showing our permit with the authentic signature of President Neilson, Peter nods his head graciously, and we walk forward. We are now ia a haU some seventy feet long and fifty broad. The lofty walls are lined -nith heavy green damask. At the base of the room, and run- ning round the most of two sides, is an iron railing be- A DAY AT THE BOAEDS. 27 hind which there is ample accommodation for that mot- ley throng which daily gathers in the strangers' gallery. Within this enclosing balustrade, in the space reserved to brokers, the floor slopes gradually toward us in terrace after terrace of arm-chairs, until it reaches the interspace in front ; then it falls sharply right and left into a series of semicircular steps leading to a hollow in the middle, where stands an elongated table at right angles to the official rostrum. This is the point where the excite- ment of the Board fuses to white heat, the central centre, the maelstrom, the mid arena of the combat. Above is the platform of the officers, with the Presi- dent's pulpit-like elevation flanked on the left by desks for three secretaries, on the right by that of the EoU- Keeper. Two black tablets on either side against the wall slide up through easy grooves, at the will of the recording clerk. On these the prices of the more active stocks are marked off as rapidly as made. At the ex- treme west corner is a telegraph key-board, and on the east the gold indicator. Installed in gilded frames, the keen faces of old John Ward and Jacob Little overlook the transactions of a generation whose daily dealings eclipse those of these giant veterans in a lifetime. All the time that we have been glancing about us the floor has been filling up. Some twenty or thirty members are standing round the table, others are chat- ting idly among the arm-chairs. Peter watches at the entrance with four or five page-boys around him. The blackboard clerk is looking over his crayons. Shrewd- eyed, wide-awake Secretary Broadhead has just seated 28 MEN AND MYSTERIES OF WALL STREET. himself in his throne-like chair, and is already sur- rounded by half a dozen brokers. The Eoll-Keeper is opening his book, and the Assistant Secretary is adjust- ing himself to his desk. Lithe, light-haired, pleasant- faced Vice-President Wheelock, who has borne the honors and ardor of office full thirteen years, every May- day more alert and popular, bends over his stock-jobbing pulpit, and sharp at the half-hour caUs the Board to order. As there was no official business at yesterday's session, there are no minutes to be read, and the day starts abruptly with the Eegular List. V. P. " Delaware and Hudson Canal. Any bids ? " As no broker makes an offer, the mallet rings down upon the desk, and the call proceeds : — "Pennsylvania Coal, Central Coal, Cumberland Coal, American Coal, Spring Mountain Coal, Canton Company, Western Union Telegraph — " Voice. "I '11 give '5 for a hundred, — '5 for a hun- dred, — '5 for a hundred." Other Voices. "A hundred at |." "Five hundred at a |." "Any part of five hundred at a \:' First Voice. " I '11 take a hundred." V. P. "At 5^. A hundred at ^. Any bids?" Rap. Bap. "That will do for that stock. — Quick- silver.'' Bohust Bidder. " 12 for a hundred," — " 12," "12|," — "13," — "14" — Voice. " Sold." Simultaneoiis Second Voice. " I take that stock." V. P. " One hundred to Snow at 14." A DAT AT THE BOARDS. 29 Second Voice. " I claim that lot, Mr. President." V. P. " The Chair decides that Snow made the pur- chase." Second Voice. " I appeal." V. P. " Is the appeal seconded ? " Fresh Voices. " Second the motion." — " Second the appeal." The Vice-President brings the question before the Board, and Broker 'No. 2 has but three votes to show for it. V. P. "The Chair is sustained. Go on with the stock Mariposa. Any bids ? — Pacific Mail." And so the mill grinds on. Mgh a billion and a half of bonds and shares will be . flung into the swaying crowd, before the list is ended. Old prices disappear; new prices come forth, and the click of the telegraph is already helping the financial world to go over its ledgers anew, and record the shrinkage of a hundred million dollars, or twice that sum of fresh new wealth born of a buoyant market, and destined perchance to untimely death before the sun has swept twenty-four hours far- ther through the eternities. As the moment for the call of Eailroads approaches, the chamber assumes a vast access of life. A fresh stream of brokers pours through the private passage, and eddies round the President's desk, or swirls off to- ward the base of the room, where eager crowds are dis- cussing the terms of loans, or are improvising private markets for the various shares. Behind the pubUc railing a motley throng has gathered, — the curious or 30 MEN AND MYSTEEIES OF WALL STREET. the anxious, small speculators, merchants from the coun- try down town to see the sights, all sorts of persons from aU sorts of places, by dozens on quiet days, in shoals of hundreds on hundreds when the rumor of a great speculative campaign is abroad. Through this dense aggregate of inquisitiveness, intermittent messenger- boys twist in and out, carrying hurried whispers back to offices, or dashing forward Avith emergent orders for brokers whose names are shouted by the page-boys in shrillest treble. The roar from the cock-pit rolls up denser and denser. The President plies his gavel, the Assistant Secretaries scratch across the paper, registering bids and offers as for dear life. The black tablet slides up second by second with ever-fresh figures evolved from the chaos below. Every tongue in every head of all this multiform con- course of excited or expectant humanity billowing hither and thither between the walls, is adding its contribution to the general bedlam. The keenest weather-beaten operator of all that outside world in the gallery vainly strives to follow the biddings of the voices "round the table," — those voices of destiny, which he wishes most to hear, torn in a hundred tattered shreds of sound by the intervening shoutings, shrieks, and sibillations. Peter, now overworked by ever-fresh arrivals of tele- grams and orders, bellows out "Smith," "Jones," "Eobinson," in interminable succession, the names ex- ploding in mid air with the crash of a forty-pounder. Failing of response, Peter discharges his pages like a sheaf of rockets into the tumult, and "Jones, JONES, A DAY AT THE BOARDS. 31 Jones, Smith, JONES," mingle with "Buyer 30," "A half," " Seven eighths," " Cash," the tara-ta-ta-tat of the auction hammer, and whatever else aids the confusion. Suddenly the Chair shouts, " New York Central." At this word a thrill of excitement permeates the room. A whirl as of a tempest carries every broker to tlie great interspace in front. The table has momen- tarily disappeared from sight. In its place is a tide of swaying hands and faces. The rattle of the President's hammer is like the falling of a pin in the immense con- fluence of shoutings. " I '11 sell five hundred at 95." No bid ! " At 4|, buyer 10." " Take 'em." " Five hun- dred more." No bid ! " Five hundred at 4." " Five hundred at 3, seller 30." "At 2, cash." "Any part of a thousand at 90." This last offer is as a huge stone flung into a geyser. A silence born of astonish- ment and dismay fills the multitude, followed by the plunging roar of a hundred voices. Up in the eastern corner a grave-faced man has his fingers on the key-board, and is spreading the news of this fierce " bear " raid, by -w^hich Central has been ham- mered down five per cent, through four hundred bankers' and brokers' offices. Down in the cock-pit the Commodore's " pups," as the merciless, cacophonic " street " argot denominates the broker friends of Vanderbilt, are making an ineffective rally. They have carried up Central to 91, 1^, 1^, 1|, when the load proves too heavy, and the sliding down- ward scale begins, and again Ursa Major's voice sounds out like a bassoon, — " At 90, buyer 3 or 30 ; any part of five ' thousand." 32 MEN AND MYSTEEIES OF WALL STEEET. V. P. "Any part of five thousand is offered at 90, buyer 3 or 30, — what 's bid ? " The hammer is poised for the fall which will clench Central at 90. Just on the second, however, a little wiry man, who has been wriggling through the contending gladiators with a crumpled bit of paper in his tightening hand, screams oiit in the face of the king bear : " I '11 take your lot, and five thousand more. 91 for a thousand, — '2 for five thousand, — '3 for any part of five thousand." A fusillade of voices follows the leader cry. The ear catches " 3^," — " |," — " 4," — " 5." " Take 'em." " Sold." " Two hundred more." " Sold." " A hundred more." Ko response. Down goes the gavel, and Cen- tral closes firm at 95. Hudson succeeds and Harlem after, the buUs now jubilant and holding the market. While the battle goes on in the cock-pit, a whisper spreads that the money-market is active and loans have risen to seven per cent, and ^, {, or f commission. V. F. " ISTorthwestern. What 's bid ? " A voice like a sledge-hammer. — "A hundred at f, five hundred at |, any part of a thousand at |." Half a dozen brokers. — " Give you \ for a hundred." " I for five hundred ! " " | for a hundred ! " First Voice. " Sold. Five hundred more. Five hun- dred at I ; five hundred at \. A hundred at an ^ ; a hundred at '4 Help yourselves, boys, at '3f, regular or buyer 3." The market trembles. The buUs hesitate. The tight- ening money-market is doing its work. Other bears fling themselves into the m4Ue. Northwestern plunges A DAT AT THE BOAEDS. 33 downward. Twenty hands are snapping out whole vol- leys of descending bids, — " Two hundred at '4." " Two hundred at '3|." " Take 'em," cries a bull, struggling to hold the market. " Five hundred more at |." " A hun- dred at f." " I '11 give ^ for a hundred ! " "Sold." "Five hundred more." " Five hundred at |." " Take 'em at a ^." A sudden lull at this last bid. The Vice-President seizes his opportunity. " That will do for that stock. No more offered. The stock " (turning to the " marker ") " closes at 85 J- 1." " Eock Island, gentlemen ! " And so on and on, pausing for five minutes over some speculative stock or a new State bond, and racing for- ward at the rate of ten, twenty, or even twice that num- ber in the same space, when the securities belong to the investment class. The Eegular Call completed, the Free List is in order, and the President brings forward such stocks as the brokers present wish to deal in. Possibly the stock of some wUd-cat oil company may be named, and a member, anxious to appreciate its value, will bid " 15 for a hundred, — 20 for a hundred, — 25 for a hun- dred." Other brokers in irony shout: "A hundred at '5^." " Five hundred at |." The Vice-President cries, " Any more bids ? OilvOle Scrip. 25 bid." TJp go all the hats, and the Board breaks out in a round of admiring cheers. Still more stocks, new bids and offers, now a light pattering, and anon a driving storm of cries. Suddenly a Secretary mounts the rostrUm. A silence as of the tomb overspreads the chamber. Every hat is lifted decorously from head. The death of a member 2* O 34 MEN AND MYSTERIES OF WALL STEEET. is announced with a few appropriate words. Then back go the hats, bids and offers resound once more, and the coffin is fo:i^otten in the coupon. By this time the room is almost deserted. A strag- gling half-dozen spectators stand near the door. Per- haps twenty-five brokers are round the table. The Free List is rapidly finished off. If any member wish to bring forward a particular stock on the Eegular List, which was hastily passed over at the first call, now is his season. Fortunately for the reader, the bidding to- day is very brief, and in a few moments the Board adjourns. As we pass into the corridor, we notice a boy at a side-stand with the morning share-list for sale, printed in a private ofi&ce up stairs almost on the second that the first call is finished. The Bankers and Brokers' tele- graph, whose wires are just at the left, has, however, superseded this list to a great extent, and it is now useful mainly for files. Before us, opening on the floor where we now stand, is the room of the Government Board. The bidding there is still going forward, but only a small portion of the members are present. In fact, in order to see this chamber in full excitement, it is necessary to be on hand at the first caU. The early Board meets at a quarter past ten. Had we entered at that hour, we should have found ourselves in an apartment little more than a third of the size of that occupied by the Eegular Board, with much the same appointments, but with this difference, that A DAY AT THE BOARDS. 35 there is no cock-pit, and the sumptuously cushioned seats rise tier on tier from the floor to the green tapestry . of the wall. In these chairs the Government Brokers sit. At the head of the chamber is the rostrum for the officers, and the order of proceedings is very little dis- similar from that which we have already witnessed. The VRe-President begins : — " 6s '81 registered, — '81 coupon. 5-20s '62 regis- tered, — coupon. What 's bid ? " Here and there from the flanking chairs come sputter- ■ ing bids or offers : — " Ten thousand at f , buyer 3." " I '11 give an |, seller 3, for the lot." " ^, buyer 30, for fifty thousand." " I, regular, for any part of five thousand." First Voice. " Sold, — five hundred." The presiding officer repeats the sale and terms, .the Secretary makes his registry, and a new bond is started. Sometimes when 5-20s are called, there is at first only one voice, which rings the changes on "I 'U give 115. I 'U give '15 for a thousand, — '15 for a thousand." Presently, however, before any response follows the offer, a member in a distant comer, either carelessly or maliciously, shouts out, " I 'U give '14 for a thousand, — '14 for a thousand." The Vice-President plies his hammer. " Fine Irving, — fine Irving fifty cents." The EoU-Keeper proceeds to make his little note of it, and Irving, who has vio- lated the rule, founded on common-sense, which forbids a member from making a bid below or an offer above the 36 MEN AND MYSTERIES OF WALL STREET. one which has the floor, immediately suhsides amid the laughter of his neighbors. Occasionally an interruption of a grosser character . occurs, a member leaping from his seat on some slight provocation, and striking off the hat of the man who has offended. " Fine Harrison, fine Harrison again, fine, FINE him again, — fine Harrison," cries the Vice-President, repeating the word without cessation until the broker's wrath has been appeased, and he returns to his chair with the disagreeable reflection that a heavy score is against him for the semiannual settlement-day. Every ' repetition of that fatal monosyllable was a fresh mark of fifty cents or a dollar against his name. Generally, however, the Government brokers are more orderly than their neighbors in the Eegular board. Indeed, the whole proceedings are more decorous and respectful, the bid- ding, half the time, being carried on in a low conver- sational tone. At second call there is a brief excitement, but when " things are dull " throughout the street, this room peculiarly reflects the external influences. Very different it is, however, on days when some special cause provokes great fluctuations. Then the members spring from their seats, arms, hands, excitable faces, rapid vociferations, aU come in play, and the ele- ment of pantomime performs its part in assisting the human voice as naturally as among the Italians of Satu- cuse. To the uninitiated the biddings here are as un- intelligible as elsewhere, sounding to ordinary eai"s lilce the gibberish of Victor Hugo's Compachinos. But the comparative quietude of this Board renders it easier to A DAY AT THE BOARDS. 37 follow the course of the market, to detect the shades of difference in the running offers, and generally to get a clearer conception of this part of the machinery of stock brokerage. Nor is it only for grasping those special brevities of utterance with which sales are affected, — as condensed as the military vocabulary of Hardee's Tactics, — that this Board is a good school. One can study not less readily that other feature of the market, — the theatrical effects, the simulated eagerness which seeks to influence values by the energy with which offers are made, as if an immense money force were at work to crush down 5-20s to zero, or to tide them up to limitless heights. It is the skill of fencers, the false lunges, the flourish which may mean a parry or a thrust, a perpetual series of deceptions which never deceive. One slowly comes into a clear understanding that all these enthusiasms are stale ; that, although in some instances the tactics are freshly evolved from the unexpected developments of the day, the main shaping of the register is very much like the results of a political caucus in which all motions and nominations have been previously arranged, and whatever is novel is due to the clashing of opposing cliques. If the visitor wishes to master one problem at a time, therefore, he wiD. keep his seat in this chamber, .and he will find abundant room for reflection in the thought that here around him are the men who daily gauge the value of a bOlion and a half of national debt, whose shouts are the annihilations of millions or a crest-wave of momentary fresh wealth, rippling through bank-vaults and the iron chests of the 38 MEN AND MYSTERIES OF WALL STREET. thrifty, east and west along the tremulous wire, to San Francisco at one end and Frankfort at the other. In "doing" the Stock Exchange for the first time, however, it is well to content one's self with the merely outward aspects. Brokerage is a science, and, apart from the technical difficulties, the phenomena of the Boards depend upon a great number of distinct forces, all acting from without and only disclosing themselves vaguely in the prices of the daily share list. Here on the upper floor the official record has notched the last wave line of each billowing security, but below fresh elements are working, and in the heaving caldron of the Long Eoom is a changeful ebb and flow that has neither rule nor limit nor certainty. There, least of all, should one re- sort for a key to the mystery of the street ; but, having visited it, the reader will have prepared himself for the explanations of subsequent chapters. You can reach the Long Eoom from the antechamber on Broad Street, from the Gold Eoom by a side entrance, or from ISTew Street, — the latter ingress affording a bet- ter opportunity to the spectator.* As we have before stated, it is a deep basin, broken up into circles of broad steps descending one below the other to a floor, * The presence of a spectator in the Long Eoom must be understood as metaphorical. That theatre of finance cannot be approached, as we are informed by most eminent oiiicials, except by payment of fifty dol- lars. This, to be sure, wiU purchase a season ticket. But as single ad- mission is only possible on the same terms, it makes this dramatic per- formance the most costly in the world. The cause of this exclusiveness, which has, to say the least, an absurd aspect to mere sight-seers, is partly because of the incessant caUa upon the courtesy of officers, but chiefly X PI r- O o w o o A DAY AT THE BOAKDS. 39 perhaps fifteen feet in diameter. When the Eegular Board is convened, this room is usually deserted ; but it can scarcely ever be called empty, and, frequently, long after half past ten the chamber seethes with a crowd un- willing to leave the perpetually fresh sensations of the free market for the slow routine of official sessions. At all other hours the Long Eoom is thronged, some- times densely thronged. Here the great bulk of pur- chases and sales are made. In the Eegular Board an aver- age of seven million dollars' worth of shares are sold in a day. In the Long Eoom, brokers roughly estimate that ten times that amount is bought or sold between sunrise and nightfall. On field-days the whole capital stock of a speculative railroad will be tossed from hand to hand in the financial shuttlecock. A hundred dollars become three millions, or a million lessens to a mill. There are the same shouts, the same cries of messen- ger-boys, the same confusion of hands and arms, which one finds in the rooms above ; but here everything is more intense, blinding, deafening. Every broker has a different mission. . Two hundred and seventy-nine mem- bers may be bidding for two hundred and seventy-nine different stocks in the same breath. Just as in the Ni- from the fact tliat the lobbies on both the Broad and the Kew Street sides have been found very valuable places of resort to "outside " brokers and speculators. The frequenters have nearly all the advantages of regular brokers, and though they are not permitted to join in the Long Eoom cries, there is nothing to prevent their making quiet bargains on the basis of current bids. Nearly all the old " curbstone '' dealers now hold tickets, and are willing to pay the small annual charge for the privi- lege of warmth, use of room, and the superb chances for speculation. 40 MEN AND MYSTERIES OF WALL STEEET. agara whirlpool there are innumerable minor eddies, whirls within whirls ; so here, also, there wiU be a little circle of Erie, another of Pacific Mail, Few York Central, Eock Island, or any other great speculative stock, with the skirting swirl of fifty other stocks boiling up in spasms and flowing into a vast maelstrom of soimd. Orders of every description and of every conceivable amount come in from Philadelphia, Boston, Baltimore, from strange small towns in border States, from the re- gions of corn and cotton and iron, from where the spin- dle flies incessantly or the sugar-cane crackles in the mill, — from the capitals of Europe and the capitals of new- fledged States. No city would seem too great or vUlage too small not to have some vivid interest in this smelt- ing-furnace of values. Laden with these commissions, with the secret instructions of some king operator, with private schemes of their own, the brokers fhng them- selves into the mel^e with " What 's bid for Lake Shore ? " " Five thousand Lake Shore at 89, buyer 30." " At '8|, cash." " Take 'em." " Who ? — how many ? " " Five hundred." " AU right." " Hundred St. Paul at J, Bfuyer 3." " f , seller 3, for a hundred." " Port Wayne." " Northwest." " Any part of a thousand at |, cash." " One hundred at f ." " Erie at J, cash." " I want five hundred Eeading." " Give '2f for three hundred Cen- tral." " I '11 loan two hundred." " I '11 take a hundred flat" "Fifty Eock Island at '4f ." "Hundred at |." " I '11 sell a hundred more." " Take 'em." " Give it for five hundred more." Peaked faces, rosy faces, faces like sunshine, and faces A DAY AT THE BOARDS. 41 over which ripple all forms and shadows of expression. Voices like a church-organ and voices like a bag-pipe ; stridulous, whooping, screeching, deep-toned, piping voices, — voices like a trip-hammer crashing through all other cries, and carrying the whole market down by an offer as tremendous as' the lungs which gave it birth. Every step and crevice jammed with men. N"ote-books, arms, fists, dexter fingers, hats, heads, tossing, swaying, darting hither and thither with nervous eagerness, and suggesting a perpetual explosion of bomb-shells from be- low. Now concentrating upon a single stock ; again break- ing out into twenty different markets. Supple youths loom up above the level, with feet apparently planted upon nothing and standing firmly there, snapping up an odd lot of Pacific Mail here, and selling five thousand Michigan Southern there, buying a "put," making a loan, doing it all in the same moment like flashing light- ning, and then like lightning disappearing in the broad- cloth darkness. Dante, gazing down into this human craze, would have added another book to II Inferno. Men might go mad here and no one know it. In this hot air and reeling hfe they would go mad, were it not for that great undercurrent of humor which bubbles up continually through the earnest confusion. In the old days when buying Erie was not like pumping out the Atlantic Ocean, and Daniel Drew was wont to send in a legion of brokers with cross orders of " carry it up to 90," or " sell it down to 80," and the Long Koom would lurch and roll under the tornado of perplexing orders and bids, a lank face once emerged from the crowd with 42 MEN AND MYSTERIES OF WALL STEEET. a rocket-like cry of " I '11 buy any part of half a miUion Erie at 33 ! " Smash went the man's hat down over his eyes. " Give us a power of attorney on your brandy- bottle at Delmonico's," shouted somebody. A roar bf. laughter followed, and, the fit of fun still on, a broker with rich, mellow voice struck up, — " John Brown's body lies a mouldering in his grave " ; the whole assembly beating time with feet and hand, and joining uproariously in the chorus. Such transitions are of daily occurrence, and the im- mense flow of ready gayety perpetually relieves the tense and jaded brains of the habitues with some fresh and lively outburst. Usually the Long Eoom begins to thin out by four in the afternoon, but in periods of high speculation the session prolongs itself till five, the flickering jets of gas from the pillars throwing a ghastly flare over the pale and weary faces. In the feverish days of the war, night brought no rest to the stockbrokers. Scarcely was' dinner well through than up at Madison Square, first in a cellar beneath the Fifth Avenue Hotel, afterward in Gallaher's Exchange at the Broadway corner of Twenty-Third Street, the members came together anew, and carried on their hoarse and frantic biddings far into the small hours. The Jen- kins and Ketchum defalcations fortunately checked this human madness ; but even at present, during every access of speculative excitement, throngs gather in the corridors of the Fifth Avenue Hotel, and country guests A DAY AT THE BOAEDS. 43 can hear on every side tlie confusing street slang, with its subdued but significant utterances of "Take 'em ! " "A thousand more ! " " Closed at a quarter ! " Should we follow the individual broker through a single twenty-four hours, we should have a still more startling conception of the engrossing character of this profes- sion. At waking, he calls for his morning paper and reads once more the " quotations " of yesterday. His breakfast is a sandwich of toast and Fort Wayne, or Central, or 5-2 Os. He talks stock all the way down town in the stage. He bids from nine tUl five ; he whispers of street incidents to his neighbor in the up-town car ; he dines upon stocks, he mingles stocks with the smoke of his post-prandial cigar, he crams his "book" in his pocket and saunters up to the Fifth Avenue, and when finally he consents to retire, he dreams of stocks the whole night long. This ceaseless tread-mill would seem to be quick murder. Yet, averagely, a healthier class cannot be found than that of men who deal in stocks. They are robust, cheerful, bubbhng over with animal spirits. One reason, undoubtedly, is that they are thor- oughly good livers. They dine well and dress well. But beside this, the luck of the market compels them to a sensible philosophy. None know better the fickleness of fortune. 'None bear up more bravely under reverses. The very variety of their life is healthful. Eoutine it- self is poisonous to brain and body, but the technicali- ties and small details of brokerage soon become a sort of second nature, and the mind is left free to enter into all the absorbing iutricacies of speculation, replete with 44 MEN AND MYSTEEIES OF WALL STREET. dramatic episodes, and so fascinating that the gains or losses would be as nothing, were they not essential ele- ments in the successful issue of the game. To understand the real life of the broker, and to ac- quire a clear perception of the daily features of the Stock Boards, one must be content to begin with the alphabet and master the language. It is impossible to compre- hend the business of Wall Street unless all the condi- tions of sale and purchase are accurately set forth, un- less broker's terms are rendered thoroughly intelligible, and the main forces which group around the market are distinctly grasped. Some of these details, however im- portant, are not the less notably dry and a weariness to the soul. But without a proper apprehension of all the cog-wheels and running gear of speculation, the game itseK will be only a delusion and a snare. THE MACHINERY OF SPECULATION. 45 CHAPTEE IV. THE MACHINERY OF SPECULATION. THAT portion of the world at large whose evil genius has borne it, willingly or unwillingly, into court-rooms and lawsuits, is probably familiar with that sublimity of humbug known as Legal Fiction. Its car- dinal idea is that things are not what they are. The New York Stock Exchange has a pleasant hallucination of this kind. /All its members are supposed to be bro- kers tiU proved to be otherwise. This proof is diligently not sought for. The absurd hypothesis has an advantage. It enables us to consider the theoretical as the practical. The New York Stock Board, then, according to the presump- tion of its constitution, is an organization of agents who purchase or sell stocks or bonds on commission. This commission, when a customer buys for regular invest- ment, is one quarter of one per cent on the par value of securities. In case of speculative transactions, one half of this is charged. Eecently a saving clause has been adopted, making these rules binding where no agreement has heen made to the contrary/. There is an immense meaning iu those italics. They can be understood bet- ter, however, if disregarded just at present. Throwing out of view the question of regular invest- 46 MEN AND MYSTERIES OF WALL STREET. ment, this broker's per cent amounts to twelve and a haE cents, or a New York shilling, upon every transaction in shares whose par value is one hundred doUars. To the uninstructed reader this is a microscopic item. One and a quarter mills on the dollar is to the cent per cent of a Broadway loan office what infusoria are to the megathe- rium. The tax is certainly not exorbitant, but its sum total is worth considering. We have before us the aiithorized list of shares, bonds, and governments dealt in by the Stock Exchange. Com- paring this schedule with the published statements of the various incorporations, etc., as to the full volume and par value of all these securities, we find that the sum in gross is considerably above three billions of dollars. If the New York brokers should have this amount of val- ues pass through their hands once only in the year, their profit as agents would be three million seven hundred and fifty thousand dollars. Moreover, it is to be noted that to every buyer there is a seller; and that on both transactions the commission is levied. Obviously, there- fore, the real percentage is doubled, or two and a haK mills on a doUar. In other words, the brokers would take seven and a half millions out of the whole every time the entire bulk is sold. How often does such a sweep- ing sale occur? Perhaps never, but its equivalent is sold on an average about every two months. This is as- certainable partly through the records of stock sales. In 1868, at the Eegular, and the now non-existent Open boards, there were bought 19,713,402 shares. The bonds bo.ught during the same period are stated at a par valua- THE MACHINERY OF SPECULATION. 47 tion of $245,245,240. CaUing $100 the par of stock, and adding tlie two amounts, we have a sum total of two MlHons two hundred millions. But we are only on the threshold of a proper estimate. Ask an intelligent broker where sales are chiefly effected. The answer wiU be, " Stocks, in the Long Eoom ; govern- ments, over the counter." At the official boards, we shall be told, there is scarcely one tenth of the real business of the stock market. Unfortunately, no registry is kept of these other transactions, and in reckoning them as ten times the whole sum we are liable to the danger attendant upon all conjectural calculations. Even on the supposition that the recorded sales are one eighth of the amount subject to the percentage we shall have a total of over seventeen and a half billions. The two and a half mills taken at the twofold sale and pur- chase of one dollar's worth of securities would give, if levied in similar proportions upon the entire bulk, a tax through commissions of forty-three million seven hun- dred and iifty thousand dollars. There are not more than four hundred stockbrokers who do any considerable business on " the street." Dividing up this percentage among that number of members of the Exchange, we iind that it will allow of a yearly in- come to each of about $ 109,000 ! These figures explain by inference the secret of the rule, which makes the broker's per cent subject to modi- fication, viz. in case of agreement to the contrary. Mem- bers naturally compete with each other, and a reduction to a half, or even a quarter, of the full commission is fre- 48 MEN AND MYSTERIES OF WALL STREET. quent street practice. There are the One-Sixteenth men, who take 6^ cents on the hundred dollars; the One- Thirty-Second class, who are satisfied with 3^ cents ; and even a One-Sixty-Fourth class, who make no objection to dividing the preceding profit by two. The larger the order, the greater the reduction. This commission is levied upon the par value of stock. A share selling at 35 costs as much, in the matter of broker's per cent, as one quoted at 90 or 110. It is charged when the stock is bought, and again upon sale ; and the greater proportion of really first-class houses adhere to the one eighth of one percentage, even in the case of old customers. This is, unquestionably, one of the most profitable features of brokerage, and there are firms whose yearly commissions amount to upward of a million dollars. The great rivalry for orders, how- ever, has sensibly reduced the gain from this source, and the average of all transactions is probably not above $ 6.25 on 100 shares of stock, the par of which would be $10,000. Wlien a customer has arranged the terms of commis- sion, the next question is how the stock is to be bought or sold. To approach this part of the machinery prop- erly, it is desirable to concentrate the attention upon what may be styled " ideal brokerage." The ideal of brokerage is the purchase or sale of securities for outside parties, where the object is an ab- solute acquisition of property, or absolute sale of prop- erty. Generally speaking, there must be in such case a deposit of the stock or of the money value of the stock. THE MACHINERY OF SPECULATION. 49 Of course, this rule loses its rigidity where the customer is a heavy capitalist or a person of recognized responsi- bility ; brokers, in such event, habitually buying on no further guaranty than a verbal or telegraphic order. The first point necessary to know is when the cus- tomer wishes to receive or deliver the stock. He may prefer to-day, to-morrow, or a more distant date. Each of these methods of settlement has a special name. Gash, in broker's language, means that the contract entered upon shall be fulfilled by payment and delivery of stock, at or before 2.15 p. m. of the day of sale. Regular, or Begular Way, is the term for sale when the delivery is to be made at or before 2.15 p. m. of the day succeeding that of contract. Buyer's Option, is where the purchaser has the right to require the dehvery of stock upon any day within the time covered by the option. Seller's Option, is where the day of delivery is at the convenience or pleasure of the person making the sale, within the time stipulated at the moment of sale. In all cases, notice must be given by the holder of the option to the other party in the contract, on or before two o'clock of the day previous to that when delivery of stock is called for ; but the stock is deliverable at the termination of the contract without notice. The sharp elliptical offers and bids at the Boards ex- press the options in such phrases as Buyer 3, Seller 10, Seller 30, Buyer 30, — the numerals standing for the number of days during which the option continues. So far as concerns the principle of this transaction, there is nothing to hinder contracts extending to any point in 3 D 50 MEN AND MYSTERIES OF WALL STEEET. the year ; but to brokers a sale buyer 7, buyer 9, buyer 11, 12, 21, etc., -would affect the ear like a wrong note in music. Custom has made 3, 10, 30, 60, 90, the usual figures for both descriptions of options. A broker receiving an order to sell 500 shares of the Chicago Eock Island and Pacific Eailroad Company, at 105, would go to the Board, and, according to liis in- structions, shout out, " I '11 sell 500 Eock Island at '5, cash," "500 at '5, regular," "500 '5, seller 3," "500 '5, buyer 30," dependent upon the desire of his cus- tomer. It is apparent that where the seller wishes money at once, he sells Cash ; where he hopes to get a better price, or cannot make a delivery of stock until next day, he sells Regular ; where a still longer time is required be- fore he can make a delivery, he sells Seller's Option, or if ready for delivery at any moment, he sells Buyer's Option, and thereby gets a better price, as the buyer is willing to pay proportionately for the advantage which the ad- vantage of time gives him. Cash, Regular, and a three days' option bear no inter- est. Beyond three days' option six per cent interest (per annum) is paid by the buyer from the day of sale to the day of delivery. And this interest is due whether the ■sale be on buyer's or seller's option, the rule being that the actual holder of stock should be remunerated for the time during which his property lies dead in his hands. Transactions either by Cash or Eegular Way are car- ried through, usually, by verbal contract alone ; and, in THE MACHINERY OF SPECULATION. 51 general, a nod of the head as well as word of mouth suf- fices to make a bargain binding on both buyer and seller. In options, however, it is customary to give acknowledg- ments after a set formula. Thus, if the firm of Takem and Makem had received an order to buy 500 shares of New Jersey Central on February 10, 1870, at 101, buyer's option, for 30 days, they might have sent a mem- ber of their house or some other broker into the Long Eoom. His iirst question would be, " How is New Jer- sey Central?" If answered, '"l-'l^," he begins to shout, " I 'U. give 101, buyer 30, for five hundred New Jersey Central." Possibly another broker, entering from New Street, with an order to sell New Jersey Central down to 100 if necessary, has commenced simultaneously to cry, "Any part of a thousand '1, seller 30." Broker No. 1 replies, " 101, buyer 30, for five hundred." " Sold," screams the other. The two now come together, give the name of buying and selling firms, and the subjoined papers are subsequently exchanged, after 2.15 p. M., gen- erally. ! :Z: I ■f:':Qr-A ■/■■■■■■': DC ,>••■■•■< 500 Shares. 101, B. 30. New Tork, February 10, 1870. We have SOLD to TAKEM & MAKBM Five Hun- dred (500) Shares of the Capital Stock of the New Jersey Central B. R. Co. at One Hundred and One (101) per cent, payable and deliverable, buyer's option, within Thirty ' days, with interest at the rate of Six per cent per annum. Either party having the right to call for deposits of Ten per cent during the pendency of this contract. JONES & EOBINSON. 52 MEN AND MYSTERIES OF WALL STREET. 500 /Scares. 101, B. 30. New York, February 10, 1870. PFe ^ave PURCHASED of JONES & EOBINSON ii\Ve Hundred (500) Shares of the Capital Stoch of the New Jersey Central R. R. Co. at One Hundred and One (101) per cent, payable and deliverable, buyer's option, within Thirty days, with interest at the rate of Six per cent per annum. Either party having the right to call for de- posits of Ten per cent during the pendency of this contract. TAKEM & MAKEM. These forms are now universally adopted in all " op- tion" transactions, and througli them a large propor- tion of speculative movements are effected. Since the Government tax of one cent on every purchase or sale of a hundred dollars has been enforced, the acknowl- edgments are frequently covered with revenue stamps, not merely upon the face, but down over the entire back of the paper. " Cash," " Eegular," and options comprise the ordinary terms heard at the Boards. A sale, however, may take place at a time when the transfer-book of the company is closed, either for dividend or for an election. In such event, a transfer of shares or the issue of new certifi- cates is impossible. If the purchase is made Cash, the buyer receives the old certificate with a power of attor- ney, and upon the opening of the books the transfer- clerk makes the substitution if desired. Power and Cer- tificate is the broker's term at such a sale, and in share price-lists was formerly printed p-C- When similar sales are made for time, the phrase used THE MACHINERY OF SPECULATION. 53 was formerly At the Opening, abbreviated in stock- reports to o.p.g. ; the meaning of the seller being obvi- ously that a delivery will be made as soon as the transfer-books are again at the service of the public. Many certificates of stock, however, pass from hand to hand without transfer. \ The usage of the Stock Board forbids the sale of less than five shares. Ten shares is the real unit. Less than this amount is styled an " odd lot," and sells a trifle above or below the market price, according as one wishes to dispose of or to purchase. A broker, with a commission to buy three shares of a certain stock, goes to the Board, and when some one cries, " Any part of fifty," he shouts, " Take 'em." " How many ? " " About five," is the answer ; the broker holding up three fingers to signify the number purchased. In case of an option, where circumstances may delay delivery, the stock being in Philadelphia or London, the broker sells " aboid buyer 10, — about seller 30." In bids or offers, the usual fraction is an eighth, while, on the London Stock Exchange, one sixteenth is the habitual fractional unit. At the New York Board, however, on a close market sometimes an eighth and a sixteenth are bid or offered. With this occasional exception the bids run numeri- caHy, 1, h i, f, h I, I, I, 2. At present, purchases or sales of this absolute charac- ter form but a small proportion of Wall Street business. When stock is bought for permanent investment, or when sold in order to change the employment of capital, this method is naturally adopted. Yet even for these 54 MEN AND MYSTERIES OF WALL STREET. ends it is not unusual for outsiders to make use of the element of credit, whereby stock operations can be con- ducted with even greater disproportion of capital to the volume of business than characterizes the ordinary transactions of trade. This expansion of money, by which a hundred dollars may perform the service of a thousand, is technically known as the " margin." Stm holding the idea of actual investment in mind, let us suppose that a young Pennsylvanian has just in- herited a hundred and fifty thousand dollars, — most of it in manufacturing stock. He has come to New York with some ten or twelve thousand dollars, and goes to a broker, — perhaps an old family friend : " I notice that 5-20s '67 registered are selling at 109. Now I want you to buy $ 8,000 bonds ; if it were only next month I 'd put ninety thousand dollars more in it, and then off to Europe. The bother is, I can't realize on that factory property just this moment, and meanwhile, of course, governments will rise." " That 's probable," replies the broker ; " but if you can pledge your ninety thousand ia thirty days, and wUl deposit ten thousand now, I 'U buy the whole lot to-day. You must pay me an eighth of one per cent commission, and interest of seven per cent on what I lend you. If money costs me more than that, you must make the extra interest good. I shall allow you seven per cent interest on what you leave with me, and you wlU be insured against the risk of a rise. If the stock falls, however, you must correspondingly increase your margin." "Done," responded the Pennsylvanian. " Buy $ 100,000, and if you want a trifle more of deposit THE MACHINERY OF SPECULATION. 55 you shall have it. The halance shall be here in thirty days sure." The broker sends over to the Board and buys f 100,000 registered 5-20s of '67, regular way ; and then looks about him to see how he shall meet his new obliga- tion. In twenty-four hours he will have to pay out $109,000. His customer finally deposited $11,000. There are $ 98,000 to be hunted up. Possibly he has ten thousand dollars at his bank, but the rest of his capital is tied up as completely as the property of his friend of the Keystone State. Two usages of Wall Street make the problem easy. The New York banks allow broker depositors of repu- table standing to draw checks for amounts immensely disproportionate to that actually to their credit. These checks, sometimes for two hundred thousand dollars, are promptly " certified," i. e. guaranteed as representing that sum of iona fide deposits, although the books may not show a real credit of even five thousand dollars. This species of accommodation is based on confidence in the giver of the check, who is bound in honor to make the whole amount good before 3, p. m., of the same day. On the other hand, banks and banking-houses freely lend money on good bond or stock security, within ten or twenty per cent of par or the selling or market value. • When, therefore, the bonds are presented, our broker gives a check on his bank for the full amount. The seller hastens to get it certified, and the buyer proceeds to one or more of the great loan houses or banks, and 6- 56 MEN AND MYSTERIES OF WALL STREET. readily borrows $ 100,000. In financial language, the bonds on which the money is raised are called " col- laterals," and the act of placing them in pawn is styled "hypothecation." There were ten thousand dollars pre- viously to the broker's credit at his bank He now de- spatches the hundred thousand, together with his cus- tomer's deposit, and thereby makes his check good, as well as insuring a slight balance in his favor. The $ 11,000 originally exacted by the broker, and the difference between the cost of the bonds and what was borrowed upon them, are both called " margins." It is obvious that their necessity arises from the fluctuating character of stocks. Were the bonds to fall to 99J, the lending bank would be in the position of holding a pledge of less value than the money advanced upon it. Against such contingency the lender protects himself, first, by the margin, seldom less than ten per cent, often widening in case of certain stocks to twenty or even forty per cent ; secondly, by furnishing money only on condition that it may be demanded at any moment. Such an arrangement is known as a " call loan." If the market falls, the bank either calls for the money or a proportionate fresh amount of stock. Now the broker's power to buy on a margin depends upon the certainty that the collaterals will have a definite borrowing capa- city. If in a week the 5-201 are at 95, the loan may be recalled, and a new one must be made either with the same or different parties. Perhaps he succeeds in bor- rowing $90,000. But he has still the difference of $ 10,000 to make up, and if his bank account remains THE MACHINEKY OF SPECULATION. 57 as before, he wiU be unable to meet his obligations. Of course, no broker would be wi llin g to place himself in such a position, and the first clause of every contract for purchase by margin is that the relative per cent must be kept up. If a customer fails to do this on due notice, the stock is sold out at once. In the present instance, the broker, had the bonds shown signs of weakness, would have immediately telegraphed to Pennsylvania for more money. As a matter of history the bonds did not fall, but, on the contrary, rose steadily to 115. When the transaction was settled, therefore, the country buyer found that by paying some six hundred dollars' in- terest he had made six thousand dollars ; since, had he waited until he covld realize upon his home property, he would have had to give one hundred and fifteen thousand dollars for what he now receives at one hundred and nine thousand. Were he to decide to avail himseK of the high market, and to sell out his bonds, the advan- tage of the ma;ygin would be still more apparent. He has been putting out his money all the while at seven per cent interest, and now receives it back with six thou- sand dollars additional, minus the charges of his brokers, which would amount, all told, to scarcely a bagatelle of the customer's profit. This is a conservative illustration, but it would be easy to find a far more startling example in the every- day facts of Wall Street. On November 14, 1868, Erie sold in the morning for 36f. That day a man with thirty-seven thousand dollars of borrowed money, who had a premonition of what was coming, could have 3* 58 MEN AND MYSTEEIES OF WALL STREET. gone to a broker, arranged for a ten per cent margin on selling value, and simply said : " Buy at once not above 37, and sell to-night, regular, for the best figure you can get." That afternoon Erie was at 52J. The specu- lator's account would have stood : — Dr. 10,000 Erie at 37, . $370,000 Margin, . . . 37,000 Two commissions at I" of 1, 2,500 Net profit, 150,000 6559,500 10,000 Erie at 52^, Margin returned, . Or. $ 522,500 . 37,000 $ 559,500 He was paying perhaps but fifty dollars a week for the money which, in twelve hours only, had brought him the clean sum of one hundred and fifty thousand dollars. Here we have an extension of the margin to its sub- tlest degree. The fifty dollars of interest, together with the borrower's credit, enabled him to command thirty- seven thousand dollars ; this again secured, the tempo- rary control of ten times that amount, and the turn of the market not only cancelled every dollar of obligation, but created an immense new capital. Such a chain of fortuitous circumstances is rare, but any broker who has grown old in the street can recall very many inci- dents on a minor scale of similar disproportion between the risk and the profit. The principle of the margin, probably the outgrowth of a legitimate desire to make use of the force of credit in ordinary stock transactions where the fmal object was THE MACHINEEY OF SPECULATION. 59 investment, is now the mainspring of speculation. Even in the case of what may be styled, for the sake of dis- tinction, solid purchases or sales, there is clearly an opportunity for availing one's self of the rise and faU of the market. In July, 1867, the shares of the Panama Eaihoad sold for 256 ; in September, for 300. The dif- ference of $ 44 on each certificate could have been pro- cured just as well by buying out and out, as by paying in only an instalment. Nor is there any dissimilarity between the conditions of purchase in complete and in marginal transactions. Supposing a customer be always lucky enough to buy lower than he sells, the margin enables him, if he operates on comparatively stable securities, to purchase in ten per cents just ten times what he could otherwise obtain, and thus make an equivalent increase in gains. If he be prudent, his margins will never be his whole property ; and he will be prepared to make good the losses by fluctuations. As long as the man who thus acquires a thousand shares at par, conscientiously intends to add to his $ 10,000 $ 90,000 more if occasion demands it, he is engaged in a business no more speculative than purchasing real estate on mortgage. The application of the margin to hona fide sales is less easy to comprehend, although it is really identical with purchases. A capitalist wishes to dispose of a thousand shares of a certain company at ruling prices, but cannot deliver them for thirty days. His broker would consent to do it upon the condition that ten or twenty per cent of the par value should be placed upon deposit, and that 60 MEN AND MYSTERIES OF WALL STREET. this margin should be increased in the event of an up- ward fluctuation. The necessity of money in this case will be apparent when the reader considers the problem before the broker. His order is to sell at " ruling prices." The stock might, for example, be Hudson; say 1,000 shares, worth, on the day the customer comes, just par. It can be sold either cash, regular, or on an option. If sold on a thirty days' seller's option, then the risk of the broker lies in the possibility of his customer's failing to deliver the stock at the time agreed upon. It may be in London or San Francisco. The steamer may foimder, there may be an accidental delay, the property may be attached by sheriff's officers ; there are a hundred con- tingencies. But the broker has pledged himseK to deliver on a fixed day ; he has, therefore, no alternative but to go iato the market and buy, or, as is commonly styled, "buy in." The shares may cost 110 or 120, owing to either an artificial or natural appreciation of the security. In other words, he must pay $ 110,000 or $ 120,000 for what he presently receives S 100,000. The object of the margin is to cover this excess in price at time of delivery. Again, the stock would probably not have realized the same at option as if sold cash. As the order was " ruling prices," the broker may have felt bound to get the best rates. He therefore sells cash or regular, and borrows of Broker C the shares which he delivers to Broker B, who bought the lot df him at the Board. This places him as debtor to C for 1,000 shares, which can only be made good either by his customer's keeping THE MACHINERY OF SPECULATION. 61 to his agreement or by " buying in " the stock. Here, as in the option, the margin protects against the rising market. Stock can almost always be obtained by borrowers, either flat, i. e. with no interest on either side, or with interest at market rates for the money advanced to the lender. In options, six per cent goes to the seller. The broker in the above transaction, therefore, charges his customer nothing on the difference between margin and selling rate. Seven per cent is generally allowed on margins, as well in sales as in purchases. The six per cent interest on sales on option goes to the customer ; but where the sale is made for cash, and the broker borrows the stock, any interest he may get is his per- quisite as a compensation for the trouble and risk in borrowing. As a matter of fact, the use of the margin is even less frequent in solid sales than in solid purchases ; but it is highly important that the underlying principle of this magnificent instrument of speculation should be rightly npprehended. Every conceivable transaction of Wall Street is based upon the presumption of an amount of actual capital equal to that which figures in the bargain. The mahogany may be veneering ; but it is always genu- ine wood so far as it goes. Brokers take commission on sum totals, and interest on sum totals. If they sell billions of stock, they actually deliver it ; if they buy billions, they pay over every dollar for which they have contracted. We shall presently consider more at large the immense expansive power of money as applied to 62 MEN AND MYSTERIES OF WALL STREET. speculation; but it may not be undesirable at this juncture to reconsider the modiis operavdi of stock- dealing with, reference to the general public. The ex- planations of this chapter cover aU the main features of buying or selling, whether the object be for invest- ment or speculative. In any case whatsoever, where stock is purchased or disposed of, the broker buys or selb either Cash, Eegular Way, Buyer's Option, or Seller's Option. And demands of his customer either Solid deposit of money or stocks, or marginal deposit of money; the margin to be ten, twenty, or even forty per cent of the par value of the stock, and to be increased in proportion to any subsequent change of the market ; — in sales, where the price of the security advances ; in purchases, where the price falls. Seven per cent a year is generally allowed on all margins advanced by customers. If the transaction be either cash, regular, or a three days' option, it implies no interest. If it be more than a three days' option, six per cent on the selling value of the stock is paid by buyer to seller. If the stock is bought by the broker on a given day, and held for the customer until he is ready to take it or sell it, the former charges seven or even a higher per cent for the difference between cost and margin, this THE MACHINERY OF SPECULATION. 63 interest continuing from the day of purchase to the date of closing the transaction. The broker, in such cases, "carries'* the stock. » In sales, no interest is charged to the customer, while he is always credited with interest on margin; and, if the operation be by options, he is entitled to six per cent, in addition, on the difference between selling price and margin. With regard to this latter point, however, usage differs. Furthermore, the broker requires one quarter of one per cent on the par value of securities in case of solid purchase or sale, or one half of this where stock is bought or sold on margin ; these conditions being obli- gatory " where no agreement is made to the contrary." 64 MEN AND MYSTEEIES OF WALL STREET. CHAPTEE V. MAEGINS AND THE LOAN MAKKET. THE moralists of this and recent generations have been much concerned over -what are called the speculative tendencies of the world, and an opinion is abroad that in this particular the old days were better than our own. A broker of the writer's acquaintance, who has a penchant for geology, clairns, to the contrary, that mankind, since the beginning of tilings, has been doing a vast amount of business on a very thin margin indeed ; and proves his point by stating the miles total of the earth's diameter and the total of furlongs making up the tenuous crust which keeps us all from instan- taneous and fiery liquidation. The illustration is quaint enough, and not so very illogical. For the gist of all credit is that the creditor has something to stand on. Take that eminently sound and responsible debtor, Great Britain. It has succeeded in borrowing some four billion dollars on a margin of not quite four per cent. This margin is put up anew each year, and the weight of consols is " carried " with an astonishing freedom from fluctuations. At bottom, this mountain of credit has not the substance of whipped-syllabub.* It is made up of * Soame Jenyns neatly stated the case when he characterized the dif- ference between laying out money in land and investing it in funds, as MARGINS AND THE LOAN MARKET. 65 notes issued by generations dead and buried, and in- dorsed by a small minority of the living population, called the governing power. To collect this debt, the only process possible is by what has always excited a shudder in the English citizen, whetlier it has taken place in classic or modern times. That process, which no army in Christendom is strong enough to enforce, is called " universal confiscation." There is about as much likelihood of this occurring as of the earth's crust break- ing through. What, thep, keeps up British consols ? Simply a confidence in the national honor, and the clear fact that England owns more than it owes. The answer is sufficiently trite, but it embodies the principle which lies at the base of all modern finance. It is the ground- work of banking, the main-spring of commerce, the pivot around which the vast system of European and American speculation revolves. Enter any broker's oifice in Wall Street. You have greenbacks and give an order. There is not a respect- able broker in all that money quarter who wUl exe- cute your commission even for ninety cents on the dollar, unless you are properly introduced and your responsi- bility vouched for. Establish a definite credit, and you may be able to buy the equivalent of a thousand dollars on a deposit of fifty. The nine hundred and fifty dollars represent the certainty that you are not only willing to consisting, in the first instance, of principal without interest, and, in the other, of interest without principal. The delicate satire upon the dis- advantages of English real estate will be less appreciated by the Amer- ican reader than the other point in the deiinition. 66 MEN AND MYSTEEIES OF WALL STEEET. meet your obligations, but that you have the ability to do so. What you pay down is called margin ; but be- hind it lies your whole fortune. There is not an opera- tion in the whole history of stock speculation that did not start with just such a background. The thinnest ■one per cent margin, allowed by personal friendship, and coupled with the understanding that if the market should fall below, no subsequent claim should be made against the customer, must some way, in valid manner, through broker's credit and the subtleties of stock, repre- sent behind it ninety-nine per cent of the seUing value of the shares before the machinery of speculation wiU. touch it. To the outside world this statement may ap- pear as mystical as the Swedenborgian theology ; but its truth will become manifest as we advance. Preliminary to a further inquiry into this feature of speculation, however, it is essential to understand the phenomena of the loan market. Out of all the incorporated banks in the United States, there are thirty situated in Wall Street and its neighbor- hood, whose office is not unHke that of the heart in the economy of animal life. Although less than half the full number of banks in the metropolis, these thirty have two thirds of the capital, and quite two thirds of the circulation. By a provision of statutory law, all outside National banks, numbering some sixteen hundred, are allowed to keep one half, and many three fifths, of their reserve balances in New York. In this way our great financial centre is rapidly acquiring the function of a National clearing-house. These temporary deposits bear MARGINS AND THE LOAN MARKET. 67 a small interest, and are subject to be called for at a day's notice. They can only be used, therefore, by the employing banks on the same conditions. The stock market supplies these conditions. Bonds and shares bought to-day and sold to-morrow, endowed with all the properties of swift conversion, and held by men whose training has been one of incessant grappling with the new and unexpected, are the only class of property upon which money can safely be borrowed without a protection against sudden demands. On these securities, therefore, the down-town banks make call loans. The name implies the nature. The money which the thirty receive from without, together with their own reserves, is lent freely to stock-brokers, with the simple provision that it must be returned immediately upon notice, if financial exigencies require it. This vast volume of what may well be styled fluid wealth is difficult of estimate in fig- ures. The published statements of loans made by city banks make no distinction between discounts of commer- cial paper and what is advanced on securities. In sum total, the thirty banks lend weekly about $ 165,000,000. Indeed, including all New York banks, the average is nearly $ 255,000,000. During the week ending Septem- ber 18, 1868, these banks lent $ 266,496,024. The real meaning of these last figures wiU be better understood when it is known that they exceed the entire average loans and discounts of all the national banks of New England and New York State, with the exception, of course, of the city itself. Or, to take a more sweeping view, they sur- pass the total weekly loans of national banks in Mary- 68 MEN AND MYSTERIES OF WALL STREET. land, Virginia, North Carolina, South Carolina, West Vir- ginia, Georgia, Alabama, Texas, Arkansas, Kentucky, Ten- nessee, Ohio, Nebraska, Kansas, Missouri, Minnesota, Iowa, "Wisconsin, Illinois, Michigan, Indiana, Delaware, and New Jersey. Nigh one hundred and eighty millions of the amount cited above were advanced by the down- town banks. What proportion of this was lent on stocks ? Probably much over one third. As many of the other banks also make call loans, we may, perhaps, estimate that from seventy to one hundred million dollars are furnished daily to the brokers and operators of New York. This, however, is but one element in the lending force of the city. There are five Trust Companies, with capi- tals amounting in the aggregate to five millions and a half, which lend, at times, sixty milKons a week. There are also a great number of private banking-houses, of which Jay, Cooke, & Co. may be selected as representa- tives, that daily loan vast sums of money on security. The foreign houses alone, which, like Belmont & Co., Brown Brothers, Drexel, Winthrop, & Co., operate in Wall Street, employ not much less than two hundred million dollars of capital. On this ocean of wealth, fed by tributary streams which flow from all America and ripple up from the far-off European capitals, along the strands of deep-sea cables, the fleets of the stock market ride with such security as is the luck of mariners the world over. Por money, selected by mankind as the gauge of all values on account of its exceeding stability, has nevertheless its MARGINS AND THE LOAN MARKET. 69 whirls and eddies, its calms and tempests, its heave and swell. To-day men will loan millions at four per cent. To-morrow it cannot be had for twice or thrice that pay- ment. A certain degree of order, however, attends these fluctuations. In general, the money market may be said to be subject to periodic influences covering whole months, ' and repeating themselves year by year at nearly the same seasons. In spring and fall the crops are to be brought forward. Merchants need money. Those who have securities hypothecate them if they can ; and sell, if they cannot borrow. Hence a universal call on banks and bankers, the tide of interest rising higher, and the amount of individual advances lessening in quantity and proportion. The finan'cial chroniclers announce that money is " very active," and the loan market " strin- gent." In midsummer the atmosphere changes. A tropical calm succeeds the trade-winds. The lender seeks the borrower. Money becomes a drug. Technically it is "easy" or "inactive." Then the broker can borrow more, and will have to pay less, than at any other season. Both these periods are subject to temporary cross cur- rents, and in some years there seems to be no law what- ever to the fluctuations. In one form or another, how- ever, these two conditions are unfailing facts, and all stock speculation depends upon them. For it cannot too frequently be iterated, that specula- tion means solid money. There cannot be a solitary transaction except upon this basis. Every departure from this principle flings the gates wide open to failure. 70 MEN AND MYSTERIES OF WALL STREET. Now the groundwork of a purchase of stock is the cus- tomer's margin, the broker's capital, and the borrowing capacity of the security. The last of these three elements is the one which must be fully known, before the risk can be calculated. Entering the loan market we find that the securities dealt in by the stock exchange classify according to de- scription and value for loans very much as follows : — Collaterals. On which money is lent G-ovemments, gold-bearing State bonds, ■ railroad bonds not open to question, bank shares, and generally all high- valued scrip held mainly for invest- ment. At par, or within 10 per cent of selling value. Speculative stocks that average high ' dividends, and have an investment value, although heavily dealt in by operators. Within 10 or 20 percent of selling value. Wholly speculative stocks, usually called | Within 20 or 30 per cent, "fancy," and of nominal real value. J if at alL This table necessarily implies a steady value in the securities. If, as not seldom happens from special causes, a stock sinks in selling worth after a loan is effected, the lender at once calls in his money, or requires a fur- ther advance of stock equal to the percentage of depre- ciation. How the machinery works practically can be best shown by an example. Suppose a firm of brokers to have a customer. A, who desires to deal very largely in a particular stock upon MARGINS AND THE LOAN MARKET. 71 "whicli a loan can be effected within five per cent of par, the selling price being 110. Wishing to accept the whole order, and believing that the stock could not pos- sibly fall below five per cent ; they agree to buy, on a ten per cent margin, twenty thousand shares. Their capital is so far in use that they can only employ in the transaction $ 100,000. The order requires $ 2,200,000. They accomplish it as follows : — Bought 20,000 shares ® 110, $ 2,200,000 Paid for it by Hypothecation of 20,000 shares @ 95, . $ 1,900,000 Customer's margin, .... 200,000 Broker's capital, 100,000 $2,200,000 If the market sinks five per cent, the'entire capital at command of the brokers instantly disappears. If it sinks six per cent, they are bankrupt. This bankruptcy may not appear because the banks may not call in their loan. Even at six per cent depreciation they hold securities valued according to the market price at $2,080,000. The possibilities of a fall we shall presently consider. At this point we wish to call the reader's attention to the great amplitude of credit open to brokers. The firm in question had placed on deposit at their bank the customer's margin and their entire capital When the purchased stock was presented, they gave checks for $2,200,000, which their bank certified, al- though there were but $300,000 to show for it, and they could not make this temporary deficit good until they had received the $ 1,900,000 as a loan on their collaterals. 72 MEN AND MYSTERIES OF WALL STREET. The running scale of their credit, starting with the solid basis of $ 100,000, might be thus stated : — 2d stage. 1st. As margin, $ 200,000. (Customer's confidence.) ^ , „ ("of certified checks based upon noth- $1,900,000 i . , , c , ' ( mg but confidence. 1,900,000 lent on stock. 200,000 margin. „ , , ( $ 1,900,000 lent on stock. 3d stage. ; * ' ' \ 200,000 margin. The condition of credit at the second stage mil appear more forcibly by the subjoined diagram : — Margin. 100,000. Foundation Stone. MARGINS AND THE LOAN MARKET. 73 The bank credit through certified checks is really the only weak point in this pile of values. That existed merely for an hour or two, and was safe enough, if we regard the results of experience. The assertion may confidently be hazarded, that, talcing known facts, the risks of mercantile houses in ordinary trade credits, or of operators through fluctuations of stock, are tenfold, if tiot fifty-fold, that of the banks in these temporary daily credits. As long as money remains plenty, the firm can carry its immense load. Naturally, also, the buying pubKc is disposed to pay even higher prices for stock. Quite possibly the shares may rise to 120. At this point, if sale is effected, there must be a renewal of the credit by certified checks. A has made a gross profit of $ 200,000. The brokers, at one eighth of one per cent commission, would receive $ 5,000, and they would also gain in the difference between the percentage on which they " car- ried " the stock, viz. seven per cent, and what they were obliged to pay. They might have borrowed at four per cent per annum. In 1867, when the Treasury report for April exhibited an expansion of currency to the amount of a million, call-loans were four per cent, and loans for thirty days were made readily for five per cent. In in- active times, such rates are by no means infrequent. "We have supposed an easy loan and a buoyant stock market. It may have chanced, however, that the shares fell, while lending rates remained as before. The bro- kers, in such a contingency, demand that the margin shall be increased in proportion to the decline. The bank is 74 MEN AND MYSTEEIES OF WALL STREET. still ready to lend, but not at such liberal advances. As the stock depreciates the loan is called in. The scale may be stated in this manner : — stock: 20,000. Selliug Kates. 110 100 90 80 70 60 50 40 30 20 10 At every stage of this descent it is A who stands in the gap. As against the street, the transactior presents a series of intrenchments in which both A and his brokers cover the bank, and in which A covers his brokers and increases the defences, step by step, as the danger becomes more imminent. The moment As resoin-ces fail, the brokers sell. In fact, below 50 or 60 the whole illus- tration is pure hypothesis, as at that point neither broker nor lender would have faith in the security, and A would have to assume the whole burden or relinquish it. We have supposed, in the above case, that the brokers borrowed from only one bank and kept but one bank account. Practically, however, such a large loan would be distributed through half a dozen banks or Trust Com- A's Margin. Broker Capital. CaU Loan. Cost of 20,000. {$200,000 $ 100,000 $1,900,000} $ 2,200,000 { 400,000 100,000 1,700,000} 2,200,000 { 600,000 100,000 1,500,000} 2,200,000 { 800,000 100,000 1,300,000} 2,200,000 1 1,000,000 100,000 1,100,000} 2,200,000 j 1,200,000 100,000 900,000} 2,200,000 { 1,400,000 100,000 700,000 } 2,200,000 { 1,600,000 100,000 500,000} 2,200,000 j 1,800,000 100,000 300,000} 2,200,000 {2,000,000 100,000 100,000} 2,200,000 {2,200,000 MARGINS AND THE LOAN MARKET. 75 panies. The usua], method is to place the securities in a long envelope with a printed form on the back, stating the amount hypothecated, and the money desired. Thus, if Black & White have a lot of Chicago and Northwest selling at 70, Eock Island worth 101, and Pacific Mail rated at 48, on which they wish to borrow within nine- teen or twenty per cent, they would make up their budget, enclose it in an envelope, and fill out the blanks as follows : — o o o o ^ o ^ o F=l *o "^ o lO Eh ~r oo" oi~ 2 ■ »S5 e* ~5^ s ^ fe*^ ^ *>^ m- Ig § ^ ^ ^ sis « "1 ^ -"S o S M ;§ £ H^ ^ o ^ S R *^ . § l-:i iS M ft; Sa; a; Q> o o H vcj S3 ta '-H* In case the bank called for more stock, on account of subsequent depression, they would either make up the deficiency with other shares, or send over another envel- ope with the loan marked down to $ 90,000 or $ 80,000, proportionate to the decreased value. The former trans- action would thus be closed up and a new loan com- mence. As banks lend more freely to customers than to out- siders, the great broker houses make it a point to keep two, three, or even more bank accounts, proportionate to their capital. They also endeavor to leave daily deposits 76 MEN AND MYSTERIES OF WALL STKEET. of as large an amount as the exigencies of business will allow, varying week by week, but with an average of from twenty to a hundred thousand dollars. It is the advantage which banks derive from these deposits of non-interest earning capital which makes them willing to certify checks to such enormous amounts, and to accommodate the speculative public with loans. When the loan market is stringent, the question of interest becomes of paramount importance. Sometimes there is apparently no limit to the rates. The city banks halt at seven per cent, and the moment money rises above this, recourse must be had to private bankers. There is an impression, very current among a portion of the mercantile class, that the banks profit directly by the extra enhancement of interest rate. This, of course, is a mistake. The law stands in the way. But there is nothing to prevent an honest cashier from distinguisliing between borrowers, and lending open-handed to one, while "regretting the inability" of the bank to assist another. If the borrower happens to make a "turn," and so is able to pass over an envelope to the officer with eight or twelve hundred dollars in greenbacks slipped in for a Christmas present, what clause in the charter forbids it ? There is certainly some way of bridg- ing over the chasm between " no loans " at the bank and plenty of loans on " the street," if one be willing to pay for them. At all events there are banking-houses whose capital is limited, but who never appear to be without a free flow of money, just when the bank presidents are assm-ing brokers that it is impossible to get it MARGINS AND THE LOAN MARKET. 77 When a broker agrees to "carry" stock, he says, " Seven per cent, unless the market tightens." There is a world of meaning in those words. The scale of rates slides up, — seven per cent coin, seven per cent plus commission of 1-16, 3-16, 5-16. Even one per cent will be charged. This is confusion to the uninitiated. It means simply that, besides the legitimate seven per cent, the borrower must sell and then buy back the stock, paying from ^^ to ^-|, or one per cent higher, when delivered the next day. The men who do this call them- selves banker brokers, and the excessive interest is readily met by dealers who have had their securities thrown back upon them by the banks, and are compelled to borrow in other quarters rather than risk the sacrifice of their stock in a falling market. By selling cash and buying back regular, they obtain a day's respite, and in the meanwhile money may become easier. After the famous Black Friday, at which the great gold " corner " culminated, this one per cent commission plus seven per cent in coin per annum was paid for a loan from Saturday to Monday, with the highest class of government bonds as collaterals. In many cases, when the security was less satisfactory, a very much higher percentage was charged. AH sorts of causes conspire to bring about this activity of the loan market. Sometimes it is an artificial lock-up in which bank directors form coalitions with gTeat opera- tors, and withhold ten millions from use. A sub-treasury sale of gold may assist. The fact that the New York City chamberlain draws out three or four millions from the Broadway bank, to pay interest and part of the 78 MEN AND MYSTERIES OF WALL STREET. principal of the iminicipal debt, has increased rates for a day. The mere intensity of speculation, causing a hor- rowing demand too great for the supply, occasions it. Often no possible explanation appears, and a stringency amounting to twelve, fourteen, or sixteen per cent in a forenoon may suddenly relax by 1 P. M., without warning or excuse. The Stock Board has made vain efforts to protect itself against these changes, and at one time greenbacks were sold in the Long Eoom, and a Loan Office opened at Eegular Sessions ; but it was found that this subterfuge oiily intensified the eviL So far as the outside customer is affected by a money tightness, the effect is seen either in the drooping value of the stock speculated in, requiring increase of margin proportionate to the decline ; or in a heavy addition to the interest charge. Thus, an order may have been given to Money, Bonds, & Co., in 1869, to buy and carry a thou- sand shares of Eock Island. The middle of ISTovember the lending bank refused to continue its loan, owing to the tightness of the market; and the firm, having no other alternative, resort to Smith & Jones, banking brokers. The latter agree to make the accommodation for a month at six per cent per annum and two per cent commission. This neat profit is called a "turn." "We have already alluded to it. Practically, it is an artifice to avoid the hazards of the usury law, precisely as fashionable pawnbrokers lend a hundred dollars on a diamond breast-pin, and give a paper which stipulates that the holder can buy back the property at one hun- dred and ten dollars withia a month. The borrowing MARGINS AND THE LOAN MARKET. 79 stock firm sells the shares at about ruling rates, cash, and then buys them back at two per cent higher, buyer 30. Supposing the date of the transaction to have been November 15th, they could probably have received a par advance, and would have given 102. The sub- joined acknowledgment would have been made by the borrowing house. >:.•.■::.■< NiH >:::.; CO «:K ;•:::■; >r>::K >:::<0>^ 1,000 Shares. 102, B. 30. New York, Novemher 15, 1869. We have PURCHASED of SMITH & JONES One Thousand (1,000) Shares of the Capital Stock of the Chi- cago, Roch Island, & Pacific R. R. Co. at One Hundred and Tioo (102) per cent, payable and deliverable, buyer's option, within Thirty days, with interest at the rate of Six per cent per annum. Either party having the right to call for a deposit of Twenty per cent during the pendency of this contract. MONEY, BONDS, & CO. Smith & Jones, by this transaction, net two thousand doUars, and a more profitable style of operation is not to be found in Wall Street. Why did not the customer of Money, Bonds, & Co. sell his stock by an option, instead of " carrying " it with the risk of this heavy usury ? As in such case there would be no interest to pay, and if the purchase itself had also been made by option, there would have been only six per cent interest, the question is natural. One reason is that a buyer's option is usually much more above the market than it would cost to "carry'' stock, while a seller's option compels the purchaser to depend 80 MEN AND MYSTEEIES OF WALL STKEET. upon the will of another, and the very opportunity of speculation may be lost. Per contra, if sold during a tight money market, less would be made than if the high interest were met. Moreover, by carrying his stock, a speculator is enabled to seize upon all sorts of wayside profits, and to meet the fluctuations of the street just at their tidal height. This especially appears in " comers," where a gain of from twenty to fifty per cent will disclose itself one day, and disappear the next. The man who " carries " realizes the'profits ; the one who has out a buyer's option must give at least twenty-four hours' notice, and so loses the chance. THE METHODS OF SPECULATION. 81 CHAPTEE VI. THE METHODS OF SPECULATION. SOMEBODY is always making money in Wall Street. At the Exchange, the moment the ear catches " Take 'em," " Sold," " Done,'' we may be sure that on one or both sides there has been a profit more or less large. This gain may not always appear, seeing that it possibly covers some loss of the future or the past ; but it is pleasant to believe in the certainty of a good bar- gain either for buyer or seller. Moreover, no one specu- lates to lose, and in analyzing the modes of stock opera- tions, it is well to look at the sunshine. What are these modes ? At bottom, only two. The " street " condenses its whole speculative business into a couple of monosyl- lables, — "long" and "short.'' If you are long, you are a "buU," ; if shorty "beaj," Much nonsense has been vn-itten and a vast deal of fanciful etymology wasted over these zoological distinc- tions. Their real origin is, probably, like aU other broker metaphors, due to a pungent conception of facts. If a bear finds anything in his rural peregrinations, whether it be a turkey on the roost or a man in a tree, he lifts his paw and pulls it down. The bull, on the contrary, lowers his head only to give men and things a decided upward tendency. 82 MEN AND MYSTEEIES OF WALL STREET. The application of these habits to speculative phe- nomena is too obvious to need explanation. Bull opera- tors take a stock at its lowest, and attempt to toss it up as high as may be. The bears, on the other hand, prefer to pull values down to the lowest possible figure. Believ- ing that prices are too high, they sell, and are therefore " short," precisely as people who have disposed of their money are " short " of change. The bull buys, confident that stocks wiU be higher, and is said to be " long," pos- sibly because this word is the opposite of " short," possibly, also, as suggestive of the dimensions of his purse. Into these two classes aU the speculators who are the life of Wall Street are divided. But the epithets are temporary rather than permanent. There are men, in- deed, who are constitutionally hopeful, — always looking for a rise ; and others who equally disbelieve everything, and invariably sell down the market. The vast majority, however, alternate from bull to bear and from bear to bull, according to the speculative outlook. Curiously enough, the dialect of " the street " — proUfic almost,^o distraction in the language of buying and selling, in the nicknames of the various orders of brokers, and in phrases descriptive of pure jobbery — is exceedingly poor in words which tersely define the different methods by which operators make money in stocks. The thing is present, but the name is wanting. There are a hundred different methods of dealing the cards, but the play is either " long " or " short.." Wlien there are high stakes, it is " cornering." When one bets on the players, it is a ■' call " or a " put." Beyond this, for the infinite permu- THE METHODS OF SPECULATION. 83 tations and combinations which street transactions allow, the imagination and ingenuity of brokers are sadly at fault. The first element in speculation is the " point." If the operator has a good " point," he has a " sure thing." This valuable acquisition is something like the advan- tage of placing your opponent with his back to a mirror. You see both hands. In other words, the " point " is a bit of secret information concerning a stock, whether it be that an extra dividend is to be declared, a bull move- ment is organizing, an emission of new shares is to take place, or some other cause is at work, or likely to be at work, which will seriously affect prices. According to this knowledge you buy or sell, and if you have, not teen misled, you are certain to make in proportion to your venture. "Wall Street is fxill of these "points." The Stock Exchange is paved with them. There is a certain other place floored with good intentions, and where, if one stumbles, he burns his fingers. Points frequently have this quality. To understand this very completely, the reader should comprehend that beautiful problem in stock chess which we will call THE DREW GAMBIT. A great man, with vast heaps of money made by gathering bulls and other cattle for the slaughter-house, one day gets possession of nearly the whole of the capi- tal stock of the celebrated E. Eye Railroad. Looking around him he sees a neighbor with a small purse, and whispers " Buy." Straightway this neighbor, whom we may as well name Trustful, does buy, and his thousands 84 MEN AND MYSTERIES OF WALL STREET. •> become ten thousands. Then after some days the low voice sibillates " sell " ; and Trustful's ten thousands turn to hundred thousands. So the neighborly good work continues until the benefactor of mankind has enabled his proUgd to surround himself with all the glories of sudden wealth, and to proudly read in his bank-book those delightful Arabic signs whose interpre- tation is half a million. This sum Trustful has acquired, not directly from his patron, but through the losses of other operators. One day the great man, having tired of E. Eye, deter- mines to shake himself loose from the burden. Trustful comes and asks for a point. With mysterious nods and knowing looks he is told that a broad-gauge road is always a good purchase, — in fact, there never was a time when one could buy at such great advantage as now. Forthwith Trustful goes iuto the market and spreads his half million in thin margin over the whole street, buy- ing and buying. The more he takes the more is sup- plied him. Presently he can buy no longer, and the stock strangely falls. His margins are washed away. A sea of debt sweeps over him. The magnificent lord of E. Eye has " sold out " his stock and his neighbor ! The world shrugs its shoulders, as it bows to the king of the shorts, Avhose ways are ways of cleverness, and whose " points " are moral guide-boards. If rumor be veracious, old Captain Hancock, of the famous Troy line of steamboats, once played out this game sc as to checkmate the king. The storj- is worth telling, as showing that the "gambit" is not always THE METHODS OF SPECULATION. 85 safe. The Captain had a friend named Daniel, who had helped him by various " points," until he was one of the mighty magnates of the money quarter. One day, how- ever, this friend advised him to buy all the stock of the great Blank Eailroad he could possibly carry. Hancock - did buy in blocks of five thousand, risking about all the wealth he was master of. A lucky accident revealed to him that Daniel, through his brokers, Largebeak & Co., had been selling the stock upon him. When the clerk of the firm brought the shares and asked for payment, Hancock gave a check for the full amount, but notified his bank not to cash it. Presently back comes the clerk, full of indignation, declaring that the check is worthless, and demanding the return of the shares. The Captain, however, in the mean time had walked over to Largebeak & Co.'s, and, entering the private of&ce, found Daniel comfortably seated at a desk. After a very brief preliminary, Hancock went straight to his work. He had been persuaded to buy a big load of this infernal Blank Eailroad. He had bought of several parties ; among them, it appeared, of Largebeak. Blank had gone down. Daniel had deceived him, and tried to " wipe him out." " Now, then, I have this lot of Large- beak's, and will keep it, if I have to spend every dollar left in the courts, unless you agree to -take back aU you sold on me." Having said this, he turns upon his heel and retires. Then the brokers and their client contem- plate the situation. Largebeak & Co. naturally object to the loss of some ten thousand shares, and call Daniel's attention to the awkwardness of litigation. The sequel 86 MEN AND MYSTERIES OF WALL STREET. of the whole matter is that Hancock gets rid of all hia Blank, saves his fortune, and thenceafter seelis his points in other quarters. It should not be inferred, however, that there is always an intention to lead astray, even when a specu- lation, founded on hints of this nature, results badly. In fact, half the failures of the street are due to poiats which brokers believe in, not only to their customers' but their own ruin. Apart from the operations based upon secret intelligence, there are a variety of combi- nations that are certain of profit if well managed. Of these, the prettiest is THE TURN. In a previous chapter we illustrated this as applied to loans. Its application is similar in regular transactions. Thus, occasionally, during a day's fluctuations, an opera- tor can buy a stock at 90, buyer 30, and sell it off at 92, seller 30. But these opportunities, however sure when the chances allow it, are apt to be, like white black- birds, not over common. One modification of this is the Spread Eagle, formerly a highly popular style of specu- lation with capitalists who had plenty of money and a wide-awake broker. Its method was delightfully simple. An operator. A, buys 5,000 Northwestern of B at 84, seller 30, and sells it to C at 85, buyer 30. The fluctuations and rivalry of the market continually afford opportunities for combinations of this kind, and brokers can frequently close with simultaneous offers ahd bids answering to all the conditions of this specu- THE METHODS OF SPECULATION. 87 lation. The gist of the transaction is apparent on the face. A sells higher than he buys, and is enabled to do this readily by making the options to the advantage of both parties with which he deals. His profit in every case will be the difference between buying and selling price ; and the premium on options, as well as the varia- tions in all stock, would not seldom permit of a larger margin of gain in the sale. He must be prepared to take the stock when it is delivered, and provide the stock when demanded. At the end of the thirty days, sup- posing both the contracts fulfilled, A will have made one per cent, or $ 5,000. The danger of this operation is in a sharp upward and then a downward turn in the market. If the stock should rise to 100, C would at once make a demand for the stock, and A must buy again at the high rates in order to keep to his contract. Should the stock fall im- mediately after- to 69, B would come forward and pro- pose settlement. In that case A will have lost by both C and B $30 on each share. Were the market to per- manently rise or fall there would be no loss in the end, but in the ordinary conditions of the present market this form of speculation is perilous. "We are informed, how- ever, that years ago it was quite frequently practised. Its real enemy is THE COENEE. This device is tolerably understood through the events of the great gold panic of September, 1869. It requires large masses of capital, great shrewdness, a happy com- 88 MEN AND MYSTERIES OF WALL STREET. bination of circumstances, and adroitness in turning even ill fortune to advantage. Its effect upon speculation is very much like trolling in the fishing-business. Its definition is simple, but its applications are full of variety. When more of a stock has been bought than the market can furnish, the corner is inevitable. The conditions of the problem may take two forms ; — I. Twice or thrice the whole capital stock of a railroad or other corporation may be bought through time pur- chases. If, simultaneously, sufficient stock be sold for delivery after the period that the purchases fall due to cover the sum total of actual shares in the market, the scheme becomes perfect and the profits are immense. It was in this way that the Morris Canal corner and the corners in Harlem, Prairie du Chien, and Michigan Southern, were engineered. II. Again, the amount of stock of a given corporation that is in the street may be accurately ascertained. A further estimate may be made of the proportion of stock held for investment which is likely to come upon the market during the crisis. The speculators then purchase largely in excess of both these amounts, although not up to the total of the capital stock. Here, also, time sales must be made enough to unload the fuU bulk of deliver- ies accruing from the purchases. It is clear that this style of comer is surrounded with difficulties. There may be an underestimate of the resources of the street. The outside -^lolders may crowd into the market beyond the speculative calculation. The Erie corner in November, 1868, and the famous gold THE METHODS OF SPECULATION. 89 combination of September, 1869, both failed from inade- quate preparations for overcoming these suddenly dis- closed obstacles. Problem No. I. may be thus illustrated : — Capital stock, 50,000. Current street sales of shares at 40. > Through a dozen or more brokers 150,000 shares are bought on buyer 30. The Long Eoom is the battle- ground, as there no registry is made of transactions. Coincidently other brokers sell freely for the combina- tion at seller 60, 30, 15, 10, and 3, the latter class of sales being made as the corner matures. Cash stock is made plentiful.' Large quantities are lent on call at low rates to give the market an appearance of natural ebb and flow. In three weeks' time some 100,000 shares have been contracted for at an average of 55, and 50,000 at 70. Sales of 50,000 had been effected at the same time for an average of 50. The purchases, all at buyer's option, are at once called in. The street is in dismay. The clique owns all the stock. It has matured contracts for nearly three times the whole capital stock. Men who held the shares which they had agreed to deliver whenever the buyers presented themselves had sold them under the seduc- tion of the upward tide of the market. They now find themselves in the same condition as others who had sold what they did not possess. As the shares rose, the clique had rapidly absorbed all floating stock, supplementing the accumulation in their tin boxes by putting forth fresh contracts. Locked up behind the bars of Trust 90 MEN AND MYSTERIES OF WALL STREET. Companies, and in innumerable bank and private safes, at the order of the combination, are the very shares -which the street had reckoned upon for satisfying their bargains. Deliveries must be made. Stock for delivery can only be secured through the clique agents. A month before it was waveless as a stagnant pool in the dead quietude of 40. Now it rises and falls in fierce but swollen fluc- tuations, — to-day 150, yesterday 160, to-morrow at 200, — as the ring changes its tactics or indulges its enmi- ties. Some settle at once ; others borrow of the combi- nation from day to day, paying fearful usury and hoping against hope. At the end, however, aU contracts must be settled, and the average compromise is at 165. Sup- posing that the shrewder portion of the street had long before settled at 90, and that the proportion stood 100,000 at 90, 50,000 at 165 ; then the clique's account would stand : — Dr. To 100,000 shares bought at 55 . . . . $ 5,500,000 " 50,000 " " " 70 . . . 3,500,000 " net profit 6,250,000 $ 15,250,000 Cr. By 50,000 shares sold at 90 . . . . $ 4,500,000 " 50,000 " " "165 .... 8,250,000 " 50,000 " contracted to be delivered at 50 2,500,000 $ 15,250,000 This statement of profits is, of course, incomplete. It does not include the money accruing from loans of stock, nor is the percentage of brokerage deducted. But the gain of over six and a quarter millions would neces- THE METHODS OF SPECULATION. 91 sarily result from the speculation. Of course, such a corner could only be engineered with vast capital and under powerful interests. Some two millions would be required for margins. A considerable portion of the bona fide stock would probably be bought out and out, or previously held by the speculators. But the charac- ter of an operation like this is such that the money could mainly be borrowed on easy terms. In the famous Morris Canal corner of '35, a clique in New York and Newark quietly bought up all the stock at thirty or forty per cent below par. They then went into the street and made enormous time purchases. On settling-day the pool unloaded at 150, clearing nearly three hundred per cent. A still more audacious corner was effected the same year in Harlem. The stock consisted of 7,000 shares. 64,000 shares were bought by the ring within a period of seven weeks. Settlement-day was in September. Stock bought in July at 123, buyer 60, paid a difference of seventy-two per cent to the pool who held the market at 195. On two days of the middle of September four thousand shares came due with differences mounting up to % 100,000 in favor of the pool. The short interest was frantic. A meeting of the Board was called, and the discussion was fierce and protracted. The final vote decreed that contracts must be satisfied. But the shorts were determined, and the ring foolishly gave a fresh twist to the stock, running it up to 200. The Board was convened anew, and the brokers elected a committee of four, to whom differences should be paid, and who should 92 MEN AND MYSTEEIES OF WALL STEEET. arbitrate between the parties. The IsTew York Adver- tiser, in its comments, intimated that the street was ready to settle at 160 or 170 for corner stock, and the clique subsequently consented to the compromise. In November, 1865, the clever Prairie du Chien corner was sprung upon Wall Street. This then ob- scure Western road had a capital stock of $ 2,900,000, and the shares, when the specidation started, were selling for 60. The clique lent out thousands of shares, and created an enormous short interest. On the last Mon- day of the month Prairie du Chien had been forced up to 250. Settlements were made from 110 to 210, and one banking-house paid $ 125,000 to escape. Wm. H. Marston, once cashier of an Illinois bank, was the leading spirit of this ring. Two years before, John M. Tobin undertook his corner in Harlem. The stock was selling at 40. Commodore Vanderbilt was interested in the Broadway Eailxoad grant, and the Common Council of New York had thrown its influence against it, many individual mem- bers at the same time going short on Harlem. As Tobin owned, or had privately purchased the entire capital stock of the road, it was easy to run the price up to 164. This was in September, and as soon as settle- ments were made the shares dropped to 80. Early the next year the Legislature of the State repealed the grant, and half the Assembly entered on a bear raid against Harlem. The stock began to fall. The shorts increased. Then Tobin sought the assistance of the Commodore, and together they run the shares up to 285, at which THE METHODS OF SPECX7LATI0N. 93 point many contracts came due. Several houses failed, and not less than three million dollars were taken from the street by Tobin and his colleague. Individual op- erators who had^agreed to deliver from 1,000 to 1,200 shares, were glad to compromise by paying some one hundred and eighty thousand dollars. The extreme prices in corners are to be explained simply from the fact that the cliques hold all the stock, and can therefore exact whatever rates they please. Nevertheless, apart from the power of a monopoly, there is a subtle force which in all scarcity raises the selling rates of an article out of all proportion to the actual deiiciency. Gregory King, in a series of studies upon the prices of the food market in Europe, generalizes from the statistics at his command the following con- clusion ; — A deficiency of 1 tenth raises the price 3 tenths. " " " 2 tenths " " " 8 " tt it u q a u u u ig ff ii a " A u ti u (f 28 " II It U c il it it tt ^C u In shares, however, it is probable that the earlier deficit produces less effect, while great scarcity tells in even more rapidly ascending ratios. Problem No. II. may be thus exemplified : — Capital stock, 50,000 10,000 held at London and Amsterdam. 20,000 held by farmers, local tradesmen, professional men, etc., in the section where the prop- erty lies. 20,000 in the street, selling at 40. 94 MEN AND MYSTERIES OF "WALL STREET. The clique quietly buys 40,000 shares at an average of 60, seller 10, and buyer 30. The movement is concealed by cash sales and free loans for a week, and then the deliveries are demanded. In its efforts to cover its shorts (argot for purchasing sufficient stock to fulfil con- tract), the share rate is run up to 120. The ten-day men are forced to settle at this figure; the thirty-day men are equally embarrassed. There has been no time for the unspeculative holders of shares remote from the market to bring any large portion forward. The foreign holders cannot make a delivery by cable, and, before telegraphic intercourse, they could not be advised of the combination. The ring's account would stand as fol- lows : — Dr. To 40,000 shares bought at average of 60 . $ 2,400,000 " 2,000 shares, bought to steady market at 120, 240,000 " net profit ' . . 860,000 Cr. $3,500,000 By 20,000 shares compromised for at 120 . $ 2,400,000 " 22,000 shares worth at cash sale 50 . . 1,100,000 $ 3,500,000 The 2,000 shares represent the portion thrown in by outside holders eager to profit by the rise. They in- evitably gain, as the clique is compelled to pay the high price in order to make a basis for the settlement of dif- ferences. As the combination must take aU the stock offered for delivery, it comes out with 22,000 shares in hand. It might have sold this before the culmination THE METHODS OF SPECULATION. 95 of the corner, at seller's option, — the only safe and quickly profitable procedure, as the street can now heavily bear the market, running the stock down to 25. But it is evident that the ring can afford to throw the whole mass of shares into the East Eiver, and still come out with two millions in hand. Furthermore, the short interest developed by the desire for revenge may immediately be caught in a second corner far more disas- trous than the first. In effect this last strategy was put into practice by Leonard Jerome, and a few of his friends, in the Hudson corner of '63. This scheme was the impulse of the moment. The bears had hammered the stock down to 112 and below. Jerome was a large holder, and, irritated at the decline in price, sent orders to several brokers to take all that was offered at seller's option. This continued for several days, till the market began to fail. Then the ring began to buy cash stock until nearly the whole of the capital stock, except some held as investment, had been secured. At this stage ap- plications were made to bear houses to " turn '' the stock. They bought it cash of the clique, and sold it back at an advance, upon ten, twenty, or thirty days' options. This apparent weakness so far persuaded the street that the ring was in sore need of money, that a short interest again developed, and cash stock was sold for future delivery freely, — the clique quietly absorbing it. When the options, given in the turns, matured, the bears found themselves in "a corner." There was no stock to be had. Hudson mounted to 180. Then the lending houses began to implore and bewail. They had 96 MEN AND MYSTERIES OF WALL STREET. made " the turn " simply as an accommodation, and it was exceedingly unfair that they should now have to lose five or six thousand dollars on every hundred shares. The clique, however, was inexorable, but con- descended to lend the stock at five per cent a day. There were 50,000 shares due, and on a large propor- tion this extreme interest was paid for several days. At last, in despair, the bears bought the stock. What little remained was disposed of at private sale. The profits of the ring can only be estimated by millions. The risk, in this species of comer, lies in a miscalcu- lation of the amount really held by the street, and in an underestimate of the number of outside holders ready to avail themselves of the rising prices. Thus, the actual state of the stock just used for illustration might have been as subjoined • — Capital stock, 50,000 5,000 held in Amsterdam. 5,000 recently held in London, but already in Cunard ,,, steamer, due at New York in two days. 5,000 held in Philadelphia. 3,000 held in Boston. 2,000 held in Providence, in hands of large capital- ists. 10,000 held by small capitalists at a distance. 20,000 in the street, selling at 50. The clique buys 20,000 at 60, seller 10, and 20,000, buyer 30, for same average. It then rims the price up to 120, at which rate it had secretly determined to settle. Up to this moment it had absorbed the recent invoice THE METHODS OF SPECULATION. 97 from London, the Philadelphia supply, and the 20,000 block held in New York. But as no contract had matured, it could not be conscious of the situation. The ring could buy 3,000 at 120, to hold the market, but there its resources ended. Boston sells at once, and the stock recoils to 80. Providence sells, and the shares slide down to 50. From aU quarters come tele- grams from the minor holders with orders of " Sell" and no limit, seeing that at 120 their hopes have become illimitable, and in a drooping market 2,000 more shares are thrown in, leaving the stock flat at 30, with no buyers, and at that point the sellers at seller 10 deliver. The account would stand : — Db. To 40,000 shares bought at average of 60 . . $2,400,000 " 2,000 " " " " 120 240,000 " 1,000 " " " " 110 . 110,000 Cr. $2,750,000 By 43,000, market value 30 . . . . $ 1,290,000 " net loss . 1,460,000 $ 2,750,000 The clique might, perhaps, have sold their 40,000 at 60, sellers 30, before the real shaping of the market was known. That would have placed the credit statement thus : — By 40,000 . . . ® 60 . . $ 2,400,000 " 3,000 . . @ 30 . . 90,000 " net loss 260,000 $ 2,750,000 G 98 MEN AND MYSTERIES OF WALL STREET. In this case their loss would be moderate, and would yet remain a quarter of a million. It will be observed that in this aspect of the corner the small outsiders are proportionately the heavier losers. They sold at 30, and will ever after regard Wall Street as the treasure-house of thieves. One hazard overhanging all corners has yet to be noted. Our previous suppositions have implied the in- tegrity of capital stock. But in pursuance of modern ideas, the directors of great corporations sometimes hold that their affairs should be managed with an eye to the street. The single eye is full of light, and the more light reserved for the Stock Exchange the less of it that remains for a disagreeable illumination of the ways and sinuosities of the management. Accordingly, money is borrowed for dividends in order to keep the stock high in the register, or the earnings which should have been distributed among shareholders are transferred to con- struction account lest dividend day might affect the stock market by an unhealthy appreciation of shares. Nearly all our great railroads have charters in which a high-priced New York lawyer can detect an obscure and inferential permission to enlarge the capital under cer- tain conditions. Bonds also are frequently possessed of the privilege of conversion into stock without very definite details regarding time or manner. Judging by not infrequent occurrences it may not be far wrong to suppose that the sufficing motive for a fresh emission of shares or conversion of bonds is to be found in the appearance of a corner, or of a movement partaking in THE METHODS OF SPECULATION. 99 some degree of the nature of this phase of speculation. Perhaps, indeed, a more accurate definition would be that railway companies are empowered to add unex- pectedly to their capital stock whenever controlling direc- tors are not members of a cornering combination, and are so far operators in the street as to be affected disas- trously by the*success of such combination. Eailway directors are the heavy artillery of the stock market, and no corner can attain Napoleonic victories without them. An important feature in this speculation is to know who are the real holders of stock. This can be discovered most expeditiously by an examination of the transfer books ; and, of these, the directors hold the key. They also can alone check the influx of newly rustling shares. This was the secret of Tobin and Vanderbilt's " Harlem Squeeze " of 1865. They owned the property and knew all its points. It was this satisfactory reliance which upheld famous Jacob Little when in a great strait. He had been selling Erie for future delivery. He was no one knows how many hundred thousand dollars short in the stock. Every broker in the Board combined against him. On settlement day, as the story goes, he walked up Wall Street with serene countenance, while the joy of expec- tant disaster gleamed darkly and scornfully at him from a hundred_eyes. He had been long known as the Napo- leon of the Exchange, and aU the brokers said that two o'clock would be his Waterloo. At one p. m. he stepped into the Erie of&ces, presented a block of convertible bonds, and demanded instantaneous surrender of equiva- 100 MEN AND MYSTBEIES OF WALL STEEET. lent shares. Then he rode round to his office, and the startled Stock Board found that Blucher and night had come ! Daniel Drew in similar extremity has mounted the Erie stairway time and again on the same errand, and with like success. The celebrated corner in Milwaukee and St. Paul was undertaken without the safeguard of a co-operating direc- tion. The feature of this speculation was the employ- ment of calls instead of buyer's options. Its master- mind was Garner. The stock was selling at 47 in Janu- ary, and the operator bought calls at twelve months, covering the whole capital stock, — paying $800;000 in premiums. He then put his broker into the Boards with orders to bid it up, and by October it was quoted at 111. At this point the direction voted an immedi- ate issue of shares upon a " construction " pretext, and the market at once broke to 61. It is evident that the essential principle of the comer is simply the aggravation of ordinary stock speculation. A man who sells seller 30 hopes that his commodity wiU. decline in value. If it rises, he suffers, and expects to suffer. But in ordinary cases the exact limit of suf- fering is known. In a perfect corner there is no limit, or rather the limit is the extreme verge of price at which it is prudent to force a stock. It is clearly better to settle with a man at 150 than compel settlement at 200, thereby breaking him and receiving only fifty cents on a dollar. A peculiar danger to which corners are incident is the perfidy of a portion of the clique. There is scarcely THE METHODS OF SPECULATION. 101 a single great operator that has not been charged with this weakness. It consists in quietly selling the stock which has heen pledged to the pool, the clique buying it at high rates in order to keep up the price, and without suspecting the source of the supply. The Rock Island comer of '63 - '64 partly split upon this snag. It had been engineered by Morse of Fort Wayne fame and Dr. Durant, the hero of the Union Pacific Eailroad. In December large quantities of the stock was hypothecated on a sixty days' loan. Then heavy purchases were made. More than 56,500 shares, constituting the whole capital stock, was held or purchased at short options. Indeed, it is asserted that 20,000 shares in excess of capital were bought. The price started at 107, and went rapidly up to 149. At that point it was discovered that the pool was being betrayed. The detection arose from the sale of certain certificates whose numbers were known as belonging to a member of the clique. The compromise with the shorts was at once effected at 140,- 143. This was on February 10. The next day a broker sold 10,000 shares, buyer 10, immediately upon the close of second session, and the corner subsided directly after. An absolute equivalent to gambling is not to be found in any phase of speculation, but what are sometimes called " privileges " approach very nearly to the nature of a bet. Privileges are either futs or calls. A ■put is where a certain sum is paid for the privilege of delivering a given amount of stock, within a stipulated time, at a definite price. Suppose an operator. A, on 102 MEN AND MYSTERIES OF WALL STREET. March 20, 1868, paid John Jones $200 for a, put on two hundred shares of Hudson at 135 any time within twenty days. The contract of the giver of the jnU would read as foUows : — New York, March 20, 1868. For Value Received, the Bearer may DELIVER ME Two Hund/red Shares of the Stock of the Hudson River Railroad Company, at One Hundred and Thirty-five per cent, any time in Twenty days from date. The under- signed is entitled to all the dividends or extra dividends declared during the time. JOHN JONES. The stock sold at 138 on the day of the hargain. It is evident that a fall of one per cent on " put " price would be necessary for the recovery of the whole pre- mium. After that every fractional decline would be a gain. Hudson was 123 on April 9. A then presented the above slip of paper, and received the difference be- tween the price contracted for and the street rate. His profit stood thus : — Received S 12 a share on 200 shares . . $ 2,400 Paid for privilege one per cent . . 200 Net gain ... ... $ 2,200 A call is simply the reverse of a put. A sum is paid as premium for the privilege of demanding witliin a designated date a given amount of stock for a certain stipulated price. In April, 1868, Eock Island sold low. It had been ranging for some months previously from THE METHODS OF SPECULATION. 103 par far down into the nineties. On April 15 a broker in the bear interest sold five hundred shares at 85. Sup- pose on that day a speculator, C, had offered $ 100, or half of one per cent, for the right of demanding two hun- dred shares within twenty days at 89. The market was unstnmg. Various rumors were afloat to the detriment of the company, and the call sought for was readily sold. The blank agreement, when properly filled in, read in this wise : * — Kbw Yokic, Apra 15, 1868. For Value Received, the Bearer may GALL ON ME for Tivo Hundred Shares of the Stock of the Chicago and RocJe Island Railroad Company, at Eighty-nine per cent, any time in Twenty days from date. The hearer is enti- tled to all the dividends or extra dividends declared during the time. -BELDEN FISK, Jk. The aspects of the speculation may be thus stated : If, np to May 4, Eock Island had remained constantly below 89, would of course have waived his right. The premium would in that case be a dead loss, but that Y/ould be his whole loss. At 89J he could make his call * This agreement is not perfectly explicit. In tlie Vandertilt Harlem comer, an old operator unsuspectingly sold a, number of " calls " at atout 130. When Harlem had reached 250, a demand for the stock was made. He fell back on the ambiguous wording of the paper, declaring he was the victim of a conspiracy. The agreement which he had signed was, as he claimed, a permission on parties to call for the stock without a word requiring his dehvery of it. As a criticism the excuse would seem valid ; but usage and the operator's own intent when he made the sales were both against this absurd subterfuge. 104 MEN AND MYSTERIES OF WALL STEEET. and recover half his premium ; at 89|^ the entire bonus would be recovered. In other words, the transaction, to be profitable, presupposed a rise of more than half of one per cent. Actually, however, on May 4 the lowest quotation of Eock Island was 98, and C calleA. upon Eichard Eoe to keep to his contract. The speculation, when Eoe settled, was in this shape : — Eoe paid C in diiferences S 9 a share on 200 shares . $ 1,800 C had previously paid as premium for call . . 100 C's net profit $1,700 It is apparent that no one would wish to deliver stock at less than the market price, or demand it on terms above ruling rates. The person who purchases a put, therefore, anticipates a decline below the percentage fixed in the contract. The holder of a call, on the other hand, buys it in hope of a rise. The scientific operator varies these simple forms by several classes of artifices. 1. He buys a tew puts and covers %vith purchases of as many calls as the market will accept. The former transaction deludes the street. The business is done through different brokers, and it is clear that the steadier the price of one class of privilege, the cheaper and more plentiful will be the market of the others. For ex- ample : — On a certain October 11th, D buys five 30-days' Erie puts amounting in all to 600 shares, the delivery price being 40, and the premium four per cent. The next THE METHODS OF SPECULATION. 105 day or the same day lie buys thirty days' calls for 10,000 shares of Erie at 40, paying half of one per cent premiiun. He looks to a rise, and on October 31 finds his foresight confirmed, and Erie stiff at 50. Settlements are demanded, and the speculation in calls closes with the subjoined result: — Ten per cent in differences on 10,000 shares of Erie . $ 100,000 Deduct premiums, one half of one per cent on 10,000 shares of Erie 5,000 Balance of profit $ 95,000 Erie failed to fall below 40 till after November 10. The puts were therefore a clear loss. Deduct four per cent, = $ 2,400, and the final result of the venture stands $92,600. 2. Another method is one which the great "specu- lative director " of Erie had the credit, a few years ago, of putting into practice. It consists in secretly buying up the great bulk of a particular stock, and then selling some fifty or a hundred thousand dollars' worth of puts for thirty, sixty, or ninety days. The stock must be one of seeming weakness, and 69 or 70 are good figures on which to base a contract. As soon as the puts are sold, the operator has only to keep the market above 70 tOl the ninety days are past, which is easy, because the previous purchases naturally render the shares buoyant precisely as in a corner. The operator pockets his pre- mium, and also sells off the stock he had accumulated at probably a handsome advance. In August, 1865, if current rumor is to be credited, a trap to catch green- 5* 106 MEN AND MYSTERIES OP WALL STREET. backs after this beautiful system was set by the muni- ficent founder of the Drew Theological Seminary. On the last week of that month Erie sold for 82, and puts were freely offered at one per cent for thirty or sixty days, at 80 or 81. The street caught at the prize, pur- chasing puts in blocks of 500, 1,000, 5,000 shares, — in any shape and to any amount offered. Something like % 300,000 were quietly absorbed in five or six days. Then Erie began to rise : one day it was 84 , the next, 87. Shrewd speculators, with their pockets crammed with privileges, thought they understood the game, and at once thronged to the Long Eoom and bought heavily. No blunder could have been more absurd. The man who sold the puts held Erie in the palm of his hand. He could depress it to 80, he could raise it to 90 ; but the price rested with himself. When they bought, it fell ; when they sold, it rose. By the time the privileges had expired, these vibrations of the market had enabled the king operator to add to his gains in premiums two fresh profits from bull and bear. It is a curious incident of this bit of strategy, that the stock had really been accumulated for the pur- pose of controlling the annual October election of direc- tors, the rich harvest from the street being a mere episode in a great campaign. 3. There is a yet further and, under certain con- ditions, an absolutely secure method. This consists in buying a call, and immediately selling one half the pur- phase at buyer's option ; videlicet, — B on November 20, 1868, buys a call for 200 shares THE METHODS OF SPECULATION. 107 of USTe-w York Central at 30 days ; delivery rate, 126 ; price of call, % 200. The same day he sells 100 shares, seller 30, at 125. Supposing stock falls to 115 and keeps there, the account would then be: — 100 shares New York Central, delivered at 125 $ 12,500 Deduct " " " " at ruUng rate 115 11,500 Difference in B's favor 1,000 Loss of premiums on calls .... 200 Net profit $800 Suppose, however, the stock had risen to 136, the re- sult would then read : — 10 per cent profit by call on 200 shares New York Central $2,000 11 " lost on 100 shares sold at 125 . . . . 1,100 Take out premium of call 200 B's net gain $ 70O B would have been saved from loss in the first case, even if Central had fallen but two per cent, viz, 123 ; and in the second case if it had risen to only 127. Had the speculation really taken place at the time stated, and under the designated conditions, the record of the share list shows that B could have bought in at 115, seller 20, the 100 shares sold at 125, seller 30, thus realizing % 1,000. At the same time he would have been able to make his call when the stock was at 159, clearing thereby % 6,600, or making in the whole, with premium deducted, the neat sum of $ 7,400 on a risk of $ 200. For it was in December, 1868, that the cele- brated scrip dividend of Commodore Vanderbilt was 108 MEN AND MYSTERIES OF WALL STREET. declared, and the street startled by one of the most audacious strategetic movements of the year. Brokers, who are fond of metaphysics, prefer to con- sider " privileges " as in the nature of an insurance. The claim has plausibility, and undoubtedly the underlying principle of not a few of these transactions is one of protection against changes in the market. An operator may be long in a certain stock. The price begins to falter. The indications of a fall accumulate. If at this point he can buy a put for an amount covering his venture, he is safe against all hazards. A short interest, of course, would be protected by a call. A year or two since, witliin the writer's knowledge, a gentleman bought 1,000 shares of a certain stock at 65, and sold it at 69, clearing $4,000. He bought again at 67^ and sold at 71|, making % 4,000 more. He then bought 1,000 at 60. The stock dropped to 59. He grew timid. The street was full of rumors, and he determined to hedge. He found a broker who agreed to seU a put for 1,000 shares at 55 on payment of $ 10,000. The money was given, when the market suddenly veered round and the stock went flying up to 71. There he sold, gaining $ 11,000, or, deducting the exorbitant premium of the j9«<, $1,000. He had previously cleared $ 8,000, and was wise enough to stop. In the Erie speculation aUuded to in a previous page the puts were largely bought as a safeguard against a possible break in the market, and to that extent the purchases were wise. CONCEENING STOCK-BEOKEES. 109 CHAPTEE VII. CONCERNING STOCK-BEOKERS. MEMBERSHIP of the New York Stock Exchange is the equivalent of a liberal education. It costs quite as much in hard cash and brain wear, and is worth neither more nor less when acquired. There are brokers, as there are lawyers and doctors, who lay up no treasures on earth, yet manage to slide up and down be- tween debits and credits with average comfort and some felicity. There are brokers whose candle of fortune has been snuffed out in a day, and who wander about the scene of their financial demise with the tenacity of spec- tres. There are others still, whose hands have the Midas touch, — men of large ideas and generous luck, keen, ver- satile, coining advantage out of misfortune, — the stamp of humanity which, in the sarcastic mot of I^apoleon, wins a fortune as one gains a battle. In the good old times (nobody knows the date, and it was probably in dream-land), brokers throve mightily, and grew passing rich simply upon their commissions. There is a tradition of this in the manual of the Stock Board, and no one, from reading that terse but over-dry code, would suspect that brokers ever did aught beyond buying or selling for other men in consideration of due percentage. In fact, were these commissions always 110 MEN AND MYSTERIES OF WALL STREET. equal to the lawful maximum, and the volume of actual business really dependent upon outside orders, there would he, as we have seen, the neat average income of about $109,000. Before the war, when the bulk of securities was not half that of the present, legitimate brokerage was a profitable profession, and the pressure of rivals did not seriously affect the old houses. But with the great national debt, the fluctuations in gold, and the rise in shares, a crowd of new men came pour- ing into the street. The Stock Exchange shut its doors against this influx. New members were elected with exceeding reluctance, and under constant peril of black- ball. Unquestionably one motive for this exclusiveness was the honorable desire to preserve the integrity of their business. Dealing in values whereof much is un- substantial, and in a class of trade where, in the opinion of a prejudiced public, a narrow margin of fact skirts a boundless space of fiction, they were justly urgent that the margin itself — the terra firma of capital and credit — should be as solid as practicable. High above the in- stinct of safety, however, was the instinct of profit. Of course, the attempt to monopolize proved nugatory. The Stock Exchange maintained its respectability, but it could not prevent men hungry for wealth, determined, full of eagerness and 4lan, from crowding the pavement, extemporizing a market, and finally establishing organi- zations of their own. Hence rose the Open Board and the Gold Eoom.- The members of these competing associations called themselves operators, and preferred the ten and twenty CONCEENING STOCK-BEOKEES. Ill per cents of speculation to the driblet earnings of com- missions. They all had customers. They took orders even more freely than their neighbors of the old school. They would work on lower margins and smaller per- centages ; but it was because their speculations covered wider ground, and their customers' capital helped to strengthen their own position. Naturally, in the demor- alization of all values by the greenback era, — fortunes rolling up between sunrise and sunset, a furnace heat of speculation glowing all around them, — even the most conservative brokers of the " close '' Board yielded to the fascinations of the period, and ventured into exten- sive operations. Probably there cannot be found a single house in Wall Street, no matter how wealthy or bound up in traditions, which could show books clean of stock speculations made in the firm interest. In many cases these operations may be hid under a thin veil of personal accounts, — Smith being in stocks ; Jones being in gold; but Smith & Jones claiming to do nothing except a commission business. Even this pretence, how- ever, is seldom kept up when broker talks with broker. When the Open and the " close " Boards so far coalesced as to meet in one Long Eoom, old notions had become so thoroughly rubbed away that members spoke frankly of their " neat turns " and " flyers " ; and the great majority were quite ready to allow that, although they never speculated, they really could not name another house of which so much could be affirmed. To-day the street has made such progress in conforming language to facts that the TiabituSs of the Stock Exchange are clas- 112 MEN AND MYSTERIES OF WALL STEEET. sified into bankers, brokers, and operators. By going one step further, and defining operators as men who specu- late generally for themselves, sometimes for others; brokers, as persons who buy or sell for outsiders and themselves ; and bankers, as a combination of the oper- ator, the broker, and the money-lender, the conclusion of the whole matter would be reached. Por of such, and only of such, is the present kingdom of the stock market. But while it is highly essential that the speculative aptitudes of Wall Street should be kept steadily in view, it is not less important to guard against exagger- ated conceptions. Taking the houses connected with the Exchange as a class, there is probably a greater average conserv^atism in their transactions than in those of many leading departments of trade. The high rates of commercial paper, compared with the low percentages of even time loans, which the city banks freely make to the really first-class bankers and brokers, is strong tes- timony in favor of this position. And this will further appear in the fact that a very considerable portion of the securities dealt in by the great establishments are governments and the class of State bonds which in ante-helium times furnished the groundwork of our entire banking system. There are dozens of houses in the financial quarter whose footing is as stable, and whose method of business is as guarded as that of the private banks of London and the English provincial cities. They take money on deposit, negotiate loans for the chief railroads, simply as agents purchase and sell CONCEENING STOCK-BEOKEES. 113 for customers, and in case of speculation operate in de- scriptions of securities which even in adverse fluctuations ■will not endanger their solvency. Their connection with the Stock Board is mainly indirect, and their profits are quite as much by lending money as by stock transactions. They are represented at the Exchange by the second partner, by that indefinite human quantity known as " the Co.," by an attacM of the office, or through any one of a score of brokers who take orders at second hand. Enter their offices, and you discover all the appoint- ments of a great bank; every department having its appropriate desk and of&cer, a score of clerks working behiad the elaborately carved railings, whole suites of carpeted apartments, with rooms within rooms, — a vast, silent, but ever active financial machine, which can cash a check for ten dollars or certify another for a hundred thousand, sell fifty government bonds or buy fifty thou- sand over the counter, negotiate a railroad loan of ten millions, and exchange fractional currency for one gold dollar. Such a house is that of Jay Cooke & Co., whose connection with the government during the war is his- toric. Its annual dealings are estimated only in him- dred millions. It receives orders from every State, buys, sells, loans, to amounts that would startle the public, if accurate figures were procurable. Henry Clews & Co. are of the same class. They are agents of a dozen rail- roads, and receive orders daily from all points of the compass. Fisk & Hatch, another firm, are notable as negotiators of the famous Central Pacific EaOroad bonds and other securities. These three houses, with the 114 MEN MTD MYSTERIES OF WALL STEEET. addition of Vermilye & Co., absorb within themselves nearly the whole of Wall Street dealings in govern- ments. Among the other first-class bankers are Bab- cock Brothers & Co., Baltzer & Taaks, Eichard BeU & Co., August Behnont & Co. (agent of the Rothschilds), Brown Brothers & Co. (connected with Brown, Shepley, & Co. of Liverpool, London, and Eio Janeiro), John J. Cisco & Son, Dabney, Morgan, & Co. (J. S. Morgan & Co., London), Drexel, Winthrop, & Co. (with houses in Paris and Philadelphia), Duncan, Sherman, & Co., Eugene Kelley & Co. (branch house in San Francisco), James G. King's Sons, Howes & Macy, Maitland, Phelps, & Co., W. C. PickersgiU & Co. (agents Glyn, Mills, Currey, & Co., London and New Orleans), James Eobb, King, & Co., Winslow Lanier & Co., S. G. & G. C. Ward (agents Barings), Frederick Schuchardt & Sons. The influence of houses of this character upon the Stock Exchange, and especially its Government and Bond department, cannot be overestimated. They con- stitute the great centripetal force of the street. Many of them owe the bulk of their vast wealth to the war. Growing up with the National debt, and extending their sphere of action in exact proportion with the increase of our legitimate speculative arena, they afford the best possible guaranty of the future. Every step toward the development of New York as a world-mart must be an advancement of themselves, and self-interest alone is sufficient to make them guardians of the integrity of the Stock Board. Besides these great establishments, -whoie reaUy CONCEENING STOCK-BEOKEKS. 115 special feature is that they are agents and dealers in the heavier and more substantial classes of securities, and sell or buy in great quantities " over counters," i. e. directly in their offices, there are several firms of com- manding influence who deal mainly through the Boards, but have extensive offices and a half-dozen active and silent partners. Among these are John Bloodgood & Co., J. L. BrowneU & Co., Camman & Co., Clark, Dodge, & Co., Thomas Denny & Co. (agents for many New England and New York banks). Fearing & Campbell, Fitch & Bowen, David Groesbeck & Co., HaUgarten & Co., Du- rant & Earle, Kidd, Pierce, & Co., Kissam & Co., Law- rence Brothers & Co., Lees & WaUer, Lockwood & Co., Marvin Brothers & Co., H. T. Morgan & Co., William and John O'Brien, George Opdyke & Co., William M. Parks & Co., Eiggs & Co., Eobinson, Cox, & Co. (brokers for Daniel Drew), Stone, Nichols, & Co., Smith, Gould, Martin, & Co. (agents for Jay Gould and James Fisk, Jr.), Ward & Co., Trevor & Colgate (brokers for Dr. Shelton), Wood, Campbell, & Co., Whitehouse & Co., Smith, Eandolph, & Co., George B. Grinnell, Frank Work & Co. (the two last-named houses are special brokers for Vanderbilt), M. Morgan's Sons. Many of these houses are connected with the Gold Board as well as the Stock Exchange. Several will carry a line of stocks from five naillions upwards. The commissions of leading houses on outside orders alone are oftentimes enormous. The location of these firms is in Broad Street, Ex- change Place, New Streets. Some also are still to be 116 MEN AND MYSTEEIES OF WALL STREET. found in WiUiam and Wall Streets. But the application of Wall Street as a name for the seat of speculation is now to a large extent a reminiscence. Some of these offices are on ground floors ; others, one flight up stairs. Many of them rival the government brokers in the magnificence of their furniture. Not a few have counters, but, in addition, there are always to be found high screens not unlike Exchange shops, with private doors opening on inner rooms, and one or more windows looking out upon the narrow vestibule where one enters, at which clerks ^it on guard. A small aperture, large enough for the thrust of both hands, is cut through the lower portion of each window, and a stranger peering up from under this outlook can hold parley with those inside. If all is satisfactory, he is admitted at the side- door ; otherwise he departs less evenly tempered than he came. At these little trap-holes brokers' clerks are per- petually presenting themselves, with budgets of stocks or checks. If the latter, the outsider holds it firmly with one hand, while with the other he seizes the parcel of shares extended to him from within. The clerk at the desk has his grasp likewise upon both check and stock. Then each simultaneously relinqiiishes the hold of one hand. The shares go out, and the representative of bank deposit goes in. And so the final part of one transaction is completed. The fuU number of these broker offices is between four and five hundred. Some of the smaller firms have lodgement several flights up, and the region between Williams and New Streets is literally honeycombed with CONCERNING STOCK-BEOKERS. 117 them. They differ in amount of capital, credit, ca- pacity; but otherwise are very nearly of a kin. The theory of the street is that there should be at least two partners, one for the of&ce and one for the Board. Where one man carries on a business he is invariably known as an operator, buying and selling almost entirely for himself. Many of the operators, as well as the smaller brokers who act principally for other houses, and are styled 1-32 and 1-64 men, have simply desk-room. They number in all some two or three hiindred, and include a not inconsiderable proportion of capitalists. The effect of speculative concentration is more and more apparent in the money quarter. The great broker and banker iirms gain every year in power. The lesser houses are becoming dependent. The number of indi- vidual small operators and brokers is diminishing. The Bankers and Brokers' telegraph has largely assisted this revolution. Dating its practical acceptance by the finan- cial community only two years back, this strange auto- matic messenger now finds its way into more than four hundred offices, printing and rolling off, with wonderful accuracy and in the full legibility of type, the exact history of the stock and gold market, second by second, and almost instantaneous with the actual bidding. Cus- tomers may enter behind the black-walnut or other screens which shut out the profane public from the mysteries and secrets of brokerage, and read the execu- tion of their orders within a half-hour of their delivery, and the brokers themselves are enabled by this unique contrivance to manipulate the market with an ease and 118 MEN AND MYSTEEIES OF WALL STREET. certainty before impossible. Not only does this expe- dient place the less wealthy broker at a disadvantage, it also renders the duty of buying and seUing at the Board more mechanical. The work can be delegated to clerks by power of attorney, or to operators who wiU divide up commissions with the large houses. Habitu- ally in firms composed of two members, the abler and older partner remains in the office, while the younger representative of the house is constantly at the Ex- change, executing the orders with which the day starts, and receiving fresh messages from head-quarters as new commissions flow in, or the opportunity of a happy turn presents itself. Establishments like Jay Cooke & Co., Henry Clews & Co., Vermilye, Lockwood, and Trevor & Colgate, sometimes employ a dozen operators acting at the instance of the managing head of the house. The problems before a thoroughly wide-awake broker, who has his future to make, are something beyond a par- allel with any other profession. He cannot scheme out a single movement without first taking in at a glance the entire field. There are the banks and brokers, — • the question of an easy or stringent market compeUing to a wide knowledge of trade influences, exports and im- ports, cotton, wheat, whether the Secretary of the Treas- ury will buy bonds or sell gold, — a mass of facts which must be comprehended as fuUy whether the speculation involves five hundred shares or a block of ten thousand. Then the great operators must be watched. Is there a clique movement developing ? Every broker must be CONCEl^iNa STOCK-BHOKERS. 119 taken up in detail. Are or are not Robinson Cox & Co selling for Drew? Is Lockwood buying for Vanderbili or on private account ? Such scrutiny is no holiday task. The kings of the stock market are not prone to let the street understand their tactics. If a large operation is to be made, Ursa Major gives the word to some special agent, who distributes the order to A, B, and C ; A whis- pers to D, C instructs F, B commissions G, and so the complication extends. This finesse is one of the difficul- ties of the game which perpetually confront the player. Brokers, however, have eyes like ferrets and the in- stincts of a Fouchd. They detect the instruments of a clique leader almost from their first bids. Sometimes they go wrong, but averagely their suspicions are infal- lible. It will be apparent, therefore, that the duties incident to attendance at the Exchange are anything but light. Indeed, there is no limit to the shrewdness, coolness, mental alacrity, and aptitudes of all sorts which are developed and strengthened by the ever-fresh condi- tions of their profession ! They go to the Boards as athletes enter the ring. They scan the offers and bids, and detect each incipient indication of unusual move- ments, of a "weakness" in this stock and a forced market in that. The whole luck of a customer's order or personal ventures may depend in shouting a half- second earlier or longer, or an octave higher, than one's eighbor. Half the small fortunes of speculation are made in the snap of the fingers, in Hghtning-like zig- CTS of buying here and selling there, both in the same ■u eatb and over the heads of a hundred rivals. A 120 MEN AND MYSTERIES OF WALL STREET. stranger may visit the Exchange every day for a month, and learn something fresh each hour. There is no end to the humor, the quick expedients, the volatility of these men. A well-perfected combination in some par- ticular stock has been upset for the day by the ready- wittedness of one or two brokers eager to foil the game. The manual of the Stock Exchange is plentifully be- sprinkled with by-laws enforcing special fines for special offences. They indicate an absurdly frolicsome spirit in members. But half the foolery has a meaning. The plan may be to run up Michigan Southern. The Vice- President calls off the stock, and a burly broker starts it off at an advance of a quarter. A neighbor tickles his ear, and in a flash down goes the offender's hat over his eyes. All around the table the brokers are in a sudden ferment. The hammer rattles at the desk. " Fine Peters, — fine, fine, fine Peters. Pine Henderson, Henderson, Henderson " ; the mob cheers and shouts, and rolls hither and thither. When quiet returns, Michigan Southern has disappeared and the call of a dozen stocks has in- tervened. The broker who caused the tumult has gained his point, and is quite. willing to pay his fifty or sixty dollars of fines. Still further, the operator must not only anticipate the loan market and clique schemes, he must equally carry in his head the transactions of every member of the Board. He must know what stocks Vermilye & Co., Henry Clews & Co., Smith, Gould & Martin, D. Groes- beck & Co., etc., are carrying, what houses are dealing heavily in options, who are holding off, who are entering CONCERNING STOCK-BEOKEKS. 121 the field in forcGj — in a word, he must know all the cards and every man's style of play, before he can confidently set forth privateering. There are brokers, according to rumor, who from time to time fee half the clerks of Wall Street, in order to hold every " point " which a knowl- edge of ofiice books would afford, — who favor club men with choice opportunities for speculation, and then use them for extracting information such as can be gleaned in the open talk of the up-town club palaces. Even with all these precautions, the risks are enor- mous ; for just as Eobiason is goiag to sail down upon Fort Wayne, with cannon all mounted and with confi- dence that so over- weighted is the street with this stock, and so active is the money market likely to be, that a sharp sale of five hundred or two or three thousand shares will knock down everything, it may happen that Messrs. Eoe & Doe have just received a Western order to buy eight thousand, and instead of a falling market, the stock rises perhaps two per cent. Eobinson's " short " sale proves, therefore, ruinous. Naturally, the operator likes to be on the side of the heavy artUlery. To be "in with" a great speculative leader, to buy and sell with him, to take his points and hold the same line of stock, are prudential measures which Wall Street thoroughly understands. It is not always safe, as the Drew Gambit shows ; but it is another element of power which is worth all the more if not too confidingly relied upon. Old members of the Board have an inveterate dislike for cliques. What the sports- man feels in regard to a Jersey decoy-hunter, or your 122 MEN AND MYSTEEIES OF WALL STKEET. genuine Down-East fisherman thinks of the trolling butchery, the thoroughbred stock-broker of the bygone school holds respecting these immense combinations ■which take more money out of stocks in a day than in- dividual operators would absorb in a year. The gold corner of September, by the reaction which it caused in every class of speculation, had a disastrous effect upon the great mass of brokers' busiaess, which was felt for three months after. The outsiders were frightened off. They no longer consented to feed the street with fresh funds when every calculation, however accurate on gen- eral grounds, was liable to be upset by a sudden inroad of from five to twenty millions of dollars, sweeping down or up the stock gamut with no regard whatsoever to the natural laws of the market. Of course in time this timidity disappears. The birds return to the plucking, and all is once more merry. But to brokers the sense of insecurity is constant; and houses which have no connection with the great rings look in vain for the same success in their business which was possible when such influences were exceptional. The customer is an important integer in brokerage. The most speculative house in the street has an ambi- tion for a good line of outside commissions. In fact, average experience proves that this is the sheet-anchor of brokers. Few houses or individuals get rich and keep rich by speculation alone. We shall revert to this phase of the business in another chapter. But there are one or two points which more properly belong to the present page. Brokers are very careful of new men. No re- CONCERNING STOCK-BEOKERS. 123 spectable firm will take a commission from any one who has not been properly introduced. They want to know all about his means, whether he be slippery in his deal- ings ; in fact, everything bearing upon his business pe- culiarities. This scrutiny is an absolute prerequisite. Scarcely any broker who disregards this safeguard but fails to pay dearly for his folly. And the reason of the caution will be readily apparent. Customers invariably buy or sell on margins. If the former, they are quite apt to desire to have their stock " carried." Hence it is necessary to be assured that when further margin is re- quired the money-will be forthcoming, and in case the loan market is exceedingly tight the additional interest will be paid without murmur. Above seven per cent is usury under the law, and there are not a few individu- als of the " shyster " class who are ready to break their word, when they can shield themselves from prosecution under the pretence of illegal rates. Eecent decisions of the courts have made it obligatory to serve a notice per- sonally upon customers whejn a fresh instalment of mar- gin is called for. This rendering of the law has an element of justice, and is a healthy check upon sharp practice on the part of brokers ; but it furnishes a loop- hole for a great deal of outside trickery. Men give orders, leave deposits, and then retire. If the stock falls, they have hasty business out of town. The broker's messengers look for them in vain. Every moment, how- ever, the shares are declining in value. The law forbids their sale, although the descent of prices may cause a loss to dealers of five or ten thousand dollars. Some 124 MEN AND MYSTERIES OF WALL STREET. sell at once. A few days after, the stock jumps up in flying leaps of twenty or thirty per cent. The John Smiths suddenly reappear, rubbing their hands gleefully. " That is a neat figure for N'orthwest. You 'd better sell." " ISTot by an acre. You did n't put up the margin, and we dumped the stock into the market." " The de'H you did. Now that won't do. I never got any notice. If you don't compromise in forty-eight hours, paying up the difference to full rates of to-day, I 'U see what the judges have to say about it." Most brokers reply that he may go to law as soon as he pleases. An energetic expletive is apt to couple itself with this permission. Possibly a suit follows, and the affair is prolonged for years in the court by sharp lawyers. But a settlement is usually cheaper in the end, and the wiser brokers content them- selves with simply branding their customer in such a way that he finds it henceforth no easy matter to specu- late. It may have happened that the shares in question were only sold after the reaction, and therefore with great profit. Ought the customer to participate in this gain, when he failed to maintain his portion of the contract ? These are subtleties of conscience and logic which confront brokers every day, and make them more apt to conciliate their patrons than to indulge in the folly of anger. Indeed, one of the wonderful things in brokerage is its development of philosophy. This wholesome rule of guidance displays itself, not merely in the serenity with which reverses of fortune are met, but in a certain beautiful instinct of forgiveness. " Street " quarrels are quick mended. The man who is denounced as an infa- CONCERNING STOCK-BROKERS. 125 mous swindler to-day is accepted as a confederate in some fresh transaction to-morrow. Some feuds last a year ; the majority, a week ; not a few, from ten hours to ten minutes. The happy Chinese principle of compromise with that l^rge class which is apt to be oblivious of the eighth clause of the Mosaic by-laws was first made fashionable among Anglo-Saxons by "Wall Street. When Jerome was robbed of his bonds, he offered to share with the appro- priators, and no questions asked, if the deficit should be promptly made up. Bank directors learn their lessons in this school of the brokers. There is an amusing story of this description afloat. X, the cashier of a certain bank, had "appropriated" a hundred thousand dollars, and lost it in speculation. The day for the examination of the books was at hand. In great fear X called in his lawyer, and asked advice. " I have a reputation to sus- tain. My wife, children, the church, — it would be a horrible scandal. What can be done ? " " You can't raise the money ? " "'No." " Well, there is an easy way out of it." " Eh ! " gasps the cashier. " Why, you should simply absorb two hundred thou- sand more, and the day before the scrutiny call to- gether the directors, and make a frank confession." X grew interested, asked more questions, and then decided to follow up the suggestion. When the outraged officers met, X was overwhelmed with mortification. He was a defaulter for $300,000. 126 MEK AND MYSTERIES OF WALL STEEET. It had all gone in that infernal Harlem. He was ex- ceedingly sorry. "Of course, gentlemen, there is the law. You can expose me. You can throw me into Sing-Sing, shock the community, and hurt the bank's credit. It ought to be done. I have not twenty dollars. But then my friends are exceedingly concerned. They agree — if you will keep the whole affair silent, give me a letter regretting that I am compelled from my health to resign, and duly testifying to my integrity — to privately collect one third of the amount and place it to your credit. You can figure to yourself the pain such a proposition causes me. But then there is the family, and the bank." The directors reflected for thirty-six hours. Then they called X in, and asked if the money was certain to be paid over. He referred them to a " friend." All was satisfactorily arranged. The bank got back its one hun- dred thousand, the cashier retired on a hundred thou- sand, and the letter of regret and admiration remains in the famUy archives as evidence of the incorruptibility of its worthy but invalid member. Among brokers this exquisite anecdote has a certain lack of freshness. It is what the street has been doing for years. Half the time, indeed, the cashier is not even suspended, provided he guarantees that the deficiency shall be made good. Four years ago a firm, now dissolved, had a clerk named Jackson, who was simply invaluable. He never made mistakes, — could figure up the most com- plicated transaction with a rapidity and cleverness that invariably redounded to the profit of the brokers, how- CONCERNING STOCK-BKOKEES. 127 ever it might be with the customers. One day the house had five hundred shares of Fort Wayne to deliver. Jack- son sent the boy out with three hundred, intending to take in the remaining two hundred during the morning, and so make the balance good. Back comes the office lad with a check for an amount covering five hundred shares. The blunder was clear, but the clerk held his peace, and before night distributed the missing shares so completely, by sales here and there, that it was quite impossible to trace them. Smith, Jones, & Co., who had unwittingly checked for more than they got, soon came round to the firm for an explanation. The boy swore he had delivered five hun- dred. He had caught the cue at once and would have taken his oath in court. Jackson was innocent. He certainly sent over the whole lot. The iajured brokers were in an unhappy plight. Their check was equivalent to a legal receipt. They were short with a vengeance, and with no redress. The members of the. house in which Jackson was em- ployed were of keen honor. Nothing was left undone to get, at the facts. In two or three days sgme of the Fort Wayne was traced. E'-^erything pointed to the clerk. One evening they called him into the inner office. " Kow, Jackson, we understand how that matter oc- curred. It was a natural temptation. You have been speculating, and you wanted to do better. Of course you would never steal from anybody. If those shares are produced by noon to-morrow, there wiU be no trouble. Otherwise — " 128 MEN AND MYSTERIES OF WALL STEEET. Jackson was not a character for a novel. He neither turned pale nor bit his lip. They might do their worst, but he was not in the conspiracy. Next morning, how- ever, a package carefully tied and containing the equiv- alent of the missing shares was found by the office-boy when he came down town and unlocked the door. The partner sent it over to Smith, Jones, & Co., and Jackson kept at his desk without being troubled with further an- noyance. Two years after, when the house broke up, the clerk was provided with flattering testimonials, and to-day is one of the smartest men in the street. Every day clerks are discharged for dishonesty. There is hardly a house in the whole money-quarter that has not suffered from peculation ; but it never goes so far as the police court. The defaulter is advised to resign, receives a great deal of sound counsel, couched in toler- ably strong Saxon, and walks forth to fields and pas- tures new, with no fear of further harm, save through whispers and the shrugging of shoulders. Even that degree of punishment is seldom inflicted, and the secret is locked up forever. Unquestionably a generous un- willingness to destroy a reputation beyond all future retrieval is the cause of most of these evasions of jus- tice; but there are men understanding stock-jobbing thoroughly who explain the habitual lenity on other grounds. Brokers have a certain phrase implying a peculiar injustice to which customers are frequently subject. "Speculating upon orders" is the technical wording. A man wishes a lot of stock bought. His broker exe- CONCERNING STOCK-BROKEES. 129 cutes the order at 69. In half an hour the shares rise to 69|. He charges his customer for the stock at 69J, and so clears half of one per cent, besides his commis- sions. Or he agrees to sell at seller 30, and, believing, from the fact that this stock is very active, that his cus- tomer wiU probably close up the transaction in four or five days, he sells at a lower figure, seller 10, and charges an average of the day's bids at thirty days. This may af^rd a difference of two per cent in favor of the broker. Perhaps in eight days, if not before, the whole business is completed, as anticipated. Technically, the customer has not suffered injury ; but it is not thought advisable to spread abroad the fame of this astuteness. There are hundreds of ways to speculate upon orders with- out much risk of discovery, and with a thin gauze of justi- fication for every infraction of theoretic honor. The pur- chases or sales are always charged down within market rates ; if usury is paid, it is never put in the bill above the quoted terms, and the broker's conscience is readily quieted by the fact that he might have been compelled to pay all that he asserts that he paid, the difference being due to his superior cleverness. As the customer does not attempt to remunerate him for that, he ought not to have the profit of it. All these neat side-transactions are known to the employees. Frequently they are de- moralized by them. And if the human nature of a brok- er's clerk grows weak, and he occasionally makes slips of the pen whereby his pocket is benefited, it is human nature in the broker to condone, lest his speculations on orders should be brought to hght in unpleasant ways. 6* [ 130 MEN AND MYSTEEIES OF WALL STREET. It is asserted that this is one of the most forcible mo- tives for abstention from criminal procedure. Some outsiders, who have lost money, go so far as to insist that even the most respectable houses have secrets that are all the better for remaining secrets. This is probably pure prejudice. At all events, with the better class of brokers, there is probably not so much trickery as in other leading pursuits. Between themselves members of the Stock Exchange are peculiarly honorable.^ Up to 1865 only three brokers had been expelled from the Boards, one for misstating the price of Hudson to a cus- tomer, another for giving checks on a bank where he had no deposit, and the last for forgery. Indeed, the whole influence of the government of the Exchange is thrown against the least indications of financial irregu- larity, and, under President Neilson, the lines have been drawn with far greater rigidity than at any previous period. Thus far we have omitted mention of a very impor- tant feature of the street. During the old days of the war a casual visitor in Broad Street at the twilight hour would have observed outside of the Stock Exchange, upon the pavement, a crowd almost as large as that within, bidding with even fiercer emphasis and with less decorum, — cigar-smoke mingling freely with the shouting, — queer habiliments, queer faces, the Jew phys- iognomy predominating over the Gentile. That was the ■once powerful, the obstreperous, burly, ancient " outside " Board, whose roof was the sky, whose offices were in their pockets, whose aspirations were boundless, and whose CONCEENING STOCK-BROKERS. 131 lives were an incessant romance. One reason for their decadence is to be found in tlie Brokers' telegraph and the monopolizing tendencies of speculation. Another cause of their recent disappearance was undoubtedly the establishment of the National Stock Exchange, whose room is on the opposite side of Broad Street. This organi- zation, the outgrowth of the temporary exclusion of Erie from the caU at the Eegular Board, has acquired a defi- nite position since the old Open Board ceased to exist.* Solid brokers are Avont to scoffingly declare that it repre- sents some hundred millions of defunct capital, its mem- bers being mainly street bankrupts who have lost credit and standing by unfortunate speculations. In street argot, they are " snipes " and " lame ducks." But this view is not destitute of prejudice. In fact, the new Exchange is a composite body with its future before it, and a modest judgment wlQ not overlook the truth that Fortune in our great money-mart is a very fidde goddess, and that the most successful men in all new countries are those who have known failure and risen superior to it. Their greatest obstacle, however, is to be found in causes which we have already noted, and which have proved signally efficient in clearing the pavement of its former habituSs. * The organization of this Board dates with February 7, 1869. The dealings are in railroad stocks and a few of the more active mining and petroleum shares. The admission fee is $ 500. The President is A. L. Mowry. The second Vice-President calls the stocks, and receives $ 5, 000 a year. Many members of the Gold Board are on the roll-call of this Exchange. The total of members is about three hundred. 132 MEN AND MYSTERIES OF WALL STEEET. The story of " outside " brokerage cannot be -written in these pages, but it would be found full of thrilling and amusing chapters. Every great stock market has had this fringe of speculation cHnging to its surface like barnacles. It has been the school of many famous op- erators. Its wit is pungent, its schemes wild in dar- ing, its courage and tenacity wonderful Whatever is piquant and coarsely racy in street argot had its birth here. What is broker argot ? It is half technicalities, half slang. Brokers have tliis in common with the liberal professions, — they deal in a dialect which is caviare to the multitude. Nobody buys coffee or copper, teak- wood or tea-chests, for purposes of profit, without a tolerable insight into trade-marks, ways of sale, and ordinary merchant " shop ' talk. But mankind goes to its doc- tors, lawyers, architects, chemists, stock-brokers, with a distinct feeling of ignorance, and a consciousness that an assumption of knowledge would be extra-hazardous un- der the circumstances. Very clever money men, unless they have taken lessons in the school, will find them- selves beyond their depth in attempting fluency in Wall Street jargon. Ordinary amateur speculators are as amusing as Mrs. Malaprops. Por although constant iter- ation has made certain phrases familiar, yet there is a subtle something in the intercourse of habitual deal- ers in stock which renders a counterfeit distinctly recog- nizable. Street argot is like other argot. It is mainly the out- growth of necessity. In sale or purchase, such abbre- CONCERNING STOCK-BEOKEES. 133 viations as " Cash," " Eegular," " Buyer 30," " At the Open- ing," " About," " Sold," " Ten up," with their endless variations, are phrases without which, or without some similar abbreviations of speech, a large stock market would be impossible. Values change with such rapidity, new tactics and strategy must be assumed so suddenly, that a systematized and routine vocabulary is as essen- tial as the keys of a piano to the musician.^ Many of the sale phrases of the Boards have already been incidentally given ; others wOl presently be explained. But there is a great mass of jargon which does not strictly belong to this specific field. Every style and manner of brok- erage has its name. Every shade and flavor of specula- tion — the artifices, frauds, deceptions, of the business — are generally nicknamed and gibbeted with an epithet. Some of this jargon owes its origin to 'Change AUey and the Paris Bourse. Much is essentially American. Al- ways more piquant than select, racy, rank with a certain street flavor like the perfume of hostelries, some- times cruel, gross, harsh, — it presents a strong fusion of the coarseness of money-getting with the dlan and vivaciousness of successful- speculation. It would be useless to attempt a complete glossary. There are words of a day, as well as the picked phrases of centuries. For stock-dealers are the keenest men in the civilized hemispheres, and no possible variation or new shufiie of cards but finds some one witty enough to pinion it with an appropriate epithet. Many of the phrases which we subjoin have already been explained in connection with the machinery of speculation. 134 MEN AND MYSTERIES OF WAiL STREET. A " break " in the market. Where stock is kept up by artificial means, and a money stringency, or similar cause, makes it difficult to carry the load, the attack of a bear clique or the actual inability of holders will produce a decline in value. The market "breaks" down. Ballomiing. To work up a stock far beyond its intrinsic worth, by favorable stories, fictitious sales, or other cognate meaius. Block. A number of shares, say 5,000 or 10,000, massed together, and sold or bought in a lump. To " buy in." The act of purchasing stock in order to meet a " short " contract, or to enable one to return stock which has been borrowed. " Carrying " stock. To hold stock with the expectation of selling it at an advance. Clique. A combination of operators, controlling vast capital, in order to unduly expand or break down the market. Conversions. Bonds are frequently issued with a pro- %dsion whereby they can at any moment be exchanged for equivalent stock. Such securities are called " con- vertible," and the act of substitution is styled " con- version." Corners. When the market is over sold, the shorts, if compelled to deliver, find themselves in a " corner." The modus operandi is detailed in Chapter VI. Collaterals. Any kind of Wall Street values given in pawn, when money is borrowed. " Cover," to " cover one's shorts." Where stock has been sold and the market rises, the seller buys where he CONCERNING STOCK-BEOKERS. 135 can, in order to protect himself on the day of de- livery. This is " covering short sales." " Curbstone " brokers. Men who are not members of any regular organization, and do business mainly upon the sidewalk. ^ Delivery. When stock is brought to the buyer in exact accordance with the rules of the Stock Exchange, it is called a "good delivery." When there are irregulari- ties, — the shares being of unacceptable issues, the power of attorney not being satisfactory, or in some way the riiles of the Exchange are contravened, — the delivery is pronounced bad, and the buyer can appeal to the Board. Differences. The price at which a stock is bargained for and the rate on day of delivery are usually not the same. The variation is known as the "difference," and occasionally brokers pay over this money balance instead of furnishing the stock. Such cases are ex- ceedingly rare, notwithstanding public opinion to the contrary. A '■' drop " in a stock is ec[uivalent to a " break," except that it may possibly be due to wholly natural causes. Duck ; Dead Dvdc ; Lame Duck. Phrases as old as the London Stock Exchange. The "Lame Duck" is a broker who has failed to meet his engagements ; and a "Dead Duck" is one who is absolutely bankrupt jipast all recovery. If he haunts the street, it is as a "curbstone" broker. Forcing Quotations, is where brokers wish to keep up the price of a stock, and to prevent its falling out of sight. 136 MEN AND MYSTERIES OF WALL STEEET. This is generally accomplished by a small sale, or by " washing." Flat. This term is used where money or stocks are lent without interest. A "flyer," is a small side operation, not employing one's whole capital. It is nearly equivalent to what is ordinarily known as a venture. Gosling. A Lame Goose. Gunning a stock, is to use every art to produce a " break," when it is known that a certain house is hea\ily sup- plied, and would be unable to resist an attack. Gutter Snipes. Curbstone brokers. Holding the market, is to buy sufficient stock at the Boards to keep the price from declining. Hypothecating. Putting up " collaterals." Jdbhers. Used only conventionally in Wall Street. In London it is the equivalent of an operator. Josh. A word shouted at the Exchange in order to wake up a sleepy member. Kite-Flying. Expanding one's credit beyond wholesome limits. A " let tip" Employed when an artificial pressiire upon money or any other cause leading to a stringency in the loan market suddenly disappears. When the high prices of a corner cease on account of the clique's withdrawing, the same phrase is used. Load. To " load " one's self with stock is to buy heMf Long in stocks. When a man is carrying a stock for a rise. CONCERNING STOCK-BROKERS. 137 Milldng the street. The act of cliques or great operators who hold certain stocks so well in hand that they cause any fluctuations they please. By alternately lifting and depressing shares, they take all the floating money in the market. An " off" market, is where prices have fallen either in a week, a day, or even an afternoon. " Out" got " out " of stock. When an operator has rid himself of a certain line of stock. To "pass " a dividend, is a euphemism adopted by di- rectors of corporations to express an act which in ordinary English would be called not passing a divi- dend. In other words, a dividend is said to be passed . when the directors vote against declaring it. A Point. A theory or a fact regarding stocks on which one bases a speculation. Pool. The stock and money contributed by a clique to carry through a corner. Saddling the market, is to foist a certain stock on the street. Salt down stock, is to buy and hold for a long period. It is nearly the equivalent of investment. To " sell out " a man, is to sell down a stock, which an- other is carrying, so low that he is compelled to quit his hold, and perhaps to fail. A Sick market ; the marlcet is III. When brokers very generally hesitate to buy. Generally the consequent of previous over-specxalation. Short. Wlien one has sold stock. Spilling stock. When great quantities of a stock are 138 MEN AND MYSTERIES 0¥ WALL STREET. thrown upon the market, sometimes from necessity, often in order to " break " the price. Swimming market. The opposite of a sick market. Everything is buoyant. " Ten up," the phrage used at the Boards when a broker's ability to keep his contracts is questioned. It means that a deposit of ten per cent on the selling value of the stock bid for must be put up before the contract can hold good. Traps. An almost obsolete phrase for broken fancy stocks, depreciated railroad securities, etc. Twist on the shorts. A clique phrase used where the shorts have undersold heavily, and the market has been artifici9,lly raised, compelling them to settle at ruinous rates. To Unload, is to sell out a stock which has been carried for some time. Washing, is where one broker arranges with another to buy a certain stock when he offers it for sale. The bargain is fictitious, and the effect, when not detected, is to keep it quoted, and, if the plotters buy and sell . the stock to a high figure, to afford a basis for honafide sales. Watering a stock, is the hydraulic artifice employed by modern managers to double the quantity of a stock without improving its quality. To wipe out an operator, is to entangle him in trans- actions untH he loses his footing and fails utterly. It is one of the malignancies and cruelties of the street. HABITS AND HUMORS OF "THE STEEET." 139 CHAPTEE VIII. HABITS AND HUMORS OF "THE STREET." ONE of the finest characteristics of brokers is their generosity. There are few mean men in and aroimd Broad and WaU Streets. The miser instinct is impossible. Dealing with money values constantly, they attach to them more accurate ideas than is the wont of portions of the outside world. They know that greenbacks are for use, and although in no region are there such oppor- tunities for making the most of every dollar, there is probably not a community so liberal and free-handed, so considerate and kindly, in the employment of its surplus resources. They lend to friends with a superb care- lessness for receipts or times of payment. They give largely to charities. Churches ia need of funds, colleges seeking new endowments, benevolent institutions that do not care to imitate Miiller's " Life of Trust," send their broadcloth beggars into the down-town of&ces by swarms. Every great banking-house has a host of such applicants. Sometimes brokers will mass their benefactions in one great gift, like Messrs. Trevor and Colgate, who placed two hundred and eighty thousand dollars to the credit of a Baptist church at Yonkers not many months ago. Others distribute their largesses more evenly, and the number of those who have bought certificates of life-membership 140 MEN AND MTSTEKIES OF WALL STREET. in Bible and Missionary societies is simply legion. They take the certificates at par, and neither seU nor employ them as collaterals. But it is not merely in what we may perhaps call routine charities that brokers evince their munificence. The instances are common of young men, just breasting the tide of luck or loss as operators, who support mothers or invalid fathers in elegance, send their brothers to college and their sisters to the musical conservatories of Germany. A painful phase of broker- age is that final winding-up of a hard-fought career by an unexpected inability to meet one's contracts. " Jones busted " passes from mouth to mouth. The Vice- President hanuners the tumult around the table into silence. " Gentlemen, Mr. Paul Jones is unable to fulfil his contract with Make & Mendum, and I have, there- fore, to buy 10,000 shares of Erie under the rule." Then the auctioneer biddings follow in swift succession from the rostrum. "When all is bought, the difference between the rate of bargain and the purchase price is chargedto the defaulting member, and until he satisfies this debt he is " suspended." Very possibly it may amount to a sum beyond his crippled resources, and the broker may not only be irrevocably ruined, but the anxieties to which it gives birth may bring on nervous prostration and dis- ease. Such calamities frequently come even without fail- ure, when dealers, by the chances of the market, have lost their last margin of_ capital. In such an event the impecunious or broken brokers receive assistance in mis- fortune from the Society of Mutual Eelief, which has long been an institution of the Stock Exchange. Thor- HABITS AND HUMORS OF "THE STREET.'' 141 oughly independent of the business organization in its officers and government, this association includes in it-, self almost every member of the Board. The yearly- assessment is twelve dollars, but one can commute for a life-membership by payment of two hundred dol- lars. Although comparatively few brokers have availed themselves of the privileges of the association, yet necessarily not a little of quiet benevolence has result- ed from this thoughtful scheme. The sick are cared for ; the dying father feels that in his burial no pauper reminiscences will cling around liis memory, — that the widow will be watched over and the orphan protected. The merchants of New York who call stock operations gambling would do well to take a lesson from this asso- ciation, instead of allowing some of the men once leaders in their ranks to fall from bankruptcy into pinched dis- tress, with Blackwell's Island as a not infrequent sequel. There are two ways of construing the golden rule, and the street adopts both renderings. It looks after its neighbors, and it cares not less for itself. Broadway tailors glorify their craft by regal achievements in the furnishing forth of their broker customers. Their biUs are long, but they never encounter long faces on present- ing them for payment. Some of the Broad Street oper- ators are unique in the elegance of their attire. John Bloodgood, one of the most dashing, incisive, and bril- liantly successful of speculative brokers, bears the just appellation of the Beau Brummel of "Wall Street, on ac- count of his superiority in this not ignoble rivalry. Good lunches as well as good dinners are thoroughly appreci^ 142 MEN AND MYSTERIES OF WALL STREET. ated at the Stock Exchange. Delmonico caters in Broad Street. Occasionally a party of brokers will open a lunch account, investing a few hundred dollars ia stocks, and charging the gain or loss to wine, cigars, and oysters. When men speculate for their stomachs, they are apt to win; and the balances of this curious account are often large enough to allow of an intermittent " spread " up town. About nightfall the Nicholson pavement fronting the Sub-Treasury and flanked by the Regular and National Exchanges is lined by hacks. A few are private, but the larger proportion wait for chance pat- ronage. Brokers who have made lucky strokes during the day, and are in good humor with the world at large, button their coats gayly, pick out their carriage, step in with a nod to the Jehu, and bowl away up Broadway and the Avenue to Vanity Fair. Some find an excuse for the extravagance in desperation itself ; holding that if they have just lost nine thousand nine hundred and ninety dollars, they cannot do better than toss the driver an X. and so even the deficit up to ten thousand. There are a great number of speculative hack " pools." One firm, in recently taking annual account of stock, found itself minus five thousand dollars through transactions looking to a constant supply of funds for carriage hire. This was not as profitable as the lunch ventures. It is impossible to treat of all the peculiarities of the Stock Board without becoming inconsecutive. There are not a few independent operators who are what may be styled " free lances." They have abundant capital, and watch the chance turns of the daily market for lai^e HABITS AND HUMORS OF ■" THE STREET." 143 profits. They buy or sell at one session, and cover either at the next call or in the Long Eoom. A gain of one quarter or one half per cent on the sale price of shares satisfies them; and the opportunities for a tolerably safe speculation are extremely frequent. Any finan- cial report in the commercial column of the daily pa- pers will show variations between morning and after- noon. Thus, on the 29th of November, 1869, New York Central and Hudson Consolidated Stock sold at eleven A. M. for 78. By three p. M. it was quoted at 76. Had a block of 10,000 shares been sold in the early part of the day and bought in later, $20,000 would have been cleared. Of course, so large an operation would have been apt to miscarry, unless the market was very firm at first, and correspondingly weak at the close. But transactions of a lighter calibre are by no means unsafe. December 1 we find that 400 shares of Toledo and Wabash sold for 60 at first call, and that at the second board 100 were bought at 58 and 300 at 57|. If this was the manipulation of the same operator, he must have made $ 837.50. December 27, 30,000 New York Central and Hudson River Consol. sold at early board for 81|, and 1,400 were bought back at one p. M. for 81|. Out of this change of five-eighth per cent $875 was the profit. The next day Pacific Mail sold for 47i and 46^ ; New Jersey Central for 92|-90|. These vibrations, perpetually recurring, are the source of hundreds upon hundreds of lucky hits. Naturally there are numerous workers in this rich mine, some with far less capital than assurance. These latter form 144 MEN AND MYSTEEIES OE "WALL STREET. an outlying fringe, to which the slang of the street has given the expressive term, borrowed from the army, of " bummers." An eighth or a quarter satisfies them. If they make a fortunate stroke, they rest upon theix laurels, loitering about the Long Eoom or before the Vice-President's pulpit for days after, ready to try an- other " flyer " if the chance comes, or to indulge in every description of tomfoolery, if the bidding is dull. They are the hites noires of more sober brokers, and the addi- tions their wild exploits make to the semiannual bal- ances of the EoU-Keeper average tens of thousands of dollars. An exceedingly ingenious device of some of the younger men of this class consists in ha%dng a minute automatic syringe filled with perfumed water and con- cealed behind a large signet-ring. Armed with this amiable weapon, the broker leans carelessly on the shoulder of an acquaintance, and dexterously sends an imperceptible streamlet of Lubin just on the edge of the ear. Off goes his hat, and down goes the Vice-Presi- dent's mallet. The real criminal escapes, and the luck- less member who has ventured to take the law in liis own hands is amerced sundry dollars. The old Open Board has witnessed hundreds of such scenes. No one knows how much of BiEy H 's income for the past half-dozen years has been swallowed by fines, into which his unbounded humor has involved him. One day he stood up some six minutes behind his brother, then Vice-President, holding an umbrella wide open like an immense canopy over the official head. Suddenly the HABITS AND HUMORS OF "THE STEEET." 145 latter turned round, and the click of the gavel kept company with " fine, fine, fine, fine, fine, fine,'' the routine penalty going down every time the word was uttered, until the fraternal offender had subsided in his seat. Another time a broker-member of a young banking- house, on a certain blue Monday, had invited a customer just in from the country to go over with him to the Board. This customer had lost fifteen thousand dollars in speculations, and was meditating the wisdom of plun- ging still farther into the whirlpool, — a tall, dreary- looking person, with a down-drooping, long, melancholy face, as woe-begone a spectacle as one might see in a lifetime. The Open Board in Broad Street was pro- vided with a broad aisle, on either side of which were dense rows of arm-chairs which members took by allot- ment, and were compelled to remain seated in during sessions. Down this aisle went the broker and his sad- visaged friend. The market was spiritless, and over the' thin murmur of offers and bids, Billy H- ^'s voice was heard screaming out, " There goes one of Granger's victims ! " The aspect of the man, so unexpectedly be- come the centre of all eyes, corresponded so remarkably with the jest that the whole assembly went wild with merriment. How much may be written of these daily escapades, of these absurdities, this overflowing humor, shot like silver threads through the dull and exhausting routine of the market ! A member drops asleep ; worn out, it may be, by long nights over ledgers and feverish daily wrestlings with bull or bear. " Josh," " Josh," " Josh," 146 MEN AND IVrrSTEEIES OF WALL STREET. comes roaring up from a dozen leathern lungs, and the broker lifts his head, and rubs his eyes, startled from slumber by the traditional raUyiag-cry. A rural stranger stands within the railing, invited by one of the Board to see the sights. " Hats off," somebody shouts. The visitor doffs his fresh-bnished beaver ia decorous submission to what he takes for an ofi&cial order to the whole assembly, and discovers when too late that he is the victim of metropolitan sportiveness. To an outsider this lack of dignity is confusing and inscrutable. That men whose fortunes or whose customers' fortunes depend upon an earnest attention to every phase of shares should break out into the effervescence of a school-boy recess, tossing " paper darts," jerking off hats, singing " So say we all of us," " Shoo, Fly," Opera Bouffe, " John Brown " ; ex- temporizing mock markets ; forsaking the regular call ia order to be onlookers in a fracas between two irate -brokers, who commence their " mill " at the Board, and adjourn to an up-stair committee-room, where the fight is carried to the bitter end amid the cheers of a hundred friendly bystanders ; — that such scenes should be so fre- quent as to be an admitted feature of broker life is a puzzle that we wUl not venture to solve. It is one of the mysteries of Providence, and, like other mysteries, has, perhaps, a wholesome and saving element behind it. In an insane asylum, dancing and theatrical exhibitions are sanitary measures. And the tense brain fibres of these soldiers of finance would paralyze under the incessant strain of business, were it not for these occasional out- bursts. HABITS AND HUMORS OF "THE STEEET." 147 Through all this spontaneity and effervescence of animal spirits there runs a vein of genuine manliness and nobleness. The death of a member throws a gloom over the Board. The Stock Exchange flag runs up to half-mast, and an adjournment is voted at the end of the first call, or at the beginning of the second session. Even the obscurest member cannot die without some official mention ; and although the buying and selling may precede or follow the announcement, there is a moment of breathless silence in which every hat is decorously raised from head. The stock-brokers were the first to initiate the general closing of all business, on news of the assassination of President Lincoln. The decease of Ex-Secretary of War Stanton caused an immediate adjournment, with appropriate resolutions. During the years of the war the brokers were loyal to the core. Men suspected of hostility to the government found it impossible to gain admission to either Board, no matter how well indorsed. The black-ball was as relentless as the bullet. As soon as gold appeared likely to be a perplexing financial element, and a ba- rometer of the waning or rising faith in the nation, it was stricken from the call. In their intercourse with strangers, the brokers are exceptionally courteous; and cases where the boorish instinct discloses itself are extremely rare. If Mr. Johnson introduces you to Mr. Smith, the latter is at once at your service, and to every apology for encroach- ing on your time replies that he is only too happy to be of use to any acquaintance of his friend Johnson. 148 MEN AND MYSTEEIES OF WALL STREET. The genuinely beautiful feature of this affability is, that Smith really means all that he says, and is prepared to prove his earnestness by long-suffering of even the most pertinacious bores. As time is peculiarly money in New Tork, and as in the street five minutes are more precious than half an hour in any other part of the town, all the more praise is due to these amenities of brokerage. The Stock Board appreciates talent, and stands by its favorite officers. Mr. "Wlieelock, the first Vice-Presi- dent, lias been connected with the Exchange for more than a dozen years. Occupying the most important of positions, and constantly compelled to interfere in dis- putes and to fine disorderly members, he rarely gives offence, and has no permanent enemies. His conduct on stormy days, and in great panics, is masterly, and he rules the turbulent masses around the table with a gen- eralship and tact that partakes of the marvellous. Mr. Broadhead, the Secretary, has had an even longer con- nection with the Board, and is universally popular. Under the new r^gwie, far greater authority now rests with the official staff than previously ; and the arbitra- tion committee, in particular, has 'frequently very deli- cate work on its hands. To decide irrevocably iipon cases involving large sums of money must inevitably produce dissatisfaction on the part of the losing side ; and it is remarkable, in view of the absolutism dis- played, that there should be so general an assent to the acts of this department of government. There has, thus far, been but one revolt. Eandal H. Foote had a trans- HABITS AND HUMOES OF "THE STEEKT." 149 action in gold with Alexander T. Compton. The latter, acting under the direction of his partner, a Mr. Pardee, refused to abide by the contract. The case was brought before the committee of arbitration, and decision made in favor of Foote. As Mr. Pardee was not a member of the Exchange, he carried the question to the courts, and Judge Cardozo iastantly issued an injunction upon the committee. An appeal to Judge Barnard resulted in reaffirming the position taken by his colleague on the bench. A court of equity, outside of the tribunals selected and solely authorized by the State, was de- clared to be an anomaly demanding the interposition of the legislative arm. Of course there can exist no doubt of the justice of this verdict from the stand-point of ordinary jurisprudence ; but the members of the Board are unanimous in their disapprobation of the rebellion against the committee. It is a denial of prerogative, and a departure from the code of honor, on which, indeed, the whole business of the Stock Exchange rests. As a con- sequence, the by-laws have since been so amended that a member appealing from the decision of the committee to the courts forfeits membership by the act. There are many stray shreds of facts regarding brokers and brokerage that can only be alluded to or lightly touched upon. When a dealer becomes a father, he is extremely solicitous to keep the news from the street. No sooner is the fortunate accouchement exploited, than a superserviceable friend hurries to the Board, com- municates the intelligence in a mock-heroic speech, and 150 MEN AND MYSTERIES OF WALL STREET. immediately offers his hat for the pennies of sympathetic members. A few dollars are quickly collected, and a gold or silver trinket is purchased as a testimonial of affection from the numerous admirers of his or her in- fantile highness, according to the sex of the new-comer. One modest broker, in terror of ridicule, sent his wife to Paris ; but his brethren of the Long Eoom soon pene- trated into the secret, and added to the usual gift a sum sufficient to cover the expense of a cable telegram an- nouncing the happiness of the Stock Board over the auspicious event. The afternoon before a holiday is sometimes marked by special excitement. Speculation often runs high. The Exchange is crowded till dusk, every broker being eager to make a lucky turn, and so go home to his Fourth of July, Thanksgiving, Christmas, or New Year's festivities in a jubilant frame of mind. It is astonishing with what rapidity the shares of ac- tive stocks circulate from broker to broker. There is a perpetual round of lending and borrowing. In sales, 600 shares will frequently do the work of 2,400, and give commissions on twice that amount. Brokers ^vill send out 300 shares from their offices at ten minutes of eleven, and receive the same lot back from third hands in an hour. Here is, of course, the secret of occasional sales of the whole capital stock of a railroad in one day, when not a quarter is in street hands. AH the great corners turn upon this celerity in the interchange of shares. Just before 4 p. m. strangers in Broad Street will no- HABITS AND HUMORS OP "THE STREET." 151 tice a great niunber of nattily dressed men, hurrying to- ward the Exchange with heavy tin boxes in hand. They are the confidential clerks or junior partners of broker firms, and their goal is the Stock Exchange vault. This vault is reputed to be the largest in the world, with massive sides and heavy granite foundation. The in- terior room, reached by passing through iron gratings behind which officers detailed .from the police staff are always stationed, is one hundred and six feet deep, and about twenty feet broad. Two hundred and four safes, each a foot and a half sc[uare, face either side. In these narrow receptacles a large proportion of the securities of the street is daily placed. Ereq^uently one of the boxes will contain collaterals or governments, held for specu- lation, to the value of a million, and the lowest estimate of the securities nightly stored here for safe-keeping is over two hundred million dollars. 152 MEN AND MYSTERIES OF WALL STEEET. CHAPTER IX. THE GEEAT OPERATORS. THE grand old captains of other days were wont to lead in the onset and bare their own breasts to the foe. That was the way of Richard Coeur de Lion and Jacob Little; of Nelson at Trafalgar and Nelson Robinson in the stock-slaughter times of '45. Fashions change, hut sometimes almost repeat themselves ; and on the great Gold Friday of September, when the head of one of the most famous of the ring firms went down into the whirl of battle " round the fountain," and both Clews and Colgate led the fierce bear attack, it seemed as if the years which were gone were returning to us. That spectacle, however, was a mirage. The genuine modern general remains prudently in the background. Napo- leon stops at Hougemont. Fisk watches from the glades of the Opera House. Vanderbilt haunts the recesses of the Bank of New York. Drew closets himself in a broker's office. The combat rages from without; the telegraph clicks within. At the Boards messages come and go, but none know whence or whither. Bids and offers boom in the poisonous air. Surging masses of at- tack and defence, rumors which spread panic, strata- gems and strategy, — all the forces of speculative warfare in fullest play ; while the great captain sits quietly in THE GREAT OPERATORS. 153 his arm-chair and reads off the history of his own achieve- ments; as it flows down along tlie paper tape from the automatic machine at liis elbow. There are operators and operators. There are men who move noiselessly, spread their nets, gather in a great harvest, retire, reappear, but love not the glory of notoriety nor the Mat of a large clientage. Observers note a tidal rise or fall, and ascribe it to bad crops, diminished earnings, to stringency of money, or again to those incidental forces which tend to appreciate securi- ties. The master-spirit which has controlled the destiny of the market is content to leave the world to its sur- mises. Of this class was Henry Keep. Tradition affirms that he was bom in a poorhouse, and worked for some years as an apprentice to the selectmen of the town. The American who can boast of a similar career with Keep's might well be proud of a like nativity. To be- gin without a mill,, and to sleep the final sleep of the prosperous under a mausoleixm costing a hundred thou- sand, — that is what Wall Street did for him whom it habitually named Hemy the Silent. Seldom is a man so happily characterized in a word. He dealt in mono- syllables. Whatever is known of his stock operations comes from his friends, not himself. At nineteen he tired of his rural apprenticeship, and ran away to Eochester. There he secured the position of boot-black and porter of a hotel. Saving his wages and carefully watching his chances, he saw an opportu- nity for making something by buying uncurrent money between the United States and Canada. After accumu- 7* 154 MEN AND MYSTEEIES OF WALL STEEET. lating a few thousands, he opened what was known as Keep's Bank. By 1854 he was worth $ 60,000. That year he came to New York. By '59 his capital was so far augmented that he was ready to enter into that lu- crative and passionate pursuit of wealth which attaches to speculations of comprehensive grasp and upon the gTand scale. He purchased great quantities of Michi- gan Southern when it was selling at five dollars a share. He also profited largely in Chicago and Alton, and his operations in Cleveland and Toledo, during '61, were very extensive. His great achievement was in Chicago and Northwestern. A " pool " was formed in October, '67. More than twenty-five thousand shares in addition to the whole capital stock were purchased. Eufus Hatch, a weU-known broker, was very prominent in this corner. Through liis manipulations the realizations netted $2,185,000 in eight months. Keep's share alone was a million and a half He died in the summer of '69, leaving four and a half millions to his family. Wil- liam H. Webb belongs to the same quiet order, al- though his operations have been mainly limited to a single stock. Everybody has some recollection of the opposition line to California. Fares were put down almost to zero. Pacific Mail felt the competition very seriously. The explanation of the fight has been vari- ously stated. But if the great New York ship-builder were disposed to tell all that he knows, the public might learn that the opposition steamers paid hand- somely, seeing that their owner had an immense short interest in Pacific Mail, and the thousands lost in one THE GREAT OPEKATOES. 155 direction were made up by tens of thoTisands in specu- lative street profits. There are other operators who hunger for sensations, who are perpetually attitudinizing, and plotting, and making their coups finances. Even the leader of leaders cannot escape this fascination. All Vanderbilt's vic- tories are dramatic. If he invents a corner, the stock flies up from 20 to 200, and for seven days the torturing screws are turned down tighter and tighter, till the Stock Exchange rings with the clamor of his victims. If he deals in privileges, it is to sell a " caU" for 50,000 shares of Erie any time within four months at seventy per cent, taking a million dollars as premium. When summoned before court, his memory of this large transaction, which would test the sanity of an average man, fades out so completely that he forgets dates, and men, and even his own si^ature. There is something so magnificent in a career in which a million dollars is like a ten-cent piece taken by a shoe-blacking gamin, — not to be thought of after, in the great influx of other ten-cent pieces, the product of industry and perseverance ! He buys or holds on December 19, 1868, some 130,000 shares of Kew York Central at 120, and in a night session of a handful of directors declares an eighty per cent dividend, which tosses the shares to 165 within forty-eight hours; — stripping the street of five millions and a half with the ^ame nonchalance as he would win a hundred dollars of Ben Wood at " Boston." A rumor that he has fallen from his Portland clipper, while out on the Blooming- dale road, sends down the whole market five per cent. 156 MEN ANT) MYSTEEIES OF WALL STREET. The news of his visit at the Bank of New York on the day succeeding Black Friday checked a stock panic which would have been a whirlwind in an hour. The surface biography of this man has been told a thousand times, and with scarcely one fresh item ; but the genuine personal history, the record of secret schemes, the hidden plots and counterplots, are exceedingly difficult to reach. The real fact that he is probably worth some fifty mil- lions in property carried almost in hand is, after all, the great thing. What possible hmit is there to the power of so much money ? Putting aside the opportunities of generosity and philanthropy, the speculative energies involved in the ownership of half a hundred million are simply incalculable. Commodore Vanderbilt is consti- tutionally a bull. He hkes to survey a rising market. He is so far a good citizen that he takes pride in making enterprises "pay" through large economies and skilJul management. The spendthrift tendencies of too many of our representative corporations find a wholesome cor- rective in the examples which his career affords of how a watchful regard for small things will bring up divi- dends to the ten per cent ideal. Sometimes this sa\Tng habit unites with foibles. He strips the brass from the Hudson Eiver locomotives, and erects a brazen monu- ment of his grandeur upon the flat ugliness of a freight depot. But nothing should make one forget the genuine respect due to the ingrained disposition for appreciating the value of whatever property is intrusted to him. There is no bound to the evil which might be wrought by such a man, if the Napoleonic instinct were asso- THE GREAT OPEEATORS. 157 dated with an undue dominance of the destructive facul- ties. The Few York Tribune, in an editorial, meant for the loftiest eulogy, recently described the conduct of Vanderbilt when at sea during a perilous storm. AU around were fishing-smacks, schooners, brigs, — half seen in the mist and darkness, — which to strike was to destroy, and to avoid called for a humanity and dex- terity which unnerved the captain of the ocean packet. The Commodore, according to the story, seized the helm and kept the prow remorselessly upon a straight and cleaving course, discounting in a second the number of lives that would probably be sacrificed, and of ships that would go down under the terrible momentum with which his vessel was sweeping on. Suppose, from some far-reaching purpose, the man whose determination has the hard, pitiless daring de- picted by the Tribime editor should see fit to put his total wealth into greenbacks, and initiate a fierce bear campaign. It might be simply for speculative profit, or in order to gain control of all the great trunk lines in the country. iSTo power in the market could withstand him. He could sell down every railway stock on the share list into the abysses of panic. He could coin wealth out of each daily fall, and on ten per cent margins hold majorities of capital stock of all the specu- lative lines from ISTew York to Omaha, and, if the Pa- cific Eailroad shares were on the call of the Exchange, straight through to San Francisco. By combinations of men and means, such as would be easy to a mind of such magnetism and fertility of invention, the pallor of a 158 MEN AJS^D MYSTEKIES OF WALL STREET. great despair could be thrown over the face of the whole country, and the imagination itself becomes impotent in the attempt to compass the infinitude of evil which would inevitably result. The full power of our imperial capitalists has never yet been fairly felt by the public. Such occasional diver- sions as comers, money lock-ups, wholesale stock-water- ing, and kindred devices, are the indications of forces with large reserves of strength. They illustrate, but do not measure. Their influence upon legitimate speculation has been ruinous, as being an incalculable as well as an immense element. A certain railroad stock is selling for 40. Its par value is 50 ; but it earns no dividends. If foreclosed and sold under the hammer, it would be worth in real estate, rolling-stock, right of way, just ten per cent discount, neither more nor less. By in- fluences not clearly seen the stock rises to 60. It has no real addition of value. There is no legislative gift. There is no improvement in travel, freighting, or in any of the causes which produce dividends. It is just- the same stock. The brokers and small operators know this, and consequently seU for future delivery. They sell and sell, until they have agreed to deliver the whole capital stock, say 70,000 shares. It ought now to faJl back to 40. It ought to go even below that figure, be- cause these sales indicate want of confidence, and in a rebound aU securities go beyond or below their real worth. Instead of falling, however, it rises. Long be- fore the options on which sales were made have expired it is at 180. The street agreed to furnish 70,000 shares THE GREAT OPERATORS. 159 for $ 2,800,000 ; to do it, there is a necessity to buy the stock at $ 12,600,000. Some one has gained, therefore, $ 9,800,000. That was very much the manner in which the last Harlem corner was manipulated. It required only ahout three million and a half of money to strip the lesser operators and outsiders of nearly three times the sum. Very properly, the moralist, taking the side of the strong, thinks that they were " served right." But this is not the point of discussion. What can be done in Harlem can be done in anything, — in fact, is done in greater or less degree, every month of the year. One man, or a body of men, by buying -or selling in vast bulks, and concealing the movement untU all the neces- sary safeguards have been used, may practically con- trol the Stock Exchange. The only danger lies in the appearance of a still greater leader, and a more powerful cliqiie. The mere guerilla force of ordinary speculators is of no efficacy whatever. That the brokers of New York feel this is shciwn in their strong dislike for all the king operators. Drew, Vanderbilt, Fisk, Jerome, Jacob Little, all the heroes who still breathe vital breath, or have already gone down to the imder-world, have never failed to be unpopular on " the street." One consequence of this pervading ill-feeling is that the stories of the great speculators, current in and around the Stock Exchange, must be accepted with caution. The newspaper belief that Vanderbilt never " goes back on" his friends is not generally assumed as truthful by brokers. There is a tradition that in years gone by, when the Commodore used to ride down to the old homestead on 160 MEN AND MYSTEEIES OF WALL STREET. Staten Island, he would now and then meet a man who courteously offered to hold his horse. Something in the appearance of the stranger struck Vanderbilt, and he inquired into his history. He had been, it seemed, a broker in "the street" and, having failed badly, had decided to foUow Horace Greeley's recommendation, and take to country life. " If you will come to the city, I will start you again," said the Idng of Central. Nobody could be more grateful than the Staten Isl- ander. He returned to Broad Street, acted upon the Commodore's hints, and in due time began to prosper. Brokers soon had faith in this proUgi of the great man. They watched his movements at the Board, and bought or sold in accordance. One day the Commodore was planning a large opera- tion. In came Blank, seeking for a point. " / 'm buy- ing," said the railway lord. Blank buys bravely, — the street follows. Presently down slips the stock, and the Staten Islander is hence- forth a " lame duck." " One of the Commodore's stool- pigeons," is what the irate brokers chose to name him. Similar incidents, trustworthy or otherwise, are nar- rated by the dozen. Horace Clark, Vanderbilt's son-in-law, was always a favorite with the stately old gentleman. The ciuTent gossip about his marriage is not lacldng in amusement. Clark was high-spirited even when poor. Having de- cided to wed the young lady, he called upon his future father-in-law, and, without preliminary, began : — THE GREAT OPEEATOES. 161 " Commodore, I wish your daughter in marriage." " Hey ? " quoth the money -king. Clark repeated his words. " You mean, ycHi want my money," growled Vander- bilt, from his chair. "You and your daughter be d — d," flamed out the young lawyer, as he clenched his hat in his hand, and turned to leave the room. " Hold on, young man," said Vanderbilt, straightening himself on his feet, and looking wonderfully suave and paternal, — " hold on. I rather like you. I did n't say you should not have my daughter. You may have her. I rather like you, young man." Clark never did get much of the Commodore's money, except in indirect ways. He had shares in speculations, and was always well supplied with points. Once Van- derbilt determined to " use " him. Clark lost hundreds of thousands of dollars. He boldly told his father-in- law what he thought of it, and after a time the losses were made good. This habit of utilizing everybody has been exercised, if we may trust rumor, on nearly every member of the family. William Vanderbilt is credited with having been favored this way. One day his father came to him and suggested that he had better sell Hud- son; 110 was too high for it. " Thank you," said the son. Nevertheless, William concluded to look about him first. The stock kept steady, with ups and downs of fractions of one per cent. By peculiar ways it was dis- covered that the elder Vanderbilt was buying quietly. , 162 MEN AND MYSTERIES OF WALL STREET. William determined to follow suit. Up jumped the stock to 137. It was a clear twenty-six per cent in pocket. "When the operation was concluded, the Commodore rode round to the son's office. " Well, William, how much did you lose ? " "I went in at 110 on 10,000 shares. That ought to make me two hundred and sixty thousand dollars — " " Very had luck, WUliam," quoth the father, trying to look extremely troubled, — " very bad luck, this time." " But then I bought, and so made." " Hey ? What sent you doing that, sir ? " " 0, I heard that was your line, and so concluded that you meant long instead of short." " Ahem ! " croaked VanderbUt p^re, as he buttoned up his fur overcoat, and stalked out of the open door. He has always had a high opinion of William since that event ! It is hard to put faith in the Staten Island story, in view of some unquestioned facts. That VanderbUt should occasionally mislead here and there a member of his patriarchal household seems not at all improbable, as in such cases he can always make amends, and the policy may be very naturally a sine qua non in the success of his schemes. But there are not a few examples of his steadfast and undeviating friendship toward men who in some way have happened to attract him. John M. Tobiii belongs to this class. He was a curbstone operator before 1862 ; rather unlucky in speculations, and with only two ■or three thousand dollars capital. Taking the Commo- THE GREAT OPERATOBS. 163 dore as a guiding-star, lie began to purchase heavily im- mediately upon the first greenback issue. Stocks went up. He cleared $ 300,000. Then he began to extend himself. His favorite style was to bid seller 3 or seller 30. His imitators followed in the same line. The bears grew dubious and began to cover. If he changed his mind about the prospects of the stock, the rise thus effected by his tactics enabled him to sell to advantage. He foresaw the crash of '64, and unloaded the last of March. He habitually "bulled" stocks and "beared" gold. He shone in the Harlem comers and cannot have made much less than three mOlions. In the first cor- ner he was cunning as a fox. He wandered through Wall Street looking pale and thin and weary. His friends whispered that he was broten down by anxiety on account of the immense amount of the stock he was carrying. The Street was deluded, and sold short. In faro he is reported to have won sixty thousand dollars of Morrisey in one night. The game continued, and the gladiatorial member of Congress soon recovered all his losses and much more besides. Tobin refused to pay the balance, and Morrisey never alludes to the circum- stance without finding the English language unequal to his indignation. Morrisey himself is one of the Commodore's favorites. He was unlucky enoiigh to have imitated the Albany legislature when it went short in Harlem. The corner nearly ruined ' him. One day he was driving out on the road at Saratoga ; his horse was known far and wide among turf-men, — a magnificent pacer. Vanderbilt saw 164 MEN AND MYSTEEIES OF WALL STREET. the animal at full speed, and could not well help ex- pressing his admiration. "So you like his gait?" "Yes; do you want to sell?" "No, but I will give him to you ! " The king of Central accepted the pres- ent, and has paid for it a thousand times over in the opportune suggestions and happy points with which Morrisey has been guided into return of fortune. In the September gold comer he was one of the outsiders who had sold to Fisk through their brokers. While other men had the folly to enter the courts and wager hopeless warfare with that redoubtable legal limb of the Erie EaHroad, David Dudley Field, — Morrisey quietly put his muscles in prime working order, and then re- paired to the Grand Opera House. With some difficulty he penetrated into the inner sanctum. The prince of Erie was alone. " Well, Morrisey, what is it ? " " Simply your check for $ 50,000 in that little matter of ." The name of the broker was given, but, as it is no part of the story, we suppress it. "I never bought that gold. It's only a lawsuit, any way." " Ball ! we are not going to law. I 've evidence enough, and you may as weU pay without more bother." The hand of the ex-champion of the P. E. was tighten- ing, and his attitude became menacing. " See my lawyer," whispered the prince, moving un- easily in his chair. " Not at aU. Your signature is sufficient." " This interview had better be ended. If you can't THE GEEAT OPEEATOES. 165 find the door, I will ring for somebody to show it to you." As the hero of the hroad gauge spoke, he sprang to the bell-cord. "When the Kamsey deputy-sheriffs called at the Erie Opera House, they had a feeling sense of what the tinkle of a bell means. Morrisey, however, had no disposition to look in the faces of a dozen roughs. Intercepting the movement, and lightly brushing back the irritated prince, he broadened his shoulders, threw back his arms in position and significantly said, — " You will not ring, and you must pay." A muscular Christian with a right arm that could stun an ox with one blow, and who has decided upon a rdle that he would play out to the bitter end, has a certain coercive force which wise men recognize. The check was drawn out, signed and passed over. What further happened is not known; but Morrisey, if we may trust the story, got his money back, and as yet has not been called upon in the courts to explain his pro- cess of obtaining it. Wall Street men are without equals in prodigal sup- ply of anecdote, if not in fecundity of invention. The story which we have just related has been told in twenty ways, and may, after all, be pure fiction. In these pages we vouch for nothing, but at the same time state nothing that has not come from sources supposed to be " reliable." Who knows'the real history of James risk, Jr. ? The biography which appeared in the Spring- field RepMican has been pronounced inaccurate by a very high authority. If the subject of that sketch denies its truth, it would certainly seem that no person 166 MEN AND MYSTERIES OF WALL STREET. whatever could be in a better position to know whereof he affirms. Fortunately, the childhood and early career of the great are not so important as the events of maturi- ty. Mr. risk's maturity dates with his entrance as part- ner in a well-lmown Boston jobbing-house. Here his fehcity in schemes, magnificent combinations, and gen- eral speculative activity became so out of proportion to the routine business of the firm that he was finally per- suaded to sell out his interest, a large bonus being paid to expedite the affair. Having become once more his own master, Mr. Fisk now wended his way to New York. His first experience with buU and bear was not gratifying. Two or three large transactions in which he had boldly entered resulted so fatally that he soon had not margin enough to float a 1-62 curbstone broker. Then, according to veracious rumor, occurred one of those dramatic passages which lend grandeur to human existence. Seating himself upon a stoop overlooking the Stock Exchange, and surveying the eager sea of faces which on that day heaved and billowed upon the Broad Street pavement, Mr. Fisk swore a mighty oath, that since Wall Street had ruined him "WaU Street should pay for it." Shortly after he took the Shore Line route for the metropolis of New England. Destiny threw him in conversation with a young man who, as it proved, was on the point -of despair from difficulties con- nected with a valuable patent belonging to himself and his father as partners. It was an invention of the ut- most importance to a vast manufacturing interest. The mill-owners were using it, and resisting the patent in THE GKEAT OPEEATOES. 167 the courts. His money was gone. So was his father's. Nobody would lend capital, and the lawyers refused to push the case further. Mr. Fisk's curiosity grew with each new revelation. Finally he proposed to his com- panion to accompany him to Boston. The sequel of the acquaintance was the purchase of the right for a song by Fisk and one or two friends, and a succession of liti- gations which ended in a sweeping victory over the manufacturers. Congress renewed the patent, and the profit of the second owners was immense. The money-centre of America soon became aware of the opening of a new office, with "Fisk and Belden, brokers " in flaming gilt over the doorway. The era of Erie was at hand. To detail subsequent events would be absurd. They are part of the national history. In injunctions and counter-injunctions, in issues of stock by millions, in steamboat speculations, theatrical and operatic magnificences, in ferry-boats and transfer- coaches, in lock-ups of money, and lock-outs of sheriffs, Mr. Fisk has obtained a splendor of reputation which will make him forever memorable. His threat of ven- geance upon the street has been realized in a way that is comparable only to the exploits of Hyder Aly. More brokers have been ruined by the two coups Jinanc& of 1868, and the upheaval of the gold market in '69, than by even the great panic of '57. Eeaders, desirous of informing themselves more particularly regarding Mr. Fisk's stock manipulations, should purchase Charles Francis Adams's " Chapter of Erie." It tells the story with admirable lucidity and piquancy. There is one un- 168 MEN AND MYSTEEIES OF "WALL STREET. pardonable omission, however. Nothing is said of the United States Express Company speculation. This cor- poration had a contract with the Erie Eailway. The clique went short in the stock, and then suddenly an- nulled the agreement. Down went the shares and the ring covered, at the same time buying heavily for a fresh operation. Then the contract was renewed. Of course the profit by the rise was as handsome as the previous one by the fall. Fisk created this scheme. Indeed, he is the great originating miad of all the genuinely sen- sational measures of the Erie party. He outlines them rapidly while retiring for the night, sleeps upon them soundly, scrutinizes every poiat anew on waking, and then launches the thunderbolt. Authentic facts of this nature are never without interest to those who respect true greatness. Daniel Drew holds a high ranlc among the king oper- ators. Of late he has allowed the laurels of Erie to grace younger brows, but his early successes with that way- ward divinity are not likely to fall into oblivion. He fills the gap left by the death of Jacob Little, and untU recently had an office with Daniel Groesbeck, who once was clerk on a small salary under the Napoleonic Jacob. Mr. Drew was a large dealer in gold duriug the war, and has at times extended his sphere of operations over a very wide field. He is instiactively a bear, and has seldom " gone long " without regretting it. On two sep- arate occasions, once in Michigan Southern and again in Harlem, he extricated himself from serious difficulties by resorting to what is known in street arffot as "squat- THE GREAT OPERATORS. 169 ting." In other words, he dishonored his own contracts and entered upon a lawsuit to cover his duplicity. More than once since he has employed the very artifices in Erie against which in the case of others he had appealed to the law. There are few jewels of consistency in Wall Street ! Mr. Drew is singularly lacking in popularity. The helief that he never hesitates to sacrifice his friends, if the necessities of speculation require it, is entertained with such unanimity in the money-quarter, and is illus- trated by so many anecdotes, that one is compelled to acquiesce in it. This foible is the more salient on ac- count of the genuine piety of the man. All who have heard him speak at Methodist Conferences are struck by the fine religious fervor and earnestness of his demeanor. In austere ways, he is superbly generous. He has built churches, founded a Theological Seminary, and given away prodigally to individual charities. Yet he has the reputation of being close in the extreme. Probably the secret of this amazing contradiction between facts and opinion is to be found in the enmities which his daring, subtle, and obscure speculations have excited. He is the sphinx of the Stock Market. The annals of the Exchange are rich in reminiscences of men who, for short periods, have filled the city with the rumor of their speculative achievements. Sam Hallet is a notable representative of this class. A school-teacher in Western New York, next a lum- berman, floating tofts of timber down the Coshocton and Susquehanna rivers, subsequently a book-keeper to 170 MEN AND MYSTERIES OF WALL STREET. Mr. Mitchell, famous for his land operations, and pres- ently a banker in HorneUsviUe, N. Y., he finally en- tered the city of New York about his thirty-first year, and opened a banker and broker's office. His initiative step was to draw up a circular which soon caught the eye of brokers on account of its valuable tabular state- ment regarding stocks. He saw the inevitable rise in gold veri early in the war, and bought largely. His prestige soon became great. Customers flowed in rap- idly. Long before his own capital began to accumulate, he had vast sums at his command from outside margins. With a remarkable financial grasp, and singular power in arithmetical combinations, he united a certain per- suasiveness of manner which fascinated all who ap- proached him. His office was crowded with a retinue of followers. A mere hint would make men buy or sell by the fifty thousand. Speculators often paid very high commissions to induce him to go to the Boards and buy in person. The street would suppose that Hallet was operating for himself, and the stock would rise propor- tionately. A respectable company holding property of unimpeachable value gave him $ 165,000 for the privi- lege of opening their books at his office and placing his name among the directors. James McHenry credits him with having originated the Atlantic and Great "Western Eailroad. His operations in the Kansas Branch of the Union Pacific Railroad were a magnificent series of audacities and headlong violence. The old board of directors were ousted, and the contractors, who had been at great expense in gathering men and material from 8 THE GREAT OPERATORS. 171 Canada and Europe, were driven from their work at the point of the bayonet. In stocks he speculated in the same bold, uncompro- mising, and sledge-hammer manner. Though a bull to the tips of his fingers, he would sell a million in a day in order to break the market. 1863 was his gala year. In '64 he attempted to control several lines of stocks at a time. Boards of railroad managers changed their policies to suit his strategy. The vision of a fortune that might rank with Vanderbilt's began to rise from out the future, when Chase and the April panic swept over the street, breaking him in forty-eight hours, and dragging down dozens of his friends in the ruin. Hallet's supposed connection with an over-issue of Indiana bonds had previously shattered his credit. The Kansas and Pacific Eailroad imbroglio added a fresh blow to his reputation. One day, after his failure as a broker, he found himself at Washington, full of schemes and eager for Congressional help. On applying to the President, Mr. Lincoln passed him a letter, written by an engineer on the road named Talcott, in which Hal- let's private and public character was the subject of sarcastic comment. When the latter reached his rooms, he telegraphed his brother, then in the West, to seek out the engineer, place him over his knee, and summarily chastise him. Hallet went to Kansas himself a month or two later, and found that his order had been obeyed to the letter. The joke, however, had a sequel Goaded by the insult, and irritated by the loss of his situation, Talcott grew moody. Accident or intention brought 172 MEN AND MYSTERIES OF WALL STEEET. victor and victim face to face. The engineer drew a pistol, and Hallet fell dead. Sixty years would have been a brief term for a life of such wide vicissitudes, of high excitements, of narrow poverty and extreme wealth, of commanding influence and illimitable schemes; yet he was only thirty-seven when assassinated ! The career of the brothers Jerome has been marked by a boldness, verve, and large magnificence of view and action which perpetually suggest a parallel with the lives of the more noted speculators of the Paris Bourse. Jerome p^re was a farmer in Onondaga .County, one of the lake districts of New York State. Addison G., the eldest son, came up to the city when quite a lad, with very little other capital than that which belongs to a brave heart and a keen brain. Strolling about town with eyes open and superabundant provincial hopeful- ness, he chanced to see the sign of John Stewart, an eminent dry-goods merchant. Walking straight up to the head of the establishment, he told his story in a few nervous words. Mr. Stewart received him kindly, but had no vacancy. " But you my^t try me. Give me any- thing, no matter how slight, and I'll write my name in your check-book before I get through." The answer struck the great dealer, and after a moment's thought he made a proposition which Jerome instantly accepted. In three years he made his pledge good, by entering as a partner in the firm. Subsequently he -withdrew, and joined forces with two well-known dry-goods men ; the new house calling itself Fitch, McNeal, & Jerome. They soon had a large connection with the Southern trade. THE GREAT OPEEATOKS. 173 About 1850 their affairs, however, toolc an unfavorable turn, and the firm was forced to suspend. Addison lost everything. Hard pressed, and with , no very clear future, he leased an out-of-the-way office in Wall Street and began life anew as a broker, with his sum-total of capital consisting of three chairs and a table, worth per- haps five dollars at the most. Thirteen years after, his books showed a daily business of five millions, while his commissions on outside orders frequently netted ten thousand dollars a week! There was a curious episode connected with this fail- ure. As soon as Addison had met with some success in his early dry-goodi? venture, he sent his favorite brother, Leonard W., to Princeton College. When Leonard was graduated, he went to Eochester and edited the Ameri- can in that city. The journal was of uncompromising and lively Whig politics. Millard Fillmore, then Presi- dent, took a liking to the young editor, and the result was a consular appointment to a small Italian port. Leonard had been in Europe a year or more, when he received a letter from New York, in which Addison spoke enthusiastically of his prospects, and proposed that the two should enter into partnership. The idea fell in with Leonard's fancy, and in a very brief time he resigned his of&ce and started for Paris. There a letter reached him, announcing the failure of Fitch' McNeal, & Jerome ! His consulship was irrevocably gone ; his vision of a partnership and prosperity had vanished ; the outlook was of the bluest. Nevertheless, Leonard W. was not easily discomfited. He took the 174 MEN AND MYSTERIES OF WALL STREET. steamer for New York, and on reaching the city decided to adopt the new line just selected by his brother. After the usual ups and downs, he finally entered into partnership with William K. Travers, under the firm name of Travers & Jerome. This event dates with '56. The new house operated in Michigan Southern rather extensively. One day they took sides against the Litch- fields, who then had a large influence over the stock. Jerome went in as a bear, and threatened to break Michigan Southern, even if it carried down the whole market. As the shares of no road stood firmer, or were better regarded, the menace was laughed at. Had it been only an affair of stock manip»lation, the vaunt would have been idle enoiigh. But Leonard W., how- ever meagre his bank account, was fertile in expedients. He had learned the value of printer's ink at Eochester. It now occurred to him to put this immense force at work in New York. The Herald opened its columns to him. He influenced other journals. Every day ap- peared articles predicting a crash. The country was overtrading. Credit was so extended that it would snap into ribbons at the first gale. Stocks were ex- orbitantly high. Wall Street was a gigantic bubble. Half the shares on the lists had nothing but rottenness to sustain them. Michigan Southern was a fair sample of the bubble prosperity of the street. Repeating these views in a hundred new shapes, always striking at the road with which he was at deadly feud, disentombing old reports of the Company, analyzing the figures re- lentlessly, and with a clearness hitherto unknown in THE GEEAT OPEEATORS. 175 Ifew Tork finance, he soon began to affect public con- fidence. His articles were copied from newspaper to newspaper all over the country. Holders began to sell their stock. The terror spread. The Litchfields strug- gled, but the weight was too great. Michigan Southern fell sharply. It was impossible to check the decline. Victorious at this point, Jerome stHl stood by his bear rdle. On the street and in the daily papers he steadijy persisted as an alarmist. One day he was on the pave- ment near the old Stock Exchange talking down every- thing, predicting universal failure, denouncing almost every security quoted on 'Change. A broker stepped up to him. " Say what you please, the Ohio Life and Trust Company is a good stock at all events.^' The dealer, as he spoke, pointed to the edifice of the company near by, and his gesture was such as a traveller in Egypt might employ in asserting the solidity of the pyramids. " What is Life and Trust ? " asked Jerome. " 103," was responded. "I'll sell a thousand at 50, seller one year," quoth Leon- ard. " Take 'em," shouted the broker. Sixty days after the Life and Trust Company failed for sundry millions, and dragged, not only Wall Street, but the entire com- merce of the country with-it. The purchaser of the thousand shares of Life and Trust compromised at a handsome figure. With the money coming from this lucky hit, and by other realizations upon short sales, Jerome felt rich enough to dissolve partnership, and shortly after sailed for Europe on a two years' vacation. Meanwhile Addison G. had been making his own fight; was a bull through '56 and '57, and came out of the panic 176 MEN AND MYSTERIES OF WALL STREET. with health and capital shattered. He used his expe- rience to advantage, and by 1860 had laid the foundation for a splendid future. He was one of the few men who bought largely at that period when the share market was at its lowest ebb. By '62 and '63 the result of his prescience disclosed itself. His realizations were enor- mous. He was loyal to the core and found his proiit in it.. Dealers noticed that the moment stocks broke upon the news of a defeat of the Union forces, Jerome was always in the market as a buyer. The policy was subtle, and not readily followed. It was based upon a theory, borne out by facts, that with every disaster came a new emission of greenbacks. The more green- backs the higher prices. Addison coined money by the hundred thousand through these tactics. His office swarmed with eager speculators. He was now worth millions. He had been the leading spirit in the organi- zation of the Open Board, and was looked up to as one of the longest heads in the street. At this juncture he formed a tacit alliance with Vanderbilt. The latter had acquired the control of the route from ISTew York to Buffalo. Jerome already held a portion of the connect- ing roads beyond, and now determined to buy up Jlich- igan Southern, and thus complete a through line to Chicago. While occupied in absorbing the majority of the shares, he was struck by the abundance of cash stock, and by the fact that he had options out for nearly the entire capital of the road. The opportunity for a corner was too tempting to be put aside. He concerted his measures, bought qiuetly thirty thousand more shares THE GREAT OPERATORS. 177 than the whole capital stock, and soon had the street in his toils. The shares went up by flying leaps. He was upon the edge of untold opulence. Just as he was be- ginning to bring the corner to an issue, however, he sud- denly observed a wealmess in the stock. Contracts were met promptly. Although he owned the whole railroad, everybody appeared to be supplied with certificates. The secret was not long in transpiring. The directors of Michigan Southern, with Henry Keep at their head, fearful of losing their ascendency, had availed them- selves of a clause in an old charter of one of the roads of which it was a consolidation, by which they were authorized to issue stock at par for construction purposes. This new emission they had been furnishing Jerome at corner rates ! The latter at once appealed to the law, but in the meanwhile his affairs were inextricably en- tangled. Stock that he had himself bought at from 100 to 112, he was forced to sell off at 75 and 70. He lost a million by the blow. Shortly after, he died from a heart trouble, superinduced by excitement, bestowing a considerable fortune and the Michigan Southern lawsuit as a legacy to his family. He left a rare name in "Wall Street. His friends affirm of him that he was never known to allow an oath, a lie, or a vulgar jest to pass his lips. As the money-quarter goes, this is immortal eulogy. Some time in '60 or '61, Leonard W. Jerome returned from abroad, and opened a new office in the street, with the firm name of Jerome & Eiggs. Operating very generally along the whole line of stocks, his interest 8* L 178 MEN AND MYSTERIES OF WALL STREET. soon centred upon the Pacific Mail Steamship Com- pany. He took the stock when its selling rate was about 62, and carried it up by 1865 to 329. His realiza- tions even at the earlier stages of the rise were enor- mous. He spent his money as freely as he made it. Fifth Avenue was in a whirl of amazement at his social audacities. He bought a magnificent steam-yacht. He dashed through Central Park in his four-in-hand. He gave dinner-parties of the most sumptuous character. At one of these feasts every lady guest received a bracelet with some rare jewel pendant. He created the Jockey Club, and established a private theati-e of his own. One day he was at Newport chatting with Mrs. , then a leader of fashion. " Why don't you give a party ? " inquired Jerome. " Because my husband can't afford it." " Pshaw ! what wiU it cost ? " An estimate was made. "That is easily done. I have a capital point in Hudson River. Deposit a few hundred dollars with my firm, and we will see what will come of it." The margin was put up. In a few days Jerome sent back the money increased beyond the wildest dreams of Wall Street speculation. Of course the party was an immediate sequence. It was impossible that such a man should riot pro- voke enmities as weU as make friends. He was exceed- ingly disliked by a large proportion of brokers. Some- times they united and struck him hard. But Jerome could bear a square blow without flinching better than any one. His sang-froid was inimitable. After a hard day of iU lack at every point, he would sit down with THE GREAT OPEEATOES. 179 his friends at supper, brimming over with animal spirits, telling a story or singing a song with the gusto of one who had just made half a million. He never acknowl- edged a moment of despondency, except in reference to one occasion. This happened in connection with the corner in Hudson in '63, the main features of which have been described in a previous page. Jerome had made all his combinations, and, satisfied with the out- look, took his yacht and set out on a pleasure-trip up the river to West Point. Beginning to have misgivings, he steamed back to the city, and, reaching the pier, found bad news awaiting him. The scheme did not work. Everything was at a dead stop. For a half-hour he was unmanned. Nevertheless, he kept his own counsels and revolved the problem over and over tiU daybreak. By that time he had laid out a fresh line of strategy, and canvassed it point^by point. Satisfied with the plan, he gave his orders, and went up to "West Point again. The result of that night shortly showed itself in the rapid culmination of one of the most brilliant corners ever known in stock speculation. There are a host of stories afloat about Jerome, illus- trating his ready wit. One of them, which will lose none of its piquancy by suppressing- the real name of the party most interested, is told in this wise. He had been carrying -a heavy load of Michigan Southern at one time, in anticipation of a rise ; but somehow the stock remained quiet. The way of throwing it off with- out a loss was not very apparent. At this juncture he happened to be walking along Broad Street, when 180 MEN AND MYSTEBIES OF WALL STREET. some one tapped him on the shoulder. Looking round, he saw an old Eochester acquaintance. " Why, Kelley, what brings you here ? " "Business. We have just opened an office, — Kelley & Cutter. We want you to give us some orders." Jerome shrugged his shoulders. " I 'd like to do it, Kelley ; but it would n't work." " Why not, Mr. Jerome ? " " 0, you 11 never make money in the street. You can't keep a secret. If I gave you an order. you would run off and tell everybody. All the brokers hereabouts would know what I am doing." " I pledge you my word that we will keep your orders sacred," said Kelley, warmly. "Then there's another thing," continued Jerome. " If you take a commission from me, you will think you've got a good point. Next you will speculate. Then we shall hear that you 've ' busted.' Xo, no, Kelley, it won't do." The representative of the new firm declared that his house was resolved to do a purely commission business, — would never speculate, — was the house of all others that Jerome ought to patronize. " Well, Kelley," said the other, after a moment of deep reflection, " I '11 give you a trial. Go and buy five thou- sand of Michigan Souttiern." Kelley went off elated, bought the stock, and whis- pered into everybody's ear that Michigan Southern was " a mighty good thing to hold. Jerome was buying by the block. There was a big rise in prospect." THE GREAT OPEEATOES. 181 Pretty* soon the market began to falter. Jerome & Eiggs had seized upon their opportunity and quietly sold. The stock plunged down. Some days later Kelley met his new patron. " Well/' said Jerome, " how do you get on ? " " Have n't you heard ? " " Eh, what 's up ? " "Why," responded Kelley, with a woful expression of countenance, " our house is ' busted.' We bought some of that confounded Michigan Southern on our own account, and it swamped us ! " " Speculated, hey ? " quoth Jerome, with great concern. " Now, Kelley, my boy, next time do remember my ad- vice !" There is an anecdote about Addison G. that may not inappropriately be told in this connection. A well-known .quiet operator had invested largely ia a certain stock, — that of the Beading Railroad, if we are not mistaken. Not liking the look of the market, he determined to sell; but as he was carrying ten or fifteen thousand shares, he was afraid to resort to the Exchange for fear of breaking the price. He knew that • the elder Jerome was weighted down by the same stock, and was also working to get rid of it. Here was a loop- hole for escape. Going into the office of -, the prin- cipal broker agent of Addison, he whispered, "I say, come along with me." As soon as they were on the street, the wary speculator instructed to accom- pany him over to Williams Street, and if they happened to meet Jerome, and if also the latter offered to buy 182 MEN AND MYSTERIES OF WALL STEEET. Eeading within certain figures, he should sell him all he wanted. The two sauntered along, and presently met Jerome, evidently in a brown study. Greetings were exchanged. " Michigan Southern is looking well," begins the plot- ting operator. " Yes, very well. Cleveland and Toledo sold hand- somely to-day. Then there 's Reading." " A good stock, that. I 'U give '14 J for five thousand ! " "As you say, a capital stock. Going higher too ! I 'U buy any part of ten thousand Reading at 115, buyer 30. " Sold" screamed the broker, taking out his book. " How 's that ? " inquired Addison, with admirably as- sumed carelessness. " Simply that I have sold you ten thousand Reading at 115, buyer 30," said the broker, pencilling off the item as he spoke. " All right," replied Jerome, quite aware that he had been trapped, but recogniziag the force of the street rule which makes a bargain sacred wherever and however made. How Addison G. extricated himself from his double load of the stock we do not know ; but as Read- ing sold up to 128 in the course of the year, it is pleasant to believe that he finally lost nothing by liis unexpected purchase. The Fordham Race-course owes its origin to one of the outside speculations of Jerome. The trains of the New York and New Haven Railroad enter the metrop- olis upon the Harlem track. Justified by highly satis- factory reasons, the management of the company decided THE GREAT OPEKATOES. 183 to secure a different means of ingress to the city, and a tacit agreement was made with Leonard W. Jerome to the effect that if he would secure the right of way from the proper terminus of the New Haven Road clear through to New York, they would change their route. The firm at once bought all the land they could find along a strip of nine miles through Westchester County, up what is known as the Saw-Mill Eiver Valley. Some portion of their purchase cost them at the rate of $ 300 an acre. Meanwhile Commodore Vanderbilt got news of the movement, bought largely of the New Haven stock, and at the succeeding election of directors was able to make such changes in the board as effectually estopped the change of base from the Harlem Line. The contract on which Jerome had acted was not in such a form as admitted of litigation. He had acquired an immense amount of real estate with no prospect of im- mediate realizations. Then came the idea of the race- course. ' Not less than $ 100,000 was cleared as net profit from that expedient. Another portion of the land was sold as a cemetery. But Jerome has the greater part of the property still on his hands. It was in the month of February, 1867, that Jerome met with his great disaster. Pacific Mail was always his favorite. He had made it one of the most popular stocks at the Exchange. During the year just named Leonard was so thoroughly preoccupied by up-town amusements, the Jockey Club, liis steam-yacht, dinners, and every description of social extravagance, that he ■neglected his affairs in the street. He controlled a ma- 184 MEN AND MYSTERIES OF WALL STREET. jority of the shares of Pacific Mail ; the directors, though nearly evenly balanced, stood one in. his favor, and al- though the annual meeting of the board to decide upon a dividend was at hand, Jerome gave himself no anx- iety. At this juncture a rapid combination was effected between certain capitalists who were largely interested in the stock, for a purpose which can be best understood by results. Men who were in the secrets of the move- ment affirm that it embodied some of the most startling and romantic phases of stock brokerage ever known in the street. Brown Brothers & Co. are credited with being especially prominent in the scheme. An essential part of the Jerome programme was the declaration of a large dividend and the issue of a favorable report. When the board came together, however, the director upon whom Leonard relied threw his vote on the adverse side. The dividend was cut down to three per cent, and the newly formed clicLue sent forth whispers to the effect that the affairs of the company were anything but in a satisfactory condition. The news of the action of the directors spread like a prairie-fire. Pacific Mail dropped thirty per cent. Leonard Jerome was carrying the main part of his stock on borrowed margins, and was wholly unprepared for the blow. Between Monday and Satur- day he fought against the market with untiring pluck and pertinacity, raising $ 800,000 by sacrificing all his other ventures, and not giving up the battle until every dollar of this large sum was melted aAvay by the contin- uous decline of the stock. Then he sold. The previous loans, however, together with the persistent depression THE GEEAT OPERATORS. 185 of the shares, prevented any considerable realizations from the sales. Jerome was now hopelessly crippled. Nothing was left but to extricate himself from the ruins ; and the fact that by the vicissitudes of the fight he had become largely indebted to certain leaders of the opposi- tion party afforded a means of escape from what now constituted his main embarrassment. This was the con- tract, still in force, by which he had bound himself to take $5,000,000 of a new issue of the company's stock. The responsibility had been assumed in the heyday of his power, and the corporation held his note for the shares, which had been sold to him at twenty-five per cent below the then market price of Pacific Mail. He now compelled the directors to resume the stock at tHrty per cent above the depreciated rates of the street. Since this event, Jerome has had very little to do with Wall Street operations, preferring the excitement of- Paris to the troubled waters of speculation. Anthony Wellman Morse made a brilliant reputation in "Wall Street, during his brief career. He came from a good family. His grandfather. Major Anthony Morse, fought at the battle of Bennington, and witnessed the sur- render of Burgoyne. On his mother's side he was related to the Eev. James Wellman, who holds an eminent place in the annals of New Hampshire ; to the Pattersons of New England and Maryland ; and to Dr. Kussell, one of whose kin protected the regicide judges Goffe and Whal- ley, — the latter being related to the family by blood. Young Morse was born at Hanover, New Hampshire, March 8, 1834 In his seventeenth year he entered the 186 MEN AND MYSTEEIES OF WALL, STREET. treasury office of the New York and New Haven Eailroad, under the patronage of Morris Ketcham. Here he was brought much in contact with iron men, and kept the books for two large houses concerned in this trade. This led to his accepting a position under Balch & Zimmerman, contractors for building the Great Western Eailroad in Canada. Thence he went to Savannah, Georgia, as book-keeper to the Marine Bank, and on the breaking out of the yellow-fever in that city he returned to New York, entering the banking-house of Corning & Co. The crash of '57 carried away this firm. Morse now joined in partnership with Edward "Wolf; and the new house, under the name of Morse & Wolf, started a bankers and broker' of&ce at 60 Wall Street. Speculating largely and not too cautiously, the young brokers failed to a heavy amount in '61. Anthony next went in with his brother, L. W. Morse ; and the two opened up a flourishing business until the Trent diffi- culty, when their affairs became seriously entangled. Soon after A. W. retired from the firm and formed a copartnership with Isaac Kip, Jr., under the style of Morse & Co., 24 Williams Street. He at once took hold of Fort Wayne, and Cleveland and Pittsburg, buying always for a rise and making hand- some realizations. After accumulating something like half a milUon dollars, he purchased the yacht " Gipsey," and in the spring of '63 sailed for Europe. The ocean voyage in so small a craft was then a novelty. His re- ception, therefore, was in the nature of an ovation. Per six months he was surrounded by the fastest set of Lon- THE GEEAT OPERATORS. 187 don and Paris fashionable yacht and turf men, — the keenest stock-gamblers in the Old Worid. The whole talk of the Continent was against the North. Every- body predicted failure, the repudiation of greenbacks, and the general ruin of the country. When Morse came back to the city in December, these ideas had burnt into his brain. Believing that almost any description of security was better than the national currency, he soon became one of the most conspicuous bulls in the street. His first operation was in Eock Island. T. C. Durant was also in this pool, but Morse was the directing and creative spirit. During its manipulation the street suf- fered by a sharp " squeeze " in the money-market, and the ease with which Morse pushed aside this obstacle gave him an immense reputation. Although but thirty years old, his office was daily crowded by eager throngs, anxious to get points. He would buy five thousand shares of Chicago and Northwestern. Men would ask what stock was likely to rise. " Northwestern " would be the answer. Off went the speculators and distributed their orders. Naturally the stock mounted rapidly at the boards, and Morse made ready realizations of the shares he was carrying. An illustration of his popu- larity was afforded by the quickness with which the stock of a coal-mining company organized by him was absorbed. The day the subscription-book was opened, outsiders fought with each other for the privilege of signing their names. One man who took a large amount, after having pushed his way forward with great violence, preseritly returned, and, walking up to Mr. Morse in- 188 MEN AND MYSTERIES OF WALL STREET. quired, " I say, Mr. Morse, was that gold or coal stock tliat I just subscribed for ? " The high fever of speculation made rapid fortunes. Morse was now worth nigh three millions, and determined to do in Fort Wayne what he had previously accomplished in Eock Island. The stock started at about 60, and was most admirably manipu- lated, until it finally touched 152. Although the corner was but half completed, Morse was carried away by his success. Upon the rumor that government wa,s at the point of selling gold, he sent a despatch to Wasliington, offering to buy whatever the Secretary of the Treasury might put in the market. This was April, '64. Mr. Chase came to the city, sold nine millions of bullion, and withheld from circulation the thirteen or fourteen millions of greenbacks with which it was purchased. The sale, and the accompanying lock-up of money shook the street, and Morse & Co. were the first to fail ! Their losses were immense. Morse never recovered from the blow. His death occurred in New York some four years after. William H. Marston has had a remarkable career as a leading speculator. He made his first money as a broker, having an office at 17 Wall Street, and doino a heavy and legitimate commission business. There is a tradition that on the day of his admission to the New York Stock Exchange he gave a great dinner to the members, at Delmonico's, spending no one knows how much money, and literally floating his guests in cham- pagne. The next morning, as gossip affirms, he " broke " for half a million. Although' the story is sacredly be- THE GREAT OPERATORS. 189 lieved upon " the street," it is a trifle too dramatic. The lunch was given, and the failure took place, but the two events were months apart. Subsequently, Marston paid up every dollar of his indebtedness, entering the market as an outside bull operator, and invariably " carrying " whatever stock he touched, until it reached a figure admitting of superb realizations. In the summer of '65 he initiated the first of a series of magnificent operations, by a transac- tion in Michigan Southern in conjunction with Henry Keep. From this he cleared $ 90,000. The fall of the same year he engineered to a brilliant conclusion the great Prairie du Chien corner. In a previous chapter we have described the main features of this celebrated strategic movement, but we omitted to say that the original intention of its promoter was simply to place the stock at par. "The street" entered into a com- bination to thwart the scheme, and began to bear the market mercilessly. Marston, irritated and indignant, at once extended his programme, set a hundred secret agents at work, encouraged the short interest, and in forty days succeeeded in so manipulating the stock that it rose to 250. His profits could not have been less than a million and a half dollars. One man who was in the secret made sixty thousand dollars on three hun- dred shares. The stock in "hand when the corner cul- ' minated was exchanged at the rate of 100 shares of Prairie du Chien for 100 shares of Milwaukee and St. Paul common and 50 shares of the preferred. The two roads were then consolidated. The act of " unloading '' 190 MEN AND MYSTEEIES OF WAIL STREET. ■was therefore quite as unique and satisfactory as the previous operation. The next spring Marston formed a pool and bought five mUlioiis of Cleveland and Pittsburg at 83. The final realizations were at from 95 to 105. The net profits were enormous. In June, Erie was buUed by the same skUful hand. Shares to the extent of 70,000 were bought at 57 and 62, and afterward sold for from 73 to 77. Daniel Drew was entangled in this specula- tion, and is credited with a loss of $ 1,700,000. This operation in the broad gauge shares proved so flattering that in the fall of '66 a party was formed, under the inspiration of Marston, to purchase 130,000 shares of Erie. The stock was bought at from 65 to 80, and the realizations were at 97. On thirty thousand shares the originator of the pool made $ 900,000. Later in the same year Marston entered into a combination to bull Northwestern common, buying 60,000 shares at 47, and carrying the stock easily up to 60 and 63. His gains were immense. Fortune is a fickle goddess. The winter of '67 Mars- ton entered upon transactions on an enormous scale, bought heavily ia the stock of two or three railroads, and handled his cards deftly for a stupendous rise. The luck of the market, however, now turned against him. He lost aU his previous accumulations and faded for $ 600,000. Some forty brokers were swept out of " the street " by tlris collapse, which is still known as " the Marston Panic." The hero of Prairie du Chien bore his losses bravely, and may be seen almost every day on THE GREAT OPERATORS. 191 Broad Street, — one of the most wide-awake men in the money-quarter ; fertile in schemes, and likely at any moment to reappear in some gigantic combination. Thomas C. Durant has an enviable reputation for financial boldness, quickness of insight, and Dantonian audacity in execution. He practised medicine for a brief time in the South; and, although he abandoned his profession at an early period, his friends always speak of him as the Doctor. Like Vanderbilt and Drew, he acquired his primary education in speculative fibaance as a shareholder and manager of Hudson Eiver boats. Afterward he became contractor for building the Chicago and Eock Island Eailroad. He completed this line six months before he had agreed to deliver it over to the directors ; and, with his usual dash, placed cars and locomotives on the track, and made a neat fortune in working the road, during the interim, upon his own responsibility. His next achievement was upon the Mississippi and Missouri Eailroad, receiving his pay for the contract in land-grants and bonds. Eeturning to the city, he soon made his influence felt in the street. His most brilliant exploit was the Eock Island corner ; but his strategetic combinations in gold, and some of the favorite railway fancies gave him large reputation. He was the leader of the Pacific Eailroad movement ; and that iidne of wealth, the £!redit Mobilier, owed all its glory to his fine executive ability. No one knows how much he is worth. The Doctor himself could not tell. He has given his wife a magnificent estate on the Isle of Wight. He has a house in Brooklyn, a house I 192 MEN AND MYSTEEIES OF WALL STEEET. in New York, apartments at the Fifth Avenue, at the Hoffman House, and at the Westmiaster. He owns a steam-yacht and a private clipper. At present he keeps a sharp eye upon tlie opportunities of the Stock Ex- change and the Gold Eoom, while pushing with great energy his last pet scheme, the completion of the Adi- rondack Eailroad. Another operator of note is Dr. Shelton. He lives at Newburg, remaining in the country all the summer and beginning his annual speculations iu October. His career covers the space of twenty years. He was carry- ing a heavy line of stocks in '62, and made a vast amount in the subsequent rise. At the close of the war he was short 75,000 shares in different railroads, and at the same time was bearing gold. The surren- der of Lee proved a very profitable event, therefore. He almost invariably sells, and not seldom gives his broker the order to go short 500 shares on every stock called. Eecently his visits to the Exchange have been infrequent. William S. "Woodward has the credit of experi- encing great financial vicissitudes. He is buU or bear alternately, and operates both in stocks and gold. His speculations in Chicago and Northwest have generally been profitable, as also have those in Rock Island. He led the rise in the latter stock in May, 1869, when the shares reached 139|-. He was prominent in the gold corner, and used his utmost efforts to persuade the clique to retire when gold had reached 145. He is said to be now worth about $ 3,000,000. THE GREAT OPERATORS. 193 Vanderbilfc, Drew, Horace F. Clark, WilHam H. Mars- ton, Woodward, Fisk, Jay Gould, Dr. Shelton, Dr. Du- rant, David Dowes, John F. Tracy, Eussell Sage (said to have a cash balance of six or eight millions con- stantly on hand), Amasa Stone of Cleveland, John Steward, James H. Banker, and Alexander Mitchell, President of the Chicago and Northwestern and of the Milwaukee and St. Paul Railroads, now constitute the leading operators in the New York Stock Market. 194 MEN AUD MYSTEEIES Or WALL STREET. CHAPTEE X. THE OUTSIDERS. TAKIlSrG- X as the unknown quantity which em- braces that portion of the universe given to specu- lation in stocks or gold, and calling the brokers a, and the recognized heavy operators h, we have ia a; — {a-\-h) an algebraic definition of what are known as outsiders. The term iacludes, not merely the promiscuous and ia- termittent body of individuals with small purses and large desires, but also merchants, manufacturing capital- ists, bank officers, and citizens who have retired upon their fortunes. Every owner of governments, from the sixteen hundred and odd National banks, and the multi- tudinous Savings-banks of the United States, down to the possessor of a single fifty-dollar bond, in some way or other, at some time or other, comes in contact with the market, and affects, or is affected by, its prices. All along the lines of our raUroads are men who hold shares or bonds. In Ohio it is estimated that more than half the capital stock is in the hands of local holders, although many of the roads are of the speculative class. Illinois Central is extensively distributed among the small capitahsts of the State through ^yhich it passes. The people of Pennsylvania and New Jersey are large owners of stock, daily quoted on the Exchange ; and, THE OUTSIDERS. 195 although very much of the one billion dollars which are said to be annually saved for investment in the United States disappears either in private channels, or is locked up in close corporations and securities, circulating in circumscribed limits, yet in no inconsiderable degree these representations of value are employed to feed the fever of speculation. Stock -brokers are always ready to take city bonds or manufacturing shares of good character, as a basis of margins. The outsider may hesitate to buy out and out the favorite shares of the Board, but he is only too eager to have his surplus in the more stable classes of securities, and to use them as collaterals for obtaining money to operate with in the street. The wide variations in the prices of the market have, therefore, had a double effect. They have penetrated the public with a desire for investment in stocks not quoted on share lists, and stimulated it into constant ventures of purchase or sale in the very arena which it otherwise shuns. Some idea is furnished of the area of outside specula- tion by the testimony of telegraph operators. The ex- act average of daily orders from different sections, which reach the New York Stock Exchange by this channel, including not only the offices of the "Western Union and the Bankers and Brokers' Telegraph Company, but also the Atlantic and Pacific and the Franklin, varies from 2300 ia lively periods to 850 in duU times. The ISTa- tional Stock Board, in addition, receive about 300 a week. By the English cables some 150 messages come to New York brokers every day, and half that number 196 MEN AND MYSTERIES OF WALL STEEET. arrive via the French wires. ISTot less than $ 1,200,000 is paid yearly by members of the Stock and Gold Ex- changes for oceanic despatches ! Omitting the foreign business in the present view, and confining our atten- tion solely to domestic localities, we find that Philadel- phia exceeds all other cities in its orders. Boston and . Baltimore foUow next. Hartford, Providence, St. Louis, San Francisco, and Chicago use the wires very freely. But the most significant iQustration of the deep-seated and widely ramified tendency toward speculation is found in the occasional commissions which trickle in from strange and wayside places. Villages whose names are scarcely known beyond the boundary of their counties have their rustic Fisks and VanderbUts. Sparks of electricity fly up from the marshes of the Mississippi Valley, from the golden desolation of Nevada, from factory hamlets in Connecticut, from the pastoral seclusions of Vermont; bearing emergent orders to sell Hudson short, to buy 500 Fort "Wayne, to take a put on Eock Island, or a call on Tennessee 6s. In the flush days, between '63 and '67, the sum total of these outside speculators reached enormous figures. New York City, and the population included in a radius of a hundred miles of that centre, furnished its thou- sands. Women pawned their jewels for margins. Clergymen staked their salaries. One man sent his horse to his broker, and realized in the end $ 300,000 from this small beginning. Brokers cleared from three hundred to three thousand dollars a week in commis- sions alone. The unlucky never teU their misfortunes. THE OUTSIDERS. 197 An author in two months lost the profits of three books. A- bank clerk, in one of that chain of towns between Albany and the city, on the Hudson railway, made thirty thousand dollars, in successive strokes. Then he offered himself to a fair young girl, and put the whole of his gains into the street, promising his affianced the rarest of bridal gifts. Three days after he received a despatch with the warning word, " Ten per cent more margin." His resources were exhausted. He hurried to New York, begged, implored, labored with his brokers for hours, to induce them to have pity on his situation. But the stock was plunging downward, and they were " carrying " more than their capital would allow. They gave one day's grace, and then sold their customer out. He returned to his home a broken man, with all his old shrewdness and self-confidence gone forever. There are hundreds upon hundreds of such human wrecks scattered through towns and cities, some shut up in asylums, others living out aimless lives, — mental paralytics, dazed or crazed by the swift shock of ruin. Those who escaped sim- ply with the annihilation of their wealth or competence might be deemed happy, compared with others whose ventures left heavy debts of honor, which absorbed the surplus of future years. Men in positions of trust, who in some iU-starred moment had taken the funds of which they were sworn guardians, in order to cover unexpected losses, were frequently at the mercy of brokers as un- scrupulous as cruel. The fate of Jenkins, the cashier of the Phoenix Bank, who defaulted for $ 300,000, the large proportion of which had been paid over for hush money. 198 MEN AND MYSTERIES OF WALL STREET. is but a single instance out of scores of cases, very few of which have come to public notice. It was asserted in a Jfew York paper of February 2, 1869, that Mr. Webster, then Assessor of the Wall Street Internal Eevenue district, had discovered that two millions were employed ia stock transactions by metropolitan church trustees, out of the ecclesiastical revenues under their control Church edifices were mortgaged in order to preserve margins. Prominent pastors were said to be heavy speculators, and their frequent presence in brok- ers' of&ces was a matter of scandal. An eminent Episcopalian divine is reputed to have made over fifty thousand dollars. Where the shepherd wanders wool- hunting, the sheep are apt to go astray. Probably if the facts regarding the use of fiduciary securities as a means of speculation were fully known, it would be a revela- tion as fatal to credit as the revulsion of '57. Veteran brokers, prone to cautiousness in speech, declare that breaches of trust are far more common in wardships, and those other guardian offices which are a part of purely private life, than in the more public departments of commerce. The trustee perceives an opportunity for rich profit. His first step is the one that does not cost. He wins and wins, always employing his private capital, and staking each new accumulation for a larger gain. Presently the tide changes. He touches the sacred legacy. Another turn of the die restores all that was taken, and the secret rests in his own bosom. If he be 8tUl unfortunate, it is not difficult to entangle his wards in the net, and persuade them that it was their foUy THE OUTSIDERS. 199 which has wrought destruction. Even at the worst, a frank confession, with the honest remorse that the hard- est natures must at such a crisis feel, will coerce the victims into the forgiveness which robs the law of a criminal. The story of financial " irregularities," caused by un- successful stock speculations, is one of the sambrest chapters in our recent history. The moral censor who should undertake the thankless task of gathering the hard, painful, romantic facts of bank, railroad, insurance- company, and mercantile defaulters, and weave them together in a volume, could have at his command ma- terial that Juvenal might well have envied. Until society gives the lie to that obsolete truism which de- clares poverty to be no disgrace, such labor would be only a fresh injustice. To penetrate the walls of state prisons, and the veiled secrets of the cemetery, in order to unearth the misdeeds^ of forgers, the malefeasances of bank presidents, at whose funerals clergymen by the dozen lent the testimony of their presence, and the un- suspecting frankincense of impassioned eulogy, — of men who committed the suicide of the body rather than endure the penalty of social suicide which their foolish- ness had wrought, — of individuals dead, or dying under feigned names in foreign lands with the misery of a blighted past haunting them to the last breath, ■ — this is to add crime to crime as long as the public insists upon the worship of success, and measures its honors by length of purse. The glory of Wall Street lies in its magnificent opportunities for satisfying in a few months 200 MEN AOT) MYSTERIES OF WALL STREET. the demands of civilization. It is the greatest money- making and money-losing spot on the globe. Pio Nino never asks how his Peter's pence are gathered together, nor do brokers feel bound to enter into aU the interior history of the margins which come to their hands. Their office is to make ten dollars out of one. It is a mission quite as distinct as that of the reformers, and a thousand-fold more appreciated. The fallacies of a few individuals who are weak enough to put themselves under the ban of law and society without enough re- served strength to ultimately break through the meshes, ought not to abate our admiration of that gigantic specu- lative machinery which most exactly answers the re- quirements of the age. Most of the outsiders who have lost money through the Stock Exchange have themselves to thank for it. Some are careless in their choice of brokers, and where there are three or four hundred houses of thorough in- tegrity which they can employ, they evince preter- natural alertness in selecting the genuine vampires of the street. Others put all their savings into one tlirow, and in the natural oscillations of- stock their margins need strengthening just at the moment when they can- not lay their hands on additional funds. Many are eager to appear learned in broker's slang, and so give orders the reverse of what they mean. Not a few besiege their friends for points, and when they have elicited some vague reply, such as " Fort Wayne is a good stock to hold," " Erie must faU under the pressure of the new issues," they plunge in, are entangled in some unexpected clique THE OUTSIDEES. 201 movement, and come forth minus their shekels and full of "wrath against the unoffending individual who had unwittingly given the hint which betrayed them. Oc- casionally these victims of their own imbecility seek redress in the courts. A late lawsuit, in which Colonel Hawldns figured as plaintiff, illustrates a phase of this subject, although in the particular instance to be cited it was not at all clear that the defendant did not pass the boundary of prudence. During the session of the great Sanitary Fair of New York, George Bliss, Jr. and Colonel Hawkins were active members of the sub-com- mittee of arms and trophies. The latter was somewhat " in stocks," and alleged at the trial that Mr. Bliss called his attention to the Wyoming Valley Coal Company as affording peculiar opportunities for investment, especially intimating that he was in with the ring and knew the stock would rise. Mr. Bliss, it should be noted, gave testimony to the contrary, and insisted that, so far as he eulogized the stock, he was justified, inasmuch as Leonard W. Jerome, then in the flower of his career, had purchased a call for a large amount, and this single fact ought, as speculation goes, to have enhanced the market value of the property. Whether the victim of self-deception or of over-con- fidence in his Sanitary Fair colleague, the Colonel de- cided to make a venture in Wyoming Valley, buying 1,000 shares and paying % 52,500. This was in April, 1864 All through the summer he waited patiently, but the stock either kept steadily at the sale figure or vi- brated in slight degTces downward. Early in the fall it 9* 202 MEN AKD MYSTERIES OF WALL STREET. dropped sharply down, and by I^ovember the speculation had so untoward an aspect that Hawkins decided to sell five hundred shares. In. March of the next year he threw the remaining instalment into the market. The profit and loss account run as follows : — To 1,000 shares Wyoming Valley Coal @ S 52^ . $ 52,500.00 By 500 shares $ 25.75 $ 12,875 " 400 " " 27.50 11,000 " 100 " " 27.75 2,775 . . . 26,650.00 § 25,850.00 In addition, the Colonel's brokers brought in a bill for interest and commissions of . . . 2 926.61 Giving a net loss of $ 28,776.61 These figures need no comment. Yet in one respect the operation conformed to one of the most important laws of speculation. The stock was bought and carried for from six to eleven months. Had there been as much wisdom in selecting as there was tenacity in holding, the balance-sheet would probably have been very different. Either by sp ilin g when the market is unduly high, or buying when it is unquestionably low, and then carrying the venture for a year if necessary, an outsider has at all events equal chances of gain or loss. This balancing of risks is in itself an advantage which veteran opera- tors can best appreciate. The difficulty with the Wyo- ming Coal was that it was emphatically a " fancy " stock. There were twenty good raiboad properties on the share list which, with fifty thousand dollars of capital, would have insured a safe profit either in a " long " or " short " operation. THE OUTSIDERS. 203 It is partly for want of courage to endure an occa- sional " break " in stocks, and partly from lack of com- mon-sense in the choice of time and of securities, that those outsiders who are free from the other weakness to which we have alluded so frec[uently meet with misfor- tune. Brokers are fond of telling their customers, jo- cosely, that the true way to speculate is to buy when stocks are low and seU when they are high. As a matter of fact, the advice is not more sound than feasible, and the few who act upon it invariably become rich. There are scores on scores of capitalists in New York City, Providence, Hartford, Philadelphia, and other places, who have always adopted this policy. They watch the market, study the earnings of companies, look into the character and bent of mind of directors, and when certain stocks fall to a reasonable figure they buy, gen- erally upon wide margins. Any yearly chart of prices will show the safety of such procedure and the fre- quency of opportunities for acting upon it. The follow- ing chapter will be found full of illustrations touching upon this subject. The great operators do not care to employ this method, as they find quicker profits in cor- ners ; the brokers cannot, as their capital is limited and they are compelled to turn it constantly, — their separate speculations seldom lasting more than a month or two. Meanwhile, the great proportion of outsiders, new in the field, impulsive, easily influenced, are captivated by some active stock, buy it when the market is boom- ing, and sell upon the first decline. Where there is not timidity, there is very apt to be obstinacy. It is one of 204 MEN AND MYSTERIES OF WALL STREET. the most harassing functions of brokerage to convince a customer that the fact a security is quoted at 150 is an argument in favor of letting it alone. One class has implicit faith that it wiU rise to 200, and at 175 refuses to seU. Of course a reaction sets in. Possibly a defal- cation is announced, or the capital stock has been wa- tered into twice its former bulk. The tumble downward commences, now 140, next 120, 110, 90, 85, 70. The fresher the men the greater the bulldog spirit, until when the shares reach 60, a panic seizes them.* They sell peremptorily, only to find, a week or two after, that the stock has recovered to 85. ISTothing could be more absurd than this, and nothing more habitual. To buy at the crest wave of extreme advance and to sell at the lowest ebb of the tide, are what brokers assure us to be the judicious customs of ninety out of a hundred of the people who bewail their inexplicable misadventures in stocks ! * We trust the reader -will not infer that because a, too quick aban- donment of a speculation is unwise, it is therefore necessary to cling with undue pertinacity to property which has lost value. Every broker has his anecdote of customers who have been caught by " traps " {argot for worthless " fancy " shares), and have kept them for yeai-s in hope of a change in the market. The most remarkable instance, however, of in- fatuated obstinacy in this regard is to be found outside of stocks. In 1825 there was a gi'eat speculative mania in cotton, followed by a short decline. A Liverpool merchant that year had sold most of his con- signment at the top prices of the time, but still had on hand some 2,000 pounds, which had cost about 43 cents a pound. Wlien rates lowered, he stored the bales away, determined not to sell until the market recovered. The lot was finally sold in 1849. By that date it had cost in storage, interest, etc., $2.60J a pound, or a total of $5,210. It brought ISJ cents, giving a net loss of $ 4,906! THE OUTSIDERS. 205 " Short " transactions are apt to he a stumbling-block to beginners. The first speculations of outsiders are al- ways for a rise. To sell what you have not got, and yet make money by it, is a species of metaphysics that comes only by education. One reason for its unpopularity is that the new men are thorough bulls. They have money. 1 Their feelings are buoyant. The stock market is couleur de rose. It is the melting down of margins and a few sharp losses which develop the bear. Among city clerks and men about town with small means, a common habit is to give a broker acquaintance an order to buy on a ten per cent margin, with the provis- ion that if the price drops down to the point covered by the advance, it shall be sold without recourse ; if it rises five per cent, the broker is to realize. Not unfrequently five or ten persons club together, putting in $ 200 each. This allows of a purchase of S 1,000 in stocks, which, if the quotation be 50, would give two hundred shares. At 55 they would double their money. Occasionally a com- plaisant operator will agree to take two per cent mar- gin, buying or selling short in the morning, and revers- ing the course in the afternoon. Ten per cent has been made by this process in a day, a thousand dollars ad- mitting of a transaction in 500 shares, giving five thou- sand dollars clear in the fall or rise between 100 and 110. Generally, however, one, two, or three per cent is all that can be obtained. Even a fluctuation of | would thus make more than half the money risked in margin. A very considerable share of commissions comes to New York indirectly. Banks all over the country form 206 MEN AND MYSTEEIES OF WALL STREET. little centres around which local speculation collects. The advice of cashiers or presidents is taken. Trades- men with a surplus balance of five or twelve hundred dollars look into the financial columns of the city daily or weeldy, compare rumors, make partial decisions, and then go to the bank and ask if Milwaukee and St. Paul would n't be safe now ; or whether New Jersey Central is not likely to react. After due hesitation they finally conclude to try Cleveland and Pittsburg, or possibly one of the other stocks just mentioned. The cashier telegraphs or writes to his usual broker, transmits the money, and in a day or more receives the stock. His action is unofficial, and very commonly he derives no profit from tlie service. The people who purchase in this manner always buy out and out, although with the purpose of realizing ia an early future. Even heavy capitalists employ the same agency, operating both on margins and by solid purchases or sales. MOBILITY OF STOCK. 207 CHAPTER XI. MOBILITY OF STOCK. AT various times ingenious accountants liave sought to devise a system of weights and measures for the Stock Market. Sometimes the basis of these cal- culations has been the average rental rate of real estate ; at others, the annual worth of money lent freely upon un- impeachable security. The method is not difficult iu its arithmetic, and has doubtless a certain use, as illustrating the difference between the seUing rate of stocks and their theoretical value. Thus, where money brings easily seven per cent a year, it is clear that a stock with guar- anteed interest of seven per cent ought to have par value, provided the company which it represents is man- aged with such care as to insure the property from future injury in its earning power. In other words, stock cost- ing one hundred dollars, and paying seven dollars yearly in dividends, if the precedent conditions were complied with, ought to be exactly as safe and profitable an in- vestment as the same amount of money out at loan. Now, if the same stock should permanently pay eight per cent, its true value in the market would be the equivalent of that sum, which at seven per cent woiild give eight dollars in interest. Were a capitalist to buy the stock at 114f , his annual dividend would be precisely 208 MEN AND MYSTERIES OF WALL STREET. what the same money,.would be worth at .07 per year. Thus $ 114f X .07 = $ 8. What is true for eight per cent will of course hold in due proportion either for six, ten, or twenty per cent dividends. On this reasoning the subjoined table is based : — Par of Stock. Guarantee Interest. True Value. 100 07 ... . 100 100 08 ... . ll^ 100 09 ... . 128^ 100 10 ... . 142f 100 15 ... . 214f 100 20 ... . 285f 100 25 ... . 357i 100 06 . . . . 85f 100 05 ... . 71f 100 04 ... . 57| 100 01 ... . 14f Any school-boy can see that seven per cent upon $ 357^ would give the same annual sum as that of a twenty-five per cent dividend upon a $ 100 stock. As long, therefore, as it is certain that the high dividend will be permanent, this stock at any point below $ 357 is a cheap pvirchase. With gold at 120, the coupon of a $ 100 government bond is worth $ 7.20. The sale value of the bond itself by the above table should have equalled, at that rate of interest, 102|-.* WhUe, in fact, 5-20s, when gold is at * In order to prevent any misapprehension, we may as well repeat what has already been said in a different place, that all fractional prices of stocks are in eighths. 'VNTien, therefore, fractions in sevenths occur in this chapter, it should he understood that reference is made to the tahle ahove. MOBILITY OF STOCK. 209 the figure cited, are marketed at 115. Fort "Wayne stock is guaranteed at seven per cent by the Pennsyl- vania Central, the wealthiest railway corporation in the State whose name it bears. The shares ought to sell, per table, for 100. They could be bought in December, 1869, at 85. Why will men give twelve per cent above the legitimate value of one security, and hesitate at the apparently great profit of twelve per cent discount in another ? Seventy years ago a chart classifying the great British funds, according to ratios similar to the tables just pre- sented, was published in London, and the subsequent fluctuations of the English stock market must have enabled all who acted upon this guide to make very considerable additions to their wealth. How many men, however, would liave the courage to employ such a sys- tem, even if convinced that the groundwork were thor- oughly sound? Let any reader, fortunate in having money to invest, look into his own heart for an answer. He will find there suspicion, over-confidence, timidity, vacillation, — each and every element which has made the prices of all financial centres through early and latter days fluctuating, unstable, hazardous. Examine any yearly record of sales in the New York Stock Mar- ket, and then go back to the emotions of January and compare them with the fact of December. You wDl find " confidence where the registry shows there should have been distrust, hesitation which ought to have been daring, doubts where faith would have been wealth. This weakness of humanity is the life of speculation. 210 MEN AND MYSTEEIES OF WAIL STREET. This uncertainty of the future, this susceptibility to momentary influences, affecting the cooUest and shrewd- est heads, gives even to irrefragable values the c[uality of quicksilver. Government bonds, during the last year or two, have maintained great evenness of rates, yet twenty-four sales and purchases either in '68 or '69 would have given fifty per cent profit, apart from the coupons, and in the dark days of the war forty gold dollars would have secured a hundred-dollar bond. Look at the Panama Railway stock when paying, as now, twenty-four per cent divi- dends, but before the Pacific Railway had materially diminished its earnings. In two years, closing with De- cember, '68, the fluctuations ranged in figures like the foUowing, — 260, 254, 270, 261, 300, 311, 295, 300. lUinois Central is not a speculative stock. It is held at home, in England, in Germany, for its annual fruitage ; yet the tidal movements of the Exchange were for the same period, 117^ 111, 129, 122, 135, 147, 137, 159, 144. The Delaware and Hudson Canal is a substantial prop- erty, managed in the interests of its owners. During the past three years its shares exhibit an ebb and flow of 133, 150, 145, 155, 152, 160, 139, 163, 1191, 131. Such examples are only too numerous. They are part of the scrutable and inscrutable features of every money mart. The primary cause of mobility of stock is, and must always be, excess or want of confidence. Tlie artificial unquestionably mingles with the natural class of in- fluences, and there are not a few operators whose style of navigation is to beat up against the wind. But there MOBILITY OF STOCK. 211 is not a speculator in or out of Wall Street who is not subject to subtle undercurrents blinding the judgment, coloring all views, depressing or exhilarating, making him buU or bear. The world does not contain a more thorough materialist than the genuine stock-broker. And yet if there be spiritual forces anywhere at play, it is around the temples of the money-changers. Sombre spirits foreboding war in peace, and defeat in battle, failure of crops, a drooping trade, a dying commerce, usury in the money-market, glimmerings of repudiation round the whole sky, dishonesty in directions, pecula- tion, defalcations, all the evils of humanity which in reaction destroy security and strike down the prices of stock. Again, bright spirits bringing the hope of sunny harvests, of peace among the nations, or victory beneath war's whirlwind, of abounding activity in manufacture and trade, of flush money days, and fever for investment and speculation. Spirits who haunt the street for an hour, and others that abide for months, — guardian spirits who make every venture successful, and malignant spirits like At§ or Nemesis driving their victims from failure to failure till the end is reached. We have yet to hear of a genuine stock-jobber who does not believe in chance even against his will. The atmosphere is so fickle, there are such swarms of rumors, the whole market is so subject to evanescent unreasonable tran- sitions that a man who buys or sells, unless on accidental certainties, uses such prevision as is granted him, and trusts to luck for the sequel. The tendencies of the times are toward instabUity. 212 MEN AND MYSTERIES OF WAIL STREET. An age of steam and telegraph is necessarily disquiet, impatient, eager to gain opulence by express-trains. En- gineers tell us that after a certain point each increase of speed is at double cost in wear and tear. It is so in money-getting. The immense friction rubs away a vast deal of fribbling honesty, small prejudices, super-niceties of conscience. Hard pan is soon reached, and both old world and new are fuH of hard-pan capitalists. Before 1825 people sought competence. Up to 1837 the end was wealth. Since then our rich men are only content with being king merchants and king speculators, — to have power to rule, to be invincible. If VanderbUt loses five dollars in early evening at the Manhattan, he will play till midnight in order to win it back. That is the character of the man in a nutshell. And finance is fuU either of men of that stamp who simply want sur- plusage of power, or of others who are eager to attain to the plane already arrived at by the others. As a con- sequence, we have corruption in railway management, finesse in telegraph and steamsliip lines, stock watering by the hundred millions, legislative jobbery, "passing" of dividends, — every artifice of capital, working under high pressure. All the antiquated influences affecting securities, — anticipation of political complications, fears of agricultural, manufacturing, or mercantile depression, foreboding of panics, and the hke, are now miiltiplied indefinitely by fresh expedients — purely artificial — but far more fatal to the equilibrium of values. Uncertainty, however, is not a disadvantage in specu- lation. The class of bonds or stoclcs about which an MOBILITY OF STOCK. 213 investor can safely reason, and cipher out profits — whicli might be taken as a basis for charts like that of For- tune's of London — are not popular with outsiders or operators. The street rallies round the stocks which are most under suspicion ; the draggled skirts of Erie have always had a fascination. When Western Union Tele- graph stock was on the edge of its present low estate, it was the pet of the street. Enter the Stock Exchange at any morning call, and, apart from mining shares, one might shrewdly select the class of security which will justify investment by the rapidity with which the Vice- President slurs it over. Northwestern, Fort Wayne, Lake Shore, Michigan Southern, Pacific Mail, the Ex- press stocks, the VanderbUt stocks, Atlantic Mail, Ten- nessee Sixes, North Carolina Sixes, rise and fall as favor- ites according as they are doubtful or steady values. The whole life and zest of the market lie in incessant undulations. Take up any annual registry of the Stock Exchange, and you can check off in a moment the tem- porary " fancies " of the year by selecting such as show the widest vibrations. The serious thing of existence is to buy New York Central at 124 and sell it at 180, leaving the new purchaser to find his profit where he can. Illinois Central in 1862 sold for 60, and was exceedingly popular. Six years later it was almost out of the market, and the few buyers paid from 145 to 159 for their shares. In- vestment ruined it for Wall Street. Not only is uncertainty an immense force, but its power is doubled by that strange perplexity of the mar- ket, arising from the great difference in the effects of the 214 MEN AND MYSTERIES OF WALL STREET. same laws. The influences which one day will produce a sharp rise or fall, at another time may cause only the feeblest ripples. Thus a number of dealers may be short of shares or gold. They may be very short, anti- cipating a heavy decline. Presently comes a panic. Everybody perceives that the market has been oversold. The bears turn and buy in order to cover their shorts. The bulls are also purchasing. On January 23, 1869, the Gold Board had this com- plexion. Yet the effect was seen only in a rise from 135f to 136f. Eight months later a similar complexity carried gold up to 160, with consequences sufficiently known. Stocks under such contingencies will rise some three or four per cent, and again, as was the case with Erie on November 14, 1868, shares that sell in the morning at 36 f may be 52^ before evening. Here is the doubtful within the doubtful, and half the success of operators is in their ability to take a rapid survey of the market, and judge whether a fluctuation be final or the prelude of a corner. The influence of legislation on prices involves similar perplexities. Wlien Hooper's bill was reported in Con- gress early in 1868, and there was a general belief that its passage was certain, thus effectually closing up our national indebtedness, governments rose markedly. The subsequent death of the measure in the Senate produced a corresponding reaction. Operators in possession of "Washington secrets made immense sums. When Grant's message in the fall of the same year appeared, govern- ments, so far from bounding up, as they might natu- MOBILITY OF STOCK. 215 rally have been expected to do under the inspiriting effects of the Executive document, remained either stationary or with a fractional decline. A vote to increase the fare on the New York Central or to reduce it on the Illinois roads has seriously affected the Exchange at one period and been without any influence at another. The New York Legislature attempted to punish Vanderbilt for not spending money freely to defeat Jay Gould and the Erie Act. A pro rata freight bill was introduced and urgently pushed. Its effect, had it passed, would have been to greatly decrease the earnings of the Cen- tral Nevertheless, in the share market Erie yielded more than either of the Vanderbilt stocks, upon recep- tion of the news. Brokers have a theory, that when gold is high stocks should be high ; greenbacks being worth less, stocks should be worth more. A fall in gold of two per cent has, time and again, sent speculative stocks down from three to eight per cent. Yet on December 20, 1869, without any other cause at work save the heave and flux of an ordinary market, gold dropped | by steady frac- tions through the day, while stocks rose an average of one per cent. There is a certain grim satire in some of the influ- ences affecting stocks. November 24, 1869, there was a rumor that the Fisk party was to be ousted from the Erie direction, and that Daniel Groesbeck had been ap- pointed receiver. The stock of the broad gauge rose two per cent in consequence ! A like result followed upon the cable despatch announcing that the English bond- 216 MEN AND MYSTERIES OF WALL STBEBT. holders were going to institute litigation against the road. The new Tennessee bonds at 1 p. m., December 27, 1869, were quoted at 45|. The street presently learned that a committee had been elected for the purpose of influencing Nashville legislation, so as to insure en- hanced value to the securities. In two hours after the bonds were at 47. The whisper that the directors of a company will omit the usual dividend has an instant effect in depressing stock. On November 11, 1869, Pacific Mail fell from 60f to 56|, because of such a rumor. St. Paul not long since was buoyed up to 116 J by anticipations of large stock and cash dividends. When the directors had un- loaded at heavy profits, these dreams were suddenly dis- sipated, and the shares decliaed to 60. The disastrous consequences of corners have been already alluded to, but the influences of cliques upon stocks are not limited to these grand operations. When the attempt of the Erie managers to get control of the Columbus, Chicago, and Indiana Central Eailroad failed ingloriously, the stock was knocked down six per cent in revenge. This was February 1, 1869, and the quota- tions of sales amounted to only eight or nine hundred shares, illustrating the cheap way in which prices can be changed. The inter-sympathy between stocks is remarkable. November 6, 1869, there was a break in Chicago and Northwest. St. Paul, Hudson, Chicago and Alton, aU fell. 5-20s declined 4^. Mississippi 6s dropped six MOBILITY OF STOCK. 217 per cent. Eock Island showed a loss of 5|. Central, Hudson, and Harlem are very sensitive to whatever en- hances Erie. The Cuban insurrection has at different times affected Governments ; now pausing a slight faU in fear of Spanish complications, and again leading to a rise, from the fact that the revolutionary party entered the market as purchasers, in order to reinvest the money previously employed in Havana trade. In its panics, "Wall Street is especially unreasonable. Indeed, there is not a safer method of profit in existence than to watch the periodical depressions of securities ; and to buy, buy, buy as soon as the downward pressure is fuUy under way. When the White fraud was discov- ered in the summer of '68, the loss by forgeries was some- thing like $ 200,000 ; while the shares of the six com- panies whose certificates had been tampered with were sold down to the equivalent of a loss of ten millions. The mere sale of a few millions of gold by Secretary Chase, in the spring of '64, sent stocks tumbling from five to twenty-five per cent ; and the gold which, in the second week of April, was held at 189, was offered on the 18th for 168, with no one to take it. It was the same way in September, 1869 ; the depression in stocks being due to purely artificial causes, and the purchasers who had the courage to buy at the fall insuring to themselves enormous gains. Nor are these fluctuations below intrinsic value con- fined to special and sensational crises. They are a part of the history of every year. In the table given at the 10 218 MEN AND MYSTERIES OF WALL STREET. commencement of this chapter a hasis for the judg- ment of values is afforded in cases where the dividend or interest is sure. Its application- to Government, State, and Eailroad bonds, in which the element of sus- picion has the least influence, would illustrate the op- portunities of speculation very forcibly. Unfortunately, such an inquiry would be complicated by the fact that in some cases coin interest is paid ; while, in others, peculiar circumstances have affected confidence either advantageously or disastrously, but in ways requiring constant explanation. What is true of the more stable classes of investment is necessarily even more a fact in regard to those descriptions of stock in which either the dividend is variable or the management untrustworthy. Nevertheless, there are points in the course of prices at the New York Exchange which can be rendered clearer by a comparison with the theoretical scale of values. The year 1868 was an active one for stocks. It is, in fact, more representative than either the preceding or succeeding twelve months. The rates of the principal shares during each month are now before us. Taldng bank stock, which is altogether held for investment, we find a few of the New York banks which conform with the figures of the table. Thus, subjoined are the names of four banks, the par value of whose shares is 100, on which, for the year, ten-per-cent dividends were declared. Selling at $ 142|, they would consequently be equivalent to an investment in the proportions of one hundred dol- lars at seven per cent. We* give the lowest and highest bids, with the comparative cheapness and dearness of the stock, taking 142|- as the true value. MOBILITY OF STOCK. 219 •'"--t- ^o'Zy'^f Highest. America . $136= 6f $145 = 2^ Disadvantage to buyer. New York . 133 = 9f 140 = 2f Advantage " Fulton . .160= 160 = 17| Disadvantage " Com Exchange 124 = 18^ 135^- = 7f Advantage " The highest sale-price of twelve other banks with par 100, and with 10 per cent dividends, is given below: — Atlantic . . 103 Supposedadvantagetobuyer@142f =$39-| Butch. & Drovers' 135 " " « 7-f Import. & Traders' 135 " " " 7f Commerce . 130 " " " 12^ Commonwealth 116 " " " 2Cf Republic . . 125^ " " « 17f Hanover .117 " " " 25f Market . . 116 " " « 26^ Mech. Bank. Asso.117 " " " 25^ Mer. Exchange 120 " " « 22f National .110 " " " 32f St. Nicholas . 112 " " " 30| Shoe & Leather 125^ " " " 17f It should be added, that many in the above list sold from five to ten per cent lower at other sales. The fig- ures in the last column help to illustrate a general law in stocks, namely, that whenever even the vaguest suspicion lurks about an investment, it never rises to the maximum of its dividend-bearing worth. Thus the Marine Bank declared a dividend of 16 per cent. That would have placed its genuine value at 228, but it actually sold for 150. The Chatham, with the same dividend, sold for 145. The Park Bank declared fourteen-per-cent dividend. 220 MEN AND MYSTERIES OF WALL STREET. That would he equal to $ 200 at seven per cent, yet the stock sold no higher than 155. The Seventh Ward sold for 112 on an eight-per-cent dividend. This was $ 2| below the table. Fer contra, the City, with twelve-per- cent dividend, sold for 186 - 190. The tabular value would be 171f, giving an excess of over $ 15 on each share. The Manhattan shows a vastly greater excess in its selling value. 'Passing to railroads, we will first select three whose dividends naturally kept them mainly in the hands of investors. Theoretic Lowest Par. Dividends. y^,„^ ^^_ Highest. Panama . . .100 24 per cent 342f 290 369 Hartford and New Haven 100 12 " 171f 213 225 NewTorkand " 100 10 " 142^ 133 159 It will readily be seen that Panama at 290 was a very cheap purchase, and that the confidence of purchasers was sufficient to carry it considerably above S 342f , which would be the real worth when money loans for seven per cent. New York and New Haven was at least nine per cent too low when at 133. Hartford and New Haven sold, at its lowest, for forty per cent above what a twelve-per-cent dividend would naturally appreciate a stock. Illinois Central and Hudson Eiver might have been added to the others, but the dividend of the former road was complicated by a stock bonus, and the latter line was subjected to a speculative bull movement which gave it a fictitious value. It may not be inadvisable, however, to test the table MOBILITY OF STOCK. 221 by the prices of a few specially active stocks given below : — Par. DiTidend True • Value. Lowest, Highest. Chicago, Rook Island, and Pacific 100 10 142f 85 118 Chicago and Alton . . IQO 10 142| 120 158^ Chic9,go, Buriington, and Quincy 100 10 142f 138 175 Cleveland, Col., Cin., and Indiana 100 7 100 75 110 Cleveland and Toledo . . 100 7 100 95 113 Dubuque and Sioux City . 100 7 100 39-50 101 Lake Shore . . . .100 7 100 95 114 Rensselaer and Saratoga . 100 ^ 92f 84 95f Adams Express . . . 100 5 71f 46 80^ Western Union Telegraph . 100 4 57> 33 39J With the exception of the first and the last stock on the list, the reader will perceive the range of prices to have been in each case above and below the standard of the seven-per-cent table. Eock Island this year labored under the disadvantage of a lawsuit, and also of a heavy new issue of shares representing construc- tion expenses, and therefore temporarily depressing the property. Western Union was buried beneath the im- mense weight of the Eussian Extension debt, which the directors had neatly shifted from their own shoulders to those of the shareholders. All the other properties rose or fell beyond the unit of true value calculated on a seven-per-cent basis. We have directed attention to the apparent corrobora- tion of the scale by the actual vibrations of the market, simply to show that there is a sense of some governing unit of value in the minds of all dealers. With the exception of a few of the banks, it has been seen that 222 MEN AND MYSTERIES OF WALL STREET. the table affords a near average of the intrinsic worth of the stock cited above. Buyers of shares at figures below the seven-per-cent unit would have been secure of ultimate profit. Holders, when the rates were above that unit, would have been prudent had they sold at once. The reader ought to thoroughly understand, how- ever, that there is no royal road to speculation. Given all the conditions of the problem, and profits could be ciphered out with the accuracy of a mathematical demonstration. But the unknown q^uantities are the stumbling-blocks of system-mongers. Integrity and ability in directors, the earning capacity of the property of a corporation, the chances of the future as well as the past, are essential points to the final judgment, and the rates of the Exchange are averagely the measure of in- creasing or decreasing faith in the dividend worth of a security. Successful operators unquestionably have a mental rule of valuation. By processes which they cannot ex- plain even to themselves, they know when stock is a good purchase, and when its price is running too higL None of them would allow that a system is possible, or could perfect their combinations except by an uncon- scious use of this very impossibility. For the sake of illustration, therefore, and with the preliminary warning, that, at best, the sale is only approximately correct, we propose to continue our glance at the opportunities of speculation on the seven-per-cent interest basis. Panama, in 1868, was a good investment at 342f-. A hundred shares, costing $34,285^, would have netted MOBILITY OF STOCK. 223 twenty-four per cent in four successive payments on each certificate. Twenty-four per cent on the par of a hundred shares, and seven per cent on the selling rate, would each give $ 2,400. A capitalist having sufficient faith in this, and with money at command for purchas- ing and holding 100 shares even at 400 as the quotation, could easily have made six times the dividend profit by buying and selling this small even lot just ten times during the year. In January the stock was 290. In February it was 345. Buying at the former price and selling at the latter, he would have cleared $ 5,500. In March lie could have bought at 330 and sold at 346 = $ 1,600 back at 315 " " 330^= 1,525 " 329| " " 339 = 925 " 330 and sold in Aug. at 368 3,800 " 330 " " " 345 1,500 " 327| " " " 340 1,250 Giving him his money back, and a profit of . . .$10,600 "With the exception of the sales of May and June he would have acted throughout upon the principle that stocks quoted above their investment worth may be safely sold with a view of buying back at a great decline. It wiU be noticed that the highest figure of purchase in this case was 330. A twenty-per-cent margin on that price woiild have been $ 6,600. The operator, with that advance, could have easily performed every part of the series of transactions, and have closed them with his six thousand changed to twenty-one. A speculation on a margin, however, is more profitable in the lower-priced shares. Take Chicago and Alton. It paid ten-per-cent " May " June " July " Oct. " Dec. 224 MEN AND MYSTERIES OF WALL STEEET. dividends, was well managed, and represented a property that was of growing value. One hundred shares at $ 14,200 was a good purchase. The men who went into the market with a firm faith in the worth of the stock even at 142 must have made money. They could have bought at 120 in April, and sold in August at 144. That would have been a clear gain of $24 on the share. What ordinary business pays such profits ? A buyer might have said in January : " I will buy whenever the stock touches 130 or falls below it. My broker shall sell at eveiy six-per-cent rise on this, and buy again on a six-per-cent fall. I will purchase no more than I can really hold, even if it falls to zero, but will only place twenty per cent on deposit. Above 142, I will let it alone." He sends up to E"ew York two thousand dollars, and his broker acts faithfully. Now observe the figures : January, 130-136; February, 128-136; April, 120- 128| ; June, 130 - 136 ; August, 145 - 138 J ; November, 135-150. The other months show like vibrations, but the prices were such that the broker, with his peculiar orders, would not have been warranted in buying. Even on six per cent, however, the customer could not have failed to clear $ 3,600, besides holding his margin intact. This is conservative speculation. There were men, that year, who bought Dubuque and Sioux City at 39, and sold it for 100. They had the courage to wait from Jan- uary to September. They could have bought a thousand shares on a margin of $4,000, and would have been worth $ 65,000 in nine months. The stock paid seven MOBILITY or STOCK. 225 per cent, and was therefore well worth f 100, even to hold. The course of Cliicago, Burlington, and Quincy was a beautiful example of the advantage of solid pur- chases. It could have been bought in January for 138. In March and September there were semiannual five- per-cent dividends. By December the stock could have been sold out for 175 ; that would have given $ 37 on each share. This is the ideal ; it presupposes buying at the lowest ebb, and selling just when the wave crests for a fall. Such extremes are the luck of the lottery. There is plenty of good profit open in the market, with- out any of these miracles. Cleveland and Toledo was cheap for any price below 100. It was dear for any price which reached much above that figure. "Within 96 and 106, any one who knew about the road might have safely held the stock. A buyer, acting upon this belief, would have made thirty per cent in five transactions with certainty, so evenly did the stock fluctuate. There are hundreds of interesting features in the prices of '68. Thus Eock Island sold down to 85 in April, and it seems incredible that its first rebound was only 93. People who knew this road, and dared to buy, even at the latter depression, could have sold ia June with a profit of $ 8 on a share ; in July, with a gain of f 17 ; in August, with an enhancement of $19; oa»they could have held on till December, and made $ 250 on every ten shares. In Hudson, between 125 and 138, there were incessant profits ; and the variations of each month would have taught an oper- 10* o 226 MEN AND MYSTERIES OF WALL STREET. ator that these limits were to be the year's rates. An average of 62J as a unit, with buying at not less than eight per cent below, and selling always at eight per cent above that figure, would have been assured profit to any one in Milwaukee and St. PauL But the chances of stocks can be seen in a better light, if exanuned by the record of ten years. We have before us a partial registry from 1860 to 1870. It is not easy to persuade one's self, in the face of the facts revealed by this ex- traordinary table of prices during the past decade, that a capitalist who has a fair proportion of foresight, and is willing to wait, can fail to make more money, and make it with greater security through speculation, than by any other of the ordinary methods of investment. The venture of a month may be treacherous, but the courage of a year is golden. In 1860 the gates of WaU Street opened to the provi- dent an opportunity for becoming rich such as cannot be found elsewhere in history. Men could have bought Erie for 8J, Harlem for 8J, Michigan Southern for 5, Cleve- land and Pittsburg for the same price, Prairie du Chien for 2. Erie could have been sold in eight months at an advance of five times the purchase-money, and Harlem at three times the cost. In seven months, Prairie du Chien was worth eight times what it sold for in February. In six months, Michigan Southern was quoted at 25. Five hundred shares in Februj^y would have cost only $2,500; in August their owner could have sold for $ 12,500. Twenty thousand dollars in six short months converted into one hundred tliousand! MOBILITY OF STOCK. 227 And this is but half the story, below. Observe the table Jan. 1860. 8i Feb. 1860. 35 Erie, Harlem, Hudson, . Michigan Central, . 35 . . " Southern, ... 5 Cleveland and Pittsburg, 6J Chicago and Rock Island, . , 42^ Prairie du Chien, ... 2 Del. Lack. West., . . 54 . Cleveland and Toledo, . 19 . May. Aug. 1863. 1863. 105 . . 179 Mar. June. 1864. 1864, 126 . 285 July. 180 . 152 April. . 118 132 1864. Jan. . 145 . 90 265 150 The purchaser of Erie in 1860 would have found one dollar turned to twelve in May, '63. In four years, a dollar in Michigan Southern would have changed to twenty-three. Ten thousand grown to two hundred and thirty thousand ! Two thousand dollars in Prairie du Chien would have become ninety thousand in '63. Ten thousand in Cleveknd and Pittsburg would have bloomed out into two hundred thousand by April, '64. The difference of gold does not account for these fig- ures. One dollar increased to three dollars and ten cents was the utmost contrast that the gold-market af- forded through all the years of the war. Even the arti- ficial influences at work in stocks, which undoubtedly produced the extreme quotations of Harlem, Erie, and Prairie du Chien, were as nothing compared to the legitimate effects of the enhancing value of railroad property. 228 MEN AND MYSTEHIES OF WALL STEBET. Moreover, it would "seem as if none of the usual ex- planations of the depression of 1860 were sufficient to afford a basis for hesitation to invest. All the roads were poor. Many were in debt. Dividends were infre- quent, and the earnings of the great lines gave no prom- ise of increase. But even at two-per-cent dividends a year, shares were cheap at 28. At one half of one per cent, they were a fair purchase at seven. War, indeed, was imminent ; but even the regular increase of popula- tion, continued emigration, and the lowest estimates of the progressive wealth of the nation, ought to have fur- nished a conservative basis for confidence in the inevita- ble increase of these securities. That they did not have that effect with the majority of investors is clear from the mere fact of such extreme quotations as are to be found in the previous page, and it is probable that the immense profit which the future disclosed really fell to the very few capitalists who chanced to have confidence as well as money. These men became directors, infused energy, prudence, and economy in the management, and in no small degree created the wealth which ultimately flowed in to them. Some of our greatest railway kings date from that period. The low prices of the beginning of the last decade ex- tended even to some of the most undoubted properties. Panama, in April, '61, was 97|. In July, '64, it sold for 300. Philadelphia and Eeading, which dragged in '62 at 35, sold up and down in April, '64, from 165 to 125. Between '62 and '64 there was a fortune, and the fluctuations of April would have given any lucky opera- MOBILITY OF STOCK. 229 tor a competence. Chicago and Alton sold, in '62, for 16 ; in '68 it reached 158J. Illinois Central in '62 sold for 60. Chicago, Burlington, and Quincy was at the same figure. In '68 the former sold for 158, and the latter for 175. In '65 both the New York and New Haven and the Harlem were subject to heavy dealings. To-day they are out of the market ; one because of its large divi- dends, the other from its steadiness and uselessness for speculation. For six months, in '66, New York Central sold down below 100, and might have been bought in the largest quantities at 91. The purchaser, from July onward to the present day, could have always sold at a profit, and even in that year might have realized from twenty to thirty per cent. In '66 Pacific Mail fluttered between 180 and 240. Atlantic Mail rose and fell in weekly see-saws from 108 to 136 through January and February. Pennsylvania Coal vacillated from 131 to 170. New Jersey Eailroad stock waved up and down between 120 and 145. Erie pulsed from 55 to 95. How easy it would be to fiU a book with these figures ! The charts teem with them. There is not a stock of genuine worth which does not indicate, by the registry, alternations of hope and fear in wide percentages and with unbounded opportunities for speculators to buy with confidence of profit. Brokers tell us that about one in a hundred buy in this manner. The ninety-nine mean to do so. They make their calculations, add up, sub- tract, wander hither and thither for points, try this sys- tem and that theory, are wise to the extent of their wis- 230 MEN AND MYSTEEIES OF WALL STREET. dom, and come forth from their ventures shorn of all their golden fleece. With a chart of prices before one, this fatality seems inexplicable. But facts are difficult matters to combat, and the facts are indubitably discour- aging. There is a solution of the failure, however, which has already been suggested. These ninety-nine buy on margins, ten per cent or twenty per cent as the case may be, but always extending themselves to the utmost limit. They also buy " active " stocks, whose fluctuations are of ten to forty per cent, giving large profits if the tide runs up, but sweeping away the advances of the outsider in a moment whenever the market breaks. If they pur- chased " out and out," the whole aspect of things would change. The cliques could not control as at present, and speculation would become an affair of relative judgment. There would, of course, be fluctuations, since human na- ture remains tolerably constant in directions of com- panies, money-lenders, and purchasers, and shares would be buoyant or depressed beyond their just proportion. The over-confident would lose by holding, and the sus- picious would sell where they ought to buy. But the average of the unlucky would surely decrease. IN THE GOLD ROOM. 231 CHAPTER XII. IN THE GOLD EOOM. JUST beyond the dusty entrance to the Long Eoom, on New Street, is a narrow doorway leading iato a grimy and fusty corridor. If a stranger continue on, he will find himself descending sundry foot-worn stairs, and finally -arriving at an inner enclosure with a private passage to the Stock Exchange at the left, and a tomb- like causeway ia front of him, which penetrates through to Broad Street. On dull days he might wander up and down through this perplexing labyrinth for hours without having any clearer perception of how to reach the tem- ple of the Gold kings than upon his first iugress. If haply some broker's clerk, sympathizing with his distress, should bravely come to the rescue, he would guide him back to the twilight of the New Street corridor, and in- dicate with his dexter finger two doors on the left, whose sombre and inauspicious aspect would strangely contrast with the dreams of princely splendor with which deal- ings in gold by the hundred millions are associated in the rural mind. Nothing in fact could be so dismal in its externals, or so modestly inconspicuous in its ap- proaches, as the famous Gold Exchange. "We have alluded to two modes of entrance. One is for members, and is strictly guarded from the interior by the Peter of 232 MEN AND MYSTEKIES OF WALL STREET. the coin-market. The other leads to the free gallery, — a scrimped and box-like place, mainly devoted to ofSce- boys and mischief. There is yet another door reached by uncertain ways, where, if properly provided with tickets, one may enter and discover himseK in an upper, nest-shaped eyrie, affording an excellent view of the ex- citmg scenes below. An on-looker from this point per- ceives the whole contour of the chamber. In front against the New Street side is the raised dais of the officers. President John F. Underhill occupies the seat of honor. Near him is the desk of Secretary Thomas P. Akers, with an under-clerk at his side. On the right of the President is the stand of the telegraph -operator and beyond are the open doorways of committee-rooms. To his left and above is a sort of reading-room, where haK a dozen city papers are on file. Before him is the foun- tain, shut in by a circling iron railing perhaps thirty feet in diameter, and consisting of a Cupid playing with a dolphin, from which microscopic streamlets of water fall harmlessly into the basin beneath. Its aesthetic features may be clear as a melted margin to brokers, but to ordinary eyes it is an ineffable vision of ugliness. Against the outlying rail the operators lean idly, or join in the feeble patter of offers and bids which are pre- lusive of the coming combat. At an active season the fountain begins to attract brokers as early as nine o'clock. But the real business of the day stai'ts with ten A. M. By that hour the floor buzzes with the whisperings and murmurs of a hundred voices. The President rises to his feet ; the gavel rings down upon IN THE GOLD ROOM. 233 the block, and the bulls and bears spring forward to the contest. Broker. " 5| for fifty. I for fifty, — fifty, — I '11 give \ for any part of a hundred." Voice. " Sold." The Secretary notes down 135^ as opening price, and % 100,000 as the amount sold, while the bids continue with renewing fury. " \ for five hundred, — give a ^ f or — " " I for a hundred." " Take 'em. How much ? " " Hundred thousand, — take fifty more." " \ for twenty, — a ^, — a J, — a ^, — for any part of fifty" Other Voices. " \ for fifty." — " f for a hundred." — " I 'U give 36 for twenty." "Sold," — "Sold." President. "Twenty thousand sold to Peters & Ca at 136." Voice. " That 's my bid, Mr. President." Second Voice. " I appeal." President. " Is the appeal seconded ? " Several individuals uphold the new claimant, and the question goes to vote precisely as at the Stock Board. Then the battle recommences, with perhaps an influx of bears, who knock the metal slowly down to the opening figure. In the fall the noise and bustle swells to high confusion. Twenty shout at once. The crowd sways from side to side, and the officers from the rostrum find it nigh impossible to keep abreast with the biddings. 234 MEN AND MYSTERIES 0¥ WAIL STEEET. Just outside of the extreme verge of the tumult little groups of brokers coUect, talking with nervous quick- ness. They are borrowers, and are arranging for loans to cover the deficiency of yesterday's transactions. Here, as in stocks, the market varies, falling as low as four or five per cent, and rising to seven per cent coin interest, or to turns of from -^ upwards, in addition. To understand more completely the object of these conferences, it will be necessary to explain the workings of the Gold Exchange Bank and Clearing-House. For some time after the national coia currency became a salable commodity, all exchanges between buyer and seller were effected by actual transfers of gold. During the mid hour of the day the streets were thronged by boys hurrying from of&ce to of&ce with bags of the precious metal. These canvas sacks were marked with the figure of their contents. Quite frequently, either from carelessness or fraud, the count did not correspond with the tally. Hence constant bickerings, quarreUings, and general bad feeling among dealers. Occasionally the specie-clerks would be knocked down in the street, red pepper thrown in their eyes, and the thieves, either in light carts or, in winter time, on rmmers, would dash off with their spoils before the police could be warned. The occurrence of two or three raids of this kind, added to the troubles in the count of coin, led the brokers to arrange with the Bank of New York for the issue of gold certificates based on actual deposits. Dealers were provided with check-books, for which a large guaranty payment was demanded, and the certificates passed cur- IN THE GOLD ROOM. 235 rent on 'change as good deliveries in all purchases of gold. It corresponded very exactly with the Bank of Hamburg's _6a7ico transactions. In August, 1865, it was discovered that this certification was surrounded by great hazards. During that month Edward B. Ketchum, of the house of Ketchum, Son, & Co., Exchange Place, sud- denly disappeared. The street soon rung with the news of forgeries in gold checks to the appalling amount of a million and a half. Confidence was destroyed. It be- came apparent that a new system must be introduced. The Gold Exchange Bank, with its associate Clearing- House, answered to all the conditions of security, and the Gold Board immediately gave it official sanction. The method of settlement under the new order of things is as follows : On or before half past twelve o'clock a statement of all the purchases or sales made by each bro- ker on the preceding day must be rendered to the bank. If the gold bought be in excess of that sold, a check for the difference must accompany the statement. If de- posits in gold or currency are not kept in the bank, the coin must be delivered at every deficiency. The Board adjourns at twelve, in order to enable tardy dealers to complete their accounts. Provided all contracts are honored, the bank must settle by two p. m. In case of default the amount in abeyance is credited or debited to the broker who suffers by the failure. The character of the paper sent in to the bank officers will be better comprehended by the subjoined illustration of the cus- tomary form : — 236 MEN AND MYSTERIES OF WALL STEEET. Statement of Jew, German, & Go. to New York Gold Exchange Bank. Receive from Gold. Bate. Currency. Philes and Sawes . $ 60,000 130 $ 78,000 Smith and Jones 10,000 131 13,100 Humphrey Davy . . 15,000 130 19,500 Winthrop Johns 5,000 131i 6,575 Gardner and Smith . 20,000 130i 26,100 Spades and Stock 30,000 130i on nnr % 182,500 $ 140,000 Deliver to Gold. Rate. Currency. Doe and Roe . $30,000 132 $39,600 Harvey and Blderkin 40,000 132i 53,000 Bacon and Herring . 20,000 132f 26,550 Israel and Son . 30,000 133 39,900 Joseph and Ishmael . 10,000 132i 13,225 Balance Check 10,225 $ 130,000 % 182,500 In this instance operations covering $ 270,000 in gold are effected with no farther direct payment than that of the check for % 10,225. Jew, German, & Co. will be credited at the Bank by the $ 10,000 of coin due them in the balance of purchases over deliveries, and the currency check makes their accoimt good at the Clear- ing-House. Had the sales been more than the pur- chases, they would either pay in the difference from their bank deposit or would have borrowed it in open market on the best terms that could be secured. It is needless to add that this beautiful arrangement by which the completion of contracts is rapidly and effi- IN THK GOLD ROOM. 237 ciently accomplislied by the simplest figures of book- keeping, has encountered recently a great deal of news- paper criticism. The fact that the final adjustment of the statement may often be made by the transfer of a com- paratively small sum of money is pointed at as a proof of the gambling tendencies of the street. That a man with a few thousand dollars, if he can get the credit, might buy fifty times what he had cash to pay for is unquestionable. Suppose gold at 135. A broker with a deposit of $ 5,000, his entire capital, may have noticed that for the past ten weeks gold has seldom been below 140, and in no ease has fallen to 134 He studies the external causes of the dechne, and is convinced that they are inadequate to effect the market except briefly. Going to the Gold Eoom and finding the bears hard at work forcing the metal down step by step 134f, 134f-f— |, at which point it turns back oscillating be- tween f and the next lower fraction; he snaps up an offer of % 100,000 specie for 134|, buyer 3. Gold may faU sharply to 130, and stay there for seventy-two hours. In that event he sells $ 100,000 at 130 cash, and sup- plements the statement to the Cleariag-House with a check for $ 4,625, leaving his whole capital $ 375. Had it fallen to 129f, he would have been left without a miU. Per contra, however, it is possible to conceive that the operator's prescience did not mislead him. From 134f, the buying price, it jumped to 136, '38J, '40, 143, and on the morning of the third day was at 145. He sells $100,000 cash at that price, and on rendering his account to the bank he claims a credit in differences 238 MEN AND MYSTERIES OF WALL STREET. over and above this five-thousand-dollar capital of $ 10,325. So far as the machinery of the Clearing- HoTise is concerned, it will readily be seen that if the sales and purchases were always at a profit and without default, there would be no necessity for capital on the part of any operator. Why the interests of society and of legitimate business should be better served by the conveyance of a number of bags of gold from two offices perhaps three streets apart, when the same result is reached by a half-dozen pen-strokes at the Clearing- House, is one of those metaphysical mysteries that brokers find hard to solve. Unfortunately the felicity of unvarying success is so rare that a well-authenticated instance of it is not to be found in the annals of broker- age, and for the rest the significant " Ten up " is heard too often at the Gold Board to permit any one to imagine that dealers are not thoroughly alive to the financial status of their neighbors, and by no means wOling to entangle themselves in transactions with men whose capital is inadequate to meet their engagements. Five minutes spent in the Gold Eoom is sufficient for a stranger to master its distinctive features. A thousand dollars constitutes the unit, and " I '11 sell any part of a hundred " means that the dealer will sell any portion of $ 100,000. Beyond this there is nothing to explain. All the various methods of purchase or sale, the mar- gins, loans, and every technicality of the Stock Market are equally in use with the Gold-Brokers. The usual practice of dealers, however, is to buy or sell either Cash or Kegular, and then borrow the gold or green- IN THE GOLD EOOM. 239 backs in case an operation is to be prolonged over a series of weeks. Options are employed at times very freely, but the general custom is that just noted. As from the very nature of the business there can be no daily call, the duty of the President is simply to pre- serve order and arbitrate in disputes. Before and after the regular session brokers frequent the chamber pre- cisely as in the Long Eoom of the Stock Exchange, and tUl three p. M. there wOl always be found a more or less spirited warfare around the circuit of the fountain. The difference of one day over another is simply in the relative intensity of speculation. Wben coin has other value than that belonging to the legal tender of a nation, an artificial market is inevita- ble. With a great people such a condition can never be permanent, and the very sense of the temporary charac- ter of the anomaly gives a feverish and fitful complexion to dealings in bullion. In every other market the com- modity offered for sale has a measure of worth apart from its current price. With coin, however, the margin between par with paper and the buying rate constitutes the sole basis of its utility as merchandise. The pre- mium is everything, and the precious metal in itself is nothing. Moreover, whether from education or from fundamental laws of trade, there has arisen an ineradi- cable impression that coin transactions have more of the unsubstantial than those of commerce or stocks. Gam- bling, or, in other words, the trade in chance, is necessa- rily associated more or less intimately with every human 240 MEN AND MYSTERIES OF WALL STREET. pursuit ; but in gold sales it stands forth in bold relief. Chance alone creates the premium. Chance magnifies it. Chance annihilates it. With specie payments the Gold Eoom becomes a reminiscence. A silver-mine is opened in Nevada. Its yield is prodigious. The company earns a thousand dollars for every ten dollars spent. The stock rises by startling leaps. The shares of $ 10 at par sell for $ 100. The Mining Board is delirious. Suddenly the vein gives out utterly. The debts of the corporation equal the entire worth of aU machinery. The stock whirls down to zero. Enlarge the comparison to the di- mensions of the gold market, add the certainty even at highest quotation that the day must come when will indicate the premium, and the reader will at once com- prehend why the Gold Board for the past eight years has been the synonyme of all that is maddening, passionate, and reckless in the struggle for wealth. In that human maelstrom where nothing but money enters, where coin metal exchanges only with coin paper, where trade is stripped of all its illusions and men battle for gold, gold, gold, with a naked greed and fury that satirizes life be- yond all the imaginings of the poets, it is impossible for the combatants to be other than natural, carrying their souls in their faces, revealing in every tortuous linea- ment the exultations and the despair of the heart. There are individuals who have staked their fortunes on the turning of a card, without a shadow of joy or anguish perceptible in their bearing. One may find dozens of operators whose interest in the shaping of the market cannot be discerned by any ordinary rules of scrutiny. IN THE GOLD ROOM. 241 But on the genuine field-days of the Gold Eoom, it is hard to believe that the general aspect of the tumult is not one in which nature throws aside its veil. lu the days of the war an unexpected victory converted the gold arena into a den of wild beasts. The bulls fought against the inevitable decline with the ferocity of gladi- ators. The chaos of voices and the stamping of feet shook the building as in an earthquake, and boomed out of the open windows into the street below like the dis- charge of artillery. In some respects the scenic effect resulting from important army news was marked by more startling phases than in the sharp rise or fall of ar- tificial movements. The gloom or the gladness over suc- cess or defeat of the national flag mingled with individ- ual passions. Men leaped upon chairs, waved their hands, or clenched their fists ; shrieked, shouted ; the bulls whistled " Dixie," and the bears sung " John Brown " ; the crowd swayed feverishly from door to door, and, as the fury mounted to white heat, and the tide of gold fluctuated up and down in rapid sequence, brokers seemed animated with the impulses of demons, hand-to- hand combats took place, and bystanders, peering through the smoke and dust, could liken the wild turmoil only to the revels of maniacs. The anecdotes afloat regard- ing gold brokers and operators all have a ring of Baden Baden in them. The dial, marking the changing price of bullion, which overhung the street when the Board met in Gilpin's Eeading Eoom, and which more recently has told its changing story to the motley crowds of New Street, always had its little band of worshippers who 11 p 242 MEN AND MYSTERIES OF WALL STREET. watched the varying figures and bet their dollars on the next quotation. The fury within changed into curious comedy without. The men who live upon each other, and adorn Broadway on bright afternoons by the gor- geousness of their waistcoats and the flashing of their jeweh?y, never failed to get quick wind of whatever sport was going on "down in the street." One could safely gauge the degrees of slaughter by the number of these birds of ill omen, but of festive plumage, who haunted the sidewalk, and wagered " fifty to three " that the next show of figures would be a f difference, or " one hun- dred even that it will be down a fraction," or " six cents to cocktails for four" that there would be a bid three per cent higher in five minutes. There was a queer street man, named T , whose line was mainly stocks, but who had a penchant for betting on the register. When the luck was all against him, and his exchequer was low, he would wait till the brokers came out in the afternoon, and shout to his friends, " Say, boys, let 's go over to my place and have a little cock-fight ! " Fre- quently the gayer men would fall in with the humor of the thing and make up a party to visit his den. The birds were game. T knew all their points, and generally managed to pick up enough out of two or three tournaments to venture anew into the troubled waters of buyer 3 and Eegular. On black Friday the throng in New Street, largely swollen by the listless " lookers-on in Vienna," had its due complement of veteran register gamblers, and the spirit of the scene was enhanced by a dim consciousness that this was to be the last great field- IN THE GOLD EOOM. 243 day. The jokes, the merry reminiscences of bygone glo- ries, the laughter over extravagances in bettings, the shrewd prescience of some who wagered on 160, and the reckless waste of fractional currency on the part of others of the bear side, who sought to forget their greater stakes on the day's fortune by curbstone episodes, — these were a dramatic feature in that large tragedy which gave it a Shakespearian roundness. The epoch of the sidewalk gamblers is over. The old excitements have vanished. The men who gloated over the frenzied alternations be- tween 170 and 280, and who reappeared with something of the bygone animation in the hour when the metal fluttered betwixt 160 and 133, have lost their interest in the game. And whatever the future may disclose of storm or struggle in the downward slide to specie pay- ments will limit itself to the confines of the Gold Eoom and the secret counsels of our great importers. The worth of bullion will hereafter be a financial rather than a speculative problem. 244 MEN AND MYSTERIES OF WALL STREET. CHAPTEE XIII. THE GOLD-BROKERS. WHEN the banks of the Union refused to honor their own bills by payment in coin for the full face value, gold tremxilously vibrated in small percent- ages for months before it began that succession of im- mense leaps which grew out of the first reverses of the war. On Saturday, April 18, 1862, it was at lOlJ ; July 1 it was 108f ; July 21 it stood at 120. The disastrous campaign of the Peninsula had borne fruit ! The houses in foreign trade who had bills for one hundred thousand dollars maturing found that it would require twenty thousand more to make their contracts good. It was their first contact face to face with the luxury of rebellion. j^ew York, neither in its commerce nor its speculation, looked kindly upon the appreciation of bullion. At the Stock Exchange the bears were in scores and the bulls in half-dozens. It was the gentlemanly thing to sell gold, and the stock operators chose to be gentlemen. On William Street, a few paces from the rooms occu- pied by the Eegular Board, is a basement floor, now radiant with the brass-mounted counters of a floirrish- irg lager-beer restaurant. In 1862, however, it was a dark and sombre cellar, so gloomy and forbidding in exterior and interior that its familiar title was the " Coal THE GOLD-BEOKERS. 245 Hole." * Its frequenters -were mainly curbstone brokers ; and the business of speculating in railway stocks, to "which it was set apart, was conducted with a total absence of decorum, and a freedom from all those re- straints of daily call which the Long Eoom of the present day exhibits. Here the bulls in gold found refuge. By December 4 they had tossed it up to 134 ; on January 31 of the next year they bought it at 160. These startling changes in price had an effect upon the outside public. Customers became numerous. Gold brokerage assumed a distinctive feature in the market. Speculation, which had found an incentive in the sudden appreciation in stocks, was intensified by this new and fascinating game. The gambling instinct penetrated to the national capital, and soon made that the point d'appui for all operations. The Washington Party, as it was styled, held the keys to the gold citadel. Members of both Houses, and of all political creeds, resident bankers, the lobby agents, clerks, and secre- taries, haunted the War Department for the latest news from the seat of war. The daily registry of the Gold EoOm was a quicker messenger of successes or defeats than the tardier telegrams of the Associated Pxess. A private secretary of a high official, Tvith no capital at all save his position, which gave him authentic information of every shaping of the chess-game of war full twenty hours in advance of the public, sitaply flashed the words " sell," " buy," across the wires, and trusted to the honor * This title was first given it by Mr. Henry A. Bowen, wlio was tten the financial editor on a leading paper. 246 MEN AND MYSTEEIES OF WALL STREET. of liis broker for the rest. He never knew what he was worth till one day, with a week's vacation on his hands, he jumped into the cars, and, entering the office of his agent, saw a credit of $ 280,000 on the books. By Jan- uary, 1863, the Washington speculators were at the high- tide of their winnings. They extended their operations to stocks, included merchandise in their grasp, bought exchange largely. The brokers in their employ became marked men ; and operators went long or short, accord- ing to the complexion of the dealings of these favorites of fortune. In February, 1863, Congress attempted to put a curb upon the gold gamblers. It was made penal to offer loans on bullion above par. Other fribbling difficulties were thrown in the way of traffic in coin; but the quotations were in no wise seriously affected. Gold fell and rose between 172 and 145 until July. The capture of Fort Wagner, and the strong belief that Charleston would fall into the hands of the Union, were the first vital blows to the Washington clique and their New York coadjutors. The precious metal reached 122J before it rebounded Foreign Exchange sharply declined. Merchants saw their stocks of goods daily lessening in value, and in despair sold bales on bales in the auction-room. The autumn trade opened more brightly. The Pe- troleum mania assisted in the recovery of the mar- ket. Stocks of all kinds sold high, and Avere manipu- lated without regard to dividends, permanent value, or aught else. Gold vibrated between 140 and 169. THE GOLD-BEOKERS. 247 The bulls were seventy out of a hundred. Between September, 1863, and April of the succeeding year the speculative fever reached a height unequalled at any previous or succeeding stage of the national history. Many brokers earned from eight hundred to ten thou- sand dollars a day in commissions. The entire popu- lation of the country entered the field. Of&ces were besieged by crowds of customers. At least a hundred minion of dollars were realized in sales. ISTew York never exhibited such wide-spread evidences of pros- perity. Broadway was lined with carriages. The fash- ionable milliners, dressmakers, and jewellers reaped golden harvests. The pageant of Fifth Avenue on Sun- day, and of Central Park during week-days, was bizarre, gorgeous, wonderful! Ifever were such dinners, such receptions, such balls. Anonyma startled the city with the splendor of her robes and the luxury of her equi- pages. Vanity Fair was no longer a dream. In other chapters we shall glance at the speculative career of the country from the first stock market to the beginning of the war. But the story of Wall Street during the Kebellion can best be understood from the stand-point of the gold-broker. It was the fluctuating character of bullion which caused the two great panics of the period. It was the lock-up of greenbacks — coin paper momentarily taking the place of coin metal — which led to another intermediate and less important flurry. 1864, 1868, 1869, can best be comprehended from the outlook of the Gold Eoom. Early in April, 1864, Secretary Chase visited New York. Determined to put a 248 MEN AND MYSTERIES OF WALL STEEET. check upon what he was not alone in deeming a national disaster, he dashed aside the law requiring the creation of a sinking-fund for the redemption of the national debt, and the rule whereby custom dues are made pay- able in coin. It was announced that paper would be received at the rate of 165 cents to the gold dollar, and that every morning the Sub-Treasury would designate the rate at which government was prepared to seU specie for the day. On Saturday, April 16, gold opened at 189 in private sales ; but the news of the resolution of the Secretary of the Treasury presently swept over the street like a tornado. By night the metal had fallen to 175. All day Sunday the city was in a tremor of excite- ment, and on the first day of the secular week men Jiur- ried to William Street hours before the usual time. The bulls fought against hope, but with tenacity. 170^, 170|-|- J, up and down through the fractions, with res- olute determination to keep the price above 170 if pos- sible. At last the bears had hammered it down to the fatal point. A despairing bull bought $ 50,000 in order to check the decline, when suddenly one hundred thou- sand was offered at 168, and no one ventured to take it. The market was broken. The brokers forsook the Gold Eoom and retired to their offices. At the Stock Ex- change all was confusion. Ten days before Fort "Wayne had dropped from 152J to 135 ; it now fell to 83. Read- ing, which had seen 160, was flat at 111. Panama reeled to 200. Northwest touched 24. All along the line stocks plunged downward, with fifteen per cent fall on Saturday, and from five to twenty-five per cent de- THE GOLD-BEOKEES. 249 pression on Monday. Morse & Co., a heavy house whose operations in Fort Wayne and Eock Island were on a vast scale, announced their suspension at the close of the first call. Sam Hallett followed. Smaller firms broke by dozens. Outside operators who had made rapid and excessive fortunes were ruined in a day. Brokers' offices were filled with customers whose margins had been swept away, or whose stock had been ruthlessly slaugh- tered. One man, just married, whose capital of $ 30,000 had been risked and lost in a single bold venture, sat in his dealer's room through the long hours of Monday, unmindful of the busy stir around him, his teeth set as if in death, his eyes transfixed, his face like a winding- sheet, and nothing to. indicate that his heart still con- tinued to beat save the cold beads of perspiration on his pallid forehead. Actors and actresses who had invested their earnings lucklessly were there. Professional men came in shoals. Eough-handed and ill-humored coun- trymen burst into the privacy of inside rooms, and demanded instant return of their deposits. Through- out the week Wall, Broad, and William Streets were the scene of whatever is tragical and terrible in specu- lation. On Tuesday, Wednesday, and Thursday the bears had the field to themselves in both markets. On Friday, however, confidence gradually restored itself. The capi- talists who had foreseen the great break in stocks and had temporarily retired, now returned and bought heavily. The gold-operators renewed their attack, and compelled the Sub-Treasury to vary its rates to suit their own 11* 250 MEN AND MYSTERIES OF WALL STREET. schemes. By Monday the 25th government discovered that it could not longer dispense with coin for custom dues, and gold jumped instantly to 182. Thwarted in his efforts, the Secretary now used his influence to se- cure the passage of the Gold Bill through Congress. The act came into effect June 21st. The Gold Koom was at once closed, and the Stock Exchange expunged the pre- cious metal from the daily call. On July 4th the act was repealed, as its only consequence had been to em- barrass the commercial class, causing a rise in exchange and an increase from 210 to 250 in the rates of private sale. Upon the morning succeeding the national holi- day the Gold Eoom opened anew. The next seven days the chamber rocked with the struggles of the bears, now caught in a vast network which the bull leaders had been weaving during the interval of the Gold Bill. On July 11th gold reached its highest quotation, selling at nightfall for 285. War had nothing to do with that ex- cessive price. It was simply the culmination of a well- concerted corner. Even these figures, which will prob- ably go down into history as the extreme point reached in gold sales, were really below the prices paid at the Eoom after the regular adjovirnment. One transaction at least on that day was for 289|. And a lot of gold amounting to $ 100,000 was bought at the extraordiaary rate of 310 ! The purchaser was William Limerick, a banker of Lexington, Missouri, who happened to be in the city at the moment, and, believing that the country- was on the edge of immense and irretrievable ruin, gave a peremptory order to his brokers to buy just as the cor- THE GOLD-BROKEES. 251 nering clique had given a final twist to the shorts by a sharp upward rise in the asking price. The bullion was placed in the hands of Wm. H. Pomeroy with an in- junction to keep it in his safe till called for, and Limer- ick retired for the night with the proud consciousness that, whatever might betide the nation, he had something secure for his old age. Heretofore the gold-brokers had had no regular gov- ernment. From the Coal Hole they had moved to Gil- pin's News Eoom, corner of William Street and Ex- change Place, where any one could be admitted on payment of $ 25 a year. It was in this room that the great corner of July 11th had been brought to successful conclusion. A few months later a number of the better class of operators and dealers came together, and prelim- inary steps were taken for a definite organization. On the 14th of October this action bore fruit. A constitu- tion and by-laws were approved and accepted, three hun- dred members paid in their subscriptions, and the new Gold Board proceeded to the election of its ofiicers. Henry M. Bendict was chosen President, Thos. P. Akers and E. H. Foote were made First and Second Vice-Presi- dents, J. W. Moses was elected Secretary, and Theodore Gentil Treasurer. The new body shortly after took up its quarters in the rooms of the old Stock Board at 24 Beaver Street. The ensuing season was signalized by a fresh acces- sion to the speculative excitement. New operators came into the field, and old leaders greatly extended the dimensions of their transactions. Wm. L. Hoblitzel, 252 MEN AND MYSTERIES OF WALL STREET. a dashing and shrewd broker, had given the keynote to the campaign by selling a million short in one block. The gold gamblers were startled. No transaction of such huge calibre had as yet occurred. The sale was in Sep- tember, and bullion fell at once to 200. Hoblitzel cov- ered with immense profit, and the street was not slow in following up the novel example. Dr. Shelton sold $ 6,000,000 in successive strokes, and bought in at a figure which afforded a brilliant fortune. E. A. Corey was another operator of the time, whose dealings were as vast as successful. He was invariably a bear, and seldom missed his mark. Light-haired S. T. Suit, a thriving Kentucky whiskey-distiller in early days, had recently entered the street and speculated as bull, buy- ing a sum-total of $ 10,000,000 up to the moment that HobHtzel hammered gold down to 200, when he went into short transactions, minting money by the way. John M. Tobin and Charles Kearney also shone, buying and selling in lots of from one hundred thousand to a million. The former shortly after the capture of Atlanta bought several millions at 198-201, and sold a lot for 221 with consequent heavy realizations. It would be easy to fill many pages with these records of gains, darkened by occasional losses. In early spring Limer- ick reappears. He had been buying and buying as his resources would allow, and sending his gold to Canada from an almost insane doubt of the continuance of pros- perity in the Union. The one hundred thousand which he had purchased at 310 was clung to pertinacioiisly until its owner was compelled to realize. It was then THE GOLD-BEOKERS. 253 sold on March 14, '65, for 185 ! Shortly after Limer- ick partly retrieved his reverse by selling at 175, and covering at 144. One of the extraordinary features of the gold market at this period was the great alterna- tions of price "within the limits of single days. Thus July 12th gold was sold for 271 and 282. July 19th the range was 258-268; August 29th, 235-245; September 10th, 218 - 228|. The next Monday it sold for 213| and 225. On Tuesday it was 217^-228. On the 24th the difference in the day's price was twelve per cent. No- vember 2d it vacillated seventeen per cent. On the 9th it changed from 246 to 260. Changes of five, six, seven, and eight per cent were common. During the winter and spring of 1864-65 the dayg were too short for the fervid haste of the speculators, The corridors of the Fifth Avenue Hotel were crowded nightly by eager throngs, and the barter in stocks and gold went on with almost the same intensity which characterized the down-town boards. A Mr. Gallagher saw his opportunity for coining money out of this un- natural fever, and opened an evening exchange in a room back of the hotel, where the Fifth Avenue Theatre now stands. Eailways, petroleum stocks, and gold were sold at different hours of the night. He had previously established an outside Petroleum Board at the corner of Broadway and 23d Street, and ultimately the evening exchange transferred its quarters to the same spot. A blood-red transparency, announcing this strange anomaly of the century, glared out upon the great pleasure street of New York immediately after dusk, and until mid- 254 MEN AND MYSTERIES OF WALL STEEET. night the murmur of voices rolled out upon the side- walk. The street became demoralized. Brokers appar- ently lived without sleep or rest or peace. They haunted the day boards with pallid faces and a strange glitter of the eye. High-strung, fevered in blood, craving excitement from the very exhaustion of over- work, they carried in their faces a prophecy of evil. In August the evil came. Jenkins, cashier of the Phoenix Bank, defaulted for $ 300,000, lost in gold and stocks, or spent in the mad debaucheries of the year. Close upon this came the failure of P. E. Mumford, an operator with an office at 42 Exchange Place. On the 12th he had bought $ 150,000 in gold and paid for it when delivered by checks on a bank where he had no deposit. Seven brokers suffered from this default, and the Christian world was scandalized by the fact that Mumford was a trustee of a church at Flushing, Long Island. These " irregularities " were prelusive of far more terrible revelations. Upon the 14th of the same month Edward Ketchum absconded, leaving behind him a bequest to the street in the shape of a million and a half of forged gold certificates. The failure of the house of which he was second partner followed immediately, and out of the smoke of the ruin emerged the amazing rumor that two millions and a half of State securities had been stolen from the firm. In a vain attempt to stem the tide, Ketchum, Son, & Co. had gathered up some 200,000 shares held on margin or contract, and sold them upon a falling market at Gallagher's Exchange and at the first call of the regular Board on the succeeding THE GOLD-BROKEES. 255 day. Stocks dropped from three to eight per cent, gold fell in proportion, and the days of '64 seemed on the point of returning. Sensational rumors were spread over the country by telegraph. It was wliispered that D. Groesbeck & Co. were seriously involved, and the house was compelled to publish a letter from the Presi- dent of the Union Bank stating that they had then on deposit $ 1,173,554. A prominent house issued a panic- stricken circular, announcing that thenceforward they should greatly restrict the extent of individual loans on collaterals, and that customers must accompany their orders with enhanced margins. Money grew exasper- atingly tight. The banks refused to discount. Brokers slaughtered their customers' stocks without warning. As usual, also, the big leviathans of speculation came sailing into the market at its low ebb and bought heavily only to sell again a week after or as soon as the tempest had spent its force. The bears reaped millions by their opportune courage. When the street had somewhat recovered its tone, a simultaneous attack was commenced upon the Evening Board. The banks of the city compelled their officers to sign an agreement to hold no intercourse with the men who frequented the rooms. The Stock Exchange voted unanimously to the same effect, and the Open Board adopted a similar resolution by 97 yeas against 17 nays. On August 25th the Gold Board at its first call gave the last blow to night-dealings by acceding to the general feeling, and making the frequenting of Gallagher's rooms a sufficient reason for the immediate 256 MEN AND MYSTEEIES OF WALL STREET. exptdsion of the offending member* On the same day the public was informed of the capture of Ketchum, and fresh light was thrown upon the vast proportions of current speculations by his statement that only a few months before he had acquired six millions of dollars by street dealings, and that ia the subsequent fall of gold from 201 to 147, incident to Sherman's successful march to the sea, this had not only disappeared, but had in- volved liabUities to the extent of four millions, which he had sought to protect by margins based upon his forgeries. From '65 to '69 the Gold Board was free from the startling paroxysms of the anterior period. The daily variations were seldom more than two or three per cent. Prices ranged up and down through the months with singular evenness. Brokers contented themselves with smaller profits. Slight causes came in play to affect the market. Government was a powerful disturbing force. One Friday McCuHoch employed three or four agents to sell six milHons, seller 3. The buyers antici- pated that the contracts would go over till Monday, when they were taken aback sharply by a demand for immediate payments. The market broke at once. Fre- quent raids of this kind incensed the street. On the * The Gold Room was now in Kew Street, where it has since remained. The apartments had heen leased the 1st of May, 1865, but were not occupied till August, as extensive repairs were found necessary. The terms of lease had a curious clause. For five years the rent was to be $ 25,000 annually. After 1870, and until 1875, it was to be reduced to $16,000. The lessors evidently supposed that by the present year the Gold Room would be a reminiscence. THE GOLD-BROKERS. 257 reception of tlie news of the London Panic of '66, Peter Myer & Co. repeived orders from Washington to sell all the gold the street would take at 130, to steady the market. The price of bullion was considerably above this figure, and when the government broker went down on the pavement before the Stock Exchange at 4 p. M. to make the sales, dealers fought with each other for the privilege of purchase. At least thirty millions were sold off within little more than a half-hour. The next day ten millions additional were put into the market. This action of McCulloch unquestionably saved the Bank of England from suspension and Great Britain from an unprecedented financial revolution. Indeed, some of the ablest bankers of "Wall Street are of the opinion that, if government had not interfered at this crisis. New York, in less than six months, would have been the principal financial city of the world. The forced and sudden cheapness of the precious metal made it the most profitable of exports. The bullion, when sent to London, was exchanged for American pro- ducts, then selling at panic prices, and vast realizations were made by trans-shipping the wheat, cotton, lard, and other articles of commerce which had been exported from the United States during the spring. 5-20s were bought in large quantities with from fifteen to twenty per cent profit. It is a curious commentary upon the rapidity with which the British market recovered through the interposition of Mr. McCulloch, that some lots of government bonds bought at this time in London reached New York too late for profiting by the home^ 258 MEN AND MYSTEKIES OF WALL STEEET. market, and were consequently reshipped by the next steamer for England. The Gold Board after this brief flurry lapsed into a certain degree of quiet. Bullion rose and fell in easy flights. The fall of American securities abroad, fears of Prussian or Oriental complications, heavy ship- ments of gold, the rumor of the fatal illness of Na- poleon, have all had their efi'ect in influencing price. Merchants and foreign bankers go into the market not infrequently to buy, and, if rates are unsatisfactory, imi- tate the methods of the brokers, by borrowing. Oc- casionally houses are caught inextricably. Not many months ago a broker, on failing for four millions and a half, disclosed his principals, who proved to be a promi- nent firm in the Eio Janeiro trade. The star of Erie during the last four years has dimmed the radiance of the Gold Eoom. In '66 Daniel Drew achieved his grandest victory in that volatile se- curity, tossing the stock up and down from 50 to 90, and making two fortunes out of the campaign. Twenty- four months later the purses of the street were twice wrung dry by the same skilful manipulator, assisted, or rather overshadowed, by the impulsive and wonderful operatic impressario Fisk. The instrument of torture was the " lock-up." Its method is simple. The firm of risk & Belden deposited on March 8th and 9th the sum of $3,625,000 in the Tenth National Bank, receiving certified checks therefor. Two days after David Groes- beck & Co. sent these checks to a bank as a special deposit. Meanwhile Mr. Drew, by sales of Erie, accu- THE GOLD-BROKERS. 259 mulated $ 5,000,000, which he carried immediately to Jersey City. Thus twelve millions were suddenly taken from the market. No financial centre can bear such a strain without sensible disturbance. Loans went up to one per cent a day. Stocks fell with a crash. At the end of October the operation was renewed. By deposits of greenbacks, by certifications of certifications, collusion on the part of bank directors, and limitless audacity on the part of the Erie clique, some twelve or fourteen mil- lion dollars were peremptorily "retired" from employ- ment in the market at precisely that point of the year when the necessities of trade make heavy drafts upon the resources of the banks. The effect was unexampled. The city saw a week of unabated and hourly augmenting agony. Gold, which had adapted itself to trivial varia- tions of an eighth or a quarter, showed two per cent depreciation. But in stocks the effect, as instantaneous as in the precious metal, was far more marked in its final results. St. Paul fell 42 per cent ; Hudson dropped 15 per cent ; Northwest, 19 per cent ; Chicago and Alton, 15. Fort Wayne and New York Central both broke, — the former from 114^ to 104f, the latter from 126f to 117|-. It is estimated that the two lock- ups produced a depreciation of at least twenty per cent in railway property, over the country, or, stated in sum- totals, riot less than two hundred millions of dollars ! The Gold Board had been comparatively untouched by this upheaval. Plalf its members also hold seats at the Stock Exchange, and the complications necessarily af- fected them seriously. But in purely gold transactions 260 MEN AND MYSTEKIES OF WALL STREET. the consequences of the clique movements were in- considerable. All through the fall and ensuing spring and summer gold slid up and down the grooves in slight changes, with fractional profits to those who followed the market with shrewdness. But none of the old spirit of the war remained with the gold-dealers, and for sharp and sudden vacillations of price they were compelled to pass from the ISTew Street Board to the Long Eoom. Early in September, 1869, however, the atmosphere began to exhibit signs of an approaching tempest. It was noticed that the clearances of the Gold Exchange Bank were increasing in magnitude. The biddings at the Board grew more lively, and the evidences of a vast clique movement were plainly per- ceptible. Although the ostensible brokers of the league invariably sold, it was not difficult to discover that the balances of purchases, from whatever cause they might be due, were greatly in excess of sales. Nevertheless, the vast proportion of operators took the bear side. It seemed preposterous that there should be any marked change in gold values. A corner in the precious metal has been proved more than once to be feasible, but the traditions of the street are against it. For one success there have been ten failures. Nor is it necessary to go far for an explanation. In stoclcs one may buy up double or treble the capital stock, or double and treble the amount held by the street or within the circuit of lona fide delivery. But gold is like the air. London or Frankfort or San Francisco can transfer millions upon millions by flash of telegraph. The immense ocean of THE GOLD-BEOKEES. 261 the Sub-Treasury may overflow. All the small sums of gold scattered throughout the banks of the United States may be tributary. The task of withdrawing and corner- ing coin would therefore appear comparable to the pump- ing out of the New York Bay by a grand combination of steam-engines. To the just scepticism with which the rumor of an impending conflict was received there was added a firm belief that the era of specie payments was not far distant, and the proposition for consolidating the national debt, with a corresponding steadiness of governments in the European money-markets, aided materially this conviction. It followed that, although during the three previous years gold had invariably mounted the register with the approach of harvest, the short interest of '69 was very great. Common belief estimates the sales for future delivery on the part of brokers and their customers at this time at an amount not less than fifty millions, one fourth of which was in the hands of three men. On the 22d of September gold stood at 137J when Trinity bells rung out the hour of twelve. By two it was at 139. Before night its lowest quotation was 141. This ascent, regular, unfluctuating, and evidently predeter- mined, carried the more alarm by the very extent of the rise. In the old Eebellion days a ten-per-cent increase in eight hours was an affair of no moment whatever. It happened every week, sometimes twice and thrice a week. But since the sharp vibrations of June 16 and 18, 1866, when gold rose and fell from 154 to 160, and again from 133 to 167|, the utmost daily range 262 MEN AND MYSTERIES OF WALL STREET. had been two per cent, with occasional fractional ad- ditions. Three years of duU monotony, and now an advance of three and a half per cent in five hours ! At the same time the Stock Market exhibited tokens of ex- cessive febrility, 'New York Central dropping twenty- three per cent and Harlem thirteen. Loans had become extremely difficult to negotiate. The most usurious prices for a twenty-four hours' turn were freely paid. The storm was palpably reaching the proportions of a tempest. Nevertheless, the brokers on the bear side strove man- fully under their burden. The character and purposes of the clique were fully known. Wliatever of mystery had heretofore enfolded them was now boldly thrown aside, and the men of Erie, with the sublime Fisk in the forefront of the assailing column, assured the shorts that they could not settle too quickly, since it remained ■with the ring, now holding calls for one hundred mil- lions, either to kindly compromise at 150 or to carry the metal to 200 and nail it there. This threat was accompanied by consequences in which the mailed hand revealed itself under the silken glove. The movement had intertwisted itself deep into the affairs of every dealer in the street, and entangled in its meshes vast numbers of outside speculators. In borrowing or in margins the entire capital of the former had been nearly absorbed, while some five millions had been deposited by the latter with their brokers in answer to repeated calls. "When Thursday morning rose, gold started at 141f, and soon shot up to 144. Then the clique began THE GOLD-BROKERS. 263 to tighten the screws. The shorts received peremptory orders to increase their borrowing margins. At the same moment the terms of loans overnight were raised be- yond the pitch of ordinary human endurance. Stories were insidiously circulated exciting suspicion of the integrity of the Administration, and strengthening the belief that the National Treasury would bring no help to the wounded bears. Whispers of an impending lock-up of money were prevalent ; and the fact, then shrewdly suspected, and now known, of certifications of checks to the amount of twenty-five milHons by one bank alone on that day lent color to the rumor. Many brokers lost courage, and settled instantly. The Gold Eoom shook with the conflict, and the battle prolonged itself into a midnight session at the Fifth Avenue Hotel. The din of the tumult had penetrated to the upper cham- bers of journalism. Eeporters were on the alert. The great dailies magnified the struggle, and the Associated Press spread intelligence of the excitement to remote sec- tions. When Friday opened clear and calm, the pavement of Broad and N'ew Streets soon fiUed up with unwonted visitors. All the idle population of the city and its neigh- borhood crowded into the financial quarter to witness the throes of the tortured shorts. Blended with the merely curious were hundreds of outside speculators who had ventured their all in the great stake, and trembled in doubt of the honor of their dealers. Long before 9 A. M. these men, intensely interested in the day's encounter, poured through the alley-way from Broad Street, and between the narrow walls of New Street, surging up around 264 MEN AND MYSTEEIES OF WALL STREET. the doorways, and piling themselves densely and pain- fully within the cramped galleries of the Room itself. They had made good the fresh calls for margins up to 143, the closing figure of the night before. The para- mount question now was, How would gold open ? They had not many minutes to wait. Pressing up to the foun- tain, around which some fifty brokers had already con- gregated, a bull operator with resonant voice bid 145 for twenty thousand. The shout startled the galleries. Their margins were once more in jeopardy. Would their brokers remain firm ? It was a terrible moment. The bears closed round the aggressors. YeUs and shrieks filled the air. A confused and baffling whirl of sounds ensued, in which all sorts of fractional bids and offers mingled, till '46 emerged from the chaos. The crowd within the arena increased rapidly in numbers. The clique agents became vociferous. Gold steadily pushed forward in its perilous upward movement from '46 to '47, thence to '49, and, pausing for a brief twenty minutes, dashed on to 150|. It was now considerably past the hour of regular session. The President was in the chair. The Secretary's pen was bounding over his registry book. The floor of the Gold Room was covered with three hundred agitated dealers and operators, shouting, heaving in masses against and around the iron railing of the fountain, falling back upon the approaches of the com- mittee-rooms and the outer entrance, guarded with rig- orous care by sturdy door-keepers. Many of the prin- cipal brokers of the street were there, — Kimber, who had turned traitor to the ring ; Colgate, the Baptist ; THE GOLD-BEOKEES. 265 Clews, a veteran government broker ; one of the Mar- vins ; James Brown ; Albert Speyer, and dozens of others hardly less famous. Every individual of aU that seeth- ing throng had a personal stake beyond, and, in natural human estimate, a thousand-fold more dear than that of any outside patron, no matter how deeply or ruinously that patron might be involved. At 11 of the dial gold was 150| ; in six minutes it jumped to 155. Then the pent-up tiger spirit burst from control. The arena rocked as the Coliseum may have rocked when the gates of the wild beasts were thrown open, and with wails and shrieks the captives of the empire sprang to merciless encounter with the ravenous demons of the desert. The storm of voices lost human semblance. Clenched hands, livid faces, pallid foreheads on which beads of cold sweat told of the interior anguish, lurid, passion- fired eyes, — all the symptoms of a fever which at any moment might become frenzy were there. The shouts of golden millions upon millions hurtled in all ears. The labor of years was disappearing and reappearing in the wave line of advancing and receding prices. With fortunes melting away in a second, with five hun- dred millions of gold in process of sale or purchase, with the terror of yet higher prices, and the exultation which came and went with the whispers of fresh men entering from Broad Street bearing confused rumors of the probable interposition of the government, it is not hard to understand how reason faltered on its throne, and operators became reckless, buying or selling without thought of the morrow or consciousness of the present. 12 266 MEN AND MYSTERIES OF WALL STREET. Then came the terrific bid of Albert Speyer for any num- ber of millions at 160., William Parks sold instantly two mUlions and a half in one lot. Yet the bids so far from yielding rose to 161, 162, 162|. For five minutes the Board reeled under the ferocity of the attack. Seconds became hours. The agony of Wellington awaiting Blucher was in the souls of the bears. Then a broker, reported to be acting for Baring and Brothers at London, sold five millions to the clique at the top price of the day. Hallgarten followed ; and as the shorts were gathering courage, the certain news that the Secretary of the Treasury had come to the rescue swept through the chamber, gold fell from 160 to 140, and thence, with hardly the interval of one quotation, to 133. The end had come, and the exhausted operators streamed out of the stifling hall into the fresh air of the street. To them, however, came no peace. In some offices custom- ers by dozens, whose margins were irrevocably burnt away in the smelting-furnace of the Gold Board, con- fronted their dealers with taunts and threats of violence for their treachery. In others the nucleus of mobs be- gan to form, and, as the day wore off, Broad Street had the aspect of a riot. Huge masses of men gathered before the doorway of Smith, Gould, Martin, & Co. and Heath & Co. Fisk was assaulted, and his life threat- ened. Deputy-sheriffs and police-officers appeared on the scene. In Brooklyn a company of troops were held in readiness to march upon Wall Street. When night came. Broad Street and its vicinity saw an unwonted sight. The sHence and the darlaiess which THE GOLD-BROKERS. 267 ever rests over the lower city after seven of the evening was broken by the blaze of gas-light from a hundred windows, and the footfall of clerks hurrying from a hasty repast back to their desks. Until long after Trin- ity bells pealed out the dawn of a new day, men bent over their books, scrutinized the Clearing-House state- ment for the morrow, took what thought was possible for the future. At the Gold Exchange Bank the weary accountants were making ineffective efforts to com- plete Thursday's business. That toilful midnight, at the close of the last great passion-day of the bullion-wor- shippers, will be ever memorable for its anxieties and unsatisfying anguish. Saturday brought no relief The Gold Board met only to adjourn, as the Clearing-House had been in- capable of the task of settling its accounts, complicated as they were by ever fresh failures. The smaU brokers had gone under by scores. The rumors of the impend- ing suspension of some of the largest houses of the street gave fresh gTounds for fear. The Stock Ex- change was now the centre of attraction. If that yielded, all was lost. To sustain the market was vital. But whence was the saving power to come ? All through yesterday shares had been falling headlong. New York Central careened to 148, and then recovered to 185f. Hudson plunged from 173 to 145. Pittsburg feU. to 68. Northwest reached 62|. The shrinkage throughout all securities had been not less than thirty millions. Would the impulse downward continue? The thrbngs which filled the corridors and overhung 268 MEN AND MYSTERIES OF WALL STEEET. the stairway from which one can look down upon the Long Eoom saw only mad tumult, heard only the roar of the biddings. For any certain knowledge they might have been in Alaska. But the financial public in the quiet of their offices, and nervously scrutinizing the prices reeled off from the automaton telegraph, saw that Vanderbilt was supporting the New York stocks, and that the weakness in other shares was not sufficient to shadow forth panic. It soon became known that the capitalists from Philadelphia, Boston, and the great Western cities had thrown themselves into the breach, and were earning fortunes for themselves as well as gratitude from the money-market, by the judicious daring of their purchases. The consciousness of this new element was quieting, but "Wall Street was still too feverish to be reposed by any ordinary anodyne. A run on the Tenth National Bank had commenced, and all day long a steady line of dealers filed up to the counter of the paying teller demanding their balances. The courage and the ability in withstanding the attack which were shown by the president and his associates deserve something more than praise. The Gold Ex- change Bank witnessed a similar scene, angry brokers assaulting the clerks and threatening all possible thing's unless instantaneous settlements were made. The free- dom with which the press had given details of the explosion had been extremely hurtful to the credit of many of the best houses. In a crisis like that of Black Friday the sluice-gates of passion open. Cloaked in the masquerade of genuine distrust, came forth whispers THE GOLD-BEOKEES. 269 whose only; origin was in ancient enmities, long-treas- ured spites, the soundless depths of unquenchable malig- nities. Firms of stanchest reputation felt the rapier stroke of old angers. The knowledge IJhat certain houses were large holders of particular stocks was the signal of attacks upon the shares. Despite of outside orders for vast amounts, these influences had their effect upon securities, and aided to tighten the loan market. One, one and a half, two and even four per cent were the compulsory terms on which money could alone be bor- rowed to carry stocks over Sunday. On Monday the 27th the Gold Board met, but only to be informed that the Clearing-House was not yet ready to complete the work of Friday. Important accounts had been kept back, and the dealings, swollen in sum-total to five hundred millions, were beyond the capacity of the clerical force of the Gold Bank to grapple with. A resolution was brought forward proposing the resumption of operations Ex-Clearing House. The measure took the members by surprise, for a moment quivered between acceptance and rejection, and then was swiftly tabled. It was an immense bear scheme, for no Exchange ca,n transact business where its dealers are under suspicion. All outstanding accounts require immediate fulfilment. Failure to make good deliveries would have insured the instant selling out of defaulters "under the rule." As the majority of brokers were in- extricably involved in the late difficulty, the only con- sequence would have been to throw them into bank- ruptcy, thus bringing some sixty millions under the 270 MEN AUD MTSTEKIES OF WALL STEEET. hammer. The market could not have borne up under such an avalanche. It was decided that the Eoom should be kept open for borrowings and loans, but that aU dealings should be suspended. One result of this complication was that gold had no fixed value. It could be bought at one house for 133, and at other offices sold for 139. The Board thus proved its utility at the very juncture when least in favor. The remaining history of the panic need not long detain us. As more and more light fell upon the tactics of the ring, it was seen that the final basis of their scheme was the use of a very old trick, first put in practice long ago on the London Stock Ex- change. Two dealers . league together. One buys all that he can by cash or credit ; the other sells propor- tionately. One loses heavily ; the other gains vastly. The former breaks and retires ; the latter remains, and secretly divides up the profits. With proper regard for that bulwark of the American people, the libel law, we shall not undertake to carry out the comparison. It may not be unfair, however, to note as an example of the proportions of the struggle, that Albert Speyer, on Friday, bought $ 47,000,000 and failed to make good his contracts ; while Belden & Co. " broke " for S 50,000,000 ; and several others, supposed to be acting for the clique, had obligations out for so many millions that no attempt has yet been made to give them numerical computation. As a rehc of that astonishing conflict, out of which no one is supposed to have made anything, we subjoin a statement supposed to be the account current of the THE GOLD-BROKERS. 271 Gold Bank with Smith, Gould, Martin, & Co., which has the merit of having been indorsed by the famous com- mittee of twenty, who finally brought order out of the terrible confusion. The reader can 'gather from this brief paper no inaccurate idea of the magnificence of the dealings of Black Friday : — Received Jrom Wm. Heath & Co. $6,210,000 White, Morris, & Co. . 400,000 Dakin & Gillespie 1,980,000 E. K. WiUard . 5,845,000 Hodgskin, Randal, & Co, 50,000 Budge, Schiff, & Co. . 300,000 Cushman & Hurlburt . 50,000 S. E. Jacobs . . 100,000 Lange, Bolle, & Anning 60,000 Dean, Maginnis, & Co. . 95,000 M. Morgan's Sons 20,000 Foster & Randall . . 20,000 J. & W. Seligman fc Co. 225,000 Hallgarten & Co. . 200,000 Domett & Nichols 10,000 B. Hall & Young . . 500,000 G. H. & H. Redmond . 875,000 W. C. Mumford . 60,000 Meyer & Greve . 200,000 Kennedy & Hutchinson . 100,000 Robinson, Cox, & Co. . . 30,000 Lees & Waller . . 200,000 Reed, Leo, & Content . 1,015,000 Hagen & Billing . 200,000 E. H. Biederman 445,000 G. P. Persch . . 735,000 Robert Waller 655,000 Stout Thayer . . 90,000 Delivered to Lockwood & Co. Stout Thayer Dzondi, Springer, & Co. Carver & Co. . Gibson Beadleston B. K. Stevens, Jr. . Lounsbery & Fanshaw 1,700,000 Fansliaw & Milliken . 300,000 Hallgarten & Co. Eamlah, Sauer, & Co. Parker Bros. & Geston Fellows & Co. Cunningham & Mead Maxwell & Graves Norton, Haughton, & Co. 50,000 Taussig, Fisher, & Co. , 90,000 ST. R. Travers . . 50,000 Gray, Prince, & Co. 1,245,000 Chapin, Bowen, & Day 2,915,000 Wm. Heath & Co. . 200,000 Cushman & Hurlburt 25,000 $10,000 20,000 50,000 430,000 75,000 26,000 35,000 134,000 15,000 16,000 85,000 30,000 $7,499,000 Coin due dealer . $ 13,151,000 Currency due Bank 20,650,000 $20,650,000 272 MEN AND MYSTERIES OF WALL STREET. In due season, after some anxious weeks, the Gold Clearing-House was once more in operation, and the Gold Board pursued the even tenor of its way. Shortly, upon the renewal of daily sessions, at a large gathering of the members, a resolution was quietly passed declaring that at some future moment, to be hereafter determined, the Board reserved the right to incorporate in its deal- ings government securities and exchanges. Specie pay- ments wUl, therefore, not put an end to the Gold Room. The members of the Board are now four hundred and eighty in number. The large proportion have connection with the Stock Exchange, and what has been said re- specting the frohcsome spirit of the dealers in stocks applies with even greater emphasis to the gold-brokers. The gayety with which they welcomed last Christ- mas-eve, in a grand carnival of drums, fifes, tin-trum- pets, gongs, and vocal music, exemplifies the delightful abandon which lurks beneath the hard exterior of the bullion-operators. One of the curious features of the Board is in its officers. Thomas A. Hoyt, the active Vice-President, is a Presbyterian clergyman. Thomas P. Akers, the Secretary, has been a member of Con- gress from Tennessee, and gained great repute in former years by his eloquent labors as a Methodist preacher. Tall and broad-shouldered, he has a muscular energy which Morrisey can scarcely surpass, and on dull days he amuses the idle crowd around the fountain when the Board is not in session, by taking a fair-sized man lightly in the palm of his hand and holding THE GOLD-BROKERS. 21' vhile decreasing their chance of recovering something from the ruin. FEOM '37 TO '60. 317 chants gathered at every discount day only to have their paper thrust back upon them with scarcely an explana- tion. The telegraph was spreading half-truths and wild rumors over the whole country. Journals, in the inter- est of men who prey upon panic, caught up every whis- per, misstated and exaggerated printed list of failures, and ran up their editions to thousands upon thousands. While the commercial world was thus being swept for- ward into illimitable ruin, the storm had already burst upon Wall Street and was carrying everything before it. The board was like a gathering of demons. Bull and bear came in personal contact, and fierce blows mingled with the ceaseless rapping of the President's hammer and the terrible slaughtering of every description of security. The great mass of brokers found it impossi- ble to return their loans. Many were swamped by time contracts. Dozens " broke " every day. The whole talk of the money market was of the rottenness in the con- duct of corporations. It was asserted that the directors of W^estern railways had been hiring funds at the rate of twenty-five per cent per annum with which to pay dividends, — that one of the best known lines had been drawn into an over-issue of stock to the detriment of bondholders and in violation of their charter. It be- came more and more understood that the collapse of the Ohio Trust Company was due to wild advances to the Cleveland and Pittsburg Eailroad, and other doubtful stocks. Under the impetus of this universal and justifi- able distrust shares went down, down, down. It was impossible to borrow upon them except at ruinous usury. 13* 318 MEN AND MYSTERIES OF WALL STREET. Panama fell twenty per cent in four weeks ; in two months it had fallen thirty per cent. Illinois Central dropped forty-two per cent. Milwaukee and Mississippi fell thirty-six per cent in ten days. Erie declined twenty per cent, and New York Central twenty-four per cent. Eock Island went down thirty-four per cent before it turned. Delaware and Hudson Canal sunk in leaps of twenty per cent, measuring forty per cent of decline by October 13th. Galena and Chicago was quoted thirty- four per cent lower in the second week of October than in the last week of August. Eeading was in the same plight. Missouri 6s and Virginia 6s both declined twenty per cent. Eailway bonds went the way of stocks. Bank shares had the same fate. On Priday, September 25th, the Bank of Pennsylvania suspended, followed the next day by the other Phila- delphia banks. Baltimore, Washington, and the lesser cities yielded to the example, and by the middle of October the New Ygrk banks had refused further pay- ments of coin. The stock-brokers now saw the oppor- tunity for revenge. When the call of banks began it was the signal of assault. The Bank of America was forced down thirty-four per cent, the Bank of Commerce thirty-five per cent; Park Bank sold down forty-four per cent; the Metropolitan, fifty per cent. A bank whose shares a month or two before were at par went plunging under the auctioneer-gavel to thirty-five. The bears were gleeful, and their faces radiant with smiles. United States 6s of '68 felt the effect of the universal decline, and Howell Cobb, then Secretary of the Treasury, FEOM '37 TO '60. 319 promptly came into the market and bought up several millions. The savings-banks which had used govern- ments as the basis of their business were thus supplied with gold, and succeeded in withstanding the daily run upon their resources. It is a curious circumstance, in view of our present Gold Board, that silver during this period sold at a discount for paper, and one half of one per cent was the highest price which gold reached even at the white heat of the crisis. The catastrophe of '57 illustrates what might have been the fate of the country in '69, if the whole nation had not grown wiser and our banking community clearer-sighted. The crash began with the Stock Market. It would have ended there, liad not two things supervened. The New York banks withdrew eleven millions of loans in three weeks. August 22d they were lending $ 120,000,000, October 24th, only $95,500,000. Such an alarming shrinkage, attended by the suspension of specie payments and the sensationalism of the telegraph and daily press, destroyed confidence everywhere, and threw the paper of the oldest and most reputable mercantile houses into the same contempt with the certificates of rotten and bankrupt corporations. But, in addition to this cause, there was another quite as vital and as immediate in its effects. The entire country was in stocks. The farmer, the country lawyer, jobbers, heavy domestic dealers, the whole foreign trade, were more or less holders of shares, bonds, county, city, or State paper. These they used as capital, drew therefrom dividends or interest, raised money for immediate needs by hypothecation, and, in. a 320 MEN AND MYSTERIES OF WALL STEEET. word, based their business movements upon the belief that this property could always be converted into coin or employed as collaterals. The panic in the Stock Market destroyed the former hope ; the panic in the banks put an end to the latter anticipation. The money of the West and the Middle States had gone into stocks, and stocks had now gone to the dogs. In '69 these conditions were reversed. The general public no longer held securities, with the exception of governments. If men bought it was on margins, and with the intention of selling upon the first rise. With ten per cent of their capital they controlled the same speculative profits which would have been theirs if the shares had been bought out and out. Here and there, in communities comparatively untainted by the fever for stock manipulation, the certificates of local manufac- turing and railroad corporations were used as an invest- ment ; but this description of property neither constituted the full bulk of assets nor was liable to the ordinary fluctuations of the market. The preponderating mass of the shares dealt in on the Stock Exchange was in the street, passed from broker to broker, was used by the great operators like the pawns in a game of chess. The September gold gale swept away the margins of out- side speculators, but left their remaining capital intact. Moreover, the brokers, schooled by the artificial " lock- ups " of money in the preceding year, were better able to resist the attack ; and the banks, in drawing in their loans, exhibited unusual prudence and conservatism. The pressure in the loan market continued .only a few FROM '37 TO '60. 321 days and then sensibly relaxed. The West suffered by the decreased value of its products, and merchants in the foreign trade were temporarily affected by the con- dition of exchange, and the variable value of the only legal currency for the payment of custom dues. The spasm limited itself almost exclusively to "Wall Street and to the corresponding speculative centres of Phila- delphia, Boston, and Baltimore. Such stocks as had genuine investment value were bought up at once by capitalists all over the Union, the moment the line of depression had reached a point where they could profit- ably be held. The very fact of this immediate influx of money is a further proof of the difference between the two crises. But it is in the results of '57 that the impropriety of its comparison to '69 is clearly shown. Factories at that period were everywhere shut up. Em- ployees and domestic servants were dismissed by thou- sands. In IvTew York City alone twenty thousand men and women lost their places in a fortnight. The country dealers found it impossible to meet their indebtedness. Liabilities incurred when wheat was two dollars a bushel were now to be met with wheat at seventy-five cents. Merchants, banks, all trades and professions, were in sore distress. The mails were weighted down by letters plead- ing for help. Twenty tons of these clamorous missives went out of the New York post-office in one day. Noth- ing but favoritism could secure help from the banks. In Philadelphia a merchant who had made ineffectual efforts to obtain advances on prime paper drew up a thirty days' note for five dollars, went to his neighbors 14* V 322 ME>f AND IIYSTEKIES OF WALL STEEET. and secured sufficient first-class indorsements to cover the back. He then pinned on a ten-dollar bill of his bank as collateral and presented it for discount. The President -smiled grimly at the delicate hint. The press of the time overflowed with anecdotes illustrating the popular feeling against the great finan- cial corporations, and their "unjustifiable" slaughter- ing of collaterals. A Chicago bank had ordered a lot of corn which had been hypothecated to be sent to a house at Oswego for instant sale. As the firm failed to remit the money, the Chicago president concluded to take a trip over the railroad and inquire into mat- ters. The dialogTxe which ensued upon his arrival is thus stated: — Chicago Financier. " Is Mr. H at home ? " H. " That 's my name, sir : take a seat." C. F. " My name is Mr. , of Chicago, and I 've come for the 15,000 bushels of wheat I sent you the other day.'' H. " Have not got it, sir ; it 's been sold." C. F. " Very well, then. I want the money for it." ff. " I have n't got the money, sir." C. F. " What has become of it, sir ? " H. " I have paid my debts with it." C. F. (In great indignation.) " You are a scoundrel, sir." H. (With hauteur.) " Very likely, and maybe there 's a pair of us. I 'm sorry my carriage is not here, as I should like to show you about the city." The Chicago bank president "left," naturally in no happy mental condition. FROM '37 TO '60. 323 The belief that the panic was attributable to the great diminution in discounts and call loans was shared not merely by journalists and the general mer- cantile class. Nathan Appleton, himself a bank direc- tor so far back as 1814, wrote to the Boston Advertiser, October 12, 1857, that the further contraction of IsTew York banks, after the alarm incident to the failure of the Ohio Trust Company ought naturally to have died, out, assuredly " brought about the present disastrous crisis." . We have already lingered too long upon the commer- cial phases of the panic, although it would be easy to fill a dozen pages with characteristic stories of runs on the banks, of the troubles of traders who drew out their deposits in specie and then passed sleepless nights in guarding their uncomfortable wealth, of young mer- chants and manufacturers who preserved their credit by efforts and accidents which have all the coloring of romance. The fate of the steamship Central America was a curious episode of the times. She was on the California line, and her arrival was anxiously anticipated in New York, as her heavy freight of gold would have sensibly relieved the market. On Saturday the 12th of September, — three weeks after the city had been thrown into wild confusion by the financial tornado, and men grew pale and weary of life in the struggle for money, — the officers of the steamer discovered that she had sprung aleak in stress of weather. They were already far out on the Atlantic. Every effort to stop the influx of water proved unavailing. In a few hours 324 MEN AND MYSTEEIES OF WALL STREET. the ship would founder. The passengers were at once notified to put themselves in readiness for the boats. Then ensued one of those scenes in which the empti- ness of wealth discloses itself, as in sudden new light, to even the dullest of manMnd. The waves were high, the distance from shore so great as almost to forbid hope. AH were huddled together in the cabin, — a few women, one or two tourists, but mainly stalwart men who had risked fever and years of desolate toil for the loved ones of a home whose sunny brightness was fading away for- ever. Every one had money: some, thousands; many, their ten thousands. A bronzed-faced miner, catching the impulse of the moment, opened his carpet-bag, weighted with freslily minted dollars, and strewed its contents over table and chairs, beseeching his terror- stricken comrades to help themselves. The crazed crowd, half unconscious of the satire, began to imitate the example. Purses, through whose meshes gleamed hundreds upon hundreds of gold-pieces, were tossed from hand to hand. The sofas were covered with piles of coin in which no one cared to confess ownership. One individual, lifting a huge canvas-sack, poixred out ten thousand dollars of gold-dust, until the carpet was thick with precious metal. This man, through strange fortune, was almost the only one of the little gathering who reached land in safety, after they had taken to the boats ; and the simple story of that hour, coming from his lips, gave point to hundreds of sermons, and to abundant editorials from those pleasant newspaper optimists who discover an advantage even in the fact of "hard times." FROM '37 TO '60. 325 If it were possible to know the secret history of many of the great commercial houses which failed during the panic, a vast number of new illustrations of the connec- tion of the Stock Market with the financial depression would come to light. The chief partner of one firm; early in '56, became so overwrought by the immense risks and profits of business that he lost his mind. His own share in the house was two millions and a half Before winter the balance-sheets showed a clear gain, in a single season, of $ 1,300,000., The victim of trade was put in an insane asylum. In a few months he died. On examining his assets there were found ten thousand shares of Illinois Central, which sold at the time of his derangement for 140. As all the instalments had not been paid in, the real value then was about $ 800,000. In October, 1857, the heirs put them in the market, and realized only fifty thousand dollars ! Illinois Central had become a bankrupt road; yet even in failure its shares were in high repute, compared to other Western securities. The Chicago, St. Paul, and Fond du Lac Eailroad Company went under with a crash this year, its stock being quoted down in the lower nu- merals, and its bondholders foreclosing. William B. Ogden was the leading spirit in this road, and is un- derstood to have lost and recovered several millions in the vicissitudes of the company. In '59 the famous Chicago and Northwest Line was created out of its ruins ; but during the interregnum the bonds of the company, as well as the certificates of indebtedness of cities, coun- ties, and States throughout the West, were in iU odor on 326 MEN AND MYSTERIES OF WALL STREET. the Stock Excliange. "Whole bales of worthless paper of thLs character were piled away in New York brokers' and bankers' offices. The luckless victims of over-confidence found language fail them to express their indignation. On a certain day in November, while the street was still pros- trate under the collapse of August, there entered one of the of&ces which had dealt most heavily and fatally in "Western stock a nattily dressed young man from a remote section of Wisconsin. The banker recognized him at once. " "Well, Williams, why are you here ? " " Just to have you help me negotiate some bonds. Our comity has elected me agent. We have printed off certificates to be issued for the purpose of building a new county- house and jail. They gave me the choice of banker, and so I concluded to let you have the job. See here, now, the discount is perfectly awful," — and the con- fident capitalist-borrower from Wisconsin began to rm- fold his budget, and whisper the terms on which the little affair was proffered. The WaU Street veteran first shaped his mouth into a sharp significant whistle, then slowly rose from his chair, his face assuming the utmost solemnity and severity. " Now, Williams, if you care to take advice, you will put those bonds in your pocket, and yourself in the cars, and when you reach home you will toss all that waste paper in the fire. If your county wants money, it better tax itself for it. New York won't risk more cash in wildcat West- ern county -houses any longer ; and, hist ! you can't disappear too soon, for if they get wind of what you 're after hereabouts, they '11 — " Before he could finish his FROM '37 TO '60. 327 sentence Williams had seized his hat, edged off toward the door leading into the outer vestibule, and was bowing himself out in a most comical condition of terror. The banker, from whom we have the anecdote, adds that the Wisconsin county agent lingered some thirty-six hours longer about town, and then departed with such mental illumination as effectually cured him of all further attempts at bond negotiations. From the spring of '58 to '60 the Stock Board very slowly recovered its old tone. The b?ar element, espe- cially the Observatory, was in its glory. Brokers had be- come fearful of forced quotations. " Washing " had been a constant trick before the panic, and bids were now closely scrutinized. The evidences of mismanagement and fraud in great corporations, of the bribery of jour- nals, of jobbing in Congress, before the crash, were now cropping out in all directions. Companies which had contrived, by great sacrifices, to hold out during the panic, began to disclose their weakness when the sub- sidence of excitement seemed to give a safe opportunity for frankness. Not a few succumbed ; among them New York and Erie, which in '59 failed to pay the interest on its mortgages, and was subjected to instant fore- closure and the appointment of a receiver. Eev. Mr. Cuyler visited the Board about the time of the Erie "break," and reported his views to a religious paper. The sessions were then held in Exchange Place. The clerical on-looker took a cheerful view of things, and was confident that a fair proportion of these keen stock- heroes were not unfitted for spiritual communion. He 328 MEN AND MYSTEEIES OF WALL STREET. saw one hundred and twenty men sitting at tables, with hats on head and books in hand. When favorite stocks were called a broker would spring up, fling himself into the middle of the room " shaking his finger violently, gesticulating, shouting, vociferating ' I 'II take you up,' ' Seventy-five for the lot,' ' That 's my bid,' ' Seller thirty days.' " Of the Ursa Major of Erie we are told, " His financial fame is world-wide. WhUe the bids are made, the workings of his countenance remind us of Brougham in the House of Lords. He steps out from his desk and snaps his' finger toward another broker, calling out, ' I '11 take your lot at thirty days.' " The picture lias the truth of a photograph, but since the war brokers jumble up their bids in fewer words, and with more precision than is indicated in the phrase attributed to the king bear. What was the fuU value of the stocks and bonds dealt in at this time by the Stock Exchange ? It is a question difficult of answer, as no complete statement is extant, and the labor of separating the additions of in- debtedness, through stock watering and new issues of bonds in the last ten years, would be very great. To estimate it at one sixth of the present buUc of securi- ties would be to do more than justice to the past. One ninth would be more nearly accurate. It should further be noted, that all the great stocks and State or railroad securities were then at a far larger percentage below par than they are now above. The actual capital invested was, therefore, disproportionately small. Probably where one hundred millions are now employed, not ten million FROM '37 TO '60. 329 was then in use. An able writer of the period pre- dicted that the wonderful phenomenon of the Paris Bourse and the London Stock Exchange would find no analogue in America. We had no great titled or moneyed aristocracy concentrating the whole wealth of the nation at one point, drawing their resources from remote regions and spending them in one metropolis. There was no such centralization of government or State debts as would enable New York to compete with European finance, nor any "field for those extensive combinations which, as in the case of the elder Baring, would yield a profit of a million and a half in three days." Times have bravely changed since this prophecy was written. Jay Cooke can match the story of Baring. Vanderbilt at one stroke in '68 made more than either of the Eothschilds ever earned in any single speculation. In one decade New York has attained precisely the central figure which the fine reasoning of ten or twelve years ago proved to be impossible ; and the impulse to- ward far higher grandeur through suboceanic cables and trans-continental railroads has scarcely begun to dis- close its immense force. Governments in '59 were a very insignificant item, but there was, nevertheless, a certain significance in the character of the holders. Two thirds of our national debt was in foreign hands ! In that year any one for- tunate enough to be allowed access to the Sub-Treasury's books would have found among the chief names of creditors only a few Americans of note, — George Pea- body, John J. Astor, "William B. Astor, and Jacob Little. 330 MEN AND MYSTEEIES OF WALL STREET. A key to this may be discovered in the fact, that, when Congress went into the market about this period to bor- row a few millions, it could not place the loan except by twelve per cent discount. Outside of the country, how- ever, such a man as John Lloyd (Lord Overstone) held $ 350,000. Lord Elgin was down for $ 17,000. Baring Brothers, the Rothschilds of both Paris and London, the nobility of Spain, Italy, Eussia, and England were buy- ers. Asiatics and West-Indians were found on the list. Macaulay began with $ 5,000 and ended with f 30,000. De Tocqueville, Scribe the dramatic author, Pouchouke the Paris publisher, Sontag, Paul Julien, and other minor celebrities, were creditors. "When war came these securities were returned in hot haste ; but the in- evitable tendency of Europe for American investments was shown by an almost immediate reabsorption, and in the subsequent popular subscription throughout Ger- many and Holland for the 5-20s. Our commercial classes had become exceedingly cau- tious at the close of the last decade. Trade turned to the South in consequence of the general distrust of the West. As a result of the prevalent timidity there was very little mercantile paper afloat, and the banks were compelled to restrict their loans from the absence of anything which would authorize discounting. Money was, therefore, more than ever a " drug " in the market. Vast quantities of specie were collected in New York. The bank vaults overflowed with it. This plethora reached its height in February, 1861, and the final sus- pension of coin payments was unquestionably delayed by this cause. FROM '37 TO '60. 331 In a previous chapter we have called attention to the low state of railroad stocks in I860.* Vast fortunes * The annexed table of prices during 1859, 1860, and 1861 at the Stock Exchange will be ! of value as indicating the average low range at which securities sold and the degree of upward fluctuations effected by bull operators : — 1859. 1860. 1861. Lowest. Highest. Lowest. Highest. Lowest. Highest. Indiana 5 per cent . 85 93 86 93 75 93 Tennessee 6 per cent . 86i 935 64 93 344 77 Virginia 6 per cent . 92i 994 73 95 36 80 N. Carolina 6 per cent 94i lOli 774 100 44 824 Missouri 6 per cent . 80i 87i 61 841 35 72 Louisiana 6 per cent . 90 96 94 994 45 774 California 7 per cent 80 864 82 95 714 88 Reading 354 54i 294 49i 294 47i Michigan Central . 38 544 35 734 39S 6I4 Michigan Southern 4 214 5 25 104 204 Panama 113i 1371 106 1464 974 121 Illinois Central . 63 72 61i 894 654 884 New York Central . 69 86 69 92J 68 824 Erie .... i 17i 8J 43 17 404 Hudson River 30 42| 35 66 314 494 Harlem . . ' . 9 14i 8 234 8i 17 Harlem preferred 33 44i 27 55 204 43 Cleveland and Pittsburg ; 6 10 5 154 64 17 Cleveland and Toledo . 164 334 181 494 204 38f Cleveland, Col. and Cin. 91 100 86 994 90 102 Galena and Chicago 604 774 55 82i 56 74i Rock Island 55f 71 424 844 30| 62 Chi., Bur., and Quincy 484 61 40 92| 51 784 Mil. and P. du Chien . 3 134 li 164 9 23 Canton Company 164 20 14 234 8 15 Pennsylvania Coal 794 85| 734 884 72 81 Del. & Hudson Co. . 87 101 80 1014 72 92 Cumberland preferred . 11 244 8 m 4 H Pacific Mail . 67i 934 70 1074 50 100 332 MEN AND MYSTERIES OF WALL STREET. were open to aity one who chose to invest. Yet stocks which sold for a song remained stationary for months, and exhibited immaterial appreciation even in '62. That year there was a sharp upward movement. The rise in gold and the great expansion of legal tender were unquestionably the source of the speculative ex- citement ; but it was not less due to an obscure cause, the origin of which dates back to '57. The country had been importing and manufacturing heavily. The crash threw this vast surplus stock into the auction-room. Even as late as 1860 the slaughtering of dry goods con- tinued, and servant-girls found it easy to dress in fine sUk and satin. Eetailers and jobbers throughout the rural districts bought immense supplies, and for two years were able to rely upon their home stock without recourse to the city. When the swelling tide of green- backs flowed in, agricultural products went up, and farm- ers' families, with more money in hand than ever before, thronged the adjacent villages and towns, and stripped the shop-shelves of even their stalest goods. The dealers instead of buying again proportionately, contented them- selves with purchasing small quantities, and invested the main bulk of their profits in the stock market. The stagnancy which New York merchants experienced in '63 finds its solution in this fact ; and the judiciovisness of the country speculators was shown in the great in- crease in the average wealth of traders throughout the Union, fortunes of fifty thousand being less common in 1860 than those of one hundred thousand in 1865. PROSPECTIVE. 333 CHAPTEK XVII. PROSPECTIVE. THEEE billion of dollars, invested in securities to which the New York Stock Exchange in this year of grace 1870 afixes its daily stamp of value, is a sum- total which may well confuse the imagination. It ex- ceeds the sale worth of all the cotton, corn, wheat, oats, buckwheat, barley, potatoes, rye, hay, and dairy produce of the Union during 1869, together with the earnings of all our fisheries, and the manufactories in iron, leather, wool, cotton, and paper in the same period. The yearly fluctuations of some of the active stocks are equal to what in the grain market would make a barrel of flour worth at one time $ 12, again $ 9, and the next day $ 4 or $ 6. Western Union has sold for 250, and is now quoted at 32. Wheat, subject to similar vacillations, would bring in the farmer f 1.25 a bushel at one season, and 15 cents a bushel at another. And although such startling vibrations are not the rule of the Share Board, the ordinary changes which mark its weekly business, if transferred to the departments of industry or agricul- ' ture, would affect ceaseless and terrible derangements. However slight may be the direct interest of the great producing class in these phenomena of the Stock Mar- ket, the secondary and less ob^dou3 consequences of 14 334 MEN AND MYSTERIES OF WALL STREET. traffic in the evidences of investment reach far into the affairs of every household in the nation. The future of our paramount money-mart is, therefore, of exceeding importance not less to the farmer and artisan than to the capitalist and statesman. In approaching a subject involving so much and penetrating so deeply, it is desirable to disembarrass the mind from certain prejudices. There is, for example, a vast amount of pure speculation in Wall Street. With- out entering into the metaphysics of speculation itself, or endeavoring to discover whether there be a profession or pursuit in life free from the active element of hazard, it cannot be unjust to call attention to the large arena over which this impropriety has extended. " Corners " are not original with stock-brokers. In '68 the prin- ciple was applied to corn in Chicago. In '65 it was put in operation upon wheat in California. Years before it was employed in the same way in Australia. Ouvrard, the great stock-operator of Europe in the last century, began his career by contracting for all the paper which should be manufactured in France for the two years succeeding 1789. The Revolution had just broken forth, and he saw instantly that in pamphlets, newspapers, etc., the demand would be immense. Starting with 5,000 francs, this corner made him a capitalist. His next oper- ation displayed even higher prescience. France pro- tected the products of her colonies. The Eevolution was laying the train for a ruinous explosion in St. Domingo. Coupling the two facts, he went to Bordeaux, and in conjunction with a large importing-house, bought coffee PEOSPECTIVE. 335 and sugar in immense quantities. At one venture he cleared nearly a million francs, and immediately rein- vested it, purchasing the entire annual yield of the colony. He was at once the heaviest capitalist in Paris. The city of Mexico is on an island in the midst of a lake. Francis Baring, son of Lord Ashburton, while there as a tourist, saw the opportunity for a startling specu- lation, and in a few days possessed himself in fee sim- ple of the entire shore circuit of the water. The whole cost was £ 200,000, and. of this he paid one fifth on the spot. Had not Baring Brothers been frightened by the daring scope of the scheme, — their timidity leading them to order its immediate abandonment, — this operation would probably have resulted in enormous profits. The most audacious and lucrative of aU the speculations of the Eothschilds was outside of the London Stock Exchange. This house, through shrewd diplomacy, obtained the control of the only quicksilver-mines in Europe. The price of the lively metal was raised to an extortionate figure. So excessive was the selling rate that all Chris- tendom, in eagerness to obtain cheap calomel, fell to scraping the backs of old mirrors. Political economy gives to the class of men who make these vast com- binations the name of monopolists. But they are simply speculators in successful corners, including in their grasp commodities of far more vital importance to the public than are paper values. "Wall Street sells what it has not in hand, but what it believes can be obtained at a lower price before the time of delivery. All our great grain-merchants, cotton-factors, 336 MEN AND MYSTEEIES OF WALL STREET. wholesale dealers in certain descriptions of manufac- tured goods, do the same. Heavy settlements were made during the war by prominent l^ew York houses who had agreed to deliver paper and woollens to a fixed amount and within a given time, but were victims of the sudden summer drouth which stopped the mills of New England for several weeks. Operations in copper and coal under precisely the same conditions as exist in short sales are very common, and not infrequently come to light in lawsuits, where the decision of court is almost invariably against the contracting party. "We call at- tention to these facts, not to defend speculation, but to show that the methods of the Stock Market are coex- tensive with trade, and have their origin, not in any par- ticular school, or rather in the universal school whose first primary lesson is, " Make money." Moreover, although it is hard to disassociate the two in the mind, there is an essential distinction between the cliques and the brokers. The latter are sometimes the instruments of the former ; but it nevertheless remains true that the street itself is not in sympathy with the great operators. The latter rob the brokers by destroy- ing their customers. To use the slang of the financial quarter, they "milk the street." Except in one par- ticular, the New York brokers really stand in the position of conservators of speculation. They sell " proxies " on the stock which by the luck of the mar- ket falls in their hands. In Cleveland and Pittsburg and in Erie this open barter has been one of the scan- dals of the times. Naturally, the more entirely an PROSPECTIVE. 337 active stock is bought at the Exchange, the greater the opportunity for irresponsible leaders to secure con- trol of important corporations. Were this vice of wide extent, the street would become the Pretorian Guard of our railway financiers ; and that it is less common, and is becoming more generally accepted as disrepu- table by the influential and controlling members of the Stock Board, is indubitable. Apart from this, all the worst evils of stock manipulations have their birth and abidiag-place in the secret counsels of the Eings and Cliques, — of that association of railway, steam- ship, and telegraph directors, presidents, and heavy shareholders, who find it consonant with their con- sciences and their purses to water stock, pay divi- dends out of capital, to invent that anomalous feature in finance known as capitalized earnings, to utter un- authorized new stock, to " pass " dividends in order to break the market ; in a word, to do everything which will keep them outside of prison-bars by means of shrewd lawyers and complaisant judges, if only in do- ing all this they can manage to make three dollars grow where but one grew before. The annals of Ameri- can financiering are not particularly exhilarating. The exhibition of fraud in high places, and of effrontery on the part of responsible managers, bordering upon the sublime, which has characterized the past few years, is not calculated to inspire over-confidence in the future. Yet even here we are not without con- solations. If the present is dark, was the past brighter? If spectdation in the United States has discouraging 15* V 338 MEN AND MYSTERIES OF WALL STREET. aspects, are the records of the London Stock Exchange and the Paris Bourse clean of stain ? The English papers have recently been laden with fierce denunciations of the New York Stock Market, and it cannot be gain- said that their criticisms are just and opportune ; but the inference underlying these reproaches, the impli- cation that British capitalists are guileless, and that stock-jobbery is a modem and American invention, is sadly inconsistent with facts. In the old South Sea days, £ 574,000 were paid to influence votes and secure the enlargement of franchise by a single com- pany. During the railway fever of 1824 — 25, news- paper exaggerations, neatly cooked reports, captivating prospectuses, were the main machinery of speculation. The press was bought up by the gift of options in shares which were sold out at a premium. The Lon- don Morning Chronicle remarked : " We blush to say few editors of newspapers in the metropolis are not to be found in the list of those benefited." In John Francis's " History of English EaUways," one will find a hundred illustrations of the keenness of cockney rail- way cliques. One road, in 1845, placed certificates of stock in the hands of an agent. This broker, by order of directors, bought large amounts of scrip through time sales. When the shorts tried to get the paper and thus meet their contracts, they were informed that the company would make no issue for the present! Of course the premium had to be paid over, and the short interest suffered proportionately. Another com- pany invited applications for shares. The number was PROSPECTIVE. 339 to be limited. Deposits on stock were fixed at 22 shillings. The directors bought fifty times the amount to be issued, and 'Change Alley was cornered at once. Perhaps the most signal example of the corner in Lon- don speculation is afforded by the operations of a clique in the Huddersfield, Halifax, and Bradford Union Eail- road during 1845. No scrip had appeared ; nevertheless, a vast number of shares were sold for future delivery at 20 and 30 s. The entire capital stock was only 15,000, but the shorts held 75,000 shares. The line was looked upon as a failure, and every one was counting on a fortune by the fall. • Suddenly it was announced that this road was to be amalgamated with the West Hid- ing Union Line, one of the most popular fancies in the market. At a jump the stock of Huddersfield, Hali- fax, and Bradford Union went to £ 15. The specu- lators were ruined, and the brokers were all deeply involved. The Stock Exchange, the day after the news, shook with the wild encounter of bull and bear ; and so inextricably was "the city" involved that the rooms of the Board were closed for a week to repair losses. The mere bagatelle of five million dollars threw the London Exchange into a six days' confusion; and yet the English journals are scandalized- that the busi- ness of the New York G-old . Eoom sliould be deranged by transactions covering one hundred times that amount ! That acme of gambling, the sale of privileges, called succintly in Wall Street by the name of " puts " and " calls," is an old English speculative invention. They " carry " stock perpetually, styling the act " continua- 340 MEN AND MTSTEEIES OF WALL STREET. tion." Gold corners are a part of the history of the London Exchange. The first attempt of the Bank of England to renew specie payments after the Continental war with Napoleon was frustrated by British operators. During the Crimean campaign the London banks de- pended upon the receipts of bullion from Australia and California for their preservation from suspension. Sometimes the ships were delayed, throwing the money- market into a whirl of excitement. " Capitalists," said Chapman, the manager for Overend, Gurney, & Co., in his testimony before the Parliamentary committee, — " capi- talists availed themselves of these crises to make enor- mous profits out of those who fell victims to them. There cannot be a doubt of it." " There is more than one capitalist who can withdraw from the circulating medium £1,000,000 or £2,000,000 of notes, if they have an object to attain by it, — to knock down the funds and create a scarcity. One morning there was a great demand for money in the Stock Exchange ; no- body knew how it was. A person came and asked me whether I would lend money. I said, ' Certainly.' He said, ' I will take £ 50,000 of you at seven per cent.' I was astonished. Our rate of money was much below that. I said, ' You shall have it.' Shortly the man re- turned and borrowed £ 50,000 at seven and a half ; next £ 100,000 at eight, and finally much more at eight and a half It afterwards turned out that there had been a sudden withdrawal from the market which created the great pressure." As first-class bills in 1852 could be discounted for one and three quartei-s per cent, the PROSPECTIVE. 341 rise to eiglit and a half was something as extraordinary as the high rates of interest in JSTew York at the spring and fall stringency of '68. It is needless to note in passing, that the affair detailed by Mr. Chapman was the " lock-up " pure and simple, — an invention absurdly attributed to recent American financiering. It would be easy to multiply these illustrations. The record of English speculation is crowded with examples of the most rapid and ruinous fluctuations in price, of a frenzy for " stock gambling " extending to all classes, and carried to a pitch of madness beyond the imagina- tion of a veteran New York broker. Crossing the Chan- nel, one finds at the French capital all the tactics and strategy of a great money-market in high perfection. The Parquet constitute the " regular " dealers. The Coulisse are the curbstone brokers. Cash sales are in- frequent, and almost the whole bulk of business is in that Rouge et noire branch of stock speculation, the " privilege.'' The technical name is MarcM d prime, and on the 15th and 30th of every month the owner of this call must decide whether he takes the stock or not. At all events he must pay the premium. Under these auspices the scenes of the Paris Bourse are character- ized by an abandon and recklessness which leave noth- ing for the student of human nature to desire. There are money stringencies, fierce panics, overselling of the market, grand combinations, gigantic failures. Every year has its fringe of defalcations. Every stock has a history of sharp rise and fall. If we go to Vienna we shall find a city whose market has hardly recovered from 342 MEN AND MYSTERIES OF WALL STREET. the terrific domestic revulsion of '69. Amsterdam, Ham- burg, Trieste, Smyrna, Marseilles, Madrid, Odessa, all witness the same capacity for high speculation, stock- jobbing, and financial irregularities. Th^ bearing of these facts upon Wall Street finance must be apparent to the least thoughtful. They prove that speculation in the United States has nothing unique, peculiar, or unparalleled. They furthermore afford room for a conjecture that much of the present exaggeration of stock manipulation is ephemeral, a part of the na- tional education, one of those diseases which attack the young, and, though not wanting in pain and discomfort, are nevertheless not fatal nor of long continuance. De- spite the speculative opportunities of London and the European towns, the controlling influences are conserva- tive ; and in New York since the war there are not a few evidences that the current is setting in a wholesome direction. The rule in force at the Stock Exchange, ren- dering a registry of shares obligatory on corporations, is a measure whose influence cannot be overestimated. Even the infamies of Erie have not been without a cer- tain advantage, and the very height of recent disorders would seem to indicate that the poison in the financial system is working to a head. A probable consequence will be the establishment of more rigorous guaranties, and the enforcement of restrictions which will give to a large proportion of the stock list a greater defined value. The enlargement of the scope of tlie New York Stock Exchange greatly depends at present upon Europe. We PEOSPECTIVE. 343 are a borrowing nation. The Panama Eailroad is the nearest approach to a strictly non-national security on the list of the Exchange. AU else is rigidly domestic. Our growth through foreign connections hinges, there- fore, upon the repute of our stocks- and bonds abroad. Germany, Holland, and England hold already about one billion of American securities in governments, railway bonds and stocks. State stocks. In the face of current speculative demoralization, this is a wonderful exhibit. With the increase of a healthier tone in our finance, and the creation of fresh safeguards upon the management of corporations, thereby rendering dividends more secure and permanent, the confidence in American stock in- terests will expand proportionately. The suboceanic cables have even now linked the finances of the two worlds. ISTew York brokers pay a million a year for telegrams from Lcndon alone. This constant intercourse requires simply a deeper faith in the substantial charac- ter of the commodities dealt in upon the Broad Street Exchange to open out very wide results. Out of the ten billion dollars of stocks and funds on the list of the London Stock Board, American securities amount to a few insignificant millions. At the Paris Bourse the Southern Pacific Eailroad is the only stock from the United States privileged to daily quotation. The great bulk of the United States bonds and shares owned abroad are bought and sold only through private bankers. Confidence will change all this. New York wiU act with Europe. The excitement at one point will be quieted by the repose at another. In the September 344 PEOSPECTIVE. gold flurry, it was a despatch from London quite as mucli as the message from Washington which checked the bul- lion conspiracy. The knowledge that Wall Street was calm under the news of the Overend, Gurney, & Co. failure of '66 did much to lessen the progress of panic in the EngUsh financial capital. It remains for the brokers of the Stock Exchange to decide whether they will seek the petty profits of a speculation marred by grave faults, or wiU cast their influence still farther and with more strenuous emphasis against the encroachment of the cliques. The former means isolation. The latter wOl be prelusive of an expansion in international relations which win make New York imperial, and Wall Street, what its pivotal position demands and allows, the para- mount financial centre of the globe. THE END. Cambridge ; Electrotyped and Printed by Welch, Bigelow, & Co.