Black Friday (1869) – The History of Gold on Wall Street

In the month of September, 1869, one of the most gigantic attempts to run up the value of gold ever made was attempted by a powerful combination of Bulls, consisting of a set of unprincipled men whose only object was to make money.  Their scheme came near attaining a success which would have broken the market utterly, have unsettled values of all kinds, and have precipitated upon the whole country a financial crisis of the most terrible proportions.  Nothing but the interference of the Secretary of the Treasury at a critical moment averted this disaster.  As it was, the losses were fearful.  Men in Wall street were ruined by the score, and for several days the best houses in the street were uncertain as to their exact condition.

An account of this formidable transaction is interesting as revealing the method of conducting the great operations of the street.

p291“On the 22d of September, 1869, gold stood at 137½ when Trinity bells rang out the hour of twelve.  By two it was at 139.  Before night its lowest quotation was 141. . . . An advance of three and a half per cent. in five hours.  At the same time the Stock Market exhibited tokens of excessive 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 manfully under their burden.  The character and purposes of the clique were fully known.  Whatever 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 millions, 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 141-5/8, and soon shot up to 144.  Then the clique began 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 beyond 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 millions by one bank alone on that day, lent color to the rumor.  Many brokers lost courage, and settled instantly.  The Gold Room 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 chambers of journalism.  Reporters were on the alert.  The great dailies magnified the struggle, and the Associated Press spread intelligence of the excitement to remote sections.  When Friday opened clear and calm, the pavement of Broad and New streets soon filled up with unwonted visitors.  All the idle population of the city and its neighborhood 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 the doorways, and piling themselves densely and painfully 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 paramount question now was, How would gold open?  They had not many minutes to wait.  Pressing up to the fountain, around which some fifty brokers had already congregated, 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.  Yells 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 150½.  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 300 agitated dealers and operators, shouting, heaving in masses against and around the iron railing of the fountain, falling back upon the approaches of the committee-rooms and the outer entrance, guarded with rigorous care by sturdy door-keepers.  Many of the principal brokers of the street were there,—Kimber, who had turned traitor to the ring; Colgate, the Baptist; Clews, a veteran government broker; one of the Marvins; James Brown; Albert Speyer, and dozens of others hardly less famous.  Every individual of all that seething 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 150½; 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 hundred 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.  Then came the terrific bid of Albert Speyer for any number of millions at 160.  William Parks sold instantly two millions and a half in one lot.  Yet the bids so far from yielding rose to 161, 162, 162½.  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 & 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 customers by dozens, whose margins were irrevocably burnt away in the smelting-furnace of the Gold Board, confronted their dealers with taunts and threats of violence for their treachery.  In others the nucleus of mobs began 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 threatened.  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 silence and the darkness which 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 Trinity bells pealed out the dawn of a new day, men bent over their books, scrutinized the Clearing-House statement for the morrow, took what thought was possible for the future.  At the Gold Exchange Bank the weary accountants were making ineffective efforts to complete Thursday’s business.  That toilful midnight, at the close of the last great passion-day of the bullion-worshippers, will be ever memorable for its anxieties and unsatisfying anguish.

p296“Saturday brought no relief.  The Gold Board met only to adjourn, as the Clearing-House had been incapable of the task of settling its accounts, complicated as they were by ever fresh failures.  The small brokers had gone under by scores.  The rumors of the impending suspension of some of the largest houses of the street gave fresh grounds for fear.  The Stock Exchange 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 came?  All through yesterday shares had been falling headlong.  New York Central careened to 148, and then recovered to 185¾.  Hudson plunged from 173 to 145.  Pittsburgh fell to 68.  Northwest reached 62½.  The shrinkage throughout all securities had been not less than thirty millions.  Would the impulse downward continue?  The throngs which filled the corridors and overhung the stairway from which one can look down upon the Long Room 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 Exchange Bank witnessed a similar scene, angry brokers assaulting the clerks and threatening all possible things unless instantaneous settlements were made.  The freedom 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 whose only origin was in ancient enmities, long-treasured spites, the soundless depths of unquenchable malignities.  Firms of staunchest reputation felt the rapier-stroke of old angers.  The knowledge that 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 borrowed 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 can 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 inextricably involved in the late difficulty, the only consequence would have been to throw them into bankruptcy, thus bringing some $60,000,000 under the hammer.  The market could not have borne up under such an avalanche.  It was decided that the Room should be kept open for borrowings and loans, but that all 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.”

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