It was one of Mr. Gould’s peculiarities that he rarely entered into any large speculation without furnishing the public with a plausible reason for assisting him in his operations. This was certainly the case in the gold conspiracy. The plausible reason was in this case suggested to Mr. Gould by James McHenry, who was then training with Mr. Gould in Erie. The latter spared no pains to dress the reason up in the best shape and give it to the public. Mr. Gould argued with much apparent force, but actual sophistry, that an advance in the price of gold would benefit the Western farmers in giving them a bigger price for their grain, and Mr. Gould backed up this theory with many facts and figures. Gen. Grant had just become President. His Secretary of the Treasury was George F. Boutwell. The key to the situation was the financial policy of the government. No successful corner in gold could be established if the Treasury should sell gold with a liberal hand. It should be explained that the war had caused a lively speculation in gold, which continued after the war until the resumption of specie payments made the greenbacks equal in value to gold. Speculation in gold was carried on in the gold-room, an institution separate from the Stock Exchange.
It became essential to the success of Mr. Gould’s plans that the Grant administration should either become a party to the speculation or else an honest believer in his crop theory. Failing in both of these, the public must at least be impressed with the idea that the administration was in the deal whether it was or not. So Gould began to lay systematic siege around the administration. He seems to have entered alone into this speculation. It was only when he was unable to carry the burden alone that he took in others, and it was not until late in the game that Fisk entered, Gould found a brother-in-law of President Grant a convenient tool in his operations. The name of this brother-in-law was A. R. Corbin, who had been something of an adventurer all his life, and whose chief hold on respectability was his relationship to the President. Gould unfolded enough of his plans to Corbin to enlist him in his service and to bind him by interest to the speculation. Gould bought for Corbin $1,500,000 of gold, and promised him that all the profits should be turned over to him. Every rise of one per cent. in the price of gold made Corbin $15,000 richer. Corbin claimed to have great influence with the President, and Gould evidently placed much reliance in him. “I am right behind the throne,” said Corbin to Gould at one stage of the proceedings. “Give yourself no uneasiness. All is right.”
Mr. Henry Adams, in his celebrated chapter, “The New York Gold Conspiracy,” makes the following interesting explanation of circumstances preliminary to “Black Friday:” “In order to explain the operation of a so-called corner in gold to ordinary readers with the least possible use of slang or technical phrases, two preliminary statements are necessary. In the first place, it must be understood that the supply of gold immediately available for transfers is limited within distinct bonds in America. New York and the country behind it contain an amount usually estimated at about $20,000,000. The national government commonly holds from $75,000,000 to $100,000,000, which may be thrown bodily on the market if the President orders it. To obtain gold from Europe, or other sources, requires time.
“In the second place, gold in America is a commodity bought and sold like stocks. In gold, as in stocks, the transactions are both real and speculative. The real transactions are mostly purchases or loans made by importers who require coin to pay custom on their imports. The speculative transactions are mere wagers on the rise or fall of price, and neither require any actual transfer of gold, or even imply its existence, although in times of excitement hundreds of millions nominally are bought, sold and loaned.
“Under the late administration, Mr. McCulloch, then Secretary of the Treasury, had thought it his duty at least to guarantee a stable currency, although Congress forbade him to restore the gold standard. During four years gold had fluctuated little and principally from natural causes, and the danger of attempting to create an artificial scarcity in it had prevented the operators from trying an experiment which would have been sure to irritate the government. The financial policy of the new administration was not so definitely fixed, and the success of the speculation would depend on the action of Mr. Boutwell, the new secretary, whose direction was understood to have begun by a marked censure on the course pursued by his predecessor.
“Of all financial operations, cornering gold is the most brilliant and the most dangerous, and possibly the very hazard and splendor of the attempt were the reasons of its fascination to Mr. Jay Gould’s fancy. He dwelt upon it for months and played with it like a pet toy. His fertile mind even went so far as to discover that it would prove a blessing to the community, and on this ingenious theory, half honest and half fraudulent, he stretched the widely extended fabric of the web in which all mankind was to be caught. This theory was in itself partially sound. Starting from the principle that the price of grain in New York is regulated by the price in London, and is not effected by currency fluctuations, Mr. Gould argued that if it were possible to raise the premium on gold from 30 to 40 cents at harvest time, the farmer’s grain would be worth $1.40 instead of $1.30, and as a consequence the farmer would hasten to send all his crop to New-York for export over the Erie railway, which was sorely in need of freight. With the assistance of another gentleman, Mr. Gould calculated the exact premium at which the western farmer would consent to dispose of his grain, and thus distance the three hundred sail which were hastening from the Danube to supply the English market. Gold, which was then heavy at 34, must be raised to 45.
“This clever idea, like all the other ideas of these gentlemen of Erie, seems to have had the single fault of requiring that some one somewhere should be swindled. The scheme was probably feasible; but sooner or later the reaction from such an artificial stimulant must have come, and whenever it came, some one must suffer. Nevertheless, Mr. Gould probably argued that so long as the farmer got his money, the Erie railway its freights, and he himself his small profits on the gold he bought, it was of little consequence who else might be injured; and indeed by the time the reaction came, and gold was ready to fall as he expected, Mr. Gould would probably have been ready to assist the process by speculative sales in order to enable the Western farmer to buy his spring goods cheap, as he had sold his autumn crops dear. He himself was equally ready to buy gold cheap and sell it dear on his private account, and as he proposed to bleed New York merchants for the benefit of the Western farmer, so he was willing to bleed Broad street for his own. The patriotic object was, however, the one which, for obvious reasons, Mr. Gould preferred to put forward most prominently and on the strength of which he hoped to rest his ambitious structure of intrigue.”
Here is the story in brief: In March, 1869, the price of gold touched 130¼, which was the lowest figure that it had reached in three years. Jay Gould, as president of the Erie railway and the principal owner of the Tenth National Bank, had the command of large sums of money. He proposed to Fisk that they take advantage of the low price of gold and “corner” it. Fisk did not think the scheme practicable, and declined at first to go in. Subsequently he reconsidered his determination and joined in the undertaking zealously. Gould bought $7,000,000 of gold at 132 and put up the price to 140. He induced other brokers to buy heavily, and within a few days gold advanced to 144. It soon dropped back to 136. The element of uncertainty in Mr. Gould’s plan was the policy of the government with reference to gold sales. Should the government at any time release some of the millions stored in the Sub-Treasury here, no “corner” could be successful.
The first step in the conspiracy after the bribing of Corbin and the purchase of a large quantity of gold was to secure the appointment of the right sort of man as Assistant Treasurer at New York. Though nominally a subordinate officer and having no original authority, the assistant treasurer draws the salary of a cabinet officer, and his influence is large. Corbin undertook this part of the scheme and secured the appointment of Gen. Butterworth, who seemed to give great satisfaction to Gould. Butterworth was afterward exonerated by Congress of all guilty connection with the gold conspiracy, but Gould purchased for his account $1,000,000 of gold. But then Gould also had the effrontery at one stage of the negotiations to buy $500,000 of gold for Gen. Porter, the President’s private secretary, which that gentleman promptly declined. It was said, also, that $500,000 was purchased in the name of Mrs. Grant, but she never received any of the profits and had no connection with the conspiracy.
Butterworth secured, it was necessary to make an impression on the President. Says Mr. Adams: “On the 15th of June, 1869, the President came to New York, and was there the guest of Mr. Corbin, who urged Mr. Gould to call and pay his respects to the chief magistrate. Mr. Gould had probably aimed at precisely this result. He called, and the President of the United States not only listened to the president of Erie, but accepted an invitation to Mr. Fisk’s theatre, sat in Mr. Fisk’s private box, and the next evening became the guest of these two gentlemen on their magnificent Newport steamer.”