Gould and Gold

Jay Gould was born in Roxbury, New York, on May 27, 1836, the son of a poor farmer. By 21, Gould had saved up $5,000, which he invested in the leather business and railroad stocks. Within a decade, Gould was a director of the Erie Railroad and, by means of illegal stock and bribery, clawed his way to a controlling interest in a number of railroads. With fellow tycoon James Fisk (1834-72), Gould hatched a scheme to corner the U.S. gold market. He persuaded President Grant to suspend government gold sales, thereby driving up the price of gold—which Gould and Fisk held in great quantity. Rousing momentarily from naive stupor, Grant realized what was going on and ordered the Treasury to release $4 million of its own gold to checkmate Gould. The result was Black Friday, September 24, 1869, which precipitated a major financial panic followed by severe economic depression as the inflated price of gold tumbled.

Many of the nation’s railroads, already reeling from cutthroat competition, now tottered on the verge of bankruptcy. John Pierpont Morgan (1837-1913), who had multiplied his family’s already mighty fortune by loaning money to France during the Franco-Prussian War of 1.871, now rushed in to pick up the pieces. By 1900, Morgan had acquired half the rail trackage in the nation. Most of the rest of the railroads were owned by Morgan’s friends, and together, they fixed freight prices at exorbitant levels. There was little shippers could do but pay.