Continuing our admittedly haphazard history of gold in America, we now advance to the story of Jay Gould and his 1869 attempt to corner the gold market.

Born on May 27, 1836, Jason "Jay" Gould was born on a family farm in upstate New York to parents who were of English and Scottish heritage. Gould was a sickly child (and he would be plagued by ill health his entire life) who appeared to have few other interests than how to make money. He left school at 14, clerked in a store, studied surveying, took a job as a surveyor's assistant at $20 / month and saved a few hundred dollars. He also was interested in literature and while he was still in his teens, Jay wrote a history of Delaware County, New York. Soon he had amassed about $5,000 selling his maps and book. Gould then launched his first real business venture, opening a tannery near Stroudsburg, PA with a partner by the name of Zadoc Pratt.

Well, before you knew it, Gould and Pratt's tannery was the biggest in the country and they named the town where it was located, Gouldsboro. But little did Pratt know that Gould was secretly learning how to play the New York futures market for leather hides. [Bet you didn't even know this once existed. I didn't.] Pratt also didn't know that Gould, who managed the books, was using a small, secret bank in Stroudsburg to siphon off Pratt's funds. Well, when Pratt realized that Jay was cooking the books you can imagine that he was quite upset, and discouraged, but for some reason he didn't try to prosecute Gould, instead, he allowed himself to be bought out by Jay for one-half of what he originally put into the tannery. Despite this incident, soon Gould had cornered the hide market and was worth, on paper, $1 million. Alas, the panic of 1857 wiped Jay out, as the hide market collapsed along with everything else, thereby proving that even today, cowhide is not a safe haven during times of financial stress.

Gould had a new partner at the time, Charles Leupp, and Leupp was astounded that the young Gould didn't seem to care that the two were nearly bankrupt. In fact Leupp was so upset by Gould's seeming lack of business ethics that he went home to his East Side New York City residence and promptly committed suicide. As market historian Charles Geisst puts it, "The first fatality in Jay Gould's long and infamous business career."

Gould would go on to become prince of the "robber barons," a group that initially included the likes of Jim Fisk, Daniel Drew, and Cornelius Vanderbilt…and later John D. Rockefeller and Andrew Carnegie.

In fact Jay Gould is one of the great dirtballs of all time. Now we aren't going to cover his whole career here because, over time, his name will pop up in various other tales I'll be addressing, and, yes, he has his defenders. After all, by the time he was finished as a speculator / financier, Gould had thought up just about every possible financial instrument there was, long before the likes of Michael Milken, including payment-in-kind bonds, deeply subordinated convertibles, and layering of junior securities. But bottom line, Jay Gould was scum. To give you an idea, following are various descriptions of him that I gleaned from the sources listed below.

"A secretive trickster…"

"Gould was slight, consumptive, dark, secretive, scheming, and loathed by all except his family…"

"He was not a builder, he was a destroyer."

"The worst man on earth since the beginning of the Christian era. He is treacherous, false, cowardly, and a despicable worm incapable of generous nature." [Fellow speculator James R. Keene - courtesy of Edward Chancellor]

"One of the most sinister figures that ever flitted batlike across the vision of the American people." [Joseph Pulitzer - Chancellor]

"A freebooter who, if he could not appropriate millions, would filch thousands; a pitiless human carnivore, glutting on the blood of his numberless victims; a gambler destitute of the usual gambler's code of fairness in abiding by the rules; an incarnate fiend of a Machiavelli in his calculations, his schemes and ambushes, his plots and counterplots." [Gustavus Myers: "A History of Great American Fortunes."]

And perhaps the most famous, from speculator Daniel Drew, "His touch is death."

Physically, there is also no shortage of description. Gould was "tiny, silent, with sad dark eyes." He only weighed about 120 pounds and he had a nervous disposition and a certain air of effeminacy in his gestures. A reporter for an upstate New York newspaper once filed this report.

"I saw him take the plunge in the Turkish bath of Saratoga. His arms were small, his chest was hollow, his face was tawny and sallow, and his legs! Well, I never saw such a prominent 'bull' that had such insignificant calves. Perhaps - perhaps you could not put a napkin ring over his foot and push it up to his knees; I am not certain."

Author Charles Morris adds, "Gould was a loner, famously poker-faced, a man of long silences, who betrayed the tensions of business by obsessively tearing small bits of paper." [Aagh! I sometimes do that.] Morris does note that "Gould could be relied upon to keep his word - provided that the relier (sic) parsed very precisely what Gould had promised, for he was master of the crucial ambiguity."

Gould made his initial fortune, after the tannery trade, in railroads, where he and his cronies would master "the art of buying rundown (operations), making cosmetic improvements, paying dividends out of capital, and selling out at a profit, (all the while) using corporate treasuries for personal speculation and judicious bribes." [Tindall and Shi]

A typical deal of Gould's was the looting of the Erie Railroad in 1868, when Jim Fisk, Frederick Lane and Gould seized control of the railroad from the rest of the board. They quickly issued and sold more than $20 million in stock (secretly) and pocketed the proceeds between the three of them. They then walked away, leaving the Erie in severe financial distress, a condition from which it wouldn't emerge until the 1940s. That was the pattern throughout Gould's career. Nearly every enterprise he touched was either compromised or ruined.

Next week, 1869 and Jay Gould's attempt to corner the gold market.

Sources:

"America: A Narrative History," Tindall and Shi
"Empire Express," David Haward Bain
"Wall Street: A History," Charles Geisst
"Devil Take the Hindmost," Edward Chancellor
"A History of the American People," Paul Johnson
"Manias, Panics, and Crashes," Charles Kindleberger
"Money, Greed, and Risk," Charles Morris
"The Presidents," edited by Henry Graff

Brian Trumbore