Black Friday (1869)
Black Friday, September 24, 1869, was caused by the efforts of two speculators, Jay Gould and his partner James Fisk, to corner the gold market on the New York Gold Exchange. After Abel Corbin, a small time speculator, married Virginia Grant, the younger sister of President Ulysses S. Grant, Gould and Fisk approached Corbin, taking advantage of the relationship and persuaded Corbin to introduce them to Grant with the idea that befriending the President would give them privy information about up and coming government gold sales -- information with which they manipulated the market, resulting in the scandals that followed and which undermined the credibility of Grant's presidency and the national economy.
To finance the Civil War and Reconstruction, the federal government had assumed a large national debt. The national debt, which was $64 million dollars in 1860, had escalated to $2.8 billion at the end of the Andrew Johnson administration when Grant assumed the presidency. The problem was further compounded when unredeemable paper money, known as "greenbacks", which were not backed by gold but were required to be accepted for the payment of federal debt, had only served to push gold currency out of circulation, causing the price to of gold rise sharply. It was generally believed that the U.S. Government would ultimately redeem the "greenbacks" with gold. One of the first things Grant did as President was to sign legislation, The Public Credit Act, that would pay U.S. bonds back in "gold or its equivalent" and would redeem greenbacks from the economy as soon as possible. Grant believed that putting "sound money" back into circulation was the best approach to restoring the economy. Grant put in charge of the U.S. Treasury the talented George S. Boutwell whose primary task was to reduce the national debt. To accomplish this Boutwell, in April, ordered his assistant treasurer to sell gold from the U.S. Treasury and buy up wartime bonds. He also initiated reforms in the Treasury Department by improving methods of tax collecting and attacking the problem of counterfeiting. By the end of May the national debt had been reduced by $12 million dollars. Boutwell's treasury policy of reducing the national debt kept the money supply level and the gold price artificially low.
Cornering the gold market
In 1869, a group of speculators, headed by James Fisk and Jay Gould, sought to profit from this by cornering the gold market. Gould and Fisk first recruited Grant's brother-in-law, a financier named Abel Corbin who had married Grant's younger sister "Jennie". They used Corbin relationship to get close to Grant in social situations, where they would argue against government sale of gold, and Corbin would support their arguments. Corbin convinced Grant to appoint General Daniel Butterfield as assistant Treasurer of the United States. With backing by the President Boutwell's weekly Treasury auctions had stabilized the gold market. Butterfield agreed to tip the men off when the government intended to sell gold.
In the late summer of 1869, Gould began buying large amounts of gold. He never sold this gold. This caused prices to rise and stocks to plummet. After Grant realized what had happened, the federal government sold $4 million in gold. On September 20, 1869, Gould and Fisk started hoarding gold, driving the price higher. On September 24 the premium on a gold Double Eagle (representing 0.9675 troy ounces (30.09 g) of gold bullion at $20) was 30 percent higher than when Grant took office. But when the government gold hit the market, the premium plummeted within minutes. Investors scrambled to sell their holdings, and many of them, including Corbin, were ruined. Fisk and Gould escaped significant financial harm.
Investigation and aftermath
The subsequent Congressional investigation was chaired by James A. Garfield. Grant's decision to counter the escalating price of gold did not completely dispel rumors that he and his administration had profited from the affair. The investigation was alleged on the one hand to have been limited because Virginia Corbin and First Lady Julia Grant were not permitted to testify. Garfield's biographer, Alan Peskin, however, maintains the investigation was quite thorough. Butterfield resigned from the U.S. Treasury. Henry Adams, who believed that President Ulysses S. Grant had tolerated, encouraged, and perhaps even participated in corruption and swindles, attacked Grant in an 1870 article entitled The New York Gold Conspiracy. Grant's suspected involvement also led his presidency to be called the Era of Good Stealings.
Although Grant was not directly involved in the scandal, his personal association with Gould and Fisk gave clout to their attempt to manipulate the gold market. Though Grant had made it public, his well intended order to release gold in response to gold's rising price was itself a manipulation of the market. Grant had personally declined to listen to Gould's ambitious plan to corner the gold market, since the scheme was not announced publicly, but he could not be trusted. Gould had promoted the plan to Grant as a means to help farmers sell a bountiful 1869 wheat crop to Europe.
A highly fictionalized account of Fisk's life, culminating in a dramatic presentation of the gold corner, was shown in the 1937 film The Toast of New York.
- White 2016, p. 478.
- White 2016, p. 481.
- The "Black Friday" Gold Scandal, 145 Years Ago "The stock market joined in on the plunge, dropping a full 20 percentage points and bankrupting or inflicting severe damage on some of Wall Street's most venerable firms. Thousands of speculators were left financially ruined, and at least one committed suicide. Foreign trade ground to a halt. Farmers may have felt the squeeze most of all, with many seeing the value of their wheat and corn harvests dip by 50 percent."
- Brands 2012, p. 445.
- The New York Gold Conspiracy
- Jean Edward Smith, Grant, pp. 481-490, Simon & Schuster, 2001.
- E. Benjamin Andrews. History of the United States from the Earliest Discovery of America to the Present Day, Volume IV (New York: Charles Scribner's Sons, 1895), courtesy of Clipart ETC
- Ackerman, Kenneth D. (1988). The Gold Ring: Jim Fisk, Gould, and the Black Friday, 1869. New York: Dodd, Mead & Co. ISBN 0-396-09065-6.
- Brands, H. W. (2012). "Presidents in Crisis Grant: Takes on the Klan". American History: 42–47. ISSN 1076-8866.
- Garfield, James A. (March 1, 1870). Investigation Into the Causes of the Gold Panic: Report of the Majority of the Committee on Banking and Currency. Washington D.C.: Government Printing Office.
- Unger, Irwin (2015) . Greenback Era. Princeton University Press. ISBN 978-1-4008-7766-9.
- White, Ronald C. (2016). American Ulysses: A Life of Ulysses S. Grant. Random House Publishing Group. ISBN 978-1-5883-6992-5.
- H.W. Brands, "Lecture on Black Friday, 1869," (video) Hauerstein Center for Presidential Studies, Grand Valley State University, May 25, 2011. (1:04:29 running time)
- NY Times - Oct. 16, 1869 Harper's Weekly Cartoon: "Black Friday" and the Attempt to Corner the Gold Market.
- Illustration: "The New York Gold Room on 'Black Friday,' September 24, 1869."—E. Benjamin Andrews 1895
- 24 Black Friday
- PBS American Experience