“Gold at 160. Gold at 130.”

October 16, 1869

artist unknown

“Gold at 160.  Gold at 130.”

Analogies, Bible; New York City, Business; Presidential Administration, Ulysses S. Grant; U.S. Economic Panics and Depressions; U.S. Economic Policy, Money Question;

Gould, Jay;

New York City;

No caption.

This cartoon shows the before and after pictures of an investor affected by crash of the gold market on September 24, 1869.  "Black Friday," as it became known, was the result of an attempt by financiers Jay Gould and James Fisk to corner the gold market.  Action by the Grant administration foiled their scheme and prevented further economic devastation.  

When Ulysses S. Grant assumed the presidency in March 1869 the national economy faced several problems:  the federal debt was huge in the wake of the Civil War; hundreds of millions of unredeemable "greenbacks" had forced gold coins out of circulation; and the country's credit was precarious.  As his first presidential act, Grant signed a law promising that the federal government would pay holders of U.S. bonds in "gold or its equivalent" and would redeem the greenbacks as soon as practicable.  The price of gold dropped to $130 an ounce, a low point not seen since Congress suspended payments in gold or silver in 1862.

Grant's talented treasury secretary, George Boutwell, implemented reforms at the Treasury Department to limit counterfeiting and enhance tax collection.  Boutwell also began selling the Treasury's surplus gold for greenbacks, and then used the paper currency to buy back government bonds.  The administration's policy kept the money supply even, the price of gold low, and reduced the national debt $50 million by September 1869.  

Because the gold market hovered around the relatively small figure of $15 million, the federal government was essentially able to set the price; selling more of the Treasury's gold reduced the price, while selling less raised it.  Thus, gold investors could not try to make a profit based on economic indicators, but were hostage to unpredictable government actions in the market.  Gould and Fisk realized, though, that gaining inside information on the government's plans would allow them buy massive amounts of gold at a low price and then sell high, reaping enormous profits.  

Gould convinced a brother-in-law of President Grant, Abel Corbin, to join him and Fisk in their gold-market investments.  It is not certain, however, whether Corbin actually knew the real plot or was just a pawn in the high-finance game.  Gould then approached the assistant treasurer in New York, Daniel Butterfield, who was in charge of gold sales.  The financier gave Butterfield $10,000 (his annual salary was $8000), which the federal agent later claimed was a no-interest loan.  Furthermore, Gould offered twice to invest $500,000 in gold for Grant's personal secretary, Horace Porter, who refused.  Finally, Gould brazenly offered to give Grant's wife, Julia, half-interest in $250,000 worth of bonds, but she, too, declined.

When Grant visited New York on several occasions, Corbin arranged for Gould and Fisk to be present, and the conspirators tried to persuade the president that a higher gold price (from reduced Treasury sales) would benefit the nation.  As he usually did, Grant listened without comment.  When Gould pointedly asked for a hint at the government's actions, the president resolutely refused.  However, the financiers' visible access to Grant and those close to him enhanced the influence of Gould and Fisk in financial circles.  They began buying millions of dollars worth of gold in early September 1869, initiating a rise in the market.

After conferring with leading bankers in New York, Treasury Secretary Boutwell realized what the speculators were up to, and that the federal government should increase its gold sales to stabilize the market, or risk devaluing greenbacks, government bonds, and American credit.  Boutwell refused to see Corbin, who then alerted Gould that something was afoot and wrote a lengthy letter to Grant urgently requesting the president to stop his treasury secretary.  Grant did not reply, but the telegram to Gould stating, "Letter delivered all right," was mistranslated at the New York telegraph office as "Letter delivered.  All right."  Gould intensified his gold buying spree, and the price continued climbing.

However, the suspicious letter and Porter's admission of Gould's bribery attempt made Grant realize that he had been used as cover for the financiers to corner the gold market.  The president warned Corbin to cut his ties with Gould, and allowed Boutwell to proceed with his plans to increase the government's gold sales.  Corbin, though, tipped off Gould, who began selling his gold without informing Fisk.  The two-week frenzy on the gold market had virtually halted the country's foreign trade, which relied on gold as the medium of exchange, and threatened to broaden into an economic panic.

On Friday, September 24, 1869, the price of gold reached between $160 and $162, and Fisk, still buying, boasted that he would push it to $200.  After a brief discussion with the president, Boutwell sent a telegram to Butterfield directing him to sell $4,000,000 in gold and buy the same amount in bonds. When the news reached the Gold Room, the price of the precious metal fell to $133 within a few minutes.  The economic fallout caused stock prices to fall 20%, export agricultural products (mainly grain crops) to plummet over 50%, several brokerages to go bankrupt, and severe disruption in the national economy for months.  A combination of expert legal counsel, led by David Dudley Field, and Tammany Hall judges allowed Gould and Fisk to escape legal punishment.   

Robert C. Kennedy

“Gold at 160.  Gold at 130.”
March 4, 2024

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