The Black Friday Gold Scandal of 1869

Known for their robber baron clout on Wall Street and their complete lack of scruples, Jay Gould and Jim Fisk, president and vice president respectively of the Erie Railroad, trailed a long list of prior shady deals, including the issuance of fraudulent stocks and bribing public officials and judges, all in an effort to line their pockets with untold riches. Dubbed the “Mephistopheles of Wall Street” for his ability to line his pockets, in early 1869, Gould devised a way to corner the gold market, enlisting Fisk in his scheme, who contributed some $7 million, and Abel Corbin, a former Washington bureaucrat who happened to be married to President Ulysses S. Grant’s sister.

Cornering the Gold Market

At the time of their scheme, gold remained the official currency for international trade, while the U.S. itself had gone off the gold standard in lieu of federally-backed Greenbacks, originally used to fund the Union’s Civil War efforts. After Corbin gained assurances from Grant that the nation’s leader had changed his mind of selling off some of the treasury’s gold to stabilize the Wall Street gold market, Gould and his fellow conspirators began secretly stockpiling gold during the late summer of 1869, driving prices trading on the New York Stock Exchange’s Gold Room from $100 a unit to $141 Greenbacks in August alone, trapping speculators and short-sellers in a sudden financial vise.

The President Fights Back

By late September, Grant had his wife send a letter to Corbin, demanding he cease and desist, while in true robber baron fashion, Gould began selling off his gold at an enormous profit, at the same time concealing his trades from his colluding partners. With gold prices now topping $145 a unit, on September 24th, 1869, now known as Black Friday, Grant ordered the treasury department to sell $4 million in gold reserves, sending not only gold prices but Wall Street stocks in general into a precipitous downward tailspin, bankrupting or severely damaging many of Wall Street’s most venerable investment houses.

Instant Bankruptcies

Thousands of high rolling Wall Street speculators met with near-instant financial ruin, while foreign trade ceased altogether, further destroying many farmers when wheat and corn prices fell by 50 percent. Ripples from Black Friday depressed the U.S. economy for several years to come, at the same time casting a blight on the remainder of Grant’s tenure as president. Both Gould and Fisk would use their political connections to avoid even a day of jail time, and while exact numbers are hard to come by, Gould’s Black Friday profits netted him somewhere in the neighborhood of $12 million, or some $450 million in today’s currency, making the gold scandal of 1869, the first Black Friday in American history.