Tavakoli Structured Finance LLC

The Financial Report

By Janet Tavakoli

The Great Gold Conspiracy of 1869

Twenty Years of Inside Life in Wall StreetWilliam Worthington Fowler’s Twenty Years of Inside Life in Wall Street or Reflections of the Personal Experience of a Speculator is a joy to read. The speculator and author met the most influential financiers of his day including Jay Gould, James “Diamond Jim” Fisk, Jr., Cornelius Vanderbilt, Jacob Little, Daniel Drew, Leonard Jerome, Addison Jerome, David Groesbeck, W.S. Woodward, and Henry Keep. Their fortunes rose and fell on margin, carry, and derivatives including puts, calls, and futures. They risked everything speculating in equities and a wide range of commodities including gold, silver, cotton, and more. Fowler’s tale entertains as he exposes the great corners, trading rings, conspiracies, bear twists, manipulations, and frauds.

Fowler’s ripping yarn covers the New York traded markets from 1860-1880, a period that spanned the Civil War, the post war bubble, worthless paper money, the Black Friday Gold Panic of 1869, the Great Panic of 1873, and the consequent first and worst seven year Great Depression.

Fowler witnessed how U.S. government paper money replaced specie leading to bubbles, panics, and crashes. It is time to revisit Fowler’s classic, especially since our current crisis has similarities with events preceding the crash of 1873 followed by the first Great Depression.

Conspiracies “R” U.S.

The Great Gold Conspiracy of 1869. Depicted are Jay Gould, James Fisk Jr., and Arthur Kimber

Arch conspirator Jay Gould, 33, Henry Fisk, Jr., 34, and Arthur Kimber. Before Black Friday, W..S. Woodward and Arthur Kimber had sold their interests to Gould.

In his account of The Great Gold Conspiracy of 1869, Fowler provides details of the New York financiers who plotted in style.

“Here, sitting at their ease, surrounded by luxury, in a magnificent apartment, with shrewd lawyers at their elbow, two confederates plotted The Great Gold Conspiracy of 1869, and coolly organized the ruin of thousands.”

“From April, 1865, to September, 1869, a period of more than four years, the movements of gold had been brought about by artificial means, in conjunction with commercial causes, or rather pretexts. The price of Government Bonds abroad, wars or rumors of wars in Europe, disturbances of trade, the shipments of the precious metal in payment of our imports, sales of gold by our government; these and a thousand other strings were harped upon by the gold gamblers to produce those singular upward and downward oscillations in the price, which enriched the members of the Gold Board, while they disturbed the peace of commerce and beggared a host of infatuated outside dealers.”

“Wall Street, like history, repeats itself. Every summer, since 1865, there had been a rise in gold. In March, 1869, gold fell to 131. The astute intellect of Jay Gould now foresaw another opportunity to push up the price of gold, and having purchased $7,000,000 of it, by playing on the strings of the Cuban insurrection, the Alabama difficulties, the prospect of a war between France and Prussia, etc., terrified the bears and rushed up the price to 145. Emboldened by the success of this move, he formed a new and daring scheme.”

The Black Friday Gold Panic or 1869 occurred on September 24, 1869. Arch conspirator Jason Gould, aka, Jay Gould (May 27, 1936-1892) was 33 years-old. James Fisk, Jr. aka Diamond Jim Fisk, aka Jubilee Jim, (April 1, 1835-Jan 7, 1872) was 34. Fisk was murdered at age 36. But that is another saga.

Wall Street Never Changes

In his book, Twenty-Eight Years in Wall Street, Henry Clews adds his own insight on the gold conspiracy. He recounts how Jay Gould and James Fisk Jr., skated for the crime and pushed their losses onto others.

The nucleus of the combination consisted of Jay Gould, James Fisk, Jr., W. S. Woodward, the veteran speculator, and Arthur Kimber, the youthful agent of a wealthy London banking house. Around this nucleus revolved a number of rich bankers, sly politicians, officials, and corporations made compact by the potentiality of a wealth beyond the dreams of avarice, and cohesive with the hope of plunder.

The eruption on Black Friday was really caused by the erratic conduct of James Fisk, Jr., who actively joined the movement on Thursday, the day before, and became wild with enthusiasm on the subject of high gold. He began on Friday, early in the morning, to buy large blocks through his own brokers, William Belden and Albert Speyer, running the price up very rapidly.

The original syndicate consisted of Jay Gould, Arthur Kimber, representing Stern Brothers, of London, and W. S. Woodward, of Rock Island corner notoriety. The two latter, however, sold out their interest to Gould, who directed the deal to the end, with the assistance of several able and wicked partners. Their office was located in Broad Street, on the present site of the Drexel Building.

My Telegram to [Treasury Secretary George S.] Boutwell and [President Grant]

When the excitement arising from the above causes was at its height, I sent a telegram to Secretary Boutwell, and one to President Grant, representing the exact condition of affairs in Wall Street, and urging the sale of gold without delay. I also prevailed upon General Butterfield, the New York Sub Treasurer, and Moses H. Grinnell, the Collector of the Port, to send similar telegrams, which they did, and timely action was taken at once by an order coming to sell $5,000,000.

The moral effect of this Government action was to strike terror to the holders of gold, and a general rush was made to sell out, thereby driving down the premium from 160, in less than two hours, to 132. The down grade produced an excitement quite equal to the early furore in the up movement. Albert Speyer had from Fisk a verbal carte blanche order to buy, in million lots, all the gold he could get at 160; while he was thus buying millions upon millions at this figure, on the opposite side, and in other sections of the room, sales were freely made in moderate amounts at 140, 145, 147 and 150, almost simultaneously; and even when 135 was reached, which was soon thereafter, Speyer still kept on bidding 160 for a million at a time, making one of the wildest and most ludicrous spectacles ever witnessed among men not idiots.

Fisk afterwards repudiated the contracts made on his account by Speyer &, Belden, simply denying having given the orders, and as they were not in writing, they could not well be proven, hence both brokers failed, throwing immense losses upon an innumerable number of others. Quite a noted firm sold Speyer some of his million lots, which they bought back at 140, being satisfied with the profit of 20 percent; when they had finished buying, the price instantly broke to 132, and the announcement of Speyer’s failure, which was made before the close of the day, caused them also to fail, as well as half the members of the Gold Room.

Owing to the serious complications prevailing, and the disaster being so widespread, it was found impossible to continue the clearances through the Gold Bank, and the Governing Committee of the Gold Room were at once convened, and passed a resolution to suspend all dealings in gold for one week, in order to enable the members to adjust their difficulties and differences between themselves privately. The Gold Bank also suspended business in the meantime. While Albert Speyer was vigorously buying and continuing to bid 160 for one million after another, the clique were as actively engaged in selling all the market would take at ten points less, and also busy making private settlements with the shorts.

As the transactions were purely phantom in their nature, the great parties in the speculative contest did not really lose much. Contrary to popular opinion about such transactions, they did, virtually, incur heavy losses, but in one way or another they managed to evade them. Gould’s losses were estimated at over four millions. Fisk’s were equally large, but he repudiated all of them. Others were heavily saddled, however, with the burden which he should have borne.

Gold Conspiracies (Not Theories) in the 21st Century

Today, it is unsurprising to find Deutsche Bank in the news as part of a multi-bank ring that fixed gold and silver prices, an activity the Commodities Futures Trading Commission (CFTC) has not stopped. In fact, the CFTC closed probes, even though price manipulation in silver and gold remains rampant. In the words of former CFTC Commissioner Bart Chilton:

“It’s been the most frustrating and disappointing non-policy related item since I joined the CFTC in 2007. Our manipulation standard remains too high a hurdle for regulators to overcome; not enough bad actors are being punished.”

In 2016, Deutsche Bank agreed to settle its gold price-fixing lawsuit fr $60 million. In 2021, gold-fixing allegations embroiled traders at Barclays, SocGen, Scotia Bank; they settled for $50 million. In 2020, HSBC agreed to pay $42 million to settle gold-fixing allegations. In August 2022, two J.P. Morgan traders, including the head of the precious metals trading desk, were convicted of fraud for “spoofing” precious metals futures contracts over an eight year period.

History repeats itself, especially in finance, as the U.S. (along with other governments) once again stretches its credit and prints money backed by promises.

See also: “How to Corner the Gold Market

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