While late-19th century America was home to many skilful and unscrupulous speculators, Jason “Jay” Gould (1836–1892) stands up as the most colourful. His climb to prominence is a vivid example of the American dream: he built one of the most impressive business empires. He became the most daring and original entrepreneur of his age. Gould was an artist, do-it-yourself financier, industrialist, innovator, visionary, and strategist. He played a crucial role in developing a modern railway system, thus contributing to the economic growth of the isolated areas of the West.

At the same time, he earned the reputation of the most hated man in America, held responsible for the primary stock exchange crash and Gold Crisis. His wealth was estimated at $77 million, but many details of his deals have never been disclosed.

Gould started his Wall Street career as a stockbroker in 1859 by buying stock in railways and engaging in speculative investing practices. Nine years later, he was elected President of Erie railroad, and during this period formed partnerships with financiers Daniel Drew and Jim Fisk. Together, they kept control over the Erie railroad, making sure railroad tycoon Cornelius Vanderbilt would not put his hands on it. The rivalry between the financiers was dubbed the “Erie War,” and no dirty trick was spared there.

For instance, Gould, Drew, and Fisk issued fraudulent shares of Erie railroad, watering down the stock hoping Vanderbilt would buy large quantities. Not only that Gould had issued one hundred thousand shares of Erie stock illegally, but he also attempted to bribe New York legislators to legalize his actions. His attempts to expand the Erie railroad led to massive indebtedness and eventually cost him his job.

In 1869, Jay Gould and James Fisk sometimes referred to as The Gold Ring, launched an operation to corner the gold market. This operation involved infiltrating the federal government and their sale of gold. It started by heavily lobbying for the appointment of “the right man” — Daniel Butterfield — as an assistant treasurer. Once he was appointed, The Gold Ring bribed him to alert them when the federal government intended to sell gold.

They also gained direct access to the President to promote the idea of halting the government’s sale of gold, claiming that the drop in gold prices would hurt the farmers. When it happened, the Gold Ring bought up as much of the gold market as it could and accumulated a fortune. And that, in turn, kept pushing the gold price to new heights.

Eventually, the President smelled potential problems and decided to step in. However, Gould — thanks to his contacts — learned about the Presidential plans beforehand and played his hand very skilfully: Gould started to unload the gold slowly on the Thursday preceding Black Friday, but his partners continued to buy to make the others think he was still bullish on gold. And the price continued to climb — it opened at 141 1/2 and closed at 143 1/2.

The records show operators linked to Gould held contracts for over $100,000,000 in gold, while the ‘short’ interest was $250,000,000. The total amount of gold in the city did not exceed $25,000,000, and the difference had to be settled.

Here, Black Friday arrived, when the shorts — seeing the gold price hit 165 — started to cover their contracts while Gould continued to sell and his partners continued to buy.

Then, rumours of the contemplated selling of gold by the Treasury came, and the street went mad. Soon the Treasury order to sell $4,000,000 of gold appeared, and the collapse followed — prices fell from 165 to 133½.

The Gold Exchange Bank was obliged to suspend operations. That day’s clearances amounted to over $300,000,000 of gold, and the trading was stopped. The fortunes of hundreds were swept away in that day’s battle. Several firms were driven to the wall, announced their bankruptcies, and went under.

The crash caused chaos and economic turmoil, but President Grant was able to break The Gold Ring’s corner on the market and help the United States avoid a national depression. Gould, however, went home saved and unscathed. It is unknown what he made or what he lost in that struggle.

Gould the Industrialist

After Gould was forced out of the Erie railroad, he stayed focused on the sector and acquisitions — he bought several of the most important railroads in the United States, the Yale telegraph system, and the top line of transportation in New York City.

His scheme was simple: to buy up cheap and bankrupt roads, restructure them, issue new stock and bonds, unload on others by paying dividends, get the public interested in the property and sell at enormous profits. Nowadays, the process is known as building value.

However, Gould was equally good at doing the reverse: buying a prospering company and squeezing it.

By 1879, Jay gained control of three more critical western railroads, including the Missouri Pacific Railroad. He controlled 16,000 km of railway, about one-ninth of the rail in the United States, and he had a controlling interest in 15 percent of the country’s railway tracks by 1882. But not only that: he transformed troubled railroads into profitable ones, developing accompanying industry sectors and agriculture. That, in turn, helped to develop uninhabited areas of the West: isolated areas became blooming centres, also thanks to telegraph systems, another sector Gould was interested in — mainly the Western Union Telegraph Company.

Gould’s connection with the Western Union Telegraph Company began in 1881. For several years, with the aid of the American Union and the Atlantic and Pacific telegraph companies, which he controlled, he influenced the Western Union stock price while waiting for his chance to take in over and merge all the lines.

Here’s one example of Gould’s craftsmanship. By 1880 his American Union company had become a constant menace to the other company. Rates to every competing point had been cut, and his lines reached the Pacific.

Western Union at one period was up to 116. The wires of the Western Union were taken from the lines of the Union Pacific, and other great railroad systems controlled by Gould and those of the American Union were substituted.

The stock of the older corporation fell to 88. It was said that Gould was short 30,000 shares of Western Union, and if that was so, he made $840,000. But in 1881, Gould and his associates had practically secured control of the Western Union.

Eventually, he consolidated the two companies, and 100,000 shares of the American Union, which represented a comparatively small capital expenditure on the Gould’s side, went into the Western Union at par. Gould’s immense holdings of Western Union were thus acquired at a low figure.

Gould was also one of the first business people who understood the vital role of information. In May 1882, the Western Union secured control of all the European cables, and soon Gould tried to ensure control of the New York Associated Press, or, at least, of the news sent out.

He was reported to control three of the seven newspapers constituting the corporation, and the Western Union’s control of the cables became absolute. Gould became the absolute dictator of the Western Union and successfully overcame every competitor that arose.

Despite closing many spectacular deals, Gould loved to wrap them in the veil of mystery and was a master of the art of keeping silent. Hence, tracing the details of his financial doings often is like arduous detective work. It requires going through various legal documents, such as minutes of congressional investigations related to many of his transactions.

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Here are some recommended readings to follow the topic:

The Life and Legend of Jay Gould by Maury Klein;

Jay Gould: His Business Career, 1867–1892 by Julius Grodinsky;

Jay Gould: The Story of a Fortune by Robert I. Warshow;

The Wizard of Wall Street and His Wealth by Trumbull White.