On Friday September 24 1869 Wall Street was paying close attention to the price of gold. In the previous three weeks it had been rising rapidly and brokers were getting jittery, though that hadn’t stopped them from investing. Suddenly the price started to fall… and didn’t stop. In under 15 minutes, the price per ounce dropped from $162 to $133. Pandemonium broke out as Wall Street lost its nerve and sent the market crashing.
The cause of ‘Black Friday’ was a complex money-making scheme cooked up by a notorious pair of racketeers – financier James ‘Barnum of Wall Street’ Fisk, who was renowned for his entertaining persona, and Jay Gould, a shrewd railway magnate.
Using every means at their disposal including charm, nepotism, government-nobbling and insider trading, they set about cornering the gold market. To ensure their success, they enlisted the aid of the President’s brother-in-law and the Assistant Secretary to the Treasury. They even had the gall to approach President Ulysses S Grant himself (although he had the good sense to blank them).
Throughout September, Gould and Fisk were bulk-buying gold and hoarding their stock to create an artificial shortage, thus forcing the price up. In an attempt to calm the market, the government ordered the sale of $4 million worth of its gold reserves. But it miscalculated badly – the sudden flood of government gold for sale sent the price nose-diving, triggering a stock market crash, which turned into a bank run when panicked depositors tried to access their savings.
Despite the failure of their outrageous scheme, Gould and Fisk still managed to walk away with a cool $11 million between them.
Within five years Gould had become boss of the Union Pacific Railway. Fisk was less fortunate – he was shot dead in an argument over a Broadway starlet.
When: September 24 1869
Where: New York, USA
Toll: The public’s faith in the presidency and trust in politicians was rocked to the core. The stock market dropped by 20 per cent and thousands of investors lost their savings. Public confidence remained so shaken that when, a few years later in 1873, the banking firm J Cooke & Co became insolvent, it triggered the historic Long Depression that lasted until 1879.
You should know: During the American Civil War (1861-1865) the government raised money by issuing ‘greenbacks’ – paper dollars backed only by a government promise that they would be swapped for gold at the end of the war. But ‘greenbacks’ stayed in circulation and it was the difference in value between this paper money and ‘double eagles’ (gold coins) that profiteers like Fisk and Gould attempted to exploit, hoping to make a fortune by price-rigging.