CHAPTER XVII.
“Plans of mice and men gang aft aglee.”
Morning’s business offices were on the west side of Broadway, below Trinity Church, but he gave attention to his large and increasing correspondence in his rooms at the Hoffman House, where he had a suite of apartments fronting on Broadway.
The largest room of the suite had always been reserved by the proprietors for a private dining room, but Morning insisted upon its constituting a part of his suite, and as he permitted the hotel keepers to name their own price, it was reluctantly surrendered to him. In this room Morning had a large-sized phonograph receiver fitted into the wall opposite his desk, the instrument itself being placed upon a long table against the partition in the adjacent room. A cord which swung over the desk was fastened to a lever connected with an electric motor, also in the next room.
It was Morning’s habit each day after breakfast to seat himself at his desk, open his letters, pull the cord which started the electric motor, and “talk” his replies to the phonograph receiver. The instrument in the next room was arranged to hold a cylinder of sufficient length to receive a communication an hour in length. After Morning had completed this portion of his daily labors, it was the duty of his secretary to remove the cylinders, and place them in other phonographs, where two and sometimes three clerks received their contents, and reduced the same to typewriter manuscript.
This simple contrivance had still another use. Morning knew that there was no such fruitful source of business difficulties and consequent litigation as that which emanated from misunderstanding or misrepresentation of verbal communications. He endeavored, therefore, to conduct all important business conversations in this room, and all the utterances of either party were recorded by the faithful and unerring phonograph, and the cylinders upon which they were reported were properly labeled, dated, and stored away. He did not fail in any instance to inform the person with whom he was conversing that all their words were thus finding accurate record.
One day in October, 1895, while Morning was in Chicago—where he had gone to perfect the organization of a Labor Aid Corporation—the great financier, Mr. Arnold Claybank, stopped at the Hoffman House on his way down town, and ordered a choice dinner for three to be served at seven o’clock that day.
“And have it served in the room fronting upon Broadway, where we always dine,” said the millionaire.
“Very sorry, Mr. Claybank,” answered the clerk, “but that room is at present rented to Mr. David Morning, as a part of his suite, and when he is in town he uses it as a room in which to receive and answer his correspondence; at present he is in Chicago.”
“If he is in Chicago,” replied the Wall Street magnate, “you can have our dinner served in the room as usual. It will not disturb him, certainly, even if he should know of it, and he is not likely to know of it unless you tell him. I have dined in that room with my friends at least once a week during the last twenty years, and, not supposing you would ever rent it for other purposes, I have already invited them to meet me there this evening. I don’t like to change, in fact, I won’t change, and if you will not accommodate me I will take my patronage elsewhere.”
After some hesitation, the clerk agreed to have dinner served in the room desired, and at seven o’clock that evening Mr. Arnold Claybank, with his guests, Mr. Isaiah Wolf and Mr. John Gray, assembled to discuss both the menu and the subject of their gathering.
Not until the last course was removed, the Burgundy on the table, the cigars lighted, and the waiter excused from further attendance, did the great capitalists approach the real object of their meeting. Mr. Claybank observed that they might need writing materials, and, stepping to Morning’s desk, he seated himself thereat, and pulled what he supposed to be a bell cord that would summon a waiter. No waiter appeared in answer to the supposed summons, and Claybank, taking a notebook and pencil from his pocket, remarked that they would serve his purpose.
These three gentlemen had dined well, and should have been in a pleasant frame of mind toward the world, for good dinners are, or ought to be, humanizing in their tendencies. Yet there are natures which will remain unaffected even by terrapins, Maryland style, and roasted canvas-back duck, assimilated with the aid of Lafitte and Pommery Sec., and no tigers crouching in the jungle were ever more merciless and conscienceless in their rapacity than these three black-coated capitalists.
Mr. Arnold Claybank was the leading spirit of the conclave. His wealth was popularly estimated at $100,000,000. He had inherited none of it. At thirty-five years of age he was a dry goods merchant in an interior city in Ohio, possessed of less than $100,000. During his frequent visits to New York to purchase goods he was in the habit of “taking a flyer” in the stock market. These flyers proved so continuously successful, and added so largely to his capital, that in a few years he closed out his dry goods business, removed permanently to the metropolis, bought a seat in the stock board, and soon became known as one of the boldest and shrewdest operators in the street.
He was rapid and usually accurate in judgment, and always possessed of the courage of his convictions. He was as cunning as the gray fox, to which he was often likened. He was suave in manner but merciless in the execution of his plans. He was identified in the public mind with several of the boldest and most unscrupulous operations in the history of Wall Street, and his millions had steadily and rapidly increased, until now, at sixty years of age, he was one of the acknowledged kings of New York finance.
Isaiah Wolf was, as his name indicated, of Hebrew origin. He was about the same age as Claybank, and had many of the qualities of that gentleman, lacking, however, his courage and his quickness of comprehension and movement. He was a gambler by birth, education, and instinct, and a gambler who never failed to use all advantages possible.
Thirty years before he had been a clothing merchant and dealer in city, county, and legislative warrants at Portland, Oregon. He furnished the impecunious legislators, when they came down from the mountain counties, with an outfit of clothing; he discounted their salaries at three per cent per month; he was usually the custodian of the lobby funds, and he could always introduce senator or assemblyman to a quiet game of “draw,” where, whenever a huge “pot” was in dispute, Isaiah could usually be found safely entrenched behind the winning hand.
When the Comstock mines began to yield their great output of silver in 1875–77, the Wolf Brothers located in San Francisco, made their homes on Pine and California Streets, and gambled in mining stocks from the vantage-ground of secret knowledge, for in every mine were one or more miners under pay, not only from the mining company, but from Isaiah Wolf. In 1879, when the transactions in the stock board of San Francisco had dwindled to a tithe of their former magnitude, and when the sand-lot agitators succeeded in grafting their ideas of finance and taxation upon the organic law of California, Isaiah Wolf and his brother Emanuel gathered their assets together and joined the exodus of millionaires. In New York City they opened a bankers’ and brokers’ office, and were now accounted as jointly the possessors of $80,000,000, the management of which was left almost exclusively to Isaiah.
John Gray was an insignificant-looking old man of seventy. From his unkempt beard, watery eyes, shrinking manner, and small stature, he might have been taken for a congressional doorkeeper who had seen better days. In truth, there was, under his ignoble exterior, one of the broadest, wiliest, and best-informed minds in America. He was the acknowledged leader of Wall Street in ability and resources. His wealth was estimated at quite $150,000,000, and it had been created by himself in about forty-five years.
He began life as a Vermont peddler, but at the age of twenty-five carried his New England education, his capacity for calculation, his retentive memory, his frugal habits, and his tireless energy into New York City, where he began as porter and messenger in the office of a broker. He soon learned the history and methods of the principal operators of the Wall Street of that day, and his savings were shrewdly, quietly, and boldly invested on “points” which he picked up while delivering messages or awaiting replies. He soon accumulated a large sum of money, yet he kept his humble place, and his employer never suspected when he paid the faithful porter his $40 at the end of each month, that the quiet and deferential young man could have purchased not only his employer’s business, but the building in which it was conducted.
Gray remained as porter and messenger for five years, declining all offers which were made to him of promotion to a desk and a higher salary. The place he held gave him opportunities which could be obtained in no other way. None suspected the quiet and stolid-looking man, who seemed so dull of comprehension when any verbal message was intrusted to him; and words were dropped and conversations held in his presence which, when fitted by his quick and comprehensive brain into other words and conversations held in other offices, often enabled him to forecast events. The man who by any means is accurately advised of the real intentions of the leaders of Wall Street a day or even an hour before their execution, has a key to wealth, and Gray used this key, conducting all his operations through one broker, who was pledged to secrecy.
At the time of the great deal in Harlem, so successfully engineered before the war by Commodore Vanderbilt, Gray was still occupying his place as messenger. He overheard a conversation held in the commodore’s private office between that gentleman and his confidential clerk, and, comprehending the magnitude of the opportunity, he directed that all his resources, which then amounted to nearly $200,000, be placed in Harlem stock. He was enabled, under the system of margins which prevailed in Wall Street, to purchase $2,000,000 worth of the stock, which he sold at an average advance of fifty per cent, clearing $1,000,000 by the operation.
The old commodore, who had himself made $6,000,000 by the deal, found that somebody had been sharing profits with him to the extent of $1,000,000, and, not supposing that this was the result of guesswork, he used means to discover who was the cunning operator and what were the sources of his information. Without much difficulty he traced the transactions to John Gray, and, remembering the presence of that young man in the anteroom at the time of giving directions to his confidential clerk, he was not at a loss to determine how it came about.
The commodore considered that Gray had gained $1,000,000 which should have come to his own coffers, and he determined to “give the young fellow a lesson, sir,” as he said to his confidential clerk. That morning Gray’s employer received—to his great surprise—a call from Vanderbilt, who, to his greater surprise, informed him of the true status of his messenger, who had become a millionaire. Gray’s employer readily promised to assist in the scheme which Vanderbilt formed for punishing Gray and “stripping him of his ill-gotten gains, sir.” Vanderbilt required only that Gray’s employer should next day send Gray to Vanderbilt’s office, with a verbal message, inquiring, “What is to be done about Erie?”
The next day Gray called and delivered his message to the commodore in his private office.
“Take a seat, young man, until I can write a reply,” was the direction, and Gray deferentially seated himself upon the edge of a chair, and gazed at the carpet stolidly, while the commodore penned the following: “Buy all the Erie offered at market rates up to fifty-three. C. V.” This note the commodore placed in an envelope, which he directed, but apparently forgot to seal, and handed it to Gray, who thereupon departed. As the door closed behind the messenger, the veteran bull smote himself upon the sides, and threw his head back and laughed.
Gray noticed that the envelope was not sealed, and before he reached the bottom of the stairs, he possessed himself of its contents.
Then he fell into a train of thought. Erie was selling at $37, and Gray was thoroughly posted as to the resources, liabilities, and business of the road, and knew very nearly who were the principal stockholders. He knew that the commodore held fully one-third of the capital stock of Erie, which had cost him not more than $30 a share, and he also knew that the old gentleman had been for some time selling his stock at $37 as fast as he could do so without breaking the market. Thirty-seven was really a nursed price for the stock; it was more than the condition and prospects of the road warranted, and Gray did not believe that Vanderbilt intended to purchase any great quantity, even at $37, or that it would be possible for him to run the stock to $53 without purchasing the entire amount.
Gray delivered the note to his employer, and asked that gentleman if he might be excused for half an hour to attend to some matters of business of his own. Leave of absence was graciously granted, and Gray was watched to the door of the office of the broker who had bought and sold his Harlem stock. Then Gray’s employer walked to the office of the expectant commodore and informed him that the young man had swallowed the bait, for he had gone to the office of his broker, probably to order large purchases of Erie.
Vanderbilt thanked the broker, assured him that in the division of the spoils he should not be forgotten, and authorized him in furtherance of their project to purchase all the Erie offered up to $42, to which figure Vanderbilt proposed to run the stock before letting it drop.
Gray directed his broker to purchase Erie in one-hundred-share lots, beginning at $37, and to follow the market up to $53 if it reached that figure, but not to purchase more than five thousand shares in all. Having given this direction, he walked into the back office of a firm of brokers, who, although leaders in the market, had never succeeded in obtaining any business from Vanderbilt, and between them and that gentleman there was a business feud of long standing. The quiet messenger was well known to the head of the firm, who greeted him pleasantly.
“What can I do for you, Gray,” said he.
“I would like to take your time for not more than five minutes,” said Gray.
“I am pretty busy,” said the gentleman, “but I will try and oblige you,” and he led the way to an inner office.
The broker’s eyes distended with astonishment as Gray rapidly told how he had made such use of his opportunities as porter and messenger as to accumulate, by speculation, a large sum of money, and that he desired now to employ their firm in an operation which, for reasons of his own, he did not care to intrust to his regular broker.
The gentleman smilingly agreed to accept Mr. Gray’s business, and opened his eyes still wider when Gray took from his pockets large packages containing bonds and securities to the amount of half a million dollars, and, depositing them as collateral, directed the broker to sell all the Erie for which he could find buyers at forty and over, and to buy it whenever it went below thirty-three.
That day Erie mounted, under the pressure of Vanderbilt’s purchases, and the flurry created thereby, to $43, at which figure an immense quantity changed hands. Then it fell rapidly, point by point, back to $37, and, under the influence of a temporary panic, went down to $32, at which figure it rallied and mounted to $35, where it stood at the close of the day.
Mr. Gray’s regular broker reported to him purchases of five thousand shares Erie at prices ranging from $37 to $42, and averaging about $39. He regretted that Mr. Gray had not authorized a sale at $43.25, which was the highest point reached, and at closing figures Mr. Gray must lose about $20,000.
And Mr. Gray’s new brokers reported to him sales of eighty thousand shares of Erie, at an average of $41.50, which had been repurchased at an average of $34.50, with a profit to Mr. Gray of $540,000, which they held, subject to his check.
And when the returns were all in at the office of the old commodore, and that white-whiskered, choleric, kind-hearted, and courageous old bull found that he owned more Erie than ever, at higher prices than those for which he had sold a small part of his holdings, and that the rattan which he had prepared for Gray had fallen upon his own shoulders, he stormed for a while and clothed himself with cursing as with a garment, and then he cooled off and laughed. Then he sent a note, this time not to John Gray’s employer, but to John Gray himself, which read as follows: “Young fellow, you are a genius. Come and dine with me at six o’clock to-day, at Delmonico’s. C. V.”
The friendship cemented at that dinner, between the great capitalist and the ex-messenger—for Gray returned no more to his duties as a porter—continued until the day of the commodore’s death.
Gray continued to operate in Wall Street, both in small and large ways, and seldom made a loss. When the first loud mutterings of the civil conflict began to shake the land, he became a heavy purchaser of tar, resin, and cotton, and, later, of gold. When the Union armies were defeated and the day looked darkest, and gold mounted to two hundred and eighty premium, he never faltered in his belief in the ultimate triumph of the nation, and he sold gold and bought government bonds, and margined one against the other, and risked little and gained much.
A year after the sun went down upon Appomattox, the Yankee peddler was worth $20,000,000, and ten years later he was worth $50,000,000. He abandoned such stock operations as were dependent for their success upon other men’s movements and plans, and only engaged in such as he could absolutely control. He gambled only with marked cards and loaded dice. He bought a control of the stocks and bonds of badly-managed and bankrupt railroads. He consolidated them, re-equipped them, built feeders, opened new sources of traffic, and so doubled, trebled, and quadrupled his investments. He sold short the stock of a prosperous railroad, and obtained, by purchase of proxies, the control of its management. He cut rates, diminished traffic, enlarged expenses, and passed dividends until he depreciated the value of the stock to a point where he could gain millions by covering his shorts, and other millions by again restoring the road to prosperity. In one instance, by his paid emissaries, he promoted a general strike, until, through riot and fires and suspension of traffic, the stock of the afflicted corporation was depreciated to the price at which he desired to purchase a controlling interest.
John Gray was an exemplary father and husband, a good neighbor, and, in a small way, generous and charitable; but in his larger dealings with mankind he was a moral idiot, without conscience or perception. The world is no better for his life; the youth of the land are the worse for his example of successful scoundrelism, and those who wish well to their country and their kind, will have a right to stand beside his coffin and thank God that he is dead.
“I suppose,” said Mr. Arnold Claybank, “that we all understand the general outlines of our project, and that this meeting is for the purpose of talking over details.”
“Our purpose,” said Mr. Wolf, “of I gomprehent it, is to use the bower dot we haf in our hants, to make for ourselves about fifty millions of tollars apiece. Is not dot apout vot it vas, eh?”
“We need not, I think, discuss that question,” said Gray suavely.
“Exactly,” said Claybank. “Now I propose that we list the securities which we shall place in our pool, at the closing quotations of the Stock Exchange to-day, each one of us being credited with his contributions. The stocks contributed will aggregate in value about $150,000,000, at present market prices, and, as nearly as possible, will be contributed by us equally. It is also understood that the stocks and bonds placed in the pool will constitute the entire holdings of each and all of us, in that class of property. Am I correct?”
“Quite so,” said Mr. Gray.
“Dot is also my unterstanting,” said Wolf.
“Very well,” resumed Claybank, “these securities are to be placed in the offices of different brokers, and turned into cash as rapidly as possible without breaking the market. The public will, I think, take them easily in a week, for the market is rising, and permanent as well as speculative investment is in order.”
“Ont then we lock up the gash for which we sells the stock, ain’t it?” said Wolf.
“Not immediately,” rejoined Claybank, “it must be left in the banks in the usual channels for a time, or there will be no money for them to loan to the buyers of stocks. Having sold our own securities, we will next proceed to sell short at ruling prices to as large an extent as possible.”
“Your plan is admirable,” said Mr. Gray. “We will next arrange at the banks for borrowing all the money that they can spare without suspending payment, and we will compel them to withdraw all loans now out. Through our joint and separate control of, and influence with, the officers and directors, we ought to be able to borrow in this city, and in Boston and Philadelphia, as much as $150,000,000, which, added to $150,000,000 received from sale of our stocks, will give us control of $350,000,000 in cash.”
“Will dey loan so much as $150,000,000 even upon the personal security of such men as we?” said Wolf.
“They will not be asked to do so,” said Gray. “The money borrowed can be sealed up and left as special deposits in their vaults as security for itself, with a small margin of one or two per cent to cover interest.”
“Dot inderest, of we borrow for thirty days at six per cent, on $150,000,000 will amount to three kevawters of a million of tollars; ont that amount we lose out of our bockets; ont the interest on our own $150,000,000 which will be itle for a month will be another three kevawters of a million. It makes US$500,000 each to lose. It is a great teal of money to lose,” said Wolf.
“That,” said Claybank, “is all we lose, and is practically all we risk. It is essential to the success of our plans that for a brief period we shall withdraw from the channels of commerce a large portion of the money of the country. We cannot withdraw it unless we control it; we cannot control it unless we borrow it; and we cannot borrow it without paying bank rates of interest upon it.”
“How,” said Gray, “do you propose to supply the necessary margins for the stock which we sell short? When you borrow stock on a rapidly-falling market, the loaner expects at some time a reaction, and an equally rapid advance, and you will have to give him a pretty big margin beyond the money which you receive from a sale of the borrowed stock.”
“We shall have for that purpose,” replied Claybank, “the $150,000,000 received from the sale of our own stock. This, at fifty per cent fall in prices, will margin borrowings of three hundred millions of stock, and this money we can arrange to have locked up in special deposits as well as the money we borrow.”
“Ont to how low a point shall we put brices before we commence to cover?” said Wolf.
“That,” replied Claybank, “will be a matter for future consideration. My present impression is that we can by thus locking up the currency bear the market one-half. We must not proceed so far as we might go, or we will ruin everybody, so that there will be no investors to purchase stocks when we wish to sell them again after we have loaded up for a rise.”
“Ont how much we makes by bearing fifty per cent?” asked Wolf.
“It is easily calculated,” replied Claybank. “If our plans succeed, we sell one hundred and fifty millions of our own holdings at present prices. In order to bear the market fifty per cent below present prices, we must continue to sell down, diminishing the quantity we sell as prices recede, and when we begin to cover, we must buy all we can at the lowest point, diminishing our purchases as prices advance. Those not familiar with such things would be surprised to know that the ebb and flow of values in the stock market is almost as regular, and can be almost as certainly predicted, as the movement of the tides. Such a movement as we propose is artificial, yet, to an extent, it will be similarly controlled by the influences of human nature. If we sell one hundred and fifty millions of stock at an average of say one hundred, and three hundred millions at an average say of eighty, and buy it all back at an average of sixty, we will gain one hundred and twenty millions, and that, I think, is about all we can calculate upon.”
“But have you considered, gentlemen, the other side of the question?” said Gray. “Have you fully considered whether there may not exist influences that will defeat us? Depend upon it, once we inaugurate this raid, our rivals in business will plot to overthrow us. Such great newspapers as are not in our control will denounce us. The Treasury Department at Washington, which is under the control of the Farmers’ Alliance party, will use every effort to break down our combination, and we shall be howled at generally as ghouls and villains. I do not care much about the public or the newspapers, but we must take every possible precaution against failure.”
“That is right,” said Claybank. “I have considered all these things and I do not see how our plan can be defeated. The newspapers may denounce us but cannot overthrow our plan, which, at last, is very simple. We produce a panic and depression of prices by locking up the circulating medium, and prices can only be advanced by unlocking the money and restoring it, or other money in its place, to the channels of commerce. The money which we lock up in special deposits must remain in the bank vaults until we release it. No bank officer would for any reason or under any pressure dare to touch a special deposit. It would be a penitentiary offense to tamper with it.”
“Are you sure,” said Gray, “that other capitalists may not combine, and provide other money to take the place of that which we lock up?”
“The only other very large sum of money in the country within the control of anybody,” replied Claybank, “is $300,000,000 in the treasury vaults at Washington. The laws authorizing government deposits in banks, as well as the law authorizing bond purchases in the discretion of the secretary of the treasury, have, as you know, been repealed. There are absolutely but two ways to get that $300,000,000 out of the treasury vaults. One is by the ordinary disbursements of government, which would take a year or more, and the other is by somebody depositing, under the law of 1894, gold or silver bars to that amount, and nobody in the world is able to command three hundred, or one hundred, or even fifty millions of dollars in gold or silver bullion.”
“The new mining capitalist, David Morning, might supply the bars from his mine in Arizona if we gave him a few years’ time,” said Gray.
“Yes, and if we gave him time he would be crank enough to do it,” replied Claybank. “But we won’t give him time. How much does his mine yield, anyhow?”
“Four millions a month in solit golt,” said Wolf. “It has yieltet that sum now for teventy months. I hear that it is nearly worked out, but nopoty can get into it, and you can’t tell anything apout it. If it continues to yielt at that rate for a few years, dot fellow is going to make us all some trupple. He is crazy as a loon, though he has taken out of his mine over eighty millons of tollars.”
“Even his $80,000,000, if he has them in money, might disarrange our plans,” said Gray.
“He has plown them all in, puilding plocks for glerks ont poor people, ont he disgriminates against Hebrews, or his trustees do. A Jew knows a goot thing when he fints it, ont there were eighteen thousant applications from Jew glerks for the prifilege of renting apartments in the Morning Blocks, ont the committee made up a mean drick to get rit of them. They requiret every man who applied for rooms to answer whether it was easier to fill to a bob-tail flush or a sequence, ont those who answered the question they refused to pass, on the grount that they knew too much apout draw poker to haf goot moral characters.”
“I do not see,” said Claybank, after the laughter at Wolf’s indignation had subsided, “that we need take Mr. Morning into consideration as a disturbing element in our present plans. If the present output of his mine shall continue, it must, by and by, greatly advance prices of stocks and all other property, but that is in the future.”
“Have we anything further to consider?” said Gray.
“I think,” replied Claybank, rising, “that we understand each other perfectly. I will have triplicate memorandums made of our agreement, which we can execute in my office to-morrow morning at nine o’clock, where we will have our stocks brought at the same time. This Burgundy is the genuine article, Clos Voguet, vintage of 1875. I propose as a parting toast, ‘Success to our enterprise.’”
And the phonograph needle in the adjoining room wrote in mystic scratches upon the wax, “Success to our enterprise.” Then came the shuffling of feet, the sound of a closing door, and the faint buzz of the electric motor until it ceased, and silence reigned.