Chapter LVIII: Jay Gould (1)

HIS BIRTH AND EARLY EDUCATION.—CLERK IN A COUNTRY STORE.—HE INVENTS A
MOUSE TRAP.—BECOMES A CIVIL ENGINEER AND SURVEYS DELAWARE
COUNTY.—WRITES A BOOK AND SELLS IT.—GETS A PARTNERSHIP IN A
PENNSYLVANIA TANNERY AND SOON BUYS HIS PARTNER OUT.—HE COMES TO NEW
YORK TO SELL HIS LEATHER, FALLS IN LOVE WITH A LEATHER MERCHANT’S
DAUGHTER AND MARRIES HER.—SETTLES IN THE METROPOLIS AND BEGINS TO
DEAL IN RAILROADS.—BUYS A BANKRUPT ROAD FROM HIS FATHER-IN-LAW,
REORGANIZES IT AND SELLS IT AT A CONSIDERABLE PROFIT.—HENCEFORTH HE
MAKES HIS MONEY DEALING IN RAILROADS.—HIS METHOD OF BUYING,
REORGANIZING AND SELLING OUT AT A LARGE PROFIT.—HOW HE MANAGED ERIE
IN CONNECTION WITH FISK AND DREW.—HIS OPERATIONS ON BLACK
FRIDAY.—CHECKMATED BY COMMODORE VANDERBILT AND OBLIGED TO SETTLE.—HE
MAKES MILLIONS OUT OF WABASH AND KANSAS & TEXAS.—HIS VENTURE IN
UNION PACIFIC.—HIS CONSTRUCTION COMPANIES.—ORGANIZATION OF AMERICAN
UNION TELEGRAPH, AND HIS METHOD OF ABSORBING AND GETTING CONTROL OF
WESTERN UNION.—THE STRIKE OF THE TELEGRAPHERS AND HIS GREAT
ENCOUNTER WITH THE KNIGHTS OF LABOR AND TRADES UNIONISTS.—GOULD’S
FIRST YACHTING EXPEDITION.—AN EXCEEDINGLY HUMOROUS STORY OF HIS
EARLY EXPERIENCE ON THE WATER.—HIS STATUS AS A FACTOR IN RAILROAD
MANAGEMENT.—HIS ACQUISITION OF BALTIMORE & OHIO TELEGRAPH, &C.

If Fenimore Cooper, Sir Walter Scott, Charles Dickens or Dumas, in the height of the popularity of any of these great writers of fiction, had evolved from his inner consciousness a Jay Gould as the hero of a novel, its readers would have found serious fault with the author for attempting to transcend the rational probability allowed to the latitude of fiction. Few novel readers, in fact, would have patiently submitted to such a strain on their credulity prior to the era in the financial development of this country which produced some of the leading characters which Wall Street has brought to the front, as stern realities of every day life, since my advent in the great arena of speculation.

Among these Jay Gould is conspicuous, and of all the self-made men of Wall Street he had probably the most difficulty in making the first thousand dollars of the amazing pile which he now controls.

Jay Gould was born at Stratton Falls, Delaware county, New York, about the year 1836. He was the son of John B. Gould, a farmer, who kept a grocery store. At the age of sixteen young Gould became a clerk in a variety store belonging to Squire Burnham, about two miles from the Falls. Here, in his leisure hours, he assiduously improved the little learning he had received at the village school, by applying himself to the study of book-keeping in the evenings.

It was when he was at this store, according to the most reliable accounts, that he manifested his natural aptitude for making sharp and profitable bargains. His employer, the Squire, had his eye on a piece of land in Albany, which he expected to obtain cheap and so make a profit. He whispered his intention to some friend in the store and his young assistant overheard him. When he went to put his design of purchasing the land in execution he found that young Mr. Gould had been there before him, and had secured the title.

About this time there was a firm which had undertaken to survey the county and make office maps of it, and young Gould was employed to assist them. Having mastered the elementary principles of geometry, and being naturally quick and correct at figures, he soon became a fair expert in common land surveying, and made himself exceedingly useful to his employers. But the idea of not only being his own boss but an employer of other people’s brains and muscles was one of his ruling propensities, and he used every effort to attain this object. In a short time he bought out the firm, wrote a history of the county to accompany the maps and peddled his book among the residents.

This natural inclination to buy out every concern with which he has been connected has been the ruling passion of his life, and still tenaciously adheres to him. Prior to his negotiations with the firm of surveyors, he had invented a mouse trap in his intervals of leisure in the store, and with the proceeds of this and the bargain in the land, out of which he had outwitted his employer, he was enabled to make himself master of the situation with the surveyors. Shortly after this Gould became interested in a Pennsylvania tannery with Zadoc Pratt, who was the capitalist. Through the advice of Israel Corse, the Commission Merchant of the firm, Col. Pratt proposed to dissolve the partnership. Gould induced Charles M. Leupp & Co. to purchase Pratt’s interest for $150,000. The business did not meet the expectations of Leupp, who in a fit of despondency committed suicide. After his death Gould failed to retain possession of the property, which was sold to H. D. H. Snyder, thus terminating Mr. Gould’s career as a Pennsylvania tanner.

On his visits to New York Mr. Gould was attracted by the greater advantages which the Empire City afforded for extending his business, and came here to reside. He had ingratiated himself in the favorable esteem of one of the grocery merchants with whom he had done business. The merchant took him to his house to board and Mr. Gould fell in love with his handsome daughter. It was a mutual affair of the heart, like that of his son George and Miss Edith Kingdon, and a speedy marriage was the result. The results of the happy union seem to have been all that could be desired, and the domestic felicity of Mr. and Mrs. Gould, so far as the public have been able to ascertain, has never suffered the slightest jar or interruption.

The father-in-law owned shares in a railroad which was in a bad financial condition. He employed his new son-in-law to see what he could do to extricate him from a position in which he was likely to become embarrassed, and he wanted to sell his shares. Mr. Gould examined the road, (with the locality of which he had been well acquainted in his boyhood,) saw the favorable possibilities of its future, under good management, and instead of selling his father-in-law’s shares to a stranger, he took them at their market value himself, purchased more, finally obtained control of the entire property, and sold it to a rival company at a large profit.

This, I believe, was Mr. Gould’s first transaction in railroad matters, and from that day to this his great speculative forte has been buying and selling railroads. It was in that kind of business, and not in the stock market, as is popularly supposed, that he made the great bulk of his enormous fortune.

On his entrance to Wall Street he began business alone. Afterwards he formed a partnership with Henry N. Smith and — Martin, the firm taking the name of Smith, Gould & Martin. Martin is now in a lunatic asylum, and Henry N. Smith, who was the chief cause of the failure of Wm. Heath & Co. for a million dollars, is now a poor pensioner on the bounty of his wife. But Mr. Gould still towers aloft, in the full enjoyment and the continued progress of his speculative prosperity, without being dismayed by any competitor, however powerful, and overcoming all obstacles, no matter how gigantic.

As I have noticed pretty fully some of Mr. Gould’s greatest speculative transactions, mostly behind the scenes in the chapter on Black Friday and also in the account of the “Commodore’s Corners,” it will be unnecessary to repeat them here.

There was one clever transaction in the Black Friday affair that should be put on record to the credit of the able management of that great deal. One prominent individual connected therewith was personally responsible for $4,500,000. This was a pretty heavy load at that time even for him to carry, but it did not weigh very heavily upon him for any appreciable length of time. He adroitly managed to shift it over on to the shoulders of that broad-backed, soulless creature called the Erie Corporation, making it responsible by simply signing himself “T. R.,” instead of “J.G.,” the large letters representing the ordinary contraction “Tr.” for Treasurer. By this simple and ingenious device this shrewd gentleman got rid of the burthensome legacy on the negative side, bequeathed to him by the “Black Friday corner.”

There is a story told, with several variations, in regard to a sensational interview between Mr. Gould and Commodore Vanderbilt. The scene is laid in the parlor of the Commodore’s house. It was about the time that the latter was making desperate efforts to get a corner in Erie, and at that particular juncture when, having been defeated in his purpose by the astute policy of the able triumvirate of Erie—Gould, Fisk and Drew—he had applied to the courts as a last resort to get even with them.

They had used the Erie paper mill to the best advantage, in turning out new securities of Erie to supply the Vanderbilt brokers, who vainly imagined that they were getting a corner in the inexhaustible stock. Mr. Vanderbilt was wild when he discovered the ruse and had no remedy but law against the perpetrators of this costly prank. These adroit financiers usually placed the law at defiance, or used it to their own advantage, but this time they were so badly caught in their own net that they had to fly from the State and take refuge at Taylor’s Hotel in Jersey City.

It seems that during their temporary exile beyond the State Gould sought a private interview one night with the Commodore, in the hope of bringing about conciliatory measures.

The Commodore conversed freely for some time, but in the midst of his conversation he seemed to be suddenly seized with a fainting spell, and rolled from his seat unto the carpet, where he lay motionless and apparently breathless.

Mr. Gould’s first impulse was to go to the door and summon aid, but he found it locked and no key in it. This increased his alarm and he became greatly agitated. He shook the prostrate form of the Commodore, but the latter was limp and motionless. Once there was a heavy sigh and a half suffocated breathing, as if it were the last act of respiration. Immediately afterward the Commodore was still and remained in this condition for nearly half an hour. Doubtless this was one of the most anxious half hours that ever Mr. Gould has experienced.

If I were permitted to indulge in the latitude of the ordinary story teller, I might here draw a harassing picture of Mr. Gould’s internal emotions, gloomy prospects in a criminal court and dark forebodings. His prolific brain would naturally be racked to find a plausible explanation in the event of the Commodore’s death, which had occurred while they were the sole occupants of the room; and at that time, in the eyes of the public, they were bitter enemies.

I can imagine that, in the height of his anxiety, he would have been ready to make very easy terms with his great rival, on condition of being relieved from his perilous position. It would have been a great opportunity, if such had been possible, for a third party to have come in as a physician, pronouncing it a case of heart disease. No doubt Mr. Gould would have been willing to pay an enormous fee to be relieved of such an oppressive suspicion.

The object of the Commodore’s feint was evidently to try the courage and soften the heart of Mr. Gould, who never seemed to suspect that it was a mere hoax. His presence of mind, however, was equal to the occasion, as he bore the ordeal with fortitude until the practical joker was pleased to assume his normal condition and usual vivacity. If Mr. Gould had been a man of common excitability he might have acted very foolishly under these trying circumstances, and this doubtless would have pleased his tormentor intensely.

The _modus operandi_ of Mr. Gould, in the purchase and sale of railroads, has been to buy up two or more bad roads, put them together, give the united roads a new name, call it a good, prosperous line, with immense prospects in the immediate future, get a great number of people to believe all this, then make large issues of bonds and sell them at a good price, for the purpose of further improving and enhancing the value of the property. After these preliminaries had been gone through, if profitable purchasers came along, they could have the road at a price that would amply compensate Mr. Gould for all his labor and acute management. If these purchasers should be unable to run the road profitably and were obliged to go into liquidation after a year or two, as frequently happens, then Mr. Gould or his agents would very likely be found on hand at the sale to take back the road at a greatly reduced price. Mr. Gould would then get a fresh opportunity of showing the superiority of his management. He would be able to demonstrate that the road had left his possession in excellent and progressive condition, but through loose management had been run down. He would then set about the work of reorganization again and go through the same role substantially, with slight variations, as before, realizing a handsome profit on each successive reorganization.

It would take too much time, and swell this volume far beyond the space which I have laid out for it, to go minutely into the history of all Mr. Gould’s great enterprises. In fact, it would take a large volume in itself to do justice to the various schemes which have been put under way by him directly and indirectly and carried to a successful issue during his busy life of a quarter of a century in Wall Street. This seems a long time for a man who is still so young, although he is a grandfather, and enjoying the use of his mental faculties more vigorously than ever.

Owing to my own busy life I have only time to sketch the most salient points of Mr. Gould’s prosperous career. Some future historian of Wall Street is destined to make a big “spread” upon him, as the newspaper reporter would say. He will have ample material if he only begins his work soon; but whoever undertakes the job should not forget the maxim of that great veteran of literature, old Dr. Samuel Johnson, about material for biography having a general tendency to become scarce, and, in some instances, eventually to vanish. While the reliable material for Mr. Gould’s biography may be subject to the common fate of growing less, as time advances, there is no danger of utter oblivion in his case. He has impressed his footprints on the sands of time too firmly for that.

I don’t for a moment mean to insinuate the reason for this, which is given by Shakespeare as applicable to similar cases, although some ill-natured and envious people might use the well-known quotation in this connection:

“The evil that men do lives after them,
The good is often interred with their bones.”

I have no hesitation in saying that Mr. Gould will leave a large amount of good after him, and, indeed, it seems now as if the Shakespearian adage was to be reversed in his case. The evil that he may have done is likely to be forgotten. He bids fair to outlive most of it, if he only goes on to the end as he has been doing for the past few years. He is now showing a decided disposition to become more of a builder up than a wrecker of values.

Through his great executive ability in railroad management and construction he has been instrumental in making many blades of grass grow where none had grown before, causing the desert to blossom like the rose, assisting thousands who had formerly been poor and almost destitute, pent up either in European hovels or New York tenement houses, to find happy homes in the West and South. He has been a great factor in improving the value of the land, and thus, while he was enriching himself, adding materially to the wealth and prestige of the nation and thereby elevating it in the appreciation of the world at large.

The correspondent of the London _Times_ recently sent over here to write up a description of the country, dwells emphatically on this characteristic of Mr. Gould and other great millionaires and railroad magnates, who contribute so largely to the general prosperity of which they seem to be the indispensable mediums.

It was as the managing power in the Erie Railroad that Mr. Gould laid the broad foundation of his fortune. His speculative connections with Erie are more fully dealt with in the lives of Daniel Drew and Commodore Vanderbilt. The money and influence which he gained, in connection with the Erie corporation, enabled him to extend his operations in the acquisition of railroad property until, through Union Pacific and its various connections, Wabash and a number of Southwestern roads, it seemed probable, at one time, that he was in a fair way of grasping the entire control of the trans-continental business in railroad matters. And this was prior to the time when he obtained his present hold on telegraph facilities.

Some of the able schemes in which Mr. Gould has had credit for playing an important part, and sometimes a role that was considered rather reprehensible, were managed, so far as the outside business was concerned, chiefly by one or more of his wicked partners. In one of the most noteworthy of those projects, namely, the attempt to capture the Albany & Susquehanna Railroad, Mr. Gould seldom or never appeared in person before the public. His partner, James Fisk, Jr., was cast in that role and played it with great ability. With the essential aid of those two shining lights of the New York bar, David Dudley Field and Thomas G. Shearman, the Prince of Erie, (as Jim Fisk was called,) came pretty near snatching possession of 142 miles of a very important railroad, with the control of only 6,500 out of 30,000 shares of the stock, and 3,000 shares of these 6,500 had been illegally obtained, as was eventually decreed by the court.

Mr. Fisk, though the silent member of the Erie firm, had also control of Judge Barnard, of the Supreme Court of the City and County of New York.

The Albany & Susquehanna road would have been a valuable prize for Erie. It runs from the eastern extremity of the New York Central at Albany to a junction with Erie at Binghamton. At that time Erie aspired to be a successful competitor with Central for New England business, and had determined to monopolize the coal trade between that section and Pennsylvania. This connecting link of 142 miles was therefore regarded as a very valuable acquisition by both the large roads. Hence it was worth a desperate effort, and Jim Fisk showed that he had a true appreciation of its value, for he organized a company of New York roughs, placed himself at their head, and being armed with bludgeons and pistols and an injunction from Judge Barnard, obtained from him in New York city—while he was really in Poughkeepsie at the time—went to Albany and took forcible possession of the offices of the railroad. He had the President, Secretary, counsel and receiver of the road arrested and put under $25,000 bonds each. Mr. Fisk went through the farce of an election of Erie candidates for the offices which he had forcibly made vacant in the Albany & Susquehanna, bringing his roughs up to vote as stockholders.

The President of the road, Mr. Joseph H. Ramsey, fought stoutly for his rights and ousted the intruders. He had spent eighteen years building the road, and was naturally attached to it. He also found a Judge to aid him. Justice E. Darwin Smith, of Rochester, eventually rendered a decision in favor of the Ramsey party, with the opinion that “Mr. Fisk’s attempt to carry the election by his contingent of ‘toughs’ was a gross perversion and abuse of the right to vote by proxy, tending to convert corporation meetings into places of disorder, lawlessness and riot.” Costs were decreed to the Ramsey directors, and a reference made to ex-Judge Samuel L. Selden, of the Court of Appeals, who fixed the allowance to be paid by the Fisk board to the Ramsey board at $92,000. It is worthy of note that the Fisk board consisted of the unlucky number of thirteen.

The Erie party appealed, but long before the appeal could be heard the Albany & Susquehanna was leased in perpetuity to the Delaware & Hudson Canal Company, against whom the Erie party was not strong enough to go to law. Thus ended the struggle for this great connecting link.

It is worthy of remark that this was one of the few cases in which, where Mr. Gould made up his mind to obtain the control, possession or ownership of property, he did not succeed.

The methods of acquiring the control and the possession of other people’s property have been raised to the dignity of a fine art by Mr. Gould. This art has been prosecuted, too, through “legitimate” means. He has had the law at his back every time, and been supported in his marvellous acquisitions by the highest Court authority.

The manner in which he managed to get Western Union into his hands affords a very striking illustration of his methods and the great secret of his success.

When first laying his schemes to obtain the control of the telegraph property he got up a construction company to build a telegraph line. This was a company of exceedingly modest pretensions. It had a capital of only $5,000. It built the lines of the Western Union Telegraph Company, with which Mr. Gould paralleled most of the important lines of Western Union, and cut the rates until the older and larger corporation found that its profits were being reduced towards the vanishing point. Then it was glad to make terms with its competitor; a union of interests was the result, and Mr. Gould obtained control of the united concern.

“Impossible,” said Norvin Green, in high dudgeon, when the insidious intentions of Mr. Gould were broached to him a few months before the settlement took place. “It would bankrupt Gould and all his connections to parallel our lines, and to talk of harmony between him and us is the wildest kind of speculation.” The genial Doctor was then master of the situation in Western Union, or imagined himself so at that time, and regarded with contempt the efforts of Gould and his colleagues to bring the company to terms. In a few months afterward the Doctor tamely submitted to play second fiddle to the little man whom he had formerly despised.

The arrangement in reference to the cable companies followed the capture of Western Union. The struggle is still pending for the entire monopoly in the cable business, and it now seems only a question of time when the Bennett-Mackay party will have to succumb, leaving Gould in the supreme control of the news of the world. If this should happen he would become an immense power for either good or evil both in speculation and politics. In fact it would be too great a monopoly to be entrusted to the will of one man. Although it might be judiciously managed, as the cup of his ambition would then be surely full, yet the experiment would be extremely hazardous.

The controlling interest in the Elevated Railroads of this city, recently achieved by Mr. Gould through his business and speculative relations with Mr. Cyrus W. Field, are of too recent date to require any special notice or comment here. Suffice it to say, that I fear my friend Mr. Field has not come out at the big end of the horn, although everything has no doubt been in conformity with the most approved business principles and in strict adherence to the most honorable methods of dealing in railroad securities. It is significant, however, that Mr. Field has preserved a prudent reticence on the subject.

Mr. Gould, from my point of view, has been a public benefactor in the bold and successful stand which he has maintained against strikers. Though Western Union lost over half a million dollars by the strike of the telegraphers, which greatly alarmed the stockholders, yet Mr. Gould held out until the strikers were obliged to give in. He pursued the same policy, with a similar result, in the case of the Knights of Labor. During the strike of the latter I explained my views on the subject in a circular to my customers as follows:

“The Knights of Labor have undertaken to test, upon a large
scale, the application of compulsion as a means of enforcing
their now enlarged demands. This has necessitated a crisis of a
very serious kind. The point to be determined has been, whether
capital or labor shall in future determine the terms upon which
the invested resources of the nation are to be employed. To the
employer, it is a question whether his individual rights as to
the control of his property shall be so far overborne, as to not
only deprive him of his freedom, but also expose him to
interferences seriously impairing the value of his capital. To
the employes, it is a question whether, by the force of
coercion, they can wrest to their own profit powers and control
which, in every civilized community, are secured as the most
sacred and inalienable rights of the employer. This issue is so
absolutely revolutionary of the normal relations between capital
and labor, that it has naturally produced a partial paralysis of
business, especially among industries whose operations involve
contracts extending into the future. There has been at no time
any serious apprehension that such an utterly anarchial movement
could succeed, so long as American citizens have a clear
perception of their rights and their true interests; but it has
been distinctly perceived that this war could not fail to create
a divided if not a hostile feeling between the two great classes
of society; that it must hold in check, not only a large extent
of ordinary business operations but also the undertaking of
those new enterprises which contribute to our national progress,
and that the commercial markets must be subjected to serious
embarrassments. * * * * * From the nature of the case, however,
this labor disease must soon end one way or another; and there
is not much difficulty in foreseeing what its termination will
be. The demands of the Knights and their sympathizers, whether
openly expressed or temporarily concealed, are so utterly
revolutionary of the inalienable rights of the citizen, and so
completely subversive of social order, that the whole community
has come to a firm conclusion that these pretensions must be
resisted to the last extremity of endurance and authority.”

The manner in which Mr. Gould acquired his great control in some of the Western and Southwestern railroads was pretty fully developed in the recent investigation held in this city, Boston and San Francisco by the Pacific Railway Commissioners. Mr. Gould’s testimony, as reported in the daily papers of May, 1887, probably contains almost as correct and succinct an account of his pooling arrangements and schemes in connection with certain railroads and his methods of making money out of them as can be obtained anywhere. His testimony, on the whole, was exceedingly affable, comprehensive and precisely to the point, and has not been contradicted in any material points by any of the succeeding witnesses that have yet been examined on this widely interesting subject. Its substance was as follows:

[_From the Herald, May 18, 1887._]

A dapper little man in plain pepper and salt (the pepper
predominating) business suit entered the Pacific Railway
Commissioners’ offices yesterday morning and sat down quietly
with his not over shiny silk hat on his knee.

The natty gentleman, unobtrusive possessor of the small dark and
brilliant eyes, was the man of millions.

He had lots of information for the Commission, and he gave them
more of the inside facts of the early consolidation deals of the
Union Pacific than they hoped to get.

It had been expected that Mr. Gould would prove a wily witness,
hard to corral and liable to shy over the fence at the slightest
provocation, but at the very outset his manner was a complete
surprise. He told the Commission that he was suffering from
neuralgia, and said that he could not speak very loud in
consequence. There were times during his examination that his
tone was faint, and it was only loud two or three times, when he
became very much interested in some explanation. At all times,
however, it was well modulated, and now and again had a musical
cadence about it that was very pleasing. He first became
interested in Pacific roads in 1873. He bought Union Pacific
stock in the market, but it went down to fourteen cents on the
dollar. He held about 100,000 shares. He had a consultation with
Sidney Dillon, and finally made a proposition to fund the
floating debt in bonds, of which he took a million dollars’
worth at above their par value. In 1874 he became a director and
served on the executive committee. He continued in the direction
during 1874, 1875 and 1876, and went over the road twice a year.
He had no interest in the Fisk suit, but knew it was brought. He
had no contingent interest whatever in the suit.

He became interested in the Kansas Pacific in 1878, but thought
he knew the road in 1874. He remembered a proposition looking
toward a unity of interest between the Denver Pacific and the
Colorado Central.

Being examined as to the positions of the roads, and as things
did not appear to be very clear, Mr. Gould, putting his hand to
his inside pocket, said: “I have a little map here if you are
not familiar with the location.”

The little map was brought out and all hands gathered around it,
while Mr. Gould’s index finger went on an excursion over States
and Territories in absolute defiance of the Inter-State Commerce
Law. He recalled the fact that the plan of consolidation was
considered as early as 1875, after Mr. Anderson read some
extract from a paper, but he said it was not carried out then.
He might even have had a talk with Scott about it on further
consideration.

The little road connecting with the Colorado Central was built
by him, and was the result partly of the contest between the
Union Pacific and the Kansas Pacific. Prior to 1878 he could not
recollect having owned any stock or securities of the Kansas
Pacific. His interest in the Union Pacific has increased to
200,000 shares, the total issue of stocks being 367,000 shares.
He kept books of his transactions. Mr. Morosini kept them a part
of the time.

Q. Where are the books? A. I have them.

Q. Where? A. In my possession.

Q. Are they at the service of the Commission? A. If they desire
them, with the greatest of pleasure.

This was the first sensation of the day, and the witness smiled
blandly as he felt the full force of it.

Up to this time he had answered every question promptly. There
appeared to be no hesitation on his part, and, indeed, there was
none during the entire day’s session. Almost every preceding
witness had taken refuge behind “I don’t know,” or “I cannot
remember,” or “Really I am not sure,” but there was none of this
from Gould. And the apparently full and free offer of his books
capped the climax.

After this whenever his memory was in any way at fault the
witness fell back on the books. In asking him what he had bought
certain stocks for he said the books would show.

“Will your books also show who the broker was?”

“Oh, yes; certainly, certainly, certainly.”

In the matter of the St. Louis pool he had conversed with a
number of persons.

Q. With whom did you converse? A. I presume with all the signers
of the agreement.

Q. Will you tell us all about the preliminary measures leading
up to this? A. I would have the neuralgia a good deal worse than
I have if I undertook to tell you all of the details.

This was the original proposition of consolidation, which was a
stock instead of a bond agreement, and it was soon demonstrated
that it would not work.

Q. How soon after this was the new arrangement entered into? A.
Almost immediately afterward, I think. The object was the
funding of a heterogeneous mass of securities into one class of
securities.

Q. Did you confer with others? A. I conferred with myself as
well as others. What I thought was a fair price for me was a
fair price for the others.

Q. To whom did you deliver your bonds? A. I suppose to the
committee, but I do not know.

Q. But you would not deliver $2,000,000 to a man in whom you did
not have confidence? A. Probably not.

Q. Who kept the accounts? A. I don’t know.

Q. You don’t remember? A. I don’t charge my memory with these
things after they are over, but my books will show, and they are
at the service of the Commission.

Mr. Gould’s manner in saying this was unusually suave and
polite, and the lines of his mouth relaxed just enough to
suggest a smile.

In speaking a few moments later of the securities bought by Mr.
Gould from the “St. Louis parties” he was asked of whom he
bought them.

“I cannot tell about that off-hand, but my books will show it.”

“Which of the St. Louis people did you confer with?”

“I think they came on here to see me. They were tired out and
wanted to sell, and came over to do it.”

“Then you bought all the securities first and tried to get some
other gentlemen to go in with you afterward?”

“Yes, several gentlemen whom I thought would be of service to
the road. There ought to be some books. Somebody must have kept
accounts of the transactions. My recollection is that these
people came on and told me they wanted to sell. I asked them how
much they thought they ought to have and they gave me the price
quoted in the agreement.”

“I simply said, ‘I will take them,’ and that was all there was
to it. That is my recollection. In 1879 I owned about $4,000,000
worth.”

The examination led into the stamped income bonds of the Kansas
Pacific, and Mr. Gould was asked as to the condition of the
road. He thought it was poor. The road had a large intrinsic
value, but it had been badly financed and its securities were
way down.

Q. Did you not buy some of your securities abroad? A. I bought
two millions of Denver Pacific at seventy-four cents, I think,
from some Amsterdam people. I was in London and heard that they
wanted to sell. I was afraid to go over, because I had very
little time, and thought they would probably take a couple of
days to smoke before finding out whether they would sell or not.
But I was mistaken. I went over and got to Amsterdam in the
morning; washed and had my breakfast. I saw them at eleven,
bought them out at twelve, and started back in the afternoon.

When Mr. Gould was asked as to the prices he had paid for the
securities with which he had acquired the Kansas Pacific bonds
he took out his papers and handed the Commission a series of
neatly written reports on these purchases and sales.

He purchased in 1879 St. Jo. and Denver first mortgage bonds,
$1,562,886.69, for $603,204.78.

Of these, $617,000 worth he sold to Russell Sage, F. L. Ames,
Sidney Dillon, S. H. H. Clark, Ezra H. Baker, F. G. Dexter and
Elisha Atkins for $246,800.

On January 24, 1880, he surrendered $956,779.76 in these bonds
and scrip in exchange for 9,568 shares of Union Pacific at par.

For St. Jo. and Denver Pacific receivers’ certificates to the
number of fifty-nine he paid $60,695, and on January 24, 1880,
he surrendered them for 590 shares of Union Pacific at par, or
$59,000.

Of St. J. and Denver stock during 1879 he acquired 8,819 shares,
and sold 3,806 shares to the same persons purchasing the bonds.
On January 24 he surrendered the 5,013 shares he had remaining
on hand at par for $100,200.

During the same time he bought $784,000 worth of the St. Joseph
Bridge bonds for $586,940, of which he sold to Sage and Dillon
$150,000 worth for $112,500.

He also bought 4,000 shares of stock for $6,000, making the
total cost of $634,000 bonds and 4,000 shares of stock $480,440.
Received in exchange for the whole business, 6,340 shares of
Union Pacific stock at par, making $634,000.

The gentlemen to whom Gould sold the securities were all
directors of the Union Pacific. These gentlemen, the witness
thought, retained their bonds until the consolidation, as they
were bought with a purpose. “The Denver stock was called
trimmings,” said Mr. Gould, smiling, “and went with the bonds.”

On the consolidation of the company he transferred 27,000 shares
of Union Pacific Railroad stock for new stock.

He had transferred his Union Pacific stock at one time to some
other parties on account of a peculiar law in Massachusetts,
which enables an attachment of stock on a suit, whether there
was anything in it or not.

“I found out about that law,” said Mr. Gould, “and put the stock
in somebody’s else’s name. You can’t tell anything,” he
continued, sharply, “about any stock list. There are many shares
of stock held by brokers for years.”

After the consolidation he had begun to distribute his stock
among other holders.

“I made up my mind,” he said, “it would be better to have four
or five stockholders do a little of the walking instead of one.”

Q. That idea was very much stimulated by the rise in the stock
after the consolidation, was it not? A. Yes, because the stock
went up then so much that there wasn’t enough to go round.

The witness told the story of the employing of General Dodge and
Solon Humphreys to recommend the consolidation. They were fair
men, he thought, and would make a fair report.

He had not talked to them after they went West to make their
report.

Q. How is that? A. Well, he naively replied, while they were
making their examination my interests had changed.

Q. They had changed? A. Yes, I had bought the Missouri Pacific.

Q. Did General Dodge and Mr. Humphreys look into the past
history of the road? A. I consider the future of a road more
important than its past.

Q. Yes, but what I want— A. The past was no criterion as to the
Union Pacific road.

Q. But don’t you think that General Dodge and Mr. Humphreys—? A.
“All my life,” said Mr. Gould, warming up; “all my life I have
been dealing in railroads—that is, since I have been of age, and
I have always considered their future and not their past.”

“That is the way I have made my money,” said he. “The very first
railroad I ever bought had a most deplorable past, but its
future was fair. I paid ten cents on the dollar for its bonds,
and finally sold the stock for $1.25. It was the future of the
Union Pacific that drew me into it. I went into it to make
money.”

“You were not in favor of the consolidation at the time it was
made?”

“No, my interests had changed.”

“Did you try to stop it?”

“Well,” said Mr. Gould, slowly, “my opposition to it was known
and they were greatly alarmed.”

“Who?”

“Ames, Dexter, Atkins and Dillon. They came on from Boston to
see me about it. They had heard that I was going to build an
extension to the Denver Pacific and connect the Missouri
Pacific. They said I was committed to the consolidation and laid
right down on me. I offered my check for $1,000,000 to let me
out, and I have offered it since.

“I will pay it now,” said the witness, with a strong rising
inflection of the voice and looking hard at the Union Pacific
people in the room.

“I offered them a million, but they would not let me out of the
room until I had signed an agreement to carry out the
consolidation.”

“Where is that paper?”

“I suppose it is in Boston. If I could have carried out my
Missouri Pacific plan I would have a property now that would be
worth par.”

“I don’t think you have any reason to complain of your profits
in the matter,” replied Mr. Anderson, at which Mr. Gould partly
closed his eyes to hide their twinkle, and said nothing.

The paper which he signed was an agreement to carry out the
consolidation on certain terms. The consolidation was an assured
fact after January 15, because the witness held the controlling
interest.

“But I have now ceased to be the tower of the Union Pacific,” he
said.

In asking Mr. Gould about his connection with Lawyer Holmes at
the time of the consolidation, Mr. Anderson asked him whether he
was sure about a certain conversation.

“Yes,” he said, “for I had it impressed on my mind.”

“How was that?”

“Well, I remember parting with a lot of stock at ten cents for
which I could have got par a few days afterward. Wouldn’t that
impress the occasion on your memory, Mr. Anderson?”

Everybody laughed at this, and the witness, although he had lost
a million or two, laughed as heartily as the loudest.

As far as the Denver Pacific stock was concerned Mr. Gould said
it was worth practically nothing unless the consolidation was
made. It was the signature of the Union Pacific that made it
good.

“Do you consider that the trustees fulfilled their duty in
letting this stock out of trust?” he was asked.

“I consider that it was the only thing to do, and I stand on
what was done. I am ready to take the responsibility for it that
day, or this day, or any other day.”

[_From the New York Times, May 19, 1887._]

Jay Gould gave another day to the Pacific Railway Commission
yesterday. His manner was, as usual, cool and collected, and he
was apparently full of a patient desire to tell everything he
knew. Yet Mr. Gould told very little, although he answered
hundreds of questions, some of them puzzling enough to drive a
less long-headed financier into a corner. The Denver Pacific
stock and the way it got out of the trust were first taken up.
Mr. Gould said he thought the course taken was best for
everybody. Naturally he wanted the Denver Pacific to go into the
consolidation, holding as he did, $1,000,000 of the securities,
and being trustee of over $3,000,000 more. At first it was
doubtful if the Union Pacific would take it, but it did for the
franchises. “I want to say again,” declared Mr. Gould, “that no
director or person connected with the Union Pacific ever made a
dollar out of Denver Pacific. I am glad to put a final nail in
that coffin.”

His plan at one time was to build a line from Denver to Ogden,
via Salt Lake and Loveland Pass. It would have been shorter than
the Union Pacific and obtained more local business, for the
Union Pacific ran north of the mineral belt and the Southern
Pacific south of it. After he obtained the Missouri Pacific he
saw what a good thing he had in it, but he was persuaded to give
his pledge to go on with the consolidation of the other roads.
The Boston folk became agitated within a month after he bought
the Missouri Pacific, and got the pledge from him. If the
Missouri Pacific had been put through it would have injured the
Union Pacific a great deal.

“According to the ethics of Wall Street,” Mr. Gould was asked,
do you consider it absolutely within the limits of your duty,
while a director of the Union Pacific, to purchase another
property and to design an extension of the road which would
perhaps ruin the Union Pacific?”

“I don’t think it would have been proper. That’s the reason I
let it go.”

“Did you consider your duty to the Government?”

“I had considered it.”

“How would the Government claim have been affected by building a
parallel line?”

“It would have been wiped out.”

After the Thurman bill had been sustained by the Supreme Court
Mr. Gould had a plan to build a road from Omaha to Ogden, just
outside the right of way of the Union Pacific, and give that
road back to the Government. It would give others “a chance to
walk.” The Government tried to squeeze more out of the turnip
than was in it. For $15,000,000 a road could be built where it
had cost the Union Pacific $75,000,000.

“You were not devoted to the interests of the Government?”

“I wanted to protect them. Their legislative action hurt their
own interests and put those of the stockholders in jeopardy. The
Government repudiated their own contracts. Cash was offered to
pay the Government the Union Pacific debt. I had the debt
reckoned up and offered to pay it. In 1877 or 1878 I made the
offer to the Judiciary Committee, of which Mr. Edmunds was
Chairman. I made the offer myself. The debt was estimated at
$15,000,000 or $17,000,000. But the Government would not concede
that interest terminated with the bonds. No action was taken on
the proposition.”

Mr. Gould thought he wrote his own resignation as Director of
the Union Pacific. He resigned because he ought not to deal with
the company while one of its directors. He put it in President
Dillon’s office. Mr. Dillon knew what it meant.

“What did it mean?”

“That if the consolidation went through it involved large
transactions with Jay Gould, and if I had stayed in it would
have complicated things. Before January 10, 1880, no bargain was
made to pay par for St. Jo. and Western bonds, nor Kansas
Central, nor 239 for Central Branch stock. That came afterward.”

The Colorado Central lease was canceled on account of a State
law against consolidating competing lines. Mr. Gould did not
know that the Dodge and Humphreys letter was to be presented to
the meeting of January 24. He was probably informed of the
consolidation on the day it took place. He was also probably
present at the first meeting of the new company on January 24.
Mr. Gould’s resignation from the Kansas Pacific Board was gone
over, and in summarizing his reasons for resigning Mr. Gould
said he did not want to be mixed up with trusteeships and
directorships. When he was not a Union Pacific director he felt
at liberty to take care of himself. There was a chance that the
properties might be made hostile to him, and then it would have
been improper for him to be a director. He did not know that
Russell Sage was to move the acceptance of his resignation.

“At the Kansas Pacific meeting a list of the branch lines
obtained from you was read. President Dillon said the company
had bought them. What did he mean?”

“Possibly he referred to the directors’ agreement with me.”

“But we can find no record of this in the books. Don’t you think
he referred to the agreement with the Boston gentlemen?”

“Very likely, but it had no authority until it was accepted or
rejected.”

Mr. Gould was set to explaining some discrepancies between the
accounts of his dealings in branch securities, handed in on
Tuesday, and the list submitted by Controller Mink. Mr. Mink
gave 15,162 shares of St. Jo. and Western stock, and Mr. Gould
8,119. The difference was explained by Mr. Gould’s getting some
stock for building the Hastings and Grand Island. He retained
control of the $150,000 St. Jo. Bridge bonds he sold Dillon and
Sage and turned them over with his own. His $479,000 Kansas
Central bonds and 2,521 shares of the stock cost him $431,820.25
at the time he bought the Missouri Pacific. They all went into
the consolidation for $479,000. Mr. Gould bought the Central
Branch of the Union Pacific from Oliver Ames and President
Pomeroy, who came to New York and induced him to go and look at
the property.

“I thought it was doing a big business,” said he. “Afterward I
learned they had kept the freight back for a week to impress me.
So I saw a freight train at every station when I got there. I
bought the road anyway.” Its total cost to Mr. Gould was
$1,826,500. Over the Central Branch, whose stock was disposed of
by Mr. Gould for 239, there was a little stir in the hearing,
but the witness tranquilly explained that the road was
practically stocked at only $2,500 a mile, and therefore the
stock ought to range way above par.

“Has the road earned dividends?” he was asked.

“I don’t think so.”

“Have the aggregate earnings exceeded the fixed and Government
charges?”

“I never figured it out. Stock doesn’t always depend upon
dividends altogether. I paid 750 for my Missouri Pacific—4,000
shares at that figure. You pay more for rubies than for diamonds
and more for diamonds than for glass.”

Then the examination turned to the days just after the
consolidation, and the witness was asked if there was any
corporate action of the new company before the stock was turned
over to him.

“All I know,” he said, “is that the stock of the new company was
delivered.”

“Was the new company bound to carry out the Kansas Pacific
obligations of this sort?”

“Well, I suppose it assumed the Kansas Pacific obligations.”

“Why were you not paid in Kansas Pacific consols instead of
stock?”

“I suppose they preferred stock to bonds. I was clever to them
and took stock.”

Another turn carried questions and answers to other differences
in the accounts, but the commission got little light. “It’s safe
to say the lawyers got the difference,” chuckled Mr. Gould, at
the end of the set of questions. He had made large cash
advances, at different times, to the Kansas Pacific to meet the
floating debt, and very likely these would have to be counted in
to explain matters in all cases. There was one point upon which
the witness strongly insisted, and that was that all through the
negotiations and transactions no class of people nor any
particular holders of securities experienced any discrimination
in their favor, as compared with the treatment given everybody
else.

After the consolidation Mr. Gould said he had few transactions
in Union Pacific branch lines. He had an interest in the Denver
& South Park, however, a minority interest at first, but
subsequently he bought the whole road from Governor Evans. “I’m
showing you my whole hand,” he said, cheerfully, at the end of
the catalogue of the branches. Of the Union Pacific’s legal
expenses he knew of none which were not perfectly legal.

“Who were the road’s counsel in Washington?”

“Messrs. Shellabarger & Wilson were the only ones, as far as I
knew.”

“Have you ever been to Washington on business of the company?”

“Yes. And I paid my own hotel bills.”

“Do you recall persons sent to Washington from other places in
the interest of the road?”

“Judge Usher and Mr. Poppleton.”

“Who represented the Kansas Pacific?”

“Judge Usher. I don’t know that they had anybody in Washington.”

“How often did you go to Washington for the road?”

“I was there while the Thurman bill was pending. It passed, and
I haven’t been there since. No, I take that back. I was down
before the Labor Committee. I got rather disgusted.”

“Do you know whether anything was spent to influence
legislation?”

“No, sir. I know of no such expenditure.”

“Where could we find records of such transactions?”

“I don’t think such transactions exist.”

“Do you remember advising, at a meeting, that Mr. Ordway, of
Washington, be employed in the interests of the Kansas Pacific?”

“No, sir.”

Mr. Anderson read from the minutes of a Kansas Pacific meeting,
in 1876, and Mr. Gould remembered that Senator Rollins, a great
friend of Mr. Ordway, asked him to write a letter about it. He
knew of nothing coming from the letter.

“Do you remember any talk of fighting the Credit Mobilier?”

“I saw some of their stockholders and they said they would turn
in their stock to us. Others wouldn’t. The Credit stockholders
alleged that the Union Pacific owed their company a great deal
of money. I succeeded in getting the great bulk of the stock
turned over before a judgment was obtained.”

“You remember your address to the Union Pacific president and
directors.”

“I wanted to put myself in a position to bring a suit.”

“Who opposed this proposed action of yours?” asked Mr. Anderson,
reading from the minutes of a directors’ meeting that Mr. Dexter
moved “to decline to bring suit, as requested by Mr. Gould.”