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Gould, Jay

Jay Gould

Born: May 27, 1836
Roxbury, New York
Died: December 2, 1892
New York, New York

American financier and businessman

American financier and railroad builder Jay Gould made a fortune by controlling the price of the stocks he bought as well as the stock market itself. He later became one of the shrewdest businessmen in American industry.

Early life

Jayson Gould was born in Roxbury, New York, on May 27, 1836, the son of John Gould and Mary More. His father was a farmer and a storekeeper, and Jay, as a small boy, grew up on a farm. He realized at a young age, however, that farm work was not to his liking. He received some education in a local school. Later, while working in his father's store, he taught himself surveying (mapping land) and mathematics at night. When he was just sixteen he started a survey business. Between the ages of eighteen and twenty-one he helped prepare maps of New York's southern counties. At twenty-one Gould invested five thousand dollars, and he and a partner opened a business tanning leather in northern Pennsylvania.

Gould then moved to New York City, where he became a leather merchant in 1860. Before long, however, he found his place on Wall Street, the financial center of the United States. In name he was a stockbroker (a person who buys and sells stocks for others), but really he was a speculator (a person who buys and sells stocks in hopes of profiting by correctly guessing their future prices). Gould quickly mastered the art of managing a business, of stock trading, and of manipulation (causing the price of a stock to change for personal gain). He traded in the stocks of his own companies, using banks he was associated with to finance his speculations, all the while bribing legislators and judges. From 1867 to 1872 he was a power and a terror on Wall Street.

Erie war

In 1867 Gould was already on the board of directors (the controlling committee of a company) of the Erie Railroad, which was having financial difficulties. He set out to control the railroad and to push its lines westward as far as Chicago, Illinois, and to defeat industrialist Cornelius Vanderbilt's (17941877) effort to acquire this potential competitor. In the "Erie war" with Vanderbilt in 1868, Gould issued one hundred thousand shares of new Erie stock, using illegal means. He then went to Albany, New York, to bribe legislators to "legalize" the action. Vanderbilt discovered he had met his match and settled, receiving $1 million and leaving the Erie Railroad to Gould.

Gould then began to expand the Erie, which vastly increased its debt. Meanwhile, he traded in Erie stock and skillfully made a lot of money before the railroad had to go out of business because of financial problems in 1875.

Buying gold to sell wheat

As part of the Erie's move westward, Gould obtained control of the Wabash, a railroad that carried wheat. To improve the fortunes of the Wabash, Gould hit on the scheme of pushing up the price of gold, thus weakening the value of the U.S. dollar, and thereby encouraging foreign merchants to buy more wheat.

In the summer of 1869 Gould secretly began buying gold on the free markethoping the U.S. Treasury (the main financial institution of the federal government) would not sell its gold. He ran the price up to where it was on September 24, 1869, now known as Black Friday because it was a day that saw a serious financial emergency. Then the U.S. Treasury, realizing that Gould had tricked it, started selling gold, and the price dropped significantly. A panic hit Wall Street, sending the price of all stocks down. Gould had speculated not only in gold but also in stocks and he lost a fortune. In 1871 and 1872, however, he made another.

Once again a man of money, Gould moved his operations westward into the Wabash, the Texas and Pacific, the Missouri Pacific, and the Union Pacific Railroads. His operations in the last two railroads demonstrate his methods well. He bought their stocks when their prices were low during the depression (a time when a country's economy is unhealthy) of 1873, obtaining control of both railroads. He also acquired the stocks of other, smaller railroads he wanted to add to the two main systems. Then he forced up the prices of the two main railroads. When the stock market recovered from 1879 to 1884, he sold the railroad stocks at prices far greater than what he had paid for them, making yet another large fortune.

Manipulator turned businessman

Gould was forced out of the Wabash and the Union Pacific Railroads in the early 1880s. He then turned his complete attention to the Missouri Pacific Railroad (of which he had gained control in 1879) and built it into a great power. He acquired new railroad lines and independent companies, used stock-market profits for financing, and waged a relentless war on competitors. His biographer, Julius Grodinsky, wrote that Gould was changed "from a trader into a business leader of national proportions." From 1879 to 1882 Gould added twenty-five hundred miles to the railroad at a cost of about $50 million. Between 1885 and 1889 he again gained control of the Wabash and the Texas and Pacific Railroads, changed how they were organized, and tied them into his Missouri Pacific system.

At the same time Gould strengthened the other two elements that made up his wealth. One was the Manhattan Elevated Railroad of New York, which he created as a monopoly of New York City's rapid transit system. The second was the Western Union Telegraph Company. Gould had bought the insignificant American Union Telegraph Company in 1879, joined it with Western Union in 1881, and seven years later added the telegraph network of the Baltimore and Ohio Railroad. By the end of the 1880s Western Union had no real competitor in the two important businesses of railroad telegraphy and sending Associated Press stories to member newspapers. Western Union was one of the most profitable companies in the country. Gould died in New York on December 2, 1892, leaving the management of his properties to his son George Jay Gould.

For More Information

Geisst, Charles R. Monopolies in America: Empire Builders and Their Enemies, from Jay Gould to Bill Gates. New York: Oxford University Press, 2000.

Grodinsky, Julius. Jay Gould: His Business Career, 18671892. Philadelphia: University of Pennsylvania Press, 1957. Reprint, New York: Arno Press, 1981.

Hoyt, Edwin P. The Goulds: A Social History. New York: Weybright and Talley, 1969.

Klein, Maury. The Life and Legend of Jay Gould. Baltimore, MD: Johns Hopkins University Press, 1986.

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Jay Gould

Jay Gould

American financier and railroad builder Jay Gould (1836-1892) began as an unprincipled stock manipulator and became one of the most acute businessmen in America's age of industrial capitalism. He operated in an era when speculative capital could play a constructive role.

Jay Gould, christened Jayson, was born in Roxbury, N.Y., on May 27, 1836, a farmer's son. He obtained some education in a local academy and also learned surveying. Between the ages of 18 and 21 he helped prepare maps of New York's southern counties. By 21, with a stake of $5,000, he and a partner opened a leather tannery in northern Pennsylvania.

Gould then moved to New York City, where he set up as a leather merchant in 1860. Before long, however, he found his forte in Wall Street, ostensibly as a stockbroker but really as a speculator. In that period of unregulated finance Gould quickly mastered the intricacies of corporate management and of security trading and manipulation. He traded in the securities of his own companies, manipulating banks he was associated with to finance his speculations and corrupting legislators and judges. From 1867 to 1872 he was a power and a terror in Wall Street.

Erie War

In 1867 Gould was already on the board of directors of the Erie Railroad, which was in financial difficulties. He set out to control it, push its expansion westward as far as Chicago, and defeat Cornelius Vanderbilt's efforts to acquire this potential competitor. Gould was the behind-the-scenes strategist (using Daniel Drew and James Fisk as his fronts) in the "Erie war" with Vanderbilt in 1868. To check Vanderbilt, Gould issued 100,000 shares of new Erie stock by illegally converting debentures and then went to Albany, where, with the Erie's money, he bribed legislators to legalize the conversion. Vanderbilt discovered he had met his match and settled with Gould, receiving $1 million as a sweetener and leaving the Erie to Gould.

Gould launched the Erie on an expansion campaign that vastly increased its capital debt. Meanwhile, he traded in Erie stock, sold it short, and made a killing before the road went bankrupt in 1875.

Buying Gold to Sell Wheat

As part of the Erie's move westward, Gould obtained control of the Wabash, a wheat-carrying railroad. To improve the fortunes of the Wabash, Gould hit on the scheme of pushing up the price of gold, thus weakening the dollar, and thereby encouraging foreign merchants to buy more wheat.

Using Fisk's brokerage house as a cover, in the summer of 1869 Gould began buying gold secretly in the free market—hoping the U.S. Treasury would not sell—and ran the price up from 135 to 160, where it was on the "Black Friday" of Sept. 24, 1869. By that time Gould had created a short interest in gold of $200 million with only a fraction of that amount available to the short sellers. Then the U.S. Treasury, realizing it had been duped by Gould, sold gold, and the price dropped to 140 and then to 133. A panic hit Wall Street, depressing all stocks. Gould had speculated not only in gold but in stocks and lost a fortune. However, in 1871-1872 he made another.

Well-heeled again, Gould moved his operations westward into the Wabash, the Texas and Pacific, the Missouri Pacific, and the Union Pacific railroads. His operations in the last two exemplify his methods. He bought their securities when they were low during the depression of 1873, obtaining control of both; he also acquired securities of independent lines and feeder lines he wished to add the two trunk systems. Then he forced up the prices of the two amplified major companies. When the stock market recovered during 1879-1884, he sold, making a large fortune out of capital gains.

Manipulator Turned Businessman

Gould was pushed out of the Wabash and the Union Pacific in the early 1880s. He then turned his complete attention to the Missouri Pacific (of which he had gained control in 1879) and built it into a great power. He acquired feeder lines and independent companies; he used stock market profits and capital gains for financing; and he waged a relentless war on competitors, breaking up traffic pools and forcing rates down sharply. His biographer Julius Grodinsky wrote that Gould was "transformed from a trader into a business leader of national proportions." From 1879 to 1882 Gould added 2,500 miles to the road, making a capital addition of about $50 million. And between 1885 and 1889 he reentered the Wabash and the Texas and Pacific railroads, reorganized them, and tied them into his Missouri Pacific system.

At the same time Gould strengthened the other two elements in the triad that constituted his estate. One was the Manhattan Elevated Railroad of New York, which he created as a monopoly of Manhattan's rapid transit system. The second was the Western Union Telegraph Company. Gould had bought the unimportant American Union Telegraph in 1879, consolidated it with the Western Union in 1881, and 7 years later added the influential telegraph network of the Baltimore and Ohio Railroad. By the end of the 1880s Western Union, now the parent company, had no real competitor in the two important businesses of railroad telegraphy and the transmission of Associated Press stories to member newspapers. It was one of the most profitable companies in the country. Gould died in New York on Dec. 2, 1892, leaving the management of his properties to his son George Jay Gould.

Further Reading

An excellent biography and railroad history of the period is Julius Grodinsky, Jay Gould: His Business Career, 1867-1892 (1957). A lively study of the family is Edwin P. Hoyt, The Goulds: A Social History (1969). The story of the "Erie war" is in Charles F. Adams, Jr., and Henry Adams, Chapters of Erie (1871). For a broad understanding of the era that made the emergence of industrial capitalists like Gould possible, see Louis M. Hacker, The World of Andrew Carnegie, 1865-1901 (1968). Gustavus Meyers, History of the Great American Fortunes (1907), portrays Gould as the "robber baron" par excellence. □

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Gould, Jay (1836-1892)

Jay Gould (1836-1892)

Speculator, railroad magnate

Source

Robber Baron. The financial practices attending the construction of railroads in the latenineteentn century gave the industry a bad name. A small group of extremely wealthy entrepreneurs became known as robber barons because of their aggressive and frequently dishonest business practices. Cornelius Vanderbilt, James Fisk, and others built immense personal fortunes through railroad promotion and consolidation. However, the prince of the robber barons was Jay Gould. He was born in 1836 and raised on a farm in upstate New York. As a young man he briefly operated a tannery. In 1859, at the age of twenty-three, he moved to New York City, where he set himself up as a leather goods merchant. During the Civil War he began speculating in the securities of small railroads and quickly grew wealthy. Gould developed the fine art of buying rundown railroads, making improvements, and selling out at a profit, meanwhile using corporate money for personal speculation and bribes.

Consolidation. In 1867 he and fellow speculators Daniel Drew and Fisk fought Vanderbilt for financial control of the Erie Railroada battle that became notorious as Gould and his partners issued millions of dollars worth of fraudulent stock and paid thousands of dollars more in bribes to judges and legislators. Goulds syndicate got the Erie, and he immediately moved to consolidate the line by leasing or buying up the smailer-western lines that fed int& ita stratcgy that set off a general wave of consolidation among railroad companies. In October 1869 Gould teamed up again with Fisk in a spectacular, unsuccessful attempt to corner the gold market. Meanwhile, Gould continued with his railroad speculations, by 1875 acquiring financial control over the transcontinental Union Pacificand so putting himself in position to begin building the first national integrated railroad system. By 1881 Gould controlied a railroad empire that stretched across the continent, spanning Boston, New York, Toledo, Chicago, Saint Louis, Kansas City, Omaha, and Denver.

Impact. Gould proved to be a better speculator than he was a railroad manager, and over the next few years he scaled back his holdings to concentrate on building a southwest regional system. Stili, Goulds maneuvers had a far-reaching impact on the railroad industry as a whole, for his aggressive challenges to other lines forced more conservative investors such as William Vanderbilt to build systems of their own to protect their originai holdings. Thus Gould helped to fuel the frenzy of railroad construction in the 1880s and 1890s that drove many railroads under and Consolidated the survivors into trunk-and-feeder networks spanning broad regions. In addition to his railroad holdings, Gould amassed a controlling stake in Western Union Telegraph, which he acquired by manipulating the telegraph subsidies of his railroads. He also controlied New York Citys elevated railroad system by 1886. He died in 1892, just before the national depression brought on, in large part, by railroads overextension.

Source

Julius Grodinsky, Jay Gould: His Business Career (Philadelphia. University of Pennsylvania Press, 1957).

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Gould, Jay

Jay Gould, 1836–92, American speculator, b. Delaware co., N.Y. A country-store clerk and surveyor's assistant, he rose to control half the railroad mileage in the Southwest, New York City's elevated railroads, and the Western Union Telegraph Company. With savings of $5,000 at 21 he became a speculator, particularly in small railroads. After some years he became a director of the Erie RR. Aided by James Fisk and Daniel Drew, he defeated Cornelius Vanderbilt for control of this road and manipulated its stocks in his own interest and that of his group, including "Boss" Tweed. The Gould-Fisk scheme to corner gold in 1869 caused the Black Friday panic. Public protest forced the Gould group out of the Erie, ending with Gould's expulsion in 1872. He then bought into the Union Pacific and other western roads. He gained control of four lines that made up the Gould system. For years his name was a symbol of autocratic business practice, and he was widely disliked. After his death his estate and interests were managed by his son, George Jay Gould.

See biographies by M. Klein (1986) and E. J. Renahan, Jr. (2005); C. F. and H. Adams, Chapters of Erie (1871); R. O'Connor, Gould's Millions (1962); E. P. Hoyt, Jr., Goulds (1969).

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Gould, Jay

Gould, Jay (1836–92) US financial speculator. With his partner, James Fisk, he typified the capitalist “robber barons” who made large fortunes from corrupt dealings in stocks and shares. He and Fisk nearly cornered the gold market, forcing the Treasury to release gold stocks and leading to the panic of Black Friday (24 September 1869).

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