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Wall Street’s 10 Most Notorious Stock Traders
The country’s financial hub has a long history of lying, cheating, and stealing
Spring 2009 | Volume 59, Issue 1
At 11:20 the price of gold reached 158; at 11:40 it reached 160. Businessmen who had made comfortable livings for years faced imminent ruin. But then, just as a telegram was sent from Washington instructing Butterfield to sell $4 million in gold, a broker on the floor sensed a turning tide and sold $5 million in gold at 160. The market instantly turned, and by noon Butterfield was able to telegraph Washington that the price had dropped to 140. The gold corner—and the single most exciting day in the history of Wall Street—was over.
The mess created by Gould and Fisk was never really cleared up but instead more or less swept under the rug and so we will never know if they made or lost money. Three years later, Jim Fisk would be murdered in a love triangle. Jay Gould would live on, getting richer and sicker by the year until 1893. But the great corner in gold had shown that having two currencies, one backed by gold and one not, was an invitation to market instability. By 1897 the nation was back on the gold standard, and the greenbacks disappeared.
After President Grant left the White House in March 1877, his son, Ulysses Jr., entered into partnership with a Wall Street speculator named Ferdinand Ward. The elder Grant, although entirely ignorant of finance, decided to join his son in the partnership of Grant & Ward, putting up $200,000 as capital, nearly his entire net worth. Ward invested a similar amount. The problem was that Ward was lying. The “gilt-edged” securities he put up turned out to be worth much less than he claimed.
Ward hoped that Grant Sr. could steer government contracts to companies in which Grant & Ward held positions. Grant adamantly refused to do any such thing, but Ward simply implied to potential investors that such contracts would be forthcoming. He thus attracted many new clients to Grant & Ward and was able to borrow money to facilitate further speculation as well. The president of Marine National Bank, where Grant & Ward did much business, asked Grant whether Ward was telling the truth. Grant replied with an incautiously worded letter that the bank president took as confirmation.
Ward began urging friends to deposit money with Grant & Ward, promising large dividends. These were forthcoming, which encouraged the investors to put in more money and new investors to come into the deal. But it was a Ponzi scheme. Ward was paying the dividends out of the new investments.
By the end of 1883, General Grant figured he was worth $2 million, enough in the 1880s to make one a rich man indeed. In reality, the firm of Grant & Ward was nearly bankrupt by May 1884. The Marine National Bank was also in deep trouble because its president had misappropriated funds to invest with the firm. Ward, his back to the wall, told the general that a sudden withdrawal by the city of New York had left the bank dangerously short. If the bank closed its doors, the resulting panic would bring down Grant & Ward.
Ward asked Grant to raise $150,000 from his friends to save the situation. Grant, ever naive, accepted Ward’s story and went to see William H. Vanderbilt, the son of the Commodore and the richest man in the world. Vanderbilt, like his father, was nobody’s fool and did not trust Grant & Ward. But he told the former president, “I’ll lend you $150,000 personally. To you—to General Grant—I’m making this loan and not to the firm.”
Grant turned the check over to Ward, who cashed it and fled. The Marine National Bank failed and took Grant & Ward along with it. It turned out that Grant & Ward had assets of $67,174 and liabilities of $16,792,640. Ward was soon arrested and spent 10 years in jail for grand larceny.
Desperate for money, Grant at last began writing the memoirs he had so long resisted writing. He finished them three days before dying of throat cancer. The Personal Memoirs of U. S. Grant became a titanic best seller, and Grant’s widow received about $450,000 in royalties, a comfortable fortune by the standards of the day.
The Memoirs are also regarded as one of the greatest works of military history, the equal, perhaps, of Julius Caesar’s Commentaries . It is ironic that a second-rate Wall Street crook should have been partially responsible for the creation of one of the masterpieces of American literature.
In the 1930s Richard Whitney was probably the most famous stockbroker in the nation. As acting president of the New York Stock Exchange, he had single-handedly stopped a panic when the market seemed to be in free fall on October 24, 1929. There was no stopping the great crash that happened five days later, but Whitney’s heroics had provided some time to get out of the market while the getting was good. He was elected president of the exchange in his own right the following year, serving until 1935, and was the public face of Wall Street as it resisted the reforms of the New Deal.
Whitney headed the brokerage firm of Richard Whitney & Company, which handled J. P. Morgan & Company’s needs in the stock market. He lived in considerable splendor, spending at least $5,000 a month at a time when $2,500 a year was a middle-class income and millions of American families lived on far less, thanks to the Great Depression.
There was one big problem: he couldn’t afford it. In mid-1931 Richard Whitney & Company actually had a net worth of only about $40,000. In the prosperous, high-flying 1920s, Whitney had managed to keep afloat by frequently borrowing from friends and acquaintances, especially his brother George, who was a Morgan partner. He would quickly pay them back and then borrow again just as quickly.