He began with nothing in 1879 and succeeded in the course of a year in possessing himself, by various adroit methods, as described, of $3,500,000 of assets in railroad securities. With this as a basis of operation, in five years he managed to obtain temporary control of property aggregating in value over $1,000,000,000.
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CHAPTER XXIII.
FERDINAND WARD.
PECULIAR POWER AND METHODS OF THE PRINCE OF SWINDLERS.—HOW HE DUPED ASTUTE FINANCIERS AND BUSINESS MEN OF ALL SORTS, AND SECURED THE SUPPORT OF EMINENT STATESMEN AND LEADING BANK OFFICERS, WHOM HE ROBBED OF MILLIONS OF MONEY.—THE MOST ARTFUL DODGER OF MODERN TIMES.—THE TRUTH OF THE SWINDLE PRACTICED UPON GENERAL GRANT AND HIS FAMILY.
In making a fair estimate of the part that Ferdinand Ward, of the firm of Grant & Ward, played in the panic of 1884, I can only say that Ward’s methods, taken altogether in their conception and execution, constituted a huge confidence game. He built up confidence by deceiving a few eminent men in financial and social circles, who, from his insinuating and plausible demeanor, were induced to place reliance upon his representations.
His presence was magnetic, and his manner deceitfully unassuming. He had the art of dissembling in great perfection and was possessed of extraordinarily persuasive powers, without appearing to have any selfish object in view. So highly developed in him were these social gifts, through the power of cultivation, that he could convince his unhappy victims that he was actuated with a single purpose for their welfare.
By practicing in this way on the credulity of certain people, Ward managed to get into his hands, for his own personal use, sums of money aggregating millions. Some of the richest financiers became his victims, chiefly induced by promises of high rates of interest and large profits on various ventures.
Ward would ascertain the names and circumstances of certain people who had large balances in their banks and were unable to make satisfactory and paying investments with them. He would bring certain influences to bear upon them to take their money out of the bank and invest it through him in “Government contracts,” which he said afforded immense returns, but were of a delicate character, and required some secrecy in the manipulation. This circumstance naturally prevented him from going into an explanation of the details of the enterprise, which it was not necessary for the investors to know when their profits were secured through such a stable investment. It was sufficient for them to be assured that the returns would be very large.
As an instance of the successful manner in which Ward’s specious pretences worked, I will relate the experience of one gentleman who deposited $50,000 with him, on the strength of these representations—just as an experiment.
This gentleman was going on a trip to Europe and he left the amount stated in the possession of Mr. Ward to be used to the best possible advantage during his absence, and invested in his own way.
About six months after the date of this deposit, the gentleman returned from Europe and called at the office of Grant & Ward to learn what progress had been made with his investment. He saw Ward, and called his attention to the fact.
The young Napoleon of finance recollected the appearance of his customer at a glance, for he is admirably developed in what phrenologists term individuality, and never forgets a face, but in the immense rush of his speculative business he had forgotten the circumstance until he referred to his books. He was but a few minutes absent in the interior office when he returned and informed the gentleman that his $50,000 had been invested with the ordinary turn of luck that usually accrued under his management, and he was very happy to be able to hand him a check for $250,000, after deducting the ordinary commission, as the result of the investment.
The man was overpowered with this unexpected turn of luck, and the enormous profits taxed his credulity to its utmost capacity. This was a speculative mine that he had never dreamed of, and instead of sleeping any that night he set his entire mind to calculate the profits on $250,000 in the same ratio that his $50,000 investment had been transformed into this amount.
It required very little mathematical knowledge to arrive at the conclusion that with such another turn of speculative prosperity, he would, within the next six months, be a millionaire and have the original investment left intact. Then if he should make this on three turns, which seemed not unlikely, when he should be present to look after his own business, he might pile up millions by the dozen.
The mind of this fortunate speculator being filled with such thoughts as these, he lost no time after breakfast in taking the train on the elevated road and arrived at Ward’s office before business had begun. When Ward arrived he met his customer with a gracious smile, took the check in the most handsome manner and made a note of it in his book.
The investor had not very long to wait this time before he knew the result of his venture. It was only a few days prior to the 12th of May, 1884, at which date the failures of Grant & Ward and the Marine Bank were announced in Wall Street, as the _avant courier_ of a sudden panic. So, the only thing that interfered with the second check producing similar results to those of the first, was the unfortunate panic, but of course Mr. Ward could tell his customer that he was not responsible for that.
In this connection an important financial question arises. Would there have been any panic had it not been for Ward, Fish, Eno & Co.? However this may be, there is one thing very evident, namely, that Mr. Ward must be accorded the power of ability to control men with whom he came in contact in a remarkable manner, and of being able to get the best of them in all financial matters. Old and astute financiers, who were considered experts in every method of speculation, and who knew all the artifices of making a sharp bargain, became helpless in the mystical presence of Ward, and were completely non-plussed by his superior acumen in taking advantage of every situation that offered the least opportunity of practicing his peculiar methods of chicanery and fraud.
Ward seems to have been very much of a mind reader. He knew when he passed that check over to the gentleman referred to, for $250,000, that it would come back again, that it would keep burning that man’s pocket while he kept it there, and that sooner or later he was bound to return it to the mysterious place of its issue. Doubtless this was not the first case that Ward had experimented upon in this way. He had evidently made a regular practice of it, and could calculate the proportion of his victims with as much accuracy as tables of mortality are made out for insurance companies. There was no blind chance about Ferdinand’s methods. He worked according to a rule, having calculated to a nicety the exceptions that proved it, and his success showed that he had not wasted much time over stubborn cases.
Ward displayed marvellous tact in discovering, at a glance, those who were sufficiently credulous to be entrapped into acquiescence with his schemes, and manifested great executive ability in pouncing upon his prey at the proper moment. His methods of operation were admirably suited to his purposes. He saw, for instance, that this man would not put the money in any other kind of investment, and would not be likely to operate, except through Ward himself, as no other man could be found anywhere who could make himself the instrument of realizing such stupendous returns for the money invested.
It is marvellous how the idea of large profits, when presented to the mind in a plausible light, has the effect of stifling suspicion.
The specious pretexts of Ward appeared equal to the task of overcoming the most obdurate cases of incredulity. So, it is not so singular, after all, that men utterly unacquainted with business methods and sharp practice in speculation, were so easily victimized by the sinister methods, conciliatory manners and seductive schemes of this consummate imposter.
Ward was so successful in his arts of persuasion that he could not only succeed in getting possession of all the available capital, for his own practical use, of many eminent financiers, but he had the power of transforming them into walking advertisements for the promotion of his nefarious designs, and turned them to the best account in drumming up business and customers for him while they were blissfully ignorant that they were all the time the subservient mediums of swindling projects. In fact, they made themselves the willing instruments of “roping” in others for Ward’s purposes, inspired by the purest motives of gratitude toward him as their confidential broker and benefactor.
In this way General Grant and his sons became the helpless victims of Ward’s deeply designing duplicity.
People who have blamed General Grant fail to reflect on the fact that the famous soldier and able tactician was no better than a raw recruit in the hands of a disciplined warrior when he was placed in contact with Ferdinand Ward’s superior financial tactics.
One great point in the confidence game worked on joint account between Fish and Ward was to obtain men of well known reputation to vouch for the genuineness of the enterprises in which they were engaged. This enabled them to solidify and extend their credit. It was for this purpose that General Grant was inveigled into signing the well-known letter No. 2, addressed to Fish, which has been the subject of so much criticism and comment. Following is a copy of this letter:
No. 2 Wall Street, } Room 6, } NEW YORK, July 6, 1882.
MY DEAR MR. FISH:—In relation to the matter of discounts, kindly made by you for account of Grant & Ward, I would say that I think the investments are safe, and I am willing that Mr. Ward should derive what profit he can for the firm that the use of my name and influence may bring.
Yours very truly,
U. S. GRANT.
This letter was written in answer to one from Jas. D. Fish, President of the Marine Bank, saying he had negotiated notes for the benefit of Grant & Ward, to the amount of $200,000. He said in explanation: “Those notes, as I understand it, are given for no other purpose than to raise money for the payment of grain, &c., to fill the Government contracts.”
This letter, signed by General Grant was designated by his counsel as “only an ordinary letter in the course of business,” and that is all it is where a man placed confidence in another as General Grant did in Ward and Fish.
It was Ward who wrote the letter, through the instruction of Fish, and got General Grant to sign it.
In an interview with a reporter of the New York _World_, in July last, Ward explained the circumstances under which the letter was signed, as follows:
“Do you know anything about that letter addressed to Mr. Fish and signed by Gen. Grant, regarding the Government contracts?” asked the reporter.
“Of course I do,” quickly replied Ward. “I made the original draft. It was by Mr. Fish’s direction, and he asked me to do it, suggesting what I should write. He had had some trouble in getting Grant & Ward’s paper discounted, for he attended to that and raised millions of dollars. He wanted something to show to Mr. Cox, President of the Mechanic’s Bank, and others from whom he tried to get money for the firm. The contract business was the great thing, and he said if he only had something from the General to show that he knew about the contracts, it would be easier for him to go to these men. I distinctly remember the circumstances under which this letter was prepared. Fish gave me an idea what it ought to be like and I wrote it. Then Mr. Fish went over it and made some corrections in his own handwriting. It was scrawled on a piece of paper that happened to be handy in the office, and after he had it to suit him he handed it to me and I gave it to Spencer, our cashier, to copy. I am not sure but that I have got that draft somewhere among my papers. I think I have seen it since the failure, and if it is still in existence it can plainly be seen that Mr. Fish knew all about it before it received Gen. Grant’s signature. The General was in the habit of signing papers I asked him to without paying much attention to what they were. So when I asked him to sign this one he did so without much if any questioning. I understood well enough what Fish wanted it for, because he told me, and I have no doubt that Mr. Cox and other gentlemen from whom he borrowed money saw the letter.”
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CHAPTER XXIV.
HENRY N. SMITH.
HOW MR. SMITH STARTED IN LIFE AND BECAME A SUCCESSFUL OPERATOR.—HIS CONNECTION WITH THE TWEED “RING,” AND HOW HE AND THE FAMOUS “BOSS” MADE LUCKY SPECULATIONS, THROUGH THE USE OF THE CITY FUNDS, IN MAKING A TIGHT MONEY MARKET.—ON THE VERGE OF RUIN IN A POOL WITH W. K. VANDERBILT.—HE IS CONVERTED TO THE BEAR SIDE BY WOERISHOFFER, AND AGAIN MAKES MONEY, BUT BY PERSISTENCE IN HIS BEARISH POLICY RUINS HIMSELF AND DRAGS WM. HEATH & CO. DOWN ALSO.
I have already had occasion to speak of Henry N. Smith, who was a member of the firm of Smith, Gould & Martin, but I consider him of sufficient importance, speculatively speaking, for a separate biographical sketch. pi This gentleman is a native of Buffalo, and had been in the mercantile business there before coming to Wall Street. He was familiarly known as the young man from Buffalo. He had then a decidedly Hebrew aspect; was a strawberry blonde, with full beard of auburn hue, sharp, piercing eyes, and an air of self-confidence. He had made some money in Buffalo, and was lucky in his first ventures in Wall Street, being one of the few who emerged from the panic of 1864 on the winning side. Smith became a bold operator, and accumulated considerable money. He was invariably successful in his transactions whenever he was governed by his own judgment. The first disaster overtook him in the panic of 1873. Immediately prior to that he had been under the influence of Commodore Vanderbilt, who put him into Western Union, and the loss which he sustained by its terrible fall in that year almost ruined him. He lost all his ready money, being left without anything but his New York residence and a stock farm.
He did not lose courage, however, by this speculative blow, but picked himself up again and soon became quite a power in the Street, and in spite of the ups and downs of speculation and the various panics, Smith kept clearly ahead of the market for many years, and became a successful and comparatively wealthy operator.
He always managed to ingratiate himself with wealthy connections in his various operations, and was able to command an enormous amount of credit in comparison with his actual means.
A few years ago, on his return from Europe, he met W. K. Vanderbilt, and they began to discuss the probable future of the market. Vanderbilt had been a bull for some time previously. They entered into an agreement to operate on the bull side together. The result was that Vanderbilt lost several millions, and came pretty near running the risk of exhausting a large part of his then anticipated share of his father’s estate. The deal was disastrous to Smith also.
Soon after this discomfiture, one day, on his way to Long Branch, Mr. Smith met the late Mr. Woerishoffer, who was the great bear on the market, while Smith and Vanderbilt were still then the leading bulls. Woerishoffer succeeded in convincing Smith that his position on the market was wrong—that he had better make a clean sweep of it in selling out the stocks which he held, and join hands with him on the bear side.
Smith was impressed with Woerishoffer’s advice, earnestness and personality.
The great bear was also in a position to back up his theory by examples of his success, the best and most convincing argument that could possibly be employed, especially by a Wall Street speculator. As the result of this bearish counsel, Smith soon recuperated from the effect of his former losses, and, in consequence, got bearish notions so badly on the brain that he was prepared to swear by Woerishoffer’s judgment, and considered his own equally infallible. He could see nothing but disaster ahead any more than his general, and was recklessly prepared to follow wherever the champion bear should lead in the destruction of values.
Smith seemed to have the same abiding faith in Woerishoffer that Ignatius Loyola reposed in the Pope of his day. “If the Holy Father,” said that eminent Jesuit, “should command me to row several leagues into the ocean in an open boat, in the midst of a terrific gale, I should straightway obey his mandate without asking why or wherefore.”
Such is hardly an exaggerated illustration of the thorough appreciation which Smith entertained of the perfection of Woerishoffer’s bearish discipline, and the exact certitude of his judgment in all matters of a speculative character. It is almost impossible for a man who has had no experience in Wall Street matters to estimate the extremes of fanaticism in speculation to which a man is prepared to go when he is seized with a monomania either on the bull or the bear side, but especially on the latter.
The evidence of his senses counts for nothing, and the evidence of other people’s senses, if possible, goes for less. He is a consistent bull or bear, as the case may be, and that settles it. He is Sir Oracle on the stock market and when he speaks let no dog bark.
This inveterate combination of egotism and fanaticism has ruined many hundreds, to my own knowledge. The disease is contagious, and Smith had a very obstinate form of it. His symptoms were even worse than those of Woerishoffer, by whom he was smitten, a peculiarity that very often occurs in the recipient of this financial malady.
Like Woerishoffer, Smith fought the market with desperation on every advance. He adhered steadily to the policy of attacking prices on every rally during the summer of 1885, while values were constantly advancing, with occasional healthy reactions. When his own money was exhausted he began to incur cumulative liabilities with the house of Wm. Heath & Co., until that famous firm had become almost depleted of its available resources in replacing margins as fast as they were wiped out by the persistent tide of advancing prices in speculation.
Thus Mr. Smith proceeded, in obedience to the spirit of bearish fanaticism, until his loss became so great that he not only had to pay out all his own money, but was in debt to the firm of Wm. Heath & Co. in a million dollars, which was the cause of their failure, and which crippled or caused to collapse several smaller houses.
When Mr. Smith appeared before the Governing Committee of the Stock Exchange to make application for the extension of time on his seat, he made the following extraordinary statement: “On January 1, 1885, I was worth $1,400,000. I had $1,100,000 in money, and the balance, $300,000, in good real estate. On the following January I had lost the whole amount, and was $1,200,000 in debt, a million of which I owed to Wm. Heath & Co.”
Many people were surprised that Mr. Smith was enabled to obtain such an enormous and unlimited amount of credit in one house. I took the ground at the time, and I am still of the same opinion, that the animal magnetism or psychologic power of Henry N. Smith over the elder Heath was the real cause of all the trouble.
Mr. Heath had been in bad health for some time, consequently he left the general management of the business to Mr. McCanless, the head clerk and general manager of the firm, through whom the orders of Mr. Heath were strictly executed.
Mr. Heath being weak in both body and mind, yielded his opinions to those of Mr. Smith, by virtue of the superior mental force of the latter.
In conducting a large Wall Street business it is necessary that a man should have the mental stamina to say “no” firmly, and stand to it. In order to be able to do this he must be backed up by a vigorous, healthy physique.
The power to utter a negative in a determined manner requires, generally, a fair degree of physical force, and it is absolutely necessary to the success of a Wall Street broker that he should be able to do it when occasion requires. A deficiency either in will power or physical force to pronounce this small negative distinctly and firmly may result in financial ruin, as it did in the case of Wm. Heath & Co.
Henry Nelson Smith made many successful turns in speculation during the Tweed regime, owing to the facilities which the municipal bankers belonging to that famous coterie afforded him for manipulating the money market.
There were great fluctuations in stocks while William Marcy Tweed was the power behind the throne in the government of the city of New York. Mr. Tweed contributed largely towards these fluctuations. He and his trusty companions pulled the wires at the City Hall while the puppets in several of the brokers’ offices in the vicinity of Wall Street danced to the sweet will of the managers in the municipal building.
One of Tweed’s three famous maxims was, “The way to have power is to take it.” The other two were, “He is human,” and “What are you going to do about it?” In conformity with the first maxim, Mr. Tweed took control of the city funds, besides a number of the city savings banks, and other financial institutions, which he had organized through special charters from the Legislature, which he also owned during the period of his Boss-ship.
These funds were so managed that a very tight squeeze could, at almost any time, be effected in the money market. The city funds on hand were, at that time, usually about from six to eight millions of dollars, and were deposited in the banking institutions of the “Boss.” They were ostensibly under the control of the City Chamberlain, who was under the control of Tweed.
Henry N. Smith and a few other favorite members of the syndicate would draw their balances from these banks, making money scarce to the general public, and the money market would suffer a sudden squeeze, and consequently the stock market would break, sometimes with such rapidity as to produce disastrous results to a number of brokers, business houses and other financial concerns outside the Tweed Ring.
On one of these occasions Mr. Smith drove up to the Tenth National Bank, the Black Friday ring institution, in a cab, and drew his balance therefrom, amounting to $4,100,000. He took it home and kept it there several days under lock and key. In the meantime Mr. Tweed and his companions withdrew from circulation the greater portion of the amount under their immediate control, making a tie-up, on the whole, of nearly twenty millions of dollars. At that time this was an amount sufficient to make a very stringent money market, and cause Wall Street operators to feel very uncomfortable. It was then a mighty power to be wielded by a few unscrupulous men. At that time Mr. Smith considered himself worth at least five million dollars. He lost most of this in the panic of 1873, largely in Western Union stock, as above stated, into which Commodore Vanderbilt had kindly put him.
I have referred to the prominent part which Mr. Smith played in the great speculative drama of Black Friday, in the scenes and incidents of my chapter on that ever-to-be-remembered day in Wall Street
I shall, in another chapter, briefly review some of the methods to which the Tweed Ring resorted to make speculation and politics play into each other’s hands, and show how a bold attempt was made to add the control of the National Treasury to that of New York.
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CHAPTER XXV.
KEENE’S CAREER.
HE STARTS IN SPECULATION AS A CALIFORNIA BROKER.—A LUCKY HIT IN A MINING STOCK PUTS HIM ON THE ROAD TO BE A MILLIONAIRE.—HIS SPECULATIVE ENCOUNTER WITH THE BONANZA KINGS.—HE MAKES FOUR MILLIONS, STARTS FOR EUROPE AND STOPS AT WALL STREET, WHERE HE FORMS AN ALLIANCE WITH GOULD, WHO “EUCHRES” HIM AND OTHERS.—SELOVER DROPS GOULD IN AN AREA WAY.—KEENE GOES ALONE AND ADDS NINE MILLIONS MORE TO HIS FORTUNE.—HE THEN SPECULATES RECKLESSLY IN EVERYTHING.—SUFFERS A SUDDEN REVERSAL AND GETS SWAMPED.—OVERWHELMING DISASTER IN A BEAR CAMPAIGN, LED BY GOULD AND CAMMACK, IN WHICH KEENE LOSES SEVEN MILLIONS.—HIS DESPERATE ATTEMPTS TO RECOVER A PART ENTAIL FURTHER LOSSES, AND HE APPROACHES THE END OF HIS THIRTEEN MILLIONS.—HIS PRINCELY LIBERALITY AND SOCIAL RELATIONS WITH SAM WARD.
One of the most remarkable up-and-down lives known to Wall Street is that of James R. Keene. His rise and fall are both of recent date.
Mr. Keene is of English parentage, and was born in London, about 48 years ago. He came to this country at the age of 17, lived in the South and studied law there. He removed to San Francisco in 1853, and became well informed in mining matters through several mining cases that were put into his hands while practising at the bar in that city. I am told he was also connected with a Western newspaper for some time. He caught the speculative fever shortly after his arrival in California, and, as it seems, abandoned both law and journalism to become a broker.
Keene had hard work for some time to make both ends meet, and his struggle for existence in the wild West made serious inroads on his health. His physician told him he must give up work, and advised him to take a long sea voyage if he intended to prolong his life. Acting on this advice, he secured his passage to the East. This was the turning point in both his health and fortune.
Prior to his departure, Mr. Keene was urged to invest a few hundred dollars in a mining stock then selling very low. The length of his journey and the change of scene caused him almost to forget about his investment, and the methods of communication between the far West and the far East in those days were so very slow that he had hardly any chance of being informed of his lucky venture until his return. As an illustration of this slow transit of news at that time, it may be stated that gold was discovered January 19, 1848, but the news did not reach the Eastern States until the following December. It was authoritatively announced in the President’s annual message, and created great excitement. Mr. Alfred Robinson, with about twenty companions, were the first to leave New York for the scene of the new El Dorado, on the bark “John Benton.”
After nearly a year’s absence Keene was surprised to find, on his return, that mining stocks had taken a prodigious bound upward and carried the one in which he had invested with them. The mine had turned out to be a veritable bonanza, and the stock which had cost him only a few hundred dollars was then worth over $200,000.
Had Mr. Keene’s health not required his absence from the scene of speculation the chances are that he would have disposed of his stock as soon as it should have realized a few thousand dollars.
This was a wonderful realization for one who had been comparatively poor, and was sufficient to turn the head of any ordinary man; but it only made Keene more anxious for greater success, which he set himself diligently to achieve.
The speculative craze was then intense and epidemic. Waiters and chambermaids bloomed into millionaires with the rapidity of mushroom growth. Mr. Keene secured a seat in the Board, and began to do an immense business.
Flood, Mackay, Fair and O’Brien were then the prominent operators. The speculative contagion spread rapidly over the coast, and soon imparted its influence to the entire continent. Keene’s further investments were crowned with similar success to that of his first venture, and even in a greater ratio of profit.
Seeing the great and rapid advance in the stocks of the Comstock mines, he naturally reasoned, like old Daniel Drew, that what had gone up so high and so fast was bound to come down. There were but few people on the coast at that time, however, in a mood to reason so soberly, and it required more than ordinary nerve to make the experiment of selling “short.” Mr. Keene, however, had the courage of his convictions, and made an onslaught upon the market.
There Was a strong contingent to oppose him, for the wealthy syndicate just named, with the Bank of California behind them, were his bitter foes, and they did their best to crush him. In spite of their efforts, however, the market began to yield under the pressure of Keene’s “short” sales. In a little while the list gave way and stocks began to topple from their dizzy eminence, even quicker than they had climbed to that unprecedented height. Keene netted millions in their fall. He cleared two and a-half millions in the Belcher and Crown Point mines, and over half a million in Ophir.