Black Friday (1869) participant Jay Gould
Cornering the gold market
In 1869, Jay Gould, a director of the Erie Railroad sought to corner the gold market with the connivance of Abel Corbin, a financier with a shady past who was President Grant's brother-in-law. They worked to persuade the President to stop Boutwell from releasing weekly gold (but not affecting those routine gold sales for the sinking fund) from the Treasury Department, with the intention to raise the gold price. James Fisk, another director who had made his fortune as a cotton smuggler during the Civil War, controlled the Erie Railroad in conjunction with Gould.  He would join the conspiracy in force later on. The first step in Corbin and Gould's plan was to recruit Daniel Butterfield, a former Major General and war hero during the Civil War who lacked any experience in finance. Both Corbin and Gould lobbied successfully for Butterfield's appointment as the assistant treasurer, through whom Boutwell gave orders to sell Treasury Department gold. Gould bribed Butterfield with a $10,000 check, more than Butterfield's annual salary of $8,000. Butterfield agreed to tip the men off when the government intended to sell gold.Corbin was considered a smooth talker and had made money speculating in real estate. More importantly to Fisk and Gould, he had direct access to Grant. They used Corbin's relationship to get close to Grant in social situations, where they would argue against government sale of gold, and Corbin would support their arguments. Gould also attempted to bribe Grant's personal secretary Horace Porter by giving him a $500,000 gold account in his name, but Porter, a former military aide to Grant, stated that he declined the offer. Not accustomed to having such offers turned down, Gould went ahead and made the purchase and opened a brokerage account in Porter's name regardless. When Porter was informed of Gould's unauthorized transaction, he refused the offer in writing. In similar fashion, Corbin approached Grant's wife Julia and attempted to entice her into accepting half interest in $250,000 in bonds, but she turned that offer down.Gould secured controlling interest in the federally audited New York's Tenth National Bank, a Wall Street broker's bank that was used as a facility to contract business. In addition to meeting at Corbin's mansion home, Fisk and Gould also talked with Grant on their Erie Canal railroad car and in Fisk's box seats at New York's Fifth Avenue Theatre. Gould suggested to Grant that increasing gold prices would lower the dollar and allow farmers in the West to sell their crops overseas, but Grant gave no response. Both Grant and Boutwell strongly felt that the nation's wartime debt had to be paid to assure the credibility of the United States in the eyes of the European banks. To accomplish this, Boutwell began selling gold from the Treasury's reserve of $100 million in gold bars, initially without the President's express consent, and then using the proceeds to buy back U.S. bonds. Boutwell's controversial approach was later endorsed by Grant, giving Boutwell all the latitude he needed. Boutwell later wrote that only outsiders unaware of the finer designs of his dealings thought "the President was taking any part in the operations of the treasury concerning the price of gold".  Grant, meanwhile, was unaware that his appearances in the company of Gould and Fisk sent a message to Wall Street that he supported raising the gold price.When buying gold and bonds, Boutwell placed all his orders through Daniel Butterfield in New York. To reduce the temptation of illicit dealing, Boutwell, at Butterfield's recommendation, publicly announced his orders by telegraphing the news to the Associated Press. Over the next few months Treasury gold began to flood the market while Boutwell began buying back wartime bonds. By September 1, Boutwell had reduced the national debt by $50 million. He continued this practice at an accelerated rate while Grant, having closely followed Boutwell's dealings, began to express reservations and sent him a letter from Washington, Pennsylvania criticizing that driving the price of gold down would hurt farmers. Many brokerage firms collapsed while trade volume and agriculture prices plummeted, causing a mild recession, but by January 1870, the economy resumed its post-war recovery. Boutwell saw little merit in either Grant's or Gould's arguments, feeling that the government had no place in manipulating the market regardless of who benefited. However, not wanting to go against the President, Boutwell ordered Butterfield to halt semi-weekly September government gold sales. Believing he now had a "green light" from Grant, Gould began buying gold through brokers at an accelerated rate while his gold account grew from $10 to $18 million in specie.