Fifty years in Wall Street
of convertible bonds, were placed in the hands of Mr. Drew as security,
and he advanced the loan of 3½ million dollars to relieve the pressing
necessities of the corporation.
When Drew found himself thus fortified with the convertible bonds, he
laid another trap for the boys in the Street. Erie had been rapidly
absorbed for some time, and was very strong at 95 with anxious
purchasers. The stock was, therefore, becoming very scarce. Mr. Drew had
a large number of contracts to fill, and operators were wondering where
he would get the stock to settle. Many of them were laughing in their
sleeves at his impending embarrassment, as they had done on a former
occasion, and were in ecstasies of delight at the idea of the terrific
“squeeze” which the old man was about to experience. When he seemed on
the very horns of this dilemma, upon which the rampant bulls thought
they would successfully impale him, he converted his three million bonds
into an equivalent amount of stock, threw 58,000 shares on the market,
met all his contracts, and fed the voracious bulls with all they wanted.
Hungry as the Street had been for Erie, this was an overdose that it was
utterly incapable of digesting. The bulls were paralyzed, and before
they could rally their broken ranks from the demoralizing effects of
this unexpected sortie from the stronghold of Erie, the stock had
declined from 95 to 50, wiping out the broadest margins and putting the
whole army of bulls, reserve forces and all, to utter rout.
Millions were lost and won in a day in this deal.
This was regarded as a grand _coup d’etat_, and one of Drew’s most
brilliant exploits in operating. In fact, at the time, it seemed to
throw every prior operation of this nature totally in the shade, and the
other leading operators of the street were blue with envy, green with
jealousy, and raging mad over their losses and the way they had been
entrapped and almost ruined by the deeply-laid scheme of the Erie
treasurer. Drew was despised, feared and revered on account of this
unparalleled achievement. He then essayed to rest on his oars for a
short time, but his period of repose was but short-lived.
There was a little side-show in connection with the maturing of the
operations in the pool just referred to, which is so characteristic of
Daniel’s methods that it is worth relating. There was a young man in the
Erie pool, but not in the wheel-within-the-wheel in that sacred circle,
who imagined that the purpose of the pool was to put Erie stock up, and
accordingly he borrowed money from Uncle Daniel, his credit being good
and having money in the pool funds, to purchase Erie. The accommodating
treasurer not only lent him the money, but his private brokers sold the
young man the Erie stock desired. He was duly fed from day to day with
the quantity which his speculative appetite craved. After the dump just
referred to, this unsophisticated youth and some other members of the
pool among his friends, went to Uncle Daniel and requested him, as
manager of the pool, according to the programme supposed to have been
agreed upon, to put Erie again on the line of advance, in order that the
young man and his friends might get in and out again, so as to cover
their recent losses.
Mr. Drew, however, coolly informed them that the pool had no Erie stock
and did not want any, and was not prepared to trade in that security any
more at that time.
“I sold all our Arie at a profit,” said Uncle Daniel, “and am now ready
to divide the money.”
So this youthful member had the felicity of discovering that while he
was speculating on his own account for a rise, Uncle Daniel was looking
after his interests in another direction, and had realized at the most
opportune moment.
Thus this amateur operator, whom Uncle Daniel had amused, without
letting him into the secret, in the way described, got nearly enough of
money back to pay the loss he had sustained experimenting outside the
pool on his own account, and upon his own independent but fallacious
judgment.
If he had not speculated outside, he would have had very handsome
profits from the pool, but he would not have obtained the useful
experience which was connected with his losses, and the independent
attitude he was ambitious to assume in speculations.
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CHAPTER XV.
DREW AND VANDERBILT.
VANDERBILT ESSAYS TO SWALLOW ERIE, AND HAS A NARROW ESCAPE
FROM CHOKING.—HE TRIES TO MAKE DREW COMMIT FINANCIAL
SUICIDE.—MANIPULATING THE STOCK MARKET AND THE LAW COURTS AT THE
SAME TIME.—ATTEMPTS TO “TIE UP” THE HANDS OF DREW.—MANUFACTURING
BONDS WITH THE ERIE PAPER MILL AND PRINTING PRESS.—FISK STEALS THE
BOOKS AND EVADES THE INJUNCTION.—DREW THROWS FIFTY THOUSAND SHARES
ON THE MARKET AND DEFEATS THE COMMODORE.—THE “CORNER” IS BROKEN AND
BECOMES A BOOMERANG.—VANDERBILT’S FURY KNOWS NO BOUNDS.—IN HIS RAGE
HE APPLIES TO THE COURTS.—THE CLIQUE’S INGLORIOUS FLIGHT TO JERSEY
CITY.—DREW CROSSES THE FERRY WITH SEVEN MILLIONS OF VANDERBILT’S
MONEY.—THE COMMODORE’S ATTEMPT TO REACH THE REFUGEES.—A DETECTIVE
BRIBES A WAITER AT TAYLOR’S HOTEL, WHO DELIVERS THE COMMODORE’S
LETTER, WHICH BRINGS DREW TO TERMS.—SENATOR MATTOON GETS “BOODLE”
FROM BOTH PARTIES.
One of the most interesting episodes connected with the speculative life
of Drew, in the somewhat sensational history of Erie affairs, was the
interposition of Commodore Vanderbilt in one of the famous deals of the
Erie clique. His object was to swallow up the corporation, and it came
pretty near swallowing him. He was only saved by the skin of the teeth,
after one of the most prolonged and desperate financial struggles of his
life.
In order to explain clearly the manner in which the Commodore became
involved in the Erie matter with Drew and his partners, it will be
necessary to take a brief resume of the history of a few of his other
prominent deals, more fully dwelt upon elsewhere.
In 1860 Harlem stock had sold as low as eight or nine dollars a share.
In January, 1863, when Vanderbilt got full control of the property, the
stock had advanced to 30, and in July of the same year it had bounded to
92. In August, when the “corner” was effected, it went to the remarkable
figure of 179.
It was put through a similar operation the succeeding year, and the
stock, which sold in January below 90, was settled for in the following
June at 285. Drew had been drawn into one of these transactions, and his
losses reached nearly a million.
Vanderbilt’s prospects with the Harlem property were seriously menaced
by the competition of the Hudson River railroad. He bought up the
competing line, and thus destroyed the competition. He made this
purchase when the stock was at par. He soon manifested his superior
power in management, and displayed his skill in the art of “watering,”
which he had invented. He had the stock advanced to 180 in a very short
time.
Seeing his great success with these two properties, through his novel
and unique methods of financiering, the managers of the New York
Central, thinking that discretion was the better part of valor, and
perceiving that they could not hold out against the edicts of manifest
destiny very long, offered their property to him almost at his own
price, which he very cordially accepted, approving their good judgment
and keen perception.
He obtained full control of New York Central early in 1867. As soon as
this triple amalgamation was complete he set his insatiable and
avaricious heart upon Erie, and essayed to compass his designs and
effect his purpose of reducing it to possession through the speculative
machinery of Wall Street.
It was through this channel that he had obtained Hudson, and in defiance
of the scientific maxim that lightning never strikes twice in the same
place, he was inspired with full confidence in his ability to “scoop”
Erie in the same manner. He tried first to arbitrate and consolidate,
but his efforts in that direction failed.
With all his marvellous foresight and almost unerring judgment in
speculative affairs, the Commodore was greatly at fault in his
calculation regarding the magnitude of the task he had now undertaken in
Erie. He had no idea of the immense volume of the stock which, after the
speculative battle began to rage, seemed to spring out of the ground,
spontaneously, as the reserve troops of Wellington were said to appear
to do in the eyes of Napoleon when the struggle waxed warm at Waterloo.
He had to contend with the ablest generals in speculation and finance
that ever Wall Street had produced. His first bold, flank movement was
an attempt to “corner” Drew. He knew how to manipulate the courts almost
as well as the Erie Ring did. Accordingly, he made use of the services
of Frank Work to obtain an injunction from Judge Barnard, of Tweed Ring
notoriety, restraining Drew from the payment of interest on 3½ million
bonds, pending an investigation of his accounts as treasurer of Erie.
This was followed up in a few days by another application to the court
for the treasurer’s removal from office.
These measures were resorted to by Vanderbilt to prevent the issue of
this stock, into which these 3½ million bonds were convertible, and thus
enable him to get a “corner” in the stock with greater facility. He thus
attempted to make the court instrumental in forcing Drew into a position
where he would be obliged to commit financial suicide.
The Erie Ring had managed to get legally around what in reality was an
over-issue of Erie stock and bonds in the following subtle manner:
There was a statute of New York which authorized any railroad to create
and issue its own stock in exchange for the stock of any other road
under lease to it. The Ring had obtained the Buffalo, Bradford &
Pittsburg road, which was comparatively worthless, for carrying out this
scheme. The Erie management then set about supplying themselves with the
amount of Erie stock required, by leasing their own road to the road of
which they were directors. They then created stock and issued it to
themselves in exchange under the authority vested in them by law.
The nominal price of the road with which they worked this game of
legerdemain was $250,000. They issued bonds in its name for two millions
of dollars, payable to one of themselves as trustee.
Vanderbilt, before he could get a “corner” in Erie, had to place a limit
to the issue of the stock. Otherwise he would have been throwing away
millions, like pouring water into a sieve, in his attempt to make a
“corner.”
Drew was enjoined by the Commodore to return to the Treasury 68,000
shares of the capital stock of Erie. This was the amount that was said
to remain in the unsettled transactions of the Erie corner of 1866. This
was the sword of Damocles which Vanderbilt had suspended over Drew’s
devoted head.
Vanderbilt thus undertook to play the double game of manipulating the
courts and the stock market at the same time, and against wily
opponents, who were experts in both operations.
There were at this time three competitors for the possession of Erie in
the field. The Drew party, the Vanderbilt party, and the Boston,
Hartford and Erie party. Drew had tried to appease Vanderbilt to some
extent, and had an interview with him at Vanderbilt’s own house prior to
the election of the Erie directors. He agreed to “let up” on Vanderbilt,
and offered him greater swing in purchasing Erie, while, on the other
hand, Vanderbilt consented not to press the proceedings in court against
Drew.
Before this, the Boston party and Vanderbilt had been fixing matters to
oust Drew from the Erie directory. Now, Vanderbilt changed his tactics,