Fifty years in Wall Street
area of speculation. Failure at any one of these points may be fatal to
success and result in disaster.
I conclude, then, that for a man to be a thoroughly equipped speculator,
it is necessary that he be possessed of extraordinary parts and
attainments. He must be an unceasing and intelligent observer of events
at large, and a sagacious interpreter of symptoms on the Exchange; his
judgment must be sound, not only as to existing conditions, but as to
coming tendencies, and he must possess the calmness and nerve to face
unflinchingly whatever emergencies may arise. Whoever enjoys these
qualities in the highest degree must be the King of Speculators. As to
others, their rank must correspond to the degree of their conformity to
this ideal standard.
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CHAPTER XXII.
VILLARD AND HIS SPECULATIONS.
RETURN OF THE RENOWNED SPECULATOR TO WALL STREET.—RECALLING THE FAMOUS
“BLIND” POOL IN NORTHERN PACIFIC.—HOW VILLARD CAPTURED NORTHERN
PACIFIC.—PURSUING THE TACTICS OF OLD VANDERBILT.—RAISING TWELVE
MILLION DOLLARS ON PAPER CREDIT.—VILLARD EMERGES FROM THE “BLIND”
POOL A GREAT RAILROAD MAGNATE.—HE INFLATES HIS GREAT SCHEME FROM
NOTHING TO ONE HUNDRED MILLION DOLLARS.—HIS UNIQUE METHODS OF
WATERING STOCK AS COMPARED WITH THOSE OF GEORGE I. SENEY.
The return of Mr. Henry Villard to Wall Street, after two years’ absence
in Germany, his native land, renews the public interest in the career of
that bold speculator. My reminiscences of Wall Street affairs would be
incomplete without a sketch of the daring railroad operations of this
gentleman, which so fully illustrate some of the evils to which I have
referred in my chapter on “Railroad Methods.”
The culminating point in the speculative history of Mr. Villard, which
covered a period of five years, from 1879 to 1884, was the famous blind
pool in Northern Pacific.
Instead of taking up the events of his life in detail, and carrying my
readers to this point, I shall depart from the usual course of
biography, and present the more interesting facts of the career of my
hero at the beginning.
In his capture, of Northern Pacific he seems to have followed the
methods of the elder Vanderbilt very closely, with the important
exception that he failed in the consummation of his purpose. Vanderbilt
always, eventually, triumphed.
Villard was the chief agent in forming the Oregon Railway and Navigation
Company, which was organized for the purpose of consolidating the
business of the Oregon Steam Navigation Company with that of the Oregon
Steamship Company, and for the purpose of buying, building and operating
railroads, as stated in the circular setting forth the objects of the
company. The lines of the Oregon Railway and Navigation Company extended
from Portland west to Wallula Junction.
The value of this property was seriously menaced by the project of the
Northern Pacific to extend its lines west, with a terminus at Tacoma.
President Billings, of the Northern Pacific, rejected a proposition from
Mr. Villard to accommodate the Northern Pacific by permitting it to
reach the Pacific coast over the lines of the Oregon Railway Navigation
Company.
It was at this juncture that Villard resorted to the old Vanderbilt
tactics, by attempting to purchase stock enough of the Northern Pacific
to enable him to control the property. For this purpose he formed a
blind pool, in which Messrs. Woerishoffer, Pullman and Endicott, and a
host of other solid men, were the original members. A fund of $8,000,000
was subscribed to purchase Northern Pacific stock. During the spring of
1881 the pool kept on buying steadily, and continued their operations
until the middle of summer, when it was discovered that the treasury of
the pool was almost exhausted without having effected its purpose of
acquiring control of the Northern Pacific property.
Mr. Villard then called a meeting, explained matters, proposed to extend
the scope of the pool’s operations, and to increase its membership. By
showing the enormous profits to be gleaned in the future, he succeeded
in getting $12,000,000 more subscribed. This secured the control of the
road, and in September, 1881, Mr. Villard was elected President of
Northern Pacific.
Villard at once emerged from this blind pool into a great railroad
magnate, in a manner, to the eye of the general public, as miraculous as
the springing forth of Minerva fully armed from the brain of Jupiter.
The stock of Northern Pacific advanced rapidly in price, and Villard and
his friends were supposed to be accumulating millions with unprecedented
celerity. Villard appeared to have realized all the financial dreams of
Monte Cristo, and he was fast looming up into a proud and dangerous
rival of Gould, Vanderbilt and Huntington.
He went forward with the building of the Northern Pacific road, which
was finished two years after his success in capturing it through the
medium of his blind pool. His phenomenal success induced him to enter
largely into the extension of other investments. He became lavish in his
personal expenses also, although he had formerly been accustomed to the
closest economy in his mode of living, and he built a palace at Madison
Avenue and Fiftieth street.
When seemingly on the highest tide of prosperity, Villard suddenly
became embarrassed, and when an accounting of the cost of finishing the
road was made, he was found to be away behind. There was a
miscalculation of $20,000,000 somewhere. Villard explained it by
declaring that the estimate of the engineers for finishing the road was
$20,000,000, whereas the real cost reached $40,000,000.
For the $20,000,000 subscribed by the blind pool the subscribers
received the stock of the Oregon & Transcontinental. This company had
been organized to build branch lines to the Northern Pacific, as the
charter of the latter did not permit it to build such lines.
This is the speculative history, in brief, of Mr. Villard from the time
he took hold of the Oregon & California Railroad up to the juncture of
his grand collapse. There were several incidents, however, of more than
ordinary interest in his railroad history prior to the time he set his
heart upon Northern Pacific. As a stock-waterer he had, probably, no
superior, and was only equalled by Mr. George I. Seney, in that
important department of railroad management. His methods in obtaining
control of the Oregon Steam Navigation Company and the Oregon Steamship
Company amply illustrate his remarkable ability in this respect. When
Villard proposed to purchase these two companies he had no money, but he
had unlimited confidence in his own ability. He asked each company to
give him an option to run a year for $100,000. They agreed to do this,
and Villard forthwith consulted a number of capitalists, who came
together and filed articles of incorporation of the Oregon Railway &
Navigation Company, a consolidation of the two companies above-named.
When this company, with such a high sounding name, was organized, it had
no assets, and the prospects of acquiring any seemed exceedingly blue.
The names of the incorporators were as follows: Henry Villard, James H.
Fry, Artemus H. Holmes, Christian Bors, W. H. Starbuck and Charles E.
Brotherton, all of the city and State of New York, and W. H. Corbett, C.
N. Lewis, J. N. Dolph, Paul Schulze and N. Thielson, all of Portland,
Oregon. The capital was nominally six million dollars, divided into
60,000 shares. This arrangement was made in June, 1879.
The next problem to be solved after the reorganization was how to raise
money to run the concern.
The Board of Directors, under the management of Mr. Villard, were equal
to the occasion. They met at Portland a few days after the organization
and executed a mortgage to the Farmers’ Loan and Trust Company of New
York, and under this mortgage issued 6,000 bonds of $1,000 each, payable
in thirty years after July 1, 1879, with interest at 6 per cent.
Mr. Villard then paid the $100,000 bonus money to the companies which
had been incorporated, took his option, stock and bonds and came East to
negotiate his securities. It is said he presented them to Jay Gould, who
refused to touch them, as he believed there was not much stamina in the
scheme, and he wished to avoid trouble with the Northern Pacific, which
he plainly saw the project involved. Villard was more fortunate with Mr.
Endicott, Jr., of Boston, Mr. George Pullman and others whom they
interested in the enterprise.
The property of the two companies, out of which the new company had been
formed, whose securities were so boldly placed upon the market, was not
in reality purchased until March of the following year.
After the organization was complete, the visible assets of the Oregon
Railway and Navigation Company did not exceed $3,500,000, while the
total liabilities amounted to $21,000,000. This was made up as follows:
Original $6,000,000
stock
Water 3,000,000
Water 6,000,000
Mortgage 6,000,000
bonds
It will thus be seen that there were seven dollars of liabilities for
every dollar of assets, and the intrinsic value of the stock was
represented by a minus quantity of 20 per cent., having no positive
value at all. In other words, it was 20 per cent. worse than nothing.
In spite of these facts, however, Mr. Villard had the stock listed at
the Stock Exchange, and through a carefully prepared report, showing
immense and unprecedented earnings, he had the stock bulled up to 200.
It was when it reached this high figure that the $9,000,000 of water
(noted before) were thrown in to prevent it from becoming top-heavy.
This was the preparatory and successful process of watering which
preceded the transactions of Mr. Villard on a more magnificent scale in
his manipulation of Northern Pacific, as described at the opening of
this chapter. Mr. Villard excelled Mr. Seney in one respect which is
noteworthy. As I have shown in a former chapter, Mr. Seney poured the
water in lavishly at the reorganization, and prior to having his
properties listed on the Stock Exchange.
Villard improved upon this process by employing Seney’s method liberally
in the first instance, and also by a free and copious dilution after the
stocks had been inflated to the very point of bursting.
There is probably no instance in the whole history of railway
manipulation in which a man has presented to the public, and with such
amazing success, such a specious appearance of possessing solid capital
where so little existed in reality.
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