Tuesday, September 24, 2013

Black Friday: September 24, 1869 - Madams, Moguls and Mediums

Gold prices on a blackboard from the NY Gold Room on Black Friday
Today when Americans talk about Black Friday, we are referring to the big shopping day after Thanksgiving in November. This is a day when many Americans venture out to the shops to begin spending money on Christmas gifts for their families.

The term Black Friday has an older, darker, more salacious meaning though: in 1869, there was a crash on Wall Street that was so sudden and harmful that it resulted in many suicides. The story of the original Black Friday- the crash- involves moguls, mediums and madams entangled in a bizarre set of circumstances.

Josie Mansfield
In the 19th century, rich and powerful men in New York often frequented brothels to avail themselves of the services of the working girls. The madams running these establishments got wise to the possibilities of hosting such men regularly. The girls were trained to extract financial information from their patrons while giving the impression that they were not even listening or understanding what they were hearing. Unbeknownst to these traders, businessmen and political heavyweights, every morsel of information they divulged was being passed to the madam.

Victoria Woodhull
One such working girl was named Josie Mansfield, a friend of Victoria Woodhull. Woodhull was a
successful and well-known fortune teller, and went on to become the first female owner of a Wall Street brokerage firm. Josie became the mistress of financier Jim Fisk, who was a competitor to notable industrialist Cornelius Vanderbilt. Fisk and his partner Jay Gould cooked up a scheme to drive up the price of gold and turn a quick profit by selling at a peak price. Essentially the scheme involves buying enormous quantities of gold, thereby driving prices up. Once the prices reach an acceptably high level, the schemers sell their share and collect a tidy profit.

Jim Fisk
Josie learned of this scheme, of course, from Fisk, and informed her friend Victoria Woodhull. Woodhull was very smart in terms of investing yet she was still selling her services (very successfully) as a medium. Woodhull came to Vanderbilt “in a trance” and advised him to buy gold at $132. Vanderbilt pulled together all of the cash he had and managed to buy $9.5 million worth of gold at $132. This was early in the week.

By Wednesday afternoon, the price of gold had risen to $141. Thursday morning, Fisk and Gould met at Josie’s house to plan their scheme. They decided to buy as much gold as possible and then sell it when it reached $150. They carried out their purchase through anonymous brokers.

On Thursday evening, Woodhull, armed with more exact information, visited Vanderbilt once more and advised him to sell at $150.

On Friday, upon the opening of the market, gold was valued at $150 and Vanderbilt sold his share at a profit. By late morning, the price of gold was at $160.

Gold. Chased for centuries.
Part of Fisk and Gould’s plan involved an Assistant Treasurer named Butterfield who was in on it and stood to profit himself off of this scheme. When the price of gold had hit $162, Butterfield knew he had to inform Washington of the circumstances. The government, in response, instructed Butterfield to sell their shares of gold the following day. Butterfield secretly informed Fisk and Gould, allowing them to sell their shares and make their profit. Butterfield then publicly announced the government’s plan to sell their gold the next day, instantly devaluing the gold price from a high of $162 all the way back down to $132.

Fisk and Gould turned a profit through the scheme. Their chief competitor Vanderbilt did as well, although he did not know he was being fed Fisk & Gould’s info. The rest of Wall Street was left in ruins. The rapid devaluation bankrupted several investment houses and by midnight, 25 people had committed suicide, earning September 24, 1869 the name “Black Friday.”

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