Erie Railway

Daniel Drew is popularly credited with introducing what would be called "watered stock" to the New York financial district, to describe company shares that were issued by false means such as counterfeit certificates or shares issued that were not authorized, resulting in a dilution of ownership; the term supposedly came from his time in the cattle business, when he would have his cattle drink water before selling them, to increase their weight temporarily.

The tactic will be used in the Erie War of 1866-1868 to block Vanderbilt from getting ownership of Erie.

In 1857, Drew had become a member of the board of directors of the Erie Railway and had used his position to manipulate the firm's stock price.

In 1864, Drew had once again struggled with Vanderbilt, speculating on the stock of the New York and Harlem Railroad.

Drew had been selling the stock short, but Vanderbilt and his associates had bought every share he sold, ultimately causing the stock price to rise from 90 to 285 in five months.

Drew loses $500,000.

Born in Carmel, New York, Drew had been poorly educated.

His father had died when Daniel was fifteen years old.

Drew had enlisted and drilled, but because he enlisted too late, never fought in the War of 1812.

After the war, he had started a successful cattle-driving business, marrying married Roxanna Mead in 1823.

In 1834, he had entered the steamship business, competing unsuccessfully with Cornelius Vanderbilt but running numerous profitable lines outside of New York.

He had founded the brokerage firm of Drew, Robinson & Company in 1844, which dissolved a decade later with the deaths of his partners, after which he had continued to work in the brokerage business as an independent operator.

Jay Gould's father-in-law is credited with introducing the younger man to the railroad industry, when he suggested that Gould help him save his investment in the Rutland and Washington Railroad.

Gould had quickly acquired a majority of the company's bonds at 10 cents on the dollar.

Jason Gould was born in Roxbury, New York, the son of Mary More (1798–1841) and John Burr Gould (1792–1866).

His father was of British ancestry and his mother was of Scottish ancestry.

Gould's maternal grandfather Alexander T. More was a businessman, and his great-grandfather John More was a Scottish immigrant who founded the town of Moresville, New York.

Known as Jay, young Gould had studied at local schools and the Hobart Academy, where his principal was credited as getting him a job working as a bookkeeper for a blacksmith.

A year later, the blacksmith had offered him half interest in the blacksmith shop, which he had sold to his father during the early part of 1854.

Gould had devoted himself to private study, emphasizing surveying and mathematics.

In 1854, Gould had surveyed and created maps of the Ulster County, New York area.

In 1856, he had published History of Delaware County, and Border Wars of New York, which he had spent several years writing.

In 1856, Gould had entered a partnership with Zadock Pratt to create a tanning business in Pennsylvania in what would become Gouldsboro.

Eventually, he had bought out Pratt, who retired.

In 1856, Gould had entered another partnership with Charles Mortimer Leupp, a son-in-law of Gideon Lee, and one of the leading leather merchants in the United States at the time.

Leupp and Gould had been a successful partnership until the Panic of 1857.

Leupp had lost all his money, while Gould had taken advantage of the opportunity of the depreciation of property value and bought up former partnership properties for himself.

After the death of Charles Leupp, the Gouldsboro Tannery became a disputed property.

Charles Leupp's brother-in-law, David W. Lee, who was also a partner in Leupp and Gould, took armed control of the tannery, believing that Gould had cheated the Leupp and Lee families in the collapse of the business.

Eventually, Gould took physical possession, but was later forced to sell his share of the company to Lee's brother.

In 1863, he had married Helen Day Miller, with whom he will have six children.

Jim Fisk has aided Daniel Drew, who had become treasurer of the Erie Railway, in the struggle against Cornelius Vanderbilt for control of the railroad from 1866 to 1868.

To get revenge, Vanderbilt had tried to corner Erie stock, which led to the so-called Erie War, bringing him into direct conflict with Jay Gould and Fisk, who had just joined Drew on the Erie board.

New York state law restricts the number of shares a company can issue

However, Fisk and Gould have become involved with Tammany Hall, the New York City political ring, and Boss Tweed had arranged, through bribes, for legislation that had legitimized fake Erie stock certificates that Gould and Fisk had issued in large quantities

Vanderbilt, unaware of the increase in outstanding shares, had kept buying the “watered” Erie stock and sustained heavy losses

Eventually conceding control of the railroad to the trio, Vanderbilt had lost more than seven million dollars in his failed attempt, although Gould will later return most of the money after Vanderbilt uses the leverage of a lawsuit to get his losses back

Vanderbilt and Gould become public enemies

Gould will never get the better of Vanderbilt in any other important business matter, but he will often embarrass Vanderbilt, who uncharacteristically lashes out at Gould in public

By contrast, Vanderbilt will befriend his other foes after their fights ended, including Drew

Boss Tweed, in return for his role, receives a large block of stock and is made a director of the company.

James Fisk was born in the hamlet of Pownal, Vermont, in the township of Bennington on April Fool's Day.

After a brief period in school, he had run away in 1850 and joined Van Amberg's Mammoth Circus & Menagerie.

Later, he became a hotel waiter, and finally adopted the business of his father, a peddler.

He applied what he learned in the circus to his peddling and grew his father's business.

He then became a salesman for Jordan Marsh, a Boston dry goods firm.

A failure as a salesman, he had been sent to Washington, D.C., in 1861 to sell textiles to the government.

By his shrewd dealing in army contracts during the Civil War, and, by some accounts, cotton smuggling across enemy lines—in which he had enlisted the help of his father—he had accumulated considerable wealth, which he soon lost in speculation.

In 1864, Fisk had become a stockbroker in New York, and was employed by Daniel Drew as a buyer.

Jim Fisk and Jay Gould carry financial buccaneering to extremes: their program includes an open alliance with Boss Tweed, the wholesale bribery of legislatures, and the buying of judges.

In August 1869, Gould and Fisk had begun to buy gold in an attempt to corner the market, hoping that the increase in the price of gold would increase the price of wheat such that western farmers would sell, causing a great amount of shipping of bread stuffs eastward, increasing freight business for the Erie railroad.

During this time, Gould uses contacts with President Ulysses S. Grant's brother-in-law, Abel Corbin, to try to influence the president and his Secretary General Horace Porter.

These speculations in gold culminate in the panic of Black Friday, on September 24, 1869, when the US Treasury, in response, releases its gold on the US market.

The sudden glut causes the price of gold to plummet—the premium over face value on a gold Double Eagle falls from 62% to 35%—and collapses the entire stock market.

The gold corner establishes Gould's reputation in the press as an all-powerful figure who could drive the market up and down at will.

Though many investors are ruined, Fisk and Gould escape significant financial harm.

Gould had made a nominal profit from this operation, but will lose it in the subsequent lawsuits.

Jim Fisk and Jay Gould betray Daniel Drew in 1870, manipulating the stock price of the Erie Railroad and causing him to lose one and a half million dollars. (Fisk will be killed in January 1872 by a jealous rival over a mistress and Gould himself will later be swindled out of one million dollars worth of Erie railroad stock and will never control the Erie Railway).

Boss Tweed is by 1871 a member of the board of directors of not only the Erie Railroad and the Brooklyn Bridge Company, but also the Third Avenue Railway Company and the Harlem Gas Light Company.

He is president of the Guardian Savings Banks and he and his confederates have set up the Tenth National Bank to better control their fortunes.

Tweed's downfall comes in the wake of the Orange riot of 1871, which occurs after Tammany Hall bans a parade of Irish Protestants celebrating an historical victory against Catholicism, because of a riot the year before in which eight people died when a crowd of Irish laborers attacked the paraders.

Under strong pressure from the newspapers and the Protestant elite of the city, Tammany had reversed course, and the march had been allowed to proceed, with protection from city policemen and state militia.

The result is an even larger riot in which over sixty people are killed and more than one hundred and fifty injured on July 12.

Although Tammany's electoral power base is largely centered in the Irish immigrant population, it also needs the city's elite to acquiesce in its rule, and this is conditional on the machine's ability to control the actions of their people, but the July riot shows that this capability is not nearly as strong as had been supposed.

Tweed had for months been under attack from the New York Times and Thomas Nast, the cartoonist from Harper's Weekly, but their campaign has had only limited success in gaining traction.

They had been able to force an examination of the city's books, but the blue-ribbon commission of six businessmen appointed by Mayor A. Oakey Hall, a Tammany man, which includes John Jacob Astor III, banker Moses Taylor and others who benefit from Tammany's actions, had found that the books had been "faithfully kept", letting the air out of the effort to dethrone Tweed.

The response to the Orange riot of 1871 changes everything, and only days afterwards the Times/Nast campaign begins to garner popular support.

More importantly, the Times has started to receive inside information from County Sheriff James O'Brien, whose support for Tweed has fluctuated during Tammany's reign.

O'Brien had tried to blackmail Tammany by threatening to expose the ring's embezzlement to the press, and when this had failed, he had provided the evidence he had collected to the Times.

Shortly afterward, county auditor Matthew J. O'Rourke had supplied additional details to the Times, which had reportedly been offered five million dollars to not publish the evidence.

The Times has also obtained the accounts of the recently deceased James Watson, who had been the Tweed Ring's bookkeeper, and these are published daily, culminating in a special four-page supplement on July 29 headlined "Gigantic Frauds of the Ring Exposed".

Tweed begins in August to transfer ownership in his real-estate empire and other investments to his family members.

The New York City Comptroller resigns shortly thereafter, appointing Andrew Haswell Green, an associate of Samuel J. Tilden's, as his replacement.

Green loosens the purse strings again, allowing city departments not under Tammany control to borrow money to operate.

Green and Tilden have the city's records closely examined, and discover money that had gone directly from city contractors into Tweed's pocket.

The following day, they have Tweed arrested.

Jay Gould, like Tweed, had become the subject of political cartoons by Thomas Nast in 1869.

In October 1871, when Tweed is held on one million dollars bail, Gould is the chief bondsman.

The exposés provoke an international crisis of confidence in New York City's finances, and, in particular, in its ability to repay its debts.

European investors are heavily positioned in the city's bonds and are already nervous about its management—only the reputations of the underwriters are preventing a run on the city's securities.

New York's financial and business community knows that if the city's credit were to collapse, it could potentially bring down with it every bank in the city.

Thus, the city's elite meet at Cooper Union in September to discuss political reform: but for the first time, the conversation included not only the usual reformers, but also Democratic bigwigs such as Samuel J. Tilden, who had been thrust aside during Tammany's elevation.

Although some at the meeting advocate lynching Tweed, the general consensus is that the "wisest and best citizens" should take over the governance of the city and attempt to restore investor confidence.

The result is the formation of the Executive Committee of Citizens and Taxpayers for Financial Reform of the City (also known as "the Committee of Seventy"), which attacks Tammany by cutting off the city's funding.

Property owners refuse to pay their municipal taxes, and a judge—Tweed's old friend George Barnard, no less—enjoins the city Comptroller from issuing bonds or spending money.

Unpaid workers turn against Tweed, marching en masse to City Hall demanding to be paid.

Tweed doles out some funds from his own purse—fifty thousand dollars—but it isn't sufficient to alleviate the crisis, and Tammany begins to lose its essential base.