Financial History Issue 125 (Spring 2018) | Page 21
Meanwhile, from another room, Gould
instructed Heath agents to sell as much of
his hoarded gold as possible, knowing that
it was only a matter of hours before the
price dropped precipitously. It did so later
that day, plummeting from a high of $160
to $138, when Treasury Secretary George
S. Boutwell sent a telegram to the “Gold
Room” at Exchange Street and Broadway:
“Sell four millions gold to-morrow, and
buy four millions bonds.”
The Black Friday gold crash caused a
ripple effect of financial devastation and
ruin for both eastern traders and mid-
western farmers. Subsequent lawsuits and
a Congressional investigation yielded few
consequences for Fisk and Gould, owing
to their ability to hire the best legal defense
teams. Heath found himself the subject
of innumerable congressional and local
judicial inquiries, examining just exactly
what amount of gold he bought and sold,
what his margins were at any given time
and why he did or did not accept payment
for gold stocks when purchasers said they
tried to sell it back before the crash.
Heath’s profits on this wild speculation
are not known for sure, but his commis-
sions were in the hundreds of thousands
of dollars, according to court records. In
spite of the fact that he came out of legal
scrutiny relatively unscathed, his wife,
Elizabeth, moved to Europe with their two
children around 1870 — some of Heath’s
obituaries hint that she had family money
of her own, and that it was best to keep it
away from any future legal proceedings.
Mrs. Heath may have known some-
thing about her husband’s high tolerance
for risk, or perhaps she knew something
about his methods. In any event, Heath
dissolved his partnership with Ellis, added
a partner named Charles E. Quincey,
and immediately re-formed a brokerage
firm, also called “William Heath & Co.”
He began working almost exclusively for
Gould and Gould’s close associates. For
the next few years, as Gould built up a
system of railroads in the Midwest and
West, Heath helped him buy up stocks in a
market pushed down by the Panic of 1873,
and he found it convenient to “go abroad”
almost every time the pair determined a
suit over Black Friday margins was about
to commence.
Along with Gould and a few other high-
risk, high-stakes clients, Heath added to
his inner circle of customers Henry N.
Smith, formerly of Smith, Gould & Mar-
tin. Smith despised Gould, owing to the
latter’s trickery by urging Smith to sell
Northwestern Railway stock short while
Gould built up a big long position buying
as much as he could. Smith got suspicious
and had Gould arrested on charges of
looting the Erie Railroad treasury. Neither
Gould nor Smith had any problem with
Heath working with the other; Heath
was, according to a Gould biographer,
“a master at keeping secrets. None of his
customers could ever learn what his other
customers were doing.”
It was probably because of Heath’s abil-
ity to keep everything so close to the vest
that his c lient G.P. Morosini, Gould’s
bookkeeper and attorney, was allegedly
shocked when he came to collect about
100,000 stocks he had on deposit with
Heath. The problem was, Heath did not
have them. He had been using Morosini’s
stocks as collateral with the bank in order
to cover the debts of Smith, who was one
of his biggest clients. Even decades later,
The Wall Street Journal and other financial
papers recounted the horrifying chain of
events:
Suddenly, a great light broke upon
Henry N. Smith, who still was heavily
short of stocks, and whose contracts
showed enormous paper profits; con-
ditions had been improving, but stocks
had not been going up. But when he
started in to cover his shorts he found
the market bare of stocks. It was a con-
dition that would not reveal itself until
someone, like himself, should begin to
buy on a large scale. When his brokers
found that the stocks were not forth-
coming readily they were instructed to
bid up for them…their buying limits
were raised. The higher they bid for
them the more pronounced became
the scarcity of stocks.
Generally speaking, Heath and Smith
and their close circle of stock men had
been in the bear market for so long that
they misjudged the continued, upward
trend of rail, municipal and commodities
stocks. The second half of 1885 was one
of the greatest bull markets Wall Street
had seen thus far. It appeared that Heath
used Morosini’s stocks as collateral to
borrow money from the banks — probably
to cover Smith’s margins — and therefore
could not deliver the stocks.
On November 19, 1885, sheriff deputies
arrested Heath at his Pine Street office and
brought him to the Ludlow Street Jail. He
sent telegrams and letters to everyone he
knew with any means in an effort to raise
the $500,000 bail set for him. Eventually,
the judge reduced his bail amount, and his
friends were able to raise $10,000 to have
him released.
But his six weeks in the dank Ludlow
Street Jail inflamed the tuberculosis Heath
had been battling for years. His wife, Eliz-
abeth, returned from Paris to nurse him
back to health, which she tried valiantly to
do even as creditors interrogated her night
and day to try to ascertain whether she
had hidden any of the couple’s financial
assets in Europe. Heath quickly declined,
even in the comfort of his Livingston, New
Jersey manor. The quiet, presupposing
“American Deer,” known at the end of his
life as “the Bear Operator,” passed away
on March 3, 1886.
Months later, the remaining assets of
William Heath & Co. were quietly swept
up by Gould.
Julia Bricklin is a frequent contributor
to history magazines, and the author of
America’s Best Female Sharpshooter:
The Rise and Fall of Lillian Frances
Smith (University of Oklahoma Press,
2017).
Sources
Ancestry.com
Archives of the Boston Evening Transcript, The
New York Times, the New-York Tribune and
The Wall Street Journal.
Klein, Maury. The Life and Legend of E. H.
Harriman. University of North Carolina
Press. 2000.
Klein, Maury. The Life and Legend of Jay Gould.
Baltimore: JHU Press. 1997.
Northrup, Henry Davenport. Life and Achieve-
ments of Jay Gould, the Wizard of Wall
Street, Being A Complete and Graphic
Account of the Greatest Financier of Modern
Times. National Publishing Co. 1892.
Sobel, Robert. The Big Board: A History of the
New York Stock Market. Philadelphia: Beard
Books. 2000.
Sobel, Robert. Inside Wall Street. Philadelphia:
Beard Books. 1977.
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