Black Friday Gold Panic Rocks Wall Street

Context

In the years after the Civil War, the United States carried a massive national debt that had ballooned from roughly $64 million in 1860 to $2.8 billion by the end of Andrew Johnson’s presidency. To finance the conflict, the government had issued paper currency known as greenbacks that were not immediately redeemable in gold, pushing gold out of circulation and elevating its price under the pressures of Gresham’s law. Investors and policymakers widely expected an eventual return to the gold standard.

What Happened

President Ulysses S. Grant, determined to restore sound money, signed the Public Credit Act of 1869, which set a timetable for redeeming bonds in gold and contracting the supply of greenbacks. Treasury Secretary George S. Boutwell implemented this policy by selling Treasury gold reserves and using the proceeds to repurchase wartime bonds, steadily reducing the debt. Speculators Jay Gould and James Fisk saw an opportunity to profit by driving gold prices higher if they could persuade the government to halt or limit those sales.

Aftermath

Gould recruited Abel Corbin, who had married Grant’s sister Virginia, to gain access to the president and arranged social meetings aboard an Erie Railroad car and at the Fifth Avenue Theatre. The conspirators also secured the appointment of Daniel Butterfield as assistant treasurer in New York, bribing him with $10,000 to provide advance notice of government sales. Through Corbin and Butterfield they influenced Grant’s thinking; in early September the president wrote Boutwell that further gold sales would harm Western farmers, prompting the Treasury to suspend non-routine sales for the month.

Legacy

With this apparent green light, Gould and Fisk accelerated purchases, pushing the gold price from around $132.50 in early September to a peak above $160 on the morning of September 24. Grant soon grew suspicious after learning of Corbin’s involvement and ordered Boutwell to release $4 million in gold reserves. The announcement reached the New York Gold Room shortly after noon; within minutes the price plunged from roughly $162 to $133–138, shattering the attempted corner and triggering panic selling that spread to stocks and brokerage houses.