But the railroad men soon became aware of this plan. As soon as they began their bear raid upon the prices of Harlem stock, buying orders came from every source by tens of thousands. Every option that was offered was purchased. The tremendous volume of transactions exhausted both sides and Vanderbilt was forced to extremes to raise the money necessary to purchase the stock that was for sale. In the mean time the politicians carried out their plan and per suaded the legislature to refuse permission for the con solidation. Harlem stock immediately fell from 150 to 90; Vanderbilt repeated his former tactics—simply sat still and waited. The shorts, as soon as they tried to cover their transactions, found that there was no stock available. The price jumped up by great leaps until it finally reached 285. Vanderbilt determined that this should be a costly lesson, and declared that he would not settle under $1,000 a share. The shorts could not purchase the stock, and therefore were at the mercy of the only person who had sufficient stock to enable them to carry out their contracts. Wall Street was in a violent panic, for every brokerage house realized that if settlement had to be made at Vanderbilt's figure it would mean universal ruin. In fluence was brought to bear upon him to alter his de cision, and he was finally induced to accept settlement at 285.
6. Gold corner of the famous gold corner was not a corner in stocks, it fits into this . narrative because it took place in a period when op erations of which it is typical were common. Specula tion in gold was rife in 1868, owing to the govern ment's adopting the policy of auctioning the gold to the highest bidder instead of selling it in private trans actions, as formerly. The new method undoubtedly stimulated wide-spread speculation in gold; for that reason Wall Street protested, but to no avail.
Late in 1869, Jay Gould and James Fisk under took to engineer a gold corner. Since the supply of gold outside the Treasury was limited, the success of the corner hinged on the promoter's ability to in fluence the Treasury Department not to sell gold in unusual amounts. This, Gould and Fisk proceeded to do. They persuaded the administration to keep the price of gold at a high level during the fall be cause the West was just beginning to move its crops and this high premium on gold would ultimately benefit the farmer by making his crops worth more in gold. In a few days, because the supply of gold was thus restricted, the premium on gold rose to 162. Thus the plans of Gould and Fisk were materially advanced.
But when the Secretary of the Treasury, Boutwell, observed this significant rise, he immediately ordered gold to be sold, and on "Black Friday," September 23, 1869, the price dropped to 135. On that day disaster overtook many, the corner was broken, and the clique was ruined by its own acts.
7. United Copper corner.—Another corner that re sulted in disaster, not only for the projectors but for the country at large, was the United Copper Corner of 1907. A brokerage firm whose leading partner was a director in many banks, had a large interest in a mediocre copper company. This man had but re cently sold another far more valuable copper property for the sum of $14,000,000, but he and his brothers, evidently not content with their newly acquired for tunes, dreamed of limitless riches.
The firm in question made arrangements to lend stock freely to shorts, and then suddenly called in all the loans simultaneously. It had made arrangements for other brokerage firms in collusion with it to do the same thing, and for a brief period the shorts were cor nered. But the ownership which the head of the firm held in many banks caused widespread loss of con fidence. Banks began to call loans made to the firm, several banks failed, the price of the stock slumped in spite of the elaborate arrangements to corner it, the firm itself failed, and the panic of 1907 was in full swing.
8. Corners in products.—The only difference be tween a corner in stocks and a corner in commodities is that in the latter case the clique buys up all the avail able warehouse receipts. Corners in wheat and cot ton are of fairly common occurrence, and there has been at least one big corner in copper, which was known as the Secretan corner. Several capitalists now living, including James A. Patten, have been concerned in numerous cotton corners.
But while corners take place fairly often in cotton and wheat, the likelihood of financial success is small and the danger to the engineers is great. This is be cause the available supply can never be more than ap proximately determined. If a corner drives wheat up to $2 a bushel, farmers have a marvelous way of find ing hundreds of thousands of bushels the existence of which had been unknown to all except themselves, and by placing this extra quantity on the market they seriously disconcert the promoters. Of course, unless practically all offers are accepted, the corner ceases to exist. The situation plainly differs from that in the stock market, where the amount of stock-outstand ing is always known, altho it may happen that the amount available for purchase cannot be definitely as certained. Thus, while at a given time the total sup ply of a commodity may have been cornered, addi tional amounts may come into the markets which the shorts can purchase and with which they can fulfil their obligations. Since such are the circumstances, to corner produce a clique must assume great risks. The possible gain from the transaction must be dis counted at an exceedingly high rate.