McClure's Magazine/Volume 10/Number 6/A Romance of Wall Street
A ROMANCE OF WALL STREET.
THE GRANT AND WARD FAILURE.
By Hamlin Garland,
Author of "Main-Traveled Roads," "Prairie Folks," etc.
SOMETIME about the year 1877 a slim young man with a pale and meager face applied to the superintendent of the New York Produce Exchange for a position. He based his application upon the fact that the superintendent had known his father in an interior town years before. The superintendent recalled the young man as the son of an excellent father, a returned missionary, and, being well-disposed toward him, secured for him the clerkship of the Exchange at a salary of $1,000 a year. The superintendent was Mr. S. H. Grant, and the young clerk was Ferdinand Ward. Mr. S. H. Grant was not related in any degree to General U. S. Grant.
Ward filled his position acceptably, and had time to figure various speculative opportunities besides. At that time seats in the Exchange were rated low, and, seeing an upward tendency in business, young Ward began buying these seats as fast as he was able to raise the money, and sold them at a profit. He went into a number of speculations, all of which turned out profitably. He became acquainted with the daughter of the cashier of the Marine National Bank, and wooed and married her. He made acquaintances rapidly, and turned casual associations into friendships,one of the most valuable of his friendships being with Mr. J. D. Fish, president of the Marine National Bank.
Sometime in 1879, through his brother William, Ward met Ulysses Grant, the second son of General Grant, who had established himself with a law firm in New York city. U. S. Grant, Jr., had charge of General Grant's property, of two trust estates, and also of other funds. Mr. Ward at once asked him to go into some speculations with him, and set forth the safety of an investment in flour certificates, which his position as clerk of the Exchange gave him special insight into. Young Grant allowed Ward to use some money in this way, and the venture proved successful. Ward then interested him in the scheme of buying seats in the Produce Exchange, and holding them against the coming boom, and young Grant found his bank account growing with gratifying rapidity, and was able to report to General Grant, who was in Europe, in the most satisfactory phrases. He was not yet a formal partner, however; the association thus far being merely for the individual enterprises in hand. The time came when Ward owed Grant on borrowed money a very considerable sum—nearly $100,000. At this point he proposed that a private banking firm be organized to do a regular Wall Street business, in which he was to be financial agent. In this firm J. D. Fish, president of the Marine Bank, was to be a silent partner. Young Grant at first declined, but upon the urging of Ward and the assurance that Mr. Fish was coming in, finally consented.
This was in 1880. At that time Ward was regarded as the most brilliant young business man on the street. His office was the meeting-place of the most trusted and influential men of affairs, and his standing was of the highest. Every venture he had commended had succeeded, and Grant would have been a singular exception had he refused to go further with such a financier, especially as the president of the Marine Bank was to be a special partner in the firm. Meanwhile young Ulysses had married a daughter of Senator Chaffee of Colorado, and through this connection the Senator became an investor with Grant and Ward.
The firm of Grant and Ward at once took high rank. Bradstreet rated it "Gilt-edged," and its credit was unquestioned. When in 1880 General Grant had been defeated for a third nomination to the Presidency, the question of engaging in some business arose. He refused the presidency of the Nicaraguan Canal, but he accepted the presidency of the Mexican Southern Railway, on the understanding that he was not to receive any salary or any stock. He had plenty of opportunities to allow the use of his name, but his deep interest in Mexico, which sprang from his early life there, was more powerful than any offer of money. He moved to New York to be near his sons, Ulysses and Jesse R. Grant, and soon afterward put all his savings (about $100,000) into the firm of Grant and Ward, on condition that he was to be a special partner, liable only for the money he put in.
General Grant's office as president of the Mexican Railroad was in a building on the corner of Wall Street and Broadway, the first floor of which was occupied by Grant and Ward. The firm was now composed of Ferdinand Ward, J. D. Fish, and General Grant and his son Ulysses. Ward was the financial agent and sole manager. The General had no detailed knowledge of the business, and asked for none. He left the whole matter to his son Ulysses, who, in turn, trusted Ward with the entire financial management. Thus Ward had complete control; but in offset to this he said he was willing to guarantee the firm against loss. So phenomenally successful did he prove both in the firm of Grant and Ward and also in his outside speculations, that great business firms trusted themselves as completely in his hands as did the Grants. J. D. Fish, president of the Marine Bank, backed him to any amount; and Mr. S. H. Grant, the city comptroller, and Mr. Tappan, city chamberlain, and Mr. W. R. Grace, Mr. W. S. Warner, Senator Chaffee, and many others were equally trustful. In addition to its fine credit, the firm started with a paid-in capital of $400,000.[1]
It was a time of "boom;" that should be remembered. Railways were building; the new lands of Kansas, Nebraska, and Dakota were being opened up. Speculation was universal. Fortunes were made in a day—almost in an hour—and men were prepared to believe any sort of romance which concerned itself with railways or buildings. The way was prepared for a man like Ward, who had an uncanny power over men. His words were golden, and his daily life a fairy-tale of speculation.
At Ward's suggestion, young Ulysses, early in the deal, offered to pay to General Grant $3,000 per month for the use of his money, but gave him the option of leaving it in the business if he wished. To this the General replied: "I don't think I can afford to do that. If you don't make that much, I don't want you to make up the deficit; and if you make more, it is rightfully mine. I would rather you paid me what my money brings in, be it a small sum or a large one." Ward's method was not to advertise much, "merely to let a few friends know" that the firm was doing an exceedingly profitable business by loaning money to men who had contracts. He was careful to say to General Grant and his sons that the firm was not handling any contracts with the Government, and warned Mr. Spencer, his cashier, to be careful about that also.
The regular transactions of the firm, and the only ones appearing in the books to which the Grants had access, were of a different nature, like loaning money to the Erie Railway, purchases of city bonds, and other equally safe and stable investments. These loans gave tone to the firm and inspired confidence. "It is my plan," said Ward, "to build up a great firm that shall live after Grant and Ward, its founders, have passed away."
Ward was a man of most exemplary life. He lived well, but quietly, and had no bad habits. He seemed a thoughtful man, and his peculiarities apparently marked him as a man born with a special genius for great financial enterprises. He seemed to be capable of the most colossal affairs, and men of the highest business qualifications shared in this belief. In these days it would be said his influence was hypnotic.
In this fashion the firm swam prosperously on. U. S. Grant, Jr., received occasional statements from Ward, which he laid before his father. These papers the General returned without examination, for he had arrived at unquestioning faith in his son's business ability. Profits had been large. The firm, from operations in stocks, bonds, and railway contracts, soon had a bank account of nearly a million dollars, and handled vast sums of money. From a capital of $400,000, the firm, in a little more than three years, was rated at fifteen millions. Ferdinand Ward, in his own fashion, outside the firm of Grant and Ward, had entered upon the most gigantic enterprises, apparently with unfailing success. Of these outside ventures the Grants knew nothing. Ulysses Grant, Jr., had access only to the one set of books wherein the Wall Street business was recorded. He knew scarcely a tenth of Ward's investors. He did not know that his own law partners were interested in Ward's affairs. The record of the huge debts of the firm was in books kept secret by Ward and Fish.
One Sunday afternoon in early May, 1884, Ward called at General Grant's house and asked to see both the General and young Ulysses. He announced that late on Saturday Mr. Tappan, the city chamberlain, had drawn on the Marine Bank for a very large sum which the bank held on deposit for the city, and that the bank's reserve was perilously low. "It is necessary," said he, "to put some money in before the clearing-house opens to-morrow morning, in order that the bank may make a proper showing."
To this young Grant very naturally replied: "Why should we borrow money to aid the Marine Bank?"
Ward for a moment seemed puzzled, but answered after a moment's hesitation: "We have $760,000 on deposit there, and it would embarrass us very much if the bank should close its doors."
"They are good for it, are they not?"
"Oh, yes; but there would be delay before we could get our money, and it might give us trouble."
Having convinced them both of the need of aiding the bank, Ward at last proposed that General Grant go out and borrow $150,000. Young Grant said that it was not easy to raise such a sum on Sunday afternoon, and to this Ward replied: "I know that; but I know the General can borrow it if anybody can."
The General at length consented to go forth in aid of the Marine Bank. After calling upon one or two men who declared themselves unable to help him, he drove to the house of Mr. H. Vanderbilt, and explained the matter to Mr. Vanderbilt at length. It was not for himself, but for the Marine Bank, he said in conclusion.
Mr. Vanderbilt took young Grant's view of it. "I care nothing about the Marine Bank, General Grant. To tell the truth, I care very little about Grant and Ward; but to accommodate you personally, I will draw my check for the amount you ask. I consider it a personal loan to you, and not to any other party," he said pointedly. General Grant took the check, and returned to Ward, who was waiting. Ward thanked him, and putting the check in his pocket, left the house. The next before the banks opened, young Grant called for a check drawn on the Marine Bank for the full amount, and hurried with it up to Mr. Vanderbilt's house, eager to pay the debt at the earliest moment. He found Mr. Vanderbilt at home, and delivered the check into his hands. Both men considered the debt thereby paid, and the whole transaction closed.
Monday saw everything righted. There was no further trouble, and the Grants dismissed the incident from their minds. Once, late in the afternoon, as Ward passed through the room, Ulysses Grant, Jr., asked, "Everything all right?" and Ward replied cheerily, "All right now." But that night after dinner a messenger came to young Grant from Ward, saying that Tappan had drawn again, and that it would be necessary to borrow $500,000. "I'll try for $250,000; and you do the same."
Grant was a little irritated at the demand, and for a moment determined to make no further attempt to help the Marine Bank out of its distress. However, after thought, he concluded to see what could be done, and taking a list of negotiable securities which Ward had sent by the messenger, he went to Jay Gould, and presented the matter.
Mr. Gould curtly replied: "I don't like lending on those securities," and young Grant concluded to do no more borrowing for the Marine Bank. He went to S. B. Elkins, however, and explained the situation. Mr. Elkins, who was Senator Chaffee's attorney, seemed a little bit puzzled over the case. "I don't understand this. Suppose we go over to Brooklyn and see Ward."
Ward was out, but they decided to wait for him, although it was nearly midnight. The servants were directed by Mrs. Ward to set out some cake and wine, and the two men remained seated in the dining-room till after midnight, waiting with growing anxiety for Ward. It was well towards one in the morning when Ward suddenly and noiselessly entered by a side door. He was calm and very self-contained. He explained his absence by saying he had been to see some capitalists. He said he had not been able to raise any money, but he did not seem specially disappointed at his own or his partner's failure to borrow the sums needed. All agreed that the Marine Bank must needs take care of itself.
Mr. Elkins, however, as attorney for Senator Chaffee, who was one of the largest creditors of the firm of Grant and Ward, demanded, on his client's behalf, to be secured. Ward said, "Very well;" but added, "I don't see the need when Senator Chaffee can have his money at any time on demand."
Mr. Elkins insisted, and Ward promised to be at the office early the next morning to turn over sufficient securities to cover the whole amount of the Senator's investment. Upon this, young Grant and Elkins took their departure, but all the way across the city Elkins discussed Ward's manner. "The whole thing is suspicious. Did you observe he had his slippers on? He was in the house all the time, and was afraid to come down and see us. Why should he enter at the side door?"
Grant stoutly thrust aside these suspicions. His faith was unshaken. Early the next morning Mr. Elkins and young Ulysses hastened to the office. Ward was not there.
"Where is Ward?" asked young Grant of Spencer, the cashier.
"I don't know," replied Spencer. "I came by the house this morning, and when I rang the bell, Mrs. Ward came down much excited, and said Ferdinand had gone out early, leaving a note to the effect that the bank would fail to-day, and that he would not be home. She seemed afraid that he was about to commit suicide, and wanted me to go and look for him."
Colonel Fred Grant came out of an inner office at this moment, and said that Mr. Fish had been in, much excited, to say that Grant and Ward's accounts were all overdrawn, and that he would not certify or pay any more of the firm's checks.
Young Ulysses was amazed. "That can't be," he said. "We have over $600,000 on deposit there. Is not that the sum, Mr. Spencer?"
The cashier brought the books; $660,000 was the exact amount.
"Make a test of it," said Mr. Elkins. "Draw a check, and send it over to the bank."
This was done, and in a short time the messenger returned to say that the officers of the bank, by order of Mr. Fish, refused to pay the check, and stated that they could honor no more Grant and Ward checks.
This was startling news, but even then young Grant did not realize its full import. He knew of but one interest that was suffering at this time, that of Mr. Chaffee; and when Mr. Elkins insisted on being secured, there was but one thing to do— carry out Ward's promise of the night before, and open the strong box in which millions of securities had been deposited. Ward held the key of this box, but the moment demanded heroic measures. The box was forced open, and found to contain only papers of doubtful value, amounting even on their face to less than $400,000.
While the others still stood aghast at this discovery, Spencer, who had been listening at a ticker, came in and announced in fateful voice, "The Marine Bank has closed its doors." With profound conviction in his face, he turned to young Grant: "This carries Grant and Ward down also."
"I don't see that," replied Grant. "The loss of $600,000 will cramp us, but it won't break us."
He was soon undeceived. Instead of being worth $15,000,000, with an enormous bank account, he and his friends found themselves without a dollar and with a flood of demands pouring in upon them.
Just when matters were at the worst, the General himself hobbled slowly into the room. He was still disabled from a fall on the ice some months preceding and used his crutches. "Well, 'Buck,' how is it?" he cheerily asked.
The son, his head still ringing with the blow which had fallen upon him, replied harshly, and without any softening words, "Grant and Ward have failed, and Ward has fled."
For a few seconds the old warrior faced the people of the office, his keen eyes piercing to the bottom of his son's anger and despair. Then he turned slowly, and without the quiver of a muscle and without a single word, left the room and ascended slowly to his own office, to be seen no more in the office of Grant and Ward. About five o'clock in the afternoon, however, he sent for Spencer, the cashier, to come up and see him. As the young man entered the room, he found the General seated close to his desk, both hands convulsively clasping the arms of his chair. His head was bowed, and the muscles of his face and arms twitched nervously as he said: "Spencer, how is it that man has deceived us all in this way?"
Even as Spencer tried to speak, the General did not look up; in fact, the young man's stammering attempt to answer seemed not to interrupt the current of the General's thought. He went on speaking. "I had not the least idea that Ward was concerned in government contracts. I told him at the beginning that I could not be connected with the firm if he was going into any business with the government. I supposed the contracts he spoke of were railway contracts." He went on for several minutes with an explanation, to which Spencer made no reply. He was evidently suffering the keenest mental anguish, and the cashier would gladly have uttered some word of comfort, but was himself too deeply moved and bewildered to do so. Finding Spencer as ignorant of it all as the rest of them, the General became silent, and the young man withdrew, leaving him seated with bowed head in the same position in which he had found him.
Without Ward, it was impossible to tell what the firm owned or what it owed. Claims developed of which U. S. Grant, Jr., had no knowledge, and which did not appear on the open books of the firm. The excitement on the street was very great. Investors with whom the Grants had no dealings whatever clamored to be secured. Great pressure was brought upon young Grant to make an assignment in favor of certain creditors, but he refused. So the day wore on. At the end it was apparent that Grant and Ward were hopelessly involved, and that every dollar possessed by General Grant was swept away.
On Wednesday, U. S. Grant, Jr., went down to the office, but Ward did not appear. The papers had immense headlines, and all sorts of charges and insinuations were in type. Creditors called, saying that the bonds given to them for security by Ward had been rehypothecated. Some of these men covertly threatened young Ulysses. He could only reply: "I presume what you say is true. I know nothing about it. I can't do anything about it. All I can say is, you'll find me here during business hours and at my house thereafter." He was ready to answer to any call.
The entire Grant family were in singular straits. Every cent of ready money was gone, and many bills for which checks had been given weeks before to butchers and bakers, who had neglected to cash them, came up now a second time for payment. The General and Ulysses, Jr., found themselves actually in need of money for daily necessities. Mrs. Grant ordered her Washington house to be sold, and that formed the fund upon which the entire family lived. They sold horses and carriages, and prepared to move into cheaper houses. Young Ulysses still refused to make any assignment or prefer any creditors.
The General was visited on Thursday night by representatives of Mr. Vanderbilt, who wished to be secured upon his loan of the Sunday preceding. He looked to General Grant for his money.
"You're quite right," said the General. "It was an individual loan, and I am having papers drawn up to secure Mr. Vanderbilt so far as possible."
General Grant now cast about to see how he could pay this individual debt, which he regarded as an affair of honor. He deeded to Vanderbilt the farm on the Gravois, near St. Louis, which was worth $60,000; a house in Philadelphia, some property in Chicago, and all his personal property. In order to bring the sum up to the full amount, the old warrior turned over all his military trophies—all the swords presented to him by citizens and soldiers, the superb caskets given to him by the officials of the cities through which he had passed on his way around the world, all the curious and exquisite souvenirs of China and Japan. He spared nothing.
Many of the papers criticized General Grant freely for going into the firm. Some of them covertly exulted, and insinuated that he was attempting to draw out of the wreck, retaining his immense profits. Investors clamored, charging that his name had been used to draw them into the firm; that Ward had claimed to have government contracts obtained through the use of General Grant's name. These things cut deep into the proud old warrior's heart; but, as his habit was, he set his lips in a grim line, and was silent, so far as the outside world was concerned. Once, however, he opened his heart to a friend. Late one night, after he had signed away all he possessed to his creditors, he sat alone with his lawyer. As he went all over the action, and thought of Ward's cunning in securing that final check, his emotion became visible in an unusual restlessness of eye and limb. At last he rose, and began hobbling on his crutches up and down the room. When he spoke at last, it was in semi-soliloquy, as though he had almost forgotten the presence of his friend:
"I have made it the rule of my life to trust a man long after other people gave him up; but I don't see how I can ever trust any human being again."
The worst was yet to come. A letter was given to the public press by Fish, the president of the failed bank, which apparently connected Grant directly with the methods of Ward. To save himself from condemnation. Fish now claimed to have been a victim, asserting that two years before he had written to General Grant asking to be assured about the firm. In this letter, after speaking in a general way of the fact that he saw very little of General Grant, and suggesting that it was advisable to consult together, Mr. Fish went on to say: "I have often been asked by friends and business men whether you and I were general or special partners. We were for a while advertised as special partners, but I think we are virtually and actually general partners. I think legally we would find that to be our status." He then spoke of a note enclosed from the president of the Lincoln National Bank, and continued: "You may be aware that I am on the notes of Grant and Ward as an endorser, which I have discounted myself, and have had to get negotiated to the extent of some $200,000 in the aggregate, at the same and at onetime, which is not a trifling amount to me. It is necessary that the credit of Grant and Ward should deservedly stand very high. These notes, as I understand it, are given for no other purpose than to raise money for the payment for grain, etc., purchased to fill government contracts. Under the circumstances, my dear General, you will see that it is of most vital importance to me particularly that the credit of the firm shall always be untarnished and unimpaired. I will be most happy to meet at almost any time you may name to talk these matters over. Please return me President James's letter at your convenience, with any suggestions you may have to make."
The answer to this letter as put forth by Fish was indubitably in the handwriting of General Grant. It was a more or less complete answer to the letter above.
"My Dear Mr. Fish:
"On my arrival in the city this morning, I find your letter of yesterday with a letter from Thomas L. James, president of Lincoln National Bank, and copy of your reply to the letter. Your understanding in regard to our liabilities in the firm of Grant and Ward are the same as mine. If you desire it, I am entirely willing that the advertisement of the firm shall be so changed as to express this. Not having been in the city for more than a week, I have found a large accumulated mail to look over and some business appointments to meet, so that I may not be able to get down to see you to-day; but if I can, I will go there before three o'clock.
"Very truly yours,
"U. S. Grant."
"My Dear Mr. Fish:
"In relation to the matter of discounts kindly made by you for account of Grant and Ward, I would say that I think the investments are safe, and I am willing that Mr. Ward should derive what profit he can for the firm that the use of my name and influence may bring."
This was signed apparently in General Grant's own hand, and upon it the detractors of Grant fell with joy. It was photo-lithographed and sent throughout the country. The signature was to all appearance genuine; the body of the letter was written in another hand. Action had already begun against Fish, and this letter became important evidence.
In March of the following year the testimony of General Grant was demanded. He was unable to leave his room—was indeed almost at the point of death—and the counsel for Fish went to the attorney for the Grants and expressed the deepest regret that the trial should come up at a time when the General was so ill, and suggested its postponement. But Grant's attorney, knowing well the temper of the General, said, "No. Let the trial go on. General Grant is ready to testify."
General Grant's deposition was taken in the room of his house on Sixty-sixth Street. He stated that he had considered himself merely a special partner in the business of Grant and Ward, liable only for his investment. He did not remember to have seen Mr. Fish's letter. He did not know that any government contracts were handled, and he had no knowledge that his name was being used to induce others to invest in doubtful speculations. When the alleged letter to Fish was placed before him, he examined the signature closely, and said that it was undoubtedly of his own writing, but that he had no knowledge of the letter itself. He added, that in the course of a long executive life he had become accustomed to affix his signature to many papers without reading them, it being impossible to personally examine everything which was put before him to sign.
The trial developed that the letter was written, at Ward's request, by Spencer the cashier. Spencer remembered the letter perfectly, for the reason that Ward brought the rough draft of it to him on a pad one morning in the midsummer of 1882. It had many corrections and interlineations for so short a letter, and that fact aided to fix the matter in Mr. Spencer's mind. It meant nothing unsigned; but with Grant's signature it would be very serviceable, and Ward had turned his attention to getting it signed. He afterwards confessed to Walter S. Johnston, the receiver of the Marine Bank,[2] that he had slipped it into a pile of other letters, and presenting it to General Grant as he was hurrying to finish his mail and catch a boat, easily procured the signature without arousing suspicion.
Ward's own testimony at the first trial was very remarkable. He was at first broken and a little bewildered, and came to the stand "looking like a man suffering from loss of sleep. His face was bloodless, his ears seemed to hang from his head." He admitted that he had been insolvent for two years.[3] He was unable to tell where and when he had made large purchases of real estate, such as Booth's Theater. The "books of the firm" were not "the books of the office": there was a difference. The "books of the firm" included books which the Grants had never seen. He admitted that there had never been any contracts; that when he said "invested in a contract," it meant that the money went into the bank as his personal deposit. He did not remember that he had ever had any dealings with the government of any kind. He admitted putting the Vanderbilt check into his personal account. He admitted having paid $3,000 for jewelry on the 22d of, April, but he had forgotten to whom he gave it. He had no contracts, and he was making no such profits as he paid to investors. Business was transacted in the name of Grant and Ward, but no one transacted it but himself. The Grants knew nothing about it. His method, as he himself delineated it, was to borrow large sums for pretended investment, set aside a profit out of the principal, and by prompt payment of this profit, induce the lender to leave the principal in his hands. He deceived the many for the few, and these few were not the Grants. He was uncertain as to what became of immense sums. Some of them appeared on the secret book he kept, and some did not. In a later trial this singular book was put in evidence. It was cabalistic in text. No one could understand it, not even Ward himself.
Out of it all this final conclusion was formed: Ward had carried on the most extraordinary game of "bluff" that the nation had ever seen—a stupendous scheme of paying profits from a principal which was never invested or which went to pay some clamorous debtor; a "blind pool" into which he led men to their ruin and ultimately to his own ruin. He was indicted first by the United States courts at the same time that Fish was indicted. Fish was convicted and sentenced to seven years' imprisonment. Closely following Fish's conviction, Ward was indicted in the State court for grand larceny, convicted, and sentenced to prison for ten years. The judge in sentencing Fish made it plain that, though the sentence might be lawfully seven times seven, out of regard for his gray hairs the sentence was not made cumulative.
Out of this deplorable entanglement General Grant emerged cleared, so far as the judgment of the majority of his fellow citizens was concerned, of any knowledge of the business which Ward conducted. There were those, of course, who were ready to believe that he knew of the use of his name, and that he shared in the profits. It is probable that no one fully informed in the facts of the case holds such an opinion to-day. Grant was the victim of over-confidence in a shrewd and ingratiating adventurer.
- ↑ As was afterward developed, the Grants furnished the cash and the other members of the firm the "securities."
- ↑ From an interview with Mr. Johnston for McClure's Magazine.
- ↑ Generalized from Ward's testimony before Commissioner Cole.