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Jay Gould,according to the New York Herald, arrived in Albany with a suitcase filledwith thousand-dollar bills, and when arrested produced $500,000 in bailmoney on the spot.The Commodore could have won a bribing contest, but he realizedthat it might be a pyrrhic victory in the long run, for public opinion wasturning against the idea of his owning the Erie as well as the HudsonRiver, Harlem, and New York Central lines.This would have given himnear monopoly power in the New York transportation market.Vander- Capitalism Red in Tooth and Claw215bilt decided to deal and sent a note to Drew.He insisted on two things.The worthless stock (it had been declared to be not good delivery byall the major exchanges) had to be taken off his hands at a price nearwhat he had paid for it, and Daniel Drew had to sever all ties to the Erie.To get their agreement, Jay Gould was made president of the Erie andJim Fisk treasurer.The Erie Wars had galvanized the public, and the story was giveneven more space in the newspapers than the concurrent impeachmenttrial of President Andrew Johnson.But while the public was vastly enter-tained, most members of the New York commercial establishment werehorrified.Unlike speculators, who look no further than the next big killing, bro-kers earn their money one commission at a time and need a market withas much predictability as possible so as to enjoy the greatest number ofcustomers possible.If the amount of a stock that has been issued couldbe doubled or halved without even a moment s notice by the manage-ment, how could anyone know what the value of a share was? The Com-mercial and Financial Chronicle, an influential weekly, put its finger on theheart of the problem.The capitalists were not wholly at fault because the letter of the law is very deficient in its regulation of the managementof corporate interests. The Chronicle published a suggested law to rem-edy the situation, requiring that directors get consent of the stockholdersfor new issues, that no issues of stock be made without notice, that a reg-ister of all issues be available for inspection at a financial institution, andthat infractions be punished criminally.In the late 1860s there was no way to get such a law enacted becauseof the corrupt state legislature.The stock exchanges, however, owned bythe brokers, could act on their own and, within a month, did so.OnNovember 30, 1868, the Open Board of Brokers and the New YorkStock Exchange issued identical sets of regulations requiring listed com-panies to register all listed securities within two months in a registryopen to public inspection, and to give thirty days public notice of intent 216 AN E M P I R E O F WEAL THto issue new securities.The Erie Railway, now the plaything of JayGould and Jim Fisk, refused and was delisted.Shortly afterward, these two stock exchanges merged under thename of the New York Stock Exchange.Finally there was an institutionon Wall Street large enough and powerful enough to act as an effectiveregulator.Jay Gould quickly found out that he had no choice but to com-ply if there was to be a decent market for Erie securities, and he regis-tered the company s stock and bonds on September 13, 1869.It was just a start, of course.James K.Medbery, in his Men and Myster-ies of Wall Street in 1870, knew what was at stake. It remains for the bro-kers of the Stock Exchange, he wrote, to decide whether they will seekthe petty profits of a speculation marred by grave faults, or will cast theirinfluence still farther and with more strenuous emphasis against theencroachment of the cliques.The former means isolation.The latter willbe prelusive of an expansion in international relations which will makeNew York imperial, and Wall Street what its pivotal position demandsand allows, the paramount financial center of the globe. Wall Street chose to go down the second path, and the New YorkStock Exchange began to exert its new power to effectively regulatestock trading.The Street was still no place for fools it never will bebut compared with just a few years earlier, Wall Street had become amodern, reasonably well-regulated financial market.The stocks tradedon Wall Street at this time had a total market capitalization of about$3 billion, while London s market was more than $10 billion.But WallStreet was catching up fast.Successful self-regulation would guide WallStreet for the next sixty years as it eclipsed London and became theworld s leading financial center.TH E CORRU PTION OF TH E POSTWAR PE RIOD was by no means lim-ited to New York capitalists, government, or New York railroads.Indeed,the greatest railroad project in the nation s history the transcontinental Capitalism Red in Tooth and Claw217railroad built between 1864 and 1869 also set off the greatest financialand political scandal of the nineteenth century.The transcontinental railroad had been envisioned ever since Cali-fornia had joined the Union in 1850, but the deepening political crisisbetween North and South had prevented any action.In 1862, with onlyloyal states now represented in Congress, the Pacific Railroad Act waspassed creating the Union Pacific Railroad, the first corporation char-tered by the federal government since the Second Bank of the UnitedStates in 1816.The project was intended as much as a symbol that theUnion would endure (hence the name of the railroad company) as it wasa commercial project.The company, from the beginning, was to receive a great deal of gov-ernment help because it would have been impossible to raise capital inthe open market for a railroad across more than a thousand miles ofunsettled land.Railroads in the East (and in Europe) had largely con-nected areas of economic activity, greatly increasing the amount of thatactivity.In the West they often created these areas of activity, as peopleand commerce followed the paths of the railroads.The original capitalof the Union Pacific was to be one hundred thousand shares at a parvalue of $1,000 each, a huge capitalization of $100 million.The UnionPacific and the Central Pacific, which was to build eastward from Sacra-mento, would be granted a right-of-way of two hundred feet on eachside on public lands.In addition the railroads would receive, for everymile of track completed, title to sixty-four hundred acres of land to besold to settlers, alternating with sections of land retained by the federalgovernment.There was more.For each mile completed, the Union Pacific wouldreceive from $16,000 to $48,000 in government bonds, depending on thedifficulty of the terrain, and government loans, in the form of first mort-gage bonds, repayable over thirty years, for construction costs
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