USA > California > San Francisco County > San Francisco > San Francisco, a history of the Pacific coast metropolis, Volume II > Part 4
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It was the utterly unwarranted sympathetic movement referred to which caused so much mischief among the small fry investors. If through genuine merit one com- pany's stock made a jump upward, or if through manipulation the price of a divi- dend paying stock was advanced, the whole line was "boosted." No reason was applied. The discovery of a rich ore body in a mine in one district sufficed to con- vince the speculator that the chances of a like discovery in another mine were increased and he acted accordingly. No one can tell how much honestly and labori- ously earned money passed into the pockets of clever manipulators while the delirium lasted, but the sum must have been immense. That much of the specu- lation merely resulted in the transference of money from the pockets of one set of gamblers, who may have been respectable citizens, into those of another set equally respectable is undoubtedly true; but if a balance sheet could be made it would show that by far the greatest amount of the resulting transactions, whether of production, or of the movement of the stock market, was absorbed by com- paratively few cunning men.
It was estimated that before Con. Virginia and California ceased to be profitably worked they had produced $133,471,000. Gould and Curry, the first mine on the Comstock in which a large body of ore was uncovered, between the date of the discovery of its richness in 1862 and 1905 was credited with a production of $15,525,000. Savage produced $20,552,000; Hale and Norcross $11,486,000; Challar Potosi $13,985,000; Imperial and adjoining claims $28,039,000; Kentuck $4,905,000; Yellow Jacket $18,043,000; Crown Point $33,081,000 and Belcher $34,415,000. How much of this vast sum exceeding $338,000,000 was paid out in dividends, or how the latter were distributed it would be impossible to tell. The figures of production were derived from the records of the defunct stock ex- changes, but they are not explicit concerning the disposition of the earnings of the mines. That the distribution was not equitable was notorious. That no pos- sible device which would turn the product of the mines into the pockets of manipu- lators was neglected is known. And that no effort was made to put an end to the shameless robbery of the people until they were practically cleaned out is a matter of history. Nevertheless, to recur to a former statement, an opinion undoubtedly prevailed in what may be termed influential circles that a brisk stock market, no
Many Companies Listed
The Public Fieeced
Output of the Big Mines
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matter what its accompaniments, spelt prosperity for San Francisco. That this idea should have gained so firm a hold on the class mentioned is due to the fact that the prosperity of the few led to extraordinary extravagances which had the effect of promoting business of all kinds.
Community's Accumu- lations Absorbed
The most of the vast sums represented by the productions of the mines, the ma- jority of which were situated in Nevada, flowed to San Francisco where they were invested or expended by those who were fortunate enough to secure them. Had the distribution been even more inequitable than it really was the result must have been to stimulate business, if only temporarily. But the trouble did not stop with the unfair methods adopted by manipulators to absorb the major part of the profits of mineral production; the greed of the principal beneficiaries was such that they did not shirk from putting up jobs which had the effect of diverting the accumulations of the community, which under normal conditions would have been devoted to the promotion of legitimate enterprises, into nonproductive undertakings, or into the pockets of the parasites who consume what is produced and saved by the industrious and frugal.
An Era of Foolish Extravagance
There is no end of anecdotes concerning the profuse display of the beneficiaries of the speculative excitement. We are told of a broker who had three hundred and sixty-five pairs of pantaloons, one for every day in the year, and the papers are filled with allusions which indicate that the motto "easy come, easy go" was lived up to by those who were profiting through the foolishness of the people. They also tell the story in their advertising and news columns of an excessive love of amuse- ment, which took the form of liberal patronage of music and the drama. At no time in the history of the City had the artist been more prosperous than he was during the Seventies, and in that decade was witnessed the remarkable passion for architectural adornment which did so much to convert San Francisco into a place of pinnacles and steeples which, however absurd when considered in detail, gave the town its admittedly picturesque appearance.
It is true too, that while the period of lavish expenditure lasted little was heard of the wrecks produced by the system. "Pauper alley" came into prominence after the bubble had burst, and the wretched "mud hens" who infested it were not conspicuous in the days when the "gent" with three hundred and sixty-five pairs of "pants" flourished. Paupers had been made in plenty in the early Seventies, but it was not until the collapse of the Sierra Nevada deal in 1877 that the alley became a place of resort for a lot of infatuated creatures who had lost what they had, and still hoped that some worthless bits of paper to which they clung would become valuable. Pauper alley was that part of Leidersdorff street south of Cali- fornia. It was a narrow thoroughfare with sidewalks three or four feet wide, and was abundantly supplied with saloons and cigar stands, there being five of the former and four of the latter in the distance of a short block. There were also two pool rooms, two restaurants and a candy stand. There was an entrance to the Pacific Stock Board from the alley, some brokers' offices and a bucket shop. It was always crowded in the flush days, and when those of tribulation came it was haunted by broken down men and bedraggled women, who spent their time telling about the fortunes that had slipped through their fingers, and dreaming dreams of fortunes still to be made. In time it became one of the sore spots which visitors were shown, but it was swept out of existence in the disaster of 1906 and is now only a memory.
The Mud Hens and Pauper Alley
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The celebrated Comstock mines from which the vast riches mentioned were ex- tracted were in Nevada, but the boundaries of the lode were rather indefinite, and were the subject of jest. Shuck in his "History of the Stock Exchange" relates that an inquisitive person who wished to arrive at the facts questioned a miner and that the following dialogue resulted:
"What is the true location out here on the side of Mount Davidson?
"Well, stranger, it is about this way. There hain't but one lode along here. Them locations east and west of this great lode is only to sell to tenderfeet.
"Well, if that is the case, what are the boundaries of this great lode?
"Well, stranger, the boundaries of this great lode is as follows: The footwall is the diorite of Mount Davidson, and the hangingwall is Salt Lake City. All quartz within them boundaries is the Comstock lode."
The joke lies in the application. The number of San Franciscans who had any better information than was embraced in this comprehensive definition of the boundary was limited. And their knowledge of the geography of the mines real or imaginary in which they invested their money was no more meager than that which they possessed of the workings of the properties, or whether they had any existence at all. It is related of a San Francisco woman who visited Monte Carlo and sat at one of the tables where she was a pretty constant winner, but had to be told when she had made a winning, that she answered the testy remark of an Englishman who sat by her side, that he could not see why any one who didn't understand the game should play, by saying "Oh, that's all right. I used to make plenty of money in mining stocks and I never knew anything about them." She was more frank than the average participant in the dangerous game but not more ignorant. The most of them could talk glibly enough about the number of feet in this, that or the other mine, and had mastered the intricacies of the various subdivisions of the leading stocks. They knew to an inch the dimensions of the leading claims, and were familiar with the history of the processes by which a few men obtained control of great ore bodies. If the mystified stranger from the East asked for information they could tell him all about the methods of William Sharon and W. C. Ralston, and of their rivals James C. Flood, William S. O'Brien, John W. Mackay and James G. Fair. They had the story of the rise of these magnates by heart, and they did not allow it to lose any of its piquancy in the telling. But there was little malice in their relations at that time. That came later. If there were animadversions upon the fact that Flood and O'Brien kept a drinking saloon on Washington street, and that they waited on their own cus- tomers, they were usually qualified with admiration that men could rise to such lofty heights from so low an estate.
These critics dwelt on the shrewd dealings of the two saloonkeepers and the profits made by them through investments in Comstocks, and upon their sagacity in associating with them in their operations Mackay and Fair, two practical miners who were working on the lode. After the formation of this partnership the un- proved ground near the north end of the Comstock lode known as Consolidated Virginia was purchased by the quartette. The claim was 1,310 feet in length and was divided in 1875 into two mines, California with 600 feet and Consolidated Vir- ginia 710 feet. The two mines were represented by 10,700 shares which were bought at $4 to $9 a share, the property being acquired by the four for a sum less
The Comstock Lode
Money Made by the Uninformed
Flood, O'Brien, Mackay and Fair
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than $100,000, and considerably less than $100 a lineal foot. "Con." Virginia- the contraction of Consolidated, was always employed in speaking of the minc- had been worked for many years but had never returned a dollar of dividends, but for reasons known to the new firm its members had unbounded faith in its future.
Not & Chance Discovery
That it was not a blind chance was shown by the mode of working. Instead of sinking on the old shaft the firm made arrangements to run a tunnel from the Gould and Curry shaft which had attained a depth of 1,800 feet and was 800 feet from Con. Virginia ground. This drift was begun at a depth of 1,200 feet below the surface, and it was while making it that the body of ore known as the "big bonanza" was discovered. The discovery resulted in the immediate enhancement of the value of the property. So great was the richness of the deposit that its owners were enabled to convert the original 10,700 shares into two issues of 108,000 shares each, each share thus representing the infinitesimal proportion of 1-14 of an inch of the claim.
During the first six months of 1875 the output of the ore was valued at a million and a half a month and the shares were sold, as already related, as high as $710 per share, the price quoted January 7, 1875, which represented an aggre- gate value of $153,360,000 for the 216,000 shares issued. But this fabulous valuation was enormously increased later. The original capital stock of California was enlarged on February 4, 1875, to 540,000 shares, and on March 14, 1876, a similar course was taken with Con. Virginia. California after the increase was sold as high as $90 per share, representing a valuation of $486,000,000, and Con. Virginia sold as high as $86, the two mines being thus speculatively rated at nearly a billion dollars.
Dangerous Dividend Paying Stocks
Although the term speculatively rated is used in describing the valuation placed on these properties the fact that after the subdivision the price of California ranged about $60 during the year 1875, and that it mounted to $87 in January, 1876, to $90 on February 24th, and that it kept near that figure until March 23d, when it was $88 indicates the degree of confidence felt in the richness of the mine, and the same comment applies to Con. Virginia, which was quoted for some time at near the price made immediately after the increase of the number of shares. These stocks represented dividend paying properties, but their value was not determined by the appreciation of investors who rarely bought with the idea of holding them. The dividend factor was never lost sight of by those who bought, but the buyer was conscious of the fact that he was at the mercy of unscrupulous men and was always ready to sell at a profit, and to hunt cover when signs of an impending storm appeared.
Some of the spectacular rises in value produced by efforts to obtain control have been referred to, but they do not illustrate the uncertainty of the market and the trickiness of manipulators near so effectively as the statement that between November 4 and December 2, 1875, California was depressed from $54 to $21 a share, and that Ophir which sold at $65 October 6, 1875, was down to $39 on November 4th. In the slang of the street the manipulators "caught the suckers coming and going." The moths fluttering near the flame were constantly having their wings singed, and not infrequently their existence wiped out, but the game went on merrily. The rich mines paid dividends, but the men who controlled them were able to arrange matters so that what they paid out found its way back
Tricks of the Market Riggers
Big Bonanza Stocks Manipulated
CLAY ST. HILL AR.CO
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CLAY STREET CABLE ROAD CAR, ON THE DAY OF ITS TRIAL TRIP, AUGUST 2, 1872
The inventor, A. S. Halladie, and his wife are seated on the front seat. The line started at the corner of Kearny and Clay Streets and ended on Leavenworth
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into their coffers, albeit by a circuitous route which was eagerly traveled by a community crazed by dreams of sudden wealth.
The extent of the infatuation can be measured by the confidence of the brokers who up to the very eve of the collapse were planning to extend their operations. On the 1st of June, 1875, the San Francisco Stock and Exchange Board increased its membership to 100 by adding 20 new names, a list of which has an historical value. They were William Sharon, James C. Flood, Robert F. Morrow, James D. Fry, William S. O'Brien, Alexander Austin, George M. Pinney, Richard C. Hooker, Charles N. Felton, H. H. Scott, John P. Jones, L. T. Haggin, H. Hart, Samuel B. Wakefield, Charles S. Neal, George T. Mayre, Jr., Marcus P. Hall, Eugene E. Dewey, Joseph Quay, and Martin Herman. These new seats were sold for $25,000 a piece. A year later there were transfers ranging from $25,000 to $40,000 Robert C. Page paying the latter sum. Even after the bottom had dropped out the fact was scarcely recognized by those eager to profit at the ex- pense of the credulous, a transfer at $40,000 being made during 1879 when it was foolishly imagined by some that there was to be a revival of what had become mockingly called "the mining stock industry."
What was characterized as "a stupid and deplorable incident" resulted in the creation of a rival board in 1875, which was known as the Pacific Stock Exchange. E. J. Baldwin, whose good fortune had earned for him the nickname of "Lucky," at that time one of the largest operators on the San Francisco Stock and Exchange Board, having forgotten his ticket was refused admission by the doorkeeper. He left in a towering rage swearing that he would start a rival board and he kept his threat. There were plenty eager to break in who were ready to join him in the new enterprise, and on the 19th of May, 1875, the Pacific Stock Exchange was organized. It maintained an existence during the vicissitudes of the years succeed- ing the failure of the Bank of California, and was finally absorbed by the older concern on September 8, 1904, when the latter was in a condition nearly moribund.
Baldwin was one of the conspicuous figures in the frequent combats for control but was never in the foremost rank, although he was a large operator. In 1874 he contended with Sharon for the mastery of Ophir, but the latter, who had bought James Keene's interest in the mine outgeneraled Baldwin after a contest in the course of which stock that sold at $65 was gradually driven up to $150. During this deal the street was greatly bewildered by the tactics of the Sharon interest, the brokers for which appeared to be buying and selling Ophir with singular im- partiality. Although the method resulted in occasional instances of compulsory repurchase of stocks which had been sold to deceive, it proved successful and Baldwin failed in his efforts to obtain control. Many of the struggles for control occurred over claims, the possession of which would prove advantageous to those dominating Con. Virginia. A contest of this sort arose over Central No. 1, and Central No. 2, two small claims extending northward from Con. Virginia to the Ophir line. A strike of rich ore had been made in Central No. 1 and Flood and O'Brien determined to get possession of it in order to strengthen their position, and there was a considerable flurry in consequence. Occasionally in contests of this sort the broker availed himself of the knowledge gained by his dealings. It is re- lated of a broker employed by Flood that he bought for his own account 500 shares of a stock which was driven up from $35 to $72, and that instead of taking his winning, which would have exceeded $10,000, he decided to hold his purchase. He
Brokers Extend Their Operations
A Rival Mining Stock Exchange
Struggles for Control
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subsequently realized a large fortune from the dividends, and the rise in value of his shares, and retired to New York in 1876 with something like $5,000,000.
Professional Integrity of Brokers
The professional integrity of brokers was rarely called into question. The methods employed appeared to give opportunities for shirking obligations but they were rarely abused. Shuck states that "a new member in making a sale or purchase on the street would state the name of his broker in the board. His word would be taken and the transaction compared with the absent broker, and such was the honor and integrity of all concerned, that I cannot recollect a single transaction that was afterward repudiated, although wide differences would occur in the value of the stocks when the board met." Considering the turpitude of the manipulators of the market, this may seem like an undeserved eulogy, but it is amply borne out by the records, which furnish abundant testimony that the people who had dealings with the brokers placed implicit confidence in them, and that they retained it to the last.
Large Rewards of Brokers
There was no reason why the broker should stray from the path of rectitude. His rewards were large and he incurred no risks, except those involved in sur- rendering to the temptations which his real or fancied knowledge of situations sub- jected him. That his information was not always of the best is attested by numer- ous anecdotes. It was reported that Coll Deane bought from James R. Keene 1,000 shares of Con. Virginia at $800 "buyer 90." It never reached that figure, but the belief was entertained by the brokers that the stock would go to $3,000. Another incident is related in which Flood figured. When Con. Virginia was selling at about $100 the holder of 1,000 shares told the bonanza king that he was tired of the stock and that he would like to get rid of it. Flood promptly offered him $100 which he accepted with equal promptitude, thus permitting the purchaser to remark subsequently that the Nevada block was built out of the profits of the transaction.
Duped by False Reports
It is not surprising that there were some who got tired. Playing in a game in which a shrinkage of the value of a stock amounted to forty per cent in a single day was not a very restful occupation. California on one occasion broke suddenly from $500 and sold as low as $300. Violent changes of this character were pro- duced by the circulation of reports, whose origin could not always be traced, but were usually supposed to emanate from the inside. In this case the break was due to a story that a "horse" had been struck. There may have been a body of barren ore, as represented, but its presence did not destroy the confidence of the operators, nor induce them to sacrifice their shares. The sufferers were the credu- lous people who were equally ready to accept the manufactured reports of disaster as they were those of finds of Midas like riches. The same kind of men who were panic stricken by a report which caused a drop of $200 a share bought with eager- ness when a fresh rumor was circulated that the barren rock had been passed and only rich ore was again in sight.
Shearing the Lambs
Sometimes, however, the rigging of the market was overdone. The breaks and recoveries were repeated so frequently that the belief would take hold of the people that "the bottom had dropped out." But these periods of distrust were not of long duration. During the frenzy the normal condition was a lamb-like confidence
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which was not disturbed by the sight of the shearer whose glittering shears fas- cinated rather than repelled. The sheep submitted to be regularly shorn until there was no more wool on the old ones, and while the fresh crop of lambs was growing up things happened from which even silly lambkins could learn a lesson and profit by what they had learned.
CHAPTER XLIX
THE BURSTING OF THE STOCK SPECULATION BUBBLE
EFFECTS OF CALIFORNIA'S ISOLATION-A SHORT LIVED BOOM- THE EASTERN PANIC OF 1873-FAILURE OF THE BANK OF CALIFORNIA-CAREER OF WILLIAM C. RAL- STON-RISE OF RALSTON FROM THE RANKS-CAUSE OF THE FAILURE OF THE BANK OF CALIFORNIA-WILLIAM SHARON-RALSTON'S ENTERPRISE-AN EXHIBITION OF FICKLENESS AND INGRATITUDE-THE DEATH OF RALSTON-VICTIM OF A BAD SYS- TEM OF BANKING-THE BANK CROWD AND FLOOD AND O'BRIEN-REHABILITATION OF BANK OF CALIFORNIA-FLOOD AND O'BRIEN START THE NEVADA BANK-THE DESIRE TO GET RICH QUICKLY-THE GREAT DIAMOND SWINDLE-THE BITERS BIT -- SPECULATION IMPEDED INDUSTRIAL DEVELOPMENT-MANUFACTURES IN 1876- LABOR'S SERIOUS MISTAKE-CROP FAILURE-UNEMPLOYED FLOCK TO THE CITY- BEGINNING OF SERIOUS LABOR TROUBLES-CONDITIONS ON EVE OF THE SAND LOT DISTURBANCES.
CI MERICAN interdependence has resulted in making the United States the greatest commercial nation on the globe. The fact is sometimes disguised by the publication of NTY H A statistics of external trade in a manner which obscures the vastness of domestic transactions, but when the latter are duly emphasized, as they usually are by rational men, + SEA OF SCO SAN FRA the American preponderance is made manifest. This superiority and the resulting integrations has its advantages, but it is also subject to drawbacks. The whole world is now united by commercial bonds of varying strength, but those which bind the states of the Union together have no weak- nesses. They have united the country so firmly commercially that an injury to one part is immediately felt by all the other parts, and business disasters or pros- perity have ceased to be sectional.
This was not always the case. The isolation of California before the comple- tion of the transcontinental railroad, and the peculiar industrial conditions pro- duced by the extraction of enormous quantities of gold, in a manner insulated the state and prevented it being seriously affected by the commercial adversities of the rest of the Union. This exemption did not immediately disappear when rail- road communication was established. During the early Seventies there was excep- tional prosperity in the Eastern states, but, as has been shown, San Francisco for the first two years of the decade was afflicted with meetings of unemployed; and those who had the interests of the City at heart were greatly disturbed over the outlook for the future which did not seem at all hopeful, owing to the unfortunately
American Inter- dependence
Effects of California's Isolation
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one sided distribution of the land, which was recognized as a great obstacle to the development of the agricultural resources of the state.
The bonanza discoveries, as already related, effected a change which disguised the true situation. While the riches extracted from the Nevada mines were being poured into the laps of San Franciscans the problems which had disturbed them before 1872 were forgotten. Business of all sorts flourished because those who made money in mines and who won in stock deals expended it freely. It was a boom period. The sales of real estate increased threefold in as many years, and building operations were extensive, giving abundant employment to workers. The merchants prospered because the money so easily obtained was freely spent upon articles of luxury, the sales of which brought big profits to the vendors.
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