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A Shock to Wall Street 1885 Part I

 Henry N. Smith and William Heath & Co. Fail.
  Wall-street had another sensation yesterday. Following close in the wake of the suspension of Soutter & Co. came the announcement early in the day of the failure of another conspicuous bear house, preceding only by an hour or so the news that one of the biggest bear operators in the market had been pushed to the wall. Two failures in one day representing losses estimated at many hundreds of thousands of dollars were enough to keep the Street in a hubbub till long after business hours.

Before business opened on the Stock Exchange yesterday morning rumors were rife that a great failure was imminent. For reasons that were appreciated in Wall-street it was quickly concluded that the weak firm was William heath & Co., of No. 78 Broadway. The anxiety of that house's customers was not long in making itself felt. Demands poured in on the firm for settlements of various kinds and for immense sums. The result was shown in the prompt announcement of Mr. Heath in a letter to the Exchange that his house was unable to meet its obligations.

Other failures were predicted in abundance. Houses that have been known for years in the Street as of the staunchest and most conservative character were named in the sensational rumors that were sent flying helter-skelter through all the Stock Exchange district. Friends of the unfortunate house of Heath & Co. were heard making bold assertions to the effect that it was through the fault of a customer prominent on the Street that they had been forced into disaster; and going further, the Heath people declared that this customer was none other than the famous bear leader Henry N. Smith, Jay Gould's old partner and Jay Gould's old dupe in more than one big stock rigging operation. It was about one hour after the Stock Exchange had listened to the reading of the confession of Heath & Co., that the Chairman rapped again with his heavy gavel in the trading room for attention once more. This was what he read then:

To the President of the New York Stock Exchange:

I am unable to meet my engagements and have made an assignment to John T. Cuming.


Excitement on the floors of the Exchange rose to fever heat. Many of the coolest men in the institution were agitated. Losses were widely distributed. Few houses actively in the market were without a financial interest of their own to a greater or less degree in either one or the other of the failures. Some bulls professed for a time to be gleeful. They talked in an off-hand way about a "clearer atmosphere," and prophesied better times now that such potent bear influences would be out of the market. But this manner of talk was not long heard, for the losses imposed by the failures were widely enough scattered to touch bull pockets more or less sharply, and before the Stock Exchange closed for the day there seemed only one sentiment abroad, and that did not partake anywhere of exultation. There was evident in many places a fear that the end was not yet.

So far did the dealings of the two houses reach, so scattered were the claims against them, that it kept the Chairman hard at work for over two hours and a half in buying and selling stock on account of the failures. Though Henry N. Smith is a member of the Stock Exchange, he had no outstanding contracts to be settled in his own name by the Exchange. Everything in this line was done for the account of Heath & Co., with whose interests his own seemed to be too closely interwoven to permit of any analysis for a long time to come.

One story that passed current on the floors of the Stock Exchange and received credence was that Smith was debtor to Heath in a sum approximating a million and a quarter of dollars. This estimate came from what should have been trust-worthy sources, but other figures were soon floating around here and there placing this debt at a much lower sum. No report received attention that rated this liability at less than $500,000. At the office of Heath & Co. Mr. A.R. McCanless, the firm's cashier, who had been named as their Assignee, was not to be tempted into a definite statement of any sort, either of liabilities or assets of Heath & Co., or of the special indebtedness of Henry N. Smith to the firm.

Affairs were in a condition far too much tangled for the giving our of any statement, he explained to hordes of brokers who came pouring in on him for information; when they would be so straightened out to permit of an official statement he could not say. From another person claiming knowledge of the matter was quoted the assertion that the losses through Heath & Co. to Stock Exchange firms on speculative account would not rise above $100,000 or $150,000. But in their stock account was involved only a comparatively small fraction of the entire loss. The firm has done one of the largest banking businesses in Wall-street, and the heavy losers by their suspension will be individuals and firms who have made deposits with them. At least $1,000,000 is said to have been placed in their hands in this way. One man was reported to have had something over $400,000 on deposit with the firm. Another operator was a depositor to the tune of $150,000, and a number of the most conspicuous firms on the Street are placed in the list of depositors quoted in the gossip heard on the Exchange.

Two of the most entertaining stories that went the rounds among the interested brokers related to the real cause of the failures. It was admitted on all sides that Smith's non-provision of funds to protect his holdings was the cause of the smash-up of the Heath people. The Heath failure was chiefly interesting for two things, one that a house long established and having a well earned reputation for conservatism should have been overtaken by such a disaster, and the other that Heath & Co. have for years been credited with standing high in the good graces of Jay Gould. A notable thing, indeed, has been the fact that the houses which fall most frequently are those which have enjoyed confidential relations with Gould himself or some one of his clique. This was what gave an extra interest to the failure the other day of Soutter & Co. But even a more interesting story than this which was premised upon the well worn theory of Gould's duplicity was listened to and given confidence. That used the name of William H. Vanderbilt.

Mr. Smith began his business career in Buffalo as a wholesale clothing merchant, amassing a competence while still very young. In 1860 he left Buffalo and came to New York, and in a small way began to operate in the stock market. His operations were from the start successful, and when, after the beginning of the civil war, gold became a speculative article, he transferred his operations to the gold market, his ventures being enormous and characterized with a dash that made his name a famous one in the street. He at this time formed a partnership with Jay Gould, under the name of Smith, Gould & Martin. The house became the Wall-street speculative firm of its day. A hair dozen of the big corners of the time when it was in existence were concocted by the estimable gentlemen who composed the firm. Erie's famous manipulations in the day of Fisk were ordered in the office of Smith, Gould & Martin. The Gold Corner and Black Friday were their contributions to history, too. And in the end, after fleecing all the lambs that were within reach, the good partners fell out over a corner in Northwest.

Mr. Jay Gould was on top: under him was red-mustached, portly Mr. Henry N. Smith. That was 16 years ago. Much of Mr. Smith's property, something like $4,000,000 was swept away by Mr. Gould's trickery. From that day on Smith and Gould have been pronounced enemies, though again and again Wall-street deals have necessarily placed them somewhat in the position of allies. Gould saw Smith badly worsted in a combat with old Commodore Vanderbilt just after the old firm of Smith, Gould & Martin had been dissolved.

The Commodore sought the control of a Western Railroad, and Smith was bent on defeating the project. smith succeeded, but it was at a tremendous cost. Gould had helped the Commodore, and secrets that Gould possessed had been of immense value in embarrassing Smith, though not quite potent enough to effect what Commodore Vanderbilt most desired. Vanderbilt watched and waited. He batched up a truce with Smith; they became intimates. The Commodore gave Smith information that netted him handsome profits, but one morning in 1873 Henry N. Smith awoke to discover that the advice of Cornelius Vanderbilt had in the end cost him far too dearly. Under the Vanderbilt tutelage he had become a rampant bull. He was long of every Vanderbilt stock. He had thousands of shares of Western Union. And the bottom had suddenly fallen out of everything. The panic was at hand. He was a bankrupt. Every penny's worth of his property was gone, save a little matter of $200,000 or $300,000 worth of real estate in his wife's name.

Smith was plucky. He did not stop his visits downtown. People who used to bow to him as Mr. Smith got into the habit of familiarly calling him "Hen," and old sufferers from his shrewdness thought they saw the thread of Providence running through life. Smith became a skirmisher. He was found in every deal, big and little. He had enough of secrets to make him still a power of a certain sort and made by little his bank account swelled into comely proportions even to the Wall-street eye. A couple of years or so ago he went over to Europe for a little trip. He had not lost his memory, and he wore abundant smiles on his face when he came across Commodore Vanderbilt' estimable grandson William K. In his persuasive way he opened up to the gaze of young Mr. Vanderbilt beautiful visions of fortunes to be doubled and quadrupled by following one or two simple little rules. William K. was captured. One of the simple little rules was to put a boundless trust in Mr. Henry N. Smith. William K. came home bankrupt; Henry N. didn't. The Western Union scoop suffered at the hands of the old Commodore was avenged. Mr. William H. Vanderbilt assumed his son's obligations, and put the young man so Wall-street says on a pension of $70,000 a year. But William H. Vanderbilt is only human, and it is not strange, says Wall-street in its palliating way, that Mr. William H. Vanderbilt should look forward to using a bit of the whip himself when the proper time came. That time is believed to have arrived yesterday, when Mr. Smith a second time went toppling over, once knocked over by Cornelius, and now knocked over by Cornelius' son, the father of William K.

Continue Part II


Website: The History
Article Name: A shock to Wall Street 1885 Part I
Researcher/Transcriber: Miriam Medina


Bibliography:  New York Times October 3, 1885
Time & Date Stamp:  


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