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
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
To the President of the New York Stock
I am unable to meet my engagements and have made an
assignment to John T. Cuming.
HENRY N. SMITH
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
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