BERNIE MADOFF AND THE GREAT GOLD CONSPIRACY: HOW LITTLE WE HAVE LEARNED

The New York Gold Room on "Black Friday" 1869

BANZAI7 NEWS--Confessed Wall Street thief Bernard Madoff, 71, was sentenced to 150 years in prison on Monday for perpetrating Wall Street's biggest and most brazen investment fraud.

US District Judge Chin in announcing the sentence said: "Mr. Madoff's crimes were extraordinarily evil."

"The breach of trust was massive."

"By any of these monetary measures, the fraud here is unprecedented."

150 years certainly is a very long sentence. If you are wondering what Bernie Madoff can learn during his 150 years of prospective incarceration, consider this: A swindler convicted and sentenced to the same term 150 years ago would have been incarcerated in the year 1869.

What a coincidence, the year 1869 was an epic year for Wall Street swindlers and con men, it was the year of what has come to be known as the original "Black Friday" or "The Great Gold Conspiracy".

"Black Friday, September 24 1869, also known as the Fisk/Gould Scandal, was a financial panic in the United States caused by two speculators’ efforts to corner the gold market on the New York Gold Exchange. It was one of several scandals that rocked the presidency of Ulysses S. Grant. During the American Civil War, the United States government issued a large amount of money that was backed by nothing but credit. After the war ended, people commonly believed that the U.S. Government would buy back the “greenbacks” with gold. In 1869, a group of speculators, headed by James Fisk and Jay Gould, sought to profit off this by cornering the gold market. Gould and Fisk first recruited Grant’s brother-in-law, a financier named Abel Corbin. They used Corbin to get close to Grant in social situations, where they would argue against government sale of gold, and Corbin would support their arguments. Corbin convinced Grant to appoint General Daniel Butterfield as assistant Treasurer of the United States. Butterfield agreed to tip the men off when the government intended to sell gold.

In the late summer of 1869, Gould began buying large amounts of gold. This caused prices to rise and stocks to plummet. After Grant realized what had happened, the federal government sold $4 million in gold. On September 20, 1869, Gould and Fisk started hoarding gold, driving the price higher. On September 24 the premium on a gold Double Eagle (representing 0.9675 troy ounce of gold bullion at $20) was 30 percent higher than when Grant took office. But when the government gold hit the market, the premium plummeted within minutes. Investors scrambled to sell their holdings, and many of them, including Corbin, were ruined. Fisk and Gould escaped significant financial harm."

[Source: Wikipedia]

Back in 1869, the The Great Gold Conspiracy was big news. The Gold Room of the New York Exchange "developed a reputation as the den of the most dangerous transactions. One regular called it "a cavern full of dank and noisome vapors" where "the deadly carbonic acid was blended with the fumes of stale smoke and vinous breaths." A journalist wrote, "Imagine a rat pit in full blast, with 20 or 30 men ranged around the rat tragedy, each with a canine under his arm, yelling and howling at once." The center of the room contained a stony Cupid spewing water into the air. "The artistic conception is not appropriate," the journalist complained. "Instead of a Cupid throwing a pearly fountain into the air there should have been a hungry Midas turning everything to gold and starving from sheer inability to eat." [Source: "The Money Men"
by H.W. Brands (W.W. Norton & Co., New York, 2006)]

The economic fallout caused stock prices to fall 20%, export agricultural products (mainly grain crops) to plummet over 50%, several brokerages to go bankrupt, and severe disruption in the national economy for months. A combination of expert legal counsel, led by David Dudley Field, and Tammany Hall judges allowed Gould and Fisk to escape legal punishment. [Source: http://nytimes.com/learning/general/onthisday/harp/1016.html#explanation]

It is not surprising that Gould and Fisk, like so many of their successive Wall Street brethren, were able to use money and influence to evade punishment.

What is also not surprising is how little America has learned about Wall Street greed and excess in the 150 years since the epic financial disaster of 1869. Not much at all. If the ghosts of Gould and Fisk were sitting in a Federal penitentiary in 2009, they would be reading about the sub-prime meltdown and securitization schemes, derivative FWMDs, Wall Street bailouts, thieving bankers and lone Ponzi Kings. No doubt, they would be shaking their spirit heads in wonder and envy, thinking: "We were way ahead of our time".

No need to wonder what Bernie Madoff's ghost will be seeing and thinking 150 years from today. More of the same...

"Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes because human nature never changes." Jesse Livermore


1869 Good and Bad times on Wall Street


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