Following the end of the Civil War came the gold war speculation of the late 1860s and its collapse on “Black Friday” of September 24, 1869. During the intervening years, the much-despised gold speculator, Jay Gould, also amassed control of the Erie Railroad, that he would be forced to relinquish in 1972 after a five-year reign. Gould’s tactics, as described by historian Charles Morris in The Tycoons, involved “exploiting immature financial markets, and then violently disrupting the comfortable business patterns of his competitors.”
After Gould’s exit from the Erie, a crash of then unparalleled proportions followed in 1873 with the failure of the Jay Cooke and Company; which was America’s leading financier and backer of the Northern Pacific Railroad. What followed was the closure of the New York Stock Exchange for ten days. Banks failed, credit dried up, businesses closed, and workers lost their jobs. A depression followed that would be repeated twenty-years later.
A marked feature of the depression of the late 1870s was that it didn’t deter overbuilding in the railways and mergers that were largely financed with European investment money. Indicative of the financial situation, Poor’s Manual, the then recognized American railroad authority, stated that more than half of the $2 billion of capital debt created over a three-year period up to December 31, 1883 was in excess of construction costs. Poor’s also reported that practically all US railroad stocks, some $4 billion worth, represented water.
For the next twenty years the railways continued to merge and conquer. Notably, the New York Central and the Pennsylvania each involved the consolidation of many local lines. Following a mild recession in 1883, Morgan brokered an agreement in 1885, on his yacht the Corsair, between Vanderbilt’s New York Central and the Pennsylvania system. Vanderbilt was incensed by the Pennsylvania’s building of the West Shore line in direct competition and retaliated by commencing construction of the mothballed South Pennsylvania line.
The agreement brokered by Morgan essentially proposed a property swap between the two lines and was thwarted by an anti- trust legal action. Out of pocket and not invited to the negotiations was Andrew Carnegie from whom Vanderbilt sought investment in the South Pennsylvania line. This was not the first time Morgan had attempted to stymie Carnegie. After biding his time for more than a decade, Carnegie purchased his own rail line to stall Morgan’s shifting focus to rationalising competition in the steel industry.
In 1901, Morgan recast his eyes on Jay Cooke’s Northern Pacific, which had been bankrupted in 1873 and again in 1893. Morgan teamed up with the Northern Railroad to defeat a takeover by the Union Pacific. The prize was the Northern Pacific’s links into Chicago, which neither bidder had. Morgan arranged for a swarm of brokers to capture a majority of outstanding common shares in the Northern Pacific. The outcome as told by Morgan’s biographer, John K Winker, ruthlessly bankrupted thousands and depressed share values by hundreds of millions of dollars. Morgan would redeem himself in a 1907 panic as he had done in 1893.
From three perspectives 1901 was a momentous year. The first was the creation of U S Steel; the second was J P Morgan’s involvement in a stock market manipulation play that bankrupted thousands of people, and; third it marks the end of America’s post-Civil War Gilded Era of relatively unhindered financial speculation and several stock market crashes.
 Charles R. Morris, The Tycoons How Andrew Carnegie John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy, (New York: Owl Books, impr. 2006), 61.
 John K. Winkler, Morgan the Magnificent: The Life of J. Pierpont Morgan (1837-1913) (New York: The Vanguard Press, 1931), 92.
 John K. Winkler, Morgan the Magnificent: The Life of J. Pierpont Morgan (1837-1913) (New York: The Vanguard Press, 1931), 191.