DARK GENIUS OF WALL STREET

The Misunderstood Life of Jay Gould,

King of the Robber Barons

By Edward J. Renehan Jr.

Basic. 352 pp. $30

Business news in recent years has been rife with reports on the unethical and illegal actions of executives who should have known better. But Enron's Kenneth L. Lay never stormed the quarters of a corporate rival amid a hail of bullets or employed gun-toting police officers to fend off armed thugs dispatched to bring him into courts controlled by his enemies. Jay Gould did both of those things during the Gilded Age, when America's industrial capitalists used any means necessary to win their battles for competitive advantage.

Even in that wide-open period, he had a bad reputation. While Cornelius Vanderbilt and John D. Rockefeller were grudgingly conceded to have built industries as they enriched themselves, Gould was viewed as a predator who looted companies. Dubbed "the Mephistopheles of Wall Street" in 1869 by the New York Times, he was getting bad press from such popular historians as Matthew Josephson (The Robber Barons) and Richard O'Connor (Gould's Millions) long after his death in 1892.

Edward J. Renehan Jr. aims to correct those one-sided portraits in his lively revisionist biography. "Gould's operations were . . . no more sinister than those of . . . men whose reputations have soared above his over the past century," he argues. Gould was simply better than anyone else at the widely practiced arts of watering stock, selling short, buying on margin, cornering a market, bulling up prices and making bear raids. "Capable of creating capital out of thin air and gaining control of companies by using just a few dollars reflected in a hall of financial mirrors," he proved to be a capable manager of a western railway system, a telegraph network and New York City's elevated trains. Moreover, far from being the cold-hearted confidence man of legend, Gould was an admirable human being: devoted to his wife and children, generous to employees (so long as they didn't join unions), content to immerse himself in his book collection or to cultivate flowers while his flamboyant associate Jim Fiske caroused with the politicians and judges whose paid-for cooperation kept the duo's tactics (mostly) legal.

This sympathetic take is persuasive in early chapters, which depict Gould as a studious farm boy in the Catskills using his brains to acquire joint ownership of a tannery by 1856. Tales like that of a betrayed partner driven to suicide, Renehan demonstrates, gained credence only decades later as Gould's reputation grew increasingly demonic. Gould was already using the letter of the law to his advantage as a teenager, but no one ever suggested at the time that he was anything but a shrewd businessman. Only after he hit Wall Street and the big money did his serious, reserved demeanor begin to seem sinister.

Renehan's zestful recounting of the intricate maneuvers involved in the titanic struggles over the Erie and Union Pacific railroads, Western Union and the Manhattan Elevated amply make the point that Gould was no more unscrupulous than his opponents and frequently a lot smarter. But Gould's 1869 attempt to corner the gold market is not so easily retouched. He may have realized, as Renahan puts it, that "a sharp decline in the value of greenbacks against gold would stimulate American agricultural exports." But he was mostly interested in convincing President Ulysses S. Grant to tighten the gold supply so that the resulting escalation in gold's greenback price would make Gould even richer. The president proved unresponsive, and Gould's failed run on gold provoked Wall Street's first Black Friday, when more than a dozen banks and brokerage houses failed. The episode suggests that Gould was more of a scheming speculator than a responsible businessman. Nor is Renehan's case for his subject as "an exemplary, successful, long-term CEO" entirely convincing. Western Union survived his attentions, but the Erie Railroad, after years of financial chicanery that reaped millions for Gould, was a hollow shell.

Mind you, Erie's stock was "the scarlet woman of Wall Street" -- prostituted for the personal gain of an unscrupulous investor named Daniel Drew -- well before Gould joined the board of directors. If Renehan doesn't wholly succeed in persuading us that Jay Gould was an upstanding industrialist, his vivid account makes it clear that the rapacious financial practices of the Gilded Age were not invented by one brilliant buccaneer. "The letter of the law is very deficient in its regulation of the management of corporate interests," noted the Commercial and Financial Chronicle in 1868. The U.S. government did not craft business regulations with teeth until the 1930s, when the Depression had made average Americans painfully aware of the broader economic consequences of shady stock manipulations. Those who argue that such regulations are outmoded and unnecessary today may find Dark Genius of Wall Street uncomfortable reading. *

Wendy Smith is the author of "Real Life Drama: The Group Theatre and America, 1931-1940." She reviews books for various publications, including the Los Angeles Times and Newsday.

Jay Gould, Cyrus Field, Cornelius Vanderbilt and Russell Sage seated on bags of moneyJay Gould