I am reading The Scarlet Woman of Wall Street and wow the mid-19th century was a fun time.
In 1864, Cornelius Vanderbilt was the main stockholder in the Harlem Railroad. He wanted to build a streetcar line, for which he needed the permission of the New York state legislature. Everyone thought the bill would pass, so the stock rose in anticipation.
But Daniel Drew, another member of the board, secretly met with a bunch of legislators and suggested that if they were to short the stock and then vote no on the bill, they could make a lot of money. They were like “yeah, great idea,” and all got short the stock along with Drew. The committee on the bill failed to recommend it, and the stock fell from 140 to 101.
Vanderbilt’s response was to get a couple of friends and buy every outstanding share of Harlem stock, pushing it up to 224. When the legislators found that they needed to make delivery, Vanderbilt and his friends were the only source of the stock. They were left with the option to buy it from him at inflated prices or borrow it at the rate of 5% per day.
Vanderbilt was pretty annoyed at them and declared that he would push the price up to 1000. But one of his friends, Leonard Jerome (Winston Churchill’s grandfather) pointed out that this would probably cause lots of bank failures and a huge financial panic. So he let them out at 285.
The weird thing about this is that the previous year, pretty much the exact same thing had happened–also with Vanderbilt and the Harlem Railroad, though that time it was the New York City Council who needed to approve something. I guess people just entirely failed to learn from it?