The Failure of Grant & Ward: How a Ponzi Scheme Ruined Ulysses S. Grant

In 1880, Ulysses S. Grant began a new chapter. He and his wife, Julia, had finished a world tour the year before and had no permanent home, and Grant had lost the Republican presidential nomination, ending his political career. They decided to settle in New York City, where three of their four children lived.

There was no presidential pension then — pensions for former presidents weren't established until 1953 — so friends and financiers stepped in. About twenty Wall Street admirers raised a $250,000 trust fund for Grant in gratitude for his service to the Union, and his friend George W. Childs, with bankers Anthony Drexel and J. Pierpont Morgan, gave $100,000 toward a house at 3 East 66th Street near Central Park.

"The Little Napoleon of Wall Street in Exile": after the firm's collapse, Puck magazine depicted Ferdinand Ward as a disgraced Napoleon while New York business leaders deny ever working with him (Library of Congress).

Into business

Grant wasn't content to retire quietly. He became president of the Mexican Southern Railroad, and his second son, Ulysses "Buck" Grant Jr., invited him into a partnership with a promising Wall Street investment banker, Ferdinand Ward. Grant happily invested $50,000. Ward proposed to invest in everything from railroads and construction to silver mines and government contracts; the Grants were guaranteed $2,000 a month (about $63,000 in today's money), with the rest of the profits reinvested. All three Grant sons — Fred, Buck and Jesse — also invested, and "Grant & Ward" became a well-known name on Wall Street.

On the surface it worked. The general's name drew new investors, Ward bought a 25-acre mansion in Connecticut, and the Grants became millionaires. Grant, who didn't oversee daily operations, admired Ward's knack for producing huge returns.

The truth

Ward was secretly running what today would be called a Ponzi scheme: he lured investors with promises of high returns and used new investors' money to pay earlier ones, while taking much of the firm's money for himself. The scheme depended on a constant stream of new money — and by March 1884 the stream was drying up.

Ward turned up at Grant's home unannounced. A large city contract had pulled its funds, he said, and without new cash the firm would fold. He claimed to have raised $230,000 himself (in fact, several banks had turned him down that day) and asked whether Grant could raise another $150,000.

Grant went to the railroad magnate William Vanderbilt, who lived a block away but whom he barely knew. Embarrassed, he explained the situation. Vanderbilt said he had never made a personal loan and thought them bad business, but he admired the general who had saved the nation. "To tell you the truth, I care very little about Grant & Ward," he said, "but to accommodate you personally I will draw my check for the amount you ask. I consider it a personal loan to you, and not to any other party." Grant signed the check over to the firm.

The collapse

Ward took the $150,000 for himself and fled. On May 4, 1884, Grant met Buck at the firm's office; according to a reporter who was there, Buck told him: "Grant & Ward has failed, and Ward has fled. You'd better go home, Father." Stunned, Grant sat in silence until 5 p.m. Before leaving, he told his clerk: "I have made it the rule of my life to trust a man long after other people gave him up, but I don't see how I can ever trust any human being again."

Worse, the $250,000 trust fund had been invested in bonds of the Wabash Railroad, which was about to fail. Ulysses and Julia Grant ended the day with $210, the cash they had on hand.

The failure made international news, bankrupted many investors and set off a partial panic as creditors called in loans across New York. Ward was arrested and tried, though many investors refused to testify rather than admit they had been fooled by "the Young Napoleon of Wall Street." When Grant was later diagnosed with inoperable throat cancer, many newspapers blamed Ward. Convicted of fraud, Ward was sentenced to ten years in Sing Sing, lived comfortably there on gifts from supporters, and was released after six.

Paying it back

Grant's first concern was his debt to Vanderbilt. Though Vanderbilt said the loan was forgiven, Grant insisted on repaying it, handing over Civil War artifacts and gifts from his world tour — which Vanderbilt later gave to the Smithsonian — and transferring his White Haven estate in St. Louis as partial payment.

His second concern was his family. Grant began writing The Personal Memoirs of Ulysses S. Grant, published after his death on July 23, 1885. The memoirs became a bestseller; the first check to Julia Grant was for $250,000.

Historian Geoffrey Ward, author of a book on Ferdinand Ward, has observed that Grant's own honesty was never in doubt, but that he fatally failed to recognize dishonesty in those who claimed to be his friends — a flaw that dogged his business life. Grant fought courageously to pay his debts while suffering from cancer, but his trusting nature brought financial ruin and great stress to his final days.

Sources

• National Park Service, Ulysses S. Grant National Historic Site: "The Failure of Grant & Ward: A Cautionary Tale," citing Geoffrey G. Ward, A Disposition to Be Rich (2012), Ron Chernow, Grant (2017) and Jean Edward Smith, Grant (2002). The historian's words are paraphrased here.
• Words on this page from people and organisations outside the federal government are paraphrased; rewritten in hubnx's own words.