But Joseph’s first hunch had been prophetic. Bohm needed watching. He began loaning the Seligmans’ money without their knowledge and overdrawing on the firm’s account. Joseph sent an aide, F. A. Benjamin, to Helena to look into things and was soon writing to him: “Bro. Abm telegraphs that you had discovered an additional indebtedness of $30,000. Now I am astonished at this discovery. I have lost all confidence in Bohm.… Now you must stop this game … if not we must try to find places behind keys and locks for all these chaps … these bad eggs.” More embezzlements were uncovered, and in a later letter a dazed Joseph wrote wondering, “By what process have they made away with 1/4 million of dollars in so small a place as Helena?”
If there was one thing that Joseph disliked more than losing money, it was having his honesty as a trader questioned. Allusions to Jews and “sharp practice” infuriated him. As he had done in Selma, when he encountered anti-Semitism he fought back. Thus we find him, in 1867, when his banking house was not quite three years old, writing an angry letter to a Mr. Julius Hart who had called some of the Seligman deals “questionable.” “Mr. Ridgely, a customer of ours,” wrote Joseph, who now almost always used the royal “we,” “informs us that you have made a statement to him that we had 50,000 pounds protested Exchange [bills] returned to us. The above statement being entirely untrue may still have a tendency to injure us, and we therefore ask you to retract all and every assertion of that kind made, previous to our handing the case to our lawyers.”
Joseph was increasingly touchy about anti-Semitism. One of the most important developments after the Civil War, as far as international bankers like the Seligmans were concerned, was the laying of the first transatlantic cable by Cyrus W. Field in 1866. The Seligmans’ first message on the cable was a congratulatory one to Field; their second, following the first by a few minutes, was addressed to Isaac in London: “California gold arrived will add hundred bonds after that hold up exchange unsalable—Josef.”* But cable service at first was erratic, and Joseph began to notice that his cables seemed not to arrive in London as fast as those of other bankers. Joseph sent off one of his prickliest letters—going, characteristically, to the top—to Cyrus W. Field. He enclosed a long list of late cables, and added: “We have reason to know that dispatches sent from London at the time ours were forwarded have been received by other bankers twelve to eighteen hours in advance of ours.”
His letter touched off an investigation at the Anglo-American Telegraph Company. No religious prejudice was unearthed, but it did turn out that downtown cable clerks accepted bribes from certain bankers to put their own messages through first and to delay others. A number of guilty clerks were dismissed.
Joseph, when the occasion arose, also enjoyed being magnanimous. In 1869, writing to a certain Henry Cohn of San Francisco, Joseph said: “Your letter of the 14th to Mr. Jesse Seligman, asks us to release Mr. Sternberg from his guarantee to repay us the $15,000 cash advanced you two years ago, and to take Mr. Lerlebach for $13,000 instead, keeping besides Mr. Lerlebach’s note, the 300 shares water stock, and you add that Brother Abe has encouraged you to address us and promised to speak a good word for you, which he actually has done, and which is natural.…” And Joseph could not resist assenting to Cohn’s request without a small self-congratulatory pat on the back for himself and his family, for he added: “Whoever knew of a Seligman who was not charitable and kind and served his neighbors, especially those who have been unfortunate?” (One can almost see Joseph smiling his sleepy little smile over this last touch.)
But his charitableness had its limits, nor was it in any way restricted to fellow Jews, as is clear from this poised and polished letter, written a year later, to an “unfortunate neighbor,” the firm of Guiterman Brothers in Amsterdam:
During your difficulties we have abstained from addressing you on the subject of the cash loaned you, which silence on our part you no doubt appreciated? But after this long delay we deem it not indelicate to remind you that we are still in the land of the living, and that periodical remittances even in small amounts would now be very acceptable, and we are sure on reflection you will agree.
Under Presidents Lincoln and Johnson, the Seligmans had enjoyed excellent relations with three successive Secretaries of the Treasury—Salmon Chase, William Fessenden, and Hugh McCulloch. When their old friend from Watertown days, Ulysses S. Grant, took Presidential office in 1869, they had every reason to look forward to the same preferential treatment. In the beginning the auspices certainly looked good. Grant appointed as his Secretary of State Elihu B. Washburne, who as a Congressman from Illinois had been one of the Seligmans’ private clients. Joseph had once purchased, in Frankfurt, 200,000 U.S. bonds for Washburne,* saying at the time, “There is no necessity for you to send any Bonds as margin, as we require none from you, dear Washburne.” (Dear Washburne was one of those Congressmen particularly influential in the allocation of land for railroads, in which, as the Seligmans were getting their feet wet, they were increasingly dabbling.) As soon as Washburne was appointed, the Seligmans wrote him, gently reminding him of their past good deeds, and offering their “full services” to the new administration.
But Washburne’s appointment, it turned out, was only a courtesy one. He held the post for only twelve days, and was then made Minister to France. Grant replaced him with Hamilton Fish, who was less a friend. As the son of a Revolutionary officer whose father had been a friend of George Washington’s and whose mother was a descendant of Peter Stuyvesant—who had once thrown every Jew in New York in jail—Fish was very much “old New York,” a social snob, and later one of the cornerstones of Mrs. Astor’s Four Hundred. Then Grant did a startling thing. He contacted Joseph privately, and said he would like to make him Secretary of the Treasury.
The offer stunned Joseph. For three days he was unable to think of a reply. He was of course flattered, and had no doubt that he could do the job. With him in Washington, his brothers would no longer have to work at making Washington friends. But there was a shy side to Joseph’s nature. He felt uneasy in the limelight, and he practiced a religion—or, as he himself always put it, “belonged to a race”—which for centuries had been disenfranchised, barred by law from politics and government office. He could not envision himself in this post. It seemed out of character to him. He was an American millionaire of fifty, but he was still a poor immigrant Jewish boy. In the end, the idea simply frightened him, and arguing the “press of business” in New York, he turned it down.
For every practical reason, he should have accepted. Grant appointed George Sewall Boutwell of Massachusetts instead, and Boutwell became a long Seligman headache.
At first, Joseph and Boutwell got along well. They worked together on a plan, carried over from the previous administration, to continue refunding the public debt, stabilizing currency, and building American credit abroad. Both men agreed on two main areas—that specie payments could not be resumed until confidence had been restored and that the high rate of interest—6 percent—then being paid on government bonds was a poor reflection on the state of American credit. With billions of dollars’ worth of bonds at stake, the mood and temperature of the bond-buying market had to be gauged with extreme caution. A fraction of an interest percentage point either way could mean the success or failure of the issue in the marketplace. After a great deal of deliberation on the question, Joseph and Secretary Boutwell agreed that the interest rate on the new bonds should be 5 percent. Or so Joseph thought.
When Boutwell submitted his bond-issuing plan to Congress, his outline coincided with Joseph’s in every major detail but one—the interest rate. The new bonds, Boutwell declared, would be offered at 4.5 percent. Joseph was flabbergasted. He hurried to Boutwell to protest that this was slashing the rate far too much and far too soon. The Seligmans, he insisted, could not sell bonds in Europe—or anywhere else—that promised such a low yield. But Boutwell was adamant. “I have decided,” he said coldly, “that four and a half is proper.” Joseph fumed.
To support his thesis, Joseph cabled his brother Henry in Frankfurt, asking him to canvass leading German bankers to see how they felt about the Boutwell plan. In Paris he asked William to sound out the formidable “Haute Banque” group—Hottinguer, Mallet, Marcuard, and De Neuflize. The brothers’ wires came back; the European bankers felt as Joseph did: Boutwell’s “cheap” bonds would not sell in Europe; 5 percent was the lowest sensible figure.
But Boutwell, who seems at this point to have fallen in love with the figure of 4.5 percent, refused to budge. Joseph, with the consensus of European bankers in his fist, marched to individual members of Congress to try to persuade them against what he called “Boutwell’s folly.” This did little to endear him to Boutwell, who complained loudly of Joseph’s “unwarranted interference” with the Congress, and the coolness that had developed between the two men ripened into open hostility.
In the acts of July 14, 1870, and January 20, 1871, Congress authorized issues of bonds totaling $1.5 billion at rates which were, in a sense, a compromise. But it was a compromise which favored the Boutwell stand. A relatively small amount—$200 million worth—would pay 5 percent. The rest would all pay a lower rate, some as low as 3.5 percent. Joseph sulked in his Wall Street tent.
Still, in return for their help in devising the plan, at least part of which was being used, the Seligmans were certain that they would be offered a share in underwriting and selling the $200 million worth of 5 percenters. Other New York firms thought so too, for they began approaching the Seligmans for a share of the Seligmans’ share. But the Seligmans were in for a hundred-million-dollar disappointment.
In March, 1871, William Seligman in Paris wrote a bitter letter to Elihu Washburne, who, since he was no longer in the Cabinet, could not have been expected to do much about the situation, saying:
Last evening I was shocked and stunned by a telegram … saying Mr. Boutwell has appointed as agents in Europe for the conversion of U.S. Bonds [William lists several firms, the Seligmans glaringly absent from the roster].… Thus we, contrary to our confident belief, are under the circumstances existing, slighted by our Government. We do not know what has caused us this neglect and injustice, whether it is personal aversion against us on the part of Mr. Boutwell or lack of confidence, or whether it is the work of intrigue and selfishness on the part of our competitors.
A moment’s reflection should have cleared up William’s mystification for him. His brother Joseph had simply been the victim of over-confidence. In his insistence that interest rates not be lowered too much and too soon, he himself had moved too quickly and high-handedly. He had overstepped himself, had stepped on toes in the process, and now was being punished for it.
But the Seligmans were, to some extent at least, able to have the last word. Boutwell capitulated somewhat, and agreed to “offer the loan to everybody.” (This did not please the Seligmans much; they did not like to think of themselves as part of “everybody.”) The brothers then took a clutch of bonds to sell, though Joseph commented tartly, “The whole business is doomed to failure unless more intelligence is infused into it.”
He was more or less right about that. The bonds sold so poorly that Boutwell agreed to let Jay Cooke & Company form a banking syndicate to try to dispose of the unsold balance. Two selling groups were set up, one in London and one in New York, and the Seligman branches in the two cities took part in both. This time the bonds sold very well indeed, so well that President Grant was able to announce that the issue had “established American credit abroad.” And, grudgingly, the Seligmans were able to accept a share of the responsibility for that development.
Socially, however, the Grant era was a merry time for Joseph Seligman. At Grant’s inauguration, Joseph had stood near the President on the platform when Grant took his oath of office. That evening, in full fig, Joseph showed up at the Inaugural Ball and waltzed with Julia Grant. (His modest little Babet, self-conscious about her poor command of English, always eschewed such functions.)
There were lunches and dinners at the White House, where hilarity ran high. After one of these Joseph wrote home to Babet that he had been seated next to “the most beautiful lady that I’ve ever seen, yourself excepted. It was a Mrs. Palmer from Chicago” (the famous Mrs. Potter Palmer, whose sister later married Grant’s son). At the table Mrs. Grant asked Joseph whether he had ever seen anything more beautiful. Joseph replied gallantly that he had not, but that he had a wife whom he found even more beautiful and whom he loved even more. This, Joseph told Babet, “made the President laugh heartily.” There was more laughter over such matters as black bread and pretzels. Julia Grant said she had never seen black bread. Joseph replied that black bread was a staple of German diet, but that there was something the Germans liked even more—pretzels, which made Germans thirsty for lager beer, which made them hungry for more pretzels. The table rocked with laughter. The President said that he had heard of a young banker in New York named Jacob Schiff, “a real comer.” Joseph said, “But he is not as smart as me.” At this, Mrs. Potter Palmer laughed so hard she choked on her cutlet and had to be pounded on the back by the President.
* Probably one of the Browns of Brown Brothers, later Brown Brothers, Harriman, Inc.
*Can this “unsalable” exchange have had anything to do with the “protested” exchange Mr. Hart was talking about? Probably not, because Hart did retract all his unkind remarks, and apologized.
*On a Congressman’s salary?
14
“THE D—D RAILROADS!”
In the years following the Civil War, the mergers, bankruptcies, organizations, and reorganizations of American railroads were creating an enormous field for stock and bond speculation. Railroads were being built competitively and haphazardly, which made them all the more interesting to speculators. By the late 1860’s railroad stocks and bonds were not only the great “wonder” securities of the age; with the exception of government issues, they had become the chief interest of Wall Street and comprised 85 percent of all shares traded. There was great enthusiasm for railroad shares in Europe, and the ability to sell railroads in the Frankfurt, London, Paris, and Amsterdam markets was making many a banker wealthy.
By 1869 Joseph and his brothers had a working capital of over six million dollars, and their firm became the first of the German Jewish banking community to enter the railroad-securities field. They entered it, however, with reservations which, in retrospect, were more sound than not, and with Joseph’s innate dread of land speculation, which, of course, was what railroad speculation was all about. A year before his banking firm was founded Joseph had turned down his brother James’s suggestion that they invest in railroads, saying, “I consider this a speculation entirely out of our line.… Certainly none of us know enough of Erie, Central, etc. to keep them for an investment. We ought not to buy them at all.… We can make enough money in a legitimate way without gambling or hazard.”* And yet, as railroads began to dominate the financial scene, Joseph quickly fell victim to railroad fever, an ailment that replaced gold fever. Railroad fever, in fact, visited Joseph Seligman with an almost fatal attack.
Not quite two years after his antirailroad advice to James, Joseph, already deeply involved in the “Erie, Central, etc.,” wrote excitedly to Isaac in London: “We have just now seen Mr. Drew and he requested you to sell his 5000 shares of Erie in London.… Mr. Drew is a large operator and if satisfied will give us frequent orders in future.”
Drew—the notorious “Uncle Daniel” Drew, an ex-cattle drover—was indeed a large operator, and was able to force the price of Erie stock up and down at will. Why did Drew want his shares sold in London and not New York? So New York wouldn’t find out about it for a while. Allied with Drew in his operations were tw
o other terrors of the age—“Jubilee Jim” Fisk, a former circus roustabout, and an ex-farm hand who became the leader of the threesome named Jay Gould. Joseph Seligman felt somewhat out of his league with these powerful roughnecks (which, perhaps, was why they employed him), but he did his best to keep up with them. At Drew’s bidding, Joseph wrote to an important customer in Cincinnati, urging him to buy Erie because “it is now 59, but we have reason to believe that old Drew is at work and we should not be surprised to see it up to 65 or 66 before two weeks.” The stock did reach that figure, then toppled again. In the great Erie “war” of 1868—when Drew, Fisk, and Gould sold millions of dollars’ worth of Erie stock to Cornelius Vanderbilt, and then drove the stock down, leaving Vanderbilt two million dollars poorer—the Erie Railroad became known as “The Scarlet Woman of Wall Street.” When Gould went to jail for this particular manipulation, the Seligmans, who had been acting as his brokers, loyally guaranteed his $20,000 bail bond and, with this action, more or less permanently committed themselves to Gould.
Just what brought the Seligmans and the Jay Gould group together to begin with is uncertain, but it was an alliance that has provided lasting controversy. Perhaps Gould—who himself admitted candidly that he was “the most hated man in America”—sought out the Seligman firm because he hoped their name would lend prestige, as a kind of ballast, to his own high-flying operations. (This, at least, is what the Seligmans have always said.) Or perhaps the Seligmans sought out Gould. Or, possibly, Gould simply had to settle for the young Seligman firm when older, more conservative gentile banking houses refused to act as his brokers. (One of these many years later told Frank A. Vanderlip, president of the National City Bank, “I made money because I stuck to one rule: I never dealt in Jay Gould bonds.”)
The Jews in America Trilogy Page 13
