It was Philip Lehman’s generation that first married into the elite of New York’s German Jewry. He and his cousins married, variously, Strauses, Altschuls, Lewisohns, Lauers, Limburgs, Fatmans, Goodharts, and—in the case of his cousin Sigmund—first-cousin Lehmans, thereby aligning the Lehmans with other fortunes and banking houses. The marriage of Arthur Lehman to Adolph Lewisohn’s daughter was of prime importance, for it brought the Lewisohn mining enterprises under the Lehman wing.
It was at Philip Lehman’s insistence that the firm first began to venture into underwriting, the step that would lead Lehman Brothers into investment banking. He had often discussed it with his best friend, Henry Goldman.
Henry’s father, Marcus Goldman, had died a few years before Philip’s, and the proceeds of the business old Marcus had carried in the lining of his hat had left his heirs more than comfortably off. Henry, too, was ambitious and eager to move into something beyond commercial paper sales—in which Goldman, Sachs had become the leading dealers in New York. Business mergers were not so fashionable in those days as they have become, and so the two friends did not consider this. But they did toy with the idea of forming an underwriting firm of their own, Goldman & Lehman. But the pressures, both practical and sentimental, not to abandon their respective family firms were strong, and so at last they decided to collaborate in underwriting as a side line. Each house would continue with its specialty—Lehman with commodities, Goldman, Sachs with commercial paper—and the two friends would go in as partners in underwriting ventures, splitting the profits fifty-fifty.
Goldman, Sachs, like Lehman Brothers, was a firm tied together with tight matrimonial knots. Two of Henry Goldman’s sisters were married to two Sachs brothers. In 1906 Henry Goldman’s brother-in-law’s sister, Emelia, married a man named Samuel Hammerslough.* Hammerslough’s older sister, Augusta, was married to a man named Samuel Rosenwald, and their son, Julius Rosenwald, who nobody thought would amount to anything, had gone to Chicago at a tender age and bought up a mail-order house called Sears, Roebuck & Company. The relationship may have been tenuous, but when Julius Rosenwald wanted money he approached his “cousin,” Henry Goldman. Julius wanted to expand Sears, Roebuck, and he asked Goldman for a loan of five million dollars.
Goldman introduced Rosenwald to Philip Lehman, and the two bankers offered Rosenwald a better suggestion. Why not make a public offering of Sears stock—and make ten million dollars? It was a fairly daring notion, because there had never before been a mail-order security on the market. There was no way of telling how the stock-buying public would react to Sears. Rosenwald agreed, and the foundation of a gigantic mail-order house was laid. Few Sears, Roebuck shareholders today regret Philip Lehman’s and Henry Goldman’s idea.
Lehman and Goldman went on to cooperate in other issues, nearly all of them for Goldman, Sachs clients. They became specialists in helping privately owned companies “go public,” an operation that has always been heavy with risk. In 1910 they underwrote an issue for the Underwood Corporation; in 1911 they introduced Studebaker. A year later the friends put the first shares of a variety chain store on the market; it was the F. W. Woolworth Company. The following year they presented the Continental Can Company. In all, the two men collaborated in fourteen major securities issues, and were considered Wall Street’s hottest young underwriting team, when the guns of August were fired in 1914.
Henry Goldman’s brother-in-law, Sam Sachs, had returned from a trip to England just after the war’s outbreak. While there, he had assured Goldman, Sachs’s correspondent firm in London, Kleinwort, that Goldman, Sachs stood firmly behind Great Britain. In New York, however, to his dismay, he learned that Henry Goldman had already made several pro-German speeches.
When the Anglo-French loan had been turned down by Kuhn, Loeb, it had gone to J. P. Morgan, and most leading Wall Street firms were asking Morgan for participations. However, Henry Goldman, one of Goldman, Sachs’s most important partners, had announced that he wanted nothing to do with the loan, and for outspokenly pro-German reasons. There was, furthermore, a rule at Goldman, Sachs that the firm could sponsor no issue unless all partners agreed unanimously. An intense, high-strung, didactic man, when Henry’s partners and sisters begged him to modify, or at least conceal, his feelings, he refused and his public utterances became more frequent and startling. The Prussianism that Otto Kahn deplored, Henry Goldman admired. He quoted Nietzsche to anyone who would listen. Sam and Harry Sachs, meanwhile, went directly to Morgan as Otto Kahn and Morti Schiff had done, to take personal subscriptions in the loan in an attempt to save the day. But Goldman’s damage had been done, and Goldman, Sachs was another German firm to fall under a heavy pall.
Even the United States’ entry into the war in 1917 did nothing to curb Henry Goldman’s tongue. A situation which the family has called “painful”—and which must have been a great deal more than that—had begun to exist on both a business and domestic level. While Henry Goldman ranted, his nephew Howard Sachs was on active duty with the 26th Division; Sam Sachs’s son Paul, another nephew, was with the Red Cross in France; other members of the joint families were selling Liberty Bonds, winding bandages, and appearing at rallies to “bury the Kaiser.”
The Kleinwort bank in London cabled New York to say that Goldman, Sachs was in danger of being blacklisted in England. At that point Goldman himself realized what was happening and came to his partners to say that he guessed he was “out of step.” They heartily agreed, and his resignation was accepted.
For several months, though no longer a partner, Goldman kept his office at Goldman, Sachs. But as the wartime atmosphere grew more heated, this became an impossible arrangement. He departed to a midtown office of his own. With Henry Goldman went his share of the firm’s funds, which was sizable. This fact did the firm even more damage than his pro-Germanism had done, and since Goldman, Sachs was not so fortunate as to have a crusading patriot like Otto Kahn working for it, the firm fell upon lean times from which it did not emerge until after the war. This did little to endear Henry Goldman to the rest of his family. Henry Goldman and Samuel Sachs never spoke again. Neither did Henry and his sister Louise, who was Sam Sachs’s wife. The hostilities continued in the next generation, and to this day there are hardly any Goldmans who are on speaking terms with any Sachses.
In the early 1930’s Henry Goldman traveled to his beloved Germany with the idea of settling there permanently. With Hitler rising to power, this was certainly a mistake. Goldman was seized and searched and was subjected to “many other humiliations,” according to the family. He returned to New York, a defeated and disillusioned man, and died there, a victim of his own dream of Nietzschean power.
Philip Lehman, meanwhile, was as surprised and distressed about his old friend’s feelings as Goldman’s partners were. After an initial meeting on the subject, the two men parted angrily. When Goldman left Goldman, Sachs, the break between the friends was final. Lehman Brothers and Goldman, Sachs continued to try to collaborate on underwriting issues, but the relationship between the two firms was not what it had been. There were frequent arguments. Why, the Lehmans demanded, did Goldman, Sachs take all the credit, with their name showily at the top of the ads, for ventures for which Lehmans had supplied the money? Goldman, Sachs, in turn, asked why the Lehmans expected half the profits on deals originated by Goldman, Sachs. The arguments frequently disintegrated into angry name-calling. “They were both too ambitious,” one banker has said, “to stay married.” But there was more to it than that.
Henry Goldman’s replacement at Goldman, Sachs was a suave and polished Southerner named Waddill Catchings, whose background was in the iron and steel industry. Presently Catchings was attracting national attention with a series of books, written in collaboration with William T. Foster, which expanded grandly, and with a certain literary style, on the increasingly rosy future of America’s postwar economy. The Lehmans, however, distrusted the flamboyant Catchings. Philip Lehman felt Catchings “lacked balance,” was “
too ambitious and aggressive” and “too optimistic.” (Events a decade later, in 1929, proved the Lehmans right and caught Catchings unaware.) At the same time, a Brooklyn youngster just out of P.S. 13 named Sidney Weinberg had been looking across the harbor to the towering financial district of Manhattan and decided that was where the money was. He had gone, by his own account, “to the top of the tallest building” in the district, which was then 43 Exchange Place, and started working his way down, asking for a job at each floor. He made it all the way to the second floor before he found Goldman, Sachs and was hired as an office boy. Catchings had taken Weinberg under his wing, and the Lehmans thought Weinberg had promise.* But Weinberg was impatient with the Lehman connection and wanted to break it. The relationship between the two firms grew steadily more bitter until, at last, a formal memorandum of separation was drafted.
The memorandum listed sixty different corporations that the Lehmans and Goldman, Sachs had jointly underwritten, and these firms were then divided according to which firm had “prime interest.” Goldman, Sachs got forty-one companies, and the Lehmans were granted the remaining nineteen. Sears, needless to say, went to Goldman, Sachs. Each banking house agreed not to invade the territory of the other.
Hard feelings continued to exist between the two firms until as late as 1956, when Sears, Roebuck decided to set up a sales-acceptance subsidiary. At that point Sidney Weinberg called on Robert Lehman, Philip Lehman’s son, and asked Lehman Brothers to resume its historic place in Sears financing.
In the long run the split benefited both firms, but Lehman Brothers most of all. It forced Philip Lehman to go into investment banking on his own, without depending on the crutch of Goldman, Sachs. As one investment banker has said, “I think it’s the best thing that ever happened to Lehman because they took off their coats, rolled up their sleeves, and went out to get some business. Lehman always had a lot of money, but that’s different from being aggressive to get business. After the dispute they became real go-getters.”
What the Lehmans got, among other things, was the solitary elegance of Number One William Street—the structure, first built by the Seligmans, which makes Lehman Brothers the only investment banking house in Wall Street to occupy a building of its own. (And quite a building it is, with its own eighth-floor dining room and its own gymnasium.) The Lehmans have continued Philip’s policy—backing issues, which, at the outset at least, seemed too “undignified” for other bankers to handle. Among these were early stocks in airlines, electronics, motion picture and liquor companies, all of which have helped the Lehmans become what Fortune calls “one of the biggest profit makers—many believe the biggest—in the business.” Today Lehman partners sit on boards of dozens of U.S. corporations, guide several billion dollars’ worth of investment funds, including the assets of the Lehman Corporation—itself a half-billion-dollar affair.
The Lehmans like to describe themselves as “merchants of money,” intermediaries between men who want to produce goods and men looking for something to do with surplus funds. They can also—thanks to continuing family control—call themselves “the oldest partnership” among U.S. investment houses. But they are still interested in what Philip Lehman first described as “trying to buy something for a dollar, and selling it for two.”
Socially, from Philip Lehman’s generation on, the Lehmans have also done well, though they have been called, as a family, “dull,” and “cut-and-dried,” and “bankerish.” Another friend says, “The women in the Lehman family have all been charming, but a lot of the Lehman men are rough—real horse-traders, like Philip.” Certainly the Lehmans, as a family and as a banking firm, have, in the long run, been vastly aided by Herbert Lehman. Though certain members of the family, particularly from the Philip Lehman branch, remain to this day scandalized by the political career and affiliation of Herbert, and by his retirement from Lehman Brothers, which some considered a breach of family trust, most admit that he lifted the family name to a position of national importance, and that his reputation for integrity and efficiency, first as Governor, then as Senator, cannot but have helped the bank.
Though he was a creditable Governor of New York, it was as a United States Senator, in his seventies, that he had his finest hour and displayed the spunk and grit for which the family is known. The Senator from Wisconsin, Joseph R. McCarthy, brandishing one of his usually bogus sheets of paper, stood up in 1950 to claim it was a photo-stat of a letter by Owen Lattimore to the Office of War Information urging that the OWI hire men sympathetic to the cause of Communist China. Senator Charles Tobey of New Hampshire asked McCarthy why he did not offer the letter for publication in the Congressional Record. He could not, McCarthy explained, because the letter was marked “secret.” Then why, Tobey asked, was McCarthy revealing its contents on the Senate floor? McCarthy’s evasive reply to this was that the letter was accompanied by documents attesting to “unusual personal habits” of persons high in government.
This was too much for Herbert Lehman. He stood up to ask if he could be allowed to read the letter.
“Does the Senator care to step over?” McCarthy shouted, and, with that, Herbert Lehman strode across the Senate aisle and said to McCarthy, “May I see the letter?” He held out his hand for it.
McCarthy, shaken, answered, “The Senator may step to my desk and read the letter.”
“I am here to read the letter,” said Lehman. “Will the Senator from Wisconsin let me see the letter?”
Clutching his sheaf of papers to his bosom, his voice rising shrilly, McCarthy whined, “Does the Senator wish to come close enough to read it?”
Lehman stared at him contemptuously for a dramatic moment, still holding out his hand. Then he turned on his heel and walked back to his seat.
The letter, when eventually published, turned out to be harmless, as Lehman had suspected. And in the meantime his brothers and partners back home in South William Street must have realized that Herbert, “dirty Democrat” though he might be, “wild-eyed friends” like Roosevelt, Al Smith, and Jim Farley though he might have, was nonetheless showering even further glory upon the House of Lehman.
* When young Herbert Lehman became a partner in 1908, he was startled to see how many “speculative” and “cat-and-dog stocks his father, Mayer, and his Uncle Emanuel had bought for the firm. There was a large block of stock in the Electric Boat Company—soon to be filling the Atlantic with submarines—plus 1,000 shares of something called the Bethlehem Steel Company.
†While the Mayer branch, which produced Herbert, has become known for public service.
* A former peddler who had migrated to Springfield, Illinois, and gone into the men’s clothing business. Hammerslough always liked to recall the extra-long trousers he cut for one of his best customers, Abraham Lincoln.
* He is now the senior partner at Goldman, Sachs, and one of the half-dozen most powerful men in Wall Street.
43
“PFLICHT UND ARBEIT”
In a way, there was almost a logical rightness in the moment Jacob Schiff chose to die. Though he was a more sophisticated financier than Joseph Seligman, he was nonetheless a financier from the nineteenth century. In a sense he was a bridge between the Seligmans and modern banking. He would not have fit, furthermore, into the new decade that was under way. In his old-fashioned white ascot ties and his frock coats, he would not have belonged in the 1920’s.
The summer of 1920 passed as all the others had. There was the same rigorous schedule. After winter in the city, June and July were spent at the house on Rumson Road in Jersey. August was passed at Bar Harbor. While there, having failed with his children, Jacob tried to instill his love of hiking and mountain climbing in his grandchildren; they disliked it even more than Morti and Frieda had, but, since he expected them to, they went along with him. Always a believer in exercise, he had taken up cycling. On Sundays in Bar Harbor, the family cycled—the younger children speeding on ahead, then stopping to wait until their elderly grandparent, pedaling slowly, made
his way up to them. To his grandchildren, he was “Grandpa”; to his servants, “the old gentleman.” There were only a few changes in his ways. One was his sudden habit of reaching down to pick up a baby grandchild and cuddle it against his whiskered chin, letting it sniff the fresh rose in his buttonhole. Every morning at Rumson Road he would walk in the garden, saying his prayers. Then he would pick a red rose for each lady in the house. These were little gestures of pleasure and love which he had never permitted himself before.
In September the family came back to Rumson Road. There was only one difference. Though he would not admit it, and would let no one speak of it, Jacob Schiff, now seventy-three, was unwell. On the Day of Atonement, though Therese and his servants begged him to relax his rule, he insisted on fasting, saying, finally, that if he was going to die he would prefer to do so observing the strictures of his faith. He was reminded that the Scriptures do not require an ill person to fast; nonetheless, he replied, he wished to. The next day, very much weaker, he announced one of his rare changes in plan: he wished to return to New York right away, instead of waiting until the end of the month. It was September 23. Wordlessly, the family packed to move back to the city.
No. 965 Fifth Avenue was a considerably more tasteful house than the old “house full of horrors” at 932. Schiff’s friend Sir Ernest Cassel had become his artistic mentor, and the lighted drawing-room cabinets displayed the beautiful collection of majolica and one of antique porcelain which the London financier himself had given to the Schiffs. Sir Ernest had helped Schiff to assemble a good collection of paintings of the nineteenth-century French School—“Stick to a school, stick to a school,” Sir Ernest had reminded him—and a splendid collection of Oriental jades and crystals. The only relics of the old house were the portraits of Jacob and Therese Schiff, and the bronze bas-relief by Augustus Saint-Gaudens of the two Schiff children, the one for which Frieda and Morti had been made to pose through an entire Christmas holiday.* Sir Ernest had not effected these changes in the Schiffs’ style easily. Repeatedly, Jacob had complained about “extravagance” and “too much luxury,” and had refused to spend money on this or that article Sir Ernest had wanted him to buy.
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