the world of private banking

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THE WORLD OF PRIVAtE BANKING
functioning central bank. When major financial breakdowns occurred, J.P. Morgan
was essentially drafted by his peers in the private sector, with the acquiescence of
government officials, to take the unpopular steps necessary to restore equilibrium.
Finally, after years of acrimonious debate, Congress created the Federal Reserve
System to deal with these recurring problems in 1913. But from 1890 to 1910
or thereabouts, J.P. Morgan reluctantly played the pivotal role of the nation’s de
facto central banker, since the federal government had long ago abrogated its
responsibilities. His decisive role in the Panic of 1907 was especially notable. In
sum, Morgan performed both private and public functions, and amassed a fortune
in the process. He left an estate of $68 million plus artwork valued at $50 million
in 1913. Whether Morgan’s wealth exceeded that of the Rothschilds in the early
twentieth century is unknown to me.
The Seligmans
Within the Anglo-American merchant banking community, the Seligman family
enterprise came the closest in most respects to emulating the Rothschilds’
organizational strategies. 14 At the height of its power and influence, the Seligman
firm had partners managing key branch offices in New York, London, Paris, and
Frankfurt. The Seligman family’s success in the United States is a classic ‘ragsto-riches’
story. Joseph Seligman emigrated from Germany to the United States in
1837. From a base camp in eastern Pennsylvania, he became a country peddler; he
used his modest savings to help bring three brothers across the ocean. By the early
1840s the Seligmans had broadened their lucrative peddling routes to include the
southern slave States.
In the early 1850s two Seligman brothers, Jesse and Henry, made the
acquaintance of a young military officer who would later become one of the firm’s
important benefactors. This friend was Lieutenant Ulysses S. Grant, a future US
president. Even before Grant’s war-ending victories on the battlefield in 1865,
the Seligmans had expanded their business from merchandizing to include
complementary financial services. They were loan contractors for the early war
bond issues of the federal government. In 1864, the brothers opened branch offices
in London and Frankfurt. They explicitly used the Rothschilds’ organizational
strategies as an instructive model.
In the late 1860s and 1870s, the Seligmans emerged as major competitors in a
wide range of typical merchant-banking fields. They contested the Browns in the
foreign exchange markets. Like the Rothschilds, the Seligmans also had influential
friends in high places. After his election in 1868, President Grant offered Joseph
Seligman, the family patriarch, the cabinet position of Secretary of the Treasury.
14
R. Muir and C. White, Over the Long Haul:the Story of J. & W. Seligman & Company
(New York: privately printed, 1964). The firm’s surviving nineteenth-century records are
located in a special collection at the main library of the University of Oklahoma.