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