the world of private banking

THE ANGLO-AmERIcAN HOUSES IN tHE NINEtEENtH CENtURy 123
Joseph declined, and his Jewish heritage and formerly immigrant status were
allegedly crucial factors in reaching that decision. The Seligmans became the
financial agents of the US government for the transmission of funds overseas. Where
the Seligmans differed markedly from the Rothschilds was in their involvement
in sponsoring securities issues of many of the largest American railroads. With
branch offices throughout Western Europe, they were in a favourable position to
identify potential investors for millions of dollars’ worth of new securities. Like
the Morgans, the Seligmans were active participants in underwriting public debt
issues and a wide range of corporate securities.
Kuhn, Loeb & Co.
The origins of Kuhn, Loeb & Co. echo the backgrounds of the Rothschilds and
Seligmans. Abraham Kuhn and Solomon Loeb were born to German-Jewish
parents. They began their business careers as small-town merchants in rural
Indiana, then moved to Cincinnati, and finally settled in New York City in 1867. 15
Their firm remained a minor player in the US investment banking field until Jacob
Schiff, who married Loeb’s daughter Theresa, became directing partner in the
1880s. In time, Schiff rose to become widely recognized as the nation’s second
leading investment banker, ranking behind only the influential J.P. Morgan. 16
Schiff was born in Frankfurt in 1847 into a fairly prosperous German-Jewish
household. Well-educated in European schools, he migrated to New York City in
1865 and subsequently joined Kuhn Loeb in 1873. Under Schiff’s management,
the partnership relied on its close connections with a network of correspondents in
London and on the continent to identify investors for American railroads searching
for new capital. Kuhn Loeb’s outstanding performance demonstrates that a
transatlantic ownership pattern was not essential for long-term profitability; but
its success does suggest quite strongly that at least one important office supervised
by a partner with tremendous authority had to be located in the financial centre of
the nation from which the demand for investment capital arose – in this case New
York City. The Barings and Rothschilds failed to take heed of this organizational
imperative; they concentrated on the supply side of the capital equation, not the
demand side, and lost their position of leadership in the Anglo-American market.
Kuhn Loeb differed from its competitors in other ways as well. Unlike the
Barings, Rothschilds, Morgans, and Seligmans, this firm never depended in its
formative years on business originating in the public sector. Instead, Kuhn Loeb
tied its fate to the private market – the booming US railroads. Again, an expanding
financial market had encouraged further specialization. Kuhn Loeb is the only
15
Carosso, Investment Banking in America, pp. 19–20.
16
C. Adler, Jacob Schiff: His Life and Letters (Garden City, NY, 1928); and F. Redlich,
The Molding of American Banking: Men and Ideas (New York, 1968).