The Jews in America Trilogy (16 page)

To Joseph, everything was a question of learning, as he himself had learned, and so, patiently, he began trying to teach Abraham banking by mail. “You are, of course, green yet in the banking business, as we were a few years ago,” Joseph wrote from New York, “and it is only through extraordinary caution, trusting no one, except we knew from our knowledge that he was safe
beyond all doubt
, that we got along without making heavy losses.” But Abraham and Leopold apparently trusted everybody, and Joseph kept having to spell things out for them: “The main thing in a banker is safety, with ability to reach his money at a moment's call.… The subject of taking deposits is rather a risky one, inasmuch as depositors can (and will, in times of panics) call for all their deposits, which is enough to break any but the very strongest banks. You will at first not take deposits on call from anyone.” He outlined his creed, which was to stay, at all times, as financially liquid as possible: “Never lend money without a security which you can sell at any time.
Never endorse or go security for a living man
.” (By this, of course, Joseph did not mean that his brothers should endorse dead men; he meant that they should back
businesses
, not people, since human beings are seldom negotiable.) On and on Joseph went, explaining the rudiments of banking, trying to put the obvious in the clearest possible terms. But the two brothers never seemed quite to grasp what Joseph was talking about. They were not helped, either, by being married to the socially ambitious Levi sisters, who conspired to keep their husbands' heads turned toward affairs other than business.

When Abraham Seligman should have been buying, he sold. When he should have sold, he bought. Finally a despairing Joseph wrote to him:

I am afraid, dear Abe, you are not smart enough for the California bankers and brokers, for whenever gold goes up you appear to get stuck with currency, and whenever it goes down you “cannot get much.” You must be wide awake and if you don't get correct quotations daily from here we will telegraph you daily or whenever a change directs.

But apparently even the daily telegrams did not help. In the summer of 1867 Joseph decided to trim the San Francisco operation, and wrote, still hoping somehow to make at least Leopold a banker: “After collecting up, we may probably get Brother Leopold to take hold of some other branch of our banking business,” and, a few days later, added gloomily:

Brother Abe will join Brother Leopold in endeavoring to collect up all that is due us, getting everything which cannot be collected in good shape, but expect you to grant no unnecessary indulgence, so that we do not lose much interest, as we already lose enough on selling the stock … $500,000 worth of goods is alone a loss of $100,000. Therefore, I trust there will be no interest lost on debts and everything collected up close.

Joseph then shipped Abraham to Frankfurt to join Henry and Max, and Leopold to London to join Isaac. It was hardly the arrangement Joseph wanted. He now had two ineffectual operatives, Abraham and Max, in his Frankfurt office. Who to handle Seligman affairs in the American West would be a continuing problem. And the whole Abraham-Leopold adventure in San Francisco had been far more expensive than mollifying Max and “our dear Babette.” Furthermore, the “our dear Babette” syndrome—Joseph's feeling that it was his duty to provide places for relatives in his business no matter how meager their talents were—would go on plaguing him for years to come. Bankers, it seems, are born, not made.

13

“GETTING OUR FEET WET”

Men were getting rich, but the American Government's financial state remained precarious during the early Reconstruction period. In 1866 there was less than a hundred million dollars in the U.S. Treasury, yet the public debt was edging rapidly toward the three-thousand-million mark. Hugh McCulloch, Secretary of the Treasury under both Lincoln and Johnson, was an experienced financier (he had served as Comptroller of Currency during the war) who understood bankers, and bankers understood him. His postwar plans for the economy included payment of short-term government obligations by issuing and selling long-term bonds, payable in ten to forty years. The Seligmans, for their bond-selling efforts during the war, were offered a large share of McCulloch's new bonds to sell. “Patriotism directs that we accept this assignment,” Joseph wrote his brothers. There was also a commission to be earned from selling bonds, though it was a small one.

Joseph took the assignment, and the bonds sold well, but in the meantime he looked around for more exciting ways to make money. One piece of business floating around New York in 1867 was $450,000 worth of stock in the New York Mutual Gas Light Company, an early ancestor of the Consolidated Edison Company. Nobody thought much of this stock, which sold for pennies a share. Shares were traded for
drinks at local saloons. But two men thought the stock had promise. One was Cornelius Vanderbilt, Sr. The other was Joseph Seligman. Joseph began buying up New York Mutual shares from bartenders as he made teetotaling rounds about the city. Presently the company was laying twenty-four-inch gas mains under the city streets. The value of the stock climbed to five million dollars and was selling for $100 a share. The Seligmans and “Old Vanderbilt,” as Joseph affectionately called him, made a tidy million dollars each.

It wasn't any special “shrewdness” that made Joseph invest in issues like this. It was more like beginner's luck. Indeed, it is one of the phenomena of the Stock Market that some men seem naturally to be lucky in it while others simply are not. Joseph's heirs and assigns today wince at mention of the far more lucrative opportunities he turned down. Just prior to the New York Mutual Gas bonanza, Joseph was advised that all the land north of Sixtieth Street and west of Broadway—up to 121st Street, where Grant's Tomb now stands, and including most of what is now West End Avenue and Riverside Drive—was for sale. The price for this tract was $450,000—more than three square miles of Manhattan for a fraction of what a single city block would cost now. It was perhaps the best bargain since Peter Minuit's original purchase of the island from the Indians. Joseph had the money, but said no. “It is a bad investment.” Had he felt otherwise, the Seligmans today would easily be the richest family in the world. Again he was showing his distaste for tying up money in anything that could not be sold quickly and his distrust of real estate. (In closing his San Francisco store, he had simply given the land to the city rather than go to the trouble of trying to sell it.)

From the beginning, the German Jewish bankers backed the riskier issues, but this was not because they preferred them to issues with less risk. Each issue that came into their hands had a little extra risk built in. The older-established, more conservative New England-bred bankers had Old School ties with the older-established, more conservative, less risky companies. They shied away from newer and more speculative ventures and, for reasons of prestige, avoided all cheap stocks. “Let the Jews have that one” was the saying on the Street. This was not anti-Semitism exactly. “Old Vanderbilt,” though he wasn't Jewish, was equally a parvenu in the 1860's and was in the same position as the Jews. It was simply that the older houses could pick and choose, and the newer bankers pawed through the leftovers like ladies at a bargain sale. “Do not worry, as we are still getting our feet
wet,” Joseph Seligman reassured his brothers when things went wrong—as happened frequently.

The New Orleans operation, under brother-in-law Max Hellman, was doing particularly well, thanks to the resumption of cotton trade. “The financing of imports in a period of reconstruction, the discounting of cotton bills—what an opportunity for addition to the Seligman fortune!” Joseph had written in 1865. By 1867 the prediction was coming true. Max Hellman was a stern-faced, square-jawed young man with a bristling mustache and heavy eyebrows. He had been born in Munich. “Max,” Joseph wrote of Henriette Seligman's brother, “is a selfish man in some ways”—but selfishness is not always a negative quality in a trader. On the plus side, Joseph said, “Max has the kind of manners that will be liked in Southern Society.” This seemed to be true also. Max did such a brisk business in buying and discounting cotton exchange bills that Joseph wrote him proudly: “We would say that, with the exception of Brown
*
and you,
we have reason to know
that every other banker
has lost money
this season in purchasing bills in New Orleans.”

But Max made mistakes. Gold bullion was still making its way from California to the Southern port, then to New York, and then to Europe, where it was again resold. And, in February, 1868, Joseph wrote to Max to say: “We received yesterday some 23 large bars, which you state to be gold and which the U.S. Assay Office returns to us as being
pure brass!
Had they been gold they would have been worth about ¼ million dollars to judge by the weight. We are glad you made no advance on them, but we had to pay freight to New York and also $5.00 to the U.S. Assay Office for their trouble.” Joseph added: “Please be more careful in the future.”

In the fall of that year, Joseph decided that Max needed a change of air. He transferred Max to Paris to work with William, and specifically asked Max to keep an eye on William, who was being less than careful in the rendering of his accounts. The Jewish practice of making up a marriage purse for each daughter in the family when she became engaged had been instituted by Joseph, who imposed a levy on each brother based on the size of his most-recent profit statement. Joseph's oldest daughter, Helene, had become engaged that year in New York, and William had submitted a particularly impressive statement from Paris. Joseph wrote him that his share-of-purse would therefore be considerable. William, red-faced, was forced to reply that he had lied
about his profits on that statement “to save you, dear Joe, from worry in New York.” Of course William knew immediately why Joseph was sending Max to Paris, and was furious.

To replace Max in New Orleans, Joseph picked Max's younger brother, Theodore Hellman (who later married Joseph's daughter Frances, thereby becoming a Seligman brother-in-law and son-in-law, and weaving the Seligman-Hellman families into an even tighter web; but when he went to New Orleans he was still a bachelor of twenty-four). Theodore was tall and slender and handsome, with curly dark sideburns and a Grecian profile. If Southern society liked Max's manners, it liked Theodore's even more. His good looks helped outweigh the fact that he was, to all intents and purposes, just another Northern carpetbagger (he rather resembled Clark Gable as Rhett Butler), and he was soon a fixture in the New Orleans party circuit.

Theodore was a believer in miracles, and was responsible for some Seligman miracles—even though, as happens with miracle workers, his miracles had a way of backfiring on him. He was superstitious. A black cat crossing his path in the morning would keep him away from the Cotton Exchange all day, and he had a phobia about the number 13. He would not sit down at a table where there were thirteen for dinner, and would not buy notes in which the number 13 appeared. He had a mystical belief in the number 24—perhaps because it was in his twenty-fourth year that he was first given a position of responsibility with the Seligmans. But, in buying only bills which contained the number 24 and refusing those that contained the number 13, he forgot that the point of it all was to buy bills in the South, at a discount, that could be sold in the North or in England at a profit. Particularly critical of Theodore's methods was quick-tempered Isaac Seligman, who had the task of trying to sell Theodore's bills in London. Isaac wrote to Joseph: “I daresay the difficulty [in New Orleans] to obtain proper bills is very great, but the difficulty here to get rid of them … is still greater.… If Theodore cannot send us only
A-One
bills, you must find some other occupation for him!” (Theodore's behavior almost drove Isaac to a nervous breakdown, and Isaac wrote that he had “to give up walking home of an evening along the Thames Embankment for fear of taking a sudden plunge into the river, thus ending my career.”)

One night in a dream, Theodore saw two numbers recur repeatedly. Waking, he wrote them down. It was the time of the great California lottery, and, assuming that these numbers represented a message from the Beyond, or at least from the West Coast, he went first thing in the
morning to the lottery agency and bought the two numbers. Both were in line for the largest prizes, and cost him twenty dollars apiece. Later in the day a gentleman came to see Theodore on business and, told of the dream, persuaded Theodore to sell him one of the numbers—for twenty dollars. That number won a $15,000 prize. But the number Theodore kept for himself, 154077 (its digits added up to 24), won the largest prize of all—$100,000. Theodore immediately sent this sum North for the Seligmans to invest. The Seligmans were beginning to dip their toes into new railroad ventures, and Theodore's money was used to buy bonds in railroads that rather quickly went into receivership. Theodore's bonds were sold for a mere $8,000. As far as is known, the Seligmans never apologized to poor Theodore for losing his little windfall so rapidly, and instead went right on scolding him for his “lack of sound business methods.”

Actually, Northern money was so much in demand in the South that it was hard for a firm such as Seligman, Hellman & Company to lose money during the Reconstruction era. But ultimately, in 1881, Theodore, whose real problem was perhaps that he was too eager to be liked and too quick to say yes, did involve the firm in a loss when a borrower he trusted failed to repay $20,000. He had broken one of Joseph's cardinal rules (“Never go security for a living man”). It was a small loss, but 1881 had to be Theodore's unlucky year. It was his thirteenth in New Orleans.

Joseph, however, did not always follow his own rules. In 1866 a certain S. H. Bohm of Helena operated a business that involved the appraisal, buying, and shipping of gold out of the Montana Territory. Abraham Seligman had heard of Bohm, and wrote Joseph urging him to enter into a partnership with the man. Joseph indignantly wrote back: “No profit would induce me to lend my name to anyone where I, or a brother of mine, were not present to watch!” But anyone dealing in gold interested Joseph, and Abraham's suggestion lurked in his mind. Soon he had contacted Bohm, and was writing to him cozily: “We would in order to facilitate your business and to give your house an A-1 reputation, go in as special partners with a certain amount of capital.” In New York, Joseph began referring to the Bohm-Seligman enterprise as “our Montana house.”