The Jews in America Trilogy (19 page)

Joseph was demonstrating a curious weakness that would continue to plague him in all his railroad dealings: he had a poor sense of geography. He never seemed to know quite where he was. (This was literally true; his wife used to complain that whenever he came out of a theater or restaurant, he invariably started walking the wrong way.) He seems only dimly to have grasped the facts of such topographical features as the Rockies and the Colorado. Also, an even more serious defect, he had very little interest in the management, operation, or even in the reason for railroads. He didn't care how a line was run, or why, or even where, as long as it had iron wheels. He was only interested in its financial side. And so, when he financed railroads, he was really financing a business he did not understand.

Still, he went into the Atlantic & Pacific for several millions of dollars and took on its bonds to sell, which did even more poorly than the South Pacific's. As he had done with the SP, he joined the board of directors of the Atlantic & Pacific. A glance at the map, meanwhile, would have revealed to Joseph that, in addition to the two lines' individual problems, for a considerable distance across the state of Missouri they ran parallel to each other and only a few miles apart. Joseph's two struggling lines were competitors.

Joseph had also become interested in the Union Pacific Railway Company, Southern Branch. This line, which presently changed its name to the jawbreaking “Missouri, Kansas & Texas Railway Company”—called the K & T, or the “Katy”—was to be built on a north-south line from Fort Riley, Kansas, to New Orleans. Once more, a glance at the map would have revealed that the tracks of the Katy, moving southward, would at some point intersect—and collide—with the tracks of the Atlantic & Pacific, moving westward. And it was not so simple as building a bridge, or constructing a tunnel, at the meeting point, since both lines appeared to have identical title to the disputed land. In other words, whichever line got there first could effectively stop the other. On the board of the Katy, and laboring to sell her bonds, were such Wall Street figures as Levi P. Morton (of Morton, Bliss &
Company), George C. Clark (of Clark, Dodge), August Belmont (of August Belmont)—and Joseph Seligman.

In 1870, while the South Pacific and the Atlantic & Pacific raced westward side by side, and the Katy raced southward to beat the Atlantic & Pacific, someone asked Seligman, “Which line are you for, Joe?” “I'm for railroads!” Joseph replied, no doubt with a trace of hysteria in his voice.

He also had other railroad commitments. He was involved with the Missouri Pacific Railroad, one of whose projects was to build a small branch line in St. Louis County from Kirkwood to Carondelet, Missouri. In the area, President Grant had a ramshackle and unproductive farm, and Joseph wrote the line's president, Andrew Pierce, saying: “When the Mo. Pacific R.R. builds the Carondelet Branch, I would advise by all means to take the route through General Grant's farm.” “Why?” Pierce wanted to know. “Because I told Grant that's the way it would go,” Joseph replied. Since Joseph was financing it, that was the way it went. Railroad fever seems to have come close to affecting Joseph's reason. While directing railroads through his friends' farms, he was able to complain, in the next breath, that railroad routes were being laid out “against all dictates of logic and sense.”

Joseph's other railroads were nearing the point of battle, and in 1871 actual warfare broke out. Construction crews of the Katy and the Atlantic & Pacific met at the town site of Vinita (now in the state of Oklahoma), and went at each other with clubs, picks, crowbars, and heavy wooden railroad ties. It was a bloody encounter, and quite a number of men on both sides were killed before the Katy was declared the victor and Joseph decided that some of his railroad directorships “seem to represent a conflict of interests.” To solve this, he resigned from the board of the Katy, remaining on the board of the other two conflicting lines. But he held on to his Katy stock anyway, just in case.

A year later Joseph found himself in a despondent mood about railroads and wrote to his brother William in Paris: “Now as to our various investments in R.R. bonds which have at present no market value I fully agree with you that we have too many for comfort.” The letter continued on a note of high resolve: “I have concluded not to go another Dollar on any R.R. or State or City bond … and nothing will induce me hereafter [to put] another Dollar in any new enterprise until I have the moral assurance that the bond is as good as sold in Europe.” And yet, halfway through this same letter, Joseph began to waver and to defend his activities in railroads, reminding William,
“We have made a fortune these past 6 years & made it principally out of new R. Roads.”

But Joseph began privately advising his clients to stay out of railroads. “We wish to give you our experience,” he wrote to one of them. “New roads want no end of money … when you are in once for $25,000 they will draw you in for $100,000 and, subsequently, for half a million … it will take you many years to get your money back—and possibly never. This is our friendly caution.”

It was good advice, but Joseph, addicted to the iron horse, was incapable of following it. In the years to come, his investments escalated from three railroads to over a hundred. At times he himself seemed confused by his activities. At one point he helped Jay Gould buy a controlling interest in the Missouri Pacific. A year later Joseph bought back a lot of the bonds he had sold to Gould. When Joseph helped Commodore Vanderbilt dispose, quietly in London—in the same kind of over-the-transom deal Joseph had performed for Drew—of some New York Central bonds, J. P. Morgan, Vanderbilt's banker, repaid Joseph by helping him sell 2 million dollars' worth of Gould's Missouri Pacific bonds—though Gould and Vanderbilt (and Morgan too) were bitter enemies. The Missouri Pacific bonds sold, as usual, poorly, and Joseph wrote William in a familiar vein: “I am heartily sick of waging a seemingly endless battle over Western railroads.” Soon, however, he was back in again, selling Gould and Collis P. Huntington of San Francisco a controlling interest in the San Francisco line, which was supposed to provide the “missing link” over the Sierras from the Gould-dominated (at the time) Union Pacific into San Francisco. The Seligmans had no sooner sold the line to Gould than they bought it back again—and tried to sell it again, and finally did, to the Santa Fe on a share-for-share basis.

While Joseph was cautioning his clients to stay out of railroads, he was flirting with “a short but very promising little road” called the Memphis, Carthage & Northwestern. Soon after he had sunk $250,000 in it the M C & W found itself unable to pay for an engine. In an emergency move to help out, Joseph personally purchased a locomotive—which he named “The Seligman”—and rented the engine back to the line for a modest seventy dollars a week. (It was an idea borrowed from Vanderbilt, whose engine was called “The Commodore.”) “The Seligman” chugged around for a while, but was unable to pull the line out of the red. Within three years it collapsed into bankruptcy and the engine was sold at auction for two dollars.

In 1873 Joseph wrote: “I am disgusted with all railroads, and shall
never again
be tempted to undertake the sale of a d—d railroad bond. I am daily engaged in two or three d—d railroad meetings and, therefore, cannot attend to office business as much as I want to.” A month later he was writing dreamily of something called the “Great National, Atlantic and Pacific Railroad … a line never obstructed by snows, and of comparatively easy grades.” A year later he was writing to William: “It would have been better if we had never touched [railroad] bonds at all … it was impossible for us to compete with the Barings and J. S. Morgan [father of J.P. and head of Morgan's London office] and others in the very best roads of the United States … we did not then understand the difference between finished first-class roads and unfinished second-class roads.”

There was more than the difference between finished and unfinished roads that Joseph Seligman did not understand. But the above letter pinpoints one area of the Seligmans' railroad difficulties: J. P. Morgan and his bank and friends. In allying themselves with Gould, the Seligmans had made a powerful enemy of Morgan. To be sure, Morgan, in return for a favor (but never otherwise), would sometimes help them out. But the Seligmans' opportunities to perform favors for Morgan were rather few. Aligned with Morgan was August Belmont, a man never particularly eager to see the Seligmans succeed. Morgan, Belmont, and the Rothschilds formed an axis of financial power that Joseph Seligman was finding it increasingly difficult to beat.

*
Curiously, when Joseph spoke of land-buying deals, he often contrasted them with “legitimate” business.

*
F. Redlich, A
History of Banking, Men and Ideas
.

*
Gould's scheme was not unlike the gold-inflating plot devised by the late Ian. Fleming in his James Bond novel,
Goldfinger
.

15

“MY BANK'

Since Joseph Seligman was the leading Jewish financier in New York, the majority of his clients were also Jewish. This meant, of course, that when Joseph Seligman got nipped in one of his less successful ventures, many other New York Jews were also nipped. At the Harmonie Club, the select German Jewish counterpart of men's clubs of the era, members took to singing, “
An Seligman hab' ich mein Geld verloren
” when Joseph entered the room after one of his railroad misadventures. Joseph grew to care less for the Harmonie, and began to spend more time at the Union League Club, whose membership he sometimes seemed to prefer.

Around 1873 a curious change began to take place in Joseph Seligman. He was fifty-four and an established millionaire, but his outlook and attitude began to shift. Possibly it was a result of Grant's Treasury offer a few years earlier, or of lunches at the White House, where people like Mrs. Potter Palmer found him amusing. It was not that he began to long for a place in New York society, exactly, but he was becoming more Americanized, more gentilized, losing some of his feeling of Jewishness. None of the Seligmans kept kosher households at this point. Joseph continued to be a member in good standing of Temple Emanu-El, but more often than not “the press of business” kept him away from Sabbath services. He had also met a young man named Felix Adler, a German rabbi's son who advanced ideas of a society
based on ethics rather than religious piety, which Joseph found interesting.

This changed frame of mind began to have a strong effect on Joseph's approach to business. For years, the names dominating the note-issuing commercial banks—Willing, Morris, Hamilton (whose spiritual descendants still control commercial banking today)—were gentile. Commercial banking seemed the gentile banker's private niche, just as Jewish bankers such as Joseph had found a niche of their own as note-trading merchant bankers. There had been little crossing over from these two banking areas until Joseph, in the 1870's, decided that the Seligmans should re-establish their San Francisco business, and that this should be their first commercial bank. Joseph, aware that this would be a departure from what was considered “traditional” Jewish banking practice, chose a name with English overtones—the Anglo-California National Bank, Ltd.—and, to reinforce the bank's Englishness, turned over its organization to his brother Isaac in London.

It is certainly a testament to Isaac's financial ingenuity that he was able to plan nearly every detail of the bank in California (where Isaac had never been) by remote control six thousand miles away. In the process he became quite possessive about the project and began to refer to it as “my bank.” (When Abraham Seligman, who considered himself a West Coast expert, traveled to London to discuss launching the new bank, Isaac was quite nettled at his brother's “interference,” and wrote home to say that Abraham had come to London “probably because he has nothing better to do.”)

In London, Isaac made a public offering of Anglo-California stock, and raised the impressive sum of £400,000—or about two million dollars in U.S. currency in those days. Isaac fussed endlessly over the tiniest matters and wrote to Joseph in a lecturing tone: “I need not call to your attention the great moral responsibility you now have. With God's help our reputation will be enchanced by the Success of your management of the Bank.” He added sternly: “Should you mismanage affairs, you may rely upon it that our good name will suffer immensely, and nothing would be so deplorable as to suffer in reputation.” Clearly, in the back of Isaac's mind through all this was his fear that Jews might be accused of overstepping themselves.

Isaac went on to instruct Joseph to send him “
weekly
summaries” of transactions and “intelligible reports,” and urged him to be “exceedingly careful not to incur any bad debts, not to lock up your money in any unnegotiable security, and not … to lend money to prominent politicians with the prospect of having to wait years before getting it
back”—all of which sounded like Joseph's advice to his brothers several years before.

In the spring of 1873, the bank was getting ready to open its doors and Isaac wrote a series of insistent letters to say, “You will find some A-1 man to become head manager.” Joseph replied that he had found two A-1 men—his oldest son, David, just twenty-two, and his brother-in-law (who was also his first cousin), Ignatz Steinhardt. Isaac was unhappy with these appointments. David, Isaac said, was “too green” to run a bank, “though at least he is American-born.” Ignatz, said Isaac, spoke English poorly and “must be kept in a back room.” He added that he hoped the boys would hire “a good corresponding clerk who can write a faultless business letter, for I should be ashamed to let the Directors read such rigamarole as dear David writes, and such ungrammatical English as Ignatz sends at present.”