The Jews in America Trilogy (28 page)

Up to that point, E. H. Harriman had been regarded primarily as a nuisance on Wall Street. He owned a small second mortgage on a few Erie Railroad bonds, and had once had the audacity to telephone the Erie's executive offices demanding that the Chicago express make a special stop at Goshen, New York, so that he could attend the races there. The request was curtly refused. Harriman, however, who knew that the express would be flagged at Goshen if passengers were boarding there for Buffalo or points west, telephoned a minion and had him buy a ticket from Goshen to Chicago. Harriman boarded the crack train at Jersey City, and when the train ground to a halt at Goshen, trainmen were surprised to find no Goshen-to-Chicago passenger but, instead, a debarking Ned Harriman. For exploits like these, he was distrusted and resented.

When Jacob Schiff first went to see Harriman, his approach was tactful. “We're having trouble reorganizing the Union Pacific, Mr. Harriman,” Schiff said. “We seem to be meeting opposition. We wonder—is this opposition coming from you?”

“I'm your man,” said Harriman.

“Why?” asked Schiff.

“Because I plan to reorganize the Union Pacific myself,” said Harriman. “I want it for my Illinois Central.”

“How do you plan to get it?” Schiff asked.

Harriman replied, “With my Illinois Central, I can borrow money more cheaply than you can.”

The temerity of the strange little man impressed Schiff, who then said, “Perhaps we can work together.”

“Perhaps,” Harriman is said to have replied. “If I can be chairman of the executive committee.”

Schiff flatly refused and departed. The opposition to his plans grew even stronger. Soon he appeared before Harriman again. “Suppose,” Jacob Schiff said, “we put you on the executive committee of the line.
Then, if it turns out you're the strongest man, you'll be the chairman in the end.”

“Fine,” said Harriman. “I'm with you. And of course I will be the strongest man.”

Schiff's joining forces with Harriman was the beginning of a collaboration that would last for more than twenty years, during which the two men were in almost daily contact, which would lead to the amassing of the greatest single railroad fortune in the world—and which would lead the great J. P. Morgan, who referred to Harriman with such epithets as “punk” and “pad-shover,” and who often called Jacob Schiff “that foreigner,” to acknowledge both men as “my dear friends.”

Harriman's Illinois Central did indeed provide a quick source of credit, but for a project as big as reviving the Union Pacific, Schiff saw immediately that foreign capital would be needed. He turned to a man who had been one of his boyhood friends in Germany, and who was now a London financier very nearly on a par with the Rothschilds, Sir Ernest Cassel.

Cassel was an unlikely sort of man for Schiff to have as a friend. He had become an elegant and an epicure, though his background was similar to Schiff's. Cassel was also, like August Belmont, a complete apostate of his faith. Schiff could be quite tiresome on the subject of religious observances. Schiff despised Belmont, whom he once called “an oyster, without a shell.” Yet the very Belmont-like Sir Ernest became Schiff's chief financial contact in London and, as the years went by, his personal arbiter of taste in clothes, painting, furniture, and even table linen and silverware. Apparently the two never discussed religion.

If Joseph Seligman had virtually invented international banking in America, it was Jacob Schiff who took the invention, refined it, and made it an art, and his alliance with Sir Ernest Cassel is another example of Jacob's more up-to-date, streamlined approach. Joseph Seligman had devised a Rothschildesque, one-for-all, all-for-one, family-business setup, with a brother stationed in each important European capital. It had worked well enough for the Seligmans, particularly in the days before the radiotelegraph and the Atlantic cable, when blood ties across the sea with men you could trust were essential. By Jacob Schiff's time, however, this had become an old-fashioned, countrified system. In this faster, more competitive age, it was too rigid, too inflexible.

By moving as a unit, the Seligman family complex moved slowly and awkwardly. It was forever having to stop what it was doing to assist some brother who had made an expensive error, or to buy out a brother-in-law, or to help William in Paris buy his wife a diamond necklace. After Joseph's death, the Seligmans belatedly realized this. In 1897 the remaining brothers drafted a “Family Liquidation Agreement,” not an agreement to liquidate the family but a plan to separate the New York, Paris, London, and Frankfurt firms from one another, and to divide their assets among the managing partners. The amount involved was $7,831,175.64, and it was portioned out in varying amounts with the largest share—$1,375,444.47—going to Isaac in London. But apparently nostalgia for the old, more familiar way of doing business quickly set in. The brothers had no sooner separated their assets than they began buying back in on one another—William, Leopold, Henry, and Isaac each buying a 10.4 percent interest in the New York house (for $800,000 each), and the New York house purchasing an interest in all three European houses. The Seligmans continued in their tight-knit way, causing Jacob Schiff to smile and say that, “The Seligmans have never really left their little family-village business in Bavaria.”

Schiff distrusted such “standing alliances.” He liked to be able to select alliances to suit the occasion. Jacob had brothers, too. (His brother Herman had gone to London and into banking, while the youngest Schiff boy, Ludwig, had remained in Frankfurt as a stockbroker.) But Jacob preferred informal contacts with correspondents and business friends, and this system enabled him to move unencumbered through the complicated reaches of international finance. “He was a man,” said one associate, “who moved fast because he always traveled light.”

He always carried his valuables with him, however. For instance, Sir Ernest had access to the highest levels of British financial and political power. He often lunched with the Chancellor of the Exohequer, and he even had the ear of the Throne. Now that Cassel shared Schiff's, and Harriman's interest in the Union Pacific reorganization, bankers' ears pricked up on both sides of the Atlantic. Within three days of the news of Cassel's participation, Schiff and Harriman had received $40 million worth of pledges, and suddenly the project which had seemed “ridiculous” to Wall Street seemed distinctly less so.

Though Schiff knew a great deal about railroads, he discovered that Harriman was a railroading genius. After getting him his financing, he gave Harriman his head. The Schiff-Harriman group bought the Union
Pacific on November 2, 1897, and Harriman was elected to the line's board of directors in December.

He then began a long struggle with his other board members for permission to spend $25 million for rolling stock, track, and improvements. It was an unheard-of sum at the time, and, once more, Wall Street soured on Harriman and called him a fool. But Schiff and Cassel backed him, and at last he prevailed. While a doubting Wall Street watched, the fortunes of the Union Pacific began to change. Schiff soon granted Harriman the chairmanship he wanted, but, as a good banker should, Schiff retained a position close behind the driver's seat. Presently the line had risen out of debt, and was even showing a profit.

But throughout the whole Union Pacific reorganization there was one question that puzzled certain observers. As Harriman, the ex-office boy and son of a poor Episcopal clergyman, was becoming one of the dominant figures in American railroads, his only rival of any importance in the field was the little Minnesotan, James J. Hill. While Harriman had been building up the Union Pacific, Hill, backed by Morgan, had been busily buying up the competing Northern Pacific. How long, people wondered, could both Hill and Harriman remain friends of Jacob Schiff?

22

MR. SCHIFF VS. MR. LOEB

If Jacob Schiff liked loose and informal business relationships which could be severed quickly and picked up again as he saw fit, he was correspondingly rigid and unyielding in his home. As Cyrus Adler, in his biography of Schiff, wrote, “He was accessible to all people on all subjects, though not easily persuaded when his mind was fixed.”
*

As a husband and father, he often seemed heartless. Those nearest to him, including his wife, had trouble feeling close to him. Therese Loeb Schiff was accustomed to discipline (from Betty) and to daintiness (her father's toy child, she could not even arrange a bowl of flowers without a servant's help). But she had also been brought up to believe that her father was the final authority on any question that dealt with money. It was a little while before she fully understood the battle that was taking place in the office downtown. When her
husband came home at night, he sometimes told her of developments, involving long lists of railroads whose names she never could keep straight, and plans. And sometimes she would interrupt him to ask, in her soft voice, “Well, what does my father think of it?” The question always seemed to make him angry, and so she learned to stop asking, and to listen to his evening discourse in respectful, if bewildered, silence.

There was almost nothing that Solomon Loeb and Jacob Schiff agreed upon. They did not agree on religion. Solomon was a professed agnostic, and there had been no religious observances at all in the Loeb house on Thirty-eighth Street. All this began to change when Jacob entered the family. He was the most “orthodox” of all the young German Jews of his generation, but with this he mixed a ritualistic liberalism which he had concocted for himself. He disapproved of the Loebs' amorphous attitudes. He lectured his father-in-law on his shortcomings as a Jew, and, though Solomon grumbled, Betty Loeb urged her husband to unbend a little for the sake of peace in the family. The nonreligious Loeb household became outwardly very pious.

Nor did Schiff and Loeb see eye to eye on spas, a serious matter for gentlemen of the era, and the arguments about which cure performed the greater service to the liver occasionally became heated. Mr. Loeb preferred the waters at Carlsbad. Schiff preferred Marienbad or Gastein—both, in those days, considered “grander” than Carlsbad. Whenever he mentioned Marienbad or Gastein, he enjoyed turning to his father-in-law to say, “I suppose you'll be at Carlsbad again—with the bourgeoisie.” Both Solomon and Betty Loeb fretted privately over what seemed to them their son-in-law's—and now their daughter's—expanding taste for grandeur. (Once, after one of the young Schiffs' trips to Europe, which had included a sojourn at Marienbad, Betty Loeb asked Therese if she had bought anything in Paris. Therese replied, “
Nur ein einfaches schwarzes SamtKleid
”—“Only a simple black velvet dress”—and Betty Loeb was aghast at the thought that her daughter had become so elegant as to use the adjective “simple” in connection with a fabric as rich as velvet.)

But it was in the Kuhn, Loeb offices that the two men's differences were most pronounced. It was a battle of banking philosophies, and of generations. Solomon was cautious. Jacob was bold. Solomon was older and contented with his firm's success. Jacob was young and wanted to bend the firm to his will. Jacob made it a point to get to the office earlier than his father-in-law. There he started each day writing dozens
of memoranda in small, meticulous longhand—plans, proposals, suggestions, ideas—and when Solomon Loeb arrived, he found his desk strewn with these notes. Some of Jacob's notions were too intricate for Solomon to grasp, and he would have Jacob sent in, and the two would try to discuss Jacob's ideas—Solomon reminding Jacob of the philosophy (“Always say no …”) that had made him successful. When they emerged from their meetings, Jacob Schiff looked angry and Solomon Loeb looked tired.

Like so many self-made men, Solomon Loeb had prided himself on knowing, at any given time, just what was going on in every corner of his company. After all, he and his first partners had been retailers. As bankers, they had preferred to finance manufacturers and merchants whose operations they understood. Now the firm's railroad operations had extended Solomon's empire beyond his reach. As he studied the firm's figures he found it increasingly necessary to call for Jacob to explain. And Solomon had begun to worry about his health. After a day at the office, he would lie on a velvet sofa with his head in Betty's ample lap while she bathed his forehead with a handkerchief dipped in cologne. One morning Solomon called for Jacob. The clerk, as usual, hurried to Jacob's office to say, “Mr. Loeb would like to see you.” But this time, without looking up, Jacob Schiff said, “Tell Mr. Loeb he may see me in my office.”

The year was 1881. The Age of Seligman was over. While uptown Jewish society in New York might continue to argue about Jews of “the Seligman type” as opposed to those of “the Nathan type,” there was no doubt among financiers in Wall Street that there was a basic difference between the Seligman and the Schiff types. American finance had entered the great Age of Schiff. Today, as a result, when the Kuhn, Loeb partners gather for a formal photograph, they do not assemble in front of the portraits of Abraham Kuhn, who looks wistful, or Solomon Loeb, who looks dismayed, but in front of the huge, mantel-crowning portrait of Jacob H. Schiff, who looks regal.

Early in the 1880's, scarcely ten years after Jacob Schiff became a partner in his firm, Solomon Loeb began to do what many in his family still call “a noble thing.” Like all noble things, it was not an easy thing. But it had the blessing of Betty, who had helped him guide the fortune of Kuhn, Loeb from the beginning. He began to draw a distinction between “projects” and “policy.” He would remain interested, he said, in Kuhn, Loeb projects. But policy would become the bailiwick of his son-in-law, Jacob Schiff. In effect, Solomon Loeb had abdicated.
Though he continued to come to the office each day, he took the position of a silent partner. Jacob was given what he had always wanted—the reins of a company, a bank of his own.