The Jews in America Trilogy (37 page)

During the next few months, more and more of Meyer's money was
required to keep the pumps going, and by August, back in Philadelphia for a fresh supply of laces and embroidery to help support the pumps, he had very nearly abandoned hope when he had a telegram from Leadville. It read: “You have a rich strike.” The A.Y. mine, un-watered at last, was yielding fifteen ounces of silver—or nearly twenty dollars' worth—per ton, along with considerable copper ore. The amount of silver in the mine was encouraging—as much as $180,000 worth of pure silver from a single stope. At the same time, the preponderance of copper was disappointing.

Immediately, Meyer called all his seven sons to Leadville, including Benjamin, who was still an undergraduate at Columbia, and William, who was barely in his teens; the two were told to finish their studies locally and to learn some practical metallurgy on the spot. Meyer and the older boys would perform purchasing and marketing tasks and, above all, devote themselves to finding a method of smelting copper ore that was not exorbitantly costly.

This did not take long, thanks to a circumstance even luckier than Mr. Graham's visit. Of several existing processes, one that had been developed but had still not been tried was the brain child of R. J. Gatling, the inventor of the rapid-fire machine gun. The financing of the Gatling process of ore recovery had been turned down by J. P. Morgan, but there was one young, little-known, lone-wolf speculator who believed in it. His name was Bernard Baruch. On Baruch's advice, Meyer gambled on the Gatling process, which almost immediately lowered the price of refining copper to a practical seven or eight dollars a ton.

One of the great “troubles” with the Guggenheims, socially, in the New York crowd they soon entered was that nearly all nineteenth-century fortunes up to that point had been built systematically, and possessed a kind of inevitable logic. But Meyer Guggenheim's money had been made in such an erratic way—from stove polish to lye to spices to Irish linen and Swiss embroidery, leaping from one business about which he knew little to another about which he knew even less, and landing, at last, with a rich strike in silver and copper from a waterlogged mine shaft. There were rumors that Meyer was a little unbalanced, and had succeeded not by his brains but by fool luck. But the consistent element in Meyer Guggenheim's career was that he was always essentially a middleman, refining and marketing a product made by someone else.

Just as he had succeeded in improving an existing brand of stove polish, he had now succeeded in improving the smelting of copper. As
he went about liquidating his lace business, he continued in this pattern. He decided to concentrate not on the production-ownership end of the copper business but, as he saw it, on the part of the business where the money really lay—in smelting and refining.

Meyer's theory was very like one held by another underground expert of the day, John Davison Rockefeller. Rockefeller never deigned to own an oil well, considering drilling companies far too risky and preferring to leave them to lesser speculators. He liked to own refineries. The well owners then had to bring their oil to him, which he bought at the lowest price (which got lower the more the producers produced, and which hit bottom when overproduction set in). Similarly, whenever Meyer bought copper lands, he bought them primarily for the purpose of setting up smelters; he then either kept his mining ownerships as subsidiaries or sold them to buy more smelters.

By 1882 Meyer's holdings were large enough, according to one biographer, to “enlist and hold the attention of his sons,” who had been working for him all along. Meyer formed M. Guggenheim's Sons for this purchase, in which each of his seven boys was an equal partner. Meyer began lending his sons money to go out and buy and build smelters. In 1888 the boys bought their first smelter in Pueblo, Colorado, for $500,000, and soon they had another in Mexico. The profits they divided were enough to hold anybody's attention. In 1890 the Minnie mine alone was worth $14,556,000. A year later the Guggenheims had made so much money that they decided to form a trust of their own, consolidating about a dozen of their refining operations under the name Colorado Smelting & Refining Company.

The first issue of stock in this new company was to have been underwritten by J. & W. Seligman & Company. But at the last minute Isaac Seligman (whose family had not yet become connected to the Guggenheims by marriage) backed out. He did not think the issue would sell.

It did, however. In 1895 the Guggenheims bought a huge refinery in Perth Amboy, New Jersey, and four years later a separate Guggenheim Exploration Company was formed, called Guggenex, which very quickly led the brothers into copper and silver mines in Nevada, Utah, and New Mexico, gold mines in Alaska, tin mines in Bolivia, diamond mines in Africa, more copper mines in Mexico, copper and nitrates in Chile, and even a rubber plantation in the Belgian Congo.

By 1900 the Guggenheims had made so much money that the two youngest brothers, Benjamin and William, decided to give the family enterprises less attention. Having been assured that, for sentimental reasons, they would continue to partake of the profits, both boys
retired, leaving digging, smelting, and exploration to Isaac, Daniel, Murry, Solomon, and Simon. Meyer, meanwhile, according to William Guggenheim, “kept books of small neat figures,” enjoying the fact that each new entry “improved his financial status.”

He had laid the foundation for what is now the United States copper industry. Such giants as Kennecott, Braden, and Anaconda Copper all had their genesis in Meyer Guggenheim's operations, and if Mr. Graham had not stopped by Meyer's store, none of it might have happened.

As news of the Lewisohns' and Guggenheims' mining successes reached the Seligmans in New York, their old enthusiasms for adventures underground were rekindled. Not that they had ever really died down. Dreams of hitting a bonanza had kept them sending good money after bad in any number of mining ventures. They had bought mines, despite their lack of knowledge of the productive end of mining. They had financed operations they had never seen. At the height of the Panic of 1873, the most severe the country had ever known, the Seligmans cheerfully invested in a totally worthless gold mine, the Oneida, and went on holding a number of other valueless mining shares. But mining shares were becoming nearly as glamorous as railroads, and the Seligmans were unable to believe that they would not soon find a winner. In the 1870's Joseph had written to his brothers: “I want no more mines at any price! Even for nothing! As the assessments
*
are always the worst!” But of course he had gone right on buying mines. In fact, one of the greatest credits to the Seligman firm is that it was able to remain solid and afloat, without visible financial injury, despite its many mining losses.

After Joseph Seligman's death Jesse became head of the New York firm and, perhaps because Joseph had had bad luck in Montana, Jesse determined that he would have better. There was not much logic behind this decision, but there had been little of that commodity evident in any of the brothers' mining operations. Jesse's Montana enterprise was called the Gregory Consolidated Mining Company, and was located southwest of Helena. “It sounds very promising,” he wrote to his brothers—without bothering to visit Helena; the mine's impressive name satisfied him. He purchased a sizable share of the Gregory, and
then dispatched an expert to look at the mine—his young son Albert, who had actually studied mining engineering. “We shall not trust strangers this time,” he wrote confidently, congratulating himself that he was being smarter than Joseph, who had trusted the thieving Bohm.

Young Albert found conditions in the Montana mining regions somewhat different from those on campus. He also found the Gregory to be a mine that was operating at a heavy loss, and soon after he arrived it was unable to meet its payroll. Albert wanted to close the mine immediately, but Jesse wanted to hold on. While father and son argued by telegraph, the miners went unpaid. Finally, when salaries had not been paid for a full two months, the miners captured Albert and held him hostage. In New York there were dark rumors that the Gregory's general manager, in collusion with Albert, had staged the kidnaping as a means to keep the men working. But as soon as Jesse Seligman paid the miners' wages, Albert was released and the mine was closed. It was never worked again.

Though Jesse continued to dabble in mines, they became a taboo subject at the Seligman dinner table when Jesse's wife Henriette discovered that Jesse's balance sheet showed holdings in six different mining companies—with a total value of six dollars.

*
Even Meyer himself, who died in 1905, was always hazy on the details of Mr. Graham's call.

*
Sellers of mining securities often “assessed” buyers of the stock to put up additional sums of money if the cost of whatever development the stock was to pay for exceeded the original estimates. If the stockholder did not come forth with these assessments, he lost his participation.

30

TWILIGHT OF A BANKER

Jesse Seligman was twenty years older than Jacob Schiff, he headed the more venerable banking house, and in the 1880's the title, inherited from his brother Joseph, “New York's leading Jewish banker,” undoubtedly still belonged to Jesse. He was one of the toughest, hardest-to-ruffle Seligmans, and one of the brightest. He was stockily built, with an earnest, square-jawed, homely-handsome face that seemed incapable of imposture. The
Daily Graphic
described Jesse as “cool, circumspect and conservative.… He carefully weighs all his opinions before expressing them, and his word, once given, is as good as his bond.” The
Graphic
also called the head of the Seligman firm “simple almost to austerity.”

Jesse was actually a more popular man in New York than his brother Joe had been. Joe's life had been pretty much all business, but Jesse had found time for considerable philanthropies. He had been one of the founders of the Hebrew Orphan Asylum, the Montefiore Home, the United Hebrew Charities, and served as a patron of the Metropolitan Museum of Art and of the American Museum of Natural History. He did a great deal to enhance the “social distinction” of the Seligman family, an eminence which families such as the Guggenheims were finding it so difficult to achieve. And so it is a particular pity that this
esteemed man shoud have embarked, soon after his brother's death, upon a project which, though it left the Seligmans a great deal richer, left their business reputation considerably damaged.

In 1869, after ten years' building, the Suez Canal linking the Mediterranean to the Red Sea was opened, and the great “impossible” dream of Ferdinand de Lesseps had become a reality. In the years that followed, De Lesseps turned to other notions for joining places together. A great railroad from Europe to the Pacific coast of China was one. Another was to flood the Sahara Desert from the Atlantic, and turn northwestern Africa into an inland sea. At last he turned his attention to an idea that had been considered by many governments and explorers before—a canal between the Pacific and the Caribbean at Panama.

Whether, if Joseph Seligman had been living, he would have tried to bridle his brother's enthusiasm for the De Lesseps project is a good question. Joseph always approached all new projects with some caution. But he also had a way of flinging caution to the winds and leaping boldly into schemes—railroads, tunnels—which he had originally distrusted, so perhaps he would have done just what Jesse did. Jesse, however, admitted that the Panama Canal appealed to him for sentimental reasons. He liked the idea of carving a trench through the mountains he had crossed on muleback thirty years before with his sick brother and their supply of dry goods, heading for the gold-rich land of California. Sentiment, of course, is not always a reliable business guide.

Jesse had little trouble getting the French Panama Canal Company to let J. & W. Seligman & Company handle its stock issue. In fact, the French company seemed so eager to employ the Seligmans that a curious arrangement was made. The sum of $300,000 was paid to the Seligmans outright as a kind of extra fee, “for the privilege of using the Seligman name as patrons of the undertaking,” or so it was airily explained at the time. No one had realized that the Seligman name alone had such value—$37,500 a letter.

A stock-selling syndicate was formed, headed in America by the Seligmans, along with Drexel, Morgan & Company and Winslow, Lanier & Company. (It always delighted Jesse when he got top billing over Morgan.) In France the committee in charge of selling canal subscriptions was headed by Seligman Frères and the Banque de Paris. The initial estimate for building the canal—considered ample—was $114 million, and the total stock issue contemplated was 600 million francs' worth.

The proposed canal would be operated by the French Government, and from the moment the De Lesseps project was announced there was a great deal of adverse criticism of it in the American press. No one wanted a European power in control of the passage. Furthermore, the United States had been negotiating on and off for many years, with Britain and various Central American countries, to build a canal across the isthmus. The route favored had always been through Nicaragua, where a series of natural lakes and rivers provided a partial waterway, and which many early gold prospectors had used successfully to get to California. American engineers considered the Nicaragua route superior, and, in fact, an American company had been about to start digging when the Panic of 1873, and the depression following it, brought the project to a halt. Now here was presumptuous France stepping in to steal the glory from America.

When it was announced that American bankers, led by the Seligmans and including Morgan, intended to back the French canal, the editorials grew angrier and more biting. Speakers rose in the House and Senate to denounce the project and the men behind it, and editors screamed of Jesse Seligman's intention of “selling America to France.” Once more there were vicious hints of “an international Jewish conspiracy,” and one reporter, trying to make Morgan's participation fit this notion, went so far as to say that Morgan, unable to beat them, had “decided to join the Jews.”