The Jews in America Trilogy (49 page)

a room full of telephones and electric bells, furnished with fine carpets, old mahogany furniture, sporting photographs and prints, coaching trophies and hunting horns; next to his office is the kitchen, which permits him and his guests to come when the whim seizes them and have supper in the stables more freely and gaily than in the château; I remember a very festive supper that we had there with the thermometer outside fifteen above zero, where ladies donned old postilion hats or bull-fighter bonnets and blew hunting horns while everybody danced the cake walk.

Life in the city was every bit as vivid as it was in the country, and another reporter describes the dashing young exquisite on his way to his office at the Equitable, “driving jauntily downtown in his private hansom cab, a bunch of violets nodding at the side of the horse's head, another bunch nodding from the coachman's hat, and a third bunch breathing incense from the buttonhole of the young man himself.” For all this—and probably
because
of all this—the financial community suspected that Hyde hadn't the slightest idea how to run an insurance company. They were quite right. Among the many financiers who wooed him after his father's death, offering to help him run his company and see to it that he “did the right things” with it, the first to gain Hyde's confidence was Ned Harriman. With Harriman, also eager to help, came Jacob Schiff and Kuhn, Loeb & Company. Schiff was placed on the board of the Equitable in 1900.

There were, however, others deeply involved in the affairs of the Equitable. They were the Alexanders, a family of such age and distinction that they snubbed Mrs. Astor, whom they considered “an amusing little upstart.” So grand were the Alexanders that they preferred not to identify themselves with New York at all, and referred to themselves as “an old Princeton family.” The Alexanders were not only large Equitable stockholders. James W. Alexander, head of the clan, had been made trustee, by the elder Hyde, of the younger Hyde's estate until he reached the age of thirty and, it was hoped, discretion. It was Mr. Alexander's opinion that James Hazen Hyde's affairs were in serious need of management—an opinion which, needless to say,
young Hyde did not share. Ned Harriman announced that he was stoutly on Hyde's side, and he said that he “did not think that the Alexanders' method of management of the Equitable was the right one.”

J. P. Morgan, meanwhile, had a large interest in another insurance company, the New York Life, and was following events at the Equitable closely. What Morgan had in mind was to buy up the Equitable and add it to the New York Life; he and his client, Jim Hill, thought that the Equitable's half-billion-dollar treasury could be put to excellent use financing railroad ventures, and this, of course, is exactly what Harriman and Schiff had in mind for
their
railroads. Soon after Schiff's appointment to the Equitable's board, the insurance company began investing in railroad issues recommended, not surprisingly, by Kuhn, Loeb.

And so the alignment for control of the Equitable—and Hyde—was the same as in the Northern Pacific battle, Morgan and Hill against Harriman and Schiff. The Equitable's fifty-two directors began taking sides.

Alarmed with the deteriorating situation, James Alexander, along with other officers in the company, drew up a protest in which they demanded that Hyde give up control of the Equitable and that the company be “mutualized”—that is, that the right to elect directors be taken from Hyde and given to the policyholders themselves. (But Alexander had great influence with Equitable policyholders and so really wanted nothing more than to be able to vote the Equitable's shares himself.)

With both the Harriman and the Morgan groups pressing Hyde to sell his Equitable interest to them, Hyde may have felt himself surrounded. Perhaps he simply didn't care. In any case, for reasons that have never been quite clear, he suddenly sold all his stock in the Equitable to a lone-wolf speculator named Thomas Fortune Ryan. Moreover, the price Ryan paid for controlling interest in the insurance empire was startlingly small—$2,500,000. And when it was announced that dividend income on this amount of stock was only $3,514 a year, things seemed decidedly fishy. “Why?” cried the New York
World
editorially. “What is the real motive?” For the moment, as the Schiff and Morgan groups silently withdrew, no one was quite willing to say.

In the storm of threats, imprecations, charges and accusations that followed, James Hazen Hyde departed for Paris. He never returned. In 1929 he appeared briefly in the news again when it was revealed
that Durand's restaurant in Paris offered, as a dessert, a peach flambéed in kirsch called “Poached Peach à la James Hazen Hyde.”

By leaving when he did, Hyde conveniently avoided getting involved in what followed, which was a full-scale investigation by the Armstrong Committee of the New York State Legislature into the securities dealings of the big insurance companies, particularly the New York Life with Morgan on its board, and the Equitable with Jacob Schiff. Schiff, Morgan, Harriman, and Hill were all called before the committee and its investigative counsel, Charles Evans Hughes. Hughes turned up a number of interesting things. Morgan's New York Life, in order to hide the fact that it owned stocks—and so it could say in its annual report, “The Company does not invest in stocks of any kind”—had made a number of fictitious loans to its employees. A bond clerk, for instance, was on the books as having received a loan in the sum of $1,857,000, and a fifteen-year-old Negro messenger boy had, according to the company's accounts, been granted a generous loan of $1,150,000.

Hughes was particularly interested in Jacob Schiff's stock sales to the Equitable. The New York State insurance law provided that any director of an insurance company who profited by “selling or aiding in the sale of any stocks or securities to or by such corporation shall forfeit his position … and be disqualified from thereafter holding any such office in any insurance corporation.” Had, Hughes asked, the firm of which Mr. Schiff was a partner, Kuhn, Loeb, sold any securities to the company of which he was a director, the Equitable? Yes, Schiff admitted, he had, but the stocks had been sound and the prices had been fair.
*
Many of them were for his favorite railroads. He added that, after all, his firm had sold “only” $49,704,408 worth of stock to the Equitable, and this paltry amount of business had been done over five years' time. He also pointed out that the $49,704,408 worth which Kuhn, Loeb had sold was “only” 16 percent of the total bought by the insurance company over the same five-year span, and finally—the most extraordinary percentage figure of all—that $49,704,408 worth of sales was “less than 3 percent” of Kuhn, Loeb's business. Schiff had never before revealed a figure that indicated Kuhn, Loeb's size. Now he had. In the five years from 1900 to 1905, the firm had sold $1.75 billion worth of securities. That meant $350 million a year. In those golden pre-income tax days, such Kuhn, Loeb partners as Schiff, Felix
Warburg and Otto Kahn must have brought home very nice pay checks indeed.

The modest presentation of these heady figures must have satisfied the Hughes committee. At the close of the investigation it was reported that Jacob Schiff “was one of the few men prominently identified with the Equitable who came through unscathed in reputation.” Nevertheless, the investigation led to far stiffer insurance regulations. And it offered, in passing, at least one explanation why the Equitable stock which Ryan had bought from Hyde for $2.5 million yielded such a niggardly dividend income as $3,514 a year. The company's charter, it seemed, stipulated that all profits except 7 percent of the $100,000 par value of stock should go to policyholders. The stock itself, however, could be used as a massive borrowing tool, to secure loans far in excess of its par valuation. As the investigating committee noted, “The stock must be regarded as affording enormous collateral advantages to those interested in financial operations.” Thomas Fortune Ryan clearly felt that way about it. He went on to buy a huge house on Fifth Avenue, added a private chapel, and converted the house next door into an art gallery which he filled with tapestries, Limoges enamels, and busts, mostly of himself—three of them by Rodin.

Jacob Schiff, meanwhile, as soon as the investigation was over, quietly resigned from the Equitable board.

*
In similar cases it had been decided that, though such sales were a “technical offense,” they were not “ethically offensive” if the conditions of soundness and fairness of price were met.

39

“I ENCLOSE MY CHECK FOR $2,000,000 …”

Glamour, on a magnificent, even international scale, was introduced to the New York crowd in the person of Otto Kahn. Like his friend and partner, Felix Warburg, Kahn was a blade—and more so. He was so sartorially splendid that, when appearing before the New York Board of Estimate to submit a fiscal plan for the city, the New York
World
devoted half a column to his remarks and three-quarters of a column to a description of his clothes—the pearl-gray cutaway, the cashmere trousers, the stickpin of an egg-size black pearl, even the tiny orchid in his buttonhole.

Through Otto Kahn the city's Jewish and gentile elite would embark on a new relationship, and, for this, Kahn had arrived at exactly the right moment. When Mrs. Astor had died in 1908, it was said that “With her passed not only a social dynasty but also the whole idea of hereditary or otherwise arbitrary social supremacy in America; with her, indeed, passed ‘Society' in the old sense.” For over thirty years, attendance at her ball had been the one and only test of social importance in New York. “If she invited you, you were in; if she did not, you
were out,” explained a contemporary. With the aid of Ward McAllister, she had defined society's limits, and at the height of her social powers, her box—No. 7—at the Metropolitan Opera House was “a social throne. It was always Mrs. Astor who gave the signal as to the proper time to leave. The time bore no relation to the stage to which the opera had advanced, but was selected because it happened to suit the matron; the time she chose was usually just after an intermission.”
*

American society had for a long time taken a rather proprietary interest in opera. The reason why was fairly simple. In the early days of American cities, when the rich entertained one another, they often found themselves all dressed up with no place to go. After an elaborate dinner party in New York, there was nothing to do but go home and go to bed. As Henry James wrote, “There was nothing, as in London or Paris, to go ‘on' to; the going ‘on' is, for the New York aspiration, always the stumbling-block. A great court-function would alone have met the strain … would alone properly have crowned the hour.” In the absence of court functions, opera and the opera season filled this dreary gap. Later, James called opera “the only approach to the implication of the tiara known to American law” and “the great vessel of social salvation.”

Opera was more fashionable than the theater for several reasons. The theater has always provided a more personal, speculative experience. One never knows what one will encounter at the new play. But the very formality and artificiality of grand opera makes it reliable; in turn-of-the-century New York, one could go to the opera certain that one would hear nothing untoward, “vulgar,” or particularly surprising. In much of Europe opera had belonged to the common man, but by the early 1900's the situation abroad had begun to change also. The upper classes seized and took over opera. In Berlin the opera season had taken on the appearance of a “court function,” and in England it was said of Edward VII that “he only talked freely when he went to the opera.”

In America each city had its own set of rules involving the opera. In San Francisco, which had built its opera house and established its “season” while it was no more than a miner's town with unpaved streets, the fashionable night was Thursday, where one showed that one was able to entertain in style regardless of the convention of “maid's night off.” In New York the smart night for opera-going was Monday, for the simple reason that Mrs. Astor and McAllister had chosen Monday as their night to go. Mrs. Astor, who established the chic practice of leaving early, also—à la August Belmont—made it
fashionable to arrive late. The great horseshoe of gilded boxes surrounding Mrs. Astor's throne contained others of her “Four Hundred.” Outside the narrow, locked, and curtained door of each box, the boxholder's name engraved on an oblong brass plate was a kind of proclamation that that person had reached the pinnacle of social success. Aspiring climbers fought in vain for opera boxes of their own, which sold for as much as $30,000 apiece, in the Diamond Horseshoe, and even younger members of old, box-holding families had to wait many years for gilt-and-velvet shrines of their own. The opera boxes had further rules. It was considered “vulgar,” for instance, to visit other boxes until the second intermission. A pair of Lemaire opera glasses, encrusted with diamonds and sapphires and costing $75,000, was, on the other hand, not vulgar. It went without saying that no Jew could be a Metropolitan Opera box holder.

The opera ritual had become so stiff and studied by the early 1900's that the quality of the music performed and sung was of extremely small importance. Appearing at the opera had become of far greater concern than hearing it. One spent such a short time at the opera anyway—sort of a digestive interval between dinner and an Assembly ball—that one hardly bothered to listen. Nor, considering the rigid sameness of the programming—it was nearly all Italian—did one really
need
to listen. Harriet Beecher Stowe, attending the opera, was surprised to hear, during a soft passage in the music, a woman's voice saying, “I always cook mine in vinegar.” So dilatory was society's interest in the actual music that the Metropolitan's impresario had said candidly, “I have never discovered a voice in my life. I don't go around discovering operas. I am not musician enough for that. Opera is nothing but cold business to me.”