THE LAST PARTNERSHIPS Inside the Great Wall Street Money Dynasties phần 4 pdf

The New York Times ran the story, giving it much drama when it said that “the greatest generalpanic that Wall Street has ever known came upon the stock marketyesterday, with the result t

man rebuilt the transcontinental link so that it regained the superiorplace in east–west transportation that it was intended to occupy afterthe Civil War Then he began to clash with the top financiers on WallStreet and usually won the battles The battle for control of the UnionPacific was one notable example In 1895, J P Morgan rejected theidea of reorganizing the Union Pacific, which had been tottering onthe brink for years The Treasury was demanding its money fromloans made during the post–Civil War period, and a major battle wasdeveloping concerning who would win the right to put the railroadback on its feet Harriman crossed swords with Jacob Schiff of KuhnLoeb, who had designs of his own on the reorganization But Harri-man proved that he could raise the necessary capital to rebuild theline at a rate cheaper than Schiff could provide Kuhn Loeb eventu-ally capitulated and reorganized the railroad according to the Harri-man plan Harriman himself was named chairman of the board andlater president of the railroad.

In 1901, competing interests flared anew when the NorthernPacific Railroad again raised its head Since the days of Jay Cooke, therailroad had had a troubled history under various managementsbefore a war for its control developed Harriman began to buy stock

in the line to compete with its major shareholder James J Hill, aMorgan customer Using Kuhn Loeb to help him finance his venture,

he successfully bought a large block of its stock before it came to theattention of Morgan and Hill The buying set off a frenzy on WallStreet and the two forces bought more stock than actually existed,forcing prices to rise astronomically to more than $1,000 per share, again of more than $900 in one week alone Then the collapse came, asthe short sellers ran for cover and finally had to settle to cover them-

selves at a loss at a negotiated price The New York Times ran the

story, giving it much drama when it said that “the greatest generalpanic that Wall Street has ever known came upon the stock marketyesterday, with the result that before it was checked many fortunes,the accumulation in some cases of years, had been completely sweptaway.”9 The panic, in reality, was a short one and the market soonregained its footing, but the battle underlined the importance of rail-roads and finance in the economy—and the importance of personali-ties in helping move market prices

The battle for control resulted in the formation of a holding pany, called the Northern Securities Company, that was controlled byboth warring factions This was the sort of organization Morgan hadhad in mind years before when the ICC was formed, and the antimo-nopolists quickly seized upon the newly formed company, using it as

com-a rcom-allying point The United Stcom-ates subsequently filed suit in courtclaiming that the holding company was a monopoly of railroad inter-ests, and the Supreme Court agreed, striking down the company as anillegal combination designed to restrain trade Undaunted, Harrimanwent on to build railroads nevertheless and had elaborate plans todevelop a railroad empire outside the United States, stretching fromSiberia to Manchuria But the grand plans were interrupted by hisdeath in 1909 The American railroad baron did not live to see his international plans come to fruition Fortunately, his sons hadbecome able financiers in their own right and would see that the fam-ily tradition was carried on

Moving Toward Merger

Harriman’s name, like those of so many nineteenth-century ciers, lived on because he was able to pass his legacy to his offspring.While he made his reputation in the nineteenth century, the familyname in banking was not established until the twentieth His oldestson, William Averell Harriman, founded W A Harriman & Co in

finan-1919, and in the 1920s he and his younger brother, E Roland man, founded Harriman Brothers & Co Both were investment bank-ing houses, actively engaging in the sorts of deals the senior Harrimanhad put together during his lifetime

Harri-The 1920s boom brought many new companies to market, and thetrend underlined the need for a merger partner for the Browns Morecapital would be needed if the firm was to compete effectively in thenew environment In the years prior to the Crash, all of the majorNew York banks added underwriting to their sphere of activities, usu-ally through securities affiliates Stock underwriting was not as popu-lar as bond underwriting for the banks, and many, including BrownBrothers, accumulated a large number of bonds on their books thatwere unsold at the time of the Crash Once economic activity began

to diminish, the bonds were difficult to sell and severe strains wereplaced upon the partners’ capital Brown Brothers had accumulated alarge amount of South American bonds, and they proved especiallydifficult to sell.10 The partners realized that they had a problem ontheir hands Years before, Baring Brothers in London had suffered acollapse because of South American bonds and had required abailout Realizing that the Crash was just not another market “break,”

in 1920s parlance, the Browns saw that a merger with the Harrimansbegan to make more and more sense

The Browns and the Harrimans had been friendly for decades, andmembers of the families had been at Yale together as undergraduates.The announcement of the merger was made jointly by Brown Brothersmanaging partner Thatcher Brown and E Roland Harriman The mar-riage brought together the Browns’ long tradition of conservative bank-ing and a fresh infusion of capital from Harriman Ironically, it was

announced in the New York Times on the same day (December 12,

1930) that the failure of the Bank of United States in New York wasannounced, the largest commercial bank failure in American history.The bank collapsed under suspicions of fraud and graft, taking $300million worth of customer deposits with it Without a merger, the fate

of the two houses could have been quite different, because manybankers and brokers were suffering the effects of the Crash One of thepartners from Harriman Brothers joining the new bank was PrescottBush, father of future U.S president George H W Bush

Clearly, access to the Harriman fortune through the sons was theprime motivating force behind the merger The Harrimans were agrowing but yet not major force on Wall Street when the merger was announced But the combined firms instantly became a WallStreet powerhouse, ranking alongside Kuhn Loeb and J P Morgan

as investment banks with considerable influence When Congresspassed the Glass-Steagall Act during Franklin D Roosevelt’s first one hundred days, however, the powerhouse status proved to beephemeral Investment and commercial banking were separated bythe act, and banks had one year to choose which side of the businessthey wanted to engage in Brown Brothers chose commercial bank-ing, not so much a radical choice as a natural return to the company’snineteenth-century roots

The securities business was separated from the bank as required

by the law, and some partners of the firm joined the new firm, Brown,Harriman & Co., the purposely created securities affiliate Members

of the National City Bank’s securities affiliate, National City Company,also joined in the venture The name was later changed to Harriman,Ripley & Co in 1938 after merging with a smaller broker, Joseph P.Ripley & Co., when it became apparent that the Glass-Steagall Act andthe Roosevelt administration were not flashes in the pan and that thefinancial reforms were permanent Brown Brothers Harriman onceagain became a commercial bank and remained a partnership It wasallowed to keep its seat on the NYSE because it conducted onlyagency business through it, acting as a broker for its clients rather than

as a principal It was the only bank allowed to do so The other privatebanks all chose investment banking, so the new law forced them out

of the commercial banking business while the commercial banksdivested their securities affiliates The Wall Street revolution was com-plete, and Brown Brothers again looked much like it had in the nine-teenth century, this time with a fresh infusion of capital

History always played a significant role on Wall Street at crucialmoments in its development When the Glass-Steagall Act was passed,this was particularly true Congress looked carefully at the record ofprivate bankers and securities firms when determining the thrust andimpact of new laws, especially ones as radical as the banking legisla-tion and two pieces of securities regulation that would be passed in

1933 and 1934 The bankers’ track records often determined whetherthey would be treated harshly or lightly at critical moments BrownBothers’ reputation plus its unobtrusive approach to financing putthem fairly low on Congress’s list of bankers who needed to be con-strained J P Morgan topped that list, and the legislation, especiallyGlass-Steagall, affected his bank the most of any on Wall Street In asense, Glass-Steagall was also an effective piece of antitrust legisla-tion, although it was never billed as such at the time.11 The moneytrust that had irritated Progressives earlier in the century was effec-tively broken, although Brown Brothers did not figure prominently inthe deliberations because of its record

After the Second World War, Brown Brothers Harriman continued

in the commercial banking business and also provided investment

management services for its clients As part of the latter service, italso provided “buy side” research on equities in much the same waythat the Seligmans had after their departure from private banking.Through the years, it remained a private bank Its behavior in themarkets has always been dictated by the fact that it chose to remainprivate, accepting the limitations that a relatively small capital basedictates As a result, it has remained one of Wall Street’s more con-servative institutions In 2000, it announced that it would cease pro-viding the brokerage services to its clients that it began providing inthe 1980s and 1990s, recognizing that other, larger, full-service invest-ment banks provided better services It was the sort of announcementthat Alexander or James Brown easily would have understood morethan a century before

The Flamboyant Banker

Whereas the Browns preferred to remain in the background and practice conservative financing, other nineteenth-century bankerswere more flamboyant and craved public attention The best-knownsocialite banker in the nineteenth century was August Belmont, anexample of a young man who rose from obscurity in a very short period

of time But Belmont was no Horatio Alger–type character His den rise to prominence was almost totally based on good connectionsand deft maneuvering in the correct political and social circles

sud-August Belmont’s name was the francophone version of his nativeGerman, literally meaning “beautiful mountain” in both languages.The name was changed to the French as a political expedient whenhis native German town was under occupation by Napoleon’s troopswhile Belmont was a child Belmont was born in 1813 in the smallRhenish village of Alzey His parents were descended from SpanishJews who had escaped Spain during the Inquisition three centuriesbefore And he was fortunate to possess valuable family connections.While he was still in his teens, his parents convinced friends in Frank-furt, the Rothschilds, to hire him as an apprentice in their bankinghouse By 1828, the family’s banking reputation was already wellestablished and the job was a plum for the teenager After severalyears, he gained positions of increasing importance, and in 1832 he

was named a secretary to one of the partners He began to travel,especially to Italy and the Vatican, and added Italian to his languagearsenal, which already included French and English This particularjob opened the world to him and would prove crucial to his profes-sional development

In 1837, civil wars on the Iberian peninsula required the Rothschilds

to send a man to Havana to look after their interests in Cuba, and theypicked Belmont for the assignment To reach Cuba, he first had to sail to New York and then catch a connection to Havana It was a con-nection never to be made Arriving in New York at the time of the

1837 crisis, Belmont was fascinated by the United States and the consternation caused by the panic He postponed his trip to Havanaand began searching New York for the means to set up shop for him-self He quickly decided to open his own banking/brokerage firm,which he called August Belmont & Co From the very beginning,

he was quick to point out that he was the Rothschilds’ man in NewYork, a connection worth its weight in gold in a country starved forinvestment capital Unlike Jacob Schiff some years later, he did notreturn home

The connection with his now former employers did not conflict,because the banking family had never opened a New York branch.The Rothschilds’ influence was found mainly in Europe, where theyhad opened a series of branches over the years Their primarystrength lay in their ability to personally arrange financings with kingsand finance ministers, and they had had little serious competition fortheir services since branching out from Germany earlier in the cen-tury But there was no New York connection, because the familywould have entrusted the opening of a new branch only to a familymember In fact, Belmont was not even sent to take over the Havanaoffice but only to gather facts and report back to Frankfurt JamesRothschild, the reigning partner, considered exploiting the possibili-ties that the panic had created in New York but evidently regardedthis sort of job far in excess of Belmont’s capabilities.12That judgmentbackfired Before anyone had time to take stock of the situation, Bel-mont had set off on his own The upstart was now in business for him-self He established the banking family in New York de facto beforeany of the partners could object Not having an American presence,

there was little the Rothschilds could do to protest Before long, mont’s assumption was accepted by all parties.

Bel-Over the years, the Rothschild connection served Belmont well

He began by sorting out the mess left by the failure of J L & S Josephand then moved into the traditional sort of merchant banking busi-ness—dealing in foreign exchange, deposits, and commercial bills ofexchange Success was almost instantaneous Since the Rothschildswere the major source of foreign capital for the United States alongwith Barings of London, customers realized that dealing with Bel-mont was in their own best interests and his business immediatelyprospered Belmont, however, continued to give the Rothschilds fits

In 1841, he fought a duel over a lady’s honor and was wounded in theleg, which gave him a permanent limp that would hobble himthroughout his life When the banking family learned of the affair,they were horrified and contemplated taking the agency business that

he had developed away from him He was able to assure them that hewas supported by the “best elements” in New York society and even-tually succeeded in mollifying them.13After the affair, he settled downand became part and parcel of New York society The social legendwas beginning to build alongside the banking legend, but the limpwas never quite forgotten

Like many of his contemporaries, Belmont fully exploited the ican War to his own purposes Along with Clark Dodge, he became amajor underwriter of the Mexican war bonds issued by the Treasury.But unlike his Yankee banking compatriots, he found himself oddlydivided because of the Rothschild interests Belmont committed asubstantial amount of his firm’s funds to underwriting a $15 millionpayment through the issue of U.S Treasury bills to indemnify Mexicofor territory ceded to the United States The Rothschilds thought thatthis sort of activity exceeded his authority to act on their behalf and eventually sent a young member of the family to New York to sort things out But the emissary was impressed by Belmont’s role inAmerican finance and the success he had achieved in such a shorttime He wrote to London, describing Belmont’s role as “a positionwhich is at once semi-dependent and semi-independent, simultane-ously that of an agent and a correspondent.” On top of Belmont’sstrengths, no members of the family seemed willing to relocate to

Mex-New York, so August Belmont & Company’s future was assured.14

However, the tension between New York and the European interestswould continue far into the future

Belmont channeled Rothschild investment funds into many tic projects Bonds of state and city governments were favorites Themoney was welcomed—by the states especially—but political andracial overtones were never far from the surface Belmont learnedthis firsthand when several states defaulted on their obligations in thefirst municipal bond default after the Panic of 1837 Without the sec-ond Bank of the United States to provide them with necessary funds,the states found themselves short of liquidity and reneged on theirinterest payments Not paying interest was quickly translated into apatriotic duty The governor of Mississippi declared that his statewould default on its interest so that the Rothschilds could not make

domes-“serfs of our children.” Paying interest to foreigners apparently wasdifferent from paying it to domestic investors and carried an emo-tional message In times of financial crisis, Belmont and his heir,August Jr., would hear more of the same because of the Rothschildconnection

Outside diversions soon competed for Belmont’s time Before theMexican War, he accepted an offer from Austria-Hungary to becomeits consul general in New York The appointment allowed his com-pany to become even more prominent than before, adding an inter-national aura to the cachet of Rothschild influence He severed therelationship in 1850 to devote all his attention to American politics, anavocation that was providing greater and greater attraction as timewent by And the diversions of social life in New York also vied for histime Society and politics interested him more than banking, which

he saw as the natural way to make the money necessary to indulge his tastes At the same time that he accepted the job from Austria-Hungary, he supported James K Polk in the presidential election of

1844 and became actively involved in Democratic Party politics Hebecame a U.S citizen the same year

Outside activities did not deter Belmont from banking, although heclearly made some poor judgments along the way When the MexicanWar was ending, the Treasury gave him the right to be its transferagent so that he could pass U.S funds to the government of Mexico

He decided to clear the transaction without taking a fee, a strategy thatJay Cooke would later use in the early Civil War financings But thestrategy backfired slightly when the United States later decided tofloat another bond Belmont bid for it, assuming that he had won all ofthe deal and would make a hefty commission for his trouble He didnot realize that the Treasury had granted Clark Dodge a similar num-ber of bonds to sell and netted only half of what he had anticipatedearning Trying to win Treasury business by performing some transac-tions gratis was becoming a well-known ploy among banking circlesand did not necessarily spell success Too many bankers employed thestrategy for it to be profitable for everyone.

In 1849, Belmont married the daughter of Commodore MatthewPerry, a hero of the Mexican War and scion of one of the country’solder families Although he was a Jew, religion apparently was notmuch of an issue, and they were married in the Episcopal Church ofthe Ascension in New York At the time, a New York newspaper esti-mated his annual income to be $100,000, a tidy sum for someone whohad entered the country only twelve years before He joined theUnion League, New York’s most prestigious club, and comfortablysettled into the New York social scene The event underlined theremarkable transformation of an immigrant who only a decade beforehad been considered neither clever nor old enough by the Roth-schilds even to open a New York office for them It also marked aneven more remarkable transformation: Belmont had grown frombeing a mere Jewish immigrant banker to an accepted member ofNew York society, a group that was not known for welcoming new-comers or outsiders Within a few years, his ethnic status would neveragain be mentioned socially, although it was probably not completelyforgotten It was quite a remarkable series of events considering thepersonal history of the other major Jewish families, most of whommarried within their clans rather than seek spouses from Americangentile society Belmont succeeded in capitalizing on his brashness,while other immigrant bankers relied more on business acumen andfamily relations to build their businesses

Of all the bankers who became overnight success stories before theCivil War, Belmont displayed perhaps the least business acumen Hecontinued to rely on the Rothschild connection to make money, and

while it served him well, it did mean that he had to toe the companyline to an extent to keep the relationship alive and well While engag-ing in financing for the railroads and other new companies coming tomarket and continuing to do trade deals, his firm missed a majoropportunity with the Civil War financings that made Jay Cookefamous But the Civil War also gave him the opportunity to displayloyalty to his new country and dissuade the Rothschilds from doingbusiness with the Confederacy.

At the beginning of the war, the Confederate Congress authorizedthe issuance of a $50 million loan to finance its war effort Belmontstridently opposed the underwriting of any such bonds, comparingthem to the worthless bonds issued in France during the Revolu-tion—a clever ploy, since it was just those sorts of issues that theRothschilds shied away from The family already had subscribed toUnion bonds, and rather than play both sides of the fence, it declined

an offer to underwrite, leaving the job to other sympathetic banks.15

The way was then clear to help Salmon Chase raise money for theNorthern war effort

At first, Belmont sounded very much like Jay Cooke when he seled Chase about raising money for the Treasury “Before the warcan be brought to a satisfactory termination, we shall require from 50

coun-to 60 millions of dollars,” he coun-told Chase authoritatively when he firstvisited Washington to discuss the war effort His idea of marketingbonds was also familiar: “A national subscription ought to be opened

in all our large cities; amounts as low as one hundred dollars, or even fifty dollars, should be accepted, and bonds for those fractionsissued.” But he felt that not all of the estimated amount could beraised domestically “It is impossible to say how the capitalists of Eng-land and the Continent may be affected toward an American loan.There is evidently a belief in the European cabinets that by withhold-ing all aid from us, they may force us into a settlement of some kindwith the Southern states.”16The only way to discover European inten-tions was to visit the various governments, something that Belmontvolunteered to do

Any opportunity to play a major role in helping Washington wassoon lost Belmont traveled to Europe to help Washington sound outthe possibility of selling bonds there to help the Union effort His

mission was unofficial but sanctioned by Chase, who recognized thebanker’s extensive European connections If the market was not favor-able for a bond, it was better to know before launching one rather thanhave it fail for lack of subscriptions He visited London, Paris, andFrankfurt, and after lengthy conversations with senior bankers andstatesmen, concluded that support was very thin and that an issuewould not be successful As a result, the Rotshchilds did not partici-pate in the earlier war financings in a meaningful way The lack ofEuropean support opened the door for Jay Cooke, who was able to fillthe void with his own form of aggressive marketing of bonds to allstrata of the public, from the institutional investor to the workingman.Only after the Rothschilds and Belmont saw the success of Cookefirsthand did they decide to participate in what became the first truesyndication of a bond issue with the Treasury refinancing after the war.While bankers like Cooke, Clark Dodge, and the Seligmans wereputting their efforts into the war, Belmont already had wandered offinto other areas of interest Representing the Rothschilds carried asocial responsibility, and he was determined to meet it fully Livingwell was his hallmark, and he quickly became known in social circles assomeone of substance who loved to give dinner parties and live lifefully and as expensively as possible His wine bill often topped $20,000per year, and he introduced many matters of social etiquette and prac-tice into New York society Often, his socializing was done with a bit ofarrogance along with his usual flamboyance He employed his father-in-law, Commodore Perry, as his wine steward and often sent him tofetch a bottle in front of guests Few would have imagined they would

be served claret by one of the country’s better-known war heroes.While Joseph Seligman was the model for Horatio Alger’s rags-to-riches stories, Belmont was more the model for Thorstein Veblen’s

“conspicuous consumption” of the Gilded Age Spending money gaveone social status in nineteenth-century New York, and Belmont wasone of the idea’s best exponents Belmont set the standard for NewYork society by throwing lavish dinner parties for as many as 200 people

at a sitting and giving fancy dress balls At one ball, he dressed in a fullsuit of gold-plated armor said to have cost $10,000 He also was fond

of dressing as Napoleon, who was always a Wall Street favorite; morethan one trader had been labeled the “young Napoleon of finance”

over the years But he spent the most money on his residence, a ish mansion on Fifth Avenue that became the standard in New Yorksociety Rumor had it that the Astors had snubbed him several timesbefore by not inviting him to their own lavish parties at their home inGreenwich Village Belmont, in turn, built the Fifth Avenue mansion

lav-to show that he was not a man lav-to be snubbed While not universallyaccepted by all of the proper New York social cliques, he was still aman to be reckoned with

Belmont often spent more time working on political projects than

he did on banking One of his pet projects before the Civil War wasworking with the Democratic National Committee Having votedDemocratic in every election since his naturalization, he was con-vinced to work for the party by his wife’s uncle, former congressmanJohn Slidell of Louisiana His political career began in 1851 when heagreed to manage James Buchanan’s presidential campaign in NewYork When Buchanan lost the party’s nomination to Franklin Pierce,Belmont threw his support wholeheartedly behind the chosen candi-date Then he discovered that his newly adopted country, and espe-cially the New York opposition, quickly raised the Rothschild scepter

when needed The New York Times, in particular, assailed Belmont

for employing “Jew gold” from abroad to support Pierce Later, thepaper stated that “the Rothschilds and the Emperor of Austria wereboth of them rather anxious for the election of Pierce and the conse-quent establishment of such a policy as would permit them to monop-olize” a potential Pierce administration And he was not allowed toforget his other foreign ties—namely, the job as Austrian consul in

New York The New York Tribune labeled that a “dual allegiance.”17

Belmont discovered that the road to riches and influence was notalways as smooth as he anticipated

It was remarkable that Belmont was able to turn his attention to itics so quickly, having been in the country only fourteen years beforebeginning to dabble in the fortunes of the Democratic Party Thisapparent dalliance made excellent business sense because it sought toforge political ties in much the same way that the Rothschilds had done

pol-in Europe over the decades Friendly politicians were always betterallies than hostile ones, and Belmont sought to practice the Americanversion of gaining political favor as quickly as possible And his sortie

into politics proved successful Pierce defeated Winfield Scott in the 1852 election, and Belmont emerged with a reputation as a goodorganizer with the right connections He also received something more tangible from Pierce: He was offered the ambassadorship to theNetherlands, a job that he readily accepted His remarkable rise con-tinued unabated He now had the distinction of holding two diplomaticjobs for two different governments within the span of ten years.

While serving as ambassador to The Hague in the 1850s, Belmontsaw his business in New York begin to suffer There were several cases of embezzlement and mismanagement at the office In onecase, $14,000 disappeared from the firm and Belmont’s chief cashieroffered a reward for the culprit It was later revealed that the cashierhimself had stolen the money; the cashier offered to repay all of it if

he could keep his job Belmont took a different view, however, andhad him jailed for embezzlement Shortly thereafter, a fire destroyedthe warehouse where Belmont kept his possessions in storage while

he and his wife lived at The Hague By the time his tenure was ished, he realized that it was time to return home before the businessand his personal life were in ruins

fin-Pierce was succeeded by James Buchanan, and Belmont’s star tinued to rise in the Democratic Party In 1860, when the party choseStephen A Douglas to oppose Lincoln, Belmont was named a mem-ber of the Democratic National Committee and then, quickly after-ward, its chairman While the post was not as important as it laterbecame, his ascendancy was still noteworthy His money was also acrucial factor, as it soon became apparent that the party delegationsfrom the various states all expected him to fund their activities Onmore than one occasion, Belmont personally wrote checks so thatlocal parties could meet their obligations to the national committee

con-He quickly became irritated with having to do so, however, ing that they needed him for his money more than for his organiza-tional skills His tenure at the Democratic National Committee lasteduntil 1872, when he decided to step down The party’s decline duringthe Civil War years blemished his chairmanship, although he was able

recogniz-to make the job a full-time commitment rather than the part-timepost for political amateurs that it had once been It is generally agreedthat Belmont helped make the job a high-profile one

Politics was not Belmont’s passion, however One of his favoritepastimes was horse racing He loved horses and began to accumulatethem and build stables as soon as he was able after arriving in thecountry That love was passed to his son, August Jr., who succeededhim at the family firm August Belmont Jr was born in 1853 in NewYork City and graduated from Harvard in 1874 Throughout his life,

he liked to be called a sportsman as well as a financier, and he was asprinter at Harvard Realizing that runners needed better traction onthe cinders, he helped bring the spiked track shoe to the UnitedStates, where other runners quickly adopted it When August Sr died

in 1890, he assumed leadership of the family bank and continued hisfather’s tradition of representing the Rothschilds

Like his father, August Jr is remembered more for his pastimesthan his financial prowess His love of horses led him to develop theracetrack in New York that became known as Belmont Park, a lifelongpassion He helped with the finance and construction of the New YorkCity subway system, which opened in 1904 And he also was instru-mental in developing the Cape Cod Canal, completed in 1914 Thecanal was designed to allow ships to save time on the Boston–to–New York run by traversing Cape Cod The family owned a stake inthe canal, which the U.S government used extensively during World War I Although he was less political than his father, August Jr.’s exten-sive contacts made involvement in public projects easy But when thefirm engaged in financings that were controversial, the press made nodistinction between August Sr and Jr A Belmont was a Belmont, andthe muckraking press treated the son much as it had previously treatedthe father when it came to the Rothschild connections

In the later stages of his political career, August Sr becameembroiled in the 1876 presidential election, won by Rutherford B.Hayes over his Democratic rival Samuel J Tilden Although he wasconfident of his party’s victory, his background and connections againbecame issues in the campaign itself Newspaper articles began to cir-culate that the Rothschilds contributed $2 million to ensure Tilden’svictory so that they could control the U.S government when he won.Speaking to a local party gathering, Belmont Sr addressed the issuewhimsically, although he was far from whimsical about the newspaperattacks “It was my custom to read the Republican papers,” he said

“I have read that after the election it is the intention of Mr Rothschildand myself to buy up the whole United States Mr Rothschild has notwritten to me yet on the subject but I know that Uncle Sam willnot sell out.”18The remarks were greeted with laughter, but the pointwas made While the matter was amusing at the time, a rumor wasestablished that lingered long into the future: a Jewish conspiracyamong international bankers planned to overthrow the governmentand/or seize control of venerable American institutions, and Belmontand the Rothschilds were at the heart of it Another rumor wasrevived about the same time, with more damaging implications.After the Civil War, an Irish revolutionary group called the IrishRevolutionary Brotherhood deposited $25,000 with Belmont in NewYork The deposit was one that would haunt him for years When

Adding to Irish anger was the fact that August Belmont owned apopular racehorse called Fenian in the 1860s, at the same time that

he was doing business with the revolutionary movement The nection between the disputed funds and the name of the horse wasnot lost upon the Irish community in New York Thomas Meehan,

con-the editor of con-the Irish-American, a New York newspaper, wrote to

Belmont asking about the connection between the funds and thehorse at the time of the original lawsuit Belmont wrote him a shortnote stating that “the connection of my horse with the Fenian fund

is not quite concisely stated and if you will kindly call here any timethis morning I will give you the exact facts as they are I can do thismuch better orally than by letter, and not being well enough to

go out this morning must ask you to favor me with your visit.”*Norecord exists of the conversation, but the second lawsuit againstBelmont suggests that the Irish community was not mollified byBelmont’s explanation to Meehan The horse’s performance wascertainly better than the Irish luck at getting their money back Itwon the race named after its owner, the Belmont Stakes, in 1869—

at the time, the most popular horse race in the country

*August Belmont to Thomas Meehan, October 21 note, no year Thomas Meehan

Papers, drawer 1 file 1, Georgetown University Special Collections

Belmont attempted to transport the money across the Atlantic toDublin at the group’s request, the British government seized it TheFenians, as they also were called, sued Belmont to recover the fundsbut lost in court That did not stop the rumors from circulating thatBelmont still had the money and refused to relinquish it But theFenians’ credibility was suspect In 1866, a large swindle was uncov-ered in New York in which they had sold worthless IOUs to Irishimmigrants, many of whom had low-paying jobs and thought theywere helping to fight for Irish nationhood with their contributions.Some of the lost money from the IOUs was probably the proceedsfrom the swindle that Belmont was unwittingly trying to send to Ireland when it was intercepted

The Irish issue raised its head almost twenty years later when

Bel-mont sued the publisher of the Irish Nation for continuing to spread

the Fenian funds rumor long after he thought it had been settled Themotive was, of course, political His son Perry was rumored as a Demo-cratic candidate for the governorship of New York, and the oppositionhad set out to smear the Belmont name When the case went to trial,the full extent of the anti-Belmont feelings that surfaced at electionsagain popped up Realizing that Belmont had an old image problem,the newspaper’s attorney went quickly on the offensive The lawyersparred with Belmont before attacking his credibility “Where were youborn?” the lawyer asked The judge himself objected to the relevancy ofthe question when the lawyer retorted that “we are in a position to show that this man’s name is not Belmont, or at least that he has usedanother name.”19Upon hearing that, Belmont became enraged and thecourtroom broke into pandemonium Belmont protested but neveranswered the question directly The name Schonberg was never men-tioned, nor did he admit to being born with the name Technically, itwas Belmont, only in a different language After the stormy proceed-ings, the result of the case was more to Belmont’s liking: the publisherwas found guilty and sentenced to sixty days in prison for maligningBelmont He had struck a sensitive chord In more proper, discreetsocial circles Belmont’s background was never mentioned In politicalcircles, the opposition never let anyone forget it

August Sr.’s funeral was a testament to the central role he hadplayed in finance and politics during his lifetime The funeral was

held at the same church at which he had been married years before.Among the pallbearers were J P Morgan and former president GroverCleveland.20 Over the years, Belmont maintained a close connectionwith Morgan The marriage of August Jr.’s son to a Morgan produced

an heir, Morgan Belmont, who would eventually wind up the bank’saffairs in the 1920s after the death of his father The two banks par-ticipated in many financings together and were involved in some ofthe more controversial operations for the U.S Treasury in the lastquarter of the century One occurred during August Sr.’s later years,and the other after his death But from the reactions of the press itwas clear that the Belmonts represented the Rothschilds and that wasall that mattered

In the later 1870s, Treasury financing again became an issue, as ithad been during and immediately after the Civil War Without toughTreasury secretaries like Salmon Chase in office, Treasury financingsagain fell under a cloud of suspicion Jay Cooke had since departed toconcentrate on his railroad ventures, and the Treasury was left with itsusual list of top Wall Street banks from which to seek financing As inthe past, that proved to be an expensive list In 1877, the UnitedStates needed to borrow more than $250 million, and Treasury Secretary John Sherman used a banking syndicate headed by J P.Morgan that included his bank at the time, Drexel, Morgan & Co.,along with J & W Seligman and August Belmont The bonds weresold successfully but the commissions were expensive The rate wasfar in excess of the normal charge for selling bonds The syndicatecharged up to 4 percent for its services and earned even more moneycharging what became known as “double interest.” This involved avariation of the old game that bankers used to play with Treasurysecurities before the Civil War In addition to the usual interest paid

on bonds, bankers exacted a rate charged for the currency that wasissued to support them Congress eventually investigated the totalcommission structure on the large issue two years later, but thebankers pocketed their profits nevertheless In addition to Belmont’sparticipation, critics started openly mentioning Rothschild participa-tion, although they made their purchases through Belmont in the

usual manner The London World was more sanguine, at least on

behalf of the Rothschilds, implying that it was their American agents