Last Partnerships

Overview

They laid the foundations of American finance and defined the American brand of capitalism. They bankrolled wars, were the impetus behind the building of the first transcontinental railroad system, and fueled a fledgling nation’s grandiose dreams of empire. S&M Allen, J. P. Morgan & Co., Goldman Sachs, Lehman Brothers...they were the great Wall Street partnerships, and for well over a century, through a combination of financial genius, political chicanery, and the audacity of Caesars, they wielded ...
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The Last Partnerships: Inside the Great Wall Street Dynasties: Inside the Great Wall Street Dynasties

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Overview

They laid the foundations of American finance and defined the American brand of capitalism. They bankrolled wars, were the impetus behind the building of the first transcontinental railroad system, and fueled a fledgling nation’s grandiose dreams of empire. S&M Allen, J. P. Morgan & Co., Goldman Sachs, Lehman Brothers...they were the great Wall Street partnerships, and for well over a century, through a combination of financial genius, political chicanery, and the audacity of Caesars, they wielded unprecedented influence over the business, financial, and political landscapes of a nation.

The Last Partnerships combines rigorous scholarship with journalism at its best to present a panoramic history of the rise and fall of the great financial houses—from the “Yankee Bankers,” at the turn of the 19th century, up to Goldman Sachs’ historic IPO in 1999—tracing their origins, their successes and failures over the years, and the reasons for their ultimate demise. The Last Partnerships is must-reading for history buffs and everyone interested in the world of finance behind the business-page headlines

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Editorial Reviews

Publishers Weekly - Publisher's Weekly
Despite the subtitle, this book doesn't throw wide the back-room doors of major investment banking and brokerage firms like Merrill Lynch and Salomon Brothers. Instead, it provides a general history of Wall Street, organized in chronological chapters, each featuring two famous houses. The first chapter covers 1812 to 1873, focusing on Clark Dodge and Jay Cooke. The last chapter runs from the 1930s to the present, featuring Lazard Freres and Goldman Sachs. Most of the material can be found in the author's previous works, 100 Years of Wall Street and Wall Street: A History. This reorganization might have yielded new insights had it shown how certain firms helped shape their time and place, and vice versa, or perhaps if it had focussed on the passing of the torch from era to era. As it stands, Ron Chernow's The Death of the Banker and Martin Mayer's The Bankers and even Geisst's previous works are more compelling and better written. Still, Geisst has more understanding of finance than most popular financial historians; despite the drawbacks of this Wall Street history, it represents the various firms fairly and aptly. (May 1) Copyright 2001 Cahners Business Information.
Library Journal
Geisst (Wall Street: A History; Monopolies in America: Empire Builders and their Enemies from Jay Gould to Bill Gates) here provides a history of U.S. investment banking over the past 200 years. As the title indicates, investment banking has shifted from partnership activity to corporate ownership. Geisst creditably describes the forces at work in the creation of capital, providing some sociological context through ethnicity and gender issues. Geisst accounts for a number of factors that have caused investment banking to undergo a sea change: increasingly high dollar amounts, the ability of inexperienced traders to bankrupt firms, and the demise of relationship banking. He shows how cutthroat competition changed investment banking from a business based on relationships to one based on the deal itself. This book's appeal will be limited to those interested in financial history. Steven Silkunas, Southeastern Pennsylvania Transportation Authority, Philadelphia Copyright 2001 Cahners Business Information.
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Product Details

  • ISBN-13: 9780071413176
  • Publisher: McGraw-Hill Companies, The
  • Publication date: 12/1/2002
  • Edition number: 1
  • Pages: 364
  • Product dimensions: 0.81 (w) x 6.00 (h) x 9.00 (d)

Table of Contents

Acknowledgments
Timeline
Introduction 1
1 The Yankee Banking Houses: Clark Dodge and Jay Cooke 9
2 "Our Crowd": The Seligmans, Lehman Brothers, and Kuhn Loeb 40
3 White Shoes and Racehorses: Brown Brothers Harriman and August Belmont 81
4 Crashed and Absorbed: Kidder Peabody and Dillon Read 114
5 Corner of Broad and Wall: J. P. Morgan and Morgan Stanley 157
6 Corner of Wall and Main: Merrill Lynch and E. F. Hutton 209
7 Unraveled by Greed: Salomon Brothers and Drexel Burnham 240
8 The Last Holdouts: Goldman Sachs and Lazard Freres 282
Conclusion 314
Notes 317
Bibliography 325
Index 329
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First Chapter

Chapter 1
The Yankee Banking Houses: Clark Dodge and Jay Cooke

The securities business had very humble beginnings in the early part of the nineteenth century. Some of the best-known names in investment banking began their careers as itinerant merchants, peddling all sorts of wares throughout the East and the South. Others sold commodities and traded on the frontier. Although many of the early American bankers aspired to be the American Rothschilds or Barings, few had the resources or the family connections to follow in the Europeans' footsteps. Baring's importance was probably best expressed by the Duke of Richelieu after the Napoleonic Wars when he stated that there were six great powers in Europe—Great Britain, France, Russia, Austria, Prussia, and Baring Brothers. The Americans, on the other hand, were content to seize any opportunity that presented itself and develop it into a profitable business. Between the War of 1812 and the Civil War, the opportunities were expanding constantly, but the early partnerships had to be industrious and farsighted as well. Without a clear view of the future, many would not survive the rapidly changing American business scene.

The years between those two wars proved to be a watershed in American history. The country was shifting from a mercantilist and agrarian-based economy to one that would soon be industrial on a scale never imagined. Shortly after the Constitution was signed, Alexander Hamilton, Secretary of the Treasury, recognized the need for switching from an agricultural economy to one that would help the new nation become more self-sufficient. The United States was not able to trade freely with many European countries because of barriers put in place by the Europeans, and the lack of two-way trade was retarding the country's potential. In The Report on Manufactures (1791), Hamilton wrote: “The embarrassments which have obstructed the progress of our external trade have led to serious reflections on the necessity of enlarging the sphere of our domestic commerce.” The remedy would be to encourage manufacturing and thus make the country less reliant on trade with Europe.

But what Hamilton envisioned as manufacturing—producing ships, armaments, and other simple types of goods—could never have foreseen the development of the steam engine, railroads, and steamships, to name but a few early-nineteenth-century industrial innovations. What Hamilton originally had in mind was manufacturing goods that would aid American exports, which were still mostly agricultural. Eli Whitney, the inventor of the cotton gin, was the personification of Hamilton's ideas. While developing the cotton gin in the 1790s, he was able to help increase American cotton exports to Europe almost fifty times over. And when he ran into financial difficulties, he expanded into rifle manufacturing, helping to revolutionize the firearms industry in the process. Like Cornelius “Commodore” Vanderbilt, Whitney was able to recognize the constantly shifting winds of change and adapt to them rather than simply remain the supplier of only one good or service. But his career showed that obtaining adequate financing for his activities was difficult because the Americans were long on ingenuity but short of the capital necessary to bring their ideas to fruition. Unlike the Europeans, the Americans could not rely upon the long-standing banking houses to supply them with capital or a wealthy domestic investing public that would buy stocks and bonds. There was not enough private capital in the new country to satisfy investment needs. The government could not provide capital for the same reason: not enough money was available from the citizenry. The early American bankers would prove that capital would not come from the government but from foreign sources that were quick to finance any idea that could make them a buck. In the early years of the republic, the federal government was not a significant financial force, nullifying Hamilton's vision of a national community where government would make up any shortfall in private investment.
Before the early banking houses could provide capital to newly emerging industries, they would have to develop to a point where they could be trusted with other people's money. Ironically, the early Yankee bankers developed their reputations aiding the federal and state governments by raising funds, but the results often fell far short of the sort of public policy that Hamilton envisioned. America was hardly a wealthy country. When the federal government needed money, it sold bonds. Its other sources of capital were limited. Taxation was applied sporadically and income taxes did not exist. But one method of raising money proved extremely popular. Lotteries were widely used by the states and the federal government to raise funds. Recognizing this, two brothers from upstate New York quickly got into the business of selling lottery tickets. Soon they would be among the first homegrown merchant bankers of the pre–Civil War period.

WHEEL OF FORTUNE

Solomon and Moses Allen formed S. & M. Allen & Co. in Albany, New York, in 1808. The two came from a very humble and obscure background; their father was an itinerant preacher who roamed New York in search of converts. The War of 1812 proved to be a watershed for them, as it would for many other aspiring bankers of the time. The finances of the United States were strained as a result of the war, and selling lottery tickets became a good way of raising money. The populace quickly became enamored of purchasing tickets. Local governments and private institutions also participated in the craze. Union College in Schenectady, New York, in the Allens' backyard, sold lottery tickets in 1810 with a potential payout of $100,000. The Allen firm was well placed to participate in the boom and opened twenty offices along the East Coast, extending as far south as Alabama. But selling lottery tickets also had its drawbacks, because the potential for profit was very limited. For the firm to survive and profit, another activity was needed.

At the height of the Allens' fortunes selling lottery tickets, the New York Stock and Exchange Board was formally organized in Manhattan and the Allens, notably Solomon, recognized that selling financial assets was preferable to being lottery ticket merchants. They quickly began shifting their business to securities, and by the mid-1820s had withdrawn from their former enterprise entirely. Their branch office system proved to be an invaluable asset, since buyers of securities were found along the entire East Coast, not simply in New York. But the new marketplace carried pitfalls that made the lottery business tame by comparison.

S. & M. Allen & Co. became one of the first members of the newly organized stock market. The market moved indoors from its traditional al fresco Wall Street location and was growing in size and stature. But the Allens soon discovered that the market was fraught with risk. The public that invested in securities was more fickle than the one that bought lottery tickets and would often react negatively to bad economic news by withdrawing its money from the market. The Allens' wide distribution network had worked well for lottery tickets, but it was not that much of an advantage with securities. Different parts of the country presented different sorts of risks for investors, as they were soon to discover. The very sort of wide distribution that securities firms would clamor for in the twentieth century was no advantage in the nineteenth. Ironically, the Allen firm was too far ahead of its time. Structural problems in the national banking system affected even lottery agents.

One of Wall Street's major setbacks in the 1830s was caused by the failure of the second Bank of the United States in 1832. Andrew Jackson's opposition to the nationwide federally chartered bank and its president, Nicholas Biddle, eventually caused it to close its doors. When it did, the regionalism of American banking became even more pronounced. Foreign investors, notably the British, upon whom the Americans depended heavily for investments, became worried. The New York stock market slipped badly and an economic crisis developed that would later cause a massive series of bank failures up and down the eastern seaboard. The crisis quickly absorbed the stock market and the Allens began to suffer serious losses. By 1836, the firm was forced to close its doors, one of the first major casualties of the nationwide economic crisis. But the lessons learned by them were not completely lost on posterity, because one of their partners quickly set up his own firm to explore new lines of business, intent on not making the same mistakes. That year was to become a milestone in Wall Street history, but the reasons would take several decades to unravel.

The market crash that followed became known as the Panic of 1837. Many banks began to fail, and dozens of brokers failed as well. The most notable casualty was J. L. & S. Josephs, a Jewish banking and brokerage house that thrived because of its association with the Rothschilds. The Josephs were originally from Richmond and made their way north, founding their securities firm with $20,000 of capital in the early 1830s. They became wealthy very quickly, channeling the Rothschild funds into all sorts of enterprises. Business was so good that they began to erect a large granite headquarters at the corner of Wall and Hanover Streets, at the very southern tip of Manhattan. But then the roof fell in, literally.

The new building was a portent for the stock market. In March 1837, as it was nearing completion, the entire building collapsed under its own weight due to shoddy workmanship. Three days later, the market collapsed. The 1830s binge of speculation on borrowed money came to a screeching halt. The Josephs closed their doors after the Louisiana cotton industry collapsed in 1837, leaving them holding millions in worthless paper. Their house, once with capital of $5 million, was now totally bust. Of more than 600 banks and brokers in the country, half of them failed in the wake of the panic, leading to the worst economic crisis the country had yet seen. The Allens were not alone in their misery.

One of the Allens' distant relatives was Enoch Clark, who was a partner in S. & M. Allen until its collapse. Clark established his own firm immediately in Philadelphia with the aid of a brother-in-law, Edward Dodge. The new firm would suffer its own travails but was destined to become one of Wall Street's longest-standing partnerships. At the same time, the Rothschilds, dismayed over the dealings of the Josephs, dispatched a new representative to the United States from Germany. They were no longer willing to leave their agency business in purely American hands. The new envoy was Augustus Schonberg. When he reached New York, he changed his name to August Belmont in an effort to sound more appealing to his new American clients and business partners.

Clark and Dodge established their firm in Philadelphia with capital of $15,000 for the original purpose of “stock and exchange.” Clark was born in 1802 and lived in Easthampton, Massachusetts, until his teens. He then joined the Philadelphia office of the Allens. Several years later, when he was legally able to represent them, he was sent to open a branch office in Providence, Rhode Island. Young men, barely out of their teens, were common in the banking and securities business at the time. While helping the Allens succeed, he began to speculate on his own in the Boston stock market, losing all of his savings in the process. When the Allens failed, he returned to Philadelphia to open the firm that would bear his name for the next hundred years. Clark learned early in life that providing solid business for others was more steady and profitable than speculation in the markets.

Also established in the 1820s were Prime, Ward & King in New York; Thayer & Co. in Boston, which later would become Kidder Peabody & Co.; and Alex Brown & Co. in Baltimore. In addition to trading the occasional stocks, bonds, commercial bills, and commodities, the early securities dealers like E. W. Clark Dodge began aiding merchants in their need for working capital and investing. One of the more lucrative aspects of their business was dealing in banknotes and trading gold bullion. Trading in banknotes, in particular, was a valuable service to clients because of the variety of paper money that existed in the United States. Recognizing the values of different sorts of notes was a specialty of the new firm, a skill that Clark had learned while working for the Allens. It was a talent that combined credit analysis, forgery detection, and common business sense. It was also very profitable. One of their young employees, Jay Cooke, wrote that “our office is continually crowded with customers and we do a tremendous business. We buy and sell at from 18 to 14 commission and thus in doing $50,000 per day you will see it pays well.” Most private banks of good reputation combined money and note dealing with a gold-trading business. Banking houses of repute that had their notes used as currency needed to maintain a supply of gold that would back the notes, and gold trading became as important as trading in securities.

Business soon prospered, and Clark and Dodge began expanding into other cities in need of such skills, especially since the Bank of the United States was no longer a force in American finance. Within two years, they had branches in St. Louis; New Orleans; New York; Boston; Springfield, Illinois; and Burlington, Iowa. They were so successful in the Midwest that their own drafts issued by the branch became one of the major currencies in the region. After the Panic of 1837, investors and businessmen favored banknotes that were backed by specie (gold or silver). Clark and Dodge became major forces in finance in a remarkably short period of time by assuring the public that their notes were fully backed if necessary. As a result, they won their confidence quickly and demand for their services quickly increased. They opened the office on Wall Street in New York to be close to the center of the financial world. Continuing success required that their main office be relocated, and on August 11 they put a notice in the New York newspapers announcing that the Boston and Philadelphia houses had formed the New York firm that would be the standard bearer in the years to come. They shared a building with the Aetna Insurance Company on Wall Street before moving to their own building in 1845 with $50,000 in capital. The amount was not large, even by the standards of the day. The major New York commercial banks dominated the market, and about twenty-four of them accounted for capital of around $20 million. While that amount dwarfed the capital of private banks like Clark Dodge, the commercial banks were not as venturesome as their smaller counterparts. But the branch system proved to be one of the new firm's enduring qualities. In the years after the Panic, prosperity returned and business confidence again soared. The only cloud on the horizon was the American annexation of Texas. Fears were growing that a war with Mexico was imminent. When war did break out, Clark Dodge & Co. would be in the forefront of its financing. Financiers had made reputations before helping the United States raise capital during the 1790s and again during the War of 1812. The war with Mexico would help solidify the reputation of Clark Dodge as one of the country's premier private banking houses.

Despite the young firm's early peacetime success, it was the Mexican War that helped make its reputation. The war lasted less than two years but still required financing for the Treasury from the private sector. Corcoran & Riggs, a well-known Washington, D.C., banking house, provided the financing along with E. W. Clark Dodge & Co. The government raised more than $60 million in the form of bonds offered to the public at 6 percent interest. The bulk of the financing was given to Corcoran & Riggs to sell, with Clark Dodge taking the remainder. Clark and Dodge made more money floating funds between their branches than they did by actually selling the bonds for a commission, and they were criticized in some quarters for taking advantage of a hard-pressed Treasury.

Clark and Dodge were generous employers. They regularly gave parties for their younger employees on weekends, took them to the theater and shows in Philadelphia, and threw lavish parties at the holidays. One of those young employees, Jay Cooke, remembered them fondly, saying that “they were generous and noble men and I am proud to recall that their affection and confidence were extended to me during all our business connection and during all their lives.”
Clark and Dodge were the original two partners in 1845 when Clark Dodge & Co. officially opened its new main office on Wall Street. Younger partners were admitted to the ranks of the smaller banks where the prospects for success, and advancement through the ranks, were greater. Clark Dodge admitted Thomas Huntington as a partner in 1848, and Joseph W. Clark and Luther Clark in 1849. Jay Cooke was also admitted in 1849.

Working for the Allens helped Enoch Clark realize that a branch network had its advantages, especially when handling and clearing funds. Floating funds between the branches earned the firm much-needed cash but was not a simple operation. Law required the Treasury to deposit the proceeds of the bonds at a specified sub-Treasury office at various locations around the country. The sub-Treasuries were created after the demise of the Bank of the United States so that not all of the Treasury's cash would be in one place, in keeping with Andrew Jackson's notion that its use might fall under the control of a small group of elite bankers. Clark's St. Louis office took the deposit and mailed it to its New York office, collecting interest on the amount while the slow mails handled the letter. Then the funds were delivered back to St. Louis, which did not have a sub-Treasury branch, so Clark Dodge issued a bond to the Treasury for the funds, backed by the full faith and credit of the firm, which the Treasury was more than willing to recognize.

When the transaction was finally complete, the firm had more than doubled the amount it had made from selling the original Treasury bonds themselves, having engaged in what would later be known as “floating” funds to its own advantage. All of which was perfectly legal because of the less-than-ideal state of the U.S. Treasury at the time. Jay Cooke, who played a prominent role in the operation, wrote in his memoirs that “our firm had a branch office in St. Louis and we proceeded to sell exchange on Philadelphia and New York at a handsome premium, say two and a half or three per cent . . . the mails were sometimes from ten to fifteen days in transit and in addition to the advantage of interest, we had a large profit in the premiums on exchange over and above the profit we made on the loan.” While this was not the ideal arrangement for the Treasury, it was certainly more advantageous than previous bond-selling efforts where the few private banking underwriters that could be found often took 10 percent for their efforts, sometimes leaving the Treasury short of the actual funds it needed.

Clark and Dodge realized that establishing good relations with the government was vital to their future business. This was a well-known business principle at the time, one long practiced by the Rothschilds in Europe. The famous German-Jewish banking house had established its reputation by forging strong alliances with various governments around Europe, and many of the young American banking houses aspired to do the same in the United States. But a major difference in the ways that the alliances were forged doomed many of the Americans to short-lived relationships with their government. The Rothschilds built their relationships on personal ties with European prime ministers and finance ministers as well as with royalty. The Americans were faced with administrations in Washington whose hold on power was much more tenuous. The clash between Andrew Jackson and Nicholas Biddle, the flamboyant president of the second Bank of the United States, illustrates the independence that government asserted from the private sector and bankers. Both Jackson and his successor, Martin Van Buren, refused several entreaties from Wall Street banks to rescind the “specie only” orders (pay in gold) so that the banks could settle their claims in paper money only, rather than rely on money backed by gold. Wall Street banks claimed that the original order from Jackson helped cause the Panic of 1837 after the charter of the second Bank of the United States was not renewed. Specie-only orders tended to deprive private businesses of the cash needed to operate, causing a cash and credit crunch in the process. All of this was a far cry from the close relationships that European heads of state had with their favorite banking houses. It also allowed the Europeans a greater degree of financial stability than the Americans experienced before the Civil War. Without a legitimate central bank, the Americans would not have a standard currency or a stable method of ensuring the value of paper money. When compared with the British, French, or Dutch, the American economy was very primitive indeed, relying on small private banking institutions to guide it in the absence of a central bank.

The other factor that separated firms like the Allens and Clark Dodge from the Europeans was their insularity. Both conducted domestic business where they could find it. They did not court European investors. The Europeans, mainly the British, Dutch, and some German Jews, were the main suppliers of capital to the United States. When they invested in America, they normally did so through one of their own or their agents. Barings of London had a substantial investment presence in the United States, as did the Rothschilds, but both lacked an American branch as such. The Rothschilds replaced Barings as the U.S. Treasury's main London representative in the early 1830s and funneled their investments through their own American agents, many of whom made a handsome living from them, as did the Josephs before their collapse.4 But the Yankee firms did not have the necessary connections to court the European bankers, so they forged their own domestic business connections wherever they could. If the new American private banking houses wanted to emulate the Europeans by courting the Treasury successfully, they had to provide an invaluable service. Raising money during wartime was certainly one. So in addition to providing advice regarding the many types of banknotes in existence and buying and selling securities, Clark and Dodge got involved in Treasury financing. But other activities also vied for Clark and Dodge's attention. One of them was railway financing, the hot new technological innovation of the 1840s that would revolutionize travel and financing. Like any new enterprise, it was highly rewarding but also extremely risky because it was capital intensive and capital was something in short supply in America.

Clark Dodge helped float bonds for most of the early railroad companies, including the Rock Island Line, Pennsylvania, Northern Central, and the Philadelphia and Erie. Railway construction began to explode geometrically in the 1850s. In 1856, construction almost exceeded the total mileage in the country ten years earlier. Bonds and stocks of the railroads became investor favorites, and the securities houses rushed to underwrite as many of the early deals as possible. But clouds that spelled trouble for the country's banking system were again on the horizon. The payments system between banks in the East and the rest of the country was not functioning properly, and bankers were beginning to feel uncomfortable about the soundness of many banks. Enoch Clark, who was in retirement in Europe, wrote to Jay Cooke as early as 1854, anticipating the financial problems that were to come. “I see you are having rugged times at home. I am not disappointed and do not look for much relief at present. I hope you are acting on safe principle. Keep snug and do not try to do a large business.” Enoch Clark died in the summer of 1856, before troubles began. Just as the railway boom got under way, a new panic developed that was more serious than the one twenty years before. The Panic of 1857 caused havoc in the financial system and forced many Wall Street houses to close. Clark Dodge did not continue unscathed.

On the surface, the Panic of 1857 looked much like the one two decades earlier. Speculation in land, securities, and gold again was rampant. In August, the Ohio Life Insurance & Trust Co. failed, causing widespread havoc. The Ohio was also a bank, so many of its obligations caused merchants and other banks to fail as well. Its stock had been trading at as high as $100 per share and it paid a 10 percent dividend, so its failure was a double blow to both savers and investors. The market was again short of gold to back many obligations of the banks and had been counting on increased shipments from California to offset the shortage. Adding to the panic, a ship called the Central America, on its way east from California, sank with more than $2 million in gold on board. Most banks suspended specie payments as a result, and widespread bankruptcies followed.


The public panicked. Merchants and ordinary citizens by the thousands began running from bank to bank in lower Manhattan, seeking one that would pay specie for their banknotes. It was becoming clear that there was more paper money in circulation than there was gold to support it, and that if banknotes could not be redeemed for specie it would soon be worthless. When the smoke cleared from the Crash of October 13, 1857, eighteen banks had failed, although the major commercial banks such as the Bank of New York had survived. But several, predominantly gold dealers, had succumbed. Paper money became the accepted norm when almost all banks with the exception of the Chemical Bank suspended payments in specie. The stock market fell substantially as a result and stayed in the doldrums for the next year.
The panic began to ebb by the summer of 1858 and the country slowly returned to normal. But the toll the panic took on Wall Street was high. E. W. Clark Dodge was forced to close its offices in New York, Boston, St. Louis, Burlington, and Springfield. The Philadelphia house was able to remain open. When specie payments began again, the firm reopened its doors as Clark Dodge & Co. in February 1858, dropping the E. W. from its official name. The new Clark Dodge listed six partners in its new partnership agreement, published on February 18. One name was conspicuously absent, however: that of Cooke. Jay Cooke withdrew from the firm with which he had been associated for the past twenty years, for private reasons. His resignation was the greatest loss that Clark Dodge would register in the nineteenth century, despite its trials and tribulations in the market. Cooke was to remain in retirement for four years, until the outbreak of the Civil War. He later wrote, “I have often reflected that this preparation of rest and disentanglement from all business providentially fitted me to carry cheerfully . . . the most enormous financial burdens I verily believe were ever placed on the shoulders of any one man.” He was correct. The financial burdens of the Civil War were fifty times those of the Mexican War and began by costing the Treasury more than $1 million per day. Clark Dodge and the new firm of Jay Cooke & Co. would play a central role in its financing.

Cooke founded his new firm with one partner, William E. C. Moorhead. Cooke held two-thirds of the partnership, Moorhead one-third. Over the years, the relationship was never easy and Moorhead and Cooke often found themselves at loggerheads over firm policy, especially during the Civil War. And Cooke always remained the decision maker of the two, giving the firm a strong but autocratic tone. That go-it-alone attitude would work well during the war but was less successful in the postwar years. His brothers Henry and Pitt also joined the firm, and while Cooke often valued their advice more than that of Moorhead, he clearly remained in charge of most of the decision making. H. C. Fahnestock joined the firm as a partner in the Washington office and became Cooke's most valued lieutenant over the years.6 Another partner, Edward Dodge, was a member of the New York Stock Exchange and held the seat on the exchange for Jay Cooke & Co. after 1870.

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