Wall Street People: True Stories of the Great Barons of Finance

Overview

Praise For Wall Street People VOLUMES 1 and 2

"The people in this book have one thing in common. For better or worse, each made a lasting impression on the landscape of our business. While some are viewed as heroes, and others as rascals or villains, there is something to be learned from each of their stories. Wall Street People is a fascinating portrayal of individuals who achieved fame or infamy in one of the most competitive arenas in the world."
-Alan C. Greenberg, Chairman ...

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Overview

Praise For Wall Street People VOLUMES 1 and 2

"The people in this book have one thing in common. For better or worse, each made a lasting impression on the landscape of our business. While some are viewed as heroes, and others as rascals or villains, there is something to be learned from each of their stories. Wall Street People is a fascinating portrayal of individuals who achieved fame or infamy in one of the most competitive arenas in the world."
-Alan C. Greenberg, Chairman Bear, Stearns & Co., Inc.

"There has been no keener observer of Wall Street than Charley Ellis. If this book had a 'Most Influential' category, Charley should include himself."
-Richard H. Jenrette, Senior Advisor Donaldson, Lufkin & Jenrette

"Charley Ellis has correctly concluded that the financial world has produced some extraordinarily interesting people. Wall Street People is certain to provide fascinating reading."
-Richard B. Fisher, Chairman Emeritus and Advisory Director Morgan Stanley

"Charley Ellis's Wall Street People is delicious reading for anyone who's been involved with Wall Street over the past half century. This book depicts saints, sinners, dreamers, and achievers with real panache. It's a treasure trove of great stories."
-David H. Komansky, Chairman and CEO Merrill Lynch & Co., Inc.

"For anyone who enjoys reading about the lives of successful, productive people, Charley's book is filled with fascinating insights into the achievements of Wall Street's best."
-Senator Jon S. Corzine former Chairman and CEO of Goldman Sachs

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Product Details

  • ISBN-13: 9780471274285
  • Publisher: Wiley, John & Sons, Incorporated
  • Publication date: 1/24/2003
  • Edition number: 1
  • Pages: 288
  • Product dimensions: 9.00 (w) x 6.00 (h) x 0.81 (d)

Meet the Author

CHARLES D. ELLIS served twenty-eight years as managing partner of Greenwich Associates. He has taught courses in investment management at Harvard Business School and the Yale School of Management; served as trustee on the investment committees of Phillips Exeter Academy, Yale University, and the Whitehead Institute; and as chairman of the Association for Investment Management and Research (AIMR). He is a director of The Vanguard Group.
JAMES R. VERTIN was the founding manager and chief investment officer of Wells Fargo Investment Advisors, which grew into Barclays Global Investors, one of the world's largest investment firms. He has long served as a leader in the investment profession's organization. Jim and Charley have enjoyed over thirty years of friendship and have produced three prior books together, including the companion volume, Wall Street People: True Stories of Today's Masters and Moguls, also published by Wiley.

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Read an Excerpt

Wall Street People

True Stories of the Great Barons of Finance, Volume 2
By Charles D. Ellis James R. Vertin

John Wiley & Sons

ISBN: 0-471-27428-3


Chapter One

Wall Street Personalities

* * *

August S. Belmont

* * *

GREGORY HUNTER

August Schöenberg Belmont was a protégé of the Rothschilds, who trained him in his native Germany. On coming to America in 1837, he represented their U.S. interests, developed his own successful firm in Wall Street, and was a social leader in New York City. He was also the de facto head of the Democratic Part y from 1860 to 1884, served as a U.S. diplomat abroad, and played a key role in blocking both European recognition and financing for the Confederacy during our Civil War. Racing's Belmont Stakes are a memorial to his interest in breeding fast horses.

Belmont was born on December 8, 1813, in the village of Alzey in the Rhenish Palatinate region of Germany. His father, Simon Belmont, was a community leader who served as president of the local synagogue for many years....

Tragedy came early to young Belmont's life. His mother died when he was seven, followed one month later by the death of his brother. Less than a year later, Belmont went to Frankfurt, 40 miles to the north, to live with his grandmother, Gertrude, and her husband, Hajun Hanau, who had connections with the Rothschilds.

In Frankfurt, Belmont attended a Jewish school.... In 1828,his father had to remove him because the tuition payments had fallen so far in arrears.

After he left school, Belmont's relatives convinced their Frankfurt friends, the Rothschilds, to train the boy for a business career. His association with the Rothschilds thus began in 1828, when he was fifteen.... The Rothschilds first made Belmont an apprentice at their Frankfurt branch. Clearly learning the business from the bottom up, he began by sweeping floors, polishing furniture, and running errands. Young Belmont was neat and punctual; he worked industriously at whatever tasks the Rothschilds gave him. He also showed drive and initiative, rising daily at five o'clock to have a private tutor instruct him in French, English, composition, and arithmetic.

The Rothschilds recognized Belmont's talents and hard work and, after a few years, advanced him through the ranks. In 1832, they gave Belmont a confidential clerkship and in 1834 made him secretary and traveling companion to one of the partners. The latter responsibility significantly broadened his horizons, as he traveled to Paris, Naples, and the Vatican. While in Italy, Belmont learned to speak Italian and spent much of his leisure time in art galleries. That led to a lifelong interest in and support of the arts.

The turning point in Belmont's life and career came in 1837. Because of the instability of the Spanish Empire, the Rothschilds decided that they needed a reliable agent in Havana to watch over their interests. Belmont accepted the assignment and sailed for Havana via New York City. He reached New York on May 14 and walked into the midst of a financial crisis: the Panic of 1837 had begun just one week before; all New York City banks had suspended specie payments.

The New York commercial community was hard hit by the financial downturn and resulting panic, with many businesses failing. Among the businesses affected was the Rothschilds' American agent, J.L. and S.I. Joseph & Company, which failed on March 17, leaving liabilities of $7 million.

Belmont therefore faced a dilemma. While he had instructions from the Rothschilds to go to Cuba, it was obvious that the Rothschild interests in the United States were at great risk. Because of the slow communications with Europe, it would take several months to receive new instructions from the partners. Belmont concluded that the situation required immediate action, and he decided to delay his Cuban departure: he stayed in New York to look after the Rothschilds' concerns.

Belmont established a firm, August Belmont & Company, and rented a room at 78 Wall Street. When the Rothschilds learned of his actions, they approved and appointed Belmont's company their new American agent. The Rothschilds gave him a $10,000 annual salary, a princely sum in the then-depressed city.

Because of its powerful international connection, Belmont's firm quickly became a success. Within three years, Belmont amassed a personal fortune of more than $100,000, making him one of the richest men in New York City. From 1837 to 1842 he sorted out the complicated Rothschild interests in the United States. He served as their disbursing agent and dividend collector even after the immediate crisis passed, and his affiliation with the Rothschilds extended to the close of the century.

August Belmont & Company also became a power in its own right. Belmont was involved in foreign exchange, commercial and private loans, acceptance of deposits, and the handling of commercial paper. By the time of the Mexican War, Belmont's firm had sufficient resources to underwrite a large portion of the loans made to the U.S. Treasury....

Belmont and his wife originally lived at 72 Fifth Avenue. In the 1850s, Belmont purchased and renovated a mansion at 109 Fifth Avenue, on the corner of 18th Street. According to all accounts the house was magnificent. The picture gallery Belmont had built was the first in New York City to include skylights. The house also had the first private ballroom in the city. The Belmonts frequently hosted and entertained guests in their mansion. Belmont won acclaim as one of the first gourmets in America, and the fine food and drink at his house constituted a source of much conversation in social circles.

As a change of pace, Belmont bought a 1,200-acre farm on Long Island a few years later. Called the Nursery Farm, it was located in Babylon and was virtually a self-contained community.

The farm had a 24-room mansion; a 30-acre lake; fields and silos for corn, hay, wheat, and rye; pastures for cows and horses; and even a bowling alley. The pride of the farm, however, was its stables, where Belmont hoped to raise the best racehorses in America. So that Belmont could watch his equine investments, the farm had a private one-mile-long racetrack complete with grandstands. Belmont emerged as one of the most influential figures in American horse racing during the second half of the nineteenth century. He served as president of the American Jockey Club and helped transform racing from a casual pastime into a professional sport.

Belmont's family connections led to his involvement with politics. In 1851, John Slidell, Belmont's wife's uncle, tried to secure the upcoming Democratic presidential nomination for his friend, Secretary of State James Buchanan of Pennsylvania. In order to win the nomination, it became clear that Buchanan needed to win New York State. At Slidell's urging, Belmont agreed to head Buchanan's New York campaign. Despite Belmont's hard work, Buchanan lost the 1852 nomination to Franklin Pierce.

In a show of party unity, Belmont worked for Pierce's election....

With the victory in hand, Belmont began his own campaign to secure a diplomatic appointment. He reminded the Pierce administration about this active role in the election and stressed his experience in international finance. Belmont hoped to secure the position in Naples, a city he had come to love while working for the Rothschilds. Because of the various political demands on Pierce, Belmont did not receive the Naples post. Rather, the President appointed Belmont chargé d'affaires at The Hague....

Although in Europe, Belmont closely followed American politics. As the 1856 presidential election approached, he promoted Buchanan for the Democratic nomination. Buchanan eventually defeated Pierce, marking the first time in American history that an elected president desirous of another term failed to secure renomination.

When Buchanan won the general election, Belmont angled for an appointment to a more prestigious diplomatic post. In particular Belmont wanted to serve in Madrid, for that would give him the opportunity to pursue a long-standing plan of his for the United States' acquisition of Cuba. Despite Belmont's long association with Buchanan, the new administration ultimately offered him nothing more than a reappointment to his current position at The Hague. When Belmont learned of this, he resigned and returned to the United States. Belmont's furniture, artwork, wine cellar, and personal belongings required 250 crates to ship home.

Belmont returned to a city in the midst of another panic. Many businesses had failed; unemployment and crime had risen. During that crisis, Belmont contributed generously to several charities. He also did something to try to raise the spirit of the city: he arranged a public exhibition of his art collection. This was a first in New York City and was well received in the press. Ever the art patron, Belmont eventually installed a large art gallery in his Fifty Avenue mansion.

Upon his return, Belmont reclaimed his place at the head of the New York social scene. He brought his chef back with him from Europe, raising dinner parties to a new pinnacle. Belmont typically seated up to 200 people at gold place settings. Each guest had a personal footman to serve and remove plates. He also used his private ballroom for lavish parties that lasted until dawn. The cost of all this socializing was high: Belmont's monthly wine bill alone exceeded $20,000.

Charles D. Barney

* * *

Charles D. Barney was a son-in-law of Jay Cooke and a Civil War veteran who lived to celebrate his 101st birthday. His name is one of the few founders' names that are still carried by the firms they started-in this case, more than a century ago. He died in 1945.

PHILADELPHIA, Oct. 24-Charles D. Barney, formerly one of this city's most distinguished financiers and one of the country's oldest Civil War veterans, died last night in his home in nearby Elkins Park after a long illness. His age was 101.

He was born in Sandusky, Ohio, where his father was a grain merchant. His mother was the former Elizabeth Caldwell Dennis, a member of an old New York family. Mr. Barney was attending college in Ann Arbor, Michigan, when his elder brother, Henry, was killed in the Civil War. After two more years of study he persuaded his mother to permit him to enlist....

After the war, he returned to Sandusky and worked as a clerk and bookkeeper in the Second National Bank, but he quit after two years and came to Philadelphia....

About the same time he renewed his acquaintance with Laura E. Cooke, daughter of Jay Cooke, the financier, who maintained offices here but who returned annually to Sandusky. Mr. Barney became affiliated with the banking house of Jay Cooke & Co. in 1867-and a year later married Mr. Cooke's daughter....

The Cooke bank failed in 1873 and a year later, with Jay Cooke Jr., Mr. Barney founded the brokerage and banking house of Charles D. Barney & Co., which soon became internationally known and was one of the leaders in the stock and bond business in Wall Street.

Finance alone, however, did not occupy all of Mr. Barney's time. He was an amateur musician, actor, and devout churchman. He taught Sunday School in St. Paul's Episcopal Church, where he was rector's warden....

Mr. Barney retired in 1906 at the age of 62, but retained his directorships in many organizations until a few years ago....

He said his greatest ambition was realized when he celebrated his one hundredth [birthday].

Ferdinand Eberstadt

* * *

Ferdinand Eberstadt graduated from Princeton, served in France, got a "war degree" in law from Columbia, joined Dillon, Read & Co., quit when they wouldn't pay him what he considered his due, and set up his own firm in 1931. Sometimes "Ferd," sometimes "Eber," he was always a dreadful golfer. After a 12 on the first hole at Ausable, he said to his caddie, "You know, I believe I'm the worst player in this Club." "Oh no," said the caddie, "there's a far worse player than you, sir." "Who?" "Mr. Eberstadt."

By late 1933, most of the water was wrung out of the fabric of finance. The reorganization business of F. Eberstadt & Co. was ebbing fast, and Ferd returned to the problem of creating an investment business. "Most new firms in Wall Street," said Eberstadt, "were formed by successful salesmen." If you were prudent and careful-and knew the right people-you could get on the big syndicate lists. If not, you had to take any list you could get, for the Wall Street syndicates operate on the backscratching principle, and there was no profit for them in scratching a new back. So Ferd had to scratch for himself.... He decided to look for business among the smaller companies that Wall Street in general was ignoring-namely those earning from $250,000 up.

Just where hindsight laps foresight in a man's career is difficult to determine; the fact is that Eberstadt moved into this field and, once there, found it the right place for him to be. Indeed, he landed right next to a nice proposition. One of the officials of Square D Co., manufacturing electric-control equipment in Detroit, had been caught in the panic. He had put up 16,000 shares of Square D stock as bank collateral and because there was no market for it, the bank threatened to clean him out. Eberstadt learned of this from a Princeton classmate. The block, consisting of 8,000 preferred and 8,000 common, was offered to him for $40,000. He looked up the company, and when he saw that it was earning nearly a dollar a share, he took up the offer. In March 1934, he tested the market and offered the preferred at $8; it went very well, but the common at $3 was sticky. So he put Square D on the shelf for a year. In early 1935, when the market turned up, he dusted off the common and got rid of some at $15, and, early in 1936, still more at $50. The common was later split three for one and even this sold for almost $50. At present levels, the original 16,000 shares would be worth over $900,000. What Mr. Eberstadt made on the Square D deal is his own secret, but his outright profit probably ran close to $500,000-and the firm still has some shares left.

* * *

This little operation was important to Mr. Eberstadt on several counts. It introduced F. Eberstadt & Co. as a dealer in the securities of a medium-sized company; it brought an inordinate profit for a new firm; and it was so spectacular that it left tongues hanging out in Wall Street. But the really important byproduct was to put him in intimate touch with the problems gathering around the small, closely held corporation.

Continues...


Excerpted from Wall Street People by Charles D. Ellis James R. Vertin Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

WALL STREET PERSONALITIES.

August S. Belmont.

Charles D. Barney.

Ferdinand Eberstadt.

Charles Hayden.

Edward A. Pierce.

Dwight Morrow.

Otto H. Kahn.

André Meyer.

Robert Lehman.

Edward Lefevre.

Jesse L. Livermore.

Joseph P. Kennedy.

William O Douglas.

GREAT PLAYERS IN AMERICAN FINANCE.

Robert Morris.

George Peabody.

Andrew Carnegie.

John D. Rockefeller.

George F. Baker.

George W. Perkins.

James J. Srorrow.

Edward H. Harriman.

Mary A. Harriman.

Amadeo P. Giannini.

Jesse H. Jones.

Charles E. Merrill.

Robert Moses.

MOVERS, SHAKERS, AND SCOUNDRELS.

John Law.

Gerson Bleichroder.

Jay Cooke.

James Fisk.

Jay Gould, Daniel Drew, James Fisk, and Cornelius Vanderbilt.

Jay Gould.

James J. Hill.

Nelson W. Aldrich.

William C. Durant.

Van Sweringen Brothers.

Charles Ponzi.

Samuel Insull.

Ivar Kreuger.

Arsene Pujo.

Ferdinand Pecora.

Albert H. Wiggin.

Charles E. Mitchell.

Charles E. Mitchell.

GREAT FINANCIAL HOUSES.

Alexander Baring.

Alexander Brown.

Johann Heinrich Schröder.

Nicholas Biddle.

Stephen Girard.

Jacob Henry Schiff.

Mr. Morgan, Mr. Carnegie.

J. Pierpont Morgan, Jr.

Lehman Brothers.

Tokuschichi Normura H.

Jonathan Binns Were.

SOME UNUSUAL INVESTORS.

Sir Thomas Gresham.

John M. Keynes.

George Ross Goobey.

Georges F. Doriot.

Benvenuto Cellini.

Ulysses S. Grant.

Winston S. Churchill.

Index.

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