The Man Who Made Wall Street: Anthony J. Drexel and the Rise of Modern Finance
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The Man Who Made Wall Street: Anthony J. Drexel and the Rise of Modern Finance
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Overview
It was the height of the Gilded Age and J. Pierpont Morgan controlled the fate of railroads, corporations, and governments. The wealthy and influential were said to tremble before his blinding intellect and intimidating gaze, yet he deferred to one man: Anthony J. Drexel. Drexel—whose name is familiar today only through the university he founded and his recently canonized niece and protegee, Katharine—was the most influential financier of the nineteenth century.
The second son of an Austrian emigre, Anthony Drexel (1826-1893) soon established himself as the preeminent financial mind in the Philadelphia currency brokerage his father began in 1838. Shunning publicity, self-promotion, and high-profile public accolades (he declined President Ulysses S. Grant's invitation to become Secretary of the Treasury), Drexel initiated a partnership with J. P. Morgan and his father, Junius, that became the most powerful financial combination of its age.
At a time when the United States did not have a central bank, the government as well as large-scale commercial ventures relied on financiers to raise the enormous sums of money necessary to build railroads, construct factories, and fight major wars. With branches and partnerships in London, Paris, Chicago, and New York, all benefiting from their leader's reputation for impeccable integrity, Drexel's firms were able to steer American business through the most extraordinary long-term economic growth of any nation in world history, as well as through four devastating depressions, an enlightening lesson in the cyclical nature of the U.S. economy.
Drexel and his firm quietly pioneered many of the financial and business strategies that we now take for granted, such as trading national currencies, guaranteeing credit for travelers abroad, rewarding workers based on individual initiative, and offering "sweat equity" to deserving employees who could not afford to buy stock. By cultivating Morgan's self-confidence and allowing his younger business partner to become the public face for the firm, Drexel was able to avoid attention and, instead, nurture his extended family.
Today, Anthony J. Drexel's influence and accomplishments are mostly forgotten or credited to others, but after decades of detective work and careful research, Dan Rottenberg has succeeded in writing the first biography of this exceptionally influential and elusive man. Since Drexel gave no interviews, kept no diaries, held no public offices, and destroyed most of his personal papers, Rottenberg had painstakingly to track down every reference and anecdote he could find and, in the process, discovered 150 previously unknown letters and cables in Drexel's hand. Drexel believed that there is no limit to what one can accomplish if one doesn't mind who gets the credit, but as The Man Who Made Wall Street shows, the balance has finally been paid in full.
Product Details
| ISBN-13: | 9780812219661 |
|---|---|
| Publisher: | University of Pennsylvania Press, Inc. |
| Publication date: | 05/22/2006 |
| Pages: | 296 |
| Product dimensions: | 6.00(w) x 9.00(h) x 0.76(d) |
About the Author
Read an Excerpt
Chapter One
The Artist as Fugitive
SIXTY-ONE YEARS BEFORE Pierpont Morgan's appointment with Anthony Drexel, an Austrian youth awaited a far more frightening nighttime rendezvous along a desolate bank of the Rhine. It was the ninth of August in 1809, and the apprehensive young man was a painter's apprentice named Francis Martin Drexel who would one day become Anthony Drexel's father.
Francis had been born just a few miles from this spot seventeen years earlier, on Easter Sunday 1792. Dornbirn, his birthplace, was a bucolic Austrian town of some five thousand souls nestled in a fertile valley surrounded by the Bregenzer Forest. From the snow-capped Apenzell Mountains above their town the burghers of Dornbirn could easily see the Rhine as it cut through their valley and flowed into Lake Constance, but otherwise they were effectively insulated from the outside world. In this picturesque and self-contained western end of the Tyrol, Francis M. Drexel's solid, simple, devoutly Catholic ancestors had worked the soil at least as far back as the early seventeenth century and possibly for centuries before that.
His father, Francis Joseph Drexel, was the first Drexel to leave the land, becoming one of Dornbirn's most prosperous merchants. In the process Francis Joseph inevitably developed the family's first connections across the nearby national borders of Switzerland, Bavaria, and Liechtenstein. This experience stimulated his greater ambitions for Francis Martin, the elder son among his three children. Old Francis resolved to give his son a thoroughgrounding in languages, which the lad could use to help expand his father's trading business.
This plan suffered from a single (albeit not insurmountable) flaw. By forsaking farming in order to follow his inclination for trade, old Francis had introduced, however subliminally, the notion of free choice into a family that had previously assumed that its fate was predetermined. But young Francis, whose future the father now proposed to mold in his own image, felt no interest in either farming or his father's business; his natural inclination, he had sensed from his earliest years, favored painting.
Nevertheless, an eleven-year-old boy was in no position to question his father. So late in 1803 Francis Martin Drexel was sent to study languages at the celebrated school of the Convent della Madonna at Saronno, near Milan, some two hundred miles away. He thus became the first member of his family to venture for any lengthy period beyond the tranquil valleys of the western Tyrol.
Young Francis remained at the convent for thirteen months, learning to speak Italian like a native and picking up some French as well. His father next intended him to continue his studies in France. But at this point the outside world intruded upon the inhabitants of the Tyrol. Napoleon's invasion of Austria in 1805 destroyed lives and property, disrupted trade, and altered commercial regulations, causing the failure of the elder Drexel's business partnership. By the end of 1805 the Tyrol had been ceded to the Napoleonic state of Bavaria, young Francis was back home, and his father was now so impoverished that he had no choice but to abandon his plans for his son's education and let the boy follow his own desires. On the first of January 1806, when he was not yet fourteen, young Francis was apprenticed to a painter in the village of Wohlfurt, five miles north of Dornbirn.
Here he stayed for three and a half years and might have remained for the rest of his life but for a second and far graver crisis. Goaded by the tyranny and oppressive taxation of the occupying French and Bavarians, the Tyrolese mountaineers revolted in 1809. That April, led by a patriotic innkeeper named Andreas Hofer, these remarkable peasants-turned-warriors overwhelmed a Bavarian army at Sterzing; in early May they took Innsbruck, the provincial capital; and on May 29 they forced Napoleon's troops to withdraw from Hohenems, just eight miles from the Drexel home in Dornbirn.
Even after the French and Austrian armies signed an armistice in July, following the French victory in the battle of Wagram, the Tyrolese under Hofer refused to recognize the truce and continued to fight. The elder Francis Drexel appears to have been an officer among these insurgents, and young Francis may have joined the uprising as well. (For the rest of his life young Francis carried with him a watercolor of Hofer and a Tyrolese pewter coin minted under Hofer's short-lived government, both of which suggest his devotion to the Tyrolese cause.)
The revolt lasted into December 1809, with Hofer slipping past the enemy and keeping resistance alive until he fell into French hands and was executed in Mantua, Italy, in February 1810. But in the province of Vorarlberg, where the Drexels lived, the uprising ended abruptly months earlier, on the fourth of August, when a French army struck through the valley, attacked the local guerrilla bands from the rear and cut them off from the rest of the Tyrol, forcing them to surrender without a battle.
Almost immediately, the French announced the price they would exact from the Vorarlbergers: All able-bodied men and boys from sixteen to forty-five would be liable for service in Napoleon's regiments, possibly to fight against their own fellow Austrians. The elder Francis Drexel was forty-seven and thus exempt from this draft, but his son was seventeen. The father quickly made a hard decision: His son would be better off adrift and alone among strangers in the outside world than as cannon fodder in Napoleon's army. Perhaps the boy would find a living across the Rhine in neutral Switzerland; perhaps he would wind up elsewhere. There simply was no time to plan anything but his son's immediate escape.
Thus on the morning of August 9, 1809, barely four days after Vorarlberg capitulated to the French, the well-connected Drexel father made arrangements with a Swiss ferryman to conduct his son across the Rhine. That night at six o'clock, father and son, along with another draft-prone neighbor named Caspar Thurnher, set out from Dornbirn for Lustenau, an Austrian village on the Rhine some five miles to the west. Here, as the elder Drexel had prearranged, they met the ferryman. At ten o'clock, on a night young Francis later called, in his awkward English, "as dark as there probably any ever had been," he separated from his father. They would not meet again for more than two years, and only once more after that for the rest of both men's lives.
Because the Rhine was guarded by the French on the east side and by the Swiss on the west, the ferryman crossed at the river's most dangerous (and therefore least guarded) point. Their boat reached the opposite shore only after what Francis later described in his memoirs as "great toil." Here the ferryman explained to the two young men how and where to proceed to avoid the guard posts, and then left them on their own.
For three quarters of an hour young Francis and Thurnher waded through marshes, ditches, and bushes. When they finally spotted a light in the distance they resolved to head toward it. A half hour's walk brought them, at midnight, to the village of Diepoldsau. It was Saturday night, the entire village was asleep, and that single light had been left burning by the inhabitants, in keeping with Catholic tradition, for the sake of departed souls. After knocking on several doors, the two fugitives finally roused one household. Thurnher concocted a long tale as to how they had come from another town in Switzerland, lost their way, and now needed directions to a public house. But the ruse failed almost immediately: The family, it turned out, knew Drexel's father and noticed how Francis resembled him. Nevertheless, they directed the two fugitives to a public house and wished them well.
The next day the two friends parted—Thurnher to seek work, Drexel to find the village priest, who was another acquaintance of his father. Francis stayed with the priest in Diepoldsau for the next five nights before setting out to seek work. His father had given him letters of introduction to a man in Altstatten, but for some unexplained reason Francis passed through that town without presenting his papers. Instead he continued some fifteen miles southwest to Appenzell, where he was advised to look for work in Trogen, some fifteen miles north and just a few miles from Altstatten whence he had come. Here he found his first job: assisting a house painter named John Meyer for six weeks. His compensation was board plus the equivalent of forty American cents per week.
Francis Drexel's first week on his own established his pattern for the next five years: The former art student would become a fugitive, wandering through Switzerland, France, and Italy, living by his wits and his impulses, always poor, often penniless, sometimes in rags, repeatedly suffering for his naïve faith in his fellow man. Yet his later memoir of these travels suggests that his loneliness and desperation during those years were transcended by his intoxication with a life of freedom, adventure, and intensity. Francis was experiencing first hand what Mary Wollstonecraft had observed less than thirty years earlier: "Nothing, I am sure, calls forth the faculties so much as the being obliged to struggle with the world."
His presumed (if unspoken) goal was to survive the Napoleonic wars until he could return home to Dornbirn. But at some point his fascination with the novelty of his vagabond life seems to have become an end in itself. However terrifying the next five years may have been, for the rest of his life Francis Martin Drexel would repeatedly seek out risk and reject security, often when there seemed no logical reason to do so.
By October he was on his way across the Splügen Pass into Italy, apparently intending to return to the neighborhood of the convent he had attended as an eleven-year-old. The fact that he was once again within Napoleon's jurisdiction does not seem to have occurred to him. In Chiavenna, just over the border from Switzerland, he found temporary work painting two coaches, which took him six weeks. From there he proceeded to Milan, hoping he might be admitted to the Academy of Fine Arts, but in that city he found neither a vacancy nor work of any kind. At Saronno, however, he was warmly received by the Morandi family, whom he had come to know as a schoolboy at the convent. They urged him to stay with them at least through the winter, but he refused. "I had too much bashfulness and honor to accept the offer," he explained in his memoirs. So with a cane in his hand and all his personal effects in a bundle covered with oil cloth on his back, Francis tramped on foot back across the Splügen and into Switzerland amid the December snows.
Near the Swiss town of Chur he fell in with two other pedestrians: one a boy of about fifteen, the other a man of about thirty who said he had just been discharged after eight years' service in a Swiss regiment allied with the French and was now on his way home to Glarus, about thirty miles to the northwest. Amid rain and snow they proceeded together to Wallenstadt, by Lake Wallensee, where they found a fair in progress and the inns so full that the three travelers had to share a single bed. Francis slept like a log and was thunderstruck to discover upon awakening the next morning that all his money was gone.
"My father, at parting, had advised me always to put my money in my vest-coat and that under my bed pillow," he noted in his memoirs, "that by those means I might not get robbed without at least awaking; which advice I punctually always followed." But on this night he had slept so soundly that the precaution had been useless.
The room contained three other beds, each of which slept two men. Francis was one of the first up and immediately announced his loss. His soldier companion helped him strip the beds in search, but they found nothing. Francis was convinced that the soldier had the money in his pocket and accused him on the spot. He also complained to the landlord, who replied that he did indeed have such money as Francis described but asked if Francis had marked the coins to prove that they belonged to him. Lacking such proof, Francis never saw another penny. It was a vivid lesson in the importance of portable credit—the challenge he would confront as a banker more than a quarter-century later.
Francis now found himself utterly without money or friends, "a hopeless stranger" in a strange country, with no prospect of work and with winter fast approaching. Near the lakeside, overcome by his situation, he burst into tears. A woman who observed his distress comforted him and gave him half her wine in exchange for his help in carrying her bundles. She also gave him a valuable piece of advice: If he boarded the lake boat without mentioning his poverty, the boat would take him the length of the lake—fifteen miles west—at no cost, because the fare would not be collected until the passengers got off. Sure enough, when Francis disembarked at Weesen and payment was demanded, he told the collector that he had no money and was let go with no more penalty than a severe reprimand.
On this boat his luck took a turn for the better: He met a twenty-eight-year-old merchant named Herburger who had served with Francis's father in the Tyrolese revolt and, like Francis, had fled the Tyrol to avoid the French draft. Herburger treated Francis to a square meal and continued to pay his expenses for the next three days until they reached Einsiedeln, a Swiss monastery famous as the site of miracles. Here they parted company, Drexel heading for Luzern some thirty miles away to seek work. On Herburger's advice, he followed the custom of German journeymen by going from house to house begging for food and shelter, which sustained him until he reached Luzern.
In Luzern he finally found work—apparently as a house painter—but no end to his troubles. The pay was equivalent to only thirty-two cents a week (plus his board), and his boarding-house companions enticed him into gambling with them at cards, with the result that "I generally lost my wages one to two weeks before I had earned them." In practical terms, this meant that in the depths of an Alpine winter Francis had no money to buy stockings and had to bind rags around his feet.
By Easter of 1810 he had resolved to turn over a new leaf. He asked his employer for a pay raise and, to his astonishment, had his wages doubled. This increase enabled him to find new lodging, repair his clothes, and put some money aside. "I from henceforth became very economical," he wrote later. Yet in Luzern he became restless again. Hoping to improve his fortune, he left—on foot, as usual—in late July for Basel. After a sleepless night in a village inn at Durnen, where he found bloodstains on the sheets and all over the floor of his room, he arose early, slept for several hours in a field, and reached Basel that afternoon. Here he found work with one Peter Biermann for two French crowns a week—his highest wages yet—until the end of October, when he was laid off with a promise of more work the following spring.
Consistent with his restless nature, Francis did not hang around Basel. In Biel, forty miles south, he was hired to paint coaches for the local postmaster. But he was outraged to find himself paid the equivalent of only eighty cents a week to do virtually all the work, while the foreman who hired him—a German from Hamburg named Ludwig Krone—received $10 for doing virtually nothing but took all the credit. "Without me," Francis later wrote indignantly, "he would absolutely not have been able to finish what he began."
Of this and other apparent wrongs suffered by Francis during his travels, of course, we have only his side of the story to go on. It is possible, for example, that the foreman shouldered other responsibilities of which the naïve Francis was unaware. And it is certainly likely that Francis's expectations of his fellow men were hopelessly unrealistic. But in any case Francis in this period was clearly developing strongly held opinions and a keen sensitivity to injustice—real or perceived.
He was less successful in his choice of companions and in his ability to protect himself from swindlers. Notwithstanding his resentments against his foreman Krone or his gratitude for steady employment through the winter, in March 1811 Francis decided to leave with Krone and head for Paris. After passing through Besançon, Dôle, and Dijon, they encountered what more sophisticated travelers would recognize as a classic scam. While they walked along the canal running northward toward Auxerre, they were joined by a distinguished-looking French gentleman who struck up a conversation with them. As they conversed they were passed by an oddly dressed man who, after questioning by the Frenchman, explained that he was a Spanish officer recently imprisoned in Dijon. The Spaniard said he had just been taught to play cards the night before and offered to sell them a deck he had been given. When the Frenchman asked him to demonstrate, the Spaniard sat down by the roadside, using his hat as a table and setting up a guess-the-card game, clearly a nineteenth-century variation of three-card monte.
"The Frenchman immediately pulled out his watch against a French guinea that he would guess it, and won the guinea," Francis later related. "So easy seemed to be gain here, and apparently so plain, that the Frenchman, my companion, and myself were disputing who should play first." With feigned reluctance, the Frenchman deferred to Krone, who in a matter of five minutes lost every penny he had—eighteen guineas—then his watch, and finally his gold seals. Drexel, finally realizing what was afoot, &dined to play further and urged Krone to join him in attacking the two swindlers, but "his courage failed him, he was stupefied, overcome."
Although Francis had apparently lost nothing to the swindlers, he now felt responsible for his impoverished companion. He assured Krone that the two of them were committed to each other and lent Krone three guineas—and Krone, thus rescued from poverty, promptly resolved to walk no more but to proceed toward Paris by coach. "I had much against my will to follow suit or run the chance to see my companion no more," Francis recalled. Given the dubious value of Krone's companionship—at least as Francis described it—the passage offers poignant insight into young Drexel's loneliness and his desperation to build lasting relationships.
They reached Paris in April 1811 on a large packet on the River Seine and found work in the Faubourg St. Antoine. Francis appears to have arrived with every intention of remaining; he visited the principal sights and even saw Napoleon at a distance. But after three weeks his work ended, and after five weeks he had tired of the City of Light and was on his way back to Switzerland. Even Francis, in retrospect, acknowledged this decision as inexplicable: "I got (unfortunately) tired of Paris (at which place I ought to have stayed)," he wrote some twenty years later.
In May he was back in Basel, but lack of work there drove him to Mulhouse in Alsace, where he stayed three weeks painting coaches. But Mulhouse didn't suit him either, so he returned to Basel and found work with his old boss Biermann. Here he was placed in charge of thirteen journeymen and paid the very high wage of four French crowns a week, the most he had ever received. At the age of nineteen, Francis for the first time had enough money to live comfortably, and he even indulged in the luxury of fine clothes. But again this situation was too good to last. His fellow workmen, jealous of his success, conspired against him and made his life so disagreeable that after about six months Francis left Basel again on yet another risky venture: a visit to his parents at their home in Dornbirn.
Near the end of January 1812 Francis set out for Austria in his best clothes, with money in his pocket. Proceeding across the northern edge of Switzerland, with a brief foray into Bavaria, he reached Dornbirn after an absence of two and a half years. As he had planned, he arrived during the local carnival, but he chose not to appear until nighttime—a wise precaution, as he quickly discovered. Napoleon had just begun to recruit a huge army for his Russian campaign. To avoid exposing himself, Francis went first to the house of an uncle named Luger, who advised him that a conscription was expected soon. Luger sent for Francis's sister, and in the darkness she escorted him home, where she had left her fiancée. According to Francis, his sister entered the house first and brought out his mother, who gave him a warm embrace. Then his sister removed the candle and, in the darkness, introduced her lover to Francis, calling Francis "a friend of hers from some miles off."
Learning that his father, at that moment, was attending a masked ball at the local hotel, Francis proceeded there with his sister, both of them covering their faces with black handkerchiefs. No one recognized Francis, although from his size and fashionable dress many guests thought him to be the governor, "for which my sister got rather wrongfully suspected by bad tongues and equal base minds, and furnished such persons talk for sometime afterwards."
The next morning, while Francis lurked secretly in his parents' house, an order went out for all young men to appear at the government house for physical examination for military service. His father too had received a notice ordering him to make young Francis appear. Father and son quickly concluded that young Francis must flee the country again, and without delay.
This time the frontiers had been sealed as soon as the conscription order had gone out; even the ferryman at Buren, on the Rhine west of Dornbirn, had strict orders not to let any young men across. The elder Drexel tried to bribe the ferryman as well as the corporal of the guard, without success. There seemed no alternative for young Francis but to sign up and fight—and most likely die—for Napoleon on the steppes of Russia. But at last the ferryman was persuaded to leave the boat unlocked; when he and the guard went to supper, the two Drexels climbed into the boat and rowed across to Switzerland. Here they parted once more—young Francis for Zurich, and his father back to Dornbirn by another ferry to avoid suspicion.
(Continues...)
Excerpted from THE MAN WHO MADE WALL STREET by Dan Rottenberg. Copyright © 2001 by University of Pennsylvania Press. Excerpted by permission.
Table of Contents
| Introduction: History's Hero, Posterity's Orphan | XI |
| Prologue: The Day the World Changed | 1 |
| PART I: SURVIVAL | |
| 1. The Artist as Fugitive | 9 |
| 2. The Making of a Currency Broker | 20 |
| PART II: SUCCESS | |
| 3. "As Good a Bargain as Possible" | 33 |
| 4. "A Wild and Reckless People" | 45 |
| PART III: STRUGGLE | |
| 5. "The Yankees Did Not Whip Us in the Field" | 59 |
| 6. The Rise of George Childs | 73 |
| 7. The Delusions of Jay Cooke | 79 |
| PART IV: POWER | |
| 8. "A First-Class Businessman" | 91 |
| 9. Panic and Progress | 107 |
| 10. The Perils of Partnership | 120 |
| 11. Railroad Boom | 127 |
| PART V: SALVATION | |
| 12. Reluctant Titan | 139 |
| 13. Two Social Revolutionaries | 149 |
| 14. TheBurden of Conscience | 162 |
| Epilogue: The Death and Rebirth of the House of Drexel | 172 |
| Appendix I: Simplified Genealogy | 185 |
| Appendix II: PrincipalCharacters | 186 |
| List of Abbreviations | 192 |
| Notes | 193 |
| Bibliography | 233 |
| Acknowledgments | 243 |
| Index | 247 |