By John Steel Gordon
In the early 20th century, the great Wall Street banks were divided into two groups according to the religions of their partners: Christian and Jewish. The origin of this dichotomy had been relatively recent, growing out of the antisemitism that had arisen only in the post-Civil War era. (The very word antisemitism entered the English language only in 1880, coming in from — where else? — German.)
The banks of the two groups routinely did business together, with the firms co-underwriting new issues of securities, while their partners sat on the same corporate boards. But their social lives were separate. The Union Club, New York City’s oldest (founded in 1836), had had Jewish members early in its history but there were none by 1900. The Harmonie Club, meanwhile, had been founded in 1852 as a place where affluent German-speaking immigrants could get together. Only in 1894, by which time the membership was overwhelmingly German-Jewish, did the club make English its official language.
J. P. Morgan had dominated Wall Street’s gentile banking until his death in 1913 and the firm then came under the control of J. P. Morgan Jr. The dominant member of the Jewish bankers at this time was Jacob Schiff. Born in Frankfurt in 1847, he came from an old Jewish family that could trace its ancestry back to 1370 (probably a lot further back than the Morgans could trace theirs).
It was Schiff who backed E. H. Harriman in his efforts to gain control of the Northern Pacific Railroad in 1901, while James J. Hill had been backed by J. P. Morgan. Schiff got the better of that contest.
While Schiff had been naturalized as a U.S. citizen in 1870, he always regarded himself as German and spoke that language at home all his life. But when World War I broke out, American opinion quickly became pro-Allied, especially after Germany violated Belgian neutrality and the British publicized the “rape of Belgium.”
Then came May 7, 1915. A German U-boat, which had fortuitously been in the right place at the right time, put a torpedo into the Cunard liner RMS Lusitania. An internal secondary explosion then caused the ship to founder in just 15 minutes, taking the lives of 1,197, including 128 Americans.
Passenger ships, unlike cargo and warships, were regarded as illegitimate targets. While the German government had published newspaper advertisements warning that a state of war existed between Germany and Britain, no one thought passenger ships would be attacked.
Schiff was appalled. And while he had no personal responsibility whatever for the tragedy, he felt the need to apologize for it to J. P. Morgan Jr. He made his way over to 23 Wall Street and found Morgan in the partner’s room. But Morgan, instead of replying graciously, only muttered angrily and left the room, leaving Schiff to make his own way out of the building.
Morgan soon realized that he had acted in a most ungentlemanly fashion. “I suppose I went a little far?” he asked his partners. “I suppose I ought to apologize?”
No one said anything, but Dwight Morrow, quick-witted even by the standards of Morgan partners, wrote out a verse from the Bible, “Not for thy sake, but for thy name’s sake, O House of Israel!” and passed the note to Morgan.
Morgan made his way over to the offices of Kuhn Loeb and made amends to the man with whom he so often had done business and with whom he would do much more over the next three years as Wall Street became by far the primary source of loans to the Allies.
