by Ron Chernow
To finance sporadic stock-market forays, Rockefeller borrowed huge sums from banks, up to fifteen or twenty million at a time, pledging his government bonds as collateral. This was all a trifle confusing for Junior, who continued to take his father’s straitlaced pronouncements against speculative investing at face value. As he moved into middle age, the son even took to lecturing his wayward father, chiding him with his own rhetoric. On the eve of World War I, when Senior’s borrowings swelled to nearly $10 million, Junior reminded him of how he had “frequently given utterance to my belief, that you should never be a borrower, but always long of cash.” 38
For a long time, Rockefeller resisted efforts to professionalize his investment team, and Gates soldiered on as best he could. In 1897, Charles O. Heydt—later Rockefeller’s expert on real-estate matters—joined the staff, followed a few years later by Bertram Cutler, who helped manage the family investments for the next fifty years. Even with this team in place, the investment operation was still slipshod, and in 1907 Gates told Rockefeller, “I have long thought that it would prove helpful if you could have a man in the office who had before him at all times every day the complete list of your investments and whose business it is to familiarize himself intimately with every one of them—to have his finger, so to speak, on the pulse of every one of them all the time.”39 The following year, Rockefeller finally capitulated and formed a four-member committee, including Gates and Junior, to manage his money.
As with the Rockefeller philanthropies, Gates operated tentatively at first in the wolfish world of Wall Street but was soon very much master of the situation. Before long, he confidently conveyed to Rockefeller his scathing opinions of such globe-straddling moguls as Andrew Carnegie and J. Pierpont Morgan. At the time, the world of high finance revolved around a spirited rivalry between Morgan and Jacob Schiff of Kuhn, Loeb. Convinced that Rockefeller was already controversial enough, Gates tried, whenever possible, to avoid clashes between these two financiers, and he balked at joining boardroom revolts, stock-market squeezes, and other activities that might bring Rockefeller into any further disrepute.
Famished for blue-chip securities, Gates clamored for inclusion in both J. P. Morgan and Company and Kuhn, Loeb syndicates, but always believed that he got superior treatment from Kuhn, Loeb. Under the aegis of this house, Rockefeller swallowed huge chunks of railroad issues, including giant stakes in the Southern Pacific, the Union Pacific, and the Pennsylvania Railroads. He also took a large share in loans floated for the Imperial Japanese government in 1904–1905 during the Russo-Japanese War and for the Chinese government in 1911. He contributed to Kuhn, Loeb’s consolidation of the Chicago meatpackers, led by Armour and Swift, helping to foster another trust. Constantly on the prowl for good securities, he sometimes bought from Kuhn, Loeb just to maintain harmonious relations.
Gates and his minions smarted at the high-handed treatment they received from J. P. Morgan and Company, where they were routinely assigned small portions of mediocre issues—curious treatment for the world’s richest investor. In the early 1900s, Rockefeller found himself with disconcerting frequency involved in Morgan’s biggest blunders, including the Chicago Street Railway that he financed for the magnate Charles Yerkes and the International Mercantile Marine, Morgan’s abortive effort to forge a North Atlantic shipping cartel. For Rockefeller, this was not happenstance but reflected Morgan’s settled antipathy. Bruised by these bad investments, Rockefeller told his son in 1911, “In future, when investments are offered us by this house, we will be of one mind, I think, in accepting nothing which we do not all agree is very desirable for us to have.”40 After J. P. Morgan, Sr., died in 1913, Rockefeller told his advisers to keep up cordial relations with the Morgan bank while tartly reminding them that “we have had sufficient experience with the House of Morgan & Company in the role of ‘pack horses’ for their poor investments.”41
In spite of his phalanx of able advisers, Rockefeller had a very uneven record as an investor. Among his triumphs, he extended a six-million-dollar loan to the fledgling General Motors in 1906—about $98 million today—taking notes for his cash. When the notes were paid off, Rockefeller took payment in General Motors shares, which then obligingly soared from 200 to 1,500. He also fared well as the premier investor in Consolidation Coal and the B&O Railroad. Yet Rockefeller could stumble abysmally, as evidenced by his mystifying relationship with George Gould. When Jay Gould, who had memorably looted the Erie Railroad, died in late 1892, leaving an estate of more than $100 million, his twenty-eight-year-old spendthrift son George inherited his investments. He proved an unlikely business partner for Rockefeller. Where Rockefeller frowned upon the expense of private railroad cars, George Gould owned an entire train and savored the patrician pleasures of fencing, hunting, yachting, and polo. The New York tabloids also delighted in reporting upon his racy relations with women. Whatever his misgivings about George’s philandering, Rockefeller was attracted by the Missouri Pacific and other western railroads that Gould wanted to weld into a transcontinental empire. In 1902, Rockefeller took giant portions of a Missouri Pacific stock offering, and before long he had buried $40 million in this graveyard, as much as George Gould himself had.
Troubles soon developed. In 1906, irate over Gould’s profligate spending and failure to consult him, Rockefeller had his son withdraw from the Missouri Pacific board. By 1909, Rockefeller felt so abominably treated by Gould that he refused further cooperation unless his representatives controlled the board. As the price of rescuing the Missouri Pacific, Jacob Schiff of Kuhn, Loeb likewise insisted upon heavy board representation. When Gould finally resigned the presidency, he installed a crony in his stead, leading Gates to declare it high time to terminate relations with “the mad failed Gould.”42 In 1912, Rockefeller unloaded his holdings in the Missouri Pacific stock, ending the misadventure.
Starting in the late 1890s, newspapers published sensational accounts of a shadowy cabal known on Wall Street as the “Standard Oil Crowd.” As diarist Henry Clews recorded, “A new order had come, due to the most powerful influence that had ever manifested itself in Wall Street. This influence was very largely composed of the Standard Oil combination, who introduced in their Wall Street operations the same quiet, unostentatious, but resistless measures that they had always employed in the conduct of their corporate affairs.”43 It was popularly assumed that John D. Rockefeller masterminded these diabolical exploits and was determined to digest Wall Street itself. “It has been said that I control all the banks, all the trust companies, all the insurance companies, even all the railroads in the United States,” a chagrined Rockefeller told one reporter in 1906. “Will you believe me when I say that I do not own a controlling interest in any bank, trust company or insurance company?” 44
Rockefeller dabbled in stocks more than he admitted, but he was largely a passive investor and remained as leery of Wall Street as any cracker-barrel Populist. Once pressed for investment advice, he retorted, “I suppose if I were to give advice it would be to keep out of Wall Street.” 45 When he bought a seat on the New York Stock Exchange in 1883, he made an obligatory appearance before the admissions committee, then avoided the exchange for the next fiftyfour years. He proudly pointed out that, during his tenure, Standard Oil was never listed on the exchange and that management’s attention was “directed to the administration of the business rather than to the stock gambling.”46 Although he never issued a public refutation, Rockefeller played no part in the Standard Oil crowd and cringed at the exploits of its three mainstays: Henry H. Rogers, James Stillman, and his own brother William. Rogers and William paid for their speculations with Standard Oil checks, a practice that always riled John D.
While John always professed warm friendship for his brother, their values had radically diverged over the years as William became a typical grandee of the Gilded Age and plunged lustily into a world of fashionable clubs and resorts. Having sold much of his Standard Oil stock to his brother, William was not nearly as rich as John, bu
t he was still one of the six major recipients of Standard Oil stock and was often listed among the ten richest Americans. A connoisseur of the good life, he loved cocktails, gambling, fast-trotting horses, hunting, fishing, opera, theater, and yachts. His Fifth Avenue mansion faced Alva Vanderbilt’s French limestone château, and he frequented her costume balls. His weekend house, Rockwood Hall, a vast pile of towers and turrets with 204 rooms and gardens landscaped by Frederick Law Olmsted, loomed over the Hudson River. He also had a rugged Adirondack estate of several thousand acres. In 1888, along with such moguls as J. P. Morgan, William K. Vanderbilt, and Cyrus McCormick, William founded the Jekyll Island Club—the posh resort of the “One Hundred Millionaires”—on an island off the Georgia coast that soon boasted roads with names such as Morgan Road and Rockefeller Path. In his later years, William traded in his Baptist upbringing for a more epicurean life. “I used to be very much interested in the church,” he told a friend in later years, “but I haven’t attended for many a day.”47 Unlike John, William gave little to charity and turned a deaf ear to John’s entreaties to contribute to the University of Chicago. At one point, when pressing William to help build a church, John needled him by saying: “Paintings are good, this would be better.”48 William was more jaundiced than John was about the motives of people who solicited his money.
It was in their stock-market operations that the two brothers differed most— so much so that John stayed aloof from enterprises in which William was involved. In declining a proposed investment, John simply told his financial staff, “No, that is William’s,” and that ended all discussion. 49 As a denizen of Wall Street, William was often found in his downtown office, puffing on a cigar and glancing at a stock ticker by the window. Besides being president of Standard Oil of New York, he was a director of forty companies, including railroads, banks, and copper mines, plus steamship, gas, and water companies. What irked John was that William engaged in stock promotions and market raids and other activities that he equated with gambling and manipulation. It might have been friction over this issue that caused their relationship to cool in the late 1890s. In 1897, John omitted William’s name alone from a list of top Standard Oil executives slated to receive large salary increases, prompting this plaintive protest from Flagler:
I wish you would include Will—from a purely business standpoint. I think he is worth as much as the younger of “the three others” and I doubt if you realize what a reflection upon him it would seem to be left out. The last day of this month will round out thirty years since I joined you and Will in business. Do not let us at this late day do anything that will have the appearance even of unkindness. I think I know Will’s personal feeling for you better than you do—it is far more kindly than you imagine. 50
John held back from William’s stock-market deals in part because he associated them with James Stillman, who on the strength of his Standard Oil connections and his friendship with William had converted National City Bank into New York’s largest bank. “I like William,” said Stillman, a darkly elegant, taciturn man, “because we don’t have to talk. Often we sit fifteen minutes in silence before one of us breaks it!” 51 They were an oddly matched pair, William good-natured and easygoing, Stillman an icy individual who played his cards close to the vest. One of Stillman’s descendants left this description of him: “Stern, brooding, forever silent except when dropping sardonic remarks, he was known on Wall Street as ‘the man with the iron mask.’ ”52 At one point, Stillman feuded with his wife and banished her forever from the house, forbidding his five children from mentioning her name. The rapport between James Stillman and William Rockefeller was transferred to their children. Stillman’s daughters, Elsie and Isabel, married William’s sons, William G. and Percy, breeding a line of Stillman Rockefellers who would be central figures in the subsequent history of National City Bank, today’s Citicorp.
Many contemporary critics assumed that John D. formed an investing triumvirate with his brother and Stillman; in fact, he had serious reservations about Stillman’s character and regretted his friendship with William. Evidently, Stillman repaid the compliment. One day, he dropped by 26 Broadway to visit William, strolled over to Junior’s desk, and proceeded to make derogatory comments about Senior. At once, Junior rose stiffly to his feet, spluttering, “Mr. Stillman, you can say those things to my father but you can’t say them to his son. Good day.”53
In spite of their uneasy relationship, Stillman invited Junior to become a National City Bank director in 1901. Junior was tempted to accept but feared that Stillman’s rival J. P. Morgan might retaliate by excluding his father from underwriting syndicates. Senior was more concerned that the appointment might lend credence to the bothersome canard that he held a major stake in National City Bank. If Junior took the position, Senior warned him, it “might seem to indicate a closer relation in that quarter than really exists, or would be wise for us to publish to the world.”54 For once defying his father’s wishes, Junior joined the National City Bank board; Senior, relenting, bought ten thousand shares of the bank’s stock. As it turned out, Junior resigned from the bank board the following year, finding some of its practices questionable.
The significance of Senior’s stake in National City Bank should not be overstated. A 1906 statement of his holdings shows that he had $415,000 invested in the bank as opposed to $375,000 in the First National Bank— controlled by Morgan’s crony George F. Baker—while his largest bank holding was $1.4 million in New York Trust, dominated by the Harkness family. He also bought a substantial stake in Bankers Trust when it was started in 1903. In general, Rockefeller deliberately avoided National City Bank and the Standard Oil crowd, but he chose never to make that public and thought it unconscionably craven that William, Stillman, and Henry Rogers failed to disabuse the press. Once asked privately about Stillman’s bank, he replied dryly, “It is called, I am told, the Rockefeller institution. But I don’t control it. I have perhaps $300,000 of its stock, and its capital is $200,000,000. . . . I have never been in the building in my life. Why, I declare I don’t even know where it is located.”55
Rockefeller did acquire a major interest in one bank. After the Armstrong investigation of 1905 exposed massive double-dealing between insurance companies and their bankers, reform legislation was enacted in 1911 that forced the Equitable Life Assurance Company to spin off its subsidiary, the Equitable Trust Company. Seizing this chance, Rockefeller, George Gould, and Kuhn, Loeb took control, with Rockefeller the principal shareholder. Rockefeller hoped to participate in the bank’s lucrative financial operations and soon urged all companies within the Standard Oil universe to switch their accounts to the bank. Profiting from the Rockefeller tie, the Equitable Trust became within a decade America’s eighth-largest bank. The move was fraught with significance for the Rockefellers, for the bank was to merge with the Chase Bank following the 1929 crash; the resulting institution would be the fortress of Rockefeller-family finance. If the descendants of William Rockefeller were identified with National City, the progeny of John D. were always associated with Chase.
Of the three principals in the Standard Oil crowd—Rogers, Stillman, and William Rockefeller—it was Henry H. Rogers who most entranced the public. In the pantheon of Standard directors, nobody save John D. himself achieved wider fame. There was something lithe and lethal, charming and fierce, about Rogers that made him a magnetic figure even to those he repelled. At Standard Oil, they affectionately dubbed him the “Savage Old Tiger,” while Wall Street, taking his initials, christened him Hell Hound Rogers. He was a handsome and athletic man, with a theatrical mustache, a sharp gaze, and a swashbuckling aura.
Rogers had a chameleon personality. He could be sensitive and generous one moment, a pitiless foe the next. In Manhattan clubs and drawing rooms, he charmed companions, relating hilarious stories and playing a wicked game of poker. He was also very charitable: He helped Colonel Edwin Drake’s impoverished widow and also built a school, library, church, parish house, and masonic ha
ll in his hometown of Fairhaven, Massachusetts. “He looked at you and he owned you,” said one Standard Oil colleague, fascinated by his kaleidoscopic moods. “He was affable unless you tramped on his little toe. He was a man of the fiercest likes and dislikes that I ever knew in the business.”56 “His expression could transform itself totally while he blinked his eyes,” a reporter wrote in the Evening Post. “His voice could travel through the scale of vindictiveness, indifference, politeness, affability and friendliness in a single sentence.” 57
Rogers’s journey from an impecunious boyhood to the summit of Wall Street affluence was startling. A sea captain’s son, he spent his adolescence clerking in a grocery store, hawking newspapers, and working on a railroad before setting off with a friend to operate a small refinery outside Oil City. Through a mutual friend, he was introduced to Charles Pratt, who bought his operation and ushered him into the Standard Oil fold. Had he stuck to oil, Rogers would have fared far better in his relations with Rockefeller, who thought he divided both his time and loyalty. From his elegant mahogany office, decorated with small bronze bulls and bears, Rogers hatched deals by the dozen, forcing reporters to work full-time to track his machinations. At one point, he became the veritable czar of Staten Island, controlling its trolleys, railroads, ferries, and electric and gas companies. In 1884, he and William Rockefeller formed the Consolidated Gas Company to provide gas to Brooklyn, and he also vied with J. Edward Addicks for control of Boston gas.
With his executive flair, Rogers thought he was the ideal candidate to succeed Rockefeller and he was elevated to vice president of the trust in 1890. He therefore bristled when Archbold was tapped for the top spot. The decision was partly a question of style. Rockefeller was irked by Rogers’s gambling and profanity, his strutting in public and mingling with high society. Rockefeller also favored Archbold because he was wedded to Standard Oil business, whereas Rogers was often distracted by other interests. Rogers sometimes bullied Standard Oil subordinates to starve his gas competitors of needed oil, even if this hurt Standard profits—a cardinal sin in Rockefeller’s view.