The Jews in America Trilogy

by Birmingham, Stephen;

  He had begun collecting clippings about himself around 1901. From then on he was engaged in a long love affair with the press. He scanned the newspapers morning and night for mention of his name, and “The sight of his picture in the paper gave him more pleasure than the news that he had made several thousand dollars in a stock transaction,” according to one biographer.* Eventually he employed the famous public-relations firm of Ivy Lee to see to it that the press was properly informed of his activities, and he kept all his press cuttings bound in expensive cloth-and-leather volumes of over a hundred pages each. In the end there were a dozen of these. Stamped in gold letters on the spine of each fat volume were the words “FROM THE PRESS,” and on the title page were the tiny, extremely modest initials, “O.H.K.”

  These were the initials that signed his memoranda which set so many things in motion at the Metropolitan Opera Company, and one member of his staff commented that they really stood for “Opera House Kahn.” His memos covered the most minute details of the Met and its operations—new lights for the vestibules, latches for the lobby doors, a wider door for the ladies’ room, memos about scenery, costumes, makeup, and lights. In his tiny, European script O.H.K. wanted to know, “Why have the chimes for the temple scene in Parsifal not been sent to Philadelphia?” To Gatti-Casazza, he wrote: “President and Mrs. Taft will be at Aida on the 15th inst. in Box 35. Please decorate it with a flag and have a nice bouquet, I suggest orchids and lilies of the valley, placed in the box for Mrs. Taft, with the compliments of the Board of Directors.” Next he was writing to an unknown opera goer who had complained about waiting in line for two hours only to find a soldout house. He enclosed two free tickets.

  To his Kuhn, Loeb partners, it was all very startling. They were not disapproving but merely mystified. It was hard for them to imagine how he could do his work at the office and still do so much for the Metropolitan Opera. It was even harder when they realized that he was the Metropolitan. Actually, Kahn, who said that his family’s motto was “Immer rastlos voran”—“Ever restlessly forward”—worked as many as eighteen hours a day at his double job, and often was required to combine the two.

  There was, for instance, Kahn’s handling of the dispute between the Pennsylvania Railroad and the Delaware & Hudson, which is considered one of his greatest achievements. At the time, the main lines between New York and Chicago were four: the New York Central, the Pennsylvania, the B & O, and the Erie, in that order of importance. Mr. L. F. Loree of the Delaware & Hudson began to dream of building a “fifth system” to Chicago and, for that purpose, began secretly buying up large stock holdings in the Nickel Plate, the Wabash, the Western Maryland, and the Lehigh Valley, in hopes of consolidating these lines into a line competitive with the Pennsylvania.

  When Kahn learned of Loree’s plan, he was horrified. It sounded painfully like the great Union Pacific-Northern Pacific fight of 1901, which had been his memorable introduction to railroading warfare. This, however, was considerably worse. At least rival banking houses had been involved in the Hill-Harriman affair. But both the Pennsylvania and Loree were Kuhn, Loeb clients. There had, in fact, been no situation quite like it in the history of railroading or banking.

  Kahn’s strategy was to invite both Loree and Samuel Rea, president of the Pennsylvania, to meetings with him at the Kuhn, Loeb offices on a Saturday morning.* He placed Rea in one conference room and Loree in another. Kuhn, Loeb had held this sort of meeting before, with warring factions in adjoining rooms, but the problem had always been to keep the one unaware of the presence of the other. Kahn, however, decided to reverse this tactic. Separately, he told each man that his rival waited just beyond the door and that the door between them would not be opened until the terms of a peace had been agreed upon. Kahn’s device produced a curious psychological effect: each man became aware of the importance of the moment, and of how much hung upon its outcome. It was a device borrowed from the theater, but it worked. Both Rea and Loree, who had arrived each determined to destroy the other, were suddenly in a mood to compromise.

  Meanwhile, adding to the suspense and to Kahn’s footwork was the fact that, in a third Kuhn, Loeb conference room, Signor Gatti-Casazza was waiting in one of his not-too-infrequent fits of temper. From the moment of his arrival in New York Gatti had complained about the Met. The stage was too short and too narrow; the storehouses for scenery were too far from the theater, and sets had to be stacked outside on the sidewalk. There were no rehearsal rooms for ballet, chorus, or orchestra. The house contained too many “blind” seats in side sections of the orchestra. And so on. Kahn had agreed with him, and had promised, “In two or three years a new Metropolitan Opera House will be built for you.” That promise had been made many times since, and, sadly, Kahn’s dream of a new opera house was one he was never able to push to fulfillment.

  In a fourth conference room was a young tenor who had written to Kahn for an audition. (It was the sort of thing Gatti-Casazza disapproved of his doing.)

  And so, that Saturday morning, Kahn moved nimbly up and down corridors, back and forth between four separate meetings.

  Presently, the temper of Gatti-Casazza had cooled, and he had departed with a kiss on both cheeks for Kahn. The young man had sung an aria, been given a check, and had gone. Undisturbed by the singing nearby, the two railroad presidents had agreed to come to terms, and Kahn opened the intervening door and brought them together. Rea offered to buy Loree’s railroad shares at a price so generous that Loree could hardly demur, and a major railroad war had been averted.

  For all Gatti-Casazza’s splendid management, the Met was always running out of money, and Otto Kahn proved himself as adept at fund-raising as he was at handling the press. He was particularly good at the “matching gift” technique which, of course, had been used successfully by Schiff. He would match every sizable gift with an equal one of his own. As early as 1909, barely a year after Gatti-Casazza had joined the Met, Kahn was able to write to the Met’s board: “I am enclosing two checks of $50,000 each from Mr. Vanderbilt and myself,” and a month later: “I am enclosing two checks from myself and Mr. Vanderbilt for $25,000 each.” The following year he wrote: “I am enclosing my check for $43,375.…”

  His gifts to the Metropolitan Opera began to amount to never less than $100,000 a year. In 1932 Kahn was asked bluntly by a young composer how much, all told, he had given to the Met, and he replied with his usual pleasant suavity, “For your personal and confidential information, I may say that my endeavors, in one way or another, to aid the cause of the Metropolitan Opera have cost me over two million dollars.”

  Fellow board members, however, have put the figure somewhat higher, at $2.5 million. And both they and Otto Kahn seem to forget two fairly important items: the million dollars-plus Kahn spent in his unsuccessful attempt to locate the company in a new opera house, and the $1.2 million which he paid to Oscar Hammerstein for the Manhattan Opera House, to remove the Met’s competition.

  In 1917 Otto Kahn was offered a box in the Diamond Horseshoe, an event which the New York Herald discreetly called “notable,” considering Kahn’s religion and which, by every sensible standard, was certainly long overdue. It was Box 14. Jacob Schiff, the Herald noted, for all his philanthropies, and though he had been an American citizen since 1870, had never been permitted to own a box, though he had been allowed to rent “Box 18 for certain performances.”

  With his characteristic aplomb and expert sense of public relations, Kahn did not refuse the offer of the box. He accepted it graciously. But he continued to sit in the Director’s Box, where he had always sat. His new box, he explained, would be loaned to foreign dignitaries who visited the city.

  It was probably the grandest gesture he could have made. It contained tolerance, wit, and just the right touch of derision. Somehow, this gesture made the banality of anti-Semitism all the more apparent, while at the same time it was clear that, as far as some Jews were concerned, some of the crusty social barriers that had been erected over the cours
e of two generations were collapsing by going out of style.

  *Our Times, Pre-War America, by Mark Sullivan (Scribner).

  *On Wall Street, certainly. One of the Street’s reasons for thinking young Hyde a featherweight was his “fancy, Frenchy” interest in opera.

  * Mary Jane Matz, The Many Lives of Otto Kahn (Macmillan).

  * Unlike his mentor, Jacob Schiff, Kahn nearly always worked on Saturdays.

  40

  THE “SINISTER TRANSMUTATION”

  “Father, we must do this no longer,” Frieda Schiff Warburg whispered to Jacob Schiff. It was the summer of 1915, and the family was in Bar Harbor. As she and her father strolled down the shaded street of the town, chatting, Frieda had noticed people giving the two of them odd and hostile looks. She realized it was because they had been speaking, as they always did, in German. From that afternoon on, the Schiffs and Warburgs never spoke German again in public.

  World War I had a deep and unsettling effect on the German Jewish crowd, and provided, perhaps, the most serious test of their emotional mettle since the founding fathers had arrived on American shores. Among the most deeply torn was Jacob Schiff. He was sixty-eight now, and beginning to show his age. He had developed a corklike dryness, a rigidity and crustiness, and an unwillingness to change his ways. He had grown accustomed to taking the waters annually at Marienbad, and the thought of a war between his adopted country and the land of his birth dismayed him. In the beginning he seemed to regard the war as something that had been devised against him personally, to inconvenience him and alter his routine.

  He had had to endure a good deal during the past few years. For one thing, his hearing had begun to fail, and since he was too proud to admit to his incapacity, several sad and embarrassing things had happened. He had, at one point, invited President Theodore Roosevelt to speak at a banquet for one of his philanthropies, and Roosevelt spoke of his 1906 appointment of Oscar Straus to his Cabinet, saying, “When this country conferred upon me the honor of making me President of the United States, I of course at once called my good friend Oscar Straus to my side, and asked him to serve as Secretary of Commerce. It was not a question of religion, of politics, or of catering to any specific group. It was simply a matter of the best man for the job.”

  Schiff, who had been able to hear none of this, then rose to his feet and said, “President Roosevelt has been so kind in the past as to honor me with his confidences, and it was a great thrill to me that, when he became President, he told me he wanted to have a representative Jew in his Cabinet. He asked me who might be the best candidate to represent our people. I had no hesitancy in at once saying that Oscar Straus was the ideal man, and I believe, as a result, he named Mr. Straus immediately as his Secretary of Commerce.”

  Poor Schiff, when he was told later what had happened, was furious, and denied that he had ever made such a statement, though of course there were hundreds of witnesses to the fact that he had.

  And the first decade of the twentieth century had produced other problems. Panics were occurring with alarming frequency. In 1903 there was the so-called “rich man’s panic,” caused by manipulators in U.S. Steel stock, when Steel plunged from $58 to $8, taking most of the market with it. Then, four years later, the Panic of 1907 had threatened to wreck the whole fabric of Wall Street. These panics had naturally led to louder talk of the need for “banking reforms” and for a central reserve banking system.* In the noisy aftermath of the 1907 panic, it was all but forgotten that Jacob Schiff had for some time urged radical banking reform, and had called the American monetary system “a disgrace to a civilized community.” Instead, as usually happened, since he was a banker, he emerged identified as one of the villains of the panic.

  The Panic of 1907 led, rather belatedly, to the Monetary Trust Investigation of 1912 by the Pujo Committee, named after its Senate Chairman. By now Wall Street was used to the pattern of panic, followed by an investigation, followed by tongue-clicking and head-shaking and muckraking in the press. But the Pujo Committee’s intent was, on the surface, deadly serious. It was to find out whether there was indeed a “money trust” controlling all industrial and financial affairs in the United States—a national financial conspiracy, in other words-just as trusts had been accused of trying to control whole areas of industry. The committee fixed its attention on seven men. The only man not connected with the so-called “White Protestant banking group” was Jacob Schiff.

  Though the committee didn’t find the monstrous trust it was looking for, it did find an almost unravelable interlocking of directorships and controls involving both industry and banking—polarized around two main money groups, headed by Morgan and Rockefeller—and so complicated in its scheme that it seemed unlikely that even its principal men understood it. It was as though American financial affairs had a life of their own, and had woven their own strange and marvelous cocoon. The committee disclosed that Kuhn, Loeb, despite its excellent relationships with Morgan, had primarily been allied with the Rockefeller-controlled National City Bank, of which Jacob Schiff had long been a director, and therefore that Schiff seemed to enjoy the best of both worlds.

  All major banks were hauled in before the Pujo Committee and asked to produce records of their transactions since 1900. These were pre-income tax days, and one can of course wonder whether records produced were full ones. But, in any case, Kuhn, Loeb seemed to be doing nicely. In the five years since 1907 the firm by itself had marketed over $500 million in securities, and in the ten years prior to 1907 over $800 million in cooperation with other houses. Schiff admitted that there was “some collusion” in setting prices asked and bid for issues. “It was not good form to create unreasonable interference or competition,” he testified. “Good practices did not justify competition for security issues.” But there was, nonetheless, “a sort of rivalry” between firms—and Schiff mentioned instances when Speyer & Company had occasionally, sneakily, tried to make a deal with a Kuhn, Loeb client. As an argument against a Wall Street money conspiracy, that one seemed rather weak.

  The Pujo Committee, in other words, certainly revealed that, though there might be no formal “money trust” agreement, there was a great deal of cooperation among the major powers in Wall Street. The Morgan-Baker-First National Bank group and the Rockefeller-Stillman-National City Bank group formed the inner circle. The powers were Steel and Oil, each with its massive bank. And, contrary to what everyone had supposed, there was no rivalry revealed between these “rival” factions. Kuhn, Loeb, the committee decided somewhat vaguely, was “qualifiedly allied, only, with the inner group.” While some people wondered what “qualifiedly allied, only” meant, others—particularly some members of the press—took it to mean that Jacob Schiff had an inside track to both the leading powers of Wall Street. Well, even he admitted that he did.

  As usually happened after Congressional investigations, when the publicity died down, everybody went back to what he had been doing all along. No one was punished, or even scolded, and there were no immediate reforms. But still—and Jacob Schiff understood this—the Pujo Committee investigation of 1913 marked the end of an era. America’s bankers had been building a kind of fortress from which they had dominated not only the financial but also the industrial scene. The first crack had appeared in that structure.

  Now, in 1914, Europe was at war. Worried, Jacob Schiff had begun to talk of a “negotiated peace” with Germany, and in letters to his friend President Eliot of Harvard he outlined his proposals. When these letters were published, they were widely misinterpreted. Instead of a negotiated peace, it was inferred that Schiff wanted a German victory, and it was widely rumored in Wall Street and elsewhere that Kuhn, Loeb & Company was pro-German. It was an era of tension and suspicion, when anything out of the ordinary was considered subversive. Though Schiff dutifully stopped speaking German to his family in public, one of his own partners did not help matters when he was quoted as doubting “whether a native-born American could understand even half of what Schiff say
s, even when he is speaking in English.”

  From the outset of the war in 1914, Kuhn, Loeb had stopped financing any transactions, directly or indirectly, for Germany or any of her allies. Late in the summer of 1915, after the Schiffs had returned home from Bar Harbor, Britain’s financial wizard, Lord Rufus Reading, arrived in New York as the head of the Anglo-French Commission, hoping to negotiate an Allied loan from Wall Street bankers. Both Otto Kahn and Morti Schiff thought this an excellent moment to dispel forever any notions that the firm had German sympathies, and to have Kuhn, Loeb come out strongly behind the Allied cause. Meeting with Lord Reading, Kahn and Morti assured the Briton that a loan for as much as $500 million could be obtained for France and England, and without collateral. The young men told Reading that, though they were in favor of Kuhn, Loeb handling the loan, the senior partner would of course have to be consulted before final arrangements could be made.

  When Kahn and Morti approached Jacob Schiff, he reacted characteristically. He would approve the half-billion-dollar loan—on one condition. The Allies could have their money if the French and British finance ministers would give Jacob Schiff their assurance, in writing, that “not one cent of the proceeds of the loan would be given to Russia.”

  It was like Morti and the pool table all over again. Schiff’s partners were aghast. One could not, in time of war, offer money of that size to one ally at the expense of another. Once again, Schiff’s condition was impossible to fulfill. Lord Reading replied politely that, while he understood Mr. Schiff’s motives, “no government could accept conditions which discriminated against one of its allies in war.” When Reading’s reply was received, a meeting was quickly called in the Kuhn, Loeb partners’ room. Mr. Schiff rose majestically to say, “I cannot stultify myself by aiding those who in bitter enmity have tortured my people and will continue to do so, whatever fine professions they may make in their hour of need. I cannot sacrifice my profoundest convictions. This is a matter between me and my conscience.”