Dan Rottenberg, The Man Who Made Wall Street: Anthony J. Drexel and the Rise of Modern Finance. Philadelphia: University of Pennsylvania Press, 2001. xvii + 262 pp. $29.95 (hardcover), ISBN: 0-8122-3626-2.

Reviewed for EH.NET by Daniel A. Schiffman, Department of Economics, Bar Ilan University.

Dan Rottenberg has written the very first biography of Anthony J. Drexel (1826-1893). Rottenberg, who is the editor of Family Business magazine, depicts Drexel as a great American hero who has been forgotten with the passage of time. Not only was Drexel "the most influential financier of the 19th century," it was he who transformed a "confused and underachieving" JP Morgan into a wizard of high finance. On March 8, 1871, JP Morgan met Anthony Drexel at the initiative of JP's father, Junius Morgan. From that day forward, these three men formed a unique partnership, which played a leading role in financing governments, railroads and corporations. Although JP Morgan was known as an autocratic leader (and deservedly so), he learned to respect Drexel's business acumen; as long as Drexel was alive, Morgan refused to make any move that that failed to meet with his approval.

This book is the culmination of more than twenty years of research by the author. Anthony Drexel makes for a difficult subject; he was always reticent about his private life, and even went so far as to destroy his personal papers. Several of the major Morgan biographers (Edwin Hoyt, Jean Strouse and Vincent Carosso), as well as historian/archivist D.W. Wright, recognized Drexel's contributions. Yet (with the exception of Carosso), their research on Drexel remains in the form of private, uncirculated drafts. Readers of Ron Chernow's The House of Morgan are led to believe that Morgan and Drexel fought constantly (Rottenberg shows the reader how Chernow reached this erroneous conclusion). In published works, Drexel appears as "Rosencrantz or Guildenstern to someone else's Hamlet."

Rottenberg's goal is to rectify this serious omission, and he succeeds admirably. With much effort, he has located 150 cables and letters written by Drexel himself, as well as several archives that contain materials relevant to his subject. Although the letters and cables date from the latter twenty-four years of Drexel's life, they help to draw at least a partial picture of the man and his personality. Among his key traits were decency and respectability; a knack for mentoring young associates (JP Morgan was just one of several); devotion to family (but without favoring family members who worked for him); deep aversion to politics; and a strong interest in philanthropy and religion.

The narrative begins in Austria, with the adventures of Anthony's father, Francis Drexel. In his youth, Francis wandered Europe to escape Napoleon's compulsory draft. After trying out various jobs, he became an itinerant painter of decent ability. While visiting his hometown in 1815, he realized there were few opportunities there and in 1817, he sailed for Philadelphia. He was accepted into Philadelphia society and married in 1821. He traveled in South America for three and a half years, selling his portraits of South American political leaders.

After several attempts to enter non-artistic business ventures, Francis opened a currency brokerage in 1837. As the Second Bank of the United States lost its influence, the task of issuing currency fell to hundreds of state-chartered banks. Many of these banks lacked sufficient specie to fully back their notes. Brokers such as Francis sustained a liquid market for bank notes, even during the Panic of 1837. When the U.S. economy recovered, Francis's brokerage became increasingly prosperous, and expanded its activities to become a private bank. It entered the emerging field of railroad financing, at a time when many saw this line of business as risky and even disreputable.

Anthony and his brother Frank (b. 1824) worked alongside Francis as teenagers, and became partners in (the renamed) Drexel & Co. in 1847. Unlike many other businessmen, Francis made sure his sons received training in art, literature and music as well. Of the two brothers, Anthony emerged as the leader in soliciting new clients; Frank specialized in office management.

In 1851, Francis yielded effective leadership of the firm to Anthony, and, taking advantage of the Gold Rush, opened a highly profitable branch in San Francisco. Meanwhile, Anthony (recently married) was occupied with large and increasing demands for railroad funds. To meet these needs, Drexel and Co. expanded to Chicago and New York. Later, it allied itself with George Peabody and his London firm.

As the Civil War approached, Anthony became active in financing the Union, along with his new partner, the flamboyant Jay Cooke. Their efforts were pivotal in the war effort. Cooke made emotional appeals to the public's patriotism, while Anthony provided sound business judgment behind the scenes. (This relationship would later rupture, however.) At the same time, Anthony helped his friend George Childs to purchase and rehabilitate the Philadelphia Public Ledger. Through his dealings in government bonds, Anthony established a branch in Paris and also became close with Junius Morgan.

Before his meeting with Anthony Drexel in 1871, JP Morgan had lost interest in a banking career and was on the verge of early retirement. But Drexel made JP an offer he could not refuse. Drexel's New York branch became Drexel, Morgan and Co., with JP as the senior partner. Junius and JP Morgan joined Anthony Drexel to create an alliance with superior contacts throughout the U.S. and Europe. But, as the author stresses repeatedly, personal chemistry was their greatest asset. In situations with potential for conflict, all three placed the survival of the alliance above their personal interests.

By working with Drexel, JP Morgan gained invaluable experience in railroad reorganization, including the replacement of reckless and irresponsible managers. This would serve him well in the 1890's, when JP Morgan & Co. became the acknowledged leader in this area. Public utility financing was another field in which Drexel, Morgan and Co. made their mark.

The final chapters of the book focus our attention on Drexel's children and family, and on his best-known philanthropic venture -- the founding of the Drexel Institute (now Drexel University) in December 1891. Anthony also encouraged the work of his niece Katherine, who dedicated her life to educating African-American and Indian children and later became a saint.

I find Rottenberg's prose to be very readable, and I believe he has documented his main points quite well. The story demonstrates the importance of personality, chemistry and management style in the success of an enterprise. Rottenberg devotes much space to Drexel's handling of employees, successful and unsuccessful, family members and strangers. He credits Drexel with inventing many business practices that are common today, such as giving shares of stock to deserving employees.

Rottenberg's book is primarily a biography of Drexel the man, not a business history of Drexel & Co. Nevertheless, I would have liked to see (in addition to the photographs) some figures or graphs relating to the events described in the text. For example, annual data on new bond issues by the Union, or new bond issues (and capital investment) by Drexel-associated railroads would further help the reader to place Drexel's activities in context. But this is a minor quibble with an otherwise excellent work, which I recommend to all students of nineteenth-century financial history.

Daniel A. Schiffman teaches in the Department Economics at Bar Ilan University, Ramat Gan, Israel. One of his major research interests is the history of U.S. railroads and their financing.