Unsung financial pioneer
Like Dr. Johnson’s epitaphs, the subtitles of histories in search of a popular readership are not “given under oath.”
For that reason -- and because her story is impressively researched and engagingly told -- Frances Dinkelspiel, who is her subject’s great-great-granddaughter, should be forgiven the histrionic subtitle of her new book, “Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California.” Moreover, while no individual can creditably claim to be the Golden State’s creator, Dinkelspiel does make a pretty good case that the pioneer entrepreneur and financier Hellman -- an intriguing and unjustly neglected figure in California history -- certainly was present at the creation of a great deal that came to count for a lot.
An L.A. original
In 1859, Isaias Hellman arrived in the rude frontier town of Los Angeles along with his brother Herman as poor immigrants from the Bavarian village of Reckendorf. (So many men from that place would come to play a role in the California economy that they became known as the “Reckendorf Aristocracy.”) Soon, the Hellmans -- and particularly Isaias -- had moved from being employees of other German Jewish immigrants to their own businesses and, from there, into banking. Ultimately, Hellman controlled the West’s three largest banks and provided financing -- and significant personal investment -- in such signature California enterprises as banking, water, electricity, transportation, oil and wine. He helped establish the University of California and USC and made a significant contribution to the schools that ultimately became Los Angeles Loyola University and high school.
The latter donation points to one of the singular things about Los Angeles in the mid- to late 19th century, which is that it was a place of unparalleled opportunity for Jewish immigrants. In fact, there were few, if any, social barriers in the rough-and-tumble city’s business community. Members of the Hebrew Benevolent Society contributed to Catholic cathedrals and schools; Gentiles of whatever denomination aided the construction of the town’s first synagogue. Hellman lent Gen. Harrison Gray Otis the money to buy the Los Angeles Times and became financier and business partner with Henry Huntington in railway enterprises. Unfortunately, other than a passing reference to a “hardening” of anti-Semitism in the 1890s, Dinkelspiel has nothing to say about how or why this era of fellow feeling vanished.
In 1887, an admiring profile in the American Israelite by the prominent Jewish journalist Isidore Choynski reported, “I got it from reliable authority that Mr. I. W. Hellman of Los Angeles has made $4 million during the last six months, without investing a cent, acting merely as the treasurer and adviser of the syndicates. . . . His countrymen in this city, the Reckendorfers, tell me he is the wealthiest Jew in America today, and I believe it.”
The syndicates Choynski referred to invested in land -- much of it previously worthless -- subdivided it and sold it to the Easterners and Midwesterners then flocking into Los Angeles on new rail connections that suddenly had made travel to Southern California convenient and cheap. The result was that all-too-familiar local phenomenon -- the real estate boom.
Hellman, however, was shrewd enough to see things for what they were and, even though deposits in his Farmers and Merchants Bank soared exponentially, he ordered a cutback in real estate lending. Over the course of a year, he brought outstanding loans on real estate from 80% of the bank’s portfolio to just 25%, then stopped them altogether. The city’s other banks followed suit and, when the statewide real estate bubble collapsed in late 1888, Los Angeles’ financial institutions escaped unscathed. In fact, they profited handsomely because they’d helped finance the bubble but gotten out before it deflated.
Chandler’s Times took note of Hellman’s leadership in an editorial: “It is very certain that the refusal of the Farmers and Merchants Bank to loan freely on real estate during the fall of 1887 -- at the critical period when the speculative boom was at its height -- is one of the chief reasons why no disastrous collapse has followed the crazy buying of those feverish days. Banking and gambling are two separate branches of finance which the management of the Farmers and Merchants Bank rightly believes should be combined under one roof.”
Greed and folly are constants of human nature and, therefore, of market economies, but it’s hard not to wish Hellman wasn’t still around to take a seat on President-elect Barack Obama’s council of economic advisors. He’d feel right at home with the problems the new administration has inherited.
Fresh from his latest triumph, Isaias and Esther Hellman joined his brother-in-law, Mayer Lehman, and his wife on a visit to their family home in Wurzburg, Germany. The trip left Hellman discontented. Mayer was head of Lehman Brothers in New York and his brother Benjamin had acquired a controlling interest in the International Bank of London, along with a magnificent country house in Sussex. Los Angeles, burgeoning though it was, suddenly seemed small and provincial. On his return, Hellman wrote his nephew Sigmund: “We are home again, all well, but not as contented with our lot as we were before European trip. Business is bad; people are loaded down with real estate. Thank God I have kept out of speculation and am not hurt. I wish that I could realize and move on to New York.”
Hellman found his wider opportunity closer to home -- in San Francisco, which then had more millionaires per capita than any other American city. That city’s Nevada Bank had become the nation’s wealthiest off deposits from the Sierra silver fields. A disastrous attempt to corner the state’s wheat market capped a serious of reversals and Hellman moved in to recapitalize the institution in return for a controlling interest.
Business associates from all over the country lined up to purchase stock when word of the L.A. financier’s role leaked out. Demand was so great, particularly among members of his extended Jewish family, that Hellman had to limit their purchases, which provoked a letter of displeasure from his investment banker brother-in-law in New York.
Isaias’ caution also points to the pervasive anti-Semitism that was the background noise of American commerce in that era, even at the level at which Hellman operated. While the majority of his new bank’s stockholders were Jews of German origin, Isaias took care to name a Gentile majority to the board. As he wrote to Mayer at Lehman Brothers, “I have selected an excellent board of directors all strong men, privately speaking seven Christians and including myself four Jews. I have done this to avoid the idea which exists with other banks here of making a Jewish bank or Catholic or any other institution. I want it to be a popular institution . . . “
In 1905, Hellman would acquire control of Wells Fargo’s underperforming bank unit and merged the two into a single financial powerhouse, one of the nation’s largest and most dynamic banks. About that same time, his habitual caution produced a rare financial misstep. Hellman sat on the board of the Columbus Savings and Loan Society, which served San Francisco’s growing Italian immigrant community. Isaias insisted, as he always did, that the S&L; function mainly as a business bank, but another board member by the name of A.P. Giannini was convinced that there was money to be made by accepting small deposits and making small loans to new immigrants. Unable to budge Hellman, Giannini quit and founded his own bank, which ultimately became the nation’s largest, Bank of America.
Mover and shaker
Dinkelspiel does an excellent job of tracing Hellman’s career as a financier, and sketches in a crisp portrait into the glittering San Francisco Jewish community into which he and his family ultimately settled, alongside the Haas, Lilienthal, Strauss, Zellerbach, Fleishhacker and other families of German and Alsatian origins. It was a legendarily stratified community, closed to newer Jewish immigrants from Eastern Europe. Dinkelspiel certainly touches on this, but she gives only glancing attention to Hellman’s role in the civic bribery and corruption scandals that rocked San Francisco in the early 20th century. So, too, there’s brief mention of Isaias’ strong aversion to unions and his deep antagonism toward Hiram Johnson and his progressive agenda. (Johnson first made his name prosecuting some of the major Bay Area scandal cases.)
The author is slightly more detailed concerning Hellman’s fervent anti-Zionism, which led him -- along with other leading German Jewish immigrants, including the New York Times’ Adolph Ochs -- to petition Woodrow Wilson to oppose any creation of a Jewish state in Palestine after World War I.
Ultimately, though, “Towers of Gold” is a more compelling account of Hellman the giant of finance than Isaias the apparently rather complicated man. He was deeply involved in politics, but only behind the scenes. He seemed not to recover from a failed attempt to secure appointment as a U.S. senator -- a defeat that seems to have turned partly on the fact he was Jewish and partly on an unwillingness to pay the requisite bribes. He opposed creation of Los Angeles’ municipal water company, partly because he feared corruption, partly because he owned a major share of the private utility. He quarreled with every business partner he had, from William Workman to Huntington. He became estranged from both his brother-in-law Mayer and his own brother, Herman. In every instance, Hellman blamed his partner for jealousy or avarice. A widower at the end of his life, he seems to have resented that his children -- coping with serious illnesses of their own and among their family members -- failed to pay him enough attention.
Readers are left to tease the implications of all this out for themselves, which is a bit of a pity, since lurking behind the deals and glittering success, one suspects there was a complex, contradictory and fascinating man.