Showing posts with label Financial Networks. Show all posts
Showing posts with label Financial Networks. Show all posts

Monday, September 30, 2013

Who was Alexander Brown?

A Protestant in Ireland, Alexander Brown had worked as an auctioneer in the linen market in Belfast, which after 1785 was conducted in an impressive building owned by the Earl of Donegall. The building's lease was bought by John Brown, founder of the Bank of the Four Johns in Belfast, but who does not appear to have been a close relation of Alexander. Although his auction business was profitable in Ballymena, after visiting a brother, Stewart Brown, in Baltimore, Alexander decided to settle in that city on the opposite side of the Atlantic. Another brother remained behind in London to work with him in an import-export business. By 1811 all four of his sons were partners with him in Alex. Brown & Sons, headquartered in Baltimore.

The British Browns

William Brown, his eldest son, returned to England in 1809 and set up a brokerage firm that would operate first as W. and J. Brown, renamed in 1839 as Brown, Shipley & Co., in Liverpool. William’s role in the business, among other duties, would be to find wealthy investors to buy the paper issued in America.

Finding such investors required that he create a network around himself of powerful society members with whom to socialize, possibly one of the reasons he first stood for Parliament in 1846. Twenty years later he was created a baronet, Sir William Brown of Beilby Grange (a mansion near Leeds) and Richmond Hill (near Lancaster). His descendants are set out in Burke's Peerage. (See also website, The Peerage).
Sir William Brown
It is a truism in banking families that they frequently marry not-too-distant cousins and relations of their father’s business associates, helping to keep the money—and the secrets—within the family. Researching genealogies is, therefore, a very useful tool in understanding confidential financial relationships.

When William returned to Britain in 1809, his younger brothers were still being educated by a country minister at Catterick in North Yorkshire. Initially, William went to Ireland to work at the market where Alexander had started his career. There he met and married the daughter of his father’s Belfast linen supplier, Andrew Gihon. Although they had eight children, only two lived to become adults, and none of those survived him.
  • Grace (1812-1849), in 1831 married John Hargreaves, whose family owned the calico print works at Accrington—midway between Leeds and Lancaster. Grace Hargreaves' son John continued with the calico business, while her son Thomas pursued a military career.
  • Alexander (1817-1849), married James Brown’s daughter, Sarah Benedict Brown, during a visit to America in 1838, thus uniting the English and American house of the brokerage company and the bank in which the brothers were all partners. Their children were as follows: William Richmond Brown (1840-1906); James Clifton Brown (1841-66); Louisa (1842-63), who married Capt. Alexander William Cobham; Alexander Hargreaves Brown (1844-76).
William's grandson, Alexander Hargreaves Brown, became a Member of Parliament in 1863 and served until 1902, while during that time becoming a partner of the Brown Brothers bank in 1875, later serving as senior partner in the London office on Pall Mall.
These two branches of Sir William's descendants continued to marry their children to their cousins and thus perpetuate the financial connections on both sides of the ocean.
James Brown was the only one of Alexander Brown's sons who married a native American girl. In December 1817 he married Louisa Kirkland Benedict, youngest daughter of Dr. Joel Benedict, and his wife Sarah McKown Benedict. Her father has sometimes been confused with Dr. Benedict's nephew and namesake, Rev. Joel Tyler Benedict, a Presbyterian minister who was working at a branch of the American Tract Society in Philadelphia when James arrived in that city, having been tasked by his father to  assist his brother, John A. Brown, in starting a branch of Alex. Brown & Sons there, and it is possible he met her through this relationship since the Brown family had long been Presbyterian rather than Episcopalian.

James Brown of New York

Eliphalet Nott
Connections to church hierarchies

In 1817 James Brown, Alexander Brown's youngest son who had recently relocated from Baltimore to Philadelphia, married Louisa Kirkland Benedict, youngest daughter of Dr. Joel and Sarah McKown Benedict.

Her parents' eldest daughter, Sarah "Sally" Benedict, was already 21 years of age by the time Louisa was born in 1795.  Union College was founded that same year in Schenectady, New York, and Dr. Joel Benedict's student and new son-in-law, Rev. Eliphalet Nott, was named the president of the college.

The eminent Potter family

Although Sally Benedict Nott died the year her husband ascended to that position, she left behind a daughter, Sarah Maria Nott, with whom Louisa was quite close. Seven years after James Brown became part of the Benedict family, his wife's niece married Rev. Alonzo Potter, her father's foremost divinity student at Union College. He also became a professor at the college (1831-45), after which he was named Bishop of the Pennsylvania Diocese of the Protestant Episcopal Church.

Louisa Brown died in 1829 and her niece followed a decade later. James Brown waited two years before marrying Eliza Maria Coe, the orphaned daughter of another Presbyterian minister, Dr. Jonas Coe of Troy, New York. Alonzo Potter married, after the death of Sarah Maria Potter, the daughter of her brother Robert, who was also named Sarah Benedict, and with her had three more sons.


The daughter born to James Brown and Louisa Benedict in 1827 would grow up to marry Howard Potter, the second son of Louisa's favorite niece, Sarah Benedict Nott and her husband Bishop Alonzo Potter. After their marriage, Howard Potter became a partner in the Brown Brothers & Co. investment bank in New York, although he spent many years as manager of the London office. It will be recalled that James Brown's eldest daughter, Sarah Benedict Brown, had married her first cousin Alexander, whose father was Sir William Brown of the Liverpool and London offices. Two of their siblings--Grace and William--were lost aboard ship in 1854 as young adults. The youngest sibling, Margaretta Hunter Brown, married James Couper Lord, a son of the firm's attorney, Daniel Lord and his wife Susan DeForest. The Lord family, as has been mentioned previously at this blog, is one of the most significant families involved in the Skull and Bones secret society.

It has also been mentioned at this author's blog, Quixotic Joust, that the DeForest family were connected to some high-level members of the Episcopal Church, such as Dr. Horatio Potter, who became acquainted with Frank G. Wisner shortly before he was chosen to become head of a select arm of intelligence in the United States. We will soon discuss how all these connections interlink with the Brown Brothers investments.

Wednesday, August 28, 2013

GLOBAL FAMILY NETWORKS

In 2006 the author was asked to deliver a presentation for a Sanders Research Associates conference, that was later cancelled. The ideas that arose from that endeavor have been expanded. What appears below is the first segment, which will be continued later.


Micro Versus Macro View of the World

During my brief talk, I want give an overview of my own concept of the historical development of transnational globalism by use of a metaphor that effectively depicts the growth and evolution over the last five centuries of similar patterns that have occurred among various nations and the economic models they use to sustain that nation's economy.

Then I want to go into a little more detail into one family I have studied which has had a very significant role in behind-the-scenes transnational finance. The family we’ll be looking at, like most merchant bankers, started out as just merchants. Whether we use other terms, like “private” bankers, “investment” bankers, or simply “venture capitalists,” they are essentially small groups of very discreet people—often family members—who have access to vast pools of wealth, which they promise to invest at great rates of return. Their costumes may change from one generation to the next, but they are always at the scene, pulling strings (often hidden behind the curtain) to make history unfold as it does.

Patterns Beginning in Early 16th Century

The earliest examples we find of global trade, such as the exploits of Marco Polo, were family enterprises. Even Christopher Columbus, after his initial discovery of the “new world,” made four or five subsequent voyages with his brothers and son. Shipbuilding was a family business, and therefore the seamen who became traders operated in family units as they set out in search of the unknown.  Over time they established trading networks in various ports throughout the world, attempting to make a profit each time they unloaded their ships in a different location. The danger was great, but the promise of large returns on a successful voyage made the risk worthwhile.

It didn’t take the seasoned travelers long to realize, however, that competition brought profits down, and that it could be eliminated by acquiring a monopoly from their local prince, or a concession from a foreign one—to have the sole right to engage in that particular enterprise in that precise location. However, such a trading right would be worthless unless it could be protected by force. The development of nation states occurred as local fiefdoms expanded, garnering increased power to secure these commercial rights. Political boundaries went as far as the lord of that domain could protect the people within.

Organic Metaphor

I tend to think in organic, rather than mechanical, terms. Visualize if you can a series of oceans surrounding masses of land. Each mass of land with a separate economic system is depicted as if it were a self-sustaining plant growing in an earthen pot. There is a root system, a cluster of leaves and a stem.   

Spider Plant as metaphor
Over the centuries, as the plant increases in size, it becomes root-bound. The roots consist of members of the economic society who cultivate the soil in some fashion--like miners or farmers--who have become unable to provide enough resources from the restrictive boundaries of this pot to furnish nutrients for the plant’s leaves in order to produce a surplus above bare subsistence that would allow the plant to produce flowers or seeds to ensure physical survival. 

It was that lack of resources, as well as the bland existence of life that motivated explorers to escape the walls of the fief during the dark ages. And it was what they brought back from their adventures that resulted in further change.

Thus the Renaissance was like a genetic mutation of the medieval plant. Think of the stem of that plant as being the lord of the manor whose responsibility was to ensure the most efficient production of all units within the plant by properly coordinating distribution of raw resources and finished consumer goods. He served as the clearinghouse or marketplace where all such products were exchanged. He could maintain power only so long as he was able to satisfy the needs of these units. The lord recognized his power was draining away when there was no longer enough soil in the pot to feed all the leaves. He either had to enlarge the pot (something that would require a war), or he had to find another way of getting the necessary nutrients. The solution he found was to change the plant’s structure.  
Since this is my metaphor, I allowed my lord of the pot to create the spider plant; lords of the various pots equate to the crowned heads of seventeenth-century Europe, whose lawyers devised the concept of the chartered company. These crowned heads were, by this time, desperate for new resources, having found that wars to increase the size of their pots had further depleted their resources. As new lands were claimed on behalf of each root-bound pot by explorers  authorized to trade outside the pot, the lord found he or she had magically acquired the means to pay these explorers as bankers suddenly popped up, generously offering to turn that new land into ready cash (specie) for the pot.

 “Give us a portion of that new land as a grant,” they said, “and we will do your work for you, as long as we have a monopoly on the trade.”  

Like stems of a spider plant, each pot on the original map began sending out new shoots, each with its own cluster of roots and leaves ready to plant itself in new soil and recreate itself. When this shoot (like a colony) settles on soil, its roots can develop to feed its leaves while still being connected to the original stem by the stolon, which allows it to send the required percentage of absorbed minerals back to the parent plant, whether assessed against the company or the settlers brought there by the company.  

In return, the lord is able to promise protection to the colony should a threat occur. Thus a reciprocal relationship was developed between trading families who invested in such charter companies and the heads of state. That relationship persists to this day even though the legal framework has evolved from chartered companies into multinational corporations.

Unfortunately, a metaphor is not the truth. It is a visual and an intellectual aid to assist in understanding the truth. It must be tested for accuracy. The plant metaphor acts as the macro illustration of the world. What follows is the micro test. Here we focus on one example--one family network arrived in America only a decade or so after the Constitution was adopted. We will examine that family to learn how its banking business became intertwined with governments in America and abroad, in so doing testing whether the metaphor we have presented gives a true and accurate picture of the world.

With reference to modern financial institutions, what is now called Deutsche Bank Alex. Brown, Inc. is the result of a series of investment bank buyouts culminating in 1999 when the German bank acquired all assets of the old  investment bank established in Baltimore, Maryland, by Alexander Brown who first arrived in America in 1800 to engage in the linen trade. 

White Linen Hall in Belfast, Ireland
Brown’s parents were William and Margaret Davison Brown, who were living in Ballymena, Ireland, when Alexander was born in 1764. Scots like the Browns had begun to settle in this section of Ireland at the height of Parliament's legal dueling with Charles I in 1641.

Fifty years later, upon accession of William and Mary and creation of the Bank of England, the Protestant population began to explode in Catholic Ireland restrictions on the woollen trade, coupled with legislation allowing linen to be shipped duty-free to England and to British colonies in America, increased the importance of the linen industry in Northern Ireland.

Most of the immigrating Scottish families stemmed from Huguenots who had fled France during the latter part of the 16th century rather than convert to Catholicism. For more than a century the flax and linen industry would be Northern Ireland’s main source of wealth as trading networks were established by immigrating families.

Saturday, July 6, 2013

Fortune Was His Middle Name

Thomas Fortune Ryan
We know that William C. Whitney (paternal grandfather of John Hay "Jock" Whitney) was ready for retirement by 1900, and that Thomas Fortune Ryan, his "pump and dump" associate on Wall Street, was then still on the move, having purchased the Equitable Life Assurance Society in 1905. The New York Times on May 19, 1907 said of Ryan,

quoting:
"the closest financial friend that Ryan ever had,... the late William C. Whitney: 
'He is the most adroit, suave, and noiseless man that American finance has ever known.' " 
America's richest man, it was speculated, would also soon be ready for retirement. Who would succeed him? Without answering that question, the Times moved on, reciting for posterity Ryan's vast wealth of properties: 
120 Broadway, Equitable Bldg.
  • The Equitable Life Assurance Society, with $434,000,000 of assets; 
  • the Washington Life Insurance Company, with about $20,000,000 of assets; 
  • the National Bank of Commerce, with $35,000,000 capital and surplus and nearly $200,000,000 of deposits; 
  • the Morton Trust Company, with $6,500,000 capital and $880,000,000 of deposits; 
  • the Mercantile Trust Company, with $8,000,000 capital and surplus and $70,000,000 of deposits; 
  • the Equitable Trust Company, with $12,000,000 capital and surplus and $50,000,000 of deposits; 
  • the American Tobacco Company, with $300,000,000 capital and bonded indebtedness and annual net earnings of $25,000,000 or more; 
  • the Interborough-Metropolitan Street Railroad system, with $225,000,000 capital stock and bonded debt issued and authorized; 
  • the Seaboard Air Line Railroad, with $125,000,000 capitalization.
Continuing in this line, the article succinctly summarized how the syndicates with which Ryan had been associated up until 1907 had operated:

How a syndicate really works?
In street railroad affairs it was first, William C. Whitney, then the Whitney-Widener-Elkins syndicate, then more recently August Belmont through the merger of Mr. Ryan's Metropolitan with Mr. Belmont's Interborough. In the Consolidated Gas Company the Standard Oil group of capitalists are more widely interested than any other. In the Southern Railroad Reorganization it was Morgan and Co.; in the Seaboard Airline, Blair & Co. with Morgan "willin'." In the Bank of Commerce the "life insurance interests," as they were known in the old days, were the co-participators, while the American Tobacco Company, as it is called to-day, represents a wide variety of financial affiliation. Only in the purchase of the Equitable did Thomas Ryan go it alone, as Mr. Harriman has had occasion to remark on several notable occasions.
The Vision Thing

In the midst of all his ability to work compatibly with certain of his competitors, Ryan was said to have suffered one memorable defeat, which he eventually turned into an advantage.  Throughout the twenty years or so of activity in building and reorganizing his various businesses, Ryan had the advice primarily of William C. Whitney, Elihu Root, and attorney Paul D. Cravath.

These men had bet their future wealth on the advancement of a public-sponsored system of electric street railways without having a vision of individually owned petroleum-powered automobiles. Thus their short-sighted vision for the future is now notable only as fanciful history, which disappeared in the great stock market crash of 1929.

Leading up to that crash was a series of run-ins between Ryan, whose Irish Catholic roots in Virginia were at odds with a fellow Virginia capitalist named J.S. Williams. Back in the 1890s, Ryan had been challenged for control of the Seaboard Air Line Railway by this rival, about whom we have already written:
John Skelton Williams
John Skelton Williams of Richmond, who, with J. William Middendorf, organized a new syndicate and offered $200 a share. The Williams party planned a connection with the Baltimore and Ohio. The courts of Baltimore refused Mr. Ryan an injunction to prevent the transfer of the stock of the Williams crowd, and he appeared to have suffered defeat. Thomas F. Ryan never forgot that defeat. He had to wait—wait until the slow panic of 1903 brought the Williams group of financiers into difficulties. Then, through the banking house of Blair & Co. [operated by C. Ledyard Blair], he helped finance the needs of the Seaboard system with the inevitable result. Ryan got the Seaboard....
The question arises naturally, enough, who have been the advisers of Thomas F. Ryan during these twenty years of his participation in the larger financial doings of this town? Two of them, Elihu Root and William C. Whitney, have been already disclosed. Whitney was the close business and personal associate whose stake went in with Mr. Ryan's stake and whose profits came out with those of Mr. Ryan. 
When we follow the money, rather than the men themselves, all roads lead to Brown Brothers, the American bank which spread its daughters out like Rothschild's arrows. It's a complicated story, which we'll attempt to clarify over a series of steps.

Start with these links:
  • T.F. Ryan lost control of the Seaboard Airline Railroad in 1893 to John Langbourne Williams' son, John Skelton Williams, who was working to connect it to the railroad controlled by Baltimore's premier banking family, Alexander Brown and his son, George Brown.
  • In 1903 Ryan worked through C. Ledyard Blair, head of a bank at 24 Broad Street in New York to regain control of the Seaboard Airline.
  • During the Panic of 1907, Morgan, with the help of James Stillman of the National City Bank (now Citigroup), and a few other bankers, pooled enough money together to allow Morgan-financed U.S. Steel to purchase the shares of the "too big to fail" Moore and Schley brokerage company in a competitor steel company, with last-minute approval of President Theodore Roosevelt.
  • C. Ledyard Blair, Ryan's banker in 1903, supported Republican William Howard Taft (Yale, Skull and Bones, 1878) for President in 1908 and again in 1912, when Democrat Woodrow Wilson won.
  • Wilson selected T.F. Ryan's nemesis, John Skelton Williams, to be Comptroller of the Currency in the very year, 1913, the new Federal Reserve Act went into effect and the same year J.P. Morgan died. James Stillman had retired from City Bank in 1908, and E.H. Harriman died in 1909. There was a vacuum at the top of the big banks during this time, waiting for someone to fill.
Who would fill this gap after the big names either retired or died? A group of banking scions were chomping at the bit to make their names known.

Tuesday, June 25, 2013

Marriage--the Ultimate Business Merger


Stillmans remain close to collateral kin.
James J. Stillman did see to it that his children married "well."  Daughter Elsie married William Goodsell Rockefeller in 1895; Isabel married his brother, Percy Avery Rockefeller, in 1901; and James Alexander Stillman later in 1901 married Anne Urquhart Potter, an actress. 

The Stillman daughters lived in Greenwich, CT with their Rockefeller husbands (both Yale educated and members of Skull and Bones), and they maintained close ties with their Stillman relatives, who worked at the bank which is now known as Citigroup. Charles Stillman, Jr., their bachelor uncle, had graduated from Yale in 1882 and worked in cotton brokerage like the Swensons.The next generation witnessed the marriage of Elizabeth Goodrich Stillman, the daughter of Elsie's cousin, Chauncey Stillman, to Langbourne Meade Williams, a son of John L. Williams, one of Eric Swenson's investors in his Freeport Sulphur Co.:

The John L. Williams & Sons, Banking Family

The Stillman family's shares in Freeport Sulphur were originally acquired in 1912 by James J. Stillman, when the mineral company was founded by a third-generation Texas banker:
Eric P. Swenson, vice- president of National City Bank in New York and a native Texan who retained strong financial ties throughout Texas, showed interest and visited the find in 1911. When Swenson saw the site, he realized that he could also develop a duty-free port nearby. Upon returning to New York, he formed the Vanderlip-Swenson-Tilghman Syndicate. He pooled capital of $700,000 to finance the project and purchased Bryanmound and the surrounding area.
It was said of Eric P. Swenson's Fidelity Bank when it opened in March 1900 in the upper East side of New York City, that:
while it will be a separate institution, it will practically be an up-town branch of the City National Bank....One of the Directors of the new bank said last night:
"The institution is designed to accommodate the people up town, and will be more especially a 'householders' bank'. It will probably have close business relations with the National City Bank."
Langbourne Williams, Sr.'s brother, John Skelton Williams, was a Virginian like President Woodrow Wilson, who appointed him Assistant Secretary of the Treasury on March 24, 1913. While awaiting approval of his appointment as Comptroller of the Currency, he was thus placed in charge of the fiscal bureaus of the Treasury Department and would have such control until Warren Harding's inauguration in 1921--the first eight years of the Fed's operation. The Southerner's background was given in an introduction to him by the Washington Post, published May 25, 1913:
blue blooded Virginian
The new Assistant Secretary of the Treasury, Mr. John Skelton Williams, has the enviable distinction of tracing his line of descent on the paternal side of his family direct from our first First Lady [Martha Washington], and from his maternal ancestors there flows in his veins the bluest blood of the F.F.V.'s [First Families of Virginia].

Mr. Williams' grandmother, Sianna Dandridge, was the daughter of William Dandridge, of New Kent, whose father, John Bartholomew Dandridge, was the brother of Martha Washington. Sianna Dandridge's mother was Susannah Armistead, the only daughter of Maj. William Armistead, of New Kent, who was a direct descendant of William Armistead, the emigrant, who landed on the shores of Virginia In 1636. 


Nor is Mr. Williams' mother's line any less distinguished. She comes from the Skeltons and the Randolphs—families who have made Virginia's history famous since Colonial days. She is the great-granddaughter of the Edmund Randolph who was the first Secretary of State under President Washington, and who was the first Attorney General of the young republic. 

Secretary Williams' parents, John Langbourne and Marie Ward Skelton Williams, were living at their country home, in Powhatan county, Va., when their son, John Skelton, was born, July 6, 1866. His early boyhood days were spent there and at the Virginia capital, and in the private schools of Richmond young Williams received his rudimentary education. Later he attended the University of Virginia [later the alma mater of Mississippi-born Frank Wisner], and in 1886 he took a short term at law at that institution, not with the idea, however, of practicing, but in order to better fit himself for his business career. He entered his father's banking house as an apprentice, and learned the business from the first round of the ladder up. He had remarkable aptitude for business, as was shown when at the age of 18 he began the publication of a pamphlet entitled "A Manual of Investments," a publication commanding such a wide circulation that he continued publishing it for a number of years—in fact, until he became too busy with other things to do so. 

... It was he who first thought out, and then brought to consummation, the short line from New York to Florida—that which is now known as the Seaboard Air Line Railway system. In 1900 he was elected the first president of the system—a most unusual honor to come to a man in his thirty-fourth year. Since then Mr. Willlams has been more and more identified with the business interests of the South. He became a director in numerous trust companies, banks, railroad and other corporations, and is now a recognized leading financier, not only of the South, but in many of the business centers of the country.
Taking Charge of the New Fed

A mere seven months after this introduction Williams was being viciously attacked in the press, and soon thereafter was being investigated by Congress. Claims were made by a Republican who had been involved politically with Theodore Roosevelt, named Milton E. Ailes,  that Williams had "resorted to extraordinary methods to obtain information with which to attack the National City Bank of New York" as well as the Riggs National Bank in Washington, D.C. 

George Peabody's partner in Baltimore, Elisha Riggs, had founded the Riggs bank. This blog has previously detailed George Peabody's rise from the elite enclave of China traders in Essex County, Massachusetts, to enter banking in Baltimore. His training complete, he shipped off to England during the days his Danvers relatives were accumulating capital in the so-called China trade, into which various members of the Peabody clan, such as Endicott Peabody, were intermarried. George Peabody's role in London, as a representative for the House of Morgan, was to launder profits of his opium-trading kin through what then served as America's bank of last-resort lending. He created the model for using drug money to build up America's gold reserves.

John Langbourne Williams' financial network
Perhaps Ailes was aware of this connection, from the previous century, between the opium traders in New England and the Baltimore bankers. Perhaps he was urged to destroy the triangular scheme by which anti-Federalist shipping merchants, who were blockade runners and smugglers during the War of 1812, had linked up with Southern bankers--both of which groups had ties to British banks which had similar experience with East India Company profits before the opium wars shut off that faucet for them.

All we know at this point is that Milton Ailes made vicious attacks against the Virginian whose father, banker John Langbourne Williams of Richmond, Va., was in partnership with the J. W. Middendorf banking family, according to information from Baltimore: Its History and Its People (1912). J.W. Middendorf II would, in 1968 help finance George Bush's run for President against Richard Nixon and others; he almost got Bush's name on the ballot as vice president, he revealed in his 2011 book, Potomac Fever.
 
Ailes also stated that "Williams had maliciously used his high office as a cover to impertinently, arrogantly and insolently pry into matters with which he had no official concern whatever, for the purpose and with the intent to injure the bank and wreak his vengeance on certain of its officers against whom he entertained a personal hatred." Ailes was obviously working on behalf of competing banking networks, likely based in New York, who did not want to allow these Southerners to compete with them. Eventually, a grand jury indicted the Riggs bankers for selling stocks short, but the defense used former Presidents William Howard Taft and Theodore Roosevelt as character witnesses for the defendants. It was all set out in a book by banker, Thomas P. Kane, in The Romance and Tragedy of Banking.

A Faked Memorial
Ten years after the 1916 trial, John Skelton Williams died, but his influence remained. The major investment in sulphur his father's bank had made in 1912 was destined to fall under the control of the former Comptroller's nephew, Langbourne M. Williams, Jr. in 1930, not coincidentally the same year Langbourne married Elizabeth Goodrich Stillman. As the sister of the same Chauncey Devereaux Stillman, introduced in a previous post, Mrs. Williams served as a link between the capital acquired at the turn of the 20th century by an old Connecticut family--with mining assets, including sulphur, in Mexico and Texas, along with assets in petroleum brought in when her Stillman aunt and grandmother married sons of William Rockefeller. 

The 1930 marriage would allow financial management of those mining and oil assets to be handed over to one of Virginia's oldest banking families. Yet it seems nobody understood what was actually happening. G. E. Dodd, who had to pay the newspaper to get it to print his version of the farce that took place when Godfrey S. Rockefeller and J. Sterling Rockefeller went  to Brownsville, Texas, with the Stillmans and Williamses to create a fake memorial for Charles Stillman did not know exactly what was amiss, only that he smelled a rat.  It was with this Brownsville memorial that we began our series about the Stillman family in Texas with the intention of exploring Lisa Pease's research which connects Freeport Sulphur to the John Kennedy assassination.


It is at that point we will pick up eventually. Watch for it.

Thursday, June 20, 2013

Citigroup's Texas Midwives

Eric P. Swenson
As we have shown previously, Freeport Sulphur actually owes its Texas birth to a network of men linked to powerful interests in financial and political forces outside the state, who owned non-liquid assets in Texas they wished to convert into income-producing resources. The first of these network partners was S.M. Swenson and his son Eric P. Swenson, who leveraged their holdings in three areas of Texas into a sub-empire within another then-budding empire set up by James J. Stillman, son of a Connecticut Yankee who made his fortune between 1825 and 1865 in Texas during two wars.

We will subsequently reveal why James J. Stillman's son did not permanently take charge of his father's empire after his death in 1918. Although he did briefly replace his father as president and chairman of National City Bank in New York, James Alexander Stillman was beset by marital problems, as we will explore later, which diverted his focus from his career, and in 1921 a new chairman of the bank was appointed in his place -- Eric Pierson Swenson -- the same man who would control Freeport Sulphur from its founding in 1912 until he lost control to a Stillman in-law, L.M. Williams, Jr., in 1930. Both the Stillmans and Swensons had long-term connections to Texas and to the National City Bank of New York.

The Swenson Roots of Citigroup

Excerpt from C. L. Sonnichsen, Cowboys and Cattle Kings: Life on the Range Today (Norman, OK.: University of Oklahoma Press, 1950), pp. 141-142:
Click map to enlarge
Swante Magnus Swenson landed at Baltimore in the middle 1830s with no money and no experience except a few months spent in a store. [He was, in fact, a bookkeeper for a railroad in Baltimore.] This, however, was enough to get him a job with a retail firm. He did well. And before long he was sent [by whom?] on a trading expedition to Texas.
In 1838, when S. M. made his first trip, that was no week-end excursion. Railroads [in this area, at least] were far in the future. The boat sailed up the Brazos as far as Richmond, and there the real business started. S. M. bought mules and a hack and sold the goods he had brought, traveling all over the parts of Texas that were then settled. Before long he was ready to set up in business for himself, first at Richmond and later [1850], when the capital was moved, in Austin. In time he became the biggest merchant in town, a close friend of Sam Houston's, and a power in the land. Swante Palm, the greatest Swede in Texas, was his uncle, and that undoubtedly helped. [Palm worked in Swenson's general store in La Grange, Fayette County.] All went well until the Civil War broke out. Like Sam Houston, S. M. was not in favor of secession. Sam was big enough to stand the storm, but Swenson "took to the hills." To be specific, he went to Mexico, and one story says that he managed to get a great quantity of contraband cotton across the border and reaped a small fortune.

Another legend, still told in the family, says that just before he left he converted all his assets into gold, got his family out of the house by sending them on a picnic, and called in a stone mason. Well, his chimney had been giving him trouble. But when the fireplace was ready to be put back together again, a metal box of gold coins was cemented in beneath the floor. S. M. did not come back to dig it up. When the war ended, he was established in New York. Swante Palm officiated at the exhumation, however, and S. M. got his gold. He invested some of it in a sugar plantation and spent the rest of his life at or between points in Sweden, New York, and Louisiana.
Quoted in a Swedes in Texas website from Swedes in Texas in Words and Pictures, English Edition, 1838-1918, the following excerpt helps to fill in a gap about Swenson's life:
"In his first marriage, Swenson was joined with Mrs. Jeanette Long, widow of Dr. [George] Long. She died after a short time without having had any children. He then married Cora S. McCready, a cousin of his first wife. In this marriage, he had two sons, Erik [Eric P.] and [S.] Albin, and two daughters, Margareta and Eleonora. The first real home the family had was on the Long plantation where Sugarland is now located, in Fort Bend County, Texas. He got possession of this property through the marriage to his first wife."
The company S.M. Swenson founded in New Orleans, before he moved to New York, brought in as a partner another Texan who would serve to be a valuable connection to the Stillman banking family. An heir to the Kenedy Ranch in south Texas, this new banker's father had been a partner of Charles Stillman and Richard King at the close of the Mexican War in 1850:
John G. Kenedy [son of Mifflin Kenedy] was born in Brownsville, Texas, April 22, 1856, and was educated at Spring Hill College, Mobile, Alabama. After leaving school in 1873, he accepted a position with Perkins, Swenson & Co., bankers and commission merchants at New Orleans, where he remained several years.... Mr. John G. Kenedy married Miss Marie Turcotte of New Orleans January 30, 1884, and has two children living, John G. Kenedy, Jr., and Sarita Kenedy East.
Swenson's partner, John G. Kenedy, was present, according the local newspaper, at a huge banquet in which railroad builder Uriah Lott would be the guest of honor in July 1904 :
Lon C. Hill presided as Toast Master. Besides the tributes paid Col. Lott, many and beautiful expressions of gratitude were addressed by Mrs. H. M. King [wife of founder of King Ranch and mother-in-law of Richard Kleberg], John G. Kenedy, Maj. J. M. Armstrong, and others who contributed so liberally of their money, lands and influence towards the building of the railroad. In addition to the prominent citizens there were present State Senator John G. Willacy, Hon. P. Merrill Griffith, U S. Consul of Matamoros, Hon. John G. Kenedy, Capts. Kilburn and Baldwin of U. S. Army, Royal Givens, President of the Corpus Christi Board of Trade, Hon. Geo. D. Palfrey, Franklin, La., and other distinguished guests. Col. Lott accepted with becoming modesty the many graceful compliments paid him on his success in bringing the St. Louis, Brownville and Mexico road to this city, and also passed out a few boquets [sic] to citizens here for their assistance in the great work.
C. L. Sonnichsen excerpt (cont'd):
In New York he [S.M. Swenson] became an investment banker, associated with such men as Frank Vanderlip and Mortimer Schiff. In Louisiana, where he passed his winters, he kept up one palatial home, and in Sweden he had another for summer use.….

The ranch empire which A. J. Swenson and his sons have managed for almost half a century does not belong to them. It is the property of a corporation started by S.M. Swenson before he left Texas. He bought scrip covering railroadlands, purchased additional land, and eventually had three enormous blocks of real estate which he called the Ellerslie, Flat Top, and Throckmorton ranches…

In 1880 the new regime came in. E. P. Swenson was the powerhouse of the family from then on until his death in 1942 when he was well over ninety.… Under E.P.'s control the Swensons acquired a fourth ranch at Paducah and finally, in 1906, organized the corporation which bought the huge and historic Spur Ranch on the high plains at the base of the Texas Panhandle. The stockholders were Vanderlip, Schiff, Emery, and Swenson. Emery owned three-fifths of the stock. The story of the Spur Ranch is one of the great tales of the range—how this empire of grass was taken over by a bunch of New York bankers—how they developed a town in the middle of their holdings and sold off thousands of acres of farmlands between 1910 and 1915—how they combined the sturdy traditions of the Old West with the grim business methods of Wall Street.
Historic Texas Ranches Linked?

We find the Swenson family had close ties to three geographic regions of Texas (depicted visually in the inset map below):
  1. The area west and south of Houston within the old Austin's Colony, which would become the town of Freeport;
  2. The area west of Fort Worth and south of Vernon (adjacent to the Matador Ranch and Waggoner Ranch) where SMS Ranches would have headquarters at Stamford; and
  3. The area between the Nueces and Rio Grande Rivers that was won from Mexico by the U.S. during the war in 1845, when Texas was annexed by treaty as a state of the Union.
Known as the "Spur Syndicate," the Americans who bought the assets of the faltering Espuela Land and Cattle Co. in 1905 and the adjacent Spur Ranch in 1907 consisted of:
  • Eric P. and Swen Albin Swenson of the New York firm of S.M. Swenson and Sons, 
  • James J. Stillman,
  • Sigmund Neustadt (one of four principal partners of Hallgarten & Co, bankers, which opened a London office in 1912),
  • John J. Emery (grandson of a Cincinnati lard oil refiner/chemical magnate, whose company ultimately became part of National Distillers & Chemical Corp.), and 
  • Benjamin F. Yoakum.
Click map to enlarge
Espuela was a cattle-raising entity set up in 1884 in London, managed in Fort Worth, with securities issued and sold abroad to raise funds, but the unpredictable weather and market conditions proved too much for absentee owners. According to author Mira Wilkins there was a proliferation of mostly Scottish companies between 1880 to 1900 investing in cattle lands. Many of the directorships of these companies interlocked, and managers were often sent to America from Scotland, although ownership of the companies continued to be fragmented. As bonds or debentures came due, creditors' committees were formed by original investors, their heirs or assignees, as well as by creditors, to salvage assets by "winding up" or reorganizing into new companies with stock issued in the new names. It was a complicated process handled under the laws of the states where the land was situated. All the ranches shown on the inset map to the left were in part financed or in some way linked to these interlocking directors, though each ranch was a separately operated entity, each of which saw the importance of developing the old trail drives into a more modern rail distribution system to deliver beef on the hoof to the slaughterhouses located in the vicinity of Chicago.

Those same packing houses would share a financial interest with the cattle men in obtaining alternative financing from New York and Boston bankers. Initially, they were drawn to Swenson's bank, which operated as a branch of the Moses Taylor establishment which financed important railroads through Texas with help from B.F. Yoakum.

House v. Faulkner at p. 308
Yoakum got his start with Jay Gould's International and Great Northern Railroad, created in 1873 by the merger of the International Railway Company of T.W. House, and the Houston and Great Northern Railroad. The merger was facilitated by a law enacted by the carpetbagger state legislature in 1875, promising land owned by the state to be used to pay railroad builders to construct the railroad from the southern areas to the northern markets. It was such land grants along railroad lines, or scrip certificates which sold for almost nothing, that S.M. Swenson and English and Scottish investors acquired with the hope of raising cattle on the Texas high plains and rolling plains. Not until oil was discovered under some of these lands did the shareholders see a penny of profit--but that was still many years in the future at this point.
Jay Gould's Octopus-Like Grip on Texas

Col. Edward M. House
Calvin Coolidge would remark just more than a decade after Woodrow Wilson took office that "the chief business of the American people is business." He could just as well have said the chief business of American politics is business, and it would have described the motivations of both parties in getting their men elected to the White House. More than anything else, the machinations of the House political machine in Texas were motivated by his own family's business concerns -- first in Texas, but which ultimately expanded onto the international scene.

When T.W. House, Sr. died in 1880, his youngest son Edward Mandell House was forced to give up college at Cornell and return to Texas, first spending a year in Italy with his bride. In 1881 Ed House settled his wife and newborn daughter in Austin, the state capital, and became the first real political strategist in the state -- determined to wrest power away from the carpetbagger financiers and create a banking system that allowed southern-born entrepreneurs a stake in national finance. His father's estate, heavily weighted with non-liquid real estate holdings, was assigned for management among the House brothers by category, with the eldest in charge of banking interests, another with the sugar and rice lands in the southern part of the state, and Edward in charge of the estate's cotton plantations in central Texas, as well as with completing the Trinity and Brazos Valley Railroad (T&BV), which was set up to get the cotton to port for distribution.

By early 1905, negotiations were well underway to sell the 90-mile T&BV -- which had financing from Boston capitalists including T. Jefferson Coolidge, a great-grandson of Thomas Jefferson -- to the St. Louis, Brownsville and Mexico system then being consolidated by B.F. Yoakum. The father ofT.J. Coolidge, Sr., Joseph Coolidge, had worked with Augustine Heard & Co. in Canton, China, in 1839 alongside John Murray Forbes, who made him president of the Atchison Railroad in 1880. Forbes had poured profits from China (opium being then highly lucrative) into construction of the Chicago, Burlington and Quincy Railroad and was also a large investor in the Atchison, Topeka & Santa Fe. The Coolidge and Ed House families each spent summers at Manchester-by-the-Sea, Massachusetts.

Benjamin Yoakum had been hired as traffic manager for the the San Antonio and Aransas Pass Railway, chartered by Uriah Lott in 1884, with financing from San Antonio bankers and businessmen. Lott had already by that time built the Corpus Christi, San Diego and Rio Grande line from Corpus Christi to Laredo, largely financed by Mifflin Kenedy. Yoakum was put in charge of the S.A. & A.P. when it was placed in receivership in 1890, while Eric P. Swenson served on its creditors' committee; Swenson in-laws, the Tilghmans, were also investors in this line.

Yoakum's mentor in railroading, Jay Gould of the Missouri Pacific system, entered Texas in about 1880, and he soon acquired control of the Texas and Pacific Railway Company and the International and Great Northern Railroad (I&GN) Company.

In the fall of 1892 a Galveston Daily News editorial lambasted land-grant legislation enacted 22 years earlier, entitled Act of the Legislature of the State of Texas, approved March 10, 1875, entitled "An Act for the Relief of the International Railroad Company, now consolidated with the Houston & Great Northern Railroad Company, under the name of the International Great Northern Railroad Company, as shown by Chapter 49. Acts Fourteenth Legislature. The editorial declared that the legislators had "transferred both public lands and public revenue to private hands. The measure worked mischief from the beginning" by distracting the corporate officers from their chartered business of railroading into land speculation. They had engineered a "political craze," led by Governor Richard Coke, followed by James S. Hogg, the attorney general, who, the writer said:

"made a grand dramatic display of litigious impetuosity to bear up the work of the former in the land subsidy and tax-exemption arrangement. Then on the heels of that impotent onset he dropped into the celebrated International and Great Northern receivership scheme with a complaisance that challenged universal admiration."
Governor Coke facilitated setting up a convention to enact the post-Reconstruction Constitution of 1876, which severely limited powers for both the legislature and the governor, imposed strict control over corporations, and forbade land subsidies for railroads. Coke then became a U.S. Senator and campaigned for Attorney General Hogg to be the new governor of Texas, who was elected in 1892 with the behind-the-scenes manipulations of Edward M. House. Hogg was a lawyer who had made it his mission to drive the outside looters from Texas, and determined the way to do that was to use a regulation scheme House had advocated in his anonymously published novel, Philip Dru, Administrator--first focusing on the railroads. According to a website styled The Railroad Commission of Texas:
While he was Attorney General, Hogg had taken on the railroads, prosecuting several of them as well as the rate-setting organization of railroads, the Texas Traffic Association, for monopolistic actions and conspiracy to discourage competition. In the race for governor which he won in 1890, Hogg had campaigned for the creation of a commission to regulate the railroads. In just a few decades, the railroads had turned from being the object of enticements by the state and many communities to being an object of derision. Why this change?...

In the Eastern United States, the railroads followed the people, connecting already existing population centers. In most of Texas, it was the other way around. From the time of the Republic, it was a recognized policy to set about attracting settlers from back east and the countries of Europe. One way to do that was to have a transportation system already in place. But, railroads are heavily capital intensive--it took a lot of money to do the necessary grading, buy and install the ties and rails, purchase the steam locomotives and cars. Since the companies did not want to invest if there was no market--no people and no goods--the state sweetened the pot by land grants, bond issuances, and loans.
Click image to enlarge
With the success that came from regulating railroads in favor of Texas consumers rather than Eastern capitalists, House and his associates broadened their interests and decided to expand Texas' influence nationally. By the fall of 1912, House had succeeded in finding his own malleable candidate and making him President--Woodrow Wilson, a Democrat from Virginia, then living in New Jersey. The same year he published a novel titled Philip Dru, Administrator, written under the name Anonymous, whose author would not be disclosed until 1918. A review of the pedantic tract, from Walter Lippmann, calls it a "didactic novel" intending to show an unknown "insider's" plans for America's future.

During his days in the state capital in Austin, Edward House had become close socially with James S. Hogg and W.T. Campbell of Lampasas, as well as with members of the Cruger banking family, though still maintaining ties with his mother's Shearn family, from Houston, and with his sister's family (the Caldwells and Munsons from the old Republic days). These mostly hidden ties would become part of the deep political roots lying beneath the 1913 Federal Reserve Act in Texas.

Click image to enlarge.
Before the Swensons could hope to extract and export sulphur from the area it was believed to exisit, they determined a need to build a distribution infrastructure into and out of that isolated location, a project best accomplished by linking themselves to an existing transportation network--the Gould system. The Galveston Daily News wrote in their April 8, 1914 edition that the Houston & Brazos Valley Railroad Company, operated by the Missouri, Kansas & Texas Railroad, and the Freeport Terminal Company, also operated by the "Katy," as it was called, met for its annual board meeting had in Freeport to elect officers and directors. At that time, Eric Swenson was a vice president of the H&BV but not a member of the Freeport Terminal board.

Northern Bankers Invest War Profits in Texas Railroad

Swenson originally headed to New York via New Orleans in the early days of secession, less than five years before Charles Stillman, from an old Connecticut family, retired to Hartford. Stillman, it will be recalled, had been one of the first to invest in Texas when it was still part of Mexico, he and two of his brothers spending several decades during the middle of the nineteenth century capturing much of the shipping and mining wealth accruing from two wars. Once the civil war ended, however, he returned to spend the last ten years of his life in Connecticut.

James J. Stillman, though born to Charles and his wife in Texas, spent his youth in Connecticut with his mother, but he reached adulthood after Charles was back with the family. James Jewett Stillman was the only one of Charles Stillman's six children to marry (his wife was Elizabeth Pamela Goodrich). A daughter, born in 1876, was given the name of his eldest sister,Isabel Goodrich Stillman (called "Aunt Bell"), and a son was named Chauncey for Charles' own brother who lived in Cleveland, Ohio--this according to the book written by Chauncey Devereaux Stillman, which was published in 1956.

James Jewett Stillman, named for a business associate of his father's in New York, was born in 1850 and his sister a year or two later, at which time their mother took them back to Connecticut, to live near her sister in Hartford, while Charles remained in Brownsville except to visit them there from time to time, usually in the summer. During the 1850's letters to his brother in Cleveland mentioned mining interests he was acquiring in Mexico, by then defeated in the the war which followed the annexation of Texas. In his letters to his wife he also wrote about his partnerships with men who owned huge ranches in the part of Texas over which the war with Mexico was fought--the Nueces Strip lying south of the Nueces River.


Kenedy and Co.'s monopoly on the shipping trade ended when the civil war officially began, but by then all the partners were extremely wealthy, both in money and land. During the war Charles Stillman transferred all his assets from Brownsville to Matamoros, on the Mexican side of the border, putting his ships under Mexican registry. The U.S. government instituted a blockade of all Southern ports to prevent goods being shipped to or from those locations. Stillman used his ships to load Texan and other southern exports, especially cotton, which was bound for textile mills in England. He paid the Southern growers for the cotton, but the profit came when he delivered it to the foreign buyers who credited his account in the bank in New York City.

Charles' death which came in 1875, when his son was 25, gave James the task of consolidating and converting the family's Texas holdings by forming a cotton brokerage business in New York. Swenson had begun operations in New York as early as 1860 as cotton broker and banker for southern planters. Of course, it was the blockade runners who made the highest profits, but the men like Swenson who handled their accounts in the financial center also made out well.

Moses Taylor
James J. Stillman, intriguingly, entered banking under the wing of Moses Taylor, a heavy investor in the Houston and Texas Central Railroad. Other investors in this road included a Massachusetts-born man, William Marsh Rice, who had made his wealth in Texas during the same era as Thomas W. House (father of Edward Mandell House) and S.M. Swenson, who arrived in the Republic of Texas from Sweden a decade after Charles Stillman went to Mexico. Rice was often, like Swenson, accused of favoring the Union cause, but he did not pack up his money and leave Texas until years after the Swede had gone north. Instead, Rice worked from Houston to complete the railroad, which his father-in-law, Paul Bremond, had begun to bring cotton from central Texas to a port they wanted to create in Houston. Bremond selected Rice as a Houston and Texas Central Railroad director in 1872, along with himself and James J. Stillman's mentor, Moses Taylor. Others included the following men:
  • William Earl Dodge (born in Hartford, Connecticut before moving to New York in 1818) established Phelps, Dodge & Co. for his wife's father, Anson G. Phelps, while his father built a cotton factory in Connecticut. The family had links to the Greens and Lows, who were also involved in opium trade in China with Joseph Coolidge. 
  • W.J. Hutchins, a Galveston banker; 
  • Abraham Groesbeeck (born in New York around 1830, who was a large investor in Houston business, including the hotel purchased by, and later named for, William M. Rice), 
  • Cornelius Ennis, and 
  • William R. Baker, associated with the Houston and Texas Central Railroad in 1852 and later mayor of Houston, he was one of the partners in a wholesale firm in Houston with Sam. K. McIlhenny, Benjamin. A. Botts, Walter B. Botts, Wm. M. Rice, Fred. A. Rice and Wm. D. Cleveland.
    It should be pointed out that Swenson was obviously not an investor with Rice or Moses Taylor in 1872, nor was Stillman, who was still a mere trainee at Moses Taylor's City Bank. It was not until after the Galveston hurricane of 1900 that things would begin to change for both the Swenson and Stillman families--the same year, incidentally--that William M. Rice was murdered.