Jay Cooke | |
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_p134_JAY_COOKE_(cropped).jpg) | |
| Born | Jay Cooke (1821-08-10)August 10, 1821 Sandusky, Ohio, U.S. |
| Died | February 16, 1905(1905-02-16) (aged 83) |
| Occupation | Financier |
| Spouse | |
| Children | 8, including Jay Cooke Jr., Laura E. Cooke, Henry E. Cooke, and Sarah E. Cooke |
Jay Cooke (August 10, 1821 – February 16, 1905) was an American financier who helped finance the Union war effort during theAmerican Civil War and the postwar development of railroads in the northwestern United States. He is generally acknowledged as the first majorinvestment banker in the United States and creator of the firstwire house firm.[1]
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Cooke was born atSandusky, Ohio, the son ofEleutheros Cooke and Martha Carswell Cooke. Eleutheros Cooke was a pioneerOhio lawyer andWhig, a member of theOhio General Assembly, and a member ofCongress from Ohio from 1831 to 1833.[2]
In 1838, Cooke went to Philadelphia, where he entered the banking house ofE. W. Clark & Co. as a clerk, and became a partner in 1842. He left this firm in 1858.[3] On January 1, 1861, just months before the start of theAmerican Civil War, Cooke opened the private banking house ofJay Cooke & Company in Philadelphia. Soon after the war began, the state of Pennsylvania borrowed $3 million ($104,990,000 today[4]) to fund its war efforts.[2]
In the early months of the war, Cooke worked with Treasury SecretarySalmon P. Chase to secure loans from the leading bankers in the Northern cities. (Cooke and hisbrother, a newspaper editor, had helped Chase get his job by lobbying for him, even though all were former Democrats.)
Cooke's own firm was so successful in distributing Treasury notes that Chase engaged him as special agent to sell the $500 million in "five-twenty" bonds – callable in five years and matured in 20 years – authorized by Congress on February 25, 1862.[2] The Treasury had previously tried and failed to sell these bonds. Promised a sales commission of 0.5 percent of the revenue from the first $10 million, and 0.375 percent of subsequent bonds, Cooke financed a nationwide sales campaign, appointing about 2,500 sub-agents who traveled through every northern and western state and territory, as well as the Southern states as they came under control of the Union Army. Meanwhile, Cooke secured the support of most Northern newspapers, purchasing ads through advertising agencies, and often working directly with editors on lengthy articles about the virtues of buying government bonds. These efforts heralded a particular type of patriotism based on classical liberalist notions of self-interest. His editorials, articles, handbills, circulars, and signs most often appealed to Americans' desire to turn a profit, while simultaneously aiding the war effort.[5] Cooke quickly sold the $500 million in bonds, and $11 million more. Congress immediately sanctioned the excess.
Cooke influenced the establishment ofnational banks, and organized a national bank atWashington and another at Philadelphia almost as quickly as Congress could authorize the institutions.[2]
In the early months of 1865, the government faced pressing financial needs. After the national banks saw disappointing sales of"seven-thirty" notes, the government again turned to Cooke. He sent agents into remote villages and hamlets, and even into isolated mining camps in the west, and persuaded rural newspapers to praise the loan. Between February and July 1865, he disposed of three series of the notes, reaching a total of $830,000,000. This allowed the Union soldiers to be supplied and paid during the final months of the war.[2]
It was in this effort that he pioneered the use of price stabilization. This practice, whereby bankers stabilize the price of a new issue, is still in use by investment bankers in IPOs and other security issuances.[6]
Although Cooke's bond campaigns were widely praised as a patriotic contribution to the Union cause, his huge personal financial gains did not go unnoticed. Notorious for stalling the deposit of bond proceeds into federal coffers, he was accused of corruption, and on December 22, 1862, RepresentativeCharles R. Train proposed a Congressional investigation of the Treasury – though the investigation was never realized.[5]
Cooke moved toDuluth, Minnesota after purchasing land, particularly inCarlton andSt. Louis counties, mostly throughagricultural college scrip. He saw the lakes as a link to a "Western Empire" and wanted to make it a "new Chicago." He bought bonds for theLake Superior and Mississippi Railroad, part of theNorthern Pacific Railway and secured an interest in the Western Land Association with the intent of uniting Lake Superior and the Mississippi, as well as reaching European markets through the Great Lakes. He believed the lumber industry would be furthered by the road which lay through hundreds of miles of white pine and hundreds more of bare prairie for settlers. The line was completed in 1870. Along with encouraging the Duluth lumber industry, Cooke built a grain elevator to store grain while the Great Lakes were icebound. Cooke's investments brought other lumbermen to the area to purchase blocks of timber.[7] However, in advancing the money for the work (especially on the railway), the firm overestimated its capital, and at the approach of thePanic of 1873 it was forced to suspend operations.[2] Cooke himself was forced intobankruptcy.
Jay Cooke was heavily involved in financial scandals with the Canadian government and caused thePrime MinisterJohn A. Macdonald to lose his office in the 1873 election. Cooke's shares in the Northern Pacific Railway were purchased for pennies on the dollar byGeorge Stephen andDonald Smith, who then finished building theCanadian Pacific Railway.
In the mid-1860s, Cooke had taken his son-in-law,Charles D. Barney, into the firm. After Jay Cooke & Company collapsed in the 1873 panic, Barney reorganized the firm as Chas. D. Barney & Co.[8] Jay Cooke, Jr.—Cooke's son and Barney's brother-in-law—joined the new firm as a minority partner.[9][10]
By 1880, Cooke had met all his financial obligations, and through an investment in the Horn Silver Mine in Utah, had again become wealthy.[11] He died in the Ogontz (nowElkins Park) section ofCheltenham Township,Pennsylvania, on February 16, 1905.[2]
Cooke married Dorothea Elizabeth Allen in 1844; she died in 1871. He died inElkins Park, Pennsylvania, in 1905 at the age of 83.
Cooke owned asummer home, constructed in 1864–65 and still standing, on the small island ofGibraltar in theLake Erie harbor ofPut-in-Bay, Ohio.John Brown's sonOwen was winter caretaker for some years. The island was a lookout for Commodore Perry during the Battle of Lake Erie in 1813.[citation needed]
A devoutEpiscopalian, Cooke regularly gave 10 percent (atithe) of his income for religious and charitable purposes. He donated funds to thePhiladelphia Divinity School and for the building ofEpiscopal churches. These includeSt. Paul's Episcopal Church inElkins Park, Pennsylvania,[12] and St. Paul's Episcopal Church on South Bass Island, across the bay from his summer home on Gibraltar. After he had been forced to give up his Ogontz estate inbankruptcy, he later repurchased it and converted it into a school for girls.[2]
A number of geographic features are named in his honor, including:
One or more of the preceding sentences incorporates text from a publication now in thepublic domain: Chisholm, Hugh, ed. (1911). "Cooke, Jay".Encyclopædia Britannica. Vol. 7 (11th ed.). Cambridge University Press. pp. 73–74.