Lehman Brothers

Hearing that Lehman Brothers is likely lying at its economic death’s door is somewhat melancholy news. Like individuals, business enterprises have a natural life span; no firm lasts forever. Lehman Brothers has been around for a hundred and fifty years; one of the last and most prominent of the German-Jewish investment banking firms that have played a major role on Wall Street since the era of the Civil War. In the mid-1970s, Lehman Brothers absorbed what was the most famous and prestigious of all the German Jewish firms, Kuhn, Loeb, which, at the turn of the 20th century, led by the redoubtable Jacob Schiff, was the one firm that could go toe to toe with J.P. Morgan. For a while the firm was known as Kuhn Loeb Lehman Brothers, but this ended in the mid-1980s, when the firm became part of the American Express octopus (put together by the greatest Jewish Wall Street tycoon of our time, Sandy Weil), but when this marriage failed, it was spun off into its independence about a decade later. Now, suffering from the aftershocks of the mortgage crisis, it seems destined to be purchased by another firm, and probably join the very long list of Wall Street firms, from Jay Cooke to E.F. Hutton, that are now known only in histories.

I suppose I am a Wall Street sentimentalist. I still rue the day when the grand old Wall Street partnerships were turned into corporations, and then were allowed to be traded on the exchange. And of course now the exchange itself is a private company, traded like any other. As Marx said somewhere (or something like it), capitalism is the ultimate acid, a corrosive fluid burning through everything that dares to constrain it, until it turns on itself. It’s been a bad year for Jewish firms on Wall Street. Bear, Stearns, another Jewish firm, but a 20th century parvenu, largely the creation of “Ace” Greenberg, rather than one of the “Our Crowd” originals is no more, and AIG, whose fortunes were directed by another Greenberg (“Hank”) for many decades, also seems to be on the road to ruin. However Goldman, Sachs, an old firm, but definitely second tier until the 1950s is still around, and former Goldman Sachs chief, Henry Paulson, recently bailed out Fannie Mae and Freddy Mac. All things pass.

Also passing is the long commitment by the German Jewish firms and the families that created them, to dedicating themselves to public service and the commonweal, from Paul Warburg and Otto Kahn of Kuhn Loeb, Robert Rubin of Citicorp, Henry and Robert Morgenthau, and perhaps the greatest political scion of the German-Jewish ascendancy, governor and senator Herbert Lehman, who even more than his friends, Franklin Roosevelt and Averill Harriman, was a moneyed plutocrat dedicating to his life to the betterment of the common man and woman. They just don’t make capitalists the way the used to.

But what is perhaps even a greater reason for melancholy at the imminent demise of Lehman Brothers is a sense that New York City’s near century-long reign as the financial center of the world is coming to an end. Since the 17th century there has always been a single financial center in the world, generally the leading economic city in the country with the deepest pockets, Antwerp for a while, Amsterdam for much of the 17th and 18th centuries; London for the long 19th century, and since 1914, New York City. It is clear, reading stories about Lehman Brothers, that it is foreign countries, from the Persian Gulf or Asia that are the suitors and likely inheritors of Lehman Brothers, and the likely inheritors of the title of the country of last resort, with the deepest pockets and largest portfolios. This trend has been ongoing since at least the 1980s, but with foolish (to use a very mild rebuke) and incredibly costly overseas military adventures, and the Bush administration’s decision (or rather inaction) to let the financial markets immolate themselves at the site of the latest bubble, it is clear that the United States and New York City’s reign is probably coming to an end. Because there are doubts about the financial freedom and transparency in Hong Kong and the Gulf, London seems likely to reinherit the crown from New York City, which will in any event be shared for a while between NYC , London, and Hong Kong. But the long period in which New York City dominated the world financial markets is just about over. What impact this will have on New York City’s economy, so driven in recent decades by the financial services industry, is too soon to tell. But New York City is probably in the process losing a lot more than just Lehman Brothers.