House of Kuhn & Loeb

Pugilists go into training before fights, and wise bankers go into training (of mind and memory) before being haled before an inquisitive committee of Congress. Last week Kuhn, Loeb partners were brushing up for an ordeal before the Senate Banking and Currency Committee, brushing up, packing their records and their clothes for an extended stay in Washington.

Only a few Kuhn, Loeb partners were, however, able to brush up their memories. For the first noteworthy fact about Kuhn, Loeb today is that of its eleven partners only two were members of the firm prior to 1928: Felix Warburg, elected 1896, now active only in an advisory capacity, whose chief concern today is with the long tier of filing cabinets containing the desiers of his numberless charities which stand behind his desk in the K. L. office; Otto Kahn, elected 1897, diplomat of the firm, whose numerous public and private appearances, not to mention ill health, have in recent years reduced his time on the job.

In one respect therefore the Senate can question only the shadow cast by the banking house founded by two solid commission merchants from Cincinnati, Abraham Kuhn and Solomon Loeb--the house reared to greatness by great Jacob Schiff who died in 1920.

But the old house survives in something more than name for it has always been a family firm. The House of Morgan until, very recent times selected practically all its partners from outside its family. Kuhn, Loeb pursued just the reverse policy. Felix Warburg was son-in-law of Jacob Schiff. Otto Kahn was son-in-law of the late Abraham Wolff (one of the early partners). Since 1931 Felix Warburg's wisecracking Son Frederick, Otto Kahn's twice-married Son Gilbert, have been members of the firm. And Jacob Schiff's Grandson John, only 26 years old, became a partner, succeeding soon afterward to the large interest in the firm held by his father, the late Mortimer. Another partner is Lewis Lichtenstein Strauss (pronounced Straws) son-in-law of Jerome J. Hanauer who was one of the pillars of the firm till he retired last January.

These young men, still in their twenties and early thirties, can do little to carry on the continuity of the firm's experience. Today that continuity rests more upon non-family members. One of them is Sir William Wiseman (loth scion of a Baronetcy founded in 1628) who came to the U. S. as chief of the British Military Intelligence during the War, became intimate with Col. House, served as British adviser at Versailles. He has been with K. L. since 1921 although only made a partner four years ago. Another is George Wallace Bovenizer (a partner since 1929) the affable head of K. L.'s bond business, whose personal popularity has brought the firm much business.* Still another is Benjamin Buttenwieser, manager of the firm's syndicate department, with the firm since 1918 but made a partner only since 1932. On these non-family members the brunt of the investigation is expected to fall.

Two other partners were admitted last January: Hugh Knowlton, onetime vice president of the Manhattan Co.'s International Acceptance Bank, and Elisha Walker, once allied with Amadeo Peter Giannini who later ousted him as head of famed Transamerica Corp. As novices in K. L. they can, however, tell the Senate little, though they know well the general business of the house they serve, a house that stands next to Morgan in reputation but that is apt to tackle different jobs.

For straight banking is not one of its jobs. It carries accounts for merchants but no checking accounts. Its primary business has been securities, railroad securities in particular. Kuhn, Loeb railroads include the North Western, the Delaware & Hudson, Illinois Central, Norfolk & Western, Pennsylvania, Southern Pacific, Paris-Lyon-Mediteranee. Kuhn, Loeb's railroad reorganizations include such famed roads as the B. & O., St. Paul, MOP.

In 1901 Loeb backed E. H. Harriman against Hill (backed by Morgan) in the struggle for control of the Northern Pacific. Jacob Schiff, dining in London dur ing the Russo-Japanese War, met Korekiyo Takahashi (now at 78 Finance Minister of Japan), and on the strength of an eve ning's conversation became Japan's banker, sold $200,000,000 of her bonds in the U. S. (biggest international loan prior to the World War). Since then K. L. has floated leans for Sweden, Holland, Austria, Argentina, for Antwerp. Paris. Marseilles and many another state and city.

Not ancient history, however, but mod ern instances concerned Kuhn, Loeb partners last week. Well could they foresee questioning about their financing of Penn-road Corp., of Paramount Publix. on whose board they seated Sir William Wiseman (last week absent in Europe) long before Depression made bankers common in the movie business.

The first to be called was Partner Kahn. Suave, precise, faultlessly attired, he told the Committee:

1) That Kuhn, Loeb's capital was $21,250,000.

2) That Kuhn, Loeb's assets shrank from $120,400,000 at the end of 1929 to $66,970,000 on Dec. 31, 1931.

3) That Kuhn, Loeb's deposits of $88,550,000 at the end of 1929 shrank to $29,100,000 on Dec. 31, 1931; that on the latter date it had more than $40,000,000 in cash & Governments.

4) That "the company buys and sells securities, accepts deposits . . . but is not in the business of soliciting deposits, and buys and sells securities for its clients."

5) That Otto Kahn and three other unnamed partners control the firm.

Partner Kahn asserted that his firm never actively sought new business, but waited, as befitted the banking house second only to J. P. Morgan & Co., for clients to come to it. Denouncing cut throat competition for bond issues, he declared that once "in those mad years [1926-28]'' 15 U. S. bankers were in Belgrade. Jugoslavia, participating in "an undignified scramble'' for an issue. "There were times," he said, "when a dozen were in Central . . . and Latin American states outbidding each other in a foolish, reckless search for business." "Was your bank represented at Belgrade?" asked Senator Costigan. "It was not," snapped Partner Kahn. Asked to criticize unethical bankers, he philosophized, "Let him who is without sin first cast a stone."

*Three months ago in Washington he told a committee of the House of Representatives that the then-proposed truth-in-Securities bill was not half strict enough.

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