The Last Partnerships; Charles R Geisst; McGraw-Hill; pounds 21.99
It seems appropriate that Solomon and Moses Allen, whose merchant bank in Albany, New York, founded in 1808, made their fortune selling lottery tickets and lost it again in the US's first stock market crash of 1836. Bankers the world over have a habit of becoming insufferably grand, and none more so than the titans of Wall Street who were the Allens' successors. But the business of raising capital and dealing in stocks has always been a milieu of chancers and peddlers as well as grandees in mahogany-panelled offices.
The contrast between these strands is one of many entertaining aspects of Charles Geisst's history of American investment banking, The Last Partnerships: Inside the Great Wall Street Money Dynasties.
Love it or hate it, Wall Street has succeeded where the City of London has come close to failing. A century ago, fledgling New York firms gained credibility by association with Barings and Rothschilds in London; but once they found their own feet, they went on to finance America's astonishing industrial expansion. The great names of Wall Street, though much merged and, in most cases, no longer partnerships, are almost all still there - with the exception of Drexel Burnham Lambert, which was brought down by the junk-bond bonanza in 1990.
Resilience, capital strength and placing power kept the rest of the Street in business. Although Geisst observes that the partnership model was an anachronism that survived in investment banking long after it had been replaced by shareholder ownership elsewhere, it is not apparent that partnership was the special key to success. Some houses prospered on the strength of high-level relationships and iron-clad reputations; others, such as Salomon Brothers, were no more than shrewd, opportunistic traders.
Salomon, which survived a bond-trading scandal in 1991 for which it was fined dollars 290 million, exemplifies the American power of recovery that is the real secret ingredient of this story. The other general observation to be made, if we seek comparisons with the City, is that in America, as in Britain, it is industry that leads finance, rather than the reverse, and that the irrepressible might of American manufacturing has made Wall Street what it is today.
It was also made, of course, by remarkable people, and Geisst has a sharp eye for an anecdote, even if his narrative style is a little dry. This is some consolation for the Brits: the Yanks may have beaten us hands down at the business of investment banking, but they have not quite beaten us at writing about it. However, the decision to put some of Geisst's best stories into separate boxes is a misjudgment: the reader's eye begins to skip through the main text in search of the next box. The fourth volume of David Kynaston's history of the City (published this month) also offers a superior model of how to bring the financial past to life.
Nevertheless, there are plums to be pulled out. One is an account of an epoch-making deal of the 1920s, in which Clarence Dillon, founder of Dillon Read, acquired Dodge, the third-largest US carmaker, for dollars 150 million in cash and in due course sold it to Chrysler for dollars 170 million. The company had come up for sale because its owners, the hell-raising brothers John and Horace Dodge, had ordered some bootleg liquor to be sent to their New York hotel room, and embarked on a drinking binge that killed them both.
There are many other vivid characters along the way: the roguish August Belmont, New York agent of the Rothschilds in the 1850s, who went to a ball in a dollars 10,000 suit of gold armour; or Katharine Drexel, niece of one of Pierpont Morgan's partners, who founded an order of nuns and became a saint. And there's a memorable image of Michael Milken wearing a miner's helmet on the bus to work so that he could read market reports before dawn. Milken was both a financial genius and a convicted felon: as such, he personified Wall Street's contradictions. The Last Partnerships is a lucid guide to understanding them.
Martin Vander Weyer is a journalist and the author of Falling Eagle: the Decline of Barclays Bank.