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Jay Cooke

Jay Cooke was one of the most outstanding business figures in American history. In the development of the United States, Jay Cooke’s experience as a private banker is particularly important and the public tends to remember him for his part in the panic of 1873, rather than his truly amazing success in selling government bonds to finance the Civil War after others had failed in the undertaking (Hower, 1936, p. 85). Financer and fund raiser for the American Civil War, Cooke was born in San dusky, Ohio.

He entered a Philadelphia bank at the age of 18 years and opened his own in 1861 at an age of 40 years. That same year he floated $3 million war loan for the state of Pennsylvania. During the next four year he organised the sale of hundreds of millions in bonds for the federal government (Webster, 2000, p. 393). Jay Cooke and Co, established in Philadelphia in 1860, is aided by his older brother, Henry, D. Cooke, who through political connection to President Lincoln’s Secretary of Treasury helped the company to profit from war time financing and bond sale.

Jay Cooke & Co, used newspaper advertisements and circulars, to sell government loans, not only to banks but to general publics. Of over two billion dollars borrowed to pay for the war, more than 22 percent was obtained through his famous campaign of selling “five twenties” (6% interest on bonds and payable in not less than five or more than twenty years), which became very popular among the public. With the success of government financing venture, Jay expanded his business to Washington, which facilitated business with the government. 1 By the time Cooke opened his D. C. branch, he had ingratiated himself with the Secretary of State.

After the federal debacle at the Bull Run, Cooke helped promote the sale of 7. 3 percent of treasury notes, which had virtually stopped selling in New York. Cooke also accompanied the Secretary to New York in 1861 to face down the associated Banks of New York, Boston, and Philadelphia and persuade them to underwrite a $150 million loan to the government (Ritter, 1998, p. 98). Throughout the war, both business houses in Philadelphia and Washington continued business in close association with the government.

By the end of the Civil War, business with the government slowed down and Cooke expanded his business to New York and London. 1 By 1870, Jay Cooke and Company was very heavily involved in the Northern Pacific Railroad, which had been founded with a high level of speculative risk. With the onset of depression, the biggest money market that financed the construction of railroads collapsed, and along with it New York’s biggest banking house Jay Cooke and Co. collapsed too, following failure of its bid to place new bond at 6 percent Rothchild’s in Europe.

Of the meagre nominal capital of 2 million dollars for 500 miles of line, only 10 percent had actually been paid up. The failure of Jay Cooke & Co, to find in Europe the money needed to complete the lines led to their collapse and in the end, as a part of the regular chain reaction to eighty three railroad societies being declared insolvent, with outstanding debt totalling 250 million dollar. This resulted in an abrupt stop to laying new lines (Wengenroth & Tenison, 1994, p. 46). Cook was a living example of the influence of sentiment in controlling and moulding http://www.lib.udel.edu/ud/spec/findaids/cooke.htm

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