Cooke, Jay, and Company

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COOKE, JAY, AND COMPANY

COOKE, JAY, AND COMPANY, a private investment bank, established in Philadelphia in 1861. Jay Cooke learned the banking trade from E. W. Clark and Company, a domestic exchange and investment house. Early in the Civil War, the Treasury's campaign to raise money for the war effort through the sale of U.S. loans stalled. Cooke was appointed special agent to sell U.S. Treasury bonds known as "five-twenties." His well-organized firm advertised the bonds directly to the people. By 1865 Jay Cooke and Company was regarded as the leading American banking house. But peace brought serious difficulties. In search of more government work, Cooke forged a close relationship with Secretary of the Treasury Hugh McCulloch. Political and rival-banker opposition, and the failure of early refunding bills in Congress, prevented the Treasury from giving them much work.

With no government business, Cooke, like other bankers, turned to railroad finance. First he sold minor issues, and in 1869 he undertook to finance the Northern Pacific. Railways were built from Lake Superior to the Mississippi and Missouri rivers. But Jay Cooke and Company failed in 1873 because of heavy advances to the railroads.

Jay Cooke and Company's financial savvy proved invaluable to the Union war effort. The company demonstrated the effectiveness of aggressive investment selling; it introduced the use of the underwriting syndicate for large loans; and, by its failure, it revealed the risk bankers run in assuming great financial responsibilities without adequate supports and controls. Finally, by making the transition from banker to master planner on a national scale, the firm exemplified the rising power of large corporations and financial conglomerates in the late nineteenth century.