Cooke, Jay, 1821-1905

Banker, financier, and fiscal agent for the U.S. Treasury Dept. during the Civil War.

During the Civil War, Jay Cooke & Co. of Philadelphia developed the idea of selling government bonds, which capitalized on feelings of patriotism at the time and which were a major source of financing the war. Jay Cooke later was heavily involved in finanacing (unsuccessfully) the Northern Pacific Railroad, which led to the Panic of 1873, but he later recovered much of his financial loss through investment in Utah mining interests.

Jay Cooke (1821-1905) was an American banker with a business based in Philadelphia, Pennsylvania, during the last half of the nineteenth century. His financial firm, Jay Cooke & Co., dissolved in the 1870s after filing for bankruptcy.

Jay Cooke (1821–1905) was an American banker with a business based in Philadelphia, Pennsylvania, during the last half of the nineteenth century. His financial firm, Jay Cooke & Co., dissolved in the 1870s after filing for bankruptcy.

Jay Cooke grew up on the Ohio frontier and came to Philadelphia in the late 1830s to work as a clerk for E.W. Clark & Co. During the Panic of 1857, E.W. Clark & Co. failed, forcing Cooke to seek other employment. In 1860 Cooke formed a partnership with his brother-in-law, William G. Moorhead, and established Jay Cooke & Co. in Philadelphia. The firm dealt primarily in bank notes, bills of exchange, and stock, in addition to discounting paper and receiving deposits. The Civil War, however, turned the direction of the company. The firm became involved in federal finances and securities, and its reputation grew in the banking business.

The firm’s success was aided by Jay Cooke’s older brother, Henry D. Cooke, who had political connections to President Lincoln’s Secretary of Treasury, Salmon P. Chase. That alliance enabled Jay Cooke & Co. to profit from wartime financing and bond sales. Jay Cooke & Co. originated the concept of selling government loans, not just to banks, but to the general public. Cooke used newspaper advertisements and circulars to sell the loans and capitalized on wartime patriotism. His famous campaign for selling “five-twenties” (bonds paying 6 percent interest and redeemable in not less than five or more than twenty years) accounted for more than 22 percent of the over two billion dollars borrowed to pay for the war.

Because the government-financing venture was successful, Jay Cooke & Co. opened another banking house in Washington, D.C., in February 1862. It was organized separately from the Philadelphia firm and, in addition to Jay Cooke and William Moorhead, the firm added Jay’s brother Henry, and Harris C. Fahnestock, an extremely adept financier, as partners. The Washington house facilitated business with the government. Henry Cooke proved himself an able lobbyist and public relations person for Jay Cooke & Co., and the firm continued its close association with the government throughout the war. By 1865 and the end of the war, business with the government slowed, and Cooke found himself and his employees in need of new work. He decided to develop a large general banking business, which in 1866 led to the establishment of another branch of the business in New York and later in 1870, with increased foreign investment and travel, a house in London. The London house was headed by Hugh McCulloch, former Secretary of the Treasury to both Lincoln and Andrew Johnson.

During 1870, Jay Cooke & Co. became heavily involved in financing the Northern Pacific Railroad. Jay Cooke also committed personal finances. Difficult economic times, overextension of the firm, and the company’s complex ties to the Northern Pacific Railroad brought the downfall of Jay Cooke & Co. in the autumn of 1873. Cooke’s business failure played a significant role in the Panic of 1873. Cooke made many efforts to shore up his banking houses and try to settle with his investors without going bankrupt, but bankruptcy was declared November 26, 1870. The courts appointed Edwin M. Lewis trustee for Jay Cooke & Co., and he worked with Cooke to settle with all the creditors. The final settlement of the bankruptcy was not completed until 1890.

Many of Cooke’s partners retired from banking following the firm’s failure. Jay Cooke’s son-in-law, Charles D. Barney, and Jay Cooke, Jr. formed Chas. D. Barney & Co. in December 1873. Their new business concentrated on trading securities. Later in life, Jay Cooke was able to recover much of the estate that he had lost to creditors during the bankruptcy, and a substantial income. He managed this recovery through his connection with mineral mines in Utah and other successful investments.

Larson, Henrietta M. Jay Cooke: Private Banker. Cambridge: Harvard University Press, 1936. Morgan et. al. The National Experience. New York: Harcourt Brace Jovanovich, 1989.