LeoGlossary: Jay Cooke (Financier)

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Born: August 10, 1821
Died: February 16, 1905

Jay Cooke made his wealth during the American Civil War. He was an financier who is regarded as being the first investment banker. He helped to finance the Union effort during the War, a move that made him a close ally of Ulysses S. Grant, and, after the conflict helped development of railroads in the northwestern United States.

Civil War Financing

Cooke's entry into the world of banking started in 1839 when he joined E.W. Clark & Company, a bank that provided loans to railroads. His acumen for finance was recognized as he moved to partner after just 4 years. The Financial Panic of 1857 took out that firm, pushing Cooke to venture out on his own.

Jay Cooke & Company was formed in 1861 becoming highly successful by helping to secure loans from banks in the north for the federal government's war effort. He was able to negotiate $3 billion in bonds for the North by the end of the war. This earned him the nickname of "financier of the Civil War".

He was credited for his patriotism but the actions generated a huge amount of wealth for himself.

Cooke also came up with price stabilization, a practice that is still used today by financial institutions for IPOs and other security issuances.

Northern Pacific Railway

The Northern Pacific has its roots dating to the summer of 1864 when President Lincoln signed the railroad's creation by an Act of Congress. It was from this that the Northern Pacific Railroad Company came into being.

Cooke took an interest in the railway in 1870, partially stemming from his hopes to make Duluth, MN the "new Chicago". The vision was to bring goods from the West, through the city, before moving onto the Great Lakes. From here, they could be moved onto Europe.

This motivated him to make the investment.

Due to overextension of capital, the Panic of 1873 left the firm out of business and pushed Cooke into bankruptcy. The railway would continue on without Cooke and his money.

Horn Silver Mine

Even though Cooke lost millions of dollars, he was able to secure his future. By the 1880s, an investment in Horn Silver Mine turned into a windfall. This was an upstart mine that returned him to millionaire status.

It also allowed him to live comfortable until his death.


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