Abraham Kuhn and
Solomon Loeb founded Kuhn, Loeb & Co. as an
investment bank in
New York City in 1867. Kuhn and Loeb had developed a successful merchandising business in
Cincinnati,
Ohio, when they decided to move east, to New York, to take advantage of the burgeoning economic expansion of the United States. Company records indicate that by the time Kuhn and Loeb established their partnership, they were able to capitalize it at $500,000 (equivalent of about $ million in ). On January 1, 1875,
Jacob Schiff (1847–1920), Solomon Loeb's son-in-law, joined the firm. He eventually became its Senior Partner (in office: 1885 to 1920) and grew the firm into the second-most prestigious investment bank in the United States (behind
J. Pierpont Morgan's
J.P. Morgan & Co.). The firm came to prominence during the
railroad era in the United States. Americans saw great hope and promise in railroads and investors saw great opportunities to profit. Kuhn, Loeb, like all investment banks, brought capital together with commercial opportunity. Its first meaningful entries into railroad financing occurred in 1877 when it raised funds for the
Chicago and North Western Railroad, and several years later, in 1881, for the
Pennsylvania Railroad and the
Chicago, Milwaukee & St. Paul Railroad. Schiff was instrumental in the reorganization of the
Union Pacific in 1897, helping to place the firm on a sound financial footing. In 1901, with Kuhn, Loeb's financial support,
E. H. Harriman famously battled
James Jerome Hill and
J.P. Morgan to acquire control of the
Northern Pacific Railroad. The firm was long associated with many of America's emerging industrial giants, providing financial backing for
Westinghouse and
Western Union, as well as for innovative consumer giants like the
Polaroid Corporation. The firm also enjoyed respect as a trusted adviser overseas, providing services to numerous foreign countries, including the governments of Austria, Finland, Mexico and Venezuela. Kuhn, Loeb & Co. also acted as the leading investment house for
John D. Rockefeller, through the guidance of his investment adviser,
Frederick T. Gates. Rockefeller invested in many syndicates with the bank, taking major stakes in the prominent railroad companies, as well as contributing to its consolidation of the Chicago meatpackers, which resulted in the formation of a leading trust. Overseas ventures that Rockefeller also became involved with included the bank's loans to the Chinese and Imperial Japanese governments. The firm also joined a partnership with Rockefeller in 1911 to gain control of the
Equitable Trust Company, which would later merge and become the
Chase Bank. Famous partners of the firm included
Otto Kahn,
Paul Warburg,
Felix Warburg,
Mortimer Schiff,
Benjamin Buttenwieser, Abraham Wolff,
Lewis Strauss, and
Sigmund Warburg, founder of
S.G. Warburg. In the firm's early years, intermarriage among the German-Jewish élite was common. Consequently, the partners of Kuhn, Loeb were closely related by blood and marriage to the partners of
J & W Seligman,
Speyer & Co.,
Goldman, Sachs & Co.,
Lehman Brothers and other prominent German-Jewish firms. Prior to the Second World War, a particularly close relationship existed between the partners of Kuhn, Loeb and
M. M. Warburg & Co. of
Hamburg, Germany, through Paul and Felix Warburg, who were Kuhn, Loeb partners. Later on, following World War II, their cousin Sigmund Warburg would briefly continue this relationship as a partner and executive director of the firm. The firm's fortunes began to fade in the years following World War II. Wall Street began to change, shifting away from relationship banking. Kuhn, Loeb's world of gentlemen-bankers was gradually being replaced by a more aggressive, transaction-oriented Wall Street, with underwriters entering the trenches and selling securities directly to the public — territory which Kuhn, Loeb stubbornly refused to enter. When asked how many people worked at Kuhn, Loeb, one partner famously quipped, "about half". Such was life at Kuhn, Loeb, resting on its laurels, while Wall Street passed it by. In 1977, facing a capital crisis, the firm succumbed and merged with
Lehman Brothers to form Lehman Brothers, Kuhn, Loeb Inc. Internationally, the merged firms were known as Kuhn Loeb Lehman Brothers Inc., in recognition of Kuhn Loeb's superior international reputation. The merger did not, however, prove to be the panacea to what ailed Kuhn, Loeb. Indeed, as detailed more closely in the
Lehman Brothers history, a period of bitter internal strife ended in 1984 when the firm sold itself to
Shearson/
American Express, itself the product of a recent merger between American Express and
Sandy Weill's
Shearson Loeb Rhoades. The combined firms then dropped the "Kuhn, Loeb" name and became known as Shearson Lehman/American Express, ending Kuhn, Loeb's almost 120 years on Wall Street. Later, the combined firm purchased
E.F. Hutton, becoming Shearson Lehman Hutton. Ultimately, however, American Express could not make the pieces of its financial-services supermarket work. In 1993, under then newly appointed CEO,
Harvey Golub, the firm sold its retail-brokerage operations to
Primerica. In 1994, it spun off a beleaguered Lehman Brothers as Lehman Brothers Holdings Inc. in an initial public offering. Although the "Kuhn, Loeb" name is probably gone forever, the firm's legacy continues. Former Kuhn, Loeb employees remain in senior positions throughout Wall Street, and, until 2008, at Lehman Brothers. Vestiges of the firm survived in the form of Lehman Brothers' extensive fixed-income capabilities, including many of their
bond indices, such as the Government/Credit index. This index, originally started in 1973 by Kuhn, Loeb, as the
Government/Corporate index, was among the first generation in bond-index data to measure the fixed-income market. It remains the preeminent benchmark in its class. ==Successors==