To most immigrants in the mid-nineteenth century, New York was the gateway to the New World. But when Henry, Emanuel and Mayer Lehman decided to leave the family cattle business in Bavaria, they chose by instinct or luck to settle in Montgomery, Alabama, a hub of the cotton trade. The first of the brothers to leave their home in search of fortune was Henry, then twenty-three and the oldest. Henry settled in this city of 4,000 citizens and 2,000 slaves. His two brothers soon followed, and in 1850 they established a trading and dry-goods business called Lehman Brothers.

Cotton trading burgeoned—until the War between the States intruded. The Lehman brothers became partisans of the Confederacy, whose original capital was Montgomery. On March 16, 1854, Lehman Brothers purchased a slave. The deed, signed by Hugh R. Segars of Montgomery, reads:

Received of H. Lehman & Bro. nine hundred dollars in full payment for a negro girl named Martha about fourteen years old. The said girl I warrant sound in body and mind, and a slave for life. I also warrant the title free from all encumbrances.

Mayer Lehman, the youngest brother, was, according to the official Lehman family centennial published in 1950, “sufficiently active in war work to earn the accolade of ‘one of the best Southern patriots’ bestowed upon him in the final year of the Confederacy.” He counted among his close friends the leading political figures of the Confederacy, including Hilary A. Herbert, after whom he would name his youngest son, Herbert, who later became a Lehman partner and then an illustrious governor and United States senator from New York.

With the end of the war, however, New York beckoned. By 1868 the brothers had shifted their headquarters to lower Manhattan, where they were instrumental in founding the New York Cotton Exchange. Soon they branched out to trade sugar, grains, coffee and petroleum. The expansion of Lehman Brothers coincided with the post-Civil War expansion of trading in stocks and bonds.

The traditional investment banks with their old-school elders—J. P. Morgan, Brown Brothers, the Harrimans—were offering conservative financing to established companies. It fell to the Lehmans and a remarkable group of German-Jewish merchants to invent more speculative means of financing upstart companies. “Let the Jews have that one,” was a familiar refrain on staid Wall Street.

Two years after Appomattox, Lehman Brothers undertook to raise funds (by selling bonds) for the state of Alabama, which was desperately in need of investment capital. The brothers supported a multitude of new Southern ventures, from textile mills to railroads. Later they pierced the financial establishment to help form two major banks—the Mercantile National Bank, which later merged with the Irving Trust Company, and the Mutual Alliance Trust Company, which later became Manufacturers Trust Company.

The Lehmans were not alone. Marcus Goldman in 1869 launched what would become Goldman, Sachs & Company and pioneered the use of what is known today as commercial paper. In return for lending a merchant, say, $900, Goldman would receive a written promise from the merchant to pay back $1,000. That paper could then be traded like a security. Jacob Schiff, like his partner-to-be, Solomon Loeb, walked to work on lower Manhattan daily, collecting IOU’s and stuffing them into his stovepipe hat.

On Wall Street, where the reputations of these and other German-Jewish investment bankers grew, they were accepted, even honored. But they were not accepted by the Astors and Morgans and other representatives of America’s reigning social families. So the Lehmans and Loebs and Schiffs and Goldmans and Sachs and Seligmans and Warburgs and Kuhns and Guggenheims and Strauses formed their own aristocracy, their own German-Jewish private club (the Harmonie), their own Temple Emanu-El, their own private schools.

As time wore on, these new millionaires strove to assimilate. By the 1870’s, writes Stephen Birmingham in Our Crowd, many German Jews who arrived around 1848 began to separate themselves from new East European immigrants: “A careful distinction was drawn between … ‘the better class of Jews’ and ‘vulgar Jews,’ between ‘Sephardic’ and ‘German,’ and, finally, between ‘refined Hebrew ladies and gentlemen’ and ‘Jews.’”

Dorothy Schiff, who once owned and served as publisher and editor-in-chief of the New York Post, and whose grandfather, Jacob Schiff, was a founder of Kuhn Loeb, recalls her mother’s experience: “My mother was Jewish but had fallen in love late in her teens with Harry Thorpe, the younger brother of [famed athlete] Jim Thorpe. His mother in Pittsburgh was horrified because she was Jewish.* I think that affected her her whole life. Although she married my father, I don’t think she was in love with him. She wanted to get out of that whole Jewish thing, which is why I suppose we moved to Oyster Bay.”

By the turn of the century, America was bursting with energy. A second generation of Lehman relatives, who had joined the firm in the 1870’s and 1880’s, now chose to downplay commodity trading and to concentrate on investment banking. The prospering companies were those that emphasized not just production but distribution of products—department stores, food chains, new technology. Lehman Brothers helped raise the money to launch Studebaker, to produce the first pneumatic tire, to spur the giant utility companies. Joining with Goldman, Sachs, in 1906, Lehman initiated one of the first major underwritings to raise funds for an American corporation, the General Cigar Company. Soon Lehman and Goldman joined forces again to underwrite Sears, Roebuck & Company.

Early in the new century, leadership of the firm came to rest on the shoulders of Emanuel Lehman’s son, Philip, who earned $20 a week when he joined the firm in 1882. At the age of twenty-four, in 1885, Philip was made a partner. For the next sixty-two years, until his death in 1947, he helped guide Lehman Brothers.

By the end of World War I, the primary focus of Lehman Brothers had shifted still further from commodities to investment banking, which then consisted mostly of raising capital and proferring financial advice. By this time the firm had five partners, all Lehmans—the second generation sons: Philip, Arthur and Herbert; and the third generation: Allan and Harold. But the crush of business had become too much for five partners, and in 1924 Lehman began to accept nonfamily partners—the first being John M. Hancock, a former naval officer who worked under Bernard M. Baruch at the War Industries Board. By 1950 there would be seventeen partners, only two of whom were Lehmans.

By the mid-twenties, Philip’s son, Robert, began to assume principal responsibility for the partnership. He was a small, trim man, about five feet seven inches, with well-tanned, smooth skin and a dapper appearance. Unfailingly polite, Robert nevertheless knew what he wanted. First he wanted to move the firm. And in 1928 the headquarters of the partnership was transferred from a cramped space in the Farmers Loan & Trust Company building at 16 William Street to Lehman’s very own eleven-story triangular Italian Renaissance-style building at One William Street, in the heart of the financial district.* For the next fifty-two years this would be the home of Lehman Brothers.

The banking act of 1933 severed the intimate relationship that existed between investment and commercial banking. To shore up a weakened banking system, a protective wall was erected between the two. Lehman shed its ties to commercial banking and concentrated even more on investment banking. As World War II approached, Lehman Brothers had either raised or invested its own capital to nurture such giant corporations as Gimbel Brothers, R. H. Macy, Continental Can, RCA, American, National, Trans World Airlines and Pan American World Airways, the Jewel Tea Company, B. F. Goodrich, and the Campbell Soup Company. After meeting visionaries who came to him with ideas about tubes that would transmit pictures and airplanes that would circle the planet like birds, Robert Lehman—who often told his partners, “I bet on people”—made Lehman the driving financial force behind RCA and the birth of television, TWA, Pan Am, Hertz, several Hollywood studios, and various department store and oil and rubber giants. Lehman Brothers was at the epicenter of those business forces that have shaped not just the American economy but the American culture as well. By 1967 the House of Lehman was responsible for $3.5 billion in underwriting. In volume, Lehman was among the top four investment banks.

Over a period of more than four decades, Bobbie, as he was called, presided from a nine-by-fifteen-foot office that was shaped, it was once said, “like a badly cut slice of pie.” Some partners had offices four times the size. Yet there was no doubt who decided—alone—the size of a partner’s annual share of the firm’s earnings. “Bobbie did not like organization,” says former Lehman President Warren Hellman, who joined Lehman in 1959, and whose family was linked to the Seligmans. “If he was an administrator, it was not the standard textbook type. Since it was unclear who would run the firm when he was gone, he decided to put the top seven to eight executives on an executive committee and rotate the chairman each month. Each month the chairman would try valiantly to impress him … Partners fought like hell. A lot of them disliked each other personally. But the common thread was tremendous respect and admiration for Bobbie Lehman—and a desire to make money.”

“He was a dozen different men,” says Lew Glucksman. “Bobbie seemed to be the mildest of men, but he was like a Mafia don who could be nice because he could send people out to do his dirty work. Bobbie’s specialty was keeping people at each other’s throats.”

A more inspired impression of Bobbie. Lehman is conveyed by investment banker Felix Rohatyn. He remembers coming back to New York after the Korean War and going to work for the legendary banker Andre Meyer of Lazard Frères: “I used to go over to Lehman with Andre Meyer. If Andre aspired for Lazard to be viewed as any other firm, it would be Lehman Brothers. And if he aspired to be viewed as any other individual, it would be Bobbie Lehman. The partners at Lehman were all men of stature. They were principals. You dealt with them as owners of a great house. You felt that if there was any such thing as a business aristocracy, and at the same time a highly profitable venture, that was it.”

*Thorpe was an American Indian.

*This building’s historical significance pre-dated Lehman, for it was the original home of J. & W. Seligman & Company, an early Wall Street firm.