Like Dr. Johnson's epitaphs, the subtitles of histories in search of a popular readership are not "given under oath."
For that reason -- and because her story is impressively researched and engagingly told -- Frances Dinkelspiel, who is her subject's great-great-granddaughter, should be forgiven the histrionic subtitle of her new book, "Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California." Moreover, while no individual can creditably claim to be the Golden State's creator, Dinkelspiel does make a pretty good case that the pioneer entrepreneur and financier Hellman -- an intriguing and unjustly neglected figure in California history -- certainly was present at the creation of a great deal that came to count for a lot.
An L.A. original
In 1859, Isaias Hellman arrived in the rude frontier town of Los Angeles along with his brother Herman as poor immigrants from the Bavarian village of Reckendorf. (So many men from that place would come to play a role in the California economy that they became known as the "Reckendorf Aristocracy.") Soon, the Hellmans -- and particularly Isaias -- had moved from being employees of other German Jewish immigrants to their own businesses and, from there, into banking. Ultimately, Hellman controlled the West's three largest banks and provided financing -- and significant personal investment -- in such signature California enterprises as banking, water, electricity, transportation, oil and wine. He helped establish the University of California and USC and made a significant contribution to the schools that ultimately became Los Angeles Loyola University and high school.
The latter donation points to one of the singular things about Los Angeles in the mid- to late 19th century, which is that it was a place of unparalleled opportunity for Jewish immigrants. In fact, there were few, if any, social barriers in the rough-and-tumble city's business community. Members of the Hebrew Benevolent Society contributed to Catholic cathedrals and schools; Gentiles of whatever denomination aided the construction of the town's first synagogue. Hellman lent Gen. Harrison Gray Otis the money to buy the Los Angeles Times and became financier and business partner with Henry Huntington in railway enterprises. Unfortunately, other than a passing reference to a "hardening" of anti-Semitism in the 1890s, Dinkelspiel has nothing to say about how or why this era of fellow feeling vanished.
In 1887, an admiring profile in the American Israelite by the prominent Jewish journalist Isidore Choynski reported, "I got it from reliable authority that Mr. I. W. Hellman of Los Angeles has made $4 million during the last six months, without investing a cent, acting merely as the treasurer and adviser of the syndicates. . . . His countrymen in this city, the Reckendorfers, tell me he is the wealthiest Jew in America today, and I believe it."
The syndicates Choynski referred to invested in land -- much of it previously worthless -- subdivided it and sold it to the Easterners and Midwesterners then flocking into Los Angeles on new rail connections that suddenly had made travel to Southern California convenient and cheap. The result was that all-too-familiar local phenomenon -- the real estate boom.
Hellman, however, was shrewd enough to see things for what they were and, even though deposits in his Farmers and Merchants Bank soared exponentially, he ordered a cutback in real estate lending. Over the course of a year, he brought outstanding loans on real estate from 80% of the bank's portfolio to just 25%, then stopped them altogether. The city's other banks followed suit and, when the statewide real estate bubble collapsed in late 1888, Los Angeles' financial institutions escaped unscathed. In fact, they profited handsomely because they'd helped finance the bubble but gotten out before it deflated.
Chandler's Times took note of Hellman's leadership in an editorial: "It is very certain that the refusal of the Farmers and Merchants Bank to loan freely on real estate during the fall of 1887 -- at the critical period when the speculative boom was at its height -- is one of the chief reasons why no disastrous collapse has followed the crazy buying of those feverish days. Banking and gambling are two separate branches of finance which the management of the Farmers and Merchants Bank rightly believes should be combined under one roof."
Greed and folly are constants of human nature and, therefore, of market economies, but it's hard not to wish Hellman wasn't still around to take a seat on President-elect Barack Obama's council of economic advisors. He'd feel right at home with the problems the new administration has inherited.