Too Big to Fail in 1930

On the morning of Dec. 11, 1930, thousands of people lined Delancey Street to withdraw their savings from the Bank of United States. Rumors had circulated for days that the largest retail bank in New York, with over 440,000 depositors and $300 million in assets, was insolvent.

Founded by Russian-Jewish immigrant entrepreneur and garment manufacturer Joseph S. Marcus in 1913, the bank, despite its grandiose name and the large portrait of the Capitol adorning its main branch, was actually just a provincial New York retail bank. The bank advertised mainly in the Yiddish press and catered primarily to immigrant Jews and their organizations scattered throughout Manhattan, Brooklyn and the Bronx. Its name convinced many immigrant depositors that, unlike other shady financial enterprises scattered throughout the city, it was, “as solid as the Bank of England.” It was this continued deep trust, The New York Times reported, that made policemen unnecessary to control the “throngs” who gathered around the bank that morning.

All were calm, failing to recognize that the bank’s president, Bernard Marcus (Joseph’s son), and first vice president, Saul Singer, a garment manufacturer turned real estate entrepreneur and banker, had depleted the bank’s assets through heavy speculation in its own stock and through risky real estate investments.

Wall Street financiers, led by J.P. Morgan, Jr., refused to risk their funds to help save the bank, despite the pleas of Joseph Broderick, New York State’s superintendent of banking, and Hebert Lehman, the state’s lieutenant governor, who warned that they were “making the most colossal mistake in the banking history of New York.” The bank was closed; within days, thousands of depositors throughout the country, who mistakenly assumed the bank’s credit was on par with that of the federal government, ran to withdraw funds from their local banks. Indeed, if a bank named the Bank of United States could fail, then no bank was truly safe. In short, as one historian argued, “the damage done by the failure of the Bank of United States to both depositors and the banking community remains inestimable.”

What role, if any, did the failure of the Bank of United States, the largest bank to fail (in dollar terms) in the United States’ history before 1930, play in the economic downswing that followed? This question has consumed scholars for the past 80 years, with economists as varied as Milton Friedman and Ben Bernanke debating the role its closure played in propelling the United States from the recession of 1929 into “the great contraction,” in Friedman’s words, which saw the country’s GNP fall 31 percent, and more than 13 million Americans lose their jobs.

After Lehman failed to work out a bailout with various Wall Street firms, he convinced Franklin Roosevelt, then New York’s governor, to rethink state banking procedures and the need for depositors’ insurance. Ultimately, by the time Roosevelt moved to Washington, he had taken to heart the lessons he had learned in New York and saw that two of the greatest banking reforms in American history, namely the founding of the Federal Deposit Insurance Corporation and the Glass-Steagall Act of 1933, were passed soon after his election. Indeed, the failure of the Bank of United States illuminates the complex ways in which financial institutions operating within an ethnic enclave, seemingly on the periphery of the mainstream economy, can force great changes in America’s larger economic regulatory system and structure.

Virtually erased in discussions of this historic bank failure, however, is its “Jewishness.” At the time, the bank’s directors and clientele’s religious affiliations were well-known and often commented upon; indeed, some argue it was precisely the Jewishness of the bank that discouraged the partners at J.P. Morgan from stepping up to save the bank. Yet American Jewish historians are surprisingly silent concerning this bank and its failure.

To be sure, the annals of the American Jewish past are filled with tales of the careers of German Jewish bankers and businessmen, but we know practically nothing about the ranks of East European immigrant entrepreneurs, like those who ran the Bank of United States, whose business practices, Jewishness and failures also reshaped the contours of finance in America. East European immigrant Jews’ economic encounter with America was hardly limited to union organizing or the garment industry. And their failures, as well as successes, need to be part of the story. In a nation that worships success, the failure to grapple with Jewish financial failure has obscured the many paths by which Jews critically reshaped the ever-shifting outlines of American capitalism. As Saul Singer’s life suggests, they transformed this dynamic economic system as much through their mishaps as through their successes.

Few individuals capture more vividly the ways in which success and failure informed the lives of Jewish immigrant entrepreneurs than Singer. Born near Odessa in 1882, he owned a hardware store by the time he was 15. But he gave it all up at 17 and made his way to New York, where he quickly found a job as a garment worker. After five years of backbreaking work, he used the system of easy credit available through immigrant banks (non-chartered financial institutions in the immigrant neighborhood) to buy his own shirt-and-cloak manufacturing shop. By 1918, his success, persona and shrewd negotiating skills got him elected president of the Cloak, Suit and Shirt Manufacturers’ Protective Association, an organization that represented garment factory owners in negotiations with the unions; he averted several strikes both during the First World War, and in 1919, earning the praise of Gov. Roosevelt. Moreover, as a result of this position, in 1918 he was enlisted to help relocate the Garment District from lower Fifth Avenue to the new area being developed around Penn Station. Erecting the Garment Center Capitol, on Seventh Avenue and 37th Street, the largest garment loft building in New York City, Singer slowly became a well-respected real estate developer, piquing the interest of Bernard Marcus, acting head of the Bank of United States. Marcus wanted to attract business from those involved in the garment industry, so he appointed Singer a vice president of the bank. Singer then helped expand the bank by creating Bankus Corporation, a bank subsidiary that bought up bank stock (thereby elevating the bank’s stock value) and invested in real estate ventures. The actions undertaken by Bankus Corp. — forbidden by New York State and national banking legislation — ultimately brought down the Bank of United States as the New York real estate boom of the 1920s began to fizzle. Both Singer and Marcus were indicted and convicted of fraud. They were sent to jail for three years. But even jail could not break Singer’s entrepreneurial spirit: upon his release from Sing Sing, he once again remade himself, moving to Texas and starting up an oil refinery in Corpus Christi, which he later sold to Citgo during the Second World War.

Singer was neither unique nor anomalous among East European Jewish immigrant entrepreneurs who dabbled in many different areas of American business. Understanding his strategies and experiences is crucial because while scholars have long charted and celebrated the rapid ascent of East European Jewish immigrants into America’s middle and upper classes, we still know practically nothing, as historian David Hollinger points out, of what precisely enabled immigrant Jews to succeed economically so quickly in the United States. This lacuna, as Hollinger argues, “perpetuates the mystification of Jewish history in ways that subtly reinforces invidious distinctions between descent groups in American society.” East European Jews may have focused their entrepreneurship on New York’s burgeoning markets, but the immigrant entrepreneur is a familiar figure in other immigrant groups’ experiences: the Irish ward boss, the Italian padrone or the Mexican coyote. How does a figure like Saul Singer compare with these other types of immigrant entrepreneurs, whom many see as central to understanding American immigration history and the development of ethnic communities? One of the striking aspects of Singer’s life and the Bank of United States is the way in which it exemplifies how Jews occupied marginal (and often disreputable) economic niches that invited suspicion from elite groups in society, and yet many Jews moved into the mainstream sectors of the economy in a comparatively brief time span. What dynamics of marginality and inclusion influenced immigrant Jews’ encounter with American capitalism?

While further research is needed to address these questions, as we mark the 80th anniversary of the dramatic rise and demise of the Bank of United States, we need to reconsider how we conceptualize and think about the nexus of economics and Jewish history, particularly in the United States. We need to think more broadly about Jewish entrepreneurship and openly discuss those who failed along with those who succeeded. Indeed we already know much about successful, American Jewish bankers such as Jacob Schiff and Paul Warburg. But in fact, the implementation of long-lasting government financial reforms, namely the FDIC, came in response to the schemes of Saul Singer, not the achievements of Schiff or Warburg. Perhaps if we shift our focus in the writing of Jewish economic history, we will be able to see more fully the multifaceted role Jews played in the evolution of America’s distinctive brand of capitalism and its regulation.

Rebecca Kobrin, is the Knapp assistant professor of American Jewish history at Columbia University. She is the author of “From Written to Printed Text: The Transmission of Jewish Tradition” (University of Pennsylvania, 1996) and “Jewish Bialystok and Its Diaspora” (Indiana, 2010) and is currently working on a book entitled, “Destructive Creators: Jewish Immigrant Entrepreneurs, Financial Failure and the Reshaping of American Capitalism, 1914-1930.”