What can an investment bank teach us about American power?

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One of the most important—and most difficult—challenges in public policy is the problem of causation. What causes a bad or good outcome? What factors instead are merely correlated with these outcomes? And how can we know the difference?

In a sweeping history of the 19th and 20th centuries, author Zachary Karabell sees through the eyes of Brown Brothers Harriman — a very small investment bank — the cause of American greatness. The book’s title pithily delivers the thesis: “Inside Money: Brown Brothers Harriman and the American Way of Power.” From the bank’s humble beginnings as the brainchild of Irish linen merchant Alexander Brown, the story wends its way to the New York governor’s mansion via partner Averell Harriman and to the U.S. Senate via partner Prescott Bush, the father and grandfather of U.S. presidents. The book is an American investment bank-eye view of the evolving world from 1818 to 1970.

Ajay Suresh

Although the histories of banking dynasties are so numerous as to be their own genre — recall that the famed biographer Ron Chernow is the author of not one, but two histories of banking dynasties, “The House of Morgan” and “The Warburgs”— this is an unusual book. The author seeks, in his words, to use “a specific narrative to make a larger point.” That point appears to be that this firm had a uniquely conservative, public-spirited ethos that began in the early 19th century and kept the firm free of so much of the stain that some associate with the business of Big Banking to promote without regard to self-interest the power and prestige of America.

In Karabell’s deft storytelling, however, the narrative presents Brown Brothers — and its many incarnations on both sides of the Atlantic — as less a causal engine and more as a kind of Zelig, ever present when great things seem to happen but rarely responsible for them. It is there for nearly every crisis in the 19th century and produces some of the leading thinkers of the 20th century, not only (or even primarily) in finance but in public affairs as well. Brown Brothers Harriman and its individual partners by turns ardently back the Union in the Civil War (albeit after profiting handsomely from the slave economy in the decades prior), drive the development of railroads in the 1870s and 1880s, award a major contract to Boeing for the creation of the B-29 “Superfortress” in World War II, and pioneer recreational skiing by building a resort in Sun Valley, Idaho.

This romp through 150 years of the bank’s public and private affairs is a charming excursion, though some detours are more tedious than others — the chapter on Yale’s Skull & Bones society could have been curtailed significantly, for example. But the destination of this journey is the conclusion that these private merchant banks and their descendants created a uniquely American form of public power that can only be understood by knowing the institution’s long, rich history.

I remain persuadable on this point, but not because Karabell has quite made his case. The narrative about the strange place of power that the United States has held from its weak origins in the shadow of warring European empires through the Civil War and onward toward its destiny as a global empire itself is thoroughly entertaining.

In the book’s strongest chapter, which describes Brown Brothers’ financial shenanigans and development of Nicaragua, backed at the firm’s insistence by the U.S. Marine Corps, Karabell provides as good a discussion of the “dollar diplomacy” and corporatism that defined that era as any I have read. These are complex ideas and a deeply challenging part of U.S. history. The blending of corporate and national interests in the late 19th and early 20th century — a blending that led U.S. soldiers to literally die to protect the financial interests of the Brown family of bankers — is a valuable perspective through which we can view our present foreign entanglements. (This tension led Smedley Butler, the Marine officer who led the Nicaraguan missions, to pen a memoir with a title perfect for the age of dollar diplomacy, “War Is a Racket.”)

In part because of the strength of chapters like this, it is very hard to see Brown Brothers Harriman as anything other than a bank with passion for its business, its partners’ capital, and the rarefied world its partners occupied, not the public-spirited firm that chooses the good of the nation at its own expense. But there is a deeper problem as the book leaves the reader with many more questions than answers.

Take, for example, the most electric trio of partners to occupy both the upper echelons of the bank and of public power: Averell Harriman (variously, and in this curious order, U.S. ambassador to the Soviet Union, U.S. secretary of commerce, governor of New York and assistantsSecretary of state for East Asian and Pacific affairs; Prescott Bush (Republican senator from Connecticut); and Robert Lovett (advisor to FDR, Truman and Kennedy and one of the first secretaries of defense).

What motivated them, in finance and in politics? Did those motivations coincide? Lovett, for example, “resigned” his partnership multiple times, but always came back — despite efforts to manage his investments ethically, he never really left Brown Brothers Harriman. What kind of policies at State and Defense does a banker like that prefer, at the expense of what others? Did these politicians/policymakers/bankers — so important in the development of early Cold War policies — manage their books of business in the shadow of policy, or their policies in the shadow of business?

We have no idea. These questions are left almost completely unexplored. Indeed, we have no real sense of what the business of Brown Brothers Harriman actually was during this time, since the narrative largely leaves those technical details behind after about 1930.

The other remaining question that the book asks, but does not come close to answering, is why this little bank did not opt for the example of its competitors, beginning in 1970, to become a publicly traded corporation. Brown Brothers Harriman remains a private partnership doing a brisk business at the periphery of the U.S. financial system.

The book’s last chapter begins to limn what it might have meant, but that fascinating story remains to be told. Today, debates about banking and financial services mostly consist of arguments about the regulation and supervision of these large institutions. Brown Brothers Harriman represents a road less traveled: Why did they opt for it and what were the consequences for public power in America and around the globe?

The reader is left, then, with a soaring narrative of U.S. history and a sense of succession within Brown Brothers Harriman, this curious, sometimes astonishingly central, but mostly irrelevant banking house. The nature of American power and the influence of bankers on its development and deployment is a profound topic. Karabell gets his readers close to those questions, but the answers remain just out of reach.