Samuel Sachs

Samuel Sachs did not found Goldman, Sachs & Co., his father-in-law Marcus Goldman did, in 1869, peddling merchants' promissory notes from a one-room office on Pine Street ^[4][5]. What Sachs did was harder to dramatize and more lasting: he supplied the discipline, the bookkeeping, the foreign alliances, and the reputation for caution that let a tiny family note-broker survive long enough to become an investment bank ^[1][3]. Invited into the partnership in 1882 after marrying Goldman's daughter Louisa, he bought his interest for $15,000 payable in installments, a debt his mother-in-law insisted be forgiven when the couple's third son was born ^[6]. In 1885 the firm took the name it still bears, Goldman, Sachs & Co. ^[6].

For the next two decades Sachs ran what was, by the 1890s, the nation's largest dealer in commercial paper, the short-term IOUs of merchants who could not easily get bank credit ^[3][6]. The firm joined the New York Stock Exchange in 1896 ^[3]. In 1897 Sachs sailed to London with a letter of introduction and forged the alliance that defined his half of the business, a partnership with the merchant bank Kleinwort, Sons & Co. that gave Goldman Sachs a transatlantic franchise in foreign exchange and arbitrage between the London and New York money markets ^[3][2]. Sachs was the firm's Europe-minded, methodical conservative; his profits came from low-risk spreads, not big bets ^[2].

That temperament collided, again and again, with his brother-in-law Henry Goldman, Marcus's son, who joined in 1885 and after Marcus's death in 1904 became co-senior partner alongside Sachs ^[1][2]. Goldman "was itching to get out of the commercial paper business and transform Goldman Sachs into an investment bank that underwrote securities, marketed bonds to the public, and orchestrated corporate consolidations", exactly the risk Sachs distrusted ^[2]. The defining test came in 1906, when Goldman, working with Lehman Brothers, took Sears, Roebuck and Co. public in a $40 million offering, $10 million preferred, $30 million common, and priced it not on factory bricks and inventory but on a radical new yardstick, the company's earning power ^[7][1]. Sachs resisted; by one account he agreed only after Kleinwort in London blessed the deal ^[2]. It became the first great American retail IPO and remade what investment banks could do ^[7].

The partnership held together for another decade on the strength of family and a shared name, but the First World War broke it. Henry Goldman, German by sympathy, refused in 1915 to let the firm join the House of Morgan's enormous Anglo-French war loan; Sachs, who backed the Allies and personally subscribed to the loan and to Liberty Bonds, was appalled ^[2]. The quarrel was irreconcilable, and in 1917 Henry Goldman resigned after thirty-five years, "the last Goldman to work at Goldman Sachs" ^[2]. Control passed to the Sachs side of the house: Sachs and his sons Arthur, Paul, and Walter ^[1][8].

Samuel Sachs retired from active management in 1928, at seventy-seven, and lived to see the firm he had steadied for caution nearly destroyed by the recklessness he had warned against, the Goldman Sachs Trading Corporation, a leveraged investment trust launched that same year by the younger partner Waddill Catchings, which was obliterated in the Crash of 1929 ^[9][1]. Sachs died in 1935; the conservative house he built outlasted both the speculation and the men who indulged it ^[1][9].

Samuel Sachs was born July 28, 1851, in Maryland, the son of Sophie (née Baer) and Joseph Sachs, Bavarian-Jewish immigrants ^[9]. Joseph Sachs and Marcus Goldman had been friends in the old country, and the families' fortunes would entwine for generations; Samuel's older brother Julius became a noted educator, and the household prized learning ^[6][9]. But Joseph Sachs died young, and the family's means were thin. Samuel went to work at fifteen as a bookkeeper, then ran a modest dry-goods business of his own ^[3][6].

It was that small enterprise that caught Marcus Goldman's eye. According to the firm's history, Goldman admired "the resolve and ethics Sam had displayed in operating a small dry goods business" after his father's death, and at his own sixtieth-birthday gathering invited the young man into his note-brokering firm ^[6]. Sachs had also married into the family, his wife was Louisa, Goldman's youngest daughter, so the partnership, formalized in 1882, was both a business and a dynastic arrangement ^[3][6].

The terms reveal the modesty of the firm's beginnings: Sachs bought his share for $15,000, payable in three installments, a sum Marcus's wife Bertha had forgiven when the couple's third son arrived ^[6]. From that family hearth came a banking house in which, for nearly half a century, every partner was a Goldman or a Sachs by blood or marriage, a closed circle of "our crowd," the German-Jewish elite of New York chronicled by Stephen Birmingham ^[10].

Samuel Sachs is the quietest of the great Wall Street founders, and that is precisely the point. He invented no instrument and chased no headline; he supplied the ballast. The commercial-paper business he stewarded, the European alliances he negotiated, and the reputation for caution he guarded were the conditions under which Goldman Sachs could afford the bolder experiments, the Sears IPO, the move into underwriting, that his brother-in-law Henry Goldman drove ^[1][3][7]. When the partnership broke in 1917, it was Sachs's name, capital, and sons who carried the firm forward; the modern Goldman Sachs descends from the Sachs branch he held together ^[2][1].

His vindication came posthumously and brutally. The Goldman Sachs Trading Corporation, the leveraged speculation launched in 1928 by a new generation, evaporated in the Crash of 1929 and nearly took the firm with it, the exact category of risk Sachs had distrusted his whole career ^[9][1]. The house survived because the culture he had embedded, and the steadying hand of his son Walter, outlasted the gamble ^[8][9]. Beyond the firm, Sachs belongs to the larger story of the German-Jewish banking families, the Goldmans, Sachses, Lehmans, Seligmans, who built parallel financial dynasties while excluded from gentile society, the world Stephen Birmingham called "our crowd" ^[10].