the world of private banking
the world of private banking
the world of private banking
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LONDON’S FIRSt ‘BIG BANG’? 75<br />
financing new railway construction, so that Thompson Hankey at <strong>the</strong> Bank could<br />
rightly call some <strong>of</strong> <strong>the</strong> arising paper not bills but mortgages, became public from<br />
January 1866. Joint Stock Discount went into liquidation shortly afterwards. The<br />
reverberating crash <strong>of</strong> Overend, Gurney on 10 May was followed by ultimately<br />
abortive attempts to rescue <strong>the</strong> businesses <strong>of</strong> Consolidated Discount and Financial<br />
Discount. The Discount Corporation, reconstituted as <strong>the</strong> United Discount<br />
Corporation, survived by concentrating upon short-dated bills despite little free<br />
capital which none were prepared to top up.<br />
Among <strong>the</strong> corporate houses formed between 1856 and 1865, only <strong>the</strong> National<br />
rode out <strong>the</strong> turmoil <strong>of</strong> <strong>the</strong> 1866 crisis largely unsca<strong>the</strong>d, <strong>the</strong> sole blot upon its<br />
assets arising from a connection with Joint Stock Discount. Its board raised fur<strong>the</strong>r<br />
capital between January 1866 and March 1867 on which initially a dividend <strong>of</strong> 20<br />
per cent was paid. With its robust position, re-buttressed during <strong>the</strong> crisis period,<br />
<strong>the</strong> National’s management seized market opportunities arising from <strong>the</strong> 1866<br />
crisis’s winnowing force. Its sole major corporate competitor was <strong>the</strong> General<br />
Credit & Discount, <strong>the</strong> post-crisis reconstitution <strong>of</strong> a finance company – General<br />
Credit & Finance. This was <strong>the</strong> last corporate discount house to be successfully<br />
established before <strong>the</strong> late-twentieth-century restructuring <strong>of</strong> <strong>the</strong> London market.<br />
Its management embarked upon <strong>the</strong>ir new business field with a very sizeable capital<br />
– £1.5m – although this may have been required to nurse pre-1866 ‘lock-ups’. 23<br />
After <strong>the</strong> 1866 crisis, Alexander’s was <strong>the</strong> sole major <strong>private</strong> discount house,<br />
although having a business smaller than that <strong>of</strong> <strong>the</strong> National. Yet <strong>the</strong> 1866 crisis had<br />
<strong>the</strong> fur<strong>the</strong>r effect <strong>of</strong> inducing <strong>the</strong> spawning <strong>of</strong> new <strong>private</strong> houses out <strong>of</strong> <strong>the</strong> ruins <strong>of</strong><br />
failed partnerships, with Overend, Gurney producing three alone. In addition, a fur<strong>the</strong>r<br />
eight were established between 1866 and 1868. 24 Amongst <strong>the</strong>se was Gillett Bro<strong>the</strong>rs,<br />
founded by some <strong>of</strong> <strong>the</strong> partners in a <strong>private</strong> Quaker Oxfordshire country bank.<br />
The Gilletts’ personal connection with <strong>the</strong> London money market had begun<br />
in 1861 when William Gillett had joined George Brightwen to form a discount<br />
house. After seven uneasy years <strong>the</strong>ir partnership was dissolved, but a new house<br />
was <strong>the</strong>n founded in Lombard Street. Guided by William, it was undertaken by<br />
his bro<strong>the</strong>rs, Alfred and George, toge<strong>the</strong>r with Thomas Aggs, a cousin and former<br />
shipbroker, and Samuel Seymour Grubb, a fellow Quaker who had worked for<br />
William and Brightwen. Alfred managed <strong>the</strong> business, which within five years<br />
had become exceedingly promising, earning about 15 per cent on capital, some <strong>of</strong><br />
which was inter-family loans. 25<br />
William returned to Lombard Street in mid-1872 with a plan to convert what<br />
was substantially his bro<strong>the</strong>rs’ business into a limited company. He put forward this<br />
23<br />
See Cottrell, Investment Banking , vol. II, pp. 418–20, 423–6, 428, 462–4, 497–<br />
500, 552–3, 643–5.<br />
24<br />
Much <strong>of</strong> <strong>the</strong> preceding paragraphs has been drawn from <strong>the</strong> still unsurpassed King,<br />
London Discount Market; see, in particular, pp. 229–61.<br />
25<br />
R.S. Sayers, Gilletts in <strong>the</strong> London Money Market 1867–1967 (Oxford, 1968), pp.<br />
1–16, 30–32.