the world of private banking

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