the world of private banking

92
THE WORLD OF PRIVAtE BANKING
activity during 1864 resulted in their managements being collectively responsible
for securing more than a fifth of the funds subscribed through the formal new-issue
markets to company and railway securities. Despite the scurrilous nature of many
of the finance companies, their corporate midwifery had something of a positive
effect. Although the particular London-registered companies that they publicly
promoted enjoyed no longer lives than all those effectively registered, with half
insolvent within five years, the finance companies were primarily involved with the
types of companies that experienced the shortest survival rates: home and foreign
financing, colonial and foreign banking, shipbuilding and shipping. Concerns in
these categories founded by the finance companies subsequently enjoyed greater
longevity than their immediate peers, if only a year or two. 75
In marked contrast, the finance companies made no real impression upon the
market for foreign sovereign loans, although the nominal value of such securities
quoted on the London Stock Exchange rose substantially from the early 1850s.
The public involvements of the General Credit and the International merely
comprised: the £1.5m. 6 per cent Venezuelan loan (1863); the £12.365m. 6 per
cent Mexican loan (1864); and the £8m. Italian 5 per cent State Domain loan
(1865). However, alongside these few public issues were private participations as
members of issuing syndicates (London and Anglo-European) and the provision
of private short-term finance to ‘bridge’ a government’s treasury from one public
issue to another. 76 Consequently, Thomas Baring largely drew the wrong conclusion
when he considered that the founding of the International Financial Society would
create a ‘formidable rival to the Rothschilds’. 77 Instead, London merchant banks
continued – to 1914 – to be the principal issuers of overseas securities, meeting
competition for this business only from overseas banks and agencies and, in the
case of corporate enterprises, these undertakings’ bankers. 78
Instead of foreign loans, the finance companies as a group concentrated on
facilitating railway building, specifically, from mid-summer 1864, by supporting
contractors as opposed to companies. This was a response to the general
subsidence of activity on the London new-issue markets after spring 1864, but their
involvement in such affairs was hinted at from the moment of their inception. One
of the London Financial’s directors, J.E.C. Koch, had previously obtained finance
to complete his Welsh railways from Overend, Gurney. The General Credit’s board
included Blount, Thomas Brassey’s partner, while its Paris institutional partner
– Société Générale – had a directorate with a strong railway flavour, personified in
Bank of India, Land Securities, Mauritius Land Credit & Agency, Ottoman Financial
Association, Queensland Sheep Investment, Société Financière d’Egypte and Société
Générale Russe de Crédit Foncier et Industriel.
75
See Cottrell, Investment Banking, vol. I, pp. 414–15.
76
Ibid., vol. I, pp. 297–318.
77
GLL: Gibbs Papers; Ms 11036/3, H.H. Gibbs PLB, to W. Gibbs, 1 May 1863.
78
A.R. Hall, The London Capital Market and Australia 1870–1914 (Canberra, 1963),
p. 72.