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