the world of private banking
the world of private banking
the world of private banking
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CHAPTER 6<br />
The Anglo-American Houses in <strong>the</strong><br />
Nineteenth Century<br />
Edwin J. Perkins<br />
This chapter focuses on <strong>the</strong> activities <strong>of</strong> <strong>the</strong> major Anglo-American merchant<br />
<strong>banking</strong> houses during <strong>the</strong> nineteenth century. My goals here are tw<strong>of</strong>old. First,<br />
I plan to review briefly <strong>the</strong> most important institutional trends in <strong>the</strong> Anglo-<br />
American trade and capital markets over <strong>the</strong> course <strong>of</strong> several centuries to provide<br />
<strong>the</strong> proper background. Second, I will discuss <strong>the</strong> main accomplishments and<br />
shortcomings <strong>of</strong> <strong>the</strong> leading firms in this dynamic market, with comparisons and<br />
contrasts included where appropriate. Let me warn readers in advance that I will<br />
devote a disproportionate amount <strong>of</strong> time and space to <strong>the</strong> House <strong>of</strong> Brown, an<br />
important firm in <strong>the</strong> Anglo-American market with Baltimore origins. I wrote a<br />
detailed book on <strong>the</strong> Brown partnership over two decades ago. I know <strong>the</strong> Browns<br />
best, and I will draw on my prior strengths in this context. I also intend to focus<br />
my attention primarily on events on <strong>the</strong> American side because, again, I am much<br />
more familiar with that scholarly literature. With <strong>the</strong>se prejudices and limitations<br />
cited, we may now proceed with <strong>the</strong> discussion.<br />
The Anglo-American financial sector passed through four distinct phases<br />
from British colonization in <strong>the</strong> early seventeenth century through <strong>the</strong> end <strong>of</strong><br />
<strong>the</strong> nineteenth century. These four stages were: 1) an absence <strong>of</strong> institutional<br />
specialization, 1600 to 1790; 2) an institutional emphasis on trade and trade<br />
financing, 1790 to 1820; 3) a mixture <strong>of</strong> trade-related activities and portfolio<br />
investments, 1820 to 1860; and 4) an emphasis on large capital transfers through<br />
portfolio investments, 1860 to 1900. The overall trend was to downplay <strong>the</strong> trade<br />
sector and to move toward <strong>the</strong> capital markets. Irrespective <strong>of</strong> <strong>the</strong> purpose <strong>of</strong> <strong>the</strong><br />
funding, during this entire era <strong>the</strong> flow <strong>of</strong> trade credit and long-term capital was<br />
invariably from Europe across <strong>the</strong> ocean to North America.<br />
Throughout most <strong>of</strong> <strong>the</strong> colonial era in British North America, a period <strong>of</strong><br />
over 150 years, <strong>the</strong> transatlantic institutional linkages between <strong>the</strong> providers <strong>of</strong><br />
various financial services were never very strong, and few, if any, linkages were<br />
enduring. Indeed, <strong>the</strong> word atomistic immediately springs to mind in describing<br />
<strong>the</strong> institutional structure <strong>of</strong> this immature market. The financial services provided<br />
<br />
The best book on merchant <strong>banking</strong> in Britain is S. Chapman, The Rise <strong>of</strong> Merchant<br />
Banking (London, 1984).<br />
<br />
E.J. Perkins, Financing Anglo-American Trade: The House <strong>of</strong> Brown, 1800–1880<br />
(Cambridge Mass., 1975).