the world of private banking

THE ANGLO-AmERIcAN HOUSES IN tHE NINEtEENtH CENtURy 115
By the end of the eighteenth century, the partners had also turned their
attention to the international trade sector in North America. Alexander Baring
visited the United States in late 1795. He established agency agreements with
independent merchants in Boston, Philadelphia, Baltimore, and New York. More
importantly, he signed an agreement with the First Bank of the United States, the
federally chartered institution with a huge capital of $10 million, to cooperate
on the transfer of various funds between the two countries. On the basis of that
mutually advantageous association, the Barings became involved in helping to
facilitate the transfer of monies linked to the American purchase of the Louisiana
Territory from the French government for $15 million in 1803. In cooperation with
Hope & Co. in Amsterdam, the Barings helped in placing $15 million in new US
bonds with European investors; these investors proved to be eager buyers given
the outstanding credit reputation of the United States after the implementation of
the federal debt refunding programme in the early 1790s. Indeed, this transaction
in 1803 was one of the few instances before the American Civil War in which the
Anglo-American houses had the opportunity to aid the US government in the sale
of bonds to prospective investors at home or abroad.
Following the War of 1812, which ended in a stalemate, the Barings were
consistently active in the American foreign trade sector. The partners were
frequently outright purchasers of cotton in the United States for shipment to Britain,
based on the usually reliable advice of their American agents and correspondents.
In addition, they periodically made advances to American exporters to attract
consignments on which they earned commissions for arranging sales in London
or Liverpool. During the 1820s and early 1830s, the Barings operated a lucrative
foreign-exchange business in cooperation with the Second Bank of the United
States. The Barings’ sterling bills always passed at premium prices because the risk
of non-payment was judged to be exceedingly low. The partners also authorized
their agents in the major US ports to issue letters of credit to American importers
with adequate capital resources and reliable reputations. In the capital markets,
the partners became loan contractors for several of the new canal and railroad
projects in the United States. In sum, the Barings acted as all-purpose merchant
bankers in the Anglo-American economy, and they were widely recognized as the
unchallenged leaders in this broad field through the 1830s.
Sensing possible danger ahead, the Baring partners were well-prepared for the
Panic of 1837, having curtailed their commitments in the American market during
the previous year. Most of their main competitors were severely damaged by the
panic and the subsequent economic downturn. Immediately after the panic, the
Barings reached what was probably their zenith of power and influence in the US
market. Rather than taking full advantage of the temporary weaknesses of their
competitors, however, the Barings became exceedingly cautious with regard to the
entire US market. Interestingly, an American, Joshua Bates, became the de facto
The definitive book on the Barings is R. Hidy, The House of Baring in American Trade
and Finance: English Merchant Bankers at Work, 1763–1861 (Cambridge Mass., 1949).