the world of private banking
the world of private banking
the world of private banking
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116<br />
THE WORLD OF PRIVAtE BANKING<br />
head <strong>of</strong> <strong>the</strong> partnership at about this time. Bates, who was born in Massachusetts<br />
in 1788, had emigrated to London in 1816 or 1817, and had steadily progressed in<br />
his business career. But Bates showed little partiality to his native land.<br />
Under <strong>the</strong> leadership <strong>of</strong> Bates, <strong>the</strong> partnership exhibited a vacillating attitude<br />
toward <strong>the</strong> American economy in <strong>the</strong> 1840s and 1850s. Bates recruited Thomas<br />
Wren Ward, a Boston merchant, to serve as a general supervisor for all <strong>the</strong> Barings’<br />
operations in <strong>the</strong> United States, and Ward was even made a junior partner in <strong>the</strong><br />
firm. But Ward had only limited influence over <strong>the</strong> independent houses that acted<br />
as Baring agents in o<strong>the</strong>r US port cities. Always fearful <strong>of</strong> a repeat <strong>of</strong> <strong>the</strong> 1837<br />
disaster, <strong>the</strong> Baring partners could never bring <strong>the</strong>mselves to make an unshakeable<br />
commitment to ei<strong>the</strong>r <strong>the</strong> US trade market or <strong>the</strong> nation’s rapidly developing<br />
capital market. Periodically optimistic and aggressive in <strong>the</strong>ir involvement in <strong>the</strong><br />
American economy during this period, <strong>the</strong> partners invariably pulled in <strong>the</strong>ir horns<br />
at <strong>the</strong> first sign <strong>of</strong> potential disturbances.<br />
Ra<strong>the</strong>r than taking <strong>the</strong> initiative and establishing a network <strong>of</strong> branch <strong>of</strong>fices in<br />
<strong>the</strong> main US ports, <strong>the</strong> Barings continued to work through a chain <strong>of</strong> independent<br />
American agents. In several instances <strong>the</strong> partners had working arrangements<br />
with two or three agents in <strong>the</strong> same port city, who competed with one ano<strong>the</strong>r<br />
for new business. In o<strong>the</strong>r words, to interject modern Chandlerian terminology<br />
into this discussion, <strong>the</strong> Barings failed to take <strong>the</strong> steps necessary to build an<br />
organizational structure with <strong>the</strong> potential to take optimum advantage <strong>of</strong> <strong>the</strong>ir<br />
enviable competitive position at <strong>the</strong> end <strong>of</strong> <strong>the</strong> 1830s. The appointment <strong>of</strong> Ward as<br />
<strong>the</strong>ir primary American agent was only a half-measure. As a consequence <strong>of</strong> <strong>the</strong>ir<br />
failure to build a strong organizational network, o<strong>the</strong>r firms began to carve out<br />
larger market shares in various sectors, leaving <strong>the</strong> Barings in <strong>the</strong>ir wake.<br />
Perhaps one <strong>of</strong> <strong>the</strong> main stumbling-blocks to any greater expansion in <strong>the</strong><br />
US market was <strong>the</strong> fact that <strong>the</strong> Barings were simultaneously deeply involved in<br />
business affairs in o<strong>the</strong>r regions <strong>of</strong> <strong>the</strong> <strong>world</strong>, including continental Europe. The<br />
partners were unable to perceive at mid-century that one <strong>of</strong> <strong>the</strong>ir best opportunities<br />
for maximizing future pr<strong>of</strong>its was in <strong>the</strong> US market. O<strong>the</strong>r regions seemed<br />
equally appealing. In trying to become and remain a global enterprise long before<br />
that modern-day terminology had entered our vocabulary, <strong>the</strong> Barings spread<br />
<strong>the</strong>mselves too thin. To compound <strong>the</strong> problem, <strong>the</strong> partners regularly withdrew<br />
a large proportion <strong>of</strong> <strong>the</strong>ir yearly pr<strong>of</strong>its, which kept <strong>the</strong> capital base stagnant.<br />
The maintenance <strong>of</strong> a luxurious standard <strong>of</strong> living was more important to many<br />
partners than <strong>the</strong> growth <strong>of</strong> <strong>the</strong> enterprise. Several members <strong>of</strong> <strong>the</strong> Baring family<br />
also served in Parliament and thus became distracted by politics. Reservations<br />
about adding new partners, especially permanent non-British residents, may also<br />
have inhibited <strong>the</strong> Baring partners from pursuing expansion plans abroad.<br />
Given all <strong>the</strong>se factors, <strong>the</strong> Barings’ failure to commit greater resources, both<br />
capital and personnel, to <strong>the</strong> United States gave o<strong>the</strong>r firms <strong>the</strong> opportunity to<br />
make inroads. By <strong>the</strong> 1850s <strong>the</strong> Browns had inherited <strong>the</strong> leadership position in<br />
<br />
Chapman, Rise <strong>of</strong> Merchant Banking, p. 27.