the world of private banking
the world of private banking
the world of private banking
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118<br />
THE WORLD OF PRIVAtE BANKING<br />
exclusively on providing financial services for <strong>the</strong> American foreign-trade market.<br />
By <strong>the</strong> mid-1840s <strong>the</strong> Browns had supplanted <strong>the</strong> Barings as <strong>the</strong> leading Anglo-<br />
American house providing services to American importers and exporters, a<br />
leadership position that <strong>the</strong> partners never surrendered throughout <strong>the</strong> remainder<br />
<strong>of</strong> <strong>the</strong> nineteenth century.<br />
The Browns were enormously successful in serving <strong>the</strong> US foreign-trade<br />
market because <strong>of</strong> <strong>the</strong>ir truly unique organizational structure. The firm had critically<br />
important branch <strong>of</strong>fices, manned by partners or salaried employees, on both sides<br />
<strong>of</strong> <strong>the</strong> Atlantic Ocean. The <strong>of</strong>fices in New York and Liverpool, with <strong>the</strong> latter<br />
superseded by London in 1863, served as dual headquarters. The entire operations<br />
<strong>of</strong> <strong>the</strong> firm were carefully coordinated and closely monitored. The Browns adopted<br />
uniform policies and procedures at all <strong>the</strong>ir <strong>of</strong>fices, which included – in addition to<br />
New York, Liverpool, and London – branches in Boston, Baltimore, Philadelphia,<br />
New Orleans, and Mobile, Alabama. Many non-family members joined <strong>the</strong> house<br />
as lowly clerks and advanced through <strong>the</strong> ranks. Except for William Brown, all<br />
<strong>the</strong> directing partners in <strong>the</strong> British branches were British nationals, among <strong>the</strong>m<br />
Joseph Shipley – thus <strong>the</strong> famous branch <strong>of</strong>fice title <strong>of</strong> Brown, Shipley & Co. At a<br />
later date, Mark Collet and Francis Hamilton shared <strong>the</strong> managerial duties. Collet,<br />
incidentally, became governor <strong>of</strong> <strong>the</strong> Bank <strong>of</strong> England in 1887.<br />
Unlike <strong>the</strong> hesitant Barings, <strong>the</strong> Browns proved willing to make a strong<br />
commitment to <strong>the</strong> US trade sector. For more than half a century, <strong>the</strong>y assiduously<br />
built <strong>the</strong> organizational capacities to succeed over <strong>the</strong> long run, and <strong>the</strong>ir carefully<br />
laid plans eventually translated into a pr<strong>of</strong>itable reality. The partners focused<br />
on <strong>the</strong> activity that <strong>the</strong>y knew best, which was serving <strong>the</strong> requirements <strong>of</strong> <strong>the</strong><br />
American foreign-trade sector. From 1840 to 1857 <strong>the</strong> firm’s capital account grew<br />
at a rate <strong>of</strong> 5.5 per cent annually – not as fast in <strong>the</strong> previous twenty years but still<br />
a respectable performance. The Browns constantly reinvested a high proportion<br />
<strong>of</strong> <strong>the</strong>ir earnings in <strong>the</strong>ir thriving enterprise. In only one exceptionally bad year<br />
during this period, 1842, did <strong>the</strong> partners’ withdrawals exceed pr<strong>of</strong>its.<br />
Unlike most <strong>of</strong> <strong>the</strong>ir competitors, including George Peabody, <strong>the</strong> Browns<br />
breezed though <strong>the</strong> worst moments <strong>of</strong> <strong>the</strong> Panic <strong>of</strong> 1857 without seeking aid from<br />
<strong>the</strong> Bank <strong>of</strong> England and without suffering any serious losses. On <strong>the</strong> eve <strong>of</strong> <strong>the</strong><br />
American Civil War, <strong>the</strong> partnership was flying high. Reminiscent <strong>of</strong> <strong>the</strong> status <strong>of</strong><br />
<strong>the</strong> Barings at <strong>the</strong> end <strong>of</strong> <strong>the</strong> 1830s, <strong>the</strong> Browns were thoroughly ensconced as <strong>the</strong><br />
undisputed leaders <strong>of</strong> <strong>the</strong> Anglo-American merchant-<strong>banking</strong> community at <strong>the</strong><br />
end <strong>of</strong> <strong>the</strong> 1850s, and <strong>the</strong> partners were exceedingly proud <strong>of</strong> <strong>the</strong>ir achievements.<br />
But developments subsequently turned sour for <strong>the</strong> Browns as well, and <strong>the</strong>y<br />
eventually fell <strong>of</strong>f <strong>the</strong> Anglo-American pedestal. Million-dollar underwriting<br />
<strong>of</strong> government bonds and railroad securities became routine in <strong>the</strong> US capital<br />
markets, and portfolio transactions soon overshadowed <strong>the</strong> volume <strong>of</strong> activity<br />
in <strong>the</strong> more mundane foreign-trade sector. While <strong>the</strong> Browns ranked among <strong>the</strong><br />
leaders in financing <strong>the</strong> trade sector through <strong>the</strong> 1890s, that sector’s relative<br />
importance within <strong>the</strong> Anglo-American economy continued to fade. In <strong>the</strong> first<br />
decade <strong>of</strong> <strong>the</strong> twentieth century, a number <strong>of</strong> American commercial banks with