the world of private banking

THE ANGLO-AmERIcAN HOUSES IN tHE NINEtEENtH CENtURy 119
huge financial resources became competitors in the foreign-trade sector, and the
Browns’ position correspondingly fell. In time the firm merged with the Harriman
family enterprise to create Brown Brothers Harriman, a small private bank with
an elite clientele.
The Rothschilds
The partners’ involvement began sometime in the 1820s, or possibly in the early
1830s. The firm invested in transportation projects, either for the partners’ own
joint account or for the portfolios of valued clients. The partners may have also
served as loan contracts for certain canal and railroad companies, plus a few
state governments, but the exact details are unknown. The Rothschilds worked
through independent American agents, although the names and locations of their
representatives are incomplete before 1840. Presumably one or more agents were
located in Boston, New York, and Philadelphia – the main US money centres.
Our key source of information about the Rothschilds’ Anglo-American
activities is linked to the career of their long-term US agent, August Belmont, who
served the firm in various capacities for over six decades. Born in Alzey, Germany,
in 1813, Belmont joined the Frankfurt office as a clerk at age 15. In the early
months of 1837 the firm sent him on a mission to Havana, Cuba, via the United
States. When he arrived in New York City in March of that year, Belmont found
the city in turmoil because of the raging financial panic. The Rothschilds’ local
agent, the firm of J.L. and S.I. Joseph & Co., had recently suspended payment,
with outstanding liabilities of reportedly $7 million. Rather than continuing to
Havana, Belmont stayed in New York to protect his employer’s financial interests
as much as possible. He created an independent firm, titled August Belmont & Co.,
and became, in turn, the Rothschilds’ sole American representative. For the next
several years, he tried to reduce as much as possible the Rothschilds’ exposure
to losses on their American securities and to recover what could be salvaged.
The partners were extremely satisfied with his performance, and rewarded him
liberally for his efforts.
But that one disastrous experience was apparently enough to stifle the
Rothschilds’ interest in the American capital market. Although Belmont frequently
tried to induce the firm to participate in a series of promising underwriting deals,
the partners remained cool to most of his proposals. They joined some syndicates
but headed very few. The Rothschilds certainly had the financial resources to
dominate the US market had the partners chosen to exert their influence after the
investment climate improved in the early 1840s. In 1844 the Rothschilds’ capital
stood at £7,800,000 versus just £750,000 for the Browns and a mere £500,000
Chapman, Rise of Merchant Banking, p. 21.