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