the world of private banking
the world of private banking
the world of private banking
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120<br />
THE WORLD OF PRIVAtE BANKING<br />
for <strong>the</strong> Barings. 10 Frustrated by <strong>the</strong> Rothschilds’ persistent disinterest, Belmont<br />
turned to politics, later serving for several years as <strong>the</strong> organizational leader <strong>of</strong> <strong>the</strong><br />
Democratic National Party. 11<br />
Why <strong>the</strong> Rothschilds failed to respond to <strong>the</strong> dramatic changes in <strong>the</strong> federal<br />
government’s accelerating debt requirements during and after <strong>the</strong> American Civil<br />
War deserves consideration. Sponsoring very large governmental debt issues<br />
had long been <strong>the</strong> firm’s specialty in Europe, and many inviting opportunities in<br />
<strong>the</strong> Anglo-American market arose after 1865. But <strong>the</strong> Rothschilds held back. To<br />
conduct business properly on a grand scale, <strong>the</strong> partners would have needed to<br />
create a genuine branch <strong>of</strong>fice in New York City under <strong>the</strong> direction <strong>of</strong> a family<br />
member. No Rothschilds stepped forward to volunteer for that assignment. Perhaps<br />
<strong>the</strong> family was so closely associated with <strong>the</strong> monarchical tradition in Europe that<br />
none <strong>of</strong> its senior members ever gave serious consideration to <strong>the</strong> prospect <strong>of</strong><br />
dealing regularly with American presidents and cabinet <strong>of</strong>ficials who had, in most<br />
cases, risen to power from humble and non-aristocratic backgrounds. I am just<br />
guessing here, <strong>of</strong> course, about <strong>the</strong> snobbery factor; I will leave it to my European<br />
colleagues to enlighten me on this issue. None<strong>the</strong>less, for whatever <strong>the</strong> reason, <strong>the</strong><br />
Rothschilds were not major players in what was rapidly becoming one <strong>of</strong> <strong>the</strong> most<br />
active markets for securities in <strong>the</strong> entire <strong>world</strong>.<br />
Peabody/Morgan<br />
Today, <strong>the</strong> name <strong>of</strong> J.P. Morgan is universally recognized in financial circles around<br />
<strong>the</strong> globe, but <strong>the</strong> original enterprise –- <strong>the</strong> firm that made <strong>the</strong> Morgan family<br />
both rich and famous – was actually founded by George Peabody. A native New<br />
Englander, Peabody became a successful Baltimore merchant in <strong>the</strong> 1820s before<br />
migrating to London in <strong>the</strong> mid-1830s. 12 He rose rapidly in <strong>the</strong> Anglo-American<br />
merchant-<strong>banking</strong> community. Like <strong>the</strong> Barings, Peabody adroitly performed<br />
several functions simultaneously: trading in commodities on his own account;<br />
<strong>of</strong>fering trade-related financial services to American importers and exporters, and<br />
acting as a securities promoter and contractor. He differed though, because his<br />
geographical focus was narrowly on <strong>the</strong> US market. Persistently optimistic about<br />
<strong>the</strong> future prospects <strong>of</strong> <strong>the</strong> American economy and <strong>the</strong> fundamental soundness,<br />
10<br />
The data on <strong>the</strong> Rothschilds and Barings is found in N. Ferguson, ‘The Rothschilds:<br />
Finance, Society and Politics in <strong>the</strong> Nineteenth Century’, paper delivered at <strong>the</strong> conference<br />
Finance and <strong>the</strong> Making <strong>of</strong> Modern Capitalism, Berkeley, University <strong>of</strong> California, Center<br />
for German and European Studies, 1997. The data on <strong>the</strong> Browns is from Perkins, Financing<br />
Anglo-American Trade, Appendix A.<br />
11<br />
The one major biography focuses on Belmont’s political career; see I. Katz, August<br />
Belmont: a Political Biography (New York, 1968).<br />
12<br />
The definitive biography is M.E. Hidy, George Peabody: Merchant and Financier<br />
(New York, 1978).