the world of private banking

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