the world of private banking

THE ANGLO-AmERIcAN HOUSES IN tHE NINEtEENtH CENtURy 125
but resumed in the 1840s and 1850s. After 1860, the cost of fighting the American
Civil War created a huge federal government debt, and soon thereafter the US
railroads embarked on a massive expansion programme in the far western States.
By the end of the century, the most prestigious and powerful firms in the Anglo-
American financial community had largely abandoned their trade orientation to
concentrate on investment banking.
The second half of the nineteenth century also witnessed the rise of New York
City as the main US money centre. Before the Civil War, Boston had a securities
market that rivalled Wall Street. New York investment-banking firms eased ahead
of their rivals in the 1850s, when railroad lines were extended into the Midwestern
States. In the 1860s New York bankers became the dominant force in the investment
market, with Boston houses like Kidder Peabody & Co. and Lee Higginson & Co.
falling into the second tier. By the turn of the century, New York was challenging
London on the world stage. London was still far ahead in terms of the number of
listed bond issues, but the New York securities market had a growing number of
choice equity issues. 17
Investigating the similarities and contrasts among the six leading firms provides
enlightenment on several fronts. Two partnerships were essentially family firms
– Rothschilds and Seligmans. The Barings had admitted non-family members by
the 1820s, and an American actually headed the London office after 1837. The
Browns began as a transatlantic family enterprise, but within a quarter century the
English branch office was being managed by non-family partners. The Morgans
had a close father-son connection in the second half of the nineteenth century,
but the mutual-ownership pattern was notably absent. Kuhn Loeb, the last major
US entrant into this oligopolistic market, never relied on family connections in
Europe for its success. On the other hand, it can be stated that Kuhn Loeb, like
Rothschilds and Seligmans, had close ties to the larger community of European
Jews. Indeed the principals in all three of the Jewish firms could trace their roots
to a single German locale, the city of Frankfurt and its hinterlands. Three houses
placed a great deal of emphasis on creating strong transnational organizations
with branch offices in key cities managed by partners or salaried employees.
The Browns, Rothschilds, and Seligmans were atypical of contemporary firms
because of their close internal coordination of operations, and they took advantage
of their administrative structure to provide customers with superior services. The
directing partners in all three firms insisted on the adoption of uniform policies and
procedures throughout the organization. The Browns and Seligmans had branches
in the United States, but not the Rothschilds. On the other hand, Barings, Morgan,
and Kuhn Loeb demonstrated that it was possible to function as a successful
enterprise by relying on a network of agents and correspondents.
When financial services were primarily linked to the trade sector, the location
of a branch office in the country where the demand for services arose was not
17
R.C. Michie, The London and New York Stock Exchanges, 1850–1914 (London,
1987).