the world of private banking

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THE WORLD OF PRIVAtE BANKING
critical for success. The Barings were fully capable of serving their American
trade customers through a chain of independent merchants in US ports before
the middle of the nineteenth century. When the emphasis shifted to the provision
of investment banking services for the federal government and the American
railroads, then the maintenance of an influential branch office in New York City was
a necessity if a house hoped to play a lead role in the transatlantic capital market.
Morgan and Kuhn Loeb had singular offices on Wall Street, while the Seligmans
made their New York branch their headquarters. The Browns had a New York
office but preferred to restrict their business to the trade sector. Without branch
offices in New York, the partners of Barings and Rothschilds could not regularly
meet with the executives of American railroads to arrange lucrative underwriting
transactions. The Browns, Barings, and Rothschilds remained participants in the
US capital markets, but they acted primarily as distributors of securities rather
than as syndicate organizers.
Over the course of the nineteenth century, the great Anglo-American merchant
banking houses underwent a major transformation. The strategy of mixing
international trading on their own account with complementary financial services
to third parties – foreign exchange transactions, advances against consignments,
letters of credit – gave way to greater financial specialization. The Rothschilds
abandoned their mercantile activities in the first quarter of the century and
immediately stressed investment banking. The Browns ceased merchandising in
the late 1830s and concentrated thereafter primarily on the provision of financial
services. The Barings, Peabody/Morgan, Seligmans, and Kuhn Loeb shed their
mercantile functions at a subsequent date. Except for the Browns, the leading
houses in the Anglo-American financial markets at the end of the nineteenth
century concentrated on providing investment banking services for governments
and large corporate accounts.