the world of private banking
the world of private banking
the world of private banking
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160<br />
THE WORLD OF PRIVAtE BANKING<br />
hinterland demanded an efficient financial backing. Thus, <strong>the</strong> Hamburg bankers,<br />
such as Berenberg, Gossler & Co., Salomon Heine, L. Behrens & Söhne, C.H.<br />
Donner and M.M. Warburg & Co., specialized in a particular service, <strong>the</strong> financing<br />
<strong>of</strong> overseas trade – merchant <strong>banking</strong>. <br />
While <strong>the</strong> economic fragmentation <strong>of</strong> <strong>the</strong> German territory before 1834, when<br />
<strong>the</strong> Zollverein was founded, had been one <strong>of</strong> <strong>the</strong> reasons for <strong>the</strong> poor state <strong>of</strong><br />
internal trade and thus for <strong>the</strong> country’s economic decline relative to its western<br />
neighbours, <strong>the</strong> political fragmentation was one <strong>of</strong> <strong>the</strong> reasons for Frankfurt’s<br />
position as a first-rank European financial centre. After <strong>the</strong> German map had been<br />
reshaped at <strong>the</strong> Congress <strong>of</strong> Vienna, <strong>the</strong> new German States were near to declaring<br />
<strong>the</strong>mselves bankrupt. In addition to <strong>the</strong>ir mainly unfunded war debt, <strong>the</strong>se States<br />
developed an enormous additional credit demand in order to build up a State<br />
bureaucracy and to integrate <strong>the</strong>ir newly acquired, <strong>of</strong>ten politically, economically<br />
and mentally incoherent parts. In economic terms political fragmentation also<br />
meant coinage chaos. Hundreds <strong>of</strong> different types <strong>of</strong> coins circulated in Germany,<br />
and in many cases <strong>the</strong> manipulation <strong>of</strong> <strong>the</strong> coins’ specie content had been a means<br />
<strong>of</strong> <strong>the</strong> smaller territories’ fiscal policy. Long-distance trade, <strong>the</strong>refore, suffered<br />
from exchange risks despite seemingly stable specie standards, and payment<br />
settlements <strong>of</strong>ten required pr<strong>of</strong>essional assistance. Exchange dealings thus formed<br />
a large market for Frankfurt <strong>banking</strong> houses. <br />
Both markets – merchant <strong>banking</strong> (in Hamburg) and State financing and<br />
exchange dealings (in Frankfurt) – were not at all declining when a new demand for<br />
capital and credit appeared. By <strong>the</strong> mid-1830s <strong>the</strong> first German railway companies<br />
had proved that <strong>the</strong> building <strong>of</strong> railways could become a pr<strong>of</strong>itable business, not<br />
only for <strong>the</strong> prospective customers (by speeding up <strong>the</strong> transport <strong>of</strong> goods and<br />
passengers and by reducing transport costs), but also for prospective investors.<br />
Capital was not scarce in Germany during <strong>the</strong> 1830s and early 1840s, but <strong>the</strong><br />
wealthy public was not yet used to investing in shares <strong>of</strong> joint-stock companies. <br />
In addition, during <strong>the</strong> early period <strong>of</strong> railway development <strong>the</strong> German States<br />
did not support <strong>private</strong> railway initiatives, while <strong>the</strong> States <strong>the</strong>mselves were<br />
not inclined to take control <strong>of</strong> railway development by building <strong>the</strong> tracks on<br />
<strong>the</strong>ir own account. The reasons were different – <strong>the</strong> Postmaster General feared<br />
railway competition with <strong>the</strong> State-owned Prussian post services, <strong>the</strong> finance<br />
minister feared <strong>the</strong> railways’ competition with <strong>the</strong> newly erected State-owned<br />
<br />
M. Pohl, Hamburger Bankengeschichte (Mainz, 1986), pp. 55–71.<br />
<br />
U. Heyn, Private Banking and Industrialization: The Case <strong>of</strong> Frankfurt am Main<br />
1825–1875 (New York, 1981), pp. 206–61; H.P. Ullmann, ‘Der Frankfurter Kapitalmarkt<br />
um 1800: Entstehung, Struktur und Wirkung einer modernen Finanzinstitution‘, in<br />
Vierteljahrschrift für Wirtschafts- und Sozialgeschichte, vol. 77, 1990, pp. 75–92; C.-L.<br />
Holtfrerich, Finanzplatz Frankfurt (Munich, 1999), p. 155.<br />
<br />
K. Borchardt, ‘Zur Frage des Kapitalmangels in der ersten Hälfte des 19. Jahrhunderts<br />
in Deutschland‘, Jahrbücher für Nationalökonomie und Statistik, vol. 173, 1961, pp. 401–<br />
21, here p. 414.