the world of private banking

170
THE WORLD OF PRIVAtE BANKING
These examples clearly indicate that by the turn of the century at the latest
even the largest private banks were facing the problem of limited resources.
Those banks which were not prepared either to follow the Ladenburg example of
cooperating with a great bank in order to enlarge the capital base or to follow the
Stahl & Federer example by building up a branch network in order to develop the
deposit business had to give away some of their formerly most important business
activities. Even outstanding private banking houses like Sal. Oppenheim jr. & Cie.
had lost major industrial customers to the great banks, 36 as their means became
insufficient to supply the growing demand for capital and credit by big industry.
Issuing foreign loans and financing international trade constituted a second
field of competition between the great banks and the leading private bankers.
The great banks’ (and their overseas subsidiaries’) attempts to gain a foothold
in overseas finance was limited. Many private bankers kept their position, partly
because of their expertise, partly because the international syndicates were still
led by Paris and London private (and merchant) bankers, and, later, New York
investment bankers, all of whom had not only been in close contact with their
German counterparts for decades, but were often even related by kinship. For
these reasons, the most internationally orientated of the great banks, Deutsche
Bank, failed to supersede the Mendelssohns as the leader of the Russian State
loan syndicate; and similarly, the Deutsche Bank’s attempts to attack the leading
position of the Rothschild and Baring syndicates in the Latin American State loan
market were equally unsuccessful. 37
Although the private bankers’ continuing success in international finance is
seemingly of no importance for the purpose of this chapter, during the interwar
period, and particularly during the 1920s, their former international orientation
became a major factor for survival, because it turned out to be a competitive
advantage in the provision of funds for big industry. Before 1914, Germany had
been a net exporter of capital, and access to foreign capital markets had been of
little importance for German industry. After the War, however, and particularly
following the inflation, due to dramatically diminished working capital, almost
all industrial companies were forced to fund necessary rationalization and
reorganization schemes by credit. Since German capital markets were unable
to meet this demand, big industry turned overseas. In this situation some oldestablished
private banks scented their chance quickly and revived their old
contacts overseas in order to facilitate the capital flows – but now in the opposite
direction as compared with the Kaiserreich. 38
The Essen banking house Simon Hirschland was particularly successful. Already
in early 1924 it managed to secure for the big steel concern Gutehoffnungshütte
Bankgeschichte, vol. 23, 1988, pp. 59–92, here p. 81.
36
W. Feldenkirchen, ‘Kölner Banken und die Entwicklung des Ruhrgebietes’, in
Zeitschrift für Unternehmensgeschichte, vol. 27, 1982, pp. 81–106, here p. 102.
37
Barth, ‘Privatbankengruppen’.
38
Wixforth et al., ‘Niche’, pp. 113–16.