the world of private banking
the world of private banking
the world of private banking
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
172<br />
THE WORLD OF PRIVAtE BANKING<br />
The outstanding importance <strong>of</strong> several <strong>private</strong> banks for <strong>the</strong> mobilization<br />
<strong>of</strong> foreign capital during <strong>the</strong> 1920s and particularly after <strong>the</strong> inflation contrasts<br />
significantly with <strong>the</strong>ir generally declining involvement in industrial finance<br />
before <strong>the</strong> First World War. One reason for <strong>the</strong>ir ability to raise foreign finance<br />
more easily, more rapidly and on more favourable terms than <strong>the</strong> great banks arose<br />
from <strong>the</strong>ir overseas connections. These stemmed from <strong>the</strong>ir tradition <strong>of</strong> conducting<br />
mutual business across international centres, long-established kinship linkages<br />
between <strong>the</strong> various cosmopolitan <strong>banking</strong> dynasties, and common behaviour<br />
patterns resulting from <strong>the</strong> particular social pre-eminence <strong>of</strong> <strong>the</strong> international<br />
<strong>banking</strong> elite. Second, <strong>the</strong> financing <strong>of</strong> international trade remained a domain<br />
<strong>of</strong> <strong>the</strong> largest international <strong>private</strong> bankers. After <strong>the</strong> war, and particularly after<br />
<strong>the</strong> inflation, <strong>the</strong> German great banks faced substantial internal problems. Their<br />
managerial capacities were absorbed in handling <strong>the</strong>se problems to a much greater<br />
extent than <strong>the</strong> smaller and more flexible <strong>private</strong> banks. In addition, <strong>the</strong> restrictive<br />
policy pursued by <strong>the</strong> Reichsbank after <strong>the</strong> hyperinflation forced <strong>the</strong> great banks<br />
to shy away from risky ventures. Many <strong>private</strong> bankers – even those who, like<br />
Hirschland, were not among <strong>the</strong> most important houses before 1914 – perceived<br />
<strong>the</strong> unique opportunity for diversifying <strong>the</strong>ir business <strong>of</strong> financing international<br />
trade through additionally negotiating international loans. During <strong>the</strong> stabilization<br />
period <strong>of</strong> <strong>the</strong> mid-1920s <strong>private</strong> bankers predominated in this segment <strong>of</strong> <strong>the</strong><br />
finance markets. The great banks began to compete once more in international<br />
finance only from 1926 or 1927. 43<br />
The flowering <strong>of</strong> <strong>private</strong> <strong>banking</strong> during <strong>the</strong> inflation was thus not simply<br />
illusory – this was true only for small local bankers, which had been large in<br />
numbers, but had not even <strong>the</strong>n been an important component <strong>of</strong> <strong>the</strong> financial<br />
markets. Instead, <strong>the</strong> pre-1931 second flowering <strong>of</strong> <strong>the</strong> leading German <strong>private</strong><br />
banks was well founded, and <strong>the</strong>re was no sign <strong>of</strong> a sudden fading. They were<br />
able to utilize <strong>the</strong> niches <strong>of</strong> <strong>the</strong> universal <strong>banking</strong> system, that is, <strong>the</strong>y provided<br />
those services which nei<strong>the</strong>r <strong>the</strong> great banks nor <strong>the</strong> savings banks were able to<br />
supply: besides <strong>the</strong>ir international contacts <strong>the</strong> <strong>private</strong> bankers’ inside knowledge<br />
derived from <strong>the</strong>ir intimate contact with o<strong>the</strong>r bankers, diplomats, politicians<br />
and industrialists as well as <strong>the</strong>ir fairly independent position as nei<strong>the</strong>r major<br />
shareholders nor big creditors, while both qualified <strong>the</strong>m for advisory services in<br />
all financial and business matters.<br />
The network <strong>of</strong> personal linkages among various big industrial concerns, and<br />
between banks and industrial undertakings, which arose from <strong>the</strong> accumulation <strong>of</strong><br />
board seats in <strong>the</strong>se companies, is more than simply a proxy <strong>of</strong> <strong>the</strong> <strong>private</strong> bankers’<br />
importance in <strong>the</strong> financial markets. In 1906, leading bankers Louis Hagen (A.<br />
Levy, Cologne), Ludwig Delbrück (Delbrück, Leo & Co., Berlin) and Eduard v.<br />
Oppenheim (Sal. Oppenheim jr. & Cie., Cologne) held up to about forty joint-stock<br />
company supervisory-board seats each. Hardly any great bank director held more.<br />
Until <strong>the</strong> late 1920s <strong>private</strong> bankers continued to occupy a central position in <strong>the</strong><br />
43<br />
Wixforth et al., ‘Niche’, p. 116.