the world of private banking

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THE WORLD OF PRIVAtE BANKING
market moved from being dominated by trade and trade-financing activities in
the late eighteenth and early nineteenth centuries to a strong emphasis on large
capital transfers through portfolio investment in the second half of the nineteenth
century.
Six leading houses dominated that market: Barings, Browns, Rothschilds,
Peabody/Morgan, Seligmans, and Kuhn Loeb. Barings were dominant in the
early stage, until the 1830s, combining commercial and financial activities, but
failed or were reluctant to commit sufficient resources to the American side of
their business. They were followed by Browns, who built powerful organizational
capacities on both sides of the Atlantic, but remained exceedingly confined to
trade finance. The Rothschilds had the financial means to dominate the American
market but never sent members of the family to the United States. In the end, and
despite significant differences in business organization, the three leading houses in
the later part of the nineteenth century, JP Morgan, Seligmans and Kuhn Loeb, all
had their headquarters in New York City, a necessary condition once the provision
of investment banking services had become the dominant activity.
These houses undoubtedly belonged to a group known in France as the
‘Haute Banque’ – the upper echelons, in both professional and social terms, of
the private banking world, discussed by Alain Plessis in chapter 7. The group
was never very clearly defined, as membership was unofficial and based on
prestige and reputation. Nevertheless, Plessis clearly underlines its international
dimension, which can be seen as one of its defining characteristics. It is significant,
for example, that the banking families making up the ‘Haute Banque’ were often
from foreign origins, especially as far as its Protestant and Jewish components
were concerned. Moreover, these families retained links with their friends and
relatives in foreign countries, not least through marriages and intermarriages,
hence appearing as a cosmopolitan world, not entirely assimilated into the French
elite. This internationalism was reinforced by travelling, especially in the form of
apprenticeships and work experience with a friendly firm in a foreign country.
Above all, the French ‘Haute Banque’ was international through its activities.
Interestingly, with the exception of the Rothschilds and a couple of other houses,
their business appears to have been dominated by French credit and financial
transactions during their so-called golden age, until the 1860s. Alain Plessis put
their decline in the last quarter of the twentieth century into perspective. Their
number might have diminished and they were increasingly sidelined by the large
joint stock banks. However, they still played a far from insignificant role in
international finance, becoming at the same time far more internationally oriented.
Mallet Frères, the oldest though not the largest house in the group, is a case in
point. Its total balance sheet increased almost threefold between 1860 and 1913,
mostly as a result of its international activities: acceptances, in particular, made
up 33 to 40 per cent of liabilities in 1913, as against 9 per cent in 1860; while the
proportion of foreign accounts rose from one third to two thirds. Other houses
appear to have followed the same pattern, securing not only their survival but their
prosperity through their adaptation to the global economy.