the world of private banking
the world of private banking
the world of private banking
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214<br />
THE WORLD OF PRIVAtE BANKING<br />
In <strong>the</strong> Ne<strong>the</strong>rlands, <strong>private</strong> banks originated from <strong>the</strong> securities business <strong>of</strong> <strong>the</strong><br />
eighteenth century. Traders in securities were merchants, usually Sephardic Jews<br />
<strong>of</strong> Spanish or Portuguese origin, who came to specialize in this field.<br />
During <strong>the</strong> wars <strong>of</strong> <strong>the</strong> French Revolution and Empire eighteenth-century<br />
merchant bankers had to refine <strong>the</strong>ir techniques in financing trade. Paris <strong>the</strong>n<br />
emerged as a national and international payments centre. Indeed, as <strong>the</strong> only country<br />
undertaking reciprocal exchange with Latin America and also having a positive<br />
balance <strong>of</strong> payments with <strong>the</strong> Anglo-Saxon <strong>world</strong>, France played a significant role<br />
in <strong>the</strong> international payments system. Whilst <strong>the</strong> English and Americans sought to<br />
procure bills on Paris to pay <strong>the</strong>ir imports <strong>of</strong> French goods, continental merchants<br />
turned to Parisian banks to manage <strong>the</strong>ir debts to Anglo-Saxon countries. Foreign<br />
banks had also set up <strong>of</strong>fices in Paris, chiefly Swiss Protestants and German Jews.<br />
While keeping busy in international trade, <strong>the</strong>y placed government loans for <strong>the</strong><br />
restored monarchies. As a result <strong>the</strong> haute banque came into being in Paris during<br />
<strong>the</strong> Bourbon Restoration. It was an informal but closed circle <strong>of</strong> twenty <strong>private</strong><br />
banks, some <strong>of</strong> <strong>the</strong>m established well before <strong>the</strong> Revolution. Among <strong>the</strong>m were<br />
German Jews such as Louis d’Eichtal, James Rothschild, Salomon Oppenheim.<br />
O<strong>the</strong>r Jewish bankers joined later: Fould, Cahen d’Anvers, Stern, Bisch<strong>of</strong>fsheim.<br />
Until 1870, <strong>private</strong> banks enjoyed a privileged position in Germany. Most <strong>of</strong><br />
<strong>the</strong>m originated in trade and business <strong>of</strong> <strong>the</strong> H<strong>of</strong>juden <strong>of</strong> <strong>the</strong> numerous eighteenthcentury<br />
German States. By <strong>the</strong> turn <strong>of</strong> <strong>the</strong> century, one hundred and fifty court<br />
Jews’ families had been raised to <strong>the</strong> nobility, mainly in south Germany and<br />
Austria. Thus, Aron Elias Seligman <strong>of</strong> Mannheim, who did <strong>the</strong> king <strong>of</strong> Bavaria<br />
services during <strong>the</strong> Napoleonic wars, was ennobled in 1814 as Leonard, Freiherr<br />
von Eichtal; <strong>the</strong>n he converted to Roman Catholicism. Similarly, <strong>the</strong> Kaulla family<br />
founded a bank with Duke Frederick <strong>of</strong> Württemberg in 1802; it became <strong>the</strong> bank<br />
to <strong>the</strong> Kingdom <strong>of</strong> Württemberg’s court after <strong>the</strong> Napoleonic wars.<br />
Frankfurt-am-Main was especially favoured as a financial centre because<br />
<strong>of</strong> its status as a free city, as well as because <strong>of</strong> its geographic position at <strong>the</strong><br />
crossroads <strong>of</strong> major European commercial and water routes. The early nineteenth<br />
century confirmed its rise as <strong>the</strong> pre-eminent commercial and <strong>banking</strong> centre <strong>of</strong><br />
Germany, a rise which had begun in <strong>the</strong> previous century. Private bankers made it<br />
<strong>the</strong>ir preferred market for broking international government loans – especially <strong>the</strong><br />
Bethmann firm, whose activities in this market were eventually to be overtaken by<br />
<strong>the</strong> Rothschilds. Cologne also figured among <strong>the</strong> important financial centres from<br />
which <strong>the</strong> Oppenheims built <strong>the</strong>ir international network. At that time <strong>the</strong> Berlin<br />
<strong>banking</strong> houses could not compete with Frankfurt in <strong>the</strong> Prussian government<br />
loan market. At Hamburg, <strong>the</strong> Warburgs, whose first known ancestor worked<br />
as a money changer and pawnbroker during <strong>the</strong> sixteenth century, established a<br />
<strong>banking</strong> house in 1798.<br />
The rise <strong>of</strong> <strong>the</strong> house <strong>of</strong> Rothschild fascinated contemporaries because <strong>of</strong> <strong>the</strong><br />
size <strong>of</strong> its operations throughout Europe. The dynasty’s founder, Meyer Amschel<br />
Rothschild, was trained by <strong>the</strong> Oppenheims at Hanover. He was one <strong>of</strong> <strong>the</strong> many<br />
businessmen who made a fortune in military procurement during <strong>the</strong> wars with