the world of private banking
the world of private banking
the world of private banking
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222<br />
THE WORLD OF PRIVAtE BANKING<br />
very quickly lost control <strong>of</strong> <strong>the</strong> joint-stock banks, especially in <strong>the</strong> D-banks. One<br />
may consider <strong>the</strong> case <strong>of</strong> Horace Finaly as an exceptional one after World War I;<br />
however, anti-Semitism was a not insignificant factor in his fall in 1937.<br />
At this stage one may wonder why <strong>the</strong> rise <strong>of</strong> joint-stock banks with a huge<br />
capacity to collect funds failed to affect <strong>the</strong> <strong>world</strong> <strong>of</strong> <strong>private</strong> banks much. While<br />
<strong>the</strong> joint-stock banks attained a dominating position in <strong>the</strong> national markets <strong>of</strong><br />
<strong>the</strong> industrialized countries <strong>of</strong> <strong>the</strong> continent, <strong>private</strong> bankers kept a privileged<br />
position in penetrating <strong>the</strong> markets <strong>of</strong> less-developed countries. They were also<br />
ideal channels for covert action in colonial activities. To open new markets,<br />
<strong>the</strong>y took advantage <strong>of</strong> <strong>the</strong>ir widespread international family and business links,<br />
<strong>the</strong>ir discreet way <strong>of</strong> operating, and <strong>the</strong>ir numerous contacts with political and<br />
diplomatic circles. In light <strong>of</strong> <strong>the</strong> specialization <strong>of</strong> <strong>the</strong> British <strong>banking</strong> system, <strong>the</strong><br />
question does not concern <strong>the</strong> merchant banks until World War I.<br />
Mendelssohn, Bleichröder and Hansemann had become <strong>the</strong> main bankers to<br />
Russia in <strong>the</strong> 1880s. They issued Russian public loans in <strong>the</strong> West European markets<br />
until <strong>the</strong> Lombardverbot <strong>of</strong> 1887, which had <strong>the</strong> consequence <strong>of</strong> transferring no less<br />
than 60 per cent <strong>of</strong> <strong>the</strong> Imperial Russian foreign debt to <strong>the</strong> French market. Thus,<br />
Paris overtook Berlin as <strong>the</strong> main market for Russian securities; <strong>the</strong> Rothschilds<br />
and <strong>the</strong> Banque de Paris et des Pays-Bas took over <strong>the</strong> leadership <strong>of</strong> <strong>the</strong> syndicates<br />
for negotiating with <strong>the</strong> Russian government.<br />
Colonial expansion also gave Jewish <strong>private</strong> bankers new opportunities. Ernest<br />
Cassel, who was close to Maurice de Hirsch, built his fortune partly through his<br />
large operations in Egypt under <strong>the</strong> British protectorate. Several Jewish bankers<br />
helped King Leopold II to achieve his scheme <strong>of</strong> founding a colony in Africa at a<br />
time when Belgian opinion and <strong>the</strong> business community were anticolonialist. Thus,<br />
Bleichröder played an important part on behalf <strong>of</strong> <strong>the</strong> king at <strong>the</strong> Berlin conference<br />
<strong>of</strong> 1885 which was decisive for his acquisition <strong>of</strong> <strong>the</strong> Congo. In Belgium, <strong>private</strong><br />
bankers like Franz Philippson and Léon Lambert collaborated closely to build <strong>the</strong><br />
Etat Indépendant du Congo, while <strong>the</strong> Société Générale and <strong>the</strong> Rothschilds were<br />
hesitant about <strong>the</strong> king’s colonial enterprise. Thanks to its colonial involvement<br />
initiated by his links with Albert Ballin, one <strong>of</strong> <strong>the</strong> few Jews in <strong>the</strong> upper echelons<br />
<strong>of</strong> German shipping, <strong>the</strong> bank MM.Warburg <strong>of</strong> Hamburg leapt into <strong>the</strong> first rank <strong>of</strong><br />
<strong>world</strong> <strong>banking</strong>. Whereas Bleichröder was regarded during <strong>the</strong> 1890s as <strong>the</strong> richest<br />
banker in Berlin, with assets <strong>of</strong> about 36 to 40 million marks, <strong>the</strong> Warburgs’ assets<br />
expanded from 46 million marks in 1900 to 127 million in 1914. Allied by marriage<br />
with Jacob Schiff <strong>of</strong> Kuhn, Loeb and Cy, <strong>the</strong> main competitor <strong>of</strong> <strong>the</strong> Morgan bank<br />
in New York, Max Warburg, toge<strong>the</strong>r with his bro<strong>the</strong>rs, introduced American<br />
securities to <strong>the</strong> German market. At <strong>the</strong> beginning <strong>of</strong> <strong>the</strong> twentieth century <strong>the</strong>y led<br />
German banks in securities underwriting with <strong>the</strong> Deutsche Bank, and sat on about<br />
twenty corporate boards. As a significant feature <strong>of</strong> <strong>the</strong> evolution <strong>of</strong> <strong>the</strong> <strong>banking</strong><br />
system, we may observe that at <strong>the</strong> time this prominent <strong>private</strong> bank employed 111<br />
employees, whereas <strong>the</strong> Deutsche Bank’s staff numbered about 6,600.<br />
After World War I, most <strong>of</strong> <strong>the</strong> <strong>private</strong> bankers were unable to compete<br />
successfully with <strong>the</strong> large joint-stock banks, be it in long-term investments or