the world of private banking

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