the world of private banking

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THE WORLD OF PRIVAtE BANKING
During the 1960s he became known as the master in the art of takeovers whether
he belonged to the attacking or defending camp. In reaction, merchant banks, and
later large banks, set up corporate finance teams before the latter actively pursued
mergers with the former in the last decade. By buying out Seligman Brothers in
1957, Simon Warburg became one of the seventeen member firms of the select
Accepting Houses Committee, thus acceding to the top of the haute banque in
London. At the time his firm, which had been founded with a group of first-rate
Austrian and German Jewish refugees, numbered eighty employees. In 1995 the
Swiss Bank Corporation bought out S.G. Warburg, while other famous London
merchant banks fell under the control of foreign banks.
By developing investment trusts beside their traditional activities, private
bankers like Schröders have adapted themselves to the accelerating concentration
in banking. This process does not hinder the rise of individual talented financiers.
The case of the Hungarian Jew George Soros is striking in this respect; his influence
on world money markets today may be compared to the power attributed to the
Rothschilds during the last century.
Social Position of the Jewish Banker
The social position of Jewish private bankers raises two main questions. The first
one concerns the nature of their networks, which proved to be a major factor in
their success. Second, the problem of integration needs to be analysed in relation
to the conditions prevailing in the various countries where they settled.
Whereas banking history of the nineteenth century early pointed out the
importance of kinship relations, this basic factor has to be combined with two
others, religion and geographic origin, as far as Jewish private bankers are
concerned.
The importance of kinship in network building has been explained by several
factors: capital accumulation ability, low transaction costs, confidentiality and
trust, supposedly best attained through working with close relatives, and informal
business connections useful for information and credit. These factors are widely
described in the literature on merchant banking. At this point, kinship has been
generally considered from the perspective of the continuity based on family
ownership. However, two conceptions of kinship emerge from the case studies of
private banks. The first one relies on a strict selection of male heirs for acceding
to top management of the family bank or banking group. The Rothschilds’ and
Lazards’ cases are well known. The history of the Warburg family reveals how
talented sons were subject to strong pressure to enter the banking business. Contrary
to that strict conception of kinship, some banks built broad networks including
numerous wedlock alliances, and recruited in-laws. The Bischoffsheims’ case is
a typical one. Similarly, two prominent leaders of Kuhn, Loeb & Cy in New York
were in-laws, viz. railroad financier Jacob Schiff, Salomon Loeb’s son in-law, and
Paul Warburg who married Schiff’s daughter.