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