the world of private banking

264
THE WORLD OF PRIVAtE BANKING
Keynes perhaps exaggerated the rise of the office-boy in the merchant banking
sector – a species of humanity kept pretty firmly in his place in Rothschilds,
Barings and Hambros, to name but three; while Lord Bicester of Morgan Grenfell
had sufficient belief in his own beauty to favour wearing a tie knotted through a
wedding ring; but Keynes’s overall thrust – that the modern world was proving
too much for the old-pre-1914 order, an order in many ways epitomized by the
private bankers – had considerable force.
This is not the place to give a considered appraisal of the merchant banks’
business performance during the City’s 40 or so more or less stagnant years after
the catastrophe of 1914. There was some recovery in the 1920s, but the German
banking crisis of 1931 had the effect of practically writing off the rest of the decade
for several of the leading houses. Then, of course, came another war, reducing
most of the merchant banks to little more than a care and maintenance basis. In
1942 the Bank of England’s George Bolton assessed their postwar prospects:
The revival of the old conception of the foreign banker appears improbable,
although there may be individual examples due entirely to the personal element.
The private Houses may also have difficulty in avoiding unfavourable criticism
based on comparative credit ranking [i.e. with the joint-stock clearing banks].
But it is possible that the merchant banks may regain their original status of
merchants, provided that they leave banking to the deposit bankers and develop
their foreign connections with a bias towards merchanting and not banking.
In practice, despite the City’s continuing problems after 1945, things did not work
out quite so poorly for the merchant banks. In particular, on the back of the 1948
Companies Act, they effectively supplanted the stockbrokers in the potentially
lucrative area of domestic new-issue finance; while in the field of investment
management, there were one or two, such as Helbert Wagg and later Barings,
that skilfully anticipated the rise of the institutions, above all the pension funds.
Even so, in what was still for the most part a rather stultifying macro-economic
environment, few would have contended in, say, the mid-1950s that the merchant
banks represented an especially thriving sector of the financial scene.
Nor, despite the unfortunate absence of systematic empirical research on the
subject, is there any reason to doubt that the picture that Cassis has drawn of
the pre-1914 City elite still essentially applied in the four decades after the First
World War: a largely closed world, in which family, wealth and social connections
counted for more than either industry or ability. The utter dominance of the Hambro
family at Hambros, the Kleinwort family at Kleinworts, and the Rothschild family
Interview with Gerald Ashfield, 20 Nov. 1997.
Bank of England Archives, ADM 14/3, 19 Feb. 1942.
D. Kynaston, Cazenove & Co.: a History (London, 1991), p. 195; R. Roberts,
Schroders: Merchants & Bankers (Basingstoke, 1992), p. 410; J. Orbell, Asset Management
and Barings: a Note on the Origins (privately published by ING Barings plc, 1966), pp. 6–8.