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