EXCERPTS

From "The Sixth Great Power : Barings, 1762 - 1929" by Philip Ziegler:

Thomas Willing of the Bank of the United States had been one of Francis Baring’s staunchest allies since the early 1790s. Cazenoves had previously been the closest associate of the Bank and were not at all pleased to see their cosy relationship disturbed. In July 1793 Baring wrote to thank Willing for trying to steer all the Bank’s business in his direction.

…In February 1803, however, Willing, with some help from Rufus King in London, secured Barings the prize they had long coveted – the agency of the government of the United States in London. When Barings took over the payment of dividends on US government stock, Alexander had argued that in this way they would ‘secure a species of monopoly in the direction of American Stocks in Europe and become more obvious for individual operations of commerce.’ The government agency was the logical next step. After the failure of the previous agents Bird, Savage and Bird, Rufus King told Barings, the American government had decided to employ ‘an English house of the first Reputation and Solidity’ to make the ‘large Remittances to the Continent’ which were periodically necessary and to keep in funds various US diplomatic missions. The work was often troublesome and the recompense in commission income insignificant, but the prestige was all important. From 1803 no one could doubt that Barings were the leading ‘American’ house in London.

...The fact that Barings were the foreign bankers most trusted by the American government did not mean that they were treated as sacrosanct or given the benefit of the doubt. In 1806 the former Vice President, Aaron Burr, was accused of plotting to dismember the Union and was widely believed to have British backing. Vincent Nolte found himself looked on with suspicion by the commanding general in New Orleans ‘since he ascertained that the house of Baring, at London, had placed itself in readiness to furnish the funds necessary to secure the success of Burr’s conspiracy; and I was well known to be the agent for that firm’. Such rumours were fantastical and easily disproved – nothing would have suited Barings less than the disintegration of the United States – but they illustrated the alarm with which Americans viewed British intentions and also the mounting hostility between the two nations.

War came in 1812. Barings took the line that, as British citizens, they would do nothing of which their government would disapprove, but that the war was a temporary aberration and they would never cease to plan beyond its ending. Alexander Baring said frankly that it was his object to help maintain the credit of the United States, and it is an interesting comment on the attitude towards war in the early nineteenth century that ministers felt this to be not merely reasonable but actually desirable. Barings continued to pay interest to holders of American bonds, even though the funds were not available from the United States, and to perform routine transactions like the liquidation of outstanding converted 6 per cent bonds, but they refused to sell new Federal issues. Their main preoccupation was to support any initiative that might lead to peace.

…Alexander Baring, said James Gallatin, ‘had done more than any other man in England, or perhaps, with one exception, even in America, to hasten the peace, and had, with the knowledge and consent of his own government, rendered very important financial assistance even while the war was going on’.

With so much goodwill working in their favour, immense financial resources and unrivalled connections, Barings should have continued to dominate Anglo-American trade in the decades after the Napoleonic wars. Certainly no one house can be said to have displaced them, but their prominence was not so absolute as at first seemed probable. This was due more to a lack of interest and energy on the part of Barings than to any mechanism of their rivals. Things began well. In 1817 John Sergeant came to London on behalf of the Bank of the United States to select as agent for the bank the house that would ‘be of the greatest solidity and integrity and possess in the highest degree the confidence of the public’. To no one’s surprise, the choice fell on Barings. The distinction may have seemed of questionable value when mismanagement in the bank led to its being $1.76 million in debt to Barings and other European houses by the middle of 1818 but the problems proved transitory. By the time its greatest, if most erratic, greatest President, Nicholas Biddle, took over in 1823, affairs seemed soundly based. The Montagu Norman of his day, he believed that his task was to fuel the growth of the American economy. He scorned the cautious attitude of his predecessor and embarked on a bold, and at times alarmingly, expansionist course. Some dismissed him as a playboy but he was in fact supremely professional.


…Rothschilds were inconsiderable in the commercial field, but after their setbacks in 1830 in France they began to look with interest at the United States. In 1834 this brought them into direct conflict with Barings. The new administration under President Andrew Jackson was known to be violently opposed to Nicholas Biddle’s Bank of the United States, with which Barings were closely allied, and Baring had also been somewhat less than sympathetic when the Secretary of the Treasury carelessly drew a bill without first appropriating the necessary funds. It seemed possible the United States government might wish to change its agent. Rothschilds evidently volunteered for the role, for in July 1834 the Treasury Department wrote to thank them: “The high standing and character of your house is well understood in the United States, and I take pleasure in saying that the Government of this country will probably avail itself of yr offer”.

The first Barings heard of it was a brusque note from the Secretary of the Treasury telling them that the account would be transferred in just over two months….’They might have written us a more civil letter’ was their [Barings] temperate comment. They comforted themselves with the reflection that they had kept the far more profitable US Navy account, and that since the change had been a political one, ‘and as parties are rapidly changing, it is probable that we shall have it back in two or three years time’.

In this they were proved right. In 1843 Tyler became President, with Barings’ staunch friend, Daniel Webster, as Secretary of State. At once the account was restored to Barings. When Webster resigned Rothschilds’ man in America, August Belmont, saw a chance to regain the prize. ‘It would be an easy matter to get the account back’, he wrote, ‘provided, however, the place is not filled by a creature of Webster’s, who for weighty reasons is very attached to Barings.’ Some months later he was pointing out to all and sundry the merits of transferring the account to Rothschilds in Paris, arguing ‘how impolitic it is on the part of the United States Government to keep her accounts for the disbursement of her diplomatic agents and a great portion of her foreign fleet not only in England, the only country with which ever a collision is likely to occur, but moreover in the hands of a banking house whose close connection with a member of the House of Lords puts the accounts of this Government almost under the immediate eye of the British Cabinet’.

…Barings were far from being the only house dealing in American securities, and Rothschilds became more interested as the scale expanded. Their motives seem to have been as much to spite Barings as to make money. Urging his nephews in London to buy American State bonds, James de Rothschild wrote, ‘I do this, so that Barings should not be in the position to say: “I forced Rothschild out of the way”. Therefore, even if there is not a penny profit, so long as there is no loss – I shall carry on with the business.’

As directly relevant as any state loan to the development of North America was the close relationship that grew up between Barings and the Bank of the United States under its ambitious, headstrong and sometimes maverick President, Nicholas Biddle. Biddle was an economic nationalist, who felt that the Bank should be used to free the United States from the shackles of European capitalism. Up to a point Barings supported him in the enterprise, and even the cautious Mildmay was in 1829 prepared to increase the Bank’s credit from £100,000 to £250,000: ‘We will not deny the mortification would be great were we to see the Institution in correspondence with any other House in London as their Agents’. With Biddle at the helm, things rarely ever ran altogether smoothly – in 1831 Barings seriously considered giving up the agency – but a more or less amicable relationship was maintained until the crisis of 1836 and 1837.