The House of Baring in American Trade and Finance: English Merchant Bankers at Work, 1763-1861 [Reprint 2014 ed.] 9780674184145, 9780674334625

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HARVARD

STUDIES

IN B U S I N E S S

HISTORY

I. JOHN JACOB ASTOR, BUSINESS MAN BY KENNETH

WIGGINS

PORTER

2. JAY COOKE, PRIVATE BANKER BY HENRIETTA M .

LARSON

3. T H E JACKSONS AND T H E LEES: TWO GENERATIONS OF MASSACHUSETTS MERCHANTS, 1765-1844 BY KENNETH

WIGGINS

PORTER

4. T H E MASSACHUSETTS-FIRST NATIONAL BANK OF BOSTON, 1784-1934 B Y N . S. B .

GRAS

5. T H E HISTORY OF AN ADVERTISING AGENCY: N. W. AYER & SON AT WORK, 1869-1949 REVISED

EDITION. BY

RALPH M .

HOWER

6. MARKETING LIFE INSURANCE: ITS HISTORY IN AMERICA BY J .

OWEN

STALSON

7. HISTORY OF MACY'S OF NEW YORK, 1858-1919: CHAPTERS IN T H E EVOLUTION OF T H E DEPARTMENT STORE BY RALPH M .

HOWER

8. T H E WHITESMITHS OF TAUNTON: A HISTORY OF REED & BARTON, 1824-1943 B Y GEORGE

SWEET

GIBB

9. DEVELOPMENT OF TWO BANK GROUPS IN THE CENTRAL NORTHWEST: A STUDY IN BANK POLICY AND ORGANIZATION BY

CHARLES S T E R L I N G

POPPLE

10. T H E HOUSE OF HANCOCK: BUSINESS IN BOSTON, 1724-1775 BY W. T.

BAXTER

I i . TIMING A CENTURY: HISTORY OF T H E WALTHAM WATCH COMPANY B Y C. W .

MOORE

12. GUIDE TO BUSINESS HISTORY: MATERIALS FOR THE STUDY OF AMERICAN BUSINESS HISTORY AND SUGGESTIONS FOR THEIR USE BY HENRIETTA M .

LARSON

13. PEPPERELL'S PROGRESS: HISTORY OF A COTTON TEXTILE COMPANY, 1844-1945 BY EVELYN

H.

KNOWLTON

14. T H E HOUSE OF BARING IN AMERICAN TRADE AND FINANCE: ENGLISH MERCHANT BANKERS AT WORK, 1763-1861 B Y RALPH

W.

HIDY

HARVARD STUDIES IN BUSINESS HISTORY XIV EDITED BY N . S . B . GRAS STRAUS PROFESSOR OF BUSINESS HISTORY AND HENRIETTA M . LARSON ASSOCIATE PROFESSOR OF BUSINESS HISTORY GRADUATE SCHOOL OF BUSINESS ADMINISTRATION GEORGE F . BAKER FOUNDATION HARVARD UNIVERSITY

LONDON : GEOFFREY CUMBERLEGE OXFORD UNIVERSITY PRESS

THE HOUSE OF BARING IN AMERICAN TRADE AND FINANCE ENGLISH

MERCHANT

BANKERS

AT

1763-1861 BY

RALPH W. HIDY Senior Associate, Business History Foundation Sometime Professor of History, Wheaton College Norton, Massachusetts

Harvard University CAMBRIDGE

·

Press

MASSACHUSETTS

1949

WORK

COPYRIGHT,

I949

BY THE PRESIDENT AND FELLOWS OF HARVARD COLLEGE

PRINTED IN THE UNITED STATES OF AMERICA

7o MY FATHER AND MOTHER

CONTENTS .

LIST OF ILLUSTRATIONS LIST OF T A B L E S

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LIST OF CHARTS

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ABBREVIATIONS

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EDITORS' INTRODUCTION AUTHOR'S PREFACE

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xiii

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XV

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XV

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xvii

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xxi

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xxv

PART I EXPANDING I N T E R E S T IN AMERICA

I.

II.

THE RISE OF THE H O U S E OF BARING,

Johann Baring . . . . The Family in Exeter . . . Francis and the London House American Relations Renewed OPERATIONS IN W A R T I M E ,

1717—1793 •

TOWARD AMERICA,

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1 .

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1793-1815

General Conditions . . . British and Continental Finance . America Beckons . . . Partnerships and Personalities . The Final Years of the War . .

III. A SHIFT

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1815-1828

Opportunities and Obstacles . . Peak Years on the Continent . . Leadership in America . . . Reorganization and New Personnel

3 4 7 . 1 2 . 2 1

24 .

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24 26 28 37 48

55

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55 58 65 76

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89

P A R T II DOMINANT INTEREST IN AMERICA

IV.

INNOVATION AND EXPANSION,

1828-1832 .

Weighing the Evidence . . Appraisal and New Departures . Commercial Expansion, 1830—1832 Financial Expansion, 1830—1832 .

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90 94

.102 108

X

CONTENTS V.

THE

SYSTEM

OF

THE

BARINGS

IN

THEORY

AND

PRACTICE,

1828-1832 Functions and Divisions of Labor . . . . Classification and Characteristics of Credits Granting Credits . . . . Reimbursement Techniques . . . . . Choosing and Marketing Securities . Commissions and Interest . Collecting Information for Making Decisions . Mistakes and Criticisms . . . . . VI.

VII.

VIII.

IX.

X.

1832-1834 Voluntary Restraint, 1 8 3 2 - 1 8 3 3 Adjusting to Recession . . .

.

ANTICIPATING A RECESSION,

.

. .

1834—1836 The Setting . . . . . . Cotton and the Packets . Merchandise and Credit Operations Competition in Securities and Exchange Curtailment, 1835-1836 . . . .

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M A I N T A I N I N G B A L A N C E IN A BOOM,

1836-1837 Shocks and Reactions . . . Preparation for a Crisis . . Crises in England and America Running before the Storm . .

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1837—1839 . Conditions of Trade . . . . . Driving for Resumption . . . . Old Debts and N e w Credits Cotton, King for a Year . . . . Exchange Accounts and Bond Operations 1839—1842 . Political and Economic Malaise Through the Crisis of 1839 . Publicity and Criticism . . Financial Policies, 1840-1842 Commercial Activities . .

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205 205 209 215 224

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FOLLOWING A MIRAGE,

FOUR L E A N YEARS,

.181 181 .184 .189 194 202

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T H E Y E A R OF T H E L O C U S T S ,

.

.164 .164 176

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124 125 131 138 144 150 .152 154 158

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235 235 243 246 254 260 270 270 273 283 288 294

χι

CONTENTS P A R T

III

RELATIVE DECLINE IN AMERICAN INTEREST XI.

XII.

XIII.

XIV.

XV.

XVI.

1842-1848 Conditions and Qualms Making Pennsylvania the Good Example Shining Maryland's Shield . . . . . . Campaigning in Louisiana and Mississippi The Midwest and the New York Merchants' Exchange

R E S O L V I N G D E F A U L T AND R E P U D I A T I O N ,

1842—1848 . . The Not-So-Fabulous 'Forties . . . Adjusting to Circumstances . . . . Credits, Indian Corn, and Cotton . . . Reduced Exchange and Security Operations

. . .

. . . . .

1847-1848 Weathering the Crisis of 1847 . . . . Confidence in America Publicly Reasserted

T H R O U G H C R I S I S , R E V O L U T I O N , AND W A R ,

.

1848-1852 Confusing Conditions of Operations, 1848-1852 Adjustment to Confusion and Competition Working toward a Boom in American Securities, 1848— 1852

N E W DEPARTURES,

N o B O O M FOR T H E B A R I N G S , 1852-1857 New Faces in the Management Moving away from American Securities . . Cotton and Shipping Problems . . . Credit Policies . . . . . .

The Record of Transition EPILOGUE

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N O T E S AND R E F E R E N C E S .

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373 373 381 389 390 395 406

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1857-1861 . . . . . .

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456 456 465

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474

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342 342 346 354 364

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307 307 313 321 330 337

419 419 423 436 442

APPROACHING THE IMPENDING CONFLICT,

Riding Out the Storm . . Maintaining the Status Quo .

INDEX

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R E C O V E R I N G AND R E C O U P I N G ,

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481

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483

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617

ILLUSTRATIONS Sir Francis Baring, his elder brother John Baring, and his son-inlaw Charles Wall (from left to right). From the original by Lawrence, date unknown, now owned by Lord Northbrook. Print furnished with the aid of Baring Brothers & Company, Ltd. . . . . . . . . . frontispiece Stratton Park, Micheldever, Winchester, Hants. Purchased by Sir Francis Baring. Photograph, furnished by Baring Brothers & Company, Ltd., of the exterior as it was when occupied by the Earl of Northbrook

38

Alexander, first Baron Ashburton, as a young man. From the original by Lawrence, date unknown, now the property of Baring Brothers & Company, Ltd. Reproduced by permission of the firm . . . . . . . . . . .

44

The Grange, Alresford, Hants. Acquired by Alexander, first Baron Ashburton. Photograph of exterior when it was the residence of Lord Ashburton, who supplied the print . . . .

45

Thomas Baring (1799-1873). From the original by Houston, 1873, now owned by Baring Brothers & Company, Ltd. Reproduced by permission of the firm . . . . . . .

70

Joshua Bates. From the original by William E. West, date unknown, which was given to the Boston Public Library, with whose permission this photograph is reproduced, by Samuel G. Ward in January, 1894 . . . . . . .

71

8, Bishopsgate Street, London. Photograph of the exterior as it now is, furnished by Baring Brothers & Company, Ltd.

134

The Partners' Room. Photograph of a corner of the room as it now appears, supplied by Baring Brothers & Company, Ltd.

135

Charles Baring Young. From a photograph, date unknown, reputedly a picture of Young. Print supplied by Baring Brothers & Company, Ltd. . . . . . . . .

326

XIV

ILLUSTRATIONS

Russell Sturgis. From the original by Richmond, date unknown, now the property of Baring Brothers & Company, Ltd. Reproduced by permission of the firm . .410 Thomas W r e n W a r d . Reproduced from a picture in S. G . W a r d , Ward Family Papers (Privately printed, 1900). Reproduced by permission of Massachusetts Historical Society .

411

Edward Charles Baring, first Lord Revelstoke. From the original by Lehman, 1879, now the property of Baring Brothers & Company, Ltd. Reproduced by permission of the firm .

442

Henry Bingham Mildmay. From the original by Ouless, date unknown, now the property of Lord Mildmay of Flete. Furnished with the aid of Baring Brothers & Company, Ltd. .

443

TABLES ι. Outstanding Commercial Credits of the Barings, 1838-1839

249

2. Outstanding Obligations of the Barings, 1838 and 1839

254

3. Outstanding Credits of Baring Brothers & Company on American Account, 1842—1848 . . . . . . . .

355

4. Outstanding Credits of Baring Brothers & Company on American Account, 1848-1852 . . . . . . . .

398

5. Canadian Debentures Marketed by Baring Brothers & Company and Glyn, Mills, Hallifax & Company, 1852-1857 .

433

6. Outstanding Credits of Baring Brothers & Company on American Account, 1852-1857 . . . . . . . .

443

7. Outstanding Credits of Baring Brothers & Company on American Account, 1857—1860 . . . . . . . .

469

CHARTS I. Partners in the House of Baring, 1763-1861

.

II. Partial Genealogical Table of the Baring Family

43 44

EDITORS' INTRODUCTION volume is a study of a merchant banking house in the period of transition of business from mercantile capitalism to industrial capitalism. The Barings as merchant bankers performed most of the functions of the old-time sedentary merchants and they developed a large degree of specialization in finance — first in financing trade and later in a combination of that business with investment banking — which itself exhibited the essentials of industrial capitalism. This combination of functions is reminiscent of the work of the Medici of the Middle Ages as also of the large private bankers who rose to prominence in the United States late in the nineteenth century. The House of Morgan exemplifies the combination before it gave up the investment business in the 1930's to specialize in commercial banking, which had been its original banking function. D R . HIDY'S

We have in Dr. Hidy's study of Baring Brothers & Company a detailed exposition of the policies and methods of a private banking firm of high distinction. The reader is given the privilege of learning the details as they happened. T o be sure, some readers will skip these details while others will revel in the abundance of challenges, solutions, successes, and failures. Decade after decade the author takes us through the experiences of the partners who made up the firm. We all remember how Americans fought for their political independence during the years 1776-83 and how during the subsequent period they strove for their commercial independence. Perhaps some of us have thought that, with the establishment of eastern commercial banks and insurance companies (about 1781-1830), we attained what we had set out for. The history of Barings proves that our tutelage continued long after this period. We had striven to be free from Westminster but we remained tied to metropolitan London. The story of the House of Baring exemplifies the leading-strings of our economy. From the Barings we learned business methods and had before us the ever-present example of conservative policies. Through the Bar-

xviii

EDITORS' INTRODUCTION

ings we were able to borrow the precious capital of the British for both commercial and investment purposes. But beyond these splendid advantages we experienced the steadying hand of wise and beneficent bankers who would help America grow but not too fast and not too dangerously. The Barings exercised the influence over their clients that the mercantile capitalists had for centuries exercised over their commercial and industrial agents and their suppliers of commodities. This very mechanism of influence, or control, was so well learned by George Peabody & Company of London, J. P. Morgan & Company of New York, and other firms that it was available for American use to help save industrial capitalism during the period of about 18931913. It was the mechanism of control, or at times just influence, which the house of Morgan so helpfully introduced on Wall Street. And it was this control which the federal government was to take over in 1933 as part of the New Deal and which has become the kernel of the present manifestations of American national capitalism. It is a memorable cliché that the roots of the present lie deep in the past. Dr. Hidy is primarily interested in broad policy, general organization, and techniques of operation. We may regret that he was forced by circumstance to use correspondence to the exclusion of accounts, with the result that he could not emphasize the business historian's interest in costs and profits. While we may feel disappointed that he has thought so much about business cycles and so little about secular trends, we must recognize that he was limited by the dearth of information about British business history. As readers, we may experience the feeling of a novice in the face of so many technical expressions and special business situations. But we must be grateful for the privilege of going through nearly a century of rich business experience with so little effort on our part. Some day the British firm may open up its archives completely or may even permit its history to be brought down to date. One may venture to prophesy that it is only a matter of time before private bankers will see the advantage of disclosing the eminent services that they have performed and will perceive that there need be no violation whatsoever of fiduciary relationships in the writing of the history of their business.

EDITORS' INTRODUCTION

XIX

Perhaps a reflection off the record may be permitted, namely, that, if British business firms and companies had written their histories and allowed scholars, journalists, and politicians to learn what private business really involved, British history of the period following the second World W a r would have been somewhat different. In Britain itself business history is still behind the iron curtain of the mythical entrepreneur. Dr. Hidy has given us a glimpse behind that curtain and has demonstrated the rich possibilities of research in the history of British business. Into the research that leads to an extensive monograph, such as the present treatise, goes a heavy expenditure of effort and money. It has seemed socially fair that outside assistance should be given in the publication of a manuscript that has cost the author so much; that is the least that beneficiaries of Dr. Hidy's work could contribute. Accordingly, the Business Historical Society has donated a part of its funds, some of which it received from the Harvard Business School Associates, to make available to students of business (especially of banking) and to students of economic and business history the results of D r . Hidy's researches. T h e Society's contribution has taken the form of the purchase of copies for its members. In addition the Business History Foundation has released Dr. Hidy for a short time from other duties so that he might complete the preparation of the manuscript for publication without further delay. T h e manuscript, then nearing completion, had been put aside in 1941 when Dr. Hidy entered the United States Navy, in which he served until 1946. N.

S.

H.

M.

B.

GRAS

LARSON

AUTHOR'S PREFACE T H I S HISTORY of the Barings is a study of English merchant bankers in American trade and finance prior to the Civil War. It has been my objective to tell what, when, why, and how the House of Baring did what it did in financing American trade and marketing American securities prior to 1861. In pursuing that objective I have analyzed policies and techniques as well as described the operations of the firm, attempting always to place all its activities in the setting of the time.

It is my hope that this study will throw new light upon several phases of American economic development. The story of the Barings presents in bold relief the functions performed by the Anglo-Ameri-» can mercantile banking group, as well as the effect upon American affairs of events in London. It shows how one of the merchant bankers in the City operated with reference to the marketing of American securities. Furthermore, the activities of the Barings reflected and paralleled to some extent the policies of competitors in contributing to the flow of British capital to the United States. My main source of information about the Barings has been the Baring Papers in the Public Archives of Canada. Dr. Adam Shortt, who was responsible for selecting the papers, chose material dealing primarily with the operations of the house in the United States and Canada. Since the business of the Barings prior to the 1850's was mainly with the United States, and not the Canadian provinces, the bulk of these early papers is connected with business and government of the former country. Unfortunately there were several gaps in the Baring Papers which made it impossible to present a full analysis of the activities of the firm over the whole period included in this study. There are very few documents before 1827 and there are some loopholes from early 1828 to the autumn of 1836. For other periods the correspondence is sparse, and in many instances the press copies of letters sent were either entirely or partly illegible. Moreover, the old account books of

xxii

AUTHOR'S PREFACE

Baring Brothers & Company, which the present directors were willing to let me see, were not available when I worked in the records in London in 1939 because they had already been removed to a place safe from possible bombing. With regard to the footnotes I should like to make an observation. Reference has been made in detail to data taken from the Baring Papers in order that the citations may serve as an index to the collection. Researchers in the economic history of the United States and Canada will now have an opportunity to utilize this invaluable collection for a wide range of special topics without the necessity of wading through a mass of papers. It is regrettable, from my point of view, that the desirability of minimizing costs of publication has caused the footnotes to be placed at the back of the book rather than at the bottom of each page. I have tried to supplement the Baring records with research in other manuscript collections and printed materials. I have pursued this subject not only in London and Ottawa but also in Boston, Salem, New York, Philadelphia, and Washington to the point of diminishing returns. The Barings had relations with so many American business houses and institutions that pertinent manuscript sources are numerous and more are continually becoming available for use. As this book goes to press, the Erastus Corning papers in Albany have just been opened to the public. Baring Brothers & Company, Ltd., deserves high praise from the fraternity of historians for making its records available to scholars. N o other private banking firm in London, unless the always quasipublic Bank of England could be fitted into that category, has opened its archives for inspection and detailed investigation. It is especially noteworthy that, in keeping with its willingness to have the full story told, the present management of the House of Baring has not even asked to see the book before publication. They have, at the same time, graciously answered all questions submitted to them and have supplied a majority of the illustrations appearing in the book. It is a pleasure to acknowledge aid given in the collection of information and the publication of a book. Financial assistance has been received from the Committee on Research in Economic History and from the Business History Foundation, Inc., though the research

AUTHOR'S PREFACE

xxiii

has been financed largely by the savings of Mrs. Hidy and me while employed at Wheaton College, Norton, Massachusetts. Through the courtesy of the late Sir Arthur Doughty and Dr. Gustave Lanctot, the successive public archivists of Canada during the period of my study there, I was afforded all the remarkable facilities of the Public Archives. Among the many helpful people in that institution I extend most grateful thanks to Miss Norah Story, who contributed many suggestions and ideas. I acknowledge particularly the contributions of the Public Record Office, the British Museum and the Goldsmith's Library in London, as well as the Essex Institute in Salem, the Massachusetts Historical Society, the Harvard College Library, the Baker Library at the Harvard Graduate School of Business Administration, the Boston Public Library, the New York Public Library, the New York Historical Society, the Historical Society of Pennsylvania, and the Library of Congress. For the publication of this volume the Business Historical Society has provided a part of the funds, of which I am highly appreciative. I thank most sincerely those who have aided me in formulating my ideas and in shaping the book as it now stands. Professor Frederick Merk suggested the study of the Barings, encouraged me, and gave me guidance in the early part of the work. Many concepts incorporated in the book were crystallized through association with the informal group known as the East Coast Institute of Entrepreneurship. Professor Henrietta M. Larson has been most helpful in criticizing the manuscript and in discussing various problems with me. T o Professor N . S. B. Gras I owe a great debt, not only for acting as editor of my book but especially for giving many fruitful suggestions over several years as to the meaning and significance of my factual material in particular and of business history in general. Thanks for assistance in typing the finished manuscript go to Miss Martha Read, Miss Jacqueline Boucher, and Mrs. Helene M. Dunn. T o Mrs. Elsie H . Bishop I am grateful for performing the tedious tasks of preparing the manuscript for the printer and of making the index. During my years of work on this book the help of my wife, Muriel E. Hidy, has been invaluable and indispensable. She has aided me in the research and has contributed greatly to the clarity of my writing

XXIV

AUTHOR'S PREFACE

by her constructive criticism. Without her active cooperation the book would never have been completed as presented in the following pages. RALPH W .

June 30, 1948

HIDY

ABBREVIATIONS BMAM — British Museum, Additional Manuscripts BP — Baring Papers BPLB — Baring Papers, Letter Book BPOC — Baring Papers, Official Correspondence BPMC — Baring Papers, Miscellaneous Correspondence BPPD — Baring Papers, Printed Documents GMCL — Glyn, Mills, Hallifax & Co., Canadian Letters GMLB —Glyn, Mills, Hallifax & Co., Letter Book HGSBA — Harvard Graduate School of Business Administration LCBM — Library of Congress, Baring Manuscripts MHS — Massachusetts Historical Society NYHS — New York Historical Society PRO —Public Record Office

PART ONE EXPANDING INTEREST IN

AMERICA

CHAPTER

I

T H E R I S E O F T H E H O U S E O F B A R I N G , 1717-1793 THIS is the American part of the story of a mercantile banking house — Baring Brothers & Company, Limited, 8, Bishopsgate Street, London, England. The firm is now a prime illustration of that longevity in business institutions for which England affords so many examples. It still carries on an acceptance and investment banking business very much like that which it has pursued since its establishment in 1763. For a time between 1828 and 1861 the financing of American trade and the marketing of American securities constituted the major interest of the House of Baring. Though American economic potentialities had increasingly attracted the attention of the partners from the 1790's onward, the firm's chief concern lay in European trade and finance prior to 1828. For the next fifteen years American trade and finance dominated the activities of Baring Brothers & Company. Until the American Civil War the firm was the leader among those merchant bankers known as "American houses" in London, but after 1843 its preoccupation with the affairs of the United States declined in relation to its operations in other areas. From 1828 onward there were always one or more American citizens among the partners, all of whom were vitally concerned with the contribution which the House of Baring was making to American economic development. That contribution was of major importance to the people of the United States. In those years when the flow of European capital in the form of both long- and short-term credit constituted one of the chief stimuli to an amazingly rapid American economic development, Baring Brothers & Company played the rôle of leading intermediary between the British capitalist and the American entrepreneur. While seeking a profit for itself, the house facilitated the operations of American merchants in Eu-

4

RISE OF HOUSE OF BARING, 1717-1793

CH. I

rope, Asia, and the Americas as well as the creation of canals, banks, and a railroad network in the United States. Its functions were numerous and its importance undoubted. T h e firm has been the chief economic resource and now stands as probably the most enduring achievement of a very able and distinguished family. Founded by an emigrant from Germany in the first quarter of the eighteenth century, the English family became in less than a hundred years one of the leaders in the financial and landed aristocracy of the United K i n g d o m . In the twentieth century at one time the Barings could point with pride to two baronies and two earldoms conferred as rewards for service to the people of England and the British Empire. Viscount d'Abernon was so impressed with the accomplishments of the family that he wrote in 1931 r1 Nothing is more like itself, nothing less like anything else, than a Baring. The family is one of the few that produce a similar type with regularity — a regularity only accentuated by the rare occurrence of a freak. Strong, sensible, self-reliant men, with a profound belief in themselves, in their family, and in their country — eminently fair and just; no trace of hypocrisy or cant; not only solid and square, but giving the impression both of solidity and squareness. All of them able; some, like Cromer, pre-eminendy so; not subtle or mentally agile but endowed with that curious combination of character which lends authority even to doubtful decisions, and makes those who possess it respected in counsel and obeyed as rulers. JOHANN BARING

Johann Baring, the founder of both the family and its business activity, had little basis in family tradition for either of those achievements. H e came f r o m Bremen in northern Germany to Exeter, Devonshire, England, in 1717. A majority of his ancestors for almost two hundred years had been intimately connected w i t h the activities of the Lutheran church in Germany. T h e earliest k n o w n member of the family was Peter Baring of Groningen, West Friesland, Holland. H i s son Franz, w h o first became a Carmelite monk, later accepted Lutheranism and rose to the position of Superintendent Gen-

CH. I

JOHANN BARING

5

eral (comparable to bishop) in that church. From the second wife of Franz the Bremen Barings descended. His great grandson was the Reverend Franz Baring (1656-97), a Doctor of Theology from the University of Groningen, pastor of the Lutheran church of St. Ansgarius in Bremen, professor of theology in the local gymnasium, and father of young Johann, his posthumous child. And this Dr. Franz Baring apparently started a family habit of marrying wellto-do women. His wife was Elizabeth Vogd, a daughter of a Bremen merchant. From his mother's family, therefore, came the direction of Johann's future career.2 Young Johann came to a place of opportunity. Exeter was one of the cities which shared in the greater freedom of English trade after 1688 and by 1717 was near its peak as a serge manufacturing and marketing center. Among the chief markets for Devonshire serges was northern Germany, Hamburg in particular; and from Germany came linens which Exeter merchants shipped to Newfoundland, the West Indies, Spain, Portugal, and the Mediterranean.3 Freedom of conscience after the Toleration Act of 1689 also encouraged foreigners to come to England. It was while acquiring a mercantile training in the Bremen house of his maternal grandfather that the son of the Lutheran pastor became acquainted with the products of Exeter. He decided to go to the city that sent the cloths handled by his firm. Seeking to combine his early mercantile experience with practical knowledge of Exeter's leading export, Johann Baring apprenticed himself to Edmond Cock, serge-maker in the parish of Holy Trinity. By 1723 he had decided to stay in England and was naturalized, thus becoming John Baring I in the English annals of the family. Within a short time he succeeded to much of the business of his employer. Then he added the marketing of the goods upon his own account, thereby eliminating the local merchant as one middleman in the export trade. This combination of .manufacturing and marketing was rare in Exeter at the time, but John Baring had an acquaintance among German mercantile firms which furnished him a ready outlet for his goods. The fact that he was a merchant in serges meant that he was also a fuller. Not being a dyer, in company with other merchants he "put out" his cloths on commission to be dyed.

6

RISE OF HOUSE OF BARING, 1717-1793

CH. I

As he expanded his market the youthful entrepreneur came in part to depend for his supply on other manufacturers of cloth in Exeter and its vicinity.4 In such fashion the ambitious immigrant laid the foundations of his fortune. Assiduity and enterprise, however, were not then, any more than now, the only avenues to business success. John Baring also followed another path often adopted by ambitious young men in all walks of life. By 1729 he had made sufficient progress in business and a definite enough impression within the business circles of his adopted city to marry well. Elizabeth Vowler was the daughter of a wealthy "grocer" of the parish of St. Petrock. John Vowler had been in fact a wholesale importer of spices, dried fruits, sugar, tea, and coffee from London via the coast trade.5 Previous to his daughter's marriage he had retired to his estate, "Bellair," on the Topsham road and was in a position to give her a handsome dowry. This initial contribution, plus a legacy later, would have made Elizabeth Vowler a quite acceptable wife, according to the customs of the times, even had she possessed no other outstanding attributes. She seems to have been endowed also with a shrewd wit, unusual business talents, and a remarkable strength of character.6 Family and fortune grew simultaneously. Five children were born to John and Elizabeth — John II in 1730, Thomas Vowler in 1733, Francis in 1740, Charles in 1742, and Elizabeth in 1744. The family fortune, paced by the ambition, energy, and experience of Johann and by the additional capital and advice of his wife, grew at a comparable speed. Until 1737 the Baring headquarters was on Palace Street, Exeter, but in that year John Baring purchased Larkbear House, on the outskirts of Exeter at that time, and there took up his residence and place of business. For many years thereafter Larkbear was considered the seat of the Barings, although in the year of his removal John Baring had also acquired for ^90 the adjoining rectory and advowson of St. Leonard and by the end of the next decade had added to his possessions large landholdings in other parts of the county of Devon. 7 In a remarkably short time the young German had run almost the whole range of accomplishment in his community. From apprentice and clerk he had risen to an established position in the

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7

business life of Exeter as a merchant and manufacturer. Through a fortunate marriage and business success he had been enabled to invest a large proportion of his wealth in land, the sine qua non of social standing among the local gentry. According to a story told by the historian of the parish of St. Leonard, "Mr. Baring, the Bishop, and the Recorder, were the only persons in Exeter who kept carriages." 8 Though probably not accepted as equals by the hereditary landlords, the social leaders of the town at the time, his children were assured a position in the city. 9 If they should desire to increase their wealth and to improve their status, his efforts had provided them with financial means and a very capable guide. THE F A M I L Y IN EXETER

After the early death of John I in 1748 the responsibility for keeping the business active and for. rearing five children devolved upon Elizabeth Vowler Baring. She performed both tasks remarkably well. During this period the name of the firm was Baring, Short & Collyns, which suggests that Mrs. Baring after her husband's death formed a partnership with other Exeter merchants. 10 That she managed the financial affairs of the family efficiently is indicated by the fact that she continued to keep her carriage and that upon her death in 1766 she left a substantial legacy to her four living children, Thomas Vowler Baring having died in 1758. 11 In the meantime Elizabeth Baring had educated her sons to carry on the business. Thomas and Charles, after elementary schooling in Exeter, apparently were initiated into the intricacies of the home market in Exeter and Devon. Francis likewise received his elementary instruction at an unnamed school in Exeter, after which he is reported to have studied French in a Mr. Fargue's school at Hoxton and to have attended a Mr. Fuller's academy at Lothbury. This formal education was supplemented by a measure of mercantile training; none-too-reliable sources indicate that Francis served as a clerk both in the London house of Boehm and in the house of Temekett, "a considerable merchant in L o n d o n . " 1 2 According to another source, he served as a clerk in the "house of Tucket or Touchet," probably identical with Temekett, the failure of which induced the young Devon entrepre-

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neur to establish a small countinghouse of his own, with no clerk. The story has it that Francis netted j£ioo profit in his first year as an independent business man. 1 3 John, as the eldest son and potential head of the family, was given special training on the Continent. He went to school in Geneva, traveled extensively, built up a wide acquaintance among Continental merchants, and returned permanently to Exeter in 1757. 14 There he proved himself as able a man of business as his father had been. Six years later the business of the family was put on a new basis. The Seven Years' War was obviously nearing its formal end, and the opportunities in business might therefore be expected to increase. The prospect of a period of stability was promising enough to warrant an extension of the family operations on a scale sufficiently large to take advantage of the varied training acquired by the three young brothers. On January 1, 1763, the firms of John & Charles Baring & Company, Exeter, and John & Francis Baring & Company, London, were brought into being. All three men had shares in both partnerships at the beginning. The Exeter firm continued the emphasis of the family in the cloth trade, whereas the London house from the first was an import and export commission house, having as its most important client its Exeter complement. Through the London firm the other sought raw materials, wider markets for its merchandise, and an effective agency for negotiating bills on London. 15 John Baring was the dominant partner in both firms until 1777, although Charles and Francis handled the details and served as general manager in Exeter and London, respectively. John & Charles Baring & Company continued a general mercantile business in Exeter along lines previously laid down by the earlier managers of the family enterprises. Additional capital was made available through John's marriage in 1757 to Anne Parker, daughter of a neighbor in the parish of St. Leonard, through Charles' marriage to Margaret Gould, daughter of a wealthy landowner of Devon, and through the division of Elizabeth Vowler Baring's estate upon her death in 1766. The firm exported bale goods to the Iberian Peninsula and imported wines and other commodities in return. A general trade was maintained with Flanders, the Low Countries, and North Germany. The house also owned at least one

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9

ship, the Venus, constructed at Topsham in 1763, which went out to Cadiz many times during the 1760*5. Finally, as independent capitalists, John and Charles Baring shared in joint enterprises with Francis Baring in London. 16 In the meantime the Exeter firm reached out and tried to control other phases of the Devon cloth trade. Charles Baring in 1764 unsuccessfully sought for the house a monopoly of the woolen manufactures of Tiverton, the largest industrial town in Devon and one of the largest producers in England. 17 Sixteen years later the Barings are reported to have been instrumental in persuading the Company of Weavers, Fullers and Shearmen of Exeter to set its accounts in order. 18 The Devon business of the Baring family changed with the times and with the interests of the individuals concerned. John, the wealthiest of the three brothers, diverted a part of his capital to land. In 1755 he purchased for 2,000 guineas seventeen acres of land and a house, known as the Mt. Radford estate, near Larkbear. In 1770 he bought the manor and lordship of Heavitree, by which purchase Mt. Radford was joined to the patrimonial estate of Larkbear. Before long nearly the whole parish of St. Leonard had passed into John's possession, thereby enabling him to consolidate the whole area into a magnificent estate centering around his stately mansion of Mt. Radford. 19 This home, according to Dymond, became the "resort of people of the best quality" in Exeter : 20 About the grounds strutted men of fashion, in cocked hats and powdered wigs, in coats of ample skirt, with buckled shoes and gold-headed canes; while gentlewomen of high degree played the parts of youth and beauty, or of the comely matron, in costumes differing but litde from those rendered familiar by Hogarth. In appearance the master of this estate was, according to report, more than a trifle eccentric. It is said that: 21 his dress was singular. Coat, waistcoat, breeches, of a light speckled colour — it was called pepper and salt — silk stockings of the same, small steel buckles at his knees, large steel buckles on his shoes. He was a tall, thin man, with powdered hair, and a sharp, penetrating look, who

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seemed to measure with his gold-headed cane every step as he walked. The people called him "Old Turkey Legs" — almost everybody had a nickname in those days — but he could smile at the jest, as those legs, with the assistance of the electors, took him to the honourable House, and there, and then, and thus were sown the seeds of future greatness. Indeed, it is true that throughout the later years of his life John Baring II combined business and politics with the life of a country squire. Before retiring from active participation in the London house in 1777, in which he remained a silent partner until 1800, he had already begun to follow another tangent to mercantile pursuits. The Devonshire Bank established by him in 1770 grew out of the Plymouth Bank, an earlier institution in which he had been interested. Under the new name it did service fifty years. Meanwhile, after the failure of Charles' efforts to obtain for his eldest brother a seat in Parliament from Tiverton, John won the election for member from Exeter. He held the office from 1776 to 1802, through a period of declining importance for Exeter and one of travail for the Empire. Some of the profits from his various business enterprises evidently went into this avocation. He is said to have spent "something like 40,000" upon his elections.22 Nevertheless, at London and in Parliament he served the business interests of Exeter well with regard to their trade with the East India Company, with Spain, and with the West Indies. 23 After a very successful career, John Baring II died at Mt. Radford on February 1, 1816. His sons failed to produce a male child to perpetuate the name of Baring. 24 Though neither so wealthy nor so famous as his eldest brother, Charles Baring effected a more socially prominent marriage and left a more numerous progeny. From his union with Margaret Gould, daughter of a country squire, came three sons and seven daughters. T w o of the sons, William and Edward, joined the name of their mother's family to that of their father to establish the two main lines of the Baring-Gould families. The second son, Charles II, emigrated to the United States and settled in South Carolina. One of Charles I's seven daughters, Emily, married Samuel Young, eldest son of Admiral Sir George Young, and produced a future partner of Baring Brothers & Company in the person of Charles Baring Young. 25 Only the descendants of Charles Baring II were left to

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carry on the unhyphenated name of Baring from this branch of the family. Charles I never went into politics, though he once expressed in print some very definite views on the Anglo-French wars. According to a summary given in the Gentlemen's Magazine for 1798, he wrote a pamphlet entitled Peace in our Power, upon Terms not unreasonable, deprecating the war with France and offering a platform for peace. H e maintained that England by waging war against the revolutionary government had merely united the people of France to the defense of their fatherland, with which the corrupt Directory had identified itself. By war, Baring thought, Britain was preventing a normal reaction to a better government in France. A s a basis for peace he suggested that the British government should renounce the title of the English monarch as K i n g of France, that by treaty with nonbelligerents it should "be guaranteed that neutral ships constitute neutral power," and that Britain should offer to restore to the rightful owners all conquests recently acquired from France, Spain, and Holland. 26 T h u s he held views similar to those of the Prime Minister, whose efforts to conclude peace in 1796 and 1797 came to naught. In the meantime Charles Baring gradually transformed the family mercantile business in Exeter. John II withdrew his name from the firm, probably at the same time (1800) that it disappeared from the title of the London house. N o record of the succeeding partnerships has been found until that formed in 1808; in that year Charles and his son, William Baring-Gould, retired from the firm of Baring, Jackson, Gould & Vicary. William Jackson, Charles Baring's son-inlaw, continued the business under the name of Jackson & Vicary until his retirement in 1819, at which time John Bennett entered the house re-named Vicary & Bennett. While these changes were occurring the business of the firm had followed the economic currents experienced by Exeter. During the later years of the eighteenth century the export of woolens from Exeter declined. Simultaneously the import of linens from Germany slid downward, while wines from Spain, Portugal, and the Canaries loomed larger upon the import lists of Exeter merchants. It is a tribute to the business acumen of John's successors that they had

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shifted with the times and were listed as wine merchants in 1819.27 Changes in his own firm were but minor episodes in the great economic developments witnessed by Charles Baring before his death in 1829. During those years the economic life of the United Kingdom underwent a series of revolutions. Industrial techniques were altered by the introduction and expansion of the modern factory system with its disciplined labor force, its mechanical power, and its large-scale production. Simultaneously, a revolution in transportation occurred through the multiplication of highways and canals and corresponding improvement in communication services. T h e mercantile capitalist, performing a multiplicity of functions, gave way to the specialists in manufacturing, transportation, marketing, and banking. Sedentary merchants themselves gradually tended to concentrate their attention upon one of their earlier functions. Although rarely abandoning their original label of "merchant," some went into the marketing of a specific category of commodities, such as dry goods. Others, the Barings for example, emphasized their export and import commission business, retaining their mercantile designation even after they had begun to devote a major part of their energies to financing trade and to investment banking. Meanwhile both the supply of and demand for capital increased at a great rate, necessitating a division of function in banking operations. While local banks increased in number, London became the leading money market in the world, with a complex mechanism of an evolving central bank and private bankers, merchant bankers, bill brokers, and other intermediaries. 28 FRANCIS AND THE LONDON HOUSE

In fact, within his immediate family Charles could contemplate with amazement the growth of the London House of Baring and the rise of his brother Francis to international fame as a merchant banker. A t first John & Francis Baring & Company was very little more than an adjunct of the Exeter house. Its main business was to act as agent for John & Charles Baring & Company. Through the London house the Exeter firm purchased raw materials for its own and other Exeter manufacturing enterprises — wool, dyestufïs, and other commodities from the Continent — and through it John &

CH. I

FRANCIS AND THE LONDON HOUSE

13

Charles Baring & Company sought wider markets for Exeter merchandise.29 T o their intimate knowledge of manufactures and manufacturing a commentator in the 1830's attributed much of the successes of the London house in financing the export of British goods to America. 30 In addition, John & Francis Baring & Company served as the medium for negotiating the many bills of exchange on London received by both firms. An advantage was gained by having bills drawn on a house in the leading English money market instead of on the one in Exeter, even though an effective mechanism already existed in Exeter for handling bills on London. 31 These operations were supplemented, of course, by dealings in commodities and exchange on account of the London firm itself, although even some of these were on joint account with the Exeter house. The general organization was similar to that of the Rothschild family of a later date, Francis in 1763 being comparable to Nathan as of 1798. 32 The family control was thus roughly analogous to the interlocking directorates of the nineteenth century. The capital of John & Francis Baring & Company is not known, but Francis kept an account of his assets which clearly indicates the humble beginnings of the house in London. Although John undoubtedly supplied the greater part of the capital for both firms, on January 1, 1763, Francis' total capital, including that in both London and Exeter, amounted to only £4,200. In 1766 he inherited .£5,000 from his mother. But by the next year his fluid capital was reduced both by the expenditure of .£3,000 in setting up a countinghouse at 6, Mincing Lane and by a loss of £1,000 in joint operations with the Exeter firm. His marriage in 1767 to Harriett Herring, daughter and coheir of William Herring of Croydon, improved his position. On January 1, 1768, he possessed a total capital of approximately ^11,000 of which about half was immediately available for commercial operations.33 By 1777 Francis Baring was still far from being a leading merchant in London. A n unfortunate speculation in barilla (soda ash) had cost him a loss of ^2,000. His chief investments outside the firm were in books and engravings for his household, and a sum of approximately ¿£820 in the Royal Exchange, where his own portrait still hangs. His capital in the firm had increased only £800 in ten

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CH. I

years. 34

Francis' son, A l e x a n d e r Baring, evidently spoke quite truthfully w h e n he said that he remembered his father " w i t h nearly nothing." 3 5 Alexander was comparing the humble beginnings of his father w i t h the £6,000,000 to ^7,000,000 w h i c h he estimated in 1830 had been taken out of the house since its establishment. H u m b l e or not, sound foundations for future achievements were laid through the operations of John & Francis Baring & C o m p a n y between 1763 and 1777. Connections were developed and maintained w i t h commercial houses in the Mediterranean, Spain, France, Holland, the Baltic, and the A m e r i c a n colonies, including the W e s t Indies. Francis Baring through business intercourse became acquainted w i t h men in the Levant, L e g h o r n , C a d i z , Malaga, Marseilles, H a v r e , Paris, A m s t e r d a m , H a m b u r g , Philadelphia, and other ports. T h r o u g h the firm of Otto F r a n c k Sí C o m p a n y , in w h i c h a friend f r o m Exeter school days, J. H . Nolte, was a partner, he imported wool, dyestufTs, and other commodities f r o m H a m b u r g and L e g h o r n . H i s earliest recorded relations with the N o r t h A m e r i c a n continent were w i t h W i l l i n g , Morris & C o m p a n y . Inasmuch as the W i l l i n g s were one of the leading mercantile families in Philadelphia and Robert Morris was an energetic business m a n as well as the future financier of the A m e r i c a n Revolution, this connection w i t h Philadelphia w a s later to be a p o w e r f u l aid to the House of Baring in acquiring A m e r i c a n business. T h e relations w i t h the colonies were easy to develop because the organization of business there was m u c h the same as in England. 3 6 Inasmuch as H o p e & C o m p a n y , of A m s t e r d a m , is still one of the intimate friends of Baring Brothers & C o m p a n y , the beginning of the connection between the two firms holds a particular interest. O n the authority of an unpublished journal written by a member of the family, Mallet records the story, perhaps apocryphal, of the openi n g of their business intercourse. A s a test transaction H o p e & C o m pany, the leading merchant banker in the then most important money market in the world, remitted to John & Francis Baring & C o m p a n y a small amount of bills for sale, the proceeds to be returned to A m s t e r d a m in bills upon Continental houses. Francis executed the commission quickly and remitted the returns at a rate of exchange slightly higher than the published rate of the day.

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Pleased w i t h his efficiency, the H o p e s soon sent h i m /15,000 in bills w i t h the same instructions. T h o u g h he h a d never h a d such a large order, B a r i n g w a s d e t e r m i n e d not to miss the opportunity to impress H o p e & C o m p a n y . H e w e n t to his bankers, M a r t i n & Stone, h a d t h e m discount the bills, a n d remitted purchased e x c h a n g e to A m s t e r d a m at once. A c c o r d i n g to M a l l e t : 3 7 T h e Hopes were exceedingly struck with this transaction which bespoke not only great zeal and activity, but what was still more important in the eyes of the mercantile men either good credit or great resources in their correspondent. From that day Baring became one of their principal "frignds," and a constant intercourse of business and good offices was established between them which proved highly advantageous to our young merchant in the early part of his career, and greatly added to his power and resources at a later period of his life. Indeed, John & F r a n c i s B a r i n g & C o m p a n y by this action m a y w e l l have acquired its most important aid t o success; attaining a reputation for regularity, industry, and resources w i t h such a p o w e r f u l house as that of H o p e has o f t e n m e a n t the difference between mediocrity a n d f a m e . T h e fact that R i c h a r d Stone, the b a n k e r w i t h w h o m John & F r a n c i s B a r i n g & C o m p a n y h a d opened a n account in 1764, w a s soon to be or w a s already F r a n c i s ' brother-in-law w a s u n d o u b t e d l y no handicap to the successful execution of the operation. 3 8 It is also another illustration of the fact that F r a n c i s B a r i n g w a s p o w e r f u l l y aided by personal friends in his rise to preeminence. T h i s story indicates a b r o a d e n i n g of the c o m m i s s i o n business of John & Francis B a r i n g & C o m p a n y very early in its career. T h e house had f r o m the b e g i n n i n g b o u g h t a n d sold c o m m o d i t i e s o n commission for correspondents as w e l l as o n its o w n account. N o w it w a s b u y i n g a n d selling e x c h a n g e for C o n t i n e n t a l houses as w e l l as f o r its Exeter correspondents. In d o i n g this, h o w e v e r , the youthf u l house w a s not at all unusual, for m a n y L o n d o n merchants at this time w e r e dealers in e x c h a n g e . B y force of circumstances a n d by the very nature of their business they w e r e practically f o r c e d to deal in exchange because bill brokers had not yet b e c o m e an integral part of the m e c h a n i s m of the L o n d o n m o n e y market. 3 9 T h e r e is no evidence that F r a n c i s B a r i n g lent his credit, that is, developed an ac-

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ceptance business, prior to 1777; his house was probably too small at that time to have had sufficient reputation for that purpose. The development of this wide range of business and correspondents induced the young business man to acquire a comprehensive knowledge of men and markets on both sides of the Atlantic. T o this problem Francis Baring devoted himself with the same assiduity and thoroughness which characterized all his activities. "His great characteristics," wrote one contemporary chronicler, "are method and dexterity in business, a sound judgment, and a most excellent heart." 40 Alexander Baring once stated his father was "of all men the one who most happily combined a capacity for distant and large views and for the detail of business." 4 1 He became an authority on trade with Turkey, in the Mediterranean and Baltic areas, and with America. Concentration on this phase of business in London occupied all the attention of Francis Baring at this stage of his career, while other opportunities awaiting the typical mercantile capitalist of the time were left until later. Activity in marine and fire insurance, in investment in English funds, and in that greatest of all attractions at the time, the British East India Company, 42 was to follow. Francis Baring's information on all these subjects proved invaluable to his political friends, whether they were in opposition or in power. At the same time, his increasing knowledge concerning financial affairs in general, and the London money market in particular, induced them to rely upon his advice in this field also. Francis was to find politicians as important as business friends in the making of a name and a fortune for the House of Baring. Francis Baring's political friends included many of the outstanding figures of his time. Among his friendly acquaintances were the Earl of Chatham, the Duke of Rockingham, Edmund Burke, the Duke of Richmond, Henry Dundas (later Viscount Melville), and William Pitt the Younger. The group with which he was more intimate included the Earl of Shelburne (later the Marquis of Lansdowne), John Dunning (later Lord Ashburton of the first creation), Colonel Isaac Barré (soldier, friend of Wolfe, member of Parliament, and exponent of liberal views), Alderman Townshend, Lord

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Camden, Sir Samuel Romilly, and Lord Erskine. Baring's political complexion is further betrayed by his intimacy with Jeremy Bentham, whom he invited to dine at his home in May, 1792, in order that they might "talk over the very strange & extraordinary situation of affairs on the continent." 43 N o matter how wide their circle of acquaintances, most men find it desirable to have a small group of intimate friends. For Francis Baring this intimacy was supplied by Shelburne, Dunning, and Barré, all very liberal thinkers according to the standards of the time. During the American Revolution and his short premiership Shelburne turned to Baring as his chief adviser upon American commercial and financial affairs, and the relationship continued throughout their lives. From the later Marquis of Lansdowne's pocket boroughs of Chipping Wycombe and Calne, Baring was returned to Parliament between 1794 and 1806. T h e close friendship with Dunning was cemented in 1780 by the lawyer's marriage to Elizabeth, only sister of Francis Baring. Dunning's only surviving son, the second and last Lord Ashburton of the first creation, was named Richard Barré Dunning in honor of the fourth member of the quadrumvirate. 44 T h e most extreme statement of the political views of these men was contained in Dunning's resolution, arising from his opposition to the measures of the K i n g and Lord North, passed by the House of Commons in 1780, that "the influence of the Crown has increased, is increasing, and ought to be diminished." 4 5 Francis Baring even had Sir Joshua Reynolds paint a group portrait of his three friends for his own home. 46 Baring's own views were sufficiently laissez-faire to shock many of his contemporaries. "Every regulation," said he on one occasion, "is a restriction, and as such contrary to that freedom which I have held to be the first principle of the well-being of commerce." In elaboration he added, " A restriction, or regulation, may doubtless answer the particular purpose for which it is imposed, but as commerce is not a simple thing, but a thing of a thousand relations, what may be of profit in the particular, may be ruinous in general." 47 N o merchant subscribing to these views could hope to receive many favors from a government dominated by Lord North.

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It was probably lucky for Baring that no one could prohibit his dealing in commodities and in the rapidly increasing certificates of indebtedness of the United Kingdom. 48 As soon as the King's friends relinquished the reins of government, Francis Baring began to participate, albeit unobtrusively in the form of an adviser, in the affairs of state. When asked to comment on the commercial article of the preliminary treaty of peace with the United States in 1782, he favored the retention, in large part, of the British monopoly in trade with the remaining colonies. By 1784, however, in "Notes on a Commercial Treaty with America," prepared for Lord Shelburne, Francis Baring stated that he was in favor of the freest possible trade with the United States and for American shipping. Although he opposed allowing Americans to sell ships without restrictions to the United Kingdom and the Colonies as had been done before the Revolution, he made specific suggestions for greater freedom. He thought that permission should be given to export from America to the West Indies in American vessels, to include West Indian produce in American cargoes to Great Britain, and to carry goods from Great Britain to the West Indies via the United States in American bottoms.49 His views on this subject were thus almost fifty years in advance of those of the majority in Parliament. In the meantime William Pitt had also begun to ask Francis Baring for advice. As early as September, 1782, Pitt asked for and received memoirs on the "Turkey Trade" and on the "Importance of Gibraltar." On both subjects Baring displayed a detailed knowledge, emphasizing the point that he was "personally acquainted or connected, with the most valuable persons" in the Levant trade. Three years later, in answer to Pitt's request, he made suggestions regarding the funding of the British public debt. Within a few months he was expressing his views to the Prime Minister upon the projected cooperation between the East India Company and Calonne's new Compagnie des Indes. In fact, these were but the initial stages of a relationship which terminated only with Pitt's death and which included the exchange of ideas on financial matters, general commercial topics, and East Indian affairs. 50 Francis Baring started slowly but gradually assumed a leading rôle

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in the councils of the East India Company. Perhaps as a substitute for the loss of business in America, he bought his first stock of the company in 1776. His first investment of ¿1,000 never rose higher than ¿4,000 and in twenty years averaged less than ¿2,ooo. B1 In spite of this relatively small financial interest, he became a director as early as 1779, a post he was to hold until his death, and served as chairman of the board of directors during the crucial year 1792-93. His position in the company induced Francis Baring to modify his normally liberal views on the freedom of trade. He adopted a middle course between those who desired greater political control over the activities of the company and those merchants who wanted the trade east of the Cape of Good Hope thrown open to competition. In 1783 a friend of his youth, Richard Atkinson, collaborated with him as a fellow director in advocating reform from within and in defeating Fox's India Bill, which would have imposed heavy governmental control from London. A steady stream of advisory letters to Lord Lansdowne, who was most instrumental in carrying this particular fight to victory in the House of Lords, as well as to Pitt and to Dundas at the India Office, were of considerable aid in establishing a moderate governmental policy toward the company in 1784 and 1786.52 Yet Baring was not forced to compromise with his principles of laissez-faire when he began his career as a pamphleteer; in his first attempt in this medium he urged a reduction in the duties on tea! 5 3 According to Adam Shortt, who viewed more documentary evidence on East India Company affairs than the present writer has done, Francis Baring was chosen chairman of the board of directors in 1792 "with the active support of Pitt and the government." 54 That year, faced with the problem of rechartering the company, Pitt and Dundas could easily be forgiven for desiring to have in the key position the man who had been advising them on Indian affairs for almost a decade. Their choice of chairman was excellent if they desired an upholder of the monopoly. Francis Baring defended the cause of the company "with an ardour contrary to the usual moderation of his character." 55 Although aware of many imperfections in the existing charter and of complications arising from the need of silver from

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RISE OF HOUSE OF BARING, 1717-1793

CH. I

both the West Indies and Latin America for both India and China trade, 66 the otherwise liberal merchant insisted : 5 7 that the heavy expense, and the actual public services of the company, composed a debt, to the discharge of which an eternal monopoly of the East India trade would scarcely be sufficient. "Let it be granted," said he, "that we have improved our possessions, and that under the hands of the company an insignificant colony has become a great empire. That we should be deprived of a government, because it has thus flourished under our own protection, appears equally unjust and ludicrous. Let us be treated with something like justice, and if we are to be ousted of a farm which we have thus improved, let it be for better reason than that we have thus improved it." One reward for his efforts was a baronetcy, conferred upon him by the Prime Minister in 1793. Some collateral phases of this association with the affairs of the East India Company are also worthy of mention. Through his position Sir Francis was able to help in sustaining Devon industry and John Baring's local prestige by agreeing to have the company buy woolens (long ells), even though the cloth was sold at a loss in India. Baring disagreed with E d m u n d Burke over the impeachment and trial of Warren Hastings and came to be a very intimate friend of the defendant. H e was also instrumental in finding a place among East India Company clerks for the essayist Charles L a m b in 1792. 58 While Francis was erecting his political and East Indian fences between 1777 and 1793, his firm was undergoing some changes of note. When Charles Baring withdrew in 1786, the house was continued under the same name but with some new partners; two years later, the head of the house reported to Pitt that there were four partners in the firm but did not name them. In addition to the known two, perhaps a third was Charles Wall, the son-in-law of Francis and the third figure in the Lawrence portrait which includes the two senior partners. (See frontispiece.) By 1795 the location of the firm also had changed from 6, Mincing Lane to 1 1 , Devonshire Square. 59 Practices and policies of the firm were presumably well established by this time. Certain items are clear: commodities and bills of ex-

CH.

I

AMERICAN RELATIONS RENEWED

21

change were bought and sold in large volume both on commission and for account of the house; and Sir Francis always had the reputation for preferring commissions on consignments to his firm to those on goods purchased for export. It may be inferred that commissions from export business as well as other sources were welcome as long as the reputation of the house for integrity and capacity was not endangered. Whether the firm was buying and selling British government securities is not known, but the managing partner was well enough acquainted with government finance to advise the Prime Minister on the subject as early as 1785. If he had not yet begun investment in the national debt, he certainly was prepared to do so. Early in the next decade John & Francis Baring & Company also established its reputation as an acceptance firm on English, Continental, and American account. T h e House of Baring still owned no ships, as far as is known, though Sir Francis participated in underwriting at Lloyd's. 60 It is clear, however, that few of the opportunities offered by the metropolis of London to ambitious merchants were ignored by the head of the firm. AMERICAN RELATIONS RENEWED

In the meantime prospects were excellent for the house to develop profitable connections with the merchants in the newly independent United States. Legally cut off from the profits of the British West Indian trade, American merchants expanded or inaugurated direct relations with the Baltic, the Mediterranean, and the Far East during the 1780's. By 1789 the volume of American foreign trade was approximately as great as it had been before the Revolution; the export trade of the United States was thriving even though cotton had yet to reach its preeminence. A t the same time, many of the leading business men in the United States were well known to each other, already enjoyed a notable community of interest, and had made marked contributions to a more stable union as well as a stronger central government. 61 John & Francis Baring & Company had much to offer enterprising American business men. From long contact with firms in the Baltic the London firm was in a favorable position to compete with the Hamburg House of John Parish & Company for primacy in

22

RISE OF HOUSE OF BARING, 1717-1793

CH. I

62

financing American trade in that sea. Through the intimate association with Hope & Company of Amsterdam, one of the outstanding mercantile firms on the Continent, the Barings could offer unparalleled facilities to American traders in the Netherlands and France. The familiarity of the managing partner with the Mediterranean and Oriental trades has already been noted. Such were the general circumstances under which Sir Francis Baring reopened his Philadelphia connections in 1783. Philadelphia was the acknowledged leader in trade and finance among the cities of the United States. Robert Morris, who opened the correspondence, had been the leading financier of the colonial cause during the War for Independence and enjoyed a reputation for business ability, even though he was later to meet financial reverses. Thomas Willing, William Bingham, and Robert Gilmor, for all of whom Morris was speaking, either already belonged, or were soon to attain the distinction of belonging, to the business élite of Philadelphia and Baltimore; Willing stood in the first rank of Philadelphia merchants for integrity, stability, and conservative views on banking and finance; his son-in-law, Bingham, was popularly considered the wealthiest man in the United States during the 1790's; and Gilmor soon became one of the leading figures in the mercantile community of Baltimore. 63 Had the Barings not had connections in other American ports, the Philadelphia group would have served as a reliable nucleus for the expansion of the American business of John & Francis Baring & Company when revolutions and wars were disturbing all of Europe. In fact, the Philadelphia correspondents were exactly the type of clients that Sir Francis desired to have and to hold. They seemed to possess integrity, adequate resources, and business acumen; they could be relied upon, it would appear, to meet all obligations without question and without collateral security. A policy of choosing correspondents on the basis of these characteristics was passed on by Sir Francis and followed by his successors in the House of Baring. Moreover, these business friends were to have a greater part in the history of his family and his firm than even the astute head of the firm could be expected to foresee. All in all, by 1793 Sir Francis Baring was well within the select

CH.

I

AMERICAN RELATIONS RENEWED

23

group of men dominating the business and politics of England. Having supplemented his mercantile wealth by the purchase of a landed estate (Lee, in K e n t ) , by friendship and collaboration with political leaders from both landed and commercial aristocracy, by serving in Parliament for six years as representative of Grampound in Devon, he was in a position to afford the House of Baring new avenues for gaining profits and prestige. 64 In fact, a contemporary records that his "wealth, talents, and activity, soon rendered him the leading member" of the "monied aristocracy," thus augmenting "his importance and favour with the administration." 6 5 In achieving this distinction Sir Francis was merely one among many business men who by good fortune, shrewd management, and sound personal relations had risen to a position of prominence in a remarkably fluid eighteenth century English society. H e was one of the men who made possible the handling of the trade of an empire and the development of the greatest metropolis in the nineteenth century. He had erected a solid edifice upon the foundations laid by his father, the emigrant from Bremen.

CHAPTER

II

O P E R A T I O N S I N W A R T I M E , 1793-1815 THE long, weary years of war from 1793 to 1815 posed new problems and provided new opportunities for the House of Baring. Practices of the clashing governments .placed such obstacles in the path of trade that many peacetime channels of operation had to be abandoned. Those same obstructive tactics, however, coupled with the new demands of war, created new opportunities for the alert business man. The Barings happily identified private profits with wartime service to the state as they marketed British loans, transferred subsidy payments to Britain's Continental allies (Austria, Prussia, Russia, and others), enabled Spain and Portugal to pay indemnities to France, and extended credit to British and American merchants who were exploiting the license system of the British government and the breaches in Spanish mercantilism. The increase in services to leading American business men and their government foreshadowed the preoccupation of the House of Baring with American trade and finance in the next generation. GENERAL CONDITIONS Between 1793 and 1815 uncertainty and confusion characterized international trade and presented numerous obstacles to the successful operation of a mercantile banking enterprise. With the exception of the short breathing spell afforded by the Treaty of Amiens, British connections with the French mercantile community were few and far between. French ships were practically driven from the seas. Other areas were closed to British and American traders as French domination of the Continent expanded. From time to time American merchants slipped into openings left by the British blockade, but Napoleon's Continental System, the British Orders in Council, and the policies pursued by the party in power in the United

CH. II

GENERAL CONDITIONS

25

States kept business men in a state of irritation and frustration even when embargo and the W a r of 1812 did not bring their activities to a full stop. Although wars impose limitations upon international trade, they usually create new opportunities for profit. British merchant bankers grasped these opportunities. T h e path to victory was paved with contracts for British and foreign loans, the purchase and forwarding of supplies to British and allied armies, the transfer of funds to British military and naval personnel in various parts of the world, and the transmittal of funds to the Continent, sometimes even to the omnipotent Corsican himself. British merchants, stepping into the vacuum left in colonial commerce by the cutting off of Continental traders, often needed increased financial assistance to realize their more extensive ambitions. During those war years American merchants also fell heir A much of the trade lost by the victims of war. French and Dutch ships in particular operated against the handicap of the British control of the sea over a long period. Spanish relations with Latin America and other parts of the Empire were reduced to practically nothing during the last years of the Napoleonic régime. Merchants in all the leading ports of the Continent, whether under the conqueror's heel or not, were anxious to acquire the business brought by American merchants and sailors. Imports into the United States from all parts of the world, especially from England—colonial habits of consumption were not broken — were paid for largely in exports of agricultural commodities, in which cotton came to be a very important item even before 1815. In these formative years of the young republic, enterprising Yankee merchants and shipowners did not fail to grasp these opportunities, thus opening new business for those merchant bankers in London — the world's new financial center — who saw fit to cultivate it. T h e merchant bankers, moreover, were not unprepared to meet the challenge of war supply and finance. They possessed ample funds, wide connections in trading centers in Europe, Asia, and America, reputations for accomplishment and integrity, and the knowledge of how to use them effectively. Credits on London merchant bankers were far from unknown in 1793 and were sus-

26

OPERATIONS IN WARTIME, 1793-1815

CH. II

ceptible of great expansion. A s dealers in foreign exchange and in the increasing governmental issues of Great Britain after 1775, merchant bankers could offer much experience in handling securities and in international finance. Though they manifested little or no interest in the expanding industrial life of England, except to facilitate imports and exports, they were the most eminently fitted among the various units in the London money market to meet the new demands of a wartime political economy. T w o products of the new situation were the establishment of a London branch of the family house of Rothschild and the emergence of bill brokers. 1 BRITISH AND CONTINENTAL FINANCE

From the moment that war seemed inevitable Sir Francis Baring began, to coordinate the objectives of the mercantile community v*ith those of the state. O n January 11, 1793, he offered the services of the East India Company for purchasing 200 tons of saltpeter, then in Holland and, unless diverted, destined to fall into French hands. 2 During the same month he served as chairman of a committee of the company memorializing Dundas, with the suggestion that the islands of Mauritius and Bourbon and the Cape Colony should be "secured" to the United Kingdom as "certain Means of protecting India and depriving the Cruisers and Privateers of the Enemy, of Protection, or the means of refitting in those Seas." 3 T w o years later, following the French occupation of Holland, Sir Francis served as chairman of a committee of six petitioning the Prime Minister that remittances made on Dutch account by the Dutch or those under their orders might be recognized as legal, and that a proclamation should be issued enabling persons who had accepted bills on bona fide Dutch, neutral, or English accounts to pay them without making application to the Secretary of State for each particular case.4 O n his own account and for that of his firm Sir Francis Baring participated in financing Britain's efforts in the war against France. Francis Baring & Company was one of the twelve agencies which marketed British loans during Pitt's administrations. 5 For example, the firm, in collaboration with Robarts & Company and a "Mr. Giles," took the ^20,500,000 loan of 1800. For every ,£100 advanced

CH. II

B R m S H AND CONTINENTAL FINANCE

27

to the government by the contractors, they received ¿ 1 5 7 in 3 per cent certificates of debt. The contract was signed on February 21, 1800. Those who paid in full on or before November 20, 1800, were allowed a discount of 4 per cent. The total sum allowed for discount was ¿176,672, whereas the bonds bore a premium of 2% per cent from the beginning. By the end of September the premium was up to 7 per cent, though it did not remain at that figure for more than two days. It is known that Francis Baring & Company also placed bids on other loans, though few of the amounts acquired have been ascertained. One report has it that during the Loyalty Loan of 1797 "the head of the house made one hundred thousand pounds for three consecutive days." 6 In such fashion were reaped the rewards of friendship and ability within the moneyed and political aristocracy of the period. More detailed information might tempt one to conclude that the large profits of the House of Baring were the product of war finance. The amazing financial policy, which has been estimated to have led (between 1793 and 1816) to the creation of ¿911,000,000 in certificates of debt from which the government received only ¿590,000,000,7 undoubtedly could be interpreted as favoritism to the contractors, but other possible consequences should not be forgotten. The risks taken in purchasing government loans were great. In 1810, after he had retired from the house, Sir Francis is reported to have joined Abraham Goldsmid in buying a government bond issue amounting to ¿14,000,000. Government credit was not too high at the moment, some younger men on the Stock Exchange raised their opposition, and the securities at first sold cheaply and then declined in value. Goldsmid, who estimated that he had lost ¿200,000 personally and had involved many of his friends in comparable losses, committed suicide on September 28, 1810. 8 He outlived Sir Francis, whose losses are not a matter of record, by seventeen days. Such losses through marketing loans were undoubtedly made up through other avenues of profit, such as remittances to the Continent. In 1802 Portugal was obligated to send funds to France, and the House of Baring remitted under British license ¿700,000 to Napoleon for account of the Portuguese government.9 The firm performed a similar function for the Spanish government in 1805 and

28

OPERATIONS IN WARTIME, 1793-1815

CH. II

1806. But when the Prince Regent of Portugal in December, 1803, requested the aid of the houses of Hope and Baring in the sale of a new bond issue and the remittance of the proceeds to France, Sir Francis reported that conditions were unfavorable for the marketing of such a loan at that time, though the British government had agreed to permit the forwarding of such sums as Portugal might wish to remit from Portugal to France. 10 In carrying out such operations the close relations with Hope & Company — made still more intimate in 1796 by the marriage of Pierre César Labouchere, a dynamic young partner of John Williams Hope, to Dorothy, daughter of Sir Francis — were certainly no handicap. 11 T h e House of Baring also shared with other merchant bankers the profitable honor of remitting to England's Continental allies subsidies totaling approximately 57,000,000 between 1792 and 1816.12 T h e method used by the Barings was reputedly in effective operation in 1804. According to one source, portions of the ,£15,000,000 loan of that year, acquired by Smith, Payne & Smiths and the Barings, were disposed of through connections of the latter house in various Continental cities. In some instances the subsidies were to be paid in the same cities where the bonds were sold. Subsidy payments in gold were also occasionally forwarded by the Barings to the Continent. 13 Firms enjoying the rewards of subsidy transmittals might well be thankful that, since Boyd, Benfield & Company had had so much difficulty in marketing in London the Imperial Austrian loans in 1794 and 1795, the system of subsidies had to be used. 14 AMERICA BECKONS

Meanwhile Sir Francis Baring had moved to take advantage of opportunities in the United States. Early in 1795 he had been asked by one Major Jackson, an agent of his friend, William Bingham, to invest some of his surplus funds in Maine lands. Jackson offered Sir Francis a million acres at two shillings sterling per acre, but he declined the offer. 15 This proposition, however, coupled with the loss of business resulting from the French occupation of Holland during the winter of 1794-95 and the prospect of acquiring new business in America, induced the head of the House of Baring to dispatch his

CH. II

AMERICA BECKONS

29

second son, Alexander, on his first trip to the United States. T h e young man had had his training in Germany, in the house of Hope & Company, and in his father's firm. H e had "shown such sense and courage in the care of Hope's property in Holland during the recent difficulties with the French as to be intrusted with vast sums for investment in American lands" on account of both John & Francis Baring & Company and Henry Hope & Company. 1 8 , Alexander completed the first part of his mission in short order. H e arrived in Boston during the Christmas season of 1795. H e was met there by General David Cobb, Bingham's agent. They set out for Philadelphia on December 31, stopped at N e w York to be entertained by General Henry Knox, who held with Bingham about two million acres in Maine lands, and arrived in Philadelphia on January 15. By January 30, 1796, Alexander had made his decision as to the purchases to be made; of Bingham's Penobscot grant he took half of the lower tract at two shillings sterling per acre and half of the upper tract at one shilling and sixpence per acre. For more than a million acres the total payment was approximately ¿90,500, or $401,000. T h e Barings and Bingham spent jointly $60,000 for improvements on the lands during the next five years. Alexander also lent General Knox $50,000 in 1796 on the security of lands and Bingham's guarantee, the loan to be repaid on January 1,1798. 17 Y o u n g Baring's interests extended far beyond investments in land during his sojourn in the United States. For one thing, he speculated in foreign exchange and imported into the United States from Jamaica about 500,000 silver dollars in the course of a few months, in his own words, "to great advantage." 1 8 His social life was very extensive as a result of his close acquaintance with the Willings and the Binghams. A s an indication of his acceptability in this, the most select circle in the United States at the time, he married on August 23, 1798, Anne Louisa, the daughter of William Bingham. Four years later his younger brother Henry married Maria Matilda, Anne's younger sister, who had apparently successfully recovered from her first attempt at marriage with the Comte de Tilly. From his alliance with Anne Bingham, Alexander acquired gifts and legacies totaling ¿20,500 and nine children. 10 Under the stimulus of prevailing economic conditions and the

30

OPERATIONS IN WARTIME, 1793-1815

CH. II

activities of Alexander, the American business of the House of Baring was greatly expanded. The Codmans in Boston, Willing & Francis in Philadelphia, and Robert Gilmor & Company (from 1799 to 1848 Robert Gilmor & Sons) in Baltimore were the nucleus of their list of correspondents. Gilmor's firms were particularly important; they were engaged in continuous and extensive trade in all parts of the world, and were so highly trusted by the Barings that the Baltimore house was given authority to issue drafts on the London house to the extent of ¿40,000. Another Baltimore mercantile firm adventuring largely in both imports and exports received an uncovered credit of ¿10,000 as early as 1800. The house was Robert Oliver & Brothers, known after 1803 as Robert & John Oliver. The account was kept alive until after the War of 1812 at least, when the Olivers practically withdrew from mercantile operations. Through William Bingham the Barings added Mordecai Lewis of Philadelphia as a correspondent, and through Thomas Willing the account of the Bank of the United States, of which he was president from 1791 to 1807.20 The account with the Bank of the United States was undoubtedly regarded as highly significant to the American business of the Barings. That efficient American institution acted as agent for payment of interest on the funded debt of the United States in London and Amsterdam and "facilitated the incessant and complicated foreign exchange operations of the Treasury." For collecting drafts remitted and making payments the Barings charged a commission of V2 per cent, and interest at 5 per cent for payments made in advance of remittances, and paid 3 per cent on funds of the bank remaining in their hands. 21 Remittances for the payment of interest on the bonds held in Holland usually were forwarded through the House of Baring to the firm of Wilhelm & Jan Willink & Nicholas & Jacob Van Staphorst & Hubbard. In 1803 the Barings probably acted as intermediaries in remitting to that firm $746,000 borrowed from it by the Bank of the United States in 1793-95· 22 Among the new correspondents was the leading business man of Philadelphia, Stephen Girard, the "Lonely Midas." In August, 1803, his London banker, George Barclay & Company, suspended payment and went into bankruptcy. As a consequence drafts of Girard on

CH. II

AMERICA BECKONS

31

Barclay & Company for ¿45,000 were protested for non-payment. The matter was complicated by the fact that the drafts had been sold to the Secretary of the Treasury for remittance to London. The House of Baring notified Alexander, who was in Philadelphia in connection with the Louisiana Purchase loan. Girard accepted Alexander's offer of October 14, 1803, to collect any dividends forthcoming from the liquidation of Barclay & Company and to become the financial agent of Girard in London. 23 Relations of the House of Baring with the government of the United States moved from the particular to the general. In order to facilitate his negotiations with the Barbary powers of Algiers, Tunis, and Tripoli in 1795 the American Minister at Lisbon, David Humphreys, was empowered to draw up to $800,000 on John & Francis Baring & Company. This sum was to be raised by the Barings through the sale of a similar amount of United States 6 per cent bonds lent to the government by the Bank of the United States. The difficulty was that the government stipulated that the bonds were to be sold in such a manner as not to cause a depression in the prevailing price of the securities.24 This special operation apparently was the first one carried out by the Barings for the government of the United States. It was supervised by Rufus King, the envoy from the United States to the Court of St. James'. Obstacles were encountered but successfully surmounted. The correspondent of the Barings in Leghorn, L . Fonnereau, was forced to leave the city when French troops occupied it in 1796 and he had to use all his powers of persuasion to get the American agent to accept the specie he had accumulated. The Barings also disappointed Humphreys by being unable to buy Portuguese and Spanish specie in London just when he wanted it. From 1795 to 1797 the Barings were unwilling to dispose of all the securities at the prevailing price, but in August, 1795, they made the entire $800,000 available for Humphreys to draw upon. Even that sum was not enough to meet the needs of the negotiators; in July, 1797, the Barings agreed to advance for Humphreys' use as much as $200,000, at a commission of 5 per cent and interest at 5 per cent, half of the transaction to be at the risk of Hope & Company. Fortunately the government of the United States paid these rates on only ¿18,704, inasmuch as it

32

OPERATIONS IN WARTIME, 1793-1815

CH. II

was soon able to forward remittances. It had to resort, however, to a similar arrangement to the extent of ¿15,000 in August, 1799.25 In 1798 the House of Baring was entrusted with another task, one connected with the prosecution by the United States of its undeclared war with France. In September of that year the Secretary of the Treasury remitted to the Barings bills of exchange to the amount of ¿45,686 sterling to be used for the purchase of muskets and cannon. Shipments were to be made to Stephen Higginson of Boston, James Watson of N e w York, Tench Francis of Philadelphia, and Jeremiah Yellett of Baltimore. The London firm conferred with Rufus King on the details of the purchases. In the course of two years, at a commission of 2% per cent, the Barings purchased 11,000 muskets from the British government, and 330 cannon, ranging from four-pounders to thirty-two pounders, from the Woolwich arsenal. The American consul in Hamburg also purchased some ordnance in that city and withdrew some of the funds from the account with the Barings, which was finally closed on April 9, 1801. 26 A year later a member of the House of Baring carried out another operation very satisfactory to the United States. A t that time, although the government had not paid its debt to the Bank of the United States, it still held 2,220 shares of that institution. Alexander Baring, for account of his firm, aided the bank in collecting the money, and the government in liquidating its debt, by purchasing the entire lot of the shares at a premium of 45 per cent, netting a sum to the government of $339,600 above the par value of the stock. The proceeds were remitted to Holland by the Barings for account of the Federal government. 27 An opening finally arrived by which the United States could show in a very tangible manner its appreciation of the successful consummation of these special operations. Bird, Savage & Bird, the general agents of the government of the United States in London, failed in February, 1803. Rufus King immediately asked the House of Baring upon what terms it would take the agency. The Barings answered that they would "esteem themselves highly flattered with the employ" and would be ready at all times to obey the commands of the Treasury on the following terms: for receiving remittances in bills of exchange from America, no commission

CH. II

AMERICA BECKONS

33

to be charged; for the sale of "funded Stock" of the United States, ι per cent commission including brokerage; on the amount of remittances made to the Continent of Europe, whatever the source of the funds, a commission of ]/2 per cent, the risk or loss arising from such remittances to be for account of the United States; for the purchase or sale of merchandise or stores of any kind, a commission of 2% per cent. The house also offered to guarantee remittances to the Continent for a commission of l/2 per cent on the amount. "It will afford a singular satisfaction," said the Barings, "to transact the business of receiving & paying the appointments of the officers of the United States in this Country, free of commission" and of interest. On other than this specific type of payment the House of Baring was to receive 5 per cent interest on all sums paid out in advance of receipt of remittances from the United States. Exclusive of one item, the foregoing stipulations constituted the terms on which the Barings acted as general agents for the government until 1835. The American Minister accepted the terms with respect to everything except the J4 P e r c e n t commission for guaranteeing remittances to the Continent; he stated that he had no authority to agree to that proposition, and further correspondence with the Secretary of the Treasury did not produce acceptance.28 Five accounts were set up at once — Diplomatic Fund, British Treaty Fund, Fund for Prosecuting Claims in Prize Causes, Fund for the Relief of American Seamen, and the Barbary Treaty Fund. Accounts were to be made out to the first of January and the first of July of each year. Before the end of the year another account was added. Baring Brothers & Company aided in marketing the loan issued by the United States for the purchase of Louisiana and incidentally acquired a lucrative account for paying interest on a large portion of the bonds. By the provisions of the treaty of purchase, $11,250,000 in bonds were to be issued by the Federal government and turned over to the French Treasury, the remainder of the $15,000,000 of the purchase price to be expended in the United States in payment of claims of American citizens against France. Since no French merchant banker or the Bank of France was willing to serve as an intermediary for this financial phase of the Louisiana Purchase, the

34

OPERATIONS IN WARTIME, 1793-1815

CH. II

French Minister of the Public Treasury turned to the Barings and to Hope & Company for aid. Alexander Baring, accompanied by P. C. Labouchere, went to Paris to conclude the negotiations, departed for the United States at the end of July, 1803, waited for the ratification of the treaty and the issuance of the bonds, received a third of the securities on January 16, 1804, and sailed for England early in February. The other two thirds were dispatched to the American Minister at Paris by a special messenger.2® Payments were made by the houses of Hope and Baring to the French government in advance of the sale of the bonds. Monroe and Livingstone, as negotiators of the Purchase, guaranteed an advance to .the French Treasury of $2,000,000, a part of which was paid in the United States through Willing & Francis of Philadelphia. For this advance payment Alexander Baring took possession of a third of the bonds. By an arrangement made in April, 1804, the houses of Hope and Baring made 34,500,000 francs available over a period of eight months to the French Treasury, in Paris and in various Baltic ports, against the remaining two thirds of the certificates, which were delivered to Hope & Company by the American Minister in Paris. Although Great Britain and France were again at war, neither government objected to these arrangements. Trading with the enemy was obviously neither so clearly defined nor considered so reprehensible as it became in the twentieth century. And it was profitable in this case. In view of the fact that the purchasers acquired the bonds for 78%, Gallatin figured that their profit on the operation should amount to $3,000,000 if sales were made at prevailing London quotations.30 Commissions on payments of interest to European holders of American securities apparently produced a not inconsiderable item in the income of Baring Brothers & Company. In 1795, foreigners held $20,288,637 of the total funded debt of the United States and $33,041,135 in 1801. In the latter year the funded foreign debt totaled $9,915,000, though this had been largely liquidated by 1809. Foreigners also owned 13,000 of the 25,000 shares of the Bank of the United States in 1798 and 18,000 in 1809. An estimate of British capital alone invested in American "funds" made by S. C. Holland, a partner in Baring Brothers & Company, in 1819, showed ¿£4,182,-

CH. II

AMERICA BECKONS

35

ooo for 1801, ¿5,747,000 for 1805, between 5 and 6 million pounds for 1806 and 1807, and between 4 and 5 million pounds for the period 1808-10. Although the Barings did not handle interest payments on the entire amount of American securities in England, a large proportion of such payments, after 1803 at least, were effected by the firm, including more than ¿80,000 per year on the Louisiana Purchase bonds alone; and through the London house after 1803 passed almost all remittances to Continental agents of both the Federal government and the Bank of the United States.31 In 1805 the Barings carried through for the government another special operation. Under the Convention of January 8, 1802, the outstanding claims of British citizens against the United States were reduced to ¿600,000 the payment of which was to be in three equal annual installments in Washington. In 1805 the Bank of the United States remitted on account of the Treasury the required sum at par to the London house. On July 15 the Barings, having participated in the negotiations which had resulted in the alteration of the stipulation in the Convention, paid the sum of ¿200,000 to the British government in London. 32 Probably the most extraordinary operation in which the House of Baring ever participated was that involving Spanish payments through the British blockade to Napoleon with gold and silver removed from Mexico by the aid of American merchants. The mercantile and political connections of the Barings in both Europe and America were called into play. The transaction involved the King of Spain, G. J. Ouvrard (a tireless French speculator and financier), Hope & Company, the House of Baring, David Parish (scion of one of the leading Hamburg merchant bankers), two special agents (Vincent Nolte and A . P. Lestapis), and several American firms. Under a treaty dated October 19, 1803, Spain was obligated to pay a subsidy of 72,000,000 francs annually to Napoleon, but the Spanish Treasury experienced great difficulty in raising the funds in 1804. Ouvrard, who was already engaged in furnishing money to Napoleon, agreed that he would lend the money for these payments if the King of Spain would join him in η commercial enterprise exercising a monopoly of commerce with the Spanish-American colonies, with particular emphasis upon the export of the gold and silver

36

OPERATIONS IN WARTIME, 1793-1815

CH. II

stored in Vera Cruz. The King agreed to sign blank licenses to trade with the Spanish colonies as well as drafts totaling 262,500,000 francs (52,500,000 piastres) on the Mexican Treasury. In May, 1805, six months after he had made the preliminary arrangements with Charles IV, Ouvrard induced Hope & Company at a commission of 5 per cent to undertake the conversion of the royal drafts and to utilize the trade licenses. Under the restraints of the British blockade all this could be implemented only with the consent of the British government and the cooperation of a British merchant banker. Hope & Company turned to its friends, the Barings. Sir Francis persuaded Pitt and members of the government that such operations would be a stimulus to British commerce and that the silver, scarce in England at the time, would be particularly valuable to the East India Company. Permission to circumvent the blockade was made contingent upon the provision that British vessels, as well as other neutral vessels, might trade with the Latin American ports. Four frigates were dispatched to bring back Mexican silver for the use of the company, the Diana and its cargo being insured for 656,800, which was the largest single risk covered by Lloyd's during the Napoleonic Wars. David Parish was entrusted with the general American management of the operation. When he arrived in the United States in November, 1805, he carried with him a letter of credit for $1,000,000 for drafts on Mexico and the signed licenses in blank. He established his headquarters in Philadelphia. The two special agents, Nolte and Lestapis, had already started operations in New Orleans and Vera Cruz, respectively. The names of American merchants were filled in on the blank licenses. The merchants then dispatched cargoes to Vera Cruz. There Lestapis disposed of the goods and arranged that shipments of gold and silver should be included in the return cargoes. Among the Americans who profited from these operations were Amory & Callender of New Orleans, Robert Gilmor & Sons of Baltimore, Willing & Francis of Philadelphia, and Archibald Gracie of New York. Robert & John Oliver of Baltimore, however, apparently took a larger part than any of the foregoing. Some of the silver which had accumulated in the United States reached Antwerp only after the Secretary of the Treasury had permitted certain Amer-

CH. II

PARTNERSHIPS A N D PERSONALITIES

37

ican ships to be exempt from the provisions of the Embargo Act. A n d some of the remittances went in the form of goods purchased in the United States and consigned to various European ports. Payments to Napoleon ceased when he became dissatisfied with his financial arrangements in 1806 and imprisoned Ouvrard, but operations of the syndicate continued for two years. N o t until the end of the summer of 1808 was all the gold and silver removed from the Mexican Treasury. Nolte and Lestapis were then discharged. When a final accounting was made in 1811, the total sum divided among Hope & Company, the House of Baring, Parish, and the two special agents amounted to more than ¿862,000, of which Parish received approximately one-quarter. T h e exact amount received by the Barings is not known, although they were to charge a commission of 2 per cent on such portions of the operations as passed through their countinghouse. In addition, both the Hopes and the Barings netted profits on the direct trade between Great Britain and Vera Cruz. 3 3 By 1808 the House of Baring had added enough Americans to its roster of correspondents and had expanded its business on American account to such an extent that Alexander Baring felt that he could act as a spokesman for those merchants in the United Kingdom concerned with American commerce. Largely because of its proximity to the cotton manufactures of Lancashire, Liverpool had reaped the advantages accruing from the marked expansion in the receipts of American cotton and other agricultural commodities after 1793 and had become the principal English scene of American trade. But a few London merchants, according to Alexander Baring, acted generally for American trade, "receiving the proceeds of consignments from America to all parts of the world, and paying the drafts of the merchants there to the order" 3 4 of British manufacturers. Not the least among these " f e w " London firms was the House of Baring. PARTNERSHIPS AND PERSONALITIES

While these changes were taking place in the business of the Barings, the house experienced several reorganizations. O n April 1, 1800, the partnership of John & Francis Baring & Company was dis-

38

OPERATIONS IN WARTIME, 1793-1815

CH. II

solved and a new firm established under the name of Francis Baring & Company, usually written Sir Francis Baring & Company. John Baring retired. The three partners in the new firm were Sir Francis Baring, Charles Wall, one of his sons-in-law, and Thomas Baring, his eldest son. Three years later Alexander and Henry, the next two sons, were taken into the partnership. A further and more comprehensive change was effected in 1806. On February 1 of that year a new partnership was formed under the name of Baring Brothers & Company, the name still retained by the house. The partners who can be identified now were Thomas, Alexander, and Henry. Sir Francis may have remained as a silent partner, though the information is as lacking on that score as on the other individuals covered by the "& Company." When Wall left the firm also is unknown. But it is certain that in 1806 the countinghouse was moved from 1 1 , Devonshire Square to 8, Bishopsgate Street, within, where it has remained to this time. 35 The change in names and addresses had been completed. John & Francis Baring & Company had stood as the firm name from 1763 to 1800, though its location had been moved from Mincing Lane to Devonshire Square. Francis Baring & Company, the name of the house for the short period from 1800 to 1806, had retained the same address. Since that time Baring Brothers & Company has been almost synonymous with Bishopsgate Street, though the membership and organization of the firm have undergone many alterations. In 1809 Thomas Baring withdrew from the house and new partners may have been brought in at that date. The uncertainty arises from the fact that certain members of the firm remain almost anonymous and shadowy figures. John Deacon, known to have been a partner in Baring Brothers & Company as early as 1813, has left no known record as to when he either entered or left the firm. Some time after 1821 he departed to become a partner in Williams, Deacon, Labouchere & Company of London, and he was still living in 1850. All that has been ascertained about Thomas Nixon is that he was a partner of the firm in 1821. Swinton C. Holland, known to have been a partner of some years' standing in 1819, when he was reported to have been in charge of the countinghouse at 8, Bishops-

CH. II

PARTNERSHIPS AND PERSONALITIES

39

gate Street, was regarded by one commentator as "an accomplished merchant, agreed by all to merit the confidence he enjoys from the great firm with which he is associated." 36 Another observer characterized him as "an honest rightspirited man, but somewhat brusque and unpolished." 3 7 As he relaxed his control over the house, to occupy his time Sir Francis had only to pursue the many other interests he had developed through the years. As a member of Parliament from 1794 to 1806 he took an active part in discussions on commercial and financial affairs. In 1797 and in 1801 he again turned pamphleteer to defend the suspension of specie payments and the issuance of paper money by the Bank of England. 38 Though not a director of the institution, he sought to inspire more confidence than had, in his own words, "hitherto appeared in wellfounded paper circulation" and to "endeavor to establish a citadel or rock to which the circulation of the Country may retire for a time in case of general confusion & destruction & from whence another Phenix may be raised to give a spring & aid to future exertions & prospects." 39 T o achieve the latter goal he suggested that country banks should be prohibited from issuing notes payable on demand. Sir Francis' collateral activities in the City were varied and numerous. He continued to be an underwriter at Lloyd's and was chairman of the Patriotic Fund of that institution from 1803 to 1810. 40 His services were in steady demand as a referee in mercantile disputes and as a trustee. His most famous task as trustee involved the settlement of the affairs of Boyd, Benfield & Company, the negotiator of the Imperial Austrian loans of 1794 and 1795, the first foreign loans to be floated in London. 41 T o the end of his life Francis always devoted Wednesdays, and occasionally Fridays, to the affairs of the East India Company, in the councils of which he continued, from 1807 on, to fight against the majority of a Board of Directors, for the right of Americans to trade with India via indirect voyages.42 His friendship for America, in fact, earned him hisses when he proposed the health of the President of the United States at a dinner given at the London Tavern to the Spanish patriots in 1808. As late as 1810 he was still called upon to testify before the Select Commit-

40

OPERATIONS IN WARTIME, 1793-1815

CH. II

tee on the high price of gold bullion and to handle the London end of Fouché's abortive attempt to forward peace negotiations through the agency of P. C. Labouchere. 43 One of Sir Francis' greatest interests during the latter years of his life was the development and improvement of his estate at Stratton Park near Winchester. A recent photograph of the mansion, now the property of L o r d Northbrook, is shown opposite page 38. Earlier in his career Sir Francis had purchased from his friend Joseph Paice a small estate named Lee, near Blackheath, Kent, for ¿27,000, but that was not enough to satisfy his ambition. In 1800, reputedly for the sum of ¿150,000, he purchased Stratton Park from the D u k e of Bedford. H e is reported to have spent another ¿40,000 in improving the house, planting the grounds, making a fine collection of Dutch pictures, and commissioning Lawrence and Reynolds to paint respectively two group portraits — the one of Sir Francis himself, his brother John, and his son-in-law Charles Wall, and the other of L o r d Ashburton, Colonel Barré, and L o r d Shelburne. Justifiable envy may well have prompted the remark in 1806, "Sir Francis Baring is extending his purchases so largely in Hampshire, that he soon expects to be able to inclose the county with his own park paling." T h a t he was well able to afford these expenditures is indicated by his estimated annual income of ¿80,000 in his later years and by the size of his fortune, which was variously estimated from ¿700,000 to ¿1,100,000 at his death. 44 Some of Sir Francis' personal characteristics were a trifle out of the ordinary. In outward appearance he was of middle size, thin in face and figure. F r o m youth he always used a trumpet as a hearing aid in consequence of an incurable deafness. Lawrence indicated the affliction by painting him with his hand to his ear. His devotion to his family was such that "he ordered shoes and frocks for his children, entered into the minutiae of the nursery and sent his boys to school." 4 5 His wife, who bore him five sons and five daughters, he characterized as possessing a "mind so superior & a heart so affectionate" as were "seldom to be found." 46 T h e foregoing evidence would indicate the truth of the statement that Sir Francis preferred "the more tranquil enjoyment of a domestic circle" to gay assemblies, but his wife apparently induced him to indulge in consider-

CH. II

PARTNERSHIPS A N D PERSONALITIES

41

able social activity; a family chronicler reports her to have been a "vain, worldly fine woman, whose life was devoted to fashionable society."47 Excessive thriftiness would not seem to have been one of Sir Francis' early traits; though he regarded it as a virtue that he had not bought an equipage until he had been in business for thirty years, he had been most generous to such friends as J. H. Nolte and Joseph Paice.48 As a business man Sir Francis Baring was industrious, sound in judgment, alert to new opportunities, and highly regarded for his honor and integrity. His devotion to his business and thoroughness in gathering information have been noted in connection with the history of the firm prior to 1793. His aptitude for detail and love of regulation in his personal affairs are testified to by members of his family, who add that he was a very positive person in business and did not "bear contradiction patiently." 49 Some of his contemporaries gave him praise in very eulogistic terms. At the time of his death on September 11, 1810, his friend Lord Erskine wrote that Sir Francis was "a man of consummate knowledge and inflexible honour," that "the soundest principles and truest policy laid the foundation of Francis Baring's fortune and character, and guided him in all his transactions," and that "few men ever arrived at the highest rank and honour of commercial life with more unsullied integrity." "At his death," Lord Erskine added, "he was unquestionably the first merchant in Europe; first in knowledge and talents, and first in character and opulence." The London Times referred to him and Abraham Goldsmid as "the Pillars of the City." Perhaps Lord Shelburne was justified in calling him "the Prince of Merchants."50 Though Sir Francis must have had some unrecorded weaknesses, such eulogistic remarks were not made about all merchants at the time! Without any doubt, under Francis Baring's guiding hand the House of Baring attained a degree of prestige matched by few other firms in London or indeed in the entire world. Baring Brothers & Company had begun as an affiliate and offshoot of the business of an Exeter sedentary merchant. At the beginning the London house did an import and export commission business in merchandise, and soon was buying and selling bills of exchange on

42

OPERATIONS IN WARTIME, 1793-1815

CH. II

commission. From its inception it probably held deposits in the form of cash balances upon which it paid interest. Having acquired a reputation for honesty and stability, the firm next added to its services an acceptance business, lending its credit for a commission. While the volume of its services to merchants was growing, Baring Brothers & Company began to buy and sell securities on its own account and for others. As agent for its own and foreign governments, the house marketed securities and handled the payment of interest. The head of the House of Baring had been successful enough to be called a merchant prince. In prestige and in the multiplicity of functions performed he belonged to that distinguished company which included the Peruzzi, Jacques Coeur, the Medici, and the Fuggers of earlier centuries. His rise to that eminence had been analogous to but not directly comparable to the evolution of those merchant bankers. Sir Francis' influence upon the house did not cease with his death. Several of the later practices of the firm obviously originated with him. The development of close and friendly relations with influential people in government has always been fundamental in the public relations policy of the House of Baring. The maintenance of a reputation for integrity and liquidity has remained the prime consideration of the managers of the firm to the present day, though for one short period in the 1890's the ambition to retain liquidity was not fully realized. Sir Francis' preference for receiving consignments to the United Kingdom, as a measure of security and control, rather than attempting to control operations in remote ports, was continued up to the American Civil War, though competition and demand forced the preference into the background at many times. Lack of satisfactory control over operations in merchandise and credits placed a premium upon the acquisition and retention of substantial, trustworthy correspondents, a practice begun by Sir Francis and emphasized by all later managers. The founder's insistence upon marketing only government bonds was to be modified cautiously as conditions warranted. Friendship with the business men and political representatives of the United States, originated in the alertness to opportunities of Sir Francis, was expanded by

CH. II

PARTNERSHIPS AND PERSONALITIES

43

Alexander and emphasized by his successors to the point that Baring Brothers & Company w a s long known as an " A m e r i c a n house." T h o m a s Baring ( 1 7 7 2 - 1 8 4 8 ) , the eldest of the five sons, did not C h a r t I. Partners in the House of Baring, 1 7 6 3 - 1 8 6 1 London Date of Entry-

Date of Withdrawal Voluntary Retirement ProbPosUnPossible Known Death able Known sible known John Baring (1730-1816) 1763 1800 Charles Baring (1741-1819) 1763 1786 Francis Baring (1740-1810) 1763 1806 1809 " Unknown 1786 Charles Wall 1786 1800 1809 1806 1800 Thomas Baring (1771-1848) 1809 1803 Alexander Baring (1774-1848) 1830 1803 Henry Baring (1776-1848) 1813 John Deacon" 1806 Thomas Nixonb 1806 Swinton Colthurst Holland0 1806 1815 Francis Baring (1800-1868) 1813 1867 Humphrey St. John Mildmay (1794-1853) 1847 1813 Thomas Baring (1799-1873) 1818 1871 Joshua Bates (1788-1864) 1818 1864 John Baring (1801-1888) 1818 1837 Charles Baring Young 1839 1867 Russell Sturgis (1805-1887) 1851 1882. Edward Charles Baring (1818-1897) 1856 Henry Bingham Mildmay (1818-1905) 1856 Henry Bingham Baring (1804-1869) 1867 1858 Liverpool Charles Baring Young Samuel S. Gair Matthias Purton James Price

1831 1831 1848 1848

1839 1847 1851

• Known to be a partner in 1813 Known to be a partner in 1811 0 Known to be a partner of several years' standing in 1819

b

1871

44

OPERATIONS IN WARTIME, 1793-1815

CH. II

Chart II. Partial Genealogical Table of the Baring Family (Partners of the House of Baring in italics) line ends —Jtbn (1730-1816) -Thomas (1733-1758)

ι daughters

—Themas ( 1 7 7 1 - 1 !

—Francis Thornhill (1796-1866) ( i s t Baron Norchbrook, 1866) •Thomas (1799-1873) —John (1801-1888) —Charles Thomas (1807-1879) -J Thomas Charla (Bishop of Durham) j (1831-1891) —3 daughters

—William Biogham (1799-1864) (ind Lord Ashburton) —Francis (1800-1868) -Altxanitr ( 1 7 7 4 - 1 8 4 8 ) - • (3rd Lord Ashburton) (tst Baroa Ashburton of —3 other sons m d creation, 1835) —Anne Eugenia • •• • Hmry Bingham m. Humphry St. John \ (1818-1905) Mildmay (1794-1853) —3 other daughters

-Francò (1740-1810)

ist marriage

—Hmry Bingham (1804-1869) — 1 other sons — 1 other daughters

—Henry (1776-1848)— Jobann — (1697-X748)

ind marriage

—William Windham (1816-1876) —Edward Charla (1818-1897) (created Baron Revelstoke, 1885) —Evelyn ( 1 8 4 1 - 1 9 1 7 ) (created Baron, later Earl of Cromer) —4 other sons ,—ι daughter

—William ( 1 7 7 9 - 1 8 1 0 ) —George ( 1 7 8 1 - 1 8 5 4 ) —Harriett m. (1790) Charla Wall —Dorothy Elizabeth m. (1796) P. C. Laboucbere —3 other daughters

—Charla— (1741-1819)

—William j Baring-Gould line —Edward —Charles (1774-1865) (emigrated to South Carolina) —Emily m. Samuel Young [ —6 other daughters

—Elizabeth (1744- » ) m. Richard Dunning—I ( i s t Lord Ashburton of tst creation)

line ends

Charles Baring Young

ALEXANDER,

FIRST B A R O N

ASHBURTON

ΒΛ -W w o ζ
000 · 12 T w o other rules were effective levers in implementing refusals to extend credits or grant new ones. T h e Barings insisted that every holder of a credit must have a general account with their house; no credits were given for single operations. T h e second stipulation was that no new credits were to be issued until all old obligations were canceled. Ward observed this practice but his principals did not; for a period of six weeks in October and November, when dry-goods importers asked for new credits the Barings permitted a few to have small increases, provided that all bills were drawn at three months date and covered four months from date of issue. 13 Even these concessions were few and given early in the period of contraction. During those six months the Barings and their agent considered the coverage of accounts the most important item on their agenda. Regulations on remittances were set forth clearly in Ward's circular to correspondents on December 1,1836. 14 Drafts on the Barings from the "East Indies" were "to be covered within four months of their acceptance," which represented a lessening of the usual time by two months. Drafts from all "other quarters" were to be covered as heretofore by bills within the maturity of the acceptances. W h e n shipments of liierchandise were forwarded instead of bills of exchange, it was requested that "such shipments be seasonably made," with bills of lading to the order of Baring Brothers & Company. Such shipments were "not to be counted on as payment," nor drawn against in advance of sales, "for more than two-thirds of the value, this being the usual advance made by Continental houses." Balances to come from property "already advanced upon" were not "considered as available in London until actually received." Correspondents were to keep the Barings regularly informed as to funds forthcoming from property or freight in Europe. Though "aware of the difficulty of deciding or moving in a matter so delicate as that of dictating" to their correspondents what bills they should remit, the managing partners "put all question of delicacy out of the way" and insisted upon good sixty-days' sight drafts. Accommodation bills were proscribed; remitters were asked to de-

212

YEAR OF THE LOCUSTS, 1836-1837

CH. VIII

termine, if possible, the nature of the transactions bringing purchased bills into existence. "Objectionable bills" also included those drawn by agents on branches in which one or more partners were identical with those of the British houses on which the bills were drawn. From December onward the latter stipulation threw out a considerable volume of bills on the "three W's," Lizardi & Company, and two small London competitors of the Barings — Bell & Grant and T . W. Smith & Company.15 Until late in March that proscription on competitors' bills was given to correspondents individually, not by publication or circular letter. Ward performed prodigious labors to carry out the orders of the Barings on prompt coverage of accounts. Delinquent remitters were kept informed as to the rules and were urged to comply. In some instances promissory notes were taken to settle a debt. In others Ward refused to transfer bills of lading for goods shipped to the United States, took possession of the merchandise, had some cargoes sold in America, and shipped others to European markets. All sales by debtors of the Barings were closely watched and unpaid balances collected. One bankrupt was permitted to pay forty cents on the dollar, but the claim on one long-standing delinquent was taken to court. To clear off the old debt of Silas Burrows, Goodhue & Company sold the John Baring. In March the New York house also paid half of its £20,000 loan on the Old Line packets and agreed to pay the remainder in 1838. Ward discouraged shipments of merchandise to pay off debts because the goods would go to a market of declining prices and the Barings might be out of funds a long time. Only a few firms used that method. All these activities Ward reported in detail by almost daily letters, which were so voluminous concerning general matters and specific accounts that he even composed indexes to enable his principals to use the information effectively. With the aid of F. H. Story, the chief clerk in the Boston office, late in 1836 he also began to draw up quarterly reports on all accounts.16 The managing partners were no less busy. Besides making the basic decisions, formulating new rules, and reiterating established courses of action, they increased direct control over their American business. Beginning in September they dispatched to Ward monthly lists of "overdues," "coming dues" (acceptances maturing in the

CH. Vili

P R E P A R A T I O N FOR A CRISIS

213

next four months), and "Expectancies," that is, corrected estimates of property in Europe or America considered as available on each account presented. They gave specific orders on the handling of individual accounts and kept their agent informed of sales of goods and securities in Europe as well as of property sent to the United States for disposal. T h e partners also supervised from London all exchange accounts and wrote directly to all remitters of objectionable bills. T h e results of these strenuous efforts varied widely. In general the exchange accounts had worked satisfactorily. None of the usual operators drew against securities and almost all stopped working their accounts, except to cover them. Only Prime, Ward & K i n g , Goodhue & Company, the Union Bank of Louisiana, and the Bank of the United States continued brisk activity. A l l conformed for the most part to the suggestions of the Barings, though Prime, Wa*d & K i n g activated the joint exchange account more than the Barings thought desirable. T h e N e w Yorkers also bought and sold bills normally on a % P e r cent margin instead of the ι per cent suggested by the London drawee. T h e Barings frowned upon the practice of Prime, Ward & K i n g in selling bills "negociable on delivery," but did not refuse to honor the drafts because signature in blank was the general custom in the United States. By February 20 the Barings had completed the sale of joint holdings of Maryland bonds on hand and had met with some success in disposing of shares of the Bank of the United States and bonds of Pennsylvania and N e w Orleans. They could not get a bid for their joint Kentucky hold17

ings. 1 ' T h e record of the Bank of the United States was excellent. Until December the exchange account was worked steadily but not excessively; the uncovered credit was always in use to practically its full extent, but reliable remittances came forward regularly. Usually the bills were so diversified that the amount of drafts on any one firm did not total more than ^30,000. During January and February the bank practically stopped drawing and remitting on its exchange account, but forwarded funds early for interest payments and in March began to transfer to London money to cancel the ,£250,000 of its bonds due June i . 1 8

214

YEAR OF THE LOCUSTS, 1836-1837

CH. VIII

Remitters on all types of accounts, however, sent forward some undesirable bills. These could not be avoided under the circumstances, particularly when American business men thought conditions were improving during December and January. Even such a trustworthy firm as Goodhue & Company remitted bills listed as "objectionable" by the Barings, More important, all Anglo-American houses were under pressure and each of them was remitted bills on all the others. On January 30 the Barings estimated that their bills receivable included a total of ^550,000 on Morrison, Cryder & Company, W . & J. Brown & Company, Lizardi & Company, the "three W's," and Warwick & Claggett. Of that total approximately ^48,000 was on the last-named firm.19 Progress in reducing outstanding obligations and in covering accounts seemed dishearteningly slow. "Overdues" stood at ^150,000 on December 10, at ,£747,000 on January 30, and at ,£400,000 on February 21. The January figure was inordinately high, in part because it reflected delays accorded some of the closed accounts as well as current drafts under open credits to the Union Bank of Louisiana. Moreover, no deductions were made for property available to reduce debit balances. At the same time, if all "overdues" and acceptances for the next four months were totaled, the outstanding obligations of Baring Brothers & Company amounted to 1,570,839. On March 6, sums due on "dry goods" accounts alone totaled ^155,240. These figures may be compared to the estimated total amount due foreigners by the United States— 12,000,000 to ^2o,ooo,ooo.20 Reasons for the large volume of unpaid obligations were manifold. Some of the difficulty lay with the Barings and their agent. Accounts were often inaccurate, Ward's particularly so because several firms deceived him for extended periods by reporting that they had sent remittances directly to the Barings or through European agents or partners. Bills went forward through so many channels — through Ward, direct to London from America, to London from the north of England and from various Continental cities — that an accurate check on a given date was almost impossible.21 Many bills were protested and returned dishonored. Many firms with closed accounts first paid debts due to other merchant bankers. Funds to come from

CH. VIII

CRISES IN ENGLAND AND AMERICA

215

property under the Barings' control were never deducted from their monthly estimates in which they also usually put current drafts issued under open credits. T h e managing partners did not want to sell merchandise when prices were falling precipitately and they seemed to want Ward to think that their situation was desperate. Ward himself did not awaken fully to the wishes of the Barings until January 3, after receiving letters of late October and early November from London. His comment, "It certainly has been an oversight in you not to have informed me earlier that you had more business than you wanted," 2 2 mirrors his slowness to understand what he had been told. A s late as December he could not agree with his principals that the events from August to October in England were a prelude to a crisis similar to that in 1825-26. That westward sailings took six weeks on several occasions delayed information and orders unduly. T h e most important factor, however, was the course of prices and events in England and America during the first three months of 1837. CRISES IN ENGLAND AND AMERICA

T h e breaking point came first in England. Declines in the prices of a wide range of commodities set the stage. Silberling's index numbers are 112, 113, 109, and 101 for the four quarters ending on June 30, 1837.23 Credit restrictions on forwarding cotton, an estimated increase of about two hundred thousand bales in the stock on hand in the United Kingdom at the end of 1836 as compared with that on December 31, 1835, and reports of large crops in both India and America drove the Liverpool price down, slowly but steadily, in spite of continued purchases by the manufacturers and the slow arrival of the new crop. A precipitate decline was ushered in at the end of January by the news of a break in the cotton market at Havre. Coffee was slow in moving and supplies were large. Teas of common quality were selling in London at a loss of 50 to 60 per cent upon the cost, and indigo was being offered at figures considerably below the latest reports of cost in Calcutta. Sellers of sugar operated against reports of large crops in every producing area, a supply on hand larger by 40,000 tons than that of the preceding year, and a

216

YEAR OF THE LOCUSTS, 1836-1837

CH. VIII

marked decline in prices in Cuba in December. Tobacco prices dropped steadily during January and broke precipitately in February. Various other factors contributed to the embarrassment of several Anglo-American houses. Large numbers of bill remittances were unreliable or were protested for non-payment. The extended houses were sent bills drawn on their competitors for the most part. Only those of Baring Brothers & Company among the Anglo-American merchant bankers enjoyed the complete confidence of discount houses and bankers, and the Barings had markedly curtailed banking bills on themselves. Because the supply of good bills was limited and the demand great, less reliable bills were purchased and accommodation bills increased. Moreover, none of the great "American houses" except the Barings had sufficiently reduced activity. Wiggin & Company had contracted some but not enough. Morrison, Cryder & Company, taking up many accounts sloughed off by the Barings, extended its business right up to March i. The "three W's" and the Browns had a disproportionate amount of their credits out to American dry-goods importers; the Liverpool house was the least blameworthy in this respect, but two-thirds of its engagements at the end of February were on dry-goods accounts.24 W. & J. Brown & Company had adequate capital, however, whereas Wiggin & Company in December showed commitments of ^1,650,000 against a capital of ,£330,000 130,000 liquid assets) and Wildes & Company late in February obligations of ,£2,200,000 against capital of ,£250,000, of which less than ,£100,000 was immediately available. One after another, Anglo-American firms succumbed to the pressure. On February 6 Warwick & Claggett, a London tobacco receiver, invited Baring Brothers & Company and other houses to look into its affairs. The investigators decided to let it fail. The firm refused acceptance or payment of bills to the extent of ,£150,000. The failure of Warwick & Claggett so injured the credit of the American houses, except the Barings, that by February 21 bills on the "three W's" could not be discounted anywhere unless drawn by "solid parties," and the obligations of both Morrison, Cryder & Company and Lizardi & Company were reported to be excessive. The latter two houses managed to struggle through their difficulties

CH. Vili

CRISES IN ENGLAND AND AMERICA

217

without outside help. Wiggin & Company, Wildes & Company, and Wilson & Company were joined by W . & J. Brown & Company as petitioners for aid from the Bank of England. A full month passed — February 22 to March 22 — before merchants and bankers could be certain that the four embarrassed houses could be sustained long enough to avert a panic in the United Kingdom. A technique of cooperation was utilized to enable the stricken firms to continue meeting their obligations. The Bank of England permitted the four houses to discount specified sums — Wilson & Company ,£400,000, Wildes & Company ,£250,000, Wiggin & Company ,£200,000, and the Browns ,£400,000 — against the deposit of collateral security and subscription lists of guarantors. Under the agreement of March 22, for example, Baring Brothers & Company endorsed for Wilson & Company three promissory notes of ,£6,666.13.4 each (totaling ,£20,000, its share of the guarantee), maturing in 5, 6, and 7 months from date — March 23. In this fashion it was hoped to aid all four houses back to liquidity or at least to honorable liquidation. Had the help not been given and the firms stopped payments, it seemed certain that a host of minor firms in London, Liverpool, and Manchester would fail, that trade would lie prostrate, and that from ,£3,000,000 to ,£5,000,000 in bills would be returned to the United States for redemption. T o avert the impact of that deluge upon the American business community, for a panic in the United States was greatly feared, was one of the aims of the Barings in giving their whole-hearted support to the cooperative measures adopted. Naturally, the collection of debts due the Barings themselves was facilitated by the stability engendered by the aid given. By this time the status of the Anglo-American merchant bankers was so depressed that some sound substitute for drafts on the discredited firms almost had to be brought forward if the American short-term foreign debt was to be soon repaid. Baring Brothers & Company proposed to the Bank of England that it should open through the Barings a credit of ,£2,000,000 for one year in favor of the Bank of the United States. The conditions suggested were that the American institution should remit _£ 1,000,000 in silver or gold to cover one-half of the bills drawn on the London House and that the remaining ,£1,000,000 of the credit should be secured by the de-

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posit of bonds of the American bank, all redeemable within twelve months and paying 5 per cent interest. The directors of the Bank made the idea their own with slight modifications. As a companion measure to aiding the four AngloAmerican houses the Bank of England offered a credit directly to the Bank of the United States for the amount proposed and upon the condition that the period for reimbursement was to be six months instead of twelve. The House of Baring was omitted as intermediary on the ground that the directors desired to give the action the appearance of a national concern in which the leading banking institutions of both countries were joining. 25 Gold and silver would come to the Bank, American debts to the United Kingdom would be paid in reliable remittances, repayment of the advances to the shaken firms would be more certain, and the shock of the bad news regarding the "three W's" upon the American business community would be mitigated. Though the situation might have been worse had the four "American houses" not been sustained, by March tension in the United States had risen to an almost intolerable pitch. The August refusal of the Bank of England to receive American bills and bonds for loans drove the American price of money up to 36 per cent per annum by October. Though discount rates for commercial paper did decline to as low as 13 per cent in January, the rate ruled above 20 per cent throughout March. Considerable alarm was produced by the arrival during the first week in February of the news of the stoppage of the Northern and Central Bank in Manchester. Throughout February and until the third week in March rumors were rife about the aid given to an unknown "American house" in December. In addition to the fears generated by the operation of the Specie Circular, the awkward management by the Federal government while distributing its surplus revenues to the various States disturbed money operations still more. Though failures among business firms were fewer in January and February than in the preceding three months, commodity and security prices broke precipitately late in February and early March. Exchange rates for sterling ranged from 107V2 in September to 109% in February for cash but with promissory notes were usually 5 points higher. The high cost

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of money in America led many to postpone remittances, thus keeping the demand for sterling bills within moderate limits at a time when the Barings were limiting drafts upon themselves and bills on their competitors were increasing.26 Panic came during the last week of March. From late February stoppages and failures became increasingly numerous, especially among cotton factors in New Orleans. Sales of cotton practically ceased. Several firms failed in New York, Philadelphia, and other eastern seaboard cities. By March 20 Wall Street was somber and fearful. Nominal as prices were, they fell precipitately. Then the late February news from England on the condition of the AngloAmerican merchant bankers hit New York. That news, plus the publication in the press on March 27 of a March 2 circular from Baring Brothers & Company openly announcing its demands as to bill remittances, started the panic. A number of failures occurred at once. Panic ruled in New York for the next four days. Wall Street was crowded till late at night. Business men were frantic. 27 Merchants and bankers of the Atlantic seaboard had already turned to Nicholas Biddle, the only master they had ever recognized. He served them well. Having been acquitted of a charge of bribery in connection with acquiring the charter for his bank from the legislature of Pennsylvania, and having come to an agreement with the Federal administration for buying the bonds of the Bank of the United States held by the government, Biddle felt prepared to prove that the bank was as powerful and important as it ever had been. As early as March 23 a committee of New York merchants, accompanied by Ward, went to Philadelphia to ask Biddle to issue $5,000,000 in post notes for use in discounting undoubted paper. He had already promised tentatively to issue dollar post notes maturing in 12 months when the panic made action imperative. Biddle and Jaudon came to New York to confer with leading business men, who now in a public letter appealed for aid. By March 30 Biddle had published a gracious reply promising to issue both domestic and foreign post notes. The total of the Bank's foreign issue came to a "little over a million" sterling, payable at Baring Brothers & Company, as well as 3,480,000 francs and 1,229,000 guilders. The offer from the Bank of England of a credit for ^2,000,000 arrived

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too late and was declined on the ground that specie was not available for export and that action had been imperative at the end of March. Biddle rode the crest of the wave. On April 4 he was said to have saved the day "by his calmness, prudence, courage, and confidence." 28 Events of the next five weeks gave the lie to such extravagant praise. Biddle had merely poured a little oil on a turbulent sea. The American economic machine moved inexorably to a breakdown. Bills on southern firms came back protested in large quantities. After a short lull, on March 22 a new rush of failures began in New Orleans; the ten largest cotton houses and many smaller ones in that city collapsed. Cotton which had recently sold for 15 cents per pound in New Orleans was moving slowly at 5 and 6 cents. The bottom had dropped out of cotton prices in Liverpool. Merchants canceled orders for European goods, manufacturing and building operations came almost to a standstill, unemployment increased rapidly, security and commodity prices attained new low points daily, and failures became more and more numerous. Grain purchased by speculators as a consequence of the poor crop in 1836 arrived from foreign ports only to meet no buyers. By April 10 credits from French bankers had ceased. Ten days earlier Prime, Ward & King had reported: "Specie generally is so scarce in the several Banks that it can hardly be procured, indeed individuals cannot well demand it, in our present excited state." 29 By April 16 the Bank of the United States had reached the end of its post notes and planned to issue no more. Inability to acquire funds, a dduge of failures, and considerable hysteria terminated in the stoppage of the Dry Dock Bank of New York, a run upon the other banks of the city, and a general suspension of specie payments in New York on May 10. Within a few days all other sections of the country had followed the lead of N e w York. Meanwhile, great exertion was necessary to avert a major crisis in England during April and May. The discredited firms could keep their heads above water only by a steady stream of discountable bills from the United States. Packet arrival dates were days of extreme tension and anxiety; if the ships arrived, it was wondered if any bills were on board; if the remittances came, there still re-

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mained the question of acceptance and payment; at once the names on the paper were scanned to ascertain whether or not they were reputable enough for the bills to be acceptable to the Bank of England for discount. Naturally enough, as reports of the mounting tension in the United States came to hand, the directors of the Bank and other men in the money market became still more dubious of bill remittances. Rumors circulated freely concerning the stability of W . & J. Brown & Company, F . de Lizardi & Company and Morrison, Cry der & Company. N o t even the Barings, never in need, were immune from suspicion of weakness. T h e return of a large volume of dishonored bills to the United States gave apparent validity to rumors and indicated the seriousness of the pressure. Outside the financial mart occurrences reflected and intensified the stresses within. Manufacturing in Manchester and Glasgow almost ceased. Unemployment mounted. T h e volume of bankruptcies moved to its highest figure since the second quarter of 1826, not "absolutely feverish" (to quote Clapham), "but unhealthy enough." 3 0 Particularly Liverpool firms, both importing and exporting, fell by the wayside; both sound and unsound were squeezed, prompting a memorial in April from the business community of Liverpool to the Chancellor of the Exchequer. Protesting bills drawn against cotton shipments became marked at H a v r e ; and the receipt of a report in early April that one of the leading hong merchants in Canton had failed suggested that the malaise was world-wide, not merely a crisis in Anglo-American economic relations. Nevertheless, the British mercantile and banking community continued its support to the three embarrassed houses until the end of May. After the governor had conferred with the Chancellor of the Exchequer during the first week of April further assistance was given by the Bank to Wildes & Company. By the end of April the number of failures was so large and the news from the United States so depressing that there was "much fear in the Bank parlours"; the directors were induced to continue their assistance to the "three W ' s " only after vigorous persuasion by various firms in the money market. On the second day of May the business community in England breathed more easily; the Bank had agreed to carry both Wildes & Company and Wilson & Company to the end of the

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month, and it was known that further aid would be given to Wiggin & Company. The sums advanced by the Bank were large; that to Wilson & Company, for example, was ¿1,192,369, exclusive of ¿736,000 in bills on that firm discounted for other houses. Secured by notes endorsed by Baring Brothers & Company and other leading houses, this aid was extended in the hope that the "W's" would prove to be solvent and could be carried through an early, orderly liquidation. The control of the chief lender was already marked; Wilson & Company could accept no drafts from Lancashire on American account, and Wildes & Company was not allowed to accept any bills except against property in hand. Neither the controls nor the sums advanced were adequate to the needs of the shaky firms. Even though the acceptances of Wildes & Company were down to £660,000, those of Wiggin & Company to ¿900,000, and those of Wilson & Company to ¿1,290,000 as of May 22, further aid to the possible extent of ¿1,500,000 was thought necessary if their stoppage of payments was to be averted. Remittances from the United States had slowed to a trickle, and many of those received could be expected to be dishonored and returned for payment. In view of these circumstances and the probability that many other houses would be forced to suspend payments, the Bank directors decided on June 1 to render no more aid to the discredited firms, although guarantees were offered. As anticipated, this decision precipitated a new shower of suspensions and embarrassments. The "three W's" stopped payment of their obligations on June 2. Within four days they had been joined by Bell & Grant, Gowan & Marx, Coleman, Lambert & Company, and A . & G. Ralston & Company — smaller houses engaged in either financing American trade or marketing American securities or both. As early as June 10 the Barings estimated that these seven suspensions would result in the return of at least ¿845,000 in dishonored bills to the United States. Additional amounts were sent back by shaken but solvent houses in the Baltic, Holland, France, and the United Kingdom. Morrison, Cryder & Company, Lizardi & Company, and W . & J. Brown & Company were successfully supported after they had put up collateral security and a list of guarantors from the mercantile and banking fraternity. For the entire period of stress

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the Browns had to get a total of almost 2,000,000 in aid from the Bank. Though these events in June seemed highly reprehensible to those who deplored weakness, suspensions and failures, the cooperation between the mercantile-banking community and the Bank of England had cushioned the shock to both the American and British economies. Had the "three W's" been allowed to fail in March, the Barings estimated that at least five million pounds in bills would have been returned dishonored to the United States. Such an avalanche would, it may be assumed, have made the actual panic of 1837 in the United States seem trivial in comparison. Almost certainly W. & J. Brown & Company, Lizardi & Company, and Morrison, Cryder & Company would have succumbed to the pressure. It could not be expected that even Baring Brothers & Company, the only one of the seven leading Anglo-American houses requiring no aid from the Bank of England, would have escaped the general debacle. No wonder the partners of that house expressed surprise on May 2 that their agent and Nicholas Biddle could for a moment think it desirable that the discredited firms should have been allowed to fail in March. In point of fact, the outcome of the crisis might have been quite different but for the assurance and stability of Baring Brothers & Company. Timothy Wiggin wrote Welles & Company, Paris, that had Baring Brothers & Company not been "above want there would have been no possibility of arranging the affairs of the discredited Houses and that he must say they B. B. & Co. have made a generous use of the advantage of their position." There was no truth in the rumors current during the crisis that the House of Baring was in a "frightful dilemma," that Lord Ashburton had been obliged to support it with 800,000, or that it had called upon the Bank of England for aid. 31 Not that the firm avoided borrowing. In January, Sutton Sons & Gribble, private bankers, lent Baring Brothers & Company ^191,350 on the collateral of ^215,000 in securities. The partners also borrowed ^70,000 in April and 60,000 in May from Overend, Gurney & Company. Both loans were for three months. Collateral consisted of shares of the Bank of the United States, a bill of lading for a

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warrants. 32

cargo of indigo, and tea and indigo In comparison with the aid needed by the other six large Anglo-American merchant bankers, the Barings' outside requirements were small. T h e resources .of the firm were adequate to the greatest pressure experienced since Baring, Bates, and Mildmay had assumed the management. RUNNING BEFORE THE STORM

T h e remarkable liquidity of Baring Brothers & Company was attributable to its practices both before and after February 22, the date when the extended situation of the "three W ' s " first became fully apparent. T h e restrained course pursued by the partners prior to August, 1836, contributed not a little to the favorable position of the house. Exclusive of the collateral against the loan to the Bank of the United States, the Barings held no more than ,£150,000 in securities for account of Americans during the fateful winter of 1836-37. Compared with the embarrassed firms the House of Baring had followed a conservative path in granting credits; the business of W i g g i n & Company and Wilson & Company consisted "chiefly in uncovered Dry Goods accounts of which," to quote the amazed Barings, "we can always have as much as we choose." They were also much gratified to find that on their books were "by far the greater proportion of the accounts of substantial Merchants and Shipowners in the United States." In fact, they were thankful that they had a good agent and that they had taken "the right view at an early stage of the reaction." From December to late February the partners were quite aware that they were losing business to competitors, as their agent cogently pointed out to them, but they were "quite willing to be idle" in the existing state of affairs. 33 By the beginning of March the Barings congratulated themselves more strongly upon their decision to curtail during the preceding six months. Considerable progress had been made in collecting debts due and overdue. By cutting off exchange accounts and cutting down the remittance of dubious bills the House of Baring had avoided loss to itself and to its correspondents. "It is a matter of pride and satisfaction to me," Bates wrote to Jaudon, "that the view my House had taken of the probable course of things has kept it and

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your Bank clear of this exposure, for although the House has considerable amount of Paper on the discredited Houses it is remitted by safe correspondents and I fear nothing but inconvenience, while your Bank is quite free so far as I can judge from any chance of loss." Bates reasoned that if the Bank of the United States had continued drawing and remitting the Barings would then have had in their portfolio many of the objectionable bills, and their acceptances would have been in circulation instead of those of the other "American houses." Those bills on the Barings would not have been discredited, but since the firm had withdrawn all its credits for exchange accounts, except for those bills drawn against specie, "the circulators were left to themselves," and the prevailing want of confidence in their paper was the consequence. In addition, Ward had done everything "short of publishing" the names in the newspapers to prevent the remittance of bills on Wildes, Wiggin, Wilson, and Lizardi. 34 That the measures of the House of Baring contributed to the development of the crisis in England there can be no doubt, though the managing partners expressed no regrets and probably did no more than hasten the inevitable. As soon as the Barings learned of the embarrassment of the "three W ' s " they adopted measures designed to make certain that all bills on their own house should be drawn against remittances which could be immediately collected. T h e authority to Samuel Comly and Samuel Herrmann & Sons to draw against uncovered credits for the purchase of cotton was withdrawn. T h e Union Bank could draw only against remittances of specie. Goodhue & Company, Prime, Ward & King, and the Bank of the United States were allowed to sell drafts against specie and bills of exchange accompanied by bills of lading. From April onward the three last-mentioned firms forwarded as coverage for drafts bonds of New York, Ohio, and Pennsylvania, and shares and bonds of the Bank of the United States. At the same time cotton also became an acceptable remittance, even for the covering of the account of the Union Bank. By the middle of June the Barings had subjected exchange accounts to more restricted activity. T h e stoppages among the "American houses" in England, the embarrassment of others, and the receipt of news that the banks in the United States had suspended

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specie payments induced the partners to order the cessation of drawing by all operators of exchange accounts and the bringing of all pending transactions to a close. T h e uncovered credits to the Bank of the United States and the Union Bank were revoked, though after their accounts had been covered they could, without charge, resume drawing against specie, shipments of cotton, and bills the payment of which they had already been advised of by the Barings. Only shares and bonds of the Bank of the United States were deleted from the original list of acceptable remittances for covering outstanding drafts. 35 While being uncertain about the effect of the suspension of specie payments upon Anglo-American exchange relations, the Barings had seized upon the action as a good excuse for asserting stronger control over their American operators of exchange accounts. N o n e of the four had acted altogether satisfactorily from the point of view of the managing partners. In April the Union Bank received from Ward permission to ship up to 10,000 bales of cotton to cover its account but not to draw in advance. T h e directors of the Louisiana institution proceeded to issue drafts in order that debtors in N e w Orleans might have good bills to remit to London. T h e Barings at first refused to accept the bills but later did so when the value of cotton received substantially exceeded the amount of the new drafts. T h e difficulty lay in the fact that the bank had forwarded £30,000 in dishonored remittances and owed £40,000 in interest on bonds as of August ι , while its collateral security, $303,000 in N e w Orleans 5 and 6 per cent bonds, was totally unsalable. 36 T h e Barings stated their view on the account of the Bank of the United States in a letter to Biddle explaining their reasons for revoking the open credit. On June 6 the London house had been in cash advance for the bank "above £400,000," and of the remittances not then matured £100,000 were refused either payment or acceptance. N o post notes had been received on the account, no authority had yet been received to sell the 10,000 shares of the bank held at set limits, at best there was little demand for American securities, and the turn of the cotton market was uncertain. T h e bank's debit balance had to be reduced, while the necessity of providing funds

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for meeting September payments on ¿250,000 bonds of the bank had at that time received no recognition. The bank officials had not heeded repeated early warnings from the Barings about the insecurity of bill remittances. Furthermore, the partners had doubted for some time whether the agency of the bank under the open-credit system was of pecuniary profit to the house. Fluctuations were so great as to derange their calculations concerning the best use of their capital. In May, 1836, against a credit of ¿250,000 the Barings honored drafts of more than ¿500,000 at one time, with ¿100,000 more advised. When Jaudon stated in 1836 the smallest amount of credit with which the bank would be satisfied, the House of Baring "reluctantly complied." There were also other causes for complaint. Ιή the Barings' view they might have objected when Jaudon in 1836 appealed to the Bank of England to assume the agency in London. Although they disagreed with the reactionary policy of the Bank of England toward bills drawn by American banks on England, they were adversely affected by this action. When in September, 1836, Baring Brothers & Company offered to rediscount all its objectionable acceptances then in the hands of the Bank of England, the only ones sent were a portion of those bills drawn by the Bank of the United States. Moreover, the American institution violated a basic rule of the Barings by having had since April, 1837, a second account in London — with Frederick Huth & Company. 37 The partners might have added that the bank had not shipped specie as repeatedly requested and that Ward no longer had confidence in Biddle. But their letter of June 14 merely revoked the open credit and did not terminate relations. In order to keep the Barings in funds on its account the Bank of the United States, in Jaudon's own phrase, had "used every exertion and resorted to every expedient" except the shipment of specie. In May, 1836, the cashier had given the House of Baring unconditional permission to sell the 10,000 shares of the bank. The bank's authorization for the London house to draw on Hope & Company unfortunately did not produce funds, as the Amsterdam house re-

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fused to obligate itself further at the moment. In June Jaudon had arranged that the bank should send to the Barings ¿250,000 in bonds of the bank to be sold for the sole purpose of cutting down its debt. Earlier Ward had taken $100,000 in domestic post notes from the cashier of the N e w York branch of the bank and invested their value in cotton consigned from N e w York to Baring Brothers & Company, Liverpool, for account of the bank. Large amounts of cotton were also forwarded to Liverpool from New Orleans. On September 9 the Barings were in cash advance ¿156,000, with ¿23,000 more in drafts advised, but bill remittances to the extent of ¿240,000 not yet due were in their "bill case," the Liverpool house held between ¿220,000 and ¿230,000 in cotton, 2,200 of the original 10,000 bank shares remained unsold, and ¿150,000 in bills on Huth & Company would soon be in hand. The partners had no fears about the account, but it had been covered too late to please them.3S Everything considered, by the end of August, 1837, the Barings thought themselves "fairly rid" of all exchange accounts except those of Goodhue & Company and Prime, Ward & King. In spite of certain unsatisfactory features, the partners were content with their relations with the two New York firms. Although Goodhue & Company was much more of a commission merchant than private banker, and had enjoyed since January an open credit for exchange operations with Huth & Company, from 1832 it had served as a valuable and inexpensive financial intermediary in the cotton operations of the Barings, its function as a deposit agency for funds collected from debtors in the United States was deeply appreciated, and its amenability to suggestion and control by Ward enhanced its value. Prime, Ward & King was open to more criticism but had even more to commend it to Baring Brothers & Company. It charged high commissions for its services, during 1836-37 it had kept the joint exchange account more active and less covered than the Barings desired, and occasionally it forwarded bonds considered undesirable by the London house. On the other hand, it had managed its affairs with more astuteness than any other sizable private banking firm in the United States and had followed reasonably well several suggestions of the Barings during the preceding year of tra-

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vail. It specialized in exchange and security operations, yet was regarded as a mercantile house. Its drafts were not suspect by the directors of the Old Lady in Threadneedle Street. Both the New York houses accepted with good grace the suspension of their uncovered credits in June, 1837. Their accounts were covered very quickly and soon reopened. Independently of orders from England, in July Ward asked both firms to reactivate their exchange accounts by remitting specie and drawing against it. He closely supervised the activities of Goodhue & Company. Prime, Ward & King shortly agreed to cover the new account $50,000 in advance and to ship specie or undoubted bills as it drew. By August, with Ward's approval, it was also forwarding securities, including "City of New York Water Stock," as coverage for drafts. 39 That trickle of securities would soon become a flood, particularly when British receivers other than the Barings vigorously encouraged it. In the meantime the reduction in the volume of bills upon their own house, coupled with the proscription of all drafts by and on failed and discredited firms, compelled the Barings to adopt new measures in order to facilitate the payment of debts due them from the United States. In accordance with orders, Ward received payments from debtors in paper currency, checks, bonds, notes, assignments, property, and specie, care being taken to consider prevailing rates of exchange on London when crediting the sums paid to the account of each correspondent. In return Ward sometimes gave a payer his own draft on the Barings, cautiously making the bill to the order of his principals and inserting in each bill the "value received of" the buyer. This operation assured the Barings that remittances came forward in reliable bills. These did not go into circulation because the Barings did not discount their bills receivable. In fact this was no more than a bookkeeping device. In most instances Ward deposited the funds received from creditors with Goodhue & Company. Using the deposit, he purchased bills by drawers of unquestioned solidity, cotton bills accompanied by bills of lading, large amounts of specie, and after April selected bonds, chiefly those of New York and Ohio. By these methods he made certain of payments upon outstanding engagements and had an opportunity to make a profit upon the transmission of the funds. By May 30 the

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Barings remarked that correspondents were remitting almost wholly through Ward, though some of their most prominent clients continued to cover their accounts by forwarding directly to Europe bills and securities as well as American, Cuban, Brazilian, and Far Eastern produce. 40 From February to September the Barings were very pressing if not adamant about the covering of accounts and the reduction of outstanding obligations. "It is a mistake to let people go on after they are overdue with us," they wrote to Ward, "you should insist on remittances or money or security or that they stop." 4 1 W a r d took collateral security and guarantees in some cases; in others he took promissory notes; in still others he settled for property assigned to him as agent of the Barings. He did his best to keep clients from paying off debts to other British firms more rapidly than those due Baring Brothers & Company. He supervised the sale of goods consigned to him by his principals and of merchandise for which he held bills of lading for account of backward remitters. When he found the pace too swift or the distances too great, he engaged agents to help. W . J. Young, brother of partner Charles Baring Young, acted as a general assistant in New York. Goodhue & Company also gave him some aid, but by August John A. Stevens was entrusted with bringing into line the bulk of the recalcitrant clients in New York. Grant & Stone served in the same capacity in Philadelphia, and the Union Bank acted as Ward's representative in New Orleans, after returning bills had involved the Barings slightly in that quarter. 42 After the suspension of specie payments in the United States all agencies of the firm tightened procedures still more. Drafts by even privileged institutions were stopped. The Barings protected the bills of very few firms which had drawn on the discredited houses, stopped permitting American merchants to send bills to India, refused all requests for extension of time to cover Far Eastern credits, after July 6 ordered all funds on travelers' credits to be deposited in advance, and in several cases merged the accounts of individuals with those of their respective houses. 43 Both the Barings and W a r d granted a few concessions, however. The London house honored unauthorized bills by C. A. & E. Heck-

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scher and the City Bank of Boston, though warning them against repetition of their offense. The partners also protected drafts on Wildes & Company and Gowan & Marx upon which the names of such close associates as Russell & Company, Gisborne & Company, and Prime, Ward & King appeared. Baring Brothers & Company lent to the three Grant firms in the Mediterranean ,£50,000 to avert suspension of payments by them. The reasons given were that the Grants had no other account in London, owed no one else, would be able to cover all debts when remittances appeared from America, and were the only firms in Genoa, Leghorn, and Trieste in which the Barings felt any confidence. Ward utilized friendly insistence and occasional concessions, rather than strict insistence upon settlements, to maximize his collections and to preserve the good will of correspondents. He followed the practice of the Bank of America and others in not charging damages upon returned bills. All moves toward coercing payment by legal proceedings were postponed.44 Difficulties in attaining a satisfactory liquidity seemed almost insurmountable. Backward remitters lied. Even trustworthy firms could not be forced. New York had no laws permitting attachment of property, and a considerable number of dubious debts were found in that region. Partners of Wildes & Company, Wilson & Company, Fletcher, Alexander & Company, and Welles & Company (Paris) competed with Ward for collections and reliable remittances. Not the least of Ward's worries was the loss of nerve by Jonathan Goodhue during the last days of April. The agent of the Barings reluctantly stepped in and managed the business until the N e w Yorker's confidence was restored. Specie was scarce and high in price. As stoppages and failures in England and America increased, reliable bills grew fewer and fewer and protested bills were returned to the United States in vast quantities. Securities acceptable for remittance could be counted on the fingers of one hand. Merchandise sold slowly. 45 T o many of those difficulties was traceable the slow progress in reducing the volume of "overdues" and outstanding obligations. Exclusive of possible deductions for merchandise and securities belonging to American business men but under the control of the Barings, delayed payments due the London house doubled between February

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2i and September i. They rose from ,£400,000 to ¿811,000, which was roughly 13 per cent of the ¿6,000,000 short-term debt Bates estimated that Americans owed Europe on the same date. On January 31 outstanding acceptances for the succeeding four months equaled ¿ 5 6 1 , 4 3 2 ; on May 30 and September 1 for each of the succeeding six months ¿745,000 and ¿464,000, respectively. T h e totals of the two groups, though not directly comparable because the acceptances for the first represented only a four-month period, were ¿1,308,839 on January 3 1 , ¿1,261,000 on May 30, and ¿ 1 , 2 7 5 , 3 5 5 o n September ι. By the latter date protested bills and unsold property of debtors represented "pretty nearly the amount" of overdue debt which the Barings had to collect, and almost all outstanding acceptances had been drawn under credits granted a year earlier for F a r Eastern operations. 46 Under the circumstances and given the operating rules of the Barings, very f e w drafts issued upon the authority of new credits could be expected. A s summafized on July 29, the "rules for business operations" for the spring and summer of 1837 stipulated that "no uncovered credit whatever" should be granted, that no credit was to be given to anyone having more than one account in London, that no credit should be granted to the American agent of any European house, and that no credits should be permitted to dry goods houses until they had paid up all balances due London firms, with restrictions later to be added as to forwarding bills of lading and effecting insurance. Credits for the West Indies and Brazil might authorize drafts to the extent of ¿200,000 against property coming to Europe to the consignment of the Barings provided that the insurance be ordered in London, that the bill of lading in all cases be filled out to the order of the London house, and that the drafts on any one cargo should not exceed two-thirds the cost value of the property consigned. Credits to the amount of ¿300,000 might be granted for F a r Eastern operations upon goods to be shipped to Europe upon the condition that the insurance be effected and the policy handed to Ward, that the drafts should not exceed two-thirds the cost value of the property, which was to be made deliverable to the order of the Barings, that one bill of lading should be forwarded to London and one to Ward, and that remittances should be made

CH. Vili

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four months after acceptance of drafts. No credits were to be issued for goods going to America from the Orient until banks in the United States resumed specie payments and no credit was to be issued to any firm having no account for operations other than those to the Far East. Finally, the commission for accepting and paying bills from the Orient was to be 2 per cent.47 All the foregoing measures kept the losses of the House of Baring to a very low figure. The firm purchased no cotton on its own account whatsoever and by early April had received only 1,144 bales, chiefly on old debts. It had no concern with any failing houses south of Philadelphia until dishonored bills of one house in Mobile and several in New Orleans involved it for a few thousand pounds. The 100,000 bales of the 1836 cotton crop ultimately consigned to Baring Brothers & Company were received almost entirely after July 1 and came to a rising market. In spite of their freedom from involvement in cotton the Barings consistently expected to lose ,£100,000. On May 19, however, their list of "Suspended Debts" included only five houses in New York, one in Mobile, nine in Boston, and one in Philadelphia; on these, potential losses were estimated at ,£37,410. Samuel Comly contributed ,£20,000 to that amount, but by August his estimated share had been scaled down to ,£15,000 and all the Boston firms were expected to pay in full. In spite of the failure of several New York correspondents during the late spring, the estimate of loss on bad accounts by the Barings had settled to ,£30,000 by October. These figures stand comparison with the ,£120,000 estimated by the Barings to have been lost by the Lizardis on cotton, and with the $2,500,000 which in April the Brown firms in America and Liverpool feared they might lose, though their actual losses were much less.48 Losses and gains usually cannot be estimated entirely in dollars or pounds. This was true of the situation of Baring Brothers & Company in the autumn of 1837. Many American correspondents had been annoyed with the aggressive curtailment of the London house during the winter and consequently established connections with the Barings' competitors. When the Barings' circular of March 2 appeared in the New York press, the Journal of Commerce criticized the Londoners for proscribing bills of agents on principals and for

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giving no warning of such a repressive remittance policy. Biddle's reaction to the revocation of the credit to the Bank of the United States was caustic; he thought the action of the Barings was unfair because it deranged the calculations of the bank and unreasonable because, in his opinion, the suspension of specie payments was not an adequate reason for annulling an open credit at the moment. His criticism seems valid in so far as the credit might have been used advantageously to facilitate payments by Americans to Europe and to resuscitate the languishing American economy.49 Despite these criticisms the prestige of the House of Baring probably never was much higher than in the autumn of 1837. It was the only large Anglo-American merchant banker to go through the crises and panic of the preceding year without recourse to the Bank of England. It had been a bulwark of strength in averting a panic in the United Kingdom between February and June. As a consequence British business men were in a position to buy American and foreign commodities as well as American securities after the stalling of the economic machine in the United States. A quick recovery and liquidation of the American short-term foreign debt was thus assured. Much credit must be assigned to the Barings for that situation. Moreover, the house was in a very favorable position to attain a greater preëminence in American trade and finance if it so desired. Its losses were phenomenally small. A relatively slight proportion of its capital was tied up in unsalable securities and commodities. Three of its strong competitors had been eliminated, three others had not yet been restored to full credit, and the Rothschilds, although they acted as a financial agent for Americans and as marketers of American securities, granted no commercial credits. Baring Brothers & Company stood alone as the leading general AngloAmerican merchant banker. Ward succinctly phrased it to the Barings: "There is very great reliance on your House, and it will be the sheet anchor of the commercial world, and command the deposits of the shipping interest of the U. States and any other business which may be desirable to you." 5 0

CHAPTER

IX

F O L L O W I N G A M I R A G E , 1837-1839 AT THE close of the summer of 1837 Baring Brothers & Company desired to recoup its losses and to restore international trade to normalcy as soon as possible. To that end strenuous efforts were made to close overdue accounts, to induce resumption of specie payments in the United States, and to initiate operations designed to increase the profits of the house. After an expansion lasting only eighteen months, the partners decided that the safety of the Barings depended upon a vigorous contraction of their activities. CONDITIONS OF TRADE Conditions of trade seemed generally favorable to profitable enterprise from the autumn of 1837 to the spring of 1839. Politics neither aided nor retarded economic activity to any extent, security markets in both England and America stirred with new life, prices rose, land values revived, and Anglo-American trade and finance experienced a rather extraordinary recovery, partly by virtue of the inflationary measures of Nicholas Biddle. Political developments exerted negligible influence upon business. In the United States no disturbances occurred and no serious alarms were sounded. President Van Buren's independent Treasury scheme failed of enactment, but the Specie Circular, which probably loomed larger in the public mind than its actual influence warranted, was repealed in May, 1838.1 Uncertainty, bred of the lack of a comprehensive Federal recovery program, acted somewhat as a deterrent to full confidence in the American economic potential. English politics were so calm as to elicit practically no comment from the Barings. International affairs were only slightly more disturbing. Friction between the United States and Mexico over debts and Texas offered little threat to trade. Revolts in Canada and Brazil caused only mild flurries in the British money market, though the Caroline episode

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CH. IX

and the Hunters' Lodges kept alive Canadian-American animosities until the tension over the Maine-New Brunswick boundary flared into the bloodless Aroostook War in the late winter and spring of 1838-39. A French blockade of Buenos Aires stopped much of the trade with that port. On the other hand, the disagreement between Britain and China concerning the traffic in opium had not yet terminated business activity in Canton. War in Afghanistan was too remote to affect international trade. Economic conditions seemed generally promising. In terms of Silberling's index numbers, commodity prices in England rose steadily, if not spectacularly, from the low point of 96 in the third quarter of 1837 to the high of 112 in the second and third quarters of 1839. British foreign trade expanded rapidly, though inactivity in manufacturing and higher wheat prices contributed to the initial agitation for the People's Charter in 1838. Market rate for money averaged 3 per cent in 1838. Signs of revival were marked in the United States. Wholesale commodity prices rose from the post-panic low of 98 in September, 1837, to a high point of 125 in February, 1839, after a sharp decline the previous spring. Receipts from sales of public lands reached a very low point in early 1838 but rose speedily during the summer and fall of the same year. Railroad stock prices rose between June and November, 1837, reached a new low for the period in April, 1838, and then fluctuated irregularly on higher levels until February, 1839, Discount rates rose from 6 per cent; in June, 1837, to 18 per cent in April and May, 1838, and ranged between 6 and 9 per cent for the following year. Exchange rates on England, which were 121 in September, 1837, dropped to 104V4 in the following April and hovered near 109 for another twenty months. Wheat crops were fair to good in both 1837 and 1838, but prices were not high. The record cotton crop of 1837, with its low prices, was followed by a poor yield in 1838 and high prices. The volume of foreign trade in 1838 was below that of either 1837 or 1839.2 The establishment of regular steam navigation across the Atlantic in 1838 injected a new element into foreign trade. On April 23 the Sirius and the Great Western, which had sailed from Cork and Bristol, respectively, steamed into New York harbor. "Steam navi-

CH. IX

CONDITIONS OF TRADE

237

gation," wrote a N e w Y o r k editor, "is no longer an experiment but a plain matter of fact." 3 T h e Great Western at once began shuttling between her home port and N e w York. Although the first year of steam transportation did not effect much change in the carrying of merchandise, orders for goods could be exchanged with much greater speed and regularity. Similarly steam communication brought bills drawn in India and China to London much sooner, thereby shortening the time to provide for all drafts which were to be covered six months after acceptance (6 months sight). During those eighteen months a new and greater stream of bonds cascaded upon the British and American money market. N e w banks, new insurance companies, and new railroads needed funds and issued securities to achieve their ends. States and cities issued bonds to aid both new and old improvement schemes and to finance public works projects to relieve unemployment. State debts jumped from a total of $123,803,747 at the end of 1837 to $175,466,578 at the end of 1839. T h e Federal government, embarrassed by the suspension of deposit banks holding its funds, ventured slowly back into debt through the medium of Treasury notes. Large portions of the State issues crossed the Atlantic and passed into the hands of European, chiefly British, investors. A s early as November, 1837, the Barings reported that the British market was filled with "American Stocks of Every description." 4 Many factors contributed to the remarkable efflux of American securities. Most important by all odds was the relatively slight effect of the crisis of 1837 upon the British investing public. There was still plenty of capital available for productive enterprise : English railroad issues soon regained popularity with investors, who were almost as willing to accept American bonds of all descriptions. American credit was still excellent: interest payments on securities had been met promptly; vigorous efforts had been made to pay the short-term debt. T h e pre-1837 habits therefore prevailed. Securities had begun to move to England again as early as the late spring of the crisis year. Simultaneously English receptivity to the American long-term borrowing assured a sympathetic hearing to politicians in the United States who trusted in divine Providence to lead them far from the pitfalls of higher taxes. Had the foregoing basic conditions not ex-

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CH. IX

isted, neither Nicholas Biddle nor anyone else would have been able to dispose of American securities abroad.5 Biddle was only one among several influences in domestic and international trade and finance. The Barings, as well as other merchant bankers, vigorously encouraged the transmission of American securities for sale. A n established pattern of operations, British demand, American willingness to supply the securities, and the need to reduce the short-term floating debt as a prelude to return to normalcy in foreign trade, were items in their thinking. By taking bonds of New York, Ohio, and Pennsylvania, as well as shares and bonds and post notes of the Bank of the United States, during the spring and summer of 1837 the Barings had returned to former practices as a means of reducing the short-term debts of their American correspondents. By mid-summer the managing partners had offered another suggestion, which, like their famous circular in 1839, advocated the assumption of responsibility by the Federal government. In 1837 the Barings considered the resumption of specie payments in the United States indispensable to the renewal of foreign trade on a normal basis. T o resume, the banks must retain specie and bullion in America. If no other medium of payment was utilized, available specie would go out to pay the short-term debt. Of the £6,000,000 balance estimated to be due foreign creditors on September 1, Baring Brothers & Company thought ^3,000,000 would have to be paid or converted into long-term obligations before the banks could with safety resume specie payments. As a means to recovery in the shortest possible time, the partners therefore suggested that Congress should pass an act authorizing the government to issue 4,000,000 noninterest-bearing sterling bonds, one-half payable at 8, Bishopsgate Street one year from date of issue, the remainder in two years. These securities should be taken in the Atlantic coast cities by banks which would at once promise to resume specie payments. In turn the banks would dispose of the bonds to business men having remittances to make to England. As a consequence of the competition from securities, the price of sterling bills would drop and needed specie would stay in America as a foundation for resumption. As Ward feared, his attempts to induce the Van Buren administration to

CH. IX

CONDITIONS OF TRADE

239

adopt the scheme produced nothing but antithetical reactions. He was forced to direct his efforts for resumption entirely toward the banks themselves.® In evaluating the situation, Baring, Bates, and Mildmay miscalculated on four points. They underestimated the forthcoming volume of securities to be created by States, municipalities, and chartered companies, as well as the willingness of British investors to buy them. The partners overemphasized the necessity of resumption as a prerequisite to the return of prosperity in American foreign trade. Finally, they failed to foresee that new opportunities for profit and their own conservative practices would produce greater competition than the House of Baring had previously known. During the height of the crisis in England they had assumed that they had the field of Anglo-American trade and finance to themselves and that they could set their own terms in operating their business.7 The partners soon discovered their error. Competition came both from former leading houses and from firms previously in the second line of repute. Ν . M. Rothschild & Sons had ridden through the debacle with undamaged reputation. W. & J. Brown & Company, Morrison, Cryder & Company, and F . de Lizardi & Company had collected their bills receivable rapidly and were again strong competitors by 1838. Wildes & Company, Grant, Bell & Company (formerly Bell & Grant), and Coleman, Lambert & Company recovered sufficiently after their temporary suspension of payments to reenter the field, though on a smaller scale. Reid, Irving & Company, Magniac, Smith & Company (formerly T . W. Smith & Company), and Thompson, Hankey & Company directed greater attention to trade with the United States. Palmer, McKillop, Dent & Company (formerly Palmer, McKillop & Company) not only devoted greater effort to forwarding its specialty, the trade with the Far East, but also became important in marketing American bonds. Fletcher, Alexander & Company, charging the same commissions and operating as cautiously as the Barings, established a Liverpool affiliate. Huth & Company, McCalmont & Company, and Holford & Company, the last-named new to American trade, expanded their business very rapidly, speculatively, the Barings thought. George Peabody, merchant from Baltimore

240

FOLLOWING A MIRAGE, 1837-1839

CH. IX

and later founder of George Peabody & Company, made a humble beginning in the London money market during this same period. 8 Nicholas Biddle and his Bank of the United States of Pennsylvania provided the most spectacular competition for all the AngloAmerican houses, however. Distrusted apparently by a few only, including Ward and the Barings, Biddle seems to have captured the imagination of merchants and bankers on both sides of the Atlantic. T h e Barings could thank themselves for contributing to the actions of the bank. For one thing, Biddle used the annulment by the Barings of the uncovered credit to his bank in 1837 as an excuse to terminate the relationship. T h e London house intended that the revocation of the credit and the closing of the account should be preludes to the negotiation of new terms more favorable to itself, particularly in giving the partners more control of the operation of the account and in the use of their funds. A s an indication of their willingness to provide facilities to the bank, early in September, 1837, the partners authorized the bank to draw ^300,000 in addition to the sums already advised. Biddle chose to decline that offer and to establish his own agency in England, an idea which he later admitted to Ward had been in his mind for two years.9 In the second place, the Barings had encouraged the bank to forward cotton during the summer of 1837. In May a group of the bank officials arranged that A . G. Jaudon, a brother of Samuel, should order as if for his own account extensive purchases and shipments of cotton from N e w Orleans and Mobile. T o provide funds A . G. Jaudon either drew on the Barings in favor of himself or ordered his southern representative, J. E. Whitall, to draw on the London house in favor of his northern principal. In either case the bank purchased the bills, thus providing immediate funds for the purchases. T h e purchased bills, accompanied by bills of lading consigning the goods to Baring Brothers & Company, Liverpool, were dispatched to the London house as remittances, which were credited to the account of the bank. A n y surplus remaining after the sale of the cotton was to be added. 10 Except that the parent institution was in the United States, Biddie's mechanism and procedure followed the regular lines of AngloAmerican trade. Samuel Jaudon arrived in London during the first

CH. IX

CONDITIONS OF TRADE

241

week of November, announced the creation of his agency of the bank, opened a drawing account at the Bank of England, almost immediately began to accept drafts issued on him by the Philadelphia principal, and raised funds to meet his obligations by discounting bill remittances, by issuing post notes, and by selling bonds of various States and corporations. At the same time the firm of Humphreys & Biddle was set up in Liverpool to receive cotton consigned by the agents and friends of the Bank of the United States. If and when Humphreys & Biddle needed funds in order to hold cotton for higher prices, it was able to draw on Jaudon in London. Between the two they had replaced the facilities of the House of Baring as utilized earlier in the same year. In America merchants and factors were enabled to forward cotton to Liverpool through the special facilities created by Biddle. One phase of the operations was a private speculation by the president of the bank and a group of his friends. This ring borrowed money from the bank to lend to Bevan & Humphreys, Philadelphia commission merchants, who engaged to accept all drafts on themselves issued by banks, merchants, and factors selected by the group. Those agents in the South used the funds thus provided for purchases of and advances upon cotton consigned to Humphreys & Biddle in Liverpool and Hottinguer & Company at Havre. The bills of lading and orders for insurance went to Bevan & Humphreys. In order to repay the Biddle group the latter firm drew on the foreign houses and turned the drafts over to the bank, which forwarded the bills and shipping documents to Jaudon as remittances. The account of the group was then adjusted on the books of the bank. The European houses sold the produce and remitted the proceeds to Jaudon to be credited to the account of Bevan & Humphreys. More important in volume was the regular business carried on by the bank. For example, upon cotton shipped by the Brandon Bank through the agency of Minturn & Yorke to the consignment of Humphreys & Biddle, the bank agreed to advance not more than $30 per bale through the agency of the Merchants' Bank of N e w Orleans. The Brandon Bank drew on Humphreys & Biddle in favor of Minturn & Yorke, who endorsed the drafts, which were then turned over with the bills of lading to the Merchants' Bank in re-

242

FOLLOWING A MIRAGE, 1837-1839

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turn for the agreed cash. T h e N e w Orleans bank then drew on the Bank of the United States, which was paid with the drafts on Humphreys & Biddle and sent them to Jaudon. Whether under private speculation or in the regular course of business, the activities of the bank in forwarding cotton offered strong competition to the Barings and markedly affected their decisions. Other operations of Biddle's bank also influenced Baring Brothers & Company to a greater or less degree: ( i ) T h e London house was obligated to transfer dividends and interest on bank shares and bonds sold to its clients. (2) It was to be reimbursed by two installments in 1838 for the last half of the loan made to the bank in 1836. (3) By issuing 180-days' sight bills on the London agency, as formerly done upon the Barings, the bank competed with the credits issued by Ward for use in the Far East. (4) T h e bank also used the same technique in facilitating imports into the United States from the West Indies and South America; it granted open credits to captains of merchant vessels. That activity caused disaffection among some seafaring correspondents of Baring Brothers & Company, which permitted drafts against freight money by shipmasters only after deposit. (5) Established under the direction of Richard Alsop and George Griswold, the branch of the bank in N e w York threatened to wean correspondents away from the Barings in that very important port. (6) In spite of their objection to receiving remittance from America in bills of the bank upon its London agent, the managing partners were forced to countenance the practice to a large extent. Inasmuch as Jaudon and the bank were really one and the same, just as were agents in the United States of principals of London houses, the Barings felt that the previous experience of the "three W ' s " and their agents was a strong warning of the danger in bills of the bank on Jaudon, its agent. (7) Moreover, the power of the bank, backed by its very large capital, was to be feared in foreign exchange operations. 11 (8) Finally, Biddle was far from anxious to resume specie payments at an early date, while the Barings regarded such action on the part of the American banks as a sine qua non for the return to normal business enterprise. Obviously almost a miracle would be required to bring the two institutions together again.

CH. IX

DRIVING FOR RESUMPTION

243

DRIVING FOR RESUMPTION

T h e London house backed up its conviction with an active campaign to induce resumption. A s indicated, the suggestion of the Barings in July was directed toward that goal. Their agent pushed the idea so vigorously that the partners finally felt it necessary to restrain him, particularly in his criticism of the Bank of the United States. Ward began his drive almost as soon as the banks had suspended. A s early as July, 1837, he was sending the Barings pamphlets and newspaper comments on resumption as well as on the reform of banking in the United States. H e urged upon his friends, acquaintances, many banks, and the government of the United States the possibility of resuming payments in specie by March 1, 1838. T o Nicholas Biddle he presented his arguments in person and submitted two extensive memoranda to bolster the points made in conversation. Ward even wrote unsigned articles for newspapers, including two that appeared in the N e w York American. With the aid of Samuel Ward, of Prime, Ward & King, he composed letters on resumption for the press in England, though the Barings apparently took no steps to have them published. Disappointed that the net result of conventions of the N e w York banks on the subject in August and November, 1837, was a resolution that it was desirable to meet again on the April 11 following, Ward consoled himself by the thought that he had advocated the proper course through individuals at both meetings. H e rejoiced when the banks in N e w Y o r k began paying specie i n May and he did not approve of Biddle's continuing apathy to a general resumption. Needless to say, Ward was not displeased when the repeal, on May 30, of the Specie Circular cut off one of Biddle's arguments; nor was he disgruntled at the order from the governor of Pennsylvania on June 29 that all banks in the State should return to specie payments on or before August 13, 1838. "I have been informed by many," he wrote with some pride to the Barings in November, 1838, "that I deserved much for the pains I had taken to place the matter of resumption fairly and fully before the country." 1 2 H e certainly deserved a medal for effort, even though many banks in the South and West had not resumed by 1839.

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CH. IX

On the other hand, Ward apparently expressed his views so vigorously and so often, particularly with reference to the Bank of the United States, that rumors began to plague him and Bates finally felt obliged to utter words of caution. In January, 1838, Jaudon informed the Barings that it was said in America that Ward was urging resumption because he had large sums of money to transfer to London and wished to "get the exchange down." Beyond reporting the matter to Ward, nothing more was said to him on that point, but a year later Bates urged him not to identify himself with any party for or against the Bank of the United States because by so doing he received credit for all the acts of that party. According to Bates, it so happened that the same ideas as expressed by Ward were promulgated in "certain newspapers" in the United States and were later "dished up in the 'Times' with their customary Seasoning." Ward's opinions were watched by Biddle's friends, who would claim that opposition on the part of Baring Brothers & Company was due to the loss of the account of the bank. "Whereas," wrote Bates, "we do not care much about the bank, and do not find the loss of the account of any moment in our concerns. I should therefore keep my opinions to myself." 1 3 As a matter of fact, the partners themselves, although Prime, Ward & King was given the limelight, aided and abetted a spectacular move to facilitate resumption. On March 19, 1838, J. G. King agreed that his house should receive and dispose of "to the best advantage, such amount of Gold coin [sovereigns]" as might be sent to it by the Bank of England and should pay for the gold in bills of exchange under the endorsement and guarantee of Prime, Ward & King and Baring Brothers & Company. The actual shipments were made through the agency of the Barings, who divided the commission of 1 per cent on the transaction with the New York house. The amount, which at first it was thought might reach ¿2,000,000, was finally set at ¿1,000,000 sterling, the last lot being shipped by April 19, 1838. The profit on the transaction was negligible, since bonds sent to London to cover bills drawn by Prime, Ward & King on Baring Brothers & Company for remittance to the Bank of England depreciated in value before the account was closed. T o the surprise of the bank officials, about ¿700,000 was remitted as

CH. IX

DRIVING FOR RESUMPTION

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early as June 15, 1838, although the account was not closed until A u g u s t ι , 1839. Various uses were made of the sovereigns. Some were utilized to buy O h i o 6 per cent bonds later remitted to Baring Brothers & C o m pany and against w h i c h Prime, W a r d & K i n g drew bills for remittance to the B a n k of England. T h e Mechanics B a n k of N e w Y o r k purchased $500,000 worth and the Merchants B a n k of Boston borrowed $97,000 worth at 6 per cent interest, payable in thirty to sixty days. E v e n Biddle, after vainly trying to embarrass the N e w Y o r k firm by forcing up exchange rates on L o n d o n and at first refusing to buy any gold, admitted defeat and purchased 300,000 of the sovereigns. O n l y about ^330,000 remained in the hands of Prime, W a r d & K i n g on M a y 25, and almost all of that was soon deposited w i t h the B a n k of America, to the credit of the Treasurer of the United States, in exchange for $1,000,000 of 6 per cent notes. T h e Girard Bank of Philadelphia purchased the last of the lot on July 25, 1838.» T h e objects of the transaction were most clearly stated by the Barings in a letter to H o p e & C o m p a n y : 1 5 W e consider this a wise and salutary measure, for besides the probability of their [Bank of England] employing in a lucrative manner its now useless excess of bullion, it will at once prove to the community that it does not dread a drain of its treasure, check the constant petty shipments of individuals, prevent any internal drawing which might proceed from constant demand by driblets of sovereigns and establish the confidence in the trade of this country that an export of specie will not frighten the Bank directors or make them have resort to measures for making money scarcer. O n the other hand it will at once enable the N e w York Banks to resume specie payments and to maintain them, whether they are immediately followed by the other Banks throughout the country or not, as N e w York is not a debtor to the other parts of the Union but has claims on them and its notes and the bills on New York are at a high premium on the other cities. W e think that most of the seaport town Banks in the North will follow speedily their example, but at any rate their act will place the trade upon a securer footing, restore confidence and facilities and diminish the pressure which the fears of the Banks and their consequent reduction of issues must produce.

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Baring Brothers & Company quite evidently had in mind more than mere aid to the banks of the United States. Although Thomas Tooke called the whole operation "mere quackery," the promoters considered that their purpose had been accomplished. Ward regarded it "as having been a very important" move. J. G . K i n g thought the gold had arrived at an opportune moment, because Biddle in a letter to John Quincy Adams "had just before issued his manifesto against the Resumption of Payments by the Banks generally." By the arrival of the sovereigns, declared King, Biddle's attempts to contravene the "labors of the best heads in N e w Y o r k and Boston" were defeated, and resumption was assured "so far as N e w Y o r k and the Eastern States" were concerned. 16 Undoubtedly, resumption was made easier for those areas. A t best, the success in achieving the objects expressed to Hope & Company would be difficult to measure and to assess. Even though N e w Y o r k banks had already decided to resume, if the operation helped to restore confidence it was of some value. A t least the Barings themselves could feel free to enter into commercial ventures more actively. OLD DEBTS AND NEW CREDITS

During the period of false prosperity, conservatism and caution characterized the operations of the Barings with reference to credits for operations in all merchandise except cotton. T h e collection of unpaid balances proceeded steadily, and a limited expansion in credits was gradually permitted. In comparison to their activities in cotton and securities, in fact, the practices of the Barings in financing ventures in the Orient, Latin America, and Europe were definitely to the right of the "middle course," said by the partners to be their ideal. Had operations in securities been conducted with as much judgment as those in credits, the House of Baring would have had less difficulty in the crisis of 1839. Substantial progress was made by the summer of 1839 in reducing debts dating from 1837 and earlier. In the available evidence the first total for "deferred debts" was ,£171,695 in April, 1838, and the last /63,34ο in August, 1839, which included overdues dating back to 1831. Of those sums, the portions secured by promissory notes dropped from .£57,768 to ,£46,597, but would have been much less

CH. IX

OLD DEBTS AND NEW CREDITS

247

had not new items been added from time to time as settlements were reached with firms which had failed. Significantly, during that period debts due from failed firms declined from 114,005 to ¿16,743. "Probable losses" on these concerns were estimated in March, 1838, by Ward at £48,650 and by his principals at £40,000. Neither mentioned the subject again.17 Collections continued to be handled as seemed best in each particular case. Some were covered by sales of merchandise, others by receipt of notes, still others by special settlements. Samuel Comly paid only 50 cents on every dollar owed to the Barings, and Manice, Gould & Company paid only 60 cents. Other houses covered their accounts by new shipments of goods. In 1838 Ward reluctantly brought a successful suit against W . C. Gibbs of Newport and Providence for a claim arising from a cotton operation in 1836. Consideration was given to bringing similar action against Davis, Brooks & Company for sums owed for railroad iron purchased for the Pensacola Railroad Company, but the Barings agreed to submit the question to three referees. When their decision proved unsatisfactory, the case went to court. The New York firm was still pleading for a settlement in 1847.18 Certain new expedients were also adopted in handling overdue accounts. Late in 1837, instead of exchanging monthly accounts, as was the case during the early part of the year, Ward and the home office began making up accounts each quarter — beginning with March 1 in Boston, and January 1 in London — supplemented by an annual account late in each year. Ward's remittance account was kept open, but most correspondents were expected to buy bills elsewhere and to remit directly without Ward's intervention. Agents were also utilized to make collections more than previously. John A . Stevens, John E. Lodge, and Edward Austin in New Orleans, the same Stevens in New York, Grant & Stone in Philadelphia, Israel Whitney in Havana, and H. B. Webb in Rio de Janeiro served in that capacity. As to granting credits, amended rules of business for 1838, which were dispatched to Ward in October, 1837, definitely reflected the extremely cautious and conservative frame of mind of the Barings. They gave Ward orders as follows: 19

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FOLLOWING A MIRAGE, 1837-1839

CH. IX

ι. No uncovered credit to be granted to anyone and no credit whatever to be granted to persons having more than one account in London [;] no credit to be granted to the agent of any European House except as herein authorised. 2. Credits may be granted for operations to Cuba Brazil and India to persons keeping their account entirely with us and having other business besides that of Credits. It seems desirable that these credits particularly those for distant places should be covered by an assignment or by the bill of Lading and the policy of Insurance, we are aware that in some cases you cannot ask for these stipulations, but these we think should be a deviation from the general rule, and where you have any doubt you can exact the Bill of Lading and Insurance and limit the drafts to % rds. It is not desirable to issue these credits for a very large amount and we leave it to your discretion but we suppose the amount of £500,000 will cover all the wants of our Solid correspondents and we are not desirous of granting credits to those who have other transactions with us, nor of granting facilities that may draw weak houses into operations beyond their means. Commissions 1 % if not more is advised. 3. Advances on consignments to London & Liverpool and Cowes and a market from the United States to be regulated according to Tariff of ist. September. 4. Exchange accounts & Bank accounts for Exchange operations, we do not wish to have unless the parties will keep a balance sufficient to meet the probable amount of protested bills, no credits to be given for such accounts. The commission on these is p. cent. 5. Dry goods accounts, those of our correspondents that have stood firm and have paid up may have a reasonable amount of credit, the condition should be that they keep no other account in London and that they employ our Liverpool House for their forwarding business but we want no new accounts of this kind. 6. Credits for Sweden,_ Russia, & France, these where there is the smallest doubt should have the security of the bill of Lading and Insurance. 7. Insurance as far as can be should be made on this side for goods going from Europe to the U. States and from Brazil etc to Europe, the Insurances on Sugars from Cuba to Europe made in London are quite as advantageous as those in the U. States on account of great advantage of the average clauses. London, 12 Octo. 1837. Baring Brothers & Co.

CH. IX

249

OLD DEBTS A N D NEW CREDITS

Note, for the present we think our friends should use the bill form of credit, drawing the bills themselves to the order of the supercargo, as it will be giving all the security such paper can carry, and all the aids that can be brought to strengthen such paper will be now required. W a r d correctly interpreted the first sentence to mean that it permitted him to grant all credits except those expressly forbidden. Although Ward followed the rules of his principals, there was a marked increase in outstanding credits. On October 6, 1837, Ward could do no more than compose a list of "Correspondents to Commence with," including only nine dry goods houses. By December, 1837, the Barings had set a limit of ^300,000 for dry goods beyond which they would not go in granting credits, but by the following July they had told Ward he could then be "governed by the reasonable wants of correspondents." 20 T h e expansion can be judged from Table 1. In view of difficulties with dry goods houses in 1837, the increase TABLE 1 OUTSTANDING COMMERCIAL CREDITS OF THE BARINGS, 1 8 3 8 - 1 8 3 9 (EXCLUDING THOSE GRANTED FOR AMERICAN EXPORTS)

June 1 D r y Goods West Indies, South America, and Europe East of the Cape of G o o d Hope Total

1838 October 15

1839 M a y 15 February 1 0

£130,500

£313,500

£417,000

£476,000

146,100

174,850

376,100

448,300

465,100

793,135

811,150

865,000

£741,800

£1,381,485

£1,614,450

£1,789,300

Source: BPOC, Ward to Barings, June 1, Oct. 1 5 , 1838, Feb. 10, M a y 13, 1839. W a r d estimated that total credits granted in America from June 1, 1837, t o June 1, 1838, had equaled about £800,000 (ibid., M a y 2.8, 1838). His estimate of outstanding credits on Aug. 10, 1838, was "something near a million sterling" (ibid., Aug. 10, 1838). The total dry goods credits on Sept. 1 7 , 1 8 3 8 , according to W a r d , were £148,100, w i t h £60,000 more in a list of "Probable D r y Goods Credits." According t o BPLB, Barings to W a r d , Oct. 6, 1838, w i t h about £300,000 running in textile credits, only about £75,000 of outstanding bills were running on them.

250

FOLLOWING A MIRAGE, 1837-1839

CH. IX

of credits in that category was especially noteworthy. T h e aggregate figures for that group of credits are somewhat misleading, however, because American importers of textiles seldom used more than a small part of their total available credit. T h i s practice resulted in part from the introduction of more regular and swifter navigation by steamships, which enabled American merchants to gauge better the demands of their customers. T h e demand itself was less after 1837. Paralleling the expansion in outstanding credits, new numbers added to the Private Remarks Book rose from 1,343 a s January ι, 1837, to 1,840 by November 17, 1838.21 Five n e w accounts deserve special comment. Alley, Stanton & Company, of N e w Y o r k , was granted an importing credit of ,£50,000, the largest in the textile category. Jonathan N e a l & Sons, general merchants of Salem, normally enjoyed the largest c r e d i t — £ 100,000 or more. Grant & Stone replaced Samuel Comly as the leading correspondent of Baring Brothers & Company in Philadelphia. In 1838 Samuel G . W a r d , son of T h o m a s W r e n W a r d , began to assist his father in N e w Y o r k and to undertake his first business ventures under credits f r o m the house whose American agent he was to become after his father's retirement in 1853.22 Grinnell, Minturn & Company, N e w Y o r k commission merchants, characterized by W a r d as "active, decided, rich, prudent, & highly honourable and capable," in the same year decided to cast its lot with the Barings. T h e firm became one of the most important connections of Baring Brothers & Company in N e w Y o r k . T h e first move involved the transfer of the agency of six of the L o n d o n packet ships under the control of Grinnell, Minturn & Company from Wildes & Company to the Barings. 23 Adherence to rules and practices was observed more strictly than before 1837. F e w indeed were the deviations f r o m them. Safety and trustworthiness in correspondents were emphasized as never before, and no credit in excess of the capital of a firm was given in any case. Almost no credits were granted to firms without a general account with Baring Brothers & Company. Houses insisting upon having more than one account in London, unless large and reliable commission merchants, were firmly turned down. T h e Barings laid much of their trouble in 1837 to laxity on that score. F u l l responsi-

CH. IX

OLD DEBTS AND NEW CREDITS

251

bility of special or limited partners and guarantees from responsible men were demanded in all cases where there was the slightest doubt. In granting credits to firms "composed of one individual" Ward adopted the rule of always having a guarantor. Otherwise, in case of death, Baring Brothers & Company would be obliged to wait a year or more for the balance due. T o a greater degree than before, Ward exercised exclusive power to grant credits to American firms while the Barings controlled those to European houses having trade with the United States. Ward's principals insisted that remittances had to be made in regular undoubted bills of not longer than "60 d/sight," "substantially drawn and endorsed to the remitter," and sent direct to Barings from America and not through agents residing in England. Their own agent was not allowed to draw upon the Barings except for their own correspondents, and only then if the bills were remitted direct to the London house. Shipments of property to the United States to the order of Baring Brothers & Company had to be paid for before delivery of the bills of lading. In spite of some suggestions that bills be sent out, the letter of credit continued to be utilized for trade east of the Cape of Good Hope. Some of the innovations introduced in the crisis period were retained. Bills from the "East Indies" had to be covered within four months after their acceptance. In case of remittance of irregular bills, the London office wrote directly to the American house and informed Ward of the action taken. When accounts were to be covered by shipments of merchandise, such shipments had to be "seasonably made," with the bills of lading made out to the order of Baring Brothers & Company. These shipments were not to be counted on as payment nor to be drawn against in advance for more than two thirds of the value. 24 Several entirely new practices were intended to give the Barings still greater assurance of safety in their commercial credit operations. The exchange of quarterly statements, though not providing so close a watch over accounts as those issued monthly during the crisis year, was at least more efficient than the yearly accounts exchanged before 1837. Bills drawn by houses in France exporting to the United States had to be issued at "three months date" instead of at "four months date," as during the boom years. Acceptance commissions,

252

FOLLOWING A MIRAGE, 1837-1839

CH. IX

formerly all ι per cent, were raised to 2 per cent for drafts from the Orient and to i l / z per cent for those issued in South America for shipments to the United States. N o charge was made on unused credits. In comparison, the Bank of the United States charged 2V2 per cent for bills sent to the Far East, 3 per cent for those to South America, and 1 per cent on all not used. The letter of credit of the Barings was altered in March, 1839, to include a more specific promise to pay and thus to assure payment to endorsers and holders as well as to drawers of bills under the letter of authorization. Special letters of credit to dry goods houses were used by Ward for the first time; also for the first time all his credits had to be confirmed by his principals in England. For almost all uncovered credits the Barings required the grantee to sign the revised receipt pledging goods purchased or advanced upon, and the policies of insurance to cover drafts issued.25 In some respects these same precautious enabled the House of Baring to follow the middle course which it had always sought under Baring, Bates, and Mildmay. The extensive use of the receipt made covered credits unnecessary, especially with such a group of trusted correspondents as Ward selected. T o be sure, some covered credits were granted to firms not fully trusted, particularly in Cuba and Brazil, provided that drafts were limited to from two thirds to three fourths of the cargo. In a few cases the amount of the credit to a house was enlarged, usually upon the condition that all the extra sum should be covered. T o Ward's chagrin, his principals insisted upon permitting strong and honest commission houses in the United States to have another account in London. Instead of holding firm against double accounts, generally the Barings restated their rule to read that they would not "grant an uncovered credit to anyone who takes credits also from other Houses." 2 6 Similarly the partners forced Ward to be less rigid in his demand that all firms using uncovered credits should sign the revised receipt. Forwarding goods purchased in England through the Liverpool house of the Barings, which was at first made a condition to all dry goods credits, was later altered to a mere request which few firms refused to follow. Ward independently liberalized previous practices in other ways. Instead of refusing all credits to dry goods houses that had not paid

CH. IX

OLD DEBTS AND NEW CREDITS

25 i

old debts, he permitted selected firms to issue drafts equal in volume to half the amount of their remittances. H e also utilized what he called "divided accounts" to allow weaker houses having no general account with the Barings to operate under the open-credit system; acting under their own open credits with the London house, Goodhue & Company and Grant & Stone opened accounts for single operations. T h e two large firms took a share of the risk and a proportionate share of the commissions, which ranged from 2l/z to 3 per cent. 27 In spite of evidences of an elastic policy, the net result of credit rules and practices as applied was extremely cautious and conservative. Exceptions and concessions were undoubtedly fewer than prior to September, 1836. Credits covered by bills of lading were probably smaller in number, but the revised receipt, which f e w refused to sign, was virtually an assignment in advance of the goods to be purchased under letters of credit. Small firms, even including those for whom the Barings shared responsibility with Grant & Stone and Goodhue & Company, were not allowed to comprise more than a very small part of the credit operations of the firm. Neither criticism of policy nor complaints of practice influenced the Barings very much one way or another. Complaints regarding the Liverpool house were occasionally received, sometimes for faulty execution of orders under credits, but usually for failure to sell cotton at the highest possible figure. Ward was criticized by a few. On that score his principals considered that a part of the trouble resulted from his inability to refuse requests graciously. Criticism of general rules and practices in granting credits worried the Barings not a whit. Although refusal to make concessions would "reduce the amount of our business," they wrote to Ward, "we shall sleep the better and we are sure you will." Newspapers commented upon the conservatism of Baring Brothers & Company and W a r d upon only one occasion, which neither deigned to notice publicly. " I cannot see," Ward somewhat naively wrote to his principals, " w h y there shd. be a disposition to write against you or myself, as it wd. seem only to hurt those who write." 2 8 T h e result of the generally conservative credit policy of the Barings was shown in the declining volume of their outstanding obliga-

254

FOLLOWING A MIRAGE, 1837-1839

CH.

IX

tions, of which current acceptances were a part. T h e changes are presented in Table 2.29 TABLE

2

OUTSTANDING OBLIGATIONS o r THE BARINGS, 1 8 3 8 AND

Total 1838 — March 6 April 14 September n 1839 — February zo May 13

£684.703 84M 2 -5 679,170 481,485 343.658

Acceptances

1839

Overdues (Including old debts)

£169,070

£5 I 5.633

348.455

494,070

107,390

471,880

155.583

116,902.

173,486

170,171

Source: BPLB, Barings to Ward, Mar. 6, Apr. 14, Sept. 22, May 13,1839; BPOC, Ward to Barings, Feb. 20, 1839.

A s the table indicates, the decline in the volume of acceptances roughly paralleled the reduction in old debts, thus creating a marked decrease in the total outstanding obligations of the House of Baring between March, 1838, and May, 1839. In comparison with the total outstanding obligations of ,£1,275,000 on September 1, 1837, all figures for 1838 and 1839 are relatively small. In fact, Baring, Bates, and Mildmay had no desire that their credit business should reach large proportions. In July, 1837, they had thought the grantor of open credits to be too much in the power of his correspondents, and must have "a very large capital if he would be always safe in his own position." They believed that such capital could be much more "beneficially employed" in ventures for account of the house itself.30 COTTON, KING FOR A YEAR

In keeping with this sentiment, one of the outstanding features of the Barings' operations between 1837 and 1839 was a marked expansion of commercial transactions on account of the firm itself. Coffee was purchased in Brazil, sugar in Havana, hemp in Russia and the United States, tea in Canton, iron in Sweden and the United

CH. IX

COTTON, KING FOR A YEAR

255

Kingdom, wheat and flour and cotton in the United States — all as ventures to terminate either in America or in Europe. 31 In many instances purchases for account of the Barings came forward as portions of cargoes upon which advances had been made to consignors. Cotton transactions, inasmuch as they include this feature and involve a larger amount of capital than any other venture in this category, will be examined in some detail. "The great staple by which we hope to make up for all our losses is Cotton," the Barings wrote in August, 1837. 32 It is not surprising, therefore, that the beginning of the autumn of that year found the Barings with large schemes for both advances on consignments and purchases for their own account. The organization for facilitating these operations in 1837-39 w a s almost the same, with the exception of personnel, as that of 1834-35. Being aware that almost all reliable cotton factors in New Orleans had failed, Baring Brothers & Company in the fall of 1837 urged the Union Bank of Louisiana and the Consolidated Association of the Planters of Louisiana each to make consignments of 20,000 bales to Liverpool. Ward was to have made similar overtures to the Bank of the United States, but Jaudon's departure to set up the London agency had announced a complete termination of the bank's account.33 Other firms in Mobile, Augusta, Savannah, Charleston, Philadelphia, New York, and Boston forwarded the staple to Liverpool, or to London, or "to Cowes and a market." T o obtain consignments from these firms, in several cases the Barings engaged to take shares in the cargoes. In addition, purchases were made in New Orleans and New York exclusively for the Barings. In 1837 Ambrose Lanfear, Edward Austin, and John E. Lodge, purchasers for New England factories, represented the Barings in N e w Orleans until John A . Stevens arrived in January, 1838, as special agent. Austin and Lodge were entrusted with the agency in 1838-39. During the same year Lovell Follett, an Englishman sent out by the Barings, was established at Natchez and inaugurated consignments from the Union Bank of Mississippi. In 1837-38 Ward engaged to take a one-twentieth share in all purchases of the Barings which were under his general supervision. Funds for these transactions were provided in a variety of ways.

256

FOLLOWING A MIRAGE, 1837-1839

CH. IX

The larger part of the capital was usually at one time or another in a "cotton account" managed by Ward. Goodhue & Company and Prime, Ward & King drew upon Baring Brothers & Company whenever Ward directed. The proceeds of the drafts were then kept by the two firms or placed in banks without interest. These funds were augmented by the transfer of sums received by Ward from maturing notes on old debts and from firms desiring to remit current payments through his agency. Usually Ward authorized firms or agents in the South to draw upon one or both of the New York houses at 5 to 6o days sight and instructed them to forward orders for insurance and bills of lading to the order of Baring Brothers & Company. Several firms, both in the South (Union Bank of Mississippi) and in N e w York and Philadelphia (Comly) drew directly upon the London office "at 6o d/sight." Commissions paid special agents, with one exception, were χ/τ per cent upon the sum of the drafts issued in making advances on cotton and freights, and P e r cent upon that issued for purchasing for the Barings. Stevens was paid per cent, less his expenses. The Barings thought he wanted too much, and the above rate was settled upon by a reference of the case to William Appleton and Samuel Ward. Follett engaged to receive 6d. on each bale consigned as a result of his efforts. Prime, Ward & King charged l/2 P e r cent for negotiating bills drawn in the South. Goodhue & Company charged nothing and therefore received the major portion of the business. Commission houses in New Orleans regularly charged 2J/2 P e r cent for "buying and drawing." The volume of the business was not so large as the Barings had anticipated. Having received 100,000 bales of the 1836 crop, largely against old debts, and having sold most of them by December 21, 1837, the partners hoped for as much the next season. Although there is no complete record of the cotton purchased on the Barings' own account, their limit of 37,000 bales was not reached. The total receipts of the Liverpool branch for the season were estimated to have been 79,564 bales, of which about 35,000 was on the firm's own account. Profits also fell below expectations. The operation started off well,

CH. IX

COTTON, KING FOR A YEAR

257

all the early shipments paying 10 to 17 per cent profit. Losses then followed on several thousand bales, even after taking into account the gains made in exchange by drawing on N e w Y o r k instead of directly on London. Ward's profitable resales in N e w Y o r k of a part of the cotton purchased there were insufficient to balance the account. On the purchases, according to the Barings, they lost "about the commissions" paid to the agents. Commissions charged on consignments by others remained as a gain to the house. Various factors contributed to the lack of profits and volume in the cotton business of the Barings that season. T h e partners entered the field late; not more than 7,000 bales had been purchased prior to January 1, 1838. Later shipments met the declining prices of spring and summer. On some of those, also, excessive freight of 1 1 / 1 6 to ι pence per pound had been paid by Stevens. Extreme caution on the part of the Barings hindered consignments in many instances. Limits for advances were kept too low too long. First set at ¿ 6 per bale, then raised to three fourths of the cost and later to nine tenths, the limits of the London house were always a little lower than those of competitors. Even when the banks in Louisiana were finally allowed to advance the full cost, the concession came too late to bring to Liverpool much cotton from those institutions. T h e " B a n k ring," W . & J. Brown & Company, and Lizardi & Company — among others — advanced almost the full cost at the outset and thus acquired a large proportion of the business. According to the Barings, other factors in their discomfiture were that not enough cotton was directed "to Cowes and a market," that freights paid could have been lower if purchases had been stored for a time, that the commissions charged by agents were too high, and that Stevens and some of the other agents were not capable judges of the staple. T h e classifications of the.buyers were not equivalent to those in Liverpool, and losses resulted. While in N e w Orleans, Stevens reported that the Barings were criticized for refusing to honor a draft of a prominent planter for ^ 5 3 above the proceeds from cotton consigned to the Liverpool house. Such caution seemed highly reprehensible to the liberal-minded, but financially circumscribed, merchants and planters of the South.

258

FOLLOWING A MIRAGE, 1837-1839

CH. IX

The sales policy of the Barings should also be assigned some of the responsibility for the unprofitable operations. The partners adhered strictly to their rule to sell steadily at current rates as long as even a small profit could be made either for themselves or for correspondents. They declined to follow the early lead of Humphreys & Biddle and W . & J. Brown & Company in holding. Even when the former turned to an active selling policy in the Liverpool market during the spring, and brought prices down, the Barings continued sales. Finally, for several weeks after May 22 the Barings felt obliged to emulate the "speculators" and sold very little. But they seized upon a slight improvement in the market in early August to begin steady sales once more. Only 8,000 bales remained in their hands on October 30, and all their interest in the 1837 crop was ordered closed during the first week of November. Conservatism and caution had dictated disposal of holdings even in the face of some criticism from American shippers. Undoubtedly one of the greatest sources of trouble was the unprecedented size of the crop. In the autumn of 1837 the Barings had based all orders upon the assumption that the United States would have no more than 1,600,000 bales of old and new cotton to dispose of during the season. When the reports came in that America would have 1,500,000 to 1,575,000 bales for export alone, the Barings at first refused to believe it. Under those circumstances they had reason to be gratified that Humphreys & Biddle continued to abstain from selling during most of the late summer and early fall; the Liverpool branch of Baring Brothers & Company could rid itself of cotton at less disastrous rates than might otherwise have obtained. Although the "Bank ring" and W . & J. Brown & Co., being the largest holders, acted as convenient targets for criticism, it cannot be denied that Baring Brothers & Company was materially aided by their activities throughout the year. The large operators were blamed for advancing full cost, for forcing up freight rates, and for plunging into the southern market again in April and May in order to sustain prices, thereby inducing Ward to cease operations for the season. On the other hand, the operations of the "ring" gave an indication as to the prices the Barings should pay. The figure at which they bought cotton was such as to enable them to make sales just

CH. IX

COTTON, KING FOR A YEAR

259

under the prices asked by Humphreys & Biddle. Also, when prices began to fall, the Barings, in deciding to cease selling during the early summer, relied upon a continuation of the holding policy of the Biddle house. W h e n the Barings were almost sold out of cotton, Humphreys & Biddle held 150,000 bales, and other holders controlled an additional 100,000. T h e situation might have been much worse for the cotton operations of the Barings in 1837-38 had prices not been maintained in such a fashion. Indeed, the house very soon decided not to tempt fate again. A much smaller business was done in cotton during the next season and almost nothing upon its own account. Anticipating that the Bank of the United States and other financiers of American exports would not again enter the field, and that the large stock on hand would make opening prices in the United States low, Baring Brothers & Company had made all arrangements for a large business. But prices did not open low enough to please them. Liverpool speculators continued to hold large supplies off the market, the spinners were manifesting greater unwillingness to buy, and reports of a very short crop in America were circulating on both sides of the Atlantic. In addition to these adverse developments, the Barings took cognizance of the growing tension over the Maine boundary and of the increasing probability that both English funds and ships would be needed to import wheat during 1839. It was expected that American securities would become a drug on the market and that both money and freights would rise. Consequently, on December 3, 1838, Ward was sent orders to utilize a portion of cotton funds on hand for purchases of sugar in Havana, and in January, 1839, to transfer all sums not thus employed to England. T h e funds were returned by April 15. In all, the Barings in Liverpool received 28,678 bales of the 1838 cotton crop, almost all for account of consignors. T h e partners violated one long-standing rule of the house in agreeing to hold cotton for the Union Bank of Mississippi "until the shortness of the crop should be ascertained." W . & J. Brown & Company and many smaller firms also decided to avoid large cotton commitments, thus leaving Humphreys & Biddle and the Liverpool speculators to bear almost the entire burden of sustaining prices during the season.34

260

FOLLOWING A MIRAGE, 1837-1839

CH. IX

EXCHANGE ACCOUNTS AND BOND OPERATIONS

In the meantime, the Barings had been devoting themselves to the marketing of another great American export — securities — with less satisfactory results than those attending the cotton operations. T h e partners gradually moved from a reactionary to a conservative attitude on exchange accounts. In their "Amended rules for 1838" they had signified their unwillingness to have any such accounts unless the correspondent would engage to keep a balance in London sufficient to cover the probable amount of protested bills. N o credits, the partners stated, were to be given for these accounts. Yet the Barings expressed willingness to reopen the joint exchange account with Ward and William Appleton. Remembering the lack of success attending the earlier operations of this account, Ward refused the offer but continued the "cotton" and "remittance accounts," both of which were carried on for the house alone. Only at Ward's insistence was Goodhue & Company granted the distinction of being the only straight commercial firm to manage an exchange account under a credit (¿20,000) from Baring Brothers & Company. A l though Ward recognized the infirmities of Jonathan Goodhue in a crisis, he argued that the services of the N e w York firm in drawing and receiving cotton drafts without charge entitled it to an exchange account. Moreover, in ordinary times Goodhue & Company was one of the most efficient houses in the United States. In the South only one exchange account under an open credit was permitted. After negotiations running over a period of six months, the Union Bank of Louisiana was finally granted, as formerly, an uncovered credit of ¿6o,ooo. 35 T h e most important exchange account continued to be that with Prime, Ward & King. T h e joint exchange account with that firm was reopened on December 16, 1837, by the remission of franc bills drawn by the Bank of America against an installment of the French indemnity payments to the United States. Prime, Ward & King, which possessed according to Ward only one fault, "an inordinate selfishness," enjoyed a reputation second to none in the United States and, as the gold operation for the Bank of England amply testified, was trusted by the Barings above all other banking

CH. IX

EXCHANGE ACCOUNTS AND BOND OPERATIONS

261

firms. Shortly after the account had been reopened, "American stocks" became a very important remittance to cover drafts. As an outgrowth of these exchange accounts and of consignments, Baring Brothers & Company was soon in receipt of large amounts of securities from the United States. Prime, Ward & King, either on joint account or on consignment, sent New York State and City bonds, as well as securities of Alabama, Ohio, Michigan, and the New York Merchants Exchange. A n attempt to buy a Michigan loan failed in competition with higher bids from the Bank of the United States, a result very pleasing to the Barings, who were concerned about the proximity of that "backwoods" State to the seat of the Canadian rebellion. Small lots of Kentucky and Louisiana bonds dating from missions of the ante-crisis period were still on hand. A few commercial firms, in order to cover overdue debts, had sent bonds which were not all sold by January i, 1838. The National Bank of New York consigned $160,000 New York State 5 per cents, redeemable in i860. The Union Bank of Louisiana dispatched to London $100,000 Louisiana 5's in June and was to send further amounts of New Orleans securities — $120,000 Second Municipality and $50,000 First Municipality. 36 The largest amount of a single issue came consigned by the Western Railroad Corporation of Massachusetts. On February 21, 1838, the legislature of Massachusetts created $2,100,000 in 5 per cent sterling bonds and assigned them to the corporation. Baring Brothers & Company engaged to sell them on consignment from April 1, 1838, to April ι, 1839, at a commission of 1 per cent on sales, charging ι per cent for paying the dividends as necessary, and '/2 per cent for reimbursing the principal thirty years later. The proceeds were used to pay for rails purchased in England through the Liverpool branch over the course of the year. 37 This was the beginning of a long relationship with the company. Bond sales proceeded slowly in the fall of 1837, gained momentum during the first three months of 1838, and tapered off during the next three.38 At the end of November, 1837, the security market having improved, Ward was permitted to send at low rates 10,000 to 15,000 of bonds per month when opportunity offered. The payment of the January dividends and the action, in February, of the

262

FOLLOWING A MIRAGE, 1837-1839

CH. IX

Bank of England in lowering its discount rate from 5 to 4 per cent made money more plentiful. By March 6 the Barings reported that their "American Stocks" were "nearly closed out" and that increasing amounts of securities of States in good credit might again be sent forward. In general, sales proceeded but little more slowly until the middle of June, 1838, when the demand almost ceased. At the moment when the Barings had decided to sell all bonds in their possession, new issues were on the way. On June 14 they stated their intention to keep their "hands as clear as possible" of American securities "at current rates." Before that decision could be activated, the Union Bank had forwarded $100,000 in Louisiana bonds, and Prime, Ward & King had sent $100,000 in Ohio as well as large amounts of N e w York State bonds. New lots of the Massachusetts issue were also soon to be received.39 By the third week in July the Barings had embarked upon a policy of rigid curtailment. Upon the receipt of the new Ohio and New York securities, Prime, Ward & King were told that under no circumstances were any more American bonds to be sent. Writing on July 20, the Barings pointed out that, although money had been abundant since the payment of July dividends, not a single certificate of either New York or Ohio bonds on hand had been sold at profitable rates. When a consignment of $100,000 Indiana 5's and $50,000 Alabama 6 per cent sterling bonds reached London, the Barings ordered Ward to curb "friend King," though the securities had been forwarded two days before the order of the London house to curtail had been written. Sales continued very slowly. On October 19 the Barings held on the exchange account alone more than $1,000,000 in bonds of New York, Ohio, and Alabama. Having no desire for more than $300,000 in bonds on that account, the Barings regarded a total of $1,000,000 as highly undesirable. Moreover, Prime, Ward & King had forwarded for others or for its own account bonds of Indiana, Louisiana, and the N e w York Merchants' Exchange. Baring Brothers & Company could look with even less equanimity upon an aggregate holding of ^400,000 in American securities forwarded by the one firm, especially when the load was so heavy as to necessitate borrowing 50,000 by the London house for two months.40

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Strong supplementary reasons for this disapproval were by no means lacking. Not only was the total amount of bonds on the joint exchange account too large, but Prime, Ward & King, so the Barings thought, should have shown more discernment regarding conditions in the British money market. The main reason for the dullness in the market, in the estimation of the Barings, was "to be found in the endless creations of new loans by States, Cities, Corporations and Companies of all sorts." These depressed the prices of the old well-known securities, thereby frightening holders from further investments in them and deterring financiers from employing money in jobbing them, because they looked "forward to the certainty if one-fourth of these New stocks were realised, of such a revulsion being brought about in our [London] money market as would bring back upon them all the difficulties with which the year 1825 was followed." So many inferior bonds, paying high rates of interest, were in the list that the good ones, at lower rates of interest, would not sell. Among the inferior groups were increasingly large amounts of slave-State issues, which were becoming "less liked every day" by the British investor. In addition, the new Alabama sterling bonds were characterized as "neither fish nor flesh," since it could not be determined whether they were long or short, whether backed by a guarantee of the State or lacking it. Not even temporary money lenders would want them. Even reputable States issued bonds with such "injudicious facility" that old issues could not be transferred to the permanent investor before new ones appeared. Another difficulty lay in the fact that portions of the same loan were often held by several agents in London and no method of control existed. One firm, holding bonds for a higher price, merely raked the chestnuts out of the fire for another, which undersold it slightly and thereby satisfied the market and depressed it still further. Massachusetts bonds, controlled entirely by Baring Brothers & Company, sold higher than any other American security, but that situation may have resulted in part from their being issued in sterling, another condition upon which the investor was manifesting greater insistence. Adding all these facts to the rising demand for foreign wheat, to the high price of cotton, and to the activities of Jaudon, the Bar-

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ings thought by August 20 that, if all the American securities should be realized rapidly, "there would be a heavy pull on the Gold in the Bank of England and considerable derangement in the money market." 4 1 A lack of appreciation of the condition of the British money market was not the only bone Baring Brothers & Company had to pick with Prime, Ward & King. In view of the magnitude of their joint engagements, the Barings thought that the New Yorkers should not unite with other London houses in taking American loans. Prime, Ward & King had joined other English firms in bidding for a Maryland loan, which they did not acquire, and had contracted with Rothschild & Sons for a Missouri issue. T o Ward the Barings complained: "209 [Prime, Ward & King] seemed disposed to take very largely and when not with us they join Rothschild or Reid, Irving & Co. or anyone else, thus lending their name to stocks that we should not care to be connected with." Moreover, when the New York house remitted bills drawn at "90 d/s," the Barings sharply called to their attention that bills other than those drawn at "60 d/s" were objectionable and urged the discontinuing of "so bad a habit." 42 The Barings felt it desirable to hold securities as long as was necessary in order to make a profit upon every mission, but Prime, Ward & King took a different point of view. The New York house expected bonds to be sold at current rates, even if some sacrifice resulted. If losses were suffered upon one lot of Ohio or New York securities, a similar amount could be purchased in New York at lower rates. The uncertainty of long retention was thus obviated. Current letters of Prime, Ward & King reveal this attitude and the firm reiterated this belief in September, 1839, in a general review of the preceding two years. In other words, Prime, Ward & King thought that the British market for American bonds would recover the more quickly if losses were submitted to occasionally; and it was not so interested as the Barings in maintaining the credit of American securities at a high level. Nevertheless, the New Yorkers heeded the wishes of the Barings in July and August, 1838.43 From the latter date to May, 1839, the joint exchange account was managed as Baring Brothers & Company desired. No more Ameri-

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can securities were forwarded on this account or for any other belonging to the New York house throughout the period under review. Prime, Ward & King steadily sold drafts on the Barings at a relatively high figure (say n o ) and purchased specie or bills on London at a slightly lower rate (say 109Y 2 ). Working for this narrow gain did not promise to be highly remunerative, but it was more certain and secure as long as strong bills were remitted. On the other hand, the exchange account, in agreement with the Barings, was kept overdrawn about ,£50,000 during January, February, and March, 1839, in anticipation of a fall in exchange rates. In remitting at this time the New Yorkers, handicapped by the lack of 60-day drafts, were forced occasionally to send "90 day sight" bills as well as drafts of the Bank of the United States. Given this fact, the Barings had a potent reason for maintaining Jaudon's agency on a stable footing during 1839.44 In spite of the cessation of the flow of securities from T . W. Ward and Prime, Ward & King, up to March, 1839, the Barings experienced slight success in selling the amount in their hands. The Kentucky and Michigan holdings were returned to New York, where Prime, Ward & King was able to dispose of them. The Barings apparently succeeded in selling only ^33,000 of Massachusetts and $125,000 of the Indiana bonds. No mention was made of sales of Ohio or New York securities. The easy money — resulting from the purchases of Exchequer bills by the Bank of England and the announcement on November 30 by the directors that they were prepared to lend money till January 22, 1839, at 3% per cent on bona fide bills of exchange, Exchequer bills, India bonds, and other approved securities — was by-passing the higher-priced American bonds. The Barings refused to sell any holdings at a loss and were disinclined to present the Alabama sterling issue to the public as long as there existed no guarantee of repayment by the State. Small wonder that late in January, 1839, they should tell Prime, Ward & King: "You will see that the joint account is not so much reduced as you & we had expected." 45 As a matter of fact, when new responsibilities were included, the aggregate amount of bonds held by the Barings for sale on March 15, 1839, was probably very slightly, if any, less than that of July 20,

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1838. In order to give firmness to the market the house had purchased $30,000 of Ohio bonds at par from Overend, Gurney & Company in November. Early in February the Ohio Life Insurance & Trust Company had consigned $200,000 more Ohio 6 per cents, having drawn about /20,000 against the mission before Ward ordered a cessation of drafts. Ward sent for his own account $10,000 New York 5's and $10,000 Ohio 6's, which he had held as an investment for two years but now desired to have sold in order to meet his obligations to the Barings which would mature in May, 1839. The Union Bank of Louisiana had also sent New Orleans bonds during the intervening months. Ward subscribed $200,000 for the Barings to the share capital of the new Bank of Commerce, New York, early in February, though he forwarded none of the securities to London. 46 Most important of all, the Barings in November, 1838, in a joint transaction with Hope & Company, purchased $1,000,000 of 5 per cent bonds of South Carolina, guaranteed by the Bank of the State of South Carolina, and acquired an option to purchase or sell on commission the remaining half of the loan. The managing partners hoped that the venture in South Carolina bonds would be the first of many joint operations with Hope & Company in American securities, particularly those of New York and Ohio. They also hoped that Prime, Ward & King would participate.47 The extent of these new holdings might well have been sufficient to induce the Barings to continue the prohibition against the transmission of any further bonds from Prime, Ward & King, but the condition of both the commodity and financial markets contributed additional reason to that decision. Cotton manufacturers were so pressed to sell their goods that they were granting book credits extensively to American buyers. Many agents of American importers in the Midlands were issuing acceptances, thereby avoiding the payment of commissions to London merchant bankers. Large amounts of cotton remained in the hands of Humphreys & Biddle; and of the quantity sold almost all had gone into the hands of speculators, who depended upon the short American crop to support the price. During December holders were forced to make sales to each other in order to give the market an appearance of animation. Demand for yarn on the Continent had declined, and the English manufacturers

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refused to pay the prices asked for the raw material. Opening prices were so high in America that only small amounts of cotton had gone forward, thereby curtailing the supply of bills and obstructing normal exchange activities. The Bank of the United States, though not buying cotton, was the chief purchaser of cotton bills and therefore was vitally affected by the developments in the exchange market. The British wheat crop was deficient for the second consecutive year, many importations of grain from the Continent had already been ordered, and specie had been shipped both to Hamburg and to Paris during December. The boom on the Continent had already ended. The cotton market at Havre periodically showed alarming instability, which augured ill for the success of the speculators. Silver sent to Paris late in December was intended to correct the instability there arisihg from the failure of the famous private bank of Laffitte, which had been occasioned largely by the stoppage of the Banque Belgique at Brussels. Supplementary to these various factors were numerous other events. In the estimation of the Barings the influx of both good and bad American securities would in itself, if sales were continuous, derange the money market. Sales were very slow, but the tremendous amount, estimated by the Barings and others at more than 6,000,000, hung over the market like a Damoclean sword. Added to these elements in the situation were the failure of Russell, Sturgis & Company in Manila the preceding summer, several failures in Calcutta, uncertainty in Canton, a blockade in Buenos Aires, unsettled politics in France, and threats of war in the Maine boundary dispute. An important bank failed in Alabama, but Ward, although noting the "feverish state of prices of many articles" in the United States, expected no crisis for at least a year and no war with Britain at all.48 In spite of Ward's optimism, the Barings did not change their policy and had little cause to rue their decision. Late February news, reaching London about the middle of March, revealed the injudicious actions of the public and governor of Maine, which induced a complete cessation of dealings in American securities for two months. In the middle of April news arrived in London that trade

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had been stopped at Canton, thus contributing one more item to the chapter of accidents afïecting foreign trade and commerce. Coutts & Company, London bankers, had just added secretly a new threat to the money market by calling in all loans predicated upon American bonds as collateral security. Jaudon, among others, was asked to repay £200,000, one-half at the end of April and the other at the end of June. Jaudon's position, difficult enough before, threatened to become serious and to cause a convulsion in an already chaotic money market. Failures at Havre, Bordeaux, and Marseilles produced and reflected widespread commercial distress in France. 4 9 By April the Barings had decided that the time to furl sails had come once more. They gave orders to curtail all types of operations — commercial and financial. Remittances of bonds from Prime, Ward & K i n g had already been stopped, but drafts on consignments from other sources were now also prohibited. Although Ward, who had moved his office to State Street in January, thought the Barings' fears about the British money market and of another suspension of specie payments in the United States "beyond the occasion," he put their orders into effect. Once again Baring Brothers & Company was anticipating a storm, but the affairs of the house in April, 1839, in spite of the acumen of the managing partners, were not all in a condition that might be called shipshape. It was true that extreme caution had been observed in managing all credits for operations in merchandise. T h e partners liad held their hand until resumption seemed inevitable and a large part of back indebtedness was in train of settlement; they had granted credits to probably the most reliable houses in the United States; their activities, even in the face of criticism, had been characterized by a stricter adherence to old rules and practices, and by the formulation of new ones designed to increase the security of the firm; and fortunately the house was very slightly involved in the high-priced 1838 cotton crop. But the Barings held, in spite of an early attempt at contraction, large amounts of American securities, partly in their own name and partly on account of others. This condition, when supplemented by a portfolio of maturing remittances, including large amounts of bills drawn on the agency of the Bank of the United States, indicated that Baring Brothers & Company

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would do well to exert every effort in averting any serious crisis in the British money market until these dubious assets could be liquidated. Ward's adaptation of an old aphorism, " T h e course of business, like that of true love never did run smooth," 3 0 was indeed true, but a relatively conservative commercial policy, already formulated and in practice, could be expected to assist in weathering either a typhoon or a prolonged storm, or both.

C H A P T E R

Χ

F O U R L E A N Y E A R S , 1839-1842 FROM the spring of 1839 till the end of 1842 Baring Brothers & Company devoted itself to adjusting to an almost constantly deepening depression. Preparations for meeting the impending crisis during the second quarter of 1839 placed the house in a position to mitigate the actual shock by assisting the Bank of England and the London agent of the Bank of the United States. After the crisis had passed, the Barings curtailed still further all their financial and commercial credit operations, except those in cotton, until the winter of 1842-43. They made one major incorrect judgment: short-term credits were expanded in 1841 upon the assumption that recovery was at hand. One reason for that mistake was the hope of the partners that their efforts to sustain the credit of various States in the Union would be successful. When the light of unrealizable ambitions finally guttered out and the States failed to honor their obligations, the Barings reluctantly resigned themselves to watching for the dawn of a more prosperous day. POLITICAL AND ECONOMIC MALAISE Those lean years constituted the longest period of depression in American foreign trade since the days of the Jeffersonian embargo. Any business firm endeavoring to carry on its activities faced falling prices and attendant dangers in initiating new ventures. Political and social unrest, almost always concomitants of such depressions, constituted added reason for fear on the part of business men. Failures and bankruptcies, experienced by individuals, partnerships, and chartered institutions, alike, produced states of mind which led to such extreme phenomena as Dorr's Rebellion in Rhode Island and the repudiation of debts by several States. A n y individual or firm which could continue business operations successfully became al-

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271

most inevitably the butt of criticism. Simultaneous injury to pocketbook and pride afforded powerful stimulants to anger. If the firm happened to be not native but foreign, then nationalism gave additional meaning to charges of unfairness and devious motives hurled against a wealthy and powerful business house. Baring Brothers & Company was in such a situation, but the partners gave no heed to criticism, with one exception, as they pursued policies laid down on the basis of previous experience. International bickerings and conflicts, deterring foreign trade in several parts of the world, increased in number and virulence. The Opium War continued with only one sign of a cessation until late in 1842. France maintained the blockade of Buenos Aires in 1839 and during the next year drew near to war with Great Britain over the pretensions of Mehemet Ali in the Mediterranean. The Maine boundary dispute, the McLeod affair in 1840-41, disagreements over the searching of American slavers on the African coast by British naval men, the case of the Creole in 1842, not to mention the unsettled Oregon question, agitated Anglo-American relations until August, 184a.1 Even then Oregon was left for later negotiations. Internal affairs in both the United States and the United Kingdom were also important contributors to uncertainty in business enterprise. The Whigs won the presidency in 1840, only to discover within a few months that the death of Harrison had placed an oldfashioned Virginian Democrat in the coveted chair. The change of administrations, however, resulted in the repeal of the Independent Treasury Act, passed only a year earlier, the revision upward of the tariff, and the passage of a general bankruptcy law, anathema to many conservative elements. These changes by the Federal government were only faint echoes of the extreme measures adopted by many States, which took decided stands upon issues ranging from the abolition of imprisonment for debt and of militia service to the repudiation of debts. In only one State, Rhode Island, did economic and social distress combine with political dissatisfaction to produce armed revolt, but instability and vacillation in many regions was marked enough to constitute an obstacle to business. While these developments were taking place in America, similar changes were being effected in the United Kingdom. Peel, succeed-

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CH. X

ing Melbourne in 1841, began to alter the traditional commercial policy of the state and to foreshadow greater changes in the future. T h e disfranchised and unemployed expressed their dissatisfaction in Chartism and strikes. Reflecting in part these political uncertainties and undoubtedly reacting to them, acute financial and commercial malaise characterized business in all parts of the world. While American trade with Canton continued for some months, British traders and Chinese hong merchants suffered loss of business. Numerous failures occurred in Calcutta, and transactions in Buenos Aires attained a very small volume. In England the railway bubble was pricked in 1839, and further financial stringency, resulting from the efflux of gold to pay for wheat imports, was averted only by the aid of a credit from the Bank of France to the Bank of England for use in stabilizing exchange rates. Depression on the Continent was paralleled, from the summer of 1839 to the third quarter of 1843, by a steady decline of commodity prices in England. On the other side of the North Atlantic the suspension of specie payments by the Bank of the United States and banks of the South and West in 1839, supplemented by the final collapse of the Philadelphia institution in February, 1841, constituted only the more spectacular features of a depression which carried security and commodity prices to their lowest points in March, 1842, and March, 1843, respectively. T h e proceeds from the sale of public lands reached the bottom of the trough during the third quarter of 1842, whereas the foreign and domestic trades of the United States did not reach the end of the downward trek until 1843. These circumstances contributed to, and were aggravated by, two periods of exceptional financial stringency — one in the fall of 1839 and another in the spring of 1842. Discount rates in N e w York and Boston rose to as high as 36 per cent in November, 1839, though only to 12 per cent in the first quarter of 1842. Sterling exchange in the United States attained in October, 1839, and November, 1841, a premium of 10 per cent but fluctuated for the most part between 7 and 9 per cent.2 Fortunately or unfortunately, depending upon the point of view, individuals living at the time of a depression never know at the beginning what its duration will be. Even if they foresee a crisis,

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they seldom visualize a long period of readjustment. As prices begin to fall they curtail their activities and hope for the early termination of the depression. If the bottom of the hill is long in coming, few people have either the equanimity or the resources to take their reverses without grumbling and attacking established institutions. That in the spring of 1839 the Barings anticipated trouble before the end of the year has already been observed, but to say that they foresaw four years of depression to follow would be stretching the evidence. THROUGH THE CRISIS OF

1839

Acting upon their conviction and their memory of previous crises, the Barings strove during the spring and summer of 1839 t o l e s s e n their holdings of American securities, particularly those upon which they were in cash advance. The time was scarcely propitious. Not only was the amount under their own control large, but State stocks to the value of at least $10,000,000 were already pressing on the market, $5,000,000 more of the same category were either in London or en route, and these figures did not include various municipal and corporate securities also in hand. Borrowers by-passed intermediaries in America by dispatching agents directly to London, thereby depriving British firms of the valued judgments of their American connections. This situation, plus the fact that American securities were in the hands of a very large number of sellers, and that continual driblets of bonds came to London from various original purchasers in the United States, created amongst the English bond brokers a competition very prejudicial to the maintenance of "good prices." The only American bonds selling at a relatively high price — 102V2 — were those of the Massachusetts 5 per cent sterling issue exclusively controlled by the House of Baring. On May 16 the Bank of England raised the discount rate to 5 per cent, on June 20 to 5V2 per cent, and on August 1 to 6 per cent. Market rate was still higher than bank rate. In spite of these difficulties, during the summer the Barings succeeded in materially reducing the bonds in their hands. During the last week in May they sold by a public subscription $574,000 of Ohio bonds at 93. Unfortunately only a part of this sum represented a dis-

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X

posai of their own holdings. When the news that the Barings were planning to dispose of some of their own holdings, with those recently brought over by M. T . Williams for the Ohio Life Insurance & Trust Company, reached Roskell, Ogden & Company, that house insisted that a portion of its holdings be included. Its threat to sell at ι to 2 points below the figure of the subscription forced acquiescence by the Barings. T h e amount of Ohio and New York securities on the joint exchange account with Prime, Ward & King was substantially reduced during June, but sales thereafter were so slight that in October the remainder was segregated into a separate account and the New York firm covered the exchange account with bills. T h e $125,000 Alabama 6's had been put into a separate account in July. A later acquisition of $184,000 of the same bonds transferred from Brown, Shipley & Company for account of Prime, Ward & K i n g was returned to America. Better luck was experienced with $100,000 New York City "Water L o a n " bonds of 1858, sent by the New York house for its own account, but almost no other sales were recorded of the many parcels of securities either owned by or consigned to the Barings. 3 Before the condition of the Barings could be described as easy with reference to American securities, a financial crisis developed in both England and America. T h e causes for this situation were numerous and complex. Largely as a consequence of an export of 10,000,000 in gold to the Continent in payment for wheat imports necessitated by crop failures in the United Kingdom in 1838 and 1839, the metallic reserve of the Bank of England dropped from 000,000 in January, 1839, to about ,£5,000,000 in May, and to approximately ,£2,300,000 in October. T h e flow of specie to the Continent was enhanced by the financial stringency in Belgium, France, and Switzerland after the suspension of specie payments by the Bank of Belgium, and by the demand of Russia preparatory to the public announcement of a silver ruble in July, 1839. W h e n a discount rate of 5 % per cent failed to stem the efflux, the directors of the Bank used loans from Paris and Hamburg to adjust the exchange rates and jumped the discount rate to an unprecedented 6 per cent. Meanwhile, according to the estimate of Joshua Bates, between Oc-

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tober, 1838, and October, 1839, American securities had tied up in England "some ^5,000,000 to £6,000,000 beyond the ordinary amount invested." 4 Bates also expressed the opinion that the Bank of England "could have stood the drain for corn with but little variation in its movements" had it not been for the conduct of the Bank of the United States during the same period.5 Biddle had resigned the presidency of the institution in March, but when the cotton "ring" was revived under the agency of S. V . S. Wilder, New York agent of Hottinguer & Company, Biddle undertook to manage its operations. Cotton recovered in price for a few weeks, then declined rapidly as the manufacturers refused to buy and the higher discount rate of the Bank of England emphasized the existence of strain in the London money market. Jaudon exerted himself not only to meet the bills of Humphreys & Biddle, which were stated by Biddle to be the chief cause of his embarrassments, but also to pay an increasing volume of drafts from the parent bank in the United States. These drafts from America, covered not by specie but chiefly by unsalable State bonds, were prompted by the critical condition of the Bank itself, which was generated in part undoubtedly by the speculative enterprise of Biddie and in part by the mismanagement of his successor, Thomas Dunlap. Jaudon managed to keep going until Hottinguer & Company on September 23 refused to accept 4,000,000 francs in drafts issued by the bank in Philadelphia. Before the news of this crisis in the affairs of the agency had reached America, the parent bank had reached an impasse. Having been forced to aid the Girard Bank and to issue more post notes, thus further depreciating its credit and inducing a run upon its cash reserve, the Bank of the United States was forced on October 9 to suspend specie payments. This action was followed by almost all banks south and west of Philadelphia.6 Before this storm had broken, Baring Brothers & Co. had been called in to aid the Bank of England and had endeavored to forestall the crisis in the affairs of Jaudon's agency. When the discount rate of per cent failed to prevent the drain of the metallic reserve from Threadneedle Street, the directors of the Bank arranged to operate a stabilization account through the

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agency of Baring Brothers & Company. The object was to keep the pound sterling, as measured in Continental currencies, at such a figure as to prevent the export of gold and silver. To accomplish that goal, on July 27 the officials of both the Bank of England and the Bank of France agreed to guarantee bills' drawn at three months date by the Barings under a credit of 48,000,000 francs, or about ,£2,000,000, on fifteen Parisian firms, of which Hottinguer & Company was the leading intermediary. A similar credit for ,£900,000 was arranged in Hamburg with Solomon Heine, the uncle of the celebrated Heinrich; and special accounts were also established by the Barings with Hope & Company of Amsterdam, and Arnstein & Eskeles and S. G. Sina of Vienna. The Barings sold drafts, as much as ,£150,000 in one day, at rates fixed after consultation with the gentlemen in the "Bank parlours," and immediately forwarded British annuities as collateral to the acceptors. The operation was successful. Aided by the Rothschilds, the Barings forwarded remittances in bills of exchange, gold, and silver. The contracts were renewed at irregular intervals for the drafts uncovered to date. By February 4, 1840, the account with the Paris houses called for repayment of 15,516,755 francs (,£610,600). All accounts were closed by the following April. The silver and gold sent to the Continent had come largely from Latin America and the Pacific. The United States had experienced no drain. The metallic reserve of the Bank of England touched its lowest point in October and began a slow rise in November, though the volume remained low for many years. On January 1 bank discount rate went down to 5 per cent. The operation, which the Circular to Bankers claimed was based upon "accommodation bills" usually castigated by the Bank itself, helped at least to prevent derangement of the currencies in the United Kingdom and on the Continent.7 In the meantime Baring Brothers & Company had helped to sustain the agent of the Bank of the United States through even worse trials than those of the Bank of England.8 Samuel Jaudon began to receive aid in June. Acting in accordance with instructions from Biddle issued shortly before he retired from the presidency of the bank, Jaudon about the middle of May asked the Barings if they would resume the agency in London. The managing partners

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agreed to do so on condition that the Philadelphia institution cease borrowing on its bonds and post notes. This stipulation Jaudon accepted. A letter incorporating the terms of the agreement was dispatched to the Bank on June n . It provided that the bank should enjoy an open credit of ,£200,000, as previously, on Baring Brothers & Company, the arrangement not to become operative until formally accepted by the new president, Thomas Dunlap. T h e credit was temporarily suspended as long as a loan made by the Barings to Jaudon on June 1 was not repaid. On that date the House of Baring had joined the long list of firms from which the agent of the Bank of the United States had borrowed. T h e partners agreed to lend him ,£200,000 for six months against collateral of $2,228,000 Mississippi 5 per cent and $1,049,000 Michigan 6 per cent bonds. By August Jaudon's situation began to be serious and further assistance was accorded to him. T h e bank and Humphreys & Biddle both drew upon him unexpectedly. During July he tried vainly to get a loan from Hope & Company. During the first two weeks of August, Baring Brothers & Company aided him by guaranteeing ,£150,000 post notes discounted with Overend, Gurney & Company. By August 23 Jaudon's liabilities, including ,£950,000 in loans from Denison & Company, Overend, Gurney & Company, Rothschild & Sons, Coutts & Company, Hope & Company, and the Barings, totaled more than ,£3,000,000. During the preceding week the British government had made money still tighter by funding through a public subscription ,£3,721,000 in Exchequer bills. Nevertheless, by August 31 Jaudon had raised ,£568,000, partly by loans from Morrison, Cryder & Company, Coutts & Company, Huth & Company, Humphreys & Biddle, and Denison & Company, and partly by the sale of bonds to Baring Brothers & Company and Hope & Company. T h e last two had agreed to buy ,£200,000 unsalable State bonds at 50 per cent of their par value. By this time the Barings were so gravely concerned at Jaudon's predicament and the calamitous implications of a suspension by his agency that they brought pressure to bear directly upon the bank in the United States. On August 23 they ordered Ward personally to ask Dunlap to stop drawing upon Jaudon and to remit bills, se-

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CH.

X

curities, and specie at once. Supplementary to that request Ward was to offer to sell for specie his own drafts on the Barings for direct remittance to the London house. Ward was also to prevent all correspondents from remitting bills on Jaudon. Before Dunlap would agree to send State bonds and other remittances, Ward felt obliged to show him his own letter of August 23 from the Barings outlining the condition of Jaudon's affairs. On the same date, the London house canceled its engagement of June i l to resume the agency of the bank when Jaudon withdrew. That Jaudon would not be able to leave for some months, that Dunlap had not replied to the original offer, and that the stipulation against further borrowing could not possibly be adhered to, gave the Barings ample justification for revoking their agreement. Moreover, the partners by all the measures taken had been looking to the security of the house in case the agency of the bank did collapse. Animated by the same skepticism about the condition of the bank, the Barings held themselves aloof from Jaudon during the month of September. They considered a total involvement of ^450,000 to the agent adequate proof of their good will. When Jaudon asked for further aid on September 23, the partners refused on the ground that their house had done enough. The occasion for the request was the protesting for non-acceptance of drafts by the Bank of the United States on Hottinguer & Company, which since September i l the Barings had known was to occur. Under the circumstances, Baring Brothers & Company was content to stand by as the Paris and London Rothschilds agreed to pay the dishonored bills, and the Bank of England, in spite of its own embarrassment, would offer Jaudon nothing better than a loan of ^300,000 consols to be returned within a month. The partners agreed with Jaudon that the conditions of the offer by the Bank of England were objectionable, but they continued to withhold their aid. They insisted that the contention of Jaudon, Daniel Webster, and Richard Alsop (a director of the Bank of the United States then in England) that the stoppage of the agency would "overturn everything in the United States," was incorrect. Merchants were not involved to the same extent in the affairs of

CH.

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CRISIS OF 1839

279

Jaudon as they were in the embarrassments of the "three W's." The Barings took this attitude even as they held ¿230,000 in drafts on Jaudon in their bills receivable, and their commitments to him remained unchanged. On his own initiative Jaudon obtained the postponement of a large portion of the post notes payable on October 3. He offered high rates of interest in some cases and deposited securities as collateral in others. T w o days later the Great Western arrived with remittances in specie and securities. In his hour of greatest travail he carried his burden alone. Thereby he won the respect and later support from British merchants and bankers, including Baring Brothers & Company. The house manifested a very cooperative spirit in enabling Jaudon to continue his payments through the next four months. The Barings invested ¿100,000 in the ¿800,000 loan issued on October 16 through Denison & Company, the security for which was the deposit with that firm of $4,450,000 in Pennsylvania, Michigan, and Mississippi securities.9 When, in spite of additional remittances from America, Jaudon needed more funds by November 1 1 and could get no aid in Holland, the Barings joined Overend, Gurney & Company, Denison & Company, Brown, Shipley & Company, and James Morrison in granting a further loan of ¿160,000 for one month against the collateral security of ¿271,319 in American securities and an engagement to apply immediately any funds acquired from expected remittances, sales of bonds, or loans from Rothschild & Sons and Hope & Company to the account. In addition to their ¿35,000 share in this loan, the Barings guaranteed drafts by Morrison on Hottinguer & Company for an equal sum in order that he might reimburse himself at once. Within the next month they had permitted an extension of Jaudon's ¿200,000 note dating from June ι , 1839, and had "interferred" for Jaudon, secured by his guarantee and by cotton shipped to the Liverpool house, in paying the interest on the State bonds assigned to the Union Bank of Mississippi. They had also agreed at Jaudon's request to guarantee drafts by Hottinguer & Company on Palmer, McKillop, Dent & Company for ¿30,000 to be used in retiring post notes of the Union Bank of Florida, against which the Barings received Florida bonds as security. In or-

280

FOUR LEAN YEARS, 1839-1842

CH. X

der to facilitate his efforts to float a bond issue of ¿900,000 against collateral of $5,000,000 in American securities with Rothschild & Sons in December and one of ¿500,000 with Hope & Company in January, they released or sold to Jaudon all the depreciated State securities in exchange for bonds of the new issues. In addition, the Barings guaranteed ¿30,000 of the new bank bonds released by the Rothschilds. These arrangements enabled Jaudon to repay all his late loans and to meet other current obligations, totaling between ¿350,000 and ¿400,000, as of January 1, 1840. T h u s the Barings had actively cooperated in Jaudon's efforts to avert suspension and to postpone a large share of his obligations from one to five years, liabilities which he hoped would be met out of the proceeds from sales of the pledged State securities. Jaudon made all payments due the Barings, who gave no further support to the agency of the bank. T h e Rothschilds, Denisons, Huths, and Hopes assumed the entire burden, to their financial embarrassment after the final suspension of the bank in 1841. 1 0 A combination of motives induced the Barings and others to aid Jaudon. Their general objectives were to prevent a complete collapse of the London money market, to mitigate the crisis in Anglo-American trade and finance, to avert injury to thousands of friends and clients, and to sustain the credit of American States and institutions. Many families in England were dependent upon their income from investment in the shares and bonds of the Bank of the United States, recommended by the Barings when they were its agent. Aside from altruism, pride, and reputation, the supporters of Jaudon counted upon more immediate benefits. They avoided losses which would have accrued not only from Jaudon's refusal to meet his acceptances but also from a probable general economic collapse. Also, so many State securities were kept off the market as collateral by the lenders and guarantors that holders of competing bonds had a much freer market. Finally, the supporters of Jaudon took advantage of his embarrassments to reap substantial sums in interest, in commissions, and in the sale of his bank's securities in a rising market. 1 1 Much the same complex motivation characterized other activities

CH. Χ

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281

of Baring Brothers & Company, both in England and America, during the crisis period. In response to a request from Louis McLane, by then president of the Baltimore & Ohio Railroad Company, the Barings on October 12 agreed to advance such sums as the company might need to buy iron to push construction beyond Harper's Ferry. The security was ¿720,000 Maryland bonds assigned to the company by the State. All the bonds then in the hands of McLane were to be held by the Barings and were not to be sold at less than 85. 12 Having in this manner acquired control of McLane's bonds, the partners next took over from the Chesapeake & Ohio Canal Company ¿640,000 of Maryland securities, ¿507,000 of which were on their own account. The agent of the canal company in London, George Peabody, had been caught between his inability to sell more than a small portion of the Maryland bonds at a reasonable price and the need to meet unauthorized drafts on him by its president. He was faced with the choice between the forced sale of bonds held as collateral for loans and a wholesale disposal of the Maryland bonds. The Barings, eager to control the market, were willing to buy; the canal company's agent had to sell. On November 27 the Barings purchased ¿300,000 of Peabody's holdings at 70 (including the January 1, 1840, interest payment, which reduced the actual cost to about 68) and took an option for further purchases under which in December they bought ¿207,000. In order to prevent forced sales in the United States they also agreed to market, along with their own holdings, additional Maryland bonds still owned by the company. As a result another ¿133,000 was to pass through their hands on a commission basis. The Barings thus controlled practically all the unsold Maryland bonds of the Chesapeake & Ohio Canal Company, as well as those of the Baltimore & Ohio. The price rose gradually with improvements in the general market and the removal of the possibility that competitive selling of Maryland bonds would reduce their value to the investors. Soon the price was 82!/2, thereby giving the partners a neat profit on the purchase from Peabody, in addition to removing him and the company from the embarrassing position and improving the credit of the State of Maryland. 13 In the meantime Ward had granted the aid of his firm to New

282

FOUR LEAN YEARS, 1839-1842

CH. X

York banks in a successful move to prevent the suspension of the Bank of the United States from effecting similar action in that city. Through the efforts of Ward and Prime, Ward & K i n g the State transferred to several N e w York banks $1,500,000 in bonds maturing in 1855. Ward then agreed that the Bank of Commerce should draw ^50,000 on the Barings against the security of $500,000 of these bonds, and that the Bank of America should sell drafts to the extent of ,£40,000 against like security. Both banks agreed that the Barings should be entitled to sell the bonds at their discretion or that, should they prefer not to sell at all, the banks should remit undoubted bills or specie to cover as soon as requested. Goodhue & Company similarly aided the Bank of N e w York by sending some of the N e w York bonds to Huth & Company and then issuing drafts against them. By these measures the exchange rate was lowered, the danger of exporting specie was averted, the N e w York banks (and thereby to a degree those of Boston) were sustained. T h e banks remitted in full by the packet of December 6.14 A l l this was accomplished against strenuous efforts on the part of George Griswold, and others favorable to the Bank of the United States, who wished to induce N e w York to follow Philadelphia. Ward was of the opinion that without his "care beforehand to prepare everything for the press — & to give influential & confidential men a knowledge of what was to happen & forestall & correct public opinion — & of my promise of aid — & actually giving it — and the magic of the name of Barings — all would have failed." Ward's confident remark, "Be assured that N e w York will not only continue to pay in specie but that there will be a gradual relief to the moneymarket," was quoted in both the American and the British press. 15 These various transactions included only the more spectacular operations of the Barings. There were others which were intended to sustain the credit of States and other institutions as well as that of the house itself. It was agreed that the interest on certain Pennsylvania bonds, due in January, 1840, should be paid by the Barings, against deposits of bonds of the State, without cash remittances. By the same technique British holders of Upper Canada debentures were enabled to receive interest payments on time. A similar arrangement was made with the Union Bank of Louisiana for inter-

CH.

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est payments in February, 1840, on the State bonds assigned to it. In the preceding October the Barings had contracted to market gradually all the $2,000,000 in bonds authorized by Ohio for completion of its public works. 16 Rather than dispose of South Carolina bonds at a price less than that at which they had first been sold, the partners returned to America those not yet marketed. They neither sold nor returned Ohio bonds on account of the Ohio Life Insurance & Trust Company and Massachusetts bonds of the Western Railroad Corporation with which a contract for an additional $1,200,000 had been concluded in October. Drafts by both correspondents were stopped temporarily, however. 17 It is apparent that not all these activities produced immediate profits to the Barings, and interest payments reduced further their net income for the year 1839. Throughout the crisis period the partners found their funds so tied up that a loan of ¿200,000, obtained from Overend, Gurney & Company, was of necessity renewed from time to time and was not retired by the end of the year. 18 T h e impact of other events could not be so easily assessed. PUBLICITY AND CRITICISM

During those months of travail various activities of the House of Baring became the subject of widespread comment and criticism in the American newspaper press. In their Prices Current of October 18, referred to as the "circular" of the Barings, the partners pointed to the ¿800,000 loan to Jaudon, floated by Denison & Company at a rate giving 10 per cent to purchasers, as an indication of the rate of interest which must be paid "to obtain any amount of money on the best American securities," and expressed the opinion that, if the prices of those "stocks" were to be maintained and if the whole scheme of internal improvements in the Union was to be carried into effect, "a more comprehensive guarantee than that of individual states will be required to raise so large an amount in a short time." A "national pledge," interpreted by readers to mean Federal assumption of State indebtedness, "would undoubtedly collect capital" from all parts of Europe. 19 A month before this opinion was printed in America, the Barings had obtained publication in England of a reply from Daniel Web-

284

FOUR LEAN YEARS, 1839-1842

CH. X

ster to their public question, "Has the legislature of one of the American states legal and constitutional power to contract loans at home and abroad?" The leading member of the American bar, a consultant of the Barings, visiting in England by virtue of contributions from his friends, including $500 from Ward and the Barings, answered with an emphatic affirmative.20 It served to reassure British investors and must have contributed, as did other actions of the Barings during the last two months of 1839, to an improvement in the prices of American securities in London. Certainly it had more effect than if Webster had expressed his opinions of individual States. "As to State Stocks," he later wrote to Bates, "Massths. you know may always be relied on; so I think may N . Y . & Ohio; & I think Pa. will come out right. I have much confidence, too, in Indiana. As to the rest, I should advise caution; but this I say to yourself only." This view, probably also expressed to the Barings when under their wing while he visited England, was one reason why the partners in almost every letter to American correspondents urged them to advocate the increase of taxation by the States to meet current and future obligations. 21 The appearance of the circular of the Barings was a signal to Whig newspapers throughout the United States to support the assumption of State debts by the Federal government. It was argued that the credit of the States which had embarked upon internal improvement schemes should not be permitted to fall into disrepute. Their projects should not be allowed to remain half-finished. Several schemes, more or less closely allied to Henry Clay's Land Distribution Bill, were advocated and much discussed. The Democrats lost very little time in framing a reply to this "plot" by Webster and the Barings. As soon as Congress convened, Senator Benton brought up a set of resolutions which stated that for the Federal government to assume the debts of the States would be unconstitutional, unjust, unwise, impolitic, and dangerous; that "the greater part of the State stocks were held by foreigners and had been purchased far below par"; and that assumption would redound to the benefit of foreign speculators. Sent to committee, the resolutions came out somewhat subdued but still productive of considerable debate in which the name of the Barings was prominently

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mentioned. T h e resolutions were passed in March. T h e Democrats flattered themselves that they had destroyed valuable political ammunition for the Whigs in the presidential campaign then only a few months away. A l l the furor did not disturb the Barings one iota. From the beginning Ward assured them that the scheme was politically impracticable. T h e partners themselves disclaimed any interest in politics and stated that they had merely intended to show that without a "national pledge" it would be impossible to borrow as much money as State improvement schemes demanded in the time required. 22 Whatever the intentions of the partners may have been, the House of Baring had precipitated itself into the middle of the American political scramble. Its suggestion of a "national pledge," which might have involved no more than a Federal guarantee of State bonds issued for the completion of State improvement projects, had precipitated a national debate on Federal assumption of State debts. In the course of the discussion Baring Brothers & Company had been both praised and roundly criticized for its interference in national affairs of the American people. A t the same time it was damned for its treatment of Samuel Jaudon. Articles in the N e w York Courier and Enquirer on December 19 and 20, 1839, accused the Barings of promising aid to him before August 23 and later refusing it, of writing to correspondents in the United States warning them of Jaudon's impending suspension, and of sending similar advices to houses in St. Petersburg and Montevideo. Bates was castigated as the leading offender. Five days after the first attack in N e w York a letter containing similar accusations appeared in the London press over the signature of " A Genavese Traveller." Had the Barings been toid, as they were five years later by the apologetic editor of the N e w York paper, that the charges were made on the authority of George Griswold, the information probably would not have lessened their concern for the reputation of Bates and their firm at the moment of the attack. 23 T h e Barings were in a quandary. Their practice had always been to avoid all newspaper controversies and never to take notice of attacks upon the house. On the other hand, they had aided Jaudon with every facility in their power, and they had no doubt that only

286

FOUR LEAN YEARS, 1839-1842

CH. X

through their aid had he been able to meet his liabilities by new loans on the deposit of depreciated bonds. The unfairness of the criticism, therefore, aroused their ire sufficiently to induce a departure from established procedure. On December 31,1839, the partners by letter asked Jaudon to deny publicly the allegations contained in the published epistle. The agent of the bank was quite agreeable. On January 14, 1840, the request of the Barings and Jaudon's reply were published in the Morning Chronicle. The agent of the bank expressed his gratitude for the generous aid of Baring Brothers & Company to him during the summer, autumn, and winter. He specifically denied that the London house had acted with "gross deception and perfidy." 24 When almost exactly the same accusations were repeated in the Courier and Enquirer three months later, the Barings decided that the situation demanded strong measures. They drew up a long memorandum surveying their relations with Jaudon from May, 1839, to March, 1840. In the survey the partners printed several of the letters exchanged between themselves and the agent of the bank; they felt certain that the publication of the correspondence would prove conclusively their active participation in averting suspension by Jaudon as well as the integrity of both Bates and the House of Baring. Not until the memorandum was in galley proof did the partners abandon their decision to publish their vindicating statement. Quite apart from the possible effect of publicity upon the Bank of the United States, 80,000 shares of which were held by clients of the house, the partners shrank from such a violent deviation from their normal dignified silence. The privately printed book was sent only to important friends in the United States — Richard Willing and Grant & Stone in Philadelphia, J. G. King, William Appleton, William Sturgis and others chosen by Ward in New York and Boston — and to a few friends in Europe. It was also shown to the officials of the Bank of the United States. Even before the printed letters arrived, the officers of the bank had denied that their failure to disavow the attacks on Baring Brothers & Company in the press had given "tacit sanction" to the charges.25 Ward was not allowed to escape blame for the attacks upon his

CH.

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PUBLICITY AND CRITICISM

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principals. The partners thought that without the information in their letter of August 23, 1839, the writer of the attacks, reported to be R. M. Blatchford, attorney for the bank, would not have known enough to make such untruthful allegations. They reprimanded Ward for showing as much as an extract from the letter to Dunlap, even though that action had been essential in persuading the bank to send remittances to Jaudon at once. Bates also labeled as "indecorous" Ward's declaration during the summer of 1839 that, if the Barings should resume the London agency of the bank, he would resign his position with the house. Ward did not take kindly to this criticism. He stated that, in order to prevent a suspension of Jaudon's agency, he had been forced to show Dunlap an excerpt from the August 23 letter of the Barings to convince him that it was imperative to send remittances to Jaudon. When the bank was endeavoring to force New York and Boston to follow its lead in suspending specie payments in October, Ward had shown the letters of the Barings to "several gentlemen," and, in his opinion, "the public" was indebted to them and to him for "doing what was proper to be done." Otherwise, he had treated the letters as strictly confidential! 2l> Regarding his declaration to resign the agency he pleaded that the pressure of business and the exigencies of the times demanded extreme statement. The remaining years of the depression witnessed only two unfriendly comments in the American press on the Barings, who returned to their policy of silence. The first appeared in the New York newspapers in connection with accusations against Prime, Ward & King. In 1840 the Barings were accused of using the New York firm "to get an ascendancy" over New York State issues of bonds, such as the Bank of the United States had acquired over those of Pennsylvania. Prime, Ward & King retaliated through the columns of the New York American, the editor of which was Charles King, a brother of J. G. King. Ward refused to lend his name or that of the Barings to the controversy. The New York Herald took occasion, when Bates was known to be coming to America in 1841, to state erroneously that the stock of the Bank of Commerce, held by Ward and Bates, really belonged to Lord Ashburton. While Bates was in America, the Herald also made it a point to state that he was

288

FOUR L E A N YEARS, 1839-1842

an agent for British bondholders

(Mississippi)

CH. X

and that he had

urged the passage of the distribution bill. T o support this last assertion the circular sent out by the Barings in October, 1839, was republished. Bates w a s made the representative of the bondholders after he had left E n g l a n d , but neither he nor W a r d heeded any of the remarks. In December, 1841, some merchants held momentary doubts about the stability of the Barings, but the sentiments were not sufficiently strong to cause open statements in the newspapers and soon evaporated. A s Bates had written to W a r d years earlier: " A n y H o u s e in a large way of business must expect to engross much

of public attention, and remark, and some

weak-nerved

people will be alarmed, but time sets these matters r i g h t . " 2 7 FINANCIAL POLICIES, 1 8 4 O - 1 8 4 2

In spite of criticism, the financial operations of the house f r o m January, 1840, to the winter of 1842 were continued without any modification of fundamental practices. E x c h a n g e accounts were managed almost entirely upon a specie and bill basis. Every effort was made to sustain the credit of A m e r i c a n States and institutions. By such measures the Barings were protecting both Americans and themselves, not to mention British bondholders. T h e relations of the Barings w i t h exchange dealers were somew h a t altered. T h e death of Samuel W a r d in N o v e m b e r , 1839, removed f r o m Prime, W a r d & K i n g a large part of its capital and the partner trusted by T . W . W a r d above all other men in N e w Y o r k . T h e subsequent suicide of E d w a r d P r i m e damaged still further the reputation of the house. Bills of G o o d h u e & C o m p a n y sold at higher rates upon occasion. T h e latter house continued to be the chief agency in handling the cotton funds of the Barings, chiefly because it was willing to do the business for % per cent and Prime, W a r d & K i n g insisted upon a commission of l/2 per cent. 28 Jacob Little & C o m p a n y , N e w Y o r k , with w h i c h the Barings opened an account in 1838, increased its exchange operations. Peabody, R i g g s & C o m p a n y , Baltimore, was granted an open credit of £2.0,000 for an exchange account. A l t h o u g h the Barings preferred dealings with mercantile firms, an account was opened w i t h the B a n k of C o m merce, N e w Y o r k , and the partners were w i l l i n g to reopen the ex-

CH.

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FINANCIAL POLICIES, 1840-1842

289

change account with the Union Bank of Louisiana if and when that institution resumed specie payments.29 All through the period trouble was experienced with the Navy Department. It drew on London in "30 days sight" bills and always remitted late. Finally, the Barings' request for drafts at "60 days sight" was acceded to in 1842.30 Although the Barings had already sold many of the State bonds under their control, including large blocks of those purchased from Peabody, by January, 1840, they still retained a very strong interest that the States should be able and willing to keep faith on outstanding indebtedness. As explained to Ward, Baring Brothers & Company was under advances for about £150,000 on Massachusetts bonds of the Western Railroad Corporation, under advance of about £100,000 on Ohio securities to the Ohio Life Insurance & Trust Company and to the Commissioners of the Ohio Canal Fund, and under advance of about ,£55,000 on Ohio and Alabama bonds on the account of Prime, Ward & King. N o advances had been made on about £80,000 of New York securities sent over by the New York banks or on about £160,000 Louisiana and New Orleans bonds consigned by the Union Bank of Louisiana. Besides a promise to advance £30,000 to the Baltimore & Ohio Railroad against the deposit of Maryland bonds assigned to the road, the Barings held £133,000 of the same securities for account of the Chesapeake & Ohio Canal Company, "some smaller sums on various accounts," and about £200,000 worth of selected American securities on their own account. 31 Until about the end of June, 1840, considerable success was met in disposing of some holdings. A material aid during this period was the convention with a group of four Paris firms — Baguenault & Company, A . Dassier, Delessert & Company and Hottinguer & Company — arranged in March by Thomas Baring for the sale of New York City, New York State, and Ohio bonds. Within a month the Barings could report that almost all Ohio certificates held on joint account with Prime, Ward & King had been sold.32 Between June, 1840, and August, 1842, the market for American securities grew progressively worse. The final suspension of the Bank of the United States in February, 1841, and unsettled Anglo-

290

FOUR LEAN YEARS, 1839-1842

CH. X

American relations, complicated by the McLeod affair in 1840-41, would have been enough to give pause to the British and European investors had not several American States either repudiated their debts or failed to pay interest during the last six months of 1841. In addition to these deterrents many bonds pledged by Jaudon in 1839 and 1840 were released by his refinancing in 1841. Small sales were effected throughout the period, but the purchases of investors were reduced to a very thin stream indeed during the financial stringency in the spring of 1842. While the Barings and others were trying to market American securities, British railroad companies and foreign governments, including Russia, Austria, and France, were competing for the favor of the British investor.33 Nevertheless, the Barings did not abandon all hope until word was received in July, 1842, that neither Pennsylvania nor Maryland was going to meet midsummer interest payments. This progressive depreciation of American bonds compelled the Barings to come near to violating their rule against discounting bill remittances. In 1841 and 1842 the Barings began to deposit bills of exchange instead of using bonds and bills of lading of merchandise as collateral security for loans from Overend, Gurney & Company. 34 The Barings could have disposed of more of the securities in their hands had they been willing to sell at prices so low as to damage the credit of the States. As a consequence of their policy they were able to sell in January, 1840, only a few of the bonds of Maryland for the Baltimore & Ohio and none of those held for the Chesapeake & Ohio Canal Company. The bonds of Alabama for Prime, Ward & King and those of Louisiana for the Union Bank failed to find a single purchaser. Very few Massachusetts bonds were sold, because the opening price had been above par and the Barings refused to lower the rate. The partners finally agreed with the Bank of the State of South Carolina to relinquish all claims to commission on the promise that no further South Carolina bonds would be sent to London for sale, and that Baring Brothers & Company would not be held responsible for advances under the contract. The partners sold a small parcel of their own holding of that security in Charleston through Leland Brothers & Company in 1842.35 Ohio bonds had the best reception both in England and on the Continent, and

CH. Χ

FINANCIAL POLICIES, 1840-1842

291

New York State and City securities met ready purchase at somewhat depreciated prices. Rather than sacrifice the issues over which they had complete control in Europe — Massachusetts, Ohio, Maryland, and South Carolina — the Barings returned some of the bonds to the United States. The action taken on South Carolina has already been noted. The large amount (,£152,000 on January 1, 1842) owed to the Barings by the Western Railroad for rails and advances induced the London house to urge assessments upon stockholders and borrowing in the United States. Later an agreement was reached that, beginning April ι, 1842, the corporation should remit at once for advances on interest and sums due the Liverpool house and pay off the remaining debt at the rate of ,£10,000 per month until the sum owed to the Barings was reduced to ,£50,000. As payments were received, corresponding amounts of bonds were returned to the railroad company. 36 The arrangement with the Baltimore & Ohio Railroad Company was completed in July, 1842. Under the agreement of October 12, 1839, the Barings were to buy iron for the railroad to the extent of ,£40,000, holding Maryland bonds as security. In June, 1842, the credit was increased to cover the entire cost of the iron needed to extend the rails to Cumberland. In return, inasmuch as Baring Brothers & Company could not cover its advances of funds by selling the bonds except at prices ruinous to the credit of the State and the company, the Baltimore & Ohio executed in July a special bond, interest at 6 per cent. Beginning on October 1, 1842, the company began reducing its indebtedness to the Barings at the rate of $50,000 per year. By 1843 the obligation of the corporation on the books of the London house stood at ,£ 67,00ο.37 Ohio bonds underwent a slightly different treatment. In 1840, when the Ohio Life Insurance & Trust Company had covered most of its unsettled balance, $130,000 in bonds was returned to it. In order to retain control of the sale of Ohio bonds in Europe, however, the Barings later purchased $400,000 from the Commissioners of the Ohio Canal Fund in July, 1840. Hope & Company took a one-fourth share in this purchase. Not until later advances to the Canal Fund had been covered by the Barings' purchase of $400,000 more at 60

292

FOUR LEAN YEARS, 1839-1842

CH. X

in May, 1842, was the residue of the company's holdings returned to the United States. At almost the same time the partners received back from the Life Insurance & Trust Company $150,000 in bonds on consignment, but since no sales could be effected the Barings would permit no drafts.38 The partners had invested in Maryland bonds for the same reason that they had purchased the Ohio securities. At 85 they bought $63,000 of Maryland bonds on joint account with Oelrichs & Lurman of Baltimore in 1841. Over half of these were lost with the sinking of the steamer President, and the Barings did not receive duplicate certificates until late in 1842. In the meantime they had learned that Oelrichs & Lurman had paid for the purchase in installments. In the partners' opinion this action damaged the reputation of the House of Baring. The Baltimore firm received a stinging rebuke.39 These actions did not mean that they had forgotten how and when to refuse overtures on American securities. In general no remittances of bonds were accepted to cover overdue accounts. The Barings had contemplated, in the spring of 1840, taking a one-fourth interest in a $1,200,000 New York loan, but the price was too high to tempt them. A Texas loan, brought to England by James Hamilton in the same year, was also refused after Lord Ashburton's advice had been sought and received. Issues by the government of the United States in 1841 and 1842 were likewise turned down. In other special cases the partners took over limited amounts of bonds of the States in which the house had a particular interest. John Ward & Company of New York forwarded a small parcel of Ohio bonds, as did Prime, Ward & King. Some of those sent by the latter firm were subsequently returned. With Hope & Company and Jones Loyd & Company the Barings purchased $104,000 Louisiana bonds at 75 from Jaudon in 1840.40 When Upper Canada requested the advice of the Barings in 1842 in regard to the attitude of the British market upon new debentures, the Receiver General was urged to send no more issues to England. 41 Proximity to the United States had given a bad name to Canadian securities. The greatest activity of the Barings and Ward in sustaining the credit of American States and institutions was concentrated in what

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might be termed a campaign of propaganda. Ward continued his efforts, initiated in October, 1839, to sustain the banks of New York and Boston and to bring about resumption of specie payments south and west of Philadelphia. He corresponded with Webster concerning the policies essential for the Federal government to follow in order to rejuvenate American banks and currency. He talked to prominent merchants and bankers in New York, Boston, and Philadelphia with special reference to the Bank of the United States, and wrote anonymous articles for the newspapers. When the Bank resumed paying specie in January, 1841, he thought his purpose had been accomplished. Even after the final suspension of that institution on February 5, 1841, he refused to abandon hope for other American banks. During the next year, as far as banking was concerned, Ward's chief attention was directed toward facilitating resumption in Philadelphia and Baltimore, but he also tried to influence the Louisiana banks.42 Actually, he was free to devote greater attention to his other main aim — the averting of default or repudiation by States on their indebtedness. He wrote newspaper articles and undoubtedly inspired others. He wrote letters to the governors of Pennsylvania and Maryland urging the levying of taxes to pay interest on bonds and to create sinking funds. The same policy was advocated for N e w York, which finally ceased new issues in 1841. Ohio inspired great confidence by actually adopting adequate taxes. In the meantime the Barings in almost every letter to correspondents were urging the recipients to exert pressure upon legislators and governors to the same end. While Ward received no response from Governor Porter of Pennsylvania, he was more concerned about Maryland. The name of Baring Brothers & Company had never been publicly associated with a Pennsylvania loan. On the other hand, many Maryland bonds had been marketed through the house, large amounts were still held by it for account of the Baltimore & Ohio Railroad Company and for the Chesapeake & Ohio Canal Company, and in April, 1840, the State made all interest outside the United States payable through the House of Baring. 43 Ward used many expedients to persuade Maryland to resume the

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"path of righteousness." H e interviewed the governor and talked to prominent Baltimore merchants. H e established a correspondence with George Mackubin, the Treasurer of the State. Most important of all, he engaged a special agent, John H . B. Latrobe, attorney of the Baltimore & Ohio, to act for him. Latrobe performed all the services of a modern lobbyist — interviewed legislators and prominent business men, spoke upon many occasions against default of interest payments, and sent detailed reports of the condition of Maryland finances to both the Barings and Ward. In spite of the fact that the Barings attempted to uphold the credit of the State by further advances, all efforts to prevent default failed. Maryland passed a tax law in 1841, but it was not sufficient to meet both foreign and domestic obligations. O n January 1, 1842, the Barings advanced funds for interest payments in London. Legally bound to pay American creditors first, Maryland found itself unable to pay $30,000 interest due in London on the following July 1. This time the Barings, although reimbursed for a part of their earlier advance, refused to assume further responsibility and passed the waiting on to the bondholders. 44 Several years were to elapse before the State began to meet its foreign obligations in full. When Pennsylvania defaulted on its interest payments on August ι, 1842, for the Barings the nadir of the depression had been reached. After that date no one would invest in American securities except those who would buy at very low prices in anticipation of returning the bonds to the United States for sale. American credit could plumb no lower depths. A t the same time faint rays on the horizon promised better days to come. Lord Ashburton's mission to the United States had been hailed by American business men as a good omen and their hopes had been realized. 45 Though the Oregon boundary was not settled, war and threats of war for the moment could not be considered as potential interruptions to Anglo-American trade. COMMERCIAL ACTIVITIES

While these events had been taking place in the realm of finance, the commercial operations of business houses all over the world had been curtailed in an effort to avoid loss or failure. Those houses which had available funds were able in many cases to operate with

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greater success than before. Baring Brothers & Company was in this category. Aggregates of outstanding credits on the Barings afford an excellent illustration of the changes made. T h e total declined from ¿ 1 , 741,900 in August, 1839, to ¿1,204,620, in February, 1841, rose to ¿1,706,722 in February, 1842, and reached the lowest point of the depression at ¿1,124,732 in October of the same year.46 T h e first contraction may be taken as a reflection of the policy of curtailment inaugurated in the spring of 1839 and maintained for the two succeeding years. Assuming, however, that the depths of the depression had been probed, the Barings, largely through the encouragement of Bates during his visit to America in 1841, expanded their credit business during the remainder of 1841. T h e y discovered their mistake with the appearance of financial stringency early in 1842. Within two months the total credits had been reduced by more than ¿300,000. If unused "dry goods" credits are subtracted from the aggregates, outstanding credits averaged between ¿250,000 and ¿300,000 less throughout the period. 47 Collections of old debts proceeded slowly and with no little difficulty. N . L . & G. Griswold was threatened with court action before payment could be agreed upon. W h e n friendly letters from Bates to Abraham Howard brought no results from Howard & Merry, Ward attached property of that firm as security for its debt. He also accepted payments from several other firms and released them from remaining obligations, thereby incurring a mild rebuke from the Barings for treating leniently firms which had paid American before European creditors. Other debtors were of necessity aided by extending their notes, and still other houses were just "written off." 4 8 Since no mention is made by either principals or agent of the totals under "old balances" after 1839, the exact status of these accounts cannot be ascertained. T h e Barings suffered considerably from the new flood of failures beginning in the fall of 1839. T h e failure of the Union Bank of Mississippi left the London house with a dishonored debt, which later was written off to profit and loss. It arose from excessive advances on cotton in 1839 and an advance, guaranteed by Samuel Jaudon, to pay interest on Mississippi bonds. Stetson & Avery, N e w

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Orleans commission merchants engaged by Ward to buy cotton during the 1841-42 season, turned over to the Barings stores and warehouses in that city to cover its debt. W h e n George Knight & Company, Havana, failed in May, 1840, it was rumored to owe the Barings $250,000. This presented a difficult problem. Several Cuban sugar plantations were offered in settlement, but the Barings thought that criticism would be heaped upon them for ownership of slaves. A settlement was finally arranged by the acceptance of the estates as coverage for the debt and placing them in the name of an agent. 49 With these exceptions most accounts were covered promptly. Very few American correspondents of the Barings failed. T h e credit-rating system of the house paid excellent dividends during the crises and depression years. Commenting upon his list of correspondents in 1843, W a r d noted "that of 250 pronounced undoubted in 1835 — only 16 have failed, & all the rest now undoubted — and of 245 pronounced as likely to continue good, 22 have failed — and of 280 of the third class, 45 have f a i l e d . " 5 0 Considering that seven years of unusual stress had just passed, that record stands as a remarkable tribute to his judgment of men and business houses. Perhaps one of the factors in this highly satisfactory result was the fact that N e w England firms constituted more than half the total number of active correspondents of Baring Brothers & Company. Given these developments it is not surprising that f e w changes were made in the business practices of the house. T h e maintenance of security was the paramount object. Deviations from rules almost always resulted in closing the accounts of offending correspondents. Covered credits and advances on cargoes constituted a very large part of the commercial operations of the house. Uncovered credits were given only to the most reliable and wealthy firms. Running credits were also displaced to a large extent by credits for specific voyages. T h e joint credits issued by Goodhue & Company and Grant & Stone were discontinued by Bates in 1841. A l l bills of American houses on partners in England were refused as remittances, to which practice Bates attributed the ease of his house when so many firms in Europe and the United States failed in 1841. T h e Opium W a r and the reorganization of Russell & Company threatened for a time to disrupt the operations of the Barings at Canton,

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but both obstacles were successfully hurdled; Americans utilized credits on the House of Baring during almost the entire period. 51 Shipowners' accounts, including that of the remaining six packets of the London line controlled by Grinnell, Minturn & Company and John Griswold, led to no changes in practices, but caused Ward to wonder if expansion in shipbuilding had not been too rapid for the welfare of owners. O n that score he could point, if he so desired, to the inauguration (December, 1841) of regular steamship service between London and Havana and Belize, Honduras, as foreshadowing the increasing competition of steam navigation. It also indicated the necessity for a change in the relations of the agent of the Barings with correspondents in the West Indies and the southern United States. 52 In spite of criticism by American clients, the Barings continued to purchase goods extensively upon their own account. Although a sugar operation with Knight & Company for the spring of 1839 was canceled, later purchases were made in the same market. Superfine "Howard street Baltimore" flour (or equivalent) attracted their attention more consistently, however; orders were sent to the value of ¿10,000 in October, 1839, and other purchases were made through Grinnell, Minturn & Company. A part of the flour was to be kept in the United States for further orders, another for immediate shipment to England. In the spring of 1840 the partners also purchased 500 hogsheads of tobacco through Ambrose Lanfear at N e w Orleans. More for the purpose of providing ballast for the packet ships of the London line than for the profits possible in the operation, the Barings consigned iron on joint account with Grinnell, Minturn & Company to N e w Y o r k on several occasions.53 For the account of the house, though under the anonymity of a "Charter Party," was the venture on the American ship Washington to Canton in 1839. If a blockade was not in effect at Canton, F. B. Wells, the supercargo, was to purchase a cargo through Russell & Company, transship the goods on the American vessel to Singapore, and transfer them at that point to a British vessel bound for London, preferably the Barings' own Alexander Baring. If all vessels were excluded from that port, Wells was to go to Manila or Singapore or Java to dispose of his British manufactured goods and there to load

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the Washington with sugar, coffee, or some other article promising satisfactory results under orders "to Cowes and a market," or directly to Baring Brothers & Company. The vessel actually brought a mixed cargo to New York. 54 Although operations on their own account in these various "colonials" and other commodities were not large, the Barings became the largest receivers of cotton in England between 1839 and 1842. Calculating upon the collapse of almost all the large cotton houses in Liverpool during the crisis of 1839, which would throw the cotton trade there into the hands of the bankers and brokers, the Barings ordered Ward to purchase 60,000 bales in the South for the ensuing season. Including both purchases and consignments, the Liverpool house received 104,270 bales from America in 1839-40 and ranked first among receivers in that port. Although only 55,250 bales of the following year's crop had come to it by April, 1841, its position as the largest receiver was still maintained. Bates characterized the 1840-41 operation as a "brilliant one." The only thing that the house did wrong in 1840 was to hold some cotton off the market for a time in fear of war when it should have sold steadily. Losses were heavy, especially on advances. About three fifths of the totals represent purchases upon their own account; the Barings bought between 70,000 and 75,000 bales during the 1839-40 season and about 33,000 the following year.55 At the same time, it must be remembered that these totals do not represent all the cotton shipments facilitated by the Barings. Smaller amounts were dispatched to London and to Continental ports, especially to Havre rather than to Liverpool. The Barings wanted to do a large business the following year and the circumstances seemed very favorable. Numerous failures in Liverpool, they thought, would diminish the capacity of dealers to hold and sales would be steady, thus permitting quick diminution of the holdings of the house and keeping prices low. These low prices would be reflected in the American market and purchases could be made advantageously. The numerous failures in both England and America would also force many Americans to accept the overtures of the Barings to advance to only three fourths or five sixths of the cost rather than the whole. Under these circumstances, the partners were desirous of making permanent friends among the sur-

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viving firms in New Orleans. Accordingly, Ward engaged Stetson & Avery, of New Orleans, to act as agent in cotton operations, even though the commissions were 2% per cent for making purchases instead of the 1 to 1 % per cent paid to special agents. With the advent of regular steamship service to Havana and the Gulf of Mexico the Barings also began to write directly to New Orleans and Mobile. The Barings' estimate of the market turned out to be wrong. Sales did not go rapidly in Liverpool because most holders, unable to wait for higher prices, sold steadily. On October 4, 1841, the Liverpool house had on hand about 70,000 bales of American and Indian cotton, including both consignments and purchases. Out of 61,000 bales on hand two weeks later, 22,000 were on consignment and 39,000 on account of the House of Baring. In order to prevent a complete collapse of the market the partners could permit only small sales. In addition, the crop in India was very large, much of the Chinese market for the article was cut off, and the cheap grades from India came to Liverpool to compete with the lower classifications from America. Manufacturers, being able to sell their finished goods only at a snail's pace, purchased for "daily wants only." With demand so slight, the losses of many receivers on Calcutta cotton consignments were about 33/4 P e r cent. This contributed to financial and commercial malaise in Bengal, thus restricting still further that market for British manufactures.5® Receipts of the 1841 cotton crop were relatively small. Given the foregoing developments, the financial stringency early in 1842, and the uncertainties surrounding the mission of Lord Ashburton to the United States at that time, the partners ordered Ward at the end of March to cease his purchases for the house. In the meantime Stetson & Avery had failed, though not before it had bought enough, when added to acquisitions by other agents, to raise the total purchases for account of the Barings to 20,000 bales. Consignments were small in number and quantity. The Barings had not yet found the Southerners content to accept advances of only part of the estimated price. The only large consignment (5,000 to 6,000 bales) for the season came from S. Metcalfe of Augusta and Charleston, late in May. 57 These activities in cotton and other commodities were not unac-

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companied by criticism from various quarters. T h e Liverpool house was fired upon both for holding cotton too long and for inefficient handling of accounts. Several accounts, some dating from the 1838— 39 season and involving heavy losses, were not closed until 1842. Consignors from both N e w York and the South objected, pointing to the fact that other Liverpool houses had long since closed sales of consignments. 58 Not all of the difficulty was attributable to withholding the cotton from the market. A t the time several of the consignments were made, the Barings had pointed out that the advances were too high and that only by holding for an indefinite period could the amounts necessary for coverage be approached. Having experienced losses, the consignors blamed the Liverpool house, but the Barings would concede only one firm the justice of its claims for damages. 59 T h e owners of the Old Line packets also criticized the Liverpool affiliate. It was stated that Gair was not so conciliatory as formerly, that charges for repairs of the vessels had been excessive, and that the partners had not devoted enough attention to procuring cargoes for return voyages to the United States.60 That there was some truth in these accusations was tacitly admitted by acts and words of the partners. Bates tried to find an additional partner for the Liverpool house during 1840 and again when he visited the United States in 1841. More explicitly, he admitted that there might be some justification for criticism, inasmuch as Charles Baring Y o u n g had been called to London during the rush of aiding Jaudon and the Bank of England during the fall of 1839 and the following winter. T h e young clerk dispatched to replace him had proved less satisfactory than anticipated. After personal conversations with the American critics Bates was also willing to admit that some inefficiency was apparent. Bates was instrumental, however, in smoothing out the difficulties during 1841 and 1842. H e realized that the competition of the steamers was cutting into the profits of the packets and that losses during the depression were a cause of nervousness and complaint. Nevertheless he informed Captain C. H . Marshall, now the chief owner of the Old Line, that efforts were being made to increase the staff of the Liverpool house and that greater inducements would be

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offered to the packet owners in the matter of return shipments.®1 Later Ward agreed to allow Marshall y2 per cent commission on the proceeds of all consignments procured by him, except on those upon which there were reclamations. In this manner the packet owners were apparently mollified, at least temporarily, by the summer of 1842. Only Grinnell, Minturn & Company among the larger N e w York commission houses refused to believe that the Liverpool branch could be relied upon. Charges against the effectiveness of Ward in procuring consignments from N e w York were met by entrusting a larger amount of business to Grinnell, Minturn & Company. T h e allegations arose partly because Ward had no special assistant in N e w Y o r k and were intensified, no doubt, by the disgruntlement of American firms as their losses multiplied during the depression. T h e idea of finding someone to act as resident sub-agent in N e w York was abandoned after a search for a competent man had produced no results. Arrangements with Grinnell, Minturn & Company were completed late in 1842.62 This new departure was among the acts designed to take advantage of prevailing low prices and of the prestige of the London house in anticipating the period of prosperity thought to be just "around the corner." Adverse criticisms were probably animated in part by the fact that by 1842 the Barings stood in a class by themselves among merchant bankers financing American trade. Morrison, Cryder & Company had been dissolved at the end of 1839 and the firm of James Morrison & Sons did not take as prominent a part as the earlier firm in American commercial activities. Holford & Company had retired from the trade entirely. In 1841 Fletcher, Alexander & Company determined to issue no more credits in N e w York. William & James Brown & Company, reorganized as Brown, Shipley & Company in 1839, was rumored to have lost heavily in cotton during the 1838-39 shipping season and had not yet regained a reputation, such as that enjoyed before 1837, to place it on a par with the Barings. Rothschild. & Sons constituted no great competition inasmuch as operations in new issues of American securities were nonexistent, the house was not interested in American commercial credits, and after 1841 August Belmont no longer acted as its special agent. There was

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even some discussion of returning the account of the State Department to Baring Brothers & Company. Lizardi & Company was so shaky in 1842 that it felt obliged to issue a public denial that its house in N e w Orleans had suspended payments. T h e Bank of the United States was gone as a competitor. T h e same was almost true of the "three W's," though residual firms carried on until 1853. Reid, Irving & Company, Huth & Company, McCalmont & Company, Palmer, McKillop, Dent & Company, and Magniac, Jardine & Company had suffered heavy losses and were still not in the first rank. As early as 1841 Bates could say with truth that the house was in the position of being able to expand its business to any limit desired.63 T h e extent of the most advantageous expansion was the only question. In contrast, though not without occasional concern, the partners in the House of Baring normally could be happy about their profits. One or two of the partners had been alarmed about the large American engagements of the firm early in 1842. A t that time Baring Brothers & Company had ,£500,000 invested in or lent on American securities, another 600,000 tied up in advances and credits on goods, and a like amount locked in its portfolio of bills receivable. Moreover, had a return been made for 1841 alone, the house would have had no income tax to pay for that year. Losses had been heavy. O n the other hand, exclusive of interest received on securities, the average annual income of Baring Brothers & Company for the three years 1839-41 had been ,£76,000. In May, 1842, it had had no bad debts for 16 months. A t the same time, the personnel of the House of Baring had proved adequate to the demands of the business. Mildmay had thought of retiring in 1841 but decided to continue in the firm. T h o u g h Charles Baring Y o u n g was not admitted as a partner in London until 1844, he was available as an assistant in emergencies. H e had been very helpful in 1839. T o give him greater freedom, James Price, an outstanding clerk, was sent from London in 1841 to aid the Liverpool partners. T h e Barings had contemplated asking John Cry der to join the Liverpool house but decided to go on without any "strangers." 84 Though the expansion of commercial credits in 1841 had proved to

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be in advance of recovery, by the autumn of 1842 the partners felt certain that conditions could not become worse. After limping along for six months, Pennsylvania had defaulted on its interest payments in August. Maryland had admitted its inability to pay its foreign creditors a month earlier. A t the same time, the Merchants' Exchange in N e w York failed to meet its obligations. "Grieved and astonished" at this action, Baring Brothers & Company decided to pay the interest due the intimate friends of the house to whom £60,000 in bonds had been sold in 1838. W h e n an institution representing the leading merchants of the most important business center of the United States defaulted on such a paltry sum as $30,000, American credit could go no lower. Other elements in the situation also looked unfavorable. Prices were still declining generally. In May a fire destroyed one-fifth of Hamburg. Failures continued to dot the economic path, particularly among East Indian merchants and corn factors in England. 65 T h e situation was not without its small measure of hope, however. A s the partners knew, recovery always began after the bottom of the depression had been plumbed. Lord Ashburton's mission had been successful, Peel's tariff had gone into operation, and the new American tariff had been passed. Money usually brought no more than 2 to 2 y2 per cent in the discount market. Those were good signs for the future. It was reasonable to expect that Anglo-American trade had shaken down to a point at which new operations might be inaugurated with some assurance of profit. T h o u g h prices in England were not to reach their lowest point until a year later, Baring Brothers & Company began expansion of its business in the summer and fall of 1842. T h e partners closed out the old cotton accounts, launched a program for receiving a substantial volume of cotton at Liverpool during the 1842-43 season, improved their service to packet owners, inaugurated a larger business with Grinnell, Minturn & Company, and expanded commercial credits in all trades. T h e Barings were even willing to buy some Ohio bonds on speculation. W h e n the news of the cessation of the Opium War reached London in December, it gave a new impetus to expansive inclinations. Lancashire was galvanized by the news, a stimulus needed after the strikes in the summer and autumn. 66

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A period of unexampled depression had been weathered. The Barings had helped to alleviate a crisis in the London money market in 1839 and had successfully protected its own resources at the same time. Conservatism in commercial credits and security operations had not eliminated losses but had kept them to a low figure. There was still hope that marketing cotton would be profitable. The campaign of the house to sustain American credit had been an almost complete failure. Too many States had defaulted on their obligations for the investing public to distinguish between the "good" and "bad." Still optimistic, the Barings had launched out again in financing the marketing of merchandise and had not abandoned the idea that some States could be induced to resuscitate their damaged reputations.

PART THREE RELATIVE DECLINE IN AMERICAN

INTEREST

CHAPTER RESOLVING DEFAULT AND

XI REPUDIATION,

1842-1848 AFTER Pennsylvania's default on its interest payments, an event popularly regarded as the nadir of American disgrace, international financiers were primarily concerned with the rejuvenation of business activity. There were signs that the downward movement of prices was due to stop soon, and some opportunities for successful operations were already appearing. The most serious brake upon recovery, however, was the low state of American credit in Europe in general and in England in particular. T o remove, or at least to minimize, that obstacle to business enterprise became one of the preoccupations of the House of Baring during the middle 1840's. Though the Barings had many colleagues among British and American business men and politicians in the campaign to restore American credit, they took the lead in several States. Both success and failure rewarded their efforts. CONDITIONS AND QUALMS

The problems facing the partners of Baring Brothers & Company seemed almost innumerable. The economy of the North Atlantic nations had been so badly crippled by two crises and a long depression after 1836 that anything but a slow recovery was out of the question. Prospects for buying low were excellent, but those of selling dear were far from good. The battle for recovery would necessarily have to be fought on several fronts simultaneously. Outstanding debts to the firm had to be liquidated and loans to the house paid. The entire investment business of the firm required attention; the reputation of the Anglo-American houses needed to be reëstablished, American credit restored, and some projects refinanced. T o accomplish these things a marked change in the state of mind among many

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people in both Europe and America was required. At the same time efforts must be made to recoup losses and to make profits by increasing activity in credits, in commissions on commodity operations, in dealings in commodities and securities, and in marketing new bond issues if possible. As new departures were formulated and carried through, care had to be taken that the reputation of the house for honesty, integrity, and stability remained intact. The House of Baring was predominant in the field of Anglo-American trade and finance. The partners cherished dearly that preëminence. Public opinion regarding the whole group of Anglo-American firms was far from favorable. It was inevitable that the purchasers of American securities should place some blame upon those whose enthusiastic prospectuses erroneously, even though honestly in most instances, had placed too much hope in the uninterrupted expansion of economic activity in the United States. The leading spokesman of the creditors was the London Times, which had never been a "bull" on American securities. One correspondent of this newspaper suggested that an investigation should be made of the manner in which American bonds had attained currency in London and "into the conduct of the mercantile or banking firms who first introduced them." The Times enthusiastically approved the propriety of such an inquiry, though recognizing the problems involved in carrying it out. In the course of this discussion the editor indicated his acceptance of the oft-prevailing conviction that banking profits are always large; he incorrectly intimated that commissions ran as high as io per cent. Later in the same year the Times stated that Anglo-American bankers had been a curse to both the United States and England by inducing poor States to contract debts beyond their ability to pay and by enticing small English capitalists, encouraged by high interest rates, to invest therein. Indeed, it was contended that as a result of the sale by the bankers of these worthless securities, trade between England and the United States had boomed, thereby causing undue expansion in English industry, then a crisis, and finally widespread distress in manufactures.1 Thus, the undoubted partial responsibility of the merchant bankers was distended by the critics into blame for all the economic ills of the time.

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Holders of American State bonds memorialized the bankers, capitalists, and the press of London. These creditors, many of whom had suffered grievously from "the dishonesty and bad faith" of the American people, demanded that the sale of any American Federal or State loan should be discouraged by English bankers. They further urged that Parliament should pass a law making contractors of foreign loans "legally responsible" as they were "morally" for the due and regular payment of the interest and the ultimate disbursement of the capital.2 They disliked what they considered the aloof attitude taken by the merchant bankers on the question of responsibility. Evidently more than one segment of the British public in 1842 held sentiments similar to those which led almost a century later to banking investigations in the United States and to the passage of the Johnson Act, which prohibited new loans to defaulting foreign governments. In fact, American credit could scarcely have reached a lower level. No distinction was made between defaulting and honorable States. Americans were regarded as a "nation of swindlers." The Federal government was rebuffed in its attempt to float a loan abroad in 1842. Overend, Gurney & Company thought there was hope for the United States commissioners only if the State debts were assumed by the Federal government, but the Paris Rothschilds told Duff Green that the United States could not "borrow a dollar, not a dollar." George Peabody, referred to by the London Times as an "American gentleman of the most unblemished character," was refused admission to the Reform Club because he was a citizen of a nation that did not pay its debts.3 Baring Brothers & Company urged that a distinction should be made between backward States and honorable ones. They saw no reason to "brand the whole United States as wanting in good faith," but few heeded this opinion, even though it came from the leading voice in Anglo-American finance. A measure of support did come from the Circular to Bankers, which pointed out that of all the States in the Union only nineteen were in debt and of these only seven were embarrassed financially.4 To June, 1842, events in America had disclosed few, if any, signs of improvement in the debt situation. Only the most optimistic

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could see any hopeful prospects in the final refusal of Federal relief to the States in March, 1843, or in the fruitless Maryland act of the same month authorizing the acceptance of 5 per cent Maryland bonds in exchange for the holdings of the State in the Chesapeake & Ohio Canal, the Baltimore & Ohio Railroad, the Susquehanna Railroad, and the Tidewater Canal. Pennsylvania did nothing to improve its faulty tax law of 1841, and the acts of 1843 providing for the sale of its holdings in various banks and corporations seemed to be mere piecemeal and pusillanimous attacks upon its financial problems. Louisiana incorporated the views of the bank-hating Governor Mouton into the discreditable law of April 5, 1843, which really repudiated the responsibility of the State for bonds assigned to the Consolidated Association and to the Citizens' Bank and made virtually impossible reasonable liquidation of the assets of the two institutions. Mississippi was defiant in its refusal to recognize the obligations of the State, nothing but justification for its repudiation emanated from Michigan, and spokesmen for Indiana did no more than express faith in the integrity of its citizens. By its banking legislation Illinois had reduced by some $3,000,000 its outstanding obligations, but the only hope for the creditors of the Illinois & Michigan Canal seemed to lie in advancing an additional fi,600,000 to the company. 5 These actions by State legislators were merely reflections of the general attitude of the American electorate. Apathy, hypocrisy, and evasion were to be found everywhere. The people as a whole felt no responsibility for the acts of defaulters and repudiators. Ward noted that politicians in Pennsylvania, Maryland, and Louisiana, not to mention Florida, Michigan, Arkansas, and Mississippi, deliberately used their evasion of responsibility and the prospect of averting heavier taxes as a means of attaining and holding power. If a State such as Maryland levied an adequate tax, administrators displayed an unwillingness to enforce collection. As if these troubles were not enough, in Maryland the Chesapeake & Ohio Canal Company and the Baltimore & Ohio Railroad Company prolonged their competition for favors from the legislature to the detriment of the honor of the State. Numerous debtors took full advantage of the Federal bankruptcy law of 1841, while others evaded taxes by mov-

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ing to new locations. Even prominent business men dodged their obligations, as evidenced by the actions of New Yorkers with regard to the Merchants' Exchange, and were lukewarm in their support of any campaign for resumption either in their own or neighboring States. One cause for this general attitude was probably that people could plead that the affairs of one State were of no concern to citizens of another. Another factor undoubtedly was the widespread habit of differentiating between public and private morals. Many Americans, too, found it easy to blame their own distress upon banks and bankers, especially since some of these were foreign. People could not get as concerned about the losses of foreign creditors as they did about those creditors at home.8 Of course, the picture was not one of unrelieved darkness. It was impossible to conceive that commodity and security prices would go much lower than they were in the spring of 1843. An upswing in business and prices seemed inevitable. Anglo-American relations had been improved through the signature of the Webster-Ashburton Treaty in 1842. The Opium War had ended. Both events augured well for improved business. Peel's tariff had gone into operation and the new American tariff of 1842 promised to end changes in customs duties for some time to come. It appeared that any change in trade would be for the better. The Barings had reason to believe that Anglo-American trade had attained an organization which might be permanent for a reasonable period of time. Such enhanced prospects for commercial operations and business in general could certainly be expected to react upon shattered nerves and morals of American debtors. Since the rehabilitating process would be slow, however, the Barings desired to hasten the restoration of honorable conduct among the States. For Baring Brothers & Company the problem was one of focusing attention upon the resumption of interest payments by a few States in order that the virtues of the non-repudiating and nondefaulting States might be clear to the minds of English investors. Although the name of Baring Brothers & Company had never been publicly associated with loans from Illinois, Indiana, Mississippi, or Pennsylvania, any improvement in the credit of those States would

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redound indirectly to the good name of those with which the House of Baring did have intimate connections. The reputation of Louisiana, South Carolina, Maryland, and Massachusetts, and of the Merchants' Exchange, with which the name of Baring Brothers & Company had been publicly connected, could be expected to improve as a result of the investors' associating them with those States of rejuvenated credit.7 Acting upon the general suggestions of his principals Ward vainly tried to forward resumption in three States immediately after the default of Pennsylvania. He continued his efforts to persuade the governor of Pennsylvania to act more vigorously and hired J. H. B. Latrobe as special agent for the Barings in Maryland. Latrobe, counsel for the Baltimore & Ohio Railroad Company and a very persuasive man, had urged his friends by conversation, the governor by interview, and the legislature through the newspapers to resume payment of interest in cash. Ward in the meantime was writing letters to the press and trying to convince the Barings that much could be done through that medium to forward their ends. That the Barings themselves were not idle is indicated by the fact that they had advanced the interest on the Consolidated Association bonds for December, 1842, and that their first memorial to the legislature of Louisiana regarding these bonds was presented on July 8, 1843.8 Inasmuch as none of these measures made much of an impression, the need for more positive action was obvious. Still the Barings nursed many qualms about taking aggressive action on the American debt situation. They knew that their ends would be challenged and defeated if American voters and legislators learned of the pressure brought to bear by foreigners, and by foreign bankers at that. Hence, for example, strict secrecy had to be maintained with regard to suggestions made to legislators in Pennsylvania. Bates squirmed at recourse to subterfuge; "my whole life has been a stranger to such doings," he said. Interference in elections was prohibited. Also, the Barings' usual dread of publicity caused them to doubt the value of pouring foreign money into a press campaign. In April, 1846, the partners wrote: The press no doubt is a powerful engine, but it is a dangerous one for foreigners to play with, and we have never been able to reconcile thor-

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oughly to our feelings the propriety of taking American papers into pay for the purpose even of advancing principles of honesty. It ought to be done without English money. T h e n , too, both partners a n d agent feared that people w o u l d suspect t h e m of speculating in A m e r i c a n securities o n the basis of inside i n f o r m a t i o n acquired t h r o u g h their p r o p a g a n d a activities. In truth, both W a r d a n d the B a r i n g s m a d e it a rule n o t to speculate in securities on the basis of i n f o r m a t i o n derived f r o m k n o w l e d g e of i m p e n d i n g public events. T h e important t h i n g w a s w h a t it w a s fitt i n g for the " H o u s e of B a r i n g to d o . " 9 Profits could be m a d e elsewhere. M A K I N G PENNSYLVANIA THE GOOD EXAMPLE

It w a s in spite of the B a r i n g s ' doubts and the obvious size of the task that the partners decided to b r i n g pressure to bear u p o n defaulti n g a n d r e p u d i a t i n g States. O n June 17, 1843, B a r i n g Brothers & C o m p a n y i n f o r m e d H o p e & C o m p a n y that a combination w a s b e i n g considered to establish a paid agency to present to P e n n s y l v a n i a the interests of its bondholders. A l t h o u g h involved only to a "trifling ext e n t " in securities of the State, the B a r i n g s considered P e n n s y l v a n i a as " t h e greatest sinner" a m o n g the n o n - p a y i n g States. T h e y t h o u g h t that sound principles of public honor t h r o u g h o u t the U n i t e d States w o u l d be " m o r e a d v a n c e d by m a k i n g a n attack there & an impression on public opinion in that state w h i c h is evidently able to pay than by spreading our action over all the defaulters. . . . " 1 0 In June o n l y the B a r i n g s a n d O v e r e n d , G u r n e y & C o m p a n y w e r e p l e d g e d to act and to raise the ¿2,000 estimated as necessary to pay a n agent and to subsidize the press. B y the time specific orders w e r e issued several other

firms

had

entered the combination. T h e list finally also included D e n i s o n & C o m p a n y , R e i d , I r v i n g & C o m p a n y , Jones, L o y d & C o m p a n y , a n d Hope & Company. The

subscribers w e r e

disposed

to e n g a g e

a

"first rate m a n in every respect," and to g i v e h i m " a liberal b u t not e x t r a v a g a n t a l l o w a n c e , " say $5,000, and a "reasonable

allowance"

f o r contingent expense. A l b e r t G a l l a t i n , W a l t e r F o r w a r d , G e o r g e M . D a l l a s , a n d H o r a c e B i n n e y w e r e suggested as likely candidates

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for the position. Charles Stokes agreed to act as secretary for the committee in London. Formal orders were finally dispatched to Ward on July 18. The European merchant bankers had agreed that the agent or agents that Ward might appoint should write for the newspapers, arrange meetings of Pennsylvania bondholders residing in the State, make speeches at said meetings, indicate how important it was that the State should keep good faith with its creditors at home and abroad and how easy it was to do so, and to "endeavor to enlist the clergy to point out from the pulpit the moral wrong and danger to the people of not acting honestly." The agent was also to determine immediately what should be done in England and whether a press campaign should be inaugurated there as well as in America. 11 Ward had the problem of creating an organization to carry out these orders. It was no easy task. The attack had to be carried to Pennsylvania specifically, pressure had to be maintained simultaneously in several defaulting States, a competent leader had to be chosen, the nature of the necessary psychological appeal had to be determined, and the specific plans had to be formulated. In spite of the general apathy of the American public, Ward maintained that the bastions could be stormed. "Experience shows," he said, "that it is only necessary to present a sufficient motive and people will tax themselves — In the present case, interest, justice, honour, state pride, individual feeling, & public sentiment, all concur to present motives, if properly brought to bear." 12 Thus he stated his points of appeal and recognized his main problem — organization. Ward spent about three months working out his plan of campaign. The editor of the Boston Daily Advertiser, Nathan Hale, characterized by Latrobe as "the very impersonation of common sense and one of the cleverest writers I ever met with on practical subjects," was appointed Ward's first lieutenant and public agent at a salary of $2,000 per year. At the end of August Hale went to Philadelphia to study public opinion and to choose aides for the struggle with the politicians. Within a short time Hale and Ward selected William B. Reed, recently State Senator, and Elihu Chauncey of the Bank of Pennsylvania as special aides. "Sound views" on finance began to appear in the press. Meetings were held partly

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through the efforts of the agents. Memorials from various groups of bondholders were collected and prepared for presentation.18 In the meantime the Barings had begun an independent campaign in Louisiana. The name of the firm had been publicly associated with Louisiana bonds assigned to both the Union Bank and the Consolidated Association of Planters of Louisiana. Connections with New Orleans had begun in Alexander Baring's day, and the firm still held some of the city's bonds on its own account in 1843. It was also agent for the collection of overdue interest on Louisiana bonds assigned to the Second Municipality of New Orleans. Moreover, the Barings' intimate collaborator, Hope & Company of Amsterdam, was the chief negotiator of the bonds of the State assigned to the Citizens' Bank. In addition, the London firm had a claim against the Consolidated Association for interest paid without remittances on January 1, 1843. Under the circumstances, therefore, it was logical that the Barings should entrust their New Orleans agent, Matthias Purton, with the task of collecting the claims and promoting the restoration of the credit of the State. Purton's orders left him considerable discretion. He was to collect the money from the Association and the Second Municipality in any way he saw fit. He was to work to induce the State to recognize its obligations for the reimbursement of the bonds assigned to the Association due in 1843 and those assigned to the Union Bank maturing in 1844. For the good name of the State it was desirable, too, that a guarantee be given for the retirement of other Union Bank bonds maturing in 1847, 1850, and 1852, and of some State bonds assigned to the Association, which had been marketed by Lizardi & Company and were to mature in 1848. Taxes should be raised in order that revenues would be sufficient to meet interest payments and current obligations. The Association and the Citizens' Bank were to be discouraged from releasing mortgages, which stood as security for the State bonds, but the chief drive for the maintenance of the integrity of the Citizens' Bank the Barings left to Hope & Company. Thus Baring Brothers & Company was already taking a series of steps to restore American credit at the moment the Reverend Sydney Smith released his famous diatribe against Americans in general and Pennsylvania in particular. 14

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Meanwhile both solicited and unsolicited assistance was forthcoming from other public figures. The two most important aides were Daniel Webster and Nicholas Biddle. Webster was retained by the Barings in his regular capacity as adviser, but he was considered unsuited as a leader for the campaign to restore State faith. He gave several speeches — as a public man in his public capacity — denouncing repudiation and dishonesty on the part of the States. Biddie contributed his part by suggesting that the Federal government, or a sister State, or a foreign nation should buy up some Pennsylvania bonds and bring suit against the State. The project was regarded as impracticable by most commentators, but the public discussion was of undoubted assistance in enlightening the American public about the debt issue. Not until 1845 was there any comment from a President of the United States favorable to restoration of State faith; Polk in his inaugural gave the movement his support. Ward was not surprised, for he had taken measures "to place the matter strongly" before the president-elect.15 Long before 1845, Ward had urged that a general program against all defaulters and repudiators should be organized under his direction. On October 31, 1843, he proposed that the foreign bondholders authorize him to guide all efforts for promoting the return of "sound ideas" in the United States. The Barings replied that for them to make such a proposal might seem "invidious" to the Pennsylvania committee and that it might be injurious to Ward's usefulness for the business of the firm. In reply Ward maintained that his proposal would mean merely an enlargement of the authority already exercised by him and that everything he had done to date was of benefit, not injurious, to the firm.16 Whatever his principals may have desired, Ward actually carried the attack to all fronts where the Barings were interested. He supervised activities in Maryland, Illinois, Louisiana, New York, and Pennsylvania. He gave suggestions and orders to Latrobe in Baltimore as well as to E. J. Forstall, R. D. Shepherd, and Matthias Purton in New Orleans. Both he and the Barings maintained a correspondence with the agents of the Illinois & Michigan Canal and with J. G. King regarding the Merchants' Exchange. Under the editorship of Nathan Hale the Boston Daily Advertiser

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became the key newspaper in a widespread press campaign. In it were inserted news items and pungent editorials upon the prevailing condition of State finances. These various items were then sent to all the agents and to many sympathizers to give to local papers for re-publication. For example, Ward wrote to Gales and Seaton, editors of the National Intelligencer, enclosing two clippings from the Advertiser and urging them to air their views on State faith. He enclosed a check for $200 as indemnification for any extra time spent on editorials and for money lost in advertising. In this case the editors refused the money but expressed their willingness to cooperate in the campaign to rejuvenate State honor. The editors of the New York Journal of Commerce, the New York Evening Post, the New York American, and the New York Courier and Enquirer, as well as several New Orleans and Baltimore papers, were not so reluctant to accept pay. Their usual fee for re-publication of submitted items was f i o per item. In one sense, however, the two key articles for the entire campaign appeared in the issues of the Democratic Review and the North American Review for January, 1844. Ward prepared the outlines for both. Alexander H. Everett, soon to be appointed American Commissioner to China, wrote the shorter item for the Democratic Review; Benjamin R. Curtis, then a prominent member of the bar in Massachusetts, wrote the one for the older periodical. The article by Curtis was the most complete analysis of State debts at the time and has been cited by all succeeding writers on the subject. Although Ward lamented that the editors shortened the article by ten or twelve pages, it still included much on the finances of Pennsylvania, Maryland, Louisiana, Mississippi, Michigan, Illinois, and Indiana. At Hale's orders 1,500 copies were made of the article. Most pleasing of all, Curtis refused to accept any compensation for his efforts.17 There was at least one American above reproach! Curtis based his appeal to readers upon practicality, principles, and democracy. He pointed out that default and repudiation on the part of some States had ruined the credit of the whole country. He urged a "rightful course" in the name of the "regard which we owe to our father, our gratitude to God, and our duty to the principles of free government." Curtis wrote:

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' The providence of God, which has led us through a feeble infancy, and supported our steps in times of great trial, and raised up mighty men to supply our needs, and stand as examples in time to come; which has made us millions from a handful, and poured upon us a tide of prosperity such as never blessed any other people, — persuades us not to repay this kindness by breaking His law of justice. Elsewhere in the article he showed the connection between returning to "sound faith" and "all our ideas of justice, of social order, of personal security, and of the peaceful pursuit of happiness." And as he discussed each State, the future Supreme Court justice made specific suggestions as to measures to be adopted and ends to be attained. By January, 1844, Ward was ready to release the full force of his campaign. Copies of the two periodical articles were sent to England, Pennsylvania, Maryland, and Louisiana as well as to particularly interested persons in Boston, New York, and elsewhere. The president of a Boston peace society received twenty-five copies of each article. The governor of Massachusetts in his 1844 inaugural address expressed sentiments derived from the study by Curtis. Excerpts from both reviews were cited by special writers engaged to discuss State finances in the newspapers of Annapolis, Harrisburg, and New Orleans. Reprintings and new articles on public honor appeared in leading newspapers of Boston, New York, Baltimore, and New Orleans.18 As suggested by the Barings, the clergy was called into action, particularly for Pennsylvania. Ward found the Presbyterian and Baptist weekly papers especially willing to cooperate. To Dr. Francis Wayland of Brown University he sent a copy of the Curtis article. The recipient found it "admirable." Ward forthwith sent him fifty copies of each review for distribution among such of the clergy and editors of religious periodicals as Dr. Wayland might think useful in giving the desired tone to public sentiment. The gentlemen on the American Board of Commissioners for Foreign Missions, a correspondent of the Barings, aided Ward with their counsel. Articles appeared in the Observer, and Joseph Tracy, a former editor of that periodical, was engaged to build up sentiment among the ministers

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in Pennsylvania. He talked to Professor Schmuker of the German Lutheran Theological Seminary at Gettysburg and elicited a promise of sermons on the subject and of articles written in German for the paper of the church edited by the professor's brother in Baltimore. 19 The nature of the appeal to religious people may be gleaned from a letter to Heman Lincoln, to whom Ward sent fifty copies of both review articles for distribution. The agent wrote: 20 You & myself both agree that it is the duty of every Christian man to give this matter his serious consideration, — especially in those states which are able to pay & do not pay, as for example Pennsylvania and Maryland. — There is a great body of men in these states who are followers of Him who commanded us to love one another — to do justly and to love our neighbor as ourselves — and to think & to do those things which are honest, just, & pure, & of good report — and there is a persuading power in these things which the most selfish cannot easily resist, — and with the blessing of God, the time is not far distant when these Great States shall be guided by the principles of justice. The pledge of the faith of the State binds the conscience of every man in it — they have received the money, — it has been expended on their soil — every man as truly owes it as if he had received it, & should not only be willing himself to pay but is bound to do all he can to make & influence others to be willing & to cause it to be done. — Let the religious world speak out, & it will be done. — and every Christian man & woman as it seems to me will feel this obligation when it is presented to their attention. — My dear Sir, it is in your power to do much good in this matter. I know your disposition to do it. The final drive for resumption of payments in Pennsylvania was beautifully coordinated. In spite of grave doubts on the part of Chauncey and other Whigs in Pennsylvania as to the prospects of success, and lukewarm support from Samuel Ward and the King brothers in New York, Ward plunged ahead. Hale acted as coordinator and leader. He received ammunition on Louisiana and Maryland by talking to Forstall and Latrobe in Philadelphia. Latrobe hired one of his young acquaintances to write for the Harrisburg papers, using the North American Review article as a model.

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Hale, Reed, and Chauncey prepared a full report on Pennsylvanian finances, adding a draft of a bill with provisions for taxation and resumption. This was presented to the chairman of the Ways and Means Committee at Harrisburg. After this had been done, Hale left the task of maintaining pressure on the committee to Reed and a certain Mr. Hepburn, whom he had hired to go to the capital at a fee of $500 each. Both agents interviewed legislators and furnished them information. Both subjected the members to a continual fire of letters from themselves and from mutual friends. At Chauncey's instigation, memorials were dispatched from Philadelphia. At the same time, through Jonathan Goodhue and Daniel Lord, Jr., attorney for the Barings in New York, the Bank for Savings of the City of N e w York, a holder of Pennsylvania bonds, sent a memorial urging resumption. Through Reed, Newark College, another institution holding State's bonds, did likewise. All this was accompanied by inspired comments in the press. As Ward phrased it, all efforts were "followed up like a temperance movement." After very minor changes the bill passed the lower house. The fight was close in the Senate. Chauncey, sensing this, wrote to two friends in Northumberland, promising compensation if they would go to Harrisburg to aid Hepburn and Reed. Chauncey later expressed the conviction that the upper house would not have acted favorably had his two satellites not been on hand. At any rate the bill was passed and signed. It varied from the prepared report only in that it levied slightly higher taxes than the engineers had planned. 21 Although pleased with the success of the campaign in Pennsylvania, and backed by the increased firmness of European holders of American securities, before this State's credit was fully restored the Barings found that they still had worries. The governor refused to authorize any payments of interest on August 1, 1844, in cash because* the law stated that the interest must be paid in certificates of transferable stock. Webster's speeches in the autumn of 1844 in Pennsylvania were intended both to aid the Whigs and to encourage a return to cash payments. Chauncey advocated pressure on the legislature for the passage of a specific law making payments in cash mandatory at least to the extent of funds in hand, with the residue

CH. XI

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to be paid in certificates or by a short-term loan. To try to force the issue Ward published a letter in the New York Journal of Commerce on November 9, 1844, and Hale had in the Advertiser an article on public faith in Pennsylvania. When February 1, 1845, arrived, the State paid one-half in cash and one-half in relief notes and depreciated currency. Out of the total of $940,000 due to foreign holders, $235,525.86 was remitted through Baring Brothers & Company. A 3 per cent loss was taken by the investors on the notes and paper money. The legislature refused to authorize cash payment in full for August, 1845, which led the Barings to suspect that the lawmakers themselves were speculators. Ward's protest against halfway measures toward resumption availed nothing for two years, but regularity was finally achieved in 1847.22 The campaign in Pennsylvania cost more than Ward had anticipated. Reed, who was to receive $500, demanded and was given $1,000. Chauncey, who said at first that he wanted nothing, was paid $1,000. Hale was given $1,000 over and above his salary of $2,000. Webster was given $100 as a retaining fee and a canceled note when the Barings wrote off his overdue debt of ^482 in 1843. Latrobe's young man was paid $100, and compensation was accorded to various "friends" whom Reed, Chauncey, and Hepburn induced to go to Harrisburg. Most of the newspapers charged $10 for each insertion of news articles and reprints from the Daily Advertiser. Ward's estimate of the total cost was .£1,300 to £1,500. He later unsuccessfully tried to add to the account of the Pennsylvania committee an item of $200 that he paid to Webster. A part of Ward's estimated total, however, went to aid the Whigs in the campaign of 1844, and part was really chargeable to resumption in Maryland and in other States.23 SHINING MARYLAND'S SHIELD

Baring Brothers & Company was forced to wait a longer time for a return to good faith in Maryland than in the case of Pennsylvania. From the beginning the situation in that State was more complicated for the London firm. The name of the house was directly associated with Maryland bonds. Baring Brothers & Company was the official foreign agent of the State, of the Chesapeake & Ohio

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Canal Company, and of the Baltimore & Ohio Railroad Company. All three owed considerable sums of money to the London house, which held bonds of the State as collateral and on its own account. The London partners stood to profit materially, therefore, from a restoration of Maryland credit. The existence of the debts gave the Barings a much-needed power over the canal and railroad companies. When either wanted to borrow more money, the Barings always made consideration of the appeal contingent upon the restoration of Maryland credit.24 However, the rivalry between them for the favors of the legislature in the race to tap the upper Potomac and Ohio valleys constituted one of the major obstacles to unified action in the campaign to obtain resumption of cash payments by the State. Equally serious as an obstacle was the "coupon law" of 1841, which allowed the payment of taxes in depreciated interest warrants. Taxpayers liked this so much that legislators hesitated to repeal it; and, without substituting more adequate fiscal measures for it, the revenues of the State would continue to be inadequate to pay interest in cash, especially when the administration of collection was notably ineffective. One saving grace was that the railroad company regularly paid the interest on those State bonds which had been assigned to it. Some slight gain for the Barings was achieved by an arrangement of the account of the Chesapeake & Ohio Canal Company. The reimbursement of the Barings for the ,£77,000 debt was complicated by the refusal of the company to permit the London house to sell the ¿133,000 Maryland bonds held as security. Peabody maintained that the Barings would be within their rights in effecting such a sale, but the officials of the canal were adamant. Not desiring to incur the ill will of these men who might later throw business in their way, the Barings ordered Ward to make a compromise, which Ward did at the end of November, 1843. By the terms of the agreement Baring Brothers & Company bought one half of the ¿133,000 bonds at 65 (the market price at the moment in London was 50) and gave a receipt for one half of the debt as it stood on January 1, 1842. The remaining ¿67,500 bonds were to be held as security for the balance of the debt and were not to be sold for eighteen months

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without the consent of the company. If at the end of that time the bonds had not been redeemed by payment of the debt, the Barings were entitled to sell at their own discretion. The agreement also provided for payment of accruing and back interest on the bonds.25 By this arrangement the Barings made some concessions but settled a debt. They also aided the credit of the State to the extent that back interest and accruing interest on certain amounts of Maryland bonds was paid. But resumption of cash payments by the State was still far removed. The technique of attack was the same as in Pennsylvania. Latrobe directed everything, with occasional assistance from Ward and Hale. In late 1843 and early 1844, newspapers were extensively utilized to educate the public. Latrobe inserted reprints from the Boston Advertiser in Baltimore papers, talked with the editors, and wrote numerous articles himself for the Clipper, Patriot, and American. He encouraged a newspaper argument between two supporters of resumption in order that all facts might come to light. Upon receipt of the Curtis article he had 750 copies reprinted. Some of these were sold, many were sent to prominent men in key towns and cities, and Ward was asked to forward enough copies to supply every member of the legislature. Latrobe urged his friend, Dr. T. E. Bond, editor of the Christian Advocate and Journal, the chief Methodist paper circulating in Maryland, to "stir up the monkeys with a long pole." Ward sent memorials from the Barings to the Senate and the House of Delegates. The bar association in Baltimore passed and publicized resolutions drafted by Latrobe.26 In fact, that agent of the Barings was ubiquitous in his personal connections in forwarding the cause at issue. J. L. Carey, a member of the House of Delegates, much impressed by a conversation with Latrobe and Ward, became virtually Latrobe's special assistant during the 1844 campaign. Latrobe avowed that he intended to fill Carey so full of facts and ideas on resumption that all the delegates would come to him for information. Carey was not only supplied with facts and statistics by the agent, but Latrobe even drew up the bills that Carey presented to the House. Furthermore, as a prominent member of the Whig party, Latrobe maintained intimate connections with leading men from all sections of the State. His ac-

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quaintanceship included such figures as Chapman, Tilghman, W. C. Johnson, John Johnson, and Reverdy Johnson. Through these he advanced the detailed plans for restoring State credit. The report of the State Treasurer for 1843 made use of a memorandum drawn up by Latrobe. These actions were supplemented by letters from G. W. Lurman, a correspondent of the Barings, to the Speaker of the House, by letters from Ward to Louis McLane, president of the Baltimore & Ohio Railroad, and to J. M. Coale, president of the Chesapeake & Ohio Canal Company, urging them to use their influence in the campaign. 27 Plans for the 1844 campaign were intended to remedy the situation at one session. Interest in arrears was to be funded, more satisfactory assessment of taxes was to be instituted, prompt and complete collection of taxes was to be established, operation of the sinking fund was to be suspended for a time, the coupon law was to be repealed, some bank stock held by the State was to be sold and the proceeds to be applied to the debt, and a definite date was to be fixed for resumption of cash payments. Although the program as a whole failed of achievement, some progress was made by the summer of 1844. Through abolition of minor offices and reduction of salaries, State expenditures were reduced. Arrears of interest were being lessened somewhat by the acceptance of coupons for taxes and by the payment of interest on a part of the Maryland bonds assigned the Chesapeake & Ohio Canal. Though seven counties were thwarting the efforts of the State administration, more effective measures were taken to enforce the collection of taxes. Nevertheless, the goal of resumption had failed. Reasons for the failure to accomplish more were both general and personal. Legislators were sensitive to the delight of the taxpayers in paying taxes in depreciated coupons and to the often violent opposition to collectors on the Eastern Shore. McLane and George Brown, both prominent in the railroad company, opposed the bill intended to aid the canal men in extending their project to Cumberland. In retaliation canal representatives voted against Carey's measures. Brown was also opposed to touching the sinking fund and thought that the time was too early to set a definite date for resumption of cash payments. As the leading member of Alexander Brown

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& Sons, he was naturally extremely influential in Baltimore's business circles.28 The campaign of the Barings was slightly broadened in 1844-45. In spite of an expressed willingness to step into the background, Latrobe was induced to continue as special agent. He maintained the flow of items to the press, some of which he wrote himself and some of which he suggested. McLane, signing himself "Q.E.D.," used facts furnished by Latrobe for articles in the American. The items in a newspaper controversy between Carey and Johnson were collected, published in a pamphlet, and both sold and given away. McLane was urged by Latrobe, Ward, and Bates to take an active part in the fight and to cooperate with the canal forces. Ward even suggested that an old debt ($4,200 in notes) of McLane to the Barings should be relinquished as an inducement. Latrobe continued his conversations with legislators and prominent Marylanders. He got George Brown to back a stamp tax and to write to John Johnson. A memorial from the merchants of Baltimore which appeared in the Sun was drafted by Latrobe. He also hired a very active special assistant, H. W . Evans, who had the ear of the governor as well as of prominent men in the canal and railroad companies and various legislators. Through this medium, facts, statistics, and drafts of bills were presented to important quarters. Given these activities, both the Barings and their agents hoped that the election as governor, in November, 1844, of Thomas E. Pratt, "a courageous, forceful executive" favorable to resumption, would mean success for their plans in the 1845 session.29 Only a modicum of success attended their efforts, however. Governor Pratt centered his attention upon increasing the revenues, and his suggestions were followed by the legislators. Additional revenue laws in the form of a stamp tax and a tax on inheritances were passed. Equally important were the measures passed to force the collection of taxes. By the summer of 1845, collections even in the recalcitrant countries were being made in full. Funding, resumption, and other proposals had to await more favorable times. One of the main factors preventing resumption in 1845 was the passage on March 10 of a special bill for aid to the Chesapeake & Ohio Canal Company. The lien of the State on the property and

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revenues of the canal was postponed, and the company was given the power to issue preferred bonds to the amount of $1,700,000 to facilitate the completion of the canal to Cumberland. During the session canal men were far more interested in their own affairs than in resumption. The measure also aroused the antagonism of the supporters of the Baltimore & Ohio Railroad Company and definitely prevented cooperation between the two corporations on the resumption issue. Some parts of the "coupon law" were even liberalized in favor of taxpayers. That action derived from the expectation of increased revenue from the canal and the new taxes. At the same time the Barings were enabled to bring some pressure to bear upon the canal company by refusing to attempt to sell the new bonds in England. Nevertheless, the London firm's offer to pay the July, 1845, dividend on Maryland bonds against the security of bank stocks held by the State was refused. 30 Under these circumstances the Barings felt impelled to adopt a scheme involving a further compromise with their principles. This time their funds were used in part to influence an election. George Peabody had served as a commissioner for the State of Maryland, had marketed in London Maryland bonds belonging to the canal company, had dealt continuously in them since 1839, and was vitally interested in the restoration of the credit of the State. He had persuaded his friend, J. J. Speed, to write letters advocating resumption in 1842 and had had the letter published in the United States. Peabody maintained a steady correspondence with friends in Baltimore, the location of his importing firm for thirty years. Thus it is not surprising that in 1845 he asked the Barings to join him in raising a fund of 1,000 to aid Governor Pratt in restoring the credit of Maryland. The Barings contributed nine tenths and Peabody one tenth of the sum. In the interests of secrecy, on which the Barings insisted, a Baltimore wholesaler, O. C. Tiffany, was authorized to transfer the 1,000 to Baltimore by drawing a bill on Wetmore & Cryder of New York. The funds were to be disbursed by Tiffany, Evans, Latrobe, John Glenn, and W. H . Getchell. Only ,£766.16.6 of the sum was spent. At least some of it was used to aid in the election to the legislature of those favorable to resumption. When the Barings appraised Ward of the plan, their statement that they

CHARLES

BARING

YOUNG

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did not wish to do anything "improper" must have made the realistic W a r d smile. 31 They had always insisted that he must not use their money to influence elections. While the Barings had qualms about making contributions to campaign funds and to having any of their propaganda activities known, they showed no restraint in pressing the Chesapeake & Ohio Canal Company to back resumption. From every possible avenue of approach they let the company know that money could not be raised in England upon the bonds authorized in 1845. T h e president and a director of the company were so told. William Cost Johnson, a special agent sent by the company to induce the Barings to purchase the bonds, was similarly informed. John S. Gittings, Commissioner of Loans of Maryland, and the governor himself were impressed with the same idea. Daniel Webster and Clarence Cox, respectively special attorney and general counsel for the contractors — G w y n , Thompson & Hunter — for the completion of the canal to Cumberland, had the matter categorically stated to them. T h e same stand was presented to Grinnell, Minturn & Company when that firm was considering an arrangement for advancing a sum of money to the contractors on the security of the bonds. Nevertheless, negotiations continued throughout 1846. In November of that year the Barings seriously considered advancing the company a sum of money on the security of the bonds. T h e y even had Hale and Captain W . H . Swift of the A r m y Topographical Engineers make a survey of the probable costs of the canal for them. Before an agreement could be reached, however, the monetary stringency of 1847 in London had become so marked that the partners decided to postpone their decision. T h e canal finally raised some money in the United States, though not before the Baltimore papers had blamed Baring Brothers & Company for the company's failure to succeed earlier. 32 Yet again in 1846 the efforts of those trying to induce resumption proved of no avail. Various obstacles were interposed. Legislators would not modify the new "coupon law." T h e usual objections to a new assessment of taxable property were encountered. Governor Pratt annoyed the agents and the Barings by advocating funding the arrears in 3 per cent rather than 6 per cent bonds. T h e resump-

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tionists were thus thrown upon the defensive. T o o many of the canal men were lukewarm in their advocacy of the proposed measures, and many of the railroad men were unwilling to take a positive stand until a favor equal to that accorded the canal company had been conferred by the legislators upon the Baltimore & Ohio Railroad Company. Even at that, the vote on the resumption bill was so close that Latrobe thought the whole scheme would have gone through had John Johnson not been such a timid chairman of the Ways and Means Committee. 3 3 Obviously two specific steps had to be taken to insure passage of the funding and resumption measures. One was to get the right men in as Speaker of the House of Delegates and as Chairman of the Ways and Means Committee. T h e other was to make certain of railroad support by special legislative aid similar to that given the canal. In 1846 Latrobe actively participated in getting John P. Kennedy chosen Speaker, and that worthy lived up to his campaign promise by appointing Thomas Donaldson as chairman of the key committee. Latrobe then gave specific instructions to Donaldson as to the method and means of resumption and even sat in on the conference which set the exact date for the move. When the voting took place in the House of Delegates, a majority was achieved only through the action of Latrobe and friends in keeping one member sober and through insistence to canal men that no assistance would be forthcoming to that company unless active support was given to the measure before the House. A s it worked out, the resumptionists had a majority of four; the insistence upon the repeal of the "coupon l a w " was the main factor in the narrowness of the margin. T h e resumption bill was passed on March 8, and on March 17, 1847, the bill permitting the railroad to issue its own bonds was approved by the Delegates. 34 Both bills were later approved by the Senate and the governor. T h e resumption law belatedly incorporated almost all the demands of the London merchant bankers. T h e provision that all taxes after October 1, 1847, were to be paid in cash in effect repealed the coupon law. T h e power now accorded the Treasurer of the State to borrow against bank stock in case of a temporary deficiency had been recommended by the Barings for four years. Outstanding ar-

CH.

XI

SHINING MARYLAND'S SHIELD

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rears of interest were to be funded after October i, 1847, in 6 per cent bonds redeemable at the discretion of the State. Surpluses in the State Treasury were to be appropriated to the retirement of these bonds and to the payment of interest thereon, after which they were to be applied to the sinking fund. This latter provision amounted to the temporary suspension of the enlargement of the sinking fund, which was the course long advocated by Latrobe and Ward. That the idea had its advantages is indicated by the fact that, with the aid of a new tax law passed in 1848, all the bonds in arrears were retired by 1851. 35 Credit for achieving the goal in 1847 must be accorded to various men and events. Reviving business conditions were of undoubted importance in inducing changed feelings in Maryland. Spokesmen such as Speed helped somewhat, although Ward was inclined to deprecate his activities. Many public-spirited citizens desired a restoration of State faith from the very beginning and used their influence to that end. Peabody lent his weight as an American in England, and the importance of his aid as a successful importer to Maryland could not be discounted. Bargaining among themselves on the part of legislators also helped to forward the measures, but Ward assigned most importance to the planned and aggressive labors of Governor Pratt, H. W. Evans, Kennedy, the canal men, the Barings, and their agents.36 The high cost to the Barings of resumption in Maryland almost seemed to belie Ward's generous allocation of credit to others for the success of the venture. Latrobe was paid $500 for the 1842-43 season and $1,000 per year for the next four years. Also, at his own diplomatic expression of dissatisfaction with the usual salary in 1847, he was granted a special credit of $500 for travel in Europe. In addition, his expenses for the resumption campaign between 1843 and 1847 totaled approximately $1,900. The Barings apparently did not act upon Ward's suggestion that McLane's debt should be canceled, but they did contribute ,£690 to the fund sponsored by Peabody. Evans was paid $1,500, but was so dissatisfied that the Barings were forced as late as 1853 to add $914 to resumption costs.37 A conservative estimate, therefore, would show approximately $15,000 expended by the Barings for resumption in Maryland, exclusive

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of whatever part of the payments to Webster should be assigned to the account. The partners could point out, however, that the State, the railroad, and the canal had all paid their debts to the house and that further gains would probably be forthcoming through future relations with all three. CAMPAIGNING IN LOUISIANA AND MISSISSIPPI

In the meantime a less successful struggle was being carried on in Louisiana. By the end of 1848 practically all the claims of the Barings had been met and the credit of the State was partially restored, but Louisiana never was persuaded to live up to its obligations to the Consolidated Association and the Citizens' Bank. The technique used in the southern State was very much like that utilized in Pennsylvania and Maryland. Although both the Barings and Ward kept in touch constantly with all active agitators for restoration of State faith in Louisiana, Purton acted in New Orleans as the specific agent of the London house. He coordinated the activities of R. D. Shepherd, C. Adams, Jr., president of the Union Bank, and Forstall; the last-named, who acted as special agent for Hope & Company, did most of the work. 38 The articles in the Democratic Review and the North American Review were reprinted and extensively distributed. A press campaign was inaugurated and sustained, and Forstall furnished expert guidance to members of the legislature. That Louisiana was legally bound to pay interest and principal on the bonds issued to the property banks was the theme of the Curtis article. The mortgages were, in his opinion, a "guaranty for the reimbursement of the principal and interest of the bonds to be issued by the state." By contract the State and the banks were obligated to hold the mortgages in trust to secure the loan represented by the bonds. The laws of 1842 and 1843 impaired the obligation of that contract and were therefore unconstitutional.39 More important than the American press campaign, however, was the castigation of Louisiana in the London Morning Chronicle for November 3, 1843. In a tone comparable to that of the Reverend Sydney Smith, whose more famous letter appeared in the same issue, the paper characterized the insolvency bank legislation of Louisiana

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331

in 1842 and 1843 as "a more heinous breach of faith than repudiation." Those were fighting words to almost all elements in the State. When this remark was combined with those of Curtis and with some from the pen of Hale in the Boston Daily Advertiser, the reaction was certain to be positive. Shepherd helped matters along by making sure that all the leading New Orleans papers had copies of the London and Boston articles. He also wrote articles himself for the Bee, a Whig paper, which took every opportunity to counter any defense of Governor Mouton's regime published in the Courier. Even though denunciatory of the legislation of 1842 and 1843, the editorials of the Bee asked what Great Britain and Massachusetts would have done under circumstances similar to those faced by Louisiana in those years. At the same time, the paper cleverly appealed to local loyalties and dislike of outside interference. "We know of no surer way to blunt the sensibilities of a people to the obligations of contracts," said one writer of editorials, "than for the press and more especially for foreign journalists to assail their honesty, when they have done the best thing, at the time, in their power to do, for the public creditors." 40 During the first quarter of 1844, aided by the convictions of the editors, Forstall and Purton made certain that readers of New Orleans papers would have full information on the subject of State faith and the means of restoring the credit of Louisiana. When the Courier attacked the proposal to extend beyond November, 1844, the guarantee of the State to a part of the Union Bank bonds, Forstall answered it in the Bee. Reprints of both Review articles were widely distributed; one of each was placed on the desk of every legislator, and excerpts were copied in all the leading New Orleans papers in French and English. After "pecuniary assistance" of an undisclosed amount had been rendered to the editors of the Age (Democratic) and the Bee, both papers printed sensational charges against the administration of the State based on material furnished by Forstall.41 The education of the citizens of Louisiana could hardly have been more thorough. Forstall also kept busy pulling other strings "behind the curtain." Adams circularized the stockholders of the Union Bank to persuade

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CH. XI

them that the institution need not liquidate if the State would pay the $1,100,000 debt to it. Purton presented memorials from Baring Brothers & Company and the foreign bondholders to both houses of the legislature and the governor. Forstall helped to direct every shaft aimed at the administration party. H e followed the lead of Shepherd in interviewing confidential friends of the governor; he talked to representatives of the three property banks; he helped to convert the Treasurer and Attorney General of the State to the belief that something must be done to restore the credit of the State; he presented the memorial from Hope & Company urging aid to the Citizens' B a n k ; he was asked to draw up the memorial from the Union Bank to the legislature and was charged with drafting the bill in accordance with the memorial and the resolutions of the stockholders; he became acquainted with the key member of the Finance Committee of the lower house, furnished him with ideas, facts, and figures, and was finally asked to translate the report of the committee into French and to frame the bill separating the "debt proper" from that arising from aid to the property banks. H e even supplied notes for the arguments to be advanced by supporters of this bill as well as those backing the bill for continuation of State support to the Union Bank. 4 2 Some gains and some defeats were the immediate results of all these efforts of the restoration party. Outright repudiators were reduced to an impotent minority, although the governor and his party had been in favor of repudiation a f e w months earlier. T h e establishment of the "debt proper" and provision for the liquidation thereof improved the credit of the State. T h e fact that the way was left open for the Union Bank to work out its own salvation was also a gain, even though further State aid was denied. That bank was helped, however, to the extent that the Finance Committee Act provided for the payment of $762,000 of the $1,100,000 debt owed by the State. Both the bill for extending beyond November, 1844, the guarantee of the State for $1,750,000 to the Union Bank and that for rescinding the act of April 5, 1843, passed the lower house but were lost in the Senate. 43 Opposition to repeal of the act of 1843 had come from several sources. Probably the most important was that represented by debt-

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LOUISIANA A N D MISSISSIPPI

333

ors w h o wished to pay their debts in depreciated securities. Another active group was made up of politicians seeking to perpetuate their o w n power by catering to the debtor group. Some agents of foreign bankers, too, seem to have supported Governor M o u t o n and his group. Forstall reported that most of the foreign agents in Louisiana were endeavoring to bring dishonor upon the U n i o n B a n k , to produce a panic in Europe in Louisiana funds, and to m a k e N e w Orleans the only market for a time at least for all the bonds of property banks. T h e Rothschilds were reported on good authority to be large operators in Louisiana securities in L o n d o n and N e w Orleans, and, said Forstall, " W h a t is honor, State or individual, compared to the golden harvest p r e p a r i n g ? " 4 4 In spite of opposition, however, the credit of Louisiana was restored in some measure during the next f e w years. W i t h the aid of the Barings, and the legal advice of Judah P . Benjamin, later the storm center of the Confederacy, the U n i o n B a n k was enabled to retire the $1,750,000 Louisiana bonds maturing in N o v e m b e r , 1844. O f this amount $850,000 was paid in cash by N o v e m b e r 1; for the remainder the U n i o n B a n k issued its o w n bonds, in four series of equal amounts, maturing in each of the next four years. 40 T h i s action in itself strengthened the credit of the State, but the fact that all the n e w issue, plus all the remaining Louisiana bonds pledged to the Bank, were redeemed in 1847, 1850, and 1852, enhanced it still further. E v e n though the State refused to assume responsibility for the bonds assigned to the Consolidated Association of Planters, the efforts to restore the credit of Louisiana through action on that institution were rewarded with success in 1848. O n January 15, 1845, Purton arranged w i t h the Association the settlement of an old balance and the amount due the Barings for the payment of interest on 763 bonds on December 31, 1842. Meanwhile, Forstall kept firing away at the governor and legislature on the question of the status of the Association and of the Citizens' B a n k . O n M a r c h 10, 1845, the act of t w o years earlier was virtually rescinded by an act providing that after M a y 1, 1845, the t w o institutions m i g h t not receive their "unmatured coupons, or bonds, or other unmatured debts in payment of debts due to them." U n d e r an act of two years later the

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management of the two banks was modified in such a manner as to make impossible the continuation of the dominance of the "bankrupt" group. Furthermore, permission was given to the managers to negotiate with the bondholders for a renewal of matured and near-maturity bonds of the State assigned to them. Although an act of 1847 allowed the stockholders to pay off their stock mortgages in Louisiana bonds, by December, 1848, laws had been passed providing for retirement of the "debt proper" of the State and for stockholders of the Association to pay all debts to it, except stock mortgages, in gold or silver. In this fashion the bank could accumulate a reserve to retire its bonds. By that time, moreover, most of the bonds to be canceled were in the name of the Consolidated Association. In 1847, Alexander Gordon, former partner of Forstall and for some years past the managing partner of Lizardi & Company, N e w Orleans, was sent to London to negotiate with the Barings and the Lizardi firm there. T h e outgrowth of that journey was the issuance, under date of May 15, 1848, of 5 per cent bonds of the Association, still covered by mortgages, to the amount (1) of the bonds redeemable in 1843, (2) of those issued by Lizardi & Company and due in 1848, and (3) of the unpaid interest from 1843 to 1848. Interest payments on the new bonds were regularly met, and the Association was in a position to retire all outstanding bond obligations in ι852.4β Despite almost continuous efforts by the Barings and their agents up to 1861, N e w Orleans contributed less than desired to the restoration of faith in it or in the State. T o be sure, the Second Municipality on March 1, 1844, made a settlement for interest due in 1843 on Louisiana bonds assigned to it, and continued to pay interest on them every year during the two decades. Some of the bonds were even redeemed, thereby reducing the indebtedness of the State and contributing to a better opinion of the credit of Louisiana. O n the other hand, payments were almost always late and special arrangements often had to be made in order that creditors might be paid on time, or nearly so. W i t h the aim of achieving punctuality, Forstall for several years tried unsuccessfully to induce the State to assume responsibility for the bonds assigned to all the municipalities

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of New Orleans, especially for those to the Second Municipality. In 1847 conditions improved slightly. The locofoco administration, which had favored the debtor and local groups, was ousted and the conservative faction came to power in the city. Heavier taxes were imposed, but the finances of the city were in such a tangled condition that interest payments were again delayed. Prices of the bonds in New Orleans rose, thereby attracting many to the city for sale. In the same year the Second Municipality bonds were placed on the "debt proper" of the State, but no appropriation was made to meet the interest when the municipality was delinquent. Between the State and the city faith in Louisiana bonds was falteringly upheld. Uncertainty continued throughout the 1850's. The city fell behind in meeting interest on State bonds. Hopes were raised for punctuality when by a new law in March, 1850, liquidators were appointed for the debts of all three municipalities and special attempts were made to produce order in the maladjusted city finances. Parts of the law, however, were declared unconstitutional. Again delays pestered the collectors and transmitters of interest in London. Finally, in 1852 a loan was floated by the city to meet matured debts and arrears. When the Barings took some of these bonds they expected to have to hold them until the city either paid off or regularly met interest payments on State and other city obligations.47 Before that could be achieved New Orleans embarked on great projects to aid railroads. Complete faith in the city was not restored to long-suffering creditors before the Civil War further affected the city's finances. Nevertheless, by 1848 the credit of Louisiana had been reasonably well resuscitated, even though the Citizens' Bank was not freed from the law of 1842 until ten years later and the State still listed as outstanding in 1854 approximately $5,400,000 bonds assigned to property banks. There was ample provision made for the retirement of the "debt proper," totaling $1,225,000; the cancellation of the Union Bank and Consolidated Association bonds was proceeding smoothly; and the city of New Orleans usually lived up to its obligations, even though belatedly. Stated in another way, in the five years preceding January 1, 1848, $2,605,000 on the debt proper and $7,814,536 on

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issues to property banks and municipalities, a sum of $10,419,536 out of a total debt of $23,807,920, had been canceled. The record was not too unsatisfactory.48 All this Baring Brothers & Company could contemplate with pleasure. The various claims of the firm had been met and the credit of the State had been largely restored; for this the partners could thank themselves and their agent for at least a part. It had been achieved at the expense of some slight "pecuniary assistance" to newspapers, together with payments of ^250 to Forstall and $1,000 to ex-Governor Roman for aiding in the exchange of Union Bank bonds for Louisiana securities in 1844. T o this should be added a part of the payments to Purton as general agent for the firm in N e w Orleans.49 Forstall earned by these efforts several special missions and ultimately the status of general representative of the Barings in New Orleans. Restoration of good faith in the State of Mississippi always seemed so remote that the Barings never gave more than half-hearted support to any move in that direction. In the early 'forties they did no more than send a memorial to the legislature through the agency of the Honorable Robert J. Walker, which he returned without presenting. With only passing comment they watched Forstall, as agent of Reid, Irving & Company, distribute reprints of the article by Curtis and induce the publication of a series of articles in Mississippi newspapers. In 1847 and 1848 they threw cold water on a scheme by Jefferson Davis and T . E. Robbins for liquidating the debt of the State. They paid Latrobe $250 in 1850 for some slight gestures toward implementing a scheme for the redemption of the Planters' Bank bonds put forward by F . L . Claiborne of Natchez, but their interest subsided when it became apparent that only bonds of the one bank were involved, and that the program would cost ,£4,000 to ,£5,000. They did contribute ,£250 to a £ 1,300 fund raised by European bankers in 1853 for a campaign to induce resumption by Mississippi at a time when the State needed to raise more money for the Mobile & Ohio Railroad. But the estimate of the need of an additional $30,000 appalled the Barings. American holders refused to contribute anything. Only Huth & Company and Hope & Company assisted in raising a meager $1,000. Even those two were not

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MIDWEST AND Ν. Y. MERCHANTS' EXCHANGE

337

too well satisfied with the activities of Forstall and Billings in Mississippi, the political complexion of the State turned unfavorable in the 1853 elections, and two key men died — J. G . K i n g of the N e w Y o r k committee and Charles Stokes, secretary of the L o n d o n committee. There the matter remained, as far as the Barings were concerned, until late in 1859, w h e n they joined the Rothschilds, the Hopes, and the Huths in a memorial to both houses of the Mississippi legislature fot general redress. T h e memorial was discussed only cursorily while the legislature was occupied with the crisis over separation from the Union. 5 0 THE MIDWEST AND THE N E W YORK

MERCHANTS'

EXCHANGE

In contrast to Mississippi, Illinois early took steps to avoid repudiation and eventually reestablished the credit of the State on a compromise basis. A l t h o u g h the Barings participated in the various arrangements made, they were only one of several American and European firms involved. T h e chief credit, moreover, for restoring honor to the name of Illinois probably should be accorded to Governor Ford, elected in 1842, and to the people of the State w h o desired to erase the stigma caused by their too sanguine actions on banks and internal improvements between 1830 and 1841. W i t h Magniac, Jardine & Company, holders of eight tenths of the $1,000,000 Illinois loan negotiated in 1840, Baring Brothers & Company represented the foreign bondholders in raising $1,600,000 for the completion of the Illinois & Michigan Canal. A c t i n g as State commissioners under authority of the act of February 21, 1843, Michael Ryan and Charles Oakley traveled to N e w Y o r k and L o n don to induce the bondholders to subscribe the required amount. T h e Barings and Magniac, Jardine & Company appointed W a r d , Abbott Lawrence, and W i l l i a m Sturgis to represent the foreign bondholders in America. Under the guidance of the Boston C o m mittee, John Davis, ex-governor of Massachusetts, and Captain W . H . Swift, of the United States A r m y Topographical Engineers, were sent to investigate the status of the canal. By March, 1844, the two had reported that the claims and needs of the State were substantially correct. T h e L o n d o n merchant bankers then proceeded, by dint of nine months' effort, to obtain subscriptions for the new

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loan from holders of $3,230,750 of Illinois bonds. In the United States, David Leavitt, president of the American Exchange Bank of N e w York, took the lead in inducing holders of $1,769,250 Illinois bonds to subscribe a proportionate share of the new loan. After some newspaper controversies, especially in the autumn of 1844, Oakley, Davis, and Leavitt visited Springfield and helped the governor to persuade the legislature to pass a small additional property tax as a token that sufficient revenue would "be raised to pay off maturing State bonds and arreared interest. The supplementary canal bill was passed. On March 10, 1845, the contract for the new loan was signed. 51 Under the agreement the money was raised on schedule, supervision was established, and the project was carried to a successful conclusion. All the subscriptions were paid by September, 1847. Swift, Leavitt, and Jacob Fry made up the Board of Trustees which administered the loan, supervised the construction of the canal, disposed of the canal lands and lots given to aid the construction of the canal, collected the revenues, and finally paid off the entire loan at the end of 1853. After that the revenues of the canal company went to pay first the holders of the bonds registered to raise the 1845 loan. Altogether the result was satisfactory up to this point; the canal was completed, the new loan was repaid, and the creditors received some of their money back. Even though the canal was not an unqualified business success, its record after 1845 was a factor in the restoration of Illinois credit at a time when railroads in the State wanted to borrow in Europe. 52 The credit of Illinois was far from fully restored by this action in favor of the canal, however. The Barings acceded to the agreement of March 10, 1845, in spite of the fact that overdue interest had not been refunded, that an increase in taxation had not been provided for beyond a two-year period, and that there was no assurance that the favorable actions of the existing legislature might not be revoked by a succeeding one. They approved the provision of February, 1847, to refund outstanding Internal Improvement bonds and scrip, including arreared interest thereon, but were chagrined that both the registered and unregistered Illinois & Michigan Canal bonds were omitted from consideration under the act. The permanent 2-mill

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339

property tax, provided for in the constitution of 1848 for use in the retirement of State bonds, was regarded as a step in the right direction, but the exclusion of canal and school bonds from the benefits of the tax was regarded as reprehensible. That the income from the 2-mill tax was used to pay only those coupons presented in Springfield also aroused the ire of the Barings and their friends. They protested against the insufficient notice given to bondholders on this score, against the fact that the canal bonds were not included in the general State debt provisions, against the fact that the 2-mill tax was inadequate to meet the interest, and against the inadequate compensation accorded the canal when the Rock Island & La Salle Railroad Company was chartered to parallel it. Not even the cooperation of the Illinois Central and Michigan Central Railroad Companies, which were vitally interested in the restoration of the good name of the State, was sufficient to enable the bondholders to win their points.53 In this fashion Illinois made certain that at least one group of investors would shy away from the Illinois Central Railroad project during the 1850's. The Barings could, however, be pleased that their expenditures toward the restoration of the honor of Illinois had been small.54 In the debt negotiations with other States, Baring Brothers & Company took a less active part. They displayed no interest whatsoever in Florida and Arkansas. Both Indiana and Michigan had been mentioned in the North American Review article outlined by Ward, but the settlement in Michigan in 1846 and 1848 elicited practically no reaction from the Barings. In 1850, however, they did send on their own account $51,000 in bonds of the State to be exchanged for new bonds under the provisions of the act of 1848. The firm also acted as agent for the transmission of a memorial from Charles Stokes, as secretary of the Council of Foreign Bondholders, to the governor and legislature of Indiana. Not until the conclusion of negotiations with Indiana did the Barings actively take part. After the efforts of Charles Butler, a New York business man, had produced a specific proposal from State officials, the Barings joined Rothschild & Sons, Palmer, MacKillop, Dent & Company, Huth & Company, Morrison & Sons, and Magniac, Jardine & Company in recommending and subscribing to the new loan for completing the

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55

Wabash & Erie Canal. In the meantime the Barings had discouraged a proposal to abolish the Bank of South Carolina as an act which would tend to impair the credit of that State.56 The affair of the 60,000 second mortgage bonds of the Merchants' Exchange of New York, an organization including most of the respectably wealthy citizens of the metropolis, gave the Barings almost as much trouble as the problems of the various defaulting States. Interest on these bonds was in default from 1842 to 1844. Inasmuch as many of their American correspondents were in the company, and the bonds had been privately distributed among their English and European friends, the Barings paid the semiannual interest coupons as they fell due and thereby accumulated a claim of ,£7,454. An article by Curtis in the Boston Daily Advertiser in January, 1844, regarding the claims of the bondholders made no impression at all. J. G. King, as trustee for the bondholders, was unable to pay the arreared interest until 1844 because tenants refused to pay rent until a suit at law forced them to do so. Plans for a reduction of interest on the bonds from 6 per cent was staved off, as well as compromise proposals for installment liquidation of the indebtedness which matured in 1849. With King & Sons, the Barings advanced all interest payments on the ¿60,000 bonds to January 1, 1850. In the meantime a suit at law for foreclosure of the mortgage was instituted in 1848 by King under the supervision of Daniel Lord, Jr., the usual attorney for the Barings in New York. Later the Barings filed a suit to obtain sale of the property. Through appeals and misadventures the case dragged on until January, 1852. When the sale of the building at auction was announced for March 16 of that year, Ward was ordered to buy it if necessary, but the sale price was high enough to cover all outstanding debts without purchase by the Barings.57 In such a long-winded fashion was the credit of an institution made up of leading American merchants maintained. At no little expense and much effort Baring Brothers & Company had contributed to the partial restoration of American credit. Campaigns in Pennsylvania, Maryland, Louisiana, Illinois, and Indiana had met relative success. Nothing was accomplished in Mississippi, and other States received little or no attention. The credit of the

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341

New York Merchants' Exchange was sustained by means of paying interest on bonds for many years. All in all, the partners had done their share in revealing the distinction between repudiators and slow payers, between dishonorable and honorable American institutions. Some Americans, including the Federal government, could again borrow abroad by 1848. In six short years the major effects of an unsavory episode in the history of the United States had been largely dispelled, though the Council for Foreign Bondholders has kept the memory alive into the twentieth century.

C H A P T E R

XII

RECOVERING A N D RECOUPING,

1842-1848

WHILE pursuing their campaign to restore the credit of American States during the 1840's, the partners simultaneously sought to maintain the prestige and profits of the House of Baring. In connection with these fundamentals, the partners strove to maintain the security and liquidity of their firm at all times. T o attain these ends, they effected some changes in the personnel of the firm, increased the use of agents, continued policies with which the former success of the house had been associated, stressed commission business in both commercial credits and dealings in commodities while reducing those for exchange operations, emphasized a growing interest of the firm in more extensive dealings in goods on their own account, collected, settled, or closed old debts, sold substantial amounts of the firm's holdings of American securities, and, as a result of a sharp watch for new opportunities, expanded the volume of their business transacted on English, European, and F a r Eastern account. By these actions the Barings successfully resisted the prevailing tendency of business men to specialize in one or more phases of economic activity. THE NOT-SO-FABULOUS 'FORTIES A t the end of the depression Baring Brothers & Company and other Anglo-American merchant bankers were faced with the problem of making money in a changing world. That the world was changing was nothing new, and the Barings like other business men, whether successful or otherwise, were well acquainted with the fact. In this case the convulsion of six years of crisis and depression had caused marked and unusually extensive modifications in the character of American foreign trade and in the manner of handling it. American credit seemed totally gone. All the States and the Federal government were identified by foreigners with the defaulting

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NOT-SO-FABULOUS 'FORTIES

343

and repudiating States. Many firms had suspended or failed and were now in liquidation. Debts to British and American creditors hung over the sustained houses like a pall of choking smoke after a forest fire. Conditions were especially bad in the South, where six years of crisis and depression had left few firms strong enough to elicit confidence in their power and stability. As a matter of fact, business conditions in the United States and England during the 1840's were too uncertain to inspire in merchants and bankers such dynamic energy as that carrying Americans on to their territorial "manifest destiny" during those years. Prices in general rose irregularly and slowly. Economic handicaps continually plagued leading entrepreneurs on both sides of the Atlantic. English cottons had to compete with American in the Far East and in the United States. Railroad booms in England and on the Continent shifted the flow of capital and led to financial stringency. Simultaneously, crop failures in the United Kingdom caused famine in Ireland, dislocated the national economy, led to extensive population movements, and contributed to the financial malaise. All this was topped off by the crisis of 1847.1 Under these conditions, together with the low credit abroad of American governments and firms, Americans had to resort to borrowing at home, which seemed to many like trying to raise oneself by one's own bootstraps. On the other hand, business opportunities were by no means lacking. The productive capacity of England, the United States, and the Continent was expanding in both manufacturing and agriculture. Public services particularly were experiencing great improvement and expansion. Canals were completed in the United States and railroads carried slowly forward, while in England and on the Continent a veritable boom in railroads proclaimed the imagination of the business man at the same time that it reflected his incapacity to avoid extremes. Out of the various trials and errors came a remarkable stimulus to speedy communication and transportation. Railway and telegraph began to supplement each other as agencies of communication. Steamships aided in regularizing and hastening the exchange of commodities and ideas between all parts of the world. These new facilities, the creation of which offered new op-

344

RECOVERING, 1842-1848

CH. XII

portunities in themselves, enabled merchants more rapidly to place orders and take deliveries of goods. Under the prevailing political conditions, however, optimism generated by Man's seeming conquest of space and time was not sufficient to carry business men far toward the goals of prestige and profits. At the moment when they thought that the commercial sea was calm, the new, quick methods of communication would bring them disturbing news of Russo-Turk relations, of Anglo-American friction over Texas and Oregon and California, of the election of the expansionist Polk, of the Mexican War, of the Bank Act of 1844 in England, of a change of ministry in England, of the repeal of the Corn Laws, of the new tariff of 1846 in the United States, of the menacing Wilmot Proviso in Congress, of the tight money market, and of the crisis of 1847 in England. Such-things, all of*which might materially influence commerce, seemed to strike the minds of business men so quickly and so forcibly that they needed assurance and confidence before embarking on large and ambitious undertakings. The Barings, inasmuch as they performed practically all types of services needed to facilitate American trade, had to face the whole field of competitors on both sides of the Atlantic. In regard to consignments, some houses specialized in one commodity alone, say cotton. When the Barings, doing a general commission business in merchandise, failed to sell as well as anticipated, consignors compared them unfavorably with those receivers of cotton who devoted their entire attention to the one commodity. Such houses often had partners or special agents in the United States to compete with the service offered by Ward. This situation prevailed for cotton, for tea and coffee, for sugar and other "colonial" products. At the same time, practically all the principal American buyers in England and on the Continent had partners or agents who went directly to the manufacturers to make their purchases. American merchants began to ask reductions or rebates in commissions on China credits in order to compete successfully with such specialists as Jardine & Company, which had interlocking houses in London and Canton. 2 T o the specializing firms Baring Brothers & Company was a banking house, and as such the leader in American trade. Inasmuch as the invest-

CH. XII

NOT-SO-FABULOUS 'FORTIES

345

ment phase of its banking operations in the United States had dwindled to virtually nothing as a consequence of the collapse of American credit, the House of Baring was therefore regarded as the outstanding financial agent and lender of short-term credit — a commission merchant in financial operations. Moreover, competition from merchant bankers also increased with the passage of the years. When Fletcher, Alexander & Company in 1844 ceased granting credits except against merchandise consigned to itself, the Barings expressed the opinion that only their house was then doing an extensive business in uncovered credits. Ward immediately corrected that view. He cited Reid, Irving & Company, Huth & Company, Lamson, Batard & Company, McCalmont & Company, Palmer, MacKillop, Dent & Company, Morrison & Sons, Magniac, Jardine & Company, and several others as extending both uncovered merchandise and exchange credits. In the cases of the Dent and Jardine firms, their expansion in America had arisen from the China trade and from the intention of stepping into the gap left by the disappearance of the "three W's" and the Bank of the United States.3 Furthermore, by 1845 he could have cited and soon had reason to comment upon the activities of George Peabody. The greatest competition from merchant bankers, however, came from Brown, Shipley & Company and its affiliated firms. All the Brown houses had recovered quickly after their troubles in 1837 and 1839. The interlocking partnerships in Baltimore, Philadelphia, New York, and Liverpool supported each other. One of the partners of the N e w York house, Samuel Nicholson, became a leading figure in New Orleans as an agent of the Browns in forwarding cotton for his houses and in financing its consignment by others. By 1844 the able and energetic Thomas B. Curtis, lately agent of Fletcher, Alexander & Company, had assumed the same function for the Browns in Boston. Not even the stronghold of the Barings was ignored as an area for business opportunity. Though the Brown firms continued to forward and to receive consignments as well as to buy and sell on their own account, after 1839 they devoted more of their capital than previously to the purely financial side of facilitating American trade. Because practically all the Southern factors had either failed or were in bad credit, the

346

RECOVERING, 1 8 4 2 - 1 8 4 8

CH. XII

buyers of cotton had dispatched agents to the South. Nicholson took the lead, though he was soon followed by many other merchants and banks, in implementing the letters of credit brought by this "swarm of agents," made up of "clerks and bankrupt merchants," sent there by European, British, and American purchasers. Devoid as most of the representatives were of personal credit, they carried letters of credit from undoubted firms. Nicholson and local competitors advanced money for buying cotton, charged interest on the advances, purchased the bills issued under the letters of credit after the shipping documents of the purchased cotton had been attached to the drafts, and used them as remittances to cover bills drawn either on Northern firms or on British houses as advantage at the moment dictated. Rumored to have made $200,000 during the 184344 shipping season, Nicholson was thereafter the leading buyer and seller of bills in N e w Orleans. By 1848 Forstall estimated that threefourths of the cotton shipped from N e w Orleans went to market under the system given great currency by the Browns. In some respects the Browns were the innovators among AngloAmerican merchant bankers in the early 'forties. One case in point is the extensive utilization of the documentary bill for the first time in financing the foreign marketing of American produce. Another was their selling of bills on England at the same rate in Boston as in N e w York, and small bills as cheaply as large ones. Within two years after assuming the agency of the Browns, Curtis had practically preëmpted the foreign exchange business in Boston. 4 T h e addition of the new techniques to the practice of the Browns in advancing the full market value on exports to selected correspondents and of encouraging clients to use uncovered credits on other British merchant bankers made the Browns strong competitors, indeed, of Baring Brothers & Company. ADJUSTING TO CIRCUMSTANCES

T o steer an honorable and profitable course over the sea of business troubled by the unpredictable winds of political, economic, and competitive changes demanded continuous alertness to those changes and a quick decisiveness as to the proper moments to increase and to curtail activities. Simultaneously, the partners were constrained to

CH. XII

ADJUSTING TO CIRCUMSTANCES

347

adhere to the general principles upon which the prestige of the house had been attained. Although not a period of declining prices, the years from 1842 to 1848 were almost as trying to the managing partners, now in middle age or past it, as those from 1836 to 1842 had been. Advancing age, death, and the pressure of circumstances during the 1840's forced some changes in personnel and in the organization of the House of Baring. Though Bates continued to be the American commercial specialist after 1843, Charles Baring Young aided him in carrying the load of correspondence concerned with operations in merchandise. In January, 1843, Thomas Baring took over all correspondence dealing with American securities. Though both he and Mildmay were in Parliament between 1844 and 1846, and Baring occupied a seat until his death, the affairs of the firm were so well organized that they proceeded smoothly. Mildmay retired at the end of 1847, but no one replaced him for three years.5 The personnel in the Liverpool house changed almost completely. After Young's departure to London, Gair managed alone. He had to meet the criticism that the Barings had so large a business that they were not interested in consignments, that they did not sell merchandise as successfully as specialists in the various fields, and that the Liverpool affiliate did not keep correspondents efficiently posted as to changes in the markets and in accounts.® By 1847 more careful attention was being given to consignments, and an effort was being made to lead every consignor to feel that his particular business had the especial care of the House of Baring. T o accomplish this, new clerks were brought in and the work at Liverpool effectively systematized. Adverse comments practically ceased. When Gair died of typhus in February, 1847, James Price, who had had mercantile experience as a supercargo and in the countinghouse, carried on until 1848. He then became one of the two partners in the Liverpool affiliate. The other was Matthias Purton. From the autumn of 1842 Purton had acted as the special agent of the Barings in New Orleans. He had been engaged to reside in that city for at least a part of each year at a salary of ,¿1,000 plus the profits on any shipments that he might see fit to send upon his own account. He was also permitted to advance on consignments for

348

RECOVERING, 1842-1848

CH. XII

account of other European houses. He had had to settle and collect old and new debts in the South and in Cuba, to aid in the campaign to induce Louisiana and Mississippi to resume cash payments on their respective debts, to make purchases of merchandise on the account of his principals, to advance against consignments of merchandise, and in general to act as agent for the English firm in New Orleans and vicinity. Close supervision of all business of the Barings in the region and the maintenance of personal contact with correspondents was the aim of the agency. Similar purposes animated the partners in their use of Archibald Gracie as cotton buying and advancing agent in Mobile, and in their choice of E. J. Forstall as the N e w Orleans agent in 1847 when Purton left to become a partner in the Liverpool house.7 Although the probable advantage of maintaining a special resident agent in New York was always in the minds of the partners, they adhered to their former reliance upon commission houses there. Some American shippers thought that Baring Brothers & Company did not want consignments because it did not seek them as did other British houses. It could be argued that an agent on the spot was needed to correct "wrong impressions" of correspondents about "the frequent bad result of their shipments." The number of articles admissible under the British tariff of 1846 made it particularly important to encourage consignments from the leading port in America. Ward took up the matter with his principals when he visited England in 1845. The partners finally decided to make no alteration, partly because Ward saw no need for change, partly because the partners could locate no satisfactory person to act as agent, and partly because Grinnell, Minturn & Company, which enjoyed credits totaling ^200,000 by 1848, was so efficient and so trustworthy. Though Howland & Aspinwall sought a greater volume of business with the Barings, the London partners were satisfied with their existing arrangements and left their relations with that famous house on the usual renewable credit basis.8 The same reliance on commission houses was also continued as far south as Savannah. Grant & Stone of Philadelphia, as well as Oelrichs & Lurman of Baltimore and Padelford, Fay & Company of Savannah, remained close friends of the Barings in those ports.9

CH. XII

ADJUSTING TO CIRCUMSTANCES

349

T h o u g h he wanted to retire, Ward carried on the general agency alone until 1847. Until the year of the crisis he supervised the activities of the key commission houses, evaluated correspondents, granted and confirmed credits, transmitted orders for financing the export of American and West Indian produce, and supervised exchange operations. When the burden became too heavy, Samuel Gray Ward, the eldest son of Thomas Wren, came from his f a r m in Lenox to aid in the Boston office. 10 Because the old system had been successful and profitable, the Barings made few changes in their policies and techniques during the 1840's. They scarcely considered dropping some of their functions. In August, 1842, Bates was secretly considering the abandonment of uncovered credits, but the change was not made. When specialization in the trade of an area or in a commodity occurred to them, the idea was immediately dismissed. "There is something apparently in this but nothing in reality," said Bates. Even the specialists dealt through brokers, as did Baring Brothers & Company. Moreover, Bates was certain that his firm sold sugar, coffee, tea, cotton, tallow, and indigo more efficiently than did its competitors. T h e House of Baring continued to be everything from merchant and shipowner to a lender of credit. It even went into the manufacturing of iron. By January, 1846, the house secretly controlled the Weardale Iron Company, maker of pig and bar iron. 1 1 In evaluating and selecting correspondents Baring Brothers & Company followed its traditional procedure. T h o u g h aware of the emergence of the credit-rating agency of Tappan & McKillop in 1841, the partners preferred to use their own tried system. For all the labor of culling out names, reviewing them periodically, assigning numbers, and entering evaluations in the Private Remarks Book, the information was their own and thoroughly to be trusted. In 1845 Ward summarized the policy of the Barings toward selecting correspondents as follows : "In the changes we have gone through within ten years, we are admonished I think in such a business as yours to confine your facilities to the best class & to take no known hazards, nor to deal except with those whose capital, character, & ability, make them pretty sure to keep safe." Given this type of correspondent, he had no fear of the new agency established by the

350

RECOVERING, 1842-1848

CH. XII

Browns in Boston; it would "not do harm," he thought, "as it takes those who would otherwise feel a hostility to your House from not partaking of its facilities, — and releases me from on the one hand doing anything against my judgment, or on the other from giving offence by declining." 1 2 In some respects the selection of clients worked very satisfactorily. The Barings had more than their proportion of the wealthy, stable, and older American firms on their books. Though New York was their clearing port more often than not, N e w Englanders outnumbered all others in the Barings' list of correspondents; Ward was a Bostonian and disliked to give credits to merchants so far away that he could not supervise them. More important was the fact that by the end of the 'forties the Barings had a virtual monopoly of the accounts of shipmasters, shipowners, and packet lines. The "conviction amongst the Shipmasters and shipowners," said the Barings in 1847, "that we are always ready to assist in case of need brings pretty nearly all the freight money of the United States into our hands and it is the best business we have." 1 3 The service of the Barings was so good that no objection was made to their rule never to honor bills of captains except with cash in hand. T o serve the packets as well required much attention and not a little capital. The captains who took over the Black Ball line in 1842 borrowed £ 10,000 from the Barings on the guarantee of Goodhue & Company. Enoch Train was enabled to provide relative regularity in his Boston-Liverpool service by building the Joshua Bates, which was made possible by a loan of £3,000 from the London principal of his Liverpool agent. Other funds were advanced later. Meanwhile, competition from steam navigation and lower freight rates threatened the prosperity of the Black X and Red Swallowtail Unes of John Griswold and Grinnell, Minturn & Company. The Barings aided the westbound voyages by shipments of bar iron on joint account or on consignment, and by encouraging the emigrant traffic from London. The latter was increased through the efforts of Captain Ε. E. Morgan, who came to London in 1846 as a representative of the packet owners. 14 N o effort was required, however, to regain the account of the greatest prestige value in the United States. Though the Barings

CH. XII

ADJUSTING TO CIRCUMSTANCES

351

had retained the account of the Navy Department, Ward was always anxious to resume service to the State Department. Almost as soon as Webster became Secretary of State in Tyler's cabinet, he notified the Rothschilds of a contemplated change. On March 14, 1843, he wrote to the Barings that relations would begin again as of July ι following. Until 1867 the House of Baring was the sole financial agent of the Federal government in London, which meant for most of the civilized world. 15 Even though the Bariifgs had many of the best accounts in the United States, two problems in connection with the selection of correspondents gave them concern. If one of their intimate friends suffered reverses, the House of Baring was embarrassed. In 1845 Goodhue & Company suffered losses of about $150,000 in cotton. Ward stepped in, supervised contraction of the business, and set the date for active resumption of operations. In 1846 Jacob Little & Company lost heavily in merchandise, but it recovered in spite of the refusal of the Barings to lend the firm $150,000. At the end of the same year, Prime, Ward & King was dissolved as a consequence of a disagreement among the partners. J. G. King accused Samuel Ward, the son of the most respected partner who had died in 1839, of using funds of the firm for private speculations. Young Samuel said King for years had left the business in the hands of the junior partners and had done no more than take out his profits. Out of the squabble two firms emerged — J. G . King & Sons and Prime, Ward & Company. The Barings gave business to both, but within a year Prime, Ward & Company, led by John Ward and Samuel Ward, had failed. 16 These developments among trusted N e w York firms emphasized the second problem — that of acquiring new, young, able, ambitious American correspondents. As the partners had put it in 1845, "If we deal only with persons of wealth, and some one else takes all the rising generation, where shall we be 10 years hence when Browns have got all the now small but then great merchants?" 1 7 The problem was not solved satisfactorily. Ward was ordered so to conduct the business that, when the Barings' "present reputable and wealthy friends" died off, the house would continue to have the "same hold on American business, by means of new correspond-

352

RECOVERING, 1842-1848

CH. XII

ents." He failed to acquire many new or young clients outside New England, however. He preferred to encourage business for his principals through the key commission houses in New York, Philadelphia, and Baltimore. Most of his acquaintances were among his own generation and he was not young enough to supervise new firms when much travel was involved. The extensive addition of new blood among the correspondents of the Barings had perforce to await Ward's retirement and the engaging of a younger agent, an adjustment which the partners were not yét ready to face. The same relative inflexibility characterized the application of the other operating techniques of the Barings during the 1840's. Rules for granting credits were rigidly observed; even the Bank of Commerce, which enjoyed a credit of £50,000 and was regarded by Bates as the flywheel of the N e w York banking machinery, was peremptorily dropped for asking Glyn, Mills, Hallifax & Company for a credit; the account of Olyphant & Son, the successor of Talbot, Olyphant & Company in 1846, was refused because the junior partners were disagreeable and the senior habitually attempted to expand his business beyond the limits considered secure by Ward and the Barings. The only modification in remittance rules was the receipt of a larger volume of documentary bills as coverage for drafts, though Baring Brothers & Company always demanded full payment before relinquishing the shipping documents. The same practice was followed in the India trade, where the weakness of Calcutta houses had also led to the extensive utilization of documentary bills. The theory behind the demand for immediate payment was that the drawer must be weak or he would be able to negotiate his drafts without the security of the documents.18 By the middle 'forties practically every receiver of an uncovered or covered credit had to sign the Barings' receipt. Its validity as a contractual agreement giving to the grantor of a credit first claim on all goods purchased under it had been established in Edward Fletcher et al. vs. George Morey, assignee, in 1843. When some firms objected to signing the receipt, the Barings said, "We never allow these little exhibitions of vanity to have any influence on our busi-

Ch. XII

ADJUSTING TO CIRCUMSTANCES

353

ness concerns." That attitude was quite different from the doubt expressed twenty years earlier when Ward introduced the device. Without it, in the 1840's the Barings might have had greater difficulty as a consequence of continuing their extensive use of uncovered credits against the growing preference for the documentary bill. 19 Naturally enough, since the Barings desired to retain flexibility in their system of doing business and to meet competitive practices, they were compelled to make some modifications. In 1843, for the first time, they granted uncovered credits to an American house located in China — Augustine Heard & Company, a firm of transplanted N e w Englanders. Within a short time they also extended credits to Russell & Company, long regarded as the strongest American house in China. Several factors induced these firms to ask for credits: new ports were opened; the volume of business increased; and these houses established other branches, usually at Shanghai. T h e greatest and most reliable hong merchant, Houqua, who had often shipped merchandise to Europe and the United States upon his own account, had died in 1843. T h e credits enabled the Canton firms to step into the breach left by his demise. 20 T w o changes were made in the length of bills drawn under credits. O n the west coast of South America the Barings permitted either sixty or ninety-day sight drafts, where only the first had prevailed prior to 1846. In practice, though not under specific authority from Baring Brothers & Company, many shippers from the West Indies and the east coast of South America also now often drew at ninety days sight. T h e term of bills drawn in Calcutta was changed from ten months date to six months sight in 1847. In this case the object was to stop firms in Batavia from getting more time to meet drafts by drawing at ten months date instead of the usual six months sight from that port, and to prevent a similar attempt at Canton just at the moment when both sea and overland communication had become more regular and speedy. Furthermore, power to issue drafts at six months sight was still more liberal than that accorded to American merchants by the Browns, who permitted drafts from

354

RECOVERING,

1842-1848

CH. XII

Calcutta at four months sight or six months date, and proposed in 1848 to change the term of drafts from China to four months sight or eight months date. 21 N o general changes were made by the Barings in interest and commission rates. In fact, all requests for alterations in interest debited or credited were refused. Only to Grinnell, Minturn & Company did the Barings reduce commissions to any extent. Even that was done for the most part by rebates on commissions paid rather than by reduction in those originally charged. 22 CREDITS, INDIAN CORN, AND COTTON

Acting within the confines of these practices, between 1842 and 1848 Baring Brothers & Company did not take advantage of its preeminent position to attain a monopoly or quasi-monopoly in financing American trade. A s a consequence, credits granted, commissions on purchases and sales, and dealings upon the account of the Barings themselves manifested no more than restrained expansion of their American business during this period of acute growing pains on the part of the American nation. In fact, the low state of American credit, a consequent shift in the flow of British capital, and opportunities in other regions induced the House of Baring to modify to a slight degree its preoccupation with the commerce and securities of the United States. Nonetheless, the volume of credits granted by Baring Brothers & Company underwent expansion between 1842 and 1844 and was held irregularly at a fairly high level until 1848. Table 3 indicates that, in response to the stimuli of greater optimism and easy money in England, the Barings increased their total credits to American merchants from 1,124,732 in October, 1842, to ^1,961,650 in September, 1844. From that point a slow irregular downward movement ensued to 1,626,806 in September, 1846. Elements in the limited curtailment were the fluctuations in .prices, the financial crisis of 1845 in England, and some slight qualms concerning the Anglo-American controversy over Oregon. Within another six months, however, the second peak in the six-year period was reached and no decided curtailment in total credits granted was manifested until after the beginning of 1848, as is shown in Table 3·23

CH. ΧΠ

CREDITS, INDIAN CORN, A N D COTTON

355

I n the m e a n t i m e , the m a r k e d g a p b e t w e e n credits g r a n t e d a n d credits in use w a s materially lessened. T h e

chief factors i n

this

c h a n g e w e r e the reduction in the total of credits permitted f o r d r y TABLE 3 OUTSTANDING CREDITS o r

B A R I N G BROTHERS

AMERIÇAN ACCOUNT,

&

COMPANY

ON

1842-1848

(Exclusive of Credits for Exports from the United States)

Revolving Dry Goods Credits

Aggregates Amount granted Oct. 10, 1841 May ι , 1843 Feb. 18, 1844 June 15, 1844 Sept. 30, 1844 Dec. 31, 1844 Apr. ι , 1845 June 30, 1845 Oct. ι , 1845 Dec. 31, 1845 Mar. 31, 1846 July ι , 1846 Sept. 30, 1846 Mar. 31, 1847 June 30, 1847 Dec. 30, 1847 Apr. 4, 1848 June 17, 1848

··· ...

•··

¿I.I2-4.73 1 I,zio,02.6 1,614,135 1,814,180 1,961,650 1,918,057 1,867,460 1,891,506 1,811,916 1,760,411 I.734.5 8 8 1,616,806 1,871,910 1,863,390 1,861,096 1,568,885 1,181,903

Amount in use

L

Amount granted

Amount in use

£330,000 304,000 314,000 304,000 309,000 319,000 304,000 167,000 311,000 317,000 317,000 189,000 191,000 170,000 114,500 194,500

£ 75 ; 8 oo 76,000 178,500 178,500 178,000 100,000 100,000 100,000 zoo, 000 100,000 100,000 100,000 100,000 100,000 100,000 170,000 100,000 175,000

7 I 3> 2 -5 1 834,016 I.439.I35 i,66o,o8o 1.777.55° 1,764,057 1,696,860 1,701,906 1,647,316 1,639,811 1,478,085 1,551,488 1,438,706 1,681,310 1,670,790 1,715,996 1,391,885 1,109,303

Source: BPMC, Credit List, Oct. i o , 1841; BPOC, Ward to Barings, M a y 1, 1843, Feb. 2.8, June 15, Sept. 30, Dec. 31, 1844, Apr. 1, June 30, Oct. 1, Dec. 31, 1845, Mar. 31, July ι , Sept. 30, 1846, Mar. 31, June 30, Dec. 30, 1847, Apr. 4, June 17, 1848, and enclosures. g o o d s operations a n d the increased use of those granted. W h e r e a s the difference in dry goods credits g r a n t e d a n d those in use w a s m o r e than ,£350,000 in 1 8 4 2 , T a b l e 3 s h o w s that by J u n e , 1844, the g a p h a d been reduced to a p p r o x i m a t e l y , £ 1 2 5 , 0 0 0 a n d that it h o v ered a r o u n d

100,000 till 1 8 4 8 .

356

RECOVERING, 1842-1848

CH. XII

The reasons for the restriction of these credits were very well taken. The failure of large numbers of American dry-goods importers since 1836 indicated the hazards of the trade. Competition was increasing from cotton and woolen manufacturers in the United States. Many of the American holders of dry goods credits at the end of the depression merely used the authorization from the Barings to enhance their own prestige and credit with their English creditors. Several of these merchants drew upon the Barings under their dry goods credits only in times of pressure. Inasmuch as the Barings always kept funds in readiness to meet the totals, the failure of the holders to use the credits kept the Barings from profitable use of their capital. They liked neither this abuse of their service nor the small volume of commissions arising from the slight amount of drafts drawn. 24 As a consequence of the crippling effects in the United States of the long depression, a larger proportion of the flow of merchandise to America after 1842 was on British or European account. The Barings participated in this change by advancing upon and forwarding consignments from England and the Continent for sale by American commission merchants. A case in point was the consigning of iron in pigs and bars through the agency of the Barings by the Weardale Iron Company and by Swedish firms to Grinnell, Minturn & Company. T o be sure, a considerable volume of iron, European dry goods, Russian products, and the like were forwarded on American account. The Western Railroad Corporation and the Baltimore & Ohio Railroad Company, for example, purchased rails during the 'forties through the Barings. Yet British and Continental houses exercised greater initiative than in the 1830's in selling their products in America. 25 Conditions for several years were deemed favorable by the partners for advances on consignments from the United States and for operations upon the account of the House of Baring. The leading commodities were almost the same as previously — furs, tallow, tobacco, cotton — but the quantity of wheat, flour, whale oil, maize, and corn meal increased. The key commission houses and special agents were the chief instruments in forwarding consignments. In New York Eli Hart &

CH. XII

CREDITS, INDIAN CORN, AND COTTON

357

Company, Suydam, Sage & Company, and Chouteau, Merle & Sanford were the largest consignors of wheat and flour through the agency of Grinnell, Minturn & Company. The latter house also acquired Sizer, Brown & Company of Buffalo as a correspondent in 1846 when the greater importance of the lake port in the western trade became apparent.26 All these houses and similar ones in other coast cities made advances to correspondents further in the interior. During the 1840's the House of Baring was accorded the prominent part in the shipment of Indian corn and meal, which assumed importance for the first time as an export from the United States. When famine threatened Ireland in 1845, the British government determined to send Indian corn as a substitute for wheat and potatoes. The Barings were secretly commissioned by the government to invest ¿100,000, including charges, in maize and corn meal. Ward was requested to send recipes for the use of the meal. The whole operation was carried out without charge by the Barings and without disturbing materially the prices of the commodities. Ward effected the insurance and supplied the funds. Grinnell, Minturn & Company, who Bates thought handled the operation "admirably," and special agents employed by the house, made the purchases in New York, Philadelphia, Baltimore, Richmond, and Norfolk. Between November 17, 1845, when the order was received from the government, and January 23, 1846, when Ward received a letter from the Barings suspending operations, the N e w York firm expended about $360,000. Total purchased on the contract by January 16, 1846, had reached 311,661 bushels of Indian corn and 28,894 barrels of corn meal. Supplementary secret purchases were made by the Barings between April and June, 1846, in London and Liverpool, largely of floating cargoes from the Azores, Portugal, and the Mediterranean.27 When the government in August, 1846, asked the Barings to execute further purchases of Indian corn, the request was politely refused. Inasmuch as the intention was to buy the article in the United Kingdom or afloat, the Barings felt that their services would be unnecessary. They recommended that a good corn factor — E. Erickson & Company of London — should be employed, which was done. Baring Brothers & Company facilitated the process by

358

RECOVERING, 1842-1848

CH. XII

agreeing to guarantee any advances up to ¿2,500 made to the factor by Williams, Deacon & Company, as well as due reimbursement of drafts by Erickson & Company upon Williams, Deacon & Company at two or three months date to the extent of ¿ιο,οοο. 28 At the same time, the Barings gladly operated in maize for private concerns. Shortages of cereals in both France and the United Kingdom, plus the lifting of tariff restrictions in Britain, encouraged Old World business men to take the initiative in importing American breadstufïs. By the third quarter of 1846 Baring Brothers & Company, like other merchant bankers, began to execute extensive orders for Indian corn on account of English and Irish merchants. In August English firms gave the Barings three contracts to buy maize in England and America to ship to Ireland. That operation proved to be small; although at least two cargoes were sent forward by Grinnell, Minturn & Company, the limits were generally lower than American prices, and purchases were suspended in November. A second attempt was more successful. Between November 18 and December 3 the Barings renewed orders to Ward for total purchases of 25,000 quarters, of which 22,500 were to be shipped before the following January 31 and the remainder before March 31. These contracts, which were filled by Oelrichs & Lurman, Grinnell, Minturn & Company, Ward, and Purton, had been obtained for the Barings through the agency of H. and J. Johnston & Company of London. A part of the maize was for Irish firms, which ordered Grinnell, Minturn & Company to reimburse itself by drafts on Johnston & Company, but almost all the bills arising from the operation were issued on Baring Brothers & Company. 29 From 1844 to 1848 the partners found conditions satisfactory for investment in merchandise for account of the house itself. During the first two years they bought tobacco in New Orleans and sugar in New York and Havana. In 1845-47 the Barings joined Grinnell, Minturn & Company and Lurman & Company in small shipments of wheat, flour, and Indian corn. The partners also gave orders for much larger purchases upon account of Baring Brothers & Company alone; inasmuch as the price limits were too low, few of the orders were filled, however. The operations in the United States were accompanied by the purchase of 10,000 to 12,000 bags of Brazilian

CH. XII

CREDITS, INDIAN CORN, AND COTTON

359

coffee in 1844 and 1,000 chests of opium in Smyrna for delivery to Southampton in 1846. Factors inducing the latter investment were the failure of fifteen merchants in Smyrna and failures and tight money in Calcutta.30 Though these operations utilized substantial amounts of capital, it was in cotton that the Barings invested most heavily between 1842 and 1848. As the partners expressed it, they wanted a good but not large business in cotton.31 Through advances on consignments from Americans and by purchase for account of the House of Baring itself they were willing to market from 80,000 to 100,000 bales per season. The exigencies of the market as interpreted by the partners determined the ratio of purchased to consigned cotton as well as the extent of operations each season. Cotton was the commodity by which the Barings hoped to recoup losses suffered between 1839 and 1842. Few innovations appeared among the agencies forwarding the cotton from America. From Savannah northward, commission houses executed the orders of the Barings. Archibald Gracie acted as special agent in Mobile, and Matthias Purton in New Orleans until replaced by E. J. Forstall in 1847. All were empowered to make advances, to make shipments on joint account with the Barings, and to purchase for account of the London house alone. The commission houses, especially in New York, made large advances on their own responsibility to southern merchants, without drawing in advance and without reference to advices from the Barings. Ward exercised general supervision over all specific orders from his principals, except those to Purton. Not until 1847, when partial telegraphic communication between the North and the South had offset the speedier connection by steamship between England and the Gulf of Mexico, did Ward resume control over operations in New Orleans. Another reason for the return to the former system of control by the general agent was that Forstall was not trusted by the Barings to exercise such sound judgment on cotton as Purton. For the most part the purchases and advances in the cotton operations of Baring Brothers & Company were financed through drafts on N e w York firms, which in turn reimbursed themselves by drafts on the London house. Normally the agents of the Barings in the

360

RECOVERING, 1842-1848

CH. XII

South carried letters of credit authorizing the drawing of specific sums, at times as much as $200,000 in the case of Purton. The northern firms which accepted most of the drafts from the South were Goodhue & Company, and Prime, Ward & King (King & Sons in 1847 and 1848). S. G. Ward & Company of Boston was given one third of the business in 1842-43, though the Barings objected on the ground that correspondents would accuse the firm of favoritism to T . W . Ward's sons. Nevertheless, J. G. Ward & Company, the successor of the earlier Boston firm, accepted some drafts for purchases made in the 1844-45 season. In that year, Prime, Ward & King, which charged twice as high a commission for accepting as did Goodhue & Company, was given none of the business, but it regained its share the next season; J. G . Ward & Company was dissolved at the end of 1845. Variations in supplying funds occasionally appeared. The Barings shipped some sovereigns and had a small shipment of silver credited to Purton's cotton account in 1842-43, while in the next year Purton used for purchases $600,000 deposited by the Union Bank with the Bank of Louisiana for account of the Barings on the refunding of the matured Union Bank bonds. Again in February, 1847, the Barings sent ,£75,000 in gold to be used for cotton shipments or to be returned in bills if not so used. At times, as in 1846-47, Purton, under a general letter of credit from the Barings, drew directly from N e w Orleans on London to raise funds. Occasionally, too, as in 1847-48, Ward's collection of debts provided funds for meeting the drafts of the agents in the South. Commissions paid to special agents and commission houses were settled on a bargaining basis. Although Padelford, Fay & Company said that other Savannah firms were paid 1 per cent for obtaining consignments to Liverpool, 2% per cent for purchasing on English account, and a return commission "on the outward consignment of ships," the Barings paid that firm only 1 per cent for purchases, per cent for obtaining consignments, gave it no rebate on ship consignment commissions, and charged it full commissions on sales in Liverpool. Ward told Herckenrath & Van Damme, of New York, and Herckenrath, Lowndes & Company, of Charleston, that American agents were paid y 2 per cent on the amount for advances

CH. XII

CREDITS, INDIAN CORN, AND COTTON

361

and 154 per cent for consignments, the New York house to charge 54 per cent on all amounts advanced to consignors and paid out for purchases. After beginning operations these associated firms asked for 2 y2 per cent for obtaining advances and the Barings agreed to i% per cent. On the other hand, Gracie was paid ι per cent for purchases and only 54 per cent for securing consignments, though that was enough to net him about $4,000 for the 1847-48 season. Prime, Ward & King charged 54 per cent on inland acceptances and 5 per cent interest on advances. Goodhue & Company, under an informal arrangement dating from Bates' visit in 1841, and a specific agreement in October, 1842, received 54 per cent for accepting all southern bills under credits opened by the Barings, 54 P e r c e n t f ° r making remittances to New Orleans and Mobile, and 4 per cent interest on sums advanced. For inland exchange business other than cotton and for remittances to England, the house charged the Barings nothing. Under this plan Goodhue & Company accepted cotton bills for a total of $237,555 f ° r account of the Barings in the 1842-43 season and $359,160 for Purton and Gracie up to April in the 1846-47 season.32 A few practices were changed. Whereas 80 per cent of cost was formerly the highest figure permitted for advances on consignments, between 1842 and 1848 the Barings occasionally countered the more lenient policy of competitors by advancing up to 90 per cent of market rates. Although early in the 'forties agents were allowed to accept consignments specifically limited as to sale price by the shippers, complaints against the Liverpool house by those who had only their own restrictions to blame caused Purton to adopt a policy of never allowing any limits to be placed by consignors. Commission merchants such as Padelford, Fay & Company did not always follow this practice. In 1847-48, however, the Barings stipulated that on all consignments they must have liberty to sell whenever they chose. Also, the increase in the use of documentary bills to facilitate shipments on the part of competitors induced the Barings to do a limited amount of that type of business, but only upon the understanding that the shipping documents were not to be relinquished until a bill had been paid. 33 Even though the Barings possessed an excellent mechanism for

362

RECOVERING, 1842-1848

CH. XII

marketing cotton, factors conditioning operations were so variable as to demand keen judgment in order to make a profit. Early in the 1842-43 season the Canton market was unsettled, seemingly impending failures among merchants in Calcutta and Bombay threatened the dumping of Indian cotton at low prices, numerous failures continued to occur among Indian and corn houses in England, both Liverpool and Hamburg had experienced disastrous fires, and so many firms had collapsed in New Orleans that the Barings did not see how American cotton could be marketed unless the banks and New Englanders took hold. Furthermore, large amounts of British capital were tied up in American securities. Fortunately, by December the Opium War had ended and the settlement of some of the labor disputes in Manchester induced hopes for an increase in manufacturing. 34 Prices could be expected to rise in the not-too-distant future. In the next season, incorrectly anticipating a very short crop, business men in New Orleans, New York, and Liverpool held substantial amounts of cotton till February, 1844, when prices broke downward and occasioned losses to holders in Liverpool alone estimated at ¿£1,500,000 by the Circular to Bankers.35 Because prices were high at the opening of the 1844-45 season, heavy shipments of cotton came to Liverpool early, prices soon declined, and many consignors lost heavily. British operators suffered the following year. English and Scotch merchants bought and held cotton and drew up to £2,000,000 on their brokers. Manufacturers refused to buy at prices asked. The financial crisis, occasioned by demands for money from the railways and by fears of an efflux of gold to pay for breadstufis, caused the brokers to refuse renewals of loans to holders, prices fell, and many failures occurred among cotton operators during the first half of 1846. Concern over the repeal of the Corn Laws and the Oregon controversy had also contributed to fear and uncertainty. Conditions during the next two seasons were no more conducive to routine decisions on cotton. Money remained tight until financial crises occurred in April and August, 1847. The departure of gold from the Bank of England caused uneasiness, until the restrictions of the Bank Act were lifted. Speculation in railways collapsed. Demand for cotton declined in Continental cities. Simultaneously, ship-

CH. XII

CREDITS, INDIAN CORN, AND COTTON

363

ping was in such demand for use in the Mexican War and for carrying breadstuffs to the United Kingdom that freights doubled over those in 1845. Slackening in manufacturing, attendant unemployment, and labor unrest, coupled with relatively high prices, caused the Barings to consider conditions unfavorable for profitable operations in 1847-48. Considering the variability of conditioning factors from 1842 to 1848, the Barings handled their cotton operations with marked success. They normally sought to purchase for their own account one half of the cotton forwarded to their order, though the ratio of purchases to consignments on account of American shippers varied with the condition of the market. The partners succeeded in having on hand in Liverpool at the opening of each season from 10,000 to 25,000 bales of cotton. Prices often were high at that time of the year. T o achieve that end in some years —1843, 1844, and 1846 — the partners bought cotton earlier in Liverpool and Bombay and held it for sale in the autumn. 36 They delayed their orders for both purchases and consignments in most seasons until November or December; very little was done until after February, 1844, for that season. On their own purchases the Barings were fortunate. They suffered no large losses at any time and often succeeded in selling at 5 per cent profit. In April, 1847, Bates boasted that for three years every bale of cotton bought by his house had yielded a profit. 37 Such accuracy for three consecutive years he considered almost a miracle. He expressed no regrets that the House of Baring was out of the market during the remainder of that season, in spite of profitable margins between American and British prices. Consignors to Baring Brothers & Company did not fare so well. Sales by the Liverpool house were almost perfect in 1842-43, but many American forwarders during the following two seasons placed such high limits on sales that their losses were heavy. The experiences of Goodhue & Company paralleled those of many Americans. The New York house expanded both advances on and purchases of cotton in 1842-43, on which it made a good profit. Forty houses in Macon, Columbus, Mobile, Apalachicola, and New Orleans were on its books the next year. The N e w Yorkers experienced a net loss of $30,000 on cotton for that season, in spite of commissions on con-

364

RECOVERING, 1842-1848

CH. XII

signments amounting to $90,000. Unsuccessful cotton operations were contributory to the troubles of Little & Company in 1846 and 1847 and to the failure of Prime, W a r d & Company in the latter year. T h e claims of the Barings for reclamations from American shippers were large in both 1844 and 1845, but the London house admitted responsibility for the loss in the case of only one consignor, whose business was large and valuable. T h e bad judgment shown by American consignors in setting high limits for sales up through 1845 induced the Barings to insist upon permission to sell at their own discretion. They thought criticism for steady sales and consequent missing of some peak prices was better than attempting to collect deficits between sales and advances from financially embarrassed merchants and factors. REDUCED EXCHANGE AND SECURITY OPERATIONS

While the Barings were cautiously increasing the employment of their funds in the marketing of merchandise on their own and American account, they were curtailing their operations in America in exchange and securities. T h e collapse of American credit explained the decision of the partners with respect to buying and selling American stocks and bonds, but the reasons for restricting exchange operations were not so obvious. During the same period the Browns adopted exactly the opposite course. After the Barings' experiences with exchange accounts through both prosperity and depression, they determined to adhere as closely as possible to basic commercial operations. Inasmuch as in their view the movement of merchandise was the fundamental object of commerce, open exchange credits, which might give rise to drafts not emanating from specific commercial undertakings, tended to lead to finance bills and overtrading. One cause of the late crises and depression, the Barings thought, had been the undue expansion of these strictly financial operations. A corollary of the view that exchange operations should be as closely associated with actual commercial enterprises as possible was the deep-seated conviction that all exchange accounts should be handled by merchants. T h e Barings had always looked with misgiving upon granting credits for this purpose to incorporated banks, even to

CH. XII

REDUCED OPERATIONS

365

the Bank of the United States. W h i l e claiming that a bank was a lending, not a borrowing, institution, they were willing to abandon that view if a bank could sell bills on Baring Brothers & Company at higher rates than merchants could. Given their point of view, the partners did not lament the loss of the account of the N e w Y o r k Bank of Commerce at the end of 1845; for some time it had been the only incorporated bank enjoying an uncovered credit from the London house. 38 Moreover, Baring Brothers & Company could use its funds more advantageously elsewhere than in exchange operations. Competition was active and the margin for profit was narrow. Under uncovered credits American firms always tied up the capital of the house by drawing in advance of remittances. T h e y often all drew at once just at the time that opportunities for investment by the Barings in England were most favorable. A s Bates put it, the exchange business seemed "rather barren." 3 9 H e added: Every now and then a bad bill sweeps off the profits of a year, and the people in the United States seem so infatuated about bills that they do not seem to care much who the drawer is provided the man drawn on lives in London or Liverpool. Finally, the k n o w n weakness of many firms in the United States, especially in N e w Orleans, and in Liverpool made the Barings very dubious about handling too many of the bills arising from the American export trade. T h e increasing use of documentary bills merely confirmed that conviction. Furthermore, documentary bill operations only caused embarrassment in normal times — the Barings refused to release the shipping documents until the attached bill was paid — and an unloading of depreciated goods upon the British banker in times of crisis. Operations in exchange were on too narrow a margin of profit and required too much care in handling under the most favorable conditions to make solving these additional complications worth while. In consequence of these views, the volume of uncovered credits for exchange operations fell far short of that in the early 1830's. It was lower in fact than the credit (^250,000) to the Bank of the

366

RECOVERING, 1842-1848

,

CH. XII

United States alone had been. Exclusive of the joint account with Prime, Ward & King (King & Sons after 1846), total revolving credits for exchange operations between 1843 and 1848 ranged between ¿65,000 and ¿160,000. At the beginning of 1844 these totaled ¿118,000, were reduced to ¿115,000 in the last part of that year, rose to ¿125,000 for three-quarters of 1845, and then fell to ¿65,000 during 1846. For a time early in 1847 the amount equaled ¿160,000, but it was reduced to ¿70,000 at the end of 1847 and continued at that figure into 1848.40 Holders of exchange credits and the amount they held varied from year to year. The Bank of Commerce had a credit of ¿50,000 but was dropped at the end of 1845. Goodhue & Company, with ¿20,000, was reduced to ¿5,000 in 1845 and was not back to its former ¿20,000 until June, 1848. Little & Company was required to remit a margin of 20 per cent in bills against drafts issued under its credit of ¿40,000; the credit was suspended when the N e w York house suffered heavy losses in 1847. Between 1842 and 1845 two Boston firms made up of T . W . Ward's sons — Samuel G. Ward & Company and John G. Ward & Company — held credits ranging from ¿5,000 to ¿10,000, but both were dissolved by 1846. The American Exchange Bank of New York and Oelrichs & Lurman were granted credits of ¿5,000 each for short periods between 1845 and 1848. King & Sons and Prime, Ward & Company each received credits of ¿50,000, but the latter house failed within a year. 41 The Barings could have had many more correspondents with a much greater volume of credits if they had so desired. John A . Stevens in 1843 asked for an increase of the open credit to the Bank of Commerce from ¿50,000 to a maximum of ¿100,000. The Barings refused the request, as they did those for open credits from the Philadelphia Bank, from the New Orleans Canal & Banking Company, and from John E. Thayer & Brother. The last-named was the largest seller of exchange in Boston before Curtis took over the agency of the Browns. The failure to have a reliable correspondent among the private banking firms in Boston was seriously questioned by Ward, but he pointed out that the dominance of bills on Brown, Shipley & Com-

CH. XII

REDUCED OPERATIONS

367

pany had one advantage: all Boston correspondents of the Barings had the opportunity of sending good bills for remittances.42 At the same time, bankers' bills on the Barings were not limited to those arising from uncovered revolving credits. The Bank of Louisiana and the Union Bank sold bills on Baring Brothers & Company against remittances in advance. During crises Ward gave bills on his principals to debtors for direct remittance to the Barings. At opportune moments a three-cornered account was operated by Purton in New Orleans, Prime, Ward & King in New York, and the London house.43 The joint account with the N e w Yorkers continued in operation even after King & Sons took over. Remittances were almost entirely in bills, many of which between 1839 and 1848 were bought by Archibald Gracie in the South. Others came to the New York firm from New Orleans, Baltimore, and the Bank of Upper Canada. A few small amounts ($25,000 to $50,000) of Pennsylvania, Ohio, and New York bonds were occasionally purchased in London for sale in New York on the "joint account E , " but the securities of the same States were seldom sent to London from New York. Specie went in Mexican dollars from the United States in 1845, in sovereigns to New York in 1847, and in gold to London during the following winter. The only important improvement in the operation of the account was the agreement in 1845 by Prime, Ward & King to guarantee all bill remittances instead of just a portion of them; the Barings never succeeded in persuading King's firm to sell by one packet and buy remittances for the next.44 Obviously the partners were much more concerned about the quality than the quantity of the bills on Baring Brothers & Company. While profits and commissions kept rolling in from operations in merchandise, income from exchange operations was of no great importance as long as bills on the Barings continued to receive the highest rating in the American money market. This aim was achieved, the prestige of the house was maintained, and the Barings remained formidable competitors of the Browns in that respect, if not in the volume of exchange business done. The curtailment in exchange operations also liberated capital for

368

RECOVERING, 1842-1848

CH. XII

use in other activities. The Barings' course with reference to old and new overdue debts had the same effect. Some of the old debts were settled at a percentage on the dollar and the loss written off. Others, such as those of Stetson & Avery and Knight & Company, were in course of gradual liquidation through management of real estate and sugar plantations. The methods of liquidating the debts of the Union Bank, Consolidated Association, Merchants' Exchange, Baltimore & Ohio Railroad Company, the Chesapeake & Ohio Canal Company, and the Western Railroad Corporation have been noted elsewhere.45 It took Ward almost four years to collect jT5,000 due in 1842 from the Bank of Pennsylvania. 46 The ,£30,000 owed by the Union Bank of Mississippi was early written off to profit and loss, but the Barings made their final attempt to collect it as late as 1844.47 Even counting current backward remittances, total overdues dropped from ,£274,200 in May, 1843, to ,£68,145 in October, 1845. After going up to ,£142,000 in 1846, the total was down to ,£71,000 by July, 1848.48 Partly for the sake of greater liquidity and partly to avail themselves of funds for more remunerative European enterprises, between 1843 and 1848 the Barings disposed of about one third of their holdings of American securities. In October, 1842, the partners stated that one of their main objects was to reduce their "line of American Stocks." Sales were made in the United States because the prices of American shares and bonds were, during this period, consistently quoted higher there than in the United Kingdom. In the early years little progress was made in reducing their holdings; until July, 1846, the Barings had sold so few American securities that they feared that they had held "a little too pertinaciously." From that time through 1848, however, they disposed of larger amounts, almost all in small lots, through more than half a dozen agents located along the seaboard from Boston to New Orleans. Among the securities sent to America for account of the London house were bonds of Kentucky, Ohio, New York, New York City, Indiana, Illinois, Louisiana, New Orleans, Maryland, Pennsylvania, South Carolina, and the United States as well as shares of the N e w York Bank of Commerce. In the group were a few scattered small parcels purchased in New York or London by the partners since

CH. XII

REDUCED OPERATIONS

369

August, 1842, either on joint account with Hope & Company or Prime, Ward & King, or on account of the House of Baring, exclusively. Almost none of these new purchases found a market in England. In September, 1847, Ward estimated that under his supervision there had been sold in the United States £60,000 in "stocks" and coupons and that the Barings still held about £ 120,000 in American securities. Inasmuch as Bates had remarked as early as January, 1843, that quoted prices of only Maryland bonds and shares of the Bank of Commerce, among all securities held by the house, stood below prices originally paid, it seems certain that profits were made on most if not all the sales.49 Many more American securities were also dispatched to the New World by Baring Brothers & Company for account of clients. Most British holders held firmly until prices of American stocks and bonds rose after mid-1846. They waited until after the easing of money following the financial crisis of 1845 in England, the settlement of the controversy over the Oregon boundary, and the passage of a resumption act by Pennsylvania. From the third quarter of 1846 the House of Baring consigned on British account a substantial volume of various securities to the United States for sale.50 Meanwhile, from 1840 onward the firm had been buying similar securities as opportunity offered for account of various American firms and institutions.51 Some of the repatriated State bonds were retired, others resold at higher prices. Some of those held as collateral, such as those on the accounts of the Baltimore & Ohio Railroad Company and the Western Railroad Corporation of Massachusetts, were returned to America as the debts of the owners were paid or reduced. Self-imposed limitations curtailed the activities of the Barings to some extent. Their refusal to speculate in bonds of States concerning which they had advance information as to resumption has been mentioned. The purchases on American account would undoubtedly have been larger had the partners not refused to buy without cash in hand bonds upon which interest was in arrears. Most important, exclusive of Maryland bonds from the Chesapeake & Ohio Canal and of a few New York, Pennsylvania, and Ohio bonds on the joint exchange account with Prime, Ward & King, until 1848 Baring Brothers & Company refused either to sell on consignment or to

370

RECOVERING, 1842-1848

CH. XII

purchase on its ewn account any old or new issues of American securities for sale in England.52 For five years the house had lived up to an ambition expressed by Bates in April, 1843. He considered the defaulters a "den of thieves." He was embarrassed at being an American every time he met someone to whom the firm had sold American securities. He did not want to sell them again except to "Americans or such friends as can judge for themselves." If Niles' Register exulted at the return of American securities to the United States, the Barings could feel likewise.53 Moreover, the house made commissions on all orders executed for clients. In such fashion Baring Brothers & Company profited as one set of investors prospered at the expense of an earlier one. The truth of the matter was that Continental and British loans had become very attractive. From 1844, at first secretly, Hottinguer & Company began to take shares in French railways for the Barings. The house joined a host of merchants, bankers, promoters, and contractors in carrying English capital and railway-building technique across the Channel. Gains were large and rapid. The Nord and the Lyons railroads were the most attractive lines to the House of Baring. In one issue for the former in 1846 the London house sold out its shares in three weeks at a 50 per cent gross profit, and the partners hoped to realize as much on their current holdings in the securities of the Lyons Company. Two partners in the House of Baring — Francis and Thomas — were on the English board of directors of the Nord.54 Also, the firm was shortly to join the Rothschilds in marketing a large British loan. Throughout the 1840's Baring Brothers & Company had shown an increasing interest in Canadian business and economic affairs. The plan of the partners in 1835 to effect profitable connections with merchants in the provinces of New Brunswick, Nova Scotia, Quebec, and Upper Canada had not been effectively consummated before the arrival of the crisis of 1836-37. After 1842, however, new accounts with merchants in St. John, Halifax, Quebec, and Montreal were opened and old ones expanded in volume. Since the 1830's the house had been, jointly with Glyn, Mills,

CH. XII

REDUCED OPERATIONS

371

Hallifax & Company, the bankers for the Province of Upper Canada. In 1843 the Barings finally closed a debt of the province which had accumulated since 1837 as a consequence of the Barings' making payments of interest on outstanding Canadian debentures in advance of remittances; the account was covered by a part of the proceeds from the sale of ¿30,000 debentures at par. In 1844 the Barings brought out a portion (¿75,000) of an Upper Canada loan guaranteed by the British Government and intended to aid in the completion of public works, chiefly the Welland Canal. 55 Interests thus developed were to lead the Barings into the financing of Canadian railways in the next decade. Increased investment in marketing merchandise and in securities other than American issues was not the only accompaniment of the curtailed exchange operations of the Barings, of sales of their American bonds and shares, and of the reduction of overdue indebtedness to them. Throughout these years Baring Brothers & Company yearly had maintained a remarkable liquidity. The partners, adhering to the rule never to discount remittances, seldom had recourse to borrowing. In fact, only one loan from Overend, Gurney & Company for ¿50,000 seems to have been negotiated. That was done in the first quarter of 1844 against the security of Ohio bonds and bills receivable. During 1846 and 1847 the Barings were lending in London to Martins & Company and to Overend, Gurney & Company. 58 Actually, Bates felt that Baring Brothers & Company had been almost too prosperous. The income of the house in 1844 was a quarter larger than in 1843 and there were no "bad debts." In April, 1846, he commented that the business of the firm was "too good and too extensive" to keep "many years"; it excited the envy of competitors. Estimating that the "permanent means" of the House of Baring would enable it to buy out all competitors and have ¿500,000 to spare, Bates thought the capital should be reduced. At the moment in its bills receivable the firm had ¿1,000,000, some of it paying interest because some people were slow in remitting. Advances against shipments other than those in North and South America amounted to between ¿300,000 and ¿400,000. Even if Baring Brothers & Company had "too much business for the business heads of the House,"

372

RECOVERING, 1842-1848

CH. XII

as young John Ward wrote to his father Thomas Wren, the partners certainly had no reason to be ashamed of their accomplishment. 57 In attaining their enviable position in this period the Barings had made one notable departure from former practices. The proportion of the funds of the House of Baring utilized elsewhere than in the United States was increasing. Some indications of that change were the size of the advances on produce beyond the ken of the American agent, the extensive operations in merchandise on account of the house, investment in the Weardale Iron Company, the extension of credits to Canadian and Far Eastern firms, the tobacco contracts for France and Spain, and the marketing of a British loan in 1847. Would the movement away from the United States continue or would it be arrested ? The partners in Baring Brothers & Company had realized their objectives in the 1840's about as nearly as the managers of any business enterprise could expect. They had collected most of their old debts due from the depression years. New business operations, especially in cotton, had resulted in amazing success; their plans for recouping previous losses in American trade and securities had been carried out. New avenues for profitable enterprise had been opened in Canada, Europe, and Asia. Safety had been maintained at all times, and the condition of the firm in 1846 and 1847 was such that it could withstand a crisis without any difficulty. The crisis was at hand.

CHAPTER

XIII

T H R O U G H CRISIS, R E V O L U T I O N , A N D W A R ,

1847-1848 THE years 1847-48 proved to be a period of opportunity for Baring Brothers & Company, not long months of strain as they were for hundreds of other businesses in the United Kingdom. The partners experienced no serious qualms throughout the crisis of 1847. Consequently, the House of Baring was in a favorable position to take advantage of the opportunities which appeared when revolution followed economic stringency in several Continental countries. The opportunity came in the form of a demand from timorous investors in the disturbed areas for the transfer of their funds to safe securities. The government of the United States was issuing a loan to defray the expenses of the war with Mexico. The supply and demand situation of 1830 was repeated, and Baring Brothers & Company again served as one of the intermediaries in enabling Continental "hot money" to meet American need for capital. In performing that function the House of Baring resumed its interest in the marketing of new American loans and thereby contributed to renewed flow of European capital to the United States after 1848. WEATHERING THE CRISIS OF 1847 By 1847 the Barings had reason to be thankful for the liquidity of the firm. Events gradually worked toward a new crisis in international trade after 1845. 1 The panic of that year merely pricked the bubble of speculation in railway securities; building of railroads proceeded rapidly thereafter and gave rise to a large and insistent demand for funds from the London money market. While the documentary bill system was winning widespread acceptance in the United States, an organized accommodation bill system had been developed by British houses which in many cases had long since

¿74

CRISIS, REVOLUTION, WAR, 1847-1848

CH. S I I

2

ceased to be liquid. A severe contraction of credit facilities in London would reveal the weakness of those houses and the iniquities of their system. Such a curtailment of credit was made inevitable by the widespread agricultural malaise in 1846 and 1847. Before the London market had recovered from the demands arising from a small potato crop in Ireland and a short wheat crop in England in 1845, new strains were put upon the source of capital supply by short potato crops in Ireland and Scotland, by short wheat crops in England, France, Belgium, and Germany, and by the failure of the indigo crop in Bengal in 1846. Cereal crops were not so short as feared, but prices rose to abnormal heights as many merchants plunged into supplying wheat and flour for the United Kingdom and Western Europe. Money was scarce in Hamburg, Berlin, and Amsterdam as early as October and November, 1846.3 During the latter half of that year failures were numerous in Calcutta, the Levant, and on the Continent. They were abnormally high in the United Kingdom, though Harman & Company, a prominent house in the Russian trade, was the only one of importance to fail. The pressure in the English money market was severe throughout the first nine months of 1847. Market rates for money, which had averaged 3% per cent in 1846, stood at 7 per cent in April and moved to 10 per cent in October, 1847. Misinterpreting their powers under the Act of 1844, the directors of the Bank of England took only belated action; not until January 21, 1847, did they raise Bank rate to 4 per cent. The departure of gold to the Continent and the United States was then causing concern in the City. During the same month the Bank of France called for and received a loan of ,£800,000 in silver from England. Aid from the Russian government to the French institution in March stopped the flow of specie to the Continent, but shipments of gold to the United States continued. A rise of Bank rate to 5 per cent in April, soon accompanied by a rationing of discounts, produced a mild panic. Corn factors in Ireland and France began to fail in June and July, the efflux of gold was resumed after a temporary lull, and grain prices began to collapse. On August 2, Bank rate was set at 5 per cent on one month bills and higher on those of longer terms. Panic became general. Failures among

CH. XIII

WEATHERING THE CRISIS OF 1847

375

corn merchants in England alone were estimated to involve a total of ¿£5,000,000 in August. Even the firm of the governor of the Bank failed. Within another month Reid, Irving & Company (one of the leading merchant bankers in the West India trade), A . A . Gower, Nephews & Company (chiefly engaged in the Mauritius sugar trade), and Sanderson & Company, one of the four leading dealers in bills, suspended payment. The climax was reached in October, 1847. Chartered banks began to fail, the Bank directors were charging as high as 13 per cent for limited amounts of discounts, and the metal reserve of the Bank was continuing to decline. The British government on October 25 suspended the Bank Act of 1844 as a final resort. Although this eased the situation considerably, discount rates continued high for some time, and ancillary failures kept occurring for months thereafter. As gold began to move back to England, market rates for discount dropped. Bank rate followed market rates, and was down to 5 per cent by the end of the year. But the revolution in France, coupled with the general monetary pressure, precipitated a further flurry of failures among French mercantile firms in France, England, and the United States during April, 1848. This last major series of collapses constituted the final phase of the crisis. Many in German cities were seriously weakened but succeeded in staying in business for another ten years. The Barings experienced no alarm about their own business throughout the early months of the crisis. Certain features of the situation were favorable to the Anglo-American merchant banker. Business in the United States had experienced no boom in the 'forties. Speculation had not run up prices excessively. Post-depression caution and the drying up of English long-term credit caused business operations generally to be conservative. After 1845, exports of foodstuffs in conjunction with European business conditions brought gold to the United States and seemed to assure stability and continued prosperity. Having followed a program of restrained expansion and constant liquidity, the House of Baring was in a position to take advantage of the situation. The partners expected trouble even before the pressure of 1845-46 had ended. As early as January, 1846, Bates reported that the house

376

CRISIS, REVOLUTION, WAR, 1847-1848

CH. XIII

had sold almost all merchandise on hand at good prices and was now "ready for the storm" which he saw approaching. In Bates' estimation, Peel's free-trade policy, the high prices of manufactures, the anticipated excessive import of grains, the railway demands for funds, and the untried Bank Act were factors leading to another crisis in the near future. 4 During over half of the 1846-47 season, the Barings continued several phases of their American business almost as though conditions were normal. They sold their hold-over of 20,000 bales of cotton between September 1 and November 30, 1846, and maintained purchases and advances, though in relatively small amounts, throughout the winter and early spring. Orders for sugar purchases and consignments were kept open, but limits were so low that few cargoes came forward. The Barings received some consignments of breadstuffs from American firms, though Indian corn credits were issued for the most part on English and Irish account. The volume of credits on the house was increased during the last quarter of 1846 and remained at a higher level throughout 1847 than on September 30, 1846, though no new dry goods credits were granted. Exchange accounts were kept going, and the open credits for them were actually increased when Prime, Ward & King was succeeded by two new firms. Especially during the first quarter of 1847, gold shipments to the United States were undertaken, although Baring Brothers & Company ran a poor third to the Rothschilds and the Browns among such shippers. On the other hand, as early as November, 1846, many correspondents were warned through Ward to avoid remitting dubious bills arising from the export of breadstuffs and cotton because the Barings expected numerous failures to result because too many merchants were rushing into the grain trade.5 In fact, the partners felt strong enough to carry out four unusual operations during this period. When the Bank of France in January, 1847, borrowed for six months 800,000 in silver from the Bank of England, Baring Brothers & Company and Hottinguer & Company acted as the intermediaries for both the initial loan and the repayment. The total credit on the London house was 1,000,000. The Barings also acted as one of the drawing agents in the stabilization operations arising from the purchase by the Russian government

CH. XIII

WEATHERING THE CRISIS OF 1847

377

of frs. 40,000,000 (¿6,600,000), 3 per cent rentes from the Bank of France in March.6 During the spring the Barings, conjointly with the Rothschilds, purchased an ¿8,000,000 British loan at 89%, payments to be made to the government over a period of a year. In the meantime, late in 1846 Baring Brothers & Company had entered upon contracts to supply tobacco to both the French and Spanish governmental monopolies. A bid placed by Hottinguer & Company to furnish 3,500,000 kilograms (about 6,000 hogsheads) of tobacco to France was accepted, the Barings to have a share of one-half in the operation. For Spain, in conjunction with Sansom, Bagnères & Company of Madrid, the Barings were to supply 10,990 hogsheads.7 Greater restraint was shown by the Barings after the April restrictions of the Bank of England had precipitated a panic in the money market. On April 19 they issued orders limiting advances on consignments of Indian corn to 60 per cent of the market price. Limits for advances upon wheat and flour were kept at such low levels that- on July 3 the Barings could say that a cargo from Jacob Little & Company and 50,000 barrels of flour from Grinnell, Minturn & Company were the only consignments of breadstuffs coming to them, as far as they knew. Cotton operations were completely stopped in May, in spite of the fact that prevailing prices still promised profits. The Barings decided to sacrifice paper profits for certain security. For the same reason, J. C. Burnham & Company of Havana in June was ordered to cease purchases of sugar on joint account with the Barings.8 After the April panic the Barings also sought to manage their exchange operations so as to attain security and to prevent the efflux of gold from England. On April 19, orders were issued to operators of exchange accounts to draw as few drafts as possible and to forward no remittances to be returned in gold. If remittances should be made, as many bills as possible had to be on the house itself, and all remittances must have undoubted American drawers as well as thoroughly sound English drawees. No documentary bills of any kind were to be sent; the Barings had no desire to be saddled with produce in a declining market. At the end of May, special orders had to be issued to keep Little & Company adhering to the new rules. This firm was also limited to drafts against cash in the hands

378

CRISIS, REVOLUTION, WAR, 1847-1848

CH. XIII

of the Barings. King & Sons complied so well with rules that by September a considerable cash balance had piled up in London on the joint exchange account. In the meantime Ward, who had been collecting debts and selling American securities of the Barings with the intention of remitting all available funds to England, was forced to retain some in the United States to meet drafts sold by the Barings on King & Sons to prevent further gold exports from the United Kingdom. 9 As a consequence of adopting these measures the Barings felt secure and ready for more business by August. They urged Ward to arrange credits for the government of the United States in Mexico for the purchase of army supplies; although the Rothschilds had the contract, the Barings thought they could supply the army more cheaply. So sure were they that monetary stringency, falling prices, and failures would leave wide open one path for new operations that the partners on August 3 gave new limits (lowered on August 18) for wheat, flour, and maize purchases and advances on consignments from the United States. 10 In fact, by September 18, 1847, the partners were feeling rather proud of themselves. They wrote to W a r d : 1 1 That free trade fettered Banking & [that] Railway expenditure could not fail to lead to these results we have kept our hands pretty clear of everything likely to fall in value and having a great distrust in corn & corn paper we have kept out of the influence in this crisis in a most remarkable manner.

At that date the House of Baring held only one unsecured bill, which arose from the failure of Prime, Ward & Company and from the efforts of the London house to avert that catastrophe. The amount of the bill was £6,000, but the Barings were responsible for only one third of the total. Some of the key commission houses in America had advanced too much on produce but all were secure. Conditions of trade were to get worse before they got better, however. American business began to stagger more than a little under the impact of the English financial stringency of September and October. By the middle of October the news of the failures in England had put a stop to exchange operations in N e w Orleans. Stock

CH. ΧΠΙ

WEATHERING THE CRISIS OF 1847

379

and commodity priccs broke downward. In February, 1848, Ward reported that his personal holdings of manufacturing securities had declined 25 per cent within the preceding year. Importers of teas to the United States lost 20 to 30 per cent on their cargoes. A financial panic in November along the northeastern seacoast introduced a period of tight money lasting more than a year. Discount rates in New York and Boston fluctuated between 12 and 18 per cent per annum. Much of the demand for money came from New England investors who had turned most of their liquid assets into fixed assets — railroads and manufacturing plants. Small specie exports began in November, then increased in volume during December and January. As a consequence of this drain the metal reserve in the New York banks was so low in January that many feared a suspension of cash payments, but inland banks shipped enough specie to New York to avert a collapse. Not until mid-February, 1848, did the alarm over the banks subside. Yet only one important firm, Horace, Gray & Company, a Boston iron merchant, failed between October, 1847, and February, 1848. 12 In spite of the relative ease of mind of the Barings about their American correspondents, the pressure of circumstances impelled them during the fall and early winter to increase their efforts to maintain the liquidity and security of the firm. Ward reassured all dubious correspondents about the stability of Baring Brothers & Company and conferred constantly with leading American business friends, including Albert Gallatin. As the London market grew tighter during September and October, the Barings aided several New York firms and continued to sell consigned merchandise as rapidly as the market would absorb it. Some reclamations for losses on sales of fur, timber, breadstuffs, and cotton had to be made, but the amount of money involved was small. All orders for advances against consignments were revoked in October, and the Barings issued no cotton orders until mid-December. Even then Forstall reported that the limits were below market rates and that nothing could be done to make purchases or obtain consignments. 13 Dry goods houses, exchange operations, and collections of debts were watched carefully. One American importing house had its credit withdrawn because it issued drafts on its agent in England,

380

CRISIS, REVOLUTION, WAR, 1847-1848

CH. XIII

and the credit of another was cut in half because it was using a Paris credit to cover indebtedness to the Barings. Three other dry goods accounts were closed because the credits had not been used. But a wholesale revision of credit policy was left to a later date. King & Sons agreed not to draw except against bill remittances purchased out of the proceeds of sales of American securities for account of the Barings, and securities owned by the London house and its European clients were sold steadily in America. The proceeds of these sales, combined with the collections of debts by Ward, were remitted to the Barings, sometimes in bills upon the house, and often after November ι in specie.14 Ward in one instance felt impelled to temper the urgency of his principals. In November he refused to obey an order of the Barings to issue a circular urging American clients to remit nothing but bills on the Barings or specie. He said such a measure would be prejudicial to other strong houses, such as the Browns, and conducive to false alarm at a time when sound bills were plentiful in the American market. Moreover, for the past two months by word of mouth he had privately circulated the request among Boston and New York correspondents of the house, and most remitters from those areas had already complied. 15 As a point of honor, the Barings completed purchasing tobacco for France and Spain. After the departure of Purton, Forstall took over the task. He discovered chicanery on the part of the broker, a joint campaign of former purchasers against the 1847-48 contractors, a short crop, and a whole series of other local complications making difficult the carrying out of the contracts. The Spanish order was completed in November, 1847. That for France, after modification of the contract, was terminated in January, 1848. The contractors lost $356 on the French operation, even though the final agreement provided for only about one third of the original amount. 16 The House of Baring had gone through the crisis with scarcely a semblance of strain. There was not an iota of truth in the rumor circulating in London that Lord Ashburton had "sold out ¿500,000 of the funds to strengthen the Barings." 1 7 The partners had plenty of money to use for special operations and were even lending to bill dealers and bankers early in 1847.

CH. XIII

CONFIDENCE IN AMERICA REASSERTED

381

By these measures and the steady liquidation of English and Continental obligations, including the payments with the Rothschilds on the 8,000,000 British loan, the Barings felt themselves to be in a position to relax their restrictions on American operations by the end of January, 1848. T h e pressure for money in England was easing. Both Bank and market rates of discount were declining. Further failures could not affect materially the stability or security of the house. Prices might decline still more, but the bottom of the decline could not be far distant. T h e time to make plans for future operations had arrived. CONFIDENCE IN AMERICA PUBLICLY REASSERTED

By 1848 economic and political conditions in both Europe and America were relatively auspicious for an expansion of services to American business men by Baring Brothers & Company. T h e business of the house was in an extremely favorable situation for the new departure: not for many years had the outstanding obligations of the firm been at a lower level, and its unmarketable assets were at a minimum. Impending events were to increase the relative advantages of an increase in their American enterprise. T h e time had come to turn to account the new opportunities appearing in the United States. During the first six months of 1848, however, many of the conditions of trade continued unfavorable to successful enterprise. Prices were falling everywhere. American business was still moving at a quieter pace; imports of dry goods and iron products were curtailed, and debts due Europeans were liquidated by exports of merchandise and gold; importers from the Orient lost money heavily, and American manufacturing declined in value and volume. T o borrow money in N e w York cost from 1 to 1V2 P e r c e n t P e r month. T h e news that Chartism in England had proved innocuous for the moment reached the United States about six weeks after American merchants had learned of the revolution in France. Both developments had acted as brakes upon American enterprise. T h e failure of a number of French merchants in America, England, and France upset all business in that category of trade and hampered operations in the entire Mediterranean. T h e appearance of cholera in Russia raised some doubts

382

CRISIS, REVOLUTION, W A R , 1 8 4 7 - 1 8 4 8

CH. XIII

about operations in the eastern Baltic. The major counterpoise to this foreboding picture was the relative cheapness of money in England. The rate at the Bank of England was set at 4 per cent on January 27, was reduced to per cent in June, and remained at 3 per cent for more than a year after November 3, 1848. Market rates in Lombard Street consistently ruled lower than Bank rates. 18 Under these circumstances the Barings, beginning in January, sought to steer a middle course between enhanced liquidity and cautious expansion. Sales of American securities were pushed in the United States. Ward continued personally to collect debts due. Debtors remitting directly to the Barings were instructed to avoid all Continental bills and all but the best English bills. Consignments of breadstuffs were discouraged. The volume of outstanding credits was reduced from ^1,862,096 as of December 31,1847, to ^ 1 , 1 2 5 , 1 1 2 on September 30, 1848.19 Much of the decrease can be attributed to the unwillingness of merchants to embark in the Far Eastern trade immediately after their heavy losses. Another factor in the decline of outstanding credits was the change in importing accounts. Dry goods credits were put on a new basis. Acting upon orders sent by Baring Brothers & Company on January 12, 1848, Ward sent a form letter to all holders of such importing credits, reducing their credits in proportion to the amounts used during 1847. For any additional amounts needed the Barings would issue special credits to the American merchants. They also limited the confirmation of all dry goods credits to four months, except in special cases. For the amount confirmed, under either fixed or special credits, the Barings were to charge their full commission, whether the full amounts were used or not.20 These limitations were markedly different from the former unrestricted confirmation and charges only on the amount of drafts issued under the credit. In contrast to the foregoing restrictive measures several expansionist steps were taken. By February 18 Ward had received orders to permit advances on consignments to "regular correspondents" of the house on non-perishable produce, but not on breadstuffs. This action put the policy of the Barings regarding the financing of American exports upon a normal footing except for cereals. Ward had issued orders for advances on and purchases of cotton in January.

CH. XIII

CONFIDENCE IN AMERICA REASSERTED

383

He suspended them for only three days in March upon receipt of the news of the revolution in France. After the suspension of the French houses had caused a panic in New Orleans, Ward sent credits confirmed to particular New Orleans banks, and Forstall and Gracie continued their purchasing and advancing. The Barings also bought some Indian cotton in Liverpool on speculation and terminated 1847-48 operations in American cotton only in September. "Very satisfactory" was their characterization of cotton dealings for that season after closing out the last of the purchases.21 At the same time the Barings expanded other categories of their business. By the end of January Ward agreed to the request of Goodhue & Company for an enlargement of its open credit operations from ,£5,000 to 10,000, provided that the increased volume of drafts be issued for the convenience of their regular customers only and that remittances be only in undoubted bills or specie. A month earlier, King & Sons, without the consent of the Barings, had begun to expand exchange operations by drawing and leaving the account uncovered in London. By the middle of February the New York firm had received from London approval of its actions and was authorized to draw up to ,£30,000 by each steamer if remittances to cover were sent within a month. Although bills on Continental houses were unsuitable as remittances, A i bills on England and specie were authorized on the joint account. By May, King & Sons was transmitting on this account Federal government bonds to England, and the Barings were purchasing and sending Pennsylvania securities to the United States. Although the Barings had forbidden any consignment of securities from America, Ward permitted two small lots to be sent forward early in May. In fact, American Federal bonds appeared so profitable that Ward was investing in them, as well as in $100,000 of Treasury notes, some of the Barings' funds in hand, and was making arrangements for his principals to take a portion of the $16,000,000 loan to be issued in June, 1848.22 Many considerations induced Baring Brothers & Company to reenter the American market for securities. Demand for capital was increasing rapidly in the United States. T o finance the war with Mexico the Federal government had resorted to extensive borrowing in 1847 and 1848. By June, 1848, at least two of the Barings' com-

384

CRISIS, REVOLUTION, WAR, 1847-1848

CH. XIII

Petitors — the Rothschilds and George Peabody — were already active in this field.23 Coincidental with the increased Federal demand came new issues of municipal, county, and State securities to forward railroad construction in the United States. Politicians, promoters, manufacturers, merchants, bankers, and farmers joined in the optimistic plans to bind the country with bands of iron. Short lines and extensive trunk lines were all a part of the vision. While the Federal government was approaching the policy of granting public lands to convert dreams into realities, the credit of cities, counties, and States was pledged for the same purpose. Thus local and State governments were competing with the central government in the relatively small American money market. To complicate the situation the railroad companies themselves were trying to raise capital in the same market. Funds were badly needed to complete the construction of old projects and to begin the laying of tracks for new ones. Shares and bonds in large amounts began to appear in the New York market in particular. In view of American inadequacy in iron and steel production, railroad builders in the United States were compelled to have cash to pay British ironmasters, the leading railmakers in the world. Inasmuch as the London market was almost closed because of the low state of American credit, funds must necessarily come initially from the United States. T o compete with the otherwise more attractive governmental securities, therefore, railroad issues in general carried the pledge of higher return on investment. It was not the first time that high interest rates had hypnotized the venturesome capitalist. Although the American money market had improved its techniques and capacity, as shown in the process of repatriating much of the State indebtedness and in financing new internal improvement projects, there was doubt that it could meet this increasing pressure upon it. Such doubt was substantiated by the prevailing excessively high value of money, occasioned in part by the great demand for funds from New England railroads and entrepreneurs. If deterrents were not too strong, money must come from Europe. Faced with this situation and the demand for capital, European investors and merchant bankers began to weigh the favorable against the unfavorable conditions in the United States. Prospects of

Ch. XIII

CONFIDENCE IN AMERICA REASSERTED

385

returning prosperity augured well for the future success of American enterprise. Recent military victories against Mexico were evidence of the tremendous energy of the people. Vast new territories, ripe for exploitation, were obviously going to be added to the colossus of North America. Of a certainty the credit of the Federal government was excellent. In fact, larger and larger numbers of foreign observers could now remember that the credit of the central government, as well as that of a majority of the States, had never been sullied except in relation to the defaulters and repudiators. Moreover, by 1848 several defaulting States — Pennsylvania, Maryland, Indiana, Illinois — had resumed interest payments or compromised with their creditors. Increasing prosperity, greater wealth, and additional tax levies promised sound finance in the immediate future. Friction between the sections over slavery was not violent enough in 1848 to offset these many factors of improvement, particularly just when the European supply of capital available for investment in America was markedly increasing. In truth, at that particular moment many English and European investors were looking very eagerly to the American scene. The English railway security market had suffered a major reversal in 1845 and was hard hit again in the crisis and recession of 1847-48. As an indication of the lack of confidence in the railways in 1849, Bates pointed out that the price of a share of the London & Birmingham had declined from ^255 to ¿ 1 0 6 since 1846.24 Construction was halted and iron manufacturers, having expanded to meet the demand for rails, soon felt the pinch of hard times. In spite of relatively steady demand from the United States, prices for rails went down. British and Continental business in general was so staggered by the events of those years that the politicians were forced to seek scapegoats. In England a special Parliamentary committee investigated the cause of the commercial and industrial distress. Across the Channel revolutions broke out in France and in central and southern Europe. From those areas nervous money scurried to London to swell the supply of capital seeking investment. What better investment offered than in securities of the United States? Baring Brothers & Company took cognizance of the situation and found it good. The partners took pride in their part in restoring

386

CRISIS, REVOLUTION, WAR, 1847-1848

CH. XIII

American credit, even though Peabody had effectively demonstrated his faith in the soundness of the United States by his extensive dealings in American securities during the 1840's. Further assurance of certainty and stability in American Federal finance was given by the signing of the treaty of peace between the United States and Mexico in February, 1848.25 That conditions were generally favorable did not lessen the significance of the new departure of the Barings in participating publicly in the $16,000,000 6 per cent Federal loan of 1848. Not since the collapse of American credit in the early 'forties had the name of Baring Brothers & Company, the acknowledged leader in AngloAmerican finance, been publicly associated with the marketing of an American issue of securities. The opening of the bids on June 17 was therefore an important event in the history of the firm and of American credit. "Corcoran & Riggs, Baring Brothers & Co. and others" placed a bid of 103.02 for the entire loan, as the culmination of negotiations initiated by Ward as early as December, 1847. The group was allocated $14,065,550. Of this amount $1,250,000 was for account of the Barings, $250,000 for King & Sons, and $1,400,000 for foreign account in addition to the Barings. Of this latter sum $750,000 was taken in the name of George Peabody, though really on joint account with Elisha Riggs of New York and W. W. Corcoran. The Rothschilds were not willing to enter the list, although they cooperated to the extent of ordering their agent in New York to cease buying other Federal securities in order that the price might be kept below 103 until the bids were opened.26 In this operation Baring Brothers & Company adopted with regard to American securities the policy which the house was to follow throughout the 1850's. The object was to facilitate the movement of capital to the United States with a minimum of risk. Consequently, the partners made no attempt to acquire the entire loan. A share in the transaction was considered enough to satisfy them and their clients. And diffusion of the risk was achieved by as large advance sales and subdivision of their share as possible. In this preliminary transaction advance sales totaled approximately $550,000. Most of the

CH. XIII

CONFIDENCE IN AMERICA REASSERTED

387

subscribers in advance received the bonds at the contract price, plus ι per cent commission to Baring Brothers & Company. Current sales also proceeded smoothly. By an agreement with Peabody in July the two firms acted together on the price in London. Neither was to sell anything below 96, the premium on sterling in New York being 10 per cent. While selling steadily "small lots" of $10,000 to $20,000 in the English market, the Barings authorized Hottinguer & Company of Paris to sell for delivery lots up to $25,000. By September 8, 1848, the Barings had only $150,000 of the 1848 loan, though $100,000 more bonds of 1868 were to come from the proceeds of the investment in Treasury notes suggested by King & Sons. 27 In spite of this successful outcome, during the summer and autumn of 1848 the Barings, with one exception, refused to accept on consignment any American securities — Federal, State, or any other variety. Consignments suggested by King & Sons of New York, Oelrichs & Lurman of Baltimore, and Ward were refused flatly. The Barings refused to buy, sell, or accept as security for a loan the Maryland bonds held for account of the Baltimore & Ohio Railroad Company, but they did agree to postpone the payment of the $50,000 remaining on the debt of the company from October, 1848, to April, 1849. As they explained to Ward in November, in England there was as much commercial commission business netting commissions of 3 to 4 per cent as the firm might choose to take; therefore, a consignment of securities to be sold at specified limits for commissions of 1 to 2 per cent was not tempting. 28 They might have added that they were not at all certain of continuance of the demand for American bonds. Far more than half the sales had been made to residents on the Continent, chiefly in France and Switzerland. As soon as stability was assured there, the demand might cease. In the meantime the Continental stocks, which some British investors might have sold to take advantage of the higher interest on the United States and other American securities, remained relatively unsalable. Furthermore, although confidence in British railways was at a low ebb, much of what the Barings labeled "floating capital" went to meet calls from the companies for additional

388

CRISIS, REVOLUTION, WAR, 1847-1848

CH. XIII

funds. Some of the British investors with funds at hand even preferred New York, Ohio, and Massachusetts bonds to those of the Federal government. 29 Nevertheless, in September Baring Brothers & Company participated in the purchase of another large portion of the 1848 loan. On August 2 the Treasury asked Corcoran & Riggs to pay $5,000,000 in advance of the period stipulated in the original contract. Unable to raise that sum in the United States and armed with the active cooperation of the Department of State, Corcoran went to London in September. After about three weeks of negotiation, he succeeded in selling $3,000,000 of bonds at 93% to a group of merchant bankers. The share of the Barings was $750,000. In this operation the Barings utilized the Dutch market more effectively than before. Hope & Company and the firm of Widow Borski of Amsterdam made independent purchases and also formed a combination with Ketwich & Voomberg of the same city for purchase and sale of United States sixes of 1868. Some demand continued from Switzerland and small sales were made in Britain. One London investor took $100,000 of the bonds, and $250,000 of the sales were made for account and risk of King & Sons. In London the price rose to 97 within a week after the signature of the contract with Corcoran, so there was no doubt that the transaction proved profitable to the London house. The Barings at the end of the year took up an additional $250,000, their share of the $1,000,000 option granted by Corcoran in the September contract.30 Was the participation by Baring Brothers & Company in marketing a loan for the government of the United States to be an isolated phenomenon, or was it to be but the beginning of increased activity on the part of the London house in financing American tráde and in marketing American securities? That was the question. The House of Baring had gone through the crisis of 1847 with ease and its stability was still undoubted. American credit in general had been restored, and the demand from the United States for British capital was again rising. If other conditions were favorable, the 1848 venture in Federal government bonds might herald a resurgence of interest by the Barings in American economic affairs.

CHAPTER

XIV

N E W D E P A R T U R E S , 1848-1852 PARTICIPATION in the Federal governmental loan of 1848 proved to be a starting point for a marked expansion of the American business of Baring Brothers & Company. For four years after the fall of 1848 the partners increased the operations of the house on American account almost as rapidly as they had between 1828 and 1832. In spite of a slow start and in the face of confusing conditions for operations, they indicated by late 1852 a strong and renewed faith in the United States. At the same time the activity of the House of Baring for account of those outside the United States showed a parallel expansion. In this new era the partners followed the pattern of their policies and techniques in former years. Caution and prudence had characterized the policies of the Barings in the past. Thomas Baring and Joshua Bates, the managing partners, were older now, and certainly no more inclined than formerly to engage in speculative enterprise. Their natural conservatism was enhanced by the memory of the recent collapse in American honor and by the realization that not all contracts then made had yet been accepted as valid by business men in the United States. Knowing that the weight in the scales was seldom overwhelmingly unfavorable, however, the Barings were not unwilling to make some concessions to changing conditions; the only qualifications were that the concessions must be necessary to effect gains in business and that they must be compatible with the maintenance of the high reputation of the firm for integrity and solidity. Given the increasing competition within the merchant banking fraternity and the phenomenal development of railroads, the managing partners could not but be convinced that some modifications in their policies and techniques were necessary. Even though impossible to locate, the golden mean must be sought.

390

NEW DEPARTURES, 1848-1852 CONFUSING CONDITIONS OF OPERATIONS,

CH. XIV

1848-1852

During the next four years the conditions of trade were almost as confusing to Anglo-American merchant bankers as those of early 1848. Economic and political developments seemed to conspire to make decisions difficult. Price movements, crop variations, crises and failures, railroads and telegraphs, revolutions, the problem of slavery, and international friction all contributed to uncertainty and variability. A totally unprecedented flow of gold from California and Australia upset all normal views as to the working of international exchanges, just at the moment that expansion in almost every line of economic endeavor in many regions gave assurance that the normal expansive proclivities of occidental economy were to continue. Political disturbances were quite numerous but not particularly disruptive of business. T h e liquidation of the 1848 revolts in central Europe and Italy dragged on so long that the Barings remarked that Germany seemed to be permanently unsettled. T h e Holstein Affair depressed trade in Hamburg for a time in 1850. In general, until 1850 developments in Germany, Austria, Greece, France, and Italy caused no great worry but kept up a "fidgety feeling" which was prejudicial to confidence and trade, according to the views of the Barings. T h e coup d'état of Napoleon III in December, 1851, disturbed the money markets less than had the rumors of it late in October. Although the partners in London grew worried over the tension concerning slavery in the territories of the United States during 1850, Ward told them to pay no attention to the press and politicians. H e was certain that a compromise would be effected. In a similar fashion the Barings and their agent experienced no serious fears about Spanish-American relations over Cuba during 1849-51, or over Canadian-American friction in 1849, or regarding the status of the fisheries as discussed in 1852.1 Even the repeal of the Navigation Acts in 1849 had been anticipated and its effects, to be felt gradually, were discounted in advance. Agricultural production showed some, though not serious, variations. Except in the United Kingdom, wheat crops were either good or excellent throughout the period. In England the lack of duties lessened the effect of deficient crops in 1850 and 1852. American cotton crops were large in 1848,1851, and 1852, but deficient in 1849 and

CH. XIV

CONFUSION IN OPERATIONS, 1848-1852

391

1850. Coffee crops were short in Brazil in 1850 and in Java in both 1850 and 1851. Other phases of business enterprise manifested similar ups and downs. Manufacturing in the United States began to increase late in 1848 and showed no marked decline until 1854. English industrial activity was not resumed to any extent until the last half of 1849. Even after that the iron trade continued to be depressed for some months. Foreign trade was generally profitable in both England and America, though some losses in colonial produce and dry goods were experienced in 1850 and 1851. The low point in American foreign trade came in 1849, whereas that in domestic trade came in 1850. Probably important factors were the decline in the volume of wheat and cotton exported in 1849-50. Transportation facilities were vastly improved, and railroads in particular were on the verge of a speculative boom. The cheapness of money in England encouraged enterprise, while the relatively high rate of discount in the United States acted somewhat as a deterrent. Nevertheless, as early as August, 1851, Ward pointed out that N e w York discounts in that year were $70,000,000 as against $40,000,000 in 1848.2 On the whole, American business was expanding. Even the effects of the gold discoveries were not unmixed. At first business men expected that great additions to the gold supply of the world would cause a rise in prices. The tendency of that expectation was to cause higher prices in 1849 before any marked influx of gold. Yet for 1849 the result of the gold rush was to drain gold away from the eastern seaboard of the United States. Gold seekers had to take money with them. Grinnell, Minturn & Company, estimating that most migrants took at least $400 with them, thought that from the Mississippi Valley and the East $50,000,000 in property had been drained off to California. At least the efflux of money to California was one of the reasons for tightness in the New York money market early in 1849. A n incidental consequence of the gold rushes to California and Australia was the preëmption of shipping for sailings to those areas, a rise in freight rates everywhere, a stimulus to packetand shipowners, an encouragement to shipbuilding, and a contribution to the momentary prosperity in that type of enterprise soon to be dissolved in marked hardship and losses.3

392

NEW DEPARTURES, 1848-1852

CH. XIV

W h e n g o l d reached the w o r l d m a r k e t in quantity, other c i r c u m stances m o d i f i e d its i m p a c t u p o n industry a n d trade. T h e increased production of g o l d in Russia d u r i n g the 1840's h a d prepared the business c o m m u n i t y for the i m p a c t of the C a l i f o r n i a n a n d A u s t r a l i a n discoveries. T h e excess of A m e r i c a n imports over exports averaged m o r e than $20,000,000 per a n n u m f r o m 1848 t h r o u g h 1852, thereby m a k i n g necessary exports of g o l d if adequate a m o u n t s of securities w e r e not exported. B o t h g o l d and securities w e r e sent in considerable amounts. A m a j o r part of the g o l d w e n t to E n g l a n d b u t d i d not stay there. T h e British people w e r e also e x p o r t i n g precious m e t a l to pay for imports f r o m various parts of the w o r l d . B e g i n n i n g in 1850, F r a n c e absorbed a considerable quantity of g o l d . T h e N e t h e r lands, h o w e v e r , h a v i n g g o n e on to the silver standard in 1847, answered part of the F r e n c h d e m a n d for this metal. Russia also kept u p its contributions of g o l d to the w o r l d market. 4 A n o t h e r complication w a s a d d e d by E u r o p e a n e m i g r a n t s c a r r y i n g capital to the U n i t e d States. A l l these variables kept contemporary observers m o r e than a little confused. W a r d freely admitted his b e w i l d e r m e n t . H e f o u n d the w o r l d m o v i n g too rapidly for h i m . H e w a s old and ready to retire. In m a n y letters he lamented his inadequacy and his uncertainty. T h e f o l l o w i n g e x a m p l e is typical. A f t e r m e n t i o n i n g i m m i g r a n t s , increased g o l d production, steam navigation, railroads, telegraphs, a n d other innovations, he w r o t e : 5

W h o can say what the future is to be — what the effect in payments — in the use of Credit. & on the state of the world — I feel as if within a few years I had come into a new world, where former experience is a fault, or lame & uncertain — & still, on the general principle that the present state here is not natural & cannot be permanently supported I look for a change. T h e m a n a g i n g partners failed to admit c o n f u s i o n so f r a n k l y , but were inclined to be pessimistic about A m e r i c a n developments a n d critical of A m e r i c a n practices. T h e y w a r n e d their agent to use prudence a n d caution. T h e y saw in the expansive tendency of business in 1849 a repetition of 1836-37. T h e railroad b o o m in the U n i t e d

CH. XIV

CONFUSION IN OPERATIONS, 1848-1852

393

States they viewed as leading to a revulsion similar to that experienced in England in 1845-46.6 While admitting that the influx of American gold had been the one element preventing a collapse in British economy, although they could not estimate all its effects, the partners feared the great expansion of credit in the United States based upon bank deposits. "Nothing but Californian Gold," they wrote in 1851, "has hitherto prevented the suspension of your Banks & Merchants and it remains to be seen whether it will come fast enough in future to prevent it." 7 In truth, the Barings had some reason to be worried about the state of business affairs. By the end of 1851 they had experienced two minor recessions since 1848. In the spring of 1849, just when they had hopes that the relaxation in the cost of money begun late in 1848 would continue, they witnessed a severe stringency in the American money market. Discount rates rose to 15 per cent per annum, prices of all kinds of commodities fell, and the pressure was relieved only when the Federal government paid out large sums by drafts and released coin from the Independent Treasury. Exchange rates on England fell and, by the end of May, gold shipments to the United States amounted "almost to a plethora." 8 Failures in these difficult months were few and English business was little affected, though commodity prices continued to decline, reaching the bottom of a recession begun in 1847. The tightness of 1851 was much more serious. It was felt keenly in both the United States and England. Prices began to break in America as early as March and continued to decline throughout the year. Discount rates in N e w York rose from 6l/z per cent in May to 16 per cent in October. Failures began in July with that of Samuel Jaudon & Company. Many other firms were also forced to suspend payment, including Jacob Little & Company and Hicks & Company of New York, and Hill, McLean & Company and Maunsell, White & Company, prominent firms of New Orleans. Although prices also declined in England and several failures occurred, the pressure was not nearly so great as in the United States. Soon discounts at the Bank of England could be had for as low as 2 per cent per annum, and the market rate was lower still. In the meantime, shipments of gold had arrived at New York and the Federal government had

394

NEW DEPARTURES, 1848-1852

CH. XIV

given further relief by heavy purchases of United States securities.9 All this was really a preliminary to a boom year in 1852. In addition to meeting this multiplicity of variables in general economic and political life, the Barings had to face increasing competition in almost all their American operations. The Rothschilds, Huth & Company, Brown, Shipley & Company, and others continued to be very active, particularly in securities, exchange, and cotton. If Fletcher, Alexander & Company practically faded out of AngloAmerican finance, other houses rose to fill the vacancy. George Peabody expanded his operations, founded a house in 1852, and, after his alliance with Duncan, Sherman & Company of New York, became one of the more dynamic figures in London. As early as 1847, W. W. Corcoran, allegedly without Peabody's knowledge, sought to persuade the Federal government to transfer its London accounts to this American citizen. McCalmont & Company, although labeled a good second-rate house by the Barings, increased its American business, especially through its close relations with Thayer & Brother, of Boston in exchange and security operations. Matheson & Company, a new firm established in 1848, soon became prominent in granting credits for the Far East. Overend, Gurney & Company had entered the American field prior to 1847, and it continued to be an important competitor in exchange and acceptance operations. Among those specializing in one type of transaction, Dennistoun & Company loomed very large as a forwarder of cotton. Other firms, including joint stock banks, became active in such special categories as the issuing of traveling credits and small bills for immigrant remittances.10 And almost all of them were willing to alter their terms of doing business in order to win correspondents. A whole series of questions thus had to be faced by the members of the House of Baring. H o w could they acquire authentic, reliable information regarding the almost innumerable problems in the economy of the world in general and of the United States in particular ? H o w should the terrific competition be met? Would the tried policies and practices answer? If modifications and concessions were necessary to maintain a competitive position, how many should be made and when? Should connections be established with a firm in California? Should the house market American railroad securities?

CH. XIV

ADJUSTMENT

395

Could the integrity and stability of the house be maintained under the circumstances ? A D J U S T M E N T TO CONFUSION AND COMPETITION

T o solve the problems facing the managing partners required a variety of adjustments. Some were made in managing personnel, others by shifting the emphasis of the operations of the house, still others by concessions to the trends of the times. One change was to bolster the organization by the addition of a new partner. Russell Sturgis (1805-1887), a Harvard-educated cousin of Mrs. Bates, had been a lawyer in Boston before becoming a merchant in 1834. For ten years thereafter he was at one time or another a partner in Russell & Sturgis of Manila, and of Russell, Sturgis & Company and Russell & Company of Canton. A period of relative inactivity in the United States followed his departure from China. In 1849 he went to London at the invitation of the Barings and became a full partner in the house in January, 1851. After the death of Thomas Baring in 1873 Sturgis was the senior partner in the firm until his retirement in 1882. Friend of leading literary figures on both sides of the Atlantic, he devoted his business hours chiefly to the Far Eastern operations of the House of Baring. 1 1 Younger men were also introduced to the problems of management in the firm. The older partners had an eye to the future. T w o later partners — Henry Bingham Mildmay and Edward Charles Baring, later Lord Revelstoke — were being trained during these years. Both traveled extensively in America and Baring served for a time in Baring Brothers & Company, Liverpool. Baring's services were definitely needed there after Purton's death in the spring of 1852, which left James Price the only full partner in that house. 12 Maintaining the proper agents in the United States was a more immediate problem. The question of the general agent was the most pressing. Ward had been wanting to retire since 1845. Bates made a trip to America in 1849 especially to arrange a joint agency composed of William R . Gray, son of William Gray, and Franklin H . Story, chief clerk in Ward's office since 1830. Gray, one of the few men that the Barings knew who could judge men and say "no" forcefully enough, declined to serve except as sole agent. Inasmuch as

396

NEW DEPARTURES, 1848-1852

CH. XIV

neither W a r d nor Bates at that time was willing to exclude Story, the elderly Ward stayed on in spite of precarious health and a desire to give more thought to his personal investments. T o aid him, however, his eldest son, Samuel Gray Ward, who had lent a hand briefly in 1847, was induced to become a permanent member of the Boston office. H e soon took many operations, such as those of Merchants' Exchange and the payments of the indemnity by the United States to Mexico, off his father's shoulders. A m o n g the son's most appreciated contributions to the operations of Baring Brothers & Company was a steady flow of information on State and national laws and finances and on foreign and domestic commerce. Samuel G . really functioned as deputy general agent. 1 3 Special sub-agents were also chosen for operations in Boston, N e w Orleans, and Philadelphia as well as aides to handle railroad investments. Several of these agents will be considered in other connections. T h e N e w Orleans agent was E d m u n d J. Forstall. T h a t vain, egotistical, sometimes brusque and arrogant gentleman had shared the management of cotton operations in the South with Archibald Gracie during the 1847-48 season, but he became sole agent of the Barings in N e w Orleans the next year. H e collected and evaluated information very well indeed, was an excellent judge of cotton and tobacco, and was almost without a peer in Louisiana in his knowledge of banking and finance. In 1851 the Barings chose the untried firm of Barker Brothers & Company, the senior partner of which was a brother-in-law of S. G . Ward, to replace the house of Richard Willing as their confidential agent in matters of finance in Philadelphia. 14 T h e relations of the Barings with the Barkers did not assume much importance. In near-by Washington a working relationship, though not intimacy, was established with Corcoran & Riggs. While admitting that the senior partner was "loose & incomplete" in handling his business, and "overrun with business & society & politics," Ward considered him an honorable, self-possessed, "growing," diligent man who was not fussy, extravagant, or tricky. T h o u g h Corcoran had earlier tried to effect the transfer of the account of the Federal government to George Peabody, in 1848-49 the Washington finan-

CH. XIV

ADJUSTMENT

397

cier was responsible for persuading the government to cover its account with the Barings and to make some of the remittances for the N a v y Department in advance. 1 5 T h o u g h Corcoran & Riggs collaborated with the Barings in several undertakings after 1848, the relationship was never such an intimate one as that of the London house with K i n g & Sons, Goodhue & Company, Grinnell, Minturn & Company, Grant & Stone, and Oelrichs & Lurman. In spite of the death of two old friends, key relations in N e w Y o r k and Baltimore remained unchanged. Jonathan Goodhue died but his firm continued. T h o u g h James G . K i n g was aging and Bates forthrightly told him that his firm was too grasping, the connection was maintained. Some thought was given to locating the general agency of the Barings in N e w Y o r k , and to establishing there an intimate connection with a reliable young house, but nothing was accomplished on either score. T h e foregoing two firms and Grinnell, Minturn & Company afforded excellent representation in N e w Y o r k . So did Oelrichs & L u r m a n in Baltimore, which consequently lessened the impact of the death of Robert Gilmor in 184s. 1 6 Knowledge of the rapidly changing conditions in America came from agents, old friends, and new connections, but the partners informed themselves by personal travel to a greater extent than ever before. Between the senior and junior partners they covered Canada, the eastern coastal cities of the United States, the Mississippi Valley, California, Mexico, Brazil, and Argentina. Supplementary to those travels were the visits of Forstall and S. G . Ward to London in 1849 and 1850, respectively. 17 Under the guidance of the old and new partners the business of the House of Baring showed a steady expansion. Outstanding credits in use rose from , £ 1 , 1 2 5 , 1 1 2 in September, 1848, to over ,£2,506,000 four years later. Of the ten categories into which W a r d divided outstanding credits, four — West Indies, South America, D r y Goods, and Miscellaneous — increased less than 100 per cent; the other six — Exchange, Europe, Calcutta, Canton, Other East Indian Ports, and Traveling — jumped more than 100 per cent in the four years. T h e three F a r Eastern groups accounted for the bulk of the increase in volume— ¿867,675 out of a total of ¿ 1 , 3 8 1 , 0 5 1 .

398

N E W DEPARTURES, 1 8 4 8 - 1 8 5 2

CH. X I V

As Table 4 indicates, the only interruption in the expansive tendency came in 1851 and early 1852. Even that decline was relatively slight. TABLE OUTSTANDING CREDITS o r

4

BARINO BROTHERS &

A M E R I C A N ACCOUNT,

C O M P A N Y ON

1848-1851

(Exclusive of Credits for Exports from the United States)

Date Sept. 30, Dec. 3 1 , Mar. 3 1 , June 30, Sept. 30, Dec. 31,

1848. 1848. 1849. 1849.. 1849. 1849.

Dec. 3 1 , 1850 Mar. 3 1 , 1 8 5 1 June 30, 1 8 5 1 Sept. 30, 1851 Dec. 3 1 , 1 8 5 1 Mar. 3 1 , 1 8 5 1 June 30, 1 8 5 1 Sept. 30, 1 8 5 1

Total

Total in Use

>,191,711 1,180,819

£1,115,111 1,140,119

1,413,491

Dry Goods

Exchange

Far East

1,367,893

£188,500 150,500 158,500

£ 60,000 55,000 55,000

1,711,049

1,631,449

103,500

60,000

913,066

1,964,031

1,866,931 1,881,887 1,083,191 1,117,160

116,500 151,500 158,500 148,500

70,000 70,000 100,000 105,000

1,099,098

1,998,987 1,116,191 1,346,160

1,333,73°

1,183,130

180,500

105,000

1,113,970

1,143,518 1,141,455 1,631,163

1,708,418 1,096,455 1,506,163

183,000 306,000 316,000

105,000 105,000 115,000

844,713 1,170,005 1,409,753

£

541,078 684,619 718,957

1,115,364 1,110,792. 1,195,895

Source: BPOC, Ward to Barings, Oct. 3, 1848, Jan. 8, Apr. 3, Oct. 1, 1849, Apr. 1 , July 1 , Oct. ι , Dec. 3 1 , 1850, Oct. 1 , 1 8 5 1 , Mar. 3 1 , July 6, Oct. 5, 1 8 5 1 , and enclosures. N o figures were found for the dates indicated by blank spaces.

Against heavy restraints the dry goods credits rose to more than 300,000, the top limit set as far back as the third quarter of 1836. In addition to the conditions laid down early in 1848, by the end of October every holder of a dry goods credit was restricted to £10,000. Bates and his colleagues always tried, though with limited success, to grant credits only to those who forwarded their purchases through the Liverpool house. Until late 1849, fearful of a severe "money crisis," the Barings restrained Ward from expanding dry goods

CH. XIV

ADJUSTMENT

399

credits, urged importing friends to avoid sales on long credit, and cautioned them to expect trouble. 18 The rise in credits for exchange operations was largely a reflection of increased activity in Boston and Baltimore. In 1850 to Hay ward & Dorr the Barings gave an open credit of ¿5,000 and to Gilmore, Blake & Ward (Blake, Ward & Company within a year) one of ¿30,000. By 1851 the latter had developed a steady business in securities and had persuaded the London house to consolidate all activity in exchange and bonds to a joint exchange account. By August, 1852, the open credit reached ¿50,000, and Blake, Ward & Company was offering the desired strong competition to Curtis of the Browns and to Thayer & Brother, who drew on McCalmont & Company. Only Oelrichs & Lurman had a credit for exchange operations in Baltimore— ¿10,000 on an annually renewable (from the first quarter of 1850) joint account. Philadelphia had none. King & Sons and Goodhue & Company were the only two in N e w York. Had the Barings responded favorably to overtures from American business houses, they could have had many more exchange and drawing accounts. In 1848 the managing partners courteously declined the offer of the newly organized firm of Lee & Higginson to act as its Boston agent for the purchase and sale of securities. The account of Jacob Little & Company was closed in October of the same year and its later requests for a credit were refused. Prior to beginning its extensive business in exchange and securities on October ι , 1851, Duncan, Sherman & Company asked for the terms of Baring Brothers & Company. The partners literally threw the new firm into the arms of the Union Bank and George Peabody by offering no open credit and no modifications in rates of commission or interest. Almost simultaneously, Ward declined an account with Drexel & Company of Philadelphia because it did not "appear to be a House of the sort of character and standing" his principals desired in its correspondents, an opinion undoubtedly long since forgotten when an interlocking relationship was established between the firms founded by George Peabody, J. P. Morgan, and the Drexels. The Bank of Commerce in New York, the Farmers & Mechanics Banks in Philadelphia, and the New Orleans Canal & Banking Company were similarly refused. 19

400

NEW DEPARTURES, 1848-1852

CH. XIV

One reason for declining connections with promising firms was that the House of Baring preferred to deal on its own account. It was much more active in exchange operations than Ward's lists of outstanding credits and refusals of accounts indicated. In 1850 Ward collected by drafts, and from debts due in America, approximately 100,000, which he invested in New York and Boston in short-term obligations, and remitted profitably in bills and gold the following year. In 1849 the Barings had inaugurated at their own risk a threecornered account with Forstall in New Orleans and Goodhue & Company. With a credit of ^50,000, Forstall drew either on London or New York, as advantage dictated, and soon gave Nicholson of the Browns more competition than he had had for many years. As early as 1849 the Barings began accounts with Burgoyne & Company and Macondray & Company of San Francisco. Without previous authority, the former began a "large and always covered" business of drawing and remitting in gold, whereas the latter was recommended by J. M. Forbes and in 1850 was granted one specific, non-revolving open credit of £ 10,000. Meanwhile, Baring Brothers & Company had shared with the government of the United States, Corcoran & Riggs, Howland & Aspinwall, Samuel Jaudon, Manning & Mackintosh, and Jecker, Torre & Company the profits in transmitting three out of the four indemnity payments to Mexico under the stipulations of the Treaty of Guadelupe Hidalgo. 20 T o compete successfully in exchange operations the Barings reduced some commissions but refused to alter other practices. Changes were always on a secret and individual basis. In 1850 they began to accept the drafts of Goodhue & Company for 54 P e r c e n t commission but would go no lower than % P e r c e n t 0 1 1 drafts of Hayward & Dorr and Gilmore, Blake & Ward. The Barings adhered strictly to the '/2 per cent charged King & Sons on its general account and to the 1 per cent charged for all letters of credit to travelers. In connection with the latter, the partners also refused to permit Blake, Ward & Company to issue circular letters of credit, as Duncan, Sherman & Company did, on the ground that "any advertisement" in which the name of Baring Brothers & Company was used looked "too much like shop." 2 1 The "small bill" business for immigrant remittances from the

CH. XIV

ADJUSTMENT

401

United States to Ireland and Germany was also extended by the Barings during the period under review. They normally handled a small volume of those drafts, but the failure of Harnden & Company, Liverpool, in 1851 injured many remitters and left others with a limited source of supply. Harnden & Company had sold "small bills" ranging from £ 5 to _£ioo in its express offices "in all the principal country towns" in the United States at the uniform rate of $5 per £ i sterling. The Barings adopted the customary rate, arranged for payment of the bills either in Liverpool or in Dublin, and urged operators of exchange accounts to push sales. The partners were aware that the large number of small items would involve relatively high costs, but they felt that if "respectable" houses did not do the business the poor people would fall into the hands of weak and unscrupulous firms.22 Baring Brothers & Company, Liverpool, was well acquainted with American immigrants. Liverpool was a strategic point of departure for the Irish, which made very easy the task of Baring Brothers & Company, Liverpool, in getting passengers for the Old Line packets. On the other hand, when the Havre packets in 1849 began to arrive in New York filled with Germans, and the Swallowtail liners with few, Grinnell, Minturn & Company appealed to the Barings as their general agents to redress the balance. By putting pressure upon the passenger agents (Phillips, Shaw & Lowther), by hiring a new special recruiting agent in the Rhineland, by advancing the $10,000 for account of the packet owners to the Prussian government in order that emigrants might depart that state, and by arranging for special low rates over the Belgian railways to Ostend, at the end of 1851 the Barings had helped the London packets under their supervision to compete successfully with the transporters of human freight from Rotterdam and L e Havre. 23 As far as the Barings were concerned, the packets still were important in the export of pig and bar iron to the United States. The partners took advantage of their own control of the Weardale Iron Company and the situation of the other British producers — expanded capacity, inadequate reserves of capital, lessened demand after 1847, and low prices — to facilitate consignments of pigs and bars to Boston, Baltimore, and New York. Almost all the bar iron

402

NEW DEPARTURES, 1848-1852

CH. XIV

sent to Grinnell, Minturn & Company, which was by far the largest receiver through the efforts of the Barings, went forward in small lots in the packets. Shipment in this manner afforded freight and ballast for the packets and kept amounts on hand in storage at a low figure. Minimization of depreciation and storage costs were accompanied by a reduction from 5 per cent to 3% per cent in the commission charged by the New York house for selling and guaranteeing payment. Similar rates were set on sales of bar iron by Thompson, Lapham & Company in Boston and Oelrichs & Lurman in Baltimore. 24 Small wonder that few Americans bought pigs and bars on their own account through the Barings during the years 1848 to 1852. In contrast, the Barings participated in the rising tide of American imports by aiding in various ways to provide iron for American railroad construction. Providing short-term credit, they purchased rails for account of such commission houses as Davis, Brooks & Company of New York, Erastus Corning & Company of Albany, and Padelford, Fay & Company of Charleston and Savannah. They bought directly for account of such railroad companies as the Northern Railroad Company of New York and the Baltimore & Ohio. In the second case the Barings took as payment bonds of the company and induced the ironmaster to receive them in payment for one-half of the cost of the rails. When the Southwestern Railroad Company grew tired of paying commissions to houses in both the United States and the United Kingdom, in 1852, the Barings and Padelford, Fay & Company purchased 1,600 tons of rails on their own joint account and sold them to the Southwestern. 25 In financing the marketing of exports, which helped to pay for the increased imports of the United States, Baring Brothers & Company refused to make advances except on their own conservative terms. Upon only one occasion, in 1851 in the case of flour, did the partners authorize advances to the full cost. Because the limits of the Barings on furs, skins, and flour were lower than others would advance in 1848, Suydam, Sage & Company withdrew its account, happily leaving the Londoners free of involvement when it failed in 1850. On the other hand, consignments of whale and sperm oil on account of New Bedford and Nantucket firms increased, partly

CH. XIV

ADJUSTMENT

403

in consequence of advances by Baring Brothers & Company through an agent in New South Wales. Among American commodities moved to market through advances from the London house, maize, wheat, and flour predominated.28 In these and several other commodities the House of Baring increased its operations on joint account or entirely on its own account. The "plowing back" of profits over the years had greatly enlarged the available capital of the firm. Relative safety in maize, wheat, and flour operations was assured by the fact that "corn factors" in Liverpool were so broken in 1846-48 that they had not even recovered their power "for speculation by holding" by 1853. Late in 1851, when money earned less than 2 per cent in England and when many houses had suffered such heavy losses in wheat and flour that the field for operations was relatively open, the Barings had purchased extensively on joint account with Oelrichs & Lurman and Grinnell, Minturn & Company. In the following September, outstanding orders for joint operations in flour with the same two houses totaled 40,000 barrels. During the years under review the Barings also ventured into Indian corn, tobacco, sugar, tea, coffee, indigo, and cotton.27 In cotton the Barings showed a decided preference for operating on their own account. Out of the 38,843 bales forwarded by Forstall during the 1848-49 season, 36,178 were purchased and only 2,665, or less than 7 per cent of the total, were consigned under advances. Grade's orders permitted him to advance upon one-half as much as he purchased, but the ratio was actually much smaller. Forstall's advances were higher than purchases in the 1849-50 season because the Barings, given the high prices and speculative holdings of Southern factors, decided to stay out of the market on their own account. During the next two seasons, however, in all Southern ports the Barings stressed purchases rather than advances. N e w York merchants were always the heaviest shippers under advances, though Jecker, Torre & Company of Mexico City began consignments from New Orleans in 1851-52. 28 Several considerations accounted for the emphasis by the Barings on purchasing cotton on their own account. The partners distrusted the strength of merchants and factors in New Orleans; they had not

404

NEW DEPARTURES, 1848-1852

CH. XIV

recovered since 1839 and were weakened in 1847-48. If prices fell and failures occurred, reclamations took months, sometimes years, to collect. Northern shippers, especially such consignors as Goodhue & Company, K i n g & Sons, Piatt & Sons, and C . H . Marshall, had weathered many a financial storm and could be trusted. Both F o r stall and Gracie, especially the former, were excellent buyers. T h e y k n e w cotton and rated it accurately f o r both the Liverpool and H a v r e markets. Lastly, the Barings had money to use and thought they could make more by buying cotton than they could by advancing upon and selling it f o r others. Actually, the partners did not match their record of the 'forties for successful operation in the staple. D u r i n g the 1848-49 and 1 8 5 1 - 5 2 seasons their purchases produced good profits; that is, gains exceeded interest and commissions that might have been earned on the same volume. But in 1850-51, after waiting five months to enter the market, they bought extensively, only to discover that their purchases had been made before the bottom of a decline had been reached. Losses were heavy. In handling cotton during those years the Barings altered a f e w of their techniques. A l l insurance on cotton shipments was effected in L o n d o n f r o m 1849 o n w a r d ; the premium on seasonal policies was % per cent lower in E n g l a n d than in A m e r i c a and a 10 per cent discount was received for cash payment; and Lloyd's was considered more trustworthy than American insurance companies. D u r i n g the two middle seasons the Barings often wrote directly to agents in N e w Orleans and Mobile, but by 1851 the telegraph was so effective that supervision of all American cotton operations was again vested entirely in W a r d . A t the same time, the Liverpool affiliate began to set schedules and to issue all orders f o r advances. F o r the first time since the early 'forties a Boston house — Blake, W a r d & Company — was authorized to accept some of the drafts f r o m the South. T h o u g h the rate on Boston was usually % P e r c e n t higher than that on N e w Y o r k , that circumstance was somewhat offset by the fact that the Boston firm charged only ]/s per cent, which was one-half the commission of Goodhue & C o m p a n y and one-fourth that of K i n g & Sons when it had to cover its acceptances by drafts on the Barings. 2 9

CH. XIV

ADJUSTMENT

405

In fact, the general expansion in the American business of the House of Baring was achieved with a minimum of deviation from established policies and techniques. Rules for granting credits were rigidly adhered to; even though they lost such large and long-standing accounts as those of W. D. Lewis of Philadelphia, Enoch Train of Boston, and William Piatt & Sons of New York, the Barings insisted that no credit should be given an American firm receiving a similar favor from another merchant banker in London. Remittance rules were modified only to the extent that drafts of "Dennistoun on Dennistoun" and of Belmont on Rothschild were approved; that, by 1851, reliable bills on France could again be forwarded; and that bills of lading attached to documentary bills might be relinquished before the drafts were paid, when payment was guaranteed by a broker in good standing. In 1851 the partners agreed that all credits for use in South America should provide for issuing drafts either at 60 or 90 days sight, a generalization of an exception previously made in individual cases. They refused the request of King & Sons to grant credits on joint account; their decision made in 1841, in connection with Goodhue & Company and Grant & Stone, was considered still valid. In 1849, for the first time, the house distributed most of its Prices Current free of charge. Under competitive pressure the Barings secretly reduced commissions to a few individuals or firms, for example, from 1Y 2 per cent to 1 per cent for accepting drafts from South America on account of De Forest & Company. Similarly, they bought rails for Padelford, Fay & Company and the Baltimore & Ohio Railroad Company for 2 per cent instead of 2'4 per cent. Whenever possible, the London house persuaded American commission merchants to reduce commissions on consignments; on Weardale bars Oelrichs & Lurman, Grinnell, Minturn & Company and Thompson, Lapham & Company all charged 5 per cent for selling and del credere, but of that amount the first two returned 11/2 per cent to the Barings and the latter 1 ¡4 per cent. Contrary to their own advice, the Barings twice held wheat and flour in Liverpool for higher prices for account of Durant, Lathrop 6 Company and Fish & Company of New York, to the gain of the Americans in 1849 and their loss in 1850. These were the only examples of holding goods off the market for any period of time. By

406

NEW DEPARTURES, 1848-1852

CH. XIV

October, 1852, there could be no doubt that the partners had sincerely meant what they had told Ward four years earlier — that they just wanted to "go along" and had "no desire to change the system." 30 While "going along" in their generally profitable operations in commodities and exchange, the Barings made some mistakes they knew about and others that they did not admit. They could have reaped large gains on cotton in 1849-50 had they not stayed out of the market, though they had the satisfaction of knowing that the Brown firms committed the same error. While maintaining their opposition to French bills as remittances for three years, the partners underestimated the solidity of the remaining houses in France. They were unnecessarily perturbed at the amount of drafts on McCalmont & Company and George Peabody & Company. They overestimated the difference in price in America between first-class bills and the "usual class of good bills." The margin of difference was narrowing more rapidly than the Barings realized. There was more validity than the Barings would admit to the unwillingness of American operators of exchange accounts to sell and buy bills almost simultaneously, especially in view of the high quality of remittances demanded by the Londoners. By 1849, documentary bills had become "respectable," a development to which the partners gave only a reluctant and grudging acquiescence. Lastly, though they were fully aware of the increasingly weak competitive position of American ships, other than clippers, the partners continued to give every facility possible to three-fourths of the shipowners and captains sailing under the flag of the United States. 31 In this they were deliberately placing their money on what turned out to be a declining industry. WORKING TOWARD A BOOM IN AMERICAN SECURITIES,

1848-1852

In marketing American securities during the years 1848-52 Baring Brothers & Company made no more mistakes than it had in its exchange and commercial credit operations. The house pursued a cautious policy until 1852, when the partners succumbed to the expansive tendencies of American business. Even then, they risked only

CH. XIV

BOOM IN AMERICAN SECURITIES

407

to a relatively small degree their reputation and capital in enterprises of dubious value. Throughout the years 1849-51 the operations of the Barings in American securities could not be characterized as anything but cautious. As of June 12, 1849, only reluctantly did they agree to lend Corcoran & Riggs $200,000 for six months, at 4 per cent interest and commission of Y2 per cent, on the security of Federal government bonds. Later extended by the London house, the loan was liquidated during 1850 by the sale of the collateral. Because their bids were lower than those of the affiliated Brown firms as well as the bids of George Peabody and others, the Barings failed to acquire portions of issues of New York and Virginia in 1849, of Boston, Ohio, and Tennessee in 1850, and of Maryland and Virginia in 1851. Those purchased by Barings were £200,000 of Maryland bonds from the Baltimore & Ohio Railroad Company early in 1849, and several lots, ranging from $50,000 to $500,000 in amount, of Massachusetts and Boston issues in 1850 and 1851. Oelrichs & Lurman, Corcoran & Riggs, Hope & Company, and Blake, Ward & Company took varying shares in these purchases. A few sales of United States, Massachusetts, Virginia, and Maryland securities were made, especially in 1850, for account of King & Sons, the Atlantic Cotton Mills, the Merrimac Manufacturing Company, the Boott Mills, the Merchants Bank of Baltimore, and the Baltimore & Ohio railroad. Similarly, King & Sons and the Barings bought and sold in the New York and London markets United States, New York, Ohio, and Pennsylvania bonds on the joint exchange account.32 As the foregoing record shows, the year 1851 was relatively unimportant for operations by the Barings in American securities. Probably the leading factor was that for various reasons money was less abundant and the market tighter. Prices were high in the United States and shipments of gold to England were profitable. The funds of the Barings were also partly tied up in a Russian loan of £5,500,000 originally brought out in 1850. The contract to facilitate the payment of the indemnity by the United States to Mexico under the treaty of Guadelupe Hidalgo also compelled the partners to keep in reserve sums to meet extensive amounts of drafts. Continental

408

NEW DEPARTURES, 1848-1852

CH. XIV

investors, except during the slight uneasiness in France as Napoleon III switched f r o m a republic to a monarchy, gradually sold their American securities or invested currently available funds in Continental stock and bond issues. B y the beginning of 1851, also, large numbers of British investors began to have more confidence in British railways. T h e prevailing relatively low prices of those securities held out the definite promise of good returns, even though the interest rates on the bonds were low. 3 3 Moreover, the partners took advantage of the rising prices in the United States to act for their clients and for themselves in disposing of a large amount of American bonds. T h e y sent a steady stream of bonds of Indiana, Illinois, N e w Orleans, Louisiana, Maryland, Michigan, Pennsylvania, South Carolina, Ohio, United States, N e w Y o r k City, and Jersey City to Charleston, N e w Y o r k , and N e w Orleans for sale. 34 A l l except the last four types were the residue of investments f r o m the 1830's and i84o's. W h e n fears about the rapidity of American economic expansion in terms of gold production, rising security prices, capital goods, and consumer goods, and misgivings regarding the acceptance of the compromise of 1850 by the South, were added to the list, the Barings evidently had all the reasons they wanted to induce them to avoid all new American loans except that of Boston in 1851. Whatever the cause for their lack of interest in 1 8 5 1 , the Barings reversed the procedure in 1852. Relatively, the house plunged headlong into the marketing of American securities. In addition to selling bonds of the Federal and State governments, the partners finally decided to associate the name of the house with American railroad bond issues. Both general arid specific circumstances turned the Barings to the new departure. Money became cheap and abundant early in the year. Because obligations arising f r o m commercial credits ranged f r o m £200,000 to £300,000 less per month during the last three quarters of 1852 than during the preceding winter, the Barings had funds to lend or to use in security operations. N o new large Continental or British loans were occupying the market. Investors began to demand American securities at a moment when f e w parcels of old State issues were appearing. T h e flow of depreciated securities to the

CH. XIV

BOOM IN AMERICAN SECURITIES

409

United States had dwindled to a trickle by 1852, and some of the undaunted wanted to reinvest in reliable bonds from the same country. Old connections were also important, as in the case of N e w Orleans, with which city the Barings had maintained relations for thirty years and which now issued bonds to bring order into its finances. A f t e r extending their policy of restraint six months into 1852, the Barings acquired extensive holdings of American securities between July ι and November 1. In January, although the bonds were "very tempting," they rejected an interest in a $250,000 Georgia loan. In April the Barings purchased $50,000 of bonds of Ross County, Ohio, issued in favor of the Cincinnati & Marietta Railroad Company. With H o w l a n d & Aspinwall and Corcoran & Riggs, they took in May a $600,000 United States loan issued in favor of Texas under the provisions of the Compromise of 1850. Then, beginning in July, they shared two £200,000 Boston issues with George Peabody & Company, Hope & Company, and Blake, W a r d & Company, divided equally with K i n g & Sons a $2,000,000 N e w Orleans issue, and with Rothschilds, K i n g & Sons and C. H . Fisher, in whose name the whole issue was bought, took a $3,000,000 Pennsylvania loan. T h e largest single lot taken by the Barings was $1,450,000 in the Pennsylvania issue. During the last six months of the year, the London house was even willing to try to sell consignments of N e w Y o r k City and Jersey City securities from K i n g & Sons and Tennessee bonds from Corcoran & Riggs. 3 5 By these and earlier operations Baring Brothers & Company was again indirectly concerned with N e w Y o r k City, Jersey City, and Tennessee bonds and heavily involved in the maintenance of the credit of the Federal government, Massachusetts, Pennsylvania, Boston, and N e w Orleans. A s an indication of the implications of these activities, in December, 1852, the Barings took an additional $50,000 in Pennsylvania and $150,000 in N e w Orleans bonds; they did this merely to maintain a show of interest after the large previous purchases, not because their supply for sale was exhausted. T h e year 1852 was also a turning point for the Barings with regard to American railroad securities. Throughout the 1830's and 1840's the managing partners had consistently refused to associate the name of their firm with either the stocks or the bonds of rail-

410

NEW DEPARTURES, 1848-1852

CH. XIV

roads in the United States. A t the same time, they had marketed bonds of both Maryland and Massachusetts issued to aid the Baltimore & O h i o and the Western Railroads, respectively. D u r i n g the 'forties the firm was also purchasing rails for these and other corporations. W h e n correspondents in the United States urged participation, when other Anglo-American merchant bankers took the lead as did the Rothschilds and the McCalmonts w i t h regard to the Erie and the Reading Railroad Company bonds, w h e n the rail manufacturers had proved willing for more than t w o years to accept bonds in part payment for their product, when at the beginning of 1852 the lack of American State securities caused some European and British investors to request American railway bonds, the Barings finally decided to reverse their attitude. In point of fact, they had prejudiced their o w n position by several previous acts. A beginning of a change was made when the house took shares in various French railway issues, usually in collaboration with Hottinguer & Company of Paris. 36 In November and December, 1849, the Barings arranged to purchase 22,000 tons of rails for the Baltimore & Ohio Railroad Company, using as payment for half of the bill to the ironmasters 6 per cent bonds of the company maturing in 6 to 10 years. T h e company executed a first mortgage on the road to Baring Brothers & Company, and the London firm for a 2 per cent commission guaranteed to investors the payment of principal and interest on the securities. T h e bonds were delivered to the Barings in January, 1850, and in part immediately turned over to the rail manufacturers. 37 Inasmuch as the ironmasters assumed the risk for marketing the bonds handed over, the Barings still adhered to their rule not to market publicly American railway securities. Actually, they had to hold more than half of the issue of 127,700 for their o w n account because the railroad company made the payment, including commissions, to the house entirely in bonds. T h e name of Baring Brothers & Company had not as yet been publicly associated with an American railroad loan. T h e same restraint was followed in the instance of the Panama Railway Company. In September, 1850, to please the Aspinwalls, members of H o w l a n d & Aspinwall and correspondents of long standing, the Barings agreed to join two other Anglo-American merchant

RUSSELL

STURGIS

THOMAS W R E N

WARD

CH. XIV

BOOM IN AMERICAN SECURITIES

411

bankers in investing $25,000 each in shares of the isthmian railroad company. These were held as an investment, but the Barings sold in the United States an additional $37,500 of the securities issued to them as a stock dividend in 1852.38 While making these initial moves the Barings continued to reiterate their policy of refusing to market American railroad securities. In 1849 they denied Josiah Quincy, Jr., permission to draw bills against bonds of the Vermont Central either as collateral or as remittances. Neither these nor the bonds of the Vermont & Canada were acceptable as purchases. In 1850 both the Worcester Railroad Company and the Northern Railroad Company were advised not to expect to be able to sell their bonds in England. Prior to 1852 the Barings also refused to have anything to do with the securities of the Michigan Central, the Hudson River Railroad, the Erie, and the Illinois Central. 39 In writing to correspondents in May, 1850, the Barings stated that they intended to keep clear of all American railroads except the Baltimore & Ohio, which they thought to be the best railroad investment in the United States. The United States was expanding too rapidly, as the Barings viewed the matter, imports would have to be paid for in part by export of securities and gold, the unfortunate experience with bonds of the New York Merchants' Exchange during the 1840*5 made them dubious of American corporation securities, too many investors had been disappointed in British railways, and great labor would be requisite in order to discriminate properly among the deluge of railroad securities.40 Nevertheless, a tentative beginning was made with the Toledo, Norwalk & Cleveland Railroad. In accordance with a preliminary agreement made in March, 1852, Charles L . Boalt, president of the company, contracted with the Barings for 4,000 tons of rails and for a loan of $20,000 upon the security of the bonds of the road. The London firm also took an option upon $350,000 first-mortgage 7 per cent bonds. By October, 1852, the debt of the company to the Barings came to be $143,565, but the option to purchase the bonds was not taken. 41 It was merely the first hesitant gesture toward public marketing of American railroad securities. In considering the Ohio road, the Barings stated their basic policy

412

NEW DEPARTURES, 1848-1852

CH. XIV

as to marketing the new type of bonds. "Before bringing forward this new kind of Bond here," they said, "it is indispensably necessary that the character of the security should be such as we can offer with credit to ourselves & with safety to the public." It was imperative that the house should avoid dealing in any railroad securities that were not good or were not likely to remain good. 42 This was merely a reiteration in a special case of the basic policy of the firm in relation to marketing securities. To carry out this principle of action the Barings consulted both former and new correspondents as well as their agent in the United States. Among old friends and trusted acquaintances whose ideas were sought and evaluated were William Appleton, William Sturgis, John Murray Forbes, Robert Bennett Forbes, D. A . Neal, W . W . Corcoran, W . H. Aspinwall, and W . S. Wetmore. When it was found necessary to acquire specialized advice, the agent of the Barings always turned to W. H. Swift, late of the Topographical Engineers of the United States Army. Swift became president of the Wilmington, Philadelphia & Baltimore Railroad Company in 1847, from which he departed to become the head of the Western Railroad Corporation of Massachusetts in 1850. He had been for some time the most valued trustee of the interests of the foreign bondholders in the Illinois and Michigan Canal. He was asked for information about every railroad which approached the Barings for a loan until the autumn of 1852, at which time they retained him as their special adviser on railroad matters.43 In Pennsylvania, acting upon the strong recommendations of Daniel Lord, Jr. (their attorney in New York), Forbes, and Swift, in July, 1852, the Barings formed a working alliance with C. H . Fisher. Ward, the Boston agent of the Barings, thought this man "an important acquisition, and it is fortunate that a man holding his position in Pennsylvania where things are so much managed by low people is a person of entire integrity as well as ability." Fisher became so important in connection with acquiring information about and participation in Pennsylvania State and railroad securities that the Barings by July 1, 1853, were willing to advance him funds to the extent of ¿50,000 at 4 per cent upon the security of Pennsylvania Railroad bonds.44

CH. XIV

BOOM IN AMERICAN SECURITIES

413

Acting upon the advice of these and other "judicious friends," the Barings plunged into the railroad bond melee. On July 22 they purchased $500,000 ten-year 5 per cent convertible bonds of the Eastern Railroad Company of Massachusetts and followed that acquisition with an additional $150,000 in August. T h e remaining $100,000 of the issue was retained in the United States for investment by William Sturgis and other N e w England capitalists. T h o u g h as late as September 3 the partners wrote that they would not offer the Eastern Railroad bonds "until we have settled the question whether generally we will connect our name publicly with American Railway Bonds," by October 15, 1852, they reported the sale of the first $500,000 at a 5 per cent gain. 45 While Thomas Baring was in the United States in September, he arranged for his house to take a share in the $3,000,000 Pennsylvania Railroad Company issue of 30-year, 6 per cent, first-mortgage bonds. C. H . Fisher bid for the entire issue and was allocated $1,300,000, the Barings getting $900,000. Of this K i n g & Sons took one fifth. T h e purchase price was 103.20. Inasmuch as the Rothschilds purchased the same amount as the Barings, the two firms agreed in London upon 98 (premium on sterling in N e w Y o r k being 6 to 7 per cent) as a minimum price for $900,000 of the bonds received by them. They had no competitors in England; the only other foreign purchases ($500,000) had been made for account of Swiss investors by Mauran & Iselin of N e w Y o r k . After their first large sale under the agreement with Rothschilds, the Barings sold smaller lots at par or slightly above, while Fisher disposed of some in the United States at 109. 46 T h e Barings acquired no more American railroad securities during 1852. In fact, though not all refusals were final, during the year they turned down or postponed decision upon Cornelius Vanderbilt's Nicaraguan Canal and a Cuban railroad, as well as upon the N e w Y o r k & Erie, Michigan Central, Mobile & Ohio, Montgomery & West Point (Alabama), Central Military Tract (Illinois), Aurora (Illinois), Illinois Central, and Northwestern Virginia railroad is47 sues. A variety of reasons were put forward for their decisions. Reliance upon Swift's advice led the Barings to prefer east-west trunk lines

414

NEW DEPARTURES, 1848-1852

CH. XIV

to north-south lines, such as the Illinois Central. In the case of the latter, moreover, neither the Wards, nor Swift, nor any unofficial advisers of the Barings trusted Robert Schuyler, whom Ward regarded as an "unfit man to have any authority in the matter." Though the Barings trusted D. A . Neal, he was not in control. W. H. Aspinwall withdrew his support because he lacked faith in the Illinois legislature. W. S. Wetmore stayed out because he had lost money in western lands and thought investors in Illinois Central bonds might have the same experience. A t this time the managing partners preferred roads which were assured of traffic and were not built in advance of settlement. For that reason Swift thought that the Illinois Central should sell some of the land granted to it before construction had proceeded very far, in order that some freight traffic would be certain when the road began operations. Moreover, a large amount of the funds of the Barings at the moment were tied up in American governmental and railway securities which were more to the liking of the partners. Probably most important, with reference to the last four railroads mentioned, was the fact that their overtures were made in the last four months of 1852 when the Barings had decided to curtail drastically their operations in American securities. Various factors gave the Barings pause during the last quarter of 1852. For one thing, the house had allocated a larger proportion of its capital than previously to operations in Canadian debentures. That situation originated with the fact that Baring Brothers & Company shared with Glyn, Mills, Hallifax & Company the London agency of Upper Canada, though the partners were not aware of their status until late in 1848. Then they immediately agreed to share equally in advancing 40,000 to the province for payment of interest in London on January 1, 1849. Later in the year the two London houses had contracted to sell on commission /500,000 in debentures for account of the province. Within fifteen months after the completion of that operation, the Barings and Glyn, Mills had been approached to sell more debentures of the province. Issued under the authority of acts passed in 1849 and 1851, ^100,000 in debentures of Upper Canada were purchased by the co-agents in August, 1851, and .£367,500 sold later, all for account of the St. Lawrence &

CH. XIV

BOOM IN AMERICAN SECURITIES

415

Atlantic Railway. In the last quarter of 1852 the London houses were jointly marketing ,£200,000 Upper Canada debentures issued in favor of the Great Western Railway and had agreed to sell ¿275,000 for account of the Ontario, Simcoe & Huron. Fortunately, Montreal bonds brought forward to the extent of ¿30,000 in 1849 and ¿80,000 of Quebec bonds purchased by the Barings in January, 1852, no longer hung over the market. A small amount of a ¿50,000 New Brunswick issue in favor of the St. Andrews & Quebec Railroad Company was serving as collateral for a ¿20,000 loan by the house.48 Baring Brothers & Company had also entered more heavily into European and Latin American securities during the years 1848-52. The activities of the house in these categories of securities paralleled those in American bonds. In 1850-51 the Barings marketed a ¿ 5 , 500,000 loan for the Russian government, but they refused to participate in Bavarian and Prussian loans in 1850, in issues by Sardinia and the order of St. Johns of Jerusalem the next year, and in a proposed Turkish loan in 1852. In the latter year, however, the London firm through Hottinguer & Company took part in a loan to Paris, and entered actively into marketing shares of Swiss and French railways, especially the Lyons, which was chartered by Louis Napoleon immediately after his December coup d'etat in 1851. A partner of the house, Francis Baring, was on the board of directors, a testimony to the result of the long friendship of Bates with the ruler of France and to the extended service of the firm as his banker prior to 1848. The holdings of Baring Brothers & Company in these railway shares were extensive during the last quarter of 1852, not all of an Austrian loan recently taken jointly with Hope & Company had yet been disposed of, and the partners were still selling their half of a ¿1,000,000 Brazilian loan acquired during the summer.49 In the meantime other funds of the house had been involved more extensively than in earlier years in connection with commercial accounts for governments, firms, and individuals outside the United States. A few examples will suffice. Exclusive of tobacco purchased on French and Italian account, the Barings extended a revolving credit of '¿60,000 to the Austrian government for the same purpose.

416

NEW DEPARTURES, 1848-1852

CH. XIV

T h e firm received consignments from all the leading commission merchants on the Continent and engaged in joint operations with many of them. Its list of British and Continental clients, which included Jenny Lind, steadily expanded. In return for an advance of ιοο,οοο through the agency of Henry O'Shea & Company of Madrid, the Barings had a contract to market all the quicksilver of Spain, some of which was sold through their correspondents in Mexico. In 1849 the financial agency of that nation was refused. T h e business of the house with the St. Petersburg firm of Winans, Harrison & Winans, which had contracts to supply all the machinery for the St. Petersburg to Moscow railway, was growing rapidly. A d vances to Russell & Company, Heard & Company, and others upon shipments from China were so extensive that Ward and J. M . Forbes urged the Barings to limit them as a protection to the firms involved. Sums utilized in advances upon indigo from Calcutta and upon sugar from Ceylon were increasing yearly. T h e wholesale collapse of firms in those trades threw a greater burden upon the Barings and at the same time offered much opportunity for profit. T h a t they felt impelled to manage some mortgaged estates in order to recover debts in Ceylon was not considered a blessing, however. 5 0 Even with these larger involvements on behalf of business men in other parts of the world, the general situation in which the Barings found themselves in the autumn of 1852 did not demand in their estimation a contraction in all of their American business. T h e house had considerable amounts of Austrian, Boston, Brazilian, Canadian, N e w Orleans, Pennsylvania State, Pennsylvania Railroad, and Eastern Railroad bonds to sell, not all of which were moving so rapidly as hoped. American railroad securities, many in the hands of stock jobbers, were pouring into the London market in a manner reminiscent of the flood of State securities in 1836. T h e volume was so large that the partners found difficulty in distinguishing desirable from undesirable issues, though they were sure that the higher interest paid on the latter category caused some investors to turn away from the reliable securities which the House of Baring had for sale. Prices of securities in the United States were high and rising, and in France had "reached an alarming height." Inasmuch as demand for money from "all quarters" was increasing in England, the Barings

CH. XIV

BOOM IN AMERICAN SECURITIES

417

feared that a crisis might soon develop there. On the other hand, money in London was earning only i l / 2 per cent per annum on call and i % to 2 per cent on discounts. Current obligations of Baring Brothers & Company under commercial credits to Americans still continued well below those of the preceding winter. Those two major considerations counterbalanced an almost 75 per cent increase in the price of railroad iron since the preceding February, high freights, "very unlucky" sales of floating cargoes as a result of rapid rise in invoice costs, higher prices for most American exports, and a willingness on the part of competitors of the Barings to advance the full cost on tobacco, flour, wheat, and cotton. "With this sort of competition," wrote Ward at the end of September, "there seems to be no room to do anything for you." Under these circumstances the partners curtailed operations in securities but made no change in the granting of credits for marketing merchandise. In October, King & Sons was ordered to take no bonds for joint account except on specific orders from the Barings. Ward was permitted to take only small, token amounts in American securities in which his principals desired to show a sustained, intimate concern. Holdings of Canadian, Brazilian, American, and European bonds and shares were sold as quickly as the market would absorb them at remunerative prices. Loans for the Odessa Railway, for improving the Paris waterworks, for Spain, and for Turkey received the same negative treatment as those for most American railroads. At the same time, the volume of outstanding credits to American merchants continued to rise and orders for consignments of American produce remained operative, though the limits of the Barings were kept so much below those of competitors that the partners had no expectation of large amounts to sell. 51 In spite of some errors in judgment during the preceding four years, the partners had no reason to disagree with a contemporary statement that the House of Baring might "be considered the most important mercantile establishment in the Empire." 5 2 While expanding their activities in other parts of the world, the Barings had doubled their operations in financing foreign commerce for account of American business men. As those credits of the firm expanded, the partners also increased operations on account of the house itself,

418

NEW DEPARTURES, 1848-1852

CH. XIV

especially in American exports and exchange. After publicly reasserting, through the marketing of the 1848 loan, the faith of Baring Brothers & Company in American honor and credit, the house participated in a steady sale of American securities in Europe. By 1852 it had even departed from its long-established rule not to sell American railroad securities. The Barings had sold their share of the estimated $220,000,000 American securities held abroad by the end of 1852. In carrying on this increased activity the partners had again followed a middle course, perhaps one slightly left of center. N o large American loans were taken by the house alone, only once (1849) did it borrow money, and it never discounted its bills receivable. Real estate in New Orleans and the West Indies held against bad debts dating from 1839 and earlier was disposed of slowly, and deviations from former techniques in general were few. By reducing some commissions, especially in exchange operations, adjustments were made to competitive demand. When circumstances seemed to dictate it, especially in the case of the obligations of the firm in marketing securities, curtailment was ordered in the last quarter of 1852.

CHAPTER

XV

NO BOOM FOR T H E BARINGS, 1852-1857 I N SOME respects Baring Brothers & Company reached the psychological peak of its American business in 1852. Thereafter, though the volume of its credit operations attained new heights, the firm pursued a policy of cautious restraint similar to that followed between 1832 and 1836. When requested to facilitate much of the feverish expansion in economic enterprise going on in the United States, the partners refused to lend the name of their house to all but a selected few. Operations in cotton and exchange were kept within very conservative limits. Increasing competition, chiefly from Peabody & Company, forced the Barings to reduce some commission charges, but the fundamental "rules" of the house were continued unchanged. As expansion of their American business slowed down, the Barings increased the volume of their operations for account of merchants, corporations, and governments in other parts of the world. Number 8, Bishopsgate "goes right and is not carried away by the excitement of the times," Bates wrote to T. W. Ward in 1855.1 That remark was an outgrowth of one of the main reasons for the caution of the Barings during the years 1852-57: the partners time and again expressed fears of a "revulsion" in the United States. Excessive expansion of railroad construction, heavy imports from all parts of the world, and an almost continuously high cost of money indicated to the Barings that American dreams were outrunning even the developments made possible by California gold. NEW FACES IN THE MANAGEMENT

Both Joshua Bates and Thomas Baring were now sloughing off responsibility rather than assuming new duties in the firm. Illness interrupted their labors more than in their youth. Baring fought a long bout with rheumatism in 1852, and Bates had protracted sick

420

NO BOOM FOR BARINGS, 1852-1857

CH. XV

spells in 1854 and 1856. Both men had been in business harness for several decades. Their familiarity with procedures and wide knowledge of the business world enabled them to carry more than their share of the labors in the countinghouse and to assume the responsibility for a major share of the decisions. But Bates was over sixty years of age, Baring more than fifty. They liked to spend more time in travel than in earlier years and they indulged themselves more in their avocations — Bates in his country estate-at Sheen and Baring in collecting paintings. Both men also had outside obligations, though those of the Englishman were infinitely the greater. Bates was a director of only a few concerns, including the London Dock Company. One of his most time-consuming tasks during these years was that of umpire in 1854 for controversies arising in the Anglo-American Claims Commission established under the convention of 1853. Besides serving in Parliament, as chairman of Lloyd's, and on more than a dozen boards of directors, Baring was importuned for advice on finance by entrepreneurs in Australia, Canada, and India, on the Continent, in the United Kingdom, and in the United States. David A . Neal of the Illinois Central considered it odd that in the greatest city in the world "there should be only one man to look to and consult, and to guide action in important" financial matters. "Ask about anything and the reply is, 'What does Mr. Thomas Baring say, or think?'" the American reported.2 Perhaps that situation accounts for Lord Derby's asking him to be Chancellor of the Exchequer and for Baring's refusal to serve in that exalted capacity. Adjustment to the changing responsibilities of the two managing partners as well as to the more voluminous correspondence was made with seeming ease. Clerks and young men in training prepared most of the letters for approval and signature. The hand of the master organizer, Bates, now rested lightly upon the everyday functioning of the countinghouse. Sir Francis Baring was consulted only on Continental commitments, though those were growing in volume. Young and Sturgis assumed more responsibility for routine correspondence and joined Bates and Baring in decisions on policy. T o infuse new blood and to divide the duties of management

CH. XV

NEW FACES IN MANAGEMENT

421

younger men were brought into the organization. Edward Charles Baring and Henry Bingham Mildmay were admitted as partners in the London house in January, 1856. T o the councils of the firm they gave youth, energy, and ambition as well as the fruits of recent extensive travel and several years of training in subordinate capacities. In 1854 Henry Bellamy Webb replaced E. C. Baring in the Liverpool affiliate. For a compensation of 1,000 per year Webb agreed to devote his time and talents to the business of Baring Brothers & Company and not to transact any business on his own account or for others.3 The transition to a younger man as resident agent in the United States was equally smooth. On February 22, 1853, Samuel Gray Ward began to sign his own name instead of " T . W . Ward, per S. G. Ward," as he had done for more than three years. Still seeking a formula to recognize fully the services of Franklin H . Story, who had worked in the Boston office since 1830, the Barings had proposed that he become the agent in Boston at a salary of $7,000 per year and that young Ward should be the agent in New York at $12,000 annual salary. Primacy and chief responsibility was to rest with the younger man in New York. Recalling that he had been offered a joint agency with William Gray in 1849, Story refused to accept anything less than equality in 1853. He resigned from the agency of the Barings to accept the treasurerships of the Perkins and Dwight Mills and of the Ames Machine Shops, taking with him a parting gift of $10,000 from the house he had served so long. The idea of making New York the center of operations was then abandoned. S. G. Ward was named sole agent at a salary of ^3,000 per year, and W. A . Wellman from the Boston customs office was engaged as his assistant and office manager.4 In some respects the eldest son of T . W . Ward was a better representative of the Barings than his father. He collected and collated more effectively than had Thomas Wren information on trade, finance, and legislative changes.6 He made fewer comments on politics but kept his principals fully supplied with American newspapers and periodicals. He successfully continued the evaluation of the capital and integrity of clients, enabling the Barings to maintain

422

NO BOOM FOR BARINGS, 1852-1857

CH. XV

their private credit-rating system. He acquired a goodly number of young, able, and reliable clients for his principals. Being more affable than his father, Samuel Gray proved more agreeable to a wider range of business men than Thomas Wren had been. The new representative was especially effective in negotiations with governmental agencies and in evaluating projects for investment, though he was effective in every field. T o Samuel Gray Ward's credit, also, is the fact that at this time he vainly urged the desirability of establishing the principal American office of Baring Brothers & Company in New York. In 1852 his willingness to give Story almost complete autonomy in the Boston office was predicated upon the recognition of the leadership of New York in the American business world. When Story refused to serve in a subordinate capacity, the Barings decided to keep the old system intact. Soon after becoming agent Ward pointed out that the correspondents of the Barings in New York had remained unchanged for several years in the face of increasingly sharp competition from Brown Brothers & Company and Duncan, Sherman & Company. He then suggested the establishment of a sub-agency in New York, but his principals vetoed the idea. They also entered a refusal when Ward recommended that a new house — Ward, Campbell & Company — should be authorized to issue credits in New York. 6 In fact, the Barings were content to stand pat as far as their key connections in the United States were concerned. Until young Ward became as familiar as his father had been with the behavior of the commodity markets, Forstall and Gracie in New Orleans and Mobile as well as reliable commission houses in Atlantic coast ports were essential to safety and a steady flow of business. Ward could think of no more astute adviser on securities in Pennsylvania than C. H . Fisher, and the Barings consulted Swift on Russian and Canadian railways as well as American. 7 The house of the Kings in New York was still sound, though its regular reports on American securities were often very brief. With the exception of the need of a trustworthy firm for exchange operations in Boston, the Barings desired no other key connections in the United States. The old were good enough.

CH. XV

REDUCTION OF AMERICAN SECURITIES

423

MOVING A W A Y FROM AMERICAN SECURITIES

American securities were brought to the attention of the Barings in almost overwhelming numbers. T h e partners had to consider bond issues of Massachusetts, Missouri, Kentucky, Tennessee, Virginia, Louisiana, Indiana, Illinois, Maryland, North Carolina, South Carolina, Pennsylvania, Ohio, and N e w York. Largely to raise money to aid railroads, the bonds of N e w York, Brooklyn, Albany, Boston, Providence, Hartford, Baltimore, Philadelphia, Savannah, Mobile, N e w Orleans, Louisville, Cincinnati, St. Louis, Chicago, and lesser cities were laid before them either for investment or for marketing. Practically every railroad of any size or importance in the United States and Canada appeared in the correspondence of the House of Baring as a subject of potential investment and aid. In addition, financial assistance was requested by the China Mutual Insurance Company, the Atlantic Cable Company, the Sault St. Marie Canal Company, the Delaware & Hudson Canal Company, the N e w Y o r k Crystal Palace Exhibition, the Panama Railroad Company, the Jucaro Railroad Company in Cuba, and the Tehuantepec Railroad Company, not to mention various railways and governments in Europe. Acting upon their own convictions and the advice of their American agents, the Barings in July, 1853, set their policy with regard to American securities. Ward was not to contract for any more shares or bonds in the United States except where the continuance of former connections dictated taking portions of an issue or where engaging to take such portions would help to maintain the value of securities already held by Baring Brothers & Company. 8 That policy, which was closely adhered to for the next five years, was merely an extension of that which led the house to take 1150,000 N e w Orleans and $50,000 Pennsylvania bonds in December, 1852. Purchases of bonds of Boston and of the Panama Railroad Company in 1853 and 1855, respectively, fitted into the policy almost exactly. In May, 1853, the Barings took three-fifths of a purchase of Boston 4'/i per cent bonds at par. T h e amount was ,£120,000. T h e other participants were Peabody & Company and Blake, Ward & Company, then in process of liquidation. Profit on the venture was

424

NO BOOM FOR BARINGS, 1852-1857

CH. XV

small, and Baring Brothers & Company showed no interest in later Boston loans.9 As a stockholder Baring Brothers & Company had a strong interest in aiding the Panama Railroad Company. In order that the construction of the line might be completed, late in 1854 the London house agreed to advance £40,000 to the company at 5 per cent interest. Early in 1855 the advance was paid by a sale to the Barings of £45,000 first-mortgage, 5-year, 7 per cent bonds of the company at 90. The entire issue was for £450,000, of which the Barings later stated that they had purchased "upwards of £280,000." In spite of some dissatisfaction with the management, the London house held on to its investment in the securities of the Panama Railroad Company through the 1850's. When the corporation issued another £225,000 in second-mortgage bonds in 1857, the partners declined to participate in marketing the loan; they had assured buyers that the 1854 issue "would cover all the cost of construction and perfect equipment" of the railroad; and they objected to the company's paying shareholders 12 per cent dividends while making no provision for building up a reserve fund to meet the earlier loan when it matured. The Barings had sold some of the stock dividends as high as 130 but held on to all the bonds because the 7 per cent interest was higher than the usual rate in the London market. Moreover, the partners held W . H . Aspinwall in high regard. The railroad company had a monopoly of transisthmian traffic for some time to come, the plans of Cornelius Vanderbilt for transit across Nicaragua had been abandoned, and the projected railroad across Honduras could not possibly be completed in less than eight years. 10 Motivation of the Barings in purchasing one third of a £600,000 Virginia sterling loan in 1853 was more indirect than in the case of the Boston and of the Panama Railroad bonds. Small amounts of bonds of that State had been sold by the London house in the past, but the fact that it was a slave State and that it had recently rapidly increased its debt through aiding railroads and other public works rather militated against the reputation of its securities. Nevertheless, Baring Brothers & Company hoped to acquire contracts for purchasing rails and was promised the exclusive control of the sterling bonds in Europe. Hence, on November 15, 1853, the partners signed a

CH. X V

REDUCTION OF AMERICAN SECURITIES

425

contract with L . P. Bayne of Seiden, Withers & Company, Washington, D. C., to purchase ¿200,000 Virginia, 35-year, 5 per cent sterling bonds at 90, with an option till the following April to take the remaining ¿400,000 of the loan at the same price. The Barings expected to be able to sell relatively few of the bonds except to special friends as an investment. The difficulties experienced far exceeded the expectations of the partners. After an initial disposition of ¿70,000 of the bonds, sales proceeded slowly even at 85V2· By 1855 the Barings were reconciled to retaining a considerable number of the bonds on their own account. As early as the spring of 1854 they had learned that Bayne had no authority to restrict sales of Virginia bonds in London to Baring Brothers & Company, that the stipulation in the contract for all interest payments payable at 8, Bishopsgate, to be in hand one month before due was contrary to Virginia law, and that Seiden, Withers & Company could agree to no contract connecting the purchase of the remaining ¿400,000 in bonds with the purchase of rails for Virginia railroads. Moreover, though the "actual debt" of Virginia was only $10,500,000, a further amount in "contingent liabilities" had been brought to the attention of the Barings. They did not take up the option on the remainder of the loan. Later events discouraged the partners still further about their relations with the Old Dominion. Seiden, Withers & Company went down in the stringency of 1854. Within six months the Virginia Board of Public Works had appointed the Bank of Commerce, soon supplanting it with the Bank of the Republic, as that State's financial agent in America. When the Barings learned in March, 1855, that they had been appointed the agents of the State in London, they also were apprised that the Board of Public Works had limited sales of Virginia bonds at a figure above the prevailing price in England, and that the bonds could not be delivered because they were deposited as security for a loan made by the Bank of the Republic to the board. Small wonder, indeed, that the London house declined to permit drafts in advance of sale, refused to make any further purchases, and sold no Virginia bonds. In August, 1857, the only tempering of the unfortunate experience of the Barings with Virginia was that during the preceding two years the Virginia Cen-

426

NO BOOM FOR BARINGS, 1852-1857

CH. XV

trai Railroad had bought or contracted for almost 5,000 tons of rails. 11 Both favorable and unfavorable results attended the ventures of the Barings arising from their confidence in John Murray Forbes. At his specific request in 1853, the London house entered its name for $25,000 in a subscription to the China Mutual Insurance Company, a New York enterprise organized at the behest of those shipping to and from China. Subscribers included Russell & Company and "nearly all" the American correspondents of the Barings in the "East Indian business." The partners disliked some features of the arrangements of the company and severed their connection with it in a few years. They regarded the total subscription of $218,000 as too small and were shocked to find that American subscribers merely gave notes — no cash — in exchange for a receipt. N o money had to be paid in unless losses exceeded premiums, and there was no reserve fund. Although Baring Brothers & Company was made the London agent of the company, the partners decided to withdraw their affiliation in January, 1857, having gained little and lost nothing. 12 Though prior to 1855 the Barings had refused to do anything more than accept bonds of Forbes' roads (Michigan Central, Central Military Tract, Chicago & Aurora, and Joliet & Northern Indiana) as collateral for debts contracted in purchasing rails, they finally joined a group of his friends in buying $450,000 of a $600,000 issue of Michigan Central bonds. The portion of the London house was only $80,000, largely in sterling bonds. All were taken at 89 and soon sold at 100, plus interest. The demand for American securities had temporarily revived in England in 1855. After that successful operation, the Barings had no qualms about purchasing more rails and making occasional investments for themselves and clients in Michigan Central and Joliet & Northern Indiana securities for resale in the United States. 13 In fact, the Barings themselves soon "locked up" a quarter of a million dollars in order to support Forbes in one of his first steps across the Mississippi River. Their respect for him and numerous other subscribers led the partners to invest at 75 in $250,000 of 7 per cent, first-mortgage, 25-year bonds of the Hannibal & St. Joseph

CH. X V

REDUCTION OF AMERICAN SECURITIES

427

Railroad Company early in 1856. The Barings were quite aware that the population of Missouri was almost wholly made up of relatively poor people from slave States, that civil war had been raging in neighboring Kansas, that the lands granted to the railroad would probably not be disposed of for several years, and that the sale of the bonds would proceed slowly, if at all, even in the United States. On the other hand, the investment was strongly recommended by Swift and Ward, in whose judgment the Barings expressed the "greatest confidence." They still willingly held the bonds when the crisis developed in the fall of 1857. 14 Investment in Forbes' projects ended the ventures of Baring Brothers & Company in the marketing of new issues of American securities prior to the panic of 1857. All others were avoided or refused. Not even the Baltimore & Ohio Railroad Company, formerly the darling of the Barings among American railroads, was accorded assistance. The reasons for that attitude toward the Baltimore & Ohio were numerous and complex. Part of the road had been poorly constructed in the rush to open it to the Ohio River in January, 1853. Double trackage to Cumberland and repairs in other places were planned at once. The company increased its financial obligations by a loan and by a guarantee of the bonds of the Northwestern Virginia Railroad Company in the winter of 1852-53. Nathan Hale investigated the latter project and reported a fear that it would not be profitable because the rates for carrying coal had been set too low. Baltimore's guarantee of $1,500,000 of the Northwestern Virginia company bonds, and the beginning of a $5,000,000 loan in aid of the Baltimore & Ohio in 1853, seemed an injudicious extension of the obligations of the city and undue encouragement to financial excess by the railroad. The change from Thomas Swann to W . G . Harrison as president and the entrusting of the marketing of the bonds for account of the railroad to Garrett & Company, which the Barings thought expansive and speculative, tended to discourage interest on the part of the London house in its old railroad friend. Oelrichs & Lurman, Swift, and Ward also feared that the Baltimore & Ohio was embarking upon a ruinous competition with the Pennsylvania road west of the Ohio River. Under these circumstances

428

NO BOOM FOR BARINGS, 1852-1857

CH. XV

the Barings had no hesitancy in permitting the marketing of the various securities as well as the purchase of rails in 1853 and later years to go to competitors. 16 Although the Barings engaged in relatively few public offerings of new American loans, they contributed in small amounts to the flow of British capital to the United States in these years. Orders by clients for purchases of Pennsylvania, Virginia, Baltimore, Philadelphia, Boston, and N e w Y o r k City as well as N e w Y o r k Central, Boston & Worcester, and Western Railroad Company bonds were executed by the London house, often through K i n g & Sons and Ward, Campbell & Company in N e w York. In addition, the Barings upon occasion bought American securities for quick resale in the United States upon their own account. A small investment in N e w Y o r k Central Railroad Company shares through Ward, Campbell & Company having proved profitable early in 1854, the Barings decided in July to take advantage of the low prices of American railroad securities after the stringency of the summer. Acting secretly in the name of the same N e w Y o r k house, the partners invested ^50,000 in shares and bonds of the Reading, N e w York Central, Pennsylvania, Toledo, Norwalk & Cleveland, Michigan Central, and Joliet & Northern Indiana railroads. T h e lot of 1,500 shares of the Reading was sold within a month because the stock was being jobbed. A l l the purchases were sold at substantial gains, largely by August, 1855, though the last of the acquisitions upon that "investment account" were not disposed of until February, 1857. T h e only other speculation of that type by the Barings was an investment of $37,000 in a joint operation with Nathaniel Thayer in bonds and shares of the N e w York Central in 1855.16 Several observations regarding the foregoing developments can be made. In the first place, Baring Brothers & Company publicly marketed the bonds of only those railroads in the managers of which the partners personally felt great confidence. Secondly, the number of railroads thus aided was small — Eastern, Pennsylvania, Michigan Central, Panama, and N e w Y o r k Central for the most part. Thirdly, the volume of British capital invested through the Barings directly in railroad securities represented a relatively small proportion

CH. XV

REDUCTION OF AMERICAN SECURITIES

429

of the total "foreign railroad loan," estimated by Ward at $70,000,000 in November, 1853. 17 Fourthly, the Barings had shifted their support from the Baltimore & Ohio and Pennsylvania railroads to the New York Central and the Michigan Central, thus lending aid to an east-west trunk line from the Atlantic coast to the upper Mississippi valley. Friendship for and confidence in correspondents of many years' standing — John Murray Forbes and Erastus Corning, the latter the creator of the New York Central — were important, though not the only, factors in that shift of allegiance. What accounted for the relatively restrained activity of Baring Brothers & Company in American securities between 1852 and the autumn of 1857? The explanation lay partly in conditions unique to Baring Brothers & Company and partly in the situation obtaining in the N e w York and London money markets. In the first category was the difficulty experienced in selling some of the bonds purchased in 1852. Though the Eastern Railroad and Boston issues were quickly vended, that of the Pennsylvania Railroad Company was not sold until 1856. The account of the 1852 Pennsylvania State loan was closed in February, 1857, only by the Barings' taking as an investment for themselves some $64,000 from their co-purchasers. The New Orleans bonds went more slowly still; in spite of recourse to the Dutch and American markets, many were yet unsold in the fall of 1857. The latter had absorbed considerable quantities of the Pennsylvania State and Pennsylvania Railroad loans, as well as the bonds of the Toledo, Norwalk & Cleveland held for two years as collateral for the debt incurred in 1852. Complicating the situation of the Barings was the fact that they had advanced the funds for the purchase by King's Sons and Fisher of the Pennsylvania Railroad, Pennsylvania State, and N e w Orleans bonds. Counting that outlay with their own investment in the three loans, the partners considered in December, 1854, that the house had ,£720,000 "locked up" in them. Not until February, 1857, did Fisher and King's Sons cover their Pennsylvania State accounts. King's Sons owed ,£31,595 on N e w Orleans bonds, and James Robb, who had taken part of the New Orleans issue from King's Sons, still owed to the Barings / 1 7 , 2 1 ο , exclusive of the interest, in November, 1857. That he was paying 7 per cent interest for the ad-

430

NO BOOM FOR BARINGS, 1852-1857

CH. XV

vanee gave little satisfaction to the partners, who preferred to have their money in liquid investments and much time would have to elapse before that interest account would make up the losses on the three loans. 18 A variety of factors contributed to the restraint of the Barings with regard to American railroads. Both Swift and Ward, who were the chief advisers of the London house on railroads, distrusted the morality of the managers of several projects. Both considered eastwest trunk lines the best investments and also usually recommended lines near the Atlantic coast in settled areas more highly than southern or midwestern roads. Both advisers emphasized the probable slowness in achieving sound operation by the lines to be constructed in part by the sale of public lands granted to them. Hence, with the exception of the Hannibal & St. Joseph, the Barings placed their confidence in trunk lines and, after their experience with the Pennsylvania, kept at a low figure the amount allocated to any one road. The partners also found that they could acquire contracts for purchasing a substantial volume of railroad iron without being forced to take many of the bonds of the companies concerned. Tens of thousands of tons of rails were purchased for several southern lines through Padelford, Fay & Company, and for the Western Railroad Corporation, Virginia Central, Michigan Central, N e w York Central, and other lines. During a period of 12 months in 1853-54, Erastus Corning & Company utilized credits totaling ^100,000 in purchasing rails through the Barings for the New York Central alone. And in addition to the commission of 2V2 per c e n t normally charged for purchasing the iron and accepting the drafts arising therefrom, interest at 6 per cent or 7 per cent often accrued on postponed debts.19 Several conditions in the American securities market caused the Barings and other merchant bankers to turn away from the United States after the autumn of 1853. They could no longer control prices. It was no unconsidered accident that Leonard W . Jerome, the grandfather of England's beloved Winston Churchill, in January, 1856, at 22 William Street, New York, began "to devote his undivided attention to the purchase and sale of all classes of stock securities" on commission. Partly as a consequence of the closing of the foreign

CH. XV

REDUCTION OF AMERICAN SECURITIES

431

market during the 1840's and partly as a result of the development of New York as the financial center of the United States, quotations in that city tended to set prices of American securities during the 1850's. That situation was particularly true of the prices of corporate shares, which seldom went abroad in any quantity; foreign investors and intermediaries through habit had in the past largely confined themselves to governmental bonds and not until the 1850's were they willing to risk any considerable amount of their funds in American corporate bonds. Though a respectable percentage of corporate bonds went to England, prices were largely set in New York. A n d the market value of the bonds roughly paralleled the downward movement of the quotations for shares after the fall of 1853. 20 Most American railroad bonds were not even within hailing distance of par for the remainder of the 1850's. Hence, the Barings, who prided themselves on helping to maintain the credit of the institutions for which they marketed securities, were forced to look elsewhere for bonds which they could sell at par or above. Not even the marked difference between the value of money in New York and London from the spring of 1853 to the fall of 1857 caused British capital to flow to the United States in a quantity comparable to the movement in the middle 1830's. While discount rates in the New York market reached as high as 18 per cent per annum, and held at 10 to 12 per cent for extended periods, money seldom brought as much as 7 per cent in the London discount market. Even at that, money commanded a much higher price in London during the years 1853-57 than it had in 1852; after June, 1853, the discount rate of the Bank of England was never below 3% per cent and ranged from 4% to 6l/2 per cent much of the time; and market rate was usually % t o Vi P e r c e n t lower than Bank rate. The demands of world trade for credit, silver, and gold, upon which were piled the extraordinary calls arising from the Crimean War, kept the rate high and imposed a severe strain upon both the Bank of France and the Bank of England. In that general situation lay the explanation for the refusal of investors to put their money into American bonds. As a class, British investors were conservative. They wanted a safe income. They were satisfied to take a lower return than they might achieve in American railroads if they had a

432

NO BOOM FOR BARINGS, 1852-1857

CH. XV

safe investment. The Barings themselves saw no reason to risk money for a promised 10 per cent gain in America when they could lend their funds in the London market at 6 to 7 per cent, as they occasionally did. 21 At the same time, the London house was able to meet the preferences of their clientele by combining apparently reliable investments with loyalty to the Empire. T o the Province of Canada, which issued debentures for its own needs and a variety of ambitious improvement projects, Baring Brothers & Company devoted a very large proportion of its energy, time, and capital during the years under review. In this connection the partners indulged their own preference for marketing governmental bonds rather than corporate securities and for associating their name with bonds selling at par or above. Activities of Glyn, Mills, Hallifax & Company and Baring Brothers & Company for account of the Province of Canada increased markedly during the years 1853-57. the first year the agents of the Province invested ,£260,000 in 3 per cent British Consols, and on April 1, 1854, paid off £200,000 Upper Canada debentures. T o raise funds to redeem ,£400,000 bonds maturing on July 1, 1855, the Barings and Glyn, Mills sold a ,£200,000 new 6 per cent issue at 110 and borrowed ,£180,000 for a short time from Lawrence, Son & Pearce on collateral of ,£206,000 British Consols. T o meet other redemptions and current interest payments, the agents sold at 1 1 2 to 1 1 5 on commission 6 per cent debentures to the extent of ¿60,000 in the autumn of 1855, ,£150,000 in 1856, and ,£146,000 early in 1857. Just before the August crisis of that year in the United States the Barings received from the Province another ,£200,000 of debentures for sale. These were securities issued under acts of the Province for pooling the credit of municipalities in order to aid railways and similar projects. When the agents also received notice in August that they were soon to receive another ,£400,000 of the Municipal Loan Fund debentures, they began to doubt their ability to maintain the quotations for the securities of the Province above par, an ambition which had been realized only by the London houses advancing funds for interest payments on various occasions.22 Sales for account of the Province of Canada, however, constituted

CH.

XV

REDUCTION

OF

AMERICAN

SECURITIES

433

only a small proportion of its securities marketed by the Barings and Glyn, Mills, Hallifax & Company between the fall of 1852 and the autumn of 1857. The amount of Canadian debentures sold by the two agents for account of railroads was much larger. The securities were consigned and sold as indicated in Table 5. If no complicaTABLE

5

C A N A D I A N D E B E N T U R E S M A R K E T E D BY B A K I N G B R O T H E R S & GLYN,

MILLS,

HALLIFAX

Company Great Western

Toronto, Simcoe & Huron

Grand Trunk

&

COMPANY,

COMPANY

AND

1851-1857

Year

Amount

1851 1854 1855 1851 1853 1854 1853 1854 1855

£100,000 400,000 170,000 100,000 175,000 100,000 905,800 905,700 900,000

tions had developed, the marketing of almost 2,000,000 sterling of debentures by each of the provincial agents would have been regarded as very desirable business. The Grand Trunk provided the complications in full measure, however. In the first place, the names of Thomas Baring and George Carr Glyn were placed without their consent on the English board of directôrs of the company. Thomas Baring had at first refused to have his name associated with the project, on the ground that he had doubts about its feasibility and that to have his name on the board would constitute a recommendation of the railway by his firm to prospective investors. But when the Provincial government asked him to serve as one of its two representatives, he reluctantly acquiesced. Problems soon became so numerous that both Baring and Glyn wished that the Grand Trunk scheme had never been forced upon them. The English board had no control over construction or management. The Canadian board seemed to have no managing head,

434

NO BOOM FOR BARINGS, 1852-1857

CH. XV

extravagance was being shown in construction, and the lease of the Atlantic & St. Lawrence from the border to Portland, Maine, for 999 years on a 6 per cent guarantee seemed an "atrocious mistake." The Quebec & Richmond line was taken over before it was completed and at the beginning of winter when it could not be operated profitably for at least six months. Drafts were issued on the Barings and Glyn, Mills without regard to whether or not the bankers had funds in hand. Almost all the shares and debentures were sold in the United Kingdom; prices of the shares sank lower and lower. The Province came to the rescue with the special loan of ,£900,000 which the two firms marketed between 1855 and 1857. In 1856 the railway company was authorized to issue ,£2,000,000 in bonds, which were to carry a preferential lien on the property of the road, even over the prior claims of the Province. These proved unsalable at more than ruinously low prices, though the two mercantile bankers used them as collateral for loans. From 1854 onward, therefore, the Barings and Glyn, Mills were always on the verge of refusing to accept bills issued to pay the English contractors — Peto, Brassey, Betts & Jackson — and continuously advancing funds to tide over the Grand Trunk Railway Company until new sources of money could be tapped. Baring and Glyn, as well as the construction contractors, even utilized their personal funds in their efforts to forward the gigantic project and to sustain the credit of the Province. 23 While thus stretching their resources for the Province of Canada, the Barings did comparatively little for other provinces, municipalities, and railroads. The London house had advanced ,£20,000 to the Nova Scotia Railway Company by 1854 and purchased at par a ,£150,000 loan of the Province of Nova Scotia in 1855. During the next two years the Barings aided N e w Brunswick in marketing ,£100,000 of bonds and advanced that province another ,£30,000. The only city aided was Quebec, from which the London house bought ,£80,000 of 6 per cent bonds at 105 in 1853 and ,£30,000 of a ,£160,000 issue in 1855 at 99. The remaining ,£130,000 of the later loan was sold on commission. When the Mayor of Quebec in February, 1857, sent another ,£50,000 of bonds without previous notice,

CH. XV

REDUCTION OF AMERICAN SECURITIES

435

the Barings bought one half of the lot at 98% and sold the remainder for account of the city.24 European securities also attracted the attention of Baring Brothers & Company during these years. It took portions of French loans with Hottinguer & Company in 1854 and with the Crédit Mobilier in 1855. Until the outbreak of the Crimean War, the Hopes and the Barings were still disposing of Russian bonds brought out in 1850, and even during that war arrangements were made through the Amsterdam firm, since it was neutral, for the Barings to market enough Russian bonds to meet interest due to British investors on earlier issues. Such a procedure would be impossible by 1914. The action had the advantage for Russia of sustaining its credit to the extent that the Barings, Hopes, and the Credit Mobilier joined Stieglitz & Company and others in a syndicate to market shares in the Russian Railway Company in 1857. Thomas Baring became a member of the board of directors and participated actively in the management of its financial affairs. While assuming these obligations the London house had declined to assist in loans proposed by Ferdinand de Lesseps for the Suez Canal, by Turkey, by Hungarian railways, and many others, including one in 1855 by the Province of Victoria in Australia, and one in 1857 by Chile, for which the Barings had been the financial agents for some years. They were still acting in close cooperation with the Committee of Spanish Bondholders regarding the debt of Buenos Aires, to which they sent a special emissary in 1857, but with little success.25 As a consequence of these developments, the House of Baring was not heavily involved in American securities when the crisis of 1857 arrived. The unprofitable ventures of 1852 in Pennsylvania State and Pennsylvania Railroad bonds had been closed. Although some of the New Orleans bonds acquired in the same year still awaited sale, the amount held had been materially reduced in the course of five years. Agents in the United States were attempting without success to sell $250,000 bonds of the Hannibal & St. Joseph Railroad, $30,000 of the Ross County, Ohio, issue, and 379 shares of the Northern Railroad Company of New York, which had been taken as coverage for a

436

NO BOOM FOR BARINGS, 1852-1857

CH. XV

debt. 23 A m o n g their investments the Barings held considerable amounts of Pennsylvania State, Panama Railroad, and Virginia bonds, which were all paying a good rate of interest and were available for use as collateral for loans, if and when the occasion arose. T h e house had no American bonds on consignment. In the American sphere the heavy involvement of the House of Baring was with Canada, not the United States.. COTTON AND SHIPPING PROBLEMS

In facilitating the export of American produce during the years 1852-57 Baring Brothers & Company made only one change in their system. In the autumn of 1854 the total responsibility for managing cotton operations was transferred to the Liverpool house, from which it had been taken after Purton's death. T h e London partners interposed their own orders only once — in November, 1855. W i t h the exception of occasional new consignors, connections in the United States remained unchanged. T h e policy of emphasizing purchases of cotton instead of advances on consignments was continued. T h e Barings still had little faith in the strength of Liverpool and Southern merchants, and they disliked restrictions upon selling, which the Americans often imposed, as well as being saddled with goods when prices fell. If consignors set limits as to selling price, the Barings always kept advances to three-fourths of the estimated cost, if they could. They were more liberal when their advice as to price and volume was followed, and when the Liverpool house was given permission to use discretion in selling. Several factors made judgment of the cotton market difficult. Liverpool no longer completely dominated the market; after 1852 Continental demand almost equaled that of the Midlands. In addition, unsettled conditions in China and overstocks of manufactured goods in India resulted in serious reductions in shipments from the United Kingdom to those areas. Cotton manufacturers in England, having previously increased their capacity, were suffering decided financial hardships by 1855, while Indian raw material was actively competing for sale with American varieties. Baring Brothers & Company operated less extensively during the

CH. XV

COTTON AND SHIPPING PROBLEMS

437

years 1852-57 than it had in the mid-'forties, but the partners considered that in only one year —1854-55 — had they made a serious mistake in judging the cotton market. At the beginning of that season they had thought prices would decline by mid-winter. The opposite occurred, and the partners in Liverpool made the error o£ waiting too long to raise their limits. As a consequence, the profits of the Liverpool house for 1855 were only ¿9,000 in comparison with £20,000 for the preceding year. Both consignments and purchases were large in the 1853—54 and 1855-56 seasons, and net income was excellent. During the 1852-53 season purchases had been small and the volume of income was low, but the market had been gauged correctly; large operators like Brown, Shipley & Company were reported to have lost heavily. The Barings kept out of the market even more completely in 1856-57. Southern factors, financed by the profits of the preceding season, held for high prices against the uncertainty prevailing in the English manufacturing districts. Baring Brothers & Company lamented the very small income to the Liverpool house and to their southern buyers — Forstall and Gracie — but they were certain that a crisis was coming in cotton during the year. Until 1856 the export of wheat and flour from the United States also loomed large in the operations of the Barings. The cutting off of Russian supplies by the blockade of the Baltic and the Black Seas after 1853, aided by short crops almost every year, created a much larger demand for American breadstuffs. 27 The House of Baring profited by that coincidence of events. At various times the partners gave orders for purchases on account of the house alone or on joint account with friends in the United States. In 1853-54 Goodhue & Company alone consigned 100,000 barrels of flour to the order of the Barings. The largest single operation of the firm in breadstuffs was for account of the government of France. A short crop in that country and the lack of supplies of wheat from the Near East in 1855 threatened the ambition of the Emperor to keep down the price of bread. He personally arranged with Bates for the purchase of 3,000,000 hectoliters (8,250,000 bushels) of wheat, or the equivalent in flour. Baring Brothers & Company agreed to make the purchases and do

438

NO BOOM FOR BARINGS, 1 8 5 2 - 1 8 5 7

CH. X V

the marketing, all on commission. Buying was suspended in December, 1855, when only 4,044,000 bushels, mostly in flour, had been acquired. Prices had begun to decline in France before the bulk of the order began to arrive. During the preceding two months, agents of the Barings from Maine to San Francisco and from the Great Lakes to N e w Orleans had been operating. The bulk of the amount purchased was shipped to France, but some was sold in San Francisco, Liverpool, and elsewhere. With the exception of some purchases of inferior goods by agents in the Middle West, and a quibble over commissions with the French Ministry of War, which bought the equivalent of 560,000 bushels of wheat, the whole operation was conducted with speed and success. In fact, it was kept so secret and the buying was so dispersed that prices did not rise, though about half of the American flour destined for the seaboard for the last quarter of 1855 had been purchased. Financing the operation proved to be as delicate a proposition as purchasing such a large amount in such a short time without causing a rise in prices. T o free their own funds the Barings drastically restricted drawings by American holders of exchange accounts, except for funds needed to pay for the wheat and flour in the United States. The partners had stipulated that the House of Baring should never be in advance to the French government for more than ^300,000, but the figure rose to ^800,000 at one time. French commission merchants advanced 150,000 for a short period and some American buyers delayed drafts for their own reimbursement; Grinnell, Minturn & Company used $1,000,000 of its own funds for a month. Ward borrowed about $600,000. The London house called back funds from the discount market and borrowed ,£300,000 from Overend, Gurney & Company, upon the security of Pennsylvania and Panama Railway Company bonds, during the first quarter of 1856. A not inconsiderable sum for interest had to be charged by the Barings against the estimated ^61,500 revenue received in commis* 2ft sions. The operation in breadstufls for account of the French government dramatized the tendency of Baring Brothers & Company to increase its business on other than American account. The houses of Hottinguer in France and Delius in Bremen bought cotton with

CH. XV

COTTON AND SHIPPING PROBLEMS

439

credits on the London firm, which occasionally did the actual purchasing. At one time in 1857 the Austrian government utilized a covered credit of 100,000 for buying tobacco in the United States through E. W . de Voss & Company, Richmond, Virginia. The Barings accepted all the drafts of Grinnell, Minturn & Company for purchases of gunpowder which it had made in America for the British government in 1855, though the partners would take no commission for the service; they thought it inappropriate to take payment when a partner, Thomas Baring, was a member of Parliament. Credits were extended to firms in Constantinople, Trieste, and Malaga as well as to houses in other parts of the Continent for the purchase of American exports.29 By 1857 the situation of American shipping afforded the Barings one very good reason for turning from the United States for business. Although demand for cargo space, accompanied by high freight rates, produced good revenues for American shipowners through 1854, after that date the Barings watched the industry gradually go into the doldrums. American clippers, which had been built in relatively large numbers, faced the competition of fast British sailers and steamships as well as declining demand in the Far East. In the Near East the needs of the allies against Russia dwindled by the end of 1855 and the vessels abnormally utilized in that region for two years returned to their normal routes. On commodities of small bulk and high value going across the North Atlantic the steamers had taken the largest volume; and what the steamers did not take the packets picked up. As a consequence of good harvests in the United Kingdom after 1854, the British demand for American breadstuffs was slight and the French demand in the winter of 1855-56 only temporarily alleviated the increasingly unfavorable competitive position of American shipowners. By early 1857 scores of American ships were unemployed and work in American shipyards, already hañdicapped by a higher wage scale than prevalent in foreign yards, had almost entirely ceased. Even before the depression in American shipping had become noticeable, the Barings had been forced to reduce their commission rates to owners and captains. In the summer of 1854, apparently upon the suggestion of J. S. Morgan, Peabody & Company began

440

NO BOOM FOR BARINGS, 1852-1857

CH. XV

soliciting accounts through agents in American and Continental ports at y 2 per cent commission. The agents emphasized that the two leading partners in Peabody & Company were American citizens and that the agents in America would draw upon the shipowners, thereby eliminating for the latter the trouble of buying bills for remittance to London. Though the Barings shared the conviction current in the City that it was "dishonourable to apply to the correspondent" of a competitor for his business, and "doubly wrong" to offer to work at a reduced commission, the fact that the solicitation was done by agents, not by the London house itself, made it impossible to bring any pressure to bear. Inasmuch as the Barings did not solicit business, they could not point out that two of their partners were also American citizens. Consequently, they met the competition by continuing to pay 4 per cent interest on deposits and by reducing on January 1, 1855, their "banking" commission to l/2 per cent, which had been the rate charged by Huth & Company and McCalmont Brothers & Company for several years with no particular success. T o make profits in this category of their business at the reduced rate per unit the Barings needed to maintain or to increase the number of shipowning accounts. They spent more time giving advice, especially against unscrupulous brokers. They lent money against an increasing number of bottomry bonds and authorized a large number of captains to draw in advance of payment of freight money. In the latter cases the house was always protected by insurance on the freight payments. All American shipowning accounts were evaluated in 1856, though Ward warned his principals in July a year later that the industry was so depressed that little dependence could be placed upon his opinions. Though the American agent was then ready to refuse advances to any shipowner, his principals, in spite of their expectation that abundant crops in Europe and the Sepoy Rebellion in India would increase the depression, reminded him that many of the accounts had been with their firm for many years and that the reliable owners should be aided whenever feasible. The results of the efforts of the Barings were mixed. The number of their shipowners' accounts increased from 400 in 1854 to 580 in 1856, which constituted three-fourths of the group with London

CH. XV

COTTON AND SHIPPING PROBLEMS

441

banking connections. Baring Brothers & Company had left the competitors at the post in this respect. It had the confidence of the American shipping industry if and when demand for cargo space revived. On the other hand, the amount on deposit had dropped almost to the vanishing point. In July, 1856, American shipowners' accounts showed ^246,000 to their credit, which had been reduced to "very little" five months later.30 The Barings were spending more time with captains, earning fewer commissions, and having less money available from this source for working capital. The situation of the packet lines was equally discouraging. As early as the end of 1852 C. H. Marshall had blamed Baring Brothers & Company, Liverpool, for the failure of the Old Line packets to sail with full passenger and freight loads on every voyage. T o satisfy the packet owner that lack of attention was not responsible for the difficulties of his ships, the Barings arranged that two young men should be established in Liverpool for the sole purpose of handling the business of the packets. While they charged a flat 2% per cent commission, other brokers won much of the business by charging 5 per cent and returning 2% per cent to the captains. The basic difficulty, however, was the competition of the steamships with the packets for passengers and of transient sailers for bulk freight. By 1855 all the large packets were sailing at a loss, and in the summer of 1857 every ship in the London line of Grinnell, Minturn & Company was losing money on every trip across the Atlantic. 31 By that time the packets had no more than driblets of pig and bar iron to carry to America as ballast. As early as the first half of 1854, the demand for British pigs and bars in Boston was lessened as a consequence of a disadvantage in freight rates; Boston merchants had to pay approximately $2.00 per ton more than N e w York receivers of Weardale products.32 In spite of the lower cost and higher quality of pigs and bars produced by the Weardale Iron Company after 1855 at its new works at Tudhoe, near Durham, the market was so dull in the United States during 1856-57 that Grinnell, Minturn & Company had to resort to retail sales. Happily the 1855 amendment to the American warehouse law permitted receivers to store iron in bond for as long as three years instead of the former one year.

442

NO BOOM FOR BARINGS, 1852-1857

CH. XV

A s a result of the narrower margin of profit in that line of their business, the Barings stopped consignments of pig iron to Fullerton & Raymond in 1856. T h a t firm refused to effect sales and guarantee payment for less than the conventional 5 per cent commission, and the London house would not send it consignments unless payments were guaranteed. Inasmuch as Thompson, Lapham & Company and Grinnell, Minturn & Company returned 1 % per cent and i l / 2 per cent, respectively, of the 5 per cent normally charged, those firms were given all the business in Boston and N e w York. 3 3 Obviously the revenues of Baring Brothers & Company from American shipping were declining and the marketing of American exports presented as many hazards as, if not more than, ever before. Some of those had been minimized by facilitating the shipment of an increasing amount of cotton, wheat, flour, and tobacco on European account. Caution and a shift away from operations on American account also developed in other phases of the business of the Barings. CREDIT POLICIES

In granting credits to Americans the Barings followed essentially conservative policies throughout the years 1853-57. In the first place, the partners retained the uncovered credit system in spite of the trend toward the use of documentary bills. Secondly, as a comparison of Tables 4 and 6 reveals, the Barings expanded their uncovered credits much more slowly after 1852 than in the preceding four years. From September, 1848, to September, 1852, total credits issued on American account by the House of Baring increased by nearly 121 per cent as compared to less than 23 per cent for the next five years. Thirdly, almost all the increase was in the Far Eastern category; the difference of £600,000 between the first and last sums for that group almost exactly equals the increase in the total amount of credits issued. A n d most of that increase came after the spring of 1855, when losses of the preceding year, prevailing low prices on "colonial" produce, and low stocks in Europe and America induced many American merchants to expand operations in the face of decreasing demand for manufactured goods in India and inter-

EDWARD CHARLES

BARING,

FIRST L O R D

REVELSTOKE

HENRY

BINGHAM

MILDMAY

CH.

X V

CREDIT

443

POLICIES

T A B L E

6

O U T S T A N D I N G C R E D I T S OP B A R I N O B R O T H E R S &

COMPANY

ON

1851-1857 (Exclusive of Credits for Exports from the United States) A M B R I C A N ACCOUNT,

Date Sept. 30, 1851 Dec. 3 1 , 1851 Mar. 3 1 , 1853 June 30, 1853. Sept. 30, 1853. Dec. 3 1 , 1853. Mar. 3 1 , 1854. June 30, 1854.. Sept. 30, 1854. Dec. 3 1 , 1854. Mar. 3 1 , 1855. June 30, 1855.. Sept. 30, 1855. Dec. 3 1 , 1855. Mar. 3 1 , 1856. June 30, 1856.. Sept. 30, 1856. Dec. 3 1 , 1856. .

Total in Use

Total

Dry Goods

Exchange®

Far East

£1,631,163 1,661,188 1,811,115

£1,506,163 1,510,088 1,646,115

£316,000 311,000 360,000

£115,000 105,000 115,000

£1,409,753 1,474,517 1,401,095

1,717,180

1,496,180

411,000

98,000

1,510,350

1,518,411 1.135.719 none given

1,170,811 1,010,119 1,308,088

401,000 351,000

118,000 118,000 100,000

I 1

2..7i7.°37

i

>517>437

378,000

118,000

I

1,778,685

1,581,085

330,000

110,000

M56.450

3,136,588 3.131.585 3.3io,455 3,130,691

3,078,488 1.964,585 3.171.355 3.037.591

188,000 308,000 303,000 308,000

110,000 110,000 110,000 110,000

1,931,708 1 .791.g75 1.979.890 1,014,451

1,318,411 > 59.9io I .3I3>473 >545>51°

• Exclusive of joint account credits for King & Sons and Forstall. Source: BPOC, Oct. 5, 1851, Jan. 4, Apr. 5, 1853, July 4, 1854, Jan. 1 , Apr. 9-10, June 30 (misdated July 3 1 ) , 1855, Jan. 1 1 , July 5, 1856, Jan. 6, Apr. 7, July 7, Oct. 6, 1857, and pertinent enclosures.

ruption of the trade at Canton by the events of the Taiping Rebellion. Moreover, the expansion of credits for trade in the Far East was hedged by several other factors. Credits were granted only to the most trustworthy merchants in N e w York and N e w England. In spite of faster communication, the Barings refused to alter the usance of their bills issued in the area east of the Cape of Good Hope. In San Francisco, a city which was so far away that supervision was

444

NO BOOM FOR BARINGS, 1852-1857

CH. XV

impossible and in which conditions were notoriously unstable, the house gave credits for imports from the Orient only to well-known and highly trusted merchants like Alsop & Company and Macondray & Company; and the latter was the sole recipient of a credit without a guarantee.34 In the meantime, the Barings had also expanded their advances and credits for trade in the Orient for account of Continental and Far Eastern merchants. Both special credits and authorizations for advances on coffee, tea, sugar, indigo, coconut oil, and other commodities were increased to firms in Mauritius, Calcutta, Penang, Canton, Batavia, and other ports. Credits to Continental houses for imports from the Orient had reached a total of /500,000 by 1857. 35 The Barings had deviated materially from their policy of the early 1830's of granting credits to European merchants only on special occasions. This opportunistic compromise with previous policy, in adjusting to changed economic conditions, paralleled that made in the granting of credits to American importers of dry goods. When the partners observed by the end of 1853 that the increase in their dry goods credits was not accompanied by a corresponding increase in acceptances on these accounts, they ordered an investigation of the cause. This revealed that drafts of American firms on partners in England, and those of special agents in the United States upon parent British firms — those labeled "promissory notes" by the Barings — had begun to appear in larger numbers. More important, to take advantage of the lower cost of money in England over that in New York, several clients of the London house had adopted the practice of having agents resident in England accept bills drawn monthly or quarterly on their firms by British and Continental creditors. The number of correspondents utilizing the latter technique increased as money became tighter during 1854. By November, Ward found that among the dry goods clients of the Barings five had "always" accepted in England, nine had adopted the practice in 1852 or later, and eleven had not yet fallen into the habit. Among the nine were some who had begun accepting only after money became dear in America and after they had learned that previous offenders had not been cut off by Baring Brothers & Company.

CH. XV

CREDIT POLICIES

445

T h e accepting in England by American firms perturbed the partners on several counts. Neither a commission nor interest was being earned on funds set aside by the Barings to meet the acceptances that never came. If the drafts accepted by the Barings were used to cover acceptances by the partner of the American house in England, the receipt signed by grantees of dry goods credits did not operate because the goods had not been purchased by means of the bill on the Barings. Under the new practice the Liverpool house seldom was chosen as the forwarder of the goods purchased and therefore failed to receive those commissions. Moreover, the acceptances by the American agents were given currency and status in England by virtue of their known credits with Baring Brothers & Company. Aside from those motives of immediate self-interest, the partners in the London house were upset at being called upon to give favorable reports on their American clients to enquirers from all parts of the United Kingdom and the Continent at the moment when general knowledge of their irregular procedure would undermine the credit of the accepting firms. Finally, the Barings wanted to keep their correspondents from overtrading; the Americans might be forced to suspend payment or fail if they had issued acceptances for large sums and at the same time owed the London house; the hazard would be especially great in the event of a violent stricture in the money markets, which the London firm expected at any moment. 36 Considerations against a change were equally numerous. T h e partners took no restrictive action throughout 1854 for fear of embarrassing their clients during the stringency of that year. Baring Brothers & Company suffered no losses from the failure of dry goods houses at that time, though one of its clients had gone into voluntary liquidation. T h e partners wanted to retain their system of automatically renewable uncovered credits as the distinguishing mark of their firm. T h e cancellation of the credits of several dry-goods importers might create the impression that the Barings were making a general reduction in their American accounts, and thus cause them to lose business to their competitors. T h e partners wanted to avoid this, especially when the amount of drafts under dry goods credits represented a relatively small proportion of their total Ameri-

446

NO BOOM FOR BARINGS, 1852-1857

CH. XV

can operations. Finally, they thought all dry goods clients should be treated alike. In view of these considerations, the Barings modified their policy of never granting credits to those Americans who accepted in England. Ward was to ask merely that each holder of a dry goods credit keep him informed as to what extent it expected to and did accept in England. No attempt was made to insist that all dry goods purchased under credits from the Barings must pass through the Liverpool house and none of the contemplated changes in the letter of credit were made. These liberal concessions were given a conservative turn by a gradual restriction in the number of houses enjoying them. After 1855, only four new firms were added to the list of holders of dry goods credits and three of those were reorganizations of previous houses. Only one — Arnold, Constable & Company of New York — was granted a marked increase in its credit, which rose to £30,000 from £20,000. That firm was then on a par with Beebe & Company and C. F . Hovey & Company, both of Boston. A t the same time, for various reasons the accounts of nine firms had been removed from the books of the Barings by May, 1857. Eighteen months earlier those nine houses had held £145,000 in credits. The aggregate of outstanding dry goods credits was again down to nearly £300,000. In view of the continued issuance of acceptances by Americans in England and the long credit granted by them to their clients in the United States, the Barings were more than happy to have fewer obligations to dry-goods importers in 1857 than in 1854. 37 If immediate profits had been the only motivation for their actions, the Barings would have suspended all credits for exchange operations with and by Americans. Of all the joint accounts, that with the Kings was the only profitable one. Forstall's activities in exchange were often very small; they depended upon the activity of the Barings in cotton, and the London house was often out of that market. Oelrichs & Lurman was not an extensive operator in exchange. With Blake, Ward & Company the Barings estimated the gross gain for themselves ( £ 1 , 1 5 7 ) in 1852, a good year, to be 5/64 of ι per cent on the volume of drafts accepted (£647,000). On the accounts operated solely for account of Americans the London house

CH. XV

CREDIT POLICIES

447

received the difference between interest debited and credited and a commission of only % per cent on almost all drafts accepted. Throughout the years 1853-57 partners were convinced that as a consequence of the relatively high value of money in London they could invest their funds more remuneratively there than by granting credits for exchange accounts to houses in the United States.38 In spite of this attitude, the Barings continued to extend uncovered credits to a selected list of American firms. Safety was the motivation. Time and again the partners reiterated to Ward that only their desire to provide sound remittances for debtors of the house accounted for the continuation of uncovered credits to American exchange operators. Of the greatest concern to the Barings was the disproportionate amount of drafts on Peabody & Company and McCalmont & Company among their bills receivable. During 1853 and 1854, out of an average of ^1,500,000 in remittances on hand, bills on Peabody & Company usually approximated ^300,000, to which was added £100,000 upon the McCalmonts. T o have more than one fourth of their bills receivable in drafts upon those two houses was a violation of sound practice which dictated that there should be a relatively even distribution among a large number of reliable acceptors. T o maintain that distribution the Barings were willing to receive documentary bills on the Browns, drafts on such joint-stock banks as the Oriental Bank and the Bank of Australasia, and bills on the new W i g g i n & Company, established by Timothy Wiggin's sons late in 1855. T h e partners' thought was dominated by fear of possible developments in case of a severe financial stringency in the United States. They knew unsound bills always increased in volume as money became more expensive. Though they trusted J. E. Thayer & Brother, the chief Boston drawer upon the McCalmonts, they thought that Duncan, Sherman & Company, which was the chief N e w Y o r k issuer of drafts upon Peabody & Company, was trading beyond even its known $2,000,000 capital. T h e N e w York house was known to have paid the Thayers 1 per cent for endorsement of bills in the summer and fall of 1854. Inasmuch as the bulk of American remitters to the Barings were located in Boston and N e w York, both Baring

448

N O BOOM FOR BARINGS,

1852-1857

CH. X V

Brothers & Company and its correspondents would feel the pinch if either the Thayer firm or Duncan, Sherman & Company, or both, should suspend operations in a crisis.39 One way to avoid the dangers inherent in receiving as remittances too many drafts on one or two merchant bankers in London was for Ward to collect debts due from correspondents in the United States, purchase gold with the funds thus acquired, and ship it to England. He had authority to adopt that procedure from March, 1853, onward, though his largest shipments of gold went forward in the year following May, 1854, thus aiding in maintaining a better distribution in the bills receivable of the Barings during the most severe financial stringency in the United States between 1847 and 1857· 40 Another measure of the Barings with the same objective in view left out the item of immediate profit. T o assure safe drafts and to avoid acquiring too large an amount of paper on a few houses, the Barings emphasized as never before that they preferred bills upon themselves as remittances from the United States. From 1853 onward Ward circulated the request by word of mouth and finally issued a circular to that effect on March 29, 1855. T o make the appeal still stronger the circular stated that when correspondents remitted bills on Baring Brothers & Company no charge would be made for the stamp duty imposed on foreign bills as of October 10, 1854." The House of Baring was not embarrassed to receive its own acceptances as remittances because it never discounted its bills receivable. The insistence upon its preference emphasized most effectively its great strength. At the same time, that emphasis upon remittance of its own bills presupposed the existence of large and reliable banking correspondents in Boston and N e w York. In maintaining the supply of good bills on Baring Brothers & Company the partners encountered considerable difficulty. In the first place, the joint exchange account with Blake, Ward & Company was terminated in the spring of 1853. The Barings distrusted and had opposed Blake's expansive tendencies, they disliked making the exception which permitted Blake, Ward & Company to have another banking account in London, they objected to the fact that the Bos-

CH. XV

CREDIT POLICIES

449

ton firm had sold small bills at $4.95 per £ 1 instead of at the agreed price of $5, and they had been chagrined at the small gain on the account in 1852. O n his side, George Baty Blake was annoyed at the continuous interference in the conduct of his business by the Barings' agent and by his conservative ideas as to the conduct of the account. T h e break came when Blake decided to set up a separate firm in N e w York and to shift S. G. Ward's two brothers, George Cabot and Thomas Wren, Jr., to that city. A l l the Wards' funds in the firm were withdrawn, the credit on the Barings was terminated, and the account was soon closed. Blake organized Blake, H o w e & Company and proceeded to advertise that it would issue traveling credits on Peabody & Company, which the Barings thought resulted in "lowering the dignity of a Banking House, more particularly as all the small people at N e w Y o r k resort to that system." 42 T h e Barings soon more than replaced the account of Blake, Ward & Company. In fact, before the final break with that firm the London house had opened an account with Lee, Higginson & Company on an uncovered credit of ,£50,000, largely at the instance of Henry Lee, Jr., who journeyed to London to negotiate the connection. By October, 1854, in order to keep competitors from acquiring the business of the firm, the Barings had also granted Fay, Mudge & Attwood an open credit of ,£30,000 for exchange operations. Both accounts were charged % P e r cent commission, with interest debited at 5 per cent. Interest was credited to Fay, Mudge & Attwood at 3 per cent and to Lee, Higginson & Company at the rate prevailing at the Bank of England. Baring Brothers & Company itself bought the remittances of the latter American firm as they arrived. Several changes were made in the two Boston accounts by 1857. A s early as March, 1855, the credit to Lee, Higginson & Company had been reduced to ,£40,000; that to Fay, Mudge & Attwood was raised to that figure in 1856. Since both were considered unprofitable on the basis of )4 per cent commission and the Barings permitted no European firm to draw for less than '/3 per cent commission, the rate for the two Americans was set at ]/3 per cent as of January 1, 1857. Finding that rate too high for profitable operations, the latter firm agreed to abandon its credit in the summer of 1857 and always to remit in advance of drafts in exchange for the % per

450

NO BOOM FOR BARINGS, 1852-1857

CH. XV

cent commission. Then it opened an account with Robb, Wilson, Hallett & Company, a new firm in Liverpool, which caused the Barings to terminate their account.43 In the meantime Hayward & Dorr had unobtrusively gone into forced liquidation in the spring of 1856. The inexperienced young partners of that house had been swindled by one man, had made advances to some weak, slow-paying firms, and had lost money on some securities. Though the embarrassment of Hayward & Dorr was kept secret, Ward had to take over some unwanted securities, including a block of Northern Railroad (New York) bonds and shares. The ultimate loss was shared equally by T . W. Ward and the Barings. 44 Only the not-too-satisfied Lee, Higginson & Company remained in Boston as a banking correspondent of the Barings. The story of their exchange operations in N e w York was quite different. Former correspondents there remained strong and active. James Gore King had taken no active interest in his house for several years before his death in October, 1853. The younger partners were able and experienced. The firm was reorganized as J. G. King's Sons & Company with an estimated capital of $450,000, even after the withdrawals occasioned by the death of the senior partner. The credit of £50,000 for joint exchange operations was continued and that account as operated until 1857 elicited less critical comment from the Barings than at any time since 1828. In other words, the house of the Kings retained its important position in the New York bill market and was almost as acquiescent to the views of Baring Brothers & Company as Goodhue & Company. The latter still served as the favored financial intermediary for cotton operations of the Barings and always operated its exchange account satisfactorily.45 T w o new exchange accounts also appeared in N e w York. The first and most important was that with Ward, Campbell & Company. Established in the spring of 1853, that firm was made up of Alexander Campbell and two younger brothers of Samuel Gray Ward. Campbell had been an accountant with Thomas Biddle & Company for many years and was an excellent judge of securities and finance. George Cabot Ward had had experience with Goodhue & Company, John G. Ward & Company, and Blake, Ward & Company. He was the Bates of the new firm until he joined his elder

CH. XV

CREDIT POLICIES

451

brother as agent of the Barings in 1869. Thomas Wren Ward, Jr., was just beginning his business career. With some fears that they might be accused of favoritism towards the sons of T . W . Ward, the Barings agreed to grant to the new house an open credit of ¿£20,000, charging 5 per cent interest on the debit side of the account and the prevailing Bank of England rate on the other side. The commission for accepting was J4 per cent, which was raised to per cent as of January 1, 1857. Ward was allowed, however, to authorize no bills from the South on Ward, Campbell & Company. 46 Baring Brothers & Company had no cause to regret the new connection prior to the Civil War. Ward, Campbell & Company performed many special tasks for the London house, such as buying securities for its account when the Barings did not want it generally known that they were in the market. Most important, the N e w York firm furnished a much-desired flow of reliable, evaluated information on financial conditions in the United States to both Boston and London. Neither Goodhue & Company nor King's Sons & Company performed that function as effectively as they formerly had. The other new exchange account in N e w York attained less importance than that of Ward, Campbell & Company. Without consulting Ward, the partners in London granted Berend & Company an open credit of £3,000 in 1855, subsequently raised in 1856 to ¿ιο,οοο. 4 7 The arrangements made with the Union Bank of Louisiana in 1856 served as a precedent for the relations of the Barings with other banking institutions after 1857. Upon the recommendation of Forstall and after refusing to grant an uncovered credit, the London house permitted the New Orleans institution to open a covered account. The Union Bank remitted in advance of drafts and the Barings charged x/i per cent commission, crediting interest on one side of the account at 4 per cent and debiting interest on the other at 5 per cent.48 With Mexican and Californian houses the Barings pursued a conservative course. They occasionally bought silver and gold from Jecker, Torre & Company but refused to sanction any large exchange operations on credit with that Mexican firm, thereby avoiding any unfortunate results from an intimate connection with it when later

452

NO BOOM FOR BARINGS, 1852-1857

CH. XV

in the 1850's it was caught on the losing side in a revolution. In 1856 Macondray & Company of San Francisco was given a revolving credit of £ 10,000, but Burgoyne & Company was never allowed to draw beyond its remittances until after its suspension in 1855, when the Barings accepted some overdrafts found to be in the hands of poor people.49 With two of their financial agents, who later displayed conspicuous weakness, Baring Brothers & Company took very specific precautionary measures. By 1855 the Ohio Life Insurance & Trust Company had become very inattentive to its account with the Barings, and Ward soon heard that there was "some doubt" that the institution was "judiciously managed." The account was not closed, but no credit was granted to it after January, i856.bo A similar procedure was followed in connection with the Bank of Pennsylvania, which remitted interest payments on Pennsylvania bonds held by 480 clients of Baring Brothers & Company. As early as 1853 Ward reported that Allibone, the new president of the Philadelphia institution, had greatly extended the bank within a year and had asked for an open credit of ^50,000. The credit was refused, but the Barings tested the bank with a small credit upon collateral of $75,000 Pennsylvania bonds in 1853. The account was not covered promptly, which proved to the partners how unreliable Allibone was. They then wanted to end the relationship but feared that the transfer of the agency for remitting funds for interest payments would impair the credit of the bank. After C. H . Fisher, special representative of the Barings in Pennsylvania, in August, 1856, reported that the condition of the bank was dangerously unsound, a fact known only by brokers, the partners decided to be certain to avoid involvement in a possible failure. They had Fisher present a draft to the bank for the amount of interest due to clients of the House of Baring. Thus the agency was not canceled, but the bank was not in arrears to either the bondholders or the Barings when the panic of 1857 demolished it. 51 Such precautionary measures as these pointed up the fact that Baring Brothers & Company during the years 1852-57 followed a policy to the right of the middle of the road. The partners certainly adhered to those policies considered fundamental to their operations

CH. XV

CREDIT POLICIES

453

since 1828. The solicitation of business was still taboo. N o exceptions to the "double account rule" were knowingly permitted and no credit was advanced beyond the estimated capital of a house. Only one small loan on a promissory note to an American was recorded. The chief basis for granting a credit continued to be the character of the individuals receiving it. Safety was a prime factor always; if no one was willing to guarantee the account of a doubtful firm, the credit was refused; uncovered credits to Latin American houses were conspicuous by their paucity. 52 Liquidity remained one of the most prized accomplishments of the House of Baring. Borrowing upon bonds as collateral was resorted to during the first four months of 1855 to the extent of ^300,000 and of 200,000 for the same period in 1856. Most of the time the house had sums of similar size invested in the discount market on call loans.53 Old American debts had been almost settled; only one of the four estates originally managed under the direction of the Barings in liquidation of the old George Knight & Company debit balance remained in their hands by 1857; and the N e w Orleans property held on the Stetson & Avery debt was sold to Forstall and R. D . Shepherd by early 1853. In February, 1857, new delayed balances, which T . W . Ward would have called "ragged accounts," totaled only ¿£28,200; of that sum S. G. Ward estimated that probably £7,000 would ultimately have to be written off to profit and loss.54 The relatively small amount of funds of the house tied up in unwanted American securities has already been noted. While adhering rather rigidly to the foregoing rules, the Barings met competition, which was led by Peabody & Company, by a downward adjustment of many of their commission charges. After being as low as J4 per cent for more than three years, the banking commission on exchange accounts was stabilized at % per cent on January ι, 1857. Goodhue & Company, which offered many other collateral services, was the only firm allowed to work its account for Î4 per cent thereafter. Shipowners' accounts were charged V2 per cent after December 31, 1854, instead of the former 1 per cent. The commission for accepting bills drawn from South America had been reduced from τ ι / 2 per cent to 1 per cent as early as January 1, 1853.

454

NO BOOM FOR BARINGS, 1852-1857

CH. XV

Reductions were made occasionally, as always, to special friends or when the House of Baring received commissions for both accepting bills and selling the merchandise bought therewith.65 One liberalizing factor in the policy of the Barings was the acquisition of a considerable number of "young, rising" firms to take the place of the old reliable houses as they disappeared from the scene of business activity. Among the new accounts were Ward, Campbell & Company, D . Appleton & Company, Jerome G . Kidder (owner of a new patent for making better seal oil), and many others. In spite of these numerous additions, as late as July, 1855, the Barings observed that in more than twenty years there had been no bad debts arising from the granting of uncovered credits.06 Baring Brothers & Company had also been quite liberal during the stringency of 1854. The list of the correspondents who were permitted delay in making remittances was large. It included Corning & Company, J. M. Forbes, Beebe & Company, Padelford, Fay & Company, and scores of lesser American firms.57 That liberal remittance policy had been made possible by earlier curtailment on the part of the Barings, by calling in their funds from the London discount market, and by borrowing the 300,000 noted. By being alert to possible recessions and the implications of politics the Barings had protected themselves and their correspondents as well. The stringency of 1854 merely afforded the outstanding example. The imminence of Britain's entry into the war against Russia accounted for some of the Barings' restraint early in 1854. The curtailment of credits for exchange operations during the last quarter of 1855 was attributable to the needs of the house itself in carrying through the grain order for Napoleon III. In May, 1856, fear of war between the United States and Great Britain over the Mosquito Coast in Central America induced the Barings to give precautionary orders, though the fears had been dissipated within two months.58 For all of their usual alertness, however, the Barings failed to foresee the panic of 1857. Although they were fully informed as to the unsettled conditions in China, the Sepoy Mutiny in India, the rising tide of failures through 1856 and 1857, the relatively high cost of money in both England and the United States, and the large imports into the United States, they observed to Ward, as late as June, 1857:

CH. X V

CREDIT POLICIES

455

" W e are glad to observe that it is thought no great money difficulty can arise on your side and if gold comes to you from California as fast as you require it for export we see no reason why you should not have a quiet money market." 59 Perhaps the reason for that mistake in judgment is that the affairs of the Barings in the United States were in a very snug condition. For several years innovations had been nil and the firm had made just enough adjustments to maintain its competitive position. The house was not in the cotton market and all credits had been curtailed except those for ventures to the Orient, which were all in the hands of wealthy and reliable firms. Aside from those bonds which were held for investment, the Barings had relatively few American securities. As far as its relations with American merchants were concerned, the House of Baring was in a much better condition to face a crisis in 1857 than it would have been had stringency developed four years earlier.

CHAPTER

XVI

APPROACHING T H E IMPENDING

CONFLICT,

1857-1861 FROM 1857 to 1861 Baring Brothers & Company maintained a strong interest in the business of the United States but turned increasingly to other scenes of action. The partners took the panic of 1857 in their stride. The house suffered little by the crisis, but the reaction of the partners thereafter was favorable to a continuance of conservative policies toward marketing American securities and granting credits to American business men. Coupled with that conservatism toward the United States was an expansion of the Barings' business for account of governments and merchants in Canada, Europe, and Asia. By i860 credits to Europeans alone almost equaled those to American citizens. In thus shifting its interest, a course which had been twenty years in developing, the House of Baring had demonstrated its flexibility and had achieved a wider geographical diversification of its concerns. RIDING OUT THE STORM A coincidence produced a crisis in the New York money market in August, 1857. Because of speculation in land, the demands of railroads for capital, and the need of funds to pay for purchases of goods in eastern cities, money had continually been scarce and dear in the Ohio and Mississippi valleys from the previous winter. Sellers of goods to the Middle West had found business increasingly dull from spring onward, and the collection of debts next to impossible. The easing of that situation depended upon the sale of a good harvest at remunerative prices, but that proved impossible as a consequence of abundant harvests in all of western Europe and the availability of wheat from Russia at a price lower than Americans could meet. In the meantime, country bankers in the interior of the

CH. XVI

RIDING OUT THE STORM

457

United States during the first week of August began to withdraw balances from New York banks in order to take advantage of the business in bills drawn against produce moving from the interior to the Atlantic coast. To meet the demands of the country banks the New York banks withdrew their funds from the call loan market and began reducing their outstanding loans, as was their custom in August of each year. Inasmuch as call loans were tied to trading in securities on margin, the price of some railroad securities began to decline rapidly. In some cases maladministration then came to light. Between August 13 and 15, Michigan Southern shares fell from 49 to 34. By August 19 the president of that corporation had resigned under charges of deception and reckless management. That event inaugurated an uninterrupted decline in railroad and other speculative securities culminating in a state of panic by August 24. The historic suspension of the New York office of the Ohio Life Insurance & Trust Company on that date was at once a result of the usual seasonal pressures as well as mismanagement. The suspension was also a precipitator of panic and a harbinger of a still more calamitous concatenation of events during the next month. New York banks stepped up their excessively restrictive policy of curtailment. Discount rates became almost prohibitive — 1 5 to 24 per cent on the best paper by September 5, and an average rate of over 24 per cent by September 22. Yet specie reserves of the banks went lower and lower. The situation was aggravated by the late arrival of four packets bearing gold from California; unfortunately, one — the Central America — was lost with f 1,600,000 of gold on board. As a consequence New York received less gold in August and September, 1857, than in any similar two-month period since 1851. American insurance companies agreed to cash at once their policies for $600,000 on the remittances lost at sea. Drafts were also immediately issued to collect the claims upon English policies. Those measures had no more discernible effect than the redemption of Federal bonds in specie by the Treasury. Large and small firms in New York, Philadelphia, and Boston failed. After September 24 matters grew worse until the middle of October. On September 25 the Bank of Pennsylvania failed, revealing the gross mismanagement of the president and the loss of almost

458

IMPENDING CONFLICT, 1857-1861

CH. XVI

all the capital of the stockholders. W i t h i n four days all the banks of Pennsylvania had suspended. Discount rate in N e w Y o r k rose to 3 per cent per month. T h e demand for foreign bills practically ceased, and sterling bills sold at a discount of f r o m ι to io per cent. O n l y bills on the Barings sold above par on October i . Hartford banks suspended specie payment on October 6, followed by all but one in N e w Y o r k eight days later. Suspension was soon general throughout the country, though the Chemical Bank in N e w Y o r k , the Indiana State Bank, the Kentucky banks, and four banks in N e w Orleans stood the strain throughout the crisis. 1 Until the middle of October the Barings showed no alarm about the situation in the United States. W h e n the O h i o L i f e Insurance & Trust Company and DeLaunay, Iselin & Clark suspended payment, W a r d merely remarked that those two failures "must be followed by others." U p o n receipt of the news the Barings observed that the debit balance of the O h i o institution with them was only ^199, exclusive of interest, which had arisen from payments on a small annuity in England. Sales of American produce were continued. Credits to Americans were neither curtailed nor suspended. W a r d urged but did not force debtors to remit and encouraged but did not press remitters to consign goods as coverage for debts. 2 M a n y elements accounted for this lack of concern of the Barings. Failures had been numerous in the United States since 1855. T h e last important stoppage prior to A u g u s t 24 was that of E. C . Bates & Company of Boston on A u g u s t 21. T h a t firm owed about $500,000, fortunately none of it to Baring Brothers & Company. Its business was connected with sugar in Cuba, where a panic had occurred during the first two weeks of August. Latin American failures included f e w clients of the Barings and none of those owed the L o n don house at the moment. T h e obligations of Baring Brothers & Company had been declining in volume since the preceding A p r i l ; "debts due and coming d u e " in A u g u s t were ^1498,000 as contrasted with ^1,980,000 four months earlier. T h o u g h some British holders of American railroad securities wanted to sell, others sent money to N e w Y o r k for the purchase of depreciated stocks and bonds. Transactions in such securities were small in England, but that condition had prevailed for some time. T h e Barings were fully

CH. XVI

RIDING OUT THE STORM

459

informed of the developments in the New York money market and were familiar with the seasonal nature of the restrictive measures of the banks in that city. Silver was still leaving England for India and China, but that drain was an old story too. The important thing was that gold continued to come to the United Kingdom and that there was no likelihood of the export of gold for breadstuffs.3 The attitude of the Barings changed, however, as a result of developments during the first three weeks of October, 1857. Gold began to leave the Bank of England for the United States. The Bank rate of discount went to 6 per cent on October 8, to 7 per cent four days later, and to 8 per cent on October 19. Bill brokers were forced to make daily arrangements for funds. Federal bonds were the only American securities salable. Discount rates were high everywhere on the Continent. The rate of the Bank of France, in the least pressed of all north European countries, had been raised to ηχ/τ per cent. Commodity prices had begun to decline, especially sugar and cotton. Failures were increasing in number, particularly in Glasgow. By October 16 the Barings were owed about £ 100,000 by American "parties who are fully able to remit," and the house held among its bills receivable too many drafts on Peabody & Company, the McCalmonts, and Wiggin & Company — £150,000, ¿140,000, and £jo,000, respectively. Since all those firms were accustomed to discount their bills receivable, failure of remittances to arrive would embarrass them and consequently the Barings.4 For the first time Ward was now given orders to press remittances forward. The Barings gave him a list of those who could and should pay at once. Some might be permitted to consign produce to cover their accounts. Such consignments of produce, which had been left to Ward's discretion up to October 16, were not wanted except to provide remittances to the London house. To further the aim of his principals Ward was also to authorize advances to a few firms, whose drafts on the Barings were taken by him for remittance. For that purpose the partners gave a schedule of limits on flour, wheat, maize, cotton, sugar, linseed cakes, and hides. All except sugar and hides were to be shipped to the order of Baring Brothers & Company, Liverpool. The Barings wanted always to be free to sell at their discretion. Insurance was to be effected in England. To pro-

460

IMPENDING CONFLICT, 1857-1861

CH. XVI

vide funds for making the advances on produce Ward was ordered to make collections from debtors of the Barings, giving them a pro forma bill in exchange for the cash. Funds not used for advances might be used to buy up other documentary bills and clean bills upon the understanding that in the former case the shipping documents would not be handed over until the bills of exchange were paid. Ward might also purchase good bankers' bills, though he was to avoid bills on Peabody & Company and the bills of the American houses of the Dennistouns, Stuarts, and Robb on their affiliated firms in the United Kingdom. If, as the Barings anticipated, gold flowed rapidly into the N e w York banks and sterling soon rose to 108, Ward was to buy gold and ship it to England. Inasmuch as gold could not be exported profitably when the sterling rate was below 109, the Barings were willing to take a 1 per cent loss to acquire gold for the Bank of England, to have cash instead of produce in hand, and to avoid receiving too many bills on a few merchant bankers.5 These orders necessitated little change in Ward's actions. He had already authorized advances on produce to such reliable firms as Grinnell, Minturn & Company and Goodhue & Company for "moderate" amounts and "at very safe limits." These and other consignments provided safe bills for him to remit. He had already collected substantial sums from debtors of his principals. On October 12 Ward had sent a list of firms which were shipping saltpeter, indigo, sugar, and sperm oil to cover their accounts. Others used freight money for the same purpose. On November 6 Ward reported that he had collected funds and authorized advances therewith to the extent of more than ,£200,000.® And many remitters were sending bills on merchants and merchant bankers in the United Kingdom. In the meantime tension had risen to the breaking point in England. Early failures in Glasgow had exposed a widespread use of accommodation bills. Distrust and uncertainty were rife in every part of the United Kingdom. Bill brokers and dealers were suspected with some justification of reckless abuse of the call loan and discount machinery. Failures began to occur thick and fast. Between October 27 and November 1 1 the list included the Borough Bank, Robb, Wilson, Hallett & Company, Naylor, Vickers & Company,

CH. XVI

RIDING OUT THE STORM

461

and Dutilh & Company of Liverpool, Dennistoun & Company, W . H . Braund & Company and Sanderson, Sandeman & Company of London, and the Western Bank of Scotland and the City of Glasgow Bank in Scotland. All call loans had been called in by the banks, the bill dealers were practically paralyzed as a consequence, and the Bank of England was left as the leading, soon the only, discounter. That institution raised its discount rate to 9 per cent on November 5 and to an unprecedented 10 per cent on November 9. Still, gold left the Bank for Ireland and Scotland, though the efflux to America ceased upon receipt of the news of the suspension of specie payments by the New York banks. In recognition of the unbearable pressure, on November 12 the government authorized the suspension of the Bank Act of 1844. Though that action eased the situation, severe stringency existed for another two weeks, and relaxation did not occur until just before Christmas Day. The chief worry in the American trade was the embarrassment of Peabody & Company, which finally notified the Bank of England that it needed a loan of 800,000 to continue operations. After a week of anxiety, on November 20, under guarantee of five banks and four other subscribers, the Bank granted the assistance required. Just as the business community began to feel easier over the affairs of Peabody & Company, the failure of Hermann Sillem & Sons in London served as a preliminary notification of panic in Hamburg and northern European cities. The impact was heavy in Scandinavia and very severe in Hamburg, where as late as April, 1858, not one of the more than a hundred failures had yet paid a dividend. These conditions were accompanied by a precipitous decline in the prices of commodities and of many securities. Losses were heavy, especially on such items of produce as sugar, silk, and coffee. Though the gold flow to the Bank of England was strong enough to permit the lowering of the discount rate to 8 per cent on December 24, the business community was so shaken that recovery would inevitably be slow. The patient had suffered a short but extremely exhausting illness.7 Those European developments gave the Barings little cause to worry. They held bills on the Sillems, Braunds, Dennistouns, Dutilhs, and the Robb house, but the remitters and drawers were

462

IMPENDING CONFLICT, 1857-1861

CH. XVI

able to pay. The three correspondents of the House of Baring in Hamburg proved among the strongest houses there. Both Holland and France experienced no great distress, and the clients of the London house were willing to give aid rather than to require it. Hence, Baring Brothers & Company was relatively free to devote its attention and resources to the United States. In general, accounts of Americans were covered much more rapidly than they had been in 1837. A few credits were revoked and many were temporarily suspended. Only the credits for use in the East Indies remained undisturbed. Many correspondents forwarded produce to cover. Others drew good bills for Ward to buy for remittance when advancing on consignments, for which the Barings lowered their limits early in November. By November 10 Ward was buying and shipping gold with the funds he had collected from debtors of his principals. Seventeen days later the Barings reported only ¿229,000 overdue, ¿180,000 of which had to be remitted; the remainder was covered by goods. Near the end of the year the Barings reported more than $1,000,000 in merchandise on hand at their two houses. Sales were made steadily after December 1, but much of their holdings of produce remained to be disposed of after January ι , 1858. Ward bought no documentary bills for remittance until after the beginning of 1858. Funds were on hand for all interest payments due in London on January 1, 1858.8 Since most debtors remitted in bills on the United Kingdom, the greatest concern of the Barings was to assure reliable bills from America. Drafts on Peabody & Company, the McCalmonts, and Wiggin & Company constituted too large a proportion of the bills receivable of the partners, who knew and were worried about the condition of all three. Requests to remitters to avoid bills on the three firms were made to trusted friends in America, but no general prohibition was even considered. Hence Baring Brothers & Company throughout November and December usually held ¿250,000 to ¿300,000 in bills on the three houses. While Peabody & Company curtailed operations and the volume of bills on it declined, the Barings continued to have on hand approximately ¿150,000 in bills on McCalmont, Brother & Company. 9 Thayer & Brother, the largest drawer on the McCalmonts in Bos-

CH. XVI

RIDING OUT THE STORM

463

ton, kept the Barings worried from the end of October to the beginning of 1858. A t one time the Boston firm had over ^ 525,000 outstanding on its London principal. In answer to its request, Ward advanced Thayer & Brother a special credit of 100,000 for use in case of need, though it was not utilized. Matters were made worse late in September by the death of J. E. Thayer, the senior partner, and by the existence of credits granted by the firm about which Ward and William Sturgis were not informed when the special credit on the Barings was granted. T h e important development, however, was that the Thayers stood firm under the pressure. 10 A s a matter of fact, the Barings were not particularly pleased with the behavior of their own exchange account clients in the United States. Oelrichs & Lurman used its credit to the full and remitted slowly. On the other hand, it was entirely untouched by the failures in Baltimore. Goodhue & Company and Ward, Campbell & Company experienced a short spasm of fear, but both stood the pressure well. A small special credit was granted by the Barings to the latter for a short time only. Lee, Higginson & Company utilized its full credit, was not able to remit promptly, and was given an additional credit of £3.2,000. T h e Barings thought the Boston house was managing its affairs inefficiently at that time and through Ward informed it of their views. Its account was not covered until 1858. 1 1 King's Sons & Company was the hardest hit of the leading correspondents of the Barings. During the third week in October the Kings became so worried that A . G . King, accompanied by his uncle, Archibald Gracie, went to Boston and laid the entire condition of the house before Ward. T h e N e w ¥ o r k firm had lost some money in the Schuyler debacle in 1854, had lent funds on stocks and notes to parties that had failed (including the Ohio L i f e Insurance & Trust Company), and had lost 70 per cent of its investment in the ill-fated venture of 1852 in N e w Orleans bonds. T h e Barings canceled the credit of ,£50,000, granted a new one for 20,000 with commission at % per cent, and ordered the joint account to be operated as a covered account, that is, bills to be remitted in advance of drafts. In England the Barings protected the name of the Kings on some protested bills and continued to defer the X31,595 due from the N e w Yorkers on account of the N e w Orleans bonds. T h e old joint

464

IMPENDING CONFLICT, 1857-1861

CH. XVI

account was covered at once, but King's Sons & Company had fewer resources and its partners were less esteemed by the Barings than ever before. 12 In addition to granting the aid to those already mentioned, Baring Brothers & Company was liberal with many other houses. At the request of Grinnell, Minturn & Company the partners accepted some protested bills for Bowman, Grinnell & Company of Liverpool, enabling that house to resume operations after a suspension of only eight days. In America Ward arranged delay in making remittances for many firms and granted special credits to several others. Among the latter were Fay, Mudge & Attwood, Beebe & Company, Skinner & Company, Arnold, Constable & Company, C. H . Fisher, and the Merchants' Bank (Boston) . 1 3 Not that the Barings did not say "no" to requests for assistance. They refused to buy bonds of the Michigan Central Railroad in November because the directors declined to make provision for a sinking fund and for interest on other securities until the bonds due in i860 had been provided for. 1 4 Partly as a consequence of those liberal measures very few of the correspondents of the Barings failed to meet their obligations. James Devereux and John Devereux, of Philadelphia, eventually paid most of their debts. Ward considered that bad judgment on the part of Maxwell, Wright & Company of Rio de Janeiro was partly responsible for the troubles of the Philadelphia houses. Skinner & Company, a dry goods firm in Boston, failed by "mistake." It paid all its debts and had $500,000 left over. Samuel Judd's Sons & Company, a N e w York house in the Far Eastern trade, failed but gave full security and paid up within a yefer.13 Dry goods correspondents almost completely gave the lie to an estimate of the Barings in October, 1857 — "the most liable of our clients to go wrong." Only one failed and it did so unnecessarily. Several were granted delay in remitting and one or two drew on emergency credits. Only one — Haight, Halsey & Company — was insulted to have been called on to remit. T w o — Slocomb, Stowell & Company and Milton, Cushman & Company, both of Boston — had received credits from sources other than the Barings, who stated that the debts of the Boston houses were too large for their capital "from the English fashion of estimate." However, that none of the dry-

CH. XVI

MAINTAINING THE STATUS QUO

465

goods importers caused loss to the Barings was the important element in the situation. 18 T o carry their liberal policy of aid as well as old "deferred balances" of almost 100,000 antedating the crisis, the Barings borrowed only ,£190,000. In September, using $600,000 Pennsylvania State bonds as collateral, the partners took 100,000 from Overend, Gurney & Company at 6 per cent for four months. In October, Hottinguer & Company remitted to the Barings ^30,000 in bills maturing in November and 60,000 in drafts falling due in December. T h e Barings agreed to return all funds to Paris on or before three months after the maturity of the remittances, with interest at 5V2 per cent and a commission of l/¿ per cent. 17 Once more the House of Baring came through a crisis with ease and with heightened prestige. In March, 1858, the partners remarked : " W e are astonished in considering the severity of the Crisis that we lose so little in fact nothing and we are in reality gainers by the large commissions on consignments." A t that time the Barings still listed about ^200,000 in their balances overdue, after deducting goods on hand and dead and failed accounts. Ward believed that the liberal actions of his principals during the "revulsion" had given a "remarkable preeminence" to the House of Baring. T h e partners thought the members of the Boston office deserved some of the credit for their success in riding out the storm; they gave Ward a bonus of £2,000, Wellman a bonus of £500, and Popkin a year's salary ($2,000 or ,£411.18 at 109¡4 for sterling). 18 MAINTAINING THE STATUS QUO

Economic and political conditions in the United States enhanced the normal post-panic inclination of the Barings to conduct their American operations along conservative lines. T h e partners were always aware of the friction over the slavery issue, but they hoped to the last that war could be averted. T h e y noted that the confidence of Southerners in their strength was increased by excellent crops and heavy exports year after year, while recovery from the panic in the Middle West was much slower in comparison. Even abundant wheat crops helped little when prices ruled low as a consequence of a foreign demand less than that of the middle 'fifties. T h e revenues

466

IMPENDING CONFLICT, 1857-1861

CH. XVI

of east-west railroad lines suffered from the relatively low demand for breadstuffs. Imports lagged from 1858 until i860. Much of the California gold continued to flow across the North Atlantic. Commodity prices fluctuated within a range of eleven points, according to the index numbers of Smith and Cole. Money was easy almost all the time until the fall of i860, yet railroad securities generally showed no strong tendency to rise in value until i860. Even then, the price of railroad securities averaged no more than 75 per cent of par. English economic conditions roughly paralleled those in the United States. Depression in 1858 was followed by revival in 1859 and prosperity in the following year. With the exception of a temporary tightness in the summer of 1859, money was easy and cheap until the last quarter of i860. The inexpensive money, however, tended to go into securities other than American; Canadian, Indian, Russian, and even Latin American loans were preferred to the lowpriced but dubious American railroad shares and bonds; and few governmental securities were issued in the United States. Improvement in foreign trade was aided by an increasing American demand for British products in 1859 and i860, though the foreign demand in the world at large was deterred by political disturbances in various regions. Many nations experienced those disturbances in the years 1858-60. War continued in China and was accentuated by foreign intervention. Revolutions occurred in Mexico and Chile. The rumors and final outbreak of the Austro-Sardinian War depressed the marketing of both securities and merchandise during the first quarter of 1859, though the signature of the treaty for peace in July gave a marked stimulus to prices in general. The moves for the unification of Italy kept affairs unsettled there through i860. Tempers flared over British cruisers searching American ships off Cuba in 1858. South Carolina gave the signal for rebellion by seceding from the Union in December, i860. 19 In doing business under these conditions Baring Brothers & Company had just as strong competition in American trade and finance as they had before the panic. Though Duncan, Sherman & Company recovered slowly, Peabody & Company returned to the business

CH. XVI

MAINTAINING THE STATUS QUO

467

arena in short order. The Brown firms in the United States met all their acceptances and carried on as stiff competition as ever. Brown, Shipley & Company never had been under serious doubt. If anything, McCalmont, Brother & Company emerged from the crisis stronger than it had been in August, 1857. Wiggin & Company, though it was not a large house, also gained in reputation. Other competitors easily weathered the storm and continued active operations.20 Almost no changes were effected by the Barings in their house or in their American connections. Agencies and relations with prominent firms in the United States remained unaltered. The one change was the admission of Henry Bingham Baring (1804-69), first son of Henry Baring, as a partner in July, 1858. 21 After a career in politics, the new partner took an unobtrusive place in the business world for a few years. The policies of the house were rigidly adhered to. In granting credits, safety seems to have been almost a fetish. After the crisis Ward took advantage of the general uncertainty to investigate thoroughly the situation of those requesting credits. He stressed examination of older firms, which he feared might be "rusting out" before new, strong houses might be acquired as replacements. Since Ward knew the capital of all houses, he was able to avoid giving credits in excess thereof. Guarantees were always taken for credits to the western coast of Latin America and to California, though Alsop & Company, San Francisco, was the only correspondent of the Barings known to be the holder of even a temporary credit from another London house. Few Latin Americans in the Caribbean Sea enjoyed uncovered credits; the failure of Hurtado & Brothers of Panama in 1857 indicated to the Barings that the long-established policy in that respect was sound. If agents of dry-goods importers accepted bills in England, the London house canceled their credit; the leniency displayed before 1857 was ended. 22 Some techniques in the utilization of credits were slightly modified. The partners admitted that they had no power to object when King's Sons & Company wanted to advertise that it granted credits on Baring Brothers & Company, though they still disapproved strongly. After Brown, Shipley & Company and the London joint-

468

IMPENDING CONFLICT, 1857-1861

CH. XVI

stock banks had taken the lead, in January, 1858, the Barings changed the usance of bills drawn in India and China to four months sight from 6 months sight. On the other hand, they refused to sanction a usance of longer than 90 days sight for Mauritius. 23 In spite of its dubious value, the receipt on the letter of credit continued to be utilized by the Barings. Having some doubts about the validity of the document, in 1859 the Barings ordered Ward to get a legal opinion on the matter. T w o legal authorities — F . E. Parker and E. R. Hoar — gave their view that the London house was bound to accept under the letter of credit and that in equity a court might hold that Baring Brothers & Company had a lien on the goods purchased under the credit, but that in law, since the pledge was signed before the goods had been purchased, the courts would probably deny the lien.24 Nevertheless, the Barings always insisted upon taking the receipt. In spite of the caution and conservatism of the Barings, their outstanding credits to Americans totaled ^3,000,000 or more throughout the period. As Table 7 indicates, the total dropped to little more than £2,000,000 on December 31, 1857, but was up almost to ,£3,500,000 within 6 months and did not go beyond that figure prior to September 30, i860. At the same time, both the small expansion in relation to early 1857 and the steadiness of the amount over a period of three years reflected the opposition of the Barings to any marked change in their American credit business. The purchase of railroad iron accounted for relatively few of the credits granted by the Barings in the years 1858-60. They purchased only a few thousand tons for the Western Railroad Corporation and for several southern railroads through the agency of Padelford, Fay & Company. And one evidence of the fear of war in the autumn of i860 was the cancellation of contracts for railroad iron by the Savannah house.25 In one area of activity, not reflected in the figures in Table 7, the operations of the Barings were markedly expanded. On December 31, 1857, outstanding credits to Americans for ventures in "South America and on the Northwest Coast" of the United States were only /178,95ο, while the total had risen to / 529,432 by September 30, i860. One factor in that increase was a credit of /100,000 to the

CH.

XVI

MAINTAINING THE STATUS

469

QUO

Panama Railroad Company for the use of its agent in Bogota. On the other hand, the dissolution of Macondray & Company of San Francisco in 1858 had temporarily lessened credits to merchants in that city.26 TABLE

7

O U T S T A N D I N G C R E D I T S OF B A R I N O B R O T H E R S &

AMERICAN ACCOUNT,

COMPANY

ON

1857-1860

(Exclusive of Credits for Exports from the United States)

Date

Total

Sept. 30, 1 8 5 7 Dec. 3 1 , 1 8 5 7 Mar. 3 1 , 1858 June 30, 1858 Sept. 30, 1858

£3,2.30,691

Dec. 3 1 , 1858 M a r . 3 1 , 1859 June 30, 1859 Sept. 30, 1859 Dec. 3 1 , 1859 Mar. 3 1 , i860 June 30, i860 Sept. 30, i860

Total in Use

Dry Goods

Exchange

Far East

3,036,481 3,496,791

£3,037,591 1,148,910 1,930,381 3,166,791

£308,000 100,000 143,000 160,000

£110,000 50,000 70,000 70,000

£1,014,451 1,483,950 1,006,861 1,404,756

3,490,836

3,184,536

115,000

50,000

1,167,479

3.338,312-

3,078,011

105,000

50,000

1,117,955

3,149,856 3,431,015 3,381,371 3,611,148

3.033,556 3,136,715 3,170,071 3,455,948

111,000 111,000 111,000 116,000

40,000 40,000 40,000 40,000

1,003,506 1,086,569 1,095,701 1,161,593

Source: B P O C , Oct. 6, 1 8 5 7 , J a n . 9, Apr. 6, J u l y 6, 1858, Jan. 4, J u l y 5, 1859, J a n . 3, A p r . 3, J u l y 3, Oct. 1 , i860, and pertinent enclosures. •

Meanwhile, uncovered credits for exchange operations were reduced to ,£40,000. In April, 1859, Lee, Higginson & Company closed its account on the grounds that the terms of operation set in January, 1857, made it impossible to derive a profit, but the Barings made no offer to modify their terms of operation. Though the change was not reflected in subsequent lists of outstanding credits, in May, i860, the account of Ward, Campbell & Company was converted to a joint exchange business like that of King's Sons & Company. Only Oelrichs & Lurman and Goodhue & Company continued to operate exchange accounts under uncovered credits, both for _£io,ooo.27 As a matter of fact, operations under open credits constituted a smaller part of the exchange business of the Barings than the record

470

IMPENDING CONFLICT, 1857-1861

CH. XVI

would indicate. For one thing, Ward operated so-called remittance accounts in the spring and summer of each of the three years beginning in 1858. The first was merely a continuation of his operations during the months of great tension. Fears of a general European war growing out of the Austro-Sardinian clash and a sharp increase in the discount rate by the Bank of England induced the Barings in April, 1859, to order Ward to make collections and remit gold to the extent of at least 150,000 "at any rate of loss." His shipments of gold were carried on through July and at a profit, though Belmont's sale of bills on Rothschilds against remittance of the metal was much larger. Ward's remittances of gold in May, June, and July, i860, were also profitable.28 Meanwhile, Baring Brothers & Company had gone into active competition with the Browns in exchange operations against remittance of documentary bills. Forstall had remitted ,£423,000 between January and October, 1858, against bills issued in New York by Goodhue & Company and Ward, Campbell & Company. Though that operation proved profitable, the Barings desired to shift some of the responsibility to other firms. Consequently, in the autumn of 1858 the partners opened covered credits with the Citizen's Bank, of New Orleans, and the Bank of Commerce, of New York. The terms were % per cent commission and interest to debit at 5 per cent for both. Interest to credit of the Citizens' Bank was '/2 P e r cent below the rate of discount of the Bank of England, while the account of the Bank of jCommerce carried interest credited at the Bank rate.29 Operators in exchange could purchase fewer bills on the Barings after 1858 than they could have done in previous years. The London house operated as cautiously in marketing cotton as it did in granting dry goods credits and in exchange activities. Few purchases of cotton were made in the 1857-58 season but advances were large, especially from January to June, 1858. During the next season, fearful of low freight rates from Bombay and the high price of American cotton, the partners bought only 900 bales, and those were on joint account with Padelford, Fay & Company. Advances on consignments were considerable in volume, but the Barings sold all but one cargo afloat or soon after arrival. Even at that, many shippers lost money. In the 1859-60 season consignors were numerous, but

CH. XVI

MAINTAINING THE STATUS QUO

471

Baring Brothers & Company purchased only 2,000 bales of cotton in Mobile and none in New Orleans. All orders were canceled in March, i860, moreover, upon the expectation that a slackening of demand for manufactured textiles in the Far East and on the Continent would cause prices to decline. Hence the Barings were but slightly involved in the article when numerous stoppages and failures occurred in Liverpool during that spring and the following summer. In the fall of i860, upon the assumption that political troubles in China, Italy, Mexico, and the United States would reduce the consumption of cotton goods and that the speculation in Liverpool was unfavorable to safety in operations, the partners did not even give Ward orders to purchase cotton or to promote consignments until the end of December. Even then they wanted no more than a total of'10,000 bales. In wheat and flour the Barings were relatively more active than in cotton. The amount of funds of the London house utilized in breadstufïs was less than that in cotton, but the partners operated jointly with Grinnell, Minturn & Company and Oelrichs & Lurman on several occasions and on their own account alone on several others. Total gains were small, however. For example, the house lost money on a flour operation terminating in the spring of i860 but made a moderate gain on a purchase of 20,000 barrels of flour in the summer months following. 30 The resurgence in foreign trade in i860 was paralleled by an improvement of the Barings' business with American shipowners and packet lines. The number of accounts in the shipowning category had risen to 815 by November, 1858, and the partners estimated in March, i860, that their firm had nine-tenths of the London accounts of American owners and masters. At the same time, the increases in American demand for Weardale bar and pig iron contributed to the temporary revival in the profits of packet lines. As the freight money came in, the Barings congratulated themselves on the fruits of their liberal policy toward American shipping, which was groggy by i860 but was not competitively disabled until the next decade. 31 The Barings reduced rather than increased their holdings of American securities. For themselves and their clients, during 1859 and i860 for the most part, the partners sold portions of their

472

IMPENDING CONFLICT, 1857-1861

CH. XVI

holdings of bonds of Panama Railroad, Eastern Railroad, Maryland, Pennsylvania, Louisiana, Virginia, and New Orleans. The chief market was the United States. King's Sons & Company finally covered its deferred account on New Orleans bonds in April, 1858, but Robb's debt remained unpaid, though reduced, in i860. All new issues except two, even by favorite States, cities, and railroads, were refused. T o help sustain the drooping credit of the Hannibal & St. Joseph Railroad, the Barings jointly with Hope & Company took $300,000, largely in land bonds, in 1858 and 1859. Holdings of these securities were being reduced by sales in America during the summer and fall of i860. The London house joined Ward, Campbell & Company in purchasing $150,000 of United States bonds in the New York market in 1859. Only a part of these were sent to England for sale. Thus, as a consequence of the dullness of British demand and the higher prices in America, Baring Brothers & Company took but very small amounts of new issues of American securities while materially reducing their holdings of old issues on the eve of the Civil War. 32 Another reason for the decline in the interest of the Barings in securities from the United States was their increasing preoccupation with issues from other areas. They successfully brought out a /1,500,000 Chilean loan in November, 1858. By late i860 Baring Brothers & Company had also added Venezuela to the list of governments for which it acted as financial agent. A working arrangement for the payment of interest by Buenos Aires had been negotiated by George White in 1857, and substantial observance of that settlement augured well for improved credit and more business in that region. Mexican affairs were still in a turmoil in i860. The Barings had reason to wonder whether the ¿£24,557 invested in Mexican bonds for account of A . Dudley Mann and his sons would be repaid. As a matter of fact, Mann covered the account in 1862 and maintained a steady flow of information on Mexican affairs to the Barings from Washington. 33 Some European securities had also proved attractive to the Barings during the years 1857-60. In December, 1857, the London house purchased a ,£220,000 Norwegian loan, of which ,£70,000 was allocated to the London & Westminster Bank. 34 That was the first in-

CH. XVI

MAINTAINING T H E STATUS QUO

473

stance found by the author of collaboration by the Barings with a London joint-stock bank in marketing a foreign loan. Meanwhile, Russian affairs were employing a much larger amount of the funds of Baring Brothers & Company. After their investment in Russian Railway shares had reached £225,000 in 1859, the partners began to reduce their holdings, chiefly by sales in St. Petersburg. In the same year the London house was allocated £70,000 of a Russian government loan, which was followed by a joint venture with the Hopes to the extent of £879,000 in a Russian 4V2 per cent loan in i860. The extent of the Barings' participation in the management of the Russian Railway Company is not known, but when Thomas Baring retired from the board of directors in i860, Francis was elected vicepresident. The House of Baring continued to do a remunerative business as London agent of both the Russian government and the railway. 35 Canadian financial operations utilized more of the funds of Baring Brothers & Company than did European securities. For account of the Province of Canada the Barings and Glyn, Mills & Company sold £500,000 bonds in December, 1857, and soon disposed of the remaining £150,000 on hand. The two London agents brought out a £2,800,000 loan on the same account in January, i860, which was used to bring a measure of order into the then thoroughly confused finances of the province. Funds of the House of Baring were also often tied up through its actions as financial agent of New Brunswick, Nova Scotia, and Quebec City. Temporary loans pulled the Grand Trunk Railway through the panic of 1857 without recourse to bankruptcy, but matters grew progressively worse during the next three years. In spite of special loans from the Province and continuous efforts of the English board of directors, the finances of the company remained precarious. By i860 the debt owed to the two London agents was so large that they established by legal action a priority of their claim on the rolling stock of the road. Loans from the House of Baring alone amounted to $1,867,650 by the end of i860. Negotiations leading to the satisfaction of the claims of the agents and other creditors dragged on for years.38 Meanwhile, the credit operations of the Barings had increased for account of business men in Europe, Asia, and Latin America. As

474

IMPENDING CONFLICT, 1857-1861

CH. XVI

early as December, 1857, the partners told W a r d that American credits represented "but little more than half" of their business of that kind. Europeans held the largest proportion of the other half of the volume. In planning for American operations in December, 1857, the Barings told W a r d that as a consequence of the "great increase" in their European accounts they were not desirous of increasing their American credits. T o French merchants, alone, credits of the Barings for ventures in the Orient amounted to 500,000 in November, 1859. T o those obligations were added the increasing amount of advances made in Latin America and the Far East on sugar, coffee, tea, indigo, and other colonial produce. 37 By a policy of caution in their American activities after 1857 the partners contributed to the preëminent reputation of the House of Baring and prepared it for the war then impending in the United States. T h a t position of readiness was achieved through rigid adherence to rules of safety in granting uncovered credits, marked restraint in cotton operations, considerable reduction in the volume of American securities held, and the maintenance of liquidity without recourse to discounting. W h e n T h o m a s Baring received f r o m Lord John Russell on December 31, i860, a polite negative to his suggestion that the British Government should act as mediator in the quarrel between the N o r t h and the South, 38 he could rest assured that his firm had relatively little at risk at the moment in case of war in the United States. His attempt to avert hostilities, however, was undoubtedly prompted by an awareness of the impact of civil war upon the American business of the Barings. It was obvious that a naval blockade of southern ports by Federal forces would stop the marketing of cotton, while no great imagination was required to visualize what Confederate sea raiders could do to the commerce and shipping of the North. In view of this situation, the Barings were very fortunate to have been induced by economic changes and their o w n policies to effect a balanced global distribution of their interests in trade and finance. THE RECORD OF TRANSITION

In terms of diversification of interest and geographical distribution of risks, by i860 Baring Brothers & Company had returned to a posi-

CH. XVI

RECORD OF TRANSITION

475

tion similar to that existing in 1828. Prior to the reorganization of the firm in that year its operations for the account of business men and institutions in the United States had constituted an imporant but not preeminent part of its activities. As a result of the opportunities in America and the decisions of the managing partners to take advantage of them, the business of Baring Brothers & Company during the 1830's and 1840's had been predominantly for the account of citizens of the United States. After the collapse of American credit in the early 'forties, the partners began to expand their activities on behalf of European and Far Eastern firms. Gains upon commercial operations were at least as great in other parts of the world as in America, and the Barings had more confidence in the strength and integrity of the business men with whom they dealt on the Continent and in the Far East than with most firms in N e w Orleans and Liverpool. Except during the five years after 1848, most investing clients of the House of Baring also preferred the securities of Europe and the British Empire to those from the United States. The transition was so gradual that not until after 1857 was business in the United States less than the predominant interest of the London house. While effecting that change in concentration of interest, the Barings had adhered to their custom of performing a multiplicity of functions. They still bought and sold merchandise and securities on commission as well as for themselves, they engaged in an extensive acceptance business, they still operated their own ships, they kept the accounts of a selected group of depositors, and they continued to act as financial agents for business houses and governments all over the world. The number of the latter was greater by far in i860 than in 1828; numerous governments in Latin America and in the British Empire had been added to the list. At the same time the partners had adhered to almost all their basic policies and techniques. The backbone of the business of Baring Brothers & Company was its acceptance operations. The partners still relied upon granting uncovered credits to correspondents in whose strength and integrity they had faith. The rating system of the house itself, evolved in the first seven years after 1828, was always the chief means by which the Barings determined who should

476

IMPENDING CONFLICT, 1857-1861

CH. XVI

issue bills on their house. The rule forbidding the issuance of credits to those firms which had any other account in London remained a vital part of that search for safety. As a corollary to that policy, those American firms which issued their own acceptances in the United Kingdom were usually on the banned list. The house never solicited business and therefore frowned upon any advertising which bore the name of Baring Brothers & Company. Safety was emphasized in all activities, even to the minimization of profit upon occasion. And the Barings prided themselves most of all upon never discounting their bills receivable, thus maintaining, as always, a high degree of liquidity. In arriving at the position in which they found themselves in i860 the Barings had had to temper many of their policies and techniques with concessions and alterations from time to time. Their remarkable liquidity, for example, enabled them in every period of financial stringency, even in that of 1833-34, to relax their insistence upon the coverage of accounts, thus aiding friends and correspondents to weather the storms more easily. Consequently, the House of Baring was noted as a haven of strength and succor in hazardous times. Though the high reputation of the firm was always one of its chief competitive weapons, the managing partners had retained a large participation in financing the trade and in marketing the securities of the United States only by adjusting downward its commission charges. If those two items constituted the main competitive measures for American business, unobtrusive piecemeal concessions to individual firms and institutions were of considerable assistance in retaining the friendship and business of particular correspondents. Commissions paid to the Barings were often the result of bargaining. The virtual retirement of the Barings after 1853 from the field of marketing American securities was occasioned largely by their insistence upon observing two policies that they had always followed. They would still sell only those securities in which they were willing to invest for their own account and they insisted upon handling only those new issues which could be marketed at par or above. T h e partners labored hard always to maintain upon a high plane the credit of all corporations and governments for which the House of Baring publicly marketed securities. Their efforts to restore the credit of

CH. XVI

RECORD OF TRANSITION

477

American States in the 1840's was a case in point. The Barings preferred to operate only in government bonds. They publicly marketed no American railroad securities until 1852, and the decline in the prices of those securities by early 1854 contributed to a reassertion of their preference. In fact, the weakness of American railroad credit was one of the factors inducing the Barings to turn to marketing the bonds of such national states as Chile, Norway, and Russia, as well as the provinces of New Brunswick, Nova Scotia, and Canada in the 1850's. The policies of the Barings in their operations in securities are similar to those followed later by the best investment bankers during the heyday of the financial capitalist in the United States. The London firm felt that it assumed responsibility to both buyer and seller when it publicly marketed the securities of any government or corporation. That responsibility involved not only the protection of the borrower's credit but also of the investment of the client and of the reputation of the marketer. That attitude led the Barings to bring pressure upon certain States to take measures to restore their credit in the 1840's. At times the house influenced policies of railroads in France, Russia, and Canada by representation through a partner on the board of directors of the corporation, but there is no evidence that the firm ever attempted to dominate a company. In facilitating the marketing of American exports the Barings established an organization in the early 1830's and utilized it almost without deviation, except for changes in personnel, until i860. Consignments came forward through reliable American commission houses and special agents in Mobile and N e w Orleans. Before 1837 only a small part of the exports from the United States went forward on account of Baring Brothers & Company, but after the panic of 1837 and the subsequent crisis of 1839 had practically eliminated the strong firms in New Orleans, Mobile, and Liverpool, the partners bought more cotton and breadstuffs than ever before for account of their firm. In some years, however, the Barings received very small consignments as well as purchases of produce because the calculated risk seemed too great. The years from 1858 to 1861 afford the best examples of decision to forego gains in the marketing of American exports because the ventures seemed too hazardous.

478

IMPENDING CONFLICT, 1857-1861

CH. XVI

Probably the greatest single asset of the Barings was their ability to judge the advent of periods of stringency and crisis. Based iipon experience and a general awareness of cyclical fluctuations in business, that judgment enabled the partners to guide their clients before trouble began and to assist them during periods of stringency. Upon several occasions the strength of the House of Baring served also as a powerful bulwark of Anglo-American merchant bankers and of the Bank of England. Though the Barings failed to foresee the crisis of 1857, their American business had been conducted with such restraint during the preceding five years that they were able to afford the aid usually accorded their clients during such crises, and the London house was not called upon to lend support to weaker firms among their competitors as in 1837. As the facts of 1857 suggested, the partners in the House of Baring were not infallible. They made mistakes just as did their competitors and the remainder of the human race. Their curtailment may have been unduly vigorous in 1836-37. In a few cases, though very few, the partners placed their faith in men who failed; their record in choosing correspondents was merely better than that of their competitors, not perfect. The house lost money in not a few ventures in merchandise and American securities; the operations of late 1852 in the bonds of Pennsylvania State, Pennsylvania Railroad, and New Orleans were notably unprofitable. If a firm's success depends upon its being correct in its judgment more than half of the time, however, then Baring Brothers & Company deserved to make large profits in the years from 1825 to 1861. The combined decisions of the partners had actually been amazingly astute. It is noteworthy that the operations of the House of Baring were profitable with little more than a minimum of new policies and techniques during the entire period of preoccupation with business in the United States. Only in the years 1828-32 did the partners actually show inventive propensities. At that time innovation took the form of extension of the uncovered credit system, already in limited use, to financing trade in new areas, such as India, and to larger numbers of clients in the United States. Another new development was the systematization of the affairs of the countinghouse. The

CH. XVI

RECORD OF TRANSITION

479

most important new feature on that score was the creation of a credit-rating system. Nothing like those new departures was introduced between 1848 and 1853, which witnessed the only other surge of expansion of the House of Baring in American trade and finance after 1832. The disparity in interest rates between Europe and America and the impact of political disturbances were important elements in the two periods of marked expansion. Throughout the period from 1825 to 1861 money was more valuable, generally speaking, in the United States than in Europe. The flow of capital tended, therefore, to be from the Old World to the New. European revolutions in 1830 and 1848 induced timorous investors to deposit a substantial amount of funds with the Barings and to invest in American securities. "Hot money" in each instance gave an added fillip to an existing inclination on the part of the House of Baring to expand its American operations. Yet it should not be forgotten that the wide spread between interest rates in London and New York after 1853 could not induce the Barings and their British clients to invest in the securities of the United States. Memory of the British experience with railways, fears as to the strength of American railroad companies, and the apparently safe 5 per cent return on various governmental issues were powerful elements in that restraint. Disparity in the value of money was not the only determinant of capital flow. In the case of Baring Brothers & Company at least, and perhaps of banking generally, some new developments were the product of gradual change over a relatively long period of time. In the early 'thirties the partners gave uncovered credits to Continental merchants and financiers only on special occasions. As a result of gradual modification of that policy, after 1857 European and Far Eastern firms were enjoying, regularly, extensive credits on the London house. That new departure coincided with the switch of the partners to the marketing of Canadian, European, and Latin American issues of bonds in preference to those of the United States. The two changes together had produced by 1861 a volume of business greater than that of the House of Baring for account of the merchants and 480

IMPENDING CONFLICT, 1857-1861

Ch. XVI

financiers in the United States. At the same time, the new situation provided proof once more of the remarkable flexibility of the firm that was nearing its one hundredth anniversary.

EPILOGUE FLEXIBILITY and capacity to adjust to changing conditions has characterized the House of Baring to the present day. Under the name of Baring Brothers & Company, Limited, it continues to occupy an honorable place in the City, which was until recently the financial crossroads of the world. The firm has survived innumerable political changes in Britain and elsewhere, two World Wars and several smaller ones, and all the economic crises which seem to accompany the fluctuating behavior of human beings. While enjoying a reputation for strength and probity second to none, in 1890 the Barings experienced their own particular trial by fire. Laden with temporarily unmarketable South American securities and faced with heavy commitments to the Russian government among a host of other clients, the house was on the point of suspending payments. A catastrophe was averted by a body of guarantors, led by the Bank of England, and comprising almost the entire financial community of the United Kingdom. T o carry out the liquidation of the old partnership the present limited liability firm was organized. Far beyond the requirements of the law, private fortunes of the family, almost all of which had originated in the operations of the house, were made available to the liquidating firm. So well did that new entity perform its function that within slightly more than four years all guarantors were discharged from their obligations without the loss of a shilling. The errors in judgment and management which led to the embarrassment have never been adequately explained, but there can be no doubt of the honor of the house and family in meeting the crisis. Both obviously merited the temporary support afforded by the City and the Bank of England, which had been aided on many occasions by the House of

482

EPILOGUE

Baring since 1763. And Baring Brothers & Company, Limited, maintained the continuity of the business and of the name. Its present functions bear a marked resemblance to those performed in 1861 and earlier. It acts as agent for foreign governments in Europe, Asia, and Latin America, though not for the United States and Canada. It buys and sells securities for clients and for account of the firm itself. A selected clientele uses 8, Bishopsgate as a bank of deposit, though Baring Brothers & Company, Limited, does not do a general banking business in the accepted sense of the word in London. It issues acceptances, though since the recent war these are chiefly in respect of domestic trade. It is known to thousands of American travelers as an issuer of letters of credit for use in the United Kingdom and on the Continent. Until World War II and the advent of the Labor Government, the Liverpool house existed primarily to make advances on cotton and still maintains a merchandising department to handle consignments of goods, admittedly chiefly for "sentimental reasons." The last vessel built for the house was launched in 1869, but its whole shipowning interest was sold within the next decade. Since 1861 two new functions have been added; the firm acts as a registrar for certain companies and as a trustee in a limited number of selected cases. In their external relations the Barings continue to rely upon old friends of established reputation. That statement holds true for the Continent as well as the United States. The present agent of the Barings in New York and Boston assumed that post upon the termination of the special agency of Samuel Gray & George Cabot Ward on December 31,1885. During the late war the British government gave to Baring Brothers & Company, Limited, one extraordinary indication of its high rank in the City. Sir Edward Peacock, a managing director of the firm, was entrusted with the responsibility of liquidating British fixed assets in the United States prior to the passage of the LendLease Act. A member of the House of Baring thus was asked to play a part in the preservation of the metropolis of London and the Empire, which his firm had helped to build through acting as one of the channels for the flow of capital from relatively stable European areas to less developed regions of the world.

NOTES AND REFERENCES

NOTES AND REFERENCES (See list of abbreviations on p. xxv of this volume.) CHAPTER I ι. Edgar Vincent (Viscount d'Abernon), Portraits and Appreciations (London, 1931), pp. 14-15. Included by permission of Lady D'Abernon. 2. Thomas George Baring (Earl of Northbrook), editor and compiler, Journals and Correspondence from ¡808 to 1852 of Sir Francis Thornhill Baring, afterwards Lord Northbroo\ (Winchester, 1905), pp. 269-277; Bernard Mallet, Thomas George, Earl of Northbroo\, G.C.S.I.: A Memoir (London, 1908), pp. 1-2 n. 284. The birth date of Johann Baring given in Robert Dymond, History of the Suburban Parish of St. Leonard, Exeter (Exeter, 1873), p. 34, seems to be incorrect. 3. W. G. Hoskins, Industry, Trade and People in Exeter, 1688-1800 (University College of the South-West of England, Monograph No. 6, Manchester, 1935). PP· !5. 17» 62-74. 4. Mallet, op. cit., p. 2; Hoskins, op. cit., pp. 36-37, 47. Johann probably apprenticed himself to the Exeter merchant from whom his grandfather received serges; Edmund Cock by 1716 was sending 1,000 or more pieces of colored serge annually to Bremen (Charles [H.] Wilson, Anglo-Dutch Commerce and Finance in the Eighteenth Century, Cambridge, 1941, p. 40). 5. Hoskins, op. cit., p. 99. This author says {ibid., p. 122 n.), "The wealth and social standing of the successful Exeter grocer were considerable. His sons usually matriculated at Oxford and he himself often attained the title of Esquire and the office of Major." 6. Mallet, op. cit., p. 2; Dymond, op. cit., p. 18. 7. Loc. cit. 8. Ibid., p. 19. 9. Hoskins, op. cit., pp. 19-21, 119. 10. P. W. Mathews and A. W. Tuke, History of Barclays Ban\, Limited (London, 1926), pp. 91-92. 11. Mallet, op. cit., p. 2. 12. Vincent Nolte, Fifty Years in Both Hemispheres, or Reminiscences of the Life of a Former Merchant (New York, 1854), p. 18; Public Characters of 1809-10 (London, 1809), appendix, pp. 590-591; Adam Shortt, "The Barings" (unpublished manuscript in the Public Archives of Canada, Ottawa), pp. 23-24, quoting from a letter of Nathaniel Clayton to Alexander, Dec. 4, 1822, found in the possession of Baring Brothers & Co., Ltd. 13. Mallet, op. cit., p. 2. 14. Hoskins, op. cit., p. 48, citing Dr. Oliver, Biographies of Eminent Ex-

486

NOTES TO CHAPTER I

onians (published in the Exeter Flying Post in 1854), Poor Rate Assessments, Dymond, loc. cit., and Exeter Parish Registers. I examined the Flying Post items in a file of newspaper clippings on the Barings in the Exeter Public Library. 15. Nolte, op. cit., p. 157; J. B. Martin, "The Grasshopper" in Lombard Street (London, 1892), p. 309. 16. Dymond, op. cit., p. 22; Sir Bernard Burke, Genealogical and Heraldic History of the Peerage, Baronetage and Knightage, Privy Council and Order of Precedence (97th ed., London, 1939), p. 1862; Hoskins, op. cit., p. 181; Charles Wright and C. B. Fayle, A History of Lloyd's (London, 1928), p. 84; Shorn, op. cit., pp. 30-31. Francis lost ¿1,000 by his operations in London and Exeter between 1764 and 1767, as well as ¿2,000 through a joint adven'ture in barilla in 1773. 17. Charles Baring failed by a very narrow margin in his bid for control of Tiverton. A small group of merchants dominated the manufacture of woolens in the town, and the same group was practically the entire membership of the borough corporation. The corporation enjoyed the exclusive privilege of choosing the members of Parliament from the town and had also been granted the power to appoint the Receiver-General of the Land Tax for that part of Devon, "a post which enabled the holder to use tens of thousands of public money as private capital for long periods and so to extend his business over wider fields." As the leading merchant in the community, one Oliver Peard had dominated the merchants, the selection of members to the corporation, and the M.P.'s; he also served as Receiver-General of the Land Tax from 1744 to his death in 1764. Charles Baring offered to live in Tiverton, placed some orders for goods, and proposed to take the total output of the members of the corporation provided that the three vacancies therein be filled by himself, his brother, and a friend; that he be appointed ReceiverGeneral of the Land Tax; and that either he or his brother be sent to the House of Commons at the next election. In spite of riots in Baring's favor by the townspeople, who feared the loss of their livelihood by a rejection of the offer, the corporation turned down the proposition by a vote of eleven to ten. John Duntze, another Exeter merchant, was elected M.P. for Tiverton and never held the office of Receiver-General. Thus the manufacturers of Tiverton retained control in their own house, and the efforts of John & Charles Baring & Company to monopolize the woolen trade of the town came to naught. Martin Dunsford, Historical Memoirs of the Town and Parish of Tiverton in the County of Devon (Exeter, 1790), pp. 245-252; Hoskins, op. cit., pp. 44-46. 18. Beatrix F. Cresswell, A Short History of the Worshipful Company of Weavers, Fullers and Shearmen of the City and County of Exeter (Exeter, 1930), pp. 104-105. John Baring II was Master of the Company in 1757 and in 1795, Charles Baring in 1772, and John Baring III in 1791. In spite of the changes in accounting, the company had no ledger until 1780. 19. Dymond, op. cit., pp. 18-20. In 1816 John Baring III, eldest son of John

NOTES TO CHAPTER I

487

II, sold all the property to Sir Thomas Baring, eldest son of Sir Francis. The furniture was sold at auction in 1825, and by 1832 the estate had been purchased by builders and promoters of the present suburb. The advowson of St. Leonard, purchased for £90 in 1737, realized £3,500 in 1825 {ibid., pp. 2, 21; Charles Worthy, The History of the Suburbs of Exeter, London, 1892, pp. 8, 10, 63, 68, 70-71). 20. Dymond, op. cit., p. 20. 21. Loc. cit., quoting All the Year Round, Oct., 1865. 22. Hoskins, op. cit., p. 48; Mallet, op. cit., p. 2; Dymond, op. cit., p. 19; Exeter Public Library, collection of newspaper clippings on the Barings; Martin, op. cit., p. 309. 23. See British Museum, Additional Manuscripts (hereinafter cited B M A M ) , Liverpool Papers, Samuel Tremlett to John Baring, Dec. 11, 1788; Hoskins, op. cit., pp. 82-85. 24. One of his sons, a chronic invalid, had died without issue in 1810, and his eldest son, John III, had no children. 25. Charles Baring's religious views offended Mrs. Gould, his mother-in-law, who passed over him and her daughter to will her estate to William Baring upon her death in 1795. In the same year her grandson assumed the name and arms of Gould, thus beginning the elder branch of the Baring-Gould family. As "unhappily he supposed he had the Baring capacity for business," he entered the family firm and traveled extensively in France, Spain, and Russia. S. Baring-Gould, Early Reminiscences (London, c. 1923), pp. 97, 99, 101-102. Charles Baring's seven daughters married as follows: Jaquetta, Sir Stafford Northcote; Frances, William Jackson; Eleanor, Thomas Redhead; Mary, Hugh Mair, a merchant of London; Emily, Sir Samuel Young; Lucy, T . Louis Mallet; Caroline, the Rev. William Coney. Charles Baring II (1774-1865) established his residence at Flatrock, South Carolina. His son Alexander was sent to England for his schooling and later entered the Royal Navy. Sir Bernard Burke, Genealogical and Heraldic History of the Landed Gentry (London, 15th ed., 1937), p. 931. 26. The Gentleman's Magazine for 1798, Part II, pp. 696-697; Sir A. W . Ward and G. P. Gooch, editors, The Cambridge History of British Foreign Policy, 1783-1815 (New York, 1922), pp. 263-281. 27. Hoskins, op. cit., p. 49; Dymond, op. cit., p. 12. 28. Paul Mantoux, The Industrial Revolution in the Eighteenth Century (translated by Marjorie Vernon, rev. ed., New York, 1927) ; Witt Bowden, Industrial Society in England towards the End of the Eighteenth Century (New York, 1925) ; J. B. Botsford, English Society in the Eighteenth Century (New York, 1924), chaps. 5 and 6; L. H. Jenks, The Migration of British Capital to 1875 (New York and London, 1927), pp. 5-22; W . T . C. King, History of the London Discount Market (London, 1936), pp. 1-34; N . S. B. Gras, Business and Capitalism (New York, 1939), pp. 165-169. 29. Nolte, op. cit., p. 157.

488

NOTES TO CHAPTER I

30. Circular to Bankers, Oct. 5, 1838. 31. Hoskins, op. cit., pp. 26-27. 32. Count Egon Caesar Corti, The Rise of the House of Rothschild, 1J701830 (New York, 1928), pp. 26-27. Nathan Rothschild came to England with £20,000 in 1798. Of this sum, only one-fifth belonged to him. Thus the original capital of Francis Baring and Nathan Rothschild was approximately equal in amount. 33. Shortt, op. cit., pp. 29-30, citing information acquired from a small notebook, kept by Sir Francis, found by Adam Shortt in the Archives of the Baring Brothers & Co., Ltd.; Burke, Peerage, p. 1862. William Herring was a brother of Thomas, who became Archbishop of Canterbury in 1796. Harriet was a coheir of Thomas too. 34. Shortt, op. cit., pp. 30-31. 35. C. C. F. Greville, The Greville Memoirs, 1814-1860, 8 vols., Lytton Strachey and Roger Fulford, editors (London, 1938), II, p. 52. 36. Nolte, op. cit., pp. 18-19; Shortt, op. cit., pp. 46-47, citing a letter from Robert Morris to John and Francis Baring, dated Apr. 17, 1783, from letters found in possession of Baring Brothers & Co., Ltd.; Virginia D. Harrington, The New Yor\ Merchant on the Eve of the Revolution, Columbia University Studies in History, Economics and Public Law, no. 404 (New York, 1935), P- 75· 37. Mallet, op. cit., pp. 3-4. On the history of the Hopes, see Shortt, op. cit., pp. 75-84, and Wilson, op. cit., pp. 65-69. 38. Martin, op. cit., pp. 239-240. Richard Stone married Mary Herring in 1766. The dates of the transactions were not given. 39. W. T. C. King, London Discount Mar\et, pp. 2-9. 40. Public Characters of 1805 (London, 1805), pp. 38-39. 41. Mallet, op. cit., pp. 57-58. 42. See Lucy Stuart Sutherland, A London Merchant, ¡6c)¡-iyj4 (London, 1933), p. 16. 43. BMAM, Bentham Papers, Francis Baring to Jeremy Bentham, April 30, 1792. Baring probably met Bentham at Bowood, Lord Shelburne's estate, which Bentham began to frequent as early as 1780. Lord E. G. P. Fitzmaurice, Life of William, Earl of Shelburne, 3 vols. (London, 1875-1876), III, p. 449. 44. Shortt, op. cit., pp. 33-46; Mallet, op. cit., p. 4; Fitzmaurice, op. cit., III, pp. 409, 435, 453-458. Richard Dunning, second Baron Ashburton of the first creation, died without heirs in 1823. 45. See article on Dunning in Sir Leslie Stephen and Sir Sidney Lee, editors, The Dictionary of National Biography (hereinafter cited D N B ) , 22 vols. (London, reprint, 1921-22), VI, pp. 213-215. 46. Sir Francis hung this portrait, together with the portrait reproduced in the frontispiece of the present volume, at Stratton, his estate near Winchester. Until Aug., 1939, both could be viewed at the countinghouse of Baring Brothers & Co., Ltd., 8, Bishopsgate Street.

NOTES TO CHAPTER I

489

47. Public Characters of 1805, p. 34. 48. For the new loans between 1777 and 1784 see J. J. Grellier, The Terms of All the Loans which have been raised for the public service during the last fifty years: with an introductory account of the principal loans prior to that period; and observations on the rate of interest paid for the money borrowed (London, 2d ed., 1802), p. 51. 49. Shortt, op. cit., pp. 65-75, briefing from Shelburne MSS, found in the possession of Baring Brothers & Co., Ltd. "The West India Merchts.," he wrote, "are large owners of shipping & will probably make the greatest clamors if a measure is adopted so directly opposite to our act of Parliament." Baring to Shelburne, Oct., 1782, Shelburne Papers, L X X (photo-copies in the William L. Clements Library, University of Michigan), quoted in V. G. Setser, The Commercial Reciprocity Policy of the United States, 1774-1829 (Philadelphia, 1937), p. 43. Shortt, op. cit., p. 65, states: "When to Shelburne and his government was committed the duty of negotiating the treaties of peace, ending the war in America and Europe, he immediately confided to Baring the task of bringing order out of chaos in the national finances and restoring the credit of the government. In this Baring made such notable progress that thenceforth his services in this line were regarded as indispensable, whatever party might be in power." The source of these ideas is not given and has not been found. 50. Public Record Office (hereinafter cited as PRO), Chatham Papers, Francis Baring to William Pitt, Sept. 27, 1782, May 8, Oct. 9, Nov. 22, 1785; F. L. Nussbaum, "The Formation of the New East India Company of Calonne," American Historical Review, vol. 38 (Apr., 1933), pp. 475-497. In the letter of Oct. 9, 1785, while giving both pros and cons for helping France to establish a rival to the British East India Company, Baring strongly emphasized that French vessels might carry out troops and stores and that he doubted the legality of the British Company's aiding foreigners. He also gave his views on the projected dissolution of a "Caracas Company" and the substitution therefor of a "King's Company of the Philippine Islands." Thus, Sir Francis Baring appears to have shared with Thomas Coutts the honor of unofficial adviser to Pitt upon financial affairs. PRO, Chatham Papers, Francis Baring to William Pitt, Dec. 27, 1785; E. H. Coleridge, The Ufe of Thomas Coutts, Banker, 2 vols. (London, 1920), I, p. 297; II, pp. 62-63. 51. Shortt, op. cit., p. 31; Holden Furber, "The United Company of Merchants of England Trading to the East Indies, 1783-1796," Economic History Review, vol. X, p. 145 n. 1. 52. Shortt, op. cit., pp. 106-117, citing letters of Francis Baring to Dundas found in the Shelburne MS in the possession of Baring Brothers & Co., Ltd.; Sir George Rose, The Diaries and Correspondence of the Right Hon. George Rose, 2 vols., the Reverend L. Vernon Harcourt, editor (London, i860), I, pp. 43-48; Fitzmaurice, op. cit., III, pp. 409, 435; Beckles Willson, Ledger and Sword, 2 vols. (London, 1903), II, pp. 294-309.

490

NOTES TO CHAPTER II

53. Sir Francis Baring, The Principle of the Commutation-act established by Facts (London, 1786). 54. Shortt, op. cit., pp. 1 1 7 - 1 1 8 . 55. Public Characters of 1805, p. 37. 56. Shortt, op. cit., pp. 118-119, citing letters from Francis Baring to Henry Dundas, Nov. 18, 1791, and Jan. 28, 1792. 57. Public Characters of i8o¡, p. 37. 58. BMAM, Hastings Papers, Edmund Burke to Francis Baring, Oct. 14, 1792; Baring to Burke, Oct. 17, 1792; Baring to Warren Hastings, Nov. 28, Dec. 5, 1785, July 1, Aug. 13, 1804, Jan. 1 1 , 1805, July 15, 1809; Hoskins, op. cit., pp. 82-85; William Foster, The East India House (London, 1924), pp. 175-192; article on Charles Lamb in DNB. 59. PRO, Chatham Papers, Baring to Pitt, Aug. 22, 1788; Martin, op. cit., p. 309. Change in location was noted from headings on letters from Baring to Pitt in the years specified. 60. Nolte, op. cit., p. 158; PRO, Chatham Papers, Baring to Pitt, May 8, 1785, Jan. 24, 1795; Wright and Fayle, op. cit., p. 196. 61. Edward Channing, A History of the United States, 6 vols. (New York, 1905-25), III, p. 414; K. W. Porter, The fackjsons and the Lees, Two Generations of Massachusetts Merchants, 1765-1844, 2 vols. (Harvard Studies in Business History, Cambridge, 1937), I, pp. 23-27; C. A. Beard, Economic Interpretation of the Constitution of the United States (New York, 1913); R. A. East, Business Enterprise in the American Revolutionary Era (New York, 1938), passim. 62. Jenks, op. cit., p. 344 n. 26. 63. Shortt, op. cit., pp. 46-47, 56-57, citing letters of Apr. 17, 1783, from Morris to John & Francis Baring & Co., Ltd.; Margaret L. Brown, "William Bingham, Eighteenth Century Magnate," Pennsylvania Magazine of History and Biography, vol. 61, p. 396. See also B. A. Konkle, Thomas Willing and the First American Financial System (Philadelphia, 1937) ; articles on Thomas M. Willing, Robert Morris, and William Bingham in The Dictionary of American Biography, 20 vols. (Allen Johnson and Dumas Malone, editors, New York, 1928-37 — hereinafter cited DAB) ; N. S. B. Gras and Henrietta M. Larson, Caseboo\ in American Business History (New York, 1939), pp. 139-149. 64. Botsford, op. cit., ch. 5. He lost an election at Ilchester in 1790. See article on Sir Francis Baring in DNB, I, p. 1 1 1 2 , and item in Martin, op. cit., pp. 240-241. The latter gives the details of the contract between the merchant and the man who mistakenly thought that he had the borough in his pocket. 65. Public Characters of 1805, pp. 34-35. C H A P T E R II I. Jenks, Migration of British Capital, pp. 10-22; Herbert Heaton, "Financing the Industrial Revolution," Bulletin of the Business Historical

NOTES TO CHAPTER II

491

Society, X I (Feb., 1937), pp. 1 - 1 0 ; W. T. C. King, London Discount Market, pp. 14-26; Corti, House of Rothschild, pp. 26-27. 2. PRO, Chatham Papers, Baring to Pitt, Jan. 1 1 , 1793. 3. BMAM, Auckland Papers, Francis Baring and others to Rt. Hon. Henry Dundas, Jan. 28, 1793. He was still urging his views in 1795, according to J. H. Rose, A. P. Newton, E. A. Benians, general editors, The Cambridge History of the British Empire, 8 vols. (Cambridge, Eng., 1929-36), II, pp. 56-57· 4. PRO, Chatham Papers, Baring to Pitt, Jan. 24, 1795. 5. T. H. S. Escott, The Story of British Diplomacy (Philadelphia, 1908), pp. 182-183. 6. John Francis, Chronicles and Characters of the Stoc\ Exchange (Boston, 1850), p. 75; Grellier, Terms of All the Loans, p. 44 (see p. 46 for bids on the ¿25,000,000 loan in 1802). According to J. B. H. R. Capefigue, Histoire des grandes opérations financières; banques, bourses, emprunts, compagnies industrielles, etc., 4 vols. (Paris, 1855-1860), II, pp. 271, 273, the houses of Baring and Smith took the 3 % ¿1%000,000 Consolidated loan of 1804 at 64, portions of which were placed with correspondents of the Barings in Amsterdam, Hamburg, Vienna, St. Petersburg, Berlin, Venice, Basel, and Frankfort. 7. Sydney Buxton, Finance and Politics: an Historical Study, 1J83-1885, 2 vols. (London, 1888), I, p. 203 n. Cf. William Morgan, A Comparative View of the Public Finances from the Beginning to the Close of the Late Administration (London, 1801), pp. 9 - 1 1 , 26. 8. H. R. F. Bourne, English Merchants: Memoirs in Illustration of the Progress of British Commerce (London, 1886), p. 449. 9. BMAM, Huskisson Papers, Baring to Pitt, Dec. 10, 1805. 10. BMAM, Liverpool Papers, Luiz de Vasconcellos y Souza to Sir Francis Baring & Co., Dec. 10, 1803; Jacinto Fernandez Bandeira to Sir Francis Baring & Co., Dec. 17, 1803; Sir Francis Baring & Co. to Don Luiz de Vasconcellos y Souza, Jan. 1 1 , 1804; Sir Francis Baring to Rt. Hon. Henry Addington, Jan. 1 1 , 1804. Bandeira was a member of a Portuguese syndicate formed to transfer the 16,000,000 franc payment for neutrality to Napoleon. The syndicate wanted to raise the money by a loan issued in England, the money ultimately to be raised by a window tax. Since conditions for marketing a loan were unfavorable, all that Baring & Co. could do was to say that the English government had given permission to permit the forwarding of the money through the Barings for the Hopes. 1 1 . A. L. Thorold, The Life of Henry Labouchere (London, 1913), p. 2. 12. Buxton, op. cit., I, p. 6 n. For an example of another person, Edward Thornton of Hamburg, remitting subsidies to Austria and Russia, see BMAM, Huskisson Papers, Edward Thornton to William Huskisson, Jan. 17, 1806. 13. Capefigue, op. cit., II, pp. 271, 273; Wright and Fayle, History of Lloyd's, p. 197.

492

NOTES TO CHAPTER II

14. Jenks, op. cit., p. 345 η. 2g. 15. Brown, "William Bingham," p. 419. 16. Margaret L. Brown, "Mr. and Mrs. William Bingham of Philadelphia," Pennsylvania Magazine of History and Biography, LXI, p. 310, citing Robert Gilmor, Memoir. This story regarding Alexander Baring's mission is quite contrary to, but obviously more reliable than, that set forth in Nolte, Fifty Years in Both Hemispheres, p. 159. 17. Brown, "William Bingham," pp. 421-424, 430. In 1800 Sir Francis was also prepared to invest in American Federal securities, but abstained because he disapproved of the piecemeal borrowing policy of the government (New York Historical Society — hereinafter cited N Y H S — Rufus King Papers, Sir Francis Baring to King, July 24, 1800). 18. Baring Manuscripts, Library of Congress (hereinafter cited LCBM), Alexander Baring to Albert Gallatin, May 14, 1805; J. B. McMaster, The Life and Times of Stephen Girard, 1 vols. (Philadelphia and London, 1918), II, p. 242. 19. Burke, Peerage, p. 1862; Konkle, Thomas Willing, pp. 120-121. Alexander and Henry were two of the five executors of Bingham's estate, each receiving a £2,000 bequest. A trust was created, the executors being also the trustees. Anne and Maria received for life the income from three of the five parts of the trust, which still exists. Brown, "Mr. and Mrs. William Bingham," p. 323, and "William Bingham," p. 434. 20. Ibid., pp. 396-421; LCBM, Francis Baring & Co. to Albert Gallatin, Oct. 8, 1805; Konkle, op. cit., pp. 143, 189; Josephine Mayer and R. A. East, "An Early Anglo-American Financial Transaction," Bulletin of the Business Historical Society, XI, no. 5 (Nov., 1937), p. 90. Willing's firm reimbursed itself by drawing on Francis Baring & Co. after supplying provisions for General LeClerc's expedition in the West Indies (Cobbett's Weekly Political Register, II, p. 698). The information on the firm of Robert & John Oliver was kindly given to me by Stuart Bruchey, who did a study of the house for a master's thesis at the Johns Hopkins University. 21. James O. Wettereau, "New Light on the First Bank of the United States," Pennsylvania Magazine of History and Biography, LXI, p. 271; Pennsylvania Historical Society, Etting Collection, Bank of United States Papers, Baring Brothers & Co. to John Sergeant, June 20, 1817. 22. Wettereau, op. cit., p. 269; NYHS, Rufus King Papers, King to J. & F. Baring & Co., Sept. 8, 1797. Other examples of remittances via the Barings to the Dutch houses may be seen in ibid., Francis Baring & Co. to King, Feb. 16, 18, Mar. 5, 7, Apr. 4, 21, 1803; King to Francis Baring & Co., Feb. 19, Apr. 3, 18, May 4, 1803. These deal with remittances of /70,000 and ¿92,868 to the bankers of the United States in Amsterdam to meet obligations due Sept. ι, 1803. Cf. C. R. King, editor, Life and Correspondence of Rufus King, 6 vols. (New York, 1894-1900), V, p. 247.

NOTES TO CHAPTER II

493

23. McMaster, Girard, I, pp. 428-436; Η . E. Wildes, Lonely Midas: The Story of Stephen Girard ( N e w York, 1943), pp. 177-178; LCBM, Francis Baring & Co. to Gallatin, Aug. 18, 1803. By the time he had paid the damages on half of the protested bills, Girard's loss was $24,215; to this was later added ¿12,000, which Barclay & Co. failed to pay. 24. N Y H S , Rufus King Papers, m e m o r a n d u m on the "State of the Algerine F u n d , " Aug. 29, 1796, by J. & F. Baring & Co. 25. J. B. McMaster, A History of the People of the United States, 8 vols. ( N e w York, 1890-1913), II, pp. 588-590; N Y H S , Rufus King Papers, King to J. & F. Baring & Co., July 19, 1797; J. & F. Baring & Co. to King, July 20, 1797; "Col. David Humphreys Account relating to money advanced by J. & F . Baring & Co. of London for Barbary Purposes," Feb. 22, 1799; King to J. & F. Baring & Co., Aug. 9, 1799; J. & F. Baring & Co. to King, Aug. 12, 1799. 26. N Y H S , Rufus King Papers, King to J. & F. Baring & Co., Sept. 1, Oct. 19, 1798; K i n g to Francis Baring & Co., Feb. 16, 19, Apr. 8, 1801; J. & F. Baring & Co. to King, Oct. 19, Nov. 15, 1798, May 9, Sept. 20, Dec. 22, 1799; Francis Baring & Co. to King, Aug. 4, 1800, Mar. 21, Apr. 9, 1801. Fifteen h u n d r e d of the muskets were lost on board a ship captured by a French privateer. 27. Wettereau, op. cit., p. 275; Konkle, op. cit., p. 154; A. S. Bolles, The Financial History of the United States from 1789 to i860 (4th ed., N e w York, 1894), pp. 65-66; N Y H S , Rufus K i n g Papers, Christopher Gore to Alexander Baring, Sept. 14, 1802; Francis Baring & Co. to King, Feb. 18, 1803. 28. N Y H S , Rufus K i n g Papers, Sir Francis Baring to King, Feb. 13, 21, 1803; King to Francis Baring & Co., Feb. 17, 23-24, 1803; K i n g to Sir Francis Baring, Feb. 19, 1803; Francis Baring & Co. to King, Feb. 18, 1803; LCBM, Francis Baring & Co. to Albert Gallatin, Apr. 25, June 14, 1803. Gallatin was willing to pay the commission for guarantee in stringent times, such as in war periods, but not in peacetime. T h e Barings refused that proposition. T h e Bank of the United States had also refused to pay a commission for the guarantee of remittances f r o m England to the Continent. T h e Barings' commissions were the accepted ones at the time (C. R. King, op. cit., pp. 223-224). 29. G. Labouchere, "L'annexion de la Louisiane aux Etats-Unis et les maisons Hope et Baring," Revue d'histoire diplomatique, XXX (1916), pp. 423-450. 30. Barbé-Marbois to Willing & Francis, Sept. 13, 1803, in T . W . Balch, Willing Letters and Papers (Philadelphia, 1922), pp. 158-160; J. A. Stevens, Albert Gallatin (Boston, 1886), p. 201; H e n r y Adams, editor, Writings of Albert Gallatin, 3 vols. (Philadelphia, 1879), I» PP· I 4 5 - I 5 2 · 31. Parliamentary Papers, Second Report from the Secret Committee on the Expediency of the Ban\ Resuming Cash Payments, 1819, III, p. 119; Wettereau, op. cit., p. 269; Jenks, op. cit., pp. 66, 358 n.; LCBM, Alexander Baring to Gallatin, July 25, 1804; Francis Baring & Co. to Gallatin, Mar. 21, 1805; Baring Brothers & Co. to Gallatin, May 21, 1806, Apr. 27, 1807, Mar. 28, Aug. 25, 1808, Apr. 20, Sept. 1, 1809, Apr. 5, 1810, July 1, Nov. 16, 1 8 1 1 . 32. LCBM, Francis Baring & Co. to Gallatin, May 7, 2 1 , July 15, 1805; Balch, op. cit., pp. 166-167, quoting Willing to Gallatin, Mar. 11, 1805.

494

NOTES TO CHAPTER II

33. John Rydjord, "Napoleon and Mexican Silver," The Southwestern Social Science Quarterly, XIX, pp. 171-182; Philip G. Walters and Raymond Walters, Jr., "The American Career of David Parish," Journal of Economic History, IV, pp. 150-157; Richard Ehrenberg, Das Haus Parish in Hamburg, 2d ed. (Jena, 1925), pp. 119-121; Fritz Redlich, "Payments between Nations in the Eighteenth and Early Nineteenth Centuries," Quarterly Journal of Economics, L, pp. 699-701; Wright and Fayle, op. cit., p. 195; Nolte, op. cit., passim; LCBM, Alexander Baring to Gallatin, May 14, 1805; BMAM, Huskisson Papers, Sir Francis Baring to William Huskisson, Dec. 10, 1805, covering Baring to Pitt, same date; NYHS, Rufus King Papers, Alexander Baring to Rufus King, Nov. 10, 1805. This was the operation fictionalized by Hervey Allen in Anthony Adverse; he placed Adverse in New Orleans as agent instead of Vincent Nolte. 34. Alexander Baring, An Inquiry into the Causes and Consequences of the Orders in Council; and an Examination of the Conduct of Great Britain towards the neutral Commerce of America (London, 1808), p. 5. 35. NYHS, Rufus King Papers, Circular letter of Francis Baring & Co., Apr. ι, 1800; Martin, The Grasshopper, p. 309; McMaster, Girard, I, p. 32; The Post-Office Annual Directory, 1804 (London, undated) ; ibid., 1809 (London, undated); Kent's Directory for 1806 (London, undated); ibid., for 1807 and 1811 ; Holden's Triennial Directory, . . . Including the Year 1808 (London, undated). 36. Richard Rush, A Residence At The Court of London, 2 vols. (London, 1845), I, p. 160; Nolte, op. cit., p. 286; Second Report from the Secret Committee on . . . Ban\ Resuming Cash Payments, 1819, III, p. 114; McMaster, Girard, II, p. 231; Baring Papers, Official Correspondence (hereinafter cited BPOC), T. W. Ward to Baring Brothers & Co. (hereinafter cited Barings), May 20, 1850; Baring Papers, Letter Book (hereinafter cited BPLB), Barings to Ward, June 7, 1850. In NYHS, Rufus King Papers, Baring to King, June 4, 1808, Sir Francis refers to his "retreat from business and from parliament," which could mean that he had withdrawn from the firm at the same time that he withdrew from Parliament. 37. Nolte, op. cit., p. 331. 38. Sir Francis Baring, Observations on the Establishment of the Ban\ of England, and on the Paper Circulation of the Country (2d ed., London, 1797), and Further Observations on the Establishment of the Ban\ of England, and on the Paper Circulation of the Country (London, 1797), and Observations on the Publication of Walter Boyd, Esq., M.P. (London, 1801) ; W. Marston Acres, The Ban\ of England from Within, 1694-1900, 2 vols. (London, 1931), II, pp. 620-624. 39. BMAM, Auckland Papers, Sir Francis Baring to Lord Auckland, Nov. 14, 1797. 40. Wright and Fayle, op. cit., pp. 196, 227, 229. The Patriotic Fund was a fund to grant bounties or annuities to wounded men and to the dependents

NOTES TO CHAPTER II

495

of those killed in action, and to present rewards for special valor or skill to members of both services on all occasions that might arise during the war. 41. PRO, Chatham Papers, Sir Francis Baring to William Pitt, June 18, 1795; Sir Francis Baring to Charles Long, Mar. 28, 1800; Grellier, op. cit., p. 380; Mallet, Thomas George, p. 4. 42. BMAM, Hastings Papers, Sir Francis Baring to Warren Hastings, Jan. 28, 1808; Holden Furber, "The Beginnings of American Trade with India, 1784-1812," New England Quarterly, XI (June, 1938), pp. 257-264. 43. Henry Adams, History of the United States of America during the Administrations of Jefferson and Madison, 9 vols. (New York, 1890-1891), IV, p. 331; Parliamentary Papers, Report from the Select Committee on the High Price of Gold Bullion, 1810, pp. 130-133; Thorold, op. cit., pp. 4 - 1 1 . 44. Francis, op. cit., p. 75, source of quotation not given; Mallet, op. cit., pp. 4-6, 141; Gentleman's Magazine and Historical Chronicle (London, 1810), LXXX 2 , p. 293; Holden's Directory; Bourne, op. cit., pp. 451-452. Sir Francis also maintained a town residence on Hill Street, Berkeley Square, London. Including a wood of 800 acres, Stratton Park totaled 12,000 acres, the rental on which rose to as high as £10,000 a year and amounted to as much as ¿7,500 a year in the early 1820's. The Lawrence and Reynolds pictures were hung in the dining-room at Stratton. 45. Mallet, op. cit., pp. 4-5, quoting from the Journals of J. L. Mallet. 46. BMAM, Hastings Papers, Baring to Hastings, Jan. i i , 1805, commenting upon her death on Dec. 4, 1804. 47. Mallet, op. cit., p. 5; Public Characters of 1805 (London, 1805), p. 38. 48. Nolte, op. cit., pp. 39, 158; Bourne, op. cit., pp. 451-452, quoting from Anne Manning, Family Pictures (London, 1861), p. 84. 49. Mallet, op. cit., p. 4; see page 16 in Chap. I of this volume for Alexander's statement. 50. Gentleman's Magazine, 1810, p. 293; London Times, Sept. 29, 1810, quoted in Jenks, op. cit., p. 19; Nolte, op. cit., p. 158. 51. T. G. Baring, Journals of Sir Francis Thornhill Baring, p. 1 n.; Mallet, op. cit., pp. 5-6; W. H. James Weale and J. P. Richter, A Descriptive Catalogue of the Collection of Pictures Belonging to the Earl of Northbrool( (London, 1889), introduction. Sir Thomas Baring's London address in 1808 was 21, Devonshire Street; he went out as a writer and covenanted servant of Port William in Bengal in 1790, was appointed Assistant to the Examiner and Reporter to the Sudder Dewain Adawlut at Calcutta in 1794, received other promotions later, and returned to England on leave in 1798. His name appeared for the last time on the East India Company Register in 1801. 52. Nolte, op. cit., p. 158; S. E. Morison, Life and Letters of Harrison Gray Otis, 2 vols. (Boston, 1913), pp. 137-138; Burke, Peerage, pp. 1862-1863. 53. Francis Bickley, The Diaries of Sylvester Douglas, II, pp. 287-288, quoted in Brown, "Mr. and Mrs. William Bingham," p. 319. 54. Miss Berry, Extracts from the Journals and Correspondence of Miss

496

NOTES TO CHAPTER II

Berry from the Year 1783 to 1852, 3 vols., Lady Theresa Lewis, editor (2d ed., London, 1866), II, p. 344. 55. Mallet, op. cit., p. 11. His London residences were at 25, Bruton Street, Berkeley Square, in 1808, and at Portman Square ten years later. His total holdings in Crawley, for example, were 7441/2 acres. N. S. B. and Ethel C. Gras, The Economic and Social History of an English Village (Cambridge, i93°)> ΡΡ· ιοί, 630, 635-636, 647. 56. Ibid., p. 9; Wright and Fayle, op. cit., pp. 244, 258-259, 308-316; A. B. DuBois, The English Business Company after the Bubble Act, 1720-1800 (New York, 1938), pp. 131-135. As M.P., Alexander's constituencies were Taunton (1806-26), Callington (1826-31), Thetford (1831-32), and North Essex (1833-35). Opinions varied as to Alexander's pamphlet, published Feb. 7, 1808. "Mr. Baring is desirous to prevent a rupture between the two countries; but his vanity is stronger than his judgment: for instead of sending his lucubrations to the minister, he published them in a pamphlet; and furnished the abettors of Mr. Jefferson in America, with new arguments to support the extravagance of their pretensions; and thus accelerates the very object he is anxious to retard." Baring's father commented, "It was undoubtedly intended as an answer to War in disguise, but as nothing has appeared from its author in reply, & that the opinion is generally favorable even by Government to the facts & principles which it contains, much good may be said to have been done. Ministers & their friends say, it is too much American, for something they must say, but they cannot point out any part that will admit of such an interpretation, & their language in public has been much more conciliatory since its appearance." Lower Canada Sundries, 1808, J. Henry to H . W. Ragland, May 4, 1808; NYHS, Ruf us King Papers, Sir Francis Baring to Ruf us King, June 4, 1808. 57. Greville, Greville Memoirs, II, pp. 299-300. 58. Mallet, op. cit., p. 9. 59. Article on Alexander Baring in DNB; Mallet, op. cit., pp. 8, 265. 60. Acres, op. cit., II, p. 623; Sir John Clapham, The Ban\ of England: A History (Cambridge, Eng., and New York, 1945), II, p. 31. The dates of Alexander's service as a director were 1805-07, 1808-1810, 1811-14, 1815-17. 61. J. H . Powell, Richard Rush, Republican Diplomat, 1780-1859 (Philadelphia, 1942), p. 101; Mallet, op. cit., p. 9. 62. Jenks, op. cit., pp. 36-37; V. A. Nigohosian, La libération du territoire français après Waterloo, 1815-1818 (Paris, 1929), pp. 77-78, 150-156. Henry Burgess later criticized Pitt's borrowing policy and the governmental practices arising from it, hitting Alexander Baring and Nathan Rothschild as the leading makers of great profits (Circular to Bankers, Oct. 5, 1832, Mar. 1, 1833)· 63. BPOC, Samuel Ward to Bates, Dec. 31, 1846; K. W. Porter, John Jacob Astor: Business Man, 2 vols. (Harvard Studies in Business History, Cambridge, 1931), I, pp. 300-301, 303, 3 1 0 - 3 1 1 , 321, 338-339. 346-347; May e r a n d E a s t > op. cit., p. 90; articles on Astor and Samuel Ward in DAB. In 1813 the Bar-

NOTES TO CHAPTER III

497

ings also offered to the Bank of New York their services as general agents at a commission of Ά % on all transactions, interest to be charged at 5% for all payments made in advance of remittances and paid at 4% on all money left in their hands. 64. McMaster, Girard, II, pp. 23-24, 57-58, 79, 85-97, 172-174, 183-184, 204-208; K. L. Brown, "Stephen Girard's Bank," Pennsylvania Magazine of History and Biography, LXVI, pp. 30-32. Joseph Curwen, Girard's special agent, purchased enough Bank of the United States shares to raise Girard's total English repatriations to 948. Of that number 311 were purchased by the Barings for him at a cost of £29,196. He invested £66,943 of his funds in dry goods and £57,717 in American bonds, both for export to the United States. Since Curwen's purchase of 637 shares of the bank was made at prevailing prices, the total withdrawal of funds by Girard from the Barings must have reached more than £200,000. 65. McMaster, Girard, II, pp. 220, 223-225, 231, 301. The ship was later sold. 66. Ibid., II, pp. 241-242. 67. LCBM, Barings to Albert Gallatin, Aug. 25, 1807, June 1, 1809, Nov. 21, 1811. 68. Ibid., Oct. 30, Dec. 5, 7, 1810, June 18, Nov. 26, 1811, Jan. 18, June 12, Sept. 14, Nov. 16, 1812; Barings to Τ. T. Tucker, Dec. 5, 1810; Barings to Edward Jones, Dec. 14, 1813, Feb. 25, June 27, 1814; Barings to G. H. Campbell, Oct. 8, Dec. 9, 1814, Feb. 9, 1815; Nolte, op. cit., p. 161. 69. LCBM, Barings to Gallatin, Sept. 14, 1812; Barings to Joseph Nourse, Feb. 3, 1814; Barings to Edward Jones, June 27, 1814; Alexander Baring to A. J. Dallas, July 26, 1815; and Elizabeth Donnan, editor, 'Tapers of James A. Bayard," American Historical Association Annual Report for the Year, 1913, 2 vols. (Washington, 1915), II, pp. 210 and note, 213-214, 245-246, 251, 277; Nolte, op. cit., p. 186. 70. LCBM, Barings to G. H. Campbell, Oct. 18, Dec. 9, 1814; A. Baring to A. J. Dallas, July 26, 1815; Barings to Dallas, July 25, 1815, Feb. 29, 1816. 7r. Capefigue, op. cit., II, pp. 335-336, 340; III, pp. 28-29. Between 1807 and 1813, bills on London were bought up not only for account of the French government but also by those in Vienna, Berlin, and elsewhere to make payments to France. From 1809 to 1812, at least, Perregaux, Laffitte & Co. was charged with all banking operations with England. As a consequence it enjoyed constant relations with the houses of Labouchere (Rotterdam) and Baring. The Paris firm was reputed to have made £28,000 per year just by handling the correspondence of all French prisoners of war in English hands at 5 francs per letter. Ibid., II, 321-322. 72. Nolte, op. cit., p. 262. CHAPTER III 1. Jenks, Migration of British Capital, p. 44. 2. For the purposes of this section the best summary was found in Jenks,

498

NOTES TO CHAPTER III

op. cit., chap. II. See also W. T. C. King, London Discount Market, chap. II; A. Andréadès, History of the Ban\ of England, 1640 to 1903 (3d ed., London, 1935), pp. 235-255; Clapham, Ban\ of England, II, pp. 50-112; Acres, Ban\ of England from Within, II, pp. 415-425. 3. N. J. Silberling, "British Prices and Business Cycles, 1779-1850," Review of Economic Statistics and Supplements, preliminary volume V, p. 233. Cf. W. L. Thorp, Business Annals (New York, 1926), pp. 155-158. 4. W. B. Smith and A. H. Cole, Fluctuations in American Business, /7901860 (Cambridge, 1935), pp. 31, 158; L. C. Gray, History of Agriculture in the Southern United States to i860, 2 vols. (Carnegie Institution Contributions to American Economic History, Washington, 1933), II, pp. 1026-1027. Cf. Thorp, op. cit., pp. 117-120. 5. Jenks, op. cit., pp. 347-348 n. 9. 6. The definitive study on the liberation loans is Nigohosian, La libération; Jenks, op. cit., pp. 34-40, is the best short analysis. 7. Nigohosian, op. cit., pp. 67-68, 194-197. Barings and Hope & Co. (hereinafter cited as Hopes) agreed to buy 9,090,909 francs of 5 % rentes at 55, which would produce 100,000,000 francs for the use of the French government (9,090,909 χ 20 χ .55 = 99,999,999)· Payment was to be made over a twelve-months' period beginning in March, 1817. The contractors were to receive a commission of 2 % per cent on the nominal capital of 181,818,180 francs. Against this commission, plus any interest accruing, the contractors had to set all expenses for marketing the securities — interest, commissions, brokerage fees, and the transfer of the funds to foreign states. In view of the fact that rentes were then selling at 60 in Paris, the contractors could expect to make a considerable profit on their original purchase unless the issue of such a large amount of securities should depress the price below 55. 8. The final date of declaration was later set for Apr. 10, 1817 (ibid., pp. 197-198). According to the optional clause in the original contract, during the four months following the first delivery of rentes the houses of Hope and Baring were given the right of declaring that they would buy for 100,000,000 francs similar 5 % rentes at 58 provided that on the day of decision the price of rentes should not be above 60. Payment was to be made in nine monthly installments beginning not later than July 31, 1817. From Mar. 22, 1817, interest was to be paid on the nominal capital (172,413,780 francs), on which, also, the contractors were to receive a commission of 2'/4%. If the option was not taken up or the price of rentes held above 60, the Minister of Finance was to arrange for the same houses to provide 100,000,000 francs by selling rentes on commission. In this alternative arrangement the contractors were to be paid 1 % commission on the yield of sales, the government of France to assume the costs of marketing the rentes and effecting transfers of funds. 9. Ibid., pp. 74, 198-201; Neuflize Company Papers, agreement between the

NOTES TO CHAPTER III

499

houses of Baguenault, Greffulhe, Hottinguer, and Laffitte with André & Cottier, dated Apr. 6, 1817, indicating subcontracting on the part of the four French firms (by courtesy of Frank Manuel). On July 22, 1817, the houses of Hope and Baring, as well as Perregaux, Laffitte, engaged to provide the French government with 115,200,000 francs in return for 9,000,000 5 % consolidated rentes at 64, the commission on the nominal amount remaining at 2 ! /2%, but with the number and extent of participating French houses to be determined by the contractors. Payments were to be made in seven monthly installments beginning not later than September and were to be utilized for indemnity payments to the end of 1817. The original contractors added Delessert & Company of Paris to their group and the four signed the final contract on July 30. 10. BMAM, Liverpool Papers, A. Baring to Lord Liverpool, July 27, 1817. 11. Nigohosian, op. cit., pp. 75-76 n., 137-145. 12. Ibid., pp. 148, 157-158, 168-169, 201-209. 13. Ibid., pp. 170-186, 210-216. 14. Ibid., p. -181 n. 3. 15. Jenks, op. cit., p. 36; Circular to Bankers, Mar. 1, 1833. Francis, Chronicles of Stock Exchange, p. 76, sets the profits of Alexander Baring at £170,000. 16. Jenks, op. cit., pp. 36-37; Nigohosian, op. cit., pp. 77-78, 150-156; Circular to Bankers, Oct. 5, 1832, Mar. i, 1833. 17. Nigohosian, op. cit., pp. 141 n., 177 n.; Corti, House of Rothschild, pp. 299-302, 307-311, 315-316. Only about £100,000 went from Britain on the Austrian loan. The Barings had acted also as intermediaries for subscriptions by English investors in Russian rentes to the amount of £2,000,000 in 1818. Jenks, op. cit., p. 350 n. 25. According to Nolte, Fifty Years in Both Hemispheres, pp. 302-306, the Barings lost heavily speculating in French rentes in 1824. On the Danish loan see Niles' Weekly Register (Baltimore and Washington, 1811-1849), XXVIII, p. 106; Charles Fenn, A Compendium of the English and Foreign Funds . . . (London, 1837), p. 63; J. W. Gilbart, The History and Principles of Banking (London, 1834), p. 59, which is a list of foreign loans contracted in England between 1818 and 1832. 18. Jenks, op. cit., p. 40. 19. First seen by the author in E. T. Powell, The Evolution of the Money Market (London, 1915), p. 340, but found in several places later. 20. "Don Juan," canto XII. 21. Nile/ Register, XXIX, p. 364. 22. Jenks, op. cit., pp. 45-49, 52-58; Powell, Richard Rush, p. 167. 23. Fritz Redlich, "The Business Activities of Erich Bollman: Part II, The International Promoter," Bulletin of the Business Historical Society, XVII, pp. 108, 112. 24. Baring Papers, Miscellaneous Correspondence (hereinafter cited BPMC), memo, in script of Alexander Baring, Jan. 6, 1836; Baring Papers, Journal of

500

NOTES TO CHAPTER ΙΠ

George Η. White (unpublished), pp. 5, 9, 56-58; Circular to Bankers, Sept 14, 21, Oct. 12, 1827; Gilbart, op. cit., p. 59; Fenn, op. cit., p. 59; Edgar Turlington, Mexico and Her Foreign Creditors (New York, 1930), pp. 51, 58. 25. Jenks, op. cit., p. 354 n. 50; Corti, op. cit., p. 319. Brazilian bonds were the only Latin American issues initially marketed in London under the auspices of the Rothschilds (Fenn, op. cit., p. 59, and Gilbart, op. cit., p. 59). Thomas Wilson & Co. also shared the Brazilian venture. 26. "The securities of the new Governments of America are so dependent on the prevailing feeling in England respecting them, and are so much under the influence of the powerful houses in London, that, in estimating their value, but little reliance can be placed purely on the resources of the states that issue the obligations." Circular to Bankers, Oct. 26, 1827. 27. LCBM, Alexander Baring to A. J. Dallas, July 26, 1815; W. C. Ford, editor, Writings of John Quincy Adams, 7 vols. (New York, 1913-1917), V, pp. 310-312, 325-326. The bonds were never sold (Bolles, Financial History, p. 234 n). 28. LCBM, A. Baring to A. J. Dallas, July 26, 1815; Barings to Dallas, Nov. 21, 1816; Barings to J. Q. Adams, Jan. 21, 1817. Such lapses by the Treasury elicited immediate requests from the Barings for specific authorizations. 29. Ibid., Barings to G. H. Campbell, Oct. 8, 1814; Barings to Dallas, Oct. 16, Nov. 20, 1815. "You may reply," wrote the Barings, "on the business of the Navy Department meeting from us that attention which it has always been our study to pay to all the concerns of the United States" (ibid., Apr. 9, 1816). 30. J. H. Powell, op. cit., p. 101; LCBM, Barings to Dallas, Aug. 15, 1815; Barings to W. H. Crawford, June 19, Oct. 16, 1817, Feb. 19, May 21, June 25, 1818, June 10, 1819, July 20, 1820, July 18, 1821, Jan. 9, July 5, 1822; and Parliamentary Papers, Second Report from the Secret Committee on the Expediency of the Ban\ resuming Cash Payments, 1819, III, p. 119. If Holland's figure was accurate, then the estimate of English holdings of United States securities—$30,000,000 in 1821 — by "The Aurora" was certainly quite high (Niles' Register, XX, p. 273). 31. R. A. Bayley, History of the National Loans of the United States from July 4, 1776 to June 30, 1880 (Washington, 1881), pp. 170-178, 267. New York State 6's, which were the first American State securities quoted in London, appeared in 1817. By 1824 Pennsylvania, Virginia, and Louisiana bonds had exchanged hands in small amounts. Ohio bonds did not get on the list in London till 1828, with Maryland appearing in 1830, Mississippi in 1831, Philadelphia and Baltimore in 1832, Alabama and Indiana in 1833 (Jenks, op. cit., p. 361 n. 25). 32. The Manhattan Company, for example, was the initial purchaser of most of the New York State loans. H. W. Domett, A History of the Ban\ of New Yorl^, 1784-1884 (New York, 1884), pp. 73-74; Warshaw Collection, New York State Certificates of Transfer, Nos. 28, 29, 32, 33, 124, with the

NOTES TO CHAPTER III

501

exception of the last-named (Oct. I, 1823), all bearing interest from Aug. 22, 1823. 33. R. C. H. Catterall, The Second Ban\ of the United States (Chicago, 1903), pp. 471, 508. Jenks, op. cit., p. 66, states that the permanent English investment in B. U. S. shares approximated $3,000,000 in 1820 and $4,000,000 by 1828. 34. Warshaw Collection as cited in note 32. 35. Nolte, op. cit., pp. 297-299; S. A. Caldwell, A Banking History of Louisiana (A Diamond Jubilee Publication Study, No. 19, Baton Rouge, 1935), pp. 43-46; Baring Papers, Printed Material (hereinafter cited B P P M ) , an act of Mar. 14, 1822, " T o Authorize the City of New Orleans to Create a Fund or Capital to Procure a Loan"; BPMC, memo, on the "Bank of Louisiana," 1824; W. G. Sumner, A History of Banking in All the Leading Nations, I: The United States (New York, 1896), p. 244; Niles' Register, X X V I I , p. 1 5 1 . The figure of $18,515,764.50, an estimate which first appeared in the National Intelligencer, would seem to be more nearly accurate than the "nearly thirtyeight million dollars" in "American stocks" held in 1824 by English investors according to the estimate in the British Traveller, unless the later figure included shares in various banking institutions {ibid., X X V I I , p. 336). 36. Etting Collection, Bank of the United States Papers (Historical Society of Pennsylvania), John Sergeant to William Jones, Mar. 14, 18, June 24, 1817; Barings to Sergeant, June 20, 1817; Julian B. Boyd, "John Sergeant's Mission to England for the Second Bank of the United States: 1816-1817," Pennsylvania Magazine of History and Biography, LVIII, pp. 2 1 3 - 2 3 1 . 37. Ibid., pp. 226, 231. 38. Louisa P. Haskell, "Langdon Cheves and the United States Bank: a Study from Neglected Sources," Annual Report of the American Historical Association for the Year 1896, 2 vols. (Washington, 1897), I, p. 365, 368-369; Catterall, op. cit., p. 7 1 ; Niles' Register, X V I , p. 19, XVIII, p. 77. 39. Haskell, op. cit., pp. 368-369; Niles' Register, XVIII, p. 1 1 7 , X I X , p. 249, X X V I , p. 7, X X I X , p. 32. 40. Mayer and East, "Early Anglo-American Financial Transaction," pp. 91, 94-95. 41. R. W. Hidy, "The House of Baring and the Second Bank of the United States, 1826-1836," Pennsylvania Magazine of History and Biography, L X V I I I , pp. 270-273; Catterall, op. cit., pp. 1 1 1 - 1 1 2 . 42. Herbert Heaton, "Benjamin Gott and the Anglo-American Cloth Trade," Journal of Economic and Business History, V, p. 159; Niles' Register, X X I X , p. 230; Circular to Bankers, June 23, 1837; H. A. Hill, The Trade and Commerce of Boston, 1630-1890 (Boston, 1895), p. 101; Harvard Graduate School of Business Administration (hereinafter cited H G S B A ) , Bryant & Sturgis Letter Book, Bryant & Sturgis to Timothy Wiggin, June 27, 1825, Jan. 16, Mar. 25, Nov. 28, 1826, Mar. 31, 1828; Bryant & Sturgis to Bates & Baring, Apr. 10, 1826, Aug. 28, 1827. Samuel Williams had given the Boston firm an open credit of / i 5,000 which had never been used.

502

NOTES TO CHAPTER III

43. Κ. W. Porter, Jacksons and Lees, I, pp. 55-56, and references cited. 44. Catterall, op. cit., p. 112 and n. 3. See HGSBA, Bryant & Sturgis Letter Book, Bryant & Sturgis to Captain Barnabas Mann, Ship Mentor, Batavia bound, Dec. 30, 1825. 45. Ibid., Bryant & Sturgis to Forrestier & Co., Dec. 30, 1825. 46. See page 66 of this volume. 47. Nolte, op. cit., pp. 175, 185, 187, 272-273, 275, 277, 280, 314-318, 325-333, 335-337. 341-342; R. G. Albion, The Rise of New Yor\ Port [181 ¡-i860} (New York and London, 1939), pp. 114-115. Nolte said he seldom purchased less than 16,000 to 18,000 bales, as compared to purchases of 6,000 to 8,000 by other first-class houses in New Orleans, and that he had purchased 40,000 bales by April, 1821, for the 1820-21 season, his most successful. 48. Albion, op. cit., p. 285. 49. NYHS, Rufus King Papers, A. Baring to Rufus King, Nov. 13, 1825; Nolte, op. cit., p. 335, quoting a letter from Alexander dated Sept. 11, 1826; Niles' Register, XXIX, p. 382. On the crisis of 1825-26 in England, see W. T. C. King, London Discount Market, pp. 35-70, and Clapham, Ban\ of England, II, pp. 93-102. 50. Thorp, op. cit., pp. 119-120; Smith and Cole, op. cit., p. 158. 51. HGSBA, Bryant & Sturgis Letter Book, Bryant & Sturgis to Henry & McCall, Feb. 13, 1826; Bryant & Sturgis to John Hartt, May 5, 1826; Bryant & Sturgis to Collings & Maingy, May 18, 1827; Bryant & Sturgis to J. P. Sturgis & Co., Apr. 19, May 16, Oct. 27, 1828. The Boston house opined that the Philadelphians' commercial existence depended upon the credits they obtained on duties, and expected their failure from 1825 onward. The last firms to fail (Oct., 1828) were Samuel Archer and Jones, Oakford & Co. 52. Thorp, op. cit., pp. 157-158; Silberling, op. cit., p. 233. 53. Circular to Bankers, Mar. 14, Oct. 10, 1834, Jan. 15, Sept. 2, 1836; Jenks, op. cit., p. 67, and references cited; R. G. Albion, Square-Riggers on Schedule (Princeton, 1938), pp. 36-40, 182-184; Parliamentary Papers, Report from the Select Committee on Manufactures, Commerce and Shipping, 1833, p. 61. Not all English imports were on American account; some were on English account, credit being advanced by American merchants {ibid., p. 59). 54. Nolte, op. cit., pp. 285-287; Porter, John Jacob Astor, I, p. 347; Massachusetts Historical Society, T. W. Ward Papers (hereinafter cited MHS, W a r d Papers), T. W. Ward to Joshua Bates, June 27, 1832; Bates to Ward, Nov. 7, 1830. 55. R. W. Hidy, "The Organization and Functions of Anglo-American Merchant Bankers, 1815-1860," Journal of Economic History, I, supplement, p. 54; Circular to Bankers, June 9, 23, 1837; MHS, Ward Papers, Diary, 182834· 56. Nolte, op. cit., pp. 285-287, gives more detail than any other source, though with slight inaccuracies; articles in DNB and DAB on Alexander and Thomas Baring and Bates; Martin, "The Grasshopper," p. 309; MHS, Ward

NOTES TO CHAPTER III

503

Papers, Diary, 1824-34. On the dates of Alexander's and John's retirement from the firm see BPLB, Barings to Prime, Ward & King, Jan. 3, 1842; Barings to Ward, May 5, 1848. 57. Burke, Peerage, pp. 156-157; Nolte, op. cit., pp. 148, 159, 281-288; Circular to Bankers, Feb. 4, 11, 1842; Niles' Register, XXIX, p. 182; C. F. Adams, editor, Memoirs of John Quincy Adams, comprising portions of his diary from 1795 to 1848, 12 vols. (Philadelphia, 1874-77), V , p. 212. As late as 1842 Francis and his father were being sued by one Thomas Kinder for damages growing out of the Mexican adventure. 58. Burke, Peerage, p. 1731; Acres, op. cit., II, p. 625; MHS, Ward Papers, Bates to Ward, Nov. 7, 1830. His periods of service as director were: 1828-30, 1831-33, 1834-36, 1837-39, 1840-41, 1842-45, 1846-49. 59. D N B ; MHS, Ward Papers, Bates to Ward, Apr. 19, 1847; T . G. Baring, Journals of Sir Francis Thornhill Baring, p. 37; Wright and Fayle, History of Lloyd's, pp. 348-379, especially 362, 375, 379. His periods of service as director of the Bank of England were: 1848-50, 1851-53, 1854-56, 1857-59, 1860-62, 1863-67 (Acres, op. cit., p. 627). In the obituary printed in the Annual Register for 1873, part II, pp. 157-158, it was stated that exclusive of those mentioned above, he had been director of the East and West India Dock Co., trustee of the National Gallery, fellow of the Royal Society and of the Royal Geographical Society, vice-president of the Society of Arts and of the Merchant Seamen's Orphan Asylum, member of the Royal Commission for the Exhibition of 1851, trustee of Morden College, a governor of Wellington College, and a liberal supporter of many charitable institutions of London. 60. MHS, Ward Papers, T . W. Ward to S. G. Ward, July 14, 1853; Weale and Richter, Pictures belonging to the Earl of Northbroolj, introduction; Mallet, Thomas George, p. 266. On p. 140 of Mallet's book there is a picture of "Thomas Baring, Esq., M.P. (1862) from a drawing by George Richmond." 61. T . G. Baring, op. cit., p. 37. 62. Articles on Bates in D N B and D A B ; MHS, Ward Papers, Edward Gray to Mr. Dorr, Jan. 7, 1912, from a brief outline of his earlier years prepared by Bates; National Intelligencer, Feb. 9, 1867; Report on Manufactures, 1833, p. 45. Beckford & Bates was apparently still an active firm as late as the summer of 1813 (see H. A. Hill, op. cit., p. 114). 63. S. G. Ward, Ward Family Papers (privately printed, 1900), pp. 5-6; HGSBA, Bryant & Sturgis Letter Book, Bryant & Sturgis to Joshua Bates, Apr. 10, 1826; MHS, Ward Papers, Bates to Ward, Nov. 20, 1853. 64. Ibid., Sept. 21, 1846; Maud Howe Elliott, Uncle Sam Ward and His Circle (New York, 1938), p. 141, quoting a letter from Sam to his father. The house in Portland Place was acquired in 1846. West painted Bates in 1832. MHS, Ward Papers, Bates to Ward, May 15, 1832. 65. Ibid., Diary, Aug. 30, 1841. 66. Perhaps Bates' friendship with Napoleon III grew out of the fact that the Barings were bankers for his uncle, Joseph Bonaparte. Bates went bail

504

NOTES TO CHAPTER IV

for Louis Napoleon when that worthy was arrested in connection with a projected duel in 1840. The sum to the Library was made in two donations. At first Bates gave $50,000 for the purchase of books, provided that the city furnished a suitable building to house them. The gift was funded, the income to be used as stipulated. Later Bates gave 27,000 books, exceeding in cost the first donation. His memory is perpetuated in the Library, which was opened in 1854, by Bates Hall, a marble bust, a daguerreotype, and the painting reproduced in this book. In a letter to the mayor of Boston concerning his gifts to the Boston Public Library, Bates indicated why he sought to aid in the formation of a library: "Having no money to spend and no place to go to, and not being able to pay for a fire or light in my own room, I could not pay for books, and the best way I could pass my evenings was to sit in a book store and read, as I was kindly permitted to do." D N B ; McMaster, Life and Times of Stephen Girard, II, pp. 322, 327; Niles' Register, LVIII, p. 96; MHS, Ward Papers, Bates to Ward, Apr. 3, 1857. 67. Ward, Family Papers, p. 6. 68. For the policies of Sir Francis, see p. 42, Chap. II, of this volume. C H A P T E R IV 1. BPLB, Barings to T . W. Ward, Apr. 14, 1831; MHS, Ward Papers, Bates to Ward, Mar. 22, 1831. 2. L. F. Hill, Diplomatic Relations between the United States and Brazil (Durham, N. C., 1932), p. 75; MHS, Ward Papers, Bates to Ward, Nov. 24, 1830; BPLB, Barings to Ward, Feb. 4, June 14, 1831. In relation to the Reform Bill the Barings noted that there was "some enquiry at the Bank for Gold, of wh. the papers may make something, but it is of no importance — the exchanges are very favorable" (ibid., May 14, 1832). When foreign governments began to indicate a desire to borrow, the market rate for money rose to 3.5% in London (ibid., Apr. 7, 1831). 3. Cholera appeared in the Baltic, the United Kingdom, and the United States. Dull markets in northern Europe in the summer of 1831 were attributed in part to the disease. It restricted sugar sales in the interior of Russia from 1830 to 1832, and was severe enough in England in the winter and spring of 1831-32 for the Barings to fear that it might invade the manufacturing districts, put an end to trade, and cause a panic in the London money market. Ibid., June 22, July 30, Nov. 16, 1831, Feb. 17, 22, Mar. 30, May 5, 1832. 4. Silberling, "British Prices and Business Cycles," V, p. 233; Smith and Cole, Fluctuations in American Business, pp. 60, 73, 158; Circular to Bankers, Mar. 5, 12, 19, 1830, Dec. 28, 1832. Compare on prices Thorp, Business Annals, pp. 1 2 0 - 1 2 1 ; G. F. Warren and F. A. Pearson, Prices (New York, 1933), p. 25; Anne Bezanson, R. D. Gray, and Miriam Hussey, Wholesale Prices in Philadelphia, ¡784-186! (Philadelphia, 1936), chart opposite p. 4; and G. R.

NOTES TO CHAPTER IV

505

Taylor, "Wholesale Commodity Prices at Charleston, South Carolina, 17961861," Journal of Economic and Business History, IV, pp. 859, 861. 5. W . T . C. King, London Discount Market, p. 80; Smith and Cole, op. cit., p. 192. The annual percentage figures for London were: 1828 — 3.04; 1829 — 3.38; 1830 — 2.81; 1831 — 3.69; 1832 — 3.15; 1833 — 2.73. 6. Jenks, Migration of British Capital, pp. 61-62. 7. BPLB, Barings to Ward, Feb. 14, Oct. 4, 1831, Mar. 14, 1832; MHS, Ward Papers, Bates to Ward, Feb. 6, 1831. Wilson & Co. was connected with loans in Denmark, Brazil, and Louisiana among others (see Gilbart, Banking, p. 59, and Fenn, English and Foreign Funds, pp. 59, 63). 8. BPLB, Barings to Ward, June 18, 1831. 9. MHS, Ward Papers, Bates to Ward, Dec. 21, 1831. Among correspondents of Bates & Baring were: Stephen Northam of Newport, R. I.; Julien Tucker and Stephen White of Salem; T . B. Curtis, Horace Gray, Joseph Baker & Son, Bryant & Sturgis, James & Thomas H. Perkins & Sons, Edmund Baylies, S. C. Gray, C. & A. Thorndike, Israel Thorndike, Thomas and Edward Motley, Munson & Barnard, Edward Craft, Charles Thatcher, and Nye, Hall & Williams, of Boston; Goodhue & Co., Jacob Lorillard, Samuel Ellis, and Davis & Brooks, of New York; Hon. James Lloyd and William D. Lewis, of Philadelphia; D. Crocker & Co., Hall, Shapter & Tupper, T . & T . Street, and John Stoney, of Charleston; Francis Fesser & Co. and Mariatequi, Knight & Co. of Havana; Zimmerman, Frazier & Co., of Buenos Aires; ship captains R. Stanhope, John Bort, Robert B. Forbes, and others. 10. MHS, Ward Papers, Ward to Bates, Jan. 4, 1831. 11. BPLB, Bates to John D. Lewis (St. Petersburg), Dec. 31, 1827. 12. BPMC, Gordon, Forstall & Co. (New Orleans) to Thomas Baring (New Orleans), Jan. 10, 1829; Gordon, Forstall & Co. to Barings, Feb. 27, Mar. 16, 1829; Nott & Co. to Thomas Baring, Feb. 25, 1830; Nott & Co. to Barings, June 26, Aug. 10, 1830; BPOC, Prime, Ward, King & Co. to Barings, Mar. 31, July 7, 1830. 13. Sumner, History of Banking, I, p. 244; Caldwell, Banking History of Louisiana, pp. 46-47; Jenks, op. cit., p. 361 n. 25; BPMC, H. Lavergne and A. H. Gordon (commissioners of the Association then in London) to Barings, Aug. 19, 1828; copy of a memorandum from the Grange, signed A. B., dated "Septr. 1828"; Gordon, Forstall & Co. to Barings, Feb. 27, Mar. 16, 31, Apr. 5 (with enclosure of instructions to Louis Allard, Commissioner of the Association) and Apr. 22, 1829. 14. BPLB, Barings to Ward, Mar. 30, Apr. 22, June 6, 22, 1831; Barings to J. Trotter, cashier of the "Pennsylvania Bank," Oct. 29, 1831. 15. BPLB, Barings to Ward, Nov. 14 (copy attached of Thomas Baring to Biddle, Nov. io, 1829) and Nov. 22, 1831, both written by Baring and reviewing relations with the bank from 1827 to 1831. By courtesy of The Historical Society of Pennsylvania the material in this chapter on the Bank of the United States stands, with some modifications, as

506

NOTES TO CHAPTER IV

a reprint of R. W. Hidy, "The House of Baring and the Second Bank of the United States, 1826-1836," Pennsylvania Magazine of History, July, 1944. 16. BPOC, Ward to Barings, May 22, 1848, enclosing the original letter from Thomas Baring to Ward, dated Oct. 3, 1829, covering the power of attorney for Ward to act as agent for the Barings. 17. BPLB, Bates to John Webb, Feb. 16, 1828; Bates to Thomson, Bonar & Co. (London), Feb. 2, 1828; S. G. Ward, Ward Family Papers, pp. 1-6; Bryant Sturgis Letter Books, Sturgis to Bates, Oct. 5, 1828. Bates had counted in New York 35 agents from different parts of Europe. He urged his London correspondent to establish close relations with an active American firm that would "use all proper exertion to increase your American connexions." 18. Ward, Family Papers, pp. 1-6; article by R. W. Hidy on Thomas Wren Ward in the DAB and references cited; William Ropes Account Books, 181725, by courtesy of Mrs. Cabot (Ropes established the house of William Ropes & Co., St. Petersburg, in 1831 or 1832) ; Hill, Trade and Commerce of Boston, p. 128; BPLB, Barings to Ward, Feb. 22 (Ropes), Dec. 30 (Webster), 1831; MHS, Ward Papers, Jonathan Goodhue to Ward, Jan. 1 1 , 1828; Ward to Bates, Mar., 1857; Diary, 1828-34, 1 827-53; Edward D. Bangs to Ward, Mar. 14, 1828. 19. J. E. Semmes, John H. B. Latrobe and His Times, 1803-1891 (Baltimore, 1917), p. 460. See also MHS, Ward Papers, Ward to Bates, Dec. 16, 1844, and Diary, 1827-53, Oct. 19, 1829; BPOC, Ward to Barings, Dec. 2, 1848 (enclosure). 20. S. G. Ward, op. cit., p. 3. In Semmes, op. cit., p. 460, Ward was characterized as accurate in judgment, cool, determined, and "not misled by false and glittering statements." 21. BPMC, Joshua Bates to Barings, Apr. 26, 30, May 13, 1841; MHS, Ward Papers, T. W. Ward to his sons, George and John, Dec. 9, 1844. "Let safety be your motto," said the father to the two who were about to establish a private banking house. "Do not be afraid to say no on all proper occasions." 22. BPLB, Barings to Ward, Feb. 5, Apr. 14, 22, June 6, July 22, 30, 1831, Feb. 17, 1832; BPOC, Ward to Barings, Aug. 15, 1832 (enclosure). 23. The delay of the Barings in deciding upon Ward's compensation was the result of their desire to avoid charging as large a salary as they knew their agent to be worth against the total commissions arising from credits granted by him. At first they thought of having Ward arrange with his brother-in-law, S. C. Gray, to operate an exchange account on the Barings, but the practice of an agent's selling drafts upon his principals in London was too distasteful to the partners to allow adoption of the scheme. They finally decided to enter against the cost of the agency the commissions on consignments of iron to Ward and profits on annual dealings in bonds or goods to the extent of ¿40,000, the London house to take a three-fourths share and the agent one-fourth. On the consignment of iron to Ward, upon which was charged a commission of 3Vi%, the gains of the commissions were

NOTES TO CHAPTER IV

507

credited to the firm and charged against the cost of the agency. On the dealings in bonds and goods, to the extent of £1,000 the profit on Ward's onefourth was to be credited to the firm as a part of the fund against which the cost of the agency was to be charged, all over that sum to be retained by the agent. MHS, Ward Papers, Ward to Bates, Nov. 10, 1830, Dec. 11, 29, 1831, and Bates to Ward, Dec. 21, 1831; BPLB, Barings to Ward, June 18, Oct. 14, Nov. 29, 1831, Feb. 6, 14, Mar. 14, Apr. 25, May 5, June 6, 1832, and a letter, no date, after one to C. W. King, Apr. 2, 1834; BPOC, Ward to Barings, May 12, 1833. The salary paid Ward may be compared to that paid by the Barings to Sussman, their agent in Vienna in 1832 — /300 per year and traveling expenses (BPLB, fragment, Barings to Sussman, before Barings to Prime, Ward & King, May 30, 1832). 24. For a description of uncovered credits, see p. 136 of this volume. The actual orders to Ward are not extant, but his actions and those of the house itself are recorded in available correspondence. 25. BPLB, Barings to Ward, Dec. 30, 1831. "Past experience would be much in favor of the dry goods Houses who have rarely failed, we allude to the importers, it is the dealers and shopkeepers that fail first" (ibid., Mar. 14, 1832). 26. "Pray inform No. 518 [Trott & Bumstead] that we are now prepared to execute orders for wool probably on better terms than any other House in London having made arrangements for receiving consignments from Germany & Spain" (ibid., Apr. 21, May 5, 1832). M. Sussman was the wool agent for the Barings on the Continent. By early April, 1832, the London house was receiving so many consignments of wool from Europe that a "clever man acquainted with the business" had been put on the staff at 8, Bishopsgate (MHS, Ward Papers, Bates to Ward, Apr. 5, 1832; BPLB, Barings to Hopes, Jan. 4, 1840). 27. Ibid., Barings to Ward, Oct. 15, 1831, and fragment after ibid., Jan. 14, 1832; Barings to Daniel Smith, Oct. 4, 1831; Bates to Samuel S. Gair, Sept. 28, 1831. Ward was told to keep alert to demand for iron by railroads in Massachusetts (ibid., Barings to Ward, Sept. 29, 1831). 28. BPLB, Barings to Ward, Nov. 29, 1831, and May 21, Aug. 9, Sept. 22, 1831, and fragment before Barings to Daniel Smith, Oct. 4, 1831. 29. Huth, Gruning & Co., Lima and Valparaiso, was an affiliate of Frederick Huth & Co., London (BPLB, Barings to Ward, Feb. 22, 1832). "As to Havana generally we have not much confidence in any of the houses there" (ibid., Feb. 18, 1831). Of the West Indies Lord Ashburton commented in 1836, "Every man there is needy for no men of any fortune & consequently credit live there, & every needy man would help his needy neighbour on condition of reciprocity" (BPMC, unsigned memorandum in Lord Ashburton's handwriting, Jan. 6, 1836). South America was a still newer area for commercial operations on the part of Anglo-Saxons. Among users of credits on the Barings in Latin America generally were

508

NOTES TO CHAPTER IV

John Donnei] & Sons, of Baltimore; Low, Wilson & Co., G. G. & S. Howland, Smith & Town, and W. W. De Forest & Son, of New York; Haven & Smith, William D. Lewis and Samuel Comly, of Philadelphia; and Gideon Barstow, Barnard, Adams & Co., Isaac Winslow & Son, E. Hathaway & Co., James Ingersoll, Abijah Fisk, John Brown & Co., Thatcher Magoun, William Savage, and Jonathan Neal & Sons, of Boston, Salem, and vicinity. 30. ". . . and so far as the India trade is concerned, the difference in the Insurance in favor of the American flag is of itself a good profit." BPLB, Barings to Ward, July 14, 1831. 31. Ibid., Nov. 5, 1831, Feb. 28, 1832; BPOC, Ward to Barings, Apr. 4, 1833. Among holders of credits for Far Eastern operations were Davis & Brooks, G. G. & S. Howland, Jacob Reese & Sons (also of Philadelphia); N. L. & G. Gris wold, and F. & H. Sheldon & Co., of New York; A. & A. Lawrence, T. & E. Motley, Chandler & Howard, Joseph Baker & Son, Jonathan Neal & Sons (Salem) ; and John Forrester, William Savage, John P. Cushing, Bryant & Sturgis, and Perkins & Co., of Boston and vicinity. 32. Relations were also maintained with many other firms. Scull, Storey & Co., of Havana, for example, held an open credit for exchange operations during 1830, but it was not renewed for the next year. For references see BPLB, Barings to Ward, Feb. 5, March 19, 22, June 29 (Atkinson & Hosier) July 14, Sept. 29 (both on Zimmerman, Frazier & Co.), Nov. 5 (Mariatequi, Knight & Co.), 1831. 33. The Barings notified the Calcutta house of their American agent, sent Ward's signature, and asked Gisborne & Co. to honor his letters of credit and letters of introduction. BPLB, Barings to Ward, Jan. 29, Apr. 29, 1831, Jan. 18, Mar. 6, June 6, 1832; MHS, Ward Papers, Bates to Ward, June 21, 1832. 34. BPLB, Barings to Davis & Brooks, July 6, 1831. "Consignments of merchandise would be more agreeable to us than uncovered Banking accts. where we only get a commission on the amo. of credits we give but we must do pretty nearly as others taking every means to make the business safe" {ibid., Mar. 22, 1832). 35. For example, see BPLB, Barings to Ward, Feb. 5, Mar. 19, 1831, in which the partners notify Ward that they have sent Mariatequi, Knight & Co., Scull, Storey & Co., Drake & Co., and Fesser, Picard & Co., all of Havana, authorizations to make advances on sugar to Cowes and a market, limiting the amount "to so much per cwt. on white Sugar and Brown according to quality." On the results of the expansion in coffee see pp. 146-147, 180. 36. Ibid., Jan. 18, Apr. 22, 29, June 18, 29, July 6, 22, Oct. 4, Nov. 5, 28, Dec. 6, 1831, Jan. 14, Mar. 16, 22, 1832; BPOC, G. W. Lurman to Barings, Dec. 31, i860; BPMC, Nott & Co. to Thomas Baring, Feb. 25, 1830; Nott & Co. to Barings, June 26, Aug. 10, 1830; P. Dalmahoy (Antwerp) to Bates, Sept. 17, 1832; MHS, Ward Papers, Bates to Ward, Oct. 6, 1832, Mar. 3, 1847. Joseph Cur wen had shipped the cotton from Savannah early in 1832 for account of F. U. Welman. Bogart & Kneeland of New York were addressed

NOTES TO CHAPTER IV

509

special letters by the Barings, but correspondence fails to reveal whether or not that firm shipped cotton. 37. BPMC, Nott *& Co. to Thomas Baring, Feb. 25, 1830; Nott & Co. to Barings, June 26, Aug. 10, 1830; BPLB, Barings to Ward, Apr. 22, May 5, June 6, Nov. 5, 28, 1831, Feb. 22, Mar. 14, 16, 22, 1832; BPOC, Ward to Barings, Jan. 7, Feb. 5, Mar. 16, Oct. 12, 1833. 38. BPLB, Barings to Bryant & Sturgis, Sept. 14, 22, Dec. 30, 1831, Apr. 28, May i l , 1832; Barings to Daniel Hammond, Sept. 29, 1831. 39. For examples, see BPLB, Barings to Ward, Jan. 14, 18, Feb. 18, 26, Mar. 5, June 6, July 14, Aug. 9, 22, Sept. 6, 22 (wool), 29 (saltpeter), Oct. 4 (saltpeter), Oct. 6, Nov. 5, 16, 28, 1831, Jan. 14, Feb. 28, Mar. 6 (rice), June 6, 14, 1832. 40. BPOC, account of teas sold by Goodhue & Co. for account of Joshua Bates, Oct. 31, 1832; BPLB, Barings to Ward, June 29, Aug. 31, Oct. 14, Dec. 14, 1831; Barings to Hopes, Sept. 13, 1831, Feb. 28, 1832. 41. BPLB, fragments before Barings to Ward, June 18, July 14, Aug. 22, 1831; Barings to Stieglitz & Co., June 21, 1831, Apr. 17, 1832; Barings to Ward, June 29, Aug. 31, Sept. 6, 14, 22, 29, Oct. 4, 6, Nov. 14, 29, Dec. 22, 1831, Feb. 22, Mar. 14, 1832; Barings to Comly, Oct. 22, 1831; BPOC, Ward to Barings, Feb. 5, Apr. 29, 1833. The Barings also purchased iron jointly with Sillem & Co., Hamburg, and drew on that house to the extent of £50,000 for reimbursement (BPLB, Barings to Sillem & Co., Mar. 6, 1832). 42. BPLB, Barings to Ward, June 18, Nov. 29, 1831. 43. BPLB, Barings to Prime, Ward, King & Co., July 22, Nov. 29, 1831; BPOC, Prime, Ward, King & Co. to Barings, Mar. 31, July 7, 1830; MHS, Ward Papers, Ward to Bates, June 24, 1831; Bates to Ward, Jan. 4, 1832. 44. BPLB, Barings to Ward, June 6, Oct. 4, 1831, Apr. 14, 25, May 22, 1832. 45. R. W. Hidy, "The Union Bank of Louisiana Loan, 1832: A Case Study in Marketing," Journal of Political Economy, X LVII, pp. 232-237, and references cited; BPOC, Forstall to Barings, June 22, 1850. The University of Chicago Press gave permission to reprint the material on the "Union Bank Loan." 46. Ibid., Ward to Barings, Aug. 15, 1832, and enclosures. 47. "In fact we may assert with truth that we lost half of the interest we paid on this account" when the credit balance was large, asserted Thomas Baring in BPLB, Barings to Ward, Nov. 14, 1831; Catterall, Second Ban\ of United States, p. 502. 48. BPLB, Barings to Ward, Nov. 14, Dec. 22, 30, 1831, Jan. 21, May 5, 1832; Catterall, op. cit., p. 502. The sum for 1831 included about ¿40,000 for the Mediterranean agencies of the Navy Department and ¿250,000 from the Continent, probably drawn by Hottinguer & Co. or Hope & Co., or both. 49. Ibid., pp. 145-146, and note 4 on p. 146; 22d Cong., ist Sess., House Report no. 460, pp. 542-543; Louis McLane to Biddle, Sept. 29, 1831; MHS, Ward Papers, Bates to Ward, Jan. 4, 1832. The total payments on the public debt for 1832 were estimated to amount to $18,080,057, much of which ex-

510

NOTES TO CHAPTER IV

penditure Biddle could foresee late in 1831. But McLane set no definite date for beginning the operation. 50. Catterall, op. cit., pp. 146-147, and note 5 on p. 148; Biddle MSS, Biddie to Ward, Oct. 6, 1831. 51. Ibid., Barings to Ward, Nov. 14, 1831. If commissions averaged £2,000 per year, as stated above, the annual drafts should have totaled about ¿550,000. The market rate for money on Dec. 6 was 5% for short periods (ibid., Dec. 6, 1831). 52. Ibid., Nov. 14, 29, 1831, Feb. 28, Mar. 6, 7, 14, 16, 1832. Biddle did not consider those long bills chargeable against the general credit granted by the Barings, who Qn the other hand habitually considered the advice of the issuance of drafts of any kind as the beginning of the employment of a credit or of funds. 53. Ibid., Nov. 14, 1831. As soon as they foresaw a demand for American flour, the Barings recommended "to the Bank to draw out their funds," upon which Biddle had acted "pretty extensively" by Apr., 1831 (ibid., Apr. 14, 1831). The Barings also held the opinion that the real importance of the London account of the bank was exaggerated by Biddle and by their English competitors. It would be a good policy, commented the partners in 1832, to let Biddle "undeceive himself by a trial of the sincerity" of the offers of other merchant bankers. Since the Barings felt that "not another House in London" would keep the account six months, they had no fear of losing it as long as they were disposed to keep it (ibid., Feb. 6, 1832). 54. Ibid., Nov. 14, 29, 1831, Jan. 6, Feb. 6, 28, Mar. 6, Apr. 21, 1832; Barings to Biddle, Nov. 28, 1831, Mar. 6, 1832. Agreement on the above terms was not automatic. The Nov. 28th letter of the Barings was not answered by the bank until Jan. 31, 1832, a longer lapse than the Barings thought necessary. The cashier in his first letter accepting the terms estimated that the £200,000 would not be needed to meet his drafts until July, 1832, and that therefore the loan should begin at that date. The Barings, however, were in the habit of considering the advice of the issuance of drafts as the beginning of the employment of a credit and of the funds of the firm. Inasmuch as the bank had already overdrawn more than ¿100,000 on the total ¿450,000, the cashier was told to estimate the account "not according to the amount of drafts which the Cashier may calculate to have appeared, but including all credits or drafts which have been advised to us as if we were actually under engagement for the whole." And since the funds were already in use under the overdraft, the Barings insisted that the loan should be considered in operation as of Jan. 1, 1832. On the other hand, Biddle did not accede to the request of the Barings that he open credits of ¿50,000 each with Hottinguer & Co. and Hope & Co., in favor of Baring Brothers & Co., for use in case of emergency. 55. MHS, Ward Papers, Bates to Ward, May 15, 1832; BPLB, Barings to Ward, Mar. 6, Apr. 14, 21, 1832; Barings to Biddle, Mar. 6, 1832; the overdraft totaled only about ¿160,000 on Apr. 21. 56. House Report no. 460, p. 531; 22d Cong., 2d Sess., House Report no.

NOTES TO CHAPTER IV

511

121, pp. 89-90, 93-97, 162, 166; Catterall, op. cit., pp. 146-150, 268-270; BPLB, Barings to Ward, Mar. 14, Apr. 25, May 5, June 6, 1832. The Barings were referring to House Report no. 460. 57. BPMC, Biddle to Barings, July 18, 1832; House Report no. 121, pp. 117, 124-125. For the contract see BPMC, Aug. 22, 1832. Cadwalader also agreed that Dutch holders of postponed "threes" should be reimbursed on Oct. 1, 1833, at the rate of 40 cents per guilder (ibid., Sept. 7, 1832); in House Report no. 121, p. 104, is the same agreement, but dated Sept. 13, 1832. 58. BPOC, Ward to Barings, Sept. 6, 1838, "Memo. Account of purchase of 3 per cent. U. S. Stock," and attached documents. Catterall gives $1,428,974 "purchased threes," but leaves the date vague. His other figure, $2,376,481, seems to be correct. The figure in the text was checked with the purchases mentioned by the Barings in communicating with Biddle (House Report no. 121, pp. 105-108). 59. BPMC, Cadwalader to Barings, Dec. 10, 1832. The best discussion of the affair, with particular reference to the degree of Biddle's responsibility, is to be found in Catterall, op. cit., pp. 270-273, especially in note 4, p. 271. The Baring Papers throw no new light on the controversy. On September 29, after receiving Cadwalader's early letters, Biddle ordered the cessation of the general contraction begun in October, 1831. 60. BPMC, Biddle to Barings, Oct. 15, 1832. Letters from Biddle, Oct. 19, 31, 1832, add nothing except urgent requests to send the certificates. 61. House Report no. 121, pp. 108-125; BPOC, Ward to Barings, Jan. 6, 20, 28, Feb. 5, 12, 28, Mar. 16, 1833. Catterall, op. cit., p. 272, says that the Barings "now concluded to buy" the postponed "threes" also if the holders would not consent to the revised terms of the bank. Actually, in spite of the legal fiction that the bonds were to stand in the name of Barings, the London firm acted as agent of the bank in paying for and receiving the bonds. 62. The postponed "threes" to the amount of $467,406 were subsequently purchased and forwarded to the bank, leaving $1,236,609 to be paid on Oct. ι, 1833. ¡bid., Sept. 6, 1833, attached paper. 63. BPMC, Barings to Overend, Gurney & Co., Sept. 1, 1832; BPOC, Ward to Barings, Sept. 20, 1832. 64. MHS, Ward Papers, Bates to Ward, Jan. 30, 1831. Unless otherwise cited, references for all facts brought out to the end of the chapter are from the same source, Bates to Ward, Nov. 24, 1830, Jan. 13, 29, Feb. 5-6, 17, Mar. 22, July 14, Dec. 21, 1831, Jan. 4, 30, Apr. 6, June 21, Aug. 17, Sept. 21, Nov. 23, Dec. 8, 1832, and Ward to Bates, Dec. 29, 1831, May 17, 1832. See also BPLB, Barings to Stieglitz & Co., Feb. 4, 1831; BPOC, Ward to Barings, Jan. 31, Feb. 28, Mar. 18, 1833. In one week during August, 1832, the Barings received 12,000 bales of cotton, 2 cargoes from Havana, 1 from Boston, 1 from Odessa, χ of wool from Danzig, various items of produce from the West Indies, specie from New York, Brazil, and the Pacific, while it was preparing a cargo for Boston and making plans for the Liverpool affiliate. 65. Circular to Bankers, Oct. 5, 1832.

512

NOTES TO CHAPTER V

66. BPOC, Ward to Barings, May 29, 1835. With regard to the freedom from loss and the status of American accounts, the following remarks have pertinence. "I am surprized that you have gone on so long without loss," said Ward in Feb., 1833. At that time a few small accounts taken over from Bates & Baring remained unpaid. In 1831 the accounts of Samuel Comly and Davis & Brooks were the only ones in the United States who gave concern to the Barings. By September of that year the partners could say, "We have not therefore one American account that gives any anxiety at this moment." They considered less than £49,000 as the "only balances worth mentioning" and those "perfectly secure" in February, 1831. Their "List of Balances," presumably dues and coming dues, totaled £228,000 on Mar. 14, 1832 {ibid., Feb. 5, 1833; BPLB, Barings to Ward, Feb. 5, Sept. 29, 1831, Mar. 14, Apr. 25, 1832). CHAPTER V 1. Parliamentary Papers, Report from the Select Committee on Manufactures, Commerce, and Shipping; with the Minutes of Evidence, Appendix, and Index (London, 1833), pp. 45, 50, 57; BPLB, Barings to Ward, Apr. 14, 1834; Niles' Weekly Register, X L V I , p. 255; Hidy, "Anglo-American Merchant Bankers, 1815-1860," pp. 53-66. 2. [Boston Board of Trade], Tribute of Boston Merchants to the Memory of foshua Bates (Boston, 1864), p. 36; MHS, Ward Papers, Bates to Ward, July 14, 1831, Jan. 4, 30, Apr. 5, 1832; Diary, 1828-34, undated comments on Bates as Ward observed him in 1828. Bates devoted Tuesdays and Fridays to appearing at the Royal Exchange. He arrived at 8, Bishopsgate between 9 and 10 o'clock each morning, read and entered letters, called in the brokers, and then listened to their market reports. For the first time the Barings notified promptly all appropriate persons and firms, except those at sea, that drafts on their accounts had appeared for acceptance in London. Ward was also informed, though apparently not fully by 1831. BPLB, Baring Brothers & Co. to Ward, June 29, 1831. 3. BPOC, Ward to Barings, May 22, 1833. For fear of discouraging correspondents in divulging the details of their business, the Barings decided to consign only limited amounts of goods to Ward (BPLB, Barings to Ward, June 18, 1831). 4. Ibid., Jan. 25, 1842; [D. M. Evans], The City: or The Physiology of London Business; with Sketches on 'Change, and at the Coffee Houses (London, 1845), pp. 99, 104, 127, 154, 174. Ward's letters, though often made in duplicate ready for forwarding to Liverpool, were all addressed to London. 5. MHS, Ward Papers, Bates to Ward, Feb. 6, 17, 1831, Nov. 3, 1847. John Baring at thirty-two found himself worth about £100,000, and living at the rate of £500 per annum (ibid., Jan. 4, ,1832). 6. N. S. Buck, The Development of the Organisation of Anglo-American Trade, 1800-1850 (New Haven, 1925), p. 6; J. H. Clapham, An Economic

NOTES TO CHAPTER V History of Modern Britain. The Early Railway Age, 1820-1850

513

(2d ed., Cam-

bridge, Eng., 1930), p. 255 n. 2.

7. BPLB, Barings to Ward, Nov. 29, Feb. 5, 1831, Mar. 22, 1832. 8. See A. H. Cole, "Evolution of the Foreign Exchange Market of the United States," Journal of Economic and Business History, I, p. 403. On bills of exchange the following books were consulted: J. R. McCulloch, A Dictionary, practical, theoretical, and historical, of Commerce and Commercial Navigation (new edition, London, 1837); W. Waterson and J. H. Burton, A Cyclopedia of Commerce, Mercantile Law, Finance, Commercial Geography and Navigation (London, 1844) ; J. F. Entz, Exchange and Cotton Trade between England and the United States (New York, 1840); F. J. Grund, The Merchant's Assistant, or Mercantile Instructor (Boston, 1834); W. F. Reuss, Calculations and Statements Relative to the Trade between Great Britain and the United States of America (London, 1833) ; and The Handbook of Trade and Commerce (London, 1840). 9. For an example providing for advances against coffee to be shipped to Europe or the United States see BPLB, Barings to Birckhead & Co. (Rio de Janeiro), July 30, 1835. T. Nicolet & Co., a New Orleans house set up by a group of French business men, drew on the Barings for shipments to France on the basis of a special credit obtained by a French agent (ibid., Barings to Ward, Oct. 29, 1831). 10. BPLB, Barings to Ward, Jan. 14, 18, June 6, Aug. 9, 22, Sept. 6, Oct. 6, Nov. 16, 1831, Feb. 28, Mar. 6, June 6, 14, 1832; Barings to Samuel Comly, Dec. 14, 183Γ. The French wheat crop was short, prices rose, and duties fell, leading the Barings to recommend ventures to France from February to June, 1832. Comly also bought wheat and flour on orders from the Barings for account of English merchants. Too, the Barings were reported to be heavily involved in shipments to Ireland, though they refused to join one Joseph K. Cummins in purchases of grain for that area in 1831 (Circular to Bankers, Oct. 5, 1832; BPLB, Barings to J. K. Cummins, Sept. 12, 1831). h . MHS, Ward Papers, Bates to Ward, June 21, 1832. "Miscellaneous" and "dry goods" might appear, also, either as headings or subheadings in recapitulations of "outstanding credits" in the "running" category. These revolving credits were reviewed annually, especially those of the importing merchants (BPLB, Barings to Ward, Dec. 30, 1831). 12. Prior to 1837 there is no list of credits to prove this classification at so early a date. A reading of the letters indicates the prevalence of the practice however. "The East Indian trade," a loose term used by American and other traders, referred to the commerce of the Indian and western Pacific oceans. It was utilized to cover trade with the east coast of Africa, Arabia, China, India, and the French, Dutch, Spanish, and British East Indies, as well as that of the various islands in the region. Tyler Dennett, Americans in Eastern Asia (New York, 1922), p. 3. 13. At one time or another between 1830 and 1837 exchange account credits

514

NOTES TO CHAPTER V

were utilized by Scull, Storey & Co., Havana; Wright, Shelton & Co. and Casamajor, Nuiry & Co. of Santiago, Cuba; W . P. Furniss, St. Thomas, Danish West Indies; Atkinson & Hosier, Kingston, Jamaica; Zimmerman, Frazier & Co., Buenos Aires; Gisborne & Co., Calcutta. T h e credit to Scull, Storey & Co. for exchange operations was withdrawn at the end of 1830 because the Barings thought it might interfere with the joint exchange account they had with "Fesser & Co." of the same city. BPLB, Barings to Ward, Feb. 5, 1831. 14. Ibid., Feb. 5 (Fesser & Co.), June 18 (no. 485 refers to Oelrichs & L u r m a n ) , 1831; B P O C , W a r d to Barings, Dec. 23, 30, 1833; Prime, Ward, K i n g & Co. to Barings, Mar. 31, July 7, 1830; M H S , W a r d Papers, Bates to Ward, Jan. 4, 1832. The "drawing accounts" against securities were supposed never to be in cash advance, but the Barings occasionally permitted deviations from the rule. 15. BPLB, Barings to Ward, Feb. 5, 1831; B P O C , W a r d to Barings, Dec. 30, 1833, and enclosure; M H S , W a r d Papers, Bates to Ward, Feb. 17, 1831; Cole, op. cit., I, p. 401; Buck, op. cit., pp. 155-157, discussed uncovered credits in regard to American imports from England. Jenks, Migration of British Capital, pp. 85-86, shows the more general application of the practice. Cf. Edinburgh Review, L X V I I , p. 230, and Hunt's Merchants' Magazine and Commercial Review ( N e w Y o r k , 1840-70), X , pp. 76-77. 16. BPLB, Barings to Ward, June 14, 1832. Credits to the missionary societies, which must have begun in 1830 with the opening of the first mission in China, at first took the form of Ward's approved bills similar to those made popular by the Bank of the United States; that is, the first only of a set was approved thus: "This Bill for £ — will be duly honored on presentation." By 1833 the societies were gradually adopting the use of the letter of credit. The Barings thought that the approved bills permitted their holders to negotiate them without paying a commission, whereas drawers under letters of credit had to pay to have their drafts paid. W a r d told them that in Brazil and Cuba the same commission was charged on both and in Calcutta and China on neither ( B P O C , W a r d to Barings, July 13, Sept. 27, 1833). 17. BPLB, Barings to Ward, Oct. 15, 1831, Mar. 14, 16, 1832; Bates to S. S. Gair, Sept. 28, 1831; Barings to Daniel Smith, Oct. 4, 1831; Barings to J. P. Cushing, Dec. 14, 1831. Most exceptional was the authorization to Captain Abel Coffin to draw at 60 days' sight on Barings or on Hopes for the purchase of a cargo in Batavia on account of the London firm in 1831 (BPLB, Barings to Hopes, Sept. 13, 1831). For a bill at 30 days' sight see "Market Report" of Barings, dated June 28, 1834, bearing duplicate of Barings to William Lord (Kennebunkport, Maine), June 19, 1834. T h e draft was small — /50. Until 1842 the U. S. Navy Department always issued its drafts on the Barings at "30 days sight" ( B P O C , W a r d to Barings, Apr. 19, 1842, enclosure). 18. Ibid., Oct. 17, 1835, and enclosures. Ordinarily Ward's letters of credit placed no limitations upon the size or number of drafts to be issued in the course of the utilization of the credit. O n Oct. 4, 1830, he had authorized

NOTES TO CHAPTER V

515

Thomas & Edward Motley to draw ¿ — "in a certain specified Bill or Bills, naming the amount, dates, etc.," but that practice was not usual (ibid., July 13, 1833)· 19. BPLB, Barings to Ward, Mar. 16, Apr. 21, 1832; BPOC, Ward to Barings, Mar. 13, 1833. The credit to the Howlands was for X 15,000 to be used for advances against consignments at Canton up to 50% of the cost, bills of lading to the order of the Barings (BPLB, Barings to Ward, Mar. 16, 22, June 6, 14, 1832). 20. Ibid., Apr. 27, 1838. 21. In 1835 Ward reported that it was so general a custom with the houses in the United States to inform him when they opened or wished credits that it followed "as a matter of course" (BPOC, Ward to Barings, Feb. 20, 1835). Israel Thorndike was one who authorized an agent to draw without informing the Barings (BPLB, Barings to Ward, Feb. 22, 1832). 22. They agreed that he should advise and aid young George Parish in his American operations for account of Richard Parish & Co. of Hamburg, an old friend. BPLB, Barings to Richard Parish, Mar. 13, 1832; Barings to Ward, Jan. 18, Mar. 6, 14, 16, June 6, 1832. And in 1833 Ward granted credits to Robert Trueman for account of his principals, the various Grant firms in the Mediterranean (BPOC, Ward to Barings, July 15, 1833, and enclosures. On increases of credits to American importers, see BPLB, Barings to Ward, Aug. 30» 1831). 23. Ibid., Feb. 5, Sept. 29, Oct. 29, Dec. 14, 1831, Jan. 18, Mar. 6, 1832; BPOC, Ward to Barings, June 12, Aug. 13, 22, Nov. 28, 1833, Dec. 7, 1834, Jan. 21, Feb. 21, 1835. 24. BPLB, Barings to Ward, Jan 18, 1832. Cf. MHS, Ward Papers, Bates to Ward, Apr. 5, 1832. 25. BPLB, Barings to Ward, Apr. 6, 1832. 26. In the list made up by Ward at the end of 1833, out of a total of ,£1,455,000 in credits granted for "East Indian" operations, and exclusive of a credit for ¿15,000 granted to J. W. Perit for exchange operations at Canton, only 8.1% was under covered credits. Out of a total of ¿384,000 for the "West Indies, South America and Europe" 29.7% was covered (BPOC, Ward to Barings, Dec. 30, 1833). Probably one reason for the large amount of uncovered credits to the Orient was that noted by Ward: "I suppose there has been hardly an instance of fraud occurred in the whole course of the American trade, and very rarely that a Bill has not been promptly honoured" (ibid., Sept. 27, 1833). 27. BPLB, Barings to Ward, June 29, 1831, Feb. 6, 1832; BPOC, Ward to Barings, Apr. 4, 9, Dec. 30, 1833; Parliamentary Papers, Report on Manufactures, p. 59. The "capital" was ¿15,000 to J. W. Perit for a venture in exchange at Canton. 28. As stated by the Barings, "would not enable him to purchase goods on 12 m [onth]s credit for a similar amount with his own name." BPLB, Barings to Ward, July 30, 1831.

516

NOTES TO CHAPTER V

29. BPOC, Ward to Barings, Apr. 9, 1833; BPLB, Barings to Ward, Mar. 16, 1832. 30. Ibid., July 30, 1831, Jan. 19, Mar. 6, 1837; BPOC, Ward to Barings, Apr. 9, 1833, Dec. 21, 1836, Oct. 9, 1837, July 18, 31, 1844, and enclosures. The case was Edward Fletcher et al vs. George Morey, Assignee, the decision by Justice Story. 31. BPLB, Barings to Ward, Apr. 22, 1831, Apr. 29, 1834; BPOC, Ward to Barings, May 6, June 6, 1833. "Combination voyages" were numerous in the Far Eastern and Latin American trades (Dennett, op. cit., p. 17). 32. BPLB, Barings to Ward, Apr. 29, 1831, Jan. 18, 1832; J. C. Brown, One Hundred Years of Merchant Banking (New York, 1909), p. 284. 33. BPLB, Barings to Ward, Apr. 29, May 21 (Dorr & Tappan, N. Y.), Aug. 9 (William B. Leverett & Co.), 1831, Feb. 22, Mar. 14 (P. & C. Flint & Co.), 16, 22, May 5, June 6, 14, 1832; MHS, Ward Papers, Bates to Ward, Jan. 4, 1832. Of the Howlands on Mar. 16, 1832, the Barings said, "We are far from wishing to have them entirely to ourselves and would rather they would keep away." 34. BPLB, Barings to Ward, Apr. 29, 1831. 35. An exceptional method was that used by Lee & Babcock, N. Y., who sent bills to its agent in England for him to discount and to pay the Barings in cash, ibid., Feb. 28, Mar. 16, 1832. 36. Ibid., Oct. 6, Nov. 29, 1831, Feb. 6, 17, 1832; BPOC, Ward to Barings, Feb. 19, Apr. 2, Oct. 21, 1833, and enclosures. 37. BPLB, Barings to Ward, Aug. 22, 1831. References to remittance problems were numerous {ibid., June 6, July 1, Aug. 30, Sept. 14, Oct. 6, 22, Nov. 29, 1831). Among slow remitters were Israel Thorndike, Davis & Brooks, William Savage, J. H. Bradford & Co., and Trott & Bumstead. 38. Ibid., Aug. 22, Nov. 29, 1831, Feb. 17, Apr. 21, 1832. 39. ibid., June 6, 1832; Barings to Birckhead & Co., Oct. 30, 1835; BPOC, Ward to Barings, Mar. 29, 1833, enclosures. 40. BPLB, Barings to Ward, Oct. 14, 22, Nov. 16, 1831, Feb. 6, 28, Apr. 25, 1832, and reports of coffee sales, passim. 41. Ibid., Mar. 6, 7, 14, Apr. 6, 1832. The Barings trusted Langdon & Co., Smyrna, just because Thomas H. Perkins & Co. did, not because they knew much about the house. 42. Ibid., Feb. 5, 1831, Mar. 6, 1832. 43. Ibid., June 18, Dec. 6, 1831. 44. Ibid., Jan. 18, Feb. 6, 1832. 45. BPOC, Ward to Barings, Sept. 14, 1833 (enclosure). 46. BPLB, Barings to Ward, Feb. 6, 1837. 47. See above, p. 120; BPLB, Barings to Nicholas Biddle, Dec. 20, 1834. 48. BPLB, Barings to Ward, Nov. 27/Dec. 3, 1841. American bonds and "stocks" were differentiated in the .1830's. Bonds passed "from hand to hand, as other floating obligations." "Stock" was "inscribed in the name of the proprietor in America." In transferring "stock," according to Fenn, English

NOTES TO CHAPTER V

517

and Foreign Funds, pp. 54-55, "it is necessary that the seller should execute a power of attorney, which must be delivered to purchaser, with the original certificate of the stock issued by the state, together with a guarantee for the regular payment of the dividends for twelve months, which guarantee must be produced at the time the dividends are claimed of the seller, to whom they are, of course, remitted so long as the stock remains in his name. It is usual for a purchaser of these stocks to have the same transferred into his own name in the books of the state; for this purpose the certificate and power of attorney must be sent to America, and the transfer will be made by agents there; the expense of the transfer in America is paid by the purchaser, but the seller defrays all charges incurred in this country by the necessary power of attorney, guarantee, &c; these documents are usually prepared by a public notary." Shares were called shares, nothing else. 49. BPLB, no addressee, but context indicates to Prime, Ward, King & Co., just before Barings to Trotter, Oct. 29, 1831; Barings to Prime, Ward, King & Co., Nov. 29, Dec. 14, 1831, Jan. 6, Mar. 16, 1832; Barings to Ward, Mar. 30, June 6, 22, 1831, June 6, 1832; Barings to J. Trotter, Oct. 29, 1831; Niks' Register, XXV, p. 119, XXXIX, p. 140, XL, p. 168. To what extent the Barings participated in the "Pole-murdering" 20,000,000 ruble (¿3,000,000) loan of the Russian government in 1832 and 1833 has not been ascertained, though many of the bonds are known to have come to England for sale, probably through Barings in part. The London house had no concern with a French loan early in 1831 (ibid., XLI, p. 102; Circular to Bankers, Dec. 14, 21, 1832, Jan. l i , 18, 1833; BPLB, Barings to Ward, Apr. 22, 1831). 50. BPLB, Barings to Ward, Jan. 6, 14, 21, Mar. 6, 1832; Barings to Prime, Ward, King & Co., Nov. 29, 1831; BPOC, Ward to Barings, May 30, 1833. 51. BPLB, Barings to Ward, Mar. 30, June 18, 22, Dec. 14, 1831, Mar. 7, 14, 1832; Barings to Prime, Ward, King 8c Co., May 30, 1832; BPOC, Prime, Ward, King & Co. to Barings, Dec. 7, 1832. The Barings tried, without success, to get a quotation on some railroad shares consigned by an old friend, Robert Oliver, Baltimore (BPLB, Barings to Oliver, Apr. 28, 1832). The Barings were willing in January, 1831, to sell the government's shares in the Bank of the U. S., and bought a few on their own account early in 1832. But their interest flagged when Jackson's opposition to recharter became probable (House Report no. 460, p. 58; BPLB, Barings to Ward, Jan. 29, Dec. 30, 1831, Jan. 6, Mar. 6, Apr. 21, 1832). 52. BPLB, Barings to J. Trotter, cashier of the Bank of Pennsylvania, Oct. 29, 1831; Barings to Prime, Ward, King & Co., Mar. 16, 1832; Barings to Ward, May 6, 1842; BPOC, E. J. Forstall to Barings, Dec. 4, 1847. 53. Del credere was the commission charged by a commission house as compensation for assuming the risk of payment by the vendee (Buck, op. cit., p. 15). 54. BPLB, Barings to Ward, May 21, Nov. 14, 1831, Jan. 30, Mar. 14, June 6, 1832. 55. Ibid., Sept. 22, 1831, Mar. 14, May 14, June 6, 1832; fragment before

518

NOTES TO CHAPTER V

Barings to Daniel Smith, Oct. 4, 1831; Barings to Samuel Comly, Oct. 22, 1831. In one instance the Barings offered to effect insurance for l A % as a part of a larger operation, but did not get the business (BPLB, Barings to Daniel Smith, Oct. 4, 1831). 56. BPLB, Barings to Ward, Dec. 6, 14, 1831. 57. See the statement to this effect in BPLB, Barings to N. Biddle, Mar. 6, 1832. 58. BPOC, Ward to Barings, Mar. 4, 1833. 59. The following pages are taken largely from R. W. Hidy, "Credit Rating before Dun and Bradstreet," Bulletin of the Business Historical Society, XIII, pp. 81-88. The date 1841 is given by R. A. Foulke, The Sinews of American Commerce (Dun & Bradstreet, Inc., c. 1941), p. 288. 60. BPOC, Ward to Barings, Jan. 7, 1833. 61. BPOC, Ward to Barings, Dec. 15, 1834, May 18, 1835. 62. Until 1837 both agent and managing partners customarily used only the numbers in referring to correspondents, presumably to discourage some of the more inquisitive sea captains and certainly to the confusion of prying historians. 63. BPLB, Barings to Ward, Apr. 29 (Higginson), July 30 (Davis & Brooks' payment not posted by clerk), 1831, Jan. 18, Apr. 6, 14, May 5, 1832 (Stephen White); Barings to W. Mcllwaine, cashier of the Bank of the United States, Oct. 14, 1831. 64. BPOC, Ward to Barings, Feb. 10, 1833; MHS, Ward Papers, Bates to Ward, Jan. 30, 1832. The order for coffee purchases was given to Capt. Abel Coffin on Dec. 20, 1830. The amount was for £20,000 without bills of lading or invoice and £30,000 with the documents. He sailed slowly, the price was advancing in Batavia when he arrived, and he purchased only 15,000 piculs instead of the expected 40,000. The cargo was sold in Amsterdam (BPLB, Barings to Hopes, Feb. 28, 1832). 65. BPLB, Barings to Ward, Feb. 6, 14, Apr. 14, 1832. In the Sillem & Co. failure the Barings appeared as creditors for 700,000 marks, though when all the securities and property held by the London house were placed to its credit they expected to have a claim for either /15,000 or £24,000, depending on an attachment which the partners were attempting to lay on some other property in London belonging to the Hamburg house. 66. Ibid., Feb. 5 (F. & N. G. Carnes), Aug. 30, Sept. 14 (Davis & Brooks), Oct. 14 (Baker & Son), 29, 1831, Mar. 22, Apr. 25 (Haven & Smith), May 14, 1832 (Nicolet & Co.); Barings, to no addressee but to Davis & Brooks from context, Sept. 14, 1831. 67. BPLB, Barings to Ward, Apr. 22, June 29, 1831. 68. BPLB, Barings to Davis & Brooks, July 6, 1831; Barings to Ward, Mar. 14, 1832; MHS, Ward Papers, Bates to Ward, July 14, 1831. 69. BPLB, Barings (in Bates' script) to Ward, June 14, 1832, July 22, 1831. 70. Ibid., June 29, 1831.

NOTES TO CHAPTER VI

519

71. ibid.; MHS, Ward Papers, Bates to Ward, Feb. 5, 1831. In England they observed their own rule, whether in relation to newspaper comments on tallow operations in 1831 or remarks in the Circular to Bankers about sales of wheat withdrawn from bonded warehouses. They also kept quiet when the same periodical voiced the expectation that such free export of capital as exemplified in the purchase of the Louisiana bonds in 1832 would probably result in "thriftless and improvident application" of the funds and create a rival to British enterprise (BPLB, fragment after Barings to Stieglitz & Co., June 21, 1831; Circular to Bankers, Oct. 5, 1832). 72. On Wiggin and Nevett — BPLB, Barings to Ward, Jan. 14, Mar. 3, Apr. 6, 14, May 14, 22, June 6, 14, 1832. Among the correspondents of Dickason & Co. were Brown & Ives, Ebenezer Kelly, Cyrus Butler, Humphrey & Everett, Carrington & Co. of Providence, all of whom came to the Barings except the first-named. 73. The partners turned down a proposal by Ward, first made in 1831, that he sell for their house bills on Calcutta payable in rupees. None of the houses in Calcutta, Madras, and Bombay was deemed either strong or reliable enough, and the estimated 2% to be earned on funds utilized seemed rather a "poorish margin" for the risk involved {ibid., July 14, 30, Nov. 5, 14, 1831, Feb. 6, Mar. 6, 14, May 14, 1832; BPOC, Ward to Barings, Feb. 10, Apr. 15, 1833). The Barings bought a few bank shares and were willing to buy more if the charter was renewed (BPLB, Barings to Ward, Jan. 14, 29, Dec. 30, 1831, Jan. 6, Mar. 6, Apr. 21, 1832; Barings to Prime, Ward, King & Co., Nov. 29, 1831, Jan. 6, 21, 1832). CHAPTER VI ι. MHS, Ward Papers, Bates to Ward, Jan. 4, 1832; BPOC, Ward to Barings, Jan. 7, 22, 28, Feb. 5, 15, 23, 28, Mar. 2, 4, 6, 7, 13, 16, Apr. 13, May 22, 1833; Smith and Cole, Fluctuations in American Business, pp. 60, 73, 158, 170; D. F. Houston, A Critical Study of Nullification in South Carolina (Harvard Historical Studies, III, New York, 1896) ; C. S. Boucher, The Nullification Controversy in South Carolina (Chicago, 1916). 2. Cambridge History of British Foreign Policy, II, pp. 148-155; Silberling, "British Prices," p. 233; Thorp, Annals, p. 159; Clapham, Ban\ of England, II, pp. 121-130; W. T. C. King, Discount Market, p. 80; BPOC, Ward to Barings, May 14, Aug. 17, 1833. 3. Coster & Carpenter, Dorr & Tappan, Macalester & York, Prime, Ward, King & Co., Shipman & Corning, and Yeatman, Woods & Co. had all drawn against remittances of bonds upon the sale of which such high limits had been set that disposal was impossible and then had not covered within the stipulated time their accounts with bill remittances. At the same time the Oriental and City banks in Boston were availing themselves of their uncovered credits to draw upon the Barings.

520

NOTES TO CHAPTER VI

4. BP, passim, Jan.-Aug., 1833, especially BPOC, Ward to Barings, Feb. 10, 15, Apr. 9, 13, 15, 27, May 14, 18, 22, 23, June 8, July 7, 9, 26, Aug. 4, 1833. The 180-days sight bills issued by the bank were also to be kept in a separate account. N. L. & G. Griswold received the only recorded new credit given when old accounts were known not to be covered. 5. Ibid., Mar. 13, Apr. 9, May 30, 1833. 6. MHS, Perkins & Co. Ledger; BPOC, Ward to Barings, Jan. 28, Feb. 5, 10, 19, Mar. 4, Apr. 4, 25, 29, May 6, 9, 22, June 16, 20, Aug. 29, Sept. 14, 21, Dec. 23, 1833. Other firms with double accounts were Gideon Barstow, D. F. Manice, and Lee & Babcock. 7. Postponement of remittances to such an outstanding business man as P. T. Jackson, acting in behalf of the Boston & Lowell Railroad Co., was permitted only after reference to London (ibid., Apr. 29, July 9, Sept. 14, 1833, and enclosures). Among the backward remitters upon whom pressure was brought were Louis McLane (for a balance apparently contracted while he was ambassador to London), Stephen White, John Forrester, Francis Coffin, Frederic Tudor, F. A. Tracy, Samuel Comly, William Savage, J. C. & R. D. Hooper, Trott & Bumstead, William Montgomery & Son, and John Donnell & Sons (BP, 1833, passim). The coffee cargoes were scattered in various European ports, and the Barings sought to sell at prices netting no loss to the owners (BPOC, Ward to Barings, Jan. 28, Apr. 13, June 16, 20, July 6, Aug. 29. 1833). 8. BPMC, Jaudon to Ward, Jan. 10, June 12, 1833; BPOC, Ward to Barings, Jan. 6, 7, 10, 20, 28, Feb. 19, 22, Mar. 4, 21, 23, 29, Apr. 3, 4, 13, 15, 29, 30, May 22, 30, June 7, 20, 28, July 6, 9, Aug. 4, 1833. Bonds returned for sale included those of Indiana, Alabama, and New York State, the cities of Baltimore, Philadelphia, and New Orleans, and the New York Life & Trust Co. Prime, Ward, King & Co. forwarded 900 shares of the bank on joint account during the first quarter and purchased another lot of 500 for account of the Barings alone in May. In this same month the New Yorkers purchased and forwarded on joint account $190,000 Pennsylvania 5% bonds, to which they added for their own account $200,000 Mississippi 6's in July. This last purchase was a part of an issue taken jointly at 113 Vi with S. & M. Allen, J. D. Beers & Co., John Gossler for Thomas Wilson & Co., Thomas Biddle & Co., and Mr. Schatt, president of the Girard Bank (ibid., Jan. 28, Feb. 5, Mar. 4, Apr. 13, 1833; Prime, Ward, King & Co. to Barings, Feb. 23, Mar. 1, 30, May 7, 23, July 20, Aug. 13, 1833). 9. BPOC, Ward to Barings, Jan. 6, Feb. 15, 19, 28, Mar. 4, 16, 21, 28, June 20, 23, 29, July 14, Aug. 4, 22, 1833. Another group took the Pennsylvania loan, and Rogers, Harrison & Gray of Richmond acquired the Virginia at 108%. Among the issues refused by Ward were those of Alabama, Mississippi, Pennsylvania, Tennessee, Virginia, and the Camden & Amboy Railroad Co. (ibid., Sept. 20, 1832, Jan. 7, 22, Feb. 19, 28, Mar. 18, 23, Apr. 13, 30, May 18, 25, 30. I " « 7-8, July 9, 14, 1833). 10. Ibid., Sept. 6, 1833, and enclosures; Catterall, Second Ban\, p. 502.

NOTES TO CHAPTER VI

521

11. Hidy, "Union Bank of Louisiana Loan," pp. 237-247, and references cited, especially BPOC, Prime, Ward, King & Co. to Barings, Apr. 30, May 7, July 6, Oct. 8, Dec. 23, 1833; Ward to Barings, Sept. 20, 1832, Jan. 22, Feb. 19, 28, Mar. ι, Apr. 4, 21, 29, June 20, 28, Aug. 4, Sept. 7, Oct. 4, 1833. 12. BPOC, Ward to Barings, May 20, June 12, July 6, 20, Aug. 1, 4, Sept. 14, Nov. 18, Dec. 25, 1833; MHS, Ward Papers, Bates to Ward, July 14, Dec. 21, 1831, Apr. 5, June 21, 1832. On S. & M. Allen, see Henrietta M. Larson, Jay Cooke, Private Banker (Cambridge, 1936), pp. 26-32. The Rothschilds in September had offered to let S. & M. Allen draw £150,000 against the remittance of Pennsylvania 5's, charging 1 % commission, 4% interest, and agreeing to hold the securities for a year. Bates had some reason to think competitors were envious. For example, Timothy Wiggin at a public dinner proclaimed that the tallow speculation of the Barings in 1830-31 had been made on funds from the Bank of the United States, whereas the Barings had £300,000 on call at the time. 13. BPOC, Ward to Barings, Feb. 28, Mar. 28, Apr. 9, June 20, July 9, Oct. 4, Nov. 7, 18, Dec. 13, 25, 1833. Robert Hooper, Jr., was the Boston agent for Wiggin & Co., Col. Henry F. Baker of Joseph Baker & Son for Wilson & Co., and a Mr. Austin for Wildes & Co. 14. Ibid., Dec. 25, 30, 1833. Because some of the credits were not precisely limited in amount Ward set no figures against their names in his list. 15. Ibid., June 7, 1833, and Apr. 9, 13, 1833. The paragraphing of the quotation has been set by me. 16. Ibid., Jan. 6, 7, 28, Feb. 5, 10, 28, Mar. 4, 8, 13, 14, 18, 28, Apr. 13, 17, June 20, 28, Sept. 27, Dec. 23, 1833. The Boston & Lowell order was for a total of 81,000 yards of rails, weighing 47 % to 50 pounds per yard, the Boston & Worcester for 850 tons of rails, 47,520 chairs, 950 pounds of keys, and the same number of pins. The orders for rails by the railroads came through former connections with Latham & Gair and the efforts of Ward. 17. Ibid., Jan. 22, 28, April 29, 1833, and enclosures. 18. BPMC, announcement of McLoskey, Hagan & Co., Aug. 1, 1832; BPOC, Ward to Barings, Jan. 22, 28, Feb. 5, 10, 15, 19, 25, 28, Mar. 11, 16, 18, 28, 29, Apr. 15, 25, 27, 29, May 6, 9, 17, 18, 20, 22, July 9, Aug. 13, 1833, and enclosures; Cole, "Foreign-Exchange Market," p. 401; A. H. Stone, "Cotton Factorage System of the Southern States," American Historical Review, XX, PP- 557-565; MHS, Ward Papers, Bates to Ward, Apr. 11, 1833. Goodhue & Co. charged no commission for accepting bills from Charleston, which were to be at not less than ten days' sight, but charged 1 % for effecting insurance. The New York house arranged with the Charleston branch of the Bank of the United States for the negotiation of the clean bills under the open credit. John Donnell & Sons, Baltimore, shipped cotton to cover its account. 19. A part of that difficulty lay in the fact that Southern merchants felt that they should be free to advance the full estimated market value of the commodity, as competitors did; they guaranteed all reclamations that might be demanded by the London house for outlay of funds in excess of sales.

522

NOTES TO CHAPTER VI

20. The rise began in the second quarter of 1833. Silberling, op. cit., p. 233; Smith and Cole, op. cit., p. 158. 21. BPOC, Ward to Barings, Aug. 22, 29, Sept. 3, 27, 29, 1833. In accordance with a recent New York State law requiring that the word "company" should not be included in the name of a firm if all the partners were therein enumerated, Prime, Ward, King & Co. became Prime, Ward & King in Nov., 1833· 22. BPOC, Prime, Ward, King & Co. to Barings, July 6, 1833; Ward to Barings, July 6, 9, 13, Aug. 5, 29, Sept. 10, 21, Nov. 7, 18, 21, Dec. 7, 17, 18, 22, 23, 25, 31, 1833, Jan. 7, 1834; Catterall, op. cit., pp. 314-331. Curtailment by the bank began on Aug. 13, 1833, and "ceased effectually" the following July, and entirely on Sept. 16, 1834. 23. Ibid., Dec. 31, 1833; BPMC, E. J. Forstall to Thomas Baring, Oct. 16, 1834; Thorp, op. cit., p. 121; Smith and Cole, op. cit., pp. 158, 190; Silberling, op. cit., p. 233. 24. MHS, Ward Papers, Biddle to Ward, June 23, 1834; BPOC, Ward to Barings, Dec. 22, 23, 25, 1833. Ward's reasons for borrowing from the bank are given in ibid., May 21, Aug. 4, 1833. 25. Ibid., Oct. 4, 21, Nov. 7, 18, 21, Dec. 22, 23, 1833, Jan. 7, 1834; Prime, Ward & King to Barings, Oct. 19, Nov. 7, 15, 23, 30, Dec. 23, 1833, Jan. 16, 1834; Biddle MS, Biddle to Ward, Mar. 10, 1834; BPLB, Barings to Ward, Apr. 24, June 14, 1834. 26. BPOC, Prime, Ward & King to Barings, Sept. 30, Nov. 22, 1833, Jan. 23, 1834; Ward to Barings, Oct. 4, 28, Nov. 7, 1833; BPLB, Barings to Overend, Gurney & Co., Jan. 30, 1835; Barings to Nicholas Biddle, Dec. 20, 1834; BPMC, J. B. Perrault to Barings, Nov. 5, 1833. Only ¿100,000 remained to be repaid on the loan from the Gurneys, as of Jan. 30, 1835. Interest was paid at the rate of 4%. 27. BPOC, Ward to Barings, Aug. 22, 29, and passim, 1833. In credits for consignments to Continental houses Ward was ordered to be strict in providing that the firm on the Continent "should be directed to remit on arrival an approximation of the value as it will prevent their being able to take so much business" and more would come to the Barings (ibid., Dec. 2, 13, 1833). The senior partner of Spring & Co. died of scarlet fever in December and the remaining partners made an assignment. John F. Delaplaine had more than enough property to meet his obligations, but he lost his head when faced with the necessity of mortgaging some of his Manhattan real estate. Shipman & Corning paid its debt in Indiana bonds (ibid., Dec. 17, 18, 22, 23, 25, 28, 30, 31, 1833, Jan. 7, 1834; BPLB, Barings to Ward, Apr. 4, May 6, June 14, 28, 1834). Gracie & Fleming defaulted on part of a ¿5,000 credit granted by Prime, Ward & King. Ward took notes running for one, two, and three years. J. G. King really stood back of Robert Gracie, and Fleming later became one of the partners in the successful firm of Fleming and Hone, auctioneer (ibid., Nov. 14, 1834; BPOC, Ward to Barings, Dec. 21, 1834, Feb. 28, Mar. 13, Nov. 4. 1835).

NOTES TO CHAPTER VII

523

28. BPLB, Barings to Ward, Apr. 22, 1834, and ibid., no date, fragment after Barings to C. W. King, Apr. 2, 1834. The names of the embarrassed or failing firms mentioned in the next paragraph were Gideon Barstow, J. & J. Hodges, William Savage, Stephen White, and P. & C. Flint & Co. 29. See p. 146 of this volume. 30. Comments on these firms run through the Baring Papers from 1833 to 1835. The best summary analysis of faults and mistakes may be found in BPLB, Barings to Ward, Apr. 4, Nov. 19, 29, 1834; BPOC, Ward to Barings, Dec. 7, 10, 29, 1834, Jan. 5, 1835. Ward had been urging since early in 1833 that the Barings should allocate to one person the supervision of all "ragged accounts" in order to keep him and clients informed at all times as to the exact state of said accounts. The final payment on the Donneili' account was made in Nov., 1835. C H A P T E R VII ι. BPLB, Barings to Ward, June 28, 1834. 2. R. C. McGrane, The Panic of 1837 (Chicago, 1925), provides the best summary of speculative prosperity prior to 1837; Smith and Cole, Fluctuations in American Business, pp. 158, 192; Jenks, Migration of British Capital, pp. 85, 360, 361 n. 25, 363 notes 48, 49; Thorp, Business Annals, pp. 121, 122; Gray, Agriculture in Southern United States, pp. 1027, 1030, 1033, 1035, 1038. 3. Thorp, op. cit., pp. 159, 160; Clapham, Economic History of Modern Britain, pp. 387, 388, 425, 478, 483, 484, 5 1 1 , 512, 515; M. Tugan-Baranowsky, Les crises industrielles en Angleterre (Paris, 1 9 1 3 ) , p. 86; [J. R. McCulloch], "The Bank of England and the Country Banks," Edinburgh Review, L X V , pp. 64, 65, 66; Silberling, "British Prices and Business Cycles," p. 233. 4. W. T. C. King, London Discount Market, pp. 3 7 - 1 0 1 ; Clapham, Ban\ of England, II, pp. 1 0 7 - 1 5 1 . 5. BPOC, Ward to Barings, May 9, 14, 17, 18, 20, 22, July 9, 26, 30, Aug. 13, 22, Sept. 3, 10, 14, 21, Oct. 12, 21, 28, Nov. 7, 21, Dec. 13, 18, 22, 28, 30, 3 1 , 1833, Jan. 7, 1834, and enclosures; BPLB, Barings to Ward, Apr. 4, 9, 14, 19, 22, 29, May 6, 24, 30, June 6, 1 1 , 21, July 5, 14, 22, 1834; fragment after Barings to Hopes, Aug. 1, 1834. Comly's credit of ¿20,000 was nominally uncovered but was secured by a deposit of "undoubted paper" with the Bank. The cashier, Samuel Jaudon, was paid Vz% commission upon the amount of bills negotiated by Comly. The shipment of cotton by Talbot, Olyphant & Co. was made to cover a debt due the Barings on purchases for the China market. Gibbs' cargoes had really come forward during the summer of 1833 but had not been sold. 6. BPOC, Ward to Barings, Dec. 13, 23, 25, 1833; BPLB, Barings to Ward, Apr. 22, 1834. 7. BP, Sept. 12, 1834-Dec. 7, 1835; Hunt's Merchants' Magazine, X, p. 94; Niles' Register, XI, pp. 33, 114, 177, 220. Firms with which the Barings operated in the years 1834-36 were William Appleton, Samuel Comly, Goodhue & Co., Patterson & Magwood and Higham & Fife of Charleston, Bayard

524

NOTES TO CHAPTER VII

& Hunter in Savannah, Herrmann & Co., Hagan, Niven Sc Co., Samuel Herrmann & Sons, Reynolds, Byrne & Co., and William Nott & Co. in New Orleans, and McLoskey, Hagan & Co. in Mobile. In 1835 Thomas Oxnard, brother of Henry, shipped cotton to Marseilles, John Brown & Co. sent some to William Ropes & Co. for the Imperial Factory at St. Petersburg, and in 1835—36 Talbot, Olyphant & Co. covered a /13,000 credit with cotton from the United States. Archibald Gracie returned to New York without forwarding a single bale of cotton in the spring of 1835. J°hn E. Lodge and Austin were sent as special agents to New Orleans in the fall of 1835 before the Barings decided to cease operations. 8. BPOC, Ward to Barings, Apr. 13, July 6, 9, Aug. 22, Sept. 3, 7, 10, 14, 17, Oct. 21, Nov. 7, Dec. 25, 28, 1833; Goodhue & Co. to Bates, Sept. 24, 1833; BPLB, Barings to Ward, Apr. 29, May 6, 14, 1834; Albion, SquareRiggers, pp. 114-118. 9. BPLB, Barings to Ward, Apr. 22, 1834. 10. BPLB, Barings to Goodhue & Co., Sept. 4, 1834; BPOC, Goodhue & Co. to Bates, July 20, 1835. "G. & Cos. packets have made very handsomely" (ibid., Ward to Barings, Nov. 14, 1835). 11. BPOC, Ward to Barings, Oct. 28, Nov. 7, Dec. 18, 25, 1833, Dec. 14, 1834, Nov. 14, 1835; BPLB, Barings to Ward, June 28, Sept. 13, 22, 1834; Barings to Goodhue & Co., Sept. 4, Oct. 4, 1834; Albion, Square-Riggers, pp. 118-120. Gracie, Prime & Co. of New York had an interest in Kermit's early ships, but the nature and extent of it is not clear. 12. BPOC, Ward to Barings, Apr. 13, July 30, Oct. 28, Nov. 7, 8, 18, 21, 1833; BPMC, John Griswold to Barings, Aug. 31, 1836. 13. BPOC, Ward to Barings, Oct. 28, Nov. 7, 9, Dec. 7, 13, 17, 18, 22, 23, 25, 30, 31, 1833, Dec. 5, 7, 21, 1834, Jan. 1 (and enclosures), 31, Feb. 20, Mar. 20, May 13, 18, 29, Aug. 29, Sept. 28, 1835; BPLB, Barings to Ward, Apr. 2, 4, 9, 14, 19, 29, Oct. 14, Nov. 6, 14, 19, 1834, Mar. 1, 6, 1837; Barings to the Liverpool affiliate, Apr. 23, 1834, Jan. 7, June 17, 1835; Barings to Goodhue & Co., Jan. 7, 1835; Barings to W. Appleton, Aug. 30, 1834. The cost of the flaxseed delivered in England was $70,000. 14. BPMC, pro forma sale of iron, 1835 (incorrectly labeled 1834); Barings to Stieglitz & Co., Sept. 29, Oct. 20, Nov. 17, 1835; Barings to William Davis, Jr., Boston, July 22, 1834; Barings to Ward, July 22, Aug. 4, Sept. 29, Oct. 4, Nov. 14, 19, 1834; BPOC, Ward to Barings, Feb. 5, Apr. 29, June 20, 28, Dec. 23, 1833, Dec. 29, 1834, Mar. 6, Apr. 13, May 4, 13, 29, June 12, 29, July 5, 14, Aug. 12-13, 2I > Sept. 12, Oct. 15, Nov. 29, 1835. 15. BPOC, Ward to Barings, Jan. 1, Feb. 6, 20-21, Mar. 13, Apr. 13-14, 16, 25, May 13, 21, June 5, 12, 29, July 14, 29, Aug. 12, 29, Sept. 7, 28, Nov. 21, 1835, Dec. 21, 1836, on wool; July 21, 30, Aug. 12/13, 21, 29, Sept. 6/7, Dec. 7, 1835, o n wheat; Aug. 14, 1835, a n d BPLB, Barings to E. Quesnel, July 15, 1835, on indigo. 16. BPLB, Barings to Birckhead & Co., July 30, 1835. In 1834 the Barings

NOTES TO CHAPTER VII

525

had to abandon a silk venture for lack of a fast ship, by which they hoped to get control of the European market for two months (BPLB, Barings to Bryant & Sturgis, July 22, 1834). They also wanted a fast ship for an undesignated purpose in 1835 (BPOC, Ward to Barings, June 29, July 5, Aug. 29, Sept. 7, 12, 17, 1835). 17. BPLB, Barings to Ward, Apr. 14, 1834, Mar. 6, 1837; Barings to Bryant & Sturgis, Feb. 21 1835; Barings to Russell & Co., Canton, May 5, June 2, July 17, 1835; BPOC, Ward to Bates, May 18, 1835; BPMC, Barings to N. Biddle, Dec. 20, 1834; Niles' Register, XLVI, p. 255. The Alexander Baring took no intoxicating liquors for captain or crew, which the London press labeled "the American system." The entrance of the Barings into the China trade may be compared with the contemporary opinion expressed in the Circular to Bankers (July 3, 1835) that English manufacturers and American merchants were "almost the exclusive exporters of [British] goods to China." The Barings evidently were in the market for the ship for which Bates offered ¿10,000 in 4 54% bonds of the New York Life Insurance & Trust Company at 90 (BPLB, Bates to undesignated addressee, Dec. 24, 1835). 18. BPOC, Ward to Barings, Oct. 28, 1835; MHS, Perkins & Co. Ledger. 19. BPMC, Barings to N. Biddle, Dec. 20, 1834; BPOC, Ward to Barings, Apr. 23, May 14, July 26, Aug. 17, Sept. 21, 1833, Feb. 28, Mar. 20-21, Apr. 14, May 4, 13, 21, 30, July 14-15, Sept. 21, 1835; BPLB, Barings to Ward, April 4, 9, 29-30, May 6, June 21, 28, Sept. 13, Oct. 6, 1834; Niles' Register, XLIX, pp. 97, 104 (Oct., 1835). The Great Houses — commission merchant princes — in Calcutta had lent money to indigo planters on security of lands, realty, and crops, the funds coming from the deposits of merchants, civil servants, and military men. Palmer & Co. failed in 1829; Ferguson & Co., Mackintosh & Co., Fairlie, Barham & Co., and Alexander & Co. had gone under before the end of 1833. The last of the six — Cruttenden, MacKillop & Co. — was in the insolvent court by January, 1834. The liabilities of the six firms were estimated to total between ^14,000,000 and £20,000,000. Circular to Bankers, Dec. 28, 1832, May 2, 1834, April 3, May 1, 1835; Cambridge History of the British Empire, II, P· 757· 20. BPOC, Ward to Barings, May 22, 1833, Oct. 20, 1835. 21. BPLB, no addressee, June 24, 1834; Barings to Ward, June 28, Aug. 30, 1834; BPOC, Ward to Barings, Feb. 6, Mar. 20, April 13, 16, June 23, July 21, Nov. 14, 21, 1835; BPMC, Davis & Brooks correspondence, Apr. 15, 1836Mar. 4, 1839, and Sidney Brooks to Bates, Mar. 27, 1847. In order to be sure to acquire satisfactory materials for the Boston & Lowell, Ward agreed that the Barings should pay half the expenses of a special agent to go to Liverpool to approve purchases before shipment. In 1836 the Barings purchased and shipped spikes for a Pensacola railroad ostensibly upon the orders of Davis & Brooks, who denied that they had made the order. The case went to court, the New York firm won the first case, the Barings instituted another, and the

526

NOTES TO CHAPTER VII

issue was still unsettled in 1847. Efforts to acquire a contract to purchase rails for the Utica Railroad Co. failed because the Liverpool Barings delayed too long in sending estimates and because the price of Samuel Hicks & Sons was better than that of C. A. & E. Heckscher, with whom Ward was operating. 22. Ibid., Jan. 21, Feb. 20, Mar. 20, Apr. 13, May 18, 29, June 5, July 5, Aug. 12, 1835. Ward did not know the merchants in the four cities and his available information about them led him to recommend that no uncovered credits be given. 23. Ibid., Feb. 5, Apr. 13, 23, May 29, July 21, Nov. 4, 1835; BPMC, C. B. Young to Barings, Aug. 3, 1835. Ward probably used William B. Young, brother of Charles B. Young, as an assistant, though not really as an agent, in New York. Ward knew that Goodhue & Co. could not "give the necessary attention — it must be the business of one person" (Apr. 13). 24. BPLB, Barings to Birckhead & Co., July 30, Oct. 30, 1835; Barings to Ward, Apr. 29, 1834; BPOC, Ward to Barings, Mar. 27, July 27, Sept. 7, 9, Oct. 16-17, 28, 1835, and enclosures. 25. BPOC, Ward to Barings, Dec. 5, 7, 24, 1834, Jan. 27, 1837. A full analysis may be seen in R. W. Hidy, "Credit Rating before Dun and Bradstreet," pp. 81-88. 26. BPLB, Barings to Ward, Sept. 22, Nov. 19, 1834; BPOC, Ward to Barings, Dec. 29, 1834, Mar. 20, Apr. 13, May 13, 26, 29, July 10, Aug. 12, Oct. 7, 16, Nov. 29, 1835, Dec. 10, 1836; BPMC, circular, Dec. 1, 1836. The Barings considered 1 % too small a commission for engagements lasting six months, and their procedure in permitting delay in covering accounts produced interest at 5% for 60 days. A part of Samuel Williams' troubles in 1825-26 was also attributed to "6 m/d" bills. Besides, by Sept. and Nov., 1834, the Barings were certain in their own minds that discounts on "6 m / d " bills would soon be higher than on those of shorter usance. For list and comments on dry goods firms allowed six months to pay, see BPOC, Ward to Barings, Jan. 3, 6, i l , 16, 27, 30, 1837. 27. BPOC, Ward to Barings, Dec. 30, 1836. As early as March, 1833, Ward had urged that a special auditor should be called in for large and complicated accounts, but his principals did not act upon his advice (ibid., Mar. 4, 1833). 28. Circular to Bankers, Oct. 7, 1836; BPOC, Ward to Barings, Dec. 7, 1835. One of the Alsops became the agent of Morrison, Cryder & Company in Philadelphia, and Francis J. Oliver served in Boston. Morrison was reported to have put up all his capital — £ 1,000,000. 29. Niles' Register, XLVIII, p. 250; Clapham, Ban\ of England, II, p. 144; BPOC, Ward to Barings, Nov. 7, 1835; BPLB, Barings to Ward, Oct. 3, 1834. The Girard Bank was reported to have a credit of $500,000 with the Rothschilds and permission to delay remittances one year. J. L. & S. Joseph, the largest operators in securities in New York, were reported in 1835 t 0 be making payments varying from $500,000 to $1,000,000 daily. 30. BPOC, Ward to Barings, Mar. 20, Apr. 29, 1835; Catterall, Second Bank,, pp. 299-302; 23d Cong., 2d Sess., Senate Doc. no. iy, pp. 263-291; New

NOTES TO CHAPTER VII

527

Yor\ Journal of Commerce, Oct. 8, 1834; Niles' Register, X L V I I , pp. 234, 276; Circular to Bankers, Feb. 13, May 8, 1835; J. S. Bassett, The Life of Andrew Jac\son, 2 vols. (Garden City, 1 9 1 1 ) , II, pp. 666-667. In addition to the Rothschilds, Thomas Wilson & Co., of London, and Welles & Co., of Paris, were bidding for the business of the Federal government (BPOC, Ward to Barings, Oct. 29, Nov. 5, Dec. 25, 1833; BPLB, Barings to Ward, Sept. 29, 1834). 31. BPMC, Forsyth to Barings, Aug. 6, 1834; BPLB, Barings to Forsyth, Sept. 29, 1834; Barings to Ward, Sept. 29, 1834; BPOC, Ward to Barings, Jan. 13, 1835. The account was not "squared off" the books of the Barings until Nov., 1835 (ibid., Nov. 29, 1835). The Times and Morning Herald in London, as well as the Evening Post and the American in New York and the Globe in Washington, entered the ranks of newspaper commentators. Payments had been made without any friction up to 1833. See LCBM, Barings to J. D. Ingham, Apr., 1831, and Barings to L. McLane, Oct. 14, 30, 1831, for the transfer of the Danish indemnity payments to the United States. The Barings had successfully warded off Biddle's attempt in 1832 to acquire control of all foreign payments by the State Department (BPLB, Barings to Ward, Mar. 7, 16, June 6, 1832). 32. BPLB, Barings to Ward, Nov. 29, 1831; BPOC, Ward to Barings, June 28, Oct. 21, 29, Nov. 5, 28, Dec. 7, 13, 23, 25, 1833, Feb. 28, Mar. 20, 29, Apr. 4, 1835, and enclosures. The Navy Department paid to Ward in advance one fourth of the estimated yearly total each quarter, Ward acknowledging receipt and stating the amount in sterling at current rates of exchange. The Barings paid on unused funds 3 % interest, and charged 5 % on overdue balances. For paying acceptances, making arrangements for negotiating bills in all ports, and effecting transfers the London house charged 1 % commission, which was less than the total charges under the previous arrangement. 33. BPLB, Barings to Ward, Apr. 22, 1834; BPOC, Ward to Barings, June 13, 1835. 34. BPLB, Barings to Ward, Aug. 4, Oct. 3, 1834; Corti, House of Rothschild, p. 1 1 7 . 35. Hidy, "Union Bank Loan," pp. 247-253, and references cited. 36. BPLB, Barings to unnamed addressee, probably Thomas Baring traveling on the Continent, July 1, 1834; Barings to Theodore Lyman, July 5, 1834; Barings to Ward, Sept. 29, Nov. 14, 22, 1834; Barings to Hopes, Nov. 28, 1834, on the Boston loan; BPOC, Ward to Barings, Apr. 16, 23, 25, 29, June 12, 13, 20, 23, 29, July 5, 14, 21, Dec. 7, 1835, and Prime, Ward & King to Barings, June 15, 1835, Dec. 16, 1836, on Maryland bonds, of which $200,000 were not to be delivered and paid for until 1836; on Kentucky, ibid., Ward to Barings, July 15, Aug. 21, 29, 1835; Ohio Life Insurance and Trust Co. —ibid., Aug. 21, 1835; on Oct. 10, 1835, Ward reported himself as daily declining advancing on or purchasing of American bonds. 37. Journals of the Assembly, Upper Canada, 1836, Appendix 7; Public Archives, Q Series, no. 401, pp. 100, 157. The loan was apparently largely the product of the personal efforts of J. H. Dunn, the Receiver General of Upper

528

NOTES TO CHAPTER VII

Canada. Citations are by courtesy of Norah Story of the Public Archives, Ottawa, Ontario. Prime, Ward, & King was allocated £20,000 of the loan. BPOC, Ward to Barings, Aug. 12, 1835; BPLB, Barings to Prime, Ward & King, July 22, 1835. 38. Circular to Bankers, July 31, Aug. 7, 15, Oct. 9, 1835; Niles' Register, XLIX, p. 70. 39. BPOC, Ward to Barings, Dec. 7, 1835. The Barings acquired some Indiana bonds from Shipman & Corning in payment of its debt. That firm never recovered from its suspension in 1833, though the Barings later gave it a credit of ¿10,000 against collateral deposited with Goodhue & Co. Coster & Carpenter dissolved partnership at the end of 1835. Dorr & Tappan and Macalester & York are never mentioned in the Baring Papers after 1833. Gracie, Prime & Co. forwarded some Phoenix Bank (N. Y.) shares to the Barings in 1835, though the London house had never heard of the institution. In 1836 C. A. & E. Heckscher were added to the small list of partnerships permitted to issue drafts in anticipation of sales of securities {ibid., June 23, July 29, Aug. 29, Sept. 7, Oct. 13, Nov. 5, Dec. 7, 1835, Jan. 6, 1837). In January, 1835, the Barings had acquired through exchange for Louisiana bonds $110,000 in certificates of the New York Life Insurance & Trust Co. These were on joint account with Prime, Ward & King; but in August of the same year the greatest concession Ward would make on prospective bonds of the Ohio Life Insurance & Trust Co. was to tell the New York house that it might forward $100,000 for sale on condition that no drafts were to be issued prior to advice of sales and authority to draw {ibid., Aug. 21, 1835). On the Mexican silver operation, see BPLB, Barings to Ward, Apr. 9, 22, 29, Sept. 22, Nov. 14, 1834. Late in the year Ward stopped buying bonds and remitted bills and/or dollars to London. 40. On the Ward-Appleton account, see BP, 1834-35, passim. Appleton sold drafts in Boston, Goodhue & Co. on Ward's orders in New York. Some shares of the Bank of the United States were purchased in England for sale in America. Coverage ordinarily was afforded by bills purchased in New Orleans, New York, and Boston. Many drafts for purchase of cotton in the South in the 1834 season were met by funds accumulated in New York. Though the cotton account and the exchange account were identical, Ward was quite chagrined when his judgment on exchange fluctuations occasionally proved incorrect. On the other items — BPLB, Barings to Ward, Apr. 22, May 6, Sept. 13, Nov. 6, 1834, Sept. 29, 1837, Apr. 6, 1838; Barings to O'Connor, Jan. 30, 1835; BPOC, Ward to Barings, Nov. 5, 1833, Apr. 4, May 30, June 13, 29, July 14, Sept. 12, Oct. 8, 13, 1835, Mar. 15, 1838, and pertinent enclosures. Credits opened by the Barings on Prime, Ward & King reached £32,278 in 1835 and £66,924 in 1836 (BPMC, memoranda at end of years). 41. BPOC, Ward to Barings, Dec. 7, 1834, Jan. 21, Feb. 20, Mar. 20, Apr. 13, May 29, June 5, July 5, 29-30, Aug. 12, 29, Sept. 6, Oct. 10, 13, Nov. 14 (quotation), 21, 28, 1835; Ward to Bates, May 18, 1835; BPLB, Barings to

NOTES TO CHAPTER Vili

529

Ward, Sept. 29, 1837; BPMC, unsigned memo, in script of Alexander Baring, Jan. 6, 1836. He disapproved of the bank's plan because the Barings would have to deal with a large board of directors, the credit of Caribbean merchants (especially on the small islands) was bad, and too many currencies were involved. 42. BPLB, Barings to Biddle, Dec. 20, 1834; Barings to Ward, Apr. 4, 22, May 14, Nov. 22, 1834; Barings to Jaudon, Jan. 30, 1835; BPMC, Jaudon to Barings, Dec. 31, 1834; BPOC, Ward to Barings, Dec. 28, 1834, Mar. 1, 30, Apr. 23, May 18, 21, July 14, 30, Oct. 7-8, 10, 13, 28, 1835; Niles' Register, X L V I , p. 427, X L VII, pp. 50, 60, 122, X L VIII, pp. 233, 276, 433, 453, X L I X , pp. 26, 192, 291, and L , p. 49. On the "proper" way to conduct exchange accounts see BPLB, Barings to Prime, Ward & King, May 6, 1834, Oct. 22, Dec. 31, 1835. 43. BPMC, Biddle to Barings, Mar. 22, Aug. 3 1 , 1836; Jaudon to Barings, May 13-14, 1836; Jaudon to Bates, Aug. 31, 1836; Niles' Register, LII, p. 61; McGrane, Panic of 183J, pp. 181, 182 n. A similar loan of 12,500,000 francs, redeemable in six equal installments in 1837, 1838, and 1839, was placed with Hottinguer & Co. See also Bray Hammond, "Jackson, Biddle, and the Bank of the United States," Journal of Economic History, VII, p. 17. Arrangements for remitting to pay dividends and interest to foreign holders of American securities by the bank and the Barings were made in May also. 44. BPOC, Ward to Barings, Aug. 21, 29, Nov. 3-Dec. 8, 1835; BPLB, Barings to Robert Gilmor & Sons, Sept. 14, 1835; Barings to Prime, Ward & King, Sept. 14, 29, Oct. 9, 1835, and later letters. The failure of R. M. Raikes, Governor of the Bank of England, had caused no concern at all in October, 1834, though fear of war between France and the United States had induced Ward both to refuse and to curtail credits during the first quarter of 1835· For information concerning the fire on Dec. 16 in New York, see Philip Hone, The Diary of Philip Hone, 1828-1851, Bayard Tuckerman, editor (New York, 1889), pp. 180-188; National Intelligencer, Dec. 17-29, 1835. On Mexico, Turlington, Mexico and Foreign Creditors, p. 73. F. de Lizardi & Co. succeeded the Barings in the agency. 45. BP, July-Dec., 1835, passim; Smith and Cole, op. cit., p. 192; W. T . C. King, Discount Market, p. 80; Jenks, op. cit., pp. 85-87. For an explanation of the "fitful and changeable character" of the London money market in 1835, see Circular to Bankers, May 8, 1835. 46. BPOC, Ward to Barings, May 29, 1835. 47. BPMC, unsigned memo, in script of Alexander Baring, Lord Ashburton, Jan. 6, 1836. C H A P T E R VIII ι. [J. R. McCulloch], "Crisis in American Trade," Edinburgh Review, L X V , pp. 232-233; Clapham, Ban\ of England, II, pp. 1 5 1 - 1 5 2 ; W. T . C. King, London Discount Market, pp. 91-97.

530

NOTES TO CHAPTER Vili

2. BPMC, Jaudon to Bates, Jan. 7, 1836; [McCulloch], "Bank of England," p. 67; Circular to Bankers, Sept. 7, 1838; Clapham, Ban\ of England, p. 159. 3. London Times, Aug. 27, Sept. 2, 1836; Circular to Bankers, Oct. 28, 1836. McCulloch ("Crisis," pp. 232-233) felt that public interest was not best served by throwing out a whole class of hitherto reliable bills. See also the criticism in Thomas Tooke and W. Newmarch, A History of Prices and of the State of the Circulation from 1792 to i8¡6, 6 vols, in 4 (London, 1928), π, p· 303· 4. [McCulloch], "Bank of England," p. 70; Jenks, Migration of British Capital, p. 87; BPMC, circular of Wiggin & Co., Sept. 12, 1836; Clapham, Ban\ of England, pp. 153-156; BPLB, Barings to Biddle, Oct. 22, 1836; Mildmay to James Pattison, Governor of the Bank of England, Oct. 17, 1836; Circular to Bankers, Apr. 28, 1837. Timothy Wiggin announced that all credits for exports to the United States would be reduced in volume and would be given semiannually instead of being kept revolving. Remittances were to be in hand at maturity of drafts and to have substantial, responsible drawers. No drafts on Wiggin & Co. were to be at six months date. 5. BPMC, Dec. 23, 1836, copy of the original agreement; BPLB, Bates to Jaudon, Mar. 1, 1837. Conditions in the agreement were that Wiggin & Co. should acquire control of £12,000 in available extraneous assets, draw fully upon a £40,000 credit open on the Continent, give no priority to the repayment of the whole or any part of the foregoing sums over the advances the signatories might be called upon to make, and each signatory should be drawn upon at the same time for an equal amount. 6. Ibid., Barings to Ward, Jan. 6, 14, 19, 21, 30, Feb. 1, 6, 1837; Barings to Prime, Ward & King, Jan. 21, Feb. 10, 20, 1837; Bates to Jaudon, Jan. 2 1 , 31, Feb. 14, 1837. 7. Clapham, Ban\ of England, II, pp. 153, 156; Acres, Ban\ of England from Within, II, p. 465. 8. BPLB, Barings to Ward, Dec. 15, 21, 1836, Jan. 3, 5, 6, 1 1 , 14, 19, 2 1 , 27, 29, 30, Feb. 4, 6, 1 3 - 1 4 , 17, 1837; Bates to Jaudon, Mar. 1, 3, 29, 1837; BPOC, Ward to Barings, Dec. 10, 1836; MHS, Ward Papers, Diary, Jan. 16, 1837. "In granting credits to Cuba and Brazil unless to rich parties drafts should not exceed 2/3rds cost. . . . Discourage combination voyages to Russia and endeavour to get solid people into the trade. Supercargoes seem generally to get more credit than they deserve" (Jan. 6). Price limits set for advances were all below prevailing prices. 9. The exception was a loan of four months to Roswell L. Colt, made at the request of the Bank of the United States, against collateral security of 2,000 shares of the bank which were later sold to cover the account. BPOC, Ward to Barings, Dec. 5, 10, 16, 1836; Biddle Papers, Barings to Colt, Dec. 30, 1836, Jan. 23, July 14, 1837. Some of the shares were sold below Colt's limit of £25. 10. BPMC, Jaudon to Barings, Aug. 3 1 , Oct. 15, 3 1 , Nov. 19, 30,1836; BPLB,

NOTES TO CHAPTER Vili

531

Bates to Jaudon, Jan. 31, 1837; BPOC, Ward to Barings, Nov. 29, Dec. 10, 21, 1836. The open credit to the Union Bank, for example, was withdrawn in November (BPLB, Barings to James Shepherd, June 19, 1837). 11. Ibid., Barings to Ward, Sept. 22, 1834. The three firms with four banking accounts each were Lambert & Slade, Downer & Rogers, and Manice, Gould & Co. 12. BPOC, Ward to Barings, Jan. 3, 5-6, 11, 16, 21, 30, Feb. 13, 1837, and enclosures. The "French accounts" were with Porter, Denny & Co. of New York, and C. H. Todd, Edwards & Stoddard, and Lane, Lamson & Co. of Boston. , 13. Ward complained about the laxity of his principals. Ibid., Dec. 30, 1836, Jan. 3, 5-6, i l , 16, 27, 30, Mar. 6, 14, 1837; BPLB, Barings to Ward, May 19, 1837. 14. BPMC, Circular to Correspondents, Dec. 1, 1836. 15. BPOC, Ward to Barings, Dec. 28, 1836; BPLB, Barings to Prime, Ward & King, Jan. 21, 1837; Barings to Ward, Jan. 30/31, Feb. 1 (quotation), Feb. 6, Mar. 20, 1837. 16. BPOC, Ward to Barings, Dec. 4, 10, 14-17, 28, 30, 1836, Jan. 3, 5-6, 11, 14, 21, 26, Feb. 2, 4-5, 13, 21, Mar. 21, 30-31, Oct. 31, 1837. The ]ohn Baring was not sold until October. 17. Ibid., Prime, Ward & King to Barings, Dec. 16, 1836, Jan. 2, 9, 23, Feb. 2, Mar. 7, 1837; BPLB, Barings to Prime, Ward & King, Jan. 21, 31, Feb. 10, 20, 1837. By February 20 the Barings reported that their only joint exchange account was with Prime, Ward & King, which probably means that they had no definite understanding with Goodhue & Co. as to the working of its account and that the one with Oelrichs & Lurman was inoperative. Goodhue & Co. sold Ohio bonds and Bank of U. S. shares on the joint exchange account in January (BPOC, Ward to Barings, Jan. 21, 1837). 18. BPMC, Jaudon to Barings, Oct. 31, Nov. 30, 1836, Jan. 14, Mar. 7, 1837; BPLB, Bates to Jaudon, Jan. 21, 31, Feb. 14, 1837; Barings to Ward, Mar. 17, 1837· The bank did annoy the Barings in one instance. As a personal favor Jaudon permitted H. Stockton to draw bills on Barings at four months date against the security of Delaware & Raritan Canal Co. bonds deposited with the Bank of the United States. The London house refused the drafts; it had refused a similar privilege to Jaudon himself in 1836, had never permitted drafts at four months date from the United States, and had always refused to have anything to do with railroad company bonds or drafts against them. The Barings called this the "most impudent transaction on the part of Mr. J." they had "ever heard of" (BPMC, Jaudon to Bates, Jan. 14, 1837; BPOC, Ward to Barings, Mar. 22, 24, 1837; BPLB, Bates to Jaudon, Feb. 14, 1837; Barings to Ward, Feb. 10, 1837). 19. Ibid., Jan. 30, 1837; Bates to Ward, Feb. 6, 1837. 20. Ibid., Barings to Ward, Jan. 30/31, Feb. 21, Mar. 6, 20, 1837; Niles1

532

NOTES TO CHAPTER Vili

Register, LU, p. 132. Bates' estimate was £18,000,000 on Mar. 20; Niles' was £20,000,000 in Nov., 1836, and £12,000,000 for Mar. 22, 1837. On May 26 Henry Burgess estimated sums due England by Americans as of Mar. 1 equaled £20,000,000 on mercantile operations alone, which was considerably higher than the figure he set — £8,000,000 — for the same date as the volume of bills in circulation on Anglo-American merchant bankers (Circular to Bankers, Mar. 24, May 26, 1837). 21. Ward and Story on Mar. 31 estimated that the total overdues had been reduced by £280,000, which the Barings later proved quite incorrect. BPOC, Ward to Barings, Mar. 30, 1837; BPLB, Barings to Ward, Mar. 30, 1837. The overdues showed a rise from £400,000 on Feb. 21 to £616,000 on Mar. 21, though neither apparently had any deductions for expectancies. 22. BPOC, Ward to Barings, Jan. 3, 1837. 23. Silberling, "British Prices," p. 233. Unless otherwise cited the material on the February-March crisis in England is derived from BPLB, Barings to Ward, Jan. 6, 14, 19, 21, 30, Feb. 1, 6, 14, 17, 20-23, Mar. 1-2, 6, 15-18, 20, 22, 30, 1837; Bates to Jaudon, Jan. 21, 31, Mar. 1, 6, 15, 1837; BPMC, George Wildes to Bates, Feb. ¿5, 1837; Jaudon to Bates, Nov. 19, 1836, Mar. 7, 1837; Wilson & Co. to Barings, Mar. 29, 1837; BPOC, Ward to Barings, Jan. 14, 26, Feb. 5, 13, Mar. 20, 1837; Niles' Register, LII, p. 65; Clapham, Ban\ of England, pp. 157-158; Circular to Bankers, Mar. 3, 24, June 9, 1837. Bates was chairman of the committee to investigate and supervise the affairs of Wilson & Co., and the prime adviser to the Bank as to procedure on the "three W's." For a more detailed discussion see R. W. Hidy, "Cushioning a Crisis in the London Money Market," Bulletin of the Business Historical Society, XX, pp. 131-145· 24. Brown Brothers & Co., Experiences of a Century (Philadelphia, 1919), P· 35· 25. BPLB, Barings to Biddle, Mar. 22, 1837; Barings to Prime, Ward & King, Mar. 22, 1837; Barings to Ward, Mar. 15, 20, 1837; Circular to Bankers, Mar. 24, May 26, 1837. The partners commented to Ward: "It is singular enough that after throwing out the Bills of the U. S. B. the Bank of England should so soon find their error and that the withdrawal of the Bank of the U. S. from Exchange operations for a time has convinced the Bank Directors that there is very little security in leaving the Exchange business to individuals who seem disposed to carry it one [«V] without means except such as they can borrow on this side." Even before their suggestion to the Bank of England in March the Barings had been mulling over ideas of the same general nature. Jaudon also had in mind the establishment of a special agency of his bank in London, upon which reliable bills might be drawn (BPMC, Jaudon to Bates, Nov. 19, 1836, Mar. 7, 1837). The Bank was still desirous of acquiring gold. During the last week in March Bates went to Paris to try to arrange with Hottinguer & Co. to ship

NOTES TO CHAPTER Vili

533

gold to the Bank of England through the agency of the Barings (see ibid., Bates to T . Baring, Mar. 2 7 , 3 0 , 1 8 3 7 ) . 26. Smith and Cole, Fluctuations in American Business, pp. 158, 183, 190, 192; BPOC and BPMC, Sept., 1836, through Mar., 1837. 27. National Intelligencer, Mar. 4-30, 1837; Niles" Register, LII, p. 66. 2 8 . BPOC, Ward to Barings, Mar. 2 2 - 2 4 , 2 9 - 3 0 , May 6 , 1 8 3 7 ; BPMC, Biddle to Barings, Apr. x, 2 9 , 1 8 3 7 ; Jaudon to Bates, June 1 5 , J 8 3 7 ; BPLB, Bates to Jaudon, May 13, 1837; National Intelligencer, Apr. 1 , 4, 1837; New Yor\ Journal of Commerce, Mar. 30, 1837. One reason for Ward's going to Philadelphia with the delegation from New York was to try to persuade Biddle, in conjunction with the Bank of America, to send 00,000 in sovereigns to the Barings on their respective exchange accounts. At the beginning the post notes sold as follows:

For cash at " 30-day notes " 60-day notes " 90-day notes 4-mo. notes

Post Notes payable in London (Percentage of par) 107 107 Vz 108 108 Vi 109

Post Notes payable in Paris (Francs per dollar) 5.35 5.32 5.30 5.25 5.25

Other banks issued smaller amounts of post notes. T h e Manhattan Banking Co. issued $ 1 , 0 0 0 , 0 0 0 of bonds payable in London. The Girard Bank issued a sum undetermined by the author. The Bank of America endorsed $ 1 , 0 0 0 , 000 of 6 per cent certificates of the Morris Canal & Banking Co., payable in England in 10, 12, and 14 months. National Intelligencer, Apr. 4, 1837. For other comments on the post note, see Circular to Bankers, Apr. 28, 1837. Burgess described the post notes as bonds circulating on the Stock Exchange by which the source of credit was shifted from the Bank of England and the discount market to the Stock Exchange. 29. BPOC, Prime, Ward & King to Barings, Apr. 1, May 1 1 , 1837; Ward to Barings, Apr. 1, 9, 16, 23, May 1 0 - 1 1 , 13, 17, 1837; BPMC, Jaudon to Barings, Apr. 16, May 15, 1837; National Intelligencer, May 18, 1837; Clapham, Ban\ of England, II, p. 159. 30. Ibid., p. 157. Information on the events in England from March 22 to the middle of June was taken from BPLB, Barings to Ward, Mar. 30, Apr. 6, 1 0 , 1 4 - 1 5 , 17, 2 2 , 2 9 , May 2 , 4-6, 9 , 1 9 , 2 2 , 3 0 / 3 1 , June 2 , 6 , 1 0 , 1 2 , 1 4 , 1 9 , 3 0 , 1837; Barings to Prime, Ward & King, Apr. 4, 10, 18, May 19, 1837; Barings to Jaudon, Apr. 6, 17, May 2, 1837; Bates to Jaudon, May 22, 1837; Barings to Biddle, June 6, 1837; Barings to M. Gordon, Jr., Apr. 6, 1837; Barings to James Shepherd, June 6, 10, 1837; BPMC, Wilson & Co. to Barings, June 3, July 8 , Dec. 1 5 , 1 8 3 7 ; Clapham, Ban\ of England, II, pp. 1 5 7 - 1 5 9 ; Circular

534

NOTES TO CHAPTER Vili

to Bankers, June 2, 9, 23, 1837. The directors of the Bank of England on May 25-26 had decided to carry the "three W's" to the end of the year, but the necessity of altering guarantees, news of pressure and failures in the United States, and no support from Downing street caused a change of mind — to let them suspend. The realization of the assets of the "three W's" dragged on till 1853. 31. BPMC, Bates to Thomas Baring, Mar. 27, 30, 1837; Journal of Thomas Raises, III, p. 157, quoted in Powell, Evolution of the Money Market, p. 340. 32. Earlier the Barings had borrowed an undisclosed sum from Overend, Gurney & Co., as indicated by the substitution of bank shares for Louisiana bonds as collateral on a loan in April (BPLB, Barings to Sutton Sons & Gribble, Jan. 13, 1837; Barings to Overend, Gurney & Co., Apr. 19, 26, May 3, Aug. 24, Sept. 7, 1837). 33. Ibid., Barings to Ward, Jan. 19, Feb. 10, Mar. 6, 1837; BPOC, Ward to Barings, Dec. 21, 1836, Jan. 21, Mar. 14, 1837. 34. BPLB, Barings to Ward, Jan. 19, Feb. 21, Mar. 6, 1837; Bates to Jaudon, Mar. ι, 6, 1837; BPOC, Ward to Barings, Mar. 22, 1837. 35. BPLB, Barings to Comly, Feb. 22, 1837; Barings to S. Herrmann & Sons, Feb. 22, 1837; Barings to Martin Gordon, Jr., Feb. 22, Aug. 22, 1837; Barings to Prime, Ward & King, Feb. 22-23, J u n e 6> I 2 > 1837; Barings to Biddle, Feb. 22, June 14, 1837; Barings to James Shepherd, June 6, 14, 19, 1837; Barings to Ward, June 14, 1837. 36. BPOC, Ward to Barings, Apr. 28, May 4, June 30, July 27, 31, Aug. 5, 16, 1837; BPMC, James H. Shepherd to Barings, June 20, 1837; BPLB, Barings to Ward, June 22, 1837. 37. Ibid., Barings to Biddle, Aug. 30, 1837; BPMC, Biddle to Barings, July 31, 1837. See also BPLB, Barings to Jaudon, Sept. 6, 1837. A succinct statement of Ward's view of Biddle is contained in BPOC, Ward to Baring Brothers & Co., May 26, 1837 — "In Mr. Biddle's judgment and management of the Bank I have never had confidence, though quite a man of talent and resource." 38. BPMC, Jaudon to Bates, May 1, June 5, 15, 19, Aug. 7, 1837; Jaudon to Ward, June 19, 1837; Jaudon to Barings, Apr. 16, May 15, 1837; A. G. Jaudon to Barings, May 15, 1837; Ward to Biddle, July 10, 1837; BPLB, Barings to Ward, May 2, June 28, Sept. 9, 1837; Bates to Jaudon, May 22, 1837; Barings to A. G. Jaudon, Aug. 5, 1837; Barings to Biddle, June 6, 1837; BPOC, Ward to Barings, May 6, June 1, 30, July 23-24 (Ward to Biddle, July 24, enclosed), 27, 31, Aug. ι , 16, Sept. 6, 1837. 39. BPLB, Barings to Ward, Mar. 17, Aug. 31, 1837; BPOC, Ward to Barings, Jan. 3, Mar. 23, July 17, 25, 31, Sept. 5, 1837, and pertinent enclosures. 40. BPLB, Barings to Ward, Feb. 22, Mar. 6, Apr. 14, May 22, 30, June 6, 10, 1837; BPOC, Ward to Barings, April 9-10, 16, 19, 23, May 4-7, 19, 23, 26, 28, June ι, 7, 13, 23, 26, 30, July 7, 15, 17, 22-23, 3 1 . A u g · 5. 8> I 2 > l 6 > 21-22, 29, Sept. 6, 15, 1837. Most of the specie remitted was purchased through Prime,

NOTES TO CHAPTER Vili

535

Ward & King, which charged such a high commission for the service that Ward decided to refuse to pay it currently and to settle it later by negotiation. Among those remitting directly to the Barings were Israel Thorndike, C. A. & E. Heckscher, Goodhue & Co., Robert Upton, Gideon Tucker, John Brown & Co., N. L. & G. Griswold, Howland & Aspinwall, D. P. Parker, Josiah Whitney, Mark Healey, Alfred Richardson, Porter Denny & Co., Jonathan Neal & Sons, Perkins & Co., Prime, Ward & King, the Union Bank of Louisiana, and the Bank of the United States. 41. BPLB, Barings to Ward, May 22, 1837. 42. BPOC, Ward to Barings, Apr.-Sept. 1837, passim, especially June 9, July 15, 26, 31, Aug. 22, Sept. 30, 1837, on the agents. 43. BPLB, Barings to Ward, Apr. 15, May 13, June 6, 28, July 6, Aug. 9, Sept. 6, 1837; BPOC, Ward to Barings, June 30, Aug. 29, 1837. 44. BPLB, Barings to Ward, Mar. 30, Apr. 22, June 6, 12, 30, Sept. 9, 1837; Barings to Wildes & Co., Apr. 19, 1837; Barings to Prime, Ward & King, June 19, 1837; BPOC, Ward to Barings, June 19-20, 23, July 25, 27, Aug. 8, 12, 21, Sept. 5, 1837. The Barings also interfered for the honor of the Bank of Louisiana and others (ibid., Sept. 30, 1837). 45. BP, Mar.-Sept., passim. On Goodhue & Company — BPOC, Ward to Barings, Apr. 9, 16, 25, 29, May 11, 17, June 4, 23, July 29 (to Bates), 1837; BPLB, Barings to Ward, June 14, 19, 22, July 6, 14, 19, 1837. On July 29, Ward wrote: "What has annoyed beyond measure was Goodhue's utter loss of self possession & energy — I hardly expect ever to recover from the feeling of pain and indignation it excited. — Having so much to do, and so much to perplex, to be obliged to go into his affairs, & to think for him & to urge & persuade, was almost beyond my patience to bear." The "affairs" of the firm were in excellent order. Peletiah Perit, another prominent partner, was in England at the time of stress. Smith and Cole, op. cit., p. 190, record that the premium on sterling exchange rose from 7V2 in January to 21 in September, 1837, and (on p. 192) that discount rates were as high as 32% in May and 18% in June before settling down to about 7 / 4 % for July, August, and September. 46. BPLB, Barings to Ward, Feb. 21, Mar. 30, Apr. 22, May 30, June 22, Sept. 6, 1837; Bates to Jaudon, Aug. 5, 1837. Overdues by dates were: Jan. 31, ¿747,407; Feb. 21, .£400,000; Mar. 21, ¿616,000; Apr. 22, ,£483,000; May 30, ¿516,000; Sept. ι, ¿810,831. Bates had reduced his estimates of the American short-term debt to Europe from ¿18,000,000 on Mar. 20, to ¿16,000,000 on Apr. 4, to ¿6,000,000 as of Sept. 1. The latter figure the Barings thought of as "probably less" than it had been for ten years past (ibid., Apr. 4, 1837; Barings to Ward, Mar. 20, 1837; Barings to Prime, Ward & King, Sept. 6, 1837). Ward estimated that ¿2,500,000 in securities and specie had been shipped to England between April 1 and June 23, and that ¿6,000,000 in specie alone had been remitted between May 10 and Aug. 21, 1837 (BPOC, Ward to Barings, June 23, Aug. 21, 1837).

536

NOTES TO CHAPTER IX

47. BPLB, Barings to Ward, July 6, 29, 1837. Compare earlier and similar determinations to limit uncovered credits, especially dry goods and Far Eastern {ibid., Apr. 22, May 30/31, June 28, July 14, 22, 1837). 48. Ibid., May 13, 19, 30/31, June 28, July 8, Aug. 22, Sept. 9, Oct. 13, 1837; Bates to Jaudon, Apr. 4, May 2, 1837; BPOC, Ward to Barings, Apr. 10, 24, May 21, June 7, 13, July 15, 26, Dec. 6, 1837. The failed firms were Cary & Co., Craft, Stevens & Tucker, Downer & Rogers, Manice, Gould & Co., and Foote & Sterling of New York; Samuel Comly of Philadelphia; Robertson, Beale & Co. of Mobile; and Dyer & Blake, William Eager, Alfred Richardson, William Tucker & Sons, Griswold & Wood, Holbrook, Green & Co., Scudder, Park & Co., Howard & Merry, and Henry Lee of Boston. Talbot, Olyphant & Co. (N. Y.) suspended temporarily but was sustained by aid from Prime, Ward & King and Goodhue & Co. Among other failures owing the Barings were Tucker, Dorr & Co., S. & F. Dorr & Co., A. H. Dorr & Co., Bond, Whitwell & Co., Henry J. Bridges, Cutler, Penniman & Co., Craigin, Cleveland & Co., William Nott & Co., Israel Thorndike, J. L. & T. Hedge, and Whitwell, Bond & Co. William Brown told George Peabody that the "actual losses" of all the Brown houses in 1837 amounted to only ¿£39,253. That figure represents the net loss after gains had been deducted from gross losses, but no provision had been made for the expenses of the partners. I have no comparable figure for the net income of the Barings. William Brown's "losses appearing on the American books," which amounted to $802,378, and the loss of his own firm in Liverpool, which was entered as £17,892, may be compared to the estimated loss of £30,000 by the Barings on their "failed accounts" (Peabody Papers, Essex Institute, W. & J. Brown & Co. to Peabody, Feb. 19, 1838, by courtesy of Muriel E. Hidy). 49. Journal of Commerce, quoted in files' Register, LII, p. 66; BPMC, Biddle to Barings, July 3 1 , 1837. 50. BPOC, Ward to Barings, May 21, 1837. In a letter to Houqua on May 12, 1837, J ° h n P· Cushing stated that with the exception of the Barings he did not think there was a house of American agency in London whose solvency at the moment could be insured at a premium of 90% ( H G S B A , Cushing Letter Book, May 12, 1837). On May 13, 1837, George Peabody stated, "Baring Brothers & Co. stand better than any other American house" (Peabody Papers, Peabody to Elisha Riggs, May 13, 1837). C H A P T E R IX ι. McGrane, Panic of 1837, pp. 191, 200-201. The Barings never expected the sub-treasury plan to pass. BPLB, Barings to Ward, Oct. 6, 1837. 2. Thorp, Business Annals, pp. 122, 160; King, History of the London Discount Mar\et, p. 80; Smith and Cole, Fluctuations in American Business, pp. 73. 183, 190, 192. 3. Quoted in McMaster, People of the United States, VIII, p. 100. For the

NOTES TO CHAPTER IX

537

effect of steam navigation in the Orient, see BPOC, W a r d to Barings, June 26, 1838. 4. BPLB, Barings to W a r d , Nov. 18, 1837; The American Almanac and Repository of Useful Knowledge for the Year 1841, p. 130; ibid., 1840, p. 106; Jenks, Migration of British Capital, pp. 93-94. 5. T h e views expressed above rather militate against the acceptance of the idea that Biddle's activities alone were responsible for "corrupting the financial mores of every American state." Jenks, op. cit., p. 93. 6. BPLB, Barings to W a r d , July 31, 1837; BPOC, W a r d to Barings, Sept. 5, 12, Oct. 30, 1837, and enclosures. Of the £6,000,000 balance due the foreign creditors of the United States, after all crops had been shipped, the Barings estimated that ^1,500,000 could not "probably be collected so as to produce a demand for remittance in less than two years, another million in not less time than one year, & another half million" would "probably never be collected at all, thus leaving Three millions only to be provided for before the Banks" could "with perfect safety resume cash payments," since it was the "foreign demand alone which could make such a measure at all hazardous." 7. BPLB, Barings to W a r d , Mar. 18, Apr. 22, 1837. 8. BPOC, W a r d to Barings, Sept. 14, Oct. 17, Nov. 30, Dec. 11, 1837, Jan. 6, 31, Feb. 18, Mar. 15, June 26, Aug. 10, Sept. 6, Dec. 10, 1838, Jan. 14, 20, 22, 31, Feb. 18, Apr. 8, May 13 (enclosed m e m o r a n d u m on the back of a quarterly statement — "List of London Houses concerned in the American T r a d e " ) , July 20, 30, Sept. 7, 1839; BPLB, Barings to Ward, Sept. 9, Dec. 21, 1837, Jan. 6, 30, Mar. 31, July 30, Sept. 19, 24, Oct. 11-12, 19, 25, 1838; Barings to Prime, W a r d & King, Oct. i o - ' n , 1838; BPMC, Charles Kerr to Barings, Nov. 7, 1837; London Times, Dec. 2, 5, 1837; MHS, W a r d Papers, W a r d to Bates, Jan. 15, 1839. 9. BPLB, Barings to W a r d , Sept. 9, 1837; BPOC, W a r d to Barings, Oct. 30, 1837, and enclosures. 10. BPMC, S. Jaudon to Bates, May 1, June 19, 1837; S. Jaudon to W a r d , June 19, 1837; A. G. Jaudon to Barings, May 15, 1837; BPLB, Barings to A. G. Jaudon, Aug. 5, 1837. By June 19 Jaudon had estimated that 18,000 bales, valued at $700,000, had been purchased at N e w Orleans. By Sept. 9 the Barings estimated that the Liverpool house had on hand for the bank cotton worth upwards of ^230,000. 11. Jenks, op. cit., pp. 90-92; S. Hazard, editor, United States Commercial and Statistical Register . . . , 6 vols. (Philadelphia, 1840-42), IV, pp. 225304; London Times, Oct. 14-Dec. 16, 1837; McGrane, Panic of 1837, pp. 1 8 1 182, 203-204; Circular to Bankers, Dec. 1, 1837, Feb. 23, Mar. 2, 9, Oct. 5, 1838, Mar. 22, 1839; Biddle Papers, Biddle to John Minturn, Dec. 7, 1837; Humphreys & Biddle to John Minturn, Dec. 7, 1837; Biddle to May H u m phreys, Nov. 21, 1838; Biddle to James Hagarty, Nov. 25, 1838, Jan. 23, 1839; Biddle to E. C. Biddle, Dec. 4, 22, 1838; BPMC, Jaudon to Bates, Sept. 15, 30, 1837; Jaudon to Barings, Aug. 20, 1838; T . Marean to Bates, Jan. 16,

538

NOTES TO CHAPTER IX

1838; Biddle to Barings, Oct. 6, 1837; BPOC, Ward to Barings, Sept. 23, 27, 30, Oct. 6, 9, 13, 21, 24, Nov. 13, 21, 24, 1837, Jan. 8, 12-13, Feb. 16, Apr. 2, May 16, fune 1, 15, July 16, 30, Aug. 16, 23, Sept. 5-6, 11, Oct. 17, 29, Nov. 18, 1838, Feb. 12, April 29, May 17, 1839; Prime, Ward & King to Bates, Aug. 16, 1838; BPLB, Barings to Jaudon, Feb. 12, 14, 1838; Barings to N. L. & G. Griswold, June 14, 1838; Barings to Ward, Oct. 12/13, 30, Nov. 22, Dec. 1, 6, 1837, Feb. 14, Apr. 28, June 14, Sept. 11, 19, 24, 1838. 12. MHS, Ward Papers, Ward to Bates, Jan. 6, 1839; BPOC, Ward to Barings, July 13, 17, Aug. 5, 21-22, Oct. 30, Nov. 21, 30, 1837, Mar. 15, Apr. 10, 16, 24, June 1, July 16, Nov. 15, 1838, and enclosures re the Bank of the United States and the Union Bank of Louisiana; BPLB, Barings to Ward, Nov. 22, Dec. 30,1837, Apr. 6, May 14, June 22, 1838; BPPD, extracts from The Globe, June 13, 1837, a n d from the National Gazette, July 11, 1837; BPMC, letter on the New York bank meeting, Aug. 18, 1837. Charles King, editor of the American, was a brother of J. G. King. For comments on banking in the United States, see BP, Sept., 1837-May, 1839, passim. See also J. L. Laughlin, A New Exposition of Money, Credit and Prices, 2 vols. (Chicago, 1931), II, pp. 261-262; McGrane, Panic of 18¡y, pp. 185-187, 200-201; G. T. Starnes, Sixty Years of Branch Banking in Virginia (New York, 1931), p. 93. 13. BPLB, Barings to Ward, Jan. 10, 1838; Bates to Ward, Feb. 6, 1839. Perhaps the foregoing was good advice for one who said, "I only fear the intrigues of the politicians, and the ignorance of the many," but it was difficult for the outspoken Ward to follow it (BPOC, Ward to Barings, Sept. 5, 1837). 14. Ibid., J. G. King to T. A. Curtis, governor of the Bank of England, Mar. 19, 1838; Barings to Curtis, Mar. 19, 1838; King to Bates, Apr. 24, May 7, 16, 1838; Biddle to J. Q. Adams, Apr. 5, 1838; Prime, Ward & King to Barings, Apr. 30, May 25, June 2, 25, 30, July 25, 1838, July 1, 6, 13, 25, 1839, and enclosures; Prime, Ward & King to Sir John Rae Reid, governor of the Bank, July 5, 1839; Biddle to Prime, Ward & King, Apr. 30, 1838; Ward to Barings, Apr. 16, 19, 20, 23-25, May 6, 16, June 15, 21, 1838, and enclosures; BPLB, Barings to Liverpool affiliate, Mar. 12, 16, 1838; Barings to Ward, Mar. 15, 21, Apr. 19, May 22, 1838; Barings to Prime, Ward & King, Feb. 6, Mar. 12, 30, Apr. 6, 9, June 1, 6, 14, 19, July 20, Nov. 6, 1838, Feb. 5, July 5, 31, 1839; Bates to King, Apr. 17, May 28, Sept. 5, 1838; Tooke and Newmarch, History of Prices, III, pp. 79-81. 15. BPLB, Barings to Hopes, Mar. 16, 1838. See also Pari. Papers, Report on Manufactures, 1840, pp. 117-155. 16. BPOC, Ward to Barings, Apr. 23, 1838; King to Bates, Apr. 24, 1838, referring to Biddle to Adams, Apr. 5, 1838; Niles' Register, LIV, pp. 98-100; McGrane, Panic of 1837, p. 229; Tooke and Newmarch, op. cit., p. 81; BPLB, Barings to Ward, May 22, 1838 (expressing pleasure that the "desired result" had been attained). 17. BPLB, Barings to Ward, Mar. 6, Nov. 14, 28, 1837, Apr. 14, Sept. 22, 1838; BPOC, Ward to Barings, Nov. 21, 1837, Mar. 5, 1838, Feb. 20, May 13,

539

NOTES TO CHAPTER IX

Aug. 22, 1839. An estimate of the progress in reducing deferred debts and debts of failed concerns is afforded in the following figures:

Deferred (by notes) Failed

1838 Apr. 14 Sept. 22 ¿ 57,768 /58,23o 114,005 55,465 I I

7 >773

1

13,695

1839 Feb. 10 May 13 Aug. 22 ¿45.597 ¿56,73° ¿Φ,597 28,445 28,554 16,743 74,04 2

85,284

63,340

18. Although comments may be found throughout the BP, key documents may be seen in BPOC, Ward to Barings, Mar. 16, May 28, June 1, 15, 26, Nov. 18, 1838, and enclosures; BPLB, Barings to Ward, Nov. 17, 1837, Dec. 13, 19, 1838; Barings to Gibbs, Oct. 26, 1838; BPMC, Davis & Brooks correspondence, Apr. 15, 1836-Mar. 4, 1839, and Sidney Brooks to Bates, Mar. 27, 1847. Ward thought several ante-1837 accounts — some dating from 1831 — should be written off the books, but there is no indication that his principals followed his advice. BPOC, Ward to Barings, Mar. 13, 28, 1838. 19. BPLB, Barings to Ward, Oct. 14, 18, 1837; BPOC, Ward to Barings, Nov. 30, 1837. 20. Ibid., Oct. 6, 1837; BPLB, Barings to Ward, Dec. 14, 1837, July 30, 1838. 21. On new numbers — ibid., July 29, Oct. 12/13, 1837, July 20, Oct. 19, Nov. 17, 1838; BPOC, Ward to Barings, Sept. 18, 1837, Jan. 31, Oct. 11, 15, Dec. 27, 1838, May 23, 1839. 22. Ibid., Sept. 20, Nov. 13, 1837 ( a r , d enclosures), Jan. 30, June 15, Aug. 13, 1838; BPLB, Barings to Ward, Dec. 21, 1837, Jan. 10, 22, Apr. 14, Nov. 19, 1838; MHS, Ward Papers, Samuel G. Ward to T . W. Ward, Jan. 2, 16, 23, 1839. S. G. Ward was on a tour of the South with a view to studying cotton and venturing in that commodity. 23. On Joseph Henry Grinnell, Moses Hicks Grinnell, and Robert Bowne Minturn, see DAB. The gradualness of the transfer by Grinnell, Minturn & Co. may be followed in BPLB, Barings to Ward, Apr. 22, May 2, Aug. 19, 30, 1837, Apr. 25, May 5, Sept. 29, Oct. 19, 1838; BPOC, Ward to Barings, June 15, 20, 21, July 30, Sept. 5, Oct. 3, 17, 1838, Feb. 18, 1839, a n d pertinent enclosures. 24. BP, Sept., 1837-Apr., 1839, passim. 25. For information regarding the letters of credit and receipts, see BPOC, Ward to Barings, Oct. 9, 1837, Jan. 23, 1838, July 1, 1842, and pertinent enclosures; BPMC, pro forma letter of credit, dated Oct. 29, 1838. For citations on other facts: BP, Sept., 1837-Apr., 1839, passim. 26. BPLB, Barings to Davis, Brooks & Co., Sept. 10, 1838. 27. BPOC, Ward to Barings, Nov. 13, Dec. 15, 1837, Jan. 23, Mar. 28, May 13, 23, 28, June 5, July 30, Aug. 2, Sept. 5, 17, Oct. 3, 1838, Feb. 18, 21, May 4, 17, 23, 1839, and enclosures; BPLB, Barings to Ward, Dec. 6, 1837, J a n · 22 > Apr. 27, June 22, Sept. 7, Oct. 19» 1838· In the "divided accounts" the three firms charged a commission of 2 / 4 % on dry-goods credits and gave the

540

NOTES TO CHAPTER IX

Barings i % ; i x A% on West Indian and South American and gave the Barings iVi%\ 3 % on Far Eastern and turned over 2%. 28. Ibid., Feb. 6, 1838; BPOC, Ward to Barings, May 18, 1838. 29. Attention is invited to the fact that the figure for Feb. 20, 1839, may not be really comparable to the other four because it was made up as an estimate in Boston, not on the basis of actual accounts in London. See p. 232 of this volume for Sept. 1, 1837, figures. Then overdues were ¿811,000 and acceptances ¿464,000. 30. BPLB, Barings to Ward, July 14, 1837. 31. None of these operations may be clearly followed from beginning to end in the Baring Papers in Ottawa, but many indications may be cited (BPLB, Barings to Ward, Apr. 14-Aug. 15, 1837, passim, disclose continued contemplation of low prices as offering opportunities for ventures). Actual orders and operations may be glimpsed in BP, July, 1837-Apr., 1839, passim. 32. BPLB, Barings to Ward, Aug. 9, 1837. 33. Ibid., Sept. 27, 29, Oct. 6, 14, 1837; Barings to J. B. Milligan, Oct. 14, 1837; Barings to H. Lavergne, Oct. 14, 1837; Barings to S. Jaudon, Oct. 6, 1837; BPOC, Ward to Barings, Nov. 1, 3, 21, 23, Dec. 1, 11, 1837. On the 1834-35 season, see pp. 185-186 of this volume. 34. References to operations in cotton are to be found in BP, Aug., 1837Aug., 1839, passim; New York Herald, Apr. 23, 1841. 35. BPOC, Ward to Barings, Sept. 20, Nov. 21, 30, Dec. 21, 1837, Jan. 12, March 15, Apr. 10, 15-16, 24, Dec. 27, 1838, Feb. 18, 25, Apr. 16, May 5, 1839, and enclosures; BPLB, Barings to Milligan, Dec. 9, 1837; Barings to Ward, Nov. i l , Dec. 6, 30, 1837, Apr. 6, May 14, 1838; BPMC, Stevens to Bates, May 19, 1838 (and enclosures); Martin Gordon, Jr., to Barings, Dec. 5, 1838. At first the bank was restricted to drafts "against remittances of Cotton Bills accompanied by Bills of Lading" (Dec. 1837), and was later granted permission to operate under an uncovered credit upon resumption of specie payments (Mar., 1838). The final permission came from London in April. 36. BPOC, Ward to Barings, Oct. 31, Dec. 15, 1837, Jan. 12, Apr. 12, 1838, Feb. 6, Apr. 15, 1839, and enclosures; J. G. King to Barings, Dec. 21, 1837, Mar. 23, May 15, 1838; Prime, Ward & King to Barings, Mar. 7, Apr. 2, 9, 24, May 15, June 8, 1838; BPLB, Barings to King, Dec. 26, 1837, Jan. 3, June 14, 1838; Bates to King, Apr. 17, May 28, 1838; Barings to Prime, Ward & King, Oct. 6, 14, 20, Dec. 30, 1837, Jan. 3, 22, Feb. 6, 27, Mar. 20, Apr. 28, May 19, June 6, July 20, Oct. 19, 1838; Barings to Ward, Oct. 12/13, Nov. 22, Dec. 6, 1837; Barings to Albert Gallatin, president of the National Bank, Dec. 6, 1837; Barings to Martin Gordon, Jr., Aug. 9, 11, Nov. 19, Dec. 13, 1838, Jan. 26, Feb. 12, 1839; BPMC, Gordon to Barings, Dec. 5, 1838. 37. For the contract, ibid., Apr. 30, 1838. For other details, see BPOC, Ward to Barings, Mar. 15 (and enclosures), 27, Apr. 1, May 1, 16, June 5, July 30, Sept. 6, 1838, Mar. 7, 23, May 17, 30, 1839; BPLB, Barings to Ward, Apr. 14, 25, 28, June 14, 19, 29, July 30, Aug. 20, Sept. 29, Oct. 6, 1838; Barings to Josiah Quincy, Jr., June 14, 1838.

NOTES TO CHAPTER IX

541

38. Ibid., Barings to Ward, Nov. 28, 1837; Jan. 1, 6, 30-31, Feb. 6, 10, 13, Mar. 6, 1838, and March 12-June 22, passim, 1838. 39. Ibid., Barings to Prime, W a r d & King, June 14, July 20, 1838; Barings to Ward, June 19, 1838; BPOC, Prime, Ward & King to Barings, June 8, 1838. 40. B P L B , Barings to Prime, W a r d & King, July 20, Aug. 9, 11, 24, 1838; Barings to Ward, Aug. 17, 22, 24, 1838; Barings to Overend, Gurney & Co., July 24, Aug. 7, Sept. 20, 1838; BPOC, Prime, Ward & King to Barings, July 18, Aug. 4, 1838. T h e sum was £100,000 for the first two weeks. 41. B P L B , Barings to Ward, July 4, 20, 30, Aug. 17, 20, Oct. 6, 1838; Barings to Prime, W a r d & King, Apr. 14, July 20, 30, Oct. 6, 1838; Bates to King, Sept. 5, 1838. 42. Ibid., Barings to Prime, Ward & King, June 14, July 20, Aug. 9, 1838; Bates to King, Apr. 17, 1838; Barings to Ward, July 20, Aug. 17, 1838; BPOC, Prime, Ward & K i n g to Barings, Mar. 9, 1839. 43. B P L B , Barings to Ward, Sept. 29, 1838; BPOC, Prime, Ward & King to Barings, Sept. 2, 18, 1838. 44. Ibid., Sept. 18, 22, Oct. 1, 24, Nov. 8, 19, Dec. 5, 1838, Jan. 2, 8, 15-16, 25, Feb. ι , 7, 18, 25, Mar. 1, 9, Apr. 1, 8, 16, 22, 1839; King to Bates, Oct. 4, 1838, Jan. 25, 1839; B P L B , Barings & Co. to Ward, Oct. 25, 1838. 45. Ibid., Barings to Prime, W a r d & King, Oct. 6, 19, 30, Nov. 10, 19, 30, 1838, Jan. 26, 1839; Barings to Ward, Sept. 19, Oct. 6, 19, 25, 30-31, Nov. 13, 19, 23-24, 30, Dec. 13, 31, 1838, Feb. 5, 1839; BPOC, Prime, Ward & King to Barings, Sept. 18, Nov. 19, 1838, Jan. 8, Mar. 9, 1839; Hopes to Barings, Oct. 2, 1838; BPMC, B. Gayle to W . R. Hallett, May 5, 1839. 46. B P L B , Barings to Prime, Ward & King, Nov. 19, 1838; Barings to Ward, July 20, 1838; BPOC, Prime, Ward & King to Barings, Aug. 16, 1838; Ward to Barings, June 22, Aug. 10, 1838; Jan. 7, 31, Feb. 6-7, 10, 12-13, J 9> 2i, Apr. 15, May 15, 17, 1839. Samuel Ward was elected president of the institution, thus making it quite natural that Baring Brothers & Company should be selected to handle its London business. W a r d had to pay cash for only 10% of the subscription to the Bank of Commerce. With Samuel W a r d of Prime, Ward & King, the Baring's agent "originated" that new bank and subscribed $40,000 for himself ( M H S , Ward Papers, Diary, 1827-1853, Mar. 3. 1839)·

47. B P L B , Barings to Hopes, Nov. 9, 16-17, 20, 23, 27, 1838, Mar. 12, 19, 1839; Barings to Prime, Ward & King, Sept. 29, Oct. 6, 19, Nov. 6, 13, 19, 23-24, 1838; Barings to George McDuffie, Feb. 13, Mar. 20, 1839; Barings to D . C. Webb, Mar. 20, 1839; Barings to Ward, Nov. 19, 22, 1838, Nov. 15, 1839; BPOC, Hopes to Barings, Nov. 13, 20, 1838, Jan. 6, Mar. 11, 1839. Because of sales to other parties, the Barings actually purchased only £217,500 of the bonds. They elected to sell the remaining $1,000,000 on commission, charging 2% if bills against the bonds were drawn before sales and 1 % if after sales were effected. T h e Bank of the State of Carolina was to be permitted to draw ¿30,000 per month until its drafts amounted to 80% of the nominal value of the securities.

542

NOTES TO CHAPTER Χ

48. BPOC, Ward to Barings, Jan. 26, 3 1 , Feb. 21, 1839. For information on the general situation during'the fourth quarter of 1838 and the first of 1839, see Jenks, op. cit., pp. 95-96; BP, Oct., 1838-Mar., 1839, passim; Clapham, Ban\ of England, II, pp. 134-137; Circular to Ban\ers, Oct. 5, 1838; BPLB, Barings to Prime, Ward & King, Mar. 18, 22, 30, Apr. 5, 1839; BPOC, Prime, Ward & King to Barings, Apr. 22, 1839; Ward to Barings, Feb. 24, 1839; MHS, Ward Papers, S. D. Bradford to Ward, July 20, 1839. 49. BPLB, Barings to Prime, Ward & King, Mar. 18, 22, 30, Apr. 5, 19, 1839; BPOC, Ward to Barings, Feb. 24, May 15, 22, 1839; Prime, Ward & King to Barings, Apr. 22, 1839. 50. Ibid.., Ward to Bates, Mar. 23, 1839. CHAPTER X ι. T. A. Bailey, A Diplomatic History of the American People (3d ed., New York, 1946), pp. 207-232; Mary W. Williams, The People and Politics of Latin America (new ed., Boston, c. 1930), pp. 664-665. 2. Thorp, Business Annals, pp. 122-123, 160-161; Silberling, British Prices, p. 233; Smith and Cole, Fluctuations in American Business, pp. 60, 73, 158, 183, 185, 190, 192-193; Clapham, Bank, of England, II, pp. 161-168; Clapham, Economic History of Modern Britain, I, pp. 516-517; Jenks, Migration of British Capital, pp. 96-106; W. T. C. King, London Discount Market, pp. 80-82. 3. BPLB, Barings to Prime, Ward & King, May 6, 17, 20, 24, 31, June 6, 12, July 5, 10, Aug. 23, Sept. 19, 24, Oct. 18, 1839; Barings to Hopes, May 17, 31, 1839; Barings to L. McLane, May 24, 1839; BPOC, Prime, Ward & King to Barings, Apr. 22, May 10, 18, June 1, July 1, 6, 25, Aug. 1, 7, 24, 1839; Ward to Barings, Apr. 1 1 , July 19, Sept. 18, 1839; Hopes to Barings, May 21, 24, 1839; BPMC, J. Hutchinson & Son to Barings, May 25, 1839. Not even Ward's $10,000 New York and f 10,000 Ohio bonds, sent against acceptances maturing in May, 1839, were sold. Securities on the joint exchange account on June 12 were $157,000 in Ohio 6's of i860, $100,000 in Ohio 6's of 1856, $80,000 in New York 5's of 1855, and $125,000 in Alabama 6's. By July 10 the comparable figures were $152,800, $15,000, $7,000, and $125,000. 4. BPLB, Bates to C. A. Davis, Oct. 18, 1839; Clapham, Ban\ of England, II, pp. 161-162; Clapham, Economic History of Modern Britain, I, pp. 517-518. 5. BPLB, Bates to William Appleton, Jan. 2, 1840. 6. One description of the Wilder operation may be noted in Hazard, U. S. Commercial Register, IV, pp. 228-229, 249. Biddle stated that the loss on this operation was a result of Humphreys & Biddle's aid to Jaudon, which necessitated sales of cotton in August and the breaking of the market. As a matter of fact, the market broke first in July, then rallied before breaking finally in August (BPLB, Barings to Prime, Ward & King, July 18, Aug. 3 1 , 1839; Barings to Ward, Aug. 22, 3 1 , 1839). All the cotton dealers in Liverpool except Breed & Eccleston managed at this time to meet engagements without suspension or failure.

NOTES TO CHAPTER Χ

543

Out of 559,309 bales received at Liverpool from January 1 to July 1, 1839, Humphreys & Biddle had been sent only 35,149, thus repudiating a prevailing idea that the Bank of the United States had a corner in cotton (NileS Register, LVII, pp. 5-6). The circular issued by Wilder, its repudiation by the bank officials, and later developments in cotton may be followed in BPOC, Ward to Barings, June 4-Oct. h , 1839, passim. To the end of Biddle's administration the bank borrowed on post notes. Rather than have his own institution do it, he persuaded the Bank of Pennsylvania to advance all the funds needed by the State on Feb. 1, 1839. H e also refused to advance funds to the Morris Canal & Banking Co. in February, ostensibly because E. R. Biddle had never delivered as promised Michigan bonds. These indications of need make Biddle's assurances to Webster sound hollow; he told the Senator that the bank had postponed resuming specie payments until Jan., 1839, in order to cooperate with the Federal government by selling bank notes in the interior and leaving specie along the Adantic seaboard. Biddle MS, Biddle to I. Cowperthwait, Jan. 26, 1839; Biddle to C. S. Baker, Jan. 27, Feb. 2, 1839; Biddle to Webster, Jan. 28, 1839; N. Biddle to E. R. Biddle, Feb. 24, 1839. 7. BPMC, John Rae Reid, senior partner of Reid, Irving & Co. and governor of the Bank of England, to Barings, July 22, 1839; BPLB, Barings to Reid, Aug. 6, 31, Sept. 11, 16, Oct. 4-5, 16, 18, 22-24, 3°> Nov. 1, 4, 15-16, 18, 21-22, Dec. 6, i l , 1839, Feb. 4, 18, 1840; Barings to S. Heine, Aug. 23, Sept. 27, Oct. 8, l i , 18 (Bates to Heine), Dec. 6, 1839; Barings to Hottinguers, Aug. 31, Sept. 18, 25, Oct. 16, Dec. 24, 28, 1839, Jan. 2, 14, 23, 31, Feb. 11, 1840; Barings to M. Sussman, Sept. 24, Oct. 11, 18, Dec. 6, 1839, Jan. 24, 1840; Barings to Hopes, Oct. 8, 1839, Jan. 4, 1840; Barings to Ward, Nov. 18, Dec. 2, 1839, Aug. 31, 1840; BPOC, Hottinguers to Barings, Sept. 28, Oct. 3, 5, 1839, Feb. ι, 1840; Neuflize & Co. Papers, Hottinguers to André & Cottier, Aug. 5, 1839; Sir John Rae Reid to Barings, Nov. 5, 1839; De Neuflize & Cie., Notice historique, annex 1 (Paris, undated) ; Circular to Bankers, Oct. 4, 1839; Clapham, Banl^ of England, II, pp. 168-170. The Paris Houses were André & Cottier, Baguenault & Co., Davillier & Co., Hottinguer & Co., Lefebvre & Co., Blanc & Co., Mallet Brothers & Co., Laffitte & Co., Aguirrivengoa & Uribarren, Périer Brothers & Co., and Pillet, Will 8c Co. The Barings were to pay the Paris firms Vi% commission for accepting the first drafts and % % on renewals. A substantial volume of the bill remittances to Hamburg and Vienna were drafts on Paris. At one time the Bank of France had discounted bills drawn by the Barings to the value of 15,000,000 francs. 8. Biddle MSS, Biddle to Jaudon, unintentionally dated Mar. 8, 1838, though written in 1839; BPLB, Barings to Hottinguers, May 13, 24, Sept. 18, 20, 1839; unaddressed letter, apparently to Hottinguers, after Barings to Ward, Aug. 12, 1839; Barings to Jaudon, June 11, 23, Aug. 23, Sept. 24, 1839; Barings to Ward, Aug. 12, 22-23, 31, Sept. 17, 19, 24, 27, Oct. 2, 5, 1839; Barings to Prime, Ward & King, July 31, Aug. 23, 31, Sept. 19-20, 24, 27, 30, Oct. 2,

544

NOTES TO CHAPTER Χ

1839; Barings to S. Heine, Sept. 27, 1839; Barings to Hopes, June 28, 1839; Barings to Thomas Dunlap, A u g . 23, 1839; BPMC, Jaudon to Barings, May 28, June l i , A u g . 9, Sept. 5 (to Bates), 23, 25, 1839; Dunlap to Barings, A u g . 31, 1839; Lord Ashburton to Bates, Sept. 17, 22, 1839; printed memorandum in galleys on the relations with Jaudon, dated "1839" by some person in the Public Archives, though obviously drawn up not earlier than Mar. 24, 1840; copies of correspondence between W a r d and Dunlap, A u g . 30-Sept. 16, 1839; B P O C , Hottinguers to Barings, May 15, 20, 22, July 1, Sept. 11-12, 16-18, 23, 28, 30, 1839; Hopes to Barings, May 24, 1839; Ward to Barings, July 13, 18, 25, A u g . 23, Sept. 7, 18, 21, 28, 1839; Prime, W a r d & K i n g to Barings, July 6, 26, A u g . 24, 1839; Niles' Register, LVII, pp. 65, 119, 161; Circular to Bankers, A u g . 16, 23, 30, Sept. 6, 13, 20, 27, Oct. 4, 18, 1839. Ward, Appleton, Sturgis, and Prime, W a r d & K i n g all thought that the Bank of the United States was in a precarious position during the summer of 1839 and disapproved of the resumption of its agency by the Barings. T h e decision of Hottinguer & Co. to refuse the bills of the bank in September was based both upon fear and upon disgust with the course of the Philadelphia institution. Before May 15 the bank had agreed never to require of the Paris and Havre houses more than £320,000, whereas at that moment they were in advance an additional ¿Γιοο,οοο. T h e Barings allowed Hottinguer & Co. to draw £100,000 on them for two months, and Jaudon acquired a further £50,000 from Rothschild & Sons before the end of May. By July remittances from Philadelphia totaling 3,500,000 francs had been received. T h e account was then in an acceptable condition. By Sept. 11, however, the bank without authority had drawn to the extent of 6,200,000 francs at a time w h e n the Paris firm was already in advance 6,000,000, and another 1,800,000 was to fall due on a loan on Oct. 1. Hottinguer & Co. decided to refuse to honor the unauthorized bills. 9. See BPMC, "List of Stocks pledged for the Loans of the Bank of the United States of Pennsylvania," dated "-/10/1839"; Overend, Gurney & Co. to Barings, Oct. 12, 1839; BPLB, Barings to Prime, W a r d & K i n g , Oct. i8, 1839; Barings to Ward, Oct. 14, 18, 1839; Niles' Register, LVII, pp. 161-162. The Denison & Co. loan was in sterling bonds, interest payable semi-annually at Denison's at 5 % per annum, redeemable half on Apr. 15, 1841, and half on Apr. 15, 1842. T h e bonds were first sold at 92 and soon rose to 95. 10. M H S , Ward Papers, Bates to Ward, Feb. 9, 1841; BPMC, Jaudon to Barings, Nov. 11-12, 30, Dec. 3, 11-13, 21, 30, 1839, Jan. 7, 1840; Jaudon to the Shareholders of the Bank of the United States, Dec. 4, 1839; document dated "-/10/1839"; Overend, Gurney & Co. to Jaudon, Nov. 21, 1839; Overend, Gurney & Co. to Barings, Jan. 16, 1840; Palmer, McKillop, Dent & Co. to Barings, Dec. 6, 1839; Thomas Wilson & Co. to Barings, Dec. 4, 10, 1839; N . M. Rothschild & Sons to Barings, Dec. 27, 1839; BPLB, Barings to Jaudon, Jan. 7, 1840; Barings to Ward, Nov. 1, 15, 18, 26, 30, Dec. 2, 12, 19, 1839; Barings to Prime, W a r d & K i n g , Oct. 31, Nov. 15, 30, Dec. 2, 11-12, 1839; Barings to Hottinguers, Dec. 2, 1839; Barings to Hopes, Oct. 22, Nov. 15, 22,

NOTES TO CHAPTER Χ

545

1839, Jan. 4, 7, 1840; Barings to H. G. Runnells, Dec. 12, 1839; Bates to W. Appleton, Jan. 2, 1840; BPOC, Hopes to Barings, Jan. 7, 1840; Hottinguers to Barings, Nov. 13-14, Dec. 4, 1839; Ward, Campbell & Co. to Barings, June 19, 1855. 11. BPLB, Barings to Ward, Sept. 24, 27, Oct. 3, 5, 1839; Circular to Bankers, Sept. 20, 1839. The loans of Jaudon tied up Pennsylvania, Mississippi, Michigan, Indiana, Maryland, and Illinois bonds to the sum of $12,200,900, according to the memorandum in BPMC, dated -/10/1839 but drawn up late in March, 1840, at least. Commissions on the various operations ranged from ι to 2% and interest was 6%. The Denison and Rothschild bond issues went on the market at 92 and soon sold one or two points higher. 12. The bonds were in sums of £1,000, /500, and £250, bearing 5% interest, payable semiannually on Jan. 1 and July 1 at the London office of the Barings, where the principal was also to be redeemed in 1889. BPMC, McLane to Bates, July 30, Oct. 15, 1839; McLane to Barings, Oct. 19, 1839; memorandum on the railroad and bonds of Maryland, Oct. 12, 1839; BPLB, Bates to McLane, Nov. 15, 1839; Niles' Register, LVII, pp. 167, 310; M. Reizenstein, The Economic History of the Baltimore and Ohio Railroad, 1827-1853 (Baltimore, 1897), pp. 49, 54-55. 13. BPLB, Barings to Ward, Nov. 23, Dec. 11, 19, 31, 1839; Barings to McLane, Nov. 23, 1839; Barings to Prime, Ward & King, Nov. 21, 23, 1839; Barings to Peabody, Nov. 27, Dec. 30, 1839; Barings to Overend, Gurney & Co., Jan. 23, 1840; Barings to Lewis Loyd, Jan. 23, 1840; Peabody Papers, Ν. M. Rothschild & Sons to Peabody, Nov. 25, 1839; Sanderson & Co. to Peabody, Nov. 26, 1839; Peabody to F. Thomas, president of Chesapeake & Ohio Canal Co., Nov. 25, Dec. 6, 1839. 14. BPOC, Ward to Barings, Sept. 28-Nov. 1, Dec. 6, 1839; Prime, Ward & King to Barings, Oct. 19, 1839; BPLB, Barings to Ward, Sept. 17, Nov. 15, 21, 1839; Barings to Prime, Ward & King, Oct. 18, Nov. 15, 1839; BPMC, C. A. Davis to Bates, Nov. 16, Dec. 2, 1839; Bates to Davis, Jan. io, 1840; J. A. Stevens to Bates, Oct. 18, 1839; Mildmay to Bates, Nov. i i , 1839; Niles" Register, LVII, pp. 117, 134, 135. 15. BPOC, Ward to Barings, Oct. 19, 1839; Circular to Bankers, Nov. 8, 1839, quoting from Journal of Commerce, of Oct. 9. 16. BPLB, Barings to Ward, Nov. 15, 23, 1839; Barings to G. B. Milligan, undated, 1839; Barings to S. F. Maccracken, Commissioner of the Ohio Canal Fund, Oct. 24, 1839; BPOC, Ward to Barings, Sept. 30, Nov. 1, Dec. 7 (and enclosure), 1839, July 11, 1840; Barings to J. H. Dunn, Receiver General of Upper Canada, Oct. 18, 1839, Apr. 30, 1840; BPMC, Maccracken to Barings, Oct. 14, 28, 1839. 17. BPLB, Bates to G. McDuffie, Dec. 19, 1839; Barings to Ward, Sept. 19, Nov. 15, Dec. 31, 1839; Barings to D. W. Williams, Dec. 12, 1839; BPMC, McDuffie to Bates, Nov. 4, 1839; BPOC, Ward to Barings, July 29, Sept. 27 (and enclosure), Oct. 30, 1839. 18. BPMC, Overend, Gurney & Co. to Barings, Nov. 30, 1839.

546

NOTES TO CHAPTER Χ

ig. Niles' Register, LVII, pp. 177, 193, 369. See also BPLB, Barings to Ward, Dec. 31, 1839, Jan. 18, 1840; BPOC, Ward to Barings, Nov. 6, 29, 1839. 20. Niles' Register, LVII, p. 272; MHS, Ward Papers, Diary, pp. 73-77; BPOC, Ward to Barings, May 4, 13, 1839. The letter of the Barings to Webster was dated Oct. 12, 1839, and Webster's answer, Oct. 16, 1839. The idea may have been suggested by C. A. Davis or Samuel Jaudon, but it is certainly not too far removed from that suggested by the Barings in 1837 (ß·· C· McGrane, Foreign Bondholders and American State Debts, New York, 1935, p. 25; Circular to Bankers, Jan. 10, 1840). 21. BPMC, Webster to Bates, Mar. 24, 1840; BP, passim (see, for example, BPLB, Barings to Prime, Ward & King, Nov. 30, 1839). Ward's opinion of Webster may be seen in BPOC, Ward to Barings, Nov. 28, 1839. "The leading Whig politicians (Mr. Webster included)," he wrote, "I have no respect for — they know the right — but follow the wrong —. . . ." 22. McGrane, Foreign Bondholders, pp. 21-29, and references cited. For comments to the Barings see BPOC, Ward to Barings, Nov. 6, 29, Dec. 12 (and enclosure), 1839, Feb. 13, 1840; BPMC, C. A. Davis to Bates, Feb. 3, 1840; BPLB, Barings to Ward, Dec. 31, 1839, Jan. 18, 1840. 23. Niles' Register, LVII, p. 277, verbatim copy from the Courier and Enquirer of Dec. 19, 20, 1839; MHS, Ward Papers, Bates to Ward, July 3, 1844; BPOC, Ward to Barings, Dec. 6, 23, 1839; BPLB, Barings to Ward, Dec. 24, 1839; Barings to J. Watson Webb, Apr. 18, 1845; BPMC, Webb to Barings, Feb. 17, 1845. The letter first appeared in the London Times. Ward heard a rumor of the dispatch of the letter. 24. BPLB, Barings to Ward, Dec. 31, 1839; Barings to Jaudon, Dec. 31, 1839; Barings to the "Editor of the Morning Chronicle," Jan. 13, 1840; Barings to Ward, Jan. 18, 1840; BPMC, Jaudon to Barings, Dec. 31, 1839. 25. Niles' Register, LVIII, p. 72; New York Herald, Apr. 1, 1840; BPLB, Barings to Ward, Apr. 30, June 3, 29, 1840; Barings to Hopes, May 8, 1840; BPOC, Ward to Barings, Apr. 3-4, 6, 8, May 6, 18, 26, 30-31 (and enclosures), June 5, 1840; BPMC, Thomas Dunlap to Barings, Mar. 18, 1840; printed memorandum on relations with Jaudon dated 1839. 26. BPLB, Bates to Ward, Jan. 4, 1840; Barings to Ward, Apr. 30, 1840; BPOC, Ward to Barings, Apr. 3, May 18, 30, June 5, 1840. See Ward's remarks, ibid., Oct. 30, Nov. 5, 1839, and Jaudon's reports thereon, BPLB, Barings to Ward, Oct. 18, 1839. 27. New York Herald, Aug. 20-Sept. 8, 1840, Jan. 21, Apr. 15, July 12, 14, 1841; BPOC, Ward to Barings, Aug. 24, Sept. 12, 1840, Dec. 6 (and enclosures), 1841, Jan. ι, 1842; BPMC, Grant & Stone to Barings, Dec. 30, 1841; MHS, Ward Papers, Bates to Ward, Feb. 17, 1831. 28. BPOC, Ward to Barings, Nov. 28, Dec. 2, 1839, Mar. 18, 1840, Dec. 6, 23, 1841, Mar. 12, 1842; BPLB, Barings to Prime, Ward & King, Oct. 18, Nov. 15, 1839, Oct. 22, Nov. 18, Dec. 3, 1841, Dec. 12, 1842; Barings to Ward, Feb. I, 1842.

NOTES TO CHAPTER Χ

547

29. BPOC, Ward to Barings, Dec. 2, 1839, Jan. 22, 27, Feb. 11 (and enclosure), Mar. 17, May 7-8, July 24, 1840, Mar. 15, Sept. 29, Oct. 2, Nov. 14, 20, Dec. 23, 1841, Apr. 6, July 6-7, Sept. 15, 1842; BPLB, Barings to C. Adams, Jr., president of the Union Bank, Feb. 19, 1840; Barings to Ward, Jan. 30, Mar. 19, June 3, 29, 1840, Apr. 3, 1841, Jan. 1, June 18, 1842; Barings to George Peabody, June 19, 1840. Little & Co. ?vas allowed to draw only 80% against bills remitted up to ¿40,000. 30. BPLB, Barings to Ward, Oct. 18, 1839, Apr. 14, May 15, June 29, Nov. 3, 1840, Oct. 20, Nov. 18, 1841, Jan. 15, Feb. 1, Mar. 31, Apr. 1, 4, 1842; BPOC, Ward to Barings, Mar. 17, July 30, Nov. 28, Dec. 23, 1840, Aug. 16, Nov. 30, 1841, Apr. 19, 26, May 1, Aug. 10, 16, Sept. 15, 17, 26, 1842, and enclosures. 31. BPLB, Barings to Ward, Jan. 21, 1840. 32. This idea had been developing since 1838. BPLB, Barings to B. A . Fould & Fould Oppenheim, Nov. 19, 1838; Barings to [Thomas Baring], Feb. 28, Mar. 10, 1840; BPMC, T . Baring to Barings, Feb. 25, Mar. 2-30, 1840; New York Herald, Mar. 25, Apr. 16, 1840. 33. BP, 1840-42, passim. The Barings took part of the Russian loan floated with Hope & Co. They also sent money to Paris for investment in French rentes in the autumn of 1840 (BPLB, Barings to Hottinguers, Sept. 16, Oct. 19, 1840; Barings to Hopes, Nov. 6, Dec. 11, 1840; Barings to Prime, Ward & King, Dec. 12, 1840; Barings to Bates, June 18, 1841). The Barings estimated that British railroads had absorbed ¿60,000,000 of British capital between 1836 and 1841. 34. BPLB, Barings to Overend, Gurney & Co., Nov. 20, 1841, Jan. 1, Feb. 4, l i , 1842. 35. BPLB, Barings to G. McDuffie, Mar. 24, 1840; Barings to F. H. Elmore, June 2, 1840; Barings to Ward, Mar. 24, June 29, 1840, Sept. 2, 19, 1842; BPOC, Ward to Barings, Mar. 25, 1840, July 6, Aug. 9, 31, Sept. 15, Nov. 15, Dec. 23 (and enclosure), 1842; BPMC, Elmore to Barings, Apr. 10, 1840; McDuffie to Bates, Jan. 15, 1840. 36. BPLB, Barings to Ward, Jan. 18, Feb. 19, 29, Mar. 12, Apr. 30, Oct. 31, Dec. 3, 12, 1840, Feb. 3, July 3, Dec. 11, 1841, Jan. 1, Feb. 18, Mar. 2, Apr. 4, May 3, June 18, July 4, Aug. 18, 1842; Mildmay to Bates, Apr. 19, 1841; T . Baring to Bates, May 18, 1841; Barings to Josiah Quincy, Jr., Apr. 30, Sept. 18, Dec. 3, 1840; Bates to Quincy, Jan. 3, Mar. 3, May 6, 18, 1842; BPOC, Ward to Barings, Oct. 29, 1840, May 31, 1841, Feb. 24, 1842, and enclosures, as well as Mar. 25, 1840-Dec. 31, 1842, passim; BPMC, Quincy to Barings, Oct. 15, 29, 1840, Dec. 18, 1841, Dec. 31, 1842; Quincy to Bates, Jan. 31, Apr. 2, June 15, Sept. 17, Dec. 16, 1842; Nathan Hale to Ward, Nov. 15, 1842; Bates to Barings, May 31, June 12, 1841. Most of the debt was incurred in 1840, though the Barings advanced money for interest and rails later. They charged only 1 % commission on sales for the corporation instead of the normal 2 % . The Barings returned ¿50,000 of the bonds to Ward in July, 1841, for transfer to the corporation when it had

548

NOTES TO CHAPTER Χ

handed an equivalent in remittances to him. The president of the company refused to make payments, and Ward still held the bonds the following June. At that time his principals authorized him to sell at current prices for their account. They were tired of waiting for payment of the debt. They bought ¿10,000 of the lot for account of the house. The Barings also purchased tfce rails for the line between the Massachusetts boundary and Albany, as well as that between Taunton and New Bedford. 37. BPOC, Ward to Barings, Mar. 23, 29, June 29, July 2, 6, 1842, and enclosures; BPMC, Ward to McLane, Mar. 12, 21, 26, 29, 1842; John Η. B. Latrobe to Ward, Mar. 6, 25, 1842; McLane to Barings, Apr. 25, 1842; BPLB, Barings to Ward, Feb. 1/3, May 17-18, June 18, 1842, Aug. 3, 1843, Mar. 1845; Barings to McLane, May 3, 18, 1842. Nathan Hale made a trip over the railroad and reported to Ward and the Barings. The special bond was altered later to be payable in dollars. 38. BPOC, Ward to Barings, July 11, 1840, Dec. 15-16, 31 (and enclosure), 1841, Feb. 28, Apr. 6-7, Dec. 7, 1842; BPMC, M. T. Williams to Barings, Mar. 24, June 24, 1840, Apr. 5, 1841; Ward to Commissioners of the Ohio Canal Fund, July.22, 1840; Commissioners to Ward, July 23, 1840; Commissioners to Barings, Nov. 9, 1841, July 22, 1842; A. Kelley to Barings, June 29, Nov. 29, Dec. 31, 1842; Kelley to Bates, Oct. 8, 1842; contract between Kelley and the Barings, May 25, 1842; BPLB, Barings to M. T. Williams, Apr. 30, June 3, July 31, Oct. 31, 1840; Barings to Commissioners of the Ohio Canal Fund, June 3, 1840, Dec. 11, 1841, Jan. 3, June 2, 18, Aug. 18, 1842. 39. Ibid., Barings to G. W. Lurman, Oct. 31, Dec. 3, 1840, Jan. 4, 18-19, Mar. 3, 18, Apr. 7, 19, 1841, Jan. 26, 1842; Barings to Oelrichs & Lurman, July 18, 1842; Barings to Ward, Dec. 3, 1840, Sept. 3, 18, 1841, June 18, 1842; BPOC, Lurman to Barings, Nov. 26, Dec. 28, 1840, Feb. 25, Apr. 5, 13, May 13, Nov. 12, 1841, Apr. 5, June 22, 29, Sept. 27, 1842; Ward to Barings, Sept. 12 (and enclosure), 1840, Mar. 1, 1841, Aug. 16, Sept. 26, 1842; BPMC, Bates to Barings, May 31, July 8, 27, 1841. 40. BPLB, Barings to Ward, Dec. 3, 1840, Jan. 6, 12, 18, 19, Feb. 3, 9, May 3, 1841; Barings to Prime, Ward & King, Jan. 4, 6, Feb. 3, Apr. 19, May 18, Oct. 4, 1841, Mar. 13, 1842; T. Baring to Bates, May 18, 1841; Barings to Jaudon, Sept. 11, 1840; Barings to Hopes, Sept. 11, 1840; Barings to Loyd, Sept. i l , 1840; Barings to Jones Loyd & Co., Sept. 30, 1840, May 1, 1841; BPMC, Jaudon to Barings, Sept. 11, 1840; Jones Loyd & Co. to Barings, May I, 1841; BPOC, Ward to Barings, May 26, Oct. 23 (and enclosure), 1840; Prime, Ward & King to Barings, 1840-42, passim. Jaudon left England on Sept. i l , 1840, with £100,000 in specie and all his engagements in Europe in a "satisfactory state" (Circular to Bankers, Sept. 18, 1840). The agency of the Bank of the United States was taken over by James Morrison & Sons (ibid., Jan. 15, 1841). 41. BPLB, Barings to Ward, June 29, July 3, 1840; Barings to Prime, Ward & King, Jan. 6, 13, 18, Feb. 17, May 15, June 3, 30, 1840, Apr. 7, 1841; Barings

NOTES TO CHAPTER Χ

549

to Ward, Jan. 12, Feb. 7, Apr. 30, 1840, Oct. 1, 1842; Barings to Bates, June 18, 1841; Barings to Hopes, Dec. 4, 1840, Jan. 5, 8, 1841; BPMC, Overend, Gurney & Co. to Barings, Apr. 16, 1840; W. Hamilton Merritt to Barings, May 10, 1842; BPOC, Ward to Barings, May 1, 1842. Ward had declined to take the United States bonds to England personally. 42. ibid., Apr. 14, 1840. See comments on suspension, ibid., Jan. 13, Feb. 6, 9, Apr. 8, 29, 1841. In the last letter Ward said that the failure of the Bank of the United States should be considered a public benefit {ibid., Apr. 19, 26, May 5, 1842, and enclosures; BPLB, Barings to Ward, June 3, 1840. See BPMC, Ward to R. D. Shepherd, Mar. 26, 1842, for example). 43. BPOC, Ward to Barings, Apr. 4, Feb. 11, May 15, 1841, Jan. 10, 13, Apr. 19, May 5, 11, June 5, July 14, 30, Aug. 1, 10, 31, 1842, and enclosures; BPLB, Barings to Ward, May 23, June 29, Nov. 18, 27, Dec. 3, 1841, Mar. 11, Apr. 18, May 3, June 3, July 9, 1842; Barings to H. G. Runnels, Dec. 12, 1839 (Mississippi); BPMC, Bates to Barings, May 31, June 12/16, July 27, 1841. During his visit in 1841 Bates conversed with the President of the United States and members of the cabinet, J. J. Astor, Albert Gallatin, and Martin Van Buren. 44. BPLB, Barings to Ward, Oct. 16, 1841 (orders to begin an active campaign in Maryland), Jan. 1, Nov. 3, 1842; Barings to Francis Thomas, Jan. 3, 1842; BPOC, Ward to Barings, June 4, 1842. For activities in the campaign, BP, Oct. 29, 1841-Dec. 31, 1842, and Semmes, John Η. B. Latrobe, p. 459. In December, 1842, the Barings also advanced funds to pay interest due on Louisiana bonds assigned to the Consolidated Association of Planters. 45. For example, BPOC, Grinnell, Minturn & Co. to Barings, Jan. 31, 1842; BPMC, Robert Gilmor to Bates, Feb. 26, 1842. 46. See BPOC, Ward to Barings, Aug. 22 (attached list), 1839, Aug. 31, 1841, Feb. 28, July 16, 1842, May 1, 1843; BPMC, list of outstanding credits, Nov. 1839; quarterly statement, Feb. 27, 1841; memorandum, Oct. 20, 1842. The Circular to Bankers, Aug. 23, 1840, estimated that the amount of mercantile credit "afloat" in 1840 was lower than at any time in seven years. 47. BPLB, Barings to Ward, Mar. 31, Apr. 1, 1842. A desire to ascertain the result of Lord Ashburton's mission was another cause of the contraction in 1842 (ibid., Feb. 1/3, 1842). 48. BPOC, Ward to Barings, July 14, Nov. 12, 15, 20, 1839, Jan. 22, May 7, 30, 1840, May 30, 1842; BPLB, Barings to Ward, Sept. 6, 19, Dec. 2, 6, 1839, Mar. 31, 1840; Bates to A. Howard, undated, 1839; Barings to L. McLane, June 30, 1840. 49. BPLB, Bates to G. Knight, June 12, 1839; Barings to Ward, Sept. 19, 1839, June 13, 30, July 3, 24, Aug. 21, 1840, Jan. 4, July 13, Nov. 27/Dec. 3, 1841, Apr. 18, Aug. 3, Oct. 17, 1842; BPOC, Ward to Barings, Oct. 11, 1839, May 30, July 24, 29, Aug. 12, Nov. 18, Dec. 4, 1840, May 14, 16, 30-31, June 14-16, 22, July ι, 14, Aug. 10, 31, Sept. 30, Oct. 26, Nov. 10, 1842, and enclosures; BPMC, file of correspondence with the Union Bank of Mississippi,

550

NOTES TO CHAPTER Χ

Dec. i , 1838-Feb. 8, 1842. Though long since written off to profit and loss, the principal and accrued interest on the debt in Nov., 1848, was £30,000 (BPOC, Ward to Barings, Nov. 22, 1848). 50. Ibid., June 15, 1843. The predominance of New England names on the books of the Barings was proved by checking names against directories, various guides, J. A . Scoville (Walter Barrett, pseudonym), The Old Merchants of New Yor\, 4 vols. (New York, 1863-64), Freeman Hunt, Lives of American Merchants, 2 vols. (New York, 1856-58), and other similar sources. Corroboration is afforded in J. C. Brown, Merchant Banking, pp. 249-250. 51. MHS, Ward Papers, Bates to Ward, Nov. 18, 1841: examples of dropping correspondents for deviations from rules and of granting covered credits are numerous (BP, 1840-42, passim). On running credits, see BPLB, Barings to Ward, Nov. 3, 1841; BPOC, Ward to Barings, Oct. 15, 1841. References on "divided accounts" are: BPLB, Barings to Ward, Oct. 18, 1839, Mar. 3, 1841, Oct. 3, 1842; BPMC, Bates to Barings, May 6, 11, 1841; BPOC, Ward to Barings, Dec. 10, 1839, Feb. 18, Nov. 22, 1840, Jan. 29 (and enclosure), Feb. 1, Mar. 31, May 15, 1841. The "divided accounts" were discontinued because they made Goodhue & Co. and Grant & Stone as responsible as if they were partners of the "weak houses" with which they were affiliated. Also, the Barings had already granted the New York and Philadelphia firms all the credits they should have, whereas the joint operations with small houses really increased the credits held. Finally, all the profits seemed to be going to the American firms, not to the House of Baring. 52. Ibid., Apr. 6, 1842; BPMC, Bates to Barings, May 6, 1841; BPLB, Barings to Ward, June 3, 1840, Oct. 20, Nov. 27/Dec. 3, 1841, Jan. 25, Mar. 31/Apr. r, 1842; Barings to Grinnell, Minturn & Co., Dec. 3, 1841, and other letters to the same firm. 53. BPLB, Barings to Ward, Oct. 18, Nov. 21, Dec. 6, 12, 1839, Apr. 14, June 3, July 13, Nov. 18, 1840, Jan. 4, 1841, July 13, 1842; Barings to Grinnell, Minturn & Co., Aug. 3, Nov. 3, 1841; Barings to Lanfear, Apr. 14, 1840, July 18, 1842; BPOC, Ward to Barings, Dec. 10, 1839, Jan. 6, 15, Mar. 17, May 6, June 8, Aug. 17, 29, Sept. 12, Dec. 23, 1840. For a criticism of the Barings for exposing themselves to the hazards of operations on their own account when they should be keeping themselves secure in the interests of correspondents who borrowed their credit, see Cabot-Jackson-Lee Papers, Henry Lee to Miller, LeCocq & Co., Rio de Janeiro, Mar. 7, 1841. 54. BPOC, Ward to Barings, Nov. 30, 1840, Jan. 31, Feb. 27, Mar. 6, May 15, 1841 (and enclosures); BPLB, Barings to F. B. Wells, Dec. 12, 1839; Barings to Captain Hale, of the Alexander Baring, at Macao, Dec. 12, 1839. 55. New York Herald, Apr. 23, 1841; Barings to Ward, Sept. 17, 19, Nov. 1, 18, 21, 1839, Jan. 9/10, 1840, Mar. 3, 1841; BPOC, Ward to Barings, July 24, 1840, Apr. 15, 1841; MHS, Bates to Ward, Nov. 18, 1841. The cotton was "well bought" both years {ibid., Dec. 31, 1840). For details, see BP, Oct., 1840-Oct., 1841, passim. All of Humphreys & Biddle's cotton had been sold

NOTES TO CHAPTER Χ

551

in Mar., 1839, but the "ring" went back into operation in the late spring and summer (Circular to Bankers, Mar. 22, Sept. 27, 1839). Wilder, Rockwell, and Biddle purchased 25,000 or more bales of cotton in the spring of 1840 (Biddle MS, Biddle to May Humphreys, Apr. 23, May 8, 1840; Biddle to Adams & Whitall, New Orleans, May 19, 1840; Biddle to C. Dillinger, Mobile, May 19, 1840). 56. BPLB, Barings to Ward, Sept. 3, Oct. 4, 17, 20, 22, Nov. 3, 18, 27/Dec. 3, 6, i l , 1841, Jan. 1, Feb. 18, Mar. 2, 1842; Barings to Stetson & Avery, Dec. 13, 15, 1841, Jan. ι, 15, Feb. 1, 1842. 57. BPLB, Barings to Ward, Mar. 31/Apr. 1, 1842; BPOC, Ward to Barings, Feb. 24, Mar. 30, Apr. 2, 19, May 31, 1842, and enclosures. For details, ibid., Jan. i-May 31, 1842, passim. On Nov. 18, 1841, the house had 27,000 bales of the 1841 crop on hand and 5,500 of the 1840 product (MHS, Ward Papers, Bates to Ward, Nov. 18, 1841). 58. BPOC, Ward to Barings, Feb. 26, Mar. 25, Apr. 17-18, May 26, July 31, Aug. 17, Oct. 23, Nov. 13, 22, 28, 1840, Aug. 31, 1841 (Ward to Bates), Apr. 20, July ι, Dec. 1, 15, 1842, and pertinent enclosures; BPLB, Barings to Ward, Dec. 31, 1839, Sept. 3, 30, 1840, Jan. 18, 1841, May 18, 1842. 59. Ibid., Aug. 31, Sept. 6, Nov. 1, Dec. 6, 1839, Sept. 30, 1840; BPOC, Ward to Barings, Sept. 7, 1839. 60. Ibid., Aug. 21, 24, 29, Oct. 8, 23, Nov. 22, 24, and enclosures, 1840; BPLB, Barings to Ward, Sept. 18, Oct. 17, 31, 1840; BPMC, extracts from correspondence between C. H. Marshall and Barings, Jan. 7, 1839-June 18, 1840; C. B. Young to Barings, Sept. 14, 1840. 61. BPMC, Bates to Barings, Apr. 3, 26, May 6, 31, June 17/18 (to T. Baring), July ι, 1841; BPOC, Ward to Barings, June 5, 1840, May 15, 1841; BPLB, Barings to Ward, May 14, Sept. 30, Oct. 17/19, 31, 1840. 62. Ibid., May 6, 1842; BPOC, Ward to Barings, Apr. 8, Aug. 16, Oct. 6, 1842; Grinnell, Minturn & Co. to Barings, Dec. 5, 1842. W. J. Young had helped Ward during 1837 and 1838 but later went into business for himself. 63. BPOC, Grinnell, Minturn & Co. to Barings, Dec. 5, 1839, Mar. 25, 1840, Mar. 16, Apr. 6, 1842; Ward to Barings, Oct. 29, Nov. 5, 1841, Apr. 19, 1842; BPMC, Bates to Barings, Apr. 30, May 31, June 12, July 8, 1841; Grant & Stone to Barings, May 30, 1842; BPLB, Barings to Ward, Oct. 20, Nov. 18, 27, 1841; MHS, Ward Papers, Bates to Ward, Dec. 3, 1841, Jan. 10, Feb. 3, 1842; Circular to Bankers, July i, 1842. 64. MHS, Ward Papers, Bates to Ward, July 23, Aug. 23/28, Sept. 17, 1841, Feb. 3, May 20, Nov. 18, 1842, June 18, 1844. 65. BPLB, Barings to Ward, June 18, July 4, 1842; Barings to the Committee of the Board of Trustees of the Merchants' Exchange Co., July 4, 1842; BPMC, Announcement by the Committee of the Board of Trustees of the Merchants' Exchange Co. that on July 1, 1842, interest on its sterling bonds would not be met, dated June 15, 1842; Circular to Bankers, May 13, June 10, July ι, Aug. 26, Sept. 2, 16, 30, Oct. 7, Dec. 23, 1842. Failures were wide-

552

NOTES TO CHAPTER XI

spread throughout the depression. All of Europe suffered. In 1840 alone, Paris reported 824 failures, the debts of which were 49,595,000 francs {ibid., Jan. 15, Oct.-Dec., 1841). 66. Barings to Ward, July 9, 13, 18, Sept. 2, 3, 16, 19, Oct. x, Nov. 3, Dec. 3, 1842; Barings to Grinnell, Minturn & Co., Sept. 19, Oct. 22, Nov. 17, 1842; BPOC, Ward to Barings, Dec. 31, 1842; Prime, Ward & King to Barings, Dec. 7, 1842; Νties' Register, LXIII, p. 18; Circular to Bankers, June 3, July 22, Aug. 12, Sept. 30, Oct. 14, Nov. 25, Dec. 2, 1842. CHAPTER XI ι. London Times, Apr. 14, Oct. 20, Nov. 18, 1842; also quoted in McGrane, Foreign Bondholders, pp. 49-51. This author used the Baring Papers so extensively that my discussion of the restoration of State credit in the 'forties must necessarily closely approximate his story as far as the Barings are concerned. Since his view1 is more comprehensive, moreover, McGrane's information has been extensively utilized in this chapter. 2. BPPD, newspaper clipping, "Appeal on behalf of the holders of American State Stocks to the Bankers and Capitalists and to the Press of London," Dec. 26, 1842. 3. Niles' Register, Jan. 14, 1843; London Times, Apr. 21, 1843, Oct. 31, 1844; McGrane. Foreign Bondholders, p. 34; Circular to Ban\ers, Apr. 21, 1843; Muriel E. Hidy, "George Peabody, Merchant and Financier" (unpublished manuscript), p. 301. 4. BPOC, Hopes to Barings, May 23, June 5, 1842; BPLB, Barings to Hopes, May 27, June 10, 1842; Circular to Bankers, Mar. 31, Apr. 7, 1843. The remark of the Barings was made in reply to a suggestion from Hope & Co. in May that all leading European bankers should unite in refusing to market the proposed Federal loan of 1842 until the States had resumed payment of interest and repudiated repudiation. 5. McGrane, Foreign Bondholders, pp. 72, 92-95, 118-119, 158-159, and references cited; BPPD, copy of the Louisiana Act of Apr. 5, 1843; newspaper clippings, Apr. 18, 21, 1843. 6. BPOC, Ward to Barings, Apr. 8, 1841, July 10, Sept. 11, Oct. 31, Dec. 27, 1843, Jan. i l , 1844; McGrane, Foreign Bondholders, pp. 34, 38-40, 47, 57, 76-77· 7. The Barings had made purchases of Ohio, Pennsylvania, Virginia, and New York securities also. BPLB, Barings to Ward, Mar. 11, 1842. 8. McGrane, Foreign Bondholders, pp. 72-73, 96, 183-184; BPLB, Barings to Ward, Sept. 3, Oct. 18, Nov. 3, 1842; Barings to Latrobe, Sept. 3, 1842; BPOC, Ward to Barings, July 28, 30, Aug. 1, 10, 13, 16, Sept. 15, 26, Oct. 6, 26, Nov. 18, Dec. 6, 7, 14, 23, 1842, and enclosures, Jan-May, 1843, passim; BPMC, Jacob Barker to Ward, Aug. 1, 1842; C. Lavergne to Barings, Sept. 3, 1842; Latrobe to Ward, Oct. 20, 1842. 9. BPOC, Ward to Barings, Jan. 31, 1844 (enclosures) ; Ward to Bates, Dec. 16, 1844; Ward to J. G. King, Jan. 31, 1844; BPLB, Barings to Ward,

NOTES TO CHAPTER XI

553

Apr. ι8, 1846; MHS, Ward Papers, Bates to Ward, Mar. 26, Nov. 4, 1844; Semmes, Latrobe, p. 460. 10. BPLB, Barings to Hopes, June 17, 1843. The Barings said that they were interested in Pennsylvania only as receivers and payers of interest payments and for ¿8,000 lately purchased at 47 (ibid., June 3, 1842). 11. Ibid., Barings to Ward, June 19, July 3, 18, Sept. 4, 1843. 12. BPOC, Ward to Barings, Aug. 29, 1843. 13. Ibid., Nov. 28, Dec. 13-14, 27, 1843, and enclosures; BPLB, Barings to Hopes, Sept. 1, 1843; BPPD, clipping from the Philadelphia North American and Daily Advertiser, Jan. 8, 1844 (including reprints) ; Semmes, op. cit., pp. 460, 461. Ward and Hale eliminated Gallatin, Binney, Dallas, Forward, and Samuel D. Ingham, a former Secretary of the Treasury, as potential aides for a variety of reasons. 14. BPLB, Barings to Purton, Oct. 31, Nov. 3, 18, 1843. Smith's second public letter of importance appeared in the London Morning Chronicle, Nov. 3. 1843. 15. McGrane, Foreign Bondholders, pp. 75-80; BPLB, Barings to Ward, Aug. 17, Nov. 18, 1843; BPOC, Ward to Barings, Sept. 15-16, 26, Nov. 1 (Ward to Bates), 14 (Ward to Bates), Dec. 8, 11, 14 (and enclosure), 1843, Mar. ι (Ward to Bates), 1844, Mar. 10, 1845. 16. Ibid., Oct. 31, Dec. 8, 1843; BPLB, Barings to Ward, Nov. 18, 1843. 17. B. R. Curtis, "Debts of the States," North American Review, vol. 58, pp. 109-157; BPOC, Ward to Barings, Aug. 29-30, Nov. 14, 29, Dec. 8, 27, 30, 1843; Jan. i l , 22, May 14, 1844, and enclosures; Ward to Gales & Seaton, Nov. 23, 1843; Ward to Grinnell, Minturn & Co., Jan. 11, 1844; BPPD, clippings, June 26, 1843, Jan. 8, 1844; Boston Daily Advertiser, Nov. 16, 23, Dec. i l , 1843. Bates pointed out that the Curtis article was not accurate as to when the loans were made because most of the non-paying issues were taken by the lenders to prevent a collapse of Jaudon's agency (MHS, Ward Papers, Bates to Ward, Feb. 3, 1844). 18. BPLB, Barings to Ward, Dec. 4, 1843, Jan. 3, 5, 1844; BPOC, Ward to Barings, Dec. 23, 27, 1843, Jan. 8, 11, 15, 19, Feb. 9, 1844, and enclosures; BPMC, Charles Stokes to Ward, Jan. 3, 1844; Ward to Grinnell, Minturn & Co., Jan. 8, 1844. 19. BPOC, Ward to Barings, Jan. 8, 10-11, 15, 19, 31, Feb. 2, 1844, and enclosures. 20. Ibid., Jan. 15, 1844, and enclosures. 21. Ibid., Dec. 27, 1843, Jan. 5, 8, 11, 12, 22, 30, 31, Feb. 1, 3, 8, 12, Mar. 26, Apr. 16, May 1, 1844, a n d enclosures; McGrane, Foreign Bondholders, p. 81. 22. BPLB, Barings to Ward, May 18, 1844, Mar. 3, May 3, 1845; Barings to F. Frey, May 18, 1844; BPOC, Ward to Barings, June 28, Oct. 1, Nov. 15, 30, Dec. ι, 15, 16, 20, 1844, Feb. 14, 15, Mar. 21, 24, Apr. 21, July 29, 1845, J® 11 · 5> and June-July, passim, 1846, and enclosures. 23. Webster asked for the "profits on the rise of a given quantity of stock

554

NOTES TO CHAPTER XI

within a year" from Nov. i , 1843, as compensation for his services in aiding resumption in Pennsylvania. Ward refused, saying that payment by the States, not a rise in security prices, was the desideratum. The Barings also held an acceptance by Webster drawn by Duff Green for $500, which Webster promised to pay but kept postponing. On Aug. 7, 1844, Ward wrote, "The only way to do with Mr. Webster is not to give him credit, — because he has no sense of what is right in money affairs." Ward paid him $200 and returned the acceptance in September, 1844, stating that the Barings had written off the ^482 balance at the end of 1843. Ward personally paid the $200 when the Barings refused to allow him to charge the 1844 campaign speeches of Webster to the account of the Pennsylvania resumption campaign. Ibid., June 28, Nov. ι , Dec. 14, 1843, Mar. 30, May 1, 14, Aug. 7, 22, Sept. 27, Oct. 15, Nov. 22, 1844, a n d enclosures; BPLB, Barings to Ward, Sept. 3, Nov. 2, 1844; Barings to Hopes, Aug. 6, 1844; MHS, Ward Papers, Bates to Ward, May 29, 1843. 24. For example, BPMC, Louis McLane to Bates, Aug. 28-29, Oct. 13, 1843. 25. BPLB, Barings to Ward, Aug. 18, Nov. 3, 1843, Mar. 4, 1844; BPOC, Ward to Barings, Dec. 23, 1842, Oct. 15, Nov. 28, 30, Dec. 30, 1843, Jan. 31, Mar. 30, 1844, and enclosures; BPMC, Thomas Turner to Barings, Jan. 12, Apr. 17, 1843; J. M. Coale to Barings, Aug. 28, 1843. 26. BPOC, Ward to Barings, Dec. 8, 1 1 , 13-14, 30, 1843, Jan. 8, 12, 19-20, 30, Feb. 3, 7, Mar. 14, 1844, and enclosures; BPMC, Ward to John Johnson, Jan. 24, 1844. 27. BPOC, Ward to Barings, Dec. 27, 30, 1843, J a n · 12, Feb. 22, 1844; Lurman to Barings, Jan. 27, 1844, and enclosures. 28. BPLB, Barings to Ward, Sept. 22, 1843, Jan. 2, 1844; BPMC, Ward to John Johnson, Jan. 24, 1844; Latrobe to Ward, Apr. 27, 1844; BPOC, Ward to Barings, Dec. 27, 1843, Feb. 3, 12, Mar. 1, 1844, a n d enclosures; G. W. Lurman to Barings, Jan. 27, 1844; McGrane, Foreign Bondholders, pp. 94, 98-99. 29. BPOC, Ward to Barings, Mar. 20, Apr. 5-6, 29, July 31, Aug. 12, 1844, Jan. 7, 14, 16, 29, Feb. 14, 1845, and enclosures; BPLB, Bates to McLane, Apr. 18, 1844; Barings to Ward, Sept. 22, 1844; Barings to Latrobe, Nov. 4, 1844; Barings to McLane, Nov. 4, 1844; BPPD, Mar. 3, Apr. 2, 1844, Jan. 7, 1845. 30. McGrane, Foreign Bondholders, p. 99; BPOC, Ward to Barings, Mar. 24, 1845, and enclosure; BPLB, Barings to Ward, Mar. 28, 1845. 31. Peabody MSS, A Letter from J. f . Speed, Esq. of Baltimore to a Landholder of Maryland on the Subject of Repudiation (Baltimore, 1842) ; BPMC, Peabody to O. C. Tiffany, May 4, Aug. 4, 1845; Peabody to H. W. Evans, Aug. 4, 1845; Peabody to Thomas Baring, Nov. 4, 1845; BPLB, Barings to Ward, July 18, 1845. 32. Ibid., Bates to Webster, Aug. 22, 1845; Barings to Coale, July 2, Sept. 3, 1845; Barings to W. C. Johnson, Sept. 3, 1845; Barings to J. S. Gittings,

NOTES TO CHAPTER XI

555

Dec. 3, 1845; Barings to Ward, Sept. 3, Nov. 3, 1845, Jan. 5, Apr. 3, Nov. 3, 1846, May 3, June 18, 1847; BPOC, Ward to Barings, July 31, Sept. 29, Oct. 14, 1845, Jan. 9, 14, Feb. 7, May 6, June 1, 29, July 13, 16, 1846, June 28, Oct. 5, 1847; BPPD, Circular under the names of Nathan Hale and John Davis asking for subscriptions to the C. & O. Canal Co. loan, July 10, 1847. 33. BPOC, Ward to Barings, July 29, Dec. 30, 1845, Jan. 5, 9, 30, Feb. 5, 10, 26, Mar. 3, 27, 1846, and enclosures; BPLB, Barings to Ward, Apr. 18, 1845, Apr. 18, 1846. For an example of Latrobe's pamphlet technique see BPPD, "Valid Reasons," Feb. 24, 1846. Among the railroad officials, Jones, president pro tem, and George Brown favored resumption at this time. 34. BPOC, Ward to Barings, Nov. 14, 1846, Jan. 29, Mar. 5, 15, 1847, and enclosures; BPMC, An Act Supplementary to an Act to incorporate the Baltimore and Ohio Railroad Company, Mar. 17, 1846; McGrane, Foreign Bondholders, pp. 97, 100. 35. Ibid., pp. 100-101; BPOC, Oelrichs & Lurman to Barings, Mar. 18, 1848. 36. Ibid., Ward to Barings, Mar. 31, 1847; Oelrichs & Lurman to Barings, Nov. 27, 1847. 37. BPLB, Barings to Ward, Aug. 3, 1843, May 18, 1847; Barings to Latrobe, May 18, 1847; BPOC, Ward to Barings, June 16, 28, Aug. 12, 1844, Feb. 14, June 30, 1845, Mar. 27, June 29, 1846, Apr. 15, 30, May 31, 1847, Mar. 9, 1848, Apr. 3, 15, 1850, Feb. 21, 1851, June 17, 1853, and enclosures; BPMC, Latrobe to Ward, Mar. 16, 1847; Semmes, op. cit., p. 459. Maryland had paid all its debt to the Barings, except the accrued interest, by Dec., 1844, and also remitted for a part of the arreared interest (that due Jan. ι, 1843) in 1846, but the final settlement of all accounts with Baring Brothers & Co. had to await the legislation of 1847. BPOC, Ward to Barings, Sept. 26, 1843, Dec. 15, 1844, Mar. 15, 1847; BPLB, Barings to Ward, Aug. 18, 1846; Barings to Thomas Baring, Dec. 18, 1844. 38. Neither Shepherd nor Forstall thought the time was ripe for attacking the problem of State faith in Louisiana. BPOC, Ward to Barings, Dec. 18, 27, 1843, and enclosures. 39. Curtis, op. cit., pp. 137-140. The Barings pointed out that the article contained an error, in that the only Louisiana bonds outstanding among those marketed by their house was the series due in June, 1843, totaling $763,000 (BPLB, Barings to Ward, Jan. 2, 1844). 40. London Morning Chronicle, Nov. 3, 1843; BPPD, clipping from the New Orleans Bee, Dec. 23, 1844; see also clipping entitled "Repudiation — State Debt — Bonds Issued to Property Banks," Dec. 1 1 , 1843, and BPOC, Ward to Barings, Dec. 30, 1843, and enclosures. 41. Ibid., Forstall to Ward, Jan. 23, 1844; Forstall to Barings, Feb. 27, 1844; Purton to Barings, Feb. 13, 1844; BPPD, newspaper clippings, Mar. 3-15, 1844. The Barings also sent some material answering charges of the New Orleans papers (BPLB, Barings to Purton, Feb. 1, 1844). 42. Ibid., Nov. 3, 18, Dec. 4, 1843, Feb. 9, 1844; BPOC, Ward to Barings,

556

NOTES TO CHAPTER XI

Dec. 30, 1843, Jan. 26, Feb. 6, Mar. 5, 30, 1844, and enclosures; Forstall to Barings, Jan. 14, 20, Feb. 27, 1844; Purton to Barings, Feb. 13, Mar. 1, 1844; BPPD, Circular to stockholders of the Union Bank, Dec. 12, 1843; Memorial of E. J. Forstall in behalf of Hope & Co. of Amsterdam and other holders of State bonds issued in favor of the Citizens' Bank of Louisiana. See McGrane, Foreign Bondholders, pp. 187-189, for the governor's recommendations and those of the Finance Committee. 43. BPOC, Forstall to Barings, Mar. 2, 19, Apr. 20, 1844; Ward to Barings, Apr. 6 (and enclosure), 1844; Purton to Barings, Mar. 6, 1844; McGrane, Foreign Bondholders, pp. 188-189. The debt proper was $3,898,000 and that to the property banks was $16,500,000. 44. BPOC, Forstall to Barings, Apr. 20, 1844, Feb. ix, 1847. 45. In order to facilitate the negotiation of 1844 the bank meticulously paid all interest as soon as due on its Louisiana bonds. The preliminary arrangements were made on July 19, 1844, with Forstall and ex-Governor Roman as the main negotiators. As the arrangement worked out, the bank canceled at once $250,000 of the State bonds in full and deposited with the Bank of Louisiana $600,000 to the credit of the Barings for the retirement of the additional $600,000 bonds on Nov. 1. As a pledge for the payment of the new bank bonds, the Union Bank deposited $978,240 of Louisiana and New Orleans securities with the Bank of Louisiana. Forstall, acting as agent both for the Barings and for the bank, went to London in the fall of 1844. All holders agreed to accept new bonds by Dec. 16. Forstall also induced some holders of bonds maturing in 1847, 1850, and 1852 to exchange them for Union Bank bonds. The Barings charged Vi%, as per the contract of 1832, for the reimbursement of the principal of the bonds, but made no charge for handling the new issue. BPLB, Barings to F. Frey, June 19, 1843, May 18, 1844, Mar. 3, June 18, 1847; Barings to Purton, Feb. 1, 9, Mar. 20, May 18, June 3, Nov. 2, 18, Dec. 3, 16, 1844, Mar. 3, Apr. 3, May 18, 1847; Barings to Hopes, Aug. 30, Nov. 5, 1844; Barings to C. A. Jacobs, Sept. 3, 1844; Barings to Forstall, Mar. 25, July 18, Aug. 3, 19, Sept. 8, 18, Oct. 31, 1844; BPOC, Forstall to Barings, May 5, July 20, Aug. 3, 5, Oct. 23, 1844; Ward to Barings, Mar. 19, Sept. 13, 1844, and enclosures; BPMC, copy of memo, to J. P. Benjamin and C. Roselius, Apr. 3, 1844; memo, signed by Benjamin declaring that the Union Bank may refund the issue of Nov., 1844, dated Apr. 17, 1844; certificate of deposits made in the Bank of Louisiana for account of the Union Bank and the Barings, Aug. 20, 1844; F. Frey to Barings, Feb. 29, July 15, 1848; S. J. Peters to Barings, Mar. 2, Apr. 8, May 23, 1848; BPPD, blank Union Bank Bond dated July 26, 1844. On cancellations later, see BP, passim, 1845-1852. 46. The claim of the Barings on the Association, which totaled ¿4,529 in February, 1844, was settled by Purton taking a bond, worth $32,770 at face value, at 95 and paying the bank $12,823 difference in cash. No interest was charged on the old balance ( ¿ 1 7 2 ) after Dec. 31, 1843.

NOTES TO CHAPTER XI

557

Forstall engaged Benjamin to institute suit against the Association for the recovery of arreared interest. The lawyer began the suit in Dec., 1846. This action was a decisive factor in determining the stockholders to recognize the debt and to arrange to ask permission of the legislature to fund the arrears and matured State bonds. Forstall intended the suit to be a threat and hoped that it would not need to be carried through. Only $530,000 of the former $763,000 issue due in 1843 was outstanding in April, 1847; of these, holders of $513,000 of bonds accepted the new issue. BPOC, Purton to Barings, Feb. 17, Dec. 19, 1844, Jan. 15, 1845, Jan. 19, Feb. 16, Mar. 18, 1847; Forstall to Barings, Mar. 14, 1845, Nov. 4, Dec. 4, 1846, Jan. 7, Feb. 15, Mar. 18, Apr. 13, Nov. 3, 19 (to Thomas Baring), 1847, Dec. 23, 1848, and enclosures; BPLB, Barings to Forstall, Sept. 22, 1848; BPPD, blank bond of the Consolidated Association of the Planters of Louisiana, dated May 15, 1848, in accordance with a decision of May 9, 1848, to repay outstanding indebtedness; McGrane, Foreign Bondholders, pp. 189-192. 47. BPOC, Purton to Barings, Feb. 13, Mar. 1, 1844, Jan. 19, Feb. 16, Apr. 19, June 18, 1847; Forstall to Barings, July 2, 1844, Dec. 17, 1846, Jan. 18, Nov. 3, Dec. 4, 19, 1847, Mar. 23, 1849, May 30, June 29, 1850; Ward to Barings, Mar. 17, 1848 (and enclosure), June 22, 1852; BPPD, Memorial sent to the Senate and House of Representatives on behalf of Baring Brothers & Co. and other holders of bonds issued in favor of the Second Municipality, Jan. 14, 1847; BPLB, Barings to Purton, Mar. 20, 1844, Nov. 18, 1846; Barings to Forstall, Nov. 18, 1846, Apr. 28, 1848, Sept. 20, 1850; Barings to King & Sons, Sept. 10, 1852. 48. BPOC, Forstall to Barings, Feb. 28, Dec. 9, 1848; McGrane, Foreign Bondholders, p. 192. 49. BPLB, Barings to Purton, Dec. 3, 1844. 50. McGrane, Foreign Bondholders, pp. 205-219; BPLB, Barings to Ward, Dec. 4, 1843, Aug. 23, 1850, Jan. 3, Feb. 7, Mar. 14, 1851, Feb. 11, Mar. 21, Apr. ι, 8, 29, May 13, 27, Sept. 23, Oct. 18, Nov. i, Dec. 30, 1853, Aug. 10, 1855, Mar. 28, Oct. 3, 1856, Apr. 16, Sept. 24, Nov. 12, 1858, Oct. 14, Dec. 30, 1859; Barings to Forstall, Apr. 29, 1853; Thomas Baring to J. G. King, Sept. 30, 1853; BPOC, Forstall to Ward, Jan. 23, 1844; Forstall to Barings, Apr. 12, 1853; Ward to Barings, Feb. 9, 1844, Dec. 5, 1850, Jan. 11, Apr. 14, 19, 22, May ι, 10, 13, 17, Aug. 9, 17, Sept. 23, 1853, Mar. 9, 30, Sept. 17, Oct. 22, Nov. 30, 1858, Sept. 23, Nov. 8, 1859, and enclosures; Hopes to Barings, Sept. 13, 27, Oct. 4, 1853, Feb. 14, 28, Mar. 28, 1854, Feb. 27, 1855, Oct. 20, 1856; King's Sons to Barings, Nov. 11, 1859, and enclosures; BPMC, memo, in folder no. 13A, undated, on contributions to the Mississippi resumption fund; memo., "Plan for arrangement of the Debt of the State of Mississippi," July 31, 1851; Charles Stokes to Barings, Aug. 30, 1853. 51. BPMC, the agreement, Mar. 10, 1845; McGrane, Foreign Bondholders, pp. 119-125. On the newspaper controversy see BPLB, Barings to Oakley, Oct. 18, 1844; Barings to Ryan, Oct. 10, 1845; BPOC, Ward to Barings, Nov. 8,

558

NOTES TO CHAPTER XI

15, 1844; BPPD, clippings from the New York Journal of Commerce, Nov. 4 (Ryan to the editor, Nov. 2), 9 (Ward and the Boston Committee to the editor, Nov. 7), 1844; Circular to Bankers, Nov. 29, 1844. Out of the $1,033,840 subscribed in Europe, the Barings contributed $120,800 on the first and second subscriptions, Magniac, Jardine & Co. $312,800, and Hope & Co. $161,920. Exclusive of their subscriptions for the third list, these three (out of 28 subscribers) therefore subscribed about % of the total (BPMC, List of Subscribers to the Illinois and Michigan Canal, Sept. 20, 1845; Ward to Magniac, Jardine & Co., May 30, Sept. 15, 1846, enclosures). And J. Horsley Palmer, the Barings, Magniac, Jardine & Co., and Leavitt agreed to assume all of the obligation, if no one else would help, on the third list totaling $357,750 of registered bonds. BPLB, Barings to Ward, May 3, 1845; BPOC, Ward to Barings, Feb. 23, 1846. 52. BPOC, Ward to Barings, May 24, 1845, Nov. 14, 1846, Oct. 21, 1848, May 28, 1850, Oct. 17, 1851, Mar. 27, 1852, Jan. 4, May 20, Dec. 27, 1853, and enclosures; BPLB, Barings to Hopes, Apr. 19, 1845; Barings to Ward, Dec. 3, 1845, June 18, 1847, Oct. 27, 1848; BPMC, Swift to Ward, Sept. 24, 1848; J. W. Putnam, The Illinois and Michigan Canal (Chicago, 1918). The canal debt was liquidated by 1871 except for $13,000 of the bond never presented (ibid., p. 64). 53. BPLB, Barings to Hopes, Apr. 19, 1845, May 21, 1847; Barings to Ward, Mar. 14, 1851, Feb. 4, Nov. 18, 1853, Mar. 28, Oct. 3, 1856; Thomas Baring to S. G. Ward, Dec. 17, 1852; BPOC, Ward to Barings, Aug. 30, 1847, Nov. 30, 1850, Feb. 19, Apr. 9, Dec. 16, 19, 1851, Feb. 2, June 22, Dec. 24, 1852, Jan. h (S. G. Ward now), 13, May 24, 1853, Mar. 3, May 19, 23, 25, June 23> July 5» Nov. 3, Dec. 4, 1854, Dec. 16, 1856, and enclosures; King & Sons to Barings, Apr. 8, 1848, Dec. 16, 1851; BPPD, Circular of Gov. A. C. French to holders of Illinois Internal Improvement bonds and scrip, June 18, 1847, and blank new Internal Improvement bond, July 1, 1847; BPMC, dated "1844-," memo, on Leavitt's claims; approval of bill for expenses by the Barings and Magniac, Jardine & Co. by the trustees, June 27, 1845; D. Leavitt to Swift, Dec. 31, 1857, with copies of preceding correspondence, later printed as shown in BPPD, same date; BPLB, Barings to Ward, May 3, 1845, July 3, Aug. 3, Nov. 3, Dec. 11, 1848, Feb. 19, 1856, June 10, 1859; Barings to Hopes, May 21, 1847; BPOC, Ward to Barings, Apr. 12, 1845, Nov. 24, 1848, Jan. 23, Feb. 19, Apr. 30, 1849, Jan. 11, 1853, July 3, 1854, Jan. 7, 31, June 24, 1859, and enclosures. 54. The Canal Trustees paid all the expenses of the Barings and Magniac, Jardine & Co. for negotiating the new loan. Davis was paid $2,500 to help persuade the Illinois legislature to pass a heavier tax in 1845. He was paid the same sum to go to Springfield to induce the legislature to fund arreared interest, and this time the amount came out,of the pockets of the two London firms. A Mr. Peck was engaged for similar purposes in 1853 for an undisclosed sum. Leavitt tried to claim $3,661 for interest on loan-fund transfers,

NOTES TO CHAPTER XII

559

but the claim was disallowed. He later tried to extract $40,000 from the London bankers for his work, but had not succeeded in getting anything by 1859, the last record found of his attempts. The Barings and Matheson & Co. paid Swift $2,500 per year, above his regular salary of that amount, from 1849 to the end of his term as trustee. 55. McGrane, Foreign Bondholders, pp. 135-142, 155-167, 242-244, 255-264; BPLB, Barings to Prime, Ward & King, Nov. 18, 1843, Jan. 3, 1844; Barings to Ward, Jan. 3, 5, 1844, June 18, July 22, 1852; Barings to J. G. King, Mar. 3, 1847; BPOC, Ward to Barings, Mar. 8, 1851; BPPD, Circular on the Debt of the State of Indiana, July 10, 1847. 56. BPLB, Barings to F. H. Elmore, Dec. 4, 1843. In far-off Buenos Aires, between 1842 and 1844, an agent of the Barings, F. de Falconnet, negotiated the resumption of a token payment ($5,000 per month) of interest, in default since 1827, on bonds of that state {ibid., Barings to F. de Falconnet, Mar. 11, 1842, Oct. 4, 1843; BP, Major Ferdinand White, "Journal of Events of my Mission to Buenos Aires in 1852"). The $5,000 per month was cleared through Zimmerman, Frazier & Co., correspondents of the Barings, as long as it was paid (BPPD, clipping from the British Packet and Argentine News, June 22, 1844). 57. BPPD, clipping from the Boston Daily Advertiser, Jan. 19, 1844, signed "A Boston Bond-Holder" (Curtis); Statement of case of James G. King vs. Merchants' Exchange Company, in N. Y. Court of Appeals, Nov. 3, 1851; BPLB, Barings to Ward, June 19, 1843, Jan. 2, Mar. 15, June 18, 1844, Feb. 3, 1847, May 3, 1850, Sept. 12, 1851, Feb. 20, Apr. 2, 1852; Bates to S. G. Ward, Feb. 8, 1850; Barings to J. G. King, Jan. 4, 1847, Apr. 5, 1850, May 14, Aug. 6, 1852; BPOC, Ward to Barings, Sept. 30, Oct. 6, Nov. 1, 1842, Jan. 15, Mar. 9, 1844, Oct. 17, 28, 1851, Feb. 6, Mar. 26, 1852, and enclosures; Prime, Ward & King to Barings, Mar. 31, 1843, Feb. 9, 1844; King to Barings, Feb. 16, Mar. 5, Apr. 29, July 15, 1844, Dec. 13, 1846, May 13, 1847, Feb. 10, Mar. 9, May 2, June 7, Aug. 2, 1848, Mar. 18, 1850, July 14, 1851, July 6, 1852; J. G. King, Jr., to Ward, Apr. 16, 1850; King & Sons to Barings, Jan. 14, 1848, Jan. 10, June 5, 19, 1849, Aug. 8, Oct. 17, Nov. 7, 1851, Jan. 6, July 6, 1852; King & Sons to Ward, Feb. 4, Mar. 16, 30, 1852. Cf. Jenks, Migration of British Capital, p. 368 n. 11. King claimed $36,893 in fees and expenses from the bondholders, who denied the claim, as the Barings did his demand for half of the 1 % commission charged by the London firm for the reimbursement of principal and interest on the bonds. The Barings did credit him, however, with half of the commission on the sale of the bonds in 1838-39. CHAPTER XII ι. Smith and Cole, Fluctuations in American Business, pp. 93-94, 104; Circular to Bankers, June 2, 1843; M. T. Copeland, The Cotton Manufacturing Industry of the United States (Harvard Economic Studies, VIII, Cambridge, 1923), p. 15; Thorp, Business Annals, pp. 123-124, 161-162.

560

NOTES TO CHAPTER XII

2. BPOC, Ward to Barings, Sept. 8, 1843, Jan. 15, 1845 (enclosure); BPLB, no addressee, July 3 1 , 1846. 3. Ibid., Barings to Ward, Sept. 3, 1844; BPOC, Ward to Barings, Sept. 27, 1844. 4. Ibid., Mar. 3 1 , 1843, Dec. 3 1 , 1844, July 13, 1846, Aug. 5, 1847, Feb. 8, Mar. 17, 1848, and enclosures; Ward to Bates, Jan. 1 1 , Dec. 3 1 , 1845; E. J. Forstall to Barings, Sept. 4, 1845, July 7, 1849; Forstall to Ward, Jan. 18, 1848; BPLB, Barings to Ward, June 18, 1846; Barings to Forstall, Apr. 28, 1848; Brown Brothers & Co., Experiences of a Century, p. 37. By advancing the full cost to selected clients Nicholson assured a steady flow of cotton to Brown, Shipley & Co. for sales on commission, provided bill remittances to cover his own drafts, and brought himself some of the strongest houses as correspondents. He charged !4 to 1 % for his advances, upon which he charged 6% interest. He usually fixed the rate of exchange on documentary bills at 1 to 3 % below the posted rate for A i clean bills. Some other financiers in this business left the rate to be fixed on the date that the bills were drawn, when a decline in the rate waß rigged. Among his local competitors were the New Orleans Canal & Banking Co., the Union Bank, and James Robb & Co. The latter used the same financial techniques as Nicholson, though in connection with Wetmore & Cryder of New York, and George Peabody in London. By the late 'forties, even small Tennessee banks were doing the same thing through the New York agency of the Ohio Life Insurance & Trust Co. and A. A. Gower, Nephew & Co., London. Some well-known and highly respected agents, such as those of the Barings, the Rothschilds, and the Lowell manufacturers, could do business upon their own credit. All factors presumably would have been pleased to deal with those men, but their terms of business were more restricted and they could not purchase the entire cotton crop. Hence, many factors opposed no objection to the documentary bill system, even though the clean bills on the Barings always sold at higher rates than the documentary bills on the Browns. Forstall said of Nicholson that "all the immense Rio coffee trade originating in Boston & elsewhere & remitted for here, is thro' him, which alone requires yearly ¿500,000 Stg. of Bills." Nicholson also sold a majority of the bills for remitting to cover New Orleans imports from France, and his bills, except when those of Baring Brothers & Co. were in the market, had preference over all others with Mexican and West Indian remitters. All French remittances were through him after the Revolution of 1848. 5. MHS, Ward Papers, Bates to Ward, Jan. 31, 1843, May 2, June 18, 1844, Feb. 17, Mar. 3, Nov. 3, 1847; BPLB, Barings to Purton, Mar. 3, 1847; Barings to Grinnell, Minturn & Co., Mar. 2, 1847; Barings to Mitchell King, July 13, 1848; BPOC, Ward to Barings, Jan. 25, 1848. For the first time since the first one issued (April 13, 1 8 3 1 ) , Ward was given a new power of attorney on June 9, 1848. The old one continued in force in spite of the fact that it con-

NOTES TO CHAPTER XII

561

tained the name of John Baring, who had not been a partner since 1837, and did not contain the name of Charles Baring Young {ibid., Mar. 17, 1851; BPLB, Barings to Ward, May 5, 1848). Mildmay had considered retirement as early as 1841 but stayed on in order to build a larger fortune for his sons. His first wife died in 1839, and he remarried in 1843. His second wife was a Miss Vernon, granddaughter of the Archbishop of York (MHS, Ward Papers, Ward to Bates, Apr. 15, 1839; Mildmay to Ward, May 17, 1839; Bates to Ward, Sept. 4, 1843). The participating of the partners in the firm in 1844 was as follows: Bates, 7/24ths; Thomas Baring, 6/24ths; Mildmay, 5/24ths; Francis Baring, 4/24ths; and Young, 2/24ths. Young's two portions were taken from the former shares of Mildmay and Francis Baring. 6. BPLB, Baring Brothers & Co. to Ward, June 18, 1846; BPOC, Ward to Baring Brothers & Co., July 13, 1846. Some of the criticism of the Liverpool house was deserved, a fact recognized by the Barings' improvement in service. On the other hand, competitors occasionally deliberately caused criticism. For example, in 1843 Carne & Telo of Liverpool induced Grinnell, Minturn & Co. to send identical shipments of tallow to the Barings and themselves. The House of Baring sold at the top wholesale price, but Carne & Telo achieved better sales by retailing to ship chandlers. The New Yorkers switched their tallow business forthwith to Carne & Telo, which sold at wholesale thereafter (ibid., Sept. 8, 1843; BPLB, Barings & Co. to Ward, Apr. 3, Oct. 3, 1843). Criticisms often occurred when sales fell below the prices expected by consignors. When sales were all that could be anticipated, as in 1843, compliments came to the house (MHS, Ward Papers, Bates to Ward, Dec. 3, 1843). 7. Purton was at one time in Thomas Wilson & Co. and later was a partner of Purton, Parker & Co. of Liverpool, a cotton house. He was described by Bates as "clever, prudent, and quite a business man." Although Forstall was the special agent for the Barings in New Orleans on a year contract from Aug., 1847, Gracie was also authorized to buy cotton in that city for the year 1847-48. The two bid against each other occasionally and collided in other ways. Therefore, Forstall was retained as sole agent from 1848 till 1861. Both Ward and Purton recommended Forstall highly, although he was regarded as a greater talker and theorizer. They described him as having no equal in New Orleans in banking and finance, as "punctiliously honorable," as "a thorough merchant" and as an improving judge of cotton. He also acted as agent for Hope & Co., turned down an offer to act in a similar capacity for Reid, Irving & Co., before agreeing with the Barings to serve only their firm and the Hopes. MHS, Ward Papers, Bates to Ward, Nov. 18, 1842; BPLB, Barings to Ward, Oct. 1, 1842, June 18, 1846, Aug. 4, 1848; Barings to Purton, Oct. 14, 1842, Oct. 1, 1845; Barings to Forstall, Mar. 3, 1847; Bates to Grade, July 3, 1847; BPOC, Ward to Barings, July 13, 1846, Dec. 27, 1847, Jan. 24 (enclosure), May 5, 1848; Purton to Ward, Feb. 9, 1847; Purton to Barings, Oct. 14, 1847; Forstall to Barings, Dec. 4, 20, 1847. 8. Ibid., Ward to Barings, Sept. 8, 1843, Nov. 14, 1844, July 29, Nov. 1 1 ,

562

NOTES TO CHAPTER XII

1845; Aspinwall to Bates, Mar. 31, 1847; Howland & Aspinwall to Barings, Aug. 31, 1847; BPLB, Barings to Ward, June 18, Aug. 3, 1846; MHS, Ward Papers, Ward to Bates, May 31, 1844; Bates to Ward, June 18, 1844. By 1845 Ward's salary was ¿3,000 per annum. The qualities most desired by the Barings in a correspondent are probably best illustrated by their evaluation of and trust placed in Grinnell, Minturn & Co. In February, 1846, when stating that this New York firm was to be the most important connection of Baring Brothers & Co. in the United States, Ward noted that the house combined "strength in capital, judgment, prudence, & enterprize." By January, 1848, the agent could say that the N e w York firm was the best correspondent of the Barings, being "perfectly safe, & well conducted, & remarkable equally for sagacity, prudence, & ability." Even before that time the London partners had arrived at the conclusion that Grinnell, Minturn & Co. was "the first commercial House in the United States." They liked it because it made no advances upon imports from Europe, except Swedish iron and a few articles of current value, and because it did very little on its own account. For all these reasons, and as a consequence of a marked increase in the number of consignors introduced to the Barings through the medium of advances made by the New York client, the Barings made no definite limits to the credit granted and gave it wide discretion. "You may always consider," wrote the Barings in January, 1847, "that in our dealings with you we do not wish to fetter you by exact limits but hope you will exercise your discretion whenever the nature of the case seems to call for it." When the amount of credit to Grinnell, Minturn & Co. rose to over ¿200,000 in 1848, Ward soothed the qualms of his principals by stating that the capital and goods (including that of the Hathaway firms in New Bedford for whom the New York house held credits) back of the acceptances totaled about $2,000,000. BPOC, Ward to Barings, Feb. 26, 1846, June 27, 1848; BPLB, Barings to Ward, Aug. 18, 1846, Jan. 19, 1847. See also MHS, Ward Papers, Ward to Bates, Nov. 1, 1843, June 16, 1847. 9. The Barings said that they extended credits largely to Oelrichs & Lurman, partly because Lurman was a talented business man and partly because he was influential in restoring the credit of Maryland. BPLB, Barings to Ward, July 18, 1845. 10. MHS, Ward Papers, Diary, July 16, 1847. Ward often disregarded instructions and made his own decisions (ibid., Bates to Ward, Sept. 4, 1843). 11. Ibid., May 31, 1844; Bates to Ward, June 18, 1844, Jan. 14, Aug. 3, 1846; MHS, Ward Papers, Bates to Ward, Aug. 1, 1842; Ward to Bates, Sept. 17, 1842. 12. BPOC, Ward to Barings, Jan. 8, 1845. See also ibid., May 22, 1843; Purton to Barings, Feb. 29, 1844; King & Sons to Barings, May 29, 1847; BPLB, Barings to Ward, Apr. 27, 1843, Oct. 18, 1844. 13. List in BPMC, Aug., 1845; BPOC, Ward to Barings, Oct. 31, 1846; BPLB, Barings to Ward, May 6, 1842, June 3, 1844, May 18, 1847.

NOTES TO CHAPTER XII

563

There is no doubt that Ward maintained a reliable group of correspondents for his principals. Upon looking over a list made by Ward in October, 1842, the Barings commented that "all seem so good that we are inclined to keep them all but some of the dry goods People who only use us in case of need." In 1843 credits for the China trade were almost wholly with Baring Brothers & Co. Ward could think of none which was not with his principals, except such as he had declined. For the Calcutta trade all the strong American firms held credits with the Barings, but at that time Fletcher, Alexander & Co. was giving credits to the less strong firms against the security of bills of lading made to its order. In 1847, just before the crisis had begun to manifest serious proportions, Ward stated, 'There has not been a loss, nor hardly a backward remittance on any credit for ten years, except Stetson & Avery." Later in the year he remarked, "Your correspondents are richer & more independent than they have ever been." BPLB, Barings to Ward, Jan. 3, 1843; BPOC, Ward to Barings, June 15, 1843, June 15, Sept. 21, 1847. 14. BPLB, Barings to Ward, Oct. 22, Nov. 3, 1842, Jan. 3, 1843, May 3, 1844, Feb. 3, 1847; Barings to Grinnell, Minturn & Co., July 18, Aug. 3, Sept. 19, 1842, Sept. 4, 1843, June 18, 1844, Apr. 3, Nov. 18, 1846, May 3, 1847; Barings to Ward, Jan. 3, 1843; BPOC, Grinnell, Minturn & Co. to Barings, Oct. 31, Nov. 15, 1843, June 30, 1845, Apr. 29, Oct. 31, Dec. 30, 1846, Apr. 30, Nov. ,12, Dec. 31, 1847, July 18, 1848 (BPMC, E. Train to Bates, Oct. 15, 1844; agreement by which Train gave Ward a bill of sale for one-half ownership in the Joshua Bates as security for ,£3,000 lent on its construction) . See Albion, Square-Riggers, p. 47, and article on Train in the D A B . 15. Baring Brothers & Co., Ltd., Webster to Barings, Mar. 14, 1843, which letter reposes in a suitable frame in one of the waiting rooms at 8, Bishopsgate Street. See also BPMC, John Howard Payne (U. S. Consul at Tunis and writer of "Home, Sweet Home") to Bates, July 25, 1843, citing notification to change his account to the Barings as of July 1, 1843. 16. BPOC, Ward to Barings, May 15, Oct. 30, 1844, Mar. 30, Apr. 12, 1845, Jan. 9, Feb. 26, May 30, June 1, Sept. 14, 1846, Jan. 1, May 28, Sept. 13, 1847, and enclosures; Samuel Ward to Bates, Dec. 31, 1846; J. G. King to Bates, Feb. 24, 1847; Grinnell, Minturn & Co. to Barings, Dec. 31, 1846; BPLB, Barings to Ward, Apr. 18, 1845, Jan. 19, Feb. 3, 1847; MHS, Ward Papers, Bates to Ward, June 17, Aug. 3, 1846, Jan. 18, Sept. 3, 1847; Ward to Bates, Dec. 31, 1846; Ward to his son John, Sept. 11, 1847. Bates was vexed with Goodhue & Co. on several counts: it sold consignments badly; the two junior partners (Peletiah Perit and Calvin Durand) had lost all their capital between 1836 and 1843, and neither was firm enough to be a good merchant; Goodhue got nervous in a crisis; and the books would not show the condition of the house even once a year. 17. BPLB, Barings to Ward, Feb. 3, 1845. 18. Ibid., Oct. ι, 1842, Jan. 3, Apr. 27, June 16, Oct. 18, 1843, Mar. 4, July an une 3, 18, Sept. 3, 18, Oct. 3, 1844, Mar. 3, July 18, Dec. 3, 1845, J · 3> J

564

NOTES TO CHAPTER XII

1846, Jan. 19, July 3, 1847, June 19, 1848; Bates to J. A. Stevens, Apr. 18, 1845; Barings to G. W. Lurman, July 24, 1846; Barings to Purtori, Jan. 17, 1846; Barings to Prime, Ward & King, Sept. 13, 1844; Barings to the Liverpool house, June 2, 1848; BPOC, Ward to Barings, May 31, 1843, July 18, 31, Oct. 30, 1844, Jan. 28, Apr. 29, Dec. 30, 1845, Feb. 26, Apr. 10, 28, Oct. 31, Nov. 14, 1846, May 8, 15, 1847, Feb. 7, 11, 1848, and pertinent enclosures; Ward to Oelrichs & Lurman, Oct. 10, 1845; Oelrichs & Lurman to Ward, Oct. 8, 20, 1845; G. W. Lurman to Ward, Sept. 20, 1844; Oelrichs & Lurman to Barings, July 22, 1846; W. H. Aspinwall to Bates, Mar. 31, 1843; BPMC, R. W. Weston to Bates, May 16, 1848. Olyphant & Son went to Brown, Shipley & Co. 19. BPOC, Ward to Barings, July 18, 31, 1844, and enclosures; BPLB, Barings to Ward, Nov. 18, 1844; Federal Cases, Circuit and District Courts, iy8g-i88o, No. 4, 864 (2 Story 555). In Baring et al. vs. Lyman the validity of the Barings' letter of credit was upheld and the liability of a grantee of a letter of credit to pay a commission on bills drawn thereunder established, even if the bills were never presented for acceptance {ibid., Case No. 983, ι Story 396). 20. BPOC, Ward to Barings, May 31, 1843; BPLB, Barings to Ward, June 16, 1843, Aug. 3, 1844, Dec. 3, 1845; Barings to J. J. Dixwell, Aug. 3, 1844, Oct. 18, 1845, Oct. 19, 1846; Bates to R. B. Forbes, Mar. 20, 1844; BPMC, memorandum of Dixwell as to the needs of Heard & Co., July 15, 1844; R. B. Forbes (for Russell & Co.) to Bates, Feb. 29, 1844, Sept. 30, 1846; Dixwell to Bates, Sept. 29, 1846; R. W. Weston to Bates, Oct. 14, 1844. 21. BPOC, Ward to Barings, Oct. 31, 1846, Apr. 22, May 28, June 15, Dec. 27, 1847, Feb. 8, Mar. 9, 1848, and pertinent enclosures: Howland & Aspinwall to Barings, Dec. 15, 30, 1845, Aug. 31, 1847; BPLB, Barings to Ward, Nov. 18, 1846, Mar. 3, Apr. 3, May 3, 18, 1847; BPMC, A. Henry to Bates, July 12, 1844. 22. BPOC, Grinnell, Minturn & Co. to Barings, Dec. 15, 1842, June 30, Aug. 15, 1844, June 30, 1847; Ward to Barings, Jan. 15, 1845, Dec. 18, 1849, and enclosures; Oelrichs & Lurman to Barings, Feb. 17, 1849; King & Sons to Barings, Jan. 14, June 7, 1848; BPLB, Barings to Grinnell, Minturn & Co., July 18, Sept. 3, 1844, Mar. 28, 1845, Jan. 4, July 19, 1847; Barings to Oelrichs & Lurman, Feb. 3, 1847; Bates to J. A. Stevens, Apr. 18, 1845; Barings to D. J. Hawder, Aug. 6, 1844; Barings to Henry Baring, Jan. 15, 1846; Barings to Ward, Mar. 3, 1845; BPMC, H. E. Moring to Barings, Oct. 21, 1845; Ward to Grinnell, Minturn & Co., Apr. 24, 27, 1849; Grinnell, Minturn & Co. to Ward, Apr. 26, 1849. In Dec., 1842, Grinnell, Minturn & Co. suggested a reciprocal arrangement by which they and the Barings would return 1 % commission charged on advances for consignments from either side of the Atlantic to their respective houses. On all commodities except cotton, in which the New York firm did not expect to operate, the Barings were to charge a total of 4% commission, including guarantee, Grinnell, Minturn & Co. to charge for the same

NOTES TO CHAPTER XII

565

services the usual rate of 5 % in New York, each to return to the other 1% from these figures. This arrangement would have involved the raising of the English commission from 314 % to 4%, and the Barings turned down the proposal at that time. Not until January, 1847, did the Barings agree to the arrangement, raise their rates, and return a portion of their commission, a system which was soon extended to other general commission house friends, such as Oelrichs & Lurman. This general concession was the result of previous specific reductions in commissions. After the failure of the American Fur Co. in 1842, the New York house of Suydam, Sage & Co. became one of the leading forwarders of furs to England and Europe. Its share of the business equaled about $150,000 gross per year. Suydam, Sage & Co. forwarded the furs to the Barings through Grinnell, Minturn & Co., which permitted the fur merchants to draw in advance. The general commission merchants felt entitled to a return commission from the Barings. Of the total commission charged in London on the accounts of Suydam, Sage & Co., iVi% went to the Barings and 1 lA% to Curtis Lampson, the fur broker in England. The Barings agreed to return % % on all fur sales, taking % % from the Lampson and Vi% from their own commissions. On tallow consignments, returns to the New York house were set at the same time at 7/10% on all sales. The arrangement covered shipments to both the London and Liverpool houses and the crediting of Grinnell, Minturn & Co. with return commissions for the season preceding September, 1844. Within a year Ward had also arranged for the Barings to return 54% of their commission on consignments from houses in China in order that competition offered by Jardine & Co., a London house specializing in Far Eastern credits, might be met. By January, 1848, the Barings had agreed to return ¡4 % commission to King & Sons, New York, on cotton consigned to Liverpool, provided that the New York house did not draw on London for advances. 23. Although friction, actual and rumored, between the United States and Britain, and between the United States and Mexico, gave the Barings some inclination to curtail in 1845, price variations in commodities and financial conditions in London seem to have been more important factors in determining credit policies. For example, the Barings never held any serious fears about the solution of the Oregon controversy and had advance assurance of its peaceful termination. Ward did see President Polk and wrote an article for the New York Journal of Commerce, but he never thought war would break out. BPLB, Barings to Ward, Mar. 21, 1844, Mar. 28, Apr. 4, 1845, Jan. 3, 1846; Barings to Grinnell, Minturn & Co., Dec. 1, 1845; BPOC, Ward to Barings, Feb. 29, 1844, Apr. 23, Aug. 15, Nov. 1, 10, Dec. 30, 1845, Jan. 9, Sept. 29, 1846; Ward to Bates, Apr. 30, Dec. 30, 1845; Grinnell, Minturn & Co. to Barings, Jan. 17, Feb. 2, 9, 11, 1846. 24. Inasmuch as Baring Brothers & Co. was known to be conservative in choosing correspondents, English sellers, noting the credits, became convinced

566

NOTES TO CHAPTER XII

of the solidity of their American correspondents and permitted book credits or direct remittances. BPLB, Barings to Ward, Oct. 18, 1842, Oct. 3, 1843, Feb. 3, Mar. 4, Apr. 18, 1844; BPOC, Ward to Barings, July 25, Sept. 8, 1843. 25. Ibid., Sept. 8, 1843; Grinnell, Minturn & Co. to Barings, Oct. 31, Nov. 15, 1843, Apr. 29, Dec. 30, 1846, Jan. 30, Apr. 30, Nov. 17, 30, Dec. 31, 1847, Jan. 13, 28, June 7, July 13, 1848; BPLB Barings to Ward, Nov. 3, 1843; Barings to Grinnell, Minturn & Co., Sept. 4, 18, 1843, June 18, 1844, Apr. 3, 1846. In the Jan. 30, 1847, letter the New York firm urged the Barings to induce Liverpool houses to make iron consignments, as "large Factors and Dealers are very generally forming connexions in this Country." Thomson, Bonar & Co., of London and St. Petersburg, consigned tin and copper to Grinnell, Minturn & Co. 26. Ibid., Oct. 22, 1842, Nov. 2, 1843, July 3, 24, Sept. 3, Oct. 30, Nov. 18, 1846, Jan. 4, 19, Aug. 3, 1847; Barings to Ward, Dec. 3, 1842, May 3, Aug. 5, 1845, Aug. 18, Sept. 3, 1846; BPOC, Grinnell, Minturn & Co. to Barings, May 25. 3 1 . 1843, June 25, Aug. 15, Oct. 31, Nov. 14, 25, Dec. 14, 31, 1846, Jan. 30, Feb. 23, Mar. 30, July 14, Aug. 3, 1847; Ward to Barings, Sept. 26, 29, 1845. Other consignors through the New York firm were Durant, Lathrop & Co. and H. Fish & Co., of New York, and Ross, Mitchell & Co., of Toronto. Grant & Stone also advanced on consignments of wheat and flour, as did Oelrichs & Lurman. The latter charged 2'/2% on purchases, 1% for drawing bills, and nothing for making advances. Ward thought it should charge 1% for advances and 2l/2% on purchases, drawing included. Ibid., Nov. 16, 1846. 27. BPMC, Henry Goulburn to Thomas Baring, Nov. 17, 1845; C. E. Trevelyan to Barings, July, 1846 (no other date), and enclosure; Memorandum, Jan. 16, 1846; BPLB, Barings to Ward, Nov. 18, Dec. 3, 1845, Jan. 3, Oct. 3, 1846; Barings to the Liverpool house, Apr. 22, June 5, 11, 12, 1846; Thomas Baring to C. E. Trevelyan, June 6, 1846; BPOC, Ward to Barings, Dec. 8-9, 16, 30-31, 1845, Jan. 23, Feb. 27, Oct. 31, 1846, and enclosures; Grinnell, Minturn & Co. to Barings, Dec. 9, 1845, Jan. 16, 31, 1846; MHS, Ward Papers, Bates to Ward, Jan. 1, 16, Feb. 25, Aug. 3, 1846; Ward to Bates, Nov. 5, 1846. Orders to Purton for purchases in New Orleans failed of realization. At first the Barings planned to charge 1% commission but later decided to charge none. Grinnell, Minturn & Co. charged 2'/2 % for making purchases, Vi% for drawing and negotiating bills, and 5% interest on advances. The premium for insurance was i ! 4 % if to the United Kingdom, 2 54% if to a Continental port. Ward charged Vi% for effecting the insurance, the proceeds of which were divided into three parts. Ward was given two parts and Franklin H . Story, his chief clerk in the Boston office, the remainder. Although not all the funds passed through the hands of Baring Brothers & Co., the British government advanced a total of £185,000 and recovered about ¿135,000 of that amount. Witt Bowden, Michael Karpovich, and A. P. Usher, An Economic History of Europe since 1750 (New York, c. 1937), p. 355. 28. BPLB, Barings to C. E. Trevelyan, Aug. 27, 1846; Barings to Williams, Deacon & Co., Sept. 2, 1846.

NOTES TO CHAPTER XII

567

29. BPOC, Grinnell, Minturn & Co. to Barings, Aug. 31, Oct. 16, Nov. 14, 25, Dec. 19, 22, 30, 1846, Feb. 23, 1847; Ward to Barings, Oct. 5, 1846, Jan. 30, 1847; BPLB, Barings to Grinnell, Minturn & Co., Sept. 11, Oct. 3, 1846, Mar. 2, 1847; Barings to Ward, Nov. 18, Dec. 3, 1846. Bates congratulated Ward on his promptness and decision in executing the second batch of contracts (MHS, Ward Papers, Bates to Ward, Jan. 18, 1847). Ward thought Grinnell, Minturn & Co. not so particular and exact in 1847 as they had been (ibid., Ward to Bates, June 16, 1847). 30. Ibid., Barings to Purton, May 3, 1844; Barings to L. Mariatequi & Co. (Havana), June 18, 1845; Barings to Grinnell, Minturn & Co., Oct. 3, 1844 — on tobacco and sugar; ibid., Sept. 18, 1845, Aug. 18, 1846; Barings to Ward, Jan. 19, 1847; Barings to Lurman, Dec. 3, 1846; Barings to Oelrichs & Lurman, Aug. 3, 1847; Barings to Purton, Apr. 19, 1847; BPOC, Ward to Barings, Oct. 14, 1845; Purton to Barings, May 19, 1847; Oelrichs & Lurman to Barings, June 12, Sept. 13, Nov. 27, 1847; Prime, Ward & Co. to Barings, Jan. 31, Apr. 30, 1847; Forstall to Barings, Dec. 4, 19, 1847 — on wheat, flour, and corn; ibid., Barings to F. le Breton & Co., Rio, Feb. 22, 1844 — on coffee; ibid., Barings to R. B. Forbes, Aug. 18, 1846, and Barings to Jacob van Lennep & Co., Smyrna, Sept. 5, 1846 — on opium. 31. MHS, Ward Papers, Bates to Ward, Nov. 18, 1842. 32. BPLB, Barings to Ward, Nov. 3, 1842, Apr. 27, 1843, J u n c Sept. 18, 1845, Apr. 3, 1847; Barings to Purton, Nov. 2, 18, 1844, Nov. 2, 1846; BPOC, Ward to Barings, Jan. 1, 28, 30, Dec. 2, 8, 1843, Nov. 30, Dec. 31, 1844, Jan. i l (Ward to Bates), Feb. 28, 1845, July 13, 1846, Feb. 22, Dec. 11, 1847, May 5, 1848, and pertinent enclosures; Purton to Barings, Mar. 29, Apr. 6, 1847; Edward Padelford to Ward, Nov. 24, 1843. The agents were given letters of introduction to various firms and banks in the southern ports in order that credits would be honored and the drafts purchased. Drafts on the North were usually at 10 days sight for purchases and 30 days sight for advances on consignments. Occasionally drafts were as short as 3 days sight, and as long as 60 days sight. In December, 1842, Purton issued a few at 20 days date because the buyers wished it. 33. BPLB, Barings to Purton, Nov. 18, 1844; Barings to Ward, Nov. 3, 1845; BPOC, Ward to Barings, Jan. 30, 1843, Feb. 5, 1848; Purton to Barings, May 19, 1847. In the 'forties insurance on cotton shipments which were forwarded on the orders of the Barings was arranged as in preceding years. From 1837 onward, general policies were taken out by Ward with American firms in Boston and New York. For purposes of insurance the cotton was valued at 1 5 % above the invoice. When the cotton was on board the agents notified Ward, who then made specific contracts under his general policies. He made no charge for effecting the insurance on consignments obtained by agents of the Barings. From 1845 onward, both Ward and the Barings were dubious about American marine insurance companies upon two counts — premiums were higher than those charged in England, and the risks assumed by the American firms,

NOTES TO CHAPTER XII

568

most of which were mutual companies, were out of proportion to their capital. Nevertheless, for convenience and to retain friends, Ward continued to effect in the United States insurance on all cotton, grain, and sugar shipments facilitated by agents of his principals. When shipping cotton on their own responsibility, merchants effected the insurance themselves. Although Ward always tried to make certain of shipments on good American and British bottoms in order to get the lowest premiums, in October, 1845, he said that losses on cotton and sugar shipments during the preceding five years had materially exceeded the premiums. Rates were steady except for an upward flurry over war with Mexico in 1846. BPOC, Ward to Barings, Apr. 20, Dec. 21, 31, 1844, May 13, Oct. 14, 1845, May 15, Sept. 29, Nov. 14, 1846, June 28, 1847, Apr. 5, 1848, and enclosures; BPLB, Barings to Ward, Sept. 18, 1845. 34. Ibid., Sept. 9, Oct. 1, 1842. For comments on conditions and actions summarized in the next four paragraphs in the text, see BP, Oct., 1842-Mar., 1848, passim. 35. Circular to Bankers, Jan. 24, 1845. 36. MHS, Ward Papers, Bates to Ward, Oct. 18, 1843, J an · M> 1846, in addition to references cited in note 34. 37. BPOC, Ward to Barings, May 15, Oct. 30, 1844, Sept. 14, 29, Nov. 30, 1846, and enclosures; Padelford & Co. to Barings, Mar. 26, 1845; BPLB, Bates to Gracie, Apr. 19, 1847. 38. Ibid., Ward to Barings, Nov. 28, Dec. 16, 1843, and enclosures; BPLB, Barings to Ward, Jan. 3, Feb. 3, Apr. 18, 1844; Barings to King & Sons, Aug. 18,1848. Ward pointed out that the Bank of Commerce was the only chartered bank in the United States holding an open exchange credit on Baring Brothers & Co. The Philadelphia Bank wanted a credit of ¿50,000 to be covered only once every six months, which was refused because of the great interim between proposed drafts and remittances. 39. MHS, Ward Papers, Bates to Ward, Oct. 3, 1844. 40. For references see note 23 of this chapter. Total revolving credits for exchange operations, 1844-48 (exclusive of joint account with Prime, Ward & King) Feb. 28, June 15, Sept. 30, Dec. 31, Apr. ι, June 30, Oct. ι, Dec. 31,

1844 1844 1844 1844 1845 1845 1845 1845

¿118,000 118,000 115,000 115,000 125,000 125,000 125,000 65,000

Mar. July Mar. June Dec. Apr. June

31, 1846 1, 1846 31, 1847 30, 1847 30, 1847 4, 1848 27, 1848

£ 65,000 65,000 160,000 160,000 70,000 70,000 70,000

41. BPOC, Ward to Barings, Feb. 28, Nov. 28, Dec. 15, 16, 1843, Sept. 7, Oct. 30, 1844, Dec. 30, 1845, July 13, Sept. 14, 1846, Feb. 22, May 28, 1847,

NOTES TO CHAPTER XII

569

Jan. 31, 1848, and enclosures; Prime, Ward & Co. to Ward, Mar. 20, 1847; BPLB, Barings to Ward, Aug. 3, 1843, Jan. 3, Feb. 3, Apr. 18, Oct. 3, Nov. 4, 1844, Jan. 3, 1845, Apr. 18, 1846; Barings to Prime, Ward & King, Oct. 3, 1846; Barings to Lurman, July 24, 1846. 42. BPOC, Ward to Barings, Nov. 28, Dec. 15, 16, 1843, July 13, 1846, and enclosures; Ward to Bates, Dec. 31, 1845; BPLB, Barings to Ward, Jan. 3, Feb. 3, Apr. 18, 1844, Apr. 18, 1846; Barings to Purton, Apr. 18, 1844. In April, 1846, the Barings accepted for the honor of Thayer & Brother a bill refused payment by Huth & Co. The Barings told Purton that they were willing to open an exchange account with the Canal & Banking Co., at V2 % commission, if the amount drawn was never over ¿30,000 at one time, and if the Barings always had remittances on hand of 2 5 % in excess of drawings. Exchange business in Latin America was treated in the same conservative fashion as that in the United States. In 1843, Todd, Naylor & Co., of Liverpool, was informed that the open credit to Naylor Brothers & Co., of Rio de Janeiro, was terminated, but the Barings softened the blow by telling the house that that credit had been the only one of its kind granted to any Rio house for some time. In the Caribbean area the Barings were looking for firms with which to open accounts in 1846. They even hesitated to grant open credits to such a trusted firm as J. C. Burnham & Co., of Havana and Matanzas. Manning & Mackintosh of Vera Cruz and Mexico City were empowered to draw up to ¿100,000 per month, but not on an open credit. BPLB, Barings to Todd, Naylor & Co., July 26, 1843; Barings to Grinnell, Minturn & Co., Jan. 3, 1846; Barings to Ward, Sept. 18, 1847; BPOC, Purton to Barings, Jan. 15, 1844. Burnham & Co. prior to 1844 had a credit of £7,000 from Fletcher, Alexander & Co., the commission in London being 1% and remittances being made by an agent in Boston. 43. BPLB, Barings to Purton, Mar. 4, 1844, Nov. 2, 1846; Barings to Ward, Apr. 27, 1843, May 3, Sept. 3, 1844, Feb. 3, 1846, Apr. 3, 1847; Barings to F. Frey, Apr. 1, 1847; BPOC, Prime, Ward & King to Barings, Mar. 9, 16, 1843; Purton to Barings, Jan. 27, Mar. 29, 1847; Purton to Ward, May 21, 1847; Ward to Barings, Feb. 22, 1847. The remittance account was temporarily transferred to J. G. Ward & Co., in Nov., 1845. 44. Ibid., Apr. 12, 1845; Prime, Ward & King to Barings, June 30, Aug. 31, Nov. 15, 30, Dec. 15, 1843, Feb. 29, Apr. 30, May 15, July 15, Aug. 15, 31, Oct. 15, 31, 1844, Feb. 7, July 31, Nov. 29, 1845, Feb. 28, Aug. 15, Nov. 25, 1846; King & Sons to Barings, Mar., 1847-July, 1848, passim·, King to Bates, Nov. 15, 1847; BPLB, Barings to Prime, Ward & King, Dec. 4, 1843, I a n · 5> Mar. 14, Aug. 3, Sept. 13, Oct. 3, Nov. 18, 1844, Feb. 3, Aug. 22, Nov. 3, 1845, J a n · 3 1 ) 1846; Barings to King & Sons, Aug. 11, 1848; Barings to Ward, Jan. 3, 1843, Jan. 3, 1844, Mar. 3, 1845, Sept. 3, 1846. BPMC, Gracie to Barings, Oct. 31, 1848. Some mention was made of a joint exchange account with John G. Ward &

570

NOTES TO CHAPTER XII

Co., but no evidence has been f o u n d that the arrangement was carried into operation. T h e Ohio parcel in 1843-44 w a s $106,000. 45. See pp. 291, 322-323, 333-334, 340. For other debt collections — BP, 1842-48,

passim.

46. While completing the debt settlement with the Bank of Pennsylvania, W a r d arranged for it to receive and credit to the Barings, for lA % commission, interest on Pennsylvania bonds paid to holders through the Barings. O n bonds sent to Philadelphia for sale, the bank agreed to charge 1% for sales and making remittances. BPLB, Barings to W a r d , May 6, 1842; BPOC, W a r d to Barings, Dec. 1, 15, 1845, J a n · 3°> ^-846, and enclosures. In 1844 the Barings also agreed to a settlement, involving a reduction of claims dating f r o m 1837, with Birckhead & Co. of Rio de Janeiro. BPLB, Barings to Naylor Brothers & Co., Rio, Jan. 3, 1844; Barings to J. B. Bond, N . Y., Jan. 2, 1847. 47. BPOC, W a r d to Barings, Sept. 16, Nov. 28, Dec. 23, 27, 1843, Mar. 30, 1844, Mar. 16, 1846, Nov. 22, Dec. 25, 1848, Feb. 8, 1849, and enclosures; BPLB, Barings to W a r d , Apr. 3, 1843, Mar. 4, 1844, Oct. 25, 1848. In order to recover the ¿30,00o debt f r o m the Union Bank, at the end of 1843 W a r d made plans to retain the Honorable Robert J. Walker and Judge Montgomery, both natives of Mississippi, to prosecute the case in their State, and Daniel Webster to argue the case if it should come to the Supreme Court of the United States. Montgomery declined to serve. Walker was given a retaining fee of $200 and a promise of 1 5 % of the amount recovered, Webster a fee of $100 and a promise of 5 % of the amount recovered. W a r d engaged Jacob Barker of N e w Orleans to supervise Walker, who was doing nothing at all. Then, when Walker became Secretary of the Treasury, he resigned f r o m the service of the London firm. In 1846 the whole matter was placed in Barker's hands on the promise of 2 5 % of the net amount regained after the deduction of expenses. H e proposed that the Barings should purchase all the assets of the bank and operate them. This the London partners declined to do. Inasmuch as Barker did nothing more, W a r d finally proposed to Robert Cochran, a Mississippian, that he take the case for one-half of what he could recover. Cochran thought the chances of success were so unfavorable that he refused to take the case. There the matter rested, as the Barings had long before written off the ¿30,000 to "Profit and Loss." 48. BPOC, W a r d to Barings, May 1, 1843, Oct. 1, 1845, Mar. 31, 1846, July 7, 1848.

49. BPLB, Barings to W a r d , Oct. 18, 1842, July 3, 1843; Barings to Prime, W a r d & King, Nov. 3, 1843; BPOC, W a r d to Barings, Sept. 13, 1847; and BP, 1842-48, passim; MHS, W a r d Papers, Bates to W a r d , Jan. 31, Apr. 26, 1843; W a r d to Bates, Feb. 27, May 14, 1843. T h e agents were W a r d , Prime, W a r d & King, J. G. King & Sons, Prime, W a r d & Co., Goodhue & Company, Little & Company, Bank of Pennsylvania, Oelrichs & L u r m a n , Leland Brothers & Co. of Charleston, Peschier & Forstall, and Purton.

NOTES TO CHAPTER XII

571

In August, 1848, Ward had on hand for account of the Barings ¿20,000 Maryland and $34,000 Pennsylvania bonds, while in October of the same year King & Sons held $270,480 Indiana and the Lelands ¿6,000 South Carolina. BPOC, Ward to Barings, Aug. 14, Oct. 7, 1848; BPLB, Barings to Ward, Oct. 13, 1848. In September, 1843, the Barings authorized Ward to interest them in American securities to the extent of ¿50,000, but no evidence exists' that the agent saw good enough bargains to act upon the authorization. Just prior to this action the London partners had given Ward authority to aid Ohio to the extent of ¿50,000 in a new loan, but the sale price was too high. Their interest was as much in sustaining the credit of Ohio as in acquiring new holdings. Ibid., Nov. 18, 1842, June 16, Aug. 18, Sept. 4, Nov. 18, 1843; BPOC, Prime, Ward & King to Barings, May 15, Sept. 15, 1843; BPPD, clipping, May 15, 1843. Ward later refused to buy Ohio bonds from Little & Co., one of the takers of the $1,500,000 Ohio loan. Among the small parcels purchased in England were bonds of Ohio, New York, Illinois, and Pennsylvania (after 1845). See, for example, BPLB, Barings to Hopes, June 3, 1842; Barings to Prime, Ward & King, June 18, Aug. 3, 1844, Apr. 18, 1845; BPOC, Prime, Ward & King to Barings, Jan. 14, 1843; Hopes to Barings, Nov. 26, 1847. The only British and Continental buyers of American securities specifically mentioned for the period 1842-48 in the BP were John Baring, Humphrey St. John Mildmay, and Hope & Co. The desired bonds were those of Massachusetts, New York, New York City, Ohio and Pennsylvania. Ibid., Ward to Barings, Apr. 4, 30, May 8, 1848; BPLB, Barings to Ward, Oct. 22, 1842, Aug. 18, 1848; Barings to Hopes, Aug. 6, 1844. 50. Ibid., Barings to Prime, Ward & King, Jan. 3, 1846; Barings to Hopes, Nov. 28, 1843; Barings to Ward, Aug. 3, 1843; Barings to Forstall, Oct 30, 1846; BPOC, Goodhue & Co. to Barings, July 15, 1843; Prime, Ward & King to Barings, Oct. 19, 1843, Jan. 31, Sept. 15, 1846; Purton to Barings, Dec. 17, 1844; Forstall to Barings, July 2, Sept. 4, 1844, July 20, 1845, Jan. 5, 7, Dec. 4, 19, 1847; Ward to Barings, July 13, 1846, Mar. 17, 1848 (enclosure). An example of one type of financial manoeuvring in American securities was afforded by the Barings in 1843-44. They sent to Oelrichs & Lurman a batch of Maryland coupons for account of themselves and clients. The coupons were sold by the Baltimore firm, which invested the proceeds in Maryland bonds and held them a few months for resale at higher prices. In this fashion, when the coupons were selling at 50 in London, by taking advantage of favorable exchange upon occasion, the Barings netted themselves and their clients 90% of the interest due. BPLB, Barings to Ward, Sept. 4, 1843; BPOC, Ward to Barings, Oct. 15, 1844. 51. BPMC, Lavergne (Consolidated Association) to Barings, July 18, Oct. 1, 1840, July. 28, 1842; R. D. Shepherd to Barings, Dec. 24, 1842; Benjamin Story (Louisiana Bank) to Barings, Apr. 29, 1842, May 4, 1843; S. J. Peters (City Bank of New Orleans) to Barings, Mar. 1, 1848; BPLB, Barings to

572

NOTES TO CHAPTER XII

Story, Dec. 15, 1841, June 1, 3, 1842, June 10, 1843; Barings to Lavergne, Dec. 14, 1841, Sept. 2, 1842; Barings to F. Frey (Union Bank of La.), Dec. 1 1 , 1841, Apr. 28, June 9, 1848; Barings to Peters, Apr. 28, May 12, June 16, 23, 1848; Barings to J. W. Zacharie (New Orleans), June i6, 1843; Barings to Shepherd, Sept. 18, 1843, Mar. 4, June 3, 1844; Barings to Lurman, Apr. 18, 1846; Barings to Oelrichs & Lurman, June 3, 1847; Barings to Ward, Aug. 3, 1842, Aug. 3, 1843, Feb. 10, 1844, Sept. 26, 1845, Feb. 3, 1847; Barings to Prime, Ward & King, Aug. 18, 1842, Apr. 3, Sept. 18, Oct. 18, Nov. 18, 1843, Mar. 9, 14, Dec. 16, 1844, Apr. 18, May 16, June 30, Sept. 3, Nov. 18, 1845, May 18, Oct. 3, 19, 1846; Barings to Hopes, Sept. 1, 29, Nov. 24, 1843, Apr. 9, May 30, 1846; Barings to J. G. King, Mar. 3, 1847; BPOC, Prime, Ward & King to Barings, Nov. 15, 1843, Jan. 30, 1844, Jan. 31, Sept. 30, Nov. 14, 1846; Ward to Barings, Feb. 3, 1844 (enclosure) ; Oelrichs & Lurman to Barings, Mar. 28, 1846, May 14, 1847. In the list were bonds of Louisiana, Alabama, Maryland, and other States, and shares of the City Bank. 52. See p. 313, Ch. XI; BPLB, Barings to Lurman, Apr. 18, 1846; Barings to Ward, Nov. 18, 1843, Feb. 10, 1844, Apr. 18, 1845, Jan. 3, July 18, Nov. 18, 1846; Barings to J. G. King, Mar. 3, 1847; Barings to W. Hamilton Merritt, Sept. 3, Dec. 3, 1845; Barings to Purton, Dec. 3, 1846; BPOC, Ward to Barings, Dec. 12, 1845, and enclosures: BPMC, J. E. Sheffield to Barings, Aug. i l , 24, 1845. Among the railroad companies approaching the Barings were the Erie, the Niagara & Detroit (Canada), the New York & New Haven, the Harlem & Albany, and the Mexican Gulf. 53. MHS, Ward Papers, Bates to Ward, Jan. 31, Apr. 26, 1843; Niles' Register, LXIX, p. 416. 54. MHS, Ward Papers, Bates to Ward, Nov. 18, 1844, Jan. 14, 1846; BPLB, Barings to Hopes, Nov. 22, 1844; Barings to Hottinguers, Oct. 21, Dec. 1, 1845, Sept. 19, Dec. 3, 1846; BPOC, Ward to Bates, Oct. 16, 1845. On the French railway mania in the 1840's, the best summary is in Jenks, Migration of British Capital, pp. 140-150, 152-157, and footnotes. Hope & Co. and the Barings bid unsuccessfully for a Hanoverian loan in 1846. 55. BPPD, 1843, An act to make further provision for enabling the Provincial Government to purchase the stock held by private parties in the Weiland Canal; BPMC, W. Hamilton Merritt to Barings, July 31, 1843; W. Curry to Ward, Mar. 10, 1845; Thomas Curry & Co. (Quebec) to Barings, Oct. 10, 1845; John Ross (of Ross, Shuter & Co., Quebec) to Barings, Jan. 10, 20, 1846; James Donaldson & Son (Halifax) to Barings, July 17, 1846; BPLB, Barings to Merritt, May 16, 1842, June 16, Sept. 4, Nov. 3, 1843; BPLB, Barings to W. G. Coesvelt, Feb. 2, 1844; Barings to Ross, Jan. 20, 1846; Shortt Notes, Order in Council, Oct. 3, 1837; Upper Canada Register, nos. 2636, 2639, and 5997. J. G. King said the Bank of Upper Canada was the best account his house had. Both of his firms — Prime, Ward & King and King & Sons — did a "great deal" through the Canadian bank with Glyn, Mills, Hallifax & Co. (BPOC, King to Bates, Jan. 30, June 14, 1847).

NOTES TO CHAPTER XIII

573

The Barings showed some interest in marketing Montreal bonds issued in 1845 i n order to improve the harbor of that city, but the loan was placed in other hands. BPMC, memo, on Montreal debentures, Mar. 29, 1845. 56. BPLB, Barings to Overend, Gurney & Co., Jan. 3, 12, Mar. 9, 1844, Mar. 2, 1847; Barings to Martins & Co., June 12, 1846. 57. MHS, Ward Papers, Bates to Ward, Nov. 18, 1844, Apr. 5 [1846? The letter is in the 1846 folder, though no date is given] ; John Ward to T. W. Ward, May 3, 1847, from London. C H A P T E R XIII 1. The best brief discussion of the causes and nature of the 1847 crisis is to be found in W. T. C. King, London Discount Market, pp. 129-148, though valuable information may be found in D. M. Evans, The Commercial Crisis of 1847-1848 (London, 1848), in Tooke and Newmarch, History of Prices, IV, pp. 1-80, and in Clapham, Ban\ of England, II, pp. 194-216. 2. Forstall thought that the excessive use of documentary bills in the United States was one cause of the crisis. See BPOC, Forstall to Barings, Jan. 18, 1848. A less common deviation from conventional lines in Indian trade was noted by Ward in 1847. American merchants bought goods in Calcutta from the proceeds of drafts on principals in the United States but payable in London. After acceptance in the United States, the bills were forwarded to England for payment. Although such bills were negotiated at lower rates in Calcutta than drafts on London merchant bankers, commission charges for payment were only i ! 4 % in contrast to the 2 % charged on the regular longterm bills issued under regular Far Eastern credits. BPOC, Ward to Barings, June 15, 1847. 3. BPLB, Barings to Grinnell, Minturn & Co., Oct. 19, 1846; Barings to Prime, Ward & King, Nov. 18, 1846. On the indigo crop failure, ibid., Barings to Grinnell, Minturn & Co., Oct. 3, 1846. The barley and oats crops in England were also short in 1846. 4. MHS, Ward Papers, Bates to Ward, Jan. 4, June 23, Nov. 2, 1846. Bates thought free trade "upsetting" unless universal, disliked "Sir Robert Peel's abominable treachery to his party," considered tariff reduction hard on the landed class, and in March, 1846, pointed out that the average amount of failures and bankruptcies in Great Britain had been "near ¿50,000,000 for the past 3 years" {ibid., Jan. 4, Feb. 3, Mar. 18, 1846). 5. BPLB, Barings to Ward, Nov. 18, 1846, Jan. 4, 19, 1847; Barings to Purton, Jan. 19,· 1847; BPOC, Ward to Barings, Jan. 14, 1847; King & Sons to Barings, Mar. 6, 13, Apr. 6, 17, May 15, 1847. Out of the recent shipments the Rothschilds had sent ¿250,000 and the Browns ¿200,000. On cotton, BP, Oct., 1846-May, 1847, passim. 6. BPLB, Barings to Prime, Ward & King, Jan. 4, 1847; Barings to Grinnell, Minturn & Co., Jan. 19, 1847; Barings to Hottinguers, June 3, 1847; Barings to Hopes, Mar. 19, 1847; Barings to Ward, Apr. 3, 1847. By the

574

NOTES TO CHAPTER XIII

Czar's operation) Russian produce would be purchased without export of bullion, which aided both central banks. There are apparently no extant records in the Bank of England regarding the loan to the Bank of France (Clapham, Ban\ of England, II, p. 200 and note). 7. Evans, Commercial Crisis, p. 56; MHS, Ward Papers, Bates to Ward, Apr. 19, 1847; Ward to Bates, Mar. 30, 1847; BPLB, Barings to Purton, Nov. 2, 1846, Jan. 4, 1847. Shares in the French contract were Hottinguers, %ths; Baring Brothers & Co., 4/8ths (i./8th to Purton); and i/8th to the New Orleans broker, D. Fehrman. 8. Ibid., Barings to Grinnell, Minturn & Co., Apr. 19, 1847; Barings to Ward, May 3, July 3, 1847; Barings to Purton, May 3, 1847; Barings to J. C. Burnham, June 1, 1847. 9. MHS, Ward Papers, Bates to Ward, Apr. 19, 1847; BPLB, Barings to King & Sons, Apr. 19, 1847; Barings to Prime, Ward & Co., Apr. 19, 1847; Barings to Grinnell, Minturn & Co., Apr. 19, 1847; Barings to Ward, Apr. 19, May 3, June 18, July 3, 1847; BPOC, King & Sons to Barings, May 11, July 15, Sept. 15, 1847; Ward to Barings, May 28 (and enclosure), Sept. 13, 1847. 10. BPLB, Barings to Ward, July 3, Aug. 3, 18, Sept. 3, 1847; Barings to Grinnell, Minturn & Co., Aug. 3, 1847; BPOC, Prime, Ward & Co. to Barings, May i l , June 30, Aug. 14, 1847; Samuel Ward to Bates, June 1, 1847; Ward to Barings, Aug. 12-13 (enclosure), 1847. 11. BPLB, Barings to Ward, Sept. 18, 1847. On business with other Americans, see ibid., Aug. 13, 1847; BPOC, Ward to Barings, Aug. 31, 1847. The two older partners in Prime, Ward & Co. had left the management of the house to the ebullient Sam Ward. He had accepted large deposits from some merchants, had issued 6 months sight bills to others trading in the Far East, had advanced on and purchased cotton, and had worked extensively an exchange account with Overend, Gurney & Co. in addition to that with Baring Brothers & Co. Although the joint exchange account with the Barings for ,£50,000 had not been confirmed nor had it operated until May, the London partners had become worried about it by June, and Ward revoked the credit on July 19. But the affairs of Prime, Ward & Co. grew worse as remittances of documentary drafts on failed or embarrassed British corn factors piled up with the Barings and Overend, Gurney & Co. Many of the bills were returned to the New York house under protest for nonacceptance. By September 3 the Barings, assuming equal parts of the responsibility for any deficit with J. G. King and Ambrose Lanfear of New Orleans, had interfered for honor of Prime, Ward & Co. on ,£45,000 in bills on Giles, Son & Co. and had induced Overend, Gurney & Co. to honor £55,000 in drafts on itself. Before this news reached America, the New York firm had failed and a special representative was sent to London to untangle its affairs. The Barings felt no serious concern because only the £6,000 was not secured by merchandise or undoubted bills, this amount would probably be reduced by later payments, and only one third of any deficit would devolve upon themselves.

NOTES TO CHAPTER XIII

575

Ibid., Prime, Ward & Co. to Barings, Apr. 30, May 11, June 30, July 31, Aug. 31, Sept. 15, 1847;· Ward to Barings, May 15, July 19, Sept. 1, 13, 15, 1847; J. G. King and A. Lanfear to Barings, Sept. 2, 1847; BPLB, Barings to Ward, May 18, June 3, July 19, Aug. 13, 18, Sept. 3, 1847; Barings to Prime, Ward & Co., June 3, Aug. 18, Sept. 18, 1847; Barings to Overend, Gurney & Co., Sept. ι, 1847; MHS, Ward Papers, Bates to Ward, June 17, 1846, Jan. 18, Sept. 3, 1847; Ward to Bates, Dec. 31, 1846, Sept. 11, 1847. 12. Smith and Cole, Fluctuations in American Business, pp. 93-95, 98, 100, 108-109, 116-122, 125-126, 193; Thorp, Business Annals, p. 124; BPOC, Forstall to Barings, Oct. 13, 1847; Ward to Barings, Dec. 11, 1847, Jan. 27, Feb. 5, 18, 1848, and enclosures; Ward to Bates, Dec. 1, 1847, Mar. 23, 1848; Grinnell, Minturn & Co. to Barings, Nov. 30, Dec. 31, 1847, Jan. 28, 1848; BPMC, John H. Hicks & Co. to Barings, Feb. 9, 1848. In March Ward attributed the scarcity of money in part to the fact that all duties were being paid in cash. 13. BPOC, Ward to Barings, Oct. 29, Dec. 11, 15, 27, 1847, Jan. 31, Feb. 8, 1848, and enclosures; Grinnell, Minturn & Co. to Barings, Oct. 5, 30, 1847; Forstall to Barings, Nov. 3, Dec. 19, 21, 1847; BPLB, Barings to Labouchere & Co. (Rotterdam), Aug. 27, 1847; Barings to Ward, Sept. 3, 1847. Unless consignors of flour paid the difference between $4.00 per barrel and the amount advanced by Grinnell, Minturn & Co., the Barings sold the merchandise at once. For those who paid the difference, the Barings held the shipments for a rise in prices. Since the April tightness and later failures had frightened shippers into converting almost all merchandise into cash before the new season opened, southern cotton factors were relatively untouched by the English stringency in September and October. Although factors were "anxious sellers" in November because of falling prices, British credits were not viewed favorably, and most purchases were made on Continental and American manufacturing account. For example, the Rothschilds' agent was in the New Orleans market during the entire season buying for Genoa, north of Europe, and Russian account. 14. Ibid., Sept. 18, 1847; BPOC, Ward to Barings, Sept. 28, Oct. 14, 23, 29, Nov. ι, 15-16, 29, 1847; Forstall to Barings, Dec. 4, 19, 1847. By October 29 Ward was devoting himself to settling debts, taking cash, and sending specie to the Barings. Browns sometimes asked above the market rate "in order to settle with their importing customers by their own rate." When clients of the Barings having credit balances in London asked Ward to be allowed to draw sight drafts, Ward refused but allowed them to draw at 30 instead of 60 days sight {ibid., Ward to Barings, Oct. 29, 1847). 15. Ibid., Nov. 13, 1847. 16. Ibid., Forstall to Barings, July 16-17, Aug. 2-3, 19, 21, Sept. 1-2, 12, 20, 22, 25 (to Ward), Oct. 13, 27, Nov. 2-3, 6, 15, Dec. 3-4, 17, 19, 1847, Jan. 16, June 6, 1848; Purton to Barings, June 18-19, July r> 3> 19-20, Oct. 12, 1847; BPLB, Barings to Purton, Aug. 3, 1847. 17. Niles' Register, LXXIII, p. 128.

576

NOTES TO CHAPTER XIII

18. T h e Barings reported that at Havre, where Americans did most of their trading with France, a f e w firms had survived the crisis and that all the survivors had suspended cash payments (BPLB, Barings to Grinnell, Minturn & Co., May 5, 1848). On the value of money see Clapham, Ban\ of England, II, p. 429, and W . T . C. King, London Discount Market, p. 163. 19. BPOC, W a r d to Barings, Dec. 30, 1847, Mar. 9, 17, 20, 23, Apr. 4, May 8, 16, June 27, Oct. 3, 1848, and pertinent enclosures; BPLB, Barings to W a r d , Apr. 28, May 31, Aug. 4, 1848; Barings to Grinnell, Minturn & Co., Apr. 20, 1848. On May 31, in spite of many payments made for cotton and securities, W a r d was holding $565,000 of the Barings' capital in the United States. 20. BPOC, W a r d to Barings, Feb. 5, 1848, and enclosure. Some of the best accounts were discontinued as a result of this policy and the lowest point in outstanding dry goods credits, ,£150,500, was reached in December, 1848 (ibid., Mar. 9, 1848, Jan. 8, 1849, a n d enclosures). T h e Browns handled their importing credits thus: credits were granted by the houses in the United States, Brown, Shipley & Co. confirmed them and on receiving the bills of lading accepted drafts at four months date for the cost of the goods, redrew immediately on the American importer at three months sight, entrusting collection to one of the Brown houses in the United States, which would later remit. T h e total commission charged was i ' / i % (ibid., Nov. 29, 1847). 21. Ibid., Jan. 25, Feb. 18, Mar. 20, 23, Apr. 4, 7, 28, 30, May 2-3, 5, 8-9, 22-23, 3 1 . J u n e 3> x9> 26-27, 1848, and enclosures; BPLB, Barings to W a r d , Apr. 20, May 5, 18, June 2, 9, 30, July 7, 21, Sept. 8, 1848; BPMC, R. W . Weston to Bates, May 16, 1848. T h e Barings ordered 45,000 bales purchased and 15,000 consigned. Apparently only 18,157 bales had been purchased by the end of June, though orders were acted upon later in the summer. A m o n g consignors were Goodhue & Co. and the Union Bank of Louisiana. Gracie handled operations in Mobile through his house there and was allowed to compete with Forstall in N e w Orleans as well. In the meantime, by June Forstall had completed purchasing tobacco for Bompard Frères, Genoa, on which transaction the Barings lost $1,810 (BPOC, Forstall to Barings, June 6, 1848). 22. Ibid., Ward to Barings, Jan. 12, 31, Feb. 18, Apr. 17-18, 30, May 2, 22, 28, June 3, 1848, and pertinent enclosures; King & Sons to Barings, Dec. 31, 1847, Jan. 14, 29, 31, Feb. 19, 26, Mar. 9-10, 20, Apr. 4, 8, 19-20, 25, May 1, 9, 16, 24, 30, June 7, 16, July 5, 25, 1848; BPLB, Barings to W a r d , May 5, 1848; Barings to King & Sons, Apr. 20, June 16, July 14, 1848. D u r i n g December and January Goodhue & Co. had drawn on the Barings, remitting shortsight bills and specie to cover, to the extent of ¿13,000. K i n g & Sons sent forward $3,500 on consignment and Edwin Bartlett of Alsop & Co. was allowed to cover an ¿8,000 debt by sending ¿10,000 United States bonds for sale. T h e material in this chapter on the loan of 1848 is largely reprinted f r o m R. W . Hidy, "A Leaf f r o m Investment History," Harvard Business Review, Autumn, 1941.

NOTES TO CHAPTER XIII

577

23. In urging the Barings to do likewise King & Sons estimated that the Rothschilds had invested, at an average premium of 1 % % , approximately $4,000,000 in Treasury notes, $500,000 of which had been converted into 6% bonds of 1867. A portion of these bonds came to the London market. The Rothschilds were also aiding the government in transferring funds to Mexico (BPOC, King & Sons to Barings, Mar. 9, 1848). Peabody had been probably the most active London dealer in American securities since 1842 (M. E. Hidy, "George Peabody," p. 289). 24. BPLB, Bates to Josiah Quincy, Jr., Sept. 21, 1849. 25. In 1847, the Barings commented, "Nobody can have confidence in contracting when he does not know what amount may be wanted nor when there may be another loan" {ibid., Barings to Ward, Feb. 3, 1847). 26. BPOC, King & Sons to Barings, May 2, 1848; Ward to Barings, Dec. 15, 18 (memo.), 19, 1847, June 5, 20, 27-28, 1848, and enclosures; BPLB, Barings to Ward, May 5, 26, 1848; M. E. Hidy, op. cit., pp. 289-290. Corcoran & Riggs was located in Washington, D. C. W. W. Corcoran was the senior partner and maintained very close relations with the Treasury and other government departments throughout the years 1840 to 1854. This firm had taken almost all of the $18,000,000 Federal loan of 1847 ( s e e D N B a n d BPOC, Prime, Ward & Co. to Barings, Apr. 17, 1847). 27. Ibid., Ward to Barings, June 19, July 3, 1848; King & Sons to Barings, July 25, 1848; BPLB, Barings to Ward, June 2, July 7, 14, 21, Aug. 18, 25, Sept. 8, 1848; Barings to King & Sons, July 14, 21, 1848; Barings to Hottinguers, July 8, 1848. Among the subscribers in advance were General Peter Carey of Southampton, Morris Prévost & Co., Thomas Baring, Charles Mills, and Sir John Stuart, and Humphrey St. John Mildmay, of London, Farquhar Jameson of Paris, the Marquis Pallavicino of Genoa, J. B. F. A. Rondeaux of Rouen, J. C. G. de Marignac of Geneva, Julie Delessert of Lausanne, and William Appleton & Co. of Boston. 28. BPOC, King & Sons to Barings, July 25, Oct. 25, 1848; Ward to Barings, June 19, Aug. 6, 1848; BPMC, Louis McLane to Barings, May 12, June 23, 1848; BPLB, Barings to McLane, June 23, July 14, 1848; Barings to King & Sons, Aug. ir, 1848; Barings to Oelrichs & Lurman, Aug. 18, 1848; Barings to Ward, Nov. 3, 20, 1848. The exception was William Appleton. The Barings did not, however, refuse to honor a credit of /ιο,οοο on themselves granted by Corcoran & Riggs to John Parrott against the security of $50,000 U. S. sixes. The reason was that the drafts were not to be issued until satisfactory bill remittances had reached the London house. 29. Ibid., Barings to Oelrichs & Lurman, May 28, 1848; Barings to Ward, Aug. h , 25, Sept. 8, 15, 1848; Barings to King & Sons, June 16, Aug. 25, 1848. Some venturesome investors took advantage of the depreciated price of railway shares to buy at the low rates and thereby to secure high interest rates. 30. Corcoran MSS, Corcoran to J. G. King, July 11, 1848; R. J. Walker to

578

NOTES TO CHAPTER XIV

Corcoran & Riggs, Aug. 2, 5, 1848; Corcoran & Riggs to Walker, Aug. 4, 1848; Walker to Bancroft, Aug. 9, 1848; James Buchanan (Secretary of State) to Bates, Aug. 10, 1848; BPLB, Barings to Ward, Aug. 4, 1 1 , Sept. 1, 15, 22, 29, Oct. 6, Nov. 17, 1848; Barings to Corcoran & Riggs, Sept. 28, Oct. 6, 13, 20, 27, 1848; Barings to Hopes, Oct. 13, 20, 1848; BPOC, Corcoran to Thomas Baring, Sept. 13, 1848; Corcoran & Riggs to Barings, Sept. 27, 1848; Bancroft to Barings, Sept. 27, 1848; King & Sons to Barings, Aug. 16, Oct. 1 1 , 1848; Ward to Barings, Jan. 23 (and enclosure), Feb. 5, 19, 1849. The other takers in September were Overend, Gurney & Co., James Morrison of Morrison, Dillon & Co., George Peabody, and Denison & Co. The sale was made on September 21 and confirmed six days later. John Davis aided Corcoran in the negotiation. Corcoran had refused to sell some of the same bonds to King & Sons in July, and the Barings on Aug. 11 canceled an order given a week previously for a purchase of $200,000 of them. C H A P T E R XIV ι. BPLB, Barings to Oelrichs & Lurman, Feb. 22, May 10, 1850; Barings to Forstall, July 30, 1850; Barings to Ward, Sept. 21, 1849, May 28, 1850, Oct. 10, Nov. 7, 1851; BPOC, Ward to Barings, Nov. 4, 1848, Apr. i6, Nov. 12, 25, Dec. 20, 1850. Although the filibustering expeditions affected the sugar market for short periods, only in September, 1849, did the Barings, who disliked the rumors regarding possible annexation of Canada to the United States, remark that Canadian and Cuban affairs should be considered as influencing decisions about American securities and the granting of credits. 2. Thorp, Business Annals, pp. 124-125, 162-163, 184-185; Smith and Cole, Fluctuations in American Business, pp. 89, 104, 193; Clapham, Ban\ of England, II, p. 429; W. T. C. King, Discount Market, p. 163; BPLB, Barings to Ward, Oct. 1 1 , 1850, Sept. 19, 1851; Barings to- Grinnell, Minturn & Co., 1848-52, on the iron trades; in re losses on coffee in 1850, BPMC, R. W. Weston to Bates, Apr. 2, 1850; on dry goods, BPOC, Goodhue & Co. to Barings, May 20, 1851; Ward to Barings, May 3, 1850, Aug. 5, 1851. The Bank of England rate had descended from 5 % as of Dec. 22, 1847, to 3 % by Nov. 3, 1848, and ruled at 2 λ Α% to 3 % from then to April 22, 1852, when 2 % was the posted rate. American discount rates ranged from 18% to 5 ! ^ % over the period. Market rates for money in London averaged 2/4% in 1849 and 1850, 3 % for 1851, and below 2 % in 1852. 3. Ibid., Feb. 6, Mar. 20, Nov. 7, 1849; Grinnell, Minturn & Co. to Barings, Apr. 30, May 7, 1850. 4. D. H. Leavens, Silver Money (Bloomington, Indiana, 1939), pp. 25-26, 33; U. S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States, 1940 (Washington, 1941), p. 490; BPLB, Barings to Ward, Dec. 27, 1850, July 18, 1851. In England freer trade was conducive to imports. In addition some of the

NOTES TO CHAPTER XIV

579

Continental investors who had sent their funds to England during 1848-50 were now withdrawing their capital. "Hitherto all the gold coming f r o m the U. S. has gone to the Continent, chiefly to France where the stock of specie is enormous & always increasing," the Barings wrote in July, 1851. 5. BPOC, Ward to Barings, Dec. 29, 1850. For other examples, see ibid., Apr. 7, June 17, 1848, Oct. 1, Nov. 6, 1849, May 6, Oct. 15, 1850, Mar. 27, 1851, Jan. 6, 1852. 6. BPLB, Barings to Ward, Oct. 14, Nov. 2, 1849. 7. Ibid., Dec. 19, 1851. See also ibid., May 3, June 7, 1850, Jan. 31, 1851, Oct. 29, 1852. The Barings thought that part of American expansion in business activity could be attributed to the low tariff. 8. BPOC, Goodhue & Co. to Barings, May 29, 1849; Ward to Barings, Mar. 20, Apr. 2, 16, 1849; Ward to Bates, Feb. 16, 1849, and enclosure; King & Sons to Barings, Mar. 6, 1849; Smith and Cole, op. cit., pp. 94, 126, 167, 191, 193; Silberling, "British Prices," p. 233. T h e pressure began in February and ended in April. The accumulation of money in the independent Treasury was cited by some as the cause, while others added the payment of customs duties in cash, the departure of coin with the rush to California, and continued demands from New England for funds. 9. BPOC, Ward to Bates, July 2, 1851; Ward to Barings, Aug. 5, 19, 29, Sept. 2, Oct. I, 28, Dec. 12, 25, 1851; Oelrichs & Lurman to Barings, Aug. 11, 1851; Grinnell, Minturn & Co. to Barings, Aug. 26, Sept. 26, 30, Oct. 4, 8, 17, 24, Dec. 9, 1851; Goodhue & Co. to Barings, Sept. 9, 23, Dec. 9, 1851; King & Sons to Barings, Oct. 11, 24, Nov. 4, Dec. 9, 1851; Margaret G. Myers, The New Yor\ Money Market, 2 vols. (N. Y., 1931-32), I, pp. 138-139; Smith and Cole, op. cit., pp. 94, 126, 167, 193. 10. BPLB, Barings to Ward, Sept. 3, 1847, Aug. 11, Nov. 17, 1848, May 28, Oct. 4, Nov. 15, 1850, Sept. 19, 1851; Barings to King & Sons, Jan. 2, 1852; BPOC, Ward to Barings, Sept. 12, Oct. 29, 1850, July 21, Oct. 1, 29, 1852; King & Sons to Barings, Apr. 4, 1848; Forstall to Barings, Dec. 7, 1849. Rothschilds were interested chiefly as dealers in bullion, exchange, and securities. At this time they also showed some activity as dealers in merchandise but usually avoided commission and credit business in the United States. T h e affiliated Brown houses were the most ubiquitous competitors of the Barings, especially in cotton and exchange. McCalmont & Co. had one or two affiliates in Brazil, one at New Orleans, one at Liverpool, and a close alliance with Gihon & Co. of New York. Mathew Morgan of New York granted the credits on Overend, Gurney & Co., which gave the Bank of Louisiana an unlimited open credit and charged only 14 % commission in 1849. Among the newcomers were the Union Bank, Oriental Bank, Herries, Farquhar & Co., and J. & F. Somes, all of London. 11. The admission of Sturgis as a full partner on January 1, 1851, was two

580

NOTES TO CHAPTER XIV

years earlier than stipulated in his first agreement with the managing partners. Peabody Papers, Peabody to Mrs. Samuel Wetmore, Apr. n , 1851. His father was Nathaniel Russell Sturgis. Among the classmates of Russell Sturgis at Harvard were Josiah Quincy, Jr., and Ralph Waldo Emerson. Among his acquaintances were Lafayette, S. T . Coleridge, Hawthorne, Dickens, Browning, Longfellow, Thackeray, Lowell, Daniel Webster, Prescott, Motley, Fanny Kemble, and many other literati and artists. Julian Sturgis, From Booths and Papers of Russell Sturgis (Oxford, n. d.), pp. 74, 76-78, 210-211, 219-236, 254. 12. On January 1, 1853, Price's share in the Liverpool house was 3/24ths. The remaining 2i/24ths belonged to Baring Brothers & Co., London, whose share of the profits for the preceding two years amounted to /25,90o at that time. The partnership contract had been renewed on Jan. 1, 1851, for three years. BPLB, Barings to Price, Sept. 29, 1851; Barings to Liverpool house, Jan. 12, 17, 1853. 13. BPOC, Ward to Barings, Mar. 26, 1845, June 27, July 11, Oct. 9, Nov. 13, 15, 20, 1848; J. G. King to Bates, Dec. 4, 1848; Ward to Bates, Feb. 2, June 24, July 17, 1849, Oct. 7, 1850, Mar. 31, 1851; S. G. Ward to Barings, Mar. 14, 1851; BPLB, Bates to Ward, July 14, Aug. 18, Oct. 6, Dec. 1, 1848; Barings to Ward, Sept. 22, Oct. 27, 1848, Oct. 26, 1849; Barings to William Sturgis, Oct. 20, 1848; Barings to S. G. Ward and F. H. Story, Apr. 10, 1851; MHS, Ward Papers, Diary, May 15, June 13, 21, 1849. In Aug., 1848, Bates said that Ward's retirement involved to the Barings the whole issue of granting credits to Americans, "for whenever the question of credits has been discussed we have always come to the same conclusion as that expressed by Mr Sturgis & Mr Appleton and as there is no other Τ W Ward to be found in the world the question what to do will puzzle us a good deal. Whether we shall decide to grant no more credits or reduce the amount I am not able to say. but in this we are perfectly agreed, that we shall never find any one to manage the business as well as you have done, nor any one in whom we & all the world has such entire confidence." When Ward agreed to stay on after 1849, the Barings gave him a candelabra worth /300 and a credit on the books of the house for ¡£300. Among those considered as a replacement for Ward were W. H. Aspinwall, R. B. Minturn, Russell Sturgis, John A. Stevens, and George Curtis, cashier of the New York Bank of Commerce. In April, 1851, the Barings gave S. G. Ward and Story power to issue credits in case of T . W . Ward's death. On information from S. G. Ward, see BPPD, passim, especially BPLB, Barings to Ward, Dec. 14, 1849, July 26, Sept. 13, 1850; BPOC, Ward to Barings, Aug. 22, 1848, Jan. 1, Oct. 13, 1849, July 8, Dec. 12, 1850, Jan. 12, 1852, and enclosures; S. G. Ward to Barings, Jan. 7, 13, 19, Nov. 23, 1852; S. G. Ward to Thomas Baring, Dec. 28, 1851; BPMC, Jan. 2, 1850, statistics on various imports and exports.

NOTES TO CHAPTER XIV

581

14. B P L B , Barings to Forstall, Oct. 20, 1848; B P L B , Barings to Ward, Oct. 25, 1848, Oct. 12, 1849; BPOC, Forstall to Ward, June 23, 184g; Forstall to Barings, Sept. 22, 1849; Barings to Forstall, Oct. 1 1 , 1849; Ward to Bates, July ι , 1849. Forstall went to England, Holland, and France in the autumn of 1849. His 1849-50 contract was signed in London on Oct. 1 1 . T h e Barings made agreements with him annually in order to restrain his egotism and ambition. They feared his expansive proclivities, though trusting his judgment on cotton, tobacco, and banking. He was an intimate friend of W. W . Corcoran and Zachary Taylor, which aided Ward in his negotiations with the Federal government on the Mexican indemnity payments. Forstall was paid ¿5,000 for his services from Aug. 1, 1847, t 0 I u ' y 3r> from which sum he had to pay his rent and the salaries of bookkeeper, cashier, and clerks. In his new contract he was paid a commission of i 4 % on the exchange account and Vi% for advances on produce. On Barker Brothers & Co., see B P L B , Barings to Ward, Mar. 14, May 9, 1 8 5 1 ; BPOC, Ward to Barings, Apr. 14, May 22, 1851. ' 15. B P L B , Barings to Ward, Sept. 29, Nov. 1 , 3, 1848, Jan. 1 1 , May J , July 19, 1850; BPOC, Ward to Barings, Nov. 1, 14, Dec. 25, 1848, Jan. 23, Nov. 12, 1849, Jan. 27, 1851; Corcoran Papers, Corcoran to Ward, Feb. 12, 1849. T h e Rothschilds tried to get the government accounts from the Barings in 1851. 16. B P L B , Bates to King, June 30, 1848; BPOC, Ward to Barings, Dec. 2, 12, 1848, Feb. 6, 1849, Feb. 4, Nov. 4, 1850, Sept. 22/23, 1851, and pertinent enclosures; Ward to Bates, Feb. 2, 5, 1849, and enclosures. T h e partners in the new Goodhue & Co. were Peletiah Perit, Robert C. and Charles C. Goodhue (sons of Jonathan), R. W. Weston (nephew of Bates), and W. R. Gray, son of William Gray, the latter two on advice of Ward and the Barings. Calvin Durand set up a separate firm of his own. Exclusive of £10,000 for exchange operations, Goodhue & Co. enjoyed credits of ¿56,000 and ¿64,000 on the Barings as of Feb. 4 and Nov. 4, 1850, respectively. The new firm, as had the old, received much advice from both Boston and London. In 1851 Ward noted that "your counsel" in Boston, Benjamin R . Curtis, had been appointed to the Supreme Court of the United States. 17. Bates visited Baltimore, Washington, N e w York, and Boston in the second quarter of 1849. In the same year Charles Baring Young was in San Francisco, which he described as a "nasty, dusty, chilly, variable, but generally blowy place," with a climate "positively not good" (BPOC, C. B. Young to E. E. Mackintosh, Sept. 29, 1849). Partly for his health, James Price disembarked at N e w Orleans in 1850, traveled up the Mississippi and Ohio valleys and thence to the eastern seaboard via Canada. His reports on railroads in the Old Northwest and Canada were later very valuable in decisions of the house. E. C. Baring went to Mexico and South America in 1849 and returned to the United States the next year. Henry B. Mildmay visited Baltimore, the Middle West, and Canada in 1852-53. Thomas Baring personally

582

NOTES TO CHAPTER XIV

investigated the railroad potential of the East Central States and commercial conditions along the Atlantic seaboard in 1852. 18. Ibid., Oct. 23, 1848; BPLB, Barings to Ward, Oct. 20, 1848, Oct. 12, 19, 26, 1849, May 24, Oct. 11, 18, Nov. 1, 1850. A very large proportion of the list of holders of dry goods credits were not forwarding through the Liverpool house in 1848, but the number of evaders of that request by the Barings was smaller in 1850. The practice of Brown, Shipley & Co. was always upheld as an example in the matter of gaining commissions by forwarding dry goods, but emulation of it was not easy when the financing was done in London. 19. BPMC, Lee & Higginson to Bates, Aug. 22, 1848; William Sturgis to Bates, Apr. 12, 1850; Gilmore, Blake & Ward to Barings, May 13, Sept. 30, Nov. 5, 1850; Blake, Ward & Co. to Barings, Feb. 20, Apr. 8, Dec. 30, 1851; George Baty Blake to Barings, July 21, Aug. 9, 1852; Robert Bell to Barings, July 15, 1848; Jacob Little to Bates, Feb. 20, 1849; Duncan, Sherman & Co. to Barings, Aug. 13, 1851; BPLB, Bates to Lee & Higginson, Sept. 8, 1848; Barings to Duncan, Sherman & Co., Sept. 30, 1851; Barings to Blake, Ward & Co., Mar. 14, 1851; Barings to Ward, Mar. 8, May 17, Oct. 18, 1850, June 27, 1851, Aug. 10, 27, 1852; BPOC, Oelrichs & Lurman to Barings, Jan. 4, Feb. 18, 1850, and passim to Oct., 1852; Ward to Barings, Mar. 10, Aug. 22, Oct. 18, 23, Dec. 12, 1848, Feb. 5, Nov. 21, 1849, Feb. 4, 1850, Feb. 20, July 8, 15, 1851, Nov. 24, 26, 1852, and enclosures; King & Sons to Barings, July, 1848Oct., 1852, and BP, passim, for the joint exchange account with King & Sons; Peabody Papers, John Cryder to George Peabody, Oct. 24, 1848. The credit to Goodhue & Co. was reduced to £5,000 during the 1847-48 pressure, raised to ¿10,000 by June, 1848, reduced again to £5,000 when Jonathan Goodhue died, and lifted to £10,000 once more in February, 1849. Jacob Little approached Cryder for a credit account with Peabody the day after Ward had closed his account. Cryder was lukewarm. In 1850 Little finally achieved a London connection with Overend, Gurney & Co. The Barings gave an open credit of £20,000 for a joint exchange account with Curtis, Beals & Fearing of New York in August, 1852, but it was terminated, almost before being operated, when Curtis retired in the following November. The Barings had never heard of Drexel & Co. Ward's opinion was based almost exclusively upon Abraham Barker's letter of July 12, 1851, to him. The Philadelphian described Drexel & Co. as bankers and brokers — "the largest Bank note Brokers in this city having almost monopolized that business by under-mining other dealers by low rates of discount." Their "whole system for many years," said Barker, "has been to underbid until at this time the difference between buying & selling is reduced to the very smallest fraction. The effect of this has been to give them a most extensive correspondence throughout the United States and a larger Counter business which notwithstanding the low rates yields in the aggregate very considerable profit." He estimated that the worth of the Drexels might reach $200,000 and character-

NOTES TO CHAPTER XIV

583

ized the father as grasping and litigious, though the sons were considered more amiable. In February, 1848, Forstall reported that the "Canal Bank," with the private banking houses of James Robb & Co. and Samuel Nicholson, "monopolised to a considerable extent the whole exchange of the country Domestic & foreign" in so far as N e w Orleans was concerned. Robb & Co. had a joint exchange account with the Liverpool Bank obtained through Moon Brothers. The Canal Bank drew either direct on the Rothschilds in London or via N e w York, where Rothschild's agent, Mathew Morgan, endorsed the bills. Some remittances were sent by the Canal Bank direct to London, some to N e w York for collection and remittance of proceeds to London. Forstall thought it had been reckless during the 1848-49 cotton season and would have gone bankrupt had not cotton prices stayed high. During that year the bank had an arrangement with Morgan by which he received ! 4 % "on all Bills remitted him for collection, & the power of using $500,000 in Wall St., retaining for his services one half of the profits realised." 20.· On Ward's remittance account, see BPOC, Ward to Barings, May 14, 1849, Aug. 6, Sept. 10, 1850, Jan. 20, 1851, and enclosures; B P L B , Barings to Ward, June 2, 1848, July 12, 1850, Jan. 10, Aug. 19, 1851. In July Ward was authorized to draw up to £100,000, if the premium on sterling was 1 0 o r £50,000 if the premium was 10V2. Ward had $490,000 invested in the United States by September, of which $50,000 was to the city of Boston. Ward was to draw himself, if the bills were at 3 days sight as preferred, but have others draw if buyers insisted upon 60 days sight drafts. A receipt was to be given by Ward to the agent of Thompson & Forman, British ironmaster with £120,000 due him from Americans in 1848, for money turned over. The receipt was to express the amount in sterling payable by the Barings 60 days after its arrival in England. For operations in N e w Orleans, see BPOC, Forstall to Barings, Feb. 28, Dec. 30, 1848, Jan. 6, Feb. 24, June 18, July 7, 12, 14, Aug. 3-4, Nov. 30, Dec. I, 7, 1849, Jan. 25, 27, Apr. 27, 1850; Ward to Bates, June 18, 1849, Jan. 7, 1850; Ward to Barings, Nov. 1 2 - 1 3 , 2 I > Dec. 18, 24, 1849, Nov. 18, 1851, and enclosures; Goodhue & Co. to Barings, Nov. 14, 1849, Jan. 8, 1850; B P L B , Barings to Ward, Oct. 19, Dec. 14, 28, 1849, Feb. 8, 1850; Barings to Forstall, Jan. 10, Feb. 8, May 24, 1850; BPMC, Fred. Frey to Barings, Apr. 6, 1849. The Mexican indemnity payments may be followed in B P L B , Barings to Ward, June 23, Aug. 25, 1848, Nov. 2 1 , 1 8 5 1 ; BPOC, Ward to Barings, Dec. 3, 1848, July 26, Aug. 6-7, i l , 17, 1850, Nov. i8, 1851, Jan. 19, Feb. 17, 20, 24, July 16, 1852, and enclosures; and BP, passim, 1848-52; M H S , Ward Papers, Diary, Aug. 6, 3 1 , 1850. In view of the criticisms in the newspapers and the complexity of the operations, it is to be hoped that an article upon the payment of the Mexican indemnity will soon be written. For the 1849 operation a gain of £35,792 was divided, and for 1851 the amount was £29,294, or about 3 1 / 3 % of the total funds transferred. 21. BPOC, Ward to Barings, May 5, 8, June 12, Oct. 3, 1848, Aug. 1, 1850,

584

NOTES TO CHAPTER XIV

Oct. 5, 1852; K i n g & Sons to Barings, May 2, 1848, July 3, Aug. 26, Oct. 27, Dec. 16, 1851, Feb. 6, 1852; Goodhue & Co. to Barings, Aug. 28, Oct. 9, 1849, Jan. 28, 1851, Feb. 17, 1852; Forstall to Barings, Dec. 7, 1849; B P L B , Barings to K i n g & Sons, May 18, June 23, 1848, Aug. 8, 1851, Jan. 2, 1852; Barings to Ward, May 26, 1848, May 17, 1850, Sept. 19, 1851, Aug. 10, 1852; Barings to Goodhue & Co., Sept. 21, 1849; Barings to Charles Klein, Vienna, June 3, 1848; BPMC, Gilmore, Blake & Ward to Barings, May 13, 1850; BPOC, Watts Sherman, Cashier of the Albany City Bank, to Barings, Nov. 15, 1849; BPPD, May 1, 1848, copy of traveler's credit form and receipt. The total commission in 1847 to the Barings on the general account of King & Sons was only £So. Gilmdre tried to persuade the Barings to do the business of his house for ! 4 % when the account was first opened. In permitting the 1 / 3 % rate the Barings expressed the opinion that only by a low commission could a Boston house operate profitably. In 1848 the volume of traveling credits granted by Ward was under ¿ } 0 , 000 at any one time and the labor involved for the Barings was large. T h e partners felt it necessary to entertain American travelers and to accord them every courtesy. Also the letters of credit had to be made out, and arrangements for honoring the drafts thereunder had often to be made with a score or more houses on the Continent. Ward suggested raising the commission charged to 2 or 2'/2%. T o that his principals objected, even though they often were unable to earn the 4 % interest paid on the deposits made by the traveler; they said there was a "great advantage in having the world" with them, even though it involved "great trouble." King & Sons suffered most from the decision of the Barings in September, 1851, to charge 1% on all credits to travelers. Up to that time the London house had charged the N e w Yorkers only the normal Vi% for accepting and paying. Inasmuch as K i n g & Sons normally charged travelers iVz%, including the commission of the Barings, when cash was paid in, and 2 % when securities were deposited or a guarantee given, the new rate raised the total figure to 2 % and 2'/2 % . These rates were at least 100% higher than those of Duncan, Sherman & Co., which charged % % and graduated upward according to where drafts were negotiated, for the same service. Thereupon King & Sons proposed to the Barings that neither firm charge any commission for credits to travelers, relying for revenue upon gain from deposits or undiscounted bills, and from exchange operations with the accounts. T h e Barings, still trying to avoid such cutthroat competition, countered with a suggestion that King & Sons charge 1 % , as Ward and Blake, Ward & Co. did, upon the agreement by the London house to take only Yt% as its share. There the matter rested during 1852. 22. BPOC, Ward to Bates, Dec. 3 1 , 1845; Ward to Barings, Dec. 2, 15, 1851, Mar. 30, 1852; King & Sons to Barings, July 19, 1848; Grinnell, Minturn & Co. to Barings, Dec. 16, 1851, Feb. 17, 1852; BPMC, Blake, Ward & Co.

NOTES TO CHAPTER XIV

585

to Barings, Apr. 8, 1851; BPLB, Barings to Ward, Mar. 8, 1850, Oct. 10, N o v . 14, Dec. 16, 1851, Apr. 20, 1852; Barings to Blake, Ward & Co., Mar. 14, 1851, Jan. 27, 1852; Barings to K i n g & Sons, Oct. 10, 1851; Barings to Grinnell, Minturn & Co., Nov. 25, Dec. 26, 1851, Jan. 6, 27, June 25, 1852. T h e Barings authorized Blake, W a r d & Co., Hayward & Dorr, and K i n g & Sons to draw small bills at one to three days sight without grace and to print such drafts on paper different in color from their normal bills. T h e drafts were payable either at Baring Brothers & Co., Liverpool, or at David La Touche & Co., Dublin. A t the suggestion of the Barings, Grinnell, Minturn & Co. ventured into the "troublesome but profitable" business of selling small bills, but found it more troublesome than profitable and ceased sales after six months. Correspondents of the Barings had sold a substantial number of small bills prior to 1845, but by the end of that year Harnden & Co. had all but monopolized the market. W a r d thought Harnden & Co. had worked through brokers and Catholic priests to win dominance in the field. Between 1845 and 1851, clients of the Barings still did some business, especially K i n g & Sons, which was ordered to buy in all small bills and remit them on the joint exchange account. Blake, Ward & Co. followed the same practice. K i n g & Sons charged 1 % for drawing the small bills, and the Barings charged their normal rate for accepting. Ward's suggestion that Barker Brothers & Co., Philadelphia, should be authorized to issue small bills was apparently not followed by his principals. 23. B P O C , Grinnell, Minturn & Co. to Barings, Dec. 26, 1848, Mar. 5, May 7, A u g . 6, 1850, Feb. 25, Dec. 2, 1851; William Phillips to Grinnell, Minturn & Co., Mar. 21, 1851; Ward to Barings, Oct. 8, Nov. 13, 1849, Dec. 29, 1850; BPLB, Barings to Grinnell, Minturn & Co., Apr. 12, May 24, 1850, Jan. 31, June 20, Nov. 25, 1851, Apr. 23, 1852; Barings to W a r d , Nov. 30, 1849. Paulsen, the first sub-agent in the Rhineland, received a 5 % discount from steamship owners on the Rhine. H e was forced to refund those gains and was replaced by one Charles Ahlborn. These agents were paid 1 0 % on the net amount paid to the packets by the emigrants, while Havre packets paid only 6 % on the gross amount. T h e main passenger agents were paid 1 0 % in both London and Havre. T h e facts set forth above suggest that the statement in Albion, Rise of New Yor\ Port, p. 340, that "packets did not seek immigrant business to any extent" does not apply to the Havre and London lines in the 1840's and I85O'S. 24. B P O C , Grinnell, Minturn & Co. to Barings, Nov. 12, Dec. 31, 1847, Jan. 28, June 7, July 13, 19, A u g . 22, 25, Sept. 13, Nov. 28, 1848, Jan. 9-10, 22, 1849, Oct. 23, Nov. 26, 1850, June 24, July 8, 22, A u g . 18, 26, Oct. 27, Nov. 25, Dec. 16, 23, 30, 1851, Jan. 6, Mar. 2, 6, 10, 19, 29, Apr. 13, 27, May 4, 25, June 22, 29, A u g . 27, Sept. 4, 14, 1852; Oelrichs & Lurman to Barings, Dec. ι, 1851, Jan. 12, Feb. 9, Mar. 8, 22, Apr. 19, May 3, Nov. 15, 1852; W a r d

586

NOTES TO CHAPTER XIV

to Barings, June 17, July 18, Aug. 22, 1848, Feb. 20, 1849, June 6, Aug. 30, Oct. 28, Nov. 14, 1851, Sept. 21, Nov. 2, 26, 1852; BPLB, Barings to Grinnell, Minturn & Co., May 19, June 2, Aug. 25, 1848, Apr. 12, Oct. 10, 1850, July 4, 17, Aug. 5, 1851, June 8, Sept. 7, 1852; Barings to Oelrichs & Lurman, Nov. 13, 1851; Barings to Ward, June 16, Oct. 25, 1848, May 9, Sept. 12, Oct. 14, 3 1 , Nov. 7, 21, 1851, Apr. 20, 23, Oct. 15, Nov. 26, 1852; Barings to Davis, Brooks & Co., June 25, 1852; Barings to Benjamin T . Reed, treasurer, Bay State Iron Co., Boston, Oct. 22, 1852; BPMC, B. T. Reed to Barings, Sept. 2 1 , 1852; Fullerton & Raymond to Barings, Feb. 20, 1849; Farmer & Rogers (Boston) to Barings, Oct. 21, 1850. Imports of pig iroa into the port of New York rose from 17,371 tons in 1846, to 32,175 in 1847, and then jumped to 65,058 in 1848. Ward reported in 1848 that New England consumed about 50,000 tons of pig iron per year, of which one-third usually came from Scotland. American pig iron, he said, was preferred for heavy shafts. Grinnell, Minturn & Co. made the suggestion that the Weardale bars be hammered because the Swedish bars were, and they had such a reputation that rolled iron, even if of superior quality, could not command such a good price. Transy Crown bars sent by the Barings in 1851 and 1852 proved very irregular in quality, to the embarrassment and loss of both Grinnell, Minturn & Co. and the London house. In 1848 the Barings persuaded Grinnell, Minturn & Co. to reduce its total commission for selling and del credere from 5 % to 3 Í 4 % . Inasmuch as the Barings made nothing out of the operation, in 1851 they tried to get the New York house to come down to 3 % but met a firm refusal because commissions of Vi% to brokers could not be evaded. Fullerton & Raymond, which specialized in pig iron sales in both Boston and New York, when it made advances and guaranteed payment charged British consignors 5 % . Thompson, Lapham & Co., whose rates won the Barings' Boston bar iron account from Josiah Bradlee & Sons in April, 1848, charged 5 % but returned i ' A % for selling and ix/i°/o del credere, with Ward making the collections on the notes taken. Credits extended to Boston and New York purchasers varied from 4 to 8 months, usually in the form of promissory notes, but Oelrichs & Lurman was asked to give no credit longer than 6 months. 25. BPOC, Grinnell, Minturn & Co. to Barings, Jan. 13, 1848; Padelford, Fay & Co. to Barings, July 1 1 , 1849; Goodhue & Co. to Barings, Mar. 5, 1850; Ward to Barings, Apr. 30, July 23, Sept. 24-25, Oct. 1, Nov. 12, Dec. 3, 1849, Jan. 8, Mar. 4, 30, 1850, Dec. 25, 1851, Jan. 15, Feb. 4, 1 1 , 1852, and enclosures; BPLB, Barings to Ward, Dec. 1 1 , 1848, Sept. 7, Nov. 16, 30, Dec. 14, 1849, Dec. 5, 1851, Feb. 10, 1852; Barings to Erastus Corning & Co., Dec. 1 1 , 1848; Barings to Davis, Brooks & Co., June 17, 1852; Barings to Padelford, Fay & Co., Sept. 7, 1849; Barings to Grinnell, Minturn & Co., Nov. 8, 1850, July 4, 1851; Barings to Goodhue & Co., Mar. 22, 1850; Barings to Thomas Swann, President of the B. & O., Oct. 12, Nov. 30, 1849, Aug. 30, 1850; BPMC,

NOTES TO CHAPTER XIV

587

Davis, Brooks & Co. to Barings, Aug. 30, 1848-Aug. 5, 1 8 5 1 ; John Clarke, agent in England of Corning & Co., to Bates, Oct. 23, 1849; "Memo, of some of the principal Stockholders in the Northern Rail Road N e w Y o r k — residing in Boston," at end of 1849 folder; copy of Barings to Swann, Dec. 14, 1849; copy of contract between the Barings and Thompson & Forman for the B. & O. rails, Dec. 1 1 , 1849. In August, 1848, Davis, Brooks 8c Co. made the comment that "of late" some New Y o r k merchants had taken contracts at fixed rates with railroad companies for "large" purchases of rails from ironmasters for delivery over "relatively" long periods of time — as long as two years. In 1851 and 1852 that N e w York firm ordered for its own account at least 2,500 tons and 4,000 tons, respectively. Padelford, Fay & Company bought rails for Georgia State, Muscogee, Western & Atlantic, Central, and Montgomery & West Point railways as well as the Southwestern. It also occasionally bought rails — 1,000 tons at one time in 1849 — on its own account. A t the same time it ordered 3,100 for the Southwestern and the Barings made the purchase from Guest & Co., ironmaster, at X4.10. The Barings accepted drafts at 4 m / d from Guest & Co., charged interest from the date of payment of the bill, and received its funds from Padelford, Fay & Co., which was paid by the railroad company for the rails upon delivery. Normal charges by the Barings were Vi% for accepting, 2'/ 2 % for purchasing, and 5 % interest. Because many correspondents of the Barings were investors in the Northern Railroad (Ogdensburg) and the company had been unable to dispose of its bonds in 1849, Ward agreed that his principals would accept Guest & Co. drafts at 4 m / d to the extent of ¿10,000 and would wait six months after maturity of the drafts for reimbursement. T h e conditions were ( 1 ) 5 % interest on the sum advanced, (2) the signature of several leading officers of the company on a promissory note, and (3) the deposit of the 7 % bonds of the company as collateral at the rate of $ 1 2 5 for every $100 of the debt, besides the normal commissions for accepting and purchasing. By 1852 competition in financing and purchasing of rails was strong. George Peabody, as" well as other merchant bankers, was very active. Some ironmasters (Bailey Brothers & Co., for example) had dispensed with bankers by authorizing American firms (e.g., Wainwright & Tappan, Boston) to make contracts to deliver rails direct to railroad companies. A revealing letter as to conditions in the trade in rails was addressed to Goodhue & Co. in 1850. It stated that some ironmasters were shipping rails on consignment from Newport in Wales at ¿ 5 . 1 0 per ton, freight at 1 2 shillings per ton, and insurance at 5 % . Freight from Liverpool to Quebec was 9 to 10 shillings per ton. Insurance rates were 5 % during the winter, 4 % in April, and 3 % in May and June. 26. B P L B , Barings to Grinnell, Minturn & Co., May 19, Aug. 1 1 , 18, Oct. 6, Nov. 10, 1848, Mar. 8, Nov. 8, 1850, June 24, Aug. 1, 8, Sept. 5, Nov. 7, 1851,

588

NOTES TO CHAPTER XIV

Jan. 23, 1852; Barings to Oelrichs & Lurman, Aug. 18, Nov. 17, 1848; Barings to Liverpool affiliate, June 4, 6, 1851; Barings to Ward, Aug. 18, Oct. 6, Nov. 10, 1848, May 28, Aug. 19, Sept. 10, Oct. 18, 1850, Aug. 1, 8, 1851, May i8, 1852; BPOC, Grinnell, Minturn & Co. to Barings, June 7, July 1 1 , 19, Aug. 8, Oct. 25, 1848, Feb. 6, Aug. 8, 14, 21-22, Oct. 3, 1849, Apr. 30, May 7, Aug. 13, Sept. 6, 1850, July 8, Aug. 18, 1 8 5 1 ; Ward to Barings, Sept. 6, 1848, Aug. 3 1 , 1850. Durant, Lathrop & Co. in 1848 made up to 5 0 % gain on maize consigned to the Liverpool house, and the young N e w York firm of Weston & Gray made between £2,000 and ,£4,000 on corn and cotton, "which is making money too fast," said Bates ( B P L B , Bates to Ward, Aug. 18, 1848). Advances on whale and sperm oil were made to R. W. Hathaway, W . D . Tower, and Abraham Ashley of N e w Bedford, and to Sam Allen, R. P. Lee, and Ed. K i n g of Newport. The agent for advances in N e w South Wales was Simeon Wilkinson, Jr. Samuel G. Ward's visit and report in August, 1850, on Nantucket and N e w Bedford held out little promise for expansion in the receipts of whale products by the Barings. Tallow was sent from the United States, but the Russians consigned 40,000 casks to London late in 1851 under an understanding, not stated to be with the Barings, to hold it off the market six months if necessary. Losses in England from "every branch of foreign business" were heavy, the Barings told Grinnell, Minturn & Co. on Jan. 23, 1852, adding, "but the masses are well employed, and in a comfortable position." 27. B P L B , Barings to Goodhue & Co., Oct. 12, 1849, Dec. 30, 1853; Barings to Grinnell, Minturn & Co., July 2 1 , 28, 1848, Sept. 12, Oct. 10, Nov. 14, 2 1 , 1851, Jan. 23, Feb. 6, May 14, 1852; Barings to Ward, Sept. 1 , 1848, June 7, 1850, Sept. 10, 1852; Barings to J. C. Burnham & Co. (Havana), May 14, 1852; Barings to Storey, Spaulding & Co., May 4, 1852; Barings to Oelrichs & Lurman, Dec. 13, 1850, Sept. 19, 1 8 5 1 ; Barings to Forstall, June 16, 1848, June 20, 1850; Barings to Gisborne & Co., Apr. 2 1 , 1851, Sept. 8, 1852; Barings to Stieglitz & Co., Nov. 2, 1849; Barings to Hottinguers, June 6, Dec. 26, 1850, Feb. 6, 1851, Aug. 28, 1852; BPOC, Grinnell, Minturn & Co. to Barings, Aug. 8, 16, Sept. 5, Dec. 19, 1848, Sept. 26, 30, Oct. 4, 14, 17, 22, Dec. 2, 1851, Feb. 10, Apr. 27, 1852; Oelrichs & Lurman to Barings, Sept. 1 1 , Oct* 9, Nov. 27, Dec. 9, 1848, Jan. 6, Feb. 3, 24, Aug. 1 1 , Oct. 6, Nov. 24, 1851, Oct. 1 1 , 1852; Ward to Barings, Apr. 16, 1849; Forstall to Barings, Feb. 23-July 20, Dec. 14, 1849. Forstall bought another 300 hogsheads of tobacco of inferior quality but resold it in the N e w Orleans market. The sugar was ordered for its own account immediately after the news of a filibustering expedition to Cuba had caused a jump in the price in England. The tea operation was entirely on account of the London house and it took % of the indigo venture with Gisborne & Co. The Barings also had joint exchange accounts with Stieglitz & Co. and Hottinguer & Co. 28. BP, Oct., 1848-Sept., 1852, passim. Cotton is mentioned in almost every letter between the Barings and Ward. Total receipts by the Liverpool house

NOTES TO CHAPTER XIV

589

were not given for any of the years. Moreover, Forstall in some years sent as high as 2,000 bales per month to the Havre market. The total purchased in the United States for the Barings in 1848-49 to April 30, 1849, was 42,000 bales. Forstall had expended $962,576 for purchases and $70,293 for advances (BPOC, Forstall to Ward, Sept. 22, 1849). 29. Insurance against fire was cheaper in the United States than in England, but most American companies refused to issue separate policies for marine risks and fire risks. Some New York companies would insure against fire alone, but they were not the stronger ones. Effecting insurance in England removed much detail from the Boston office. BPLB, Barings to Ward, Oct. 19, Dec. 14, 1849; BPOC, Ward to Barings, Nov. 6, 13, 21, 1849, June 24, 1851, Mar. 30, 1852. 30. BPLB, Barings to Ward, Oct. 24, 1848. Isaac Moses & Brother, N. Y., had less capital than the ¿50,000 credit Ward issued to the firm (BPOC, Ward to Barings, Sept. 25, 1850, and enclosure). On permission to issue 90 days sight drafts, see BPLB, Barings to Ward, May 16, 1851; BPOC, Ward to Barings, May 28, June 2, 1851. For account of Grinnell, Minturn & Co., R. B. Minturn was given a credit of ¿25,000 to be employed by drafts at 4 months date to purchase cotton goods in Manchester for export to China (BPLB, Barings to Ward, June 9, 1848; BPOC, Grinnell, Minturn & Co. to Barings, June 27, 1848; Minturn to Barings, July 13, 1848). On extensions of credits in England — ibid., June 2, 1848, Apr. 12, Sept. 20, Dec. 6, 1850. In re W. D. Lewis, Enoch Train, Perkins & Higginson, and William Piatt & Sons, ibid., Oct. 26, Nov. 12, 1849, June 21, Oct. 4, Dec. 20, 1850, Sept. 21, Oct. 22, 1852; BPOC, Ward to Barings, Nov. 12, Dec. 18, 1849, Sept. 17, 1850, Jan. 10, 1851, Oct. 13, 1852, and pertinent enclosures. For the proposals of King & Sons — ibid., Mar. 27, 1851, and enclosures; King & Sons to Barings, Mar. 25, 1851; BPLB, Barings to Ward, May 9, 1851. Ward's principals refused credits on joint account on the grounds that they already had all the best houses in New York, that documentary bills would have to be used, that they had no desire to be saddled with produce when prices declined, and that the granting of joint credits by King & Sons might increase the responsibilities of that house beyond the limits desired. The Barings insisted, even with the new firm of Howland & Aspinwall (Jan. ι , 1849), upon knowing the exact liability of the limited partners. In Europe the Barings granted no credits to firms with commandite capital. BPOC, Ward to Howland & Aspinwall, Aug. 3, 1848; Howland & Aspinwall to Ward, Aug. 4, 1848; W. H. Aspinwall to Bates, Aug. 22, 1848; Ward to Barings, Oct. 18, Nov. 21, 1848, and enclosures; BPLB, Bates to W. H. Aspinwall, Sept. 8, 1848. All Far Eastern credits were still issued for twelve months, those to Rio and the Mediterranean for six months. BPMC, copy of a list of credits granted from June 25, 1849, to Feb. 2, 1850. Until 1849 the Barings charged the postage to all recipients of their Prices

590

NOTES TO CHAPTER XIV

Current. As the partners remarked, to send them free would cost the house £ 150 to £200 per year; since they were never sent unless asked for, why should not the receivers pay the postage! Ward thought the practice beneath the dignity of the House of Baring, had all the Boston lot forwarded to him for distribution, and suggested that Goodhue & Co. perform the same function in New York. BPLB, Barings to Ward, Sept. 28, 1849; BPOC, Ward to Barings, Oct. 15, 1849. On remittance rules — ibid., July 26, Oct. 30, Nov. 4, 1848, Sept. 17, 1849, Apr. 26, 30, 1852, and pertinent enclosures; BPLB, Barings to Ward, Sept. ι, Oct. 20, Nov. 24, 1848, Oct. 12, 19 (J. W . Edmonds, the exception), 1849, Nov. 8, 1850, May 14, 1852; Barings to Goodhue & Co., Dec. 28, 1849; Barings to Oelrichs & Lurman, May 10, 1850. Through 1850 the Barings wanted no long bills on France, and only short ones "with very good names" were permissible. Reductions of commissions — BPOC, Ward to Barings, Dec. 18, 1849, Jan. 5, Feb. 4, Mar. 1, Apr. 15, May 8, 1850, Dec. 25, 1851, Jan. 9, 15, Feb. 4, 11, Oct. 5, Dec. ι, 1852, and pertinent enclosures; BPLB, Barings to Ward, Jan. 9, 25, Mar. 22, Apr. 12, 1850, Nov. 14, 1851, Dec. 24, 1852. De Forest & Co. cited Huth & Co. as the London house doing South American business for 1 % . When asked in 1850, the Browns asserted that their charge was i'/2%. As long as competitors charged the higher rate, the Barings insisted on doing the same, "except on the very best accounts such as De Forest & Co. & Foster & Sons." The only other example was the waiving of the Vz% commission for effecting insurance on cargoes from China consigned to J. M. Forbes. He wanted the insurance on cargoes from China effected in the United States because the rates in England were 3 % % to 4 ¡ 4 % , while those in America were 1 Vi% to 1 % % . In May, 1851, the commissions of the Barings for purchasing rails were 2/4 % for buying, 1% more if they had to wait three months for payment, and an additional 1 % for the next three months. The Barings refused to reduce commissions to Barnard, Adams & Co., G. G. & S. Howland, and Hanau & Co. (New Orleans). On a shipment of timber in 1847 by Jewett & March, a Canadian firm, the Liverpool affiliate sold for cash, for which 8 % discount was allowed, the charges being 8 % interest and 4 % for selling, accepting, and guaranteeing payment. BPOC, Ward to Barings, Jan. 1, 1848, and enclosure. 31. BPOC, Forstall to Barings, Nov. 30, 1849, Apr. 27, 1850; BPLB, Barings to Ward, Nov. 30, 1849, Jan. 11, 1850, June 6, Aug. 8, 1851, May 7, 14, 1852; Barings to King & Sons, Aug. 11, 1848; BPOC, Ward to Barings, Oct. 30, May 22, 1849, May 28, 1852. The Barings still strove to induce American exchange account operators to sell drafts and to cover by the next packet at the latest. The partners were annoyed that Blake, Ward & Co. and King 8c Sons did not remit gold as early as it was profitable to do so in 1851; they even expressed a determination to alter their exchange arrangements when

NOTES TO CHAPTER XIV

591

those accounts were not worked steadily. The Americans could lend the money more profitably in the United States; hence most of the profits on the joint accounts accumulated there. Blake, Ward & Co. had to buy the sovereigns in New York, which increased the cost. Ward induced his principals to do nothing till the end of the year, when the matter was not mentioned. In their bills receivable the Barings held ¿227,000 on Peabody & Co. on May 14, 1852, which they considered large on the one house. Thayer's bills on McCalmont were covered by Federal and Massachusetts bonds, bills purchased in the South, and gold, but the Barings held ¿100,000 in Jan., 1850, which amounted to aiding McCalmont for that amount as long as their house did not discount. The Barings knew that the gold discoveries in California and Australia caused the withdrawal of "considerable transient tonnage" from other trades and the raising of freight rates, in spite of increased building in America and Britain. At the same time, since British vessels carried British manufactures out and returned with Brazilian products, the repeal of the Navigation Laws led to the loss of trade for Americans between the United Kingdom and Brazil. Americans could not indulge in the Indian coastal trade and were at a disadvantage with those British vessels which carried emigrants to New South Wales and picked up return freights in China. Moreover, vessels of the Swedes, Danes, Prussians, Hamburgers, and Austrians operated at an estimated 40% less cost than the American ships. BPOC, Grinnell, Minturn & Co. to Barings, Dec. 26, 1848; Ward to Barings, Oct. 8, Nov. 13, 1849, and enclosure; BPLB, Barings to Ward, Nov. 30, 1849, Sept. 24, 1850. 32. Corcoran & Riggs loan — Through the courtesy of the Harvard Business Review the section on the security operations of the Barings stands for the most part as a reprint of R. W. Hidy, "A Leaf of Investment History," Autumn Number, 1941. BPOC, Ward to Barings, June 25, Nov. 20, 1849; Corcoran & Riggs to Barings, June 25, July 16, Nov. 1, 1849, Mar. 16, July 22, Sept. 23, Nov. 18, 1850; BPLB, Barings to Ward, Nov. 2, Dec. 14, 1849. N.Y. — BPOC, King & Sons to Barings, May 29, June 19, 1849; Ward to Barings, June 25, 1849; BPPD, newspaper clipping, June 26, 1849. Va. — BPOC, Corcoran & Riggs to Barings, July 9, 16, 1849. Boston —BPLB, Barings to Ward, Mar. 22, Apr. 5, 1850; BPOC, Ward to Barings, Apr. 15, 26, 1850. Ohio — BPOC, King & Sons to Barings, Mar. 5, June 21, 1850. The limit of the Barings was 107. The $1,600,000 sixes of the loan sold for m @ 115%, and the fi,000,000 fives for ioo!4 @ 102. Tenn. — BPLB, Barings to Ward, Sept. 6, 1850, Barings to King & Sons, April 5, 19, 1850; Barings to Corcoran & Riggs, Nov. 15, 1850; BPOC, Ward to Barings, Oct. 15, 24, 1850. The loan was for $350,000. Camman & Whitehouse of New York took a portion at 103Vi· Because the debates in Congress

592

NOTES TO CHAPTER XIV

kept the issue of slavery before the public, the Barings wanted no Virginia or North Carolina bonds in 1850. Md. — BPLB, Barings to Ward, Nov. 22, 1850, Jan. 3, 1851; BPMC, Thomas S wann to Barings, Jan. 6, 1851. The Baltimore & Ohio Railroad Co. still held ¿495,000 Maryland bonds. The Barings offered to buy £200,000, but the Browns made a better offer. Va. — BPLB, Barings to Ward, June 27, 1851; Barings to King & Sons, Oct. 3, 1851; BPOC, Ward to Barings, Sept. 22, 1851. The loan was for $500,000. Ward's negotiations were interrupted by the departure of the agent to London. Peabody took the loan. B. & O. — After negotiations lasting more than three months Ward and Swann agreed to the terms of sale on Apr. 10, 1849. Corcoran & Riggs and Oelrichs & Lurman were allocated £10,000 each, and Hope & Co. also took a portion of the loan. BPOC, Ward to Barings, Jan. 23-24, Feb. 5, Mar. 31, Apr. 10, May 28, June 5, 1849, and enclosures; Corcoran & Riggs to Barings, Mar. 4, Apr. 16, Aug. 6, 1849; Oelrichs & Lurman to Barings, Apr. 2, 10, July 2, Aug. 6, 13, 1849; Hopes to Barings, May 1 1 , 1849. Oelrichs & Lurman had their share returned and sold it in Baltimore. Mass. and Boston, 1850-51 — BPLB, Barings to Ward, Mar. 8, June 14, Sept. 6, Oct. i l , 25, 1850, Mar. 14, June 13, 27, Aug. 1, 8, 29, Oct. 24, Nov. 25, 1851; Barings to Gilmore, Blake & Ward, Sept. 13, Oct. 18, 1850; Barings to Blake, Ward & Co., Mar. 14, May 23, 1851, Jan. 23, 1852; BPOC, Ward to Barings, July 9, Sept. 23, 1850, May 5, July 4, Oct. 6, Nov. 1 1 , 1851; Hopes to Barings, Mar. 18, May 23, 1851; BPMC, Gilmore, Blake & Ward and Blake, Ward & Co. to Barings, Sept. 30, Nov. 5, 1850, Feb. 25, June 17, Dec. 30, 1851; James C. Dunn (Treasurer of Boston) to Blake, Ward & Co., July 17, 1851. Hope & Co., Blake, Ward & Co., and the Barings had equal shares in the entire amount of $750,000 Boston bonds purchased. Only $7,000 of the bonds remained unsold in Jan., 1852. Sales on U. S. account and others — BPOC, King & Sons to Barings, Feb. 19, May 22, 1849; Ward to Barings, Mar. 21, Nov. 12, 1849, July 15, 1851 (and enclosure); Oelrichs & Lurman to Barings, Mar. 18, 1850; BPLB, Bates to W. Gray, Sept. 7, 1849; Barings to Ward, Aug. 25, 1848, Oct. 26, 1849, Mar. 8, 1850; Barings to Oelrichs & Lurman, Apr. 19, May 10, 1850; Barings to T. Swann, May 3, June 21, Aug. 30, Oct. 1 1 , 1850; BPMC, W. Gray to Bates, Oct. 6, 1849; Swann to Barings, Mar. 23, May 27, 1850. Prior to July, 1850, the Barings allowed the Baltimore & Ohio to issue drafts on them only when they sold some of the Maryland bonds in hand, but after July 1 the Barings advanced the company ¿100,000 on the condition that sales of the bonds could be made at their discretion. In 1849 Λ ε Barings refused to sell in England issues put forth by Columbus and Savannah, Georgia,-in aid of two local railroads. And in both 1850 and 1851 E. S. Whelen & Co., of Philadelphia, was told that the Barings would not buy or sell Philadelphia and St. Louis bonds. BPOC, Ward to Barings,

NOTES TO CHAPTER XIV

593

Apr. 30, July 23, 1849, and enclosures; Padelford & Fay to Barings, July n , 1849; BPLB, Barings to Whelen & Co., Feb. 7, 1850, Jan. 16, 21, 1851; Barings to King & Sons, Oct. 12, 1849; Barings to Ward, Jan. 11, 1850. 33. Ibid., Jan. 25, 1851; Barings to King & Sons, Jan. 31, 1851. 34. BPOC, Ward to Barings, Aug. 14, 22, Sept. 5, 11, Oct. 7, 17, Nov. 14, Dec. 9, 1848, Jan. 9, Feb. 5-6, Mar. 9, 1849, Mar. 28, July 29, Aug. 6, 1850, Jan. 6, Mar. 8, Oct. 14, 1851, June 18, 22, July 22, Dec. 28, 1852; Forstall to Barings, Mar. 23, 1849, May 30, July 19, 1850; Hopes to Barings, Mar. 8, 1850; BPLB, Barings to Ward, Sept. 15, Oct. 6, 13, Nov. 17, 1848, Mar. 8, 22, Apr. 19, June 14, Dec. 20, 1850, Apr. 25, 1851; Barings to King & Sons, Oct. 27, 1848, Feb. 22, 1850, June 13, 1851, Aug. 6, Oct. 15, 1852; Barings to Forstall, Apr. 28, 1848, June 21, 1850. 35. Ibid., Barings to Ward, Apr. 21, 1854. Georgia — BPOC, Ward to Barings, Oct. 28, Dec. 16, 1851, Jan. 15, 27, 1852; BPLB, Barings to Ward, Nov. 14, 1851, Jan. 27, 1852. Ross County — ibid., Apr. 22, 1852. United States and Texas —BPOC, S. G. Ward to Barings, Dec. 23, 1851; Ward to Barings, Feb. 2, Mar. 23, Apr. 2, 6, May 14, 21, 1852, and enclosures; Hopes to Barings, May 21, June 11, July 2, 1852; BPLB, Barings to Ward, Apr. 20, June 25, 1852. Boston —ibid., Jan. 23, Oct. 1, Nov. 12, 1852; Barings to William Thomas, July 9, 12, 1852; Barings to Peabody & Co., July 21, 1852; BPMC, Thomas to Barings, July 10, 1852; Peabody & Co. to Barings, July 21, 1852; BPOC, Hopes to Barings, July 19, Oct. 12, Dec. 16, 1852; Ward to Barings, May 31, Aug. 17, Sept. ι, Oct. 19, Nov. 9, 1852. Peabody & Co. was allocated £20,000 in the July purchase and ¿30,000 in that of October. Blake, Ward & Co. and Hope & Co. shared equally in the remainder of both loans. Ward raised the money in the United States, some by collection from the government, and lent it until needed. One borrower was the City of Boston. New Orleans — BPLB, Barings to Ward, June 10, 1852; Barings to King & Sons, Aug. 3, 1852; BPOC, King & Sons to Barings, Aug. 10, 20, 1852. Höge & Co. was allocated $300,000 out of the $1,000,000 in bonds belonging to King & Sons on condition that the Barings had control of the sale of the entire issue. Pa. — ibid., Ward to Barings, June 8, 11, 15, Sept. 15, 1852. The Barings' bid was too low on the June, 1850, Pennsylvania loan. N. Y. City, Jersey City, and Tenn. — BPLB, Barings to Blake, Ward & Co., Mar. 5, 1852; Barings to King & Sons, July 23, Aug. 3, 13, 1852; BPOC, King & Sons to Barings, May 18, June 11, 1852; Ward to Barings, Nov. 6, 1852. The New York City and Jersey City bonds would not sell in London and were returned to New York. In the previous spring the Barings had refused to buy Hartford, Providence, and Jersey City bonds. 36. See p. 370 of this volume. 37. The bonds were redeemable by groups of /25,54o in 1856, 1857, 1858,

594

NOTES TO CHAPTER XIV

1859, and i860. BPOC, Ward to Barings, Sept. 24-25, Oct. 1, Nov. 12, Dec. 3, 1849, Jan. 8, Mar. 4, 30, 1850, and enclosures; BPLB, Barings to Thomas Swann, president of the Β & O., Oct. 12, Nov. 30, 1849, Aug. 30, 1850; Barings to Ward, Nov. 16, 30, Dec. 14, 1849; BPMC, copy of Barings to Swann, Dec. 14, 1849; copy of contract between the Barings and Thompson & Forman, Dec. i l , 1849. The ironmasters, Thompson & Forman, charged an extra £1 per ton, or ^5.10, for taking bonds in partial payment. The Barings charged 2% for purchasing the rails. 38. BPOC, W. H. Aspinwall to Barings, Dec. 8, 1849; Aspinwall to Thomas Baring, Feb. 4, 1851, June 19, 1852; Ward to Barings, Oct. 28, Nov. 11, 1851, July 2-3, 7, Aug. ι, 13, and enclosure, 1852; BPLB, Barings to Ward, Sept. 27, 1850, June 8, 18, July 16, Sept. 3, 1852. Huth & Co. and Cavan Brothers & Co. joined the Barings in 1849 promising to purchase upon issue 250 shares of $100 each in the company (BPMC, undated contract). 39. Ibid., Theodore Dehon (Davis Brooks & Co.) to Bates, June 14, 17, 1848, and enclosure; J. M. Forbes to Bates, May 10, 1848, July 10, 1850; Josiah Quincy, Jr., to Bates, Sept. 4, 1849; Watts Sherman to Bates, Sept. 24, 1849; Lambert Dexter to Bates, Apr. 30, 1850, and enclosures; D. A. Neal to Bates, Oct. 26, 1851; BPOC, Oelrichs & Lurman to Barings, July 31, 1848, Nov. 7, 1851; King & Sons to Barings, Mar. 24, 1848, May 28, 1850; Ward to Barings, Mar. 3, Sept. 3, 1849, Aug. 13, 1850, Aug. 15, 1851, and enclosures; BPLB, Barings to Ward, Oct. 5, 12, 19, 1849, Feb. 22, Apr. 19, May 3, 28, 1850; Bates to Josiah Quincy, Jr., Sept. 21, 1849; Bates to J. W. Edwards (Northern Railroad), Nov. 16, 1849; Barings to King & Sons, May 10, 1850; Bates to J. M. Forbes, May 26, 1848, Sept. 5, 24, 1850. Quincy wanted to draw on the Barings to the extent of .£100,000 against bonds as collateral, and on his personal name, to provide funds for the construction of the Vermont & Canada (Rouses Point to Burlington). Bates said the bonds would not sell in England and would be a "mere lock-up" of money. With regard to the bonds of the Northern Railroad Co. (connecting with Vermont & Canada at Rouses Point), Bates noted on Dexter's letter: "Decided that until the mortgage bonds of the New York Merchants Exchange are paid we will not enter into any money engagement with any New York Corporation." In May, 1850, the Barings wrote to Ward, "The Merchants Exchange is enough to cure one of any disposition to deal with corporations." The Barings also refused to take B. & O. bonds with Oelrichs & Lurman in 1848. 40. Ibid., Barings to Ward, May 28, 1850; Barings to King & Sons, May 10, 1850. 41. Ibid., Barings to Ward, Mar. 12, 19, Apr. 3, 8, Oct. 8, 1852; Barings to Charles L. Boalt, July 2, 1852; BPOC, Ward to Barings, Apr. 15, 23, May 14, June I, 1852. C. L. Boalt brought $350,000 first-mortgage, 7 % bonds, of which $115,000 was guaranteed by the Cleveland, Columbus & Cincinnati Railroad Co. The Barings agreed to purchase and ship 4,000 tons of rails and to lend $20,000

NOTES TO CHAPTER XIV

595

on the security of the bonds, which were payable in N.Y. The estimated price was 85 for unguaranteed and 90 for the guaranteed bonds. The option was to be taken in two months from date of delivery. J. M. Forbes and William Sturgis did not think well of the road or its bonds, though Swift was not too opposed and G. W. Bliss, president of the Michigan Southern, was favorable. Judge Lane, brother-in-law of Boalt and president of the Lake Shore road then running from Cleveland to Sandusky, gave Ward more information, not altogether favorable or unfavorable, and told him that he and Boalt wished to unite their two lines but were opposed by the shareholders of both. The Barings decided that there were too many dubious factors, declined the option, and returned the bonds to Ward for sale in New York, proceeds of the sale to be used to cover the account of the Barings for their expenditures. 42. BPLB, Barings to King & Sons, Apr. 2, 1852; Barings to Ward, Apr. 2, 1852. The rising interest in American railroads by the Barings may be traced

in ibid., Jan. 23, Feb. 4, Apr. 2, 16, 23, May 7, 28, June 1, July 9, 16, 1852;

BPOC, Ward to Barings, Feb. 17 (Swift to Ward, Feb. 14, 1852, enclosed, contains a very good analysis of the general situation as to railroads and is a good example of the kind of information the partners desired and received), July 26, 1852.

43. ibid., Dec. 19, 1847, Oct. 15, 1850, Nov. 19, 1852, Jan. 21, Aug. 9, 1853.

Swift agreed to keep the Barings advised as to plans and "actual undertakings" of railroads in the United States for a retainer of $1,000 per year, plus special compensation for special services. Up to November, 1852, Ward had consulted him during the year upon the Eastern, Illinois Central, Michigan Central, Pennsylvania, Toledo, Norwalk & Cleveland, Havana, and other roads. The Barings told Ward: "Captain Swift's reports are carefully preserved and we consider his sound views of immense value in keeping us out of bad business." In July, 1853, Swift made the "mistake" of drawing $1,000 for six months' salary, which the Barings decided not to mention to him because his services were so valuable to them, whether they bought railroad securities or not. 44. Ibid., May 4, July 2, 7, 23, Sept. 29, Oct. 5, 1852, and enclosures; BPLB, Barings to Ward, July 1, 1853. Fisher had previously operated extensively in Reading Railroad bonds, among others. 45. BPMC, Samuel Hooper (of William Appleton & Co., Boston) to Russell Sturgis, Jan. 6, 1852; Sturgis to Hooper, Jan. 20, 1852; BPLB, Barings to Ward, Feb. 13, Mar. 19, July 22, Aug. 6, Sept. 3, Oct. 15, 1852; BPOC, Ward to Barings, July 23 (copy of agreement of July 22 enclosed), Aug. 20, 1852. Hooper first addressed Sturgis with a proposition to take jointly with Appleton & Co. a 6 per cent $500,000 loan for five years to the Eastern, 5,000 shares of the company to serve as collateral. The Barings refused on the ground that the bonds would not sell when Boston 5 per cents would bring but little above par, that Appleton & Co. wanted them to supply all the funds, and

596

NOTES TO CHAPTER XIV

that the Boston house seemed to expect them to borrow at a very low rate of interest, whereas they would charge no less than 5 % for the loan, with power to call for the portion advanced to Appleton & Co. upon six months' notice. T h e bonds were convertible into shares after five years. 46. BPLB, Barings to W a r d , Apr. 29, June 10, A u g . 3, Oct. 1, 5, 8, 15, Nov. 2, 1852; Barings to K i n g & Sons, Oct. 1, 8, 15, 22, 1852; Barings to C . H . Fisher, Sept. 7, 1852; B P O C , K i n g & Sons to Barings, May 14, July 6, Sept. 14, 18, Oct. 26, Nov. 3, 9, 26, 1852; S. G. W a r d to Barings, May 15, June 4, July 2, 16, Sept. 11, 15, 17, 23, 29, Oct. 5, 13, 15, 26, 29, Nov. 6, 9, 1852. 47. BPLB, Barings to Ward, Apr. 2, 20, 29, May 7, June 25, July 2, 22, Dec. 28, 31, 1852; Barings to K i n g & Sons, Apr. 2, May 7, Sept. 3, 1852; Thos. Baring to S. G. Ward, p e c . 17, 1852; Barings to Geo. Griswold, Dec. 17, 1852; B P O C , K i n g & Sons to Barings, Apr. 20, 1852; W a r d to Barings, Jan. 7, Apr. 20, May 14, June 1, 4, 15, July 16, Sept. 21, Oct. 19, Nov. 19, Dec. 7, 14, 28, 1852, and pertinent enclosures; BPMC, memo, by D . A . Neal, "Illinois & Michigan Canal & the Illinois Central R Road Compared," Apr. 26, 1852; Thos. Swann, president of the Northwestern Virginia Railroad Co., to Barings, Nov. ι, 1852; P. W . Gates, The Illinois Central Railroad and Its Colonization Wor\ (Cambridge, 1934), pp. 72-73. Many considerations induced Barings and others in the City in July, 1852, to turn down participation in Commodore Vanderbilt's American Atlantic & Pacific Ship Canal Company. George Peabody, the Rothschilds, Capel & Co., Finlay, Hodgson & Co., and the Barings in 1850 had agreed that, if after examination and surveys it should appear that a Nicaraguan canal could be built at a cost that would offer a fair return on the capital invested, they would later negotiate with Vanderbilt for the formation of a company and use their influence, to get English capitalists to join in completing it. In the face of a favorable report by an engineering survey, the Londoners turned down the proposition. T h e estimated cost seemed very large; Swift, a leading engineer himself, had never heard of Vanderbilt's engineers; John L. Aspinwall said that J. L. White was just a mouthpiece of Vanderbilt, whose sole interest was to unload shares of the company upon John Bull; Henry Grinnell would take no interest until a full survey had been made and a board of directors of "sound" men appointed; W a r d portrayed Vanderbilt as "quite unscrupulous, levying blackmail, skilful in getting himself out of difficulties without any great delicacy as to contracts, & leaving others to bear the burthen." Bates was the one w h o pointed out that the promoters had no estimates as to maintenance or receipts, and that the size of the proposed canal was not large enough even for the larger vessels of the moment, much less of the future. BPLB, Barings to Ward, Oct. 15, 1850, July 16, 22, Oct. 8, 1852; Barings to K i n g & Sons, Oct. 15, 1850; BPMC, C. Vanderbilt and Joseph L. White to Barings, Jan. 7, 1852; J. L. White and H. L. Routh, commissioners of the American Atlantic & Pacific Ship Canal. Co., to Barings, July 17, 1852; Bates to Thomas Baring, July 23, 1852; B P O C , S. G. W a r d to Barings, May 17,

NOTES TO CHAPTER XIV

597

Aug. 6, 1852. Compare Wheaton J. Lane, Commodore Vanderbilt: An Epic of the Steam Age (New York, 1942), pp. 91-92, 99-100. For early attitudes toward the Illinois Central project — BPOC, Ward to Barings, Dec. 25, 1848, Aug. 30, 1850, Sept. 2, 9, 12, 1851; BPLB, Barings to Ward, Sept. 16, 1851; BPMC, D. A. Neal to Bates, Oct. 26, Nov. 5, Dec. 5, 1851. 48. Ibid., John H. Dunn to Barings, Apr. 22, 1848; Dunn to Thos. Baring, Feb. 9, 1849; Francis Hincks, Inspector General of Upper Canada, to Barings, Sept. 7, Nov. 8, 1848, June 19, 1852; Hincks to Barings and Glyn, Mills, Hallifax & Co., Sept. 13, 1849, May 30, 1850; copy of Glyn, Mills, Hallifax & Co. and Barings to Hincks, Sept. 20, 1849; E. P. Taché, Receiver General of Canada, Feb. 19, 1851; John Young, vice-president of the St. Lawrence & Atlantic, to Barings, Aug. 18, Oct. 18, Dec. 7, 1851, Jan. 23, 1852; H. B. Mildmay to Barings, July 19, 1852; Thomas Ryan (Montreal) to Barings, Dec. 1, 1851, Feb. 21, 24, Mar. 2, June 28, 1852; W. Stevenson to Barings, Jan. 7, 1852; C. H. Castle, cashier "City" Bank of Montreal, to Barings, Mar. 14, 1849; A. Simpson, cashier of Bank of Montreal, to Barings, Feb. 21, Mar. 6, June 6, 28, 1852; J. W. Byrne, Secretary of the St. Andrews & Quebec Railroad Co., to Barings, Nov. 28, 1851, Aug. 27, 1852; BPLB, Barings to Hincks, Oct. 13, Dec. I, 1848; Barings to Ward, Jan. 6, 1852, Dec. 14, 1854; Barings to James Price, May 30, 1851; Barings to Hopes, Jan. 3, 1852; Barings to J. W. Byrne (a memo.), Dec. 10, 1851; Barings to Simpson, Mar. 26, May 4, June 1 1 , 1852; Barings to Ryan Brothers & Co., June 1 1 , July 27, 1852; Barings to Thos. Ryan, June 18, 1852; Barings to Taché, Mar. 14, Dec. 26, 1851, July 22, 1852; BP, Dominion of Canada Letters (hereinafter cited B P C L ) , Taché to Glyn Mills, Hallifax & Co., June 12, 26, Nov. 1, 5, 1851, Jan. 9, 15, July 2, Nov. 20, 27, Dec. 17, 1852, Jan. 28, Nov. 26, 1853; Letterbooks of Glyn, Mills, Hallifax & Co. (hereinafter cited G M L B ) , Glyn, Mills, Hallifax & Co. to Hincks, May 27, July 22, Sept. 3, Oct. 29, Dec. 16, 17, 1852; Glyn, Mills, Hallifax & Co. to John Young, July 29, Nov. 7, 28, Dec. 26, 1851; Glyn, Mills, Hallifax & Co. to Taché, Oct. 22, Dec. 10, 1852. The Barings could come to no agreement with the Bank of Montreal for marketing a ^100,000 loan in 1852 and the negotiation collapsed entirely after the fire in Montreal on July 8, 1852. At the same time, the London house refused to consider marketing bonds of the St. Lawrence & Lake Champlain Railroad. For information on the history of early Canadian railways, the financial side of which is almost untouched, see Adam Shortt and [Sir] A. G. Doughty, editors, Canada and Its Provinces, 22 vols. (Toronto, 1913), X ; O. D. Skelton, The Life and Times of Sir Alexander Tilloch Gait (Toronto, 1920); and G. P. Glazebrook, A History of Transportation in Canada (Toronto and New Haven, 1938). Glyn, Mills lent Taché £20,000 in September and October, 1852, upon the security of unnamed bonds deposited with the Bank of Upper Canada. The

598

NOTES TO CHAPTER XIV

letters read as though the loan was to Taché himself, though that might not be an accurate inference. The two London agents in 1851 invested £100,000 in 5 % Canadian sterling bonds for the province. 49. BPLB, Barings to Ward, Jan. 25, 1850, May 28, 1852; BPLB, Barings to King & Sons, Jan. 25, 1850; Barings to Stieglitz & Co., Apr. 6, 16, 1850; Barings to Hopes, May 14, Nov. 5, 1850, Dec. 5, 1852; Barings to Thomas Baring, Jan. 2, 1852; Barings to Hottinguers, May 16, 1851, Feb. 21, 25, Apr. 2, July 2, Aug. 9, Dec. 18, 24, 1852, Jan. 10, 1853; Barings to Henry O'Shea & Co., Madrid, Nov. 15, 1851; Thomas Baring to Baron I. L. Goldsmid, Aug. 30, 1852; Barings to P. Erickson, Nov. 16, 1852; unaddressed fragment in BPLB, 1852, pp. 371-372; BPOC, Hopes to Barings, Mar. 22, 26, June 3, Dec. 13, 1850, Mar. 28, July 1 1 , 1851, Feb. 27, Mar. 29, Dec. 10, 16, 1852. The share of the Barings in the Parisian loan was fr. 1,000,000. Both silver and Imperials were remitted from London in the case of the Russian flotation. Hope 8c Co. was a participant in the loan and exchange operations. The details on the Austrian loan are not in the papers examined. The same may be said for abortive negotiations in 1852 for a loan to the Spanish government against quicksilver as collateral. Thomas Baring and de Falconnet discussed the matter in Madrid with O'Shea & Co. and W. Kennedy, who were to be participants in the operation. London Times, Jan. 21, 1853; BPLB, Thomas Baring to W. Kennedy, Apr. 3, 1852; Baring to unnamed addressee, presumably O'Sheà & Co., Apr. 21, July 9, 1852, Barings to O'Shea & Co., July 21, Nov. 16, 1852. The Barings were originally allotted 14,868 shares in the Lyons Railway. Jenks, Migration of British Capital, p. 384 n. 8. 50. BPOC, Forstall to Barings, Jan. 13, 1849; Manning & Mackintosh to Barings, Sept. 13, Oct. 13, 1849; Ward to Barings, Apr. 16, 1852; Falconnet to Barings, June 12, 1849; BPMC, F. L. Brauns & Co. (Baltimore) to Barings, Dec. 8, l i , 1851; J. M. Forbes to Bates, May 27, 1850; BPLB, Barings to Ward, June 2, 1848, Jan. 25, Sept. 5, 20, 1850, Mar. 19, 1852; Barings to Falconnet, June 2, 1848; Barings to P. Erickson, Nov. 16, 1852; Barings to Forstall, Oct. 24, 1851; Barings to O'Shea & Company, Nov. 8, 1849, Feb. 28, 1851; Barings to Russell & Co., May 9, 1853; Thos. Baring to R. Donald Mangles, Sept. 22, 1848, Apr. 17, 1852; Thos. Baring to Elick Macnaghten, Sept. 27, 1848; Barings to Gisborne & Co., Sept. 7, 1849; Barings to James Murray Robertson, agent in Colombo, June 24, 1848, Feb. 24, Oct. 8, 23, 1851, Dec. 24, 1852; Barings to Richard W. Stevens (Tabriz), Dec. 18, 1852. The Barings remarked in October, 1851: "All our properties in Ceylon appear to be in a satisfactory state except the sugar plantation." A Mr. Wright mortgaged several estates to the London house to pay his debts. By December, 1852, the partners decided that the value of their holds in Ceylon had declined £20,000 to £30,000 during the preceding year.

NOTES TO CHAPTER XIV

599

Even though Prince Woronzow was the backer, the Barings refused to take an interest in a firm to be established by R. W . Stevens in Tabriz. Jenny Lind was a close friend of Bates and became an intimate acquaintance of the Ward family in Boston. Some of her savings were invested in United States and State bonds. Bates gave her letters of introduction to Corcoran, King, the Howlands, Aspinwalls, and others in 1850. T . W . Ward characterized the "Swedish nightingale" as "a remarkable person, full of heart, & sense, & high principle, & a high idea of duty," and her husband, "Mr. Goldschmidt is a superior person," he added. "I have become quite interested in them & much attached to Madame Goldschmidt." BPOC, T . W . Ward to Bates, June 1, 1852; S. G. Ward to Bates, May 29, 1852; King to Bates, Oct. 12, 1850; Corcoran to Bates, Sept. 5, 1850; BPLB, Barings to Howland & Aspinwall, July 19, 1850; BPMC, P. T . Barnum to Barings, Apr. 30, 1850. 51. BPOC, Hopes to Barings, July 2, Dec. 16, 1852; Ward to Barings, Sept. 39, 1852; Oelrichs & Lurman to Barings, Oct. 11, 1852; K i n g & Sons to Barings, Nov. 3, 1852; BPLB, Barings to Ward, Oct. 8, 15, 29, Nov. 5, 12, 26, Dec. 10, 14, 17, 1852, Apr. 21, 1854; Barings to King & Sons, Oct. 15, Nov. 26, 1852; Barings to Hottinguers, Nov. 6, Dec. 3, 18, 24, 1852; Barings to Hopes, Aug. 3, Oct. ι, Nov. 30, 1852. The price of rails jumped from /4.10 per ton to X7.10 per ton between February and October, 1852. 52. Francis, Stoc\ Exchange, p. 76; BPLB, Barings to Hopes, Nov. 30, 1852; BPOC, Goodhue & Co. to Barings, Dec. 15, 1852, Jan. 4, 1853. Goodhue & Co. had helped in the preparation of Decoppet's circular at the end of 1852, which estimated foreign holdings of American securities at $218,000,000. The Barings borrowed £200,000 in September and October, 1849, using Massachusetts, Maryland, Pennsylvania, and United States bonds as collateral. BPLB, Barings to Overend, Gurney & Co., Sept. 27, Oct. 6, 1849. Among new deferred debts were those due from Manning & Mackintosh (,£4,369) and Josiah Quincy, Jr. For the former the Barings held a mortgage of ,£3,234 on the English estate of one partner, Daniel Price. BPOC, Ward to Barings, Oct. 8, 1849, Feb. 26, 1852; Forstall to Barings, June 3, 1851, and enclosure; Falconnet to Barings, Dec. 2, 1852. On the old George Knight debt a part of the claim was liquidated by the sale of the Santa Maria (De Mun) estate in 1851. Old debts in St. Croix (Danish West Indies) still aggregated ¿20,000 in Oct., 1852, though some of the estates had been sold. The New Orleans property taken for the Stetson & Avery debt was still in the possession of the Barings. Ibid., Ward to Barings, Feb. 19, Nov. 15, 1848, June 25, July 31, 1849, Apr. 9, 1851, Feb. 26, 1852; Goodhue & Co. to Barings, Aug. 19, Oct. 16, 31, Nov. 6, 20, 1849, Dec. 24, 1850, Feb. 11, 1851; BPLB, Barings to Ward, Oct. 13, 1848, Nov. 30, 1849, May 23, Sept. 12, 30, 1851, Apr. 2, 1852; Barings to Goodhue & Co., A u g . 31, 1850, Mar. 26, 1852; Barings to Storey, Spalding & Co., Sept. 20, Dec. 28, 1850, Feb. 28, 1851; Barings to D. Griffith, Oct. 21, 1852; BPMC, W .

600

NOTES TO CHAPTER XV

Beech (St. Croix) to Barings, Nov. 13, 1850; R. D. Shepherd to Ward, Feb. 12, 1850, Apr. ι , 1851, and enclosures. CHAPTER X V ι. MHS, Ward Papers, Bates to Ward, July 13, 1855. 2. BPOC, Ward to Bates, June 1, 1852; MHS, Ward Papers, T. W. Ward to S. G. Ward, July 14, Aug. 15, 1853. The father reported the clerks of the Barings to be very able, though Bates and Thomas Baring made all decisions of importance and did "work enough for all the other gentlemen besides." The bias of an older man in favor of two of his own generation should not be disregarded. 3. BPOC, Oelrichs & Lurman to Barings, Jan. 30, 1854; BPPD, brief presented to the Supreme Court of Massachusetts in the case of Swift et al. vs. David Leavitt et al.; Shortt Notes, affidavit regarding the membership of Francis Baring in the firm, Feb. 2, 1856; BPLB, Barings to H. B. Webb, Feb. 13, 1854. The agreement with" Webb was to last for two years. If at any time a majority of the partners in Baring Brothers & Co. should see cause to terminate the agreement with him, he was to receive /500. 4. BPOC, T. W. Ward to Bates, May 2, June 1, 1 1 , July 16, Dec. 28, 1852; T. W. Ward to Barings, Jan. 1 1 , 18, Feb. 22, 1853; S. G. Ward to Bates, June 17, 1852, Jan. 5, 1853; S. G. Ward to Barings, Jan. 4, Feb. 22, Apr. 5, 26, 1853; F. H. Story to Barings, Jan. 1 1 , 1853; BPMC, Bates to Thomas Baring, July 23, 1852; BPLB, Bates to T. W. Ward, Dec. 10, 1852; Barings to F. H. Story, Jan. 28, 1853; Barings to T. W. Ward, Feb. 3, 1853; Barings to S. G. Ward, Feb. 4, Mar. 4, Apr. 19, May 3, 1853; MHS, Ward Papers, Diary, Dec. 29, 1852, Jan. 9, 1853. 5. For examples see BPOC, Ward to Barings, June 17, Oct. 7, 1 1 , 1853, Dec. 15, 1854, and BPPD, 1853-57, passim. Ward characterized statistics on breadstuffs in 1853 as of "the loosest character" and commented, "Mr. Kettell's Articles from the United States Economist are too sweeping & hasty to be always accurate but they are always suggestive & clever." 6. BPOC, Ward to Bates, June 6, 1853, Nov. 8, 1856. 7. Ibid., Ward to Barings, June 14, July 26, Aug. 26, 1853, Jan. 3, Oct. 17, Nov. 21, 1854, Aug. 15, 1856; BPLB, Barings to Ward, Jan. 6, Oct. 13, Dec. 8, 29, 1854, Aug. 29, 1856. Swift was paid $1,000 per year, plus fees for special services. In addition to £25,000 advanced to Fisher against Pennsylvania Railroad bonds in 1852, the Barings advanced him £20,000 against various securities as collateral in Nov., 1854, and £30,000 in Aug., 1856. As the railroad bonds were sold, that debt was reduced and the other drafts were covered at maturity. While admitting that Fisher was "somewhat" of a stock-jobber, Ward wrote in Oct., 1854, "Still he is altogether the cleverest man in Philadelphia, & his connexion is important, & having the right mutual understanding. I do not know any one of a generally sounder political judgment as to Stocks to act with."

NOTES TO CHAPTER XV

601

8. Ibid., July 26, 1853; BPOC, Ward to Barings, July 12, 1853. Among the railroads mentioned in the Baring Papers between 1852 and 1857 were the following — in New England: Boston & Lowell, Boston & Maine, Boston & Providence, Boston & Worcester, Western, Eastern, Norwich & Worcester, Vermont Central, Vermont & Canada, Hartford & New Haven, New Haven & Springfield, New York & New Haven; in New York, Pennsylvania, and Maryland: Northern (N.Y.), New York Central, Hudson River, Syracuse & Binghamton, New York & Erie, Pennsylvania, Reading, Lehigh Coal & Navigation, Sunbury & Erie, Northern Pennsylvania, Little Schuylkill, Belvidere & Delaware, Delaware, Cumberland & Pennsylvania, Philadelphia, Easton & Water Gap, Philadelphia, Washington & Baltimore, Pittsburgh & Connellsville; in the South: Baltimore & Ohio, Northwestern Virginia, Virginia Central, Georgia State, Augusta & Waynesboro, Montgomery & West Point, Henderson & Nashville, New Orleans, Jackson & Great Northern, New Orleans, Opelousas & Great Western, New Orleans & Mobile, Mobile & Ohio; and in the Middle West: Little Miami, Cincinnati, Hamilton & Dayton, Louisville, Cincinnati & Charleston, Ohio & Mississippi, Terre Haute & Alton, Illinois Central, Michigan Central, Michigan Southern, Northern Indiana, Joliet & Northern Indiana, Chicago & Aurora, Central Military Tract, Galena & Chicago, Chicago, Burlington & Quincy, Ottawa & Oaklands, Toledo, Norwalk & Cleveland, Milwaukee & Mississippi, Cleveland & Mahoning, Steubenville & Indiana, Pacific (Southwest Branch), Hannibal & St. Joseph, and Chicago, Detroit & Canada Grand Trunk Junction. 9. By June 24, 1853, the Barings had sold all of their 1852 purchase of Boston bonds; by the February following only ¿4,000 remained of their share in the second purchase. BPMC, George Baty Blake to Barings, Jan. 25, 1853; BPLB, Barings to Ward, Feb. 25, Mar. 4, June 3, 24, July 22, Aug. 5, Sept. 20, 1853, Feb. 21, Apr. 28, 1854, June 22, 1855; BPOC, Ward to Barings, May 17, 20, 1853, June 6, 1855; Hopes to Barings, June 7, 1853. 10. Ibid., Ward to Barings, Mar. 15, May 15, Dec. 20, 1853, July 18, Sept. 6, 8, 12, 20, Oct. 6, 1854, Mar. 6, 20, 1855, July 8, Nov. 13, 1856, Mar. 31, Apr. 7, July 7, 1857, and pertinent enclosures; W. H. Aspinwall to Thomas Baring, Aug. 22, 1854; Ward, Campbell & Co. to Barings, Mar. 15, 1856; BPLB, Barings to Ward, Aug. 4, 1854, Jan. 12, 26, Feb. 9, 16, Mar. 2, Apr. 5, 1855, Apr. 4, Dec. 5, 1856, Feb. 27, Mar. 27, Apr. 24, July 10, Aug. 14, 1857; Barings to Ward, Campbell & Co., Aug. 29, 1857; Barings to Edwin Bartlett, Feb. 15, 1856; Barings to David Hoadley, Feb. 27, 1857; BPMC, Bartlett to Barings, Jan. 31, Feb. 2, 1855; Hoadley, president of the Panama Railroad Co., to Barings, Feb. 10, 1857. Beyond the casual mention in a letter to Hoadley on Feb. 27, 1857, there is no information in the Baring Papers that the London house purchased ¿280,000 of the 1854 issue. The unfavorable points about the Panama Railroad were summarized in a 22 page report by W. H. Swift dated Apr. 4, 1857. The directors were borrowing money to pay dividends, the road was built through jungle so far dis-

602

NOTES TO CHAPTER XV

tant from N e w York that adequate supervision and accurate information on it were impossible, and there was always danger of a revolution or invasion led by some adventurer like Walker, then dominant in Nicaragua. The price of the shares declined in 1856. This development was attributable, according to Henry Chauncey, who was a member of the board of directors, to the appearance of the Honduran railway project, an accident on the Panama line which killed or maimed 60 people, and sales by the directors growing out of fear of war between the United States and Great Britain over the Mosquito Coast. By Nov., 1856, Chauncey had reduced his own holdings in the railroad and the Pacific Mail Steamship Co. from $430,000 to $30,000. I i . B P L B , Barings to Ward, Nov. 1, 15, 18, 1853, Feb. 24, Mar. 7, 10, 3 1 , May 12, July 7, Oct. 27, 1854, Jan. 5, Feb. 9, Mar. 2, Apr. 27, Aug. 17, Oct. 19, 26, Dec. 14, 1855; Barings to L . P. Bayne, Dec. 30, 1853, Feb. 24, Mar. 17, May 5, 1854; Barings to Seiden, Withers & Co., Mar. 17, 3 1 , 1854; Barings to King's Sons, Nov. 25, 1853; Barings to Ward, Campbell & Co., Mar. 30, Apr. 27, 1855; Barings to James T . Soutter, Bank of the Republic, Apr. 27, Aug. 10, 1855; BPMC, Bayne to Barings, Dec. 13, 1853, Mar. 9, 1855; Seiden, Withers & Co. to Barings, Sept. 8, 1854; Soutter to Russell Sturgis, Apr. 4, 1855; Soutter to Barings, Apr. 24, 1855; Robert Soutter, Jr., to Barings, Oct. 24, Nov. 30, 1855; BPOC, Ward to Barings, Dec. 6, 9, 13, 1853, Mar. 28, Apr. 4, 14, 28, May 30, 1854, Apr. 10, 1855, Oct. 17, 1856, Apr. 3, 1857, and enclosures; Hopes to Barings, Sept. 6, 1853; Ward, Campbell & Co. to Barings, Jan. 24, Apr. 10, 1855; BPPD, Doc. no. 50, "Report on the Committee of Finance relative to the Revenues, Liabilities, Expenses, Etc. of the Commonwealth [Virginia], 1853-4, dated Apr. 7, 1854." The Barings purchased rails for the Virginia Central as follows: 1,500 tons in 1855, 1,000 tons early in 1856, and made a contract for another 2,200 tons in September of the same year. The first was purchased at ¿6.7.6 per ton on 6 months' credit, bonds of the company being deposited as collateral. T h e terms for the second were four months' credit in the form of drafts, with 7 per cent being charged for an extension of six months to pay. Alexander Campbell of Ward, Campbell & Co. negotiated the third contract — credit for twelve months, bonds of the company as collateral, six months free of interest, the last six months to bear 6 per cent, commission for buying the rails at 2V1 per cent, and a further commission of 2/4 per cent upon the amount unpaid at the end of the first six months. The Barings refused to waive the second commission upon the request of the company but agreed to charge interest at 5 per cent. The London house estimated its probable profit, if everything went as planned, at ¿ 7 5 0 upon the whole operation, exclusive of compensation to Campbell. In April, Ward allowed the company to arrange to take up in September its note due November 20 and to give notes payable, respectively, four and six months from November 20 for the remainder of the debt. B P L B , Barings to Ward, Mar. 16, 1855, Jan. 25, Aug. 29, Sept. 5, 12,

NOTES TO CHAPTER XV

603

Oct. 3, io, 14, 1856, Apr. 18, 24, 1857; Barings to Charles Eilet, Sept. 5, 1856; BPOC, Ward to Barings, July 24, 1855, Aug. 8, Sept. 30, 1856, Mar. 24, Apr. 28, 1857, and pertinent enclosures. 12. Ibid., Sept. 2, Oct. 11, Nov. 15, Dec. 20, 26, 1853, Jan. 16, 1857, and pertinent enclosures; BPLB, Barings to Ward, Sept. 16, Oct. 28, Nov. 29, 1853, Jan. 10, 1854, Feb. 6, 1857. 13. BPOC, Ward to Barings, Nov. 22, 1852, Apr. 19, June 28, Oct. 13, 1853, Apr. 14, May 16, Sept. 4, 26, 29, Oct. 17, Nov. 25, Dec. 7, 12, 1854, Feb. 10, Mar. 20, 28, Apr. 3, May r, 15, June 29, 1855, July 28, 1857, and enclosures; S. G. Ward to T. Baring, Jan. 7, 1853; BPLB, Barings to Ward, July 12, 1853, Jan. 13, Apr. 4, May 2, Oct. 13, 17, 27, Nov. 14, 21, Dec. 22, 1854, Mar. 2, 9, Apr. 5, 13, 20, 27, May 18, 25, June 1, 15, Aug. 17, 1855, Feb. 15, 1856; Barings to J. M. Forbes, Feb. 15, 1856; Thomas Baring to S. G. Ward, Dec. 17, 1852; BPPD, newspaper clipping containing the answers of Forbes to accusations regarding the management of the Michigan Central; BPMC, Forbes to Barings, Oct. 16, Nov. 28, 1854. Ward thought it a mistake for the Michigan Central to have agreed in 1852 to hold $2,000,000 Illinois Central bonds for two years in exchange for an opportunity to get past the Indiana State line. The Barings purchased for Forbes 3,750 tons of rails delivered in the first four months of 1854. The price was ¿8.10. Payment was to be made in six months from the date of the bills of lading, without interest or commissions, at Boston, and at the prevailing rate of sterling exchange on London or in satisfactory bills. Extension of time to pay was made later in the year. Forbes owed ¿50,017, exclusive of his notes for £32,905 for purchase of iron, on Sept. 19, 1854. The Barings could not negotiate a contract for rails using Central Military Tract and Chicago & Aurora bonds as part payment to the ironmaster, but Forbes ordered 2,200 tons on the usual six months credit in Nov., 1854. The House of Baring refused to grant a loan of $150,000 to Governor Matteson of Illinois upon the security of Joliet & Northern Indiana bonds. Forbes was approached on the subject and turned to the Barings. He wanted to prove to Matteson the necessity of revising the tax laws of the State in order to improve its credit and that of railroads in it. The Barings disapproved on the ground that it was a political loan, would do harm to them if the operation became known, and would "lock up" the sum required. 14. BPOC, King & Sons to Barings, June 10, 1853; Ward to Barings, Sept. 25, 1855, Feb. 18, 19, 22, 26-27, Apr. 8, June 10, 1856, and enclosures; Ward, Campbell & Co. to Barings, Dec. 31, 1855, Feb. 20, Aug. 5, 1856, Jan. 23, Feb. 24, Mar. 14, 1857, New York Times, Dec. 24, 1855, on finances and railroads in Missouri; BPPD, Hannibal & St. Joseph Railroad blank "Indenture of Mortgage," dated Apr. 1, 1856; copy of mortgage issued to trustees, Apr. I, 1856; BPMC, Forbes to Barings, Jan. 29, Feb. 5, 8, 1856; Solon Humphreys to Barings, Sept. 5, 1856; BPLB, Barings to Ward, Jan. 24, 1854, Oct. 12, 1855,

604

NOTES TO CHAPTER XV

Jan. 18, 26, Feb. 19, Mar. 7, 20, Oct. 24, 1856, July 24, 1857; Barings to Ward, Campbell & Co., Jan. 4, t8, 1856. The Barings tested the London market for the Missouri bonds of Forbes in late 1855 but found no takers. Its slave status and the provision to redeem the bonds at the pleasure of the State, in addition to conditions in Kansas, made its securities undesirable to British investors. T h e total loan of the Hannibal & St. Joseph was for $5,000,000, not all to be issued at once. The security for the bonds was a first mortgage (really second to a prior lien of the State arising from its issuance of $3,000,000 in bonds to aid the railroad) upon about 600,000 acres of land received from the Federal government and ceded to the company. T h e trustees were W. H . Swift, Sidney Bartlett, and John Eliot Thayer. Among the subscribers to the issue were John C. Green, David Leavitt, S. Austin, T . Β. Curtis, McCalmont Brother & Co., many Boston friends of the Barings, and von Hoffman & Co., Schuchardt & Gebhardt, and others in N e w York on German account. The decision to take a portion of the Hannibal & St. Joseph loan was really taken almost entirely by Ward. Though the Barings in Oct., 1855, had authorized investment of $ 100,000, on Feb. 19, 1856, the day after Ward made the first tentative agreement, the Barings wrote that they deemed it "prudent to keep clear of any new engagements" until they could "see more clearly into the future." Yet they immediately approved the purchase and agreed to have interest payable in England at their countinghouse. They never expected to sell many in England and did not. The British investors did not want them. The partners had hoped to sell at least a few in the United States but were disappointed. The passage of the free banking law in Missouri in 1857 promised a later demand for securities in the State. Solon Humphreys, partner of E. D. Morgan & Co., Ν . Y., approached the Barings on the $10,000,000 7 % bond issue of the "Southwest Branch of the Pacific Railroad," of which $3,000,000 was guaranteed by the State and all secured by 1,000,000 acres of land. 15. BPMC, Thomas Swann to Barings, Dec. 22, 1852; C. H . Fisher to Barings, Mar. 8, 1853; BPOC, Ward to Barings, Jan. 13, 18, 21, Feb. 4, Mar. 1 , July I, 12, Sept. 12, 27, Nov. 29, Dec. 23, 1853, Mar. 7, 15, Apr. 1 0 - 1 1 , July 25, Nov. 13, 1854, July 17, 1855; Oelrichs & Lurman to Barings, July 5, 1852, May 3 1 , Aug. 4, Sept. 20, Oct. 2 1 , 24, Nov. 1, Dec. 23, 1853, Jan. 2, Feb. 7, Nov. 10, 1854; B P L B , Barings to Ward, Jan. 7, 21, June 17, 24, July 15, Sept. 23, 30, Nov. 29, 1853, Feb. 24, Aug. 8, 1854, Aug. 3, 24, 1855; Barings to Swann, Jan. 1 1 , 1853, May 5, 1854; Barings to Oelrichs & Lurman, May 5, Nov. 28, 1854; BPPD, newspaper clippings and other documents dated Jan. 20, 1853, Feb. 8, Mar. 7, 1854. Harrison's brother had married a sister of Ward's wife, but that fact only gave Ward entrée to investigate the condition of the B. & O. Duncan, Sherman & Co. and C. H . Fisher bought the $2,500,000 Northwestern Virginia Railroad loan in the spring of 1853. The B. & O. raised its funds for the most part in Baltimore.

NOTES TO CHAPTER XV

605

16. BPOC, Ward to Barings, Apr. 19, Oct. 21, 1853, Aug. 8, 28, Sept. 8, 13, Oct. 3, 6, 9, Nov. 10, Dec. 15, 1854, May 9, June 5, 19, July 24, Aug. 6, 10, 14, 21, 1855, June 24, Oct. 7, 21, 3 1 , Nov. 4, 1856, Jan. 12, 23, Feb. io, 1857; Ward, Campbell & Co. to Barings, Feb. 8, 1854, Sept. 30, Oct. 7, Nov. 1, 1856; BPLB, Barings to Ward, July 21, Aug. 4, 1 1 , 22, Sept. 15, Nov. 3, 28, 1854, Apr. 5, 27, May 18, June 22, 29, 1855, July 4, 18, Oct. 14, 24, Nov. 7, 20, Dec. 5, 1856, Jan. 2, 20, Feb. 27, Mar. 6, 1857. The Barings refused overtures from Nathaniel Thayer for joint ventures in New York Central shares in 1854 and 1856. The portion of the Barings in the 1855 venture was 85 shares at 100 3 / 1 6 and $33,000 6 % bonds at 87. The shares were sold at a profit; some of the bonds at a loss of a point or two. Among clients making purchases through the Barings were the Widow Delessert, Hope & Co., and Otto Goldschmidt, the husband of Jenny Lind. 17. BPOC, Ward to Barings, Nov. 22, 1853. He estimated that $35,000,000 was represented by railroad bonds given to ironmasters in exchange for rails and an equal amount by railroad and State bonds purchased directly by foreign investors. His comments were inspired by two articles in the New York Economist, which he forwarded to the Barings. He later forwarded the report of the Secretary of the Treasury, dated Mar. 2, 1854, which estimated foreign holdings of American railroad stocks and bonds at more than $52,000,000 as of June 30, 1853. Foreign holdings of all kinds of American securities were set at $184,000,000. BPPD, Mar. 2, 1854. Compare ibid., Mar. 13, 1854. 18. BPLB, Barings to Ward, Oct. 15, 1852, Sept. 6, 15, 21, 1853, Dec. 14, 1854, May 30, Sept. 5, Nov. 14, Dec. 19, 26, 1856, Jan. 9, June 5, July 3, Nov. 13, 1857, Apr. ι , 1859; Barings to King's Sons, May 1 1 , 1855; BPOC, Ward to Barings, Dec. 9, 1853, Dec. 2, 1856, June 5, 1857; Hopes to Barings, May 3, 14, 26, July 18, Aug. 16, Oct. 15, 1855; King's Sons to Barings, Dec. 9, 1856, Feb. 10, 1857; BPMC, memo, on deferred balances, Nov. 13, 1857; and BP, 1853-Aug., 1857, passim, for detailed discussion. The allocation of the "lock up" on Dec. 14, 1854, was as follows: Barings, £500.000·, King's Sons (including Robb), £200,000; and Fisher, £20,000. Robb's debt was secured by a deposit of $119,000 New Orleans bonds. 19. See references in footnotes 1 1 and 13 of this chapter and BPOC, Ward to Barings, Aug. 18, 1854, and enclosure. 20. New York Herald, Jan. 8, 1856; Smith and Cole, Fluctuations in American Business, pp. 181-182, 184; Myers, New Yor\ Money Market, pp. 35-37; BPPD, clipping from the United States Economist, Mar. 13, 1854. 21. Smith and Cole, op. cit., pp. 193-194; W. T . C. King, London Discount Market, p. 163; Clapham, Ban\ of England, II, pp. 222-226, 429; G. W. Van Vleck, The Panic of 1857 (New York, 1943), pp. 57-59; BP, 1853-Aug., 1857, passim. 22. GMCL, Taché to Glyn, Mills, Oct. 8, Dec. 3, 1853, Mar. 18, Dec. 2 1 , 1854, Mar. 3 1 , May 12, June 27, July 19, 1855, Apr. 19, 1857; William Cayley, Inspector General of Canada, to Glyn, Mills, May 12, July 17, 1855; C. E.

606

NOTES TO CHAPTER XV

Anderson, Deputy Receiver General of Canada, to Glyn, Mills, July 30, Sept. 10, 1855; Joseph C. Morrison to Glyn, Mills, Aug. 11, Sept. 22, 1856, Feb. 2, 28, Apr. 27, June 1, July 20-Aug. 17, 31, 1857; memo, dated Aug. 4, 1856; GMLB, Glyn, Mills to Barings, Aug. 24, 1854; BPLB, Barings to Glyn, Mills, Dec. 16, 1856; and GMCL and GMLB, passim. It is to be hoped that an article will soon be written on the relations of the two London merchant bankers to the financial development of Canada between 1848 and 1861. 23. GMCL, Taché to Glyn, Mills, Nov. 27, 1852, Mar. 24, Apr. 15, 1853, Aug. 4-25, 1855; Anderson to Glyn, Mills, Aug. 6-Oct. 1, 1855; memo, dated Jan. 26, 1854, which should be 1855, as indicated from context; Barings to Glyn, Mills, Dec. 10, 1855; GMLB, Glyn, Mills to Taché, Oct. 22, 1852; Glyn, Mills to C. T. Brydges, Aug. 24, 1854; Glyn, Mills to T. B. Smith, Jan. 5, 1855; Province of Canada, Sessional Papers, 1857, XV, no. 2, Appendix No. 4, Statement of the Affairs of the Province of Canada, Dec. 31, 1856; BPLB, T. Baring to W. H. Swift, Aug. 24, 1855; T. Baring to Benjamin Holmes, Jan. 18, 1856; T. Baring to John Ross, Apr. 8, 1853; and BP, 1853-57, passim. 24. BPMC, Joseph Howe to Barings, Nov. 29, 1852, June 20, Aug. 15, 17, Sept. ι (to T. Baring), 1855; Charles Fisher to Barings, Dec. 26, 1855, Jan. 10, i l , 1856; Bates to T. Baring, Aug. 3, 1855; office memo, in re Nova Scotia, 1855; Ryan Brothers & Co. to Barings, Jan. 10, 1853; U. J. Tessier, mayor of Quebec, to W. Stevenson, June 18, 1853; memo, by Stevenson, July 8) 1853; Joseph Morrin, mayor of Quebec, to Barings, Apr. 8, 1855; BPLB, Barings to Howe, Dec. 6, 1852, June 3, Nov. 25, 1853, May 26, July 28, 1854, July 5-6, Aug. 16-17, 1855; T. Baring to Howe, Sept. 4, 1855; T. Baring to W. I. Ritchie, May 24, 1855; T. Baring to J. H. T. Manners-Sutton, Jan. 4, Feb. 29, 1856; Barings to Manners-Sutton, Aug. 15, 22, 1856; Barings to Stevenson, Dec. 3, 1852, June 3, Aug. 18-19, 1853; Barings to Morrin, April 27, May 4, June 8, 15, July 16, 1855, Mar. 20, 1857; Barings to Ryan Brothers & Co., Dec. 10, 1852; BPOC, folder No. 78, New Brunswick Railway Impost Fund to 31 Oct. 1857. The Barings refused to aid in marketing loans for Montreal and various railroads. 25. Jenks, op. cit., pp. 244, 285, 397 note 18, 402 note 18; BPLB, Barings to Hottinguers, Feb. 25, Sept. 20, 1853, Feb. 25, Mar. 7, 27, 1854, Aug. 16, 1855, Feb. 14, 1857; T. Baring to Hottinguers, June 26, 1857; Barings to Hopes, June 7, July 18, 1853, Apr. 27, 1855, June 30, 1857; Barings to A. d'Eichthal, Jan. 4, 1855; T. Baring to d'Eichthal, Aug. 17, Sept. 4, 1855, June 6, 1856; Barings to Crédit Mobilier, July 14, 1855; Barings to Ward, Campbell & Co., Apr. 21, 1855; Barings to King's Sons, Apr. 21, 1855; T. Baring to Sir Charles Hotham, Melbourne, Dec. 12, 1855; T. Baring to Isaac Pereire, Apr. 1 1 , 1857; Barings to Stieglitz & Co., Nov. 28, 1856; T. Baring to Baron Stieglitz, July 31, 1857; Barings to Ward, Apr. 24, June 12, 1857; Barings to Edward Zimmerman, Feb. 8, 1854; Barings to George White, Apr. 8, 1857; BPMC, Memo, by W. B. Liot re a steamship line between Chile and the River Plate, Aug. 18, 1856;

NOTES TO CHAPTER XV

607

memo, rt Chilean loan, Apr. 26, 1857, J. D. Powles, chairman of the Committee of Spanish American Bondholders, to Barings, Aug. 8, 1855; F. de Lesseps to the Barings, Aug. 5, 1855; Bates to T. Baring, Apr. 10-11, 1855; T. Baring to Bates, July 5, 12, 1855; BPOC, Hopes to Barings, June 10, 1854, Oct. 15, Nov. 24, 1855; Hopes to T. Baring, Sept. 15, 1856. George White, who had assisted in earlier negotiations, was sent to Buenos Aires in 1857. Zimmerman, Frazier & Co., the leading correspondent of the Barings in Buenos Aires, had been selected as the local agent by the government in 1855. Thomas Baring went to Russia in October, 1856, to investigate the railway project there. 26. Ibid., Ward to Barings, Sept. 30, 1857 (enclosure); BPLB, Barings to Ward, July 15, 1859, Mar. 9, i860. 27. BP, Sept. 10, 1852-Aug. ι, 1857, passim, with special reference to BPLB, Barings to Ward, Mar. 3, 1854, June 12, 1857; Barings to the Liverpool affiliate, May 18, 1853, June 13, 1855, June 11, 1857; BPOC, Barings, Liverpool, to the London house, Jan. 18, 1855, Jan. 19, 1856. 28. BPLB, Bates to Napoleon III, Sept. 3-4, 1855; Barings to Ward, Sept. 21, 1855, J a n · 1857; BP> Special folder on French grain, Ward to Barings, Jan. i l , June 24, 1856, and accounts dated June 17, 1856. For newspaper speculation about the operation see BPPD, newspaper clippings, New York Herald, Nov. 22, 1855, Chicago Press, Nov. q, 1855, and New York Times, Nov. 26, 1855. On financing the operation, see BPLB, Barings to Alexander & Co., Sept. 28, Dec. 28, 1855; Barings to Overend, Gurney & Co., Jan. 8, Apr. 30, 1856; BPMC, Overend, Gurney & Co. to Barings, Jan. 9, Feb. 13, 1856; Bates to Thomas Barings, Nov. 8, 1855. O" June i7> 1856, total debits to the account of the grain operation were ¿1,896,288. Ward received a bonus of ¿1,000 for his extra efforts in connection with the grain purchases, with Wellman receiving an added ¿750 and Popkin, the clerk, ¿250. 29. BPOC, Ward to Barings, July 5, 1853; Grinnell, Minturn & Co. to Barings, Jan. 9, 24, 30, Apr. 17, 24, May 22,'June 5, Aug. 8, Sept. 11, 1855; Barings (Liverpool) to the London house, Feb. 9, 1855; BPLB, Barings to Ward, July 5, 1853, Mar. 29/30, Dec. 21, 1855, Feb. 15, 1856, May 8, June 12, 1857; Barings to Grinnell, Minturn & Co., Dec. 22, 1854. 30. Ibid., Barings "to George Griswold, Dec. 17, 1852; Barings to Grinnell, Minturn & Co., Dec. 28, 1852; Barings to J. C. Burnham & Co., Feb. 18, 1853; Barings to the Liverpool affiliate, June 11, 1857; Barings to W. H. Aspinwall and S. W. Comstock, Aug. 18, 1854; Barings to Ward, Jan. 28, July 15, 1853, Apr. 28, May 12, July 11, 14, Aug. 22, Sept. 29, Oct. 13, 27, Nov. 10, 14, 28, Dec. 14, 1854, Jan. 12, Mar. 2, Oct. 12, 1855, Jan. 1 1 , Mar. 14, June 20, July 18, Aug. ι, 5, 15, Sept. 12, Oct. 10, Dec. 26, 1856, Jan. 30, Feb. 2, Mar. 6, 13, May 15, 29, July 24, 31, 1857; BPOC, Ward to Barings, Jan. 3, Feb. 8, Aug. 5, 1853, May 16, Aug. 1, 8, 11, Oct. 17, 20, 27, 31, 1854, Nov. 6, 1855, Feb. ι, May 30, Aug. 12, Oct. 21, Dec. 19, 1856, Jan. 16, Feb. 24, July 17, 1857; Goodhue & Co. to Barings, Mar. 15, 1853; Grinnell, Minturn & Co. to

608

NOTES TO CHAPTER XV

Barings, Oct. 13, 1855, Feb. 7, 1857; W. H. Aspinwall and S. W. Comstock to Barings, Aug. 5, 1854; New York Herald, Jan. 1, 1856; BPPD, Freight circular of Alfred Laming & Co., London, Jan. 1, 1856. 31. BPOC, Barings to Grinnell, Minturn & Co., Nov. 19, 1852, Mar. 24, 1853; Barings to Ward, Dec. 3, 1852, Jan. 21, July 1, Aug. 2, 1853, Mar. 29/30, 1855; Barings to the Liverpool affiliate, June 1 1 , 1857; BPOC, Ward to Barings, Dec. 21, 1852, and enclosure. Grinnell, Minturn & Co. put more ships on the London run in the spring of 1853, and raised wages, but those measures failed to result in successful competition to the steamers by 1855. The Barings kept the New York house informed of its problem by sending it a prospectus of a screw propeller in Nov., 1852! 32. Ibid., Dec. 14, 1852, Apr. 21, 1854; Grinnell, Minturn & Co. to Barings, Nov. 29, Dec. 9, 1854, Jan. 9, Feb. 21, Apr. 18, 24, May 1, June 13, 27, Sept. h , 1855, and 1856-57, passim; BPLB, Barings to Ward, Dec. 3, 28, 1852, Mar. 24, May 20, 1853, Mar. 31, Apr. 7, 18, June 23, 1854, Apr. 13, 1855; Barings to Grinnell, Minturn & Co., Apr. 13, May 25, Sept. 28, 1855. In the second quarter of 1854, pigs and bars could be sent to New York for J.fìd less freight per ton than to Boston. Of the $2.00 extra cost of iron to Boston via New York, $1.00 was for coastwise freight, 50^ for trucking in New York, and the remainder for insurance. The advantage of the new and more efficient works of the Weardale company was accentuated by the failure of a number of Staffordshire ironmasters in 1854, and by a "growing want of Iron Stone" in Staffordshire. 33. Ibid., Barings to Carruth, Whittier & Sweetser, Feb. 10, Aug. 23, 1853; Barings to Ward, Dec. 10, 1852, Jan. 21, 1853, Mar. 16, Apr. 20, 27, Nov. 19, 30, Dec. 7, 28, 1855, Jan. 11, 18, Feb. 1, Mar. 14, July 25, 1856; Barings to Fullerton & Raymond, Apr. 27, Oct. 5, 1855; BPOC, Ward to Barings, Apr. 3, 1855, Feb. 22, 1856. 34. Ibid., June 28, July 12, Aug. 12, 19 (enclosure), Sept. 16, 1853, Mar. 28, July 4, Dec. 12, 1854, Jan. 2, June 19, Dec. 26, 1855, Mar. 10, 1856, Apr. 14, May 5, July 7, 1857; Ward to Bates, June 6, 1853 (enclosure), Nov. 8, 1856; BPLB, Barings to Ward, July 26, Sept. 30, Oct. 14, 1853, Mar. 7, 1854, May 18, 1855, Feb. 9, Apr. 29, May 4, 1856, Jan. 23, Mar. 27, May 1, 8, 1857. In Nov., 1856, Ward said the Barings had "every first rate E. I. account in Boston." Two months later the London house observed that it would be a "long time before the return of order" at Canton. When in 1854 Paine, Strecker & Co. of Batavia remarked that inasmuch as the Dutch East India Co. drew on the Barings at 6 months date, the drafts of Americans on 8, Bishopsgate at 6 months sight sold at a slightly lower rate, the London house adhered to the latter usance on the ground that the privilege of an additional two months to pay more than compensated for the occasional "trifling" disadvantage in negotiating the drafts. Three years later the Barings refused to permit Lawrence & Stone, agents of the Bay State and Middlesex woolen mills, to issue drafts at 6 months sight from

NOTES TO CHAPTER XV

609

Australia. Since bills on English account were usually drawn at 30 days sight there, the power to draw at 60 or 90 days sight, which was the usance enjoyed by Americans holding credits granted by Ward for use in Australia, was considered quite generous by the Barings. Though Alsop & Co., San Francisco, was given no credit without guarantee, the Barings did permit it in 1853 to have a credit under which the power to draw in Canton was transferable by endorsement. That concession was highly unusual. The Barings preferred to have some reliable firm in Canton as the designated drawer. 35. BPLB, Barings to Ward, May 8, June 12, 1857; Barings to Robertson & Co., Dec. 24, 1852, May 9, 1855, July 27, 1857; Barings to C. G. Richards, Sept. 2, 1853; Barings to Revely & Co., Penang, Mar. 8, 1856; Barings to Edward Horsman, July 22, 1857; Barings to James Odier, July 7, 9, 1857. 36. Smith and Cole, op. cit., pp. 193-194; BPLB, Barings to Ward, Oct. 4, 1853, Feb. 7, Mar. 7, 10, 17, May 12, June 13, July 7, Aug. 18, Sept. 5, Oct. 6, 13, 27, Dec. 8, 29, 1854, Jan. 19, 26, Feb. 26, Mar. 2, 1855; Barings to McCall, Blake & Fairchild, May 5, 1854; BPMC, H. McCall to Barings, Mar. 4, 1854; McCall, Blake & Fairchild to Barings, Apr. 18, 1854; W. H. Smith to Barings, June 2i, 1854; BPOC, Ward to Barings, Feb. 3, Mar. 28, Apr. 11, 18, 21, May 23, 30, June 9, 27, July 4, 21, Aug. 1, 3-4, 10, 18, 22, 28, Sept. 1, 20-21, Oct. 9, 11-12, 20, 24, 31, Nov. 3, 7, 14, 19, Dec. 14, 26, 1854, Jan. 2, 12, Feb. 6, 13, Mar. 20, Apr. 9, 1855, and pertinent enclosures. 37. BPLB, Barings to Ward, Mar. 9, Apr. 27, May 25, 1855, Jan. i8, Sept. 16, 26, 1856, Jan. 9, May 15, 22, 29, June 19, 1857; BPOC, Ward to Barings, Apr. i l , 24, May 9, Dec. 26, 1855, Mar. 10, July 3, Sept. 2, Dec. 23, 1856, Feb. 24, May 5, 12, 1857, and pertinent enclosures; New York Herald, Jan. 6, 12, 1856. It should be observed that the Barings curtailed their dry goods credits in the face of "remarkably successful" business among the American firms during 1855 a t l d 1856. In 1855 Hovey & Co. had the largest retail business in Boston, conducted its business with regularity and skill, and showed Ward a balance sheet every 6 months. For these reasons he felt safe in^giving it more credit in proportion to its capital than any other dry goods house. On Feb. 1, 1855, the assets of Hovey & Co. were $614,000, its liabilities $257,000. The two firms in Philadelphia were M. L. Hallowell & Co. and Henry Farnum & Co. 38. BPLB, Barings to Ward, Mar. 22, 1853, Jan. 20, Feb. 21, 1854, Feb. 2, Nov. 14, 1855, May 23, Aug. 5, Dec. 9, 1856, May 1, 8, 1857. For examples of the activities of Oelrichs & Lurman, see BPOC, Oelrichs & Lurman to Barings, Aug. 29, 1853, J a n · 3°. i8 54> Nov. 5, 1855, Aug. 19, Dec. 1, 1856. Among the firms with which the Barings might have and did not open exchange accounts were R. K. Swift, of Chicago, the Farmers & Exchange Bank, of Charleston, S. C., and Parrott & Co. and Tallant & Wilde of San Francisco. Ibid., Ward to Barings, May 17, 28, 1853, May 27, 1856; D. J.

610

NOTES TO CHAPTER XV

Tallant to Barings, Aug. 4, 1855; BPLB, Barings to Ward, May 31, 1853, Sept. 5, 1855; Barings to Tallant, Sept. 3, 1855; Barings to Tallant & Wilde, Sept. 5, 1855; BPMC, Tallant to Barings, Aug. 31, Sept. 3, 1855. 39. BPLB, Barings to Ward, Mar. 24, Apr. 29, May 20, Aug. 19, Sept. 6, 1853, Sept. 29, 1854, Feb. 20, Sept. 7, 1855, Feb. 29, Nov. 7, 21, Dec. 19, 1856, Jan. 9, 1857; Barings to Ward, Campbell & Co., July 6, 1855; BPOC, Ward to Barings, Apr. 9, 14, June 2, Sept. 2, 1853, Jan. 6, 10, Apr. 11, Oct. 27, 1854, Feb. 20, 1855, Oct. 31, Nov. 8, 28, Dec. 23, 1856; Ward, Campbell & Co. to Barings, Sept. 21, 1853, June 5, July 25, 1855. Late in 1856 the Barings feared that one of their clients, W. F. Weld & Co., was going to accept the agency of Peabody & Co. in Boston, but it did not do so. Ward learned that Brown Brothers & Co., New York, was so jealous of Duncan, Sherman & Co. that it hinted that Watts Sherman had to go to England to straighten out the relations of his firm with his London principal. In contrast, Ward spoke most highly of Peabody's new partner, J. S. Morgan, when he departed for London in the summer of 1854. That Duncan, Sherman & Co. was reported to be actively urging the switch of the Federal government's accounts to Peabody & Co. did not contribute to the good will of the Barings. 40. BPLB, Barings to Ward, Mar. 18, Apr. 15, May 20, 1853, May 5, June 9, Sept. 19, Nov. 3, 1854, Feb. 26, May 25, Oct. 19, Nov. 23, 1855, Aug. 1, 1856; Barings to King's Sons & Co., Sept. 15, 1854; BPOC, Ward, Campbell & Co. to Barings, July 16, Aug. 2,1853, May 5, Aug. 1, 1854; Ward to Barings, Aug. 23, 1853, May 30, June 6, 1854, Aug. 15, 1856. After Oct. 10, 1854, the stamp tax on foreign bills enhanced the advantage of shipping gold. In October, 1855, the Barings ordered Ward to ship gold when sterling stood at 109.75, e v e n if l° s s occurred, but soon decided that there was no fear of an efflux of gold from the Bank of England and rescinded the order. Special orders to ship gold were again sent out in August, 1856, but the situation of sterling exchange was not then conducive to action. Belmont shipped extensively to the Rothschilds when bills were quoted at 109.75 a n d made a profit because he took out no insurance. The Barings normally wished no gold unless the sterling rate was 110 because they always insured the shipments. 41. BPLB, Barings to Ward, Jan. 20, Mar. 10, July 11, Sept. 15, Oct. 6, 17, Nov. 21, 1854, Feb. 9, 1855; BPOC, Ward to Barings, Feb. 22, Dec. 12, 1854, Apr. 3, 1855; BPPD, newspaper clipping, advertisement of an exchange of letters between George Peabody & Co. and the Board of Inland Revenue, Somerset House, Dec. 4, 13, 1854. At first the Barings were informed that no stamp duty needed to be paid on bills remitted to themselves. When this proved untrue, they still decided to make no charge. 42. BPLB, Barings to Ward, Apr. 22, 1853. For details on the events leading to the termination of the account with Blake, Ward & Co. — ibid., Dec. 10, 1852, Feb. 25, Apr. 19, 22, 1853; Bates to Ward, Mar. 18, 1853; BPOC,

NOTES TO CHAPTER XV

611

S. G. Ward to Barings, Nov. 19, 1852, Feb. 22, 25, Mar. 4, Apr. 5, 1853; BPMC, Blake, Ward & Co. to Barings, Jan. 4, 1853; BPPD, circular of Blake, Howe & Co., Jan. 27, 1857. The partners in Blake, Howe & Co. were G. B. Blake, his brother John Rice Blake, and James Murray Howe. In November, 1852, Ward had proposed to Thomas Baring that Blake, Ward & Co. should issue all the traveling credits in Boston; with a larger number of people coming into its office the Boston house might build up that phase of the business more than if it were divided with the agent of the Barings. His principals denied him permission to refer anyone to Blake, Ward & Co., which was to grant credits just as Ward and the New York house did — only to those who came in and asked for them. 43. BPMC, Henry Lee, Jr., to Barings, Dec. 31, 1852; Lee, Higginson & Co. to Barings, Mar. 31, 1854, Jan. 8, 1855; Fay, Mudge & Attwood to Barings, Mar. 17, 1857; BPLB, Barings to Ward, Feb. 22, Mar. 22, July 26, 1853, Nov. 10, Dec. 8, 22, 29, 1854, Jan. 19, Feb. 2, 9, Mar. 13, Dec. 14, 1855, Aug. 5, Sept. 5, 12, 1856, June 12, July 17, 1857; Barings to Lee, Higginson & Co., Apr. 28, 1854, Feb. 2, 1855; BPOC, Ward to Barings, Mar. 8, 1853, J a n · 3> Oct. 20, Nov. 29, 1854, Feb. 27, Dec. 11, 1855, May 2, July 22, Aug. 26, Sept. 9, Nov. 25, 1856, Jan. 23, May 26, June 26, Aug. 4, Sept. 8, 1857. Until new arrangements were made in July, 1853, Lee, Higginson & Co. paid 54% commission on the first ¿200,000 of bills it issued within any one year and on those sold in excess of that sum. The Boston house drew ¿584,000 in its first 12 months of operation. It operated with Mathews, Finlay & Co. of New Orleans, which bought up a majority of the bills used to cover the drafts sold by its Northern colleague. Through the stringency of 1854 Lee, Higginson & Co. worked its account to the "entire satisfaction" of the Barings, though the London house at times feared that the credit of ¿50,000 was larger than should be given to a firm which had claimed a capital of only $250,000 in 1853. Fay, Mudge & Attwood had an estimated capital of from $600,000 to $800,000, but reports to Ward indicated that none of the partners was a first-class business man. The credit of the house was raised to ¿40,000 in 1856 after it had requested ¿60,000. During 1856-57, Cahuzac Brothers & Co. of Havana was authorized to use ¿10,000 of the credit of Fay, Mudge & Attwood.,, 44. BPOC, T. W. Ward to Bates, Feb. 8, 1853; S. G. Ward to Bates, Feb. 4, 17, 1856; Ward to Barings, Mar. 7, 22, 24, Oct. 28, 1853, May 23, 1856, Apr. 23, June 22, 1858, May 15, i860; BPLB, Barings to Ward, Feb. 26, June 4, 1859. On Feb. 26, 1858, the account of Hayward & Dorr showed a debit balance of ¿8,067.3.3. That figure was reduced an undisclosed amount by sales of securities and by payments received from both Hayward & Dorr and French, Wells & Co., one of the former's creditors (¿449.10.10 in May, i860, for example). 45. Ibid., Barings to King & Sons, Dec. 10, 1852, Oct. 21, 1853; Barings to King's Sons & Co., Oct. 28, 1853, Jan. 24, Oct. 27, 1854, Mar. 28, May 23,

612

NOTES TO CHAPTER XV

1856, Jan. 2, Mar. 13, June 12, 1857; Barings to Hopes, Nov. 1 1 , 1853; Barings to Ward, Jan. 20, 1854, Oct. 5, 1855; BPOC, King & Sons and King's Sons & Co. to Barings, Jan., 1853-Aug., 1857, passim, especially Oct. ix, 1853. 46. BPOC, Ward to Barings, Nov. 16, 1852, Apr. 19, 29, 1853, Mar. 24, 1854, May 4, 1855; Ward, Campbell & Co, to Barings, July 23, 1856; BPLB, Barings to Ward, Mar. 31, 1853, Apr. 21, 1854; MHS, Ward Papers, Diary, 1827-53, June 26, July 3, 1845, Feb. 14, 1851, May 16, 1852; Ward to Bates, Dec. 31, 1845; obituary of G. C. Ward in clipping, May 5, 1887. The Barings set the commission at lA% in spite of their conviction that no London house could profitably accept and pay bankers' bills for less than Vi%· At the time (Mar. 31, 1853) only Goodhue & Co. and Lee, Higginson & Co. enjoyed 1 4 % accounts, the latter even then receiving that commission only after the first ¿200,000 accepted in any given year. 47. BPLB, Barings to Ward, Mar. 20, 1856; BPOC, Ward to Barings, Apr. 18, 1856. 48. BPMC, Alfred Penn, president of the Union Bank, to Barings, Nov. 24, 1854; P. N. Wood, cashier of the Union Bank, to Barings, Jan. 29, 1855; Enoch French, cashier of the Union Bank, to Barings, July 15, 1856; BPLB, Barings to French, Aug. 22, 1856; Barings to Ward, Aug. 5, Sept. 12, 1856; BPOC, Ward to Barings, Aug. 26, Sept. 9, 1856. The bank had a capital of $1,500,000 in 1856, had redeemed the State bonds assigned to it, had been reorganized, and had already ventured extensively in domestic exchange. 49. Ibid., Forstall to Barings, Apr. 22, June 10, 1853, Dec. 2, 1854; Ward to Barings, Mar. 16, 1855; BPLB, Barings to Ward, Feb. 1 1 , 26, July 8, 1853, Mar. 2, 1855, Mar. 28, June 6, 24, July 1 1 , 1856; Barings to King's Sons, Apr. 5, 1855. The Barings ordered Jecker, Torre & Co. to cover its account in 1854 and declined to sanction a special exchange operation in 1856. 50. BPMC, Charles Stetson to Barings, July 28, 1855; BPLB, Barings to Ward, Oct. 19, 1855, Feb. 26, Dec. 3, 1858; BPOC, Ward to Barings, Nov. 17, 1855, Feb. 5, 1856, Nov. 16, 1858. 51. BPLB, Barings to Ward, Dec. 16, 1853, Jan. 20, Sept. 5, 15, Nov. 21, 1854, Feb. 2, June 15, 1855, June 13, 20, July 22, Aug. 22, 1856; BPOC, Ward to Barings, Jan. 13, Nov. 3, 1854, Mar. 6, 1855, Feb. 20, Aug. 14, 1856. The Barings permitted the bank to draw ¿10,000 against the Pennsylvania bonds in 1853, upon which the limits were set so high that no sale could be made. The bank was to remit to cover in four months. It did not cover its account and did not remove its limits for sale of the bonds until September, 1854. 52. When Col. Colt, the manufacturer of the Colt firearms, was reported to indulge in sharp practices, the Barings refused to grant him a credit, though they had his account. BPOC, Ward to Barings, Mar. 3, 1854, June 3, 13, 1856, and enclosures; BPLB, Barings to Ward, June 6, 1856, July 10, 1857. The Barings lent Thomas Trout, a young cotton buyer in Charleston, S. C., $3,000 at 5 % for two years from Jan., 1856. Ibid., Nov. 30, 1855, Jan. 18, 1856; BPOC, Ward to Barings, May 26, 1857.

NOTES TO CHAPTER XV

613

The Barings labeled as "unusual" their uncovered credit to Moré, Ajuria & Co., Havana, in 1856. BPLB, Barings to Ward, Apr. x, Nov. 26, 1856. 53. Ibid., Barings to Overend, Gurney & Co., July 26, Oct. 4, 1853, Feb. 1, Mar. 31, Apr. 11, May 16, 18, 1854, Jan. 8, 9, Apr. 30, 1856; Barings to Lawrence, Cazinove & Co., Aug. 6, 1853; Barings to Alexander & Co., Aug. 24, 1854, Sept. 28, Dec. 28, 1855; BPMC, Overend, Gurney & Co. to Barings, Dec. 20, 1854, Jan. 4, Feb. 13, 1855. 54. BPOC, Ward to Barings, Dec. 2, 1851, Dec. 16, 1852, Oct. 28, 1853, Feb. 10, 1857; Forstall to Barings, June 24, 1854; BPLB, Barings to Ward, Jan. 7, Feb. 8, Mar. 4, July 1, 1853, Jan. 23, Feb. 27, 1857; Baring to Adot, Spalding & Co., July 21, 1853. The accounts of Israel Thorndike and Nott & Co., dating from 1837, were closed in 1853 and 1854, respectively. 55. For the reduction of the commission on South American acceptances, see BPOC, Ward to Barings, Dec. 6, 1852, Jan. 19, Feb. 18, 1853, BPLB, Barings to Ward, Dec. 24, 1852, Jan. 28, Feb. 4, 1853. For other comments and actions on requests for reductions of commissions, see ibid., July 14, 1854, Jan. 26, Feb. 26, Mar. 29/30, 1856, Apr. 1, 11, Nov. 25, 1856; T. Barings to d'Eichthal, Dec. 15, 1856; BPOC, Ward to Barings, Sept. 14, 1854, Feb. 1, Mar. 3, 1855, Nov. 11, Dec. 12, 1856, Mar. 13, 1857, and the pertinent enclosures. The arguments for reducing the charges on the South American credits were that (1) competitors with branch houses saved commissions and could do the business for less than the Barings were charging; (2) some London competitors had offered clients of the Barings lower rates than the Barings charged; (3) steam communication brought South America nearer and therefore shortened the credit afforded by 60 days sight bills; (4) the amount of South American credits of the Barings was only about ¿325,000; and (5) the Barings might lose some business if they refused. 56. Ibid., Apr. 23, Dec. 16, 1853, Jan. 24, Feb. 12, 29, Mar. 25, 1856, Feb. 20, 1857; BPLB, Barings to Ward, Jan. 25, Mar. 4, Apr. 29, 1853, June 22, July 20, 1855, Feb. 15, Mar. 14, 1856. 57. BP, Apr. 4, 1854-Jan. 2, 1855, passim. Among those allowed to remit late were George Perkins, J. O. Ward, George B. Upton, E. C. Bates & Co., M. L. Hallowell & Co. (one of two dry goods accounts of the Barings in Philadelphia), Lane, West & Co., French, Wells & Co., and John Griswold. Several clients failed, including William Piatt & Son, but most of the accounts were already covered. 58. BPLB, Barings to Ward, June 6, 1856; BPOC, Ward to Barings, May 19, 27, June 20, 24, July 22, 1856; Goodhue & Co. to Barings, June 25, 1856; BPMC, Bates to T. Baring, Apr. 28, 1856. At this same time France and Belgium were having some friction over the entry into France of Belgian newspapers which had been advocating measures considered undesirable by Napoleon III. Linking that trouble with the Central American imbroglio, Bates wrote to Baring, "It is unpleasant to have a large claim [that for the

614

NOTES TO CHAPTER XVI

French grain order] on a despotic Government just now and equally so to hold republican bonds but I suppose all will come right." 59. BPLB, Barings to Ward, June 19, 1857. CHAPTER XVI 1. Van Vleck, Panic of 1857, pp. 60-71; Myers, New Yor\ Money Market, pp. 141-142; Smith and Cole, Fluctuations in American Business, pp. 184, 191, 194-195; Thorp, Business Annals, p. 126; BPOC, Ward to Barings, Oct. ι, 1857, and BP, Aug. 24-Oct. 14, 1857, passim. 2. BPOC, Ward to Barings, Aug. 25, 1857; BPLB, Barings to Ward, Sept. i l , 1857; BP, Aug. 24-Oct. I, 1857, passim. 3. BPOC, Ward to Barings, Aug. 14, 21, Sept. 1, 1857; BPLB, Barings to Ward, Sept. i-Oct. 1, 1857, passim. 4. Clapham, Ban\ of England, II, p. 429; W. T. C. King, London Discount Market, pp. 181, 197; BPLB, Barings to Ward, Oct. 2, 9, 16, 20, 23, 1857. 5. Ibid., Oct. 16, 20, 23, 30, 1857. 6. BPOC, Ward to Barings, Sept. 15, Oct. 12, Nov. 6, 1857; BPLB, Barings to Ward, Oct. 2, 9, 1857; Barings to Oelrichs & Lurman, Oct. 2, 1857; Bates to Ward, Oct. 13, 1857. The Barings refused to join Oelrichs & Lurman in a flour operation early in October and later declined to advance Ward ¿5,000 to buy some of the low-priced securities in the American stock market. 7. Ibid., Barings to Grinnell, Minturn & Co., Apr. 9, 1858; W. T. C. King, London Discount Market, pp. 181, 197-199. For details of the crisis, see D. M. Evans, The History of the Commercial Crisis, 1857-1858 (London, 1859), and Hans Rosenberg, Die Weltwirtschaft\risis von 1857-59 (Stuttgart, 1934). 8. BPMC, a listing of goods at Liverpool and London for account of the Barings, dated 1857; BPLB, Barings to Ward, Nov. 27, 1857; BP, Nov.-Dec., 1857, passim. 9. BPLB, Barings to Ward, Oct. 30, Nov. 6, 13, 24, Dec. 1, 8, 15, 1857, Jan. I, 1858. 10. BPOC, Ward to Barings, Sept. 8, 28-29, ° c t · 5> I2> D e c · r> 8> i857> Jan. 8, 1858; BPLB, Barings to Ward, Sept. 20, Oct. 2, 9, Nov. 12, 29, 1857, Jan. 8, 22, Feb. 2, 1858. The Barings held ¿152,000 on McCalmonts in Feb., 1858. 11. Ibid., Oct. 9, 13, 20, 23, 30, Nov. 6, 10, 12, 20, 29, Dec. 8, 1857, Apr. 30, May 7, 28, 1858; BPOC, Ward to Barings, Oct. 20, 23, Nov. 3, 6, 17, 24, 1857, Jan. 19, 1858; Oelrichs & Lurman to Barings, Oct. 27, Nov. 14, 30, Dec. 8, 22, 1857. 12. Ibid., King's Sons to Barings, Aug. 25, Oct. 20, Nov. 3, 24, 1857; Ward to Barings, Oct. 18, 1857; BPLB, Barings to Ward, Nov. 3, 6, 1857; Barings to King's Sons, Nov. 6, 13, 1857. 13. BPOC, Ward to Barings, Sept. 15, Oct. 1, 12, 21, 27, 30, Nov. 10, Dec. ι, 28, 1857; Ward to Bates, Oct. 29, 1857; BPLB, Barings to Ward, Oct. 2, 9, 16, 30, Nov. 6, 12, 20, 24, 29, 1857; Barings to Grinnell, Minturn & Co., Nov. 20, 1857.

NOTES TO CHAPTER XVI

615

14. BPOC, Ward to Barings, Sept. 10, Oct. 13, Nov. 10, 1857, Jan. 5, 1858; BPLB, Barings to Ward, Sept. 20, 25, Oct. 2, 16, 22, 30, 1857, Jan. 22, 1858; Barings to Forbes, Dec. 4, 1857; BPPD, Circular to the Stockholders of the Michigan Central Railroad, Oct. 1, 1857; BPMC, W. Appleton to Bates, Oct. 9, 12, 1857; Forbes to Barings, Nov. 9, 1857. 15. BPOC, Ward to Barings, Oct. 23, 1857, Jan. 12, 15, Feb. 2, Nov. 30, Dec. 17, 1858; BPLB, Barings to Ward, Aug. 13, Sept. 17, 1858. 16. Ibid., Sept. 20, Nov. 3. 13, Dec. 18, 1857; BPOC, Ward to Barings, Oct. 12, Dec. ι, 8, 22, 1857. 17. BPLB, Barings to Overend, Gurney & Co., Sept. 5, 1857; T. Baring to Hottinguers, Oct. 5, 14, 1857. 18. Ibid., Barings to Ward, Mar. 26, Apr. 9, June 4, 1858; BPOC, Ward to Barings, Apr. 13, June 22, 1858. Ward was also authorized to increase Wellman's salary either $500 or $1,000 per year. 19. Thorp, op. cit., pp. 127, 164; Smith and Cole, op. cit., pp. 167, 184, 191, 194-195; Van Vleck, op. cit., chap. 5; Samuel Rezneck, "The Influence of Depression upon American Opinion, 1857-1859," Journal of Economic History, II, pp. 1-23; W. T. C. King, London Discount Market, pp. 205-208; BP, 1858-60, passim. In June, i860, the Barings remarked to Ward: "Some distrust of foreign politics continues but the general feeling is that nothing serious can happen for the coming twelve months." 20. BPOC, Ward to Barings, Dec. 22, 1857, Feb. 16, 1858; Minturn to Bates, Feb. 16, 1858; BPPD, clipping from the New York Times, Jan. 21, 1858, containing note from Peabody; BPLB, Barings to Ward, Feb. 26, 1858. 21. Ibid., Barings to Charles Baring, July 23, 1858. 22. BPOC, Ward to Barings, Jan. 26, Mar. 9, 1858, July 9, Oct. 16, Nov. 20, i860; BPLB, Barings to Ward, Sept. 2, 1859. Regarding the Hurtados, see BPLB, Barings to J. M. Hurtado, Apr. 2, 1857; Barings to Ward, Oct. 15, 1858, Apr. ι, 1859, Mar. 1, i860. Among Latin American houses holding credits were Maxwell, Wright & Co. of Rio de Janeiro, and Moré,' Ajuria & Co. and J. C. Burnham & Co. of Havana. 23. Ibid., Jan. 8, 15, 22, Feb. 5, May 7, 1858, Aug. 17, i860; BPOC, Ward to Barings, Apr. 23, 1858, Aug. 3, i860. 24. Ibid., Apr. 26, May 24, 1859; BPLB, Barings to Ward, Nov. 12, 1858, May 13, June 10, 1859. 25. BPLB, Barings to Ward, Mar. 12, Nov. 19, 1858; BPMC, Padelford, Fay & Co. to Barings, Nov. 30, i860. The Barings had purchased an unrevealed amount of iron for account of Padelford, Fay & Co. for delivery to the Atlantic & Gulf Railroad in i860. 26. BPOC, Ward to Barings, Nov. 16, 1858, Jan. 10, 17, i860, and enclosures. 27. BPMC, Lee, Higginson & Co. to Barings, Apr. 5, 1859; T. C. Baring to Thomas Baring, Dec. 21, 1858, Jan. 10, 1859; BPOC, Ward to Bates, July 26, Oct. 29, 1858; Ward, Campbell & Co. to Barings, Apr. 17, May 22, i860; BPLB, Bates to Ward, July 20, Nov. 19, 1858; Barings to Ward, Jan. 21, 1859, Mar. ι, i860. Ward, Campbell & Co. was reorganized as of Jan. 1, 1859, to

616

NOTES TO CHAPTER XVI

take in Henry Grafton Chapman and Thomas Charles Baring, a son of Charles, Bishop of Durham, and therefore a nephew of Thomas Baring. T . C. Baring aided Ward in the crisis of 1857 and traveled in Canada. He married a daughter of R. B. Minturn and in 1867 returned to England to become a partner in the Liverpool house. 28. Ibid., Apr. 29, May 6, 13, 20, 27, June 3, 10, 17, July 15, 1859, Apr. 13, May 4, 25, July 7, i860; BPOC, Ward to Barings, May 13, 28, 1859. 29. Ibid., Jan. 8, Oct. 7, 12, 1858; BPLB, Barings to Ward, Oct. 1, 22, 29, 1858. 30. BP, Apr., 1858-Dec., i860, passim. 31. BPLB, Barings to Ward, Nov. 5, 1858, May 20, Oct. 21, Nov. 18, 1859, Mar. ι, 30, Apr. 5, May 1 1 , i860; Barings to Grinnell, Minturn & Co., Mar. 2, Apr. 5, i860; BPOC, Grinnell, Minturn & Co. to Barings, Feb. 13, i860; Ward to Barings, May 24, Aug. 15, i860; BPPD, circular on the freight market in 1859, by Seymour, Peacock & Co., Jan. 2, i860; BP, i860, passim, on bar and pig iron. 32. BP, Jan., 1858-Dec. i860, passim. 33. BPLB, Barings to George H. White, Dec. 8, 1857; Barings to L. Gisborne, July 29, 1859; Barings to Hopes, Nov. 13, 1858, June 3, 8, 17, 1859; Barings to Don Sylvestre Ochagaira, no date but before a letter dated Aug. 30, i860; BPMC, Bates to C. B. Young, Aug. 26, 1858; BPOC, A. Dudley Mann to Barings, Sept. 17, 1855-Mar. 1, 1862, passim. 34. BPLB, Barings to Hopes, Dec. 24, 1857; Barings to James W. Gilbart, Dec. 24, 1857; T. Baring to Halver Schon, Mar. 19, 1858. 35. BPLB, 1858-60, passim. 36. BPLB, Sept., 1857-Dec., i860, passim; G M L B and G M C L , Sept., 1857Dec., i860, passim; Report of the Commission appointed to inquire into the affairs of the Grand Trun\ Railway (Quebec, 1861), Appendix XXIII, p. 145; BPPD, prospectus of the ¿2,800,000 loan, Dec. 3 1 , 1859. 37. BPLB, Barings to Ward, Dec. 1 1 , 1857, Nov. 4, 1859. Advances on crops in Ceylon for the 1862-63 shipping season, for example, totaled ¿137,000 (BPOC, Robertson & Co. to Barings, Dec. 30, 1862). 38. BP, Special Folder No. 78, Lord John Russell to Thomas Baring, Dec. 3 1 , i860.

INDEX Accounting control, 126, 251 Accounts, double, 143, 167, 194, 202, 227, 248, 250, 252-253, 539 n. 27, 550 n. 5 1 Adams, C., Jr., 3 3 0 - 3 3 1 Administration, 24-54, 76-90, 1 2 4 - 1 6 3 , 395. 419-422· See also Management; Policy Agents, relations with, 1 7 1 - 1 7 3 , 179, 1 9 3 194, 2 1 1 - 2 1 2 , 247-249, 287, 3 4 7 348, 395-396. 4 2 1 - 4 2 2 ; salaries of, 1 0 1 - 1 0 2 , 421, 506 n. 23. See also Barker Brothers & Co.; Forstall, E. J.; Gracie, Archibald; Ward, Samuel Gray; Ward, Thomas Wren; Willing, Richard; Subagents Agricultural commodities, 121, 190, 255, 297. 376, 402-403, 437, 471, 477· See also specific commodities Alabama, bonds of, 2 6 1 - 2 6 3 , 289-290 Allen, S. & M., 170, 520 n. 1 2 Alley, Stanton & Co., 250 Alsop, Richard, 1 7 3 , 195, 242, 278 America, see United States Amsterdam, see Holland; Hope & Co. Appleton, William, 186, 189-190, 1 9 9 200, 202, 256, 260, 286, 523 n. 7, 577 n · 28 Argentina, bonds of, 66, 435, 559 n. 56; relations with merchants in, 104 Arkansas, bonds of, 339 Arnold, Constable & Co., 446, 464 Ashburton, see Baring, Alexander; Baring, Francis III; Baring, William Bingham Aspinwall, W. H., 414. See also Howland & Aspinwall Astor, John Jacob, 49, 78 Atlantic Cotton Mills, 407

Austin, Edward, 247, 255 Austria, loans to, 39, 64, 415

Baguenault & Co., 60, 289, 499 n. 9 Baltimore, Md., 30, 36, 202. See also Donnell (John) & Sons; Oelrichs & Lurman; Oliver (Robert) & Brothers Baltimore & Ohio Railroad Co., 281, 289-291, 293, 3 1 0 , 322, 326, 328, 355. 369, 387, 402, 405, 407, 4 1 0 4 1 1 . 427, 592 n. 32 Bank Act of 1844, suspension of, 375, 461 Bank failures, 208, 272, 295, 549 n. 42. See also Business failures Bank of America, 200, 2 3 1 , 245, 282, 533 n. 28 Bank of Commerce (N. Y. C.), 282, 287-288, 352, 365-366, 369, 399, 470 Bank of England, 202, 207, 262, 273, 275-278, 374; attitude toward American securities, 207, 2 1 7 - 2 1 9 , 2 2 1 , 223, 227; cooperation with merchant bankers, 217-224; credit management, 1 8 3 - 1 8 4 ; curtailment, 208; discount rates, 207, 262, 273, 276, 374-375. 381, 459, 461, 470, 578 n. 2; loan policy, 206; metallic reserve, 276; outflow of gold from, 205, 208; stabilization activities, 270-273 Bank of France, 276, 374, 376-377 Bank of Louisiana, 7 1 , 360, 367, 556 n. 45 Bank of New York, 49, 72, 282 Bank of Pennsylvania, 96, 135, 1 5 1 , 200, 368, 452, 457, 543 n. 6, 570 n. 46

618

INDEX

Bank of Stephen Girard, 50, 245, 275, 526. See also Girard, Stephen Bank of the United States, 196-197, 199-201, 206-207, 213, 218, 240, 267, 275-278, 289, 365, 501 n. 33; collapse of, 272, 549 n. 42; purchase of Federal loans by, 69-70; relations with Barings, 30, 35, 97-120, 134, 148, 153, 159, 165, 167-169, 176-178, 184, 206, 217-218, 238, 242, 276-277; suspension of specie payments, 272, 275. See also Biddle, Nicholas Baring, Alexander (ist Baron Ashburton), 24-54, 38. 43-85, 487 n. 25; as patron of art, 47; business ability, 48; American affiliations, 29, 48; connection with Bank of England, 48; home, 46-47, 496 n. 55; marriage of, 29; personal characteristics, 46; political activities, 44-45, 76, 496 n. 56; retirement, 79, 97 Baring, Charles I, 6-7, 9, 43-44; business activities, 7, 486 n. 17; political views, 11; religious views, 487 n. 25. See also Baring (John & Charles) & Co. Baring, Charles II, 10, 44, 487 n. 25 Baring, Charles Thomas, 44 Baring, Dorothy E., 28, 44 Baring, Edward Charles (Lord Revelstoke), 43-44. 395, 421 Baring, Elizabeth, 6, 17, 44 Baring, Elizabeth Vowler, 6-7 Baring, Emily, 44 Baring, Evelyn, 44 Baring, Sir Francis, 6-8, 38-44; American interests, 28, 39; and the London house, 12-23; as patron of arts, 38; attitude toward colonial trade, 19-20, 28; education of, 7;

family life, 40-41; investments of, 13, 16; losses of, 13; personal characteristics of, 16, 40; political activities of, 18-20, 39; property of, 40, 495 n. 44; tribute to, 41; writings of, 39. See also Baring (Sir Francis) & Co.; Baring (John & Francis) & Co. Baring, Francis II (ist Baron Northbrook), 44 Baring, Francis III (3rd Lord Ashburton), 44, 79-80 Baring, George, 44 Baring, Harriett, 44 Baring, Henry, 29, 38, 43-45 Baring, Henry Bingham, 43-44 Baring, Johann, see Baring, John I Baring, John I (Johann), 4-7, 44, 485 η. 4; background of, 4-5 Baring, John II, 6, 8 - 1 1 , 38, 43-44. See also Baring (John & Francis) & Co. Baring, John III, 44, 79, 512 n. 5 Baring, Thomas Vowler, 6-7, 43-44 Baring, Thomas II, 38, 43-45, 495 n. 51 Baring, Thomas III, 43-44, 79-82, 126127, 395, 419-420, 473-474, 607 n. 25; interests of, 81, 420, 503 n. 59. See also Bates, Joshua; Baring Brothers & Co.; Mildmay, Humphrey St. John Baring, William, 44 Baring, William Bingham (2nd Lord Ashburton), 44 Baring, William Windham, 44 Baring Brothers & Co., accounting control, 126, 251; administration, 24-54, 76-90, 124163, 395, 419-422; agents, compensation of, 1 0 1 - 1 0 2 , 421, 506 n. 23; agents, relations with, 1 7 1 - 1 7 3 , 179, 193-194, 2 1 1 - 2 1 2 , 247-249, 287, 347-348, 395-396, 421-422, see also specific agents; Bank of U. S., relations with, 30, 35,

INDEX 9 7 - 1 2 0 , 134, 148, 153, 159, 165, 1 6 7 - 1 6 9 , 1 7 6 - 1 7 8 , 184, 196, 238, 242, 261, 2 7 6 - 2 7 7 ; b o o m period, operations during, 181— 204; branch organization, see Liverpool; breadstuffs, trade in, 1 2 1 , 190, 255, 297. 376, 402-403. 437. 4 7 1 , 477. 5 1 3 n. 10, 566 n. 26, 575 n. 13; British government, relations with, 24, 357; Canadian investments, 199, 370, 4 1 4 4 1 5 , 432-434. 473. 597 n· 48; capitalization, 129—130, 380; China trade, 104, 160, 1 9 0 - 1 9 1 , 254, 353. 525 n. 1 7 ; coffee, trade in, 105, 1 2 1 , 1 4 6 - 1 4 7 , 159, 167, 180, 190, 193, 2 1 5 , 254, 403, 5 1 3 n. 9, 518 n. 64, 520 n. 7; commission houses, relations with, 348, 352, see also specific houses; commissions charged, 34, 72, 1 5 2 153. 193. 354, 400, 405. 440. 547 n. 36, 556 n. 45, 565 n. 22, 566 n. 27, 584 n. 21, 590 n. 30; commissions, policy regarding, 1 5 2 154; competition, 55, 85, 9 3 - 9 4 , 153, 1 7 1 , 193-202, 239-242, 261, 273, 301, 345. 394. 440. 453. 4 6 6 - 4 6 7 , 470, 520 n. 12, 579 n. 10; conservatism, 42, 1 6 4 - 1 7 6 , 246, 250, 2 5 2 - 2 5 3 , 407, 4 6 7 - 4 7 6 , 565 n· 24, 569 n. 42; control, xviii, 42, 2 5 0 - 2 5 1 , see also Administration; Agents, relations w i t h ; Management; copper, trade in, 1 5 4 ; correspondents o f , 130, 1 6 2 - 1 6 3 , I 93"" 194, 233, 349-350. 399. 4 1 2 . 505 n9. 523 n· 7, 5 5 ° n. 5 1 ; cotton operations, 74—75, 95, 105—108, 128, 1 7 3 - 1 7 6 , 1 8 4 - 1 8 9 , 193, 228, 240, 255-260, 2 9 8 - 3 0 1 , 3 5 9 - 3 6 4 , 3 7 6 - 3 7 7 , 404, 436-442, 4 7 0 - 4 7 1 . 477. 537 n. 10, 567 n. 33, 576 n. 2 1 , 588 n. 28; credit management, 166-168, 202, 2 0 9 - 2 1 5 , 224-234, 246-254, 382,

619 398-400, 520 n. 8, 562 n . 8, 569 n. 42, 582 n. 19, 589 n. 30, 6 1 3 n. 5 5 ; credit policy, 1 3 8 - 1 5 0 , 246-254, 3 4 9 356, 4 4 2 - 4 5 5 . 468; credit-rating system, 1 3 1 - 1 3 8 , 154158, 296, 349; credits outstanding, 1 7 1 , 232, 249-250, 254. 295, 3 5 4 - 3 5 5 . 382, 397-399, 459. 468, 576 n. 19, 591 n. 3 1 ; credits, uncovered, 1 4 0 - 1 4 2 , 202, 2 1 3 , 232, 248, 252, 296, 353, 365, 383, 469, 479, 508 n. 32, 514 n. 15, 5 1 9 n. 3, 568 n. 38, 613 n. 52; crises, operations during, 205-234, 2 7 3 - 2 8 3 , 3 7 3 - 3 8 1 , 435; criticisms of, 63, 1 5 8 - 1 6 3 , 1 9 1 , 234, 2 7 1 , 283-288; curtailment, 1 6 4 - 1 8 0 , 202-204, 2 0 9 2 1 5 , 262, 268, 270-304, 364-372, 407, 410, 4 1 7 - 4 5 5 , 423-436; discount policy, 1 4 9 - 1 5 0 , 290; division of labor, 82-83, 1 2 5 - 1 3 1 ; double (divided) accounts, 143, 167, 194, 202, 227, 248, 250, 2 5 2 - 2 5 3 ; 539 n. 27, 550 n. 5 1 ; dry goods, dealings in, 192, 194, 209, 214, 248-249, 252, 356, 3 7 9 - 3 8 ° . 382, 398, 443-446, 469, 582 n. 18; errors, 1 5 8 - 1 6 3 ; exchange accounts, 194-202, 443, 4 5 0 - 4 5 1 , 453, 463, 469-470; expansion, 89-123, 192, 200-202, 2 5 0 - 2 5 1 , 303, 354, 3 8 1 - 3 8 9 , 405; Far Eastern trade, 104, 209, 232-233, 397, 443-444. 4^9, 474. 598 n. 50, see also specific localities; Federal loan, participation in, 383-388; financial policy, 27, 288-294, 402, see also Credit management; Credit policy flaxseed, trade in, 190, 524 n. 13; foreign loans, marketing of, 27—28, 5 8 - 6 4 , see also specific localities; f o u n d i n g of, 3—23, 38; French loans, 60, 376, 415, 435-438, 498 n. 7, 547 n. 33, see also H o t tinguer & C o . ; French railways, investment in, 370, 410;

620

INDEX

functions, 1 2 5 - 1 3 1 , 475; headquarters, 38, 128-129; hemp, trade in, 254; immigrant remittances, handling of, 400-401; Indian corn, trade in, 354, 376, 403; information, sources of, 95, 107, 1 5 4 158, see also Agents, relations with; innovations, 89-123, 250-252, 3 5 3 354. 359-360. 389-418, 478-479; insurance, placing and collecting of, 404, 567 n. 33, 589 n. 29; interest rates, 96, 152-154, 170, 234, 429, 440, 449, 451, 497 n. 63; investments, 53, 68-74, 150-154, 289294, 398-418, see also specific investment items; iron, trade in, 108, 173, 190, 254, 297, 349, 355-356, 401-402, 430, 441, 468, 509 n. 41, 586 n. 24, see also Railroads, raw materials for; joint-account purchasing, 125, 135, 213, 264, 296, 369-371, 377, 403, 409, 414, 446, 448, 470, 472-473, 498 n. 7, 509 n. 41, 520 n. 8, 588 n. 27; labor, division of, 82-83, 1 2 5 - 1 3 1 ; Latin American trade, 104, 192-193, 248, 474, see also specific localities; legal action against debtors, 247; letters of credit, terms of, 248; losses (financial), 122, 159, 233, 404, 499 n. 17, 576 n. 21, 598 n. 50; management, 65-76, 98-106, 124-204, 238, 246-254, see also Administration; Credit management; Policy; manufacturing by, 349; marketing, methods of, 3-4, 42, 1 5 0 152, see also Agents, relations with, specific commodities and securities; municipal bonds, marketing of, 151— 152, 423, 434, 583 n. 20, 592 n. 32; organization, 37-48, 106-107, 395~ 396, 419-422; packet business, 184-189, 250, 300301, 350, 401, 441, 471; partners, 3, 8-13, 20, 38, 43, 79, 106107, 1 2 5 - 1 3 1 , 395, 419-422, 579 n. 11;

personnel, 75-84, 347, see also Agents; Liverpool; Partners; Sub-agents; policy, xviii, 42, 53, 68, 72, 124-163, 197, 2 1 0 - 2 1 1 , 246, 288-294, 346354, 386, 389, 423, 436, 467-468; political influences upon, 90-91, 270273, 284-285; profits, 62-63, 256-257, 281, 302, 363, 400, 446; public relations, 42, 53-55, 63, 75, 85, 93, 124, 161-162, 191, 234, 253, 271, 283-288, 301, 308-309; railroads, bonds of, 261, 409-416, 426436, 472-473, 601 n. 8, see also specific railroads; railroads, raw material for, 173, 192, 247, 291, 355-356, 384. 401-402, 405, 430, 468, 521 n. 16, 525 n. 21, 548 n. 36, 586 n. 25, 590 n. 30, 602 η. IX, 603 n. 13, 615 n. 25; reorganization of, 76-85; research by, 95, 107, 154-158, see also Agents, relations with; Russian investments, 64, 190, 248, 254, 407, 435, 473, 499 n. 17, 517 n. 49, 547 n· 335 salaries and wages, 101—102, 129, 179, 421, 506 n. 23; securities, marketing of, 150-152, 194202, 260-269, 471, 476-477, see also specific securities; South American trade of, 65, 173, 180, 613 n. 55, see also Latin and South American countries; specialization, attitude toward, xvii, 12, 342, 348; State bonds, marketing of, 96, 151, 245, 260—269, see dso specific States; status, see Public relations; sub-agents, 396, 585 n. 23; sugar, trade in, 105, 193, 215, 254, 376-377, 403, 578 n. 1; tallow, trade in, 121, 190; tea, trade in, 190, see also China; Far East; tobacco, trade in, 297, 372, 377, 380, 403, 415, 576 n· 21; United States, dominant interest in, 89-304;

INDEX U. S. Navy Dept., relations with, 3 5 1 , 397. 527 n· 32; U. S. State Dept., relations with, 3 5 1 ; wartime activities, 24-54; woolen trade, 5, 8-9, 1 1 , 103, 190, 507 n. 26; working capital, 1 2 9 - 1 3 0 , 380. See also Baring Brothers & Co., Ltd.; Baring (Sir Francis) Sc Co.; Baring, Jackson, Gould & Vickary; Baring (John & Charles) St Co.; Baring (John St Francis) & Co.; Baring, Short St Collyns; Liverpool Baring Brothers & Co., Ltd., 481-482. See also Baring Brothers St Co. Baring (Sir Francis) St Co., 38, 4 1 - 4 2 . See also Baring, Sir Francis Baring, Jackson, Gould & Vickary, 1 1 Baring (John & Charles) St Co., 8 - 1 2 Baring (John it Francis) it Co., 8, 1 2 23. 3 1 ; dissolution of, 37-38. See also Baring Brothers St Co. Baring, Short & Collyns, 7 Baring-Gould, Edward, 10, 44 Baring-Gould, William, 1 0 - 1 1 , 44, 487 n. 25 Barker Brothers St Co., 396 Bates, Joshua, 43, 79-85, 89, 103, 1 1 3 , 1 2 1 - 1 2 2 , 126, 137, 162, 165, 167, 178, 1 8 1 - 1 8 2 , 188, 1 9 1 , 207-208, 239, 244, 252, 254, 288, 298, 300, 3 1 2 , 347, 3 6 1 , 363, 365. 389, 4 1 9 420, 437, 504 n. 66, 5 1 2 n. 2 Bates (Joshua) St Baring (John), 73, 79, 83, 505 n. 9 Beebe St Co., 446, 454, 464 Beers (J. D.) St Co., 168, 170 Bell & Grant, 2 1 2 , 222. See also Grant, Bell St Co. Belmont, August, 301 Biddle, Nicholas, 73, 97-120, 177, 201, 219-220, 227, 234-235, 238, 240, 245-246, 275, 3 1 6 , 5 1 0 n. 54, 543 n. 6. See also Bank of the United States Biddle (Thomas) & Co., 1 1 6 , 168 Bingham, William, 28-30 Birckhead St Co., 104, 180, 193

621

Bird, Savage St Bird, 32 Black Ball Line, 187, 350 Blake, Ward St Co., 399, 404, 407, 409, 446, 448-449, 584 n. 2 1 , 590 n. 31 Blockade, circumvention of, 3 5 - 3 6 Boalt, Charles L., 4 1 1 , 594 n. 41 Bollman, Erich, 65 Bonds, American, as distinguished from stock, 5 1 6 n. 48; marketing of, 68-74, 1 0 8 - 1 2 3 , 1 5 1 152. See also Bank of the United States; States of V. S. Boom periods, 181—204. See also Business conditions Boston, Mass., bonds of, 423, 583 n. 20, 592 n. 32; money rates in, 92, 176. See also City Bank of Boston Boston St Lowell Railroad, sale of equipment to, 173, 520 n. 7, 521 n. 16, 525 n. 2 1 Boston St Providence Railroad, sale of equipment to, 173 Boston St Worcester Railroad, sale of equipment to, 173 Boyd, Benfield St Co., 28, 39 Branch of firm, see Liverpool Brazil, trade with, 91, 232, 254, 569 n. 42. See also South America Breadstuffs, trade in, 1 2 1 , 190, 255, 297, 376, 402403. 437. 471. 477. 5 1 3 n· 1 ° . 5^6 n. 26, 575 n. 13 Brown (W. and J.) St Co., 79, 106, 170, 175. 187-189, 195, 214, 2 1 6 - 2 1 7 , 2 2 1 - 2 2 3 , 239, 257-259, 301, 353 Brown, Shipley & Co., 279, 345, 3 6 6 367, 394, 468, 560 n. 4, 576 n. 20 Bryant St Sturgis, 73-74, 76-77, 107, 160 Buenos Aires, Argentina, 66, 1 0 4 - 1 0 5 , 236, 435. 559 n · 56 Bullion, trade in, 125, 4 5 1 . See also Gold Burgoyne St Co., 400, 452 Burnham (J. C.) St Co., 377, 569 n. 42 Business conditions, 55-57, 77-78, 1 6 4 -

622

INDEX

165, 1 8 1 - 1 8 4 , 203-242, 270-283, 298, 3 0 7 - 3 1 1 , 342-344. 362» 373376, 390-395. 456-457, 465-466. See also Business failures; Crises; Panics Business failures, 73, 1 2 2 - 1 2 3 , 159, 163, 179, 203, 218, 233, 267, 298, 3 7 4 375. 379. 381, 393. 4i, 425. 45°, 460-461, 507 n. 25, 518 n. 65, 525 n. 19, 536 n. 48, 613 n. 57. See also Bank failures; United States Business policy, xviii. See also Policy Cadwalader, Thomas, 1 1 7 , 5 1 1 n. 57 Calcutta, India, business failures in, 1 9 1 - 1 9 2 ; correspondents in, 104-105, 2 3 1 ; trade with, 352-353. 519 n. 73, 573 n. 2, 588 n. 27. See also Gisborne & Co.; India Canada, bonds of, 199, 414-415. 432-434. 473. 597 n. 48. See also New Brunswick; Upper Canada Canton, China, trade with, 104. See also China, trade with Capital, flow of, 63, 92, 479, 519 n. 7 1 . See also Gold; Silver; Specie Capitalization, 129-130, 380 Carey, J. L., 323 Chauncey, Elihu, 168, 314, 3 1 9 - 3 2 1 Chesapeake & Ohio Canal Co., 281, 289290, 293, 310, 321-328 China, trade with, 104, 160, 1 9 0 - 1 9 1 , 254, 353, 525 n· 17. See also Far East China Mutual Insurance Co., 426 Citizens' Bank, 310, 3 1 5 , 330, 333, 335, 470 City Bank of Boston, 110, 134, 163, 167, 230, 519 n. 3 Cloth trade, 5, 8-9, 1 1 , 103, 190, 507 n. 26

Coffee, trade in, 105, 1 2 1 , 146-147, 159, 167, 180, 190, 193, 2 1 5 , 254, 403, 5 1 3 n. 9, 518 n. 64, 520 n. 7 Coleman, Lambert & Co., 222, 239 Combination voyages, 1 4 2 - 1 4 3 , 516 n. 31 Comly, Samuel, 103, 106, 108, 133, 174, 184, 190, 225, 247, 250, 256, 523 n. 7 Commission houses, 348, 352. See also specific houses Commissions, 34, 72, 1 5 2 - 1 5 3 , 193, 354, 400, 405, 440, 547 n. 36, 556 n. 45, 565 n. 22, 566 n. 27, 584 n. 21, 590 n. 30 Competition, 55, 85, 93-94, 153, 1 7 1 , 193-202, 239-242, 261, 273, 301, 345. 394, 44°, 453, 466-467, 470, 521 n. 12, 579 n. 10 Conservatism, 42, 164-176, 246, 250, 252-253, 407. 467-476, 565 n· 24, 569 n. 42 Consolidated Association of the Planters of Louisiana, 96, n o , 201, 255, 310, 312, 315, 33°, 333-335. 549 n. 44, 556 n. 46 Continent, the, business conditions on, 266-267; financial relations with, 26-28, 1 7 1 , 232, 249, 355, 382, 397, 459; peak years on, 58—64. See also specific locations Control, xviii, 42, 250-251. See also Administration; Agents, relations with; Management Copper, trade in, 154 Corcoran, W. W., 386, 388, 394, 577 n. 26 Corcoran & Riggs, 386, 388, 396-397, 400, 407, 409, 577 n. 26 Corn, Indian, trade in, 275, 354-358, 374-376, 4°3 Corning (Erastus) & Co., 402, 429, 454 Correspondents, relations with, 130, 162-163, 193-194, 233, 349-350, 399, 412, 505 n. 9, 523 n. 7, 550 n. 51

INDEX Coster & Carpenter, 167, 170, 528 η. 39 Cotton, trade in, 74-75, 95, 105-108, 128, 1 7 3 - 1 7 6 , 184-189, 193, 228, 240, 255-260, 298-301, 359-364, 376377. 404. 436-442. 470-471. 477, 537 n. 10, 567 n. 33, 576 n. 2 1 , 588 n. 28 Coutts & Co., 268, 277 Credit, information, 154—158; management, 166-168, 202, 209-215, 224-234, 246-254, 382, 398-400, 520 n. 8, 562 n. 8, 569 n. 42, 582 n. 19, 589 n. 30, 613 n. 55; outstanding, 1 7 1 , 232, 249-250, 254, 295, 354-355, 382, 397-399, 459, 468, 576 n. 19, 591 n. 3 1 ; policy, 1 3 8 - 1 5 0 , 246-254, 349-356, 442-455, 468; rating agency, 349; rating system, 1 3 1 - 1 3 8 , 154-158, 296, 349| revolving, 133, 140, 568 n. 40; uncovered, 140-142, 202, 213, 232, 248, 252, 296, 353, 365, 383, 469, 479, 508 n. 32, 514 n. 15, 519 n. 3, 568 n. 38, 613 n. 52; volume of, by countries, 171 Crises, operations during, 205-234, 273-283, 373-381, 435 Criticisms, 63, 1 5 8 - 1 6 3 , 1 9 1 , 234, 271, 283-288 Cropper, Benson & Co., 75, 105 Cryder, John, 173, 302, 582 n. 19 Cuba, trade with, 105, 201, 216, 254, 377, 578 η. ι Curtailment, 164-180, 202-204, 2092 1 5 , 262, 268, 270-304, 364-372, 407, 410, 417-455, 423-436 Curtis Benjamin R., 3 1 7 , 3 3 0 - 3 3 1 , 340, 345, 399 Davis, Brooks & Co., 159, 247, 402, 587 n. 25 Deacon, John, 38, 43 De Forest & Co., 405, 590 n. 30

623

Delaplaine (John F.) & Co., 179, 522 Delessert & Co., 63, 289 Denison & Co., 277, 279-280, 283, 3 1 3 , 544 n· 9 Denmark, loan to, 64 Dennistown & Co., 394, 460-461 Depressions, 270-273. See also Business conditions; Crises; Panics Devon trade, 5, 8-9, n , 20 Dickason (Thomas) & Co., 162, 519 n. 72 Discount, bank rates, 202, 207, 262, 273, 2 7 5 278, 374, 381; market rates, 176, 182, 273, 374-375, 381, 417, 431-432, 578 n. 2; on foreign loans, 62; policy, 149-150, 290. See also United States Dollars, export of, 29. See also Gold; Silver; Specie Donnell (John) & Sons, 180, 521 n. 18 "Double accounts," 143, 167, 194, 202, 227, 248, 250, 252-253, 539 n. 27, 550 n. 51 Drexel & Co., 399, 582 n. 19 Dry goods, 192, 194, 209, 214, 248-249, 252, 356, 379-380, 382, 398, 443446, 469, 582 n. 18 Duncan, Sherman & Co., 394, 399, 447448, 466, 584 n. 21 Dunlap, Thomas, 275, 277-278, 287 Dunning, Richard Barré (2nd Lord Ashburton), 17 Durant, Lathrop & Co., 405 East India Co., 10, 16, 19-20, 26, 36, 39, 183 East Indian trade, 104, 134, 159, 297, 353, 513 π· 12, 5 i 8 n. 64. See also East India Co. Economic conditions, 11-12, 1 8 1 - 1 8 4 , 205-209, 235-239, 270-273. See also Business conditions; Crises; Panics Establishment of firm, 3 - 2 3 , 38

624

INDEX

Europe, 26-28, 58-64, 1 7 1 , 232, 249, 266-267, 355, 382, 397. 459· See also specific localities Exchange accounts, 194—202, 443, 450— 451. 453. 463. 4 6 9 - 4 7 0 Exclusive agencies, policy regarding, 143, 1 5 7 Exeter, England, Baring family in, 4—12; woolen trade in, 5, 8-9, 11 Expansion, 89—123, 192, 200—202, 2 5 0 251. 303. 354, 381-389, 405

F a r East, trade with, 104, 209, 2 3 2 - 2 3 3 , 397, 4 4 3 - 4 4 4 . 469, 474, 598 n . 50. See also specific localities Fay, M u d g e & Attwood, 449, 464, 6 1 1 n . 43 Federal loan, participation in, 3 8 3 - 3 8 8 Fesser, Picard & Co., 104, 5 1 4 η. 13 Financial policy, 27, 288-294, 402. See also Credit, m a n a g e m e n t ; Credit, policy Fisher, C. H . , 409, 413, 422, 452, 464, 600 n . 7 Flaxseed, trade in, 190, 524 n . 13 Fletcher, Alexander & Co., 79, 93-94, 97-98, 123, 195, 2 3 1 , 239, 301, 345, 394 Florida, bonds of, 199, 279, 339 Flour, see Breadstuffs Forbes, John Murray, 426, 429, 454 Foreign loans, m a r k e t i n g of, 2 7 - 2 8 , 58-64. See also specific localities Forstall, E d m u n d J., n o , 330, 3 3 2 - 3 3 3 , 3 3 6 - 3 3 7 , 346, 379. 383, 396, 400, 403, 422, 437, 446, 453, 556 n . 45, 561 n . 7, 576 n . 2 1 , 588 n . 27 France, loans to, 58-64, 376, 4 1 5 , 4 3 5 - 4 3 8 . 498 n . 7, 547 n . 33; railroad investments in, 370, 410; trade with, 248.

See also Hottinguer & Co.; Napoleonic Wars Functions, of merchant bankers, 1 2 5 - 1 3 1 , 475. See also specific functions

Gair, Samuel S., 43, 107, 128, 347 Gallatin, Albert, 493 n. 28 Gilmor, Robert, 30, 75, 397 Gilmor (Robert) & Sons, 30, 36, 202 Gilmore, Blake & W a r d , 400 Girard, Stephen, 3 0 - 3 1 , 49-50, 75, 493 n. 23, 497 n. 64. See also Bank of Stephen Girard Gisborne & Co., 104, 1 9 1 - 1 9 2 , 2 3 1 , 588 n. 27 Glyn, Mills, Hallifax & Co., 352, 3 7 0 3 7 1 , 414, 432-434, 473 Gold, discovery of, 390-393, 591 n. 3 1 ; m o v e m e n t of, 29, 3 5 - 3 7 , 56, 125, 2 0 7 208, 244-246, 274-276, 3 7 4 - 3 7 9 , 390-393, 407, 451, 457-462, 466, 470, 579 n. 4. See also Capital, flow of; Specie Good Friends, 49 Goodhue, Jonathan, 2 3 1 , 260, 582 n. 19 Goodhue & Co., 75, 96, 100, 103, 1 0 6 108, 133, 1 4 1 , 1 7 4 - 1 7 5 , 1 7 9 - 1 8 0 , 1 8 6 - 1 8 8 , 192, 200, 210, 2 1 3 - 2 1 4 , 225, 228—230, 253, 256, 260, 282, 288, 296, 360-361, 363, 366, 383, 397, 3 9 9 - 4 0 0 , 404-405, 4 5 0 - 4 5 1 , 460, 463, 469, 521 n. 18, 5 3 1 n. 17, 550 n. 51, 563 n . 16, 576 ns. 21 a n d 22, 582 n. 19 Goodhue & W a r d , 100. See also Goodhue & Co. G o w a n & Marx, 1 1 6 , 222, 231 Gracie, Archibald, 36, 185, 348, 359, 3 6 1 , 367, 383, 396, 403, 422, 437, 463, 524 n. 7, 561 n. 7, 576 n. 21 Gracie, Prime & Co., 528 n. 39 Grain trade, 220. See also specific grains G r a n d T r u n k Railway Co., 433-434, 473 G r a n t & Stone, 230, 247, 250, 253, 286, 296, 348, 397, 405, 550 n. 51

INDEX Grant, Bell & Co., 239. See also Bell & Grant Gray (Horace) & Co., 108, 379 Gray, William, 99 Gray, William R., 395 Great Western, 2 3 6 - 2 3 7 , 279 Grinnell, Minturn & Co., 189, 250, 297, 301,

350,

354-355,

357-358> 377, 391, 397,

401-403,

405,

303,

327,

438,

348,

441-442,

460,

464,

561

n. 6 , 5 6 2 n. 8 , 5 6 4 n. 2 2 , 5 8 6 n. 'Griswold, George, 242, 282 Griswold, John, 297, 350 Griswold, N . L . & G., 295, 520 n. 4

24

625

Houqua, 192, 3 5 3 House of Baring, see Baring Brothers & Co. Hovey (C. F . ) Sc Co., 446, 609 n. 37 Howland, G. G. Sc S., 1 3 7 , 1 4 3 , 167 Howland Sc Aspinwall, 348, 400, 4 0 9 4 1 0 , 5 8 9 n. 3 0 Humphreys it Biddle, 2 4 1 , 258-259, 266, 275, 2 7 7 H u t h St C o . , 7 9 , 1 0 3 , 1 9 5 , 2 2 7 - 2 2 8 , 2 3 9 , 277, 507

280,

n.

282,

302,

336,

bonds of, 3 1 0 , 3 3 7 - 3 4 0 ,

126

Hope

60-

34-37,

49,

53,

276-277,

279-280,

291-292,

313,

315, 330, 336, 369, 388, 407, 409. 415, 472-473. 498 n. 7, 499 n. 9, 5 7 1 n. 4 9 Hottinguer Sc Co., 60, 196, 2 0 1 , 2 4 1 , 275-276,

278-279,

410,

438,

n. 8

435,

289,

465, 529

370,

n.

43,

387, 544

558

n.

558

ns.

52-54

Immigrant remittances, 400-401 India, trade with, 248, 299, 5 1 9 n. 73. See also Calcutta; Gisborne St Co. Indiana, bonds of, 262, 265, 284, 3 1 0 , 3 3 9 , 385, 528 n. 3 9 Indigo, trade in, 190, 2 1 5 Industrial capitalism, xvii Industrial Revolution, 12 Information,

sources of, 95, 1 0 7 ,

154-158.

See also Agents, relations with Innovations, 8 9 - 1 2 3 , 2 5 0 - 2 5 2 , 3 5 3 - 3 5 4 , 359-360,

389-418,

478-479

Insurance, 404, 566 n. 27, 567 n. 3 3 , 5 8 9 n. 2 9 Interest, 440, 449, 4 5 1 , 497

64, 72, 83, 153, 159, 199, " 7 , 245,

385,

51 Illinois 8t Michigan Canal, 3 1 0 , 3 1 6 , 338,

rates of, 96, 1 5 2 - 1 5 4 ,

51· See also Hope Sc Co. Holland, Swinton C., 38, 43, 78, 28-29,

345,

Illinois,

Hagan, John, 1 7 4 - 1 7 5 , 184 Hagan, Niven & Co., 186 Haie, Nathan, 1 7 3 , 3 1 4 , 3 1 6 , 3 1 9 - 3 2 1 , 323, 331 Hannibal Sc St. Joseph Railroad Co., 4 2 6 4 2 7 , 4 3 0 , 4 3 5 , 4 7 2 , 6 0 4 n. 1 4 Harnden Sc Co., 401, 585 n. 22 Hart (Eli) & Co., 3 5 6 - 3 5 7 Hayward Sc Dorr, 399-400, 450 Headquarters, 38, 128—129 Heard (Augustine) Sc Co., 3 5 3 , 4 1 6 Heckscher, C. A. Sc E., 167, 2 3 0 - 2 3 1 Hemp, trade in, 254 Herring, William, 1 3 , 488 n. 33 Herrmann & Co., 186, 200, 524 n. 7 Herrmann (Samuel) Sc Sons, 186, 200, 2 2 5 , 5 2 4 n. 7 Holford Sc Co., 239, 3 0 1 Holland, financing wartime trade with, 26, 30,

& Co.,

339,

29

170,

n.

234,

429,

63

Ireland, bank failures in, 208 Iron, trade in, 108, 1 7 3 , 190, 254, 297, 349, 355-356, 401-402, 430, 441, 468, 5 0 9 n. 4 1 , 5 8 6 n. 2 4 . See also Railroads, raw materials for Jackson, Patrick Tracy, 1 7 3 , 520 n. 7 Jaudon, Samuel, 168, 206, 2 1 0 , 2 1 9 , 227-228,

240-241,

255,

263,

265,

626

INDEX

268, 275, 277-280, 283, 285-287, 290, 295, 393, 400, 523 f. 5, 531 η. ι8, 543 η. 8, 545 " · " > 553 η. \η Java, 104. See also East Indian trade Jecker, Torre & Co., 400, 403, 451 Joint-account purchasing, 125, 135, 213, 264, 296, 369-371» 377. 403» 409. 414, 446, 448, 470, 472-473, 498 n. 7, 509 n. 41, 520 n. 8, 588 n. 27 Joliet & Northern Indiana Railroad, 426, 603 n. 13 Jones Loyd & Co., 292, 313 Kentucky, bonds of, 199-200, 213, 261, 265 Kermit, Robert, 188-189 King, J. G., 286, 316, 351, 397, 450, 559 n. 57 King, Rufus, 31-32 King, (J. G.) & Sons, 340, 351, 360, 366-367, 378, 380, 383. 386-388, 397. 399. 404-405. 407. 409. 413, 417, 422, 429, 446, 451, 463-464, 472, 576 n. 22, 584 n. 21, 585 n. 22, 589 n. 30, 590 n. 31 Knight (George) & Co., 296-297, 368, 453 Labor, division o£, 82-83, 125-131 Labouchere, Pierre César, 28, 34, 40, 53, 83. 497 η· 7i Lanfear, Ambrose, 255, 297 Latin America, bonds of, 66-67, 475! credit terms to, 248, 453, 569 n. 42; trade with, 65, 104, 192, 474. See also specific localities Latrobe, J. Η. B., 100, 294, 312, 314, 316, 319, 323, 325, 328-329 Leavitt, David, 338, 558 n. 54 Lee, Higginson & Co., 399, 449-450, 463, 611 n. 43 Legal entanglements, 247 Lestapis, A. P., 35-37 Letters o£ credit, 74, 136-137, 248 Little (Jacob) & Co., 288, 364, 366, 377, 393. 399

Livermore it Kendall, 173, 190 Liverpool, England, Baring branch in, 106-107, 128, 138, I 73~I75. 188-189, 228, 248, 258259, 291, 298, 347, 363, 395, 401, 436-437. 590 n. 30; cotton operations in, 542 n. 6; partners in Baring branch, 43, 106107, 302, 421, 616 n. 27 Lizardi & Co., 79, 195, 212, 214, 216, 221-222, 225, 233, 239, 257, 302, 334 Lodge, John E., 247, 255, 524 n. 7 London, money rates in, 92, 98 Losses, 122, 159, 233, 404, 499 n. 17, 576 n. 21, 598 n. 50 Louisiana, bonds of, 199, 261-262, 289, 292, 310, 315. 555 n. 39, 556 n. 45. See also Citizens' Bank; Consolidated Association of the Planters of Louisiana; Cotton; Louisiana Purchase; New Orleans; Union Bank of Louisiana Louisiana Purchase, financing of, 31, 33-34, 51-52, 68-69 Macalester & York, 134, 168, 170 McCalmont & Co., 239, 302, 345, 394, 399, 406, 447, 459, 462, 579 n. 10 Macondray & Co., 400, 452 McLane, Louis, 195, 281, 324-325, 329, 520 n. 7 McLoskey, Hagan & Co., 174, 524 n. 7 Magniac, Jardine & Co., 302, 337, 339, 345 Magniac, Smith & Co., 239. See also Magniac, Jardine & Co.; Smith (J. W.) & Co. Maine, investment in land in, 28-29 Management, 65-76, 98-106, 124-204, 238, 246-254. See also Administration; Control; Policy Manice, Gould & Co., 247, 531 n. 11 Manning & Mackintosh, 200, 400, 569 n. 42, 599 n. 52

INDEX Manning íc Marshall, 66, 104 Manufacturing, by firm, 349 Market rate, of money, 92. See also Money market Marketing, 3-4, 42, 1 5 0 - 1 5 2 . See also Agents, relations with; specific commodities Marshall, C. H., 187, 441 Massachusetts, bonds of, 2 6 1 , 263, 265, 273, 2 8 3 284, 289-291 Matheson & Co., 394, 559 n. 54 Maryland, bonds of, 199-200, 2 1 3 , 281, 289-294, 303, 3 1 0 , 3 1 2 , 3 2 1 - 3 3 0 , 369, 387, 407, 555 n. 37, 571 n. 50. See also Baltimore Mercantile capitalism, xvii Merchandise, trade in, see specific items Merchant bankers, Baring's position among, 42, 5 3 - 5 5 , 78; functions of, 1 2 5 - 1 3 1 . See also Baring firms and members of Baring family; Bates & Baring; Brown, Shipley & Co.; Brown (W. & J.) & Co.; Deiessert & Co.; Duncan, Sherman & Co.; Fletcher, Alexander & Co.; Hope & Co.; Hottinguer & Co.; Huth & Co.; Lizardi & Co.; McCalmont it Co.; Morrison, Cryder & Co.; Palmer, McKillop, Dent & Co.; Peabody & Co.; Prime, Ward & King; Reid, Irving & Co.; Rothschild (N. M.) & Sons; Wiggin (Timothy) & Co.; Wildes (George) & Co.; Williams, Samuel; Wilson (Thomas) & Co.; et al. Merchants Bank (of Boston), 245, 464 Merchants' Exchange (N. Y . ) , 261-262, 303. 3 1 1 . 3 3 7 - 3 4 1 , 396 Mercury, dealings in, 65-66 Merrimac Manufacturing Co., 407 Mexico, loans to, 66-67, 472;

627

trade with, 400, 403, 451 Michigan, bonds of, 261, 265, 277, 279, 310, 339 Michigan Central Railroad, 426, 464 Mildmay, Henry Bingham, 43, 395, 421 Mildmay, Humphrey St. John, 43, 7 9 80, 89, 94-95, 103, 1 2 6 - 1 2 7 , 208, 302, 347, 571 n· 49 Mississippi, bonds of, 277, 279, 288, 295, 310, 3 1 7 Money market, 92, 208, 263-264, 3 7 3 374, 408, 4 1 7 ; rates, 273, 374~375, 3 ® ! , 4*7, 4 3 ' 432, 578 n. 2. See also Discount; Specie; United States Monroe Doctrine, 65, 67 Morris Canal & Banking Co., 152, 533 n. 28, 543 n. 6 Morrison, Cryder & Co., 79, 195, 214, 216, 2 2 1 - 2 2 3 , 239, 277, 279, 3 0 1 , 526 n. 28 Municipal bonds, marketing of, 1 5 1 - 1 5 2 , 169, 423, 434, 583 n. 20, 592 n. 32

Napoleon III, relations with Barings, 84, 454, 503 n.

66

Napoleonic Wars, operations of firm during, 26—27, 4854 New Brunswick, Canada, 201 New Orleans, La., as transshipment point for cotton, 74, 228; Baring affiliations in, 95-96, 1 5 1 - 1 5 2 , 257, 299, 347-348, 383; bonds of, 177, 199, 2 1 3 , 220, 261, 289, 429, 463. See also Cotton; Forstall, Edmund J.; Gracie, Archibald New Orleans Canal & Banking Co., 152, 199, 366, 399, 569 n. 42, 583 n. 19 New York Central Railroad Co., 428, 605 n. 16 New York City, bonds of, 2 6 1 ; money rates in, 92, 176;

628

INDEX

"water loan" bonds, marketing of, 274 New York State, bonds of, 238, 261-262, 265, 284, 289, 500 η. 3 2 Nicholson, Samuel, 3 4 5 - 3 4 6 , 560 η. 4 Nixon, Thomas, 38, 43 Nolte, Vincent, 35, 37, 7 1 , 7 4 - 7 5 , 502 n. 47 Northern Railroad Co., 435, 450 Norway, loan to, 472 Nott (William) & Co., 95, 106, 132, 524 n. 7 Nova Scotia, bonds of, 434 Oelrichs & Lurman, 96, 103, 106, 1 0 8 109, 1 3 3 , 292, 348, 358, 366, 387, 397, 399. 4 0 2 - 4 0 3 , 405. 407. 446. 463, 469, 586 n. 24 Ohio, bonds of, 200, 238, 245, 2 6 1 - 2 6 2 , 265, 273, 283-284, 289-293, 303, 3 7 1 , 435, 570 n. 44, 571 n. 49 Ohio Life Insurance & Trust Co., 210, 283, 289, 291, 452, 457, 528 n. 39 Old Line packets, 1 8 7 - 1 8 9 , 3 0 0 - 3 0 1 , 401, 441 Oliver (Robert) & Brothers, 30, 75 Oliver, Robert & John, 30, 36 Olyphant & Son, 352. See also Talbot, Olyphant & Co. Opium War, 236, 296, 303 Organization, 3 7 - 4 8 , 106-107, 395—396, 419-422 Oriental Bank, 110, 167, 519 n. 3

Ouvrard, G. J., 35-37, 59

Overend, Gurney & Co., 120, 179, 183, 202, 205, 223, 277, 279, 283, 290, 309, 313, 371. 394, 438, 465, 5 " n. 26, 534 n. 32, 574 n. 11, 579 n. 10, 582 n. 19 Oxnard, Henry, 185, 189, 524 n. 7 Packets, 1 8 4 - 1 8 9 , 250, 300-301, 350, 401, 441, 471 Padelford, Fay & Co., 348, 3 6 1 , 402, 405, 454. 4 7 ° , -587 n. 25

Palmer & Co., 91, 123, 525 n. 19 Palmer, McKillop, Dent & Co., 239, 279, 302. 339. 345 Panama Railway Co., 4 1 0 - 4 1 1 , 423-424, 436, 469, 601 n. 10 Panics, 57, 73, 76, 198, 203, 219, 452, 456. See also Business conditions; Business failures; Crises Parish, David, 3 5 - 3 6 , 52 Partners, 8 - 1 3 , 20, 38, 43, 79, 106-107, 395, 419-422, 579 n. 11; Americans among, 3; specialization among, 1 2 5 - 1 3 1 . See also Partnerships Partnerships, 53, 55; dissolution of, 37—38. See also Partners Patterson & Magwood, 174, 523 n. 7 Paxson, Grenfell & Co., 103 Peabody, George, 239, 281, 309, 322, 326, 345, 386, 394, 396, 399, 406, 409. See also Peabody & Co. Peabody & Co., 439-440, 447, 449, 4 5 9 462, 466, 610 n. 39. See also Peabody, George Peabody, Riggs & Co., 288 Peel, Sir Robert, 47, 2 7 1 - 2 7 2 , 573 n. 4 Pennsylvania, bonds of, 168, 200, 2 1 3 , 238, 279, 282, 284, 290, 293-294, 303, 307, 310, 3 1 2 - 3 2 1 , 385, 409, 429, 436, 465. See also Philadelphia Pennsylvania Railroad Co., 412, 429 Pensacola Railroad Co., 247 Perit, Peletiah, 187, 535 n. 45, 563 n. 16 Perkins, Thomas Handasyd, 75, 107 Perkins & Co., 166, 191 Perregaux, Laffitte & Co., 497 n. 71, 499 n. 9 Personnel, 7 5 - 8 4 , 347. See also Agents; Liverpool; Partners; Sub-agents Philadelphia, Pa., 109, 348; money rates in, 176. See also Bank of the United States; Comly, Samuel; Grant & Stone

INDEX Pitt, William, 26, 36, 496 η. 62 Platt (William) & Sons, 405, 613 n. 57 Policy, xviii, 42, 53, 68, 72, 1 2 4 - 1 6 3 , 197, 2 1 0 - 2 1 1 , 246, 288-294, 346354. 386, 389- 423. 436, 467468 Political activities o£ Baring family, 11, 18-20, 39, 44-45, 76, 496 η. 56 Political conditions, 90-91, 270-273, 284-285 Portugal, loans to government, 27-28 Price, James, 43, 302, 347, 395, 580 n. 12 Prices, levels of, 56, 76, 91, 133, 176, 203, 215, 236, 466 Prices Current, dissemination of, 107, 283, 405 Prime, Ward & Co., 351, 574 n. 11. See also Prime, Ward & King; Prime, Ward & Sands; Prime, Ward, King & Co. Prime, Ward & King, 522 n. 21, 522 n. 27, 531 n. 17 Prime, Ward & Sands, 49, 7 1 Prime, Ward, King & Co., 49, 75, l o g l i o , 1 3 1 - 1 3 2 , 134-135. 143. 149. 1 5 1 , 168-169, '76, 178, 195, 1 9 9 202, 210, 213, 220, 225, 228-229, 231, 244-245, 256, 260-268, 282, 287-290, 292, 351, 360-361, 364, 366-367, 369, 376, 378 Profits, 62-63, 256-257, 281, 302, 363, 400, 446 Public relations, 42, 53-55, 63, 75, 85, 93, 124, 1 6 1 - 1 6 2 , 1 9 1 , 234, 253, 271, 283-288, 301, 308-309 Purton, Matthias, 43, 3 1 5 - 3 1 6 , 330-332, 347, 358-361, 367. 380, 395. 556 n · 46, 561 n. 7, 567 n. 32 Quincy, Josiah, Jr., 4 1 1 , 594 n. 39, 599 n. 52 Railroads, bonds of, 261, 409-416, 426-436, 4 7 2 473, 601 n. 8;

629

raw materials for, 173, 192, 247, 291, 355-356, 384, 401-402, 405, 410, 417, 430, 468, 521 n. 16, 525 n. 21, 548 n. 36, 586 n. 25, 590 n. 30, 602 n. i l , 603 n. 13, 615 n. 25. See also specific railroads Receipts, example of, 142 Reed, William B., 314, 321 Reid, Irving & Co., 64, 71, 79, 195, 239, 302, 313, 345 Rentes, dealings in, 58-63. See also France Reorganization, 76-85 Research, 95, 107, 1 5 4 - 1 5 8 . See also Agents, relations with Resumption, 238, 243-246, 3 1 9 - 3 4 1 . See also Specie Rcvelstoke, Lord, see Baring, Edward Charles Reynolds, Byrne & Co., 184, 524 n. 7 Rio de Janeiro, Brazil, 569 n. 421. See also Brazil Robb, Wilson, Hallett & Co., 450, 460 Ropes, William, 75, 100, 524 n. 7 Ropes & Ward, 100 Rothschild, Nathan, 47, 55, 59, 63-64, 488 n. 32 Rothschild (N. M.) & Sons, 79, 85, 170, 183, 195-199, 239, 276-280, 301, 309. 339. 370, 377-378, 381, 386, 394, 413, 500 n. 25, 521 n. 12, 577 n - 2 3. 579 n · I 0 . 583 n. 19 Russell & Co., 104, 192, 231, 296-297, 353. 416 Russell, Sturgis & Co., 267, 395 Russia, loans to, 64, 407, 435, 499 n. 17, 517 n. 49, 547 n. 33; railroad investments in, 435, 473; trade with, 190, 248, 254 Russian Railway Co., 435, 473 Salaries and wages, 1 0 1 - 1 0 2 , 129, 179, 421, 506 n. 23 Savannah, Ga., Baring affiliations in, 348. See also Padelford, Fay & Co.

630

INDEX

Securities, marketing of, 1 5 0 - 1 5 2 , 194-202, 260269, 471, 476-477· See also specific securities Sedentary merchants, xvii, 12 Sergeant, John, 70-71 Shepherd, R. D„ io6, 316, 33°-33i> 453 Shipman & Corning, 167, 179, 522 n. 27 Shortt, Adam, xxi, 19 Sillem, Jerome, 53 Sillem & Cq., 123, 159, 461, 509 n. 41 Silver, flow of, 29, 36, 276. See also Specie Smith, Rev. Sydney, 3 1 5 , 330 Smith (J. W.) & Co., 212. See also Magniac, Smith & Co. Smith, Payne & Smiths, 28, 53 South America, trade with, 65, 173, 180, 249, 348, 353. 405. 613 n. 55. See also Latin and South American countries South Carolina, bonds, 266, 283, 290-291 Spain, loans to government, 27; trade with, 380 Specialization, xvii, 12, 342, 348 Specie, flow of, 56, 70, 109, 274-276; payment in, 125, 225-226, 238, 245, 321; resumption of, 238, 243-246, 3 1 9 - 3 4 1 ; suspension of payments in, 230, 272; trade in, 29, 244. See also Dollars; Gold; Money market; Silver Specie Circular, 206, 218; repeal of, 235, 243 Spring (John) & Co., 179, 522 n. 27 State bonds, marketing of, 96, 1 5 1 , 166-169, 245> 260-269, 3°9See also specific States Status of firm, 42, 53-55, 63, 75, 85, 93, 124, 1 6 1 - 1 6 2 , 1 9 1 , 234, 271, 2 8 3 288, 301, 308-309

Steam navigation, effect on transatlantic trade, 237 Stetson & Avery, 295, 299, 368, 453 Stevens, John Α., 230, 247, 255-256, 366 Stieglitz & Co., 108, 139, 173, 190, 435 Stock, as distinguished from bonds, 516 n. 48 Story, Franklin H., 395, 421, 566 n. 27, 580 n. 13 Stratton Park, 40, 495 n. 44 Sturgis, Russell, 43, 395, 579 n. 11 Sturgis, William, 83, 286, 413 Sub-agents, 396, 585 n. 23 Sugar, trade in, 105, 193, 2 1 5 , 254, 376-377. 403, 578 η. ι Suydam, Sage & Co., 357, 402, 565 n. 22 Sweden, trade with, 248 Swift, W . H., 412, 422, 595 n. 43 Sussman, M., 507 ns. 23 and 26 Talbot, Olyphant & Co., 167, 523 n. 5. See also Olyphant & Son Tallow, trade in, 1 2 1 , 190 Tea, trade in, 190, 2 1 5 . See also China; Far East Terms of sale, 1 3 8 - 1 5 0 , 246-254, 349356, 442-455, 468. See also Credit Texas, bonds of, 292 Thayer (John E.) & Brother, 366, 394, 399. 447-448, 462-463 Thompson, Lapham St Co., 402, 405, 442 Tobacco, trade in, 297, 372, 377, 380, 403, 415, 576 n. 21 Train, Enoch, 350, 405 Union Bank of Louisiana, 1 1 0 - 1 1 2 , 134, 148, 163, 165-166, 169, 176-178, 198, 200, 2 1 3 - 2 1 4 , 225-226, 230, 255, 260-261, 282, 289, 315, 332, 335-336, 360, 367, 451, 576 n. 2 1 , 579 n. 10, 612 n. 48

631

INDEX Union Bank of Mississippi, 255-256, 279, 295» 368, 570 η. 47 United States, crises in, 215-224; decline of Baring's interest in, 3 0 7 480; decline of shipping in, 439-442; economic conditions in, 3, 181-182, 465-466; expansion of Baring's interest in, 3— 304; money rates in, 97, 176, 182, 203, 218, 236. 391. 393. 431. 456-457; national debt, 70, 93, 113, 501 n. 35, 509 n. 49; panics in, 150, 177, 457; political malaise in, 270-273; price levels in, 236, 407-408. See also Bank of the United States; specific institutions, persons, and locations U . S. N a v y Dept., relations with, 351, 397, 527 n. 32 U. S. State Department, relations with, 351 Upper Canada, bonds of, 199, 203, 282, 292, 371, 432; trade with, 370, 414-415, See also Canada Virginia, bonds of, 168, 424—425, 436 Vowler, Elizabeth, see Baring, Elizabeth Vowler Vowler, John, 6 Wall, Charles, 38, 43 War of 1812, operations during, 24—54 Ward, Samuel G., 49, 84, 243, 250, 256, 288, 349, 351, 366, 396, 421-422, 448, 459, 465, 470-471. 541 n46, 560 n. 5, 574 n. h , 580 n. 13 Ward, Thomas Wren, 83-304, 560 n. 20 Ward (John) it Co., 292 Ward (J. G . ) it Co., 360, 366 Ward (S. G . ) it Co., 360 Ward, Campbell it Co., 450-451, 454, 463, 469, 472 Wartime activities, 24-54

Warwick it Claggett, 214, 216 Weardale Iron Co., 349, 356, 372, 401, 405 Webb, Η. B., 247, 421, 600 n. 3 Webster, Daniel, 100, 278, 283-284, 293, 316, 320-321, 327, 553 n. 23 Welles & Co., 223, 231 Wellington, D u k e of, 47, 60 Wellman, W . Α., 421, 465, 615 η. ι 8 West Indies, trade with, 103, 232, 249, 507 n. 29 Western Railroad Corporation of Massachusetts, bonds of, 261, 283, 289, 291, 355, 369, 410 Wheat, see Breadstuffs Wiggin, Timothy, 73, 137, 162, 223, 521 n. 12, 530 n. 4 Wiggin (Timothy) & Co., 93, 170, 194, 207-208, 2 1 6 - 2 1 7 , 222, 224-225, 447, 459, 462, 521 n. 13, 530 n. 5 Wildes (George) it Co., 93, 103, 170, 189, 2 1 6 - 2 1 7 , 221-222, 224-225, 231, 239, 250, 521 n. 13 Wildes, Pickersgill it Co., 171 Williams, Samuel, 73, 79, 93, 501 n. 42, 526 n. 25 Williams, Deacon, Labouchere & Co., 38, 358 Willing, Richard, 75, 286, 396 Willing, Thomas, 30 Willing & Francis, 30, 36 Willink (Wilhelm it Jan) & V a n Staphorst (Nicholas it Jacob), 30, 67 Wilson (Thomas) it Co., 64, 71, 78-79, 93, 1 7 0 - 1 7 1 , 199, 201, 217, 2 2 1 222, 224-225, 231, 521 n. 13 Woolen trade, 5, 8-9, 11, 103, 190, 507 n. 26 Working capital, 129-130, 380 Yeatman, Woods & Co., 109-110, 134, 152, 168 Young, Charles Baring, 10, 43, 107, 128, 230, 300, 302, 347 Zimmerman, Frazier it Co., 104, 559 n. 56