the most powerful banker in london -- 4/5/22
Today's selection -- from Same Old Game! by David Tearle. By 1800, the most powerful bankers in the world were the Baring family. The family had come to prominence on the wave of the Industrial Revolution and the Atlantic trade, and would become the most important bankers to the young country of the United States of America, helping place the debt of its young government, and financing the all-important Louisiana Purchase:
"The Barings story did not start in London, or even England. It started more than forty years earlier when their father Johann arrived in Exeter, England from Bremen, Germany to export wool back to the family firm. Johann stayed, prospered, married well, and now as John Baring became one of the West Country's most successful merchants. When he died at the age of 51 in 1748, he left his wife Elizabeth with a flourishing business and five children. She was wealthy enough to call it a day, but she had acquired her husband's ambition, and decided that she would continue to run the business with her sons.
"With her eldest, John and Thomas to help run the business in Exeter, she sent the younger sons Francis and Charles to London to be educated and apprenticed to City merchants. This was an expensive exercise but she had clearly set her sights beyond the West Country.
"Francis, in particular, showed considerable aptitude, and it was not long before he decided he knew everything there was to know, or least what he thought he needed to know, to succeed in the merchant business. Charles, on the other hand, was proving less able, but his future was overtaken by events when their brother Thomas died suddenly. Charles was recalled to Devon, to help John in Exeter, where he continued to demonstrate his lack of aptitude.
"Francis Baring, having learnt everything he needed to know, saw his opportunity and decided to set up on his own, with capital grudgingly diverted from the Exeter business. Elizabeth Baring and her sons now had two linked businesses. Whether Elizabeth Baring and sons were ready for two linked businesses two hundred miles apart was a different matter.
"Although the firm in Cheapside was John and Francis Baring & Co, it was Francis who was building the partnership, whilst John kept an eye on him from the West Country. This was an exciting time to set up a merchant house in London, as Europe settled down after the 'French Wars' and the industrial revolution in Britain gathered pace. The new peace after 1762 saw a sudden expansion of trade, but the financial machinery to facilitate it was not keeping up and Francis was keen to find a way to oil the wheels of international commerce. He was now acting for the Exeter business and at the same time also acquiring the agency of other west-country firms. He was effectively financing the merchant activities of others, and discovered that making a return on this business was reliable, profitable, and above all did not tie up the family capital. Whilst he did not invent the 'acceptance' business, he became a very effective exponent of the procedure. The Baring capital was making more money financing than trading. Francis Baring was on his way to being the 'first merchant of Europe'.
"As Francis Baring's reputation grew, he found the time to take a wife, and in what was becoming a family tradition he made a very good marriage to 17 year old Harriet Herring. Between them they raised ten children, 'over the shop' at No. 6 Mincing Lane. Like Francis' mother Elizabeth, Harriet Baring was helping to forge a remarkable business, that by 1775, and after the birth of Thomas and Alexander -- in Francis' words -- might just be 'perpetual'.
"But despite having unlocked the secret of banking success, the growth of the London house was still unspectacular in its early years, as likely to make a loss as a profit. Francis Baring remarked towards the end of his life that he had started out with a fortune of £10,000, and had spent £9000 and was well into the last £1000 before he really understood the business he was in. Nevertheless he was establishing a reputation as a diligent, intelligent, and trustworthy merchant, and, in due course, banker.
"At first Barings' business was predominantly in Europe, and still largely in wool and textiles, but by 1775 he was setting his sights much higher -- he invested in the East India Company and severed the link with the Exeter business. With uncharacteristically poor timing, or with spectacular foresight, on the eve of the American Revolutionary War, in 1775 he opened an account with Willing, Morris & Co, Philadelphia's leading merchant house. ...
|Sir Francis Baring, in a painting by Sir Thomas Lawrence|
"The rise of the house of Baring had begun; Francis Baring would have no way of knowing how the events that would take place in America would shape the Baring family fortune .......
"But Thomas Jefferson's Declaration of Independence in July of 1776 put Francis Baring's American trade aspirations on hold for the duration of the revolutionary war. He prospered using his East India Company connections, having hedged his bets by investing in the same year. But despite being at war with the colonies, both Benjamin Franklin and Caron de Beaumarchais (the man behind the 'Hortalez & Co' shadow company set up by the French to supply arms to the Continental Army through William Bingham) appear in Baring's ledgers during this period!
"At the start of the American War of Independence John and Francis Baring & Co was one of many hopefuls in the City of London; by its end Francis Baring was standing out from the crowd. He now considered a political future, and through his bother-in law John Dunning (later Lord Ashburton) he had become acquainted with Earl Shelburne and Isaac Barre. This strongly pro-American, pro-trade triumvirate began to wield considerable political influence, particularly over American affairs and had attempted to convince the Government to ease its punitive colonial taxation policies before the war. Although this proved unsuccessful, his pro-American stance had not gone unnoticed in Philadelphia. Meanwhile his concern over the British government's policies, did not extend to turning down the opportunity to raise War Loans for the British government.
"By the late 1780's Francis Baring and Baring Brothers Bank were now financing governments as well as trade and were now recognisable as the world's first merchant bank. An appreciative William Pitt the Younger bestowed Francis Baring with a baronetcy. He was soon to become 'the first banker of Europe'."