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Cushioning a Crisis in the London Money Market

Published online by Cambridge University Press:  24 July 2012

Ralph W. Hidy
Ralph W. Hidy
Affiliation:
Wheaton College, Norton, Mass.
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Extract

Any person who could devise measures by which the fluctuations in modern business could be eliminated, or materially reduced, would undoubtedly carve for himself a deep niche in the Hall of Fame. Both business men and observers of economic phenomena have noted that recurring crises seem almost as inevitable as the setting of the sun, if not so regular. If the severity of crises could be mitigated, solvent firms might not fail as often as they do, and the erratic economic course of man might not be subject to such violent ups and downs.

Type
Research Article
Information
Business History Review , Volume 20 , Issue 5 , November 1946 , pp. 131 - 145
Copyright
Copyright © The President and Fellows of Harvard College 1946

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References

1 Silberling, N. J., “British Prices and Business Cycles, 1779-1850,” Review of Economic Statistics and Supplements, preliminary vol. v, pp. 232–233Google Scholar; Smith, W. B. and Cole, A. H., Fluctuations in American Business, 1790-1860 (Cambridge, Mass., 1935), pp. 66, 158Google Scholar; Sir Clapham, John, The Bank of England: A History, 2 vols. (Cambridge, England, and New York, 1942), pp. 151–161Google Scholar; King, W. C. T., History of the London Discount Market (London, 1936), pp. 80, 91–101Google Scholar. Much of the detailed information in this article has been derived from the Baring Papers in the Public Archives of Canada, Ottawa, but in the interests of brevity only direct quotations and statements deemed to require explanatory remarks will have footnote citations.

2 Clapham, op. cit., vol. ii, p. 154. On the Anglo-American bankers see Hidy, R. W., “The Organization and Functions of Anglo-American Merchant Bankers, 1815-1860,” Journal of Economic History, vol. i, Supplement, pp. 53–66Google Scholar. N. M. Rothschild & Sons was active in marketing American securities but was not a specializing “American house.”

3 Baring Papers, Miscellaneous Correspondence (hereinafter cited BPMC), Dec. 23, 1836, copy of the original agreement; Baring Papers, Letter Book (hereinafter cited BPLB), Joshua Bates to Samuel Jaudon, Mar. 1, 1837.

4 Clapham, op. cit., vol. ii, p. 153; Acres, W. M., The Bank of England from Within, 1694-1900 (2 vols., London, 1931), vol. ii, p. 465Google Scholar.

5 BPLB, Bates to Jaudon, Mar., 1837.

6 BPLB, Baring Brothers & Co. to T. W. Ward, agent of the firm in the United States, Feb. 20, 21, 22, 23, 1837; Bates to Jaudon, Mar. 1, 1837.

7 Ibid.

8 Ibid.; BPLB, Baring Brothers & Co. to Ward, Mar. 2, 1837; Niles' Register, vol. lii, p. 65.

9 Clapham, op. cit., vol. ii, p. 157, states that each of the three “W's” was given “£200,000 of abnormal discounts, on personal and other security.” The author cites a document dated Mar. 21, 1837. The figures given in the text of this article are taken from letters dated Mar. 22 and 29; this indicates that charges must have been made in the original plan. Wilson & Co. refers specifically to the £400,000 accorded to it by the Bank. BPLB, Baring Brothers & Co. to Word. Mar. 22, 1837; Baring Brothers & Co. to Prime, Ward & King, private Bankers in New York, Mar. 22, 1337; BPMC, Thomas Wilson & Co. to Baring Brothers & Co., Mar. 29, 1837. The Barings make no mention of guarantees (demanded for W. & J. Brown & Co., though they may have bsen requested in that care also.

10 BPLB, Baring Brothers & Co. to Biddle, Mar. 22, May 6, 1837; Baring Brothers & Co. to Prime, Ward & King, Mar. 22, 1837; Baring Brothers & Co. to Ward, Mar. 15, 20, 22, 1837; BPMC, Biddle to Baring Brothers & Co., Apr. 1, 29, 1837; Jaudon to Bates, June IS, 1837; New York Journal of Commerce, Mar. 30, 1837; National Intelligencer, Apr. 1, 4, 1837; Clapham, op. cit., vol. ii, p. 159.

11 Ibid., p. 157.

12 Ibid., p. 158, note; BPLB, Baring Brothers & Co. to Ward, April 10, 15, 1837.

13 Ibid., May 22, 30, June 2, 6, 10, 1837; Clapham, op. cit., vol. ii, p. 158.

14 BPLB, Baring Brothers & Co. to Ward, May 2, 1837.

15 BPMC, Bates to Thomas Baring, a partner of the firm, Mar. 27, 30, 1837; BPLB, Baring Brothers & Co. to Sutton Sons & Gribble, Jan. 13, 1837; Journal of Thomas Raikes, vol. iii, p. 157Google Scholar, quoted in Powell, E. T., The Evolution of the Money Market (London, 1915), p. 340Google Scholar.

16 Clapham, op. at., vol. ii, pp. 38, 337.