Vincent Carosso

A Financier’s Evolution: The ‘Natural History’ of a Merchant Bank
Over the course of the so-called long nineteenth century, the period that began with the French Revolution and ended with the outbreak of the First World War, the role of industrial and corporate finance – merchant banking in the phraseology of Lombard Street – in the global economic system underwent an epochal, if gradual, transformation. As British and continental mercantile houses in the eighteenth and nineteenth centuries increasingly utilized their excess capital to finance other merchants, using negotiable instruments such as bills of exchange, such trader/financier hybrids started to specialize in financing commercial activity, engaging in proprietary or speculative trade only whenever advantageous circumstances presented themselves. With the spread of industrialization and the surge in the growth of state expenditure due to outlays for infrastructure spending and government services, merchant banks, recognizing their growing role in financing parastatal and transnational enterprises, transitioned from financing small-scale merchant traffic to promoting colossal undertakings, thereby ushering in the heyday of what later came to be known as finance capitalism. This very transformation inevitably brought the merchant banking fraternity into the public eye, and generated both awe and opprobrium in equal measure.

Carosso’s authoritative study of the early history of the Morgan banking firm describes the archetypal direction that the US and continental investment banks took in reinventing themselves. Well researched and documented, combining scholarly insight with readability, “The Morgans” proceeds both thematically and chronologically, showing how the family, through its members’ business acumen and aided with some timely help from Providence, advanced from co-managing a small mercantile house in Boston to control of a respected London-based merchant bank serving a global clientele. For its perceptive inquisition into the operations of JP Morgan & Co. and its predecessor firms and the author’s absolute command of both archival sources and secondary material, this volume remains unsurpassed by other books before or since its publication. Arguing in effect that the American-led Morgan organization was the rightful heir to venerable British merchant banking traditions, since “[n]o American private banking house was more deeply rooted in the traditions of London’s merchant bankers…than the Morgan firm”, Carosso provides a detailed, generally sympathetic picture of the Morgan family’s ascent to prominence. If there is a major weakness in this volume, it is the lack of comparative statistics or league tables that would allow a meaningful, objective comparison of the fin de siècle standing of Barings, Morgans, Rothschilds and the other leading merchant banks.

In his introduction, Carosso provides an overview of the Morgan bank’s forerunners, introducing certain proprietary practices of London’s merchant banks and describing in brief the extraordinary careers of early mercantile financiers such as the Fuggers and the Medicis, who as grand hommes d’affaires were as well-versed in affairs of state as they were in high finance. The book’s greatest strength lies in its conscious choice to let the Morgan bankers speak for themselves, for the most part. Carosso, delving into the bank’s rich archives and the personal papers of Morgan pere et fils, brings to light long-buried conversations amongst the Morgan principals that illuminate their thought processes, essentially illustrating, using the very words exchanged amongst the bankers, how they attempted to make sense of the mass of information confronting them in such a way as to unlock economic value from their various dealings and thus avert financial entropy for the firm. One learns, for instance, how Morgan’s London partners, in their own words, felt “very badly treated after all [of the] encouragement given by [the] Chancellor of the Exchequer” in the process of raising a thirty-million pound loan to finance the Boer conflict; instead of agreeing to an underwritten bond issue, given the tone of earlier discussions on the subject, the UK treasury department, in view of domestic considerations, decided on opening the loan for general subscription, thus depriving Morgans of a potentially highly prestigious and remunerative undertaking. Another episode demonstrated the bank’s apprehensions about raising a major loan for Russia in October 1905; Pierpont Morgan, under pressure from the Russian authorities to lend his name to the undertaking, expressed concern that “a successful [Russian] issue in this [current] market would be at present impossible” and that it would be “unwise” to proceed. The loan negotiations ultimately foundered, as geopolitical and economic issues proved the accuracy of Morgan’s views.

As befits a volume which forms part of the Harvard series in business history, Carosso’s book only infrequently intrudes into the principals’ lives outside the office or boardroom, predominantly confining the discussion to matters relevant to the Morgan principals and partnerships in New York, London, and Paris as they mobilized capital, promoted new ventures, created new industrial structures, and served as financial advisors to governments. Given the House of Morgan’s provenance and unique place in economic history, Carosso’s research thus has significant epistemic value for historians and non-academic readers alike. “The Morgans” fittingly serves as an archetypical history of a firm of Olympian accomplishments.… (lisätietoja)