Rothschild intervention averts Barings Bank crisis
Citations (1)
- The House of Rothschild whole source · open book
Credit is usually given to the “the Sinbad of Threadneedle Street”—as Goschen’s successor Harcourt called the Governor of the Bank—for saving Barings from oblivion and the City from “a panic of unparalleled dimensions.” This, as Lidderdale himself acknowledged, is to understate Natty’s role in persuading the government to act. Goschen’s initial reaction—seconded by the First Lord of Treasury, W. H. Smith—was to refuse Lidderdale’s request for £1 million, arguing that “la haute finance” would have “to find its own solution.” The most he was prepared to offer, he told Lidderdale on November 11, was authorisation to suspend the Bank Act if the drain on the Bank’s reserve grew too great (an offer which was refused). But, as Goschen warned Salisbury, “the Rothschilds [were] sure to put the screws on”; and when the Prime Minister sent for Natty on November 12 they were put on with a vengeance. The Barings, Natty told Salisbury contemptuously, were finished; at most the partners would be left with £10,000 a year apiece and might “prefer to cut up their remaining capital and retire into the country on 4 per cent a year ... each.” The danger was that their losses were so great as to threaten “a catastrophe [which] would put an end to the commercial habit of transacting all business of the world by bills on London.” Natty subsequently made a similar point to Brett: if Barings had “been allowed to collapse, most of the great London houses would have fallen with them.” His conclusion was that nothing but government intervention could avert a crisis greater even than that of 1866. As would happen again in 1914, a crisis on the London acceptance market was presented as a crisis for the City as a whole
chapter: ELEVEN - The Risks and Returns of Empire (1885-1902)