User:Goodmorningworld/Bethmann bank

For other uses, see Bethmann.

Founding

The establishment of the Bethmann bank in Frankfurt am Main is dated to 1748, the year when Johann Philipp Bethmann (1715-1793), who had inherited the trading enterprise of his uncle Jakob Adami in 1746, officially took his brother Simon Moritz as a partner. From that point the enterprise was called Gebrüder Bethmann.

Within a short span of time, the Bethmann bank developed into one of Frankfurt's leading (Christian-owned) banks, on a scale comparable only to its younger rival, the House of Rothschild. The bank's fortunes began to rise in 1754 based on its business in imperial, princely and municipal bonds and skyrocketed from 1778, thanks to the bank's innovation of breaking the Austrian emperor's borrowing down into "sub-bonds" (Partialobligationen) at 1000 gulden each offered to the public, which made them tradeable in secondary markets. This transformed the bank from a lender to an underwriter of bond issues. At one point, the profits of Gebrüder Bethmann exceeded those of all its Frankfurt competitors together, and it ranked first among all German banks.

Historians on the halcyon years

Egon Caesar Conte Corti (1927)

“ In spite of this new offensive in favor of the House of Rothschild, the business was entrusted to Bethmann, on the ground that the property of that house was 'well known to be so great as to require no other security than a duly binding contract or debenture.' This was a triumph of Bethmann over Rothschild, and it was due to the fact that the importance and financial greatness of the firm of Rothschild, which at that time [1814] was still of very recent date, was not appreciated at Vienna, and even Barbier had more faith in the old Christian firm of Bethmann than in the upstart Jewish firm. ”

Paul Johnson (1988)	“ What happened was this. Until the beginning of the revolutionary wars in France, in the mid-1790s, European merchant banking was dominated by non-Jews: the Barings of London, the Hopes of Amsterdam, and the Gebrüder Bethmann of Frankfurt. ”

Niall Ferguson (1999)

More than most German towns in the eighteenth century, Frankfurt was a businessman's town. At the junction of several major trade routes linking the towns of South Germany (Strasbourg, Ulm, Augsburg and Nuremberg) to the Hanseatic ports of the North (Hamburg, Bremen and Lübeck), and linking Germany as a whole to the economies of the Atlantic seaboard, the Baltic and the Near East, its prosperity was bound up with the two annual fairs in the autumn and the spring which had been held in the town since the Middle Ages. And because of the enormous variety of coinage circulating in Europe up until the late nineteenth century, the town's commerce necessarily went hand in hand with banking: in particular, money-changing and bill-broking (buying and selling the IOUs generated by more complex transactions). More In addition--and in some ways more importantly--Frankfurt acted as a financial centre for the princes, archdukes and electors who governed the numerous petty territories of the region. The revenues from their lands and subjects (rents, taxes and so on) and the expenditures of their courts (on grand residences, gardens and entertainments) made these rulers the biggest customers of the pre-industrial German economy, even if most of them were considerably less well off than their counterparts in the English aristocracy. In particular, the fact that the majority generally spent more than they earned created lucrative if sometimes risky opportunities for German bankers. Perhaps the most successful firm in this field prior to 1800 was that of Simon Moritz and Johann Philipp Bethmann, who imported from Amsterdam to Germany the system of "sub-bonds" (Partialobligationen) whereby a large loan could be subdivided into more manageable portions and sold on to a wide clientele of investors. A typical transaction was the Bethmann Brothers' loan to the Holy Roman Emperor of 20,000 gulden (around 2,000 pounds sterling) in 1778, which they sold on to investors in the form of twenty 1,000-gulden bonds, handing over the cash thus raised--minus their substantial commission--to the imperial Treasury in Vienna, and subsequently ensuring the prompt payment of interest from Vienna to the bondholders. Between 1754 and 1778 the Bethmanns floated loans totalling nearly 2 million gulden, and no fewer than fifty-four separate loans totalling nearly 30 million gulden in the following five years. Other Frankfurt bankers became involved in the same kind of business, notably Jakob Friedrich Gontard.

Michael Jurk (2004)

Besides an extensive business in imported goods, natural dyes and textiles, between 1754 and 1778 the brothers Bethmann mediated bond issues totaling 1.9 million guldens for their customers among the princes and electors of southern and central Germany. The Frankfurt Almanach of Trade assigned pride of place among banks to the Gebrüder Bethmann already in 1773. However, their breakthrough did not come until the year 1778. From then until 1793, they underwrote additional bond issues for the Holy Roman Emperor totaling 17.2 million guldens, besides bonds underwritten on behalf of various princes and cities totaling 20.5 million guldens. The descendants of Johann Philipp and Simon Moritz managed to preserve their achievements: More “ Since the era of the Fugger dynasty, no German bank attained such prominence or acquired such wealth as the House of Bethmann. They were the first to return to doing business in the rarefied air of multi-million gulden deals ... . Within a mere thirty years, the entrepreneurial spirit of Gebrüder Bethmann, coupled with tireless industry and great astuteness, far outstripped all other banks: Eventually their assets and annual profit equaled the figures of all their Frankfurt competitors taken together. ” Towards the end of the 18th century, other bankers in Frankfurt, such as Philipp Nikolaus Schmidt, Gebhard & Hauck, Jakob Friedrich Gontard, D. & J. de Neufville and Johann Goll & Söhne followed in their footsteps as bond underwriters. For example, the Metzlers, a bank established in 1674 and linked by marriage to the Bethmanns, joined forces with the banker Johann Ludwig Willemer in 1795 in order to underwrite a Prussian government bond of one million guldens, an extraordinary amount for the time. The end of the 18th century, then, was a time of fundamental change in the money and capital markets. Half a century earlier, the leading merchants and bankers of Frankfurt had met the potentates' demand for money by extending loans out of their own funds. But the enormous need for capital of the modern state far exceeded their intrinsic financial strength. It was not until they made the change from private loans to the floating of bonds that they were able to mobilize the sums required. Thus private bankers could meet the credit needs of their customers in government without having to expose their equity to incalculable risks. At the same time they benefited from the considerable potential for profit presented not only by the commission income for the technical handling of the bond issue but also by the margin between the price guaranteed by them to the issuer and the price at which they offered the bond to the public. As a consequence the focus of the merchant banks of Frankfurt shifted from their traditional business in merchandise, commissions, and shipping to doing business primarily as bankers. However, this shift was a very gradual one: for example, Gebrüder Bethmann did not finally abandon their merchandise business until the year 1864. The introduction, and the trade in, partial obligations or "sub-bonds" caused the Frankfurt bourse to transform itself from a marketplace for bills of exchange to a major European exchange for fungible securities. This tendency was given added impetus when the French occupied Amsterdam in 1795, hastening the decline of its exchange.

Rivalry with Rothschilds

Further information: [[:Bethmanns and Rothschilds]]

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Satirical drawing c. 1850 of Moritz Freiherr von Bethmann as "coachman of Europe".

Steamboats and railroads

1853	Founding of Frankfurter Bank, together with Joh. Goll & Söhne, Philipp Nikolaus Schmidt, D. & J. de Neufville, Philipp Donner, W. Gansland & Sohn, and B.H. Goldschmidt.
1887-1889	Eiffel tower is built in Paris with financing provided by Bethmann bank. (In a repeat of sorts, the Singapore Flyer would be built based on S$240 million financing provided by Delbrück Bethmann Maffei and one other German bank, and the bank also co-financed the Great Orlando Wheel project.)

Standing still as the world turned faster

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As Business Unit of ABN AMRO

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Trivia

• In 1763, when Wolfgang Amadeus Mozart and his family were visiting Paris, a letter of recommendation penned by a wife of either Johann Philipp or Simon Moritz Bethmann and addressed to Baron de Grimm served as an effective door opener, as Leopold Mozart wrote afterward.

• When Johann Wolfgang Goethe traveled to Italy in 1768, he was using a bill of exchange payable by a Roman banker and drawn on the Bethmann bank, which had issued the letter to his pseudonym of Möller, not knowing the true identity of the payee.

External links

• Niall Ferguson: The House of Rothschild, vol. 1. Table of contents and beginning of first chapter.
• Zur Geschichte des Finanzplatzes Frankfurt am Main: Manuscript of 2004 talk by Michael Jurk (Historical Archive of Dresdner Bank)
• ABN AMRO Private Banking webpage showing timeline of Bethmann bank up to and past its merger into ABN AMRO
• Die Bank, die Goethes Reisen finanzierte by Claudia Wanner, article in Handelsblatt, first published 27 January 2005

Bibliography

• Claus Helbing: Die Bethmanns. Aus der Geschichte eines alten Handelshauses zu Frankfurt am Main. Gericke (publishers), Wiesbaden 1948. (in German)
• Alexander Dietz: Frankfurter Handelsgeschichte, Glashütten 1971, reprint of 1925 edition (in German)
• Egon Caesar Conte Corti: Rise of the House of Rothschild, B. Lunn (translator), Books for Business 2001 (reprint of 1928 translation published by Gollancz), ISBN 978-0894990588, Amazon.co.uk searchable online view (in English)
• Erich Achterberg: Frankfurter Bankherren, 2nd revised edition. Fritz Knapp Verlag, Frankfurt am Main 1971. This book was published without an ISBN (in German)
• Wolfgang Klötzer (ed.): Frankfurter Biographie. Erster Band A-L. Verlag Waldemar Kramer (publishers), Frankfurt am Main 1994, ISBN 3-7829-0444-3 (in German)
• Hans Sarkowicz (ed.): Die großen Frankfurter, Frankfurt am Main and Leipzig, 1994, ISBN 3-458-16561-4 (in German)
• Ralf Roth: Stadt und Bürgertum in Frankfurt am Main, Oldenbourg Wissenschaftsverlag, Munich, 1996, ISBN 978-3-486-56188-3 (in German)
• Paul Johnson: A History of the Jews. Harper Perennial, 1988, ISBN 978-006-091533-9 (in English)
• Carl-Ludwig Holtfrerich: Frankfurt as a Financial Center: From Medieval Trade Fair to European Banking Centre, Munich, 1999, ISBN 3406456715, Google Books Preview (in English)
• Niall Ferguson: The House of Rothschild. Volume 1, Money's Prophets: 1798-1848. Penguin, 1999, ISBN 978-0140240849 (in English)