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Anglo-American Merchant Bankers and the Railroads of the Old Northwest, 1848-1860

Published online by Cambridge University Press:  24 July 2012

Ralph W. Hidy  and
Muriel E. Hidy
Ralph W. Hidy
Affiliation:
Professor of Business History atHarvard Graduate School of Business Administration
Muriel E. Hidy
Affiliation:
Business History Foundation
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Abstract

As distrust of American investments lessened, conservative international brokers allowed themselves to be drawn into an economic orbit with ever-widening western limits. Short-term credits to support an active agency business in railroad construction materials led inevitably to longer term commitments. The merchant bankers supplied the facilities for transatlantic capital exchange and by absorbing the best rail and government issues helped create an American market for all grades of railroad securities.

Type
Research Article
Information
Business History Review , Volume 34 , Issue 2 , Summer 1960 , pp. 150 - 169
Copyright
Copyright © The President and Fellows of Harvard College 1960

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References

1 The material in this article is largely derived from the George Peabody Manuscripts deposited in the Essex Institute, Salem, Massachusetts, and from the Baring Papers in the Public Archives of Canada in Ottawa.

2 Hidy, R. W., “The Organization and Functions of Anglo-American Merchant Bankers, 1815–1860,” The Journal of Economic History, Vol. I (Supplement, 1941), pp. 53–66CrossRefGoogle Scholar; Gras, N. S. B., Business and Capitalism (New York, 1939), pp. 67–119Google Scholar.

3 The following analysis of the resumption of capital flow to the United States between 1848 and 1852 is derived from Hidy, R. W., “A Leaf from Investment History,” Harvard Business Review, Vol. XX (Autumn, 1941), pp. 65–74Google Scholar; Hidy, R. W., The House of Baring in American Trade and Finance: English Merchant Bankers at Work, 1763–1861 (Cambridge, 1949), pp. 408–411CrossRefGoogle Scholar; and McGrane, R. C., Foreign Bondholders and American State Debts (New York, 1935), pp. 270–271Google Scholar.

4 Peabody Manuscripts, Essex Institute (Hereinafter cited EIPM), G. Peabody to Wm. Hoge, May 7, 1852; G. Peabody & Co. to Duncan, Sherman & Co., Oct. 1, 1852; Watts Sherman to Peabody, Aug. 8, 1852.

5 Ibid., Allen Robbins to Peabody, Nov. 22, 1852.

6 Ibid., Agreement between V. K. Stevenson, president of the Nashville & Chattanooga Rail Road Co. and George Peabody, Sept. 13, 1849.

7 Ibid., Peabody to G. Upton, Treasurer, Michigan Central Railroad Co., Mar. 7, 1851.

8 Ibid., Peabody to U. A. Murdock, April 15, 19, 1851; Peabody to Chouteau, Merle & Sanford, June 6, 1851; Peabody to P. Chouteau, Jr., Sanford & Co., June 4, 1852. After May 10, 1852, the partners were Pierre Chouteau, Jr., John F. A. Sanford, and U. A. Murdock.

9 Ibid., U. A. Murdock to Peabody, April 10, 1851.

10 Ibid., Peabody to Chouteau, Merle & Sanford, Aug. 22, 1851; Chouteau, Merle & Sanford to G. Peabody & Co., Feb. 20, 22, 1852.

11 Ibid., e.g. Peabody to Harnden & Co., Oct. 15, 1851; Chouteau, Merle & Sanford to Peabody, Aug. 5, 1851; Peabody to Cyrus Prentice, president, Cleveland & Pittsburgh Railroad Co., July 26, 1850.

12 Ibid., U. A. Murdock to Peabody, April 10, 1851; Porter, K. W., John Jacob Astor, Business Man, 2 vols. (Cambridge, 1931), p. 836Google Scholar.

13 EIPM., C. M. Lampson to Peabody, July 26, 1852; Chouteau, Merle & Sanford to G. Peabody & Co., March 16, 1852; G. Peabody & Co. to Chouteau, Sanford & Co., Jan. 25, March 8, April 14, Sept. 13, 1853; Chouteau, Sanford & Co. to G. Peabody & Co., April 10, 1853.

14 Ibid., Peabody to U. A. Murdock, June 20, 1851; Peabody to H. Ferguson, Glasgow, Oct. 13, 1851.

15 Ibid., Chouteau, Sanford & Co. to G. Peabody & Co., May 14, 1852.

16 Ibid., e.g. U. A. Murdock to Peabody, April 10, Sept. 19, 1851; Chouteau, Sanford & Co. to C. M. Lampson, Sept. 25, 1852.

17 Ibid., C. M. Lampson to U. A. Murdock, unsigned, May 4, 1852. The purchases of iron were made through many manufacturers. Among the makers of rails most favored in the United States were J. Guest & Co., William Crawshay, and the Ebbw Vale Co., one of the largest in the British Isles. Several smaller contracts were placed with other producers, however, and the Aberdare Iron Works and the Rhymney Iron Co. in Wales, and G. & C. Kreglinger of Antwerp, all filled orders. See ibid., Chouteau, Merle & Sanford to G. Peabody & Co., Sept. 19, 1851.

18 Ibid., Chouteau, Merle & Sanford to Peabody, July 15, 1851; Feb. 17, 1852; G. Peabody & Co. to Chouteau, Merle & Sanford, March 12, 1852.

19 See especially ibid., Chouteau, Merle & Sanford to G. Peabody & Co., April 9, 20, 23, 1852. See list of railroads built during the decade of the 1850's in the Old Northwest in Paxson, Frederic L., “The Railroads of the ‘Old Northwest’ before the Civil War,” Transactions of the Wisconsin Academy of Sciences, Arts, and Letters, Vol. XVII, Part I, No. 4 (Madison, 1912), pp. 243–274Google Scholar.

20 EIPM, 1851–1854, passim, especially G. Peabody & Co. to Chouteau, Merle & Sanford, Aug. 1, 1851, March 12, 1852; Chouteau, Merle & Sanford to G. Peabody & Co., Sept. 19, 1851; Jan. 23, 1852; G. Peabody & Co. to C. K. Hamilton, Dec. 10, 1852.

21 Peabody Manuscripts, Morgan, Grenfell & Co. Ltd., London (hereinafter cited MG&CO.PM), G. Peabody & Co. to Chouteau, Sanford & Co., April 14, 1853; C. M. Lampson & Co. to G. Peabody & Co., Aug. 18, 1858. Cf., “Morgan, Grenfell & Co.'s New Home,” reprint from Banker's Magazine (London, Nov., 1928Google Scholar).

22 EIPM, Peabody to Blake & Ward, Boston, Oct. 29, 1850; U. A. Murdock to Losh, Wilson & Bell, May 16, 1851.

23 EIPM, 1853, passim.

24 Baring Papers, Official Correspondence (hereinafter cited BPOC), T. W. Ward to Baring Brothers & Co., Sept. 10, 1857. The Barings also sold for Forbes a number of Michigan Central bonds in Nov. and Dec, 1857. Baring Papers, Miscellaneous Correspondence (hereinafter cited BPMC), Forbes to Baring Brothers & Co., Nov. 9, 1857; Baring Papers, Letter Books (hereinafter cited BPLB), Baring Brothers & Co. to Forbes, Dec. 4, 1857.

25 BPLB, Baring Brothers & Co. to Ward, Feb. 3, 1860; BPOC, Ward to Baring Brothers & Co., Feb. 20, 1860.

26 EIPM, Agreement between C. L. Boalt and G. Peabody & Co., March 1, 1852.

27 Ibid., G. Peabody & Co. to Chouteau, Merle & Sanford, March 19, 1852. The interest on $115,000 of the Toledo, Norwalk & Cleveland bonds was guaranteed by the Cleveland, Columbus & Cincinnati Railroad Co.

28 BPLB, Baring Brothers & Co. to Ward, March 12, 19, April 8, Oct. 8, 15, 1852; Sept. 6, 1853; Baring Brothers & Co. to Boalt, July 2, 1852; BPOC, Ward to Baring Brothers & Co., April 15, 23, May 14, June 1, 1852; Dec. 9, 13, 1853.

29 EIPM, Chouteau, Merle & Sanford to Peabody, July 15, 1851.

30 BPOC, Ward to Baring Brothers & Co., March 20, May 15, June 29, 1855; BPLB, Baring Brothers & Co. to Ward, April 20, 27, May 25, June 1, 15, 1855.

31 BPLB, Baring Brothers & Co. to Ward, July 21, Aug. 4, 11, 22, Sept. 15, 1854; April 5, 27, June 22, 29, Aug. 3, 1855; July 18, Nov. 20, Dec. 5, 1856; Jan. 20, 1857; BPOC, Ward to Baring Brothers & Co., July 25, Aug. 8, 28, Sept. 8, 13, Oct. 6, 9, 1854; May 9, June 5, 19, July 24, Aug. 6, 10, 14, 21, 1855; June 24, July 2, 1856; Jan. 12, Feb. 10, 27, 1857; Ward, Campbell & Co. to Baring Brothers & Co., Aug. 9, Sept. 1, 1854; Dec. 10, 1855; July 23, 1856. Other securities included in the investment account were New York Central shares and bonds, Reading shares, and Pennsylvania shares.

32 The Illinois Central loan in 1852 was for £1,000,000, but it was arranged through a British syndicate headed by Devaux & Company. See Gates, P. W., The Illinois Central Railroad and Its Colonization Work (Cambridge, 1934), pp. 72–73CrossRefGoogle Scholar.

33 Hungerford, Edward, The Story of the Baltimore & Ohio Railroad, 1827–1837 (New York, 1928), Vol. I, p. 301Google Scholar. The first estimate for the railroad and equipment was $5,000,000; the completed cost was $20,000,000.

34 See above, p. 155.

35 EIPM, Peabody to Watts Sherman, May 28, Nov. 19, 1852; Duncan, Sherman & Co. to G. Peabody & Co., Feb. 18, 1853; Agreement between O. M. Mitchel, Atty. of the City of Cincinnati, State of Ohio, and George Peabody & Co., April 1, 1853; G. Peabody & Co. to Page & Bacon, Aug. 19, 1853.

36 Ibid., Peabody to editor of The Times, April 4, 1853; Brief Statement of the Elements of Credit of the Cincinnati and St. Louis Railway; Peabody to Duncan, Sherman & Co., April 1, 8, 1853; C. M. Lampson to Peabody, April 7, 1853.

37 Ibid., G. Peabody & Co. to Duncan, Sherman & Co., April 1, 29, June 10, 1853; G. Peabody & Co. to Page & Bacon, June 11, 13, 1853.

38 Ibid., Duncan, Sherman & Co. to G. Peabody & Co., May 1, 8, Nov. 6, 1852; Jan. 12, 26, 1853; G. Peabody & Co. to Page & Bacon, Dec. 3, 1853; G. Peabody & Co to Chouteau, Sanford & Co., April 14, 1853.

39 Ibid., Chouteau, Sanford & Co. to C. M. Lampson, Sept. 25, 1852.

40 Ibid., John W. Rhodes to Peabody, Feb. 13, 1856; MG&Co.PM, Memorandum, George Peabody, Aug. 13, 1861; Peabody to J. Pierpont Morgan, Aug. 13, 1861.

41 BPLB, Baring Brothers & Co. to Ward, April 22, 1852; Sept. 14, 1855; Jan. 29, March 12, 1858; May 27, Oct. 28, 1859; March 16, May 26, June 29, 1860; BPOC, Ward, Campbell & Co. to Baring Brothers & Co., Nov. 15, 1859; April 17, May 1, June 12, 30, July 14, 1860.

42 BPOC, Ward to Baring Brothers & Co., Oct. 15, 1850; Aug. 30, Sept. 2, 9, 12, 1851; Jan. 7, May 14, June 1, Sept. 21, Nov. 19, Dee. 7, 1852; and enclosures; BPLB, Baring Brothers & Co. to Ward, Sept. 16, 1851; April 29, May 7, June 25, 1852; Thomas Baring to Ward, Dec. 17, 1852; Baring Brothers & Co. to George Griswold, Dec. 17, 1852; BPMC, D. A. Neal to Joshua Bates, Oct. 26, Nov. 5, Dec. 5, 1851; memorandum by D. A. Neal, April 26, 1852; Baring Papers Printed Documents, Prospectus of the Illinois Central Railroad Co. loan, June 10, 1852; newspaper clipping, dated June 17, 1852, signed “Justice.”