WEDGED BETWEEN THE MARKET AND THE WORLD : THE AMSTERDAM HAUTE BANQUE, 1650s Joost Jonker University of Amsterdam/Utrecht University

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1 WEDGED BETWEEN THE MARKET AND THE WORLD : THE AMSTERDAM HAUTE BANQUE, 1650s-1914 Joost Jonker University of Amsterdam/Utrecht University I. Introduction. The term haute banque poorly fits the firms which dominated the Amsterdam market at one time or another, for two reasons. Firstly, they offered a variety of financial services without engaging in banking proper, that is transforming deposits into loans and living off the spread inbetween. At times interest earnings generated a considerable part of income but, because of the way in which the local market worked, it was never a core business. Unlike, for instance, Britain, where deposit banking became the norm from the late 17 th century, the Amsterdam haute banque business model rather resembled a combination of today s private equity firms with venture capitalists and hedge funds, that is to say, firms deriving their main revenues from commissions and profits on transactions arranged. Secondly, with the exception of a few 19 th century cases, Amsterdam firms rooted in the commodity trade and retained close links to that, in some prominent cases until the dawn of the 20 th century. The importance of financial services differed between firms and between periods. Classifying individual ones as belonging to the haute banque is therefore a little arbitrary, the more so since we do not have the archival sources to assess the balance of operations for any firm until the late 18 th century. These factors render dating the emergence and composition of an haute banque group equally arbitrary. The survey which follows should therefore be treated with some caution, since it is neither complete nor sufficiently precise, notably for the earlier period. Much work remains to be done. During the 17 th and 18 th centuries there were many bankers and banking firms, even very prominent bankers such as Clifford, Pels, Muilman & Son, or D Echenique, of whom we know little more than their names. Some of those could be fleshed out through patient reconstruction by trawling Amsterdam s voluminous city archives, notably the Wisselbank and the notarial records. 1

2 One important aspect should be kept in mind. the Amsterdam haute banque was never a closed group, new firms continually arising through the ranks of the commodity trade to complement or supplant old, established, but sometimes slightly worn names. Haute banque firms such as Pels, Clifford, or later Hope & Co. did have considerable market power, but rarely to the extent of shutting out new initiatives because the market was too fragmented and too mobile for that. Operating in a constantly shifting international environment, facing clients able to access a wealth of alternatives a the world market, the Amsterdam haute banque, for its their ostensible wealth and power, was always permeable, open to newcomers supplanting established names with innovative ideas, keener entrepreneurship, better terms. II. Origins and first blossoming. The Amsterdam market, heavily oriented towards the Baltic, already possessed sufficient interest for the Fuggers to employ a factor there from 1511, Poppius Occo. 1 About his business we know little more than that he specialized in trade and finance with notably Denmark, which yielded sufficient rewards for him to enjoy a sumptuous lifestyle in true Renaissance mould, embellished by the arts. Merchants like Occo also raised money for their own and for foreign sovereigns. In 1489 Maximilian of Austria granted Amsterdam the right to add his crown to its coat of arms in return for financial services rendered; merchants supplied both Charles V and the provincial Estates with loans in 1555; and during the 1610s two German princes received smaller loans. 2 Such transactions remained incidents, however, and driven more by political than by commercial motives. This was not for a want of capital power. Following the Fall of Antwerp in 1585 and the closure of the Scheldt river for commecial shipping by the Dutch Republic Amsterdam developed precociously, extending its trade network over all of Europe, to Africa, the Levant, the Americas, to Asia. High retained earnings fuelled this expansion, providing sufficient capital to launch the Dutch East India Company or VOC in 1602, with Amsterdam merchants supplying 3.6 guilders of the 6.8 million total equity. 3 And still there was 1 M. Carasso-Kok, ed., Geschiedenis van Amsterdam tot 1578, stad uit het niets (Sun: Amsterdam 2004) 160; O. Nübel, Pompeius Occo , Fuggerfaktor in Amsterdam (Mohr: Tübingen 1972); G.W. Kernkamp, Rekeningen van Pompejus Occo aan koning Christiaan II van Denemarken, , in: Bijdragen en mededeelingen van het Historisch Genootschap 36 (1915) W.F.H. Oldewelt, De Hoefijserse schuld ( ), in: Jaarboek Amstelodamum 51 (1959) O. Gelderblom and J.P.B. Jonker, 'Completing a financial revolution: the finance of the Dutch East India trade and the rise of the Amsterdam capital market, ', in: Journal of Economic History 64 (2004)

3 money to spare; for a whaling company, a West India Company (WIC), for land reclamation which, in the Holland province alone, absorbed an estimated million guilders during the first half of the 17 th century, most of it invested by Amsterdam businessmen. 4 Such ventures were typically launched by a syndicate which then recruited shareholders through family, friends, and business relations, a durable configuration still widely used during the late 19 th century. Capital mobilization on the Amsterdam market was always a matter of dense networks gathering money from many comparatively small investors rather than a few big players clubbing together. Another key market feature was the emphasis on liquidity tied to an aversity to debt finance. Businessmen accepted deposits as a favour, from family members and close friends, not as a prime source of finance. Some used debt to a higher degree than others, but most sought to finance their operations with equity, not with debt. 5 Proper merchants do not have much debt, a 1622 pamphlet warned, because settlement days punish those who with bankruptcy. 6 This marked preference was probably a response to the sharp liquidity fluctuations characteristic of Early Modern money markets tied to the early development of lombarding securities, which appeared soon after the founding of the VOC. 7 The ability to switch easily and securely from assets to cash and back made both creditors and debtors wary of longterm commitments, especially if uncollateralized. Over time the lombard market, termed prolongatie market because the transactions were commonly prolonged (rolled over) on expiry of the customary three-month term, evolved into the main repository for surplus cash, setting terms with which merchants competed at their peril. 8 As a result the market had no firm base of deposits and this prevented the most likely candidates, the kassiers or cashiers, from developing into bankers once official action had clipped the wings of their businesses. As money changers and cash keepers, the cashiers really ran the payments system and no doubt they accomodated 4 H. van Zwet, Lofwaerdighe dijckagies en miserabele polders, een financiële analyse van landaanwinningsprojecten in Hollands Noorderkwartier, (Hilversum 2009) O.C. Gelderblom, The governance of Early Modern trade: the case of Hans Thijs ( ), Enterprise & Society 4 (2003) Pamphlet Knuttel No (no page numbers). 7 Gelderblom and Jonker, Completing ; L.O. Petram, The world s first stock exchange, how the Amsterdam market for Dutch East India Company shares became a modern securities market, , PhD Thesis, University of Amsterdam 2011, J.P.B. Jonker, Merchants, bankers, middlemen, the Amsterdam money market during the first half of the 19th century (NEHA: Amsterdam, 1996)

4 their clients with advances as and when needed. 9 However, in 1609 the city council, wanting to put the payments system on a more secure footing, established the Wisselbank or Exchange Bank, designed to function as a girobank on the Italian model and provide merchants with stable means of payment. 10 Through a successful rearguard action the cashiers repositioned themselves to remain a crucial intermediary between the Wisselbank and the market, but at the same time confined to a particular, narrow segment without scope for an evolution into banking. For all its precocious growth Amsterdam does not appear to have assumed Antwerp s function as an international financial centre for some considerable time. Leading businessmen such as Louis de Geer and Elias Trip, brothers in law and joint partners in a large firm for manufacturing and trading in arms, must have generated voluminous international payments with their sales all over Europe and their advances to the Swedish King for copper supplied to them. In 1634 the firm had a capital of 2.4 million. 11 Two brothers Marcelis did a similar, and no less voluminous, business in iron, arms, and finance with Denmark, lending very substantial amounts for which they received Danish real estate in return, not always to their contentment. 12 But the continuing war with Spain distanced the Republic from Southern European networks, so Antwerp merchants could retain a firm grip on trade and finance with Spain and thus on the large amounts of bills circulating in that trade until the late 1640s. 13 The money transfers from Madrid to the Spanish Netherlands alone averaged 3 million écus or 7.5 million Dutch guilders a year at a time when deposits in the Wisselbank barely crept above 3 million guilders, so the Antwerp bill market was probably much larger than the Amsterdam one. 14 During the 1640s Antwerp s Spanish trade began to wither, however, and its mercantile community took a bad hit with the crown s 1647 bankruptcy and another 9 Jonker, Merchants L. Gillard, La Banque d Amsterdam et le florin européen au temps de la république néerlandaise ( ) (Éditions EHESS: Paris 2004); Nieuwkerk, M. van, ed., The Bank of Amsterdam: on the origins of central banking (Sonsbeek Publishers: Arnhem 2009), P.W.N.M. Dehing, Geld in Amsterdam, wisselbank en wisselkoersen, (Verloren: Hilversum 2012). 11 J.P.B. Jonker and K.E. Sluyterman, At home on the world markets, Dutch trading houses from the 16th century to the present (SDU: The Hague 2000) 58-60; J.G. van Dillen, Van rijkdom en regenten, handboek tot de economische en sociale geschiedenis van Nederland tijdens de Republiek (Nijhoff: The Hague 1970) Van Dillen, Rijkdom ; C.J. van Bochove, The economic consequences of the Dutch, economic integration around the North Sea, (Aksant: Amsterdam 2008) 98, 103, 114, 115, , 138, 226, 248, R. Baetens, De nazomer van Antwerpens welvaart, de diaspora en het handelshuis De Groote tijdens de eerste helft van de zeventiende eeuw (Gemeentekrediet: Brussels 1976) J.J.H. de Lonchay, Étude sur les emprunts des Souverains belges au XVIe et au XVIIe siècle (Lamertin: Brussels 1907) ; cf. Baetens, Nazomer I,

5 one when Spain sharply reduced its transfers following the Peace of Westphalia in As a result the Iberian and Flemish firms which had specialized in this trade went bust, retired from business, or moved to the Dutch Republic, leaving the market seriously depleted. 15 By contrast, the peace with Spain enabled the Republic to expand trade with that country and its American colonies, with the result that this sector and the bullion flows which it generated became one of the mainstays of Dutch trade. 16 During the 1650s a group of prominent Sephardic Jews emerged on the Amsterdam market specializing in the woolen trade and gradually moving into finance. 17 Belgian minting dropped for a lack of silver, causing complaints about the power of the Wisselbank and forcing the mintmasters repeatedly to increase their price in a vain attempt to attract bullion flows back. 18 At the same time interest rates started to drop, increasing the attraction of doing business there. Borrowers became interested to seek loans in Amsterdam; the first foreign monarchs looking for money appeared in the late 1650s, now for financial rather than political reasons. 19 Slowly the contours of an international financial centre emerged. III. Transiting during the climacteric. This coincided with a transition of the Republic s economy from very dynamic growth to a phase of consolidation. Rivals such as Britain and France introduced trade protection discriminating against Dutch imports, igniting some sixty years of near continuous warfare with one or the other. Other rivals began making more peaceful inroads into Holland s commercial supremacy, venturing onto the same shipping routes, introducing similar terms and conditions, even copying the fluytschip cargo carrier to get on a par in shipping productivity. Merchants responded by switching from trading for their own account, widely practised during the Republic s expansionary phase to capture new markets, to the commission trading typical for 15 Baetens, Nazomer; J.I. Israel, The economic contribution of Dutch Sephardic Jewry to Holland s Golden Age, , in: Tijdschrift voor Geschiedenis 96 (1983) , ibidem 521, 522, Israel, Economic contribution J.I. Israel, De Republiek der Verenigde Nederlanden tot omstreeks demografie en economische activiteit', in: J.C.H. Blom, R.G. Fuks-Mansfeld, I. Schöffer, ed., Geschiedenis van de joden in Nederland (Balans: Amsterdam 1995) , ibidem V. Janssens, Het geldwezen der Oostenrijkse Nederlanden (Koninklijke Vlaamsche Academie: Brussels 1957) 10, See, for instance, Resolutions of the Estates of Holland (RSH) in National Archives The Hague, Generaale Index op Resoluties Staten van Holland on microfilm: Geneva: RSH 27 March 1657; Denmark: 19 October 1657, 18 May 1658, 2 and 3 October 1659, 20 February 1660, 23 September 1666, 26 November 1666; Britain: 24 May

6 more settled and more competitive circumstances. 20 Moreover, the volume of Amsterdam trade enabled them to concentrate on commission trading and to outsource allied commercial services such as transport, handling, expedition, and insurance to dedicated providers which offered such services at comparatively low cost. This specialization gave the fading entrepot market a new lease of life because commercial rivals could not immediately match it. 21 Finance developed into the system s lynchpin, helped by the evolution of bills of exchange into acceptances, which enabled merchants to sell their reputation for probity. For a small fee merchants would allow their overseas correspondents to draw on them. When presented with the bill, the firm would accept it by signing for payment at maturity, thus improving the paper s negotiability, which in turn increased the attraction of routing business through Amsterdam and making international payments in guilder denominated acceptances on Amsterdam houses. 22 Changes to the Wisselbank s operations added further attractions. During the 1680s the bank ended a period of prolonged stagnation following the stabilization of the guilder in the 1650s by introducing new lombard arrangements to draw more bullion to Amsterdam. Since trading receipts issued for gold and silver deposited with the bank was much cheaper than handling bullion, deposits shot up, boosting liquidity and, in combination with the low interest rates, firmly anchoring Amsterdam s commercial position. For a considerable time to come no commercial centre in northwestern Europe could offer better terms than a bill on Amsterdam, the guilder becoming the international currency of choice in the same way as the pound sterling in the 19 th century, or the dollar in the 20 th. 23 Consequently, during the second half of the 17 th century merchant houses came to prominence which, in addition to their commodity trade, had a distinctly greater finance component. As often as not this remained closely related to the trade. In 1659, for instance, Jean Deutz, obtained an exclusive sales agency for mercury from the Austrian emperor. Like Trip and De Geer before him, he gave large advances on mercury supplies to his client. After his death his widow continued the business as Wed. Jean Deutz & Sn., the first instance we have of a commercial business 20 Jonker and Sluyterman, At home Jonker and Sluyterman, At home For a good explanation of acceptances I. Schnabel, H.S. Shin, Liquidity and contagion: the crisis of 1763, in: Journal of the European Economic Association 6 (2004) Gillard, Banque

7 enhancing its stature by assuming a formal name. 24 In 1695 this firm pioneered an important innovation by offering investors shares in a negotiatie, a unit trust fund holding a 1.5 million guilders 5 per cent loan for the emperor, backed by mercury supplies. 25 In addition to this high finance, Deutz also lombarded securities and provided small loans to private individuals. A relative, Joseph Deutz, did a very similar business based on the exclusive sales agency for Swedish pitch and tar. At one point he had 1,200 guilders worth of bibles amongst his lombards. Other merchants such as Louys Trip also lombarded securities, sometimes apparently as part of securities transactions. 26 The Sephardic firms which came to prominence during the 1650s also combined finance with trade, at least initially. Following his arrival from Antwerp in 1652 Antonio Lopez Suasso, for instance, established himself as a leading importer of wool from Spain but he dealt in other commodities as well, notably jewels. He gradually moved more and more into finance as agent for the Stadholder William III, who used Suasso s European financial connections to counter Louis XIV s expansionary policy. At the same time Suasso acted as agent for the Spanish king, channeling payments to his German allies and eventually financing the Spanish diplomatic service in northern Europe. As a reward for his services Suasso received the unprecedented honour of an aristocratic title. His son Francisco continued in his footsteps, reportedly lending William III two million guilders without collateral to pay for his peaceful invasion of Britain in Like his father he moved money around to thwart French aspirations and facilitate payments for the Spanish king, in close collaboration with the king s political representative in Amsterdam, the Sephardic merchant and financier Manuel de Belmonte. 27 At the same time the firm of Machado and Pereira operated as William III s main army contractors, supplying anything from bread to kitchens and horses and wagons for the armies fighting the succession of wars raging in Western Europe 24 Jonker and Sluyterman, At home 91. In 1719 the firm was renamed into Jean Deutz & Sn. 25 J.E. Elias, De vroedschap van Amsterdam (Amsterdam 1963) 637, ; I.H. van Eeghen, Buitenlandse monopolies voor de Amsterdamse kooplieden in de tweede helft van de zeventiende eeuw, in: Jaarboek Amstelodamum 53 (1961) ; P.W. Klein, A 17th century monopoly game, the Swedish-Dutch trade in tar and pitch, in: J. Schneider, ed., Wirtschaftskräfte und Wirtschaftswege, II, Wirtschaftskräfte in den Europäischen Expansion (Bamberg 1978) O.C. Gelderblom, J.P.B. Jonker and C.J.M. Kool, Banks versus markets: the character of the Amsterdam financial system during the 17 th century, working paper Utrecht D. Swetschinsky and L. Schönduve, De familie Lopes Suasso, financiers van Willem III (Waanders: Zwolle 1988) 26-41; Israel, De Republiek ; idem, European Jewry in the age of mercantilism, (Littman Library: London 1998) ; idem, Economic contribution 523,

8 during the last decades of the 17 th and first decades of the 18 th century. The firm also helped provisioning the Amsterdam naval squadron taking part in the 1688 expedition. 28 Having to bridge the often rather wide gap between purchases and payment on a constant basis, Machado and Pereira acted in fact as financiers of the war effort. One of their agents, Solomon de Medina, moved to Britain and, as chief supplier to Marlborough s armies, became the first Jew be to be knighted there. 29 Other prominent Sephardic merchants-bankers were Jeronimo Nunes da Costa, a dealer notably in Brazil wood, tobacco, sugar, spices, and diamonds who also acted as the chargé d affaires for the Portuguese crown, and Jacob Delmonte, a leading wool merchant. 30 In effect these Jewish financiers were the closest Holland came to having a group of Hofjuden, bankers with close connections to the court. 31 IV. Living in splendour. These merchants-bankers distinghuished themselves by their political connections and by their sumptuous lifestyle. Jean Deutz, for instance, was the brother-in-law and a close friend of Johan de Witt, the Republic s most important politician during the 1650s and 1660s. He also acted as adviser to the financially astute statesman. 32 The Suasso s stood, of course, on intimate terms with the Stadholder and his court. In his capacity as diplomatic representative for the Portuguese king Jeronimo Nunes da Costa conducted a household to match, entertaining foreign diplomats, statesmen, and princes. 33 Because of Manuel de Belmonte s position as the personification of the alliance between the Republic and Spain during the war-torn late 17 th century, his house also served as natural meeting point for foreign diplomats and nobility. 34 As for lifestyle, Amsterdam merchants were considered to live frugally by foreign observers, who often commented on the Dutch propensity to save rather than spend, and on the lack of ostentatiousness. Even so the rich stood out, of course, as everywhere else, most visibly through their often gorgeous canal side houses. In 28 Israel, De Republiek ; idem, Economic contribution Several other Sephardic merchants acted in similar capacities for German princes: Israel, Economic contribution Israel, De Republiek ; idem, Economic contribution , 528, G. Kurgan-Van Hentenryk, Jewish private banks, in: Y. Cassis et al., ed., The world of private banking (Ashgate: Farnham 2009) H.H. Rowen, John de Witt, Statesman of the True Freedom (Cambridge UP: Cambridge 1986) 50-51; L. Panhuysen, De ware vrijheid, de levens van Johan en Cornelis de Witt (Olympus: Amsterdam 2005) 181, 252, 253, 255, , 271, 360, 362, Israel, De Republiek Israel, De Republiek

9 Occo s days Amsterdam had been a modest town with a couple of thousand inhabitants, but by 1650 it was a comparatively large city of some 200,000 people. Three rings of canals encircling the medieval centre had been built to accommodate the swelling population. The two innermost ones, the Herengracht and the Keizersgracht, were given over to housing for the rich, with at their southern segments plots of double the standard width for those wanting more space and able to afford it. As often as not those houses had, and some still do, a deep garden running to the opposite side of the block and ending in stables opening on to the next street or canal. Joseph Deutz commissioned the leading architect of his day, Philip Vingboons, to design such a double house for him at Herengracht (now no. 450), so he had ample room to hang his picture collection. The brothers and business partners Louys and Hendrick Trip chose the Kloveniersburgwal (no. 29) as location for their immense joint mansion, built by Justus Vingboons and closely mirroring Jacob van Campen s splendid town hall on the Dam square, then newly finished and testimony of Amsterdam s proud commercial self-confidence. Belmonte s grand mansion stood at Herengracht no. 586, those of Suasso and Nunes da Costa just across the river Amstel and almost next to each other at Nieuwe Herengracht 43 and 47 respectively. Contemporaries marvelled at the magnificent gardens behind the houses, havens sheltered from the city s bustle. Other indulgences favoured by the commercial elite were country mansions, with lordly titles if possible. Dutch society never created regular mechanisms to let burghers ascend to the nobility in the way other European countries did, so ambitious businessmen could not aspire to that. But they could buy social deference by acquiring feudal titles which, having lost most of their original public function, were regularly bought and sold as chattels. Thus in 1696 the third Jean Deutz, then head of his grandfather s firm, bought the lordship of Assendelft to add lustre to the nearby castle of Assumburg which he had acquired two years before. His example was to be widely followed during the 18 th century. V. The importance of the securities trade. The switch to commission trading, the Iberian trade, and William III s policies were not the only factors boosting the evolution of finance. Buoyed up by rising wealth, securities trading developed into a major business with an increasingly sophisticated 9

10 array of derivatives and products. 35 Sephardic Jews were quite prominent in this trade as well. In 1688 one of them, Joseph Penso de la Vega, an acquaintance of Francisco Lopes Suasso, published a justly famous account of the techniques used on the Amsterdam exchange. 36 One new product introduced during the 1670s were tontines. Developed during the 1650s in Italy and France as a public debt instruments, these constructions were mainly used for private pension arrangements by Dutch investors. Tontine contracts were in effect unit trusts with an element of chance. A number of investors clubbed together to buy a block of securities, usually VOC shares, members splitting the revenues until a specified last surviving number obtained the joint fund. Some 200 such contracts were concluded between 1670 and 1700, most of them in Amsterdam, the estimated total value totalling 4.3 million guilders. 37 We have already seen how Deutz applied the unit trust construction to repackage an Austrian loan in William III s accession to the British throne in 1688 opened entirely new avenues for finance. By ending the political stalemate between Crown and Parliament the Glorious Revolution spurred the London money market into action. A series of joint-stock companies were floated for insurance, banking, and trade, notably the Bank of England and the South Sea Company. To pay for the wars with Louis XIV the government adopted Dutch Finance, selling large amounts of floating debt. The burgeoning opportunities attracted an influx of Dutch bankers and brokers keen to apply the techniques described by Penso de la Vega in a new, much larger, and as yet underdeveloped market. These bankers also channeled surplus Dutch savings into British securities and widened British access to Amsterdam s pool of liquidity centered on the Wisselbank, with a triple effect. Dutch investments in Britain rose rapidly, peaking at an estimated 200 million guilders in On the back of that specialized traders arose linking the Amsterdam and London markets and developing 35 O. Gelderblom and J.P.B. Jonker, Amsterdam as the Cradle of Futures Trading, in: W.N. Goetzmann, K.G. Rouwenhorst, ed. The Origins of Value, the Financial Innovations that Created Modern Capital Markets (Oxford UP: Oxford 2005) ; Petram, World s first. 36 J. Penso de la Vega, Confusion de confusiones (ed. G.J. Geers and M.F.J. Smith, Nijhoff : Den Haag 1939; English translation H. Kellenbenz, Baker Library: Boston 1957 ); J.I. Israel, Een merkwaardig literair werk en de Amsterdamse effectenmarkt in 1688: Joseph Penso de la Vega's Confusion de confusiones, in: De zeventiende eeuw 6 (1990) O. Gelderblom and J.P.B. Jonker, With a view to hold, the emergence of institutional investors on the Amsterdam securities market during the 17 th and 18 th centuries, in: J. Atack, L. Neal, ed., The Evolution of Financial Markets and Institutions (Cambridge UP: Cambridge 2009) 71-98, ibidem A.C. Carter, Getting, spending and investing in early modern times, essays on Dutch, English and Huguenot economic history (Van Gorcum: Assen 1975). 10

11 a lively arbitrage traffic between them. 39 As a result the two markets drew closer together, creating the first modern integrated capital market, which soon also included Paris. 40 The speculative wave of showed just how close the three markets were integrated by then, Amsterdam facilitating international financiers in the three cities to circulate their funds between markets. Moreover, British company promoters moved to and fro over the North Sea to try and start a bubble in the Republic, which largely failed. 41 VI. At the peak of their powers. As a result of these developments the 18 th century became the undisputed heyday of the Amsterdam haute banque. A group of merchants-bankers emerged which combined commodity trading with acceptances, bullion trading, and floating loans for foreign powers. This characteristic combination derived its sense from the financial engineering which such firms could exercise through their control of the flow of information and payments between countries. Commodity and bullion trading yielded bills of exchange and insights about the reputation of correspondents; the volume of acceptances enabled them to offer financial services to clients at low cost. In 1711 the firm of A. Pels & Sn., for instance, handled a large volume of bills with which the British government paid its army fighting in the southern Netherlands. Some years later Pels had a large trade in specie, notably French, and in 1763 it took part in floating a Danish loan. 42 George Clifford & Zn. had moved into banking by 39 R.C. Michie, The invisible stabilizer, asset arbitrage and the international monetary system since 1700, Financial history review 5 (1998) 5-26; E.S. Schubert, 'Arbitrage in the foreign exchange markets of London and Amsterdam during the 18th century', Explorations in economic history 26 (1989) 1-20; idem, Innovations, debts and bubbles: international integration of financial markets in Western Europe, , Journal of economic history 48 (1988) L. Neal, The rise of financial capitalism, international capital markets in the age of reason (Cambridge UP: Cambridge 1990). 41 The only large bankruptcies in Amsterdam during were arbitrage specialists: F.P. Groeneveld, De economische crisis van het jaar 1720 (Noordhoff: Groningen 1940) and On the general 1720 events O. Gelderblom and J.P.B. Jonker, Mirroring different follies, the character of the 1720 bubble in the Dutch Republic, forthcoming from Yale UP 2013; on British promoters C.H. Slechte, 'De Maatschappij van Assurantie, Disconteering en Beleening der stad Rotterdam van 1720, bekeken naar haar produktiefactoren over de periode ', in: Rotterdams Jaarboekje 7th series, vol. 8 (1970) ; idem, Het aandeel van de Rotterdamse regenten in de actie-handel van 1720, in: Rotterdams Jaarboekje 7th series, vol. 10 (1972) ; idem, Vianen en de spotprenten op de windhandel van 1720, in: In het land van Brederode, historisch tijdschrift voor het land van Vianen 2 (1977), 5-27; idem, 'Een noodlottig jaar voor veel zotte en wijze', de Rotterdamse windhandel van 1720 (The Hague 1982); idem, De firma List en Bedrog, de Provinciale Utrechtsche Geoctroyeerde Compagnie ( ), in: Jaarboek Oud Utrecht Van Dillen, Rijkdom , 607. The firm was set up in 1707: M.G. Buist, At spes non fracta, Hope & Co , merchant bankers and diplomats at work (Nijhoff: The Hague 1974) 5. 11

12 1714, when the firm successfully floated a 2.5 million guilder loan for Austria which Jean Deutz & Sn. had failed to sell to investors. 43 Deutz & Sn. remained in the game, however, and even survived a heavy loss inflicted by the collapse of another Austrian loan in 1742, when the emperor stopped paying after Prussia had seized the collateral, Silesia. 44 In 1753 the firm found a new application for the familiar unit trust concept by creating funds holding securitized mortgages on Caribbean plantations. This was a very lucrative business for the issuer. Deutz arranged the mortgages with the plantation owners, repackaged them into unit trusts, sold the shares, managed the trust, handled the tropical produce sent to Amsterdam by the debtors, and serviced the mortgages from the sales proceeds, collecting fees at every step. Investors did not mind, for the interest rate gap between the Republic and the Caribbean offered attractive returns. Consequently merchant firms scrambled to push mortgages onto Caribbean planters and repackage them for sale to Dutch investors. Within a couple of years some 80 million guilders had been channeled into these mortgages, creating a dangerous asset price bubble which burst during the mid-1770s. 45 Jean Deutz & Sn. did not live to see that. Willem Gideon Deutz, who had pioneered this innovation, died in 1758, leaving his affairs somewhat in disarray, so the firm was wound up. 46 Its Austrian business was taken over by a relative newcomer, Verbrugge & Goll, later known as Goll & Co. 47 Next to Pels, Clifford, and Deutz there were other firms which probably belonged to the haute banque of the first half of 18 th century, such as Muilman & Sn., active since 1727 from offices in London and in Amsterdam, Hodshon, Anthoni Grill, Hogguer, or Raymond & Théodore de Smeth, but we know even fewer details of these firms than we do of Clifford or Pels. We can, however, get a good idea of how merchant banking firms developed and operated from the history of Hope & Co., Amsterdam s leading firm from the second half of the 18 th century until the early 20 th. 48 At the end of the 17 th century a member of the Scottish Hope family settled in Rotterdam. The next two generations built up a flourishing shipping and trade 43 Van Dillen, Rijkdom Van Dillen, Rijkdom 459. The original bonds signed by the Austrian emperor are still in the possession of the Amsterdam city archives. 45 J.P.B. Jonker, De vroege geschiedenis van de firma Insinger & Co., in: Jaarboek Amstelodamum 94 (2002) , ibidem 114; idem, Roeien tegen de stroom, , de geschiedenis van Insinger & Co., deel 2, in: Jaarboek Amstelodamum 96 (2004) , ibidem Jonker, Merchants Jonker, Merchants ; Van Dillen, Rijkdom Buist, Hope & Co. 3-21; J.P.B. Jonker, MeesPierson, the link between past and future, 275 years of tradition and innovation in Dutch banking (Amsterdam 1997)

13 business with the British isles there, but around 1720 a son of the third generation, Archibald, moved to Amsterdam and struck out on his own in shipping, trading, and possibly stockbroking. In 1734 his brothers took over the firm, renaming it Thomas & Adrian Hope. The the mid-18 th century is generally seen as a period of slow economic growth in the Republic. By 1750 foreign trade turnover in London was nearly double that of Amsterdam, so the volume of allied commercial services such as shipping, finance, and insurance must also have been higher. 49 Even so the two Hope brothers successfully expanded their firm s operations and reputation, presumably because Amsterdam still had an edge in price and conditions. By 1750 Thomas Hope had acquired sufficient prominence for him to be asked by Stadholder William IV for expert advice on how to regenerate the economy. He recommended introducing a full free trade regime, which foundered on the country s political fragmentation. 50 During the 1750s Hope also contributed materially, as the Stadholder s representative on the VOC board, to reforms aimed at improving the company s poor performance, though in this case as well he failed to realize his ambitions. 51 By 1760 the firm chartered some fifty ships a year for its timber trade alone. 52 The extent of its commodity trade may be gaged from the very large complex of residential accomodation, offices, and warehouses which may still be seen between de Keizersgracht and the Prinsengracht along the Molenpad. Foreign travellers marvelled at this commercial and financial powerhouse, which employed some 26 people. 53 Buoyed up by extensive financial transactions for the British government during the Seven Years War ( ), Thomas & Adrian Hope was probably Amsterdam s biggest firm around 1760 with assets of 8 million guilders and a capital of 4 million, and quite possibly the biggest firm in Western Europe. 54 When in 1762 two new partners joined the firm it was renamed Hope & Co. This steep ascent to the top shows just how much dynamism the Amsterdam market still possessed deep into the 18 th century. Other firms grew rapidly, too, but 49 Jonker and Sluyterman, At home 102, Van Dillen, Rijkdom ; J. Hovy, Het voorstel van 1751 tot instelling van een beperkt vrijhavenstelsel in de Republiek (propositie tot een gelimiteerd porto-franco) (Wolters: Groningen 1966). 51 J.J. Steur, Herstel of ondergang, de voorstellen tot redres van de VOC (HES: Utrecht 1984); Jonker and Sluyterman, At home Jonker and Sluyterman, At home G.W. Kernkamp, Bengt Ferrner s dagboek van zijne reis door Nederland, in: Bijdragen en Mededeelingen Historisch Genootschap 31 (1910) ; Jonker and Sluyterman, At home 121; Elias, Vroedschap Jonker and Sluyterman, At home ; Buist, Hope & Co

14 with less circumspection. In 1751 L.P. de Neufville, then 21 years old, joined with three of his brothers to form Gebroeders de Neufville, a typical merchant banking firm combining a varied commodity trade with shipping, insurance, and acceptances. 55 The Seven Years War boosted the firm s operations, presumably because L.P. de Neufville, who managed the business more or less singlehandedly, undercut rival firms and took high risks to seize a large share of the acceptances market. He had succeeded in grabbing fourth place after Hope, Clifford, and Pels, and stood on the brink of moving into the elite group of loan issuing houses, but following the collapse of commodities prices following the end of the war De Neufville went bankrupt with debts of 9.6 million guilders. 56 Initiatives to support the firm foundered on Pels refusal to join, probably out of spite about De Neufville cutting corners. 57 VII. Coping with crises. For all the spectacle of a major firm going bust, the 1763 crisis was relatively mild. Grill ran aground but could be saved, at least for the moment; despite losing a large amount of money in De Neufville s collapse, De Smeth, active since 1736, continued in business and remained in the front rank, floating the first loan for the Russian Czar in The 1772 crisis hit Amsterdam harder, however. 59 Two old and renowned firms, Clifford and Pels, went under, as did Grill, which had survived the 1763 crisis by the skin of its teeth. 60 A deep recession set in which lasted several years. At the same time the pound-guilder exchange rate began declining as a consequence of international businessmen moving their money to London, a sign that the two successive crises had dented Amsterdam s commercial advantages by undermining trust. Amongst those leaving was Abraham Ricardo, the stockbroker father of the famous economist David Ricardo. Other indications of shifting circumstances included the city council s 1776 decree giving the banknotes circulated by cashiers the status of legal tender, in effect 55 E.E. de Jong-Keesing, De economische crisis van 1763 te Amsterdam (Internationale Uitgevers- en Handelmaatschappij: Amsterdam 1939) For a detailed discussion of the crisis see Jong-Keesing, Economische crisis and C.P. van Eeghen, 'Het faillissement van den firma Coenraad & Hendrick van Son in 1762', Economisch-historisch jaarboek 22 ( ) ; for a modern analysis Schnabel and Shin, Liquidity and contagion. 57 Van Dillen, Rijkdom Van Dillen, Rijkdom 607; Buist, Hope & Co. 13; J.C. Riley, International government finance and the Amsterdam capital market (Cambridge UP: Cambridge 1980) 155 and footnote Van Dillen, Rijkdom Van Dillen, Rijkdom

15 sanctioning an alternative to the Wisselbank s giro system. At the same time the cashiers, from passive cash-keepers and extensions of the Wisselbank, moved into banking on their own by using deposits for extending loans. 61 Though Wisselbank deposits and the premium on banco money did not suffer, this suggests that the bank faced a slow erosion of its position. During the 1780s this erosion accelerated. From the start the Fourth Anglo-Dutch War ( ) went very badly for the Republic, trade coming to a standstill and the VOC evading bankruptcy only through clandestine loans from the Wisselbank, ordered by the Amsterdam city council. Though done in utmost secrecy word came out, causing the premium on banco money to drop from 5 per cent to zero by the early 1790s, effectively ending the bank s core business. With these loans VOC survived its acute liquidity crisis but the company was really beyond help, years of mismanagement having ruined a great business. From 1784 the Republic entered a period of profound civil unrest bordering on war, as rival political factions sought to blame each other for the defeat by Britain. An invasion by Prussia restored the incumbent regime and the stadholder, but in 1794 the country once again entered a war for which it was badly prepared, this time as an ally of Britain and Austria against revolutionary France. The French armies made rapid headway through Belgium on their way to Amsterdam, hoping the capture the city s famous riches, but they arrived too late. In 1795 the Wisselbank had to suspend payments; the VOC avoided bankruptcy only because it was nationalized by the regime of the Batavian Republic installed by the French; and the Republic itself proved to be bankrupt, a parliamentary inquiry showing that the public debt had spun out of control. Key firms had meanwhile left Amsterdam, Hope & Co. transferring its seat to London during the autumn of VIII. An Indian summer. The last decades of the 18 th century were thus a period of marked economic decline and great political turmoil, established structures and activities wasting away; but at the same time new opportunities kept opening up. The Atlantic trade was a particularly dynamic sector, the plantation boom of the 1750s and 1760s being followed by a rapidly expanding trade with North America as Britain lost hold over its colonies there. Finance now achieved its most luxurious growth, Amsterdam houses 61 J.P.B. Jonker, Kassierspapier, in: J. Lucassen, ed., Gids van de papiergeldverzameling van het Nederlandsch Economisch-Historisch Archief (NEHA: Amsterdam 1992) ; idem, Merchants

16 raising international lending to a scope and scale never shown before. Between 1760 and 1794 loans were floated for an estimated 375 million guilders, bringing the total of Dutch foreign assets to 575 million. 62 There was also room for conspicuous innovation. In 1774 the securities trader Abraham van Ketwich took the recent market upheaval as an opportunity to launch what was probably the world s first mutual fund offering small investors the chance to diversify and thus spread risk. Though not a runaway success, several others followed. 63 As before the international loans usually followed trade. Dull & Co. specialized in Danish trade and finance, for instance, as Occo and Clifford had done before. 64 J. & C. Hasselgreen floated Swedish loans in competition with Hope & Co. and with Horneca Hogguer & Co. The last firm was a rare instance of French-Swiss bankers succeeding one another in the Amsterdam haute finance. Established in 1722 by Jacques Hogguer, the firm welcomed the Genevan banker Jean-Jacques Horneca into the partnership in 1762 and floated a Swedish loan in Renamed Horneca Fizeaux & Co. in 1773, the firm employed one of the great rainmakers of the day, Georges Grand, an immigrant from Lausanne, which resulted in it being renamed Fizeaux Grand & Co. in 1779 and, when a relative of the firm s founder, Paul Iwan Hogguer, was admitted into the partnership, to Hogguer Grand & Co. in The firm floated Polish loans as well but, more importantly, acted as agent for the French government in sending money and arms supplies from the Republic to support the fledgling United States in its independence fight against Britain. It was thus a first port of call when an American delegation headed by Benjamin Franklin came to Europe looking for long-term loans. Though taken in with Grand no deal was done, because the Americans mistrusted the French government s intentions. 65 Moreover, they could easily find willing takers of loans for the new republic elsewhere. Hope & Co. did not want to get involved, probably because the partners 62 Riley, International government finance W.H. Berghuis, Ontstaan en ontwikkeling van de Nederlandse beleggingsfondsen tot 1914 (Van Gorcum: Assen 1967) 46-73; K. G. Rouwenhorst, The origins of mutual funds, in: W.N. Goetzmann, K.G. Rouwenhorst, ed. The Origins of Value, the Financial Innovations that Created Modern Capital Markets (Oxford UP: Oxford 2005) Van Bochove, Economic consequences 114, 226, 250, Van Dillen, Rijkdom 608, ; S. Baumgarten, Emprunts de Suède à Amsterdam, in: Tijdschrift voor Geschiedenis 77 (1964) ; B. Bijtelaar, Het huis Herengracht 543, in: Jaarboek Amstelodamum 50 (1958) , ibidem ; H. Lüthy, La banque protestante en France de la révocation de l'édit de Nantes à la Révolution II, De la banque aux finances ( ) (Neue Zürcher Zeitung: Zürich 2005) , ; Jonker, Merchants 296, 319 note 14; P.J. van Winter, Het aandeel van den Amsterdamschen handel aan de opbouw van het Amerikaansche Gemeenebest (Nijhoff: The Hague 1933) I, 33; see also J.C. Riley, Financial and economic ties, the first century, BMGN 97 (1982)

17 had strong Orangist sympathies and supported the stadholder, whereas the Patriot or republican party favoured the United States. Prominent firms belonging to that party and heavily involved in American trade and finance included N. & J. van Staphorst & Hubbard, W. & J. Willink, P. & C. van Eeghen, and D. Crommelin & Sn. As a result Amsterdam became, together with France, the chief financial support on which the revolutionary government depended for its survival. Van Staphorst and Willink were the leading houses in American public loans, floating 34.2 million guilders between them. 66 This strong position appears to have been a matter of acumen rather than firm size, at least as regards Van Staphorst. The two Van Staphorst brothers had started their insurance business more or less from scratch in In 1789, when N. Hubbard was admitted to the partnership, its equity amounted to no more than 200,000 guilders, modest by Amsterdam standards. 67 Willink, by contrast, was an older firm, dating from the 1730s. By 1780 its reputation was as good as Hope & Co. s. 68 Driven by the ingenuity and energy of its chief partner, Pieter Stadnitski, the firm of Stadnitski & Van Heukelom also made its name in US loans, pioneering stocksubstitution loans and property schemes. 69 Van Eeghen and Crommelin were much bigger firms and they had deeper roots in the commodity trade and in shipping. The former firm dated from During the 1760s and 1770s Van Eeghen had blossomed in the Caribbean trade and subsequently branched out to the US, assets growing rapidly to reach million guilders during the 1790s, just behind Hope & Co. Though not participating in floating public loans, the firm led a syndicate of six participants engaging in largescale land speculation and succeeded narrowly in piloting that venture through very difficult times to modest success. 70 The firm still exists as a commodity trader with a splendid office on the Herengracht. Crommelin was set up in 1737 and specialized in trading between the founder s country of origin, France, the Republic, and America. By 1760 it had grown to a good house of middling size, possessing about 200,000 guilders of capital. The boom in US trading catapulted the firm to prominence; by 1795 it was similar in size to Van Eeghen. Like its rival Crommelin did not engage 66 Jonker, Merchants Jonker, Merchants Jonker, Merchants J.C. Riley, Pieter Stadnitski and Dutch investment banking (Chapel Hill 1972; Ann Arbor 1986); Jonker, Merchants Jonker, Merchants ; P.B. Evans, The Holland Land Company (Buffalo Historical Society: Buffalo 1924); J. Rogge, Het handelshuis Van Eeghen, proeve eener geschiedenis van een Amsterdamsch handelshuis (Amsterdam 1949). 17

18 directly in floating US loans. Instead, the firm concentrated on selling securitiesbacked American loans to the Dutch public for a total of 3.5 million guilders. 71 The available opportunities are best illustrated, however, with the impressive careers of absolute newcomers starting from scratch. Impecunious German immigrants such as Braunsberg and Insinger, for instance. When F.L. Braunsberg arrived in Amsterdam from Berlin during the late 1760s he was probably around twenty years old. Having served an apprenticeship as an office clerk, he set up under his own name in 1770, trading between Germany and France via the Republic. Three years later he floated a small loan, but Braunsberg remained otherwise on the sidelines during the boom in foreign loans until 1807, when he brought out a Prussian loan. By then the firm belonged to the financial top, engaging in triangular bullion trades with Hope & Co. and its regular London partner Baring Brothers & Co. 72 Hermann Insinger was only sixteen on his arrival from Westphalia in His apprenticeship therefore lasted a little longer, but he used his time well, building relationships with key businessmen such as Henry Hope, senior partner of the eponymous firm. In 1779 Insinger accepted an offer to travel to St. Croix, St. Thomas, and St. John, three Caribbean islands under the Danish crown, and bring a number of defaulting planters to heel. Having succeeded in his mission he returned three years later with a good reputation as a fixer plus a solid social and business network focused on the Caribbean. His firm s assets grew from 180,000 guilders to 1.5 million in twenty years, on a par with the likes of Van Eeghen and Crommelin. Insinger collaborated closely with Hope & Co., notably in the diamond trade, and after Hope had transferred to London Insinger acted as its Amsterdam caretaker, with the broker Robert Voûte and Willem Borski, Hope & Co. s chief underwriter. 73 Despite his Polish sounding surname, Willem Borski was not an immigrant. He started in business as a broker in 1789, moved into commodity trading and loan underwriting, in the latter capacity becoming the manager responsible for the remarkable ease with which Hope & Co. s fed its often large foreign loans to the market. This made him into the central fixer of the stock exchange and the central figure in a string of initiatives to bolster the financial sector during the early 1800s. 71 Jonker, Merchants L. van Nierop, 'De honderd hoogst aangeslagenen te Anmsterdam van 1813', in: Economisch historisch jaarboek 11 (1923) 1-76, ibidem 36-38; I.H. van Eeghen, Louis Splitgerber, in: Maandblad Amstelodamum 62 (1975) 1-9; Jonker, Merchants Jonker, Vroege geschiedenis. 18

19 By 1812 Borski stood at the top of the Amsterdam income ladder as a multimillionaire. 74 These firms demonstrate just how much room the market, for all its outward signs of decline, still offered to enterprising businessmen, and not just in finance, for they all, even Borski, continued to deal in commodities. Indeed, as before the commodity trade was a first consideration in finance deals, the conditions for interest and redemption payments having a close interdependence with the acceptances generated by commodity flows. The houses specializing in American loans clearly meant to lure the trade in tobacco and cotton away from London, and for a time they succeeded in attracting a voluminous trade, be it not in substituting Amsterdam for London. The firms also show the relative openness of the social and business elite to newcomers, regardless of their origin, provided they made an effort to fit in, as Insinger obviously succeeded in doing very early on. At the same time we have clear indications of overcapacity. With equity of over 15 million guilders and assets of million, the equivalent of deposits in the Wisselbank, Hope & Co. attained the peak of its power during this era, which put it way ahead of any other merchant firm in either Amsterdam or London. 75 Led by Henry Hope and John Williams Hope, the firm continued to have a large and varied commodity trade including, for a time, a commanding position in the import of Brazilian diamonds via Portugal, and a spectacularly failed attempt to corner the European cochineal market. As for international government finance, from 1768 Hope floated a series of Swedish loans and one for Spain in 1782, but its heyday came in 1788 when the firm replaced De Smeth as the Russian court s preferred banker. During the next seven years Hope & Co. issued 53 million guilders of loans for Russia, carefully nursing the bonds to a wide investors public by building a network of brokers within the Republic plus a number of partner firms abroad. One regular partner firm, though not for the Russian loans, was Baring & Co. in London, then still very much the junior partner in what was fast becoming a close and regular team effort. 76 The issuing business was very profitable for the firm and served to mask a hard truth: it had really grown too big for the Amsterdam market. Since the early 74 Jonker, Merchants 201; G. Wiersma, Johanna Borski, financier van Nederland (Prometheus: Amsterdam 1998). 75 Jonker and Sluyterman, At home A recent account is P.E. Austin, Baring Brothers and the birth of modern finance (London: Pickering & Chatto 2007); cf. 10 for Baring s equity peaking at nearly 76,000 pounds in 1792, which would have been around 830,000 guilders. 19

20 1770s asset growth went hand-in-hand with gradually declining profits, so the marginal utility of operations fell. 77 The firm s senior partner Henry Hope set new lifestyle standards as well. As an American he did not share an earlier generation s appetite for empty feudal titles, but he did like to have a lot of room around him. Though a bachelor, he inhabited two huge houses. His town residence on the Keizersgracht, a few doors away from the office building, was really a museum, very spacious, its interior conceived to show his splendid collection of paintings of Italian, Dutch, Flemish, and French masters to best effect. When moved to Britain in 1794 the collection counted nearly 400 paintings. 78 During the 1780s Hope also built Welgelegen, a grand country mansion in neoclassical style just outside Haarlem, where he organized concerts. Borski chose a location somewhat closer to the sea for his country retreat, Elswout, buying up adjoining plots of sandy dune land until he had collected an immense estate. Such ostentation was not uncommon, but not mandatory either. Henry Hope famously observed the thrift customary amongst Dutch businessmen, who reportedly saved a third of their income. The Van Eeghen family always emphasized the virtue of frugality in word and deed. Hermann Insinger s bride Anna Maria Swarth refused the pearl necklace which he had bought for her as a wedding gift in 1787 because she considered it too expensive for their modest station in life, and accepted it only when, 12.5 years later, they celebrated their first milestone together with a well-established firm. 79 Such prudence could make all the difference in economic adversity, of which there was a lot to come. IX. Retreat to the second rank. The French invasion of 1795 turned the economic decline from which the Republic had been suffering into a rout. With much ingenuity merchants had succeeded in maintaining supraregional commercial functions for Amsterdam, but now the political upheaval, the collapse of VOC and Wisselbank, and the crisis of confidence in public finance broke the trust required for international business. Merchants rerouted their transactions to London, shipowners had their vessels reregistered in foreign ports, never to return. Moreover, the Netherlands switched sides in the 77 Jonker and Sluyterman, At home Buist, Hope & Co Henry Hope s Keizersgracht home was big enough to serve as Amsterdam s main public library until the 1960s; his country mansion still serves as the seat of Holland s provincial administration. 79 Jonker, Vroege geschiedenis