Banking Houses

(offices), private banking enterprises belonging to individual bankers or groups of bankers (partners) joined in associations with unlimited responsibility. Often a partnership is formal, since only members of a family, relatives, or employees of a banker participate in it. Banking houses are results of capitalism; some of them arose out of usury in the context of the manufactory stage of capitalism—in Italy (14th century) and England (17th century). The comparatively small deposit banking houses, which received deposits and discounted promissory notes, have gradually disappeared with the development of capitalism and the intensification of share capital. Conversely, the large banking houses achieve ever increasing (frequently international) importance, not only engaging in domestic credit operations and exchange speculation but also acting as intermediaries in the issuing of state loans to foreign countries and loans guaranteed by the state. They participate in the floating of shares and bonds by different companies, in the crediting of foreign trade, and in currency transactions.

The change in the nature of the operations of large banking houses was the result of their adaptation to the new conditions of monopoly capitalism. Some banking houses turned into joint-stock banks, in which the former owners of the house held the controlling block of shares. The process of concentration of banks in the era of imperialism is accompanied by a decrease in the number and relative proportion of banking houses. Thus, in the USA there were more than 3,000 banking houses in 1903 (with $584 million in assets in 18 states), but the number had declined by 1962 to 80 (with $383 million in assets, in every state); their assets were no more than 1 percent of the total of all the banks of the country. In England deposit banking houses numbered more than 100 in 1890; by 1968 only one remained. In Germany there were 709 banking houses in 1933 and 206 in the Federal Republic of Germany in 1965; their relative share in the total mass of asset operations was 7.5 percent in 1965. The history of the Morgan banking house (USA) is characteristic. In 1933 it was divided into two banks: the deposit bank, which merged with the Morgan joint-stock bank Guaranty Trust Company into the giant deposit bank Morgan Guaranty Trust Company, and the investment banking house Morgan, Stanley and Company, which played a leading role in intermediary activity in the floating of securities and in stock exchange speculation. In 1967 the bank Rothschild Frères of France, one of the largest European banking houses, changed into a joint-stock bank, control of which remained with the Rothschild financial group.

A sizable group of banking houses are known as banks of issue, since they act as intermediaries in the issue of securities. In England (1970) there are 53 issue banking houses, of which the 17 largest, called underwriting or “merchant” banking houses, engage in the financing of foreign trade (by means of underwriting commercial notes), perform currency transactions, and so on. The influential English banking house Rothschild and Sons has remained a banking house, but its main operation is as an intermediary in the issue of securities. In the Federal Republic of Germany, the most influential banking house is Pferdmenges, which is linked to Thyssen. The banking house Schroder Brothers (it was Hitler’s banker), which was established in 1846, also survives; its partners today are the barons von Schroder. There are banks related to the Schroders in England—Henry Schroder, Wagg and Company—and the USA (Henry Schroder Banking Corporation). This international banking group is one of the most reactionary in finance capital: during World War II it attempted to reconcile the USA and England with fascist Germany so that these countries could act in concert against the USSR. The influential banking houses include Lazard Fréres (in France, England, and the USA); de Neuflize, Shlumberger, Mallet et Compagnie (France); Dillon, Reed, and Company (USA); Kuhn, Loeb, and Company (USA); and Harriman, Ripley and Company (USA).

The greatest banking houses are part of financial oligarchies and are closely tied to governments. As a rule, the activity of banking houses proceeds secretly, since they are not obligated to publish their balance sheets.