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. . About twenty-five years ago, Lord Revelstoke, at the head of the great firm (Baring Brothers), was visiting a German watering-place, where he met one of our leading American bankers. Naturally, their conversation drifted into a discussion of the financial situation, and in the course of the talk, Lord Revelstoke remarked that he intended during the next ten or fifteen years to enter extensively into modern financial banking. From that time the character of the business of the Barings began to change, and from being the greatest merchants in commercial credits, they put their resources more and more into fixed forms of investment, into speculative ventures in securities and into the promotion of financial enterprises. What was the result? In 1890 the ... world was startled by rumors reflecting upon the credit of this house, hitherto considered invincible, and its failure was only averted by the most strenuous efforts of the Bank of England, with the aid of the strongest bankers of London. ...
“We refer to this striking chapter in financial history simply because it illustrates one of the peculiar dangers of our own times. Unquestionably, the special temptation to which our banks are now subjected is the temptation to turn from commercial to financial banking; to change from the buying and selling of commercial credit into investments in securities and loans extended to promote financial enterprises; in short to change their business from that of commercial banks to that of finance companies.
“The process of concentration in banking which is going on would possess little danger were it not accompanied in so large a degree by this change. The house of the Barings was a striking example of concentration in banking. Its business encircled the globe; its wealth was enormous, and so great were its transactions that even at the time of its trouble in 1890 its holdings of paper amounted to $100,000,000. But when it began to divert its interest, formerly directed almost exclusively to commercial credits, and began to throw the weight of its prestige and
irces into the field of investment, speculation and promotion, then the power of its concentration of capital became a menace to the world. In the same way concentration in banking, which is going on at such rapid rate in New York, would not be open to much or any criticism if such concentration . was employed for the purpose of facilitating the commerce of the country instead of being used in purely financial undertakings.” — THE WALL STREET JOURNAL, New York, Oct. 29, 1904.