American CivilWar, Financial Support of Frankfurt Bankers for
Frankfurt bankers lent money to the U.S. government in the form of six large war bonds during the American Civil War. Frankfurt was the most powerful banking city in Germany, and in the trading of state bonds it was certainly as important as London, Paris, or Vienna.
Its relationship to the American capital market had flourished after the middle of the nineteenth century. For over half a century, the financial relations between Germany and the United States could, with very few exceptions, be identified as those existing between the Frankfurt and the New York money powers. Frankfurt nevertheless managed to bolster its position as the principal German capital market by acquiring a new measure of importance in the 1860s, not only as an underwriting and trading center for German bank and railroad issues but above all as the gateway for Germany’s capital exports, especially to the United States. After its debut on the Frankfurt market in the early 1850s, American debt and equity paper inundated Frankfurt in second and third waves in the early and late 1860s, respectively. The city became, after London, the second-largest outlet for U.S. government and railroad bonds in Europe. Since London sympathized with the South for both practical (cotton supplies) and political (free trade) reasons, it took over the majority of the Confederate issuance of bonds. Frankfurt seems to have placed the overwhelming portion of the Union issues during the American Civil War. By 1864, the bonds of the United States—whose public debt between 1860 and 1865 rose from $90 million to $2.74 billion—had fallen to a low of 38 percent on the Frankfurt market.Frankfurt achieved a key position in the financing of the American Civil War for two reasons: the efforts of the U.S. consul general, William Walton Murphy, and the influence of a group of Frankfurt’s top bankers, which, over the years, had established a strong economic relationship with the United States.
Murphy became the U.S. consul general in the free city of Frankfurt in 1861. After he arrived on November 7 in Frankfurt, he immediately began to search for support for the Union. His initial attempts were, however, unsuccessful. He never received a reaction to his offer of 50,000 rifles for 12 Taler each, and his suggestion to hire German soldiers was repudiated by the U.S. government, which asked instead for German immigrants to farm the lands. Murphy’s time came when he put his experience as a newspaper publisher and banker into action. He made sure that the press remained supportive and “friendly” toward the affairs of the Union in Frankfurt. This was of great importance at a time when the Confederacy was engaging well-known writers to influence public opinion against the Union. It even publicized a £30-million loan from the Parisian branch of the Frankfurt bank of Raphael Erlanger in Europe in 1863. Murphy personally wrote articles and essays against these activities and discredited the loan to the Confederacy in the Neue Frankfurter Zeitung (New Frankfurt Journal) or the Ober-Post-Amts-Zeitung (MajorPost-Office-Journal). Indeed, the honor of Erlanger’s bank was successfully damaged. In return for this activity, Murphy managed to convince many of the Frankfurt banking houses, including Seligman and Stettheimer, Lazard Speyer-Ellissen, Philipp Nicolaus Schmidt, Karl Pollitz, M. A. Gruenebaum and Ballin, to support six large war bonds for the Union. At the end of the Civil War their bonds were quoted at an almost dreamlike height and upon redemption brought hundreds of millions in profits to their shareholders. It was especially J. and W. Seligman that harvested most of the wealth. They founded branches in London, Paris, and the business metropolises of the United States.RalfRoth
See also Frankfurt am Main Citizens in the United States
References and Further Reading
Heyn, Udo. Private Banking and Industrialization: The Case of Frankfurt am Main, 1825—1875. New York: Arno Press, 1981.
Roth, Ralf. Stadt und Burgertum in Frankfurt am Main: Ein besonderer Wg von der standischen zur modernen Burgergesellschaft 1760 bis 1914. Munich: Oldenbourg, 1996.
Sterne, Margaret. “Ein Amateur wird Diplomat: Die politische Karriere von William Walton Murphy, amerikanischer Generalkonsul in Frankfurt am Main 1861—1869.” Archiv fur Frankfurts Geschichte und Kunst 48 (1962): 119-132.