Academic journal article ABA Banking Journal

How a 'Generous Skinflint' Restored America's Fiscal Reputation

Academic journal article ABA Banking Journal

How a 'Generous Skinflint' Restored America's Fiscal Reputation

Article excerpt

SKINFLINTS CAN BE generous too. Consider George Peabody (1795-1869), one of this country's first international bankers, living in London the last 30 years of his life. Born poor in Danvers, Mass. (now renamed Peabody in his honor), he never quite got over his early penury. Worth millions, he once famously stood in the rain, letting the two-penny bus go by in order to catch the one-penny bus. Like his fictional contemporary Ebenezer Scrooge, Peabody was notably ungenerous to his employees. And then, like Scrooge, at the end of his life he suddenly redeemed himself.

Peabody moved to Baltimore when he was 21 and established a dry goods business, importing fabrics and such from England. He soon prospered and began trading in state bonds, slowly moving away from dry goods and into merchant banking.

In the early 19th century, London was the world's financial center and the capital-poor United States needed British capital to develop and power its rapidly growing economy. Unfortunately, many state governments developed very poor financial reputations, making London bankers reluctant to buy their paper. After the financial panic of 1837, the year that Peabody moved to London, states began to default as the ensuing depression deepened.

Pennsylvania, Mississippi, Indiana, Arkansas, Michigan and the territory of Florida all stopped making interest payments on their outstanding bonds. No wonder Charles Dickens in A Christmas Carol, published in 1843, gave Scrooge a nightmare in which his gilt-edge bonds had become "a mere United States security."

Peabody worked hard to restore his country's reputation. He had sold many of Maryland's state bonds to European investors and when Maryland too went into default, his own reputation was severely tarnished. Peabody wrote his Baltimore business associates to pressure the state government to resume payments. Together with Barings Bank he paid journalists to run stories favoring resumption and even paid Sen. Daniel Webster of New Hampshire to make speeches on the subject. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.