Francis Baring

British banker, investor, and merchant

• Born: April 18, 1740
• Birthplace: near Exeter, Devonshire, England
• Died: September 11, 1810
• Place of death: Lee, Kent, England

Baring was one of the first great British merchant bankers. He helped manage the British government’s debt during the American Revolution and the Napoleonic Wars. His financial network extended throughout Western Europe and North America.

Sources of wealth: Banking; trade

Bequeathal of wealth: Children

Early Life

Francis Baring was the third of four surviving sons of John and Elizabeth Baring. He was born partially deaf. One of his grandfathers had been a Lutheran pastor in Germany; his maternal grandfather was a prosperous grocer in Exeter in the county of Devon, England. His father was a leading textile merchant in Exeter, then the largest city west of London. His father died when Baring was only eight years old. He was largely brought up by his mother, who had a good business sense, under which his father’s business continued to thrive. She extended the business to London. Baring moved to London for his education and then in 1755 was apprenticed to Samuel Touchet, a London merchant, for seven years.

First Ventures

On the completion of this apprenticeship in 1762, Baring joined his two older brothers in setting up two firms or “houses”: John and Francis Baring & Co. of London and John and Charles Baring & Co. of Exeter. The Exeter branch needed a London base for many of its transactions. The two houses were interlinked in their finances. In 1767, he married Harriet Herring, the daughter of a merchant in Croydon. Around this time, he also injected some £20,000 into his business. He and his wife eventually had twelve children—six boys and six girls. Harriet Baring died in 1804.

Charles was not a good businessman and Francis frequently had to bail him out. John was also not much interested in the business, preferring to become a member of Parliament for Exeter in 1776. In the end, John became a sleeping partner only. Meanwhile, Francis was being recognized for his business acumen, and by 1771 he was a director of the Royal Exchange Assurance, a post he held until 1780.

The two firms did not do well at first, perhaps because of the brothers’ inexperience. Francis’s own capital had fallen from £10,000 after his marriage to only £2,500 in 1777. The two houses had to be restructured and separated. Thereafter, Baring prospered.

Gradually, the Barings’ business was turning from trading to banking, particularly the financing of import-export trade in its many different facets. Baring acted as London agent for many Western European and North American firms, buying and selling consignments for them, collecting payments, arranging shipping and warehousing, making advances, and accepting bills of exchange.

Of the European houses, the Dutch bank of Hope & Co. was the most important. It had used the Barings for its British deals, and Baring tried to merge his business with Hope. One of the Dutch partners married one of Baring’s daughters, and Baring later tried to get his son Alexander to work for Hope. During the Napoleonic Wars at the end of the eighteenth century, Hope was forced to relocate to London, and the firm worked closely with Baring’s companies, eventually merging with them.

Before the American Revolution, Baring had seen the potential of trade with the United States. His first American client was a Philadelphia merchant in 1774. Through this contact he was introduced to one of America’s richest men, William Bingham. Baring was consulted in the final negotiations over America’s independence.

Mature Wealth

Beginning in 1777, the capital of Baring’s business rose steadily, from £20,000 in 1777 to £400,000 in 1804. Baring’s stake in this was a modest 12 percent in 1777, rising to 54 percent by 1804. Profits likewise rose steadily, from £40,000 during the 1790’s to £200,000 by 1802. By then, Baring was taking the lion’s share, so that his personal wealth grew from £5,000 when he started in 1763 to £64,000 in 1790 and to £500,000 by 1804. As a result of this expansion, in 1781 two additional partners were brought into the business, though only one, Charles Wall, stayed on, eventually marrying Baring’s eldest daughter.

During the American Revolution, Baring had traded in supplies for the British army. He also marketed the British debt incurred by the war, probably making about £19,000 in profit. After the war, he speculated in American property and bought large chunks of what is now the state of Maine. Several of his daughters married American merchants. He became the London banker for the Bank of the United States. In 1795, he sold some $800,000 worth of stocks for the United States government to help it negotiate with the Barbary States of North Africa, and he also negotiated the purchase of British armaments for the United States.

Baring had won the confidence of London and other European merchants through his good business methods, his sound judgment, and his pleasant manner. He now began to win the confidence of leading politicians in the British cabinet through contacts made by his brother John. His sister had married a member of Parliament. Politicians were impressed by Baring’s forward-looking views on the economy and commerce. Prime Minister William Pitt, the Younger, appointed him a commissioner to investigate the payment of fees in 1784. That same year Baring became a member of Parliament for Devon. He served four sessions in Parliament, where he was noted for being a logical speaker, especially when discussing matters of commerce and expressing his belief in free trade. Although he opposed Pitt’s war policy against France, seeing it as a waste of resources and a hindrance to trade, Pitt awarded him a baronetcy in 1793.

During the Napoleonic Wars, Baring again bought up government debt over a period of fifteen years, helping to finance a conflict he theoretically opposed. These transactions brought him some £190,000 in profit.

From 1779 he was a director of the British East India Company, a vastly profitable concern that ran all Indian trade. Baring made sure the company retained its monopoly, and he opposed government attempts to control it politically by making India a colony. Pitt commissioned Francis to renegotiate the company’s charter.

In 1803, Baring began withdrawing from active management of his firm, and the next year he gave up his partnership. Charles Wall became the firm’s manager, with three of Baring’s sons assisting. In 1807, the name of the firm was changed from Sir Francis Baring & Co. to Baring Brothers. Baring had already begun to live like a gentleman, purchasing several country houses outside London; by 1803, these homes were worth £60,000. He then decided to settle at Stratton in Hampshire, some sixty miles southwest of London, which he furnished with old masters and luxury furniture and fittings.

Legacy

At his death in 1810, Baring was able to leave his children some £175,000. His capital at Baring Brothers was £70,000, his estates were worth £400,000, and his paintings were worth £30,000. His son Thomas succeeded to the baronetcy and estates. Another son, Francis, became a member of Parliament, eventually becoming Lord Northbrook.

Although fortunes like Baring’s became more common during the Industrial Revolution of the nineteenth century, Baring’s rise as a “prince of merchants” was unusual in his time. He can be said to be Great Britain’s first merchant banker, instrumental in founding a long-lived firm. His sound financial judgment and honest dealings laid the foundation not only for Barings Bank but also for other merchant banks; this in turn laid the groundwork for London’s centrality as the banking and financial capital of the world in the nineteenth century, taking away much of the importance of the Dutch and German financial centers. His ability to handle the national debt gave Great Britain a sound basis for its leadership in its fight against Napoleon I. Baring was truly an international figure, whose company represented Napoleon during negotiations for the Louisiana Purchase, conducted business with the newly created United States and with South American nations, and built railroads throughout North America.

Bibliography

Hidy, Ralph W. The House of Baring in American Trade and Finance: English Merchant Bankers at Work, 1763-1861. Vol. 14 in Harvard Studies in Business History. Cambridge, Mass.: Harvard University Press, 1949. Provides the fullest account of Barings’s American dealings.

Orbell, John. Baring Brothers & Co. Limited: A History to 1939. London: Baring Brothers, 1985. An in-house account of the rise of the bank and its history till the beginning of World War II.

Pears, Iaian. Stone’s Fall. London: Jonathan Cape, 2009. A novel based on the Barings Bank collapse of 1890, examining what drove the bank to make such unwise investments.

Wechsberg, Joseph. The Merchant Bankers. London: Weidenfeld and Nicholson, 1967. Sets Baring Brothers in the wider context of merchant banking.