------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (April 2008)

Christopher Kobrak, _Banking on Global Markets: Deutsche Bank and the 
United States, 1870 to the Present_. New York: Cambridge University 
Press, 2007. xx + 484 pp. $45 (cloth), ISBN: 978-0-521-86325-4.

Reviewed for EH.NET by Richard Tilly, Institut f?r Wirtschafts- und 
Sozialgeschichte, University of M?nster.


When a group of private bankers founded the Deutsche Bank in 1870, 
their goal was to create an institution which would capture a larger 
share of Germany's foreign short-term credit and payments business, 
then seen as "needlessly" dependent on British intermediaries. This 
dependence continued, but the bank proved able to exploit it 
profitably by establishing its own British intermediary, i.e. a 
London agency, which came to execute a sizeable share of the 
business. To the chagrin of the Deutsche Bank's founders, however, 
their prot?g? by no means confined itself to the finance of foreign 
trade. Indeed, its growing domestic business transformed it into one 
of their most serious competitors.

Nevertheless, the bank's foreign business, though overshadowed by the 
volume of domestic transactions, was important. Given its growing 
size -- by the early twentieth century the Deutsche Bank had become 
the world's largest private bank -- it became a major player in 
international banking as well. The story Christopher Kobrak tells in 
this useful book is thus a welcome addition to the literature on 
banking history. Its focus is on the bank's business activities in 
the United States from the 1870s to the present, a long period 
divided here into three parts: a kind of "golden age" which takes us 
to 1914, the war and interwar years to 1945, and Part Three bringing 
us into the present. This basically chronological structure is 
somewhat imbalanced. The first part is not only much longer than the 
other two; it is much more closely researched, an "inside story" 
based in large part on material found in the Deutsche Bank's rich 
archival holdings (an observation which only partly applies to the 
second part and not at all to the last one). This review reflects the 
same imbalance.

Part One consists of a series of fascinating case studies of business 
finance involving railroads (e.g., the Northern Pacific), 
manufacturing companies (e.g., Edison General Electric), utilities, 
and a number of other projects. The approach is highly personalized, 
reflecting not simply the sources but also the crucial importance of 
personal networks of trust on which much of international banking has 
always been based. Well into the 1890s the key relationship linked 
Georg Siemens, a cousin of the famed inventor and the Deutsche Bank's 
de facto leader, with Henry Villard, a German-born financial 
adventurer specialized in connecting American financial needs with 
German capital. Disappointments with Villard led to his replacement 
in 1893 by Edward Adams, an American banker, while Arthur Gwinner 
gradually assumed Siemens' functions as head of the Deutsche Bank's 
U.S. operations. The author describes the individual projects and the 
financial difficulties they raised with great clarity. My reading of 
these micro-studies left me with two general impressions. First, the 
cross-cultural differences in economic institutions (e.g., banking 
regulation) and behavior patterns (attitudes toward competition and 
cooperation) between German and American business repeatedly led to 
misunderstandings and communication difficulties. This was one reason 
behind the considerable risks the Deutsche Bank found itself taking 
on the Northern Pacific project. As the author notes, that project 
led the bank to reduce its own direct investment (risk exposure) and 
concentrate more on marketing U.S. securities in Germany; but 
communication problems -- and unexpected risk-taking -- persisted. 
Second, the Deutsche Bank's "U.S. directors." Siemens and Gwinner, 
both enjoyed considerable decision-making autonomy. Even when the 
risks just mentioned had become visibly threatening, the other 
directors seemed willing to accept their judgment. That might reflect 
the ability of strong executives to shape the bank's development 
path, the bank's ongoing commitment to its "internationalist" roots, 
or its willingness to take a fairly long-run position on its 
strategic investments, perhaps even all three of these. Since German 
foreign portfolio investment in the 1870-1913 period as a whole 
produced higher yields than comparable domestic securities, it is 
reasonable to assume that the Deutsche Bank's U.S. investments were 
profitable as well. Kobrak argues, however, that conclusive proof is 
not available.

World War One radically changed the rules of the game -- and the 
story Kobrak has to tell in Part Two. His focus here is initially on 
protection of German investments in the U.S., then on salvaging and 
seeking recompense for expropriated assets, followed by a discussion 
of the intermediation and subsequent "buy-backs" of U.S. loans to 
Germany. He quite sensibly devotes almost no attention to the 
Deutsche Bank's experience in the Nazi era, since there are 
alternative monographs on the subject (e.g. by Harold James). He does 
discuss one immediate consequence of that experience, however: the 
attempted "Americanization of German banking" that marked the 1945-52 
period and which aimed at reducing the "power of the big banks" (such 
as the Deutsche Bank). The section closes with discussion of the 
rehabilitation of Hermann Josef Abs and his postwar role as the 
driving force behind the Deutsche Bank's revival.

Part Three opens with continued emphasis on Abs' leadership. Kobrak's 
comments on Abs' influence in postwar West German banking policy are 
uncontroversial. The suggestion that Abs was also responsible for a 
belated globalization of the Deutsche Bank's business stance, 
however, seems to be based on little more than temporal coincidence. 
The rest of the story, in any case, has further strong leaders like 
Alfred Herrhausen, Hilmar Kopper and Rolf Breuer transforming the 
bank into an international institution, bench marks being 
acquisitions like the London investment bank Morgan Grenfell (1989) 
and, Rolf BreuerZs crowning achievement, Bankers Trust, which, in 
1997, for the first time made the Deutsche Bank a truly major player 
in the United States.

Not all readers will find the author's emphasis on strong leaders 
persuasive; and nor did I. This seems most obvious in Part Three, 
where Kobrak presents so little supplementary evidence on the bank's 
problems and decision-making. That reflects the source problem 
alluded to at the beginning of this review. Strong leaders, moreover, 
can bring some disadvantages. Rolf Breuer, for example, is alleged to 
have cost the bank millions through careless remarks in the media, 
one concerning Bankers Trust, another concerning the media mogul Leo 
Kirch. Nevertheless, the excellent treatment of the 1870-1914 period 
alone makes the book a fine addition to German banking history.


Richard Tilly was Professor and Director of the Institut f?r 
Wirtschafts- und Sozialgeschichte at the University of M?nster from 
1966 to 1998. His most recent publications are a textbook (together 
with Toni Pierenkemper), _The German Economy during the Nineteenth 
Century_ (2004) and a German textbook on the history of money and 
credit. He is currently completing the history of a German 
entrepreneur (Willy H. Schlieker). [log in to unmask]

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