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Authors: William D. Cohan
Tags: General, History, Biography & Autobiography, France, Biography, New York, New York (State), Economics, Banks & Banking, Business & Economics, Business, Corporate & Business History, Lazard Freres & Co - History, Bankers - France, Banks And Banking, Finance, Bankers, Corporate & Business History - General, History Of Specific Companies, Banks and banking - France - History, Banks and banking - New York (State) - New York - History, Bankers - New York (State) - New York
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their credit," according to the once secret notes of the Bank of England's Committee of Treasury. Once again, the Bank of England stepped in, giving Lazard Brothers a new PS1 million loan, secured by "French Securities" sent to London from Paris. Lazard Brothers, in turn, used the PS1 million "to support the Paris House." National Provincial Bank provided the balance of PS1 million to Lazard Brothers, for the benefit of Lazard in Paris, after examining "their Balance Sheet and the list of Shareholders." The badly needed PS2 million was made available to Lazard in Paris.
No word of how close Lazard once again came to total liquidation leaked to the press or to its competitors. At the time, there were no articles about the crisis, which also happened to be the precise strategy devised by the Bank of England to prevent a widespread financial panic. Hugo Kindersley, grandson of Robert Kindersley and himself a longtime Lazard Brothers partner, said he remained stunned the news never leaked but also explained that this was how his grandfather wanted it to be. "The most remarkable part of the whole affair was that there was no press coverage and no rumors about any problems with Lazard London," he explained. "My grandfather insisted that partners continue to live their lives as before with all their servants and all their houses and not show by the blink of an eyelid that anything was wrong. I don't know how they got away with it because they were wiped out."
FOLLOWING THE UNEXPECTED death, at age fifty-one, of the second Viscount Cowdray--also known as Weetman Harold Miller Pearson, the son of Weetman Pearson--on October 5, 1933, the executors of his estate commissioned a valuation from Deloittes (the accounting firm) of Lazard Brothers & Co. The remarkable fourteen-page document makes clear, at the time of the second Viscount Cowdray's death anyway, that S. Pearson & Son owned 100 percent of the 337,500 then issued and outstanding shares of Lazard Brothers, not just 80 percent of the firm. Understandably, resolving the May 1932 crisis in Paris must have wiped out, for a time anyway, the 20 percent stake in Lazard Brothers held by Lazard Freres et Cie. Also, the accounting states that Lazard Brothers' exposure to Creditanstalt was actually PS200,000, not PS40,000, and that the firm could reasonably expect to recover only 20 percent of the amount owed.
The document also revealed just how minuscule was Lazard Brothers' valuation at that time. Deloittes set PS931,250 as the "fair valuation for probate" of the holding of 337,500 shares, the total number of Lazard Brothers' outstanding shares. The conclusion was unmistakable: the events of the previous two years had fully wiped out the ownership stake in Lazard Brothers previously held by Lazard Freres et Cie and by the English working partners. Lazard Brothers did get back on its feet during the mid-1930s, thanks in large part to a slow but steady increase in the number of the firm's corporate bond underwritings and the general slow improvement of the European economy. Over time, the obligation to the Bank of England was repaid.
What role, if any, Lazard Freres in New York played in rescuing Lazard Brothers is difficult to discern. There is no public mention of its involvement, other than that contained in the "secret" Bank of England minutes suggesting that some of the PS1 million contribution to the rescue effort was to come from New York. Michel David-Weill said he believes Frank Altschul and his fellow New York partners were asked to support the rescue mission but that any contribution from them would have been small given the perilous economic environment at that time. "And the people of New York were furious," he explained. "Having successfully survived the Depression, they were now being asked, without explanation, to send money to Europe. This did not create a very happy atmosphere between Paris and New York." Altschul's many letters are devoid of any reference to what
No word of how close Lazard once again came to total liquidation leaked to the press or to its competitors. At the time, there were no articles about the crisis, which also happened to be the precise strategy devised by the Bank of England to prevent a widespread financial panic. Hugo Kindersley, grandson of Robert Kindersley and himself a longtime Lazard Brothers partner, said he remained stunned the news never leaked but also explained that this was how his grandfather wanted it to be. "The most remarkable part of the whole affair was that there was no press coverage and no rumors about any problems with Lazard London," he explained. "My grandfather insisted that partners continue to live their lives as before with all their servants and all their houses and not show by the blink of an eyelid that anything was wrong. I don't know how they got away with it because they were wiped out."
FOLLOWING THE UNEXPECTED death, at age fifty-one, of the second Viscount Cowdray--also known as Weetman Harold Miller Pearson, the son of Weetman Pearson--on October 5, 1933, the executors of his estate commissioned a valuation from Deloittes (the accounting firm) of Lazard Brothers & Co. The remarkable fourteen-page document makes clear, at the time of the second Viscount Cowdray's death anyway, that S. Pearson & Son owned 100 percent of the 337,500 then issued and outstanding shares of Lazard Brothers, not just 80 percent of the firm. Understandably, resolving the May 1932 crisis in Paris must have wiped out, for a time anyway, the 20 percent stake in Lazard Brothers held by Lazard Freres et Cie. Also, the accounting states that Lazard Brothers' exposure to Creditanstalt was actually PS200,000, not PS40,000, and that the firm could reasonably expect to recover only 20 percent of the amount owed.
The document also revealed just how minuscule was Lazard Brothers' valuation at that time. Deloittes set PS931,250 as the "fair valuation for probate" of the holding of 337,500 shares, the total number of Lazard Brothers' outstanding shares. The conclusion was unmistakable: the events of the previous two years had fully wiped out the ownership stake in Lazard Brothers previously held by Lazard Freres et Cie and by the English working partners. Lazard Brothers did get back on its feet during the mid-1930s, thanks in large part to a slow but steady increase in the number of the firm's corporate bond underwritings and the general slow improvement of the European economy. Over time, the obligation to the Bank of England was repaid.
What role, if any, Lazard Freres in New York played in rescuing Lazard Brothers is difficult to discern. There is no public mention of its involvement, other than that contained in the "secret" Bank of England minutes suggesting that some of the PS1 million contribution to the rescue effort was to come from New York. Michel David-Weill said he believes Frank Altschul and his fellow New York partners were asked to support the rescue mission but that any contribution from them would have been small given the perilous economic environment at that time. "And the people of New York were furious," he explained. "Having successfully survived the Depression, they were now being asked, without explanation, to send money to Europe. This did not create a very happy atmosphere between Paris and New York." Altschul's many letters are devoid of any reference to what
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