Abstract: “Prestige” and the European Peace: Dillon, Read and the Politics and Finance of European Stabilization, 1924-1928

Ted Fertik

Abstract

Two generations ago, archives of American international bankers helped scholars overturn long-held assumptions about the supposed “isolationism” of American policy in the 1920s. Recently, economic historians have begun to construct working microeconomic models of the operations of the New York capital market in the 1920s. These scholarly advances form the basis for a careful study of the international activities of the banking house Dillon, Read & Co., which surged from middling status to the highest rung of the American financial ladder due to its spectacular success in foreign bond issues. The bank, which was active where J.P. Morgan was passive, especially in the booming market for German securities, played a leading role in the export of American capital in the 1920s. Inevitably, its bond issues often had a fraught political dimension, even as the whole thrust of American policy was a determined effort to separate politics and economics. This paper considers the bank’s “long” bet on Germany in the 1920s, and how its most ambitious concepts were thwarted by its lack of Morgan-like prestige. While affirming the power of prestige as a signal in financial markets, the paper questions whether this was to anyone’s benefit.