Kidder, Peabody's success in securing funds for railroads and industry stemmed from the confidence wealthy Bostonians had in the integrity and experience of its founding partners-Henry P. Kidder, Francis H. Peabody, and Oliver W. Peabody. All three were natives of Massachusetts, well-known among the state's business and financial leaders through their long association with J. E. Thayer & Brother, a firm that had enjoyed close ties with Boston's affluent elite for nearly two generations.
The three partners themselves came from families of modest circumstances. None of them had attended college, each having gone into business when quite young. Kidder, the son of a Boston fish and meat inspector, was one of twelve children. He attended The Roxbury Latin School and worked for several years as a clerk in Coolidge & Haskell, auctioneers of promissory notes, real estate, dry-goods, and miscellaneous other articles, mostly imports. From there he went to the Boston & Worcester Railroad where he served as a clerk in the forwarding department. In 1845, at the age of twenty-three, he joined J. E. Thayer & Brother as Nathaniel Thayer's confidential clerk, was made head clerk in 1857, and a partner the next year.
Francis and Oliver Peabody were the sons of a Unitarian minister. Their father was the pastor of a church in Springfield, Massachusetts, where they were born. Francis, the oldest, went to public schools and worked for two years in the Chicopee Bank in which the Thayers had an interest. In 1847, at the age of sixteen, he moved to Boston to become a clerk in the Thayer firm.
He stayed with the Thayers until 1862, leaving to enlist in the Forty-fifth Regiment, Massachusetts Volunteers. When the regiment was disbanded, he joined another, the Second Massachusetts Volunteer Militia, and served in it through the war, rising to the rank of lieutenant colonel. After Lee surrendered to Grant, Peabody returned to Boston and joined his brother and Kidder in the newly organized firm.
Kidder, forty-two years old at the time the firm was organized, was the senior partner. He headed the house until his death in 1886. The terms of agreement made no mention of the firm's capital or the amounts contributed by each partner. A statement on the division of profits suggests what may have been the relative size of their contributions. Kidder was to receive 50 percent, Francis Peabody 30 percent, and his brother 20 percent. Toward the end of the century it became firm policy to admit new partners without requiring them to put up any new capital, but this probably was not true at the start.
Profits were calculated on the same accounting principle employed by the Thayers. Earnings were charged with 6 percent interest on the capital before profits were derived.
The firm's staff, composed of four clerks in 1865, was headed by Frank G. Webster who had been hired to close the books of J. E. Thayer & Brother. Born on June 11, 1842, Webster was the son of a carriage maker in Canton, Massachusetts, a Boston suburb. He went to public schools; then worked as a book-binder and in a wallpaper store in Providence, Rhode Island. After a few years he returned to Canton and accepted a clerk-ship in a local bank. In 1862 he enlisted in the Fifty-fourth Massachusetts Volunteers, serving until 1864. On his return to Boston he worked for a short time in the National Shoe and Leather Bank, and in March 1865 joined J. E. Thayer & Brother. The next month, when Kidder, Peabody was organized, Webster became its senior clerk. In 1886, at the age of forty-five, he was made a partner.
Webster opened Kidder, Peabody's books and he continued to be solely responsible for keeping the accounts and supervising the entire office staff until December 1868. By then the number of clerks had doubled and Webster was assigned an assistant, a Mr. Sibley. Webster continued to be in charge of the firm's correspondence and bond accounts; Sibley assumed oversight of the gold and currency books; and the two of them, the only two employees "authorized to deal with customers at the counter," also supervised the work and conduct of the other "young gentlemen" on the staff, making certain that they arrived promptly "at half-past eight a.m., do their duty faith-fully... and do not leave without... approval." Webster and Sibley also were charged with enforcing the partners' rules on "general deportment in the office" which, according to the firm's "regulations," meant no "profanity, rough play, coarse language and disrespect to the members of the firm, to them-selves, or to each other.
Like many private banking houses in Boston, New York, and other major Atlantic seaboard cities, Kidder, Peabody's business fell into two broadly defined categories: banking and investments. The firm conducted both types of operations not only in Boston but also in out-of-state cities through correspondents. Within each of these classifications, Kidder, Peabody provided a variety of services. As bankers it accepted deposits of corporations and individuals subject to check. Nearly all these accounts were those of clients for whom the firm also conducted other business. It dealt in gold and specie, made secured call and time loans, bought and sold foreign exchange on a commission basis, and issued commercial and travelers' letters of credit.
The firm was particularly active in the foreign exchange and letter of credit business. Daniel Curtis, the manager of Brown Brothers & Co.'s Boston branch, reported to his firm's New York office that Kidder, Peabody was incessantly "drumming our customers." The newly organized house, Curtis wrote in March 1871, was "ingenious in invention of small inducements to such of our Credit and Exchange customers as are open to them."10 Kidder, Peabody was equally forceful in developing its letter of credit business. New England merchants turned to the firm to finance substantial shares of their imports with Kidder, Peabody letters of credit. In November 1878 the firm opened an account with Baring Brothers & Co., London, one of the world's most prestigious and influential private banking houses then. The account proved so mutually advantageous that in January 1886 the English bankers made Kidder, Peabody their exclusive American agents. The negotiations leading to these arrangements also resulted in Thomas Baring becoming a partner in Kidder, Peabody. From then on the Boston firm's circular letters of credit were issued jointly with Barings. Kidder, Peabody's foreign banking business was sufficiently important that letters of credit and foreign exchange received major attention in the firm's advertisements until the early 1890s. Foreign banking continued to be important into the 1920s, but it ceased to receive special attention.
During the years of Kidder, Peabody's emergence as a foreign banking house serving the needs of business people buying and selling throughout the world, the firm also expanded its investment operations. These involved several functions: dealing in federal, state, and municipal securities; buying and selling corporate bonds and stocks on commission in Boston and other markets; trading and investing in securities on its own account; originating and distributing new issues, mostly railroad offerings; acting as fiscal agents for the companies the firm had helped finance; and when it appeared necessary, participating in the management of the corporations whose securities it had helped distribute or in which the firm had invested. Little was added to those operations after 1865, particularly in the half century before World War I.
All of these functions had been performed by J. E. Thayer & Brother; Kidder, Peabody increased their volume and modified them to meet the changing needs of its clients. Since its founding, the firm had a partner on the Boston Stock and Exchange Board and since 1886 a representative on the New York Stock Exchange. During the Civil War J. E. Thayer & Brother dealt and invested in the federal government's bond offerings, particularly the "five-twenties" and "seven-thirties." After Appomattox Kidder, Peabody, along with other private bankers, participated in the Treasury's funding of its short-term obligations. In the 1870s the firm also helped the government refund its Civil War loans, selling federal bonds in Boston and elsewhere in Massachusetts.
Most of the firm's ventures on its own account were conducted jointly with the Barings and wealthy Bostonians. Typical of these transactions was one Francis Peabody proposed early in December 1883, when it appeared there might be a brief credit panic. Writing to Kidder, who was then in London conferring with the Barings on a new offering for the Atchison, Topeka & Santa Fe Railroad, Peabody suggested that if security prices dropped substantially, as was anticipated, the firm should buy a large block of Ottawa Railroad stock, using its own funds and those of an undisclosed local capitalist. The road had been showing a steady profit; the price of its stock would recover from any momentary loss it might suffer. The venture Peabody proposed was large, involving some $2 million, so he wanted Kidder's approval. If he consented, Kidder was to instruct the Barings to include the word "ADELITA" in their next communication to Boston; if, however, he deemed it "wiser to forego embarking on so large an enterprise", then the Barings should "telegraph the word 'NIRVANA' upon receipt of which we shall drop the idea. Kidder's reply is missing from the record, and there is no other evidence to indicate that the firm purchased the stock.
As was true of so many of its operations, Kidder, Peabody's activities in originating and distributing new corporate issues also grew out of the partners' earlier experience with the Thayers. Some of the firm's earliest bond offerings, such as those for the Chicago, Burlington & Quincy, were for carriers with which Nathaniel Thayer had been associated. Kidder, Peabody built upon these ties and developed others.
