Leendert Pieter de Neufville (Amsterdam, March 8, 1729Rotterdam, July 28, 1811) was a Dutch merchant and banker trading in silk, linen, and grain. His business grew quickly during the Seven Years' War. De Neufville secretly supplied the Prussian army with gunpowder. It is likely that the army's outsourcing of handling bills of exchange in commercial payment boosted his business in a sophisticated form of letters of credit, acceptance loans. His business model had similarities with the modern shadow banking system.Responding to a Shadow Banking Crisis: the Lessons of 1763 by S. Quinn & W. Roberds
Beginning in 1762 De Neufville became involved in melting down debased coins, no longer allowed in Prussia and Saxony,F. von Schrötter, p. 63, 65 with the plan to sell back the melted silver. In Spring 1763 De Neufville was party to a major speculative grain deal with the Berlin merchant banker Johann Ernst Gotzkowsky.I. Lazcano, p. 6 The financial crisis of July 1763 was triggered when De Neufville had to pay his obligations to Gotzkowsky.Crisis Chronicles: The Commercial Credit Crisis of 1763 and Today’s Tri-Party Repo Market by James Narron and David Skeie De Neufville suspended payment on 3 August 1763; his list of creditors included over 100 bill counterparties, the great majority of those residing in cities outside of the Dutch Republic.E.E. de Jong-Keesing (1939), p. 101-110
Early life
Leendert Pieter de Neufville was the son of Pieter Leendert de Neufville (1707-1759) and lady Catharina de Wolff (1708-1760), both Mennonites.Plate with the arms of the De Neufville and De Wolff family Ovoid tea caddy with the arms of the De Neufville family His father started out as a merchant in textiles and rye, with extensive trade on the east of Germany and the Mediterranean. On 1 February 1735 Pieter L. de Neufville went bankrupt. He sold his share in a dozen ships. His wife was his biggest creditor.Leonie van Nierop (1936) Het dagboek van Jacob Bicker Raye (1732-1772), p. 200. Jaarboek Amstelodamum
In 1750 Leendert Pieter and his brothers David and Balthasar took over the trading and banking house from their father. The Neufville Bros. traded in almost everything: silver (formally for 82,429 guilders), almonds, sugar, Meissen porcelain, and gum were the most important products. In 1757 he started to buy and trade in paintings and became, like his father, an art collector.
Seven Years’ War
"During the war, they were catapulted into being one of the richest and most prestigious banking houses of Amsterdam by taking full advantage of the opportunities that the buoyant war economy provided."Liquidity and Contagion: The Crisis of 1763 by Isabel Schnabel & Hyun Song Shin, p. 14 De Neufville was the first to provide forage (and clothing) for the army of the King's youngest brother, Prince August Ferdinand of Prussia, who took part in the campaign in Bohemia in 1757, but was fired by his brother after the Prussian defeat at the Battle of Kolin. Also Charles William Ferdinand, Duke of Brunswick-Wolfenbüttel, an army contractor, placed orders with De Neufville. F. Spooner, Risks at Sea, p. 82 Henderson, W.O. (1962) The Berlin Commercial Crisis of 1763. In: The Economic History Review, New Series, Vol. 15, No. 1, pp. 89-102 Having a contact with a Hamburg merchant's house for handling the bills made De Neufville Bros. a trusted party in commercial payments between Amsterdam and Hamburg and its Hinterland. Prussia can be considered as an "emerging market" and Hamburg played an intermediate role.Central Banks at a Crossroads: What Can We Learn from History? Published by Michael D. Bordo, Øyvind Eitrheim, Marc Flandreau & Jan F. Qvigstad
Beginning in 1758, De Neufville became a monthly buyer of gunpowder.Amsterdam City Archives: NA 10384/377, 27 april; 10284/489, 14 juni, not. B. Phaff From 1759 things seemed to be going very well for him. De Neufville was also engaged in shipping and insurance.Jonathan Bikker (2012) The hidden collection of the spectacularly bankrupt banker Leendert Pieter de Neufville, p. 186 His account turnover at the Bank of Amsterdam increased ten times between 1759 and 1762.J.G. van Dillen (1970) Van rijkdom en regenten, p. 602 A little light-hearted De Neufville assisted Gotzkowsky (like Schimmelmann, and Daniel Stenglin, etc.) in helping Saxony pay its war contribution to Frederick II. In January 1762 the Parliament of Great Britain threatened to stop its subsidy to Prussia; on 30 April a bill to this effect went through.F.A.J. Szabo (2008) The Seven Years War in Europe, p. 386 Frederick had to adjust his war finance after losing Britain's support.The French Navy and the Seven Years' War by Jonathan R. Dull, p. 230
On 7 or 18 November 1761, Frederick forbade the use of foreign debased coins in Prussia and Saxony that were minted (by Schimmelmann) in Rethwisch.Friedrich der Grosse: Eine lebensgeschichte, Band 2 by Johann David Erdmann Preuss, p. 391F. von Schrötter, p. 95; H. Rachel & P. Wallich, p. 447 Already in January De Neufville started to import and melt debased coins from Mecklenburg, Plön and Zerbst, expecting to sell the refined silver at a high price to Prussian merchants. De Neufville ordered 300 wagons of coins.Schlesische Privilegirte Staats - Kriegs - und Friedens-Zeitungen. 1763-10-05 [Jg.22] No. 117Kernkamp, G.W.: Johan Beckmann"s dagboek van zijne reis door Nederland in 1762. Bijdr: in Meded. van het Hist. Genootsch. Utrecht 33 (1912), p. 320.
On 6 February 1762, De Neufville wrote a note to Frederick, who was then stationed in Breslau, stating that the French had approached him to make peace proposals to Frederick. De Neufville hoped for an appointment as a negotiator.Œuvres de Frédéric le Grand - Werke Friedrichs des Großen Digitale Ausgabe der Universitätsbibliothek Trier In May 1762 De Neufville bought an estate outside Heemstede; he experimented with silver refining, but was not very successful, according to Johann Heinrich Müntz.J.H. Müntz (1769) Ausführliche Beschreibung von dem Silber- und Kupfer Schmeltz-werk, von denen Ofen ... aufgericht zu Muiden beij Amsterdam, Eigenthümer davon der Herr B.V. Ephraim
After the Peace of Hubertusburg
In April 1763 De Neufville went to Berlin. There he met with his business partner Gotzkowsky. Together they paid a visit to Frederick the Great. De Neufville offered his help in reviving the Prussian Asiatic Company. According to Gotzkowsky, it was Frederick the Great who asked De Neufville to develop plans for a recovery of the Asiatic company.Geschichte eines patriotischen Kaufmanns aus Berlin, Namens J. E. Gotzkofsky, p, 146 De Neufville offered to invest a million guilders. According to Jan Jacob Mauricius, the Dutch resident in Hamburg, the merchant/bankers Schimmelmann and Stenglin were interested in restarting the company with help from De Neufville.Archief van de Burgemeesters: diplomatieke missiven van ambassadeurs, gezanten en residenten in het buitenland aan burgemeesters. 5027-8-100.11.8 Stadsarchief Amsterdam
On 19/20 April Gotzkowsky bought a huge amount of grains (oats) through the intermediation of the Russian envoy Vladimir Sergeevich Dolgorukov (1717 - 1803).E. Ris, p. 37-38, 54; H. Rachel & P. Wallich, p. 448 It was stored in Kolberg and along Pommeranian coast, sitting unused after the Russian army had left Poland. Both Russia and Prussia were hoping for a swift sale, that would allow for a discharge of the troops who had to guard these supplies. Because of a grain shortage and famine in Prussia, the transaction could have been profitable for Gotzkowsky and De Neufville, the latter one secretly collaborating with two partners Stein and Leveaux, all collectors of art.Verzeichnis der verkauften Gemälde im deutschsprachigen Raum vor 1800 ... von Thomas Ketelsen, Tilmann von Stockhausen Neufville paid 100,000 guilders down payment (in exchange bills) on behalf of the buying syndicate. The remaining one million guilders were to be paid by Gotzkowsky in four terms, within a year. Two Russian traders, Svešnikov and Rogovikov, would take over a 1/5 of the total grain sold.J.E. Gotzkowsky, p. 153, W.O. Henderson (1963), p. 55 The remaining 4/5 was allocated to Gotzkowsky, De Neufville, Leveaux und Stein.E. Ris, p. 39 The contract was signed by just two men: Gotzkowsky and Svešnikov.N. Schepkowski, p. 341
On 12 April 1763, Frederick decided to dump his unused wartime grain supplies in Lower Silesia, leading in the next months to a 75% drop in the local price of wheat, with other commodities prices soon following.Schlesische Privilegirte Staats - Kriegs - und Friedens-Zeitungen. 1763-04-16 [Jg.22] No. 44I. Lazcano, p. 7S. Quinn & W. Roberds (2012), Responding to a Shadow Banking Crisis: The Lessons of 1763, p. 16; I. Schnabel & H.S. Shin (2001), p. 15Studies in the Economic Policy of Frederick the Great by W.O. Henderson On June 27, 1763, (N.S.) the Gotzkowsky transaction became a state affair of the Russian Empire.E. Ris, p. 45-46 Legal problems meant that the grain would not now be exported.E. Ris, p. 47 When it arrived after two months half of the grain was of bad quality. Gotzkowsky wanted to change the contract and offered to pay only 2/3 of 1.170.448 guilders owed. (He could not mention Svešnikov, playing a double role in the deal?) He would have been satisfied if he did not suffer any loss. On 18 July the Russian senate refused this offer and insisted on being paid promptly; she demanded payment in Dutch guilders, and not in debased Saxon coins.E. Ris, p. 38, 39, 45, 54, 56, etc
Liquidity
De Neufville settled 240,000 guilders in bills of exchange every week (i.e. 40,000 daily) at the Bank of Amsterdam or "Wisselbank",W. Roberds & S. Quinn (2012) Responding to a Shadow Banking Crisis: The Lessons of 1763, p. 15 so that his outstanding bill of exchange portfolio would have been 1.2 million; half for clients of bills that De Neufville had drawn and half for the settlement of bills drawn on De Neufville. Starting in April De Neufville borrowed 335,793 guilders over the next four months.E.E. de Jong-Keesing (1939), p. 93 In Amsterdam De Neufville borrowed with a term of only eight days - an unusually short period of maturity. The rate on interest rose from 4 to 12%.J.G. Busch, p. 122.
In May 1763 one Amsterdam observer remarked: "The crude bars of silver that are being smelted here from the money arriving in great quantities from the north of Germany, cannot be sold and are everywhere being borrowed against; these are also being discounted by 7 percent. … Everything is bad for business."W. Roberds & S. Quinn (2012) Responding to a Shadow Banking Crisis: The Lessons of 1763, p. 17 From 1 June the market for discounted bills collapsed when Frederick demonetized his debased wartime coinage before new money was issued.The First Modern Economy: Success, Failure, and Perseverance of the Dutch ... by Jan de Vries & Ad van der Woude, p. 59 When the Saxon debased coins were removed from circulation and new coins had not yet come available, a severe shortage of cash money resulted, especially in Silesia.F. von Schrötter, Band III, p. 158-159, 163 Prussian merchants that were holding the demonetized coins saw the value of their collateral cut by 22%,J.G. Busch, p. 122? or 41%?F. von Schrötter, p. 161 Consequently, they responded by trying to fund short-term debts with new bills drawn on markets such as Amsterdam.I. Lazcano, p. 7