The collapse of Barings Bros. & Co., the London merchant bank that helped finance some of Maryland's biggest public works more than 150 years ago, will have little effect on the state it helped build or the financial companies that now do business in Maryland.
The news yesterday that Barings PLC, the parent company, was ruined by $1 billion in losing bets made by one derivatives trader in its Singapore office sent ripples through stock and currency markets around the world.
But other than unsettled markets, companies in Maryland reported few aftershocks.
"We do have a client relationship with them, as do most of the institutional players on Wall Street," said Alex. Brown Inc. spokeswoman Geraldine Leder. But the exposure from that relationship amounts to the value of any unsettled securities trades between the two companies, which is practically nothing, Ms. Leder said.
Similarly, NationsBank Corp., based in Charlotte, N.C., "had some dealings with them" regarding securities sales, said Investor Relations Director Rusty Page. But the impact, if any, is negligible, he said.
Officials at First Fidelity Bancorp., in New Jersey, and at Legg Mason Inc. and T. Rowe Price Associates Inc. also said the collapse of the 233-year-old merchant bank would have no direct effect on them.
"It's a matter of concern to the extent that it puts pressure, particularly on the Japanese market," said Steven Norwitz, spokesman for Price, some of whose mutual funds invest in Japanese companies. Although concern that Barings would be forced to liquidate its Japanese stocks and derivatives sent the Nikkei index down 3.8 percent yesterday, most analysts expect the drag on the Japanese market to be short-lived,
As for the state of Maryland itself, which once relied on Barings to finance transportation projects that transformed the state, officials say the British bank's collapse will have no effect.
"We have no relations or dealings in any way with them," Deputy Treasurer Mark Reger said. "We've been watching the markets all day to see if there'd be any effect on our securities, and there haven't been any."
Barings had far greater influence on Maryland's financial health almost 160 years ago, when the state issued bonds to finance construction of the Chesapeake & Ohio Canal and the Baltimore & Ohio Railway. Baltimore businessman and philanthropist George Peabody was one of three "commissioners" appointed by the legislature to market the $8 million in bonds in Europe.
But his job was complicated by a severe U.S. recession in 1837 and by the rumors in Europe that several states were about to repudiate their debt.
Finally, in 1840, Mr. Peabody persuaded Barings Bros. to buy the bonds, albeit at a sharply reduced price, and sell them in Europe.
By 1841 Maryland did stop paying interest on its debts. But Mr. Peabody remained faithful to the state and actually continued buying its securities on his own.
Maryland's economic health returned a few years later, and the state resumed paying the interest. In large part, Mr. Peabody made his fortune by buying those bonds when they were devalued.
The canal and the railway were built, and Barings Bros. survived for another century and a half.