Nor was such ill-feeling confined to Gentile firms. In 1802 the Kassel Jewish community lodged a complaint against Mayer Amschel, on the ground that he was to all intents and purposes residing in the town (where most of the business described above was done) without having the status—and tax liabilities—of a “protected Jew.” Having been obliged to pay 180 gulden to buy exemption from the relevant dues, Mayer Amschel then decided to secure protected status for his eldest son Amschel. With wonderful insincerity, he argued in his application that the presence of a Rothschild in Kassel would “not impair the activities of the local merchants in any way and those who conduct business in bills will rather profit from this, as such transactions always benefit from a large competition.” Opposition from the local Jewish community and hesitation on the part of Mayer Amschel as to whether the residence permit should be in his or his son’s name meant that it was not actually issued until June 1806.2
Yet, despite the title of senior court agent (Oberhofagent) bestowed on him in 1803, it is important to stress that at this juncture it was not Mayer Amschel so much as William who was the real banker; Rothschild was in many ways more of a stockbroker, catering to his client’s growing preference for bearer bonds as opposed to personal loans.3 Typically, Mayer Amschel’s commission when he bought bonds for William was no more than around 1.75 or 2 per cent, so that his total profits from this business probably did not exceed 300,000 gulden. Moreover, on at least two occasions, it was Mayer Amschel himself who borrowed from William. At the same time, it is important to remember that, although William was Mayer Amschel’s most important client in this period, he was by no means his only client. The objective, in this era of multiple states, was to establish links with as many princely courts as possible—something which the loans business he did for Hesse-Kassel made easy. By 1803 he had been appointed court agent to the Order of St John (on the strength of a decidedly ill-starred loan), the Prince of Thurn und Taxis (hereditary postmaster of the Holy Roman Empire), the Landgrave of Hesse-Darmstadt and Karl Friedrich Ludwig Moritz zu Isenburg, Count of Büdingen. The most prestigious of these appointments came in 1800, when Mayer Amschel secured the title of imperial court agent from the Austrian Emperor, in return not only for his earlier services as a supplier of war matériel, but also for his work in collecting the interest on the Emperor’s considerable borrowings from Hesse-Kassel. His only failure came in 1802, when the court of Bavaria ignored his application for the title of agent.
The importance of such titles should not be exaggerated, of course. In 1803, for example, Hesse-Darmstadt customs officials simply refused to recognise Mayer Amschel’s privileged status as a court agent. In any case, the whole system of petty principalities and overlapping jurisdictions which had made such titles matter in the eighteenth century was on the brink of an unprecedented and revolutionary upheaval—an upheaval which was to transform the Rothschilds’ relationship with their princely patrons. Up until 1806 they had depended on the Elector and his ilk for their business and the privileges they could confer. Thereafter, William found that, little by little, it was he who began to depend on Mayer Amschel and his sons.
The Origins of a Myth
As we have seen, there had already been one major collision between Hesse-Kassel and the forces of Revolutionary France in the 1790s, culminating in the bombardment of Frankfurt which destroyed the Judengasse in 1796. That had led to a strengthening of the traditional links between Kassel and London: not for the first time, William put troops in the field against France in return for English money. True, he had subsequently accepted the terms of the Peace of Lunéville (1801), which transferred the left bank of the Rhine to France. But when war broke out again between England and France in 1803 a showdown became almost inevitable. William was too committed to England to follow the lead of those sixteen German states which seceded from the defunct Holy Roman Empire to form the Francophile Confederation of the Rhine in the summer of 1806. He was also too intent on driving a hard bargain with the various powers bidding for his support to realise the vulnerability of his own position. Napoleon offered Hanoverian territory. On the other hand, the Elector (as William now was) had lent money to Austria and to Prussia, who had joined the coalition against France in 1805. When the Prussian army was defeated at Jena and Auerstadt in the autumn of 1806, he was hopelessly exposed. Neither the hasty demobilisation of his troops, nor his belated request to join the Rhine Confederation, nor even the plaintive signs he hastily ordered to be put up at his borders—“Electorat de Hesse: Pays Neutre”—could deflect the wrath of Bonaparte, in whose eyes he was now merely “a field marshal in the service of Prussia.” “My object,” Napoleon declared bluntly, “is to remove the House of Hesse-Kassel from rulership and to strike it out of the list of powers.” William had little option but to flee, heading initially for his brother’s estate at Gottorp in Holstein (then Danish territory).4 On November 2 General Lagrange occupied his residence at Kassel as Governor-General; two days later he issued a proclamation formally confiscating all his assets and threatening anyone who sought to conceal these with trial by a military tribunal.
According to legend, it was at this critical moment that William turned to his faithful court agent Rothschild, hastily leaving in his care the entirety of his movable wealth:
The French army was actually entering Frankfurt at the moment when Rothschild succeeded in burying the prince’s treasures in a corner of his little garden. His own property, which in goods and money was worth about 40,000 thalers, he did not hide, well knowing that, if he did so, a strict search would be made and that not only his own but the prince’s hoard would be discovered and plundered. The Republicans who, like the Philistines of old, fell upon Rothschild, left him not one thaler’s value of his own money or property. In truth, he was, like all the other Jews and citizens, reduced to utter poverty but the prince’s treasure was safe . . .
According to this not untypical version of the story from an English newspaper in 1836, when Mayer Amschel finally returned the money to William, he replied: “I will neither receive the interest which your honesty offers nor yet take money out of your hands. The interest is not sufficient to replace what you lost to save mine; and further my money shall be at your service for 20 years to come and at no more than two per cent interest.”
As discussed in the introduction, this story first gained currency in 1827, when it appeared in F. A. Brockhaus’s General German Encyclopaedia for the Educated Classes. Though there is good reason to think that it was initially inspired by the Rothschilds themselves, it was subsequently so widely disseminated as to take on a life—and a variety of significances—of its own. Initially, it was intended to illustrate the family’s exceptional probity as deposit-holders: willing to risk everything rather than fail to protect and pay interest on a client’s money. That was certainly the message of Moritz Daniel Oppenheim’s two paintings on the subject commissioned by the family in 1861. By the later nineteenth century, however, it was beginning to acquire an alternative reading: the Elector’s treasure was “blood money” because it had been earned by the sale of mercenaries, while Mayer Amschel made the most of it rather than merely preserving it. The positive and negative versions of the myth are vividly juxtaposed in the American and German films The House of Rothschild (1934) and Die Rothschilds (1940).
As has long been realised, the story is fiction—though, like so much of the Rothschild myth, it contains a very tiny grain of truth. In fact, William’s movable property was widely dispersed in the period after the French occupation and only a few relatively unimportant items came into Mayer Amschel’s possession. Some of the most important valuables—mainly bonds (without their coupons, which were stored separately)—were successfully smuggled out of Kassel by Buderus, who made the hazardous trip through the French lines to Itzehoe in early November. The bulk, however, was stored in caches at William’s country houses. According to a meticulous list drawn up by the Elector himself, twenty four chests—containing not onl
y securities and coupons but also accounts, silverware and clothes—were hidden under the stairs of the north wing of the Wilhelmshöhe, while another twenty-four, including important War Chest papers, were concealed in another part of the palace. In the cellar of the nearby Löwenburg were hidden a further twenty-four chests, including securities belonging to the Elector’s mistress, official papers, porcelain and clothes. Finally, at his hunting lodge at Sababurg, there were forty-seven chests, most of them filled with silverware. Most of this would in fact have been lost to the French—who quickly managed to obtain an inventory of the Elector’s silver—had it not proved possible to strike a deal with Lagrange. In return for a bribe of 260,000 francs (modest under the circumstances) he agreed to allow forty-two of the chests to be spirited away; the rest were confiscated. Accordingly, on the night of November 8, one of the Elector’s officers led a convoy of carts with the freed chests to Hof Stölzingen, where they were divided up. War Councillor Lennep took some of the most important documents (including papers relating to the Elector’s London investments) back to Kassel; ten chests were deposited with the Münden firm of Thorbecke, of which two were sent on to Schleswig and the rest to Eisenach; and nineteen were smuggled into Frankfurt and left in the hands of the bankers Preye & Jordis.
By this time, however, Lagrange had realised that he had undercharged the Elector’s men. Having managed to recapture some of the chests he had previously released, he now demanded more money. Eventually, an agreement was reached: in return for a second, rather larger payment, Lagrange promised to understate the total value of the Elector’s assets. A list was drawn up totalling 19.8 million gulden (composed mainly of the larger loans to other German princes), and this became the “official” French inventory. All documents relating to the Elector’s other assets—an estimated 27 million gulden—were then handed over to Buderus. Some of these were sent to the Elector at Schleswig. Some were kept by Buderus himself. The rest, mostly routine papers from the War Chest and Privy Purse, were packed into four chests. It was these four chests which were given to Mayer Amschel. A few others containing medals and a few bonds were also temporarily left in his care in Hamburg when the Elector left Itzehoe for Austrian territory in the summer of the following year.5 But that was all.
Yet this prosaic account understates Rothschild’s importance to the exiled Elector. For one thing, William still had need of a skilled stockbroker and investment adviser. Having managed to hang on to assets worth 27 million gulden, his investment income remained substantial, even after the extra costs imposed by exile. (According to Berghoeffer’s figures, the surplus was something like 740,000 gulden a year.) Part of Mayer Amschel’s role in this period was to collect this income from the various borrowers concerned. In addition, he had to reinvest it in new loans. For example, he arranged a loan of 100,000 gulden to the Hanau Treasury and a large loan to Graf Karl von Hahn zu Remplin (the profligate “Theatergraf,” who was shortly afterwards made a ward of court by his family). He looked after a current account for money the Elector had entrusted to Buderus. On one occasion, at Buderus’s suggestion, he also borrowed money from the Elector himself. He repurchased a substantial part of the Elector’s coin collection, which had been sold off and dispersed, as well as fourteen cases of wine which had been stolen from the Hanau cellars. He handled various transfers of money which the Elector had to make for military and diplomatic purposes: payments to Hessian prisoners-of-war held by the French, to the Machiavellian Prince Wittgenstein, who had offered his diplomatic services, as well as to Russia and Prussia in 1813. He lent around 160,000 gulden to the Elector’s son in Berlin. He looked after the finances of the Elector’s mistress, Gräfin von Schlotheim. He even sold the Elector a diamond ring.
Much of this was trivial, admittedly, and a good deal of it was unprofitable. A lot of time was wasted in 1809 and 1810 on an abortive scheme to assist the depleted Austrian Treasury by transferring some of William’s assets—with a nominal value of over 10 million gulden—to the Emperor. But there was one service performed by the Rothschilds for William which made all the rest worthwhile: the management of his English investments. Nathan later claimed that “The Prince of Hesse-Cassel . . . gave my father his money; there was no time to be lost; he sent it to me. I had 600,000£ arrive unexpectedly by the post; and I put it to such good use, that the prince made me a present of all his wine and his linen.” This has a superficial plausibility: one of the most important financial consequences of the French wars was a large migration of capital from the continent to London. As with the story of the treasure, however, the reality was rather more complex.
At the start of his time in exile, William already had a very substantial English portfolio, primarily annuities with a nominal value of £635,400 paying interest of £20,426 a year. In addition, he was owed a considerable sum—around £200,000—by the Prince of Wales and his brothers (though they were characteristically in arrears with their interest payments). As an ally of the crown, he also received subsidies totalling £100,150 between 1807 and 1810.6 The critical question was what should be done with the interest payments and subsidies as they were paid to William’s current account with Van Notten. As early as 1807—in other words, some time before his move from Manchester to London—Nathan approached William’s envoy in London, Lorentz, with suggestions as to how the money might be invested, but he was rebuffed at the Elector’s express instruction.7 It was not until two years later, once again at the prompting of Buderus, that Mayer Amschel was instructed to purchase 3 per cent consols (redeemable state annuities, or what would now be called gilt-edged securities) with a face value of £150,000 at 73.5 (that is, at 73.5 per cent of their face value or price at redemption). It was to be the first of no fewer than nine such purchases up until the end of 1813, totalling £664,850. This was the money to which Nathan later alluded in his conversation with Buxton. His brother Carl was also alluding to it when he observed in 1814 that “the Old Man”—mean ing William—had “made our fortune. If Nathan had not had the Elector’s £300,000 [sic] in hand he would have got nowhere.”
How could such purchases of consols on someone else’s behalf have been so vital to the Rothschilds? The answer lies in the way these investments were carried out. At first sight, there was not a great deal to be made from this business, as Mayer Amschel charged only one-eighth of a per cent brokerage on each purchase. On closer inspection, however, much more stood to be made. William did not actually put up all the cash at once for each purchase; it was the Rothschilds who effectively bought the consols, albeit on his behalf, and with money they had largely borrowed. If they had wished, they could have paid only a fraction of the market price, postponing full payment until a future settlement date. But this would have involved a double speculation: on the price of the consols and on the gulden-sterling exchange rate. Mayer Amschel preferred not to do this. He was content to derive advantage from the difference between the price and the exchange rate agreed with William, and the actual price and exchange rate paid by his son in London. For the first three purchases, the difference in price was of the order of 2 per cent, reflecting the fact that, at this low ebb in Britain’s campaign against Napoleon, consols were falling. It is probable (though impossible to prove) that Mayer Amschel was also deriving some benefit from differences in the exchange rate.
The Elector probably suspected what was going on: when consols reached a low of 62.5 in the summer of 1811, he called a halt to new purchases and ceased remitting money to cover previous purchases until May of the following year. But this probably suited the Rothschilds well. For the consols remained registered in Nathan’s name until they were fully paid for by William. That meant, for example, that even as late as March 1813 consols with a face value of £121,000 were notionally Nathan’s. Of course, they had largely been bought with borrowed money, and, from the moment the Elector’s remittances arrived until the stocks were formally transferred to him or his agents, the Rothschilds also had to pay interest. On the other hand, a certain
latitude was possible, given the difficulty of getting certificates of ownership from London to the Elector in Prague.8 Whatever profits Nathan was able to make on the market price and the exchange rate, purchases of more than £600,000 worth of consols and the actual possession of over £100,000 signalled the advent of a new financial force in the City of London. In this sense, as Carl later noted, it gave Nathan a kind of “security”—the impression of capital resource in excess of what the family actually had. Amschel spelt out the significance of this in a letter to his brothers in 1818: “The good Nathan would have been unable to draw during the war bills to the amount of £132,000 and to handle all the businesses if . . . we had not obtained for him in Prague the big deal of the Elector’s stocks, which he handled . . . [U]p to then Nathan did not even know what stocks looked like.” In effect, the war had allowed the Rothschilds to make a part of William’s financial strength their own.
The House of Rothschild, Volume 1 Page 12