Underwriting Peace
In fact, it was not so much by denying governments money as by making it available to them that the Rothschilds were able to give weight to their diplomatic efforts. The classic illustration of this point is the way they responded to requests for credit from the areas where revolutions had broken out.
The Rothschilds had been doing business with the Belgian-based Société Générale since 1827. Within days of the revolution in Brussels, James had re-established contact with it and over a period of months advanced over a million francs to help it weather the storm of revolution. At the same time, he and Nathan discussed a possible loan to Holland, presumably as a carrot to persuade the Dutch King to accept the secession of Belgium; Salomon saw such a loan as a way of helping “to control our war mongers.” But Nathan could also wield a stick: when the Dutch invaded Belgium in August 1831 he at once offered to sell guns to the government in Brussels. Only when the Dutch had withdrawn and appeared to be about to accept the loss of Belgium, did he and James revive the possibility of a 6 per cent loan to the Dutch King, “for if he has the money, he will not consider any warlike actions”—and needless to say, “a lot of money could be earned from the Dutch government.”
In the case of Belgium, although James was convinced there was “a fortune to be made there,” the brothers waited until the supposedly definitive 24 Articles had been signed by Leopold before making their move. At the end of 1831, in partnership with the Belgian banker Osy, they floated a loan worth some £2.75 million—five times as much as the previous year’s loan to Holland. This might be thought something of a gamble, considering that a diplomatic resolution of their differences was anything but sure. Interestingly, a contemporary British cartoon entitled The Protocol-Society in an Uproar shows the representatives of the powers gathered in Downing Street, with Nathan stage left complaining: “Your Potecols are no use; help mi Cot, Shentlemen, if you don’t make everyting out for me, I will lend you no more monish—vat am I to do vit your Ponds” (see illustration 9.i). An etching from the same period by “J.W.W.” depicts Nathan plucking the Belgian goose, and muttering: “cot tam you and your Pelgian Ponds! I could not find a shingle flat to puy them; upon my shoul, they are not worth as much as Spanish ponds” (see illustration 9.ii).
9.i: S.W. Fores, The Protocol-Society in an Uproar, or the Conferees Confounded. A Sketch in Downing Street (1831).
9.ii: “J.W.W.,” PLUCKING THE GOOSE OR BELGIUM SUPPORTED BY HER FRIENDS AND ALLIES (1831).
Anselm for one feared that it would “prove a bad concern, as I do not think that Belgium will be able to pay the Dividend for many years.” On the other hand, he went on, “There is some money to be made . . . We must take things as they are and profit of the folly of the world.” Provided the Dutch did not resume hostilities during the period when the loan was being sold to investors, the Rothschilds as underwriters could only profit; and if they did invade again there was “a clause which provides that, in the event of war, we need not take anything further.” As James reported, brokers and bankers were “snapping [the loan] up like sugar pumpernickel” even before it had been issued, though by the time it was issued news of unrest in Rome and delays over the ratification of the Belgian agreement weakened demand, forcing James to support the market with repurchases.
By the spring of 1832, with Holland diplomatically isolated, the brothers were ready for more. The diplomatic settlement had created a Belgian debt to Holland by allocating a portion of the pre-1830 combined Dutch debt to the new government in Brussels, and this raised an obvious possibility. “There is money to be made there,” wrote James. “If you promise Talleyrand a little something, my dear Nathan, he will then arrange that you be appointed the agent for the handling of the debt, just as Baring was between France and the Powers [in 1815].” There was “money to be made if we place ourselves between Belgium and Holland”—provided of course there was no further war between the two. In August 1832 proposals were drawn up for a second loan of £1.9 million, a third of which was to be issued by the Rothschilds in Paris—despite a warning from the French government that “it would be madness for us to give the Belgians money just at this moment & to give them every facility of making war.” The dandy and diarist Thomas Raikes took a different view. “The Belgian question is just as near settlement as it was twelve months ago,” he wrote on September 12:
The mandates of the Conference are of no avail. Holland will not abate a particle of its demands. Leopold wishes to yield, but the Belgians will not hear of it. His treasury is empty, and Rothschild will not contract for the loan without binding the Belgians not to go to war. But there will be more temporising, as the stock-jobbing interest must prevail. All the nations of Europe want money, and dread a fall in the funds more than any other calamity.
However, when French troops were marching into Belgium to impose terms on the Dutch the following November, it was James’s turn to think twice when the Belgian minister approached him for a short-term loan of 10 million francs. “One must help these people,” he wrote somewhat wearily, “for, otherwise, they will simply not know what to do, and will only resort to stupid actions . . . In a word, these people . . . have no money and . . . don’t have the intelligence to make any money.” Belgium, he grumbled, was “a lousy country.” Only when it was apparent—and the assurances came from both Louis Philippe and Metternich—that the Dutch were diplomatically isolated and would have to acquiesce in the continuing Belgian occupation of Luxembourg and Limburg did the Rothschilds consent to the Belgian request. In partnership with the Société Générale, the Paris house now took more than half of a new issue of treasury bills. The decision to lend to the new state was, in many ways, a remarkable gamble, for the Rothschilds had no way of knowing that the diplomatic stand-off would end peacefully. But it was a gamble that paid off, not least because Belgium was to prove one of the dynamos of European industrialisation.
Poland was a different case, however. Although the Rothschilds had business links in Warsaw just as they had in Brussels, they were never seriously interested in the success of the Polish revolt. Expressions of sympathy aside—“poor Poles, I pity them,” wrote Charlotte to her mother—they did nothing to assist the revolt; on the contrary, as we have seen, they sought to lend money to Russia which would have been used to crush the revolt, and actually sold guns to St Petersburg.
In Italy too there was no question of assisting the revolution. Here, even before the political situation had been brought under control, the brothers arranged a £400,000 loan to the Papacy in partnership with an Italian banker named Torlonia. Perhaps more than any other Rothschild transaction of the 1830s, this loan fascinated contemporaries, who were in varying measures amused or appalled by the notion of a Jewish bank lending to the Holy See. Carl’s audience with the Pope in January 1832, for example, was widely commented upon. “Now things are getting at last into the order that God desired when He created the world,” sneered Börne:
A poor Christian kisses the Pope’s feet; a wealthy Jew kisses his hand. If Rothschild had got his Roman loan at 60 per cent instead of 65 and so been able to give the cardinal-chamberlain another 10,000 ducats, he might have been permitted to fall on the Holy Father’s neck. The Rothschilds are assuredly nobler than their ancestor Judas Iscariot. He sold Christ for 30 small pieces of silver; the Rothschilds would buy Him, if He were for sale.
“Like pagan Rome Christian Rome too was overcome and even obliged to pay tribute,” gloated the more sympathetic Heine, conjuring up a vision of the portly Papal emissary arriving at the Rothschild office in the rue Laffitte to deliver “the tribute of Rome” to “a fair haired young man . . . who is somewhat older than he looks and whose aristocratic, grand-seigneurial nonchalance has something so solid, so positive about it that you might be inclined to think that he had in his pocket all the money of this world. And indeed—he does have all the money of this world in his pocket; his name is James de Rothschild . . . What further need, then, of the Talm
ud?” “The Jewish banker says: ‘[God] has given me the royalty of wealth and the understanding of opulence, which is the sceptre of society,’ ” wrote Alfred de Vigny in July 1837. “A Jew now reigns over the Pope and Christianity. He pays monarchs and buys nations.”
In truth, the Rothschilds themselves had their doubts about the wisdom of it. At first, James was tempted to let two English banks, Wilson & Co. and Wright & Co., take the lead, for two reasons:
First, we are Jews, and if we should have a different Pope who is an evil man, he will say to himself that he could earn a ticket to Paradise if he refuses to pay anything to Jews. Secondly, I think the Pope’s financial situation is in a bad state, similar to that of Spain, and if they should decide not to pay their interest, we will then not be involved with them directly.
At the same time, he and Lionel feared that while the British banks would find it easy to sell their shares, because of “the certainty of [their] being able to place amongst their Catholic friends, all their shares,” the Rothschilds, “having quite a different connexion & not having the confidence of the friends of His Holiness, should have no employment for this stock & should be obliged to lock up our own money in it.” This partly explains the Rothschilds’ uncharacteristic caution in proposing to take the loan in three separate tranches, retaining the option to withdraw after the first. On the other hand, the stabilisation of Papal finances promised at least short term and diplomatic benefits, because (as Périer, Pozzo and Apponyi all agreed) “the Pope, if he is in need of money, and he receives the same, will then ensure that peaceful conditions are maintained.” Moreover, there was much more public demand for the loan than James had anticipated, leading to a hasty last-minute renegotiation of the deal to the disadvantage of Wilson and Wright, who found themselves cut out. The loan, issued at 70 but soon rising above 79, turned out to be a “most excellent little business,” Lionel reported with relief. Although the recurrence of unrest in February 1832 caused a temporary setback, the bonds surged to a peak of 83 that summer and rose with only minor checks to reach par in 1835.
At first sight, there was something contradictory about all this, an echo of Heine’s point about the Rothschilds’ ambivalence towards revolution: they lent at one and the same time to revolutionary states like Belgium and conservative states like the Papacy. On closer inspection, the rationale was consistent: the Rothschilds made money available to new states if they had the backing of the five great powers. Formal or informal guarantees made loans attractive whether they were to an independent Belgium or a superficially reforming Papacy. In that sense, they were merely carrying on the policy which they had begun in the 1820s and which contemporaries had misrepresented when they called them bankers to the Holy Alliance. The obvious precursor to their support for Belgium was their loan to Greece. As early as February 1830, when Leopold of Saxe-Coburg was being touted as a possible monarch for the new kingdom, James urged Nathan:
to pay a visit to your Coburg for there is business to be made from Greece. England has already agreed that if Coburg is prepared to accept, then they will guarantee to pay the country the same every month as France and Russia and he is negotiating with them that England should join in granting the guarantee together with France and Russia.
This was premature. It was not until May 1832 that a treaty was signed by the powers guaranteeing a loan to the new King, and he was a Bavarian rather than a Coburg prince (much less the Dutch prince predicted by Ludwig Börne). But the Rothschilds were still determined to handle the loan, and fought a hard battle for control against the Bavarian banker d’Eichthal and the Spaniard Aguado. Greece herself might be “worthless,” but a 60 million franc loan guaranteed by France, England and Russia looked a sure thing. The feeling was mutual. Apponyi spoke for all the diplomats when he said: “Mr. Rothschild, it must not happen that such a large deal, in which all the Powers are interested, should be completed without your participation.” 7 By contrast, where the powers had difficulty in agreeing—for example over Portugal, where the years 1830-34 saw the return of Dom Pedro from Brazil and his successful deposition of his brother Dom Miguel—the Rothschilds kept their distance.
In a multi-polar world, in which five powers with distinct interests sought to resolve international crises without resorting to war, the Rothschilds acted not so much to ensure peace—their power was more limited than that—as to underwrite it once it had been made.
TEN
The World’s Bankers
The Rothschilds are the wonders of modern banking . . . We see
the descendants of Judah, after a persecution of two thousand
years, peering above kings, rising higher than emperors, and
holding a whole continent in the hollow of their hands. The
Rothschilds govern a Christian world. Not a cabinet moves
without their advice. They stretch their hand, with equal ease,
from Petersburg to Vienna, from Vienna to Paris, from Paris to
London, from London to Washington. Baron Rothschild, the
head of the house, is the true king of Judah, the prince of the
captivity, the Messiah so long looked for by this extraordinary
people. He holds the keys of peace or war, blessing or cursing . .
. They are the brokers and counsellors of the kings of Europe
and of the republican chiefs of America. What more can they
desire?
—NILES WEEKLY REGISTER, 1835-36
In the years after 1832, as fears of revolution and war gradually subsided, the Rothschilds appeared to increase the geographical extent of their financial influence. The American author of the passage quoted above was just one of many writers to comment on this expansion. At around the same time, Thomas Raikes observed in his journal: “The Rothschilds, who began by sweeping out a shop at Manchester, have become the metallic sovereigns of Europe. From their different establishments in Paris, London, Vienna, Frankfurt, Petersburg [sic] and Naples, they have obtained a control over the European exchanges which no party ever before could accomplish, and they now seem to hold the strings of the public purse. No sovereign without their assistance now could raise a loan.” As Prince Pückler had put it, punning on the German word Gläubiger (believer or creditor), “the great R[othschild] could be compared with the Sultan, for the latter was the ruler of all believers, while the former was the creditor of all rulers.” The German economist Friedrich List agreed: Rothschild was “the pride of Israel, the mighty lender and master of all the coined and uncoined silver and gold in the Old World, before whose money box Kings and Emperors humbly bow”—in short, the “King of Kings.” William Makepeace Thackeray made the same point in some early and undistinguished verses published in the short-lived National Standard in 1833:
Here’s the pillar of ’Change! Nathan Rothschild himself,
With whose fame every bourse in the universe rings;
The first Baron Juif; by the grace of his pelf,
Not “the king of the Jews,” but “the Jew of the kings.”
The great incarnation of cents and consols,
The eighths, halves and quarters, scrip, options and shares;
Who plays with new kings as young Misses with dolls;
The monarch undoubted of bulls and of bears!
Cartoonists echoed and even amplified such comments. One English print dating from 1829 shows Nathan as “the great humming top spinning a loan,” with kings bowing before him as he distributes coins to them (see illustration 10.i).
Perhaps the most potent (and pejorative) of all such images was produced by an anonymous German cartoonist in around 1840.1 Die Generalpumpe portrays a grotesquely caricatured Jew—evidently a composite Rothschild—as a giant money pump, a play on the double meaning of the German pumpen, to pump or to lend (see illustration 10.ii). The central figure stands knee-deep in a sack full of gold; his bulging stomach is the earth itself, with a louis d’or (labelled “earth’s axis”) for a North Pole or belly-butto
n; and on his head he wears a paper crown bearing the names of major Rothschild loans of the 1820s and 1830s (the Prussian, Russian,
10.i: “A. C.” [Crowhill], The Great Humming Top spinning a Loan (1820).
10.ii: Die Generalpumpe (c. 1840).
Neapolitan, Austrian and Portuguese). According to the badge on his waistcoat, he is no less than “the Executor of the Court of all the World.” Two diminutive figures on either side grip the monster’s fingers, as if working the pump (though it is not clear how far they really control its motion). One on the left represents a Turk, one on the right an Austrian. Beneath are the recipients of Rothschild money, into whose cash-boxes and hats streams of coins flow. The Egyptian ruler Mehemet Ali and his son Ibrahim Pasha are depicted on the left, spoon-feeding the Sultan; below them sits a bespectacled figure with a bulldog who may represent a British Chancellor of the Exchequer (though the couple behind him “Edouard and Kunigunde” are not easily identifiable). On the other side, there is no mistaking Louis Philippe and the French politician Adolphe Thiers; the less instantly recognisable character to their right is probably the Spanish general Baldomero Espartero. But although these individuals are the recipients of Rothschild’s money, they are also entangled in thorny tendrils which sprout from his bulging money bag. So too are the smaller figures beneath them: the people standing at a closed customs post marked “Imports Prohibited” and those passing through an open one marked “Imports Allowed or New Income”; the soldiers massed on the right bank of the Rhine; and those beneath Espartero begging for their “unpaid wages.” Rothschild, the cartoon suggests, not only pumps money to the world, but sucks it back like a monstrous heart.
The House of Rothschild, Volume 1 Page 44