The House of Rothschild, Volume 1

by Niall Ferguson

  “Vat’s dat got to do vit you?” James had retorted cantankerously.

  “You are quite right,” exclaimed Manuel. “You could drop down dead as I stand here, and I would no more care than if a dog died.”

  Small wonder so many of his Parisian contemporaries assumed that James was Nathan’s heir.

  Yet it is far from clear that James ever wielded the same power within the Rothschild family that his brother had. He was undoubtedly quick to try to impose his authority on his nephews following Nathan’s death. One of the first letters he wrote to Lionel and his brothers under the new dispensation of 1836 began in no uncertain terms:

  I would ask you kindly, my dear nephews, to pay a little more attention to my letters, because quite frankly I was very cross today, for I would very much have wished to continue working with London in the same way that I had done in the past with your late father, and not to have to write argumentative letters, for a business can only be managed well if one pays as much attention to the smaller business transactions as one does to the larger ones.

  And there followed three specific sins of omission allegedly perpetrated by the London house. Such rebukes were issued on a fairly regular basis over the next decade, with James’s favourite criticism being that his nephews were too busy hunting to read, much less answer, their uncle’s letters. Pointed allusions to the way things had been in Nathan’s day were also regularly made, not only by James but by all the brothers. “You can now see how right I was,” wrote Salomon patronisingly in September 1837,

  when I wrote you about the business deals and you will now have to admit it, my dear children . . . We now have to push the business with the bills, my dear children. This is what your late father had always said. Whenever he saw that others wanted to push us out of a business deal he always wrote, “My dear brother, we have to push it through.” It is all the same whether we make a loss or a profit, whether we earn something or suffer a loss, we must not, nor should we let anyone grow above our heads or we will be simply pushed aside. I hope that you will now listen to my advice, my dear nephews, and irrespective of whether we make a profit or a loss we have to push.

  Not long after, James wrote to point out “that in the lifetime of your dear Papa he used to give us discount notes at 2½ per cent and that, as good bills can now be freely discounted in London at 3 per cent, the other houses take advantage of it . . . so that if you wish us to be able to compete with them and do business you must discount for us on the same terms.” Amschel harped on the same theme. He and James could only agree in 1839 that “the loss of our brother Nathan was a terrible blow and one can’t expect that youngsters will get the same respect, fear and trust as do the older generation.”

  Yet—as James’s complaint about preferential discounting suggests—the most serious complaint made by the continental Rothschilds was that the London house was neglecting their interests; and, as we have seen, just the same had been alleged on a number of occasions before Nathan’s death. Indeed, it might be said to testify to the success of his sons in defending their relative autonomy that this charge was being heard again within just over a year of his death. It was frequently repeated thereafter. In September 1839, for example, James accused the London house of collecting half the profits on their business in Spain but leaving the Paris house to run all the risks. “I think that it is only right and proper,” he complained irritably, “that we share the other business operations where the Paris House runs just as much of the risk as does London, and that no House has any advantage over the other, for as soon as one House notices such behaviour in the other this will generate a feeling of mistrust and everything will then simply collapse, God forbid.” A week later he repeated his grievance. “As long as I am alive,” he told Nat, “I will never countenance that one of our Houses should seek to achieve an advantage over another or perpetrate an injustice [against another].” But “when you [meaning the London house] see that a deal is going well then you say, ‘Let us keep it here,’ whereas if it is not going well then you give a share of it to the Paris House. My dear and good Nat, this sort of attitude acts as a dampener and only gives rise to annoying correspondence.” Such minor disputes about the collective accounts between the houses became more frequent. There was also friction in 1840 and 1841, when both James and Amschel accused their nephews of sending bills to rival banks in Paris and Frankfurt.

  For their part, the younger Rothschilds were often irritated by the older. “I assure you that it is a great bother to arrange with people who are so very sententious about money affairs,” grumbled Anthony to Lionel, at a time when all four of his uncles seemed to be taking an inordinate interest in his marriage plans. “I assure you that although Uncle Charles is your father in law, that the less one has to do with this gentleman, the better.” Amschel’s will, which he constantly redrafted in the hope of exerting some sort of leverage over his nephews, was another source of discontent.

  The reality was that, in terms of resources, the London, Paris and Frankfurt houses were now quite evenly matched, so that no one of them was really in a position to dictate to the others as Nathan once had. “My very dear nephews,” James had to write apologetically, following a disagreement in March 1838, “I am very pleased with you and I fervently request of you not to take my words à la lettre because one has to put up with such torments over here that at times one becomes very critical and discontented. My nerves are about to snap and I am easily irritated.” Nor was James in a position to dominate his brothers. When Amschel made one of his periodic threats to give up business on the ground of ill health, James rushed off to Frankfurt; but it was on Salomon, his son Anselm and Carl’s eldest son Mayer Carl that the onus of responsibility naturally fell, reflecting the closer community of business interest between Frankfurt, Vienna and Naples. When James himself was taken seriously ill in the winter of 1838-9, any thought of his playing the role of “commanding general” had to be put aside. Indeed, there were few, if any, occasions before 1848 when he explicitly opposed his elder brothers’ wishes. As Nat commented when Salomon demanded a bigger share of some railway and state loan business, “here we are in the habit of giving way to Frankfurt.”

  As in the past, the older Rothschilds sought to counteract the firm’s centrifugal tendencies by appealing to the hallowed principle of fraternal “concordia”: “In what has our strength been until now?” remonstrated James in 1839, when he and his nephews were once again at odds. “Only in that people knew that one place will support the other . . . [A]s you well know, the well-being of our family is closer to my heart than anything else.” In 1841 Amschel felt so worried about the extent of internecine friction that he sent all his brothers and nephews a passionate appeal for family unity, invoking the memory of Mayer Amschel. “Let us do business again in peace and in harmony and not quarrel with each other,” pleaded James the following year. “If peace reigns between us this will only bring us good fortune and blessings and both you and we should not lack anything.”

  Perhaps wisely, it was decided when the partners met at Paris that same year to leave the 1836 agreement unaltered, as—in Hannah’s words—“the Elder Brothers appear to be content with things as they are and require no change.” However, she added significantly: “The counting house of each[,] having their [sic] own capital[,] should be independent, and they must regulate the income of each party to make all those concerned equally so[;] the Elder Members’ capital being so much greater they have more to say.” This was also the view of her elder sons. Two years later, Lionel was able to modify the partnership agreement in precisely that way. By formally withdrawing £340,250 from their personal share of the combined capital, he and his brothers brought their proportion—and therefore the amount of annual interest they received, calculated as 3 per cent of that proportion—into line with those of their uncles, ending the situation whereby Nathan had been the biggest “shareholder.”

  In doing so, it might be thought, Lionel was surrendering an advantage.
Indeed, he surrendered even more by leaving the 1836 system intact for the distribution of the combined profits, which had specified that 10 per cent of the continental houses’ profits went to the London house. “As I was quite sure that it would have given rise to disagreeable disputes or discussions,” Lionel reported to his brothers, “and I am quite certain we should have got nothing by it, I of course said not a word about our having a larger share of the profits; thank God for what we have and may we have to divide as much the next time we meet.” However, Lionel’s objective was primarily to retain the relative autonomy of the London house. His real victory was to defeat James’s proposal—first put forward nearly thirty years before—that the partnership between the five houses should be made public:

  Uncle James wanted this act of partnership, without any mention of our money matters so that he might show it at Paris, in case they wanted to know who the partners of the House are—now, as we in London always have said that our house has nothing to do with any others we just want to avoid having any document which anyone might show, the agreement with all the money matters is not likely to be produced but one as was proposed might very easily have been made public and will therefore not be made, they immediately agreed to my observations.

  Thanks to Lionel, the precise nature of the relationship between the five houses remained shrouded in mystery, a secret between the partners and their lawyers. Such secrecy was a Rothschild tradition; but it seems reasonable to conclude that Lionel already preferred not be bound too tightly to the other four houses.

  “Thank God for what we have”: that sentiment was typical of Nathan’s sons. Both Nat and Anthony had used almost exactly the same phrase just a few months before: “We must thank God for what we have got & try to keep it.” Indeed, it is tempting to identify a “generation gap” in entrepreneurial attitudes as one explanation for the disagreements of the 1830s and 1840s. There is no question that New Court was a more financially staid place than it had been under Nathan: there was less bond market speculation and more bill-broking for example. “We prefer dealing largely with a little less profit to keeping a very large stock on hand and holding out for very high prices,” wrote Nat to his brothers from Paris, one of many essentially cautious business maxims he committed to paper. Exiled as he was on the other side of the Channel, he tended to interpret differences between New Court and the rue Laffitte as national in character. “The more I see,” his younger brother declared when he visited Paris in 1846, “I am convinced the more, there is no place like our old New Court. Where would the rubbishy French shares be, if we did not support them? I think we may give ourselves a few airs and be as great men as others.” But it is hard to imagine Nathan saying such a thing. Although only sixteen years separated Lionel and his uncle James, their attitudes to business were separated by much more. For James and his brothers retained the restless, insecure drive born of the Frankfurt ghetto. “Whenever we write to you that other people are more attentive to what is going on and do more business, you immediately assume that we are trying to pick a quarrel with you,” James wrote to his nephews in a somewhat pained letter of 1845. “However, I assure you, my dear nephews, I have nothing of the sort in mind, but my heart breaks when I see how everyone is trying to push us out of [every] business deal. [Even] the stone on the wall is envious and is our enemy.” That tendency to regard all competition as a threat was not something the next generation could inherit.

  Yet even without such differences of attitude, there would probably have been increased friction between the five houses, for it was the inevitable price of success. By the mid-1830s each of the five Rothschild houses had securely established itself as the pre-eminent force in the public finances of its respective base country. Admittedly, the great powers were inclined to draw in their horns in the wake of the revolutionary crisis of 1830-33. With the exception of the 1835 loan to indemnify the West Indian slave-owners, Britain, France and Austria did not borrow big sums until 1839-41. Nevertheless, the experience of the revolutionary alarms of the early 1830s had cemented the links between the three main Rothschild houses and the states where they were based. On the part of Lionel and his brothers, there was evidently a degree of emotional identification with England. Salomon too, influenced by his growing intimacy with Metternich, was increasingly inclined to give consideration to Austrian imperial interests. Even James, for all his disdain for the ministers of Louis Philippe, could not wholly avoid taking national priorities into account. Such national identifications did not greatly matter if peace prevailed in Europe. But when the interests of the great powers clashed, as they periodically did, it was less and less easy for the Rothschilds to remain neutral.

  The Rothschilds’ natural response to the reduced capital needs of the great powers was to seek business elsewhere. However, there were few regions of the world in which the European powers had no interest, and no regions in which their interests coincided perfectly. In four areas—Iberia, America, the Low Countries and the Near East—the challenge was to arrive at a policy which was in the Rothschilds’ collective interest even when the national interests of their “local” governments were in conflict. This was difficult enough while Nathan was still in charge; after his death it became all but impossible.

  III

  Uncles and Nephews

  TWELVE

  Love and Debt

  [T]he very society which you think is today rejecting you because you are not being very friendly to it over a sister who is behaving against the wishes of her family, that very same society will be just as friendly to you and will hold you in even greater esteem when they see that you stick to your principles . . .

  —JAMES TO NAT, JULY 16, 1839

  On April 29, 1839, a catastrophe befell the Rothschilds—or so it seemed to the family at the time. Less than three years after the unexpected death of Nathan at the very height of his powers, his second daughter, Hannah Mayer, renounced Judaism to marry a Christian.

  In every other respect, the Hon. Henry Fitzroy might have been thought a perfectly suitable, indeed desirable, spouse for the daughter of a German-Jewish immigrant who owed his fortune to “trade.” True, he was the younger son of Lord Southampton, and therefore unlikely to inherit much in the way of a title or land; on the other hand, at the age of thirty-two he was already (after Magdalen, Oxford, and Trinity, Cambridge) Deputy Lieutenant for Northamptonshire and MP for Lewes, with realistic prospects of one day achieving political office. Not that this was a consideration in the mind of Hannah Mayer. At some point in 1838 she had fallen in love with the dark-haired, blue-eyed young man. It was an apostasy for which she would never wholly be forgiven.

  The Crime and Punishment of Hannah Mayer

  In the classic topos of the nineteenth-century novel, it is the aristocratic family which disapproves of the mercantile match. Fitzroy’s family undoubtedly did disapprove, cutting off his allowance. However, they did not disapprove nearly as violently as the Rothschilds. This was not, in fact, the first time Hannah Mayer had formed an attachment to a Gentile: before her father’s death, according to one account, Prince Edmond de Clary had proposed to her in Paris. Then Nathan had bluntly dismissed the idea; and when his brother James heard of her new affair with Fitzroy, he was no more sympathetic:

  Well, my dear Lionel, your letters wherein you speak about the distressing circumstances and the love affair of your sister Hannah Mayer break our heart. You can imagine why this is so because nothing could possibly be more disastrous for our family, for our continued well-being, for our good name and for our honour than such a decision, God forbid. I hardly even dare mention it. To renounce our religion, the religion of our [father] Rabbi Mayer [Amschel] Rothschild of blessed memory, the religion which, thank God, made us so great.

  Yet James was from the outset pessimistic about the likelihood of stopping her a second time. This was not so much because he felt he lacked Nathan’s patriarchal power; for Nathan had formally stated in his will that his younger daughters could
marry only with the consent of their mother and brothers, with his own brothers having the final, binding word in the event of a disagreement. The real problem was that the financial sanctions intended to enforce this clause were an insufficient deterrent. On her father’s death, Hannah Mayer had received £12,500, having already been given the same sum on attaining her majority, as well as a further £50,000 which was invested in the family bank to yield 4 per cent per annum. Had she married with her family’s blessing, she would have received another £50,000 as a dowry; but this was money she evidently felt she could do without. James advised his nephews to inform their uncle Salomon of Hannah’s intentions, but was doubtful whether he would be able “to do any more good as far as this issue is concerned than I can.” He also agreed to come to London before February 20 to try to dissuade his niece in person. “But,” he wrote gloomily,

  whether our trip will turn out to be successful and what kind of impression this will make on the public, this I can’t possibly predict, or whether Hannah Mayer will take any notice of our well-meaning advice when she well knows that the only purpose of our visit to London is to frustrate her love adventure. I am more inclined to believe that in view of this girl’s independent character we are more likely to exasperate her even more than convince her to abandon this ill-starred love affair. However, I want nothing more than the well-being of our family and nothing will prevent me from going to London . . . I am extremely concerned.