The plight of the Vienna house in turn jeopardised the position of the Frankfurt house: new calculations in March suggested that Salomon owed the other Rothschild houses—principally Frankfurt—some £1.7 million (half his total liabilities). Salomon subsequently tried to justify this by arguing that the Frankfurt house had been milking the Vienna branch for years, but the most that can be said is that Amschel was as much to blame for allowing him to accumulate such an enormous debt. For the Frankfurt house had problems enough on its own account, notably the payments still owing to the state of Württemberg for its loan, money due to Hesse-Kassel, and the substantial sum deposited with it by the German Confederation (the so-called “fortress money”) which it was now feared would be withdrawn. Altogether, Anselm put its short-term liabilities at 8 million gulden, and felt sufficiently pressed to terminate support for the Beyfuses, writing off 1.3 million gulden already advanced to keep them afloat. Another source of anxiety was a substantial sum (1.2 million gulden) owed to the Frankfurt house by Prussia, the payment of which could no longer be relied upon. Ironically, it was Amschel who turned to Salomon for assistance in the first weeks of March—at the very time that James was desperately seeking assistance from Frankfurt, urging Anselm to sell securities “at any price!” Each house thought the other owed it money; none was in a position to pay. Salomon pledged all his houses and estates as securities for the money he owed the Frankfurt house; but, as none of these were realisable, the valuation he gave them (5 million gulden) was purely notional.
With three out of the five Rothschild houses on the verge of insolvency, the future of the family as a whole evidently began to look doubtful. In London, Charlotte encountered a new, disrespectful tone from diplomats like the Austrian ambassador Count Dietrichstein, who, as she recorded in her diary,
paid me some compliments in poor taste, saying, “Looking at you it is obvious that you no longer enjoy such a high position in the world. Now you are grateful if someone calls you beautiful whereas in the past you would have laughed your head off at such irony.” I replied, “And why is it that I no longer enjoy such a high position? Is it because I no longer have a money-sack for my throne or my footstool? Or is it perhaps because I no longer am a money-sack?” “The money-sack is still there, but the revolution has half emptied it.” “The world will not trouble itself about that, your Excellency, provided we do not delay our payments and make no claims upon it.”
She suspected that even the Disraelis “believe in the destruction of our power,” though this too she defiantly rejected: “It does not lie in our wealth alone, and God the Almighty will not withdraw his protecting hand from us. Amen!” Privately, as she admitted, “the Rothschilds, whose wealth only two months ago exceeded the reserve of the Bank of England, have lost the greatest part of that wealth.”
Survival
How then did they survive? The obvious answer is that the revolutions themselves did not. The degree of popular support for liberal and republican constitutional innovations outside the major cities turned out to be limited, while within the cities there were deep divisions between different occupational groups over economic issues: liberalising bankers had little in common with disgruntled artisans who yearned to revitalise the guild system. Such divisions did much to dish the republicans in France and the liberals in Germany. Secondly, there was much less danger than there had been in 1830 of a war between the great powers—which in many ways remained the Rothschilds’ greatest nightmare, not least because of the remembered tendency of war to radicalise revolution. James said on more than one occasion that he would leave Paris in the event of a major war; but Lamartine’s France declined (once again) to play its historic role as the exporter of revolution, while Palmerston’s Britain could not decide whether to back the revolution or not, when aspects of it appeared contrary to British interests (notably the German claim to the duchies of Schleswig and Holstein).4 Prussia and Piedmont went to war, to be sure, but with strictly limited aims and even less resolve. Thirdly, the revolutionaries dissipated a good deal of their energies on national questions which implied a redrawing of state borders as well as constitutions; and here the contradictory rather than complementary nature of “the springtime of the peoples” became manifest.
As in 1830, the Poles fell victim to Russian intransigent opposition to their aspirations, despite a half-hearted Prussian flicker of support (it was all over in Posen as early as May). The minor Slav nationalities within the Habsburg Empire had everything to fear from successful Magyar secession, nothing to gain from the creation of a greater Germany and little in common among themselves, least of all language. The German project hatched in Frankfurt foundered ostensibly because the out-sized and loquacious parliament could not agree on a royal figurehead for their new liberally constituted federation; in reality because there was no way of reconciling Austrian and Prussian notions of how the German Confederation should be reformed. Beyond the “Kingdom of Upper Italy” formed by Piedmont, Milan and Lombardy in May 1848, the notion of Italian unity was really an afterthought to a multiplicity of quite diverse revolts up and down the peninsula. Thus competing nationalisms tended to cancel one another out. Finally, once the Habsburg armies had regrouped under the leadership of Windischgrätz, Jelacic and Radetzky, they made short work of the revolutionaries. Prague fell in June 1848. Charles Albert’s Piedmontese armies were defeated at Custozza the following month (July 25). Vienna itself capitulated in November.
Yet none of this could have been predicted with any degree of certainty. In many ways the revolution was at its most radical in the period after October 1848, and its defeat in Italy, South Germany and Hungary was not conclusive until the summer of 1849. Under the circumstances of March 1848, James and Salomon could have been forgiven for following Louis Philippe, Guizot and Metternich into exile, so closely identified were they with the ousted kings and ministers. Instead, they stayed; and their survival is one of the most remarkable aspects of 1848—from a Marxist perspective, one of the classic symptoms of the revolution’s foredoomed failure.
The sine qua non of the Rothschilds’ survival was their own “concordia.” Mayer Amschel’s hallowed injunction to his male progeny to maintain familial unity never counted for more, for it was the ability of the London house (and to a lesser extent the Naples and Frankfurt houses) to bail out the stricken Paris and Vienna houses which proved decisive. It helped that the revolution which had been so successful in Sicily failed so comprehensively in Naples. The accounts of the Rothschild house there reveal 1848 as a poor but not a disastrous year: profits slumped to just 2,709 ducats in the first half of 1848, but bounced back to 58,229 ducats in the second half; for the year as a whole they were down just over 40 per cent on 1847. The balance sheets show the Naples house treading water, with no major changes in the composition of its assets between 1845 and 1850. It was therefore possible for Carl to send money to Frankfurt in early April.
It helped even more that (as Charlotte put it) “the stirring wind of revolution which destroys the old injustices [did] not blow in England”—thanks in no small measure to the repeal of the Corn Laws and the suspension of the Bank Charter Act in 1847. The Chartist demonstration on Kennington Common on April 10 made the family nervous, but proved a damp squib; and Nat’s warning to Lionel that “you will find yourselves in the same position with regard to P.A. [Prince Albert] as we are with L.P. [Louis Philippe]” proved excessively pessimistic.5 In Ireland too the harvest proved less disastrous than had been feared. This meant that, having suffered its worst-ever year in the year of monetary crisis, 1847—with losses amounting to a staggering £660,702, or 30 per cent of capital—the London house was able to rebuild its position with some measure of success in 1848 and 1849, pushing its profits back up to £132,058 and £334,524. It was true then, as Charlotte had to admit to Dietrichstein, that the Rothschilds as a family were less rich than they had been; but their “money-sack” was far from half-empty, to judge by the limited domestic economies she had to ma
ke. “We had three nursemaids and sent away two of them,” she declared, “keeping one to do the dirtier and heavier chores. We shall dress the children ourselves. Our hands shall certainly lose some of their whiteness and beauty in the process, but they will still be of use to us, we hope.” Piano tutors for her daughter Leonora had to be content with 10 shillings an hour; when Chopin told her grandmother that he “cost” 20 guineas per performance, she “replied that of course I could play very beautifully, but that she advised me to take less, as one had to show greater ‘moderayshon’ this season. I gather from this that they are not so open-handed and that money is tight everywhere.”
Yet there was a vast difference between these expenditures and the immense sums required by the Paris, Frankfurt and Vienna houses. Lionel’s hasty visit to Paris in late February seems to have convinced him that James’s position could be salvaged, but he was a good deal more hesitant about Salomon and Amschel. For all their sentimental appeals to their father’s memory, they were made to sweat—and pay—for their salvation. Indeed, Lionel’s first reaction to Salomon’s pleas for support (in the form of accepting some bills of Sina’s) was to refuse; and when he did respond to the appeals of the Frankfurt house to send silver (the first of which arrived on April 14), he made sure the London house turned a profit on the shipments. His uncles reproached him, but they were at his mercy and were made to feel it. Lionel’s tough line was reinforced by Anselm, who arrived in Vienna on April 10 to clear out his father’s Augean stables, a task which he performed with a marked lack of filial compassion. Faced with a request to render yet more assistance to Arnstein & Eskeles (as well as another Vienna house, Heinrich & Wertheimer), Anselm
immediately informed my father in the clearest possible terms, that on the basis of all my powers as representative of the [five] houses I forbade any further financial sacrifice . . . no matter what the consequences might be for the commerce and the situation of this place, and added that I would leave immediately in protest if any attempt was made here to insist on this . . . It is, believe me dear Uncle, a fatal role which I am taking on here . . . they will curse me as my father’s evil angel . . . He is unfortunately in such a state of moral collapse and so bowed down by the situation, that for him to remain here any longer could only have a negative effect on his health . . . It would have been much better if he had left Vienna three months ago.
The recriminations between father and son over the financial morass into which the Vienna house had sunk in many ways marked the end of the dominance of the second generation. In a sense, this was the 1848 revolution within the house of Rothschild.
The reality was, however, that the London house was not the lender of last resort at all. For the ability of New Court to assist Paris and Vienna depended heavily on the ability of the Rothschilds’ agents in America to remit funds to New Court. The year 1848 was in many ways the decisive test of Belmont’s agency: had the system failed, the Rothschilds would have been seriously at risk. Beginning in the summer of 1847, they had nervously followed Belmont as he committed substantial resources to speculating in tobacco and to financing the American war against Mexico which had broken out in May the previous year. As late as February 1848 James sanctioned his decision to advance the US government a substantial sum against treasury bills to help pay the $15 million indemnity accorded to Mexico for the territory ceded by the US under the Treaty of Guadalupe Hidalgo. Typically, the Rothschilds had a man in Mexico at the same time—Lionel Davidson—who for several years had been importing Rothschild mercury from Spain to sell to Mexican silver mines; he too took a hand in the indemnity payment. Scharfenberg in Cuba and Hanau in New Orleans had also made large advances on tobacco and cotton respectively on the eve of the European crisis. These were big commitments: as James himself commented uncomfortably, “We are too much in the hands of these people.” Indeed, there is no better testimony to Belmont’s importance at this time than the frantic letters he was sent from London and Paris, berating him for his involvement with the Mexican indemnity and accusing him of having exceeded his powers. Finally, at the end of 1848, a Rothschild—Alphonse—was sent to New York in person, as if to bring the errant agent to heel.
This had its effect. Rightly fearing that Alphonse had been sent out to replace him, Belmont hastily despatched large consignments of silver to London. These were to prove one of the most important stabilising influences on the European financial situation in 1848, and without them Lionel would have been hard-pressed to assist his relatives on the continent. But Belmont wished it to be understood that he was bestowing favours, not following orders. As Alphonse reported, after a frosty reception in New York, Belmont’s role was a “singular” one: “It is a position which is at once semi-dependent and semi-independent, simultaneously that of an agent and a correspondent.” The long-discussed plan to replace him with a family member foundered once again in the face of Belmont’s doggedness and the reluctance of any of the younger Rothschilds to settle permanently in the US. In the short term, Belmont packed Alphonse off to New Orleans and carried on as before, resuming the payment of the Mexican indemnity.
The second factor in the Rothschilds’ survival was the relaxation of monetary policy by the European central banks, which undoubtedly helped to end the collapse of security prices. The Bank of England had set the precedent by suspending its gold reserve rule in October 1847; however, it proved less than easy to persuade its counterparts on the continent to do likewise. In Frankfurt, of course, there was no central bank, and it took time to persuade the town Senate to create some emergency credit facilities. In Paris, the situation was better, once the fear had receded that the republic would use the Banque de France as a milch cow for forced loans. In addition to suspending convertibility, the government set up a nationwide complex of comptoirs d’escompte and magasins généraux to supply firms with new sources of liquidity, although these proved ephemeral and the enduring effect of the revolution was to increase the power of the Banque de France by obliterating the provincial banks of issue. In Vienna, the National Bank imposed a ban on exports of silver and gold and, in May, suspended convertibility. In each case, of course, the danger existed that issues of paper money might be excessive, and Anselm was not alone in fearing a slide into inflation in Central Europe (no one had forgotten the assignats). Here again the Rothschilds’ access to supplies of silver from America and England proved crucial, for it enabled them to replenish the reserves of the continental central banks. As early as April the Banque de France was placing orders for large silver purchases through New Court. The prospect of a similar deal gave Anselm an important source of leverage in the discussions over his father’s huge accumulation of due bills at the Bank, which he succeeded in prolonging for two years. Even so, it was necessary for him to issue a bald threat to clinch the deal: “Either the prolongation of the bills or the fall of the houses of Eskeles and Wertheimer, which would not only have as a consequence the fall of many other houses here and in the provinces, but would also seriously compromise the portfolio of the National Bank itself.”
This was one of the critical moments in the rescue of the Vienna house. For the Paris house, however, of greater importance were the deals struck over government finance. Government loans contracted in 1847 were among the Rothschilds’ most burdensome obligations. The only way to reduce these was by hard bargaining. Thus, in parallel with his negotiations with the National Bank, Anselm sought to arrange a modest rescheduling of his father’s obligations to the Austrian Treasury. In Frankfurt too Mayer Carl sought to strike deals with Kassel and the Confederation. Even in Naples an agreement had to be reached with the government regarding payment of the interest due on Neapolitan rentes. The Rothschilds were most vulnerable in Paris, however, where James had been left holding around 170 million francs of 3 per cent rentes, now valued at roughly half what he had agreed to pay the government for them. Rather than swallow this heavy loss by selling (as it has sometimes been claimed he did), James sought to extricate himself
from the 1847 commitments; and the way he did so is a case study in negotiation from a position of weakness.
It was far from easy. On February 24, as we have seen, James paid a visit to the Ministry of Finance, possibly to get the new regime to pay the interest falling due on the Greek bonds guaranteed by the previous regime (which normally he himself would have paid). There was a quid pro quo: the next day, it was announced that he was to make an ostentatiously large donation of 50,000 francs to the fund for those injured in the street fighting and that he intended to “offer his co-operation to such a good and honest Revolution.” He then presented himself at the prefecture of police on February 26. When Caussidière detailed the allegations that he was smuggling money out of Paris in preparation for his own flight abroad, James categorically denied them, steering a clever course between admitting to bankruptcy and implying that he had millions at his disposal:
People think I am made of money, but I only have paper. My fortune and my cash are converted into securities, which at the moment have no value. I am far from wishing to declare bankruptcy, and if I must die, then I am resolved to do so; but I would regard flight as cowardice. I have even written to my family, to ask them to send me funds so that I can meet my engagements; and if you like, he added, I will introduce you to my nephew tomorrow.
Once again money changed hands: Caussidière requested that James open a credit for a print works to keep its 150 workers in employment, a request granted when James returned the next day with Lionel (Caussidière was handed 2,000 francs “to be distributed as [he] intended”). This was small beer to James, but the stakes were raised higher in early April when the government unexpectedly demanded 500,000 francs, the balance of a mortgage loan arranged before the revolution with Louis Philippe. At the same time, he was reminded of the large sum owed by his railway company to the government.
The House of Rothschild, Volume 1 Page 79