The House of Rothschild, Volume 1

by Niall Ferguson

  9 Jews could not formally obtain the freedom of the City of London, but this restriction did not in practice prevent them from doing business there.

  10 A typical order was a commission “from Messrs Sichel & Hildesheim Frankfort a/m to be forwarded immediately that the greatest part may arrive in Aug., the remaining part in Sept. to Messrs Wertheimer & Co. Hamburg, payable 3/4 of the amount as soon as the goods arrive at Hamburg, the remaining 1/4 on arrival of the goods at Frankfurt, with bills on London at 2 1/2 month, without Discount. Insurance to be effected by N. M. Rothschild: 30 1/3 pieces blk velveretts . . . 54 1/3 blk velveteens . . . 30 1/3 pieces blue velveretts . . . 221 1/3 pieces blue velveteens . . . 21 1/3 ps plain velveteens . . . 42 1/3 ps fancy velveteens . . . 42 1/3 plain thicksetts . . . 33 1/3 ps fancy cord . . . 12 1/3 ps blue fancy thicksetts newest patterns . . . 30 1/3 pieces white quilting plain and satin stripe . . . 69 1/3 printed thicksett . . . 24 1/3 ps yellow printed thicksetts newest patterns . . . 24 1/4 ps London printed quiltings, the newest patterns and good quality; 40 ps swandowns check and striped; 4 ps toilinets new fashion; 27 1/3 ps. printed thicksett same as patterns.”

  11 Nathan to Salomon Salomons & Co., Dec. 21, 1800: “You’ll remember me evry [sic] day that you drink it as you’ll find it very good and cheap. Mr Harman gives the insurance at 1pct. lower than you to do.”

  12 The outbreak of war obliged Nathan hastily to renew his passport to ensure that his right of residence in England was not called into question.

  13 In fact, Nathan burnt his fingers again with an ill-fated shipment of goods to Russia, which appears to have fallen victim to the Napoleonic invasion.

  14 At the time, this now famous address was one of five three-storey houses in a prosperous professional neighbourhood. Nathan’s neighbours included a surgeon and an insurance broker.

  TWO The Elector’s Treasure

  1 Because cash was scarce in Hessen between the bi-annual fairs, it would have depressed the price of the English bills to have auctioned them for cash. For this reason, the brokers bought them on credit, paying the War Chest at a later date when the markets were more liquid.

  2 In addition to his statutory dues and a payment of 400 thalers towards the fabric of the Neustadt church, Mayer Amschel offered to pay the Jewish community as much as the richest Kassel Jew, Oberhofagent Moses Joseph Büding, but the community was insistent that he move permanently to Kassel. In the end, no use was made of the residence permit, which was finally made out in Amschel’s name, and after 1809 the Rothschilds stopped paying contributions to the Kassel community. This led to a protracted legal wrangle between 1815 and 1829 which was settled only when Amschel agreed to pay the community a fine of 2,500 thalers.

  3 William’s officials increasingly favoured the purchase of bearer bonds because they were regarded as legally more secure than personal loans; there was added safety in being one of a number of investors; they were more liquid than other forms of loan and they were a relatively anonymous form of investment, which gave little away about the total wealth of the Elector.

  4 William’s brother was at that time Danish Statthalter of Schleswig and Holstein, and it was to his seat, Schloss Gottorp, that William initially went. In April 1807, he moved to a modest house at Itzehoe.

  5 This second flight was necessitated when Denmark allied herself with France, following the British seizure of the Danish fleet.

  6 In 1812 the princes’ debts were rescheduled to include back interest at £225,361, of which the Prince of Wales owed £140,000, the Duke of York £66,667, the Duke of Clarence £20,000.

  7 Nathan had made his first tentative foray into the gilts market in June 1803.

  8 On one occasion the sea captain to whom they had been entrusted threw them overboard when his ship was searched. In the spring of 1812 James was entrusted with collecting five certificates for £189,550 in London. He and Carl, whom he met at Dunkirk, then went to Paris, from whence Carl proceeded to Prague. The Elector did not receive the certificates until May 20. In late 1812 Salomon picked up a further certificate of £250,000.

  9 The total assets of the firm were in excess of 970,000 gulden, 70,000 of which were bonds of various kinds, and 110,000 of which were loans of other sorts, including a loan to William’s son of 10,000 gulden and a bill on Prince George—the Prince Regent—of 127,784 gulden.

  10 Virtually all the 190,000 gulden (apart from sums reserved for Carl’s and James’s marriage gifts) went to his wife and daughters however.

  11 According to legend, the school originated when Mayer Amschel heard a poor Jewish boy singing in the street in Marburg: he persuaded Geisenheimer to adopt him as the first pupil in a new school.

  THREE “The Commanding General” (1813-1815)

  1 In the eighteenth century, the guinea was the principal gold coin used in Britain, though the silver shilling (of which sixty-six were coined from the troy pound of silver) was regarded as the monetary standard. In 1717 the mint price was set at 21s. = 1 guinea. However, at this time the Mint switched to a new coin, the pound sterling (= 20s.), and the price of gold was set by Newton at £3 17s. 10 1/2d. This proved to be the first step towards the gold standard: in 1774 silver was effectively demoted when it ceased to be legal tender for sums in excess of £25.

  2 The business was given to the Bethmann Brothers, apparently on worse terms than the Rothschilds had offered—a reflection of the continuing preference in Vienna for established banks.

  3 It was this rally which increased the profit margin on the Prussian subsidy deal from zero to a respectable 3 per cent.

  4 Herries later stated that the total sum transferred by “a single and confidential agency” in 1814 and 1815 was £18 million.

  5 The bulletins Nathan received have not been preserved, though a letter confirming the news from a Dutch source based just six miles from the battlefield survives.

  6 Characteristically, Nathan, who had intended to float as much as £3 million of these bills, blamed Carl for the Amsterdam market’s lack of interest.

  7 Nathan was incensed to hear that James had suffered a riding accident; in his view, to be riding at all was a sign of dilettantism.

  FOUR “A Court Always Leads to Something” (1816-1825)

  1 Punctuation varies: this is the text in the 1986 Oxford edition. The 1930 Oxford edition has “Jew Rothschild, and his fellow-Christian, Baring” but this seems nonsensical. Byron clearly intended to suggest that the two bankers were on a par, despite their different religions.

  2 Of the 700 million francs, some 138 million was to be spent on reconstructing strategic fortresses around France’s borders. Each of the great powers was to receive between 100 and 139 million to compensate them for the costs of the Hundred Days; smaller sums went to the other states in the anti-French coalition. In addition, France had to pay substantial sums to private claimants; after prolonged wrangles, these amounted to 240 million francs. The peace also returned French borders to those of 1790, as opposed to those of 1792 which the 1814 treaty had set. It should be noted that France had previously imposed indemnities on the Netherlands, Austria, Prussia and Portugal, but the sums involved had been smaller.

  3 James arranged to invest £20,000 for Dalberg in British stocks at around this time. A short time later he and Salomon joined Dalberg in a small speculation in French rentes.

  4 The Amsterdam bank of Hope & Co. had been founded by the Boston-born Henry Hope and the Cor nishman John Williams in the 1760s. Laid low by the French occupation of Holland, it had effectively been taken over by Baring Brothers. Labouchère was a Hope employee who married a Baring and later became a Hope partner.

  5 Adolphe d’Eichthal was the grandson of the Bavarian court banker Aron Elias Seligmann; he changed his religion and name and moved to Paris with his son Louis.

  6 It was at this time that the Kassel Jewish community took Amschel to court for alleged non-payment of residence dues.

  7 Baring had already agreed to advance 165 million francs to the Allies in retu
rn for 246 million of rentes at 67; the problem was the decision by the Allies at Aix to accept a final payment of 100 million in the form of 132 million of rentes which Baring rashly agreed to buy at the higher price of 74.

  8 The price of gold was £4 0s 6d in 1819 compared with the bullionists” pre-war target of £3 17s 101/2 d.

  9 The final terms were that 5 per cent bonds totalling £5 million would be sold in three successive tranches with the price rising from 70 (£2.5 million) to 72.5 (£1.25 million) and then to 75 (£1.25 million). £1 million of the first tranche was taken by the Prussian government itself at Rother’s suggestion. Repayment was to take place over twenty-five years. Officially, as Ehrenberg says, there was no additional commission; in fact, Nathan got his 4 per cent, though this was “kept secret” to defuse criticism in Berlin. In addition, the Rothschilds kept at least £1.5 million for themselves, netting a large profit when the price rose to a peak of 83 in September. This explains why the brothers wrote in such affectionate terms to Rother after the contract was concluded: Salomon assured him that he and Nathan were his “heartfelt, eternal and faithful good friends”; it is unlikely that he would have expressed such sentiments if he had been forced to forgo a commission.

  10 The Rothschilds had no difficulty in placing the greater part of the loan with the major Paris and Frankfurt banks, though they were less generous to their rivals in Berlin. The bonds rose initially to 83 in Sept. 1818, then slipped back to 73.5 until late 1819, before rising steadily again. Rumours of a new loan in 1820 seem to have prompted the Rothschilds to sell their own holdings, but these proved unfounded. In fact, the bonds reached par (i.e. 100) in 1824.

  11 Isaac Arnstein and Bernhard Eskeles were descendants of Samson Wertheimer, court banker of Charles VI. Arnstein’s son Nathan married Fanny Itzig, famed for her Vienna salon.

  12 Ultimately only around 300,000 ducats were repaid.

  13 The problem was that neither her son by Napoleon, the Duke of Reichstadt, nor her two children by her second husband, Count von Neipperg, stood to inherit her Italian duchies, which were to pass to the Duke of Lucca after her death.

  14 Salomon initially offered to underwrite a loan of 42.8 million gulden at an effective price of just 67. When this was refused he proposed a smaller loan of just 12 million gulden, offering to pay “1.5 per cent more for the amount decided than is offered by any other firm.” The same tactic was repeated when the loan was put out to tender; now Salomon simply offered to pay 0.5 per cent more than the highest bidder. The Austrian government wisely waited, and in April 1823 was able to secure significantly improved terms from a Rothschild-led consortium: a loan of 36 million gulden was issued at an underwriting price of 82.

  15 Metternich suspected that this initiative had the backing of the French government, or at least that part of it which was against intervention, but British observers believed that the Rothschilds were “pacific” for reasons of their own.

  16 As Finance Minister and then premier, Villèle had succeeded in establishing a modicum of order in the French financial system, but was disliked by the less “circumspect” Ultras, especially Chateaubriand.

  17 Significantly, no Rothschild was sent to Madrid and the negotiations there were entrusted to agents, first Belin and then Renevier.

  18 In 1807 the Portuguese Crown Prince Joao had gone to Brazil at the time of the French invasion. In 1812, when the French were driven out, he refused to leave Brazil and elevated it “to the dignity, prominence and denomination of a Kingdom” equal with Portugal following his mother’s death in 1816. Six years later, when Joao VI returned to Portugal, his son Pedro became Emperor and he remained as such when Brazil’s independence was recognised in August 1825. When João died the following year, Pedro in turn passed the Portuguese throne to his daughter Maria, though this arrangement was subsequently challenged by Pedro’s brother Miguel.

  19 Put simply, the plan drawn up by Nathan was that the Rothschilds, Barings and Laffitte together would undertake the conversion in return for the first year’s saving which resulted from it (28 million francs). To make the conversion attractive, Nathan insisted that the Banque de France must set its discount rate at 3 per cent.

  20 See e.g. James, Paris, to Nathan, London, Jan. 28, 1825: “The Minister said to me today, ‘Mr Rothschild, you have the reputation of a man who has been selling large numbers of rentes.’ I must therefore be careful not to antagonise the Government. However, I think that on Monday or Tuesday when the King is due to make his speech I will be able to sell [rentes] at a better rate than today and I will profit from the situation because I don’t foresee any sizeable rise.”

  21 In fact, Nathan intervened to support the rente after the rejection of the conversion bill, which unleashed a wave of selling in Paris and London.

  22 Of twenty-six foreign government loans totalling £52.4 million which had been made between 1823 and 1826, sixteen were in default within a few years.

  FIVE “Hue and Cry” (1826-1829)

  1 It is surprising that the Rothschilds could still fear that bills endorsed by them might not be accepted.

  2 See illustration 10.vii below. The title is a pun: “Exemplary Knight” literally, but also “Knight with Samples.”

  3 See illustration 7.i below.

  4 The origin of the word “Hep” is variously explained: as an acronym of “Hierosolyma est perdita,” or as the sound of bleating goats, alluding to the Jews’ traditional beards. There was a similar backlash against emancipation in many German towns.

  5 His “Political Georgics,” a pastiche of Dryden’s Georgics, appeared in The Times, March 18, 1828: Macaulay later repeated the lines in a letter to his sister:

  “ . . . Oh mysterious two,

  Lords of our fate, the Doctor and the Jew,

  If by your care preferred th’aspiring clerk [Herries]

  Quits the close alley for the breezy park,

  . . . And you, great pair, through Windsor’s shades who rove,

  The Faun and Dryad of the conscious grove,

  All, all, inspire me;—for of all I sing

  Doctor and Jew and Marchioness and King . . .

  But the black stream beneath runs on the same

  Still bawls in Wetherell’s key, still stinks like Herries[’] name.”

  6 The loan was intended solely to enable Brazil to maintain interest payments on her existing debt. James “admit[ted] quite frankly that in two years” time these people will not pay anything”; but in the short run it boosted the price of Brazilian bonds.

  7 The loan was apparently never repaid, so Nathan kept the jewels.

  8 In fact, Amschel provided a sumptuous lunch, to which a number of leading figures in the Frankfurt diplomatic corps were also invited. The Augsburger Zeitung reported that “the stairs leading to the ban quetting room were laid out with red carpet, and decorated with garlands of flowers and plants . . . Several of the most distinguished emissaries to the German Diet, as well as foreign ministers present here, enjoyed this guest luncheon prepared with no expense spared.”

  9 The Courrier Français also reported the dinner, humorously explaining the absence of the British ambassador as follows: “An Englishman was asked how it could be that the ambassador of his nation had not been present at this diplomatic feast. ‘Because,’ he replied, ‘England has no need of money.’ ”

  SIX Amschel’s Garden

  1 Of eight German-Jewish merchants in Manchester in 1806, Nathan was the only one who maintained his religious affiliation.

  2 In 1844 Nat was obliged to eat “a kosher lunch and [felt] very sick in consequence. I shall smoke a 14 sou Havana to relieve my stomach.”

  3 Wilhelm attended the synagogue twice daily and studied the Talmud in the evening. On the Orthodox revival in Frankfurt.

  4 The most common Schnorrer joke has Rothschild complaining about the Schnorrer’s tactics only to be asked, “Are you trying to teach me schnorring?” Another favourite has the Schnorrer regarding his relative’s regular
hand-out as inheritable property. Sometimes the Schnorrer is caught out: he claims to play the bassoon, but Rothschild has one in a cupboard and asks him to play; or he sees Rothschild’s daughters playing a duet and decides not to bother schnorring: the Baron has clearly fallen on hard times if they have to share a piano.

  5 “So young—and already a Rothschild,” says one Schnorrer to another as a child is wheeled past in a sumptuous perambulator or carriage. Contemplating a lavish Rothschild gravestone, the Schnorrer can only marvel: “They sure know how to live.” There are numerous jokes in this vein.

  6 An important element in the Jewish case, stressed by the Rothschilds, was that a payment had been made by the Jewish community for their rights, to finance which bonds had been issued. To revoke the 1811 agreement would therefore require this money to be refunded.

  7 The economic restrictions extended the duration of Jewish apprenticeships and prohibited Jews from the trading in food and firewood.

  8 Montefiore had retired from business to concentrate on philanthropy and Jewish communal matters.

  9 Caroline’s few surviving letters to Salomon suggest above all an impatience with his over-eagerness to please Nathan and others. Their son Anselm became the main focus for her affections; that may explain the relatively cool relationship he had with his father.

  10 Hannah was supposed to be there in attendance at the birth of her first grandchild; but she was irresistibly attracted by the wild fluctuations of the bourse caused by the revolution. Despite a number of “specs,” however, she had to confess to her husband: “You will see me back without having made a great deal of money.” Three years later her son wrote expressing the hope that she had been “a great Bull” during the “enormous rise in all the funds.”

  SEVEN Barons