The House of Rothschild, Volume 1

by Niall Ferguson

  It was only after the birth of his youngest child that Mayer Amschel began to engage in business which can properly be called banking. In some ways, the transition was a natural one. An antique-dealer with a growing circle of suppliers and customers naturally would extend credit to some of these from time to time. As early as 1790 we find Mayer Amschel listed as one of the creditors of Joseph Cassel in the nearby town of Deutz, albeit for a mere 365 gulden. In a similar way, the coin and medal business inevitably brought him into contact with the Hessian mint, especially as his most coveted client, Prince William, often commissioned new medals to be struck. In 1794, for example, Rothschild offered to sell a quantity of silver to the Hessian war treasury “at the best possible price.”

  However, the speed with which Mayer Amschel’s wealth grew in the 1790s marked a real break with his earlier business activity. At the beginning of the 1790s Mayer Amschel Rothschild was no more than a prosperous antique-dealer. By 1797 he was one of the richest Jews in Frankfurt, and a central part of his business was unmistakably banking. The evidence for this breakthrough is unequivocal. In 1795 the official figure for Mayer Amschel’s taxable wealth was doubled to 4,000 gulden; a year later he was moved into the top tax bracket, with property worth more than 15,000 gulden; and in the same year he was listed as the tenth richest man in the Judengasse with taxable wealth of over 60,000 gulden. Thanks largely to Mayer Amschel, the Rothschilds had become one of the eleven richest families in the Judengasse by 1800. It was at around the same time that he began to rent a large four-roomed warehouse outside the Judengasse. He also took on a talented and multilingual accountant from Bingen named Seligmann Geisenheimer. Further evidence of increased wealth can be found in the generous dowries Mayer Amschel was able to give his children as they began to marry. When his eldest daughter married Benedikt Moses Worms in 1795, she received a dowry of 5,000 gulden and was promised a legacy of 10,000 after her parents’ deaths. When his eldest son married Eva Hanau the following year, he was given a share of the business worth 30,000 gulden.

  Just what such a share meant can be seen from one of the most important documents to have been found in the recently opened Moscow “trophy” archive: the first known balance sheet of Mayer Amschel Rothschild’s firm, dating back over 200 years to the summer of 1797. The total assets of the firm at this stage were given as 471,221 Reichsthaler or 843,485 gulden, the total liabilities as 734,981 gulden, leaving 108,504 gulden (around £10,000) as—in Mayer Amschel’s own words—“the balance of my capital, praise God” (“Saldo meines Vermögens, Gott lob”). This remarkable document repays close scrutiny, for it reveals that Mayer Amschel was already far more of an international merchant banker than has previously been realised. The “assets” side of the balance-sheet evidently excluded Mayer Amschel’s personal property, in that the family house does not appear there: by “my capital” he already meant his firm’s capital. Most of the assets listed were either state bonds of various sorts, or personal loans and credits to a widely dispersed range of other firms. On the other side, the liabilities consisted of sums owed by Mayer Amschel to an equally broad spectrum of institutions and individuals.

  The geographical range of Mayer Amschel’s business credit network at this early stage was wide. The balance sheet shows that he was doing business with firms located not only in the immediate vicinity of Frankfurt (for example, in Kassel and Hanau) but also in more remote parts of Germany, ranging from Hamburg and Bremen to Regensburg, Augsburg, Leipzig, Berlin and Vienna, as well as in Amsterdam, Paris and London. Moreover, in addition to the names which might have been expected to feature in such a list of creditors and debtors (such as Mayer Amschel’s son-in-law Worms and his future son-in-law Sichel), there appear the names of a number of eminent Gentile firms, including the Bethmanns, de Neufvilles and Brentanos (whom he owed a good deal of money). The celebrated art-collector Johann Friedrich Städel also had deposits with Rothschild totalling 17,600 gulden. Finally, the balance sheet provides evidence of a new kind of relationship with the government of Hesse-Kassel, which he owed some 24,093 gulden. It is not without significance that the names of two Hessian officials—Louis Harnier and Karl Buderus—appear in their own right as creditors.

  This was a rapid economic ascent by any standards. Indeed, Mayer Amschel’s success had been so swift and so great that it had to some extent outstripped his own capacities. In 1797 he was appalled to discover that one of his most junior employees—a youth named Hirsch Liebmann—had been able to embezzle a substantial sum virtually from under his nose. The proceedings of the subsequent criminal case have partially survived and give a good insight into the chaotic state of his rapidly expanding business at this period. According to Mayer Amschel, Liebmann, who had been with the firm some three years, had stolen between 1,500 and 2,000 gold carolins (as much as 30,000 gulden) from his office. The theft had been possible for three reasons. Firstly, Mayer Amschel allowed Liebmann to buy and sell goods on his own account to supplement his meagre wages—one and a half gulden a month after the rent of a shared room. Indeed, Rothschild even lent him a small sum on one occasion to help finance this. No one was therefore surprised when Liebmann appeared to be supplementing his wages, even if he was doing so with singular success. Secondly, the firm had no safe for valuables and scarcely any office security: the cupboard in the main office was frequently left open during business hours and employees and clients seem to have come and gone as they pleased. No one therefore noticed when coins, notes and other valuables began to disappear. And thirdly, Mayer Amschel’s system of book-keeping was woefully primitive: when he came to lay charges against Liebmann, he had virtually no documents to prove how much had been stolen. No one therefore realised that money was missing until some time after Liebmann had begun stealing. It was only when a local broker appeared in the office, claiming that Liebmann wished to buy seed from him, that Mayer Amschel’s suspicions were aroused. When pressed, the man admitted that this was a cover story suggested by Liebmann; in fact, he was there to buy an Austrian bill worth around 1,220 gulden which Liebmann had offered to sell him. Mayer Amschel belatedly grasped where his employee had been getting the money for his gold watches and handmade shirts. Further enquiries confirmed his suspicions: Liebmann had not only been spending money on himself, but also sending it to his parents in Bockenheim, who were notoriously “as poor as could be” but who suddenly seemed able to afford a 500 gulden dowry for Liebmann’s sister. When the thief was arrested, eight thaler coins and an imperial treasury note were found among his possessions, as well as some silver spoons, a gold salt pot, a gold mug and seven medals, belying his protestations of innocence. Further proof of guilt was unwittingly provided by Liebmann’s own father, who offered to return 1,000 gulden which his son had given him plus an additional 500 if Rothschild would drop his charges. Eventually, though only after prolonged interrogation, Liebmann confessed.

  Liebmann gave conflicting accounts of the theft, at one point saying that he took the money in small amounts over a prolonged period, later claiming that he had simply snatched two sacks of coins from the office cupboard while Mayer Amschel’s second son, Salomon, was talking with some clients. Either way, the case illustrates that by 1797 at the latest the business was turning over so much cash that Rothschild himself could not keep track of it: bags of money were lying around the office, as he himself told the court, some in the cupboard, some on the floor. He always had a lot of money in his house, he said, because of his “extensive business dealings.” The subsequent decade would see those dealings become more extensive still.

  The Dual Revolution

  In his Biographical Notes on the House of Rothschild, written long after Mayer Amschel’s death, Friedrich von Gentz fulsomely praised his business acumen. “Nevertheless,” he added wisely, “the most outstanding personal qualities may sometimes require exceptional circumstances and world-shattering events to come to fruition.” This was doubly true.

  The epoch-making events which followed the summon
ing of the French Estates General by Louis XVI in 1789 took time to affect the lives of German Jews like Mayer Amschel Rothschild and his family. But when finally the Revolution reached Frankfurt, its effects were profound—indeed, literally explosive. The advance guard came as early as October 1792, when French troops temporarily occupied Frankfurt, just ten weeks after the coronation of the last Holy Roman Emperor, Francis II. We should not, of course, exaggerate the significance of this superficially symbolic change of regime. Frankfurt had been occupied by French troops before (during the Seven Years’ War) and it seems that the Jewish community was no more pleased than the rest of the town’s population at this renewed foreign incursion. Indeed, for all the potential benefits of French influence which could be inferred from the National Assembly’s emancipation of French Jewry in 1791, the immediate, tangible effects of the French presence were distinctly negative. In June 1796, following the defeat of the Austrian army at Lodi, Frankfurt was bombarded by the victorious French forces so heavily that nearly half the houses in the Judengasse were destroyed by fire.8

  On the other hand, the upheaval of war had its advantages. The destruction of the Judengasse obliged the Frankfurt Senate to relax its residence restrictions, granting permits (albeit for only six months) to the 2,000 or so people left homeless by the fire to live outside the Judengasse. It was presumably in the wake of this relaxation that Mayer Amschel was able to begin renting the warehouse in the Schnur gasse. Later French incursions led to a real, if temporary, improvement in the legal status of the Frankfurt Jews, an improvement foreshadowed by the emancipation of the Jews in those parts of the Rhineland which the French now annexed. (One beneficiary of this was Geisenheimer, the man Mayer Amschel hired as his book keeper.) Of more immediate importance, the war presented Mayer Amschel with a new and lucrative business opportunity. He and two other partners, Wolf Loeb Schott and Beer Nehm Rindskopf, were able to secure a contract to provide the Austrian army with grain and cash during their operations in the Rhine-Main region.

  The French Revolution was not the only revolution to transform Mayer Amschel’s life and business. The British Industrial Revolution, in its first phase by the 1780s if not before, exerted an equally important influence. For although Mayer Amschel had already begun building up his banking business by the late 1790s, this did not imply a winding up of his previous coin-dealing business, which continued in a small way even after his death; and nor did it preclude expansion into other potentially profitable fields of business activity. Of these, none was more profitable in the late eighteenth century than that generated by the English revolution in textile manufacturing. In particular, the dramatic growth of (partly) mechanised cotton spinning, weaving and dyeing in Lancashire signalled an unprecedented and genuinely revolutionary change in the pace of economic life. Although this industrialisation was regionally as well as sectorally concentrated—so much so that it barely registers in the aggregate national income figures extrapolated by modern economic historians—its ramifications were felt as far as Africa, whence the slave labour of the cotton plantations came, America, where the cotton itself was grown, and India, where an established native textile industry was soon to face lethal competition from the cottages and mills of Lancashire and Lanarkshire. Those mills exerted a powerful pull in Germany too, where demand for the cheaper yet better British cloths—shawls, handkerchiefs, checks, gauzes, muslins, muslinettes, quiltings, dimities, velveteens, sallampores and jaconets—grew rapidly in the 1790s. Mayer Amschel was only one of many German businessmen to scent a unique and highly profitable opportunity. Around fifteen Jewish firms in Frankfurt alone were importing English textiles by the turn of the century, and a number of these established permanent agents in Britain at around this time. Between 1799 and 1803 no fewer than eight German merchants settled in Manchester for this purpose.

  It is against this background that we must see the decision to send Nathan, the third of the Rothschild brothers, to England at some point on the eve of the new century. The date of his departure from Frankfurt and the reasons for his going have long been a source of confusion to historians. Although some have Nathan arriving in England in 1797, 1799 or 1800, the majority opt for 1798. There is little evidence to support this last date. We know from the balance sheet discussed above that Mayer Amschel had begun to have dealings with firms in London from at least as early as 1797, but on a fairly limited scale. It was only February 1800—the date of his first letter to the London bankers Harman & Co., requesting that he be permitted to draw on them—that he began to expand his English business. The first documentary evidence of Nathan’s presence in England comes from 1800 too. Wolf cites a letter from Nathan dated May 29 in which he requests an acquaintance to reserve “a room with two beds in it, in some respectable lodging house” for himself and his “business manager.” We also have a letter from Mayer Amschel to Harman, dated June 15, which mentions that Nathan would “soon be at your place,” and a letter from Nathan dated August 15 from a London address (37 Cornhill). From this Williams concluded that Nathan had actually arrived in England in 1800, spent the summer in London, then proceeded to Manchester. But this cannot be right. Not only was Nathan’s first letter to Harman addressed from Manchester; we also have several later letters in which Nathan explicitly states that he had first come to Manchester the year before, 1799. It therefore seems reasonable to conclude that Nathan did not arrive in Manchester before 1799, though he and his father were not doing English business on a large scale until the following year. This leaves the possibility—though it is nothing more—that Nathan first crossed the Channel in 1798, staying in London for some months before proceeding northwards.

  Why did Nathan go to England? In the absence of hard evidence, most historians have followed Nathan’s own account of his emigration—which he related to the MP Thomas Fowell Buxton in 1834—in which he portrayed the decision to leave as his own:

  “There was not,” he said, “room enough for all of us in that city. I dealt in English goods. One great trader came there who had the market to himself: he was quite the great man, and did us a favour if he sold us goods. Somehow I offended him, and he refused to show me his patterns. This was on a Tuesday; I said to my father, “I will go to England.” I could speak nothing but German. On the Thursday I started . . .”

  There is no reason to think that this version of events was wholly fictitious. Nathan was a fiercely ambitious and competitive man, as quick to take offence as to give it in his business dealings, and it is not difficult to imagine him responding impetuously to such a contretemps. However, in a number of respects his retrospective account was misleading. Perhaps he could not resist romanticising his own rags-to-riches story; perhaps he was indulging in irony for the benefit of his after-dinner audience (the latter would have been more in character). In any event, it seems highly unlikely that his father would, or indeed could, have entrusted him with as large a sum of money as he suggested to Buxton—£20,000, or roughly double the net assets shown in the 1797 balance sheet—on the strength of a youthful impulse. However much “start-up” capital Nathan took with him, the idea that he was doing much more than following his father’s orders seems unlikely.

  For political reasons, it soon became imperative to conceal the fact that Nathan was acting as the agent of a Frankfurt firm, and this has led some historians to assert that, once he arrived in England, he effectively operated independently from his father and brothers. But the evidence in the firm’s archives for this period is unequivocal: initially, Nathan took his orders from Frankfurt—indeed, his elder brother Salomon was sent over to assist him in 1801—and it was only gradually that he began to trade on his own account. A number of Nathan’s earliest letters from London and Manchester are signed “pp. Meyer Amschel Rothschild.” Correspondence between father and son was evidently regular (though very little of it has survived), and Nathan wrote frequently on his father’s behalf to the London firms of Salomon Salomons and Harman & Co., which handled the firm’s insuran
ce and banking business in London. It was not untypical for letters of this early period to begin with phrases like “My father wishes me to write to you” or “Agreeable to the direction I have just received from my father.” On one occasion when a firm let him down, Nathan warned them that if there were more “complaints of this nature . . . [I] am certain my father will order me to turn myself to somebody that will attend more punctually.” On another, he informed Salomons: “I received letters from home this morn[in]g advis[in]g me of my father being very discontented w[ith] your packing, writing that I must not send any more goods to London as you have neglected the shipping.” And for most of this period the chests of cloth which Nathan was sending to the continent in increasing quantities all bore the insignia “MAR” for Mayer Amschel Rothschild. Nathan was not sparing his father anxiety when he concealed a brief illness from him in the summer of 1802. Rather, he did not want his father to think he had been unable—for whatever reason—to attend to business. In a letter to a recalcitrant French customer not long after this illness, Nathan left for posterity a revealing insight into his father’s character, and his own view of it: “Do you think that my Father will sell . . . Goods upon his own bills . . . without Profit? You are quite mistaken, my father’s Chimney will not smoke without Profit.” Just ten days later he received a stern letter from his father accusing him of not keeping “regular” accounts.