The House of Rothschild, Volume 1

by Niall Ferguson

  On the other hand, the price of that security was a high level of insecurity on the continent. For the risks the Rothschilds ran in serving William were real. The French authorities were in earnest about tracking down the Elector’s wealth and they were prepared to use all the means at their disposal to do so. Under the Berlin Convention of 1808, for example, Napoleon extended a tempting offer to the Elector’s numerous debtors, inviting them to settle with the French authorities instead of the Elector in return for reductions in their debts. More alarmingly, the departure of General Lagrange put paid to the deal which had been struck with him. Mayer Amschel’s offices were searched by the French police, as were those of Preye & Jordis. It was probably at this time that the contents of the four chests in Mayer Amschel’s possession were concealed in the secret cellar described above. In August 1808 Salomon was interrogated by a French police official, as was a representative of another bank suspected of acting for William, and the following month Buderus and Lennep were briefly arrested. The same happened in the summer of the following year, in the wake of a minor anti-French revolt. The Special Commissioner of Police in Westphalia—a man named Savagner—had Buderus and Lennep arrested again and then, acting on information supplied by one of the Rothschilds’ business rivals, proceeded with a senior Frankfurt police officer to Mayer Amschel’s office. There followed a bizarre interrogation in which the French attempted to get Mayer Amschel to admit to having supplied money on William’s behalf to the instigators of the recent revolt.

  Savagner was undeniably well informed. He knew about Mayer Amschel’s visits to Hamburg and Itzehoe in 1807—where he had “spent hours with [the Elector] in his office, walking in his garden and conversing with him.” He also knew about his dealings with Buderus. But Mayer Amschel was apologetic: “Because of a painful illness from which he had suffered for years, he had developed a short memory.” Yes, he had been in Hamburg, but only on account of some goods which had erroneously been impounded as contraband. Yes, he knew Buderus and Lennep, but he had “never trusted them, as neither of them had ever sincerely been his friends, merely appearing to be in the world’s eyes.” Yes, he had been the Elector’s court agent and had in the past made loans on his behalf to Denmark—or was it Emden? Far from relaying money to Buderus, he had received 20,000 gulden from him, from which he had made various payments, though to whom he could not recollect. The next day, Savagner tried again with Salomon, the fifteen-year-old Jacob, Salomon’s wife, Amschel’s wife and even Mayer Amschel’s wife Gutle. Each stonewalled in turn. Gutle in particular was the embodiment of feminine innocence: “She knew about nothing at all, she was at home throughout the year and had nothing whatever to do with business. She had never seen [Buderus], she only concerned herself with her housework.” In the end, Savagner seems to have admitted defeat and, like most Napoleonic officials the Rothschilds encountered, settled for a small “loan.” Matters only eased in 1810 when Frankfurt was transformed into a grand duchy under the direct jurisdiction of Baron Karl Theodor Anton von Dalberg, erstwhile Archbishop of Mainz and, since 1806, Prince-Primate of the Rhenish Confederation.

  Mayer Amschel had already begun to ingratiate himself with Dalberg some three years before by offering the inevitable loan. He now proceeded to facilitate a payment of 440,000 gulden to secure the emancipation of the Frankfurt Jews by discounting bonds worth a total of 290,000 gulden and to advance Dalberg 80,000 gulden to finance his journey to Paris for the baptism of Napoleon’s son. Indeed, Mayer Amschel was soon formally acting as Dalberg’s “court banker,” assisting him in the speculative purchases of land he undertook with the money paid by the Frankfurt Jews. It was a sign of the esteem in which Dalberg came to hold Mayer Amschel that he appointed him to the electoral college of the new département of Hanau, along with such eminent Gentiles as Simon Moritz von Bethmann. Whether he was aware how far Mayer Amschel continued simultaneously to serve the man whose most fervent wish was to oust him and his French patrons from Hesse-Kassel is not known. There is a startling symmetry in the fact that, only a few years previously, Mayer Amschel had been arranging payments of some 620,000 gulden from the Elector to Austria, to pay for troops and horses in the 1809 campaign against France. Shortly after Mayer Amschel’s death, his son Amschel was advancing 255,000 gulden to Dalberg, partly in order to purchase horses for the French army!

  It is possible, of course, that Mayer Amschel—like Buderus, who also accepted an official appointment by Dalberg—no longer expected William to be restored to his estates. But if so, he never wrote him off completely. He simply backed both sides. Such a strategy has obvious attractions, and it was to become a frequent Rothschild gambit in the decades ahead. However, the double agent always runs the risk of forfeiting the trust of both sides and ending up the loser, whichever wins. For this reason, it is not surprising that during the years of the Elector’s exile Mayer Amschel developed a penchant for secrecy—another of his most enduring bequests to later generations. At first, he had been blasé. He and his son Carl made numerous trips to the vicinity of Itzehoe in the first months of the Elector’s exile—indeed, they established a permanent office for the purpose in Hamburg—and corresponded regularly and openly with one of William’s most senior officials, Knatz. As we have seen, this did not go unnoticed by the French police, and Mayer Amschel quickly came to appreciate that “these days one has to set to work carefully.” By the middle of 1808 correspondence between the Rothschilds and the Elector’s officials, much of which was relayed via Buderus and Lawätz, was being written in a crude code. Buderus was referred to as “Baron von Waldschmidt,” Knatz as “Johann Weber,” Mayer Amschel as “Peter Arnoldi” or “Arnold” and William himself, variously, as “Herr von Goldstein,” “Johannes Adler” or “the Principal.” The Elector’s English investments were known as “stock fish” (a pun on the German for cod, Stockfisch). For additional security—“for the more care that you take, the better it is”—letters were sent not to Mayer Amschel but to Juda Sichel, whose son Bernhard had married Isabella Rothschild in 1802. When Carl and Amschel travelled to see the Elector in Prague, following his flight south from Denmark, correspondence was hidden in specially fitted secret compartments. Sometimes the Rothschilds even took the precaution of transliterating incriminating letters into Hebrew characters. And it seems highly probable that two sets of books were kept in this period, one complete, the other specially doctored for the consumption of the authorities. Such precautions were justified; in addition to the searches and interrogations described above, the French police succeeded in intercepting at least one letter in 1811.

  In Austrian territory too, Rothschild moves were monitored by the police. There was less reason to fear the Austrian authorities, of course, but there was no guarantee that relations between William and the Emperor would remain friendly. Indeed, after the French victory over Austria at Wagram, there was a strong likelihood that the Elector would be forced once again to move on. Nor can the failure of their financial discussions have endeared him to the authorities in Vienna. For this reason, the Rothschilds continued to operate behind a veil of secrecy even in Prague, leading the police to draw somewhat exaggerated inferences about their political role:

  [T]his Jew [Amschel] is at the head of an important propaganda scheme in favour of the Elector, whose branches extend throughout the former Hessian territories . . . These suppositions are based on facts: whenever I enter the Elector’s quarters, I always find Rotschild [sic] there, and generally in the company of Army Councillor Schminke and War Secretary Knatz, and they go into their own rooms and Rotschild generally has papers with him. We may assume that their aims are in no sense hostile to Austria, since the Elector is exceedingly anxious to recover the possession of his Electorate, so that it is scarcely open to question that the organisations and associations, whose guiding spirit Rotschild probably is, are entirely concerned with the popular reactions and the other measures to be adopted if Austria should have the good fortune to make any progress against Fran
ce and Germany. Owing to his extensive commercial connections it is probable that he can ascertain this more easily than anybody else, and can also conceal his machinations under the cloak of business.

  Yet for all the risks they took on his behalf, the Rothschilds were never wholly trusted by William. No part of the myth of the hidden treasure is more at variance with the truth than the idea that he was grateful to Mayer Amschel for his efforts on his behalf. On the contrary, Mayer Amschel had to endure repeated bouts of paranoia on the Elector’s part. William’s first concern was that Mayer Amschel might betray him to the French. Later, he began to worry that his agent had his hand in the till, suspicions which were only encouraged by envious rivals. He accused Mayer Amschel of swindling him of the interest on his English stocks. He accused him of deliberately hanging on to the valuables which had been left in his care at Hamburg. Throughout this time, Mayer Amschel had to rely on Buderus to reassure the Elector. Buderus was unstinting in his praise. His reasons for entrusting so much business to Mayer Amschel were, he told William,

  the most punctual payment which one can expect of him, the certainty that he always reckons by the official exchange rate on the day of a transaction, the conviction that he never discloses Your Majesty’s transactions to anyone, as he has handled the realisation [of your assets] with such care that French officials who were sent to interrogate him to find out whether he had received English money on Your Majesty’s behalf, could find no trace of the money in the books which were laid before them.

  The irony, however, is that Buderus’s assurances were themselves far from disinterested. For, unbeknown to the Elector, he had entered into an agreement with Mayer Amschel which effectively made him a sleeping partner in the Rothschild firm. In return for investing 20,000 gulden—the sum which Mayer Amschel admitted to having received when questioned by Savagner—Buderus promised “to advise that firm in all business matters to the best of his ability and to advance its interests as far as he may find practicable.” In the light of this—to say nothing of the deals struck by Mayer Amschel with the French authorities and with Dalberg—the Elector’s mistrust begins to look rather less like paranoia. As William came to realise, the Rothschilds’ skill at forging new business relationships was liberating them from their early dependence on him. When, in May 1812, he requested that one of Mayer Amschel’s sons move to Prague to act as a kind of court agent in exile, he was politely but firmly rebuffed.

  It is therefore something of an exaggeration to say, as Carl did, that “the old man” had made their fortune. In 1797 Mayer Amschel’s capital had been 108,504 gulden (around £10,000). Ten years later the balance sheet showed a total capital of 514,500 gulden (around £50,000).9 It seems unlikely that the business he did with William in this period accounted for as big a share of this increase as the import-export business between Frankfurt and Manchester. By 1810, to be sure, the firm’s capital had risen to 800,000 gulden (around £80,000) and a substantial part of this increase probably was due to the income generated by managing William’s portfolio. But the real significance of the Elector’s treasure, as both Carl and Amschel implicitly acknowledged, was that it helped Nathan to make the transition from Manchester merchant to London banker. Once this was achieved, the Rothschilds needed “the Old Man” less.

  Mayer Amschel’s Legacy

  A letter Buderus wrote to William at around this time provides a neat summary of the firm’s radius of activity in the last months of its founder’s life:

  Their father is old and ailing. His eldest son Amschel Mayer, and his second son Salomon, who is delicate, are indispensable to him in his extensive operations. The third [sic] son, Carl, is almost continually engaged in travelling in the service of your Electoral Highness, while the fourth [sic] son, Nathan, is very usefully established in London and the youngest, James, spends his time between London and Paris.

  By this stage, power in the firm had effectively passed from Mayer Amschel to his five sons. Only a few years before, however, the old man had still been playing the role of Herr im Haus. As we have seen, even the mercurial Nathan, far away in England, was still having to do as he was told as late as 1805. His brothers were treated even more like employees:

  Amschel writes that Kalman [Carl] would like to come to you, but what is the point of that? . . . I still need to have Kalman with me in Frankfurt for the moment and he would be much less use with you . . . He is keen to go to London. But I don’t think it sensible from the point of view of our house, as Salomon has hard work to do cashing in and paying out bills. He has the obligations to deal with too . . . [If Kalman goes] then all my commodity business will have to be done through Seligmann and Abraham Schnapper, and Mayer Schnapper his son, because although Jakob [James] is already in the office he has only just had his bar mitz vah. So it really is necessary for Kalman to stay with us. He really wants to go to London [and] if you really need him then I will write him off. But it is stupid not to leave Kalman here for a few more years until Jakob has grown up. Don’t write to Kalman that I said this to you . . . Furthermore, my dear son Nathan, when you are writing to my son Kalman, I advise you to praise him a lot. With God’s help he is a very clever man for his age, though he is rather too bold . . . He really wants to come to you but I really don’t want this dear boy, may he live to be a hundred years old, crossing the sea for just a three-week trip and we cannot do without him for long[er] because as I told you Amschel has business in Kassel. Much as I would like my son Kalman to travel to London for three weeks it would end up being six months, and it is simply not possible to teach conceited outsiders how to run my indigo business.

  Mayer Amschel prevailed and Carl stayed; it may have been a sop to Nathan that James was sent to join him for a spell three years later.

  As this letter also shows, Mayer Amschel’s in-laws, the Schnappers, were now involved in the business; so too were the Sichels, into which family Isabella had married, and the Beyfus brothers, Seligmann and Mayer, who married Babette and Julie respectively in 1808 and 1811. He was also well aware of Nathan’s work in partnership with Rindskopf and his own father-in-law Levi Barent Cohen. But from the outset, Mayer Amschel kept his in-laws at one remove from the management of the firm: the reference to the Schnappers as “outsiders” is revealing. In the same letter to Nathan, he asked a characteristic question: “Dear Nathan, do our letters come directly into your hands alone, so that one can write what one wants, or do you read our letters to your whole family [meaning Nathan’s in-laws, the Cohens]? Let me know.” Even at this early stage, Mayer Amschel had formulated a rule which was to be followed strictly for more than a century: his male descendants were, as far as the running of the firm was concerned, the inner circle. In practice, this meant a distinction between family or private correspondence—almost always written in Hebrew characters—and business correspondence, usually written in German, French or English by clerks. Mayer Amschel more than once had to reprimand Nathan for forgetting this distinction: “I repeat for the last time that your Hebrew written letters may be good enough for family purposes, but for account and business matters you have to write in German, French, or English; I cannot give to my clerks in the office your muddled Jewish letters mixed with family news, if they are to keep good books—accordingly, a good deal of confusion arises.” For the historian, of course, it is precisely these letters—repetitive and unstructured though they often were—which have by far the greater value.

  The transition of the family business into “Mayer Amschel Rothschild & Sons” happened in September 1810, when he and three of his sons—Amschel, Salomon and Carl—issued a printed circular announcing that they would henceforth act as partners (wirkliche Theilhaber) in a new firm (Gesellschaft). When members of the family had been interrogated by Savagner the year before, Mayer Amschel was still calling himself the sole proprietor (Inhaber) of the firm, while his sons were merely his “assistants” (Gehülfen). However, he may have been lying in order to protect them in case Savagner decided to prose
cute the firm. Earlier in the year it had been Amschel, Salomon and Carl who had negotiated the purchase of a vacant lot in the Judengasse (as reconstruction work at last began) in order to build a proper office for the firm. And when a formal legal partnership contract was drawn up in September 1810, its preamble explicitly stated that “a trading company already existed” in which Mayer Amschel, Amschel and Salomon were the “associates.” The principal function of the 1810 agreement was to make Carl a partner, giving him a 30,000 gulden share of the total capital of 800,000 compared with Mayer Amschel’s 370,000, Amschel’s 185,000 and Salomon’s 185,000; and to guarantee that James would become a partner (also with a share worth 30,000 gulden) when he attained his majority.

  It was not only in terms of capital that Mayer Amschel remained primus inter pares: he alone had the right to withdraw his capital from the firm during the period of the agreement; he alone had the right to hire and fire employees of the firm; and his unmarried sons could marry only with his permission. The agreement made the grounds for this explicit. It was Mayer Amschel who had, “through the industry which he had evinced from his youth onwards, his commercial abilities and the indefatigable activity which he had maintained into his old age, laid the basis for the prosperity of the firm, and thereby established the worldly fortune of his children.”

  In other respects, however, the agreement would act as a model for future agreements between the brothers and their descendants for most of the nineteenth century. Profits were divided in proportion to capital shares, no partner was to engage in business independently of the others and the agreement was to run for a fixed period of years (in this case, ten). The most remarkable clause in the agreement stated what would happen were one of the partners to die. Each solemnly renounced the rights of his wife, children or their guardians to contest in any way the amount of money agreed by the surviving partners to be the deceased’s share of the capital. Specifically, his widow and heirs were to be denied any access to the firm’s books and correspondence. This was the first formal statement of that distinctive and enduring rule which effectively excluded Rothschild women—born Rothschilds as well as those who married into the family—from the core of the business: the hallowed ledgers and letters.