The House of Rothschild, Volume 1

by Niall Ferguson

  Should you, dear Nathan, not need him [Lionel] you know how much pleasure it would give me to have him here with us. It is always better to work in pairs rather than singly. In spite of our unfortunately doing very little business here, it is nevertheless always useful to act as a pair. If it should be too inconvenient to allow him to come here, I would then be obliged if you could send one of your other sons here, whom I always treat like one of my own children. I hope that Lionel has no reason to complain about me and that he will return here.

  When Lionel was sent to Brussels, James expressed his unease at being left “on my own” in Paris. By 1833 Lionel seemed to his sister a “complete man of business”: “[He] calls to pay his respects in the morning and we do not see him again until dinner at 7.” His trip to Madrid in 1835 was judged a success; and he stepped into his father’s shoes in 1836 apparently without difficulty.

  By contrast, Lionel’s younger brothers were more reluctant bankers. Anthony had to cut short his first apprenticeship in Frankfurt because of a romantic entanglement of which his father disapproved, and harboured an intense dislike of “that stinking place” thereafter (a feeling shared by his brothers). By comparison with Paris and London, Frankfurt had little to offer in the way of fleshpots; worse, their Uncle Amschel worked longer hours than his nephews were used to: from 8 a.m. to 7 p.m., six days a week. (Nathan plainly did not drive his sons as hard as he had once driven himself.) Even in the more congenial atmosphere of Paris, Anthony was found wanting. As James put it tactfully, although he was “hard working,” he failed “to bring the deals which after all will remain for future generations.” His uncles tried their best. James encouraged him to “observe all the wheeling and dealing” as he negotiated a major contract; Salomon sought to “instil in him a degree of steeliness which on the one hand will teach the young man not to be too quarrelsome, and on the other hand, not to be too tempestuous.” But Anthony never entirely lost his unreliable reputation: as late as 1840 his brother Nat felt obliged to protest at the “very coarse language” of his letters. “I do not like him to write to me exactly as if I were his servant,” he complained to Lionel. “I do not think I am touchy but there is a way of saying things which is particularly offensive and our good brother Billy [Anthony’s nickname] sometimes adopts that way.”

  Nat had an altogether more placid temperament than Anthony, but he too seems to have chafed at the constraints of his apprenticeship. “You must know,” he confided in his sister Charlotte, “that I have been about a month in London, I go regularly to the counting house with Papa & try as much as possible to become an accomplished man of business which however I find rather a difficult thing to do.” When he was sent to Naples he liked it even less, as he complained to his brother Lionel:

  I have now rather a tender subject to touch upon, namely myself. I have frequently written to you my great dislike of Naples which I assure you increases every day, I assure you however I should not mind that at all, but then I am afraid I am of no service & that I should be much better employed in London where I certainly might learn business in about a twentieth of the time & twenty times as well as here . . . [D]o my dearest Rabbi write to Papa & tell him to let us come home.

  In the end, it was once again James who took charge, putting Nat through a thorough year’s training “just like any other apprentice, to enable him to learn how to keep the books in order.” Nat was, he assured Nathan, “a very nice boy . . . and I can guarantee you that, if he is prepared to listen, he will become the most skilful of all.” Indeed, Nat seems to have become James’s favourite nephew: soon he was talking of “teaching the good young man all that I know.” By 1833 he felt his protégé was ready for a foreign mission, though the choice of destination—Constantinople, during the prolonged Greek loan wrangle—was probably not a wise one. Ultimately, it was Nat’s fate to live and work almost all his life in his Parisian uncle’s shadow, never quite ceasing to be a disgruntled English gentleman in exile, constantly dismayed by the political volatility of the French, and quietly counting the long hours he had to spend in “the stinking counting house.”

  Why, when they had so many sons—twelve in all—did Nathan and his brothers not follow their father’s example and establish at least some of them in new financial centres? This is not easy to answer. While their sons were still young, the brothers seem to have thought of establishing new houses in Madrid or St Petersburg. And later there was intermittent talk of sending one of the members of the younger generation to the United States. But the plan for a “sixth house” on the other side of the Atlantic remained no more than a pipe-dream. The best explanation for this is that they trusted five of their sons—Anselm, Lionel, Mayer Carl, Adolph and Alphonse —enough to groom them as their successors, but the others insufficiently to give them the major responsibility of setting up new houses. For if Anthony and Nat seemed to lack the spark of financial ability and dedication their uncles were looking for, they were at least competent by comparison with Nathan’s youngest son Mayer, a would-be country squire, or the Orthodox zealot Wilhelm Carl. Another obstacle appears to have been Nathan’s widow Hannah, who resolutely refused to allow her younger sons to be posted overseas.

  Instead, the Rothschilds had to rely on a small group of paid agents. Of course, since the very early days in the Judengasse there had always been non-family members employed as clerks. We know little about these shadowy letter-writers and bookkeepers, save that the partners preferred to exclude them from executive activity: they were regarded as drones, to be worked hard, treated well—and watched carefully. Some were little more than servants, like the cheerful Jakob who was injured in a coach crash in 1814 while delivering a consignment of gold to Warsaw (“better to be hurt in the legs than hurt in the gold,” he joked). Others were skilled linguists and accountants. In 1818 there were at least nine clerks in the Frankfurt office: Radius and Kremm, who were responsible for the book-keeping; Berend, who conducted the correspondence and ledger for all Frankfurt transactions; Geiger, who also handled Frankfurt business and matters relating to coupons; his father, who dealt with current accounts; Hamburg, who conducted all correspondence with titled customers; his brother, who dealt with foreign letters; Heisler, who looked after bills of exchange; and Kaiser, who took care of domestic matters. There was also an office boy in the accounts department and an apprentice letter-copier. To Carl, however, they were all “the young people,” and when he contemplated the running costs of the office (150,000 gulden a year, or around £14,000), he suspected them of “trickery”—remembering, no doubt, his father’s experience with Hirsch Liebmann. The Paris house was even smaller (and cheaper): at around the same time, James estimated that he spent 34,000 francs a year (£1,700) on eight clerks, a porter, a messenger, two servants and a coachman.

  Often the clerks were drawn from extended families similar to the Rothschilds’. In Vienna, a key role was played by the Goldschmidt family, which included Salomon’s chief clerk Moritz Goldschmidt, who had moved from Frankfurt to Vienna with Salomon in 1803, and his sons Julius, Jacob and Alexander, who worked in Vienna, Frankfurt and Paris respectively. Relations of the Goldschmidts were also regarded as trustworthy: one of Moritz’s nephews worked for Rothschilds in Amsterdam, but died young. Another nephew (Moritz) worked at the London house for eighteen years, while a third (Ignaz Bauer) was sent to Spain to assist Weisweiller.

  Inevitably, the numbers of staff had to be increased to keep pace with the amount of business, so that by the 1830s New Court alone employed between thirty and forty people, earning between £50 and £500 a year. But the paternalistic attitudes of the partners persisted. “Pray let the Clerks have a good dinner,” wrote Lionel on the occasion of his wedding in 1836, “and get all drunk or if they like . . . I think they might make a party to Greenwich; if some of them are too proud, let them make two parties and take their better halves with [them].” The nearest thing to an incentive was that “on our becoming the contractors of an English and foreign loan [we] ge
nerally allowed the clerks a small interest independent of a gratuity at Christmas which of late years we have allowed them.” When it became apparent that both Nat and Anthony might have to leave their posts in London and Paris to attend their father’s deathbed, there was consternation: for the first time ever, it was necessary to give the senior clerks in both houses powers of attorney, a responsibility which had previously been conferred only on members of the family. In the case of London, there was some doubt about who should actually be appointed, suggesting the absence of any formal hierarchy within the office. Part of the problem was that Nathan’s monopoly over executive decision-making had encouraged a degree of indolence among his own employees, who were spared difficult decisions and all but guaranteed bonuses.

  This explains the great difficulty the Rothschilds experienced when they had to entrust their interests in remote cities like Madrid, St Petersburg or New York to men who had generally begun their careers as clerks. For inevitably these agents could not be treated as mere office-boys, subject to daily orders from the partners and denied all real responsibility. No matter how many letters were sent from New Court, the men on the ground were bound to be better informed about the places where they lived. Sometimes they had to take decisions quickly, so that consultation with London or Paris could only be retrospective. And no matter how often it was asserted that they were mere agents of the great Rothschilds, they naturally acquired considerable local status in their own right, disposing as they did over substantial resources. All this the Rothschilds found extremely hard to stomach. They constantly suspected their most valuable agents of disloyalty—above all, of trading on their own account—and complained endlessly of their insolence, independence and incompetence. “I noticed that Gasser [the St Petersburg agent] has no interest at all in our business affairs,” James wrote to Nathan in 1829 on hearing of a large consignment of silver bound for Russia:

  Another man, realising that so much silver is due to arrive, would say, “I will meanwhile send you a remittance,” but no, nothing of the kind occurred to him. He wrote to me and enquired whether I wanted to make with him c/meta [a joint account] for three months which would give him more courage to operate. Well, we will have to send one of our own people over there, someone who shows greater loyalty to our House. Well, thank God, you will soon have grown up sons.

  Gasser was repeatedly the target of such criticism. In 1838 James threatened to stop paying his salary (14,000 roubles a year), which he considered excessive, instead paying him a quarter per cent of “whatever business we do with him.” As so often, the charge was that Gasser was putting his own interests before those of the firm. “Under no circumstances should you write even a single word to Gasser,” fumed James a year later. “That stiff dog, who is only too glad to hold on to your money at no cost to himself, is doing you more harm than any good he could possibly render.” Even Lazare Richtenberger—established in Brussels in 1832 as the first fully fledged Rothschild agent—was occasionally dismissed as an “ass.” Despite his proximity and punctilious subservience, even he sometimes made the mistake of acting in advance of James’s instructions.

  Perhaps the most important Rothschild agent in the 1830s was Daniel Weisweiller, their man in Madrid, whose name was first discussed for the job in 1834. Weisweiller had apparently won a reputation as a “businessman” in the Frankfurt office, and his correspondence over the years was detailed to a fault. But it was not long before he too was suspected of neglecting his masters’ interests. By 1843 there was even talk of replacing “that young man, whose pretensions [according to Anselm] become more unagreeable [sic] every year”:

  I think really the man is half cracked & fancies himself of the highest importance . . . By today’s post I shall . . . write to my father about Landau that he may prepare himself for Madrid . . . [T]he best were [if] one of us could or would go to Madrid . . . but you may rely that I shall not mention Mayer in my letter to London as your good Mama wishes him to remain in England. I think Landau will do very well in Madrid when once he knows the terrain, he is very clear . . . [and,] belonging to a very respectable family[,] he will never express such ridiculous preten tions [sic] as Weisweiller does & will not fail to continue doing.

  Such threats were idle. Weisweiller might possess “a triple dose of vanity,” but he had made himself more or less indispensable. Thus it was decided to send Mayer to Madrid only for the few months when Weisweiller was abroad getting married: as Nat put it, “Weisweiller’s absence will oblige Tup [Mayer’s nickname] to exert himself & will enable him at once to be master, whilst later W. will be there & it wd not be so easy for Mayer to put him immediately in his proper position.” When Anthony sought to bring Weisweiller to heel, he made little headway:

  He complained as usual and was as cold as ice, until I told him in plain terms that as long as he did our business in Madrid to our satisfaction, we would make no change, but if he went on giving himself airs and thought our gratitude insufficient, it would be impossible for him to stay in Madrid and one of us would be obliged to go hitherto [sic] . . . He is an uncommonly clever agent and it would be difficult to replace him, but I have seldom or never seen a more disagreeable cold hearted calculating agent. His vanity is excessive.

  Instead, another agent, Hanau, was sent to the United States, where he almost immediately incurred the partners’ irritation by over-hasty dealings—though one suspects that, if he had taken more time to learn the ropes, he would have been criticised for idling. Only the Rothschilds could have found fault with an agent for “directing too much of his attention towards finding out all the business he could for us.”

  To correct a long-standing misapprehension, it is important to distinguish between salaried agents like Weisweiller and associated banks with whom the Rothschilds corresponded regularly and did business on a preferential basis. To list all these would be tedious: by the end of the 1840s the Rothschilds had such associates in Amsterdam, Baltimore, Berlin, Cologne, Constantinople, Florence, Hamburg, Milan, Odessa, Rome and Trieste, to name just some of the more important. Two famous German banking names are sometimes erroneously said to have been Rothschild agents in their early years: Warburg and Bleichröder. In fact, they were merely two of these many associates, and before 1848 there was nothing unusual about the modest role they played in the bank’s network. Nevertheless, the two cases are of interest because they illustrate how much value smaller banks (especially in Germany) attached to establishing some sort of connection—however tenuous—with the Rothschilds.

  The Warburgs began lobbying for Rothschild business in Hamburg as early as 1814, though regular dealings were not established until the 1830s, and preference continued to be given to Carl Heine (the poet Heinrich’s uncle) until the 1860s.6 In much the same way, Samuel Bleichröder attempted to supplant the Mendelssohns as the Rothschilds’ favoured banker in Berlin; again, despite much sycophancy, it was not until the 1860s that his son Gerson was accorded any special status, largely on account of his proximity to Bismarck and the good-quality political news this enabled him to provide. Even then, he continued to be treated with a measure of disdain: “Bleichröder?” James was heard to exclaim to Herbert Bismarck. “What is Bleichröder? Bleichröder is the one per cent I let him have.” Many other banks performed the same role in the Rothschilds’ operations, participating in major bond issues, helping to facilitate large bullion transfers and engaging in occasional arbitrage transactions: the Oppenheims in Cologne, the Schröders in London and the Banque de Bordeaux, to name just three. At this stage in their histories, all were minor players.

  By comparison, the Rothschilds had much more time for those larger banks whom they regarded primarily as rivals, but whose co-operation they sometimes sought for very large operations: the Barings, Thomas Wilson and Goldschmidt in London; Laffitte, Hottinguer and Mallet in Paris; Geymüller, Sina and Eskeles in Vienna; and Bethmann and Gontard in Frankfurt. Far from wishing such competitors ill—as they had in the decade of cut-throat compet
ition after 1814—the Rothschilds increasingly came to see their existence as complementary, so long as their own position as primus inter pares remained unchallenged. The 1830s and 1840s saw the emergence of informal syndicates and shifting coalitions of banks in all the major financial centres. At the same time, by dint of their size, the Rothschilds came to see themselves as bearing a degree of responsibility for the stability of the banking system as a whole. This explains their reluctance to see their rivals fail. In the 1820s they had watched the collapse of Parish with almost callous indifference. In the subsequent decades, by contrast, they were occasionally willing, for the sake of financial stability, to come to their competitors’ rescue, as in the case of Laffitte in 1831 and 1838. Salomon’s arguments for assisting Geymüller in 1841 are illuminating:

  To sit back and watch the bankruptcy of a man of 65 years—of a house which has existed for so long, a house which was in the first rank here—and not to be able to help . . . was just impossible . . . If Steiner and Geymüller do have to stop their payments, what a spectacle it would be, what an impression it would make abroad, as well as in Frankfurt and other German markets, because several million—as many as 3 or 4 million—gulden of acceptances and bills would be turned away from both these houses.

  In this case, Salomon was overruled by his brothers and nephews. But his sense of responsibility for financial stability in general also informed Lionel’s atttitude to the protracted debate on monetary policy in England. In 1839 he reported to his uncle on “the measures to be enacted with regard to the joint stock banks” (a new generation of which had proliferated since the mid-1820s) and their likely “effect upon our internal money concerns.” “The question,” as he put it, “is how to keep these gentlemen from getting too fat and getting themselves and the country into scrapes without too much cramping the circulation.”