The House of Rothschild, Volume 1

by Niall Ferguson

  In all this, the Rothschilds were increasingly beginning to think in a way fundamentally similar to that characteristic of central bankers. This is scarcely to be wondered at. In the first half of the nineteenth century, the central banks of England and France continued to be partly private institutions, albeit with evolving public responsibilities governed by statute. In terms of their financial resources, they were in fact the only banks comparable with the Rothschilds, though of course they were national where the Rothschilds were international, and the Rothschilds had no interest in resisting their monopolisation of note-issue. The relationships between the Rothschilds and the European central banks were thus almost always close and sometimes symbiotic. We have already seen how Nathan made use of the Bank of England for short-term loans during the 1820s; how, in return, he had come to its rescue in 1825; and how it had provided the advances of bullion needed to bail out James in 1830. Small wonder his evidence to the 1832 Bank Committee was so positive: “I feel the management and I know that it is good.” After the 1830-32 crisis, James appears to have been on a similar footing with the Banque de France; and Salomon’s relations with the Austrian Nationalbank were even closer.

  ’Change

  In 1836 James gave his nephews some advice about how to sell securities on the Paris stock exchange:

  When you are buying or selling rentes, try not to look at making a profit, but rather your aim should be to get the brokers used to the idea that they need to come to you . . . [O]ne initially has to make some sacrifices so that the people then get used to the idea to come to you, my dear nephews, and as such one first has to spread the sugar about in order to catch the birds later on.

  It is easy for the historian to lose sight of that throng of brokers attracted by the Rothschild “sugar,” for the simple reason that most of their dealings were conducted orally rather than by correspondence. Yet the brokers were the indispensable worker-ants of nineteenth-century finance. As with the banks they dealt with, the Rothschilds had their favourites: Menet & Cazenove in London, for example, who sold foreign stocks amounting to £2 million for Rothschilds in 1834 alone, and £1.4 million the following year; and the partnership founded by John Helbert Israel and his nephew John Wagg. However, even these were treated rather in the manner of casually hired grouse-beaters: Alfred Wagg recalled how “on the fortnightly settlement days my grandfather or father would go over to New Court with a statement of the position across which Baron Lionel would write £500 or £1,000, being an arbitrary fee which he fixed as our renumeration, varying in amount according to the humour he was in.” In any case, it made tactical sense to deal with many brokers, above all because of the need to conduct some operations surreptitiously.

  When contemporaries called Nathan “the master of the exchange,” they were not wholly exaggerating: by the late 1820s the positions he took were watched closely by smaller traders who—not unreasonably—credited him with superior information and intuition. This meant that overt Rothschild sales or purchases could trigger a general flight from or into a particular stock, a ripple effect the brothers generally did not like to encourage. Stories abound about Nathan’s techniques for averting such imitation. “If he possessed news calculated to make the funds rise, he would commission the broker who acted on his behalf [initially] to sell half a million.” “It was a common practice with this mighty speculator to have one set of agents selling, and another buying the same stock so that there was no ascertaining what in reality was the object of his manoeuvres.”7 In Vienna, Salomon delegated much of his stock market business to a jobber whom he paid “a fixed salary of 12,000 gulden, irrespective of his immense commissions”:

  This person used to wait upon Rothschild early every morning, when together they concerted their plans for the day’s operations. The stock-jobber had his clients and customers not only in the Bourse but also in the “Panduren-Lager” [the unofficial bourse in the Grünangergasse café where out-of-hours trading went on] with whom he concluded his purchases and sales. He kept a number of runners in his employ, whose sole duty it was to run backwards and forwards from him to Rothschild’s with reports of all the fluctuations in prices.

  Of growing importance as a non-exclusive source of financial information (and misinformation) in this period was, of course, the press. It might be thought that the proliferation of newspapers in the nineteenth century tended to erode the advantages which the Rothschilds were able to derive from their private system of communications; and to some extent this was the case. On the other hand, the existence of financial pages in newspapers presented new opportunities for influencing the markets which the Rothschilds were not slow to exploit. This was not at first easy: as we have seen, in the 1820s the Rothschilds were more often the targets of press criticism than manipulators of the media, and there were always radical and reactionary journals which remained unremittingly hostile to them. Gradually, however, a group of papers emerged over which the bank could exercise at least some influence. We have already noted how Salomon was able, through Gentz, to exert pressure on the German Allgemeine Zeitung, and its use of Heinrich Heine as a correspondent in the 1830s also ensured relatively positive (if satirical) coverage of James’s activities. James himself appears to have steadily increased his influence over papers like the Moniteur Universel and the Journal des Débats. “Yesterday a deprecatory article concerning us was published in one of the newspapers,” wrote James to Nathan in 1832. “If this article should appear in one of the larger newspapers, we will then publish a response here.” “Well,” he told his nephews five years later, following some sensitive negotiations in Spain, “I am arranging for several articles to be printed in the newspapers for this will make an impression in Madrid and in London because your English newspapers often follow in the footsteps of our French ones and it is good if one can regulate public opinion.” By 1839 he could assure his nephews confidently that he would “see to it” that the French government was “attacked in all the newspapers” if it had the temerity to oppose his railway plans. “If one can’t make oneself loved then one has to make oneself feared,” he declared, repeating a favourite Mayer Amschel maxim. “Newspapers can make a strong impact.”

  Nathan too responded to early press attacks by establishing what was to be an enduring relationship with the most influential of all British papers: The Times. In the 1820s he had been attacked on a number of occasions by the Morning Chronicle: for example, it alleged in 1829 that one of its rivals, the Courier, had used inside information from the Foreign Office about a change of ministry in France as the basis for a stock market speculation with Nathan: the editor allegedly “told Montefiore, Montefiore told Rothschild, and a very neat stock job was got up with the rapidity of lightning.” In fact, it was more often Nathan who was in a position to provide the papers with news—in particular, political communications relayed by his brothers from Vienna and Paris. Indeed, it was partly their common interest in speedy communication which brought the Rothschilds and The Times together: by the end of the 1830s they were effectively sharing a pigeon-post service between Boulogne and London. Perhaps more importantly, Nathan struck up a friendship with Thomas Massa Alsager, who had joined The Times in 1817 as a City correspondent and was one of its leading financial writers until 1846.8 Although the closeness of the link should not be exaggerated (Alsager at times expressed concern about the scale of British capital export, which no one had done more to encourage than Nathan), nevertheless the Radicals and Chartists who accused the paper of being “the Jew’s harp” were not wholly fantasising. In 1842 Anselm wrote to his cousins enclosing a new “regulation which the Prussian Govt. intends issuing about the poor Jews”:

  [T]he King of Prussia being very vain & much affected when the Journal des Débats or the English disapprove his Govt. it would be very desirable for those papers to contain from time to time articles in favour of the Jews. As you know well the leading men of The Times, you will easily obtain from them the insertion of some articles, & I will then se
nd you some German articles you may have translated.

  Such manipulation of the media goes on in much the same way today, of course, and it is difficult to fault the Rothschilds for seeking to influence an often hostile press. More difficult for a modern reader to judge are the financial practices of a period when there was little formal regulation and the rapid pace of financial innovation left such legislation as did exist lagging some way behind. There is no question that the Rothschilds took full advantage of the fluidity of the financial environment; but it would be quite anachronistic to level retrospective charges of “insider dealing,” or any of the other modern forms of fraud which were then unknown. In the Comédie humaine, Balzac’s Nucingen—the German-Jewish banker modelled on James—is reputed to have made his fortune by a succession of essentially bogus bankruptcies. These operations are described in considerable—and entertaining—detail, but they make little economic sense; nor do they correspond in any way to the reality of Rothschild practices. In fact, there appear to have been only a few legal actions brought against Nathan alleging financial malpractice, and in only one case did the charges stick. In 1823, for example, a subscriber to the 1822 Neapolitan loan claimed that Nathan had sought to retain his deposit of £1,255 without handing over the relevant stock certificates: the case was thrown out, and it would appear that it was actually the plaintiff, a London corn-merchant named Hennings, who had acted in bad faith (refusing to pay the money due when the bonds were falling as a result of the French invasion of Spain, then attempting to pay belatedly when they began to recover).

  The one case which went against Nathan was filed in 1829 by a man named Brookman, who alleged that the Rothschilds had deliberately given him bad investment advice, and had then charged him for sales and purchases of stocks which had not in fact taken place. In 1818, Brookman claimed, Nathan had advised him to sell 20,000 francs of French rentes and invest in the new Prussian sterling loan then being issued by the London house. Not only had this been bad advice—rentes had promptly risen 10 per cent, while the Prussian bonds fell 7 per cent—it had also been disingenuous, for instead of selling Brookman’s rentes to a third party, Nathan had kept them for himself. Contrary to Brookman’s instructions, he had then sold the Prussian bonds, advising a fresh purchase of rentes worth 115,000 francs. “As in the previous cases, the moment the plaintiff bought, down went the stock into which he purchased, and the plaintiff is then advised to sell . . . The moment the plaintiff ’s rentes were sold, up went the market.” Brookman had then asked that the money be reinvested in rentes, but shortly after that decided to sell again. According to the accounts of the Paris house, there had been “regular charges for exchange, interest, brokerage and commission” deducted from Brookman’s account for each transaction; yet there had in reality been no actual purchases or sales of rentes, which had remained in the Rothschilds’ hands all along. Nathan’s counsel sought to argue that Brookman was merely a “veteran stock-jobber,” that the accounts in question had been settled ten years before and that such book transactions were routine; but the court was unimpressed. According to the Vice-Chancellor’s scathing judgement, Nathan was guilty of having made “fallacious statements,” and he was ordered to pay to Brookman “the amount of all the sums which he has lost or ought to have received,” plus 5 per cent interest, plus costs. Predictably, the case inspired yet another cartoon of Nathan, The Man Wot Knows How to Drive a Bargain, which portrayed Nathan as a dealer in old clothes, carrying a sack marked “French Rentes £20,000” (see illustration 10.ix).

  Yet this example of apparently Nucingen-like behaviour is worth mentioning precisely because it seems to be unique. In reality, the Rothschilds of this period were more often the victims of fraud—not to mention straightforward robbery—than its perpetrators. In 1824 a Frenchman named Doloret—who had also brought an unsuccessful action against Nathan over the Neapolitan loan—fraudulently obtained from the London house bills worth £9,670, drawn in his favour on the Paris house. A year later one of James’s clerks stole a quantity of banknotes (perhaps as much as 1.5 million francs) by smuggling them out of the office in a spe-cially designed belt. A similar robbery occurred at New Court in 1838, when an eighteen-year-old clerk named Samuel Green absconded with a cheque for £2,900. In 1839 it was the turn of the Paris house. There was a much bigger robbery from the Madrid office six years later, with gold and securities worth around £40,000 being stolen. And seven cases of Spanish piastres worth around £5,600 were stolen from a Rothschild coach on its way from London to Paris in 1845. Nor were fraud and robbery the only threats the Rothschilds had to contend with. In 1863 a young man who had lost heavily on the bourse sought to extort 100,000 francs from James by sending him threatening letters. Such crimes were perhaps the inevitable price the Rothschilds paid for their celebrity. For what more tempting target did the nineteenth century have to offer its aspirant crooks than the world’s bankers?

  10.ix: “A Sharpshooter,” The Man Wot Knows How to Drive a Bargain (July 14, 1829).

  ELEVEN

  “Il est mort” (1836)

  Sidonia had foreseen . . . that, after the exhaustion of a war of

  twenty-five years, Europe must require capital to carry on peace.

  He reaped the due reward of his sagacity. Europe did require

  money, and Sidonia was ready to lend it to Europe. France

  wanted some; Austria more; Prussia a little; Russia a few mil

  lions. Sidonia could furnish them all . . . It is not difficult to

  conceive that, after having pursued the career we have inti

  mated for about ten years, Sidonia had become one of the most

  considerable personages in Europe. He had established a

  brother, or a near relative, in whom he could confide, in most of

  the principal capitals. He was lord and master of the money

  market of the world and of course virtually lord and master of

  everything else. He literally held the revenues of Southern Italy

  in pawn; and monarchs and ministers of all countries courted

  his advice and were guided by his suggestions. He was still in the

  vigour of life, and was not a mere money-making machine. He

  had a general intelligence equal to his position, and looked for

  ward to the period when some relaxation from his vast enter

  prises might enable him to direct his energies to great objects of

  public benefit. But in the height of his vast prosperity he sud

  denly died.

  —DISRAELI, CONINGSBY

  A Wedding and a Funeral

  On June 15, 1836, a wedding took place in Frankfurt. The bride was Carl’s daughter Charlotte. She had turned seventeen just two days before and was, it was generally agreed, rather beautiful. Her future mother-in-law—an exacting judge—found her as “beautiful as members have already said and her manner agreeable,” “simple and amiable.” This was not just familial pride. When Benjamin Disraeli met Charlotte for the first time the following year, he was struck by her “tall, graceful, dark, and clear” looks: “picturesquely dressed [in] a robe of yellow silk, a hat and feathers, with a sort of “Sévigne” [bandeau] beneath of magnificent pearls,” she looked “quite a Murillo” and was “universally admired.” The two characters in his fiction which she later inspired—Eva Besso in Tancred and Mrs Neuchatel in Endymion—are both fascinating and exotic beauties, especially the former:

  That face presented the perfection of oriental beauty; such as it existed in Eden, such as it may yet occasionally be found among the favoured races in the favoured climes . . . The countenance was oval, yet the head was small. The complexion was neither fair nor dark, yet it possessed the brilliancy of the north without its dryness, and the softness peculiar to the children of the sun without its moisture. A rich subdued and equable tint overspread this visage, though the skin was so transparent that you occasionally caught the streaky spleandour of some vein like the dappled
shades in the fine peel of beautiful fruit. But it was the eye and its overspreading arch that all the Orient spake . . .

  Her groom—and also her cousin—was Nathan’s eldest son Lionel. He was twenty-seven, and already an experienced businessman, having recently played a pivotal role in his father’s intricate financial operations in Spain. To judge by his letters, he was a rather solemn, serious young man, conscious already of his daunting responsibility, as the eldest son, to preserve his father’s remarkable financial achievements; but also increasingly aware of a more general obligation to advance the cause of Jewish emancipation not only in England, where he had been born and brought up, but throughout Europe. He was presentable, if not handsome, and not a little amorous.

  For weeks the women of the family in Frankfurt had been preparing for the great event: Gutle, the betrothed couple’s grandmother, now aged eighty-two; Eva, her eldest son Amschel’s wife; the bride’s mother, Adelheid; as well as Lionel’s eldest sister Charlotte, who had married her cousin Anselm ten years before, and was now bringing up their three children, with another on the way. The Rothschild houses in Frankfurt were being vigorously “washed and cleaned” in preparation for the anticipated round of family dinners: Amschel’s house, with his beloved garden, in the northern suburbs of the town; his elegant town house on the Zeil; Anselm’s newly acquired “palace” in the Neue Mainzer Strasse; and the more modest house in the same street used by Carl and his family when they were in Frankfurt rather than Naples. The original family home in the former Judengasse—where Gutle stubbornly continued to live, despite her sons’ great wealth—seems not to have been considered a fit venue for the festivities.