The House of Rothschild

by Ferguson, Niall

  For his sons, the world had abruptly lost its axis; for his nephews, the cessation of James’s letters marked the end of the long era in which, for all their hard-won autonomy, “the Baron” had been primus inter pares. “At least we have the consolation of seeing this grief shared by all, the big and the small, the old and the young,” wrote Alphonse:No one was more popular than our excellent father, and no one more deserved to be so. To the most rare and precious qualities of spirit he added a gaiety, an affability in every communication, which won over people’s hearts and attached them to him for ever. He left us still full of ... youthful spirit, in the full enjoyment of his faculties, surrounded by respect, affection and, I believe I can say, general admiration.

  James’s funeral on November 18 was indeed an event in French public life as well as a watershed in the family’s history. The contingents from Frankfurt (Wilhelm Carl and his sister-in-law Louise) and London (Anthony, Leo, Natty and Alfred) could not fail to be impressed by the crowds who turned out on the day of their uncle’s interment. “All Paris came to pay their respects,” reported Leo, “and the whole courtyard was full as all these strangers & friends alike passed before the house. The funeral cortege started & the boulevards were lined with spectators ... it was a public funeral which our Uncle’s greatness & popularity had earned for him & this spontaneous outburst of sympathy gratified all our relatives.” “I never saw such an assembly of people as came to the rue Laffitte this morning,” reported his eldest brother Natty; “4,000 people passed through the Drawing room, they say there were 6,000 people in the court yard and from the Rue Laffitte to Pere la Chaise [the cemetery] the wheels are lined 5 deep on both sides . . .”

  This was no mere family hyperbole. Even The Times‘s Paris correspondent Prévost-Paradol was impressed: “Before 10, the Rue Laffitte was full of people from all parts of Paris [come] to offer their condolence to his family. I do not remember to have ever seen, no matter on what occasion, the Boulevards from the corner of that street along to the Porte St. Denis more crowded and it required the exertions of several sergents de ville to keep a passage open.” There were diplomats (including the Austrian ambassador Metternich), leaders of the Jewish community, including the three Chief Rabbis, as well as representatives of the Banque de France, the bourse and the Compagnie du Nord. Above all, there were throngs of lesser bankers—men like Gerson Bleichröder and Siegmund Warburg, who journeyed to Paris to pay their last respects to the chief of the “power of powers.” Though the family had declined the military honours due to a recipient of the Great Cross of the Legion of Honour, and though his gravestone bore an austere inscription—simply the letter “R”—James’s funeral still struck Alfred as “more like that of an Emperor than of a private individual.”

  In fact, the Emperor of the French himself was not present, merely sending his master of ceremonies, the obscure duc de Cambacérès. Otherwise, there were no senior political figures in evidence. Moreover, among the telegrams of sympathy sent by heads of state from the Austrian Emperor Franz Joseph to the American President Ulysses S. Grant, there was also one from the exiled Orléans royal family whose throne Napoleon III had to all intents and purposes usurped. The significance of this was not lost on contemporaries. As Prévost-Paradol put it in a subtly worded obituary in the Journal des Débats, James had represented “financial royalty”: towards political royalty, by contrast, he had been “compelled to observe in the midst of ever-recurring political dissensions, a prudent neutrality.” Although “nobody could ever reproach him with not having at all times very punctually paid to Caesar what was due to Caesar,” he had been “a citizen of the world rather than belonging to any nationality in particular.”

  With all this, he had his preferences ... Certainly for him the most pleasing period was the Restoration ... and the Orléans Government was also dear to him ... [But] with his strong good sense he knew that real security exists only under a free Government. He took a serious view of business; he placed no trust in vain theories, and he disliked risky ventures. It was just that which set him apart from the present time and gave him an old-fashioned air in the midst of a generation less risk-averse in business as well as in politics.

  This was, of course, a thinly veiled dig at the Bonapartist regime—the kind of press criticism which the more liberal press law introduced in 1867 had made possible. It was also close to the mark: James had indeed remained ambivalent, if not hostile, to the Second Empire to the last, and this explains the conspicuous absence of political figures at his funeral.

  James’s death marked the end of an era in more ways than one. He was the last of the generation which had been born in the Frankfurt Judengasse. Having inherited the mantle of his brother Nathan in 1836, he had helped steer the family firm through the worst storm in its history in 1848. While conceding greater autonomy to the London house, he had largely checked the centrifugal forces generated by conflicts of temperament and interest within the family. He had transformed the Paris house, adding to its original accepting and issuing functions a new role as an industrial Investment bank with its own railway “empire.” In 1815 the capital of the Paris house he founded had been £55,000; by 1852 the figure was £3,541,700 and just ten years after his death £16,914,000.1 What made this achievement so remarkable was the fact that James had managed to withstand not only periodic financial crises, but also a succession of severe political crises: 1830, 1848 and 1852. And he had exerted for nearly four decades a unique influence over French foreign policy and European international relations in general. Nothing quite like this was possible again after 1868. Ferrières and the Gare du Nord—the two most grandiose monuments he left to posterity—are not out of scale.

  As an individual, he was without question one of the richest men in history. According to The Times, his personal fortune as disbursed to his heirs by his will amounted to 1,100 million francs (£44 million). The Kölnische Zeitung came up with the even higher figure of 2,000 million. These figures—which do not even include his extensive rural and urban real estate in the rue Laffitte, Ferrières, Boulogne and château Lafite—are so enormous as to be scarcely credible. (Expressed as a percentage of French gross national product, 1,100 million francs is equivalent to a staggering 4.2 per cent.) However, surviving, documents enable us to calculate a more realistic figure. James’s will specified cash payments or annuities to his relatives and a handful of minor legatees (including his manservant) totalling approximately 20 million francs, of which the greater part (16 million) went to his wife Betty. In addition, an unspecified residue, including James’s share of the combined capital of the Rothschild houses was divided between his three sons, his daughter Charlotte and his granddaughter Hélène.2 Unfortunately, no figures for the firm’s capital have survived for the years between 1863 and 1879, and the 1863 figure is an estimate by Gille. However, bearing in mind that James’s personal share had been put at 25.67 per cent in 1855, we can estimate the value of his share eight years later at £5,728,000, or around 143,200,000 francs. It is impossible to put an exact price on James’s real estate, but the fact that the contents of Ferrières were valued at 20 million francs while the Lafite estate had cost 4.1 million francs would suggest a rough figure of around 30 million francs. Adding all these figures together, a total of around 193 million francs (£7.7 million) would seem reasonable, though this must be an underestimate (we do not know how big a securities portfolio James had amassed apart from his share in the family partnership; nor is it possible to attach a cash value to his huge art collection). “It seems to me,” joked Mérimée irreverently, “that it must be more disagreeable to die when one has so many millions.”

  There was one other thing which James sought to bequeath his heirs: the culture he himself had inherited from Mayer Amschel. In many ways, his will is the last authentic expression of that distinctive ethos which had been the foundation of the Rothschilds’ success. Here was the old appeal to fraternal unity, urged on his sons “as a duty, the fulfilment of which will
bear the happiest of fruits.” He explicitly urged them:never to forget the mutual confidence and fraternal accord which reigned between my beloved brothers and me and which became the source of fruitful happiness in happy days, just as it was a refuge in times of trial. That fraternal union alone, [which was] the dying wish of my worthy and revered father, has been our strength and has been our protective shield, [and along with] our love of work and practice of probity, has been the source of our prosperity and public reputation. May the wish which I in my turn express here therefore be religiously taken to heart by each of my children, as the most precious legacy of my fatherly love ...

  Here too was the old principle (enshrined since in the earliest partnership contracts) that his sons should “not do business outside the [family] house, whether in public funds, commodities or other securities”; though James elaborated on this point in more detail than had perhaps seemed necessary in previous decades:A house cannot be well managed, its unity cannot be preserved, unless all the associates work in the same interests and in the same way. I have left, I hope, each of my children a sufficiently independent fortune for them not to need to run after dangerous enterprises. I urge them not to give their names to all the affairs which are offered to them so that the name they bear will always be as respected as it is at present. I urge them not to put all their fortune in paper and as far as possible to hold current securities which can be realised at short notice.

  That last injunction takes us close to the heart of Rothschild business philosophy: invest some of your property in real estate and favour high liquidity in your securities portfolio. Yet, echoing once again his father’s words more than a half a century before, James ended with a ringing reminder to his children of the connection between their business and their religion, urging them: “never to discard the holy traditions of our forefathers. It is a precious heritage which I leave to you and which you will pass on to your children. The will of God has given man his religion at the same time as his life; to obey this decree of providence is our first duty; to desert one’s faith is a crime. Love the God of your ancestors and serve him with good deeds: may I be accepted into his bosom and watch over you from the heaven above as I have watched over you on earth.”

  Guided by—one might even say thanks to—these hallowed principles, James had outlived most if not all of his rivals. Most piquant of all was his final triumph over those sorcerer’s apprentices, the Pereires. The Credit Mobilier had been in difficulties for some time, partly because of the activities of its property offshoot the Credit Immobilièr, partly because of its own unsuccessful attempts to involve itself in Austrian and Spanish government finance. The first sign of trouble came in early 1866, when it doubled its nominal capital with a major rights issue and sought to raise a further 80 million francs for the Immobilièr. The financial crisis of that year, exacerbated as it was by pre-war tensions in Central Europe, proved fatal. Despite the Pereires’ efforts to push up the price of Mobilier shares from the low of 420 francs in June 1866, by the end of the year they were barely able to pay a dividend. As usual, Emile Pereire blamed the “hostility” of “the Rothschild group,” and pleaded with his friends in the government for assistance. But a loan of 29 million francs from the Credit Foncier did not suffice and in April 1867, as the full extent of the Immobilière’s losses became apparent, the Pereires had no alternative but to throw themselves on the mercy of the Banque de France—the institution which they had once dreamt of supplanting—with a request for a 75 million franc loan. Predictably, they were given short shrift, not least by Alphonse in his increasingly influential capacity as a regent. At a special meeting on September 14, he argued strongly that only 32 million francs should be made available, and that this should be “to facilitate the liquidation of the Credit Mobilier.” When the bank’s shares touched a nadir of 140, the Saint-Simonians’ flagship was sunk.

  The Pereires’ decline and fall evoked no sympathy whatever from the Rothschilds. To the bitter end, James remained implacably hostile to the very principle of the Crédit Mobilier. “On a given day,” he told Landau in March 1867, “all these financial societies will agree among themselves, absorb all business activities and will leave us nothing, as they say colloquially, but the bones to gnaw on.” He categorically opposed all efforts to rescue the Crédit Mobilier. To others, however, it seemed that it was the Pereires themselves who were being left with only the bones. Ten days after the decisive meeting at the Banque, Napoleon III’s de facto deputy Rouher observed: “The Pereires are really to be pitied; they did not deserve the ferocious hatred with which they are being pursued.” It was true. Once the Credit Mobilier was effectively defunct, the Rothschilds proceeded to buy up the Pereires’ private assets with an unforgiving ruthlessness. As we have seen, the Pereires’ purchases of town and country houses near to Rothschild properties had always rankled with James. It is easy to imagine the Rothschild Schadenfreude in 1868, when Adolph bought the hotel at 47 rue de Monceau from Isaac Pereire’s son Eugène for just £42,000—£17,200 less than the Pereires had paid for it; and in 1880, when Edmond bought the Pereire château d‘Armainvilliers. As if to twist the knife still further, Alphonse declined to buy any Pereire paintings when their collection went on sale in 1872: “No very celebrated works,” he remarked dismissively, “simply a few honourable mediocrities.“ It is tempting to read this as an oblique epitaph for the Pereires themselves.

  5.i: Baron Lionel de Rothschild (The Modern Croesus), The Period (July 5, 1870).

  By contrast, James’s death seemed to leave the Rothschilds in a position of unrivalled supremacy. “There is after all only one less Rothschild,” declared the author of one panegyric in 1868: “The Rothschilds carry on.” In 1870 the British magazine The Period used a now familiar image when it portrayed Lionel as the new Rothschild “king” upon his throne of cash and bonds, accepting the obeisances of the rulers of the world—among them, the Emperor of China, the Sultan, Napoleon III, the Pope William I and Queen Victoria (see illustration 5.i).

  Yet the Credit Mobilier’s failure did not represent a generic failure of joint-stock banking: on the contrary, the years after James’s death saw no slackening in the proliferation of such banks. And as international financial markets grew larger, more competitive and better integrated, the relative importance of the Rothschilds’ concentration of private capital was already declining, immense though it was. Two years before James’s death, the French journalist Emile de Girardin commented:The great [private] banking houses have lost their influence. They can still, when the political and monetary circumstances do not go against them (which is becoming rare) determine the great [financial] movements, but ... from now on the universal suffrage of speculation will prevail over the influence of this or that [private] banker.

  The reign of the “banquiers,” he suggested, was coming to an end; “the reign of the institutions, of the great financial companies” was beginning.

  If 1868 marked a turning point in French financial history, did it also mark a political turning point? It is tempting to argue that it did—that James’s death, following hard on the heels of the Credit Mobilier’s collapse, sounded a kind of financial death-knell for the regime. “L‘Empire, c’est la baisse,” James had said in 1866; was not its political demise also legibly imminent after the Prussian victory over Austria? It would be convenient for the historian’s narrative if this were true—if “the orthodox bankers” really had “delivered a deadly blow to the already tottering credit of the Second Empire.” In reality, the most pronounced feature of the period between 1866 and 1870 was the optimism of the French financial markets. There undoubtedly had been a baisse tendency between 1863 and 1866. From a peak of 71.75 in late October 1862, the rente had fallen to a low of 64.85 in November 1864. But thereafter its trend was upwards: the crisis precipitated by the Austro-Prussian conflict, which James had cited as an argument for a change in French policy, was in many ways just a temporary check. Prices touched their lowest point (60.80) on A
pril 28, 1866, almost two months before war broke out; they actually rose from 63.03 to 68.45 in the week which saw the battle of Königgrätz. There were ups and downs thereafter—often linked to fears about Napoleon’s health—but the general trend is unmistakable. The closing price on the week ending May 21, 1870, was 75.05, a level not seen since the Empire’s halcyon days in the 1850s. Seldom has a débâcle been so blithely unanticipated by the bond market as that of 1870.

  How are we to explain this? The plain answer is that the Second Empire after Königgrätz was a foolish rentier’s paradise. This was because monetary conditions, for primarily international reasons, eased. An improvement in the French balance of payments, combined with the creation of the Latin Monetary Union, led to an influx of gold and silver into the Banque de France’s reserve, allowing the discount rate to be lowered to 3 per cent in August 1866 and 2.5 per cent in May 1867. At the time there was much gloomy comment about the contemporaneous decline in industrial activity—investment in railways tailed off sharply after 1862—but the so-called “strike of the billion” (a reference to the Banque’s unprecedented reserves) had its positive aspect in rising bond prices. A new issue of rentes worth 340 million francs in the summer of 1868 was heavily oversubscribed. The harvests of 1868 and 1869 were good too. All this is important because it helps to explain why France, though she lost the war in 1870, was able to win the peace in 1871-3.