The House of Rothschild

by Ferguson, Niall

  As the war drew to a close, most of the stolen works were found by the advancing Allied armies, though a few pieces—a Watteau, for example, and the Rape of Europa taken by Göring—have never been recovered. The Memling Madonna was found when Goring offered it as a bribe to his American captors. But a great deal more could have been lost. Only the intervention of the SS Intelligence Chief Kaltenbrunner prevented the fanatical Gauleiter Eigruber of Oberdonau from blowing up the Alt Aussee salt mines (southeast of Salzburg) to stop the many paintings hidden there from being returned to “International Jewry.”

  If Hitler had successfully launched “Operation Sealion” in the summer of 1940, when Britain was at her most vulnerable, a similar fate might have befallen the English Rothschilds and their remaining private collections—a worse fate probably, as the invasion of Britain would have made the ultimate defeat of Germany infinitely harder to achieve. He did not, and they survived. Yet it was a tenuous kind of survival. Of the fifth generation, only Anthony lived to see the Allied victory, serving as a private in the Home Guard; Charles and Walter had both died before the war began, and Lionel died in January 1942. The next generation was too busy fighting to think of the bank; or too young, in the case of Lionel’s second son Leo (born in 1927) and Anthony’s own son Evelyn (born in 1931), who spent the years from 1940 to 1943 in America. Lionel’s elder son Edmund refused to do as his father had felt compelled to do in the First World War: that is, to sit out the war in St Swithin’s Lane. As an artillery officer in the Bucks Yeomanry, he served with the British Expeditionary Force in France, narrowly escaping capture at Cherbourg, and subsequently fought in North Africa and Italy with the 77th (Highland) Field Regiment. Victor began the war in the commercial section of MI5, later becoming involved in bomb disposal (for which he was awarded the George Medal) and the Prime Minister’s personal security. This brought him into close contact with Churchill and his private secretary Jock Colville and probably explains why he was entrusted with the highly sensitive investigation into the death of the head of the Polish government-in-exile, General Wladyslaw Sikorksi, in July 1943. Another Rothschild link to Churchill was forged when Jimmy became Under-Secretary to the Ministry of Supply in March 1945 (though it was to prove the briefest of ministerial careers).

  All this had little immediate significance for the family firm, however. For the Second World War even more than the First was financed in ways which left little room for the Rothschilds to play their traditional role. The sinews of war had ceased to be flexed by bankers and bondholders; a new Keynesian age was dawning, in which governments would manage economic life more directly, controlling the allocation of scarce factors of production, manipulating the level of aggregate demand and treating money as little more than a convenient unit for national accounting. In this age, the firm over which Anthony presided in the war years seemed an anachronism. New Court itself lay almost empty. More than half the clerical staff and all the current records were moved to Tring, out of reach of the Blitz. Others—the younger men like Palin—were called up. Only a few old hands like Philip Hoyland remained, using the basement as a bomb shelter. It was only by good luck that the offices escaped serious damage when they were hit by incendiary bombs on the night of May 10, 1941, during a ferocious bombardment of the City which destroyed the nearby Salters Hall and literally “surrounded New Court by fire.” Other Rothschild properties were also commandeered for war use. The Royal Mint refinery was converted to artillery-parts production. Exbury was taken over by the navy (and temporarily renamed HMS Mastodon). And Charles’s and Rozsika’s house at Ashton Wold was used by the Red Cross and the Ordnance Corps. Inevitably, these buildings also suffered some damage, not all of it through enemy action. In Evelyn Waugh’s Brideshead Revisited, such wartime depredations seem to herald the dissolution of an older, Catholic aristocracy. As she contemplated what remained of the gardens at Ashton before leaving for war work at Bletchley, Victor’s sister Miriam felt that her own family too was waning: “The Holocaust; the war; my parents’ deaths; the end of the garden. Nothing seemed to matter any more.”

  Two members of the family died as a consequence of the Nazi policy of genocide. The aunt to whom Victor referred in his speech in the Lords in 1946 was his mother’s eldest sister Aranka, who perished at Buchenwald. The other victim was Philippe’s estranged wife Lili. “Why should the Germans harm me?” she had asked him in 1940. “I am from an old French Catholic family.” Despite reverting to her original title, the comtesse de Chambure, she was arrested by the Gestapo in July 1944 and sent by the last transport to Ravensbrück where, her husband was later told, she was brutally murdered. It is thus the blackest of ironies that the only person named Rothschild killed by the Nazis was not a Jew and had disowned the family name.

  Only a few months later, Major Edmund de Rothschild led his battery of the 200 (Jewish) Field Regiment—part of the Jewish Infantry Brigade Group formed in November 1944—into the town of Mannheim “through an archway which still bore the repulsive legend judenrein.” As they drove into the town, people began to shout: “Die Juden kommen! Die Juden kommen!” (“The Jews are coming!”) A few months later, he paid a visit to Hitler’s mountain retreat, the “Eagle’s Nest.” “Seeing a mass of broken Sèvres porcelain,” he later recalled, “I wondered if it had been stolen from one of my cousins” homes.“ It probably had.

  EPILOGUE

  The first important strength of the family is unity.

  SIR EVELYN DE ROTHSCHILD, 1996

  The visitor to New Court today enters a black and white marble building in the modern style. The entrance hall, however, is dominated by William Armfield Hobday’s 1820 portrait of Nathan Rothschild and his family. That portrait would not hang there if the firm of N. M. Rothschild & Sons were not conscious of—proud of—its history. Nor would this book have been written. It is worth asking, however, what exactly the relevance of a bank’s past is to its present and future. For most of the nineteenth century, N. M. Rothschild was part of the biggest bank in the world which dominated the international bond market. For a contemporary equivalent, one has to imagine a merger between Merrill Lynch, Morgan Stanley, J. P. Morgan and probably Goldman Sachs too—as well, perhaps, as the International Monetary Fund, given the nineteenth-century Rothschilds’ role in stabilising the finances of numerous governments. Today, by contrast, the bank occupies a relatively small niche in the international financial services business, dwarfed by such products of corporate hypertrophy as HSBC, Lloyds-TSB and the projected banking Behemoth Citigroup. Is looking back, then, anything more than an exercise in nostalgia? That is the question this epilogue seeks to answer. It should not be read as a history of the bank since 1945, but as an essay on the role history has performed in ensuring its post-war survival and its present success.a

  Continuation

  The history of N. M. Rothschild & Sons might have ended in the 1940s. That it did not owed much to Anthony de Rothschild. After his brilliant youth at Harrow and Cambridge, and his distinguished record in the Great War, he had dedicated himself to conserving his heritage as a Rothschild. Like so many of his ancestors, he was a keen collector, with a particular enthusiasm for Chinese ceramics, and a devotee of first growth clarets.1 He had been elected to the Jockey Club in 1925 and kept up his father’s stable of horses and house at Newmarket. He had married (in 1926) Yvonne Cahen d‘Anvers, whose family had been associated with de Rothschild Frères since the 1850s (he had even met her at his relative the Marquess of Crewe’s residence when the latter was ambassador in Paris). His role in the Jewish community also echoed that of previous generations: like his uncle Natty, he was chairman of the Four Per Cent Industrial Dwellings Company; like his father and his great-uncle Anthony before him, he was president of the Jews’ Free School. Yet the greatest challenge Anthony faced was in preserving his family’s most fundamental role: as bankers.

  To this task he brought a certain austere diligence. Every day, he commuted by train from Leighton Buzzard (the nearest sta
tion to his house at Ascott) to Euston and on to New Court. After lunch in the partners’ dining room, Harold Nicolson described being “hurried out” at 2.30 p.m., “as then the work begins again and the great wheels of the Maison Rothschild revolve.” In truth, however, the war had substantially reduced the size of N. M. Rothschild’s “wheels”—and Anthony’s approach to business was not calculated to make them revolve at great speed. “They know where we live,” Ronald Palin remembered him as saying. “If they want to do business with us let them come and talk to us.” As a watchword for the post-war world, this was perhaps too fatalistic. Edmund found life at New Court distinctly sedate when he returned from the war: the partners arrived at the Room between 10 and 10.30 a.m. and spent the morning perusing the incoming mail “to see if there was anything likely to result in some business”:It was our practice in those days for all letters, cheques, bonds, bills of exchange and other such papers to be signed by a partner ... In consequence, there was always a mass of documents waiting to be signed ... if ever, before putting my signature to a document, I ventured to say to Tony ... “I’m afraid I don’t quite understand this,” his reply was invariably the same: “No. You wouldn’t.”

  Apart from a short and unhappy New York apprenticeship at Guaranty Trust and Kuhn, Loeb & Co. (where he “was made to feel very much the poor relation”), Edmund received little financial training before he became a partner. His younger brother Leopold, who became a partner in 1956, also did a tour of duty at Kuhn, Loeb, as well as at Morgan Stanley and Glyn, Mills; but Anthony had advised him not to read economics at Cambridge precisely because he was expected to become a partner. Nor was the former Lloyd’s treasurer David Colville—who now came to New Court as a kind of de facto partner—strictly speaking new blood: his step-grandmother was the Marchioness of Crewe, daughter of Hannah Rosebery. Much of the day-to-day running of the business was left to Hugh Davies, who had succeeded Samuel Stephany as general manager, and his assistant Michael Bucks—both men who had worked their way up through the clerical ranks at N. M. Rothschild.

  Not that these things made the firm unique in the clubbish, not to say somnolent, City of those days. Part of the problem, of course, was that post-war Britain retained many of the economic controls of wartime, not least restrictions on what had always been the basis of Rothschild business: capital export. Under the Bretton Woods system, there was little scope for traditional international bond issues. This was, moreover, the zenith of British socialism, and although the Attlee governments owed a good deal more to Liberals like Beveridge and Keynes than to Marx, they were scarcely friendly towards the City. Consider the following views of one Labour party supporter, interviewed in January 1948:I do not believe that people should be allowed to have a lot of money unless they have earned it; being the son of a rich man is not a good enough reason ... We have come to associate Conservative rule with the following conditions: unemployment, under-nourishment, unpreparedness, unpopularity abroad, unequal ... education and opportunities, undeveloped resources and lack of opposition to Fascism ... The only time when some of these wrongs were put right was during the war when conditions and the Labour members of the Cabinet forced the State Control of basic industries and commodities on the Government ... The war showed up the stupidity of the old Tory idea that people will only work for private gain and therefore that private enterprise is more efficient than state enterprise ... The old days of unrestrained private enterprise for private profit are, I hope, gone forever ... Having a lot of money does not automatically mean that one is happy ... The fact that under a Socialist Government the rich will not have so much money and advantages which they have not earned may be inconvenient to the rich; but this is unimportant, and I think that you will find that many rich people ... will not be unduly worried about this prospect.

  The fact that these were the words not of Aneurin Bevan but of the 3rd Lord Rothschild may help to explain why he kept his distance from New Court throughout the 1940s and 1950s. When he finally left academic life for the private sector in 1959, it was to direct scientific research at Royal Dutch Shell (admittedly a firm with which the Rothschilds had historic links).

  A restructuring of the old partnership had been in preparation since 1941, when Rothschilds Continuation Ltd had been created to act as a legal successor in the event of one of the two remaining partners being killed in the war: the new company became a partner in its own right. In 1947 N. M. Rothschild took a further step away from its original form with the creation of £1 million of voteless preference shares and £500,000 of ordinary voting shares. In retaining 60 per cent of the ordinary shares, Anthony ensured that he was the dominant partner; after him in the hierarchy came Edmund and Victor, who were each allocated 20 per cent (though Victor received a larger proportion of the voteless preference shares). It was a shift in the balance of power within the family which would have profound consequences in the next generation.

  The point to emphasise, however, is the firm’s contraction in terms of capital. On the eve of the First World War, the capital of the London house had been close to £8 million. A reduction to £1.5 million—especially allowing for the pound’s forty per cent loss of purchasing power in the intervening period—signalled a dramatic decline, due in large part to business setbacks and unprecedented taxation. When Lionel died, he left an overdraft of £500,000, but his children also had to pay death duties totalling £200,000.

  Anthony’s strategy was to rebuild the firm’s traditional overseas business. This was not easily done, given the fact that the direction of post-war capital flows was mainly from the United States to Europe. True, Edouard and Robert had by now set up Amsterdam Overseas (in conjunction with Peter Fleck of the Dutch company Pierson, Heldring & Pierson) to act as a New York base for Rothschild operations; but this does not seem to have generated much business for New Court. Initially, a great deal of labour went into untangling the various pre-war debts on which countries like Chile and Hungary had defaulted. New issues—like the 1951 offering of £5 million of 3.5 per cent stock for the International Bank for Reconstruction and Development (usually known as the World Bank)—were rare, and had to be shared with other City houses. The old Rothschild predominance in the South African gold market had already been reasserted three years previously when the international gold market reopened: once again, the world gold price was formally set in New Court’s “fixing room.” However, with the international gold pool aiming to hold the price of gold at $35 per ounce, this had lost much of its importance. Under these circumstances, the firm had to concentrate on documentary credit and acceptance business. This was far from unprofitable, but it had previously been the bank’s second or third string.

  The most ambitious—and at the same time the most traditional—project of the post-war years was in Canada, more or less unknown territory for the Rothschilds. Joseph Smallwood’s scheme to develop the resource-rich province of Newfoundland (of which he was premier) was probably the most important financial opportunity generated by the bank’s continuing links with Winston Churchill2—links strengthened by the fact that his private secretary was David Colville’s brother Jock. Churchill had returned to Downing Street in October 1951 and was immediately attracted by Smallwood’s scheme, which he hailed as “a grand imperial concept but not imperialistic.” In that sense, the British Newfoundland Corporation Ltd (“Brinco”) was something of an echo of past glories, a reminder of the role N. M. Rothschild had played in the heyday of the British Empire. Indeed, Lord Leathers, Churchill’s Minister for Co-ordination of Transport, Fuel and Power, went so far as to ask: “You did Suez, so why can’t you do Newfoundland?” Yet despite this Anthony was hesitant—so much so that the members of the consortium very nearly turned to German banks instead. It was largely owing to the efforts of Edmund that N. M. Rothschild remained on board, and even then it was felt necessary to bring in other City firms, including Schröders, Hambros and Morgan Grenfell. The final agreement reached in March 1953 leased 60,000 square miles of land
to the Brinco consortium for twenty years and, after surveys had effectively ruled out the exploitation of the region’s mineral and timber resources, it was decided to construct a hydroelectric plant at Hamilton Falls. It was characteristic of the late-nineteenth-century flavour of the enterprise that, when the consortium privately distributed two million Brinco shares, Churchill himself bought 10,000.

  In the years which followed, however, it proved impossible to sustain the “imperial” tie, partly because the Bank of England was obliged to restrict overseas investment to counter the perennial post-war weakness of sterling, but also because the Canadian government wished to diminish the “foreign” control of Brinco. The Rothschilds were not consulted about the first public issue of “Churchill Falls” shares and, although they nevertheless agreed to take up to $7 million of the shares issued, they were discouraged from doing so by the Canadian banks. The obstruc tiveness of the Quebec government was especially damaging, as it controlled the overland cable route to New York, potentially the plant’s biggest customer. Although N. M. Rothschild participated in a subsequent issue of debentures for the Commonwealth Development Finance Co. in 1963 and a major loan to Newfoundland eight years later, the project never really extricated itself from this political tangle.3 The Churchillian strategy proved a wrong turning in the era of decolonisation.

  By the later 1950s, however, there were signs of a change of direction at New Court. In 1955 Anthony suffered a stroke which incapacitated him and forced him to retire; he died six years later. The partnership had meanwhile been doubly reinforced. After Cambridge, the navy and spells at Rio Tinto in New York and the Toronto arbitrage firm R. D. Smith & Co., his son Evelyn joined the bank in 1957; while Victor’s elder son Jacob joined the firm six years later, after Oxford and stints with the accountants Cooper Brothers, Morgan Stanley and the investment partnership of Herman Robinow and Clifford Barclay. “We’ve been through difficult times because of the war,” Leopold recalled Anthony saying. “It’s up to you young people to go out and look for new business.”