The Rothschild System.

If there was a single "secret" of Rothschild success it was the system of co-operation between the five houses which made them, when considered as a whole, the largest bank in the world, while at the same time dispersing their financial influence in five major financial centres spread across Europe. This multinational system was regulated by the partnership agreements which were drawn up and revised every few years and which were, in effect, the const.i.tution of a financial federation. The earliest such agreement, as we have seen, had been drawn up in 1810, but this was untypical because of Mayer Amschel's continuing dominance and the wartime exclusion of Nathan. It was the three-year contract of 1815 between all five brothers which was the first authentically "federal" agreement. The crux of the matter at this stage was the superior wealth of the London house. According to the preamble of the agreement, the brothers' "partnership property in London[,] at Paris and at Frankfurt on the Main consists of the sum of 500,000 or thereabouts," but most of this was evidently Nathan's. The contract sought to redefine the brothers' collective a.s.sets by excluding some items (presumably real estate), and redistributing some 200,000 in the form of promissory notes of 50,000 each from Nathan to his four brothers. The resulting shares of a total notional capital of 336,000 were Nathan, 27 per cent; Amschel and Salomon, 20 per cent each; Carl and James, 16 per cent each. Moreover, it was agreed to defray all expenses from the London house's revenues and to share net profits at the end of each year equally.

In the three years during which this contract ran, as we have seen, the brothers' capital grew at a phenomenal rate, from 336,000 to 1,772,000. So much of this increase was due to Nathan's immensely successful speculations in consols that, although the proportions of the total capital were more or less unchanged, his brothers now agreed to weight the distribution of profits in his favour. As Carl saw it, Nathan should have a bigger part than a fifth. He has a big family, he needs more. Whatever you arrange, I will give my agreement . . . You told me yourself that Nathan has to be given [some] prerogatives. We owe everything, really everything to him. He saved us. We wanted to take a jump earlier [that is, to sell] and he kept us back.

There were now technically "three joint mercantile establishments [conducted] under . . . the . . . five partners' mutual responsibility": N. M. Rothschild in London, M. A. von Rothschild & Sohne in Frankfurt and James's new house in Paris, de Rothschild Freres. Henceforth, half of all the profits of the London house would go to Nathan, while his brothers would receive an eighth each; he would also receive four-sixteenths of the profits of the other two houses, while his brothers received three-sixteenths apiece. The 1818 agreement also introduced a new system whereby each of the partners received 4 per cent of their individual capital share per annum by way of an income to cover their expenses (both business and domestic); any lump sums spent on legacies for children, houses or landed estates were to be deducted from the individual's capital. In addition, "to preserve regularity in the books and accounts . . . it has been determined that in the running transactions of the three joint establishments although they form but one general joint concern although they form but one general joint concern each respectively is to charge exchange, brokerage, postages, stamps and interest pro and contra at the rate of 5 per cent." To reinforce the sense of collective ident.i.ty it was now specified that each House had to inform the others of the transactions it carried out on a weekly basis. each respectively is to charge exchange, brokerage, postages, stamps and interest pro and contra at the rate of 5 per cent." To reinforce the sense of collective ident.i.ty it was now specified that each House had to inform the others of the transactions it carried out on a weekly basis.

Although initially intended to run for just three years, this agreement in fact remained in force until 1825. However, it would be wrong to infer from this a high level of fraternal harmony. Quite apart from the periodic disputes described in previous chapters, the four continental brothers on one occasion felt obliged to draw up a separate agreement between themselves, the terms of which suggest a quite serious rift between themselves and Nathan.3 Significantly, the 1825 agreement restored the 1815 system whereby profits were shared equally, reflecting the fact that the capital of both the Frankfurt and Paris houses had grown so rapidly as to outstrip that of the London house. On the other hand, Nathan's personal share continued to be counted as more than a quarter of the joint capital, which now stood at more than 4 million. Moreover, although Salomon and Carl had more or less settled in Vienna and Naples, their houses were not given equal status with the original three, and continued to be treated as mere "branch establishments" of the Frankfurt house, without any separate capital until 1828 (and thereafter relatively little). This was probably intended to check the centrifugal tendencies discussed above. The partners now bound themselves to "mutually inform each other . . . of all the transactions, of whatever nature they may be, which have occurred" on a monthly rather than weekly basis. Significantly, the 1825 agreement restored the 1815 system whereby profits were shared equally, reflecting the fact that the capital of both the Frankfurt and Paris houses had grown so rapidly as to outstrip that of the London house. On the other hand, Nathan's personal share continued to be counted as more than a quarter of the joint capital, which now stood at more than 4 million. Moreover, although Salomon and Carl had more or less settled in Vienna and Naples, their houses were not given equal status with the original three, and continued to be treated as mere "branch establishments" of the Frankfurt house, without any separate capital until 1828 (and thereafter relatively little). This was probably intended to check the centrifugal tendencies discussed above. The partners now bound themselves to "mutually inform each other . . . of all the transactions, of whatever nature they may be, which have occurred" on a monthly rather than weekly basis.

The 1825 agreement also saw the first steps taken to bring the next generation into the firm, with the decision to admit Salomon's son Anselm as a partner following his marriage to Nathan's daughter Charlotte. The brothers were experiencing the first intimations of mortality: the 1825 doc.u.ments included a clause permitting Amschel to withdraw from the business "if the work becomes too hard for him," and sought to antic.i.p.ate possible disputes over inheritance by binding each of the partners' heirs to accept whatever their share might be without resort to law. It was specifically stated that, if the heirs of a deceased partner took legal action against the surviving partners, a third of the deceased's share of capital would be forfeit and would be given to the poor of Frankfurt, London and Paris!4 In describing their terms, it is easy to lose sight of the secrecy of these agreements, which such sanctions were intended to preserve. When the brothers met at Frankfurt in August 1828 to take stock of what had been a relatively disappointing three years, Nathan's wife and two of his sons were present but were wholly excluded from the negotiations, just as they would be eight years later. "Papa and his Brothers with Anselm are almost continually engaged in deliberating upon the arrangement of their concerns," reported Hannah, "which are held in the Tower in the Garden and are perfectly secret." The most she could say was that "every thing among the family seemed to be going on with much unanimity." This was probably something of a relief to her, as the accounts drawn up in 1828 revealed that, though the partners' personal shares remained formally unchanged, the relative importance of the London house had continued to decline. Its share of the total capital was now just over 27 per cent, compared with 42 per cent in 1818. This share increased only very slightly in the eight years which intervened before the next such meeting at Frankfurt-the fateful 1836 gathering during which Nathan unexpectedly died. As a result, the continental partners were able to secure new and potentially more favourable terms for the distribution of profits: henceforth, Nathan would receive 60 per cent of the profits of the London house but just 10 per cent of the profits from Frankfurt, Naples and Vienna, while his brothers would each get 10 per cent from the London house and 22.5 per cent from the continental houses.5 This rule-which undoubtedly increased the relative autonomy of the London house-was retained despite Nathan's death: all his rights were simply transferred to his four sons. This rule-which undoubtedly increased the relative autonomy of the London house-was retained despite Nathan's death: all his rights were simply transferred to his four sons.

It goes without saying that the Rothschilds were financially successful; indeed, the rate of growth and size of their capital in the period before 1850 were unprecedented in banking history. Table 10a summarises the available figures for the combined capital of the various houses in the first half of the century: Table 10a: Combined Rothschild capital, 1797-1844 ( thousand).

Sources: CPHDCM, 637/1/3/1-11; 637/1/3; 637/1/6/5; 637/1/6/7/7-14; 637/1/6/32; 637/1/6/44, 45; 637/1/7/48-52; 637/1/7/53-69; 637/1/8/1-7; 637/1/9/1-4; RAL, RFamFD, B/1; RAL, RFamFD/3; AN, 132 AQ 1.

The sheer scale of the Rothschilds' resources can hardly be over-emphasised: to take a single year-1825-their combined resources were nine times greater than the capital of Baring Brothers and eleven times larger than the capital of James's princ.i.p.al rival in Paris, Laffitte. They even exceeded the capital of the Banque de France (around 3 million at this time). Surviving figures for the individual houses are patchy, especially before 1830. For the London house, ledgers survive from 1809 but there are no profit and loss accounts for the years before 1828. Ill.u.s.tration 10.vi gives the "bottom line" data for the period up until 1850: annual profits as a percentage of capital at the beginning of the year. A number of points stand out from these figures: firstly, the large fluctuations in performance, ranging from the very successful (1834), when profits were close to a quarter of capital, to the wholly disastrous (1847), when close to a third of the firm's capital was lost. Averaged out, profits were in fact rather unremarkable, though this partly reflects the fact that all expenses were deducted before net profits were calculated, rather than being paid out of profits. The figure for profits (or losses) was merely added to (or deducted from) the previous year's capital; a system quite unlike that used by the Rothschilds' great rivals Barings, who tended to calculate gross profits, and to distribute these to the partners. Perhaps the biggest difference between the Rothschilds and their rivals was that the Rothschilds ploughed back their net profits, so that their capital tended to acc.u.mulate, while the Barings kept their capital more or less constant and sought to maximise the profits on which they could then live. Between 1829 and 1846, while the capital of N. M. Rothschild increased by 90 per cent, that of Barings increased by just 50 per cent.

The other house for which detailed accounts survive is the much smaller Naples house. Considering its size, the Naples house was singularly profitable, especially in the first decade of its existence. Its average annual profits were more than 30,000 between 1825 and 1829, at a time when its capital was little more than 130,000; and throughout the 1830s and 1840s its profits averaged around 20,000. Unlike the London and Paris houses, it appears never to have recorded a loss despite the financial crises of 1825, 1830 and 1836. Carl may have been regarded by contemporaries as the least gifted of the five brothers, and his letters intimate a certain dullness. Yet there can be no doubting his financial ac.u.men.

There are, unfortunately, no complete data for the profits of the Paris, Frankfurt or Vienna houses in this period. In the French case, the only surviving figures are for the years 1824-28, and all they tell us is the extent of the damage done to James's position by the crisis of 1825 (when his losses totalled no less than 356,000) and the speed with which he recovered from the setback (his profits in the succeeding two years were 44,000 and 124,000). However, it is possible to infer average annual profits for all the houses from the combined capital accounts (table 10b), though the different periods which elapsed between agreements make these a rather approximate guide to performance. These suggest-rather unexpectedly-that the London house was in fact the least economically successful of the three princ.i.p.al Rothschild houses: average annual profits were higher at both Frankfurt and Paris for the period 1818-44. Nathan's brothers-and Amschel in particular-have often suffered in comparison with the man they regarded as their "commanding general"; but even in the period of Nathan's dominance, the Frankfurt house was more profitable than the London house. The Vienna house too was highly profitable in view of its small capital base.

10.vi: N. M. Rothschild & Sons, annual profits as a percentage of capital, 1830-1849.

Table 10b: Average annual profits of the five Rothschild houses, 1818-1844 ( thousand).

Source: As table 10a.

The question, of course, is whether it is legitimate to make such comparisons when the houses were still regarded by the partners as inseparably linked. The Rothschild correspondence indicates that the individual houses derived a substantial part of their profits from a collective strategy whose architect before 1836 was Nathan. There would have been no need for the brothers to write so frequently and in such detail to one another if this had not been the case. Nor would the fundamental principle of profit-sharing have lasted for long if the individual partners had not continued to feel dependent on one another. The balance sheets of the Naples house give a good indication of how inextricable the activities of the five houses were: between 1825 and 1850 the share of its a.s.sets which were monies owed to it by the other Rothschild houses was rarely less than 18 per cent and sometimes as much as 30 per cent. This seems to have been the case for all the houses. In 1828 some 31 per cent of the a.s.sets of the Paris house were credits to the other Rothschilds, mainly to New Court.

How exactly did the brothers make their money? Thus far, we have princ.i.p.ally been concerned with the Rothschilds' business in government bonds, as (to judge by their letters) this was the activity which interested them most in the period before 1836. It was also the activity which most impressed contemporaries, because of its obvious political implications. Table 10c provides figures for the total nominal value of the loans issued by the London and Frankfurt houses in the period (unfortunately, no lists of issues appear to exist for the other houses).

Table 10c: The nominal value of loans issued by the London and Frankfurt houses, 1820-1859 (by decade, ).

Sources: Ayer, Century of finance Century of finance, pp. 16-81; Berghoeffer, Meyer Amschel Meyer Amschel, pp. 29-42, 206-28.

These figures confirm that the Rothschilds (and especially the London house) were throughout the period the dominant force in international bond issues. Between 1815 and 1859 the London house issued altogether fifty loans, primarily for governments, the nominal value of which was around 250 million-very roughly a tenth of total British overseas a.s.sets in the 1850s. By comparison, Baring Brothers issued just fourteen loans in the same period, to a nominal amount of 66 million. Table 10d shows the regional distribution of loans-including a small number of quite large private sector issues-in which the London house partic.i.p.ated between 1818 and 1846. These figures show that the contemporary view of the Rothschilds as "bankers to the Holy Alliance" was exaggerated; the London house's biggest clients were France and Britain, with Prussia, Russia and Austria some way behind.

Table 10d: Loans issued by the London house, 1818-1846 (by recipient).

Source: Ayer, Century of finance Century of finance, pp. 14-42.

It is relatively easy to show the importance of government bonds in the balance sheets of the various houses. The earliest surviving balance sheet of the London house (that of 1828) reveals that a very large proportion of the bank's a.s.sets-more than a quarter-were invested in British government bonds. The proportion rises to 37 per cent if its holdings of Danish government stock are added. In the same year, 35 per cent of the French house's a.s.sets took the form of French 3 per cent rentes. The "state securities account" comprised exactly the same proportion of the Vienna house's a.s.sets, suggesting some sort of rough Rothschild policy to keep the proportion of (supposedly) "gilt-edged" securities at around a third. However, it is much harder to compute the profits made from such issues. Commissions and other charges varied considerably from case to case, as we have seen; and some major issues actually lost large sums (the French loan of 1830, for example). In any case, much of the money which the brothers made on the bond market came not from issuing new bonds, but from speculating in existing bonds. Here too precise figures are hard to come by. To judge by the records which have survived, accounts were made up primarily with a view to calculating the returns on specific lines of business or transactions and ensuring that there were no discrepancies between the various inter-Rothschild accounts. Like the ledgers of most nineteenth-century firms, the London house's did not group its transactions according to type: purchases and sales of all kinds were logged as they occurred and then totted up at the end of the year. It would in theory be possible to add together the profits obtained from purchases and sales of government bonds, but it would be exceedingly laborious and it has not been attempted here. The Naples house had a "rentes account," but it also maintained separate accounts for its dealings in other government securities-Neapolitan, Roman and so on. Because it constantly changed its half-yearly accounting conventions, creating new accounts as it went along, it is well-nigh impossible to make more than an impressionistic a.s.sessment of its activities. The most that can be said is that the lion's share of its profits came from between five and ten joint accounts, some with other Rothschild houses, some with other Italian-based banks; from commissions charged on transactions for third parties; and from interest on various unspecified loans.

Of course, this would not matter if the Rothschilds had dealt only in government bonds. But their banking activities were in fact quite heterogeneous, and grew more so over time. Government finance was their first love. Of comparable importance, however, in terms of the volume volume of business, if not the profit-margins achievable, was the cla.s.sic business of the London "merchant banker": the acceptance of commercial bills or bills of exchange. In the words of the 1882 Bills of Exchange Act-which gave statutory precision to a practice dating back more than three centuries-a bill of exchange was "an unconditional order in writing addressed [and signed] by one person (the drawer) to another (the drawee) . . . requiring . . . the drawee, who when he signs it becomes the acceptor, to pay at a fixed . . . future date a sum . . . to . . . a specified person or to the bearer." In other words, the seller of some goods would draw on the buyer in order to give him credit for a specific time (often three or four months), thus allowing him to put off payment until the goods had arrived and been sold on to a manufacturer or retailer. The role of the merchant banks was twofold: to act as a bill's acceptor on behalf of a buyer (charging an acceptance commission) or to buy it from a drawer at a discount (charging interest). A discount house could also rediscount a bill by selling it to a central bank, for example, and adding its own signature or endors.e.m.e.nt. The banker who accepted a bill was effectively "selling the use of [his] name," that is, his reputation for creditworthiness. of business, if not the profit-margins achievable, was the cla.s.sic business of the London "merchant banker": the acceptance of commercial bills or bills of exchange. In the words of the 1882 Bills of Exchange Act-which gave statutory precision to a practice dating back more than three centuries-a bill of exchange was "an unconditional order in writing addressed [and signed] by one person (the drawer) to another (the drawee) . . . requiring . . . the drawee, who when he signs it becomes the acceptor, to pay at a fixed . . . future date a sum . . . to . . . a specified person or to the bearer." In other words, the seller of some goods would draw on the buyer in order to give him credit for a specific time (often three or four months), thus allowing him to put off payment until the goods had arrived and been sold on to a manufacturer or retailer. The role of the merchant banks was twofold: to act as a bill's acceptor on behalf of a buyer (charging an acceptance commission) or to buy it from a drawer at a discount (charging interest). A discount house could also rediscount a bill by selling it to a central bank, for example, and adding its own signature or endors.e.m.e.nt. The banker who accepted a bill was effectively "selling the use of [his] name," that is, his reputation for creditworthiness.

Such buying and selling of commercial bills was one of Nathan Rothschild's princ.i.p.al activities. Its importance can be inferred, again, from the surviving balance sheets: in 1828 "bills receivable" accounted for a quarter of the London house's a.s.sets; "bills payable" for 5 per cent of its liabilities. Such business was less important to the continental houses, reflecting the greater volume of international trade conducted through London in the nineteenth century. As Nathan put it in his evidence to the Bank Committee in 1832, "this country in general is the Bank for the whole world . . . all transactions in India, in China, in Germany, in the whole world, are guided here, and settled through this country." Nevertheless, the other Rothschild houses still played an important subsidiary role in his operations, as Nathan explained: I buy on the Exchange bills drawn from Liverpool, Manchester, New-castle and other places, and which come to every banker and merchant in London. I purchase 6,000 or 7,000, and sometimes 10,000 of those bills in a week, and I send them to the Continent to my houses; my houses purchase against them bills upon this country which are purchases for wine, wool and other commodities . . . [I]f there be not a sufficient supply of bills abroad on this country we are obliged to get gold from Paris, Hamburg and elsewhere.

This was a reasonably accurate summary of what went on. The Rothschilds did not seek to make their money from the commissions they charged for accepting bills (indeed, Nathan was well known for charging half a per cent less than other firms); rather, the aim was to profit from exchange rate differentials between the various European markets. The Rothschild correspondence constantly alludes to such arbitrage transactions: was the price of "London" (short-hand for bills on London) high enough in Paris or Frankfurt to justify Nathan sending a large amount to James or Amschel? "And now, dear Nathan," wrote James in a typical letter of 1832, I am starting once again to busy myself with the bills of exchange business, and beg you to evaluate [precisely] what you are sending us. We are buying London here at 25.65 francs and 3 per cent [which] is equal to 25.84 francs and you send us 21,000 Parisian at 26.07 [and] 4 per cent, which is equal to 25.79, that is a loss of a fifth without the brokerage. Well, I am only bringing this to your attention because we don't want to operate at a loss when dealing with the bills of exchange.

This gives a flavour of the complex calculations involved, and the very narrow differentials the brothers sought to exploit. As a multinational partnership, they were uniquely positioned to do such business.

Yet the Rothschilds were not as dominant in the market for bills as they were in the market for bonds. In his influential survey of the City, Lombard Street Lombard Street, Walter Bagehot called them "the greatest . . . of the foreign bill-brokers"; but this accolade properly belonged to the Barings. In 1825 Nathan's acceptances totalled 300,000 compared with 520,000 for Baring Brothers. Twenty-five years later, acceptances at New Court had risen to 540,000, but the figure for the Barings was 1.9 million; and the gap widened still further in the second half of the century, when new-comers like the Kleinworts made the running. Apart from the obvious fact that the Rothschilds put government finance first-it is almost invariably discussed before commercial business in the brothers' private correspondence-this primarily reflected the fact that the greater part of the bills business was generated by transatlantic trade, rather than by trade between Britain and continental Europe, which the Rothschilds were better placed to finance. As we shall see, there were attempts to increase the Rothschild share of the American market, but they were only fitful; throughout the first half of the nineteenth century, the Barings had the upper hand there.

Bill-broking led naturally into numerous connected avenues of activity. One of the most important of these, from an early date, was the international bullion market. As Nathan stated in his 1832 testimony, there was often a gap between the total volume of bills representing British imports and those representing exports; in the terms of contemporary cla.s.sical economics, a trade deficit or surplus automatically necessitated a movement of specie out of or into London provided it was big enough to pay the cost of shipping and insuring specie, as well as melting and re-minting if necessary. When the exchange rate reached the so-called "gold points" it paid to import or export gold (or silver in some countries). For the Rothschilds, transfers of gold from England to the continent had been a vital stepping stone towards direct involvement in English war finance before 1815, and the brothers never lost their interest in the bullion business, doing substantial amounts of business with the Bank of England and the Banque de France. This was what Nathan alluded to when he loftily told a Hamburg house: "My business . . . consists entirely in Government transactions & Bank operations." Here too complex calculations were involved, especially when coins were being melted down into bars to be re-minted in another market. "And now, dear Nathan," wrote James in another typical letter, "[when thinking of buying] silver at 11 grain gold, where you can consider the rest as profit, a lot will depend on the a.s.say, for grain is equivalent to per cent. Well, at 591/8, this is equivalent to 25.82 francs, and one has the chance here to make a profit when it is being a.s.sayed, and I therefore strongly urge you not to let the opportunity pa.s.s by." "The van loaded with silver ingots" which blocked Prince Puckler's access to New Court was no rare sight: to judge by the brothers' letters, consignments of bullion worth tens of thousands of pounds regularly pa.s.sed between Paris and London.

Another related field of activity was direct involvement in commodity trade itself. Buying and selling goods rather than paper had, of course, been an integral part of Mayer Amschel's business, and Nathan himself had begun his career in Britain as a textile merchant, later branching out into "colonial goods." However, to judge by the partners' correspondence, the Rothschilds' interest in such business appears to have dwindled in the 1820s, and it was not until after 1830 that it revived. Unlike the Barings, who dealt in a wide range of traded goods, the Rothschilds preferred to specialise, aiming to establish a dominant role in a select number of markets. The key commodities which attracted their attention were cotton, tobacco, sugar (primarily from America and the Caribbean), copper (from Russia), and, most importantly, mercury (from Spain). More will be said about these below. Very occasionally they dabbled in other goods: iron, wool and wine, for example. The hostile cartoonist who portrayed "Blauschild" as a travelling salesman doing business "in all branches of commerce" was therefore in error: the Rothschilds were never jacks-of-all-trades (see ill.u.s.tration 10.vii). To give one example: although their relatives the Worms brothers established a tea plantation in Ceylon-which they even named "Rothschild"-the bank never seriously involved itself in the tea trade.

The final area of business which the Rothschilds entered as a result of their mercantile activities was insurance. The first half of the nineteenth century saw a boom in insurance, with numerous companies being founded in London and elsewhere. Nathan's involvement in the founding of the Alliance a.s.surance Company in 1824-the only joint-stock company in which he ever took a serious interest-has been variously explained, but never satisfactorily. According to the company's official history, it was the result of a casual meeting with his brother-in-law Moses Montefiore; others have suggested that the aim was partly to provide employment as an actuary for their relative Benjamin Gompertz, an accomplished mathematician. A third hypothesis advanced is that the existing insurance companies had been discriminating against the Jewish business community. In fact, the Rothschilds had been interested in insurance for some years, understandably in view of the high premiums they themselves had been obliged to pay to insure shipments to the continent before 1815. As early as 1817 James was able to report "quite nice profits" from an unidentified French insurance company. In 1823 a further impetus was provided by a request for a.s.sistance from the Duke of Saxe-Coburg, whose applications for a new life insurance policy had been rejected by two existing London companies, including the recently founded Guardian. Above all, Nathan seems to have wanted to break the cartel of Lloyd's (located directly above him on the first floor of the Royal Exchange), the London a.s.surance and the Royal Exchange which monopolised marine insurance in London. Just days after the "Alliance British and Foreign Life and Fire a.s.surance Company" had been established with a capital of 5 million, the MP Thomas Fowell Buxton, one of the new company's auditors, introduced a bill into the House of Commons to end the monopoly of marine insurance. At the same time, Nathan sought to enlist the support of his old friend Herries (then Financial Secretary to the Treasury). "The object of this Society," he wrote, adopting the characteristic puffing rhetoric of the 1820s joint stock bubble, is to promote all kinds of national industry, by affording facilities in the advancement of Capital, and to protect Commercial men and society in general by granting insurancies [sic] on shipping and every species of property exposed to risks. There are other ends, equally salutary, towards which the views of the Company will be directed, all tending to give an impetus to manufactures, and to attract and retain in their ports every branch of foreign commerce.This is . . . the policy . . . of the whole European Continent at the present moment: everywhere, efforts are [afoot] to introduce a spirit of commercial enterprise, to revive trade where it has languished, and to discover new channels in which it may be directed . . . [I] request you will bring this subject before the consideration of my Lord Liverpool, who will no doubt perceive in these facts additional grounds for persevering in that liberal principle upon which His Majesty's Government has acted, by removing every obstacle in the way of an open, free and unrestricted trade.

10.vii: I. Nussgieg, after G. Geissler, Der Musterreiter Der Musterreiter (1825). (1825).

This was a well-judged appeal to the economic liberalism of the government; but then came the crux of the matter. According to Nathan, the existing marine insurance companies lacked: that energy and those liberal extended views which are necessary, at the present day, to retain the advantages which they have hitherto monopolised, and I am sure I shall be borne out in the a.s.sertion that if insurancies are to be tied up by their old fashioned modes of thinking and acting, Establishments of a similar nature will arise in every part of the Continent, and will eventually wrest from their hands the business which they now conduct exclusively.

The government was evidently persuaded, for the bill received the royal a.s.sent in June. However, one of the new company's shareholders (who was also an underwriter at Lloyd's) managed to obtain an injunction to restrain the Alliance from becoming involved in marine insurance on the ground that this went beyond its original objects. As a result, a second company had to be created, the "Alliance Marine a.s.surance Company," also with capital of 5 million.

The Rothschilds' new incarnation as insurers was initially greeted with some public scepticism. A contemporary cartoon (A New Court Fire Screen, by "an Amateur") depicts a stagecoach loaded with a group of country investors and their bags of money drawing up in front of the "Hollow Alliance Fire and Life Preserving Office" (see ill.u.s.tration 10.viii). The office has three entrances: one marked "German Porter's Lodge," one marked "English Porter's Lodge" and one in the middle, in front of which three men (Rothschild, Montefiore and Gompertz) converse in French. Nathan declares, "Ma fois, c'est entre nous," Montefiore replies, "C'est bien fait pour mon beau pere," and Gompertz mutters, "Experience makes men wiser." Another sign to the left reads "No Holidays except Dog Days and the Fifth of November," while on the other side the office hours are stated: "From Sun rise to Moonshine." Above the middle door there is a notice: "No Persons to be admitted but those with empty heads and full pockets." The English porter tells the newly arrived investors: "No! All full at a premium," but his German counterpart cries, "No! No! Open your door in order to get plenty of room to take in take in our Gentry Friends." our Gentry Friends."

Yet this cynical a.s.sessment was unfounded. Unlike so many of the joint-stock companies of the period, the Alliance was no mere vehicle for mulcting naive investors, but a securely founded enterprise with a long and prosperous future ahead of it. After two years at 4 New Court, next door to Rothschilds, it moved to Bartholomew Lane. Nor was this the only Rothschild foray into insurance. In 1839 they became involved (albeit less directly) in the rapidly developing Rhineland market, lending their support to the Colonia fire insurance company set up by the Oppenheims and others. This connection survived the turbulent events of the 1840s (in particular the great Hamburg fire of 1842, which all but exhausted the company's resources), and in 1852 the London, Frankfurt and Paris houses were involved again as major shareholders in the Cologne Reinsurance Society.

10.viii: "An Amateur," A NEW COURT FIRE SCREEN A NEW COURT FIRE SCREEN (1824), published by H. Fores. (1824), published by H. Fores.

The Rothschild Network.

The ever-increasing volume of the Rothschilds' business, the diversification of their financial activities and the expanding geographical range of their interests inevitably exceeded the capacities of five brothers. It was usually possible for one of the partners to make personal visits to Brussels, the Hague, Berlin or Madrid when major government loans were being negotiated. But if they wished to conduct regular business in those capitals, other arrangements had to be made. Similarly, buying and selling commodities like cotton, tobacco, sugar, copper and mercury were impossible without effective and reliable representation in the key markets: New York, New Orleans, Havana, St Petersburg and Madrid. Throughout the 1820s and 1830s it was necessary not only to expand the number of partners by initiating the new generation into the management of the five houses, but also to increase the number of clerks in the five offices and to establish a select group of salaried agents employed to take care of the bank's interests in such new markets. Radiating out from London, Paris, Frankfurt, Vienna and Naples, the lines of communication with these agents formed a complex new network, greatly increasing the volume of correspondence, but also increasing the volume of business which could be done in the name of Rothschild. Nor was this network of formal influence all; of comparable importance was the larger but looser network of links to other banks, as well as to stockbrokers, central banks and financial newspapers. If every individual or firm which conducted regular correspondence with the Rothschilds is counted as a part of their network, then it was immense indeed.

The expansion of the partnership to include the sons of Salomon, Nathan, Carl and finally James was achieved with relatively little friction. The eldest members of the next generation-Anselm and Lionel-seem to have accepted without reservation their hereditary vocation, pa.s.sing without complaint through the successive stages of a Rothschild apprenticeship: work in the paternal house, then one or more stints in an uncle's house and finally a solo foreign mission. Anselm was formally made a partner in 1826; but it was not until 1830 that the brothers had sufficient confidence to entrust him with sensitive negotiations in Berlin, and even then he was carefully coached beforehand by his anxious father, who gave him the cla.s.sic Rothschild advice to "listen to everything and say little in reply": You are now the plenipotentiary of all the brothers . . . and in the same way all the brothers will [have to] approve everything, as fundamentally the business entails a considerable risk, so do not write too little . . . and be hard-working and busy and in all these undertakings put your reliance in the Almighty, who will give you luck and His blessing.

In fact, it was not long before Anselm had the self-confidence to begin a.s.serting his notionally equal authority as a partner. Within a year he felt sure enough of himself to criticise his uncles' investment strategy following the July Revolution, and James was soon asking for his a.s.sistance in Paris "as he really has character." This was perceptive: when the next and far greater revolutionary crisis swept across Europe, Anselm would play a decisive role in limiting the damage to the five houses, even at the expense of his own father's feelings.

Nathan's eldest son Lionel also pa.s.sed through his apprenticeship years with flying colours. In 1828 he was formally "initiated into the business" when he was appointed "Lieutenant General" while Nathan travelled to Frankfurt to meet his brothers. "You are now the General all on your own," wrote James, offering avuncular encouragement, "and you will no doubt attend to the business very nicely." "Make some nice business deals, like a man," he added a few days later. "Show that you are a clever and good businessman." Three years later, as he struggled to remain afloat in the wake of the 1830 revolution, James's tone was altogether less patronising: 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 coa.r.s.e 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 a.s.sure you increases every day, I a.s.sure 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 a.s.sured 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 protege 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 Judenga.s.se 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 t.i.tled 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 a.s.sist 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 att.i.tudes 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] generally 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 a.s.serted 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 Ga.s.ser [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 G.o.d, you will soon have grown up sons.

Ga.s.ser 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 Ga.s.ser was putting his own interests before those of the firm. "Under no circ.u.mstances should you write even a single word to Ga.s.ser," 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 "a.s.s." 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 grat.i.tude 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 a.s.sociated 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 a.s.sociates 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 Bleichroder. In fact, they were merely two of these many a.s.sociates, 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 ill.u.s.trate 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 Bleichroder 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: "Bleichroder?" James was heard to exclaim to Herbert Bismarck. "What is Bleichroder? Bleichroder is the one per cent I let him have." Many other banks performed the same role in the Rothschilds' operations, partic.i.p.ating in major bond issues, helping to facilitate large bullion transfers and engaging in occasional arbitrage transactions: the Oppenheims in Cologne, the Schroders in London and the Banque de Bordeaux, to name just three. At this stage in their histories, all were minor players. In much the same way, Samuel Bleichroder 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: "Bleichroder?" James was heard to exclaim to Herbert Bismarck. "What is Bleichroder? Bleichroder is the one per cent I let him have." Many other banks performed the same role in the Rothschilds' operations, partic.i.p.ating in major bond issues, helping to facilitate large bullion transfers and engaging in occasional arbitrage transactions: the Oppenheims in Cologne, the Schroders 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; Geymuller, Sina and Eskeles in Vienna; and Bethmann and Gontard in Frankfurt. Far from wishing such compet.i.tors ill-as they had in the decade of cut-throat compet.i.tion after 1814-the Rothschilds increasingly came to see their existence as complementary, so long as their own position as primus inter pares 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 compet.i.tors' rescue, as in the case of Laffitte in 1831 and 1838. Salomon's arguments for a.s.sisting Geymuller in 1841 are illuminating: 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 compet.i.tors' rescue, as in the case of Laffitte in 1831 and 1838. Salomon's arguments for a.s.sisting Geymuller 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 was just impossible . . . If Steiner and Geymuller 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. . . . If Steiner and Geymuller 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 in general also informed Lionel's attt.i.tude 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 sc.r.a.pes without too much cramping the circulation." also informed Lionel's attt.i.tude 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 sc.r.a.pes without too much cramping the circulation."

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 inst.i.tutions, 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 surrept.i.tiously.

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 t