The Rothschild story: A golden era ends for a secretive dynasty
This week NM Rothschild & Sons pulled out of trading in gold, the commodity that made their name in banking
(The Independent) --by Paul Vallely --
...Secrecy has been a hallmark of the Rothschilds from the outset. Mayer Amschel Rothschild, the son of an itinerant money lender and goldsmith who settled in the Jewish ghetto in Frankfurt-am-Main in 1744, specialised not just in clever accounting practices but also kept secret books and subterranean vaults which he ensured were never the privy of auditor, lawyer or taxman.
As the paterfamilias became more successful he despatched four of his five sons to different European capitals to take advantage of the rise of capitalism and the growth of international trade...
None of the Rothschild enterprises have been banks in the sense as understood by the man or woman in the street. What Mayer Rothschild founded in the 1760s was a business which grew from the humble beginning of selling rare coins to becoming the prime moneylender to greedy and spendthrift governments across Europe. One German contemporary quipped that Mayer was "the pride of Israel ... before whose money box kings and emperors humbly bow". And the novelist Thackeray said of Nathan that he was "not king of the Jews, but the Jew of the kings". The brothers financed both sides in the Napoleonic wars and in the Austro-Prussian war too.
It has long been supposed that Nathan increased the family fortune 20-fold by speculating on the outcome of the Battle of Waterloo in 1815. The Rothschilds had a network of agents throughout Europe who, using fast boats, coded letters and carrier pigeons, got information to the family ahead of official sources. Victor Rothschild, third baron and former chairman of the London bank, N M Rothschild, always maintained that Nathan had made a killing by encouraging rumours that Wellington had lost when he knew he had won, though the historian Niall Ferguson in his magisterial history of the family recently disputed that.
Certainly, for all the family motto of Concordia, Integritas, Industria (Unity, Integrity, Industry), Nathan's ability to depress stock prices by using the network of agents to spread rumours, true or false, and then buy the stock up after people panicked, was legendary.
More significant, however, was that in the process the Rothschilds created the world of banking as we know it today. Nathan operated principally as an underwriter and speculator in the early 19th-century bond market. He and his brothers invented, or at any rate popularised, the government bond, which allowed investors, big and small, to buy bits of the debts of sovereign states by purchasing fixed-interest bearer bonds.
Governments liked this because they could use them to raise colossal sums of money. Investors liked them because they could be traded - at prices that fluctuated in relation to the performance of the issuing government - and shrewd investors could make big sums. It brought investment in railways, the industrial revolution and ventures like the Suez Canal. The Rothschilds got a cut of everything.
It was a new kind of power. "I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain's money supply controls the British Empire, and I control the British money supply," Nathan said. The family developed a lack of awe for the powerful and important. A pompous aristocrat one day called on Nathan who was head down at his desk. Without looking up, the banker said: "Take a chair." His caller, affronted, said: "You are speaking to the Prince of Thurn and Taxis." To which Rothschild replied: "Take two chairs." At one point he even rescued the Bank of England after a run on gold caused the collapse of 145 banks. In 1885 he was given the hereditary title of Baron Rothschild.
Many of the distinct characteristics of the family can be traced back to the will of the founder Mayer Rothschild. It stipulated that no public inventory should be made of his estate; that key positions in the House of Rothschild were to be held by family members; that the eldest son should inherit unless the rest agreed otherwise; that the family was to intermarry with first and second cousins to keep the fortune together; that anyone disputing these terms would be struck from the will. And that all this should apply in perpetuity.
In part this was about preserving not just their Jewish identity but a self-conscious position as role models for their poorer co-religionists. The Rothschilds expended much effort and money pressing for Jewish emancipation and equality across the continent.
Their Jewish solidarity was not heterogeneous. In 1938 Nathan's great-great-grandson, Victor, shocked an audience by saying that in spite of "the slow murder of 600,000 people" on the continent "we probably all agree that there is something unsatisfactory in refugees encroaching on the privacy of our country, even for relatively short periods of time." And the family split over the question of the dream of a Jewish homeland, with some members supporting the first Zionist settlement in Palestine and the Balfour declaration and others opposing it on the grounds that it would encourage anti-Semites to question the existing national identities of assimilated Jews around the rest of the world. None of which has allayed the wild fears of anti-Semites who throughout the 20th century branded the Rothschilds as part of a Jewish plot to take over the world.
The world has changed around the Rothschilds. At one point Nathan Rothschild was the richest man in Britain and probably in the world. In today's terms he was wealthier than Bill Gates. But they never gained the foothold in America they needed. The world became corporate. Private banking got left behind.
Still, the family has moved down only from fabulously rich to enormously wealthy. And they adjusted to the times. They made billions in the 1980s from Margaret Thatcher's privatisations of state-owned industries on which they advised. In France after their bank was nationalised by the Socialist president Francois Mitterrand they slowly built a new business which, under Baron David de Rothschild, has risen to the top ranks of the merger and acquisition league tables. They have pulled out of retail fund management - into which they went with much fanfare only three years back - and now they are pulling out of oil and gold in favour of the higher-margin areas of private banking and wealth management...MORE...LINK
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