the world of private banking

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THE WORLD OF PRIVAtE BANKING
In France and Germany Jewish bankers played a significant role in promoting
railway companies in the 1830s. When Emile Pereire, his former employee,
launched the Paris-Saint Germain line, James Rothschild was one of the main
shareholders in the company, with Louis d’Eichtal. Its success focused attention
on the market for railway stock. In 1837 the launching of the Paris-Versailles
route by the Rothschilds gave rise to numerous stock-exchange transactions,
stimulated by a press campaign announcing the creation of a number of projected
lines throughout Europe. The financial crises of 1838 brutally suspended railway
building. And in spite of the 1842 law which laid down the basic principles of
French railway construction, many years passed before the bankers became
decisively involved in railway business. While the Rothschilds got the concession
for the Paris-Belgian frontier line, which was the starting point for the expanding
network of the Compagnie des Chemins de Fer du Nord in the North of France
and South-Western Belgium, the great Parisian bankers speculated on rail mainly
by investing heavily in stocks of various important railway companies. Thus, the
Pereire brothers were promoting the PLM (Paris-Lyon-Méditerranée).
In Germany, Jewish private banks invested early in railway construction. The
initiative there was taken by four private bankers of Cologne – J.H. Stein,
A. Schaaffhausen, J.D. Herstatt and Salomon Oppenheim Jr – with the foundation
in 1837 of the Rheinische Eisenbahngesellschaft with a capital of 325,000 thalers,
of which the Rothschilds of Paris contributed 50,000 and the Oppenheims 35,000.
Originally mandated to build a line from Antwerp to Cologne, the company
managed to construct a network of railroads between the western frontier
of Prussia, the Rhine and the Saar. The banks supported the railway company
through its difficult early years by overdrafts and brokerage services. Their reward
lay in share issue and speculation in railway stocks. Their policy of holding
stocks assured them of voting rights and influential positions on the board of the
railway company. Among other similar enterprises, let us recall the alliance of the
Rothschilds and the Bethmanns for developing Frankfurt as a railway centre for
the whole of Germany.
While financing railway construction, bankers also took an interest in the
industrialization of the regions served by the companies they supported. Thus, the
Rothschilds of Paris acquired important interests in coalmining in Belgium and
extended their railway network in such a manner that they controlled Belgian coal
imports to France. The Pereire were long-standing shareholders in the Compagnie
d’Anzin. The Oppenheims were tied to the iron industry in the Rhineland.
Jewish private bankers became aware that the demands of railway and
industrialization finance could no longer be satisfied by their limited resources.
It was necessary to mobilize public savings by creating joint-stock banks. In
Belgium, the model of the universal bank had been adopted early with the founding
of the Société Générale in 1822. In 1835 James Rothschild, Jonathan-Raphaël
Bischoffsheim and Adolphe Oppenheim had helped King Leopold I in founding
the Banque de Belgique which invested in coalmining and ironworks to supply
the construction of the railway network by the State. Conversely, governments