the world of private banking
the world of private banking
the world of private banking
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CHAPTER 1<br />
The Rise <strong>of</strong> <strong>the</strong> Rothschilds: <strong>the</strong> Family<br />
Firm as Multinational <br />
Niall Ferguson<br />
This chapter attempts to explain <strong>the</strong> rapid rise <strong>of</strong> <strong>the</strong> Rothschild bank to a position <strong>of</strong><br />
supremacy in international finance between around 1810 and 1836. The first section<br />
describes <strong>the</strong> size <strong>of</strong> <strong>the</strong> bank, which, for most <strong>of</strong> <strong>the</strong> nineteenth century, was <strong>the</strong> biggest<br />
bank in <strong>the</strong> <strong>world</strong> in terms <strong>of</strong> capital. The second section discusses <strong>the</strong> business <strong>the</strong><br />
Rothschilds did, in particular <strong>the</strong>ir development <strong>of</strong> <strong>the</strong> international bond market. The<br />
third section discusses <strong>the</strong> structure <strong>of</strong> <strong>the</strong> partnership. The fourth section shows how<br />
intermarriage helped ensure that capital remained in <strong>the</strong> family. Finally, an attempt is<br />
made to identify <strong>the</strong> Rothschilds’ distinctive business methods. These, it is suggested,<br />
provide <strong>the</strong> best explanation for <strong>the</strong> Rothschilds’ astonishing success.<br />
Between around 1810 and 1836, <strong>the</strong> five sons <strong>of</strong> Mayer Amschel Rothschild rose<br />
from <strong>the</strong> obscurity <strong>of</strong> <strong>the</strong> Frankfurt Judengasse to attain a position <strong>of</strong> unequalled<br />
power in international finance. Despite numerous economic and political crises<br />
and <strong>the</strong> efforts <strong>of</strong> <strong>the</strong>ir competitors to match <strong>the</strong>m, <strong>the</strong>y still occupied that position<br />
when <strong>the</strong> youngest <strong>of</strong> <strong>the</strong>m died in 1868; and even after that <strong>the</strong>ir dominance was<br />
only slowly eroded. So extraordinary did this achievement seem to contemporaries<br />
that <strong>the</strong>y <strong>of</strong>ten sought to explain it in mystical terms. According to one account<br />
dating from <strong>the</strong> 1830s, <strong>the</strong> Rothschilds owed <strong>the</strong>ir fortune to <strong>the</strong> possession <strong>of</strong> a<br />
mysterious ‘Hebrew talisman’. It was this which enabled Nathan Rothschild, <strong>the</strong><br />
founder <strong>of</strong> <strong>the</strong> London house, to become ‘<strong>the</strong> leviathan <strong>of</strong> <strong>the</strong> money markets <strong>of</strong><br />
Europe’. Similar stories were being told in <strong>the</strong> Russian Pale as late as <strong>the</strong> 1890s. <br />
They form part <strong>of</strong> a complex web <strong>of</strong> fantasy which has been – and continues to be<br />
– woven around <strong>the</strong> name Rothschild.<br />
<br />
This chapter draws on my book The World’s Banker: a History <strong>of</strong> <strong>the</strong> House <strong>of</strong><br />
Rothschild (London, 1998). I would like to express my gratitude to Sir Evelyn de Rothschild<br />
for giving me unrestricted access to <strong>the</strong> firm’s pre-1918 archive in London (henceforth<br />
RAL), and to Victor Gray, Melanie Aspey and <strong>the</strong>ir assistants. I would also like to thank <strong>the</strong><br />
archivists at <strong>the</strong> Archives Nationales, Paris (henceforth AN), <strong>the</strong> Centre for <strong>the</strong> Preservation<br />
<strong>of</strong> Historical and Documentary Collections, Moscow (henceforth CPHDCM) and <strong>the</strong><br />
Frankfurt Stadtarchiv, as well as those at <strong>the</strong> o<strong>the</strong>r archives and libraries I have used. I have<br />
received invaluable research assistance from Abigail Green, Edward Lipman and Rainer<br />
Liedtke, as well as Ka<strong>the</strong>rine Astill, Glen O’Hara, Harry Seekings and Andrew Vereker.<br />
<br />
Anon., The Hebrew Talisman (London, 1840), pp. 28ff.<br />
<br />
H. Iliowzi, ‘In <strong>the</strong> Pale’: Stories and Legends <strong>of</strong> <strong>the</strong> Russian Jews (Philadelphia, 1897).