the world of private banking
the world of private banking
the world of private banking
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12<br />
THE WORLD OF PRIVAtE BANKING<br />
are so diametrically opposed to <strong>the</strong> truth. In fact, Nathan’s relations with <strong>the</strong> Bank<br />
<strong>of</strong> England were close and mutually beneficial. In December 1825, for example,<br />
<strong>the</strong> Rothschilds supplied <strong>the</strong> Bank with enough specie from <strong>the</strong> Continent to avert<br />
a suspension <strong>of</strong> cash payments. Looking back in 1839, <strong>the</strong> Duke <strong>of</strong> Wellington<br />
had no doubt who had averted disaster: ‘Had it not been for <strong>the</strong> most extraordinary<br />
exertions – above all on <strong>the</strong> part <strong>of</strong> old Rothschild – <strong>the</strong> Bank must have stopped<br />
payment’. 40<br />
Interest in money led naturally to an interest in <strong>the</strong> extraction and refining <strong>of</strong><br />
precious metals. The Rothschilds’ first step in this direction was <strong>the</strong>ir involvement<br />
in <strong>the</strong> mining <strong>of</strong> Spanish mercury (primarily for use in <strong>the</strong> refining <strong>of</strong> silver).<br />
For over three centuries <strong>the</strong> mines <strong>of</strong> Almadén had played a pivotal role in <strong>the</strong><br />
international monetary system because <strong>of</strong> <strong>the</strong> use <strong>of</strong> mercury in <strong>the</strong> refining <strong>of</strong><br />
silver. Traditionally, <strong>the</strong> Spanish government leased <strong>the</strong> Almadén mines to <strong>private</strong><br />
companies, most famously to <strong>the</strong> great <strong>banking</strong> dynasty <strong>of</strong> <strong>the</strong> sixteenth century,<br />
<strong>the</strong> Fuggers. 41 It was a precedent <strong>the</strong> Rothschilds followed when Nathan’s son<br />
Lionel went to Madrid to try to retrieve 15 million francs his fa<strong>the</strong>r had advanced<br />
to <strong>the</strong> Spanish government. 42 Although he failed to recover <strong>the</strong> money, he outbid<br />
four o<strong>the</strong>r companies to secure <strong>the</strong> new contract to control <strong>the</strong> mines. 43 This was<br />
<strong>the</strong> beginning <strong>of</strong> a long and lucrative involvement. Henceforth, when <strong>the</strong> Spanish<br />
government asked for money, <strong>the</strong> Rothschilds could simply make advances <strong>of</strong><br />
<strong>the</strong> sums <strong>the</strong>y had contracted to pay on account <strong>of</strong> Almadén. Their experience<br />
with mercury mining proved useful in <strong>the</strong> second half <strong>of</strong> <strong>the</strong> century when <strong>the</strong><br />
Rothschilds followed <strong>the</strong> international shift from silver to gold, acquiring <strong>the</strong>ir own<br />
gold refinery in London in 1852, establishing agents in California and Australia,<br />
and later playing a leading role in South African gold mining.<br />
The final area <strong>of</strong> business which <strong>the</strong> Rothschilds entered in this period was<br />
insurance. Nathan’s involvement in <strong>the</strong> founding <strong>of</strong> <strong>the</strong> Alliance Assurance<br />
Company in 1824 has been variously explained. According to <strong>the</strong> company’s<br />
<strong>of</strong>ficial history, it was <strong>the</strong> result <strong>of</strong> a casual meeting with his bro<strong>the</strong>r-in-law Moses<br />
Montefiore; o<strong>the</strong>rs have suggested that <strong>the</strong> aim was partly to provide employment as<br />
an actuary for <strong>the</strong>ir relative Benjamin Gompertz, an accomplished ma<strong>the</strong>matician.<br />
A third hypo<strong>the</strong>sis advanced is that <strong>the</strong> existing insurance companies had been<br />
40<br />
R. Davis, The English Rothschilds (London, 1983), p. 45.<br />
41<br />
C.P. Kindleberger, A Financial History <strong>of</strong> Western Europe (London, 1984), p. 26;<br />
Corti, reign, pp. 120f.<br />
42<br />
RAL, XI/109/31a/1/31, Lionel, Paris, to his parents, 11 March 1834.<br />
43<br />
RAL, XI/109/32/4/50, Lionel, Madrid, to his uncles and parents, 13 Dec. 1834;<br />
RAL, T22/678, XI/109/33/1/2, Lionel, Madrid, to Anthony, Paris, 15 Feb. 1835; RAL,<br />
T22/678, XI/109/33/1/2, Lionel to his uncles and parents, 25 May; RAL, XI/109J/J/35,<br />
James to Nathan and Nat, 28 Feb.; same to same, 9 March; RAL, XI/109/33/1/9, Lionel<br />
to his uncles and parents, 25 March; RAL, XI/109/33/1/20, same to same, 6 June. Cf. J.<br />
Fontana, La revolucion liberal (Madrid, 1977), pp. 59f. See in general V.M. Martin, Los<br />
Rothschild y las Minas de Almadén (Madrid, 1980).