the world of private banking

THE RISE OF tHE ROtHScHILDS 13
discriminating against the Jewish business community. 44 In fact, the Rothschilds
had been interested in insurance for some years, not surprisingly in view of the
high premiums they themselves had been obliged to pay to insure shipments to the
Continent before 1815. By founding the Alliance, Nathan seems to have wanted
to break the cartel of three firms – Lloyd’s, the London Assurance and the Royal
Exchange – which monopolized marine insurance in London.
The significance of their involvement in insurance was partly that it acquainted the
Rothschilds with the rudiments of company formation. When they began to involve
themselves in continental railways – a subject not dealt with here – they therefore
had some experience of the benefits of joint-stock structures. It is worth noting,
however, that the nineteenth-century Rothschilds never regarded the joint-stock form
as suitable for banking – especially investment banking of the sort undertaken by the
Crédit Mobilier and its imitators in the 1850s and 1860s – and remained committed
to the private-partnership model until well into the twentieth century.
Finally, it should be said that they only offered current-account and deposit
banking services in special cases where they wished to do a favour for an individual
(see below) or State. By and large, they disliked holding long-term deposits (like
the so-called ‘fortress money’ left with them by the German Confederation after
1815), fearing the effect of sudden withdrawals on their liquidity. The Rothschilds
favoured a high ratio of reserves to liabilities.
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. Essentially, the Rothschild bank was
a family firm crossed with a multinational, with three notionally equal ‘houses’ in
Frankfurt, Paris and London and two subsidiary branches (of the Frankfurt house)
in Vienna and Naples. This system was regulated by the partnership agreements
which were drawn up and revised every few years and which were, in effect, the
constitution of a financial federation. These agreements have never been studied
properly; yet they were the very foundation of Rothschild success.
In the Hollywood version, Mayer Amschel bids his sons to fan out across
Europe as he lies on his deathbed. In fact, the partnership evolved gradually and it
was not until the 1820s that his brothers began to consider themselves permanently
settled in, respectively, Frankfurt (Amschel), Vienna (Salomon), Naples (Carl)
and Paris (James). When members of the family were interrogated by the French
police in 1809, Mayer Amschel was still calling himself the sole proprietor
(Inhaber) of the firm, while his sons were merely his ‘assistants’ (Gehülfen). 45
44
Sir W. Schooling, Alliance Assurance, 1824–1924 (London, 1924), pp. 1f.; E.V.
Morgan and W.A. Thomas, The Stock Exchange (London, 1962), p. 129; P.L. Cottrell,
‘The Business Man and Financier’, in S. and V.D. Lipman (eds), The Century of Moses
Montefiore (Oxford, 1985), pp. 29ff.; Kynaston, City, vol. I, p. 62.
45
CPHDCM, 637/1/4, Transcript of interrogation of Mayer Amschel and his family,
10 and 11 May 1809.