the world of private banking
the world of private banking
the world of private banking
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24<br />
THE WORLD OF PRIVAtE BANKING<br />
<strong>the</strong> business.’ 90 Throughout his life – until his final illness in 1868, when he was 76<br />
– James worked indefatigably, writing and dictating letters almost every day, even<br />
when supposedly ‘taking <strong>the</strong> waters’ or observing <strong>the</strong> Sabbath.<br />
Second, client relationships – which invariably meant relations with<br />
governments – were assiduously cultivated. ‘Fa<strong>the</strong>r <strong>of</strong> blessed memory used to<br />
say’, recalled Salomon, ‘“Any Court appointment means [business] advantages”.’ 91<br />
Equally, once a ‘court’ had been secured, it had to be kept. As Mayer Carl recalled,<br />
‘Uncle [Amschel] used to say that Governments are like teeth: if you lose <strong>the</strong>m, you<br />
never get <strong>the</strong>m back again’. 92 But which governments? An important Rothschild<br />
insight (again originating with Mayer Amschel) was that it was ‘better to deal<br />
with a government in difficulties than with one that has luck on its side’. 93 The<br />
Rothschilds took great care to assess <strong>the</strong> bargaining power and creditworthiness<br />
<strong>of</strong> governments before doing business with <strong>the</strong>m. Some countries were dismissed<br />
as too risky, for example <strong>the</strong> former Spanish states <strong>of</strong> Latin America; conversely,<br />
o<strong>the</strong>rs (e.g., Prussia and Russia) were regarded as too strong to concede pr<strong>of</strong>itable<br />
terms. It was <strong>the</strong> countries in between – politically weak enough to have to pay<br />
generous commissions, but not so weak that <strong>the</strong>y were likely to default – which<br />
<strong>the</strong> Rothschilds preferred.<br />
How could attractive clients be won? From <strong>the</strong> very earliest days, <strong>the</strong><br />
Rothschilds firmly believed in winning market share by undercutting <strong>the</strong>ir rivals.<br />
This principle was still being cited by James in <strong>the</strong> 1830s. In 1836, for example,<br />
James gave his nephews some revealing advice about how to sell French bonds on<br />
<strong>the</strong> Paris stock exchange:<br />
When you are buying or selling rentes, try not to look at making a pr<strong>of</strong>it, but<br />
ra<strong>the</strong>r, your aim should be to get <strong>the</strong> brokers used to <strong>the</strong> idea that <strong>the</strong>y need to<br />
come to you. . . . [O]ne has, initially, to make some sacrifices so that <strong>the</strong> people<br />
<strong>the</strong>n get used to <strong>the</strong> idea to come to you, my dear nephews, and as such one first<br />
has to spread <strong>the</strong> sugar about in order to catch <strong>the</strong> birds later on. 94<br />
A related principle was that many small deals were as good as a few big deals: <strong>the</strong><br />
Rothschilds never turned up <strong>the</strong>ir noses at trifling transactions, and James was fond<br />
<strong>of</strong> telling his nephews to ‘do business’ even when only <strong>the</strong> tiniest sums were to be<br />
made. This might seem so obvious as to be a truism. But when Alexander Baring<br />
sought to exclude <strong>the</strong> Rothschilds from <strong>the</strong> French reparations loan in 1817, he<br />
90<br />
RAL, T63/5/1, XI/109/8, Salomon and James, Paris, to Nathan, London, 6 Nov.<br />
1817; RAL, T5/171, IX/85/1, James to Nathan, 24 Jan. 1818.<br />
91<br />
RAL, XI/109/9/4/6 109/10/1/6, Salomon to Nathan, Jan. 1818.<br />
92<br />
RAL XI/109/101/2, Mayer Carl, Berlin, to his cousins and nephews, London, 19<br />
March 1870.<br />
93<br />
RAL, T30; XI/109/2/2/170, Amschel, Frankfurt, to Salomon and James, Paris, 15<br />
Nov. 1815.<br />
94<br />
RAL, XI/109J/J/36, James, Paris, to his nephews, London, 15 Nov. 1836.