the world of private banking

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