Wednesday, January 4, 2012

From Excluded to Exclusive -- Frederic Morton's Rothschilds

I guess that my strongest feeling regarding the Rothschilds coming into this book was the MX-80 Sound song, from the late 1970s, called "Natty Rothschild." The song is in the lovely MX-80 Sound tradition of absurd, kind of poetic, almost spoken-word type lyrics. It's all about the kind of absurdly rich and lifestyle of the Rothschilds, from the embittered view of a post-punk rock band.

Morton's representation of the Rothschilds also gives a portrait of rather lavish, sometimes absurdly lavish, lifestyles. Certain members of the Rothschilds, for instance, owned their own circuses, funded their own private symphonies, or received entire schools as sweet-sixteen birthday presents. Morton even gives an episode of an entire private train being sent after one Rothschild, to give him a change of clothes for a royal dinner.

Of course, the Rothschilds, being a rather exclusive group of people controlling a large amount of wealth all across the world, provide fodder for all kinds of conspiracy theorists' imaginations. And, since I find conspiracy theory as interesting as the next guy does, I've lately wanted to know more about the Rothschilds.

Also, over the past two or so years, I've become more and more interested in the lives of the legends of business and finance. These people have done as much or more as politicians and generals to shape history. But a lot of times, I've thought of these people as "just" business people. The Rothschilds weren't on the top of my list -- for some reason I was more interested in the Americans.

But one day I found Frederic Morton's 1961 history of The Rothschilds at my favorite New York City bookstore, the Housing Works Used Bookstore Cafe. I brought it home with me. And I tried to read it once, after I'd finished my reading of Moll Flanders. I got about fifty pages through it and had to stop. It's not too terribly well written.

But, for some reason I decided again, after having finished Dickens' American Notes, that I would really try to read The Rothschilds. So I started it yesterday and found the same kind of difficulty. But this time I just pressed through the difficulty.

The story of the Rothschilds is very interesting. But, as it was really hard for me to understand, I think I'd like to spend all my effort in this post on a summary of the history, as I understood it from Morton's book.

The story starts with Mayer Amschel Rothschild. He was living, I think, in Hanover, being put through school to become a Rabbi, in Hanover. But his parents, who lived in Frankfort, died. And so, around 1764, Rothschild had to stop his studies. He could have gone to work with a counting-house in Hanover. But he decided to go back to Frankfort.

In Frankfort, Rothschild had to live on the Judenstrasse, or Jew-Street. He, like all the other Jews in Frankfort, experienced all kinds of racial bigotry. But Rothschild got started working for himself. His scholarly attitude enabled him to get an edge in collecting and creating portfolios of old coins. Rothschild eventually began to peddle his coins to wealthier people.

Eventually, through his coin-selling business, Rothschild formed a relationship with the Frankfurter Prince William at Hesse. By 1769, Rothschild was given a Factorship by Prince William. Encouraged by this business, Rothschild expanded his business into a "Wechselstube," basically a currency-exchanging sort of bank.

Prince William, like his father, made a large amount of his money by conscripting, training, and then selling as soldiers, the young male subjects in his realm. Prince William's treasury official, a man named Carl Buderus, took a liking to Mayer Rothschild. He therefore convinced Prince William to give Rothschild some of his money-changing business. In 1785, Prince William's father died, and Prince William became Landgrave.

Rothschild also ran other businesses, such as a dry goods and second-hand goods shop. Rothshchild managed most of his banking affairs in a small, underground counting-house, which was actuallly composed of two secret rooms, the deeper of which held all of the contracts for the business Rothschild did with Landgrave William.

From this point, Morton discusses Rothschild's business strengths. One business strength is that Rothschild made a point of conducting business with some of the highest nobility in his region. The second is that, with Landgrave William, Rothschild gave very good rates on his services -- this made Carl Buderus trust Rothschild even more with Landgrave William's accounts.

The third business strength Morton gives is the fact that Rothschild had five sons, which became for him something like a financial army, as well as a reason to keep working at all: posterity.

By this point, Rothschild had been carrying on trades of goods with England. Rothschild would buy goods in England and sell them in Frankfurt. At the same time, Landgrave William was training soldiers in Frankfurt and selling them in England. Rothschild got the idea that his sons could act as a middle-man for Landgrave William's activities in England. Carl Buderus agreed to this idea. And this set Rothschild's sons in motion.

Then one of Landgrave William's uncles, the King of Denmark, got into financial troubles which could have bankrupted his nation. Landgrave William wanted to bail out Denmark. But he didn't want to be known as the person to have done it. Again, Rothschild was able to act as a middleman on the loan that was given to the King of Denmark.

In 1806, just as Rothschild and his sons were becoming the chief bankers for Landgrave William, Napoleon took over Frankfurt and sent Landgrave William into exile, in Denmark.

But Landgrave William's business operations were still operating all over Europe. The money William had made from selling conscripted soldiers had been invested in other areas. Landgrave William now wanted the money from those investments. And he needed somebody to go get it for him. Carl Buderus again chose to use Rothschild and his sons as managers for William's business activities.

But, at the same time, one of Rothschild's sons, Nathan, who lived in London, began trading contraband goods from England to the European continent. Napoleon had banned all sorts of goods, even in France. But Nathan had found some way to get them to the continent. And he was now selling them at "famine prices."

It took a while, but the Rothschilds were, also getting William's investment money back for him. But Mayer Rothschild asked Carl Buderus to convince William to let the Rothschilds use William's money for currency trading. William agreed to this. The money was given to Nathan, in London. Nathaniel was a gifted trader. And he multiplied William's money and made plenty of profits himself. However, William soon tired of this kind of investment and asked to be given what he'd gotten.

Now, however, Nathan Rothschild had developed quite a stable reputation among a number of other extremely influential people. When 800,000 pounds sterling in worth of gold went on sale in India, the Duke of Wellington assigned Nathan to get the gold for him. Nathan had already been of the same idea. The only problem was how to get the gold from India, through Napoleon, and into England.

Another one of Nathan's sons, Jacob, or "James," as he came to be known, was living in France. He helped Nathan by setting up a campaign of misinformation. He made it seem as if there were an inflow of gold arriving into France, which the English were trying to stop. By giving the details of this supposed inflow, he made it so that there was basically free access for the gold that was traveling from India to flow through and out of France, and in to England, where it reached Nathan and then the Duke of Wellington.

Nathan was also famous for a rather notorious trade he made, based on the news of Napoleon's defeat at Waterloo. Everybody had their eyes glued to how Nathan was investing. He invested all his money one way. Everybody followed him. Prices became very cheap. Nathan bought everything he could at a cheap price. Then it was announced that Napoleon had been defeated. And everything that Nathan had bought skyrocketed. A ton of people lost entire fortunes by following Nathan's first move. But Nathan made a whole lot of money in his own follow-up moves.

After Napoleon's defeat, peace came back to Europe. The Rothschilds had been key financial agents during the War, due to their widespread reach, speed, and flexibility. But when peace came, the more refined gentlemen, more like courtiers than bankers, moved back into the scene, and edged out the Rothschilds.

But the Rothschilds found a way to edge their way right back into the financial world. France had issued about 610 million francs in loans, without using the Rothschilds. But the Rothschilds had made a lot of money during the War. They now bought up those bonds, all in secret. And, at the right moment, they began selling everything.

The bond prices were depressing so much, it threatened to cause a financial crisis in France. The Rothschilds revealed what they had done. The French banking world decided to let the Rothschilds have their place in the financial world again. And the Rothschilds brought everything back to a state of order.

At this point in the story, Morton gives character sketches of Mayer Rothschild's five sons. He first describes Nathan, the Rothschild son who operated out of London. But Morton described Nathan in kind of general terms, which sort of makes sense, since Nathan has, up to this point in the book, played a pretty big role already.

Morton then describes Jacob, or, as he was later known, "James," the Rothschild son who operated out of Paris. The most interesting thing, to me, about James, is that he was a friend for so many artists. He was friends with Heine, Rossini, Balzac, Delacroix, and others. But he was also very shrewd in working with the various parties that oversaw France during the tempestuous first half of the nineteenth century.

Salomon is the next son described. He operated out of Vienna. In Vienna, Salomon formed a strong relationship with Prince Metternich, as well as with Marie Louise Bonaparte, wife of the exiled Napoleon. With this influence, as well as through his own skill, Salomon was able to accumulate a number of real estate possessions, including the Vitkovitz coal and iron works.

Carl, the head of the Rothschild's Naples operations, is described next, in a vignette about meeting with the Pope, and being given his hand to kiss, instead of being required to kiss his foot.

Amschel, who ran his father's Frankfurt business, is described as being a bit like his father -- the courtier of the family, the one who would soften the hard edges of his other brothers. The character sketch of Amschel also ends with a nice, little sketch of Mayer Rothschild's wife, Gutele, the mother of the family, who lived to be ninety-six years old.

Morton next moves into a small description of the various ways that the Rothschilds controlled the flow of information in various parts of Europe, as well as manipulating people of political influence in Europe, through the second quarter of the nineteenth century, in order to avert the outbreak of large-scale war.

From this point, Morton describes some of the activities the Rothschild brothers carried out with railroads. Nathan, Morton says, was a bit too late to make money on the railroad boom in England. But he was able to alert Salomon in Vienna and James in Paris about the coming railroad booms there.

In Vienna, Salomon first encountered resistance against railroads through what we might think of as the "Not In My BackYard," or "NIMBY" mentality. Also, most people thought that travel by railroad was too fast. People seriously thought the speeds of the railroad would kill human beings.

While Salomon and Metternich were battling public opinion, another financial institution, Sina, was also working to build railway lines. Salomon was building lines in the North. Sina wanted to build lines in the South, and then beat Salomon out of the business through competition. But Metternich helped Salomon's northern railroad get royal approval, and, thus, more credibility than Sina's railroad. Sina attempted to attack the credibility of Salomon's railroad through quasi-scientific propaganda. But Salomon beat Sina at that game, too.

Morton then gives an interesting story of how one of the Rothschild workers in France, a man named Carpentier, with a few other people in the Rothschild office in France, managed to extort thirty-one million francs from the Rothschild office.

Morton continues the railroad story with James. James was also meeting a lot of resistance in France. People thought railroads were either extravagant and impractical, or outright dangerous. They felt that people were only putting up railroads to exploit the new mechanisms and make money. So James had to hire as many pro-railroad propaganda-spreaders as he could, to meet the resistance coming from the anti-railroad propaganda-spreaders.

One of the propaganda spreaders James hired was a Portugese man named Jacob Emile Pereire. Pereire served James pretty well. But Achille Fould, one of James' finance-world rivals, once the railroad controversy was over, won Pereire over to his own side. Achille Fould used Pereire to spearhead the Credit Mobiliere, an investment firm that would open itself up to the common people, allowing people to make investments of as low as one thousand francs.

The Credit Mobiliere became extremely popular, and Pereire went very actively into the finance world. He also worked his way into the world of the court. When Napoleon III fell in love with Eugenie de Montijo, a woman with few social credentials, the nobility of France was in a rage. James stood by Napoleon. And Napoleon eventually married Eugenie. But Pereire stood by the nobility. And, as a result, he got a lot more friends than James did.

It appeared that, because of this, Pereire, with his Credit Mobiliere funds, would be the chief banker of France. And, in fact, Pereire did win a number of really good deals, including power over the Austrian State Railways.

And now, in 1855, the aging Rothschild brothers were beginning to pass away. Nathan, Carl, Salomon, and Amchel all died in 1855. James was suddenly the only Rothschild brother left.

But the next generation of Rothschilds were ready to join in the fight against Pereire. Salomon's son Anselm started the fight. He took the Credit Mobiliere idea and started up a similar kind of institution, the Creditanstalt, in Vienna, effectively debilitating Pereire in Austria.

Then Nathan's son Lionel, in London, and James' son Alphonse, in France, both began fighting for railroad investments. They brought down a number of deals on Pereire's head. They also began using the old Nathan Rothschild bid of driving an investment price in one direction, then getting out of the investment, watching it move in the other direction, then re-collecting on it from that direction. All these moves eventually exhausted the solitary Pereire. His funds basically collapsed. And the Rothschilds were back in charge.

Morton now gives a bit more information on this generation of Rothschild brothers. He begins with Lionel, who, like his father, was instrumental in a lot of the great financial transactions that occurred in England. In 1847, Lionel raised eight million pounds for the British government in its efforts to aid the Irish during their famine. And in 1854, Lionel raised another sixteen million pounds for the British government, so that it could enter into the Crimean War.

Lionel became friends with British Prime Minister Benjamin Disraeli. And, in 1875, when the Egyptian Khedive, overwhelmed with debts, put his shares of ownership of the Suez Canal up for sale, Disraeli worked with Lionel to secure those shares for Britain. Lionel eventually ended up, on very short notice, and against conventional British procedures, providing the British government with the 400 million pounds necessary to purchase the shares of the Suez Canal.

Even with all their wealth and influence, the Rothschilds still faced anti-Semitism. Lionel did his best to fight for equal treatment of Jewish people in Europe. But probably one of the greatest steps he took was getting himself into Parliament.

In these days, Jews were not allowed into Parliament. But Lionel, flouting convention, campaigned for election and got himself elected into the House of Commons in 1850. But the ceremony and oaths that Lionel had to go through were filled with Christian-oriented language. Lionel, being Jewish, couldn't agree to the oaths -- they went against his religion. So it was determined that he couldn't sit in Parliament.

For eight years, Lionel fought for the right of Jews to take a different oath from Christians, so that they could sit in Parliament. Finally, Lionel won this right for the Jews. And he sat in Parliament for eleven years.

Lionel later tried to get into the House of Lords. But, in this case, Queen Victoria was the sole determinant regarding Lionel's acceptance. And Queen Victoria was too steeped in convention to allow the rules to change for Lionel. Nevertheless, Lionel's son, Nathaniel Mayer, did get into the House of Lords, in 1885.

Morton then moves on to character sketches of the other Rothschild brothers. Natty Rothschild -- I guess he'd be the Natty Rothschild of MX-80 Sound's song -- also ran for parliament. He gave a lot to charities, and he did a lot for Jewish causes. But he seems to have been a bit of an imposing character.

Leo was a bit more easygoing. He raised horses and competed in Derbies. His house was incredibly extravagant. But he was a very approachable and helping kind of person.

Alfred was an interesting character. He had his own private symphony. And he'd hold what he called "adoration dinners," where greatly admired young women were invited as the sole female dinner guests. At these dinners, the solitary women would be wooed by three or four wealthy, individual men. It seems like an ultra-elite version of the Dating Game.

James' son Alphonse was able to maintain the Paris business, as his father had, through the various changes in government in France. Also, when France was reeling under the effects of losing the Franco-Prussian War, Alphonse was able to raise the funds to provide France with the means of sustaining itself and rebuilding.

Edmond's great effort was to back the efforts of the Jewish people to establish colonies in Palestine. This was largely against the general sentiment of the rest of the Rothschilds, who weren't necessarily for the Zionist movement. Even Edmond didn't consider himself -- I'm pretty sure -- a Zionist. But he provided the movement with funds all through his life.

After discussing a few more elements of the Rothschilds' lives and business activities, Morton moves into a discussion of the Rothschilds' attempts to avert World War I. These entreaties from the Rothschilds were heeded by people of influence. But the momentum of the war was too strong, even for the Rothschilds. Rothschild men fought -- and died -- in the War.

After the War, Morton says, the Rothschilds, like the rest of the world, were changed. Morton paints a picture of the Rothschilds family values being shaken and shimmied away by the Jazz Age. More than anything else, it just seems like the young Rothschilds, following the War, didn't lose their values, but determined what the new, more fashionable ways were of being extravagant with their wealth.

Morton then follows Louis Rothschild, who was thirty years old at the end of the first World War, through the years of the Depression (as well as through an accident on the New York City subway station!) and into the years preceding the second World War. Louis was in charge of the Vienna operations for the Rothschilds during this time.

Louis Rothschild's story is the most dramatic of all, in my opinion. In 1937, Louis was arrested by the Gestapo. Louis was imprisoned for a ransom, which included the signing over of the Vitkovitz coal and iron works to the Nazis. But Louis would not accede to these terms, and he advised the rest of the Rothschilds not to comply. Besides, Vitkovitz -- on the surface, anyway -- no longer belonged to the Rothschilds. It had been ostensibly transferred into the hands of the British.

Louis went through a number of rather opulent trials with some of the Nazi elite, including Herman Goring and Heinrich Himmler. Goring and Himmler basically tried to bribe Rothschild into complying with the ransom demands. But Louis remained steadfast and was let out of custody of the Nazis.

Morton then discusses the achievements of some of the younger generation of Rothschilds in the second World War. Guy de Rothschilds and Philippe de Rotshschild had spectacular, unbelieveable careers with the French military. The splendid of Edmund Rothschild with the British military and of Victor, Lord Rothschild with the British (and the American?) military, are also described.

Another interesting story Morton gives is about the search, following the War, for the Rothschilds' stolen art. Hitler had pillaged a number of art collections. The Rothschilds' collections were, of course, among the larges. But, through the work of invetigator James J. Rorimer, the work was located.

Rorimer worked off of tips from Rose Valland, an art student in occupied France who had been recruited to appraise art for Hitler and had, consequently, heard Hitler's men discussing where they would hide this art. Rorimer went to one location and found a series of cipher-stamps which gave him clues as to the location of a large number of other hiding places for Hitler's collection of stolen art.

Morton then concludes the book with a discussion of the younger generation of Rothschilds. This includes Guy de Rothschild, who, at the time of Morton's writing, was running the de Rothschilds Freres bank in France, and maintaining its position as largest private bank in France. Morton gives a portrait of the lives of the Rothschilds in the 1960s, and of the role of women in the Rothschild family. Morton then ends the book with a description of how exclusive the Rothschild banking institutions remain, to this day. Only the most elite work with the Rothschilds.