The House Of Rothschild Part 4

Moreover, Nathan's insistence on some kind of political guarantee had important political implications. There is an obvious link from Nathan's negotiations with Rother to the subsequent Clause 2 of the "Decree for the Future Management of the State Debt" of January 17, 1819, which imposed a ceiling on the state debt, earmarked revenues from the royal domains to service it and declared: "If the state should in future for its maintenance or for the advancement of the common good require to issue a new loan, this can only be done in consultation with, and with the guarantee of, the future imperial estates a.s.sembly." Drafted by Rother himself, this meant that any future loan by the Prussian state would automatically lead to the summoning of the estates; in other words, it conceded the link between public borrowing and const.i.tutional reform. Only by raising loans indirectly through the notionally independent Seehandlung could the Prussian state henceforth borrow money without summoning the estates. This explains why, of all the German states, Prussia borrowed the least in the 1820s and 1830s and why, when the policy of retrenchment broke down in the 1840s, the consequences were revolutionary.

Whatever its significance for Prussian politics, the 1818 Prussian loan was without question a watershed in the history of the European capital market, as contemporaries came to recognise. For Nathan's demand for some kind of political security was, in financial terms, probably the least important of the conditions he attached to the loan. Firstly, the loan was to be not in thaler, but in sterling, with the interest payable (half-yearly) not in Berlin but in London. Secondly, there was to be a British-style sinking fund to ensure the amortisation of the loan (though Rother managed to get rid of Nathan's initial stipulation that it take the form of 150,000 of British consols). This deliberate Anglicisation of a foreign loan was a new departure for the international capital market. The Baring French loans had paid interest in francs in Paris, with attendant inconvenience and exchange rate risks for British investors. Now it was much easier to invest in foreign funds; and the fact that throughout the century all foreign government bonds paid higher yields than British consols meant that people did. The Times The Times did not exaggerate when it later described Nathan as "the first introducer of foreign loans into Britain": did not exaggerate when it later described Nathan as "the first introducer of foreign loans into Britain": for, though such securities did at all times circulate here, the payment of dividends abroad, which was the universal practice before his time, made them too inconvenient an investment for the great majority of persons of property to deal with. He not only formed arrangements for the payment of dividends on his foreign loan in London, but made them still more attractive by fixing the rate in sterling money, and doing away with all the effects of fluctuation in exchanges.

Moreover, the loan was issued not just in London but also in Frankfurt, Berlin, Hamburg, Amsterdam and Vienna. In other words, it represented a major step towards the creation of a completely international bond market. In his book On The Traffic in State Bonds On The Traffic in State Bonds (1825), the German legal expert Johann Heinrich Bender identified this as one of the Rothschilds' princ.i.p.al contributions to modern economic development: "Any owner of government bonds . . . can collect the interest at his convenience in several different places without any effort." Henceforth, an investor could receive the interest on Austrian metalliques, Neapolitan rentes or any other Rothshild-issued bonds from any of the Rothschild houses. In stipulating these conditions, Nathan not only succeeded in making the Prussian loan attractive to British and continental investors; he also established a model for such international bond issues which would swiftly become standard. (1825), the German legal expert Johann Heinrich Bender identified this as one of the Rothschilds' princ.i.p.al contributions to modern economic development: "Any owner of government bonds . . . can collect the interest at his convenience in several different places without any effort." Henceforth, an investor could receive the interest on Austrian metalliques, Neapolitan rentes or any other Rothshild-issued bonds from any of the Rothschild houses. In stipulating these conditions, Nathan not only succeeded in making the Prussian loan attractive to British and continental investors; he also established a model for such international bond issues which would swiftly become standard.10 Although the terms of the loan were heavily criticised in Berlin (not least by the bankers there), Humboldt and Rother were impressed. Nathan, Humboldt reported to Hardenberg, was not only "the most enterprising businessman here"; he was also "dependable . . . fair, very upright and understanding" in his dealings with governments. Rother went further: "The Rothschild in this country . . . has an incredible influence upon all financial affairs here in London. It is widely stated, and is, indeed, close to the truth, that he entirely regulates the rate of exchange in the City. His power as a banker is enormous." His reputation in Berlin firmly established, Nathan was able to secure a second loan (to the Seehandlung) in 1822 for 3.5 million.

In one respect, Rothschild activity in Germany was far from innovative. Hesse-Ka.s.sel was one of those states which had emerged intact from the Napoleonic period, and Amschel was careful to continue cultivating the special relationship his father had developed with the Elector. Now that he had been restored to his lands, however, William needed the Rothschilds less, and the family's old rivals in Ka.s.sel hastened to rea.s.sert their influence at court. The Rothschilds continued to manage some of the Prince's financial affairs, collecting his reparations from France, selling his English stocks (as we have seen) at a healthy profit, trying to sort out his tangled Danish investments and involving him in their post-war loans to Prussia. Amschel even indulged his old coin-collecting enthusiasm. But there was no doubt that the days of mutual dependence were over, especially when Buderus had ceased to be the dominant force in the Ka.s.sel bureaucracy. Although the brothers lent considerable sums to William's spendthrift son, their hopes that these highly unprofitable transactions would bring more lucrative business after he succeeded his father were disappointed when this finally happened in 1821. Apart from two large loans in 1821 and in 1823 for a total of 4.3 million gulden (390,000), business in Ka.s.sel dried up.

On the other hand, Hesse-Ka.s.sel was only one of thirty-nine German states which had emerged from the Napoleonic upheaval and were now grouped together as members of the loose German Confederation. And because the Confederation's Diet met in Frankfurt-in a rented hall in the Thurn und Taxis palace-it was easy for Amschel and Carl to establish contact with senior diplomatic representatives of all the member states. This led to a stream of relatively small-scale loans to minor German states and princes-including the neighbouring Grand Duchy of Hesse-Darmstadt, as well as Schaumburg, Homburg, Saxe-Weimar, Anhalt-Coethen and Na.s.sau-Usingen-throughout the 1820s. Though the individual loans only rarely exceeded 500,000 gulden (45,000), taken together they represented a substantial amount of business. Between 1817 and 1829 total loans of this sort by the Frankfurt house amounted to more than 24.7 million gulden (2.2 million). While some were little more than personal loans to petty princes, others took more sophisticated forms, like the Hesse-Darmstadt lottery loan of 1825, one of many premium-bond-style loans issued in this period. On occasion, the Rothschilds also acted as bankers to the Confederation itself. Twenty million francs-paid by France under the terms of the Peace of Paris for the construction of fortifications in Germany-were deposited with the Rothschilds in 1820, pending a decision by the Confederation to proceed with building them. Given the slowness with which such decisions were reached in Frankfurt, this turned out to be a long-term deposit; but it was never certain how much notice would be needed for its withdrawal, nor indeed who had the right to request it. The difficulties this created for the Rothschilds may explain why they never did much to attract similar deposits.

Real power in Germany, however, lay not in Frankfurt, but in Vienna, the capital of the Confederation's dominant member: and it was the Austrian court more than any other which the Rothschilds sought to cultivate in the 1820s. As we have seen, the Austrians had been reluctant to leave the payment of their British subsidies to the Rothschilds in the later stages of the war against France, preferring to deal with Viennese houses like Arnstein & Eskeles,11 Fries & Co. and Geymuller & Co.; they had driven hard bargains over the French reparations payments too. Only in partnership with the Frankfurt banker Gontard were the brothers able to handle the minor payments Austria had to receive in the wake of the peace from Russia and Naples. But Vienna needed cash just as badly as the other continental states if it was to consolidate its large floating debt and stabilise its heavily depreciated currency. Although its first major post-war loan of 50 million gulden was concluded-to Rothschild chagrin-with the Anglo-Hanseatic Parish brothers in partnership with Baring, Bethmann and Geymuller, it was obvious, with annual expenditure running above 100 million Austrian gulden, that more would soon be needed. The breakthrough came in 1820, when Salomon jointly organised two lottery loans worth 45 million Austrian gulden (c. 4.8 million) in partnership with David Parish-a transaction so profitable that, despite the hostile comment it aroused, Salomon resolved to remain in Vienna on a more or less permanent basis. Fries & Co. and Geymuller & Co.; they had driven hard bargains over the French reparations payments too. Only in partnership with the Frankfurt banker Gontard were the brothers able to handle the minor payments Austria had to receive in the wake of the peace from Russia and Naples. But Vienna needed cash just as badly as the other continental states if it was to consolidate its large floating debt and stabilise its heavily depreciated currency. Although its first major post-war loan of 50 million gulden was concluded-to Rothschild chagrin-with the Anglo-Hanseatic Parish brothers in partnership with Baring, Bethmann and Geymuller, it was obvious, with annual expenditure running above 100 million Austrian gulden, that more would soon be needed. The breakthrough came in 1820, when Salomon jointly organised two lottery loans worth 45 million Austrian gulden (c. 4.8 million) in partnership with David Parish-a transaction so profitable that, despite the hostile comment it aroused, Salomon resolved to remain in Vienna on a more or less permanent basis.

The final coup which completed the Rothschilds' emergence as "bankers to the Holy Alliance" came in 1822, with the loan to Russia. Here, as in Prussia and Austria, the war had generated acute fiscal and monetary problems: public spending had roughly quadrupled between 1803 and 1815 as had the circulation of paper roubles, leading to the inevitable inflation and currency depreciation. And despite having allowed the Rothschilds to handle so much of her wartime subsidy payments and subsequent reparations contributions, Russia too turned first to others for a.s.sistance with stabilisation: it was Baring and Reid, Irving who handled the 1820 loan, for example. This, however, was no great disappointment, as the Russians at this stage were still refusing to follow the Prussian example of issuing a loan denominated in sterling and with interest payable in London. Two years later the Russians, like the Austrians before them, had come round. In the summer of 1822 a loan of 6.6 million was issued by Nathan in 5 per cent bonds priced at 77, which he had no difficulty in selling at prices of 80 and more to his network of London brokers, led by his brother-in-law Moses Montefiore.

Thus by the end of 1822 the Rothschilds could justifiably be regarded as bankers to the Holy Alliance-"la haute Tresorerie de la Sainte Alliance." Indeed, when the itinerant German Prince Puckler-Muskau first described Nathan in a letter to his wife, he introduced him as "the chief ally of the Holy Alliance." There is unquestionably a sense in which it was the Rothschilds who gave the alliance substance. When the Austrian Emperor remarked to his envoy in Frankfurt that Amschel was "richer than I am," he was not being wholly facetious. The Times The Times correspondent reported from St Petersburg that the mere appearance of James Rothschild at the bourse was expected to boost Russian bond prices. Without the financial support which Nathan in particular could provide, it would have been harder to make the Austrian strategy of "policing" Europe effective in the 1820s. Political critics of this strategy recognised this. Nathan was caricatured as the "Hollow Alliance's" insurance broker, helping to prevent political fire in Europe. In 1821 he even received a death threat because of "his connexion with foreign powers, and particularly the a.s.sistance rendered to Austria, on account of the designs of that government against the liberties of Europe." correspondent reported from St Petersburg that the mere appearance of James Rothschild at the bourse was expected to boost Russian bond prices. Without the financial support which Nathan in particular could provide, it would have been harder to make the Austrian strategy of "policing" Europe effective in the 1820s. Political critics of this strategy recognised this. Nathan was caricatured as the "Hollow Alliance's" insurance broker, helping to prevent political fire in Europe. In 1821 he even received a death threat because of "his connexion with foreign powers, and particularly the a.s.sistance rendered to Austria, on account of the designs of that government against the liberties of Europe."

Finance and Revolution.

It had, of course, been a.s.sumed by the founders of the Holy Alliance that the best way of preventing a renewed revolutionary upheaval in Europe would be a policy of "containment" directed against France, the fons et origo fons et origo of revolution since 1789. While that would prove to be the right strategy later, in 1830 and in 1848, in the 1820s it quickly had to be abandoned as it became evident that the political order established at Vienna could be challenged almost anywhere. When August von Kotzebue-a minor hack reputed to be in the pay of the Tsar-was murdered in Mannheim by a radically inclined student, Karl Sand, it suited Metternich quite well as the pretext for a crackdown on liberal tendencies throughout the German Confederation. Like the a.s.sa.s.sination of the King's nephew, the duc de Berry, in Paris in February 1820, one death did not portend a serious revolution. But the Cadiz mutiny by army units destined for South America that January was the real thing, as it led not only to the reimposition of the 1812 Cortes const.i.tution on the Spanish King Ferdinand VIII, but also to the imposition of the same const.i.tution on his uncle, Ferdinand I of Naples, just six months later. The "domino effect" continued in August 1820, with a military revolt in Portugal. In March 1821 there were risings by Italians in Piedmont and by Greeks throughout the Near East. The abortive Decembrist movement in Russia in 1824-5 was part of the same pattern: the unrest was often led by disenchanted soldiers (the victims of post-war cuts in defence spending), or by secret societies like the Italian Carbonari or the Spanish Freemasons. Indeed, so widespread was the political instability that France, the former outcast, had to be co-opted into the counter-revolutionary coalition. The question which came to dominate the congresses of Troppau (October to December 1820), Laibach (January 1821) and Verona (September to December 1822) was how far this coalition should intervene in the affairs of other states to prevent the success of localised revolutions. The financial question this begged, of course, was whether or not they could afford to do so. In so far as they helped to finance Austrian intervention in Italy and French intervention in Spain, the Rothschilds deserve to be thought of as financiers of "reaction." of revolution since 1789. While that would prove to be the right strategy later, in 1830 and in 1848, in the 1820s it quickly had to be abandoned as it became evident that the political order established at Vienna could be challenged almost anywhere. When August von Kotzebue-a minor hack reputed to be in the pay of the Tsar-was murdered in Mannheim by a radically inclined student, Karl Sand, it suited Metternich quite well as the pretext for a crackdown on liberal tendencies throughout the German Confederation. Like the a.s.sa.s.sination of the King's nephew, the duc de Berry, in Paris in February 1820, one death did not portend a serious revolution. But the Cadiz mutiny by army units destined for South America that January was the real thing, as it led not only to the reimposition of the 1812 Cortes const.i.tution on the Spanish King Ferdinand VIII, but also to the imposition of the same const.i.tution on his uncle, Ferdinand I of Naples, just six months later. The "domino effect" continued in August 1820, with a military revolt in Portugal. In March 1821 there were risings by Italians in Piedmont and by Greeks throughout the Near East. The abortive Decembrist movement in Russia in 1824-5 was part of the same pattern: the unrest was often led by disenchanted soldiers (the victims of post-war cuts in defence spending), or by secret societies like the Italian Carbonari or the Spanish Freemasons. Indeed, so widespread was the political instability that France, the former outcast, had to be co-opted into the counter-revolutionary coalition. The question which came to dominate the congresses of Troppau (October to December 1820), Laibach (January 1821) and Verona (September to December 1822) was how far this coalition should intervene in the affairs of other states to prevent the success of localised revolutions. The financial question this begged, of course, was whether or not they could afford to do so. In so far as they helped to finance Austrian intervention in Italy and French intervention in Spain, the Rothschilds deserve to be thought of as financiers of "reaction."

From the Rothschild viewpoint, however, the instability of Restoration Europe was not only a source of potential new business; it was also a threat to the stability of financial markets. Existing loans to regimes which suddenly looked vulnerable slumped as alarmed investors sought to sell their bonds. Even successful armed intervention, by throwing the Austrian and French budgets into deficit, had similar negative side-effects. On the other hand, the emergence of new states in those regions where revolutions actually succeeded created a source of new business too. In particular, the creation of independent states in Brazil, in formerly Spanish America and in Greece led to numerous new bond issues as fledgling regimes rushed to the London and Paris capital markets. For that reason, the role of the Rothschilds' financial power was ambivalent.

On the Italian peninsula, matters were relatively straightforward: the Rothschilds supported Metternich's policy of divide and rule by lending to the various monarchical regimes which had his backing. As early as December 1820 Metternich wrote to Salomon from Troppau alluding suggestively to a transaction involving 25 or 30 million francs "with respect to the future fate of the Kingdom of Naples." The banker's initial response was positive. "Even our financiers, led by Parish and Rothschild," so the Austrian Finance Minister Stadion a.s.sured Metternich at Laibach in January 1821, "are only anxious to see our troops across the Po at the earliest possible moment, and marching on Naples." Nevertheless, Salomon was unenthusiastic when Metternich and Nesselrode invited him to Laibach to discuss possible loans, the purpose of which was evidently to pay for intervention. "My presence there," he explained to Nesselrode, "might give rise to numerous and probably highly inaccurate newspaper reports. Persons with base motives might unearth the fact that a loan to the most gracious monarchs was being discussed; rumour would be piled upon rumour, and this would not be at all agreeable in the highest quarters." Firstly, the prospect of a new Austrian loan would depress the Vienna market, already shaken by the Italian crisis. Secondly, the Rothschilds had no desire to make their role in financing the Holy Alliance so public. Instead, Salomon insisted to Stadion that any loan should be raised by Ferdinand I only after his restoration to power, the proceeds to be used to reimburse the Austrian government for the costs of intervention. In the meantime, he offered Stadion short-term advances to finance General Frimont's advance south. As in the Napoleonic Wars, the Rothschilds used their extensive banking network to make cash available at reasonable rates to an army on the march. And, as before, one of the brothers-this time Carl ("un pet.i.t frere Rothschild," as he seemed to Stadion)-had to be sent to the scene of the action to ensure that all ran smoothly. In March 1821 Carl set off from Vienna to join Metternich and the exiled Neapolitan king at Laibach.

To Metternich, the Neapolitan campaign was nothing less than a counter-revolutionary crusade: "We have embarked," he told Stadion, on a great undertaking, one that contains the possibilities of greater results than any of our time. It is great, for upon its success or failure the whole future depends; not merely the future of the Austrian monarchy, but that of the whole of Europe . . . It was impossible for us to take any other action, for it is a matter of life or death . . . everything now depends upon success. If not, the result will be the same as if we had ventured nothing; the revolution will engulf first Italy and then the world. I will spare no effort until I am killed myself.

But financial reality gave the lie to such rhetoric. There were recurrent shortages of supplies at the front, while in Vienna Stadion despairingly foresaw a return to the fiscal and monetary mora.s.s of the Napoleonic period. Indeed, Salomon had to intervene to prevent a slump in the price of "metalliques" (Austrian silver-denominated bonds). The crisis deepened when reports reached Laibach of further revolutionary outbreaks in Piedmont. The impact of this news in Vienna appalled the hapless Stadion: If the enemy were at the gates there could not be more unreasoning panic. The whole of the population of Vienna is rushing to the Bourse to get rid of our public securities . . . Our credit (which has only just been established) is on the eve of vanishing completely. I shall be forced to suspend the conversion of paper money into cash . . . destroying in one day the labours of the preceding five years . . . This is the first step to our destruction. It is impossible that a loan should be considered, either at home or abroad, at a time when our securities are becoming worthless.

By March 24, however, Naples had fallen, and Carl hurried south after Ferdinand to organise the now desperately needed loan from which the Austrians were to be reimbursed.

At this point, a conflict of interests emerged: the Austrian government wished to exact the maximum sum possible, but the Rothschilds had a low opinion of Neapolitan creditworthiness, and were willing to lend to the restored regime only at punitive rates, while the Bourbon regime itself faced the prospect of renewed unrest if it was burdened with onerous new debts. The first Neapolitan loan was a hard-won compromise, with Carl being forced to improve his initial offer to head off compet.i.tion from a rival Milanese banker: instead of 10 million ducats at a discounted price of 54, he agreed to lend the government 16 million (around 2 million) at 60. To help meet the costs of the continuing Austrian occupation, a second loan was issued in November 1821, of 16.8 million ducats, underwritten at 67.3. Two more loans followed for 22 million ducats in 1822 and 2.5 million in 1824, increasing the state's debt to around 13 million in all. Nevertheless, the price of Neapolitan securities rose in Paris from 65 to 103, and in London there was considerable enthusiasm for the sterling-denominated bonds. This successful stabilisation partly reflected the good relationship which had developed between Carl and the new Neapolitan Finance Minister, Luigi de' Medici, whose claim that the Austrians were unnecessarily prolonging the occupation and overcharging for their presence Carl was inclined to support. Even before the Congress of Verona in late 1822, it was obvious that the Austrians intended to recoup the costs of the invasion in full: of 4.65 million gulden which Metternich demanded in August 1821 as payment for the actual invasion, 4 million had been received by the following February, and to this were added occupation costs of 9 million ducats per annum. By 1825 Medici was accusing the Austrian government of deliberately profiting from the occupation and threatened to resign unless more than 1 million ducats were repaid. When the Viennese authorities stalled, Carl advanced the money to Medici-to Metternich's evident irritation.12 The Austrian intervention in Naples provided a cla.s.sic ill.u.s.tration of the difficulty of maintaining good relations with both sides in a bilateral international transfer. Nevertheless, Carl had probably struck the right balance between Austrian and Italian interests. While his establishment in Naples flourished on the strength of his ties with the Bourbon regime (and also did some business with the Grand Duke of Tuscany), Metternich continued to turn to Salomon for financial a.s.sistance over other Italian matters-notably the complicated 5 million lire loan organised to provide for the children of the Archd.u.c.h.ess Marie-Louise, the Habsburg Princess who had briefly been married to Napoleon, and who had been established after his fall in the duchies of Parma, Piacenza and Guastalla.13 Another such case concerned the finances of Napoleon's former Governor in Illyria, Marshal de Marmont, the Duke of Ragusa. At the same time, the Austrian government found itself once again having to turn to the Rothschilds to satisfy its own burgeoning financial needs. For no matter how much could be squeezed out of Naples, the costs of the military intervention there far exceeded what Stadion could raise in current revenue. There was no alternative but another loan; and although some officials were minded to reject the initial Rothschild bid, the government ended up bowing to the inevitable, although it managed to secure improved terms. Another such case concerned the finances of Napoleon's former Governor in Illyria, Marshal de Marmont, the Duke of Ragusa. At the same time, the Austrian government found itself once again having to turn to the Rothschilds to satisfy its own burgeoning financial needs. For no matter how much could be squeezed out of Naples, the costs of the military intervention there far exceeded what Stadion could raise in current revenue. There was no alternative but another loan; and although some officials were minded to reject the initial Rothschild bid, the government ended up bowing to the inevitable, although it managed to secure improved terms.14 Vienna's dependence on the Rothschilds was further increased in 1823, when the British government, in an attempt to exert pressure on Vienna to end its occupation of Naples, raised the question of outstanding loans-now notionally totalling 23.5 million including interest-which had been given to Austria in the early stages of the war against France. Once again Austria turned to the Rothschilds, pressing Salomon to use his brother's influence in London to get the debt scaled down-the first of many occasions when the Rothschilds would act as an unofficial channel for Metternich's diplomatic communications. When this had finally been achieved, the Rothschilds offered to organise yet another loan, in partnership with Baring and Reid, Irving, to pay the agreed sum of 2.5 million. Thirty million gulden of new metalliques were taken by the banks at an underwriting price of 82.33, and were soon trading at 93, yielding a substantial profit to the banks. Another 15 million gulden loan followed in 1826. Ultimately, the Austrian policy of intervention in Italy had yielded multiple profits for the Rothschilds.

By contrast, the outbreak of revolution in Spain raised more serious dilemmas. For two years after 1820, the gout-ridden despot Ferdinand VII endured the Cortes const.i.tution, and in that period the liberal government raised a number of loans (which were needed to compensate for the shortfall in revenues caused by the revolution). Although the Rothschilds-as Salomon hastened to rea.s.sure Metternich-were not at first involved in these, they were preparing to take a hand when, in July 1822, Ferdinand and his Ultra-royalist supporters unexpectedly attempted to overthrow the Cortes, calling for foreign intervention when their coup failed. At this point James became involved in an attempt by the Spanish financier Bertran de Lys to forestall an invasion by reconst.i.tuting the government on less "exalted" (that is, radical) lines.15 It was too late, however; in April 1823, a French expedition a.n.a.logous to the Austrian invasion of Naples was launched under the leadership of Louis XVIII's surviving nephew, the duc d'Angouleme, and with the enthusiastic support of revanchist diplomats like the vicomte de Chateaubriand. It was too late, however; in April 1823, a French expedition a.n.a.logous to the Austrian invasion of Naples was launched under the leadership of Louis XVIII's surviving nephew, the duc d'Angouleme, and with the enthusiastic support of revanchist diplomats like the vicomte de Chateaubriand.

Ever the pragmatist-and anxious not to be out-flanked by that seasoned military paymaster Ouvrard-James now offered his services to the French Prime Minister, the comte de Villele: just as his brother had supplied the Austrian army in Italy with cash, so he now made himself "useful" to d'Angouleme, even raising the ransom money needed to buy Ferdinand VII's release.16 And just as military intervention had necessitated a new loan in Vienna, so too in Paris the government was obliged to fund its military adventure by borrowing: in 1823 James was at last able to overcome the suspicion of the Restoration regime and secure a major French loan. Worth 462 million francs (nominal) or 18.5 million, it was the biggest single issue of rentes by a French government between 1815 and 1848 and had been preceded by a smaller issue of 120 million in 6 per cent treasury bills, also handled by James. Given the importance of such issues throughout James's long career in Paris, it is worth noting how he pulled off this deal. Rather as his father had initially squeezed out his rivals in Ka.s.sel, James won his first rentes issue by outbidding Lafitte and three other Paris bankers, offering a price (89.55) which was actually above the current market rate. This was more than enough to beat the rival group's offer of 87.75, but it did not leave James out of pocket: the success of the operation quickly pushed rentes up above 90 and by the end of 1823 they had reached 100. And just as military intervention had necessitated a new loan in Vienna, so too in Paris the government was obliged to fund its military adventure by borrowing: in 1823 James was at last able to overcome the suspicion of the Restoration regime and secure a major French loan. Worth 462 million francs (nominal) or 18.5 million, it was the biggest single issue of rentes by a French government between 1815 and 1848 and had been preceded by a smaller issue of 120 million in 6 per cent treasury bills, also handled by James. Given the importance of such issues throughout James's long career in Paris, it is worth noting how he pulled off this deal. Rather as his father had initially squeezed out his rivals in Ka.s.sel, James won his first rentes issue by outbidding Lafitte and three other Paris bankers, offering a price (89.55) which was actually above the current market rate. This was more than enough to beat the rival group's offer of 87.75, but it did not leave James out of pocket: the success of the operation quickly pushed rentes up above 90 and by the end of 1823 they had reached 100.

The difference between Naples and Spain was that after the restoration of the Spanish Bourbon (which had been achieved by the end of 1824), the Rothschilds declined-after contemplating a joint operation with Baring and Reid, Irving-to lend to his neo-absolutist regime without guarantees which the French government was unwilling to give.17 There were three reasons for this: the regime's refusal to recognise and redeem the bonds issued by the Cortes, its refusal to repay France the costs of the invasion and, finally, the bankers' suspicion that any money lent to Ferdinand might be used in a last and probably vain attempt to recapture his former colonies in South America, which had been fighting successfully for their independence since 1808. After all, had not the 1820 revolution begun with a mutiny by soldiers about to be sent across the Atlantic? And were not Ferdinand's advisers convinced that recovering the American colonies would solve all his financial problems? It was the South American dimension which particularly concerned the British government. While London had been prepared to put up with the French expedition into Spain, despite its implicit negation of Wellington's victory in the Peninsular War, the notion that this might be the prelude to some kind of reconquest of Latin America, with whose fledgling republics Britain was rapidly forging close economic ties, was wholly unpalatable. As the Austrian amba.s.sador in Paris reported to Metternich: "Although the House of Rothschild may pretend that their sympathies are purely monarchist, the recognition of the engagements entered into by the Cortes Government, and the independence of the Spanish colonies, would provide a far wider field for his [Nathan's] financial enterprises and afford political security, the value of which they do not fail to appreciate." In short, the Rothschild role in Spain had been ambivalent: initially showing signs of interest in the Cortes government, then financing the French invasion, but declining to bankroll the restored regime. James, Salomon and Nathan all came under conflicting pressures from the governments in Paris, Vienna and London; but the final outcome was a united and carefully calculated policy of non-commitment, which was continued throughout the decade. As James put it succinctly in 1826, "Spain's bankruptcy is uppermost in my mind." There were three reasons for this: the regime's refusal to recognise and redeem the bonds issued by the Cortes, its refusal to repay France the costs of the invasion and, finally, the bankers' suspicion that any money lent to Ferdinand might be used in a last and probably vain attempt to recapture his former colonies in South America, which had been fighting successfully for their independence since 1808. After all, had not the 1820 revolution begun with a mutiny by soldiers about to be sent across the Atlantic? And were not Ferdinand's advisers convinced that recovering the American colonies would solve all his financial problems? It was the South American dimension which particularly concerned the British government. While London had been prepared to put up with the French expedition into Spain, despite its implicit negation of Wellington's victory in the Peninsular War, the notion that this might be the prelude to some kind of reconquest of Latin America, with whose fledgling republics Britain was rapidly forging close economic ties, was wholly unpalatable. As the Austrian amba.s.sador in Paris reported to Metternich: "Although the House of Rothschild may pretend that their sympathies are purely monarchist, the recognition of the engagements entered into by the Cortes Government, and the independence of the Spanish colonies, would provide a far wider field for his [Nathan's] financial enterprises and afford political security, the value of which they do not fail to appreciate." In short, the Rothschild role in Spain had been ambivalent: initially showing signs of interest in the Cortes government, then financing the French invasion, but declining to bankroll the restored regime. James, Salomon and Nathan all came under conflicting pressures from the governments in Paris, Vienna and London; but the final outcome was a united and carefully calculated policy of non-commitment, which was continued throughout the decade. As James put it succinctly in 1826, "Spain's bankruptcy is uppermost in my mind."

The Rothschilds kept a safe distance from the numerous bond issues by the former Spanish colonies which were generating such speculative enthusiasm in London at the time of the French intervention. The years 1822-4 were the time of the great South American "bubble," as investors rushed to lend to new republics like Chile, Colombia, Buenos Aires and Guatemala. Even as unlikely a figure as Gregor MacGregor, a Scottish adventurer and former general in the Venezuelan army, was able to raise 200,000 by styling himself the "Caique of Poyais" and persuading investors that the malarial swamp in Honduras which he claimed to rule was ripe for development. With a bravado it is impossible not to admire, MacGregor even wrote to Nathan outlining a project for an independent Hebrew colony in his "kingdom" on an island called Ruatan. From all this the Rothschilds remained aloof, with one exception: Brazil. There were two reasons for this preference. Firstly, Brazil remained closely linked to Portugal and therefore enjoyed close commercial ties with Britain; secondly, it retained a monarchical form of government even after gaining independence in 1825. (Indeed, the fact that the Brazilian Emperor was married to an Austrian princess inclined some contemporaries to regard Brazil as a kind of American representative of the Holy Alliance, though this exaggerated Austrian influence.)18 Nathan's first step in this direction came in 1823, with a loan of 1.5 million to Portugal, secured on Brazilian revenues. This once again demonstrated his willingness to lend to a const.i.tutional regime, as the Portuguese King had accepted a Spanish-style const.i.tution drafted by the Lisbon Cortes on his return from Brazil in 1822. The water for Brazilian bonds proper was tested in 1824 by a City group led by Thomas Wilson, which sold over a million pounds' worth of 5 per cent bonds at an issue price of 75. When these rose to 87, Nathan took over, issuing a further 2 million in 1825 at a price of 85. As Heinrich Heine later joked, Nathan was now "the great Rothschild, the great Nathan Rothschild, Nathan the Wise, with whom the Emperor of Brazil has p.a.w.ned his diamond crown." Though it fell into disuse during the middle decades of the century, the relationship with Brazil was to prove one of the firm's most enduring. Nathan's first step in this direction came in 1823, with a loan of 1.5 million to Portugal, secured on Brazilian revenues. This once again demonstrated his willingness to lend to a const.i.tutional regime, as the Portuguese King had accepted a Spanish-style const.i.tution drafted by the Lisbon Cortes on his return from Brazil in 1822. The water for Brazilian bonds proper was tested in 1824 by a City group led by Thomas Wilson, which sold over a million pounds' worth of 5 per cent bonds at an issue price of 75. When these rose to 87, Nathan took over, issuing a further 2 million in 1825 at a price of 85. As Heinrich Heine later joked, Nathan was now "the great Rothschild, the great Nathan Rothschild, Nathan the Wise, with whom the Emperor of Brazil has p.a.w.ned his diamond crown." Though it fell into disuse during the middle decades of the century, the relationship with Brazil was to prove one of the firm's most enduring.

By the summer of 1825, therefore, the Rothschilds had succeeded triumphantly in establishing themselves as the leading specialists in European public finance-and not only European. One by one, the powers of the Holy Alliance had followed the British lead, entrusting their loans to Rothschilds: first Prussia, then Austria, then Russia. Finally, France too had to abandon her preference for more established Parisian houses. In the s.p.a.ce of three years, the brothers had provided the crucial financial a.s.sistance which enabled Austria to suppress revolution in Naples, and France to restore royal absolutism in Spain. Yet their contemporary image as "bankers to the Holy Alliance" was in some respects a caricature. It understated what might be called their political agnosticism, their tendency to a.s.sess business opportunities in financial rather than political terms. James neatly summed up the Rothschild att.i.tude to Restoration politics in an exuberant letter to Nathan in late 1826: It would be a mortal sin to be dependent on a Villele and on a Canning and on what these Gentlemen may wish to say in the Chambers, as a result of which one will be unable to sleep at night, and why so? Because they want more than they can afford to pay and we have to thank the dear Lord that we can extricate ourselves from this situation. What we now want to say is, "[You want] a loan? You can have one, as much as you want, and draw a certain profit from it. But to keep all the millions, to that we say no!"

The attraction of counter-revolution, in other words, was not that it restored despots, but that it generated new financial needs. Nor were conservative regimes given preferential treatment. As the conditions attached to the 1818 Prussian loan show, Nathan in fact saw const.i.tutional structures for controlling government finance as preferable to the extravagance and inefficiency which often characterised absolutist regimes, and which in any case tended sooner or later to generate revolutionary pressures. Ultimately, that was why he was unwilling to lend to absolutist Spain without a guarantee from const.i.tutional France. Such views would also condition the Rothschilds' att.i.tude to the increasingly reactionary drift of French policy under Charles X, who succeeded his brother in September 1824. And if, on the other hand, the Rothschilds preferred to lend to a const.i.tutional monarchy like Brazil rather than a republic like Colombia, events would soon confirm the economic rationality of that preference. Where Laffitte, the follower of Saint-Simon, was "truly liberal" (in Byron's phrase), Rothschild was more politically ambivalent, a conditional supporter of the Holy Alliance at best.

Saving an Old Lady.

If the French Prime Minister Villele had hoped the large 1823 loan would ultimately "free him from the hands of these gentlemen"-meaning the Rothschilds-he quickly found himself more firmly in their grip. The sustained rise of the rentes in 1823-4 was not so much proof of "the strength and power of France"; it was proof that interest rates throughout Europe were falling. This presented the Rothschilds with a new business opportunity: the conversion of government bonds bearing higher rates of interest into new bonds with lower rates. Though new to France, such operations had been undertaken in Britain before (for example, in 1717 and 1748-57). Indeed, Vansittart had converted 150 million of 5 per cents into 4 per cents in 1822; and two years later a further 75 million of 4 per cents were converted into 3.5 per cents by Frederick Robinson, his successor. For the governments which undertook such conversions, the benefit was obvious: the annual burden of debt service was significantly reduced. For the Rothschilds, the benefit was obvious too: such large-scale operations justified fat fees. The only difficulty lay in persuading bondholders who had enjoyed substantial capital appreciation and wished to continue enjoying annual interest of 4 or 5 per cent to accept less. One reason for the boom in continental and Latin American bonds between 1822 and 1824 was precisely the refusal of British bondholders to do so. Confronted with the option of converting their British 5 or 4 per cents or redeeming them and reinvesting the cash in higher-yielding a.s.sets, many did the latter, fuelling the speculative fever.

In France, when Villele proposed to convert 2,800 million francs of 5 per cent rentes into 3 per cents issued at 75, the bondholders' reaction took a different form. The arguments for conversion were the same as in England: more than a third of the French budget was being consumed by the costs of servicing the state's debt and, with 5 per cents rising from 93 to a peak of 106, the time for such an operation seemed right.19 But the proposal became mixed up with the vexed question of compensation for losses suffered by royalist emigres during the Revolution and was narrowly rejected in the Upper House following spurious claims by Chateaubriand and others (notably financiers like Casimir Perier who had been excluded from the deal) that it was an Anglo-Austrian racket to defraud the humble French rentier. A second, heavily modified scheme-which offered to convert 5 per cents on a voluntary basis in return for tax breaks-was pushed through in 1825, but only 30 million francs' worth of bonds were exchanged, leaving James with a substantial sum on his hands at a time when the market price was falling. Ouvrard later claimed that the Rothschilds had doubly insured themselves against the possible failure of the first conversion scheme by not only insisting on an official safety net of 100 million in treasury bills (to be issued if the banks were left with large quant.i.ties of rentes on their hands), but also surrept.i.tiously selling both 5 per cents and 3 per cents. Suspicions that the Rothschilds were cutting their losses by selling rentes-which were justified in 1825 But the proposal became mixed up with the vexed question of compensation for losses suffered by royalist emigres during the Revolution and was narrowly rejected in the Upper House following spurious claims by Chateaubriand and others (notably financiers like Casimir Perier who had been excluded from the deal) that it was an Anglo-Austrian racket to defraud the humble French rentier. A second, heavily modified scheme-which offered to convert 5 per cents on a voluntary basis in return for tax breaks-was pushed through in 1825, but only 30 million francs' worth of bonds were exchanged, leaving James with a substantial sum on his hands at a time when the market price was falling. Ouvrard later claimed that the Rothschilds had doubly insured themselves against the possible failure of the first conversion scheme by not only insisting on an official safety net of 100 million in treasury bills (to be issued if the banks were left with large quant.i.ties of rentes on their hands), but also surrept.i.tiously selling both 5 per cents and 3 per cents. Suspicions that the Rothschilds were cutting their losses by selling rentes-which were justified in 182520-brought to an end the brief period of harmonious relations with Villele which had begun in 1823. In the wake of the conversion fiasco, the French premier made a concerted effort to direct government business back to James's rivals in Paris, organising Laffitte and the Receivers-General into a syndicate to undertake a loan to Haiti and to issue 1,000 million francs of 3 per cent rentes for the benefit of the dispossessed emigres.

Yet the reality was that the Rothschilds had enjoyed a lucky escape. As Nathan's well informed Times Times obituarist remembered: obituarist remembered: [H]ad it [the Villele conversion] been carried, the convulsion in the money markets of Europe which shortly followed it would probably have proved fatal to him with such a burden on his shoulders, notwithstanding all his vast resources. Indeed, it was a common remark of his own at the time, that neither he nor the houses engaged in the undertaking with him could have stood the shock.21 It was indeed fortunate that Villele's scheme foundered when it did. For 1825 was to be the year in which the great speculative bubble burst on the London stock exchange. And not only would it have been awkward for Nathan to have been left holding millions of 3 per cent rentes at such a time; the conversion might also have made it more difficult for his brother James to a.s.sist him in containing the English banking crisis of that year.

The 1825 crisis had in many ways been prophesied by Nathan and the other opponents of the decision to resume gold convertibility six years before. Between 1818 and 1823 the Bank of England's note circulation fell by around a third, a dramatic contraction. In 1824 a temporary influx of gold generated a big expansion in the note issue, but this was followed by an equally sharp contraction in 1825. At the same time, though fiscal policy was gradually being brought under control following Vansittart's resignation in December 1822, the enthusiasm of Huskisson at the Board of Trade for cuts in import duties made balancing the budget harder than it might have been. The medium-term aim of these first steps towards free trade was to increase the volume of commercial activity, in conformity with the principles of the political economists; but the short-term effect was to reduce revenues. Even with sharp cuts in expenditure, the government still found itself having to resort to both short- and long-term borrowing. Moreover, as Nathan complained, Huskisson's policy was also giving rise to a trade deficit: as he told Herries in April 1825, "The consequence of admitting foreign goods (which had not been met by any corresponding liberality on the other side of the water) was, that all the gold was going out of the country. He had himself sent two millions within the last few weeks; the funds fell rapidly, and no advantage is gained by any human being." It was this outflow of gold which lay behind the sharp monetary contraction of 1825. Under these circ.u.mstances, the high prices which had been reached on the London stock exchange during the 1822-4 bubble could not be sustained. In April 1825 the market began to slide. The heaviest falls were experienced by British industrial securities and Latin American bonds: the Brazilian bonds which Nathan had issued at 85 were down to 81.25 by July and just 56 by March of the following year.22 But the bonds of the formerly Spanish republics fared even worse: Mexican, Colombian and Peruvian all fell below 20. Even the best paper-British 3 per cent consols-was affected, falling below 75 compared with a peak of more than 97 the previous year. Such a severe a.s.set-price deflation was bound to bring a banking crisis in its wake. But the bonds of the formerly Spanish republics fared even worse: Mexican, Colombian and Peruvian all fell below 20. Even the best paper-British 3 per cent consols-was affected, falling below 75 compared with a peak of more than 97 the previous year. Such a severe a.s.set-price deflation was bound to bring a banking crisis in its wake.

There is an old anecdote which describes Nathan threatening to exhaust the Bank of England's reserve by bringing an immense number of small denomination notes to its counter and demanding gold. This is another Rothschild myth which is diametrically opposed to the truth. In fact, Nathan's relations with the Bank of England were close and mutually beneficial. Beginning in the summer of 1823, when he borrowed 3 million silver dollars to finance his first loan to Portugal, he set out to establish a direct line of communication with the Governor with the intention of circ.u.mventing the Bank's established bullion brokers Mocatta & Goldsmid. It worked, though his parallel challenge to Mocatta & Goldsmid's position as the East India Company's sole bullion brokers and his later efforts to deal directly with the Mint were thwarted. Thereafter, Nathan's dealings with the Bank were regular, as he later told the 1832 Committee on the Bank Charter (with characteristic oversimplification): "You bring in your bank notes, they give you the gold." Much of the time, Nathan was a buyer or borrower of gold and silver. In December 1825, however, it was the other way round: the Rothschilds gave the Bank their gold, supplying the "Old Lady" of Threadneedle Street with enough specie from the continent to avert a suspension of cash payments. James had in fact been sending substantial quant.i.ties of gold across the Channel since the beginning of 1825, if not earlier. In the first week of January alone, he had sent gold worth nearly 500,000, which he expected to "impress your Bank" (meaning the Bank of England). By the middle of the month, he was talking about "our old established practice" of "buy[ing] some gold whenever we can find any."

It was at the end of the year, however, that his a.s.sistance mattered most. As a succession of banks stopped their payments-six failed in London alone-the Governor of the Bank informed the government that a suspension of cash payments might be the only way to avert a general financial collapse, as he would be unable to meet the demand for gold likely when exchequer bills fell due. Liverpool and his colleagues were determined not to sanction this, suspecting the Governor of exaggerating the shortage of bullion to undo the work of the 1819 Committee. On the other hand, the Bank's reserve of coined coined gold which could be used immediately was running out fast, and the Cabinet was sufficiently alarmed at the prospect of an unauthorised suspension by the Bank that "orders had been given to the regiment of Guards to remain in the City in case of disturbance." Some City insiders-notably Henry Thornton, who was battling to rescue Williams & Co.-had already realised that "the Jew King of the City, Rothschild" had a stock of gold in reserve, and according to one account, "by dint of a little persuasion and exhortation [by Alexander Baring] the Jew was induced to bring out his gold, first charging 2 per cent commission, then saying he did it out of public spirit, and lastly begging that they would never tell it or he would be besieged night and day." gold which could be used immediately was running out fast, and the Cabinet was sufficiently alarmed at the prospect of an unauthorised suspension by the Bank that "orders had been given to the regiment of Guards to remain in the City in case of disturbance." Some City insiders-notably Henry Thornton, who was battling to rescue Williams & Co.-had already realised that "the Jew King of the City, Rothschild" had a stock of gold in reserve, and according to one account, "by dint of a little persuasion and exhortation [by Alexander Baring] the Jew was induced to bring out his gold, first charging 2 per cent commission, then saying he did it out of public spirit, and lastly begging that they would never tell it or he would be besieged night and day."

The government, however, may have hesitated to approach Nathan because of his well-known antipathy towards Huskisson, whose policies, as we have seen, he held responsible for the crisis. On December 17 - the turning point of the crisis-the wife of Charles Arbuthnot, the Joint Secretary of the Treasury, recorded in her diary "the detestation in which Mr Huskisson is held in the City" as well as their "utmost contempt" for the Chancellor, Robinson. The feeling was evidently mutual. According to her informant, Nathan's old friend Herries (now Financial Secretary to the Treasury), Mr Huskisson has done all he can also to ruin Rothschild by spreading reports that their house was in danger, & he made Mr Canning write to Paris to enquire into the affairs of [Rothschild's] brother. Ld. Granville sent his private secretary to pump Rothschild. R found out what he was at & instantly shewed him his accounts & proved to him that he was worth 2 millions.

Evidently, this led to a change of heart on both sides, which no doubt owed something to Herries's mediation and Huskisson's absence: "Rothschild has made the most gigantic efforts to a.s.sist the Bank and he told Mr Herries that, if he had been applied to sooner, he wd. have prevented all the difficulty. As it is, if they can hold out till Monday or Tuesday, he will have enormous sums over in sovereigns from Paris, & the pressure will be entirely relieved."

Nathan had done two things that evening: firstly, he had advised the government to intervene in the money market itself by purchasing exchequer bills to inject liquidity into the market; secondly, and more important, he had delivered gold to the Bank, beginning with 300,000 of sovereigns, and continuing with larger sums in the succeeding weeks until confidence had finally been restored. In fact, the reserve touched its lowest level (just over a million pounds) on December 24; however, Nathan was still delivering gold a year later, pledging a million pounds in the course of March 1826 and a total of 10 million by September. His princ.i.p.al source was James in Paris (as he later reminded Nathan, "I emptied my coffers for your gold"). But, as Nathan recalled, "there was a good deal [of gold] supplied from the whole world; I imported it, and it was imported almost from every country; we got it from Russia, from Turkey, from Austria, from almost every quarter in the world." The Bank's ledgers describe the influx of myriad kinds of gold coin from France, Italy, Holland and Germany.

The crisis of 1825 had come close to being another 1797 (the year when the Bank had last suspended cash payments), a monetary crisis with the potential to destabilise the British economy as a whole. As it was, 73 out of 770 country banks failed and, as Huskisson himself admitted, the country came within forty-eight hours of "putting stop to all dealings between man and man except by barter." Looking back in 1839, Wellington had no doubt who had averted disaster: "Had it not been for the most extraordinary exertions-above all on the part of old Rothschild-the Bank must have stopped payment." Of course, Nathan would not have made such immense deliveries of gold without asking for a generous commission in return. The operation has to be seen as part of his campaign to establish himself as the dominant force in the London bullion market. On the other hand, there is no reason why he should have bailed out the Bank and the government free of charge, when the crisis was so manifestly the product of policies he had advised against. The rescue of the Bank was a remarkable achievement which owed everything to the international nature of the Rothschilds' operations. In effect, the brothers were establishing that system of international monetary co-operation which would later be performed routinely by central banks, and on which the gold standard came to depend. Increasingly, their position in the international bullion market was becoming as dominant as their position in the international bond market.

Byron was therefore not far wide of the mark when he suggested in Don Juan Don Juan that Baring and Rothschild reigned over both royalists and liberals, and that their loans could "seat a nation or upset a throne." He erred only in regarding the two bankers as financial equals. In 1815 they had been. By 1825 they were not. As early as August 1820 the Bremen delegate to the German Confederation's Diet in Frankfurt had a conversation with his Austrian counterpart Count Buol which acutely identified the unrivalled extent of the Rothschilds' political influence in Europe: that Baring and Rothschild reigned over both royalists and liberals, and that their loans could "seat a nation or upset a throne." He erred only in regarding the two bankers as financial equals. In 1815 they had been. By 1825 they were not. As early as August 1820 the Bremen delegate to the German Confederation's Diet in Frankfurt had a conversation with his Austrian counterpart Count Buol which acutely identified the unrivalled extent of the Rothschilds' political influence in Europe: This house has, through its enormous financial transactions and its banking and credit connections, actually achieved the position of a real Power; it has to such an extent acquired control of the general money market that it is in a position either to hinder or to promote, as it feels inclined, the movements and operations of potentates, and even of the greatest European Powers. Austria needs the Rothschilds' help for her present demonstration against Naples, and Prussia would long ago have been finished with her const.i.tution if the House of Rothschild had not made it possible for her to postpone the evil day.

The Frankfurt banker Simon Moritz von Bethmann echoed this judgement in a letter written at around the same time: N. M. Rothschild, who is equipped with a vulgar talent, audacity and vanity, const.i.tutes the centrifugal point around which the stock exchange revolves. He alone determines the exchange, buying and selling 100,000 each day . . . I can well understand why the Rothschilds are such useful instruments for the [Austrian] government.

Both men had their reasons for disliking this phenomenon, as we shall see; but they did not exaggerate it.

FIVE.

"Hue and Cry" (1826-1829) Seyd Umschlungen Millionen.

-CAPTION TO A GERMAN CARICATURE OF NATHAN ROTHSCHILD

It is not wholly surprising, in view of the decisive role they played in so many post war financial transactions, that the Rothschilds first became famous in the 1820s. Even as early as 1816 Carl was conscious that he and his brothers were becoming "very famous" in their home town. As he told James, "these days a lot is written about us in consequence of the freedom of the Press." He encountered similar publicity when he visited Berlin later the same year. Carl evidently felt uneasy about such celebrity, not least because of the inaccuracy of much that was written. "We are every day in the news," he complained to Amschel. "Last week you were mentioned in the papers in connection with the poor . . . Today you are mentioned in connection with grain, and that you are going to become [the Elector of Hesse-Ka.s.sel's] Minister at the Diet of the Confederation." It was the same in Hamburg: Whenever any one of us arrives gossip and marvellous stories are spread by people. Lawatz told me that at some party in town the story was told that the King of Prussia wrote to us asking to arrange a bond issue of three millions. We are supposed to have replied that this was not necessary, because we were able to advance this sum from our own money.

Amschel too was struck by the public propensity to exaggerate: "People think that we are ten times as rich as we really are." "Wherever we go now," Carl found, "people think it is a political trip." The arrival of James at the St Petersburg stock exchange, or of a ship chartered by Nathan in port, was enough to bring business to a standstill. James had only to buy a certain security in Paris for "everybody" to buy it. Unlike Carl, the youngest brother relished this new-found fame. As he told Nathan, "It is indeed nice to possess so much prestige." "They all say: 'Il n'a jamais existe a Paris une maison aussi fameuse que la notre.' . . . We are now regarded as the the first . . . I sent last week [bills for] three millions to the Banque de France. There was a lot of rubbish among them-yet not a single one was returned." first . . . I sent last week [bills for] three millions to the Banque de France. There was a lot of rubbish among them-yet not a single one was returned."1 Salomon and Nathan too could make light of publicity. "We are not going to cry about the fact that you have been caricatured," he told Nathan. "As you say, so are kings and emperors . . . May G.o.d grant that this is the worst thing that ever happens to us . . . May my Anselm and your Lionel also be caricatured, please G.o.d, as soon as they become well known in this world. I wish this for our darling children . . . [Idle] dreams!" Nathan's att.i.tude was typically robust: " Salomon and Nathan too could make light of publicity. "We are not going to cry about the fact that you have been caricatured," he told Nathan. "As you say, so are kings and emperors . . . May G.o.d grant that this is the worst thing that ever happens to us . . . May my Anselm and your Lionel also be caricatured, please G.o.d, as soon as they become well known in this world. I wish this for our darling children . . . [Idle] dreams!" Nathan's att.i.tude was typically robust: "Gagesh [n.o.body] is not being written about." Press interest-including unsubstantiated claims that they were in f