The Rothschild: Banking Pioneers

The Rothschild is a prominent family that has amassed a huge fortune in the banking industry. It is one of the wealthiest and most powerful families in the world.

Coat of arms granted to the Barons Rothschild by Emperor Francis I of Austria

The beginnings

In the 16th century, the Rothschild were just simple exchangers established in Frankfurt am Main, in a store with the label of the "Red Shield" (in German, "Rot Schild"). The emblem of this store would give the name of the family.

They acquired some importance when Meyer Amschel (1744-1812) the founder of the dynasty, became the banker of his sovereign, the Landgrave from Hesse-Kassel, Wilhelm IX. Supplier in the court of Hesse, Meyer Amschel was introduced within powerful and wealthy groups of merchants. He, as "Jew of the court," enjoyed the confidence of his ruler, and got some relief during the European war that would last 20 years (1792-1815).

In 1798, one of his children, Nathan (1777-1836) settled in England, first in Manchester and then in London. From there, he could centralize the shipments of goods and money that, despite the Continental Blockade, England was pouring into the anti-Napoleonic Europe. In 1813, Nathan became practically the official agent of the British government.

Meyer Amschel died in 1812, but, since the end of the war, the name "Rothschild" was already known everywhere, and in 1815 Nathan was overseeing and directing the London House. James (1792-1868) was established in Paris since 1812, whereas Anselm (1773-1855) Carl (1788-1855) and Salomon (1774-1855) stayed in the old home, in Frankfurt. Some years later, Salomon moved to Vienna and Carl to Naples.

After 1815, the Rothschild added to their traditional banking functions (commercial operations or credits) a specific financial activity: sale of titles, real estate assets... Conservative bankers, they were the treasurers of the Holy Alliance since 1815, being this their first important social ascent: in 1816, they were ennobled by Austrian emperor. Bankers of the counterrevolution, they supplied money to the sovereigns; for this reason, they soon dominated the rest of European bankers.

Thanks to their help, Klemens von Metternich, prime minister of the Austrian Empire (archenemy of Napoleon Bonaparte) could carry out his political plans. In 1822, the 5 brothers were appointed Barons.

The Transformations of Banking in the 19th Century

However, after 1830, the Rothschild had to adapt to a world of fast economic transformation: the upper bank had to decrease their traditional activities and started lending money to the growing industries.

In Paris, in 1831, James managed the personal fortune of Louis Philippe I. In 1835, he was one of the tycoons in the railway industry: É. Pereire obtained his participation in the construction and exploitation of the line Paris-Saint-Germain; but it was the railway line from the north (1847) his biggest success.

The coup on December 2, consolidated the interests of the railway companies, but in 1852 started the confrontation between James de Rothschild and the brothers Pereire, Émile (1800-1875) and Isaac (1806-1880) who, with Benedict and Achilles (1800-1867) Fould, created a new bank: the Credit Mobilier.

It was a ruthlessly fight between the upper traditional bank and a modern banking system, the confrontation between two conceptions: the one of the traditional merchant of capitals and the one of an organization worried about financing the economic expansion, turning to the public credit thanks to advertising methods that repelled the aristocratic upper bank.

The conflict between the Pereires and the Rothschild took place at different places, the stock and the railway markets. So, the line Paris-Lyon-Mediterranean, owned by the Rothschild and Paulin Talabot (1799-1885) united with François Bartholoni (1796-1881) from the Paris-Orleans (southwest) against the Grand Line owned by the Morny Duke and by the Pereires, big enemies of the Rothschild.

The Pereires were defeated in the confrontation; in 1867, they resigned from their executive posts of their own bank, the Credit Mobilier. 

19th Century-20th Century Transformations and Continuity

James died in 1868, a year after the defeat of the Pereires. His brother in London, Nathan, deceased in 1835 was, without a doubt, the one who made the largest fortune within the Rothschild: in 1835, for instance, thanks to the Carlist War in Spain, he took ownership of the mercury mines in Almaden, Spain, indispensable element for the refinement of precious metals.

With Alphonse (1827-1905) in Paris, Lionel (1808-1879) in London, Carl (1820-1886) in Frankfurt and Anselm (1803-1874) in Vienna, the third generation of the Rothschild, assimilated in each country, maintained close family and economic ties. However, the so-called "Rothschild policy" disappeared. Since 1880, the Rothschild had to give place to other banks; since then, the family was limited to manage their large fortune, perfectly settled. Although the Naples and Frankfurt branches disappeared in 1860 and 1901, respectively, the branches of Paris, London and Vienna were gradually consolidating.

Alphonse de Rothschild, head of the Bank of France in 1855, made large profits from the 2 billion frank loan conceded by the House of Paris to France (as Germany imposed to France a large fine for war reparations once the war was ended). This operation annoyed many business and deposit banks, supplanted, which signed a treaty on August 1871. This allowed them to participate in the complementary loan of 3 billion franks on July 1872, where the Rothschild were forced to give them place. But, it is important to highlight that the Rothschild did decrease the reparations of the war and they assured the payment of them. Alphonse was associated in the bank with his brothers Gustave (1829-1911) and Edmond (1845-1934.) The latter one was one of the most devoted advocates of the Zionism.

In London, Lionel, asked by Disraeli, allowed in 1875 Great Britain to buy again the stocks of the Suez Canal Company owned at the time by Isma'il Pasha, Khedive of Egypt and Sudan from 1863 to 1879, what would later trigger the English Imperialism in Egypt and in India. The Rothschild of England also supported the policies of Cecil Rhodes in South Africa and the mining company De Beers that he had created. The power of the Rothschild's English branch went hand-in-hand with the predominance of Great Britain over the rest of the world at that time.

The House of Paris, which was successively headed by Edouard (1868-1949, Alphonse's son) and by Robert (1880-1946, Gustave's son,) and later by the two sons of Robert, Alain (1910-1982) and Elie (n.1917), constituted the starting point for the foundation of multiple societies which had as objective the exploitation of oil in the African countries and of the iron mines in Mauritania. The last heirs of the Rothschild Empire are David (born in 1942, Guy's son), and Edmond (born in 1926, Maurice's son, and Edouard and Robert's brother). Edmond possesses one of the largest fortunes in France.

Source: Investopedia

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