II
THREE
My brother in London is the commanding general, I am his field marshal . . .
—SALOMON ROTHSCHILD
It is an established rule with us that no disapprobation shall be expressed by either of us at the conduct of the other, since as partners we act always for the joint interest and consequently neither of us has the right to blame the other when he has acted for the best.
—SALOMON ROTHSCHILD
Napoleon’s celebrated aphorism—“An army marches on its stomach”—left open the question of how that stomach was to be filled. So did the Duke of Wellington’s equivalent: “To gain your objects you must feed.” All the armies which fought in Europe between 1793 and 1815 resorted at times to the age-old practice of requisitioning provisions from civilian populations. To varying degrees, they also relied on their own lines of supply from secure territory. But taking supplies at gunpoint has the disadvantage of making an army unpopular and food scarce, while extended supply lines are a source of vulnerability. In protracted campaigns like Wellington’s in the Iberian peninsula, more sophisticated methods of procurement were necessary. Above all, it was essential to be able to purchase supplies and to pay troops. The truth of Cicero’s maxim was never more apparent than in the years between 1808 and 1815: nervos belli, pecuniam infinitam, or, as Henry Dundas had put it to William Pitt at the outset of the wars with Revolutionary France: “All modern Wars are a Contention of Purse.”
As early as May 1809 Wellington was complaining to the government in London that he did not have enough of it. In March 1811 he wrote to the Prime Minister, Lord Liverpool, threatening that he would have to halt the campaign altogether because of the lack of cash. A year and a half later, on the eve of the invasion of France itself, the problem was once again acute. The outgoings of his military chest were running at around £100,000 a month, including not only payments to his own troops, but also subsidies to Portugal and Spain (now forcibly won over to the British side). But, as he explained to Earl Bathurst, he was only just able to pay for the subsidies to his allies. In the absence of cash, he was reduced to paying officers in depreciated paper money, while the lower ranks (who refused to accept payment in paper) were not being paid at all. “Unless this army should be assisted with a very large sum of money at a very early period,” he warned the government,
the distress felt by all the troops will be most severe . . . and it will be quite impossible for me to do anything . . . [The Spanish troops] are in so miserable a state, that it is really hardly fair to expect that they will refrain from plundering a beautiful country, into which they enter as conquerors; particularly, adverting to the miseries which their own country has suffered from its invaders. I cannot, therefore, venture to bring them back into France, unless I can feed and pay them . . . Without pay and food, they must plunder; and if they plunder, they will ruin us all.
The nadir was reached in February 1813, when Wellington reported that he could “scarcely stir out of my house on account of the public creditors waiting to demand payment of what is due to them.” As it was Wellington’s financial difficulties which provided Nathan Rothschild with the decisive business opportunity of his career, it is worth saying a few words about the cause of them.
Of all the states of the ancien régime, Britain had the most efficient financial system. The key institutions had evolved in the century after the Glorious Revolution: a relatively cheap and centralised system of revenue collection; a fairly transparent budget-making process in parliament; a more or less stable system of public borrowing, the funded national debt; and an equally stable monetary system revolving around the Bank of England and the convertibility of paper notes into gold. It was this which enabled Britain to wage six major wars in the course of the eighteenth century without succumbing to the kind of political crisis which precipitated the overthrow of the more financially backward French state. But the cost of war rose rapidly after 1789 (partly because the Revolutionary regime was able to field armies of unprecedented size): it has been estimated that the annual cost was five times higher in real terms during the Napoleonic Wars than it had been a century before. Public expenditure in Britain rose sharply between 1793 and 1815, from something like £18 million a year to around £100 million (around 16 per cent of estimated national income). The total cost of war with France in that period was around £830 million, of which some £59 million took the form of subsidies to Britain’s less solvent allies. A host of new taxes had to be created, of which the income tax was the most important, but these only paid for about a quarter of the war’s costs. As a result, the national debt soared from £240 million in 1793 to £900 million in 1815, close to 200 per cent of national income. Moreover, in 1797 the Bank of England felt obliged to suspend gold convertibility, ushering in a period of currency depreciation. The combination of wartime shortages and the growth of paper-money circulation led to inflation: prices roughly doubled in the twenty years before 1815. Wellington’s campaign was therefore being fought at a time of unparalleled fiscal “overstretch.”
This does not fully explain the Duke’s difficulties, however, which were partly logistical. Even if the Exchequer in London had been overflowing, it would still have been difficult to get money to Wellington in a form that Spanish merchants would accept. Up until 1813 there were two ways in which this could be done. Either bullion (in the form of gold guineas)1 could be shipped to Portugal or Spain, and exchanged there for local coins; or the Duke could borrow from local bankers by selling them bills on London. Given the risks which attended large-scale shipments of gold, it was the latter method to which Wellington more often had recourse. The problem was that by 1812 the Iberian market for bills on London was saturated, and Wellington found that he could sell new bills only at a prohibitively steep discount: “The patriotic gentlemen at Lisbon,” he complained to Bathurst, “will give us no money, or very little, for the draughts on the Treasury.” It was into this breach that Nathan Rothschild stepped.
War and Peace
Historians have never adequately explained how an obscure Jewish merchant banker—who only a few years before had been a smuggler, and a few years before that a minor textiles exporter—was able to become the principal conduit of money from the British government to the continental battlefields on which the fate of Europe was decided in 1814 and 1815. Of all the steps in the ascent of the house of Rothschild, this was surely the greatest; yet it is also the least understood.
Three distinct elements were required to turn Nathan into (as his brothers later said, only half in jest) the “commanding general”—the Napoleon of finance. The first was the absence of competition. This was a matter of sheer good luck, for before 1810 the City of London was not short of able bankers. Harman & Co. (whom we have already encountered among the Rothschilds’ earliest correspondents in London), Reid, Irving & Co., Smith, Payne & Smith and above all Baring Brothers—all might have been expected to assist the government in its financial difficulties. Indeed, the Barings had already been involved in relaying British funds in the form of loans to Portugal. Nor was Nathan the only Jewish merchant seeking to challenge the established banks: Abraham and Benjamin Goldsmid had been doing so since the 1790s, while a succession of German bankers arrived in London in the years after 1802 (notably Schröder, Brandt and Huth) intending to emulate their achievements. As the new Commissary-in-Chief who had been entrusted with the task of providing Wellington with funds observed in November 1813, “Many houses have already offered their services to me.” Indeed, his first instinct was that Barings were “on every score the most proper channel for our money transactions.” Yet it soon became apparent that neither Barings nor any other established firm was in a position to act. In the case of Barings, this was partly because leadership of the firm had only recently passed from Francis Baring (who died in 1810) to his son Alexander. The main reason, however, was that the City as a whole was reeling from two major shocks. The first was the crisis of 1810, partly occasioned by the report of the Bullion Committee, recommending (against the advice of the Bank of England) an early resumption of gold payments. The prospect of a period of tight money—which this implied—led to a slump in the price of government stocks and left the Barings and the Goldsmids holding substantial amounts of the most recent government loan. Barings lost around £43,000. Abraham Goldsmid committed suicide, leading (as William Cobbett remarked with distaste) to “alarm and dismay” in the City and an intensification of the panic. Probably of equal importance was the simultaneous collapse of the Amsterdam market occasioned by Napoleon’s annexation of the Netherlands. This left Barings’ continental partner Hope & Co., which had for some time played a dominant role in Russian finances, a mere “empty shell.”
The second factor in Nathan’s favour was the appointment of John Charles Herries as Commissary-in-Chief in October 1811. Herries was to be Nathan’s Buderus, his first “friend” in a high place. Himself the son of a minor merchant banker, Herries had risen through the political ranks rapidly since becoming a junior clerk at the Treasury in 1798. Three years later he was appointed private secretary to Nicholas Vansittart, the Secretary to the Treasury, and served Spencer Perceval in the same capacity when he was Chancellor of the Exchequer in 1807-9. It was not only his family background in finance, however, which enabled Herries to identify Nathan Rothschild as the solution to his problem as Commissary. For Herries, unusually, was something of a Germanophile. Not only had he studied in Leipzig; he had even translated Friedrich Gentz’s anti-French tract On the State of Europe before and after the French Revolution. It also seems possible that it was a friendship dating back to his Leipzig days which alerted him to the potential usefulness of the Rothschilds. According to one account, Herries had, as a student, been involved romantically with a woman who was now the wife of an ennobled Leipzig tobacco merchant named Baron Limburger—to the extent that he had an illegitimate child by her. The Limburgers later claimed that it was on their recommendation that Herries had involved Nathan in the financing of Wellington’s campaign; and it seems reasonable to infer something of the sort from the fact that they subsequently felt able to claim between £30,000 and £40,000 as a 1 per cent commission on the money made by Nathan on government business. On the other hand, it was not until February 1814—after Nathan’s first commission from the government—that Limburger wrote to Herries, praising the Rothschilds’ “zeal and prudence,” but at the same time offering his own services as “an upright and prudent individual” to superintend their operations; and Herries was initially cool in his response. On reflection, he did decide to employ Limburger in the way suggested, but he was careful to emphasise that his confidence in Nathan predated Limburger’s involvement. Similarly, it was not until June of the same year that the Rothschilds began to regard Limburger as having influence with Herries.
It is possible that Limburger was merely one of those unscrupulous and opportunistic conmen who abounded in Napoleonic Europe, and that he was subtly blackmailing Herries on account of his bastard child. As Carl commented sceptically in early 1815, Limburger’s wife was “a great lover of money,” and Amschel suspected Limburger himself of merely “playing the great man.” In the end, the Limburgers had to be paid off with £15,000 in a manner which was more appropriate to blackmailers than partners. Nevertheless, as Carl had to admit, Limburger “had done us a favour,” if only by acting as an aristocratic go-between in the brothers’ dealings with continental governments.
The third and most important reason Nathan became involved in British war finance was that, unlike his rivals, he had a solution to the problem of how to get money to Wellington. As so often, Nathan subsequently made what he had done sound easy:
When I was settled in London, the East India Company had £800,000 worth of gold to sell. I went to the sale, and bought it all. I knew the Duke of Wellington must have it. I had bought a great many of his bills at a discount. The Government sent for me and said they must have it. When they got it, they did not know how to get it to Portugal. I undertook all that and I sent it to France; and that was the best business I ever did.
And, of course, the story has been embroidered by myth-makers, attributing patriotic motives to Nathan and even imagining James crossing the French lines in woman’s clothing. The reality was very different. At some point before March 1811 the Rothschilds became involved in smuggling gold bullion from England to France. This was technically a breach of the Continental System, but it was tolerated by Napoleon and later actually licensed. The youngest Rothschild brother took care of the business on the other side of the Channel, at Gravelines or Dunkirk, exchanging the imported guineas for bills on London, the prices of which were naturally very low in France at that time and which could then be redeemed at a profit in London. A typical series of six shipments from Nathan to James in April 1812 amounted to some £27,300 in guineas, in return for which James sent Nathan bills from Paris bankers like Hottinguer, Davillier, Faber and Morell with a face value of £65,798. The other Rothschild brothers contributed by relaying suitable bills to James from Hamburg and Frankfurt.
As with the earlier covert operations on behalf of the Elector of Hesse-Kassel, an unsophisticated code was devised which more or less sufficed to allay French suspicions. Nathan became “Langbein,” London became “Jerusalem,” and the transfers of bullion across the Channel were codenamed “Rabbi Moses” or “Rabbi Mosche.” Incriminating consignments were referred to, variously, as “beer,” “fish” or “children.” Other key figures (no longer identifiable) were known as “the fat man” and “the cursed one.” In addition, to ensure that cross-Channel communications were as secure and swift as possible, agents at Dover were authorised to charter boats for Rothschild business. It was one such vessel which smuggled James himself across the Channel when he visited Nathan in 1813. “Playing hide and seek” with the authorities was becoming second nature to the brothers. Indeed, even their sons were already being taught to attach importance to secrecy: at the age of just eleven Salomon’s son Anselm refused to let his teacher correct a letter he was writing to his father. “My dear mother,” the boy explained, “how can I possibly divulge the secrets which I share with my father to Mr Sachs?”
It was probably the scale of Nathan’s purchases of bullion in London which first brought him to Herries’s attention. It may also be that some of the bills which were finding their way back to London through the Rothschilds were Wellington’s, having been sold on by his Spanish, Portuguese and Maltese bankers to Paris houses. And it is just possible that James was already using the bullion sent to him by Nathan to buy bills on Spanish and Portuguese houses which were then sent across the Pyrenees to Wellington. Although evidence for this assertion is scant, it is not implausible. After all, money had been sent in 1806 and 1807 from Spain’s American colonies to France by an even more circuitous route starting in Vera Cruz, heading north to New York and then crossing the Atlantic, via London, to Paris. Indeed, on one occasion Mexican piasters worth over 14 million francs were shipped across the Channel to the French Treasury by a British warship! Generally speaking, the profits to be made from such transactions were regarded as outweighing the benefits the enemy derived from the money itself. In addition, there was a degree of theoretical confusion as to the economic significance of such transfers of bullion, which helps to explain why the French authorities tolerated James’s activities in Paris and Bordeaux (about which they were quite well informed). Although some French police officials had their suspicions, Napoleon followed the advice of his Minister of the Public Treasury, François Nicholas Mollien, who argued that any outflow of bullion from Britain was a sign of economic weakness and therefore advantageous to France.
This was a bad miscalculation; on the contrary, the Rothschilds’ ability to relay specie across the Channel was about to become a decisive source of strength to Britain. On January 11, 1814, Nathan was officially charged with the task of financing Wellington’s advance through France. In Vansittart’s words, Herries was to “employ that gentleman [Nathan] in the most secret and confidential manner to collect in Germany, France and Holland the largest quantity of French gold and silver coins, not exceeding in value £600,000, which he may be able to procure within two months from the present time.” These were then to be delivered to British vessels at the Dutch port of Helvoetsluys, whence they would be relayed to Wellington via St Jean de Luz, near Biarritz. It was to be “distinctly understood by Mr Rothschild . . . that he is to take upon himself all risks and losses, which may occur, prior to the delivery on board His Majesty’s ship.” If successful, he would be entitled to a commission of 2 per cent on the sum delivered. But, at all costs, secrecy must be maintained. This was a breakthrough, in that it was the Rothschilds’ first official commission from the British government and it brought Nathan into direct contact not only with Herries—by March, he was “almost continually” in Herries’s office—but with Vansittart and the Prime Minister himself, Lord Liverpool.
Admittedly, the operation proved to be rather more difficult than Nathan had anticipated. Meyer Davidson, whom Nathan sent to Amsterdam, complained repeatedly about the short supply of suitable coins in the wake of the French occupation, and quickly concluded that new napoléons d’or (the imperial successor to the old louis d’or coin) would have to be struck if Nathan was to fulfil his contract. By the end of February Davidson had been able to accumulate no more than £150,000, “Yet this is like a drop of water in the ocean. Why? Because it is . . . an English government commission and the English government could make use of all the cash that exists on the continent and even this would not satisfy them.” Davidson began to fear that the transaction could not be carried out, and there was talk of reducing the target figure from £600,000 to half that amount.
Despite these difficulties, however, Herries was impressed. As early as February 22 Wellington was writing to thank Bathurst for “the supplies of money which are very ample.” By April Nathan and James were able to convert over £20,000 into guilders for immediate use by the British forces, and the Rothschilds continued to furnish the advancing army with money until the end of the year, when the government resumed normal methods of payment. As Herries told Sir George Burgman, the British paymaster in Amsterdam, “Rothschild of this place has executed the various services entrusted to him in this line admirably well, and though a Jew, we place a good deal of confidence in him.” One reason for Herries’s satisfaction was that the Rothschilds delivered substantial amounts of the cash to Helvoetsluys in advance of being paid by the government, leading some historians to assume that Nathan was using Prince William’s London stocks as collateral for large-scale borrowings in London and Paris. This is possible, but it cannot have been the brothers’ sole source of credit, given the size of the sums involved. As Neal has put it, Nathan was “financ[ing] the war against France with the resources of the continent”—merchants’ bills on London which the Rothschilds were buying up and converting into bullion, which they then sent to Wellington’s army on Herrries’s account. By the middle of May Nathan was owed as much as £1,167,000 by the government—a sum large enough to terrify his brother Salomon, and evidently more than even Nathan could sustain. As Herries told Drummond, his representative in France, he was
not surprised at the extreme solicitude of the brother in London to obtain money from you. They are now serving us to a very considerable extent by their credit and if we fail to supply [them] with funds to meet these engagements the weight is greater than any individual however rich could be expected to support. The brother here is doing the business remarkably well and seems capable of supplying one with money to any extent.
It was not only the British army which received money from the Rothschilds on Herries’s account in 1814. Of rather more importance—because potentially more lucrative—were the payments which had to be made by the British government to finance the military efforts of its less solvent allies on the continent. Such payments had previously been handled by banks such as Barings and Reid, Irving, but now Nathan, having won Herries’s confidence, was well placed to take them over. The only difficulty lay in persuading the recipient countries to place similar confidence in his brothers on the other side of the Channel. This was achieved most easily with Russia, rather less easily with Prussia and only to a limited extent with Austria. Smaller Allied states—including Mecklenburg and, predictably, Hesse-Kassel—also received money through the Rothschilds, as did the returning French monarch, Louis XVIII. The total amounts involved were huge. Altogether between 1811 and 1815 Britain paid around £42 million to her allies. The Rothschilds became involved late in the day, but swiftly established a dominant position. In June 1814 Herries listed the payments they had so far made to Prussia, Austria, the French King and the British army. Including money that had not yet been disbursed, the total was 12.6 million francs, and more was to come. Small wonder Lord Liverpool referred to “Mr Rothschild” as “a very useful friend.” “I do not know,” he told Castlereagh, “what we should have done without him last year [1814].”
It proved relatively easy to secure a substantial share of the Russian business. The agreement reached between Britain, Russia and Prussia at Reichenbach in June 1813 had promised a total payment of £1,333,333 to Russia and £666,666 to Prussia, partly in the form of interest-bearing treasury bills. However, the cash-strapped British government repeatedly deferred payment and it was not until the end of May 1814 that an agreement was reached which provided for fifteen monthly instalments of a million Prussian thaler each (in the form of interest-bearing drafts), two-thirds to Russia, one-third to Prussia. Gervais, the Russian diplomat charged with converting the subsidy into cash, initially turned to Hope & Co., seeking an advance on the first seven months’ payments and offering a discount of 2 per cent. But the Hope director Labouchère hesitated and the Rothschilds—represented ably by Salomon and James—snapped up the business. They offered not only to convert instalments worth 4 million thaler into louis d’or and ducats, but to deliver most of the money to Hamburg, Dresden and Warsaw, where it was urgently needed to pay Russian troops.
The Rothschilds’ terms were evidently attractive enough, especially in the initial absence of competition. As James said, Gervais “needed cash, and soon,” and no other firm would risk delivering so much cash to remote Warsaw. It was also advantageous from a British viewpoint to let the Rothschilds handle the transaction, as they undertook to reduce the interest Britain had to pay and to secure a more favourable exchange rate from pounds to thalers than had originally been agreed. Indeed, James exuberantly claimed that “a better deal had never been made for [a] government.” “You can confidently tell Lord Liverpool,” he told Nathan with youthful bravado, “that this transaction is a masterpiece.”
It was a masterpiece in more ways than one. As their father had taught them, the brothers were always careful to make their terms attractive not only to governments, but also to the individual officials with whom they were negotiating. Thus, to ensure that Gervais acquired a personal interest in doing business with Rothschilds—to make him a reliable “friend” or “helper” of the house—he and other Russian officials were discreetly plied with money in the form of commissions and interest-free loans. This was, as the brothers themselves privately acknowledged, no more or less than bribery. Under the terms of a separate agreement with Russia, a 1 per cent commission went straight into Gervais’s pocket. “Our friend baksheesh” (“der Freund Schmiergeld”) had, as James and Carl said, played a vital role not only in clinching the deal, but in paving the way for future deals. For, as Davidson archly put it, “Now the Russian knows Salomon and Salomon knows the Russian.” Characteristically, the brothers had widely differing views as to how much Gervais should receive. Salomon knew—or thought he knew—Gervais’s price. On reflection, he felt James had given the Russian “too much of the profits” and “obviously [did] not understand how bribes are given”: the gift of a watch and some English stocks would have sufficed. But James dimissed this as “really stupid,” assuring his brothers that he would be able to secure an even bigger commission on the next Russian transfer: “The money given to Gervais makes all the difference and I happen to know the man.” Carl appears to have sided with James in this argument, but could not resist pointing out that bribing Gervais had originally been his idea.
Such payments to politicians and civil servants should not, of course, be judged by the standards of late-twentieth-century Britain, where holders of public office are forbidden to accept bribes, and Members of Parliament are obliged to declare their private business interests, consultancy fees and even gifts. As we shall see, bribery was common practice in most of Europe for most of the nineteenth century, and the Rothschilds frequently obliged the more venal politicians and civil servants they encountered with cash payments. To be sure, as contemporaries often remarked, “corruption” varied in its character and degree from place to place as well as over time. Even in 1814—long before the spread of Gladstonian notions of public probity—British officials were understood to be more scrupulous than Russian; or, rather, they were known to be more subject to parliamentary and press scrutiny. For this reason, the payments to Gervais were carefully concealed from Herries, and there was no question of Herries himself receiving similar sums. But more subtle ways could be found of taking his private interests into consideration. In July 1814 Amschel sent Nathan a letter from Madame Limburger relating to her illegitimate child—a letter he advised his brother to show to the child’s father, Herries. “It would be good [if you could],” he wrote, “because he may give you the Prussian and Russian business, as he would very much like the child to make some more money. And if the child gets a quarter of the profit, then we would have our profit, too.”
The Russian subsidy deal was indeed a Meistergeschäft—for the British government, for Gervais, and above all for the Rothschilds themselves. Taking into account their 2 per cent commission from Britain, an additional 2 per cent to cover costs and a further 4 per cent from the Russian government, their gross profit on the first tranche of 4 million thaler was of the order of 8 per cent. Later payments (of 3.7 million francs and 5.3 million thaler) yielded comparable returns. Other governments were equally willing to pay substantial commissions in order to convert their subsidies into ready cash. The government of Mecklenburg “needed money like bread,” James reported from Schwerin, and was willing to forgo up to 30 per cent of its 1.5 million thaler subsidy entitlement—and pay a 5 per cent commission—if the Rothschilds could arrange “immediate payment.” “They would do anything we want them [to do],” wrote James gleefully, “in order to obtain money quickly.” The returning French King, Louis XVIII, was also furnished with money by Rothschilds in the form of bills on Paris. There were equally easy pickings in Hesse-Kassel, where, following the departure of Dalberg and prior to the return of the Elector, a skeleton administration struggled to pay the costs imposed by Allied armies in transit. With the Russian Second Army Corps requisitioning already scarce grain and not a penny left in the War Chest, William’s officials turned in desperation to the Rothschilds for a 250,000 gulden loan. Initially intended to be for only six months, part of this loan had to be prolonged because of the virtual impossibility of raising adequate taxation from the “plundered” and “exhausted” populace.
By contrast, the Prussian subsidy business proved at once harder to secure and less lucrative. In part, this was because Prussian negotiators were less biddable than Gervais. The brothers made overtures to the Finance Minister Prince Bülow and to Prince Hardenberg’s adviser Christian Rother, but elicited only a lukewarm response, despite the positive impression made by Herries’s recommendation. James managed to secure three instalments totalling a million thaler, but the Prussians dismissed the 2 per cent commission he asked as too high. “There’s money to be made from Russia,” James suspected, “but none from Prussia.” Six months on, he saw no reason to revise that initial judgement: “There is generally no pleasure in doing business with the Prussians,” he grumbled as yet another bid was rejected. In the end, the brothers had to do without a commission altogether, and although the 3 per cent profit finally realised on this deal was better than had initially been expected, they had to console themselves with the thought that they had at least secured a foothold in Berlin, which might prove more profitable in the future. “At any rate,” James reflected, “we have now, thank God, managed to push our way into the business, and it will be of considerable use in bringing us into contact with the Prussian court.”
It proved harder still to “establish contact” with the Austrian court. Under the Treaty of Treplitz of 1813, the Austrians were to be paid a million pounds as a subsidy, and the Treaty of Chaumont of January 1814 increased the total by two-thirds, to be paid in monthly instalments of £138,888. After the French defeat, the total due was scaled down to £555,555. Again the Rothschilds put in a bid to handle part of the transfer, backed up as usual by Herries. The terms were deliberately generous: not only did the Rothschilds offer to waive any commission, but they offered to convert sterling into gulden at the rate of 8.48 to the pound. But Barbier, the Vice-President of the Austrian Treasury, and his superior, the Finance Minister Count Ugarte, rejected the offer in the belief that Viennese banks should be employed. A second bid to transfer monies to Austria from Belgium (to defray the costs of occupation) also fell through because the Austrians sought to attach unacceptable conditions to the Rothschild offer.2
All the diverse inter-governmental payments the Rothschilds succeeded in making in 1814 had one thing in common: in each case, there were at least two ways (and sometimes three) to make a profit. The first and most obvious took the form of commissions, which ranged, as we have seen, from as much as 8 per cent to as little as zero. The second—potentially more lucrative but also riskier—lay in exploiting the often rapid and large exchange rate movements which occurred in this period. This was how the otherwise unattractive Prussian transfer was made to yield a profit; and it seems to have been attempted on most of the other transfers too. Essentially, the brothers were able to take advantage of the variations in exchange rates from place to place, which reflected the absence—especially pronounced in wartime—of an integrated European foreign exchange market, and the effects of political uncertainty—also at a peak in 1814-15. On a given day, a draft or bill denominated in sterling might be worth quite different amounts in terms of gulden in London, Amsterdam and Frankfurt. Arbitrage transactions sought to exploit those differences by buying a currency cheap in one market and selling it dear in another. In the same way, the exchange rate of the thaler or the ducat could vary dramatically within a short space of time. Classic forward exchange speculation meant timing payments so that a particular currency could be bought when its exchange rate was weakest and sold when it was strongest.
The Rothschild brothers were singularly well placed to carry out such transactions. Not only did they have permanent bases in Frankfurt and London and semi-permanent offices in Amsterdam and Paris; individual brothers also continued to undertake business trips as far afield as Berlin and Prague. Moreover, thanks to their relationship with Herries, they had a large advantage over their competitors. For one of the main causes of volatility on the foreign exchanges was the very transfers of money from Britain to the continent which the Rothschilds themselves were being asked to undertake. Long before 1814, British observers had realised that large purchases of foreign currency with sterling bills tended to cause the pound to depreciate. The bigger the deficit on the British balance of payments—in effect, the more such unrequited subsidy payments had to be made—the more the pound’s exchange rate slid. It was precisely Nathan’s commitment to Herries to undertake the transfers with the minimum exchange rate depreciation which secured him the subsidy business in the first place; and the brothers never ceased to draw Herries’s attention to their success in this regard. (This was what James was driving at when he described the first major Russian transfer as a “masterpiece” from the British point of view.) At the same time, however, the Rothschilds were able to derive substantial benefits for themselves by exploiting the effects of their transactions on the various currency markets.
The key lay in controlling the sterling exchange rate, and this was in many ways the brothers’ principal concern in this period. As early as June 1811, when they were first engaged in smuggling bullion across the Channel, Amschel accused James of “forcing the rate of exchange in Jerusalem [London] too high” (meaning, in fact, that the pound was falling against the franc); and James’s letters to Nathan the following year frequently refer to his efforts to keep the franc from rising. “It is impossible,” he assured Nathan, “to do more than I do to keep [the exchange] so low as possible.” These early experiences explain the success with which the Rothschilds avoided substantial depreciation when transferring larger sums for Herries. To Herries’s surprise and satisfaction, Nathan was able to disburse as much as “£700,000 in the purchase of bills on Holland and Frankfurt, without its having produced the smallest effect or excited any sensation on the market . . . The exchange is better now than when the operation commmenced . . . I am convinced that £100,000 negotiated by a foreign minister or an officer of the commissariat would have produced ten times the effect of Rothschild’s operations.” The fall of Paris to the Allied armies naturally strengthened the pound, but the continued payment of subsidies soon threatened to weaken it again. For this reason, the Rothschilds intervened to push it up further. By now the markets were tending to follow the Rothschild lead. As Carl noted: “When we buy, everybody buys.” This reflected the widespread belief that the Rothschilds were acting “on behalf of the English government and that this is being done in order to force the rate of the pound sterling up [and] . . . that we succeeded very well in doing so.”
In reality, of course, the Rothschilds had reasons of their own for holding up the pound. With movements of sterling more or less predictable, it was possible to engage in profitable arbitrage on the back of the big subsidy transfers. In May 1814, for example, Salomon drew Nathan’s attention to the substantial gap between the Paris and London gold quotations. A month later it was Nathan’s turn to urge James to buy undervalued pounds in Frankfurt. The subsidy payments to Gervais generated a succession of profits from exchange rate differences. For example, Amschel went to Berlin in July to take advantage of the premium on ducats over louis d’or. The ducats which were delivered to Gervais in August and September had been bought by James at a lower price in Amsterdam, yielding an extra profit of some 4 per cent.
Such transactions probably accounted for the lion’s share of the profits the Rothschilds made in this decisive period. Amschel was only half joking when, during the post-war surge in sterling, he wrote urging Salomon: “Do your stuff, make the Frankfurt house richer by a million francs, the Paris house richer by a million louis d’or and the London house richer by a million pounds, and you’ll be awarded the order of the Grande Armee!” Yet it must be stressed that this was a strategy fraught with risk. It was exceedingly difficult to accumulate the cash necessary to carry out the subsidy transfers to Russia and Prussia on time. The Frankfurt house found its sources of credit all but exhausted on more than one occasion, and Carl and Amschel frequently complained that Nathan was biting off more than they could chew. Raising sums of the order of 600,000 gulden was, as Carl complained, “no joke.” At the same time, the governments concerned in the subsidy transfers naturally resented the fact that the Rothschilds were making these large profits on the side. Even Herries and Gervais on occasion complained about what was going on, while the Prussian government managed to pass at least some of the costs occasioned by the unexpected fall of the pound in August back on to the Rothschilds. The exchange rate was also a stumbling block in the negotiations with Austria.
Moreover, the success of arbitrage and forward exchange operations hinged on rapid communication. As far as possible, the brothers sought to keep one another abreast of news which might affect the exchange markets: the impending payment of a new subsidy, the likelihood of further military action, the imminence of the peace treaty being signed. And, as we have seen, they were already able to transmit such information through their own couriers considerably faster than was possible through official channels or the regular post. Yet the time-lags could still be substantial and Nathan was constantly being urged to speed up the system. When sterling surged by 6 per cent in Amsterdam, James wrote impatiently for guidance:
Now, dear Nathan, if you think the subsidies are going to stop, then you can be sure that the exchange rate will rise again, as there will be fewer bills. But if you think that there will be further transfers, then the exchange [rate] will fall again . . . One simply no longer knows what to do about the exchange rate. It is terrible that you, dear brother Nathan, don’t bother to write me your opinion, because now it is vital to know what is going on over there.
So anxious was Amschel to have up-to-date news from London that he asked Nathan to send his letters by more than one route—via Paris and Amsterdam as well as Dunkirk—and to use colour-coded envelopes so that his contact at the post office could tell at a glance whether the exchange rate was rising (blue) or falling (red).
And even with the benefit of swift communications, it was still possible to be caught out. In July 1814 Nathan unexpectedly remitted—“like a madman”—more than £100,000 to his brothers in Frankfurt. This caused the pound to drop at once in Frankfurt; and when the slide persisted into August and spread to Amsterdam, a “depressed” Carl began to fear that Nathan had lost control of the market. Salomon nervously warned Nathan not to “bring the pound below a certain level”: “If you are not careful you will not remain the master of the Stock Exchange.” Even as matters stood, confidence in sterling on the continent had been badly damaged. These anxieties were merely compounded by Amschel’s continuing confidence (which may have been due to the fact that, just as he had feared, bad news had not reached him soon enough). It was time, Carl felt, to stop speculating in sterling:
But if you were to write about this to Amschel [in Berlin] he would do exactly the contrary and would buy sterling immediately without thinking things over first. No one on earth can imagine what I have to go through. Immediately after his arrival in Leipzig he proceeded to purchase £10,000 at 136. His opinion is that the pound will rise to 140 but if it were to reach 140 he still would not be able to decide whether he could sell or not. He would maintain the fact that it would rise to 150 and so forth . . . If therefore you write to him, have a fixed . . . amount in your mind and tell him half of it, as he will no doubt buy more in any case.
When Amschel realised his mistake, he found it “astonishing”—the more so as he was held responsible for the fall of sterling in Berlin! “Could I have been more careful?” he retorted, stung by his brothers’ criticisms. “You really want to be able to go out in the rain without getting wet.” Salomon’s gloomy conclusion was that Nathan had overreached himself: “No man on earth can at any time fix the rate of the pound except a government which would be ready to risk half a million pounds during one year in order to carry out a monetary plan . . . I do not think there is any point in buying sterling for the purpose of keeping the rate of the pound from falling, because there is too much of this currency already in the world.” James even suggested a change of strategy: running up sterling debts on the assumption of continuing depreciation. It was only gradually—and with Nathan “operating . . . as much as lies in my power” to push the rate back up—that the brothers recovered their confidence in the pound. By November James found that it was once again enough for him “to put in an appearance” at the Hamburg stock exchange for the pound to rise, and the same was true when he visited Berlin early in the New Year.3 By February he could confidently report to Nathan: “It depends solely on me whether the pound rises or falls in Paris.”
There was another (and not dissimilar) way of profiting indirectly from the subsidy business: by speculating on fluctuations in bond prices. Like exchange rates, bond prices were highly sensitive to large international transfers, as well as to related political developments. For example: the price of Russian bonds had plummeted from 65 per cent of their face value to just 25 between February and October 1812, for the reason that the French invasion had led to the suspension of interest payments on the government debt. News of the retreat from Moscow led to a rally: on November 30 they were quoted at 35 in Amsterdam and by March 1813 they had risen to 50, only to fall back to 41 in June on news of Napoleon’s victories in Saxony. As the prospect of an Allied victory neared, so Russian bonds rallied, with the payment of subsidies from Britain strongly implying an imminent resumption of interest payments. It therefore made sense for anyone who anticipated the defeat of France to buy the bonds of states allied to Britain while they were still in the doldrums. The Rothschilds attempted to do so, albeit rather late in the day. By the time Nathan sent his brother-in-law Moses Montefiore to Paris with instructions to make some speculative purchases, Russian bonds were already close to par. Nevertheless, James was convinced that they would go higher, having received information (from Gervais) that interest payments would soon be resumed. Amschel also made purchases of modest amounts of bonds from neighbouring German states that August. And in March 1815 Rothschild purchases based on similar calculations pushed up the price of Austrian bonds. However, it seems that much less money was made from these transactions than from arbitrage and foreign exchange speculation, which were on a much larger scale. Indeed, the last bond purchases very probably led to considerable losses—for reasons which will become clear.
Nathan’s Waterloo
As soon as the French had been defeated, of course, and Napoleon exiled to Elba, the end of the subsidy business was in sight—or seemed to be. Nor did any major new money-making opportunity present itself. The French financial position in 1814 appeared to preclude the payment of reparations. Although the debts of the French state accumulated in the period before around 1800 had been largely wiped out by the assignat inflation, Napoleon’s wars had run up a new internal debt of 1.27 billion francs and rentes perpétuelles (the French equivalent of British consols) stood at around 58 (that is, 42 per cent below par). Napoleon had succeeded in reforming the currency, giving a monopoly on note issue to the Banque de France and effectively placing the new franc on a bimetallic (gold and silver) standard. But by 1814 the reserves of precious metal in Paris were severely depleted. The most the victorious Allies therefore asked of the restored Bourbon regime was a modest contribution to the costs of the military occupation of France in the form of interest-bearing bons royaux. The Rothschilds might have expected to play a major part in these transactions, given their dominant role in the British subsidy transfers. But they were disappointed. Although they seem to have handled some franc-denominated payments to Russia, their bid to convert the Austrian share of the bons royaux into cash for a commission of 0.5 per cent was rejected, as were later proposals to the other Allied powers.
For this reason, it is tempting to see Napoleon’s return from Elba on March 1, 1815, as an immense stroke of luck for the Rothschilds. Just as the brothers appeared to be losing the peace, Bonaparte’s “Hundred Days” plunged Europe back into war, restoring the financial conditions in which the Rothschilds had hitherto thrived. This idea that Nathan profited from the dramatic events of 1815 is central to Rothschild mythology: it has been repeatedly claimed that, by obtaining the first news of Napoleon’s defeat at Waterloo—before even the government itself—Nathan was able to make a huge sum of money on the Stock Exchange. The more fabulous elements of the myth—Nathan’s presence at the battle itself, his riding alongside Wellington, his stormy night crossing from Ostend to Dover, his profits of between £20 and £135 million—have long ago been debunked. Nevertheless, historians—including Victor Rothschild himself—have continued to assume that the Rothschilds benefited at least to some extent from the resumption of war and the final Allied victory. Even if the money made from buying British government stock immediately after the battle can have amounted to little more than £10,000, their total profits from the Waterloo campaign have been estimated at around a million pounds.
The real story is very different. It is true that the resumption of war appeared to promise a return to the lucrative business conditions of 1814—but not because of its effect on consols, which, as we have seen, had hitherto been of relatively minor importance to Nathan. (It was the Barings who were once again given responsibility for a new issue of gilts in 1815.) Rather, it was to a resumption of his previous business with Herries that he now looked, on the assumption that Napoleon’s return would create the same urgent need for transfers of money from England to the continent as the year before. Up to a point, this was perfectly correct. But the Rothschild correspondence reveals that the resumption of payments to Wellington and to Britain’s continental allies proved a source of far less easy pickings than in 1814. Indeed, it is possible that a series of miscalculations by the brothers led to losses rather than profits in the critical period before and after Waterloo. On this occasion, it seems, reality is diametrically opposite to myth.
To begin with, Napoleon’s return was, as Nathan put it, nothing but “unpleasant news” for the Rothschilds. Early March had seen the brothers buying Austrian stocks in the expectation of a bull market in both Vienna and London. When the news of the escape from Elba reached Nathan on March 10, this prospect evaporated. There was, he informed Salomon, “stagnation on ’Change . . . in the bill way, and I am prevented from making you a large remittance.” The effect on Paris was even worse: “It is practically not possible to continue business at present,” reported James. True, Nathan was quick to reorientate his operations. On the assumption that the British government would soon once again need cash on the continent, he began buying up bullion in London, which he then sold to Herries for shipment to Wellington. Immense sums were involved: in the first week of April alone, Nathan bought “100,000 guineas gold, £50,000 foreign and upwards of 100,000 Spanish dollars and . . . nearly £200,000 good bills.” To maximise the amount he could offer Herries, Nathan also sent Salomon to Amsterdam and James to Hamburg with orders “to purchase plenty of gold for the armies” and send it to London. The first shipment to the continent—three ingots worth around £3,000—was despatched on April 4; around £28,000 followed on May 1, and by June 13 more than £250,000 had been sent. On April 22 Nathan sold Herries gold worth around £80,000; by October 20 he had provided gold coins worth a total of £2,136,916—enough to fill 884 boxes and 55 casks. In addition, he offered his services again to relay a new tranche of subsidies to Britain’s allies, which at their peak reached the unprecedented level of a million pounds a month. This time, not only Russia and Prussia but the previously aloof Austrians found they had little option but to accept payment from the Rothschilds—as did a gaggle of other states, including Saxony, Baden, Württemberg, Bavaria, Saxe-Weimar, Hesse, Denmark and Sardinia. Altogether, Herries’s account with Nathan in 1815 amounted to £9,789,778.4
Assuming that the commissions charged for these transfers were, as in 1814, somewhere between 2 and 6 per cent, that figure might seem to imply profits in the region of £390,000. However, this overlooks the role of exchange rate fluctuations which, as in 1814, were the key to the profitability of the transfer payments. The immediate impact of Nathan’s bullion purchases in London was to weaken sterling, pushing up the price of gold by as much as 23 per cent. This represented a major gamble, as it remained uncertain throughout March whether Britain would in fact go to war against Bonaparte once more. (Had it been postponed, Nathan might have found himself with a large stock of unwanted and depreciating bullion.) When the decision for war was finally confirmed, Nathan sought once again to strengthen sterling’s exchange rate with the continental currencies—he was duly credited with pushing the pound up from 17.50 francs to the pound to 22. The Rothschilds’ “commanding general” was now quite confident of his ability to control the exchanges: “You need be under no uneasiness from anywhere,” he told James. “Our resources here are like lions, equal if not superior to all and every demand.” He was equally sanguine in a letter to Carl: “I am not limited to a trifling difference in the exchange . . . which will give me great command over the market.” Nathan was also convinced that his latest agreement with Herries was effectively risk-free, as it provided for immediate reimbursement of every amount sent to the continent (where previously he had advanced the government considerable sums).
But he miscalculated in two vital respects: in assuming that it would take another lengthy war to defeat Napoleon, and in assuming that the financial paralysis which had prevailed on the continent a year before would quickly return, leaving the field empty of competition. In fact, barely three months elapsed between the return from Elba and the defeat at Waterloo, and for the first two of these there was minimal military action. As a consequence, the Rothschilds’ rivals in Amsterdam, Hamburg and Frankfurt were able to compete in the money markets in a way they had not in 1814. The first signs of trouble came in Hamburg, where—to Nathan’s dismay—James found himself unable to hold up the exchange rate in his purchases of bullion. Then from Amsterdam it was reported that Wellington had more bullion than he knew what to do with, so that on May 5 Nathan “received orders from Government this day to desist in my operations owing to your having sent off so much specie.” Furiously, he laid the blame on James:
I certainly feel at a loss to understand the reason you cannot follow the instructions I have so repeatedly given you . . . I am certain you cannot be aware of the injury you are doing me . . . by your inattention I have lost at least ⅞ of the business I expected . . . What do you suppose will be the result for they are not my orders but Government’s as I before mentioned and I am continually blamed. I beg of you to do nothing whatever for the present in purchasing coins or bills to draw on London a single bill, and if you do I shall not countenance your operations in any way whatever, and will not accept the bills, but let them be returned protested to you. I hope I shall not have occasion to repeat this.
Yet it was hardly James’s fault. It was simply—as Davidson pointed out—that he was being undercut by continental bankers like Heckscher who discerned the absurdity of the Rothschilds’ shipping gold from Hamburg and Amsterdam to London only to ship it back to the continent:
When I left London, Mr R, the Commissary in Chief in fact everyone was anxious that as much bullion might be obtained as possibly might be done. To execute this order there was no alternative but to draw on London. Things have since taken a different turn, and the long expected war remains hitherto only in preparation, and no actual war having commenced, has the effect that bullion can be collected fom all quarters. Moreover the Houses which at the time when Bony recaptured France had no desire to be connected in that line of business, appear more anxious to receive a share thereof.
James—despatched back to Paris in disgrace—and Salomon, now joined in Amsterdam by Carl, struggled to reverse the slide of sterling, but the damage had been done.
It was at this juncture that the military situation came to its epoch-ending climax at Waterloo. No doubt it was gratifying to receive the news of Napoleon’s defeat first, thanks to the speed with which Rothschild couriers were able to relay a newspaper version of the fifth and conclusive extraordinary bulletin—issued in Brussels at midnight on June 18—via Dunkirk and Deal to reach New Court on the night the 19th. This was just twenty-four hours after Wellington’s victorious meeting with Blücher on the battlefield and nearly forty-eight hours before Major Henry Percy delivered Wellington’s official dispatch to the Cabinet as its members dined at Lord Harrowby’s house (at 11 p.m. on the 21st). Indeed, so premature did Nathan’s information appear that it was not believed when he relayed it to the government on the 20th; nor was a second Rothschild courier from Ghent.5 But no matter how early it reached him, the news of Waterloo was anything but good from Nathan’s point of view. He had expected nothing as decisive so soon; indeed, just five days before the battle, he had arranged a new million pound loan for the British government in Amsterdam, and was in the middle of organising a subsidy payment to Baden even as his courier neared London. Now Waterloo threatened to bring his financial operations on behalf of the anti-French coalition to a premature and highly inconvenient end. For the brothers were encumbered not only with substantial amounts of depreciating bullion, but also with over a million pounds’ worth of treasury bills to be sold in Amsterdam, to say nothing of a succession of half-finished subsidy contracts which would cease the moment a peace treaty was signed. As reports reached New Court confirming that the end of the war was imminent, Nathan was faced not with the immense profits of legend but with heavy and growing losses. John Roworth, his agent with the British army, described a gruelling journey on foot from Mons to Genappe, walking by day “in the midst of a cloud of dust under a burning and scorching sun” and sleeping at night “under the cannon’s mouth on the ground.” But when he finally caught up with Wellington’s Commissary-General Dunmore, he was handed back unwanted Prussian coins worth £230,000.
Although Nathan told his brothers to carry on delivering specie to Wellington’s military chest, the business had ceased to be viable. Towards the end of July an “alarmed” Carl temporarily halted payments to the military chest. Two months later James found himself so strapped for cash that he had to do the same. Amschel, by contrast, was “swimming” in money in Frankfurt, but money which no one needed. As Carl admitted, “Now we don’t need money for the army, as the army has enough.” By the end of the year James was reduced to offering Drummond deposit facilities in Paris in an attempt to get some of the specie back—a suggestion which was curtly rejected. Even bigger difficulties arose in Amsterdam, where Carl found himself unable to sell the British treasury bills at the relatively modest discount agreed between Nathan and Herries. Indeed, the sudden advent of peace had made the Amsterdam market so liquid that such long-dated bills could scarcely be sold at all, precipitating another round of ill-tempered recrimination between the brothers.6 The French collapse also had a disruptive impact on the subsidy business. In Berlin, James’s negotiations with the Prussian government were thrown into confusion as the news of Waterloo caused a surge in the sterling exchange rate. Other German states quickly began demanding more generous exchange rates for their subsidy payments. To compound the brothers’ misery came news of a family tragedy: the death of their sister Julie at the age of thirty-five. “I feel my spirits very depressed indeed,” Nathan confessed to Carl just two weeks after Waterloo, “and [am] by no means able to attend to business as I could wish. The melancholy communication of the death of my sister has entirely unhinged my mind and have done but very little business today on that account.” Far from being hugely profitable, the aftermath of Wellington’s victory was a period of acute crisis for the Rothschilds.
In London, a frantic Nathan sought to make good the damage; and it is in this context that the firm’s purchases of British stocks have to be seen. On July 20, the evening edition of the London Courier reported that Nathan had made “great purchases of stock.” A week later Roworth heard that Nathan had “done well by the early information which you had of the Victory gained at Waterloo” and asked to participate in any further purchases of government stock “if in your opinion you think any good can be done.” This would seem to confirm the view that Nathan did indeed buy consols on the strength of his prior knowledge of the battle’s outcome. However, the gains made in this way cannot have been very great. As Victor Rothschild conclusively demonstrated, the recovery of consols from their nadir of 53 in fact predated Waterloo by over a week, and even if Nathan had made the maximum possible purchase of £20,000 on June 20, when consols stood at 56.5 and sold a week later when they stood at 60.5, his profits would barely have exceeded £7,000. Much the same can be said of Omnium (another form of government bond), which rose eight points on the news of victory. In fact, the brothers’ correspondence suggests that such purchases were not made on a large scale until some time later, in the period before the Paris peace treaty was finally signed. An unusually anxious letter from Nathan suggests that even these were nerve-racking speculations, dependent as they were on the assumption that this time the French would not seek to resist the peace terms:
Everything is going well, so help me God, better [even] than you would imagine. I am quite pleased. I went to see Herries, he made me feel . . . well. He swears that everything is going well. I bought stock at 61⅛ and 61½ and Herries swears . . . that everything is going well, with God’s help . . . We are all in better spirits. I hope it will have the same effect on you.
According to Salomon, Nathan had also purchased around £450,000 of Omnium funds at 107; if he had followed his brother’s advice and sold at 120, his profit would have been around £58,000. But this evidently did not strike him as a significant sum; he fretted at having bought too few in the first place, and held on for higher prices in the new year. Indeed, it may not have been until quite late in 1816 that Nathan made perhaps his most successful speculation in stocks to date: the purchase of £650,000 at an average price of 62, much of which he sold in November 1817 at 82.75, yielding a profit of £130,000. However, this was not his to keep, as the original investment had been made with government funds at Herries’s suggestion.
A second and more important way of recouping some of the losses caused by Waterloo lay in prolonging for as long as possible the subsidy payments to Britain’s allies. In this, the Rothschilds had invaluable accomplices in the Allied powers themselves, who naturally wished to pocket as much as they could before peace was signed and the subsidies ceased. In October the Prussian representative Jordan privately admitted that the continental powers were spinning out the negotiations to secure an extra month’s subsidy; a gift of £1,100 in British stocks ensured that the Rothschilds handled the payment. Another amenable official was, as before, the Russian Gervais, who received a generous cut (2 per cent) of the subsidy business he sent the Rothschilds’ way. “The main thing,” reported James from Paris, “is that Gervais, thank God, had been made Commissar in Chief for everything. Yesterday he said to me: ‘Rothschild, we must make money!’ ” The previously wary Austrian government too (thanks partly to lobbying by Limburger) now entrusted some of its subsidy business to the Rothschilds. As Carl observed, it was “not easy to do business with the Austrians . . . but once you have their confidence you can depend upon it.” On the other hand, the increase of competition on the continent reduced the commissions which could be charged, and it was harder to make money on the side from arbitrage. Some governments—for example, that of Saxe-Weimar—were eager to avoid “falling completely and utterly into the hands of Mr Rothschild, who is, after all, a Jew.” The brothers repeatedly alluded to the meagreness of the profits (often as little as 1 per cent) they were making in this period, and it seems questionable whether the various petty German states which Amschel provided with subsidy payments—including Frankfurt as well as Saxe-Coburg and Coburg-Saarfeld—were worth the “heartbreak” of which he complained. Salomon and Amschel were philosophical: “You can’t make millions every day,” wrote the former as negotiations with Prussia dragged on. “Nothing in this world can be forced to happen. Do what you can; you can do no more.” The whole world could not “belong to Rothschild.” “Things here are not the way they are in England, where transactions worth millions happen every week. For a German 100,000 gulden is a big deal.” It is doubtful whether such fatalism impressed their brother in London.
The summer of 1815 was therefore anything but a time of unalloyed success for the Rothschilds. The agreement drawn up in March of that year would seem to suggest that the brothers’ collective assets had grown substantially since the last balance sheet of 1810. But no less than two-thirds of the total capital in 1815 was credited to Nathan, and he had not been party to the 1810 agreement. Taking into account only the shares of his four brothers, there may in fact have been a contraction in the continental side’s capital. Moreover, this agreement predated the crisis of the Hundred Days and should therefore be regarded as evidence of earlier success (primarily, it seems reasonable to conclude, the highly lucrative business done for Herries in 1814). By the summer of 1816, it is true, the brothers estimated that their combined capital amounted to between £900,000 and £1 million, implying a doubling of their capital between March 1815 and July 1816. Given that the figure agreed between them in June 1818 was £1,772,000 (a three-quarters increase over two years), this was a remarkable rate of growth. But there is good reason to doubt whether the period immediately after Waterloo was when the bulk of this increase occurred.
The trouble is that it is almost impossible to say precisely how the Rothschilds performed financially in this period because they had no idea themselves. So tumultuous were the events precipitated by Napoleon’s return from Elba, and so enormous the turnover of their various transfer operations during 1814 and 1815, that their already rudimentary accounting procedures collapsed altogether.
The problem first surfaced in June 1814, as Carl scrambled to raise the cash needed for an especially large subsidy instalment. The only way he had been able do this, he complained, was by “swindling” (issuing accommodation bills, or bills unrelated to “real” purchases of commodities). When James complained about this, Carl pointed out that it was not his responsibility to “keep the books.” At this stage, it was Salomon who was regarded as the accountant of the family—the one who could always cheer their father up by making him “on paper . . . rich in a minute.” But even he was soon unable to keep track of the immense commitments Nathan was making on his brothers’ behalf. By August 1814 he and Amschel had to confess that they were “completely confused and do not know where the money is.” “Together we are all rich and if all the five of us are taken into consideration we are worth quite a lot,” wrote Salomon anxiously to Nathan. “But where is the money?” Nathan’s (perhaps rather acid) response was that “a book [should] be kept where [Carl] should enter business rules.”
The problem recurred in September 1815, when the brothers on the continent experienced a severe cash-flow crisis. “But dear Nathan,” wrote Salomon, “you must have a frightful amount of money over there because here I am in debt [and] Amschel hasn’t much left over. It must all be over there and [yet] you write that you are so much in debt. Where is our [cash] reserve?” Calculating that he owed as much as £120,000 in Paris alone, he repeated the question a few days later:
You must have all our money over there with you. We here are stinking poor. We haven’t a penny to spare. Amschel has less than a million left and therefore the whole lot must be with you, including what we owe . . . Work out where the family money is, my good Nathan. I don’t know . . . Where is our money? Well, it’s just absurd. God willing it will turn up when we do the spring cleaning!
When Nathan wrote back suggesting that it was Amschel who was the “big rich man,” there was something close to panic.
The problem was that Amschel had a string of subsidy payments to make in Berlin and elsewhere, and virtually no cash in hand, while Carl’s funds were almost entirely tied up in the British treasury bills in Amsterdam. In Paris too the position was alarmingly tight. “This eternal indebtedness is not very pleasant,” complained James. “The payments we have to make are big, far too big,” echoed Salomon. “Dear Nathan, you write that you have one million or two million over there. Well you really must have, because our brother Amschel is bust. We are bust. Carl is bust. So one of us must have the money.” In fact, the continental Rothschilds averted “bankruptcy” at this time only by means of short-term borrowing and by making further use of accommodation bills. Not surprisingly, they blamed Nathan for their predicament. Echoing their father’s earlier criticisms, Salomon bitterly accused his brother of mismanagement: “We are relying on miracles and luck, and I say to you once again that you don’t write clearly enough. In the name of God, such important transactions have to be carried out precisely. Unfortunately, there is absolutely no order in the way you deal with these.” Too much of their accounting was being done “in the head” instead of on paper. Was it any wonder the Austrian government feared that the Rothschilds might “go bankrupt?”
Nathan tried to reassure his brothers that their position was secure. But Amschel continued to yearn for some tangible proof of the family’s wealth. “You state that I need not enquire as to where the money actually is,” he complained to Nathan. “In this respect I am like little Anselm [Salomon’s son, then aged thirteen] who always inquires as to where the money is. ‘People say my father possesses five millions,’ he says. He would like to see it all in one single heap.” Were they millionaires, he demanded to know, or bankrupts? The uncertainty was making him ill: “I have to tell you that since Sukkoth [October 1815] I have not been well and I cannot bear it any longer. If you wish to keep your brother in good health then you must try to reduce his money worries. I have sacrificed my health. I have to take it easy . . . I have lost my spirit of speculation.” They were, he complained, “living like drunkards”: “We don’t know whether we owe money to the English Government or not.”
To compound the problem, this period of chaos came just as Herries was facing allegations of “maladministration” in the Commons and was therefore pressing Nathan for detailed account statements. His principal parliamentary critic, Alexander Baring, had an axe to grind, needless to say. On the other hand, there was some justification for his claim. In their dealings with at least one government (the Russian) the Rothschilds had secured additional commissions and paid bribes about which Herries had not been informed. In addition, they had made the most of exchange rate differences during the early phase of subsidy payments. The need to cook books which were already in a state of some confusion no doubt explains the months of prevarication in the face of repeated requests for accounts from the “very particular” Herries. Even if it meant keeping the clerks in Paris working until midnight, it was vital, as Salomon said, to avoid damaging the Rothschilds’ reputation in London, “as England is our bread basket.” So fearful was Nathan of a scandal that in early 1816 he wrote to Amschel advising him not to purchase a new house in Frankfurt:
I asked Herries and he gave me a rather incomplete answer saying that I should not go in for luxuries because the papers would immediately commence writing against me and officials here would start questioning . . . It would be best to take mine and Herries’s advice, do not buy a house, wait until my accounts are straight.
Herries was already receiving disquieting reports from Drummond in Paris about a “simulated transaction” which James assured him had been necessary to avoid disturbing the exchange rate. “This I dare say is very true,” commented Drummond nervously, “but on the other hand in matters of account that are to come before the auditors nothing is more to be avoided than fiction to which a suspicion is always likely to be attached . . . Would it not be a proper general injunction to all accountants to banish all fiction?” What Drummond did not know was the extent of the fiction. When his colleague Dunmore paid a visit on James in March 1816, the latter confessed: “My heart was beating terribly as I was scared that he might give me the order to send his money to the army.” James had in fact no more than 700,000 francs, far less than the sum Dunmore could legitimately have demanded.
In the end, none of the brothers was equal to the task of untangling the accounts. It was left to Benjamin Davidson to try to reconstruct the extraordinary transactions of the previous year—and then to try to conceal the numerous irregularities which had occurred. The difficulties he confronted were daunting. For a start, none of the brothers had yet adopted the system of double-entry book-keeping. As Amschel put it, the Berlin banker Mendelssohn “know[s] how he stands with each of [his joint accounts] while in the House of Rothschild we have to rely on what the book keepers say. Gasser tells me: ‘We have made nice profits on the Prussian transactions’ and I have to believe him.” This in itself is remarkable: after all, the double-entry system had first been described by the Venetian Luca Pacioli in 1494 and was widely known in most European countries by the end of the sixteenth century. The fact that the Rothschilds were so slow to adopt it suggests that the capitalism of the Frankfurt Judengasse was technically quite backward (though it also, of course, suggests that business geniuses can do without accountants—for a time). Secondly, there were substantial gaps in the records, reflecting the habits of concealment which had developed in Frankfurt and elsewhere during the period of French occupation. Thirdly, there was the problem of the large profits which had been made on exchange rate fluctuations without Herries’s consent. Finally, and most embar rassingly, there were the “fictional” accommodation bills which had been issued, which totalled more than £2 million. As Davidson put it drily, “One should have thought earlier . . . that one day Herries [would] have to look at these accounts.”
Fortunately, Davidson was able to arrive at figures which showed the government rather than the Rothschilds as the principal beneficiary of the subsidy and other payments; and in the end Salomon’s verdict seems to have been accepted by Liverpool and his colleagues that “not even a hundred banking houses would have been able to carry out a business transaction of this size within nine months and to show a profit for the government.” Herries was discharged honourably with a pension when the office of commissary was wound up in October 1816 and a Commons motion to prevent his appointment as auditor of the Civil List was defeated. Nevertheless, Salomon was still fretting about the accounts as late as January 1818:
We are not yet in the clear with the government . . . As long as the government leaves the accounts with Herries in suspension, we are not yet in the clear. [Are we] rich men or are we at ease? As far as I can see, the serving boy is more at ease with the little he has than we are with the great deal we have. Why? Because he doesn’t have a bungled account with a government hanging round his neck . . .
It is fair to conclude that the huge profits of 1814 and 1815 were made in ways much more mysterious—and hazardous—than the traditional Waterloo myth implies.
Fraternity
The idea of brotherhood was profoundly important in nineteenth-century Europe. Freemasons, liberals and later socialists all idealised the fraternal relationship, creating a bewildering variety of associations which sought to forge artificial brotherhoods beyond the narrow familial realm. This was nothing new, of course. Religious orders had done the same for centuries. But “Alle Menschen werden Brüder” was a line which, when penned by Schiller and set by Beethoven, had a thinly disguised revolutionary significance. As the French Revolution’s best-known slogan implied, to imagine all men becoming brothers was as radical as to imagine them all becoming free and equal.
Contemporaries often inferred from the Rothschilds’ extraordinary success that they exemplified this ideal of fraternity. This was not because it was exceptional, as it is in Europe today, for a family to produce five sons or, indeed, five daughters, as Mayer Amschel and Gutle Rothschild also did. Francis Baring also had five sons. Indeed, as late as the 1870s nearly a fifth (18 per cent) of women who married in Britain had ten or more live births, and more than half had six or more; the statistics for Germany are similar. What impressed contemporaries was that the Rothschild brothers seemed to work together in uncommon harmony. This had been one of the points strongly emphasised by Friedrich Gentz in his influential article for the Brockhaus Encyclopaedia:
With the greatest conscientiousness, the brothers [have] obeyed their father’s heartfelt deathbed injunction to maintain unbreakable unity and co-operation in all business transactions . . . [E]ach [business] proposition is the subject of their joint deliberations; every operation of even moderate importance is carried out according to an agreed plan and with co-ordinated efforts; and all the brothers have an equal share in the results.
Simon Moritz von Bethmann, their rival in Frankfurt, echoed this view: “The harmony between the brothers contributes largely to their success. None of them ever thinks of finding fault with another. None of them adversely criticises any of the others’ business dealings, even when the results do not come up to expectations.” “The prosperity of the Rothschilds,” remarked Benjamin Disraeli later, “was as much owing to the unity of feeling which alike pervaded all branches of that numerous family as in their capital & abilities. They were like an Arabian tribe.” This soon hardened into the myth of “the five Frankfurters.” As one German writer put it in the 1830s:
These five brothers together formed an indomitable phalanx . . . and, true to their principle never to undertake anything individually and to agree all operations precisely among themselves, always followed the same system and pursued the same goal.
Such comments would have been otiose if fraternal harmony had been the norm; the paradox is that, unlike the idealised brotherhood of the poets, real brothers seldom worked well together. Jews and Christians alike knew the story of Joseph and his brothers, one of the best biblical accounts of fraternal strife: the hatred of Gad and Asher for their half-brother, the precocious favourite Joseph; the intense affection between Joseph and his young brother Benjamin; the ambivalent feelings of Reuben, the first born; the violent confrontation and final reconciliation. Relations between the Hope brothers and the Baring brothers were less turbulent, but they failed to transcend their personal differences in the name of fraternal unity. As the Rothschild brothers overtook them financially, they seemed to personify an elusive ideal.
In reality, however, brotherly love was far from easy to maintain in the chaotic circumstances of 1814 and 1815. As their resources were stretched by a succession of huge and risky undertakings, personal relations between the Rothschild brothers frequently deteriorated—on occasion, to the point of complete rupture. The main reason for this was undoubtedly Nathan’s increasingly imperious treatment of his supposed partners in the business. Technically, according to the 1815 agreement, the brothers were equals: profits were divided equally, and Nathan gave each of them a promissory note worth £50,000 to compensate for his much larger share of the capital. But as Salomon and others commented at the time, the combination of Nathan’s aggressive temper and the increasingly Anglocentric nature of the firm’s operations effectively reduced the other brothers to the status of mere agents. Nathan was, as Salomon half joked, “the commanding general,” the others were his “marshals,” while the sums of “capital resources” they had to dispose of were “soldiers” who had to be “kept in readiness.” The implied comparison with Napoleon himself—against whom, after all, their financial operations were ultimately directed—was a revealing one, and Nathan’s brothers were not alone in making it. As Swinton Holland said to his partner Alexander Baring in 1824: “I must candidly confess that I have not the nerve for his operations. They are generally well planned, with great cleverness and adroitness in execution—but he is in money and funds what Bonaparte was in war, and if any sudden shake comes, he will fall to the ground like the other.” To Ludwig Börne, Nathan and his brothers were all “Finanzbonaparten,” and the parallel was still being drawn by writers in the 1870s. But it was really Nathan who became the Bonaparte of the banking world, and he shared with the French Emperor his superhuman appetite for risks and his intolerance of inept subordinates.
As early as 1811—even before their father’s death—Nathan’s brothers had begun to complain about the occasionally bullying tone of his letters. But it was not until the middle of 1814 that he really began to emerge as the dominant, not to say domineering, partner. The key issue was his desire to dictate his brothers’ movements. In June 1814 he ordered Salomon to go to Amsterdam to assist James and took the opportunity to let fly at their brothers in Frankfurt: “I tell you, Amschel and Carl make me damned upset. You have no idea how idiotically they write and they draw on me like madmen . . . By God, they write me such idiocies that today I feel very cross. Amschel writes to James as if he could do the business by himself.” This evidently touched a raw nerve, and Davidson’s appeal to Nathan to desist from “disparaging correspondence” came too late. A distraught Carl took to his bed, warning that “if he carried on in this way,” Nathan would “soon have a partner in the other world,” so ill did his letters make him feel. Salomon also complained of “severe pains in my back and legs,” but his tone was angrier:
I cannot for one moment believe that even if I were the learned Nathan Rothschild I would regard the other four brothers as stupid schoolboys, and myself as the only wise one . . . I do not wish to be upset any more and made more ill than I already am. To put it quite bluntly, we are neither drunk nor stupid. We have something you in London obviously do not have—we keep our books in order . . . If my tears were black I would write a lot more easily than with ink . . . The English mail day is a regular terror for me. Every night I dream of these letters . . . One just doesn’t write that way to one’s family, one’s brothers, one’s partners.
But all their protests merely elicited from Nathan a stark threat to dissolve the business:
I have to admit that I was thoroughly fed up with the longwinded business and its disagreeable consequences . . . And now from today on . . . I think that it would be best if Salomon would close the Paris accounts and come to London. And David[son] can bring the Amsterdam accounts with him. Then we could clear up the accounts. I expect from Frankfurt an account [too] . . . because I am fed up with the partnership . . . I know that you are all clever men and now all five of us shall have, thank God, peace.
This had the desired effect; henceforth Nathan gave the orders more or less unchallenged, as Salomon acknowledged in a letter to Salomon Cohen in August 1814:
My brother in London is the commanding general, I am his field marshal and consequently I have my duty to fulfil in my capacity as such, and therefore I have to give the commanding general reports, comments etc. I may have made the case somewhat stronger so as to show him how serious I am in what I say, but it is still an exaggeration to say that I lose my head . . . Being a good general, you ought to know exactly what a good general has to know and not think continually of advancing only, but you ought to go on the defensive occasionally in order to safeguard your strength.
As this letter suggests, Salomon continued to worry that Nathan was overreaching himself, but he now obviously saw himself in a subordinate, advisory role: “[W]e regard you as general-in-chief, with ourselves as lieutenants-general. God may give us luck and blessing, and success. In this case we [remain] generals. Those, who, God forbid, have no peace, nor luck, are not even corporals.” Carl too accepted Nathan’s primacy, though he employed a slightly different metaphor: “I am only the last wheel [of the carriage] and look upon myself in the sense of a machine only.” He and Salomon might not care for Amsterdam, but they stayed there if Nathan told them to. Even Salomon’s requests to return to Frankfurt—where he had spent just three weeks in the previous three years—to see his wife or to be present at his son’s barmitzvah were evidently regarded by Nathan as unreasonable; the second request was granted only on condition that Salomon return to Paris after just a day and attend to the Frankfurt accounts while he was there. Nathan had only one concern: business. “All you ever write,” complained Salomon wearily, “is pay this, pay that, send this, send that.”
Since 1811 . . . I have gone where business called me. If I were needed today in Siberia I would . . . go to Siberia . . . Please do me a favour and desist from posting any more ill-tempered letters. One sits in his inn, often at the light of a candle, waiting for the brothers’ letters. Instead of going to bed in a happy mood, one is depressed and remains sleepless. What kind of pleasures are still open to us? We are all well on in years, the pleasures of youth are out of our reach; unfortunately we have had to say “good night” to [all] that; our stomachs are bad [so] there is no gluttony for us. Consequently nearly all the worldly pleasures are closed to us. Should we have to renounce the pleasure of correspondence [too]?
But Nathan gloried in his ascetic materialism:
I am writing to you giving my opinion, as it is my damned duty to write to you . . . I am reading through your letters not just once but maybe a hundred times. You can well imagine that yourself. After dinner I usually have nothing to do. I do not read books, I do not play cards, I do not go to the theatre, my only pleasure is my business and in this way I read Amschel’s, Salomon’s, James’s and Carl’s letters . . . As far as Carl’s letter [about buying a bigger house] is concerned . . . all this is a lot of nonsense because as long as we have good business and are rich everybody will flatter us and those who have no interest in obtaining money through us begrudge us for it all. Our Salomon is too good and agreeable to anything and anybody and if a parasite whispers something into his ear he thinks that all human beings are noble minded[;] the truth is that all they are after is their own interest.7
Privately, even Gentz had to acknowledge that in reality Nathan was primus inter pares. It was he who had the “remarkable instinct which causes them always to choose the right, and of two rights the better”:
Baring’s most profound reasoning inspires me, now that I have seen everything at close quarters, with less confidence than the sound judgement of one of the more intelligent Rothschilds—for among the five brothers there is one whose intelligence is wanting and another whose intelligence is weak—and if Baring and Hope ever fail, I can state with confidence that it will be because they have thought themselves cleverer than Rothschild and have not followed his advice.
The use of the singular “Rothschild” is important. There was only one true Finanz bonaparte.
It was probably Amschel and Carl whom Gentz had in mind when he spoke of “one whose intelligence is wanting and another whose intelligence is weak.” This was unfair: a more accurate characterisation would be that they were more risk-averse than their brothers. Amschel was the most cautious of the five and constantly yearned to lead “a quiet life.” “Me, I don’t want to eat the world,” he wrote in a typically homespun letter. His ideal was “to work in tranquillity,” without the anxieties which Nathan’s Napoleonic approach necessarily generated. Carl, the fourth brother, was nervous and insecure, and shared Amschel’s limited ambition. “I am fed up with business,” he confided to his eldest brother in a characteristic letter. “I wish God would give me but little, enough to live, garments for myself and bread to eat. I do not wish to float above the skies.” This feeling doubtless intensified at the time of the Amsterdam treasury bills fiasco, which brought a torrent of recrimination down upon him. After this, as Salomon wrote, Carl was genuinely “afraid” of Nathan, though he was still capable of muttering criticisms behind “the boss’s” back. As we have seen, Salomon himself had the intellect and self-confidence to question Nathan’s strategy; but he was too “quiet and thoughtful” and “took things too much to heart”—according to senior Rothschild employees like Davidson and Braun—to withstand his brother’s belligerence. He preferred, where possible, to side with Nathan against the others.
Yet Nathan’s dominance was never absolute: the partnership did not degenerate into a dictatorship. There were several reasons for this. Firstly, Nathan’s youngest brother James—who was just twenty-three in 1815—was markedly less submissive to his will than the other three. At the height of the bitter row in June 1814, James remained cool, sardonically telling Salomon Cohen that he was allowing Nathan “to dictate to him about millions as if they were apples and pears.” Although there were times when James contemplated leaving Paris, it is unlikely that he stayed there just because Nathan told him to. The youngest brother was intellectually and temperamentally Nathan’s equal; he also had the advantage of a better schooling. Revealingly, it was James who urged his brothers to adopt double-entry book-keeping. It was only really the age difference between the two which obliged James to defer for the next twenty years to his brother. Even in acknowledging Nathan’s leadership, James was less than deferential. “The main point is now to work out a sensible plan for England,” he wrote to Nathan in March 1818. “You will have to do this . . . I leave the decision to you. My duty is mainly to draw your attention to this matter and your duty, as chief commander, is to work it all out.” As early as December 1816 Carl had cause to complain about James’s critical letters, the burden of which was that the Frankfurt house was not making enough money. Already he was evincing Nathan-like traits. At the same time, Nathan (and later James) occasionally needed to be restrained by their less bullish relations. As Amschel said to James following one of the most serious setbacks of the post-war period:
[O]ne should [n]ever lose one’s head. Here lies the advantage of a partnership. If one of the partners loses his senses, the others must remain serene. If all of them lose their heads—then good night. I hope that [this letter finds you] quietened down and that you will give thanks to God that we gained a fortune quicker than anybody else.
There were indeed occasions when Nathan was only too glad to postpone a difficult decision by claiming that he needed to consult his brothers. At times, this was a gambit; at times, he genuinely listened to them.
Finally, no matter how much they quarrelled, the brothers had no one else whom they could trust as much. We know that on occasion Salomon forged Nathan’s signature on bills when Nathan had forgotten to endorse them; it is inconceivable that anyone else could have done so. Even the best clerks were kept at one remove: when one named Feidel appeared to be gaining an undue influence over Amschel, Carl’s response can only be described as jealous. Similarly, their brothers-in-law—sisters’ husbands and wives’ brothers alike—were always viewed with a measure of suspicion, as outsiders with designs on their business. James was especially worried that Nathan was confiding too much to his wife’s relatives Salomon Cohen and Abraham Montefiore (Moses’s brother), and was relieved to hear otherwise:
It is rare that a man should realise that even what friends are telling him is nothing more than flattery, that there is not a true word in it; when they leave you they are laughing at your credulity. Well, dear Nathan . . . you are clever and honest, you know the world . . . Before your letter arrived, a stone fell from my heart because Salomon told me that London is now different, not only are [Abraham] Montefiore and Salomon Cohen no longer allowed to read and deliberate [about] the letters and all the business, but not even Davidson is allowed to do so. This is now confirmed by your letter.
In the same way, the other brothers were kept abreast of Carl’s attempts to find a wife in Hamburg because it was a matter of intense interest to all of them which family Carl married into. In the end, there were authentic bonds of brotherly love, forged in the Judengasse, which no other ties could rival. “Did anyone promise us more when we all slept in one little attic room?” asked Salomon when Nathan was grumbling at having sold some consols too soon. Such memories were never wholly forgotten, no matter how far apart the brothers lived and how many harsh words they exchanged by post.
The extent—and limits—of fraternal unity were most apparent as the brothers debated whether or not to modify the 1815 partnership agreement. The legacy of the great transactions of 1814 and 1815 was a tangle of financial interdependence which could not easily be undone. The question now was whether James should be allowed to establish a new house in Paris under the explicitly collective name of “de Rothschild Frères.” Although James was against merging the accounts of the various establishments, Amschel had his anxieties, fearing that James might embroil him in risky business. He and Carl were only brought round when James agreed that the capital of the partnership should not be made public—an important decision in favour of secrecy which was to set an enduring precedent. The result was a compromise which it took almost two years to hammer out. The 1818 agreement accordingly defined the brothers’ partnership as “three joint mercantile establishments [conducted] under their the said five partners’ mutual responsibility” but at the same time “form[ing] but one general joint concern.” It was a nice distinction which quite accurately encapsulated the way the brothers reconciled their individual differences with a deep and enduring sense of common fraternal purpose.