The House of Rothschild (111 page)

There were two other important areas of domestic activity in this hectic period. Firstly, N. M. Rothschild kept an eye open for investment opportunities for itself, especially in growing areas such as media and telecommunications. The bank invested in ATV, one of the first independent television companies, and in the less successful British Telemeter Home Viewing, an abortive early pioneer of “pay-television.” In addition, Evelyn sat on the boards of Beaverbrook Newspapers, the
Economist
and later The Telegraph plc. The old links to Alliance Assurance were also reinforced when Sun Alliance acquired a stake in Rothschilds Continuation, and Gresham Life was acquired for £6.9 million in 1973 (it was sold for £15 million six years later).

By this time, remarkably, most of N. M. Rothschild’s balance sheet was domestic. Nevertheless, it remained an international bank at heart. It retained its long-standing interest in gold, even after the breakdown of the gold pool as a consequence of the pressures brought to bear on the dollar by the Vietnam War. Although the Royal Mint Refinery was sold, the bank continued to be a major bullion dealer, operating not only in the London market but also in New York, Hong Kong and Singapore, and laying the foundation for its present pre-eminent position in the Australian natural resources market (at the time of writing, Rothschild Australia accounts for around a third of the N. M. Rothschild group’s profits). At the same time, its traditional business of channelling British capital into overseas investment promised to revive following the removal of the Interest Equalisation Tax in 1963 and the development of the “Eurobond” market. Here past ties could be an asset. When Portugal issued bonds worth $15 million in 1964, for example, it could cite precedents as far back as the 1820s for turning to N. M. Rothschild. In Latin America, under the direction of Leopold, the bank helped raise £3 million for the Inter-American Development Bank and £3 million for Chile in 1965; while three years later it organised two major loans totalling £41 million to its old client Brazil—funds which were used for major infrastructural projects like Chile’s first atomic reactor and the Rio-Niteroi bridge. In 1966 N. M. Rothschild led a large syndicate raising the first tranche of funding for a trans-Alpine pipeline between Trieste and Ingol stadt, also old Rothschild territory. When Hungary became the first Eastern-bloc economy to borrow from Western banks in 1968, the decision to turn to New Court had numerous historical precedents. Pre-1914 links to Japan were also renewed by Edmund, who made several visits there between 1962 and 1969, arranging “Eurodollar” bond issues (in partnership with Nomura Securities) for a number of Japanese companies including Hitachi and Pioneer.

Above all—and the importance of this in shaping Rothschild attitudes can hardly be overstated—it was to the countries of the developing European Economic Community that the bank looked. It was at around this time that Guy, the head of the Paris house, was being touted in some quarters as “EEC banker Rothschild.” The same might equally well have been said of his London relatives.

A first tentative step in this direction was taken in 1960, when N. M. Rothschild and Warburgs placed £340,000 shares in the August Thyssen steel company on the London market—the first German shares to be quoted in London since the war. A year later the bank committed itself to join the Common Market Banking Syndicate (set up in Brussels in 1958) as soon as Britain signed the Treaty of Rome. The expectation was clearly that this would happen sooner rather than later. In September 1967 a Channel Study Group was formed (along with Morgan Grenfell, Lazards and Barings) in an effort to revive the old Victorian dream of a tunnel under the English Channel. Although this plan foundered like its predecessor, N. M. Rothschild maintained its interest in the project and acted as adviser to the European Channel Tunnel Group which initiated the present “Chunnel” in 1981. Another Europe-inspired project was the £20 million New Court European Investment Trust set up in 1972—at the time the European Communities Bill was going through parliament—in the hope of attracting British investors to continental securities. Most far-sighted of all was the Rothschild plan for a new currency called the “eurco” (“European Composite Unit”), based on the values of nine major European currencies. This forerunner of the later ecu and euro was primarily a practical response to the problem of sterling’s depreciation relative to the deutschmark: the idea was to offer investors fifteen-year bonds with a face value of 30 million Eurcos (around £15 million) and an 8.5 per cent coupon. This experiment was a success: when bonds worth 20 million Eurcos were issued for Metropolitan Estates and Property, they were heavily oversubscribed. In the light of subsequent debates it is ironic that the
Daily Telegraph
welcomed the idea as “an encouraging grassroots move towards monetary union.”

The logical way of advancing Britain’s financial integration with the continent was to establish some kind of cross-Channel institutional link. In 1966, for example, N. M. Rothschild and the National Provincial Bank joined forces to create a new European bank with £1 million capital, and something similar was attempted two years later with the Manufacturers Hanover Trust Co. and the Riunione Adriat ica di Sicurtà. However, the obvious strategy was to rebuild the old cross-Channel links between the British and French Rothschilds. The question was whether the two halves of this old partnership were any longer compatible.

The French Rothschilds’ post-war experience had been very different from that of their English relatives. The older partners had not long survived the end of the war: Robert died at the end of 1946, Edouard three years later. Despite the upheavals of the years after 1940, the new triumvirate—Guy and his cousins Alain and Elie—found themselves the heirs of a substantial portfolio. In June 1946 de Rothschild Frères’ assets were revalued (to take account of franc’s depreciation) at 250 million francs (around £1 million); but that figure did not include the family’s stake in the Compagnie du Nord and their investments in multinational companies like Rio Tinto, Peñarroya and Le Nickel. When new legislation allowed Guy and his partners to pool all their assets in a single investment fund, the Société d‘Investissement du Nord (1953), the total capital came to 4 billion francs (around £4 million). The range of their financial interests was enormous—by 1964 the Compagnie du Nord had stakes in 116 different enterprises ranging from cold storage to construction—but as in the past, mining and minerals remained in the forefront. Although there were setbacks associated with decolonisation in Mauritania and Algeria, Guy’s ambitious strategy in this field bore fruit in the late 1960s as Le Nickel absorbed Peñarroya and various other mining companies. When the aluminium company Henry Kaiser pulled out of a planned expansion of Le Nickel, Guy sold half the company to a government corporation and created a new umbrella for Rothschild mineral interests, IMETAL. It was not long before this too was expanding, acquiring (after a struggle) two-thirds of the Pittsburgh-based Copperweld, and a stake in the British Lead Industries Group.

Guy’s other main objective in this period was to compete with the French joint-stock banks which had been outstripping de Rothschild Frères since the First World War by attracting deposits, increasing shareholder equity and developing branch networks. Although the Paris house had increased its deposits by a factor of seven in the first two decades after the war, its balance sheet totalled just 421.5 million (new) francs (£31 million) when it was published for the first time in 1965, compared with a figure of 20 billion francs for the Credit Lyonnais. Narrowing that gap became possible with the ending of the legal distinction between
banques d‘affaires
and deposit banks in 1967. After exactly 150 years, de Rothschild Frères became Banque Rothschild, a limited-liability company with capital of around £3.5 million and a new modern office in place of the historic building in the rue Laffitte. The aim, as Guy put it, was to “collect more and more liquidities from the broadest possible clientele in the widest possible area.” Formally, the new structure implied a dilution of family control: the three partners held only 30 per cent of the shares, while the Compagnie du Nord (which itself had around 20,000 shareholders) now owned the rest. But as long as the Rothschilds dominated the Nord, this “democratisation” was only notional. In 1973 Elie modestly assured an interviewer: “You can’t compare the power of the Rothschild bank of 1850 with that of 1972. At that time ... we were the first. Today, we’re not so stupid as to think we’re something other than what we really are, the fifteenth.” But this was still something of an understatement, given the size of the Compagnie du Nord, which had effectively become the parent of the bank: between 1966 and 1968, its capital increased rapidly from 52.8 million to 335 million francs (around £25 million). Banque Rothschild drew additional strength from its links to James Goldsmith (who joined its board), acquiring 72 per cent of his Discount Bank for £5 million and going on to acquire three other banks to bring its total number of branches to twenty-one, employing around 2,000 people. When Banque Rothschild absorbed the Compagnie du Nord completely in 1978, its assets totalled 13 billion francs (around £1.3 billion).

The French Rothschilds would have been still bigger had it not been for the persistence of the split which had excluded Maurice from the Paris house in the 1930s. The supposed black sheep had made good in New York during the war, speculating on commodities so successfully—and inheriting so fortunately—that he was probably the richest of all the Rothschilds by the time of his death in 1957. Although his son Edmond had served a financial apprenticeship at de Rothschild Frères, working for the Transocéan company, he soon chose to set up his own venture capital company, Compagnie Financière, backing (
inter alia
) the immensely successful Club Méditerranée holiday company.

Nor was the Rothschild revival in France purely financial. Although (as in England) some of the family’s numerous houses had to be sold or given to the state after the war,
⁴
Guy and his cousins did not take long to resume the traditional Rothschild role at the summit of Parisian “society.” Guy and his second wife in particular began to appear as often in the gossip or racing columns as in the financial pages: it was she who urged him to reopen Ferrières and to throw lavish fancy-dress parties like the Proust Ball (1971) and the Surrealist Ball (1972). The other French branch of the family was meanwhile devoting most of its attention to the vineyards at Mouton, which Philippe inherited when his father Henri died in 1947, along with the neighbouring château d‘Armailhac (acquired in 1933). The older Lafite vineyards remained the joint property of James’s male descendants, though they were mainly managed by Elie and later Alain’s son Eric. (The protracted battle between the Mouton and Lafite branches of the family over the classification of the former’s produce attracted almost as much publicity as the parties at Ferrières.)

There was also a political dimension to the French Rothschilds’ high profile. The recruitment of the former civil servant Georges Pompidou to run the ailing Transocéan subsidiary in 1954 was unremarkable at the time: as Deputy Commissioner of Tourism, Pompidou was no more than a minor civil servant. However, Pompidou combined his ascent to the post of general manager with careful cultivation of General de Gaulle, then in his self imposed political retreat. When the political crisis over Algeria brought de Gaulle back to power as President of a newly constituted Fifth Republic, Pompidou left Banque Rothschild to run de Gaulle’s staff office for six months before returning to the bank after the constitution had been revised. He went back into politics as de Gaulle’s second Prime Minister between 1962 and 1968. Though probably of limited significance, Pompidou’s past links with the rue Laffitte did much to sustain the myth of Rothschild power on both the left and the right. The irony is that his period as President—following de Gaulle’s departure in 1969—coincided with a deepening crisis at Banque Rothschild.

Despite the structural differences between Banque Rothschild and N. M. Rothschild, the process of restoring the links between the Paris and London Rothschilds began as early as 1962, when the French house invested £600,000 in a new company chaired by Guy and obviously intended to promote Rothschild reunion: Rothschilds Second Continuation. There followed a succession of joint ventures. The Paris house took a 60 per cent stake in Five Arrows, a holding company set up to manage the English Rothschilds’ mining interests in Canada. The London house then joined Warburgs and two other firms as members of the French Rothschilds’ property syndicate Cogifon. The following year both houses collaborated in setting up the European Property Company and in 1968 Guy de Rothschild became a partner at N. M. Rothschild, while Evelyn was appointed a director of Banque Rothschild. An important development in this context was the transformation of the New York affiliate Amsterdam Overseas into New Court Securities, the shareholders of which included not only Banque Rothschild but also Edmond’s Geneva-based Banque Privée. When the National Provincial scaled down its involvement in 1969 (following its absorption into the National Westminster Bank), a much larger entity was created along similar lines: Rothschild Intercontinental Bank (RIB), which brought together not only the London house (with a 28 per cent share) and the Paris Banque Rothschild (with 6.5 per cent), but also Edmond’s Banque Privée (2.5 per cent), as well as Pierson, Heldring & Pierson and two continental firms with historical links to the Rothschilds: Banque Lambert of Brussels and Sal. Oppenheim jnr of Cologne.

RIB was conceived as part of a wider global strategy. In 1971 it was brought in to float a $100 million loan to Mexico. Efforts were also made to revive Rothschild connections in Asia. In 1970, for example, N. M. Rothschild set up Tokyo Capital Holdings with Merrill Lynch and Nomura and floated loans for the Philippines and South Korea. In 1975, however, RIB was sold to the American financial giant Amex International (for £13 million). The global strategy appeared to falter.