The House of Rothschild (27 page)

The French Rothschilds, by contrast, were mainly concerned to secure concessions for the ailing Zaragoza line, and were willing to flirt with the possibility of further advances and even a new loan to this end: as Anthony rightly said, “railroads are always at the bottom of the Baron’s business.” The tortuous negotiations of 1867 revolved around the ban on Spanish bonds at the French bourse which had been imposed in 1861 in an attempt to combat capital export. The French premier Eugène Rouher intimated that he was willing to end this suspension—thus allowing a new Spanish loan to go ahead—provided the Spanish government set its financial house in order. The question was whether this reordering would include the kind of perks for the Zaragoza line sought by James; though quite why the Spanish government should borrow between 10 and 100 million francs purely in order to hand it over to French-controlled railway companies was never entirely clear. The negotiations, which were initiated on behalf of the Narváez government by the banker Salamanca, were still dragging on inconclusively when the revolution broke out—by which time Narváez was dead and Salamanca bankrupt. “A little security and stability in the political system,” grumbled Alphonse, “would be more efficacious than any subsidy.” It was not to be: in September a coalition of generals led by Juan Prim launched a successful revolution which overthrew Queen Isabella. Indeed, one reason for the failure of the various loan negotiations prior to this was probably the various bankers’ sense of impending upheaval. As Alphonse acknowledged, Weisweiller had “long anticipated the Catastrophe.”

That Alphonse was able to count on strong support from the French government in his negotiations with Spain is in itself noteworthy. For perhaps the most unexpected consequence of the Italian war was its impact on relations between the Rothschilds and Bonapartist France. Superficially, the French role in Italian unification was one of the high points of Napoleon III’s reign, and the Second Empire never looked more outwardly impressive than it did in the early 1860s. When Lionel visited Paris in April 1861, he was dazzled by the transformation of the city being wrought by Georges Haussmann. “I must say,” he commented half-seriously on seeing some of the wide, new boulevards which had replaced the cluttered alleys of the old town, “I wish we had a man like the Emperor for three months just to make a few alterations in old London.” Yet behind this veneer the Empire was developing serious weaknesses. In part, these were diplomatic. Nothing did more to alienate English Liberal opinion than Napoleon’s acquisition of Savoy and Nice in March 1860; this intimation of “vast conceptions” akin to those of his uncle undid all the diplomatic good done by the Anglo-French trade treaty signed in the same month. To James, Anglo-French antagonism could only imply trouble for France; that had been the lesson, as he saw it, of Louis Philippe’s demise. “The most revolutionary developments of French internal policy,” he told the new Austrian ambassador, Richard Metternich in October 1859, “would not affect the financial world here as profoundly as a breach with England.” “It is a great pity,” remarked Mayer Carl in March the following year, “that the favorable impression of the treaty should suffer by all these unfortunate speeches [about Italy] which lead to nothing good [and] are at liberty to spoil the good understanding which ought to exist between England and France for the general security of Europe.” “The great financiers of Paris and especially the Rothschilds” were, according to one diplomatic observer the following month, “engineering a panic and are shrieking from the housetops that war between the two great sea powers is inevitable.”

This diplomatic estrangement had an economic dimension too. The approach of civil war in America led to a drain of gold from Europe across the Atlantic, beginning in 1860. This affected both London and Paris; but, while the Bank of England relied principally on increases in Bank rate to defend its reserves, the Banque de France was not quite converted to strict imitation of Threadneedle Street practice. Partly in order to avoid further increases in its discount rate—which some of the regents opposed—the Governor of the Banque therefore authorised purchases of gold in London in November 1860. Unfortunately, his agent made the mistake of withdrawing over £300,000 directly from the Bank of England itself, a confrontational step which Alphonse deplored. An agreement to swap 50 million francs of Bank of England gold for the equivalent in Banque de France silver provided only a temporary respite for the Banque, which was coming under additional pressure from the abnormally large French trade deficit and the financing needs of the government.

These difficulties forced the government to turn to the Rothschilds. In October 1861 an elaborate transaction was agreed whereby de Rothschild Frères and five other Paris banks (Hottinguer, Fould, Pillet-Will, Mallet and Durand) drew three-month bills on the London house and on Barings to the value of £2 million, with the aim of reducing the premium on sterling bills and halting the gold flow across the Channel. At the same time, the Banque sold rentes (though it appears to have partly negated the deflationary effect of these open market operations by issuing 50 million francs’ worth of small denomination notes). None of these devices really resolved the Banque’s difficulties, however, which continued into 1862-4 as gold and silver were diverted to Egypt and India, the principal suppliers of cotton to the European textile industry in the absence of the blockaded American South.

For the Paris Rothschilds, tight money meant a revival of influence; or rather, it meant a decline in the influence of a number of rivals. In 1861 Jules Mirès was arrested for fraud, a downfall James relished: “Rothschild is triumphant,” observed Mérimée, “and says that he is the sole baron of industry.” The early 1860s also saw the first intimations of the Credit Mobilier’s mortality. Having invested heavily in real estate through their subsidiary the Compagnie Immobilière, by 1864 the Pereires found themselves struggling to balance their books. As these stars of the 1850s waned, Alphonse waxed as the voice of economic orthodoxy at the Banque de France. The Credit Mobilier, argued Alphonse in October 1864, was the “principal author” of the monetary crisis and the “sole remedy lay in the energetic resistance of the Banque.” “The suspension of convertibility,” he feared, was the Pereires’ last hope of survival. “This situation is really quite critical, for it is a struggle to the death between the old system and the new system of business, between the Credit Mob. and the banks of state.” The testimony he and his father gave to the monetary Enquête of 1865 was therefore an advance obituary for the earlier ambitions of the Pereires to supplant the Banque with a more expansionist system of credit. “You wish to establish a dozen banks?” James asked the commission, alluding to Pereires’ requests for monetary relaxation:

Monetary policy, he and Alphonse argued, could be a matter for the Banque alone; confidence would evaporate if the convertibility of its notes were threatened; its conduct should resemble as far as possible that of the Bank of England, with the important exception that silver should continue to enjoy equal status with gold in the Banque’s reserve. The Pereires sought to strike back, blaming their difficulties on the Banque’s high discount rate and the drain of French capital abroad orchestrated by the Rothschilds. As Emile Pereire put it in November 1865:

But the Rothschilds could follow the death throes of the “Mob.” with detached
Schudenfreude.
James even indulged in a casual speculation in Credit Mobilier shares, though he was probably not responsible (as some contemporaries believed) for their last great rise and fall in 1864. The “old” bank had become the new; the “new” bank had become the old.

In fact, the monetary difficulties of the early 1860s were not solely due to uncontrollable global economic forces; they were partly a consequence of the government’s fiscal policy. The Italian war had necessitated an increase in public borrowing: in 1859, for example, the Banque had to lend the Treasury 100 million francs against rentes and also discounted treasury bills worth 25 million. These sums, however, were just a small fraction of the regime’s total borrowings throughout the 1850s, which—even without the costs of the Crimean and Italian campaigns—had totalled approximately 2 billion francs. The decision of the former Minister of State Achille Fould to set himself up as the leading critic of this policy paved the way for an unlikely political realignment which would have been unthinkable a decade earlier.

It was a rapprochement of erstwhile foes visible at first only in the countryside. As early as November 1860 it was reported that the Emperor was “hunting at St Germain with Messrs Fould and Rothschild”; the following October rumour had it that “Messrs Fould, de Germiny [the Banque Governor] and Alphonse Rothschild have held long conferences on the financial situation with the Emperor at Compiègne.” A month later, however, came the announcement in Paris of Fould’s return to office as Finance Minister—an announcement conspicuously welcomed by the Rothschilds and the bourse as a whole. “I am glad to note that... your good friend ... Fould has followed your wise counsel not to reduce the Banque’s discount rate,” wrote James in a letter to Alphonse just a few weeks later. Alphonse should “go to Fould and quite openly and freely chat with him a bit” and intimate that “we would very much like to work hand in hand with him.”

Substantial proof of this new harmony between Rothschild, Fould and Bonaparte came in January 1862 with the conversion of the (relatively few) 4.5 per cent rentes into 3 per cents. Although James, who was wintering in Nice, had some minor reservations about the transaction, in the end Fould was able to count on complete Rothschild support, not only at the Banque de France but at the rue Laffitte itself. In the first phase, the Paris house lent the government 30 million francs (for four months at 5 per cent interest) to push up the price of 3 per cents. In addition, Alphonse agreed to purchase 85.9 million francs of thirty-year government debentures, which were also to be gradually converted by the government into 3 per cent rentes. The conversion was a success for the government; for his part, James was delighted to have reasserted the Rothschilds’ traditional predominance in French public finance.

The famous visit of the Emperor to hunt at Ferrières on December 16, 1862, needs to be seen in this context. Historians have often represented this as symbolising the reconciliation of Bonaparte with (if not his surrender to) the old Orléanist
haute finance
; and so it seemed. Accompanied by Fould, his Minister of State (and cousin) the comte de Walewski, the English ambassador Earl Cowley and Generals Fleury and Ney, Napoleon travelled by rail to Ozouer-la-Ferrières, where he was met by James’s four sons at 10.15 a.m. Having walked across the green velvet carpet embroidered with golden bees which had been rolled out across the station platform, the Emperor and his party were then transported to the chateau itself in five carriages decked out in the Rothschild colours of blue and yellow. On his arrival, imperial flags were flown from all four towers. The rest of the family (including Anthony, Natty and his sister Evelina) were then introduced in the main hall, and the Emperor paused to admire the pictures by Van Dyck, Velasquez and Rubens hanging there. He then stepped outside to plant a commemorative cedar tree in the gardens, after which he was served a lavish breakfast. “The service of silver plate made from models which were immediately destroyed to preserve it unique,” reported
The Times
in reverent tones, “was accompanied by the celebrated service of Sèvres porcelain, every plate of which bears an authentic picture by Boucher.” The hunting itself was also pronounced a success: some 1,231 head of game were reported killed. The afternoon concluded with a buffet in the hall, accompanied from the gallery by the senescent Rossini’s specially composed “Chorus of Democratic Hunters”
(sic),
a piece of nonsense scored for tenors, baritones and basses, accompanied by two drums and a tam-tam. At 6 p.m., the imperial party returned to the station, their way illuminated by “keepers, huntsmen and other persons employed on the domain, holding torches.”

Yet the extent to which this most ostentatious of all displays of Rothschild hospitality represented a genuine reconciliation with Napoleon is doubtful. Although quite favourably impressed by the Emperor himself, Natty captured something of the uncomfortable reality of the day in his account to his parents:

Moreover, according to one account, James could not resist a barbed parting shot as he bade the Emperor farewell. “Sire,” he supposedly said, “mes enfants et moi, nous n‘oublierons jamais cette journée.
Le
memoire nous en sera cher”: with the masculine article, “mémoire” means “bill,” suggesting a pun at the Emperor’s expense (in both senses). Like the Goncourt brothers, for whom Napoleon was just the latest French sovereign “to pay a state visit to money,” the contemporary German cartoonists who portrayed Napoleon as hunting the golden calf or fat “bags” of money were wide of the mark (see illustrations 3.iii and 3.iv); but they all sensed the essentially bogus nature of the occasion. The Ferrières reception was nothing if not a bid for Anglo-French reconciliation—hence the presence of Cowley and no fewer than four English Rothschilds. Yet no such reconciliation ever came. On the contrary, each diplomatic crisis seemed to drive France and England further apart.