Unlike Pereire, almost everyone knows the Rothschild name. The banking dynasty is renowned throughout the world, earning respect, admiration, jealousy and hatred from different quarters. They’re no ordinary family, that’s for sure, and this time we’ll be telling you all about James in the second instalment of our series on the great families of the European and US rail industry.
The Rothschild story starts in Germany in the eighteenth century in the Jewish ghetto of Frankfurt. Their current name in fact forms from the house in which they lived for a long time. It had a small red coat of arms and was known as Zum roten Schild, ‘the one with a red badge’.
A few generations later, Mayer Amschel Rothschild, considered the founder of the dynasty in its current manifestation, transformed the exchange and numismatics business of his father into a bank. Trained in finance, he quickly found favour with the powerful, including William I, Elector of Hesse. Considered one of the richest men in Europe, he had to hand over management responsibilities for his money to the Rothschild patriarch when he was forced into exile.
Mayer didn’t intend to limit his business dealings to Germany and sent his sons to various other countries. While his brother Nathan went to Londres, James (formerly Jacob) went to Paris in 1810. There he acted as a correspondent for his father before launching his own bank. The patriarch died in 1812, having joined forces with his four sons. The extremely intelligent James set up an information network (carrier pigeons, informers and so on) that was so effective it was feared in many quarters. The Rothschild was more clued up than kings, emperors and prices, and that allowed them to carry out all sorts of complex financial operations across the continent. It was said that Nathan even managed to make a huge profit by learning about the defeat of France at Waterloo before everyone else. Some even said the Rothschild himself was perched on a hill overlooking the battle. Though how this really happened is still subject to great historical debate, it is testament to the omnipotence and genius of this uber-rich family which was ennobled by the Emperor of Austria at the start of the nineteenth century.
James’s business dealings in Paris went well. He was only 25 years old when he was charged with looking after millions of francs, and he carried out his job with great skill. He also quickly integrated into Parisian high society. His wife Betty (who was also his niece) played a big part in helping him fit in, since she was a protégée of Queen Marie-Amélie. From the 1830s, his bank was estimated to have 40 million francs of equity – an unheard-of amount in the 1860s. Only the powerful Banque de France could say the same. While debates raged at the time about how the industry was financed, James operated for economics history professor Hubert Bonin has described as ‘industrial banking’, which essentially involved lending a lot to businesses.
As we saw in our previous instalment, James was persuaded by the Pereire brothers to invest in the railways. He ended up funding the famous Paris-Saint-Germain line. He also invested in the line linking the capital with Versailles as well as various railway companies in England. Then the family linked up with various big rail investors in Spain and Italy. Compared with the Pereire brothers, James’s investments were intended to be more sustainable, and less susceptible to change with the unpredictable political movements of the time. It was James, too, who would later be in charge of the group that founded the Compagnie des chemins de fer du Nord, the most successful of all such rail firms in France.
We could speak at much greater length on all the investments of James de Rothschild and his brothers, but they are simply too numerous, covering industries as varied as mining and property. Eventually, the child of the Frankfurt ghetto had become the banker to most of Europe’s most powerful people, including the Holy See. But he wasn’t just a man of money. A worldly socialite, a hugely generous philanthropist and great support of the arts: James de Rothschild was so influential he became a part of popular culture himself. Nicknamed the ‘viceroy of France’ by the wife of the Tsar’s foreign affairs minister, he would inspire characters by three of the greatest-ever French writers: Stendhal in Lucien Leuwen, Balzac in La Maison Nucingen and Zola in L’Argent. And that’s not all. His legacy lives on in that iconic name that we all know, still to this day.