The House Of Rothschild Part 13

Quite apart from floating bonds for medium-sized German states, the Frankfurt house also made good profits from loans to minor German princes such as Prince von Bentheim-Tecklenburg and Prince Viktor zu Isenburg (to name just two), as well as to major aristocratic landowners like Count Hugo Henckel von Donnersmarck. In many ways this represented a continuation of business dating back to the time of Mayer Amschel. What was novel in the 1840s was the extension of such business to the non-German parts of the Habsburg Empire. Between 1843 and 1845 loans to the value of 12.3 million gulden were issued by Salomon and his Vienna a.s.sociates to a group of Austro-Hungarian n.o.blemen notable for the size of their estates and the extent of their political influence, all but one of whom-the Habsburg Archduke Karl Ludwig-were Hungarian. Much the largest loan, to Prince Paul Esterhazy, was, of course, far from being the first Rothschild loan to that powerful family. But the sudden spate of loans to other eminent Hungarians is striking. The likes of Count Moric Sandor, Count Joseph Hunyady and Count Lajos Szechenyi, eldest brother of the multi-talented Magyar reformer Istvran Szechenyi, were at the apex of Hungarian society. In principle, these transactions were little different from the lending facilities provided by West End banks like Coutts & Co. to the English aristocracy. (Indeed, Esterhazy had a close counterpart in the Duke of Buckingham, another land-rich but cash-poor grandee.) But this new involvement with the Magyar elite was to prove a source of political as well as financial embarra.s.sment to the Rothschilds when, just a few years later, Hungary was plunged into a secessionist war with Austria.

In Italy, the Rothschilds pursued the same strategy of diversification. They continued to play a leading role in the finances of the Bourbon regime in the Two Sicilies, though James and his nephews worried that local bankers would sooner or later challenge Carl's dominant position there. Here, as in Spain, there was a s.h.i.+ft away from conventional bond issues in the 1830s. For example, the state-owned Sicilian sulphur mines were considered as a possible source of guaranteed revenue against which advances might be made to the government. Another possibility raised was that of a lottery loan, an idea which James disliked because such loans had been prohibited on the Paris bourse. It is evident from their private correspondence that the Rothschilds had a low opinion of the Neapolitan government (which was to be famously excoriated by Gladstone in 1850). On the other hand, they had no scruples about continuing to do business with "His Macaroni Majesty." "Your Finance Minister is not a man you can reliably count on," James told Carl after a visit to Naples in 1839. "He is a real blackguard. He is afraid to speak with the King and if one wants to accomplish anything at all in Naples, the only man who can do so is the King himself and [sic] the Minister of the Interior, who is a very smart fellow."

Relations with the Papacy had a similar character: a fundamental contempt for the Roman government was no barrier to a profitable business relations.h.i.+p. As in the case of Naples, the mid-1830s saw attempts by rivals to break the monopolistic position over Papal finances which the Rothschilds had established after 1830. These were successfully seen off, and the management of the Papal debt remained firmly and profitably in the hands of their Roman partner Torlonia. This gave the Rothschilds a degree of leverage over the Papal government: on at least two occasions Salomon protested through Metternich against ill-treatment of the Jewish community of Rome, reinforcing the widespread belief that (in the words of Alfred de Vigny) "A Jew now reigns over the Pope and Christianity." However, this aspect of the relations.h.i.+p should not be exaggerated: the primary concern was profit from, not reform of, the Papal regime.

It proved rather more difficult to establish financial relations with the state which was to pose the most successful challenge to Habsburg power in Italy: the Kingdom of Piedmont-Sardinia. In 1834 the Paris house was invited by the government in Turin to bid for the management of a 1 million loan it was proposing to make. From the outset the compet.i.tion for the business was fierce and Lionel was sent to Turin in an attempt to clinch the deal. The correspondence between him and his uncle James during this mission sheds light not only on Rothschild negotiating techniques but also on the difficulties of dealing with an essentially absolutist regime. Finding the Piedmontese Finance Minister impossibly obtuse, Lionel sought to strike a behind-the-scenes deal with his secretary, but was unable to overcome the King's preconceptions about how the loan should be arranged. "If," James advised, our compet.i.tors come to you (for in no case must you go to them yourself ) come to you (for in no case must you go to them yourself ), saying that they are disposed to understand with you [sic] for the Loan, we beg you will receive their overtures and to make a contract with them, conceding to them a fourth or the half of the affair, to be disposed of as they like . . . but in this case the business must be done by you in our sole name our sole name; for you were the first on the spot, and in no case can it suit us to be in the background or to join our name to another.

However, if they did not accept such a proposal, Lionel should improve his offer, for "we are disposed to take the business if not at any price, at least at a price that will make them pay dear for it if they go beyond us . . . If the business be in the least feasible, do it, even if it should give no profit whatever, even if it were necessary to lose 2 or 3 hundred thousand francs to prove to those gent[leme]n. that we are not afraid of a sacrifice when we want to baffle them If the business be in the least feasible, do it, even if it should give no profit whatever, even if it were necessary to lose 2 or 3 hundred thousand francs to prove to those gent[leme]n. that we are not afraid of a sacrifice when we want to baffle them." James carefully outlined how Lionel should deal with the government in order to outbid the compet.i.tion: Your princ.i.p.al object [he wrote] must be to do well to captivate the minister, and so clearly to prove to him that it is [in] his interest to contract with us rather than with another, never giving him your last word, and to show yourself in such dispositions that he can conclude nothing with the others without having enabled you to cover their offers-and when you must come to the last word last word you must insist that it shall in fact be the last, and that your offer shall be accepted immediately and without reserve. you must insist that it shall in fact be the last, and that your offer shall be accepted immediately and without reserve.If however these gentlemen are clever enough to place themselves in an equal or better position than yours in this respect . . . your plan must be to make them pay as dear for it as possible, and to abandon the field to them only when you have sown so many difficulties & thorns in it that they can gather nothing but weeds. In such case we will be easily consoled . . . there are cases when victory costs more than a prudent retreat . . .

This gives an indication of the way James himself would have operated had he himself been in Turin; and perhaps he might have succeeded. But the inexperienced Lionel was ultimately outmanoeuvred-or rather outbid-by what he called the "Bande Noire" of French bankers led by Hagermann. It was not until 1843 that renewed attempts were made to do business with Turin and relations remained embryonic before 1848.

This expansion into new areas explains why, by the early 1840s, many observers had begun to see the Rothschilds as more than merely allies of the European states: they now appeared to have acquired a unique power of their own which was independent of the great powers and nearly universal. In his essay "Rothschild and the Finances of Europe" (1844), Alexandre Weill-one of many writers of Jewish origin who were fascinated by the Rothschild phenomenon-made the point succinctly: while "Rothschild" had needed the states to become "Rothschild," he now no longer needed them. In 1842, the liberal historian Jules Michelet declared in his journal that James knew "Europe prince by prince, and the bourse courtier by courtier" (see the epigraph to this chapter). This was barely an exaggeration. Leaving aside the two outstanding Rothschild failures-Portugal and the United States-and the exceptional case of Spain, where control of the country's mercury mines took precedence over the floating of loans, the list of states for which the Rothschilds raised money in the decade or so before 1848 is impressively long. Conservative states borrowed to avoid parliamentary influence over financial policy, often the necessary corollary of tax reforms. More progressive states borrowed to pay for public works, notably railways, when the private sector seemed unable or unwilling to fund investment. Few did not at least contemplate employing the Rothschilds as bankers and underwriters. The benefits of this widening of the financial net were obvious. The risks would only become apparent in 1848.

"Absolument le Maitre des Finances de Ce Pays": Belgium.

Perhaps the best example of Rothschild strategy in the pre-1848 period is their involvement in the finances of the newly created Kingdom of Belgium. James and his brothers had moved swiftly to establish a financial foothold in Brussels in the wake of the Belgian secession from Dutch rule in 1830, providing the new government with a lifeline of credit in the first three stormy years of its existence. In the period of relative tranquillity between mid-1833 and 1838, James energetically sought to defend and develop the position of dominance he and the Societe Generale had established in Brussels. A variety of transactions helped to sustain Rothschild interest-above all, state loans to finance Leopold I's policy of economic development, the centrepiece of which was the building of a railway network.

In directly involving itself in railway (and ca.n.a.l) construction, the Belgian government was to some extent breaking with the established British practice whereby the financing of railways was at first left more or less entirely to the private sector. But it was a precedent which other powers would soon follow. What the Belgians had appreciated was the strategic significance of possessing a railway network-an insight which owed much to their strained relations with Holland and, in particular, the need to avoid dependence on the established network of ca.n.a.ls and rivers in the Low Countries which the Dutch controlled. From the Rothschild point of view, there were obvious advantages to such a policy: it always struck them as less risky to issue state bonds than private railway shares. More importantly, the development of the Belgian railway system dovetailed neatly with plans for a railway link between Paris and Belgium in which James had already expressed an interest. On the other hand, the Belgian strategy of industrial development would have made little sense if it had not been accompanied by a parallel development of the country's own banking system. Having created three new inst.i.tutions in partners.h.i.+p with the Societe Generale (the Societe de Commerce de Bruxelles, the Societe nationale pour entre-prises industrielles et commerciales and the Banque fonciere), James had done his best to maintain his dominant position. But the Banque de Belgique (founded in 1835 with largely French capital) was a genuine rival and James had to decide whether to resist the challenge to his position or to join forces with it. In the boom years of the mid-1830s, the Paris house worked closely with the Societe Generale in floating a succession of Belgian mining companies on the Paris bourse. But in the sphere of government finance, as the inconclusive negotiations over a conversion operation in 1837 revealed, even the Societe Generale had to be regarded as a rival as much as an ally. Intimate though their relations were with King Leopold, the Rothschilds were never able to rest on their laurels as the financiers of independence, especially in view of the suspicion with which they were viewed by sections of the Belgian parliament and press. Moreover, the possibility could not be ruled out that the Belgian government might one day seek to make military use of its railway network, or indeed of the money it was borrowing to pay for it. The government spent roughly three times what it spent on railways during the 1830s on building up an army.

All these conflicting factors had to be taken into consideration when the Dutch-Belgian question returned to the European diplomatic agenda in 1838-9. In essence, the question now arose whether or not the Belgian government would abide by the terms of the 1832 articles and evacuate Luxembourg and Limburg, in return for a Dutch recognition of Belgian independence. Quite apart from the territorial sacrifice, the 1832 articles entailed a financial sacrifice, because they envisaged a roughly equal division of the pre-1830 Dutch debt between the two states. It so happened that the resumption of negotiations coincided with a new Belgian proposal for a 36 million franc loan (and a parallel Dutch request), giving the Rothschilds more than usual diplomatic leverage. Despite the small sum involved, James was extremely eager to secure this new loan, partly because he expected it to be relatively easy to float, but mainly because it would be the first major Rothschild bond issue since Nathan's death. It was a chance, in other words, for him to a.s.sert not only the Rothschilds' continuing dominance of the bond market, but also his own leaders.h.i.+p within the firm. If the terms were right, he declared in May 1838, "I will immediately say yes, despite all the political problems, because there won't be any war. Belgium will have to yield and the world is so keen to do business that one really has to hurry." The Belgians might huff and puff, James reasoned, but without French support they could do little.

Momentarily, when Prussia occupied Luxembourg in order to force the Belgian government into submission, James hesitated: "the sound of cannon fire" had its usual effect on the Paris bourse. But, when it appeared that even this would not provoke a French intervention on the side of Brussels, he went ahead swiftly with the loan, aiming to issue it as quickly as possible in London, Paris and Brussels, before there could be any deterioration in the diplomatic position. Although the bonds proved slightly less easy to market than James had antic.i.p.ated, the issue went ahead smoothly. The fact that the Belgian coal bubble also burst in 1838 may have strengthened James's position, as the sudden slump in industrial shares very nearly broke the Banque de Belgique and put even the Societe Generale itself under pressure. Now it was James who stepped in to bail the two banks out.

James was right to antic.i.p.ate that the negotiations might sooner or later run into difficulties, though fortunately for him this did not happen until the new Belgian bonds had largely been placed. There was considerable political opposition in Belgium (and in France) to the reimposition of the 1832 settlement. Yet the fact remained that the Belgians lacked the wherewithal to resist, for, although the bonds for the new loan had by now been sold, the Rothschilds had not yet finished paying over the money raised. To make the position unambiguously clear, in December 1838 James requested that a clause be inserted in the loan agreement to the effect "that if war were to break out or if any disputes were to arise then we would be at liberty to annul our contract." Somewhat optimistically, the Belgians continued to negotiate with the Rothschilds in the hope of securing additional funds in the form of an advance against treasury bills. "Well, the Belgians are a.s.ses," James commented on hearing reports of military preparations in Brussels. "I am not at all pleased to see all the troop concentrations, and they are quite capable of turning a joke into a serious affair, although as long as the major powers are opposed to war, they can't do anything." The request for an advance was turned down flat. Playing, as usual, on Metternich's hostility to "revolutionary" regimes, Salomon (who was in Paris during the crisis) sent Apponyi a copy of his instructions to Richtenberger, the Rothschilds' agent in Brussels: We do not in the least resent the fact that the [Belgian] Government is somewhat angry at our refusal with regard to the Treasury Bills. It is not at all a bad thing that these gentlemen should realise that they may count on us only as long as they mean to follow a policy of wisdom and moderation. We have certainly given sufficient proof of our intention to support and help the Belgian Government but our goodwill necessarily stops short of the point of providing the rod with which we are to be beaten, that is to say, providing the money wanted to make a war which would destroy the credit that we are applying all our energies and resources to maintain. You may tell these gentlemen what I have written freely and frankly and without mincing words.

Lest there be any doubt in Austria about Rothschild policy, he followed this letter up with another to his Vienna office "for Prince Metternich's information" detailing Richtenberger's conversations with the Belgian government: They won't get a farthing from me until they give way, and before I go away I shall leave similar instructions with my brother James . . . I hope that Belgium will now sign the twenty-four articles especially as they lack the "nervus rerum" and as long as the articles are not accepted the Belgian Government will not get a halfpenny from us, although they have been begging for money for months. Difficult though I [have] found it to keep on refusing, I shall feel compensated, should Belgium yield and peace be restored, by the reflection that I shall have done my best to contribute to such a result.

It was, of course, as much the lack of a pro-Belgian government in Paris as the lack of 4 million francs from the Rothschilds which obliged the Belgians to give way. Still, the leverage which the Rothschilds were able to exert in Brussels had been considerable. Moreover, it seemed to present a perfect opportunity to consolidate Rothschild dominance in Belgian finance. Even before the treaty had been signed, James was urging his nephews that "a Belgian security is always marketable and I would suggest that one of you . . . should go to Brussels to make the acquaintance of the new Minister in order to establish a close relations.h.i.+p with him and to tell him that you are [now] prepared to make all the loans and to receive treasury bills"-something which had previously been refused. What James now aimed at was nothing less than a monopoly. As he put it bluntly: "[T]he arrangement of the Belgian question is going to be followed by a need for money and this will be a moment we ought to exploit in order to make ourselves the absolute masters of the finances of this country." Even by Rothschild standards, this was strong stuff; but in many ways the position subsequently achieved was not far short of mastery over the government's borrowing, even if it had to be shared with the Societe Generale. In early 1840, when James travelled to Brussels to discuss the terms of a new loan of 60-80 million francs, he found the government "very well disposed": "I left all the people there exceedingly pleased with my visit, and I lectured them about how to put themselves on a better footing, at least for a while. They are content enough to let us guide them, now that I have pointed out to them all the mistakes they have made in attempting to act without us."

After protracted discussions, a loan was duly agreed in November, and another (for 28.6 million francs) followed two years later. Whether to pay its indemnity to Holland or to embark on new railroad projects, the Belgian government seemed addicted to borrowing, and its reliance on the Rothschilds to find buyers for its bonds was almost complete. Typically, when James fell out with a Belgian minister in 1842, he requested Lionel "to go to Windsor on Sunday to see the King of the Belgians": Constantin has written a letter which you will receive in due time explaining how matters stand at Brussels & you will be able to tell the King if . . . the present minister remains there will be no market anywhere for Belgn Bonds & no possibility of undertaking a large financial operation, you must be careful not to speak against [the minister] but only let his Majesty find out yr opinion.

Altogether, Belgium raised five major loans between 1830 and 1844 with a combined nominal value of close to 300 million francs; almost all had been underwritten by the Rothschilds.

Nor was it only Belgian finance which the Rothschilds now sought to control. In October 1840 Anselm visited the Hague, where the Dutch government was demanding the payment of a capital sum from the Belgians (as opposed to the annuity of 5 million francs they had agreed to pay in 1839). When the Dutch blamed their deficit on the fact that the Belgians were delaying these payments, Anselm obliged with a modest advance. Two years later, when an agreement was reached with Belgium to capitalise the money in the form of bonds, it was the Rothschilds who then offered to cash them (at a substantial discount) for the Dutch government. It was entirely typical of the Rothschilds to act on behalf of both parties in such an international transfer.

In both Belgium and Holland, there was considerable opposition to the role played by the Rothschilds in public finances. For example, the Rothschilds were closely identified with the French government's abortive scheme for a customs union with Belgium. Protectionists in Brussels detected a sinister French plan for economic annexation, though there is in fact no evidence that the Rothschilds supported the scheme. Anselm feared similar attacks by the liberal press in Holland when the possibility was raised of a conversion of the Belgian bonds given to Holland in 1841. The Dutch Finance Minister, he complained, was as well disposed for us [sic] as can [be], but he is so much under the influence of the public opinion & the newspapers which say that he is sold to us, that really the man has not the courage to contract with us, altho he is very well aware that no other one has the means, the credit, the influence we dispose of & has the power to raise so much the public credit of the country as we might possibly do it . . . Really the Man is so terrified by every stupid Article in the news papers saying that he has sold himself to us, that he told me, "I wish most sincerely to do alone with you, if only I could save my reputation of an honest man or prove to others that they are in the impossibility [sic] of doing so well as you."

The Minister was right to worry; three months later he was forced to tender his resignation in the face of opposition pressure.

Although Anselm was able to retain Rothschild control over the transfer transfer of the 40 million guilders still owed by Belgium to Holland, both the Dutch and Belgian governments now sought to emanc.i.p.ate themselves from the Rothschilds in their capacity as underwriters by selling Belgian bonds by public subscription. Needless to say, the Rothschilds viewed this development with extreme hostility, fearing a precedent which (like the British income tax) other governments might follow. Nat was characteristically fatalist: "I fear folks have become too clever everywhere & governments will not pay commission when they can manage without." "If the govt. succeeds," he told his brothers gloomily, "which is most probable, they will be able to do without us at present & in future-We can not oppose them openly." But his uncle James never gave up business without a fight. "The Baron wishes the thing not to succeed," Nat reported, "& consequently avoids helping the minister thro"-cer tainly it is against our interest that the Government should make open loans & if we can prevent them so doing it is our duty to act accordingly." of the 40 million guilders still owed by Belgium to Holland, both the Dutch and Belgian governments now sought to emanc.i.p.ate themselves from the Rothschilds in their capacity as underwriters by selling Belgian bonds by public subscription. Needless to say, the Rothschilds viewed this development with extreme hostility, fearing a precedent which (like the British income tax) other governments might follow. Nat was characteristically fatalist: "I fear folks have become too clever everywhere & governments will not pay commission when they can manage without." "If the govt. succeeds," he told his brothers gloomily, "which is most probable, they will be able to do without us at present & in future-We can not oppose them openly." But his uncle James never gave up business without a fight. "The Baron wishes the thing not to succeed," Nat reported, "& consequently avoids helping the minister thro"-cer tainly it is against our interest that the Government should make open loans & if we can prevent them so doing it is our duty to act accordingly."

It would seem that James's aggressive view prevailed. "The Belgian Finance Minister will not find it a very easy job to get rid of his loan by subscription," Nat wrote some days later. "I think he will be obliged to have recourse to us after all which will very much delight us all-Try & make Belg[iu]m flat by selling a few 1840 or 1842 bonds for the J[oint] A[ccount], it will be a good thing if they write to Brussels from every where that the market is flat." This was a cla.s.sic Rothschild tactic-selling off bonds to embarra.s.s a recalcitrant government. The aim was to force the Belgian government to return to Rothschilds, cap in hand. This appears to have had its effect; for, although the public sale of the Belgian 4.5 per cents went ahead, it was not long before the government once again had to turn to Rothschilds. Meanwhile, Anselm's indefatigable negotiations in the Hague had won over the new Dutch Finance Minister to the view that Rothschilds should after all handle the sale of the 6 million Belgian 2.5 per cents he wished to realise. In 1845 the Belgian government returned contritely to the Rothschild fold and James was able to exact tough conditions for relatively modest advances in 1846 and 1847. Without Rothschild, reported the French amba.s.sador in Brussels, the Belgian government had "realised that it would be impossible for it to find a penny on any bourse, domestic or foreign." This was only a slight exaggeration. To all intents and purposes, the Rothschild monopoly on Belgian public finance was complete-though the abortive attempt to sell bonds directly to the public was an intimation of how that monopoly might be challenged in the future.

Roads to Damascus.

In many ways the most important aspect of the Belgian crisis of 1838-9 had been its impact in France. Along with its alleged foreign policy failures in Spain and Switzerland, the Orleanist regime's unwillingness to stand up for Belgian interests was widely criticised as appeas.e.m.e.nt of France's old enemies, conservative Austria and perfidious England. Ever since the revolution of 1830, the Rothschilds had fretted about the possibility of a French return to the old combination of internal radicalism and external aggression which had set Europe ablaze in the 1790s. When yet another international crisis-this time in the Middle East-confronted France with diplomatic isolation, that possibility threatened to become a reality. This was the first of many "Eastern Crises" the Rothschilds would have to weather. Its outcome-the fall of the bellicose Thiers government and the diplomatic humiliation of France-marked one of the high points of their political power.

In fact, James had never really stopped worrying that international developments might lead to a change of government in Paris. "Rentes will fall because Thiers is in favour of a policy of intervention [in Spain]," he warned when it was rumoured that the latter might be about to return to government in April 1837, recalling his efforts to send troops across the Pyrenees the previous year. Indeed, the very thought of another Thiers ministry was enough to convince James of the need to "get out of the [French] funds, for the end will not be good." "A good ministry," according to James's definition, was essentially one which would pursue pacific policies abroad and balance the budget at home: he liked the Mole ministry which ultimately emerged that April precisely because it was "weak." When Mole survived the elections held the following November, James regarded them as having "gone well"; and he urged the government "to stay united and convince themselves that they are strong and powerful," promising "firm and steadfast support" when Thiers mounted a new challenge in December 1838.

The Rothschilds were nervous when Mole's position finally crumbled following the elections of March 1839, fearing a ministry "composed of the Thiers party" and the doctrinaire doctrinaire liberals. "It is a very bad thing according to my opinion," wrote Anthony uneasily, "and the King is obliged to give way & to do everything as Thiers wishes-I a.s.sure you that we become a little frightened." As it turned out, Thiers' insistence on a more aggressive foreign policy was still too much for Louis Philippe to accept and another moderate government was formed by Marshal Soult. But this proved short-lived, and on March 1, 1840, Thiers was at last back in office. His seemingly irresistible rise made James pessimistic: liberals. "It is a very bad thing according to my opinion," wrote Anthony uneasily, "and the King is obliged to give way & to do everything as Thiers wishes-I a.s.sure you that we become a little frightened." As it turned out, Thiers' insistence on a more aggressive foreign policy was still too much for Louis Philippe to accept and another moderate government was formed by Marshal Soult. But this proved short-lived, and on March 1, 1840, Thiers was at last back in office. His seemingly irresistible rise made James pessimistic: After a new Ministry has been formed no one gives this matter any further thought, especially so during the summer, but in the long run I am very sorry to say that France will only be able to extricate herself from her current predicament by means of war. As long as Louis Philippe, may G.o.d preserve him, remains [on the throne] I think that peace will be maintained but his son, I believe, will have no option but to wage war. Well, be that as it may my dear nephews, I intend to remain faithful to my previously voiced opinion slowly but surely to sell our 3 per cent rentes . . . It is a disgrace that no Ministry can be formed and whoever may eventually head the Ministry . . . we can expect to see the various Parties in the Chamber at each other's throats, but if the securities suffer a fall then one can buy again because in France the people are just like in Spain, one day they fight each other and the next day they are good friends again.

With Thiers as premier, he warned his nephews, he was "not too happy with the fundamental situation, that is, with the internal state of affairs." The regime was "losing those friends who were most dedicated to her." Although James was soon talking-in his usual, adaptable way-of "build[ing] up a friendly relations.h.i.+p with [Thiers]," this proved to be unrealistic.

The issue which led to open war between the Rothschilds and Thiers is usually referred to as the "Eastern Question": could the sprawling Ottoman Empire, which notionally encompa.s.sed most of North Africa, much of the Balkans and nearly all of the Middle East, be preserved intact? If not, what should take its place? Economically backward, religiously divided, administratively ramshackle and politically despotic-the Ottoman Empire was all of these things. So, of course, were the Romanov and Habsburg empires; but less so, and they were Christian states-hence the effective exclusion of Turkey from the "pentarchy" of European great powers in the modern period. At this time, four of the "big five" had interests in the areas where Ottoman rule appeared to be in decline. Austria and Russia, for obvious geographical reasons, had the longest history of territorial conflict with their southern neighbour; while Britain and France were becoming more and more interested in the region for a mixture of commercial, strategic and religious reasons.

In the course of the nineteenth century the future of Ottoman rule came to hinge on the interaction of these powers: the consistent theme which links all the various Eastern crises is that, while each power had her own distinct objectives, none could achieve these alone. The Rothschilds came to play a vital role in the diplomacy of the Eastern Question mainly because, whether the status quo was preserved or new structures created, money was needed; for one of the fundamental problems of governing the region was the chronic narrowness of its tax base. There was, however, a second and very different reason why the Rothschilds took an interest in Ottoman affairs: the position of their "co-religionists."

As we have seen, it was the successful Greek bid for independence which had first involved the Rothschilds in the Eastern Question. Once the diplomatic wrangles over the extent and const.i.tution of the Greek state were over, they were only too happy to help provide the funds required to indemnify the Turks and set the new government in Athens on its feet. The loan looked at first sight a relatively straightforward business, as the Greek bonds were to be guaranteed by three of the interested powers, Britain, France and Russia. However, James had to fight hard in Paris to secure a satisfactory share from Aguado and d'Eichthal, who was in a position to dominate the transaction because of his close links-as a fellow Bavarian-with the new Greek King. Moreover, the execution of the transaction proved a good deal more difficult than had been antic.i.p.ated. Essentially, 60 million francs were supposed to be issued, a third guaranteed by each of the powers. Of the money raised, 11 million francs were to be paid to Turkey through the Rothschilds, while the rest went to the Greek government via d'Eichthal.

Renewed tension in the region almost immediately disrupted these arrangements, however. In November 1831 Mehemet Ali, ruling Pasha of Egypt, revolted against Sultan Mahmud II on the ground that he had been inadequately recompensed for his military efforts against the Greeks in the Balkans. Ali-himself an Albanian by birth-sent his son Ibrahim to invade Syria, the territory he most coveted. Within a matter of months he had taken possession of Gaza, Jerusalem and Damascus itself. The Sultan initially sought to enlist British support against his rebellious va.s.sal, but Palmerston rejected the advice of his man in Constantinople, Stratford Canning, and refused a.s.sistance, seeking instead to broker some sort of compromise. The Sultan therefore turned to Russia, accepting the Tsar's offer of military a.s.sistance in February 1833. Five months later, to British and French dismay, a treaty (that of Unkiar Skelessi) was concluded between Turkey and Russia which included a secret article binding the Sultan to close the Straits of the Black Sea to wars.h.i.+ps of all nations "au besoin"-in effect, if Russia requested it. The Russian diplomatic triumph was complete when Austria and Prussia endorsed the treaty at Munchengratz.

To the Rothschilds, all this was at first just another of many threats to European peace. Salomon hastened to warn James on Metternich's behalf that France should not retaliate by backing Mehemet Ali, whose Napoleonic public image in Paris was further enhanced by his apparently progressive economic policy of state monopo lies. The financial implications of the crisis were, however, less clearcut because the French guarantee for the Greek loan had yet to be ratified, while the indemnity payment to Turkey was now due to be paid. Under the strained diplomatic circ.u.mstances, it was predictable that these transactions were plagued by (ostensibly) technical difficulties. The Greeks delayed sending the necessary bonds to London, for example, while the Turks refused to admit a Greek delegation to Constantinople if they arrived in a wars.h.i.+p. Nat had set off for Constantinople fantasising about the exotic decorations he would receive from the Sultan in return for facilitating the indemnity payment. By the time he left, however, he was "sick & tired of the Turks and their shameful double dealing & regret exceedingly that I ever came here to do business . . . [in] this detestable place."

There were further difficulties in 1836-7, when the Greek government threatened to default on the interest payments due on its loan, a crisis which put the international guarantee to a test it only just managed to pa.s.s. In an operation similar to that which the Rothschilds had to carry out for Portugal at around the same time, new bonds were issued to raise the cash for the dividends on the existing bonds; but the financial markets quickly learned to value the various Greek bonds differently, preferring those guaranteed by Britain to those guaranteed by France and Russia. The problem persisted into the 1840s, with the guarantor powers seeking to pay only the interest due, without the Rothschilds' commission.

It was at this moment that French and British policy on the Eastern Question began to diverge. The period 1836-7 saw the resumption of French colonisation of another formerly Ottoman fiefdom, Algeria-a project initiated in the dying days of the Bourbon regime and now brought to a successful military conclusion. Palmerston, on the other hand, was now steering British policy in a more pro-Turkish direction, in the hope of undermining the dominant Russian position in Constantinople. When war broke out again between the Sultan and Mehemet Ali in April 1839, the French government gradually found itself isolated in its support for the latter. In the course of tortuous diplomatic manoeuvring, an Anglo-Russian deal was struck whereby the Treaty of Unkiar Skelessi would be replaced by an international agreement on access to the Black Sea, while Mehemet Ali would be forced to quit Syria but allowed to keep the fortress of Acre. In October 1839 the Soult government rejected this proposal, but there was very little it could do. It was, as the Paris house reported to New Court, "in a rather embarra.s.sing position. In effect . . . the French government either will be obliged to accept [Lord Palmerston's proposals] too or may well find itself completely isolated in its view of Eastern affairs." Coming so soon after the government's inert response to the Belgian crisis, this diplomatic reverse seemed a compelling argument for giving Thiers' more aggressive approach to foreign policy a chance.

Up until this point, the Rothschilds had done little more than monitor diplomatic developments. Then, on February 5, 1840, something happened in Egyptian-occupied Damascus which dramatically altered the complexion of the crisis. Under circ.u.mstances which remain obscure, a Sardinian Capuchin friar named Father Tommaso and his servant Ibrahim went missing without trace. As they had last been seen in the city's Jewish quarter, allegations soon began to circulate that they had been murdered there. Egged on by the French consul, the comte de Ratti-Menton, who wished to a.s.sert France's responsibility for Catholics in Damascus, the Egyptian Governor arrested a number of Jews and subjected them to torture. One Jew who alleged that he had seen Tommaso in the Muslim market was arrested and tortured to death, as was his servant. After 500 lashes, a Jewish barber alleged that he had seen Toma.s.so with two rabbis and seven leading members of the Jewish community, including one David Arari. They were all arrested, along with a third rabbi. When they protested their innocence, the unfortunate barber was whipped again, whereupon-in return for immunity-he claimed that the suspects had offered him money to murder the monk so that his blood could be used to make unleavened bread for Pa.s.sover. Although he had refused, the barber claimed to have witnessed Toma.s.so's "ritual murder" at Arari's house.

After torture and a promise of immunity, Arari's servant confessed to the murder, and what were supposed to be Tommaso's remains were duly "found" in a sewer, whereupon the seven suspects were tortured until they "confessed" their guilt. One of them-who converted to Islam to save himself and his family-confirmed the ritual murder story: Tommaso's servant had, he said, been murdered in the same way. As with early modern witch-hunts, the more bizarre the story grew, the greater the number of people who were implicated. Altogether some seventy people were arrested, and almost as many children were taken hostage to force those "suspects" who had fled Damascus to give themselves up. Throughout, the French consul played the role of witchfinder-general, exploiting not only the anti-Semitism of the Catholic community but the social divisions within the Jewish community.

It was the arrest of Isaac de Picciotto, a Jewish merchant who also happened to be an Austrian subject, which transformed the witch-hunt into a major international incident. Determined to prevent his suffering the same fate as Ratti-Menton's other victims, the Austrian consul, Caspar Giovanne Merlatto, protested to the Damascus authorities and asked his superior in Egypt, the consul-general Anton Laurin, to do the same in Alexandria. On March 31 Laurin-who regarded the whole notion of ritual murder as spurious-not only complained to Mehemet Ali, but also sought to get his French counterpart in Alexandria to restrain Ratti-Menton. For good measure, Laurin simultaneously took the somewhat unusual step of sending copies of his own reports and some of those he had received from Merlatto directly to the Austrian consul-general in Paris. The latter should, Laurin suggested, press the French government to "issue a strong order . . . seriously rebuking the consul in Damascus" and "hold[ing] the government there responsible . . . [lest] the animosity of the non-Jewish population develop into a real persecution of the Jews."

The Austrian consul-general in Paris and the author of the letter quoted above was, of course, James de Rothschild, and Laurin's was only one of a number sent to him and to other members of the Rothschild family seeking support for the Damascus Jews, as well as those of Rhodes who were experiencing similar persecution. On March 15 letters on the subject had reached the Dutch Jewish leader Hirsch Lehren from a Beirut Jew who urged that they be pa.s.sed on to the Rothschilds so that they might "speak to the kings and to their ministers." Two days later another letter from an English businessman based in the Middle East prompted Lehren to write to James, arguing that only "the renowned Rothschild family . . . has the power to save the brethren suffering persecution." On March 27 the Constantinople community had sent letters from Damascus and Rhodes to Salomon, Carl and Lionel, appealing to "the tie which so strongly binds together the whole Jewish community."

James did as Laurin suggested. However, the French Foreign Ministry merely ordered that their vice-consul in Alexandria should investigate Ratti-Menton's conduct, which, as James divined, was "only a temporising measure, since the vice-consul is under the consul, so that he has no authority to call the latter to account for his actions." "In such circ.u.mstances," he informed Salomon on April 7, the only means we have left is the all-powerful method here of calling in the newspapers to our a.s.sistance, and we have accordingly today had a detailed account, based on the reports of the Austrian consul [in Damascus], sent in to the [Journal des] Debats Debats and other papers, and have also arranged that this account shall appear in similar detail in the and other papers, and have also arranged that this account shall appear in similar detail in the Allgemeine Zeitung Allgemeine Zeitung of Augsburg. of Augsburg.

This decision to involve the press was partly a response to the widespread support for the ritual-murder theory in French newspapers like the Quotidienne Quotidienne and the and the Univers Univers. Determined that this should be countered as effectively as possible, James turned to Adolphe Cremieux, vice-president of the Consistory of French Jews since 1834, whose forensic skills were as celebrated as his journalistic. Cremieux's long letter on the subject appeared in the Gazette des Tribunaux Gazette des Tribunaux and the and the Journal des Debats Journal des Debats the next day. In the course of the subsequent press debate, James also authorised Cremieux to publish doc.u.ments Laurin had sent him-much to the irritation of Metternich who, while sympathising, abhorred the involvement of the (by Austrian standards) uninhibited press. the next day. In the course of the subsequent press debate, James also authorised Cremieux to publish doc.u.ments Laurin had sent him-much to the irritation of Metternich who, while sympathising, abhorred the involvement of the (by Austrian standards) uninhibited press.

This was only the beginning of the Rothschilds' involvement in the campaign to secure the release of the Damascus prisoners. In London, Lionel was present when the Board of Deputies met to discuss the affair on April 21 (as was Cremieux), and he was also a member of the delegation which Palmerston received nine days later. Six weeks later it was Nat who suggested that Cremieux write an official letter addressed to Lionel and the British Board of Deputies, "& that will afford you an opportunity of addressing Lord Palmerston on the subject"; and it was Nat who suggested that Lionel "get up a good subscription to pay the expenses of sending Cremieux there [to the Middle East] fast." This led directly to the idea of the highly publicised expedition to Alexandria by Cremieux and Sir Moses Montefiore, the purpose of which was to clear the prisoners' names and secure their release. The Rothschilds contributed a substantial sum-at least 2,500-towards the costs of this venture, as well as acting as treasurers for the Damascus Jews' fund. In Vienna, Salomon meanwhile persuaded Metternich to press the Vatican about rumours that Tommaso was in fact alive and hiding in a monastery (he was not). In Naples, Carl loaded Montefiore's s.h.i.+p with provisions, gave him some negotiating tips and later helped him in his fruitless attempts to persuade the Catholic church to expunge the allegation of murder on Father Tommaso's supposed gravestone. In Paris, Anselm received regular communications from Laurin, detailing the progress of Montefiore's negotiations in Alexandria.

It has usually been a.s.sumed that, in taking up the cause of the Damascus Jews, the Rothschilds were motivated by sincere outrage at the way their fellow Jews were being treated. Heine-one of the journalists James tipped off-contrasted James's altruism with the indifference of other French Jews, and in particular his rival in the sphere of railway finance, Benoit Fould. James, Heine observed, had "shown a n.o.bler spirit in his sympathies for the House of Israel than his learned antagonist." There is no question that all the Rothschilds sincerely sympathised with their co-religionists. It was, said Nat, "an unpleasant business, but one must exert oneself to prevent such calumnies being spread against our religion & such horrid tortures being practised on our unfortunate brethren in the East." The aim, he added a few days later, was "to show people generally that the day is gone by when any religious sect may be neglected with impunity." The French government's attempts to defend the conduct of Ratti-Menton enraged Nat: "[W]hen the Prime Minister of France declared in the Chamber that he thought the Jews committed murder for the sake of Christian blood to be used in a Hebrew religious ceremony . . . it strikes me that such a calumny upon all those who have any Jewish blood in their veins ought not only to be contradicted but proved to be false." He and the rest of the family shared the widespread Jewish jubilation at the success of Montefiore's mission in securing not only a solemn firman firman from Mehemet Ali himself denying the existence of ritual murder as a Jewish practice (August 28), but also the "honourable discharge" of the prisoners a week later. All this gave the lie to the charges which had been levelled at the Rothschilds in the 1830s of indifference to the fate of their fellow Jews. "Who can come forward," the editor of the from Mehemet Ali himself denying the existence of ritual murder as a Jewish practice (August 28), but also the "honourable discharge" of the prisoners a week later. All this gave the lie to the charges which had been levelled at the Rothschilds in the 1830s of indifference to the fate of their fellow Jews. "Who can come forward," the editor of the Allgemeine Zeitung des Judenthums Allgemeine Zeitung des Judenthums Ludwig Philippson had demanded to know in 1839, "to say that these people have done anything substantial for Judaism, for its external or inner emanc.i.p.ation, for its civil or spiritual elevation?" Like the American writer who had claimed that James did not "care [about] the barren seacoast of Palestine," Philippson had to eat his words after the Damascus affair-or, alternatively, conclude that they had been heeded. Ludwig Philippson had demanded to know in 1839, "to say that these people have done anything substantial for Judaism, for its external or inner emanc.i.p.ation, for its civil or spiritual elevation?" Like the American writer who had claimed that James did not "care [about] the barren seacoast of Palestine," Philippson had to eat his words after the Damascus affair-or, alternatively, conclude that they had been heeded.

On the other hand, the extent of the Rothschilds' ambitions for the Jewish communities of the Middle East should not be exaggerated. Even before 1840 it was an idea frequently canva.s.sed in the press and elsewhere that the Rothschilds had some sort of design to reclaim the Holy Land for the Jewish people. As early as 1830, an American journal (Niles Weekly Register) suggested that "the pecuniary distress of the sultan" might lead him to sell Jerusalem to the Rothschilds: They are wealthy beyond desire, perhaps even avarice; and so situated, it is quite reasonable to suppose that they may seek something else to gratify their ambition . . . If secured in the possession, which may be brought about by money, they might instantly, as it were, gather a large nation together, soon to become capable of defending itself, and having a wonderful influence over the commerce and condition of the east-rendering Judah again the place of deposit of a large portion of the wealth of the "ancient world." To the sultan the country is of no great value; but, in the hands of the Jews, directed by such men as the Rothschilds, what might it not become, and in a short period of time?

At around the same time, a correspondent asked Nathan directly: "How is it that your people with so extensive an influence have made no efforts to re-acquire Palestine, the land of your forefathers, from the Porte, the Ruler of Egypt and the Powers of Europe?" As we have seen, this question was answered in mystical terms in the pamphlet The Hebrew Talisman The Hebrew Talisman in 1836; and one "proto-Zionist" Jewish writer formally proposed that Amschel purchase land in Palestine that same year. The early French socialist Charles Fourier was another who thought that "The restoration of the Hebrews would be a splendid coronation for the gentlemen of the House of Rothschild: like Esra and Serubabel, they can lead the Hebrews back to Jerusalem and erect once again the throne of David and Solomon, in order to call into being a Rothschild dynasty." Almost exactly the same image was conjured up at the other end of the political spectrum by the in 1836; and one "proto-Zionist" Jewish writer formally proposed that Amschel purchase land in Palestine that same year. The early French socialist Charles Fourier was another who thought that "The restoration of the Hebrews would be a splendid coronation for the gentlemen of the House of Rothschild: like Esra and Serubabel, they can lead the Hebrews back to Jerusalem and erect once again the throne of David and Solomon, in order to call into being a Rothschild dynasty." Almost exactly the same image was conjured up at the other end of the political spectrum by the Univers Univers in October 1840. in October 1840.1 British Evangeli cals were also attracted to this idea. As Lady Palmerston commented in the wake of the Damascus affair, "the fanatical and religious elements . . . in this country . . . are absolutely determined that Jerusalem and the whole of Palestine shall be reserved for the Jews to return to; this is their only longing (to restore the Jews)." Though Stanley was surprised when Disraeli raised the subject eleven years later, British Evangeli cals were also attracted to this idea. As Lady Palmerston commented in the wake of the Damascus affair, "the fanatical and religious elements . . . in this country . . . are absolutely determined that Jerusalem and the whole of Palestine shall be reserved for the Jews to return to; this is their only longing (to restore the Jews)." Though Stanley was surprised when Disraeli raised the subject eleven years later,2 it was scarcely an original thought. Indeed, it is possible to see such remarks as expressions of Christian millenarian hopes, with the Rothschilds supposedly hastening the Second Coming. it was scarcely an original thought. Indeed, it is possible to see such remarks as expressions of Christian millenarian hopes, with the Rothschilds supposedly hastening the Second Coming.3 But there is no evidence that the Rothschilds harboured any such intentions; the involvement of individual members of the family in what became known as Zionism was a much later development. But there is no evidence that the Rothschilds harboured any such intentions; the involvement of individual members of the family in what became known as Zionism was a much later development.

What is more, a number of members of the family had reservations even about the way the campaign for the release of the Damascus prisoners was conducted. It appears from Nat's letters that Lionel was uneasy about the "rumpus" being made by Cremieux and some of the more vociferous British Jews. They had, he felt, shown "rather too much warmth of feeling." Indeed, one reason for suggesting that Montefiore accompany Cremieux to Alexandria was "to moderate [the latter's] zeal." Nor, it seems, did Nat or Anselm expect the expedition to achieve its objectives. When it did succeed, Anselm was "decidedly against any public demonstration" and deplored the hero's welcome which Cremieux was accorded in Frankfurt and elsewhere. The Damascus agitation galvanised Jews throughout Western Europe, and led to a variety of schemes for improving the condition of the Jews in the Holy Land, notably the plan for a Jewish hospital in Jerusalem devised by Philippson. At first the French Rothschilds seemed willing to follow the lead of Montefiore, who supported the scheme; but they made their contribution conditional on the founding of a secular school alongside the hospital. When the Jewish community in Palestine vetoed this, the Rothschilds withdrew, and it was not until 1853-4 that the hospital scheme was revived.4 The Rothschilds continued to try to use their influence to improve the condition of Jewish communities elsewhere (in Russian-controlled Poland for example), as they had in the past; but their efforts were always regarded with suspicion by more radical Jews who aimed at something more than economic amelioration. The Rothschilds continued to try to use their influence to improve the condition of Jewish communities elsewhere (in Russian-controlled Poland for example), as they had in the past; but their efforts were always regarded with suspicion by more radical Jews who aimed at something more than economic amelioration.

For the Rothschilds, the real significance of the Damascus affair can be understood only when it is set in its diplomatic context. Sympathetic though they undoubtedly were to the Damascus prisoners, James and Salomon in particular attached more importance to the diplomatic ramifications of their plight. For the Damascus affair presented James with an ideal opportunity to undermine the position of Thiers, who had become premier a matter of weeks after the supposed "murder" of Father Tommaso. In essence, the affair tended to accentuate the problem of French diplomatic isolation which had helped bring Thiers to power. The British government had its own reasons for backing the campaign for the release of the Jews. Having decided to break the power of Mehemet Ali and isolate France, Palmerston was only too delighted to portray the Egyptian regime in Syria as barbaric. Similarly, Metternich welcomed the chance to challenge the French claim to defend the interests of Catholics in the Holy Land. Thiers, on the other hand, could hardly be seen to criticise Mehemet Ali's regime in Syria, much less disown his own consul. Instead, he went on the offensive. In early May he told James "that the case is based on truth; and we had better let the matter rest . . . [as] the Jews in the East still maintain such superst.i.tions . . ." He said much the same to Cremieux. On June 2, in response to a speech by Fould in the Chamber of Deputies, Thiers sarcastically called into question the patriotism of the French Jews: You protest in the name of the Jews; well, I protest in the name of the French. And if I may be permitted to say so, something extremely honourable is happening among the Jews. Once the story became public knowledge, their disquiet was apparent all over Europe, and they have handled the affair with a zeal and a fervour that profoundly honours them in my eyes. If I may be permitted to say so, they are more powerful in the world than they pretend to be, and at the very moment, they are lodging complaints at every foreign chancellery. And they do it with a zeal, an ardour that exceeds all imagination. A minister must have courage to defend his agent who is attacked in this way.

This unleashed a spate of attacks on "the man who owns the splendid mansion on the rue Lafitte . . . who sought at all costs a coup d'etat coup d'etat against . . . our consul at Damascus" (the against . . . our consul at Damascus" (the Univers Univers) and "the incredible arrogance" of "Mr Rothschild" (the Quotidienne Quotidienne).

It is, of course, tempting to dismiss such remarks as an expression of that anti-Semitic streak which periodically surfaced in French politics throughout the nineteenth century. Yet there was a sense in which Thiers had little alternative but to defend Ratti-Menton. The Rothschilds-and James in particular-were determined to undermine his position, though more because of the threat he posed to international stability than because of the threat he posed to the Jews of Damascus (to say nothing of the Jews of France). determined to undermine his position, though more because of the threat he posed to international stability than because of the threat he posed to the Jews of Damascus (to say nothing of the Jews of France).

It would be an oversimplification to say that the Rothschilds toppled Thiers from power. Quite apart from the events in Damascus, the summer of 1840 saw a steady worsening of the French position. Rather than accept the Anglo-Russian solution to the problem posed by Mehemet Ali, Thiers sought to engineer a bilateral agreement between Ali and the new Sultan. However, this merely provoked the other powers into signing an agreement (on July 15) to use force if necessary to compel Mehemet Ali to accept their terms, which would have confirmed him as hereditary Pasha of Egypt, given him the t.i.tle of Pasha of Acre, but entrusted him with no more than the administration of southern Syria for life. It was now beyond doubt that Palmerston put the preservation of British influence in Constantinople before the preservation of the already moribund Entente Cordiale. Nor was Thiers helped by Louis Napoleon's abortive landing in August and the outbreak of unrest in Paris the following month. In any case, Nat explicitly stated at the height of the crisis that it would be "almost impossible and would indeed be dangerous and altogether unwise, to overthrow him." On the other hand, when Nat inveighed against the "irresponsibility and . . . nationalistic peasant obstinacy" and the "pseudo liberalism" of "this most arrogant of all parvenus" it was obvious what kind of "happier future" he had in mind. The question is how far the Rothschilds were able to hasten Thiers' downfall.

On the face of it, their sole objective in the frenetic months of August and September 1840 was to promote peace through their tried and tested channels of diplomatic communication. Lionel rea.s.sured Lord Clarendon that France would not fight; James relayed to Metternich Louis Philippe's repeated pleas for an Austrian deus ex machina deus ex machina; Lionel sought to involve the King of the Belgians; James visited the bellicose duc d'Orleans; Lionel relayed Nat's warning to Palmerston not to push the French too far-and so on. But the financial subtext of this diplomatic activity was calculated to undermine Thiers' position. The key was the impact of the crisis on the price of rentes. On August 3 there had been "a tremendous fall in the price of rentes" which sent Nat and James scurrying back to join Anselm in Paris. It was the beginning of a protracted slide. As the British naval expedition closed in on Ibrahim Pasha and Palmerston intransigently rejected Thiers' bids for a face-saving compromise, so, inexorably, the price of rentes declined. Three per cents fell from a high of 87 in July to 79 in early August, touching a low of 73.5 in early October. It would, no doubt, be wrong to suggest that the Rothschilds were single-handedly responsible for this fall, which was the product of a generalised panic on the Paris bourse. On the other hand, they did nothing to check it. More importantly, they had no reason to do so. For, unlike comparable crises in the early 1830s, this was costing them nothing. The clue lies in Nat's comment on August 2: "Thank G.o.d the house has scarcely any [rentes]." Quite simply, they had covered themselves in advance of the crisis by clearing out of French government bonds altogether. This was what Guizot, struggling as French amba.s.sador in London, failed to realise. "Do you think he is praying to G.o.d for the safety of his money?" he asked the Princess Lieven after a visit from Lionel on September 9. Heine too was taken in by James's furrowed brow: "The rente, which had opened down two per cent, tumbled by another two per cent. M. de Rothschild, it is said, had the toothache yesterday; others say he had a colic. What does this portend? The storm draws ever nearer. The beating of the Valkyries' wings can be heard in the air." In fact, James was play-acting for the benefit of Heine's readers. Nat's only regret was that he did not have more liquid funds available to speculate: "I could make a fortune," he mused.

Thiers fought back. On October 12, the pro-government Const.i.tutionnel Const.i.tutionnel fired a broadside at "M. de Rothschild and his manoeuvres": fired a broadside at "M. de Rothschild and his manoeuvres": [According to [According to The Times The Times] M. de Rothschild is a man of finance and does not want war. Nothing could be easier to understand. M. de Rothschild is an Austrian subject and the Austrian consul in Paris, and as such he has little concern for the honour and interests of France. This too is understandable. But what, pray, have you to do, M. de Rothschild, man of the Bourse, M. de Rothschild, agent of Metternich, with our Chamber of Deputies and our majority? By what right and by what authority does this King of Finance meddle in our affairs? Is he the judge of our honour, and should his pecuniary interests prevail over our national interests? We speak of pecuniary interests, but, surprisingly enough, if one can believe highly accredited reports, it is not just financial grievances that the Jewish banker would lodge against the cabinet . . . There also seems to be wounded vanity to satisfy. M. de Rothschild had promised his co-religionists to have our consul-general in Damascus dism