How Did They Do It?

May 25, 2011Marketsby David Smith

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The World's Richest Family - You Didn't Know About
The World's Richest Family - You Didn't Know About (Part 1)

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So, how did the Rothschilds rise from Frankfurt’s Judengasse, a narrow street at the heart of the city’s Jewish ghetto, to become the world’s bankers?

Mayer Amschel Rothschild, the founder of the modern dynasty, was born in 1744. He made a small fortune in coin trading. After expanding his business, he dispatched his five sons to set up new branches. One son stayed in Frankfurt, the other four set up branches in London, Paris, Vienna and Naples. Of these, the most important became London and Paris.

The most talented of the boys was Nathan, who arrived in England in 1798, aged 21. After 10 years working as a textile merchant in Manchester, he took a small office near the Bank of England in London, from where he soon realised there was money to be made out of the outcome of wars.

In the greatest coup in the history of banking, he provided financing for the cash-strapped Duke of Wellington’s Army. Wellington was expected to lose and Rothschild was aware that an upset win would send the market soaring.

As the armies closed in, the Rothschilds had a network of agents in place to speed news of the battle back to London. Late on the afternoon of June 18, 1815, a Rothschild representative boarded a fast schooner on the French coast and headed for England. Nathan heard the news a day before anyone else and went into the stock market and sold heavily. Other traders, following his example, sold, too. After the prices had dropped, Nathan bought all the stock he could late in the day. When the official communiqué from Waterloo arrived, the market rocketed, and Nathan had made a fortune.  

George Ireland, the author of the acclaimed work on the 19th century English Rothschilds - Plutocrats: A Rothschild Inheritance, takes up the story: “Nathan was engaged by the British government to procure and deliver the coin necessary to finance the last phase of Wellington’s campaign, the final push from Spain into France. He was given a commission of 2.5%. He also delivered the subsidies that Britain was providing to her less solvent allies, principally Russia, Prussia, Austria and King Louis XVIII and his exiled court at Ghent. He managed these operations with the assistance of his four brothers and their agents on the Continent. The commission from these operations made Nathan and his brothers sterling millionaires.”

That was just the beginning for Nathan, who expanded the lucrative business of granting loans to foreign governments over the next few years, culminating in a massive £5-million Prussian loan in 1818.