July 7, 1956
Peter C. Newman
The Maclean’s Archive
[REPRINTED AS ORIGINALLY PUBLISHED]
SAYS ANTHONY DE ROTHSCHILD: “There was the De Beers diamond mine, then the loan that helped Disraeli buy the Suez. Now this. This could be the biggest of them all”
LAST WINTER twenty Quortok Eskimos and two bearded prospectors herded ten huskydrawn sleds loaded with six tons of iron Ore through northern Quehecs numbing cold from Morgan Lake to an inlet off Ungava Bay just below the 60th Parallel. l.ike thousands of other Canadians who do not realize it. the members of this Arctic caravan were working for N. Ni. Rothschild & Sons. the world’s most powerful private hank, which has during the past tour ears cautiously and secretly acquired a huge stake in (`anada. 1 he ore was being brought out I rom deposits owned by Oceanic Iron Ore of Canada ltd. for trans-shipment to metallurgical laboratories in Montreal after spring breakup. Oceanic is a suhsidiar’y of i’echnical NI Inc Consultants I ,ti,I., which in turn is owned by Rio Tinto Mining Co.
Where the Rothschilds are building their new empire of Canada. The Rothschilds stand at the top of this corporate spiral by virtue of holding the largest single share of Rio Tintos English parent company.
The Canadian empire of the Rothschilds now includes:
• An area bigger than England and Wales containing nearly till the unstaked mineral and lumber resources of Labrador and Newfoundland. Uranium deposits which could be the continent’s largest have already been found in this area. Among its other riches is a waterfall twice as high as Niagara; when fully harnessed it will produce more power than any existing powci installation in the world.
• A substantial interest in the Rio 1 into group of fifty-five Canadian mining companies with shafts and claims in seven provinces. These properties include three quarters of the Blind River district’s known uranium reserves, and mills that may eventually produce one million dollars worth of uranium a day.
• A cluster of companies across Canada, which sell Canadians fire and casualty insurance, lend money to Vancouver car buyers, roll steel in Edmonton, and make barrel hoops at Mattaw a. Ont.
• Nine hundred acres just twenty miles west of Toronto Citv Hall on which Rothschild money is building an entire new town.
The Rothschilds do not associate their name with any of these enterprises. Few if any of their Canadian customers are aware that they are dealing with the same family that financed Britain’s purchase of the Suez Canal and underwrote Cecil Rhodes’ development of the prodigious
De Beers diamond fields in South Africa. Originally insignificant money lenders, then blockade runners and international financiers, the Rothschilds emerged by 1818 as history’s most influential bankers. They had Europe at their feet in a way Napoleon never had. In fact, Rothschild gold financed the ambitious emperor’s defeat.
‘The Rothschild invasion of Canada had its genesis four years ago during a luncheon in the private dining room of the family bank in London. The host was Anthony de Rothschild, the firm’s senior partner. The guest of honor was Joseph Smallwood, who was stumping Europe for risk capita! to develop Newfoundland and Labrador. Six months of negotiation followed. Smallwood offered to close all remaining crown lands in the province to prospectors so that the Rothschilds could choose a fifty-thousand-squaremile concession out of the seventy-one thousand unstaked square miles of Labrador and half of Newfoundland’s unstaked twenty thousand square miles. This would give the Rothschilds first choice in an area considerably larger than the combined size of Nova Scotia. New Brunswick and Prince Edward Island.
All mineral, power and lumber resources of the concession (which would gradually decrease to one third the size as useless ground was explored and discarded) would belong to the Rothschilds. In return. Smallwood demanded that the Rothschilds spend five million dollars exploring the territory over a period of twenty years and pay the provincial government an eight-percent royalty on profits.
The offer granted domain over three times as much territory as is held in Labrador by the Iron Ore Co. of Canada, which is now developing iron-ore deposits at Knob Lake. It was taken up by a syndicate made up of thirty of England’s largest companies and a few Canadian investment houses, headed by N. M. Rothschild & Sons. Assets of the partners in the bold new enterprise, called British Newfoundland Corporation (and soon nicknamed “Brinco”) exceeded five billion dollars—more than the Canadian government’s entire annual budget. Smallwood claimed it was “the biggest real-estate deal on this continent in this century.” Sir Winston Churchill called the scheme “a grand imperial concept.”
While Malcolm Hollctt. member of Newfoundland’s Progressive Conservative opposition, was still attacking passage of the bill to authorize the huge concession. Brinco was setting up exploration headquarters at North West River, a small settlement near Goose Bay. Canada’s greatest game of geological hide-and-seek was under way. During the next twenty-four months Brinco engineers picked their concession outlines from a desolate rock-and-lake-strewn land that ranks among this continent’s least explored territories. At first they had little more to work from than wall-type maps.
During the summer of 1953 the company’s float-equipped Beavers ferried survey parties on more than a thousand sorties. Aircraft crammed with geophysical equipment criss-crossed the region in the winter. During the summer of 1954 a Bell helicopter and the BRINCO, a forty-sixton motor launch, joined the search. To make sure no likely mineralization areas were being overlooked, the company hired Claude K. Howse, Newfoundland’s top geologist who had been provincial deputy minister of mines, to guide its 228-man prospecting corps.
By the end of 1954 boundaries of the Brinco concessions were established, and so was their future importance. Ten miles southwest of Makkovik, a missionary outpost on Labrador’s cast coast, Brinco geologists traced a radioactive occurrence eight miles wide and eighty-five miles long that Premier Smallwood predicts will eventually outrank the Beaverlodge and Blind River uranium strikes. Brinco crews also uncovered significant iron-ore. titanium, copper, lead. zinc, nickel, asbestos and colombium deposits, and outlined nearly twenty million cords of virgin timber—the basis of a possible pulp-and-paper industry at Goose Bay, fed by a new railroad opening up the Labrador interior.
How the Rothschilds’ wealth and whims became a legend
But the prize asset of Brinco’s northern kingdom is the foaming Hamilton River, which drops seventeen hundred feet in its wild cascade from the upper Labrador plateau into Lake Melville, at Goose Bay. About two hundred miles from its mouth the stream is broken by a succession of steep cataracts, finally plunging over a 302-foot vertical precipice into Bowdoin Canyon wdth a roar audible fifty miles away.
This is Grand Falls, the site of one of the world’s largest hydro potentials. Brinco engineers are now working on plans to divert the Hamilton through artificial lakes and retaining dykes that will allow a full 1,050-foot head to be harnessed in a single power plant, producing an ultimate four to five million horsepower. (The largest existing power installation is the Grand Coulee dam on the Columbia River in the northwestern U. S. It produces a peak load of 3.102,000 horsepower.) “If Grand Falls had been in some of the developed areas of Canada,” says Senator C. C. Pratt, of St. John’s, a Brinco director, “it would probably by this time have become the greatest power aid to industry in the world.”
A report by Brinco’s consulting engineers predicts Grand Falls can produce electricity at the lowest per-horsepower cost in Canada, partly because the main dam can be built entirely of rock from nearby pits. “The generators.” the study states, “will be larger than any now in existence.” The main problem will be selling the huge power load. An aluminum smelter is being considered. Power-short Montreal is only seven hundred miles away. Brinco is now building a hundred-mile access road to Grand Falls from Mile 286 of the Quebec North Shore Railroad. And the corporation recently said it would build a 250-mile transmission line from Grand Falls to Seven Islands.
The investigations leading up to the decision to develop Grand Falls underlined the cautious course followed in most things by the Rothschilds, who are investors, not gamblers. They even had their engineers weigh possible acts ol God. The reports they received showed that a power plant at Grand Falls would be immune to earthquake damage because it would be imbedded in the Canadian Shield — North America’s most stable rock formation. Brinco physicists also studied the incidence of lightning, landslides and avalanches. None of these natural phenomena were found likely to defy the power of the Rothschilds.
Besides holding the huge Labrador and Newfoundland concessions, the Rothschilds have an equally significant, though quite separate, interest in the Rio Tinto Co., of London. This huge U. K. mining trust formed a partnership with Joseph Hirsh-horn’s gilded Canadian mining ventures to establish the Rio Tinto Mining Co. of Canada, a sixty-three-million-dollar group of uranium, gold, copper, silver, lead and zinc mines, with important properties in many Canadian mining districts.
The deal with Flirshhorn took four months of trans-Atlantic bargaining. At the four-hour signing-over ceremony in the sombre board room of the National Trust Company in Toronto. Hirshhorn signed his name twenty-five times and happily warbled: “This is the biggest deal in my life. What a break for Canada!”
The contract gave Hirshhorn, a florid promoter from Brooklyn, five million dollars cash and more than thirteen million dollars worth of securities. It also made him a partner in Rio Tinto, whose chairman was the late Earl of Bessborough, Canada’s governor-general from 1931 to 1935, and whose shareholders are rumored to include Britain’s royal family. Rio Tinto was formed by the Rothschilds and other financiers in 1873. Its assets of nearly two hundred million dollars.include copper mines in Rhodesia, a large uranium producer in Australia and interests in the Rand gold fields of South Africa.
With customary British reserve Rio Tinto w’on’t discuss its future plans in Canada, but the company has budgeted a million dollars a year for the next twenty-five years on Canadian mineral exploration. Its engineers are probing some of the properties transferred to Rio Tinto through the Hirshhorn deal. These include: a group of 1,019 claims at Windy Point, on the northwest shore of Great Slave Lake, where traces of important lead and zinc showings similar to the huge Pine Point find on the lake’s
south shore have been found; a suspected copper-zinc-gold-silver ore body ten miles northeast of Rouyn, Que.; a copper prospect near Sioux Lookout in northwestern Ontario; the silver values found thirteen miles east of Hazelton, B.C.; a copper discovery in Gaspe’s Holland Township; the five-hundred-millionton Oceanic iron-ore body on the western side of Ungava Bay; and a three-millionton copper deposit at Waden Bay, on the northwest side of Lac la Ronge, in northern Saskatchewan.
Through their separate holdings in Brinco and Rio Tinto, the Rothschilds now have a major interest in nearly forty million acres of Canada’s most promising mining country. That’s an area almost twice the size of Canada’s total 1956 wheat acreage. But the family’s influence on Canada is confined neither to the future nor to the exploitation of natural resources.
Canadians have since 1892 been buying casualty and fire insurance from the Rothschilds through the Toronto, Montreal and Vancouver branches of the Alliance Assurance Co. of London, a subsidiary of their English insurance operation. While not ranking among Canada’s largest insurers, the company now covers risks in Canada worth more than five hundred and fifty million dollars.
Three years ago. with other European investors and some private Canadian capital, the Rothschilds established a Montreal investment company called United North Atlantic Securities Ltd., which has since funneled millions into a variety of Canadian enterprises. In Vancouver, United set up Consolidated Finance Company, a car-financing operation. At Edmonton, the company built Premier Steel Mills—Alberta’s first steelrolling plant. In Hamilton it financed the new factory of Canadian Conveyors Ltd., which makes mechanical handling equipment. At Mattawa, Ont., and Seotstown, Que., the Rothschild-backed firm bought out Guelph Plywoods Ltd., a plywood processor and barrel-hoop manufacturer.
A United North Atlantic subsidiary is building a new town called Park Royal on nine hundred acres near Clarkson, Ont., on the Queen Elizabeth Highway, twenty miles from Toronto. Construction of the three thousand homes, churches, schools, a park, and community and shopping centres will be completed by I960. last April the Rothschilds incorporated another Canadian investment company, called Five Arrows Securities Ltd., after the design on the family’s coat-of-arms This coajt-of-arms is a `U I I V r I reminder that there were originally five Rothschild banks—-in Frankfort, Vienna and Naples, as well as the still-functioning London and Paris houses. The new firm has an initial capital of eight million dollars, comprising investment by Dutch and French financiers, including Baron Guy de Rothschild, of Paris. There is speculation that this company will provide some of the funds for the further development of the power and mineral resources held by Brinco in Labrador.
There is speculation also that the Rothschilds may help develop a gold market in Canada. Long-standing restrictions on private gold trading were scrapped in Finance Minister Harris’ last budget and anyone can now buy, keep and sell gold. As gold-sales agents of the Bank of England (the exclusive clearing house for the South African gold output) the Rothschilds are the world’s most influential private gold dealers. They employ two hundred in their own mint at London, which can refine a million pounds’ worth of the precious metal a day.
Horse-race results too
But gold traffic is only a subsidiary passion with N. M. Rothschild & Sons. Besides being investment counselors to wealthy Englishmen and bankers for such world-wide organizations as the Bowater newsprint trust, the Rothschilds specialize in “financing foreign commerce”—a vague term that covers their Canadian activities. The bank operates as a closed partnership, all its shares held by the Rothschild family. Only the clients it chooses to accept are allowed to open accounts. The bank has never published a balance sheet, but London financial pundits set its current reserves at around thirty million pounds, though it controls assets of perhaps ten times that amount.
The bank sits unobtrusively at the end of a small, cobbled courtyard in downtown London, yet secluded from the city’s turmoil. It is built of inconspicuous greywhite stones, its calm Georgian architecture unmarred by identifying signs, except an oval shingle with five fading golden arrows. The hush in the portrait-filled lobby is broken only by two tickers— one for stock-market quotations, the other for horse-race results, which now ticks only for tradition. Anthony de Rothschild, the bank’s sixty-nine-year-old partner, sold his final string of ten brood mares for forty thousand pounds in 1940.
Anthony and his thirty-nine-year-old nephew’ Edmund, the bank’s junior partner. conduct all their business from “The Room,” an imposing office dominated by a large marble fireplace, its paneled walls checkered with ancestral portraits. Twenty-nine-year-old Leopold, an-other nephew, is the only other Rothschild currently with the firm. The bank’s basement is packed with historic archives and at least one stack of evidence that the Rothschilds have been studying Canada for a long time: copies of The Financial Post dating back to 1910.
The firm’s one hundred and fifty employees are served free lunch, coffee and cakes at eleven, tea and fruit at four. But no one can go out to eat without the office manager’s permission. It is seldom requested and seldom granted. The staff gets no overtime pay. but everyone receives a turkey for Christmas and the privilege of buying wine (bottled by Baron Phillipe de Rothschild near Bordeaux. France) at cost. Employees are seldom dismissed. If one leaves, the shock spreads to the partners.
All important visitors are screened by Edmund de Rothschild, a quick-witted, friendly financial wizard who is tremendously interested in Canada and eagerly questions businessmen from this side of the Atlantic about this country’s prospects. He visited Newfoundland in 1952 and Montreal in 1953, and has since made semi-annual inspection tours of the bank’s Canadian properties.
Few proceed past “Mr. Eddy” to the marble desk of Anthony Gustave dc Rothschild, a frail-looking, white-haired introvert who rules the bank with despotic finality. “He has a personality on rubber soles,” says a friend. “He speaks rarely, but tell him something once and you never have to repeat it.” He was educated at Harrow and Cambridge and his initial ambition w’as to become a Cambridge history don. His only hobby is art. At his country home in Buckinghamshire he has one of the world’s most valuable collections of Oriental pottery, a pair of tripod Chippendale tables and paintings by Hogarth, Rubens and Holbein. When Princess Elizabeth married, he gave her a forty-four-piece Sèvres tea service.
As senior partner of N. M. Rothschild & Sons. Anthony has maintained the firm’s financial eminence. But the bank’s current influence on world affairs is only a dim reflection of the power it held during the nineteenth century under the rule of Nathan. Anthony’s great grandfather. who operated a private Marshall Plan with a twist. He floated loans to needy nations aggregating billions of dollars, but charged “attractive” interest rates.
The Rothschilds’ dealings formed the basis of many well-known facts and legends about this fabulous business dynasty. Rothschild money built most of western Europe’s railroads, their banks controlled a petroleum, diamond, mercury and copper empire of incredible proportions. They backed Cecil Rhodes when his De Beers Mines acquired most of the fabulous Kimberley diamond field. Rothschild banks were the exclusive financial agents for the Russian Empire, the Vatican. Brazil, Chile and half a dozen other countries.
Many modern financiers have tried to reconstruct the forces that inspired the unmatched money-making instinc* of the Rothschilds. Part of their success was based on the progressive methods they introduced to the primitive banking system of their day. They were the first to use widely the now-taken-for-granted procedure of remitting funds from one country to another through letters of credit, without the physical transfer of coinage. In all their dealings the Rothschilds followed the same principle: they imposed a strict limit on the profits from a transaction and did not strain for uncertain extra gains.
The typical reaction of a Rothschild receiving private news likely to raise the price of a stock was to rush into the Exchange and sell all his holdings. As the news spread that Rothschild was selling, brokers quickly followed his example, sinking the issue’s price. Meanwhile agents secretly employed by Rothschild bought up the shares at their ebb quotations, to resell them when the market reacted to the favorable news Rothschild knew was on the way.
Could Napoleon lose?
The success of such manoeuvres depended on being the first to receive important business information. Because mail moves at the same speed for everyone, the Rothschilds set up their own carrier-pigeon network and operated speedy trans-Channel packets, whose captains had strict orders to convey important messages regardless of weather.
Much of the Rothschild fortune was a by-product of this news service. A private agent waiting at Ostend, Belgium, for the outcome of the battle at Waterloo rushed across the Channel in one of the bank’s boats with news of Napoleon’s defeat. The British government had been previously informed that the French were winning. Word had leaked to the London Stock Exchange, brokers stampeded to sell. Nathan Rothschild reported Itis news to the Foreign Office, but wasn’t believed. Meanwhile his brokers had bought up the securities panicked investors were throwing into the market. When news of victory was confirmed quotations sky-rocketed.
The Rothschilds still rely on private agents they appoint in every country, [‘heir chief Canadian agent is Ronald I). Smith, an intellectual walrus-mustached Englishman who runs a small Toronto brokerage house. He trades stock for the Rothschilds and their customers and reports on Canadian business trends. “The Rothschilds have been more prominent in realizing the investment potentialities of Canada than any other firm in London,” says Smith. “I know of no other country where they have such a large new interest.
Another ingredient of Rothschild success has been the family’s policy ot intermarriage. I his, according to the Rothschild creed, is good economies. You don’t have to share secrets that way —and dowries and bequests stay in the family. Besides, only a Rothschild, they claim, is really fit to bear a Rothschild. Of the fifty-eight marriages contracted during their first century of prominence, exactly half were between first cousins. When the daughter of Wilhelm de Rothschild. son of the Italian line’s founder, married her cousin Edmond, geneologieal experts confirmed that on her father’s side she belonged to the fourth generation. on her mother’s to the fifth, while she was marrying into the third. “It’s not that we’re clannish,” Victor, the present Lord Rothschild, once explained, ’’it’s just that Rothschild men find Rothschild women irresistible.”
Besides choosing brides from their own clan, the Rothschilds seem to prefer their ancestors’ names. Seven English Rothschilds have been called Nathan, after the first of their line. Their surname comes from the German Rot Schild, describing the red shield that hung over the entrance of the ghetto house in Frankfort. Germany, where Nathan was born in 1777. His father Meyer Amschel Rothschild was a junk dealer with a part-time money-lending and rarecoins business. The family’s annual earnings rarely exceeded two thousand dollars. but profits increased as old Rothschild built up his lending business. He eventually became financial agent for a local prince who helped spread his influence.
The family separated in 1798. While Amschel, Meyer’s eldest son, stayed to look after affairs at home, Nathan went to England. Carl to Italy. James to Paris and Solomon to Vienna. Each established a bank to co-operate with its brother organizations in building up the most powerful private banking complex in financial history. Carl became financial adviser to the Pope, but closed his branch in 1861. The charter house at Frankfort was closed in 1901. The Viennese Rothschilds became influential but Hitler’s 1938 annexation of Austria permanently closed the business. Baron Louis, great grandson of the Austrian dynasty’s founder, was jailed by the Nazis for fourteen months until his British and French relatives ransomed him—for twenty-one million dollars.
Among the Paris family’s main achievements were construction of many French and Belgian railroads and the historic guarantee of the five-billion-franc debt to Germany after the war of 1870. After the fall of France in 1940. Baron Edouard de Rothschild, head of the French bank, arrived in New York carrying a satchel containing a million dollars’ worth of diamonds which he described as “a mere bagatelle.”
If their operations had been confined to Paris, Vienna. Naples and Frankfort, however, the Rothschilds would have quickly been forgotten. But in 1804. Nathan Meyer, the third son and genius of the family, established N. M. Rothschild & Sons in I ondon. This bank’s transactions (which now also include the huge Canadian investment) first pushed the family into the highest league of international banking, and have kept up its leadership through four generations.
Nathan’s initial capital consisted largely of the six hundred thousand pounds sent to England for investment by Wilhelm. the Elector of Hesse-Cassel, at the advice of his financial counselor—Nathan’s father. His first major deal was the smuggling of a million pounds’ worth of gold into Spain past Napoleon’s continental blockade, to provide (at a handsome commission) the Duke of Wellington with funds to provision his troops. The House of Rothschild matured quickly, specializing in foreign loans, a then unexploited, risky but profitable business. Nathan eventually became England’s richest citizen. He hired Mendelssohn to teach his daughter music and bought her a harp of pure gold.
Nathan’s son Lionel tamed the bank’s functions, but demonstrated typical Rothsehildean boldness in 1875, when Prime Minister Disraeli had found out that Khedive Ismail Pasha, the debtridden ruler of Egypt, was trying to sell his 177,602 shares in the Suez Canal Company. French financiers also wanted to buy the stock. Disraeli had no time to call parliament to sanction expenditure of the necessary four million pounds. Rothschild was eating grapes in his office when Monty Corry, Disraeli’s secretary, burst in to ask for the loan. Lionel ate one of the grapes, spat out the skin, and said: “You shall have it.”
Lionel’s son Alfred, uncle of the present partner, traveled to his holiday castle in a private train and stirred his tea with solid gold spoons. He amused his guests by conducting his private orchestra and performing in the ring with his own animal circus, dressed in a blue frock and lavender kid gloves. His estate at Halton was so big that when lie turned it over to the government in World War I its grounds were used to house and train twenty thousand men.
Except for their charity projects, the Rothschilds did little to gain popularity. One of the Austrian Rothschilds scandalized the courts of Europe by shaking lí is jacket on the floor of palace ballrooms, just to see the ladies ol the court diving after the pearls and diamonds that fell from it. Their riches did little to ease the Rothschilds’ entry into aristocratic society, which could not forgive their ghetto origin, flic Austrian government, frantically trying to retain its precarious solvency, saw the opportunity of gaining loyalty of the rich bankers. On September 29, 1X22, Emperor Francis II called Solomon Rothschild to his palace at Schönbrunn and broke his country’s tradition of not conferring titles on Jews by raising the whole Rothschild tribe to a perpetual baronage. The Rothschilds changed the German “von” to the smoother-sounding French “de.”
His hobby was actresses
Only Nathan, first of the English Rothschilds, scorned the title. He considered the family name superior to other distinctions. His grandson, Nathaniel, however, was elevated to Britain s peerage in 1XX5 as the first Lord Rothschild, in recognition of his bank’s aid in empire affairs.
Lionel Walter, the second Lord Rothschild, was the first Rothschild to rebel against banking. He disgusted his father by driving around London in a cart pulled by four zebras. Baron Henri, one of the French Rothschilds, became famous with his books on infant diseases. Abyssinia was explored by one Rothschild, whose expedition, wags of the day claimed. was financed by his parents to lure him away from his other hobby: Parisian actresses.
f lic third and current Lord Rothschild lasted exactly one week at the London bank. He now lives near Cambridge conducting experiments which he describes as dealing with “the love lile of the frog. He is a doctor of biology and won three medals for his work in World War II with military intelligence. In 1946 he shattered family tradition by joining the British Labor Party. His hobby is as revolutionary as his politics. He plays a hot piano and is a friend of jazz pianist Teddy Wilson.
Anthony, the present banking power of the Rothschilds, alone knows exactly how many ot the family s millions will eventually be committed to Canada. He is an unemotional, ultraconservative banker who seldom makes predictions. But referring to his Canadian investment through the British Newfoundland Corporation, he has said: “1 here was the De Beers diamond mine, then the loan that helped Disraeli buy the Suez Canal. Now this. This could be the biggest project of them all.”