In the history of Germany, few men are as significant as Otto von Bismarck, who unified the country in the mid-19th century. It is perhaps not because of Bismarck that Germany unified, but Bismarck more than anyone else elected the manner in which it would be done. Through the entire saga, he had a financier of relatively humble birth beside him, Gerson von Bleichröder. As an adviser, Bleichröder initially served as an intermediary between Bismarck and Europe’s most prominent banking institution, the Rothschild family. However, he became close friends with Bismarck, at least in a professional sense, and developed a direct and close relationship with the Prussian head of government matched by few others. This association allowed him to witness the mid-19th century’s most significant political events from the inside.
The history of the Bleichröders as a banking family began with Samuel Bleichröder, born in 1779. Samuel Bleichröder, a German-Jewish banker based in Berlin, founded the firm S. Bleichroeder in 1803. The family firm started as a mere currency exchange house but went on to become the Berlin correspondent bank to the Rothschilds in the 1830s. How the small firm came to secure this valuable relationship isn’t entirely clear but the story has it that Amschel Mayer Rothschild of the Frankfurt branch of the family looked past the insignificant size of Bleichröder’s firm and developed an affinity with the man running it. It wasn’t to be the last transformative relationship to be secured by the Bleichröders.
But first, from Berlin, Samuel Bleichröder worked to syndicate Rothschild arranged bonds and also promoted the offerings of new types of firms, insurance and railway companies, springing up in the country, still in the early stages of industrialization. With this initiative, Bleichröder’s firm grew rapidly. In the distant future, the bank became Arnhold and S. Bleichroeder following a merger with another German bank a century later. Some portion of the firm continued to bear the Bleichröder name until its acquisition by Blackstone in 2015.
Returning to the history, Samuel had two sons, Gerson and Julius, both of whom became bankers. Gerson von Bleichröder, the more successful and well-known, was born in 1822 and joined the family business in 1839. There, he became a partner in 1847 and led his father’s firm after the latter’s death in 1855. Gerson von Bleichröder developed the second of two historic and lucrative partnerships for the firm, a close relationship with Germany’s most significant 19th century leader, Otto von Bismarck. This partnership was reconstructed in writing by the historian Fritz Stern in his 1977 book, Gold and Iron: Bismarck, Bleichröder, and the Building of the German Empire. However, this was not the ‘court Jew’ relationship of old; to start, Bismarck was no king but a mere minister. Nonetheless, it looked to outsiders like a more modern version.
In the 1850s, Otto von Bismarck served as the representative of Prussia, the most powerful state in northern Germany before its unification, to various congresses discussing such a unification. This was a project Bismarck then opposed but later came to make his goal and successfully execute. This was in the years before Bismarck became the Prussian ministerpräsident, its head of government, in 1862. Bismarck’s attendance at congresses in Erfurt and Frankfurt made him a key participant in the Austro-Prussian rivalry that defined this era in German history.
Bismarck was eventually recalled from Frankfurt and made ambassador to Russia in 1859. The future German chancellor was in need of someone to manage his finances in Prussia though while he was going to be away in St. Petersburg. Towards the end of his days in Frankfurt, Bismarck dined with the Rothschilds and received the recommendation of such a person. He needed a financial advisor independent from the Rothschilds since the prominent family leaned towards the opposite side in the geopolitical rivalry in Germany, favoring the Austrians to organize and lead Europe’s German-speaking countries over Prussia. Nonetheless, Bismarck took Rothschild’s advice in choosing Gerson von Bleichröder to serve as his financial advisor.
At this point, Bleichröder’s role was more personal than political. In managing Bismarck’s finances while he was away in St. Petersburg, Bleichröder simply collected Bismarck’s salary, paid his expenses, and managed his savings. However, he did go above and beyond to cultivate the relationship, making interest-free loans to the frequently indebted Bismarck and supplied the ambassador with financial news from other parts of Europe. He also made periodic investment recommendations even though the ambassador’s investments were not under his management, continuing to remain with the Rothschilds.
Bismarck became ministerpräsident in 1862 and Germany was unified less than a decade later. However, unification came by war, or by ‘blood and iron’ as Bismarck put it. Prussia’s three wars of German Unification were fought between 1864 and 1871, the first of these against Denmark, the second against Austria, and the third against France. Bleichröder was involved in each of these.
Firstly, raising money for all this fighting was a politically and financially sensitive task. The Prussian parliament, the Landtag, was hesitant to raise the necessary funds and so Bismarck turned to Bleichröder to raise money. This was a challenge since financing wars was seen as sinful business by other bankers who also firmly believed war was bad for business. Unlike industrialists, lenders rarely benefit from war. Bleichröder himself offered to acquire the government’s shares in the Cologne-Minden Railroad at a favorable price on the eve of the war with Austria to provide funding on better terms than was available elsewhere.
Later, during the Franco-Prussian War, Bleichröder lent three million thaler to the Prussian government through his firm. The company also formed part of a lending consortium which included the Rothschilds who also took three million thaler of the offering. The equal sizes taken by the two banks reflect the changed circumstances of their relationship. The firm S. Bleichroeder was no longer a minor correspondent bank to the Rothschilds but was its equal, at least in Germany. This was due to the Bleichröder firm’s tremendous growth. Whereas in 1863, S. Bleichroeder’s net profits stood at 18,661 thaler; by 1869, it was over four times greater at 80,761 thaler.
During this period, Bleichröder also increasingly managed more of Bismarck’s personal wealth which grew with the various honors conferred on the victorious ministerpräsident. Bismarck was made a count after the war with Denmark and was granted a gift of 400,000 thaler, an extraordinary sum, by the parliament following the Austrian defeat. That same year, Bleichröder was given management of Bismarck’s investments which were still managed by the Rothschilds in Frankfurt up to this point.
Bleichröder and the Indemnity
France was defeated in the Franco-Prussian War of 1870-71. Following an armistice, it was agreed that France would have to pay a large indemnity to the victors. The amount was set in the Treaty of Frankfurt at five billion francs or something like 25% of French GDP at the time. Bleichröder had some input on the amount and thought five billion excessive; he suggested an indemnity of just four billion francs. In the end, five billion francs was agreed to on top of a separate charge levied specifically on the city of Paris, amounting to a further 200 million francs. The five billion francs was due within five years, was to accrue interest at 5%, and was payable in gold or silver or the banknotes of Britain, Prussia, the Netherlands, or Belgium.
The large indemnity was designed specifically to ruin France, to virtually bankrupt it. However, in this it was unsuccessful. The indemnity was refinanced over a longer duration in the bond markets and the ultimate economic cost to France was, if not minimal, at least surprisingly manageable. In fact, Bleichröder’s own firm helped make this so, organizing a German syndicate to buy the French bonds which proved popular investments in the victorious country. Financing the French indemnity payments may have been geopolitically contrary to Prussian aims but it didn’t stop Bleichröder from being elevated to the Prussian nobility in 1872.
Although Bleichröder continued to serve Bismarck, and by extension the German state, this was the height of his career and his involvement in major events in global finance. Bleichröder died in 1893, three years after Bismarck left office, having acquired numerous honors in his life. He died an extremely wealthy man; by the end of his life he was earning perhaps two million German marks per year in income, making him the richest man in Berlin and perhaps in all of Germany at the time.
Bleichröder’s life was shaped by the financial and political circumstances of Prussia in the mid-19th century. His firm’s growth was enabled by the connections secured through the most prominent banking family of the era, the Rothschilds, as well as by the industrial revolution then underway. His most important relationship, that with Bismarck, was shaped by the personal manner in which politics was conducted, the imperfect constitutionalism of the country, and by the transformative events of the era, industrialization and the unification of Germany. No full history of Germany, or at least 19th century Germany, is complete without some mention of the banker Gerson von Bleichröder.
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1. Green, David B. “This Day in Jewish History / The Man Who Would Bankroll Prussia’s Wars Is Born.” Haaretz.com, Haaretz Daily Newspaper Ltd., 10 Apr. 2018.
2. Kindleberger, Charles. “The Franco-Prussian Indemnity.” A Financial History of Western Europe, George Allen & Unwin, 1984, pp. 239–241.
3. Landes, D. S. “The Bleichroder Bank: An Interim Report.” The Leo Baeck Institute Yearbook, vol. 5, no. 1, 1960, pp. 201–220.
4. Stern, Fritz Richard. Gold and Iron: Bismarck, Bleichröder, and the Building of the German Empire. Knopf, 1977.
5. “The Richest German.” Current Literature, May 1893, pp. 13.