THE HOUSE OF ROTHSCHILD: MONEY'S PROPHETS, 1798-1848 By Niall Ferguson, Penguin, $12.95 The most complex things of the world, in the hands of master practitioners, are surprisingly simple. When the 3rd Lord Rothschild was asked to define banking, he said, 'Banking consists essentially of facilitating the movement of money from Point A, where it is, to point B, where it is needed.' Sounds elementary but it does not even offer a glimpse into the elaborate network of institutions and informants that the Rothschilds established all over Europe. Moreover, it utterly underplays the difficulties involved in moving money from one point to another at a time when transport facilities were primitive, and letters carried by messengers on horses the only form of communication. Nathan Mayer Rothschild, the founder of the London branch of the house in the early 19th century, began his business career in England as a textile exporter. But he soon came to specialize in various financial services. The London branch, N.M. Rothschild & Sons, has had an uninterrupted existence down to the present day. But it was one of a group of Rothschild houses, which were run as a family partnership. The power, influence and wealth of the family reached an unprecedented height between 1820 and 1870. During this period, there were five distinct establishments: Frankfurt (M.A. Rothschild & Sohne; in Paris (de Rothschild Freres); in Naples and in Vienna; and in London. The histories of the five houses were irretrievably interwoven. They formed, Niall Ferguson says, 'the component parts of a multinational bank.' In the long 19th century - from 1815 to 1914 - it was easily the biggest bank in the world...The 20th century has no equivalent: not even the biggest of today's international banking corporations enjoys the relative supremacy enjoyed by the Rothschilds in their heyday - just as no individual today owns as large a share of the world's wealth as Nathan and James as individuals owned in the period from the mid-1820s until the 1860s.'' Ferguson sets out to explain this phenomenal success and influence. The key to this, according to him, lies in the nature of public finance in the 19th century. The Rothschilds made a very large part of their fortune either by lending to governments or by speculating in existing government bonds. Most 18th and 19th century governments had huge budget deficits which they had to meet. The other problem governments faced, especially the British government during the Napoleonic wars, was the transfer of huge sums of money to the Continent. The latter demanded innovations in the system of cross-border payments. It was this need that the Rothschilds met and thus transformed themselves from small time traders and bankers to the running of a multinational financial partnership. The emergence of another economic instrument in the 19th century - the government bonds, especially, the high yielding British bonds - helps to explain the proximity of the Rothschilds to political circles and the influence that flowed from that closeness. Apart from economic factors, bonds were dependent on the ability of the bond-issuing states to continue to pay the interest on the bonds. Successful trading in bonds, in the volatile atmosphere of the 19th century, required a close knowledge of political events and economic trends and policies. Rothschilds, because they were lenders to governments and bankers, had an edge in this regard over their rivals. They spent an enormous amount of time and energy in maintaining the best possible relations with the political figures of the time. This barebone summary does scant justice to the rich material and acute analysis that Ferguson presents in this book. He presents analysis that is based on previously unknown documents, including those kept in the KGB archives. This is a family saga as well as the story of an economic triumph: the rise of a family from the Frankfurt ghetto to a status that made them equals of the European aristocracy.