GO back to the 1880's, at Waddesdon Manor, one of more than 45 mansions once owned by the legendary Rothschild banking family. A typical day, the story goes, began with a servant entering a guest's bedroom.
Would the guest like tea, coffee or cocoa?
If tea, what kind?
With milk, cream or lemon?
Milk? Would that be Jersey, Hereford or shorthorn?
By all accounts, a guest's reception at a Rothschild home is still elegant today. But a certain time in history has passed, and with it the perfect projection of power and generosity found at the dynasty's zenith, when those gently wakened at the 222-room Waddesdon Manor included Prime Ministers of Britain and a Shah of Persia.
The manor, indeed, is no longer a Rothschild home; it went to the National Trust in 1955. The great question now is what is to become of the House of Rothschild itself. For while any family, business or industry can have a bad year, the Rothschilds, financiers of kings and princes when Europe was a royal family affair, have had a bad century.
The fortune has shrunk as world wars battered the Rothschilds' banks; revolution in Czarist Russia killed their best client, and French Socialists nationalized their Paris bank.
Some of the brightest sons went their own way to earn renown as scientists, poets and wine makers. Family feuds sent off others who, as competitors, outdid those who stayed in the fold in terms of wealth and reputation.
A 253-year-old banking dynasty whose greatest modern successes have been wines (Chateau Lafite, Chateau Mouton) and vacation resorts (Club Mediterranee), the Rothschilds are now drawing together to show that today's global banks have not eclipsed their family, as nations have done away with kingdoms.
To succeed is more than a matter of banking strategy. Just as important, the English and French branches of the family must be reunited by welcoming the head of the French bank, Baron David de Rothschild, as the next head of the much larger and more prestigious London bank, N. M. Rothschild & Sons. Only a few years ago, that was unthinkable.
In a rare interview here on Friday, David and the man who invited him to cross the Channel, Sir Evelyn Rothschild, the head of N. M. Rothschild, said that the London and Paris banks had become partners again, in a way not seen since the first generations of Rothschilds invented international banking.
Uniting the family to join London's financial expertise with Paris's continental contacts, Sir Evelyn said, is crucial if the Rothschilds are to adapt to changing financial markets and intense competition from multinational banks.
''The first important strength of the family is unity,'' he said. ''The point I am trying to make is that today we're one. As you sit here and you talk to me, you are talking to David, and if you talk to David you are talking to me.''
To that, Sir Evelyn's French cousin added, ''Never has the collaboration between the French and British Rothschilds been so good, except possibly in the very beginning.''
Among the branches, London has suffered least from the force of history, but it has felt the effects of the thinning of the Rothschilds' banking blood. During Sir Evelyn's tenure at N. M. Rothschild, several stellar bankers have left to become successes elsewhere, including the talented Jacob, who is now Lord Rothschild, a potential successor whom Evelyn saw as a rival.
N. M. Rothschild was also the unhappy home of Jacob's half brother, Amschel, who was compelled by his father to carry on the business, despite having no enthusiasm for it and little skill. In July, apparently overwhelmed by the death of his mother, he ended a business meeting in Paris, went to his hotel room and hanged himself. He was 41.
Amschel had long ago ceased to be seen as a possible successor to Evelyn, but his death put a focus on the future of the dynasty. There was the choice seen as inevitable by those in the banking world: ceding the House of Rothschild to a manager from outside, as other European family banks like Schroders have done. And there was David, consummately charming and highly competent, but from the wrong branch of the family.
Evelyn, though, had brought David into N. M. Rothschild four years earlier as deputy chairman. And this month he appointed his cousin, whom he is said not only to admire, but to like, as chairman of a global committee to coordinate Rothschild investment banking around the world.
After a century of enormous individualism and too-evident mediocrity, yet continued flashes of brilliance, the Rothschilds appear ready to carry on in a way that much younger banking families like the Barings and Morgans have not.
European Outposts Profit From Turmoil
What is the House of Rothschild? In the United States, it is little known beyond the aura of its name. In Europe, it has shaped nations and industries.
Mayer Amschel Rothschild, a coin dealer in the Jewish ghetto of Frankfurt who was born in 1744, founded both the banking business with the Rothschild name and the family traditions that would make it Europe's leading bank in the 19th century. He decreed that only males could inherit stakes in the bank, and he impressed on his sons the importance of working loyally together as family.
All five sons entered the business. While Amschel stayed in Frankfurt, Nathan founded a bank in London, James a bank in Paris, Solomon a bank in Vienna, and Carl a bank in Naples. In one generation, the Rothschilds established the first international banking house -- just as European wars, industrialization and imperialism were to create enormous demands for capital.
Mayer Rothschild pleased his first noble client, a German prince, and soon the House of Rothschild was known as the personal banker to royalty.
The London bank led a Rothschild group underwriting Prussian bonds after the Napoleonic Wars, and the House of Rothschild became the financier of kingdoms.
By 1875, when Britain had a sudden opportunity to buy control of the Suez Canal, the London bank was so powerful that it produced the $:4 million -- equal to $200 million today -- within hours.
And while each English generation managed to produce a financial genius, the attention of the other sons, in both England and France, inevitably wandered. Rothschilds entered politics and the nobility. They became deeply involved in Jewish affairs. They were physicians, scientists and gentleman farmers.
Europe, meanwhile, had changed. Nations financed themselves through taxes, not loans. The Rothschilds' relationships with rulers became less exclusive, and as royal courts disappeared, less valuable. They financed Russia's southern oilfields, but then their client, Czar Nicholas II, was killed by revolutionaries.
World War I disrupted alliances. Then the Depression bore down. As Nazism took control of Germany, Austria, and in the end even France, the family withdrew. At the end of World War II Europe had changed again, half of it behind the Iron Curtain.
By the 1970's, the House of Rothschild comprised three much smaller banks, N. M. Rothschild in London, Banque Rothschild in Paris, and a Swiss bank founded by the family's most independent, and wealthiest, member, Baron Edmond de Rothschild.
In 1980, Jacob, the English branch's most highly regarded banker, left N. M. Rothschild after Sir Evelyn, its largest shareholder, rejected his proposal to reinvigorate the bank with outside money. A year later, the French Government nationalized the Paris bank and barred the Rothschilds not only from banking, but from using their family name in business.
By then, the contrast between the fortunes of Rothschilds who had made their own way, and those who had stayed strictly in the family, seemed stark.
Jacob was prospering in investment banking, while the London bank, N. M. Rothschild, stagnated. In France, Baron Edmond de Rothschild's bank had prospered under both conservative and Socialist governments, while miscalculations by his cousin, Baron Guy de Rothschild, had actually contributed to the nationalization of Banque Rothschild.
As always with the Rothschilds, the divisions had not been strictly over business. As the family grew and its members' interests and aptitudes diverged, jealousies, egos and rivalries played their role. Though it is a Rothschild rule not to air family matters, wounded pride counts a great deal.
But questions of strategy and succession loomed as Jacob went off on his own, as his half brother Amschel was made to give up farming and car racing for an unwanted banking career, and as Guy moved to the United States, leaving behind no Rothschild bank in France.
Seeing a 'Renaissance' In Melding 2 Cultures
N. M. Rothschild & Sons is quartered in New Court, a nondescript office building on St. Swithin's Lane, an alley in London's business district. Upon entering a lobby that contains a single splash of color -- a portrait of Mayer Rothschild and his founding family -- there is no question who is master here: Sir Evelyn Rothschild, a towering, silver-haired man who has been part of the bank for 45 years.
Sir Evelyn has a reputation for severity, and the starkly empty corridors seem to bear it out. His drink, as he sat down in his wood-paneled office to discuss his family's business on Friday, was hot water with lemon. ''It's good for you,'' he said.
Sir Evelyn, 65, appeared affable and extremely proud of his family, whose portraits were everywhere, and pleased to have at his side Baron David de Rothschild, his French cousin and, quite probably, his successor.
It is thanks to David, 53, that the Rothschilds again have a bank in France. When the Government nationalized Banque Rothschild in 1981, David's father, Baron Guy de Rothschild, bitterly left France for the United States. Barred from banking and from using the family name in business, David stayed. He started over with a shell of a company, Paris-Orleans, with four employees in a hotel suite.
Despite the growing distance between some Rothschilds, the bankers had always invested in one another. David's cousin in Switzerland, Edmond, helped by taking a 10 percent stake in the new French bank. David dabbled in real estate and small mergers. In 1986 Edmond helped again, successfully urging France's Finance Minister, Edouard Balladur, to end the prohibition barring the family from using its name in business.
David moved quickly, forming Rothschild & Cie. Banque, and attracting merger-and-acquisition clients including British Airways and the financier Sir James Goldsmith. David brought in experienced bankers from prestigious institutions, including the Government, and has built his merchant bank into France's second largest.
His goal, David said, was to ''be the best'' in a few areas, an echo of Edmond's description of his own highly successful Swiss bank, Compagnie Financiere Edmond de Rothschild Banque: ''Small is beautiful.''
But while Edmond prospered, delighting in his independence, he also smarted at the insinuations conjured up in family references to him as ''le petit Edmond,'' when real Rothschild men were known to be tall. In contrast, Baron David de Rothschild was more open to closer family relationships.
In 1992, Sir Evelyn made David deputy chairman of N. M. Rothschild, even though he was not a shareholder. And this month David took charge of a new initiative to coordinate the family's investment banking offices around the world.
''David rebuilt,'' Sir Evelyn said. ''I think to have started a new institution, with some support from the family, and create something in 15 years, is a remarkable achievement. He has managed to encroach on Lazard Brothers and do very well, not only in France but in the rest of Europe.''
And it is rebuilding that the House of Rothschild needs now, Sir Evelyn said, to keep pace with rivals as the asset-management business and corporate finance grow. The obvious solution is to bring together its branches as active partners.
''The Rothschild family success 100 years ago was European,'' he said. ''We were the No. 1 bank in Europe up until World War I. After that there was a great decline because of the problems of the war period and the 30's. We have moved today out of Europe and into the world as a whole, where I think we can hold our head up.''
Sir Evelyn added, ''I'd like to think as we go into the 21st century, they will say that the last quarter of the 20th century was a renaissance for the Rothschilds, a new opportunity and growth which was second to none.''
David listened and then added his own thoughts, speaking in French: ''The personal links between Evelyn and I are very strong, but the business links are very important because we blend, if you like, two cultures.
''We blend the phenomenally qualified financial skills of the London team, which happens to be outstandingly good, with a great expertise of Continental Europe.''
Uniting the London and Paris banks would give the House of Rothschild a capital base of more than $1 billion, the cousins said, putting it in a league with A. G. Edwards Inc., which ranks 15th in capital in the United States. The family expects to compete in most of the world with financial giants like Merrill Lynch & Company and Morgan Stanley & Company, though not in the United States, where the Rothschilds have a small but successful New York investment bank. ''I think we can compete with them outside the United States,'' Sir Evelyn said.
In Europe, Rothschild intends to compete both with continental investment houses and with Japanese banks. It plans to expand its own Asian presence by opening an office in China. And the benefits of cooperation among Rothschild offices around the world have already been proved.
Privatization has been a Rothschild specialty since the Thatcher administration in Britain. Indeed, last year, Rothschild offices worldwide were said to participate in the sale of 60 government businesses, more than any other investment bank. Part of that success comes from greater coordination among Rothschild offices in Europe and the Americas that has produced business that the family might otherwise not have received.
Recently the Rothschilds used their international presence to assist in the privatization of Fiji Telecom. The project involved Rothschild offices in Britain, the United States and Australia.
''If any one of us had gone after the business by ourselves, I doubt we would have gotten the job,'' said Wilbur L. Ross Jr., senior managing director of the New York investment bank, Rothschild Inc.
Using Famous Name To Best Advantage
Preserving the world's oldest -- and last -- family-owned investment bank may depend ultimately, however, on whether family dynamics can adapt to rapidly changing financial markets as quickly as institutions managed by professionals. To many observers, the question is whether Sir Evelyn, whose determination to keep family control has driven other talented bankers from N. M. Rothschild, will allow David to realize his ambitions.
While it seems all but certain that David will be Sir Evelyn's successor, neither would say so. ''Anyone in this place, which is based on meritocracy, and in Paris, can become senior person without having the name Rothschild attached to them,'' Sir Evelyn said.
David added, ''In our organizations you don't advance just because you are a Rothschild, but because you are good.''
The evidence in this century, however, is mixed. Amschel was dragged into N. M. Rothschild by his father, Victor Rothschild, who near his death implored Amschel to leave his gentleman's farm and join the bank. But Victor opposed his other son, the enthusiastic banker Jacob, in his efforts to open N. M. Rothschild to public offerings.
A hero in the financial district, Jacob took a small part of the bank, the Rothschild Investment Fund, and quickly made it profitable through associations with insurers, stockbrokers and even Sotheby's, the auction house. But bankers familiar with the dispute say Sir Evelyn disapproved, fearing that the Rothschild name would be cheapened by Jacob's alliances.
Meanwhile, Amschel managed the bank's money management business known as Rothschild Asset Management and watched its losses grow. By April, three months before his suicide, they reached $10 million, compared with $700,000 the previous year.
''Amschel hated his job,'' said an investment banker who had worked with Amschel at N. M. Rothschild, and who spoke on the condition of anonymity. ''It was quite obvious he wasn't good at it, but it had to be a Rothschild because of this thing about family control.''
Another banker who knows the family, also speaking on the condition of anonymity, said: ''They don't pick people on the basis of ability. They pick people they like to be with.''
In Baron David de Rothschild, however, the family does not have simply the only available Rothschild male, but someone who sees the future and can take his family to it -- if Sir Evelyn treats him as a partner, rather a rival -- observers say.
''David has changed the way the bank works,'' said Herbert Lottman, author of ''The French Rothschilds,'' who has spent hundreds of hours interviewing David, Edmond and other family members. ''He learned how to choose good outside managers without losing the company to them. That is a very important transition for the Rothschilds.''
The Rothschilds also have certain advantages because of their name and their reputation; the banking house has never been touched by scandal.
''Above all, the Rothschild name signifies our motto, which is 'Integrity above all,' '' Sir Evelyn said. ''Integrity to the people you employ, and integrity to the customer you serve. And that is the No. 1 question mark in today's world.''
Mr. Ross, of the New York offices, knows the power of the family name, because for years his operation didn't use it. In 1982, as soon as New Court Securities became Rothschild Inc., he said with a smile, ''It was much easier to get people to return your calls. Since we became Rothschild Inc., I have never been asked, 'What is your balance sheet?' ''
A certain Old World charm doesn't hurt, either. And Baron David de Rothschild not only personifies it, but is happy to employ it in marketing his family business.
How charming is the baron? In one recent international deal, the buyer, who was not a Rothschild client, had one last demand before he closed the deal. ''He wanted to have dinner with David,'' a banker involved in the transaction said.
The deal was made.
Photos: Sir Evelyn Rothschild, above, held a rare interview on Friday with his French cousin Baron David de Rothschild, right, saying they would become partners to rebuild a banking empire that has been fragmented for generations. (T. Humphries; Jacques Boissay); Waddesdon Manor is one of more than 45 mansions once owned by the Rothschild family. (Aerofilms) Chronology: ''oney, Patronage and Power'' For two centuries, the Rothschilds have been a cornerstone of European banking. Time and again, they have financed wars, buildings and business ventures for rulers and aristocrats. At its height, the Rothschild banking empire included institutions in Paris, London, Vienna, Naples, Geneva and Zurich. Its wealth produced more then 45 palaces and chateaus. But Mayer Amschel Rothschild, the patriarch, started it all at the house shown below in the Jewish ghetto of Frankfurt in the late 1700's. 1794-1806 In the etching at right, the elector of Hesse-Kassel entrusts his treasuries to Mayer Amschel Rothschild at the start of the Napoleonic Wars. He was said to be the founder's first big business client and helped to build Mayer's reputation for handling the money of royalty across the continent. 1804 Nathan Mayer, the third son of the founder, establishes a bank in London, then the financial center of Europe. Brilliant and impatient, he sensed that Europe's turmoil had created an immense business opportunity. He chafed at the confinement of the Jewish ghetto in Frankfurt. 1816 Austria, the only country that would grant titles of nobility to Jews, decrees the family the von Rothschilds. The family's banks had been important backers of Austrian rulers, including Metternich. 1817 The Paris bank is established by Jacob, the last child of the founder, who preferred to be known as James. N. M. Rothschild, the British bank, finances the English armies of Wellington in Spain and France. The Duke of Wellington is shown in the painting at right on Copenhagen, the horse he rode at the Battle of Waterloo, where his victory over Napoleon established England as Europe's foremost power. 1818 The London bank leads a Rothschild group underwriting the first Prussian bond issue, when Prussia desperately needed a loan after wars throughout Europe. The sale led to a big business selling bonds and financing European kingdoms in the first half of the 19th century. 1830's As railroads are established across Europe, various Rothschild enterprises provide financing, and in some cases actually build the railways. 1853 Chateau Mouton of Bordeaux, an already prestigious label, is bought by Nathaniel for 1.125 million francs. The Rothschilds are mostly absentee owners until Philippe takes over the winery in 1922 and transforms it. In the 1930's he fashioned a less costly Bordeaux, Mouton-Cadet, that is now the mainstay of the winery. He is shown in the photo below at the Lutece restaurant in New York in 1980. He also successfully had the vineyards reclassified as first growth from second growth in 1973, the only such change since France adopted its strict Classification Act of 1855. 1858 Lionel becomes the first Jew to be elected to the British Parliament. 1868 Chateau Lafite, another prestigious wine maker in Bordeaux, is acquired by Baron James Rothschild for 4.44 million francs. James's heirs still own and manage the winery, which became known as Chateau Lafite-Rothschild and makes one of the most prized wines in the world. 1869 The Suez Canal is opened. Lionel pulls off one of the British bank's biggest coups, financing the British acquisition of the canal by producing $:4 million, or about $6.4 million at today's rates, in a matter of hours for the Government. 1880's Pioneered the development of Russian oilfields in Baku. 1901 The Frankfurt bank is closed. It had made loans primarily to German states and had declined in importance in the family's growing empire. 1917 The Balfour Declaration expressing Britain's interest in creating a Jewish state in Palestine was addressed to Lionel Walter Rothschild from Lord Balfour. 1966 Israel's Knesset, or Parliament building, is dedicated after a $3 million gift from the Rothschild family, long active in Jewish and pro-Israeli causes throughout Europe. 1981 The new Socialist Government of France nationalizes the Paris bank, which has about $400 million in deposits. The Government provides $70 million in compensation (which the Rothschilds said was less than the cost of the building). 1986 France allows the family to restore the Rothschild name to a reconstituted bank led by Baron David de Rothschild. The bank successfully advises the Government on the privatization of Banque Paribas and Matra, the electronic giant. 1986 N. M. Rothschild, the British bank, handles the successful privatization of British Gas, one of the world's largest stock offerings. The bank has been a leading adviser to Governments and companies involved in Europe's wave of privitizations. 1992 The British and French sides of the family move closer as Baron David, who led the revivial of the French bank, is named deputy chairman of the British bank. He is widely considered the heir apparent to his cousin Evelyn. 1995 Merrill Lynch & Company buys Smith New Court, a London stock brokerage, for $843 million. N. M. Rothschild held a 26 percent stake. 1996 Amschel, the 41-year-old chairman of the money-management arm of the British bank, hangs himself at an elegant hotel in Paris. (Sources: ''Rothschild, The Wealth and Power of a Dynasty'' by Derek Wilson (Charles Scribner's Sons); Encyclopedia Britannica) (pg. 12) Chart: ''The Houses of Rothschilds, English and French'' Mayer Amschel Rothschild, a coin dealer in the Jewish ghetto of Frankfurt, founded both the banking business with the Rothschild name and the family traditions that would make it Europe's leading bank in the 19th Century. He and his wife, Gutele Schnapper, had 10 children, but he decreed that only males could inherit stakes in the bank. All five sons entered the business. One stayed in Frankfurt, while the four others set up operations in Vienna, London, Naples and Paris. Here are some prominent descendants of the two main branches of the family. (Sources: ''Rothschild, The Wealth and Power of a Dynasty'' by Derek Wilson (Charles Scribner's Sons); ''The Rothschilds, A Family Portrait,'' by Frederic Morton (Atheneum); the Jewish Museum, New York; the Jewish Museum, Frankfurt; Encyclopedia Britannica Photo Sources: Culver Pictures (Mayer Amschel); Private Collection, London (Amschel Mayer, Nathan Mayer) (pg. 13)