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Saturday, August 8, 2009

The Warburgs: The Odyssey of a Remarkable Jewish Family

The Warburgs [1]

The Warburg saga can be traced to 1559, when a German Jew known as Simon of Cassel moved from Hesse to Warburg, a town in Westphalia. There he worked for the Prince-Bishop of Paderborn as a moneychanger and pawnbroker, two of the very few professions the Catholic authorities in the region permitted Jews to enter. In 1668 Simon’s great-grandson, Juspa Joseph of Warburg, moved to Altona, near Hamburg, and in 1773 one of the latter's descendants moved into the great port city itself. There, in 1798, two Warburg brothers, Moses Marcus and Gerson, created M.M. Warburg & Co., which mostly brokered bills.

The Warburgs' first claim to major prominence coincided with the life-times of five Warburg brothers: Aby (1866-1929), Max (1867-1946), Paul (1868-1932), Felix (1871-1937), and Fritz (1879-1964). Aby turned his back on finance and became one of the great bibliophiles and art historians of the twentieth century. Max and Paul worked diligently and patriotically for a German empire that had allowed Jews much freedom after centuries of anti-Semitic deprivation. By 1914, M.M. Warburg & Co. was the leading private bank in Hamburg, playing a top role in acceptance credits, foreign exchange, and securities operations.

In 1895, the firm cemented ties to Kuhn, Loeb, and Company, Wall Street's second most important investment banking house, when Paul married Nina Loeb, daughter of one of its founders, and Felix married Frieda Schiff, whose father Jacob was the leading partner in Kuhn, Loeb and was himself a Loeb son-in-law. With Max and Fritz in Hamburg, and Paul and Felix in New York, the Warburgs could now boast strong global connections. Indeed, 1900-1914 was a high point of financial success for the Hamburg Warburgs, as they floated numerous government loans and enjoyed close ties to the Kaiser and the German Foreign Office.

This summit would prove ephemeral, however, for it was followed by World War I, chaos in international banking, hyperinflation in the German mark, and, most ominously, a new German nationalism resulting from the Versailles Treaty that would make the Warburgs the most visible scapegoat for Nazi propagandists and their disillusioned, resentful followers. By 1938, after a 140-year existence, M.M. Warburg & Co. had been plundered and then "Aryanized" as Brinckmann, Wirtz & Co. by the Nazi regime. After World War II, the Warburgs persevered in resuscitating the family name in Hamburg banking circles, and Max's son Eric (1900-1990) succeeded in capturing control of the old firm and restoring the original name.

In America, Paul grew weary of Wall Street and, having long been interested in importing European banking theories and practices, pushed certain basic reforms for U.S. finance--all of them tied to his vision of a central bank. In 1913 his brainchild, the Federal Reserve System, was enacted and President Woodrow Wilson appointed him a member of its first board of governors. Felix remained with Kuhn, Loeb but found time, like many other Warburgs past and present, to be extremely active in Jewish causes. He donated generously to philanthropy at home and to overseas relief efforts for impoverished and endangered Jews in Europe and pre-state Israel. For many years he was a leader of the Joint Distribution Committee, and in 1917 he was instrumental in bringing together 75 different charities to form the Federation of Jewish Philanthropies.

In the generation succeeding the five Hamburg-born brothers, Max's son Eric, was notable for his attempts to reinvigorate a Jewish presence in post-Holocaust Germany; Paul's son James (1896-1969), moved in high government circles during the New Deal, was an intimate of John F. Kennedy and Adlai Stevenson, and wrote numerous books on government economic policies and international relations; and Felix's son Frederick (1897-1973), secured much business for Kuhn, Loeb through his well-placed connections and continued his father's high-level identification with Jewish philanthropy.

The most successful of all the Warburgs, incidentally, was not a son of the five brothers but a nephew, Siegmund (1902-1982). Having apprenticed with Uncle Max in the 1920s, he later fled the Nazis for London, where he eventually developed this century's foremost global banking firm.

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