An Epic Tale Of Talent And Optimism


By Ron Chernow

Random House x 820pp x $30

Ron Chernow keeps disproving the stereotype of bankers as boring. In his justly acclaimed The House of Morgan, he depicted the iron-willed sultan of finance, J.P. Morgan, and his associate Thomas W. Lamont as huge, flawed, and fascinating characters. Now, he has struck literary gold again with The Warburgs, an extensively researched, lovingly told saga of an extraordinarily talented and appealing German-Jewish banking family that had a surprisingly big impact on the U.S.

The story is both epic and tragic. Chernow traces the family's origins to a 16th century money changer and pawnbroker in Warburg, Germany. After moving to Hamburg in the late 1700s, the family rode the crest of German power under Bismarck and Kaiser Wilhelm II to vast wealth and influence.

The Warburgs were German patriots and boosters. They aided German foreign adventures, notably a farcical 1911 attempt to muscle into Morocco. They watched with pride as the Imperial fleet's battleships paraded on the Elbe. But despite their success and service to Germany, they were always suspect because they were Jews. When the German economy soured after World War I, anti-Semitism grew. Establishment ties couldn't spare the family near-ruin under the Nazis.

An army of colorful Warburgs marches through the book. There's biologist Otto Warburg, winner of two Nobel prizes, whom Hitler protected in hopes he would find a cure for cancer. There's the formidable Sara, who ran the family bank, M.M. Warburg & Co., in the mid-19th century and built great good will by helping Hamburg through a financial panic. At the story's heart are five of her grandsons--brothers Aby, Max, Paul, Felix, and Fritz. They presided over M.M. Warburg's most glorious years, as well as its long struggle with the Nazis. Chernow portrays them as high-spirited, often hilarious characters known for their wicked wit and youthful pranks.

But the brothers also epitomized the struggle of many to "reconcile the contradictions of being Jewish and German, nationalist and internationalist, traditional and modern." Such contradictions helped drive the eldest, Aby (1866-1929), mad, though he produced seminal scholarship on art history.

Max (1867-1946), who ran the bank, also struggled to reconcile his Jewish and German identities. In some ways, he succeeded grandly, making M.M. Warburg Germany's largest private bank and hobnobbing with top German officials. Warburg partners sat on the boards of dozens of German companies.

Yet Max's patriotism and optimism blinded him as Nazi influence grew. He kept shrugging off humiliations, giving agonized speeches on German-Jewish patriotism. Thinking he could outlast the Third Reich, he persuaded his brothers to pour good money after bad. Circumstances forced him into what Chernow calls a "ghoulish" role, brokering Jewish property at fire-sale prices. After losing much of the family fortune, he fled to the U.S. in 1938.

Unlike less fortunate German Jews, the Warburgs had a lifeline out. In 1895, Paul and Felix had married, respectively, daughters of Solomon Loeb and Jacob Schiff, top partners in New York's leading Jewish banking house, Kuhn Loeb. These marriages gave M.M. Warburg a link to Wall Street just as the U.S. surged to world industrial and financial preeminence. With Paul and Max in daily cable and phone contact, M.M. Warburg became a pioneering global investment bank, participating in countless U.S. government and railroad issues.

Chernow says the family considered Aby its genius, but Paul could also bear that sobriquet. He foresaw the 1929 crash and, with John Maynard Keynes, predicted the disastrous results of the financial burdens put on Germany after World War I. Soon after immigrating to the U.S., he began advocating a central bank system and emerged as a key architect of what became the Federal Reserve System--an extraordinary feat for a foreigner and a Jew in then-xenophobic America. President Woodrow Wilson appointed him to the Federal Reserve Board in 1914 and named him vice-governor in 1916. Then, in a hugely ironic twist, the war made his German ties an issue, and in 1918, Wilson decided not to reappoint him.

The Warburg name remains prominent largely because of a cousin, Siegmund G. Warburg (1902-1982). After moving to London in 1934, he built S.G. Warburg & Co. into Britain's top investment bank and a world player in international securities. Chernow is good on Siegmund's perfectionism and occasional ruthlessness. This outsider won business away from sleepy British houses through efficiency and meticulous cultivation of clients. He prevailed in the landmark 1958 hostile takeover of British Aluminum in part by holding a press conference on a Friday evening, when the lords of British finance were at their country houses.

Britain owes Siegmund a huge debt for pioneering the Eurobond market in the 1960s, thereby reestablishing London as a world financial center. And where did this refugee from Hitler sell his bonds? In economically resurgent Germany. While many Warburgs remained leery of Germany, others were irresistibly drawn back: Chernow says Siegmund spent half his time there in the 1960s. Today, Max's grandson, also named Max, presides over the reclaimed and rejuvenated M.M. Warburg Bank in Hamburg. As Chernow writes, only the resurgence of German anti-Semitism mars this exhilarating ending.