The Warburgs

by Ron Chernow

  Stymied by Max’s stubbornness, Felix used every stratagem to get him to leave. He saw that Max kept offering his love to a Germany that only reciprocated with hatred—the plight of so many German Jews. As someone who had idealized German culture, Felix was traumatized, too, by the Nazi takeover. Angry and perplexed, he walked around muttering, “I am so ashamed that this has happened.”28 Upset by events, he spent much of February and March 1933 at home with a heart spasm. As he told Chaim Weizmann that April, “In regard to the madness of Germany, no words can express the disgust that everybody feels that that beautiful country should have gotten into such rotten hands.… My own people … still whip themselves into a hopefulness and the same old patriotism which had made them bring all kinds of sacrifices without receiving any reward.…”29

  Constantly worried about his Hamburg relatives, Felix was often starved for information. Max likely kept him in the dark for several reasons. He doubtless feared the censor, didn’t wish to worry Felix, and knew Felix opposed his decision to stay. The upshot was that Felix operated in a vacuum when he could have used news of Nazi oppression to lobby Washington.

  Once the Nazis had cleansed Germany of opposition parties and ended parliamentary government, they turned their attention to the Jews. By mid-March, the rank-and-file were storming department stores and demanding a boycott of Jewish businesses. As much to guide as to incite these volatile emotions, Hitler and Goebbels championed the idea of a boycott. In a March 27 radio broadcast, the government announced that on the morning of April 1st, at the stroke of ten, SA and SS members would take up positions outside Jewish stores and warn the public not to enter. This offense was portrayed as a defensive measure against “Jewish atrocity propaganda abroad.”30 To add further terror, Göring told Jewish community leaders that they would be held responsible for any anti-German propaganda appearing abroad. Eager to create jobs through exports, Hitler wanted to minimize adverse publicity overseas.

  In reacting to the boycott, a split was immediately apparent between foreign Jewish groups who wished to fight and German Jews who wished to negotiate. The latter feared that foreign protest would only seem to confirm the notion of a world Jewish conspiracy inimical to Germany. They also knew that they and not their vocal brethren abroad would feel the stinging lash of reprisals. As a result of their tenuous absorption into German life, the Jewish community had always preferred diplomacy and negotiation to public confrontation.

  Overseas Jews labored under no such need to appease the Nazis. The day that the boycott was announced, twenty thousand people crowded into a Madison Square Garden rally in New York to condemn the treatment of German Jews, while another thirty-five thousand milled about outside. When a counterboycott of German exports was launched, it posed an excruciating dilemma for the American Jewish Committee. Started by the Jews of German ancestry, the committee feared exposing relatives to reprisals. At the same time, they had to respond to the spontaneous anguish of American Jewry. In the end, the committee opposed the boycott of German goods and tried to halt the Madison Square Garden rally, urging speakers to cancel their appearances. A fatal division sapped “international Jewry” even as the Nazi press claimed that it operated with a single, implacable will.

  Max and Eric typified those Germans Jews who thought the foreign boycott of German products would backfire. On March 29, Eric sent a breathless cable to Friedaflix that the April 1 boycott would be carried out against Jewish firms “if atrocities news and unfriendly propaganda in foreign press mass meetings etc. does not stop immediately.”31 After Felix read this cable to the president of the American Jewish Committee, Cyrus Adler, the group issued a statement that repudiated any boycott of German goods and branded advocates of such a position “irresponsible.”32

  Felix was trapped in a quandary. At heart, he sided with the boycott, telling one friend how German youth were becoming so imbued with hatred that the masses would only turn against Hitler if they felt “that their pocketbooks are attacked by their own foolishness.…”33 Yet family loyalty tugged the other way. Instead of an outright boycott of German products, he compromised and favored voluntary refusal to buy them. He told Eric that the real problem lay with the German government and not with American Jews. “Resentment so widespread no individual efforts to stem it likely available unless government changes attitude,” he cabled. “Will continue to discourage mass meetings and unfounded atrocity stories.”34

  In hindsight, it is easy enough to see through the false promises and bluffs of Nazi leaders. Yet at the time, German Jews were lost in a mad tangle of speculation that obscured the uniform malevolence of their opponents. “Hitler is a very weak man,” Dr. Bernhard Kahn, European director of the Joint Distribution Committee, said the day before the boycott. “He is in the hands of Göring and Goebbels.… We must strengthen his hand.…”35 Within days, Kahn was chased from Berlin because of his ties to American Jews and he relocated in Paris. In July, the Joint would spearhead a one-million-dollar fund-raising campaign for German Jews, with Felix as honorary chairman.

  April 1st proved the day of terror the Nazis had envisioned. People marched through Hamburg with signs proclaiming, “Germans don’t buy from Jews.” In many cities, Nazi hooligans hurled stink bombs into Jewish stores, scattered merchandise, and intimidated shoppers. Jewish private banks were largely exempt from this organized intimidation. When the boycott officially ended on April 4, German Jews felt great relief and Max thought they had survived the worst of Hitler.36

  Because of haunting newsreel images of goose-stepping soldiers and Nuremberg rallies, we forget that some semblance of normality remained for well-to-do Jews in large cities in 1933. The Warburgs had to deal with ostracism, not outright terror. When Max walked to work each morning, he no longer tipped his hat, since people crossed the street when they saw him coming. Indeed, it became dangerous for an “Aryan” to chat or walk with him in the street. Family members were kicked out of chess clubs and swimming pools. An eerie isolation descended upon the Warburgs’ private lives. They received fewer dinner invitations and, when they did, the guest list had been scrupulously screened by anxious hosts afraid of inviting party spies. The family servants remained faithful, providing some comfort in the fortresslike isolation.

  If the Warburg family experienced, at worst, creeping menace in Hamburg, they didn’t fare so well elsewhere. For years, Jim Loeb and his wife, Toni, had led a reclusive life at his Murnau estate of Hochried. A remarkable benefactor of German culture, Jim had built a new wing of the Murnau hospital in 1932 and was named an honorary citizen of the town. He bequeathed to a Munich museum the most important antiquity collection ever donated by a private individual in Bavaria and devoted enormous sums for a Munich psychiatric research center under Dr. Binswanger. These gifts would receive no thanks.

  Two days before Hitler took power, Toni suddenly died. Upset by her death and the political situation, Jim Loeb suffered a fatal heart attack on May 27, 1933. Then (or possibly at a later date) the Nazis wouldn’t let Jim and Toni’s ashes be buried at Hochried. In a courageous act, the Count and Countess Resseguier secretly buried the ashes behind a sculpture near the Hochried gate. In a final indignity, the Nazis seized the Munich research building from Dr. Binswanger, deleted the name Loeb from the stone, and turned it into a center for Nazi theories of racial superiority.

  The month Jim Loeb died, Hitler asked Dr. Robert Ley to merge German trade unions into one big Nazi labor organization named the Labor Front. Ley, we recall, was the drunken I. G. Farben chemist who had attacked Max in the 1920s and sacrificed his job in consequence. From a palatial government building, Ley would now manage a vast treasury to indoctrinate German workers and control a private army of blue-uniformed henchmen. As creator of the holiday group “Strength Through Joy,” he would even subject German workers to Nazi brainwashing in their leisure activities.

  On June 9, the Warburgs were stunned by news of the double suicide of Moritz Oppenheim—Charlotte’s brother—and his wife, Käthie,
in Frankfurt. Moritz had worked in the family jewelry business and become an important patron of German science. He had subsidized a Helgoland aquarium and endowed a chair in theoretical physics at the University of Frankfurt. As a donor to the university’s observatory, he even had a small planet, “Mauritius,” named after him. He and his elegant Viennese wife had a cultured home, featuring music every Sunday afternoon.

  The story of Moritz and Käthie highlights the Jewish suffering that antedated the gas chambers. After the Nazis took power, the elderly couple—Moritz was eighty-five, Käthie almost eighty—grew increasingly despondent. When their only son, Paul, emigrated to Brussels, their solitude deepened. They decided to die with the same harmony as they had lived. For the Warburg brothers, who associated the Frankfurt Oppenheims with carefree, youthful days, it seemed a terrifying omen. “How it all happened is mysterious to me,” Felix wrote, “but no doubt the Hitler Regime made life for them a plague and they were yearning for the end of their days.”37

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  One paradox of the Warburg story is that while the family figured prominently in a mad farrago of Nazi allegations, M. M. Warburg & Co. enjoyed a relatively privileged place in the Third Reich. The same Jewish bankers who starred in the pages of Der Stürmer enjoyed, in practice, a certain immunity from attack. However fierce the Nazi rhetoric against them, they were accorded more privileges than almost any other Jewish group, as the Nazis happily exploited the financial power that they so eagerly denounced. They got away with this because private banks operated in an elite universe foreign to the street hoodlums and small shopkeepers who comprised the party faithful. With eighteen million reichsmarks of capital, M. M. Warburg & Co. was probably the largest and most eminent private bank in Germany, rivaled only by Mendelssohn & Co. in Berlin.38

  That Germany benefited from Jewish bankers who allegedly plundered the Volk was one of Nazism’s dirty secrets. The bankers had something Germany desperately needed. A lot of foreign trade floated through Hamburg on Warburg credits and the Nazis were short of foreign exchange needed to rearm Germany. And without strong exports, Hitler couldn’t create rapid job growth needed to buttress his regime. Thus, he granted a special dispensation to the very people he most reviled. If this belied the party worldview about the Jews, it never seemed to disturb the committed.

  Another factor giving Jewish bankers some immunity from attack was their international connections. The Warburgs were a showcase family well known abroad. “The Nazis were very interested in portraying Germany as okay in the outside world,” said Max’s daughter, Gisela. “Goebbels knew that the Warburgs had a lot of relations in the U.S.”39 Again the bankers were saved by aspects of their work otherwise used to arouse paranoia.

  The atmosphere of M. M. Warburg & Co. after 1933 was an implausible blend of the frightening and the mundane. Max would evoke the mortuary gloom of the ancestral bank, with grandfather clocks ticking away as a shrinking staff tried to fill empty hours. The mail dried up and fewer clients stopped by in person. The number of clients plummeted in 1933 from 5,241 to 1,875 and the firm was expelled from many securities syndicates. Max stubbornly kept up daily visits to the stock exchange. But where friends once crowded around him, he now stood alone or with his employees. He was shadowed by the secret police, who photographed people approaching him at the exchange or visiting the bank. For a man once dubbed the uncrowned king of Hamburg, it was all a nightmarish reversal.

  M. M. Warburg’s slowdown didn’t entirely result from the Nazis. The moratorium on repayment of German loans froze international capital flows. When the Reichsbank clamped more controls on capital movements, it handicapped the Warburgs, who specialized in foreign trade. Also, the bank still suffered from the 1931 debacle, which required cost-cutting. Among the many factors holding Max in Germany was doubtless his desire to regain the eminence he had enjoyed before 1931. The Nazis had deprived him of a chance to restore his glory.

  If business at the Warburg bank was never nearly so moribund as Max made out, it had much to do with the patronage of Dr. Hjalmar Schacht. Assigned to deliver Hitler’s economic boom, he had to transmit to the Führer the unpleasant news that Germany needed these devilish Jewish bankers. Schacht had not only been a key emissary to big business at a time when industrialists still feared the Nazis, but also gave some financial legitimacy to a party that attracted a large number of monetary quacks. Hitler prized Schacht as a respectable figure who could hoodwink foreign financiers. In 1931 Hitler said of him, “He is, in fact, enormously skilled and enjoys great respect, even among the foreign, and especially among the Jewish-American international bankers. And that is why I, too, think highly of him.”40 Hitler bragged that Schacht was the only “Aryan” who could outswindle the Jews.41 In a totalitarian state where every human body seemed expendable, Dr. Schacht alone enjoyed special freedoms, and this would even extend to protesting the abuse of Jewish businessmen.

  This old-school banker, with his pinstripes, cigars, and wire-rimmed glasses, never joined the party and regarded many Nazis as coarse ruffians. Later disclaiming knowledge of the Final Solution, he would yet mastermind the German economic revival that made Hitler omnipotent. On February 20, 1933, at a meeting of business leaders at his home, Göring predicted that the March 5 elections would be “the last for the next five years, probably even for the next hundred years.”42 Once the crowd was warmed up, Dr. Schacht stepped forth, raised three million marks for the Nazis, then administered the fund himself. This opportunist fancied himself the one sane man who could moderate Nazi excesses from within. Watching Hitler deliver his first radio address in 1933, he said he thought it might be “possible to guide this man into the path of righteousness.”43 When the Führer said the Jews could continue working as before, Dr. Schacht professed to believe him. Max would hear these specious promises from Schacht’s own lips.

  When Hitler demanded the resignation of Dr. Luther, the head of the Reichsbank, in March 1933, he proposed Dr. Schacht in his stead. As a member of the Reichsbank advisory board since 1924, Max participated in the vote. He and two other Jewish bankers on the eight-member council were caught in a touchy position. Max thought Schacht a smart, opportunistic blowhard who overestimated his talents; Max also had never forgiven his cynical betrayal of Carl Melchior after the 1929 Young conference. Nevertheless, he voted for Schacht at the March 16 meeting, telling Jimmy afterward, “Under current conditions, I consider it objectively correct that Schacht get this post, for his personal influence over the government is so important that mistakes, which he will unquestionably make, will be offset. I voted for him de plein coeur and am glad that Luther himself did the same.”44 Max joined two other Jewish bankers in appending his signature to the March 17 appointment document signed by Hitler and Hindenburg. The advisory board was dissolved in October 1933.

  If Max’s business life hung from a thread after 1933, it was Dr. Schacht who could wield the shears, for he held life-and-death power over private banks. Since the 1931 crisis, the Reichsbank enjoyed dictatorial control over foreign exchange—the lifeblood of any international bank. Schacht could obliterate the 135-year history of M. M. Warburg in one stroke. Recognizing this, Max told Jimmy that everything depended upon “what Schacht plans to do in general with private banks and bankers and in particular, how a private Jewish bank can do business in future.”45

  For Max, Schacht’s appointment promised some small rationality in financial affairs instead of weird Nazi experiments or a vicious purge of Jewish bankers. His relationship with Schacht at first duped Max into a sense of security. It gave him high-level access to the Nazi bureaucracy of a sort enjoyed by few Jews. Max felt he should use this influence for the Jewish community, which, in turn, bolstered his importance in the community. For Jews who felt bereft of any court of appeals in a Germany gone mad, Max Warburg, with his government contacts, could render unique service. He had an open door to Schacht and periodically discussed with him topics of mutual concern.

  Jimmy and Felix thought Max
was manipulated by the wily Schacht. As Jimmy later said, “My uncle, Max Warburg … always claimed that Schacht was doing the best he could to protect the Jews. I never believed him. I think [Schacht] talked out of one side of his face to people who were anti-Semitic and out of the other side of his face to people who were pro-Semitic, but I have no proof of that.”46 Yet at moments Schacht bucked the Nazis at great personal risk. In the rogues gallery of the Third Reich, he is the hardest person to bring into moral focus, for he exhibited both patent hypocrisy and unquestionable courage. If Max proved gullible, he had some reason to trust Schacht.

  Being ignorant of financial matters, Hitler granted Schacht unusual autonomy in Nazi officialdom. Once asked whether Hitler had financial ideas, Schacht boasted, “Yes, he had one idea and a very good one. It was, leave it to Schacht.”47 As his policies lifted Germany from the Depression, Schacht enjoyed immunity from party criticism. In May 1933, he shielded the bankers’ trade association from party meddling and it confirmed Max and two other Jews as board members.

  The most startling proof of Schacht’s freedom from party strictures was seen in the Reich Loan Consortium, the august bank syndicate that marketed German government issues. Of fifty member banks when the Nazis seized power, a third were Jewish, and Schacht resisted the party’s efforts to expel some of them. Gradually almost all Jewish banks were pruned and only three managed to stay until 1938, including M. M. Warburg & Co. Membership in this body provided the Warburg bank with protection and permitted leading industrial firms to continue doing business with it safely. If M. M. Warburg enjoyed the imprimatur of the Reich Loan Consortium, how could it be considered a traitorous firm?