The Warburgs

by Ron Chernow

  German industry defied the Nazi fanatics and continued to do business with the Warburgs. In the mid-1930s, the bank lost some major clients, including Daimler-Benz and the Maxhütte of Friedrich Flick, but, astonishingly, these were the exception, not the rule. In 1935, the bank surrendered just four of seventy-two supervisory seats on corporate boards—a startling fact that confirms Max’s repeated contention that anti-Semitism was all too real but far from universal among the German economic elite. Unfortunately, this only helped to deceive him about the strength and durability of the Nazi appeal among less lofty Germans.

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  It was never clear whether Max’s relationship with Dr. Schacht was finally his salvation or misfortune. As Schacht’s wizardry revitalized the economy—unemployment plunged from 6 million to 2.6 million in Hitler’s first two years in power—it made the Führer heroic to the masses. It also gave Schacht a seemingly impregnable position in economic affairs. In July 1934, he met with Hitler in Bayreuth, where the Führer drank in inspiration at the Wagner festival. Hitler asked if Schacht would head the Economics Ministry as well as the Reichsbank. “Before I take office I should like to know how you wish me to deal with the Jewish question?” Schacht asked. “In economic matters, the Jews can carry on exactly as they have done up to now,” Hitler said with a straight face.16 Henceforth, Dr. Schacht would preside over the Reichsbank in the morning, then stroll over to the Economics Ministry on Unter den Linden for the afternoon.

  In 1935, he still retained jurisdiction over the treatment of Jewish enterprises. That May, he added a fancy new title, “Plenipotentiary for the War Economy,” his mission to reconcile economic growth with rearmament. Because a foreign exchange shortage could hurt rearmament, Schacht needed to maintain links with bankers abroad and thus acquired a vested interest in protecting Jewish bankers.

  Foreign exchange was also much on the mind of Jewish bankers. Because of punitive exchange rates and the flight capital tax, Jewish emigration entailed a sudden, massive loss of this wealth. Even with Paltreu, Jews going to Palestine in 1935 relinquished 25 percent of their wealth; to settle elsewhere meant a loss of 78 percent. During the first eight months of 1935, Max met with Schacht ten times and many of these meetings must have revolved around foreign exchange. For instance, Max tried to negotiate the best rate possible for the Joint Distribution Committee, which had to convert dollars into marks to maintain its work in Germany.17 This open door to Dr. Schacht clearly bred a misleading sense of security in Max and other Jewish bankers. In March 1935, U.S. Ambassador William E. Dodd dined at the home of Hans Fürstenberg. Max was also a guest. In his diary, Dodd noted the faith that these Jewish bankers reposed in the Reichsbank chief: “There were other guests claiming to be friends of Dr. Schacht, as they indicated more than once.”18

  An adept double-talker, Dr. Schacht walked a fine line between Jewish businessmen and Nazi stalwarts. Opinionated, conceited, he thought he could beat Hitler at his own game, simultaneously knocking economic sense into the Führer’s head while protecting the Jews and placating foreign opinion. Sometimes he was quite vocal about the mistreatment of Jews. On July 15, 1935, Nazi thugs went on a spree on Berlin’s fashionable Kurfürstendamm, ransacking Jewish shops. In a radio speech, Dr. Schacht condemned the violence and said Jews should be free to engage in business. Goebbels made the press censor this speech. In an extraordinary move, Schacht then had the Reichsbank publish ten thousand copies of the speech and display them at its branches across Germany. A quarter-million copies were printed. At times, when Schacht reopened Jewish businesses, it created a furor among Nazi activists. He wasn’t motivated by humanitarian love of Jews. In internal Nazi counsels, he argued that persecuting Jews only hurt his effort to obtain raw materials and foreign exchange for arms and public works.

  On September 15, 1935, the Nuremberg Laws repealed the entire history of Jewish emancipation and transported the community back to the Middle Ages. These decrees stripped Jews of citizenship, deprived them of the vote, and barred them from public office. Nor could Jews and people of “German blood” marry or have sexual intercourse. (In Hamburg, a Jewish brothel was set up to service clients without running afoul of the law.) Henceforth, the Warburgs were living on borrowed time. As Eric said, “Those were years of standing by lost posts, full of abominations and human disappointments.”19

  The German Jewish elders now tried to experiment, finally, with militant action. Max convinced the Reich Representation to attempt a mass protest on Yom Kippur. In synagogues across Germany, speakers would simultaneously speak out in protest. “And since I would have thought myself cowardly had I caused it to be read by others while I took no share, I decided to deliver it in the synagogue of the Jewish Orphan Asylum,” Max said.20 In doing this, Max and others would risk deportation to concentration camps. The Reich Representation amateurishly bungled the action by mailing out all eight hundred fliers at once. This tipped off the Gestapo, which confiscated them, banned the protest, and arrested two leaders of the Reich Representation, Dr. Leo Baeck and Dr. Otto Hirsch. Shifting position, the Reich Representation now began to advocate a mass exodus of Jews from Germany.

  A few days later, Max was summoned by Dr. Schacht, who played him for a fool. Schacht professed satisfaction with the Nuremberg Laws and denied that they diminished the status of the Jews. They only assigned a different value to them, he noted. The laws’ purpose, Schacht continued, was to restore tranquility to economic life. After speaking with high officials, Schacht was certain this was their sincere intention. In future, Jewish businesses would no longer be disturbed.

  Belatedly, the scales fell from Max’s eyes. He saw that Schacht’s real agenda at the meeting was to get him to muzzle criticism of the Nazis by Samuel Untermyer, a group of American Jews organizing a boycott of German goods, and the Manchester Guardian, an unsparing critic of Hitler. Max suddenly tired of being blackmailed by Schacht and told him he refused to protest the American boycott or counter criticism abroad. Thus ended Max’s efforts to appease the Nazis, although not his relationship with Schacht.21

  After the Nuremberg Laws, Max unveiled new strategies to deal with the darkening situation. He came up with a plan for a world peace conference that would provide a cover for a global rescue effort for German Jews. Instead of attacking the Nazis’ anti-Semitism, he would inveigh against their militarism and worshipful devotion to the state. With the Nazis preaching the need for Lebensraum (living space) for Germany’s growing population, Max intended to argue that such population pressure could be relieved by allowing unrestricted Jewish emigration.22

  By the end of 1935, about 100,000 Jews had left Germany in three years while 450,000 dangerously temporized. Now, as the timetable of doom markedly accelerated, tens of thousands of Jews desperately wanted to get out. The Aid Society of Jews in Germany collated reports from four hundred worldwide correspondents, describing local job markets and helping Jews with visas, ships, loans, and resettlement. As the group’s chairman, Max Warburg still dreamed of a liquidation or transfer bank that would permit a vast exodus of Jews. He broached the idea to Schacht of having overseas Jews ransom German Jews, partly by buying German goods. Nazi officialdom knew of these talks and let them continue unofficially. Part of Max’s plan was to expand the Haavara concept of having Jews deposit marks in Germany, then receive an equivalent sum in foreign currency. To finance the scheme, he would raise an enormous loan from overseas Jews that would be collateralized by property left behind in Germany by emigrating Jews.

  Max regarded this scheme as his master plan to free German Jews from bondage. On November 7, 1935, Jewish leaders met in London under the aegis of the Central British Fund at the Rothschild offices in New Court. First they listened to a plan presented by Simon Marks to settle German Jews in Palestine alone. Then, speaking for non-Zionists, Lionel de Rothschild described Max’s plan for a bank with three million pounds in capital to be used for emigration to all countries, not just Palestine. James G. McDonald reported glowingly t
o Felix. “For Lionel he showed an almost amazing enthusiasm … he was anxious that this should be the major program, and that the Palestine scheme should be subordinated to it or made a part of it.”23

  In combatting the Nazis, perhaps the most harmful factor was the simple disunity of world Jewry during the emergency. The issue of mass emigration from Germany exacerbated latent tensions between Zionists and non-Zionists just when Jews could least afford it. Chaim Weizmann was offended by his exclusion from the London meeting, which buttressed his suspicion that treacherous non-Zionists favored destinations other than Palestine.24 Weizmann had defended the Haavara agreement but didn’t trust Max’s new Liquidation Bank and was disappointed to learn that Palestine would get only 20 percent of funds earmarked under the scheme.25 As he told Simon Marks, “The recent utterances of our friend Max Warburg (who for some reason best known to himself now poses as an expert on Jewish and Palestine matters), and the arrogance with which his brother [Felix] approaches any subject connected with Palestine, about which he really knows little and understands still less, are portents indicating the dangerous tendency to which I refer.”26 Weizmann milked the Warburgs for money but then didn’t want to listen to their views.

  The Rothschilds converted the leading British Jew, Sir Herbert Samuel, to Max’s plan. A Liberal member of Parliament and former Cabinet member, son of the founder of the Samuel Montagu merchant bank, he had spoken for the anti-German boycott in Parliament. Samuel accurately feared that American Jews and trade unionists would never accept a plan premised on increased imports from Germany. In January 1936, having made discreet soundings at the Foreign Office, he, Lord Bearsted, and Simon Marks got ready to sail to New York to promote a transfer plan. They came equipped with two versions, one for general emigration, along the lines Max proposed, the other slanted to Palestine. The objective was to rescue as many as 168,000 German Jews in four years, with two thirds of the money to come from American Jews and one third from British Jews.27

  The Nazis were skittish about cutting a deal with Jewish bankers and didn’t want to answer embarrassing questions. So the whole operation hinged on secrecy. Then, on January 6, 1936—a week before the British trio sailed—The New York Times ran a front-page article headlined, “World Jewry to Be Asked to Finance Great Exodus of German Co-Religionists.”28 The article named the three Englishmen and said the projected migration of German Jews would be the biggest since the seventeenth-century Huguenots. As the article baldly stated, the project was based upon “conditions designed to restore economic and financial prosperity to the German Reich.” The alternative, of course, was further repression for trapped Jews. Once again, it was a Hobson’s choice. Either Jews could aid their German brethren and the Third Reich or spurn the Nazis and leave the German Jews to their own devices.29 As Norman Bentwich lamented, “The choice was between satisfying the emotion of the Jewish masses outside Germany and facing the economic realities of Jewry inside Germany; and German Jewry was the loser.”30

  The newspaper publicity scotched the Warburg Plan. Some American Jews simply shrank from aiding the German economy, while others thought it would mark a terrible precedent. Would fiendish governments, in future, deliberately persecute Jews in order to have them ransomed by rich Jews overseas? The three British leaders journeyed to New York anyway. They succeeded in setting up a Council for German Jewry, with Felix, Paul Baerwald, and Rabbi Stephen Wise as the American representatives, but the transfer plan seemed stillborn.

  Never easily dissuaded, Max prevailed upon a divided Reich Representation to submit a new plan to the Economics Ministry on January 27, 1936. He spent days in Berlin lobbying, pleading for a moratorium against attacks on Jewish business and for an orderly departure of the Jews. Two days before Hitler sent troops into the demilitarized Rhineland in March 1936, Dr. Bern-hard Kahn told Felix that long-running talks about the Warburg Plan between Max and Schacht were deadlocked.31 Despite sympathy for his scheme, Schacht had already confided in Max about his own political troubles. He had undertaken a campaign against Goebbels’s diversion of hard currency for foreign propaganda, which spawned a legion of new enemies for him.32

  In despair, Max manufactured one last, all-encompassing dream. In London, Sir Osmond d’Avigdor Goldsmid presided over a small, charitable foundation that, he told Max, could provide seed money for the Liquidation Bank. At the time, he didn’t realize that the foundation’s charter made this impossible. In the meantime, Max rejoiced to think that he had found the needed money. Despair gave way to a powerful reverie. Max envisaged the liberation of 120,000 Jews—in fact, half of all German Jews under age 45.33 Back in London, he seemed cheerfully confident that he would pin down 500,000 pounds in commitments for his transfer bank.34

  In fact, the foundation had a mere 125,000 pounds in capital—woefully short of what Max needed—and already had extensive commitments to provide cheap credit to small Jewish businesses in Eastern Europe. With naïveté odd in a banker, Max had believed that Sir Osmond would simply pledge the capital en toto to his bank. Dr. Bernhard Kahn went to disabuse him. He described the deflation of Max’s hopes: “I must confess that it has seldom been my lot to have a more painful conversation with Mr. Warburg. When I explained the situation to Mr. Warburg … [he] was extremely disappointed. It seems that this possibility of the Foundation giving all of its funds for the purposes of the proposed bank was the last great chance which he saw for the establishment of that institution.”35 Max bitterly reproached the “hundred percent retreat” of Sir Osmond.36

  Siegmund was involved enough in Max’s scheme to draw fire from the Zionist press in America.37 In spring 1936, he spent several weeks with Friedaflix at 1109 Fifth Avenue. Siegmund delighted in Felix’s open, generous nature, and Felix liked his nephew’s straightforward manner. Because Siegmund wasn’t a joiner or organization man, Felix drafted him as the ideal liaison between the Joint and the foremost British Jews. From a business standpoint, this gave Siegmund entrée into the upper echelons of the clubby world of high finance in Britain. Both Felix and Siegmund thought Max’s talks with Schacht were a farce and that the Nazis exploited Schacht as respectable cover for their crimes. Felix remembered the soothing but empty words he had heard in the Soviet Union from Rykov during his Agro-Joint trip. As he told Hans Fürstenberg, “They are evidently doing to Schacht what I saw Stalin do to Rykov—put him where he can be consulted, giving him a title, but keeping him, so to say, a physical and mental prisoner.”38

  Even after his overpowering disappointment with Sir Osmond d’Avigdor Goldsmid, Max’s imagination still minted elaborate transfer schemes, some of which he implemented. He created a London bank called the International Trade and Investment Agency that transposed the Haavara concept to a global plane. Just as Paltreu transferred money to Palestine through the purchase of German goods, so the new Altreu would do the same for destinations other than Palestine.

  The American Warburgs also set up their own ingenious network to spring Jews trapped in Germany. Bettina Warburg sat on a committee of the American Psychoanalytic Association that obtained visas and jobs for Jewish psychiatrists and analysts. Since the Nazis branded psychoanalysis a Jewish science, there was an urgent need to assist these people. Bettina tapped a ready source of funds. With exchange controls in place, M. M. Warburg hadn’t been able to remit interest payments on the 1931 loan that Paul and Felix made to rescue the bank. This Kara Corporation money was idly accumulating in Germany. Bettina instructed Eric to use it for two- to three-hundred-reichsmark advances each to psychiatrists and others who lacked the means to emigrate. The recipients were also provided with three thousand dollars to pay for visa applications in America on the proviso that they later replenish the revolving fund. In this way, Bettina and Eric quietly saved 154 people, many prominent in the psychiatric world. Bettina never publicized this heroic work and before her death destroyed all documents related to the effort, save a simple list of beneficiaries.39

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  The Warburgs’ sp
ecial influence during the Third Reich depended upon their matchless access to government officials, a situation threatened on February 10, 1936, when the Gestapo, under Heinrich Himmler, emerged as supreme police organ of the Third Reich. It soon promulgated rules designed to isolate Jews by outlawing meetings between Jewish leaders and Nazi officials that were not initiated by the government. Max suggested that the Joint send an American to Germany who might function as a go-between for the Jews with the Nazi bureaucracy.

  Dr. Bernhard Kahn in Paris was dubious, believing such an American would quickly be immobilized in Germany. Nevertheless, Felix and Paul Baerwald crafted a plan that would stay secret until 1960. A former Pennsylvania labor secretary named Peter Glick volunteered to serve as the German liaison. When Felix and Baerwald learned Glick had five children, they rejected him for such a hazardous assignment. Peter suggested his brother David instead. A Pittsburgh lawyer fluent in German, David Glick was prepared to assume the extreme risks associated with the mission. He knew that as soon as he arrived in Berlin, he would be taken in for questioning by the secret police. “I suggested to Messieurs Warburg and Baerwald that my first objective should be to meet with Mr. Himmler, who was the chief and Head of the Gestapo.”40