The Warburgs

by Ron Chernow

  Felix’s death shattered Max, who now believed he had hastened the death of both of his American brothers. In his bank’s report for 1937, he said of Felix: “Across the last years of his life fell a large shadow of concern for his family in Germany, and in particular, I must say, for me.”42 The words must have been painful to write. Perhaps from feelings of guilt, Max considered leaving Germany and even visited New York with Alice, but then returned to Hamburg.

  Felix was the last of a disappearing breed and an irreplaceable figure in Jewish charity. Nobody had equivalent style, prestige, or stature. As The New York Times observed, “Never has there been shown in our time a finer sense of the obligations of wealth than he put into his daily deeds of human sympathy.”43 Felix and Frieda had distributed thirteen million dollars to two hundred causes over the past fifteen years. Henceforth, Jewish philanthropy would shift from the paternalism of individual Jewish bankers to fund-raising bureaucracies, administered by professional staffs. As Felix predicted, the Jewish state would reduce the relative power of Diaspora Jews who had superintended the welfare of their communities.

  In his will, Felix had one last posthumous chance to exhibit his generosity. Thirty-five house servants, ranging from gardeners to chauffeurs, got bequests between one hundred and ten thousand dollars. Each of 125 Kuhn, Loeb employees got a check of two hundred to two thousand dollars, depending upon their length of service. The bulk of the money went to Felix’s five children, who divided the estate equally. Following an old-fashioned custom, Felix left ethical wills, advising each child as to the best charitable work to pursue.

  Shortly after Felix died, Frieda summoned her children for a meeting. She took Felix’s pet charities and parceled out responsibility for them among her children. Carola took health care; Freddy education for black children; Gerry music and the arts; Piggy civic duties; and Eddie Jewish philanthropy.

  Felix died at a moment when Eddie had grown disillusioned with his fast, forbidden, Bohemian world of art and ballet and wanted to return to his roots. Having already visited Palestine several times, he picked the Joint as his chief project and headed its 1938 fund-raising drive in New York and became its vice-chairman. For a time, Felix was succeeded as chairman by Paul Baerwald, a shy, modest, hard-working partner of Lazard Frères. Eddie would succeed him, carrying the Warburg banner into the post-World War II era. Already in 1938, Eddie assembled a committee to coordinate Joint activities around the world.

  Ironically, he would reign over the Joint while married to a Christian divorcée, Mary Whelan Currier, a pretty fashion editor for Vogue. Warburg sons now married stylishly slim American women, not the stout German ladies of old. Eddie and Mary were married in December 1939 in the apartment of her boss, Condé Nast. When Eddie stalled in introducing Mary to his mother, Frieda knew it. “I deeply resent the fact that I should have been the last one in the family to meet Mary,” she told Eddie. Her agile son retorted, “Yes, I know; but Ma, you don’t meet the champion until the finals.”44 Frieda knew she had lost the battle to preserve her family’s Jewish identity. Instead of fighting it, she chose to retain her children’s love over rigid adherence to doctrine. Resigned to her fate, Frieda laid out her best jewelry on two card tables and asked Eddie to pick a ring and brooch for Mary. “Mary is not going to sneak into the family,” she stated. Frieda did everything to make Mary feel welcome, even telling her privately that in marrying a Jewish man, she might now face certain restrictions, such as booking hotels. Mary replied that she didn’t like hotels anyway.45

  On the eve of the wedding, Frieda gathered the family one last time in the large, tapestry-hung dining room at 1109 Fifth Avenue. It was a farewell to the ornate mansion as well as to Eddie’s bachelorhood. Everybody wore evening clothes and ceremoniously toasted the newlyweds. Freddy, the family wag, wrote a poem for the occasion, notable for its sophisticated wit and hard, cutting edge. It warned Mary not to expect fidelity from any Warburg male: “Some stay married months, some weeks/But all in all their record reeks.… The Boys, except for Uncle Max/Are apt to be a wee bit lax.…”46

  Frieda hadn’t really ventured outside the “Our Crowd” world of wealth and comfort. After Felix died, she took her first faltering steps alone. She jousted with Weizmann, warning him in 1938 that a small Jewish state would destroy twenty years of effort in Palestine.47 The Zionists resisted vigorously her effort to replace Felix in the Jewish Agency. She became honorary president of the American Friends of the Hebrew University and honorary chair of the Joint’s women’s division. Despite being the daughter of Jacob Schiff and the widow of Felix Warburg, she wasn’t sure of her own religious beliefs. After her brother, Morti, died, she had moaned to Dr. Magnes, “Judah, give me faith.”48 Yet she remained strongly bound to Jewish tradition. After reading a book by Rabbi Morris Lazaron called Common Ground, she wrote to thank him. “To be a good American, a loyal Jew, coupled with the spiritual uplift which Palestine has given me personally have often been confusing problems to me; and you have given me a better balanced point of view.”49 She remained true to the Panglossian Schiff-Loeb-Warburg conviction that one could simultaneously be true to one’s religion, one’s country, and oneself.

  —

  ——

  Lola and Max Warburg at her Wannsee home. (Warburg family, Hamburg)

  CHAPTER 32

  ––

  The Twilight Dynasty

  Even as Max helped people to flee and supervised preparation of an instructional booklet for emigrants, he tried to comfort those who stayed behind. He was a guiding spirit behind the Hamburg chapter of the Jewish Culture League (Der Jüdische Kulturbund), which sought to divert the community with cultural activities ranging from film to cabaret. It provided work nationwide for seventeen hundred Jewish actors, entertainers, and musicians hounded from their jobs. On January 9, 1938, in a last, misplaced expression of faith in the future of German Jewry, Max hammered in the mezzuzah to dedicate a new Jewish Community Center in Hamburg. With Jews banned from libraries, theaters, and social clubs, they were imprisoned in their homes, and Max hoped this center would buck up their courage. He made a substantial contribution to the complex, which contained a theater, restaurant, and two-hundred-seat lecture hall. The restaurant was also suitable for weddings and other festivities. This macabre place foreshadowed a nonexistent future and, appalled by the poor timing, many Hamburg Jews refused to contribute.

  In his inaugural speech at the center, Max said bravely, “We are responsible for the minds and spirits of our people, which are not to be crushed by the miseries and anxieties of every day.”1 His words bore no connection to the bleak reality. He described the new center as life-affirming—which required quite a stretch of the imagination. With Nazi monitors sitting in, he peppered his speech with patriotic touches. “Our exclusion from many fields of activity makes it impossible for us today to work for the country in which we were born and which we are ready to serve.”2 The major thrust of his talk was that Jews needed to reaffirm their religion against its savage negation. Regardless of whether a German Jew was observant or not, he concluded, “today he is a Jew, with all the emotional barriers, all the problems and cares, which the times inflict upon him!”3 The speech received extended applause.

  Even as Max oversaw plans for the cultural center, Goebbels dispatched a goon squad through German museums to cull the most blatant examples of “Bolshevik-Jewish” art for display at a special Munich “horror show.” When the “Degenerate Art” exhibition opened there in July 1937, it featured paintings by Beckmann, Chagall, Kandinsky, Kokoschka, Nolde, Grosz, and other artists reputedly perverted by the Jewish spirit. By the following spring, the Nazis had “cleansed” German museums of this “Jewish garbage,” confiscating sixteen thousand works.

  This crusade against modern art suggested to Eric Warburg a novel rescue plan. M. M. Warburg & Co. owed money to the Norske Creditbank in Oslo that it couldn’t repay because of the moratorium on foreign debt payments. Eric asked the Reich Economics Minist
ry whether the Warburg bank “as a German bank could pay back its foreign debts to an evil foreign bank with ‘degenerate art.’ They thought it a brilliant idea.”4 So, as if embarked on a furtive mission, he went to a cellar window of the Hamburg art museum, bought on the cheap several paintings by the Norwegian Expressionist Edvard Munch, then sent them to Oslo plastered with the permission stamps of the Third Reich.

  —

  All illusions would soon be over. The clock was now approaching midnight. Max had hitched his star to Dr. Schacht’s, a strategy that had at first paid off handsomely, enabling him to survive in a charmed sphere, protected by invisible barriers, if surrounded by enemies. But by 1936, this strategy miscarried as Schacht’s own power waned. The blustery, opinionated central banker caused offense on several fronts. He repeatedly grumbled to Hitler that Goebbels, Himmler, and other Nazis siphoned off foreign exchange for their own use. And for all his elastic morals, Dr. Schacht hewed to an old-fashioned banker’s faith in sound finance. Instead of favoring autarky, he wanted Germany to bolster its foreign exchange reserves through exports. He also thought economic growth had reached a point where further arms spending would be inflationary. For a long time, he violated his own principles and advanced rearmament through his Mefo-bills, barter deals, and exchange controls. But Hitler grew tired of his warnings about inflation. In consequence, Schacht slowly shed his strange glow of political immunity, and Hitler began to brush aside this pigheaded man who had outlived his usefulness.

  First Hitler gave supervision of foreign exchange and raw material matters to Schacht’s archrival, Göring, in April 1936. That same year, he unveiled a four-year plan to rearm Germany and again assigned the supervisory role to Göring. Right next door to Schacht’s Economics Ministry, Göring erected his own private bureaucracy, the Office for Raw and Synthetic Materials, manned by a staff of five hundred. It would become the tutelary spirit behind German war preparations and promulgate a militaristic policy of autarky instead of free trade.

  As Schacht’s power dipped, the Warburgs knew they might soon forfeit their government patronage. As Felix told the Joint in April 1937, “We had a few friends over there who were in high positions, but who are now losing their power.”5 On cue, German businesses took a tougher line with Jewish bankers. Word filtered down from Berlin that companies should purge their boards of Jews or lose government contracts; many were stampeded into dropping Jewish firms. The number of M. M. Warburg clients now skidded from almost 3,000 in 1936 to about 2,200 in 1937. Between 1936 and 1938, Warburg partners lost eighty board seats, which left them with a meager eighteen. Siegmund was expelled from two boards in 1937: the Hotel Atlantic (Hitler’s favorite haunt in Hamburg) and the Cameroun Railroad Company. In many cases, the Warburgs slipped in a substitute. Most often it was Dr. Rudolf Brinckmann, the highest-ranking non-Jewish employee, for whom this produced a stunning, overnight elevation in status—a fact the Warburgs would pointedly bring up later. Another substitute was Dr. Kurt Sieveking, who came from a distinguished legal family. In 1936, as a way of expressing solidarity with the Jews, he surrendered a lucrative law practice and took a job with M. M. Warburg. He was later a mayor of Hamburg.

  It rankled party zealots that Dr. Schacht had kept the Warburg bank in the Reich Loan Consortium, the august body that marketed government debt. By 1937, M. M. Warburg was one of just three Jewish banks left in the group; when the bank had joined the Consortium in 1905, one third of the fifty member banks had Jewish owners. Even though M. M. Warburg got a minute 1.5 percent sliver of consortium issues, the mere fact of its membership mattered greatly. “[Dr. Schacht] knew the importance in the matter of loan flotations of at least our firm and that of Mendelssohn,” said Max.6 The cachet was of immense practical value, for it signified that the firm still enjoyed some official favor. If bullied by Nazis, industrial companies could cite the Reich Loan Consortium as their justification for doing business with the Warburgs.

  So long as Dr. Schacht clung to power, Max believed he could survive. He often said that he wanted his firm to be the last one out of Germany, not the first. If his firm were liquidated, he feared that it would throw Jewish employees on the street and so dismay the entire Jewish community that it would flee—in retrospect, the optimal solution.

  Max Warburg’s destiny was determined on August 11, 1937, when Dr. Schacht met with Hitler on a sun-drenched terrace on the Obersalzberg. Schacht’s boisterous rows with Göring now threatened to disrupt the whole rearmament program. After Schacht adjourned with Hitler into his study, a furious dialogue ensued. The windows were open and guests on the terrace heard the two men raging at each other. Schacht was one of the few officials who dared to holler at Hitler. He now tendered his resignation, citing irreconcilable differences with Göring. When Hitler insisted that he reconsider, Schacht only said he would think about it. From then on, Schacht’s power eroded, and on September 5, 1937, he took a leave of absence from the Economics Ministry. The Ministry of Justice promulgated new rules that made it illegal for Nazi party members and government employees to patronize Jewish shops. The last Jewish war veterans were booted from the Reichsbank staff.

  That September, Dr. Schacht asked Max to visit him in Berlin. The somber central banker said, “I’m sorry, Mr. Warburg, but I can’t keep your firm in the [Reich Loan] Consortium any longer.” Max was jolted from his trance. At once he knew that he had lost his protective cover. “Then we’ll have to liquidate the firm,” Max said. Schacht replied that he had expected that.7 As Max recalled, “We said goodbye after, for thirty years, we had in all possible ways worked together.”8

  Back in Hamburg, Max found the city awash with rumors that M. M. Warburg wanted to liquidate—rumors he thought fanned by the Nazis. Along with Felix’s death in October, these events had a crushing impact upon him. When Schacht yielded the Economics Ministry to Göring in December (while keeping the Reichsbank presidency), the new nazified ministry told Max he had to transfer his bank to Aryans. Schacht’s downfall was a general disaster for Jewish bankers and businessmen, for his successors drastically curtailed the raw material and foreign exchange quotas that were essential for many Jewish firms.

  Schacht’s downfall came amid a huge wave of so-called Aryanizations that transformed the German economy. The Warburg bank, in fact, negotiated forced sales for many Jewish businesses, a ghoulish activity that became a staple of its work by 1937. As distinguished names in Jewish banking disappeared—Gebrüder Arnhold, S. Bleichröder, J. Dreyfus & Co., and nearly two hundred other private banks—their clients shifted to the Warburgs. As Max noted, “We more and more became the confidential bankers of the Jewish business world.”9 With many large Aryan banks financing these takeovers, Jewish businessmen trusted M. M. Warburg to broker their deals and the partners scoured the world for foreign firms that might purchase Jewish businesses with blocked mark accounts.

  These involuntary sales to predatory Aryans were conducted in an extremely tense atmosphere. Many Jewish businessmen awaited entry visas elsewhere and didn’t know whether they would escape. They sold their shares based on original cost, not market value, and received nothing for goodwill, which led to staggering capital losses of as much as 70 percent. The notaries handling these contracts needed to get approval from the local Nazi office. If the party thought the terms too generous, they were sent back for further negotiation. Once this legal extortion was completed, businessmen had to pay the 25 percent Flight Capital Tax. After more duties and punitive exchange rates, Jews might get 10–20 percent of the remaining pittance out of Germany. By the end, most Jewish businessmen were battered and broke. Outright theft might have been kinder. The Nazis rationalized these coercive moves by saying that the Jews had built their businesses through trickery and cheating. As German firms profited from the Aryanization drive, it implicated them more deeply in Nazi machinations, which would finally culminate with their exploitation of slave labor during the Holocaust.

  A fierce Aryanization battle raged over the pipe and bla
st furnace company controlled by the family of Lola’s husband, Rudolf Hahn, and his brother, Kurt. As Göring tried to expel Jewish owners from industries of strategic importance, especially in mining and metals, he found an enthusiastic supporter in Friedrich Flick, later a convicted war criminal. With a crude steel empire that by 1932 rivaled that of Krupp, Flick had lavishly subsidized Heinrich Himmler and the SS. By 1937, he sat atop the largest privately owned iron and steel combine in Germany.

  In searching for pig iron to feed his steel mills, Flick had long eyed a company known as Lübeck Blast Furnace (Hochofenwerk Lübeck). The largest firm in Thomas Mann’s native city, Lübeck, it provided gas and electricity. This conglomerate also owned a sprawling complex of blast furnaces on the Baltic Sea, a cement factory, a coking plant, and a copper foundry. Its owners were mostly Jewish: the Hahn Works (Hahnsche Werke), the Berlin metals trading house of Rawack & Grünfeld, and M. M. Warburg. This investment constituted the Warburgs’ only large-scale industrial participation, and Max was a managing director, Eric apprenticed there, and Fritz sat on its supervisory board.

  Early in the Third Reich, Lübeck Blast Furnace was forced to name several unwanted Aryans to its boards. One of them, a Nazi official named Dr. Werner Daitz, quietly notified the military in 1935 that the company had 90 percent Jewish or foreign ownership. Under the guise of national security, Daitz and Flick conspired to take over the firm. At first, the Hahns and the Warburgs stood firm, and Flick didn’t press the issue for he knew time would only make his Jewish prey more pliant.