Paul Warburg
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Paul Moritz Warburg (August 10, 1868 – January 24, 1932) was a German-born American
investment banker Investment banking pertains to certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated with ...
who served as the 2nd
Vice Chair of the Federal Reserve The vice chair of the Board of Governors of the Federal Reserve System is the second-highest officer of the Federal Reserve, after the chair of the Federal Reserve. In the absence of the chair, the vice chair presides over the meetings Board of ...
from 1916 to 1918. Prior to his term as vice chairman, Warburg appointed as a member of the
Federal Reserve Board of Governors The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mon ...
since 1914. He was an early advocate of the US central bank system.


Early life

Warburg was born in
Hamburg (male), (female) en, Hamburger(s), Hamburgian(s) , timezone1 = Central (CET) , utc_offset1 = +1 , timezone1_DST = Central (CEST) , utc_offset1_DST = +2 , postal ...
,
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
, to the
Warburg family The Warburg family is a prominent German and American banking family of German Jewish and originally Venetian Jewish descent, noted for their varied accomplishments in biochemistry, botany, political activism, economics, investment banking, law, ...
, a Jewish banking dynasty with origins in Venice. His parents were Moritz and Charlotte Esther (Oppenheim) Warburg. After graduating from the
Realgymnasium ''Gymnasium'' (; German plural: ''Gymnasien''), in the German education system, is the most advanced and highest of the three types of German secondary schools, the others being ''Hauptschule'' (lowest) and ''Realschule'' (middle). ''Gymnas ...
in Hamburg in 1886, he entered the employ of Simon Hauer, a Hamburg importer and exporter, to learn the fundamentals of business practice. He similarly worked for Samuel Montague & Company, bankers, in London in 1889–90, and the Banque Russe pour le Commerce Etranger in Paris in 1890–91.''Dictionary of American Biography'', Vol. XIX, p. 412–13. New York: Charles Scribner's Sons, 1936.''National Cyclopaedia of American Biography'', Vol. XXVI, p. 151–52. New York: James T. White & Company, 1937. In 1891, Warburg entered the office of the family banking firm of M. M. Warburg & Co., which had been founded in 1798 by his great-grandfather. He interrupted work there to undertake a world tour during the winter of 1891–92. Warburg was admitted to a partnership in the family firm in 1895. On October 1, 1895, Warburg was married in New York City to Nina J. Loeb, daughter of
Solomon Loeb Solomon Loeb (June 29, 1828 – December 12, 1903) was a German-born American banker and businessman. He was a merchant in textiles and later a banker with Kuhn, Loeb & Co. Biography His father, a devout Jew, had been a small corn- and wine ...
, a founder of the New York investment firm of Kuhn, Loeb & Co. The Warburgs were the parents of a son, James Paul Warburg, and a daughter, Bettina Warburg Grimson.


Career

Although a major factor in German finance, after frequent business trips to New York Warburg settled there in 1902 as a partner in Kuhn, Loeb & Co., where the influential
Jacob Schiff Jacob (; ; ar, يَعْقُوب, Yaʿqūb; gr, Ἰακώβ, Iakṓb), later given the name Israel, is regarded as a patriarch of the Israelites and is an important figure in Abrahamic religions, such as Judaism, Christianity, and Islam. Ja ...
was senior partner. Paul's brother, Felix, was married to Schiff's daughter and both brothers would be involved with Kuhn, Loeb over the years, making partner after marrying into the firms family members.. Warburg remained a partner in the family firm in Hamburg, but he became a naturalized American citizen in 1911. He was a member of Temple Emanu-El in New York City. Warburg was elected a director of
Wells Fargo & Company Wells Fargo & Company is an American multinational financial services company with corporate headquarters in San Francisco, California; operational headquarters in Manhattan; and managerial offices throughout the United States and intern ...
in February 1910. He resigned in September 1914 following his appointment to the
Federal Reserve Board The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mon ...
, and Jacob Schiff was elected to his seat on the Wells Fargo board. Warburg became known as a persuasive advocate of central banking in America. Many of his contemporaries regarded him as the chief driving force behind the establishment of America's central bank.
Russell Leffingwell Russell Cornell Leffingwell (September 10, 1878 – October 2, 1960) was an American banker who led the Council on Foreign Relations from 1944 until 1953. From 1944 to 1946, he served as president of the Council, and from 1946 to 1953, he served a ...
, who served variously as the Assistant Secretary of the Treasury, head of the
Council on Foreign Relations The Council on Foreign Relations (CFR) is an American think tank A think tank, or policy institute, is a research institute that performs research and advocacy concerning topics such as social policy, political strategy, economics, mi ...
, and chairman of J.P. Morgan, credited Warburg with doing "yeoman's service in preaching the doctrines and practices of modern entralEuropean banking" while all other "friends of sound money" were so occupied with battling against the free silver movement that they gave scant thought to the need for currency reform. Harold Kellock of ''
The Century Magazine ''The Century Magazine'' was an illustrated monthly magazine first published in the United States in 1881 by The Century Company of New York City, which had been bought in that year by Roswell Smith and renamed by him after the Century Associatio ...
'', characterized Warburg as "the mildest-mannered man that ever personally conducted a revolution". This shy and sensitive man, Kellock continued, "imposed his idea on a nation of a hundred million people". Upon arriving in New York in 1902, Warburg drafted a critique of the American banking system, which he thought was insufficiently centralized. Self-conscious of his imperfect English and his status as a newcomer, he left his paper to sit in his desk for four years.Kellock, 81. He overcame his reticence in 1906 after attending a dinner party hosted by Professor
Edwin Seligman Edwin Robert Anderson Seligman (1861–1939), was an American economist who spent his entire academic career at Columbia University in New York City. Seligman is best remembered for his pioneering work involving taxation and public finance. His p ...
of
Columbia University Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
. Seligman, an advocate of central banking, was impressed with Warburg's extensive knowledge of the financial system and reportedly told him that "It's your duty to get your ideas before the country." Shortly thereafter, the ''New York Times'' published Warburg's "Defects and Needs of our Banking System". Concerning its financial system, he argued, "The United States is in fact at about the same point that had been reached by Europe at the time of the Medicis, and by Asia, in all likelihood, at the time of Hammurabi." The chief reason for this lagging state of development was the lack of a central institution that could rediscount bank promissory notes to facilitate the exchange of promises of future payment for cash. A central bank constructed along the lines of the
Reichsbank The ''Reichsbank'' (; 'Bank of the Reich, Bank of the Realm') was the central bank of the German Reich from 1876 until 1945. History until 1933 The Reichsbank was founded on 1 January 1876, shortly after the establishment of the German Empi ...
could fulfill this role, according to Warburg, and thus make it easier for the excess reserves of one bank to be used to bolster the insufficient reserves of another. Warburg's ideas gained a wider hearing after the panic of 1907 engulfed the country’s financial system, and he subsequently published two more articles elaborating and defending his plans, "A Plan for a Modified Central Bank" and "A United Reserve Bank of the United States". At the same time, he appeared at conferences hosted by Columbia University, the American Economic Society, and the Academy of Political Science.Kellock, 83. By 1908, Warburg had gained enough recognition that
Nelson Aldrich Nelson Wilmarth Aldrich (/ ˈɑldɹɪt͡ʃ/; November 6, 1841 – April 16, 1915) was a prominent American politician and a leader of the Republican Party in the United States Senate, where he represented Rhode Island from 1881 to 1911. By the ...
, the Republican senator from Rhode Island, consulted him for advice on currency reform. The
National Monetary Commission The National Monetary Commission was a U.S. congressional commission created by the Aldrich–Vreeland Act of 1908. After the Panic of 1907, the Commission studied the banking laws of the United States, and the leading countries of Europe. The ...
, which Aldrich chaired, subsequently interviewed Warburg on multiple occasions. In 1910, Aldrich invited Warburg to attend a secret meeting with other influential bankers on Jekyll Island in Georgia, where the draft of a bill to establish a central bank was worked out.G. Edward Griffin, ''The Creature From Jekyll Island'' (1994, 002/4, (1994 pp. 3-23, 441-443, 461), American Opinion Publishing, Inc., Appleton WI/American Media, Westlake Village CA, (2002/4 ed. This bill was close enough to the outline that he adumbrated in his three articles that Harold Kellock could write, "Five years from the time Mr. Warburg had begun his single-handed crusade, his ideas were placed before Congress in the form of the Aldrich Bill." The Aldrich Bill, however, did not become the
Federal Reserve Act The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Panic ...
. The Owen–Glass Bill did. But modern scholars such as Elmus Wicker, Murray Rothbard, William Greider, and Griffin believe that the Aldrich and Owen–Glass bills are so similar that there is little doubt the latter plan was heavily influenced by the former. "The New York bankers got all they wanted", Wicker argues, "with the single exception of banker control. ... The Federal Reserve Act owes as much, if not more, to Senator Aldrich as it does to Representative Glass." Despite some minor quibbles, Warburg himself largely celebrated the Owen–Glass Bill in the ''
North American Review The ''North American Review'' (NAR) was the first literary magazine in the United States. It was founded in Boston in 1815 by journalist Nathan Hale and others. It was published continuously until 1940, after which it was inactive until revived a ...
''. It was "a source of great satisfaction", he wrote, that both the Democratic and Republican parties had come to embrace the type of plan for which reformers like him had been campaigning.Paul Warburg, "The Owen–Glass Bill as Submitted to the Democratic Caucus: Some criticisms and Suggestions", ''North American Review'' (October 1913), pp. 527-555. In 1919, he founded and became first chairman of the American Acceptance Council. He organized and became the first chairman of the International Acceptance Bank of New York in 1921. International Acceptance was acquired by the
Bank of the Manhattan Company The Manhattan Company was a New York bank and holding company established on September 1, 1799. The company merged with Chase National Bank in 1955 to form the Chase Manhattan Bank. It is the oldest of the predecessor institutions that eventually ...
in 1929, with Warburg becoming chairman of the combined organization. He became a director of the Council on Foreign Relations at its founding in 1921, remaining on the board until his death. From 1921 to 1926 Warburg was a member of the advisory council of Federal Reserve Board, serving as president of the advisory council in 1924–26. He was also a trustee of the Institute of Economics, founded in 1922; when it was merged into the
Brookings Institution The Brookings Institution, often stylized as simply Brookings, is an American research group founded in 1916. Located on Think Tank Row in Washington, D.C., the organization conducts research and education in the social sciences, primarily in ec ...
in 1927, he became a trustee of the latter, serving until his death. On March 8, 1929, Warburg warned of the disaster threatened by the wild stock speculation then rampant in the United States, foreshadowing
Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange colla ...
which occurred in October of that year. He encouraged German–American cultural cooperation, helping found the Carl Schurz Memorial Foundation in 1930 and serving as its treasurer from May 1930 until his death. He also made substantial contributions to the Warburg Library in Hamburg, founded by his brother, the art historian
Aby Warburg Aby Moritz Warburg, better known as Aby Warburg, (June 13, 1866 – October 26, 1929) was a German art historian and cultural theorist who founded the Kulturwissenschaftliche Bibliothek Warburg (Library for Cultural Studies), a private library, ...
; he gave a hall known as the American House to
Heidelberg University } Heidelberg University, officially the Ruprecht Karl University of Heidelberg, (german: Ruprecht-Karls-Universität Heidelberg; la, Universitas Ruperto Carola Heidelbergensis) is a public research university in Heidelberg, Baden-Württemberg, ...
; and he made generous donations to the Academy of Political Science in Berlin.


Death

Warburg died at his home in New York City on January 24, 1932, and was buried in
Sleepy Hollow Cemetery Sleepy Hollow Cemetery in Sleepy Hollow, New York, is the final resting place of numerous famous figures, including Washington Irving, whose 1820 short story "The Legend of Sleepy Hollow" is set in the adjacent burying ground at the Old Dutch C ...
in
Sleepy Hollow, New York Sleepy Hollow is a village in the town of Mount Pleasant, in Westchester County, New York, United States. The village is located on the east bank of the Hudson River, about north of New York City, and is served by the Philipse Manor stop on ...
. At the time of his death, he was chairman of the Manhattan Company and a director of the Bank of Manhattan Trust Company, Farmers Loan and Trust Company of New York, First National Bank of Boston, Baltimore & Ohio Railroad, Union Pacific Railroad, Los Angeles & Salt Lake Railroad, Western Union Telegraph Company, American I.G. Chemical Company, Agfa Ansco Corporation, and Warburg & Company of Amsterdam.


Legacy

The cartoon character, Oliver "Daddy" Warbucks in the ''
Little Orphan Annie ''Little Orphan Annie'' is a daily American comic strip created by Harold Gray and syndicated by the Tribune Media Services. The strip took its name from the 1885 poem "Little Orphant Annie" by James Whitcomb Riley, and it made its debut on Aug ...
'' series, was purportedly inspired by Warburg's life and times. The Paul M. Warburg chair in Economics at
Harvard University Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
was named in his honor.


Family

His son,
James Warburg James Paul Warburg (August 18, 1896 – June 3, 1969) was a German-born American banker. He was well known for being the financial adviser to Franklin D. Roosevelt. His father was banker Paul Warburg, member of the Warburg family and "father" of ...
(1896–1969) was a financial adviser to
Franklin D. Roosevelt Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
in the first years of his presidency, and according to his memoirs, FDR's son, James, lived in a cottage house located on uncle Felix Warburg's New York country estate.


Notes


References

* Chernow, Ron. ''The Warburgs''. New York: Random House, 1993 * Kuhn, Loeb & Co. ''Kuhn, Loeb & Co. A Century of Investment Banking''. New York: Privately printed, 1967 * Kuhn, Loeb & Co. ''Kuhn Loeb & Co. Investment Banking Through Four Generations''. New York: Privately printed, 1955 * Warburg, Paul M. ''The Federal Reserve System''. New York: The Macmillan Company, 1930.


External links

* Paul Warburg papers (MS 535). Manuscripts and Archives


Paul Warburg's Crusade to Establish a Central Bank in the United StatesStatements and Speeches of Paul M. Warburg
* {{DEFAULTSORT:Warburg, Paul 1868 births 1932 deaths American bankers American people of German-Jewish descent Burials at Sleepy Hollow Cemetery Businesspeople from New York City German emigrants to the United States 19th-century German Jews History of the Federal Reserve System Loeb family Vice Chairs of the Federal Reserve
Paul Warburg Paul Moritz Warburg (August 10, 1868 – January 24, 1932) was a German-born American investment banker who served as the 2nd Vice Chair of the Federal Reserve from 1916 to 1918. Prior to his term as vice chairman, Warburg appointed as a member o ...
Wells Fargo Woodrow Wilson administration personnel