Paul Warburg

Paul Moritz Warburg
Born	Hamburg, Germany
Died	24 January 1932(1932-01-24) (aged 63) New York City, U.S.
Occupation	Investment banker
Years active	1889–1932
Known for	Second vice chairman of the Federal Reserve (1916–1918); advocate for creation of the U.S. central bank system

Paul Moritz Warburg (born August 10, 1868 – died January 24, 1932) was a German-born American investment banker who held the position of the second vice chairman of the Federal Reserve from 1916 until 1918. As one of the inaugural members appointed to the Federal Reserve Board in 1914, he played a pivotal role in advocating for the creation of the United States’ central bank system.

Early life

Originating from Hamburg, Germany, Warburg was part of the distinguished Warburg family, a Jewish banking lineage with roots tracing back to Venice. His parents were Moritz Warburg and Charlotte Esther (Oppenheim) Warburg. After completing his education at the Realgymnasium in Hamburg in 1886, he acquired practical business knowledge working with Simon Hauer, a local importer and exporter. Subsequently, he held positions at Samuel Montagu & Co. in London between 1889 and 1890, followed by Banque Russe pour le Commerce Etranger in Paris from 1890 to 1891.

In 1891, Warburg entered his family’s banking firm, M. M. Warburg & Co., originally established in 1798 by his great-grandfather. After undertaking a brief global tour, he became a partner in the firm by 1895.

On October 1, 1895, he married Nina J. Loeb, daughter of Solomon Loeb, who co-founded the New York investment company Kuhn, Loeb & Co.. The couple had two children: James Paul Warburg and Bettina Warburg Grimson.

Career

Following numerous business visits to New York, Warburg relocated there permanently in 1902 to join Kuhn, Loeb & Co. as a partner, where Jacob Schiff served as senior partner. His brother Felix’s marriage to Schiff’s daughter further strengthened their ties to the firm. Although maintaining his partnership in the Hamburg family bank, Warburg became a naturalized U.S. citizen in 1911 and was affiliated with Temple Emanu-El in New York City.

In 1910, Warburg was elected to Wells Fargo & Company’s board of directors but stepped down in 1914 upon his appointment to the Federal Reserve Board; Jacob Schiff then took his place on the Wells Fargo board.

Recognized as a principal proponent for central banking within America, Warburg was widely acknowledged as the driving force behind establishing the nation’s central bank system. Russell Leffingwell credited him with introducing contemporary European banking concepts during an era when many were preoccupied with free silver debates. Harold Kellock of The Century Magazine described him as "the mildest-mannered man that ever personally conducted a revolution," noting his success in implementing transformative ideas nationwide.

Shortly after arriving in New York, Warburg composed an analysis criticizing the fragmented nature of American banking but postponed its release due to language concerns. Encouraged by Columbia University professor Edwin Seligman, he published "Defects and Needs of our Banking System" in 1907. In this work, he argued that America lagged behind Europe because it lacked a central institution capable of rediscounting bank notes and providing liquidity support. He advocated for a central bank modeled after the Reichsbank to facilitate reserve sharing among banks.

Warburg’s proposals gained momentum following the Panic of 1907, prompting him to publish additional articles outlining plans for an adapted central bank and suggesting a United Reserve Bank for the United States. He also delivered presentations at conferences organized by Columbia University and other institutions.

By 1908, Senator Nelson Aldrich sought Warburg’s expertise on currency reform matters. Warburg engaged in several consultations with the National Monetary Commission and participated in the confidential 1910 Jekyll Island meeting where a draft bill for a central bank was formulated—this draft closely mirrored Warburg’s concepts.

Although the Aldrich Bill failed to become law, its successor—the Owen–Glass Bill—reflected much of its content. Analysts observe that New York bankers achieved most objectives except direct control over policy. Warburg generally expressed approval of the Owen–Glass Bill as bipartisan endorsement of reforms he had long supported.

In 1919, Warburg established and chaired the American Acceptance Council. He later organized and led the International Acceptance Bank of New York starting in 1921; this institution was acquired by Bank of the Manhattan Company in 1929, after which Warburg assumed chairmanship of the combined organization.

Warburg joined the founding board of the Council on Foreign Relations in 1921 and remained active until his passing. Between 1921 and 1926, he served on the Federal Reserve Board advisory council and held its chairmanship from 1924 to 1926. Additionally, he was trustee of the Institute of Economics (established in 1922) and subsequently continued this role after its merger with the Brookings Institution.

On March 8, 1929, Warburg issued a warning about excessive stock market speculation posing severe risks—a prescient caution preceding that year’s Wall Street Crash.

He also championed German–American cultural relations by helping establish the Carl Schurz Memorial Foundation in 1930 and serving as its treasurer until his death. His contributions included supporting his brother Aby Warburg’s Hamburg library collection, donating an American House hall to Heidelberg University, and backing Berlin’s Academy of Political Science.

Death

Paul Warburg passed away at his residence in New York City on January 24, 1932. He was laid to rest at Sleepy Hollow Cemetery located in Sleepy Hollow, New York. At the time of his passing, he held the position of chairman at the Manhattan Company and served on the boards of several prominent organizations, including 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 based in Amsterdam.

Legacy

The figure of Oliver "Daddy" Warbucks from the Little Orphan Annie comic strip is said to have been modeled after Warburg’s life and persona. In recognition of his impact, Harvard University established the Paul M. Warburg Professorship in Economics.

Family

His son, James Warburg (1896–1969), acted as a financial advisor to President Franklin D. Roosevelt during the early years of his administration. According to personal accounts, Roosevelt's son resided on the country estate owned by Felix Warburg in New York.

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. [1]
• Paul Warburg's Crusade to Establish a Central Bank in the United States
• Statements and Speeches of Paul M. Warburg