The Warburgs

by Ron Chernow

  When the New York Fed finally hiked interest rates in August 1929, Paul thought it had acted at least half a year too late. He seemed so enervated by worry that Max urged him to take two weeks of rest. When the crash came, Paul didn’t gloat or experience Schadenfreude. Saddened by a sense of human futility, he wondered why people had been too greedy to avert certain doom. His sole consolation was that the banking system, backed by the Fed, survived the crash without a major loss of depositor confidence. The Warburgs saw firsthand legions of ruined investors. On two occasions, Jimmy watched distraught investors leap from upper-story windows, and Felix was besieged by desperate men. He did save several of them. Ironically, the 1929 crash, in a roundabout way, would claim Paul as a victim, too, for it set in motion a sequence of events that would topple the German banking system and force Paul to squander his fortune to save the family honor.

  Even as Paul bemoaned Wall Street gambling, he was oddly tolerant toward Max, who had expanded too rapidly with American credits Paul had placed at his disposal. Max treated the fortunes of Paul and Felix as a backup bank reserve. Even before the crash, Jimmy warned his father that this imaginary safety net only tempted Max into risky ventures. He also thought Max didn’t direct enough business to them in New York. “I tried to make it clear without being too explicit that my father bore a large share of the blame for the overextension of the Hamburg firm’s engagements,” Jimmy said.15

  Why did Paul let down his guard? From the time he was a boy, Paul had revered Max, admiring his spirit and charm. Max took an easy joy in life that the chronically depressed Paul must have envied. Another important factor made Paul and Felix defer to him. Max believed—and his brothers concurred—that he had maintained the family firm while they went off to make a mint in America. This gave Max some moral leverage in soliciting their help. Paul felt so keenly the need to help Max that he resented it whenever Jimmy urged restraint. We must also remember that the Famous Five had drawn tremendous strength from a solidarity rarely found among such ambitious, competitive brothers.

  Max confessed that he didn’t foresee the meaning of the crash for Germany. Dependent upon foreign, especially American, credit in the 1920s, the German economy was endangered by its withdrawal. Its stock markets plunged, its cities scrounged for cash, and Berlin turned to a bank consortium that included M. M. Warburg for an advance. The crash would be a turning point for Max and start an unending sequence of misfortunes. By coincidence, it came during a month that also saw the death of Aby and of Gustav Stresemann, the German foreign minister, a personal hero whom Max regarded as the last politician who might have checked Germany’s decline. He thought the moderate Stresemann had been worn down by petty political infighting. Troubles, as always, arrived in battalions.

  —

  Panina had two strapping, Americanized children—Jimmy and Bettina—who were as sociable, spirited, and daring as their parents were cautious and shy. Born in Hamburg, they yet had an American sense of opportunity. Angry, rebellious, they had more fire and intelligence than Felix’s children. Brother and sister would turn their back on Jewish tradition as passé, although both would invoke a liberal, egalitarian tradition rooted in Judaic thought. Among children of the Famous Five, Bettina and Jimmy would distance themselves most from a sometimes claustrophobic family.

  As a child, Bettina had dark, shiny hair that had made her look like a young Apache. She developed into an emancipated young woman with an athletic figure and photogenic smile. She reacted against an upbringing so pampered that her governess brushed her teeth. Going to the other extreme, she developed a strong will, an indomitable craving for independence, and would never tell Nina where she was going. She had a highly unusual résumé for a young Jewish woman. After Brearley, she went to Bryn Mawr, the first young woman in the family to go away to college. Like Jimmy, she gloried in her audacious nonconformity.

  Affected by the schizophrenia of her favorite uncles, Aby and Jim Loeb, she became a psychiatrist despite her parents’ dismay and took pride in her trail-blazing career. At the time, psychiatry was considered suitable only for muscular males who could handle hefty patients in padded cells. Bettina went to the Cornell University Medical Center, followed by the National Hospital for Nervous Diseases in London. She was liberated in both her social and professional life. As she recalled of her London sojourn, “All eyes were popping out of the Bloomsbury boardinghouse windows when that American in evening dress was called for and returned at shocking hours by gentlemen in large automobiles.”16 Back in the United States, she worked at the Boston Psychopathic Hospital, Harvard’s pathology lab, and at various mental hospitals before starting a private practice at the New York Psychoanalytic Institute.

  Bettina always flaunted her iconoclasm and defiance toward her stuffy upbringing. As she later said, “Nice Jewish girls ‘came out.’ They did not go to college, only ‘bluestockings’ did that, and they specialized in being unattractive. Girls brought up in big houses with lots of servants certainly didn’t go to Medical School, coming home reeking of formaldehyde from the anatomy lab. Neither did they—oh supreme frightening horror—learn to catch babies in Harlem.”17 (This was apparently how she referred to delivering babies.) Bettina adored her father, but not Nina, whom she saw as outwardly sweet and generous but always demanding something in return; everything came with strings attached so that Nina could stay in control. Jimmy also thought his mother frequently behaved in a spoiled, manipulative manner beneath her lovely surface.

  The identification with her father gave a clinical, rational cast to Bettina’s mind. Destined to became a prominent psychoanalyst, she would display a cool, abstract, unsentimental approach to life. A doctrinaire Freudian, she would issue ex cathedra pronouncements, giving people the uncomfortable sense that she secretly analyzed them. She cast a cold eye on her family. Later, she drew a chart in which she divided them into psychiatric categories, showing how the Loebs were long on manic-depressives and the Warburgs on schizophrenics. Yet a coquettish side also lay underneath, a by-product of her relationship with her father. In the midst of hardheaded talk with men, Bettina could suddenly flash a girlish, boldly inviting smile.

  By modeling herself after men, Bettina competed with Jimmy more than a sister ordinarily would have with a handsome older brother. She seemed both fascinated and infuriated by him. Even as a little girl, she had a large doll named Paul that she would dress up every day in the clothes that Jimmy wore. Bettina knew Jimmy hated this but she kept on doing it. The incident would capture their lifelong ambivalence toward each other. It also expressed Bettina’s adoration of her father.

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  When Frieda and Nina played that eternal game of Jewish mothers called “Who has the most brilliant son?” Nina fielded one of the foremost candidates of modern times. She pushed her son Jimmy relentlessly: If he got 99 percent on a test, she asked why he hadn’t scored 100. For the American Warburgs, the educational system was the most potent agent of assimilation, melting the old German-Jewish bonds. Frieda, Nina, and their daughters joined a tiny handful of Jewish girls at the Brearley School. Along with Felix’s sons, Jimmy attended the Middlesex School near Concord, Massachusetts. Located hard by the first battlefield of the American Revolution, it took only a small number of Jewish boys. Middlesex had been founded by Boston patricians and financed with money from the WASP investment bank of Lee, Higginson; it became a feeder school for Harvard. Studying in a town identified with Emerson, Thoreau, and Hawthorne made a lasting impression on Jimmy. “No boy can go to Middlesex without absorbing both American history and a certain amount of American culture,” he said.18

  At Middlesex, Jimmy achieved grades so astronomical that other boys bet on them in pools. A special Greek class was arranged to keep him busy. Middlesex students came mostly from several Christian denominations, and Sunday attendance at chapel was compulsory. The strict but liberal headmaster, Robert Winsor, was a Unitarian. Jimmy went to Middlesex after being bar mitzvahed by Rabbi Judah Magnes and, p
redictably, felt self-conscious about his religion. Like other Warburg children, he associated Judaism with the burning and sometimes rigid religiosity of Jacob Schiff. In the Unitarian faith, Jimmy professed to find an ethical code consistent with the wisdom he had absorbed from Rabbi Magnes.

  Jimmy would always feel terribly ambivalent about being Jewish and he absorbed contradictory messages from his parents. As a schoolboy in New York, Jimmy signed his initials, JW, on school papers. One day, a sadistic older classmate inserted an E between the two letters. When Jimmy turned to Nina to explain such taunting, she responded in a way that betrayed anxiety instead of pride about being Jewish. She conceded that some people disliked Jews. “She said that because of this, a Jewish boy should always be very careful not to push himself forward,” Jimmy later wrote. “This puzzled me. It seemed like accepting some sort of second-class status.”19 Far from being meek, as Nina recommended, Jimmy would be defiantly assertive.

  By sending their sons to Middlesex, Friedaflix and Panina virtually guaranteed that they would socialize with non-Jews and marry outside the faith. Nonetheless, they were then dismayed when this happened. When Felix and Frieda deplored their children’s estrangement from their German-Jewish roots, Freddy, the eldest, retorted: “If you wanted us to stay locked in the Jewish community and be active solely in all their communal activities, you should have sent us to Horace Mann and Columbia instead of Middlesex and Harvard. Why should it surprise you that Bunker Hill means more to us than the days of the Old Testament?”20

  Jimmy would stray farthest and most determinedly from the fold. At Harvard, he excelled at everything, exchanging letters in Greek and Latin with uncle Jim Loeb and graduating magna cum laude in classics. After his marriage to the musical, non-Jewish Kay Swift, Jimmy clerked for the Metropolitan Bank of Washington and worked for the First National Bank of Boston, whose original charter petitioners included John Hancock. After his wartime feud with his father, he needed distance from Paul. Jimmy became an expert on textile financing for the Boston bank. Always a prolific writer, he cranked out booklets on financing wool, cotton, hides, and leather. He felt marked out for big things and approached life with a brash, instinctive confidence. In 1921, the new commerce secretary, Herbert Hoover, called him to Washington and asked if he would become assistant secretary of commerce—a junior Cabinet post for a twenty-five-year-old! Amazingly, Jimmy balked, asking what his duties would be. “Helping me,” said Hoover. “But what do you do?” Jimmy pursued. “You’ll find out if you take the job,” replied Hoover irritably.

  At once, Jimmy conceived a distaste for Hoover and the proposal. He discussed the offer with his father. Still smarting over his Washington come-uppance, Paul advised, “Don’t you touch that. Washington is a place that destroys people. You stay out of there.”21 Jimmy wrote to Hoover and declined the invitation. Later, he would be understandably puzzled by his own behavior. The incident set a pattern, the first of many occasions when Jimmy, from sheer hubris, would fritter away opportunities. The gods had so generously endowed him with talent that he lacked normal human caution about spurning offers. His supreme confidence could shade off into arrogance, blinding him to the limits of his own powers and fortune’s fickle nature.

  In writing to Hoover, Jimmy mentioned that he wanted to join his father’s new bank. One suspects that Paul made an attractive offer to counter Hoover’s. In late 1921, Jimmy and Kay moved to Riverside Drive so Jimmy could enter the IAB as a junior officer. For Jimmy, the overwhelming reason for becoming a banker was so that he could work beside his extraordinary father. A loving son, he respected Paul’s brilliance and his principled concern for world affairs. He enjoyed listening to him discourse about Keynes, Versailles, and the plight of Germany. Banking for Paul was never a sterile pursuit of money, but a very human activity saturated with political and social concerns.

  Jimmy had deeply divided feelings about his father and this made him feel guilty. He didn’t always see his father as a gentle, unassuming saint. We must recall that Jimmy worked with his father for years. On the job, Paul could be sharp and exacting, correcting his son with a suppressed pique that gave an edge to his words. Paul was a strict father and very sensitive to slights. One day after work, while riding uptown and chatting with his father, Jimmy turned to watch a fire engine go by. For twenty blocks, Paul kept a frigid silence until Jimmy finally asked what was wrong. “Well, if you can’t listen to what I’m saying there’s no point in my talking,” his father shot back.22

  As with Felix and his sons, a generational gap divided Paul from Jimmy. Paul was straitlaced, puritanical, and family-minded, while Jimmy had a wild, libertine streak. He wanted to venture beyond the “Our Crowd” ghetto of banking, Jewish philanthropy, and wealthy Jewish friends to dabble in art, high society, and sexual experimentation. The strain of generational change first appeared when Jimmy wrote serious poetry in college. Poetry had long been a Warburg pastime but only as an amateur exercise for family gatherings, with light verse the preferred, gentlemanly style. Nina didn’t want Jimmy to publish his poetry. The idea of it seemed ostentatious to her. When the Atlantic Monthly published his first sonnet, Jimmy didn’t tell her and when she heard about it from someone else, she was hurt. His parents’ cultural rigidity bothered Jimmy. A fresh, irreverent young man, he reflected the swinging, unconstrained spirit of the 1920s. He came to see his father as a priggish man of somewhat limited sympathies, who could be unforgiving toward those who didn’t share his values.

  Jimmy was the first American Warburg to flee the family, with its byzantine feuds and warring wings. His life was restless and unsettled. As he yearned for excitement, it did not take him long to make his first forays into the high life. As a young banking star, he was amassing a small fortune and had the money and style to lead an elegant life. In the mid-1920s, he bought and adjoined two town houses on East Seventieth Street, which he staffed with five servants; a chauffeur drove his three daughters to school. One day in 1924, Jimmy and Kay were riding horseback in Greenwich, Connecticut, when they came to a lovely, maple-shaded colonial house named Bydale. It had an old barn, a stone water tower, and a windmill. At the time, Connecticut was very Christian. Nevertheless, Jimmy and Kay bought Bydale and decorated it with Early American furniture, adding a tennis court, swimming pool, and stables. Eventually Jimmy increased the original twenty-five acres to eighty-two acres. He liked to ride one of his seven horses along the bridle paths before breakfast.

  This tycoon-cum-country squire life was only part of the story. Jimmy and Kay decorated their East Seventieth Street town house in sleek black and white and threw parties as wild and glamorous as the setting, with lots of heavy drinking and urbane people lounging by two back-to-back grand pianos. They were among the social darlings of the era, with Kay—vain, childish, witty, delightful—the beautiful flapper who reliably taught guests how to do the Charleston. She and Jimmy knew everybody: Fred and Adele Astaire, the New Yorker crowd at the Algonquin Round Table, Beatrice Lillie, Ring Lardner, Marshall Field, Averell Harriman, Dick Rodgers, Larry Hart, Robert E. Sherwood, Marc Connelly, and, most memorably, the Gershwin brothers. Jimmy was suddenly leading a double life. The sober banker by day, he played late-night poker with Harold Ross, Herbert Bayard Swope, and other literary figures. If Nina frowned on his poetry, well, Jimmy was spurred on by Franklin P. Adams, who had befriended Kay’s father.

  After the prudish Panina world, Jimmy faced constant temptation and often submitted to it. Women were smitten by him and he had a long list of conquests. Kay was a dazzling, effervescent personality. Encouraged by the prevailing social license, Kay and Jimmy had an open marriage and neither lacked for willing partners. It is hard not to see Jimmy’s behavior as a rebellion against Paul. Paul was so repressed that he thought one-piece female bathing suits indecent when they came into vogue after the war. His father, Jimmy said, believed “that a man should be grateful to his wife for fulfilling a carnal requirement, the existence of which was, on the whole, regrettable.”23
In one poem, Jimmy wrote of Paul’s “strong distrust/Of the experiments of reckless youth,” which signaled Paul’s attitude toward his bon vivant son.24

  This sexual license formed part of a larger revolt by Jimmy against his Jewish ancestry. The problem didn’t stem from Kay, who had many Jewish show-biz friends. Two of her three husbands would be Jewish. By contrast, Jimmy would have three non-Jewish wives and he gravitated to places such as Greenwich that had a WASP image. For all the surface glitter, the three Warburg girls—April, Andrea, and Kay—grew up in a cold, empty environment, for Jimmy and Kay were absorbed by their social lives. Jimmy avoided talk of religion with his daughters. One day at Brearley, at age eleven or twelve, Andrea learned from Florence Straus, another “Our Crowd” girl, that she was Jewish. She was stunned by this information.25

  In 1925, an irresistible but disruptive figure entered this rather fragile family circle: George Gershwin. The first time that Kay saw him performing his own music at a rehearsal, she thought how much this lithe, agile man resembled his music. Kay’s partner from the Edith Rubel Trio, cellist Marie Rosanoff, brought George and Ira along to a Warburg party. Kay was captivated by George’s vibrant personality and electrifying keyboard style. He made a memorable exit. Springing abruptly from the piano, he said, “I have to go to Europe,” then vanished.26 In late December, Kay met him again at a party in conductor Walter Damrosch’s apartment to celebrate the premiere of Concerto.

  Soon Gershwin was a frequent visitor at the Warburgs’ East Seventieth Street town house and even composed the Spanish Prelude there. Kay’s musical tastes began to shift. Before, she had been snobbish about show tunes. “I liked blues, spirituals, fast music, but not musical comedy.”27 Under Gershwin’s tutelage, she became an enthusiast for popular music and began writing songs. In 1927 Dick Rodgers hired her as a rehearsal pianist for A Connecticut Yankee and this completed the transition. Kay, in turn, helped Gerschwin with counterpoint and orchestration.