by Ron Chernow
Siegmund had to cope with many forms of stress and again shouldered premature burdens. In 1933, his uncle, Otto Kaulla, a retired Stuttgart judge, was roughed up by Nazi hooligans. And Siegmund worried constantly about his fragile mother, Lucie, who struggled with the giant, thankless task of running the Uhenfels estate in southwest Germany. Amid his other concerns, Siegmund had to scrutinize her contracts for manure, feed, and the purchase of horses. In 1932, he learned that the estate’s longtime steward, Otto Sauter, had secretly run up crushing debts. When confronted, Sauter got abusive and sent Siegmund a threatening letter, saying he and his wife would no longer tolerate such treatment. He brazenly asked “in what manner you wish to pay us off.”29 Lucie was flabbergasted to discover the magnitude of Sauter’s loans. Siegmund tried to pacify the blackmailer with flattering letters, but the strategy didn’t work.
When Hitler came to power, Siegmund said he had never seen his mother so indignant.30 She was appalled that Germans had succumbed to such irrationality. The Nazis and the economic disaster on her estate sapped her physical and emotional strength. Siegmund had a Stuttgart lawyer, Dr. Peters, who kept him posted on events. In May 1933, Dr. Peters told Siegmund that tension between his mother and Sauter had acquired such animosity that she was contemplating legal action. At a Stuttgart hotel, Lucie poured out her heart to Peters, saying she felt abandoned by her son. “Frau W. then told me that her son had lost all interest in Uhenfels.”31 Dr. Peters believed Lucie’s shattered nerves needed rest. Though Sauter resigned, the new manager turned out to be a Nazi, providing more trials for the beleaguered Lucie. She must have then suffered some kind of breakdown, for she spent two months in 1935 and eight months in 1936 at the Sanatorium Hochberg in Urach. Given his devotion to his mother, Siegmund must have experienced terrible worry.
Siegmund later tended to glorify his decision to flee Germany as an impulsive act of clairvoyance, yet it was intermingled with many personal and business considerations. In March 1933, Siegmund went for a chat with Baron Konstantin von Neurath, the German foreign minister. A career diplomat, descended from a noble Swabian family, the conservative baron had been a neighbor of Siegmund’s and an avuncular figure in his life. Widely regarded as an opportunist and mediocrity, he was used as window-dressing to deceive governments abroad about Nazi intentions. With high respect for Siegmund’s intelligence, he valued the impressions that the young banker gleaned on trips abroad. When Siegmund entered his office, von Neurath greeted him cordially and asked if he had come to report on a foreign trip.
“On the contrary, Herr Minister. I’ve come to report on some happenings right here in Berlin which worry me a great deal—–Do you know that people are arrested in the middle of the night and sent to prison without any judicial procedure?”32 The smile left von Neurath’s face. The SS had arrested Jewish and Catholic friends of Siegmund under special warrants called Schutzhaftbefehle. Created for the purpose of protective custody during the Weimar years, the Nazis had converted them into terrifying instruments of preventive detention.
Von Neurath confessed to having heard such reports and admitted they were “most unpleasant,” but waved them away as the inevitable, messy aftermath of a revolution.33 Siegmund wouldn’t let him off the hook so easily. “It’s brutal injustice,” he said. “Despotism.”34 Squirming, von Neurath regretted such things. “But after all, what can I do?” he replied.35 Siegmund pointed out that because the Nazis had never formally abrogated the Weimar Constitution, President von Hindenburg still had emergency power to dismiss any chancellor who violated the constitution. If Hindenburg fired Hitler, Siegmund argued, the Reichswehr would back him. “And it is well known, Herr Minister, that you have the ear of the President.”36
The baron, who didn’t belong to the Nazi party until several years later, then made a chilling remark that forever altered Siegmund’s life. “I have to tell you, my young friend, that I myself am considered politically unreliable and must be very careful. Sorry, but there is nothing I can do. Good luck, and good-bye.”37 Siegmund later characterized this admission as a “hint of fate.” Thunderstruck, he went to his office and phoned Eva in a panic, saying, “If the Foreign Minister himself has a bad conscience and is afraid, I have no doubt what will happen here to all of us sooner or later.”38 Not long afterward, Siegmund had a visit from Edmund Stinnes, who had been tipped off to an impending law that would forbid all family members from leaving Germany at the same time. About to travel to America, Siegmund feared that Eva and the children might be trapped inside Germany. “If you don’t get out tonight,” he told Eva, “I’m not going to America.” On the spot she began to pack, planning to take the children to Sweden at once. Siegmund and Eva later gave their furniture to Edmund Stinnes for safekeeping.
Having surrendered her Swedish citizenship, Eva was petrified, since she knew it would be no easy matter to regain it. Yet her father, as head of the powerful Svenska Handelsbanken, arranged for her to see a high official who assisted her in retrieving her nationality. Because Eva’s mother had cancer, Sweden became a natural destination and she stayed there with the two children for a year. Her mother died in November 1933, three years after Eva herself contracted breast cancer.
Siegmund would allow the impression to linger that the von Neurath talk had actually occurred in March 1934—not 1933—and that he had thereupon immediately left for London with his family.39 The chronology was far more complicated. Siegmund was in the thick of reorganizing the Karstadt department store. With Eva and the children safely settled in Sweden, Siegmund sailed for New York in April and was met by Jimmy at the Brooklyn docks. On the eve of his departure from New York, the Warburgs threw a dinner for him that was marred by a panicky call. Siegmund’s Berlin assistant, Roesler, had traveled to Prague to call in safety. “He urged Siegmund not to come home … that the bolshevistic part of the Nazis was getting stronger by the minute.…”40 The Warburgs mulled over Siegmund’s next step, agreeing that he should stop in England and make sure, as Jimmy said, “that if he went back into Germany that he could get out again because it is essential for M.M.W. to have someone outside the country.”41
Jimmy’s comment hints at an unfolding Warburg strategy after Hitler rose to power. Max decided to shift the center of gravity to foreign fields, setting up small outposts in various countries to service Jewish clients as they fled Germany. “The German Jewish refugees in England, among whom there were many of our former Hamburg customers, began to reestablish their businesses there and asked us to supply credit,” Max said.42 At the Amsterdam meeting following the London economic conference, Jimmy had proposed forming a new company in Amsterdam with the Berliner Handels-Gesellschaft to be called the Dutch International Corporation. This financial holding company would provide an escape route for family members, enable the Warburgs to assist Jews to transfer money abroad, and help retain clients who had left. In June 1934, the deal was sealed in a fifty-fifty split between Warburg & Company and the Fürstenbergs of the Berliner Handels-Gesellschaft, and Siegmund personally conducted the negotiations with Hans Fürstenberg.43 Eva’s family, the Philipsons, and the Wallenbergs also took small stakes in the venture, according to Hans Fürstenberg.44
For years, Max had wondered whether to create a London office, only to be deterred by fear of offending the Rothschilds. Now Hitler removed any chance that the Rothschilds might misinterpret such a move, since many German-Jewish banks were dispatching young representatives to London. By August 1933, lawyers in London had drawn up papers for a new firm, and Max went to London to brief Lionel de Rothschild and the Barings. In September and October, Siegmund stayed at Brown’s Hotel to assist with the preparations. There were two companies under way. One was the Merchants and General Investment Corporation, to be wholly owned by Warburg & Co. of Amsterdam and Paul Kohn-Speyer. As Max told Felix in October 1933, “First and foremost Siegmund and Eric will manage the new company in London.”45 The ambitious Siegmund must have recoiled at the idea of sharing leadership with his cousin. Th
e other entity was The New Trading Company, which was controlled by the Dutch International Company, an entity owned by a cluster of Dutch banks, including Warburg & Co. in Amsterdam, plus banks owned by Hans Furstenberg, Edmund Stinnes, and Albert Voegler. Siegmund was only marginally involved with Merchants and would adopt New Trading as his primary vehicle.
Relations between Max and the temperamental Siegmund sharply deteriorated that year. In August, Max reprimanded him, “You left yesterday without saying good-bye, which caused great offense.”46 They were bound to clash. Both were empire-builders with charm, daring, vision, and a strong autocratic streak. Even in the 1920s, Siegmund felt ambivalent toward Max, finding him inventive but superficial and impressionable. In many ways, he preferred the more humane Fritz. Gradually, the conviction ripened in Siegmund that Max was a faux bonhomme, a name-dropper, his friend on the surface, but a tough and ruthless character underneath.
Having spent two years wading through the Karstadt wreckage, Siegmund must have foreseen a sorry future for M. M. Warburg. Even if the bank thrived in a post-Hitler era, he would have to share power with Eric. So when Siegmund had his blinding flash of insight with von Neurath and decided to emigrate, he could afford the courage of his clairvoyance. Max, in turn, must have felt betrayed by Siegmund’s unilateral decision. In January 1934, Siegmund completed the massive Karstadt reorganization, freeing him to leave.
In early May 1934, Siegmund had a heated debate with Uncle Max that summed up the excruciating choices faced by German Jews. Max had always been a fighter. When people asked whether their sons should go into business, he retorted, “Is your son a fighter—a fighter by nature?”47 He told Siegmund that Nazism was a transitory sickness and accused him of running away from the problem. Siegmund said that by staying in Hamburg, Max was raising false hopes and misleading people who didn’t have the Warburg money and resources to protect them. “Most of my family said, ‘You are mad, you are crazy, you are defeatist,” ’ Siegmund recalled of his decision to leave.48
On May 31, 1934, Siegmund immigrated to London. Only thirty-one, he carried many scars and postponed dreams into exile. He rejected joining Kuhn, Loeb, deciding he was too European to become a Yankee and probably knowing that he could more easily run his own show in London. In Britain, Jews had enjoyed freedom and prosperity since the early nineteenth century, and the City of London had always been guardedly receptive to them.
Later on, Siegmund liked to portray himself as a threadbare immigrant who lost everything in Germany and started afresh in London. As a New Yorker profile put it, “Although Siegmund George Warburg is a member of an old and powerful banking family on the Continent, he started just about from scratch when he and his wife arrived in England from Nazi Germany as refugees in 1934. His total worth at that time was less than five thousand pounds.”49
It doesn’t detract from Siegmund’s stunning achievement to state that he started life in London with signal advantages and a host of impressive connections. He and his family first lived in a mock-Georgian house in Westminster—not exactly a shabby part of town—and they had a butler and cook. Siegmund called on Montagu Norman, governor of the Bank of England, and they discussed a good school for Siegmund’s son, George.50 The Rothschilds and other City worthies received Siegmund, not as a lone, obscure refugee, but as ambassador of the distinguished banking house of M. M. Warburg & Co. (After arriving in London, Siegmund remained a Warburg partner in Hamburg and Amsterdam, retaining personal liability there.) Submitting a naturalization petition in 1934, Siegmund was sponsored by the barons of British finance—the Rothschilds, the Hambros, the Barings, and Lord Bearsted of M. Samuel. New Trading’s bills were countersigned by N. M. Rothschild, giving the nascent firm the finest interest rates.51 Siegmund’s most important contact was perhaps Paul Kohn-Speyer, the chairman of Brandeis, Goldschmidt, who had married Olga Warburg. Paul Kohn-Speyer provided Siegmund with small offices at his own headquarters on King William Street. He also took a small share in New Trading and financed many of Siegmund’s early transactions.
Once Siegmund had recuperated from a bout of jaundice, the New Trading Company was launched with four people on October 3, 1934. Siegmund liked to suggest that the company was his sole creation, but the little firm was created as much for Siegmund as by him and formed part of a broader Warburg plan to follow clients abroad. It started with modest capital of 120,000 pounds. Half of the share capital was held by the Dutch banks grouped under the umbrella of the Dutch International Corporation in Amsterdam. The very name “New Trading” betrayed its origins, since many Dutch and German banks were called trading companies in homage to their origins as overseas trading banks. To the more literal British, it seemed an odd and confusing name. In early 1935, Max told Hans Fürstenberg that the Warburgs would trim their investment in Dutch International, but boost their New Trading stake, citing Siegmund’s intense work for the latter as making that move logical.52
To penetrate the inbred world of the City, the Warburgs needed to furnish New Trading with a high-class British board. In searching for people who were socially top-drawer, the M. M. Warburg partners touted Harry Lucas as the best possible manager, with Siegmund as his “adviser.”53 There seems little doubt that Max intended to control both Siegmund and New Trading. In August 1934, his partner, Ernst Spiegelberg, told him that if they instructed Siegmund clearly about the London setup, “I believe that we can steer the London boat quite according to our wishes.”54 But the strong-willed Siegmund hadn’t fled Germany to serve as a foot soldier again for Max.
Holding a quarter of the share capital, the new manager, Harry Lucas, brought just the right tony profile to New Trading. An old Etonian who was also Jewish, he had trained at Rothschilds and managed the National Discount Company. The son of a fabulously wealthy Goldsmid heiress, he enticed his cousin, Dick Jessel, into becoming a New Trading investor. Jessel’s mother was also a Goldsmid sister, and his grandfather had been the Master of the Rolls. So Lucas and Jessel put Siegmund in the very midst of the Jewish nobility of England, giving his tiny firm a cachet out of all proportion to its size. Tall, thin, and very charming, Lucas waltzed in at ten o’clock each morning and never equaled Siegmund’s industry. But he tutored Siegmund in the manners and mores of the City and did the hiring for the firm.
The rest of the British facade was equally illustrious and branched out beyond the Jewish community. Sir Andrew McFadyean, a former high civil servant, would become chairman of New Trading. Closely associated with the Liberal party and a former private secretary to Prime Minister Stanley Baldwin, he had met Siegmund through his work on the Reparations Commission in Berlin. Sir Kenelm Lee Guinness of the brewing family, an ex-racing car driver who had started a spark plug company, also joined the board. Other luminaries included Gerald Coke of Rio Tinto and the self-made Sir Louis Sterling, the head of EMI.
In recounting his London start, Siegmund was wont to edit out his Hamburg relatives, as if he had sprung, full-blown, out of nowhere. It is hard to imagine that Siegmund could have assembled the distinguished London board without the Warburg and Fürstenberg money and connections. Nonetheless, the credit for building up the firm must go entirely to Siegmund. Despite the stigma of being an immigrant with a thick Swabian accent, he developed New Trading with a tremendous fighting spirit. His desire to succeed was perhaps a disguised form of revenge against fate, a determination not to let the Nazis ruin his life. Often exhausted and even sick from overwork, he had to resist Eva’s pleas to take a vacation.
One of Siegmund’s secrets was that he never sought refuge in false pride. He was scrappy, opportunistic, and unorthodox in finding clients. Having seen the German banking collapse firsthand, he focused on fee-based business with limited risk. To create the modern Denham film laboratories for producer Alexander Korda he assembled an investor group and interested the giant Prudential insurance company. It turned out that Korda overstated the potential of his new studios and disaster loomed. Siegmund grew so upset that he became ill, l
ost his voice, and couldn’t even talk on the telephone. He feared the Korda fiasco would ruin his reputation and by dint of hard work arranged a last-minute rescue along with Henry Grunfeld. “From that moment on,” he said, “I had established my reputation with the Pru.”55 (Other sources speculate that it was Pearl Assurance.) As a result of the debacle, however, New Trading sacrificed the support of two key financial angels, the German Brettauer brothers, who had, in one stroke, nearly doubled the firm’s capital.
Siegmund spent an enormous amount of time helping to extricate Jewish families and their money from Nazi Germany, often through barter or blocked-mark deals. He was active in refugee organizations. In 1934, Violet Bonham Carter, the daughter of former Prime Minister Herbert H. Asquith, spoke in the Royal Albert Hall about the plight of German-Jewish children. As a result of this speech, Siegmund became acquainted with her and won the friendship of a blue-ribbon family.56
By a wonderful coincidence, Siegmund ended up in the same city as his friend and literary idol, Stefan Zweig, who was driven into exile by the Nazis in 1934. He assisted Zweig in converting his blocked marks at M. M. Warburg in Hamburg into pounds sterling at Warburg & Company in Amsterdam.57 The two discussed publishing a monthly journal written by German-Jewish refugees, and Siegmund referred Zweig to Uncle Felix for funding. It proved a pleasant daydream of the sort that momentarily diverts those who have irretrievably lost their homeland.
Siegmund and Zweig often mused about the myopia of a world that turned a blind eye to the Nazi peril overshadowing Europe. Uncle Max might retain hope, but Siegmund’s pessimism now hardened into absolute conviction. As he told Zweig in 1935, “I believe that the Hitler Regime in Germany still sits, as before, firmly in the saddle while the outside world has accepted it completely (with curious speed and ease …).”58 Siegmund was never fooled by the periodic tactical lulls in Hitler’s aggressive rhetoric. When Hitler entered the Rhineland in 1936, he thought war was inevitable. And when the Japanese invaded China in 1937, he told Zweig that it was but a small installment of the tremendous disaster that would engulf Europe within a year or two.59
