The Warburgs

by Ron Chernow

  In the Euromarkets, Siegmund and Gert were an ideal team. Siegmund had the strategic vision and salesmanship, as well as the clients to issue the bonds and the Continental bankers to absorb them. Gert knew the marketplace mechanics of currencies, interest rates, and syndicates—things remote from Siegmund’s ken. With his fine intuition and broad experience, he could determine the appropriate price and maturity for a new issue.

  However complementary in the Euromarkets, Siegmund and Gert began to grate on each other as personalities. Gert wouldn’t play the servile courtier to Siegmund and trespassed on forbidden territory. Many bankers and chief executives liked to deal with Gert and this upset Siegmund, who jealously guarded his relationship turf from all intruders. As lead manager of issues, S. G. Warburg & Co. acquired tremendous power as banks around the world jockeyed to participate. Gert felt entitled to offer opinions about participants, which constituted lèse-majesté in Siegmund’s eyes. As Gert asserted himself about Euromarket decisions, he fell irrevocably from favor.

  Siegmund criticized self-promotion, yet always manipulated the press like a maestro. As he took credit in the press for the rise of the Euromarkets, Gert came to believe that Siegmund not only envied him but deliberately slighted his contribution. He tested his intuition. Whenever he suggested an idea, Siegmund branded it ridiculous. But if he had Peter Spira present it as his own, Siegmund lauded it to the skies.18 This demotion was a crushing blow to Gert, who had been devoted to Siegmund. When Siegmund began to ignore him, Gert started coming home from work very despondent. His position soon became intolerable and he left the firm.

  Gert had been on the board of S. G. Warburg and Company Frankfurt along with Richard Daus and Hans Petersen. Gert had annoyed Siegmund by defending Daus when the latter lost favor with Siegmund. When Daus left to form his own firm, Gert joined him in March 1970 without bothering to consult Siegmund. Siegmund construed this as a slap in the face and an act of unpardonable disloyalty.

  Many S. G. Warburg executives thought the firm owed Gert a retirement dinner, but Siegmund adamantly rejected this. Ian Fraser, the former Reuters correspondent, said, “Sir Siegmund, I think you may have to reconsider that decision.”19 He and others felt strongly that Gert deserved recognition for his Euromarket work. In the end, after much prodding, Siegmund grudgingly acceded to the farewell dinner. But he devised an unexpected way to punish Gert and defy his colleagues.20 When Siegmund rose to make the farewell speech, he talked of many things. Then he sat down without having made a single reference to Gert. An uncomfortable silence descended upon the room.

  While working in Frankfurt with Daus, Gert suffered a heart attack on October 17, 1970. He was rushed to the hospital, but it was too late. After his death, Gretchen went through a hellish period. In listing the cause of death, the doctors had, for some reason, placed a question mark after “heart attack.” This meant a four-week delay while an obligatory autopsy was performed, prolonging Gretchen’s suffering.

  For two years, Gert had suffered from angina pectoris, ignoring warnings from doctors to quit smoking. Yet Gretchen was convinced that Siegmund’s unfair treatment of her husband had contributed to his death. Neither Siegmund nor Eva ever contacted her afterward and S. G. Warburg sent no representative to the funeral. The firm only acknowledged Gert’s death through a cold, impersonal telegram.21 When Raymond Bonham Carter called to inform him of Gert’s death, Siegmund said dismissively, “Oh, I thought he died yesterday.”22 Some months later, Gretchen ran into Eva on Bond Street and Eva, flustered, said, “Oh, Gretchen, I’m so sorry about Gert.” When she reached out to her former friend, Gretchen recoiled from her touch.23

  In an unsigned Times obituary on October 21, 1970, Ian Fraser had tried to give Gert the due denied by Warburgs. Among the 250 houses active in the Euromarkets, Fraser noted, nobody’s judgment on new bond issues was more prized than that of Gert Whitman. After sketching in Gert’s background, Fraser wrote, “He later became a full-time executive director of S. G. Warburg & Co. in London and, together with Sir Siegmund Warburg, was largely instrumental in advancing the firm to the position which it occupies in the Eurobond and Eurodollar market today.”24 When Siegmund read this appraisal, he grew enraged at having to share credit with Gert.

  Most of Siegmund’s colleagues believe that he fully deserved his title as Father of the Euromarkets. Siegmund created the essential concepts while Gert was the man of a million details. Even those who adhere to this view, however, believe that Siegmund grew envious of Gert and tried to erase his substantial contribution. Increasingly as the 1960s progressed, Siegmund seemed like a king who demanded absolute fealty from his liege lords and was quick to strike down those who overreached themselves. Gert Whitman was such a casualty.

  For S. G. Warburg & Co., an ironic by-product of the Euromarkets was that it wedded this firm founded by Jewish refugees more closely to Germany. Young Britons at the firm were both baffled and intrigued by the interplay between their Jewish bosses and German banks. In the 1960s, Siegmund probably spent half his time in Germany and sold many Eurobond issues through his Swiss and German friends, especially Paul Lichtenberg of Commerzbank and Hermann Abs of Deutsche Bank. Once again, German banks, as before the Third Reich, tapped Jewish financial power and connections. For Siegmund, the idea of returning in triumph to Germany always had profound emotional reverberations.

  Siegmund especially revered Hermann Abs, head of all-powerful Deutsche Bank, who had advised Adenauer and was the godfather of postwar German finance. The Warburgs had known Abs since the 1920s, when he had discussed with Max a possible apprenticeship with the International Acceptance Bank in New York. That Siegmund glorified Abs was strange, since many Jews faulted Abs for having been a director during the war of many large German companies, including I. G. Farben, which had employed slave labor from Auschwitz. Whether a genuine belief or convenient rationalization, Siegmund would always lay great stress upon the fact that Abs never allowed his children to join the Hitler Youth.25 Abs wouldn’t entirely reciprocate Siegmund’s worshipful attitude. It was said in the firm that Siegmund would try to address Abs by the familiar “du” only to have Abs put him in his place with the more formal “sie.”26

  Siegmund prospered as a guide to German businessmen and culture. He had a knack for harmonizing diverse national groups. In 1969, Mobil Oil wanted to buy a German oil-production company, Gelsenkirchener Bergwerk, then trying to ward off French suitors. A majority of its stock was held by Dresdner and Deutsche Bank. Siegmund agreed to represent Mobil, and his good relations with Hermann Abs proved indispensable to his success. When he brought together his American clients and German executives to negotiate, only two people in the room spoke German and English: Siegmund and his personal assistant, Tony Korner, Eric’s son. Unbeknownst to the Germans, the Mobil Oil people were being crassly belligerent; unbeknownst to the Mobil people, the Gelsenkirchener crowd were being arrogant and supercilious. In a bravura performance as negotiator and translator, Siegmund subtly toned down the Germans’ arrogance, while elevating the coarse language of the Mobil Oil cowboys, thus bringing the two sides together.27

  Siegmund thought it undignified to set a fee in advance and would invoke the great merchant bankers he had met in the 1920s who had identified something beyond money as their objective. In this respect, Siegmund’s style harked back to the mystery-shrouded manner of Jacob Schiff and Max Warburg. When he went to Mobil Oil to discuss his fee, he expected it to be at most five to six hundred thousand dollars. Nervous about broaching the subject, Siegmund circled around it evasively for a while. When the Mobil people asked if a million-dollar fee would be suitable, he almost fainted. “I was just enjoying myself,” he protested.28

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  Besides inventing the Euromarkets, Siegmund Warburg left another enduring monument: the firm of S. G. Warburg & Co. itself. No man was more slavishly devoted to his mistress. As he had since 1946, he continued to insist upon diversification, and in 1964 Mercury Securities added the British Gal
lup Poll firm to its portfolio of investments. Siegmund found it hard to let go of his creation and he would stage the longest retirement drama in modern business annals. As early as 1959, he circulated a memo about the need to step aside and make room for younger people. He thought it his duty to retire on time and made friends promise to warn him if he stayed too long. But he also observed, prophetically, that they wouldn’t do so when the time came because they would feel sorry for him. The firm, which now had 250 employees, was an extension of his personality and he could no more cut himself off from it than he could amputate a limb.

  Siegmund often referred to his semiretirement, which became a standing joke at Warburgs. He managed to keep three full-time secretaries busy. The Times of London noted that the semiretired Siegmund seldom left the bank before seven o’clock.29 In 1964, amid much fanfare, he yielded the chairmanship of Mercury Securities to Henry Grunfeld and became, at least on paper, a nonexecutive director. As he said that year, “Leaders of industry and commerce are often inclined not to step down before the decline of their powers becomes manifest, holding on too long to their positions and thus preventing the formation of a strong chain of successors.”30 Siegmund himself would be strikingly guilty of this sin and his 1964 “retirement” was more a matter of show than substance.

  Despite his years in England, Siegmund remained Continental at heart. In the early 1960s, he and Eva built a lovely house called Roccamare near Grosseto on Italy’s west coast. About two hours north of Rome, the summer and weekend house was equipped with telephone, telex, and secretary. It was a beautiful but sweltering place, shrill with the sound of crickets. Siegmund took working vacations there but never learned the art of casual recreation. Every day at noon, he and his family tramped over the dunes to bathe in the Mediterranean. Siegmund could swim, but he would only go up to his waist, bend at the knees, and flap his arms. Whenever Eva pulled out a camera to take pictures of Anna and her baby, Batya, Siegmund would, as always, protest. He feared that pictures of him in shorts or swim trunks would fall into the wrong hands and destroy his image.

  Often alone, Eva felt terribly isolated at Roccamare. When she complained to Siegmund, he was perfectly mystified. Hadn’t he recently purchased the complete twenty-volume works of Sigmund Freud? And wouldn’t such reading nicely fill the time? Apparently not. Siegmund was himself driven wild by the inconvenience and the inefficient Italian telephones. So the Warburgs sold the house to the Ferragamo family.

  Even as he felt the old magnetic pull of the Continent, Siegmund was drawn more deeply into British politics. He often lamented that his Swabian accent had prevented him from engaging in English statecraft or diplomacy. While he loved the stuff and feel of politics, he lacked any set ideology. Even in Weimar Germany, he had seen the alternation of parties in power as a salutary thing.31 Colleagues viewed him as an unpredictable floating voter, a heterodox Tory who often voted Labour. Mostly Siegmund hated weak, equivocating politicians and admired fearless, uncompromising personalities of either party. For that reason, he went through periods of being entranced by both Richard Nixon and Margaret Thatcher. His most consistent belief was in European integration, and he was saddened to see the European Community weakened by protectionism and sectional interests in the 1960s.

  Siegmund liked the fiery intellect of Prime Minister Harold Wilson, who turned to Siegmund as an unofficial financial adviser in the 1960s, particularly about currency matters. This was a rare honor from a Labour leader—after all, Siegmund was one of eighty-one British millionaires, according to 1963 tax returns—and Wilson took heat for the move. Now in his sixties, Siegmund still liked to tweak the establishment. He certainly had more sympathy for Labour than most Tory bankers in the City, but never reflexively adopted Labour positions. For instance, he opposed cheapening the pound to stimulate exports, calling such an expedient defeatism and favoring tough, unpopular measures to restore British competitiveness.32 His lifelong contempt for bureaucracy posed limits to his public flirtation with Labour. Yet he was closely enough identified with Wilson’s government that in 1966 he had to issue a disclaimer in The Sunday Times: “I am not a Socialist and I believe that private enterprise has just as important a role to play in our time … as during the First Industrial Revolution.”33

  Siegmund’s association with Wilson made him a traitor in the City—a status he surely enjoyed. He enjoyed remarkable access to the prime minister. When Chrysler considered shutting down one of its Scottish plants, Siegmund shepherded company executives to Chequers, a meeting he arranged on just a few days’ notice. After Rhodesia declared its independence, Wilson made Siegmund governor of the rump central bank. In line with his antiapartheid views, Siegmund was an early contributor to the jailed Nelson Mandela in South Africa.

  In July 1966, undoubtedly in recognition of his services to Wilson, Siegmund Warburg was knighted. At first, as an avowed foe of vanity, he hesitated to accept it and only did so when Henry Grunfeld told him the distinction would benefit the firm. He was stunned and delighted by the knighthood, which was actually very important to him, for it validated his decision to live in England and conferred some ultimate certificate of success. The new Lady Warburg was terribly happy for him.

  As Siegmund was flooded with handwritten congratulatory notes, the press speculated, correctly, that he was sending batches of them to Zurich to be analyzed by Mrs. Dreifuss.34 It was a great windfall to have a sudden collection of so many famous handwritings. Once again Mrs. Dreifuss turned in a stellar performance. When Siegmund sent her an unidentified letter from Oxford scholar Isaiah Berlin, she commented on his minute, spiky penmanship: “This handwriting is that of the most brilliant man I’ve ever analyzed.”35

  The knighthood came at a time when Siegmund was trying to ease into a nonexecutive role at S. G. Warburg. Wanting to give Henry Grunfeld more room, Siegmund and Eva abruptly moved to Blonay in Switzerland, about an hour from Geneva. At the advice of lawyers, Siegmund transferred his assets to Switzerland so that he could enjoy greater freedom to set up charitable trusts and the like. At a time of severe foreign-exchange controls in England, the move required the permission of the Bank of England.

  Coming upon the heels of the knighthood, the move irked some Britons, who felt it showed base ingratitude. Siegmund’s great ally in the Aluminium War, Lionel Fraser, was disappointed. “Lionel thought it was a bit shabby to get a knighthood and then move to Switzerland,” said his partner, Michael Verey. “Siegmund didn’t enhance his reputation in the City.”36 Nobody knows for sure why Siegmund chose Switzerland. He was critical of tax exiles, yet many suspect he joined their ranks. “Siegmund went to Switzerland to escape the high socialist taxes at the time,” said Dr. Goldman. “He thought they were too high.”37

  There were other compelling reasons. For a veteran traveler, it provided a central European location. It also wasn’t far from Swabia and perhaps stirred some old memories; as late as 1980, Siegmund attended a reunion of his Gymnasium. He had more Continental than British friends and sometimes vacationed in the Black Forest. By going to Switzerland, Siegmund also sought to gain a fresh perspective on events in London. Finally, with sunshine and fresh air at Blonay, Siegmund could dispense with the need to go away on holiday. Eva would have preferred staying in London but at Blonay they at least had as neighbors her old Swedish friends, Ruth and Carl Kjellberg. It seems fitting that Siegmund ended up in Blonay. He was at home in the rich no-man’s land along Lake Geneva. As a crossroads of the European business and social elite, it was an appropriate place for a world citizen and international banker.

  With telephone lines, a corner telex, and a secretary often present, Siegmund now ruled at Gresham Street by remote control and was no less omnipresent in absentia. For two hours each morning, he dialed around the office. When slouching people suddenly sat bolt upright, everybody knew Sir Siegmund was on the other end. He endlessly plied people with questions and had an elephantine memory for answers. Sir Eric Roll, who became chairman in 1974, wrote that to
know what was happening in the office, “the quickest and surest way was to telephone [Siegmund] at Blonay.”38

  Some visitors saw the Swiss house as a camouflaged office. Every day dense packets of material arrived from London and Siegmund’s colleagues mocked his inability to retire. Siegmund always loved the delightful in-house satirical skits written in Evelyn Waugh style by one of the uncles, Charles Sharp. In one sketch called “Gloom,” Sharp depicted Siegmund “in his villa in Blonay, amidst the theoretical beauty of the Lake of Geneva which cannot be seen from the window of the villa’s telex-room where SGW spends his time when he is there for one of his 24 to 48 hour holidays.”39

  In January 1970, in yet another step in his protracted retirement pageant, Siegmund became president of S. G. Warburg & Co. and Mercury Securities and surrendered his directorships in both.

  Ostensibly Siegmund had withdrawn to Blonay to give room to his successors. Yet his personality was no less forceful when filtered through a long-distance telephone. It was simply not in his nature to let his creation out of his grasp, and nobody at S. G. Warburg & Co. was particularly shocked that the sovereign continued to issue decrees in exile from his distant castle on Lake Geneva.

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  Siegmund Warburg and an “adopted son,” Peter Spira, signing a Eurobond issue for Bank Leumi, 1967. (Courtesy of Peter Spira)

  CHAPTER 47

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  Fathers and Sons

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  A painting of Siegmund Warburg from the early 1970s captures him in a characteristic pose. He slouches in a chair, brooding, lugubrious, with a languidly passive air. He looks slightly gaunt, the lines etched deep in his face. Yet upon closer inspection, the first impression fades. He is poised and watchful, ready for action, his tremendous drive concealed beneath a cloak of relaxed urbanity. The dark, piercing eyes are deeply ringed, keenly alive and alert, but also hard and disappointed. Now in his seventies, Sir Siegmund still betrays something of the coiled tiger, conserving his energies for the next spring. Staring from hooded eyes and a well-tended facade, he seems tired but restless within.