Paul Warburg
German-born banker who helped shape the U.S. Federal Reserve.
Paul Moritz Warburg (August 10, 1868 – January 24, 1932) was a German-born American investment banker. He served as the second vice chairman of the Federal Reserve from 1916 to 1918, and before that, he was one of the original members of the Federal Reserve Board, starting in 1914. He was an early proponent of creating a central banking system in the United States.
Warburg was born in Hamburg, Germany, into the Warburg family, a German Jewish banking dynasty that traced its roots to Venice. His parents were Moritz and Charlotte Esther (Oppenheim) Warburg. After finishing school at the Realgymnasium in Hamburg in 1886, he learned business basics working for Simon Hauer, a Hamburg import-export firm. He then worked for Samuel Montagu & Co. in London from 1889 to 1890, and for the Banque Russe pour le Commerce Etranger in Paris from 1890 to 1891. In 1891, he joined the family banking firm M. M. Warburg & Co., founded by his great-grandfather in 1798. He took a break for a world tour in the winter of 1891–1892 and became a partner in the firm in 1895. On October 1, 1895, he married Nina J. Loeb in New York City; she was the daughter of Solomon Loeb, a founder of Kuhn, Loeb & Co. The couple had a son, James Paul Warburg, and a daughter, Bettina Warburg Grimson.
Though a major figure in German finance, Warburg moved to New York in 1902 after frequent business trips, becoming a partner at Kuhn, Loeb & Co., where Jacob Schiff was the senior partner. His brother Felix married Schiff’s daughter, and both brothers made partner after marrying into the firm’s family. Warburg remained a partner in the Hamburg firm but became a naturalized U.S. citizen in 1911. He was a member of Temple Emanu-El in New York. In February 1910, he was elected a director of Wells Fargo & Company, resigning in September 1914 when he joined the Federal Reserve Board; Jacob Schiff replaced him on the board.
Warburg was a persuasive advocate for central banking. Many contemporaries saw him as the main force behind the creation of the U.S. central bank. Russell Leffingwell, who served as Assistant Secretary of the Treasury, head of the Council on Foreign Relations, and chairman of J.P. Morgan, credited Warburg with doing “yeoman’s service in preaching the doctrines and practices of modern [central] European banking” while others focused on fighting the free silver movement.
- Born
- August 10, 1868, Hamburg, Germany
- Died
- January 24, 1932, New York City, USA
- Field
- Investment banking, central banking
- Nationality
- German-born American
- Known for
- Advocacy for the U.S. central banking system; second vice chairman of the Federal Reserve
Lore & Background
Paul Warburg was born in Hamburg, Germany, to the Warburg family, a German Jewish banking dynasty. After graduating from the Realgymnasium in Hamburg in 1886, he worked for a Hamburg importer, a London bank, and a Paris bank before joining the family firm M. M. Warburg & Co. in 1891. He became a partner in 1895 and married Nina J. Loeb, daughter of a founder of Kuhn, Loeb & Co., in New York City in 1895.
Warburg settled in New York in 1902 as a partner in Kuhn, Loeb & Co. and became a naturalized American citizen in 1911. He drafted a critique of the American banking system in 1902 but hesitated to publish it until 1906, after encouragement from Professor Edwin Seligman. His article 'Defects and Needs of our Banking System' argued that the U.S. financial system lagged behind Europe and Asia due to the lack of a central bank. He later published two more articles and attended secret meetings on Jekyll Island in 1910 that produced the Aldrich Bill, a precursor to the Federal Reserve Act.
Reader's Guide
Paul Warburg's significance lies in his role as a leading advocate for the establishment of the U.S. central banking system, which culminated in the creation of the Federal Reserve. His writings and lobbying efforts, particularly after the panic of 1907, helped shift public and political opinion toward currency reform. Although the Aldrich Bill he helped draft did not become law, the Owen–Glass Bill that did pass was considered by many scholars to be heavily influenced by it. Warburg served on the original Federal Reserve Board and later as its second vice chairman. He also founded the American Acceptance Council and the International Acceptance Bank, and served on the advisory council of the Federal Reserve Board. His legacy includes the Paul M. Warburg chair in Economics at Harvard University and the purported inspiration for the cartoon character Oliver 'Daddy' Warbucks.
Did You Know?
- Warburg's article 'Defects and Needs of our Banking System' compared the U.S. financial system to that of Europe at the time of the Medicis.
- He attended a secret meeting on Jekyll Island in 1910 with Senator Nelson Aldrich and other bankers to draft a central bank bill.
- Warburg warned of the disaster threatened by wild stock speculation on March 8, 1929, months before the Wall Street crash.
- The cartoon character Oliver 'Daddy' Warbucks was purportedly inspired by Warburg's life and times.
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