marriage I am related to members of the firm, the late Mr. Loeb having
been my father-in-law, which brought about a desire on the part of the
family to bring me over here.... I ought to say that I got married in
this country in 1895 and that I have been in this country every year
since, for several months.... That is the history of my banking
education.”
It will be recalled that Jacob H. Schiff also married a daughter of Mr.
Loeb, so that Mr. Warburg married the sister of Mrs. Jacob H. Schiff.
Felix Warburg, Paul’s brother, who is also in the firm, married Mr.
Schiff’s daughter.
Mr. Warburg immediately cast a critical eye upon the state of financial
affairs in the United States and it is significant of the grasp he
already had on such matters that he found the country rather behind the
times.
He conceived the ambition—the very daring ambition—of taking hold of the
United States’ monetary system and making it what he thought it ought to
be.
This alone would make him a remarkable man. It illustrates very well
that detached point of view which the Jew is more fitted to take than
any other man perhaps. He sees countries and systems with the same
freedom from intimate bias with which another man would view assorted
fish upon a market stall. Most of the world is engaged in doing its work
and indulging its national, racial, domestic and social affections and
inclinations; a small minority stands in the background and watches the
entire mass at its unconscious maneuvers, and studies it as an observer
studies a hive of bees. The man at work has no time except for his job.
One man, standing back and studying 1,000 men at work, is able to see
how he might utilize their labor or possess himself of a first toll on
their production. Doubtless there must be men to stand at a sufficient
distance from things to get a correct idea of their interrelationship,
and doubtless such an attitude may be made of great service to the race,
but doubtless it has also contributed to the selfish manipulation of
natural and social processes.
Mr. Warburg testified: “When I came here I was at once impressed by the
lack of system, by the old-fashioned nature of the system that prevailed
here; and I got immediately into one of those periods of high interest
rates, where call money went up to 25 and 100 per cent; and I wrote an
article on the subject then and there for my own benefit.
“I was not here three weeks before I was trying to explain to myself
the roots of the evil. I showed the article to a few friends but I
kept it in my desk, because I did not want to be one of those who
try to inform and educate the country after they have been here for
a month or so; and I kept that article until the end of 1906,
shortly before the panic, when those conditions arose again, and
when one newspaper wanted for an issue at the end of the year an
article dealing with the conditions in our country.
“Then I took out that article and touched it up and brought it up to
date; and that was the first article of mine that was published. It
was called, ‘Defects and Needs of Our Banking System.’...
“That was, however, the first time that I know of that the question
of the discount system and the concentration of reserves was really
brought out; and I got a great many encouraging letters asking me to
go on and explain my ideas.”
Mr. Warburg was perfectly willing to talk to the committee about
himself, but not about Kuhn, Loeb & Company, his firm.
“I cannot discuss the affairs of my firm nor my partners,” he said,
“nor be asked to criticise acts of my partners, either to approve
them or in any other way,” but eventually he did tell a number of
things which students of American financial affairs have considered
interesting. Of which more later.
On page 77 of the testimony, more personal matters appear:
Senator Bristow—“When did you become a citizen of the United States,
Mr. Warburg?”
Mr. Warburg—“1911. Did I not answer that?”
Senator Bristow—“Perhaps so. Did you intend to become a citizen when
you came to the United States in 1902?”
Mr. Warburg—“I had no definite intentions then, because some of the
reasons that brought me over here were family reasons;.... That had
a good deal to do with my first coming here; and I was not sure at
all that I would stay here when I came.”
Senator Bristow—“When did you decide to become a citizen of the
United States?”
Mr. Warburg—“In 1908, when I took out my papers.”
Senator Bristow—“When you took out your first papers? You took out
your second papers, then, in 1911?”
Mr. Warburg—“Yes.”
Senator Bristow—“You made your declaration in 1908; that is when you
decided to become an American citizen?”
Mr. Warburg—“Yes.”
Senator Bristow—“Why did you wait as long as you did after you came
to this country, before deciding to become a citizen of this
country?”
Mr. Warburg—“I think that a man that does not come here as an
immigrant; a man who has had, if you may call it such, a prominent
position in his own country, will not give up his nationality so
easily as a man who comes over here knowing that he does not care
for his own country at all. I had been a very loyal citizen of my
own country; and I think that a man who hesitates in giving up his
own nationality and taking a new one, is apt to be more loyal to his
new country when he does change his nationality than a man who gives
up his old country more lightly.”
Senator Bristow—“Yes.”
Mr. Warburg—“I may add this: That a thing which had a great deal of
influence on my making up my mind to remain in this country and work
here, and become a part and parcel of this country, was that
monetary reform work, for I felt I had a distinct duty to perform
here; and I thought I could do that; and in fact I have been working
on it since 1906 or 1907.
“Then I felt that it was the right thing for me to become an
American citizen and work here and throw in my lot definitely with
this country.”
Senator Bristow—“When you became an American citizen; and the motive
which induced you to become an American citizen was, then, as I
understand it, largely with a view of laboring to bring about a
reform of the American monetary system?”
Mr. Warburg-“Well, you put it nearly exclusively on that. I think a
man wants to feel that he is going to do some useful work in his
country; that he has a mission to perform; and that is what happened
to me.... Moreover, I had been long enough in this country then to
have thoroughly taken root and feel that I was a part and parcel of
it.”
Senator Bristow—“Yes. When did you first become active in promoting
the monetary reforms in the United States?”
Mr. Warburg—“1906.”
Senator Bristow—“What was your method of promoting your ideas with
regard to monetary reforms?”
Mr. Warburg—“Mainly writing.”
Senator Bristow—“Were you connected with the Monetary Commission?”
Mr. Warburg—“No, not directly....”
Senator Bristow—“Were you consulted in regard to the report of the
Monetary Commission in any way?”
Mr. Warburg—“Yes, Senator Aldrich consulted with me about details,
and I gave him my advice freely.”
Senator Bristow—“And in regard to the bill which was prepared by
Senator Aldrich in connection with the commission, were you
consulted in regard to that?”
Mr. Warburg—“Yes.”
Senator Bristow—“What part did you have in the preparation of that
bill, directly or indirectly?”
Mr. Warburg—“Well, only that I gave the best advice that I could
give.”
Most readers will recall that the name of “Aldrich” was, a few years
ago, the synonym for the money power in government. Senator Aldrich was
an able man and a tireless worker. His character for thoroughness and
industry did more than anything else to disabuse the popular mind of the
notion that such men were mere “tools of the money interest,” or engaged
in their work out of lust for gain, or out of sheer pleasure in
legislating against the interests of the people. Senator Aldrich led on
tariff and financial matters because he understood them; and he
understood them by tireless study of them; and, therefore, he was the
master of other men who had not paid the price of knowledge. But, he
understood these matters from the standpoint of the business interests
only. He was sincerely desirous of the prosperity of the country, but
that prosperity was written in banking balances. Fifteen years ago it
might not have been possible to judge him thus calmly, because then he
represented in the public mind, more than any individual does today, the
concentrated power of the financial group. Their prosperity was his
first care, possibly because he believed that their prosperity was also
the country’s.
It was such a man, then, that came to Mr. Warburg for advice. The labors
of Senator Aldrich comprise many volumes of difficult material and
Senator Aldrich’s appeal to Mr. Warburg was a very high compliment to
the quality of the latter’s mind and financial experience—this, of
course, assuming that Mr. Warburg’s counsel was not forced upon the
Aldrich committee by the New York money interests.
In his testimony, Mr. Warburg did not tell all. The omission, however,
was supplied by an article in _Leslie’s Weekly_ in 1916, the author
being B. C. Forbes.
It is a story of which _Current Opinion_ said: “It reads like the
opening in a shilling shocker.”
It appears that the conferences between Mr. Warburg and Senator Aldrich
took place on an isolated island off the coast of Georgia—Jekyl Island.
Included in the party, besides Senator Aldrich and Mr. Warburg, were two
New York bankers and the then Assistant Treasurer of the United States.
The mysteriousness of it all was well brought out by Mr. Forbes:
“Picture a party of the nation’s greatest bankers stealing out of
New York on a private railroad car under cover of darkness,
stealthily hieing hundreds of miles south, embarking on a mysterious
launch, sneaking out to an island deserted by all but a few
servants, living there a full week under such rigid secrecy that the
name of not one of them was once mentioned lest the servitors learn
their identity and disclose to the world this strangest, most secret
episode in the history of American finance.
“The utmost secrecy was enjoined upon all. The public must not glean
a hint of what was to be done. Senator Aldrich notified each one to
go quietly into a private car which the railroad had received orders
to draw up at an unfrequented platform. Drawn blinds balked any
peering eyes that might be around. Off the party set. New York’s
ubiquitous reporters had been foiled. So far so good. After bowling
along the railroad hour after hour into southern country, the order
was given to prepare to disembark.
“Stepping from the car when the station had been well cleared of
travelers, the members of the expedition embarked in a small boat.
Silence reigned, for the boatmen must not find out how distinguished
were their passengers.
“In due time they drew up at another deserted pier. They were at
Jekyl Island, off Georgia. The island was entirely unpeopled save
for half a dozen servants.
“‘The servants must under no circumstances learn who we are,’
cautioned Senator Aldrich.
“‘What can we do to fool them?’ asked another member of the group.
The problem was discussed.
“‘I have it,’ cried one. ‘Let’s all call each other by our first
names. Don’t ever let us mention our last names.’
“It was so agreed.
“The dignified veteran Senator Aldrich, king of Rhode Island and a
power second to none in the United States Senate, became just
‘Nelson’;... and the quiet, scholarly member of the powerful
international banking firm of Kuhn, Loeb & Company, became ‘Paul.’
“Nelson had meanwhile confided to Harry, Frank, Paul and Piatt that
he was to keep them locked up on Jekyl Island, cut off from the rest
of the world, until they had evolved and compiled a scientific
currency system for the United States, a system that would embody
all that was best in Europe, yet so modeled that it could serve a
country measuring thousands where European countries measured only
hundreds of miles.”
Mr. Forbes does not omit to write this further description of Mr.
Warburg’s condition at the time:
“unable then to speak idiomatic English with perfect freedom and
without an accent, an alien not naturalized.”
Mr. Forbes also wrote—“Here is a German-American, but the sort of one
that makes the hyphen look like a badge of honor.”
That was in 1916. Hyphens went out of fashion, though not entirely out
of use, soon after.
Thus far the story of Paul Warburg.
——
Issue of June 18, 1921.
LVIII.
Jewish Idea Molded Federal Reserve Plan
The last view the reader had of Paul M. Warburg in the preceding article
was as “an alien not naturalized” secretly closeted with Senator Nelson
W. Aldrich and a party of bankers on an obscure island off the
southeastern coast of the United States, all the members of the party
concealing their identity even from the servants by calling each other
by their first names.
That conference in its ultimate results was of the utmost importance to
the United States, for then and there were formulated those fiscal
devices, those financial methods, those “monetary reforms” which have
exerted an influence on every citizen, rich and poor, of the Republic.
Much history was made in that little trip. It irresistibly calls to
memory that other trip made in 1915—almost two years before America’s
entry into the war—by Bernard M. Baruch. As readers of THE DEARBORN
INDEPENDENT of November 27, 1920, will recall, Mr. Baruch had been
financial backer of the Plattsburg camp, and in his testimony he said he
thought that General Wood would admit this. Then—“I went off on a long
trip, and it was while on this trip that I felt there ought to be some
mobilization of the industries, and I was thinking about the scheme that
practically was put into effect and was working when I was chairman of
the board. When I came back from that trip I asked for an interview with
the President.... The President listened very attentively and graciously
as he always does.” Mr. Baruch was an authority on the President’s
demeanor, for there was a long period in 1917 and 1918 during which he
called at the White House every afternoon.
Two momentous trips in our recent history, both of them signalized and
given their principal meaning by the presence of Jews. Not that there
should not have been Jews in either case; to insist upon their total
exclusion would be going too far. The Jew as a citizen, bearing his
part, is one matter; the Jew as a master, directing the national show,
is quite another thing. It is by no means agreed that Barney Baruch was
the only man in the United States who could have run this nation’s war
business. That is the explanation made of the high place he took—that he
was the _only_ man who could do it. Nonsense! If that be so, let us
close up the nation and hand the keys over to the New York Kehillah. Mr.
Baruch could say—“I probably had more power than any other man did in
the war; doubtless that is true,” but he had that power because he was
for the time the head and front of the Jewish group for war purposes.
If the explanation of Jewish mastery at critical moments were “brains,”
well and good, but if it were, it would be more evident to the people;
brains do not need to be advertised, they advertise themselves. There is
another reason.
The British public recently awoke to the fact that not Lloyd George but
Mr. Montagu and Sir Alfred Mond were in charge of the recent
negotiations over the German indemnities. These gentlemen are both Jews,
one of them of German descent. Of all the British Empire are they the
only two men to advise the premier in a great crisis? If they are, why
is it? The Montagus, we know, control the silver of the world; Sir
Alfred Mond, we know, turned the very neat trick of keeping the sign of
the Cross off the war memorials raised to the soldiers of the empire;
their Jewishness always so apparent. Both financiers; both the close
advisers of the premier; as Baruch to Wilson, so they to Lloyd George.
Apparently there are no Anglo-Saxons on either side of the sea capable
of managing these deep matters, if we are to judge from the war
administrations—those that have passed off the stage and those that
still linger. Lloyd George, for once stung to the quick by the criticism
of the British public of his tendency to closet himself with Jews when
confronted with a crucial question, retorted bitterly—with what? With
the old outworn Jewish propagandist boast, that it ill became people who
sang Jewish psalms in church to rag the race that wrote them! A most
illuminating defense! The world would give a good deal for a true psalm
from Sir Alfred Mond, Mr. Montagu, or even Sir Philip Sassoon, who is
soon to become the premier’s son-in-law.
In our own history, Barney Baruch boldly claims his place, he
unhesitatingly asserts that he had more power than any man in the war.
If Allenby in Palestine needed a locomotive, if the Americans in Russia
needed clothing, if the munition mills needed copper—it was Baruch who
gave or withheld the word.
Mr. Warburg, being of somewhat finer grain, probably due to his having
less than Mr. Baruch of the rough experience of “the Street,” does not
make the claim that he is the chief factor in the present monetary
system of the United States, nor does THE DEARBORN INDEPENDENT undertake
to make it for him lest the cry of “anti-Semitism” wax wrathful again;
but fortunately the fact is amply attested by a Jew whose knowledge of
the matter is unquestionable.
Readers have doubtless become aware by this time that for a non-Jew to
say that a certain Jew is a most important factor in any field is to be
guilty of anti-Semitism, while for a Jew or a “Gentile front” to say it
is perfectly proper. It is a rather odd etiquette in which simple minds
sometimes become confused.
Professor E. R. A. Seligman, of Columbia University, is the sponsor of
this great honor for Mr. Warburg. What Professor Seligman says is of
such importance, both as to its source and its subject, that quotation
is justified: (the italics in all cases are ours)
“It is in a general way known to the public that Mr. Warburg was in some
way connected with the passage of the Federal Reserve Act, and his
appointment to his present responsible position on the Federal Reserve
Board was acclaimed on all sides with a rare degree of approval and
congratulation; but I fancy _it is known only to a very few how great is
the indebtedness of the United States to Mr. Warburg. For it may be
stated without fear of contradiction that in its fundamental features
the Federal Reserve Act is the work of Mr. Warburg more than of any
other man in the country_....
“When the Aldrich commission was appointed it was not long before
Senator Aldrich—to his credit be it said—was won over by Mr. Warburg to
the adoption of these two fundamental features. The Aldrich Bill
differed in some important particulars from the present law.... _The
concession in the shape of the twelve regional banks that had to be made
for political reasons is, in the opinion of Mr. Warburg as well as of
the writer of this introduction, a mistake_; for it will probably, to
some extent at least, weaken the good results which would otherwise have
followed. On the other hand, the existence of a Federal Reserve Board
creates, in everything but in name, a real central bank; and it depends
largely upon the wisdom with which the board exercises its great powers
as to whether we shall be able to secure most of the advantages of a
central bank without any of its dangers....
“In many minor respects also the Federal Reserve Act differs from the
Aldrich Bill; but in the two fundamentals of combined reserves and of a
discount policy, the Federal Reserve Act has frankly accepted the
principles of the Aldrich Bill; _and these principles, as has been
stated, were the creation of Mr. Warburg and of Mr. Warburg alone._
_“... It must not be forgotten that Mr. Warburg had a practical object
in view. In formulating his plans and in advancing slightly varying
suggestions from time to time, it was incumbent on him to remember that
the education of the country must be gradual and that a large part of
the task was to break down prejudices and remove suspicions. His plans
therefore contain all sorts of elaborate suggestions designed to guard
the public against fancied dangers and to persuade the country that the
general scheme was at all practicable. It was the hope of Mr. Warburg
that with the lapse of time it might be possible to eliminate from the
law not a few clauses which were inserted, largely at his suggestion,
for educational purposes._
“As it was my privilege to say to President Wilson when originally
urging the appointment of Mr. Warburg on the Federal Reserve Board, at a
time when the political prejudice against New York bankers ran very
high, England also, three-quarters of a century ago, had a practical
banker who was virtually responsible for the idea contained in Peel’s
Bank Act of 1840. Mr. Samuel Jones Lloyd was honored as a consequence by
the British Government and was made Lord Overstone. The United States
was equally fortunate in having with it a Lord Overstone....
“_The Federal Reserve Act will be associated in history with the name of
Paul M. Warburg...._”—(pp. 387–390, Vol. 4, No. 4, Proceedings of the
Academy of Political Science, Columbia University).
It surely cannot be considered invidious for THE DEARBORN INDEPENDENT
thus to introduce to the people of the United States a gentleman whose
influence upon the country is so vital. Just how vital can be understood
only by those who have studied the puzzle of a country filled with the
good things of life, and still unable to use them or to share them
because of a kink in the pipe line called “money.”
But that Mr. Warburg himself is not entirely unaware of his position is
indicated on page 56 of his testimony quoted last week. Mr. Warburg had
just told the Senate Committee that he was making a heavy financial
sacrifice to accept the position on the Federal Reserve Board offered
him by President Wilson, and into the fitness of which appointment the
Senate was carefully inquiring:
Senator Reed—“May I ask what your motive is, or your reason for
making that sacrifice?”
Mr. Warburg—“My motive is that I have, as you know, taken a keen
interest in this monetary reform since I have been in this country.
“_I have had the success which comes to few people, of starting an
idea and starting it so that the whole country has taken it up and
it has taken some tangible form._”
Professor Seligman advises us of the strategy that was used to get the
whole country to take up Mr. Warburg’s idea, and of the fact that some
of the items inserted to appease the public might easily be removed when
the public shall have become accustomed to Mr. Warburg and the Federal
Reserve Board; but Mr. Warburg adds another hint, to the effect that you
can do some things by administration which you cannot do by
organization.
For example: Mr. Warburg wanted _only one central bank_ which should be
the sole arbiter of finance in the United States. The United States
Government would have almost nothing to do save to make the money and
stand back of it; the bankers of the United States, and the people
thereof, would have nothing to do except what they were told; the one
central bank would be the real financial governing authority.
When asked by Senator Bristow to state the fundamental difference
between the Aldrich plan and the present Federal Reserve plan, Mr.
Warburg replied:
“Well, the Aldrich Bill brings the whole system into one unit, while
this deals with 12 units, and unites them again into the Federal
Reserve Board. It is a little bit complicated, which objection,
however, _can be overcome in an administrative way_; and in that
respect I freely criticized the bill before it was passed.”
There is evidently, then, a method of administration for which severe
critics might even use the word “manipulation,” by which the plain
provisions of a banking law, whatever they may be, may be, if not
evaded, then somewhat adapted.
This idea is brought to mind by a more colloquial expression of Mr.
Warburg’s to be found in his address on “bank acceptances” delivered in
1919: