Warburgs, Bakers

What Wall Street delicately terms a "combination of interests," what on other thoroughfares would more bluntly be called a merger, last week transpired between the International Acceptance Bank and the Bank of the Manhattan Co., both of Manhattan. The distinction between interest combination and merger lies in the fact that the two banks will not merge physical properties, but that their stockholders will arrange an interchange of securities. Later there will be formed an investment bank, to be known as International Manhattan Co., so that, like many another bank, the new combination will have an affiliated financing organization whose operations and earnings may be less conservative than those of the parent body. Resources of the two banks total some $500,000,000.

The union of Bank of the Manhattan Co. with International Acceptance brings together one of the oldest of U. S. banking families and one of the oldest of international banking families. The U. S. family is Baker, contemporary Baker being J. Stewart, president of the Bank of the Manhattan Co., Vice Chairman of International Acceptance. The international family is Warburg, current Warburgs being Brothers Paul & Felix. The present story, however, concerns only Brother Paul, Board Chairman of International Acceptance, Associate Chairman of Bank of the Manhattan Co., and his son, James P., who will become president of International Manhattan. Of the two families the Warburg is the older, the more exclusively banking, the more internationally famed.

The Warburg family derives its name from Warburg, a town in Westphalia, where Warburgs lived as long ago as 1400. At some time during the Sixteenth Century the family moved to Hamburg. Here, in 1798, was founded M. M. Warburg & Co. Since the founding of the Warburg firm--130 years ago--a son of the Warburg family has always headed the House of Warburg; no person not a Warburg has ever reached a dominant position. Comparatively, the Morgans are parvenus.

It is with the U. S. branch of the Warburg family, however, that the U. S. financial world is most concerned. For it was Paul M. Warburg who organized the International Acceptance Bank in 1921. Born in Hamburg in 1868, Paul M. Warburg entered a Hamburg export house at 18, entered the House of Warburg at 20. Followed experience in English, in French banking houses, a world tour, a return to Hamburg, and, in 1896, membership in the Warburg firm. In 1894 Mr. Warburg had married Nina, daughter of Solomon Loeb of Kuhn, Loeb & Co. In 1902 he came to live in the U. S., became partner in Kuhn-Loeb, in which Brother Felix had been a partner since 1896.

He found the U. S. financial world in a depressed condition, with call money bringing 25% to 30%. Interested, able, he wrote an article showing the unsound condition of U. S. banking, likening the U. S. banking system to European banking during the Renaissance. Seeing no chance of publishing a critical essay written by a stranger, an alien, he put his paper in a desk-drawer, where it remained for four years. But in 1907, on the advice of Professor Seligman of Columbia University, he brought the article up to date, sent it to the New York Times, saw it in print. Soon the Panic of 1907 vividly demonstrated the justice of his criticisms, won him recognition as a financial authority. In 1908 he went with the late great Henry P. Davison and Frank A. Vander-lip and Senator Nelson Aldrich to recently-famed Jekyl Island (see National Affairs) where the U. S. currency system was thoroughly studied, scientifically revised. In 1911, Mr. Warburg became a U. S. citizen.

Bankers, financiers knew Mr. Warburg in 1908; the U. S. Senate and the U. S. public did not become thoroughly aware of him until 1914, when President Wilson appointed him a member of the first Federal Reserve Board. A Senate Committee on Banking and Currency questioned Mr. Warburg, their inquiries colored somewhat by a distorted idea of the Money Demon and Mr. Warburg as an incarnation of it. At that time a Kuhn-Loeb member, and with an income of some half a million a year, Mr. Warburg devoted himself to building up the Federal Reserve system. For four years (1914-1918) he served on the Federal Reserve Board, did much to determine the success of what has since been recognized as by far the greatest domestic accomplishment of the Wilson administration--the modernization of U. S. banking. In 1921 Mr. Warburg founded International Acceptance.*

Hardly less ancient than the House of Warburg is the House of Baker, but the Bakers have not so continuously been bankers, and the Baker bank has not remained always in Baker control. This bank--the Bank of the Manhattan Co., was organized in 1799. One of its original stockholders was Stephen Baker. The Bank of the Manhattan Co. did not remain a Baker property, but did return to the Baker family 35 years ago. J. Stewart Baker, present head, succeeded his father, Stephen Baker, grandson of Stephen the Founder.

The affiliation between the Bank of the Manhattan Co. and International Acceptance is particularly important in the field of international banking. The Bank of the Manhattan Co. has hitherto confined itself chiefly to New York City, where it has built up some 50 branches. International Acceptance, on the other hand, with its Warburg German connections, has specialized in international enterprises. The combination in effect puts the combined resources of the two banks into the international field.

* Brother Paul's connection with Kuhn-Loeb ended in 1914; Brother Felix remained in the Kuhn-Loeb organization. Born in Hamburg, in 1871, Brother Felix came to the U. S. in 1894, married Frieda Schiff, daughter of Jacob H. Schiff, in 1895, has been Kuhn-Loeb partner since 1896, became a U. S. citizen in 1900. He has been conspicuously identified with Jewish charities and with the Palestine movement. In 1925 he gave $500,000 for a Hebrew University in Jerusalem.

Brothers Paul and Felix have three other brothers:

Brother Max M. of the House of Warburg,

Hamburg.

Brother Fritz of the House of Warburg,

Hamburg.

Brother A. M. who is Professor of Art. Of the five Brothers Warburg, Brother Paul has a son, James Paul, to be head of International Manhattan.

Brother Max has a son, Eric Warburg, recent partner in House of Warburg, Hamburg.

Brother Felix has four sons:

Paul Felix with International Acceptance.

Frederick with Lehman Bros. Edward, college student.

Gerald, music student (cello).