Paul Warburg: Daddy Warbucks and the Federal Reserve

Paul Moritz Warburg was the inspiration for the Little Orphan Annie Daddy Warbucks character, [1] but he is perhaps best known for being one of the founders of the Federal Reserve.[2] Paul Moritz Warburg (1868-1932) was the third child of seven born to Moritz M. Warburg and Charlotte Oppenheim in Hamburg, Germany.[3] The Warburg family comprises a German Jewish dynasty of bankers who trace their origin back to medieval Italy.[4] After graduation, he worked for a trading firm in Hamburg and later trained at several banks in Paris (Banque Russe pour le Commerce Étranger) and London (Samuel Montagu). Finally, he joined the family firm M. M. Warburg & Co., becoming a partner in 1893.[5] He married Nina Loeb of the Kuhn, Loeb & Co. in 1895 and settled in New York in 1902.[6] Before joining the Federal Reserve in 1913, Paul had directorships at Westinghouse Electric, B&O Railroad, and Wells Fargo Express.[7]

Club House on Jekyll Island, Georgia

Paul Moritz Warburg advocated for a central bank as early as 1903, bringing his experience of the European banking systems with him.[8] He wrote two articles promoting the concept of a central banking system after the Panic of 1907, including “A Plan for a Modified Central Bank” and “Defects and Needs of Our Banking System.”[9] He met with the New York Merchants Association, the American Economic Association, and leading academic economists advocating banking reform, gathering a tangible plan for the Federal Reserve.[10] On March 23, 1910, he made a speech at the New York YMCA entitled “A United Reserve Bank for the United States.”[11] He promoted having a centralized American bank and accepting paper instead of promissory notes and stated, “Small banks constitute a danger.”[12] He was among the few attendees of the secret two-week conference held at Jekyll Island, Georgia, on November 22, 1910, who drafted the central bank bill.[13]

Warburg called for a grassroots “decentralization” rallying cry and was named to head the “Businessmen’s Monetary Reform League” to lead the group to establish the “National Citizen’s League for the Creation of a Sound Banking System” (a forty-five-state organization) to push for a central bank in Chicago.[14][15] He was a Vice Chairman of the Federal Reserve and a Federal Reserve Board of Governors member under Woodrow Wilson.[16]

In later years, Paul Warburg published a two-volume history of the Fed and also publicized a prophecy of the impending collapse of Wall Street in 1929 that he and his partners saw coming.[17] Paul died in New York in January 1932, having changed the world in his lifetime.[18]

[1]Edward Morris, “Paul M. Warburg: 1868–1932: Daddy Warbucks,” in Wall Streeters: The Creators and Corruptors of American Finance, ed. Edward Morris (Columbia University Press, 2015), 39, https://doi.org/10.7312/columbia/9780231170543.003.0002.

[2]Economic Research Federal Reserve Bank of St. Louis, “The Meeting at Jekyll Island | Federal Reserve History,” Informational, Federal Reserve History, December 4, 2015, https://www.federalreservehistory.org/essays/jekyll-island-conference.

[3]Ron Chernow, The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family (New York: Vintage Books, 1994), xxii.

[4]Chernow, 3.

[5]Chernow, 40.

[6]Chernow, 54.

[7]Chernow, 138.

[8]Murray N. Rothbard, “The Origins of the Federal Reserve,” Quarterly Journal of Austrian Economics 2, no. 3 (Fall 1999): 33.

[9]Rothbard, 38.

[10]B. C. Forbes, “How the Federal Reserve Bank Was Evolved by Five Men on Jekyl Island,” Current Opinion 61, no. 6 (December 1916): 42.

[11]Rothbard, “The Origins of the Federal Reserve,” 45.

[12]Rothbard, 40.

[13]Forbes, “How the Federal Reserve Bank Was Evolved by Five Men on Jekyl Island,” 382.

[14]Rothbard, “The Origins of the Federal Reserve,” 48.

[15]Morris, “Paul M. Warburg,” 53.

[16]Chernow, The Warburgs, 308.

[17]Chernow, 308–9.

[18]Chernow, 330.

Bibliography

Acklom, Moreby. Jekyll Island Club. N. Y.: Photogravure & Color Company, 1919.

Chernow, Ron. The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family. New York: Vintage Books, 1994.

Economic Research Federal Reserve Bank of St. Louis. “The Meeting at Jekyll Island | Federal Reserve History.” Informational. Federal Reserve History, December 4, 2015. https://www.federalreservehistory.org/essays/jekyll-island-conference.

Forbes, B. C. “How the Federal Reserve Bank Was Evolved by Five Men on Jekyll Island.” Current Opinion 61, no. 6 (December 1916): 382–83.

Kuiper, Kathleen. “Warburg Family | Banking, Finance, Philanthropy | Britannica.” In Britannica Online. Accessed November 16, 2023. https://www.britannica.com/topic/Warburg-family.

Morris, Edward. “Paul M. Warburg: 1868–1932: Daddy Warbucks.” In Wall Streeters: The Creators and Corruptors of American Finance, edited by Edward Morris, 36–54. Columbia University Press, 2015. https://doi.org/10.7312/columbia/9780231170543.003.0002.

Rothbard, Murray N. “The Origins of the Federal Reserve.” Quarterly Journal of Austrian Economics 2, no. 3 (Fall 1999): 3–51.

Warburg, Paul M. “A United Reserve Bank of the United States.” Proceedings of the Academy of Political Science in the City of New York 1, no. 2 (1911): 302–42. https://doi.org/10.2307/1171675.

———. “Address of Hon. Paul M. Warburg of the Federal Reserve Board before the Twin City Bankers’ Club of St. Paul and Minneapolis at the Minnesota Club, St. Paul, Oct. 22, 1915.” Speech. St. Paul, Minnesota, October 22, 1915. https://fraser.stlouisfed.org/title/statements-speeches-paul-m-warburg-454?browse=1910s.

———. Defects and Needs of Our Banking System. New York: Oppenheimer Printing Co., 1907. https://hdl.handle.net/2027/pst.000055506663?urlappend=%3Bseq=11.

———. The Federal Reserve System and the Banks. Atlantic City, New Jersey: New York State Bankers’ Association, 1916. https://hdl.handle.net/2027/uc2.ark:/13960/t53f4p208?urlappend=%3Bseq=5.