the world of private banking

JEwISH PRIVAtE BANKS 223
financial services to industry. On the continent, postwar inflation eroded their
resources while large banks were able to rebuild deposits. This was the beginning
of a new process in the economic role of Jewish private bankers, which was
accelerated by the rise of Nazism in Germany and World War II. To diversify their
income, those who survived developed a fee-based business in providing advisory
services and arranging credits instead of making loans and taking positions. In
Germany, Max Warburg and Carl Melchior were from the start the most important
figures on the reparations question. This was not only because they enjoyed a
broad international experience, but also because they had excellent connections
in Great Britain and the United States. Two of Max Warburg’s brothers were
American bankers through their partnership in Kuhn, Loeb & Co. One of them,
Paul Warburg, was a founder of the Federal Reserve System. With Franz von
Mendelssohn, who operated in Amsterdam, the European centre for German
currency and trade operations during the inflation period, the Warburgs contributed
to facilitating capital flows to Germany after the war.
When Hitler came to power, Schacht failed to protect the Jewish bankers on
whom he depended as a source of foreign exchange to finance rearmament. In 1938,
the Jewish banks had to choose between liquidation, selling out to an Aryan bank,
or being Aryanized. Aryanization meant that the Jewish partners could sell their
stakes to non-Jews and preserve the firm. As a consequence, almost two hundred
private banks disappeared and most of the Jewish families fled abroad. The same
process occurred in the countries occupied by the Nazis during World War II.
Many of those who survived did not return to the home country and settled in Great
Britain or in the United States. Some very old families came back after the war
to Germany, like the Oppenheims who controlled Colonia, the second insurance
group in Western Germany, which they sold in 1989 with the aim of centring their
business on banking. In Belgium, the Lambert and Philippson families came back.
Léon Lambert rebuilt his bank and developed investment banking. After merging
his group with the Banque de Bruxelles, he progressively lost influence and was
supplanted by financier Albert Frère. To-day only the Philippson family is still
present in private banking, through Banque Degroof, which adopted the name of
their wartime Aryan partner.
In both the United States and Europe, Jewish private bankers developed
innovation in finance by leveraging their experience and dense network of
international business and political connections to advise governments and big
business. Creativity had become the key to their fortune. Lazard Brothers is
the paradigm of this new type of bank. They are still today at the top of merger
and acquisition business, through keeping the tradition of the haute banque of
privileging quality of services over capital investment. Similarly, the rise of
Siegmund Warburg, who emigrated from Germany to London in 1934, deserves
a mention. Besides traditional activities like issuing the first long-term postwar
dollar bond for a European institution, the European Coal and Steel Community,
he became famous by creating the Euromarkets. He gained worldwide fame by
conducting successfully for Reynolds Cy the hostile takeover of British Aluminium.