High Financier: The Lives and Time of Siegmund Warburg by Niall Ferguson

The ObserverBusiness and finance booksReviewNiall Ferguson's engrossing biography of banking pioneer Siegmund Warburg reveals a workaholic with an eccentic streak

When I first encountered the City of London in the early 1960s, the merchant bank of SG Warburg & Co was frowned on by the establishment and considered rather sharp. The vulgar phrase "those shits" was used. Lord Kindersley, on the losing side of a takeover battle, vowed "never to speak to that fellow [Siegmund Warburg] again". Founded by Warburg in 1946, the bank had come into particular prominence in 1959 when the celebrated takeover battle lost by Kindersley's Lazard Brothers resulted in Warburg's client, Tube Investments, taking over British Aluminium, after some deft footwork by Warburg's.

Half a century is a very long time in financial affairs and Warburg's creation has been and gone – risen in the late 1950s, had its period of supremacy during the 60s and 70s, and fallen foul of the consequences of the City's "Big Bang" in 1986, and of the pursuit of profit and deals with "counterparties" rather than the relationship banking in which the great Siegmund believed. Warburg himself has long since moved on to more ethereal relationships. He had a good innings (he was born in 1902 and died in 1982) and did not live to see so much of what he believed in go to pot in subsequent financial excesses.

Niall Ferguson's biography, 12 years in the writing, paints the kind of sympathetic picture that families expect from commissioned biographers with access to the papers. But Ferguson is balanced and more at home in this area of financial and personal history than in his new love, economic policy. Much of the territory – Warburg's arrival in the 1930s as a refugee from the Nazis and his family background in German banking – is familiar and many of the good stories come from published memoirs of City figures, as well as David Kynaston's seminal The City of London Volume IV: A Club No More, 1945-2000.

But the story is engrossingly told, with some insights that will be new to many. For example, Warburg's pioneering role in seeing and founding the potential of the Eurobond market in the 1960s has long been the stuff of City legend, but Ferguson explains how one aspect of Warburg's intentions was to promote financial integration in Europe as a means of encouraging political integration and, eventually, monetary union – "linking the European capital markets and thereby advancing the wider project of European integration". Warburg knew the problems associated with a monetary union that is not propped up by political union – as we see only too clearly now. In common with so many of his generation, and not surprisingly, given what they had lived through, he was deeply suspicious of nationalism.

Indeed, like so many successful financiers, he had ambitions not so much to be a politician as to cultivate and influence politicians. He was close to prime minister Harold Wilson in 1964-70, being granted a knighthood in the face of opposition from the governor of the Bank of England, Lord Cromer, who said he might have been "very successful in his own affairs" but had "not... made any outstanding contribution to the common weal of the City".

Warburg affected not to be terribly interested in making money – except for his clients. "An intellectual whom fate rather than free will had made into a financier, he was always more interested in the organisational challenge of running a firm than in the bottom line," Ferguson writes. He said that probably the strongest influence on his life was his mother, who infused him with "a basic idealism" and believed "happiness in life consists in fulfilment of duties and not of desires".

Mother and wife apart, Warburg was more interested in relationship banking than in most of his relations, "selected relationship in contradiction to blood relationships". He fell in and out of these selected relationships, as some of his proteges learned to their cost. However, he claimed that most of his firm's "substantial transactions" were "the result of cultivation of contacts over very many years".

He was notoriously eccentric in the way he chose people to work for him – trusting graphologists and hiring people if they shared his enthusiasm for Thomas Mann, Dickens, Balzac, Tolstoy and Trollope (not a bad list, it has to be said). He was a workaholic and he brought round-the-clock work to his own company well before the wider development in this direction after Big Bang. One of the bank's strange practices was to have two lunch sessions, one succeeding the other.

On a personal note, I cannot resist ending by mentioning that when my late father-in-law, Maurice Stonefrost, was director-general of the Greater London Council, with its prominent role in the Eurobond market, he was much in demand at Warburg's and was invited to lunch by two different directors on the same day. Demonstrating that Warburg's internal communications were not infallible, he went straight from the first lunch to the second.

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