and Kuhn, Loeb were not significant financiers of the German war machine
came from an American government panel. In 1918 a subcommittee of the
Senate Committee on the Judiciary reported on the organized brewery
interests, a suspected source of unpatriotic activities, and on the web of
German propaganda in America in 1914. One Justice Department official,
who had participated in a two-year government probe of German activities,
disclosed that the scope of German propaganda in the United States was
very wide. “It embraced the furnishing of news secretly to newspapers, the
distribution of film, the sending of lecturers through the country, the send-
ing of newspaper correspondents from Germany to this country to write fa-
vorable matter for the papers, the sending of American correspondents
abroad to send back to this country propaganda favorable to Germany.... It
embraced propaganda among the Irish, among the Jews, among the Catho-
lics.” To finance the operation and to secure American loans, the German
agents came armed with $150 million in German treasury notes.
Among many others, Jewish individuals and the Yiddish press were in-
vestigated by the government, and so too was Kuhn, Loeb. Like other
banks, Schiff’s firm advanced a loan to Dernburg that was backed by Ger-
man bonds, but the subcommittee could not prove that the firm knew of
the purposes for which the funds would be used. To be sure, Kuhn, Loeb,
again like other banks, also disposed of a small amount of German war
bonds, but it failed nonetheless to live up to Germany’s expectations. Schiff
explained privately to Max Warburg that America’s initial reluctance to
deal in European securities, as well as Kuhn, Loeb’s operational methods,
forbade it from handling the financial arrangements that Germany desired.
All told, Schiff and Kuhn, Loeb, in large measure because of the divided
sympathies of the partners, disappointed the kaiser. A government witness
told the subcommittee that the “vicious fire of gossip” about the firm not-
withstanding, Kuhn, Loeb was proven neither pro-German nor other than
neutral. “The sum total of the thing, is that, taking it by and large, you will
find that the firm of Kuhn, Loeb & Co. imposed on the German Govern-
ment such difficult conditions for financing that the German Government
was compelled to turn elsewhere to do its financing.” Unnoted by the sub-
committee, albeit denied by Schiff in 1915, were his two private monetary
contributions to the German cause.^17
Kuhn, Loeb’s minimal financial help to Germany on top of Schiff’s first
peace message and, more important, the report (soon discredited) that his
firm was participating in the large Allied loan in 1915, gave Schiff a bad
name in the German press. Max Warburg, who functioned as a conduit
between Schiff and the German government, reported that one Berlin
newspaper warned Germany to keep a safe distance from the American.
Harsh criticism also came from the American Jewish Chronicle, the periodi-
cal funded by the German government.^18
194 Jacob H. Schiff