From Pawnbrokers to Power Brokers : THE WARBURGS: The 20th-Century Odyssey of a Remarkable Jewish Family, <i> By Ron Chernow (Random House: $30; 820 pp.)</i>

When Frederick Morton published his landmark biography of the Rothschilds in 1966, the economy was vigorous, interest rates were attractive and savings-and-loan organizations enjoyed a robust reputation. Today the engine is in reverse, and few depositors would disagree with Mark Twain’s definition of a banker as “a fellow who lends his umbrella when the sun is shining and wants it back the minute it begins to rain.”

So this is not, perhaps, the best moment to tell yet another ghetto-to-glory saga of remarkable financiers. Ron Chernow has done it anyway, and save for his timing and a few infelicitous phrases, “The Warburgs” turns out to be a keeper on the long shelf of fat books about rich people.

The family’s first certifiable ancestor appears in 16th-Century Westphalia: Simon Van Cassel, a pawnbroker in the town of Warburg. Jews of that period found themselves barred from professional guilds and from farming. By default they turned to money lending. The situation formed the bedrock of their fortune--and their catastrophe.

Simon’s descendants pushed on to Hamburg, but they kept the name of his town. Acutely aware that blood was thicker than gold, this new group of merchant bankers married well. Thus began, says Chernow, “a Byzantine network of connections that converted the Warburgs into a small-scale multinational corporation” with branches in Russia, Scandinavia and France. Warburgs begat Warburgs, and in each generation the financial acumen increased.

Late in the 19th Century, one paterfamilias uttered a memorable definition: “To sell a man pearls that you have got and he wants, that is not business. To sell a man pearls that you have not got and that he does not want, that is business.”

As canny as the Warburgs might have been about fiscal matters, they were naifs when it came to politics. Germany was their home, and hardly any of them could believe the claims of Zionist Chaim Weitzman: suspicion and outright hatred of Hebrews “was eating into Germany . . . a heavy, solid, bookish anti-Semitism of Russian city hooligans.” Chernow is particularly acute in his account of prosperous German Jews in the first third of the 20th Century. They were, for the most part, superpatriots who thought they had found the key to acceptance, just as the gates of the ghetto were being welded shut. Some wandering Warburgs married into the powerful Wall Street families of the Schiffs and the Loebs. But the family’s focal point remained Deutschland, where the firm of M. M. Warburg had become the country’s leading international lender.

World War I split the family down the middle. Max Warburg, head of the German branch, hailed the Kaiser’s early victories. Chernow recalls the occasion in tragic detail: during the summer of 1914, “Thousands of jubilant people, including Max’s son Eric, gathered before the Rauhaus to cheer reports that the British army was in headlong flight. To delirious roars, the entire Senate emerged on the balcony in tail-coats, while the mayor read aloud stirring battlefield news. Swept by emotion, the crowd called for the German flag to be raised and simultaneously began singing, ‘Deutschland, Deutschland uber alles.’ Max’s partner was sure the war would be over by Christmas.”

The war was not over that Christmas, or the Christmas after that. When conditions grew dire for his country, Max warned the military not to torpedo American ships; it would draw the U.S. into the battle and guarantee defeat. For his plans Max was derided and ignored. After the predictions were borne out, Germany sent him to Versailles to help negotiate a treaty with the Allies. There he protested the punitive damages leveled against the fatherland. But anti-Semites wanted no part of the truth: pamphlets distributed at the Hamburg stock exchange disparaged the “Warburg Jewish Peace.” This provided the first sparks of the Holocaust to come.

Meanwhile, across the ocean another branch of Warburgs was rapidly becoming Americanized. They busied themselves with banking, philanthropies, government service--as well as some lighter diversions. Max’s nephew Jimmy backed Broadway shows and married a composer named Kay Swift. He divorced her upon discovering that she had eyes for another tunesmith named George Gershwin. Paul (“Piggy” to his friends) acted the part of playboy, to the amusement of high society. At Sun Valley he collided with a fellow skier. “Excuse me, Mr. Rockefeller,” he apologized. “I’m Piggy Warburg and I promise to marry you in the morning.” The family elders found him endlessly charming; still, they shook their heads over his business ventures. When a colleague encouraged young Warburg to invest in a new venture, Piggy’s father demurred. “I love you dearly,” he told his son, “but if you’re so irresponsible with money as all that, I’m going to put you on an allowance.” The friend was William F. Paley; the idea was a radio network called CBS.

The wealthy Warburgs stayed on in Germany, convinced that the nation’s Jewry could survive the storm. Even so, Max generously provided aid for those refugees who wanted it. The results were ambiguous. Chernow notes, “For many German Jews, the Warburgs were heroes who eased their way out of Germany by providing money, training or foreign currency at advantageous rates. Others, however, would feel bitter toward Max Warburg as a man who, by urging them to stay had played god with their lives.” In the end, Max and all but one of the other German Warburgs packed up and fled. (The young woman married an Aryan, kept a profile so low it was almost concave and miraculously survived the war.)

With most of their hard-won assets in Nazi hands, the German branch began anew in England and America. Jimmy’s cousin Seigmund became a prominent banker with close ties to the British government; he was eventually knighted by the Queen. Another cousin, Eric--the one who had cheered on the German troops in 1914--became a war hero with the U.S. Intelligence, then, after V-E Day, worked for German-American reconciliation. They and the next generation consolidated the family fortune, and re-established the Warburg reputation as a great Jewish banking family.

Yet this, as Chernow points out, was something of a misnomer. In the end, for all it had done to them, the old country exerted an almost mystical attraction. In 1990, Eric died in his German home at the age of 90; according to his wishes he was interred in the Gentile side of the Hamburg cemetery. Younger Warburgs confidently decided to re-establish the family bank, setting down new roots in the Federal Republic. History seemed to have come full circle. But seeming is not believing, and Chernow is acutely aware of the ethnic fevers now raging through Europe. He concludes: “As the generations changed in Hamburg, a tacit question disturbed the air. Was the germ of anti-Semitism finally dead in Germany? Or was it only dormant and waiting to flare up again? Had the Warburgs come back in vain?”

The biographer-historian offers no answers; these remain for the Germans, not the Warburgs to decide. But Chernow does provide a companion piece to his magisterial “House of Morgan,” which won the National Book Award three years ago. I wish that he had eschewed bromides like “‘Max Warburg’s head was at war with his heart” or “some demon tended to drive (Jimmy) to extremes.” But these are minor pocks in an impressive structure. The Warburg clan is not as flamboyant--or as appealing--as their great rivals, the Rothschilds. But recently they have done better, and the book about them is twice as thick as Frederick Morton’s elegant old family portrait. All that remains is the ultimate tribute: a Broadway musical based on the story of their epic rise, fall and resurgence.