The Bank for International Settlements actually financed Hitler’s war machine
The official history of the bank, written in 1950 but posted online for the
first time on Tuesday, reveals how we betrayed Czechoslovakia – not just
with the infamous Munich agreement of September 1938, which allowed the
Nazis to annex the Sudetenland, but also in London, where Montagu Norman,
the eccentric but ruthless governor of the Bank of England agreed to
surrender gold owned by the National Bank of Czechoslovakia.
The Czechoslovak gold was held in London in a sub-account in the name of the
Bank for International Settlements, the Basel-based bank for central banks.
When the Nazis marched into Prague in March 1939 they immediately sent armed
soldiers to the offices of the National Bank. The Czech directors were
ordered, on pain of death, to send two transfer requests.
The first instructed the BIS to transfer 23.1 metric tons of gold from the
Czechoslovak BIS account, held at the Bank of England, to the Reichsbank BIS
account, also held at Threadneedle Street.
The second order instructed the Bank of England to transfer almost 27 metric
tons of gold held in the National Bank of Czechoslovakia’s own name to the
BIS’s gold account at the Bank of England.
To outsiders, the distinction between the accounts seems obscure. Yet it
proved crucial – and allowed Norman to ensure that the first order was
carried out. The Czechoslovak bank officials believed that as the orders had
obviously been carried out under duress neither would be allowed to go
through. But they had not reckoned on the bureaucrats running the BIS and
the determination of Montagu Norman to see that procedures were followed,
even as his country prepared for war with Nazi Germany.
His decision caused uproar, both in the press and in Parliament. George
Strauss, a Labour MP, spoke for many when he thundered in Parliament: “The
Bank for International Settlements is the bank which sanctions the most
notorious outrage of this generation – the rape of Czechoslovakia.” Winston
Churchill demanded to know how the government could ask its citizens to
enlist in the military when it was “so butter-fingered that £6 million worth
of gold can be transferred to the Nazi government”.
It was a good question. Thanks to Norman and the BIS, Nazi Germany had just
looted 23.1 tons of gold without a shot being fired. The second transfer
order, for the gold held in the National Bank of Czechoslovakia’s own name,
did not go through. Sir John Simon, the Chancellor of the Exchequer, had
instructed banks to block all Czechoslovak assets.
The documents released by the Bank of England are revealing, both for what
they show and what they omit. They are a window into a world of fearful
deference to authority, the primacy of procedure over morality, a world
where, for the bankers, the most important thing is to keep the channels of
international finance open, no matter what the human cost. A world, in other
words, not entirely different to today.
The BIS was founded in 1930, in effect by Montagu Norman and his close friend
Hjalmar Schacht, the former president of the Reichsbank, known as the father
of the Nazi economic miracle. Schacht even referred to the BIS as “my” bank.
The BIS is a unique hybrid: a commercial bank protected by international
treaty. Its assets can never be seized, even in times of war. It pays no
taxes on profits. The Czechoslovaks believed that the BIS’s legal immunities
would protect them. But they were wrong.
The Bank of England’s historian argued that to refuse the transfer order would
have been a breach of Britain’s treaty obligations with regard to the BIS.
In fact there was a powerful counter-argument that the Nazi invasion of
Czechoslovakia had rendered any such obligations null and void as the
country no longer existed.
A key sentence in the Bank of England documents is found on page 1,295. It
reads: “The general attitude of the Bank of England directors of the BIS
during the war was governed by their anxiety to keep the BIS to play its
part in the solution of post-war problems”. And here the secret history of
the BIS and its strong relationship with the Bank of England becomes ever
more murky.
During the war the BIS proclaimed that it was neutral, a view supported by the
Bank of England. In fact the BIS was so entwined with the Nazi economy that
it helped keep the Third Reich in business. It carried out foreign exchange
deals for the Reichsbank; it accepted looted Nazi gold; it recognised the
puppet regimes installed in occupied countries, which, together with the
Third Reich, soon controlled the majority of the bank’s shares.
Indeed, the BIS was so useful for the Nazis that Emil Puhl, the vice-president
of the Reichsbank and BIS director, referred to the BIS as the Reichsbank’s
only “foreign branch”.
The BIS’s reach and connections were vital for Germany. So much so, that all
through the war, the Reichsbank continued paying interest on the monies lent
by the BIS. This interest was used by the BIS to pay dividends to
shareholders – which included the Bank of England. Thus, through the BIS,
the Reichsbank was funding the British war economy. After the war, five BIS
directors were tried for war crimes, including Schacht. “They don’t hang
bankers,” Schacht supposedly said, and he was right – he was acquitted.
Buried among the typewritten pages of the Bank of England’s history is a name
of whom few have ever heard, a man for whom, like Montagu Norman, the
primacy of international finance reigned over mere national considerations.
Thomas McKittrick, an American banker, was president of the BIS. When the
United States entered the war in December 1941, McKittrick’s position, the
history notes, “became difficult”. But McKittrick managed to keep the bank
in business, thanks in part to his friend Allen Dulles, the US spymaster
based in Berne. McKittrick was an asset of Dulles, known as Codename 644,
and frequently passed him information that he had garnered from Emil Puhl,
who was a frequent visitor to Basel and often met McKittrick.
Declassified documents in the American intelligence archives reveal an even
more disturbing story. Under an intelligence operation known as the “Harvard
Plan”, McKittrick was in contact with Nazi industrialists, working towards
what the US documents, dated February 1945, describe as a “close cooperation
between the Allied and German business world”.
Thus while Allied soldiers were fighting through Europe, McKittrick was
cutting deals to keep the Germany economy strong. This was happening with
what the US documents describe as “the full assistance” of the State
Department.
The Bank of England history also makes disparaging reference to Harry Dexter
White, an official in the Treasury Department, who was a close ally of Henry
Morgenthau, the Treasury Secretary. Morgenthau and White were the BIS’s most
powerful enemies and lobbied hard at Bretton Woods in July 1944, where the
Allies met to plan the post-war financial system, for the BIS to be
closed.White, the Bank history notes rather sneeringly, had said of the BIS:
“There is an American president doing business with the Germans while our
boys are fighting the Germans.”
Aided by its powerful friends, such as Montagu Norman, Allen Dulles and much
of Wall Street, the BIS survived the attempts by Morgenthau and White to
close it down. The bank’s allies used precisely the argument detailed on
page 1,295 of the Bank of England’s history: the BIS was needed to plan the
post-war European economy.
From the 1950s to the 1990s the BIS hosted much of the planning and technical
preparation for the introduction of the euro. Without the BIS the euro would
probably not exist. In 1994, Alexander Lamfalussy, the former BIS manager,
set up the European Monetary Institute, now known as the European Central
Bank.
The BIS remains very profitable. It has only about 140 customers (it refuses
to say how many) but made a tax-free profit of about £900 million last year.
Every other month it hosts the Global Economy Meetings, where 60 of the most
powerful central bankers, including Mark Carney, Governor of the Bank of
England, meet. No details of meetings are released, even though the
attendees are public servants, charged with managing national economies.
The BIS also hosts the Basel Committee on Banking Supervision, which regulates
commercial banks, and the new Financial Stability Board, which coordinates
national regulatory authorities. The BIS has made itself the central pillar
of the global financial system.
Montagu Norman and Hjalmar Schacht would be very proud indeed.
No comments:
Post a Comment