CHAPTER
ONE
Wall
Street Paves the Way for Hitler
The Dawes Plan, adopted in August 1924, fitted perfectly
into the plans of the German General Staffs military economists. (Testimony
before United States Senate, Committee on Military Affairs, 1946.)
The post-World War II Kilgore Committee of the United States Senate heard detailed evidence from government officials to the effect that,
...when the Nazis came to power in 1933, they found that
long strides had been made since 1918 in preparing Germany for war from an
economic and industrial point of view.1
This build-up for European war both before and after 1933
was in great part due to Wall Street financial assistance in the 1920s to
create the German cartel system, and to technical assistance from well-known
American firms which will be identified later, to build the German Wehrmacht.
Whereas this financial and technical assistance is referred to as
"accidental" or due to the "short-sightedness" of American
businessmen, the evidence presented below strongly suggests some degree of premeditation
on the part of these American financiers. Similar and unacceptable pleas of
"accident" were made on behalf of American financiers and
industrialists in the parallel example of building the military power of the
Soviet Union from 1917 onwards. Yet these American capitalists were willing to
finance and subsidize the Soviet Union while the Vietnam war was underway,
knowing that the Soviets were supplying the other side.
The contribution made by American capitalism to German war
preparations before 1940 can only be described as phenomenal. It was certainly
crucial to German military capabilities. For instance, in 1934 Germany produced
domestically only 300,000 tons of natural petroleum products and less than
800,000 tons of synthetic gasoline; the balance was imported. Yet, ten years
later in World War II, after transfer of the Standard Oil of New Jersey
hydrogenation patents and technology to I. G. Farben (used to produce synthetic
gasoline from coal), Germany produced about 6 1/2 million tons of oil — of
which 85 percent (5 1/2 million tons) was synthetic oil using the Standard Oil
hydrogenation process. Moreover, the control of synthetic oil output in Germany
was held by the I. G. Farben subsidiary, Braunkohle-Benzin A. G., and this
Farben cartel itself was created in 1926 with Wall Street financial assistance.
On the other hand, the general impression left with the
reader by modern historians is that this American technical assistance was
accidental and that American industrialists were innocent of wrongdoing. For
example, the Kilgore Committee stated:
The United States accidentally played an important role in
the technical arming of Germany. Although the German military planners had
ordered and persuaded manufacturing corporations to install modern equipment
for mass production, neither the military economists nor the corporations seem
to have realized to the full extent what that meant. Their eyes were opened
when two of the chief American automobile companies built plants in Germany in
order to sell in the European market, without the handicap of ocean freight
charges and high German tariffs. Germans were brought to Detroit to learn the
techniques of specialized production of components, and of straight-line
assembly. What they saw caused further reorganization and refitting of other
key German war plants. The techniques learned in Detroit were eventually used
to construct the dive-bombing Stukas .... At a later period I. G. Farben
representatives in this country enabled a stream of German engineers to visit
not only plane plants but others of military importance, in which they learned
a great deal that was eventually used against the United States.2
Following these observations, which emphasize the
"accidental" nature of the assistance, it has been concluded by such
academic writers as Gabriel Kolko, who is not usually a supporter of big
business, that:
It is almost superfluous to point out that the motives of
the American firms bound to contracts with German concerns Were not pro. Nazi,
whatever else they may have been.3
Yet, Kolko to the contrary, analyses of the contemporary
American business press confirm that business journals and newspapers were
fully aware of the Nazi threat and its nature, while warning their business
readers of German war preparations. And even Kolko admits that:
The business press [in the United States] was aware, from
1935 on, that German prosperity was based on war preparations. More important,
it was conscious of the fact that German industry was under the control of the
Nazis and was being directed to serve Germany's rearmament, and the firm
mentioned most frequently in this context was the giant chemical empire, I. G.
Farben.4
Further, the evidence presented below suggests that not only
was an influential sector of American business aware of the nature of Nazism,
but for its own purposes aided Nazism wherever possible (and profitable) —with full knowledge that the probable
outcome would be war involving Europe and the United States. As we shall
see, the pleas of innocence do not accord with the facts.
The Treaty of Versailles after World War I imposed a heavy reparations
burden on defeated Germany. This financial burden — a real cause of the German
discontent that led to acceptance of Hitlerism — was utilized by the
international bankers for their own benefit. The opportunity to float
profitable loans for German cartels in the United States was presented by the
Dawes Plan and later the Young Plan. Both plans were engineered by these
central bankers, who manned the committees for their own pecuniary advantages,
and although technically the committees were not appointed by the U.S.
Government, the plans were in fact approved and sponsored by the Government.
Post-war haggling by financiers and politicians fixed German
reparations at an annual fee of 132 billion gold marks. This was about one
quarter of Germany's total 1921 exports. When Germany was unable to make these
crushing payments, France and Belgium occupied the Ruhr to take by force what could not be obtained
voluntarily. In 1924 the Allies appointed a committee of bankers (headed by
American banker Charles G. Dawes) to develop a program of reparations payments.
The resulting Dawes Plan was, according to Georgetown University Professor of
International Relations Carroll Quigley, "largely a J.P. Morgan
production."5
The Dawes Plan arranged a series of foreign loans totaling $800 million with
their proceeds flowing to Germany. These loans are important for our story
because the proceeds, raised for the greater part in the United States from
dollar investors, were utilized in the mid-1920s to create and consolidate the
gigantic chemical and steel combinations of I. G. Farben and Vereinigte
Stahlwerke, respectively. These cartels not only helped Hitler to power in
1933; they also produced the bulk of key German war materials used in World War
II.
Between 1924 and 1931, under the Dawes Plan and the Young
Plan, Germany paid out to the Allies about 86 billion marks in reparations. At
the same time Germany borrowed abroad, mainly in the U.S., about 138 billion
marks — thus making a net German payment of only three billion marks for
reparations. Consequently, the burden of German monetary reparations to the
Allies was actually carried by foreign subscribers to German bonds issued by
Wall Street financial houses — at significant profits for themselves, of
course. And, let it be noted, these firms were owned by the same financiers who
periodically took off their banker hats and donned new ones to become "statesmen."
As "statesmen" they formulated the Dawes and Young Plans to
"solve" the "problem" of reparations. As bankers, they
floated the loans. As Carroll Quigley points out,
It is worthy of note that this system was set up by the
inter. national bankers and that the subsequent lending of other people's money
to Germany was very profitable to these bankers.6
Who were the New York international bankers who formed these
reparations commissions?
The 1924 Dawes Plan experts from the United States were
banker Charles Dawes and Morgan representative Owen Young, who was president of
the General Electric Company. Dawes was chairman of the Allied Committee of
Experts in 1924. In 1929 Owen Young became chairman of the Committee of
Experts, supported by J.P. Morgan himself, with alternates T. W. Lamont, a
Morgan partner, and T. N. Perkins, a banker with Morgan associations. In other
words, the U.S. delegations were purely and simply, as Quigley has pointed out,
J. P. Morgan delegations using the authority and seal of the United States to
promote financial plans for their own pecuniary advantage. As a result, as
Quigley puts it, the "international bankers sat in heaven, under a rain of
fees and commissions."7
The German members of the Committee of Experts were equally
interesting. In 1924 Hjalmar Schacht was president of the Reichsbank and had
taken a prominent role in organization work for the Dawes Plan; so did German
banker Carl Melchior. One of the 1928 German delegates was A. Voegler of the
German steel cartel Stahlwerke Vereinigte. In brief, the two significant
countries involved — the United States and Germany —were represented by the
Morgan bankers on one side and Schacht and Voegler on the other, both of whom
were key characters in the rise of Hitler's Germany and subsequent German
rearmament.
Finally, the members and advisors of the Dawes and Young
Commissions were not only associated with New York financial houses but, as we
shall later see, were directors of firms within the German cartels which aided
Hitler to power.
According to Hitler's financial genie, Hjalmar Horace
Greeley Schacht, and Nazi industrialist Fritz Thyssen, it was the 1928 Young
Plan (the successor to the Dawes Plan), formulated by Morgan agent Owen D.
Young, that brought Hitler to power in 1933.
Fritz Thyssen claims that,
I turned to the National Socialist Party only after I became
convinced that the fight against the Young Plan was unavoidable if complete
collapse of Germany was to be prevented.8
The difference between the Young Plan and the Dawes Plan was
that, while the Young Plan required payments in goods produced in Germany
financed by foreign loans, the Young Plan required monetary payments and
"In my judgment [wrote Thyssen] the financial debt thus created was bound
to disrupt the entire economy of the Reich."
The Young Plan was assertedly a device to occupy Germany
with American capital and pledge German real assets for a gigantic mortgage
held in the United States. It is noteworthy that German firms with U.S.
affiliations evaded the Plan by the device of temporary foreign ownership. For
instance, A.E.G. (German General Electric), affiliated with General Electric in
the U.S., was sold to a Franco-Belgian holding company and evaded the
conditions of the Young Plan. It should be noted in passing that Owen Young was
the major financial backer for Franklin D. Roosevelt in the United European venture
when FDR, as a budding Wall Street financier, endeavoured to take advantage of
Germany's 1925 hyperinflation. The United European venture was a vehicle to
speculate and to profit upon the imposition of the Dawes Plan, and is clear
evidence of private financiers (including Franklin D. Roosevelt) using the
power of the state to advance their own interests by manipulating foreign
policy.
Schacht's parallel charge that Owen Young was responsible
for the rise of Hitler, while obviously self-serving, is recorded in a U.S.
Government Intelligence report relating the interrogation of Dr. Fritz Thyssen
in September, 1945:
The acceptance of the Young Plan and its financial
principles increased unemployment more and more, until about one million were
unemployed. People were desperate. Hitler said he would do away with
unemployment. The government in power at that time was very bad, and the
situation of the people was getting worse. That really was the reason of the
enormous success Hitler had in the election. When the last election came, he
got about 40%.9
However, it was Schacht, not Owen Young, who conceived the
idea which later became the Bank for International Settlements. The actual
details were worked out at a conference presided over by Jackson Reynolds,
"one of the leading New York bankers," together with Melvin Traylor
of the First National Bank of Chicago, Sir Charles Addis, formerly of the Hong
Kong and Shanghai Banking Corporation, and various French and German bankers.10 The B.I.S.
was essential under the Young Plan as a means to afford a ready instrument for
promoting international financial relations. According to his own statements,
Schacht also gave Owen Young the idea that later became the post-World War II
International Bank for Reconstruction and Development:
"A bank of this kind will demand financial co-operation
between vanquished and victors that will lead to community of interests which
in turn will give rise to mutual confidence and understanding and thus promote
and ensure peace."
I can still vividly recall the setting in which this
conversation took place. Owen Young was seated in his armchair puffing away at
his pipe, his legs outstretched, his keen eyes fixed unswervingly on me. As is
my habit when propounding such arguments I was doing a quiet steady
"quarter-deck" up and down the room. When I had finished there was a
brief pause. Then his whole face lighted up and his resolve found utterance in
the words:
"Dr. Schacht, you gave me a wonderful idea and I am
going to sell it to the world.11
This interplay of ideas and cooperation between Hjalmar
Sehacht in Germany and, through Owen Young, the J.P. Morgan interests in New
York, was only one facet of a vast and ambitious system of cooperation and
international alliance for world control. As described by Carroll Quigley, this
system was "... nothing less than to create a world system of financial
control, in private hands, able to dominate the political system of each
country and the economy of the world as a whole.12
This feudal system worked in the 1920s, as it works today,
through the medium of the private central bankers in each country who control
the national money supply of individual economies. In the 1920s and 1930s, the
New York Federal Reserve System, the Bank of England, the Reichs-bank in
Germany, and the Banque de France also more or less influenced the political
apparatus of their respective countries indirectly through control of the money
supply and creation of the monetary environment. More direct influence was
realized by supplying political funds to, or withdrawing support from,
politicians and political parties. In the United States, for example, President
Herbert Hoover blamed his 1932 defeat on withdrawal of support by Wall Street and
the switch of Wall Street finance and influence to Franklin D. Roosevelt.
Politicians amenable to the objectives of financial
capitalism, and academies prolific with ideas for world control useful to the
international bankers, are kept in line with a system of rewards and penalties.
In the early 1930s the guiding vehicle for this international system of
financial and political control, called by Quigley the "apex of the
system," was the Bank for International Settlements in Basle, Switzerland.
The B.I.S. apex continued its work during World War II as the medium through
which the bankers — who apparently were not at war with each other — continued
a mutually beneficial exchange of ideas, information, and planning for the
post-war world. As one writer has observed, war made no difference to the
international bankers:
The fact that the Bank possessed a truly international staff
did, of course, present a highly anomalous situation in time of war. An
American President was transacting the daily business of the Bank through a
French General Manager, who had a German Assistant General Manager, while the
Secretary-General was an Italian subject. Other nationals occupied other posts.
These men were, of course, in daily personal contact with each other. Except
for Mr. McKittrick [see infra] theft were of course situated permanently in
Switzerland during this period and were not supposed to be subject to orders of
their government at any time. However, the directors of the Bank remained, of
course, in their respective countries and had no direct contact with the
personnel of the Bank. It is alleged, however, that H. Schacht, president of
the Reichsbank, kept a personal representative in Basle during most of this
time.13
It was such secret meetings, "... meetings more secret than any ever held by Royal Ark Masons or by any Rosicrucian Order..."14 between the
central bankers at the "apex" of control that so intrigued
contemporary journalists, although they only rarely and briefly penetrated
behind the mask of secrecy.
A practical example of international finance operating
behind the scenes to build and manipulate politico-economic systems is found in
the German cartel system. The three largest loans handled by the Wall Street
international bankers for German borrowers in the 1920s under the Dawes Plan
were for the benefit of three German cartels which a few years later aided
Hitler and the Nazis to power. American financiers were directly represented on the boards of two of these three
German cartels. This American assistance to German cartels has been described
by James Martin as follows: "These loans for reconstruction became a
vehicle for arrangements that did more to promote World War II than to
establish peace after World War I.15
The three dominant cartels, the amounts borrowed and the
Wall Street floating syndicate were as follows:
|
German Cartel
|
Wall Street Syndicate
|
Amount Issued
|
|
Allgemeine
Elektrizitats- Gesellschaft (A.E.G.) (German General Electric) |
National City
Co. |
$35,000,000
|
|
Vereinigte Stahlwerke
(United Steelworks) |
Dillon, Read &
Co. |
$70,225,000
|
|
American I.G.
Chemical (I.G. Farben) |
National City
Co. |
$30,000,000
|
Looking at all the loans issued, it appears that only a
handful of New York financial houses handled the German reparations financing.
Three houses — Dillon, Read Co.; Harris, Forbes & Co.; and National City
Company — issued almost three-quarters of the total face amount of the loans
and reaped most of the profits:
|
|
|||
|
Wall Street Syndicate Manager
|
Participation
in
German industrial issues in U.S. capital market |
Profits
on
German loans* |
Percent
of total |
|
Dillon, Read &
Co.
|
$241,325,000
|
$2.7 million
|
29.2
|
|
Harris, Forbes & Co.
|
186,500,000
|
1.4 million
|
22.6
|
|
National City Co.
|
173,000,000
|
5.0 million
|
20.9
|
|
Speyer & Co.
|
59,500,000
|
0.6 million
|
7.2
|
|
Lee, Higginson & Co.
|
53,000,000
|
n.a
|
6.4
|
|
Guaranty Co. of N.Y.
|
41,575,000
|
0.2 million
|
5.0
|
|
Kuhn, Loeb & Co.
|
37,500,000
|
0.2 million
|
4.5
|
|
Equitable Trust Co.
|
34,000,000
|
0.3 million
|
4.1
|
|
|
___________
|
___________
|
_________
|
|
TOTAL
|
$826,400,000
|
$10.4
million
|
99.9
|
Source: See Appendix A
*Robert R. Kuczynski, Bankers Profits from German Loans
*Robert R. Kuczynski, Bankers Profits from German Loans
(Washington, D.C.: Brookings Institution, 1932), p. 127.
After the mid-1920s the two major German combines of I.G.
Farben and Vereinigte Stahlwerke dominated the chemical and steel cartel system
created by these loans. Although these firms. had a voting majority in the
cartels for only two or three basic products, they were able — through control
of these basics — to enforce their will throughout the cartel. I.G. Farben was
the main producer of basic chemicals used by other combines making chemicals,
so its economic power position cannot be measured only by its capacity to
produce a few basic chemicals. Similarly, Vereinigte Stahlwerke, with a
pig-iron capacity greater than that of all other German iron and steel
producers combined, was able to exercise far more influence in the
semi-finished iron and steel products cartel than its capacity for pig-iron
production suggests. Even so the percentage output of these cartels for all
products was significant:
|
Vereinigte
Stahlwerke
products |
Percent
of German total
production in 1938 |
|||
|
Pig iron
|
50.8
|
|||
|
Pipes and tubes
|
45.5
|
|||
|
Heavy plate
|
36.0
|
|||
|
Explosives
|
35.0
|
|||
|
Coal tar
|
33.3
|
|||
|
Bar steel
|
37.1
|
|||
|
I.G.
Farben
|
Percent
of German total
production in 1937 |
|||
|
Synthetic methanol
|
100.0
|
|||
|
Magnesium
|
100.0
|
|||
|
Chemical nitrogen
|
70.0
|
|||
|
Explosives
|
60.0
|
|||
|
Synthetic gasoline
(high octane) |
46.0 (1945)
|
|||
|
Brown coal
|
20.0
|
|||
Among the products that brought I.G. Farben and Vereinigte
Stahlwerke into mutual collaboration were coal tar and chemical nitrogen, both
of prime importance for the manufacture of explosives. I. G. Farben had a
cartel position that assured dominance in the manufacture and sale of chemical
nitrogen, but had only about one percent of the cok-ing capacity of Germany.
Hence an agreement was made under which Farben explosives subsidiaries obtained
their benzol, toluol, and other primary coal-tar products on terms dictated by
Vereinigte Stahlwerke, while Vereinigte Stahlwerke's explosives subsidiary was
dependent for its nitrates on terms set by Farben. Under this system of mutual
collaboration and inter-dependence, the two cartels, I.G. Farben and Vereinigte
Stahlwerke, produced 95 percent of German .explosives in 1957-8 on the eve of
World War II. This production was from
capacity built by American loans and to some extent by American technology.
The I. G. Farben-Standard Oil cooperation for production of
synthetic oil from coal gave the I. G. Farben cartel a monopoly of German
gasoline production during World War II. Just under one half of German high
octane gasoline in 1945 was produced directly by I. G. Farben and most of the
balance by its affiliated companies.
In brief, in synthetic gasoline and explosives (two of the
very basic elements of modern warfare), the control of German World War II
output was in the hands of two German combines created by Wall Street loans
under the Dawes Plan.
Moreover, American assistance to Nazi war efforts extended
into other areas.17
The two largest tank producers in Hitler's Germany were Opel, a wholly owned
subsidiary of General Motors (controlled by the J.P. Morgan firm), and the Ford
A. G. subsidiary of the Ford Motor Company of Detroit. The Nazis granted
tax-exempt status to Opel in 1936, to enable General Motors to expand its
production facilities. General Motors obligingly reinvested the resulting
profits into German industry. Henry Ford was decorated by the Nazis for his services to Nazism. (See p. 93.)
Alcoa and Dow Chemical worked closely with Nazi industry with numerous
transfers of their domestic U.S. technology. Bendix Aviation, in which the J.P.
Morgan-controlled General Motors firm had a major stock interest, supplied
Siemens & Halske A. G. in Germany with data on automatic pilots and
aircraft instruments. As late as 1940, in the "unofficial war,"
Bendix Aviation supplied complete technical data to Robert Bosch for aircraft
and diesel engine starters and received royalty payments in return.
In brief, American companies associated with the
Morgan-Rockefeller international investment bankers — not, it should be noted,
the vast bulk of independent American industrialists — were intimately related
to the growth of Nazi industry. It is important to note as we develop our story
that General Motors, Ford, General Electric, DuPont and the handful of U.S.
companies intimately involved with the development of Nazi Germany were —
except for the Ford Motor Company — controlled by the Wall Street elite — the
J.P. Morgan firm, the Rockefeller Chase Bank and to a lesser extent the Warburg
Manhattan bank.18
This book is not an indictment of all American
industry and finance. It is an indictment of the "apex" — those firms
controlled through the handful of financial houses, the Federal Reserve Bank
system, the Bank for International Settlements, and their continuing
international cooperative arrangements and cartels which attempt to control the
course of world politics and economics.
Footnotes:
1United States Congress. Senate. Hearings before a
Subcommittee of the Committee on Military Affairs. Elimination of German Resources for War. Report pursuant to S. Res.
107 and 146, July 2, 1945, Part 7, (78th Congress and 79th Congress),
(Washington: Government Printing Office, 1945), hereafter cited as Elimination of German Resources.
3Gabriel Kolko, "American Business and Germany,
1930-1941," The Western Political
Quarterly, Volume XV, 1962.
4Ibid, p. 715.
5Carroll Quigley, op.
cit.
6Ibid, p. 308.
7Carroll Quigley, op. cit.,
p. 309.
8Fritz Thyssen, I Paid
Hitler, (New York: Farrar & Rinehart, Inc., n.d.), p. 88.
9U.S. Group Control Council (Germany), Office of the Director
of Intelligence, Intelligence Report No. EF/ME/1, 4 September 1945. Also see
Hjalmar Schacht, Confessions of "the
old Wizard", (Boston: Houghton Mifflin, 1956)
10Hjalmar Schacht, op cit.,
p. 18. Fritz Thyssen adds, "Even at the time Mr, Dillon, a New York Banker
of Jewish origin whom I much admire told me 'In your place I would not sign the
plan.'"
11Ibid, p. 282.
12Carroll Quigley, op.
cit., p. 324.
13Henry H. Schloss, The
Bank for International Settlements (Amsterdam,: North Holland Publishing
Company, 1958)
14John Hargrave, Montagu
Norman, (New York: The Greystone Press, n.d.). p. 108.
15James Stewart Martin, op.
cit., p. 70.
16See Chapter Seven for more details of Wall Street loans to
German industry.
17See Gabriel Kolko, op.
cit., for numerous examples.
18In 1956 the Chase and Manhattan banks merged to become Chase
Manhattan.
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