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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