Chapter 4
WALL STREET AND WORLD REVOLUTION
What you Radicals and we who hold opposing views differ about, is not so much the end as the means, not so much what should be brought about as how it should, and can, be brought about ....
Otto H. Kahn, director, American
International Corp., and partner, Kuhn, Loeb & Co., speaking to the
League/or Industrial Democracy, New York, December 30, 1924
Before World War I, the financial and business structure of the United States was dominated by two conglomerates: Standard Oil, or the Rockefeller enterprise, and the Morgan complex of industries — finance and transportation companies. Rockefeller and Morgan trust
The great Morgan enterprises were in
steel, shipping, and the electrical industry; they included General Electric,
the rubber trust, and railroads. Like Rockefeller, Morgan controlled financial
corporations — the National Bank of Commerce and the Chase National Bank, New
York Life Insurance, and the Guaranty Trust Company. The names J.P. Morgan and
Guaranty Trust Company occur repeatedly throughout this book. In the early part
of the twentieth century the Guaranty Trust Company was dominated by the
Harriman interests. When the elder Harriman (Edward Henry) died in 1909, Morgan
and associates bought into Guaranty Trust as well as into Mutual Life and New
York Life. In 1919 Morgan also bought control of Equitable Life, and the
Guaranty Trust Company absorbed an additional six lesser trust companies.
Therefore, at the end of World War I the Guaranty Trust and Bankers Trust were,
respectively, the first and second largest trust companies in the United
States, both dominated by Morgan interests.2
American financiers associated with
these groups were involved in financing revolution even before 1917.
Intervention by the Wall Street law firm of Sullivan & Cromwell into the
Panama Canal controversy is recorded in 1913 congressional hearings. The
episode is summarized by Congressman Rainey:
It is my contention that the
representatives of this Government [United States] made possible the revolution
on the isthmus of Panama. That had it not been for the interference of this
Government a successful revolution could not possibly have occurred, and I
contend that this Government violated the treaty of 1846. I will be able to
produce evidence to show that the declaration of independence which was
promulgated in Panama on the 3rd day of November, 1903, was prepared right here
in New York City and carried down there — prepared in the office of Wilson
(sic) Nelson Cromwell ....3
Congressman Rainey went on to state
that only ten or twelve of the top Panamanian revolutionists plus "the
officers of the Panama Railroad & Steamship Co., who were under the control
of William Nelson Cromwell, of New York and the State Department officials in Washington,"
knew about the impending revolution.4 The
purpose of the revolution was to deprive Colombia, of which Panama was then a
part, of $40 million and to acquire control of the Panama Canal.
The best-documented example of Wall
Street intervention in revolution is the operation of a New York syndicate in
the Chinese revolution of 1912, which was led by Sun Yat-sen. Although the
final gains of the syndicate remain unclear, the intention and role of the New
York financing group are fully documented down to amounts of money, information
on affiliated Chinese secret societies, and shipping lists of armaments to be
purchased. The New York bankers syndicate for the Sun Yat-sen revolution included
Charles B. Hill, an attorney with the law firm of Hunt, Hill & Betts. In
1912 the firm was located at 165 Broadway, New York, but in 1917 it moved to
120 Broadway (see chapter eight for the significance of this address). Charles
B. Hill was director of several Westinghouse subsidiaries, including Bryant
Electric, Perkins Electric Switch, and Westinghouse Lamp — all affiliated with
Westinghouse Electric whose New York office was also located at 120 Broadway.
Charles R. Crane, organizer of Westinghouse subsidiaries in Russia, had a known
role in the first and second phases of the Bolshevik Revolution (see page 26).
The work of the 1910 Hill syndicate in
China is recorded in the Laurence Boothe Papers at the Hoover Institution.5
These papers contain over 110 related items, including letters of Sun Yat-sen
to and from his American backers. In return for financial support, Sun Yat-sen
promised the Hill syndicate railroad, banking, and commercial concessions in
the new revolutionary China.
Another case of revolution supported by
New York financial institutions concerned that of Mexico in 1915-16. Von
Rintelen, a German espionage agent in the United States,6 was
accused during his May 1917 trial in New York City of attempting to
"embroil" the U.S. with Mexico and Japan in order to divert
ammunition then flowing to the Allies in Europe.7
Payment for the ammunition that was shipped from the United States to the
Mexican revolutionary Pancho Villa, was made through Guaranty Trust Company.
Von Rintelen's adviser, Sommerfeld, paid $380,000 via Guaranty Trust and
Mississippi Valley Trust Company to the Western Cartridge Company of Alton,
Illinois, for ammunition shipped to El Paso, for forwarding to Villa. This was
in mid-1915. On January 10, 1916, Villa murdered seventeen American miners at
Santa Isabel and on March 9, 1916, Villa raided Columbus, New Mexico, and
killed eighteen more Americans.
Wall Street involvement in these
Mexican border raids was the subject of a letter (October 6, 1916) from Lincoln
Steffens, an American Communist, to Colonel House, an aide' to Woodrow Wilson:
My dear Colonel House:
Just before I left New York last
Monday, I was told convincingly that "Wall Street" had completed
arrangements for one more raid of Mexican bandits into the United States: to be
so timed and so atrocious that it would settle the election ....8
Once in power in Mexico, the Carranza
government purchased additional arms in the United States. The American Gun
Company contracted to ship 5,000 Mausers and a shipment license was issued by
the War Trade Board for 15,000 guns and 15,000,000 rounds of ammunition. The
American ambassador to Mexico, Fletcher, "flatly refused to recommend or
sanction the shipment of any munitions, rifles, etc., to Carranza."9
However, intervention by Secretary of State Robert Lansing reduced the barrier
to one of a temporary delay, and "in a short while . . . [the American Gun
Company] would be permitted to make the shipment and deliver."10
The raids upon the U.S. by the Villa
and the Carranza forces were reported in the New York Times as the "Texas
Revolution" (a kind of dry run for the Bolshevik Revolution) and were
undertaken jointly by Germans and Bolsheviks. The testimony of John A. Walls,
district attorney of Brownsville, Texas, before the 1919 Fall Committee yielded
documentary evidence of the link between Bolshevik interests in the United
States, German activity, and the Carranza forces in Mexico.11
Consequently, the Carranza government, the first in the world with a
Soviet-type constitution (which was written by Trotskyites), was a government
with support on Wall Street. The Carranza revolution probably could not have
succeeded without American munitions and Carranza would not have remained in
power as long as he did without American help.12
Similar intervention in the 1917
Bolshevik Revolution in Russia revolves around Swedish banker and intermediary
Olof Aschberg. Logically the story begins with prerevolutionary tsarist loans
by Wall Street bank syndicates.
In August 1914 Europe went to war.
Under international law neutral countries (and the United States was neutral
until April 1917) could not raise loans for belligerent countries. This was a
question of law as well as morality.
When the Morgan house floated war loans
for Britain and France in 1915, J.P. Morgan argued that these were not war
loans at all but merely a means of facilitating international trade. Such a
distinction had indeed been elaborately made by President Wilson in October
1914; he explained that the sale of bonds in the U.S. for foreign governments
was in effect a loan of savings to belligerent governments and did not finance
a war. On the other hand, acceptance of Treasury notes or other evidence of
debt in payment for articles was only a means of facilitating trade and not of
financing a war effort.13
Documents in the State Department files
demonstrate that the National City Bank, controlled by Stillman and Rockefeller
interests, and the Guaranty Trust, controlled by Morgan interests, jointly
raised substantial loans for the belligerent Russia before U.S. entry into the
war, and that these loans were raised alter the State Department pointed out to
these firms that they were contrary to international law. Further, negotiations
for the loans were undertaken through official U.S. government communications
facilities under cover of the top-level "Green Cipher" of the State
Department. Below are extracts from State Department cables that will make the
case.
On May 94, 1916, Ambassador Francis in
Petrograd sent the following cable to the State Department in Washington for
forwardin to Frank Arthur Vanderlip, then chairman of the National City Bank in
New York. The cable was sent in Green Cipher and was enciphered and deciphered
by U.S. State Department officers in Petrograd and Washington at the taxpayers'
expense (file 861.51/110).
563, May 94, 1 p.m.
For Vanderlip National City Bank New
York. Five. Our previous opinions credit strengthened. We endorse plan cabled
as safe investment plus very attractive speculation in roubles. In view of
guarantee of exchange rate have placed rate somewhat above present market.
Owing unfavorable opinion created by long delay have on own responsibility
offered take twenty-five million dollars. We think large portion of all should
be retained by bank and allied institutions. With clause respect customs bonds
become practical lien on more than one hundred and fifty million dollars per
annum customs making absolute security and secures market even if defect. We
consider three [years?] option on bonds very valuable and for that reason
amount of rouble credit should be enlarged by group or by distribution to close
friends. American International should take block and we would inform
Government. Think group should be formed at once to take and issue of bonds . .
. should secure full cooperation guaranty. Suggest you see Jack personally, use
every endeavor to get them really work otherwise cooperate guarantee form new
group. Opportunities here during the next ten years very great along state and
industrial financiering and if this transaction consummated doubtless should be
established. In answering bear in mind situation regarding cable.
MacRoberts Rich.
MacRoberts Rich.
FRANCIS,
AMERICAN AMBASSADOR14
There are several points to note about the above cable to understand the story that follows. First, note the reference to American International Corporation, a Morgan firm, and a name that turns up again and again in this story. Second, "guarantee" refers to Guaranty Trust Company. Third, "MacRoberts" was Samuel MacRoberts, a vice president and the executive manager of National City Bank.
On May 24, 1916, Ambassador Francis
cabled a message from Rolph Marsh of Guaranty Trust in Petrograd to Guaranty
Trust in New York, again in the special Green Cipher and again using the
facilities of the State Department. This cable reads as follows:
565, May 24, 6 p.m.
for Guaranty Trust Company New York:
Three.
for Guaranty Trust Company New York:
Three.
Olof and self consider the new
proposition takes care Olof and will help rather than harm your prestige.
Situation such co-operation necessary if big things are to be accomplished
here. Strongly urge your arranging with City to consider and act jointly in all
big propositions here. Decided advantages for both and prevents playing one
against other. City representatives here desire (hand written) such
co-operation. Proposition being considered eliminates our credit in name also
option but we both consider the rouble credit with the bond option in
propositions. Second paragraph offers wonderful profitable opportunity,
strongly urge your acceptance. Please cable me full authority to act in
connection with City. Consider our entertaining proposition satisfactory
situation for us and permits doing big things. Again strongly urge your taking
twenty-five million of rouble credit. No possibility loss and decided
speculative advantages. Again urge having Vice President upon the ground.
Effect here will be decidedly good. Resident Attorney does not carry same
prestige and weight. This goes through Embassy by code answer same way. See
cable on possibilities.
ROLPH
MARSH.
FRANCIS,
AMERICAN AMBASSADOR
FRANCIS,
AMERICAN AMBASSADOR
Note:—
Entire Message in Green Cipher.
TELEGRAPH ROOM15
TELEGRAPH ROOM15
"Olof" in the cable was Olof Aschberg, Swedish banker and head of the Nya Banken in Stockholm. Aschberg had been in New York in 1915 conferring with the Morgan firm on these Russian loans. Now, in 1916, he was in Petrograd with Rolph Marsh of Guaranty Trust and Samuel MacRoberts and Rich of National City Bank ("City" in cable) arranging loans for a Morgan-Rockefeller consortium. The following year, Aschberg, as we shall see later, would be known as the "Bolshevik Banker," and his own memoirs reproduce evidence of his right to the title.
The State Department files also contain
a series of cables between Ambassador Francis, Acting Secretary Frank Polk, and
Secretary of State Robert Lansing concerning the legality and propriety of
transmitting National City Bank and Guaranty Trust cables at public expense. On
May 25, 1916, Ambassador Francis cabled Washington as follows and referred to
the two previous cables:
569, May 25, one p.m.
My telegram 563 and 565 May
twenty-fourth are sent for local representatives of institutions addressed in
the hope of consummating loan which would largely increase international trade
and greatly benefit [diplomatic relations?]. Prospect for success promising.
Petrograd representatives consider terms submitted very satisfactory but fear
such representations to their institutions would prevent consummation loan if
Government here acquainted these proposals.
FRANCIS,
AMERICAN AMBASSADOR.16
The basic reason cited by Francis for facilitating the cables is "the hope of consummating loan which would largely increase international trade." Transmission of commercial messages using State Department facilities had been prohibited, and on June 1, 1916, Polk cabled Francis:
842
In view of Department's regulation
contained in its circular telegraphic instruction of March fifteenth,
(discontinuance of forwarding Commercial messages)17 1915,
please explain why messages in your 563, 565 and 575, should be communicated.
Hereafter please follow closely
Department's instructions.
Acting.
Polk
Polk
861.51/112
/110
/110
Then on June 8, 1916, Secretary of State Lansing expanded the prohibition and clearly stated that the proposed loans were illegal:
860 Your 563, 565, May 24, g: 569 May
25.1 pm Before delivering messages to Vanderlip and Guaranty Trust Company, I
must inquire whether they refer to Russian Government loans of any description.
If they do, I regret that the Department can not be a party to their
transmission, as such action would submit it to justifiable criticism because
of participation by this Government in loan transaction by a belligerent for
the purpose of carrying on its hostile operations. Such participation is
contrary to the accepted rule of international law that neutral Governments
should not lend their assistance to the raising of war loans by belligerents.
The last line of the Lansing cable as
written, was not transmitted to Petrograd. The line read: "Cannot
arrangements be made to send these messages through Russian channels?"
How can we assess these cables and the
parties involved?
Clearly the Morgan-Rockefeller
interests were not interested in abiding by international law. There is obvious
intent in these cables to supply loans to belligerents. There was no hesitation
on the part of these firms to use State Department facilities for the
negotiations. Further, in spite of protests, the State Department allowed the
messages to go through. Finally, and most interesting for subsequent events,
Olof Aschberg, the Swedish banker, was a prominent participant and intermediary
in the negotiations on behalf of Guaranty Trust. Let us therefore take a closer
look at Olof Aschberg.
OLOF ASCHBERG IN NEW YORK, 1916
Olof Aschberg, the "Bolshevik
Banker" (or "Bankier der Weltrevolution," as he has been called
in the German press), was owner of the Nya Banken, founded 1912 in Stockholm.
His codirectors included prominent members of Swedish cooperatives and Swedish
socialists, including G. W. Dahl, K. G. Rosling, and C. Gerhard Magnusson.18 In
1918 Nya Banken was placed on the Allied black-list for its financial
operations in behalf of Germany. In response to the blacklisting, Nya Banken
changed its name to Svensk Ekonomiebolaget. The bank remained under the control
of Aschberg, and was mainly owned by him. The bank's London agent was the British
Bank of North Commerce, whose chairman was Earl Grey, former associate of Cecil
Rhodes. Others in Aschberg's interesting circle of business associates included
Krassin, who was until the Bolshevik Revolution (when he changed color to
emerge as a leading Bolshevik) Russian manager of Siemens-Schukert in
Petrograd; Carl Furstenberg, minister of finance in the first Bolshevik
government; and Max May, vice president in charge of foreign operations for
Guaranty Trust of New York. Olof Aschberg thought so highly of Max May that a
photograph of May is included in Aschberg's book.19
In the summer of 1916 Olof Aschberg was
in New York representing both Nya Banken and Pierre Bark, the tsarist minister
of finance. Aschberg's prime business in New York, according to the New York
Times (August 4, 1916), was to negotiate a $50 million loan for Russia with an
American banking syndicate headed by Stillman's National City Bank. This
business was concluded on June 5, 1916; the results were a Russian credit of
$50 million in New York at a bank charge of 7 1/2 percent per annum, and a
corresponding 150-million-ruble credit for the NCB syndicate in Russia. The New
York syndicate then turned around and issued 6 1/2 percent certificates in its
own name in the U.S. market to the amount of $50 million. Thus, the NCB
syndicate made a profit on the $50 million loan to Russia, floated it on the
American market for another profit, and obtained a 150-million-ruble credit in
Russia.
During his New York visit on behalf of
the tsarist Russian government, Aschberg made some prophetic comments
concerning the future for America in Russia:
The opening for American capital and
American initiative, with the awakening brought by the war, will be
country-wide when the struggle is over. There are now many Americans in
Petrograd, representatives of business firms, keeping in touch with the
situation, and as soon as the change comes a huge American trade with Russia
should spring up.20
While this tsarist loan operation was
being floated in New York, Nya Banken and Olof Aschberg were funneling funds
from the German government to Russian revolutionaries, who would eventually
bring down the "Kerensky committee" and establish the Bolshevik
regime.
The evidence for Olof Aschberg's
intimate connection with financing the Bolshevik Revolution comes from several
sources, some of greater value than others. The Nya Banken and Olof Aschberg
are prominently cited in the Sisson papers (see chapter three); however, George
Kennan has systematically analyzed these papers and shown them to be forged,
although they are probably based in part on authentic material. Other evidence
originates with Colonel B. V. Nikitine, in charge of counterintelligence in the
Kerensky government, and consists of twenty-nine telegrams transmitted from
Stockholm to Petrograd, and vice versa, regarding financing of the Bolsheviks.
Three of these telegrams refer to banks — telegrams 10 and 11 refer to Nya
Banken, and telegram 14 refers to the Russo-Asiatic Bank in Petrograd. Telegram
10 reads as follows:
Gisa Furstenberg Saltsjobaden. Funds
very low cannot assist if really urgent give 500 as last payment pencils huge
loss original hopeless instruct Nya Banken cable further 100 thousand Sumenson.
Telegram 11 reads:
Kozlovsky Sergievskaya 81. First
letters received Nya Banken telegraphed cable who Soloman offering local
telegraphic agency refers to Bronck Savelievich Avilov.
Fürstenberg was the intermediary
between Parvus (Alexander I. Helphand) and the German government. About these
transfers, Michael Futrell concludes:
It was discovered that during the last
few months she [Evegeniya Sumenson] had received nearly a million rubles from
Furstenberg through the Nya Banken in Stockholm, and that this money came from
German sources.21
Telegram 14 of the Nikitine series
reads: "Furstenberg Saltsjöbaden. Number 90 period hundred thousand into
Russo-Asiatic Sumenson." The U.S. representative for Russo-Asiatic was
MacGregor Grant Company at 120 Broadway, New York City, and the bank was
financed by Guaranty Trust in the U.S. and Nya Banken in Sweden.
Another mention of the Nya Banken is in
the material "The Charges Against the Bolsheviks," which was
published in the Kerensky period. Particularly noteworthy in that material is a
document signed by Gregory Alexinsky, a former member of the Second State Duma,
in reference to monetary transfers to the Bolsheviks. The document, in part,
reads as follows:
In accordance with the information just
received these trusted persons in Stockholm were: the Bolshevik Jacob
Furstenberg, better known under the name of "Hanecki" (Ganetskii),
and Parvus (Dr. Helfand); in Petrograd: the Bolshevik attorney, M. U.
Kozlovsky, a woman relative of Hanecki — Sumenson, engaged in speculation together
with Hanecki, and others. Kozlovsky is the chief receiver of German money,
which is transferred from Berlin through the "Disconto-Gesellschaft"
to the Stockholm "Via Bank," and thence to the Siberian Bank in
Petrograd, where his account at present has a balance of over 2,000,000 rubles.
The military censorship has unearthed an uninterrupted exchange of telegrams of
a political and financial nature between the German agents and Bolshevik
leaders [Stockholm-Petrograd].22
Further, there is in the State Dept.
files a Green Cipher message from the U.S. embassy in Christiania (named Oslo,
1925), Norway, dated February 21, 1918, that reads: "Am informed that
Bolshevik funds are deposited in Nya Banken, Stockholm, Legation Stockholm
advised. Schmedeman."23
Finally, Michael Furtell, who
interviewed Olof Aschberg just before his death, concludes that Bolshevik funds
were indeed transferred from Germany through Nya Banken and Jacob Furstenberg
in the guise of payment for goods shipped. According to Futrell, Aschberg
confirmed to him that Furstenberg had a commercial business with Nya Banken and
that Furstenberg had also sent funds to Petrograd. These statements are
authenticated in Aschberg's memoirs (see page 70). In sum, Aschberg, through
his Nya Banken, was undoubtedly a channel for funds used in the Bolshevik
Revolution, and Guaranty Trust was indirectly linked through its association
with Aschberg and its interest in MacGregor Grant Co., New York, agent of the
Russo-Asiatic Bank, another transfer vehicle.
Several years later, in the fall of
1922, the Soviets formed their first international bank. It was based on a
syndicate that involved the former Russian private bankers and some new
investment from German, Swedish, American, and British bankers. Known as the
Ruskombank (Foreign Commercial Bank or the Bank of Foreign Commerce), it was
headed by Olof Aschberg; its board consisted of tsarist private bankers,
representatives of German, Swedish, and American banks, and, of course,
representatives of the Soviet Union. The U.S. Stockholm legation reported to
Washington on this question and noted, in a reference to Aschberg, that
"his reputation is poor. He was referred to in Document 54 of the Sisson
documents and Dispatch No. 138 of January 4, 1921 from a legation in
Copenhagen."24
The foreign banking consortium involved
in the Ruskombank represented mainly British capital. It included Russo-Asiatic
Consolidated Limited, which was one of the largest private creditors of Russia,
and which was granted £3 million by the Soviets to compensate for damage to its
properties in the Soviet Union by nationalization. The British government
itself had already purchased substantial interests in the Russian private
banks; according to a State Department report, "The British Government is
heavily invested in the consortium in question."25
The consortium was granted extensive
concessions in Russia and the bank had a share capital of ten million gold
rubles. A report in the Danish newspaper National Titende stated that
"possibilities have been created for cooperation with the Soviet
government where this, by political negotiations, would have been
impossible."26 In
other words, as the newspaper goes on to say, the politicians had failed to
achieve cooperation with the Soviets, but "it may be taken for granted
that the capitalistic exploitation of Russia is beginning to assume more
definite forms."27
In early October 1922 Olof Aschberg met
in Berlin with Emil Wittenberg, director of the Nationalbank fur Deutschland,
and Scheinmann, head of the Russian State Bank. After discussions concerning
German involvement in the Ruskombank, the three bankers went to Stockholm and
there met with Max May, vice president of the Guaranty Trust Company. Max May
was then designated director of the Foreign Division of the Ruskombank, in
addition to Schlesinger, former head of the Moscow Merchant Bank; Kalaschkin,
former head of the Junker Bank; and Ternoffsky, former head of the Siberian
Bank. The last bank had been partly purchased by the British government in
1918. Professor Gustav Cassell of Sweden agreed to act as adviser to
Ruskombank. Cassell was quoted in a Swedish newspaper (Svenskadagbladet of
October 17, 1922) as follows:
That a bank has now been started in
Russia to take care of purely banking matters is a great step forward, and it
seems to me that this bank was established in order to do something to create a
new economic life in Russia. What Russia needs is a bank to create internal and
external commerce. If there is to be any business between Russia and other
countries there must be a bank to handle it. This step forward should be
supported in every way by other countries, and when I was asked my advice I
stated that I was prepared to give it. I am not in favor of a negative policy
and believe that every opportunity should be seized to help in a positive
reconstruction. The great question is how to bring the Russian exchange back to
normal. It is a complicated question and will necessitate thorough
investigation. To solve this problem I am naturally more than willing to take
part in the work. To leave Russia to her own resources and her own fate is
folly.28
The former Siberian Bank building in
Petrograd was used as the head office of the Ruskombank, whose objectives were
to raise short-term loans in foreign countries, to introduce foreign capital
into the Soviet Union, and generally to facilitate Russian overseas trade. It
opened on December 1, 1922, in Moscow and employed about 300 persons.
In Sweden Ruskombank was represented by
the Svenska Ekonomibolaget of Stockholm, Olof Aschberg's Nya Banken under a new
name, and in Germany by the Garantie und Creditbank fur Den Osten of Berlin. In
the United States the bank was represented by the Guaranty Trust Company of New
York. On opening the bank, Olof Aschberg commented:
The new bank will look after the
purchasing of machinery and raw material from England and the United States and
it will give guarantees for the completion of contracts. The question of
purchases in Sweden has not yet arisen, but it is hoped that such will be the
case later on.29
On joining Ruskombank, Max May of
Guaranty Trust made a similar statement:
The United States, being a rich country
with well developed industries, does not need to import anything from foreign
countries, but... it is greatly interested in exporting its products to other
countries and considers Russia the most suitable market for that purpose,
taking into consideration the vast requirements of Russia in all lines of its
economic life.30
May stated that the Russian Commercial Bank
was "very important" and that it would "largely finance all
lines of Russian industries."
From the very beginning the operations
of the Ruskombank were restricted by the Soviet foreign-trade monopoly. The
bank had difficulties in obtaining advances on Russian goods deposited abroad.
Because they were transmitted in the name of Soviet trade delegations, a great
deal of Ruskombank funds were locked up in deposits with the Russian State
Bank. Finally, in early 1924 the Russian Commercial Bank was fused with the
Soviet foreign-trade commissariat, and Olof Aschberg was dismissed from his
position at the bank because, it was claimed in Moscow, he had misused bank
funds. His original connection with the bank was because of his friendship with
Maxim Litvinov. Through this association, so runs a State Department report,
Olof Aschberg had access to large sums of money for the purpose of meeting
payments on goods ordered by Soviets in Europe:
These sums apparently were placed in
the Ekonomibolaget, a private banking company, owned by Mr. Aschberg. It is now
alledged [sic] that a large portion of these funds were employed by Mr.
Aschberg for making investments for his personal account and that he is now
endeavoring to maintain his position in the bank through his possession of this
money. According to my informant Mr. Aschberg has not been the sole one to
profit by his operations with the Soviet funds, but has divided the gains with
those who are responsible for his appointment in the Russian Commerce Bank,
among them being Litvinoff.31
Ruskombank then became Vneshtorg, by
which it is known today.
We now have to retrace our steps and
look at the activities of Aschberg's New York associate, Guaranty Trust
Company, during World War I, to lay the foundation for examination of its role
in the revolutionary era in Russia.
During World War I Germany raised
considerable funds in New York for espionage and covert operations in North
America and South America. It is important to record the flow of these funds
because it runs from the same firms — Guaranty Trust and American International
Corporation — that were involved in the Bolshevik Revolution and its aftermath.
Not to mention the fact (outlined in chapter three) that the German government
also financed Lenin's revolutionary activities.
A summary of the loans granted by
American banks to German interests in World War I was given to the 1919 Overman
Committee of the United States Senate by U.S. Military Intelligence. The
summary was based on the deposition of Karl Heynen, who came to the United States
in April 1915 to assist Dr. Albert with the commercial and financial affairs of
the German government. Heynen's official work was the transportation of goods
from the United States to Germany by way of Sweden, Switzerland, and Holland.
In fact, he was up to his ears in covert operations.
The major German loans raised in the
United States between 1915 and 1918, according to Heynen, were as follows: The
first loan, of $400,000, was made about September 1914 by the investment
bankers Kuhn, Loeb & Co. Collateral of 25 million marks was deposited with
Max M. Warburg in Hamburg, the German affiliate of Kuhn, Loeb & Co. Captain
George B. Lester of U.S. Military Intelligence told the Senate that Heynen's
reply to the question "Why did you go to Kuhn, Loeb & Co?" was,
"Kuhn, Loeb & Co. we considered the natural bankers of the German
government and the Reichsbank."
The second loan, of $1.3 million, did
not come directly from the United States but was negotiated by John Simon, an
agent of the Suedeutsche Disconto-Gesellschaft, to secure funds for making
shipments to Germany.
The third loan was from the Chase
National Bank (in the Morgan group) in the amount of three million dollars. The
fourth loan was from the Mechanics and Metals National Bank in the amount of one
million dollars. These loans financed German espionage activities in the United
States and Mexico. Some funds were traced to Sommerfeld, who was an adviser to
Von Rintelen (another German espionage agent) and who was later associated with
Hjalmar Schacht and Emil Wittenberg. Sommerfeld was to purchase ammunition for
use in Mexico. He had an account with the Guaranty Trust Company and from this
payments were made to Western Cartridge Co. of Alton, Illinois, for ammunition
that was shipped to El Paso for use in Mexico by Pancho Villa's bandits. About
$400,000 was expended on ammunition, Mexican propaganda, and similar
activities.
The then German ambassador Count Von
Bernstorff has recounted his friendship with Adolph von Pavenstedt, a senior
partner of Amsinck & Co., which was controlled and in November 1917 owned
by American International Corporation. American International figures
prominently in later chapters; its board of directors contained the key names
on Wall Street: Rockefeller, Kahn, Stillman, du Pont, Winthrop, etc. According
to Von Bernstorff, Von Pavenstedt was "intimately acquainted with all the
members of the Embassy."33
Von Bernstorff himself regarded Von Pavenstedt as one of the most respected,
"if not the most respected imperial German in New York."34
Indeed, Von Pavenstedt was "for many years a Chief pay master of the
German spy system in this country."35 In
other words, there is no question that Armsinck & Co., controlled by
American International Corporation, was intimately associated with the funding
of German wartime espionage in the United States. To clinch Von Bernstorff's
last statement, there exists a photograph of a check in favor of Amsinck &
Co., dated December 8, 1917 — just four weeks after the start of the Bolshevik
Revolution in Russia — signed Von Papen (another German espionage operator),
and having a counterfoil bearing the notation "travelling expenses on Von
W [i.e., Von Wedell]." French Strothers,36
who published the photograph, has stated that this check is evidence that Von
Papen "became an accessory after the fact to a crime against American
laws"; it also makes Amsinck & Co. subject to a similar charge.
Paul Bolo-Pasha, yet another German
espionage agent, and a prominent French financier formerly in the service of
the Egyptian government, arrived in New York in March 1916 with a letter of
introduction to Von Pavenstedt. Through the latter, Bolo-Pasha met Hugo
Schmidt, director of the Deutsche Bank in Berlin and its representative in the
United States. One of Bolo-Pasha's projects was to purchase foreign newspapers
so as to slant their editorials in favor of Germany. Funds for this program
were arranged in Berlin in the form of credit with Guaranty Trust Company, with
the credit subsequently made available to Amsinck & Co. Adolph von
Pavenstedt, of Amsinck, in turn made the funds available to Bolo-Pasha.
In other words, both Guaranty Trust
Company and Amsinck & Co., a subsidiary of American International Corporation,
were directly involved in the implementation of German espionage and other
activities in the United States. Some links can be established from these firms
to each of the major German operators in the U.S. — Dr. Albert, Karl Heynen,
Von Rintelen, Von Papan, Count Jacques Minotto (see below), and Paul
Bolo-Pasha.
In 1919 the Senate Overman Committee
also established that Guaranty Trust had an active role in financing German
World War I efforts in an "unneutral" manner. The testimony of the
U.S. intelligence officer Becker makes this clear:
In this mission Hugo Schmidt [of
Deutsche Bank] was very largely assisted by certain American banking
institutions. It was while we were neutral, but they acted to the detriment of
the British interests, and I have considerable data on the activity of the
Guaranty Trust Co. in that respect, and would like to know whether the
committee wishes me to go into it.
SENATOR NELSON: That is a branch of the
City Bank, is it not?
MR. BECKER: No.
SENATOR OVERMAN: If it was inimical to
British interests it was unneutral, and I think you had better let it come out.
SENATOR KING: Was it an ordinary
banking transaction?
MR. BECKER: That would be a matter of
opinion. It has to do with camouflaging exchange so as to make it appear to be
neutral exchange, when it was really German exchange on London. As a result of
those operations in which the Guaranty Trust Co. mainly participated between
August 1, 1914, and the time America entered the war, the Deutsche Banke in its
branches in South America succeeded in negotiating £4,670,000 of London
exchange in war time.
SENATOR OVERMAN: I think that is
competent.37
What is really important is not so much
that financial assistance was given to Germany, which was only illegal, as that
directors of Guaranty Trust were financially assisting the Allies at the same
time. In other words, Guaranty Trust was financing both sides of The conflict.
This raises the question of morality.
Count Jacques Minotto is a most
unlikely but verifiable and persistent thread that links the Bolshevik
Revolution in Russia with German banks, German World War I espionage in the
United States, the Guaranty Trust Company in New York, the abortive French
Bolshevik revolution, and the related Caillaux-Malvy espionage trials in
France.
Jacques Minotto was born February 17,
1891, in Berlin, the son of an Austrian father descended from Italian nobility,
and a German mother. Young Minotto was educated in Berlin and then entered
employment with the Deutsche Bank in Berlin in 1912. Almost immediately Minotto
was sent to the United States as assistant to Hugo Schmidt, deputy director of
the Deutsche Bank and its New York representative. After a year in New York,
Minotto was sent by the Deutsche Bank to London, where he circulated in
prominent political and diplomatic circles. At the outbreak of World War I,
Minotto returned to the United States and immediately met with the German
ambassador Count Von Bernstorff, after which he entered the employ of Guaranty
Trust Company in New York. At Guaranty Trust, Minotto was under the direct
orders of Max May, director of its foreign department and an associate of
Swedish banker Olof Aschberg. Minotto was no minor bank official. The
interrogatories of the Caillaux trials in Paris in 1919 established that
Minotto worked directly under Max May.39 On
October 25, 1914, Guaranty Trust sent Jacques Minotto to South America to make
a report on the political, financial, and commercial situation. As he did in
London, Washington, and New York, so Minotto moved in the highest diplomatic
and political circles here. One purpose of Minotto's mission in Latin America
was to establish the mechanism by which Guaranty Trust could be used as an
intermediary for the previously mentioned German fund raising on the London
money market, which was then denied to Germany because of World War I. Minotto
returned to the United States, renewed his association with Count Von
Bernstorff and Count Luxberg, and subsequently, in 1916, attempted to obtain a
position with U.S. Naval Intelligence. After this he was arrested on charges of
pro-German activities. When arrested Minotto was working at the Chicago plant
of his father-in-law Louis Swift, of Swift & Co., meatpackers. Swift put up
the security for the $50,000 bond required to free Minotto, who was represented
by Henry Veeder, the Swift & Co. attorney. Louis Swift was himself arrested
for pro-German activities at a later date. As an interesting and not
unimportant coincidence, "Major" Harold H. Swift, brother of Louis
Swift, was a member of the William Boyce Thompson 1917 Red Cross Mission to
Petrograd — that is, one of the group of Wall Street lawyers and businessmen
whose intimate connections with the Russian Revolution are to be described later.
Helen Swift Neilson, sister of Louis and Harold Swift, was later connected with
the pro-Communist Abraham Lincoln Center "Unity." This established a
minor link between German banks, American. banks, German espionage, and, as we
shall see later, the Bolshevik Revolution.40
Joseph Caillaux was a famous (sometimes
called notorious) French politician. He was also associated with Count Minotto
in the latter's Latin America operations for Guaranty Trust, and was later
implicated in the famous French espionage cases of 1919, which had Bolshevik
connections. In 1911, Caillaux became minister of finance and later in the same
year became premier of France. John Louis Malvy became undersecretary of state
in the Caillaux government. Several years later Madame Caillaux murdered Gaston
Calmette, editor of the prominent Paris newspaper Figaro. The prosecution
charged that Madame Caillaux murdered Calmette to prevent publication of
certain compromising documents. This affair resulted in the departure of
Caillaux and his wife from France. The couple went to Latin America and there
met with Count Minotto, the agent of the Guaranty Trust Company who was in
Latin America to establish intermediaries for German finance. Count Minotto was
socially connected with the Caillaux couple in Rio de Janeiro and Sao Paulo,
Brazil, in Montevideo, Uruguay, and in Buenos Aires, Argentina. In other words,
Count Minotto was a constant companion of the Caillaux couple while they were
in Latin America.41 On
returning to France, Caillaux and his wife stayed at Biarritz as guests of Paul
Bolo-Pasha, who was, as we have seen, also a German espionage operator in the
United States and France.42
Later, in July 1915, Count Minotto arrived in France from Italy, met with the
Caillaux couple; the same year the Caillaux couple also visited Bolo-Pasha
again in Biarritz. In other words, in 1915 and 1916 Caillaux established a
continuing social relationship with Count Minotto and Bolo-Pasha, both of whom
were German espionage agents in the United States.
Bolo-Pasha's work in France was to gain
influence for Germany in the Paris newspapers Le Temps and Figaro. Bolo-Pasha
then went to New York, arriving February 24, 1916. Here he was to negotiate a
loan of $2 million — and here he was associated with Von Pavenstedt, the
prominent German agent with Amsinck & Co.43
Severance Johnson, in The Enemy Within, has connected Caillaux and Malvy to the
1918 abortive French Bolshevik revolution, and states that if the revolution
had succeeded, "Malvy would have been the Trotsky of France had Caillaux
been its Lenin."44
Caillaux and Malvy formed a radical socialist party in France using German
funds and were brought to trial for these subversive efforts. The court
interrogatories in the 1919 French espionage trials introduce testimony
concerning New York bankers and their relationship with these German espionage
operators. They also set forth the links between Count Minotto and Caillaux, as
well as the relationship of the Guaranty Trust Company to the Deutsche Bank and
the cooperation between Hugo Schmidt of Deutsche Bank and Max May of Guaranty
Trust Company. The French interrogatory (page 940) has the following extract
from the New York deposition of Count Minotto (page 10, and retranslated from
the French):
QUESTION: Under whose orders were you
at Guaranty Trust?
REPLY: Under the orders of Mr. Max May.
QUESTION: He was a Vice President?
ANSWER: He was Vice President and
Director of the Foreign Department.
Later, in 1922, Max May became a
director of the Soviet Ruskom-bank and represented the interests of Guaranty
Trust in that bank. The French interrogatory establishes that Count Minotto, a
German espionage agent, was in the employ of Guaranty Trust Company; that Max
May was his superior officer; and that Max May was also closely associated with
Bolshevik banker Olof Aschberg. In brief: Max May of Guaranty Trust was linked
to illegal fund raising and German espionage in the United States during World
War I; he was linked indirectly to the Bolshevik Revolution and directly to the
establishment of Ruskombank, the first international bank in the Soviet Union.
It is too early to attempt an explanation
for this seemingly inconsistent, illegal, and sometimes immoral international
activity. In general, there are two plausible explanations: the first, a
relentless search for profits; the second — which agrees with the words of Otto
Kahn of Kuhn, Loeb & Co. and of American International Corporation in the
epigraph to this chapter — the realization of socialist aims, aims which
"should, and can, be brought about" by nonsocialist means.
Footnotes:
1John Moody, The Truth about the Trusts
(New York: Moody Publishing, 1904).
2The J. P. Morgan Company was originally
founded in London as George Peabody and Co. in 1838. It was not incorporated
until March 21, 1940. The company ceased to exist in April 1954 when it merged
with the Guaranty Trust Company, then its most important commercial bank
subsidiary, and is today known as the Morgan Guarantee Trust Company of New
York.
3United States, House, Committee on
Foreign Affairs, The Story of Panama, Hearings on the Rainey Resolution, 1913.
p. 53.
4Ibid., p. 60.
5Stanford, Calif. See also the Los
Angeles Times, October 13, 1966.
6Later codirector with Hjalmar Schacht
(Hitler's banker) and Emil Wittenberg, of the Nationalbank für Deutschland.
7United States, Senate, Committee on
Foreign Relations, Investigation of Mexican Affairs, 1920.
8Lincoln Steffens, The Letters of
Lincoln Steffens (New York: Harcourt, Brace, 1941, I:386
9U.S., Senate, Committee on Foreign
Relations, Investigation of Mexican Affairs, 1920, pts. 2, 18, p. 681.
10Ibid.
11New York Times, January 23, 1919.
12U.S., Senate, Committee on Foreign
Relations, op. cit., pp. 795-96.
13U.S., Senate, Hearings Before the
Special Committee Investigating the Munitions Industry, 73-74th Cong., 1934-37,
pt. 25, p. 7666.
14U.S. State Dept. Decimal File, 861.51/110
(316-116-682).
15U.S. State Dept. Decimal File,
861.51/112.
16U.S. State Dept. Decimal File,
861.51/111.
17Handwritten in parentheses.
18Olof Aschberg, En Vandrande Jude Frän
Glasbruksgatan (Stockholm: Albert Bonniers Förlag, n.d.), pp. 98-99, which is included
in Memoarer (Stockholm: Albert Bonniers Förlag, 1946). See also Gästboken
(Stockholm: Tidens Förlag, 1955) for further material on Aschberg.
19Aschberg, p. 123.
20New York Times, August 4, 1916.
21Michael Futrell, Northern Underground
(London: Faber and Faber, 1963), p. 162.
22See Robert Paul Browder and Alexander
F. Kerensky, The Russian Provisional government, 1917 (Stanford, Calif.:
Stanford University Perss, 1961), 3: 1365. "Via Bank" is obviously
Nya Banken.
23U.S. State Dept. Decimal File, 861.00/1130.
24U.S. State Dept. Decimal File,
861.516/129, August 28, 1922. A State Dept. report from Stockholm, dated
October 9, 1922 (861.516/137), states in regard to Aschberg, "I met Mr.
Aschberg some weeks ago and in the conversation with him he substantially
stated all that appeared in this report. He also asked me to inquire whether he
could visit the United States and gave as references some of the prominent
banks. In connection with this, however, I desire to call the department's
attention to Document 54 of the Sisson Documents, and also to many other
dispatches which this legation wrote concerning this man during the war, whose
reputation and standing is not good. He is undoubtedly working closely in
connection with the Soviets, and during the entire war he was in close
cooperation with the Germans" (U.S. State Dept. Decimal File, 861.516/137,
Stockholm, October 9, 1922. The report was signed by Ira N. Morris).
25Ibid., 861.516/130, September 13, 1922.
26Ibid.
27Ibid.
28Ibid., 861.516/140, Stockholm, October
23, 1922.
29Ibid., 861.516/147, December 8, 1922.
30Ibid., 861.516/144, November 18, 1922.
31Ibid., 861.316/197, Stockholm, March 7,
1924.
32This section is based on the Overman
Committee hearings, U.S., Senate, Brewing and Liquor Interests and German and
Bolshevik Propaganda, Hearings before the Subcommittee on the Judiciary, 65th
Cong., 1919, 2:2154-74.
33Count Von Bernstorff, My Three Years in
America (New York: Scribner's, 1920), p. 261.
34Ibid.
35Ibid.
36French Strothers, Fighting Germany's Spies
(Garden City, N.Y.: Doubleday, Page, 1918), p. 152.
37 U.S., Senate, Overman Committee,
2:2009.
38This section is based on the following
sources (as well as those cited elsewhere): Jean Bardanne, Le Colonel Nicolai:
espion de genie (Paris: Editions Siboney, n.d.); Cours de Justice, Affaire
Caillaux, Loustalot et Comby: Procedure Generale Interrogatoires (Paris, 1919),
pp. 349-50, 937-46; Paul Vergnet, L'Affaire Caillaux (Paris 1918), especially
the chapter titled "Marx de Mannheim"; Henri Guernut, Emile Kahn, and
Camille M. Lemercier, Etudes documentaires sur L'Affaire Caillaux (Paris,
n.d.), pp. 1012-15; and George Adam, Treason and Tragedy: An Account of French
War Trials (London: Jonathan Cape, 1929).
39See p. 70.
40This Interrelationship is dealt with
extensively in the three-volume Overman Committee report of 1919. See
bibliography.
41See Rudolph Binion, Defeated Leaders
(New York: Columbia University Press, 1960).
42George Adam, Treason and Tragedy: An
Account of French War Trials (London: Jonathan Cape, 1929).
43Ibid.
44The Enemy Within (London: George Allen
& Unwin, 1920).
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