Banking on Hitler

Between World War I and World War II, Wall Street’s big banks invested heavily in Germany’s recovery. As early as the Versailles treaty negotiations, an American team led by Wall Streeters Bernard Baruch, John Foster Dulles, and J. P. Morgan’s Thomas W. Lamont argued without much success against forcing Germany to pay the punitive reparations demanded by the other allies. In political and financial chaos, Germany was failing to keep up the payments within a year, and in 1923 France and Belgium occupied Germany’s industrial Ruhr as a way to extract the funds directly. Lamont led the renegotiation of the reparation payment schedule, and organized other giant Wall Street banks to bail Germany out with loans.

He also participated, with other New York bankers, in setting up the Bank for International Settlements (BIS) in Basel, Switzerland, in 1930, ostensibly to facilitate the reparation payments. The BIS was the brainchild of Hjalmar Horace Greeley Schacht, who in a few years would become Hitler’s president of the Reichsbank and Economics Minister. Schacht came into his unusual middle name because his father, as a German immigrant to New York City shortly after the Civil War, idolized the liberal newspaperman Greeley. Hjalmar was conceived in New York, but born in Germany.

The BIS was (and remains today) so low-profile as to be nearly invisible, the Swiss bank to end all Swiss banks, without even a sign on its nondescript building in Basel. Its partners included the Reichsbank, the Bank of England and other European central banks, Japan’s central bank, and three Morgan banks: J. P. Morgan and the Morgan-affiliated First National Bank of New York and First National Bank of Chicago. When Schacht stopped Germany’s reparation payments in 1932, citing the world depression, the BIS sailed on, pursuing its real goal: to be a safe and discreet clearinghouse that would allow all those banks to continue doing business together, despite whatever their respective nations were doing, even if that included war. Via the BIS, the American and British bankers would maintain a mostly secret friendship with their Nazi and Japanese counterparts straight through World War II, while thousands of American and British men in uniform were being killed and maimed in the fight to defeat the Nazis and Japanese.

Throughout the war, the BIS would shelter hundreds of millions of dollars in Nazi gold, stolen from conquered nations and from slaughtered Jews (including dental fillings, jewelry and such). It also secretly facilitated exchanges between the Nazis and supposedly neutral nations like Sweden, which sold wartime Germany most of the iron ore for its steel in exchange for looted gold. Dag Hammarskjöld, who would come to New York after the war to be secretary general of the United Nations, was directly involved as chairman of Sweden’s central bank.

The American banks not only continued to participate in BIS activities as this was going on; the director of the BIS throughout the war was in fact a Wall Streeter, Thomas McKittrick. He traveled freely in Nazi territory and Mussolini’s Italy during the war; in 1943, U-boats received orders not to meddle with the ship that carried him back to New York for high-level meetings to discuss BIS business, after which he traveled to Berlin for a debriefing at the Reichsbank.

McKittrick came back to New York when the war ended and was made vice president at the Rockefellers’ Chase National Bank. That’s not surprising. During the 1930s and the war, the Rockefeller empire, through various of its entities, maintained extensive business relations with Nazi Germany. In 1939, for example, six months before Hitler invaded Poland, Chase sent him $25 million for his war machine. The funds came from the bank’s sale of Rückswanderer (Returnee) Marks to Germans in America. RMs were another of Hjalmar Schacht’s ideas, conceived as a way to flow much-needed U.S. currency to Germany. In theory, Germans who were living abroad but intended to return to the Fatherland would buy RMs. The RMs’ value was to be credited to their personal accounts in German banks and available when they moved back. In practice, some German nationals and even Americans, never intending to move to Germany, bought RMs as a patriotic gesture of support for Der Führer – Nazi war bonds, in effect. Chase was a major broker, earning a percentage on every dollar it sent to the Nazis. The German consulate in New York, naturally, did its banking with Chase.

Chase’s collaborations with Nazi Germany look rather insignificant compared to those of the Rockefellers’ largest business, the literal wellspring of their vast family wealth, Standard Oil.

The gigantic Standard Oil monopoly that John D. Rockefeller had built in the late 1800s was broken up in the trust-busting 1910s into regional constituents, huge in their own right: Standard Oil of New Jersey, which became Exxon; Standard Oil of New York, which became Mobil, and so on. In the years leading up to the war, Standard Oil of New Jersey was the largest petroleum company in the world, with roughly four fifths of the U.S. market. Despite its name, its headquarters were in Manhattan, first in the monolithic Standard Oil Building at 26 Broadway, then at 30 Rockefeller Plaza. It did its banking, of course, with the Rockefellers’ Chase.

The two largest shareholders in Standard Oil of New Jersey were the Rockefellers themselves and the colossal German chemical cartel I. G. Farben. Farben started out at the turn of the century as a group of companies that produced most of the world’s synthetic dyes (farben is German for dye). Germany’s great weakness as a world power was its lack of the domestic raw materials needed by a modern industrial society – petroleum, rubber, iron for making steel, and other resources. The chemists at Farben solved this to a degree by developing synthetic oil and gasoline, a synthetic rubber called buna, plastics, and synthetic fibers like nylon and rayon. In other areas of applied chemistry, Farben also developed Bayer aspirin and other pharmaceuticals, Agfa film, explosives, armaments, and poison gases, including the Zyklon B that would be used in Nazi gas chambers. Several Farben chemists won Nobels.

Farben metastasized through the 1920s into the largest corporate entity in Europe, and spread around the world. It established its first outpost in the U.S. in 1929, opening the offices of I. G. Chemical Corporation at 230 Park Avenue (then the New York Central Building, now the Helmsley Building). Soon its board of directors included Edsel Ford; Standard Oil president Walter Teagle; and Charles Mitchell, president of the Morgan-affiliated National City Bank of New York (now Citibank). As it expanded in the U.S., Farben would also forge alliances with DuPont, Dow, Alcoa, and other American corporations.  

By the time Hitler came to power, Farben was a phantasmagorically complex and secretive global hydra of a few thousand partnerships and cartel agreements, interlocking boards, and hundreds of subsidiary and shell corporations, a conspiracy theorist’s dream. (It plays a role in Pynchon’s Gravity’s Rainbow.) Besides its factories and research labs, it ran its own power plants, mines, banks, patent offices, and a huge private intelligence-gathering operation that rivaled any nation’s.

All this was put at Hitler’s service in 1933. Farben was the industrial foundation on which Hitler built his war machine. Its president sat in the Reichstag; its production plants, scientists, technicians and intelligence operatives prepped and equipped the Wehrmacht for conquest. During the war, hundreds of thousands of people from occupied countries were given over to Farben as slave labor. Farben used Auschwitz captives – and worked some 25,000 of them to death – to build one of its synthetic fuel and rubber plants next-door to the death camp, where its Zyklon B was used to massacre millions more.

There was one substance Farben could not produce or synthesize in the 1930s: high-octane leaded aviation fuel. Without it, Göring’s Luftwaffe would be grounded. Only three corporations produced it. Luckily for Herr Göring, all three had close relations with Farben – Standard Oil, DuPont, and General Motors. Especially Standard, where Walter Teagle, president of the company from 1917 to 1937, then chairman of the board to 1942, as well as a director of Farben’s American subsidiary, was good friends with Farben CEO Hermann Schmitz. Teagle was very conservative, very anti-Communist, and a great supporter of Germany’s recovery in the 1920s and 1930s. He entertained Schmitz at the Cloud Room of the Chrysler Building when the German visited New York, and on some of Teagle’s frequent trips to Germany the two of them went shooting game fowl with Göring. With Teagle and Schmitz at the helms, Standard invested heavily in Farben and Farben in Standard.

In 1938, Teagle helped Schmitz get supplies of aviation fuel from a British subsidiary of Standard. The Luftwaffe planes that bombed London in 1940 were flying on this fuel. When the British government complained about American companies selling supplies to the people who were murdering them, Standard switched all its tankers to Panamanian registry. They sailed to the island of Teneriffe, where their fuel was offloaded into waiting German tankers. The planes that bombed Pearl Harbor in 1941 also flew on fuel sold to Japan by Standard Oil.

Standard and Farben also colluded on synthetic rubber. As Japan expanded its empire in the 1930s, it came to control virtually the entire world supply of natural rubber. Gas rationing and hoarding only covered part of the shortfall. Synthetic rubber was the real answer. Farben had exclusive world rights to its form of synthetic rubber, buna, while Standard was developing its own version, butyl. In a series of cartel arrangements, Standard agreed to help Farben produce butyl, and Farben granted Standard exclusive U.S. rights to produce buna – but only if and when Farben allowed it to. In short, Standard Oil agreed to help the Wehrmacht get all the synthetic tires it needed for its planes, trucks and other vehicles, while withholding the same from the U.S. military.

Roosevelt was kept informed about all this, but he was in a ticklish spot. He needed the mighty Rockefellers and Standard Oil and the Wall Street bankers for his own war efforts. Standard supplied most of the fuel used by the American military. Roosevelt had appointed Teagle to chair his National War Labor Board, and Teagle’s right-hand man William Farish to the War Petroleum Board. Within a week of the attack on Pearl Harbor, Roosevelt signed an executive order amending the 1917 Trading With the Enemy Act so that he could allow certain transactions to continue.

But Roosevelt had little control over a previously unremarkable Missouri Democrat, Senator Harry Truman. On his own initiative, in the spring of 1941 Truman formed the Senate Special Committee to Investigate the National Defense Program. The committee probed waste, fraud and other problems in the defense industry, and in 1942 turned its spotlight on Standard Oil. Called to testify, Farish put on a great show of belligerence and indignation for the stoic Truman, who told the press he believed Standard’s activities amounted to treason.

Roosevelt stepped in and blocked antitrust actions against Standard. Although there were other probes of its activities, Standard Oil continued doing business, through various circuitous routes, with both Germany and Japan throughout the war.

by John Strausbaugh