Part 2 (2/2)

Among the plague of new legislation enacted in 1933 was a law for the compulsory sterilization of people suffering ”congenital mental defects, schizophrenia, manic-depressive psychosis, hereditary epilepsy, and severe alcoholism.” Germans were not alone in their enthusiasm for the pseudoscience of eugenics, which in the 1920s30s was widely espoused across Europe and America in the interests of ”racial hygiene.” One of its advocates was John D. Rockefeller, the founder of Standard Oil of New Jersey. It was his Rockefeller Foundation that provided much of the funding for the Kaiser Wilhelm Inst.i.tute, Germany's most prestigious medical school, to carry out studies on ”anthropology, eugenics, and human heredity” under the direction of a Swiss psychiatrist and fervent n.a.z.i, Ernst Rudin. A ma.s.s program of sterilization of both the mentally ill and social misfits, as determined by 220 district ”hereditary health courts,” was inst.i.tuted. Among the several hundred thousand victims were such undesirables as convicts, prost.i.tutes, and even children as young as ten from orphanages.

By inexorable n.a.z.i logic, the next step was euthanasia or ”mercy killing.” This program began in 1938 under the auspices of Hitler's personal physician, Dr. Karl Brandt. At first the victims were limited to mentally and physically handicapped children who were killed by lethal injection. But the program was soon extended to handicapped adults and to anyone judged an incorrigible social deviant. When lethal injection proved time-consuming and less than efficient, a bureaucracy of murder was established; this was designated the T4 program after the address of its headquarters at Tiergartenstra.s.se 4 in Berlin. The program was codified in law by decree of the Fuhrer in October 1939. At every mental inst.i.tution false bathhouses were built, where the victims were killed at first by carbon monoxide and later by poison gas.

SOON AFTER KRISTALLNACHT, Goring devised yet more devious schemes from which to profit by forcing German Jews to leave the country. By a decree dated January 1, 1939, all their property and possessions were essentially confiscated by the state. Public Acquisition Offices were set up for ”the safekeeping of works of art belonging to Jews,” and a subsequent decree demanded the surrender of ”any objects in their owners.h.i.+p made of gold, platinum, or silver, as well as precious stones and pearls.” This expropriation of Jewish property was the first foreshadowing of the n.a.z.is' future plundering of Europe. After Goring had made his choice of artworks and trinkets, the proceeds from the loot went directly to the coffers of the AH Fund or the Adolf Hitler Cultural Fund. With such resources at his disposal, Hitler was able to indulge his pa.s.sion for paintings.

The Fuhrer's personal taste was bourgeois in the extreme. He loathed all nonrepresentational art and his eye for quality was completely inconsistent. In 1934 he purchased a portrait of his great hero Frederick the Great of Prussia by the Swiss painter Anton Graff (17361813) for the then-considerable sum of 34,000 reichsmarks. It was. .h.i.tler's favorite painting and it traveled with him everywhere. As an example of his more prosaic taste, Hitler paid 120,000 reichsmarks to Hermann Gradl, a painter of idyllic landscapes, to make six large oils for the dining hall of the New Reich Chancellery between 1939 and 1941. Their conventional character may be guessed from Hitler's instructions that this commission was to ill.u.s.trate ”the typical appearance of the German Land, in its intertwining of Nature and Culture and its many different guises as Motherland of the German Nation.” To adorn the New Chancellery the Fuhrer spent nearly 400,000 reichsmarks on other contemporary artworks of very mixed quality. Although he bought for his own collection paintings by Rubens, Ca.n.a.letto, van Dyck, and Watteau at the behest of his art adviser, Dr. Hans Posse, his favorite painters were actually somewhat obscure German nineteenth- and early twentieth-century artists such as Franz Stuck and Carl Spitzweg, neither of whom has stood the test of time. One of his all-time favorites was Eduard von Grutzner, whose particular specialty was portraits of drunken monks. In a conversation with Albert Speer, Hitler declaimed, ”Look at those details-Grutzner is greatly underrated. It's simply that he hasn't been discovered yet. Some day he'll be worth as much as a Rembrandt.” This has not proved to be the case.

In one of his first acts as chancellor, Hitler ordered the construction of the House of German Art in Munich to display the finest examples of Germanic painting and sculpture. The task was entrusted to Alfred Rosenberg, the n.a.z.i Party ideologue and chief racial theorist, who was given the grandiose t.i.tle of ”Fuhrer's Delegate for the Entire Intellectual and Philosophical Education and Instruction of the National Socialist Party.” The fundamental contradiction was, of course, that the n.a.z.i Party was profoundly anti-intellectual and as totally opposed to freedom in the arts as it was to any other sort of independent thinking. Nevertheless, the leaders.h.i.+p devoted an inordinate amount of time to cultural matters-as the character Wilhelm Furtw.a.n.gler says in Ronald Harwood's modern play Taking Sides, ”Only tyrannies understand the power of art.” But Rosenberg's role was twofold; besides finding and glorifying politically acceptable German art, he was to root out all art that did not conform to n.a.z.i ideology or Hitler's personal taste. For fear of losing their jobs, museum directors and curators across Germany were obliged to surrender to the state ”purging” committees all works by artists suspected of ”degeneracy”-Cubists, Impressionists, Futurists, German Expressionists, Dadaists-and other ”un-German” art.

In all, some 16,000 works of art were confiscated from museums across the country. As the new arbiter of artistic merit, Hitler dismissed the works of masters such as Georges Braque, Paul Cezanne, Henri Matisse, and Pablo Pica.s.so as ”twaddle,” and a new office was set up to implement his demands in the ”unrelenting war of purification.” All active artists had to submit their work to this Committee for the a.s.sessment of Inferior Works of Art; any works deemed substandard were confiscated without compensation, and artists who ran afoul of the committee were forbidden to purchase painting materials on pain of imprisonment, thus ending their careers. Many artworks were destroyed; for example, on March 20, 1939, 1,004 paintings and sculptures as well as 3,825 drawings, watercolors, and other items were burned during a practice exercise for the Berlin Fire Department.

Predictably, Hermann Goring turned the situation to his pecuniary advantage. All the confiscated works of art from the nation's museums were stored in a warehouse on Kopernikusstra.s.se in Berlin, and when Goring sent his art agent to forage through this Aladdin's cave he came away with a veritable feast of Impressionist paintings, including four by Vincent van Gogh. A single Cezanne and two van Goghs, including Portrait of Dr. Gachet, were sold to a Dutch banker for 500,000 reichsmarks. (In 1990, Portrait of Dr. Gachet sold for $82.5 million.) With the money raised, Goring purchased more Old Masters and his favorite Gobelin tapestries to adorn the walls of his country mansion Carinhall.

Following Goring's example, the other n.a.z.i leaders now profited from the activity of a Commission for the Exploitation of Degenerate Art that released purged artworks onto the international market. Despite their greed, however, the sales of Germany's heritage that were held in London, Paris, and Switzerland from 1937 until early 1939 effectively dumped these despised works. Some extraordinary bargains were to be had: a Paul Klee for $300, now in the Museum of Modern Art in New York; a Kandinsky for $100, now in the Guggenheim Museum in New York; and Henri Matisse's Bathers with a Turtle, purchased by Joseph Pulitzer for 9,100 Swiss francs, which now resides in the St. Louis Art Museum.

The Austrian Anschluss of March 12, 1938, saw Hitler's native country annexed to the Third Reich, to the rapturous enthusiasm of a large part of the Austrian people. Within hours, every public building was bedecked with swastika flags, while gangs of thugs rampaged through the streets hunting down Jews. Two days later, Hitler made a triumphal progress through Vienna. In the meantime, SS officers were pillaging Jewish homes in search of artworks and valuables. They knew exactly where to look since German scholars had been commissioned to prepare catalogs and inventories of private collections across Europe in antic.i.p.ation of Hitler's conquests. The art collections of the Rothschild banking family were primary targets; Baron Alphonse de Rothschild was stripped of 3,444 artworks from his Hohe Warte villa in Vienna and his country estate at Schloss Reichenau, while his elder brother Baron Louis lost 919 pieces to the n.a.z.is. All such items were carefully cataloged and photographed and an extensive inventory was prepared before the chosen pieces were transferred to Germany and the residue to Austrian museums. In the month following the Anschluss, Hitler decided to create the greatest art museum in the world in the city of Linz, close to his birthplace. The Fuhrermuseum was planned to become the repository for all the great works of art looted during the n.a.z.i wars of conquest-except, of course, for those pieces diverted to the private collections of Adolf Hitler, Hermann Goring, and a select few others of the n.a.z.i elite.

ON JUNE 23, 1940, THE DAY FOLLOWING France's humiliating armistice, Hitler conducted a triumphal tour of Paris. He was accompanied by his favorite sculptor Arno Breker, his architect Albert Speer, and several general staff officers, traveling in three G4 Mercedes six-wheel touring cars. Speer recalled that when they visited the famed nineteenth-century Paris Opera house, Hitler ”seemed fascinated by the Opera, went into ecstasies about its beauty, his eyes glittering with an excitement that struck me as uncanny.” The entourage sped past Madeleine church and the Arc de Triomphe, down the Champs-elysees, past the Eiffel Tower, and on to Les Invalides, where Hitler spent a considerable time at Napoleon's tomb, communing with the previous great European tyrant. At the conclusion of his tour of the City of Light, he stated, ”It was the dream of my life to be permitted to see Paris. I cannot say how happy I am to have that dream fulfilled today.”

That dream had cost the lives of 27,074 Germans and left another 111,034 wounded, but Allied casualties in the Battle of France were a staggering 2.292 million. The greatest toll was paid by the French, with 97,300 killed and missing, 120,000 wounded, and 1.54 million captured. The latter were doomed to become forced laborers for the German war effort. After this colossal victory, achieved in just six weeks, continental Western Europe lay helpless and ripe for plunder. A galaxy of the world's great art museums had fallen into the hands of the n.a.z.is-the Musees Royaux des Beaux-Arts in Brussels, the Rijksmuseum in Amsterdam, and the Louvre in Paris, as well as a host of provincial galleries and private collections. The greatest h.o.a.rd in the history of military conquest since the time of Napoleon Bonaparte now became subject to the greatest art theft in recorded history.

THE TASK OF PERFORMING this grandest of larcenies fell to Alfred Rosenberg and an organization named after him, the Einsatzstab Reichsleiter Rosenberg fur die Besetzen Gebiete (Special Staff of National Leader Rosenberg for the Occupied Territories) or ERR for short. Rosenberg's role, defined in a personal directive from Hitler, was to comb every public and private collection in the occupied countries and ”to transport to Germany cultural goods which appear valuable to him, and to safeguard them there.” France, Belgium, and Holland were the responsibility of ERR Dienststelle (Agency) Western, headquartered in Paris. Within a few weeks, a fabulous body of art had been a.s.sembled at the Louvre and the German emba.s.sy awaiting a decision as to final disposal. This included twenty-six ”Jewish-owned works of degenerate art,” comprising fourteen Braques, seven Pica.s.sos, four Legers, and a Rouault, which were retained for ”trading for artistically valuable works.”

Even as his Luftwaffe was fighting in the skies over England during the Battle of Britain, Goring was scouring the museums of the Low Countries in his insatiable quest for artistic loot. By October 1940, he had lost his ”Channel War,” and the contemplated invasion of Britain was canceled. On November 3, he consoled himself with a trip to Paris to view the acc.u.mulated treasures that had been gathered in the Jeu de Paume museum. The haul was so extensive that it took Goring two full days to make his choices-mostly French and Dutch masters from the Rothschild and Wildenstein collections. Above all, he craved the painting t.i.tled The Astronomer by Jan Vermeer, stolen from Baron Alphonse de Rothschild; but as the Fuhrer's collection lacked a Vermeer, Goring was out of luck. In the pecking order of plunderers, Hitler had first choice through his chief art procurer, Dr. Hans Posse, both for his personal collection and for the planned museum at Linz. The diligent and resourceful Posse wrote to Martin Bormann almost every day, in great detail, about his various acquisitions for the Fuhrer and the state of the art market. Second came Reichsmarschall Goring, and after he had taken his pick, then sundry German museums received the remaining spoils.

While the search for Jewish valuables continued tirelessly, with the ready cooperation of officials in Vichy France-even individual safety deposit boxes were opened-the harvesting of conquered Europe was not confined to items of obvious value. In the occupied countries, millions more Jews were now at the disposal of the n.a.z.is, to be registered by their national authorities and to await the bureaucracy of genocide. At any time they were subject to deportation to Germany and on to the concentration camps that spread like plague pits across Eastern Europe. At first, Jewish homes were simply abandoned and then ransacked by neighbors, but the n.a.z.is soon realized that this was a waste of resources. However humble and mundane, furniture and household items could be of benefit to the Reich, where the manufacture of most domestic goods was seriously curtailed in favor of war production.

Accordingly, the ERR set up another division tasked with expropriating all Jewish belongings once their owners had been dispatched to the death camps. This new organization, known as Aktion-M (Project M) for Mobel (furniture), operated across Europe. Once a Jewish family had been expelled from their home, local police under the direction of the n.a.z.is would arrange for vans to collect all the furniture and kitchen appliances, which were taken to a central repository to await s.h.i.+pment to Germany. The Dutch even invented a word for the process-pulsen-after the name of the Amsterdam moving company Abraham Puls & Sons, which was employed by the Dutch police for this task. In one year alone, Project M was responsible for the clearing of 17,235 Dutch homes of items totaling loads of almost 17 million cubic feet; these were crated for dispatch to Germany or to the ethnic German populations living in the occupied Eastern Territories. During 1942, 40,000 tons of furniture were also s.h.i.+pped from France to Germany. A report by ERR Dienststelle Western dated August 8, 1944, records that after 69,512 Jewish homes had been stripped of household goods, it took 674 trains with 26,984 freight cars to carry the plunder to Germany.

THE n.a.z.iS SYSTEMATICALLY LOOTED artworks-using that term to embrace everything from ceramics to church bells and from sculptures to silverware-from every country they occupied, while also inflicting untold destruction on cultural buildings. The Soviet Union lost 1.148 million artworks as the Germans ransacked 400 museums, 2,000 churches, and 43,000 libraries inside Soviet territory. In Poland, some 516,000 individual pieces of art were looted, representing about 43 percent of the country's cultural heritage. Much of this plunder was intended to reside in the Fuhrermuseum at Linz, the symbol of Hitler's artistic vision and the cultural center of the Thousand-Year Reich, which would finally expunge his rejection at the hands of the Academy of Fine Arts in Vienna. In the meantime, however, the Fuhrermuseum existed only in blueprint and tabletop models, and it was essential to protect Hitler's loot from the ever more destructive Allied bombing campaign.

Across Germany, numerous repositories were created in cave complexes and salt mines where the appropriate conditions of humidity and temperature could be maintained. Thanks to the meticulous records of the ERR and Dr. Hans Posse, Martin Bormann knew the location of every single crate of plunder across the length and breadth of the Third Reich. He was therefore able to inform the Fuhrer of the exact whereabouts of any particular piece, should Hitler wish to view or display it at any time. Bormann himself had little interest in the subject, but he realized the potential value of even ”degenerate art” on the world market. He arranged for many pieces to be sold at international auctions held in Switzerland; the funds from these sales were deposited in Hitler's personal account at the Union Bank of Switzerland or in a separate account to purchase essentials for the war effort. Unlike other n.a.z.i leaders, however, Bormann never appropriated state funds for his own personal ends. The rewards he craved were power and control.

Following the occupation of Vichy France in November 1942, this avenue for art sales closed, since international dealers were unable to visit Switzerland and U.S. customs regulations forbade trading with the occupied countries of Europe. Bormann promptly established bogus art dealers.h.i.+ps in Latin American locations ranging from Buenos Aires to Mexico City. Degenerate art was now transported to the Americas from Genoa, Italy, on s.h.i.+ps sailing under the flags of neutral countries. Many pieces thus continued to reach the American market, and Bormann had the proceeds from these sales salted away in the Banco Aleman Transatlantico and the Banco Germanico in Buenos Aires. The s.h.i.+pping companies involved included the Argentine firm Delfino S.A. and the Spanish line Compania Naviera Levantina; the latter was purchased by a German front company to make supply voyages under the Spanish flag to the beleaguered German forces in Tunisia during the winter of 194243. On their return trips from South America, these vessels brought back much-needed foodstuffs and strategic materials-such as vanadium from Argentina, which was crucial for the production of synthetic fuels. In addition, many crewmen from the Kriegsmarine pocket battles.h.i.+p Admiral Graf Spee, who had been interned in Argentina and Uruguay since their s.h.i.+p was scuttled off Montevideo in December 1939, were carried home to Germany.

The flow of confiscated art from France to Germany continued right up until the Allied advance was threatening Paris in July 1944. By then, 29 major s.h.i.+pments of artworks had been undertaken since 1941, involving 137 freight cars carrying some 4,174 crates of plunder, comprising about 22,000 objects from 203 different collections.

Similar streams of plunder continued to flow from all the other occupied countries of Europe and from the Soviet Union, and even from Italy after its surrender to the Allies in September 1943. Under orders from their t.i.tular chief, the Luftwaffe's Hermann Goring Panzer Division plundered artworks from Naples and all points northward as the German forces gradually retreated up the length of Italy. This industrial-scale looting provided a ma.s.sive infusion of funds to the Third Reich and ama.s.sed for both Hitler and Goring the finest individual collections of art ever known. The plundered art was also to become a vital element in the master plan that Martin Bormann developed as the tides of war turned against Germany: Aktion Feuerland.

Chapter 5.

n.a.z.i GOLD.

FROM THE TIME THAT HITLER a.s.sumed power, rearmament was his top priority, both to reduce unemployment among the German people and to pursue his plans for a short, sharp war of conquest. From as early as 1933, the president of the Reichsbank, Dr. Hjalmar Schacht, created several phantom accounts where gold acquisitions by the Reichsbank were hidden in order to finance German rearmament without alerting the outside world. By the following year, the published gold accounts revealed that the Reichsbank had $80.5 million while the hidden accounts held $27 million. By 1939 this situation had almost been reversed, with published gold reserves down to $28.6 million while the hidden accounts had risen to $83 million. Between September 1, 1939, and June 30, 1945, however, Germany's gold transactions for the purchase of vital raw materials from overseas amounted to the staggering sum of $890 million. The eightfold difference between this amount and the Reichsbank holdings represented the gold bullion and coinage ransacked from every country conquered by the Germans.

During the 1930s, Germany was able to attract credit from many foreign banks and countries to underwrite the modernization of its industry and, by extension, the program of rearmament (see Chapter 1). Similarly, up to the outbreak of war, most countries were willing to accept payment for goods and services in reichsmarks, which were then often used to buy manufactured products from Germany. However, once the U.S. Treasury Department severed financial and commercial links with Germany and occupied Europe after December 1941, payment was demanded in more attractive currencies such as British pounds, U.S. dollars, or Swiss francs. But the most attractive currency of all-then as now-was gold.

By the end of 1942, following its conquest of most of Europe, Germany had an abundance of gold. The central banks of every occupied country were plundered for the benefit of the Third Reich, starting with that of Austria following its annexation in March 1938. The gold reserves of the Austrian National Bank divulged 200,765 pounds of gold bars and coinage, of which some 49,254 pounds were held in the Bank of England; the total value in U.S. dollars was $102,689,215. Czechoslovakia rendered $44 million; the Free City of Danzig, $4.1 million; Holland, $163 million; Luxembourg, nearly $4.858 million; Belgium, $223.2 million; and Italy after September 1943, some $80 million. The amount of gold taken from Greece is not recorded, while that of Yugoslavia was shared between Italy and Germany, some of it being used to establish the Ustae fascist regime in the puppet state of Greater Croatia. Denmark, Norway, and France had made the wise provision of transferring most of their gold reserves to England, America, or Canada before the n.a.z.is invaded.

POLAND'S GOLD WAS SAVED by chance and by the indefatigable efforts of Stefan Michalski, the director of the Bank of Poland. In September 1939, just as the Germans were invading Poland, he personally escorted the gold via train and truck from Warsaw through Romania and Turkey to Lebanon, where it was loaded on a s.h.i.+p bound for Ma.r.s.eille in France. It arrived in Paris by train in October 1939. The gold was then moved to the port of Lorient in Brittany and s.h.i.+pped aboard the French cruiser Victor Schoelcher to Dakar in French West Africa (in the region that is now the country of Senegal). After May 1940, Dakar was also the refuge for the residual gold holdings of France and Belgium's reserves; the latter had been transferred to the Bank of France for safekeeping early in 1940. German demands for the surrender of the Polish and Belgian gold under the terms of the armistice with Vichy France met with months of delay and prevarication. Eventually the French agreed to hand over the Belgian gold, but not the Polish, on the grounds that since that country had been carved up between n.a.z.i Germany and the Soviet Union it was no longer a sovereign state and could not currently honor the credit France had extended to it previously. The diligent Stefan Michalski guarded his charge until the Allied invasion of North Africa in November 1942, when he arranged for a U.S. wars.h.i.+p to transport the sixty-five tons of Polish gold to New York to be deposited in the U.S. Federal Reserve Bank.

The saga of the Belgian gold was one of the most extraordinary tales of World War II. On September 23, 1940, the British and Gen. de Gaulle's Free French launched Operation Menace, an unsuccessful attack on Dakar to capture the remaining French gold reserves. Before this fiasco, the Belgian gold-comprising 4,944 sealed boxes weighing some 270 tons-had been moved inland by Vichy French operatives to Kayes, where it arrived on September 20. From there it went by train to Bamako on the Niger River and was transported by riverboats and light trucks upriver to Timbuktu and Gao. The long haul across the Sahara Desert was accomplished by camel train to the railhead at Colomb-Bechar in French Algeria. Once the gold reached Algiers, 120 aircraft flights were needed to transport it to Ma.r.s.eille. It arrived at the Reichsbank in Berlin in May 1942, after a journey lasting twenty months.

ANY GOLD BULLION STOLEN from the central banks of the occupied countries was easily recognized on the international market, due to particular stampings on each gold bar that revealed its provenance. Accordingly, all looted gold was processed through the Precious Metals Department of the Reichsbank, where it was carefully weighed, cataloged, and stored, either centrally in Berlin or in one of some twenty other branches. When necessary, the bullion was re-smelted at the Prussian State Mint into new bars that were stamped with prewar German markings to disguise their true origins.

Similarly, all the gold items taken from the victims in the extermination camps, such as gold teeth and jewelry, were either sold or melted down and cast into gold bars by the firm of Degussa-Deutsche Gold und Silber Scheideanstalt. The company even had its own smelter at Auschwitz, where it processed on average twenty-four pounds of gold per day: with a hideous symmetry, Degussa and IG Farben jointly owned the chemical production firm Degesch, which manufactured the Zyklon-B tablets used in the gas chambers. The first s.h.i.+pment of prisoners' valuables from the death camps to the Reichsbank was made on August 26, 1942, under the supervision of SS Capt. Bruno Melmer. In November 1942, the tenth s.h.i.+pment to the Reichsbank was the first to include dental gold, and the deliveries continued until the end of the war; some seventy-eight in all. The Reichsbank realized the market value of all the bullion and currency, and the proceeds were deposited in a special SS account under the name of Melmer. Funds were then transferred to an account in the name of Max Heiliger; this account was controlled by SS and Police Gen. Ernst Kaltenbrunner, the successor to Reinhard Heydrich as head of the Reich Main Security Office, and by SS Gen. Oswald Pohl, the chief administrator of the concentration camps. This became a slush fund for the SS leaders.h.i.+p, which made large deposits and investments in Switzerland, mainly through the Bank for International Settlements.

Despite its newfound h.o.a.rds of looted gold, n.a.z.i Germany had no direct mechanism of paying for foreign goods, and the transfer of funds or gold bullion to another country required the cooperation of the international banking community. The solution lay on Germany's doorstep, in the financial inst.i.tutions of neutral Switzerland, which had been quick to recognize the commercial opportunities of what was happening in Germany. As early as 1934, Swiss banks had introduced a system of numbered bank accounts to guard the privacy of depositors-particularly Jews wis.h.i.+ng to move their wealth out of Germany-from the scrutiny of the n.a.z.i regime. Only the most senior bank officials knew the true ident.i.ties of the account holders. In August 1939 alone, just weeks ahead of the German invasion, some 17,000 transfers were made from Poland for safekeeping in Swiss bank accounts, and once war broke out large numbers of European Jews or their appointed agents came to deposit their savings and valuables in the banks of Basel and Zurich despite Swiss border restrictions to inhibit the entry of Jews. But these Swiss transactions with the prey were small beer compared to the trade in gold that was conducted with the predators.

AT THE OUTSET, THE GERMANS FAVORED the Bank for International Settlements (BIS) based in Basel. As already mentioned, this bank was founded in 1930 for the purpose of overseeing the transfer of German reparation payments to various recipient countries under the provisions of the Treaty of Versailles, but those provisions were repudiated by Germany in 1932. Lacking any form of governmental control, the BIS was owned and run by the central banks of the member countries, including the U.S. Federal Reserve Bank, the Reichsbank, and the Bank of England. Its role was ”to promote the cooperation of central banks and to provide additional facilities for international financial operations.” By its own charter, it was immune from seizure or prosecution even in times of war. It acted as the prototypical world bank, but was run purely for the benefit of its own members. Indeed, it became a useful club where central bankers and their staffs met once a month in the agreeable surroundings of Basel.

The members.h.i.+p of the BIS board of management was intriguing. The two princ.i.p.al directors were Hjalmar Schacht, former president of the Reichsbank and Reich economic minister, and Sir Montagu Norman, the governor of the Bank of England. These two were long-standing close friends given to extended walks in the woods together. The chairman was the affable Thomas H. McKittrick, a New York banker-c.u.m-lawyer, whose sympathies with the n.a.z.is were well known. The German bias of the BIS was further confirmed by the presence on its board of Dr. Walter Funk, president of the Reichsbank (193945), and his deputy Emil Puhl; Hermann Schmitz, chairman of IG Farben; and Baron Kurt von Schroder, banker to Adolf Hitler and owner of the J.H. Stein Bank of Cologne, whose most noted client was the SS-accordingly, one of the Stein bank's directors was Gen. Ernst Kaltenbrunner.

Baron von Schroder, himself an SS brigadier, was the director of more than thirty other companies, including ITT in Germany. Schroder's Bank of Hamburg was affiliated with the J. Henry Schroder & Co. of London, which acted as the German government's financial agent in Britain from 1938. The latter in its turn owned the J. Henry Schroder Banking Corporation of New York; this concern went into partners.h.i.+p with the Rockefellers in 1936 to become the Schroder Rockefeller & Co. investment bank, of which Allen Welsh Dulles-the future OSS station chief in Bern-was a director. Such was the fraternity of international banking, united in the belief that business must continue even in the depths of a world war.

Up to the outbreak of war in 1939, the BIS channeled funds totaling some 294 million Swiss francs from foreign investors into n.a.z.i Germany, and it continued to a.s.sist the n.a.z.is throughout the war. At the time of the German annexation of the Czech Sudetenland in October 1938, the National Bank of Czechoslovakia in Prague held some $26 million of gold in the BIS account held by the Bank of England in London. In March 1939, after the whole of Czechoslovakia had been occupied, the Germans laid claim to this amount for the Reichsbank. The BIS immediately bowed to German demands, but required the agreement of the Bank of England for completion of the transaction, and Sir Montagu Norman duly arranged this. When the Soviet Union tried the same ploy after occupying the Baltic states of Estonia, Latvia, and Lithuania in 193940, its claim was refused.

DESPITE CLAIMING NEUTRALITY and total probity, the BIS was of vital a.s.sistance to n.a.z.i Germany in its quest for strategic resources-such as rubber from j.a.panese-occupied Malaya, paid for with funds transferred to j.a.pan via the BIS. It was Germany's need for essential raw materials that fueled the money-laundering operations of the BIS and the Swiss banks. Coincidentally, some of the most critical resources were to be found in Europe's neutral countries-Swedish iron ore, Turkish chromium, and Portuguese and Spanish wolfram-the latter being essential for the manufacture of tungsten, which was used to make machine tools and armor-piercing ammunition. Both Portugal and Spain were ruled by fascist dictators sympathetic to the n.a.z.i cause.

Antonio de Oliveira Salazar of Portugal played a canny game, trading with both the Allies and Germany. His regime depended on America for oil and wheat but was willing to sell wolfram by a strict quota system on a cash-and-carry basis that inevitably inflated the cost of the ore-by 1943, wolfram commanded eight times the prewar price, and the Allies alone paid $170 million for wolfram to Portugal and Spain during World War II. While Britain and America paid respectively in pounds sterling and U.S. dollars, Germany was obliged to pay in gold. At the outbreak of the war, Salazar had declared that Port

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