The Bank for International Settlements: Part II – The Rise and Rise of the BIS

A small contingent within the US State Department wanted to see an end to the Bank for International Settlements (BIS) and used the formation of the IMF to call into question the BIS’s utility. This contingent succeeded in tabling a motion at the Bretton Woods conference in July 1944 to liquidate the BIS and to investigate its operations during the war.

These moves were nixed by other factions within the State Department, Wall Street, the Bank of England, and the British Foreign Office. The famous British economist John Maynard Keynes, who was close to John Foster Dulles, was apoplectic at the prospect of a terminal BIS, and is rumoured to have suffered a heart attack as a consequence of the agitation the affair caused.[i]

The Marshall Plan for Europe’s reconstruction was conditional on financial and economic cooperation between the countries that would eventually make up the European Union.[ii] The BIS immediately set to work assisting the World Bank with its mission to unite Europe and placed itself at the centre of a new system to manage multilateral payments under the Marshall Plan.[iii] It astutely did not seek to compete with the new IMF or World Bank, but continued to do what it knew best – offering discreet services to the nascent international financial order and, crucially, continuing to provide a coordinating hub for central banks.

This coordinating role is essentially how central banks have extended their global reach. When Matt Taibbi vividly described Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”, he was substantially correct, but was still not describing the whole picture. The vampire squid is in fact central banking, of which Goldman Sachs, as a key global financial institution, is only one tentacle.

Nazism regroups

Contrary to popular folklore, Nazism was not defeated in 1945. If you need evidence for that statement, survey the video footage of what’s been happening in Gaza over the last eighteen months, if you have the stomach for it. We wouldn’t be in the mess we’re in today had Nazism been properly buried. Nazism was on the run in 1945 but successfully evaded capture by discarding its military fatigues and donning a suit – specifically, a banker’s pinstriped suit. Yesterday the BIS bankers supported Nazi Germany. Today the IMF bankers are keen to help fund the ethnic cleansing of Gaza. Nothing has changed.

In 1948, the Reichsbank rebranded as the Bank deutscher Länder (BdL), which later became the Bundesbank, and continued to represent Germany at the BIS in Basel. Between 1948 and 1980, 39% of officials on the executive or governing boards of the BdL, the central banks of the regional states, or the Bundesbank were former Nazis.[iv] Thus, as Lebor puts it, “[t]he Fourth Reich would be a financial, rather than a military imperium.”

Emil Puhl, explaining the Nazi leadership’s postwar strategy to McKittrick in 1945, asserted that the Nazis were fanatics whose ideals would not be easily abandoned. They would merely go underground. Relaying this information to Allen Dulles in a March 1945 telegram, McKittrick explained that:

“…Nazis had made careful plans to go underground, that every essential figure had his designated place, that Nazism would not end with military defeat…”[v]

After the Allied victory, British intelligence produced an extensive dossier on IG Farben detailing how its trading partners in New York and London had set up cartel arrangements with the conglomerate that helped Germany to re-arm. [vi]

In 1947, twenty-four IG Farben executives, including its CEO Hermann Schmitz, were put on trial at Nuremberg. Twelve were found guilty but the sentences were derisory. Schmitz got four years and was released in 1950. By February 1951, all the other IG Farben executives were free. They were welcomed back into the German business community and Schmitz himself joined the supervisory board of the Deutsche Bank.[vii]

The Warburg banking empire that had been instrumental in the prewar reconstruction of German industry used its ties to the new president of the World Bank to ensure that German industrial plants were not dismantled.[viii]

And what of Schacht, the Bank of England governor’s close friend and key architect of the BIS? He went on trial at Nuremberg, charged with organising Germany for war. He was found guilty but then acquitted, amid rumours that his good friend Montagu Norman had used his influence with a British judge. Even more intriguingly, Schacht’s lawyer told the press that the US Consul General in Zurich had offered the Reichsbank president a deal in 1939 – that if he resigned from Hitler’s government, he would be returned to power after the war. Schacht did in fact resign in 1939.[ix]

My own observation about the potential implication of such a deal is that the requirement to resign with the promise of reappointment in recognition of having avoided disgrace implies that the outcome of the war was a near certainty to those involved in the deal.

Following his acquittal, Schacht went on to set up his own bank, and lived happily ever after until his death in 1970 as a consequence of a fall while putting on his dinner trousers.

As we shall see, rebuilding Germany with Nazi brains was key to the grand plan for European union – a plan hatched well before the Second World War was over.

The BIS and European union

“With the United States supplying the money through the Marshall Plan and the BIS providing the financial and technical expertise, the drive toward a united Europe was unstoppable ” – Adam Lebor.[x]

The idea that the European Union we see today evolved organically over time is not easy to swallow after reading chapter 11 of Lebor’s exposé on the BIS – Tower of Basel. Far from being an organic development, the Dutch politician Jelle Zijlstra who served as prime minister from 1966 to 1967 labelled the first major European institute – the European Coal and Steel Community (ECSC) – a “political exercise” and “an impossibility”.[xi]

Lebor posits that the EU project was hatched in Wall Street, two of its chief architects being Jean Monnet and John Foster Dulles. As early as 1941, John Foster Dulles wrote:

“We should seek the political reorganisation of continental Europe as a federated commonwealth….the reestablishment of some twenty-five wholly independent sovereign states in Europe would be political folly.”[xii]

Lebor does not give the precise date in 1941 in which this was written, but the failure of the Nazis’ Operation Barbarossa was apparent only when the Soviet counteroffensive began in early December of that year. Notwithstanding the uncertain timing of Dulles’ statement, there is a seemingly unfounded confidence in the outcome of the war that is intimated in the plan for a federalised Europe, particularly at a time when the outcome of the war ought not to have been a certainty. The US entered the war with President Roosevelt’s declaration of war against Japan on 8 December 1941.

When a European Payments Union (EPU) was established in 1950, the BIS was appointed agent to the EPU. This assured the BIS’s future and locked it into the European integration project.[xiii]

The incestuous relationship between the bankers, Wall Street and the EU project is evident in the story of Jean Monnet, reverentially referred to as the Father of the European Union. Monnet was a highly influential technocrat who germinated and led key projects that spawned European union, such as the ECSC, established in 1951. His legacy is indelibly inked in the academic discipline of European integration studies, the product of which is the Jean Monnet Program offered by more than 785 universities in 72 countries as of the date of publication of Tower of Basel.[xiv]

Monnet worked in Wall Street during the 1920s and ‘30s, where he would form close business ties and friendships with the likes of John Foster Dulles (partner at Sullivan and Cromwell and US Secretary of State from 1953 to 1959), and John McCloy. McCloy was a partner in a powerful New York law firm that represented German business interests in the US. He served as Assistant Secretary for War from 1941 to 1945, and then became the first president of the World Bank in 1947.

I have already referred to John Foster Dulles’ 1941 statement regarding the goal of a federated Europe. In his role as World Bank President, McCloy stated in 1950, one year before the establishment of Monnet’s brainchild, the ECSC:

“I say no permanent solution of the German problem seems possible without an effective European union.”[xv]

John Foster Dulles described Monnet as “one of the most brilliant men I know” and “an intimate friend”.[xvi] The two men shared a common vision for postwar Europe and drew up plans accordingly. The ECSC was the first step in that grand plan, and Monnet was the ECSC’s first president. Like the BIS, the European federal project operated by stealth. The ECSC was in fact a cartel for German steel and coal producers that fixed prices in their favour. As such, it was a key step in resurrecting German industry to ensure it was locked into the unification project, and that it would also serve as a buffer against Soviet power during the Cold War.[xvii]

So effective was the resurrection of Germany’s commerce and finances that by 1955, its new central bank, the BdL, was in a position to lend France’s central bank $100 million.[xviii] The BIS had served as the Nazis’ lifeline during the war, and now Nazism was to be reanimated within the entire infrastructure of today’s global central bank network fronted by the BIS. Donald MacLaren, the British spy who investigated IG Farben’s postwar empire concluded:

“Men who built such an elaborate structure and who thought so thoroughly of every contingency…are not likely to disappear from the scene without leaving a group of younger men…to engage once more in an attempt of economic domination of the world.”[xix]

Karl Blessing was such a younger man, and a Nazi. He was a BIS veteran who had worked in Basel during the early 1930s. During the war he served as an administrator of the Third Reich’s business interests and was imprisoned at the war’s end. Blessing had powerful allies including Thomas McKittrick, the BIS president from 1940 to 1946, and Allen Dulles, the OSS spymaster in Switzerland during the war, and then head of the CIA from 1953. Blessing had made it onto Dulles’ list of Germans eligible for posts in a reconstituted German administration[xx], despite being a member of the Nazi Party.[xxi]

The rescue of high-ranking Nazis was not the exception but the rule. It was justified by Dulles on the grounds that the skills of important German industrialists and scientists would be lost to Russia if they were not given safe haven in the West[xxii]. Operation Paper Clip, involving the integration of more than 1,600 Nazi scientists into US government employment immediately after the war, is another example of the application of this principle that provided a life raft for Nazi ideology.

Blessing returned to his old job at Unilever and went on to become one of the highest paid executives in Europe. He was then appointed to the presidency of the German Bundesbank in 1958 and served on the BIS board until 1969.

Perhaps the BIS’s most crucial role in the drive towards European union was its contribution in driving currency union. The committee set up to manage and implement European currency union, the Delors Committee, was run out of Basel with all the technical support coming from the BIS. Its most influential member was Alexandre Lamfalussy, BIS economic adviser from 1976 and General Manager from 1985 to 1993. Lebor asserts that “Lamfalussy was widely regarded as the intellectual powerhouse behind European economic integration.”

A central tenet of currency union was the independence of central banks from governments. The Delors Report, a crucial landmark policy paper in the construction of the single currency, called for a centralised monetary policy body that expressly excluded governments from monetary policy making. This new entity would become the European Central Bank (ECB).[xxiii]

The ECB, like the BIS, is accountable to no-one except itself. It is actually prohibited from taking advice from Eurozone governments. Repeated demands by the European Parliament for the release of the ECB’s Governing Council meetings have been met with denials on the grounds that such a release would inhibit the free exchange of ideas at the meeting.[xxiv] It’s an absurd admission of guilt since it implies that ideas expressed freely by central bankers would be so repulsive to the public that they must be kept secret.

One has to admire the shameless effrontery of a person who explains, with a straight face, that the organisations that determine your financial well-being and security must operate in secret simply because if you knew what they were saying, you’d be horrified. Are such statements the manifestation of a serious mental dysfunction or a low regard for the intellect of the audience to whom they are addressed? I think both. This is what Mervyn King, the Bank of England’s Governor from 2003 to 2013, said about the absolute necessity of central bank secrecy:

“The themes and subjects of discussion are of value solely because they are confidential... the expectation of publication constrains useful discussion. …There has to be a role for private conversations for them to be useful. You cannot have every conversation between central bank governors being minuted and reported.”[xxv]

King, like a man who farts loudly in a packed elevator and remains poker-faced while everyone else gags, is shamelessly arguing that the management of the world’s monetary system – the lifeblood of economies on which 7.5 billion people depend – must, of necessity, be managed in secrecy by a handful of rich bankers representing a group of people whose interests are diametrically opposed to those of 99% of the world’s population. He is asking you to accept that it would be churlish of the 99% to be even mildly curious about how decisions affecting their wellbeing are made. Why? Because the less you know, the better the decision-making process works for the decision makers who represent the 1% and who are in an undeclared war against the 99%.

You will know sanity is being restored to the world when King and his ilk are sitting in secure padded cells reminiscing fondly about the days when they drained the peasants of trillions, while instructing them to hold their tongues.

Contrary to King’s assertion, the only way to begin restoring sanity to financial management of the world’s money is to minute every single word that falls out of the mouths of the banksters. That would be the first step to getting them to say and then do things that might be in our interests, as opposed to the interests of insane plutocrats.

The demands by EU parliamentarians for the minutes of ECB meetings are theatrical since the EU Parliament would have been well aware of the ECB’s undemocratic strictures at the time it was set up. The time for proper scrutiny and grizzling passed when they knowingly anointed the ECB as a law unto itself, and they know that. This cynical cosplay is actually an absurd admission of guilt by the so-called democratic representatives who, knowing full well that the demands will be denied, are underhandedly telling the electorate that democracy has been excised by design – that the financial infrastructure of the entire continent, indeed the world, is in the hands of private bankers and not elected representatives.

In short, the BIS not only dodged the postwar attempts to shut it down; it went on to provide the financial glue to cement European nations in a political and monetary union, culminating in the birth of a European central bank in its image.

Walther Funk, who took over the Reichsbank presidency from Hjalmar Schacht in 1939, declared that “European economic unity will come, for its time is here.”[xxvi] In the end, the Nazis did not lose the war after all. As Lebor puts it:

“To point out any similarities between the Nazis’ postwar economic plans for Europe and today’s European Union is to risk ridicule and invective…The uncomfortable, unspoken truth is that the parallels between the plans of the Nazi leadership for the postwar European economy and the subsequent process of European monetary and economic integration are real. The BIS runs like a thread through both…The BIS helped to ensure the postwar successors of the Reichsbank, the Bank deutscher Länder (BdL), and the Bundesbank, would continue to dominate the economies of postwar Europe. The BIS provided the BdL and the Bundesbank with both legitimacy and prestige…As early as 1940, Arthur Seyss-Inquart, the ruler of the Nazi-occupied Netherlands, called for a new European community ‘above and beyond the concept of the nation-state,’ which would ‘transform the living space given us by history into a new spiritual realm.’…In 1942, the German Foreign Ministry created a ‘Europe Committee’ whose members drafted plans for a German-dominated European confederation.”[xxvii] [emphasis added]

The Nazis are laughing from their graves as their successors have delivered their ambitious goals.

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In Part III, I’ll bring the BIS and its associated global financial infrastructure up to date to examine the global ambition of the monetary fascist juggernaut.

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[i] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 8, pg. 124

[ii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 9, pg. 140

[iii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 9, pg. 146

[iv] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 10, pg. 152, 153

[v] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 10, pg. 157

[vi] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 10, pg. 157

[vii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 10, pg. 158, 159

[viii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 10, pg. 160

[ix] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 10, pg. 162

[x] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 165

[xi] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 171

[xii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 170

[xiii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 167

[xiv] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 168

[xv] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 174

[xvi] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 169

[xvii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 172, 173

[xviii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 175

[xix] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 11, pg. 177

[xx] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 12, pg. 185

[xxi] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 12, pg. 186

[xxii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 12, pg. 186

[xxiii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 13, pg. 214, 215

[xxiv] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 15, pg. 244, 245

[xxv] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 16, pg. 268

[xxvi] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 14, pg. 219

[xxvii] Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank that Runs the World, Public Affairs, New York, 2014, Ch 14, pg. 220-223