Tower of Basel: The Shadowy History of the Secret Bank That Runs the World (16 page)

McKittrick himself lobbied Marcel Pilet-Golaz, the Swiss foreign minister. The two men met in October 1942. There were several items to discuss. The unpleasant articles about the BIS in the British press unsettled McKittrick. The BIS president was hypersensitive to criticism or any hint that the British government might withdraw its support for the bank. As the bank depended on its neutrality for its continued existence during wartime, a British withdrawal would spell the end. The Swiss legation in London had taken the matter up with the Foreign Office and the Treasury. The articles did not reflect British governmental opinion, Pilet-Golaz said, reassuringly. Pilet-Golaz also confirmed the Swiss government’s support for the BIS. The Swiss attitude to the numerous international organizations it hosted “varies very much.”
³⁹
He complained the League of Nations was the worst. The conduct of its staff left much to be desired, and it had created “numerous political difficulties.”
⁴⁰
The International Labor Organization (ILO) was somewhat better regarded, while the BIS had never “given cause for severe criticism.”
⁴¹
It would certainly be a “cause for regret” if the bank would leave Switzerland.
⁴²

McKittrick then raised the delicate matter of the Weber plan. The chairman of the board, he explained, was very different to being president of the bank. The board dealt mainly with the bank’s internal governance. The big questions of
transnational capital flows, loans, and currency support were dealt with at the governors’ meetings, which were anyway suspended for the war. Pilet-Golaz was agreeable, noted McKittrick. “He thinks it desirable that Switzerland should assist in the maintenance of international organizations and as an intermediary between belligerent countries when this can be done without undue publicity and when it does not interfere with the general policy of neutrality.”
⁴³

It worked. Weber was appointed chairman of the BIS board. And on January 1, 1943 the Swiss banker re-appointed McKittrick for a further three years. By then, the BIS president—just as Norman had suggested—was in the United States.

          
“He believes that the Germans—at least those connected with the Reichsbank—desire his return [to Basel] and that some way will be found to make it possible.”

           
— American intelligence report on Thomas McKittrick and the BIS, December 14, 1942
¹

T
he BIS had pioneered swift movements of international capital but could do little to speed its president across the Atlantic with enough cash in his pocket. In late 1942 Thomas McKittrick planned to travel to France, Portugal, Spain, and Britain, and then head to the United States. But even with his privileged status, he was still subject to currency control laws that allowed him to take a maximum of 1,000 French francs into France. “Can French franc banknotes be sent by registered mail to Spain from Switzerland?” he wondered in a note to himself. Such postal smuggling might be a better option, as he could use the French francs to buy pesetas on the black market. “Spanish currency can be obtained on better terms than by exchanging dollars or Swiss francs in Spain at the official rate,” McKittrick mused to himself. Food might also be problematic, especially perhaps for someone used to the BIS dining room. “Take sandwiches to supplement food available in France. On arrival in France, ask for bread coupons. Use these to purchase bread on leaving France, as bread in Spain is very scarce and bad.”
²

McKittrick left Basel in early November and arrived in Lisbon some days later. There, while checking into his hotel, he had a pleasant surprise. He recalled, “The first thing I knew, somebody grabbed me from behind and said, ‘Is that you Tom McKittrick?’ I said, ‘Yes’ without seeing who it was. He said, ‘Well, my gosh, I’ve got to see you. You’re the first man I wanted to see in Switzerland.’”
³
It was
Allen Dulles, who was on his way to Bern to set up the Swiss station of the Office for Strategic Services, the embryonic American foreign intelligence service. The two men spent some enjoyable time together before McKittrick flew to London. There he spent two weeks ensconced with Montagu Norman and Sir Otto Niemeyer. McKittrick then traveled to Ireland, took a flying boat back to Lisbon, and eventually reached New York via Portuguese Guinea, Liberia, Brazil, Trinidad, and Puerto Rico.

There was much to think about on the long and arduous journey. The BIS now had a suitably neutral chairman in the shape of Ernst Weber, the president of the Swiss National Bank, and McKittrick had secured himself another three years as president. McKittrick had lobbied hard for a second term, using his extensive network of diplomatic contacts to make sure he was acceptable to both the Allied and Axis powers. The world was at war, but the one thing both sides could agree on, it seemed, was that the BIS should stay in business, with Thomas McKittrick in the president’s chair. The American banker carefully cultivated his friends at the foreign legations in Bern. He was so successful that the foreign diplomats even sent his letters in their embassies’ diplomatic pouches, McKittrick later recalled. “I made it my business to keep on good terms with their ambassadors or ministers in Bern, and they were all of them kind enough to send letters that were of certain importance and secrecy in the diplomatic pouches—so they were all informed of this and they all agreed to do it.”
⁴

The American Legation in Bern also encoded communications from the BIS to McKittrick while he was in the United States. In February 1943 Roger Auboin, the BIS’s general manager, asked the US Legation to send a coded cable to McKittrick inquiring about the arrangements for his return journey to Basel, via Lisbon:

                 
Please communicate as soon as possible approximate date arrival Lisbon to enable us to settle material details of your journey regarding which we shall cable you in due course care American Legation Lisbon.
⁵

It seemed that Leland Harrison, the American ambassador to Switzerland, even allowed McKittrick to write his cables for him—in exchange for a substantial sum of money. On November 15, 1943, McKittrick wrote to Harrison about “the draft cable of which we spoke on Thursday.” The cable had been “recast,” noted McKittrick, who admitted he had “gone rather far in putting words” into Harrison’s mouth. “My purpose has not been to tell you what to say but to avoid leaving blanks in the picture, and if I have used the wrong color anywhere you will please make the necessary correction.” McKittrick then promised Harrison a “reward” for his services, of three million Swiss francs (around US$700,000).
⁶

The Treasury Department did not share the State Department’s enthusiasm for McKittrick and the BIS. Henry Morgenthau, the Treasury secretary, and his colleague, Harry Dexter White, loathed the BIS, seeing it, correctly, as a channel for the perpetuation of Nazi economic interests in the United States. They ensured that the bank was facing ever more obstacles to doing business in the United States. Under wartime legislation Swiss banks, including the BIS, could operate only under special license in the United States. At first, McKittrick’s friends at the New York Federal Reserve had obtained a general license for the BIS, so most routine transactions could be executed without delay. But that was revoked in June 1941, which caused substantial difficulties. The bank’s dividends to its American shareholders, and other planned transactions, were blocked. The Treasury Department believed that Swiss banks were being used to transfer ownership of Italian and German firms to Swiss or American front companies. Their investigators were unraveling the links between New York, Berlin, and Bern. For example, Felix Iselin, a Swiss banker, was the chairman of IG Chemie, the Swiss subsidiary of IG Farben, the industrial conglomerate that drove the Nazi war machine and whose chairman, Hermann Schmitz, sat on the BIS board. Iselin also sat on the board of the Swiss Bank Corporation and the Credit Suisse bank.
⁷
IG Chemie was a holding company for General Aniline and Film, IG Farben’s American subsidiary.

Morgenthau was a doughty foe, drawn from a very different world to McKittrick’s WASP friends on Wall Street. Born into a prominent Jewish dynasty in New York, Morgenthau was an intellectual and a farmer who grew Christmas
trees. His father, Henry Morgenthau Sr., had served as American ambassador to the Ottoman Empire during the Armenian genocide and had loudly condemned the extermination. A close friend of Franklin and Eleanor Roosevelt, Henry Morgenthau had a strong sense of social justice and was a key architect of Roosevelt’s New Deal. White, like Morgenthau, was also Jewish, but his parents were poor Lithuanian immigrants. Born in Boston, White worked for a while for his father’s hardware business and served in the US Army during the First World War. White was a prize-winning Harvard economist and had a solid understanding of the new global financial architecture emerging under the aegis of the BIS. He left academia to work at the Treasury, where Morgenthau placed him in charge of international affairs. Morgenthau and White would prove to be McKittrick’s most powerful enemies in the United States. McKittrick later recalled that White “hated me, because I was doing things that he couldn’t get done because I could get in all sorts of places in Europe that he couldn’t get his people in.”
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This was largely because many of the things that McKittrick was doing, such as gold and foreign exchange deals with the Reichsbank after Pearl Harbor, were treasonable.

Once McKittrick had safely arrived in Manhattan, he set up an office at the Federal Reserve, with the help of his old friend Leon Fraser, the former BIS president who was now president of the First National Bank of New York. McKittrick needed a lawyer to persuade the Treasury to unblock the BIS’s funds. His choice was never in doubt: John Foster Dulles. Meanwhile, McKittrick made the rounds of government departments, trying to show how the BIS could help with the American war effort by offering financial services and helping in the postwar reconstruction of Europe. The BIS president was much in demand as a fresh, firsthand source on wartime Europe. “I had a lot of questioning to go through in Washington, because everybody wanted to know everything about the war in Europe, everything about political affairs in Europe.”
⁹
McKittrick also met Henry Morgenthau. The encounter did not go well. McKittrick laid out his arguments for paying dividends to American BIS shareholders and the bank’s position on other contentious matters. Morgenthau walked out after twenty minutes, recommending that he consult Treasury experts.

But the worst was to come. In April 1943, while McKittrick was still in the United States, Congressman Horace Jeremiah Voorhis demanded an investigation into the BIS. Voorhis wanted to know why the bank’s president was an American and whether the bank was being used to help the Axis powers. Voorhis, McKittrick believed, was being fed information by Paul Einzig, the BIS’s journalistic nemesis, who ever since the fiasco of the Czechoslovak gold, had lambasted the bank in the British financial press. Einzig was a dogged reporter, whose criticisms of the bank struck a nerve, so much so that McKittrick, always hypersensitive about press coverage, referred to him in one letter to Leon Fraser as a “swine.”
¹⁰

McKittrick then found he could not get permission from the US authorities to return to Basel. He was stranded, his requests for help unanswered. “I talked to the State Department and they made believe they didn’t know what I was talking about.”
¹¹
McKittrick asked Col. Bill Donovan, the OSS chief and Allen Dulles’s boss, for help. Donovan also stonewalled the BIS president, repeatedly promising him to sort out his passport. But the passport did not arrive. The OSS did not want McKittrick to go anywhere until he had told them everything he knew about Nazi Germany’s economy, the Swiss connection, the role of the BIS, the progress of the war, in-fighting among the Nazi leadership, conditions inside Germany, and anything else of interest. McKittrick was called in for several interviews. He was, it turned out, a fantastic source, if somewhat delusional about the centrality of his own role. Even with all that we now know of the BIS’s wartime record, the OSS report of McKittrick’s explanations of why an American should run an international bank that was under de facto control of the Nazis is still eye opening.

The Weber plan—to install the president of the Swiss National Bank as BIS chairman—McKittrick explained, had been carried out with the full knowledge of the Reichsbank and the German Foreign Office. Both also knew that the Swiss banker would name McKittrick as the next BIS president and were satisfied with that. Hitler himself, though, was not involved, and the plan to extend McKittrick’s term as president avoided mentioning the American banker in detail, in case Hitler “heard of the matter” and became angry. The
OSS memo reveals how much high-grade economic intelligence McKittrick had access to: the governor of the Hungarian National Bank explained to him how Hungary had deliberately obstructed a new trade agreement with Germany; Vichy France, had been sending gold into Switzerland by a roundabout route to avoid occupied France; Switzerland was awash with Romanian oil, as Romania preferred to sell there rather than to its ally Germany; Walther Funk, the Reichsbank president, had failed to persuade Germany’s allies in the Balkans that their debts would eventually be paid. There is an intriguing glimpse into the morale of the BIS’s staff: the bank employed fourteen British staff and eight Italians. The Italians were “morose and depressed.” They felt that Italy was already defeated and would not “have a friend in the world.”