by Adam LeBor
— The American view of Karl Blessing, appointed the first president of the Bundesbank in 19581
After fifteen years at the New York Federal Reserve, Charles Coombs was not easily awed. But even he was impressed at the financial firepower present at the BIS governors’ meeting in December 1960. Gathered in one room, sipping their coffee in an anonymous former hotel near Basel railway station, were the governors of the banks of England, France, Germany, Italy, Sweden, Belgium, and the Netherlands. But despite their urbane appearance and easy familiarity with each other, the governors were worried men—as was Coombs himself.
The combined dollar holdings of their banks totaled $6 billion. Under the Bretton Woods system the dollar-to-gold exchange rate was fixed at $35 an ounce. As long as the London gold market stayed around that price, the value of their dollar reserves was stable. But earlier that year the price of gold had jumped to $40 an ounce. The dollar was a victim of its own success. There were too many dollars in circulation or held by national banks as part of their reserves to be redeemable for gold at $35 an ounce. Thus the dollar’s value against gold was declining. The central bankers could sell their reserves, but such a move would certainly crash the dollar and fuel global instability.
The central bankers wanted to ask Coombs about the financial plans of the new Kennedy administration, which would take office in January 1961, he recalled in his memoirs.2 Coombs’s book provides a rare and fascinating glimpse into the secret deals reached at the Basel governors’ meetings. The central bankers “were very worried men that day, genuinely distressed by the impending clash between their sworn duty to protect the value of their countries’ international reserves and their fear of precipitating a dollar crisis by cashing in dollars for gold.”3 Much was riding on Coombs’s answers. If he could reassure the other bankers, the dollar would retain their confidence. If not, he might trigger a worldwide financial crisis.
The bankers were reassured. The new US government would firmly maintain gold parity at $35 an ounce and would work to reduce the balance of payments deficit, Coombs promised. The governors welcomed his assurances and requested that he, or a representative of the Federal Reserve, attend every Basel meeting from now on, even if only as an observer. Thirty years after the founding of the BIS, the United States officially still kept itself at a distance. Three of the BIS’s presidents had been American—Gates McGarrah, Leon Fraser, and Thomas McKittrick—but the Federal Reserve had never taken up the stock allocated to it at the bank’s founding. Coombs was honored to be invited to the Sunday evening dinner, the “inner sanctum from which all lower ranking officials were normally excluded.”
Coombs regularly attended the governors’ meetings from 1960 until his retirement in 1975. He relished his time at the BIS. He usually left New York on Thursday afternoon, after the meeting of the directors of the New York Federal Reserve, and went straight to Idlewild Airport to fly to Zürich, arriving on Friday. From there he traveled to Basel and his usual room at the Schweizerhof Hotel, near the BIS. It was exhausting but exhilarating, with meetings and discussions on Friday night and all through the weekend until Monday morning when he flew back to New York. But his jet lag soon evaporated. “As the central bankers converged on Basel from all the European capitals and from Ottawa, New York, and Tokyo, the fatigue of our journey seemed to vanish as we greeted old friends and listened to the inside story of what was really going on in the financial markets of the world.”
Basel was the “ideal meeting place for central bankers seeking a refuge for quiet and confidential discussion of highly charged financial issues.” In between the formal meetings, the bankers drifted down the corridors between their private offices, “always stopping to shake hands in the continental fashion with any colleague going in the opposite direction.” The meetings were worth the trip in themselves, wrote Coombs, providing “not only a quiet testing ground for new ideas and approaches but also an early warning system when things were beginning to go wrong.” The dinners, especially, gave “priceless access.” “I could generally tell from those dinner discussions which birds would fly and which would not,” he recalled.
Like couples who had been married for years, the bankers could read each other’s minds. “There is something deeply satisfying in dealing with fellow professionals in any technical field. Never any speeches, everyone focusing clearly on the issue at hand, sentences frequently left unfinished because everyone instinctively knew the rest and in an almost uncanny way, a simultaneous realization of the appropriate technical solution. None of us were romantic internationalists, but where we could see a clear overlapping of national interests our minds instinctively reached out to one another in a true camaraderie of professional cooperation.”
Coombs was especially impressed with Karl Blessing, the president of the Bundesbank, the new West German national bank, who “played a towering role”:
As a young man he had worked on the staff of the BIS and once recounted to me his anguished memories of those days as he watched from Basel the breakdown of international financial cooperation in the early thirties. Now as President of the Bundesbank with the mark entrusted to his care, he wielded his enormous authority with courage and sensitive discernment of his world financial responsibilities. A cheerfully resolute man, Blessing was an unfailing source of strength and morale in all of our Basel meetings. I thought of him as truly a great man of his times.
Blessing was indeed a man of his times, although not in the way that Coombs believed. The Bundesbank president embodied the new class of rulers in West Germany, many of whom were the same people who had managed Nazi Germany. Former Nazis ran or held senior positions in the banking and finance sectors, the military, the intelligence service, and government administration. Hans Globke, the national security adviser to Chancellor Konrad Adenauer, had helped write the Nuremberg anti-Jewish laws. Richard Gehlen, the head of West Germany’s intelligence service, was the wartime chief of military intelligence on the Eastern Front, where the German army and SS troops had slaughtered hundreds of thousands of civilians. The directors of IG Farben, as we have seen, swiftly returned to lucrative business careers.
The unfortunate past of these men was rarely discussed. And Blessing, too, was adept at rewriting history, none more than his own. He had worked at the BIS during the 1930s, although his claim of “anguished memories” is risible. He had joined the BIS under instructions from his employers at the Reichsbank, with the express purpose of not facilitating, but wrecking international financial cooperation. Blessing’s 1930 memorandum, “Opinion on How the Reichsbank Should Conduct Itself in the BIS,” called for German officials to argue that reparations were “completely utopian,” to make impossible demands, and to undermine the BIS’s legitimacy in order to derail the Young Plan.
Blessing had returned to Germany in 1934 to work as an adviser at the Ministry of Economics. His patron, Hjalmar Schacht, then brought him back to the Reichsbank and appointed him its youngest director. Blessing loudly proclaimed his loyalty, declaring, “National Socialist economic and financial policy, like National Socialist policy for freedom and equality, has taken upon itself the law of action. We will allow no one in the future to strike this from our hand.”4 Blessing joined the Nazi party, and after the 1938 Anschluss—the absorption of Austria—he was rewarded with the job of absorbing the Austrian National Bank. It was joyous work for a true believer: “Just three months separate us from the memorable day, which will remain unforgettable for us. And yet in this short period, all the measures have been put into place with the goal of forging together the two economies into an unbreakable whole.”5
Blessing was also forward thinking. When Germany’s Jews were fined one million Reichmarks for the cost of the Kristallnacht pogrom in November 1938, he worried that Jews would sell their government bonds to raise the cash, which would drive down the market. The answer was for the Reichsbank to limit sales of Jewish-owned securities to one thousand Reichmarks.
The following year Blessin
g, together with Schacht, left the Reichsbank. Blessing had also signed the directors’ memorandum criticizing Hitler’s armaments spending. But the former BIS official was a canny survivor. He swiftly courted Walther Funk, Schacht’s successor as president. With Funk’s imprimatur, Blessing returned to the Reichsbank as a member of its advisory board. Blessing moved in the highest circles of the Third Reich. He attended thirty-eight meetings of the Himmlerkreis, the circle of Nazi industrialists who channeled funds to the SS chief through Special Account “S” at Kurt von Schröder’s J. H. Stein bank. Blessing went on two trips with the group to visit concentration camps, guided by Himmler himself. Blessing later said of the Himmlerkreis, “I thought it was just for beer evenings.”6
Blessing’s importance went far beyond the monies he donated to the SS. He embodied the kind of intelligent, sophisticated technocrat who was essential both for the Nazi regime and for the perpetuation of German economic interests after the war ended. Hannah Arendt, the German-Jewish writer and philosopher, described the bureaucrats who organized the Holocaust as “desk-murderers.” They did not raise a gun to the naked victims standing over the death-pit or pull the lever to release the gas. They merely stamped and moved pieces of paper from one government department to another and kept the money moving. But without them the Third Reich could not function. Blessing, too, was a desk-murderer.
In April 1939 Blessing joined the board of the German subsidiary of Unilever, a giant Anglo-Dutch company that manufactured fats and oils. The following year Germany invaded the Netherlands, and Blessing was appointed one of three administrators looking after Unilever’s interests across the Reich. Meanwhile, Hermann Goering—the chief of the Luftwaffe, the German air force, and the minister in charge of the four-year plan—set up Kontinental-Öl to exploit the oil reserves of central Europe and the Balkans. This was a project after Blessing’s own heart. He recognized the importance of Germany’s allies in the east and south—Croatia, Hungary, Romania, and Bulgaria—as a means of ensuring Nazi economic hegemony and supplies of raw material. The Danube, he said, was the “river of the future,” and petrol and grain would flow up it to Germany.7
Together with Walther Funk, the president of the Reichsbank, and Heinrich Bütefisch of IG Farben, Blessing was appointed to the board of Kontinental-Öl. As Christopher Simpson notes, the establishment of the Reich’s oil company represented a triumph for the businessmen and bankers. The hardline Nazi ideologues around the SS wanted state control, government ownership, and centralized planning of the economy, especially of vital strategic industries. However the business elite, such as Schacht and Blessing, favored a more commercial approach.8 Germany should dominate world markets, they believed, but there was no need to control every aspect of them. Kontinental-Öl was the answer: a government-supported monopoly to take over the oil industries of eastern Europe, with financial services provided by Hermann Abs at Deutsche Bank.
Kontinental-Öl, like IG Farben, was built on plunder, exploitation, slavery, and murder. As the Nazi oil empire expanded eastward, Kontinental became one of the Third Reich’s largest users of concentration camp inmates, ghetto workers, and prisoners. The firm ran at least ten concentration camps in Poland alone, where the workers were leased from the SS. In Ukraine, for example, Kontinental paid the SS and the German police administration five zlotys a day for a man, and four for a woman. The average life expectancy of a slave laborer was between three and six months. When Kontinental’s camps were shut down, many of the inmates were shot. The Borisow camp was closed in March 1943 with about eight hundred prisoners still alive. According to Red Cross records, about eighty men and twenty women were evacuated to Smolensk, and the rest were executed.9
As the financial director of Kontinental-Öl, Blessing was at the epicenter of this nexus of death and profit. He oversaw its acquisition of new firms in the east. He managed the company “payroll,” much of which was concerned with payments to the SS for the concentration camp labor the firm used—labor that was also used to build the new company headquarters in Berlin. Unfortunately for Blessing and his managers, the half-starved, traumatized labor force was not very productive. As late as March 1945, one of Blessing’s underlings complained that work in Upper Silesia was being held up by the “use of concentration camp prisoners of low performance.”
Blessing was arrested and imprisoned at the war’s end, while the Allies considered whether to charge him with war crimes, as he certainly deserved. But behind the scenes, Blessing had powerful allies: Allen Dulles and Thomas McKittrick. The Nazi bankers and industrialists were correct in their belief that the western powers would need them to rebuild the German economy. In the contest between justice and realpolitik, Dulles would make sure that the latter would triumph.
In July 1945 the US occupation authorities asked Dulles to furnish a list of Germans “eligible on the basis of ability and political record for posts in a reconstituted German administration.” The first set of lists was quickly submitted. But by autumn, Dulles, now running the OSS station in Berlin, had more detailed information about suitable German bankers. Much of this would have come from McKittrick.
In September 1945 Dulles submitted his new white list. It was divided into two categories: A and B. On the A list were three names judged suitable for “higher posts in a ministry.” The B list contained five names that were suggested for “lesser posts such as Bureau head or division chief.” 10 Among the names in group A was that of Ernst Hülse, the former head of the BIS banking department. Hülse, said Dulles, enjoyed “excellent connections with banking circles abroad,” had a Jewish wife, and was definitely anti-Nazi. Hülse was appointed to the Reichsbank in the British zone and was named president of the central bank for the federal state of Nordheim-Westfalen.
The first name on the B list was that of Karl Blessing, whom Dulles described as a “prominent businessman and financial expert” with “considerable experience in international trade.”11 Dulles was well informed about Blessing’s central role at Kontinental-Öl, which the American spymaster described as a “government-owned holding company organized to coordinate German-controlled oil properties throughout Europe.” Dulles hedged his bets. Blessing’s relationship with Kontinental-Öl might, he wrote, disqualify him for a “high government position.” However Blessing had accepted the job “under pressure” and had been in touch with the German resistance. In addition, Dulles added, Blessing had not been a member of the Nazi Party. In fact Blessing had joined in 1937. And Blessing’s party records were held by the US authorities, had Dulles bothered to check. Blessing’s main claim to anti-Nazi activity was being included on the list of the July 1944 anti-Hitler plotters as a potential minister for economics. When the conspirators were arrested, Blessing was protected by Walther Funk, who told the Gestapo that Blessing had not known anything about the plot.
The whitewashing of Blessing was not the exception, but the rule. Declassified telegrams revealed that Dulles had long planned to rescue important German industrialists and scientists. In January 1945, Dulles wrote to William Casey, who was running operations inside Germany and who later served as CIA director in the 1980s:
My project contemplates that in normal course of events and without any prior contact with us but merely to escape impending chaos, important German industrialists, scientists, etc., will desire to find some haven, preferably Switzerland. If Switzerland is closed to them, these men might possibly turn to Russia as their only alternative. . . . Discreet preliminary conversations indicate some hope of securing Swiss cooperation.”12
Not everyone in Washington approved. The following month First Lady Eleanor Roosevelt wrote to her husband, “Memo for the President. Allen Dulles who is in charge of Bill Donovan’s outfit in Paris has been counsel, closely tied up with the Schroeder Bank. That is likely to be the representative of the underground Nazi interests after the war. There seems to be in Paris a great many people who are pretty close to the big business side!”13
The president’s wife wa
s certainly well informed about the importance of the Schröder bank network, which reached from Germany to London and New York, and to the BIS via Kurt von Schröder. But by summer 1945, after the death of her husband, Mrs. Roosevelt’s opinions counted for little in Washington.
Blessing was not charged with war crimes. Instead, with Allen Dulles’s help, he was freed and returned to his old job at Unilever. He became one of the highest paid executives in Europe, earning $75,000 a year. Blessing took a pay cut to $50,000 a year when he joined the Bundesbank in 1958, but the power and prestige was ample compensation. By the early 1960s, when Blessing was a regular attender at the Basel governor meetings, he had transformed himself into a former member of the resistance.
Hermann Abs, of Deutsche Bank, was the most powerful commercial banker in the Third Reich, and he was not on Dulles’s A list. Rather, he was high on an Allied blacklist of important Nazi officials to be arrested. In the American zone Colonel Bernard Bernstein, the head of the Finance division, had Abs, indeed all the Nazi financiers in his sights. Bernstein ordered that every banker and industrialist be detained as a suspected war criminal.
Luckily for Abs, he was living in the British zone. There he met his old friend, Charles Gunston of the Bank of England, whom he used to see in Basel during the 1930s at BIS meetings. Gunston was a senior official in the British occupation authority. Gunston had no interest in the Nazi atrocities. All he cared about was getting the banks working again. Gunston asked Abs to help rebuild the banking system in the British zone. Abs was more than happy to oblige. Bernstein was enraged and demanded that Abs be extradited to the American zone. Gunston refused, but in early January 1946 he returned to England. Abs was then finally arrested as a suspected war criminal, and he spent three months in prison before being released and was never charged. Instead Abs went to work, fulfilling his promise to his old friend Charles Gunston.