Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion

by George M. Taber

  Following the invasion of Poland on September 1, 1939, however, the Roosevelt Administration moved with a new urgency to help the western allies militarily even though the American public still opposed entering another European war. The Neutrality Act of 1935, which had been regularly renewed with only minor changes, imposed an embargo on all war materials and to all parties in the conflict. On September 21, 1939, the president asked Congress to replace that with a new policy that became known as Cash and Carry. It would allow arms sales under stiff conditions. The primary ones were that the buyers had to pay immediately in convertible currencies or gold and had to provide their own transportation for their purchases. Moreover, foreign vessels picking up military hardware could spend only twenty-four hours in a U.S. harbor. Since it often took longer than a day to unload gold and then load heavy equipment such as airplanes, the western allies used Halifax, Canada as a drop-off and pick-up harbor. Vessels brought gold from Europe destined for the New York Federal Reserve and picked up war goods. Cash and Carry was designed primarily to help Britain and France. The new proposal passed Congress relatively quickly and became law in November.

  On February 5, 1940, Harry Dexter White informed Morgenthau that France and Britain would soon buy $1 billion worth of airplanes and spend even more on other weapons. He added that they still had $14 to $15 billion in foreign exchange assets, but warned that at the rate they were purchasing they might spend half of that within a year. White speculated that each had left roughly $6.5 billion in gold.17

  Morgenthau began getting regular reports on world gold shipments from the New York Federal Reserve. The inflow to the U.S. had been only about $100 million per year in the 1920s and early 1930s, but in 1935 had jumped to $1.7 billion, and in 1939 was likely to hit $3 billion. On Tuesday February 6, 1940, the U.S. bought $22.5 million in gold from the Bank of England, $1 million from the Dutch, and $410,000 from Belgians for a total on that one day of $23.9 million. An additional $3.2 million came via Canada. The Fed received a cable from the Bank for International Settlements to transfer $2.7 million from its account to the Turkish National Bank. The traffic was staggering:

  • The Bank of Iceland sent $800,000.

  • The Bank of Latvia sent $11 million.

  • The State Bank of the U.S.S.R. on September 27, 1939, sent 160 bars of gold via San Francisco.

  • The Bank of Romania in late December 23, 1939, sent $845,486 and on March 5, 1940, another 84 more bars worth $1.2 million.

  • The Bank for International Settlements in the fall of 1939 made two shipments to New York worth $6.3 million.

  • The National Bank of Hungary in late February 1940 sent $3 million.

  • The Ministry of Foreign Affairs of Afghanistan even contacted the U.S. embassy in Paris to ask about the New York Fed’s gold policy.18

  By the fall of 1939, it was hard to shock the U.S Treasury policymakers, but in November 1939 the British Exchequer stunned even Treasury Secretary Morgenthau by selling $50 million more in gold. Between the beginning of the war in September 1939 and early 1940, British gold sales amounted to $125 million, and the sales of securities were $112 million.19

  The Scandinavian countries were particularly nervous about being invaded and losing their gold. Sweden took the lead, and its central bank president Ivar Rooth often spoke for other Nordic central banks. He sent messages to New York City for the Danish Central Bank, asking if Finnish gold could be sold for delivery in Stockholm. The Federal Reserve said no. It did not want to take the added risk of getting it from Stockholm to New York. In February 1938, Rooth sent a letter to New York Fed president George Harrison, saying that he had “long contemplated to distribute gold holdings belonging to the bank.” Sweden had significant deposits in London, but he wanted to move them out of harm’s way. As war dangers increased, the Swedish banker was soon shipping large amounts of bullion to New York at his own cost. In June and July of 1938, he sent $15 million on four separate sailings. In October 1939, he transferred $25 million and then in December another $5.9 million. A week before Christmas in 1939, Sweden’s Rooth sent a year’s end message to the New York Fed’s Harrison, “We must also think of the possibility that we might become the next victim of the Russian bear. We pray for peace in 1940, but we prepare for the worst.”20

  By the early months of 1940, the influx of gold into the U.S. from Europe was so great that there was a risk that it could destabilize the international monetary system. More than sixty percent of the world’s gold was now in the U.S., as compared to twenty-three percent in 1913 or thirty-eight percent in 1929.21 In the spring of that year and with that trend only growing greater, Morgenthau asked Harry Dexter White to work on a major study on the subject. He called his long report “The Future of Gold.” The Treasury Secretary had been invited to give a talk to the Women’s Division of the Democratic National Committee, and he hoped that his aide’s work might make its way into the speech. The professor came out in White’s work, however, and the study turned out to be akin to an academic treatise. At one point, though, he alarmingly wrote: “Suppose the war lasts more than three years? Suppose it lasts five years? At the rate gold is now coming in—$2 billion to $3 billion a year—we would assuredly have most of the world’s gold by the end of the war.” White also delved into the future of the world monetary system. In many ways, he was exploring issues that would be the basis for the 1944 United Nations Monetary and Financial Conference that was held in Bretton Woods, New Hampshire near the end of the war that was then just beginning.22

  Morgenthau met with White in Sea Island, Georgia in the spring to go over his work. The secretary reiterated his support for gold, saying that he “felt it did not matter whether the government was a democracy or a totalitarian government or whether its economy was socialism or free enterprise, it would still use gold for international transactions.” White agreed. The two concluded, though, that White’s work was too dense and theoretical for Morgenthau’s upcoming speech and would go over everyone’s head including his own. So the secretary’s staff produced a more popular talk that stressed the strength of the U.S. economy and the role of gold. The secretary gave his talk in Washington on May 3, and it received good press reviews, which pleased him because he was not a natural public speaker and rarely spoke at public forums. Emil Puhl, the new power at the Reichsbank after the ouster of Hjalmar Schacht, read a copy of the speech and wrote a letter to the U.S. financial attaché in Berlin about his own views on bullion: “I am personally of the opinion that the role of gold in the monetary respect need not by any means have been played out provided all parties concerned can arrive at a reasonable solution of the gold problem.”23

  After his speech to the Democratic women, Morgenthau left for an R-and-R visit to Chicago. At 3:00 on Sunday morning May 5, he woke up and scribbled a note to his secretary on a small pad supplied by the Shoreland Hotel, where he was staying. He noted the date and time and then wrote: “Please tell Dan Bell I want enough money to move all the remaining gold out of N.Y. City to Kentucky. He should speak to me Tuesday.” Morgenthau underlined the word “all” three times and put his initials at the bottom. In the morning his son asked why he had gotten up in the middle of the night and written a note.24

  Two days later, Morgenthau was back in his Washington office. At his regular morning staff meeting he explained his middle-of-the-night note, saying, “I got to worrying about three or four billion dollars worth of gold laying in New York.” Undersecretary Dan Bell explained that Fort Knox had the capacity to hold about $15 billion dollars in gold, but was only about one-third full. He figured it could store at least $9.5 billion more. Bell proposed sending about $7.5 billion to Kentucky. An irritated Morgenthau replied that he wanted to ship $10 billion, adding, “I will take it over to the president myself. It is the height of stupidity when it cost a million and a half dollars not to remove ten billion dollars to a place of safekeeping.”25 In his memo to the president Morgenthau recommended that “in the current calendar year” the
government should ship “approximately $9 billion of refined gold from New York to Fort Knox. He estimated that this would require a supplemental budget appropriation of $1.6 million. Roosevelt approved the proposal.

  Morgenthau learned that same day that the treasury had just received $21.8 million in gold from Canada, Britain, Switzerland, and Portugal. In addition the Netherlands had wired that it would be soon sending $3.7 million more. Nazi propaganda claimed that the U.S. was simply trying to grab all of Western Europe’s gold, and the British press also angrily reported that the U.S. now had seventy percent of the world’s bullion.26 The Bank of England had previously been the major location where countries parked their bullion for protection, but with London no longer looking like a safe location, it was now going to the U.S. Large shipments from Switzerland, Sweden, and Portugal landed at the New York Federal Reserve for safekeeping, and it was sometimes gold that they had received from Germany. Without realizing it, the U.S. was actually helping finance the Nazi war effort by giving Hitler’s partners a secure place to store stolen bullion.27

  The national press was slow to pick up on the historic influx of gold to the U.S. In June 1940, though, the papers finally paid attention. The New York Times and the Washington Post carried breathless headlines such as “May Gold Imports Double; Britain Ships Heavily,” “Half Billion of European Gold Enters U.S. in 2 Days,” and “$225,000,000 in Gold Arrives Over Week-End.” The Nazi invasion of the Low Countries and France had precipitated the latest panic. The New York Times in a story datelined June 4 reported, “One of the greatest mass movements of gold in history is now under way.”28

  A series of memos the Treasury staff sent to Secretary Morgenthau showed starkly how the U.S. was gathering up nearly all the world’s central bank gold. One on July 1, 1940, reported that the U.S. during the previous month had purchased $662.8 million, with $242.7 million of that coming from Britain and $332.9 million from France. Moreover, it stated that in the ten months between September 1939 and June 1940, those two European countries had sold the U.S. $1.7 billion in gold (France $900.7 million, and Britain $766.8 million). At 2014 prices, that would have amounted to $60 billion.29

  In the first full year of World War II, from September 1, 1939 through August of 1940, the U.S. took in $4.1 billion in bullion from mainly European countries. Harry White noted in a report in late September 1940, “This is by far the largest sum of gold ever received by us or any country in a like period. We now have slightly over 70 percent of the monetary gold held by governments and central banks. We actually hold 80 percent of the world’s monetary gold if we include earmarked gold held here.”30

  On October 28, 1940, Henry Morgenthau wrote in a memo that London had just ordered $1.6 billion in war materials and was preparing for an additional one of $3.3 billion. Unless there was a change in American policy, the purchases would all have to be paid for in gold.31

  Chapter Thirteen

  DENMARK AND NORWAY FALL QUICKLY

  On September 27, 1939, the day Warsaw fell, Hitler told the heads of his three military services that he wanted to open his next offensive in the west as soon as possible. The initial objective was to conquer the Low Countries of Holland, Belgium, and Luxembourg, but that objective was soon enlarged to include northern France. This was the same area where German forces in World War I initially had great success, but then got bogged down in trench warfare and eventually lost the war. Hitler remembered those days with both agony and anger. He vowed that this time it would be different.

  Hitler issued Führer-Directive Number Six on October 9 for the invasion of the four countries, expecting that it would be launched in only a few weeks. Just ten days later, General Franz Halder, the chief-of-staff of the German army high command, presented the first draft of the operation code-named Case Yellow. Hitler wanted to begin the offensive on November 12, 1939, the day after the signing of the humiliating armistice ending World War I. Hitler stated that his objective was to conquer “as much territory as possible in Holland, Belgium, and northern France to serve as a base for the successful prosecution of the air and sea war against England and as a wide protective area for the economically vital Ruhr.”1

  The invasion date, though, kept slipping, and on the morning of January 10, Army Major Hellmuth Reinberger was carrying Wehrmacht plans for the invasion on a flight from the Loddenheide airport near Munster to Cologne, which then had to make a forced landing in Vucht, Belgium. He had been specifically ordered to take the train to avoid just such an accident, but he flew so that he could spend some extra time with his new wife. In a panic, the major tried to burn the secret documents and nearly set himself on fire in the process. When the Belgians discovered the contents, they quickly distributed them to officials in Holland, France, and Britain. Hitler was livid when he learned what had happened, but he might not have been all that unhappy because he had never thought highly of the original plan.2

  Upon further reflection and pressure from his naval commander Admiral Erich Raeder, Hitler changed his mind and decided to invade Denmark and Norway first in order to eliminate the possibility that Britain could use those countries in the future as a forward base in a conflict with Germany. When British forces stopped a German vessel in Norwegian waters and searched it, Hitler was more determined than ever to neutralize the two Nordic countries. On February 19, he ordered new plans be drawn up for the invasion of the two Scandinavian countries. The code name was Fall Weserübung (Case Weser Exercise) after the Weser River in northwestern Germany.3

  The area was also important to Nazis war plans because it was the gateway to high-quality Swedish iron ore, which came from the Kiruna area in the far northern part of the country. Germany had to import large amounts of iron ore because of the low quality of its own, which was not weapons grade. Admiral Raeder, the head of the navy, later wrote, “Swedish ore for steel was the heart of our war economy and without which our armament industries would have died overnight.”4 There were only two ways for Germany to transport the Swedish ore to the Vaterland. One route was via the Swedish port of Luleå in the Baltic, but that was frozen from December to May. The second was via the Norwegian port of Narvik, which was open all year long. The Nazi war effort, Raeder argued, could not rely on getting iron ore only half the year via Luleå. Germany therefore needed to control the port of Narvik.

  Generals Wilhelm Keitel and Alfred Jodl recommended that Hitler appoint General Nicholaus von Falkenhorst, a member of an old military family, to command Weserübung. He had served during World War I in Finland as a military advisor helping the Finns fight the Russians, which gave him experience fighting in the Nordic area. He had also been successful in the Nazi invasion of Poland. At the time, he was commanding an army corps stationed in the Rhineland town of Koblenz. Hitler and Falkenhorst met for the first time on February 21, and the Führer talked with him only about his experience in Finland.5

  After a brief talk, Hitler ordered the general to return at 5:00 that afternoon with a plan to occupy Norway. The Germans lacked proper maps of the country, so Falkenhorst went to a nearby bookstore and bought a Baedeker travel guide. As he said later, he had “to find out just what Norway was like. I didn’t have any idea.” The general quickly saw that his biggest challenge was going to be Norway’s long 1,500-mile coastline. After working up his plan at the nearby Kaiserhof hotel, Falkenhorst returned to the Führer at the scheduled time. His proposal was similar to one a naval taskforce had already made, and Hitler appointed him to lead the operation.

  The occupation of Denmark was not originally part of Weserübung. It was included later because German military leaders wanted to gain control of airbases in northern Denmark in order to facilitate airborne attacks on Norway. Air Force Marshal Hermann Göring also insisted on having a larger role for his Luftwaffe. Falkenhorst and his staff easily agreed.

  On February 29, Hitler approved Falkenhorst’s final battle plan, and the following day put out a four-page war directive. Only nine copies were made. The first senten
ce said that the objective was to occupy both Norway and Denmark, while the second sentence gave the rationale: “This would anticipate English action against Scandinavia and the Baltic, would secure our supplies of ore from Sweden, and would provide the Navy and Air Forces with expanded bases for operations against England.” The attack on Norway was renamed Weserübung Nord, while the one against Denmark was Weserübung Süd. For the first time in military history, the German attack on Norway would involve army, navy, and air force units. Hitler wrote in the order: “It is of the utmost importance that our operations should come as a surprise to the Northern countries as well as to our enemies in the West. This must be kept in mind in making all preparations.”6

  Attacks on the two countries were to take place simultaneously down to the minute. The paratroop landings at the civilian airport on the outskirts of Oslo were to be made at precisely Weser Hour plus 185 minutes. A top priority was to capture the Danish and Norwegian kings, Christian X and his younger brother Håkon VII, their governments, as well as the gold stocks of both countries. Deception was a major part of the planning. All the ships in the German flotilla sailing north were given dummy British names that were to be used in wireless communications with Norwegian officials in order to conceal their true nationality until the last possible moment.

  By March 20, Falkenhorst had finished his planning and was ready to go to war. The only thing left was to set a date and time for the invasion. The navy wanted to launch it during the period of long, dark nights, when units would have the maximum natural protection while ships and troops were transported north from German ports. The afternoon of April 2, Hitler and his top military officers conducted a final review of the war plans. Hitler decided that Weser Day would be April 9, a week later, with the invasion beginning at 5:15 A.M. Berlin time.