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The Contradiction of Neutrality and International Finance: The Presidency of Thomas H. McKittrick at the Bank for International Settlements in Basle, Switzerland 1940-46

May 24, 2010

What makes World War II a “World War?” To address such a deceptively simple question, an engagement with the growing field of transnational historiography, which questions the traditional role of national histories to complement our increasingly globalized world, is both useful and necessary.  As the boundaries of historical exploration progress beyond the borders of the nation-state, new threads of inquiry have emerged in thoroughly-researched realms where national histories have once dominated, exposing highly complex transnational phenomena.[1] Such is the case of international finance during World War II.

What can be learned from the intricate and convoluted state of transnational capital flows during these turbulent years is that neutrality takes on a completely different meaning from the way it is typically understood in a national framework. Likewise, this new dimension adds a transnational perspective to studies that are based on the national histories of the war, opening up the traditionally understood orientation of the belligerents to reevaluation. Examining national neutrality in the context of international finance is highly complex due to the circuitous nature of transnational capital; yet the question remains: Can capital itself be neutral in a wartime environment and outside the realm of national policy? In order to address this question, a different methodology is required than that of studying national histories. Such a method requires an orientation in the realm of non-state actors, such as banks, law firms, and investment companies. The Bank of International Settlements (BIS) in Basle, Switzerland and particularly the presidency of Thomas Harrington McKittrick during the critical war years of 1940-46 is an excellent lens for studying the relationship between international capital movements and the war.

The BIS was set up in 1930 to facilitate large scale transnational financial activity and to encourage nonpolitical interactions between the central bankers of various nations much like the International Monetary Fund and the World Bank today. Originally meant to serve as a conduit for German reparations payments following the First World War, the BIS was intimately connected to the economies of Europe and the United States.[2] The BIS continued to do business with its member countries in the lead up and during World War II, and persists as a meeting place for international bankers into the present.

McKittrick’s vantage point as president of the BIS during World War II can be utilized to analyze the rapid economic and political changes that took place during this period. Additionally, as an American with many influential connections to individuals in the U.S. economic and diplomatic spheres, McKittrick’s actions expose the irony of his and the BIS’s expressed neutrality, as his work at the bank played a critical role in helping Germany finance the war against his home country. But this is not the whole story; the larger narrative of how capital transcended national boundaries during World War II is yet to be fully explored. By interrogating the global linkages, a more nuanced understanding of the complex underlying dynamics of the war may be approached. The goal of this paper is to shed more light on McKittrick himself, to examine his contacts, viewpoints, and most importantly, the transnational mechanisms that the BIS employed under his supervision in order to unravel the components of wartime international finance.

In order to orient McKittrick’s actions at the BIS (and their approval in U.S. diplomatic circles) among other non-state actors, the research presented here references a body of work involving U.S. wartime corporate interactions, cooperation, and collaboration with Germany. This literature is highly varied and has contributors from many different fields, including journalists, lawyers, and professional historians. Examination of this topic has been growing steadily since the war’s end, particularly in the last three decades due to expanding bodies of declassified archival sources in the U.S. and elsewhere. This work can be grouped into four interrelated categories delineating military, political, ideological, and economic support, with some overlap considering the extensive scope of some of the organizations involved.[3] The essential argument underpinning this research is that U.S. businesses that cooperated with the Third Reich did so purposefully, and despite their excuses of the loss of control of various European subsidiaries to Nazi officials, manufacturing, financial transactions, and business services were invariably managed by Americans or those loyal to the American parent companies. In reaction to this indictment, a fifth “category” of historiography has more recently emerged, commissioned by some of the organizations accused of collaboration – such as Ford and General Motors – in order to defend their past business practices.

Military aid is perhaps the most concrete category to begin a discussion of the historiography relevant to this topic. Research on this topic detailed the cooperation of U.S. corporations with German war production in the form of building tanks, warplanes, munitions, poison gas, and research and development of new military technology.[4] Another thread of inquiry related to this subject matter regards the business activity of the sprawling chemical company, I.G. Farben, which was critical to the Nazi war effort and built the infamous Auschwitz concentration camp.[5] As more information became available during and directly after the war’s end, a handful of historians investigated this corporation’s connections to American firms.[6] A third line of inquiry into the topic of military collaboration between U.S. and German institutions involves the role that information technology played in harnessing the power of the Third Reich’s military and industrial capacity.[7]

Researchers in the category of American political support for the Nazis have noted that the leaders of many corporations held various amounts of power and influence, which they utilized to provide political cover for their activities and for their control over the lucrative German market.[8] Several historians have argued that prominent corporate managers pressed for peaceful relations with Germany, despite its aggressive posture.[9] Other studies have involved Americans who worked with the Nazi party in its beginning stages.[10]

Differing from the other categories of collaboration listed above, research on ideological support is situated more widely within the context of American culture. Many historians have explored the currents of racist thought, which were present in many circles of American life in the 1930s.[11] Additionally, the role of American eugenics pseudo-scientists in the development and implementation of Nazi genocidal goals has been well documented.[12] Documentation on ideological sympathy for the Nazis also includes prominent industrialists such as Henry Ford, who harnessed the significant resources at his disposal to publish his pro-Nazi views widely.[13]

More recently, several corporations have responded to indictments of collaboration with Germany by publishing histories of their own. This literature differs from the other categories detailed above in that it involves research directly sponsored by the companies accused of dealing with the Nazis.[14] Each organization exhibited a different response to the various accusations against them. For instance, Ford was fairly candid about its involvement, opening its archives to a team of researchers and publishing the findings on their website.[15] GM, on the other hand, hired the business historian, Henry Ashby Turner, who wrote several defenses of U.S. subsidiaries in Germany, including the widely cited German Big Business and the Rise of Hitler.[16] According to journalist Edwin Black, Turner was given exclusive access to GM archives, which he then restricted in his own collection at Yale.[17] I.G. Farben also retained a historian, Peter Hayes, who was paid directly by the corporation to produce an argument that the company’s American managers lost control to Nazi officials, which directly contradicts the previous research detailed above.[18]

Access to archival sources is a central problem for the economic historiography on this topic. Because financial institutions tend to be more protective of their information, there are still spaces to be filled in the story of their role in Nazi Germany.[19] Contemporary research has revolved around Holocaust restitution, which focuses almost solely on looted Jewish assets.[20] Much of the work that has attempted to reach beyond this subject into a more broad view of economic collaboration with the Nazis has drawn upon Anthony Sutton’s book, Wall Street and the Rise of Hitler. Sutton argues that many U.S. corporations “…aided Nazism wherever possible (and profitable) – with full knowledge that the probable outcome would be war involving Europe and the United States.”[21] Charles Higham drew similar conclusions in Trading with the Enemy, in which he contends that several American financial institutions were responsible for financing various war production activities. Higham’s work is controversial due to its relationship with its archival sources, which are not referenced within his text.[22] However, it has since been established that Higham was responsible for declassifying a large number of archival materials on U.S. firms and individuals collaborating with the Third Reich.[23] These documents, which mainly involve internal investigations by the U.S. Department of Treasury, can provide a starting point for further historical investigation. Although Higham and Sutton have been cited elsewhere, there has been sparse recent academic analysis of their sources. Therefore, the job of detailing exactly what constituted the relationship between some U.S. financial institutions and the Nazis remains an unfinished task.[24]

Other researchers have provided some specific hindsight to the study of Swiss banks that this paper centers on. The Independent Commission of Experts Switzerland (ICE) was mandated to investigate gold and currency transfers facilitated by various Swiss financial institutions for the benefit of the Nazis. Completing their work in 2002, researchers involved with ICE concluded that “Switzerland had acted as a hub for all kinds of dubious business transactions…Precisely where the gold deliveries from the German Reichsbank are concerned, it is apparent that the stolen bullion came into the country with the knowledge of individuals at the highest level, even though it came in via a secret route.” [25] Most importantly, the report noted that the BIS was intimately involved in such transactions, but more information was still required to understand the exact dimensions of the relationship to the Third Reich’s financial apparatus.

The Interwar Business Environment

Before discussing directly McKittrick’s presidency at the BIS, historical context is needed to describe how the BIS was created and the business environment it operated in leading up to World War II. Although the interwar period was chaotic politically, socially, and economically, international bankers found many innovative ways to take advantage of this period and expand their transnational business networks.

In the years following World War I, the Allied Reparations Committee commissioned a group of experts chaired by American banker Charles Dawes to formulate a plan to deal with the economic impact of the war’s devastation in Europe. Basically, these were agreements among Allied central bankers to reorganize the financial system of Germany to facilitate reparations payments and increase foreign investment.[26] This plan led to the strengthening of ties between the American and German business world primarily because of a confluence of needs; Germany needed new investment capital while the American economy required a substantial export of capital.

Unresolved political issues in Europe such as those between France and Germany over resources in the Ruhr valley, as well as German dependency on American investment, caused the Allied Reparations Committee to rethink its overall strategy of restructuring Germany’s economy at the beginning of the 1930s. The committee hired American lawyer and banker Owen D. Young to formulate a new plan for German economic stability. Among other pressing needs, including the cancellation of a portion of German war debts, the Young Plan called for the creation of an international bank to handle reparations payments. This recommendation led directly to an agreement among Allied finance ministers to create the BIS in 1930. In short, the BIS was designed to collect, administer, and distribute reparations payments between Germany and the Allied powers. The secondary purpose of the BIS was to promote cooperation between central bankers, and assist in large cross-border capital flows, such as international currency trades and large scale international investment.[27] Gates McGarrah, who had the impressive resume of holding the presidency of Chase Bank and the chairmanship of the New York Federal Reserve Bank before becoming the first president of the BIS, expressed satisfaction with the new institution as a profitable and innovative way for large scale financial institutions from all over the world to communicate and cooperate on a global scale.[28]

The BIS grew in tandem with other large transnational banking networks. Schrobanco was one such network that was poised to profit from the worldwide financial recovery that led up to the war and take advantage of a linkage between growing markets in Latin America, Britain, Germany and the U.S. Schrobanco was the American subsidiary of Schroders, which Richard Roberts states in the official commissioned history of the bank, one of the City of London’s “oldest and most important merchant banks.”[29] When the Schroder Bank’s US subsidiary opened in October of 1923, senior management convinced the influential future BIS president Gates McGarrah to become the chairman.[30] Following this pattern of pulling in important personalities with transnational experience, Schrobanco also employed the legal representation of the prestigious firm Sullivan & Cromwell through its management’s relationship with John Foster Dulles, who had participated in Allied reparations agreements at the Versailles Peace Conference in 1919.[31]

With the help and experience of these well-connected businessmen and diplomats, Schrobanco aggressively advanced into a leading position as an agent in processing Dawes and Young loans for German economic development facilitated by the BIS. Roberts notes that while other firms were fearful of the risks of political exposure, Schroders’ partners had “intimate knowledge of German firms and German affairs, which minimized commercial risk, [making] high rates of return which could be earned on German financing very attractive.”[32] Additionally, in order to exploit their expertise profitably, the partners of Schroders created the Continental and Industrial Trust Limited (CONTI). Using the access to financial networks created by the BIS, CONTI went on to invest deeply in German firms that would ultimately become very profitable during the World War II due to their indispensability to the Nazis, such as Siemens, Deutsche Bank, and IG Farben.[33]

Another highly profitable venture was Schrobanco’s relationship with the J.H. Stein Bank, managed by Baron Kurt Freiherr von Schröder, who was on the German side of the Schroder banking family and another board member of the BIS. Directly after World War I, Schrobanco made efforts to renew ties to the firm which was then owned and managed by the family of the partner of the Schroder bank, Baron Bruno Schröder.[34] Later this bank would be used as a slush fund for the Nazi SS, via Heinrich Himmler and Karl Wolff’s direction, making a large amount of capital available for further investment.[35]

In the years leading up to World War II, the Schroder banking empire was able to profit off German ventures before any of its competitors, in part with the help of Thomas McKittrick. The most dramatic example of this was its facilitation of the sale of bonds for Germany’s (and the world’s largest) fertilizer and soil concern, the German Potash syndicate. The first postwar German corporate bond issue in London was made for the German Potash Syndicate in 1925. Problematically, this deal was not able to be closed in the US due to legal advice that the “monopolistic nature of the undertaking might fall foul of US anti-trust legislation.” Luckily for Schroders, the firm McKittrick managed in London, Higginson & Co. stepped in as a partner to proceed with the arrangement yielding fantastic profits for both organizations. This deal was so successful that it was hailed by the British Quarterly Review as “an event of outstanding importance.”[36]

As demonstrated by the Potash deal, McKittrick’s firm Higginson & Co. was a good example of highly profitable international financial organizations of the time.[37] Consequently, McKittrick gained an extraordinary amount of valuable contacts and experience with the nature of transnational financial business. For instance, following the lead of other Wall Street firms, Higginson & Co. stepped in to lend the German government short term financing. This allowed McKittrick to expand his relationship with the Dulles brothers, who had extensive business and diplomatic contacts through their law firm, Sullivan & Cromwell.[38] Other contacts were not as positive. A significant problem for Higginson & Co. occurred in 1931 when McKittrick’s contact, Ivar Kreuger, was found to have been running a large scale Ponzi scheme as an agent selling bonds for many companies, including the International Match Company, which Higginson & Co. which provided a significant amount of financial backing.[39] Unfortunately, Kreuger turned up dead before he could be questioned about his involvement.[40] Pressure from several different investors came upon Higginson & Co., which caused them to liquidate the foreign sales portion of their business.[41]

Luckily for McKittrick, new opportunities in international finance presented themselves, even as the parent company of his employer, Lee, Higginson & Co., was reeling from the fallout of the Kreuger debacle.  In part because of his company’s enormous investment in Germany, and McKittrick’s experience in these matters, he was appointed as the Vice-Chairman of the Arbitration Committee of the German Credit Agreement (also known as the Standstill Agreement) to oversee German investment matters on behalf of the BIS.[42] These investments were large short-term loans, many of which were of the kind made to German governmental agencies by Schroder Bank and its subsidiaries. Between 1931-39 the agreement was renewed every year as banks primarily in the US and Britain continued to lend even as they saw the Nazis rise to power.[43] McKittrick put a positive spin on Nazi aggression, noting that Germany had quickened its pace in liquidating its past debts after the annexation of Austria.[44] It was in this environment that the current president of the BIS, Jan Beyen, notified McKittrick that the BIS board of directors had nominated him to be the new president.

On the Eve of McKittrick’s Appointment


The chain of events that sparked World War II in Europe were already developing rapidly by the time McKittrick prepared to depart to Basle in late 1939. The BIS was already involved with the financial problems of Austria, Poland, and Czechoslovakia, who were seeing a major restructuring of their central banking operations in the face of German occupation. Additionally, Basle became host to a whole cast of both Allied and Axis personalities. Although BIS board meetings were cancelled due to hostilities, several prominent Nazi financial managers were appointed to the board such as Baron Kurt Freiherr von Shröder, Walther Funk, Hjalmar Schacht, and Emil Phul, all of whom made frequent visits to the city.[45] In addition to private bankers, the U.S. Treasury and State department also sent representatives to Basle, whose function was to report back to Secretary of State Cordell Hull and Secretary of Treasury Henry Morgenthau regular updates on the BIS.[46] Problematically for Morgenthau, who worried that the BIS was becoming an Axis controlled financial institution, these representatives gave positive reports on their Nazi counterparts even as Hitler annexed various European territories and looted gold from their central banks.[47]

Switzerland also became a haven for intelligence agents, including McKittrick’s friend, Allen Dulles, who was stationed in Bern as the regional Office of Strategic Services (OSS) Intelligence coordinator.[48] Dulles was a wealth of information for McKittrick, in contact with the top authorities in Washington, as well as the business contacts he shared with his brother through Sullivan & Cromwell, where he was also a partner.[49] Dulles also used his privilege as a high level diplomatic official to give right-of-passage to McKittrick so he was able to travel unrestricted on the war torn European mainland.[50] Dulles and McKittrick traveled in similar circles, as Dulles was on the board of Schroder bank as part of his duties associated with his law firm.[51]

When McKittrick moved into his new offices in Basle in January of 1940, he was immediately beset by the major challenges of managing the bank with some semblance of neutrality as the war heated up. While it cannot be known for certain what went on inside McKittrick’s mind, his collection of papers do provide a glimpse of his possible motivations during his tenure as president of the BIS. For his part, McKittrick’s public statements consistently revolved around the importance of neutrality in dealing with an international organization like the BIS during wartime. A Time article published in 1943 about McKittrick remarked:

While in the U.S. he did not comment on the fact that the Nazis refrain from using the Axis majority on the board of directors for unneutral undertakings. To all such queries he replied: “Remember, I’m neutral.” Once he amplified this: “The policy of the bank can only be to remain outside all matters of politics.”[52]

McKittrick’s documents provide a picture that is far more complicated. An examination of the body of literature on McKittrick, both public relations materials designed to exemplify his character, as well as texts that deal with banking and the Third Reich which may hint at a darker side, will demonstrate that neither of these groups get at McKittrick’s motivations. For instance, none of this literature references the fact a significant wing of McKittrick’s family was German. During the war, McKittrick had numerous friendly correspondences with his cousin, Otto Knauth, who served in the Luftwaffe.[53]

It is unfair, of course, to suggest that the presence of German family members was enough to motivate McKittrick to facilitate Nazi financial goals. However, if there were an additional presence of other documents suggesting that McKittrick had an admiration for Germany under Hitler, there is a more compelling case to be made for where McKittrick’s sympathies lay. Indeed, there are several instances of this. In a discussion with the pro-Nazi Swiss foreign minister, Marcel Pilet-Golanz, about the death of FDR and his legacy, McKittrick stated, “History will not judge him highly. He did not seem to have a practical grasp of industrial and financial questions and that to my mind goes far to explain why the United States were still struggling ineffectually with unemployment in 1939 when the rest of the world had left that problem well behind.”[54] Although McKittrick does not mention Germany here, the inference is fairly clear. Throughout the 1930s, McKittrick had been an opponent of FDR’s New Deal policies, labeling it a “mismanagement of public finances,” compared to that of German economic policy.[55]

In issues of politics leading up to the war, in early 1940 McKittrick complained that there was an “unjustified hostility” and a “suspicion of German policy” in the American press.[56] While Poland was being decimated by the Germans in 1939, McKittrick noted that the war “…seems here to be more diplomatic than military.”[57] With access to high level German diplomats and finance ministers, in 1939 McKittrick proclaimed, “…my opinion is there will be no war and I have said so everywhere. Nobody wants war, particularly Germany…”[58] Although McKittrick may have been misled or naïve about Hitler, how would world events play on his viewpoints after the war had started and he occupied a leading position in an institution that would be prove to be critical for the Nazis? To answer this question, McKittrick’s actions at the BIS must be examined.

Mechanisms of Transnational Finance and the Third Reich

McKittrick’s main duties as president of the BIS were to continue the bank’s operations, provide information at regular intervals regarding the state of the bank, and facilitate dividend payments to its shareholders. Operationally, the BIS continued to function as it had during the previous decade – its main business involving the exchange of currency from one central bank to another, facilitating the trade of commodities (primarily gold), and investing in various industries. McKittrick’s primary challenge was how to handle politically sensitive business functions, such as the transfer of gold from Nazi occupied countries into German accounts. German financial ministers, such as Walther Funk and Emil Puhl, relied heavily on the BIS in order to exchange German currency and gold into foreign currency, such as Swiss francs, that could be used to buy raw materials for war industries.[59]

In the eyes of individuals like U.S. Treasury Secretary Henry Morgenthau, these operations constituted a direct threat to America and its Allies. McKittrick responded by treading a very fine line, avoiding publicity as much as possible while continuing to facilitate the bank’s business. An example of this policy can be demonstrated with McKittrick’s dealings with the Swedish central bank, which had a significant stake in German business exporting wood, iron, and ball bearings, which were essential for building planes, tanks, and trucks. Soon after taking office in March 1940, McKittrick confirmed an arrangement in which gold transfers from Germany in exchange for Swedish crowns in order for Germany to purchase these essential imports would not be questioned under his administration of the bank. McKittrick stated that the BIS:

…shall be permitted to buy foreign exchange for such banks as, e.g. the Deutsche Reichsbank will be permitted to transfer to our account. Since the exemption which has been granted to the BIS, in, as I gather, of general character, it will in fact apply also to balances held by us in Swedish crowns and gold earmarked for our account…May we take for granted in cases when we are informed that a transfer of balances or gold is to be made to us from an account with your institution that you are fully informed and that if we get no information to the contrary such transfer is made with your consent?[60]

By reducing the paper trail and quietly facilitating these transnational capital transfers, this activity ensured a steady stream of imports to aid Germany’s war efforts. The source of the gold Germany was using for these transactions came from several locations. The Nazis had been seizing Jewish assets since Hitler came to power in 1933. Much of the gold that was taken was melted down prior to being shipped to Switzerland to hide its origin.[61] Additionally, gold was seized from the central banks of countries occupied by the Axis, such as Austria, Czechoslovakia, Poland, Belgium, and the Baltic States. Much of this gold could simply be transferred to Switzerland under the auspices of central bank cooperation between the various occupied countries’ central banks and the BIS, which McKittrick promoted in his communications to BIS board members; but in reality, this meant that the gold was available in the German BIS account to be traded for more currency that could be used for war production.[62]

The BIS would only become more essential to Germany as the war continued. By the spring of McKittrick’s first year as president of the BIS, France, Belgium, Luxembourg, and the Netherlands were overrun by the Nazis, triggering the U.S. to block accounts from Germany and these countries.[63] This update of the “Trading with the Enemy Act” in the U.S. not only meant that business between America and Europe was effectively frozen, but also that institutions like the BIS would have trouble paying out dividends to their American investors, which was of primary concern to McKittrick. The US Treasury Department had been aware at least since 1939 that there was a “remarkably close relationship” between the BIS and Nazi Germany. In preparing their justifications for blocking such dividend transactions that McKittrick was attempting to process, the Treasury department stated:

The Reichsbank’s sacrifice of foreign exchange and gold during the war for continuation of interest payments and for more repayment of principle on BIS investments in Germany is partially explained by the action of the BIS continuing throughout the war to declare dividends and to deliver such dividend payments… [64]

Essentially, the Treasury Department saw the BIS being used, via the neutrality of Switzerland, to Germany’s advantage by moving looted capital beyond its shores. The Treasury Department’s view that the BIS was a Nazi controlled institution was primarily based on the issue of voting rights of the BIS board. For every country that was occupied by Germany, the management of the central bank was forced into complicity with Nazi financial goals, which meant that these representatives could be counted as a pro-Nazi voting bloc on the BIS board. This can be illustrated by the experience of the Polish representative to the BIS, Léon Baranski, who tried to keep the management of the bank’s assets with the BIS in the hands of the Polish government in exile after his country’s occupation. McKittrick responded by recognizing Poland as a “protectorate” of Germany, which had forfeited its national sovereignty. Likewise, McKittrick attempted to silence Baranski, stating that he should refrain from speaking about it either publicly or privately lest “unforeseeable future consequences” occur.[65] Privately, McKittrick admitted to Leon Fraser, a previous president of the BIS, that he was aware that Germany had a “probable command of a majority of the Board,” but trusted Nazi finance ministers that they would not exercise their voting rights aggressively, as it would “destroy the international character of the Bank and therewith its future usefulness.”[66]

McKittrick became frustrated with U.S. Treasury’s moves to block trade between Europe and the U.S. Confiding in his Reichsbank counterpart, Paul Hechler, McKittrick stated, “It is irrational to think that it was the intention [of the BIS board] to pay dividends in a currency which shareholders are unable to use…it has been necessary to adopt a variety of expedients according to circumstances existing in different countries…it must not be allowed to create a precedent for the payment of future dividends.”[67] Several times during 1940, McKittrick complained to George Harrison, president of the Federal Reserve Bank of New York, that he felt the BIS was being discriminated against unfairly.[68]

Throughout the next three years, McKittrick would reach out many influential bankers and businessmen in order to get dividends paid out in the US. Beginning with canvassing the American legation and the U.S. Treasury department directly, one group McKittrick approached was Schroder banking corporation, a company that he was familiar with through his earlier days managing the German Standstill agreement.[69] All efforts turned out to be unsuccessful. Frustrated, McKittrick turned to Leon Fraser, who as was noted earlier, a previous president of the BIS, with a possible friendly bank, The First National Bank of New York that could process the dividend payments. Through Fraser, McKittrick also sought out the legal services of John Foster Dulles at Sullivan & Cromwell, who as also noted earlier, was an expert on Swiss banking law from his experience representing the firm IG Farben’s Swiss subsidiaries.[70] J.F. Dulles ended up taking the case, and advised that McKittrick should personally visit the US to beseech the Treasury department directly on behalf of individual shareholders.[71] McKittrick made such a visit in December of 1942, and after a concerted lobbying effort, was able to get Treasury to grant a license for 3 million Swiss francs to be paid to individual shareholders out of Leon Fraser’s bank.[72] Thus, McKittrick was able to successfully move assets out of Switzerland even in the face of stiff resistance by regulators who were aware of the value of the BIS to Germany’s financial system.

On April 1st, 1943, Congressman Horace Jeremiah Voorhis introduced a resolution to the U.S. House of Representatives calling for an investigation into the BIS. He demanded to know “…why an American retains the position as president of the bank…[and] whether or not there exists the possibility of this bank being used to further the designs and purposes of Axis Powers.”[73] Although the BIS had been engaged in assisting German finance ministers free up capital for investment in war industries for years, lawmakers like Voorhis became aware of the BIS due to the increasing stream of negative press the BIS started to receive in tandem with the U.S. entering the war in late 1942. One of the most dramatic stories published was the BIS complicity in gold plunder is that of Czechoslovakia. Although this act was concluded in 1939 prior to McKittrick taking office, his handling of the gold once it was in BIS possession demonstrates an interesting personal twist to the nature of transnational gold transfer that Germany depended upon throughout the war. Originally, the Czech government had cleverly requested the BIS to transfer its gold reserves to England to keep them safe from the Nazis just before the country was occupied by Germany; conversely, these funds were then transferred back to Switzerland by BIS officials and made available to Germany.[74]

Josef Malik, who was the head of the Czech national bank, visited the previous president of the BIS in October of 1939, accompanied by Paul Hechler, who was a representative of the Reichsbank.[75] Under duress due to being escorted by a Nazi official, Malik was forced to retract his protest regarding his country’s gold being shipped back to the BIS and acceded all rights to it.[76] Once Malik was able to escape to England, however, his story changed significantly. Working with financial columnist, Paul Einzig, several articles were printed in the English Financial Times about the Czech gold seizure, enflaming public viewpoints against the BIS.[77] In 1945, Malik wrote to McKittrick, stating that he was removed from his job, beaten, and his family threatened so that he would not protest what was happening at his bank. McKittrick paradoxically responded to Malik that the BIS, “was not in the same position as a neutral Government,” and he was unable to take any action that did not include an agreement between Germany and the occupied governments, which McKittrick viewed as Nazi protectorates.[78]

Diplomatically, the situation in Switzerland was becoming more difficult for McKittrick to negotiate after the U.S. entered the war. McKittrick confided with his friend Allen Dulles and the head of the American legation in Switzerland, Leland Harrison, in order to figure out where the U.S. government officially stood on his actions as head of the BIS. Surprisingly, the State Department responded that there was no illegality relative to his leadership of the bank, and that he should continue his work.[79] In response to critics like Morgenthau and Voorhis, McKittrick went on the offensive. McKittrick defended this activity by stating that the BIS was a neutral organization and operated on trust between himself and the Nazi bankers.[80] McKittrick argued to Treasury officials that all transferred gold was “carefully segregated and documented so that any of it that may have been looted could be readily identified…and let the Germans keep it for other uses.”[81] McKittrick also noted that after the war he intended to “throw open the books,” and that the United Nations and the U.S. “would appreciate and approve of the role he and the BIS had played during the war.”[82] In defending his actions to private businessmen at a party thrown for him by Leon Fraser during his brief visit to the U.S. in the winter of 1942-43, McKittrick’s argument took on a remarkably different tenor.[83] He assured his fellow businessmen not to become distracted by Nazi aggression. He reassured his audience that Nazi Germany was stable; there had been no revolutions or instability under Hitler. McKittrick moved to inform them that “weak spots” in Germany’s defenses were being strengthened. In other words, Germany was still worth investing in.[84]

Debate over the role of the BIS emerged again during the Bretton Woods financial conference in the summer of 1944, as the Allied finance ministers and politicians gathered to do determine the economic fate of postwar Europe as it became clear that the defeat of Germany was imminent. Treasury Secretary Morgenthau saw his chance to make the BIS a central issue: “I am going to stop the whole Conference until this whole BIS thing is settled… There aren’t going to be any two ways about it.” He continued, “…here are fourteen directors [of the BIS], twelve of which of these directors are Nazi or Nazi-controlled. Now this is up before forty-four United Nations and we have just got to grab this thing and meet it head-on.”[85] Morgenthau’s wishes to have the BIS liquidated and shut down were quickly sidelined by the other finance ministers, who were in favor of a settlement with the bank. Even with heavy lobbying by Morgenthau of delegations whose nations had suffered at the hands of the Nazis, such as the Czech group, they were unwilling to take an official stand against the bank. Behind the scenes McKittrick pressured the more influential delegates, such as the French and English finance ministers, to resist calls for an end to the BIS and vote against the measures. Despite assertions by McKittrick of transparency, the delegates eventually agreed to have the BIS return a fixed amount of Nazi plundered gold in exchange for keeping their books secret.[86]

McKittrick’s Legacy and Avenues for Further Research


McKittrick’s brand of neutrality would be more properly described as loyalty to the BIS itself. Despite the enormous risk of continuing his job as World War II raged around him, McKittrick felt that his presence in Basle was indispensable to the survival of the organization. McKittrick quipped to the American ambassador, “Many people in the central banks business are willing to say that the bank cannot survive without me…the responsibility rests, now that the board of directors no longer meets, so largely on my shoulders.”[87] As important as he believed he was, however, McKittrick also made two important caveats: First, he would resign and return to America if the U.S. State Department, and by extension, lawmakers in Washington, believed what he was doing was illegal.[88] Second, he stated that he would resign if his neutrality was compromised in any way.[89]

McKittrick’s actions speak much louder than his words. By providing the Nazis with the financial resources they needed during the crucial war years, utilizing the transnational mechanisms described in this paper, McKittrick finds himself as a possible leading perpetrator in Nazi geopolitical goals. While McKittrick may have been able to turn a blind eye to brazen plunder and even genocide, the obvious questions are: Why didn’t he resign? Was the survival of the BIS that important to McKittrick? A more compelling answer beyond profit may be what did not happen during his tenure – he was never asked to leave by the U.S. authorities. Neither the American ambassador Leland Harrison nor the OSS station chief Allen Dulles ever decided to remove McKittrick from his post. When communicating with the Federal Reserve Bank of New York, every effort was made to help McKittrick. He was honored by Thomas Watson, the American head of the International Chamber of Commerce. Why would all of these Americans provide support to an individual that was so crucial to their nation’s enemy?

The answer again may be more than profit. The underside to America’s role in World War II shows an extraordinary amount of corporate involvement. Ford and General Motors monopolized the production of engines inside Germany. ITT fuses were in every German bomb. IBM catalogued the location and means of execution of nearly every Jew in the death camps across Europe. Chase and JP Morgan handled millions of dollars worth of transactions in Nazi controlled banks. The Dulles brother’s law firm, Sullivan & Cromwell, handled legal services for all of these institutions. Where were the loyalties of the management? These are inquiries that require future research.[90]

The question of whether the collective actions of a nation’s businesses can constitute a country’s foreign policy is beyond the scope of this paper. What can be surmised, though, are the factors that may lead toward a more definitive answer. If the BIS was truly neutral, did they provide similar financial services to the Soviet Union as they did to Germany? The BIS did not. From the outset of McKittrick’s presidency, he prevented gold and currency transfers to Russia, hiring legal experts to protect the BIS from any claims of favoritism.[91] When the Baltic States fell to the Nazis, McKittrick rushed to have their assets transferred to Switzerland over the protests of the Soviet Union.[92] Given the extraordinary imbalance between the BIS treatment of its German and Russian financial partners, the idea that the BIS was a neutral institution during the war becomes much more difficult to maintain.

McKittrick left Basle to return and live in the U.S. in relative obscurity for the rest of his life. Nevertheless, his management of the BIS left an undeniable mark on World War II, and by extension, the latter half of the 20th century. The issue of BIS complicity with Nazi plunder would not be revisited again until the late 1990s when the Bergier commission was set up to investigate the stolen assets of European Jews in Swiss Banks.[93] The tandem ICE commission found that more research on the BIS was needed to surmise its role during World War II. The report concluded:

It is therefore imperative that a future phase seek to achieve supranational coordination of fresh discoveries in terms of both inner-state workings and international relations, and of newly emerged facts concerning the economic, political and moral dimensions of developments in individual countries during the era of National Socialism, the Second World War, and the Holocaust. [94]

In concurrence with the ICE Report, further efforts must be made to understand how the implements of destruction found their way into the hands of one of the most brutal regimes of the 20th Century. Otherwise, humanity may be doomed to repeat these mistakes. In the words of the International Commission of Experts Switzerland, “Let us remember and take heed.”


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[1] Deborah Cohen and Maura O’Connor, Comparison and History: Europe in Cross-National Perspective (New York: Routledge, 2004), p. ix.

[2] Although Japan also had a small account with the BIS during the interwar and World War II years, very little activity took place between the BIS and the Japanese central bank. This subject, while outside the scope of this paper, is worth further consideration in future historical analyses of transnational capital flows between Allied and Axis countries.

[3] Sociologist and historian Michael Mann has used these categories to describe power dynamics within societies. This model was first propagated in the opening volume of his series of texts, A History of Power from the Beginning to A.D. 1760, vol. 1 of The Sources of Social Power (Cambridge: Cambridge University Press, 1986). More recently, he extended this model to a specific study of Nazis and other groups in his book, Fascists (Cambridge: Cambridge University Press, 2004). One of the focuses of Mann’s categories of power are the networks that “contain” them. This idea is elucidated well in the introductory piece, An Anatomy of Power: the Social Theory of Michael Mann, edited by John Hall and Ralph Shroeder. In essence, Mann’s model expresses the idea that all power can only be carried as far as the reach of the networks that they exist within. Therefore, the study of banks appears to be a starting point for a discussion on transnational economic power in relation to the Nazi state, which can then facilitate further business activity, such as the building of weapons, transport, communication, etc. In a conversation I had with Mann on October 13, 2009, he noted that this model is an appropriate construction for this topic.

[4] Bradford Snell, U.S. Congress Senate Committee on the Judiciary, American Ground Transport (1974), A-22. Much of the research done thus far on this topic has been recent, though its beginnings originate with work done by Bradford Snell, an attorney hired by the U.S. Senate in 1974, to inquire into anti-competitive practices of Ford and General Motors (GM). Surprisingly, this report contained new evidence that both of these organizations had also been an integral part of Nazi military production, in the lead up to and during the war, building a majority of the Third Reich’s planes, tanks, and trucks. Snell’s research was expanded upon by the team of researchers, Reinhold Billstein, Karola Fings, Anita Kugler, and Nicholas Levis Working for the Enemy: Ford, General Motors and Forced Labor in Germany During the Second World War (New York: Berghahn, 2000). The argument of this text revolves around the premise that Ford and GM controlled a majority of Third Reich War industries through their subsidiaries, Ford-Werke & Opel, and maintained in contact and control with them throughout the war via managers loyal to the company. For example, Ford produced 48% of all the 2-3 ton trucks in Nazi Germany, and an additional 90,000 civilian trucks were used by Nazi troops in occupied Europe, which were crucial to Nazi supply lines (115). Ford-Werke also helped develop the V-2 rocket for the Nazis through a separate company, Arendt GmbH, to obscure its involvement. (115-116) GM Opel owned a much larger market share in the Third Reich and also built engines for all types of military vehicles. One popular model with the Wehrmacht, or German military, was the “Blitz Truck” which was developed specifically for the Blitzkrieg in 1936 (21-24). Opel also took special pride in building armor for the Panzer tank model (82).

[5] Theodore J. Kreps. “The Political Economy of International Cartels: Cartels, A Phase of Business Haute Politique,” The American Economic Review, 35,  No. 2, Papers and Proceedings of the Fifty-seventh Annual Meeting of the American Economic Association (May, 1945), 297-311. This article demonstrates that many American institutions involved in Nazi war production, including Standard Oil of New Jersey, DuPont, Ford, and General Motors, had a substantial interest in I.G. Farben. All had members on I.G. Farben’s board of directors. Kreps describes that formal inquiry into the organization started near the war’s end with a congressional investigation into the relationship of monopolies and international chemical cartels under a committee established by U.S. Senator Harley Kilgore to oversee war production efforts. This committee reported that patent agreements between American and German firms to produce materials essential to building armaments such as synthetic rubber, beryllium, tungsten carbide, optical glass and plastics were monopolistic in nature and designed to keep all competitors out of the market.

[6] The revelations of the Kilgore committee prompted the historians Joseph Borkin, Charles A. Welsh, Richard Sasuly, and Josiah DuBois to argue that these business relationships were essential to Nazi war production both before and after the U.S. and Germany were at war. Richard Sasuly, IG Farben (New York: Boni & Gaer Press, 1947). Joseph Borkin and Charles A. Welsh, Germany’s Master Plan: The Story of the Industrial Offensive (New York: Duell, Sloan and Pearce, 1943), Josiah E. DuBois, The Devil’s Chemists (Boston: The Beacon Press, 1952).

[7] Edwin Black, IBM and the Holocaust: The Strategic Alliance between Nazi Germany and America’s Most Powerful Corporation (New York: Crown Publishing, 2001) Edwin Black argued in his exhaustively sourced monograph that International Business Machines (IBM) played a crucial role in Nazi war production by organizing inventories, production schedules, combat records, and census data – specifically for concentration camp slave labor and genocide. Additionally, Charles Higham argued that International Telephone and Telegraph (ITT) also assisted Nazi information needs by supplying phones, radios, and telegraph technology, in Trading with the Enemy: An Expose of the Nazi-American Money Plot 1933-1949. (New York: Delacorte Press 1983, 2007). Higham contends that ITT was not only a willing participant in Nazi military goals, but that the CEO Col. Sosthenes Behn, utilizing his freedom of movement as a high ranking U.S. military officer, personally flew to Europe to renegotiate conditions of his company’s contract with the Nazis while America was at war with Germany.

[8] Black, IBM and the Holocaust 37, 41-42, 148,333. Thomas J. Watson of IBM was one of the most influential CEO’s of his generation. According to Edwin Black, “Watson had cultivated a loyal following of employees throughout the IBM empire, as well as a nation of admiring executives, a fascinated American public, and enamored officials throughout the U.S. government.” Watson was elected chairman of the American Section of the International Chamber of Commerce in 1935. In many capacities, this role made him the official representative of all U.S. business abroad. Two years later, Watson personally traveled to Germany to receive a medal from Hitler himself for his efforts in organizing Nazi aims.

[9] Snell. American Ground Transport. A-22, Pauwels. Profit Über Alles 17, Billstein et. al. Working for the Enemy 37-44, Higham. Trading with the Enemy. 166. These historians focus on James Mooney of GM as a case study, who also received the same medal from Hitler as well, and was known in American diplomatic circles as a strong supporter of the Nazi regime.

[10] Stephen H. Norwood, “Legitimating Nazism: Harvard University and the Hitler Regime,

1933-1937,” American Jewish History, Vol. 92, no. 2 (June, 2004), 193-199. Some personalities to exert political influence such as Ernst Hanfstaengl were less well known; but as historian Stephen Norwood argued, their influence was crucial to shoring up political support for the Hitler regime early on. Norwood explains some political connections of this figure, “…Scion of a wealthy Munich family, Hanfstaengl had been one of Hitler’s earliest backers, joining his Nazi movement in 1922 largely because he shared Hitler’s virulent anti-Semitism. After the abortive beer hall putsch in 1923, Hitler had taken refuge at Hanfstaengl’s country villa outside Munich, where he was arrested. Hanfstaengl provided important financial assistance to the Nazi party when it was first establishing itself in the early 1920s.”

[11] Donald Warren, Radio Priest: Charles Coughlin, The Father of Hate Radio. (New York: The Free Press/Simon & Schuster, 1996), 1-2, 115. 129-160. Donald Warren argued that the American radio evangelist Charles Coughlin purposefully fanned the flames of racial hatred over the airwaves. Aligning himself with the Nazi cause, he often praised German actions and is alleged to have received translated propaganda from Nazi officials to read on the radio.

[12] Edwin Black,  War Against the Weak: Eugenics and America’s Campaign to Create a

Master Race (New York: Four Walls Eight Windows, 2003). Black argues that Nazi eugenics programs received funding and advisors from their American counterparts. One of the chief institutional supporters of this program was the Carnegie corporation, which Black contends provided operational guidance, as well as millions of dollars in financial support. Black also includes Ford’s influence on Nazi ideology, demonstrating that his publication was not only a direct inspiration to Hitler, but was actually plagiarized and reproduced in Mein Kampf.

[13] Victoria S. Woeste, “Insecure Equality: Louis Marshall, Henry Ford, and the Problem of Defamatory Antisemitism, 1920-1929,” The Journal of American History, Vol. 91, No. 3 (Dec., 2004): 905. Woeste argues that Ford was able to use his enormous political influence to both project his racist opinions and shield himself from lawsuits generated by it. Woeste surmises that, “[Henry] Ford gained as much fame for his anti-Semitic views as his cars. His Dearborn Independent, published dozens of articles between 1920 and 1925…the accusations in the Dearborn Independent, represented the broadest, most sustained published attack on individual Jews and Jews as a group in the nation’s history.” In War Against the Weak, Black demonstrates that these articles were reprinted widely in Germany. See also Black, Nazi Nexus, 2-15.

[14] Barry Meier, “Chroniclers of Collaboration; Historians Are in Demand to Study Corporate Ties to Nazis,” The New York Times, Feb 18, 1999, C1. In the late 1990s many corporations ramped up their legal and historical defenses against accusations, creating a market for researchers willing to work with these institutions.

[15] Ford Motor Company, Research Findings About Ford-Werke Under the Nazi Regime (Dearborn, MI: Ford Motor Company, 2001) Section 2 Historical Background of Ford Motor Company and Ford-Werke, 2. This source is made possible due to the first group of slave labor related lawsuits, starting with Iwanowa vs. Ford, which is still in appeal. Although Ford claims it lost control of its German plant, its own report seems to contradict this by showing that the corporation installed loyal managers as caretakers of the subsidiary to safeguard assets until after the war.

[16]Henry A. Turner, “German Big Business and the Rise of Hitler,” The American Historical Review, Vol. 75, No. 1 (Oct., 1969): 56-70. Turner argues that most businesses lost their autonomy and were under complete control of Nazi authorities. Turner came to focus on GM in particular to illustrate this thesis.

[17] Black, Nazi Nexus 123-25. Black recounts the story of how Turner used his access to GM’s files to restrict their right of use by other historians, Black in particular, who was also researching GM’s involvement with Nazis at the time for his book Internal Combustion (Washington D.C.: Dialog Press 2006). In a phone conversation with Edwin Black on September 26, 2009, Black stated he had to threaten to sue to get access to Turner’s archives. For more details on the conflict between Turner and Black over GM’s archives, see (accessed February 16, 2010)

[18] Peter Hayes, Industry and Ideology, IG Farben in the Nazi era (Cambridge: Cambridge University Press, 1987), xxx. In the acknowledgements Hayes states plainly that he received financial support from I.G. Farben to produce the book. The text itself resembles a legal defense for its American business partners.

[19] See Sébastien Guex, “The Origins of the Swiss Banking Secrecy Law and Its Repercussions for Swiss Federal Policy,” The Business History Review, Vol. 74, No. 2. (Summer, 2000): 237-266. Guex states that Swiss banking secrecy law was promoted and fiercely defended as a method of attracting foreign capital. This capital, Guex contends, was often precisely for illegal, immoral, and illicit purposes precisely because of the enforced opacity by Swiss financial institutions. Guex argues that this was the rule for large banks such as the Bank of International Settlements, as well as smaller financial institutions.

[20] Michael J. Bazyler and Roger Alford, ed., Holocaust Restitution: Perspectives on the Litigation and Its Legacy (New York: New York University, 2006).

[21] Anthony C. Sutton, Wall Street and the Rise of Hitler. (Los Angeles: ’76 Press, 1976).

[22]Jason Weixelbaum, “Trading with the Enemy: A Review of the Shocking Revelations of U.S. Corporate Collaboration with Nazi Germany,”  History News Network (July 9, 2009) (accessed February 16, 2010) and The Cutting Edge News (June 15, 2009) (accessed November 30, 2009). My determination at the time of this article’s publication was that although there were a lack of footnotes, a limited bibliography, and tabloid writing style; however, some allegations, such as those regarding Ford and GM, had been provided further credibility by more academically written sources. Thus, Higham’s work was difficult to classify.

[23] Given the breadth of these sources, they are given limited treatment by Higham and have potential to yield further details.

[24] One of the most detailed documents to date is the Bergier Commission, also known as the Independent Commission of Experts Switzerland – Second World War (Zürich: Pendo Verlag GmbH 2002), whose task, mandated by the Swiss government, was  to investigate Nazi era confiscated and stolen assets that were transferred through, or deposited in Swiss banks. In the report’s conclusion, (523) it states that analysis of declassified material in the U.S. and other places –  precisely like the documentation Higham located – is needed to further the development of this research.

(accessed February 16, 2010).

[25] Independent Commission of Experts, Switzerland, Switzerland, National Socialism and the Second World War (Zürich: Pendo Verlag GmbH, 2002), p. 520.

[26] Eberhard Kolb, The Weimar Republic. (New York: Routledge, 2005), 60-62. Kolb explains that the Dawes plan possessed some decisive economic advantages over previous reparations settlements including: replacing extremely high annuities in the short term to ease tensions between Germany and the Allies, immediate 800 million mark loan to give Germany “breathing space” before payments were due, and a more detailed and safe control system for what resources German reparations payments could be secured from – such as taxes, customs, etc.

[27] The BIS continues to act as a forum for international bankers to discuss global monetary issues. A short history written by the organization can be found at For a useful overview of the BIS see Gianni Toniolo, Central Bank Cooperation at the Bank for International Settlements (Cambridge: Cambridge University Press, 2005). One of the central features of Toniolo’s thesis is that the English central banker, Montagu Norman, along with his American counterpart, Gates McGarrah, desired a smooth functioning international central bank to handle the transfer of transnational capital in the wake of early 20th century international financial confrontations, particularly over various central banks adherence to (and rejection of) the gold standard. Norman, who was known for his close friendship with Reichsbank president Hjalmar Schacht, was said to have supported a pro-German banking policy even when it went against his own national interests. See Neil Forbes, Doing Business with Hitler: Britain’s Economic and Financial Relations with Germany 1931-1939 (London: Frank Cass Publishers, 2000), 72, 90-91.

[28] Gates W. McGarrah, “The First Six Months of the Bank for International Settlements,” Proceedings of the Academy of Political Science, Vol. 14, No. 2, (Jan., 1931), 25-36. McGarrah states the main function of the BIS should be matched to that of U.S. central banks: “An examination is being made of the possibilities of the organization of a system of international clearing through the B.I.S., so that central banks may have facilities for clearing international movements of capital, just as in the United States…”

[29] Richard Roberts, Schroders: Merchants and Bankers (London: Macmillan, 1992), xvii. Roberts states that the most significant themes in the history of the bank are the role of the founding family, its international connections – particularly in the interwar years, and its conservative style of business. While Roberts writes volumes on the latter aspect, he only lightly touches the first two categories, especially as it relates to Schroders’ connection to financing the Third Reich’s political and military ambitions. Ironically, Roberts notes that his commission to write a history for the bank was a difficult undertaking because “very little is known about the historical development of the firm and virtually nothing published on the subject.” Even more problematic, Roberts states that there is an absence of sources during the war years. He states that there was an “absence of other records in the results of a zealous response to the government’s appeal for paper during the Second World War which led to the pulping of the letter books and many other papers.” (p. 520)

[30] Roberts, 220. Roberts states, “Thus began Schrobanco’s long and important business association with the Chase Bank and the Rockefeller family.”

[31] Roberts, 225.

[32] Roberts, 193.

[33] Roberts, 194.

[34] Roberts, 157, 295-6. Roberts does not illuminate Kurt Schröder’s connection to the bank whatsoever, only getting a scant mention on two pages of this substantial 500+ page history of the bank. Roberts only mentions Kurt Schröder in the context of noting that many journalists during the lead up to and during the war questioned his involvement to the far flung financial empire. Furthermore, Roberts states that criticisms of Schröder’s connection to the firm were really focused at John Foster Dulles, who was in the midst of the 1944 US electoral cycle as a candidate for Secretary of State for the Republican party. Thus, Roberts completely misses an opportunity to illuminate the relationship between Kurt Schröder and American business interests that has been speculated upon since the end of the war in texts such as Trading with the Enemy and Profit Über Alles. To his credit, Roberts may not be aware of this literature – however, he incorrectly states, “there were no further [political] attacks after polling day.” (p. 296)

[35] Interrogation of Kurt Freiherr von Schroeder on Monday, 3 December 1945, from 10:00 a.m. to 3:00 p.m., by Foster Adams and Emil Lang, Box 3, Folder 6, Charles Higham “Trading With the Enemy” Collection, USC Cinematic Library, Los Angeles, CA.

[36] Roberts, 195. This event enabled Schroder bank in London to be designated a “Receiving Bank” which meant it was able to receive and process profits even when the owners of other German corporate bonds were only receiving partial payment in the later 1930s.

[37] Memorandum of Conversation which Mr. McKittrick had with Mr. August Diehn, General manger of the German Potash Syndicate, August 15, 1928. Series 2, Carton 6, Folder 8, Reel 10, Thomas H. McKittrick Papers, Harvard Business School Baker Library, Allston, MA.

McKittrick expanded Higginson & Co.’s relationship with the German Potash syndicate to include a collaboration in chemical trade with IG Farben to create what would then be “unquestionably the strongest single factor in the Potash industry in the world.”

[38] Higginson & Co. Paris Office, Copies of Cable & Telegraphic Correspondence – German Gov’t Short Term Financing, September 19, 1930. Series 2, Carton 6, Folder 13, Reel 10, Thomas H. McKittrick Papers.

The confidential telegraph states, “we are seriously considering throwing some legal work to Sullivan and Cromwell in order to get the benefit of Dulles services in many directions.”

[39] “I.T.&T. CHALLENGED KREUGER’S HONESTY :Told Lee, Higginson, 3 Weeks Before Suicide, of False Balance Sheet He Gave. BANKERS’ FAITH UNSHAKEN Found Him Disturbed and III, One Testifies, and Accepted His Word That Charge Was a Mistake.. ” New York Times (1923-Current file) 14  May 1932, ProQuest Historical Newspapers The New York Times (1851 – 2006), ProQuest. Web.  10 Apr. 2010. See also Frank Partnoy,  The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals (New York: Public Affairs, 2009).

[40] Ibid. Although it had been deemed a suicide, Kreuger’s brother Torsten believed he was killed and published several books on the subject, Sanningen om Ivar Kreuger (Ivar Kreuger: The Truth at Last), Därför mördades Ivar Kreuger (The Reason for the Murder of Ivar Kreuger), and Kreuger-Mordet: En utredning med nya fakta (The Kreuger Murder: An Investigation with New Facts).

[41] “$1,500,000 OFFERED IN KREUGER SUITS :Trustee Proposes to Settle $150,000,000 Actions in International Match Case. BANKS ALSO SUBMIT PLAN $500,000 for Three Concerns Suggested to Wipe Out Claims on Institutions.. ” New York Times (1923-Current file) 26  May 1936, ProQuest Historical Newspapers The New York Times (1851 – 2006), ProQuest. Web.  10 Apr. 2010. See also “LEE, HIGGINSON & CO. PLAN WIDE CHANGES :Banking Firm to Drop the Securities Business and Eventually Liquidate. WILL FORM CORPORATION New Organization to Confine Offices to New York, Chicago and Boston. AGENTS OF IVAR KREUGER Total of the Securities Handled Over Many Years Put at $1,000,000,000.. ” New York Times (1923-Current file) 15  Jun 1932, ProQuest Historical Newspapers The New York Times (1851 – 2006), ProQuest. Web.  10 Apr. 2010.

[42] BIS, Press Comunique, March 5, 1934. Series 2, Carton 10, Folder 12, Reel 19, Thomas H. McKittrick Papers. For Higginson & Co.’s investments by country see Lee, Higginson & Co., Foreign indebtedness to Lee, Higginson & Co., Higginson & Co., Lee, Higginson et Cie, September 30, 1930. Series 2, Carton 6, Folder 9-10, Reel 10, Thomas H. McKittrick Papers.

[43] Neil Forbes, London Banks, the German Standstill Agreements, and ‘Economic Appeasement’ in the 1930s, The Economic History Review, New Series, Vol. 40, No. 4 (Nov., 1987) p. 571-587. Forbes concludes that even though London financiers became more concerned as Nazi aggression became more obvious, but were unable to relinquish their investments and stop the flow of money into Germany. Forbes states, “The London banks had to choose between reducing their credit lines at a considerable cost, or trusting that eventually the politico-economic situation in Germany would improve. They chose the latter course, largely because of the special financial relationships which they believed existed between the two countries.”

[44] McKittrick, Interoffice memo, Offices of F.L. Higginson Esq., April 11, 1938. Series 2, Carton 6, Folder 16, Reel 11, Thomas H. McKittrick Papers. It is important to note McKittrick’s personal views on the Anschluss: “Personally I am less downright and bitter in my condemnation than most people. If we bear in mind that Austria definitely declared through its legislature for annexation to Germany as far back as 1921 the incident loses the character of an unjustifiable military adventure and my impression is that Austria as a whole was about as ready to accept Hitlerism as Germany was when he seized power there in January 1933.”

[45] Bank of International Settlements – Board of Directors – 1933 to 1940. Box 3, Folder 6, Charles Higham “Trading With the Enemy” Collection. Kurt von Shröder was president of the J.H. Stein Bank, Walter Funk, Hjalmar Schact, and Emil Phul were all former presidents of the Reichsbank, Germany’s central bank.

[46] Telegram No. 890, May 5, 1939 and Telegram No. 907, May 9, 1939, Bullitt to Morgenthau. Box 3, Folder 6, Charles Higham “Trading With the Enemy” Collection. In the aftermath of the Anschluss, or annexation of Austria, Treasury Sec. Moganthau was aware that the Nazis had transferred the gold reserves of the Austrian central bank. Instead of addressing such allegations, Bullitt obscured the Nazi theft by stating, “…an alignment of axis and anti-axis powers was completely absurd.” Bullitt goes on to state that “There was an entirely cordial atmosphere at Basle; most of the central bankers have known each other for many years and these reunions are enjoyable and profitable to them.” Bullitt noted that Walther Funk, then president of the Reichsbank, had convinced him that “…he did not want the Reichsbank to have any more voting BIS rights than any one of the other founding banks had.” Bullitt acknowledged that Germany had taken over the Austrian banking system but never addressed the stolen gold directly. Technically, in the case of annexation, it could be construed that the gold was not actually stolen, however the U.S. Treasury Department did not share this view.

[47] Telegram No. 907, May 9, 1939, Bullitt to Morgenthau. Box 3, Folder 6, Charles Higham “Trading With the Enemy” Collection.

[48] Dulles was a family friend of the McKittrick’s meeting with his wife Marjorie and his children. See telegram Marjorie McKittrick to Thomas McKittrick, September 25, 1945. Series 1, Carton 5, Folder 2, Reel 6, Thomas H. McKittrick Papers.

See also Eduard Watjeh to McKittrick, April 20, 1946. Series 2, Carton 6, Folder 6, Reel 10, Thomas H. McKittrick Papers.

[49] Allen Dulles to McKittrick, Prof. V.F. Wagner, December 30, 1943. Series 2, Carton 6, Folder 6, Reel 10, Thomas H. McKittrick Papers. As an example, McKittrick and Dulles corresponded about various political/economic studies of central Europe. This one in particular was about the development of industry along the Danube River.

[50] Colonel Edward W. Gamble, Jr., OSS European Theater of Operations U.S. Army dispatch, June 15, 1945. Series 2, Carton 7, Folder 8, Reel 18, Thomas H. McKittrick Papers.

[51] Nancy Lisagor, A Law Unto Itself: The Untold Story of Sullivan & Cromwell (New York: William & Morrow, 1988), p. 139.

[52] “BANKING: Mr. McKittrick of Basel,” Time, July 7, 1943.

[53] Gabriele Knauth to McKittrick, November 12, 142. Series 2, Carton 8, Folder 19, Reel 18, Thomas H. McKittrick Papers.

[54] McKittrick to Marcel Pilet-Golanz, April, 1945. Series 2, Carton 9, Folder 3, Reel 18, Thomas H. McKittrick Papers.

[55] McKittrick to Walter McKittrick, September  21, 1937. Series 2, Carton 5, Folder 17, Reel 8, Thomas H. McKittrick Papers.

[56] McKittrick to Leland Harrison, February 15, 1940. Series 2, Carton 5, Folder 23, Reel 8, Thomas H. McKittrick Papers.

[57] McKittrick to Charley McKittrick, October 23, 1939. Series 2, Carton 5, Folder 21, Reel 8, Thomas H. McKittrick Papers.

[58] McKittrick to Lt. Col. George Akers-Douglas, August 29, 1939. Series 2, Carton 5, Folder 18, Reel 8, Thomas H. McKittrick Papers.

[59] Toniolo, p. 228-29

[60] McKittrick to Ivar Rooth, March 2, 1940. Series 2, Carton 6, Folder 20, Reel 11, Thomas H. McKittrick Papers.

[61] Roger Alford and Michael Bazyler, Holocaust Restitution: Perspectives on the Litigation and Its Legacy (New York: NYU Press, 2005) p. 45, 84, 104.

[62] A good example of this phenomenon was the case of Belgium, in which the entire central bank’s gold holdings were transferred and melted down at the Prussian mint and deposited in the Swiss National Bank in the BIS’s account. This gold was then able to be transferred into Swiss francs that could be used to purchase raw materials. See BIS, Memorandum of the management of the BIS on the gold identified as part of the gold from the national bank of Belgium, June 21, 1946. Series 2, Carton 10, Folder 15, Reel 19, Thomas H. McKittrick Papers.

[63] United States Treasury, Trading with the Enemy Act (TWEA) (accessed on November. 30, 2009). An unofficial compilation of laws specific to banking in TWEA is available through the Cornell Law School at (accessed on Nov. 30, 2009). TWEA was first enacted in 1917 to outlaw any business transaction with a country in which the U.S. was at war. It was updated several times between 1940-41 to include several European countries. For the purposes of this paper, implementation of TWEA occurred for France, the Netherlands, Belgium and Luxembourg on June 17, 1940, Hungary on March 13, 1941, and Germany, Switzerland, Italy, Sweden, and Poland on June 14, 1941.

[64] TWX Conversation between Washington and Berlin, Col. Bernstein, Miss Mayer, Mr. Ritchin and Mr. Nixon and Thorson, Capt. Zap: Investigation by Bernstein’s associates, Donald W. Curtis and William V. Dunkel of the External Assets Census Branch December 5, 1945. Box 3, Folder 6, Charles Higham “Trading With the Enemy” Collection. Though this report declares that use of dividend payments applied primarily to Nazi occupied countries, Germany was utilizing this method in any way it could to free up capital to continue their geopolitical agenda.

[65] McKittrick to Baranski, May 1, 1940. Series 2, Carton 6, Folder 21, Reel 11, Thomas H. McKittrick Papers.

To be fair, a portion of Bank Polski’s securities were eventually deposited in England in 1943, but German authorities in Warsaw and Cracow attempted to circumvent this action, which the BIS did not make any attempt to stop. See London to BIS Managers, November 20, 1942. Series 2, Carton 8, Folder 14, Reel 17, Thomas H. McKittrick Papers.

[66] Communication for US Diplomatic Pouch, McKittrick to Fraser, American Legation, May 13, 1941. Series 2, Carton 9, Folder 19, Reel 18, Thomas H. McKittrick Papers.

[67] McKittrick to Hechler, July 31, 1940. Series 2, Carton 6, Folder 21, Reel 11, Thomas H. McKittrick Papers.

[68] Extract of Letter dated September 20, 1940. McKittrick to Harrison. Series 2, Carton 10, Folder 18-21, Reel 19, Thomas H. McKittrick Papers. McKittrick stated, “I have been trying to form some clear idea of what the apprehensions and purposes back of the whole matter are so far as it concerns the BIS” See also McKittrick to Federal Reserve Bank of New York, July 19, 1940 and McKittrick to Harrison, December 20, 1940. Series 2, Carton 10, Folder 18-21, Reel 19, Thomas H. McKittrick Papers.

[69] For communications with the American Legation, see Confidential memo, Foreign Service of the United States, January 20, 1941. Series 2, Carton 10, Folder 1-3, Reel 19, Thomas H. McKittrick Papers.

For communications with Treasury, see Memorandum of Telephone conversation with Mr. Fox of the Treasury, February 2, 1943. Series 2, Carton 8, Folder 18, Reel 17, Thomas H. McKittrick Papers. For communications with Schroders see McKittrick to BIS board, January 13, 1942. Series 2, Carton 8, Folder 18, Reel 17, Thomas H. McKittrick Papers. One way McKittrick thought to process payments into the US was in the form of acceptances (credits).

[70] Telegram Fraser to McKittrick, June 10, 1942. For more detail on Sullivan & Cromwell’s legal opinion, see Fraser to McKittrick, October 6, 1942. Series 2, Carton 8, Folder 18, Reel 18, Thomas H. McKittrick Papers. Fraser noted to McKittrick that Dulles was happy to help in these matters and considered it “a matter of international courtesy.” For information on the relationship between JF Dulles and IG Farben, see Borkin, The Crime and Punishment of IG Farben, 165-199.

[71] Sullivan & Cromwell to BIS, Memo No. 13-04415, October 1, 1942. Series 2, Carton 8, Folder 18, Reel 18, Thomas H. McKittrick Papers. Sullivan & Cromwell to the Office of Secretary of State, December 1, 1943. 9.11. JF Dulles was also granted Power of Attorney to act on behalf of the BIS. See also Fraser to Jules Roose, Esq., January 8, 1943. Series 2, Carton 8, Folder 18, Reel 17, Thomas H. McKittrick Papers. This letter is an example of individual shareholders that were in contact with Fraser, pressing for action on dividend payments. See also Incoming Cablegram – Serial No. 186, Federal Reserve Bank of New York to McKittrick, January 23, 1943. Series 2, Carton 8, Folder 18, Reel 17, Thomas H. McKittrick Papers.

[72] List of Papers for BIS Registry, President’s journey to USA 1942-43, December 1942. Series 2, Carton 8, Folder 21, Reel 17, Thomas H. McKittrick Papers. This is a long list of dignitaries McKittrick visited while in the US in connection with processing the BIS dividend payment.

[73] House Resolution 188, April 1, 1943. Henry Morgenthau Diaries, Reel 181, Diary 623, p. 94. FDR Library.

[74] BIS, Memo on the Position of the banks immediately after the annexation of Czechoslovakia on 14/15 March 1939, Report dated April 9, 1944. Series 2, Carton 10, Folder 17, Reel 19, Thomas H. McKittrick Papers.

[75] McKittrick was concerned about how his interactions with Hechler, as a high-level Nazi official would be viewed by others. When Hechler was killed late in the war, McKittrick noted, “Hechler’s death raises a serious administration problem, while solving a political one.” See McKittrick to Auboin, January 22, 1946. Series 2, Carton 8, Folder 4, Reel 17, Thomas H. McKittrick Papers.

[76] Jan Beyen, Note on Mr. Malik’s activities as regards the Czech gold,  October 19, 1939. Series 2, Carton 10, Folder 17, Reel 19, Thomas H. McKittrick Papers. See also McKittrick Memorandum of conversation with President Weber at Swiss National bank, Bern, June 7, 1940. Series 2, Carton 6, Folder 21, Reel 11, Thomas H. McKittrick Papers. McKittrick states lucidly, “I asked him [Weber, president of the Swiss National Bank] not to tell me where the where the gold would go and he did not do so.”

[77] BIS, Transfer of Czech Gold 1939, July 8, 1944. Series 2, Carton 9, Folder 2, Reel 17, Thomas H. McKittrick Papers. This memo is a catalogue of Financial Times articles critical of the Czech gold transfer.

[78] McKittrick to Malik June 1946. Series 2, Carton 9, Folder 2, Reel 17, Thomas H. McKittrick Papers. This memo is a reiteration of McKittrick’s original response to Malik. For McKittrick’s views on Czechoslovakia as a “Nazi protectorate” see Einzig, “The BIS and Foreign Exchange Legislation” Financial Times, June 1943.

[79] McKittrick to Leland Harrison, December 17, 1941. 9.8. See also U.S. Foreign Service, American Legation, Bern, Switzerland, January 9, 1942. Series 2, Carton 9, Folder 25-26, Reel 19, Thomas H. McKittrick Papers.

[80] Treasury Department memorandum, Conversation between Mr. McKittrick and Orvis Schmidt, March 23, 1945.

[81] Ibid., 4.

[82] Ibid., 5.

[83] Although there is a lack of evidence in McKittrick’s collection of papers, which include numerous friendly correspondences between he and Fraser, McKittrick must have been disturbed to learn that Fraser abruptly killed himself on April 8, 1945, a year before McKittrick was due to return to the U.S. See Leon Fraser of Banking Fame Takes Own Life,” The Evening Independent, April 9, 1945. p. 2.

[84] Handwritten notes for McKittrick speech at Fraser luncheon. Undated. Series 2, Carton 8, Folder 19, Reel 17, Thomas H. McKittrick Papers.

[85] Bretton Woods July 20 1944 9:15 am Liquidation of BIS Commission. Note: Morgenthau made a mistake with number of board members. There were actually 16 individuals on the board of the BIS, including the chairman. There were also five executive officers, including McKittrick as president.

[86] McKittrick contacted other delegates on the BIS liquidation commission and convinced them to agree to a settlement. See Bretton Woods, July 18, 1944, 3:30pm, Conference on BIS Looted Property, attachments J-L, letters from Rene Pleven, John Anderson, and Arthur Souza de Costa. A decent summation of the situation is captured by journalist Heinz Pol in his article, “Nazis Run World Bank – But we pick up the crumbs,” May 11, 1944, published in The New York World-Telegram, 45. Essentially, the Swiss delegation was intractable in protecting the BIS’ secrecy. Their offer was to remit some looted gold in exchange for an end to any further investigation of the BIS. When Morgenthau pressed the issue, the Swiss diplomats threatened to leave the conference. Morgenthau was forced to relent.

[87] McKittrick to Leland Harrison, December 17, 1941. Series 2, Carton 10, Folder 11, Reel 19, Thomas H. McKittrick Papers.

[88] Ibid. See also U.S. Foreign Service, American Legation, Bern, Switzerland, January 9, 1942. Series 2, Carton 9, Folder 25-26, Reel 19, Thomas H. McKittrick Papers.

[89] Telegram McKittrick to Barings Brothers, October 10, 1940. Series 2, Carton 5, Folder 25, Reel 9, Thomas H. McKittrick Papers.

[90] For summaries of these business activities see Charles Higham, Trading with the Enemy, Jacques Pauwels, “Profit Über Alles!”, and Edwin Black, Nazi Nexus.

[91] Memorandum of Conversation with Dr. Jurgis Saulya and Edouard Turauskas  Envoys of Lithuania, July 29, 1940. 6.29. See also BIS Report on Operations of the Bank from January 1st to 31st, 1942. Series 2, Carton 10, Folder 4-10, Reel 22, Thomas H. McKittrick Papers.

[92] McKittrick to Montagu Norman, August 28, 1940. Series 2, Carton 6, Folder 21, Reel 11, Thomas H. McKittrick Papers.

[93] Bazyler and Alford, Holocaust Restitution, 103-6, 115-32.

[94] Independent Commission of Experts Switzerland, p. 524.

  1. Jason,
    Nice to meet you today. Hope your CD release party is successful tonight. I know a lot the people in the other bands playing. Send your CD in for review. T Max, 24 Beverly Drive, Georgetown, MA 01833

    T Max

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