TO HISTORIANS OF THE NAZIS, 1943's SIGNIFICANT events were the surrender of Stalingrad, the ending of hostilities in North Africa, the appointment of Heinrich Himmler by Hitler as minister of the interior, the capitulation of Italy, and the rescue of Mussolini by SS Brigadefuehrer Otto Skorzeny from an Italian mountaintop fortress. Historians with a broader focus on the European war would include: the round-the-clock bombing by RAF and U.S. Air Force planes of German cities and other key targets, the Battle for the Atlantic in climax and conclusion, the massacre of Polish Jews in the Warsaw ghetto by SS troops (to be repeated with even greater ferocity in 1944 as Russian divisions stood idly outside the Polish capital, on orders from Stalin), the formation in Algiers of the French Committee of National Liberation, at first under generals Giraud and de Gaulle, later under de Gaulle alone, the Allied landing in Sicily, the casting down from power of Mussolini by vote of the Fascist Grand Council, the Allied crossing of the Mediterranean to mainland Italy, the new Italian government under Marshal Badoglio that shifted its support from Germany to the Allies, and the meeting of Churchill, Stalin, and Roosevelt at Teheran to coordinate plans for a final attack on Germany.
But to Bormann the most telling event of 1943 was the appointment of Himmler Reichsfuehrer of the SS and chief of police, to the additional position of minister of the interior of the Third Reich. This was seen by Bormann as a threat to his control of the 42 Gaue, or districts, whose leaders reported directly to him. Albert Speer also perceived it as a potential dissolution of Bormann's domestic power base, so he looked anew to Himmler as the one who could accomplish what he had failed to do-win out over Bormann in the political infighting for control of the domestic economy. Himmler attempted to pull the Gauleiters into line by sending them orders through district SS commanders. The Gauleiters complained to Bormann, who had Hitler prohibit any more such steps. Himmler immediately pulled out, and the Himmler-Speer alliance came to an end.
Martin Bormann was now sole leader on the domestic front, and he went further to strengthen his hold over the economy. The aging, old-line Gauleiters were replaced with his new breed of administrators, typically with legal training, to handle the complex matters of an economy that, since the fall of Stalingrad on February 1, was moving rapidly into full war production. Each district leader had committees constantly surveying the entire spectrum of his regional economy. There were committees on insurance, electric power, steel, coal, and industry in general. Their reports went directly to Bormann, who dictated the directives that kept the economy in tune with his thinking. Whenever Albert Speer would try to expand his area of armament production, he would receive a curt memorandum from Martin Bormann to desist. Speer attempted to bring into his ministry's jurisdiction the Peenemiinde rocketry production, and sent Hitler a request to this effect. The reply was negative and bristling, and came not from Hitler but from Reichsleiter Bormann.
In 1943 Bormann moved to control banking by expanding regional economic committees into the financial field under his department 111-B, a unit covering finance and special fiscal projects of a highly confidential nature to which his district economic advisors belonged.
Reichsleiter Bormann's move to place the banking structure of the Third Reich in his domain was understandable, for without the banks he couldn't exercise full control of industry and the economy. In the last years of the war, big banks had nearly all German industry under their control. This was done in several ways: through ownership of stock and the right to vote stock owned by others; through bank officers and stockholders sitting on the boards of the big corporations, and, in turn, including representatives of the largest corporations on their boards. Then, when limitations to the size of the boards were mandated, they continued to extend their sway over German industry by setting up regional committees, Landesausscbuesse to which leading industrialists in the various regions would be invited to belong. It was considered a great honor to do so, with the opportunity to attend two or three meetings a year at large dinners, to which officers of big banks would journey from Berlin.
Thus, the big Berlin banks maintained their influence over all parts of German industrial life. When a law was passed limiting the number of directorships any one man could hold, it put the small bankers at a disadvantage because the big banks could divide their directorships among the many members of their management. Also, by putting officials of leading industries on the regional committees, which were not limited in number, and which in the case of the Deutsche Bank listed several hundred members, they were able to spread their influence even further.
By inviting the local industrialists to serve on these committees, they, of course, obtained the business of such companies and would extend credit to the companies, when needed. They obtained further control over industry through their ability to call in the money due under the credits they extended to the local industrialists. By these means, the big banks continued to an increasing extent to capture the customers of the small private banks.
For these reasons, the district economic advisors of the party urged Bormann to assume control of the big banks. The smaller regional banks and their customers were unhappy over the domination exercised by the large Berlin banks, and resented having all their banking decisions now referred by regional private banks to head offices in Berlin. Bormann was agreeable to such a move: it would give him greater influence with all major banks, and he foresaw needing at a later date their good will and assistance in moving capital around the world.
The major corporations did not mind Bormann applying additional charges on the banks, which they thought had become too domineering and cavalier toward their own needs. They were aware that German banks administered 70 percent of the capital of all German stock companies.
At the same time, many large corporations held large blocks of stock in the very banks that served them. Siemens & Halske A.G. of Berlin, a giant electronics firm with many subsidiaries and extended worldwide (the General Electric of Germany), had bought into Deutsche Bank in 1930 during the economic crisis. It held 1 million marks of Deutsche Bank stock until selling it in 1942. It was a quiet deal, Siemens & Halske not wanting its competitors to know about its insider position. At annual meetings the firm always had "neutral parties," a notary public, a lawyer, or some friend of the bank vote its stock.
A like situation prevailed with H.F. & Ph.F. Reemtsma, an international tobacco firm located in Hamburg. It had acquired 5 million Reichsmarks of Deutsche Bank stock during the same banking crisis of 1930, but held on to it through the years. In later days, the bank asked Reemtsma to buy several million more shares of its stock that was floating in the market, inasmuch as Deutsche Bank was not permitted to buy its own shares. In appreciation, the bank extended guarantee facilities to Reemtsma to cover cigarette tax stamps of 25 million marks. Again, the stock was voted anonymously for Reemtsma by neutral parties.
I.G. Farben, however, was of such size and generated so much cash flow of its own that it didn't need to hold bank stock to extract favorable treatment. It could tell its prime bank what to do and how to do it at any time. Hermann Schmitz, president of the management of I.G. Farben during twelve years of the Third Reich and an early Hitler supporter, once told Nuremberg investigators how Deutsche Bank functioned for I.G.
"The banking transactions performed by Deutsche Bank were mostly in collection of money from customers. They always led the syndicate of banks when increases of capital and issue of debentures were necessary. Generally I tried not to arrange loans with banks. I made one exception when I arranged a revolving credit of something like RM 170 million in 1942 for General Motors which could be repaid and taken up again over a period of time. This credit was intended to be used in the beginning of 1945 but because of the difficulties of that year it could not be used."
Schmitz said that Deutsche had become their primary bank because it "was the bank with the old relations with the Badische Anilin and Soda-Fabrik and Farbwerke vorm. Friedr. Bayer & Co., and when I.G. Farben was created in 1925 it was natural that the Deutsche Bank continue relations. It is also the reason that I.G. Farben always asked one member of the Deutsche Bank to come on the board of I.G. Farben. First it was Schlieper, then Schlitter, Mosler, and later on Abs."
All banks, in all countries, work together. Bankers relate to each other, even if they often to fail to understand what motivates their customers and the public in general. In Germany, the big banks were the money machines that insured the silent financing of the war Hitler was planning. In order of fiscal strength and importance, Deutsche Bank led the Big Three, followed by Dresdner and Commerzbank (the standing of the three still today in the Federal Republic of Germany; Fortune magazine places these among the 50 largest commercial banks in the world outside the United States).
Here is an explanation of the type of industrial funding by the big banks to produce the behind-the-scenes financing of the war, related by a participant of the management of Deutsche Bank. It is fairly representative of loans continually made to the munitions industry throughout the war by all big banks:
Loans to the aircraft industry in 1943 amounted to some 150 million Reichsmarks. Of the long term Government guaranteed loans, some 22 million went to Bavarian Motor Works and about 10 million to Daimler-Benz. Dornier received six million RM (of a syndicate credit of 60 million) without Government guarantee, covered by assignment of Government orders in 1943. A similar loan of 15 million Reichsmarks was given to BMW in 1944. Daimler-Benz also had a 15 million loan of the latter type, but did not draw on it until the closing months of the war. There was a large loan to the Frankfurt affiliate of the Verein Deutscher Metallwerke for aircraft purposes. I do not recall the amount, but it was substantial.
The Martin Bormann Nazi Party Committee on Banking consisted of ten district industrialists and bankers. The chairman of the committee was Hellmut Boernicke, who was general manager of the Brandenburger Provincial Bank and on the board of Deutsche Bank Another member was Heinrich Huncke, who was president of the Chamber of Commerce in Berlin, on the management committee of Deutsche Bank, and an economic advisor of the Berlin district of the National Socialist Party. Another was Wilhelm Avieny of Frankfurt, where he was also economic advisor to the party and a management member of the Metallgesellschaft. There was Walter Jander of Dessau, who was with the Junkers Werke; he was on the board of Commerzbank and was economic advisor of Dessau. Walter Rafelsberger of Vienna was party economic advisor for Vienna. He was an engineer, but had a seat on the board of Creditanstalt-Bankverein of Vienna (owned by Reichsand Deutsche Bank), Wolfgang Richter, an economic advisor for the Sudetenland and manager of the Braunkohlen Syndicate of Mitteldeutschland. Julius Maier served as economic advisor of Hanover. He owned the private bank of Hanover, Julius Maier & Company. There was Dr. Walter Schieber, economic advisor for Thuringia. He lived in Weimar and was manager of an artificial wool company in Schwarza, and a member of the board of directors of the Dresdner Bank during the final months of the war. Christian Franke, economic advisor for Muenster and Westphalia, North, was also president of the Muenster Chamber of Commerce and head of a large lumber company. Karl Heinz Heuser served as an alternate to Huncke on the Bormann Nazi banking committee, and also served as an alternate economic advisor for Berlin.
This banking committee not only had government access to all German bank operations and a degree of control, but it also placed representatives on the boards of each bank The big banks did not object, merely insisting that these men not be party hacks but party professionals who had a feel for and understanding of finance. The bankers of Germany have always looked to the seat of their government for guidelines, and if this was what Bormann wanted they would go along. From the Fuggers of the sixteenth century or the Rothschilds of the eighteenth century, bankers in Germany could make or break governments, and did. But during the era of the Third Reich, their period of enormous power, they had become virtually a second government. Bank chairmen were consulted by the Nazi Party on every economic and financial question that arose. Baron Kurt von Schroeder, a well-known banker of Cologne during these years and an economic advisor to Bormann's economic committee, commented that Dr. Hermann Josef Abs, chairman of Deutsche Bank, was particularly important to the government of the Third Reich.
"His influence was mainly with the Reichsbank and with the Ministry of Economics. Abs proved very valuable to the party and to the government by using his bank to assist the government in doing business in the occupied countries and in other foreign countries. Abs enjoyed excellent relations with Walther Funk, who was both president of the Reichsbank and head of the Ministry of Economics."
Walther Funk stated that the bankers and banks of greatest importance in German financial affairs abroad were "Abs (Deutsche Bank), Goetz or Rasche (Dresdner Bank), Rodewald (Reichskreditgesellschaft), Radort (Aerobank) ." Funk added that this last-named bank, the Bank der Luftfahrt (Aerobank), "confined its activities largely to the monetary affairs of France and Norway. But Deutsche Bank and the Dresdner Bank had few limitations on their activities, due to their worldwide associations and prestige in finance." Even within their own organization, much of their personnel reflected the Nazi Party. Branch managers of Deutsche Bank were to a man members of the p- of course, management insisted that all be first-class bankers, men who had come up through the Deutsche Bank ranks to positions of authority.
While the Big Three of German banking were vital to the funding of the German war machine, both before and during the war, Deutsche Bank was much more so, for it was the lead bank in establishing economic authority over the banks and corporations of the occupied countries. When the German armies were preparing to invade the Lowlands and France, Deutsche Bank submitted to the Ministry of Economics its plan for insuring economic control over nations about to be overrun by the Wehrmacht. Like I.G. Farben and its "New Order" for the European chemical business, Deutsche Bank's plan was also named Neuordnung. It was approved by the Ministry of Economics and the Reichsbank, and when German armies moved Deutsche Bank followed.
In Belgium, control was assumed by establishing banking subsidiaries of the big German ones, which also bought majority control of existing Belgian banks. The Deutsche Bank already had its own branch in Brussels and was doing business as usual on May 19, 1940, when German troops marched into the city and proceeded to give a band concert in the Grande Place-it being a sunny afternoon. Dresdner Bank bought majority interest in Banque Continentale of Brussels and Antwerp; the Bank der Deutschen Arbeit bought into Banque de l'Ouest in Brussels; Commerzbank moved in on Banque Hanseatique of Brussels.
In Holland, German banking exploitation was achieved simply by having the Deutsche Bank, which had long been interested in Handelmaatsschappj, increase its holdings in H. Albert de Bary & Co., Inc. The Berliner Handelsgesellschaft increased its holdings in the Hollandsche Koopmansbank. The Bank der Deutschen Luftfahrt acquired all shares in N.V. Hollandsche Buitenland Bank, while several other German financial institutions secured majority shares in Rodius Koenigs Handel Maatschappin. Three subsidiaries were established by Dresdner Bank.
Deutsche Bank bought majority control of Bohmische Union Bank of Prague and the Banca Commerciale Romana of Bucharest and 30 percent ownership of the Banque Generale de Luxembourg. It purchased controlling shares from banks in Belgium and Paris, which up to that time had owned these banks of Prague, Bucharest, and Luxembourg. The Societe Generale de Belgique of Brussels and the Banque de l'Union Parisien of Paris, which owned these banks, sold their shares to Deutsche Bank. In much the same way, this German bank bought majority stock from Belgian and French majority shareowners of Columbia Oil and Concordia Oil, both Romanian joint stock companies operating these oil-producing plants of Romania.
These economic penetration specialists of the Third Reich handled France similarly, with but a slight difference. In the years before the war the German businessmen, industrialists, and bankers had established close ties with their counterparts in France. After the blitzkrieg and invasion, the same Frenchmen in many cases went on working with their German peers. They didn't have much choice, to be sure, and the occupation being instituted, very few in the high echelons of commerce and finance failed to collaborate. The Third Republic's business elite was virtually unchanged after 1940. Jewish businessmen, of course, were penalized for being just that, along with those who joined de Gaulle. The Vichy government, and the occupation government under German domination, was run by "notables," people who had already made it in public administration, commerce, finance, and the professions. They regarded the war and Hitler as an unfortunate diversion from their chief mission of preventing a communist revolution in France. Antibolshevism was a common denominator linking these Frenchmen to Germans, and it accounted for a volunteer French division on the Eastern Front, which in actuality was useful only as propaganda for the Germans. Hitler never thought much of the volunteer divisions of occupied Europe, dismissing their existence with, "We will rise by ourselves."
The upper-class men who had been superbly trained in finance and administration at one of the two grand corps schools were I referred to as France's permanent "wall of money," and as I professionals they came into their own in 1940. They agreed to the establishment of German subsidiary firms in France and permitted a general buy-in to French companies. In 1941, French banks sold a large part of their holdings in the industrial and banking enterprises of central and southeastern Europe; after all, they reasoned, the German armies were already there, which secured French interests; and half a loaf is better than none.
In Paris the usual direct penetration took place by shareowner control of such as Worms et Cie. (now Banque Worms Group), the Banque de Paris et des Pays-Bas, Banque Nationale pour le Commerce et Industrie (now Banque Nationale de Paris), and Banque de Undo Chine (now Banque de l'Indo Chine et de Suez Group).
On May 23,1940, all French banks operated under the German banking administration, and fiscal operations came under the supervision of Berlin auditors. When the Japanese bombed Pearl Harbor on December 7, 1941, and President Roosevelt announced that the United States was at war with Japan and Germany, the branches of American banks in France came under German control and were closed, except for two American banks: Morgan et Cie., and Chase of New York. Both received this special treatment through the intercession of Dr. Hermann Josef Abs of Deutsche Bank, financial advisor to the German government. According to U.S. Treasury agent reports, the favorable treatment was due to an "understanding relationship" between Lord Shawcross and Dr. Abs. Sort of an "old school tie," an unspoken understanding among international bankers that wars may come and may go but the flux of wealth goes on forever. Lord Shawcross was, and is, a British financial leader in the City of London, a distinguished barrister, and a board member of many international firms; he had also been serving as special advisor to Morgan Guaranty Trust of New York, and to their French and Spanish banks. Morgan et Cie. and Morgan et Cie. Internationale S.A. and Chase of New York had their own ties to Abs. Lord Shawcross was later to become chief prosecutor for the United Kingdom before the International Military Tribunal at Nuremberg. He was to have many friendly conversations with Dr. Abs, who was under house arrest for a time in 1945. Both Lord Shawcross and Dr. Abs were to work together again in the 1950s in jointly sponsoring an international organization named "Society for the Protection of Foreign Investments of World War II," with headquarters in Cologne, West Germany-all this according to testimony and documents submitted to the U.S. Justice Department and a Senate committee in Washington.
Meanwhile, in 1940, Jewish banks in France (such as Banque Transatlantique, Lazard Freres, and Rothschild Freres) and many a more modest Jewish firm engaged in the securities business and in international operations were seized, but were all returned to rightful ownership after 1945.
In both Belgium and France control of banks gave the Germans control of industry because banks could vote the shares they held in commercial firms, determining management's collaboration in manufacturing products for use in Germany. Control of both banking and industry in occupied countries was therefore essential to continued effective domination of a nation. People depended on factories and commercial establishments for their livelihood; they needed banks to cash paychecks and for their savings, as well as to lend them money for business expansion and home mortgages. Those eliminated from this economic circle suffered severely. With no jobs and no savings, they constituted a minority society of social and economic outcasts. Some tuned to the Resistance-not too many until Allied troops were at the gates. On the other hand, as part of the "carrot," compliant workers in factories and employees of banks received part of an increased salary scale in food bonuses, so that they and their families survived the occupation in better style.
Hitler could afford to strip these countries of 153 divisions and send them to the Eastern Front in 1941. Thirty-eight divisions were enough for the Lowlands, Belgium, and France: bank control and the police, both German state secret police and the local police who worked for them, did the rest.
In Holland, because the big local banks did not have stock ownership of the firms they financed, Deutsche Bank specialists approached the industrial problem in a different way. They bought into the key firms much as they would go about negotiating a takeover in peacetime, except that their hole card was the German army.
As one example, AKU (Algemcene Kunstsijde Unie N.V., of Arnheim, Holland) was a chemical firm, which had been formed in 1929. It owned outright an important subsidiary, Vereignigte Glanzstoff, among other properties. In Germany the Dutch-owned subsidiary was Vereinigte Glanzstoff-Fabriken A.G., of Wuppertal-Elberfeld. The Germans already held a minority interest in AKU and V.G. But Deutsche Bank and Reichsbank wanted majority control, not only for the benefits it would provide to German war production in Holland, but for the increased profits that would flow to German shareowners. This is how the transition was accomplished: AKU had common shares and preferred shares; the latter, which had the bigger voting rights, were all in the hands of members of the board of AKU. The first move was to change the composition of the board. The German Ministry of Economics, in the person of Hans Kehrl, asked a Cologne banker, Kurt Freiherr von Schroeder, to join the board of AKU and of Vereinigte Glanzstoff. Upon becoming a board member of AKU, Schroeder received 6,000 florins of shares (6 shares of 1,000 florins each). He received these as a trustee and as a member of the board. At the beginning of the war there were eight members on the board of AKU: three Germans and five Hollanders. The chairman of the board was Mr. Fentner van Vlissingen; the vice chairman was Dr. Abs of Deutsche Bank. Deutsche Bank controlled many of the AKU shares and had a leading position in the Vereinigte Glanzstoff. Liaison between the two companies was carried on by Vaubel. The eight men holding the priority shares were all now in a consortium. The Germans dominated this consortium, although technically the Dutch had a 50 percent interest. Before each meeting, when the shares had to be voted, it was decided how they could vote. The shares of the trustees had to be voted the same way. The German holders were trustees for the Vereinigte Glanzstoff. The Germans, such as von Schroeder, who had received their shares at no cost, were obligated to turn back their stock when they left the board. They were merely trustees, and voted on order for V.G., as did the priority shareholders. Before board meetings, owners of the priority shares received letters from the Deutsche Bank or V.G. management telling them how they should vote. The eight priority shareholders each held six priority shares valued at 48,000 florins. Before each meeting Dr. Abs and Mr. van Vlissingen held a short conference, at which time the course the voting should take was outlined. The leading figure was Abs; van Vlissingen would deliver the instructions as initiated by Abs.
Kurt von Schroeder said the Dutch members did as the German government desired. "They never made difficulties. Abs was the leading man because of the majority of the shares he controlled in the consortium."
There were three American companies, North American Rayon Corporation, American Bemberg Corporation, and American Enka, all subsidiaries of Vereinigte Glanzstoff subsidiaries. American Bemberg was a subsidiary of J.P. Bemberg A.G., itself a subsidiary of Vereinigte Glanzstoff, After the war began, it was difficult to manage the three American companies from Germany. An effort was made to have the American subsidiaries appear to be under Dutch rather than German control. The consortium of V.G. and AKU, however, continued receiving annual reports and the profits from the American firms placed on deposit to accounts in Switzerland, through Swiss subsidiaries. (In the 1950s, both AKU and Vereinigte Glanzstoff were reshuffled and became part of a Dutch holding company, AKZO NV. AKU today is AKU-Goodrich, and Vereinigte Glanzstoff has been absorbed into the American Enka Company of North Carolina. All continue profitable for AKZONV and the Dutch and German shareholders.) The original move for control in 1941 was prompted by the German need to increase the production of artificial wool and cellulose. To fulfill this AKU needed more capital, for the construction of a new plant for the artificial wool, and it had to found a new company, SOVE, to produce increased cellulose. Deutsche Bank agreed to increase the AKU capital by 10 million florins with nonvoting certificates in Germany, retaining the original shares with its voting rights. Any who bought the certificates received the same dividends and had the right for one time only to change the certificates for original shares. Deutsche Bank, with its 10 million florin shares of capital with voting rights, was in command, but it was not until it bought additional shares of AKU in Holland that it held a majority of the total shares. The AKU shares against which certificates were issued by the Deutsche Bank were deposited with the Deutsche Bank Filiale Hamburg; in the amount of 27,762,900 florins with German stamp and 3,444,400 florins without German stamp were the amounts exchanged for certificates by the Deutsche Bank at that time, when AKU was reorganized in 1942.
If all this seems devious in a war of shot and shell, it is. But such a form of control was necessary to the long haul of occupation, in which the Third Reich envisioned a peaceful, prospering community of nations within their Fortress Europe. Commerce and industry had to go on, and profits had to flow with benefit to all involved parties and shareholders, if a common market under German direction were to succeed and communism were to be held back.
Once Martin Bormann had the German banks assume majority control of the fiscal apparatus of each overrun country and of the corporations of special worth to them, the German "Four-Year Plan" was the next step in total administration, determining precisely which individuals were to direct these enterprises in the occupied areas; also, into which German sphere of requirement such should fall.
In Holland, the overall administrator of the financial and economic plan was Dr. Hans Fischbock The Luftwde took charge of the electronics firm of Phillips, which had become a prime supplier. Philips of Eindhoven was likewise used for special wireless projects, thanks to its astounding capabilities in the manufacture of electronic communications and radar equipment. One such was to engineer equipment that would monitor the telephone conversations between Prime Minister Churchill and President Roosevelt.
In 1940 AT&T and their Bell Laboratories had developed a device for secret telephone transmissions between the president of the United States and the prime minister of Great Britain. This so-called X-System was-the first speech encoding technique that could be deciphered only at the point of intended reception. Churchill, from his command post beneath Westminster, would speak into a specially contrived handset; his words were encoded with electronic pulses called "key signals," and transmitted by short-wave radio; received at AT&T headquarters in New York City, they would then be transmitted to the White House, where the key signals would be deleted; thus the listener, the president, would hear only the perfectly clear, original message. It was a giant leap forward in telephone confidentiality, developed by Robert C. Mathes, Ralph K. Potter, and P.W. Blye, Bell engineers.
But this unique invention of telephonic radio scrambling was about to lose its confidentiality. In 1941 a Gestapo agent within the British intelligence structure sent a coded report to General Mueller in Berlin that top secret information affecting the course and outcome of the war was being regularly exchanged over the ether between Churchill and Roosevelt. Although it is true that British intelligence had penetrated the German General Staff, it is equally true that General Mueller had his mole inside Britain's Secret Intelligence Service, a fact unknown to either the British or Admiral Canaris of the Abwehr, who was leaking information secretly to General Sir Stewart Graham Menzies, head of MI-6.
General Mueller's agent was Charles Howard Ellis, a top level British career intelligence officer who also served as a Nazi double agent throughout World War II. At the time of his tipoff to General Mueller, Ellis was in New York as second in command to Sir William Stephenson ("A Man Called Intrepid"), who was doing his best to move the U.S. into war against Germany with a combined propaganda and British spy operation and who later assisted in the formation and training of the American OSS, Charles EIlis learned of the Roosevelt- Churchill telephone conversations from Stephenson, who was a frequent visitor to the White House. Ellis sent his message to Mueller through Gestapo channels via Mexico City to Buenos Aires, where it was beamed to Hamburg by one of the clandestine German transmitters in that capital. The Ellis report was quickly taken by General Mueller to Reichsleiter Bormann, who promptly told Hitler about it. The Fuehrer ordered Bormann to do whatever was necessary to unscramble these conversations and provide him with transcripts within hours of their occurrence.
Under the direction of Group 111 of the Berlin cipher section, Bormann instituted a hurry-up program, and after many months of intensive work and many millions of Reichsmarks spent by the research institute of the Deutsche Reichspost, Dr. Ohnsorge, minister of postal services, informed Bormann that a sophisticated installation would enable them to unscramble undetected the telephone conversations between the two Allied leaders and place them in clear, listenable context. The task was described by German cryptologist Wilhelm F. Flicke: rust imagine you are standing on the edge of a seething volcano, with a dozen yelping dogs just behind you and with a few wolves and lions howling and roaring at the other side of the crater. Add a gentle whistle to this sound mixture and you have an idea of what scrambled speech is like and what German engineers had to penetrate before they could extract words."
The chief German electronics engineer who developed this counterachievement of the Deutsch Reichspost was Herr Vetterlein. In September 1942, under his direction, the Dutch engineers of the newly captive firm of Phillips at Eindhoven constructed the necessary installation in a monitoring station, on a spit of land close by The Hague.
Hitler was delighted each time Reichsleiter Martin Bormann placed on his desk a transcript only hours after the American president and the British prime minister had held one of their transatlantic conversations. Bucked up by the ingenuity and patriotism of his German inventors, he expressed thanks to the Phillips engineers. "Their work alone in this matter made the taking of Holland worthwhile," he is said to have remarked to Bormann. Indeed it did, for it gave Hitler a window into the workings in London and provided him with the certain knowledge that there would be no Second Front in 1943, leaving him free to shift further divisions from the Westwall to the Eastern Front. The many hundreds of British and Allied agents sacrificed by the British in France and in the Lowlands to convince the Germans there would be a Second Front in 1943 makes a dismaying footnote in the history of World War II. Not until February 1944, months before D-Day, did British intelligence discover that its worst security leak was at the top of the pyramid, and order the Royal Air Force to destroy the Nazi monitoring station in Holland.
Bormann's Four-Year Plan proceeded like clockwork in Western Europe, and the Germans made a special effort to apply the same to the countries of southeastern Europe. Before World War I they had large holdings in public loans, railways, banks, mining, oil, and other industrial interests in this part of the world. As a condition of the peace treaties following World War I, Germany forfeited it all, and furthermore had to pay retributive reparations to those countries that had taken the side of the Allies. Part of the Austrian and Hungarian holdings, especially in the heavy and armaments industries and in banking, were taken over lock, stock, and barrel by France and Great Britain, as well as by Belgium, Switzerland, and other nations. Thus, up until 1934, what was left to Germany was minuscule; they held only 1 percent of the total foreign investment in Yugoslav industry and less than 1 percent of the total foreign investment in Yugoslav banking.
With the advent of National Socialism, perceived as a saving grace, and the concomitant era of renewed German production, trade, and Reichsmark diplomacy, the Fatherland once again became a force to be reckoned with in southeastern Europe, drawing it into the Nazi orbit. In 1941, when German armies slashed through the Balkans to the Aegean in five weeks, the administrators of the Four-Year Plan moved to exploit this region in a businesslike manner. They carried out the financing and development of important raw materials in Yugoslavia, Romania, and Bulgaria. For this they utilized the skills of German industrial firms to extract maximum benefits from the mining, steel, and petroleum industries. Deutsche Bank, Dresdner Bank, and Commerzbank had already gained majority control of the principal banks and industrial corporations of these countries by buying sufficient shares from their principal shareowners, French and Belgian banks.
A similar pattern was developed for Luxembourg, a country smaller than Rhode Island, whose principal industry is iron and steel. The Germans annexed Luxembourg, as they did Alsace- Lorraine, and it became an administered territory, like Poland, Belgium, and Holland, where local nationals did not serve as government. Gustav Koenigs, chairman of Hamburg-Amerika shipping line and a director of many companies, was appointed Reich trustee of ARBED, an important Luxembourg steel cartel, by the German Ministry of Economics. There were in ARBED 250,000 shares outstanding, the majority held by Luxembourgers, Belgians, and French, in that order. German shareholders, largely through their banks, accounted for 54,747 shares. Some were held by British and Americans through their secret accounts in Swiss banks. A shift in control was made when Gustav Koenigs, as Reich trustee, also became trustee of the Belgian- and French-held shares. On April 19,1943, a shareholders' meeting was held in Luxembourg city, and the capital of the company was converted from francs into Reichsmarks. ARBED was recapitalized at 300 million Reichmarks ($120 million), and under German direction the cartel became the third largest iron and steel company in Europe, ranking behind only Germany's Vereinigte Stahlwerke and the Goering Steel Works. A sales company was then formed under the name of Luxembourg Iron & Steel Company to market all ARBED products throughout Europe. It was capitalized at RM 1.5 million. To further tighten German control over the iron and steel output of this small, mountainous country, all of the iron mines in Luxembourg were combined and amalgamated into one unified association under German direction. This association was named "Luetzellurg," and its advisory board was appointed by the chief of the German civil administration. Gustav Koenigs, as Reich trustee of ARBED, served as president of Luetzellurg.
The two principal German banks, Deutsche Bank and Dresdner Bank, had assumed 73 percent ownership of the Banque Generale de Luxembourg and the Banque International de Luxembourg in May 1940. They bought majority shares of the two Luxembourg banks from the Belgian and French banks, where they had increased their shareholdings to a controlling interest. Both Commerzbank and the Deutschen Arbeit banks established branches in Luxembourg.
In dealing with all other aspects of the economy of occupied countries, the Germans were just as thorough. In 1939, the British insurance companies held nearly half of the French portfolios, amounting to 90 billion francs, or about $1,800 million. When France fell, all British insurance offices in both occupied and unoccupied France were closed and by agreement with the French Insurance Department in Vichy, and the German Central Organization of Insurance Carriers, a full concession was issued by France to German insurance companies. The Munich Reinsurance Company had already penetrated France before 1939 through the Societe Anonyme de Reassurance of Paris. In 1940 Nordstern of Germany acquired most of the British business. The heavy industries of France were put to work for Germany, as was the iron and steel industry in Alsace-Lorraine. By 1941 there was great bitterness in France toward the British, anyway. It appeared to the French now that most Allied military successes seemed to involve French losses. First, there was the British invasion of Syria in June 1941. Then the British blockade of the Continent began, causing grievous food and fuel shortages in France, although had the German occupation authorities not drained so much food from the French economy and diverted it to Germany the shortage would have been manageable. On March 3,1942, the British bombed the Renault works in the Paris suburb of Boulogne-Billancourt, which caused great damage and civilian casualties. Also, the Vichy French were still smarting from the seizure of two battleships, four light cruisers, two submarines, and about two hundred small craft at anchor in Portsmouth and Plymouth. But the shelling and bombing of the battleships Bretagne, Dunkerpue, and Provence at Oran, and the Richelieu at Dakar, along with lesser vessels, turned Britain into an enemy of Vichy France, although Churchill was wise to order the attacks to keep this naval force from falling into German hands. If they had--and German plans were being made to seize the ships and man them with German and Italian crews-the battle for the Mediterranean and the Atlantic would have swung in Germany's favor.
Against this background, and with the schism between France and Britain, France looked to Germany rather than to Britain. The economic penetration of the neutral nations was handled differently by German corporations and banks. They continued to move in tandem, I.G. Farben and Friedrich Krupp, A.G., to name only two major ones with worldwide interests, and manufactured and sold their products while participating banks handled the funding and the collection of money, according to terms of contracts between manufacturer and principal.
Hermann Brombacher, manager of the War Material Export Branch of Friedrich Krupp A.G. in these war years, stated that all contracts for export had to be passed on by two government agencies, A.G.K. (Ausfuhr Gemeinschaft Kriegsgerat) and O.I.W. (High Command of the armed forces). Brombacher said that foreign business was handled in the following manner: