The great bank robbery

The BIS headquarters is in Basel, Switzerland, but it is answerable to no government. (AP)


Tower of Basel

The Shadowy History of the Secret Bank that Runs the World

by Adam LeBor


Before the Nazis took the first step toward conquering Czechoslovakia in the late 1930s, Czech leaders had sent a portion of their gold reserves to their account with the little-known BIS, or Bank for International Settlements, believing it would keep the loot safe.

So when, in 1939, officers of the Czech national bank were ordered under threat of death to transfer 23.1 metric tons of gold from their BIS account to the BIS account of Germany’s Reichsbank, they believed that BIS officials would recognize that the orders had been given under duress and refuse the transfer.

What they didn’t count on was that the BIS didn’t care. Montagu Norman, the governor of the Bank of England and a BIS founder, said that “political considerations must not affect BIS transactions.” And with that, the Nazis looted over 23 tons of Czech gold “without a shot being fired.”

In “Tower of Basel,” veteran journalist Adam LeBor writes that the BIS might be the most important and influential bank in the world, and yet few even know of its existence.

Founded in 1930 by Norman and Reichsbank head Hjalmar Schacht to coordinate German reparations payments from World War I, the BIS quickly came to serve as a central bank for the world’s central banks, setting key policies for global banking and eventually playing a major role in the creation of the European Union.

But this massively influential and powerful bank is also shrouded in secrecy and accountable to no one.


Headquartered in Basel, Switzerland, the bank was declared above the law, during times of both peace and war, by The Hague Convention, to the extent that even Swiss officials are not allowed to enter their offices.

Despite the stated reason for its founding, Norman always intended the BIS as a place where the world’s central bankers could “bring some much needed order and coordination to the world financial system,” without being subject to the prying eyes of journalists, politicians or the citizens whose lives their policies would affect.

From the beginning, the BIS made itself invaluable to the world’s central banks by helping them move capital.

“In the first six months of 1931, the BIS advanced 3 million pounds to the Bank of Spain to stabilize the peseta . . . advanced $5 million to the Hungarian National Bank and arranged a further $10 million credit for Budapest.”

In its first 10 1/2 months, the BIS, which its officers noted was not designed to profit, nonetheless showed a profit of over 11 million Swiss francs.

“A small clique of financiers,” writes LeBor, “unaccountable to any government, most of whom knew each other well, had somehow amassed unprecedented economic and political power.”

In doing so, they created what LeBor calls “a perpetual money machine.”

Meanwhile, the supposedly nationless bank was quickly rigged in one country’s favor.

Germany, facing decades of massive reparations payments, figured out that “the bank set up to administer reparations [could] be used to wreck them.” Advising its BIS members to try to create an anti-reparations mentality there, Germany had the decades-long payment schedule revoked by 1932.


Despite the fact that the first BIS president, Gates McGarrah, was an American, Nazi influence at the bank grew.

Schacht was joined on the BIS board by Baron Kurt von Schroder, “one of the most powerful and influential bankers in Nazi Germany” and a man who had helped bring Adolf Hitler to power; and Hermann Schmitz, CEO of IG Farben, the Nazi chemicals conglomerate that produced rubber and synthetic oil for Germany’s war machine, and which LeBor calls “a virtual parallel state, which would soon evolve into an unprecedented synthesis of finance capital and mass murder.”

As atrocities committed by corporations — including several revered American companies — grew increasingly abhorrent, a BIS connection was rarely far behind.

IG Farben, led by BIS board member Schmitz, created an intelligence service to “plan its takeover of competitors in newly occupied countries,” and built and ran its own private concentration camp, IG Auschwitz, where Jewish slaves manufactured rubber. Schmitz also transferred funds to Nazi SS chief Heinrich Himmler through fellow BIS board member von Schroder’s bank, J.H. Stein.

The BIS, meanwhile, did business with Germany’s Reichsbank throughout the war. They continued accepting transfers of gold and other assets from occupied countries to the Reichsbank, and with its investments in Germany reaching $96 million by 1939, the BIS had given the Reichsbank legitimacy with other banks.

The actions of the BIS as a whole, though, were driven not by overwhelming ideological support, but rather a technocratic belief in the importance of internationally flowing capital above all else.

A 1943 article in Bankers Magazine claimed that where Nazi activities were concerned, the bank’s annual reports showed “emotionless neutrality [that would] do credit to a visitor from Mars.” Nazi takeovers of Jewish businesses, for example, were referred to as “. . . changes in ownership of private enterprises due to the Aryanization of private firms.”

“The bankers may not have been immoral . . . but they were certainly amoral,” writes LeBor. “They believed that financial considerations existed in a vacuum, away from troublesome politics and national interests. Ethical considerations of right and wrong simply did not exist in their universe.”

Sadly, many American bankers and corporate executives showed similar amorality — or immorality, depending on your perspective — such as transferring funds from the Czech national bank into Germany’s BIS account with little hesitation.

Morality aside, LeBor notes that the Czech gold incident highlighted another important aspect of the BIS: how they were creating the modern global financial infrastructure.

“The BIS’s gold trades were a primitive forerunner of today’s globalized economy where vast sums instantly fly back and forth at the touch of a keyboard,” writes LeBor. “The technology . . . was far more primitive, but buying and selling assets sight unseen and without taking physical possession was the same.”

In 1939, a prominent American banker named Thomas McKittrick became the new president of the BIS. McKittrick took the bank’s cooperation with Nazis even further, not only accepting the treasures of occupied territories as German, but also “pass[ing] economic and financial intelligence to the Reichsbank leadership.”

The BIS, write LeBor, “gave the Reichsbank a mechanism for buying vital war materials,” and provided “useful intelligence on enemy financial transactions.”

LeBor even posits that the Nazis never invaded Switzerland because it was more useful to them as the home of the BIS.

That use went both ways.

“The bank was kept going by the interest payments it received from the Reichsbank, which eventually accounted for 82% of its income,” writes the author.

“During the war Germany added $603.5 million worth of gold to its reserves, more than 80% of which was plundered from the central banks of occupied countries. Eighty-eight million dollars worth was seized from citizens of Germany and Nazi-occupied territories. Around $3 million worth was taken from concentration-camp victims, including the macabre category of ‘dental gold.’ ”


When it became clear that Germany would be losing the war, global leaders agreed that for Europe to revive and prosper, it would need to unify, and that this would need to include a fiscally strong Germany.

So while our soldiers were still dying in battle, McKittrick — who was informing the head of the Reichsbank on American strategy and upcoming missions — was, “with the knowledge of the State Department,” “using his position at the BIS to try and bring Allied and Nazi businessmen together.” (McKittrick left the BIS in 1946 to become a vice president at Chase National Bank.)

After the IMF and the World Bank were founded toward the end of the war, the BIS provided “the financial and technical expertise” needed for the spending of Marshall Plan money in creating the reconstituted Europe. And when the European Payments Union was established in 1950 to simplify trade between European countries, the BIS “managed its banking, kept its accounts and controlled its funds.”

“The BIS,” writes LeBor, “had effectively reasserted itself as an international clearinghouse for Europe’s central banks.”

With its profit and power growing rapidly, the BIS “started to issue stern policy prescriptions to the world’s governments,” declaring that “the inflation mentality must be extirpated,” and calling for a vast curtailment of government spending.

LeBor makes the case that the BIS made these important proclamations based on no real authority. “An unelected, unaccountable, and secretive financial institution,” he writes, “was issuing policy prescriptions for democratic governments.”

Today, the BIS is “one of the best-informed financial institutions in the world, especially about cross-border banking transactions and the flow of international capital.”

In the fiscal year ending March 2012, the bank had profits of around $1.17 billion, with total equity of around $28 billion. “These are extraordinary sums,” notes LeBor, “for a single financial institution with just 140 clients.”

LeBor believes that the BIS has long outlived its usefulness. But clearly, the forces of international finance disagree, which is why the BIS will most likely continuing profiting and affecting global monetary policy for some time to come.

“When people start shooting at each other rather than talking to each other,” LeBor quotes one international banker as saying, “economies and trade still continue. There is always an interest that is bigger than war.”

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