Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (18 page)

Beyen thought he was off the hook, but at 6:00 P.M. he received another call from Auboin, saying that the French and British central banks governors had discussed the matter and did not want to interfere with the order. Montagu Norman felt strongly that it should not be stopped since it was a bank transaction, and the French were not anxious to act unilaterally to block it.
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At 6:00 P.M. on March 20, the BIS sent a cable to the Bank of England instructing officials to execute the transfers. The British government would later claim that the Bank of England did not know the ownership of accounts or that they even had the right to know. That was false; they knew. The two transfers changed the ownership of 1,845 bars from the Czechs to the Germans.
²²

The Reichsbank then quickly emptied their account in London. They swapped most of their gold in London with the Dutch and Belgian central banks for bullion stored in those countries. The whole charade was a clever deal. Berlin had outmaneuvered the well-planned Czech strategy to protect the country’s gold. By early April it was in Berlin. Wrote BIS historian Gianni Toniolo: “The timing and details of these operations are essential for the understanding of this carefully planned and skillfully executed action by Germany in anticipation of war.”
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At their next monthly meeting the BIS board members discussed whether Beyen had properly handled the politically delicate Czech gold affair. France’s Fournier insisted the transfer should not have taken place, even though he could have stopped it. The Bank of England’s Otto Ernst Niemeyer, who was chairman of the BIS board of directors, said that the organization should not “concern [itself] with political questions.” Montagu Norman considered it a purely financial transaction that bankers, rather than politicians, should handle.

The Chamberlain government, however, soon faced outrage in Parliament over how it had handled the case. Critics charged that the Bank of England had facilitated the Nazi robbery of Czech gold. Treasury Minister Sir John Simon lamely told Parliament that he had asked the Bank of England not to make any such moves in the future without contacting the government. On March 27, the government passed legislation to impound Czech assets in the country, including gold. By then, though, it was too late.

The story of the Czech gold burst into the minds of the international public on May 19, when the British
Financial News
broke the story about the handling of the Czech gold. The author of the story was Paul Einzig, an editor of the paper. His source of the information was the Czech central bank’s Josef Malík, who had escaped from occupied Czechoslovakia and was now a refugee in London. The rest of the press quickly picked up the story, and it became a national scandal. Prime Minister Chamberlain soon faced a whirlwind of rage in Parliament. In an attempt to minimize the issue, he called the whole matter a “mare’s nest,” insisting incorrectly that the government had not agreed to release Czech gold earmarked in the Bank of England. Government officials also claimed that the Bank of England didn’t even know the countries involved in gold transfers. That was a lie.
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Churchill used the scandal to attack the government, saying that it was “so butter-fingered that £6 million worth of gold can be transferred to the Nazi government.” He added that Hitler “only wishes to use it, and is only using it, as it does all its foreign exchange, for the purpose of increasing its armaments.” Montagu Norman came under particularly sharp criticism and was accused of being the dullard who turned Czechoslovakia’s national treasure over to the Nazis. The Chamberlain government tried to maintain that, under the Hague Protocol of 1930 and the Brussels Protocol of 1936, the Bank of England had to execute the order from the Prague officials. Norman won few friends with either the public or politicians when he argued that it was “even more important to keep the Bank for International Settlements as a non-political body than to keep £6 million out of Hitler’s hands.”
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Beyen also came under attack for his handling of the Czech gold, and the British press pointed out that he had recently resigned from the BIS to take up a top job in London with the Anglo-Dutch company Unilever, which had important financial interests in Germany. Beyen later argued in his memoirs that the whole thing was the fault of feckless politicians: “It is strange that the blame for the transfer of the Czech gold has been put on the B.I.S. as an institution—or even on me as its President—while it clearly belonged at the doorsteps of appeasing governments of those days.”
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The United States had not paid much attention to Germany’s seizure of the Austrian gold, but after the Munich sellout and Hitler’s takeover over the remaining part of Czechoslovakia, Washington became more attentive. On March 21, 1939, Treasury Secretary Morgenthau telephoned Roosevelt and explained what had happened. The president was unhappy, but lightheartedly suggested that his Treasury Secretary should find a “friendly judge” in the New York State Supreme Court to agree to issue an injunction to block any money from being sent to the former Czechoslovakia. The president quipped, “I am a bit of a devil,” and Morgenthau replied, “I’ll say you are.”
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Morgenthau had already become concerned about developments in Europe. He was also worried about the role the Bank for International Settlements was playing in sending gold to Berlin. The bank had never been particularly popular in official Washington circles, and its reputation slipped to a new low. The Treasury Secretary now read the daily telegraph reports about European financial markets that the Bank of England sent regularly to the New York Federal Reserve Bank. Ambassador Joseph P. Kennedy also sent critical reports to Washington from London, as did his counterpart William C. Bullitt from Paris.

On July 27, 1939, Harry Dexter White, Morgenthau’s key staff member, sent him a four-page memo entitled, “What Happened to the Czech Gold in the Bank of England?” It was mainly a day-by-day account of how the bullion ended up in German hands and made no recommendations about what the U.S. might do at that point.
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The day after getting the White report, Morgenthau spoke up strongly during that morning’s London-New York phone call when global financial markets were discussed. He said that “no matter who’s guilty or not guilty,” it was unfortunately “water over the dam.” He added that the more important thing was that “the Czechs still have a chance.” White jumped into the call to add that the U.S. government, a year before, had decided it didn’t “want to deal with BIS” because “we anticipated some possibility of this sort.” Morgenthau added, “Well. It’s a dirty business whichever way you look at it.”
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In October 1939, the Bank of Bohemia and Moravia asked the Bank for International Settlements to send to them the remaining gold ingots left in London. Beyen this time refused to execute the order. The Germans, on August 22, then changed the directive and ordered that half of the gold be sent to Holland and half to Switzerland.
³⁰
Beyen believed that since they were both neutral countries, he could not deny the transfers, and so the gold was moved. A little over two tons arrived in those locations on August. The bars remained untouched through most of the war, and at the end of the conflict were returned to the reestablished Czech National Bank.

Dr. Friedrich Müller, who became the head of the Bank of Bohemia and Moravia in Prague, diligently rounded up any remaining gold and shipped it to Berlin. On June 14, 1940, the bank sent to Germany the remaining 6.4 tons of gold in the form of coins of largely historic value. In the fall of the same year, the bank also transferred to the Reichsbank just over a ton of gold that it had been holding for the Skoda Works and Brno Munitions. After that point, no central bank gold was left in the former Czechoslovakia.
³¹

In 1938, Hjalmar Schacht was proud of the contributions he had made to Germany’s economy and rearmament. In a speech on November 29, he pointed to his achievements during nearly seven years in office. He had laid down the economic foundation for the Third Reich and the mightiest army in Europe. He particularly cited his program to build up trade surpluses, noting that between 1934 and 1937, imports of finished goods were down sixty-three percent, and imports of mineral ores, petroleum, grain, and rubber, all needed for war, were up sharply. Schacht flamboyantly said, “It is possible that no central bank in peacetime carried on such a daring credit policy as the Reichsbank since the seizure of power by National Socialism. With the aid of this credit policy, Germany created an armament second to none, and this armament in turn made possible the results of our policy.”
¹

Hitler never worried about economic issues because he never understood them. He thought that willpower was all that mattered. His easy successes in conquering Austria and Czechoslovakia, and getting large amounts of gold out of them to finance future wars, had shown him that the western powers would not stand up to him and reinforced his belief that economic nuance was not necessary. While Schacht wanted him to slow down and consolidate, Hitler wanted to conquer more countries before Germany’s opponents could catch up with him militarily. Just after the Munich agreement, General Thomas wrote in his diary, “By telephone I receive instructions: all preparations now for war against England, target 1942!”
²
Acting on the Führer’s orders, Göring revved up even further his already ambitious armaments program. On October 14, 1938, he told a conference of aircraft manufacturers that Hitler had instructed him to put together an armament program that would make earlier ones look insignificant. Overall military spending would be tripled, and the Luftwaffe budget would increase five-fold. The army would soon have a massive increase in tanks and heavy artillery. Göring put the arms manufacturers on notice that they needed to expand their industrial capacity to meet the new demand.
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Schacht’s hopes that Hitler could be stopped were crushed when he replaced generals Blomberg and Fritsch in January and February 1938. He would later maintain that was when he “started working for my own retirement.” The central banker suspected that the Gestapo was bugging his office, and independent inspectors found listening equipment. The Nazis had put a servant on the payroll to spy on him. Nonetheless, he had an uncontrollable habit of speaking up. While attending a private dinner at the home of a wealthy Swedish banker in Berlin in the summer of 1938, Schacht imprudently and impatiently told his host’s wife, “Madam, how could I have known that we have fallen into the hands of criminals.”
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Recklessly or courageously, he reached out to anti-Hitler opposition. He first contacted Hans Bernd Gisevius, a leader of the small and loosely organized movement. Schacht boastfully told Gisevius, “I have got Hitler by the throat.”
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Schacht had been aware of General Ludwig Beck’s aborted coup in September 1938, and also met with two other highly placed Hitler opponents: Admiral Wilhelm Canaris, the head of German military intelligence service, and Ulrich von Hassell, a top foreign ministry official. At a meeting on September 4, 1938, he told Hassell, “Economically we have pumped ourselves more and more dry: the secret funds, foreign exchange reserves of Austria et cetera have already been used in an irresponsible way.” Hassel met him again on December 19, when Schacht said he would stay in power “until the impossible is demanded of me.”
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Schacht also confided in his close friend Montagu Norman at the monthly meetings at the Bank for International Settlements. He tried to get a message to Prime Minister Chamberlain that he should stand firm against Hitler. But when Norman tried to set up a meeting with Chamberlain, the prime minister dismissed him, saying that he had to deal with Hitler.

In November 1938, Schacht attended a political rally, sitting in the second row facing Hitler. While the rest of the audience cheered the Führer wildly, Schacht sat with this arms folded and coldly stared at him. Hitler noticed the insubordination, but did nothing. The central banker later wrote a twenty-page memo that included strong attacks on both the party and the Führer. When he showed it to a military officer, the person responded, “This is dynamite; one doesn’t leave something like this lying around the desk!” Schacht answered, “Let the swine read it and then hang me!”
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Schacht traveled to London that same fall to promote his project to let Jews and Nazi opponents immigrate to Madagascar. It was a non-starter from the beginning. During his time in London, he met several times with Norman at the German embassy, but no records were ever made of their conversations. The British banker simply wrote in his diary that he had gone alone to the German embassy to see him.

Christmas was the biggest holiday of the year even in Hitler’s Germany, and the Reichsbank held an annual party for the office staff where the president would make a speech thanking people for their work. The 1938 party took place shortly after the infamous
Kristallnacht
of November 9th and 10th, when Nazi mobs attacked Jews, burned more than 1,000 synagogues, and destroyed some 7,000 businesses. Dr. Joseph Goebbels, the minister of propaganda, selected that date because it was the twentieth anniversary of Germany’s surrender to the Allies in World War I, which Hitler considered the country’s worst humiliation.

At the Reichsbank’s holiday party, Schacht called the anti-Semitic violence “a wonton and outrageous undertaking as to make every decent German blush for shame.” Then he added, “I hope none among you had any share in these goings-on. If any one of you did take part, I advise you to get out of the Reichsbank as quickly as possible. We have no room in the Reichsbank for people who do not respect the life, the property, and the convictions of others.” Several Nazi members on the bank staff were present, and Hitler soon learned of his central banker’s attack on
Kristallnacht
.
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