by Gregg Fields
In 1963, the political theorist Hannah Arendt produced “Eichmann in Jerusalem: A Report On The Banality of Evil,” a chronicle of the trial of Hitler’s infamous, murderous henchman. Arendt stated the controversial viewpoint, “The trouble with Eichmann was precisely that so many were like him, and that the many were neither perverted nor sadistic, that they were, and still are, terribly and terrifyingly normal.”
A riveting—if at times dispiriting—new book by British journalist Adam LeBor puts Arendt’s theory in a different context. It’s titled “The Tower of Basel: The Shadowy History of the Secret Bank that Runs the World.” (PublicAffairs, Perseus Books Group).
The book might have been subtitled, “The banality of institutional corruption.” The shadowy organization that LeBor refers to is the Bank for International Settlements. For those who haven’t heard of it, the BIS isn’t the kind of place where you go to get free checking. It is a central bank for central banks.
And it is unquestionably powerful and influential. Among other things, it hosts the Basel Committee on Banking Supervision, the international agency that has been trying—with mixed results—to bolster capital levels for financial institutions around the world. And it also hosts the Financial Stability Board, which acts as a coordinator of economic regulatory authorities around the globe. According to LeBor, BIS members regularly meet in private meetings—every other month on a Sunday at 7 p.m.—over lavish meals to hash out, in essence, how to run the world.
The BIS is secretive, no question. As one example, its website notes that its archives are open to the public—provided the records are over 30 years old, “with the exception of a limited number of records.”
Despite some high hurdles, LeBor succeeds at peeling away at least some of the BIS’s facade to reveal a great deal of how it operates. Its founding statutes call for the BIS to “promote the cooperation of central banks and to provide additional facilities for international financial operations,” LeBor writes. That benign sounding mission would later become the justification for participating in some of the most horrendous crimes in human history.
Setting The Stage
The BIS was formed in 1930, largely to process the World War I reparations required of Germany. It also performed the function of providing liquidity to European governments, which were struggling with economic instability, currency fluctuations and the Great Depression. Central banks of most large European countries joined to create the BIS. (The U.S. Federal Reserve did not join until 1994, although its allotted shares were held by American banking interests.) Basel, in neutral Switzerland, was a natural headquarters pick.
BIS describes itself as the world’s oldest international financial institution, which was a novel business model in 1930. One mechanism used to perform its duties was having countries assign their gold reserves to BIS accounts—though the gold itself might be stored elsewhere—and payments between countries were processed by officials in Basel.
By now, you’ve probably guessed where this is going. Adolf Hitler rose to power and Germany within a few years was unleashing its formidable war machine across Europe and setting the stage for what would become the Holocaust.
It would be reasonable to assume that the BIS then went out of business. Clearly, there weren’t going to be any reparations forthcoming from the Third Reich. But the BIS became, in essence, an ATM for Berlin, LeBor argues, treating the murderous regime as if it were just another government. (The British-born LeBor, a foreign correspondent based in Budapest, clearly has the credentials for this work. His previous book, Hitler’s Secret Bankers, examined collaboration of Swiss bankers with Nazis and was short-listed for Britain’s prestigious Orwell Prize.)
He devotes a great deal of Tower of Basel to an episode which, though highly controversial at the time, is often overlooked by history. After Germany annexed the Sudetenland province of Czechoslovakia in 1938, Czechoslovakian leaders transferred much of the country’s gold to two accounts at the Bank of England for safekeeping, LeBor writes. One account was in the name of the BIS and another was in the name of the National Bank of Czechoslovakia itself.
In early 1939, German officials demanded Prague hand over 14.5 metric tons of gold, supposedly to back Germany currency now circulating in the Sudetenland. In essence, LeBor notes, Berlin was demanding Czechoslovakia “supply the gold to pay for the loss of its territory.”
A month later, Germany invaded Prague and Czechoslovakia ceased to exist. Three days later, the Reichsbank demanded the National Bank of Czechoslovakia order the gold in its BIS account transferred to Germany. They were also ordered to request the Bank of England transfer the 27 metric tons of gold in the National Bank of Czechoslovakia account there to Germany.
“The BIS transfer order went through,” LeBor writes. He adds that “Nazi Germany had just looted 23.1 metric tons of gold without a shot being fired.”
The Bank of England did refuse to transfer the gold in the National Bank of Czechoslovakia account there. Nevertheless, the BIS transaction gave the Third Reich a new source of funding with which to finance its war effort.
The process was repeated throughout the war years, as Germany used plundered wealth to stoke its war machine. Accompanying the looting of central bank assets were proceeds from the “Aryanization” of Jewish-owned businesses that were stolen from their owners. Meanwhile, Germany gained ever greater influence at the BIS, leading to the completely reasonable assumption that it had a firmly pro-Nazi slant.
Its multi-national staff—the president from 1940-46 was an American named Thomas McKittrick—got along well, LeBor reports. When the battles got within shooting distance—Basel borders Germany and France—the bank simply retreated to temporary quarters in the Swiss interior.
LeBor’s recounting of the nightmare years of World War II is fittingly chilling. And perhaps unwittingly, LeBor’s investigation raises a troubling question: At the BIS, where did the institutional corruption actually begin, and could it have been prevented or stopped?
One fact is undeniable: From the beginning, the BIS achieved immunity from essentially all banking regulation and international laws. Although it functioned as a central bank, it wasn’t actually connected to a government. It was virtually self-governing. Located in neutral Switzerland, it gained another layer of protection by not being subject to even the notoriously secretive Swiss banking laws. For years it didn’t bother to put a sign on its door. That autonomy continues.
The lack of transparency and accountability thwarted officials in Washington and Europe who wanted the BIS to be shut down. (At the Bretton Woods Conference in 1944, where plans for the post-war monetary system were developed, Norway, the U.S. and others worked to have the BIS dismantled. The effort ultimately failed.)
What is most shocking in LeBor’s book is the moral blindness of BIS officials. Their goal was, apparently, to simply grease the wheels of global commerce. Their eyes were shut to the horrors in front of them.
After the war, the BIS reinvented itself as a natural team captain for the rebuilding of Europe. It didn’t merely survive—it thrived. Its curved headquarters opened in 1977 and its multilingual workforce quickly earned it the nickname the Tower of Basel, a reference to the Tower of Babel story in the Bible.
Clearly, the BIS is far from the only institution shown to have been, at best, indifferent to the slaughter of Europe’s Jews and the Nazis’ other crimes against humanity. As a story in The New York Times recently noted: “The list of institutions and industries that have been accused of whitewashing their links to the Third Reich is long, including various governments, the Vatican, Swiss banks and American corporations like IBM, General Motors and DuPont.”
Judging by other reviews, I’m also not the only reader to feel LeBor writes a bit too conspiratorially about the modern-day BIS. “Mr. LeBor's polemical tone makes his book compelling, though at times you wonder if he wrote it in a hut in the Idaho backwoods while waiting for the United Nations and the staff of Goldman Sachs to invade and carry off his firstborn,” is how The Wall Street Journal put it.
But Lebor’s important new book shows that the Third Reich didn’t rely on bombs and bullets alone. It was also aided by the banality of institutional corruption.