WALL STREET AND THE RISE OF HITLER
The Empire of I.G. Farben
(Senator Homer T. Bone to Senate Committee on Military Affairs, June 4, 1943.)
The Farben cartel dated from 1925, when organizing genius Hermann Schmitz (with Wall Street financial assistance) created the super-giant chemical enterprise out of six already giant German chemical companies Badische Anilin, Bayer, Agfa, Hoechst, Weiler-ter-Meer, and Griesheim-Elektron. These companies were merged to become Internationale Gesellschaft Farbenindustrie A.G. or I.G. Farben for short. Twenty years later the same Hermann Schmitz was put on trial at Nuremburg for war crimes committed by the I. G. cartel. Other I. G. Farben directors were placed on trial but the American affiliates of I. G. Farben and the American directors of I. G. itself were quietly forgotten; the truth was buried in the archives.
It is these U.S. connections in Wall Street that concern us. Without the capital supplied by Wall Street, there would have been no I. G. Farben in the first place and almost certainly no Adolf Hitler and World War II.
German bankers on the Farben Aufsichsrat (the supervisory Board of Directors)1 in the late 1920s included the Hamburg banker Max War-burg, whose brother Paul Warburg was a founder of the Federal Reserve System in the United States. Not coincidentally, Paul Warburg was also on the board of American I. G., Farben's wholly owned U.S. subsidiary. In addition to Max Warburg and Hermann Schmitz, the guiding hand in the creation of the Farben empire, the early Farben Vorstand included Carl Bosch, Fritz ter Meer, Kurt Oppenheim and George von Schnitzler.2 All except Max Warburg were charged as "war criminals" after World War II.
In 1928 the American holdings of I. G. Farben (i.e., the Bayer Company, General Aniline Works, Agfa Ansco, and Winthrop Chemical Company) were organized into a Swiss holding company, i. G. Chemic (Inter-nationale Gesellschaft fur Chemisehe Unternehmungen A. G.), controlled by I. G. Farben in Germany. In the following year these American firms merged to become American I. G. Chemical Corporation, later renamed General Aniline & Film. Hermann Schmitz, the organizer of I. G. Farben in 1925, became a prominent early Nazi and supporter of Hitler, as well as chairman of the Swiss I. G. Chemic and president of American I. G. The Farben complex both in Germany and the United States then developed into an integral part of the formation and operation of the Nazi state machine, the Wehrmacht and the S.S.
I. G. Farben is of peculiar interest in the formation of the Nazi state because Farben directors materially helped. Hitler and the Nazis to power in 1933. We have photographic evidence (see page 60) that I.G. Farben contributed 400,000 RM to Hitler's political "slush fund." It was this secret fund which financed the Nazi seizure of control in March 1933. Many years earlier Farben had obtained Wall Street funds for the 1925 cartelization and expansion in Germany and $30 million for American I. G. in 1929, and had Wall Street directors on the Farben board. It has to be noted that these funds were raised and directors appointed years before Hitler was promoted as the German dictator.
Qualified observers have argued that Germany could not have gone to war in 1939 without I. G. Farben. Between 1927 and the beginning of World War II, I.G. Farben doubled in size, an expansion made possible in great part by American technical assistance and by American bond issues, such as the one for $30 million offered by National City Bank. By 1939 I. G. acquired a participation and managerial influence in some 380 other German firms and over 500 foreign firms. The Farben empire owned its own coal mines, its own electric power plants, iron and steel units, banks, research units, and numerous commercial enterprises. There were over 2,000 cartel agreements between I. G. and foreign firms including Standard Oil of New Jersey, DuPont, Alcoa, Dow Chemical, and others in the United States, The full story of I,G, Farben and its world-wide ae-tivities before World War II can never be known, as key German records were destroyed in 1945 in anticipation of Allied victory. However, one post-war investigation by the U.S, War Department concluded that:
Directors of Farben firms (i.e., the "I. G. Farben officials" referred to in the investigation) included not only Germans but also prominent American financiers. This 1945 U.S. War Department report concluded that I.G.'s assignment from Hitler in the prewar period was to make Germany self-sufficient in rubber, gasoline, lubricating oils, magnesium, fibers, tanning agents, fats, and explosives. To fulfill this critical assignment, vast sums were spent by I.G. on processes to extract these war materials from indigenous German raw materials - in particular the plentiful German coal resources. Where these processes could not be developed in Germany ,they were acquired from abroad under cartel arrangements. For example, the process for iso-octane, essential for aviation fuels, was obtained from the United States,
The process for manufacturing tetra-ethyl lead, essential for aviation gasoline, was obtained by I. G. Farben from the United States, and in 1939 I.G. was sold $20 million of high-grade aviation gasoline by Standard Oil of New Jersey. Even before Germany manufactured tetra-ethyl lead by the American process it was able to "borrow" 500 tons from the Ethyl Corporation. This loan of vital tetra-ethyl lead was not repaid and I.G. forfeited the $1 million security. Further, I.G. purchased large stocks of magnesium from Dow Chemical for incendiary bombs and stockpiled explosives, stabilizers, phosphorus, and cyanides from the outside world.
In 1939, out of 43 major products manufactured by I.G., 28 were of "primary concern" to the German armed forces. Farben's ultimate control of the German war economy, acquired during the 1920s and 1930s with Wall Street assistance, can best be assessed by examining the percentage of German war material output produced by Farben plants in 1945. Farben at that time produced 100 percent of German synthetic rubber, 95 percent of German poison gas (including all the Zyklon B gas used in the concentration camps), 90 percent of German plastics, 88 percent of German magnesium, 84 percent of German explosives, 70 percent of German gunpowder, 46 percent of German high octane (aviation) gasoline, and 33 percent of German synthetic gasoline.5 (See Chart 2-1 and Table 2-1.)
Chart 2-1: German Army (Wehrmacht) Dependence on I.G. Farben Production (1943)
Dr. von Schnitzler, of the I.G. Farben Aufsichsrat, made the following pertinent statement in 1943:
Unfortunately, when we probe the technical origins of the more important of these military materials quite apart from financial Support for Hitler we find links to American industry and to American businessmen. There were numerous Farben arrangements with American firms, including cartel marketing arrangements, patent agreements, and technical exchanges as exemplified in the Standard Oil-Ethyl technology transfers mentioned above. These arrangements were used by I.G. to advance Nazi policy abroad, to collect strategic information, and to consolidate a world-wide chemical cartel.
One of the more horrifying aspects of I.G. Farben's cartel was the invention, production, and distribution of the Zyklon B gas, used in Nazi concentration camps. Zyklon B was pure Prussic acid, a lethal poison produced by I.G. Farben Leverkusen and sold from the Bayer sales office through Degesch, an independent license holder. Sales of Zyklon B amounted to almost three-quarters of Degesch business; enough gas to kill 200 million humans was produced and sold by I.G. Farben. The Kilgore Committee report of 1942 makes it clear that the I.G. Farben directors had precise knowledge of the Nazi concentration camps and the use of I.G. chemicals. This prior knowledge becomes significant when we later consider the role of the American directors in I.G.'s American subsidiary. The 1945 interrogation of I.G. Farben director von Schnitzler reads:
There was no attempt by I.G. Farben to halt production of the gases a rather ineffective way for von Schnitzler to express any concern for human life, "because it was too terrible."
The Berlin N.W. 7 office of I.G. Farben was the key Nazi overseas espionage center. The unit operated under Farben director Max Ilgner, nephew of I.G. Farben president Hermann Schmitz. Max Ilgner and Hermann Schmitz were on the board of American I.G., with fellow directors Henry Ford of Ford Motor Company, Paul Warburg of Bank of Manhattan, and Charles E. Mitchell of the Federal Reserve Bank of New York. The so-called statistics department of N.W. 7 (known as VOWI) was created in 1929 and evolved into the economic intelligence arm of the Wehrmacht.
At the outbreak oĢ war in 1939 VOWI employees were ordered into the Wehrmacht but in fact continued to perform the same work as when nominally under I.G. Farben. One of the more prominent of these Farben intelligence workers in N.W. 7 was Prince Bernhard of the Netherlands, who joined Farben in the early 1930s after completion of an 18-month period of service in the black-uniformed S.S.8
The U.S. arm of the VOWI intelligence network was Chemnyco, Inc. According to the War Department,
Chemnyco's vice president in New York was Rudolph Ilgner, an American citizen and brother of American I. G. Farben director Max Ilgner. In brief, Farben operated VOWI, the Nazi foreign intelligence operation, before World War II and the VOWI operation was associated with prominent members of the Wall Street Establishment through American I.G. and Chemnyco.
The U.S. War Department also accused I.G. Farben and its American associates of spearheading Nazi psychological and economic warfare programs through dissemination of propaganda via Farben agents abroad, and of providing foreign exchange for this Nazi propaganda. Farben's cartel arrangements promoted Nazi economic warfare the outstanding example being the voluntary Standard Oil of New Jersey restriction on development of synthetic rubber in the United States at the behest of I. G. Farben. As the War Department report puts it:
In 1945 Dr. Oskar Loehr, deputy head of the I.G. "Tea Buro," confirmed that I. G. Farben and Standard Oil of New Jersey operated a "preconceived plan" to suppress development of the synthetic rubber industry in the United States, to the advantage of the German Wehrmacht and to the disadvantage of the United States in World War II.
Dr. Loehr's testimony reads (in part) as follows:
I.G. Farben was pre-war Germany's largest earner of foreign exchange, and this foreign exchange enabled Germany to purchase strategic raw materials, military equipment, and technical processes, and to finance its overseas programs of espionage, propaganda, and varied military and political activities preceding World War II. Acting on behalf of the Nazi state, Farben broadened its own horizon to a world scale which maintained close relations with the Nazi regime and the Wehrmaeht. A liaison office, the Vermittlungsstelle W, was established to maintain communications between I.G. Farben and the German Ministry of War:
Wehrwirtschaftsant) and from this office with the Ministry of Economy. To the field of the work of the Vermittlungsstelle W belongs, besides the organizational set-up and long-range planning, the continuous collaboration with regard to the armament and technical questions with the authorities of the Reich and with the plants of the I.G.12
Unfortunately the files of the Vermittlungsstelle offices were destroyed prior to the end of the war, although it is known from other sources that from 1934 onwards a complex network of transactions evolved between I.G. and the Wehrmacht. In 1934 I. G. Farben began to mobilize for war, and each I.G. plant prepared its war production plans and submitted the plans to the Ministries of War and Economics. By 1935-6 war games were being held at I.G. Farben plants and wartime technical procedures rehearsed.13 These war games were described by Dr. Struss, head of the Secretariat of I.G.'s Technical Committee:
Consequently, throughout the 1930s I. G. Farben did more than just comply with orders from the Nazi regime. Farben was an initiator and operator for the Nazi plans for world conquest. Farben acted as a research and intelligence organization for the German Army and voluntarily initiated Wehrmacht projects. In fact the Army only rarely had to approach Farben; it is estimated that about 40 to 50 percent of Farben projects for the Army were initiated by Farben itself. In brief, in the words of Dr, von Schnitzler:
This miserable picture of pre-war military preparation was known abroad and had to be sold or disguised to the American public in order to facilitate Wall Street fund-raising and technical assistance on behalf of I. G. Farben in the United States. A prominent New York public relations firm was chosen for the job of selling the I.G. Farben combine to America. The most notable public relations firm in the late 1920s and 1930s was Ivy Lee & T.J. Ross of New York. Ivy Lee had previously undertaken a public relations campaign for the Rockefellers, to spruce up the Rockefeller name among the American public. The firm had also produced a syncophantic book entitled USSR, undertaking the same clean-up task for the Soviet Union even while Soviet labor camps were in full blast in the late 20s and early 30s.
From 1929 onwards Ivy Lee became public relations counsel for I. G. Farben in the United States. In 1934 Ivy Lee presented testimony to the House Un-American Activities Committee on this work for Farben.15 Lee testified that I.G. Farben was affiliated with the American Farben firm and "The American I.G. is a holding company with directors such people as Edsel Ford, Walter Teagle, one of the officers of the City Bank .... " Lee explained that he was paid $25,000 per year under a contract made with Max Ilgner of I.G. Farben. His job was to counter criticism levelled at I.G. Farben within the United States. The advice given by Ivy Lee to Farben on this problem was acceptable enough:
The initial payment of $4,500 to Ivy Lee under this contract was made by Hermann Schmitz, chairman of I.G. Farben in Germany. It was deposited in the New York Trust Company under the name of I. G. Chemic (or the "Swiss I.G.," as Ivy Lee termed it). However, the second and major payment of $14,450 was made by William von Rath of the American I.G. and also deposited by Ivy Lee in New York Trust Company, for the credit of his personal account. (The firm account was at the Chase Bank.) This point about the origin of the funds is 'important when we consider the identity of directors of American I.G., because payment by American I.G. meant that the bulk of the Nazi propaganda funds were not of German origin. They were American funds earned in the U.S. and under control of American directors, although used for Nazi propaganda in the United States.
In other words, most of the Nazi propaganda funds handled by Ivy Lee were not imported from Germany.
The use to which these American funds were put was brought out under questioning by the House Un-American Activities Committee:
Finally, Ivy Lee employed Burnham Carter to study American new paper reports on Germany and prepare suitable pro-Nazi replies. It should be noted that this German literature was not Farben literature, it was official Hitler literature:
Who were the prominent Wall Street establishment financiers who directed the activities of American I.G., the I.G. Farben affiliate in the United States promoting Nazi propaganda?
American I.G. Farben directors included some of the more prominent members of Wall Street. German interests re-entered the United States after World War I, and successfully overcame barriers designed to keep I.G. out of the American market. Neither seizure of German patents, establishment of the Chemical Foundation, nor high tariff walls were a major problem.
By 1925, General Dyestuff Corporation was established as the exclusive selling agent for products manufactured by Gasselli Dyestuff (renamed General Aniline Works, Inc., in 1929) and imported from Germany. The stock of General Aniline Works was transferred in 1929 to American I.G. Chemical Corporation and later in 1939 to General Aniline & Film Corporation, into which American I.G. and General Aniline Works were merged. American I.G. and its successor, General Aniline & Film, is the unit through which control of I.G.'s enterprises in the U.S. was maintained. The stock authorization of American I.G. was 3,000,000 common A
shares and 3,000,000 common B shares. In return for stock interests in General Aniline Works and Agfa-Ansco Corporation, I.G. Farben in Germany received all the B shares and 400,000 A shares. Thirty million dollars of convertible bonds were sold to the American public and guaranteed as to principal and interest by the German I.G. Farben, which received an option to purchase an additional 1,000,000 A shares.
The management of American I.G. (later General Aniline) was dominated by I.G. or former I.G. officials. (See Table 9..9..) Hermann Schmitz served as president from 1929 to 1936 and was then succeeded by his brother, Dietrich A. Schmitz, a naturalized American citizen, until 1941. Hermann Schmitz, who was also a director of the bank for International Settlements, the "apex" of the international financial control system. He remained as chairman of the board of directors from 1936 to 1939.
The original board of directors included nine members who were, or had been, members o[ the board of I.G. Farben in Germany (Hermann Schmitz, Carl Bosch, Max Ilgner, Fritz ter Meer, and Wilfred Grief), or had been previously employed by I.G. Farben in Germany (Walter Duisberg, Adolph Kuttroff, W.H. yon Rath, Herman A. Metz). Herman A. Metz was an American citizen, a staunch Democrat in politics and a former comptroller of the City of New York. A tenth, W.E. Weiss, had been under contract to I.G.
Directors of American I.G. were not only prominent in Wall Street and American industry but more significantly were drawn from a few highly influential institutions:
The remaining four members of the American I.G. board were prominent American citizens and members of the Wall Street financial elite: C.E. Mitchell, chairman of National City Bank and the Federal Reserve Bank of New York; Edsel B. Ford, president of Ford Motor Company; W.C. Teagle, another director of Standard Oil of New Jersey; and, Paul Warburg, first member of the Federal Reserve Bank of New York and chairman of the Bank of Manhattan Company.
Directors of American I.G. were not only prominent in Wall Street and American industry but more significantly were drawn from a few highly influential institutions. (See chart above.)
Between 1929 and 1939 there were changes in the make-up of the board of American I.G. The number of directors varied from time to time, although a majority always had I.G. backgrounds or connections, and the board never had less than four American directors. In 1939 presumably looking ahead to World War II an effort was made to give the board a more American complexion, but despite the resignation of Hermann Schmitz, Carl Bosch, and Walter Duisberg, and the appointment of seven new directors, seven members still belonged to the I.G. group. This I.G. predominance increased during 1940 and 1941 as American directors, including Edsel Ford, realized the political unhealthiness of I.G. and resigned.
Several basic observations can be made from this evidence. First, the board of American I.G. had three directors from the Federal Reserve Bank of New York, the most influential of the various Federal Reserve Banks. American I.G. also had interlocks with Standard Oil of New Jersey, Ford Motor Company, Bank of Manhattan (later to become the Chase Manhattan), and A.E.G. (German General Electric). Second, three members of the board of this American I.G. were found guilty at Nuremburg War Crimes Trials. These were the German, not the American, members. Among these Germans was Max Ilgner, director of the I.G. Farben N.W. 7 office in Berlin, i.e., the Nazi pre-war intelligence office. If the directors of a corporation are collectively responsible for the activities of the corporation, then the American directors should also have been placed on trial at Nuremburg, along with the German directors that is, if the purpose of the trials was to determine war guilt. Of course, if the purpose of the trials had been to divert attention away from the U.S. involvement in Hitler's rise to power, they succeeded very well in such an objective.