Hjalmar Schacht

(2 of 9)

March 17, 1933: President Hindenburg, on the recommendation of Hitler, appoints Schacht Reichsbank Chairman. He will hold this office continuously until 20 January 1939.

From Schacht’s IMT testimony: My entire work as President of the Reichsbank was primarily based on the principle of working with the banks in foreign countries as harmoniously as possible, of pursuing a policy of mutual assistance and support.

Secondly, I tried to enter into personal, friendly relations with the directors of all these banks in the hope of meeting understanding for German problems, and thus of contributing to a solution by way of co-operation and mutual solution of these difficult problems, which had arisen in Central Europe. The word "co-operation" (Zusammenarbeit) was the leitmotif of our circle . . . .

As I already said a little while ago, from the start, I was in disfavor with all the money makers, those people who had profited from German loans in foreign countries, for I was against Germany’s being involved in debts abroad, and I took my stand very firmly on this point.

Then later, after the misfortune which I had always predicted actually did come to pass, after the financial crash in the year 1931, these self-same financiers and money men blamed me for the fact that the interest on their money was no longer being transferred to them. Therefore, in those circles, I did not gain any friends, but among serious bankers and large banking institutions, which were interested in constant and regulated business with Germany, I believe I made no enemies, because all measures [that] I later had to take, in order to protect the German currency and to maintain Germany’s foreign trade, all these measures I always discussed jointly with the representatives of foreign creditors. Approximately every six months, we met, and I always gave them a detailed account of German conditions. They were permitted to look into the books of the Reichsbank. They could examine and interrogate the officials of the Reichsbank, and they always confirmed that I told them everything in the most frank and open manner. So that I may say that I worked in a fair and friendly way also with these men.

I believe that after the happenings that have now taken place, it is today even clearer than before that Germany cannot and could not live without foreign trade, and that the maintenance of export trade must be the basis for the future existence of the German nation. Consequently, I did everything in order to maintain German foreign trade. I can cite a few specific examples to supplement the general principles. I tried, for example, to do business with China, in order that we might export to China. I was ready to give China credit, and did. I hailed the fact that the Soviet Union kept up an extensive flow of trade with us, and I always advocated expanding and stabilizing this foreign trade in the case of Russia, as well as China. About the ability and readiness to pay, and the promptness of payment of the opposite parties, I never had any doubts . . . .

When, on Hitler’s suggestion, President Hindenburg in March of 1933 appointed me again to the position of President of the Reichsbank, Hitler left it to me to fix my own income. At that time, I voluntarily reduced my income to less than 25 percent of my former income from the Reichsbank.

From Wilhelm Vocke’s IMT testimony: First, I would like to mention two conversations that I remember almost word for word. During the period when Schacht was not in office, that is about three years, I hardly ever saw him, maybe three or four times at occasions at the Wilhelmstift. He never visited me, nor did I visit him, except once, when Schacht came into the bank--maybe he had some business there--and visited me in my office. That must have been in 1932, a comparatively short time before the seizure of power. We immediately began to speak about political questions: about Hitler, and Schacht’s relations[hip with] Hitler. I used that opportunity to warn Schacht seriously, against Hitler and the Nazis. Schacht said to me: "Herr Vocke, one must give this man and these people a chance. If they do no good, they will disappear. They will be cleared out in the same way as their predecessors."

I told Schacht: "Yes, but it may be that the harm done to the German people, in the meantime, will be so great that it can never be repaired." Schacht did not take that very seriously, and with some light remark, such as: You are an old pessimist, or something like that, he left.

The second conversation, about which I want to report, took place shortly after Schacht’s re-entry into the bank. It was probably in March 1933, or the beginning of April. Schacht at that time showed a kind of ostentatious enthusiasm, and I talked to him about his relation to the Party. I assumed that Schacht was a member of the Party. I told him that I had no intention of becoming a member of the Party, and Schacht said to me: "You do not have to. You are not supposed to. What do you think? I would not even dream of becoming a member of the Party. Can you imagine me bending under the Party yoke, accepting the Party discipline? And then, think of it, when I speak to Hitler I should click my heels and say, ’Mein Fuehrer,’ or when I write to him address him as ’Mein Fuehrer.’ That is quite out of the question for me. I am and remain a free man."

That conversation took place and those words were spoken by Schacht at a time when he was at the apex of a rapprochement with Hitler, and many a time I have thought about it, whether it was true, and remained true, that Schacht was a free man.

As things turned out, after a few years, Schacht was forced to realize, to his sorrow, that he had lost a great deal of his freedom, that he could not change the course of the armaments financing scheme, upon which he had embarked, when he wished to do so; that it had become a chain in the hands of Hitler and that it would take years of filing and tugging for it to break.

But, in spite of that, his words were true, inasmuch as they reflected the inner attitude of Schacht towards Hitler. Schacht never was a blind follower. It was incompatible with his character, to sign himself away to somebody, to sell himself, and follow with blind devotion.

If one should seek to characterize Schacht’s attitude to Hitler thus: My Fuehrer, you command, I follow; and if the Fuehrer ordered him to prepare an armament program: I will finance an armament program, and it is for the Fuehrer to decide to what use it shall be put, whether for war or peace; that would be incompatible with Schacht’s attitude and character. He was not a man who thought along subaltern lines or who would throw away his liberty; in that, Schacht differed fundamentally from a great many men in leading political and military positions in Germany.

Schacht’s attitude, as I came to know it from his character and from his statements, could be explained somewhat as follows: Schacht admired this man’s tremendous dynamic force directed towards national aims, and he took account of this man, hoping to use him as a tool for his own plans, for Schacht’s plans towards a peaceful political and economic reconstruction and strengthening of Germany. That is what Schacht thought and believed, and I take that from many statements made by Schacht.

March 22, 1933: Dachau concentration camp opens near Munich, soon to be followed by Ravensbrück for women, Sachsenhausen near Berlin in northern Germany, and Buchenwald near Weimar in central Germany.

From Schacht’s IMT testimony: Already in the year 1933, when Goering established concentration camps, I heard several times that political opponents and other disliked or inconvenient persons were taken away to a concentration camp. That these people were deprived of their liberty perturbed me very much at the time, of course, and I continuously demanded, as far as I was in a position to do so during conversations, that the arrest and removal to concentration camps should be followed by a clarification before the law with a defense and so on, and suitable legal proceedings. At that early time, the Reich Minister of the Interior Frick also protested energetically along the same lines. Subsequently, this type of imprisonment, et cetera, became less known in public and, in consequence, I assumed that things were slowly abating. Only much later, let us say the second half of 1934 and 1935 ... when I met Gisevius, I heard on repeated occasions that, not only were people still being deprived of their liberty, but that sometimes they were being ill-treated, that beatings, et cetera, took place. I have already said before this Tribunal that, as a result, as early as May 1935, I personally took the opportunity of drawing Hitler’s attention to these conditions, and that I told him at the time that such a system was causing the whole world to despise us, and must cease. I have mentioned that I repeatedly took a stand against all these things publicly, whenever there was a possibility of doing so.

But I never heard anything of the serious ill-treatment and outrages--murder and the like--which started later. Probably because, firstly, these conditions did not begin until after the war, after the outbreak of war, and because already, from 1939 onwards, I led a very retired life. I heard of these things and of the dreadful form in which they happened only here in prison. However, I did hear, as early as 1938 and after, of the deportation of Jews; but because individual cases were brought to my notice, I could only ascertain that there were deportations to Theresienstadt, where allegedly there was an assembly camp for Jews, where Jews were accommodated until a later date, when the Jewish problem was to be dealt with again. Any physical ill-treatment, not to speak of killing or the like, never came to my knowledge.

March 23 1933: Hitler addresses the Reichstag:

For years, Germany has been waiting in vain for the fulfillment of the promise of disarmament made to her by the others. It is the sincere desire of the national Government to be able to refrain from increasing our army and our weapons, insofar as the rest of the world is now also ready to fulfill its obligations in the matter of radical disarmament...

From Schacht’s IMT testimony: The Leadership Principle was not established by a single law, and the subsequent attempt to reduce the responsibility of the individual ministers--and that affects me, too--by saying that it had become prescriptive law, is not correct. The responsibility of the ministers continued to exist, my own also, and was kept down, only by the terror and the violent threats of Hitler . . . .

I made only two notes. In Hitler’s Reichstag speech on 23 March 1933 he said, "It is the sincere desire of the National Government . . ."--not the National Socialist, as it is always referred to later, but the National Government.

And the second point: In the proclamation to the Wehrmacht which Defense Minister von Blomberg issued on 1 February 1933 this sentence occurs:

"I assume this office with the firm determination to maintain the Reichswehr, in accordance with the testament of my predecessors, as a power factor of the State, above Party politics."

This and other factors already mentioned convinced me that the Cabinet would be a national coalition cabinet, whereas Hitler, by his rule of terror and violence, formed a pure Nazi dictatorship out of it.

April 1933: Schacht approves the repayment of a 420 million gold mark loan, advanced to the Reich by the Bank of England in 1931.

From Wilhelm Vocke’s IMT testimony: Schacht often expressed the view that only a peaceful development could restore Germany, and not once did I hear him say anything [that] might suggest that he knew anything about the warlike intentions of Hitler. I have searched my memory, and I recall three or four incidents, which answer that question quite clearly. I should like to mention them in this connection.

The first was the 490 million gold mark credit which was repaid in 1933. Luther, when the Reichsbank cover disintegrated in the crisis in 1931 when the cover for the issue of notes had to be cut down, Luther, in his despair, sent me to England in order to acquire a large credit in gold from the Bank of England, which would restore confidence in the Reichsbank. Governor Norman was quite prepared to help me, but he said that it would be necessary for that purpose to approach also the Federal Reserve Bank of New York, the Bank of France, and the International Bank in Basel. That was done, and the credit amounted to 420 million gold marks, but the inclusion of the Bank of France created political difficulties, which delayed the credit for about 10 or 12 days.

When I returned to Berlin, I was shocked to hear that the greater part of the credit had already been used up. The gold divas torn from our hands, and I told Luther: The credit has lost its usefulness, and we must repay it immediately. Our honor is our last asset. The banks [that] have helped us shall not lose a single pfennig.

Luther did not have sufficient understanding for that, and he said in so many words: What one has, one holds. We do not know for what purpose we may still have urgent need of the gold. And so the credit was extended and dragged out over years.

When Schacht came to the bank in 1933, I told myself that Schacht would understand me, and he did understand me, immediately. He agreed with me, and repaid that credit without hesitation. It never entered his head for what other purpose one might use that enormous sum of gold, and I say here that, if Schacht had known of any plans for a war, he would have been a fool to pay back 420 million gold marks.

April 7, 1933: The Nazi Civil Service Act is passed, a law providing that all civil servants must be trustworthy--as defined by Nazi standards--and must also meet the Nazi racial requirements.

From Wilhelm Vocke’s IMT testimony: The Party demanded that the Freemasons should be eliminated from the Civil Service. Schacht said: "I refuse to let anybody tell me what to do. Everybody knows that I myself am a Freemason; how can I take action against officials, simply because they belong to the Order of Freemasons?" And as long as Schacht was in office, he kept Freemasons in office and promoted them.

From Schacht’s IMT testimony: I have always considered it a very unhappy precedent to speak of a "chosen people," or of "God’s own country," or of things like that. As a convinced adherent to the Christian faith, I believe in Christian charity, which bids me extend love to all men, without regard to race or faith. I would like to mention also, that the silly talk about the master race, which some Party leaders made their own, was held up to constant ridicule by the German public. That was not surprising, because most of the leaders of the Hitler Party were not exactly ideal types of the Nordic race. And in that connection, when these things were discussed among the German population, little Goebbels was referred to as "Der Schrumpfgermane"--the shriveled Teuton.

Only one thing--I have to say this to be just--did most of the leaders of the Party have in common with the old Teutons--and that was drinking; excessive drinking was a main part of the Nazi ideology . . . .

Weltanschauung, in my opinion, is a summation of all those moral principles that enable me to acquire a clear judgment on all aspects of life. Therefore, it is a matter of course that a Weltanschauung cannot take root in the tangible world, but must rise above it; it is something metaphysical, that is to say, it is based on faith, on religion. A Weltanschauung [that] is not rooted in religion is, in my opinion, no Weltanschauung at all. Consequently, I reject the National Socialist Weltanschauung, which was not rooted in religion.

April-May 1933: Schacht makes forty speeches, appears on radio programs, and writes several articles for American newspapers, during a tour of the United States. His message: Hitler will soon return Germany to democracy. He meets with FDR, who later describes him as "extremely arrogant."

May 2, 1933: Throughout Germany, union buildings are occupied, high union officials taken into custody, and union funds seized. All independent trade unions are abolished and replaced by the German Labor Front [Deutsche Arbeitsfront, DAF], a quasi-union under the leadership of Dr. Robert Ley. The workers are given an annual May Day holiday under Nazi control in compensation. (Shirer)

From Schacht’s IMT testimony: The destruction of the labor unions took place as early as May 1933. I did not know everything, only what was generally known. I knew exactly what every other German knew about it, and what the labor unions themselves knew.

May 6, 1933: President Roosevelt to the US Secretary of State:

I talked this afternoon with Dr. Schacht for one half hour and made it perfectly clear that the United States will insist that Germany remain in status quo in armament, and that we would support every possible effort to have the offensive armament of every other nation brought down to the German level. We discussed only land armament, and not naval. I intimated, as strongly as possible, that we regard Germany as the only possible obstacle to a Disarmament Treaty, and that I hoped Dr. Schacht would give this point of view to Hitler, as quickly as possible.

May 29, 1933: Krupp von Bohlen writes to Schacht.

From Schacht’s IMT testimony: This letter never reached me. It has been crossed out, and apparently it was not sent, because Krupp and I had a personal conversation, to which Krupp refers in the letter of the following day, 30 May; the letter begins, "As Dr. Kottgen and I had the opportunity of mentioning to you yesterday..." That apparently was a personal conversation . . . . Please, let me answer quietly. I do not wish to be accused of anything without replying.

I did not receive that letter on 29 May, nor did I receive it later. Instead, there was a personal conversation. The subject of that conversation is contained in the letter of 30 May, which we read before, and which I received. You have just asserted that I had promised Krupp von Bohlen to speak to Dr. Fischer and Dr. Mosler. The letter makes no mention of that.

May 30, 1933: Krupp von Bohlen writes to Schacht:

As Dr. Hoettgen and I had the opportunity of mentioning to you yesterday, it is proposed to initiate a collection in the most far-reaching circles of German industry, including agriculture and the banking world, which is to be put at the disposal of the Fuehrer of the NSDAP, in the name of ’The Hitler Fund’, which would replace collections, in many cases separately organized, of the various NSDAP organizations and the Stahlhelm. It has been decided to appoint a management council for this central collection; I have accepted the chairmanship of the management council, at the unanimous request of the principal federations, inspired by the wish to collaborate with my full strength in this task, which is to be a symbol of gratitude to the Fuehrer of the nation.

From Schacht’s IMT testimony: In that letter, Herr Krupp informed me that industry and other economic circles, such as agriculture, et cetera, intended to organize a joint Hitler fund, in order to combine in one collection, the unrestrained Party collections [that] were making the entire country insecure. He informed me of this, and also of the fact that a board of trustees was to be appointed for this Hitler fund. I want to say that I never joined the board of trustees ,and was not a member of it. He further informed me that the representatives of the banks, Dr. Fischer and Dr. Mosler, would contact me, and inform me about these things. That is all that the letter says.

October 14, 1933: Germany withdraws from the International Disarmament Conference and the League of Nations.

From Schacht’s IMT testimony: I considered that Germany absolutely had to have political equality with other nations, and I am of the same opinion today; and in order to reach this state, it was necessary that, either the general disarmament which had been promised by the Allied powers would come into effect, or that if equal rights were to be obtained, Germany would have to rearm on a corresponding scale . . . .

In the Reichsbank, the Leadership Principle was never applied; I rejected the Leadership Principle for the Reichsbank. The Reichsbank was governed by a group of men, all of whom had an equal power to vote, and if there was a "tie,’’ the vote of the chairman was the decisive vote and, beyond that, the chairman had no rights in this board . . . .

[Former Reichsbank Director] Herr Puhl participated in all decisions [that] were made by the Reichsbank Directorate on this question, and not once did he oppose the decision reached . . . . We cannot even talk about keeping the armament a secret. I call your attention to some excerpts from documents presented and submitted by the Prosecution, themselves, as exhibits. I quote, first of all, from the affidavit by George Messersmith, dated 30 August 1945, Document Number 2385-PS, where it says on Page 3, Line 19: "Immediately after the Nazis came into power, they started a vast rearmament program." And on Page 8 it says: "The huge German armament program, which was never a secret..."

Thus, Mr. George Messersmith, who was in Berlin at the time, knew about these matters and, I am sure, informed his colleagues also.

I continue quoting from Document Number EC-461. It is the diary of Ambassador Dodd, where it says, under 19 September 1934, and I quote in English for I just have the English text before me:

"When Schacht declared that the Germans are not arming so intensively, I said: Last January and February, Germany bought from American aircraft people one million dollars worth of high-class war flying machinery, and paid in gold."

This is from a conversation between Dodd and myself which took place in September 1934 . . . .

The mefo bills as such, as far as rearmament was concerned, had of course no connection with the question of secrecy, for the mefo bills were used to pay every supplier. And there were, of course, hundreds and thousands of small and big suppliers, all over the country.

Apart from that, before they could be taken to the Reichsbank, the mefo bills circulated among the public for at least 3 months, and the suppliers who required cash used the mefo bills to discount them in their banks, or to have advances made on the strength of them, so that all banks participated in this system.

But I should like to add, also, that all the mefo bills, which were taken up by the Reichsbank, were listed on the bill account of the Reichsbank. Furthermore, I should like to say that the keeping secret of State expenditure--and armament expenditures were State expenditure--was not a matter for the President of the Reichsbank but an affair concerning the Reich Minister of Finance. If the Reich Minister of Finance did not publish the guarantees [that] he had accepted for the mefo bills, then that was his affair, and not mine. I am not responsible for that. The responsibility for that lies with the Reich Minister of Finance . . . .

It goes without saying that, in normal times and under normal economic conditions, such means as mefo bills would not have been resorted to. But if there is an emergency, then it has always been customary, and it has always been a policy recommended by all experts, that the issuing bank should furnish cheap money and credits, so that the economic system can, in turn, continue to function.

Mefo bills, of course, were a thoroughly risky operation, but they were absolutely not risky if they were connected with a reasonable financial procedure, and to prove this, I would say that, if Herr Hitler, after 1937, had used the accruing funds to pay back the mefo bills, as had been intended--the money was available--then this system would have come to its end just as smoothly as I had put it in operation. But Herr Hitler preferred simply to refuse to pay the bills back, and instead to invest the money in further armament. I could not foresee that someone would break his word in such a matter too, a purely business matter. That, of course, was the very purpose of my wanting to terminate the procedure. I said if the mefo bills were not met, it would obviously show ill-will; then there would be further rearming, and that cannot be. I think in a general manner it must be realized that State expenditures do not come under the jurisdiction of the President of the Reichsbank, and that the expenses and receipts of the State are under the control of the Reich Minister of Finance and consequently, the responsibility lies in his hands, and it is his duty to publish the figures. Every bill [that] the Reichsbank had in its possession was made known every week . . . .

A few very important remarks are, of course, to be made on [why I was fundamentally in favor of rearmament], and since this question concerns the chief accusation against me, I may perhaps deal with it in greater detail.

I considered an unarmed Germany, in the center of Europe, surrounded by armed nations, as a menace to peace. I want to say that these states were not only armed, but that they were, to a very large part, continuing to arm and arming anew. Especially two states which had not existed before: Czechoslovakia and Poland, were beginning to arm, and England, for example, was continuing to rearm, specifically with reference to her naval rearmament in 1935, et cetera.

I should like to say, quite briefly, that I myself was of the opinion that a country which was not armed could not defend itself and that, consequently, it would have no voice in the concert of nations. The British Prime Minister Baldwin once said, in 1935:

"A country which is not willing to take necessary precautionary measures for its own defense will never have power in this world, neither moral power nor material power."

I considered the inequality of status between the countries surrounding Germany, and Germany, as a permanent moral and material danger to Germany.

I further want to point out--and this is not meant to be criticism, but merely a statement of fact--that Germany, after the Treaty of Versailles, was in a state of extreme disorganization and confusion. Conditions in Europe were such that, for example, a latent conflict and controversy existed between Russia and Finland, and between Russia and Poland, which had considerable parts of Russian territory. There was Russia’s latent conflict with Romania, which had Bessarabia, and then Romania had a conflict with Bulgaria about the Dobruja, and one with Hungary about Siebenbuergen. There were conflicts between Serbia and Hungary, and between Hungary and nearly all her neighbors, and between Bulgaria and Greece. In short, all of Eastern Europe was in a continuous state of mutual suspicion, and conflict of interests.

In addition, there was the fact that, in a number of countries, there were most serious internal conflicts. I remind you of the conflict between the Czechs and the Slovaks. I remind you of the civil war conditions in Spain. All that will make it possible to understand that I considered it absolutely essential that, in the event of the outbreak of any conflagration in this devil’s punch bowl, it was an absolute necessity for Germany to protect at least her neutral attitude. That could not possibly be done, with that small army of 100,000 men. For that, an adequate army had to be created.

Here in prison I accidentally came across an edition of the Daily Mail, dated April 1937, where the conditions in Europe were described, and I beg you to allow me to quote one single sentence. I shall have to quote it in English. It does not represent the views of the Daily Mail; it only describes conditions in Europe. I quote:

"All observers are agreed that there is continual peril of an explosion, and that the crazy frontiers of the peace treaties cannot be indefinitely maintained. Here, too, rigorous noninterference should be the King of the British chariot. What vital interests have we in Austria, or in Czechoslovakia, or in Romania, or in Lithuania or Poland?"

This merely describes the seething state of Europe at that time and, in this overheated boiling pot which was always on the point of exploding, there was Germany, unarmed. I considered that a most serious danger to my country. Now, I shall probably be asked whether I considered Germany threatened in any way. No, Gentlemen of the Tribunal, I did not consider Germany threatened directly with an attack, nor was I of the opinion that Russia was likely to attack Germany. However, for example, we had experienced the invasion of the Ruhr in 1923, and these past events and the actual situation made it imperative for me to demand equality for Germany, and to support a policy that would attempt to achieve this. I assume that we shall deal with the reasons for the carrying out of the rearmament, and with the reaction of foreign countries, et cetera . . . .

Fundamentally, I was not in favor of rearmament. I only wanted equality for Germany. That German equality could be brought about, either by means of disarmament on the part of the other nations, or by our own rearmament. I would have preferred, in fact I desired disarmament on the part of the others, which anyway had been promised to us. Consequently, I most zealously tried all along, for years, to prevent a rearmament, if general disarmament could be brought about.

The disarmament on the part of the others did not take place, although the Disarmament Committee of the League of Nations had repeatedly declared that Germany had met her obligations regarding disarmament. To all of us who were members of the so-called National Government at the time, and to all Germans who participated in political life, it was a considerable relief that, during the first years, Hitler again and again, strove for and suggested general disarmament. Afterwards, of course, it is easy to say that that was a false pretense and a lie on Hitler’s part, but that false pretense and that lie would have blown up quite quickly, if the countries abroad had shown the slightest inclination to take up these suggestions.

I remember quite well what was told Foreign Minister Eden of Great Britain, when he visited Germany at the beginning of 1934, because I was present at the social festivities. Quite concrete proposals concerning Germany’s obligations in all disarmament questions, in case disarmament on the part of the others was begun and carried out, were made to him. It was promised to Eden that all so-called half-military units, like the SS, the SA, and the Hitler Youth, would be deprived of their military character, if only the general disarmament could be accelerated by those means.

I could produce a number of quotations regarding these offers to disarm, but since it is the wish of the President not to delay the proceedings, I can forego that. They are all well-known statements made by statesmen and ministers, ambassadors, and such, all of which have the same tenor, namely, that it was absolutely essential that the promise made by the Allies should be kept; in other words, that disarmament should be carried out. Hitler made still further offers, but the other countries did not take up a single one of these offers, and thus, unfortunately, only one alternative remained, and that was rearmament. That rearmament, carried out by Hitler, was financed with my assistance, and I assume responsibility for everything I have done in that connection . . . .

The question of mefo bills was quite certainly a system of finance which normally would never have been attempted. I made a detailed statement on this subject, when I was questioned by my attorney. On the other hand, however, I can say that this question was examined by all legal experts in the Reichsbank, and by means of this subterfuge, as you put it, a way was found which was legally possible. The matter was investigated from’ a legal viewpoint, and we assured ourselves that it could be done in this way. Moreover, I am still satisfied today that I contributed to the rearmament, but I wish that Hitler had made different use of it.

Explaining Mefo Bills by Levi Bookin.

From Wilhelm Vocke’s IMT testimony: The mefo bills, and the construction of that transaction had, of course, been legally examined beforehand; and the point of their legality had been raised with us, and the question as to whether these bills could be brought under banking law had been answered in the affirmative. The more serious question, however, was whether these bills fulfilled the normal requirements which an issuing bank should demand of its reserves. To that question, of course, the answer is definitely "no."

If one asks, why did not the bank buy good commercial bills instead of mefo bills, the answer is that, at that time, there had been no good commercial bills on the market for years: that is, since the collapse due to the economic crisis. Already under Bruening, schemes for assisting and restoring economy and credit had been drawn up, all of which followed similar lines, that is, they were sanctioned according to their nature, as normal credits, along the lines of a semipublic loan; for the Bank was faced with the alternative of standing by helplessly, and seeing what would happen to the economy, or of helping the Government as best it could, to restore and support the economy. All issuing banks in other countries were faced with the same alternative, and reacted in the same manner. Thus, the armaments bills which, economically speaking, were nothing more than the former unemployment bills, had to serve the same purpose. From the point of view of currency policy, the Reichsbank’s reserves of old bills, which had been frozen by the depression, were again made good.

All the regulations under banking law, the traditional regulations concerning banking and bills policy, had only one aim, namely to avoid losses.

August 19, 1934 Gleichschaltung: Hitler becomes Fuehrer und Reichskanzler, as 90% of the German electorate approves Hitler’s merging the two offices of Chancellor and President.

From Schacht’s IMT testimony: When all these laws were issued, I was not a Cabinet member. I had no vote in the Cabinet. I had a vote in the Cabinet, only after 1 August 1934, at which time, the last disastrous law, the merger of the offices of Reich Chancellor and Reich President was decreed. I did not participate in the discussions preceding this law, nor did I vote on it. I had absolutely no part in any of these laws . . . . I received my official nomination as Minister on 3 or 4 August. I did not take part in the deliberations on that law. I did not vote for it, and did not sign it . . . . During my entire life, I was never a member of the Reichstag. One look into the Reichstag Handbook could have enlightened the Prosecution that, also during that time, I was not a member of the Reichstag. I had nothing to do with all these laws either as member of the Cabinet or of the Reichstag, because I had been neither during that time.

October 27, 1933: By a Cabinet decree, the statutory reserve of 40 percent in gold and foreign exchange, required against circulating Reichsbank notes, is permanently abandoned.

From Schacht’s IMT testimony: I never had [close friendly or social contact] relations ... with Hitler. He repeatedly urged me, in the first years, to come to the luncheons at the Reich Chancellery, where he was lunching with closer friends. I tried to do that twice. I attended twice at various intervals, and I must say that, not only the level of the discussion at the luncheon, and the abject humility shown to Hitler, repulsed me but, I also did not like the whole crowd, and I never went back again.

I never called on Hitler personally in a private matter. Of course, naturally, I attended the large public functions, which all the ministers, the Diplomatic Corps, and high officials, et cetera, attended, but I never had any intimate, social, or other close contact with him. That applies to the other gentlemen as well.

As a matter of course, in the first months of our acquaintance, we visited each other on occasion, but all so-called social gatherings [that] still took place in the first period had a more or less official character. Close private relations simply did not exist.

March 29, 1934: A system of forced corporate lending to the Reich is imposed on German business.

From Schacht’s IMT testimony: In former statements [that] I have made here, I have spoken of Hitler as a semi-educated man. I still maintain that. He did not have sufficient school education, but he read an enormous amount later, and acquired a wide knowledge. He juggled with that knowledge in a masterly manner in all debates, discussions, and speeches.

No doubt he was a man of genius in certain respects. He had sudden ideas, of which nobody else had thought, and which were at times useful in solving great difficulties, sometimes with astounding simplicity, sometimes, however, with equally astounding brutality.

He was a mass psychologist of really diabolical genius. While I myself and several others--for instance, General von Witzleben told me so once--while we were never captivated in personal conversations, still he had a very peculiar influence on other people, and particularly he was able, in spite of his screeching and occasionally breaking voice, to stir up the utmost overwhelming enthusiasm of large masses in a filled auditorium.

I believe that, originally, he was not filled only with evil desires; originally, no doubt, he believed he was aiming at good, but gradually he himself fell victim to the same spell [that] he exercised over the masses; because whoever ventures to seduce the masses is finally led and seduced by them, and so this reciprocal relation between leader and those led, in my opinion, contributed to ensnaring him in the evil ways of mass instincts, which every political leader should avoid.

One more thing was to be admired in Hitler. He was a man of unbending energy, of a will power [that] overcame all obstacles and, in my estimate, only those two characteristics--mass psychology and his energy and will power--explain that Hitler was able to rally up to 40 percent, and later almost 50 percent, of the German people behind him . . . .

It appears from this, as if I had been a convinced adherent of Hitler at some time. I was never that. On the contrary, out of concern for my people and my country, after Hitler gained power, I endeavored with all my strength to direct that power into an orderly channel, and to keep it within bounds. Therefore, there was no question of a break with Hitler. A break could only be spoken of, had I been closely connected with him before. At heart, I was never closely connected with Hitler but, to all appearances, I worked in the Cabinet, and I did so because he was, after all, in power, and I considered it my duty to put myself at the disposal of my people and my country for their good.

June 30, 1934 Blutbereinigung: The ’Blood Purge’ (Night of the Long Knives) occurs.

From Schacht’s IMT testimony: My serious criticism of Hitler’s doings started already at the time of the so-called Roehm Putsch on 30 June 1934. I should like to point out first that these things occurred quite unexpectedly, and took me by surprise, because I had not at all anticipated them. At that time, I had told Hitler, "How could you have these people just simply killed off? Under all circumstances, there should have been at least a summary trial of some sort." Hitler swallowed these remarks, and merely mumbled something about "revolutionary necessity," but he did not really contradict me.

Then in the course of the second half of the year 1934, and the first half of the year 1935, I noticed that I had been under a misconception, when I believed that Hitler did not approve of what might be considered revolutionary and disorderly Party excesses, and that he was really willing to restore a respectable atmosphere. Hitler did nothing to put a stop to the excesses of individual Party members or Party groups. Very likely, the idea which recently--or I believe today--was mentioned by a witness, was always in his mind: let the SA have its fling for once. That is to say, for the masses of the Party he sanctioned, as a means of recreation, so to speak, behavior which is absolutely incompatible with good order in the State. In the course of the following months, my suspicions were confirmed and increased, and then, for the first time, in May 1935, I took occasion to bring these matters up with him quite openly.

July 25, 1934: Austrian Chancellor Dollfuss is murdered by eight Austrian Nazis. A coup d’état fails, however, and order is soon restored. Kurt Alois Josef Johann Schuschnigg becomes Austria’s new federal chancellor. At the age of 36, he is the youngest person to have ever held the position.

From the affidavit by George S. Messersmith: From the very beginnings of the Nazi Government, I was told, by both high and secondary Government officials in Germany, that incorporation of Austria into Germany was a political and economic necessity, and that this incorporation was going to be accomplished ’by whatever means were necessary.’ Although I cannot assign definite times and places, I am sure that at various times and places, every one of the German officials whom I have listed earlier in this statement told me this, with the exception of Schacht, von Krosigk and Krupp von Bohlen. I can assert that it was fully understood, by everyone in Germany who had any knowledge whatever of what was going on, that Hitler and the Nazi Government were irrevocably committed to this end, and the only doubt which ever existed in conversations or statements to me was how and when.

At the beginnings of the Nazi regime in 1933, Germany was, of course, far too weak to permit any open threats of force against any country, such as the threats [that] the Nazis made in 1938. Instead, it was the avowed and declared policy of the Nazi Government to accomplish the same results, which they later accomplished through force, by the methods which had proved so successful for them in Germany: Obtain a foothold in the Cabinet, particularly in the Ministry of the Interior--which controlled the police--and then quickly eliminate the opposition elements. During my stay in Austria, I was told on any number of occasions by Chancellor Dollfuss, Chancellor Schuschnigg, President Miklas, and other high officials of the Austrian Government, that the German Government kept up constant and unceasing pressure upon the Austrian Government, to agree to the inclusion of a number of ministers with Nazi orientation. The English and French ministers in Vienna, with whom I was in constant and close contact, confirmed this information through statements, which they made to me, of conversations which they had with high Austrian officials.

The outrages were an almost constant occurrence, but there were three distinct periods during which they rose to a peak.

During the first two of these periods, in mid-1933, and in early 1934, I was still in Berlin. However, during that period I was told by high Nazi officials, in conversation with them, that these waves of terror were being instigated and directed by them. I found no concealment in my conversations with high Nazi officials, of the fact that they were responsible for these activities in Austria. These admissions were entirely consistent with the Nazi thesis that terror is necessary, and must be used to impose the will of the Party, not only in Germany, but in other countries. I recall specifically that General Milch was one of those who said frankly that these outrages in Austria were being directed by the Nazi Party, and expressed his concern with respect thereto, and his disagreement with this definite policy of the Party.

During the wave of terrorist acts in May and June, 1934, I had already assumed my duties as American Minister in Vienna. The bomb outrages during this period were directed primarily at railways, tourist centers, and the Catholic Church, which latter, in the eves of the Nazis, was one of the strongest organizations opposing them. I recall, however, that these outrages diminished markedly for a few days, during the meeting of Hitler and Mussolini at Venice, in mid-June, 1934. At that time, Mussolini was strongly supporting the Austrian Government, and was strongly and deeply interested in maintaining Austrian independence and sovereignty, and in keeping down Nazi influence and activity in Austria. At that time also Hitler could not afford an open break with Mussolini, and undoubtedly agreed to the short cessation of these bomb outrages, on the insistence of Mussolini because he, Hitler, wished to achieve as favorable an atmosphere for the meeting between him and Mussolini, as possible. The cessation of the bomb outrages during the Hitler-Mussolini conversations was considered by me, and by the Austrian authorities, and by all observers at that time, as an open admission on the part of Hitler and the German Government that the outrages were systematically and completely instigated and controlled from Germany . . . .

The events of the ’putsch’ of 25th July, 1934, are too well known for me to repeat them in this statement. I need say here only that there can be no doubt that the ’putsch’ was ordered and organized by the Nazi officials from Germany, through their Organization in Austria, made up of German Nazis and Austrian Nazis. Dr. Rieth, the German Minister in Vienna, was fully familiar with all that was going to happen, and that was being planned. The German Legation was located directly across the street from the British Legation, and the Austrian secret police kept close watch on persons who entered the German Legation. The British had their own secret service in Vienna at the time, and they also kept a discreet surveillance over the people entering the German Legation. I was told by both British and Austrian officials that a number of the men who were later found guilty by the Austrian courts of having been implicated in the ’putsch’ had frequented the German Legation. In addition, I personally followed very closely the activities of Dr. Rieth, and I never doubted, on the basis of all my information, that Dr. Rieth was in close touch and constant touch with the Nazi agents in Austria, these agents being both German and Austrian. Dr. Rieth could not have been unfamiliar with the ’putsch,’ and the details in connection therewith. I recall, too, very definitely, from my conversations with the highest officials of the Austrian Government after the ’putsch,’ their informing me that Dr. Rieth had been in touch with von Rintelen, who, it had been planned by the Nazis, was to succeed Chancellor Dollfuss, had the ’putsch’ been successful.

It may be that Dr. Rieth was himself not personally sympathetic with the plans for the ’putsch,’ but there is no question that he was fully familiar with all these plans, and must have given his assent thereto, and connived therein.

As this ’putsch’ was so important, and was a definite attempt to overthrow the Austrian government, and resulted in the murder of the Chancellor of Austria, I took occasion to verify at the time for myself various other items of evidence, indicating that the ’putsch’ was not only made with the knowledge of the German government, but engineered by it. I found and verified that, almost a month before the ’putsch,’ Goebbels told Signor Corruti, the Italian Ambassador in Berlin, that there would be a Nazi government in Vienna in a month.

From Schacht’s IMT testimony: First of all, I would like to remark that, of course, I never made a statement of that sort, neither to Mr. George Messersmith, nor to anyone else. As far as these three affidavits of Mr. Messersmith, which were submitted by the Prosecution, are concerned, I would like to make a further statement.

Mr. Messersmith asserts that he had frequent contact and numerous private conversations with me, and I would like to state here now that, according to my exact memory, I saw Mr. George Messersmith perhaps two or three times in my entire life. Mr. George Messersmith represents himself as having had numerous contacts, and many private conversations with me, and he asserts further that his official capacity brought him in contact with me, as President of the Reichsbank and as Minister of Economics.

I do not recall once having received Mr. Messersmith in my office. Mr. George Messersmith takes these two or three discussions, and proceeds to characterize me. He calls me cynical, ambitious, egotistic, vain, two-faced. I am, unfortunately, not in a position to give an equally comprehensive picture of the character of Mr. Messersmith. But I must definitely dispute his trustworthiness.

And as a first reason for this, I should like to quote a general remark by Mr. Messersmith. In his affidavit of 30 August 1945, Document 2385-PS, Mr. George Messersmith says, and I quote: `’When the Nazi Party took over Germany, it represented only a small part of the German population."

Contrary to that, I say that, before the Nazi Party took over Germany, it occupied about forty percent of Reichstag seats. That percentage, Mr. Messersmith calls a small part of the German population. If diplomatic reports are everywhere as reliable as in this instance, it is small wonder that nations do not understand each other.

I would still like to correct a specific remark by Mr. Messersmith. Mr. Messersmith asserts, as I have quoted just a minute ago, that his duty brought him in contact with me as Minister of Economics. In his affidavit of 28 August, 1760-PS, Mr. Messersmith says, and I quote: "During the wave of terrorist activity in May and June of 1934, I had already assumed my duties as American Charge d’affaires in Vienna." In August of 1934 I became Minister of Economics, whereas, on the other hand, Mr. Messersmith, already in May of 1934, assumed his official duties in Vienna; but this does not prevent Mr. Messersmith from asserting that his official duties brought him in frequent contact with me as Minister of Economics. I believe this will suffice to gauge the capacity of Mr. Messersmith’s memory correctly . . . .

I do not know whether that completely unsubstantiated private opinion of Mr. Messersmith has any value as evidence.

Nevertheless, I should like to contradict it by means of a few figures. I had stated earlier that, until 31 March 1938, the Reichsbank had given 12,000,000,000; that is to say during the first fiscal year, about 2,250,000,000, and during the subsequent 3 years, 3,250,000,000 per annum. During those years--the Codefendant Keitel was asked about that, when he was examined here; the armament expenditures, as Keitel said, amounted to the following:

In the fiscal year 1935-1936-5,000,000,000.

In the fiscal year 1936-1937-7,000,000,000.

In the following fiscal year--9,000,000,000.

And at that stage, the assistance from the Reichsbank ceased. In spite of that, during the following year, and without any assistance from the Reichsbank, the expenditure for armament increased to 11,000,000,000, and in the following year it climbed to 20,500,000,000. It appears, therefore, that even without the financial genius of Herr Schacht, they managed to raise the funds. Just how they did so is another question . . . .

I have these figures in the document before me. The figures are absolutely correct, and again I want to declare that they show that, during the first year after the Reichsbank had discontinued its assistance, no less than 5,125,000,000 more, were spent without the assistance of the Reichsbank, that is to say, a total of 11,000,000,000. Many times I spoke, not only before economists and professors who were my main auditors, but I often spoke upon invitation of the Minister of War, and the head of the Army Academy, before high-ranking officers. In all these lectures, I continually referred to the financial and economic limitations, to which German rearmament was subject, and I warned against excessive rearmament.

Beginning in 1935, I made continuous attempts to slow down the speed of rearmament. On one occasion Hitler had said--just a moment, I have it here—that, until the spring of 1936, the same speed would have to be maintained. I adhered to that as much as possible although, beginning with the second half of 1935, I continuously applied the brake. But after 1935, I told myself that, since the Fuehrer himself had said it, after the spring of 1936, the same speed would no longer be necessary. This can be seen from Document 1301-PS, in which these statements of mine are quoted, statements which I communicated to the so-called "small Ministerial Council" (kleiner Ministerrat). Goering contradicted me during that meeting, but I of course maintain the things which I said at the time.

After that, I constantly tried to make the Minister of War do something to slow down the speed of rearmament, if only in the interest of general economy, since I wanted to see the economic system working for the export trade. Proof for the fact of just how much I urged the Minister of War is contained in my letter dated 24 December 1935, which I wrote him, when I saw the period desired by Hitler coming to an end, and when I was already applying the brake. It has also been presented by the Prosecution as Document Number EC-293. In the English version of the document it is on Page 25.

I beg to be allowed to quote very briefly--all my quotations are very brief--from that document. I wrote a letter to the Reich Minister of War, and I quote:

"I gather from your letter dated 29 November"--and then come the reference numbers--"that increased demands by the Armed Forces for copper and lead are to be expected, which will amount to practically double the present consumption. These are only current demands, whereas the equally urgent provisions for the future are not contained in the figures. You are expecting me to obtain the necessary foreign currency for these demands, and to that, I respectfully reply that, under the existing circumstances, I see no possibility of doing so."

In other words, Blomberg is asking that I should buy raw materials with foreign currency, and I am stating quite clearly that I do not see any possibility of doing so.

The document goes on to say, and this is the sentence regarding the limit up to 1 April. I quote:

"In all the conferences held with the Fuehrer and Reich Chancellor up to now, as well as with the leading military departments, I have expressed my conviction that it would be possible to supply the necessary foreign currencies and raw materials for the existing degree of rearmament until 1 April 1936. Despite the fact that, due to our cultural and agrarian policies, which are being repudiated all over the world, this has been made extremely difficult for me, and continues to be difficult, I still hope that my original plan may be carried out."

That is to say, that I thought this proposed program could be carried out up to 1 April, but not over and beyond that.

July 26, 1934: From the diary of US Ambassador to Berlin, William Dodd:

On Monday, 23rd July, after repeated bombings in Austria by Nazis, a boat loaded with explosives was seized on Lake Constance by the Swiss police. It was a shipment of German bombs and shells to Austria, from some arms plant. That looks ominous to me, but events of the kind have been so common that I did not report it to Washington.

From Schacht’s IMT testimony: First of all, I might say that Ambassador Dodd was one of the most undefiled personalities I have met, an upright character, a man of unflinching fidelity to his convictions. He was a professor of history, undoubtedly a good historian. He had studied at German universities. I believe that he would turn in his grave, if he could know that the notes that he put down casually in his diary were put together by his two children without commentary, and printed without investigation.

Mr. Dodd, I am sorry to say, had one characteristic which made dealing with him a little difficult. I think the reason for this lay in his steadfastness of conviction which, from the first, often made him appear averse to outside influence. He found it rather hard to make himself understood easily and fluently, and he was even less in a position to view opinions of others in the right light. Many things that were told him, he misunderstood and saw in a wrong light.

On Page 176 in his diary, in the lower part, there is one sentence I would like to quote to illustrate the point I am trying to make. Here he says: "I talked fifteen minutes with Phipps"--the British Ambassador at that time--"about the accumulated evidence of Germany’s intense war activities." This statement dates from the autumn of 1934 and I believe no one is able to say that, in the autumn of 1934, there was any talk of a war activity on the part of Germany. Mr. Dodd uses the expression "war" undoubtedly in the place of "armament"; he says "Krieg" instead of "Aufruestung." In that sense, I believe he misunderstood the words.

And, as further evidence for the difficulty [that] one had in making the Ambassador understand, I might say that the Foreign Office asked him once to bring a secretary who would take notes of discussions with representatives of the Foreign Office, so that misunderstandings could be avoided. I believe, therefore, that all these statements by Mr. Dodd are apt to be misunderstood. As for myself, I can only say what I have already said about Mr. Messersmith, that, of course, I never talked about war intentions . . . .

Dodd was entirely friendly to me, and I respected him deeply. I saw a sign of his friendship in that, shortly before his departure from Berlin in December of 1937, he visited me at my home, and this incident is also dealt with in his diary, and I would like to quote just one sentence: "I went to Dr. Schacht’s house in Dahlem. I wished especially to see Schacht, whose life is said to be in danger."

In other words, Mr. Dodd had heard of an imminent attack on my life on the part of National Socialists, and considered it important enough and a reason for coming to my home personally in order to warn me.

A second piece of evidence of his friendship towards me can be seen from the final visit he paid me, just a few days before returning to America. At that time, he again called on me, and told me urgently that I should go to America with him, or as soon after him as possible, that I should change my residence to America, and that I would find a pleasant welcome there. I believe he would never have said that to me, had he not felt a certain degree of friendship for me . . . .

At that time--and I only heard about this in January after Mr. Dodd told me--I was informed that the SS was planning an attack on my person. The intent was, as the technical expression then had it, "to remove" me. Something like that must have been in the air; otherwise, a foreign ambassador and the circles close to me would not have known about it.




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