Capitolo 1
The Secret Club That Runs the World's Economy
The world's most exclusive club meets every other month in a circular tower in Basel, Switzerland. Its eighteen members-central bankers from the most powerful economies-gather on Sunday evenings for confidential discussions followed by exquisite dinners where the real decisions happen. This institution, the Bank for International Settlements (BIS), operates with extraordinary legal privileges. Its premises are "inviolable," its communications protected by diplomatic immunity, and its staff enjoy generous tax-free salaries. Founded in 1930 ostensibly to manage German war reparations, the BIS was actually created to promote central bank cooperation free from political interference. Today, these unelected technocrats control the global money supply, set interest rates, and make profoundly political decisions affecting billions of lives. When they meet, they represent countries comprising four-fifths of global GDP, making them arguably more powerful than any elected officials on earth-and they operate in near-total secrecy.
Capitolo 2
A Cozy Club Born from War's Ashes
In summer 1929, Montagu Norman, the eccentric and powerful governor of the Bank of England, summoned Walter Layton, editor of The Economist, to discuss establishing the world's first international financial institution. Norman, a mercurial manic-depressive from an old banking dynasty, envisioned a meeting place where central bankers could coordinate the global financial system away from politicians' interference and journalists' scrutiny.
The BIS emerged from complex negotiations about German reparations after World War I. With Europe's economies devastated, two approaches competed: France demanded punishment while Norman and Wall Street favored rebuilding through trade and cooperation. Germany's post-war economic collapse had brought hyperinflation, political extremism, and fears of communist revolution. Hjalmar Schacht, appointed Reich currency commissioner in 1923, had stabilized Germany's new rentenmark through psychological confidence-building rather than gold backing, becoming "Germany's economic dictator" by raising taxes and firing 400,000 public employees.
The Young Conference of 1929 established that Germany would pay nearly $29 billion over 58 years, with a new bank to manage payments. Despite fierce debates over location and governance, the Bank for International Settlements was established in Basel, Switzerland. Norman successfully ensured the bank's statutes protected it from government interference, creating a financial institution with unprecedented independence.
When the BIS opened in 1930, it employed 95 people selected from 13,000 applicants, mostly lawyers and economists rather than bankers. Salaries were generous and tax-free: the president received $36,000 plus $14,000 entertainment allowance, while department heads earned $15,000-$20,000 annually-compared to the average American salary of $2,000. The bank operated from an inconspicuous headquarters in Basel's Grand Hotel et Savoy Hotel Univers, with nothing identifying it to passersby.
Capitolo 3
Banking on Politics: The BIS's Hidden Agenda
The BIS, initially established to administer German reparations, quickly became a battleground between competing national interests. While Montagu Norman envisioned a cozy bankers' club, German officials saw the institution as a political tool to undermine the reparations system itself. Hjalmar Schacht, who called the BIS "my bank," had resigned from the Reichsbank in March 1930 after raging against the Young Plan's reparations scale. Meanwhile, his protege Karl Blessing drafted a strategic memo positioning the BIS as a political battleground, arguing German officials should undermine the bank through impossible demands and "create an atmosphere in which the anti-reparation bacillus finds fertile ground."
By 1931, Germany's political instability triggered a devastating cycle: capital flight led to unemployment, which fueled extremist support, causing further instability. The BIS found itself "at the heart of the first experiment ever of a multilateral attempt at managing an international financial crisis." Six months later, European governments agreed at Lausanne to cancel German reparations except for one final payment-a triumph for Berlin's strategy.
Despite this political reality, the BIS positioned itself as a neutral technocratic institution, offering a potential alternative to the nationalist politics that had led to war-a global brotherhood of central bankers united by common goals of stability and prosperity. Central banks and warfare had long been intertwined: the Bank of England was founded partly to finance King William III's war with France; Napoleon established the Bank of France to stabilize the economy after revolutionary turmoil; and the Reichsbank was created in 1876 partly to finance German expansionism.
Yet some argued that empowering financial technocrats might prevent future conflicts. The BIS emerged as part of a new wave of multilateral institutions run by apolitical technocrats. While the League of Nations would defuse political crises, the BIS would ensure financial stability. Pierre Mendes-France, a French Socialist politician, predicted in 1930 that the BIS would "progressively increase its patch" beyond administering the Young Plan, potentially becoming "a potent aid for the preservation of world peace."
Capitolo 4
The Nazi Takeover and the BIS
By April 1933, Germany had transformed into a racially-based dictatorship. The Enabling Act removed citizens' rights, Nazi stormtroopers attacked Jewish businesses, and the first concentration camp prisoners arrived at Dachau. Hitler asked Schacht to return as Reichsbank president, restoring his seat on the BIS board. Though Schacht occasionally spoke against anti-Jewish campaigns, he primarily wanted a strong, economically independent Germany and saw Hitler as the means to achieve this.
The BIS's American management viewed Nazi Germany favorably. Gates McGarrah praised Germany's "exemplary order and discipline" under leaders "inspired by goodwill." Meanwhile, Carl Melchior, the Jewish vice president of the BIS, was forced to resign by the Nazis-a development the bank regretted but did nothing about, citing neutrality in members' internal affairs. Melchior was replaced by Baron Kurt von Schroder, a powerful Nazi-affiliated banker who had personally helped bring Hitler to power.
Schacht turned against the bank he helped create. While supporting repayment of the Dawes loan, he claimed Germany lacked resources to repay the Young loan, under pressure from Nazi leaders who viewed both loans as vestiges of Germany's Versailles humiliation. When a conference chaired by BIS president Leon Fraser failed in May 1934, Germany announced a complete moratorium on medium and long-term debts. Schacht outmaneuvered everyone by swiftly concluding bilateral agreements with bondholders in seven countries at reduced interest rates-brilliantly applying divide-and-rule to international finance.
By 1939, Hermann Schmitz, CEO of IG Farben, had joined the BIS board. This chemical conglomerate was essentially a parallel state that would become an unprecedented synthesis of finance capital and mass murder. The fourth-largest concern in the world, IG Farben produced everything from pharmaceuticals to explosives, and would later run its own concentration camp at Auschwitz to manufacture synthetic rubber.
Capitolo 5
Mr. Norman Takes a Train to Nazi Germany
On January 5, 1939, almost two months after Kristallnacht, Montagu Norman arrived in Berlin as guest of honor at the christening of Hjalmar Schacht's grandson, who was named Norman Hjalmar. The two bankers then traveled together to Basel for the monthly BIS board meeting.
This close relationship raised suspicions among British journalists and politicians. Ernest Bevin demanded answers about these "financial arrangements between these great central banks" and their effect on people's liberties. The concerns were justified-Schacht had indeed rebuilt Germany's economy, reducing unemployment from six million to around three hundred thousand through public works programs and arms production.
Schacht, appointed General Plenipotentiary for the War Economy in 1935, was essentially a state-sanctioned crook licensed by Hitler to manipulate Germany's finances. He funded rearmament through "MEFO" bills-an illegal borrowing scheme from the Reichsbank. He hijacked foreign depositors' blocked funds, requisitioned German residents' foreign currency, and manipulated capital markets to disadvantage foreign firms. Hitler boasted that Schacht could outsmart "the Jew bankers of the entire world."
Despite his economic wizardry, Schacht grew increasingly uncomfortable with the regime. After Kristallnacht, he condemned the attacks on Jews at the Reichsbank Christmas party, declaring that "every decent German blush for shame." This indignation rang hollow, however, as his Reichsbank remained the primary instrument for looting Jewish assets, including collecting the billion-Reichmark fine imposed on Jews after Kristallnacht.
By 1938, Schacht claims to have used the BIS as a secret back channel to Britain, attempting to bring down Hitler and prevent war. When Norman relayed this to Chamberlain, the British Prime Minister dismissed it, saying "Who is Schacht? I have to deal with Hitler."
Despite Europe's march toward war, the atmosphere at the BIS remained "entirely cordial." The governors met monthly without taking notes or minutes, followed by high tea and various social events. The bankers began to appreciate the global linkages between their decisions and consequences, with one observer noting "you could almost see their point of view change as they began to realize the effect of their own actions."
Capitolo 6
An Authorized Plunder
When Nazi Germany annexed Czechoslovakia's Sudetenland in September 1938, they targeted not just territory but the nation's banking system. The Czechoslovak National Bank had prudently transferred most of its gold abroad to the Bank of England in two accounts-one in the BIS's name and one in the National Bank's name. For Czechoslovaks, these gold reserves represented their nationhood, much donated by the public after independence in 1918. Their faith in international financial institutions would prove tragically misplaced.
In the Czech gold affair, Montagu Norman emerged as the true villain. Despite having power as governor of the Bank of England to block the transfer or refer it to the BIS board, he refused to intervene. Even as war with Nazi Germany loomed, Norman prioritized the BIS's independence over Britain's national security interests. He maintained that there could be no "political interference" in BIS operations, even when transactions were ordered at gunpoint. When questioned by the chancellor, Norman shockingly admitted he was "doubtful that he would have thought it his duty, as Director of the BIS, to make a statement about its transactions to the British government."
The Czech gold affair highlighted the BIS's increasingly sophisticated gold operations, which functioned as a primitive forerunner of today's globalized economy. The BIS offered central banks a unique service through two types of gold deposits: direct bank deposits and "earmarked gold" held in accounts at the Bank of England and New York Federal Reserve. This system allowed central banks to transfer funds between sub-accounts without physically moving gold-merely requiring bookkeeping changes.
As Norman and Schacht traveled to Basel in January 1939, both sensed it might be their last meeting together. Schacht had realized he'd created a monster-German war spending was spiraling out of control. On January 7, Hitler received a memo from all eight Reichsbank board members warning that uncontrolled expenditure would soon collapse the "national financial structure."
Two weeks later, Hitler summarily dismissed Schacht as Reichsbank president. Walther Funk, an ardent Nazi who had joined the party in 1931, took over both Schacht's position and his seat on the BIS board. Just over a month later, Germany invaded Poland.
Capitolo 7
Hitler's American Banker
As war approached in May 1939, the BIS was selecting a new president to replace Johan Beyen. American Thomas McKittrick emerged as frontrunner-a curious choice given his lack of central banking experience, but perfect for maintaining financial channels during wartime as a citizen of neutral America.
McKittrick had worked for Lee, Higginson & Company, building impressive connections while working extensively on German loans and investments. His friendship with Allen Dulles provided entree to the covert world where politics met finance. Despite his involvement in the Ivar Kreuger scandal-where Lee, Higginson backed a massive Ponzi scheme that ultimately collapsed-McKittrick survived professionally unscathed.
Before moving to Basel, McKittrick helped secure the release of Ernst Hanfstaengel, Hitler's former propaganda chief, from British detention. Hanfstaengel had been one of Hitler's earliest financial backers, contributing $1,000 to publish the Nazi party newspaper during Weimar hyperinflation before becoming foreign press chief in 1931.
When war broke out, the BIS chose to remain active under "neutrality" rather than liquidate or become dormant. The bank's neutrality declarations proved worthless as management deliberately transformed the BIS into a de facto arm of the Reichsbank. It accepted looted Nazi gold until war's end, recognized Nazi territorial annexations, and allowed Nazi occupation regimes to take ownership of BIS shares, giving the Axis 67.4% of voting stock.
McKittrick maintained a close relationship with Emil Puhl, Reichsbank vice president, whom he called his "friend." Even after America joined the conflict, their relationship remained productive, with Puhl describing the BIS as the "only real foreign branch" of the Reichsbank. The BIS served as a crucial financial channel for Nazi Germany to access neutral countries.
The BIS accepted gold from Nazi Germany throughout the war, much of it looted. The Belgian gold reserves were particularly notable-over 200 metric tons had been sent to France for safekeeping, then transported to Africa, and eventually seized by Germany. The Nazis melted this gold at the Prussian Mint, stamping it with false dates between 1934-1939. About 1.6 metric tons of this Belgian gold and 2 tons of looted Dutch gold were used for BIS interest payments. Some BIS gold had even more horrific origins-from the watches, spectacles, jewelry, and gold teeth of concentration camp victims.
Capitolo 8
Reassuring Wall Street During Wartime
McKittrick embodied the American-Nazi financial network that kept money channels open through Basel despite the war. While the State Department supported McKittrick, Treasury Secretary Morgenthau and Harry Dexter White viewed the BIS as a Nazi economic channel and blocked its operations in America.
Stranded in America without permission to return to Basel, McKittrick became an intelligence asset, providing the OSS with detailed information about Nazi Germany's economy. Despite Treasury opposition, McKittrick remained popular on Wall Street, with Fraser hosting a dinner attended by thirty-seven top American financiers and industrialists-many with profitable German business connections that continued after Hitler's rise to power.
Standard Oil had deep entanglements with Nazi Germany through its cartel arrangement with IG Farben. Under a 1929 "division of fields" agreement, IG Farben maintained chemical supremacy including in the United States, while Standard Oil received oil patents for use everywhere except Germany. In 1938, Standard Oil shared its complete specifications for synthesizing artificial rubber (Buna) with IG Farben, technology that would later be used at IG Auschwitz, where slave labor and concentration camp inmates produced chemicals under horrific conditions.
The American car industry reaped enormous profits from Nazi Germany's war machine. Opel, General Motors' German division, produced the "Blitz" trucks used in the invasion of Poland, while Ford's German subsidiary manufactured nearly half of Nazi Germany's medium-duty trucks. Without these American subsidiaries, the Nazis likely couldn't have waged war.
Chase National Bank functioned as a vital hub in the Nazi financial network. After the invasion of France, Chase's Paris office eagerly collaborated with Nazi authorities with full knowledge from New York headquarters. The bank's manager, Carlos Niedermann, was an ardent Nazi sympathizer who closed Jewish accounts and transferred assets to Nazi-owned ones.
As the war neared its end, the July 1944 Bretton Woods conference established a new international financial system through the IMF and World Bank. Treasury Secretary Henry Morgenthau and Harry Dexter White pushed to liquidate the BIS, with Norway introducing a formal resolution for its dissolution. Eventually, a compromise Norwegian-Dutch resolution called for liquidation "at the earliest possible moment"-satisfying critics while giving the bank's supporters an indefinite timeline with no specific conditions.
Capitolo 9
The BIS Survives and Thrives
Despite media attacks questioning McKittrick's wartime activities and the BIS's gold transactions with Germany, the bank quietly returned to business. In December 1946, it held its first postwar directors' meeting. The turning point came in May 1948 when the BIS returned 3.74 metric tons of looted gold to Belgium and the Netherlands. In exchange, the Allied Tripartite Commission dropped all future claims against the bank, the US Treasury freed all BIS assets, and the Bretton Woods resolution calling for the BIS's liquidation quietly disappeared.
Post-war Germany was devastated, with destroyed housing, halved food production, and industrial output at one-third of pre-war levels. Everything changed in 1948 when the Reichsbank was replaced by the Bank deutscher Lander (BdL) and the deutschmark replaced the Reichsmark. When price restrictions were lifted, the economy boomed spectacularly-employment soared and inflation plummeted. However, this "economic miracle" was built on Nazi foundations. German companies had reinvested their wartime profits so effectively that Germany's capital stock was actually greater in 1948 than in 1936, despite Allied bombing and reparations.
The financial continuity between Nazi Germany and post-war Germany reached to the highest levels. Wilhelm Vocke, the BdL's first president who would represent Germany at BIS meetings, had been on the Reichsbank board from 1919-1939 and Germany's alternate BIS board member from 1930-1938. Between 1948 and 1980, 39 percent of officials on the executive and governing boards of Germany's central banking system were former Nazis.
By 1943, Nazi industrialists and SS leaders like Otto Ohlendorf were secretly planning for Germany's economic future after their inevitable military defeat. The August 1944 "Red House Report" documented a meeting where industrialists planned for a "Fourth Reich"-not a military empire but a financial one. Nazi leaders were exporting massive capital to neutral countries through Swiss banks and establishing themselves in South American corporations.
With American financial backing through the Marshall Plan and BIS expertise, the drive toward European unity gained unstoppable momentum. The United States demanded Europe create a comprehensive multilateral payments system, moving away from bilateral arrangements. This led to the European Payments Union in 1950, with the BIS appointed as its agent to manage banking, accounts and funds across eighteen Western European countries.
Capitolo 10
The Tower of Basel Rises
By 1970, the BIS had evolved from its controversial origins into a confident, influential institution at the heart of global finance and European integration. Its membership had expanded beyond Europe to include Spain, Portugal, Iceland, South Africa, Turkey, Canada, Australia, and Japan, with membership becoming a mark of prestige for emerging economies.
The BIS commissioned local architect Martin Burckhardt to design a modern headquarters befitting its growing status. Despite some local opposition, Basel residents overwhelmingly approved the construction of an ultramodern circular tower in a city-wide referendum. The foundation stone was laid in 1973, and the bank moved into its new offices in 1977.
Unlike its previous discreet location next to a chocolate shop, the new "Tower of Basel" made a bold architectural statement-eighteen stories high with bronze-tinted windows and national flags displayed prominently at the entrance. The building's circular corridors and globular 1970s furniture represented a surprisingly stylish choice for conservative central bankers.
The Tower of Basel was designed as a self-contained fortress with state-of-the-art technology and security features. Protected by international treaty, the bank guards its sovereignty zealously-Swiss authorities need management permission to enter the premises. The building includes a bomb shelter, redundant sprinkler systems, in-house medical facilities, and extensive underground archives.
During the Cold War, the BIS served as a neutral meeting point between Communist and capitalist worlds, just as it had connected Allies and Axis powers during World War II. Central bankers from behind the Iron Curtain regularly visited Basel, receiving generous treatment-covered travel expenses, per diem payments in hard currency, fine food and wine-making them friendly sources of economic intelligence.
By 1982, Hungary's "Goulash Communism" experiments with limited private enterprise had accumulated $10 billion in foreign debt. Janos Fekete of the Hungarian National Bank approached BIS President Fritz Leutwiler for help. Hungary needed a bridging loan until its IMF membership application was approved. This intervention had far-reaching consequences, strengthening reformers who further liberalized the economy. Hungary opened the Iron Curtain in August 1989, allowing East German refugees to cross to Austria three months before the Berlin Wall fell, triggering Communism's collapse across Eastern Europe.
Capitolo 11
The European Dream and Its Discontents
Walther Funk, the Reichsbank president and BIS director, had predicted in 1942 that "European economic unity will come, for its time is here." The uncomfortable truth is that parallels between Nazi plans for postwar European economy and subsequent European integration are real, with the BIS running like a thread through both. Funk's 1940 memo "Economic Reorganization of Europe" outlined a vision strikingly similar to what later emerged: a dominant German currency, multilateral clearing arrangements, gradual removal of exchange controls, and recognition that monetary union required similar living standards across countries.
In December 1993, Alexandre Lamfalussy left his position as BIS general manager to become director of the European Monetary Institute (EMI), the European Central Bank's precursor. Despite remaining profitable with a 162.4 million gold franc net profit for the year ending March 1995, the BIS faced an existential crisis under new manager Andrew Crockett, who understood that the bank needed to find a new purpose at age sixty-four.
Crockett's answer was clear: "We are going to go global." This required bringing the Federal Reserve fully on board. In 1994, Crockett's lobbying succeeded-the Federal Reserve finally took up its shares, joined the bank, and appointed two directors to the board. By 1996, central banks from China, India, Russia, Brazil, Hong Kong, Singapore, and Saudi Arabia had joined, securing the BIS's future as a truly global institution.
In June 1998, the EMI closed down and the European Central Bank opened for business. The euro launched on January 1, 1999, with eleven countries participating, and physically replaced national currencies in 2002. For many, the euro represented the continuation of post-World War II politics by other means. French politicians believed the single currency would solve "the German problem" forever by binding Germany economically to Europe, while Germans shaped the ECB to focus on price stability.
Critics like former Bank of England deputy governor Rupert Pennant-Rea called the euro "a monstrous creation" driven by Franco-German politics. The Eurozone suffered from two inherent flaws: it was not a homogeneous currency area, attempting to unite economically diverse countries like Germany and Greece; and it lacked a credible transnational fiscal system with enforcement mechanisms. As Alexandre Lamfalussy admitted, "if you have a common currency you have to have a common economic and fiscal policy from the beginning."
Capitolo 12
The Citadel Cracks
Like the biblical Tower of Babel, the BIS tower houses those who believe themselves possessed of a near-celestial mandate. The financial crisis has only strengthened the BIS, with profits nearly doubling to $1.17 billion by March 2012 and total equity reaching $28 billion-extraordinary sums for an institution with just 140 clients and two local offices.
The BIS wields profound soft power, hosting bimonthly governors' meetings that gather central bankers controlling over four-fifths of global GDP. Its committees are rebuilding the world's financial architecture, with the Basel Committee on Banking Supervision overseeing commercial banks' capital requirements. The bank has become "the vampire squid of the regulatory world," spawning an endless merry-go-round of committees, subcommittees, reports, and recommendations that shape global financial governance.
Critics argue banking should become a normal industry with minimal regulation-just enough to protect against fraud and maintain integrity. The BIS, however, remains an opaque, elitist institution out of step with the twenty-first century. It should have been closed after the collapse of German reparations in the 1930s, but instead funded the Nazi war machine while staff like McKittrick and Jacobssen passed intelligence to the Nazis.
While Andrew Crockett opened the bank's wartime archives in the 1990s-a boon for historians-the BIS remains secretive about current governance. Its website and Twitter feed share public documents but reveal nothing about internal operations, governors' meetings, or transactions with central banks.
After Argentina's 2001 default on $81 billion of debt, most creditors accepted thirty-five cents on the dollar. However, holdouts including Italian bondholders and "vulture funds" like Elliott Management pursued legal action. Argentina protected its reserves by depositing them with the BIS, where they're shielded by the bank's legal immunities. This creates uncomfortable parallels with the 1930s, when Montagu Norman and Johan Beyen facilitated the transfer of Czech gold to Nazi Germany, prioritizing the bank's interests over ethical concerns.
The BIS must reform in three critical areas to ensure its survival: transparency, accountability, and corporate social responsibility. It should hold public press conferences after governors' meetings, publish attendance lists and discussion themes, and be stripped of its legal inviolability through an Extraordinary General Meeting, as its founding statutes are outdated for an institution handling public funds.
The BIS has demonstrated remarkable adaptability throughout its history, reinventing itself from the Schacht-Norman era through World War II and the birth of the euro to today's regulatory committees. Now facing global hostility toward bankers, the bank emphasizes its status as an international organization serving the common good. However, the bank's evolution into a socially responsible institution may prove most challenging, as secrecy and unaccountability are embedded in its DNA. In an age demanding transparency and accountability, when even Wall Street can be occupied for weeks, the Tower of Basel is no longer inviolable.
