Although the women of the United States are confined within the narrow circle of domestic life, and their situation is, in some respects, one of extreme dependence, I have nowhere seen woman occupying a loftier position; and if I were asked... in which I have spoken of so many important things done by Americans, to what the singular prosperity and growing strength of that people ought mainly to be attributed, I should reply, To the superiority of their women.

--Alexis de Tocqueville, Democracy in America

Friday, December 16, 2011

Wall Street and FDR: Chapter 3

Profiting From German Tears

One of the most morale-damaging aspects of the inflation was the "sack of Germany" that occurred at the height of the [1923] inflation. Anyone who possessed dollars or sterling was king in Germany. A few American dollars would allow a man to live like a millionaire. Foreigners swarmed into the country, buying up family treasures, estates, jewelry and art works at unbelievable low prices.
Marjori Palmer, 1918-1923 German Hyperinflation, (New York: Traders Press, 1967)

As we get in our "wayback" machine, we plan to investigate 1920s Germany to get the lay of the economic land and the activities of our subject FDR therein. Let's just say our boy FDR makes a killing from the hyperinflation of 1922 and1923 in Germany. How did he pull that off?

If you will recall, after WW1, Germany had to make restitution as a condition of the Versailles Treaty. The conditions and terms of the reparations were crafted by who else but our bankster friends:

The 1923 Reparations Committee had as its U.S. members Brigadier General Charles G. Dawes and Owen D. Young of the General Electric Company.

The 1928 Committee of Experts on the Young Plan comprised, on the American side, Owen D. Young and J.P. Morgan, with Thomas N. Perkins and Thomas W. Lamont as alternates. On the German side the members were Hjalmar Schacht and A. Voegler, with C. Melchior and L. Kastl as alternates.

In brief, the General Electric-Morgan elements prominent in the Bolshevik Revolution, and as we shall see also prominent in the New Deal, were the negotiators of a scheme generally regarded as one of the prime causes of World War II—and incidentally a scheme in which these same financiers, as well as Franklin Delano Roosevelt, were to profit.
You guys remember Thomas Lamont as an operative in our Bolshevik series, (he's the guy that secured a million bucks for Mousillini) but here we'll take a closer look at some of the German players.

It is also worthy of note that businessmen on the German side of the reparations negotiations were associated with the rise of National Socialism in Germany. Witness Hallgarten in his essay "Adolf Hitler and German Heavy Industry:"

... in November 1918 a group of the Reich's most prominent businessmen, comprising Stinnes, Albert Voegler (then director of the Gelsenkirchen Mining Co., Ltd.), Carl Friedrich von Siemens, Felix Deutsche (of German General Electric), Director Mankiewitz of the Deutsche Bank, and Director Salomonsohn, of the Diskontogesellschaft, financed the movement of a Hitler forerunner, one Dr. Eduard Stadtler, who demanded the establishment of a German National Socialist state....
The pertinent point is that the Felix Deutsche mentioned was a director of German General Electric and the American reparations representatives included Owen D. Young of General Electric, while the Albert Voegler mentioned by Hallgarten was the German representative in the Young-Plan negotiations.
The depreciation of the German mark into worthless paper currency as a result of this reparations burden imposed by these men is illustrated in the following table:
The German Mark in Terms of
Foreign Exchange
German Wholesale Prices
January 1913
January 1920
January 1921
January 1922
July 1922
The inflation accelerated following the formation of United European Investors, Ltd., with Franklin D. Roosevelt as President and John von Berenberg Gossler as a member of the German advisory board:
January 1923
July 1923
August 1923
The inflation went entirely out of control following the dismissal of Chancellor Wilhelm Cuno, who returned as president of HAPAG, and co directors John von Berenberg Gossler and Max Warburg:
September 1923
Nobember 1923

So you get the picture. Their currency was totally FUBARed and then the banksters went in to pick their bones. I'm not a pro-kraut person, but when something just ain't right, it's unAmerican not to point it out. This wasn't right to do this to people and still call yourself a Christian nation. But these people aren't Christians, never really claimed to be, but they'll be whatever you want them to be so long as they can watch your pocketbook and make laws for you.

The policies that created this insane inflation were started under Chancellor of Germany, Wilhelm Cuno, who had previously been president of the Hamburg-America Line. You may recognize a couple of the other directors: Max Warburg (who's brother Paul was on the Fed's Board  of Advisors) and John von Berenberg Gossler (who was also on the German board of  United European Investors, Ltd.) Wanna know who else was on the board of  United European Investors, Ltd.: the man of this series--Franklin Delano Roosevelt!

To quote Sutton who puts a fine point on the relevance of all this information:

This terrifying monetary inflation and the ultimate collapse of the German mark in 1923 ruined the German middle class and benefited three groups: a few German big businessmen, a few foreign businessmen who were in a position to gain advantage from the inflation, and the rising Hitler movement. As president of United European Investors, Ltd., Franklin D. Roosevelt was among those foreign businessmen who took advantage of Germany's misery for their own gain.
Sound familiar proles? Who's profiting today but the bailout banks and the foreign banks that the Fed is lending to.

Let's talk about William Schall. He had a financial house called Muller, Schall, and Company. Problem is, this outfit had a lot of connections with German espionage during WW1, not to mention connections to our previous study of the Bolshevik Revolution. In 1918, the company Amsinck and company had its connnections to German espionage exposed. The German interests of Muller, Schall, and Co had its interests represented by Edmund Payne who liquidated it and reformed it as William Schall and Co. which was located at the same address as Muller, Schall, and Co, 45 William St., NYC. I'm telling you all this because William Schall will prominently play a role in United European Investors.

United European Investors Ltd. was an outfit that profited handsomely off of the German hyperinflation. And  our man of the hour, FDR was right there not only on the board, but in the thick of picking the bones of the German economy.

The original organizing group for United European Investors, Ltd. comprised the aforementioned William Schall and Franklin D. Roosevelt, joined by A. R. Roberts, Charles L. Gould, and Harvey Fisk & Sons. The 60,000 preferred shares issued were held by Harvey Fisk & Sons ($25,000), Franklin D. Roosevelt ($10,000) and Schall, Roberts, and Gould ($5,000 each). In brief, FDR was the largest individual preferred shareholder of the incorporating group.
United European Investors was unusual in that it was a corporation chartered in Canada with a very liberal parameters that allowed it to do just about whatever it wanted to. Ex.  "including the right to promote trade and commerce between Canada and any other country; to acquire title to property; underwrite or otherwise deal in bonds, stocks, and shares; act as brokers and agents; undertake all kinds of functions in regard to purchase, exchange, and transfer of stocks and shares; lend money; carry on any business, "manufacturing or otherwise;" and buy and sell property."

The stock was divided into two sections: 60,000 preference shares and 60,000 ordinary shares. These sharese were denominated in 10,000 German Marks. The goal of the corporation was to invest the billions of hyperinflated German Marks held in the US and Canada in German property. Then they would start earning money right away as they were connected to tangible property. Let's just say that United European Investors got in at exactly the right time. Once again, we have a Federal Reserve connection:

The actual investment of U.E.I. was carried out in Germany by a German advisory board that occupied an office in Hamburg headed by Senator August Lattman, formerly a partner in G. Amsinck & Company of New York (see page 41). The second member of this German board was Senator John von Berenberg Gossler, head of the Hamburg banking firm Berenberg, Gossler & Co. Berenberg, Gossler was also a member of the management board of the Hamburg-America Line (HAPAG); other members were Wilhelm Cuno, at that time Chancellor of Germany and responsible for his country's economic policy, and Max Warburg, brother of Paul Warburg, member of the Federal Reserve Board in the United States.
You know what else is familiar, the investment in mortgages:

In a letter dated November 11, 1922 to U.E.I., the German Advisory Board recorded its initial investments: "All the investments so far made are of first class industrial shares." However, the prospectus issued in the U.S. emphasized investment in real estate, and on this point the German board wrote:
As to investing in mortgages we understand your point of view but shall eventually come back to the question in case we shall be able to offer you mortgages with a gold clause which might be possible, and would exclude any additional risk in case the mark should further decline.

The investments made by the board during the next few years were stocks of German companies. Further, the investment prices were cited in an unusual manner, not in German marks or absolute figures of any kind, but as a percentage increase, presumably from a 1913 base, which enabled the German Board to write to New York, "the shares which you so far bought have risen considerably with the depreciation of the mark."

These shares and the percentage increase cited included, for example:
Deutsche Maschinen A.G.bought at 1350% now quoted 1805%
Allgemeine ElektricitÀts Gesellschaftbought at 740% now quoted 5000%
Nobel Dynamitbought at 1119% now quoted 3975%

So we see that there is a lot of going on here behind the scenes at United European Investors. You'll have to read this chapter for yourself to get all the details, for there are many names, and letters sent back and forth. What we are establishing here is that FDR was a hard-core Wall Street financier who made money off the hyperinflation of Germany. We are also establishing that he ran on the inside track and had access to influence and information the vast majority of even Wall Streeters were not privy to.

A letter to FDR:
Taking as a test the first Mks 60,000,000 invested by the company, we find that the appreciation in price of the securities has somewhat exceeded the depreciation in the exchange value of the mark. In other words, the securities purchased could probably be sold today for a price in marks which would bring somewhat more in dollars than could have been secured by the holders of marks had they sold them at the time of the investment in spite of the fact that the value of their marks has gone down tremendously.
From Professor Homer B. Vanderblue, Business Economics at Harvard University trying to understand the UEI Investment program
Did the American holders of German marks who invested in United European investors gain or lose on their investment? If we suppose they held their stock to 1926 and accepted the company offer at $7.50 per common share unit, then buying at the issue price of 10,000 German marks in September 1922 (the date offered) they would have lost considerably. In September 1922 the dollar-mark exchange rate was $1.00 to 764 German marks. Thus a 10,000 mark share would be equivalent to $13.00 per share, and a share held from 1922 to 1926 would have realized a loss of approximately $5.50 per share; on the other hand, a shareholder would have avoided total depreciation and a loss of all his funds from holding on.
The Roberts-Gould element that joined FDR and Schall on the Board of U.E.I. had a poor reputation on "the Street". The owners of the office that they had taken up at 7 Pine Street sent Mr. Crary to investigate what these known "crooks" were up to. What was FDR's reaction? From his right hand man Mr. Howe, a letter:
Dear Boss,

My recommendations are as follows: That Gould and Roberts be directed to immediately find new offices, preferably in a church or some other respectable place. That we get rid of Roberts, who is a wild man on publicity anyway, and who has no important function in this game, and that closest watch be kept of Gould. If Mr. Crary actually turns up the circular I would tear off the roof over it and make sure that its use is stopped until we are ready to make a formal announcement. I think it would be wise to insist that during the summer I be made a member of the Board of Directors, particularly as both Jenks and Rogers will be away most of the time and some one wants to watch every action taken.
--Louis Howe, July 29,1922

To make a long story short, the Gould guy that had a bad reputation got to keep his job. This whole thing is shady, but as nailable as jello. Our host Dr. Sutton keeps it real:
There is only superficial evidence that the whole United European Investors operation was designed by Roosevelt. When Gould tells FDR that his "name was applauded as being the master mind," it is reasonable to assume that Gould was flattering Roosevelt for his own purposes. There is really no evidence either way in the files or elsewhere that Roosevelt's background and financial knowledge were sufficient to originate a plan as ingenious as U.E.I.

 CHANCELLOR WILHELM CUNO AND HAPAGThe disastrous depreciation of the German mark that was the raison d'ĂȘtre of United European Investors was concentrated in the period mid-1922 to November 1923. The table indicates how inflation got completely out of hand after mid-1922. The German Chancellor between mid-1922 and August 1923 was Wilhelm Cuno (1876-1933). Cuno was originally a civil servant, always active in politics, and in November 1917 was elected a director of the Hamburg-America Line (HAPAG). When Ballin, the president of HAPAG, committed suicide in 1918, Cuno became its president. After May 10, 1921 Karl Wirth was German Chancellor, and Walter Rathenau, the president of German General Electric (A.E.G.), was Minister for Reparations. Then followed a series of dramatic events. The German Minister of Finance Matthias Erzberger was assassinated August 26, 1921. In January 1922 Rathenau became Foreign Minister and on June 24, 1922 was also assassinated. In October of 1922 Friedrich Ebert was Reich Chancellor and Wilhelm Cuno of HAPAG was appointed German Chancellor. The depreciation of the mark occurred under Cuno and culminated in the financial crisis and his dismissal in August 1923. Cuno returned to the presidency of the Hamburg-America Line. We might note in passing the prevalence of corporate presidents in contemporary politics: e.g., German General Electric's Rathenau and HAPAG's Cuno. Owen D. Young of General Electric in the U.S. was also creator of the Young Plan for German Reparations, and German General Electric (A.E.G.) president Rathenau was German Reparations Minister in 1922. These appointments are usually explained on the basis of "the best man for the job" but, given the evidence presented in the last chapter on politics in the bonding business, we can justifiably express skepticism about this explanation. It is much more likely that the Youngs, Cunos, Rathenaus—and the Roosevelts—were mixing business and politics for their own pecuniary gain. Unfortunately, while we must leave unanswered the key question of how far these elitist groups used the state apparatus for their own ends, it is clear that, when we probe the background of Wilhelm Cuno, we arrive back at Franklin D. Roosevelt and the formation of United European Investors, Ltd. Cuno, under whose auspices the great German inflation raged, was a director of the Hamburg-America Line; John von Berenberg Gossler, the United European Investors adviser in Germany, was also a member of the board of that company. In sum, Cuno and Gossler were on the same board of directors at HAPAG. Cuno's policies were essentially responsible for the German inflation of 1922-23 while his co director Gossler, in cooperation with Franklin D. Roosevelt, was making profit out of the very same inflation policies. It makes one ponder.
THE INTERNATIONAL GERMANIC TRUST COMPANYThe International Germanic Trust Company, founded in 1927, was prompted, according to its promoters, by a demand for American banking institutions in central Europe. Among the organizers of the trust as approved by the Banking Department of the State of New York were Franklin D. Roosevelt; Herman A. Metz, a director of I. G. Farben; James A. Beha, Superintendent of Insurance for the State of New York; and E. Roland Harriman of the international banking firm of W. A. Harriman  Co. The president of the associated International Germanic Company and chairman of the executive committee of the trust company was Harold G. Aron, who had had more than his share of law suits involving stock promotion. The main offices of the International Germanic Trust were on the ground floor of 26 Broadway, the Standard Oil Building in New York. The authorized capital consisted of 30,000 shares to provide a capital of $3 million and a surplus of $2 million. In its application to the banking department the company was represented by Senator Robert F. Wagner; although not listed among the organizers, FDR's old friend, James A. Beha, Superintendent of Insurance for the State of New York, became a member of the board of directors.The objectives of the company as stated by its president, Harold G. Aron, were:
There appears to be a real need for an institution of sufficient size and backing, to take the place of those institutions which existed before the war and were primarily concerned in financing commercial intercourse between America and the Central European business world. Through its incorporators the trust company will have and develop relations both with Americans of German descent throughout this country and with business and banking institutions in Germany. It is the intention of the company to stress particularly the development of its foreign and trust departments, and to provide an effective fiscal agency in the expected liquidation of German properties and trusts still in Government custody.The company will, from the outset, be assured the support of important organizations and societies in this country, and the small depositor both in and outside of New York City will be welcome. It will aim to distribute its shares widely and in comparatively small amounts. There will be no voting trust nor individual or group control.
Roosevelt was involved in the flotation of the proposed company. A telegram dated April 7, 1927 from Julian Gerrard, president of the trust company, to FDR requested him to telegraph Frank Warder, Superintendent of Banks in the State of New York, to the effect that he (Roosevelt) was interested in the trust company. It was anticipated that this intervention would clear the delay in granting the charter. Board meetings were held in the Standard Oil Building, in FDR's office, and in the Bankers Club, the latter both located at 120 Broadway. The first meeting of the organization committee was held at the Bankers Club Friday May 27, 1927; although FDR was unable to attend, he wrote Julian M. Gerrard, "What is the news of the trust company?" Again on August 15, 1927 FDR asked Gerrard, "How is the organization work proceeding and what is being done in regard to the stock subscriptions?"A considerable part of the FDR letter files of this promotion consists of requests for employment, stock in the proposed company, or related favors. For example, the National Park Bank of New York wrote FDR July 26, 1927 that it was interested in the creation of the International Germanic Trust Company and would be pleased to "have one of our officers address that body, going into detail regarding our facilities." In other words, the National Park Bank was looking for deposit business. FDR promised to take up the matter with the organization committee of the new trust company. Then on August 12, 1927 Roosevelt's partner Basil O'Connor dropped him a note: "Dear Franklin, On the Germanic Bank, see if you can get me 100 shares." The stock issue itself was heavily oversubscribed. It was planned to issue 30,000 shares, but total requests by September 12 were in excess of 109,000 shares, and by September 20 applications exceeded 200,000 shares from approximately 1900 individuals. The trust notified FDR on October 3, 1927 that his allotment was 120 shares at $170 per share and must be taken up by October 5. The telegram added that the issue was heavily oversubscribed and quoted at 187 bid, 192 asked, which would give FDR a profit on an immediate resale. This telegram from Howe added, "Would like ten of your shares for Grace if you are willing."FDR was duly elected a member of the board of directors and notified on November 4, 1927 that the first meeting of the board would be held Friday, November 11 at the Bankers Club at 120 Broadway. However, Basil O'Connor, Roosevelt's law partner, apparently had cold feet or received adverse information on the promotion because he wrote FDR on November 14:I don't know what our position now is in this matter but if it is as when I parted I feel very badly about it. The proposition has not helped us any (with) other banking connections on which I have been working on a year and frankly it has all the earmarks that Gerrard (sic) thinks he can "kid you."O'Connor suggested that FDR should resign from the board because "heretofore I have been able to say we have no banking affiliations, that was wrong. I can't say that now." Apparently, FDR did not immediately take this advice, because on January 19, 1928 he was notified of reelection as director for the coming year, but in a letter dated January 27, 1928 FDR wrote Gerrard as follows:Dear Julian,The more I consider my directorship and the trust company and the International Germanic Company, the more I am inclined to feel that it is somewhat futile. I have already told you of my partner's and my feelings in regard to extraneous connections on the part of either of us which involve merely attending occasional meetings and nothing more. It is somewhat difficult of course for me to go to the meetings at 26 Broadway in view of the steps but, frankly, I feel that in retaining my directorship I am accomplishing little either for myself or for the Trust Company or the International Germanic Company.--FDR, Janueary 27, 1928 
Could it be that they'd already sucked the marrow out of the German bone? I thought the offices of the Germanic Trust Co were one the ground floor, what's this about the step? Why republican Mother, you wouldn't call a crippled man a liar, would you? A crippled man with glasses on? Oh, yes I would if the shoe fits and all.
Whereupon FDR offered his resignation. It is notable that the reasons for resigning were "I am accomplishing little either for myself or for the trust company." In view of the rather unsavory reputation of the promoters, this explanation is a little weak.

Read it all for yourself at Reformation Theology, which generously reprinted this book with permission from Dr. Sutton.

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