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Fostering ‘the bank that rules Europe’: the Bank of England, the Allied Banking Commission, and the Bank deutscher Länder, 1948–51

Published online by Cambridge University Press:  12 September 2008

Monika Dickhaus
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Without a doubt the Bundesbank, the German central bank, enjoys a formidable reputation in the United Kingdom. It is seen as a most important and powerful institution, as an independent, well-functioning and sometimes even stubborn player in the realm of German, European and international monetary affairs. Therefore it is not difficult to find British newspaper headlines dealing with it. Above all, in times of monetary upheaval, the Bundesbank is understood to be an institution which ‘allows a flicker of hope’ and on which markets ‘keep a nervous eye’. Probably even more telling is the fact that some years ago a book was published in the UK which presents the German central bank in its title as ‘the bank that rules Europe’ and which maintains that ‘the Bundesbank took the place of the Wehrmacht as the most known and most feared German institution’.

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Articles
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Contemporary European History , Volume 7 , Issue 2 , July 1998 , pp. 161 - 179
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Copyright © Cambridge University Press 1998

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References

1 Financial Times, 16 Sept. 1992, 7 Sept. 1992 and 10 Sept. 1992.

2 Marsh, D., Die Bundesbank. Geschäfte mit der Macht (München: Bertelsmann, 1992), 18Google Scholar; Eng. version Marsh, D., The Bank that rules Europe (London: Heinemann, 1992).Google Scholar

3 For years, only a collection of essays written in order to commemorate the hundredth birthday of German central banking shed light on the history of the Bundesbank, see Bundesbank, Deutsche, ed., Währung und Wirtschaft in Deutschland, 1875–1976 (Frankfurt am Main: Knapp, 1976).Google Scholar Only in recent years was the documentary evidence from its historical archives used, see V. Hentschel, ‘Die Entstehung des Bundesbankgesetzes 1949–1957’, Bankhistorisches Archiv, 14 (1988); T. Geiger and D. Ross: ‘Banks, Institutional Constraints and the Limits of Central Banking’, Business History, 33/3 (1991); T. Horstmann, Die deutschen Groβbanken, Alliierten und die, Bankenpolitik nach dem Zweiten Weltkrieg in Westdeutschland (Bonn: Bouvier, 1992)Google Scholar; Marsh, , Bundesbank, ; Berger, H.: Konjunkturpolitik im Wirtschaftswunder. Handlungs-spielräume und Verhaltensmuster von Zentralbank und Regierung in den 1950er Jahren (Tübingen: Mohr Siebeck, 1997)Google Scholar; Dickhausv, M.: Die Bundesbank im westeuropäischen Wiederaufbau. Die internationale Währungspolitik der Bundesrepublik Deutschland 1948 bis 1958 (München: Oldenbourg, 1997).Google Scholar E. Wandel was the first to exploit the material of the Bundesbank archives. However, his work – Die Entstehung der Bank deutscher Länder und die deutsche Währungsreform (Frankfurt: Knapp, 1980) – is not always reliable, see Dreißig, W., ‘Wandel, Eckhard: Die Entstehung der Bank deutscher Länder und die deutsche Währungsreform’, Zeitschrift für die gesamte Staatswissenschaft, 138 (1982), 163–170.Google Scholar

4 See above all Horstmann, T., ‘Die Entstehung der Bank deutscher Länder als geldpolitische Lenkungsinstanz in der Bundesrepublik Deutschland’, in Riese, H. and Spahn, H.-P., eds., Geldpolitik und ökonomische Entwicklung (Regensburg: Transfer, 1990).Google Scholar

5 See for example, Pünder, T., Das bizonale Interregnum: die Geschichte des Vereinigten Wirtschaftsgebietes 1946–1949 (Bergisch-Gladbach: Grote, 1966), 191Google Scholar; Lindenblaub, D., Bemerkungen zum Einfluβ der Alliierten Bankkommission auf die westdeutsche Geldpolitik 1948–1951, mimeo., (Frankfurt am Main: Bundesbank, 1992)Google Scholar; Marsh, , Bundesbank, 192.Google Scholar

6 See Public Record Office (PRO) Foreign Office Haynes (Kleinworth, Sons & Co., London) to Hellmuth (Control Commission for Germany/British Element (CCG/BE)), 18 July 1947, FO 1046/678, quoted in: Horstmann, Entstehung der Bank deutscher Länder, 210.

7 See Horstmann, Alliierten und die deutschen Groβbanken; Horstmann, T., ‘Die Angst vor dem finanziellen Kollaps’, in Petzina, D. and Euchner, W., eds., Wirtschaftspolitik im britischen Besatzungsgebiet 1945–49 (Düsseldorf: Schwann, 1984)Google Scholar; T. Horstmann, ‘“The worst banking practice in the world”: Inter-Allied Discussions over American Plans to Reform the German Banking System in 1945/6’, German Yearbook on Business History (1986).

8 Westfälisches Wirtschaftsarchiv (WWA) Office of the Military Government for German U.S. (OMGUS), Financial Advisor (FINAD) 2/66/6: Joseph M. Dodge, Statement to the Finance Directorate, Allied Control Authority (ACA), Directorate Finance (DFIN), Minutes of the 26th Meeting, DFIN/M(46) 11, 5 Apr. 1946.

9 These are the reasons suggested by Horstmann, ‘Alliierten und die deutschen Großbanken’, 74–5. For the lack of moral fervour see Bower, T., Blind Eye to Murder. Britain, American and the Purging of Nazi Germany (London: Deutsch, 1981), 20Google Scholar, who reports on the reminiscence of Charles Gunston, head of the banking Branch in the CCG/BE, when meeting Hermann J. Abs, a director of the Deutsche Bank in the 1930s: ‘I didn't ask him about the war. It didn't matter. They had been financing their war efforts, like we had been financing ours. Politics just didn't come into it.’

10 ACA, DFIN, Banking Committee, Elimination of Excessive Concentration of Economic Power in Banking, DFIN/BC/Memo(46), 14 Feb. 1946, WWA OMGUS ACA 2/112–1/11.

11 For a detailed account of these negotiations see Horstmann, ‘“The worst banking practice”’.

12 This banking council was purely advisory, see Vogel, W., Westdeutschland 1945–1950, iii (Boppard: Boldt, 1983), 134–135.Google Scholar

13 Bennett to Coates, 9 Sep. 1947, WWA OMGUS FINAD 17/59/4. For a more detailed account of the negotiations see Horstmann, , ‘Alliierten und die deutschen Großbanken’, 134–143.Google Scholar

14 Telegram No. 79, BASIC, FO (German Section) to Berlin, Reference ARGUS 869 and BGCC 9969, Banking Reform, 3 Jul. 1947 and Minute by GWS, 26 Jun. 1947, PRO FO 944/335, all quoted in Horstmann, , ‘Alliierten und die deutschen Großbanken’, 136.Google Scholar

15 Bipartite Board, Minutes of the 7th Meeting, 3 Mar. 1947, WWA OMGUS FINAD 2/117/1. See Horstmann, , ‘Angst vor dem finanziellen Kollaps’, 215ff.Google Scholar

16 For the credit policy in the British zone see Horstmann, , ‘Angst vor dem finanziellen Kollaps’, 220–224.Google Scholar

17 Bipartite Board Paper(47)77/2, 30 Oct. 1947, WWA OMGUS FINAD 17/59/4.

18 For the following juridical details see ‘Gesetz über die Errichtung der Bank deutscher Länder’ and ‘Gesetz über die Errichtung der Landeszentralbanken’, both published in the form valid as in 1949 in: Länder, Bank deutscher, Geschäftsbericht für die Jahre 1948 und 1949 (Frankfurt, 1950).Google Scholar

19 The eight Land central banks were: Bavaria, Bremen, Hamburg, Hesse, Lower Saxony, North Rhine-Westphalia, Schleswig-Holstein, Baden-Württemberg. The French zone – and thus the Land central banks of Rhineland-Palatinare, Baden and Würrtemberg – joined this system only later, making it the first “trizonal” institution.

20 For example Oberdirektor Pünder and Direktor der Verwaltung für Finanzen Hartmann in the plenary sessions of the Wirtschaftsrat, 27/28 Sep. 1949 and 24/25 Mar. 1949, Wörtliche Berichte über die Vollversammlungen des Wirtschaftsrates des Vereinigten Wirtschaftsgebietes, ii, 957, 1536.

21 ABC to BdL and Veit to Central Bank Council, 22 Mar. 1948, Archiv der Deutschen Bundesbank (BBK) 1; Central Bank Council, minutes, 2 Apr. 1948.

22 Central Bank Council, draft minutes, 2 Apr. 1948, BBK 1.

23 Fenwick to Gunston, 5 Apr. 1948, Archives of the Bank of England (BoE) Overseas Division (OV) 34/90.

24 Abs was alleged to have participated as a director of the Deutsche Bank ‘in the acquisition of large scale banking and industrial participation in the annexed, occupied, conquered and satellite countries’. Schniewind was alleged to have been a member of Nazi organisations and to have played an obscure role in the restructuring of the ‘non-Aryan’ company Telefonbau und Normalzeit. See Report of Allied Authorities on Schniewind and Abs, 29 Jul. 1947 and 20 Feb. 1947, BBK 1.

25 Central Bank Council, minutes, 14 Apr. 1948, BBK 1. At this time Schniewind acted already as head of the ERP Co-ordination Office, see Vogel, W., Westdeutschland 1945–1950, ii (Boppard, 1964), 280–281.Google Scholar

26 Central Bank Council to ABC, 30 Apr. 1948 and ABC to Central Bank Council, 24 Apr. 1948, BBK 1.

27 ABC to Central Bank Council, 4 May 1948, BBK 2.

28 Central Bank Council, minutes, 5 May 1948 and 20 May 1948, BBK 2.

29 Central Bank Council, minutes, 1 Jun. 1948. Central Bank council, minutes, 2/3 Nov. 1948, BBK 7. While Allied opposition as regards Wilhelm's nomination proved unsuccessful, another nomination, namely of Fritz Paersch, was successfully rejected, see Marsh, , Bundesbank, 181, 212–214.Google Scholar

30 Könneker was at the Reichsbank from 1924 to 1942. Treue was head of the department of foreign exchange dealings. Vocke was director of the Reichsbank from 1919, until dismissal in 1939 following criticism on the NS-monetary policy. Wilhelm entered the Reichsbank in 1914; from 1939 to 1945 he was member of the directorate.

31 Macdonald to Siepmann, 1 Dec. 1949, BoE OV 34/92.

32 Rootham, Note, 5 Apr. 1950, BoE OV 34/92.

33 Central Bank Council, minutes, 15/16 Jun. 1948, BBK 2.

34 William J. Logan, US general director to the JEIA, opposed a raising of the discount rate and General Lucius Clay, US military governor, was reluctant to intervene. See Turner, W., ‘Great Britain and the Post-war German Currency Reform’, Historical Journal, 30 (1987), 706.CrossRefGoogle Scholar

35 Central Bank Council, minutes, 5 Oct. 1948, BBK 6.

36 ABC/Ingrams to Chairman BdL, 2 Nov. 1948, BBK 3125, and Central Bank Council, minutes, 2/3 Nov. 1948, BBK 7.

37 Central Bank Council, minutes, 4 Nov. 1948, BBK 7.

38 Central Bank Council, minutes, 10 Dec. 1948, BBK 8.

39 For this reason Eduard Wolf, head of the department Volkswirtschaft/Statistik, warned that it was highly dubious whether this measure would have the desired effect. Wolf, Lage der Banken bei Beginn der Kreditrestriktion, 9 Dec. 1948, BBK 8. See also Lange, T., Die Funktionsweise des deutschen Zentralbanksystems in seiner Frühphase Ende der vierziger/Anfang der fünfziger Jahre. Eine Rekonstruktion anhand der Aktenlage (Diss. Mainz, 1994), 58–62.Google Scholar

40 In the documents positive remarks can easily be found on Vocke. See for example: ‘Vocke is wonderful – happy, active and a tower of strength’. Fenwick to Gunston, 23 Jun. 1948, BoE OV 34/90.

41 Bernard, Note on Conversation with Tenenbaum, 21 Jun. 1948, BBK 2.

42 ABC to Bernard, 14 Aug. 1948 and Central Bank Council, minutes, 17 Aug. 1948, BBK 4.

43 Kühne, R., Die Regelungen für den Auβenwirtschaftsverkehr unter der Geltung der besatzungsrechtlichen Devisenbewirtschaftungsgesetze, Mai 1945 bis August 1961 (Frankfurt: Bundesbank, 1984), 29.Google Scholar

44 Kühne, , Regelungen, 43–44.Google Scholar The GAK was in charge of internal payments resulting from foreign trade.

45 Kühne, , Regelungen, 85.Google Scholar

46 Macdonald to BoE, 19 Mar. 1949, BoE OV 34/91.

47 Siepmann to Macdonald, 5 May 1949, BoE OV 34/91.

48 See the extensive correspondence and notes in BoE OV 34/91 on this. It should be mentioned that the British rationale was not to sell treasury bills. On the contrary, the Bank of England was afraid that too big an amount would be accumulated and could later be dissipated at a probably inconvenient time. Rootham, Note, 29 Nov. 1949, BoE OV 34/50.

49 Macdonald to Rootham, 3 Nov. 1949, BoE OV 34/32.

50 Note for Rootham, 16 Nov. 1949, BoE OV 34/32.

51 Macdonald to Siepmann, 1 Jun. 1950, BoE G 1/42.

52 Niemeyer, Germany and the BIS, 16 Dec. 1949, BoE OV 4/107.

53 Bolton, BIS Notes, 14 Dec. 1949, BoE OV 4/107.

54 Vocke to Niemeyer, 25 Apr. 1950, BoE OV 4/107.

55 On some occasions a third, yet not dominant, motive is also mentioned, namely the fear of German interest rates set too low. Jasper Rootham stressed that they should have a ‘particularly sharp watch of the internal financial policy so that German industry is not enabled to float off to a flying start because of low interest rates’. Rootham, Note, 14 Nov. 1950, BoE OV 34/50.

56 The Bank of England acknowledged this explicitly. See Cairncross, A., ‘The Bank of England: Relationships with the Government, the Civil Service, and Parliament’, in Toniolo, G., ed., Central Banks' Independence in Historical Perspective (Berlin, 1988), 39–72, here: 46–47.Google Scholar

57 Kriz, M. A., ‘Central Banks and the State Today’, The American Economic Review, 38 (1948), 571.Google Scholar

58 Kriz, , ‘Central Banks’, 571.Google Scholar

59 For this and the following see Fforde, J., The Bank of England and Public Policy 1941–1958 (Cambridge: Cambridge University Press, 1992), 314–397Google Scholar, and Sayers, R. S., The Bank of England, 1891–1944, ii (Cambridge: Cambridge University Press, 1976).Google Scholar

60 Sayers, R. S., ‘Central Banking in the Light of Recent British and American Experience’, Quarterly Journal of Economics, 63 (1949), 207.CrossRefGoogle Scholar

61 For Jacobsson and the BIS see Jacobsson, E. E., A Life for Sound Money (Oxford: Oxford University Press, 1979), 193–235.Google Scholar Other central banks shared this opinion, for example the Bank of Italy under the leadership of Donato Menichella; see Baffi, P., Testimonianze e ricordi (Milan: Scheiwiller, 1990).Google Scholar

62 On the British monetary policy in this period see Howson, S., British Monetary Policy 1945–1951 (Oxford: Oxford University Press, 1993).Google Scholar

63 Sir Otto Niemeyer, quoted in Fforde, Bank of England, 335–337.

64 Abelshauser, W., Wirtschaftsgeschichte der Bundersrepublik Deutschland 1945–1980 (Frankfurt am Main: Sahrkamp, 1983), 63–65.Google Scholar

65 Central Bank Council, minutes, 25/26 Jan. 1949, BBK 10.

66 Central Bank Council, minutes, 5 Apr. 1949, BBK 12.

67 ‘Keine Deflationspolitik der Bank deutscher Länder’, Frankfurter Rundschau, 11 Mar. 1949.

68 Central Bank Council, minutes, 10 May 1949, BBK 13.

69 Siepmann to Macdonald, 5 May 1949, BoE OV 34/91.

70 Central Bank Council, minutes, 2/3 Aug. 1949, BBK 16, and ABC to Central Bank Council, 18 Aug. 1949, BBK 17.

71 Baranyai, Report on Conversations in Basle, 19 Nov. 1949 and Macdonald to Niemeyer, 16 Dec. 1949, BoE OV 4/107. Central Bank Council, minutes, 9/10 Nov. 1949, BBK 19.

72 For this and the following see Schwartz, W., ‘European Integration and the “Special Relationship”: Implementing the Marshall Plan in the Federal Republic’, in Maier, C. S., ed., The Marshall Plan and Germany (Oxford: Oxford University Press, 1991)Google Scholar, and Hardach, G., ‘The Marshall Plan in Germany, 1948–1952’, Journal of European Economic History, 16 (1987).Google Scholar

73 Central Bank Council, minutes, 9/10 Feb. 1950, BBK 22. The Central Bank Council agreed to this programme within ‘the limits of the bearable’.

74 Macdonald to Siepmann, 17 Feb. 1950, BoE OV 34/33.

75 In April 1950 Vocke stated that the Bank of England had ‘strengthen [ed] a good deal my position and [had] help[ed] me to defend and to maintain a reasonable policy here’, Vocke to Niemeyer, 25 Apr. 1950, BoE OV 4/107.

76 See ‘Verordnungsblatt für die britische Zone 1949’, No. 50, 7 Sep. 1949.

77 Macdonald to Rootham, 22 May 1950, BoE G 1/42.

78 Vocke to Adenauer, 31 Oct. 1949, BBK 2011.

79 Central Bank Council, minutes, 31 Mar. 1950 and 4/5 Apr. 1950, BBK 25. Later, however, when in April 1951 a transitory law – see below – was passed, the Council changed its opinion. Under the lead of Bernard it even refused to hand minutes of its meeting to the ABC, Rootham, Note, 9 Oct. 1952, BoE OV 34/92.

80 Documentary evidence shows that at least in September 1950 Vocke had asked Cobbold for his support in maintaining the ABC. Vocke to Cobbold, 1 Sep. 1950, BoE OV 34/34.

81 Crawford, Note, 19 Apr. 1950, PRO FO 944/813. The Foreign Office later changed its opinion, viewing the maintenance of the ABC as well as a British adviser to the BdL – which had been proposed by Vocke – as impossible. Crawford to Melville, 11 Nov. 1950, PRO FO 944/813.

82 Already with the passing of the transitory law in August 1951 – see below – the ABC had no executive powers any more.

83 On the reactions see Hentschel, ‘Entstehung des Bundesbankgesetzes’, 11. The Bank of England felt ‘disquiet’, Rootham, Note, 9 Oct. 1950, BoE OV 34/92.

84 See for example Der Spiegel, 22 Nov. 1950 and Die Zeit, 9 Nov. 1950.

85 The transitory law can be found in Bundesgesetzblatt I, 1951, 509.

86 See Bundesgesetzblatt I, 1957, 745ff.

87 Von Mangoldt to Blücher, 16 Sep. 1950, Bundesarchiv (BA) B146/464. The EPU was a clearinghouse for all European currencies which also provided automatic credit. It was in operation from Summer 1950 and its first settlement was made in September. For a short overview on EPU see Dickhaus, M., ‘“It is only the provisional that lasts”: The European Payments Union’, in Griffiths, R. T., ed., Explorations in OEEC History (Paris, 1997), 183–200.Google Scholar

88 Central Bank Council, minutes, 20/21 Sep. 1950, BBK 31.

89 Central Bank Council, minutes, 13 Oct. 1950, BBK 31.

90 EPU, Minutes of the 1st Session of the Managing Board 20–22 Oct. 1950, 26 Oct. 1950, Historical Archives of the European Communities (HAEC) OEEC Deposit 35/37: MBC/M(50)1(Part 2).

91 Vocke immediately telephoned Jacobsson, a friend of his from the days of being a member in the Central bankers’ Club in Basle, when he heard of this choice and asked whether Cairncross was a ‘Keynesianist’, Jacobsson, , Life for Sound Money; Jacobsson, Note, 23 Oct. 1950.Google Scholar

92 For Jacobsson's recommendations on German problems and policies following the outbreak of the Korean War, see Jacobsson to McCloy, 15 Jul. 1950, BBK 3366.

93 Jacobsson, , Life for Sound Money; Jacobsson to Auboin, 25 Oct. 1950.Google Scholar

94 Jacobsson noted in this respect in his diary: ‘What help, unknown to him, I got from Macdonald,’ quoted in Jacobsson, , Life for Sound Money, 240.Google Scholar

95 Central Bank Council, minutes, 26 Oct. 1950, BBK 32. Jacobsson, , Life for Sound Money, 242.Google Scholar

96 For Cairncross's analysis and position see: A. Caimcross, ‘The Economic Recovery of Western Germany’, Lloyds Bank Review (1951); Cairncross, A., ‘Die deutsche Zahlungsbilanzkrise 1950/51’, in Ludwig-Erhard-Stiftung, , ed., Die Korea-Krise als ordnungspolitische Herausforderung der deutschen Wirtschaftspolitik. Texte und Dokumente (Stuttgart, 1986), 109–117.Google Scholar

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98 C/M(50)31 (Prov.) Part I, Council, Minutes of the 113th meeting on 14 Nov. 1950, 16 Nov. 1950, HAEC OEEC 35/37.

99 Geiger, and Ross, , ‘Banks, Institutional Constraints and the Limits of Central Banking’, 146.Google Scholar

100 Central Bank Council, minutes, 31 Jan. 1951, BBK 38 and BBK 39. Central Bank Council, minutes, 24/28 Feb./1 Mar. 1951.

101 Jacobsson, A., ‘Die Wiederbenutzung der monetären Ausgleichsktäfte’, Zeitschrift für das Gesamte Kreditwesen, 5 (1952), 32–36Google Scholar; Bernard, K., ‘Werkzeuge der Kreditpolitik’, Zeitschrift für das Gesamte Kreditwesen, 5 (1952), 9–12Google Scholar; Emminger, O., D-Mark, Dollar, Währungskrisen (Stuttgart: DVA, 1986), 63–64.Google Scholar It should be noted however, that Emminger in 1951 maintained that also the development of the terms of trade contributed to bringing about the crisis. See Emminger, O., ‘Die Europäische Zahlungsunion als Etappe der europäischen Währungs-Neuordnung’, Zeitschrift für die gesamte Staatswissenschaft, 107 (1951), 639.Google Scholar

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103 Ludwig-Erhard-Stiftung, , Korea-Krise: Cattier to BdL, 13 Apr. 1951, 367–368.Google Scholar

104 Ludwig-Erhard-Stiftung, , Korea-Krise: Bernard to Cattier, 27 Apr. 1951, 369–370.Google Scholar Hentschel, ‘Entstehung des Bundesbankgesetzes’.