Chapter 1
A Criminal Enterprise
On September 8, 1883, a private four-coach train chugged into Gold Creek, Montana. It was packed with hundreds of American and European dignitariesâmembers of Congress, diplomats, high-ranking judges, Ulysses S. Grant. On its way from Chicago, the Northern Pacific Special had made a number of stops so that its passengers could admire waterfalls, scenic vistas, and President Chester A. Arthur, who had greeted the travelers in Minneapolis. In dusty Gold Creekâan old mining outpost on its way to becoming a ghost townâa contingent of Crow Indians performed war dances for men in bowler hats and women in ruffled dresses. A newly constructed pavilion, bedecked with gold-mining pickaxes and sprigs of greenery, afforded seating for a thousand spectators.
Henry Villardâslim, balding, and sporting a well-manicured brown mustacheâstood before the crowd in a black coat, hat, and necktie, ready for his moment in the limelight. Thirty years earlier, Villardâthen going by his given name, Heinrich Hilgardâhad emigrated to America, a penniless, sickly German eighteen-year-old who spoke zero English. He had worked in wheat fields and at a lumber yard and on a wood-burning train and as a bartender before eventually landing a job for a German-language newspaper. That was the springboard for a reporting career in which he would cover Abraham Lincoln and the Civil War and, in the process, become a respected syndicated journalist. After the war, his pedigree established, Villard married the daughter of the great abolitionist and progressive William Lloyd Garrison. But all of that was not enough for Villard: He wanted fame and fortune. And the greatest fame and fortune to be had at the end of the nineteenth century were in the railroads.
Charismatic and charming, Villard exuded a fearless, infectious confidence. Like many master showmen, he also had a tendency for exaggeration and a taste for his own celebrityânot to mention blind spots when it came to weighing risks, keeping track of money, and focusing on details. Banking on his national heritage and promising riches, he convinced German institutions to entrust him with millions of dollars to invest in American railroads. Using other peopleâs money, he refashioned himself as an up-and-coming industrial baron. He soon achieved fame and fortuneâhis initial investments in railroads paid off handsomelyâand bought a brick mansion that stretched a full block along New Yorkâs Madison Avenue, its interior decorated in grand Renaissance style and its mahogany floors inlaid with mother-of-pearl.* It was about a quarter of a mile away from the future Trump Tower, where another rich man, needing to prove himself to the world, would live in comparable gaudiness.
In September 1883, the forty-five-year-old Villard had journeyed to southwestern Montana to mark the completion of his companyâs Northern Pacific Railway, a key segment of the transcontinental railroad. Always the self-publicist, he arranged for photographers to capture him swinging a large hammer to drive in the ceremonial last spike, then mounting a shiny black locomotive, festooned in American flags, like a big-game hunter standing atop his conquered prey. The audienceâincluding a German banker named Georg von Siemensâcheered.
Yet as Villard celebrated for the crowd and cameras in Gold Creek, his overextended company was unraveling financially, crushed by a massive and unsustainable load of debt. Within weeks of the last-stake ceremony, Northern Pacific defaulted on its loans. Creditors seized Villardâs Madison Avenue mansion. A group of banks bailed out his prized railroad on the condition that he resign from the company. Villard stepped down but refused to accept blame for the debacle, insisting that he was the victim of bad luck and economic forces outside his control. It was scant comfort to creditors who lost their money.
Georg von Siemens was among those losers. His fledgling bank had helped sell $20 million of bonds that had financed Northern Pacificâs breakneck expansion. The bonds were now worth pennies on the dollar. At a normal bank, a customerâs default typically spelled the end of the relationship, or at least the onset of a much more conservative posture. But Siemensâs bank wasnât normal, and it would soon pave the way for Villardâs comeback.
Thirteen years earlier, in April 1870, Siemensâs tiny bank had opened for business in Berlin, chartered by âhighest decreeâ of His Majesty the King of Prussia. Its offices were a short walk down Französische StraĂe from the Berlin stock exchange, inside a dilapidated shingled building, reached by a treacherous staircase. He chose an almost generic name for his new company: Deutsche Bank.
A group of German businessmen had established the bank along with Siemens to facilitate international commerce, especially between German and other European companiesâand most important, to free German firms from relying on the dominant British banks to finance their international growth. Deutsche Bank didnât provide banking services to individuals; its sole focus was on rapidly growing industries. Deutsche Bankâs mission was decidedly imperial. It saw its role as helping Germanyâs business communityâand Germany itselfâestablish far-flung beachheads. Within two years, the bank had outposts in China and Japan. By the 1880s, it was lending money to German companies in South America and the United States and financing the czarâs Russian railroads. Projects in the Balkans and the Middle East followed, including a railway stretching from Istanbul to Baghdad.
Siemens was the bankâs first leader. A portly, cigar-chomping man (and a cousin of the founder of the giant eponymous electrical company), he didnât know much about banking. âI nevertheless try to look very erudite, give the occasional shrug, grin from ear to earâthis is my sneering smileâand secretly refer, when I get home, to my encyclopedia or dictionary,â he confided to a family member. Siemens was boisterous and brimming with creative energy; details were not his strong suit. These shortcomings were not lost on Siemensâs colleagues. âThe transactions on which my brilliant colleague embarked stood on what were to some extent artificial foundations,â Hermann Wallich, whose job at the bank was to serve as the check on Siemensâs impulsivity, wrote in his memoirs. The public had no idea, though, âand my colleague was hailed as a genius.â
The year after Northern Pacificâs implosion, Villard retreated to Germany to lick his wounds. There he got to know Siemens. The two men bonded over their shared visions of progressive politics, of an electrified future, of a coming American Century. Siemens had become infatuated with the young, scrappy, and hungry country on his trip to Gold Creek, and he was dying to have his bank do more business in the United States. A few years after Villard burned the bank, Siemens again placed his faithâand Deutscheâs moneyâin the aspiring tycoon.
In 1886, Villard returned to New York with a mandate to scout out investments for Deutsche Bank. He quickly ginned up opportunities; Deutsche sold a total of more than $60 million of railroad securities to German investors, playing an important role financing the development of Americaâs rail network. Soon he convinced Deutsche Bank to lend him millions to invest in his old railroad so that he could be installed, once again, as its leader. As his great-granddaughter would write in a biography more than a century later: âArmed to the teeth with German capital, Henry Villard could return to the railroad wars.â Soon, American newspapers were hailing him as âThe Railroad Kingâ and a âgenius of financial operations.â
Villard might have been a visionary, but he was not a financial genius. He was reckless, and this became clearer each time he returned to Berlin to plead for millions of dollars in additional loans. Despite signs that Northern Pacific was once again facing financial distress, Deutsche kept backing Villard. At times Siemens even encouraged Villard to move faster to spend the bankâs money. Rarely, it seems, did Siemens ask for collateral to protect the bank and its investors. âIt is a little hard to understand why Deutsche Bank gave Villard such a wide berth,â a biographer of the bank wrote with considerable understatement in 2008.
Partly thanks to Deutsche Bankâs generosity, the Northern Pacific by the 1890s was massive: thousands of miles of track, tens of millions of acres of land. But that expansion had been bankrolled by hundreds of millions of dollars of debt. For the second time in a decade, Villardâs railroad had grown dangerously overleveraged. In 1893, the interest on that debt was nearly $11 million a year, which was in addition to the companyâs roughly $25 million in annual operating expenses. By contrast, the railroadâs annual revenue averaged $10 million. Then, on top of that irreconcilably lopsided ledger, a great financial crisis descended on the United States and Europe, and Northern Pacific went from treading water to sinking fast. Twice in 1893, Villard traveled to Germany to beg for more money, and twice the bankâby now grudginglyâthrew millions of dollars of good money after bad. It wasnât enough. A defeated but unapologetic Villard, now gout-stricken and with a silver comb-over, sent a self-pitying cable to Deutsche that August to inform his sponsors that Northern Pacific was bankrupt. Once again he blamed circumstances outside his control. Deutsche was stuck with millions of dollars in lossesâa painful blow at the timeâand many of its furious clients, to whom Deutsche had sold Northern Pacific bonds, suffered ruinous hits.
A century later, in 1995, a German historian would write: âThis was the first (but not the last) time that the bank had the wool pulled over its eyes by a man who employed great personal charm and shrewd publicity to win over investors and repeatedly mobilize fresh sources of credit, but whose business rested on thoroughly rickety foundations.â
While the Villard experience was bad, it was not catastrophic. Deutsche kept growing, propelled by the rapid industrialization of Germany, Europe, and the world. By 1903, its Berlin headquarters occupied an entire city block. A decade later, benefiting in part from acquisitions of domestic competitors, it was the worldâs sixth-largest bank, with nearly 10,000 employees. A set of statues in its headquarters illustrated its global dreams: five men, each from a different continent, each chiseled with stereotypes. The North American was a cowboy with a pistol in one hand and a locomotive in the other. The African and Australian figures were dark-skinned warriors, brandishing weapons and wearing loincloths. The European was a noble-looking knight. (The ponytailed Asian just looked confused.)
When Hitler took power in 1933, the bank was transformed into a financing source for the Nazi military machine. Decades later, historians hired by the bank would explain its actions as the inevitable result of operating under a fascist regime. They would note, accurately, that most large German companies helped the Nazis and would distance the bankâs management from the criminal behavior of local lenders that Deutsche took over. âHe was at worst an opportunist, at best a man of character who had to practice his profession in a human system,â one academic wrote of the bankâs leader at the time, Hermann Abs. That sanitizes a basic fact: Deutsche Bank and its executives were parties to genocide. World War II and the Holocaust would have happened without the bank, but its participation allowed the Nazis to improve the ruthless efficiency of their military campaign and their quest to cleanse Europe of Jews. And it was not an accident. Deutsche was involved because of decisions made by the bankâs leaders for reasons of expedience, if not ideology.
Once Hitler ascended, the Jewish members of the bankâs board were forced to resign. The resignations had been suggested by Germanyâs central bank, and though some Deutsche executives worried about setting a bad precedent, they were overruled by colleagues who were inclined to remain in the good graces of the Nazis. At the bankâs annual employee meeting in 1933, Nazi flags hung on the walls and podium, and the gathering began with a parade of the companyâs SS members. Deutsche soon started pressuring its clients to remove Jews from their boards of directors. By 1938, the bank had conducted hundreds of âAryanizationsââtaking over Jewish businesses or assets and handing them over to Aryans. In the 1940s, the bankâs annual reports were adorned with swastikas in lieu of a corporate logo.
As Germany steamrolled across Europe, Deutsche took over conquered countriesâ local banks and dutifully completed the Aryanization process with those banksâ clients. Deutsche sold more than 1,600 pounds of gold the Nazis had stolen from Holocaust victimsâsome of it extracted from Jewsâ teeth and then melted downâand the proceeds provided Hitlerâs regime with desperately needed hard currency to buy weapons and raw materials. Deutsche financed the construction of the Auschwitz death camp and a new factory nearby, which was run using Auschwitzâs slave labor and which manufactured Zyklon B, the chemical used in Auschwitzâs gas chambers. The Auschwitz loans were closely reviewed by bank managers, who received regular updates on the progress of the campâs construction.
There is no proof that Hermann Abs knew exactly what was going on inside the death camp his bank was financing. He wasnât a member of the Nazi Party. But it is inconceivable that he was completely in the dark. In addition to his role at Deutsche, he sat on the board of I. G. Farben, the chemical company that was building the factory alongside Auschwitz. At best, there is no record of Abs raising any questions or concerns about the bankâs complicity in mass murder.
So synonymous was Deutsche with German military aggression that the bank earned a cameo in the 1942 movie Casablanca. In a scene at Rickâs CafĂ©, a German, later identified as a representative of Deutsche Bank, tries to get into the gambling room. The bouncer refuses him entry, as does Humphrey Bogartâs Rick Blaine. âYour cash is good at the bar,â he says.
âWhat! Do you know who I am?â the banker demands.
âI do,â Rick responds coolly. âYouâre lucky the barâs open to you.â
After Germany surrendered in 1945, Berlin was divvied up among the Allied powers. The ruins of the bankâs headquarters happened to fall in the British quadrant. That proved fortuitous. Germany still owed England reparations from World War I. If the British had any hope of recouping that money, a strong German bank would be necessary to bring the countryâs economy back from the dead. Hermann Abs had fled Berlin in the back of a delivery truck on the eve of the Allied invasion, and he was now wanted as a war criminal. When he was later tried in absentia and sentenced to a decade of hard labor, the British came to his aid; Abs ended up working the fields at an upscale prison camp for a few months and then was released.
The American military did not feel as kindly. It concluded in a report that Deutsche Bank had been âa participant in the execution of the criminal policies of the Nazi regime in the economic field.â The report recommended that the bank âbe liquidatedâ and that top executives be barred from holding positions of power as Germany was rebuilt.
The United States didnât get what it wanted. As part of a compromise with Britain, Deutsche was split into ten regional institutions, forbidden from operating under the name Deutsche Bank. But this was a decentralization, not a demolition. The bankâs legal structure was left basically intact, with no restrictions on the ten institutions interacting with each other. Unsurprisingly, it didnât take long for the bankâs supportersâincluding Absâto start campaigning for Deutsche to be resuscitated so that it could serve as an engine of European economic recovery and ward off the communist menace. Slowly but surely, the ten ostensibly independent banks were fused back together. By 1956, they published an annual report under the umbrella name Deutsche Bank Group. Soon after that, the ten banks were legally reunited, operating out of a three-story stone building in Frankfurt. The name Deutsche Bank was hung from the top of the building in large bold lettering. The bankâs directors unanimously elected Absâthe convicted war criminalâto be their leader.
What followed was an extraordinary era of growth and rebuilding in which West Germany and its leading bank (and some of its other large corporations) quickly returned to international prominence.
In the late 1950s, Deutsche again spread its wings internationally, doing business in South Africa, Mexico, Hong Kong, and Egypt. It lent money to companies all over Western Europeâand even in the USSR, where ...
