The Money ClubHARPER'S
November 1983
by Edward Jay Epstein
Ten times a year— once a mouth except in August and October— a small elite of well dressed men arrives in Basel, Switzerland. Carrying overnight bags and attache cases, they discreetly check into the Euler Hotel, across from the railroad station. They have come to this sleepy city from places as disparate as Tokyo, London, and Washington, D.C., for the regular meeting of the most exclusive, secretive, and powerful supranational club in the world. Each of the dozen or so visiting members has his own office at the club, with secure telephone lines to his home country. The members are fully serviced by a permanent staff of about 300, including chauffeurs, chefs, guards, messengers, translators, stenographers, secretaries, and researchers. Also at their disposal are a brilliant research unit and an ultramodern computer, as well as a secluded country club with tennis courts and a swimming pool, a few kilometers outside Basel.
The membership of this club is restricted to a handful of powerful men who determine daily the interest rate, the availability of credit, and the money supply of the banks in their own countries. They include
the governors of the U.S. Federal Reserve, the Bank of England, the Bank of Japan, the Swiss National Bank, and the German Bundesbank. The club controls a bank with a
$40 billion kitty in cash, government securities, and
gold that constitutes about one tenth of the world's available foreign exchange. The profits earned just from renting out its hoard of gold (
second only to that of Fort Knox in value) are more than sufficient to pay for the expenses of the entire organization. And the unabashed purpose of its elite monthly meetings is to coordinate and, if possible, to control all monetary activities in the industrialized world. The place where this club meets in Basel is a unique financial institution called the Bank for International Settlements-or more simply, and appropriately, the BIS (pronounced "biz" in German).
THE BIS was originally established in May 1930 by bankers and diplomats of Europe and the United States to collect and disburse Germany's World War I reparation payments (hence its name). It was truly an extraordinary arrangement. Although the BIS was organized as a
commercial bank with publicly held shares, its
immunity from government interference, and even taxation, in both peace and war was guaranteed by an international treaty signed in The Hague in 1930. Although all its depositors are central banks, the
BIS has made a profit on every transaction. And because it has been highly profitable, it has required no subsidy or aid from any government.
(...)
Originally, the central bankers sought complete anonymity for their activities. Their headquarters were in an abandoned six story hotel, the Grand et Savoy Hotel Universe, with an annex above the adjacent Frey's Chocolate Shop.
There purposely was no sign over the door identifying the BIS, so visiting central bankers and gold dealers used Frey's, which is across the street from the railroad station, as a convenient landmark.
It was in the wood-paneled rooms above the shop and the hotel that decisions were reached to devalue or defend currencies, to fix the price of gold, to regulate offshore banking, and to raise or lower short-term interest rates. And though they shaped "a new world economic order" through these deliberations, according to Guido Carli, the governor of the Italian central bank,, the public, even in Basel, remained almost totally unaware of the club and its activities.
In May 1977, however, the BIS gave up its anonymity, against the better judgment of some of its members, in exchange for more efficient headquarters. The new building, an eighteen story-high circular skyscraper that rises over the medieval city like some misplaced nuclear reactor, quickly became known as the "Tower of Basel" and began attracting attention from tourists. "That was the last thing we wanted," Dr. Fritz Leutwiler, its president told me, when I interviewed him in 1983. "If it had been up to me, it never would have been built." While we talked, he kept his eyes glued to the Reuters screen in his office, which signaled currency fluctuations around the globe.
(...)
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