sign in sign up
<<
Home , Creditanstalt, De Beers, National Bank of Detroit

CIC Brief — July, 1973

THE FRANKFURT DOCUMENTS Secret Loans to the South African Government The Corporate Information Center tions of secret loans suggest the opposite. By selling participation in the vari- recently obtained confidential internal ous credit arrangements to American and documents known as the "Frankfurt Doc- With the documents' revelations, multinational , EABC tapped the uments " originating from sources within church agencies and other organizations U .S. money market, largely through the a U.S.-based multinational banking firm, concerned about South African issues offshore subsidiaries of these banks . It the European American Banking Corpora- have begun organizing protest of the then re-lent the money to the South Afri- tion. These materials reveal that a group loans. The following discussion provides can government . Three of the six credit of forty banks from the , an initial basis for action (see Item II) on transactions, each $50 million and made Europe, and have been jointly in- the developing new bank campaign. from the bank's Nassau branch, were ar- volved in direct loans totaling over $210 ranged with the Ministry of Finance in million to The South African government . The three other loans were made and its agencies since late 1970. with METKOR, ISCOR, and ESCOM, all EABC 's Role South African government agencies. Participants for two of the six Sources within EABC have indicated that loans, representing $70 million of the to- a further credit of approximately $50 tal, include 11 American banks. It is like- According to the secret documents, million has been negotiated with the Fi- ly that other American banks are involved the European-American Banking Corpora- nance Ministry within the last few in the additional loans. Representatives of tion (EABC) of New York was the chief months. It appears that $150 million has the European American Banking Corpora- organizer of substantial credits, making yet to be repaid to the bank. tion confirmed the veracity of the docu- six major transactions with the South The Ministry of Finance loan was ments in a meeting in New York with African government . These loans are far organized on favorable terms in Septem- Judge William Booth, president of the larger than any previously given to the ber 1970 with the stipulation that it be American Committee on Africa, Rev. South African government. repaid in two years . This transaction oc- Donald Morton, South African consultant curred shortly after the end of the Bank to the Council for Christian Social Ac- EABC is jointly owned by six of Campaign . At that time the South Afri- tion, United Church of Christ, and Profes- the largest banks in Europe — the can government publicly denied the ne- , West Germany sor Sean Gervasi, economic research of- ; the So- cessity for its receiving favorable credit. ciete Generale, France ficer at Oxford University. ; Midland Bank, Money drawn on the credit was held in U .K. ; Amsterdam-Rotterdam Bank N.V. the South African Reserve Bank, which of the Netherlands The fact that these transactions ; the Societe Generale suggests it was used for general balance- were carried out in complete secrecy has de Banque S .A. of Belgium ; and the Cred- of-payment purposes. extreme political significance. The banks itanstalt-Bankverein of . EABC In June 1971 the bank approved involved obviously were seeking to avoid represents the link between these Euro- another $50-million credit, this time stip- public protest of subsidies to .the racially pean financial interests and the U .S. ulating repayment during the next three money market oppressive South African government. . It also is one of the most years. EABC's management fee increased powerful banking groups in the world. 50 percent for this loan, from $100,000 From 1966 to 1969, American With combined deposits and loans to $150,000. For each of these two loans churches, community organizations, the of nearly $1 .1 billion, it is one of the top EABC contributed $5 million from its United Nations, and other groups con- 70 banking organizations in the U.S. Nassau branch . The names of the subpar- ducted a successful "Bank Campaign" EABC is also probably the most impor- ticipant banks in either loan are not yet against 10 American banks that were tant source of finance for the importers known. providing a $40 million revolving credit of in New York . The bank thus The most recent known credit to arrangement to the South African govern- has a unique connection with South the South African Finance Ministry was ment (see Item I). While the banks then Africa, where the bulk of the world's dia- approved in June 1972 . Again, it was or- denied that public pressure caused them monds are marketed through South ganized through a consortium of banks to cancel the credit, these latest revela- Africa's Corp . by the European-American Banking Cor-

This section, the "CIC BRIEF," appears in each edition of the Corporate Examiner . Its purpose is to inform investors, organizations and individuals concerned about corporate social impact of given issue areas . Each "CIC BRIEF" highlights a particular social area – foreign investment, environ- ment, labor and minority policies, military contracting, or consumerism, and focuses on one or more corporations . It also includes reference to groups, individuals, and studies involved in each given issue. Copies of this separate insert may be obtained from the Corporate Information Center, Room 846, 475 Riverside Drive, N .Y., N. Y. 10027; Tel: (212) 870-2295. Price : 1-10 copies, $.60 each, 11-19 copies, $ .40 each, 20-50 copies, $ .35 each, 50 copies and above, $.15 each, 01973 Corporate Information Center, National Council of Churches.

3A poration . This loan is due to be repaid by European $(Mil) It presently supplies 75 percent of South July 1975 . EABC has contributed $3 .5 Africa's steel requirements . As Barclays million, the other banks $46 .5 million. Banque Europeanne de Credit Bank's economic survey states, "ISCOR Again, the funds are probably being used a Moyen Terme S .A., Brussels 3.0 plays a vital and increasingly important for general balance-of-payment purposes. role in the nation's economy ." The names of these bank partici- Midland and International pants in the most recent agreements were Banks Ltd ., 3 .0 Foreign companies have also sup- this time revealed in the secret docu- plied ISCOR with equipment necessary ments . Included are four American banks Midland Bank Ltd., London 3 .0 for operations . For example, General that sought to have their participation Electric recently provided $25 .7 million remain "undisclosed" — Wells Fargo, Societe Generale de Banque of automation control equipment and Central National Bank of Chicago, S.A., Brussels 3 .0 motors as well as $3 million of com- Merchants National Bank and Trust Co. puters. of , and City National Bank Amsterdam-Rotterdam Bank of . An EABC official confirmed N.V. Amsterdam 2 .0 The ISCOR loan is to be repaid by that at least one of these banks admitted the end of 1976 . Though its use is un- it wished to remain anonymous because Compagnie Financiere de specified, this loan is probably for the im- of the political sensitivity of its loan. la Deutsche Bank A .G., portation of machinery and other equip- Luxembourg 2 .0 ment for industrial expansion. EABC con- tributed $ 3 million from its Nassau The banks and their dollar partici- -Bankverein, branch. The other participating American pation are: 2 .0 bank, which sought to participate anony- mously, is the Wachovia Bank and Trust Societe Generale, Paris 2 .0 Co ., Winston-Salem, contributing $2 mil- U.S. $(Mil) lion. The other banks participating are:

Canadian $(Mil) Wells Fargo Bank (N .A.), Luxembourg branch 2.0 Canadian Imperial Bank of Commerce, New York Agency 3.0 Standard Bank Limited, Central National Bank in London 4 .0 Chicago 1 .0 The Dominion Bank, Toronto 3.0 Bank of Montreal, Montreal 3.0 Merchants National Bank and Trust Co. of Indianapolis, Bank of Montreal, Montreal 2.0 Canadian Imperial Bank of Nassau branch 1 .0 Commerce 3.0

City National Bank of Detroit, Toronto Dominion Bank, Japanese London branch .5 Toronto 3.0 Japan International Bank Republic National Bank of Compagnie Financiere de la Limited, London 2 .0 Dallas, London branch 3.0 Deutsche Bank A.G., Luxembourg 1 .0 First Israel Bank and Trust Co. of New York, Nassau World Banking Corporation 1 .0 branch 2.0 ISCOR

First National Bank of Louisville 2.0 In October 1970 EABC organized METKOR bank participation in a $20-million credit Maryland National Bank, for the South African Iron and Steel Cor- Nassau branch 2.0 poration (ISCOR), which is wholly In October 1970 EABC organized a owned by the government . ISCOR was two-year $8 .5-million credit for Metkor United Virginia Bank, created by act of the white parliament. Investments Limited, a 79 .8 percent Nassau branch 2.0 This strategic industry is white-dominated owned subsidiary of ISCOR . In late 1971, and firmly controlled by the government . Metkor requested and received an in- 3B

crease to $10 million and an extension of $(Mil) repayment to 1975 . The loan's original ITEM I purpose was the expansion of Wire In- dustries Steel Products and Engineering A Brief History of the Bank Campaign Midland Bank Limited, 1966–69 Co., in which Metkor holds an interest. London 5 .0 Funds have also apparently been used for In 1966 ten American banks, general financing . Participating in the Samuel Montagu and Co. including Chase Manhattan and First loan's extension are four banks, including Ltd., London 5 .0 National City banks, were involved in a consortium loan of $40 million to the EABC, which contributed $2 .5 million South African government . The Com- from its Nassau branch . The other three Midland and International mittee of Conscience Against , formed by the American Committee on are : Banks Ltd ., London 5 .0 Africa and the World Student Christian Federation and with A . Phillip Randolph as chairman, developed a multifaceted $ (Mil) The Standard Bank, London 5 .0 campaign to oppose the loans . The cam- paign emphasized individual and organi- zational letters of protest, delegations to Societe Generale de Banque meet with bank representatives, with- Bank of Montreal, Montreal 2 .5 S .A., Brussels 2 .0 drawal of funds, attendance at share- holder meetings, picketing, leafleting and demonstrations. Midland Bank Limited, London 2 .5 Societe Generale, Paris 2 .0 Numerous Protestant, Catholic, and Jewish clergy leaders, including Rev. Midland and International Amsterdam-Rotterdam Bank Dr. Henry P . Van Dusen, Rabbi Marc Tannenbaum, and Monsignor Thomas Banks Ltd ., London 2.5 N.V., Amsterdam 1 .0 Carey, lent their support early in the campaign. Many church organizations wrote letters of protest and sent delega- tions to the banks.

Perhaps the most significant ESCOM church action was the United Methodist Political Implications Board of Missions ' vote to remove a $10-million investment portfolio from the First National City Bank because of In late 1970 EABC contributed $ 5 its South African loan . The General As- sembly of the United Presbyterian million toward a consortium loan of $28 The EABC and other banks' spon- Church, the General Synod of the million for the Electricity Supply Com- sorship of substantial credit arrangements United Church of Christ, arid the Execu- tive Council of the Episcopal Church mission of (ESCOM) . This is represents a concerted effort to assist the adopted resolutions supporting this pol- a public agency of the government whose government of South Africa to overcome icy for their respective bodies . A number of local and regional churches, including members are appointed by the govern- serious economic and financial problems. a region of the American Friends Service ment to supply the country's electrical The secrecy surrounding these transac- Committee, also withdrew funds . In to- tal, some $23 million of funds of cam- needs. ESCOM, as the government agency tions confirms what the banks involved paign supporters were removed from in charge of power for South Africa, is would no doubt wish to deny, that these banks involved. loans have the important political effect one of the major industrial sectors of the Numerous protests occurred on South African economy, essential for of providing concrete assistance to the college campuses . Nine Congressmen co- white-supremacist government signed a letter of protest to the bank keeping that economy strong and . One of presidents . Various black community healthy. the prime objectives of that government leaders aided the campaign, and the in order to preserve its racial policies in United Nations General Assembly adopted a resolution to terminate its In June 1972 this loan was in- the face of international condemnation is own transactions with these banks. the achievement of economic self- creased to $30 million and extended to It seems clear that the bank loans mid-1977 . The purpose is to help finance sufficiency . Self-sufficiency would free were terminated in November 1969 as a result of the public protest. additions to the generating, transmitting, South Africa from crippling international and distribution systems of ESCOM . Cur- economic pressures to isolate the white Since the bank campaign ended, the number of church actions aimed at rently one of ESCOM's prime projects is government and to challenge its ability to halting Western aid to white-minority the supplying of electricity from the Ca- maintain the apartheid system. regimes in Southern Africa has increased dramatically. The World Council of borra Bassa dam under construction in Churches has publicly divested its invest- the Portuguese colony of Mozambique. Economic self-sufficiency requires ments in companies supporting such regimes . The National Council of There an intense struggle is taking place by rapid industrial and technological de- Churches has called for the withdrawal the Portuguese army to defeat the Mozam- velopment . Since much of this tech- of corporate investments there. Many Protestant churches have filed sharehold- bique liberation movement, FRELIMO. nology has to be imported, South Africa er resolutions seeking to prevent Ameri- has incurred huge trade deficits in recent can corporations from entering these areas and to disclose the full extent of Other bank participants in the loan years to finance grea+ °r economic se- their involvement in those countries . are : curity . 3C Strategic Implications ITEM II Action Suggestions for Organizations and Individuals Balance-of-payment loans to the The involvement of U.S. banks in these new loans implicates the U .S. in direct South African Ministry of Finance, used economic assistance to the South African government . Unlike the direct investments of to help offset trade deficits, are financing 350 U.S. companies in South Africa which may be difficult to remove, these loans can be canceled easily. a privileged position for South Africa in It is ironic that many of these loans were made through offshore bank branches in international trade . This increases the the Bahamas, where many black citizens vocally oppose the racist policies of apartheid. The Nassau government's admission to the United Nations is pending . The UN has country's political and economic repeatedly called for an end to all economic aid to South Africa. strength . The other loans directly assist What You Can Do the government's "development" policies in strategic and critical sectors of the LETTERS economy . These policies are designed to Write a letter of protest to the bank in your area or to all of them (see list below). achieve "stability" and preserve the racial Such a letter can be an "open letter, " publicized in a newspaper or periodical or a "letter to the editor." Urge your Congressmen, other legislators, your church, or other organiza- status quo. tions to publicly support the protest. MEETINGS AND WITHHOLDING FUNDS Contributions to South Africa's economic strength are indirect contribu- Request a meeting with bank representatives to explain your concern . Should you not receive positive action from the bank, you may wish to withhold your funds until tions to its military and police systems, the bank cancels its loans to the South African government. Publicize this action. designed to perpetuate the domestic SHAREHOLDER ACTION racial helotry . These policies are also aimed at retaining direct control over If you own stock in the bank or know someone who does, you may attend the annual meeting to raise the issue . You may wish to buy a single share for this purpose. neighboring (South-West Africa) and aiding the Rhodesian regime, led by DEMONSTRATE Ian Smith, in its defiance of majority rule Leaflet bank customers about their bank 's involvement. Organize a picket line or and the United Nations . They maintain a other demonstration. network of poverty-stricken black client states — Lesotho, Swaziland, — U.S. BANKS PARTICIPATING IN SECRET LOANS in the region, and prop up Portuguese CENTRAL NATIONAL BANK MARYLAND NATIONAL BANK colonial rule in Angola and Mozambique. Frank E . Bauder, Chairman Robert D . H. Harvey, Chairman 120 S . Lasalle St. 10 Light St. South Africa has continually indicated its Chicago, Ill. 60603 Baltimore, Md . 21203 intention to help its white-minority MERCHANTS NAT 'L BANK & TRUST CO. neighbors keep power. CITY NATIONAL BANK OF DETROIT R . E. Sweeney, Jr., Chairman John H . French, Jr ., Chairman 11 S . Meridian St. Penobscot Bldg. Indianapolis, Ind . 46204 Detroit, Mich . 48226 REPUBLIC NAT 'L BANK OF DALLAS James W. Aston, Chairman EUROPEAN-AMERICAN BANKING CORP. Pacific & Bryan Sts. No Confidence Jean Cattier, Chairman Dallas, Tx . 75201 10 Hanover Sq. New York, N .Y . 10005 UNITED VIRGINIA BANKSHARES INC. Edward F . Gee, Chairman 900 E . Main St. A number of foreign banks with- FIRST ISRAEL BANK & TRUST CO. Richmond, Va . 23219 held credits from Chile when the present OF NEW YORK Mendes H . Sachs, Chairman WACHOVIA BANK & TRUST CO ., INC. government came to power in 1970 . Such 579 Fifth Ave. Archie K. Davis, Chairman credit denial is a political act expressing New York, N .Y . 10017 3rd and Main Sts. Winston Salem, N .C. 27101 "no confidence" in the Chilean govern- ment and seeking to weaken the Chilean FIRST NAT 'L BANK OF LOUISVILLE WELLS FARGO BANK, N .A. Hugh M. Shwab, Jr., Chairman Ernest C . Arbuckle, Chairman economy. 216 S. 5th St. 464 California St. Louisville, Ky . 40202 San Francisco, Calif . 94120 The converse argument applies to South Africa. Loans to South Africa's For further information on the bank loans or U.S. investment in Southern Africa, contact CIC or: government provide psychological and political support for its policies . The most AMERICAN COMMITTEE ON AFRICA AFRICA INFORMATION SERVICE 164 Madison Ave. 112 West 120 St. meaningful international vote of confi- New York, N .Y . 10016 New York, N .Y . 10027 dence for apartheid is a vote with cash. (212) 532-3700 (212) 8504070 These loans are a strong approving voice for apartheid's future. 3D