11.

Another Berlin capitalist was in much bigger trouble by spring 1932. Friedrich Flick had finalized his takeover of the Düsseldorf-based VSt steel conglomerate, and right between the global rout of the stock market and the start of the Great Depression, no less. He had been able to finance a majority stake in Europe’s largest industrial conglomerate only by taking out massive loans and bonds. The debt was secured by his shares in the VSt through Gelsenberg, both of which Flick had put up as bank collateral. However, given the stock market’s collapse, the value of these shares had plummeted, and Flick owned few other tangible assets that could serve as further collateral. Flick’s holding company and Gelsenberg were on the brink of insolvency; he was about to be wiped out.

In early 1932, Flick needed to make a quick financial exit from Gelsenberg. At the same time, Hitler too needed money, yet again. He wanted financial backing for the upcoming presidential election. Walther Funk arranged an introduction to Flick, again at the Hotel Kaiserhof, on an icy February morning, a year after Günther Quandt and August von Finck had visited Hitler’s suite at the invitation of the cunning newspaperman. In the year since that first meeting, Funk had left Berlin’s financial newspaper and started editing the NSDAP’s economic newsletter. He had also become acquainted with Otto Steinbrinck, Flick’s ruthless right-hand man.

Steinbrinck was a highly decorated navy veteran who had sunk more than two hundred merchant ships as an enterprising submarine commander during World War I. Flick had spotted his business talent when Steinbrinck prepared an investing memo for him. He had quickly risen to become Flick’s most trusted confidant. Flick, who cultivated a public image of abstinence from politics, made Steinbrinck his liaison with the Nazis after he proved himself very capable in backroom dealing in business and politics.

Flick’s right-hand man, Otto Steinbrinck, in his SS uniform, 1934.

bpk/Atelier Bieber/Nather

Funk relayed Flick’s Kaiserhof invitation through Steinbrinck. Flick was keen to get to know the man who had started to play such a major role in German politics. But their one-hour meeting in late February 1932 was a disaster. As Steinbrinck waited outside the suite, Hitler mistook Flick for the naval hero and talked endlessly about his plans for a confrontation with the Polish navy. As the two men walked back from the hotel to their office nearby, Flick told his top aide that he had not been able to get a word in with Hitler. The Nazi leader too was disappointed with the one-sidedness of the conversation. Miffed, Flick decided to throw his financial might behind Paul von Hindenburg, the sitting president and the conservative establishment’s candidate; he donated almost a million reichsmarks to his reelection campaign.

Flick badly needed some clout with the government. The state was the only liquid buyer for his Gelsenberg stake and had no clue about the sorry state of his finances. He had only just started negotiating a deal when he first met Hitler. Talks dragged on for months, but Flick at last succeeded. In a stunning act of gamesmanship, he managed to sell his Gelsenberg stake to the government for more than ninety million reichsmarks, about three times its market value, in late May 1932. Flick strong-armed the state at the negotiating table by alleging that his fellow VSt shareholder Fritz Thyssen was willing to buy out his majority stake with financial backing from French lenders. A takeover of Germany’s largest conglomerate with French money was unthinkable. It had been only a few years since France had co-occupied the Ruhr area in response to Germany’s failure to continue reparation payments. When the government bailed out Flick at an enormous premium, he was able to pay off his debts. The deal left him flush with cash.

When news of Flick’s backroom deal with the government broke in mid-June 1932, it caused a national scandal. At the height of the Great Depression, with more than six million Germans unemployed, the state had used taxpayer millions to unwittingly bail out a speculating industrialist and his private holding company. But in a matter of weeks, the Gelsenberg affair was eclipsed by bigger news: the parliamentary elections of July 31, which for the first time made the NSDAP Germany’s largest party in the Reichstag. By late summer 1932, as the public and the politicians moved on from the financial scandal, Flick began to prepare for Nazi Party rule.

Although the Gelsenberg affair had made Flick even richer, the PR disaster associated with it had tainted his name. Flick had also spurned Hitler’s initial advances, and now the magnate was convinced he needed political protection; he was happy to pay handsomely for it. In early fall, Walther Funk dropped by Flick’s headquarters on Berlin’s Bellevuestrasse with a new request from the NSDAP: money was needed for yet another election campaign cycle. Funk left with some thirty thousand reichsmarks. Soon, a procession of Nazis soliciting for funds found their way to Flick’s office door. The SA needed new boots for another torchlight parade: two to three thousand reichsmarks. Flick’s handlers wanted positive coverage of their boss in the press: a few thousand reichsmarks to Nazi newspaper and magazine editors. As Flick and Steinbrinck discovered, “Giving money to Nazis was rather like shedding blood while swimming in the presence of sharks.”

Then the SS came knocking. On a somber gray day in late fall 1932, the chicken farmer turned SS leader, Heinrich Himmler, visited Flick’s headquarters. He had come to make a deal. To put an end to the requests for Flick’s money that were emanating from every corner of the Nazi universe, Himmler proposed that the steel tycoon’s future donations go solely to the SS. Flick quickly agreed. It was a devil’s pact. The rising paramilitary organization offered the ultimate political protection, but at what price? Flick would soon find out.

Steinbrinck and Himmler’s aide Fritz Kranefuss helped broker the agreement between their bosses. The ambitious Kranefuss was a nephew of Wilhelm Keppler, a failed businessman who was quickly becoming Hitler’s favored economic adviser. Earlier that year, Hitler had told Keppler to establish a council comprising industrialists and financiers who could advise him on economic policies and “who will be at our disposal when we come into power.” He enlisted his nephew to help recruit members and establish the Keppler Circle, as it soon became known. One of their first recruits was Otto Steinbrinck. He joined the group as Flick’s representative just as the Gelsenberg affair erupted. His beleaguered boss instructed him to find out which way “the wind was blowing” in the Nazi elite. Flick was eager to use that information to ready himself for rearmament.