What was happening to bank deposits during WW2?

Question

I'm curious what was happening with people's money in banks in countries involved in World War Two. Were they frozen, lost or banks were functioning no matter who was currently controlling territory?

Answer 1

During wars, such as World War II, banking goes on as usual with a few differences:

• Enemy assets and bank accounts are seized; meaning if the address on the account is located in an enemy country, then the government takes the money in the account

• Non-sovereign accounts are frozen; what this means is that if a foreign country has a sovereignty problem, then any accounts originating in that country are usually frozen until the sovereignty problem is solved; this happens whenever a country is conquered by another, for example.

• Foreign exchange with the enemy is ended. That means you can't send money or receive money from an enemy country.

• When a foreign country is occupied normally the local banks are shut down and the money is replaced either with that of the conquering nation or with a military scrip which is issued by the occupying army. For example, when the US occupied Okinawa the money used was a military scrip called the "B-Yen", it looked like this:

• If you have a bank account in a conquered country, usually any money in that account becomes worthless, because the whole banking system of the country no longer functions. If you have gold deposits or safety boxes in a bank, however, those may be honored, at least temporarily.

Answer 2

For Germany, you can find some info (in German) on wikipedia and on the website of the federal bank.

If I understand it correctly, not much changed after 1945 except that the money got quite worthless. To fix this, a currency reform was conducted in the western zones in 1948 in which each citizen would get 40 D-Mark and everything else was converted with a 1:10 conversion rate (or actually a even less D-Marks per Reichsmark in many cases), and only if given a green light by the financial authorities.

The situation in East Germany was somewhat similar, just with 70 Marks per citizen, with more generous conversion rates for smaller amounts of money and with much more generous rates for state-owned companies. And the financial authorities were supposed to be more thorough in their investigations before approving of a conversion of an account to East German Deutsche Mark.

The Soviets were actually somewhat taken by surprise by the West German currency reform and really had to rush their own reform before all the worthless Reichsmark from West Germany would end up in the East. They were also somewhat disgruntled and started the Berlin Blockade.

Answer 3

No more interest. 2-4% was normal, pegged down to .375% for the duration. In 1942, the Fed began intervening in Treasury auctions, keeping 90-day bills at 3/8%, with a ceiling for all debt on 2.5%. For domestic institutional investors during the war, this was all the fixed income there was to buy. There were no mortgages, no car loans, no consumer durable loans, no foreign investment.

So, why're you going to keep your money in a bank-account? (And you had money? Great Depression just ended, and the stock market had just fleeced any middle-class who were investing).

War bonds. Screw with the markets, to direct money where they wanted it to go. Half of all loans made by the Fed were for under $100k; which probably severely cut into banks' cut of the loan business. Mandate loan downpayments and durations by fiat.

Fed money went from $100mil to $85bil in '43 and $91bil in '44. Bretton woods; gold and silver out of circulation (and copper: '43 steelies). Script and rationing.

During the war, the US borrowed more than 100% of its gross domestic product and did not subsequently collapse.

All of this is going to mess with your need for money, and what you can get with your money - nevermind shortages, rationing, etc.

Tax rate for over-$100k incomes: 94% then down to 91%.

The US raised taxes on capital from 44% to 60% during the second world war. Labour taxes doubled, from 9% to 18%.

The US financed just over 40% of the war through direct taxes. That still left 60% of the war costs to be funded through debt and seignorage.

Inflation, wages, stock market shenanigans, etc - all in play.

Flush American occupying soldiers drove a lot of business in Germany, during and after '44.

A number of post-war American businesses were funded by soldiers who did well in poker games during the war (ie: they aggregated other (over-paid?) soldier's pay to get capital). Soldiers were making $21/month (pre-war), and come home with thousands of dollars. eg: Smitty's (sold to Kroger).

SE doesn't like links from the likes of me:

www.federalreservehistory org/essays/feds-role-during-wwii

www.ft com/content/e4eec640-321e-3cfe-9b82-46bacfa4d6bc

www.bis org/about/history_2ww2.htm

leidenlawblog nl/articles/banker-to-the-resistance

fun tidbits: moneywise com/a/financial-facts-about-world-war-ii

Pre-war German bank failures propelled Nazi / anti-semitism: voxeu org/article/financial-crisis-and-right-wing-extremism-germany-1931-33

French stripped Jews (and mixed marriages to half-Jews) of financial assets: phdn org/archives/www.ess.uwe.ac.uk/genocide/France1.htm

Italian savings, not protected until '48 Constitution: www.bancaditalia it/chi-siamo/storia/seconda-guerra-mondiale/index.html

Italian law '26 after WWI devaluation, and gold standard (40% reserve) and massive changes after war started ('36); devaluation and cessation of gold standard: www.bancaditalia it/chi-siamo/storia/istituzione/index.html

Allegedly of interest: www.jstor org/stable/2950852