Deposition on Schacht's funding of rearmament through "mefo" bills during 1935-38

DEPOSITION
2 November 1945
I, Emil Puhl, was a Director of the Reichsbank during the entire period of Dr. Schacht's Presidency of the Reichsbank in the years 1933 to 1939.
In the early part of 1935 the need for financing an accelerated rearmament program arose. Dr. Schacht, President of the Reichsbank, after considering various techniques of financing, proposed the use of "mefo" bills to provide a substantial portion of the funds needed for the rearmament program. This method had as one of its primary advantages the fact that secrecy would be possible during the first years of the rearmament program and figures indicating the extent of rearmament that would have become public through the use of other methods could be kept secret through the use of "mefo" bills.
"Mefo" bills, abbreviation for "mefo-wechsel", were drawn by the armament contractor and accepted by the Metallurgische Forschungsgesellschaft m.b.H. These bills ran for six months with extensions running for three months each consecutively. The total life of these bills varied and in some instances exceeded four years. The Reichsbank could discount the original bill any time within its last three months. The co-endorser and drawer did not have to accept any liability. (This provision results from a guarantee of the bill by the Reich.)
494
EC—436
These "mefo" bills were used exclusively for financing rearmament, and when in March 1938, a new finance program discontinuing the use of "mefo" bills was announced by Dr. Schacht, there was a total volume outstanding of twelve billion marks of "mefo" bills which had been issued to finance rearmament. One of the primary reasons for discontinuing financing rearmament with "mefo" bills was that by the spring of 1938 it was no longer considered necessary to keep secret the progress of German rearmament. The rearmament boom had reached such proportions by the spring of 1938 that it became possible to raise sums by taxation and by the sale of government securities which could never have been raised when the armament program acceleration began in 1935.
I hereby swear that the foregoing is a true and correct statement of the facts.
Emil Puhl
Witness: Foster Adams Witness: Merle K. Brenizer