A second rural cooperative organisation

In 1872, another promoter of the cooperative system, Wilhelm Haas,  set up a consumer cooperative society for farmers in Friedberg in the state of Hesse. The goal was to secure price advantages for members purchasing agricultural inputs. Just a few months later, another 15 cooperative purchasing associations managed by Haas came together in the Association of Hessian Agricultural Cooperative Purchasing Societies. Their success proved that they were on the right road. Thus the seed had been sown for the second rural cooperative organisation – alongside that of Raiffeisen. The organisation soon grew beyond the borders of Hesse. For this reason, in July 1883 Haas – together with other leading representatives of the cooperative movement – set up the Association of German Agricultural Cooperatives in Darmstadt. This umbrella association, which was later renamed as “Reich Association of the German Agricultural Cooperatives,” moved to Berlin in 1913.

Landwirtschaftliche Genossenschaftsbank

The fast-growing number of savings and loan banks in Hesse was initially served by the Landwirtschaftliche Kreditbank, Frankfurt am Main. But because of their growing dissatisfaction with this non-cooperative bank, the cooperatives soon decided to set up a central institution of their own. The new bank was to fulfil a liquidity-compensation function and was also to look after the payments and collection system for the joint procurement of agricultural commodities. It was Haas who in 1883 supported the establishment of the Landwirtschaftliche Genossenschaftsbank AG in Darmstadt – DZ BANK’s oldest “roots.” The shareholders were the savings and loan banks of the state of Hesse. Haas and the founding members hoped that this mutually-established bank would strengthen the cooperative system in Hesse.

Nationwide liquidity compensation

For nationwide liquidity compensation the new regional central institution initially used Deutsche Genossenschaftsbank von Soergel, Parrisius & Co., Berlin. The “Soergelbank” had been set up in 1864 as the central institution for the “disbursement societies” of the Schulze-Delitzsch General Association. The expansion of his organisation throughout the entire German empire and unsatisfactory cooperation in the field of supra-regional liquidity compensation prompted Haas to set up his own national central credit institution. As a result, Landwirtschaftliche
Reichsgenossenschaftsbank GmbH was set up in Darmstadt in 1902. Haas deliberately waived cooperation with the Landwirtschaftliche Zentral-Darlehnskasse, which Raiffeisen had set up in 1876 in Neuwied and which was renamed Deutsche Raiffeisenbank AG in 1923.



Towards the end of the nineteenth century conditions in the agricultural sector deteriorated. A bank was needed to provide the rural and handicraft cooperatives with cheap loans. At the initiative of Prussia’s finance minister, Johannes Miquel, the Preußische Zentralgenossenschaftskasse – also known as the Preußenkasse – was set up along the lines of the Reichsbank and was furnished with capital by the state. It started business in Berlin in 1895 and worked with the regional central institutions, e.g. the Landwirtschaftliche Genossenschaftsbank in Darmstadt. As early as 1889 the amended Cooperatives Act allowed for the first time the establishment of limited-liability cooperatives. The new legal framework and the provision of cheap loans unleashed a wave of start-ups in the cooperative sector. Between 1895 and 1900 the number of cooperative banks in Prussia more than doubled. New central or association institutions also emerged at the regional level, allowing the cooperatives access to the cheap loans furnished by the Preußenkasse.

A second commercial cooperative organisation
Towards the end on the nineteenth century, the painter Karl Korthaus advocated the creation of commercial cooperatives and cooperative craftsmen’s credit associations allowing access to the cheap loans extended by the Preußenkasse. He was the initiator of the central association of German commercial cooperatives. The establishment of this second commercial association in Osnabruck in 1901 also led to a deep rift in the commercial cooperative system.


Four national associations

The cooperative organisation was thus heavily fragmented: there were the four big central associations of Schulze-Delitzsch, Raiffeisen, Haas and Korthaus. Four national organisations also competed as central institutions. While the Soergelbank and the Landwirtschaftliche Zentral-Darlehnskasse collaborated directly with the local cooperative banks, the Preußenkasse and the Reichsgenossenschaftsbank worked mainly with the regional central institutions. The growth of the cooperative movement was now unstoppable – despite the fact that it was split up into an increasing number of organisations: by 1903 there were more than 12,000 local cooperative banks with around three million members.


Difficult times

The growing number of commercial central institutions conducting banking business with the Preußenkasse eroded the Soergelbank’s business base. In addition, many credit unions accused Soergelbank of having developed into a big bank. In order to broaden its earnings base the bank had increasingly conducted business outside its cooperative framework – and had incurred heavy losses. In 1904 this forced it to merge with Dresdner Bank. From then on, the central institution function for the credit unions was taken over by the special cooperative departments in Berlin and Frankfurt am Main. A few years later, the central institutions founded by Haas also got into financial difficulties. In 1912 over-indebtedness forced the Reichsgenossenschaftsbank into silent liquidation. When its associate Landwirtschaftliche Genossenschaftsbank in Darmstadt suffered the same fate in 1913, a successor bank was established: the “Zentralkasse der hessischen landwirtschaftlichen Genossenschaften”.

Deutscher Genossenschaftsverband
After the World War I there was a rapprochement between the positions of the two commercial cooperative associations of Schultze-Delitzsch and Korthaus. The Allgemeine Verband, for example, was no longer opposed to limited liability for cooperatives. In addition, the pressure to consolidate was increased by the repercussions of the lost war. The Allgemeine Verband and the central association shared common interests, leading to their merger in April 1920. The Allgemeine Verband absorbed the central association and changed its name to “Deutscher Genossenschaftsverband,” encompassing all urban commercial cooperatives. The local cooperative banks were now able to decide freely whether they wanted to work with a cooperative department of Dresdner Bank or with one of the regional central institutions associated with the Preußenkasse.


Emergency programme against agricultural crisis
The agricultural crisis that started in the nineteen twenties led to the amalgamation of Raiffeisen’s Generalverband and Haas’ Reichsverband. In spring 1928 the German central government set up an emergency programme to combat the agricultural crisis. Substantial funds were funnelled through the Preußenkasse and the Deutsche Reichsbank-Kreditanstalt to restructure agriculture and consolidate the rural cooperative system. The president of the Preußenkasse, Otto Klepper, took on the role of intermediary between the Generalverband, the Reichsverband and various cooperative splinter groups.

The world’s largest cooperative organisation
On 19 July 1929 the “Frankfurt Cooperative Pact” brought agreement. Under pressure from the Preußenkasse, one year later the agricultural cooperatives’ associations  merged to form the “Reichsverband der deutschen landwirtschaftlichen Genossenschaften - Raiffeisen - e.V.”. This comprised 36,000 cooperatives and four million individual members and was thus also the largest of its kind worldwide. The former minister Andreas Hermes and the vice president of the Reichsverband, Ludwig Hohenegg, joined the board of the new Reichsverband. The Deutsche Raiffeisenbank was wound up after its losses had been settled. Its banking business was transferred to regional central institutions. The Frankfurt Cooperatives Pact was a milestone on the road to a joint cooperative organisation.


The cooperative idea falls into the wrong hands
The “Gleichschaltung” or “forcible coordination” of the rural cooperatives began shortly after the NSDAP seized power. Members of the Boards of Managing Directors and Supervisory Boards were replaced by successors who towed the party line – as an opponent of National Socialism Andreas Hermes retained his position as president only briefly and resigned after his arrest on flimsy charges. His successor was the Chairman of the Reichsführergemeinschaft”, Walter Darré. Nothing now stood in the way of the association’s incorporation in the “Reichsnährstand”. As a result of the influence exerted by the NSDAP, little trace was left of fundamental cooperative principles such as voluntary participation, independent initiative or democratic self-determination. The local cooperative banks were exploited as central pools for collecting the funds needed for Germany’s military build-up.

Gleichschaltung” at the credit unions, too
When the Nazis seized power Karl Korthaus belonged to the managing board of the Deutsche Genossenschaftsverband. In contrast to Hermes, Korthaus backed the still young National Socialist movement and before his death in 1993 experienced the “Gleichschaltung” of the Genossenschaftsverband. Political functionaries moved into the board rooms and abolished democratically elected bodies.

Deutschlandkasse the sole central credit institution
The Preußenkasse was renamed “Deutsche Zentralgenossenschaftskasse” in 1932. At this time, Dresdner Bank was attempting to push through a realignment of the central institution function for the credit unions – but unsuccessfully. However, the central government finally imposed an agreement in 1939. Dresdner Bank received compensation to wind up its cooperative departments and transfer their activities to the Deutschlandkasse, which thus positioned itself as the sole central credit institution in a three-tier banking system. After the outbreak of war the banks lacked qualified personnel. The war machine devoured immense resources, leading to a shortage of goods. Citizens were obliged to save an increasing part of their income. At the same time, investment in the small trades segment and in agriculture ground to a halt and demand for credit collapsed. The flood of deposits reached the Deutschlandkasse through the regional central institutions. Since the central institution also had scant lending opportunities, the funds were invested almost entirely in Reichsanleihen (German government bonds).

End of the war
Towards the end of the war many bank buildings and account records fell victim to the bombing attacks. The previous president of the Reichsverband, Andreas Hermes, was arrested in connection with the failed attempt on Hitler’s life and sentenced to death. Shortly before Berlin fell, Hermes managed to escape from death row and after the end of the war played an active part in establishing the Deutsche Raiffeisenverband in Bonn.