US Involvement In The Swiss Banking Scan Essay, Research Paper

Nick Bostic

Period 3

June 2, 1997

US Involvement in the Swiss Banking Scandal during World War II

The Holocaust during World War II was a period of time that will always be a sore spot in the memory of Jewish people worldwide, a time most would try to forget. Yet, new discoveries and memories reveal a scandal involving money and valuables stolen from Jews by Nazi?s and hidden in neutral Switzerland?s famous banks. This discovery is bringing out lawsuits of descendants of Holocaust victims on the Swiss Banks, trying to recover the money and valuables stolen by Nazi?s and hidden by Swiss bankers. A question troubling Jews worldwide is why didn?t the US government act against the actions of the Swiss Banks during World War II. The US was an international giant with footholds in almost every country, so why didn?t they stop the atrocities. Some people believe the US didn?t know about the money and others believe the US knew but couldn?t do anything about it. Furthermore, some just wish their compensation and the ability to forget about the things that happened almost 60 years ago.

World War II officially started in 1939, but the atrocities of the Holocaust had been going on for years. When the Nazi regime came to power in Germany in January 1933, it immediately began to take systematic measures against the Jews. One early decree was a definition of the term Jew. Crucial in that determination was the religion of one’s grandparents. Anyone with three or four Jewish grandparents was automatically a Jew, regardless of whether that individual was a member of the Jewish community. Half-Jews were considered Jewish only if they themselves belonged to the Jewish religion or were married to a Jewish person. All other half-Jews, and persons who had one Jewish grandparent, were styled Mischlinge (half-breeds). Jews and Mischlinge were ?non-Aryans.? In Nazi doctrine, such emphasis on descent was regarded as an affirmation of ?race,? but the principal purpose of these categorizations was the clear delimitation of a target for discriminatory laws and directives. The proclaimed objective of the Nazi regime was Jewish emigration. In November 1938, following the assassination of a German diplomat in Paris by a young Jew, all synagogues in Germany were set on fire, windows of Jewish shops were smashed, and thousands of Jews were arrested. This ?Night of Broken Glass? (Kristallnacht) was a signal to Jews in Germany and Austria to leave as soon as possible. Several hundred thousand people were able to find refuge in other countries, but a similar number, including many that were old or poor, stayed to face an uncertain fate. When World War II began in September 1939, the German army occupied the western half of Poland and thereby added almost 2 million Jews to the German power sphere. Restrictions placed on Polish Jewry were much harsher than those in Germany were. The Polish Jews were forced to move into ghettos surrounded by walls and barbed wire. The ghettos were like captive city-states. Each ghetto had a Jewish council that was responsible for housing, sanitation, and production. Food and coal were to be shipped in and manufactured products sent out. The food supply allowed by the Germans, however, consisted mainly of grains and such vegetables as turnips, carrots, and beets. In the Warsaw ghetto, the official ration provided barely 1200 calories to each inhabitant. Some black-market food, smuggled into the ghettos, was sold at high prices, but unemployment and poverty were widespread. Housing was overcrowded, with six to seven people to a room, and typhus was common. A month after the beginning of mobile operations in the occupied USSR, the second in command of Nazi Germany, Hermann Goring, sent a directive to the chief of the Reich Security Main Office, Reinhard Heydrich, charging him with the task of organizing a ?final solution to the Jewish question? in all of German-dominated Europe. By September 1941, the Jews of Germany were forced to wear badges or armbands marked with a yellow star. In the following months, tens of thousands were deported to ghettos in Poland and to cities wrested from the USSR. Even as that movement was under way, the stage was set for another innovation: the death camp. Camps equipped with facilities for gassing people were erected on the soil of occupied Poland. Most prospective victims were to be deported to these killing centers from ghettos nearby. From the Warsaw ghetto alone, more than 300,000 were removed. The first transports were usually filled with women, children, or older men, who could not work; Jews capable of labor were retained in shops or plants, but they too were eventually killed. The heaviest deportations occurred in the summer and fall of 1942. The destinations of the transports were not disclosed to the Jewish communities, but reports of mass deaths eventually reached the surviving Jews, as well as the governments of the United States and Great Britain. In April 1943, the 65,000 remaining Jews of Warsaw offered resistance to German police who entered the ghetto in a final roundup. The battle was fought for three weeks. Wherever possible, the Germans collected the belongings of the deportees. In Germany, bank accounts and the contents of apartments were confiscated, and from occupied France, Belgium, and Holland furniture was shipped to Germany for distribution to bombed-out persons. Transportation of victims to the death camps was generally by rail, and the police had to pay the German State railways a one-way third-class passenger fare for each deportee. When as many as 1000 persons were loaded on a train, a group rate that was half the normal tariff was allowed. The trains, consisting of freight cars, moved slowly on special schedules to their destinations. Often, the sick and the elderly died en route.

In Germany, the Nazis established concentration camps almost immediately after assuming power on January 30, 1933. A decree in February removed the constitutional protection against arbitrary arrest. The security police had the authority to arrest anyone and to commit that person to a camp for an indefinite period. The political police, known as the Gestapo, imposed ?protective custody? on a wide variety of political opponents: Communists, socialists, religious dissenters, Jehovah’s Witnesses, and Jews. The criminal police, known as the Kripo, imposed ?preventive arrest? on professional criminals and numerous groups of so-called asocials: Roma (Gypsies), homosexuals, and prostitutes. The SS (Schutzstaffel, or protective units) operated the camps with brutal military discipline. During the 1930s six major camps were established: Dachau, Sachsenhausen, Buchenwald, Flossenburg, Mauthausen, and, for women, Ravensbruck. In 1939, these camps held about 25,000 prisoners. During World War II the camps increased in size and number. Important new ones included Auschwitz-Birkenau, Natzweiler, Neuengamme, Gross-Rosen, Stutthof, Lublin-Majdanek, Hinzert, Vught, Dora, and Bergen-Belsen. Millions of prisoners entered these camps from every occupied country of Europe: Jews, partisans, Soviet prisoners of war, and impressed foreign laborers. Early in 1942, the SS Central Office for Economy and Administration (Wirtschafts-Verwaltungshauptamt, or WVHA) assumed operational control of the concentration camps, and inmates were exploited as forced laborers in industrial production. In addition to the central camps, the WVHA operated hundreds of subsidiary camps, and local offices of the security police in the occupied territories maintained large numbers of forced labor camps. Inmates were worked to death in industries such as the I. G. Farben chemical works and the V-2 rocket factories. Those no longer able to work were killed by gassing, shooting, or fatal injections. Inmates were also used for ?medical experiments.? Early in 1945, the camp population exceeded 700,000.

During World War II, the Nazis also established extermination centers to kill entire populations. There the SS systematically gassed millions of Jews and thousands of Roma and Soviet prisoners of war. Two extermination centers operated in concentration camps under the authority of the WVHA: Auschwitz-Birkenau and Lublin-Majdanek. Five operated in camps established by regional SS and police leaders: Belzec, Sobibor, and Treblinka in eastern Poland; Kulmhof in western Poland; and Semlin outside Belgrade, in Serbia. More than 6 million persons, the majority of whom were Jews, perished in the Nazi camps.

Throughout history, Switzerland has had declared neutrality during any conflict. Lately, however, investigations have led an influx of knowledge on the truth behind the Swiss declaration of neutrality. The investigations are leading the country into a national soul search in which their pacifist image including founding the Red Cross, defender of democratic values, oasis of peace and multiethnic harmony is being challenged by the opposite image. The investigations are revealing that Switzerland was actually a self-centered mercantile nation that prospered with its dealing with Hitler, showed little sympathy for his victims and emerged unscathed from a conflict that devastated its neighbors. The investigations also show that Swiss citizens were not in fact the half a million citizen-soldiers lay hidden in their ?Alpine Redoubt? that deterred a Nazi invasion. The newly revealed truth is that Switzerland was protecting its role as the Third Reich?s main money launderer and trading partner as well as key arms supplier. Defenders of the country actions declare they had no other option: Nazi-controlled countries surrounded them and the Allies froze its overseas assets. Also, Switzerland traded with the Allies and allowed US Intelligence to operate out of Bern. A new discovery shows a blur in the Swiss morality upon the revelation that Switzerland had turned away 30,000 Jewish refugees from its border and many were handed directly to the Gestapo. The government requested that Germany stamp Jewish passports with a red J so Swiss border guards could recognize them easier. Switzerland did admit 28,000 Jews, but charged the Swiss Jewish community and other organizations a head tax for their upkeep.

The ?Neutral? Swiss were involved in many shady dealings including laundering stolen Jewish money, selling supplies to the Nazi?s, and refusing admittance of Jew into the country. The question many in the Jewish community is why didn?t the US of one of the other superpowers in the Alliance didn?t put a stop to the actions. The US did try to stop the laundering. As early as 1943, when the US government applied Project Safehaven to locate the Nazi plunder and find out where it was going, the US knew most of it was entering Switzerland. The same year, spymaster Dulles warned the Swiss government that much of the 100 tons of gold bullion the Reichsbank was selling for Swiss francs was stolen. Eventually, Safehaven agents concluded that some $6 billion in Nazi assets had been transferred into Switzerland from 1938 to 1945 under cover of bank-secrecy laws. On December 10, 1941, the British embassy in Washington warned the US Treasury Department that ?every leading member of the governing groups in all the Axis countries have funds in Switzerland. Some have fortunes.? On July 10, 1944, President Franklin Roosevelt gets a classified report from William Donovan, chief of the Office of Strategic Services, calling his attention to the personal friendship between senior Swiss and Nazi central-bank officials and a deal they had arranged. Each month, Switzerland promised to purchase 6,000 kg of German gold, which the Reich was using to buy Swiss ball bearings. Roosevelt?s reply was ?We ought to block the Swiss participation in saving the skins of rich or prominent Germans.? However, Roosevelt did not act.

Recently, governments of the world, the Jewish International Community, and the Swiss Banks have acted themselves. The loudest action has come from the Jewish community. They have filed claims for lost money and have gained support in the US government including Senator Alfonse D?Amato, republican of New York, and even President Clinton himself. In August of 1995, Jewish Agency chairman Avraham Burg sent out a press release demanding that the heads of the Swiss banks return hundreds of millions of dollars rightfully belonging to Jews. On September 12, 1995, two weeks after Burg?s press release, Swiss bankers announced they had found up to $34 million that could belong to Jews killed in the Holocaust. In the past 18 months, investigations have begun in Sweden, where the government is combing its central bank vaults for gold stolen by the Nazi?s. Investigations are also taking place in Portugal, which allegedly received truckloads of looted gold, and France, where millions of dollars of jewelry, gold, bonds and cash were confiscated from Jews deported to Nazi death camps. The United States, Britain and France have agreed to freeze the return to European countries of gold looted by the Nazi?s and turned over to the Allies after World War II. The remaining $68 million may be used to compensate Holocaust victims. The money itself, according to Burg, is not the point. It is the principle that no one should profit from the deaths of 6 million Jews. In 1962, after denying that they held such assets, the Swiss banks admitted that they had found $8 million belonging to Holocaust victims, which they paid to Jewish charities. Three months later, they came up with $32 million. A key factor to the recent discoveries was the collapse of the Soviet bloc. That made available thousands of secret files to aid the search. Another factor was the expiration of 50-year confidentiality laws in the United States, which made public a wealth of information formerly sealed in the National Archives, including crates of documents from Operation Safehaven. The Swiss government announced recently that it would set up a fund to compensate Holocaust victims and their families. While Jewish groups welcomed the Swiss government?s decision, Senator Alfonse D?Amato was angry and incredulous. D?Amato, who has led the calls for compensation, accused the Swiss government of ?running a shell game and using the banks? money for propaganda. The Swiss are going to set up and manage the fund? Since when are they going to manage the funds that come from private institutions and banks? And they?re going to decide how to disburse this? And they haven?t even put up money?? he said in Washington, ?I think it?s an outrage. It?s not their money.? Burg cautioned that ?This is not Swiss money. It?s money that belongs to the Jews. The only solution will be when all assets looted from the Jews will return to Jewish hands.? People wonder why this new information is just now coming out and the answer is that Jews then wished to forget and now wish to remember. Some problems include with so many beings exterminated and so much time wasted since, it may be difficult to find heirs for the fortune. The Swiss government itself has set up a $110 million Holocaust memorial fund. Three big Swiss banks established a $70 million Holocaust fund for survivors. One reason the banks are fighting so much is that the banks get to keep abandoned funds. Switzerland treats inactive accounts far differently than the US, where banks must turn over abandoned accounts to the state if the owners or heirs cannot be found. Swiss law holds that if an account is inactive for 10 years, the bank must post a notice in the branch where the account is handled. Ten years after the notice is posted, the bank is allowed to take possession of the unclaimed funds. If the rightful owners, or heirs, turn up later, they can claim the funds?if they can furnish satisfactory proof. That is a big ?if? in Switzerland. In other countries, the former Allied powers are suddenly re-examining their part in profiting from the Holocaust. The search is leading to embarrass Washington?like the two tons of looted gold, recovered by the Allies after the war, found sitting in the New York Federal Reserve Bank, some of which might go to victims. Many Allied countries are finding looted gold and valuables due to the compensation forced upon Germany after the war. The Allies found Germany solely responsible for the war and forced them to compensate the victims. The money they had, they had looted from the Jews. They paid the Allies with stolen money. Now the Allies are starting to discover their stores of Jewish money. Back in Switzerland, in late August, bankers said that a survey of its members begun in June had so far uncovered $34.1 million in 893 accounts opened prior to the end of World War II. The records of the Stasi, the former East German secret police, refer to a large shipment to Switzerland of gold, diamonds, foreign currency, and paintings taken as payment by SS boss Heinrich Himmler for the freedom of 13,000 Hungarian Jews in 1945. Various estimates of the current value of the shipment range from several hundred million to $1 billion. In 1963, when the Swiss government ordered the banks to report all monies of Holocaust survivors, a sweep that netted about $2.2 million, which was handed over to Swiss Jewish organizations. The Swiss dispersed $1.7 million of that to a small number of claimants. Currently, people can search in an attempt to discover any money hidden. Up to now, the banks have been charging $85 to $850 for searches, which in most cases failed to turn up anything. Senate hearings were heard April of last year after a discussion between President Clinton and Edgar Bronfman, a leader of the World Jewish Congress, in which Bronfman described the Swiss bank issue. The President ordered Secretary Eizenstat to investigate the US archives. In the Senate hearings, the Swiss banks mounted a week defense. By early February, New York lawmakers proposed kicking Swiss banks out of the state if they failed to open their banks to local auditors searching for Jewish accounts. New York?s Governor warned that Swiss banks could lose their operating licenses, and the state comptroller halted overnight deposits in Swiss banks. New York?s city council threatened to bar official deposits in Swiss banks until Holocaust victims were compensated. On February 4, Britain France and US froze the distribution of $68 million in gold bars they still hold from the Nazi hoard.

Today, six Swiss banks have a total of 13 branches and agencies and a number of representative offices in six states. Only one Swiss bank, Swiss Bank Corporation had US operations before 1940. Swiss banks in the United States engage only in a wholesale banking business. They do not engage in a retail banking business and cannot accept insured deposits. Swiss banks are net providers of credit to the US economy; US loans significantly exceed US source deposits. In 1994, loans to large US businesses exceeded $9 billion and loan commitments were over $29 billion. Swiss banks actively participate in the field of corporate banking, private banking, treasury activities, project finance and public finance. Swiss banks employ 6,000 people in the United States and occupy more than 2.4 million square feet of office space. In 1994, they paid more than $100 million in federal, state and local income taxes. On behalf of their clients whose funds they manage, Swiss banks invest hundreds of billions of dollars in US stocks.

In conclusion, the US didn?t act against the actions of the Swiss banks because they didn?t know how to handle a country that had blatantly declared neutrality yet appeared to have ?shady dealings? with the enemies of the Allies. It wasn?t proven until after the fact that the Swiss were making deals, at the time there was only speculation. The only way the US could have found proof would have been to invade the country, which would lead to war and hatred due to the US?s attack of a neutral country.