| U.S. and Allied Efforts To Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II |
IV. The Allied-Swiss Negotiations at Washington, March-May 1946
In February 1946 the Allies invited Switzerland to send a delegation to Washington for talks on reparation matters with British, French, and U.S. delegations. Since the Swiss had already rejected the legality of the occupying powers’ claims to assets outside Germany, the negotiations promised to be difficult. Dean Acheson, who spent much of the war as the State Department’s head of economic blockade efforts against the neutrals, recalled in his memoirs his frustration with the wartime negotiations: "If the Swedes were stubborn, the Swiss were the cube of stubbornness." The Allies were also mindful that the outcome of negotiations with Switzerland would serve as a model for dealing with the other neutrals.
The Allied negotiators approached the Allied-Swiss talks in March 1946 with several assumptions that were to prove overly optimistic. The belief that the Swiss had already committed themselves (during the Currie Mission) not to permit Switzerland to be a repository for assets stolen by the Nazis was among the more prominent. U.S. officials also believed themselves justified in expecting that the Swiss authorities would make every effort to assist individuals seeking to reclaim assets that had been placed in Swiss financial institutions.
Perhaps more compelling than the objective factors that would govern the talks were the intangible attitudes created by differing Allied and Swiss experiences during the war. To the French and the British, World War II had been an epic catastrophe, effectively ending their status as global powers. Both had suffered huge loss of life, civilian and military, and the humiliation of occupation (in the case of the French) and impoverishment. The United States, while spared domestic damage, nevertheless took massive military casualties. A U.S. delegate during the Paris Reparations Conference observed that "the magnitude of the U.S. military effort was almost beyond comprehension." Switzerland, on the other hand, despite its precarious military position during the early stages of the war, emerged in 1945 as one of the wealthiest countries in the world with burgeoning trade and gold reserves far surpassing its totals for 1938.
A. The Swiss and British Perspectives on the Negotiations
Switzerland viewed the Allies (particularly the United States) as bringing unwarranted pressure to bear on a small and relatively powerless neutral state. At the same time, Swiss leadership believed that Swiss actions during the war were fully consistent with the internationally recognized obligations and rights of a neutral power. The Swiss asserted that they were equally convinced that Nazi Germany’s seizure of monetary gold from the occupied countries accorded with international law (the right of occupying powers to war booty); therefore Switzerland’s receipt of such gold was legal. On the other hand, Swiss officials contended that Allied claims to German assets beyond Germany’s borders were illegal and an assault on Swiss sovereignty. Swiss negotiators appeared thoroughly convinced of the legal basis for their position and frequently mentioned the possibility of submitting the conflicting positions to arbitration, a prospect the Allies resisted, in the first instance, because of the time required for arbitration and the likelihood of their losing the case.
On its side, Switzerland was committed to convincing the United States to eliminate Swiss companies and individuals from its blacklist and other blocking regulations so as to return Switzerland to full membership in the international community of trading nations. In addition, the Swiss negotiating strategy and the aggregate of Swiss actions and correspondence left the impression that Switzerland was bent on keeping as much gold and German assets as possible to meet the claims of Swiss creditors.
The Swiss contested the Allied claim at the Potsdam Conference to ownership of German assets in neutral countries. Max Petitpierre, Swiss Minister for Foreign Affairs, told U.S. Minister in Bern Leland Harrison in September 1945 that occupation of German territory by Allied powers could "hardly have any effects beyond German borders." Harrison conveyed to Petitpierre the U.S. "dissatisfaction with slowness in effecting census [of German assets] measures taken and non-cooperation." In October 1945 Harrison complained to the Swiss Foreign Minister about the "unsatisfactory situation with regard to our efforts to unearth German assets in Switzerland and in particular our dissatisfaction with lack of cooperation on the part of Swiss officials and their apparent failure to implement the March agreement," which the Currie Mission had negotiated with Switzerland.
Swiss resistance to the Allies’ policy stiffened in response to splits in Allied ranks. As early as August 1944, the British Foreign Office was reportedly "most reluctant" to undertake or recommend any measures dealing with German loot that could not effectively be enforced without widespread continuation after the war of censorship and blockade, according to Ambassador Winant in London. Winant told the State Department in September 1945 that the British would find it very difficult to approve of extreme measures such as cutting off exports to neutrals that rejected the Potsdam Protocol. He said that the British were dubious of the legal basis of the protocol, and supported a proposal by U.S. negotiator Seymour J. Rubin to eschew legal arguments when dealing with the neutrals. Rubin’s idea was to ask the neutrals to hand over German assets on the moral ground that the Allies had saved them from Nazi tyranny. By October 1945, the British Ministry of Economic Warfare was urging compromises over the disposition of German assets as between the neutrals and Allies. The Ministry saw the United Kingdom’s economic position as too shaky to allow for pressure through financial measures. In particular, the United Kingdom could not cut off coal shipments to Switzerland or Sweden lest it be deprived of cash.
As crucial negotiations between the Allies and neutrals on reparations loomed, the United States and Great Britain (together with France) remained deadlocked over the use of sanctions if the neutrals failed to agree that all German assets should be made available to the Allied Control Council in Germany. Acting Secretary of State Acheson in December 1945 was convinced that the sanctions weapon was "basic" to the negotiations, but the British in January 1946 flatly rejected the use of sanctions as "unnecessary and impractical." As a result, no preliminary agreement was reached by the Allies on the threat to use sanctions in the event that discussions with the neutrals broke down.
B. The Question of Sanctions Against the Neutrals; State and Treasury on the Eve of the Negotiations
Treasury officials prepared briefing materials for the U.S. delegation to the upcoming negotiations with the Swiss. They encouraged State negotiators to invoke a "global approach" to the looted gold issue, whereby any restitution figure would have to reflect a monetary value that encompassed all looted gold that had entered Switzerland after a certain date, rather than try to distinguish each particular shipment and assess the exact nature of the value for restitution of each. They also proposed that any agreement with the Swiss should contain a so-called open-end clause "which would enable us to make further claim against the Swiss" if further proof was discovered of looted gold bars in Swiss banks, including those that belonged to the Netherlands. This "open-end clause" would leave the Swiss open to all future claims concerning looted gold that Switzerland had acquired during the war.
To force Swiss cooperation in these matters, Treasury Assistant Secretary Harry Dexter White insisted that Swiss funds remain blocked in the United States until the Swiss provided iron-clad guarantees that they would identify and seize all accounts under German control. He estimated at $500 million the sum of German assets in Switzerland, excluding numbered accounts and cloaked assets.
American negotiators had the benefit of two comprehensive appraisals of German gold movements during World War II including the sales of gold to and through Switzerland. A summary chart by Otto Fletcher, Special Assistant to the Division of Economic Security Controls of the State Department, demonstrated from information in captured Reichsbank ledgers that Germany, whose estimated gold reserves at the beginning of the war was $120 million, acquired another $661 million in monetary gold during the war most of which was looted. According to the Fletcher chart, all of the gold sold by Germany after early 1943 was looted gold. The amount of $276 million in gold was sold to the Swiss National Bank during the war, and "the larger part was looted gold." An additional $138 million was "washed through" the Swiss National Bank and eventually sold to Portugal and Spain. This made a total of $414 million in looted gold sold or transferred to the Swiss National Bank by the Nazis. A separate analysis prepared by James Mann of the Treasury Department estimated the total monetary gold looted by Germany at $579 million out of a total of $785 million available to Germany after June 30, 1940. Mann determined, from available ledgers of the Reichsbank, that Germany exported "at least" $398 million worth of gold during the war, and of this amount "an absolute minimum" of $185 million must have been looted. Mann concluded that "on the fairest assumptions, the amount of loot [gold] taken by the Swiss from Germany can be estimated at 289 million dollars."
The centerpiece of Treasury’s negotiation strategy lay in the recognition by the neutral countries of the legal right for the ACC to assume title to all German external assets under the Vesting Decree. For that reason, Treasury favored ACC as the supreme authority in the negotiations, and when that failed, Treasury officials attempted to place the tripartite negotiating team under the aegis of the National Advisory Council.
Before the negotiations even began, Treasury officials insisted that the Swiss Government not only recognize the ACC Vesting Decree and the authority of the German External Property Commission over the disposition of German assets in Switzerland but agree to restitute to the Allies for reparations an estimated $378 million in looted monetary gold that, according to FFC, the Reichsbank had sent to the Swiss National Bank during the war. To make the point, Treasury Secretary Vinson informed Secretary of State Byrnes of the extreme importance he accorded to Swiss recognition of the ACC Vesting Decree, even if it meant applying economic sanctions against the Swiss, regardless of British sentiments on this question.
Secretary Byrnes informed Vinson of his decision to postpone a decision on how and whether to use sanctions against Switzerland. Byrnes wanted to wait and see how the negotiations with the Swiss worked out. The Secretary had been advised against the exercise of sanctions by his chief adviser on Europe, H. Freeman Matthews, Director of the Office of European Affairs, in a lengthy memorandum of February 15, 1946. While Freeman conceded the importance of general Safehaven objectives, he argued that economic sanctions were a drastic measure that rarely succeeded. Matthews argued that the United States undertake sanctions only with the full agreement and full participation of the French and the British¾ "the nations nearest geographically to the neutrals and those having the most at stake in both the reparations and security features of the Safehaven program." Since the British and the French had both rejected the Department’s proposals on sanctions, Matthews concluded by recommending to the Secretary a cautious approach on the application of sanctions "with a view to agreeing to a line of procedure vis-à-vis the neutrals, to which we and the British and the French could all give our full support. There are increasing indications that the neutrals are aware of the necessity of settling the question of German assets to the substantial satisfaction of the victorious powers, and that the success of the program will be endangered more by our intransigeance vis-à-vis our negotiating partners than by a failure to reach agreement in the use of sanctions."
C. The Allied and Swiss Delegations at the Washington Negotiations
In February 1946 Randolph Paul was designated Special Assistant to President Truman in charge of the U.S. contingent to the Allied-Swiss negotiations. Paul had served during the war as General Counsel of the Treasury Department and Acting Secretary of the Treasury in charge of Foreign Funds Control which managed the financial aspects of the war against the Axis. Paul had an important role in urging, often in the face of State Department resistance, vigorous action to rescue the Jews from Europe as the extent of the Holocaust became known, and he had accompanied Treasury Secretary Morgenthau to a meeting with President Roosevelt on January 15, 1944, to present a copy of a report prepared by the Foreign Funds Control office highly critical of the State Department "obstructionism" and entitled "Report to the Secretary [Morgenthau] on the Acquiescence of This Government in the Murder of the Jews."
Paul was assisted by Seymour Rubin and Walter Surrey, senior Department of State officials responsible for economic security programs. The delegation, which numbered more than 15 officials, also included officers from the Embassies in Bern and London and senior Treasury Department officials including Orvis Schmidt, Director of Foreign Funds Control and Joseph Friedman, Assistant General Counsel. The British delegation was headed by F. W. McCombe, Economic Counselor the British Embassy in Washington who had served in the Embassy during the war working on economic warfare problems. The French delegation was headed by Paul Chargueraud who was a French Foreign Ministry Director. Walter Stucki, Chief of the Division of Foreign Affairs of the Federal Political Department, headed the Swiss Delegation. He was assisted by various senior Swiss Government officials and at least one representative of the Swiss National Bank.
The Soviet Union, which had at the Potsdam Conference renounced its claims to German assets in Western Europe, made no particular effort to participate in or observe the Allied negotiations. The Second Secretary of the Soviet Embassy in Washington, M. Moliakov did, however, call upon Seymour Rubin early in the negotiations to inquire in a general way about the negotiations and the nature of the agenda. Although Moliakov made the vaguest reference to Soviet observers, he did not raise the matter as a request or allude to it in a manner that required reaction. No further expression of interest by the Soviet authorities appears to have occurred.
D. Opening of the Negotiations at Washington
The Allies entered the talks with access to a considerable body of intelligence gained from the records of the Reichsbank and from lengthy interrogations of German banking officials, including most prominently Emil Puhl, the former Reichsbank Vice President. Puhl had had extensive relations with the Swiss National Bank during the war and served as a German member of the Board of Governors of the Bank for International Settlements at Basel. The Allies were particularly indignant at documentary evidence that the Swiss had been conducting commercial negotiations with the Germans at the same time they made the March 1945 agreement with the Currie Mission to block German assets. An exchange of letters between Puhl and the Swiss National Bank formed a Swiss-German agreement that "in fact wipes out the payment blockage against Germany which the Americans and British have made such strenuous efforts to achieve."
The Allied negotiators also had access to a number of memoranda and reports analyzing the flow of German-origin gold to and through Switzerland during the war. In addition to this material on gold movements was a French Government memorandum given to the Swiss just prior to the opening of negotiations, detailing the illegal seizure and ultimate shipment to Switzerland of Belgian monetary gold, which had been sent to Paris for safekeeping. The memorandum also set out the Allied legal and moral position with regard to external German assets. The Swiss, on the other hand, insisted that international practice and domestic law precluded them from opening their financial ledgers to the Allies.
The press was an eager observer to the Allied-Swiss negotiations. Starting in early March 1946 even before the conference opened, many of the essential factors in the negotiations were publicized. Press reports regularly noted that the U.S. negotiators estimated the value of German assets in Switzerland at $750 million (3 billion Swiss francs) compared to Swiss acknowledgment of German assets of no more than $250 million (1 billion Swiss francs). The press also reported that the $250 million in assets matched the estimate of $250 million in wartime Swiss credits owed by Germany, and regularly referred as well to the $1.5 billion in Swiss assets frozen in the United States. The accounts stressed Switzerland’s insistence that the Allies had no right under international law to resort to the Heads of Government decisions at Potsdam in 1945 to justify a claim to any German assets. Press reports also linked to the Allied-Swiss negotiations the public call by American business and labor groups for a substantial reduction in the importation of Swiss watch movements.
Randolph Paul made several points in his opening statement. The dual objectives of the negotiations were to eliminate the German war potential in Switzerland and to make all German assets in Switzerland available for reparations. The Allies in no way questioned the principle of neutrality and were fully cognizant of Switzerland’s difficult position during the war. The Allies sought complete cooperation with Switzerland in making German property and assets available for reparation and reconstruction of Europe as soon as possible. The British and French made opening statements underscoring Paul’s remarks.
Walter Stucki followed with opening remarks that stressed that Switzerland’s war record was beyond reproach, that Switzerland had long opposed Nazism, that his country opposed application of ACC Law No. 5 as a contravention of Swiss sovereignty, and that the Swiss constitution forbade the expropriation of any assets in Switzerland, nor could the government hand such asserts over to a third party. The Swiss delegation, in an opening statement, addressed the assets issue by offering to open a blocked account (i.e., unavailable to Germans) at the Swiss National Bank to receive revenues from the liquidation of German assets. Funds from the account would be used to pay Swiss creditors and other Swiss citizens who lost property in Germany through Nazi action. The statement further referred to Switzerland’s moral duty to the Allies and to the population of devastated Europe but made no financial commitment.
After the exchange of opening positions, it was evident that progress would be facilitated by periodic meetings of expert working groups to cover the gold and assets issues. Paul’s status report on the first week of talks showed no progress from opening positions and considerable irritation with Stucki’s decision to make the Swiss position public. After another week of little progress, Stucki departed for Bern to consult with his government. Several days later, the Swiss Embassy delivered an Aide-Mémoire to the Department of State, seemingly unrelated to the talks, restating the Swiss Government’s frequent requests that the United States eliminate Swiss companies from the Proclaimed List.
During the first several weeks of the conference, the Allies sought to make clear to the Swiss that in providing for reparations, they were not being subjected to punitive action but were being asked to participate in the reconstruction of war-ravaged Europe. In order to overcome the deadlock in the talks, the Allies abandoned their claim to all the German assets and offered to share with the Swiss. The Swiss were offered up to 20 percent of the proceeds of liquidated German assets in Switzerland, but the Allies could not recognize any of the Swiss claims against a bankrupt Germany. The Allied negotiators also sought to emphasize that the first $25 million collected from liquidation of German assets would be turned over to the Intergovernmental Committee on Refugees (IGCR) for the relief of non-repatriable victims of Nazism. Allied negotiators presented evidence to the Swiss that at least $200 million worth of gold transferred by Germany during the war to Switzerland was loot.
For their part, the Swiss resisted Allied legal claims to German assets, proposed that the issue of the liquidation of assets be referred to international arbitration, rejected Allied estimates of the looted gold in Switzerland, argued that any restitution of gold was a responsibility of the Swiss Federal Tribunal, and insisted that the reconstruction of Europe could only be funded with German assets found in Germany¾ not in Switzerland.
Paul’s second status report noted Stucki’s departure and commented that the negotiators still remained far apart on both the gold and assets issues. The report did, however, contain the seeds of a possible agreement on liquidating German assets in Switzerland in exchange for the Allies’ concession that they would be willing to consider the participation of the Swiss Government in that liquidation and permit the Swiss to keep a percentage of the revenues. The report also introduced the notion of an up-front payment of $25 million to European relief agencies from the early proceeds of the liquidation. Paul further stated that he had sought to refute the early Swiss arguments about looted gold.
Throughout the early weeks of the conference, the Swiss made the negotiations regarding the return of looted gold particularly frustrating for the Allies, especially in view of the considerable body of analysis of German wartime gold sales to the Swiss. At the March 26 meeting of the Gold Subcommittee, Rappard told his Allied counterparts that Switzerland had never handled looted gold. The Swiss at this time informed the Allied negotiators that Switzerland had purchased during the war 1.2 billion Swiss francs worth of gold and had received another 600 million francs in gold for the accounts of other Central European banks, for a total of more than $417 million at wartime prices¾ an estimate quite close to that prepared by the State Department in February 1946. At the March 29 meeting of the Gold Subcommittee, the Swiss repeated their assertion that Switzerland had no looted gold and shrugged off the wartime warning by the Vichy Bank of France President about the shipment of looted Belgian gold by the Nazis to Switzerland as a warning not deserving serious attention because it was conveyed by a known wartime collaborator. The Swiss fall-back argument was that under international law Nazi Germany as a conqueror nation had a legal right to the gold looted from central banks so long as they were government-owned, not private. U.S. delegate Otto Fletcher replied that all of the central banks in question were private institutions.
The Allied negotiators gradually advanced, over the course of the negotiations with the Swiss, an estimate of the gold expected from the Swiss. A few days before the conference began, Allied negotiators discussed a State Department report that estimated German looted gold in Switzerland at the end of the war at as much as $289 million and certainly at least $185 million. According to a March 26 State Department memorandum, the Allies informed the Swiss that the $200 million was a "minimum," and, according to information found in Germany, there was a possibility that all of the gold received by Switzerland from Germany was looted. In a March 29 memorandum, the Allies furnished the Swiss with information upon which the Allies based their estimate that at least $200 million worth of gold looted by Germany was transferred to Switzerland.
By early April, the Swiss began their bargaining on gold, arguing that Switzerland would consider agreeing to returning to the Allies a part of the gold obtained from Germany after the Allied Gold Declaration of February 1944. In the face of Allied negotiators’ arguments, the Swiss receded in mid-April to the position that the Allied estimates of German monetary gold were inflated and that Switzerland did not have any concrete information about German looting of gold. A few weeks later, the Swiss insisted that all Swiss purchases of gold during the war were in accord with the laws of neutrality, that wartime Allied warnings about the purchase of looted gold were not decisive in determining whether Switzerland would surrender of its gold, that Switzerland would never acknowledge that the Belgian gold it had purchased during the war was looted, and if the Allies rejected an offer of $25 million in gold, Switzerland would refer the matter to a Swiss tribunal.
By April 23, the Allied negotiators informed the Swiss that Switzerland was liable to restore to the Allies approximately $130 million in monetary gold, the value of the Belgian monetary gold looted from France during the war and transferred to Switzerland. Allied negotiators revised their expectations downward between late April and early May after concluding that Austrian monetary gold could be excluded from the estimate of looted gold. By this time the Swiss negotiators acknowledged that they had purchased $88 million in gold from Germany traceable originally to Belgium, but they were not willing to concede that they were liable to restore that amount to the Allies.
E. Role of Intelligence in the Washington Negotiations
With the onset of negotiations in Washington, interest revived in Project Jetsam¾ the early postwar version of the former OSS intelligence collection for Safehaven¾ as an important channel for reporting on Swiss negotiating goals and tactics. Priority tasking began in March 1946. Two urgent messages were dispatched that month from the Strategic Services Unit (SSU) Headquarters in Washington to officials in Bern: one of March 14 requesting "any possible information on instructions particularly general line of defense given Stucki," followed by a "priority" request on March 19 for "instructions to Stucki delegation re willingness Suisse permit Allied seizure German funds for use for reparations¼ Was committee allowed latitude for decision here?" Some of the replies from Bern apparently were useful: on March 25 SSU Headquarters in Washington cabled Bern, "State considers Bern 337¼ valuable and timely. Congratulations. Cable any further developments."
Responding to the tasking from Washington, SSU in Bern was able to contact a "reliable source" close enough to the Swiss Foreign Office to report on the thinking of Max Petitpierre, head of the Political Department. The reporting showed Petitpierre and a majority of the Swiss Federal Council to be "convinced" that granting Allied claims to German assets was "indispensable." Petitpierre was said to be particularly concerned for the upcoming Swiss elections and apprehensive of a conservative reaction to Swiss resumption of diplomatic relations with the Soviet Union. On March 21 he told the SSU source that he earnestly desired to settle "the present misunderstanding with the United States to counterbalance this gesture of friendship toward the East." The Swiss were further prepared to accede to the demand that Allied representatives be admitted into Switzerland to track down concealed German assets. According to this report, the most important Swiss demand was for payment of approximately 500 million Swiss francs for goods shipped to Germany during the war and not yet paid for. This they planned to take from the outstanding balance of a prewar German loan for building the Gotthard tunnel and from German investments in the Swiss railway system.
This intelligence was passed to the State Department on March 22, but it is unclear if it had any immediate effect on the negotiations since for a long period, the positions of the two sides were too far apart for any progress to be made. Stucki’s firm stance contrasted sharply with the more conciliatory posture of the Swiss Foreign Office in Bern, but he clearly had considerable latitude in negotiating with the Allies. Obviously frustrated by the lack of progress, Stucki nevertheless retreated very slowly to his final negotiating position, apparently adhering strictly to what must have been his instructions before he left Bern. In contrast, the intelligence that came from the Swiss Foreign Office indicated that Petitpierre and the Federal Council were willing to be more flexible, possibly even to the extent of increasing the sum they were willing to offer as restitution. Moreover, the Swiss were concerned that the Allies might exploit their considerable economic leverage to force Switzerland into an agreement on unfavorable terms. It is probable that the U.S. negotiators found it difficult to resolve the differences between Stucki’s position and that of the Swiss Federal Council in Bern. On March 27 the Chief of the Strategic Services Unit, General John Magruder, complained to U.S. officials in Bern: "Everything Swiss delegation has said to date" contradicted the information that had been provided through intelligence, and he requested immediate confirmation: "Much depends on it."
At the end of March, when Walter Stucki returned to Switzerland for about a week to discuss the progress of the negotiations with the Foreign Office, he became an especially important target. On April 10 SSU Headquarters in Washington cabled Bern placing an "urgent" requirement for "information re Stucki’s new instructions and report of his activities during the week he spent in Switzerland." By this time, however, SSU in Bern was reporting all intelligence obtained on German assets in Switzerland directly to the Ambassador in Bern and no further reports have been found.
F. First Swiss Draft Agreement on German Assets
Stucki returned from Bern on April 11, and immediately wrote Paul reserving the Swiss legal position, but enclosing a draft agreement that accepted a role for the Allies in the liquidation of German assets in Switzerland through the establishment of a joint commission and a plan to share the revenues in some unrevealed proportion. The draft offered a Swiss payment in gold without prejudice to the strongly held Swiss view that the Allies had no claim to gold acquired from wartime Germany. The Swiss draft failed to indicate the level of payment the Swiss contemplated in this category. Two days later, the Swiss followed the draft with an April 13 memorandum entitled "Swiss Observations With Regard to the Gold Problem," which differed markedly from Allied calculations regarding German gold holdings at the beginning of the war and questioned the credibility of information provided by former Reichsbank Vice President Emil Puhl (and presented to the Swiss by the Allies) since, among other things, the Swiss were not present for his interrogation. Puhl had told U.S. interrogators that Swiss National Bank officials knew they were receiving looted gold, in part because he admitted this to them. The press accounts of the Swiss position at this time emphasized continuing Swiss resentment to the continued blocking of the $1.5 billion of Swiss assets in the United States, Swiss insistence on the rightness of its claim for the $250 million wartime clearing account with Germany, and Swiss reminders that the Allies were supplied during the war with three times that amount against blocked Swiss gold accounts in the Allied countries.
The Allied delegation’s reaction to the latest Swiss proposals was strongly negative, but Paul’s response to Stucki was carefully crafted to avoid a breakdown in the negotiations. His letter reasserted (with some further legal clarification) the Allies’ right to order the liquidation of German assets but it gave up the insistence that Switzerland recognize ACC Law No. 5. Paul pointed out that the Allies could have simply transferred title to individual German assets to those countries claiming reparations with very negative implications for the Swiss economy and relations with the countries involved, but had rejected this course in order to do as little damage as possible to the Swiss economy. Paul also rejected the notion of arbitration for several reasons, paramount among them the length of time involved during which the Allies would have to maintain "certain measures to ensure that no German assets fail to be uncovered." Lastly, Paul drew a correlation between the outcome of the negotiations and procedures for unblocking Swiss assets in the United States. Paul reserved the Allied position on looted gold and followed the letter with a memorandum of April 17, providing the Swiss with a detailed accounting of the Allied gold calculations on the critical matter of Germany’s monetary gold reserves at the beginning of the war based, in part, on the Reichsbank’s books. The Allies also offered an accounting of Swiss gold imports from Germany during the war and a reiteration of their position on looted Belgian monetary gold.
By mid-April the negotiations had become largely an exchange of notes, memoranda, and letters and meetings between principals. Stucki wrote Paul on April 17, answering the latter’s assertions on the assets question point for point, and concluding on a constructive note that the framework of an agreement could be worked out at Washington and later polished and concluded in Bern. Both Stucki and Paul agreed that the major differences boiled down to only two issues¾ gold and procedures for liquidating German assets and dividing the revenues.
G. Second Swiss Draft Agreement on German Assets
On April 18 the Swiss gave the Allies another draft agreement, very similar to the first draft but more detailed in the technical treatment of the asset question and with the significant concession that Switzerland would consider sharing with the Allies the custody of German assets. Specifically, Swiss debtors and others holding German assets located in Switzerland would settle either through the use of a special account at the Swiss National Bank or by surrendering German assets to a Swiss Governmental agency. The agency would be charged with the liquidation of these assets and with the payment of the proceeds into the special account. Swiss holdings belonging to Germans living in Germany would be transferred to Swiss ownership and the equivalent in Swiss francs would be paid into the special Swiss National Bank account. Germans with Swiss debts would be expected to pay their debts in Reichsmarks to a designated agency in Germany.
The Swiss draft provided further that a percentage of the proceeds of the liquidation on account at the Swiss National Bank would be credited to the Allies in a special account to be used for humanitarian and reconstruction purposes. The Allies would also be expected to undertake that the equivalent of their share of the proceeds would be deposited with a German agency in Marks. These revenues would in turn be used to pay the German creditors whose claims and assets were transferred to the Swiss National Bank. The Swiss added that the control and liquidation of German assets were wholly functions of the Swiss authorities who would act in close cooperation with a commission composed of representatives of the three Allied governments.
On the gold issue, the draft provided for a payment to the Allies of an undisclosed amount provided that the Allies waived all claims in connection with gold transactions. Both the gold payment and the Allied share of the revenues from the liquidation of German assets were characterized in the draft as "a Swiss contribution to the alleviation of human suffering and to the reconstruction of the areas of Europe ravaged by war." Finally the draft provided for procedures to unfreeze Swiss assets in the United States and to remove all restraints on Swiss trade. The Allied governments would also undertake to respect and protect private Swiss property in their territory and territory occupied by them.
The Swiss draft gave rise to an exchange of memoranda in which the Allied side rejected the Swiss proposals for the procedures to be followed in Germany for clearing of Swiss and German debts and compensating Germans for their assets located in Switzerland. In summary, the Allied view was that compensation of Swiss and German creditors was a matter for the domestic authorities of Germany and Switzerland to decide, not the negotiators. The Swiss memorandum focused on gold, asserting that the Swiss Government accepted no legal or moral obligation for the restitution of gold and if the Allies did not accept the offer outlined in the Swiss draft, made in the "interest of a contribution to the reconstruction of Europe," arbitration would be the only solution. In a short note dated April 23, the Allies rejected the Swiss position on gold but left the door open for a continuation of discussions looking to a fair settlement.
The Swiss also considered all accounts and property owned by Jews to be foreign-owned assets, therefore subject to blocking. The American Jewish Congress (AJC), after meeting with Colonel Bernard Bernstein, former head of the Foreign Exchange Depository of OMGUS, responded that these assets were exempted from ACC Law No. 5 since Jewish-owned property was not slated to be used as a form of reparations. The AJC maintained that there was a "substantial amount of property in Switzerland belonging to Jews who have been exterminated during the last thirteen years and who have left no heirs or other legal representatives to claim on their behalf¼ Great amounts of property all over the world now held in the accounts of non-Jews are assets that belonged to Jews on or since January 1933, and were taken from them by force or duress. Undoubtedly, a substantial amount of this type of looted property is now held in Switzerland."
Within a 24-hour period, there were several meetings of the principals and exchanges of notes embodying an Allied request for a Swiss payment of $130 million in settlement of the gold issue and two-thirds of the revenue from the liquidation of German assets. A Swiss source wrote that "Stucki could hardly contain his anger and left the conference room abruptly." On April 24, Stucki wrote Paul formally rejecting the Allied request and stating that in his judgment the "discussions should be interrupted."
Seymour Rubin informed Under Secretary Acheson and Assistant Secretary Clayton on April 24 that the Swiss had suspended the talks, and he set out the negotiating posture of both sides. From Rubin’s standpoint, the negotiations broke down on the gold issue. The Swiss had informally (and tentatively) offered $25 million as a contribution to the reconstruction of Europe. The Allies sought $130 million or the amount the Allies believed equaled the looted Belgian gold traceable to Switzerland. The Swiss had sought an exploration of the data. When the numbers turned out to favor the Allied position, the Swiss retreated to "the question of principle," pointing out that only a Swiss court was competent to decide the gold issue and that Swiss law gave no legal or moral basis for restitution of gold. Rubin assured Acting Secretary Acheson:
"Mr. Paul and his associates, Messrs. Chargueraud and McCombe, tried until the very last to reach a satisfactory compromise agreement. They had no help from the Swiss, who were legalistic even when they privately conceded that their legal position had been exploded by the Allied offer to compensate the German owners, and who consistently refused to put forward proposals of a reasonable character¼ Despite the Swiss attitude, the Allied negotiators have throughout impressed me with their moderation and sincere desire to reach an amicable solution. They have not endeared themselves to the fire-eaters in the American agencies by this conciliatory spirit; but they have persisted in¼ trying to bring the negotiations to a successful conclusion."
Rubin observed that "an extreme Allied position was not the cause of the collapse of the negotiations and that the outcome would have been the same if the Allies had asked for $30 million in gold rather than $130 million." The underlying Swiss position on German assets, according to Rubin, boiled down to using the machinery put in place by the occupying powers for a Swiss-German capital clearing arrangement that would enable Swiss authorities to use the revenues from German assets to pay Swiss claimants against Germany, in effect honoring Swiss franc claims that were of doubtful value given the collapse of the Reichsmark. Rubin assured Acheson and Clayton that the Allied side had, despite Stucki’s bitter refusal to consider further counterproposals, made every attempt to continue the discussions (as did Stucki’s deputy). He concluded with the judgment that Stucki would have terminated the talks whatever offers were on the table. This critical phase of the talks ended with a short letter from Paul to Stucki informing him that unless the Allied negotiators heard to the contrary they would inform their governments that the Swiss saw no possibility of finding a basis for a settlement.
During the next week, an exchange of letters between Assistant Secretary of State William Clayton and the Swiss Minister in the United States, Bruggmann, evidenced the continuing strong disagreement with Switzerland’s legal argument that German wartime requisitions of monetary gold were consistent with international law and hence the Swiss were within their rights to have accepted such gold in the course of their commercial activities. In his response, Clayton made clear that the United States could not accept the legitimacy of German acquisitions and hoped that the gold issue could be resolved on the "equities of the situation."
The press reported that public reaction in Switzerland was unanimously in favor of the firm bargaining position of its representatives at the Washington talks. Swiss newspapers sought to portray the negotiations as struggle between David and Goliath. Invoking the sanctity of private property protected by the Swiss constitution, Swiss commentators argued that Allied intentions to confiscate German assets was plainly illegal because such assets could only be disposed of by their owners acting without pressure. A Basel newspaper was quoted in The New York Times as stating: "Nothing will move us. We will not yield to pressure or relinquish our sovereign rights¼ We must have the courage to resist force and bear whatever restrictions are imposed."
I. Resumption of the Talks and the Final Swiss Offer
The Swiss resumed the negotiations on May 2 when Paul and his British and French colleagues met with Stucki, a meeting arranged by Minister Bruggmann. Stucki made what he explained "on his word of honor" was his final offer. It provided for a 50-50 split on the proceeds of German assets in Switzerland and a payment of 250 million Swiss francs, or approximately $58.1 million, in settlement of the gold question. Stucki told Paul that he would be returning to Switzerland, whether his offer were accepted or not, either to sell the proposition to the Swiss people or to report his failure to the government.
Paul discussed the Swiss offer with his French and British colleagues on the afternoon of May 2. Paul felt that the Swiss offer was the final bid. He reminded his colleagues that their original proposal of $88 million in gold had been a good case, but they had agreed to a settlement of $75 million. A better settlement with the Swiss would only be possible if economic controls against the Swiss remained in place. Chargueraud and McCombe agreed to consult their governments. Paul was told at the time that the French Government probably would refuse Stucki’s offer as insufficient, but the British probably would accept the offer as made.
Before turning to his own government for instructions, Paul met with Stucki again on May 2 and, on behalf of the Allies, expressed willingness to conclude an agreement if the Swiss offer on gold were raised to $70 million. Stucki not only refused but suggested that the Swiss would subtract a 2 percent commission as a collection fee on German assets, but Paul reported that "he retracted this suggestion after I indicated that I thought he was chiseling on his previous offer."
Paul immediately reported his last several meetings with the Allies and Stucki in identical letters on May 3 to Assistant Secretary of State Clayton and Treasury Secretary Vinson. Paul made clear his conviction that the Swiss had made their last and best offer. A final Allied decision whether to accept the offer rested on the willingness of the Allies to maintain trade and financial controls against the Swiss. Paul observed that there was significant sentiment in France, Britain, and the United States for elimination of controls over commercial and financial activities, and Switzerland would inevitably be drawn into trade with the wartime allies, creating even greater pressure against continued economic controls against Switzerland. He doubted the Allies would have much leverage to employ against the Swiss within several months. Paul further pointed out that a settlement of the Swiss negotiations would set a pattern for negotiations with the other neutrals, but he remained silent on whether the precedent would be for the better or worse:
"If it were assured that this Government would maintain its freezing controls and the Proclaimed List in effect for a substantial period, even without regard to whether the French would be willing to bring suit on the gold question, I would probably recommend rejection of this offer, on the ground that within a few months it would be increased to the Allied advantage. However, I am told that the British Government refuses to continue the Proclaimed List beyond June 30, and that this Government is reluctant to press the British more than has already been done. I am also told that the pressure for the release of the freezing controls are increasing daily. In addition, there is significant sentiment in the United States, Great Britain and France in favor of the elimination of controls over commercial and financial activities. As trade in Europe becomes more feasible, it is apparent that Switzerland will be drawn more and more into arrangements which so far have been largely confined to the United Nations, with the end result that the pressure against controls on Switzerland will be great.
"You will recall that when these negotiations began I discussed with Secretary Byrnes the question of economic sanctions. It was his view that any decision on this matter should be postponed until it became necessary to raise the question in the course of the discussions. Accordingly, the subject of economic sanctions has not been discussed since the original meeting with Mr. Byrnes. The decision, however, is now pertinent on the question of whether the settlement offered by the Swiss at the present time can be improved at some future date."
Taking these factors into account, Paul asked Vinson and Clayton to instruct him if the Swiss offer should be accepted or rejected.
U.S. understanding of the Swiss position gained at the bargaining table was supplemented by information provided by U.S. intelligence. That some details of the Swiss instructions were made available to the Allied negotiating team appears to have become known to and alarm Stucki. On April 15 he expressed his concern that the United States was obtaining information on his instructions directly from a source in Bern. On April 24, the day after he terminated the talks, Stucki voiced his conviction that the State Department was leaking information from Bern to the American press corps on how far the Swiss were willing to go in making restitution. Although it is impossible to confirm such leaks, negotiators in Washington were probably still receiving reporting on the Swiss negotiating posture from information being provided directly to the Ambassador. On April 30 Magruder asked representatives in Bern: "What instructions were given to Stucki on gold? How far can he go and how much has he been authorized to pay?" No response has been found to Magruder’s cable, but it is clear that by May 3 Randolph Paul was persuaded that the Swiss had made their final offer.
J. Response to the Swiss Offer
On May 3 Randolph Paul cabled the Legation in Bern asking the Minister to approach the Federal Council describing Stucki’s last minute attempt to get a commission for the Swiss as well as his apparent willingness to break off negotiations before tabling the Federal Council’s best offer. Paul hoped that Stucki’s behavior might motivate the Council to accept the Allied request for a $70 million payment instead of the roughly $60 million already offered. Paul stressed that the higher figure would be much easier to sell to the French who had the most pressing interest in the gold settlement. The Legation responded on May 6 that Petitpierre had stated that the Federal Council could not go beyond its previous offer and that Stucki would so inform Allied negotiators at a meeting the same day. Petitpierre also informed the U.S. Minister that any final agreement reached would be submitted to the Swiss Parliament for ratification. The Minister reported that Petitpierre appeared to recognize that only the French would be dissatisfied by the Swiss gold offer. The message signaled that there was no room left for further bargaining (including any attempts by Stucki to drive a harder bargain) and that the Swiss believed the United States and the United Kingdom could convince the French to accept Switzerland’s offer.
Hours after receiving the Legation’s message, Paul and his colleagues called on Senator Harley Kilgore, Chairman of the War Mobilization Subcommittee of the Senate Military Affairs Committee, to determine the Senator’s view of the Swiss offer. In the course of the discussion, Paul explained that the Swiss were very likely keeping over $30 million of the gold looted from the Belgians or close to one-third. Nonetheless, Allied negotiators believed the approximately $60 million the Swiss were offering was the best the negotiations could provide. Paul explained in great detail the terms of the procedures relating to the liquidation of German assets. According to Rubin’s account of the meeting, there was an extended discussion of the difficulty of negotiating a better deal with the Swiss if economic sanctions could be brought to bear:
"Mr. Paul indicated his feeling that a better deal perhaps might be worked out with the Swiss if the United States were firm in a policy of application of economic sanctions and of continuation of the freezing controls and black list, and if agreement on these matters could be worked out with the other interested United Nations, particularly the British. Senator Kilgore indicated his feeling that the most effective sanction was the freezing controls and he had some doubt that the British would go along on any application of continued economic pressures on the Swiss. Rubin stated that the questions of the black list had been taken up with the British, and that so far it had been indicated that the British would not continue the Statutory List beyond June 30, 1946. He stated also that the British had said that this decision could only be reversed if Mr. Truman were to take up the matter with Mr. Attlee.¼ He [Rubin] emphasized that a better agreement might perhaps be worked out if a strong position were maintained by the Allies for a substantial period of time, but stated his belief that the pressures for relaxing rather than tightening controls were increasing all the time. Senator Kilgore stated that he knew this very well, and that he was receiving daily a great many letters in this general vein."
Rubin’s account concluded as follows:
"Senator Kilgore, in summing up his reactions, stated that he felt that the security aspects of the proposed agreement were the more important, and that apparently the agreement did about as well as could be done with respect to the problem of security. He indicated that he had never expected to get a great deal from the Swiss on the monetary side, and stated that he felt that the agreement outlined by Mr. Paul did quite well on this aspect of the problem. In response to Mr. Paul’s question, Senator Kilgore indicated that he would accept the terms suggested, if the problem were up to him."
Paul next wrote Secretary of War Robert Patterson, enclosing a copy of his earlier letter to Assistant Secretary Clayton and Secretary Vinson as well as reporting that Senator Kilgore favored accepting the Swiss offer.
On May 8 Paul and Rubin met with Vinson and Clayton to make a final decision on the Swiss offer. Clayton indicated early in the discussion that he believed the Swiss offer should be accepted since it would provide the Allies with a substantial sum of money that could be used to help rebuild Europe. Clayton felt that factors other than controls impelled him to think that the Swiss offer ought to be accepted. According to Rubin’s record of the meeting, "should the negotiations fail, there would be a great deal of comment inspired by the Swiss along the lines of Switzerland, ‘a small democratic country’, being bullied by the greatest power in the world. He thought that the negotiations had been very well conducted by Mr. Paul, and that the offer should be accepted." Vinson remarked that it seemed to him pointless to endanger the agreement for the difference between $70 million informally put forward by Paul to Stucki and the Swiss offer of $58-60 million. In his judgment, any further risk was not justified and given the current atmosphere of the negotiations he would not hesitate "a split second" to accept the offer. Both Acting Secretary Clayton (both Byrnes and Acheson were out of the country) and Secretary Vinson addressed the issue of how the State Department leadership regarded the impending agreement with the Swiss.
During their meeting, Paul pointed out that one problem of the negotiations was that the Allies were acting on behalf of one group of claimants with respect to gold and another group of claimants with respect to external assets, and Vinson and Clayton observed that "we might incur criticism if an overall settlement were given up in order to get an additional amount on the gold claim." According to Rubin’s record:
"Mr. Clayton said that he had not consulted Mr. Acheson on this matter, but that he thought he could speak for him, and that he knew how Mr. Acheson felt about this matter. Mr. Vinson alluded to the question of sanctions, and read aloud that portion of Mr. Paul’s letter alluding to sanctions and to Mr. Byrnes’ views. He said also that there had been discussion at the staff level (it was understood that this meant in Treasury) and that there was considerable doubt about the efficacy of sanctions."
After the group agreed to accept the Swiss offer, the discussion turned to eliminating controls, and Rubin believed that June 30 would be a workable deadline assuming the agreement was signed.
K. Allied Acceptance of the Swiss Offer
Three weeks passed during which the United States and the United Kingdom attempted to convince the French to accept the Swiss gold offer, apparently with considerable difficulty. Finally, on May 21 Paul wrote Stucki that the Allied governments accepted Switzerland’s last offer, and a final agreement could be based on definitions included in written exchanges that had taken place on April 17. Paul’s letter included an assumption that the Swiss Government would provide detailed statements outlining amounts of gold deposited in Switzerland by the Reichsbank and subsequently sent to other countries. In the penultimate paragraph of his letter, Paul proposed that the Swiss delegation recommend to the Swiss Government that "procedures should be established whereby the property within Switzerland of victims of Nazi action who have since died and left no heirs are put at the sole disposal of the Allied Governments for purposes of relief." Stucki answered Paul’s notification the following day, generally repeating the Federal Council’s final offer, but asserting that German assets must be defined differently than in the U.S. note of April 17. Regarding the Allied request for an accounting of Reichsbank deposits, Stucki offered to discuss it orally. He also noted that the Allied proposal on the use of heirless accounts would need further study.
The negotiations ended officially the same day with a press release outlining the main terms of the agreement and stating that some technical details remain to be worked out in Washington. The final agreement with the Swiss was signed on May 26; it consisted of an Accord, an Annex, a gentlemen’s agreement, and an exchange of letters between the Swiss and Allied delegations. On June 3 Paul submitted a report to President Truman on the negotiations, which included a summary of the final agreement.
The Allied-Swiss Accord agreed that:
The Annex to the Accord elaborated on the process for the liquidation of German assets and provided that the Allies might draw immediately up to 50 million Swiss francs (nearly $12 million) upon their share of the liquidated assets, and that advance would be assigned, through the Intergovernmental Committee on Refugees, for the rehabilitation and resettlement of non-repatriable victims of Nazism. Exchanges of six letters between the Allied and Swiss negotiators further defining the procedures for asset liquidation and including, as well, a commitment by the Swiss Government to examine the matter of putting the proceeds of property in Switzerland of heirless victims of German aggression at the disposal of the Allies for relief and rehabilitation purposes.
L. President Truman Endorses the Allied-Swiss Agreement; Senator Kilgore Rejects the Settlement
On May 24, 1946, Senator Harley Kilgore, reversing the approval of the Allied-Swiss agreement that he gave Randolph Paul on May 6, wrote to President Truman a lengthy letter rejecting the agreement, urging the breaking of negotiations with the Swiss and the referral of the issues to the United Nations. Kilgore’s letter argued that the agreement "violates, both in spirit and in form, the Allies’ pledges to root out Nazism and the German war potential" and would "leave intact Nazi resources and strengthen the hand of Nazis and Nazi collaborationists in Switzerland, and eventually in all neutral and allied countries." The Senator based his assertions on his understanding that the Germans had looted over $700 million in Europe, that $400 million in gold was transferred to Switzerland, that it was reasonable to estimate that Switzerland received at least $200 to $300 million in looted gold from countries conquered by the Nazis. He expressed dismay that the Allied-Swiss negotiators agreed that $130 million in looted gold bars had been received by Switzerland, that $88 million was the amount retained by Switzerland, and of this amount assigned only $58 million to the Allied gold pot. Kilgore argued against the terms of Switzerland’s gold payment:
"Justice, decency, and plain horse sense require that the Allies hold Switzerland responsible for all of the $300,000,000 of looted gold which they accepted from the Nazis and reject their proposition of settling for 20 cents on the dollar."
The Senator also categorically rejected the terms of the Allied-Swiss agreement that would split the Nazi assets in Switzerland on a 50-50 basis and contended that such a deal would profit those Swiss who dealt with the Nazis during the war, might safeguard the assets of wealthy German industrialists who aided Hitler, left entirely to the Swiss the management of the divesting of the assets, and allow Nazis and Nazi collaborators to regain "cloaked" portions of the $1,500 million in Swiss assets frozen during the war in the United States. Kilgore doubted that the "riches" in the assets would reach the Swiss people but would rather enrich only the Nazi collaborationists and ensure that Switzerland remained an outpost of Nazism, and the agreement would establish a pattern allowing other former neutral states to serve as safehavens for Nazism. The Senator concluded his letter as follows:
"Mr. Randolph Paul, the principal American negotiator, has personally informed me that he does not believe it possible to secure from the Swiss, by negotiation, anymore stringent terms with respect to seizure and elimination of Nazi assets in Switzerland. I believe that this is probably the case. I accordingly urge that all negotiations be broken off and that the United States take the initiative in bringing this matter to the attention of the United Nations as a matter of the highest order of security to the nations which sacrificed so much in blood and treasure to defeat Nazism and Fascism in the field of battle."
President Truman acknowledged Kilgore’s letter on May 27 and also sent a copy to Treasury Secretary Vinson with the request: "I don’t know where he gets his information but I thought it might be worth looking into." Vinson never replied to the President, and shortly thereafter was named Chief Justice of the Supreme Court. John Snyder was named by the President in June 1946 to become the Secretary of the Treasury, and he finally replied to the May 27 inquiry on July 3. Secretary Snyder’s letter sought to refute, point by point, Senator Kilgore’s allegations about the Allied-Swiss agreement. Negotiations could no longer be broken off, as the Senator proposed, because the agreement had already been concluded, and referral of the issue to the United Nations (like the Swiss proposal to refer the dispute to arbitration) was a protracted process and would leave the issue of the German assets unsettled for years, leaving security concerns weakened and denying urgently needed reparations payments to the victims of the Nazis. Secretary Snyder was convinced of the soundness of Randolph Paul’s negotiation and recalled Paul’s consultations with Vinson and with Kilgore resulting in the judgment to accept the final Swiss offer in early May. Snyder was also sure that the Allied security interests had been met by the agreement, and Kilgore’s fears about the Nazi exploitation of the unblocking of Swiss assets to be wholly unfounded. Snyder’s letter concluded as follows:
"It is my view that if the Allied Governments approach the execution of the agreement with the sense of cooperation and trust, which is basic to the agreement, German assets in Switzerland will be liquidated to accomplish the two-fold Allied objective to: (1) eliminate the use of German assets in Switzerland for future war or aggression; and (2) make these assets available for the rehabilitation and reconstruction of countries which have been devastated or depleted during the war."
On the basis of his close analysis, Secretary Snyder offered President Truman a letter of reply to Senator Kilgore responding to the Senator’s various points. The President signed and sent the letter on July 3. In it the President noted that the American negotiators had consulted with the Senator in early May and thought they had his approval of the main lines of the agreement with the Swiss. The President made abundantly clear his acceptance of the agreement:
"As you know, the Allied Delegations, after long deliberation and mutual consultation, decided to and have accepted a compromise settlement. Accordingly, the question cannot now be reopened. The factors which impelled settlement on the basis of the final Accord¾ which I believe were thoroughly explored with you before action was taken¾ seem to me to indicate strongly the wisdom of this step."
The President’s letter asserted that the Allies, under the agreement, had gained their security objectives which would be seriously jeopardized without such an agreement. Additionally, it pointed out that the agreement would make immediately available to the Allies sums badly needed for the rehabilitation, restitution, and relief in Europe including the $25 million in German assets assigned to the resettlement and rehabilitation of non-repatriable victims of Nazism and "relieve the distress and misery of Hitler’s first victims." The President’s letter summed up his endorsement of the agreement as follows:
"You will recognize that, of the amount of looted gold purchased from Germany, about two-thirds of the amounts fairly provable [$88 million] will be returned by the Swiss. The Swiss Delegation, upon several grounds, denied any liability. We, of course, did not admit the validity of any Swiss defense. But settlement of the claim on the basis finally adopted was certainly within the realm of the reasonable¾ particularly since the settlement was concurred in by France, the nation which has lost most gold during Germany occupation.
"Had no agreement been reached, and had the matter merely been referred to the United Nations, the outcome would have been extremely doubtful. Any arbitral process, which might then have resulted, would have extended over a period of years. During the arbitration our security objectives would not have been advanced; and we should have waited long for the funds which refugees and victims of German attack need immediately. I am sure that I can mention to you also the deterioration in our chances of finally obtaining a satisfactory agreement had certain of our economic controls vanished during this period. I am, therefore, satisfied that the agreement was in the interests not only of this country but also of the United Nations as a whole."
Senator Kilgore appears to have been a lone voice of complaint from the Senate regarding the terms of the Allied-Swiss agreement. From the House of Representatives, Congressman Joseph Clark Baldwin also turned to the President with a request to abort the agreement. In a telegram to the White House on July 13, 1946, Congressman Baldwin urged that the negotiation of the Allied-Swedish agreement on German assets and looted monetary gold going forward at the time be halted until the agreement with Switzerland was reexamined and more forceful directives be given to the U.S. negotiators. Congressman Baldwin said he was "profoundly disturbed" by the agreement, which netted only "$58 million out of a reliably estimated $300 million of gold looted by Germany," and he urged investigations, stating that "surely the situation warrants both Executive and Congressional investigations." Baldwin’s letter was also the subject of a New York Times story on July 17.
Acting Secretary of State Dean Acheson responded to Congressman Baldwin on behalf of the White House in a letter on July 31, 1946. Acheson’s letter, which was presumably not seen by Acheson or any other senior officer of the Department, was drafted by Walter Surrey of the Division of Economic Security and cleared by Seymour Rubin and junior officers on the staffs of Assistant Secretary Clayton and European Chief James Dunn, reported in some detail the mechanisms and definitions established under the agreement to deal with German assets in Switzerland and summarized the course of the negotiations regarding looted gold as follows:
"With respect to the looted gold problem, there was no reasonable evidence that Switzerland had purchased $300,000,000 worth of gold looted by Germany. As you will realize, there is necessarily difficulty in proving just what amounts of gold purchased by Switzerland were in fact gold which had been looted by Germany. It was conceded that about $88,000,000 worth of gold originally belonging to the Bank of Belgium had been acquired by the Swiss National Bank: the Swiss vigorously contested liability, on the ground of purchase in good faith. Under these circumstances, the Allied negotiators agreed that settlement for $58.14 million worth should be accepted—particularly since the French Government, which was the largest loser to the Germans, held this opinion."
It has not been determined on what basis Congressman Baldwin calculated the Swiss portion of looted gold at $300 million, nor is there any information about why those officials preparing Acheson’s letter disregarded or discounted the estimate of $289 million of German looted gold drawn up in February by their State Department colleague Otto Fletcher.
M. Stucki’s Appraisal of the 1946 Allied-Swiss Negotiations
A postscript to the story of the Swiss-Allied negotiations occurred in Basel on November 11, 1946, during a speech by Walter Stucki, head of the Swiss delegation at the Washington talks. Characterized by the U.S. Consul at Basel as a presentation by a disappointed and bitter man, Stucki asserted that the principles advanced by the Atlantic Charter had been violated by the very Allied nations that had promulgated the Charter. "Can one still speak of equality today, considering everything that has happened of late, the veto rights of the Great Powers, for example?" Turning to the Currie agreement, he described the setting of the negotiations as Switzerland confronting three great powers with sixteen other states arrayed behind them. Stucki claimed that in 1935 the Swiss could still say "no" to the solicitations of a Herman Goering, but "in the dangerous political isolation in which Switzerland found itself at the end of hostilities in a world lacking material and moral foundations, our no could not have avoided consequences of such action because the pressure on us was heavy."
Stucki followed in a sarcastic vein with a series of accusations he imagined the Allies had made against Switzerland, such as a "haven of Fascism." When the Swiss first learned of the Currie Mission, these negative sentiments were far from their minds. In fact, the just concluded liberation of France had raised hopes that shortly proved futile. Without identifying those "hopes," Stucki pointed out that at the time Swiss imports were at their "lowest figure." He enumerated the measures taken by the Swiss Government as a result of the Currie mission and other forms of Allied pressure. Under the circumstances, "what were we to do," Stucki asked rhetorically: Switzerland could not have dealt with the trial of nerves that would have ensued if an agreement had not been reached. According to Stucki, definitive measures against the Axis had not been taken earlier (although they were under consideration for some time) because Switzerland lacked coal which was only to be had from Germany. He continued by pointing out that the Germans understood the situation and did not consider Swiss blocking actions as an "unneutral act."
Stucki viewed the political environment as further deteriorating with the passage of Allied Control Council Law No. 5 presenting Switzerland with an array of new problems. This was particularly the case when viewed against the background of a petition presented to the Federal Council in October 1945 signed by a number of important parliamentarians and 220,000 Swiss citizens "to the effect that the blocked German assets in Switzerland were to be considered in the first place as a pledge for our own, Swiss legal claims." In enumerating the courses of action open to the Swiss, Stucki saw a total rejection of Allied demands as impracticable since it would have led to a "new campaign of the world against our country." On the other hand, the Swiss constitution and public opinion, as evidenced in the 1945 petition, made total submission impossible. Stucki stressed that the compromise reached with the Allies permitted no foreign intervention in Swiss affairs and in general sustained the Swiss constitutional injunction against expropriation without appropriate compensation.
Stucki added that Swiss consent to cede 250 million Swiss francs to the gold pool, a decision severely criticized domestically, should be viewed as a Swiss contribution to friendly central banks which had to begin their economic functions under difficult circumstances. This contribution was clearly in the national interest of the Swiss as was the return to a normal position in the world trading community occasioned by the unblocking action taken by the Allies. Stucki made no reference to the promised down-payment in support of non-repatriable refugees nor to the dire conditions facing many Europeans.
The U.S. Consul reported that Stucki’s speech was well received but recognized as the presentation of an embittered civil servant who had not received a posting commensurate with his performance on behalf of the Swiss nation.