| U.S. and Allied Efforts To Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II |
I. Wartime Efforts To Halt Commerce With Germany and Prevent the Flight Abroad of German Assets
During World War II, the United States and its Allies grew increasingly aware of the importance to the German war effort of imports from the neutral nations of Europe and elsewhere. Germany’s industrial production and military capacity depended on material such as bearings and iron ore from Sweden, precision tools and ammunition from Switzerland, chrome from Turkey, and wolfram (tungsten ore) from the Iberian Peninsula. Germany also obtained from the neutrals badly needed supplies for its war-ravaged civilian economy. The arrangements for paying for these imports also drew increasing attention from the United States and its Allies, as did the Allied effort to counter these arrangements.
In the United Kingdom, this campaign was conducted and managed by the Ministry of Economic Warfare (MEW) from the earliest days of the war. The American efforts, ambitious from the outset, were undertaken by a series of wartime agencies of ever greater size and scope. These wartime agencies were carved out of the responsibilities of the State Department and other established departments and were presided over by the President’s advisers and supporters. In April 1943, President Franklin D. Roosevelt assigned to the recently established Board of Economic Warfare (BEW)¾ initially charged with oversight of the nation’s export and import program—with the added responsibilities for advising the State Department on Lend-Lease negotiations and with relating the U.S. economic warfare program and facilities to the economic warfare activities of America’s allies. This Board, chaired by Vice President Henry Wallace and including the chairman of the War Production Board and the Lend-Lease Administration, lasted until the summer of 1943. A second phase in the American economic warfare effort began in September 1943 when President Roosevelt created the Foreign Economic Administration (FEA) with the personnel and functions of the Board of Economic Warfare and the foreign relief and rehabilitation operations of the State Department as well as functions for overseas procurement from the War Production Board and the Commodity Credit Corporation. The FEA became in sum responsible for export control, foreign procurement, lend-lease, participation in foreign relief and rehabilitation, and economic warfare, including foreign economic intelligence.
Allied efforts to impose an effective economic blockade on Germany were at first led by the British initiative, but by 1942 became an American-British enterprise. As the official British history of this effort clearly demonstrates, there were "some lively clashes of aims and moods¼ with each party at times encouraging and at times exasperating the other into ever fresh activity." Both U.S. and British authorities were determined to minimize Axis opportunities to benefit from the large amounts of gold and U.S. currency held in occupied countries as well as in Switzerland and other neutral states. Allied military successes in late 1942 and early 1943 gave the Allies more leverage in demanding that these nations limit trade with the enemy.
B. Wartime Treasury Department Controls
The main concern of the Treasury Department in the early years of the war was to prevent the Nazis from using the financial resources of the United States to finance their military campaigns and occupation costs. One way to achieve that goal was to regulate monetary transactions in foreign exchange or property dealings in which any foreign party held an interest. To assist Treasury in this task, President Roosevelt issued Executive Order 8389 on April 10, 1940, which froze Norwegian and Danish assets in the United States. Eventually, every country in Europe except Great Britain was included in this Executive Order, as well as China and Japan. Foreign Funds Control (FFC), established in 1940 with the Office of the Secretary of the Treasury and made a separate bureau within Treasury in September 1942, administered the freezing controls, permitting use of frozen assets only with a license granted by the Department.
No citizen or company from those countries could use funds or properties in the United States without a Treasury Department license. After the governments of neutral Sweden, Spain, Portugal, and Switzerland gave the United States assurances that they would forbid transactions involving blocked countries or individuals, the United States granted general licenses to those countries. Under the general licenses, the United States permitted transactions that involved that particular neutral country and its citizens. Tangiers did not come under the Spanish general license and remained blocked as part of France. The Soviet Union received a general license without providing such assurances. The Federal Reserve monitored transactions (over $5,000 for Switzerland) under Treasury Department supervision.
The FFC, in conjunction with other government agencies, believed that the United States should not allow Germany to use frozen funds to purchase American-owned property in Germany or German-controlled territories because doing so would make "the United States an international fence for the disposal of looted property." However, the Axis’ main sources of supplies, raw materials, and foreign exchange resided in the neutral and non-belligerent nations of Europe and some even in Latin America. With the gold looted from the gold reserves of central banks in the countries occupied by Germany, the Axis gained significant financial leverage in the purchasing of influence and commodities in the neutral countries. Treasury perceived the seizure of European gold reserves by the Axis as a formidable threat to Allied security, and FFC officials sought ways to prevent the Nazis from using these gold reserves to fuel their war economy and sustain their military campaigns. They needed therefore to convince the governments of the neutral powers in Latin America and Europe that they ought not to accept any gold or other property that had been stolen by the Axis powers.
C. Movements of Gold and Other Assets to and Through Switzerland, 1941-1943
Germany needed large quantities of gold and foreign exchange to pay for imports of essential goods from neutral countries, as well as to finance subversive activities. Moreover, the large payments exacted by Germany from occupied countries, combined with inflationary pressures stemming from the war effort, were reducing the stability of the various currencies in Continental Europe. In an analysis of the German financial situation at the end of 1942, the U.S. Consulate in Zurich predicted that in 1943 Germany would become vitally dependent upon exploitation of all available reserves throughout Europe.
The smuggling of foreign exchange into and through Switzerland began as early as Spring 1941, when large amounts of smuggled French francs were reported destined for transfer to the French colonies via Lisbon. Jewish and other refugees entering Switzerland were reported to be bringing large sums of dollars with them. The U.S. Treasury Department believed that nationals of Axis countries could be selling their interests in accounts blocked in the United States to Swiss purchasers, either voluntarily or under duress, and that these funds could become available to the Axis. While few details were available, the total foreign holdings in Swiss banks at the end of 1942 were estimated to be several billion Swiss francs, with German and old Austrian accounts estimated at more than $116 million. Even the diplomatic pouch was used to evade exchange controls in transferring funds from Switzerland to the Western Hemisphere and elsewhere.
Germany also used Swiss banks as intermediaries in transferring gold to Portugal, rather than shipping its own gold across unoccupied France and Spain. The Bank of France was also selling gold to Portugal, possibly to acquire escudos to pay for merchandise destined for Germany, and there were reports that the Axis powers may have been transferring escudos to South America for use in propaganda activities. Moreover, there were unconfirmed reports that Germany was buying gold coin on the French black market, having the coin converted into bullion in Switzerland, and shipping the bullion to South America to purchase gasoline and other supplies. U.S. diplomatic missions were instructed to take up these reports with central bank officials in host governments, but they were unable to uncover evidence of smuggled bullion.
Germany also sold dollar notes through Swiss banks, and some of these dollars may have been collected by German authorities from fines extracted from French Jews. An OSS report from Bern warned that smaller Swiss banks might be helping Germany acquire dollars as well through the sale of French francs. The U.S. Justice Department believed that Swiss banks were being used by Germans to invest money in the United States and in Latin America.
Officials in Washington were concerned that not only were the Axis powers using Swiss financial intermediaries in pursuit of their war aims, but that the large gold reserves in Switzerland were themselves an invitation to invasion. In October 1941, a Treasury Department decision to deny an application by the Swiss National Bank to transfer $34 million in gold from New York to Switzerland was taken up by the Board of Economic Operations in the State Department, chaired by Assistant Secretary Dean Acheson. Acheson requested that a study be undertaken of the Swiss need to purchase dollars in order to make payments in Swiss francs to U.S. officials in Europe and to pay for food and other supplies that could be shipped to Switzerland.
The Treasury Department continued to be concerned about the conduct of Swiss banking institutions. Treasury officials felt that the Swiss banking structure was entirely out of proportion to the economy of the country and that the Swiss had been able to build up their banking business to a large extent through the device of omnibus accounts surrounded by the strict Swiss banking laws assuring secrecy. In 1943 Switzerland engaged in economic negotiations with Germany that revived expired credits and increased the shipments of war materials to the Axis. In addition, as U.S. officials received reports that in the early 1930s the Germans had placed French-speaking Nazis in leading Swiss banks, they grew increasingly concerned that Nazi elements may have infiltrated the Swiss banking system.
In July 1942 the British took the initiative in proposing that a warning be made to the Axis powers, but more particularly to the neutral countries, that the Allies would not recognize the transfers of property taking place in territories occupied by the Axis, whether these transfers appeared to be legal or not. A proposed declaration to this effect was placed on the agenda of a meeting of the Allied Finance Ministers. Given only a 2-day notice in advance of this meeting, the U.S. Embassy in London sent an observer. The State and Treasury Departments subsequently took an active role in vetting the proposed text and in persuading the Soviet Union and China to join in the declaration.
The final text of the London Declaration was approved at a meeting held at the British Foreign Office on November 27. The declaration would be issued as a formal warning that the signatories would do their utmost to defeat the methods of dispossession practiced by the Axis powers "against the countries and peoples who have been so wantonly assaulted and despoiled." A committee of experts would be set up to receive information on the methods adopted by the Axis to secure control over property in Allied territory or belonging to residents in such territory, and to consider the scope of existing legislation of Allied countries by which the Axis dispossession of property could be invalidated. The forced dispossession of the property of those Jews and other victims of Nazi oppression who were residents of the Axis countries was not covered by this declaration.
On January 4, 1943, the State Department informed U.S. Missions in the American Republics that their British counterparts had been instructed to communicate the text of the declaration to the host governments, on behalf of the parties to the declaration. British Missions would also be furnishing a copy of the declaration to the U.S. Missions, together with an interpretive note for guidance in treating any discussion or publicity. U.S. Embassies in Argentina and Chile were instructed to invite host governments to make a public statement indicating that they were in sympathy with the declaration and that they did not condone the looting practiced by the Axis countries.
The declaration, signed by 17 nations on January 5, 1943, was formally entitled "Declaration on Forced Transfers of Property in Enemy-Controlled Territory," but is known as the "Inter-Allied Declaration Against Acts of Dispossession." The signatory countries reserved the right to declare invalid "transfers of or dealings with, property, rights and interests of any description whatsoever" presently or formerly situated in territories under Axis control or belonging to residents of those territories. "This warning applies whether such transfers or dealings have taken the form of open looting or plunder, or of transactions apparently legal in form, even when they purport to be voluntarily effected." The Treasury Department officials felt that this declaration would "create uneasiness in the minds of neutrals who are trafficking in German gold," and were convinced that, if the neutrals took even minimal measures to prevent the deposit and use of looted gold in their countries, such measures would "have serious repercussions upon [Germany’s] wartime economy."
The British Foreign Office informed the other parties to the declaration that the United Kingdom planned to make an introductory statement when it announced the declaration on January 5. This introduction would make clear that the systematic spoliation of occupied or controlled territory by the Axis had taken every form, from open looting to camouflaged financial penetration, and that it had extended to every sort of property, including works of art, stocks of commodities, bullion and bank notes, stocks and shares in business, and financial undertakings. The statement further warned that there was evidence that as the tide of battle began to turn against the Axis, the campaign of plunder would be accelerated, and that every effort would be made to hide the stolen property in neutral countries and to persuade neutral citizens to act as fences or cloaks.
The British undertook their declaration in order to maintain Allied solidarity. The British Treasury and the Bank of England doubted that the Declaration would achieve its goals. The British felt that there was little that could be done to enforce the Declaration without prejudicing future economic relations with the neutrals. Officials of the Bank of England foresaw that the Declaration would cause Germany to take measures to cloak its looting of Europe and its disposal of that loot in the neutral nations.
E. Prevention of Axis Financial and Commercial Intercourse With the Americas, 1941–1942
Prewar German economic penetration into South America was extensive. Even before entering World War II, the United States cooperated with the United Kingdom and the European countries overrun by Axis forces in taking measures to prevent the Axis powers from using their assets in the Americas to strengthen their position. On June 14, 1941, all German and Italian assets in the United States were frozen. The United States also worked with the American Republics to counter Axis economic penetration in the Americas. In July 1941 the United States issued the "Proclaimed List of Certain Blocked Nationals," containing the names of individuals and firms in the Americas whose activities were deemed inimical to the defense of the hemisphere. Dealings with these persons or firms were prohibited without a license. In March 1942, the 1917 Trading with the Enemy Act restrictions against trade and communications with the American Republics under wartime conditions were adapted and implemented by the Treasury Department.
Following issuance of the Proclaimed List, U.S. Missions in the American Republics began to work with host governments to find ways to eliminate the influence of enemy or Proclaimed List nationals in specific banks or industrial or commercial firms. In the case of the Caja de Credito Agrario in Colombia, the Embassy in Bogota was instructed to keep its British colleagues closely informed in the interest of having them take similar action. U.S. agencies also cooperated with their British counterparts to prevent insurance companies in the Americas from placing their coinsurance or reinsurance business with Axis companies.
In April 1942, the State Department participated in a study by the White House Office of the Coordinator of Latin American Affairs of ways and means to eliminate Axis control and influence of organizations operating in Latin America. Diplomatic missions in the American Republics encouraged host governments to put into place their own foreign property and exchange controls. In some cases, experts were sent to help in implementing control measures; in other cases, financial assistance was offered to support steps taken to liquidate and expropriate Axis firms. The Chiefs of Mission were instructed to give personal attention to ensuring that local authorities took steps to examine the files of Axis firms. The State Department believed that information in these files would reveal, among other things, sources of funds used to finance subversive activities.
The Treasury Department had set up a Foreign Funds Control unit to implement these freezing control measures. A memorandum of agreement was worked out between that office and the State Department that set forth principles for consultation and obtaining State Department concurrence in the extension of these freezing controls to neutral countries.
The U.S. campaign to eliminate Axis financial and commercial dealings with friendly countries was not limited to the Americas. A U.S.-British-Belgian agreement relating to trade with the Belgian Congo included provisions for measures designed to prohibit commercial and financial transactions with enemy states. The Union of South Africa was informed that it was U.S. policy to cut off financial and commercial transactions with nations outside the Western Hemisphere when such transactions would benefit the aggressor nations, or were inimical to the defense of the Western Hemisphere.
F. Allied Gold Declaration of February 1944
The January 5, 1943, declaration did not directly address the German export of gold. The British Ministry of Economic Warfare became increasingly concerned in the Spring of 1943 that the Germans were resorting to the sale of gold to meet their commercial debts to neutral nations providing vital supplies for the Nazi war effort. In view of the German needs and the size of the pre-war gold reserve, such gold sales were, the MEW thought, certain to be of monetary gold looted in Western Europe. The Foreign Office proposed a warning to the neutrals that if they accepted gold from Germany they would be opening themselves to claims under the terms of the January 1943 Declaration. The British Treasury considered such a warning useless inasmuch as looted gold could be melted down and made unrecognizable. In June 1943 the State Department was unwilling to join in issuing such a warning, although the Treasury Department seemed inclined to take such an action.
In November 1943 Treasury asked State to agree to the issuance of a statement on looted gold acquired by the neutral nations in dealings with Germany. The Treasury argued that the United States should not recognize the transfers of Axis gold and should not purchase gold from a nation dealing with the Axis unless it could be determined that gold had not come from the Axis, directly or indirectly. The British Foreign Office found this American proposal for a declaration far too sweeping when the State Department presented it late in 1943. Although the British Treasury was concerned that the action proposed would cause Britain and the United States "many embarrassments" after the war, both Treasury and the Bank of England swung around to willingness to support a gold declaration in the interest of Anglo-American relations.
The Declaration on Gold Purchases of February 22, 1944, made in the United States by Treasury Secretary Morgenthau, stated that the United States would not recognize the transference of title to looted gold which the Axis at any time held or had disposed of in world markets. It further declared that the United States would not buy any gold located outside the territorial limits of the United States from any country which had not broken relations with the Axis, or from any country which subsequently acquired gold from any country which had not broken relations with the Axis, unless and until the United States was fully satisfied that such gold was not acquired directly or indirectly from the Axis powers, or was not gold which any such country had been or was able to release as a result of the acquisition of gold directly or indirectly from the Axis powers. Britain and the Soviet Union made similar declarations on the same day.
G. Argentina’s Failure To Control Axis Funds, 1943- 1946
While most of the Latin American republics responded positively to U.S. urging to adopt freezing controls, several of the military regimes were reluctant to cut off their commercial and financial dealings with the Axis, or to act against Axis-dominated firms in their countries. The most serious problem for U.S. diplomacy lay with Argentina, which maintained relations with the Axis through 1943. In January 1944 following Argentina’s formal break of relations with Germany and Japan, a new pro-Axis regime headed by General Farrell came into power. On January 8, 1944, Treasury Secretary Morgenthau sent a strongly worded letter urging a general freezing of Argentine assets to Secretary of State Cordell Hull. Convinced of Argentina’s intention to destabilize the region by its involvement in the Bolivian Revolution, Hull agreed to extend a general freeze over Argentine assets in the United States, which Roosevelt ratified in an amendment to Executive Order 8389 on January 24, 1944. The Farrell regime gave open support to Axis-controlled firms and tolerated the dissemination of Axis propaganda. The United States recalled its Ambassador and refused to recognize the Farrell government.
The Klaus Mission to Spain in September 1944 looked into the possibility that Spanish banks were assisting the movement of gold to Argentina. Klaus’ report on his mission concluded that Spain’s totalitarian financial organizations made it possible for Germans to make personal deals with friends in the government to carry out transactions and transfers from Spain to Argentina or Tangier or Portugal. Argentina was viewed in FEA as in some respects the most critical Safehaven country.
Following the end of the war, the State Department prepared a compendium of information on Argentina’s support for the Axis clause, the Argentine "Blue Book," for use in consulting with the American Republics concerning the position that should be taken with regard to the military regime in Buenos Aires. The "Blue Book" charged that where the German Government preferred to transfer funds from Europe, it found no serious obstacle in any Argentine exchange control regulations, and that the availability of these funds made possible the subversive activities in which German organizations were known to have engaged. These activities included intervention in Argentine elections, press and propaganda subsidization, and purchase for shipment of strategic materials for the German war machine. The Argentine Government issued a decree in March 1945 stipulating that Axis-controlled firms would be placed under government control and possession, but delayed taking action for so long that the managers of these firms had ample time to distribute or dissipate their assets.
As early as March 1940, reports of forced movement of Jews from Germany to Poland warned that the moneys they were carrying might be confiscated at the border. Although the German government provided assurances that no steps were being taken to confiscate the property of enemy aliens of Jewish origin, it was already clear that German Jews as well as Jewish citizens of countries overrun by German forces would not be so fortunate. The Reich Citizenship Law of November 25, 1941, codified actions that were already commonplace in depriving all German Jews who left Germany of their German citizenship and declaring their property forfeited. This decree applied to Jews being deported to Poland and German-occupied territories of the Soviet Union, as well as to those Jews who had escaped to Allied or neutral countries. By late 1942, German authorities were beginning to confiscate property from all residents of occupied countries who had fled abroad. All visible wealth was confiscated, with the exception of a small percentage, usually between 10 and 12½ percent, that the emigrant was permitted to retain and export abroad. In addition to providing foreign exchange for the Axis war effort, there was mounting evidence even in 1942 that individual members of the Nazi party personally profited from carrying out this confiscation.
German authorities also obtained large sums of foreign exchange by extorting ransom from Jews and other persons who wanted to emigrate from occupied territories. This practice of extortion was particularly prevalent in the Netherlands, where the large sums of money that were demanded appeared to be most readily procurable. According to the U.S. Legation in Bern, the amounts demanded were as high as $30,000 per person. Reports of much higher ransoms were also reaching the State Department. The victims, or their friends and relatives abroad, were instructed to pay the ransom into accounts in Swiss or Dutch banks. The Legation in Bern reported that the Union des Banques Suisse in Zurich and the Wester Bank in Amsterdam were mentioned in this regard, but warned that it was difficult to gain information regarding the names of the banks that were used, and thus it had not been possible to identify the individual accounts into which the ransom sums were paid.
A report by the British Ministry of Economic Warfare (MEW) provided to the U.S. Embassy in London in early November 1942 confirmed a growing traffic in the sale of exit permits, particularly from the Netherlands, and warned that there was good reason to believe that the Germans were contemplating operations of this kind on an increasing scale. MEW wanted to issue an announcement that it would proceed with utmost rigor against those who acted as middlemen or brokers, and proposed a meeting with U.S. and Dutch Government representatives to take up this issue. At this meeting, representatives of the three governments considered the text of a draft U.K. statement warning that payments of German ransom demands would be treated as transactions for the benefit of the enemy, and that persons making such payments would be liable to prosecution. On November 24, the State Department issued its own press statement, which drew upon the report from Bern that described Nazi ransom extortions and which noted that this barbaric and inhuman practice had been discussed by the U.S., U.K., and Dutch Governments. The press statement warned that persons acting as brokers or agents in this traffic would be placed on the "Proclaimed List of Certain Blocked Nationals," issued in July 1941 containing names of individuals and firms whose activities were deemed inimical, and that persons making payments would render themselves liable to treatment as enemies.
The November 24 statement was sent at once to U.S. diplomatic missions in the American Republics. After the Embassy in Buenos Aires reported that there was increasing evidence of German extortions involving Jewish residents of Germany, with particular attention being made to obtaining payment in Switzerland, the Embassy was instructed to emphasize to the Argentine Central Bank and Foreign Office that the United States attached special emphasis to the active cooperation of the Argentine Government in preventing persons within its jurisdiction from submitting to the Nazi practices of ransom and extortion, and trusted that the Argentine Government would not make itself a party to this infamous traffic.
The case-by-case efforts of the U.S. and British Governments and by U.S. and British posts in neutral countries to suppress this traffic in exit permits finally met with success. The rate of new extortion efforts slowed after the November 1942 announcement. The leaders of Jewish communities in South America were approached and in at least two countries promised to use their influence to see that none of the members of their communities paid any ransoms. By the end of June 1943, the number of persons or firms outside enemy territory who had been applied to for help in raising ransoms had risen to 151, but only 10 of the cases were reported since November 24. Of the 151 cases, 37 involved residents in the United States and the United Kingdom. In all but 6 outstanding cases, the persons contacted had either refused to negotiate or had been prevented from making payment. Special attention was paid to identifying persons acting as go-betweens for the Germans. On May 25 seven Swiss residents were placed on the Proclaimed List for acting as agents in the ransom traffic.
Nazi efforts to collect ransom moneys did not cease altogether. In August 1943 the Embassy in London was requested to report on any information available in London concerning reports that the Nazis were taking refugee children to the Turkish border and releasing them upon payment of ransom. The question of whether and how to rescue Jewish and other victims of Nazism through ransoms or other methods persisted through the war.
(Editor’s Note: The concerns of the U.S. Government and its Allies concerning the plight of Holocaust victims and various rescue proposals, and the differences within the U.S. Government and with the governments of the major Allies over how to proceed are not taken up here except as they became a part of the discussions and negotiations regarding the control and restitution of assets from Nazi Germany, including the assets of the victims of the Holocaust. The immediate problems of caring for and providing for the victims of Nazism overshadowed in their immensity the issues that make up the subject of this report. Outstanding private historical scholarship has been carried out in recent years on U.S. refugee policy in World War II. Notwithstanding, an accurate and comprehensive review of U.S. Government records bearing on the tragic failure to rescue more than a few thousand victims of the Holocaust deserves to be the subject of a separate report.)