Testimony, House Committee on Banking and Financial Services Subcommittee on Capital Markets, Securities and GSEs June 25, l997 Gerhard L. Weinberg

First, let me make clear that I am not speaking for anyone but myself, and second, that what I have to say pertains to the time of World War II and the immediate postwar period, not to the present.

The Report referred to as the Eizenstat report seems to me to be in general very sound. Its finding that Swiss financial and trade assistance to Germany prolonged the war has been challenged but is undoubtedly correct. The Germans were not buying cuckoo clocks so that every German soldier could be provided with one to wake him up when the time came to invade another neutral country. The Swiss francs acquired by the Germans through borrowing or sales of looted gold and other items were utilized by them for intelligence operations in Switzerland against the Allies and against Switzerland itself and, certainly primarily, for the purchase of those goods and services which the German leadership at the time believed would be of greatest assistance to them in fighting the war. In their calculations and allocations they undoubtedly made some mistakes, but basically it was the war needs of the German economy which dominated. Electric power for German factories, raw materials for the German war effort, rolling stock for the German railway system, and all manner of other materials which those running the German war economy believed might assist them in the war had first call on the balances in Swiss financial institutions which the Germans acquired as a result of their looting of much of Europe.

There are three aspects of the report which in my opinion require either some addition or further emphasis. First, the report does not mention the very large credit, 850 million SF, which was extended to Nazi Germany in l940-42. I mention this because the Germans were not borrowing from Switzerland because they enjoyed paying interest but because they had to borrow to pay for purchases from Switzerland. When thereafter they suddenly came up with massive quantities of gold and other valuables, it was obvious thaat these had been looted. And this was clear long before the Allies pointed it out formally. Those running the Swiss government and banks at the time were not kindergarten dropouts but smart people; they knew what they were doing. If you own an automobile dealership and your neighbor appears one day asking to borrow a hundred dollars so that his electricity will not be turned off, the next week there is a bank robbery in your town and the description of the robber fits your neighbor precisely, and the following week he comes into your showroom and puts down $30,000 in cash for a car, you will know where the money came from.

The legal position of the Swiss government at the time and in the immediate postwar years was always that looting is legal; the looter acquires legal title to the loot, and can convey legal title to you or anyone else. That position was held not only towards Nazi Germany but also toward Communist Poland. As the report points out -- but without the emphasis I believe it deserves -- in l949 the Swiss government signed a secret agreement with the Communist government of Poland under which the Swiss government with the agreement of the regime in Warsaw looted the accounts in Swiss financial institutions of those Polish citizens who had been murdered and who either had no heirs or whose heirs had been stonewalled. The proceeds of this looting operation were then paid over to Swiss citizens who had claims on Poland arising out of the nationalization and/or confiscation of their property in Communist Poland. Note that suddenly the accounts which either could not be located or did not exist -- depending on which week the Swiss negotiators were speaking to the Allies or the organizations looking after Holocaust survivors -- _COULD be located the moment the accounts were to be identified and emptied so that payments could be made to Swiss citizens. I am not suggesting that the individual recipients knew that there was blood on this money; however, everyone concerned in the government and banks knew, since by definition, the accounts emptied were those of the murdered.

This brings me to the second point. As the report indicated, in April l945 the Swiss government signed a secret agreement with the German government which violated the agreement they had reached with the Allies in the preceding month. With Allied troops about to meet in the middle of Germany, this obviously had nothing to do with fear of a German invasion. As should, perhaps, have been made more explicit, this agreement and the many prior arrangements of various sorts with the Nazi government of Germany detailed in the report, had no more to do with pro-Nazi sentiments than the l949 agreement with Poland (or a similar agreement with the Communist regime in Hungary) involved pro-Communist sentiments, nor should such deals be attributed to anti-Semitism or anti-Catholicism. I am not suggesting that there were no pro-Nazis, anti-Nazis, anti-Semites, philo-Semites, anti-Catholics, or pro-Catholics in the Switzerland of the time. My point is that all such considerations were insignificant as compared with priority number 1: making as much money as possible for Swiss citizens, and to do so regardless of legalities, morality, decency, or anything else. There is an irony in the fact that the characteristic so often falsely attributed to Jews -- greed for money above all else -- was in fact the constant policy of those involved in these wartime and postwar procedures.

The third issue to which I want to draw your attention is of an entirely different kind. In dealing with the reluctance of the Western Allies to push the Swiss government too hard, the report repeatedly mentions in passing that the Allies were concerned about the fate of the British and American preisoners of war held by the Germans. Switzerland was representing Allied interest to the Germans, and the Red Cross was involved in arranging inspections, food parcels, and correspondence links for these prisoners. It is my opinion that this issue was vastly more important in restraining the Allies from pressuring the Swiss government than the report might lead one to believe. There was always concern that the Swiss government, and the Red Cross, might renounce their role if we pushed them too hard, a step that might well endanger the fate of these POW's.

It is important to note that this concern increased rather than decreased after the tide of battle turned in favor of the Allies, and it did so into the last days of the war. It was obvious that the number of Allied prisoners held by the Germans was likely to increase as the war continued: there would be POW's taken at the front in Italy and the West, and there would be members of aircrews who had to bail out during operations over the shrinking portion of Europe controlled by the Germans. No one could predict the numbers; everyone could predict that the total number would go up.

It was known that the Germans slaughtered Red Army POW's by the hundreds of thousands; it was known that there had been terrible incidents -- perhaps the most notorious one involving Americans being the one during the Battle of the Bulge; but it was also known that on the whole, the vast majority of British and American POW's were surviving. Would the Germans allow this to continue? Would they issue orders, as we were beginning to understand that the Japanese had, to kill them all before they could be liberated? We know now that this did not happen, but it should be easy to understand that Allied officials at the time did not know and had every reason to be concerned.

In February l945, during the fighting in Manila in the Philippines, Japanese soldiers not only raped and slaughtered tens of thousands of Filipinos but also broke into the Spanish dipomatic mission there and raped and slaughtered about 200 people inside. What has this to do with our subject? The answer is that Spain had been representing Japanese interests to the Allies and in response to this outrage formally renounced that role. Renouncing such a role had few if any precedents; it must have reminded the American and British governments at the time -- as they received the formal notification in the last months of the war in Europe -- that something like this could indeed happen. It seems to me that as we look back on events from today's perspective and with today's knowledge, we must be very careful to make allowances for the concerns of those who faced agonizing choices at the time.

I would like to conclude with a brief reference to the immediate postwar years. A major concern of the allies was the reconstruction and recovery of Europe; we were in fact putting substantial amounts of American money into the Soviet dominated portion of the continent through UNNRA. The Cold War does not enter the picture substantially for several years. It was the relief and reconstruction concern that made it difficult for the allies to pressure Switzerland, especially because the British government of the time was unwilling to participate in such a policy. Their main concern was the recoveryof an economy terribly drained by the war; their second worry was that compensation to Holocaust victims and their heirs might enable more of them to get into the British mandate of Palestine. But no economic pressure on Switzerland would work unless all the major trading nations were willing to participate. In effect the British had a veto and exercised it. The profiteers could rest easy on whatever they had pocketed while others had sacrificed to protect their safety and Switzerland's independence.

References:

For Swiss credits to Germany and related support of the German war effort, see the piece by Daniel Bourgeois in "Operation Barbarossa and Switzerland," in Bernd Wegner (ed.), __From Peace to War: Germany, Soviet Russia and the World, 1939-1941__ (Providence: Berghahn Books, 1997), pp. 593-610, which also has a useful bibliography.

For German espionage against Switzerland, including the payments to Swiss citizens involved, see Hans Rudolf Fuhrer, __Spionage gegen die Schweitz: Die geheimen deutschen Nachrichtendienste gegen die Scweitz im Zweiten Weltkrieg, 1939-1945__ (Frauenfeld: Allgemeine Schweizerische Militaerzeitschrift, 1982), esp. pp. 19ff.

On the Spanish angle to the Japanese massacres in Manila in 1945, see Gerhard Krebs, "Japanese-Spanish Relations, 1936-1945," __Transactions of the Asiatic Society of Japan__, fourth series, vol. 3 (1988), p. 49.