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Nazi Gold: The Role of the Central Banks - Where Does the Blame Lie?

William Clarke

From Central Banking, Volume VIII Number 1, Summer 1997

William Clarke is chairman of Central Banking Publications and author of The Lost Fortune of the Tsars (Orion, London)

Moralising with hindsight is an easy temptation. The growing avalanche of official evidence concerning the acceptance of Nazi gold and what may be called Holocaust deposits during and after World War II has produced a similar avalanche of emotions: fierce accusations, condemnations, pity and guilt. The actions of individuals, governments, firms, commercial banks and central banks are all now coming under a pitiless microscope, thanks to the efforts of two men: Edgar Bronfman, head of the World Jewish Congress and Senator Alfonse d'Amato, chairman of the US Senate Banking Committee.

High on the list of those now needing to explain their war-time and post-war actions are the Swiss commercial banks (represented by the Swiss Bankers Association), the Swiss National Bank and, as it is increasingly perceived, even the Swiss nation. To their credit there are signs that Swiss nationals are beginning to respond in a humane manner. It is a pity that it has taken political pressure of a truly remarkable kind to get an appropriate response from the Swiss commercial banks. The stain will take years to assuage.

Basic accusations

The basic banking accusations can be summed up as follows:

  1. Swiss banks accepted both money and gold deposits from refugees from Nazi Germany before and during the war and subsequently placed obstacles in the path of descendants of those killed in the Holocaust wishing to claim such deposits.
  2. The Swiss National Bank accepted gold bars from the Reichsbank, some smelted down from gold stolen from other central banks and some no doubt extracted from Jewish victims in Nazi extermination camps.
  3. Neutral central banks, such as those from Portugal, Spain, Sweden, Turkey and Argentina all accepted Nazi gold, in one form or another, some of it looted, either during or immediately after the war.
  4. The Swiss National Bank, as well as the Bank for International Settlements, based in Switzerland, openly carried out gold transactions between neutral central banks and the Reichsbank during the war, thus facilitating the Nazi war effort.

Others accused too

The accusations have not, however, been confined to the Swiss alone. German firms who built the Nazi extermination camps and supplied the gas for gas chambers; German mints who turned the gold teeth fillings of exterminated Jews into 'respectable' gold bars; 'neutral' intermediaries who, like the Swiss, were instrumental in channelling gold bars, former gold fillings, out of Nazi Germany; Allied governments who took too lenient a view of Swiss actions immediately after the war; and central banks (and the Bank for International Settlements in Basle) who accepted former Nazi gold, some without too many qualms, in settlement of war-time and other official debts: all have stood in the dock of world opinion over past twelve months. Few have escaped censure.

Apportioning blame

There are two difficulties in trying to assess where the 'blame' should lie and where belated action is still urgently needed. One is the sheer volume of recent revelations.. Even now the flood has hardly subsided and several official inquiries have still to report. The other difficulty is how to pick one's way through this tragic mixture of cold-hearted calculation and unthinking reactions in a war-torn world, half a century later. All I have attempted in this article is to clarify a particularly narrow, though significant, area - what role neutral central banks (including the Swiss National Bank), the Swiss commercial banks and the Bank for International Settlements played, and what, if any, lessons they should now be contemplating.

What brought matters to a head and to a dramatic change in Swiss attitudes were the continued efforts of the World Jewish Congress, particularly in its evidence to the US Senate Banking Committee. Coupled with the belated emergence from German archives of Reichsbank gold dealings with Switzerland and the Bank for International Settlements and, finally, two official Foreign Office reports in London, these Senate hearings soon had the Swiss banking community on the defensive.

The first Foreign Office report, containing as it did a simple currency slip, led within days to world headlines accusing the Swiss, rightly or wrongly, of still holding up to $6 billion of Nazi gold, including that from the dental fillings of Holocaust victims. If unclaimed monetary deposits of Holocaust victims in Swiss banks were included, it was alleged without precise evidence, then the total owed by the banks could be nearer $20 billion. Law suits for that precise sum, known as 'class actions', swiftly followed against the three top Swiss banks by leading law firms in New York and Washington.

Swiss façade crumbles

It was not long before the first real crack came in the Swiss facade - the chairman of Crédit Suisse proposed the setting up of a well-endowed compensation fund for Holocaust victims. Combined with growing threats to freeze Swiss assets and to revoke Swiss banking licences in the US, and the threat of further revelations, the Swiss Government finally acted. It endorsed the proposal to set up a humanitarian fund for the Holocaust victims by proposing the revaluation of Switzerland's gold reserves, sufficient to provide a fund of $5 billion, from which $250 million would be produced annually to compensate victims of all human catastrophes including the Holocaust.

The US Senate Committee's inquiries had thus not only produced a remarkable Swiss reaction, belated though it was. It had also spawned a flood of official reports and other inquiries: two reports, already mentioned, from the Foreign Office in London, one from the Bank of England, one from the Bank for International Settlements in Basle and finally, though hardly the last, a 200-page report from an Under Secretary of State in the US Department of Commerce, appointed personally by the President. Further inquiries continue: a five-year Swiss historical inquiry into the official Swiss archives; an investigation by Swiss historian Peter Hug in to Switzerland's post-war deal with communist Poland under which Jewish money was used to compensate Swiss citizens; and an inquiry, chaired by Paul Volcker, former chairman of the US Federal Reserve, into unclaimed Jewish and other refugee deposits in Swiss bank accounts. Finally, an International Conference on Stolen Gold is promised by the US State Department and the British Foreign Office in London later this year.

$400m through Switzerland

What then has emerged from these investigations so far? First a few facts. It is calculated that Germany began the war with reserves in the Reichsbank of around $208m, of which some $97m represented gold already stolen from Austria, Czechoslovakia and Danzig. The total amount of gold looted by the Nazis during the war itself, not only from the defeated nations, such as Belgium, Holland and Hungary, but from Jewish and other victims of the Nazis is now estimated at $580m. Of this about $400m (worth $4 billion today), according to US Under Secretary Eizenstat, "went to Switzerland either to the Swiss National Bank's own account, or to the account of other countries at the Swiss National Bank". The Swiss accepted some $280m ($2.8 billion today) on their own account.

Exported with pre-war date stamp

German archives, including those of the Reichsbank, clearly indicate that the Nazis had consistently re-smelted and exported, with a pre-war date stamp, both former looted gold bars from other central banks and the gold channelled to it from the extermination camps. It was a simple attempt (that did not always succeed) to disguise the original source of some of the gold when it was transferred to such places as Switzerland, Sweden, Portugal, Spain and Turkey, in exchange for precious hard currency to finance the war. Triangular deals between the Reichsbank, the Bank of Switzerland and the Bank of Portugal, for example, were regularly monitored by the Allies during the war. And the same went for deals between the central banks of Spain, Sweden and Turkey, again in triangular deals with the Reichsbank and the Swiss National Bank.

Did central banks know it was tainted?

The question is how far the recipient central banks were aware of the true origins of the gold bars they accepted. Immediately after the war the Swiss National Bank denied taking any 'tainted gold'. But subsequent reports showed clearly that Nazi gold, originally owned by Belgium, had been re-smelted and shipped to Switzerland. Moreover a later interrogation report by Dr Puhl of the Reichsbank, who had dealt with the Swiss National Bank, "stated clearly that in his view Swiss bank officials had been aware that the gold in question had been looted". There is also apparently clear evidence of Holocaust victims' gold being passed, for example, through Switzerland to Sweden and Italy and US Under Secretary Eizenstat seems convinced such gold would have been received "by all of the neutral countries".

BIS accepted gold looted from Holland, Belgium and Italy

In addition, it is now clear that the Bank for International Settlements in Basle, in effect the central banks' bank, received Nazi gold during the war, thus facilitating the Nazi's war effort. As early as 1945 the US Military Government in Germany (OMGUS) concluded starkly that "the BIS accepted looted gold, aided the Reichsbank in salvaging assets threatened by blocking in neutral countries, was dominated by Axis interests, continued pay dividends to occupied countries in spite of the inevitable confiscation by the Nazis, and furnished financial intelligence to the Reichsbank". Little wonder that the BIS was fortunate to escape outright liquidation, strongly recommended by the US Treasury Secretary in November, 1945. It is now confirmed that the BIS actually acquired 13,452 kilograms of looted Nazi gold during World War II (worth more than $15m) and still had 3,893 kilograms at the end of the war (worth $4.4m). The BIS looted gold was later identified as originally belonging to Holland, Belgium and Italy.

Allocating the Nazi gold

Against these facts, it is instructive to record what Allies, BIS, the Swiss National Bank and other "neutral" central banks stated and did following the cessation of hostilities. First, and briefly, the Allies. The US, Britain and France set up a joint Tripartite Gold Commission to analyse and re-allocate the monetary gold captured by the Allies at the end of the war. The gold was held on behalf of the Commission at the Bank of England, the Federal Reserve Bank of New York and the Foreign Exchange Depository in Frankfurt. Claims were matched against the gold recovered. Because of war-time losses, claimants were eventually granted 64% of their claims. Distribution stretched out from 1947 to 1982, with a final payment being made to Albania in October 1996. As a result some three and a half tons of gold remain at the Bank of England and two tons at the Federal Reserve Bank of New York, worth in total about $70m. Claims remain outstanding from France, Austria, Holland and Italy, but it is proposed that a 'substantial' amount of the remaining gold should now be allocated to Holocaust survivors or victims.

The BIS, for its part, after initial reluctance, finally made a payment of some $4.2m to the Tripartite Gold Commission for redistribution among the deprived central banks and, thereby, assured its own survival. Meanwhile the Swiss initially protested that they had received no looted gold from Germany. After several years of reluctant discussion, however, they finally offered $58m to the Allies, compared with the $280m of looted gold now estimated to have been accepted by the Swiss National Bank. Beyond that, although the Swiss promised to provide the Allies with 50% of the liquidated German assets in Switzerland, all that was eventually passed over by the Swiss was $28m, compared to the Allied estimates of $250m to $500m.

'Heirless' deposits remain

So much for the Nazi gold question. There remains the worst element of the war: the so-called "heirless deposits" of gold and currency in Swiss banks belonging to the survivors and relatives of victims in Nazi camps and elsewhere in Eastern Europe. The evidence given before the US Senate Banking Committee provided personal, heart-rending examples of the difficulties in establishing details of family accounts in Switzerland. The reaction of the Swiss bankers to Allied questions immediately after the war was particularly discouraging. At first they denied having any. Then, under pressure, the Swiss Bankers Association reported that a survey had discovered deposits of no more than the equivalent of $100,000. The next estimate by the Association in 1964 pushed up the total to $2.5m, though it was later claimed that only 26 of the 400 member banks had replied.

By 1997 the total announced by the Association was $40m. In July this year the Swiss Bankers Association eventually published the first list of pre-war dormant accounts in prominent newspapers, giving claimants six months to apply. This list contained 1,872 non-Swiss names, over half of which were from France and Germany. A further 20,000 names are promised in October. These lists will need careful scrutiny and the basis on which they have been compiled fully explained.

It is now up to Paul Volcker and his audit committee to establish the truth. A preliminary audit is due fairly soon and the final report next year.

It is too soon to come to final conclusions. Too many inquiries are still continuing. But it is not too soon to conclude that, above all else, the final response of the Swiss Bankers Association to the Volcker report, whatever its conclusions, will be crucial to the Swiss national image. As for the central banks plainly involved in the receipt of Nazi looted gold, basically those of Argentina, Portugal, Spain, Sweden, Switzerland and Turkey, they too must now review their war-time actions. As the US report put it "neutrality collided with morality [in World War II]; too often being neutral provided a pretext for avoiding moral considerations". The time has come to wipe the slate clean.


History Notes No.11. Nazi Gold: Information from the British Archives: Foreign Office, London, September 1996 (Revised January 1997)

History Notes No.12. Nazi Gold: Information from the British Archives, Part II: Foreign Office, London, May 1997

Nazi Gold: Background Note to Editors. Bank of England, London, May 1997

US and Allied Efforts to Recover and Restore Gold and other Assets Stolen or Hidden by Germany During World War II. Preliminary Study. US Department of Commerce, May 1997 (Plus summary of Press Briefing by Stuart E Eizenstat, US Under Secretary of Commerce for International Trade).

Introductory Note on The Bank for International Settlements 1930-1945. BIS, Basle, May 1997

Note on Gold Operations involving Bank for International Settlements and the German Reichsbank, 1st September, 1939 - 8th May, 1945. BIS Basle, May 1997.

Tom Bower, Blood Money: The Swiss, the Nazis and the Looted Millions, Macmillan, London, 1997.

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