California asked to lift sanctions on Swiss banks
October 24, 1997
Web posted at: 7:24 p.m. EDT (2324 GMT)
NEW YORK (CNN) -- The State Department has asked the state of California to lift actions it took against Swiss banks, under fire because of questions about money deposited by Holocaust victims and possible ties to Germany's World War II Nazi regime.
California, Massachusetts and New York City have all taken action to limit their financial dealings with Swiss banks, a response to what was seen as delays in producing information about dormant World War II-era accounts and providing restitution for the lost money. The State Department has termed such measures as "counterproductive."
In California, State Treasurer Matt Fong placed a moratorium on any state investments in the banks, which has resulted in the pullout of $2 billion in the past year.
In a letter to Fong, U.S. Undersecretary of State Stuart Eizenstat warned that "sanctions and boycotts" produce a "negative reaction in Switzerland" and create the impression "they are under unfair attack."
As recently as one year ago, California had $2 billion invested in certificates of deposit with Union Bank of Switzerland, Swiss Bank Corp., and Credit Suisse. By August, when the last of those certificates matured, the state was left with no investments in -- and no loans from -- the banks.
In his letter, Eizenstat told Fong that the "Swiss banks have taken a number of steps to redress past mistakes and provide assistance to Holocaust survivors."
The undersecretary made reference to a "cooperative approach" by Swiss leaders in identifying dormant accounts, publishing names of account holders, implementing a relaxed claims process and establishing a $190 million fund for needy survivors, which begins disbursements next month.
"We are reviewing his concerns, and we appreciate the benefit of his views," said a spokesman for Fong. The treasurer is scheduled to meet soon with Switzerland's ambassador to the United States, Alfred Defago.
Last month, New York City became the first local government to take action against Swiss banks. The city's comptroller, Alan Hevesi, denied United Bank of Switzerland a chance to back routine borrowing of $1 billion and to earn a major share of the $1.3 million fee.
A spokesman for Hevesi said Eizenstat has been invited to express his vies on this subject at a conference in New York in December.
Massachusetts has also taken steps to punish Swiss banks. Last week, State Treasurer Joe Malone terminated the state's relationship with the Union Bank of Switzerland, canceling a short-term borrowing arrangement with the bank worth $120,000 a year in fees.
Eizenstat has been the Clinton administration's point-man on the questions surrounding the possible relationship between Swiss banks and the Nazis. In May, he issued a report highly critical of Switzerland's relationship with Nazi Germany, concluding that it may have helped prolong World War II.
A spokesman for Eizenstat said his office is setting up a process for informing state officials further about this issue.
"In an atmosphere of cooperation, we have gotten progress from the Swiss banks. We're saying, `Here's what they've done.' We feel confrontation would be counterproductive. We don't question the states' motives. We question their approach," the spokesman said.