The Transfer Agreement (56 page)

These were complicated concepts of high finance that Senator was presenting. They were hard to comprehend and might be harder still to imple
ment. But in paragraph 16 of his memo he estimated just how much money was at stake. The bonds sold against the blocked deposits of German Jews could amount to $
150
million in just two years. These bonds might require a mere 7 percent interest, with repayment of principle waived during the first five years. Thereafter, the principle would be paid in equal installments over two decades.
⁵

The Zionists were suddenly taking charge of a massive store of frozen cash. They could use that cash to create a bank. That bank could raise capital to build the State of Israel through development bonds that would be repaid out of the Palestinian commerce created by the development. Even then, payment would occur under the most advantageous rates. The bonds would be backed up by German Jewish sperrmarks to be stabilized by some hopedfor Reich guarantee of the marks needed for bond repayments, even if the mark devalued due to the deteriorating Nazi economy. Otherwise, the value of a pool of reichmarks, say RM
1
million, could dwindle to virtually nothing.

Senator's July 24 memo admitted that "it would be possible to obtain such a transfer guarantee ... only against certain concessions on the Jewish side .... We might offer ... certain export facilities for German goods. Such facilities are already being sought with some anxiety by the German government in view of the recent rapid decline in German exports." Here Senator was probably talking about extending exports to the entire Near East, perhaps beyond. Senator also suggested that the Liquidation Bank should actually make development loans to Germany "and thus make possible an increased employment program on the part of the German government."
⁶

Senator's memo acknowledged that the Zionists knew just how desperate the Germans were. Senator's words: "From preliminary negotiations ... with the Economics Ministry, we know that special importance is attached to any measure ... to counteract the present tendency of German exports to decline. The German government knows very well from experience during the War, that a decline in exports means not only the loss of orders for a year or two, but that [trade] obstacles ... increase progressively, and that reconquering markets once lost is possible only with great difficulty and expense, and even then only partially." Acknowledging that the boycott had already battered German exports to the breaking point, Senator declared that Zionists could at least "help Germany ... avoid the almost certain rupture of commercial relations."
⁷

Reflecting a keen awareness of Hitler's unemployment problem, Senator added, "We know that one of the principal aims of the German government is to provide work for the unemployed." Senator explained that the residual Jewish community in Germany would have little chance to earn a living unless overall employment improved. As such, "We shall have to ... offer the German government some help with their program for providing employ
ment." For example, the Liquidation Bank, in addition to providing employment loans, would itself purchase shares in major German enterprises, such as the railroads.
⁸

Senator's long transfer memorandum wasn't the only report the Zionist Organization Executive considered in late July. At about the same time, a second memo came through Leo Motzkin, head of the Committee of Jewish Delegations in Geneva.
⁹
It spoke not of high finance and long-term loans but of high crimes and long-term damage to the Jewish people of Germany. The report began, "For close on six weeks ... I have been in contact with Jews in all stations of life. Professors, doctors, solicitors, manufacturers and businessmen, young and old, from towns as far apart as Danzig and Aachen .... They one and all affirmed that they were living in a veritable Hell .... The actual number of cruelties and of violence perpetrated against Jews ... will never be known. Those reports which have penetrated abroad, are only a small fraction of what has actually occurred."
⁹

After listing a series of atrocities, and confirming the utter bleakness of a Jewish future in Germany, Motzkin's report divided German Jewry into five categories. First, the "genuine Zionists," who were quickly leaving Germany without thinking of who would stay behind to organize the exodus. Second, the non-Zionist now hoping to find safety in the Zionist movement. Third, the anti-Zionists willing to go to Palestine if no other place was available, but this group's emigration would be contingent upon taking "German culture, German customs, German manners, and the German language with them."
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The fourth category was comprised of establishment Jewry, who "attribute the entire disaster which has befallen German Jewry to the Eastern Jews, who are all Zionists. They do not want to go to Palestine .... [They believe] the Jews in Germany should be satisfied with being considered an inferior species of humanity. The fifth category are the . . . German Nationalist Jews. They are not
100
percent but
101
percent German."
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The point: Except for the small percent who were genuine or newly converted Zionists, almost all of Germany's established Jews still reviled the Jewish national home and the Zionist philosophy. They were desperate but seemed to prefer a German death to a Palestinian life. However, the report emphasized the "undeniable fact that young German Jewry, even from the fifth category, are turning to Jewish nationalism. What we have not been successful with during 30 years, Hitler has accomplished for us overnight."
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The report's conclusion: "The majority of the older generation of German Jewry cannot be moved, they are too deeply rooted in the soil of the country. A large portion does not want to leave. But the Youth are anxious to start a new life as Jews and every effort should be made to rescue them from ... utter destruction." However, the report added that while emigration would save the young, only an intensified international boycott would help the older generation survive in a hostile Reich.
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"The boycott of German goods in various countries is having a very material influence on German trade and the effects are undeniably being felt," the report asserted. [And it is] the only weapon which might ... [influence] the present order to restrain the violence of the rank and file." The report recommended that the "boycott be increased and extended. Concentrated action against a few more industries will intensify the already serious economic situation in Germany and will force the present order to change its tactics."
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The report presented through Motzkin may have seemed like a reasonable compromise. Transfer the true believers to Palestine. At the same time, continue boycotting to force Germany to curtail persecution of those remaining. Unfortunately, the Third Reich was willing to release any number of Jews for Palestine as a means of expulsion, but it was unwilling to let them remove any of their assets unless the Zionists intervened against the boycott. Unless assets preceded emigrants, there would be no real nation to emigrate to. Motzkin's boycott report was rejected. Senator's report for stabilizing the German economy was accepted.
It
was simply a matter of priorities.

What began as a purely noble task in the minds of a few German Zionists quickly diluted into a grand bazaar of business opportunities. The notion of tranfer was itself steeped in business transactions with Germany. When complete, Palestine would possess the commercial-industrial framework needed to supply a population's needs, provide jobs, and qualify the Jewish State as a member among nations in world commerce. This was sensible. A true nation was more than a haven, more than a commune. It was a land whose citizens could live, work, and prosper in peace. Therefore, the transfer of industrial machinery to build factories was intrinsic to state building as surely as the transfer of hospital beds and irrigation works.

Israel's commerce was to be as diverse as any nation's. In fact, this was a special feature of Zionist self-determination. Whereas Jewish economic opportunities had historically been confined, the opportunities in Israel would be unlimited—including the opportunity to earn one's bread by sweat and labor in fields and factories.

But in the summer of
1933,
as the transfer apparatus developed, the lines between welfare and windfall blurred. What was state building, and what was pure commercialistic opportunism? Indeed, this conflict represented the critical flaw in the actions of Mr. Sam Cohen. For his flaws, Cohen was replaced with a fleet of brokers and enterprises that did enjoy the Zionist Organization's seal of approval, but were nonetheless just as commercialistic. So it soon became impossible to distinguish between the unhappy burden of doing business with the Third Reich to facilitate emigration, and the gleeful rush of entrepreneurs frantic to cash in on the captive capital of Germany's Jews.

For example, in the summer of
1933
a new publishing company was formed in London, headed by leading Palestinian publisher Shoshana Persitz. Its board included such notables as financier Robert Waley-Cohen, Hebrew University chancellor Judah Magnes, Palestinian industrialist Pinchas Rutenberg, and JNF director Menahem Ussischkin. The venture would be called the Palestine Publishing Company. Its feasibility hinged on the purchase of
£80,000 ($400,000)
worth of printing presses and other lithographic equipment from Germany, only half of which was to be paid in actual pounds. The remainder would be paid out of blocked marks. To complete the transfer, Palestine Publishing would deposit minority shares instead of money in the balancing account. Thus, a new industry was created for Palestine that would have been financially impossible except for the transfer.
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In early August, several of the original transfer conceptualizers in Jerusalem, including Felix Rosenbluth and Arthur Landsberg, formed Exim, a company to import German steel via the transfer apparatus. The first transaction called for RM
500,000
in German steel, only
40
percent of which would be paid in foreign currency. The remainder would be paid in blocked transfer marks. There was no particular public character to their enterprise, no charitable by-product of Exim sales. Although steel was vital for housing and factories, Exim was in fact just a company selling German steel products via transfer.
¹⁶

In August another group of investors decided to establish a brewery in Palestine. The German government agreed to transfer brewery equipment valued at RM
750,000
(about
$250,000), 90
percent of it paid by sperrmarks. The balance would be foreign currency supplied in part by the American Economic Committee for Palestine in New York.
¹⁷

The Palestine Publishing Company, Exim, and the new brewery represented just a fraction of the Palestinian-German business ventures that came into play during July and August as the bonanza that lay within the transfer became known in business circles. Were these business deals little more than taking advantage of the crisis facing German Jewry? Or were they legitimate efforts to build the Jewish home by developing the Palestinian economy? All enterprise in Palestine of course expanded the Jewish national economy by providing jobs, services, products, and capital. But then again, in
1933,
all nations and their citizens were struggling to recover from the Depression. Those who placed the boycott against Germany before lucrative business deals were sacrificing in the fight against Hitler. Palestinian entrepreneurs simply concluded that they could not afford to be part of that fight. A nation was being built. For now, there could be no wars. Only alliances.

An alliance with Germany based on trade quickly shifted the Zionist emphasis from the people caught in crisis to the money caught in crisis. By late July, transfer activists spoke increasingly of "saving the wealth" and
"rescuing the capital" from Nazi Germany. The impact on the German Jews themselves seemed to be a subordinated issue. It was this very accusation that led to the rejection of Mr. Sam Cohen. And it was to avoid private-sector exploitation that the Zionist Executive had convinced Cohen to bring his mid-May deal under "national supervision." This meant sharing the transfer with the rival company Yakhin, operated by the Histadrut, the official labor conglomerate essentially controlled by Mapai. Yakhin and Hanotaiah had eventually signed a binder of cooperation, but Yakhin ultimately joined the Conference of Institutions.

However, at a July
31
Histadrut Executive session called to review the transfer, Histadrut leaders acknowledged that from the outset their main interest was forming a special investment combine to usurp the project from Hanotaiah. Then the Histadrut leaders unveiled a plan for a sort of mandatory loan that German emigrants would extend to a Yakhin subsidiary called Nir, which would purchase German goods for sale in Palestine using blocked funds. But instead of depositing all the proceeds in the Palestine balancing account, thus completing the transfer, Nir would essentially convert two-thirds of the transaction into a mandatory fifteen-year loan, using the money for large land purchases and housing construction.
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One of the leaders attending the July 31 meeting objected, "Frankly, this imposed loan has a bad smell. The Jew in Germany might claim he is being forced to loan money, while the Jew in the States is not." Such hesitation was brushed aside, however, as Histadrut leaders agreed that "constructive" tasks were of the highest priority. And unless a public body such as the Histradrut seized control, "it will turn to a gang of speculators."
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