Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (40 page)

The Vatican’s source of information during this period were anti-Hitler officers within the German military, who were warning that an attack on Holland, Belgium, and France would take place in early May. The tips were correct. France’s Charles Roux wrote Taylor that he had seen the pope about the invasions and that Britain’s Sir D’Arcy Osborne was going to see him as well. The Frenchman called the attacks a “shameful action enterprised by Germany in violation of the international law.” Roux also told Taylor that it would be “comforting” to him and Osborne to “feel your presence in Rome for a few days to come.”
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That, however, did not happen. Only two days later the American diplomat had to leave for Florence to get emergency medical treatment. A few weeks before at a diplomatic dinner in Rome, he had eaten bad lobster and become quite ill. Since he had undergone two operations just before Roosevelt named his as his personal representative, Taylor took his health seriously. The Florence doctor had been recommended to him.
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Before leaving, Taylor had an hour-long meeting with the pope to discuss the German invasion. He learned that the Vatican had warned Dutch Crown Princess Juliana about an imminent attack during her visit to the Vatican just days before it took place. The pope also passed along to Taylor Mussolini’s reply to the pontiff after the invasion. The Italian leader had ominously warned the pontiff, “I cannot, however, give absolute assurance that it will be possible for us to remain non-belligerent until the end.”
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Taylor was back in Rome on May 17, and four days later sent an emergency message directly to the president, rather than through the State Department. The letter began: “The Vatican Secretary of State has asked of you the following favor.” It went on to explain that the Vatican State had a “sizable amount of gold on deposit in a bank in a belligerent country.” It turned out that the gold was then stored in Britain. The short cable said that the Vatican wanted to “deposit for safekeeping in trust with New York bankers.” Taylor wrote that papal officials wanted to sell gold and to be assured that “as in case of other states with deposits in America that the gold will be intact and in all ways free under our laws.” Church leaders had no experience in this type of operation and were terrified that it would become known. The cable ended: “Vatican very anxious to avoid any publicity.”
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The issue was given to the Federal Reserve since it handled gold matters, but officials were at something of a loss about what to do. Working out the details of the Vatican gold transfer was handled by telephone so as not to leave a written trail. The Federal Reserve officials were used to making such transactions with other central banks or commercial banks, but not with the Vatican, which did not have a central bank. At times Federal Reserve offficials seemed to be all thumbs, not knowing whether the Vatican could be considered a government. There were also concerns in Washington that the Vatican in the past had been too cozy with Hitler and Mussolini. The Fed at one point attempted to shift the issue to the State Department, but officials responded that it didn’t have relations with the papacy because it “had no diplomatic standing.” Fed vice president L. Werner Knoke replied in a memo that he understood the department’s position because the New York Fed “at the very beginning tried to get away from handling this business.”
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During a telephone conversation between George L. Harrison, the head of the New York Fed, and Marriner Eccles, the chairman of the Federal Reserve Board in Washington, Harrison started the call by saying, “I’ll talk, Marriner, as though I were talking with you.” He went on to explain that he had received a phone call from the Treasury Department and that someone had dictated over the phone a memo that had arrived from Rome. It said: “The Vatican State would like to ship to New York for deposit and safekeeping with New York bankers a sizeable amount of gold bars which it does not wish to sell.” The memo also noted, “The Vatican very much desires to avoid any publicity on the matter.” Rome also wanted a reply by the next day.
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Harrison explained that he would usually have taken up such a matter with his board, “but the time factor makes it impossible to do that.” He said that his bank had never before dealt with anything but another central bank or a government, and he was unsure about where the Vatican fit. He then said he thought his bank could take responsibility for the matter, under its institutional power “to deal in gold.”
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Eccles ended the talk with another appeal for secrecy, saying, “It’s terribly important, I can see, that this thing is kept quiet.”
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The Federal Reserve board in Washington held a special meeting at 2:00 P.M. and agreed to Harrison’s suggestion that he handle the issue under the power it had “to deal in gold.” A Washington Fed official called New York at 4:00 P.M. to say that it “imposes no objection to Federal Reserve declaring itself willing to open a gold deposit account for the Vatican State.”

Treasury Secretary Morgenthau learned of the request on May 21, and the following day Secretary of State Hull sent a cable to Taylor saying, “It has been arranged with the Federal Reserve of New York that the Vatican gold be held on the same basis as the bank holds the gold of other foreign accounts.”
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The State Department passed that news along to Taylor in Rome at the end of the working day on May 22. The dispatch signed by Secretary of State Cordell Hull said that appropriate instructions and signatures would be needed, but “the gold shipment which is desired by the Vatican does not need to be held up in any way by this.”
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Shortly after the Vatican learned that it could send gold to the U.S., Giovanni Fummi, an international financial wheeler-dealer, traveled to London to arrange for the shipments. The investment house Morgan Grenfell held the gold. Cardinal Luigi Maglioni, the papal Secretary of State, also became involved in the operation. In addition, the Vatican informed Lord Halifax, now the British ambassador in Washington, and Kingsley Wood, the Chancellor of the Exchequer, about the transfer.
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The British firm Morgan Grenfell shipped the gold from London in early June. On June 11, Secretary Morgenthau received a memo from the Federal Reserve saying that about ten tons of gold was due to arrive the following day. J. P. Morgan told the Fed that the papacy was anxious that the delivery not be publicized and asked that all communications be conducted with the apostolic delegate in Washington. The Federal Reserve wanted to work through the U.S. embassy in Rome, but Vatican officials said that was too dangerous. It wanted to deal with New York and Washington.

On June 10, a J. P. Morgan official informed the New York Federal Reserve that the Vatican had sent it two shipments. The first, which amounted to 112 gold bars in 28 boxes, arrived from Liverpool aboard the
SS Aracataca
on June 14 at Manhattan’s Pier 56. It was valued at $1.6 million. A second shipment of 432 bars aboard the
SS Britannica
landed in New York on June 21. The value of that was $6.1 million. A Fed statement two days later showed that the New York Fed had put $7.7 million in gold into a new Vatican account, which had the name
Amministrazione Speciale della Santa Sede, Stato della Città del Vaticano
(Special Administration of the Holy See, Vatican City State). A confirming letter on August 5, reported that the first ship carried 45,162.8 ounces of gold and the second 173,844.2 ounces. The New York Fed agreed to charge the Vatican $966.03 per quarter for storage. On February 27, 1942, an additional 104 bars worth $1.5 million arrived at the New York Fed.
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The Vatican became an active Fed client. It later purchased $1 million in Swiss francs from Switzerland, and then ten days later it sent 2.1 million escudos to Lisbon. In November 1942, the Vatican paid $1 million for seventy-one bars of gold for its account in a deal arranged by J. P. Morgan.
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The U.S. government also found it convenient to have a Vatican connection. In December 1942, it sent the equivalent of $3,000 in lira through the Vatican to Howard Tittmann, an American diplomat who had taken political refuge in the Vatican because of fascist threats.

The same day that the cable about the Vatican’s gold request went out, Taylor sent a message to Roosevelt saying that he wanted to return to Washington in June “to consult with you.” It was unclear whether he was doing that because of war developments or his own medical problems. At the end of the message he added simply, “Leaving tonight for Florence.”
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Taylor on that same day also wrote a longer memo to Roosevelt about developments in Europe in view of the Nazis attacks in Western Europe. He ended the downbeat report with: “It is considered that the next effort of the Germans will be against Switzerland in order to turn the flank of the French army such as they are trying to do in the case of Holland and Belgium at the Northern end of the line.”
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Two days later, Secretary of State Hull sent Taylor a “confidential message from the president,” that stated: “I believe that under existing conditions it is unwise to plan more than twenty-four hours on anything.”
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On May 23, Taylor had a long farewell audience with the pope, the fifth meeting since the American arrived in Rome at the end of February. In a cable report of the meeting sent to Washington, Taylor wrote that the pope and the secretary of state “were appreciative of your prompt action in regard to the request they had made through me [regarding the gold].” The pope also told Taylor that he thought Italy would enter the war “within the next two or three weeks,” but that he could do nothing to stop Mussolini.

By then Rome was becoming an ugly place for the papacy. Crowds in the streets were shouting “Down with the Pope! Down with the French! Down with the British!” When the pope left the safe confines of Vatican City to celebrate a mass in Rome, an angry crowd shouted at him, “Death to the Pope!” Taylor sent a cable to Washington about newspaper attacks on the pope that said, “He needs all the support that can be given him.”
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On February 27, 1942, the Fed’s Knoke reported to his board of governors that an additional $1.5 million in gold had been received from the Vatican State, which brought the amount now held in two accounts to just over nine tons. That bullion remained at the New York Fed for the duration of the war.
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In a cable to President Roosevelt on June 14, Taylor finally explained his mysterious urgent trip to Florence, writing, “I regret to advise you that I have been for the last two weeks very ill in Florence. Professor Batianelli, surgeon, and Professor Fugone, medical advisor, urge me as soon as I am able to travel to return home for a time.”
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Taylor spent most of June and all of July in Florence in the hospital, and correspondence between the ambassador and Washington was interrupted for several weeks. On July 29, President Roosevelt sent his envoy a cable saying, “I am delighted you have come through the operation so well, and I need not tell you that you have been in my thoughts.” He ended it with the admonition, “Take care of yourself.”
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In a telegram to Roosevelt on August 2, Taylor said he would be back in Rome on August 19 for a Vatican conference and suggested that he leave Europe after that via Lisbon. He explained the need for the trip by saying, “In view of great European change past and to come, I feel it desirable to return home the week of the 26th to confer with you.”
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The following day, Taylor had an hour-and-a-quarter audience with the pope, but the special envoy sent the president only a vague report, writing, “I hesitate to present them in a telegram and in view of the fact that no immediate or urgent action is suggested. I believe it best to reserve a complete report for the time when I can call on you upon my return to the United States.”
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Taylor flew to Lisbon on September 22 and then continued on to New York City. His illness had cut short his mission to the Vatican before it had hardly started. Nonetheless, he had been there to handle the church’s gold shipment to the New York Federal Reserve. The Vatican and the New York Fed continued to keep up a steady stream of messages concerning the papacy’s financial dealings, which were now mostly handled through the church’s office in Washington.

Taylor spent most of World War II in the United States, making only a few short trips back to Rome. In the summer of 1942, Roosevelt asked him to return to ask Pope Pius XII to speak out against German atrocities against the Jews. The president was also anxious to explain his support for the Soviet Union. Pius was strongly anti-communist, and continued his outspoken opposition to Stalin despite the war against Hitler. Roosevelt was anxious to stop American bishops from becoming strongly anti-Soviet, which would make it more difficult for him to support Moscow’s war efforts. Taylor showed the pontiff concrete proof of the killing of Jews in concentration camps. In his annual Christmas Eve message that year, Pius said, “Humanity owes this vow to those hundreds of thousands who, without any fault on their part, sometimes only because of their nationality or race, have been marked down for death or gradual extinction.” Critics, though, said that he should have been tougher and more direct. Later in the war, Taylor also lobbied Roosevelt not to bomb Rome.
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The following year, Taylor played a significant role in Mussolini’s departure from the war. In 1943 and working with the apostolic delegate in Washington, Taylor encouraged the Vatican to push Il Duce from power. Pius at first was cautious and skeptical, but eventually supported installing a new Italian government. When Roosevelt learned of that he replied, “Myron, this is the first break in the war. It is wonderful.”
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