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John Pehle on: The Conflict Between the Treasury and State Department
John Pehle Well we [staffers at the Treasury Dept.] became involved when we were asked to license communications with occupied territory, enemy occupied territory. And our policy was at the beginning to allow no communication. We thought that that was the strictest way to help the war effort, to not let people do business with enemy territory or enemy-occupied territory.

We were finally convinced that it was possible to license some things if it didn't involve anything that would bring additional hard currency to the Germans or Italians. And so we lessened our policy, reviewed our policy, and did issue one or more licenses that permitted Jewish agencies to communicate with representatives in occupied territory.

Well the licenses in effect were going out through State Department channels and they never were received. They were held up. And when we discovered they had been held up, we of course made inquiries and they were told that they were consulting with the British. And they had had an arrangement whereby these, the lifting of the embargo in a sense communications and fiscal problems in isolated cases would be cleared with the British and ourselves. And the British hadn't acted.

When we found out that the licenses had been held up because of this cooperative arrangement with the British, inquiries were made to the American Embassy in London, as to why it was held up. And we were told and they received a written communication from the British who say they were reluctant to engage in rescue efforts which the license was supposed to do because of the difficulty of disposing of any considerable number of these people should they be rescued.

And this is one of the things that really touched off Secretary [of the Treasury Henry] Morgenthau and gave rise to ultimately the establishment of the War Refugee Board.

Once the State Department furnished us with a copy of the British written report saying that they were opposed to financial transactions even though they were carefully designed to avoid any hard currency coming into the hands of the enemy, they said that, well, I've got it mixed up again.

And when we received this incredulous statement we were of course shocked, but we also realized that this was a valuable document in obtaining some United States action with regard to refugees.

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