NEW YORK (CNN) -- A committee representing more than 800 U.S. finance officials has cleared the way for states to impose sanctions against Swiss banks suspected of holding the assets of Holocaust victims.

Expressing frustration in negotiations between Swiss institutions and Holocaust survivors seeking their family's assets, the committee overturned a moratorium on sanctions that was put in place in March.

U.S. President Bill Clinton's opposition to sanctions did not deter states from readily taking action.

California's treasurer on Thursday said the state would not seek new contracts with U.S. subsidiaries of Swiss banks.

New York City and New York state said they'd impose sanctions within 60 days, unless the banks and the victims reached an agreement on restitution. Officials said they would stop Swiss banks and investment firms from selling or insuring state and city debt and would bar short-term investments with the banks.

In Switzerland, banks expressed outrage over the committee's decision, reached on Wednesday. The institutions also mulled whether to revoke a $600 million offer to settle the Holocaust-era claims.

U.S. Jewish groups have not accepted the offer. They've been pressing for a $1.5 billion settlement that would encompass the banks, the Swiss central bank, and the Swiss government.

Will Swiss appeal to WTO?

In Berne, the government released a statement calling the committee's move "counterproductive, unjustified and illegal." Officials also warned the committee could be damaging U.S.-Swiss relations, and urged all parties "to return to a serious, calm discussion."

"The Cabinet will not allow itself to be influenced by such pressure tactics," the Swiss government statement read.

The government also said it would support Swiss institutions that took legal steps against any U.S. sanctions.

The Social Democrats, the largest voting block in Parliament, said it would back a protest to the World Trade Organization, even though it had opposed Berne's involvement in talks between the banks and the surviving families.

The WTO can mediate trade disputes between member nations.

In announcing the U.S. committee's decision, the chair, New York Comptroller Alan Hevesi, said the moratorium had not been effective in pushing the Swiss toward a resolution in the matter.

U.S. committee: Negotiations stalled

"We felt we had to be resolute after all this time where we had cooperated and agreed not to impose sanctions or even discuss them," Hevesi said.

"There has been no movement," he added, blaming the Swiss government for much of the stalemate. "The banks are negotiating, but they have just been unable or unwilling to come to an arrangement and understanding for both moral and material restitution."

Two of Switzerland's leading banks -- Credit Suisse Group and the new conglomerate UBS -- issued a joint statement calling the possibility of sanctions "unwarranted, counterproductive, unconstitutional and illegal."

"No government or organization in the world has responded as positively, quickly, and constructively to resolve Holocaust-era related issues as the Swiss banks," they said.

Tens of thousands of Holocaust victims deposited money in Swiss banks as the Nazis gained power in Europe. Survivors' and victims' relatives say the banks stonewalled their efforts to recover their assets after the end of World War II. The complainants say the banks claimed they could not find accounts, or that they demanded nonexistent death certificates before relinquishing the assets of relatives who had died in concentration camps.

related reading	book search