Businessmen or manufacturers
can either be genuine free
enterprisers or statists; they can either make their way on the
free
market or seek special government
favors and privileges (rent-seeking).
They choose
according to their individual preferences and values. But bankers are
inherently inclined
toward statism.
Commercial bankers, engaged as they are in unsound
fractional reserve credit, are, in
the free market, always teetering on
the edge of bankruptcy. Hence they are always reaching for government
aid and bailout.
Investment bankers do much of their business underwriting government
bonds, in the United States and abroad.
Therefore, they have a vested
interest in promoting deficits and in
forcing taxpayers to redeem government debt. Both sets of
bankers,
then, tend to be tied in with government policy, and try to influence
and control government actions in domestic and foreign affairs.
In the early years of the 19th century, the organized capital
market in the United States was largely confined to government
bonds
(then called "stocks"), along with canal companies and banks
themselves. Whatever investment banking existed was therefore
concentrated in government debt. From the Civil War until
the 1890s,
there were virtually
no manufacturing corporations; manufacturing and
other businesses were partnerships
and
had not yet reached the size
where they needed to adopt the corporate form. The only
exception was railroads, the
biggest industry in the U.S. The first
investment banks, therefore, were concentrated in railroad securities
and government bonds.
The first major investment banking house in the United States
was a creature of government privilege.
Jay Cooke, an Ohio-born
business promoter living in Philadelphia, and his brother Henry, editor
of the leading Republican newspaper
in Ohio, were close friends of Ohio
U.S. Senator Salmon P. Chase. When the new Lincoln
Administration took
over in 1861, the Cookes lobbied hard to secure Chase the appointment
of Secretary of the Treasury. That lobbying, plus the then
enormous sum
of $100,000 that Jay Cooke poured into Chase’s political coffers,
induced Chase to return the favor by granting Cooke, newly set up as an
investment banker, an enormously
lucrative monopoly in underwriting the
entire federal debt.
Cooke and Chase then managed to use the virtual Republican
monopoly in Congress during the war to transform
the American
commercial banking system from a relatively free market to a National
Banking System centralized by the federal government under Wall Street
control. A crucial aspect of that system was that national banks
could
only expand credit in proportion to the federal bonds they owned –
bonds which they were forced to buy from Jay Cooke.
Jay Cooke & Co. proved enormously influential in the
post-war Republican administrations, which continued their monopoly in
under-writing government bonds. The House of Cooke met its
well-deserved fate by going bankrupt in the Panic of 1874, a failure
helped along by its great rival, the then Philadelphia-based Drexel,
Morgan & Co.
J.P. Morgan
After 1873, Drexel, Morgan and its dominant figure J.P.
Morgan became by far the leading investment firm in the U.S. If Cooke
had been a "Republican" bank, Morgan,
while prudently
well connected in
both parties, was chiefly influential among the Democrats.
The other
great financial interest powerful in the Democratic Party was the mighty European investment
banking house of the Rothschilds,
whose
agent, August Belmont, was treasurer
of
the national Democratic
party
for many years.
The enormous influence of the Morgans on the Democratic
administrations of Grover
Cleveland (1884–88, 1892–96) may be seen by
simply glancing at their leading personnel. Grover Cleveland himself
spent virtually all his life in the Morgan ambit. He grew up in Buffalo
as a railroad lawyer, one of
his major clients being the Morgan-dominated
New York
Central Railroad. In between administrations,
he became a partner of the powerful New York City law firm of Bangs,
Stetson, Tracey, and MacVeagh. This firm, by the late 1880s, had become
the chief legal firm of the House of Morgan, largely because senior
partner Charles B. Tracey was J.P. Morgan's brother-in-law. After
Tracey died in 1887, Francis Lynde
Stetson, an old and close friend of
Cleveland's, became the firm's dominant partner, as well as the personal attorney for J.P.
Morgan. (This is now the Wall
St. firm of
Davis, Polk, and Wardwell.)
Grover Cleveland's cabinets
were honeycombed with Morgan men,
with an occasional bow to other bankers. Considering those officials
most concerned with foreign policy, his first Secretary of State,
Thomas F. Bayard, was a close ally and disciple of August Belmont;
indeed, Belmont's son, Perry, had lived with and worked for Bayard in
Congress as his top aide. The dominant Secretary of State in the second
Cleveland Administration was the powerful Richard Olney, a leading
lawyer for Boston financial interests, who have always been tied in
with the Morgans, and in particular was on the Board of the Morgan-run
Boston and Maine Railroad, and would later help
Morgan organize the
General Electric Company.
The War and Navy departments under Cleveland were equally
banker-dominated. Boston Brahmin
Secretary of War William C. Endicott
had married into the wealthy Peabody
family. Endicott’s wife’s uncle, George Peabody, had
established a banking firm
which included J.P.
Morgan’s father as a senior partner; and a Peabody had been best man at
J.P.’s wedding. Secretary of the Navy
was leading New York City
financier William C. Whitney, a close friend and top political advisor
of Cleveland’s. Whitney was closely
allied with the Morgans in running
the New York Central Railroad.
Secretary of War in the second Cleveland Administration was
an old friend and aide of Cleveland’s, Daniel S. Lamont, previously an
employee and protégé of William C. Whitney. Finally, the
second Secretary of the Navy
was an Alabama Congressman, Hilary A.
Herbert, an attorney for and very close friend of Mayer
Lehman, a
founding partner of the New
York mercantile firm of Lehman Brothers,
soon to move heavily into investment banking. Indeed, Mayer’s son,
Herbert, later to be Governor of New
York during the New Deal, was
named after Hilary Herbert.
The great
turning
point of American foreign policy came in the early 1890s, during the
second Cleveland Administration. It was then that the U.S. turned
sharply and permanently from a foreign policy of peace and
non-intervention to an aggressive program of economic and political
expansion abroad.
At the heart of the new policy were America’s
leading bankers, eager to use the country’s growing economic strength
to subsidize and force-feed export
markets and investment outlets that
they would finance, as well as to guarantee
Third World government
bonds. The major focus of aggressive
expansion in the 1890s was Latin America, and the
principal Enemy to be dislodged was Great Britain, which had dominated
foreign investments in that vast region.
In a notable series of articles in 1894, Bankers'
Magazine set the agenda for the remainder of the decade.
Its
conclusion: if "we could wrest the South American markets from Germany
and England and permanently hold them, this would be indeed a conquest
worth perhaps a heavy sacrifice."
Long-time Morgan associate
Richard Olney heeded the call, as
Secretary of State from 1895 to 1897, setting the U.S. on the road to
Empire. After leaving the State Department, he publicly summarized the
policy he had pursued. The old isolationism heralded by George
Washington's Farewell Address is over, he thundered. The time has now
arrived, Olney declared, when "it behooves us to accept the commanding
position... among the Power of the earth." And, "the
present crying
need of our commercial interests," he added, "is
more markets and
larger markets" for American products, especially in Latin
America.
Good as their word, Cleveland and Olney proceeded belligerently to use U.S.
might to push Great Britain out of its
markets and footholds in Latin America. In 1894, the United States Navy
illegally used force to break the blockade of Rio de Janeiro by
a
British-backed rebellion aiming to restore the Brazilian monarchy. To
insure that the rebellion was broken, the U.S. Navy stationed war-ships
in Rio harbor for several months.
During the same period, the U.S. government faced a complicated situation in
Nicaragua, where it was planning to guarantee
the bonds of the American Maritime
Canal Company, to build a canal
across the country. The new regime of General Zelaya was threatening to
revoke this canal concession; at the same time, an independent
reservation, of Mosquito Indians, protected
for decades by Great
Britain, sat athwart the eastern end of the proposed canal. In a
series
of deft maneuvers, using
the Navy and landing the Marines, the U.S.
managed to bring Zelaya to heel and to oust the British and take over
the Mosquito territory.
In Santo Domingo (now the Dominican Republic) France was the
recipient of the American big stick. In the Santo Domingo Improvement
Company, in 1893, a consortium of New York bankers purchased the entire
debt of Santo Domingo from a Dutch company, receiving the right to
collect all Dominican customs revenues in payment of the debt.
The
French became edgy the following year when a French citizen was
murdered in that country, and the French government threatened
to use
force to obtain reparations.
Its target for reparations was the
Dominican customs revenue, at which point the U.S.
sent a warship to
the area to intimidate the French.
But
the most alarming crisis of this period took place in 1895–96,
when
the U.S. was at a hair’s breadth from actual war
with Great Britain over a territorial dispute between Venezuela
and
British Guiana. This boundary dispute had been raging for forty years,
but Venezuela shrewdly attracted American interest by granting
concessions to Americans in gold fields in the disputed area.
Apparently, Cleveland had had enough of the "British
threat,"
and he moved quickly toward war. His close friend Don Dickinson, head
of the Michigan Democratic Party, delivered a bellicose speech in May
1895 as a surrogate for the President. Wars
are inevitable, Dickinson
declared, for they arise out of commercial competition between nations.
The United States faces the danger of numerous conflicts, and clearly
the enemy was Great Britan. After reviewing the history of the alleged
British threat, Dickinson thundered that "we
need and must have open
markets throughout the world to maintain and increase our prosperity."
In July, Secretary of State Olney sent the British an
insulting and tub-thumping note, declaring that "the United States is
practically sovereign on this continent, and its fiat is law
upon the
subjects to which it confines its interposition." President Cleveland,
angry at the British rejection of the note, delivered a virtual war
message to Congress in December, but Britain, newly occupied in
problems with the Boers in South Africa, decided to yield and agree to
a compromise boundary settlement. Insultingly, the Venezuelans received
not a single seat on the agreed-upon arbitration commission.
In effect, the British, occupied elsewhere, had ceded
dominance to the United States in Latin America. It was time
for the
U.S. to find more enemies to challenge.
The next, and greatest, Latin American intervention was of
course in Cuba,
where a Republican Administration entered the war
goaded by its jingo
wing closely allied to the Morgan interests, led by
young Assistant Secretary of the Navy
Theodore Roosevelt and by
his powerful Boston Brahmin mentor, Senator
Henry Cabot Lodge. But
American intervention in Cuba had begun in the Cleveland-Olney regime.
In February 1895, a rebellion for Cuban independence
broke out against Spain. The original U.S. response was to try to end
the threat of revolutionary war to
American property interests by
siding with Spanish rule modified by autonomy to the Cubans to pacify
their desires for independence. Here was the harbinger
of U.S. foreign
policy ever since: to try to maneuver
in Third World countries to
sponsor "third force" or "moderate" interests which do not really
exist. The great proponent of this policy was the millionaire sugar
grower in Cuba, Edwin F. Atkins, a close friend of
fellow-Bostonian
Richard Olney, and a partner of J.P.
Morgan and Company.
By the fall of 1895, Olney concluded that Spain could
not win, and that, in view of the "large
and important commerce between
the two countries" and the "large
amounts of American capital" in Cuba,
the U.S. should execute a 180-degree shift and back the rebels, even
unto recognizing Cuban independence. The fact that such
recognition
would certainly
lead to war with Spain did not seem worth noting. The
road to war with Spain had begun, a road that would reach its logical
conclusion three years later.
Ardently backing the pro-war
course was Edwin F. Atkins,
and
August Belmont, on behalf of
the Rothschild banking
interests. The
House' of Rothschild, which had been
long-time financiers to Spain,
refused to extend any further credit to Spain, and instead under-wrote
Cuban Revolutionary bond issues, and even assumed full obligation for
the unsubscribed balance.
During the conquest of Cuba in the Spanish-American War, the
United States also took the occasion to expand its power greatly in
Asia, seizing first the port of Manila and then all of the Philippines,
after which it spent several years
crushing the revolutionary forces of
the Philippine independence movement.
An Aggressive Asian Policy
The late 1890s also saw a new turn in the United States'
attitude toward the Far
East. Expanding rapidly into the Pacific in
pursuit of economic and financial gain,
the U.S. government saw that
Russia, Germany, and France had been carving up increasing territorial
and economic concessions in the near corpse of the Chinese imperial
dynasty. Coming late in the imperial game of Asia, and not willing to
risk large-scale expenditure of troops, the U.S., led by Olney and
continued by the Republicans, decided to link up with Great Britain.
The two countries would then use the
Japanese to provide the shock
troops that would roll back Russia and Germany and parcel
out imperial
benefits to both of her faraway allies, in a division
of spoils known
euphemistically as the "Open Door." With Britain leaving the
field free
to the U.S. in Latin America, the U.S. could afford to link arms in
friendly fashion with Britain in the Far East.
A major impetus toward a more
aggressive policy in Asia was
provided by the lure of railroad
concessions. Lobbying heavily for
railroad concessions was the American
China Development Company,
organized in 1895, and consisting of a consortium of the top
financial interests in the U.S., including James Stillman of the then
Rockefeller-controlled National City Bank; Charles Coster, railroad
expert of J.P. Morgan and Co.; Jacob
Schiff, head of the New York
investment bank of Kuhn, Loeb and Co.; and Edward H. Harriman, railroad magnate. Olney and the
State Department pressed
China hard for
concessions to the ACDC for a Peking-Hankow
Railway and for a railway
across Manchuria, but in both cases the American syndicate was blocked.
Russia pressured China successfully to grant that country the right to
build a Manchurian railway; and a Belgian
syndicate, backed by France
and Russia, won the Peking-Hankow concession from China.
It was time for sterner
measures. The attorney for the ACDC
set up the Committee on American
Interests in China, which soon
transformed itself into the American
Asiatic Association, dedicated to
a more aggressive American policy
on behalf of economic
interests in
China. After helping the European powers suppress the
nationalist Boxer
Rebellion in China in 1900, the U.S. also helped push Russian troops
out of Manchuria. Finally, in 1904, President
Theodore Roosevelt egged
Japan on to attack Russia, and Japan succeeded in driving Russia
out of
Manchuria and ending Russia's economic concessions. Roosevelt readily acceded to Japan's
resulting dominance in Korea and Manchuria, hoping
that Japan would also protect American economic interests in the area.
Theodore Roosevelt had been
a Morgan man from the beginning
of his career. His father and uncle were both Wall Street bankers, both
of them closely associated with various Morgan-dominated railroads.
Roosevelt's first cousin and major financial adviser, W. Emlen Roosevelt, was on
the board of several New York banks, including the Astor National Bank,
the president of which was George F. Baker, close
friend and ally of J.P. Morgan and head of Morgan's flagship
commercial
bank, the First National Bank of New
York.' At Harvard, furthermore,
young Theodore married Alice Lee, daughter of George Cabot Lee, and
related to the top Boston Brahmin
families. Kinsman Henry Cabot Lodge
soon became T.R.'s long-time political mentor.
Throughout the 19th century, the Republicans had been mainly
a high-tariff, inflationist party, while the Democrats had been the
party of free trade and hard money, i.e., the gold
standard. In 1896,
however, the radical inflationist forces headed by William Jennings
Bryan captured the Democratic presidential nomination, and so the Morgans,
previously dominant in the Democratic Party, sent a message to
the Republican nominee, William McKinley, through Henry Cabot Lodge.
Lodge stated that the Morgan interests would back McKinley provided
that the Republicans would support
the gold standard. The deal
was
struck.
William McKinley reflected the dominance of the Republican
Party by the Rockefeller/Standard Oil
interests. Standard Oil was
originally headquartered at Rockefeller's home in Cleveland, and the
oil magnate had long had a commanding influence in Ohio Republican
politics. In the early 1890s, Marcus
Hanna, industrialist and high school chum of John D. Rockefeller,
banded together with Rockefeller and other financiers to save McKinley from
bankruptcy, and Hanna became McKinley's top political adviser
and
chairman of the Republican National Committee. As a consolation prize
to the Morgan interests for McKinley's capture of the Republican
nomination, Morgan man Garret A. Hobart, director of various Morgan
companies, including the Liberty
National Bank of New York City, became
Vice-President.
The death of Hobart in 1899 left a "Morgan vacancy" in the
Vice-Presidential spot, as McKinley walked into the nomination. McKinley and Hanna were
both hostile to Roosevelt, considering him
"erratic" and a "Madman," but after several Morgan
men turned down the
nomination, and after the intensive lobbying of Morgan partner George
W. Perkins, Teddy
Roosevelt at last received the Vice-Presidential
nomination. It is not surprising that virtually Teddy's first
act after the election
of 1900 was to throw a lavish dinner in honor of J.P. Morgan.
Teddy Roosevelt and the "Lone Nut"
The sudden appearance of one of the "lone nuts" so common in
American political history led to the assassination
of McKinley, and
suddenly Morgan man Theodore Roosevelt was President. John Hay, expansionist Secretary of
State whom Roosevelt inherited from McKinley,
had the good fortune of having his
daughter marry the son of William C.
Whitney of the great Morgan-connected family. TR's next
Secretary of
State and former Secretary of War was his old friend Elihu Root, personal attorney
for J.P. Morgan. Root appointed as his Assistant Secretary a
close
friend of TR's, Robert Bacon, a
Morgan partner, and in due course Bacon
became TR's Secretary of State. TR's first appointed Secretary of the
Navy was Paul Morton, vice-president
of the Morgan-controlled Atchison,
Topeka and Santa Fe Railroad, and his Assistant Secretary was
Herbert
L. Satterlee, who had the distinction of being J.P. Morgan's son-in-law.
Theodore Roosevelt's greatest direct boost to the Morgan
interests is little known. It is well-known that Roosevelt engineered a
phony revolution in Columbia in 1903, creating the new state of
Panama
and handing
the Canal Zone to the United States. What has not been
fully disclosed is who benefited from
the $40 million that the U.S.
government paid, as part of the Panama settlement, to the owners
of the
old bankrupt Panama Canal Company, a French company which had
previously been granted a Colombian concession to dig a Panama canal.
The Panama Canal Company's lobbyist, Morgan-connected New
York attorney William Nelson Cromwell, literally
sat in the White House
directing the "revolution" and organizing the final settlement.
We now
know that, in 1900, the
shares of the old French Panama Canal Company
were purchased by an American financial syndicate, headed by J.P.
Morgan & Co., and put together by Morgan's top attorney,
Francis
Lynde Stetson. The syndicate
also included members of the Rockefeller,
Seligman, and Kuhn, Loeb financial groups, as well as Perkins and
Saterlee.
The syndicate did well from the Panama revolution, purchasing
the shares at two-thirds of par and selling them, after the revolution,
for double the price. One member of the syndicate was especially
fortunate: Teddy Roosevelt's
brother-in-law, Douglas E. Robinson, a director of Morgan's Astor
National Bank. For William Cromwell
was
named the fiscal agent of the new Republic of Panama, and Cromwell
promptly put $6 million of the $10 million payoff the U.S. made to the
Panamanian revolutionaries into New York City mortgages via the real
estate firm of the same Douglas E. Robinson.
After the turn of the century, a savage economic and
political war developed between the Morgan interests on the one hand,
and the allied Harriman-Kuhn,
Loeb-Rockefeller interests on the other.
Harriman and Kuhn, Loeb grabbed control of the Union Pacific Railroad
and the two titanic forces battled to a draw for control of the
Northern Pacific. Also, at about the same time, a long-lasting and
world-wide financial and political "oil
war" broke out between Standard
Oil, previously a monopolist in both the crude and export
markets
outside of the U.S., and the burgeoning
British Royal Dutch
Shell–Rothschild combine.
And since the Morgans and Rothschilds were longtime allies,
it is certainly sensible to
conclude – though there are no hard
facts
to prove it – that Teddy
Roosevelt launched his savage anti-trust
assault to break Standard Oil as a Morgan contribution to the worldwide
struggle. Furthermore, Mellon-owned Gulf Oil was allied to the
Shell
combine, and this might well explain the fact that former
Morgan-and-Mellon lawyer Philander Knox, TR's Attorney-General, was
happy to file the suit against Standard Oil.
Roosevelt's successor, William Howard Taft, being an Ohio
Republican, was allied to the Rockefeller camp, and so he proceeded to
take vengeance on the Morgans by filing anti-trust suits to break up
the two leading Morgan trusts,
International Harvester and United
States Steel. It was now all-out war, and so the Morgans in 1912
deliberately created a new party, the Progressive Party, headed by
former Morgan partner, George W. Perkins. The successful aim of the
Progressive Party was to bring Theodore Roosevelt out of retirement to
run for President, in order to break Taft, and to elect, for the first
time in a generation, a Democratic President. The new party was
liquidated soon after.
Supporters of Roosevelt were studded with financiers in the
Morgan ambit, including Judge Elbert Gary, chairman of the board of
U.S. Steel; Medill McCormick of the International Harvester family, and
Willard Straight, Morgan's partner.
In the same year, Straight and his
heiress wife, Dorothy Whitney,
founded the weekly magazine of opinion, The
New Republic, symbolizing the growing
alliance for war and statism
between the Morgans and various of the more moderate (i.e.,
non-Marxist) progressive and socialist intellectuals.
Morgan, Wilson and War
The
Morgan-Progressive Party ploy deliberately
insured the election of
Woodrow Wilson as a Democratic President. Wilson
himself, until
almost the time of running for President, was for several years on the
board of the Morgan-controlled Mutual
Life Insurance Company. He was
also surrounded by Morgan men. His
son-in-law, William Gibbs McAdoo,
who became Wilson's Secretary of the
Treasury, was a failing
businessman in New York City when he was bailed
out and befriended by
J.P. Morgan and his associates. The Morgans then set McAdoo up as
president of New York's Hudson and Manhattan Railroad until his
appointment in the Wilson Administration. McAdoo was to spend the rest
of his financial and political life securely in the
Morgan ambit.
The main sponsor of Wilson's run for the Presidency was
George W. Harvey, head of Morgan-controlled
Harper & Brothers publishers
(Harper-Collins?); other major backers included Wall Street financier and
Morgan associate Thomas Fortune Ryan, and Wilson's college classmate
and Morgan ally, Cyrus H.
McCormick, head of International Harvester.
Another close friend and leading political adviser of Wilson
was New York City banker George
Foster Peabody, son of the
Boston Brahmin and a Morgan banker. A
particularly fascinating figure in Wilson's fateful foreign policy was "Colonel"
Edward Mandell House, of the wealthy House family of Texas,
which was deeply involved in landowning, trade, banking, and railroads.
House himself was head for several years of the Trinity and Brazos
Valley Railway, financed by the House family in collaboration with
Morgan-associated Boston financial interests, particularly of
the Old
Colony Trust Company. The mysterious House, though never graced
with an
official government post, is generally acknowledged to have been Wilson's all-powerful
foreign policy adviser and aide for virtually his
entire two terms. (House
became key founder of the Council on Foreign Relations, wrote a
fictional book with the lead character - himself - as "Philip Dru,
Adminstrator" of a world govt., i.e. communism/capitalism. Which
basically he was to some degree.)
By 1914, the Morgan empire
was in increasingly shaky
financial shape. The Morgans had long been committed to
railroads, and
after the turn of the century the highly
subsidized and regulated
railroads entered their permanent decline. The Morgans had also
not been active enough in the new capital market for industrial
securities, which had begun in the 1890s, allowing Kuhn-Loeb to
beat
them in the race for industrial finance. To make matters worse, the
$400 million Morgan-run New
Haven Railroad went bankrupt
in 1914.
At the moment of great financial danger for the Morgans, the
advent of World War I came as a godsend. Long connected to British,
including Rothschild, financial interests, the Morgans leaped
into the
fray, quickly securing the
appointment, for J.P.
Morgan & Co., of fiscal
agent for the warring British and French governments, and monopoly underwriter for
their war bonds in the United States. J.P.
Morgan also became the fiscal
agent for the Bank of England, the powerful (privately-owned) English central
bank. Not only that: the Morgans were
heavily involved in financing
American munitions and other firms exporting war material to Britain
and France. J.P.
Morgan & Co., moreover, became the central
authority organizing and channeling war purchases for the two Allied
nations.
The United States had been in a sharp recession during 1913
and 1914; unemployment was high, and many factories were operating at
only 60% of capacity. In November 1914, Andrew Carnegie, closely allied
with the Morgans ever since his Carnegie Steel Corporation had merged
into the formation of United States Steel, wrote to President
Wilson
lamenting business conditions but happily
expecting a great change for
the better from Allied purchases of U.S. exports.
Sure enough, war material
exports zoomed. Iron and steel
exports quintupled from 1914 to 1917, and the average profit rate of
iron and steel firms rose from 7.4%
to 28.7% from 1915 until 1917. Explosives
exports to
the Allies rose over ten-fold during
1915 alone.
Overall, from 1915 to 1917, the export department of J.P. Morgan and
Co. negotiated more than $3 billion
of contracts to Britain and France.
By early 1915, Secretary McAdoo was writing to Wilson hailing the "great prosperity"
being brought by war exports to the Allies, and a prominent business
writer wrote
the following year that "War, for
Europe, is meaning devastation and
death; for America a bumper crop of new millionaires and a hectic
hastening of prosperity revival."
Deep in Allied bonds and export of munitions, the Morgans
were doing extraordinarily well; and their great rivals, Kuhn-Loeb,
being pro-German, were necessarily left out of the Allied wartime
bonanza. But there was one hitch: it
became imperative that
the Allies win the
war. It is not surprising, therefore, that from the beginning of
the great conflict, J.P. Morgan and his associates did everything they
possibly could to push the supposedly neutral United States into the
war on the side of England and France. As Morgan himself put
it: "We
agreed that we should do all that was lawfully in our power to help the
Allies win the war as soon as possible."
Accordingly, Henry P. Davison, Morgan partner, set up the
Aerial Coast Patrol in 1915, to get
the public in the mood to
search the skies for German planes. Bernard M. Baruch, long-time
associate of the extremely wealthy copper magnates, the Guggenheim
family, financed the Businessmen's
Training Camp, at Plattsburgh, New York, designed to push
for universal military training
and preparations for war. Also participating in financing the
camp were Morgan partner
Willard Straight, and former Morgan
partner
Robert Bacon. In addition to J.P.
Morgan himself, a raft of Morgan-affiliated
political leaders whooped it up for immediate
entry
of the U.S. into the war on the side of the Allies: including Henry
Cabot Lodge, Elihu Root, and Theodore Roosevelt.
In addition, the National
Security League was founded in December, 1914, to call for
American entry into the war against Germany. The NSL
issued warnings
against a German invasion of the U.S., once England was
defeated, and
it called
all advocates of
peace and non-intervention, "pro-German,"
"dangerous aliens,"
"traitors," and "spies." (Deja vu)
The NSL also advocated universal
military training, conscription,
and the U.S. buildup of the
largest navy in
the world. Prominent in the organization of the National
Security
League were Frederic R. Coudert, Wall
Street attorney for the British,
French, and Russian governments; Simon and Daniel Guggenheim; T.
Coleman DuPont, of the munitions family; and a host of prominent
Morgan-oriented financiers; including former Morgan partner Robert
Bacon; Henry Clay Prick of Carnegie
Steel; Judge Gary of U.S. Steel;
George W. Perkins, Morgan partner,
who has been termed "the secretary
of state" for the Morgan interests; former President Theodore
Roosevelt; and J.P. Morgan
himself.
A particularly interesting founding associate of NSL was a
man who has dominated American foreign policy during the 20th century: Henry
L. Stimson, Secretary
of War under William H. Taft and Franklin D. Roosevelt, and Secretary
of State under Herbert Hoover. Stimson, a Wall Street lawyer in the
Morgan ambit, was a protégé
of Morgan's personal attorney
Elihu Root, and two of his
cousins were partners in the
Morgan-dominated Wall Street utility stock market and banking firm of
Bonbright & Co.
While the Morgans and other financial interests were beating
the drums for war, even more influential in pushing the only
partially reluctant
Wilson into the war were his foreign
policy Svengali, Colonel House, and House's
protégé, Walter
Hines Page, who was
appointed Ambassador to Great Britain.
Page's salary in this prestigious influential post was handsomely subsidized through Colonel
House by copper magnate Cleveland H. Dodge,
a prominent adviser to Wilson, who benefited greatly from munitions
sales to the Allies.
Colonel House liked to pose
as an abject instrument of
President Wilson's wishes. But before and after U.S. entry into
the war, House
shamelessly
manipulated Wilson, in secret
and traitorous collaboration with
the British, to push the President first into entering the war and then
into following British wishes instead
of setting an independent American course.
Thus, in 1916, House
wrote to his friend Frank L. Polk,
Counselor to the State Department and later counselor to J.P. Morgan,
that "the President must be
guided" not to be independent of British desires. Advising British Prime Minister
Arthur Balfour on how best to handle Wilson, House counselled
Balfour to exaggerate
British
difficulties in order to get more American aid, and warned him
never to mention a negotiated peace. Furthermore, Balfour leaked to
Colonel House the details of various secret Allied treaties that they
both knew the naïve Wilson would not accept, and they both agreed
to keep the treaties from the President.
Similarly, soon after the U.S. entered the war, the British
sent to the U.S. as personal liaison between the Prime Minister and the
White House the young chief of British military intelligence, Sir
William Wiseman. House and Wiseman quickly entered a close
collaboration, with House coaching the Englishman on the best way of
dealing with the President, such as "tell him only what he
wants to
hear," never argue with him, and discover and exploit his weaknesses.
In turn, Britain's
top intelligence agent manipulated House,
constantly showering him with flattery, and established a close
friendship with the Colonel, getting an apartment in the same building
in New York City, and travelling together abroad. Collaborating with
House in his plan to manipulate Wilson into pro-British policies
was
William Phillips, an Assistant
Secretary of State who had married
into
the Astor
family.
Collaborating with House in supplying Wiseman with illegal
information and working with the British agent against Wilson were two
important American officials. One was Walter Lippman, a young socialist
who had been named by Morgan partner Willard Straight as one of the
three editors of his New
Republic, a magazine which, needless to say, led 'the
parade of progressive
and
socialist intellectuals in favor of entering the war on the side of the
Allies.
Lippmann soon
vaulted into important roles in the war effort: assistant
to the
Secretary of War; then secretary
of the secret group of
historians called The
Inquiry, established under Colonel House in late
1917 to plan the peace settlement at
the end of the war. Lippmann later
left The Inquiry
to go overseas for American military
intelligence.
Another important collaborator with Wiseman was businessman
and scholar George Louis Beer, who was in charge of African and Asian
colonial matters for The Inquiry. Wiseman secretly showed British
documents on African colonies to Beer, who in turn leaked Inquiry
reports to British intelligence.
The plans of Colonel House and his biased
young historians of
The Inquiry were put into effect at the peace settlement at
Versailles. Germany,
Austria-Hungary, and Russia were cruelly dismembered, thus
insuring that Germany and Russia,
once recovered from the devastation
of the war, would bend their
energies toward getting their territories
back. In that way, conditions
were virtually set for World War II.
Not only that: the Allies
at Versailles took advantage of the
temporary power vacuum in Eastern Europe to create new independent
states that would function
as client states of Britain and France, be part
of the Morgan-Rothschild financial network, and help
keep Germany
and Russia down permanently. It was an impossible task for these
new
small nations, a task made more difficult by the fact that the young
historians managed to rewrite the map of Europe at Versailles to
make
the Poles,
the Czechs, and the
Serbs dominant over all the other minority nationalities
forcibly incorporated into the new countries. These subjugated peoples
– the Germans,
Ukrainians,
Slovaks, Croats, Slovenes, etc – thus became built-in allies for
the revanchist dreams of Germany and Russia.
American entry into World
War I in April 1917 prevented
negotiated peace between the warring powers, and drove the
Allies
forward into a peace of unconditional
surrender and dismemberment, a
peace which, as we have seen, set the
stage for World War II. American
entry thus cost countless lives
on both sides, chaos and disruption
throughout central and eastern Europe at war's end, and the consequent
rise of Bolshevism,
fascism, and Nazism to power in Europe. In this way, Woodrow
Wilson's decision to enter
the war may have been the single most fateful action of the 20th
century, causing untold and unending misery and destruction. But Morgan
profits were expanded and assured.
The Fortuitous Fed
The massive U.S. loans to
the Allies, and the subsequent
American entry into the war, could
not have been financed by the relatively hard-money, gold standard
system that existed before 1914. Fortuitously, an institution
was established at the end of 1913 that made the loans and war finance
possible: the Federal
Reserve System. By centralizing reserves, by
providing a government-privileged
lender of last resort to the banks,
the Fed enabled the banking system to
inflate money and credit, finance
loans to the Allies, and float
massive deficits once the U.S. entered
the war. In addition, the seemingly odd Fed policy of creating an
acceptance market out of thin air by standing ready to purchase
acceptance at a subsidized rate, enabled
the Fed to rediscount
acceptance on munitions exports.
The Federal Reserve
was the outgrowth of five years of
planning, amending, and compromising among various politicians
and
concerned financial groups, led by the major
financial interests,
including the Morgans, the
Rockefellers, and the Kuhn, Loebs, along
with their assorted economists and technicians.
Particularly notable among the Rockefeller interests were Senator Nelson W.
Aldrich (R.-R.I.), father-in-law of John D. Rockefeller, Jr.,
and Frank A. Vanderlip, vice president of Rockefeller's National City
Bank of New York. From the Kuhn, Loebs came the prominent Paul Moritz Warburg,
of the German
investment banking firm of M.M. Warburg and Company. Warburg
emigrated to the United States in 1902 to become a senior partner at
Kuhn, Loeb & Co., after which he spent most of his time agitating for a central
bank in the United States.
Also igniting the drive for a Federal Reserve System was Jacob H. Schiff,
powerful head of Kuhn,
Loeb to
whom Warburg was related
by marriage. Seconding and sponsoring Warburg in academia was
the prominent Columbia University economist Edwin R.A. Seligman, of the
investment banking family of J. & W. Seligman and Company; Seligman was the brother
of Warburg's brother-in-law.
The Morgans were prominently represented in the planning and
agitation for a Central Bank by Henry P. Davison, Morgan partner;
Charles D. Norton, president of Morgan's
First National Bank of New
York; A. Barton Hepburn, head of Morgan's Chase National Bank; and
Victor Morawetz, attorney and banker
in the Morgan ranks and chairman
of the executive committee of the Morgan-controlled Atchison, Topeka,
and Santa Fe Railroad.
While the establishment
of the Federal Reserve System in late 1913 was the result of a coalition of Morgan,
Rockefeller, and Kuhn, Loeb interests, there is no question
which financial group controlled the personnel and the policies of the
Fed once it was established. (While influential in framing policies of
the Fed, Federal Reserve Board member Warburg was disqualified from
leadership because of his pro-German views.) The first Federal Reserve
Board, appointed by President
Wilson in 1914, included Warburg (later a backer of Nazis for profit);
one
Rockefeller man, Frederic
A. Delano, uncle of Franklin D. Roosevelt, and president of the Rockefeller-controlled
Wabash Railway; and an Alabama banker, who had both
Morgan and
Rockefeller connections.
Overshadowing these three were three definite Morgan men,
and a university economist, Professor Adolph C. Miller of Berkeley,
whose wife's family had Morgan
connections. The three definite Morgan
men were Secretary of the Treasury
McAdoo; Comptroller of the
Currency
John Skelton Williams, a Virginia
banker and long-time McAdoo
aide on
Morgan railroads; and Assistant
Secretary of the Treasury Charles S.
Hamlin, a Boston attorney who
had married into a wealthy
Albany family
long connected with the Morgan-dominated
New
York Central Railroad.
But more important than the composition of the Federal
Reserve Board was the man who became the first Governor of the
New York Federal Reserve Bank and who single-handedly dominated
Fed policy from its inception until his death in 1928. This man was Benjamin Strong,
who had spent virtually his entire business and
personal life in the circle of top associates of J.P. Morgan. A
secretary of several trust companies (banks doing trust business) in
New York City, Strong became neighbor and close friend of three top
Morgan partners, Henry P. Davison, Dwight Morrow, and Thomas W. Lamont. Davison,
in particular, became his mentor, and brought him into Morgan's Bankers
Trust company, where he soon succeeded Lamont as vice-president, and
then finally became president. When Strong was offered the post of
Governor of the New York Fed, it was Davison who persuaded him to take
the job.
Strong was an enthusiast for American entry into the war, and
it was his mentor Davison who had engineered the coup of getting Morgan named as sole
underwriter and purchasing agent for Britain and France. Strong
worked quickly to formalize collaboration with the Bank of England,
collaboration which would continue in force throughout the 1920s. The
Federal Reserve Bank of New York
became foreign agent for the Bank of England, and vice versa.
The main collaboration throughout the 1920s, much of it kept
secret from the Federal Reserve Board in Washington, was between Strong and the man who soon became
Governor of the Bank of
England, Montagu
Collet Norman. Norman and Strong were not only fast friends, but had important investment
banking ties, Norman's uncle having been a partner
of the great English banking firm of Baring
Brothers, and his
grandfather a partner in the international banking house of Brown Shipley & Co., the
London branch of the Wall Street banking firm of Brown Brothers
(became
Brown Brothers, Harriman, funded Nazis and Soviets). Before coming
to the Bank of England, Norman himself had worked at the Wall Street
office of Brown Brothers, and then returned to London to become
a
partner of Brown Shipley.
The major fruit of the
Norman-Strong collaboration was Strong's
being pressured
to inflate money and credit in the U.S. throughout the 1920s, in
order to keep England
from losing gold to the U.S. from its inflationary policies.
Britain's predicament came from its
insistence on going back to the
gold standard after the war at the highly overvalued pre-war par for
the pound, and then insisting
on inflating rather than deflating to
make its exports competitively priced in the world market. Hence, Britain needed to induce
other countries, particularly the U.S., to inflate
along with it. The
Strong-Norman-Morgan connection did the job, setting the stage for the
great financial collapse of 1929–1931.
As World War I drew to a close, influential Britons and
Americans decided that intimate post-war collaboration between the two
countries required more than just
close cooperation between the central
banks. Also needed were permanent
organizations to promote joint
Anglo-American policies to
dominate the postwar world.
The Round Table
In England, Cecil Rhodes
had launched a secret society in
1891 with the aim of maintaining
and expanding the British Empire to re-incorporate the United States.
After the turn of the 20th century, the direction, organization, and
expansion of the society fell to Rhodes's friend and executor, Alfred
Lord Milner. The Milner
Group dominated domestic planning in Britain during World War I,
and particularly the planning for post-war foreign and colonial policy.
The Milner Group staffed the British delegation of experts to
Versailles. To promote the
intellectual agitation for such a policy,
the Milners had also set up the Round Table Groups
in England and abroad in 1910.
The first American
to be asked to join the Round Table was George Louis Beer,
who came to its attention when his
books attacked the American Revolution and
praised the British Empire of the 18th century. Such loyalty could
not go unrewarded, and so Beer became a member of the Group about 1912
and became the American correspondent of Round Table magazine.
We have seen Beer's pro-British role
as colonial expert for The
Inquiry. He was also the chief U.S. expert on colonial affairs
at
Versailles, and afterward the Milner Group made Beer head of the Mandate
Department of
the League of Nations.
During the war, Beer, Anglophile Yale historian George Burton
Adams, and powerful Columbia University historian James T. Shotwell, an
important leader of The
Inquiry and head of the National
Board for
Historical Services, which emitted deceptive
propaganda for the war
effort, formed a secret
society to promote Anglo-American
collaboration. Finally, led by Beer for the United States and
the head
of the Round Table group in England, Lionel Curtis, the British and
U.S. historical staffs at Versailles took the occasion to found
a
permanent organization to agitate for an informally, if not formally,
reconstituted Anglo-American Empire.
The new group, the Institute of
International Affairs, was formed at a meeting at the Majestic
Hotel in Paris on May 30, 1919. A six-man organizing committee was
formed, three Milnerites from Britain, and three Americans: Shotwell; Harvard historian
Archibald C. Coolidge, head of the Eastern European desk of the Inquiry, and
member of the Morgan-oriented Boston financial family; and James Brown
Scott, Morgan lawyer who was to write a biography of Robert Bacon.
The British branch, the Royal Institute of
International Affairs, set up a committee to supervise writing a
multi-volume
history of the Versailles Peace Conference; the committee was
financed by a gift from Thomas
W. Lamont, Morgan partner.
The CFR
The American branch of the new group took a while to get
going. Finally, the still inactive American Institute of
International Affairs merged with a defunct outfit, begun in
1918, of New York businessmen concerned with the postwar world, and
organized as a dinner club to
listen to foreign visitors. This organization, the Council on
Foreign Relations,
had as its honorary chairman Morgan lawyer Elihu Root, while Alexander Hemphill, chairman of Morgan's
Guaranty Trust Company, was chairman of its
finance committee. In August 1921, the two organizations merged into
the new Council on
Foreign Relations, Inc., a high-powered organization embracing bankers,
lawyers, and
intellectuals.
While varied financial interests were represented in the new
organization, the CFR was Morgan-dominated, from top to bottom.
Honorary president was Elihu Root. President was John W. Davis,
Wilson's Solicitor-General, and now chief counsel for J.P. Morgan &
Co. Davis was to become Democratic Presidential candidate in 1924.
Secretary-Treasurer of the new CFR was Harvard economic historian Edwin
F. Gay, director of planning and statistics for the Shipping Board
during the war, and now editor of the New York Evening Post, owned
by his mentor, Morgan partner, Thomas W. Lamont.
It was Gay who had the idea of founding Foreign Affairs, the
CFR's quarterly journal, and who suggested both his Harvard colleague
Archibald Coolidge as the first editor, and the New York Post reporter
Hamilton Fish Armstrong as assistant editor and executive director of
the CFR. Other prominent officials in the new CFR were: Frank L. Polk, former
Under-Secretary of State and now lawyer for J.P. Morgan & Co; Paul
M. Warburg of
Kuhn, Loeb; Otto H. Kahn
of Kuhn, Loeb; former Under-Secretary of State under
Wilson, Norman H. Davis, a banking associate of the Morgans; and as
vice-president, Paul D. Cravath, senior partner of the
Rockefeller-oriented Wall
Street law firm
of Cravath, Swaine, and Moore.
After World War II, the Council
on Foreign
Relations became dominated by the Rockefeller rather than by the Morgan
interests, a shift of power reflecting a general alteration in
financial power in the world at large. After World War II, the rise of
oil to prominence brought the Morgans and Rockefellers – once intense
rivals – into an Eastern Establishment of which the Rockefellers were
the senior, and the Morgans the junior, partners.
Rockefeller, Morgan, and War
During
the 1930s, the
Rockefellers pushed hard for war against Japan, which they saw
as competing with them
vigorously for oil and rubber
resources in Southeast
Asia
and as endangering the Rockefellers'
cherished dreams of a mass
"China market" for
petroleum products. On the other hand, the Rockefellers took a
non-interventionist position in Europe, where they had close financial
ties with German
firms such as I.G. Farben and Co., and very few close relations
with Britain and France. The Morgans, in contrast, as
usual deeply committed to their
financial ties with Britain and France,
once
again plumped
early for war
with Germany, while their interest in the Far East had become
minimal. Indeed, U.S. Ambassador to Japan, Joseph C. Grew, former
Morgan partner, was one of the few officials in the Roosevelt
Administration genuinely interested in peace with Japan.
World War II might therefore be considered, from one point of
view, as a
coalition war: the
Morgans got their war in Europe, the Rockefellers theirs in
Asia. Such disgruntled Morgan men as Lewis W. Douglas and Dean
G. Acheson (a protégé of Henry Stimson), who had left the
early Roosevelt Administration in disgust at its soft money policies and
economic nationalism, came happily roaring back
into government service with the advent of World War II. Nelson
A. Rockefeller,
for his part, became head of Latin
American activities during World War
II, and thereby acquired his taste for government service.
After World War II, the united Rockefeller-MorganKuhn, Loeb
Eastern Establishment was not allowed to enjoy its financial and
political supremacy unchallenged for long. "Cowboy" Sun Belt firms, maverick oil men
and construction
men from Texas, Florida, and southern California, began to
challenge the Eastern Establishment "Yankees" for political power.
While both groups favor the Cold War, the Cowboys are more
nationalistic, more hawkish, and less inclined to worry about
what our European
allies are thinking. They are also much less inclined to bail
out the now Rockefeller-controlled Chase Manhattan Bank
and other Wall Street banks that loaned
recklessly to
Third World and Communist countries and expect
the U.S. taxpayer – through outright taxes or the printing of U.S.
dollars – to pick up the tab.
It should be clear that the name of the political party in
power is far less important than the particular
regime's financial and
banking connections. The foreign policy power for so long
of
Nelson Rockefeller's personal foreign affairs adviser, Henry A. Kissinger,
a
discovery of the extraordinarily powerful Rockefeller–Chase Manhattan
Bank elder statesman John J.
McCloy, is testimony to the importance of financial power. As is
the successful lobbying
by Kissinger and Chase Manhattan's head, David Rockefeller, to
induce Jimmy
Carter to allow the ailing Shah
of Iran into the U.S. – thus precipitating the humiliating hostage
crisis.
Despite differences
in nuance, it is clear that Ronald Reagan's originally
proclaimed challenge to Rockefeller-Morgan power in the Council
of Foreign Relations and to the Rockefeller-created Trilateral
Commission has fizzled, and that the "permanent
government" continues to rule regardless of the party nominally in power.
As a result, the
much-heralded
"bipartisan foreign policy" consensus imposed by the
Establishment since World War II seems to remain safely in place.
David Rockefeller, chairman of the board of his family's
Chase Manhattan Bank from 1970 until recently, established
the Trilateral Commission in 1973 with the financial backing of the CFR
and the Rockefeller Foundation. Joseph Kraft, syndicated
Washington columnist who himself has the distinction of being both a
CFR member and a Trilateralist, has accurately
described the CFR as a "school for statesmen,"
which
"comes close to being an organ of what C. Wright Mills has called the Power
Elite –
a
group of men, similar in interest and outlook,
shaping events from invulnerable positions behind the scenes."
The idea
of the Trilateral Commission
was to internationalize policy
formation, the commission consisting of a small group of
multinational corporate leaders, politicians, and foreign policy
experts from the U.S., Western Europe, and Japan, who meet to
coordinate economic and foreign policy among their respective nations.
Perhaps the most powerful
single figure in foreign policy
since World War II, a beloved adviser to all Presidents, is the
octogenarian John J. McCloy.
During World War II, McCloy virtually ran the
War Department as Assistant to aging Secretary Stimson; it was
McCloy who presided over the decision to round up all
Japanese-Americans and place them in concentration camps in
World War
II, and he is virtually the only American left who still justifies that
action.
Before and during the war, McCloy, a disciple of Morgan
lawyer Stimson, moved in the Morgan orbit; his brother-in-law, John S.
Zinsser, was on the board of directors of J.P. Morgan & Co. during
the 1940s. But, reflecting the postwar power shift from Morgan to
Rockefeller, McCloy moved quickly into the Rockefeller ambit. He became
a partner of the Wall Street corporate law firm of Milbank, Tweed, Hope,
Hadley & McCloy, which had long served the Rockefeller family and
the Chase Bank as legal counsel.
From there he moved to become Chairman of the Board of
the Chase Manhattan Bank, a director of the
Rockefeller Foundation, and of Rockefeller Center,
Inc., and finally, from 1953 until 1970, chairman of the board of the Council
on Foreign Relations. During the Truman Administration, McCloy
served as President
of the World Bank and then U.S.
High Commissioner for Germany. He was also a special
adviser to President John F. Kennedy on Disarmament, and
chairman of Kennedy's Coordinating Committee on the Cuban
Crisis. It was McCloy
who "discovered" Professor Henry A. Kissinger for the
Rockefeller forces. It is no wonder that John K. Galbraith and Richard
Rovere have dubbed McCloy "Mr. Establishment."
A glance at foreign policy leaders since World War II will
reveal the domination of the
banker elite. Truman's first Secretary of Defense was James V. Forrestal, former president
of the investment banking firm of Dillon, Read & Co.,
closely allied to the Rockefeller financial group. Forrestal had also
been a board member of the Chase
Securities Corporation, an affiliate of the Chase National Bank.
Another Truman Defense Secretary was Robert A. Lovett, a partner
of the powerful New York investment banking house of Brown Brothers Harriman. At
the same time that he was Secretary
of Defense, Lovett continued to be
a trustee of the Rockefeller
Foundation. Secretary of the
Air Force
Thomas K. Finletter was a top Wall
Street corporate lawyer and member
of the board of the CFR while
serving in the cabinet. Ambassador
to Soviet Russia, Ambassador to Great Britain, and Secretary of Commerce
in the Truman Administration was the powerful multi-millionaire
W. Averell Harriman, an often underrated but dominant force
within the Democratic Party since the days of FDR. Harriman was a
partner of Brown Brothers Harriman.
(It
was Harriman who earlier worked with
George Herbert Walker and set up Walker's son-in-law Prescott Bush to
run his money-laundering campaign to finance Nazi Germany.
Harriman's liaisson Dulles later headed the CIA.)
Also Ambassador to Great Britain under Truman was Lewis W. Douglas, brother-in-law of John J.
McCloy, a trustee of the Rockefeller Foundation, and a board
member of the Council on Foreign Relations. Following Douglas as
Ambassador to the Court of St. James was Walter S. Gifford, chairman of
the board of AT&T, and member of the board of trustees of the
Rockefeller Foundation for almost two decades. Ambassador to NATO under
Truman was William H. Draper, Jr.,
vice-president of Dillon, Read &Co.
Also influential in helping
the Truman Administration organize the Cold War was director of
the policy planning staff of the State Department, Paul H. Nitze. Nitze, whose wife was
a member of the Pratt family,
associated with the Rockefeller family since the origins of Standard
Oil, had been vice-president
of Dillon, Read & Co.
When Truman entered the Korean War, he created an Office of Defense Mobilization to
run the domestic economy during the war. The first director was Charles E. ("Electric Charlie") Wilson,
president of the Morgan-controlled
General Electric Company, who also served as board member of the
Morgans' Guaranty Trust
Company. His two most influential assistants were Sidney J. Weinberg, ubiquitous senior partner
in the Wall Street investment banking firm of Goldman
Sachs
& Co., and former General Lucius
D. Clay, chairman of the board of Continental Can Co., and a
director of the Lehman
Corporation.
Succeeding McCloy as
President of the
World Bank, and continuing in that post throughout the two terms
of Dwight Eisenhower, was Eugene
Black. Black had served for fourteen years as vice-president of
the Chase National Bank,
and was persuaded to take the World Bank post by the bank's chairman of
the board, Winthrop W. Aldrich,
brother-in-law of John D.
Rockefeller, Jr.
The Eisenhower Administration proved to be a field day for the Rockefeller interests.
While president of Columbia University, Eisenhower was invited to high-level
dinners where he met and was groomed for President by
top leaders from the Rockefeller and Morgan ambits, including the
chairman of the board of Rockefeller's Standard Oil of New Jersey, the
presidents of six other big oil companies, including Standard of California and SoconyVacuum,
and the executive vice-president of J.P. Morgan & Co.
One dinner was hosted by Clarence Dillon, the
multi-millionaire retired founder of Dillon, Read & Co., where the
guests included Russell B. Leffingwell, chairman of the board of both
J.P. Morgan & Co. and the CFR (before McCloy); John M. Schiff, a
senior partner of the investment banking house of Kuhn,
Loeb & Co.; the financier Jeremiah Milbank, a director of
the Chase Manhattan Bank; and John D.
Rockefeller, Jr.
Even earlier, during 1949, Eisenhower had been introduced
through a special study group to key
figures in the CFR. The study group devised a plan to create a new
organization called the American Assembly – in essence an expanded CFR study group – whose
main function was reputedly to build up Eisenhower's prospects for the
Presidency. A leader of the "Citizens
for Eisenhower" committee, who later became Ike's Ambassador to
Great Britain, was the multi-millionaire John
Hay Whitney, scion of several wealthy families, whose granduncle, Oliver H. Payne, had
been one of the associates of John D.
Rockefeller, Sr. in founding
the Standard Oil Company. Whitney was head of his own investment
concern, J.H. Whitney & Co.,
and later became publisher of the New York Herald Tribune.
Running foreign policy during the Eisenhower Administration
was the Dulles
family, led by Secretary
of State John Foster Dulles, who had also concluded the U.S.
peace treaty with Japan under Harry Truman. Dulles had for three decades been a
senior partner of the top Wall Street corporate law firm of Sullivan & Cromwell (Enron's
law firm), whose most
important client was Rockefeller's Standard Oil Company of
New Jersey. Dulles had been for fifteen
years a member of the board of the Rockefeller Foundation, and
before assuming the post of Secretary of State was chairman of the
board of that institution. Most important is the littleknown fact that Dulles's wife was Janet
Pomeroy Avery, a first
cousin of John D. Rockefeller, Jr. (The
Dulles Bros were important intermediaries between New York and the Nazi party,
before Hitler's rise to power, during
the war while troops were dying, and after Germany lost the war they
assisted Nazis to get themselves and their money out of Germany.)
Heading the super-secret Central Intelligence Agency during
the Eisenhower years was Dulles's brother, Allen Welsh Dulles,
also a partner in Sullivan &
Cromwell. Allen Dulles had long been a trustee of the CFR and had served as
its president from 1947 to 1951. Their sister, Eleanor Lansing Dulles, was
head of the Berlin desk of the
State Department during that decade.
Under-Secretary of State, and the man who succeeded John
Foster Dulles in the spring 1959, was former Massachusetts Governor
Christian A. Herter. Herter's wife, like Nitze's, was a member of the Pratt family. Indeed, his wife's
uncle, Herbert L. Pratt, had been for many years president or chairman of the board of
Standard Oil Company of New York. One of Mrs. Herter's cousins,
Richardson Pratt, had served as assistant treasurer of Standard Oil of
New Jersey up to 1945. Furthermore, one of Herter's own uncles, a
physician, had been for many years treasurer of the Rockefeller Institute for Medical
Research. (Rockefeller
Institute studied Eugenics, and was a source of inspiration for
Germany's racial policies.)
Herter was succeeded as Under-Secretary of State by
Eisenhower's Ambassador to France, C.
Douglas Dillon, son of Clarence,
and himself Chairman of the Board of Dillon,
Read & Co. Dillon was soon to become a trustee of the Rockefeller Foundation.
Perhaps to provide some balance for his banker-business
coalition, Eisenhower appointed as Secretary of Defense three men in
the Morgan rather than the Rockefeller ambit. Charles B. ("Engine Charlie") Wilson
was president of General Motors,
member of the board of J.P. Morgan
& Co. Wilson's successor, Neil H. McElroy, was president of Proctor & Gamble Co. His board
chairman, R.R. Deupree, was also a director of J.P. Morgan & Co. The third
Secretary of Defense, who had been Under-Secretary and Secretary of the
Navy under Eisenhower, was Thomas S. Gates,
Jr. (probably related to current Secy of
Defense replacing Rumsfeld in 2006), who had been a partner of the Morgan-connected Philadelphia investment
banking firm of Drexel & Co. When Gates stepped down as
Defense Secretary, he became president of the newly formed flagship
commercial bank for the Morgan interests, the Morgan Guaranty Trust Co.
Serving as Secretary of the Navy and then Deputy Secretary of
Defense (and later Secretary of the Treasury) under Eisenhower was
Texas businessman Robert B. Anderson. After leaving the Defense
Department, Anderson became a board member of the Rockefeller-controlled American Overseas
Investing Co., and, before becoming Secretary of the Treasury,
he borrowed $84,000 from Nelson A. Rockefeller to buy stock in Nelson's International Basic Economy
Corporation.
Head of the important Atomic Energy
Commission during the Eisenhower years was Lewis L. Strauss. For two
decades, Strauss had been a partner in the investment banking firm of Kuhn, Loeb & Co. In 1950,
Strauss had become financial adviser to the Rockefeller family, soon
also becoming a board member of Rockefeller Center, Inc.
A powerful force in deciding foreign policy was the National Security
Council, which included on it the Duller brothers, Strauss, and Wilson.
Particularly important is the post of national security adviser to the
President. Eisenhower's first national security adviser was Robert
Cutler, president of the Old Colony Trust Co., the largest trust
operation outside New York City. The Old Colony was a trust affiliate
of the First National Bank of Boston.
After two years in the top national security post, Cutler
returned to Boston to become chairman of the board of Old Colony Trust,
returning after a while to the national security slot for two more
years. In between, Eisenhower had two successive national security
advisers. The first was Dillon Anderson, a Houston corporate attorney,
who did work for several oil companies. Particularly significant was
Anderson's position as chairman of the board of a small but fascinating
Connecticut firm called Electro-Mechanical
Research, Inc. Electro-Mechanical was closely associated with
certain Rockefeller financiers; thus, one of its directors was Godfrey Rockefeller, a limited
partner in the investment banking
firm of Clark, Dodge & Co.
After more than a year, Anderson resigned from his national
security post and was replaced by William H. Jackson, a partner of the
investment firm of J. H.
Whitney & Co. Before assuming his powerful position, Dillon
Anderson had been one of several men serving as special hush-hush consultants to the
National Security Council. Another special adviser was Eugene
Holman, president of Rockefeller's Standard Oil Company of New Jersey.
We may mention two important foreign policy actions of the
Eisenhower Administration which seem to reflect the striking influence of
personnel directly tied to bankers and financial interests. In
1951, the regime of Mohammed
Mossadegh in Iran decided to nationalize the British-owned oil
holdings of the Anglo-Iranian Oil company. It took no time for the
newly established Eisenhower Administration to intervene heavily in
this situation. CIA
director and former Standard Oil lawyer Allen W. Dulles flew to
Switzerland to organize the covert overthrow of the Mossadegh regime,
the throwing of
Mossadegh into prison, and the restoration of the Shah to the
throne of Iran.
After lengthy behind-the-scenes negotiations, the oil industry was put back into action as
purchasers and refiners of Iranian oil. But this time the
picture was significantly different. Instead of the British getting all
of the oil pie, their share was reduced to 40 percent of the new oil
consortium, with five top U.S. oil
companies (Standard Oil of New Jersey, Socony-Vacuum – formerly
Standard Oil of N.Y. and now Mobil – Standard Oil of California, Gulf,
and Texaco) getting another 40 percent.
It was later disclosed that Secretary of State Dulles placed a sharp upper limit on any
participation in the consortium by smaller independent oil companies in
the United States. In addition to the rewards to the
Rockefeller interests, the CIA's man-on-the-spot directing the
operation, Kermit
Roosevelt, received his due by quickly becoming a vice-president of Mellon's Gulf Oil Corp.
The Guatemalan Coup
Fresh from its CIA triumph in Iran, the Eisenhower
Administration next turned its attention to Guatemala,
where the left-liberal
regime of Jacob Arbenz Guzman had nationalized 234,000 acres of uncultivated land owned by
the nation's largest landholder, the American-owned United Fruit
Company, which imported about 60 percent of all bananas coming into the
United States.
Arbenz also announced his intention of seizing another 173,000 acres of idle United
Fruit land along the Caribbean coast. In late 1953, Eisenhower gave the CIA the assignment of organizing
a counter-revolution in Guatemala. With the actual operation
directed by former Wall Street
corporate lawyer Frank Wisner of the CIA, the agency launched a
successful invasion of Guatemala, led by exiled Army Colonel Castilo
Armas, which soon overthrew the Arbenz regime and replaced it with a military junta.
The Arbenz
land program for peasants was abolished, and most of its
expropriated property was returned to the United Fruit Company.
Allen W. Dulles had
financial connections with United Fruit and with various sugar
companies which had also suffered land expropriation from the Arbenz
regime. For several years, while a partner at Sullivan & Cromwell, he had been
a board member of the Rockefeller-controlled
J. Henry Schroder Banking Corporation. Members of the board of
Schroder during 1953 included Delano Andrews,
Sullivan & Cromwell partner who had taken Dulles's seat on the
board; George A. Braga, president of the Manati Sugar Company; Charles W.
Gibson, vice-president of the Rockefeller-affiliated
Air Reduction Company; and Avery Rockefeller, president of the closely linked banking house of Schroder,
Rockefeller, & Co. Members of the board of Manati Sugar, in
the meanwhile, included Alfred
Jaretski, Jr., another Sullivan & Cromwell partner; Gerald
F. Beal, president of J. Henry
Schroder and chairman of the board of the International Railways of Central America;
and Henry E. Worcester, a recently retired
of executive of United Fruit.
United Fruit,
furthermore, was a controlling shareholder in International Railways,
while, as in the case of Beal, the board chairmanship of the railway
had long been held by a high official of Schroder. The close ties
between United Fruit, Schroder, and International Railways may also be
seen by the fact that, in 1959, the board chairman of the railway became
James McGovern, general counsel for United Fruit. International Railway, in fact, carried
most of United Fruit's produce from the interior to the port in Guatemala. In addition, Dulles's close associate and fellow trustee
of the Council of Foreign Relations in this period, and former
treasurer of the CFR, was Whitney H.
Shepardson, formerly vice-president of International Railways.
Not only that: Robert Cutler, national security adviser to
the President at the time of the coup against Arbenz, had himself very
close ties to United Fruit. Cutler's boss at Old Colony Trust, chairman of the
board T. Jefferson Coolidge,
was also, and more importantly, board chairman at United Fruit. Indeed,
many members of the board of United Fruit, a Boston-based company, were
also on the board of Old Colony or its mother company, the First National Bank of Boston.
Furthermore, during the period of planning the Guatemalan
coup, and up till a few months before its success in 1954, the Assistant
Secretary of State for Inter-American Affairs was John Moors Cabot,
a well-known anti-Arbenz hawk.
Cabot's
brother Thomas D., was an executive of United Fruit and a member of the
board of the First National Bank of
Boston.
The
Council on Foreign Relations played an important role in the Guatemalan
invasion. It began in the fall of 1952, when Spruille Braden, a
former Assistant Secretary of State for Inter-American Affairs and then
consultant for United Fruit, led a CFR study group on Political Unrest in Latin America.
Discussion leader at the first meeting of the CFR-Braden group was John McClintock, an executive of United Fruit. Former leading
New Dealer and Assistant Secretary of State Adolf A. Berle, Jr.,
a participant in the study group, recorded in his diary that the U.S. should welcome an overthrow of the
Arbenz government, and noted that, "I am arranging to see Nelson Rockefeller
(himself Assistant Secretary of State for Inter-American Affairs during
World War II) who knows the situation and can work a little with
General Eisenhower."
In the actual Guatemalan operation, President Eisenhower himself was a CFR
member, as were Allen
Dulles, John M. Cabot and Frank Wisner, the man in charge of the coup
and the CIA's deputy director for plans. Of the twelve people in
the U.S. government identified as being involved at the top level in
the Guatemalan affair, eight were CFR
members or would be within a few years. These included, in
addition to the above, Henry F. Holland, who succeeded Cabot in the
assistant secretary of state slot in 1954; Under-Secretary of State Walter Bedell
Smith, a former director of the CIA; and Ambassador
to the UN Henry Cabot Lodge.
Paving the way for the coup was
a public report, issued in December 1953 by the Committee
on International Policy of the National Planning Association on the
Guatemalan situation. Head of the Committee was Frank Altschul,
secretary and vice-president of the
CFR and a partner of the international banking house of Lazard
Freres, as well as a director of the
Chase National Bank and president of the General American Investor Corp., a
firm largely controlled by Lehman
Brothers. The Altschul report, signed by twenty-two committee
members of whom fifteen were CFR members, warned that "Communist
infiltration in Guatemala" was a threat
to the security of the Western Hemisphere and hinted that
drastic action would probably be necessary to deal with this menace.
