All the Presidents' Bankers (38 page)

Leffingwell responded in his typical deferential manner: “Your letter of the 22nd reached me this morning. I read it promptly to our officers’ meeting and we all enjoyed a good laugh. A President with so human a touch makes everybody feel good. Though you were not my candidate, you are my President, and I pledge you my support and help, and that of my colleagues, in your great task.”
⁴⁰
In turn, Leffingwell had made a contribution to the Democratic Campaign Fund.
⁴¹

This would be the beginning of a friendly relationship between the two men.

McCloy Leaves the World Bank

By 1949, the postwar economic recovery was waning. World exchange rates reflected this. Britain devalued the pound from $4.03 (the 1946 rate) to $2.80. Other countries followed suit. The US economy experienced its first, albeit minor, postwar recession. Loan volume declined for the first time in three years, with business loans dropping by 19 percent.
⁴²

Around that time, McCloy’s stint as president of the World Bank was coming to an end after two short years. Truman offered him the position of US high commissioner of Occupied Germany. (As assistant secretary of war,
McCloy had been situated in Germany in the spring of 1945, when Eisenhower’s troops occupied 43 percent of the country.
⁴³
) As he had done before accepting his World Bank post, McCloy gave Truman a list of requirements. Again, he asked for “a free hand in picking people” to assist him and an assurance that “no substantial decisions on Germany” would be made “without consultation with me.”
⁴⁴

In addition, he demanded full authority over Economic Cooperation Administration monies dispensed in Germany and for Truman to name Eugene Black as his successor. The president agreed to his demands. Only then did McCloy send Truman a brief note accepting the job.
⁴⁵

When McCloy officially resigned from the World Bank on June 30, 1949, Snyder didn’t miss a beat. He wrote Black, “I know that under your leadership the successful administration of the Bank will continue” and that “regarding matters relating to international financial programs you may be assured that at all times the Treasury will be glad to assist you in any way it can.”
⁴⁶

In his new capacity, McCloy worked on the creation of the West German state from 1949 to 1952. In 1951, he controversially reduced the sentences on convicted Nazi war criminals (about which many in Europe and the United States were extremely upset).
⁴⁷
McCloy retained a characteristically independent style in Germany, sending Truman reports rather than engaging in regular dialogue. Overseeing the development of Germany was one of McCloy’s favorite roles, perhaps more interesting to him than running the Chase Bank, which he did afterward (though budding Middle East relationships would eventually fulfill his capacities for juxtaposing his public and private roles).

After four years in Germany, McCloy returned to New York City. In 1953, when Aldrich was nominated by Eisenhower to become ambassador to Britain, Aldrich chose McCloy to assume his slot as Chase chairman.

Old to New Guard

Three influential men stood in the wings of the 1940s. They wouldn’t emerge into the national consciousness until the 1960s, but nonetheless they were beginning their political and financial ascent. The first was John F. Kennedy, who ran for Congress for the first time in 1946 and won.

The second was David Rockefeller, whom Aldrich recruited to join Chase in 1946. Rockefeller had spent the summer of 1937 with the Chase economics department, and as a student at the London School of Economics he had devoted half a day each week as a trainee at the London branch of Chase. While traveling through Europe in 1945, Aldrich met Rockefeller in Paris
and suggested that he join the bank. Rockefeller started his Chase career as an assistant manager in the foreign department.
⁴⁸

The third man was Walter Wriston, son of Henry Wriston, a conservative former president of Brown University and a friend of W. Randolph Burgess. Burgess enticed Walter to work at National City Bank in 1946.

American power unfolds more like a monarchy than a meritocracy. There are no accidents in global influence, no surprise emergences. All three young men harnessed family connections on their way to leading the country and its two biggest banks, respectively. The views of these men at the time were more alike than they would be perceived to be in later years. Before he turned more liberal on the national stage, Kennedy was critical of Truman’s “soft” policy on Communism. Wriston and Rockefeller were both free-market advocates who harbored international ambitions, positions passed on by family patriarchs.

All three believed in America’s right to global expansion and the necessity of an offensive stance as a way to fight the Cold War. Likewise, the Cold War would prove a convenient excuse for making money, as well as for political posturing. The sort of patriotism that had been associated with World War II would become associated with the war against Communism and its threats, real or fabricated. This fight would allow them to consolidate their roles in the epicenter of global finance.

NSC 68

The Cold War also dictated foreign policy and budget appropriations in the White House. On April 14, 1950, a top-secret report on US objectives and programs for national security—compiled by Truman’s executive secretary, James Lay Jr., and the secretaries of state and defense—was distributed to the National Security Council, the Treasury secretary, the Economic Cooperation Administration, the director of the Bureau of the Budget, and the chairman of the Council of Economic Advisers.
⁴⁹

The report, dubbed NSC 68, opened the door for future wars against Communism, and also for the funding and financing that would come from the private bankers along those foreign policy lines. It concluded that “the gravest threat to the security of the United States within the foreseeable future stems from [the] formidable power of the U.S.S.R,” and that “the risk of war with the U.S.S.R. is sufficient to warrant, in common prudence, timely and adequate preparation by the United States.”
⁵⁰

The threat, it said, “is of the same character as that described in NSC 20/4 [approved by Truman on November 24, 1948] but is more immediate than had previously been estimated. In particular, the United States now faces
the contingency that within the next four or five years the Soviet Union will possess the military capability of delivering a surprise atomic attack of [considerable] weight.”
⁵¹

To mitigate that threat, the report suggested developing “a level of military readiness . . . as a deterrent to Soviet aggression . . . should war prove unavoidable.”
⁵²
As it said further, “Our position as the center of power in the free world places a heavy responsibility upon the United States for leadership.”
⁵³
Also, “We must, by means of a rapid and sustained build-up of the political, economic, and military strength of the free world, and by means of an affirmative program intended to wrest the initiative from the Soviet Union, confront it with convincing evidence of the determination and ability of the free world to frustrate the Kremlin design of a world dominated by its will.”
⁵⁴

Bankers had a propensity to capitalize on wars, but they were equally adept at profiting from peace, especially if it could be backed by US military power and foreign policy initiatives that would augment and protect their financial expansion policies by fortifying “democratic” countries that could be their clients.

During the previous three and a half decades, the world had witnessed two major global wars, revolutions in Russia and China, and “the collapse of five empires—the Ottoman, Austro-Hungarian, German, Italian and Japanese,” according to the NSC 68.
⁵⁵
The report concluded that “the defeat of Germany and Japan and the decline of the British and French Empires have interacted with the development of the United States and the Soviet Union in such a way that power has gravitated to these two centers. . . . The Soviet Union . . . is animated by a new fanatic faith, antithetical to our own, and seeks to impose its absolute authority over the rest of the world.”

Six months after the report was distributed, the United States entered the Korean War. In late 1950, Truman signed a letter to Secretary of State Dean Acheson saying that recent developments required review and adjustment of certain policies and programs with respect to “international communist imperialist aggression.” Truman wanted to enlist the cooperation and support of other nations in carrying this out. To the extent that US legislation, organization, and funds permitted, Truman wanted all “appropriate programs now to be adjusted and administrated in light of [those] determinations.”
⁵⁶

The Korean War would find the US population less financially supportive than it had been during World War II. Thus, bankers would turn toward mergers and credit extension to grow their domestic power base, while keeping their eyes on international financial developments and their feet in the corridors of Washington.

CHAPTER 10

T
HE
1950
S
: E
ISENHOWER
’
S
B
UDS
, C
OLD
W
AR
, H
OT
M
ONEY

“Recognizing economic health as an indispensable basis of military strength, and the free world’s peace, we shall strive to foster everywhere, and to practice ourselves, policies that encourage productivity and profitable trade.”

—Dwight D. Eisenhower, inaugural address, January 20, 1953

O
N THE SURFACE
,
THE
1950S
EMBODIED THE FAIRY-TALE ASPECT OF THE
American Dream. As society emerged financially stable from the clouds of the Great Depression and World War II, the model suburban family with perfectly coiffed hair beamed smiles from the pages of
Life
magazine. Oodles of must-have gadgets offered jolts to the economy while Elvis Presley’s hips mesmerized a generation of teenage girls.

President Eisenhower, the moderate Republican war hero, hugged the country’s traumas away like a political grandfather. President Truman’s mantra of “unity” and collective responsibility for the world gave way to Eisenhower’s
use of the popular 1920s Coolidge and Hoover mantra “prosperity.” To attain more widespread wealth, the US population would pursue a brand of isolationism similar to that which followed World War I, but the White House would be more primed to international intervention, and Wall Street to open trade. Indeed, the doctrine of interventionism against the threat of spreading Communism, which could hamper America’s emergence as a world superpower and US bankers’ standing as the world’s superfinanciers, suited both the White House and Wall Street. The Cold War became the glue binding presidents’ desires to accumulate non-Communist allies like pins on a map and the bankers’ desire to open up shop in the same countries backed by American military and foreign policy.

The United States was no longer involved in one world war. However, the drive to battle the Soviet Union militarily and economically paved the way for a fresh set of regional wars for ideological and global control. The battle of capitalism vs. Communism manifested in the Korean War in the early 1950s and in other forms of aggression later in the decade, like Lebanon in 1958. Moreover, “containment” (as the Council on Foreign Relations dubbed it) of the “domino effect” (as Eisenhower dubbed it) of Communism provided the impetus to carve up the parts of the world that hadn’t been involved in World War II, like the Middle East and Latin America, into American democratic capitalism and Soviet Communism camps.

From a domestic economic policy standpoint, Eisenhower supported many of the elements of FDR’s New Deal, though his advisers held more conservative views on that score. When mild recessions surfaced in the United States intermittently in the 1950s, he thwarted them by utilizing government funding for initiatives like the construction of the nation’s superhighways—the largest public works program in US history, which also helped the auto industry, stoked pent-up consumer demand, reaped bank loans to finance new car purchases, and provided profits to oil companies supplying gasoline.

During the 1950s, Americans enjoyed a decade of domestic tranquility and growing middle-class security, to an extent that has not been experienced since then. In tandem, the bankers’ concentrations were split between branching out internationally to regions and nations supported by the Eisenhower administration and its anti-Communist doctrine and merging domestically to consolidate more customer deposits and lend credit to more of the population. The atmosphere for doing this was perfect. More financially stable citizens gave the bigger banks more deposits and required more loans from them, fueling their domestic operations with capital to expand internationally in tandem with the president’s policy to enhance American power abroad.