by Prins, Nomi
Ike’s banker sphere also included his secretary of war, Thomas Gates, who would later chair the Morgan Guaranty Bank. The circle encompassed the globally minded Chase chairman Winthrop Aldrich, who would become Ike’s ambassador to Britain, and the ubiquitous power broker John McCloy, who spent the Eisenhower years as chairman of Chase National Bank. McCloy had met Ike during World War II while serving as assistant secretary of war and as one of Secretary of War Henry Stimson’s six “wise men.” He and the president shared a fascination with puddle jumper planes.17
Ike’s more domestically oriented Wall Street friends included Weinberg, who served as his behind-the-scenes headhunter but influenced little policy, and Morgan head George Whitney, who shared his populist opinions and golf club lifestyle. Rounding out the mix was Whitney’s successor, Henry Alexander, who presided over a mega-merger in 1959, recapturing the wilted power of the House of Morgan.18
These men, by virtue of their positions and ambitions, were more a part of Ike’s presidency and America’s legacy than any other official cabinet member. All of them would use the Cold War backdrop to usher in a policy of American freedoms, which in the heart of America meant free markets and a free banking system. This would translate to initial campaigns to reduce regulations and enable mega-mergers that fostered greater consolidation and thus decreased competition. Whereas competition was the theoretical cornerstone of the notion of “free markets,” these moves would foster the opposite: markets that were not free but that merely benefited the larger players.
George Whitney, Ike’s Progressive Banker
George Whitney counterbalanced the more conservative approaches of Ike’s Treasury Department and economic advisers. After nearly two decades at J. P. Morgan, he succeeded Leffingwell as chairman and served from 1955 to 1959. Like Weinberg and Aldrich, he played a major part in helping to finance Eisenhower’s campaign. He also had a warm personal relationship with Ike and served as his close unofficial adviser on a variety of issues.
Whenever he requested one, Whitney received an appointment with Eisenhower. He helped balance Eisenhower’s economic thinking relative to his more right-wing advisers. Whitney’s opinions were unique; he was one of the few bankers advocating for policies to strengthen the middle class, even if the upper class was sacrificed in the process.
For example, while Hauge opposed cost-of-living increases for workers, Whitney advocated an equalization policy for the lower class. Whitney expressed as much to Ike in a private letter penned on January 19, 1954. At the time employment figures were dipping, and there were calls emanating from the business community to balance the budget and reduce corporate taxes. Whitney wanted to help the nonrich, ignore the deficit, keep corporate taxes where they were, and support the nation’s workers. His thoughts reflected Eisenhower’s, and Eisenhower was grateful for his perspective, which weaved its way back to the president’s advisers.
“It is not now the time to balance the budget,” wrote Whitney. “I couldn’t agree more that the further reduction in corporate taxes and excise taxes are not proper in principle and certainly not unless something is done in the income taxes of those in the lower economic brackets. That is the greatest shot in the arm to the economy because it puts the spending money in the hands of those who spend it. $75 in the hands of a $4,000 a year man is a lot of money when multiplied by some 50 million families.” He concluded, “The economic welfare of the whole country is still more important and the best way to stabilize it is to increase the spendable income of the lower tax brackets.”19
Whitney appealed to Eisenhower’s more public-spirited views. His brand of populist considerations also snaked its way into certain bankers’ views during the administration of Lyndon B. Johnson in the 1960s, but afterward it became a relic of a bygone postwar, post-Depression era, as bulging paychecks trumped self-sacrifice.
The End of the Korean War
In a June 10, 1953, statement, Eisenhower made it clear that US military isolationism was not an option. This enabled him to invoke US military intervention against Communism while promoting free trade, which entailed international financing and helped the bankers’ expansion plans. Two days later, in his role as British ambassador, Aldrich endorsed Eisenhower’s two-way trade program at a dedication of the Aldrich (in honor of his father, Fed founder Nelson Aldrich) and Kresge Halls at his alma mater, Harvard University. He pressed for immediate support for Eisenhower’s proposed program of “healthy two-way trade” with other nations, calling it vital to the political and security interests of the United States and the free world. He also stressed the importance of increasing US imports and admonished the “archaic” policy of purchasing goods abroad only in “exceptional cases.” Absent extenuating circumstances, he recommended that the US make its public purchases “wherever goods of comparable quality can be found on competitive and advantageous terms.”20
Thus, Aldrich also served as an ambassador for globalized “free trade,” which in practice meant the removal of barriers around commodity-rich nations. His old colleagues at Chase were translating this into a business strategy that involved finding nations where cheap goods or raw commodities could be purchased and converted to products for external consumption and profit. These nations tended to be located in Latin America. The idea of prying open local markets into which new bank offices or branches could situate themselves dovetailed nicely with Eisenhower’s doctrine of increasing foreign trade with allies and non-Communist countries. The more countries that remained faithful to the US notion of democracy (equated with free-market capitalism), the more countries in which US bankers could operate.
Aldrich went so far as to claim that failure to initiate more open trade would be a political failure as well, undermining the prosperity of the United States and its allies. “The US learned by painful experience that it can afford neither political nor military isolationism,” he stressed. Americans “now must learn that we cannot afford economic isolationism.”
In that manner, Aldrich summarized the Cold War president-banker doctrine of political, military, and economic internationalism; all three elements coalesced to promote the export of American financial capitalism wrapped in a package called “free nations” with an added flourish of “free markets.” The doctrine would result in a world divide that wasn’t just between capitalism and Communism but also between the countries that produced cheap goods, like in Latin America, and the ones, like America and its major European allies, that exploited them.
Two weeks later, on July 27, 1953, Eisenhower ended the Korean War with the threat to drop another atomic bomb. The way he accomplished this left lingering bad feelings with British prime minister Winston Churchill because Churchill felt he had not been sufficiently consulted in the process. In a December 10, 1953, diary entry, Eisenhower was irritated by the Brit’s emotional response. “[Secretary of State John] Foster Dulles explained the position in Korea,” he wrote. “The only part of the discussion that led to opposition (this from Winston) was the assertion that in the event of renewed attack, we would feel free to use the atomic bomb against military targets.”21
In general, Eisenhower didn’t believe that America and Britain should be joined at the hip.22 He regarded this method of the “joint ultimatum” as “self-defeating.”23 That prevailing attitude would lead to the Suez Canal crisis. It would also help catapult the United States above its former superpower ally, politically and from an international banking perspective.
John McCloy, the World’s Most Powerful Banker
As mentioned, when Eisenhower won the presidential election in 1952, ending twenty years of Democratic control of the White House, he sought advice from a panel of bankers who supported his domestic and foreign trade policies of tight budgets and open markets.
Nearly simultaneously, transitioning from his Truman-appointed post as US high commissioner to Germany, Aldrich chose John McCloy to succeed him as Chase chairman for $150,000 per year plus benefits ($1.3 million in today’s terms). McCloy
remained chairman of the Board of Trustees at the Ford Foundation and became chairman of the highly influential Council on Foreign Relations concurrently. Coupled with his tight relationship with Eisenhower and connection to the World Bank through his former friend and colleague Eugene Black, McCloy became the most influential banker in the world.
Most of McCloy’s public service roles had been under Democratic presidents, though he considered himself a classic Republican. Generally, during Republican presidencies, he’d worked in the private sector. He modestly downplayed his influence on Eisenhower. As McCloy put it, “He had his own advisors.”24 But McCloy would not hesitate to get in touch with Eisenhower when he needed, or wanted, to.
When Eisenhower became president, he considered McCloy for the secretary of state position, but instead offered him the subordinate position of undersecretary of state under John Foster Dulles, a man McCloy held in low regard. Adding insult to ego, it was Dulles, not Eisenhower, who approached him about the role.
Describing the incident, McCloy later explained, “Eisenhower . . . indicated that there had been more to it than just the Under Secretaryship for State, that it was really the Secretary of State he had in mind . . . because Dulles wanted to be relieved of the job of Secretary of State. . . . [As] I understood the proposal, Mr. Dulles was to still be the general advisor on foreign affairs although no longer Secretary of State. If I was going to be Secretary of State I wanted to be responsible for foreign policy. At any rate I indicated to him that that wouldn’t have made any difference. . . . It was a flattering offer but it did not appeal to me.”25 McCloy had no interest in subordinating his foreign policy views to Dulles, whatever the capacity.
David Rockefeller’s name was batted around the White House in consideration for assistant secretary for economic affairs, but Rockefeller decided to remain at Chase as senior vice president, where he focused on growing the firm’s Latin American businesses.26 His and McCloy’s public post rejections portended a major transition of power alliances: Wall Street was becoming an increasingly more appealing platform for influence than a public post in Washington.
It took McCloy five months after starting at Chase to call the White House for an “important” meeting with Eisenhower. On May 18, 1953, they met regarding word McCloy had received about pending testimony before the Senate. Later that day, Eisenhower wrote his thoughts on Senator Joe McCarthy to Harris Bullis of General Mills: “With respect to McCarthy, I continue to believe that the President of the United States cannot afford to name names in opposing procedures, practices, and methods in our government . . . but, whether a Presidential ‘crackdown’ would better, or would actually worsen the situation, is a moot question.”27
The topic would soon rear itself in a very public way. For in July 1953, McCloy was called before a Senate subcommittee investigating the Internal Security Act. The inquiry was based on a Jenner Committee report that accused the Army of being too tolerant of Communists during World War II, implying that McCloy was responsible. In February 1954, McCloy was subject to more direct attacks by Senator McCarthy regarding commissioning Communists to Army positions and having ordered the destruction of Army Intelligence files when he worked in the War Department. Eisenhower, who had at first stayed on the sidelines regarding McCarthy, became irate. As White House Press Secretary James Hagerty wrote in his diary on February 24, “Pres very mad and getting fed up . . . it’s his army and he doesn’t like McCarthy’s tactics at all.” McCarthy was operating too close to home for Eisenhower, who said, “This guy McCarthy is going to get into trouble over this. I’m not going to take this one lying down. He’s ambitious. He wants to be president. He’s the last guy in the world who’ll ever get there, if I have anything to say.”28 The charge was dropped two days later.29
These incidents might have rendered McCloy more inclined to focus on his private-sector responsibilities, but they didn’t serve to alienate him from his involvement with the Eisenhower administration. Thus, when Congress wanted to slash Eisenhower’s appropriation requests for the Mutual Security Program, McCloy came through and explained the necessity of the program to Congress and the public. In June 1954, Eisenhower told Congress, “Our Mutual Security Program is based upon the sound premise that there can be no safety for any of us except in cooperative efforts to build and sustain the strength of all free peoples. Above all else communist strategy seeks to divide, to isolate, to weaken. . . . We have chosen to help develop and expand world markets, because we believe that this course will strengthen the economies of all free nations, including our own.”30
The bankers’ efforts were successful. As Ike wrote McCloy and the other bankers who supported him, “I am most grateful for your vigorous help. . . . Since you and others have taken steps to avoid a crippling appropriations cut, the action of the Subcommittee on Foreign Operations of the House Appropriations Committee has been twice postponed.”31 The bankers supported the Mutual Security Program largely because it was also a mutual government-banking alliance program. The better funded Eisenhower’s military program, the more financially successful it would prove for the bankers as they expanded into the related countries.
McCloy’s Foreign Banking Legacy
By mid-1954, following a brief and mild recession, US newspapers were singing Eisenhower’s praises for allowing his advisers to steer his domestic policy to one of deregulation with respect to businesses. “Their [businessmen’s] attitude and that of investors throughout the country,” wrote the New York World Telegram, “is best expressed by the action of the stock market, which is currently at the highest levels in a generation.”32 In addition, by the fall of 1954, the unemployment rate had dropped to 4.8 percent, from a postwar peak of 7.6 percent in February 1950.
By late 1954, Chase’s foreign loan department was booming. Despite being known for his fiscal prudence, McCloy had taken the opportunity to increase the bank’s risk by lowering the amount of cash reserves the bank held against the loans it extended. Combining this more speculative lending with his shaping of international private banking policy, McCloy led a precedent-setting deal. With the US Treasury and IMF as partners, Chase extended a $30 million loan to the Peruvian government. The twist was that there was no collateral from Peru; instead the deal forced Peru to adopt IMF-dictated austerity measures in return for loans.33
The Peru deal was the first of many instances since Bretton Woods where US banks, the US government, and the multinational agencies would cooperate to force developing countries into the American-dominated financial system in return for their economic and political concessions, through the extension of public or private loans, or a combination of both. The loan further cemented the role that Chase and other private banks would play in the supposed spirit of helping developing countries.
While at the World Bank, McCloy had consummated an agreement by which all loan proposals would require approval of the core “management” team, the elite American directors that he was friends with, as opposed to that of the broader board. This meant that he could more easily influence World Bank loans while at Chase. A stark example of that would occur when McCloy’s friend and former colleague World Bank president Eugene Black enlisted McCloy’s financial and advisory help with respect to the Aswan Dam in Egypt. Ultimately the incident had dire consequences beyond the control of either man.
The Inter-American Community
In April 1955, Eisenhower submitted another request for increased appropriations for the Mutual Security Program, including economic aid to “the free nations of South and East Asia.” He considered US determination to fight Communism as “rooted in our own revolt against colonial status” and “exemplified by our encouragement of Cuba and the Philippines to assume full freedom and control of their own destiny as independent nations.” He reiterated that America’s foreign economic policy expresses the combined embrace of political, military, and economic security across all “free nations.”34 It was the conservative Republicans, in particular, who opposed the prov
ision of foreign aid to other nations. Eisenhower’s request unleashed another avalanche of banker moves to support him.
Three months later, his foreign policy initiatives were underscored by the Council on Foreign Relations’s flagship journal, Foreign Affairs. In a July 1955 article, former assistant secretary of state Edward Miller Jr. wrote that “Latin America is changing with sensational rapidity.” “As one country after another has become aware of the great progress and great wealth that the United States enjoys,” he explained, “the people have come to demand for themselves, and for their countries as a whole, a greater share of the good things of life and a better place under the sun.”35
Miller continued, “The economic contribution which we have made to the development of Latin America during the ten years following the end of World War II has been far greater than our prewar aid.” But it was up to the United States to pick up the slack Britain, Germany, Italy, Japan, and France had left after World War II in terms of their critical economic roles as “suppliers and consumers of goods and as suppliers of capital.”
The United States and Latin America had similar population sizes, yet the aggregate national income per year in the United States was “ten times as large as all 20 Latin American nations combined.” He regarded the wealth disparity as a reason to strengthen economic ties to the region, an action that would be paired with anti-Communist rhetoric and US military support. The bankers and the White House embraced the notion of Latin America as a region desirous and needy of US support. Piling on debt and creating expensive financial arrangements between Latin American producers and US refiners of products was seen as beneficial to the region.
