All the Presidents' Bankers
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Weinberg worked tirelessly during the campaign, courting the press and raising money. At a White House dinner in October 1964, Johnson asked him if he would deliver a message to “Jock Whitney” (referring to John Hay Whitney, publisher of the New York Herald Tribune), thanking the paper for endorsing him. Weinberg happily did.30
With his media, business and banking, and popular support, Johnson decisively won the 1964 election with 61 percent of the popular vote, the highest of any president since 1820. His campaign deftly mixed his progressive initiatives with an attack on Goldwater’s extremism while escalating war in Vietnam. He reserved enough goodwill to launch his Great Society plan.31 And he never forgot his friends.
Weinberg continued to provide regular recruitment recommendations for the Johnson administration. For the next few years, he also regularly reported on the pulse of the business community.
As a matter of reciprocity for his assistance, Weinberg, like the other bankers, balanced supporting Johnson with pushing his own agenda. For instance, at congressional appearances, Weinberg would strike a perfect chord between endorsing Johnson and equating the ongoing health of the national economy with the need for more lenient and favorable investment and foreign expansion related legislation.32
Johnson and the Bankers’ Economy
In his spirited inaugural speech on January 20, 1965, Johnson declared, “In a land of great wealth, families must not live in hopeless poverty. In a land rich in harvest, children just must not go hungry.”33 He made good on his word. When Johnson began his second term, 20 percent of people in America were living in poverty. Between 1965 and 1968 he raised federal expenditures addressing the War on Poverty from $6 billion to $12 billion (Nixon would double the figure again to $24.5 billion by 1974). That spending, in conjunction with a booming economy, made a big impact. When Johnson left office in 1969, the poverty rate in America had dropped to 14 percent.34
On February 18, 1965, Johnson increased his focus on his friends in finance. He invited Rockefeller, Weinberg, and other prominent bankers to an intimate White House dinner to discuss his voluntary program for an early reduction in the balance of payments deficit. His plan would require each of their firms to curtail their international transactions so as to limit dollar outflow, a request that brought the ire of Wriston when it came from Kennedy but solicited no such reprimand under Johnson.35 Johnson also established a nine-member advisory committee on balance of payments, which included Weinberg, George Moore, and railroad mogul Stuart T. Saunders to keep the business community engaged, and on his side, on the issue.36
That same day, Rockefeller, in turn, invited Johnson to a Business Group for Latin America gathering the following month. Johnson informed Rockefeller that he would be pleased to meet with the group in Washington. Johnson knew how to swap favors.37
After the event, Johnson wrote Rockefeller a warm note: “I appreciate more than I can express every line of your fine and thoughtful letter. To put it in a Johnson City way, I got more than I gave from being with you and your associates on the Council.”38
Even when the two were at odds, Johnson maintained a deferential tone with the financier. “Thank you for sending me your views, which I am always glad to have, even when we disagree,” the president wrote on November 30, 1965, after Rockefeller described some of Johnson’s Great Society policies as “handouts.”39
The bankers acted against their own profit motives and for the economic strength of the United States, possibly for the last time in American history, when they responded to Johnson’s request to streamline some of their international capital outflows. On March 3, 1965, Johnson thanked Morgan Guaranty Trust Company president Thomas Gates for “the response of Morgan Guaranty and other banks to my request to voluntarily limit their foreign lending.” He assured Gates, “You can count on our willingness to work with you closely.”40 Everything was up for bargaining between Johnson and the bankers, and everyone would get something out of it, including the Main Street economy.
Like other key bankers, Gates, who was appointed to the Committee on Voluntary Overseas Activities in February 1967, earned Johnson’s gratitude and supported his efforts over the years. His backing included a crucial press release in August 1967, in which he regarded “a war tax essential to the support of our effort in Vietnam and the conduct of vital domestic programs,” hoping it would “be enacted without delay.”41
Wall Street and Johnson’s New Treasury Secretary: “Joe” Fowler
By early 1965, Dillon wanted to return to the private sector. There was speculation in Washington that the Treasury secretary post would go to Johnson’s friend and unofficial adviser Don Cook. Congressional insiders wanted Rockefeller.42 Dillon wanted Rockefeller too. He penned a fervent four-page letter to Johnson equating Rockefeller with US dollar strength on December 29, 1964. “I have given a great deal of thought to the Treasury position,” he wrote. “The more I have thought the more certain I have become that David Rockefeller has unequalled qualifications for the job. . . . At 49 [he] is young, vigorous and at the very height of his capacities. . . . Another important consideration is David Rockefeller’s unique, worldwide reputation. . . . His appointment would signify, as nothing else could, your own resolve to protect the value of the dollar.”43
The idea of the value of the dollar and the value of the dollar itself represented two sides of a coin. One, the political ideological-narcissistic side, had the ring of global dominance to it (strong dollar equals strong country equals American “exceptionalism”). The other, the economic side, concerned the amount of dollars that were needed to pay for certain imports or would be received for exports. In practice, the two sides canceled each other out. The more dollars dispersed throughout the world, the more their economic value would be diminished. However, the more the United States supported the dollar through its monetary or trade policies, the more that value would be artificially buoyed. This paradoxical role would manifest through various banker, Federal Reserve, Treasury Department, and White House policy decisions for the next half-century.
Although Johnson respected Rockefeller, he trusted his loyal supporter Sidney Weinberg more. At Weinberg’s suggestion, Johnson chose Democrat Henry “Joe” Fowler, Kennedy’s undersecretary of the Treasury, for the position. Fowler had worked on Kennedy’s $11 billion tax cut plan. (Weinberg later enlisted Fowler to join Goldman Sachs as a senior partner. Fowler would be the first major Goldman executive to move from that elite public to private office; in the future, the direction would go the other way.)
In true form, Johnson didn’t announce his decision right away. He wanted to ensure all the bankers and the media were on his side. So he strategically built up a consensus in the banking community. On March 17, 1965, he held a select White House luncheon with half a dozen key bankers to broach the topic. Afterward, he made some follow-up calls to secure their approval.44 Then Johnson called Fowler: “Henry, I talked to all these bankers we met with yesterday: [First National City Bank president] George Moore, George Murphy, William Moore—there’s a Princeton meeting. I’ll have a Jetstar so you can land there. Go up there, no newspaper reporters, just say I don’t know if I want to be Secretary or not, but I want to work with you guys.”45
Next, Johnson called Moore, saying, “I talked to Fowler and told him to go up there tomorrow . . . you take charge of him. I want some good statements coming out. He’s going to be Secretary.”46
Moore replied, “You can rest assured the bankers will support him and his program in every way.”47
On March 25, 1965, the Senate unanimously confirmed Fowler. Johnson sent an effusive thank-you note to another advocate, Chase chairman George Champion, writing, “I do—and will always—appreciate your constructive support of him.”48
Political mission accomplished, Johnson wrote Weinberg the next day: “I am sure that Joe Fowler is going to make an outstanding Secretary. One reason is his talent and experience. The other is the support of men like Sidney Weinberg.”49
Johnson and Mergers
Toward the middle of 1965, Johnson spoke widely of national economic growth, progress, and the Great Society. He presided over the enactment of the Medicare program, and when he signed the Medicare bill into law on July 30, 1965, at the Harry S. Truman Library in Independence, Missouri, he paid homage to a plan that “all started” with Truman.51 A year later, Johnson presented Truman and his wife, Bess, with Medicare cards number one and two.
With respect to financial regulations, however, Johnson was nearly as laissez-faire as his banker friends. Both Johnson and the bankers felt the country had moved past the more prudent restrictions of the Great Depression (the bankers more publicly so). Neither Johnson nor the bankers saw any reason to entertain legislative restrictions on the bankers’ desires to grow freely. Like Eisenhower, Johnson equated strong American banks with a strong America. He also equated the size of US companies with national strength.
The pace of US corporate mergers had already accelerated under Kennedy. In 1963, the number reached 1,311, the highest figure since the Federal Trade Commission began tracking mergers in 1951. The number of antitrust cases filed by the Justice Department had also risen—to twenty by the end of 1963.
This became a key concern for Johnson. As U.S. News & World Report noted, “For the first time . . . businessmen have sounded protest against this action in [Johnson’s] administration.”52 The FTC was launching more complaints against big companies like US Steel, GM, and AT&T, as well. Fortunately for him, the major bank regulator, the comptroller of the currency, sided on behalf of bank mergers. This helped Johnson’s and the bankers’ cause.
Johnson was not above using his muscle to support mergers that would increase political power. The Houston Chronicle, for instance, had been critical of him and endorsed Richard Nixon in 1960.53 But John Jones Jr., the Chronicle’s president, was also the president of Houston’s National Bank of Commerce and was attempting to merge with Texas National.
The merger had been agreed upon by both boards of directors but was stalling at the Federal Reserve, which tended to approve eastern mergers more quickly than other ones. But Johnson intervened; he made Jones guarantee him the Chronicle’s support as long as he held the presidency. Following an off-radar meeting at Johnson’s ranch, the president got his guarantee and Jones got his merger.54
Manufacturers Hanover president Gabriel Hauge was fighting his own merger battle against Donald Turner, the assistant attorney general in charge of the Justice Department’s antitrust division, who had filed several suits against bank mergers on the grounds that they violated Section 7 of the Clayton Act and Section 1 of the Sherman Act, which prohibited anticompetitive or monopolistic mergers (though not generally for banks).
On August 24, 1965, Hauge sent an eleven-page letter defending his bank’s 1961 merger to Congressman Richard Bolling. He deemed Turner’s August 6 letter to him “such an extraordinary amalgam that I cannot let it pass without comment.”
Turner had contended in that letter, “there is no room for the argument that the antitrust laws were displaced in whole or in part by the Bank Merger Act [of 1960], and if Mr. Hauge’s materials are intended to assert to the contrary, they are plainly wrong.”55
Hauge argued that his merger occurred “in good faith” and was “legal under then existing law.” Further, he had never received notice from the Justice Department that it intended to sue either of the banks involved in the merger. Turner eventually dropped his charges, and Manufacturers Hanover, the merged entity, remained intact.
A few months later, the bank merger bill finished its route around Washington. When the House, Senate, and Johnson passed the subsequent Bank Merger Act of 1966, it gave the appearance that more mergers would be rejected for “monopoly” reasons under Section 7 of the Clayton Act and Section 1 of the Sherman Act. But in practice, the bill left major bank mergers open to approval by the comptroller of the currency and the Federal Reserve, both of which supported the consolidation of the financial arena.
Eight months later, an antitrust suit was filed to block a proposed merger of First City National and Southern National Bank in Houston on the grounds it would substantially reduce competition and increase “concentration in commercial banking in the Houston area.”56 The merger had been approved by the comptroller of the currency. With Johnson’s intervention, it remained so.
A month afterward, Special Assistant Joe Califano told President Johnson that “Stuart Saunders has been calling me about the Penn-Central merger. He claims that you told him if he ran into any problems delaying the merger, to get in touch with you and that you would move things along.”57
In response, Johnson signaled his support directly: “You can be certain that I will be watching your merger developments, and wishing you all success.”58 Penn Central would become America’s biggest bankruptcy in the 1970s.
The Latin American Alliance
On the foreign policy front, Johnson and the bankers remained in agreement over where America should wield power: both wanted to infuse more US private enterprise into Latin and Central America. Not much had changed in that regard since Eisenhower, despite a diversion by Kennedy to be more willing to provide aid based on economic need rather than strict ideological assurances.
Johnson had stated, “We are embarked on a great adventure with the Latin Americans. It is nothing less than to transform the life of an entire continent.” In a letter to Rockefeller, Johnson noted, “I share your view that the private sector throughout the hemispheres has played a creative role in the life of the Alliance [for Progress].” Johnson was “especially grateful” for the “leadership” of Rockefeller and his colleagues in this “great undertaking.”59
Johnson aligned solidly with Rockefeller, and changed or reversed certain Kennedy policies. Kennedy had been sympathetic to leaders of Latin America and its people, but under Johnson, the Alliance for Progress once again served neocolonialist goals, encouraging bankers to infiltrate the region for their own private gain.60
As the White House concluded in an internal note to Walt Rostow in June 1966, “Our modest security assistance to Latin America ($80 million annual) is small enough an investment to protect our major investment ($1 billion annual) in the economic, social and political development of the area.”61 Thus, as with many foreign policy ventures, US military and financial goals meshed.
Robert Kennedy made this a bone of contention with LBJ early on in his campaign to wrest the Democratic nomination for president from him. He wanted to carry on his late brother’s wishes for a more peaceful, economically just Latin America. An October 31, 1966, Washington Post article, “RFK Would Cut Latin Aid,” noted that he proposed a reduction of economic aid to Latin American nations engaged in military buildups at the expense of social reform.
RFK’s position was a swipe at Johnson’s policies. “This proliferation of arms,” he warned, referring to sales of fighter planes to Peru and twenty-five Skyhawk jets to Argentina, “threatens to cause conflict and instability between nations and to obstruct the great objectives of the Alliance [for Progress.]”62
RFK was right about the more idealistic aspects of the Alliance for Progress as his brother had conceived it. The region had only seen the beginning of future abuses at the hands of US corporate and bank
ing interests. These would blossom in the 1970s and implode catastrophically in the 1980s.
Arguably, if JFK or RFK had lived and retained the mantra of economic equality or self-sufficiency in Latin America rather than a free-for-all profit grab accompanied by military alignments, the third world debt crisis, which enabled bankers to use the federal government to support private speculation (the harbinger of more such maneuvers to follow), might never have occurred. But because the third world remained a bastion of opportunity for private bankers, and there was no political doctrine to tone down their zeal for such activity, there were no barriers to stop US bankers and their business clients from going off a speculative cliff. Once they did, the US government backed their losses, while the developing countries suffered extreme economic hardship when they were forced to default on their debts.
Bankers and Vietnam
At first, bankers were supportive of the Vietnam War. They recognized that war in general had buoyed the US economy as well as their domestic and international businesses. Indeed, by early 1965, Chase and other banks had experienced skyrocketing demand for credit, particularly from their subsidiaries abroad, as demand for war-related funding had increased.
The balance of payments had even gravitated toward the United States during the buildup to the war. Following Johnson’s efforts to engage the bankers on the issue, the balance of payments showed a whopping surplus of $259 million by the week ending March 3, 1965.
Johnson expressed gratitude to the bankers for standing firmly behind him on Vietnam. On April 12, 1965, his aide Jack Valenti—who would go on to be Hollywood’s supreme lobbyist for several decades—wrote First National City Bank president George Moore to say, “We are deeply grateful for your articulate analysis of the President’s Vietnam address and your sound, patriotic response to the business luncheon. The knowledge that the President’s policies stand your penetrating examination is both comforting and encouraging.”