All the Presidents' Bankers

by Prins, Nomi

  Public Issue: The sale of securities that are registered and available for sale to anyone (the opposite of private placement).

  Quantitative Easing (QE): A means by which a central bank maintains a low level of interest rates through the purchase of government debt or other securities, thereby increasing money supply by flooding banks with capital. A byproduct of QE is keeping those securities’ prices artificially high, and theoretically increasing lending and liquidity.

  Rediscounting: Lowering the interest rate on short-term debt instruments or loans in order to move them in a tight market and add market liquidity.

  Savings and Loan (S&L) Bank: See “Thrift.”

  Security: A tradable asset (or financial instrument) of any kind, broadly categorized into equity, debt, or derivative classifications.

  Setoff: The ability of a debtor to reduce the amount of debt by an amount the

  creditor owes to the debtor from another avenue of funds.

  Short Sale: A sale in which an investor sells borrowed securities in anticipation of a price decline.

  Stock: A security signifying an ownership percentage in a company, also referred to as “shares” or “equity.”

  Subprime Loan: A loan offered at an interest rate above prime to individuals whose credit scores are low, or who otherwise present a greater risk than those receiving prime rate loans.

  Thrift: A financial institution mostly focused on taking deposits and originating mortgages, originally designed to take the business of making mortgage loans away from insurance companies. Trusts tend to be smaller and more community-focused than commercial or investment banks. In the years leading up to the S&L crisis, many thrifts were allowed to expand their services to include more speculative investments, with disastrous results.

  Trust: A legal construct in which a business entity consolidates power over a particular commodity or product, such as steel, copper, or oil.

  Underwriter: A company or other entity that administers the public issuance and distribution of securities, collaborates with the issuer to determine the offering price of the securities, and buys the securities from the issuer and sells them to investors, receiving underwriting fees from issuers and profits from selling the issue to investors.

  Wash Sale: A sale in which an investor sells a security that has lost value to claim a capital loss for tax purposes, and repurchases it for a bargain. Also done to fabricate the appearance of demand, to entice other investors to buy or sell the security.

  ACKNOWLEDGMENTS

  THIS BOOK WOULD NOT HAVE BEEN POSSIBLE WITHOUT THE ASSISTANCE AND support of many people, from my friends and family to researchers to archivists to fellow authors, journalists, and historians who generously shared their energy and knowledge. To thank everyone who participated in All the Presidents’ Bankers would be to invite the internal sounds of award-ceremony music signaling a conclusion to the list. However, there are people without whom this book simply wouldn’t have come into being, and certainly not within the time frame it did.

  I’m grateful to my chief editor and “coach,” Carl Bromley, Dan LoPreto for his editorial eye, Mark Sorkin for his meticulous copyediting, Melissa Raymond for moving things along, Jaime Leifer and her marketing staff, and the rest of the wonderful Nation Books team for their energy and support—they “got” the concept immediately and more clearly than even I did. Thank you to Katrina vanden Heuvel for her support for my work through various Nation channels over the years.

  I’m deeply thankful to my agent, Andrew Stuart, who pressed me to do this book even when its scope was so daunting to me. My heartfelt appreciation to my publicist, Celeste Balducci, whose support over the years has been a delight and necessity.

  I’d like to especially thank my interns and researchers, who passionately devoted so many hours, weekends, and holidays to exploring the motivations and actions of former presidents and bankers. I’m grateful for the heroic efforts of Alex Amend, Craig Wilson, Krisztina Ugrin, Johnnie Kallas, Laura Huley, Clark Merrefield, and Elaine Yu.

  The preservation of historical archives requires general praise. It is astonishing to consider the volume of material that has been preserved. Perusing century-old hand-written letters and emails of recent times, as well as spending time in the various presidential libraries across America—from Hyde Park, New York; to Atlanta, Georgia; to Yorba Linda and Simi Valley, California; to Abilene, Kansas; to Independence, Missouri; to Little Rock, Arkansas; and to College Station and Austin, Texas—was a tremendous experience.

  I’d like to thank all the archivists who helped me with this project, including at the libraries and collections of Franklin Delano Roosevelt, Winthrop Aldrich, John McCloy, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon Baines Johnson, Richard Nixon, Jimmy Carter, Ronald Reagan, George H. W. Bush, and William J. Clinton, as well as the Jekyll Island Museum. Special thanks to Allen Fisher at the LBJ library for teaching me the “archive ropes,” to Marta Brunner at the UCLA library, who helped me access ample Woodrow Wilson records and shared all sorts of tricks to find information, and to the entire staff at the Carter Library, whose warmth was truly special. I’m grateful for the West Hollywood library, where I spent hundreds of hours while working on this book. Thanks also to Miles Rapoport, Rich Benjamin, and everyone at Demos. My gratitude to Morris Berman for his guidance though the creation of this book.

  Lastly, I thank my partner, Lukas, and furry partner, Homer, for just being there with patience and love.

  This book has not just been an exploration of relationships and people, but of the very character of the American political-financial system. A vast amount of material wound up on the “cutting-room floor” in the process. Any mistakes in this book are solely my own.

  NOTES

  Epigraph

  1. Herbert Hoover, The Cabinet and the Presidency 1920–1933 (New York, NY: Macmillan, 1952), 327–328.

  Introduction: When the President Needed the Bankers

  1. Thomas Kessner, Capital City: New York City and the Men Behind America’s Rise to Economic Dominance, 1860–1900 (New York, NY: Simon & Schuster, 2003), 208.

  2. Matthew Josephson, The Robber Barons (New York, NY: Harcourt, 1962), 394.

  3. James Stillman was president of National City Bank until 1906, whereupon he shifted to the post of chairman and Frank Vanderlip took his slot as president.

  4. Josephson, Robber Barons, 397.

  5. John Moody, The Masters of Capital (New Haven, CT: Yale University Press, 1919), 63–65. According to Moody, Stillman’s first “plaything” was a toy bank.

  6. Josephson, Robber Barons, 399.

  7. James Stillman Rockefeller became chair of National City Bank in 1959.

  8. Brandeis was appointed to the Supreme Court by President Woodrow Wilson in 1916 and served until 1939.

  9. Louis D. Brandeis, Other People’s Money and How the Bankers Use It (Chevy Chase, MD: National Home Library Foundation, 1933), 15.

  10. Josephson, Robber Barons, 409.

  11. Ibid., 402.

  12. Ibid., 409.

  13. Frank A. Vanderlip and Boyden Sparkes, “From Farm Boy to Financier: Stories of Railroad Moguls,” Saturday Evening Post, February 9, 1935.

  14. “Men of Means” plaque outside the Sans Souci dwelling on Jekyll Island, Georgia.

  15. Charles R. Morris, The Tycoons (New York, NY: Henry Holt, 2006), 235.

  16. Josephon, Robber Barons, 297.

  17. Ibid., 414.

  18. George E. Mowry, Theodore Roosevelt and the Progressive Movement (Madison, WI: University of Wisconsin Press, 1946).

  19. David Graham Phillips, The Treason of the Senate (New York, NY: Monthly Review Press, 1953), 10.

  20. Theodore Roosevelt, “Man with the Muck Rake” speech, April 15, 1906, at www.pbs.org/wgbh/americanexperience/features/primary-resources/tr-muckrake/.

  21. Phillips, Treason of the Senate, 24.

  22. Louis Glackens, “He loves me!,” April 17, 1907. Library of Congress Pri
nts and Photographs division, at Theodore Roosevelt Digital Library, Dickinson State University, at www.theodorerooseveltcenter.org/Research/Digital-Library/Record.aspx?libID=o285736.

  23. Theodore Roosevelt, An Autobiography by Theodore Roosevelt, prepared by The Project Gutenberg, based on an edition first published by Charles Scribner’s Sons in 1920. The original was published in 1913.

  24. “Panic of 1907,” Federal Reserve Bank of Boston, 4.

  25. Ibid., 5–6.

  26. Ibid., 7–10.

  27. Ellis W. Tallman and Jon R. Moen, “Lessons from the Panic of 1907,” Federal Reserve Bank of Atlanta, Economic Review, May/June 1990, 5–6.

  28. “Developments in Bank Situation,” New York Evening Telegram, October 22, 1907.

  29. Ibid.

  30. Ibid.

  31. Roosevelt, An Autobiography.

  32. “Frank Vanderlip, Banker, Dies at 72,” New York Times, June 30, 1937.

  33. “Cortelyou Puts in $25,000,000,” New York Times, October 24, 1907.

  34. Ibid.

  35. “Bankers Calm, Sky Clearing,” New York Times, October 26, 1907.

  36. “All Day Siege at Doors of Eight Banks,” New York Evening Telegram, October 24, 1907.

  37. During the Pujo hearings, Cortelyou testified that he met with Morgan and other big bankers in the evenings and was stationed at the subtreasury during the day, where he met with a “great many people of prominence in the banking business.” In response to questioning about which national banks received the bulk of the $25 million, Cortelyou replied, “The national banks which could most quickly put up the collateral” and added that Morgan was the “leading spirit” of the conferences.

  38. “Bankers Calm, Sky Clearing.”

  39. Ibid.

  40. Tallman and Moen, “Lessons from the Panic of 1907,” 11.

  41. Ibid., 10.

  42. Morris, The Tycoons, 250.

  43. Edward M. Lamont, The Ambassador from Wall Street (Madison Books, 1994), 37.

  44. Lamont, Ambassador, 39.

  45. Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (New York, NY: Grove Press, 1990), 127–128.

  46. Roosevelt, An Autobiography.

  47. Letter from Samuel Untermyer, July 3, 1912, Woodrow Wilson Papers, Vol. 24. Arthur S. Link, ed., The Papers of Woodrow Wilson (Princeton, NJ: Princeton University Press, 1966).

  48. Ibid.

  49. M.A. Frank Moore Colby, ed., The New International Year Book: A Compendium of the World’s Progress for the Year 1907 (New York, NY: Dodd, Mead and Company, 1908), 262.

  50. “John Pierpont Morgan: A Bank in Human Form,” New York Times, November 10, 1907.

  51. William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York, NY: Simon & Schuster, 1987), 273.

  52. “Federal Aid Up to $150,000,000,” New York Times, November 18, 1907.

  53. Woodrow Wilson, Addresses at Three Schools, Some Ideals of Public Life, November 7, 1907, Wilson Papers, Vol. 17, 474.

  54. Ibid.

  55. Letter from Junius Spencer Morgan, January 10, 1909, Wilson Papers, Vol. 18.

  56. Letter to Mary Allen Hulbert Peck, October 25, 1908, Wilson Papers, Vol. 18.

  57. Letter to Frank Arthur Vanderlip, April 1, 1908, Wilson Papers, Vol. 18.

  58. Letter to Melancthon Williams Jacobus, November 11, 1908, Wilson Papers, Vol. 18.

  59. Letter from Frank Arthur Vanderlip, December 11, 1909, Wilson Papers, Vol. 19.

  60. Franklin MacVeagh, formerly a wealthy wholesale grocer of Chicago, served as Secretary of the Treasury in the Taft administration.

  61. Letter to Frank Arthur Vanderlip, December 11, 1909, Wilson Papers, Vol. 19.

  62. Letter from Frank Arthur Vanderlip, December 17, 1909, Wilson Papers, Vol. 19.

  63. Letter to Frank Arthur Vanderlip, December 20, 1909, Wilson Papers, Vol. 19. See also four news reports of Wilson’s address, January 18, 1910, Wilson Papers, Vol. 20.

  Chapter 1. The Early 1910s: Post-Panic Creature and Party Posturing

  1. Nelson W. Aldrich Jr., Old Money: The Mythology of Wealth in America (New York, NY: Alfred A. Knopf, 1988). Senator Aldrich’s grandson Nelson Aldrich Rockefeller became a four-term governor of New York and vice president under Gerald Ford.

  2. “Monetary Inquirers Set Sail,” New York Times, August 5, 1908.

  3. Julie Miller, “Frieda Schiff Warburg,” Jewish Women: A Comprehensive Historical Encyclopedia, Jewish Women’s Archive website, at http://jwa.org/encyclopedia/article/warburg-frieda-schiff.

  4. “World’s Money Centre Here,” New York Times, March 5, 1910.

  5. Ibid.

  6. “President Stillman Sails,” New York Times, August 29, 1910.

  7. Frank Vanderlip, From Farm Boy to Financier (New York, NY: D. Appleton-Century, 1935), 210.

  8. Charles F. Speare, “Frank A. Vanderlip, Banker-Journalist,” The American Review of Reviews, January–June 1908.

  9. Vanderlip and Sparkes, “From Farm Boy to Financier.”

  10. Ibid.

  11. Author interview with Jekyll Island Museum historical director John Hunter, February 7, 2013.

  12. “Aldrich Not Badly Hurt,” New York Times, October 22, 1910.

  13. Author interview with John Hunter.

  14. Ibid.

  15. G. Edward Griffin, The Creature from Jekyll Island, 5th ed. (New York, NY: American Media, 2010), 5.

  16. Vanderlip and Sparkes, “From Farm Boy to Financier.”

  17. Author interview with John Hunter. In the hotel where the Clubhouse once stood, there are two meeting rooms by the dining room hallway: one is marked “Aldrich,” and the other is marked “Federal Reserve Room.”

  18. Vanderlip and Sparkes, “From Farm Boy to Financier.”

  19. “A Brief History of the Bureau of Engraving and Printing,” paper prepared by the Historical Research Center, Washington, DC, 2004.

  20. Federal Reserve Act, Section 16. “1. Issuance of Federal Reserve notes; nature of obligation; where redeemable: Federal Reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal Reserve agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal Reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.”

  21. Vanderlip and Sparkes, “From Farm Boy to Financier.” In Vanderlip’s account of the men at the Jekyll Island meetings, he omits Charles Norton, president of the First National Bank of New York, as do later versions of Griffin’s The Creature from Jekyll Island. The Jekyll Island Museum includes Norton as one of the team members, but it admits that it has not come to a “conclusive” decision as to his presence.

  22. Ibid.

  23. “The Central Bank Question,” New York Times, January 17, 1911.

  24. “Partner of Morgan Bank Praises Bank Plan,” New York Times, January 20, 1911.

  25. “Aldrich Money Plan Praised in Speech,” New York Times, February 5, 1911.

  26. “Vanderlip on Bank Defects,” New York Times, February 25, 1911.

  27. Richard T. McCulley, Banks and Politics During the Progressive Era (New York, NY: Routledge, 2012), 228.

  28. “Taft Advocates Currency Reform: State Bankers Pleased When He Endorses Aldrich’s Reserve Bank Plan,” New York Times, June 23, 1911.

  29. “The Titanic Launched,” New York Times, June 1, 1911.

  30. “Money Trust Begins with Coffee,” New York Times, May 16, 1912.

  31. Charles A. Lindbergh Sr., Banking and Currency and the Money Trust (National Capital Press, 1913).

  32. “The Money Trust at Work,” New York Times
, May 25, 1912.

  33. “Questions Annoy Banks,” New York Times, June 7, 1912.

  34. “Untermyer Sees Taft,” New York Times, September 26, 1912.

  35. “Money Trust Inquiry Halts,” New York Times, July 5, 1912.

  36. John Wells Davidson, A Crossroads of Freedom: The 1912 Campaign Speeches of Woodrow Wilson (New Haven, CT: Yale University Press, 1956). In his “Speech of Acceptance, Delivered at Sea Girt, New Jersey,” on August 7, 1912, Wilson said, “No mere bankers’ plan will meet the requirements, no matter how honestly conceived. It should be a merchants’ and farmers’ plan as well, elastic in the hands of those who use it as an indispensable part of their daily business. I do not know enough about this subject to be dogmatic about it; I know only enough to be sure what the partnerships in it should be and that the control exercised over any system we may set up should be, as far as possible, a control emanating not from a single special class but from the general body and authority of the Nation itself.”

  37. Ferdinand Lundberg, America’s Sixty Families (New York, NY: Vanguard Press, 1937), 114.

  38. Vanderlip and Sparkes, “From Farm Boy to Financier.”

  39. Ibid.

  40. “Wilson Departs with Labor Speech,” New York Times, September 2, 1912.

  41. Davidson, A Crossroads of Freedom, 433. Speech delivered at Georgetown, Delaware, October 17, 1912.

  42. Ibid., 23. Speech of Acceptance, delivered at Sea Girt, New Jersey, August 7, 1912.

  43. October 11, 1912, campaign speech, Wilson Papers, Vol. 24, 1912.

  44. According to the November 6, 1912, edition of the New York World, the popular vote was Wilson 6,293,019, Roosevelt 4,119,507, Taft 3,484,956, and Debs 901,873. The vote in the Electoral College was Wilson 435, Roosevelt 88, and Taft 8.

  45. “Thinks Only Wilson Will Curb Trusts,” New York Times, November 4, 1912.

  46. Letter from Samuel Untermyer, November 6, 1912, Wilson Papers, Vol. 12.

  47. Letter to Untermyer, November 12, 1912, Wilson Papers, Vol. 12.

  48. Henry Park Willis (1874–1937) was an adjunct professor and professor at Washington and Lee University from 1898 to 1905 and a professor of finance at George Washington University from 1905 to 1906 and 1907 to 1912. At various times after 1901, he was a financial writer and correspondent for the New York Evening Post, Springfield Republican, and New York Journal of Commerce. He was a consultant to the House Ways and Means Committee in 1911 and to the House Banking and Currency Committee in 1912. Fifteen years earlier, Willis had served on a private banker-sponsored commission to promote an earlier version of monetary reform.