The House of Morgan

by Ron Chernow

  By the time the Lindberghs returned to America in April 1939, Charles had a settled belief in German invincibility and French and British decadence. That fall, he began making radio speeches urging U.S. neutrality and arguing against repeal of the arms embargo. His remarks were sometimes laced with racist innuendos. On October 13, 1939, he said, “If the white race is ever seriously threatened, it may then be time for us to take our part for its protection, to fight side by side with the English, French, and Germans. But not with one against the other for our mutual destruction.”39 Whether consciously or not, Lindbergh had absorbed many Nazi doctrines. In the Atlantic Monthly of March 1940, he cynically saw England and France as fighting for their possessions and ethics, whereas the Germans claimed “the right of an able and virile nation to expand—to conquer territory and influence by force of arms as other nations have done at one time or another throughout history.”40

  During the debate over the war, Lindbergh increasingly reverted to his father’s midwestern populism, with its reflexive hatred of the Money Trust and its dark vision of Anglo-American finance. While the younger Lindbergh might have taken comfort from following in his father’s footsteps, the situation was more complicated for his wife. Anne Morrow Lindbergh was torn between her isolationist husband and the memory of her late internationalist father. She had always admired the Morgan partners, a type she saw as “keen man-of-the-world, discreet, kindly and cultured.”41 She once talked of the “whole warm rich world of my father and mother” and remembered idealistic talk over breakfast between her father and Jean Monnet, a French economist and diplomat. She cherished memories of her father, and after reading Harold Nicol-son’s biography of him, she wrote, “I suddenly feel my heritage, feel him in me. It is mine.”42

  Now Anne was in an excruciating situation. Her mother felt strongly that Dwight would have favored aid for the Allies. Most of the Lindberghs’ friends on Long Island held similar views. The Lindberghs also had many French and British friends, and as soon as Germany began mobilizing for war in 1938, Anne imagined Florrie Grenfell, Lady Astor, and the rest wiped out by air raids.43 Yet Anne shared Charles’s simplistic views of European politics, albeit without the nasty overlay of racism. In 1940, she published a book called The Wave of the Future in which she saw the war not as a contest between good and evil but as one between the “Forces of the Past” (the Allies) and the “Forces of the Future” (Germany).

  If Charles felt buoyed by his identification with his father, Anne was tormented by the ghost of hers. She told herself that Charles was as idealistic as her father but that it was the idealism of a later age. After William Allen White formed the Committee for Defending America by Aiding the Allies, Anne asked herself, “I wonder where Daddy would stand? Probably behind the committee et al. And yet he was among those idealists, very practical, intensely practical—that was his great gift.”44 Nevertheless, as the Lindberghs were socially ostracized by old friends—including Harry Guggenheim, who had sponsored Charles’s three-month tour following the solo flight—Anne was haunted by her father’s specter. She lamented that “Charles . . . has the memory of his father with him,” but “I’m entirely alone.”45

  Anne’s dilemma was sharpened on May 19, 1940, when Charles made a radio speech entitled “The Air Defense of America.” By then, the Nazis had conquered Denmark and were overrunning Holland and Belgium. Lindbergh’s speech made menacing reference to “powerful elements in America” who controlled the “machinery of influence and propaganda.” These elements, he said, wanted to push America into war for profit and to serve their foreign allies.46 The Morgan bank wasn’t named, but Lindbergh’s language echoed that used in attacks on the bank ever since the Nye hearings. President Roosevelt told Treasury Secretary Henry Morgenthau the next day, “I am absolutely convinced that Lindbergh is a Nazi.”47

  Betty Morrow, now acting president of Smith College (having attained the academic distinction denied Dwight), was disturbed by Charles’s insinuations. Five days after the radio speech, she had an emotional lunch with Anne at the Cosmopolitan Club. Betty felt ashamed that America hadn’t rushed to join England and said in anguish to Anne, “How they will hate us—oh, how they will hate us.”48 Yet despite her candor with her daughter, Morrow felt constrained in challenging her son-in-law. The day after the lunch, she secretly wrote to Lamont asking him to reason with Lindbergh: “I am in a difficult position just now . . . but my chief worry is over Anne. She is torn in spirit and it is telling on her health.”49

  Taking the tone of a concerned uncle, Lamont wrote to the rather aloof Charles Lindbergh. He said he had hesitated to contact him and cited his affection for the Morrow family. Then he asked point-blank who those nameless conspirators in his speech were. He added that he didn’t know of any such elements. Trying to recapture the personal warmth of earlier years, Lamont admonished him tactfully: “Dear Charles—It is so important that we shall have unity in our country that we must not broadcast suspicions and accusations unless we have complete basis for the charges.”50

  The return letter must have chilled Lamont. It wasn’t hostile so much as cool and correct, as if Lindbergh had turned into a stranger. “I intentionally did not specify individuals, groups, or organizations in my address because I still hope that it will not be necessary to do this,” Lindbergh said, claiming that to do so would only stir up dangerous class antagonisms. He warned that U.S. entry into the war would cause “chaotic conditions” and destroy American moderation. He concluded, “I have great respect for your judgment, but I am afraid that our viewpoints differ in regard to the attitude this country should take toward the war in Europe.”51 Later, when a reporter asked Lamont why he didn’t visit the Lindberghs, he snapped, “I have nothing to do with them.”52

  Her secret overture through Lamont having failed, Betty Morrow decided to make public her opposition to her son-in-law. During the Dunkirk evacuation in June, she made a speech for the William Allen White committee rebutting Charles’s views. She telephoned Anne first to soften the blow. “Your father would have wanted me to do it,” she told Anne, who thought her mother was being exploited for the purposes of publicity.53 Betty came to agree with this appraisal after White made a speech boasting of his “smart trick” in setting her against Charles. After that, Betty Morrow was “very humanly, unwilling to appear again in a public clash with Lindbergh,” as Russell Leffingwell informed Roosevelt.54

  THERE was a moment in the spring of 1940 when it seemed the House of Morgan might simultaneously defeat the New Deal and advance the British cause. The long-awaited middle path opened up in the Republican party. Along with the British ambassador, Lord Lothian, Lamont attended a dinner at the home of publisher Ogden M. Reid, who presented two would-be Republican presidential candidates. Robert A. Taft, son of the former president and a Republican senator from Ohio, was predictably anti-internationalist. But the other aspirant, Wendell Willkie, was a revelation. As president of the giant utility holding company Commonwealth and Southern Corporation, he had clashed with FDR over the Tennessee Valley Authority’s takeover of his generating plants. At the dinner, Willkie came out in favor of unqualified support for Britain, including the provisioning of planes and naval equipment. On the spot, Lamont and Reid championed his candidacy, and Lamont was instrumental in getting him to run. Willkie then repeated his pro-British pep talk before a dinner at Lamont’s house, a gathering credited with enlisting Wall Street support for his run for the presidency.

  For Morgan partners, Willkie was tailor-made. Ever since McKinley, the bank had been baffled by a Hobson’s choice in American politics. It could side either with Democrats, who were too interventionist at home, or with Republicans, who were too isolationist abroad. As a major foreign lender, it favored free trade and free flow of capital at a time when big business was still mostly protectionist. On balance, the bank had opted for Republicans, but not without considerable discomfort on foreign issues.

  Willkie was decidedly in the Morgan grain. A former De
mocrat, he was an outward-looking Anglophile, a supporter of reciprocal trade agreements, and generally attuned to FDR’s foreign policy. At the same time, he was a supporter of domestic free markets and wished for a midcourse correction in New Deal policies and a more favorable environment for investment. He had plenty of Wall Street friends, including Perry Hall of Morgan Stanley (where Willkie was one of Harold Stanley’s first clients in 1935), and provided a version of Republicanism they could unreservedly support.

  With his broad, open face, big grin, and Indiana twang, Willkie was folksy and sophisticated and uniquely able to advance Wall Street’s cause without seeming like an ambassador for the rich. Fortune called him a “clever bumpkin,” and Harold Ickes memorably mocked him as “a simple barefoot Wall Street lawyer.”55 The verdict was too harsh, for Willkie wanted to retain many New Deal innovations—collective bargaining, minimum wages, and maximum hours—that were anathema to Wall Street bankers. Though Willkie declared his candidacy only seven weeks before the Republican National Convention in June 1940, his dark-horse candidacy galloped fast. He had to soft-pedal his Morgan support so as not to alarm the small-town, anti-Wall Street wing of the party. To foster a down-home image, he took a modest two-room suite at the Benjamin Franklin Hotel in Philadelphia, site of the convention, and Tom Lamont was expressly instructed to avoid his headquarters.

  Despite this sanitary distance, the anti-Willkie troops wasted no time in fastening onto his Wall Street links in order to discredit him. Representative Usher L. Burdick of North Dakota circulated an alarmist tract to delegates that said, “I believe I am serving the best interests of the Republican Party by protesting in advance and exposing the machinations and attempts of J.P. Morgan and the other New York City bankers in forcing Wendell Willkie on the Republican Party. Money, I know, talks.”56

  The Republicans were famished for new leaders and finally chose Willkie on the sixth ballot over prosecutor Thomas Dewey (who had indicted Richard Whitney) and Senator Taft. The following month, FDR was nominated for a third term in Chicago, with Henry A. Wallace of Iowa as his running mate. Willkie tried gamely to forge a compromise between support for FDR’s foreign policy during the war emergency and moderate reform of New Deal policy. He even sounded out Roosevelt about a deal in which the president would consult him on foreign policy in exchange for a pledge to keep the war out of the campaign. Roosevelt didn’t trust the Republicans enough to accede to this and was loath to confer the prestige of such a deal upon Willkie.

  In November, Roosevelt won by over five million votes. Willkie’s defeat didn’t end charges of Wall Street machinations but only strengthened the conviction of those who saw wily bankers as having foisted him upon the party. As historian Harry Elmer Barnes afterward charged: “It is doubtful if any man was ever nominated for the Presidency on the basis of less popular knowledge and approval. There were at least a dozen or more persons in the famous ’smoke-filled room’ in the Chicago hotel where Warren G. Harding was chosen for the nomination in 1920. Two men decided that Mr. Willkie should be the Republican nominee. . . . These men were Ogden Mills Reid . . . and Thomas W. Lamont.”57

  As it turned out, the House of Morgan didn’t suffer as much from Willkie’s defeat as might have been expected. Bolstered by his election victory, Roosevelt moved more vigorously to support Britain, and in this effort he needed the Morgan bank. With marvelous suddenness, the chill in Morgan-Roosevelt relations thawed and was replaced by cordiality from the White House of a sort that 23 Wall hadn’t known since the twenties. As America’s attention shifted from blistering debates over domestic policy to ways in which to deal with Europe’s dictators, the power of the House of Morgan surged accordingly.

  CHAPTER TWENTY-THREE

  HOSTAGES

  ON June 22, 1940, the new French Premier, Marshal Henri Philippe Petain, submitted to the Nazi blitzkrieg and signed an armistice with Hitler, leaving Britain to fight alone against the Axis powers. This left Morgan et Compagnie in a vulnerable situation. The stately Banque Morgan, as the French termed it, occupied an imposing mansion at 14 place Vendôme, its marble banking floor illuminated by a huge skylight. Established by the Drexels in 1868, the firm had an illustrious heritage, having stayed open during the Franco-Prussian War and World War I. It was known as Morgan, Harjes until 1926, when partner Herman Harjes died in a Deauville polo accident and the name was changed to Morgan et Compagnie. Under the interlocking partnership structure of the pre-Glass-Steagall Morgan empire, Jack Morgan was senior partner, and New York had provided most of the bank’s capital.

  If Morgan et Compagnie never achieved quite the renown of the New York and London banks, it still ranked as one of the largest foreign financial institutions in Paris even in the 1980s. It was a conduit for dealings between the French government and J. P. Morgan and Company and was very close to the Banque de France. Its French officers had often held high government posts. Morgan et Compagnie served the subsidiaries of most American companies in France, provided traveler’s checks and letters of credit for rich American tourists, handled currency transactions for Americans in France, and had vaults brimming with securities owned by Americans and Frenchmen. It exchanged young apprentices with Morgan Grenfell and J. P. Morgan. Yet in the last analysis, the French house was always stymied by Morgan intimacy with Great Britain and France’s nationalistic resistance to American business penetration.

  So total was the wartime news blackout that an account of what happened to Morgan et Compagnie during the Nazi occupation wasn’t known until September 1944; it can now be reconstructed from unpublished memoirs at Morgan Guaranty. The story begins with the Banque de France, which didn’t trust the phony peace promulgated by the Munich Pact and in 1938 began making plans to protect its gold. It shipped gold to New York as a fund for future war purchases and took gold bullion stored at its vaults on the rue de la Vrilliere and distributed it to fifty-one strategic sites around the country.

  Many Parisian banks made similar contingency plans. Morgan et Compagnie bought a run-down hotel in Niort, a town southeast of Nantes. It was redesigned as a self-sufficient unit for protecting securities, with safes in the basement and sleeping quarters upstairs for staff. After war was declared, the French government advised Morgans to set up an office in Chatel-Guyon, in unoccupied France, to protect its exchange dealings with the Banque de France. Several weeks before the Nazis stormed Paris, Morgans and other banks shipped out securities to these safe houses in south-central France and left behind skeleton staffs in Paris. Then, five days before France fell, two American partners of Morgan et Compagnie, Bernard S. Carter and Julian Allen, fled Paris along roads swollen with refugees and clogged with horse-drawn carts and bicycles. All of these acts proved wise precautions.

  During the German occupation, the Nazi flag flew over the Justice Ministry and the Ritz Hôtel, Morgan et Compagnie’s neighbors on the place Vendôme. Three of the American banks with Paris branches—J. P. Morgan, Guaranty Trust, and Chase National—stayed open, while the fourth—National City—shut down. In late June 1940, Leonard Rist of Morgan et Compagnie was arrested and dispatched to a German prison camp in the Sudetenland. Rist was the son of an eminent French economist, Charles Rist, and had been personally recruited by Jack Morgan. When Leonard was in New York in 1928, he recalled, Jack “asked me what the hell I was doing in any other place than Morgan’s in exactly those words; whereupon I decided to apply for a job at Morgan’s in Paris.”1

  Rist ended up spending eighteen months behind barbed wire while his parents worked out emergency plans to secure a Wall Street job for their younger son through Russell Leffingwell. The House of Morgan finally sprang Leonard through their old Vatican friend, Bernardino Nogara, the treasurer of the Special Administration of the Holy See. Nogara somehow convinced the Germans that Rist’s release was needed to maintain French financial health. The combined force of the Morgan mystique and Rist’s reputation was such that the argument worked. After the war, the French Treasury assigned Leonard Rist to
the World Bank, and he ended up as head of its Economic Department.

  For the rest of the war, executive control of Morgan et Compagnie fell to two stubborn, courageous Frenchmen—the elegant Maurice Pesson-Didion, a veteran wounded in the Battle of the Marne, and Louis Tute-leers, chief of the Credit Department, who limped from a wartime injury suffered while serving in the Belgian army. The two bankers had to contend with constant, hovering Nazi interference and menacing surveillance of their activities. To finance his conquests, Hitler set a policy of plundering gold and foreign currency from banks in occupied territories. As part of his revenge for Versailles, he chose to extort money from France. Like other banks, Morgan et Compagnie could conduct business in franc accounts, but foreign-exchange transactions were outlawed. The bank had to apprise the Germans of any foreign currency it held as well as any property in safe deposit boxes.

  The House of Morgan has always been proud that it operated in Nazi-occupied Paris without compromising its principles. Yet the bank may have had a secret patron: Marshal Petain, head of the collaborationist Vichy government. As a celebrated war hero in 1917, Petain had associated with many fund-raising society ladies, including Herman Harjes’s wife and Anne Morgan. It was perhaps through such meetings that he came to have an account at Morgan et Compagnie. This embarrassing account was disclosed in November 1941, during a boisterous debate in the British House of Commons. It came out that Petain had signed an annuity plan with a Canadian company in 1937; even after the fall of France and the British blockade, the Canadian company duly paid £600 annually to Morgan Grenfell, which then credited Petain’s account at Morgan et Compagnie. The transfers were sanctioned by a British Treasury license.