Bernard Baruch: The Adventures of a Wall Street Legend

by James Grant

  A few minutes later, a British delegate by the name of Harris needled him:

  HARRIS: I wish Mr. Baruch would form himself into a Committee.

  BARUCH: If you will give me the authority of all the Governments I will do it and I can assure you it will be done.

  HARRIS: There is nobody like a Committee of one.

  BARUCH: If there was ever a dictator wanted in the world there is one wanted now.

  In the war Baruch had been a dictator, albeit a circumscribed one, and in the peace he felt a sense of letdown. In another meeting there had been an exchange about nitrate of soda, a commodity over which he had in fact reigned supreme. Now the problem was that none could be shipped to Poland until the Finance Section met. “In the happy times of war we could order these things done but in piping times of peace we cannot do that,” said Baruch. “I would like to take some action.”

  Sometimes the shoe was on the other foot, with the British or the French seeking action and Baruch and the Americans favoring a kind of benign neglect. Thus a scheme to finance postwar reconstruction by the sale of bonds to governments was proposed by John Maynard Keynes and opposed by the United States. Presently Keynes, whom Baruch came to loathe, packed his bags and sailed home to write an acid denunciation of the Peace Conference and of the treaty it finally produced. Another British proposal to retain the various wartime commodity-buying pools in the interest of holding down prices also met with American opposition. The minutes of a meeting of the Raw Materials Committee late in June recorded the nut of Baruch’s view as follows: “He stated that the operation of the law of supply and demand, with as little Governmental control as possible, would be the best solution of the problem.”

  Although Baruch, probably more than most delegates in Paris, was accustomed to evening clothes and first-class hotels (to Renée, his younger daughter, he had written, “. . . remember me to all the servants”), he was untrained in the circumlocutions of diplomacy and from time to time his plain talk alarmed this diplomat colleagues. A few weeks after he reported for duty, for example, he announced that he wanted to see the minutes of some secret meetings that had been held at the Quai d’Orsay. When the fact of his interest reached the State Department, Christian Herter, a junior aide in Paris, wrote to Grew, “I would suggest confidentially that there is liable to be Hell popping if Mr. Baruch goes to the French for their secret minutes, and perhaps this could be conveyed to him very discreetly.” But the French were less alarmed than Herter, and Baruch and his associates were made privy to the documents after all. Baruch had a way with some of the foreign delegates; one told James M. Tuohy of the New York World in February that Baruch’s was the “ruling mind” of the Reparations Committee. April found him in top nondiplomatic form during an exchange with Lord Robert Cecil at a Raw Materials session:

  BARUCH: No. 4 is next on the list. Progress Report of Committee on War Stocks. Has anybody sold anything yet?

  LORD ROBERT: Nobody has any money to buy.

  BARUCH: All waiting for the Americans to give them the money.[35]

  Baruch thought that the US government should lend to foreign governments sparingly and only on condition that they establish free trade in return. His lifelong approach to economic problems was the fundamental notion that people must work and save. (He preached this doctrine at home as well as in councils of state. From Paris he wrote to his seventeen-year-old son at the Milton Academy about the healing properties of work: “Even after peace is signed we will have great difficulties in getting the world back to work, for the world must get back to work. Work will cure everything, and I would be very unhappy and I know you would be if you did not have some object or ambition which involved study and continuous work.”) Although this was never a startling idea, in 1919 it was pertinent because labor was relatively unproductive and governments were meddlesome.

  Arthur Krock, a young reporter who was in Paris for the Louisville Courier-Journal, sought out the financier for an interview on the economic situation. He arrived at the Ritz one day in the tow of Herbert Bayard Swope, the former WIB man who was back on the New York World. The visitors found Baruch in mid-toilet: a manicurist at his nails, a chasseur at his boots, a barber poised at his head, and Lacey, his valet, awaiting instructions nearby (or so Krock remembered the scene).

  Baruch graciously rose to greet his guests and listened while Krock posed a question that had been suggested by Swope:

  “Have you any message for the American people now that they have saved democracy in Europe and the world?”

  “Yes,” replied Baruch . . . “they must work and save.”

  I burst into laughter [wrote Krock] in which Baruch—sensing the incongruity between this platitude and the environment in which it was uttered—quickly joined.[36]

  As one of the richest delegates in Paris, Baruch entertained lavishly, and a particular dinner party that he gave—possibly an affair for forty at the Ritz on May 22, of which Vance McCormick took diarial note—astonished even him. Harold Ickes, Roosevelt’s Secretary of the Interior, wrote in his diary that Baruch was bragging about it in 1942, twenty-three years after the dishes had been cleared. Baruch had a clear recollection of another party. He was, he said, dancing with a beautiful Englishwoman when his friend Cary Grayson inopportunely cut in, leaving him to dance with a Frenchwoman who shadowed him for the rest of the evening. Presently she moved into a room on his floor of the Ritz and appeared one day in his sitting room bearing a list of securities. Lacey, however, who had been prepared for such a contingency, faithfully clung to his master’s side, and the woman walked out, as Baruch told the story, “in disgust”:

  Grayson is a very clever practical joker [Baruch wrote]. When he is putting one over, he lies like the old trout at the bottom of the pool and never makes a move or sound. However, one day, he said, “General Pershing and I would like to know about that Frenchwoman with a gold bracelet on her ankle who danced away with you?” and his eyes twinkled just a little. I backed him into a corner and said, “You scoundrel. You put something over on me.” And then he confessed. He said that as he was sitting with this woman, she asked who the tall man with the gray hair was and he answered, “Don’t you know? That is Mr. Baruch.” She said, “Mr. Baruch, the American? Tell me something about him.” Grayson asked her what she wanted to know. She said, “Is he clever?” He said, “Well, financially, he is the cleverest man in America. Sometimes he makes millions of dollars in one day and he is very generous with the ladies.” He said that she shot over to the middle of the floor, where she insisted upon dancing with me and he said, “And, of course, I had to dance off with your girl.”

  As rich, outspoken, and good-looking people usually are everywhere, Baruch in Paris was the object of gossip. Stories were hatched that he was pro-German and that he favored a return of the city of Fiume (now Rijeka) to Austria instead of to Italy because he held an interest in an Austrian shipping line. It was rumored that he had helped to finance the Russian Revolution; perhaps he provoked that story by declaring that the civilized world, in brooking the tyranny of the czars, had helped to foment Bolshevism. (The year 1919 was a time of labor upheaval and radical politics. Baruch said that he was prepared to give up a substantial portion of his income in taxes in order to stave off confiscation of the rest. As many others did then, he favored the sharing of corporate management with labor.)

  A mysterious cable that appears to have been the result of either a gross misunderstanding or of a crude attempt to embarrass him reached the War Department in Washington from Berlin. The message referred to Baruch as the Secretary of the Treasury, which office he was fond of bragging that he had refused. Signed only “Siegmarious,” the communiqué said:

  PLEASE REQUEST THE AMERICAN AUTHORITIES IN YOUR CITY TO INFORM THE AMERICAN SECRETARY OF THE TREASURY “BARUCH” BY WIRE THAT THE FORMER REPRESENTATIVE OF HIMSELF AND HIS BROTHERS, STEINHARDT IN BERLIN URGENTLY REQUESTS AN INTERVIEW WITH HIM ALSO IN ORDER TO SUBMIT FINANCIAL PROPOSITIONS FROM ME. THE SECRETARY OF
THE TREASURY “BARUCH” WILL PLEASE INFORM ME THROUGH YOU AS TO WHEN AND WHERE MR. STEINHARDT MAY SPEAK WITH HIM. MR. STEINHARDT PROPOSES A MEETING IN THE NEAR FUTURE AT COLOGNE.

  The cable was passed from the War Department to the Treasury Department to the State Department, which in June forwarded it to Baruch with an ambiguous covering message: “Treasury suggests you might be interested.” Baruch cabled back that he had never heard of Steinhardt or Siegmarious, didn’t know anything about his brothers’ business dealings and hadn’t any interest in meeting the “supposed sender” of the cable whoever he was.

  One possible ground for the suspicion of pro-German tendencies in Baruch was that he, along with the other Americans, supported a reparations scheme that was considerably more lenient than either the British or the French program. Baruch’s conviction was that Germany ought to pay what she was able and obliged to pay under the Armistice terms, and that the sum should be fixed so that the German taxpayers could see an end to it. He wrote in March or April:

  I do not wish in any way to express any sympathy for Germany, nor to lessen her burdens; for she should be made to pay everything she can pay, and brought to a full realization of the crime she has committed against civilization; but it would be a great mistake to be a party to promising the already over-burdened taxpayer of the Associated Governments with the hope of a payment which will never be collected.

  If the terms were too onerous, Baruch and his American colleagues said, individual Germans would refuse to work, or would emigrate and the victors would get nothing.

  An accompanying legal argument was made by John Foster Dulles, thirty-one-year-old nephew to the wife of Secretary of State Lansing. Dulles said that the cease-fire accord was a contract of which the operative part was a phrase of Wilson’s, namely, that Germany was bound to make restitution “for all damage done to the civilian population of the Allies and their property by the aggression of Germany by land, by sea, and from the air.” It followed that no military costs could be recouped since none had been mentioned in the pre-Armistice language and that the extent of allowable reparations was therefore limited.

  The British, French, and Australians resisted. France, in fact, denied that there had been a contract at all. Germany, said Klotz, had surrendered, and that was that. To the American proposal that a definite bill be drawn up and presented to Germany—so many houses demolished, civilians maimed, factories dismantled and carted off—Lloyd George objected that to name any one figure would foreclose the possibility of a still higher total and thus would prove a political liability. Baruch guessed that Germany could pay $12 to $15 billion; Keynes thought a little less. Those were conservative, and, as it seemed to some delegates, niggardly, estimates. At one meeting Lord Cunliffe, a former director of the Bank of England, ventured $120 billion, to which Baruch commented: “Let us all take a trip to the moon.” The French talked about $200 billion.

  No issue put a greater strain on inter-Allied harmony. Where the Americans pressed for a literal interpretation of Wilson’s language, the Allies wanted an expansive one. Even when war costs themselves were agreed to be inadmissible, a push began for inclusion of pensions and family allowances on a par with tangible damage. Jan Smuts of South Africa argued that the public expense of sustaining a soldier after he had left the colors, or of supporting his family during the time of his service, in fact represented “compensation for damage done to civilians” and must therefore be paid by Germany. Baruch, Dulles, and the other Americans saw the Smuts formula as sophistical and untrue to Wilsonian principle, but Wilson himself found that he rather liked it. On April 1, at the Crillon, the President informed his advisers that he was abandoning them, on this question, for Smuts. But still there was no settlement. So much did Wilson despair of ever coming to terms that on April 7 he ordered the George Washington to Brest in case he felt the sudden need to leave the Europeans to their peevish selves.

  The compromise that did emerge bore faint resemblance to the Americans’ original proposal. A Reparations Commission would be formed to assess what Germany could pay and to see to collecting it. No definite sum would be fixed until 1921. In the end, of course, the Commission failed, and Germany, which careened into hyperinflation and Nazism, wound up paying just $5 billion, of which half was borrowed from America.

  Unlike Keynes, who resigned when his advice was ignored, Baruch carried on, attending to such business as patents and coal, still seeking (in vain) a definite tallying up of the reparations bill, and from time to time taking in the races at Longchamps with Grayson and Swope. Early in April and again in May, Baruch’s father, aged seventy-eight, was near death with double pneumonia and a severe heart attack in New York. Presented with this compelling reason to sail, Baruch nonetheless remained at his post.

  On June 28 he donned cutaway, striped pants and top hat to witness the signing of the treaty at the Hall of Mirrors at Versailles. Then, on the twenty-ninth, he reboarded the George Washington in the presidential party for the voyage back to New York. On July 5 the weather was so salubrious that he was able to visit the President’s salon after lunch to listen to a reading of the treaty speech that Wilson planned to make to Congress. McCormick, Lamont, Davis, and others were also on hand. Wilson, after reading the text, asked for comments. Baruch thought it too timid, but characteristically held his tongue until he could tell Wilson so in private. In his autobiography he explained that he hadn’t wanted to appear critical in front of the others. That evening, McCormick, Davis, Grayson, and Baruch ate splendidly in the captain’s cabin. On the morning of the eighth, twenty miles off Sandy Hook, a naval escort consisting of forty destroyers, five battleships, ten seaplanes, and a blimp hove into view. Baruch was on the bridge with the President as greetings were exchanged and twenty-one-gun salutes boomed across the water. Late in the afternoon, to the cheering of the crowd along River Street in Hoboken, the George Washington warped into berth. The presidential delegation, now landed and augmented by Cabinet officials, was borne across the Hudson by special ferry to West 23rd Street, and then, by a parade of automobiles, to Carnegie Hall for speeches. Although Baruch was assigned to car No. 7, which was to the rear of the President and the Cabinet, he preceded his wartime adversary Judge Gary, who was in car No. 8. Herbert Hoover, with whom there had been the earlier protocolary run-in, had remained in Europe. Baruch literally came ashore campaigning for the treaty—he had prepared a summary of its salient economic points for distribution at dockside—and he defended it three weeks later as the leadoff witness before a hearing of the Senate Foreign Relations Committee. The art in upholding the pro position was to acknowledge with as little forensic damage as possible that the finished product was imperfect and far from what had been sought. The challenge on the reparations matter was especially keen. Instead of a definite sum, there was an indefinite one and the promise of future oversight by a Reparations Commission.

  At the hearing Baruch began masterfully by straightening out the senators on a point of French usage in a translation of a worrisome passage of Article 237. He described how the economic work was done and who were the American personnel involved. To Senator Hiram Johnson, a California Republican who asked whether it wasn’t true that the entire economic section of the treaty had been drafted by Englishmen, he replied, “It is not, sir; unless you call me an Englishman, sir.” He confessed his lack of familiarity with the Central Rhine Commission and with the reparations liability, if any, attaching to the territories of Memel, Danzig, and Schleswig. Having worked until the last minute in Paris to try to get a fixed reparations bill, he now chose to testify that, inasmuch as postwar economic conditions could not be foreseen, there was no way of telling how much Germany could pay and that a fixed bill would have therefore been impossible. In general he said: “The terms are harsh and severe, but I think they are very just, and I would go on record as saying that this commission [the Reparations Commission] is workable. It is a workable arrangement.”

  Senator Johnson thought he detected a qua
lm.

  “Do you express that with some doubt?”

  “No, sir,” said Baruch.

  “There is much to be left to the future, however, is there not?”

  “I have no fear of the future.”

  In the Republican-controlled Senate, the treaty faced resistance that at first took a passive form under the direction of Henry Cabot Lodge of Massachusetts, chairman of the Foreign Relations Committee. Lodge consumed two weeks by reading the treaty aloud to a sometimes empty committee room, another six weeks in hearings (then an unheard-of accompaniment to a Senate treaty deliberation), and three hours more, on August 19, 1919, in taxing the President himself at a White House audience. Just as Wilson had spoken over the heads of the rulers of Europe, so he felt bound now to appeal to the American people over the head of the Senate. Setting out by rail on September 3, he spoke for twenty-two days before collapsing in Pueblo, Colorado, on the night of September 25. Rushed back to the White House, he suffered a paralytic stroke on October 2. Neither a martyr nor a whole man, he fought for the treaty from his bed, not meeting the Cabinet, breaking with House and Lansing, seeing only a small circle of intimates, among them Baruch. Having bent in Paris, Wilson now refused to compromise. Article 10 of the Covenant, in particular, which bound the members of the League to “undertake to respect and preserve as against external aggression the territorial integrity and existing political independence” of all members, the President held as untouchable. Republicans objected that if the word “preserve” meant anything, it was that members would meet aggression with force, but that under the Constitution only Congress could make war. Former President Taft offered an amendment to state plainly the only constitutional process by which the United States was prepared to enter a foreign war. Carter Glass, who was just stepping down as Treasury Secretary, had tried but failed to persuade Wilson to accept it, or something like it. At Glass’s behest, in February 1920, Baruch called on the President with the same conciliatory counsel. He too failed. As Baruch left the room, according to Mrs. Wilson, the President murmured, “And Baruch, too.” But presently Wilson had a change of heart and said: “You know, Baruch is true to the bone. He told me what he believed, not what he knew I wanted him to say. Tell the dear fellow that I would like him to be Secretary of the Treasury, and then that will be off my mind.”