by Kai Bird
About the same time, Ellen, at the age of thirty-nine, finally found a doctor who was able to perform a “miracle,” as one friend put it. “They had just about given up hope,” says one friend, “when Johnny was born.” Ellen had the baby at Lennox Hospital, where McCloy was on the board of directors. “He phoned,” says Mrs. Mary Weicker, “and said, ‘We have a son. It is Johnny. Come and meet me for a glass of champagne at the Carlyle.’ Well, I went to the Carlyle and had that glass of champagne. He was so excited. And then I looked across the room and there was sitting Mrs. Adams, the headmistress of Buckley School. I told Jack my children would probably be expelled because their mother had been seen drinking champagne at noon. Jack just laughed.”30 After Ellen came home from the hospital, the McCloys celebrated Johnny’s birth with a large party to which they invited practically everyone they knew in New York.31
That August, McCloy, Ellen, and their new son vacationed at the Ausable Club in Keene Valley, New York.32 And though he caught plenty of salmon, his month in the countryside turned into a working vacation: he had once again been assigned the “laboring oar” to produce the first draft of the final Black Tom brief.
Filling reams of yellow legal pads with his practically indecipherable handwriting, he laid out the major evidence: the Zimmermann telegram, the Herrmann message, the Ahrendt postscript, the Larkin affidavit, the British Secret Service intercepts, and the incriminating cables obtained from the Austrian archives. He also placed special emphasis on the duplicitous and fraudulent character of the German evidence.33
When done, McCloy had an impressive document. In November 1938, he came down to Washington to prepare for the oral arguments before the Mixed Claims Commission. He knew his strong point was not oral presentation, so he had former U.S. Attorney General William Mitchell present the case. Using McCloy’s notes, Mitchell argued that “there were high German officials . . . who were quite willing to testify falsely. They may have been men who in private life would not be guilty of misstatement, but they seem to have had a point of view about their country which made them justify in their own mind anything which would defend the Fatherland from embarrassing charges.”34
The commissioners adjourned on January 26, 1939, and McCloy was confident of a favorable decision. On March 1, the two commissioners conferred with Umpire Justice Roberts, and when it became clear that Roberts was now ready to rule in favor of the sabotage claimants, the German commissioner announced his immediate “retirement.” Justice Roberts requested the German government to appoint a replacement, but in the meantime ruled that the sabotage claimants had proved their case.
Awards of nearly $50 million were entered on behalf of the sabotage claimants. These were immediately contested in federal district court by the American award-holders, led by Chase Bank, who claimed that, since the German commissioner had retired, the Commission could not make a ruling. The case was eventually brought to the Supreme Court; McCloy worked on the brief, which was submitted to the full Court on November 29, 1940, and on January 6, 1941, the court upheld Justice Roberts’s decision.
The Supreme Court’s action became a landmark decision in the field of international law. Since the Germans had withdrawn their commissioner, the Court could have ruled that the arbitration board technically had not made a decision. By refusing to accept such an argument, the Court struck a blow for the concept of international arbitration. As McCloy argued, “It would make a farce of the proceedings and a travesty of international arbitration, were it possible for one Commissioner, by withdrawing at the last moment, to frustrate or impede a final decision.”35 Forever afterward, McCloy would cite his Black Tom experience as evidence that international arbitration was an imperfect but viable tool. Over the years, this conviction fueled his support for internationalist institutions.
On a less lofty plane, Black Tom finally paid some dividends. “Amos [Peaslee] was determined above all else,” said Ben Shute, “to become a rich man, and he succeeded pretty well.”36 Peaslee’s special arrangement with his clients made him a millionaire four times over; he personally received $4.4 million in attorney’s fees.37
McCloy did not do nearly as well, but he was not hurting. Cravath paid him $94,105 in 1941, more than double his partnership share of 1940. “I was just getting into the so-called big money,” he said. “I thought I was being richly paid.”38 In addition, Peaslee, evidently realizing that McCloy had unduly contributed to his sudden wealth, gave him a small portion of his contingency fee. McCloy’s recollection was that this amounted to between $10,000 and $25,000.
Black Tom made a number of people a great deal of money, but McCloy was also rewarded in another currency. He had acquired a reputation as one of the country’s foremost experts on German spies at a time when the United States had no central intelligence service, and only a tiny and neglected military intelligence. He had firsthand knowledge of the structure and capabilities of the British and German intelligence bureaucracies, and had dealt personally with numerous German agents and double agents. He was friends with such veterans of British intelligence as Admiral Reginald Hall and Sir William Wiseman.
McCloy thought these experiences had taught him some broad lessons about the craft of intelligence. In the coming years, these “lessons” became to him matters of absolute conviction. Spying in the twentieth century, he believed, was a sophisticated business carried out by well-financed institutions. It was no longer an isolated occurrence or something confined to wartime. Having proved the existence of the German spy ring responsible for Black Tom, McCloy was now psychologically prepared to be a ready believer in all spy rings.
Black Tom was by no means the only spy case widely publicized in the years immediately after World War I. Thousands of “suspicious-looking” foreigners, communists, union organizers, and immigrants of any kind were placed under surveillance by private vigilante groups such as the American Protective League. Together with a surge of nativist prejudice against postwar immigrants, the spy scares contributed to the “Palmer Raids” of 1919–20, when hundreds of individuals were arbitrarily arrested for subversive activities. Gradually, after the hysteria died down, many Americans recognized that it had all been much ado about nothing. Of the thousands arrested under the U.S. Espionage and Sedition Act, only a handful were convicted, including one German officer, Captain Franz von Rintelen. And even Rintelen hadn’t accomplished anything with his spying. It is easy, then, to see why so many of McCloy’s colleagues had been skeptical of the claims he made for Black Tom. The cast of characters—Fred Herrmann, Paul Hilken, Count Nelidoff, James Larkin, “Putzi” Hanfstaengl, Franz von Papen, and all his agents—seemed to be taken out of a pulp spy novel, but McCloy had proved it to be nonfiction. The Black Tom conspiracy always had its skeptics, and now McCloy would always be skeptical of the skeptics. Not surprisingly, in 1940, he had few doubts that German intelligence had once again targeted neutral America for infiltration and sabotage.
Others in Washington came to similar conclusions. The Washington Evening Star editorialized that the Court’s decision “climaxes, but does not end, a true story international intrigue as weird as any tale ever conceived by writers of popular fiction. . . . The whole sordid Black Tom-Kingsland episode has served one good purpose, however. It has shown the need in this country of an efficient counter-espionage system in time of peace as well as war.”39
Because America had been unprepared for the German intelligence offensive in 1915–16, McCloy believed the United States should create its own intelligence capabilities before it had to do so in the midst of war. He was also prepared to have the government do things in the name of national security that might offend certain “constitutional” sensibilities. Wiretaps, mail intercepts, and the decryption of foreign radio messages were essential techniques for any intelligence organization. Henry Stimson, he believed, was wrong to have thought that “gentlemen do not read each other’s mail,” and wrong to have closed down the Black Chamber. Black Tom had taught him that such scruples wer
e naïve.
CHAPTER 6
Cravath, the New Deal, and the Approach of War
“In America there are neither nobles nor men of letters, and the people distrust the wealthy. Therefore the lawyers form the political upper class and the most intellectual section of society.”
ALEXIS DE TOCQUEVILLE
McCloy’s relentless pursuit of German saboteurs for nine years had often seemed a bit quixotic, particularly in the context of the Great Depression. As the seams of American society ripped apart, the great Wall Street law factories became more important than ever before in adjudicating the country’s political and economic disputes. Cravath was no exception. With the lucrative market for handling securities drying up, Cravath once again began handling a great number of receiverships.
When McCloy returned from Paris in 1931, the firm appointed him managing partner. Black Tom consumed more of his time than any other case, but as managing partner he had to spend nearly half his time assigning cases, interviewing new associates, supervising the production of briefs, and attending endless meetings. If there was a problem between partners, McCloy’s task was to solve it during their regular Monday luncheons. Not surprisingly, being managing partner was considered a headache, because it took one away from the law. But McCloy was good at it; he was personally popular, and he smoothed the abrasive edges of Robert Swaine, who as the most active senior partner, was the ultimate boss. “He [Swaine] was a very able guy,” recalled one young associate, “but a little rough; in fact, he made more enemies than he should have because he was so rough. . . .”1 Young associates like Howard Petersen and Ben Shute, who were both hired by McCloy in 1933, recall working seventy hours a week. “I worked Saturdays and Sundays for years,” says Petersen.2 The firm churned out an endless stream of legal documents, as systematically as Ford Motor Company turned out automobiles. And McCloy was the factory’s foreman, the man who ensured that the papers were written, the affidavits collected, and the briefs filed on time.
It was not always the most stimulating work, and Cravath was not always on the winning side. As managing partner, McCloy became involved in many bitter corporate battles. But some tasks were less onerous, such as the one McCloy and Swatland performed for Jean Monnet, who became one of McCloy’s closest friends and collaborators. Part philosopher and part international financier, Monnet devoted much of his political life to burying age-old animosities between the French and the Germans. Some would later call him the “godfather” of a united Europe; in the 1920s and ’30s, however, Monnet was a low-profile but powerful Wall Street operator.
Back in 1929, Monnet had been invited to a party in Paris, and among the dinner guests were an Italian businessman and his twenty-year-old wife, Sylvia. Monnet, forty, instantly fell in love with Sylvia: “She was very beautiful. We forgot the other guests. . . . We soon decided that we must be together for life.”3 Unfortunately, Sylvia had married under Italian law, which did not allow for divorce. Five years later, when Monnet and Sylvia decided to formalize their liaison, they sought the European equivalent of a Mexican divorce: meeting in Moscow on November 13, 1934, Soviet civil authorities granted Sylvia a divorce from her Italian husband and a marriage to Monnet. Bound for New York from Moscow, Monnet was worried that U.S. authorities might not recognize Sylvia’s standing as his wife. So he wired Cravath, and both Swatland and McCloy were there at dockside to see that Monnet and Sylvia made it ashore.4 Sylvia charmed everyone in New York, and in particular Ellen McCloy. The two women soon became close friends.5
By 1932, the once-favorable consensus on Wall Street concerning the merits of the great engineer in the White House had broken down. Many of McCloy’s friends believed Herbert Hoover was incapable of restoring confidence in the economy. McCloy’s brother-in-law, Lew Douglas, hoped the Democrats would elect a “real leader in 1932.”6
Hoover had been elected with the strong backing of Kuhn, Loeb partners and other investment houses that represented clients with large investments abroad. In 1928 he had had the support of the internationalist business community, but by 1932 only protectionist interests, led by the Du Ponts, still supported the president. Other than the House of Morgan, aligned with Du Pont and other domestic-based industries, most investment bankers had switched to the Democratic Party. Winthrop Aldrich of Chase National Bank, James A. Moffett of the Standard Oil Company of New Jersey, banker James Warburg, and the Rockefellers all supported Roosevelt. They did so not only because they had given up on Hoover’s inactivity in the face of the financial crisis, but also because Roosevelt had assured them of his commitment to a balanced budget.7
McCloy was not impressed by Roosevelt; he thought his appeals to the masses with rhetoric about the “forgotten men” and promises of a “new deal”8 unnecessarily flamboyant and decided to cast his vote again for Hoover. In November 1932, Roosevelt won by nearly seven million votes, but McCloy was pleased that the president-elect soon nominated Lew Douglas as his budget chief.9 From his Wall Street offices, McCloy wrote to his brother-in-law, “The feeling here is that it is the best appointment Roosevelt has made yet.”10 Douglas was a conservative Democrat, a firm believer in a balanced budget and lower federal spending. He thought the country could dig its way out of the depression only by a negotiated reduction or even cancellation of intergovernmental debts. In November 1932, he wrote the columnist Walter Lippmann that a revival of world trade was essential: “If the debt question can be readjusted currencies will automatically become stabilized. When currencies are stabilized, tariffs . . . can then be lowered.”11
These were views endorsed by McCloy and many of his investment-banking friends. On March 7, 1933, he wrote Douglas, “The crisis that we are going through at the present time will require all the courage that the President indicated he had in his inaugural address. All of you must be thinking and working hard and if Roosevelt can formulate and have enacted a program which will avoid the stagnation of business I will be willing to concede that he is a great and courageous man.. . . To my mind the only one clear beneficial remedy that will certainly do good, irrespective of what other remedies may be applied, is to balance the budget.”12
Douglas heeded this advice and soon drafted an austerity budget which called for reducing the salaries of federal employees by $100 million and cutting military spending from $752 million to $531 million by 1934. Even veterans’ benefits were to be cut by $400 million. But at the same time, Roosevelt was creating new programs, such as the billion-dollar-a-year Agricultural Adjustment Act, which paid farmers not to plant their fields. These expenditures caused Douglas and other fiscal conservatives to wonder where the president was leading them. “I never know when some new and foolish idea is going to be sprung,” he wrote his father.13 He was particularly incensed when, in the spring of 1933, he walked into the Red Room of the White House and a grinning FDR said, “Congratulate me. We are off the gold standard.” Douglas wanted to resign. This time FDR persuaded him to remain.14
These were the worst years of the depression, but Cravath lawyers and many others from the professional classes were doing well. The McCloys lived in Beekman Place, a fashionable high-rise complex on the Upper East Side of Manhattan. They were not unaware of their good fortune; McCloy later recalled long bread lines and men in worn pinstripes, standing on street corners, selling apples. But he and Ellen were now people of considerable social standing. They were listed in the Social Register, and Ellen was known around Manhattan for her volunteer work in behalf of various charities. In the evenings, they hosted small dinner parties for their friends and frequently attended the Metropolitan Opera. McCloy was a member of the usual clubs associated with the Wall Street scene: the New York Bar Association, the University Club, Grolier, and Broad Street.15
But closest to his heart was the Anglers’ Club, located in two rooms above the Fraunces Tavern on Broad Street, where General George Washington had been given a farewell banquet by his fellow officers. Founded in 1906, the Anglers’ was one of New York’s most excl
usive all-male clubs; membership was limited to 265 men devoted to fly-fishing salmon and trout. The club went to great lengths to preserve its anonymity; it neither advertised its existence nor encouraged growth. With membership came a reciprocal membership in the exclusive Flyfishers Club of London.16 President Calvin Coolidge was a member until his death, and so was Herbert Hoover. McCloy became a member in 1933, and over the years helped to raise money for its operations.17 He frequently took his lunches there on weekdays.
Lew Douglas had first introduced McCloy to fly-fishing, and he had taken it up with a passion. Every summer, he cast his lines into the west branch of the Neversink River or the Ausable River, both in the Catskills. McCloy considered the latter one of the best trout streams in the Eastern United States.18 Douglas was a frequent companion on these expeditions, as were Dean Acheson, Chester McClain, Chauncey Parker, and Harry Brunie, all of them bankers and lawyers.19
In the summer of 1933, McCloy took two weeks away from the office to join Lew Douglas on a fishing expedition to the Jupiter River, on Anticosti Island in Canada. The brothers-in-law never enjoyed each other’s company so much as when they were fishing salmon. But they were always rivals. Together with some friends and a couple of guides, they made their way up the Jupiter by horse-drawn boats. Arriving at the Jupiter’s traditional campsite, the guides commented that few sportsmen had explored much of the wilderness farther upriver. “The River went straight up 12 miles, and then went perpendicular,” recalled McCloy. “I said to Lew, Tor God’s sake, if I were a salmon I wouldn’t stop at that corner of the Jupiter.’ ” He challenged Douglas to accompany him the next day up the river. “Early the next morning I tried to wake Lew and he just told me to go off by myself, he wanted to sleep.”
