The Chairman

by Kai Bird

  Warburg’s funeral in a sense marked McCloy’s own coming of age in Wall Street society. He was not himself a financier, nor would he ever have the riches of a Felix Warburg or an Averell Harriman. But men like John D. Rockefeller, Jr., were known to consult him on matters of business and philanthropy. And because Rockefeller sought his advice, so too did the rest of Wall Street. His status in the company of such men of wealth was not that of an equal, but these uncrowned members of the American aristocracy depended upon his legal talents to insulate their wealth and social status from the uncertainties of a democratic republic.

  If Washington passed legislation regulating their businesses, it was his job, and the job of other Wall Street lawyers like him, to find a way to make that law work in their interest. His was a role that had been aptly described by Tocqueville a hundred years earlier. Lawyers in America, wrote the Frenchman, are “arbiters between the citizens,” and perform a function essential to any democratic society. But because their legal training imbues them with an aristocrat’s “instinctive preference for order,” Tocqueville had concluded that in America “lawyers provide the only aristocratic element naturally able to combine with elements natural to democracy.” By the 1930s, the American legal profession, concentrated in the Wall Street law factories, had become a class apart. McCloy was now a bona-fide member of the Establishment.

  Another sign of his enhanced status in society was the summons he received in the late 1930s to join the most exclusive of Wall Street luncheon clubs, Nisi Prius. Literally Latin for “unless, before,” nisi prius is the legal term for a law that takes effect at a specified time unless cause is subsequently demonstrated why it should not. Nisi Prius was organized in 1925 by Arthur Ballantine, who had been a member of a club by the same name in Boston before moving down to New York. The Boston club gatherings were somewhat rowdy affairs, where the members put on satirical skits featuring prominent lawyers about town. They had even published a small tabloid newspaper which printed outlandish reports on the activities of thinly disguised members.

  Transplanted to Manhattan, Nisi Prius became a staid version of its Boston predecessor. “It was the elite of the bar then,” McCloy said. “I remember thinking that it meant I was coming along. . . . It was quite an honor in those days.”42 With the exception of Harrison Tweed, a Democrat and a man of unorthodox wit, the original members were a decidedly conservative lot. Winthrop Aldrich, a name partner at Murray, Prentice & Aldrich, and Rockefeller, Jr.’s brother-in-law, was a founding member. Ballantine was quick to recruit John Foster Dulles of Sullivan & Cromwell. Robert Swaine, representing Cravath; George Roberts of Winthrop, Stimson, Putnam & Roberts; and George S. Franklin, of Cotton & Franklin, were founding members. So too were Lansing P. Reed, Walter Hope, Francis McAdoo, Frank L. Polk, Elihu Root, Jr., Harold Otis, Joseph Cotton, and Grenville Clark, all from prestigious Wall Street firms. “These were fellows I looked up to,” McCloy recalled.

  George Roberts seems to have been responsible for McCloy’s invitation to join the club. They had met on the tennis court and become good friends. “He was a passable tennis player,” McCloy said. “He called them close.” There were twenty-eight members, who met for weekly Monday luncheons in a room reserved at the Broad Street club. As a rule, each of the major Wall Street law firms was represented by one or at most two of its senior partners. New members were accepted with the unanimous approval of the club. Anywhere from six to ten club members would show up at the Monday luncheon, and as time went by the practice became to have someone at the table volunteer to introduce a topic for conversation. The discussions ranged from national and international politics to the law. “We’d talk about anything,” says McCloy. “Sometimes people brought legal problems and asked for help. At other times, we’d talk about the city or politics.”43

  Gradually, the club became a venue where the leading lawyers of the country could informally keep in touch with one another and air their political views in the company of men they considered “sound.” Confidentiality was the rule. To this day, members are reluctant to talk about the group. McCloy was a natural candidate, both as a senior partner from the number-one firm in the city and as a congenial raconteur who often regaled the older men with stories about the Black Tom case or his dealings with the growing federal bureaucracy in Washington. With Nisi Prius, McCloy was now part of the innermost circle of the country’s legal aristocracy.

  Shortly after winning the Black Tom case in 1939, McCloy received an invitation to join yet another club. Since its founding in 1921, the Council on Foreign Relations had gradually become a regular meeting ground of the Establishment’s inner circle. The reason for this was quite clear. As American financial interests expanded abroad, men of influence in the private sector found it necessary to become conversant in matters of foreign policy. The Council sought to fill this need in the elite atmosphere of a New York society club.

  McCloy was delighted to join the Council’s ranks, and soon was regularly attending the Council’s dinner seminars in the company of such pillars of the Wall Street community as Paul Cravath, Frank Altschul, Frank L. Polk, Allen Dulles, and Russell C. Leffingwell. (Lew Douglas became a Council director in 1940.) By the end of Roosevelt’s second term, in 1940, the kind of men who gravitated toward the Council’s internationalist world-view were of two minds about the administration. Counting themselves as fiscal conservatives and Republicans, they still disapproved of the New Deal. But they were also increasingly alarmed by events in Europe, and if war were to break out, they knew Franklin Roosevelt was no isolationist.

  The Council was not particularly interested in propaganda, or publicity campaigns to counter widespread isolationist sentiment. That was a function for less elite organizations, some of which Council members would soon help to fund. The Council wanted to influence the War Department, not the American people. They wanted to engage in war-planning, and planning for a postwar Pax Americana. Soon after Hitler invaded Poland in September 1939, Hamilton Fish Armstrong and Walter H. Mallory of the Council went to Washington to propose a joint “War and Peace Project” with the State Department. Their idea was to provide the State Department with outside expert advice on global strategic issues. In December 1939, the Rockefeller Foundation gave the Council an initial $44,500 to begin the project. Allen Dulles, Norman H. Davis, Jacob Viner, Whitney H. Shepardson, and other Council members began to draft policy papers. Soon they were exerting direct influence on the White House; even before Germany overran Denmark in April 1940, Roosevelt had on his desk a memo from the group proposing that he announce that the United States considered Danish-owned Greenland part of the Western Hemisphere and therefore covered by the Monroe Doctrine. That autumn, the War and Peace Project produced a memo outlining the measures needed “to achieve military and economic supremacy for the United States within the non-German world.”44

  Such interventionist views were far outside the mainstream of American opinion. Most Americans would have been aghast to learn of the Council’s sweeping war plans. Even on Wall Street there was no consensus on the Nazi threat. Many of McCloy’s peers outside the Council on Foreign Relations were not convinced that European fascism threatened U.S. interests. Leading Republicans such as Herbert Hoover and Foster Dulles had made it clear that they thought some of the German demands were reasonable. Several years earlier, Dulles had given a speech at Princeton University in which he suggested that Europe was now divided between “dynamic” nations, such as Germany and Italy, and “statis” nations, like England and France. Though the Nazis might be temporarily “distasteful,” it was not worth a war to stop them.45 Even after the British abandoned the Czechs at Munich in 1938, Dulles had not changed his mind about Germany. McCloy thought such attitudes naïve and shortsighted. He was shocked by the Munich capitulation, and when war came in Europe, both he and Lew Douglas joined an avowedly prowar propaganda group, the Committee to Defend America by Aiding the Allies, organized by the prominent journalist William Allen White.46


  Douglas also joined the Council for Democracy, a lobbying-and-public-relations outfit organized by C. D. Jackson, Henry Luce’s right-hand man at Time magazine. Under Jackson’s direction, the Council became an effective and highly visible counterweight to the isolationist rhetoric of the America First organization, led by Charles Lindbergh and Robert Wood of Sears & Roebuck. With financial support from Douglas and Luce, Jackson, a consummate propagandist, soon had a media operation going which was placing anti-Hitler editorials and articles in eleven hundred newspapers a week around the country.

  As these organizations tried to proselytize the country for a coming war, a migration of lawyers from Wall Street to Washington commenced. The first Cravath man to leave the firm was Howard C. Petersen, a young associate whom McCloy had hired in 1933. Petersen took a job in the War Department, working with Grenville Clark, the same lawyer who in 1915 had inspired the Plattsburg military training camps. Fervent internationalists, Petersen and Clark served under an equally fervent Kansas isolationist, War Secretary Harry H. Woodring. It was Woodring who in 1938 took credit for the decision not to put the B-17 bomber into production. By 1940, many in the Roosevelt administration wanted him out. Frank Altschul, a partner with the investment-banking firm of Lazard Freres and a director of the Council on Foreign Relations, and Thomas Lamont, the J. P. Morgan partner, began a campaign in the spring of 1940 to have Woodring replaced by Henry Stimson, the Wall Street establishment’s consensus candidate for any position of power in Washington.47 He had already been secretary of war and of state. A lawyer who personified “soundness,” Stimson could certainly run the War Department the way the men associated with the Council on Foreign Relations wanted it run—if only Franklin Roosevelt could be persuaded to get rid of Woodring.

  “Roosevelt was not one to fire anyone,” Petersen recalled. “He was terrible—he would procrastinate forever. Finally, Clark contacted Julius Ochs Adler, vice-president of the New York Times Company, and they printed a fictitious leak that Woodring was about to go.”48 That precipitated Woodring’s resignation. And then, on the afternoon of June 19, 1940, as the Republicans gathered to nominate their candidate for president, Roosevelt offered the post to Stimson. In accepting, Stimson told Roosevelt that, while he would be loyal to him as commander-in-chief, he owed him no political loyalty, he was still a Republican. And he warned that he would brook no political interference in running the War Department. Stimson liked FDR personally, but strongly disapproved of the New Deal. He abhorred Roosevelt’s budget deficits and his “appeals to class feeling.”49

  Roosevelt, of course, was reaching out to liberal, internationalist Republicans in order to build a coalition government for the coming war. Simultaneously, he was keeping the country in suspense as to whether he would run for an unprecedented third term. That same week, the Republican Party nominated Wendell Willkie as their dark-horse candidate for president. Willkie had come to national prominence for leading the fight against the Tennessee Valley Authority (TVA), the New Deal’s showcase public utility, as president of the Commonwealth & Southern, a private utility holding company.50 He had made a fortune on Wall Street, sitting on the board of the Morgan-dominated First National Bank of New York.51 But he now cast himself as a “good ol’ boy” from Indiana, an image Interior Secretary Harold L. Ickes sarcastically caricatured as “just a simple barefoot boy from Wall Street.”52 Unlike Senator Robert Taft (Republican from Ohio), the Republican front-runner for the nomination, Willkie was also an internationalist and a free-trader. These qualities endeared him to Wall Street and the Eastern wing of the Republican Party.

  The McCloys were enthusiastic Willkie supporters. On the last day of the convention, Ellen went to Philadelphia with a group of fellow supporters and was in the galleries, chanting, “We want Willkie,” as he was nominated. McCloy himself did not attend the convention, but he was very quickly brought into the campaign by his friend Jeremiah Milbank, a major Willkie fund-raiser. He and Milbank worked closely together during the campaign, largely writing fund-raising letters to their contacts in the New York financial community. McCloy in turn recruited Ben Shute to handle the correspondence, turning the Cravath offices into an unofficial finance committee for the Willkie campaign.53

  Nearly all of McCloy’s friends were on the Willkie bandwagon, including such financiers as Sidney Weinberg, Frank Altschul, and Lew Douglas, who lent his name to “Democrats-for-Willkie,” a committee that independently raised nearly $400,000 for the campaign.54 Meanwhile, Roosevelt won renomination without ever announcing that he would seek another four years in the White House. Willkie ran a vigorous campaign, particularly on domestic issues, but the race was overshadowed by the European war, where the Battle of Britain was raging. Roosevelt used both his incumbency and the European war to his political advantage. During one of his few campaign tours, the president said, “You can’t say that everyone who is opposed to Roosevelt is pro-Nazi, but you can say with truth that everyone who is pro-Hitler in this country is also pro-Willkie.”55

  McCloy was offended by such rhetoric. On September 13, 1940, he wrote Acheson, “It is amazing to me what contrasts this man Roosevelt can present. The destroyer deal [wherein Britain received fifty U.S. destroyers in return for long-term leases on British bases in the Western Hemisphere] was a stroke of real statesmanship but his speech to the Teamsters Union might just as well have been written by [French Socialist Prime Minister Léon] Blum.”56 He told Acheson he thought it “ridiculous” that Roosevelt could suggest “that every element in the country, except labor, must make sacrifices in order to defend the country.”

  Lew Douglas had been intimately involved in putting together the destroyer deal. On July 11, 1940, he gave a dinner for eleven friends, all of whom felt America had to do something more concrete to aid Britain. Many of these men simply felt that it was time the United States declare war on Germany. Douglas expanded the group in succeeding weekly meetings, which became known as the Century Group because their gatherings were frequently held in the Century Association club. McCloy was not a formal member of the Century Group, but many of his friends were. The Group’s membership overlapped heavily with the Council on Foreign Relations and the Committee to Defend America by Aiding the Allies. Francis P. Miller, organizational director of the Council on Foreign Relations; Whitney H. Shepardson, a Council director; and Stacy May, another Council regular, were members. So too were James Warburg, Joseph Alsop, Will Clayton, Dean Acheson, Frank Polk, and Allen Dulles. On July 25, 1940, the group met and drafted a legal memo instructing Roosevelt how he could circumvent the Neutrality Act’s prohibition. The memo suggested that Roosevelt simply describe the destroyer deal as a defense measure. On August 1, Miller and four others went to Washington and pitched their ideas to the president and several Cabinet members. The next day, their proposal was approved by the full Cabinet, and by September Britain had signed the agreement.57

  That Douglas and other staunch Willkie supporters could in the midst of the campaign work so closely with the Roosevelt administration is an indication of their true priorities. However much the Wall Street community felt repulsed by Roosevelt’s political demeanor and domestic agenda in 1940, on matters of war and peace there was a growing affinity. As the situation in Europe disintegrated, opinion among American investment bankers and businessmen with interests abroad rapidly began to coalesce behind those who believed it was time for America to assume world leadership. The Century Group literally wanted America to become “top dog,” in the words of James Conant, president of Harvard University, who began to attend the irregular meetings that autumn. Douglas wrote Conant in October 1940, “Our endeavor and England’s endeavor, it seems to me, should be aimed at the reconstruction of a world order in which . . . the United States must become the dominant power. . . . I see little hope in my lifetime if this remains undone.”58

  Conant agreed: “I believe the only satisfactory solution for this country is for a majority of the thinking people to become convinced that we must
be a world power, and the price of being a world power is willingness and capacity to fight when necessary. . . .”59

  By 1940, a clear consensus had thus developed in such elite and overlapping organizations as the Century Group, the Council on Foreign Relations, and the Council for Democracy: the United States must soon replace the British Empire as the world’s dominant economic and military power. McCloy, closely associated with many of the men active in these groups, couldn’t have agreed more. As a matter of politics, he and his friends regarded Willkie as the preferable candidate to carry out this broad agenda. But toward the end of the campaign, Willkie came under strong pressure from the Taft wing of the Republican Party to differentiate himself from Roosevelt’s foreign policies. Two weeks before election day, Willkie began emphasizing, “A vote for Roosevelt is a vote for war.” Willkie, who had previously supported the destroyer deal for Britain, now called it “the most dictatorial act ever taken by an American President.”60

  McCloy, of course, disagreed; from his point of view, there was nothing wrong with stretching the chief executive’s powers a bit in order to achieve the larger goal of saving the European democracies. He soon became intimately involved with that effort when, in mid-September 1940, he got a call from Stimson asking him to come down to the War Department for a few days. Stimson said he needed him to work as a temporary consultant on how to defend the country against German sabotage. Stimson’s law partner, George Roberts, had recently introduced the McCloys into Stimson’s small social circle at the Ausable Club, where both families had cottages. Stimson now knew of McCloy as a “top-notch” tennis player and an expert on German intelligence matters.61