The Chairman

by Kai Bird

  On September 16, 1940, Stimson told General Sherman Miles, chief of Army G-2 intelligence, to hire McCloy as a part-time consultant. That night, the war secretary wrote in his diary, “I have been trying to get the State Department and the Department of Justice to connect with McCloy ever since I have been here but they have made no progress on it, so I finally decided to take him on in the War Department until they begin to realize how much he knows. He is the man who handled the Black Tom case.. . . McCloy knows more about subversive German agents in this country I believe than any other man.”62

  Stimson’s call could not have come as a complete surprise to McCloy. That autumn, Black Tom seemed to be happening all over again. The newspapers were filled with stories of mysterious munition explosions in New Jersey factories, the sinking of ships in New York harbor, and congressional investigations of Nazi and communist spy rings. On September 12, 1940, a terrific explosion at a powder plant in Kenvil, New Jersey, destroyed ammunition bound for England and killed dozens of employees. The headlines throughout late September and October announced, “Hitler’s Plot for War on U.S. Includes Bombings” and “FBI on Scent of Plot to Wreck U.S. Arsenals.”63 The left-wing New York daily, PM, reported in September that “U.S. naval intelligence agents intercepted incendiary bombs disguised as lead pencils, made in Germany.. . . A saboteur has only to split one of these harmless looking pencils and leave it in a plant. Hours later it will spread a fire almost impossible to extinguish.”64 Stimson had reason to call on the lawyer who had broken open the Black Tom case.

  So it was that, even before the election, McCloy found himself in Washington, working for the Roosevelt administration. He still would not vote for the man, even if the rapid pace of events seemed to leave FDR the only politician capable of leading the American public into a new “world order.” In any case, on November 5, 1940, in the largest turnout ever, forty-nine million, twenty-seven million voted to give the president his third term.65 Roosevelt had his mandate—and little more than a year left to put together a war council.

  BOOK II

  World War II

  CHAPTER 7

  Imps of Satan

  “We have as much chance of ignoring this war as a man has of ignoring an elephant in his parlor. . . .”

  JOHN J. MCCLOY SEPTEMBER 19, 1941

  In the beginning, McCloy’s arrangement with the seventy-two-year-old Stimson was very informal. The two men simply agreed that the younger lawyer would work “on and off” as a consultant to Army Intelligence a couple of days each week.1 At forty-five years of age, McCloy exuded the athletic energy of a man ten years younger. His habitual double-breasted, baggy gray suits, topped off with a Stetson felt hat, made him appear shorter than his five-foot-ten-inch frame. He walked with a long, quick stride, the gait of a man who still played an aggressive set of tennis at least once a week. His closely shaven, unblemished face showed little sign of wear; only a few crow’s-feet wrinkles around his eyes betrayed his early middle age. He smiled easily, and his brown eyes brightened as he engaged in conversation. He had a weakness for good cigars, but as a substitute, visitors to his office frequently saw him popping chocolate drops into his mouth from a bowl on his desk. He enjoyed telling stories, often at too great length. But he also had the patience of a listener.

  The army officers who encountered him in these first few weeks on the job found that, unlike many such civilian appointees, McCloy was not full of himself. He wore the easy self-assurance of someone who felt no need to intimidate underlings. In meetings, his demeanor was informal and deferential. He often sat in silence, leaning back in his chair, his eyes closed, while lightly running his right hand back and forth across the hairless dome of his head. One might have thought he was not listening until the end of the meeting, when he would open his eyes and, in the most concise and agreeable language, summarize the salient points made by everyone in the room.

  Initially, McCloy concentrated on sabotage investigations, poring over FBI reports on the security of plants manufacturing defense items. Almost immediately, he saw that any effective antisabotage effort would require a centralized intelligence organization. But there was little coordination between the FBI and the intelligence branches of the army and the navy. Army G-2 had a staff of only eighty and a budget to match it. The Office of Naval Intelligence (ONI) had fewer than twenty attachés to cover the entire globe.2 Only the previous summer had the FBI begun to set up an organization, the Special Intelligence Section, to cover Latin America.3

  Yet these three organizations all claimed that, if war came, they were prepared to execute their intelligence tasks, and to do so without sharing their assets. McCloy thought this unrealistic and complained about “how small a concept of the picture we now have.”4 Exercising all his charm, he tried to persuade the rival intelligence chiefs to coordinate their work.

  Part of the problem stemmed from personality clashes; General Sherman Miles of Army G-2 complained of J. Edgar Hoover’s “dictatorial attitude.”5 Army and naval intelligence were reluctant to share their material, particularly when it came to sensitive coded communications intercepts. In September 1940, the Army’s Signal Intelligence Service (SIS) successfully built a duplicate of the PURPLE machine used by the Japanese to encode their cables. McCloy was briefed on this breakthrough, and later that autumn he persuaded the reluctant military brass that this special intelligence should be shared with the British.

  In his unobtrusive manner, he was quietly becoming an unofficial coordinator of intelligence matters. In early November, he submitted a draft of a report on counterpropaganda to Interior Secretary Harold Ickes, General Miles, and Stimson. Among other things, he charged that Hitler had prepared “a barrage of ideas to precede his mass attacks,” and that the twelve million German Americans had not been insulated from this “virus.” He concluded, “Only a well-organized and well-financed bureau or department could counter-act this new weapon of war.” Attached was an organizational chart of “Department X,” which looked suspicionsly like a highly centralized intelligence organization. A “Director and his Staff” reported directly to the secretaries of war and state and the attorney general. Below the “Director” were dotted lines of “liaison” to G-2, ONI, the FBI, and “Treasury Sources.” And below them were ten counterintelligence units, each assigned to a separate target group. One unit was assigned to “Counter-work in U.S. among Germans.” Another unit was to conduct counterpropaganda in Germany. There were similar units for Italians, French, Czechs, Poles, and “all other races” in the United States.6

  Miles and Ickes thought McCloy’s proposed “Department X” was exactly what was needed. Taking his cue from Ickes, Stimson too thought McCloy’s estimation of the danger of German propaganda was sobering. None of these men questioned the propriety of having a government agency secretly plant propaganda in newspapers read by American citizens. McCloy was not insensible to such civil-liberty concerns, he just discounted them in the present emergency. He acknowledged to General George C. Marshall, the army’s chief of staff, “It is a distasteful job to organize a propaganda weapon but in these days the Army cannot ignore the necessity for it any more than the Army can ignore the necessity for artillery or an air force. . . .”7

  Over the next few months, Ickes doggedly pushed the idea of a centralized propaganda agency. But Roosevelt, while never saying no, refused to submit any concrete legislation to Congress. If McCloy’s specific proposal died, some of his ideas nevertheless resurfaced in a few short months. In the meantime, his name became closely associated with the growing debate inside the administration over the country’s intelligence needs.

  Black Tom continued to grip him. When the FBI passed him a report in mid-November concluding that there was no evidence of sabotage in the recent spate of factory explosions, he told J. Edgar Hoover, “The fact of the matter is that if there is any German sabotage, it is probably being done with the use of devices which destroy themselves and leave no trace. . . .”8

  To be sure
, McCloy was not alone in giving credence to the dangers of sabotage. That summer, a book entitled The Fifth Column Is Here was a best-seller.9 Newspapers all over the country, regardless of their political orientation, were running stories claiming that sabotage and fifth-columnist conspiracies were rampant. The left-wing New York daily, PM, observed that settlements of Japanese American truck farmers had “a consistent habit of springing up around places like the Bremerton Navy Yard on Puget Sound” and other military installations.10 When Hoover complained that such sensationalized reporting fostered public hysteria, McCloy responded, “Some of the widespread publicity and near-hysteria may have a salutary effect. . . . Guards are being strengthened all round, and precautions are increasing not only against sabotage but against accidents.”11

  By November 1940, Stimson was using McCloy as his favorite troubleshooter, someone who could monitor “everything that no one else happened to be handling.”12 Some officers in the War Department began to resent his far-flung activities. General Marshall’s assistant, General Thomas T. Handy, warned a colleague, “He’s peppery. He’s got his nose into everything.”

  What worried Stimson in the autumn of 1940 was lagging war production. How could one orchestrate an increase in military goods when the nation was still officially at peace? The army’s own expanding needs were not being met, let alone the requirements of the British.

  British armament needs were a particular problem, because Congress had not yet authorized the transfer of certain categories of weapons. Consequently, McCloy soon found himself trying to construct a legal rationalization for what the administration wanted to do without congressional approval. Roosevelt wanted to sell the British twenty B-17 heavy bombers and munitions. The law, however, specified that nothing could be sold to the British that was needed for the United States’ own security. Congress had also barred the sale of certain munitions and aircraft unless the army certified them obsolete. McCloy’s solution was ingeniously simple. In return for our selling the British the twenty B-17 bombers, London agreed to place a production order for at least twelve hundred bombers prior to March 1, 1940. This allowed the War Department to certify that the sale would benefit U.S. security by dramatically increasing aircraft production capacity. Regarding the munitions, the department merely stated that the bombs sent with the B-17S were obsolete. A willing Congress accepted these “certifications,” though a minority angrily denounced the whole thing as a charade.13

  Everyone was aware that such rationalizations might not withstand close congressional scrutiny, and McCloy constantly had to reassure Stimson that he could handle the legal proprieties. It was widely assumed among Washington insiders that McCloy was pushing the war secretary to the edge of illegalities. One day, at a Cabinet meeting, the president asked Stimson for his opinion on whether certain supplies could be sent to the British. In response, Stimson began reading from a memo on the subject prepared by McCloy. As he came to the conclusion of McCloy’s arguments for why the supplies could be sent, Stimson suddenly found himself reading aloud, “Of course, this is illegal as hell, but—” and stopped short. Roosevelt laughed and, leaning back in his chair, teasingly said, “Why, Henry, you old Republican lawyer.” The story was repeated all over town, and among young New Dealers like Joseph L. Rauh, who had just finished clerking for Justice Frankfurter and was then working in the president’s Office of Emergency Management, it was told to McCloy’s great credit.

  It soon became apparent that such legal artifices were temporary measures. The magnitude of British requirements—estimated at $5 billion—would force the president to seek a congressional mandate. Something more had to be done than merely hornswoggling accounts in the War Department. On December 16, Roosevelt returned from a short sailing vacation down the Eastern Seaboard and suggested to Morgenthau that he now had in mind legislation that would allow Washington to “lend” the British guns and ships which they could return in kind at the end of the war. He said, “. . . it seems to me that the thing to do is to get away from the dollar sign. . . .”14

  One evening, as the president’s idea was percolating through Washington, McCloy was at dinner with his old law professor Felix Frankfurter, who had been nominated to the Supreme Court in January 1939. When the topic of British armament needs came up, McCloy mentioned that he thought America’s role in this war was to be an “arsenal of democracy.” Hearing the phrase from McCloy’s lips, Frankfurter’s eyes lit up; he told his friend never to use it again.15 On Christmas Day, the justice wrote Roosevelt a short letter in which he urged him to use the phrase in his next speech. The president said he “loved” the metaphor.16

  By this time, McCloy was not the only “young man” assisting Stimson. The war secretary had recently brought Robert Lovett, one of McCloy’s investment-banking acquaintances, down from New York to work exclusively on air power. Lovett told a reporter, “My business was banking, now it’s airplanes.” McCloy admired Lovett’s command of statistics, and his mildly profane humor. Behind his quiet owlish exterior, Lovett possessed a sharp wit; he could quote Dorothy Parker and George Santayana in the same breath.17

  In addition to McCloy and Lovett, Stimson had also hired Harvey H. Bundy, who had served him as assistant secretary of state during the Hoover administration. These men formed an unusually close working relationship. All three occupied adjoining offices just down the hall from the secretary, who was forever shouting unintelligible orders to them over an interoffice “squawk box.” Occasionally Stimson’s temper got the better of him. McCloy and Lovett used humor to deflect such angry outbursts, telling his wife, Mabel, that he was a bad-tempered tyrant who “roared like a lion.” Out of his presence, Lovett and McCloy began to refer to their boss as “Stimmie.” For his part, the secretary called McCloy and Lovett the “Imps of Satan.”18

  Of the three aides, McCloy was the closest to the Stimsons. Both in the office and at Stimson’s Woodley estate in Northwest Washington, D.C., he spent more time with “the Colonel,” as he called him to his face, than did any of the other aides. Bundy’s demeanor was rather straitlaced. Lovett could be cold and aloof, and even his humor was of the dry, cutting kind. He had little of McCloy’s energy or patience in dealing with the bureaucracy, and when confronted by disagreements was apt to mutter, “To hell with the cheese. Let’s just get out of this trap.” McCloy was the consensus builder, the kind of man who could chair a meeting of people holding violently opposing views and emerge with a concrete list—scrawled on his ever-present yellow legal pad—of “what everyone seems to be saying.” He called it “yellow-padding.”19

  On December 18, Stimson went to see FDR and got the president’s approval to appoint both McCloy and Lovett as “Special Assistants to the Secretary of War” at a salary of $8,000 each.20 McCloy had formally terminated his Cravath partnership on December 7, 1940, though he viewed this break as a temporary separation, not a divorce. In fact, his career as a corporate lawyer would never be the same. After New Year’s, Ellen and Johnny, now two years old, moved with him into a small house in Georgetown he rented from an old army friend for $75 a month.21 Their new home, at 3303 Volta Place, had all of Georgetown’s antique charms. It was a low-slung, two-story brick house with a tiny garden in the back. Adjacent to the house was a park where Johnny could play.

  All this represented a major break with the past. In his new circumstances as a public servant, McCloy was paid less than 20 percent of his previous annual earnings on Wall Street. His household expenses alone in Washington averaged $10,000 a year. On top of this, he was still supporting his two aunts and his mother as well. Even so, he could afford to take the large salary cut. After twenty years in a Wall Street law practice, he had cash savings and securities worth $106,246, a sizable sum in 1941.22

  Over Christmas week, which he spent in New York and Hastings-on-Hudson, McCloy had turned his mind to preparing a memo for Stimson on the war economy. “The warfare of today,” he wrote, “is increasingly a question of industrial capacity to produce the a
bility to make, day after day, year after year, planes, ships, arms, and equipment. We must overtake and surpass in this connection an efficient, well-organized nation which is and has been devoting for a number of years the major part of its efforts to the job of preparing and fighting a war.” Citing figures that showed that Germany was spending some $60 billion a year on war production, versus America’s 1940 budget of about $10 billion, McCloy complained, “Business is going on in the country as usual, and it cannot go on as usual if we are to build up our capacity to anything like German dimensions. . . . To triple or quadruple our present effort requires that radical things be done to our existing economy. Obviously the job demands industrial planning of a high order on the part of the Production Boss.”23

  The problem, of course, was that there was no “Production Boss” with the power to dictate production schedules to private industry. Roosevelt, at least for the moment, was disinclined to take this step, fearful of criticism that by doing so he would be creating a “super-Government.”24 But Stimson was “startled” enough by McCloy’s memo that he called the president in the afternoon and conveyed the gist of the critique. There is no record of FDR’s response, but the very next day the president gave his famous “Arsenal of Democracy” fireside chat. Both McCloy and Stimson were delighted with it; their only complaint was that the president could not now cross the line into overt war. Stimson predicted, “. . . we cannot permanently be in a position of toolmakers for other nations which fight. . . .”25