The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance

by Ron Chernow

  Always proud of his work for Woodrow Wilson, Lamont seemed to stand out as the great exception, refuting, in Corliss’s words, the “stereotype of rich people and Republicans as conservative or reactionary plutocrats opposed to all forms of progress and liberalism.”18 Nor was this just a loving son’s bias; such accolades tumbled in upon Lamont. To poet John Masefield, the Lamonts were an exemplary couple, representing everything civilized: “Their political views, national and international, were ever generous and liberal. They always seemed to be in touch with the generous and the liberal of every country.”19 Even General Smuts of South Africa told Lamont, “There is no doubt that your house is an international meeting place, and an influence for good . . . second to none in the world.”20

  Why should they have thought otherwise? Reasonable and fond of discourse, an engaging letter writer, Lamont lacked the smug conservatism of many on Wall Street. He was one of the major contributors to the League of Nations Association and the Foreign Policy Association. For many years, he was financial angel of the Saturday Review of Literature and knew poets ranging from Robert Frost to Stephen Vincent Benét. He was that rare banker with an appreciation for words, a zest for ideas. Because Lamont was a partner in a mysterious, private bank, his admirers couldn’t compare his stated beliefs with his business behavior. That he served as banker to Italy during its Fascist period apparently didn’t faze them. They doubtless imagined that he kept a businesslike distance from Mussolini and served his client with thinly disguised distaste.

  But Lamont could do nothing halfway. As a Morgan man, he had to render those thousand and one special touches that made a client feel pampered. As with Pierpont, unvarnished banking lacked some final satisfaction for Lamont. His elaborate letters and memorandums seem almost a substitute for the writing career he never had. He always wanted to go beyond mere dollars and invest his deals with some larger meaning. He tried to make loans a total experience, by immersing himself in the politics and culture of client countries. In Italy, he would meet with Mussolini one day, then picnic in the Roman campagna the next. Despite the Fascist regime, he saw an Italy touched with poetry and romance. As president of the Italy-America Society, he hosted meetings of its Dante Committee at his East Seventieth Street townhouse and once screened a Florentine film on Dante and Beatrice. At the office, he worked at a beautiful Italian refectory table. Yes, his life would be all of a piece, a fusion of business and pleasure.

  The Morgan agent in Rome was Giovanni Fummi, whom Lamont had met at the Paris Peace Conference. Fummi was a former stockbroker with an American wife, a charming, extroverted man with a trim mustache and laughing eyes. He lived well at the Hotel Excelsior and was tanned both summer and winter. He was typical of the powerful but discreet lobbyists the bank employed in foreign capitals. He was rich in contacts, both in the government and in the Vatican. Lamont would boast of Fummi’s high standing with Mussolini yet insist he was free of Fascist taint. Fummi was perhaps less a Fascist than a conformist willing to sacrifice his principles for la dolce vita. He was an expert rationalizer and even when faced with Italian atrocities would contend that criticism might only polarize the Fascist party and bring more extreme elements to the fore. Funny, charming, and sentimental, Fummi made a curious match with the cool, patrician House of Morgan.

  After the war, J. P. Morgan and Company sparred with Dillon, Read for business with the Italian government. Lamont wanted an exclusive relationship, as understood by the Gentleman Banker’s Code. In 1923, six months after taking power, Mussolini first met with Lamont to discuss how to restore Italian credit. Initially Wall Street viewed il Duce benignly, as the man who had saved strike-torn Italy from Bolshevik hands. The Blackshirt terror that killed a hundred people in the 1921 elections was conveniently overlooked. Traveling through Italy, Jack Morgan reported to a friend, “We had the great satisfaction of seeing Mr. Mussolini’s Revolution.”21 In the early days, Mussolini stuck to conservative financial policies and kept flunkies from the key financial posts. Italian financial policy was something of a showcase for the outer world.

  During their fifteen-year relationship, Lamont and Mussolini would form an implausible pair. Lamont was stylish and natty with wonderful manners, scores of friends, and a refined sense of beauty. Mussolini was sloppy and unshaven, an insecure, misanthropic loner with a mega-phonic voice and a black view of human affairs. Their relationship had a Beauty and the Beast quality that hid one likeness: both men were former journalists and newspaper owners and were fascinated by the art of public relations. Both had the knack of giving a pretty verbal gloss to ugly things, and much of their relationship revolved around the manipulation of words.

  Lamont didn’t start out an apologist for Mussolini. As usual, the path to perdition comprised a series of small steps. In the summer of 1923, Italian troops occupied the Greek island of Corfu, and their bombing of civilians outraged world opinion. If the League of Nations thwarted him, Mussolini promised to destroy it. Appalled, Lamont told Fummi, “I think you ought to know direct from me that the action of Mr. Mussolini in the Grecian affair has given us all a tremendous jolt here.” The fact of the occupation bothered Lamont less than the manner: “There was no reason in the world why he shouldn’t have been able to occupy it peacefully instead of shooting up and killing several innocent civilians, including children.”22 The indignation wasn’t simply humanitarian, for Lamont realized that Corfu would make impossible the financing he had discussed with Mussolini the previous May.

  The following year, Blackshirt violence intensified. Hundreds were murdered or wounded during the rigged 1924 elections, scores of judges were later dismissed, and Italian democracy was dismantled. Mussolini now controlled six of the thirteen cabinet departments and the three armed services. For the first time, a conflict arose between Lamont’s business commitment to Italy and the humane indignation of some important friends, most notably Walter Lippmann, who attacked the Corfu invasion in the New York World. When Lippmann returned from Rome in 1924, he had dinner with Lamont and told him il Duce needed these violent antics to stay in power. Lamont didn’t disagree.

  How would Lamont deal with the growing strain between his liberalism and his desire to expand Morgan business in Italy? He would paper it over with words. He had a politician’s talent for speaking in different voices to different people. He never exactly lied but shaded the truth and pretended to side with everyone. Only Lamont was bright enough to keep all his stories straight and wrap them up in outward consistency. After the dinner with Lippmann, he wrote to Prince Gelasio Caetani, the Italian ambassador in Washington, about the chat: “This all sounds to me like silly gossip; nevertheless I had to keep within bounds because I was the host.”23 This was a more cynical voice than the one Lippmann heard. Through nods, winks, and pats on the back, Lamont would keep everyone happy.

  A certain convenience of vision, a selective filtering out of details, began to accompany the verbal touch-ups. Mussolini’s henchmen had now killed Giacomo Matteotti, the regime’s eminent foe, causing Socialist deputies to boycott Parliament. Yet when Lamont visited Italy in April 1925 to meet with Mussolini, he seemed oblivious to these grisly developments. Bonaldo Stringher, the governor of the Banca d’Italia, assured Lamont that il Duce resorted to strong-arm tactics only when absolutely necessary. With Corliss, the Lamonts motored through Italian hill towns and stopped by Bernard Berenson’s villa, I Tatti, for tea and a chat about Italian Renaissance art. Afterward, Lamont wrote this paean: “The Italy through which I traveled seemed to be industrious and prosperous. The newspaper headlines in the New York and even London papers seemed to me exaggerated. Everybody, both in and out of the Government, laughed at these stories of street fights, unrest upsetting the Government etc.”24 Back at 23 Wall, Lamont received an autographed photograph from Mussolini, which was now featured as prominently on his wall as the earlier picture of Woodrow Wilson had been.

  In reviewing Lamont’s files, one gets the impression that in 1925 he made a moral leap
and cast his lot with Mussolini. The year was rife with rumors, encouraged by Lamont’s trip, of a $100-million Morgan emergency loan. In part, Mussolini wanted Morgan money to rebuild Rome as a monument to his own maniacal splendor. The new secretary of state, Frank Kellogg, made it clear that no loan would be forthcoming unless Rome settled more than $2 billion in war debts with Washington. In October 1925, Mussolini sent a mission to Washington, headed by his finance minister, Count Giuseppe Volpi, to negotiate the debt.

  As the big $100-million loan hung in the balance, Lamont made his most startling shift with Mussolini, one that went far beyond basic banking requirements. This former champion of the League of Nations began to coach the Italian dictator on how to appeal to Anglo-American opinion. He fed him sugared phrases, language that would make reprehensible policies palatable abroad. A modern man, Lamont knew that any product, if attractively packaged, could be marketed to the public. The Italian problem was redefined as one of public relations. After Mussolini suspended town councils and bullied Parliament into passing 2,364 decrees at once, Lamont sent fresh publicity angles to Fummi for il Duce’s consideration:

  If Mr. Mussolini declares that parliamentary government is at an end in Italy such a declaration comes as a shock to Anglo-Saxons. If, on the contrary, Mr. Mussolini had explained that the old forms of parliamentary government in Italy had proved futile and had led to inefficient government and chaos; therefore they had to be temporarily suspended and generally reformed; then Anglo-Saxons would understand.

  Again, when Mr. Mussolini announces that the mayors of interior cities will be appointed by the Fascista government, Anglo-Saxons jump to the natural conclusion that such a step means that the interior cities are to be deprived of all local self-government. If, at the time of such announcement, Mr. Mussolini had explained that in most cases the mayors of the interior cities were simply the appointees and tools of local deputies, and were conducting the affairs of the municipalities so badly that, for the time being, the central government had to intervene, then again such an explanation would have seemed reasonable.25

  In public appearances, Lamont tried to deflect attention from Mussolini’s politics to his economic record. Wall Street enjoyed pretending that there were two Mussolinis—the sound economic leader and the tough politician—who could be treated separately. Mussolini spouted the predictable litany of promises—balanced budgets, low inflation, and sound money—that bankers adored. Resorting to sophistry, Lamont said he was only praising the Italian economy, not Mussolini or fascism. In a January 1926 speech before the Foreign Policy Association, Lamont extolled Italy’s record in lowering inflation, stopping strikes, and reducing unemployment. He even endorsed Mussolini’s highway and public works projects—measures that would be roundly denounced by Morgan partners during the Roosevelt administration. Lamont’s trump card was his claim that the Italians supported Mussolini: “At this gathering to-day, we all count ourselves liberals, I suppose. Are we sure that we are liberal enough to be willing for the Italian people to have the sort of government which they apparently want?”26

  Lamont’s efforts were crowned with success: in early 1926, Washington reached a lenient settlement of Italy’s war debt, paving the way for a Morgan operation. Treasury Secretary Andrew Mellon had already advised President Coolidge that without a conciliatory debt settlement, Wall Street might lose the Italian loan to Britain. So Coolidge was pleased when, a week later, Lamont announced the $100-million Morgan loan. It triggered a vituperative debate in Congress, with critics such as Representative Henry Rainey, Democrat of Illinois, calling Mussolini a murderous dictator and protesting the favoritism shown toward the Fascist regime. As with the Dawes Loan to Germany, the Morgan loan to Italy proved a catalyst for further American investment. The bank itself went on to provide loans to Rome and to two industrial clients, Fiat and Pirelli. In December 1927, J. P. Morgan again joined with Ben Strong and established a credit for the Banca d’Italia that permitted a return to the gold standard.

  On a Wall Street disturbed by European radicalism and worshipful of economic progress, Lamont wasn’t the only Mussolini supporter. Jack Morgan and George Whitney both hailed him as a great patriot. Otto Kahn of Kuhn, Loeb likened his iron rule to that of a tough receiver straightening out a bankrupt company. With a poetic flourish, Willis Booth of Guaranty Trust said Mussolini lifted Italy “out of the slough of despair into the bright realm of promise.”27 Judge Elbert Gary of U.S. Steel and publicist Ivy Lee joined the fan club. As a self-professed “missionary” for Mussolini, Lamont’s contribution was singular. One scholar has noted, “Of all the American business leaders, the one who most vigorously patronized the cause of Fascism was Thomas W. Lamont. . . . Though not the most voluble business spokesman for the Italian government, Lamont was clearly the most valuable. For it was he who translated verbal apologetics into hard cash, securing for Mussolini a $100 million loan.”28

  Was Lamont ignorant of events inside Italy? Not likely. As lender to sovereign states, the bank maintained thick clipping files and received abundant intelligence from around the world. (It was partly the excellence of Lamont’s files that enabled him to keep abreast of an extraordinary range of clients.) In January 1926, publicity man Martin Egan passed on to Lamont an anguished letter from a friend in Anticoli, Italy:

  I wonder if you all in New York know just what you are doing in backing Fascistism in Italy. We had a taste of it last night here. A party of Fascists motored up from Rome armed with revolvers, rapiers and loaded whips, arrived at nine and proceeded to beat up with fierce brutality the peasants who could not produce a Fascisti card. . . . If any peasant objects he is shot. This is happening all over the place. It seems funny for American money to be perpetuating it.

  On top of this, Lamont scribbled, “Pretty terrible, I must say.”29 In addition, an Italian opposition leader reported to him how his house in Rome was plundered by Blackshirts; he passed along a sheaf of bellicose speeches in which Mussolini boasted of his readiness for war. These speeches occasionally upset Lamont, but he always ended up recasting the problem as public relations.

  At the same time, Lamont was plied with constant requests from a new Italian ambassador, Giacomo de Martino, whom he used to put up at the University Club in New York. Most of de Martino’s requests were for more sympathetic press treatment of Mussolini. To this end, Lamont lined up favorable editorials in the New York Sun, protested dispatches of an “anti-Fascist” correspondent in the World, and arranged for de Martino to plead with Walter Lippmann at his home. Mussolini took a personal interest in winning over Lippmann and even sent him a personal photograph with a tribute to Lippmann’s “wisdom” scribbled across it.30 (Lippmann worked in a penthouse under signed photos of the British ambassador and Morgan partner Thomas Cochran.) Lippmann’s antagonism toward Mussolini only deepened, however, confirmed by Italian press censorship, which he saw as symptomatic of weakness. “As long as the censorship lasts, I shall remain persuaded that the Mussolini Government is not certain of its hold on the Italian people,” he told Lamont. “If the opposition to it inside of Italy were as negligible as Fascists like the Ambassador make out, there would be no occasion for a censorship of this character.”31

  Mussolini stamped out all press freedoms in Italy. He was so preoccupied by his image that he would examine in advance front-page layouts of national newspapers. By 1930, half of his ministers were recruited from the press corps, and he decreed that all journalists be Fascists. Dissenting editors were jailed, and many foreign journalists were mugged by street toughs. Hence, Mussolini’s only fear of press exposure was from abroad.

  At the time of the $100-million loan, Lamont and Martin Egan convinced Ambassador de Martino to suggest an American press service to Mussolini. Its purpose, Lamont said, would be to “acquaint our financial community more faithfully with the proper situation in Italy.”32 Mussolini was excited by the idea, and the secret operation went into effect in 1927. Paid for by Italy, it would write up favorable press
releases and bring over speakers. There was some difficulty in finding an appropriate American journalist to head the operation. The first choice was Associated Press correspondent Percy Winner, who once wrote of Mussolini, “An artist in the use of millions of human beings as tools and a nation as a canvas, the Duce rises so far above the typical politician or even dictator as to defy definition.”33 Even de Martino was relieved when Winner’s name was dropped for a less slavish admirer. Early preparations for the press bureau were cleared with Lamont, and it eventually operated under the aegis of his Italy-America Society.

  How did Lamont, a Woodrow Wilson protege, end up an accomplice of Benito Mussolini? The answer is partly personal. He had a romantic attachment to Italy and a proprietary feeling toward the Italian account, which he had won. His training as a Morgan banker taught him to transcend the mundane and to move mountains for important clients. This personal approach to business suited him, for he had varied and contradictory ambitions. He yearned to be a sleuth, a statesman, a political fixer, and a bon vivant. He loved politics, not so much as an ideological contest, but for the intrigue and the high-stakes gambling with fate. As a result, he could cooperate with politicians of many stripes. Washington’s tacit support for Italian loans perhaps also removed any inhibitions that might otherwise have existed.