All the Presidents' Bankers (15 page)

This was the crux of Wilson’s proposed covenant, but it also dovetailed with bankers’ interests for a more open financial playing field. Both the president and the bankers wanted to realign the Old European balance of power and put an end to secret side treaties and imperial economics. Breaking these barriers would leave a broader platform on which America could position itself as a dominant political and financial force.

Lamont had submitted his association’s resolutions to Republican Senate majority leader Lodge, hoping that his intervention would help break through the political deadlock and assuage long-held philosophical hostilities between Wilson and Lodge.
²⁹
Lodge’s reply was immediate. He responded that “the difficulty with the resolutions covered by his reservations” was that of “amending the League of Nations after its ratification.”
³⁰
He didn’t want to take the chance of letting the League of Nations slide until his reservations against it were addressed. Of course, doing so would undermine the agreement that the European nations had signed, with the understanding that the United States would be a military presence if needed in any future European upheavals.

Upon Lamont’s renewed and persistent suggestions that Wilson take the matter to the people, Wilson agreed to tour the country to drum up support for the League of Nations and the treaty ratification, but Dr. Grayson, his physician, warned him that his health would not likely survive the intense campaign. Indeed, on July 19, Wilson suffered a “small” stroke that affected his mood, leadership, and memory.
³¹

His condition led him to refuse to negotiate with the Republicans. Four days later, a news report stated, “An unyielding attitude against reservation to the treaty of peace was taken by President Wilson in talks today with four Republican Senators at the White House. . . . President Wilson was reported by the Senators to have explicitly stated that he would accept no compromise with the opposition forces.”
³²

Lamont soldiered on. Unaware of his friend’s waning health, he urged Wilson to “go direct to the Senate” and explain the chief points of controversy. Such a direct course, he believed, “would rivet the public attention.”
³³

But by early August, Europe’s economic crises had spilled into the United States. Increased costs of living due to global shortages became an absorbing domestic problem making Washington and the population even less interested in helping Europe.
³⁴
The economic turmoil rendered the environment even less malleable to helping external nations and added vigor to the isolationists in Congress.

In the emotional haze of his mini-stroke, Wilson was deflated. He wrote Lamont, “I thank you sincerely for every ray of light you shed on the present perplexed and somewhat distressing situation, and you do shed many that help me to see the path.”
³⁵

Mounting tensions between Japan and China threw another wrench in the works. Concerns grew that Japan’s grip on China would ripple through US financial, industrial, and economic systems.
³⁶
Lansing suggested that to mitigate the situation, Lamont become US minister in China, given his unique skills and “force of character.”
³⁷

On August 19, 1919, Wilson made an unprecedented presidential appearance before the Senate Foreign Relations Committee to argue for ratification of the Treaty of Versailles. Four days later, the committee responded by deciding to approve its first weakening of Wilson’s agreements—returning the Shantung Peninsula, which had been given to Japan, to Chinese control.

Lamont remained focused on the League upon hearing the news. During his late August vacation in Maine, he sent Wilson his draft statement on the matter for approval. He had previously refrained from making any public statement for fear of its potential adverse effects. “People, for instance like Senator Root, with whom, of course, I have been in disagreement, as he has been still hanging out for firm reservations, told me that if I made a statement, praising your course in Paris, I might get Borah, et al, so angry it would get their backs up still worse against the Treaty. . . . To tell you the truth, I am getting a little tired of being shut up all the time, just because I might get somebody ‘mad.’”
³⁸

Fortified by Lamont’s support, Wilson muscled up the strength to travel to Columbus, Ohio, where on September 4 he made his first stop on a national tour to rally public opinion.
³⁹
But his failing health inhibited his oratorical skills. Wilson’s talent for memorizing and delivering speeches was faltering. His sentences came out incomplete, disconnected, and rambling.

Still, Lamont remained tireless. This had become his and Wilson’s cause, and for a moment that cause loomed larger than what either had to gain separately. On September 10, he tried to bolster Wilson’s confidence over the impact of his statement, noting that “The New York Tribune . . . is beginning to hedge very strongly in its support of the Lodge types.” In other words, the press was beginning to lean away from Wilson’s detractors. Lamont praised Wilson on his recent speeches and told him that “they must have their effect upon the country & thus upon the Senate.”
⁴⁰

The shifting sentiment in the press appeared to be doing the trick, for critics in Washington looked like they might budge. Lodge and the mild reservationists finally agreed to the critical Article X, on the condition that Congress would approve any use of US forces.

But it was not to be. Wilson declared the compromise “a rejection of the Covenant.” Three days later, as his train reached Colorado, he suffered such a severe stroke warning that Dr. Grayson canceled the rest of his tour. In wavering health and frustrated with the Republicans’ suggestions, which he believed would gut the entire point of the treaty and the League of Nations, Wilson returned to Washington on September 28. At about 8:30
A.M.
on October 2, a major stroke paralyzed the left side of his body.
⁴¹
The next day, the White House issued a statement that Wilson had been working on, saying that the coming election will be a “genuine national referendum” on the issue of American membership in the League of Nations.

Toward the 1920 Election

Lamont defended and advised Wilson during the campaign period through the following year. But Wilson’s ideals and Lamont’s push would go unappreciated. On Election Day, November 2, 1920, voters rejected Wilson and his League, as represented by Democratic presidential candidate James A. Cox and vice presidential candidate Franklin Delano Roosevelt (FDR). Republican Party presidential candidate Warren Harding and vice presidential candidate Calvin Coolidge, catering to an increasingly isolationist citizenry, won in a landslide victory.
⁴²

Two and a half weeks later, on November 19, 1920, the Senate rejected a peace treaty for the first time in history, by a vote of thirty-nine to fifty-five. A group of Democrats helped Lodge’s mild reservationists and the irreconcilables defeat the proposal. The United States never ratified the Treaty of Versailles, nor did it join the League of Nations.
⁴³

On March 1, 1921, Wilson said farewell to his cabinet at their last meeting. A few minutes later, “leaning on his cane and limping slightly,” he “passed slowly out of the executive offices.”
⁴⁴
The Progressive Era was officially over.
⁴⁵

In the coming decade, the bankers would extend their power by expanding their franchises globally and by consolidating the deposits of the more insular-focused US population. The result would be extreme speculation within and beyond America’s borders that would bring about great highs and subsequent economic collapse. The presidency would be weakened in the process. And the absence of America’s presence in the League of Nations, coupled with the overcompromised, tension-laden Treaty of Versailles, would set the stage for a deadlier second world war.

To be sure, America was destined to become a financial, military, and political superpower. But it would do so by way of the conservative Republicans (with support from a war-weary public), who believed that global power would be amassed by focusing on domestic fortification rather than by helping other countries. Adopting a stance of nationalistic elitism, they weren’t willing to risk contamination by socialistic doctrines or accept the labor rights Wilson supported through the League (which more liberal Democrats wanted strengthened). Even though the bankers constantly sought ways to rise above isolationism in the direction of financial and trade internationalism, the victorious politicians wanted a more self-centered, laissez-faire style of government, and that in turn fueled a more mercenary breed of financial capitalism. The prevailing stance would have an economic impact worldwide and helped pave the way to a war that would claim millions of lives.

CHAPTER 4

T
HE
1920
S
: P
OLITICAL
I
SOLATIONISM
, F
INANCIAL
I
NTERNATIONALISM

“Human nature cannot be changed by an act of the legislature. It is too much assumed that because an abuse exists it is the business of the national government to remedy it.”
¹

—President Calvin Coolidge, 1926

T
HE NOTION OF
A
MERICAN ISOLATIONISM AFFECTED THE WAY THE 1920S PRESIDENTS
conceived of the role of chief executive domestically as well. They didn’t attempt to shape their authority or that of the White House relative to the bankers in the way that Teddy Roosevelt and Woodrow Wilson had. As such, financiers stepped in to enhance their power, primarily by expanding on the influence they already had but also by doing what they wanted to do without any Washington-imposed restrictions.

President Warren G. Harding was an uninspiring politician who saw his job as calming a nation, balancing a postwar budget, and leaving bankers
and businessmen alone. President Calvin Coolidge represented more of the same, though with an even more reticent personal style. Coolidge even kept most of Harding’s cabinet, including Treasury Secretary Andrew Mellon and Secretary of Commerce Herbert Hoover. Given his international experience under Wilson, Hoover might have done more to mold the power of the presidency and adopt a more internationalist doctrine when he assumed the presidency. But his time as president was marred by an epic financial disaster and all that the bankers had done to instigate it.

For the most part, the philosophy of these three Republican presidents was simple. They believed the role of government should be to facilitate, rather than regulate, the growth of business and finance, and that such an approach would strengthen America. They embodied the “laissez-faire” (in English, “Let them do”) doctrine, and they were determined not to leave a distinctive mark on the post of the presidency. Isolationism became a form of denial, leaving room for the bankers to expand their control over the country’s economy—and to take greater financial risks domestically and globally.

Harding shunned Wilson’s foreign policy ambitions during his campaign, reflecting the country’s disenchantment with internationalism, peace treaties, and debate over whether America should join the League of Nations. The population and politicians became increasingly disengaged from the preceding Progressive Era and cultivated a strident sense of individualism, particularly as it pertained to personal economics. Relegated to the back pages of newspapers were strikes, riots, and the growing vilification of immigrant “radicals.” Promising a “return to normalcy,” of which this insularity was indicative, Harding grabbed the presidency by a landslide (404 to 127 electoral votes).

Political isolationism was fine for some bankers, as long as it did not interfere with their global expansion goals. Charles Mitchell, president of National City Bank—as mentioned earlier, it was the largest bank in terms of assets in the United States, with the most extensive network of overseas branches—solidified his position by standing outside the fray of postwar financial diplomacy as much as possible, even as he dumped loans into countries that couldn’t pay for them and sold the related shabby and fraudulent bonds to the American public.

Meanwhile, the Morgan Bank, under the daily direction of Thomas Lamont (with oversight from Jack Morgan), continued to influence foreign policy by collaborating with the New York Federal Reserve Bank to assist in the European recovery through more targeted loan extensions, particularly to the Bank of England. The firm maintained its role of indispensability to the
presidents regarding war debt and reparations discussions. However, unstable economic conditions in Europe—and, to a lesser extent, in Latin America—contributed significantly to the more subtle power plays between the White House and major bankers. Lamont believed that a stronger Europe would catapult American dominance forward faster, expanding the Morgan Bank’s footprint in the process. But he and the presidents had differing opinions on the degree and nature of US participation in European reconstruction and debt forgiveness.